<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
HOME BANCORP OF ELGIN, INC.
(Exact name of registrant as specified in its charter)
---------------------------
DELAWARE 6035 PENDING
(State or other jurisdiction of (Primary Standard (IRS Employer
incorporation or organization) Classification Code No.) Identification No.)
16 NORTH SPRING STREET
ELGIN, ILLINOIS 60120
(847) 742-3800
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------------------
GEORGE L. PERUCCO
PRESIDENT AND CHIEF EXECUTIVE OFFICER
HOME BANCORP OF ELGIN, INC.
16 NORTH SPRING STREET
ELGIN, ILLINOIS 60120
(847) 742-3800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------------
WITH COPIES TO:
JOHN E. FREECHACK, ESQ.
V. GERARD COMIZIO, ESQ. BARACK, FERRAZZANO,
THACHER PROFFITT & WOOD KIRSCHBAUM & PERLMAN
1500 K STREET, N.W. 333 W. WACKER DRIVE
WASHINGTON, D.C. 20005 CHICAGO, ILLINOIS 60606
(202) 347-8400 (312) 984-3100
---------------------------
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Title of Securities to be Amount to be Registered(1) Proposed Maximum Proposed Maximum Aggregate Amount of
Registered Offering Price Per Offering Price (2) Registration Fee
Share(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value 7,604,375 $10.00 $76,043,750 $26,222
$.01 per share shares
====================================================================================================================================
</TABLE>
(1) Includes the maximum number of shares that may be issued in connection with
this offering, based on various assumptions relating thereto.
(2) 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 SECTION 8(a), MAY
DETERMINE.
================================================================================
<PAGE>
HOME BANCORP OF ELGIN, INC.
Cross Reference Sheet showing location in the Prospectus of information required
by Items of Form S-1:
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM AND CAPTION LOCATION OR HEADINGS IN PROSPECTUS
- --------------------------------------- ----------------------------------
<S> <C>
1. Forepart of the Registration Statement Outside Front Cover Page
and Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back Cover Pages
Pages of Prospectus
3. Summary Information, Risk Factors and Summary; Risk Factors
Ratio of Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price The Conversion -- Stock Pricing; -- Number of Shares
to be Issued
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Outside Front Cover Page; The Conversion --
Subscription Offering and Subscription Rights; --
Community Offering; -- Syndicated Community
Offering; -- Public Offering Alternative; -- Marketing
Arrangements and Underwriting; -- Procedure for
Purchasing Shares in Subscription and Community
Offerings
9. Description of Securities to be The Conversion -- Certain Restrictions on Purchase or
Registered Transfer of Shares After Conversion; Restrictions on
Acquisition of the Company and the Association;
Description of Capital Stock of the Company;
Description of Capital Stock of the Association
10. Interests of Named Experts and Counsel Not Applicable
11. Information with Respect to the Outside Front Cover Page; Selected Consolidated
Registrant Financial and Other Data of the Association; Home
Bancorp of Elgin, Inc.; Home Federal Savings and Loan
Association of Elgin; Dividend Policy; Market for the
Common Stock; Management's Discussion and Analysis
of Financial Condition and Results of Operations;
Business of the Company; Business of the Association;
Regulation; Management of the Company; Management
of the Association; The Conversion; Description of
Capital Stock of the Company; Description of Capital
Stock of the Association; Financial Statements
12. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act
Liabilities
</TABLE>
<PAGE>
[To be used in connection with the Syndicated Community Offering only]
PROSPECTUS SUPPLEMENT
HOME BANCORP OF ELGIN, INC.
(PROPOSED HOLDING COMPANY FOR
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN)
________ SHARES OF COMMON STOCK
Home Bancorp of Elgin, Inc. (the "Company"), a Delaware corporation, is
offering for sale in a syndicated community offering (the "Syndicated Community
Offering") ____________ shares of its common stock, par value $.01 per share
(the "Common Stock"), at a per share price of $____________, to be issued upon
the conversion of Home Federal Savings and Loan Association of Elgin (the
"Association") from a federally chartered mutual savings and loan association to
a federally chartered stock savings and loan association and the issuance of the
Association's outstanding common stock to the Company pursuant to a plan of
conversion (the "Plan of Conversion"). The remaining ____________ shares of the
Common Stock have been subscribed for in subscription and community offerings
(the "Subscription and Community Offerings") by (i) the Association's depositors
whose deposits in qualifying amounts totalled $50 or more on March 31, 1995 (the
"Eligible Account Holders"); (ii) the Employee Stock Ownership Plan of Home
Bancorp of Elgin, Inc. and related trust (the "ESOP"); (iii) the Association's
depositors whose deposits in qualifying amounts totalled $50 or more on June 30,
1996 (other than Eligible Account Holders or directors or officers of the
Association or their associates); (iv) certain other members of the Association,
consisting of depositors and borrowers of the Association as of _______ __,
1996; and (v) certain members of the general public. See "The Conversion --
General." Contained herein is the Prospectus in the form used in the
Subscription and Community Offerings. The purchase price for all shares
purchased in the Syndicated Community Offering will be the same as the price
paid by subscribers in the Subscription and Community Offerings (the "Purchase
Price"). The Purchase Price of $10.00 per share is the amount to be paid for
each share at the time a purchase order is submitted. See the cover page of the
Prospectus and the table below for information as to the method by which the
range within which the number of shares offered may vary and the method of
subscribing for shares of the Common Stock.
Funds submitted to the Association with purchase orders will earn interest
at the Association's passbook rate of interest from the date of receipt until
completion or termination of the Conversion. The Syndicated Community Offering
will expire no later than ____________, 1996, unless extended by the Association
and the Company with the approval of the Office of Thrift Supervision (the
"OTS"). Such extensions may not go beyond ____________, 1998. If an extension
of time has been granted, all subscribers will be notified of such extension,
and of their rights to confirm their subscriptions, or to modify or rescind
their subscriptions and have their funds returned promptly with interest, and of
the time period within which the subscriber must notify the Association of its
intention to confirm, modify or rescind such subscriber's subscription. If an
affirmative response to any resolicitation is not received by the Association
and the Company from a subscriber, such subscriber's order will be rescinded,
and all funds will be returned promptly with interest. The minimum number of
shares that may be purchased is 25 shares. Except for the ESOP, which intends
to purchase up to 8% of the total number of shares of Common Stock issued in the
Conversion, no person, together with associates of and persons acting in concert
with such person, may purchase more than the total number of shares offered in
the Community Offering and the Syndicated Community Offering that could be
purchased for $200,000 (20,000 shares) at the Purchase Price and no person,
together with associates of and persons acting in concert with such person, may
purchase more than 1.0% of the total number of shares issued in the Conversion.
See "Plan of Conversion -- Subscription Offering and Subscription Rights" and "-
- - and Limitations on Common Stock Purchases." The Company and the Association
reserve the right, in
<PAGE>
their absolute discretion, to accept or reject, in whole or in part, any or all
subscriptions in the Syndicated Community Offering.
The Company and the Association have engaged Hovde Securities, Inc.
("Hovde") to assist them in the sale of the Common Stock in the Syndicated
Community Offering. It is anticipated that Hovde will use the services of other
registered broker-dealers ("Selected Dealers") and that fees to Hovde and such
Selected Dealers will be ________% of the aggregate Purchase Price of the shares
sold in the Syndicated Community Offering. Neither Hovde nor any Selected
Dealer shall have any obligation to take or purchase any shares of Common Stock
in the Syndicated Community Offering.
The Common Stock has been approved for quotation upon issuance on The
Nasdaq Stock Market under the symbol "_____." Prior to this offering, there has
not been a public market for the Common Stock, and there can be no assurance
that an active and liquid trading market for the Common Stock will develop. The
absence or discontinuance of a market may have an adverse impact on both the
price and liquidity of the stock.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION, DEPARTMENT OF THE
TREASURY, OR ANY OTHER FEDERAL AGENCY OR ANY STATE SECURITIES COMMISSION, NOR
HAS SUCH COMMISSION, OFFICE, OTHER AGENCY OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED OR GUARANTEED BY THE SAVINGS ASSOCIATION INSURANCE FUND OR
THE BANK INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION, OR BY ANY
OTHER GOVERNMENT AGENCY.
<PAGE>
<TABLE>
<CAPTION>
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ESTIMATED NET
ESTIMATED PROCEEDS OF
NET SUBSCRIPTION,
ESTIMATED PROCEEDS OF COMMUNITY AND
SYNDICATED UNDERWRITING FEES SYNDICATED SYNDICATED
COMMUNITY AND OTHER COMMUNITY COMMUNITY
OFFERING PRICE EXPENSES(1) OFFERING OFFERINGS(2)(3)
=========================================================================================
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
Minimum Per Share $10.00 $ $ $
- ------------------------------------------------------------------------------------------
Midpoint Per Share $10.00 $ $ $
- ------------------------------------------------------------------------------------------
Maximum Per Share $10.00 $ $ $
- ------------------------------------------------------------------------------------------
Total Minimum(4) $ $ $ $
- ------------------------------------------------------------------------------------------
Total Midpoint $ $ $ $
- ------------------------------------------------------------------------------------------
Total Maximum(4) $ $ $ $
- ------------------------------------------------------------------------------------------
Total Maximum, As $ $ $ $
Adjusted(5)
==========================================================================================
</TABLE>
- ----------------------
(1) Consists of a pro rata allocation of estimated expenses of the Association
and Company in connection with the Conversion (other than estimated fees to
be paid to Hovde for services in connection with the Subscription and
Community Offerings) and estimated compensation of Hovde and Selected
Dealers in connection with the sale of the remaining shares in the
Syndicated Community Offering, which fees are estimated to be $____________
million and $____________ million, respectively, at the minimum and the
maximum of the estimated price range and may be deemed to be underwriting
fees. The information under "Pro Forma Data" in the Prospectus was based
on the assumptions stated therein, which may differ from the estimates used
for this table. See "The Conversion -- Marketing and Underwriting
Arrangements" for a more detailed discussion of fee arrangements.
(2) The Company applied to retain up to 50% of the net conversion proceeds.
The balance of the net proceeds will be transferred to the Association in
exchange for all of the capital stock of the Association to be issued in
connection with the Conversion.
(3) The net proceeds of the Subscription and Community Offerings (based upon
the sale of the ____________ shares subscribed for at a price of $10.00 per
share and after allocation of a pro rata portion of the estimated relating
to the Conversion) are estimated to be $____________.
(4) Based on an estimated price range of $____________ to $____________ at
$10.00 per share (the "Estimated Price Range"). The Total Minimum reflects
the sale of ____________ shares at a per share price of $10.00, leaving a
total of ____________ shares to be sold in the Syndicated Community
Offering.
(5) Gives effect to an increase in the number of shares which could occur due
to an increase in the Estimated Price Range of up to 15% to reflect changes
in market and financial conditions following commencement of the offerings.
See "The Conversion -- Stock Pricing." For a discussion of the
distribution and allocation of the additional shares, see "The Conversion -
- Subscription Offering and Subscription Rights" and "-- Limitations on
Common Stock Purchases."
HOVDE SECURITIES, INC.
____________________________________
The date of this Prospectus Supplement is ____________, 1996.
<PAGE>
PROSPECTUS
[Logo]
HOME BANCORP OF ELGIN, INC.
(PROPOSED HOLDING COMPANY FOR HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF
ELGIN)
6,612,500 SHARES OF COMMON STOCK
$10.00 PER SHARE
-------------------
Home Bancorp of Elgin, Inc. (the "Company"), a Delaware corporation, is
offering up to 6,612,500 shares of its common stock, par value of $.01 per share
(the "Common Stock"), in connection with the conversion of Home Federal Savings
and Loan Association of Elgin (the "Association") from a federally chartered
mutual savings and loan association to a federally chartered stock savings and
loan association pursuant to the Association's amended plan of conversion (the
"Plan" or "Plan of Conversion"). In certain circumstances, the Company may
increase the amount of Common Stock offered hereby to 7,604,375 shares. See
footnote 4 to the table below. The simultaneous conversion of the Association
to stock form, the issuance of the Association's stock to the Company and the
offer and sale of the Common Stock by the Company are referred to herein as the
"Conversion."
(continued on following page)
FOR INFORMATION ON HOW TO SUBSCRIBE FOR THE COMMON STOCK, CALL THE STOCK
INFORMATION CENTER AT (847) XXX-XXXX.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR, SEE "RISK FACTORS" BEGINNING ON PAGE 16 OF
THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION OR ANY OTHER
FEDERAL AGENCY OR ANY STATE SECURITIES COMMISSION, NOR HAS SUCH
COMMISSION, OFFICE OR OTHER AGENCY OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PURCHASE PRICE(1) ESTIMATED UNDERWRITING ESTIMATED NET
FEES AND OTHER EXPENSES(2) PROCEEDS(3)
===============================================================================================
<S> <C> <C> <C>
Minimum Per Share............... $ 10.00 $ 0.32 $ 9.68
Midpoint Per Share.............. $ 10.00 $ 0.29 $ 9.71
Maximum Per Share............... $ 10.00 $ 0.27 $ 9.73
Total Minimum(1)................ $48,875,000 $1,563,763 $47,311,237
Total Midpoint(1)............... $57,500,000 $1,682,788 $55,817,212
Total Maximum(1)................ $66,125,000 $1,801,813 $64,323,187
Total Maximum, as adjusted (4).. $76,043,750 $1,938,691 $74,105,059
===============================================================================================
</TABLE>
(1) Determined in accordance with an independent appraisal prepared by RP
Financial, LC. ("RP Financial") dated June 7, 1996, which states that the
aggregate estimated pro forma market value of the Common Stock ranged from
$48,875,000 to $66,125,000 with a midpoint of $57,500,000 (the
"Valuation Range"). RP Financial's independent appraisal is based upon
estimates and projections that are subject to change, and the valuation
must not be construed as a recommendation as to the advisability of
purchasing such shares nor that a purchaser will thereafter be able to sell
such shares at prices in the range of the foregoing valuation. Based on
the Valuation Range, the Board of Directors of the Association (the "Board
of Directors") established the estimated price range of $48.9 million to
$66.1 million (the "Estimated Price Range"), or between 4,887,500 and
6,612,500 shares of Common Stock at the $10.00 price per share (the
"Purchase Price") to be paid for each share of Common Stock subscribed for
or purchased in the offerings. See "The Conversion -- Stock Pricing" and
"-- Number of Shares to be Issued."
(2) Consists of the estimated costs to the Association and the Company arising
from the Conversion, including estimated fixed expenses of approximately
$920,000 and marketing fees to be paid to Hovde Securities, Inc. ("Hovde")
in connection with the Subscription and Community Offerings (as defined
herein), which fees are estimated to be $643,763 and $881,813,
respectively, at the minimum and the maximum of the Estimated Price Range
(as defined herein). See "The Conversion -- Marketing and Underwriting
Arrangements." Such fees may be deemed to be underwriting fees, and Hovde
may be deemed to be an underwriter. See "Pro Forma Data" for the
assumptions used to arrive at these estimates. Actual fees and expenses
may vary from the estimates.
(3) Actual net proceeds may vary substantially from estimated amounts depending
on the number of shares sold in each of the offerings and other factors.
Includes the purchase of shares of Common Stock by the Employee Stock
Ownership Plan of Home Bancorp of Elgin, Inc. and related trust (the
"ESOP"), funded by a loan which the Company intends to make to the ESOP,
which initially will be deducted from the Company's stockholders' equity.
See "Use of Proceeds" and "Pro Forma Data."
(4) As adjusted to give effect to the sale of up to an additional 15% of the
shares which may be offered at the Purchase Price, without resolicitation
of subscribers or any right of cancellation, due to regulatory
considerations, changes in the market and general financial and economic
conditions. See "Pro Forma Data" and "The Conversion -- Stock Pricing."
For a discussion of the distribution and allocation of the additional
shares, if any, see "The Conversion -- Subscription Offering and
Subscription Rights," "-- Community Offering" and "-- Limitations on Common
Stock Purchases."
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED OR GUARANTEED BY THE SAVINGS ASSOCIATION INSURANCE FUND OR
THE BANK INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION, OR BY ANY
OTHER GOVERNMENT AGENCY.
----------------------------
HOVDE SECURITIES, INC.
----------------------------
The date of this Prospectus is ___________, 1996.
<PAGE>
NON-TRANSFERABLE RIGHTS TO SUBSCRIBE FOR THE COMMON STOCK HAVE BEEN GRANTED,
IN ORDER OF PRIORITY, TO EACH OF THE ASSOCIATION'S ELIGIBLE ACCOUNT HOLDERS, TO
THE ESOP, TO THE ASSOCIATION'S SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS AND TO
CERTAIN OTHER MEMBERS (EACH AS DEFINED HEREIN) IN A SUBSCRIPTION OFFERING (THE
"SUBSCRIPTION OFFERING"). SUBSCRIPTION RIGHTS ARE NONTRANSFERABLE. PERSONS
FOUND TO BE TRANSFERRING OR ATTEMPTING TO TRANSFER SUBSCRIPTION RIGHTS WILL BE
SUBJECT TO THE FORFEITURE OF SUCH RIGHTS AND POSSIBLE FURTHER SANCTIONS AND
PENALTIES IMPOSED BY THE OFFICE OF THRIFT SUPERVISION (THE "OTS"). Subject to
the prior rights of holders of subscription rights, the Company expects to offer
any shares of Common Stock not subscribed for in the Subscription Offering for
sale in a community offering to certain members of the general public, with
preference given to natural persons residing in Kane, DuPage and McHenry
counties in Illinois, the counties in which the Association's offices are
located (the "Community Offering") (the Subscription Offering and the Community
Offering are referred to, together, as the "Subscription and Community
Offerings"). It is anticipated that any shares not subscribed for in the
Subscription and Community Offerings will be offered to members of the general
public in a syndicated community offering (the "Syndicated Community Offering")
(the Subscription and Community Offerings and the Syndicated Community Offering
are referred to, collectively, as the "Offerings").
The ESOP intends to subscribe for 8% of the total number of shares of Common
Stock issued in the Conversion. Shares purchased by the ESOP are anticipated to
be funded by a loan from the Company to be repaid over a period of up to 10
years at an interest rate of 8%. No Eligible Account Holder, Supplemental
Eligible Account Holder or Other Member may, in their capacity as such,
subscribe in the Subscription Offering for more than $200,000 of the Common
Stock offered in the Conversion; no person, together with associates of and
persons acting in concert with such person, may purchase in the Community
Offering and the Syndicated Community Offering more than $200,000 of the Common
Stock offered in the Conversion; and, except for the ESOP, no person, together
with associates of and persons acting in concert with such person, may purchase
in the aggregate more than the overall maximum purchase limitation of 1.0% of
the total number of shares of Common Stock offered in the Conversion; provided,
however, that the overall maximum purchase limitation may be increased and the
amount that may be subscribed for may be increased or decreased in the sole
discretion of the Association or the Company without further approval of the
Association's members. Prior to the consummation of the Conversion, if such
amount is increased, subscribers for the maximum amount will be, and certain
other large subscribers in the sole discretion of the Association may be, given
the opportunity to increase their subscriptions up to the then applicable limit.
The minimum purchase is 25 shares. The Company and the Association reserve the
right, in their absolute discretion, to accept or reject, in whole or in part,
any or all subscriptions in the Community Offering and the Syndicated Community
Offering, either at the time of receipt of an order or as soon as practicable
following the termination of such Offerings. If an order is rejected, the funds
submitted with such order will be returned promptly with interest. If the
Company rejects a subscription in part, the subscriber will not have the right
to cancel the remainder of his or her subscription. See "The Conversion --
Subscription Offering and Subscription Rights," "-- Community Offering" and "--
Limitations on Common Stock Purchases." The Association has engaged Hovde to
consult with and advise the Company and the Association in the Offerings, and
Hovde has agreed to use its best efforts to assist the Company with the
solicitation of subscriptions and purchase orders for shares of Common Stock in
the Offerings. Hovde is not obligated to take or purchase any shares of Common
Stock in the Offerings. The Company and the Association have agreed to
indemnify Hovde against certain liabilities arising under the Securities Act of
1933, as amended. See "The Conversion -- Marketing and Underwriting
Arrangements."
THE SUBSCRIPTION OFFERING WILL TERMINATE AT 12:00 NOON, CENTRAL TIME, ON [
, 1996] (THE "EXPIRATION DATE") UNLESS EXTENDED BY THE ASSOCIATION AND THE
COMPANY, WITH APPROVAL OF THE OTS, IF NECESSARY. Subscriptions paid by cash,
check, bank draft or money order will be placed in a segregated account at the
Association and will earn interest at the Association's rate of interest on
passbook accounts from the date of receipt until completion or termination of
the Conversion. Payments authorized by withdrawal from deposit accounts at the
Association will continue to earn interest at the contractual rate until the
2
<PAGE>
(continued from previous page)
Conversion is completed or terminated; these funds otherwise will be unavailable
to the depositor until such time. Upon completion of the Conversion, funds
withdrawn from depositors' accounts will no longer be insured by the Federal
Deposit Insurance Corporation (the "FDIC"). Orders submitted are irrevocable
until the completion of the Conversion; provided, that, if the Conversion is not
completed within 45 days after the close of the Subscription Offering, unless
such period has been extended with the consent of the OTS, if necessary, all
subscribers will have their funds returned promptly with interest, and all
withdrawal authorizations will be cancelled. If an extension of time has been
granted, all subscribers will be notified of such extension, of any rights to
confirm their subscriptions or to modify or rescind their subscriptions and have
their funds returned promptly with interest and of the time period within which
the subscribers must notify the Association of their intention to confirm,
modify or rescind their subscriptions. Such extensions may not go beyond
[_________], 1998. A resolicitation of subscribers will also be made if the pro
forma market value of the Common Stock is either more than 15% above the maximum
of the Estimated Price Range or less than the minimum of the Estimated Price
Range. If an affirmative response to any resolicitation is not received by the
Association and the Company from a subscriber, such subscriber's order will be
rescinded and all funds will be returned promptly with interest. See "The
Conversion -- Subscription Offering and Subscription Rights" and "-- Procedure
for Purchasing Shares in Subscription and Community Offerings."
The Company has received conditional approval from the National Association of
Securities Dealers, Inc. (the "NASD") to have its Common Stock quoted on The
Nasdaq Stock Market under the symbol "____" upon completion of the Conversion.
One of the requirements for continued quotation of the Common Stock on The
Nasdaq Stock Market is that there be at least two market makers for the Common
Stock. The Company will seek to encourage and assist at least two market makers
to make a market in its Common Stock. Hovde will assist the Company in such
efforts but will not be a market maker in the Common Stock. Prior to this
offering there has not been a public market for the Common Stock, and there can
be no assurance that an active and liquid trading market for the Common Stock
will develop or that the Common Stock will trade at or above the Purchase Price.
The absence or discontinuance of a market may have an adverse impact on both the
price and liquidity of the Common Stock. See "Risk Factors -- Absence of Market
for Common Stock; Recent Performance of Conversion Offerings."
3
<PAGE>
MAP
[MAP SHOWING BRANCH OFFICES IN ELGIN, CRYSTAL LAKE, ROSELLE, BARTLETT AND
SOUTH ELGIN, ILLINOIS TO BE PROVIDED]
4
<PAGE>
SUMMARY
This summary is qualified in its entirety by the more detailed information and
Financial Statements of the Association and Notes thereto included elsewhere in
this Prospectus.
HOME BANCORP OF ELGIN, INC.
Home Bancorp of Elgin, Inc. (the "Company") is a Delaware corporation recently
organized by the Association for the purpose of acquiring all of the capital
stock of the Association to be issued in the Conversion. Immediately following
the Conversion, the only significant assets of the Company will be the capital
stock of the Association, the loan that the Company intends to make to the ESOP
and the net conversion proceeds retained by the Company. The Company will
purchase all of the capital stock of the Association to be issued upon the
Conversion in exchange for at least 50% of the net proceeds from the Offerings
with the remaining net proceeds to be retained by the Company. Funds retained
by the Company will be used for general business activities, including for the
loan that the Company intends to make to the ESOP. On an interim basis, the net
proceeds from the Offerings are expected to be invested in federal funds, short-
term, investment grade marketable securities and mortgage-backed securities.
See "Use of Proceeds." The business of the Company will initially consist of
the business of the Association. See "Business of the Association" and
"Regulation -- Regulation of Savings Association Holding Companies."
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
GENERAL
Home Federal Savings and Loan Association of Elgin (the "Association") was
originally founded in 1883 as an Illinois state-chartered mutual savings and
loan association. On October 7, 1969, the Association converted to a federally
chartered mutual savings and loan association. The Association has been, and
intends to continue to be, a community-oriented financial institution providing
a variety of financial services to meet the needs of the communities which it
serves. The Association maintains its headquarters in Elgin, Illinois, and
operates four other branch offices in Crystal Lake, Roselle, Bartlett and South
Elgin, Illinois. The Association gathers deposits in its market area primarily
from the communities and neighborhoods in close proximity to its branch offices.
The Association's delineated lending area is larger and includes portions of
Cook, Kane, Lake, McHenry, DuPage and DeKalb counties in Illinois. Most of the
Association's mortgage loans are secured by properties located in its delineated
lending area. See "Business of the Association -- Market Area" and " --
Competition." At March 31, 1996, the Association had total assets of $306.7
million, total savings deposits of $264.5 million and equity of $37.2 million.
The Association's deposits are insured up to the maximum allowable amount by the
Savings Association Insurance Fund of the FDIC (the "SAIF").
Beginning in 1993, the Association began to implement a business strategy that
was intended to improve the Association's profitability and capital position.
The business strategy includes, among other things, an aggressive program to
reduce general and administrative expenses, which resulted in the sale of three
branch offices (one during 1993 and two during 1994). The branch sales also had
the effect of increasing the Association's capital by a total of $1.5 million.
The Association's business strategy also provides for an operating plan that,
among other things: (i) emphasizes the origination of one-to-four-family
residential mortgage loans (secured by properties located in the Association's
delineated lending area), with a particular emphasis on the origination of
adjustable-rate mortgage loans; (ii) provides for the origination of
multifamily, commercial real estate, construction, land and other loans
(consisting primarily of passbook savings and consumer loans) in the
Association's delineated lending area; (iii) requires the Association to
maintain high asset quality by originating all loans in strict compliance with
its underwriting standards; and (iv) focuses on attracting transactional deposit
accounts (rather than certificates of deposit). The Association
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seeks to attract and retain customers by providing a high level of personal
service, a variety of loan and deposit products and extended office hours, as
well as 14 automated teller machines ("ATMs") at convenient locations throughout
the Association's market area.
FINANCIAL HIGHLIGHTS
Capital Position. At March 31, 1996, the Association had equity of $37.2
million. At that same date, the Association's tangible, core and total risk-
based capital ratios were 12.04%, 12.04% and 23.65%, respectively, which
exceeded all applicable regulatory capital requirements. See "Regulatory
Capital Compliance," "Capitalization" and "Pro Forma Data."
Residential Mortgage Lending. The Association's assets, which totaled $306.7
million at March 31, 1996, are primarily comprised of conventional first
mortgage loans. The Association's gross loans amounted to $267.1 million, or
87.1% of total assets. At March 31, 1996, the Association's total one- to four-
family residential mortgage loans amounted to $262.1 million (or 98.1% of gross
loans), approximately $201.0 million (or 75.2% of gross loans) of which provided
for fixed rates of interest. The remainder consisted of multifamily mortgage
loans, commercial real estate mortgage loans, construction and land loans and
other loans. See "Business of the Association -- Lending Activities." The
Association's holdings of investment securities, representing 2.0% of total
assets at March 31, 1996, were comprised of mortgage-backed securities totaling
$173,000 and obligations of the U.S. Government and government agencies totaling
$6.0 million. See "Business of the Association -- Investment Activities."
Profitability. The Association's net income was $2.4 million, $4.4 million,
$4.3 million, $3.8 million and $2.4 million for the years ended December 31,
1995, 1994, 1993, 1992 and 1991, respectively, and $512,000 and $695,000 for the
three months ended March 31, 1996 and 1995, respectively. For the years ended
December 31, 1994 and 1993, net income included a gain on sale of branches of
$1.7 million and $822,000, respectively. The Association's return on average
assets (net income expressed as a percentage of average assets) for the years
ended December 31, 1995, 1994, 1993, 1992 and 1991 and the three months ended
March 31, 1996 and 1995 was 0.78%, 1.33%, 1.22%, 1.13%, 0.73%, 0.68%
(annualized) and 0.91% (annualized), respectively. See "Selected Financial and
Other Data of the Association."
Asset Quality. The Association has sought to maintain high asset quality by
utilizing strict loan underwriting standards and collection efforts and by
generally limiting its origination of mortgage loans to its delineated lending
area. The Association's ratio of non-performing loans to total loans at year
end ranged from 0.34% to 0.81% during the five-year period ended December 31,
1995 and was 0.41% at March 31, 1996. Non-performing assets to total assets
ranged from 0.46% to 0.86% during the five-year period ended December 31, 1995,
and was at 0.47% at March 31, 1996. The Association's allowance for loan losses
to non-performing loans ranged from 18.49% to 90.17% over the five years ended
December 31, 1995 and was 79.48% at March 31, 1996. See "Business of the
Association -- Delinquencies and Non-Performing Assets."
Net Interest Margin. The Association's net interest margin (net interest
income divided by average interest-earning assets) ranged from 3.82% to 4.77%
for the five fiscal years ended December 31, 1995. The Association's net
interest margin for the year ended December 31, 1995 decreased to 4.19% from
4.53% for the year ended December 31, 1994, primarily because the yield on
interest-earning assets increased at a slower rate than the cost of interest-
bearing liabilities. For the three months ended March 31, 1996, the
Association's net interest margin on an annualized basis was 3.98%. See "Risk
Factors -- Potential Impact of Changes in Interest Rates" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Management Strategy" and "--Analysis of Net Interest Income."
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Savings Deposits. The Association's total savings deposits at March 31, 1996
were $264.5 million, of which $135.2 million, or 51.1%, were in transactional
accounts. Management of the Association considers its transactional accounts to
consist of noninterest bearing NOW accounts, NOW/Super NOW interest-bearing
accounts, passbook and money market accounts, which accounts management believes
are more resistant to interest rate changes than certificates of deposit. At
March 31, 1996, the Association's total cost of deposits was 4.14%. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business -- Sources of
Funds."
MARKET AREA AND DEMOGRAPHICS
Elgin is located in the Fox River Valley approximately 38 miles northwest of
downtown Chicago and 25 miles west of O'Hare International Airport. Neighboring
communities include Sleepy Hollow, West Dundee and East Dundee to the north,
Hoffman Estates and Streamwood to the east, Bartlett to the southeast and South
Elgin to the south. Elgin and its surrounding communities are in one of the
fastest growing areas in northeastern Illinois. Elgin's population based upon
the 1990 census was 77,010, an increase of approximately 21% from the
community's population recorded in the 1980 census. The Northeastern Illinois
Planning Commission estimates that Elgin's population will grow by approximately
30% to 100,000 by the year 2010.
One of the major contributors to this population growth has been the expansion
of the boundaries of metropolitan Chicago. Elgin is located on U.S. Interstate
90 (the Northwest Tollway), which provides easy access to the city of Chicago
and is a major corridor of suburban growth for Chicago. As the Chicago suburbs
have extended to the northwest, Elgin has experienced a considerable influx of
people and a number of new employers. As a result, a new service-oriented
business sector has developed to supplement Elgin's historical manufacturing
base. See "Business of the Association -- Market Area" and " -- Competition."
THE CONVERSION AND THE SUBSCRIPTION AND COMMUNITY OFFERINGS
On April 18, 1996, the Board of Directors of the Association adopted the Plan
of Conversion (which was amended on June 6, 1996) pursuant to which the
Association is converting from a federally chartered mutual savings and loan
association to a federally chartered stock savings and loan association, and all
of the outstanding capital stock of the Association will be acquired by the
Company in exchange for at least 50% of the net proceeds from the Offerings.
The Conversion and the Offerings are subject to OTS approval, which was received
on ______ __, 1996, and approval of the Association's members at a special
meeting to be held on ______ __, 1996. See "The Conversion -- General." The
Association is converting to increase its capital and to structure itself in a
form used by commercial banks and many other business entities and a growing
number of savings institutions. The Conversion will enhance the Association's
ability to access capital markets, expand its current operations, acquire other
financial institutions or branch offices, provide affordable home financing
opportunities to the communities it serves and diversify into other financial
services to the extent allowable by applicable law and regulation. The holding
company form of organization would provide additional flexibility to diversify
the Association's business activities through existing or newly-formed
subsidiaries or through acquisitions of or mergers with both mutual and stock
institutions, as well as other companies. Although there are no current
arrangements, understandings or agreements, written or oral, regarding any such
opportunities, the Company will be in a position after the Conversion, subject
to regulatory limitations and the Company's financial position, to take
advantage of any such opportunities that may arise. See "The Conversion --
Purposes of Conversion." The holding company form of organization also provides
certain anti-takeover protections. See "Risk Factors -- Certain Anti-Takeover
Provisions."
Common Stock will be offered in the Subscription Offering and, to the extent
shares are available, in the Community Offering. To the extent that shares are
available after the expiration of the Community
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Offering, such shares may be offered in the Syndicated Community Offering. See
"The Conversion -- Syndicated Community Offering." Common Stock offered in the
Subscription Offering will be offered in the following order of priority: (1)
depositors whose deposits in qualifying accounts in the Association totaled $50
or more on March 31, 1995 ("Eligible Account Holders"); (2) the ESOP; (3)
depositors whose deposits in qualifying accounts in the Association totaled $50
or more on June 30, 1996, other than (i) those depositors who would otherwise
qualify as Eligible Account Holders or (ii) directors or officers of the
Association or their Associates (as defined herein under "The Conversion --
Limitations on Common Stock Purchases") ("Supplemental Eligible Account
Holders"); and (4) members of the Association, consisting of depositors and
borrowers of the Association as of [________ __, 1996,] the voting record date
(the "Voting Record Date") for the special meeting of members to vote on the
Conversion, other than those members who otherwise qualify as Eligible Account
Holders or Supplemental Eligible Account Holders ("Other Members").
Subscription rights will expire if not exercised by, and the Subscription
Offering will terminate at, 12:00 Noon, Central Time, on the Expiration Date,
unless extended by the Association and the Company, with approval of the OTS, if
necessary. Subject to the prior rights of holders of subscription rights,
Common Stock not subscribed for in the Subscription Offering will be
subsequently offered in the Community Offering to certain members of the general
public, with preference given to natural persons residing in Kane, DuPage and
McHenry counties, the counties in which the Association's offices are located.
The Company and the Association have the option to reserve up to 25% of the
Common Stock offered in the Community Offering for purchase by certain
institutional investors. The Company and the Association reserve the absolute
right to reject or accept any orders in the Community Offering, in whole or in
part, either at the time of receipt of an order or as soon as practicable
following the expiration of the Community Offering. The Community Offering will
terminate not later than 45 days after the Expiration Date. The Association and
the Company have retained Hovde as consultant and advisor in connection with the
Offerings and to assist in soliciting subscriptions and purchase orders in the
Offerings. The Association and the Company will pay a fee to Hovde which will
be based on the aggregate Purchase Price of the Common Stock sold in the
Offerings. See "The Conversion -- Marketing and Underwriting Arrangements."
In connection with the Conversion, the Company has established, and the
Association has adopted, the ESOP for eligible employees of the Association and
the Company. The ESOP intends to subscribe for 8% of the shares of Common Stock
issued in the Conversion. At a meeting of stockholders to be held no earlier
than six months following the completion of the Conversion, the Company intends
to seek stockholder approval of the Stock Option and Incentive Plan for
Employees and the Stock Option Plan for Outside Directors (the "Stock Option
Plans") and certain other stock-based compensation plans (the "Stock Programs")
which the Company intends to establish as a method of providing officers,
employees and non-employee directors of the Association and the Company with a
proprietary interest in the Company in a manner designed to encourage such
persons to remain with the Association and the Company. For a more detailed
discussion of the Stock Option Plans and Stock Programs and the benefits
expected to be received by officers, employees and directors, see " -- Benefits
to Management and Directors," "Risk Factors -- Certain Anti-Takeover Provisions
- -- Voting Control of Officers and Directors" and "Management of the Association
- -- Benefits."
PROSPECTUS DELIVERY AND PROCEDURE FOR PURCHASING SHARES OF COMMON STOCK
To ensure that each purchaser receives a prospectus at least 48 hours prior to
the respective expiration dates for the Offerings in accordance with Rule 15c2-8
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), no
prospectus will be mailed any later than five days prior to any such date or
hand delivered any later than two days prior to any such date. Execution of the
stock order form will confirm receipt of delivery in accordance with Rule 15c2-
8. Each stock order form distributed will be accompanied by a prospectus and
certification form. The Company and the Association are not obligated to accept
for processing orders which are submitted on facsimiled or copied stock order
forms. Stock order forms unaccompanied by an executed original certification
form will not be accepted. Payment by check, money
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order, bank draft, cash or debit authorization to an existing account at the
Association must accompany the stock order form and certification form. No wire
transfers will be accepted. The Association is prohibited from lending funds to
any person or entity for the purpose of purchasing shares of Common Stock in the
Conversion. See "The Conversion -- Procedure for Purchasing Shares in the
Subscription and Community Offerings."
In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priorities, depositors as of the Eligibility Record Date (March 31,
1995), Supplemental Eligibility Record Date (June 30, 1996) and/or the Voting
Record Date (________ ___, 1996) must list all accounts on the stock order form,
giving all names on each account and the account numbers. Failure to list all
such account numbers may result in the inability of the Company or the
Association to fill all or part of a subscription order. See "The Conversion --
Procedure for Purchasing Shares in the Subscription and Community Offerings."
RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES OF COMMON STOCK
Prior to the completion of the Conversion, no person may transfer or enter
into any agreement or understanding to transfer the legal or beneficial
ownership of the subscription rights issued under the Plan or the shares of
Common Stock to be issued upon their exercise. Each person exercising
subscription rights will be required to certify that any purchase of Common
Stock will be solely for the purchaser's own account and that there is no
agreement or understanding regarding the sale or transfer of any shares
purchased as a result of the exercise. The Company and the Association will
pursue any and all legal and equitable remedies in the event they become aware
of the transfer of subscription rights and will not honor orders known by them
to involve the transfer of such rights. See "The Conversion -- Restrictions on
Transfer of Subscription Rights and Shares of Common Stock."
PURCHASE LIMITATIONS
The minimum purchase in the Offerings is 25 shares. The ESOP intends to
subscribe for 8% of the shares of Common Stock issued in the Conversion pursuant
to the subscription rights granted under the Plan. The subscription of the ESOP
will be afforded a second priority behind the subscription rights of Eligible
Account Holders, except that, in the event of an increase in the amount of
Common Stock to be issued as a result of an increase of up to 15% in the maximum
of the Estimated Price Range, the subscription of the ESOP will be afforded a
first priority with respect to such increase in shares. No Eligible Account
Holder, Supplemental Eligible Account Holder or Other Member, in their capacity
as such, may subscribe in the Subscription Offering for more than $200,000 of
the Common Stock offered; no person, together with associates of or persons
acting in concert with such person, may purchase in the Community Offering and
the Syndicated Community Offering in the aggregate more than $200,000 of the
Common Stock offered; and, except for the ESOP, no person, together with
associates of or persons acting in concert with such person, may purchase more
than the overall maximum purchase limitation of 1.0% of the total number of
shares of Common Stock offered in the Offerings. At any time during the
Conversion and without further approval by the Association's members, the
Company and the Association may in their sole discretion decrease the maximum
purchase limitation below $200,000 of the Common Stock offered. Additionally,
at any time during the Conversion and without further approval by the
Association's members, the Company and the Association may in their sole
discretion increase the overall maximum purchase limitation, and increase the
amount that may be subscribed for in the Offerings, to up to 5% of the shares
offered or, if orders for Common Stock that exceed 5% of the total offering of
shares do not, in the aggregate, exceed 10% of the total shares offered, to up
to 9.99% of the total offering of shares. Prior to consummation of the
Conversion, if such amount is increased, subscribers for the maximum amount will
be, and certain other large subscribers in the sole discretion of the
Association may be, given the opportunity to increase their subscriptions up to
the then
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applicable limit. See "The Conversion -- Limitations on Common Stock Purchases"
and "The Conversion -- Community Offering." In the event of an increase in the
total number of shares up to 15%, the additional shares will be distributed and
allocated to fill unfilled orders in the Subscription and Community Offerings,
with priority given to the subscription of the ESOP, without any resolicitation
of subscribers, as described in "The Conversion -- Subscription Offering and
Subscription Rights" and "-- Limitations on Common Stock Purchases."
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION
Federal regulations require that the aggregate purchase price of the Common
Stock to be issued in the Conversion be consistent with an independent appraisal
of the estimated pro forma market value of the Common Stock following the
Conversion. RP Financial, an independent appraiser, has advised the Association
that in its opinion, dated June 7, 1996, the aggregate estimated pro forma
market value of the Common Stock ranged from $48,875,000 to $66,125,000, with a
midpoint of $57,500,000. The Board of Directors of the Association has
established the Estimated Price Range of $48.9 million to $66.1 million,
assuming the issuance of between 4,887,500 and 6,612,500 shares of Common Stock
at the Purchase Price of $10.00 per share. THE APPRAISAL OF THE COMMON STOCK IS
NOT INTENDED AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION OF ANY KIND AS TO
THE ADVISABILITY OF PURCHASING SUCH STOCK NOR CAN ANY ASSURANCE BE GIVEN THAT
PURCHASERS OF THE COMMON STOCK IN THE CONVERSION WILL BE ABLE TO SELL SUCH
SHARES AFTER THE COMPLETION OF THE CONVERSION AT OR ABOVE THE PURCHASE PRICE.
All shares of Common Stock issued in the Conversion will be sold at the
Purchase Price, as determined by the Association and approved by the Company.
The actual number of shares to be issued in the Conversion will be determined by
the Company and the Association based upon the final updated valuation of the
estimated pro forma market value of the Common Stock, giving effect to the
Conversion, at the completion of the Offerings. The number of shares to be
issued is expected to range from a minimum of 4,887,500 shares to a maximum of
6,612,500 shares. Subject to approval of the OTS, the Estimated Price Range may
be increased or decreased to reflect market and economic conditions prior to the
completion of the Conversion, and under such circumstances the Company may
increase or decrease the number of shares of Common Stock to be issued in the
Conversion. The maximum of the Estimated Price Range may be increased by up to
15% and the number of shares of Common Stock to be issued in the Conversion may
be increased to 7,604,375 shares due to regulatory considerations, changes in
the market and general financial and economic conditions. No resolicitation of
subscribers will be made and subscribers will not be permitted to modify or
cancel their subscriptions unless the gross proceeds from the sale of the Common
Stock are less than the minimum or more than 15% above the maximum of the
current Estimated Price Range. See "Pro Forma Data," "Risk Factors -- Possible
Increase in Estimated Price Range and Number of Shares Issued" and "The
Conversion -- Stock Pricing" and "-- Number of Shares to be Issued."
USE OF PROCEEDS
Net proceeds from the sale of the Common Stock are estimated to be between
$47.3 million and $64.3 million (or $74.1 million if the Estimated Price Range
is increased by 15%) depending on the number of shares sold and the expenses of
the Conversion. See "Pro Forma Data." The Company will use the net proceeds
from the sale of the Common Stock as follows:
1. The Company will purchase all of the capital stock of the Association to
be issued upon Conversion in exchange for at least 50% of the net proceeds.
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2. The remaining net proceeds will be retained by the Company. Net proceeds
to be retained by the Company after the purchase of the capital stock of the
Association are estimated to be between $23.7 million and $32.2 million (or
$37.1 million if the Estimated Price Range is increased by 15%).
3. The Company intends to use a portion of the retained net proceeds to make
a loan directly to the ESOP to enable the ESOP to purchase 8% of the shares to
be issued in the Conversion. The amount of the loan to the ESOP is estimated to
be between $3.9 million and $5.3 million (or $6.1 million if the Estimated Price
Range is increased by 15%) to be repaid over a period of up to 10 years at an
interest rate of 8%. See "Management of the Association -- Benefits -- Employee
Stock Ownership Plan and Trust."
DIVIDENDS
Upon completion of the Conversion, the Board of Directors of the Company will
have the authority to declare dividends on the Common Stock. The Board of
Directors may consider a policy of paying cash dividends on the Common Stock,
subject to statutory and regulatory requirements. However, no decision has been
made as to the amount or timing of such dividends, if any. Declarations of
dividends, if any, by the Board of Directors will depend upon a number of
factors, including the amount of the net proceeds from the Offerings retained by
the Company, investment opportunities available to the Company or the
Association, capital requirements, regulatory limitations, the Company's and the
Association's financial condition and results of operations, tax considerations,
general economic conditions, industry standards and other factors. As the
principal asset of the Company, the Association will provide the principal
source of funds for payment of dividends by the Company. See "Dividend Policy."
BENEFITS TO MANAGEMENT AND DIRECTORS
Stock Option Plans. Following the Conversion, the Company intends to adopt
the Stock Option Plans. The adoption of the Stock Option Plans will be subject
to stockholder approval obtained at a meeting of stockholders to be held no
earlier than six months after the completion of the Conversion. Assuming the
receipt of stockholder approval, an amount of shares of Common Stock equal to
10% of the Common Stock issued in the Conversion (488,750 shares and 661,250
shares at the minimum and maximum of the Estimated Price Range, having an
aggregate fair market value of $4.9 million and $6.6 million, respectively,
based on a Purchase Price of $10.00 per share) is expected to be reserved for
issuance under the Stock Option Plans. No determinations have been made by the
Company as to the specific terms of the Stock Option Plans or the amount of
awards to be made thereunder. Current OTS regulations provide that no
individual employee may receive more than 25% of the options granted, and non-
employee directors may not receive more than 5% individually or 30% in the
aggregate of the options granted, under option plans implemented within one year
following the Conversion. See "Management of the Association -- Benefits --
Stock Option Plans."
Stock Programs. Following the Conversion, the Company also intends to adopt
certain Stock Programs for the benefit of officers, employees and non-employee
directors of the Company and the Association. The adoption of the Stock
Programs will be subject to stockholder approval obtained at a meeting of
stockholders to be held no earlier than six months after the completion of the
Conversion. Assuming the receipt of stockholder approval, the Association
expects to contribute funds to the Stock Programs to enable their related trusts
to acquire, in the aggregate, up to 4% (3% unless OTS approval is obtained) of
the shares of Common Stock issued in the Conversion, or 195,500 shares and
264,500 shares at the minimum and maximum of the Estimated Price Range,
respectively, having an aggregate fair market value of $2.0 million and $2.6
million, respectively, based on a Purchase Price of $10.00 per share. These
shares will be acquired either through open market purchases, subject to OTS
approval, if necessary, or from authorized but unissued Common Stock. See "Risk
Factors -- Possible Dilutive Effect of Stock Options and Stock Programs." No
determinations have been made by the Company as to the specific terms of the
Stock
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Programs or the amount of awards to be made thereunder. Current OTS regulations
provide that no individual employee may receive more than 25% of the shares of
any plan, and that non-employee directors may not receive more than 5% of the
shares individually or 30% in the aggregate, in the case of plans implemented
within one year following the Conversion. Under the anticipated terms of the
Stock Programs, recipients would vote any shares allocated to them and an
independent trustee would vote unallocated shares in the same proportion as it
receives instructions from recipients with respect to allocated shares which
have not been vested and distributed. See "Management of the Association --
Benefits -- Stock Programs."
ESOP. The Association and the Company have established the ESOP for the
benefit of eligible employees, including officers. The ESOP intends to
subscribe for up to 8% of the Common Stock issued in the Conversion (7% unless
OTS approval is obtained) and to finance its subscription with funds anticipated
to be borrowed from the Company for a period of up to 10 years at an interest
rate of 8% per annum. The Association and the Company intend to make cash
contributions to the ESOP as required for debt service. The Common Stock
acquired by the ESOP will initially be held in a suspense account and will be
allocated to eligible employees as the loan is repaid. See "Management of the
Association -- Benefits -- Employee Stock Ownership Plan and Trust."
Termination of Pension Plan. In connection with the Conversion and the
implementation of the ESOP, the Association intends to terminate its tax-
qualified defined benefit pension plan on August 31, 1996. Plan benefits will
cease to accrue on June 30, 1996. Such termination will result in the vesting
of all benefits and will afford each participant the option of receiving an
immediate lump sum payment in settlement of all benefit entitlements. The
estimated cost of terminating the pension plan is $1.0 million. Termination of
the pension plan is expected to be completed by March 31, 1997. See "Management
of the Association -- Benefits."
Employment Arrangements With Senior Management and Key Personnel. The
Association and the Company intend to enter into employment arrangements with
certain senior management and key employees that will provide for benefit and
cash payments to be made in the event of their termination of employment
following a change of control of the Association or the Company. The provisions
of these arrangements, described below, may have the effect of increasing the
cost of acquiring the Company, thereby discouraging future attempts to take over
the Company or the Association.
Based on current compensation and benefit costs, cash payments to be made in
the event of a change of control of the Association or the Company pursuant to
the terms of the Employment Agreements would be approximately $1,940,000 of
which approximately $955,000 would be payable to Mr. Perucco, $555,000 would be
payable to Mr. Dolan and $430,000 would be payable to Mr. Moran. However, the
actual amount to be paid under the Employment Agreements in the event of a
change of control of the Association or the Company cannot be estimated at this
time because the actual amount is based on the compensation and benefit costs
applicable to these individuals and other factors existing at the time of the
change of control which cannot be determined at this time. See "Management of
the Association -- Employment Agreements."
The Association and the Company also intend to enter into employee retention
agreements ("Retention Agreements"), effective on the Conversion, with certain
other officers ("Contract Employee(s)"). Based on current compensation and
benefit costs applicable to the Contract Employees expected to be covered by the
Retention Agreements, cash payments to be made in the event of a change of
control of the Association or the Company would be approximately $530,000.
However, the actual amount to be paid under the Retention Agreements in the
event of a change of control of the Association or the Company cannot be
estimated at this time because it will be based on the compensation and benefit
costs applicable to the Contract Employees and other factors existing at the
time of the change of control which cannot be determined at this time. See
"Management of the Association -- Employee Retention Agreements."
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Other Change in Control Provisions. The Association's Employee Severance Pay
Plan provides for benefits and/or cash payments in the event of a change of
control of the Company or the Association. Certain anticipated provisions of
the Stock Option Plans and Stock Programs (which the Company intends to adopt
and which will only become effective upon stockholder approval obtained at a
meeting of stockholders to be held no earlier than six months after completion
of the Conversion) provide for cash payments and/or accelerated vesting in the
event of a change of control of the Company or the Association. The ESOP
provides for accelerated vesting in the event of a change of control. These
provisions may also have the effect of increasing the cost of acquiring the
Company. Based on current salaries, cash payments to be paid in the event of a
change of control pursuant to the terms of the Employee Severance Pay Plan would
be approximately $[ ]. However, the actual amount to be paid in the event
of a change of control of the Association or the Company cannot be estimated at
this time, because it will be based on the compensation and benefits, as
applicable, for each covered individual and other factors existing at the time
of the change of control which cannot be determined at this time. See
"Restrictions on Acquisition of the Company and the Association -- Restrictions
in the Company's Certificate of Incorporation and Bylaws," "Management of the
Association -- Employee Severance Compensation Plan," "-- Benefits -- Employee
Stock Ownership Plan and Trust," "-- Benefits -- Stock Option Plans," and "--
Benefits -- Stock Programs."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered by prospective investors, including: Potential Impact of Changes in
Interest Rates; Impact of the Economy on Operations; Competition;
Recapitalization of the SAIF; SAIF Premiums and Possible Special Assessment;
Pending Tax Legislation Regarding Tax Bad Debt Reserves; Impact of Technological
Advances; Residential and Non-Residential Lending Risks; Certain Anti-Takeover
Provisions; Absence of Market for Common Stock and Recent Performance of
Conversion Offerings; Possible Increase in Estimated Price Range and Number of
Shares Issued; Possible Dilutive Effect of Stock Options and Stock Programs;
Possible Adverse Income Tax Consequences of the Distribution of Subscription
Rights; Financial Institution Regulation and Possible Legislation; and Risk of
Delayed Offering.
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<PAGE>
SELECTED FINANCIAL AND OTHER DATA OF THE ASSOCIATION
The selected financial and other data of the Association set forth below is
derived in part from, and should be read in conjunction with, the Financial
Statements of the Association and Notes thereto presented elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AT MARCH AT DECEMBER 31,
31, -------------------------------------------------------
1996 1995 1994 1993 1992 1991
-------- -------- -------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets...................................... $306,688 $304,520 $306,956 $34,390 $347,173 $320,650
Loans receivable, net(1).......................... 264,082 267,153 271,040 01,676 289,186 267,481
Investment securities held to maturity............ 5,955 5,948 5,918 -- 6,019 16,092
Savings deposits.................................. 264,485 259,972 267,938 93,932 318,971 296,212
Borrowed funds.................................... -- 4,000 -- 7,000 -- --
Retained earnings, substantially restricted....... 37,195 36,683 34,319 29,961 25,701 21,933
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
-------------------- ------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- ------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Interest income................................... $ 5,629 $ 5,748 $ 22,925 $24,669 $27,652 $ 28,639 $ 30,975
Interest expense on savings deposits and borrowed 2,773 2,548 10,850 10,484 11,791 14,068 19,071
funds............................................ -------- -------- -------- ------- ------- -------- --------
Net interest income before provision for 2,856 3,200 12,075 14,185 15,861 14,571 11,904
loan losses.................................
Provision for loan losses......................... 30 45 180 240 240 256 232
-------- -------- -------- ------- ------- -------- --------
Net interest income after provision for loan 2,826 3,155 11,895 13,945 15,621 14,315 11,672
losses......................................
Noninterest income, excluding gain on sale of 319 269 1,150 1,471 1,566 1,244 1,178
branches.........................................
Gain on sale of branches.......................... -- -- -- 1,683 822 -- --
-------- -------- -------- ------- ------- -------- --------
Noninterest expense............................... 2,303 2,288 9,069 9,624 10,402 9,526 9,018
-------- -------- -------- ------- ------- -------- --------
Income before income tax expense and cumulative 842 1,136 3,976 7,475 7,607 6,033 3,832
effect of change in accounting principle.....
Income tax expense................................ 330 441 1,612 3,117 2,998 2,265 1,441
-------- -------- -------- ------- ------- -------- --------
Income before cumulative effect of change in
accounting principle......................... 512 695 2,364 4,358 4,609 3,768 2,391
Cumulative effect of change in accounting for -- -- -- -- 348 -- --
income taxes (2)................................ -------- -------- -------- ------- ------- -------- --------
Net income................................... $ 512 $ 695 $ 2,364 $ 4,358 $ 4,261 $ 3,768 $ 2,391
======== ======== ======== ======= ======= ======== ========
</TABLE>
(Notes on following page)
14
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE THREE
MONTHS ENDED
MARCH 31, AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------- ----------------------------------------------------
1996 1995 1995 1994(3) 1993(3) 1992 1991
---------- --------- -------- ---------- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS(4):
PERFORMANCE RATIOS:
Return on average assets.................... 0.68% 0.91% 0.78% 1.33% 1.22% 1.13% 0.73%
Return on average equity.................... 5.53 7.87 6.53 13.46 15.26 15.89 11.51
Average interest rate spread(5)............. 3.53 4.03 3.78 4.31 4.60 4.45 3.71
Net interest margin(6)...................... 3.98 4.41 4.19 4.53 4.77 4.60 3.82
Average interest-earning assets to average
interest-bearing liabilities............ 111.87 110.85 111.09 106.84 104.71 103.48 101.89
Noninterest expense to average assets....... 3.04 3.01 2.99 2.93 2.98 2.86 2.73
CAPITAL RATIOS(4)(7):
Average equity to average assets............ 12.23 11.61 11.93 9.84 7.99 7.12 6.30
Equity to total assets at end of period..... 12.13 11.63 12.05 11.18 8.96 7.40 6.84
Tangible capital............................ 12.04 11.56 11.96 11.18 8.95 7.40 6.82
Core capital................................ 12.04 11.56 11.96 11.18 8.95 7.40 6.82
Total risk-based capital.................... 23.65 22.60 23.32 21.90 16.39 14.10 11.62
ASSET QUALITY RATIOS AND OTHER DATA:(4)
Total non-performing loans(8)................ $ 1,077 $ 967 $ 916 $ 986 $ 1,642 $ 2,356 $ 1,920
Real estate owned, net....................... 377 455 496 514 433 629 198
Non-performing loans to total loans.......... 0.41% 0.36% 0.34% 0.36% 0.54% 0.81% 0.72%
Non-performing assets to total assets........ 0.47 0.47 0.46 0.49 0.62 0.86 0.66
Allowance for loan losses to:
Non-performing loans....................... 79.48 71.77 90.17 65.82 24.91 23.26 18.49
Total loans(9)............................. 0.32% 0.26% 0.31% 0.24% 0.14% 0.19% 0.13%
Full service offices......................... 5 5 5 5 7 8 8
- --------------------
</TABLE>
(1) Loans receivable, net, represents gross loans less net deferred loan fees,
loans in process and allowance for loan losses.
(2) Pursuant to Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"), on January 1, 1993, the
Association changed prospectively from the deferred method to the liability
method of accounting for income taxes. The effect of the adoption of this
standard is reflected in the financial statements as the cumulative effect
of change in accounting principle.
(3) Includes gain on sale of branches of $1.7 million in 1994 and $822,000 in
1993.
(4) With the exception of end-of-period ratios, all ratios are based on average
monthly balances during the indicated periods and are annualized where
appropriate. Asset Quality Ratios and Regulatory Capital Ratios are end-
of-period ratios.
(5) The interest rate spread represents the difference between the weighted-
average yield on interest-earning assets and the weighted-average cost of
interest-bearing liabilities.
(6) The net interest margin represents net interest income as a percent of
average interest-earning assets.
(7) For definitions and further information relating to the Association's
regulatory capital requirements, see "Regulation -- Regulation of Federal
Savings Associations -- Capital Requirements." See "Regulatory Capital
Compliance" for the Association's pro forma capital levels as a result of
the Offerings.
(8) Non-performing loans consists of non-accrual loans; the Association did not
have any loans that were 90 days or more past due and still accruing at any
of the dates presented.
(9) Total loans represents gross loans less deferred loan fees and loans in
process.
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<PAGE>
RISK FACTORS
The following risk factors in addition to those discussed elsewhere in this
Prospectus should be considered by investors in deciding whether to purchase the
Common Stock offered hereby.
POTENTIAL IMPACT OF CHANGES IN INTEREST RATES
The Association's profitability, like that of most financial institutions, is
dependent to a large extent upon its net interest income, which is the
difference between its interest income on interest-earning assets, such as loans
and securities, and its interest expense on interest-bearing liabilities, such
as savings deposits and borrowed funds. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Analysis of Net
Interest Income."
A substantial portion of the Association's assets consist of fixed-rate
residential mortgage loans with contractual maturities of up to 30 years. At
March 31, 1996, an aggregate of $202.9 million, or 75.9%, of gross loans were
invested in such assets. In addition, the Association generally accepts savings
deposits for considerably shorter terms than its fixed-rate mortgage loans. As
a result, at March 31, 1996, the Association's total interest-bearing
liabilities maturing or repricing within one year exceeded its net total
interest-earning assets maturing or repricing in the same time period by $88.4
million, representing a one-year interest sensitivity gap as a percentage of
total assets of negative 28.8%. Management anticipates that substantially all
of the maturing or repricing liabilities will be retained by the Association.
As a result of the Association's negative gap position, the yield on interest-
earning assets of the Association will adjust to changes in interest rates at a
slower rate than the cost of the Association's interest-bearing liabilities. As
a consequence, any significant increase in interest rates could have an adverse
effect on the Association's results of operations. Increases in the level of
interest rates also may adversely affect the fair value of the Association's
securities and other interest-earning assets. Generally, the fair value of
fixed-rate instruments fluctuates inversely with changes in interest rates. As a
result, increases in interest rates could result in decreases in the fair value
of interest-earning assets which could adversely affect the Association's
results of operations if such interest-earning assets are sold prior to
maturity. Increases in interest rates also can affect the type (fixed-rate or
adjustable-rate) and amount of loans originated by the Association and the
average life of loans and securities, which can adversely impact the yields
earned on the Association's loan and securities portfolio. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Management of Interest Rate Risk."
Under interest rate scenarios other than that which existed on March 31, 1996,
the gap ratio for the Association's assets and liabilities could differ
substantially based upon different assumptions about how deposit decay rates and
loan prepayments would change. For example, the Association's interest rate
risk management model assumes that in a rising rate scenario, by paying
competitive rates on non-transactional deposits, a large share of transactional
deposits will transfer to certificates of deposit and be retained, although at a
higher cost to the Association. Also, loan and mortgage-backed security
prepayment rates would be expected to slow, as borrowers postpone property sales
or loan refinancings until rates again decline. However, there can be no
assurance that the Association's results of operations would not be adversely
affected in a period of rising interest rates. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Management
Strategy."
IMPACT OF THE ECONOMY ON OPERATIONS
Declines in the local economy, national economy or real estate market could
adversely affect the financial condition and results of operations of the
Association, including through decreased demand for loans or increased
competition for good loans, increased non-performing loans and loan losses and
resulting additional provisions for loan losses and for losses on real estate
owned. Although management of the Association believes that the current
allowance for loan losses is adequate in light of current economic conditions,
many factors may require additions to the allowance for loan losses in future
periods above those reasonably anticipated. These factors include: (i) adverse
changes in economic conditions and changes in
16
<PAGE>
interest rates that may affect the ability of borrowers to make payments on
loans, (ii) changes in the financial capacity of individual borrowers, (iii)
changes in the local real estate market and the value of the Association's loan
collateral and (iv) future review and evaluation of the Association's loan
portfolio, internally or by regulators. The amount of the allowance for loan
losses at any time represents estimates made by management that are susceptible
to significant changes due to changes in values of collateral, national and
regional economic conditions, prevailing interest rates and other factors.
Future adjustments to the allowance also may be necessary if economic or other
conditions differ substantially from those underlying the assumptions used in
making such estimates.
COMPETITION
The Association faces intense and increasing competition both in making loans
and in attracting savings deposits. The Association's market area has a high
density of financial institutions, many of which have greater financial
resources, name recognition and market presence than the Association, and all of
which are competitors of the Association to varying degrees. Particularly
intense competition exists for savings deposits and the origination of all of
the loan products emphasized in the Association's business plan. The
Association's competition for loans comes principally from commercial banks,
savings banks, other savings and loan associations, mortgage banking companies,
finance companies and credit unions. The Association's most direct competition
for savings deposits historically has come from savings banks, other savings and
loan associations, commercial banks and credit unions. In addition, the
Association faces increasing competition for savings deposits from non-bank
institutions such as brokerage firms, insurance companies, money market mutual
funds, other mutual funds (such as corporate and government securities funds)
and annuities. Trends toward the consolidation of the banking industry and the
lifting of interstate banking and branching restrictions may make it more
difficult for smaller institutions, such as the Association, to compete
effectively with large national and regional banking institutions. See
"Business of the Association."
RECAPITALIZATION OF THE SAIF; SAIF PREMIUMS AND POSSIBLE SPECIAL ASSESSMENT
Under current law, SAIF-insured institutions pay deposit insurance assessment
rates of $0.23 to $0.31 per $100 of deposits. In contrast, institutions that
are insured by the FDIC's Bank Insurance Fund (the "BIF") and that are well
capitalized and without any significant supervisory concerns pay the minimum
annual assessment of $2,000, and all other BIF-insured institutions pay deposit
insurance assessment rates of $0.03 to $0.27 per $100 of deposits. See
"Regulation -- Regulation of Federal Savings Associations -- Insurance of
Deposit Accounts."
As a result of the BIF premium reduction, institutions that are required to
pay SAIF assessments, such as the Association, are likely to be subject to a
competitive disadvantage relative to BIF-insured institutions, subject to the
adoption of legislation to remedy the disparity. The FDIC has recognized that
the assessment disparity may have adverse consequences for SAIF-insured
institutions, including reduced earnings and an impaired ability to raise funds
in capital markets and to attract deposits.
The proposed Balanced Budget Act of 1995 (the "Budget Act"), which was
approved by the Congress but vetoed by the President, included provisions that
focused on a recapitalization of the SAIF. Under the provisions of the Budget
Act, all SAIF-member institutions would have paid a special assessment to
recapitalize the SAIF, and the assessment base for the payments on the FICO
bonds would have been expanded to include the deposits of both BIF- and SAIF-
insured institutions. The amount of the special assessment required to
recapitalize the SAIF was then estimated to be approximately 80 basis points of
the SAIF-assessable deposits. This estimate of the special assessment was less
than the special assessment of 85 to 90 basis points that had been previously
estimated. The special assessment would have been imposed as of the first
business day of January 1996 or on such other date prescribed by the FDIC not
later than 60 days after enactment of the Budget Act, based on the amount of
SAIF deposits on March 31, 1995. It is the view of the Treasury Department that
the special SAIF assessment is deductible in accordance with the Association's
tax method of accounting. If an 80 basis point assessment were assessed against
the Association's savings
17
<PAGE>
deposits as of March 31, 1995, the Association's special assessment would be
approximately $2.1 million, or $1.3 million on an after tax basis.
The Budget Act also provided for the merger of the BIF and SAIF on January 1,
1998, with such merger being conditioned upon the prior elimination of the
thrift charter. Congressional leaders had also agreed that Congress should
consider and act upon separate legislation to eliminate the thrift charter as
early as possible in 1996. If adopted, such legislation would require that the
Association, as a federal savings and loan association, convert to a bank
charter. See "-- Financial Institution Regulation and Possible Legislation."
The veto of the Budget Act by the President was not based on the above
described provisions of the Budget Act, and the federal banking regulators
continue to seek a legislative solution for the recapitalization of the SAIF.
In February 1996, representatives of the FDIC, the OTS and the Treasury
Department stated to Congress that, unless Congress adopts legislation to
strengthen the SAIF, the SAIF's current problems could result in an erosion of
the SAIF deposit base, could cause a default on the FICO bonds that are paid
from SAIF assessments, and could leave the SAIF unable to meet its obligations
to insured depositors.
If enacted by Congress, legislation to recapitalize the SAIF as proposed in
the Budget Act would have the effect of reducing the capital of SAIF member
institutions by the after-tax cost of the special SAIF assessment, plus any
related additional tax liabilities. The legislation would also have the effect
of reducing any differential that may otherwise be required in the assessment
rates for the BIF and SAIF.
Management cannot predict whether the above legislation or any other
legislative proposal will be enacted as described above or, if enacted, the
amount of any special SAIF assessment, whether ongoing SAIF premiums will be
reduced to a level equal to that of BIF premiums or whether, if thrifts are
required to convert to a bank charter, there will be any relief from the
additional tax liabilities that would be incurred upon the recapture of their
bad debt reserves. It also cannot be predicted whether some other legislative
action will be taken to address the BIF/SAIF disparity and what consequences
such action could have for SAIF members. A significant increase in SAIF
insurance premiums, either absolutely or relative to BIF premiums or a
significant one-time fee to recapitalize the SAIF could have an adverse effect
on the operating expenses and results of operations of the Association.
PENDING TAX LEGISLATION REGARDING TAX BAD DEBT RESERVES
For federal income tax purposes, thrift institutions such as the Association,
which meet certain definitional tests primarily relating to their assets and the
nature of their business, are permitted to establish a tax reserve for bad debts
and to make annual additions thereto, which additions may, within specified
limitations, be deducted in arriving at their taxable income. The Association's
deduction with respect to "qualifying loans," which are generally loans secured
by certain interests in real property, may currently be computed using an amount
based on the Association's actual loss experience (the "Experience Method"), or
a percentage equal to 8.0% of the Association's taxable income (the "PTI
Method"), computed without regard to this deduction and with additional
modifications and reduced by the amount of any permitted addition to the non-
qualifying reserve. See "Federal and State Taxation -- Federal Taxation -- Tax
Bad Debt Reserves."
Under pending legislative proposals, the PTI Method would be repealed and the
Association would be permitted to use only the Experience Method of computing
additions to its bad debt reserve. In addition, the Association would be
required to recapture (i.e., take into income) over a six-year period,
beginning with the Association's taxable year beginning January 1, 1996, the
excess of the balance of its bad debt reserves (other than the supplemental
reserve) as of December 31, 1995 over the greater of (a) the balance of such
reserves as of December 31, 1987 (or a lesser amount since the Association's
loan portfolio has decreased since December 31, 1987) or (b) an amount that
would have been the balance of such reserves as of December 31, 1995 had the
Association always computed the additions to its reserves using the six-year
moving average Experience Method. However, under the proposed legislation, such
recapture requirements would be suspended for each of two successive taxable
years beginning January 1, 1996 in which the Association originates a minimum
amount of certain residential loans based upon the average of the principal
amounts of
18
<PAGE>
such loans made by the Association during its six taxable years preceding
January 1, 1996. The enactment of such legislation, in its present form, would
result in an aggregate tax liability of $1.9 million associated with such
recapture. Since the Association has already provided a deferred income tax
liability of this amount for financial reporting purposes, the enactment of such
legislation will not adversely impact the Association's financial condition or
results of operations.
IMPACT OF TECHNOLOGICAL ADVANCES
The banking industry is undergoing rapid technological changes with frequent
introductions of new technology-driven products and services. In addition to
improving customer services, the effective use of technology increases
efficiency and enables financial institutions to reduce costs. The Company's
future success will depend, in part, on its ability to address the needs of its
customers by using technology to provide products and services that will satisfy
customer demands for convenience as well as to create additional efficiencies in
the Association's operations. Many of the Association's competitors have
substantially greater resources than the Association to invest in technological
improvements. There can be no assurance that the Association will be able to
effectively implement new technology-driven products and services or be
successful in marketing such products and services to its customers.
RESIDENTIAL AND NON-RESIDENTIAL LENDING RISKS
The Association has historically employed an operating strategy which
emphasized the origination of fixed-rate and adjustable-rate one- to four-family
residential mortgage loans in its delineated lending area. At March 31, 1996,
98.1% of the Association's gross loans were one- to four-family residential
mortgage loans secured by properties located in such area. See "Business of the
Association -- Lending Activities." This lack of geographic diversification
could have an adverse impact on the Association and the Association's
profitability in the event that the Association's delineated lending area were
to suffer a substantial economic decline or a natural disaster, such as a flood.
In addition, the profitability of the Association's one- to four-family
residential lending business could be adversely impacted by competitive market
forces and technological advances of its competitors. See "-- Competition" and
"-- Impact of Technological Advances."
The Association also originates, to a significantly lesser extent,
multifamily, commercial real estate, construction and land and other loans in
its delineated lending area. Multifamily residential, commercial real estate,
construction and land and other loans are generally considered to involve a
higher degree of credit risk than one- to four-family residential mortgage
loans. In particular, multifamily residential and commercial real estate
lending typically involves higher loan amounts, and the repayment of such loans
generally depends on income produced by the property being sufficient to cover
operating expenses and debt service. Circumstances outside the borrower's
control may adversely affect income from the property as well as its market
value. See "Business of the Association -- Lending Activities."
CERTAIN ANTI-TAKEOVER PROVISIONS
Provisions in the Company's and the Association's Governing Instruments.
Certain provisions of the Company's Certificate of Incorporation and Bylaws,
particularly a provision limiting voting rights, and the Association's Stock
Charter and Bylaws, as well as certain federal regulations, assist the Company
in maintaining its status as an independent publicly owned corporation. These
provisions provide for, among other things, supermajority voting on certain
matters, staggered boards of directors, noncumulative voting for directors,
limits on the calling of special meetings, certain uniform price provisions for
certain business combinations and limits on voting shares in excess of 10% of
the outstanding shares. Any person owning in excess of 10% of the outstanding
Common Stock will be limited to one one-hundredth (1/100) of a vote for each
share of the Common Stock owned in excess of the 10% limit. The Association's
Stock Charter also prohibits, for five years, the acquisition of, or the offer
to acquire, directly or indirectly, the beneficial ownership of more than 10% of
the Association's equity securities. In the event that holders of revocable
proxies for more than 10% of the shares of Common Stock of the Company, acting
as a group or in concert with other proxy holders, attempt actions which could
indirectly result in a change in control of the
19
<PAGE>
Association, management of the Association may be able to assert this provision
of the Association's charter against such holders if it deems such assertion to
be in the best interests of the Association, the Company and its stockholders.
It is uncertain, however, if the Association would be successful in asserting
such provisions against such persons. These provisions in the Association's and
the Company's governing instruments may discourage potential proxy contests and
other potential takeover attempts, particularly those which have not been
negotiated with the Board of Directors, and thus, generally may serve to
perpetuate current management. See "Restrictions on Acquisition of the Company
and the Association."
Evaluation of Offers. The Certificate of Incorporation of the Company further
provides that the Board of Directors of the Company, when evaluating any offer
of another "Person" (as defined therein) to (i) make a tender or exchange offer
for any outstanding equity security of the Company, (ii) merge or consolidate
the Company with another corporation or entity or (iii) purchase or otherwise
acquire all or substantially all of the properties and assets of the Company,
shall, in connection with the exercise of its judgment in determining what is in
the best interests of the Company and the stockholders of the Company, give due
consideration to all relevant factors, including, without limitation, the social
and economic effects of acceptance of such offer on the Company's and its
subsidiaries' customers, suppliers, borrowers and employees, and on the
communities in which the Company and its subsidiaries operate or are located.
By having these standards in the Certificate of Incorporation of the Company,
the Board of Directors may be in a stronger position to oppose such a
transaction if the Board concludes that the transaction would not be in the best
interest of the Company, even if the price offered is significantly greater than
the prevailing market price of any equity security of the Company. See
"Restrictions on Acquisition of the Company and the Association."
Voting Control of Officers and Directors. Directors and executive officers of
the Association and the Company expect to purchase approximately 2.8% or 2.1% of
the shares of Common Stock to be sold in the Conversion, based upon the minimum
and the maximum of the Estimated Price Range, respectively. In addition, the
ESOP intends to purchase 8% of the Common Stock. As a result, assuming the
Stock Programs and Stock Option Plans are approved by the Company's
stockholders, directors, executive officers and employees have the potential to
control the voting of approximately 24.1% of the Company's Common Stock (based
on the maximum of the Estimated Price Range), thereby enabling them to prevent
the approval of transactions and other corporate actions requiring 80% approval
of stockholders, such as certain business combinations, the removal by
stockholders of a director for cause and the amendment of certain charter
provisions. As a result, this potential voting control may preclude takeover
attempts that certain stockholders deem to be in their best interest and may
tend to perpetuate existing management. See "Restrictions on Acquisition of the
Company and the Association -- Restrictions in the Company's Certificate of
Incorporation and Bylaws."
ABSENCE OF MARKET FOR COMMON STOCK AND RECENT PERFORMANCE OF CONVERSION
OFFERINGS
The Company and the Association have not previously issued capital stock
(other than shares issued by the Company upon incorporation), and, consequently,
there is no established market for the Common Stock at this time. The Company
has received conditional approval from the NASD to have its Common Stock
approved for quotation on The Nasdaq Stock Market under the symbol "____" upon
completion of the Conversion. One of the requirements for continued quotation
of the Common Stock on The Nasdaq Stock Market is that at least two market
makers be a market maker for the Common Stock. The Company will seek to
encourage and assist at least two market makers to make a market in its Common
Stock. Hovde will assist the Company in such efforts but will not be a market
maker in the Common Stock. While the Company anticipates that there will be
other broker-dealers to act as market maker for the Common Stock, there can be
no assurance that there will be two or more market makers for the Common Stock.
Making a market in securities involves maintaining bid and asked quotations
and being able, as principal, to effect transactions in reasonable quantities at
those quoted prices, subject to various securities laws and other regulatory
requirements. The development of a public trading market depends upon the
existence of willing buyers and sellers, the presence of which is not within the
control of the Company, the Association or any market maker. Accordingly, there
can be no assurance that an active and liquid trading
20
<PAGE>
market for the Common Stock will develop, or, once developed, will continue, nor
can there be any assurances that purchasers of the Common Stock will be able to
sell their shares at or above the Purchase Price. The absence or discontinuance
of a market for the Common Stock may have an adverse impact on both the price
and liquidity of the Common Stock. In addition, the market prices of the common
stock issued in some recent conversions of financial institutions from mutual to
stock form have decreased below their initial offering prices. See "Market for
the Common Stock."
POSSIBLE INCREASE IN ESTIMATED PRICE RANGE AND NUMBER OF SHARES ISSUED
The number of shares to be sold in the Conversion may be increased as a result
of an increase in the Estimated Price Range of up to 15% to reflect changes in
market and financial conditions following the commencement of the Subscription
and Community Offerings. In the event that the Estimated Price Range is so
increased, it is expected that the Company will issue up to 7,604,375 shares of
Common Stock at the Purchase Price for aggregate proceeds of up to $76.0
million. An increase in the number of shares issued would decrease a
subscriber's pro forma net earnings per share and stockholders' equity per share
but would increase the Company's pro forma consolidated stockholders' equity and
net earnings. Such an increase would also increase the Purchase Price as a
percentage of pro forma stockholders' equity per share and net earnings per
share.
POSSIBLE DILUTIVE EFFECT OF STOCK OPTIONS AND STOCK PROGRAMS
An amount equal to 10% of the Common Stock issued in the Conversion has been
reserved for issuance under the Stock Option Plans, the implementation of which
will be subject to the approval of the stockholders of the Company. If all of
the options were to be exercised using authorized but unissued Common Stock, the
voting interests of existing stockholders would be diluted by approximately
9.09%, and, assuming that all options were granted at the Purchase Price, the
effect on pro forma net earnings per share and stockholders' equity per share
would be as set forth under "Pro Forma Data." Also, following the Conversion,
the Stock Programs, if approved by the stockholders of the Company, will acquire
up to 4% of the shares of Common Stock issued in the Conversion, either through
open market purchases, subject to OTS approval, if necessary, or from the
issuance of authorized but unissued shares. If the Stock Programs are funded by
the issuance of authorized but unissued shares, the interests of existing
stockholders would be diluted by approximately 3.85% (assuming no exercise of
any options). See "Pro Forma Data" for the effect on pro forma net earnings per
share and stockholders' equity per share. If the Stock Programs are funded by
open market purchases, the voting interests of existing stockholders would not
be diluted, and, assuming that the shares were acquired at the Purchase Price,
the effect on pro forma net earnings per share and stockholders' equity per
share would be as set forth under "Pro Forma Data."
POSSIBLE ADVERSE INCOME TAX CONSEQUENCES OF THE DISTRIBUTION OF SUBSCRIPTION
RIGHTS
The Association has received an opinion from RP Financial that subscription
rights granted to Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members have no value. However, this opinion is not binding on
the Internal Revenue Service (the "IRS"). If the subscription rights granted to
Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members are deemed to have an ascertainable value, such Eligible Account
Holders, Supplemental Eligible Account Holders or Other Members could be taxable
upon the receipt or exercise of the subscription rights in an amount equal to
such value. Additionally, the Association could recognize a gain for tax
purposes on such distribution. Whether subscription rights are considered to
have ascertainable value is an inherently factual determination. See "The
Conversion -- Effects of Conversion" and "-- Effects of Conversion -- Tax
Aspects."
FINANCIAL INSTITUTION REGULATION AND POSSIBLE LEGISLATION
The Association is subject to extensive regulation and supervision as a
federally chartered savings and loan association. The regulatory authorities
have extensive discretion in connection with their supervision and enforcement
activities and their examination policies, including the imposition of
restrictions on the operation
21
<PAGE>
of a savings institution, the classification of assets by an institution and the
imposition of an increase in a savings institution's allowance for loan losses.
In addition, the Company, as a savings association holding company, will be
subject to extensive regulation and supervision. Any change in the regulatory
structure or the applicable statutes or regulations, whether by the OTS, the
FDIC or the Congress, could have a material impact on the Company, the
Association, its operations and the Association's Conversion. See "Regulation."
Congress has considered various proposals to consolidate and reorganize the
regulatory functions of the four federal banking agencies: the OTS, the FDIC,
the Office of the Comptroller of the Currency (the "OCC") and the Board of
Governors of the Federal Reserve System. Legislation has also been introduced
that would limit the activities of unitary savings association holding companies
to those permitted to be engaged in by multiple savings association holding
companies. See "Regulation -- Regulation of Savings Association Holding
Companies." The outcome of efforts to affect regulatory consolidation and
reorganization and to change the permitted activities of holding companies is
uncertain. Therefore, the Association is unable to determine the extent to
which such legislation, if enacted, would affect its business.
RISK OF DELAYED OFFERING
The successful consummation of the Offerings will depend, in part, upon market
conditions at the time of the Offerings, both generally and with respect to the
Common Stock, and upon the operating results of the Association. In the event
that following completion of the Subscription and Community Offerings, various
factors (including the market demand for the Common Stock as reflected by the
level of subscriptions received in such Offerings) result in the estimated pro
forma market value of the Common Stock (as determined by RP Financial) being
outside the Estimated Price Range, a resolicitation of subscribers likely would
be required, which would delay completion of the Conversion. Developments other
than market conditions could also delay the Conversion; however, management is
currently unaware of any such developments.
OTS regulations require the Conversion to be completed within 45 days after
the completion of the Subscription and Community Offerings. Such 45-day period
may be extended with the approval of the OTS for a period of up to 24 months
after the date of approval of the Plan of Conversion by the Association's
members. In the event that the Association and the Company determine that
economic conditions generally, the market for publicly traded thrift institution
stocks, the operating results of the Association or other factors make a sale of
the Common Stock undesirable, then the Conversion may be delayed until such
conditions improve, subject to any necessary OTS approval. A material delay in
the completion of the Conversion may result in a significant increase in the
costs of the Conversion. In addition, significant changes in the operations and
financial condition of the Association or the Company, the aggregate market
value of the shares to be issued in the Conversion or general market conditions
may occur during any such material delay.
22
<PAGE>
HOME BANCORP OF ELGIN, INC.
The Company was recently organized at the direction of the Board of Directors
of the Association for the purpose of acquiring all of the capital stock to be
issued by the Association in the Conversion. The Company has received approval
from the OTS to become a savings association holding company, and, as such, will
be subject to regulation by the OTS. See "The Conversion -- General." After
completion of the Conversion, the Company will conduct business initially as a
unitary savings association holding company. See "Regulation -- Regulation of
Savings Association Holding Companies." Upon consummation of the Conversion,
the Company's assets will consist of all of the outstanding shares of the
Association's capital stock issued to the Company in the Conversion and no
greater than 50% of the net proceeds of the Offerings. The Company intends to
use part of the retained net proceeds to make a loan directly to the ESOP to
enable the ESOP to purchase 8% of the Common Stock in the Conversion. The
Company will have no significant liabilities. See "Use of Proceeds." The
management of the Company is set forth under "Management of the Company."
Initially, the Company will neither own nor lease any property but will instead
use the premises, equipment and furniture of the Association. At the present
time, the Company does not intend to employ any persons other than officers but
will utilize the support staff of the Association from time to time. Additional
employees will be hired as appropriate to the extent the Company expands its
business in the future.
Management believes that the holding company structure will provide the
Company with additional flexibility to diversify its business activities, should
it decide to do so, through existing or newly-formed subsidiaries, or through
acquisitions of other financial institutions and financial services related
companies. Although there are no current arrangements, understandings or
agreements, written or oral, regarding any such opportunities or transactions,
the Company will be in a position after the Conversion, subject to regulatory
limitations and the Company's financial position, to take advantage of any such
acquisition and expansion opportunities that may arise. The initial activities
of the Company are anticipated to be funded by the proceeds retained by the
Company and earnings thereon or, alternatively, through dividends from the
Association.
The Company's office is located at the main office of the Association at 16
North Spring Street, Elgin, Illinois 60120-5569. The Company's telephone number
is (847) 742-3800.
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
Home Federal Savings and Loan Association of Elgin was originally founded in
1883 as an Illinois state-chartered mutual savings and loan association. On
October 7, 1969, the Association converted to a federally chartered mutual
savings and loan association. The Association has been, and intends to continue
to be, a community-oriented financial institution providing a variety of
financial services to meet the needs of the communities which it serves. The
Association maintains its headquarters in Elgin, Illinois, and operates four
other branch offices in Crystal Lake, Roselle, Bartlett and South Elgin,
Illinois. The Association gathers savings deposits primarily from the
communities and neighborhoods in close proximity to its branch offices. The
Association's delineated lending area is larger, and includes Cook, Kane, Lake,
McHenry, DuPage and DeKalb counties located in Illinois. Most of the
Association's mortgages are secured by properties located in its delineated
lending area. See "Business of the Association -- Market Area" and " --
Competition."
The Association's principal business has been, and continues to be, gathering
savings deposits from customers within its market area, and investing those
savings deposits primarily in one- to four-family residential mortgage loans.
To a lesser extent, the Association makes multifamily, commercial real estate,
construction, land and consumer loans. The Association also invests in
mortgage-backed securities and obligations of the U.S. Government and U.S.
Government sponsored enterprises ("GSEs"). At March 31, 1996, the Association
had total assets of $306.7 million, of which $264.1 million was comprised of
loans receivable, total savings deposits of $264.5 million and equity of $37.2
million. The Association's savings deposits are insured up to the maximum
allowable amount by the SAIF. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business of the
Association."
23
<PAGE>
The Association is subject to extensive regulation, supervision and
examination by the OTS, its primary regulator, and the FDIC, which insures its
deposits. As of March 31, 1996, the Association exceeded all regulatory capital
requirements with tangible, core and risk-based capital ratios of 12.04%, 12.04%
and 23.65%, respectively. Additionally, the Association's regulatory capital
was in excess of the amount necessary to be "well-capitalized" under the Federal
Deposit Insurance Corporation Improvement Act of 1991 (the "FDICIA"). See
"Regulation -- Regulation of Federal Savings Associations." The Association is
a member of the Federal Home Loan Bank of Chicago (the "FHLB of Chicago"), which
is one of the 12 regional banks which comprise the Federal Home Loan Bank
system.
The Association's main office is located at 16 North Spring Street, Elgin,
Illinois 60120-5569. The Association's telephone number is (847) 742-3800.
24
<PAGE>
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock cannot be
determined until the Conversion is completed, it is presently anticipated that
the net proceeds from the sale of the Common Stock will be between $47.3 million
and $64.3 million (or $74.1 million if the Estimated Price Range is increased by
15%). See "Pro Forma Data" and "The Conversion -- Stock Pricing" as to the
assumptions used to arrive at such amounts. The Company will be unable to
utilize any of the net proceeds of the Offerings until the close of the
Offerings.
The Company will use the net proceeds from the sale of Common Stock as
follows:
1. The Company will purchase all of the capital stock of the Association to
be issued upon Conversion in exchange for at least 50% of the net proceeds.
2. The remaining net proceeds will be retained by the Company. Net proceeds
to be retained by the Company after the purchase of the capital stock of the
Association are estimated to be between $23.7 million and $32.2 million (or
$37.1 million if the Estimated Price Range is increased by 15%). The net
proceeds retained by the Company will initially be invested primarily in federal
funds, short-term investment grade marketable securities and mortgage-backed
securities.
3. The Company intends to use a portion of the retained net proceeds to make
a loan directly to the ESOP to enable the ESOP to purchase 8% of the Common
Stock in the Conversion. Based upon the issuance of 4,887,500 shares or
6,612,500 shares at the minimum and maximum of the Estimated Price Range, the
amount of the loan to the ESOP (if the loan is made by the Company and not a
third party) would be $3.9 million or $5.3 million, respectively, (or $6.1
million if the Estimated Price Range is increased by 15%) to be repaid over a
period of up to 10 years at an interest rate of 8%. See "Management of the
Association -- Benefits -- Employee Stock Ownership Plan and Trust."
The net proceeds retained by the Company may also be used to support the
future expansion of the Association's operations through branch acquisitions and
the acquisition of other financial institutions or diversification into other
banking related businesses and for other business or investment purposes,
including possibly the payment of dividends and the repurchase of the Company's
Common Stock as permitted by the OTS. See "Dividend Policy" and "Regulation --
Regulation of Federal Savings Associations -- Limitations on Capital
Distributions." The Company has no current arrangements, understandings or
agreements, written or oral, regarding any such transactions. The Company, upon
completion of the Conversion, will be a unitary savings association holding
company, which under existing laws generally would not be restricted as to the
types of business activities in which it may engage, so long as the Association
continues to be a qualified thrift lender ("QTL"). See "Regulation --
Regulation of Savings Association Holding Companies" for a description of
certain regulations applicable to the Company. In determining the amount of net
proceeds to be used to purchase the capital stock of the Association,
consideration was given to such factors as the regulatory capital position of
the Association, both before and after giving effect to the Conversion, and the
rules and regulations and policies of the OTS governing the amount of proceeds
which may be retained by the Company.
Upon completion of the Conversion, the Board of Directors will have the
authority to adopt stock repurchase plans, subject to statutory and regulatory
requirements. Based upon facts and circumstances which may arise following the
Conversion and subject to applicable regulatory requirements, the Board of
Directors may determine to repurchase stock in the future. Such facts and
circumstances may include: (i) market and economic factors such as the price at
which the stock is trading in the market, the volume of trading, the
attractiveness of other investment alternatives in terms of the rate of return
and risk involved in the investment, the ability to increase the book value
and/or earnings per share of the remaining outstanding shares, and improvement
in the Company's return on equity; (ii) the avoidance of dilution to
stockholders by not having to issue additional shares to cover the exercise of
stock options or to fund employee stock benefit
25
<PAGE>
plans; and (iii) any other circumstances in which repurchases would be in the
best interests of the Company and its stockholders. In the event the Company
determines to repurchase stock, such repurchases may be made at market prices
which may be in excess of the Purchase Price in the Conversion.
Any stock repurchases will be subject to the determination of the Board of
Directors that both the Company and the Association will be capitalized in
excess of all applicable regulatory requirements after any such repurchases and
that such capital will be adequate, taking into account, among other things, the
level of non-performing and other risk assets, the Company's and the
Association's current and projected results of operations and asset/liability
structure, the economic environment and tax and other considerations. In
addition, applicable OTS regulations generally prohibit the Company from
repurchasing its own stock for a period of one year following the Conversion.
Any stock repurchases by the Company during the two years thereafter are subject
to OTS approval and generally are required to be part of an open market program
not involving greater than 5% of the outstanding Common Stock during any twelve-
month period. However, the OTS Regional Directors have the authority to approve
stock repurchases during the first three years after the Conversion that are in
excess of these limits. See "The Conversion -- Certain Restrictions on Purchase
or Transfer of Shares After Conversion."
Upon completion of the Conversion, the Board of Directors of the Company will
have the authority to declare dividends on the Common Stock. The Board of
Directors may consider a policy of paying cash dividends in the future. No
decision has been made as to the amount or timing of such dividends, if any.
The payment of dividends or repurchase of stock, however, would be prohibited if
stockholders' equity would be reduced below the amount required to maintain the
Association's "liquidation account." See "Dividend Policy," "The Conversion --
Certain Restrictions on Purchase or Transfer of Shares After Conversion" and "--
Effects of Conversion -- Liquidation Rights."
The portion of the net proceeds not retained by the Company, estimated to be
between $23.6 million at the minimum of the Estimated Price Range and $32.2
million at the maximum of the Estimated Price Range, will be added to the
Association's general funds to be used for general corporate purposes, including
investment in one- to four-family residential mortgage loans and other loans
which will provide affordable home financing opportunities to the community;
investment in federal funds, short-term, investment grade marketable securities
and mortgage-backed securities; and to fund the Stock Programs. The Association
may also use such funds for the expansion of its facilities, and to expand
operations through acquisitions of other financial institutions, branch offices
or other financial services companies. The Association has no current
agreements, arrangements or understanding regarding any such establishment or
acquisition, or any other transaction related to the possible expansion of its
operations. Neither the Association nor the Company has yet determined the
approximate amount of net proceeds to be used for each of the purposes mentioned
above.
DIVIDEND POLICY
Upon completion of the Conversion, the Board of Directors of the Company will
have the authority to declare dividends on the Common Stock. The Board of
Directors may consider a policy of paying cash dividends on the Common Stock in
the future, subject to statutory and regulatory requirements. However, no
decision has been made as to the amount or timing of such dividends.
Declarations of dividends by the Board of Directors, if any, will depend upon a
number of factors, including the amount of net proceeds retained by the Company
in the Conversion, investment opportunities available to the Company or the
Association, capital requirements, regulatory limitations, the Company's and the
Association's financial condition, results of operations, tax considerations,
general economic conditions, industry standards and other factors. No
assurances can be given, however, that any dividends will be paid or, if payment
is commenced, will continue to be paid.
26
<PAGE>
As the principal asset of the Company, the Association will provide the
principal source of funds for payment of dividends by the Company. The
Association will not be permitted to pay dividends on its capital stock if,
among other things, its stockholders' equity would be reduced below the amount
required for the liquidation account. See "The Conversion -- Effects of
Conversion -- Liquidation Rights" and "Regulation." For information concerning
federal regulations which apply to the Association in determining the amount of
proceeds which may be retained by the Company and regarding a savings
institution's ability to make capital distributions including payment of
dividends to its holding company, see "Regulation -- Regulation of Federal
Savings Associations -- Limitation on Capital Distributions" and "Federal and
State Taxation -- Federal Taxation -- Distributions."
Unlike the Association, the Company is not subject to OTS regulatory
restrictions on the payment of dividends to its stockholders, although the
source of such dividends will be dependent on the net proceeds retained by the
Company and earnings thereon and may be dependent, in part, upon dividends from
the Association. The Company is subject, however, to the requirements of
Delaware law, which generally limit dividends to an amount equal to the excess
of the net assets of the Company (the amount by which total assets exceed total
liabilities) over its statutory capital, or if there is no such excess, to its
net profits for the current and/or immediately preceding fiscal year.
MARKET FOR THE COMMON STOCK
The Company and the Association have not previously issued capital stock
(other than shares issued by the Company upon incorporation) and, consequently,
there is currently no established market for the Common Stock. The Company has
received conditional approval from the NASD to have its Common Stock quoted on
The Nasdaq Stock Market under the symbol "____" upon completion of the
Conversion. One of the requirements for continued quotation of the Common Stock
on The Nasdaq Stock Market is that there be at least two market makers for the
Common Stock. The Company will seek to encourage and assist at least two market
makers to make a market in its Common Stock. Making a market involves
maintaining bid and asked quotations and being able, as principal, to effect
transactions in reasonable quantities at those quoted prices, subject to various
securities laws and other regulatory requirements. Hovde will assist the
Company in such efforts, but will not be a market maker in the Common Stock.
While the Company anticipates that there will be other broker-dealers to act as
market maker for the Common Stock, there can be no assurance that there will be
two or more market makers for the Common Stock. Additionally, the development
of a liquid public market depends on the existence of willing buyers and
sellers, the presence of which is not within the control of the Company, the
Association or any market maker. The number of active buyers and sellers of the
Common Stock at any particular time may be limited. Under such circumstances,
investors in the Common Stock could have difficulty disposing of their shares on
short notice and should not view the Common Stock as a short-term investment.
There can be no assurance that an active and liquid trading market for the
Common Stock will develop or that, if developed, it will continue, nor is there
any assurance that persons purchasing shares will be able to sell them at or
above the Purchase Price or that quotations will be available on The Nasdaq
Stock Market as contemplated.
27
<PAGE>
REGULATORY CAPITAL COMPLIANCE
At March 31, 1996, the Association exceeded all regulatory capital
requirements. See "Regulation -- Regulation of Federal Savings Associations --
Capital Requirements." Set forth below is a summary of the Association's
compliance with regulatory capital standards as of March 31, 1996, on a
historical and pro forma basis assuming that the indicated number of shares were
sold as of such date and receipt by the Association of 50% of net conversion
proceeds. For purposes of the table below, the amount expected to be borrowed
by the ESOP and the cost of the shares expected to be acquired by the Stock
Programs are deducted from pro forma regulatory capital.
<TABLE>
<CAPTION>
PRO FORMA AT MARCH 31, 1996 BASED ON (1)
----------------------------------------------------------------------------------
7,604,375 SHARES
4,887,500 SHARES 5,750,000 SHARES 6,612,500 SHARES (15% ABOVE
(MINIMUM OF (MIDPOINT OF (MAXIMUM OF MAXIMUM OF
HISTORICAL AT ESTIMATED ESTIMATED ESTIMATED ESTIMATED
MARCH 31, 1996 PRICE RANGE) PRICE RANGE) PRICE RANGE) PRICE RANGE) (2)
------------------- ------------------- ------------------- ------------------- -------------------
PERCENT PERCENT PERCENT PERCENT PERCENT
OF OF OF OF OF
ASSETS ASSETS ASSETS ASSETS ASSETS
AMOUNT (3) AMOUNT (3) AMOUNT (3) AMOUNT (3) AMOUNT (3)
--------- -------- --------- -------- --------- -------- --------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP Capital............... $37,195 12.13% $54,986 16.95% $58,204 17.76 % $61,422 18.56% $65,122 19.46%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Tangible Capital: (3)
Capital level........... $37,195 12.04% $54,986 16.83% $58,204 17.64% $61,422 18.44% $65,122 19.33%
Requirement............. 4,634 1.50 4,901 1.50 4,949 1.50 4,998 1.50 5,053 1.50
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess.................. $32,561 10.54% $50,085 15.33% $53,255 16.14% $56,424 16.94 % $60,069 17.83%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Core Capital: (3)
Capital level........... $37,195 12.04% $54,986 16.83% $58,204 17.64% $61,422 18.44% $65,122 19.33%
Requirement............. 9,268 3.00 9,802 3.00 9,898 3.00 9,995 3.00 10,106 3.00
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess.................. $27,927 9.04% $45,184 13.83% $48,306 14.64% $51,427 15.44% $55,016 16.33%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Risk-Based Capital: (4)
Capital level........... $38,051 23.65% $55,842 32.89% $59,060 34.46% $62,278 36.00% $65,978 37.73%
Requirement (5)......... 12,872 8.00 13,584 8.00 13,712 8.00 13,841 8.00 13,989 8.00
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess.................. $25,179 15.65% $42,258 24.89% $45,348 26.46% $48,437 28.00% $51,989 29.73%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
___________________
(1) Pro forma capital levels assume receipt by the Association of 50% of the
net proceeds of the Conversion as reduced by the anticipated purchase of
Common Stock at a price of $10.00 per share by the ESOP and Stock Programs.
The amount expected to be borrowed by the ESOP and the cost of the shares
of Common Stock to be purchased by the Stock Programs (assuming a price of
$10.00 per share) are deducted from pro forma capital to illustrate the
possible impact on the Association. No effect has been given to the
possible issuance of up to 10% of the issued Common stock at the minimum,
midpoint, maximum and 15% above the maximum of the range pursuant to the
Stock Option Plan, which is expected to be adopted by the Company following
the Conversion, and which will require approval at a meeting of
stockholders to be held no earlier than six months after the completion of
the Conversion.
(2) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Price Range of up to 15% to
reflect changes in market or general financial and economic conditions
following the commencement of the Subscription Offering.
(3) Tangible capital and core capital levels are shown as a percentage of total
tangible assets as defined by the OTS. Risk-based capital levels are shown
as a percentage of risk-weighted assets.
(4) Regulatory risk-based capital reflects the inclusion of the allowance for
loan losses. See "Regulation -- Regulation of Federal Savings Associations
-- Capital Requirements."
(5) The current OTS total risk-based capital requirement is 8.0% of risk-
weighted assets. Assumes net proceeds are invested in assets that carry a
50% risk-weighting, which approximates the historical combined risk-
weighting of the Association's assets at March 31, 1996.
28
<PAGE>
CAPITALIZATION
The following table presents the historical capitalization of the Association
at March 31, 1996, and the pro forma consolidated capitalization of the Company
after giving effect to the Conversion, based upon the sale of the number of
shares indicated in the table and the other assumptions set forth under "Pro
Forma Data."
<TABLE>
<CAPTION>
COMPANY CONSOLIDATED PRO FORMA CAPITALIZATION
BASED ON $10.00 PER SHARE
------------------------------------------------------------
7,604,375
4,887,500 5,750,000 6,612,500 SHARES
SHARES SHARES SHARES (15% ABOVE
(MINIMUM OF (MIDPOINT OF (MAXIMUM OF MAXIMUM OF
ASSOCIATION ESTIMATED ESTIMATED ESTIMATED ESTIMATED
HISTORICAL PRICE RANGE) PRICE RANGE) PRICE RANGE) PRICE RANGE)(1)
------------- ----------- -------------- ------------ ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Savings deposits (2).......................... $264,485 $ 264,485 $ 264,485 $ 264,485 $ 264,485
=========== ========== ========== ========== ==========
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value, 3,000,000 $ -- $ -- $ -- $ -- $ --
shares authorized; none to be issued......
Common Stock, $.01 par value, 12,000,000
shares authorized; shares to be issued
as reflected..............................
-- 49 58 66 76
Additional paid-in capital (3)(4)........... -- 47,262 55,759 64,257 74,029
Retained earnings, substantially 37,195 37,195 37,195 37,195 37,195
restricted (5).............................
LESS:
Common Stock acquired by ESOP (6)........... -- (3,910) (4,600) (5,290) (6,084)
Common Stock acquired by Stock -- (1,955) (2,300) (2,645) (3,042)
Programs (7).............................. ----------- ---------- ---------- ---------- ----------
Total stockholders' equity.................... $ 37,195 $ 78,641 $ 86,112 $ 93,583 $ 102,174
=========== ========== ========== ========== ==========
</TABLE>
- --------------------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Price Range of up to 15% to
reflect changes in market or general financial and economic conditions
following the commencement of the Subscription Offering.
(2) Does not reflect withdrawals from savings deposit accounts for the purchase
of Common Stock in the Conversion. Such withdrawals would reduce pro forma
savings deposits by the amount withdrawn.
(3) No effect has been given to the issuance of additional shares of Common
Stock pursuant to the Company's Stock Option Plans intended to be adopted by
the Company and presented for approval by stockholders at a meeting of
stockholders to be held no earlier than six months following the completion
of the Conversion. If approved by the stockholders of the Company, an amount
equal to 10% of the shares of common stock issued in the Conversion will be
reserved for issuance upon the exercise of options to be granted under the
Stock Option Plans. See "Management of the Association -- Benefits -- Stock
Option Plans."
(4) Amount shown net of expected conversion expenses of approximately $1.6
million, $1.7 million, $1.8 million, and $1.9 million, respectively,
corresponding to the issuance of 4,887,500 shares, 5,750,000 shares,
6,612,500 shares, and 7,604,375 shares.
(5) The retained earnings of the Association will continue to be substantially
restricted after the Conversion. See "The Conversion -- Effects of
Conversion -- Liquidation Rights" and "Regulation -- Federal Savings
Associations --Limitation on Capital Distributions."
(6) Assumes that 8% of the shares offered for sale in the Conversion will be
purchased by the ESOP and that the funds used to acquire such shares will be
borrowed from the Company. The Common Stock acquired by the ESOP is
reflected as a reduction of stockholders' equity. See "Management of the
Association --Executive Compensation" and "-- Benefits -- Employee Stock
Ownership Plan and Trust."
(7) Assumes that an amount equal to 4% of the shares of the Common Stock issued
in the Conversion will be purchased by the Stock Programs subsequent to the
Conversion through open market purchases. The Common Stock purchased by the
Stock Programs is reflected as a reduction of stockholders' equity.
Implementation of the Stock Programs is subject to the approval of the
Company's stockholders to be obtained at a meeting of stockholders to be
held no earlier than six month's following the completion of the Conversion.
See "Management of the Association -- Executive Compensation."
29
<PAGE>
PRO FORMA DATA
The actual net proceeds from the sale of the Common Stock cannot be determined
until the Conversion is completed. However, net proceeds are currently
estimated to be between $47.3 million and $64.3 million (or $74.1 million in the
event the Estimated Price Range is increased by 15%) based upon the following
assumptions: (i) 100% of the shares of Common Stock will be sold in the
Subscription and Community Offerings, as follows: (a) 8% will be sold to the
ESOP and 204,750 shares will be sold to directors, officers and employees or
members of such persons' immediate families; and (b) the remainder will be sold
to Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members in the Subscription Offering and to other persons in the Community
Offering; (ii) Hovde will receive a fee equal to 1.50% of the aggregate actual
purchase price of the shares sold to Eligible Account Holders, Supplemental
Eligible Account Holders, Other Members or in the Community Offering, excluding
shares purchased by directors, officers, employees and their families and the
ESOP for which there is no fee; (iii) no shares are sold in the Syndicated
Community Offering; and (iv) Conversion expenses, excluding the fees paid to
Hovde, will be approximately $920,000.
Pro forma net earnings have been calculated assuming the Common Stock had been
sold at the beginning of the periods and the net proceeds had been invested at
an average yield of 6.03% and 6.04% for the three months ended March 31, 1996
and the year ended December 31, 1995, respectively, which approximates the
arithmetic average of the Association's average yield on its interest-earning
assets and the weighted average rate paid on its deposits during such periods
(as required by OTS regulations). The pro-forma after-tax yields are assumed to
be 3.67% and 3.59% for these respective periods, based on an effective tax rate
of 39.2% and 40.5%, respectively, for such periods. The effect of withdrawals
from savings deposit accounts for the purchase of Common Stock has not been
reflected. Historical and pro forma per share amounts have been calculated by
dividing historical and pro forma amounts by the indicated number of shares of
Common Stock, as adjusted (in the case of pro forma net earnings per share) to
give effect to the purchase of shares by the ESOP. Pro forma stockholders'
equity amounts have been calculated as if the Common Stock had been sold on
March 31, 1996 and December 31, 1995, respectively, and, accordingly, no effect
has been given to the assumed earnings effect of the transactions.
The following pro forma information may not be representative of the financial
effects of the foregoing transactions at the dates on which such transactions
actually occur and should not be taken as indicative of future results of
operations. Pro forma consolidated stockholders' equity represents the
difference between the stated amount of assets and liabilities of the Company
computed in accordance with Generally Accepted Accounting Principles ("GAAP").
The pro forma stockholders' equity is not intended to represent the fair market
value of the Common Stock and may be greater than amounts that would be
available for distribution to stockholders in the event of liquidation.
The following tables summarize historical data of the Association and pro
forma data of the Company at or for the three month period ended March 31, 1996
and the fiscal year ended December 31, 1995 based on the assumptions set forth
above and in the tables and should not be used as a basis for projections of
market value of the Common Stock following the Conversion. No effect has been
given in the tables to the possible termination of the Association's pension
plan. The tables below give effect to the Stock Programs, which are expected to
be adopted by the Company following the Conversion and presented to stockholders
for approval at a meeting of stockholders to be held no earlier than six months
after completion of the Conversion. See footnote 2 to the tables. No effect
has been given in the tables to the possible issuance of additional shares
reserved for future issuance pursuant to the Stock Option Plans to be adopted by
the Board of Directors of the Company, nor does book value give any effect to
the liquidation account to be established for the benefit of Eligible Account
Holders and Supplemental Eligible Account Holders or the bad debt reserve in
liquidation. See footnote 3 to the tables below and "The Conversion -- Effects
of Conversion -- Liquidation Rights" and "Management of the Association --
Benefits -- Stock Option Plans."
30
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE THREE MONTHS ENDED MARCH 31, 1996
------------------------------------------------------------------
4,887,500 5,750,000 6,612,500 7,604,375
SHARES SOLD SHARES SOLD SHARES SOLD SHARES SOLD
AT $10.00 AT $10.00 AT $10.00 AT $10.00 PER
PER SHARE PER SHARE PER SHARE SHARE (15%
(MINIMUM (MIDPOINT (MAXIMUM ABOVE MAXIMUM
OF RANGE) OF RANGE) OF RANGE) OF RANGE)(1)
------------- ------------- ------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Gross proceeds............................................ $ 48,875 $ 57,500 $ 66,125 $ 76,044
Less offering expenses and commissions.................... (1,564) (1,683) (1,802) (1,939)
---------- ---------- ---------- ----------
Estimated net proceeds.................................... 47,311 55,817 64,323 74,105
Less: Common Stock purchased by ESOP (2)................. (3,910) (4,600) (5,290) (6,084)
Common Stock purchased by Stock Programs (3).............. (1,955) (2,300) (2,645) (3,042)
---------- ---------- ---------- ----------
Estimated net proceeds, as adjusted....................... $ 41,446 $ 48,917 $ 56,388 $ 64,979
========== ========== ========== ==========
Net earnings:
Historical............................................. $ 512 $ 512 $ 512 $ 512
Pro forma net earnings on net proceeds................. 380 448 517 596
Pro forma ESOP adjustment (2).......................... (85) (100) (115) (132)
Pro forma Stock Programs adjustment (3)................ (59) (70) (80) (92)
---------- ---------- ---------- ----------
Pro forma net earnings.............................. $ 748 $ 790 $ 834 $ 884
========== ========== ========== ==========
Per share net earnings:
Historical............................................. $ 0.11 $ 0.10 $ 0.09 $ 0.07
Pro forma net earnings on net proceeds................. 0.08 0.08 0.08 0.08
Pro forma ESOP adjustment (2).......................... (0.02) (0.02) (0.02) (0.02)
Pro forma Stock Programs adjustment (3)................ (0.01) (0.01) (0.01) (0.01)
---------- ---------- ---------- ----------
Pro forma net earnings per share (4)................... $ 0.16 $ 0.15 $ 0.14 $ 0.12
========== ========== ========== ==========
Shares used in calculation (2)......................... 4,509,750 5,306,500 6,012,500 7,017,750
Stockholders' equity:
Historical............................................. $ 37,195 $ 37,195 $ 37,195 $ 37,195
Estimated net proceeds................................. 47,311 55,817 64,323 74,105
Less: Common Stock acquired by ESOP (2).................. (3,910) (4,600) (5,290) (6,084)
Common Stock acquired by Stock Programs (2)............... (1,955) (2,300) (2,645) (3,042)
---------- ---------- ---------- ----------
Pro forma stockholders' equity (2)(3)(4)(5)............ $ 78,641 $ 86,112 $ 93,583 $ 102,174
========== ========== ========== ==========
Stockholders' equity per share: (4)
Historical............................................. $ 7.61 $ 6.47 $ 5.62 $ 4.89
Estimated net proceeds................................. 9.68 9.71 9.73 9.75
Less: Common Stock acquired by ESOP (2).................. (0.80) (0.80) (0.80) (0.80)
Common Stock acquired by Stock Programs (3)........... (0.40) (0.40) (0.40) (0.40)
---------- ---------- ---------- ----------
Pro forma stockholders' equity per share (2)(3)(4)(5).. $ 16.09 $ 14.98 $ 14.15 $ 13.44
========== ========== ========== ==========
Shares used in calculation............................. 4,887,500 5,750,000 6,612,500 7,604,375
Offering price as a percentage of pro forma =========== =========== ========== ==========
stockholders' equity per share........................... 62.15% 66.76% 70.67% 74.40%
========== ========== ========== ==========
Offering price to pro forma net earnings per share........ 15.63% 16.67% 17.86% 20.83%
========== ========== ========== ==========
</TABLE>
(Notes following tables)
31
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------------------
4,887,500 5,750,000 6,612,500 7,604,375
SHARES SOLD SHARES SOLD SHARES SOLD SHARES SOLD
AT $10.00 AT $10.00 AT $10.00 AT $10.00 PER
PER SHARE PER SHARE PER SHARE SHARE (15%
(MINIMUM (MIDPOINT (MAXIMUM ABOVE MAXIMUM
OF RANGE) OF RANGE) OF RANGE) OF RANGE)(1)
------------- ------------- ------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Gross proceeds............................................ $ 48,875 $ 57,500 $ 66,125 $ 76,044
Less offering expenses and commissions.................... (1,564) (1,683) (1,802) (1,939)
---------- ---------- ---------- ----------
Estimated net proceeds.................................... 47,311 55,817 64,323 74,105
Less: Common Stock purchased by ESOP (2)................. (3,910) (4,600) (5,290) (6,084)
Common Stock purchased by Stock Programs (3).............. (1,955) (2,300) (2,645) (3,042)
---------- ---------- ---------- ----------
Estimated net proceeds, as adjusted....................... $ 41,446 $ 48,917 $ 56,388 $ 64,979
========== ========== ========== ==========
Net earnings:
Historical............................................. $ 2,364 $ 2,364 $ 2,364 $ 2,364
Pro forma net earnings on net proceeds................. 1,489 1,758 2,026 2,385
Pro forma ESOP adjustment (2).......................... (332) (391) (450) (517)
Pro forma Stock Programs adjustment (3)................ (233) (274) (315) (362)
---------- ---------- ---------- ----------
Pro forma net earnings.............................. $ 3,288 $ 3,457 $ 3,625 $ 3,870
========== ========== ========== ==========
Per share net earnings:
Historical............................................. $ 0.52 $ 0.44 $ 0.38 $ 0.33
Pro forma net earnings on net proceeds................. 0.33 0.33 0.33 0.33
Pro forma ESOP adjustment (2).......................... (0.07) (0.07) (0.07) (0.07)
Pro forma Stock Programs adjustment (3)................ (0.05) (0.05) (0.05) (0.05)
---------- ---------- ---------- ----------
Pro forma net earnings per share (4)................... $ 0.73 $ 0.65 $ 0.59 $ 0.54
========== ========== ========== ==========
Shares used in calculation (2)......................... 4,549,500 5,355,750 6,159,000 7,083,000
Stockholders' equity:
Historical............................................. $ 36,683 $ 36,683 $ 36,683 $ 36,683
Estimated net proceeds................................. 47,311 55,817 64,323 74,105
Less: Common Stock acquired by ESOP (5)............... (3,910) (4,600) (5,290) (6,084)
Common Stock acquired by Stock Programs (3)............ (1,955) (2,300) (2,645) (3,042)
---------- ---------- ---------- ----------
Pro forma stockholders' equity (2)(3)(4)(5)............ $ 78,129 $ 85,600 $ 93,071 $ 101,662
========== ========== ========== ==========
Stockholders' equity per share: (4)
Historical............................................. $ 7.51 $ 6.38 $ 5.55 $ 4.82
Estimated net proceeds................................. 9.68 9.71 9.73 9.75
Less: Common Stock acquired by ESOP (5)............... (0.80) (0.80) (0.80) (0.80)
Common Stock acquired by Stock Programs (3)............... (0.40) (0.40) (0.40) (0.40)
---------- ---------- ---------- ----------
Pro forma stockholders' equity per share (2)(3)(4)(5).. $ 15.99 $ 14.89 $ 14.08 $ 13.37
========== ========== ========== ==========
Shares used in calculation............................. 4,887,500 5,750,000 6,612,500 7,604,375
Offering price as a percentage of pro forma
stockholders' equity per share.......................... 62.54% 67.16% 71.02% 74.79%
========== ========== ========== ==========
Offering price to pro forma net earnings per share........ 13.70% 15.38% 16.95% 18.52%
========== ========== ========== ==========
</TABLE>
(Notes on following page)
32
<PAGE>
(1) As adjusted to give effect to an increase in the number of shares which
would occur of up to 15% to reflect possible changes in market and financial
conditions following the commencement of the Subscription Offering.
(2) It is assumed that 8% of the shares of Common Stock offered in the
Conversion will be purchased by the ESOP. The funds used to acquire such
shares are expected to be borrowed by the ESOP from the net Conversion
proceeds retained by the Company. The Association intends to make
contributions to the ESOP in amounts at least equal to the principal and
interest requirement of the debt. The Association's payment of the ESOP
debt is based upon equal principal installments plus interest over a 7-year
period. Assuming the Company makes the ESOP loan, interest income earned by
the Company on the ESOP debt will offset the interest paid by the
Association. Accordingly, only the principal payments on the ESOP debt are
recorded as an expense (tax-effected) to the Company on a consolidated
basis. The amount of ESOP debt is reflected as a reduction to stockholders'
equity. In the event that the ESOP were to receive a loan from an
independent third party, both ESOP expense and earnings on the proceeds
retained by the Company would be expected to increase.
For purposes of these tables the purchase price of $10.00 was utilized to
calculate ESOP expense. The Association will account for the ESOP in
accordance with the American Institute of Certified Public Accountants
("AICPA") Accounting Standards Division's Statement of Position No. 93-6.
"Employers' Accounting for Employee Stock Ownership Plans" ("SOP No. 93-6").
Accordingly, the Association will recognize compensation expense equal to
the fair value of ESOP shares at the time they are committed to be released
to participants. As a result, to the extent the fair value of the Common
Stock appreciates over time, compensation expense related to the ESOP will
increase. SOP No. 93-6 also requires that, for the earnings per share
computations for leveraged ESOPs, outstanding shares include only such
shares as have been committed to be released to participants. The table at
or for the year ended December 31, 1995 assumes that the number of ESOP
shares are allocated on a straight-line basis over 7 years, and,
accordingly, 14.3% of the ESOP shares are assumed to be committed to be
released at the beginning of the first year following Conversion (3.6% of
ESOP shares in the table at or for the three months ended March 31, 1996).
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Impact of Accounting Standards" and "Management --Benefit
Plans -- Employee Stock Ownership Plan."
(3) Gives effect to the Stock Programs expected to be adopted by the Company
following the Conversion and presented for approval at a meeting of
stockholders to be held no earlier than six months after completion of the
Conversion. If the Stock Programs are approved by the stockholders, the
Stock Programs intend to acquire an amount of Common Stock equal to 4% of
the shares of Common Stock issued in the Conversion, or 195,500, 230,000,
264,500 and 304,200 shares of Common Stock respectively at the minimum,
midpoint, maximum and 15% above the maximum of the range, either through
open market purchases, subject to OTS approval, if necessary, or from
authorized but unissued shares of Common Stock or treasury stock of the
Company, if any. Funds used by the Stock Programs to purchase the shares
will be contributed to the Stock Programs by the Association. In
calculating the pro forma effect of the Stock Programs, it is assumed that
the required stockholder approval has been received, that the shares were
acquired by the Stock Programs at the beginning of the three months ended
March 31, 1996 and the year ended December 31, 1995 in open market purchases
at the Purchase Price, and that 5% and 20% of the amount contributed was
amortized to expense during the three months ended March 31, 1996 and the
year ended December 31, 1995, respectively. The issuance of authorized but
unissued shares of the Company's Common Stock to the Stock Programs instead
of open market purchases would dilute the voting interests of existing
stockholders by approximately 3.85% during the three months ended March 31,
1996 and the year ended December 31, 1995, pro forma net earnings per share
would be $0.15, $0.14, $0.13 and $0.12 at the minimum, midpoint, maximum and
15% above the maximum of the range, respectively, for
33
<PAGE>
the three months ended March 31, 1996 and $0.70, $0.62, $0.57 and $0.52 at
the minimum, midpoint, maximum and 15% above the maximum of the range,
respectively, for the year ended December 31, 1995; pro forma stockholders'
equity per share would be $15.86, $14.78, $13.99 and $13.30 at the minimum,
midpoint, maximum and 15% above the maximum of the range, respectively, for
the three months ended March 31, 1996 and $15.76, $14.70, $13.92 and $13.24
at the minimum, midpoint, maximum and 15% above the maximum of the range,
respectively, for the year ended December 31, 1995. There can be no
assurance that stockholder approval of the Stock Programs will be obtained,
or the actual purchase price of the shares will be equal to the Purchase
Price. See "Management of the Association -- Benefits."
(4) No effect has been given to the issuance of additional shares of Common
Stock pursuant to the Stock Option Plan expected to be adopted by the
Company following the Conversion. The Company expects to present the Stock
Option Plan for approval at a meeting of stockholders to be held no earlier
than six months after the completion of the Conversion. If the Stock Option
Plan is approved by stockholders, an amount equal to 10% of the Common Stock
issued in the Conversion, or 488,750, 575,000, 661,250 and 760,438 shares at
the minimum, midpoint, maximum and 15% above the maximum of the range,
respectively, will be reserved for future issuance upon the exercise of
options to be granted under the Stock Option Plan. The issuance of Common
Stock pursuant to the exercise of options under the Stock Option Plan will
result in the dilution of existing stockholders' interests. Assuming
stockholder approval of the Stock Option Plan and the exercise of all
options at the end of the period at an exercise price of $10.00 per share,
the pro forma net earnings per share would be $0.15, $0.14, $0.13 and $0.11,
respectively, at the minimum, midpoint, maximum and 15% above the maximum of
the range for the three months ended March 31, 1996 and $0.66, $0.59, $0.54
and $0.49 respectively, at the minimum, midpoint, maximum and 15% above the
maximum of the range for the year ended December 31, 1995; pro forma
stockholders' equity per share would be $15.54, $14.52, $13.78 and $13.12,
respectively, at the minimum, midpoint, maximum and 15% above the maximum of
the range for the three months ended March 31, 1996 and $15.44, $14.43,
$13.71 and $13.05, respectively, at the minimum, midpoint, maximum and 15%
above the maximum of the range for the year ended December 31, 1995. See
"Management of the Association -- Benefits -- Stock Option Plans."
(5) The retained earnings of the Association will continue to be substantially
restricted after the Conversion. See "Dividend Policy," "The Conversion --
Effects of Conversion -- Liquidation Rights" and "Regulation -- Regulation
of Federal Savings Associations -- Limitation on Capital Distributions."
34
<PAGE>
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
STATEMENTS OF EARNINGS
The following Statements of Earnings of the Association for each of the years
in the three year period ended December 31, 1995 have been audited by KPMG Peat
Marwick LLP, independent certified public accountants, whose report thereon
appears elsewhere herein. These statements should be read in conjunction with
the other financial statements and notes thereto included elsewhere in this
Prospectus. The Statements of Earnings for the three month periods ended March
31, 1996 and 1995 are unaudited, but, in the opinion of management, reflect all
adjustments necessary for a fair presentation of the results for such periods.
All such adjustments are of a normal recurring nature. The results for the
three month period ended March 31, 1996 are not necessarily indicative of the
results of the Association that may be expected for the entire year.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
-------------------- ----------------------------
1996 1995 1995 1994 1993
--------- --------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest income:
Loans secured by real estate............................. $5,311 $5,463 $21,719 $23,160 $26,408
Other loans.............................................. 15 14 60 63 90
Mortgage-backed securities held to maturity.............. 3 4 15 18 24
Investment securities held to maturity................... 90 90 360 264 279
Interest-earning deposits................................ 161 131 569 977 633
FHLB of Chicago stock.................................... 49 46 202 187 218
------ ------ ------- ------- -------
Total interest income................................ 5,629 5,748 22,925 24,669 27,652
Interest expense:
Savings deposits......................................... 2,736 2,548 10,773 10,445 11,661
Borrowed funds........................................... 37 -- 77 39 130
------ ------ ------- ------- -------
Total interest expense............................... 2,773 2,548 10,850 10,484 11,791
------ ------ ------- ------- -------
Net interest income before provision for loan losses........ 2,856 3,200 12,075 14,185 15,861
Provision for loan losses................................... 30 45 180 240 240
------ ------ ------- ------- -------
Net interest income after provision for loan losses...... 2,826 3,155 11,895 13,945 15,621
Noninterest income:
Service fee income....................................... 295 265 1,129 1,362 1,364
Gain on sale of branches................................. -- -- -- 1,683 822
Gain on sale of real estate owned........................ 18 -- -- -- 10
Gain on sale of office properties and equipment.......... 1 -- -- 48 --
Other income............................................. 5 4 21 61 192
------ ------ ------- ------- -------
Total noninterest income............................. 319 269 1,150 3,154 2,388
Noninterest expense:
Compensation and benefits.............................. 964 922 3,692 4,144 4,508
Occupancy expense...................................... 379 377 1,608 1,683 1,722
Federal deposit insurance premiums..................... 169 181 709 767 689
Advertising and promotion.............................. 81 83 371 334 329
Automated teller machines.............................. 114 66 314 321 333
Data processing........................................ 252 257 950 858 867
Other.................................................. 344 402 1,425 1,517 1,954
------ ------ ------- ------- -------
Total noninterest expense............................ 2,303 2,288 9,069 9,624 10,402
------ ------ ------- ------- -------
Income before income taxes and cumulative 842 1,136 3,976 7,475 7,607
effect of change in accounting principle..................
Income tax expense.......................................... 330 441 1,612 3,117 2,998
------ ------ ------- ------- -------
Income before cumulative effect of change in 512 695 2,364 4,358 4,609
accounting principle......................................
Cumulative effect of change in accounting for income taxes.. -- -- -- -- 348
------ ------ ------- ------- -------
Net income........................................... $ 512 $ 695 $ 2,364 $ 4,358 $ 4,261
====== ====== ======= ======= =======
</TABLE>
See accompanying "Notes to Financial Statements" presented elsewhere in this
Prospectus.
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company has only recently been formed and, accordingly, has no results of
operations. The Association's results of operations are dependent primarily on
net interest income, which is the difference between the interest income earned
on its interest-earning assets, such as loans and securities, and the interest
expense on its interest-bearing liabilities, such as savings deposits. The
Association also generates non-interest income such as service charges and other
fees. The Association's non-interest expenses primarily consist of employee
compensation and benefits, occupancy expenses, federal deposit insurance
premiums, net costs of real estate owned, data processing fees and other
operating expenses. The Association's results of operations are also
significantly affected by general economic and competitive conditions
(particularly changes in market interest rates), government policies and actions
of regulatory agencies. The Association exceeded all of its regulatory capital
requirements at March 31, 1996. See "Regulatory Capital Compliance" for a
discussion of the historical and pro forma capital of the Association and
capital requirements. See also "Regulation -- Regulation of Federal Savings
Associations -- Capital Requirements."
MANAGEMENT STRATEGY
Beginning in 1993, the Association began to implement a business strategy that
was intended to improve the Association's profitability and capital position.
The business strategy includes, among other things, an aggressive program to
reduce general and administrative expenses, which resulted in the sale of three
branch offices (one during 1993 and two during 1994). The branch sales also had
the effect of increasing the Association's capital by a total of $1.5 million.
The Association's business strategy also provides for an operating plan that,
among other things, (i) emphasizes the origination of one-to-four-family
residential mortgage loans (secured by properties located in the Association's
delineated lending area), with a particular emphasis on the origination of
adjustable-rate mortgage loans; (ii) provides for the origination of
multifamily, commercial real estate, construction, land and other loans
(consisting primarily of passbook savings and consumer loans) in the
Association's delineated lending area; (iii) requires the Association to
maintain high asset quality by originating all loans in strict compliance with
its underwriting standards; and (iv) focuses on attracting transactional deposit
accounts (rather than certificates of deposit). The Association seeks to
attract and retain customers by providing a high level of personal service, a
variety of loan and deposit products and extended office hours, as well as 14
ATMs at convenient locations throughout the Association's market area.
MANAGEMENT OF INTEREST RATE RISK
The principal objectives of the Association's interest rate risk management
activities are to (i) evaluate the interest rate risk included in certain
balance sheet accounts, (ii) determine the appropriate level of risk given the
Association's business focus, operating environment, capital and liquidity
requirements and performance objectives, (iii) establish prudent asset
concentration guidelines and (iv) manage the risk consistent with guidelines
approved by the Board of Directors. Through such management, the Association
seeks to reduce the vulnerability of its operating results to changes in
interest rates and to manage the ratio of interest rate sensitive assets to
interest rate sensitive liabilities within specified maturities or repricing
dates. The Association closely monitors its interest rate risk as such risk
relates to its operating strategies. The extent of the movement of interest
rates, higher or lower, is an uncertainty that could have a negative impact on
the earnings of the Association. See "Risk Factors -- Potential Impact of
Changes in Interest Rates."
As a traditional thrift lender, the Association has a significant amount of
its interest-earning assets invested in fixed-rate mortgage loans with
contractual maturities of up to 30 years. At March 31, 1996, an
36
<PAGE>
aggregate of $203.7 million, or 70.5%, of total interest-earning assets were
invested in such assets. Based upon the assumptions used in the following
table, at March 31, 1996, the Association's total interest-bearing liabilities
maturing or repricing within one year exceeded its total interest-earning assets
maturing or repricing in the same time period by $88.4 million, representing a
one-year cumulative "gap," as defined below, as a percentage of total assets of
negative 28.8%. As a result, the Association is vulnerable to increases in
interest rates.
The Association has taken several actions designed to manage its level of
interest rate risk under various market conditions. These actions have
included: (i) increasing the interest rate sensitivity of the Association's one-
to four-family residential loan portfolio through the origination of adjustable-
rate mortgage loans and 15-year fixed rate mortgage loans, as market conditions
permit; (ii) increasing the proportion of liquid assets invested in instruments
with maturities of two years or less; and (iii) undertaking an effort to
lengthen the maturities of its certificates of deposit. The Association does
not currently engage in trading activities or use derivative instruments to
control interest rate risk. Even though such activities may be permitted with
the approval of the Board of Directors, the Association does not intend to
engage in such activities in the immediate future.
The matching of assets and liabilities may be analyzed by examining the extent
to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest rate
sensitivity gap is defined as the difference between the amount of interest-
earning assets maturing or repricing within the same time period and the amount
of interest-bearing liabilities maturing or repricing within that time period.
A gap is considered positive when the amount of interest rate sensitive assets
exceeds the amount of interest rate sensitive liabilities. A gap is considered
negative when the amount of interest rate sensitive liabilities exceeds the
amount of interest rate sensitive assets. During a period of rising interest
rates, therefore, a negative gap theoretically would tend to adversely affect
net interest income. Conversely, during a period of falling interest rates, a
negative gap position would theoretically tend to result in an increase in net
interest income.
The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at March 31, 1996, which are
anticipated by the Association, based upon certain assumptions, to reprice or
mature in each of the future time periods shown. Except as stated below, the
amount of assets and liabilities shown which reprice or mature during a
particular period were determined based on the earlier of term to repricing or
the term to repayment of the asset or liability. The table is intended to
provide an approximation of the projected repricing of assets and liabilities at
March 31, 1996 on the basis of contractual maturities, anticipated prepayments
and scheduled rate adjustments within a three-month period and subsequent
selected time intervals. For purposes of presentation in the following table,
the Association utilized the national deposit decay rate assumptions published
by the OTS as of December 31, 1995 (the latest available), which, for NOW/Super
NOW accounts, money market accounts and passbook accounts in the one year or
less category were 62%, 70% and 84%, respectively. The loan amounts in the
table reflect principal balances expected to be redeployed and/or repriced as a
result of contractual amortization and anticipated early payoffs of adjustable-
rate loans and fixed-rate loans and as a result of contractual rate adjustments
on adjustable-rate loans. The amounts attributable to mortgage-backed
securities reflect principal balances expected to be redeployed and/or repriced
as a result of anticipated principal repayments.
37
<PAGE>
<TABLE>
<CAPTION>
AT MARCH 31, 1996
--------------------------------------------------------------------------------------
MORE THAN MORE THAN MORE THAN MORE THAN
3 MONTHS 3 MONTHS TO 6 MONTHS TO 1 YEAR TO 3 YEARS MORE THAN
OR LESS 6 MONTHS 1 YEAR 3 YEARS TO 5 YEARS 5 YEARS TOTAL
---------- ------------ ------------ ---------- ----------- ---------- -------
INTEREST-EARNING ASSETS: (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Loans receivable(1)......................... $ 15,055 $ 12,063 $ 36,760 $ 86,978 $ 38,094 $75,988 $264,938
Investment securities held to maturity...... -- -- -- 5,955 -- -- 5,955
Mortgage-backed securities held to maturity. 12 10 17 58 40 36 173
Interest-earning deposits................... 15,161 -- -- -- -- -- 15,161
FHLB of Chicago stock....................... 2,678 -- -- -- -- -- 2,678
-------- -------- -------- -------- -------- ------- --------
Total interest-earning assets........... $ 32,906 $ 12,073 $ 36,777 $ 92,991 $ 38,134 $76,024 $288,905
======== ======== ======== ======== ======== ======= ========
INTEREST-BEARING LIABILITIES:
NOW/Super NOW accounts.................... $ 8,754 $ 8,754 $ 10,864 $ 6,027 $ 3,982 $ 7,753 $ 46,134
Money market accounts..................... 3,999 3,999 4,402 3,289 1,282 819 17,790
Passbook accounts......................... 19,944 19,944 15,906 2,927 2,115 5,506 66,342
Certificates of deposit................... 33,381 13,413 26,828 27,165 28,531 -- 129,318
-------- -------- -------- -------- -------- ------- --------
Total interest-bearing liabilities..... $ 66,078 $ 46,110 $ 58,000 $ 39,408 $ 35,910 $14,078 $259,584
======== ======== ======== ======== ======== ======= ========
Interest sensitivity gap per period......... $(33,172) $(34,037) $(21,223) $ 53,583 $ 2,224 $61,946
Cumulative interest sensitivity gap......... (33,172) (67,209) (88,432) (34,849) (32,625) 29,321
Cumulative interest sensitivity gap
as a percent of total assets.............. (10.82)% (21.91)% (28.83)% (11.36)% (10.64)% 9.56%
Cumulative total interest-earning assets
as a percent of cumulative total interest-
bearing liabilities....................... 49.80% 40.09% 48.04% 83.37% 86.71% 111.30%
</TABLE>
- --------------------
(1) Loans receivable represents gross loans less net deferred loan fees and
loans in process.
Certain shortcomings are inherent in the method of analysis presented in the
foregoing table. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may react in different degrees
to changes in market interest rates. Also, the interest rates on certain types
of assets and liabilities may fluctuate in advance of changes in market interest
rates while interest rates on other types of assets may lag behind changes in
market rates. Additionally, certain assets, such as adjustable-rate loans, have
features which restrict changes in interest rates both on a short-term basis and
over the life of the asset. Further, in the event of a change in interest
rates, prepayment and early withdrawal levels would likely deviate significantly
from those assumed in calculating the table. Finally, the ability of many
borrowers to make scheduled payments on their adjustable-rate loans may decrease
in the event of an interest rate increase.
As its primary interest rate risk planning tool, the Association utilizes a
market value model prepared by the OTS (the "OTS NPV model"), which is prepared
quarterly, based on the Association's quarterly Thrift Financial Reports filed
with the OTS. The OTS NPV model measures the Association's interest rate risk
by approximating the Association's net portfolio value ("NPV"), which is the net
present value of expected cash flows from assets, liabilities and any off-
balance sheet contracts, under a range of interest rate scenarios which range
from a 400 basis point increase to a 400 basis point decrease in market interest
rates. The following table sets forth the Association's NPV at March 31, 1996,
as calculated by the OTS, based on information provided by the Association to
the OTS.
38
<PAGE>
<TABLE>
<CAPTION>
NPV AS % OF ECONOMIC
CHANGE IN NET PORTFOLIO VALUE VALUE OF ASSETS
INTEREST RATES ---------------------------- -----------------------
IN BASIS POINTS $ % %
(RATE SHOCK) AMOUNT CHANGE CHANGE NPV RATIO CHANGE (1)
- ---------------- -------- --------- ------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
400 $29,797 -19,853 -40% 10.11% -5.36%
300 35,031 -14,619 -29 11.62 -3.85
200 40,340 -9,309 -19 13.09 -2.39
100 45,509 -4,141 -8 14.44 -1.03
Static 49,650 -- -- 15.47 --
(100) 52,298 2,648 +5 16.08 +0.61
(200) 52,604 2,954 +6 16.07 +0.59
(300) 51,813 2,163 +4 15.77 +0.29
(400) 52,535 2,885 +6 15.85 +0.38
</TABLE>
- ----------------
(1) Based on the economic value of the Association's assets assuming no change
in interest rates.
As shown by the table above, increases in interest rates will result in net
decreases in the Association's net portfolio value, while decreases in interest
rates will result in smaller net increases in the Association's net portfolio
value. See "Risk Factors -- Potential Impact of Changes in Interest Rates."
Moreover, because a 200 basis point increase in interest rates would cause more
than a 2% decrease in the ratio of NPV to the economic value of the
Association's assets, the Association is considered by the OTS to have "above
normal" interest rate risk and is required to hold additional capital with
respect thereto. See "Regulation -- Regulation of Federal Savings Associations
- -- Capital Requirements."
ANALYSIS OF NET INTEREST INCOME
Net interest income represents the difference between income on interest-
earning assets and expense on interest-bearing liabilities. Net interest income
depends upon the relative amounts of interest-earning assets and interest-
bearing liabilities and the interest rates earned or paid on them.
39
<PAGE>
The following tables set forth certain information relating to the
Association's statement of financial condition at March 31, 1996 and statements
of financial condition and the statements of operations for the years ended
December 31, 1995, 1994 and 1993 and the three months ended March 31, 1996 and
1995, and reflects the average yield on assets and average cost of liabilities
for the periods indicated. Such yields and costs are derived by dividing income
or expense by the average balance of assets or liabilities, respectively, for
the periods shown. Average balances are derived from average monthly balances.
The yields and costs include fees which are considered adjustments to yields.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
AT MARCH 31, -------------------------------------------------------------------
1996 1996 1995
-------------------------------- ------------------------------- ----------------------------------
WEIGHTED AVERAGE AVERAGE
AVERAGE AVERAGE YIELD/ AVERAGE YIELD/
BALANCE RATE (1) BALANCE INTEREST COST BALANCE INTEREST COST
----------------- -------------- ----------- -------- -------- ----------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Real estate loans(2)... $264,373 7.68% $265,140 $5,311 8.01% $271,181 $5,463 8.06%
Other loans............ 565 9.29 623 15 9.63 665 14 8.42
Mortgage-backed 173 6.99 177 3 6.78 234 4 6.84
securities............
Investment securities.. 5,955 6.05 5,953 90 6.05 5,923 90 6.08
Interest-earning 15,161 5.15 12,140 161 5.30 8,891 131 5.89
deposits..............
FHLB of Chicago stock.. 2,678 6.50 2,930 49 6.69 3,010 46 6.11
-------- ------ -------- ------ ------ -------- ------ ------
Total 288,905 7.51% 286,963 $5,629 7.85% 289,904 $5,748 7.93%
interest-earning -------- ------ -------- ====== ------ -------- ====== ------
assets..............
Allowance for loan losses (856) (846) (679)
Non-interest-earning 18,639 16,644 14,980
assets.................. -------- -------- --------
Total assets........ $306,688 $302,761 $304,205
======== ======== ========
LIABILITIES AND EQUITY:
Interest-bearing
liabilities:
NOW/Super Now accounts. $ 46,134 2.25% $ 43,066 $ 229 2.13% $ 43,105 $ 236 2.19%
Money market accounts.. 17,790 3.22 17,678 142 3.21 22,114 160 2.89
Passbook accounts...... 66,342 3.00 65,773 516 3.14 72,630 550 3.03
Certificates of deposit 129,318 5.68 128,669 1,849 5.75 123,677 1,602 5.18
Borrowed funds......... -- -- 1,333 37 11.10 -- -- --
-------- ------ -------- ------ ------ -------- ------ ------
Total 259,584 4.22% 256,519 $2,773 4.32% 261,526 $2,548 3.90%
interest-bearing -------- ------ -------- ====== ------ -------- ====== ------
liabilities.........
Non-interest-bearing NOW 4,901 4,314 2,463
accounts................
Other 5,008 4,904 4,897
non-interest-bearing -------- -------- --------
liabilities.............
Total liabilities.... 269,493 265,737 268,886
Equity................... 37,195 37,024 35,319
-------- -------- --------
Total liabilities $306,688 $302,761 $304,205
and equity.......... ======== ======== ========
Net interest income........ $2,856 $3,200
====== ======
Interest rate spread(3).... 3.29% 3.53% 4.03%
====== ====== ======
Net interest margin(4)..... 3.98% 4.41%
====== ======
Ratio of interest-earning
assets to
interest-bearing 111.30% 111.87% 110.85%
liabilities............. ====== ====== ======
</TABLE>
__________________
(1) The weighted average rate represents the coupon associated with each asset
and liability, weighted by the principal balance associated with each asset
and liability.
(2) In computing the average balance of loans, non-accrual loans have been
included.
(3) Interest rate spread represents the difference between the average rate on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net interest margin represents net interest income as a percentage of
average interest-earning assets.
40
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------
1995 1994 1993
-------------------------------- -------------------------------- --------------------------------
AVERAGE AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST BALANCE INTEREST COST
----------- --------- -------- ----------- --------- -------- ----------- --------- --------
(DOLLARS IN THOUSANDS)
ASSETS:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Real estate loans(1)..... $269,323 $21,719 8.06% $281,240 $23,160 8.24% $302,977 $26,408 8.72%
Other loans.............. 670 60 8.96 747 63 8.43 855 90 10.53
Mortgage-backed 213 15 7.04 266 18 6.77 338 24 7.10
securities..............
Investment securities.... 5,934 360 6.07 4,431 264 5.96 4,507 279 6.19
Interest-earning deposits 8,981 569 6.34 23,013 977 4.25 20,195 633 3.13
FHLB of Chicago stock.... 3,045 202 6.63 3,126 187 5.98 3,708 218 5.88
-------- ------- ------ -------- ------- ------ -------- ------- ------
Total interest-earning 288,166 $22,925 7.96% 312,823 $24,669 7.89% 332,580 $27,652 8.31%
assets................ -------- ======= ------ -------- ======= ------ -------- ======= ------
Allowance for loan losses (746) (572) (544)
Non-interest-earning 15,769 16,628 17,306
assets.................. -------- -------- --------
Total assets........... $303,189 $328,879 $349,342
======== ======== ========
LIABILITIES AND EQUITY:
Interest-bearing
liabilities:
NOW/Super Now accounts... $ 43,035 $ 980 2.28% $ 52,685 $ 1,066 2.02% $ 55,745 $ 1,151 2.06%
Money market accounts.... 19,927 565 2.84 27,517 767 2.79 34,271 1,001 2.92
Passbook accounts........ 69,362 2,137 3.08 86,062 2,627 3.05 87,397 2,718 3.11
Certificates of deposit.. 125,820 7,091 5.64 125,946 5,985 4.75 136,618 6,791 4.97
Borrowed funds........... 1,250 77 6.16 583 39 6.69 3,583 130 3.63
-------- ------- ------ -------- ------- ------ -------- ------- ------
Total interest bearing 259,394 10,850 4.18% 292,793 10,484 3.58% 317,614 11,791 3.71%
liabilities........... -------- ------- ------ -------- ------- ------ -------- ------- ------
Non-interest-bearing NOW 3,410 -- --
accounts..................
Other non-interest-bearing 4,208 3,715 3,804
liabilities............... -------- -------- --------
Total liabilities..... 267,012 296,508 321,418
-------- -------- --------
Equity..................... 36,177 32,371 27,924
-------- -------- --------
Total liabilities and $303,189 $328,879 $349,342
equity............... ======== ======== ========
Net interest income.......... $12,075 $14,185 $15,861
======= ======= =======
Interest rate spread(2)...... 3.78% 4.31% 4.60%
====== ====== ======
Net interest margin(3)....... 4.19% 4.53% 4.77%
====== ====== ======
Ratio of interest-earning
assets to
interest-bearing
liabilities............... 111.09% 106.84% 104.71%
====== ====== ======
</TABLE>
__________________
(1) In computing the average balance of loans, non-accrual loans have been
included.
(2) Interest rate spread represents the difference between the average rate on
interest-earning assets and the average cost of interest-bearing
liabilities.
(3) Net interest margin on interest-earning assets represents net interest
income as a percentage of average interest-earning assets.
41
<PAGE>
RATE/VOLUME ANALYSIS
Net interest income can also be analyzed in terms of the impact of changing
interest rates on interest-earning assets and interest-bearing liabilities and
the change in the volume or amount of these assets and liabilities. The
following table represents the extent to which changes in interest rates and
changes in the volume of interest-earning assets and interest-bearing
liabilities have affected the Association's interest income and interest expense
during the periods indicated. Information is provided in each category with
respect to (i) changes attributable to changes in volume (change in volume
multiplied by prior rate), (ii) changes attributable to changes in rate (changes
in rate multiplied by prior volume) and (iii) the net change. Changes
attributable to the combined impact of volume and rate have been allocated
proportionately to the changes due to the volume and the changes due to rate.
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, 1996 December 31, 1995
Compared to Compared to
Three Months Ended Year Ended
March 31, 1995 December 31, 1994
--------------------------- ------------------------------
Increase(Decrease) Due to Increase(Decrease) Due to
--------------------------- ------------------------------
VOLUME RATE NET VOLUME RATE NET
------- --------- ------- --------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Real estate loans............... $(119) $ (33) $(152) $ (968) $ (473) $(1,441)
Other loans..................... (1) 2 1 (7) 4 (3)
Mortgage-backed securities...... (1) -- (1) (4) 1 (3)
Investment securities........... -- -- -- 91 5 96
Interest-earning deposits....... 40 (10) 30 (2,119) 1,711 (408)
FHLB of Chicago stock........... (2) 5 3 (5) 20 15
----- ----- ----- ------- ------ -------
Total...................... $ (83) $ (36) $(119) $(3,012) $1,268 $(1,744)
===== ===== ===== ======= ====== =======
Interest-bearing liabilities:
NOW/Super Now accounts......... $ -- $ (7) $ (7) $ (273) $ 187 $ (86)
Money market accounts.......... (40) 22 (18) (215) 13 (202)
Passbook accounts.............. (55) 21 (34) (515) 25 (490)
Certificates of deposit........ 66 181 247 (6) 1,112 1,106
Borrowed funds................. 37 -- 37 41 (3) 38
----- ----- ----- ------- ------ -------
Total..................... $ 8 $ 217 $ 225 $ (968) $1,334 $ 366
===== ===== ===== ======= ====== =======
Net change in net interest income.. $ (91) $(253) $(344) $(2,044) $ (66) $(2,110)
===== ===== ===== ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
Year Ended
December 31, 1995
Compared to
Year Ended
December 31, 1994
------------------------------
Increase(Decrease) Due to
------------------------------
(In thousands)
<S> <C> <C> <C>
Interest-earning assets:
Real estate loans............... $(1,821) $(1,427) $(3,248)
Other loans..................... (10) (17) (27)
Mortgage-backed securities...... (5) (1) (6)
Investment securities........... (5) (10) (15)
Interest-earning deposits....... 97 247 344
FHLB of Chicago stock........... (35) 4 (31)
------- ------- -------
Total...................... $(1,779) $(1,204) $(2,983)
======= ======= =======
Interest-bearing liabilities:
NOW/Super Now accounts......... $ (62) $ (23) $ (85)
Money market accounts.......... (190) (44) (234)
Passbook accounts.............. (41) (50) (91)
Certificates of deposit........ (516) (290) (806)
Borrowed funds................. (154) 63 (91)
------- ------- -------
Total..................... $ (963) $ (344) $(1,307)
======= ======= =======
Net change in net interest income.. $ (816) $ (860) $(1,676)
======= ======= =======
</TABLE>
42
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1996 AND DECEMBER 31, 1995
Total assets increased $2.2 million or 0.72% to $306.7 million at March 31,
1996 from $304.5 million at December 31, 1995. The increase in assets is
primarily due to the increase in funds generated by an increase in savings
deposits of $4.5 million, an increase of advance payments by borrowers for taxes
and insurance of $1.1 million and a $512,000 increase in retained earnings for
the three months ended March 31, 1996, which increases were offset by the
repayment of $4.0 million in advances from the FHLB of Chicago. The savings
deposit growth of $4.5 million is a 1.7% increase for the three months ended
March 31, 1996. The $1.1 million growth in advance payments by borrowers for
taxes and insurance represents payments made to escrow accounts by borrowers for
payments of real estate taxes and insurance.
The components of the Association's asset base also changed from December 31,
1995 to March 31, 1996. Interest-earning deposits increased $6.6 million due
primarily to a decrease in loans receivable of $3.1 million as a result of loan
repayments exceeding loan originations. The increase in savings deposits and
advance payments by borrowers for taxes and insurance in excess of the repayment
of advances from the FHLB of Chicago also increased interest-earning deposits.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
1995
General. Net income for the three months ended March 31, 1996 was $512,000
compared to $695,000 for the three months ended March 31, 1995, a 26.3%
decrease. The $183,000 decrease was due primarily to a decrease of $344,000 in
net interest income before provision for loan losses offset by a decrease in
income tax expense of $111,000 and an increase in service fee income of $30,000.
Interest Income. Interest income decreased $119,000 or 2.1% from $5.7
million for the three months ended March 31, 1995 to $5.6 million for the
comparable period in 1996. The decrease was due to a decrease in the yield and
a decrease in the average balance of interest-earning assets. The average yield
on the Association's interest-earning assets decreased 8 basis points from 7.93%
for the three months ended March 31, 1995 to 7.85% for the three months ended
March 31, 1996. The average balance of interest-earning assets decreased $2.9
million from $289.9 million for the three months ended March 31, 1995 to $287.0
million for the three months ended March 31, 1996.
Interest Expense. Interest expense increased $225,000 or 8.8% from $2.6
million for the three months ended March 31, 1995 to $2.8 million for the three
months ended March 31, 1996. This increase was due to an increase in the cost
of average interest-bearing liabilities resulting primarily from increases in
market rates of interest from the 1995 period and due to the shift in the type
of interest-bearing liabilities from lower rate passbook and money market
accounts to generally higher rate certificates of deposits. These increases
were offset by lower average balances in total interest-bearing liabilities.
The average amount of interest-bearing liabilities decreased $5.0 million or
1.9% to $256.5 million for the three months ended March 31, 1996 from $261.5
million for the three months ended March 31, 1995. The average rate paid on
average interest- bearing liabilities increased 42 basis points from 3.90% for
the three months ended March 31, 1995 to 4.32% for the same period in 1996.
Net Interest Income before Provision for Loan Losses. Net interest income
before provision for loan losses decreased $344,000 or 10.8% from $3.2 million
for the three months ended March 31, 1995 to $2.9 million for the comparable
period in 1996. The average interest rate spread decreased 50 basis points from
4.03% for the three months ended March 31, 1995 to 3.53% for the three months
ended March 31, 1996.
Provision for Loan Losses. The provision for loan losses decreased by
$15,000 or 33.3% from $45,000 for the three months ended March 31, 1995 to
$30,000 for the comparable period in 1996. Management determined that
decreasing the provision for loan losses was appropriate in light of its review
of the Association's loan portfolio, asset quality, trends in the Association's
delinquent and non-performing
43
<PAGE>
loans and the national and regional economies. At March 31, 1996 and 1995, the
ratio of the allowance for loan losses to non-performing loans was 79.48% and
71.77%, respectively, and the ratio of the allowance for loan losses to total
loans was 0.32% and 0.26%, respectively.
Noninterest Income. Noninterest income increased $50,000 or 18.6% from
$269,000 for the three months ended March 31, 1995 to $319,000 for the three
months ended March 31, 1996. This increase was due primarily to an increase in
service fee income of $30,000 from $265,000 for the three months ended March 31,
1995 to $295,000 for the three months ended March 31, 1996, which was due
primarily to an increase in ATM fee income. There also was a gain on sale of
real estate owned in the amount of $18,000 in the three months ended March 31,
1996. There was no gain in the comparable period in 1995.
Noninterest Expense. Noninterest expense for the three months ended March
31, 1996 increased $15,000 or 0.7% to $2,303,000 from $2,288,000 for the three
months ended March 31, 1995. Compensation and benefits increased $42,000 or
4.6% from $922,000 for the three months ended March 31, 1995 to $964,000 for the
three months ended March 31, 1996. This was primarily attributable to normal
salary increases. Automated teller machine expense increased $48,000 or 72.7%
from $66,000 for the three months ended March 31, 1995 to $114,000 for the
comparable period in 1996. Due to a change in ATM processors, service fee
income and expenses are now accounted for on a gross basis. These increases
were offset by a decrease in other noninterest expense of $58,000 from $402,000
for the three months ended March 31, 1995 to $344,000 for the three months ended
March 31, 1996. This was primarily due to a $28,000 decrease in real estate
owned expense to $5,000 for the three months ended March 31, 1996 from $33,000
for the comparable period in 1995.
Income Tax Expense. Income tax expense decreased $111,000 or 25.2% from
$441,000 for the three months ended March 31, 1995 to $330,000 for the three
months ended March 31, 1996 due to a decrease in income before income taxes of
$294,000. The effective tax rate of 39% for the three months ended March 31,
1996 was the same for the comparable period in 1995.
COMPARISON OF FINANCIAL CONDITION OF DECEMBER 31, 1995 AND DECEMBER 31, 1994
Total assets decreased $2.5 million to $304.5 million at December 31, 1995
from $307.0 million at December 31, 1994. This decrease in total assets was
primarily the result of a decrease in savings deposits of $8.0 million to $260.0
million at December 31, 1995 from $268.0 million at December 31, 1994, which was
offset by an increase in advances from the FHLB of Chicago of $4.0 million and
an increase in retained earnings of $2.4 million for 1995. The increase in
retained earnings was due to net income for the year ended December 31, 1995.
Loans receivable decreased by $3.8 million to $267.2 million at December 31,
1995 from $271.0 million at December 31, 1994, which resulted from loan
repayments exceeding loan originations. This was offset by an increase in cash
and due from banks of $365,000 to $10.0 million at December 31, 1995 from $9.7
million at December 31, 1994 and an increase in office properties and equipment
of $743,000 to $6.8 million at December 31, 1995 from $6.1 million at December
31, 1994. The increase in office properties and equipment was due to the
building of a drive-up facility at the Bartlett branch office.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
General. Net income for the year ended December 31, 1995 decreased $2.0
million or 45.5% from $4.4 million for the year ended December 31, 1994 to $2.4
million. The $2.0 million decrease was due to a decrease of $2.1 million in net
interest income before provision for loan losses and a decrease of $2.0 million
in noninterest income, which were offset by a decrease of $555,000 in
noninterest expense and a decrease in income tax expense of $1.5 million. The
decreases in net interest income before provision for loan losses and in
noninterest income resulted primarily from a gain on the sale of two branch
offices in 1994 of $1.7 million. No such gain occurred during 1995.
44
<PAGE>
Interest Income. Interest income decreased $1.8 million or 7.3% from $24.7
million for the year ended December 31, 1994 to $22.9 million for the year ended
December 31, 1995. The decrease was due primarily to a decrease in the average
balance of interest-earning assets. The average balance of interest-earning
assets decreased $24.6 million or 7.9% from $312.8 million for the year ended
December 31, 1994 to $288.2 million for the year ended December 31, 1995. This
decrease was due primarily to the sale of two branch offices in December 1994,
which reduced interest-earning assets by $18.1 million. The remainder of the
decrease in average interest-earning assets was due to competitive market
conditions and the Association's decision not to offer loan products at below
market interest rates. The average yield on the Association's average interest-
earning assets increased 7 basis points from 7.89% for the year ended December
31, 1994 to 7.96% for the year ended December 31, 1995.
Interest Expense. Interest expense increased $366,000 or 3.5% from $10.5
million for the year ended December 31, 1994 to $10.9 million for the year ended
December 31, 1995. This increase was due to an increase in the cost of average
interest-bearing liabilities resulting primarily from increases in market rates
of interest during the year. The average rate paid on average interest-bearing
liabilities increased 60 basis points from 3.58% for the year ended December 31,
1994 to 4.18% for the year ended December 31, 1995. These increases were offset
by lower average balances in total interest-bearing liabilities. The average
balance of interest-bearing liabilities decreased $33.4 million from $292.8
million for the year ended December 31, 1994 to $259.4 million for the year
ended December 31, 1995. This decline was due primarily to the sale of two
branch offices in December 1994, which resulted in a decrease in savings deposit
balances of $21.8 million. The remainder of the decrease in average interest-
bearing liabilities was due to competitive market conditions and the
Association's decision not to offer above market interest rates on its savings
deposits.
Net Interest Income before Provision for Loan Losses. Net interest income
before provision for loan losses decreased $2.1 million from $14.2 million for
the year ended December 31, 1994 to $12.1 million for the year ended December
31, 1995. This was due to the average interest rate spread decreasing 53 basis
points from 4.31% for the year ended December 31, 1994 to 3.78% for the year
ended December 31, 1995, which was offset by a decrease in average interest-
bearing liabilities of $8.8 million more than average interest earning assets
for the year ended December 31, 1995 compared to the year ended December 31,
1994.
Provision for Loan Losses. The provision for loan losses decreased by
$60,000 or 25.0% from $240,000 for the year ended December 31, 1994 to $180,000
for the year ended December 31, 1995. Management determined that decreasing the
provision for loan losses was appropriate in light of its review of the
Association's loan portfolio, asset quality, trends in the Association's
delinquent and non-performing loans and the national and regional economies.
The ratio of the allowance for loan losses to non-performing loans was 90.17%
and 65.82% at December 31, 1995 and 1994, respectively, and the ratio of the
allowance for loan losses to total loans was 0.31% and 0.24% at such respective
dates.
Noninterest Income. Noninterest income decreased $2.0 million or 63.5% from
$3.2 million for the year ended December 31, 1994 to $1.2 million for the year
ended December 31, 1995. In 1994, two branches were sold for a gain of $1.7
million. No branches were sold in 1995. Service fee income decreased $233,000
or 17.1% from $1.4 million for the year ended December 31, 1994 to $1.1 million
for the year ended December 31, 1995. This decrease was due primarily to a
decrease in fees on savings accounts as a result of the branch sales.
Noninterest Expense. Noninterest expense decreased $555,000 or 5.8% from
$9.6 million for the year ended December 31, 1994 to $9.1 million for the year
ended December 31, 1995. Compensation and benefits expense decreased $452,000,
a 10.9% decrease from $4.1 million in the year ended December 31, 1994 to $3.7
million for the year ended December 31, 1995. This was primarily attributable
to the decrease in staff size that resulted from the sale of two branches, which
was offset by normal salary increases. Occupancy expense decreased $75,000 for
the year ended December 31, 1995 to $1.6 million from $1.7
45
<PAGE>
million for the year ended December 31, 1994. FDIC insurance premiums decreased
$58,000 or 7.6% from $767,000 for the year ended December 31, 1994 to $709,000
for the year ended December 31, 1995. Other noninterest expense decreased
$92,000 to $1.4 million for the year ended December 31, 1995 from $1.5 million
for the year ended December 31, 1994. The decreases in occupancy, FDIC
insurance premiums and other noninterest expense were due primarily to the sale
of the two branch offices in December 1994. Data processing expense increased
$92,000 or 10.7% to $950,000 for the year ended December 31, 1995 from $858,000
for the year ended December 31, 1994. This increase was due to service bureau
costs associated with increased automation and improvements to the data
processing system.
Income Tax Expense. Income tax expense decreased $1.5 million from $3.1
million for the year ended December 31, 1994 to $1.6 million for the year ended
December 31, 1995 due to a decrease in income before income taxes of $3.5
million. The effective tax rate was 41% for the year ended December 31, 1995,
which was comparable to the effective tax rate of 42% for 1994.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
General. Net income increased $97,000 or 2.3% from $4.3 million for the year
ended December 31, 1993 to $4.4 million for the year ended December 31, 1994.
Net income for 1993 decreased by $348,000 due to a cumulative effect of change
in accounting for income taxes for the year ended December 31, 1993, which
resulted from the Association's adoption of SFAS 109 effective January 1, 1993
on a prospective basis. Net income before cumulative effect of change in
accounting principle for the year ended December 31, 1994 was $4.4 million
compared to $4.6 million for the year ended December 31, 1993. The $251,000
decrease was due to a decrease of $1.7 million in net interest income, which was
offset by an increase of $766,000 in noninterest income, a decrease of $778,000
in noninterest expense and a decrease in income tax expense of $119,000.
Interest Income. Interest income decreased $3.0 million from $27.7 million
for the year ended December 31, 1993 to $24.7 million for the year ended
December 31, 1994. The decrease was due to a decrease in the yield and a
decrease in the average balance of interest-earning assets. The average yield
on the Association's interest-earning assets decreased 42 basis points from
8.31% for the year ended December 31, 1993 to 7.89% for the year ended December
31, 1994. The average balance of interest-earning assets decreased $19.8
million or 6.0% from $332.6 million for the year ended December 31, 1993 to
$312.8 million for the year ended December 31, 1994, primarily as a result of
selling two branch offices in December 1994. The remainder of the decrease in
average interest-earning assets was due to competitive market conditions and the
Association's decision not to offer loan products at below market interest
rates.
Interest Expense. Interest expense decreased $1.3 million or 11% from $11.8
million for the year ended December 31, 1993 to $10.5 million for the year ended
December 31, 1994. The decrease in interest expense was due primarily to a
decrease for the year in the average balance of interest-bearing liabilities of
$24.8 million or 7.8% from $317.6 million for the year ended December 31, 1993
to $292.8 million for the year ended December 31, 1994, which resulted primarily
from the sale of two branch offices. In addition, the average cost of interest-
bearing liabilities decreased 13 basis points from 3.71% for the year ended
December 31, 1993 to 3.58% for the year ended December 31, 1994. The remainder
of the decrease in average interest-bearing liabilities was due to competitive
market conditions and the Association's decision not to offer above market
interest rates on its savings deposits.
Net Interest Income before Provision for Loan Losses. Net interest income
before provision for loan losses decreased $1.7 million from $15.9 million for
the year ended December 31, 1993 to $14.2 million for the year ended December
31, 1994. This was due to the average interest rate spread declining 29 basis
points from 4.60% for the year ended December 31, 1993 to 4.31% for the year
ended December 31, 1994, which was offset by average interest bearing
liabilities decreasing $5.0 million more than average interest-earning assets
for the year ended December 31, 1994 compared to the year ended December 31,
1993.
46
<PAGE>
Provision for Loan Losses. The provision for loan losses of $240,000
remained the same for the years ended December 31, 1993 and December 31, 1994.
The ratio of the allowance for loan losses to non-performing loans was 65.82%
and 24.91% at December 31, 1994 and 1993, respectively, and the ratio of the
allowance for loan losses to total loans was 0.24% and 0.14% at such respective
dates.
Noninterest Income. Noninterest income increased $766,000 or 32.1% from $2.4
million for the year ended December 31, 1993 to $3.2 million for the year ended
December 31, 1994. This was primarily due to the increase in gain on sale of
branches of $861,000 from $822,000 for the year ended December 31, 1993 to $1.7
million for the year ended December 31, 1994. This was the result of the
Association's sale of two branches in 1994 compared to one branch in 1993.
Other noninterest income decreased $131,000 from $192,000 for the year ended
December 31, 1993 to $61,000 for the year ended December 31, 1994. This was
primarily due to interest received on tax refunds in the amount of $174,000 for
the year ended December 31, 1993 compared to $33,000 for the year ended December
31, 1994.
Noninterest Expense. Noninterest expense for the year ended December 31,
1994 decreased $778,000 from the year ended December 31, 1993. Compensation and
benefits expense decreased $364,000 or 8.1% from $4.5 million for the year ended
December 31, 1993 to $4.1 million for the year ended December 31, 1994. This
was primarily attributable to a decrease in staff size due to the sale of
branches, which was offset by normal salary increases. Other noninterest
expense decreased $437,000 from $2.0 million for the year ended December 31,
1993 to $1.5 million for the year ended December 31, 1994. For the year ended
December 31, 1993, $142,000 of other noninterest expense was incurred due to
costs related to the settlement of a lawsuit, and $60,000 of other noninterest
expense was due to higher real estate expense for 1993. The remainder of the
increase in other noninterest expense was attributable to having more offices in
1993 and the normal operating expense of these offices.
Income Tax Expense. Income tax expense increased $119,000 from $3.0 million
for the year ended December 31, 1993 to $3.1 million for the year ended December
31, 1994 due to an increase in the effective tax rate, which was offset by a
decrease in income before income tax expense and cumulative effect of change in
accounting principle of $132,000. The effective tax rate was 42% for the year
ended December 31, 1994 compared to 39% for the year ended December 31, 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Association's primary sources of funds are savings deposits and principal
and interest payments on loans and securities and, to a limited extent,
borrowings from the FHLB of Chicago. While maturities and scheduled
amortization of loans and securities provide an indication of the timing of the
receipt of funds, changes in interest rates, economic conditions, and
competition strongly influence mortgage prepayment rates and savings deposit
flows, reducing the predictability of the timing of sources of funds.
The Association is required to maintain an average daily balance of liquid
assets and short-term liquid assets as a percentage of net withdrawable savings
deposit accounts plus short-term borrowings as defined by the regulations of the
OTS. The minimum required liquidity and short-term liquidity ratios are
currently 5.0% and 1.0%, respectively. At March 31, 1996 and December 31, 1995
and 1994, the Association's liquidity ratios were 11.49%, 8.24% and 9.56%,
respectively, and its short-term liquidity ratios were 8.00%, 5.97% and 7.50%,
respectively. The levels of the Association's short-term liquid assets are
dependent on the Association's operating, financing and investing activities
during any given period.
The primary investing activities of the Association are the origination of
mortgage and other loans and the purchase of U.S. government or U.S. government
agency securities. During the years ended December 31, 1995, 1994 and 1993, the
Association's disbursements for loan originations totalled $34.0 million, $21.3
million and $87.6 million, respectively. These activities were funded primarily
by net savings deposit inflows and principal repayments on loans and securities.
The Association had borrowings at
47
<PAGE>
December 31, 1995 and 1993 of $4.0 million and $7.0 million, respectively.
There were no borrowings outstanding at March 31, 1996 or December 31, 1994.
For the years ended December 31, 1995, 1994 and 1993, the Association
experienced net decreases in savings deposits (including the effect of interest
credited) of $8.0 million, $26.0 million and $25.0 million, respectively. The
decreases in 1994 and 1993 included the sales of three branches, which decreased
savings deposits $21.8 million and $18.1 million, respectively. In addition,
during 1993, 1994 and 1995, the Association experienced decreases in savings
deposits as a result of competitive market conditions and management's decision
not to offer above-market interest rates on its savings deposits.
The Association has other sources of liquidity if a need for additional funds
arises, including the ability to obtain FHLB of Chicago advances of up to $54
million based on the Association's current investment in FHLB of Chicago stock.
At March 31, 1996, the Association had outstanding loan origination
commitments of $5.0 million, undisbursed loans in process of $364,000 and unused
lines of consumer credit of $302,000. The Association anticipates that it will
have sufficient funds available to meet its current origination and other
lending commitments. Certificates of deposit scheduled to mature in one year or
less from March 31, 1996 totalled $73.6 million. Based upon the Association's
most recent experience and pricing strategy, management believes that a
significant portion of such deposits will remain with the Association.
At March 31, 1996, the Association exceeded all of its regulatory capital
requirements with a tangible capital level of $37.2 million, or 12.0% of total
adjusted assets, which is above the required level of $4.6 million or 1.5%; core
capital of $37.2 million, or 12.0% of total adjusted assets, which is above the
required level of $9.3 million or 3.0%; and total risk-based capital of $38.1
million, or 23.6% of risk-weighted assets, which is above the required level of
$12.9 million, or 8.0%. See "Regulatory Capital Compliance" and "Regulation --
Regulation of Federal Savings Associations -- Capital Requirements."
IMPACT OF INFLATION AND CHANGING PRICES
The Association's Financial Statements and Notes thereto presented herein have
been prepared in accordance with GAAP, which generally require the measurement
of financial position and operating results in terms of historical dollars
without considering the changes in the relative purchasing power of money over
time due to inflation. The impact of inflation is reflected in the increased
cost of the Association's operations. Unlike industrial companies, nearly all
of the assets and liabilities of the Association are monetary in nature. As a
result, interest rates have a greater impact on the Association's performance
than do the effects of general levels of inflation. Interest rates do not
necessarily move in the same direction or to the same extent as the price of
goods and services.
IMPACT OF ACCOUNTING STANDARDS
The Association will be required to account for the ESOP under SOP 93-6. SOP
93-6 measures compensation expense recorded by employers for leveraged ESOPs
using 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 Association's ESOP shares differ from the cost of such shares, this
differential will be charged or credited to equity. Employers with internally
leveraged ESOPs will not report the loan receivable from the ESOP as an asset
and will not report the ESOP debt as a liability. See "Management of the
Association -- Benefits -- Employee Stock Ownership Plan and Trust."
In March 1995, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived
48
<PAGE>
Assets to be Disposed of" ("SFAS 121"). Various assets are excluded from the
scope of SFAS 121, including financial instruments which constitute most of the
Association's assets. For assets included in the scope of SFAS 121, such as
office property and equipment, an impairment loss must be recognized when the
estimate of total undiscounted future cash flows attributable to the asset is
less than the asset's carrying value. Measurement of the impairment loss is
based on the fair value of the asset. SFAS 121 is effective for financial
statements issued for fiscal years beginning after December 15, 1995. The
Association adopted SFAS 121 on January 1, 1996, and it did not have a material
impact on the Association's results of operations or financial position.
In May 1995, the FASB issued Statement of Financial Accounting Standards No.
122, "Accounting for Mortgage Servicing Rights," ("SFAS 122"),which amends
Statement of Financial Accounting Standards No. 65, "Accounting for Certain
Mortgage Banking Activities." SFAS 122 is effective for fiscal years beginning
after December 15, 1995. SFAS 122 requires that entities recognize, as separate
assets, rights to service mortgage loans for others regardless of how those
servicing rights are acquired. Additionally, SFAS 122 requires that the
capitalized mortgage servicing rights be assessed for impairment based on the
fair value of those rights and that the impairment be recognized through a
valuation allowance. These requirements will accelerate the income recognition
associated with mortgage banking activities, increase future operating expense
due to the amortization of servicing rights and will also result in greater
earnings volatility for those institutions involved in mortgage banking
activities. The implementation of SFAS 122 on January 1, 1996 did not have a
material impact on the Association's financial condition or results of
operations, because the Association does not currently conduct mortgage banking
activities or purchase loan servicing rights.
In November 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock Based Compensation" ("SFAS 123"). This statement
establishes financial accounting standards for stock-based employee compensation
plans. SFAS 123 permits the Association to choose either the new fair value
based method, or the current accounting prescribed by Accounting Principles
Board ("APB") Opinion 25, using the intrinsic value based method of accounting
for its stock-based compensation arrangements. SFAS 123 requires pro forma
disclosures of net earnings and earnings per share computed as if the fair value
based method had been applied in APB Opinion 25. SFAS 123 applies to all stock-
based employee compensation plans in which an employer grants shares of its
stock or other equity instruments to employees except for employee stock
ownership plans. SFAS 123 also applies to plans in which the employer incurs
liabilities to employees in amounts based on the price of the employer's stock,
(e.g. stock option plans, stock purchase plans, restricted stock plans and stock
appreciation rights). SFAS 123 also specifies the accounting for transactions
in which a company issues stock options or other equity instruments for services
provided by nonemployees or to acquire goods or services from outside suppliers
or vendors. The recognition provisions of SFAS 123 for companies choosing to
adopt the new fair value based method of accounting for stock-based compensation
arrangements may be adopted immediately and will apply to all transactions
entered into in fiscal years that begin after December 15, 1995. The disclosure
provisions of SFAS 123 are effective for fiscal years beginning after December
15, 1995, however, disclosure of the pro forma net earnings and earnings per
share, as if the fair value method of accounting for stock-based compensation
had been elected, is required for all awards granted in fiscal years beginning
after December 31, 1994. Any effect that SFAS 123 will have on the Association
will be applicable upon the consummation of the Conversion.
49
<PAGE>
BUSINESS OF THE COMPANY
GENERAL
The Company was organized as a Delaware corporation on June 3, 1996 at the
direction of the Board of Directors of the Association for the purpose of
becoming a holding company to own all of the outstanding capital stock of the
Association upon consummation of the Conversion. The Company filed an
application with, and received the approval of, the OTS to become a savings
association holding company and to acquire the Association. Upon completion of
the Conversion, the Company will be a unitary savings association holding
company and, as such, will be subject to the regulations of the OTS. See
"Regulation -- Regulation of Savings Association Holding Companies."
BUSINESS
The Company is not an operating company. Following the Conversion, in
addition to directing, planning and coordinating the business activities of the
Association, the Company will initially invest primarily in U.S. Government and
federal agency securities and federal funds or in other debt and equity
securities which are permissible for a unitary savings association holding
company. In addition, the Company intends to fund the loan to the ESOP to
enable the ESOP to subscribe for up to 8% of the Common Stock in the Conversion;
however, a third party lender may be utilized to lend funds to the ESOP. In the
future, the Company may acquire or organize other operating subsidiaries,
including other financial institutions or it may merge with or acquire other
financial institutions and financial services related companies, although there
are no current arrangements, understandings or agreements, written or oral,
regarding any such expansion. See "Use of Proceeds." Initially, the Company
will neither own nor lease any property, but will instead use the premises,
equipment and furniture of the Association. At the present time, the Company
does not intend to employ any persons other than certain officers of the
Association who will not be separately compensated by the Company. The Company
may utilize the support staff of the Association from time to time, if needed.
Additional employees will be hired as appropriate to the extent the Company
expands its business in the future.
50
<PAGE>
BUSINESS OF THE ASSOCIATION
GENERAL
The Association's principal business is to operate a customer-oriented savings
and loan association. The Association attracts retail savings deposits
primarily from the general public in its market area and invests those funds
primarily in one- to four-family owner-occupied mortgage loans. To a lesser
extent, the Association invests in multifamily mortgage loans, construction and
land mortgage loans, commercial real estate mortgage loans and other loans. The
Association's revenues are derived principally from interest on mortgage loans
and interest and dividends on investments, mortgage-backed securities and, to a
much lesser extent, short-term investments and other fees and service charges.
The Association's primary source of funds is retail savings deposits and, to a
lesser extent, advances from the FHLB of Chicago. The Association does not have
any subsidiaries.
MARKET AREA
The Association has been, and intends to continue to be, a community-oriented
savings institution offering a variety of financial services to meet the needs
of the communities which it serves. The Association's market area is composed
of the areas surrounding its branch offices, while its lending area is larger
and includes portions of Cook, Kane, Lake, McHenry, DuPage and DeKalb counties
in Illinois. In addition to its administrative home office and check processing
center in Elgin, Illinois, the Association operates four other branch offices.
The branch offices are located in Crystal Lake, Roselle, Bartlett and South
Elgin, Illinois.
The Association's market area is largely suburban in nature and is located
primarily in the northwestern suburbs of Chicago. Management considers the
area's economy to be strong, and a major reason for such strength is a well
balanced economic base that is not dominated by a single industrial sector.
Major employers in and around the Association's market area include: Motorola,
Inc., Ameritech Corp., Sears, Roebuck and Co., Safety Kleen Corp. and an
affiliate of Panasonic Company. According to the U.S. Department of Commerce,
in 1992 the city of Elgin recorded retail sales and wholesale sales of $517.5
million and $1.9 billion, respectively. In 1992, annual receipts from the
service-related industries in Elgin totaled $359.6 million. The recent
introduction of riverboat gambling on the Fox River in Elgin has also
contributed to an increase in economic activity and growth in and around Elgin.
The median household income for the city of Elgin, as reported from 1990
census data, was $41,190, or a 78% increase from the level reported in the 1980
census. Elgin's median household income in 1990 was 7% higher than the Illinois
median of $38,664. Elgin and its surrounding communities are in one of the
fastest growing areas in northeastern Illinois. Elgin's population, based upon
the 1990 census, was 77,010, an increase of approximately 21% from the
community's population recorded in the 1980 census. The Northeastern Illinois
Planning Commission estimates that Elgin's population will grow by approximately
30% to 100,000 by the year 2010. New housing construction in the Association's
delineated lending area has increased in the past several years and is expected
to continue into the foreseeable future due to its proximity to major employers
and lower land costs. According to the City of Elgin, for the five-year period
from 1985 to 1989 single-family building permits totaled 2,094 with an aggregate
value of $121.1 million. In the five-year period from 1990 to 1994, single-
family building permits totaled 2,741 (a 31% increase from the prior five-year
period). Management believes that the Association's success as a home lender
has been due, in part, to the favorable income, population and housing
demographics in Elgin and in the Association's market area. At the same time,
the growth of the market area and delineated lending area and their proximity to
Chicago has resulted in a highly competitive environment among the many
financial institutions competing for deposits and loans.
51
<PAGE>
COMPETITION
The Association faces substantial competition for both the savings deposits it
accepts and the loans it makes. The Association's market area has a high
density of financial institutions, including branch offices of major commercial
banks, all of which compete with the Association to varying degrees. The
Association also encounters significant competition for savings deposits from
commercial banks, savings banks and savings and loan associations located in its
market area, as well as competition for savings deposits from non-bank
institutions such as brokerage firms, insurance companies, money market mutual
funds, other mutual funds (such as corporate and government securities funds)
and annuities. The Association offers a more limited product line than many
competitors, with an emphasis on product delivery and customer service instead.
The Association competes for savings deposits by offering a variety of customer
services and savings deposit accounts at generally competitive interest rates.
The Association and its competitors are significantly affected by general
economic and competitive conditions, particularly changes in market interest
rates, real estate market values, government policies and actions of regulatory
authorities.
The Association's competition for loans comes principally from savings banks,
savings and loan associations, commercial banks, mortgage bankers, brokers and
other institutional lenders. The Association competes for loans primarily by
emphasizing the quality of its loan services and by charging loan fees and
interest rates that are generally competitive within its delineated lending
area. Changes in the demand for loans relative to the availability of credit
may affect the level of competition from financial institutions that may be more
willing than the Association or its competitors to make credit available but
which have not generally engaged in lending activities in the Association's
delineated lending area in the past. Competition may also increase as a result
of the lifting of restrictions on the interstate operations of financial
institutions.
Management considers the Association's reputation for customer service as its
major competitive advantage in attracting and retaining customers in its market
area and its delineated lending area. The Association also believes that it
benefits from its community orientation, as well as its established deposit base
and level of core deposits.
LENDING ACTIVITIES
Loan Portfolio Composition. The Association's loan portfolio consists
primarily of conventional first mortgage loans secured by one- to four-family
residences. At March 31, 1996, the Association had gross loans receivable
outstanding of $267.1 million of which $262.1 million, or 98.1%, were one- to
four-family, residential mortgage loans. The remainder consisted of $3.0
million of multifamily mortgage loans, or 1.14% of gross loans; $873,000 of
commercial real estate mortgage loans, or 0.33% of gross loans; $578,000 of
construction and land loans, or 0.22% of gross loans; and $565,000 of other
loans, or 0.21% of gross loans.
The loans that the Association may originate are subject to federal and state
laws and regulations. Interest rates charged by the Association on loans are
affected by the demand for such loans, the supply of money available for lending
purposes and the rates offered by competitors. These factors are in turn
affected by, among other things, economic conditions, monetary policies of the
federal government, including the Board of Governors of the Federal Reserve
System (the "FRB"), and legislative tax policies.
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<PAGE>
The following table sets forth the composition of the Association's mortgage
and other loan portfolios in dollar amounts and percentages at the dates
indicated.
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT MARCH 31, -----------------------------------------
1996 1995 1994
------------------- -------------------- -------------------
PERCENT PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL
-------- --------- ---------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
MORTGAGE LOANS:
One- to four-family...... $262,056 98.10% $265,115 98.09% $267,727 97.63%
Multifamily.............. 3,056 1.14 3,106 1.15 4,118 1.50
Construction and land.... 578 0.22 456 0.17 859 0.31
Commercial............... 873 0.33 891 0.33 862 0.31
-------- ------ -------- ------ -------- ------
Total mortgage loans.. 266,563 99.79 269,568 99.74 273,566 99.75
-------- ------ -------- ------ -------- ------
OTHER LOANS:
Passbook savings (secured 483 0.18 627 0.23 576 0.21
by savings and time
deposits)..............
Consumer installment 82 0.03 92 0.03 100 0.04
loans...................
Home improvement loans... -- -- -- -- -- --
-------- ------ -------- ------ -------- ------
Total other loans..... 565 0.21 719 0.26 676 0.25
-------- ------ -------- ------ -------- ------
Gross loans...... $267,128 100.00% $270,287 100.00% $274,242 100.00%
======== ====== ======== ====== ======== ======
LESS:
Loans in process......... $ 364 $ 418 $ 150
Deferred loan fees....... 1,826 1,890 2,403
Allowance for loan losses 856 826 649
-------- -------- --------
Loans, net....... $264,082 $267,153 $271,040
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------------------
1993 1992 1991
------------------- -------------------- -------------------
PERCENT PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL
-------- --------- ---------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
MORTGAGE LOANS:
One- to four-family...... $298,117 97.54% $284,549 96.92% $260,519 96.22%
Multifamily.............. 4,587 1.50 5,165 1.76 5,247 1.94
Construction and land.... 1,130 0.37 1,371 0.47 1,717 0.63
Commercial............... 1,039 0.34 1,568 0.53 2,294 0.85
------ ------- -------- ------ -------- ------
Total mortgage loans.. 304,873 99.75 292,653 99.68 269,777 99.64
-------- ------ -------- ------ -------- ------
OTHER LOANS:
Passbook savings (secured 631 0.21 798 0.27 775 0.29
by savings and time
deposits)..............
Consumer installment 120 0.04 134 0.04 150 0.06
loans...................
Home improvement loans... -- -- 17 0.01 58 0.01
-------- ------ -------- ------ -------- ------
Total other loans..... 751 0.25 949 0.32 983 0.36
-------- ------ -------- ------ -------- ------
Gross loans...... $305,624 100.00% $293,602 100.00% $270,760 100.00%
======== ====== ======== ====== ======== ======
LESS:
Loans in process......... $ 505 $ 876 $ 373
Deferred loan fees....... 3,034 2,992 2,551
Allowance for loan losses 409 548 355
-------- -------- --------
Loans, net....... $301,676 $289,186 $267,481
======== ======== ========
</TABLE>
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<PAGE>
Loan Maturity and Repricing. The following table shows the maturity or period
to repricing of the Association's loan portfolio at March 31, 1996. Loans that
have adjustable rates are shown as being due in the period during which the
interest rates are next subject to change. The table does not include
prepayments or scheduled principal amortization. Prepayments and scheduled
principal amortization on the Association's loan portfolio totaled $11.7 million
for the three months ended March 31, 1996.
<TABLE>
<CAPTION>
AT MARCH 31, 1996
--------------------------------------------------------------------
MORTGAGE LOANS
--------------------------------------------------
ONE- TO
FOUR- MULTI- CONSTRUCTION OTHER TOTAL
FAMILY(1) FAMILY(1) AND LAND COMMERCIAL LOANS LOANS
------------ ---------- ------------ ---------- ----- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
AMOUNT DUE:
One year or less..................... $ 12,061 $ 715 $207 $ $476 $ 13,459
-------- ------ ---- ---- ---- --------
AFTER ONE YEAR:
One to three years................... 42,969 687 103 98 83 43,940
More than three years to five years.. 13,339 303 245 238 6 14,131
More than five years to ten years.... 27,894 408 23 167 -- 28,492
More than ten years to twenty years.. 96,141 943 -- 370 -- 97,454
Over twenty years.................... 69,652 -- -- -- -- 69,652
-------- ------ ---- ---- ---- --------
TOTAL DUE OR REPRICING AFTER ONE YEAR... 249,995 2,341 371 873 89 253,669
-------- ------ ---- ---- ---- --------
TOTAL AMOUNTS DUE OR REPRICING, GROSS... $262,056 $3,056 $578 $873 $565 $267,128
======== ====== ==== ==== ==== ========
</TABLE>
The following table sets forth the dollar amounts in each loan category at
March 31, 1996 that are due after March 31, 1997, and whether such loans have
fixed or adjustable interest rates.
<TABLE>
<CAPTION>
DUE AFTER MARCH 31, 1997
-----------------------------------
FIXED(1) ADJUSTABLE TOTAL
------------ ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
MORTGAGE LOANS:
One- to four-family (1).. $200,973 $49,022 $249,995
Multifamily (1).......... 1,889 452 2,341
Construction and land.... 268 103 371
Commercial............... 631 242 873
Other loans................ 89 -- 89
-------- ------- --------
Total loans........... $203,850 $49,819 $253,669
======== ======= ========
- --------------------
</TABLE>
(1) FHA/VA loans are included in one- to four-family loans and multifamily.
Originations, Purchases, Sale and Servicing of Loans. Loan originations are
developed from continuing business with depositors and borrowers, referrals from
real estate agents, builders, and walk-in customers. Loans are originated by
the Association's staff of salaried employees. While the Association originates
both fixed-rate and adjustable-rate loans, its ability to originate loans is
dependent upon demand for loans in its delineated lending area. Demand is
affected by the local economy and interest rate environment. The Association
retains all newly originated fixed-rate and adjustable-rate mortgage loans in
its portfolio. The Association does not normally sell mortgage loans nor has it
purchased mortgage loans. The Association sold two loans in 1995 in the amount
of $169,000 on a servicing-released basis to a community housing group.
During the year ended December 31, 1995, the Association originated $34.0
million of loans, compared to $21.3 million and $87.6 million in 1994 and 1993,
respectively. Management attributes the increase in originations during 1993 to
the sustained low interest rate environment in 1993 which caused many
54
<PAGE>
individuals to refinance their loans. Management attributes reduced levels of
loan originations for the years ended December 31, 1994 and December 31, 1995 to
the decline in refinancing as a result of a generally rising interest rate
environment since mid-1994, competitive market conditions and management's
decision not to offer loan products at below market interest rates.
In periods of economic uncertainty, the Association's ability to originate a
large dollar volume of mortgage loans with acceptable underwriting
characteristics may be substantially reduced or restricted with a resultant
decrease in operating earnings. While the Association generally does not sell
loans, and presently has no intention to do so, it may consider selling loans in
the future depending on market conditions and the asset/liability management
position of the Association. The Association does not service loans for others
and has no current plans to begin such servicing.
The following table sets forth the Association's loan originations, loan sales
and principal repayments by loan type for the periods indicated.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
LOANS (GROSS):
At beginning of period......................... $270,287 $274,242 $274,242 $305,624 $293,602
MORTGAGE LOANS ORIGINATED:
One- to four-family............................ 8,319 6,883 33,157 19,875 85,661
Multifamily.................................... -- -- -- 227 783
Construction and land.......................... 160 -- 76 266 464
Commercial..................................... -- 119 119 225 --
-------- -------- -------- -------- --------
TOTAL MORTGAGE LOANS ORIGINATED........... 8,479 7,002 33,352 20,593 86,908
OTHER LOANS ORIGINATED.............................. 64 140 614 755 658
-------- -------- -------- -------- --------
TOTAL LOANS ORIGINATED.................... 8,543 7,142 33,966 21,348 87,566
-------- -------- -------- -------- --------
Principal repayments........................... 11,702 7,347 37,560 52,269 74,826
Loans sold..................................... -- 169 169 -- --
Loans transferred to real estate in judgement.. -- -- 192 461 718
-------- -------- -------- -------- --------
LOANS (GROSS) AT END OF PERIOD...................... $267,128 $273,868 $270,287 $274,242 $305,624
======== ======== ======== ======== ========
</TABLE>
One- to Four-Family Residential Real Estate Lending. The Association's
residential first mortgage loans consist of loans to purchase or refinance one-
to four-family, owner-occupied residences and, to a lesser extent, secondary
residences in the Association's lending area. At March 31, 1996, $262.1
million, or 98.1%, of the Association's gross loans consisted of one- to four-
family residential first mortgage loans. Approximately 77% of the one- to four-
family residential first mortgage loans provided for fixed rates of interest.
The Association's one- to four-family loans typically provide for repayment of
principal over a fixed period not to exceed 30 years. One- to four-family
residential mortgage loans are priced competitively with the market rates of
interest. At March 31, 1996, the Association had residential construction loans
(included in one- to four-family residential mortgage loans) with an aggregate
principal balance of $1.4 million outstanding to borrowers intending to live in
the properties upon completion of construction, at which time such loans would
convert into permanent mortgage loans.
The Association currently offers adjustable rate mortgage loan programs with
interest rates which adjust either every three or five years. An adjustable-
rate mortgage loan may carry an initial interest rate that is less than the
fully-indexed rate for the loan. All adjustable-rate mortgage loans offered by
the Association have lifetime interest rate caps or ceilings. Generally,
adjustable-rate mortgage loans pose credit risks
55
<PAGE>
somewhat greater than the credit risk inherent in fixed-rate loans primarily
because, as interest rates rise, the underlying payments of the borrowers rise,
increasing the potential for default. It is the Association's policy to
underwrite its adjustable rate mortgage loans based on the initial interest rate
due to the relatively long period of time prior to the first adjustment.
In underwriting one- to four-family residential first mortgage loans, the
Association evaluates both the borrower's credit history and ability to make
monthly payments, and the value of the property securing the loan. All
properties are appraised by independent appraisers approved by the Board of
Directors. The Association requires borrowers to obtain title insurance, fire
and property insurance (including flood insurance, where appropriate) naming the
Association as an insured party in an amount not less than the amount of the
loan. The Association's one- to four-family mortgage loans do not contain
prepayment penalties and do not permit negative amortization of principal. Real
estate loans originated by the Association generally contain a "due on sale"
clause allowing the Association to declare the unpaid principal balance due and
payable upon the sale of the security property. The Association may waive the
due on sale clause on loans held in its portfolio for assumption and real estate
sale contracts when it is in the Association's interest.
The Association adheres to its Board-approved underwriting guidelines for loan
origination, which, though prudent in approach to credit risk and evaluation of
collateral, allow management flexibility with respect to documentation of
certain matters and certain credit requirements. Although such underwriting
guidelines are less rigid than comparable Federal National Mortgage Association
("FNMA") or Federal Home Loan Mortgage Corporation ("FHLMC") underwriting
guidelines, the Association underwrites the substantial majority of residential
mortgage loans in accordance with FNMA's guidelines.
The Association does not currently originate residential mortgage loans if the
ratio of the loan amount to the value of the property securing the loan (i.e.,
the "loan-to-value" ratio) exceeds 97%. If the loan-to-value ratio is 90% or
greater, the Association requires that borrowers obtain private mortgage
insurance in amounts intended to reduce the Association's exposure to 80% or
less of the lower of the appraised value or the purchase price of the underlying
real estate.
Multifamily Mortgage Lending. The Association originates multifamily mortgage
loans generally secured by five- to ten-unit apartment buildings located in the
Association's delineated lending area. In reaching its decision on whether to
make a multifamily loan, the Association considers the qualifications of the
borrower (including the financial resources and income level of the borrower,
the borrower's experience in owning or managing similar properties and the
Association's lending experience with the borrower) as well as the underlying
property. Some of the factors considered with respect to the underlying
property include: the net operating income of the mortgaged premises before
debt service and depreciation; the debt service ratio (the ratio of the
property's net cash flow to debt service requirements); and the ratio of loan
amount to appraised value. Pursuant to the Association's underwriting policies,
a multifamily mortgage loan may only be made in an amount up to 75% of the
appraised value of the underlying property. The Association's multifamily
mortgage loans are generally fixed-rate loans and may be made with terms up to
15 years. Adjustable rate loans are offered with 3 or 5 year adjustments with
25 year terms. Properties securing a loan are appraised by an independent
appraiser approved by the Board of Directors. Title and hazard insurance are
required on all loans. At March 31, 1996, the principal balance of the
Association's multifamily mortgage loan portfolio was approximately $3.0
million, or 1.14% of total gross loans outstanding. The Association's largest
multifamily mortgage loan at March 31, 1996 had an outstanding balance of
$327,000 and is secured by a 5-unit apartment building and an adjacent 6-unit
apartment building.
Mortgage loans secured by apartment buildings and other multifamily residential
properties are generally larger and involve a greater degree of risk than one-
to four-family residential mortgage loans. Because payments on loans secured by
multifamily properties are often dependent on the successful operation or
management of the properties, repayment of such loans may be subject to a
greater extent to adverse conditions in the real estate market or the economy.
The Association seeks to minimize these risks through
56
<PAGE>
its underwriting policies, which require such loans to be qualified at
origination on the basis of the property's income and debt service ratio.
Commercial Real Estate Lending. The Association occasionally originates
mortgage loans secured by commercial real estate properties located in its
delineated lending area. The Association's commercial real estate portfolio
consists of loans secured by a variety of non-residential properties, including
six mortgage loans secured by buildings owned by local churches and six loans
secured by small office buildings. At March 31, 1996, the Association had 12
commercial real estate loans with an aggregate outstanding balance of $873,000,
representing 0.33% of the Association's total loan portfolio. At that date, all
of such loans were current and performing in accordance with their terms. At
March 31, 1996, the Association's largest commercial real estate loan, the
borrower of which was a church, had an outstanding balance of $219,000.
Appraisals on properties securing commercial real estate loans originated by
the Association are performed by an independent appraiser approved by the Board
of Directors at the time the loan is made. In addition, the Association's
underwriting procedures generally require verification of the borrower's credit
history, income and financial statements, banking relationships, references and
income projections for the property. The Association also requires title and
hazard insurance for at least the principal amount of the mortgage with a loss
payable clause to the Association.
Mortgage loans secured by commercial real estate properties, like multifamily
mortgage loans, generally present a higher level of risk than loans secured by
one- to four-family residences. This greater risk is attributable to several
factors, including the concentration of principal in a limited number of loans
and borrowers, the effects of general economic conditions on income-producing
properties and the increased difficulty of evaluating and monitoring these types
of loans. Furthermore, the repayment of loans secured by multifamily
residential and commercial real estate is typically dependent upon the
successful operation of the related real estate project. If the cash flow from
the project is reduced (for example, if leases are not obtained or renewed), the
borrower's ability to repay the loan may be impaired. At March 31, 1996, the
Association had no non-residential loans which were 30 days or more delinquent.
Construction and Land Lending. As a result of the relatively high level of
construction activity in the Association's delineated lending area, the
Association makes construction loans to individuals for the construction of
their primary residences and to builders for residential construction.
Loans to individuals to finance the construction of their residences typically
have a term of up to 30 years. The borrower pays interest only during the
construction period. Residential construction loans are generally underwritten
pursuant to the same guidelines used for originating permanent residential
loans, with the loan converting to a permanent mortgage loan upon completion and
final payout. At March 31, 1996, the Association had residential construction
loans (included in one- to four-family residential mortgage loans) with an
aggregate principal balance of $1.4 million outstanding to borrowers intending
to live in the properties upon completion of construction, at which time such
loans would convert into permanent mortgage loans. Subject to future market
conditions, the Association intends to continue its construction lending
activities to persons intending to be owner-occupants.
The Association originates construction loans to builders for the construction
of pre-sold one- to four-family residences in the association's delineated
lending area. Construction loans to builders of one- to four-family residences
generally carry terms of up to 18 months and generally do not permit the payment
of interest from loan proceeds. At March 31, 1996, the Association had no
construction loans outstanding to builders. While the Association anticipates
that it will continue to engage in this type of lending from time to time in the
future, the Association currently expects that its total volume at any one time
will be limited.
Construction loans are generally originated in amounts of up to a maximum loan-
to-value ratio of 80% of the appraised value of the property. Prior to making a
commitment to fund a construction loan, the
57
<PAGE>
Association requires an independent appraisal of the property. The Association
obtains personal guarantees for all of its construction loans. Personal
financial statements of guarantors are also generally obtained as part of the
Association's loan underwriting. All of the Association's construction loans
have been secured by properties located in its delineated lending area.
The Association also originates land loans for individual building sites.
These loans are generally to individuals for eventual use as their primary
residence, and such mortgage loans are generally underwritten pursuant to the
same guidelines used for permanent residential loans. Terms of land loans
offered by the Association generally require a loan-to-value ratio of 80% of the
appraised value of the property and are 5-year balloon loans with higher
interest rates than the comparable one- to four-family residential mortgage
loans. At March 31, 1996, the Association had 23 land mortgage loans with an
aggregate outstanding balance of $578,000.
Construction lending generally affords the Association an opportunity to
receive interest at rates higher than those obtainable from residential lending
and to receive higher origination and other loan fees. Nevertheless,
construction lending to persons other than owner-occupants is generally
considered to involve a higher level of credit risk than one- to four-family
residential lending due to the concentration of principal in a limited number of
loans and borrowers and the effects of general economic conditions on
construction projects, real estate developers and managers. In addition, the
nature of these loans is such that they are more difficult to evaluate and
monitor. The Association's risk of loss on a construction loan is dependent
largely upon the accuracy of the initial estimate of the property's value upon
completion of the project and the estimated cost (including interest) of the
project. If the estimate of value proves to be inaccurate, the Association may
be confronted, at or prior to the maturity of the loan, with a project having an
insufficient value to assure full repayment and/or the possibility of having to
make substantial investments to complete and sell the project. Because defaults
in repayment may not occur during the construction period, it may be difficult
to identify problem loans at an early stage. When loan payments become due, the
cash flow from the property may not be adequate to service the debt.
Consumer Lending. The Association also offers consumer loans secured by
savings deposit accounts. At March 31, 1996, loans totalled $483,000,
representing 0.18% of the Association's total loan portfolio. The Association
also offers unsecured overdraft protection loans to its qualifying customers. At
March 31, 1996, the total outstanding principal balance of such unsecured loans
was $82,000, representing 0.03% of the Association's total loan portfolio.
Loan Approval Procedures and Authority. The Board of Directors establishes
the lending policies of the Association and reviews properties offered as
security. For all loans originated by the Association, upon receipt of a
completed loan application from a prospective borrower, a credit report is
ordered and certain other information is verified by an independent credit
agency, and, if necessary, additional financial information is required to be
submitted by the borrower. An appraisal of any real estate intended to secure
the proposed loan is required. Appraisals currently are performed by an
independent appraiser designated and approved by the Association. The Board of
Directors annually approves the independent appraisers used by the Association
and approves the Association's appraisal policy. It is the Association's policy
to obtain title and hazard insurance on all real estate loans.
Upon the approval of an application for a real estate mortgage loan by two
senior officers, the loan may be closed and the proceeds disbursed, provided
that the following requirements are satisfied: (i) loans with a principal
balance in excess of $250,000 but less than $400,000 must be approved by three
senior officers at the level of vice-president or higher, with ratification by
the Board of Directors at its next scheduled meeting; (ii) loans with a
principal balance of $400,000 or more must be approved by the Board of
Directors; and (iii) all loans with a principal balance of up to $250,000 must
be reviewed by the loan committee, which must report the results of its review
to the Board of Directors. Second mortgage loans are made by the Association
only if the first mortgage on the subject property is also held by the
Association.
58
<PAGE>
The total amount of the first and second mortgages on the property may not
exceed 80% of the property's appraised value, unless otherwise approved by two
senior officers of the Association. Applications for passbook and consumer
loans are approved at the level of branch or savings supervisor. The foregoing
lending limits are reviewed annually and revised, as needed, by the Board of
Directors.
DELINQUENCIES AND NON-PERFORMING ASSETS
Delinquency Procedures. When a borrower fails to make a required payment on a
loan, the Association attempts to cause the delinquency to be cured by
implementing collection procedures. With respect to residential mortgage loans
originated by the Association, late notices are mailed to borrowers who are more
than eight days late in their monthly payments. A five percent (5%) late charge
of the monthly principal and interest payment is assessed for loans that are
past due more than 15 days. If payments remain uncollected, additional written
and verbal contacts are made on a continuing basis with the borrower between 18
and 90 days after the due date.
All loans 90 or more days delinquent are submitted to the Board of Directors
for its review. The Board of Directors determines the appropriate course of
action for those loans where collection efforts are unsuccessful. Its options
include modification of the loan, forbearance, deeds in lieu of foreclosure or
foreclosure.
The following tables set forth delinquencies of the Association's loan
portfolio by type of loan at the dates indicated:
<TABLE>
<CAPTION>
AT MARCH 31, 1996 AT DECEMBER 31, 1995
------------------------------------------ -----------------------------------------------
60-89 DAYS 90 DAYS OR MORE 60-89 DAYS 90 DAYS OR MORE
-------------------- -------------------- ----------------------- ----------------------
NUMBER PRINCIPAL NUMBER PRINCIPAL NUMBER PRINCIPAL NUMBER PRINCIPAL
OF LOANS BALANCE OF LOANS BALANCE OF LOANS BALANCE OF LOANS BALANCE
-------- ---------- -------- ---------- ---------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family.... 20 $1,085 18 $1,077 24 $1,093 16 $ 915
Multifamily............ -- -- -- -- -- -- -- --
Construction and land.. 1 36 -- -- 2 48 -- --
Commercial............. -- -- -- -- -- -- -- --
Other.................. -- -- -- -- -- -- 1 1
-- ------ -------- ------ -- ------ ---------- ------
Total....... 21 $1,121 18 $1,077 26 $1,141 17 $ 916
== ====== ======== ====== == ====== ========== ======
Delinquent loans to 0.42% 0.41% 0.42% 0.34%
total loans(1)....... ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1994 AT DECEMBER 31, 1993
---------------------------------------- -----------------------------------------------
60-89 DAYS 90 DAYS OR MORE 60-89 DAYS 90 DAYS OR MORE
------------------- ------------------- ---------------------- ---------------------
NUMBER PRINCIPAL NUMBER PRINCIPAL NUMBER PRINCIPAL NUMBER PRINCIPAL
OF LOANS BALANCE OF LOANS BALANCE OF LOANS BALANCE OF LOANS BALANCE
-------- --------- -------- --------- ---------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family.... 10 $ 516 18 $ 974 33 $1,412 26 $1,642
Multifamily............ -- -- -- -- 1 92 -- --
Construction and land.. 2 53 1 12 1 40 -- --
Commercial............. -- -- -- -- -- -- -- --
Other.................. -- -- -- -- -- -- -- --
-- ------ -------- ------ -- ------ ---------- ------
Total....... 12 $ 569 19 $ 986 35 $1,544 26 $1,642
== ====== ======== ====== == ====== ========== ======
Delinquent loans to 0.21% 0.36% 0.51% 0.54%
total loans(1)....... ====== ====== ====== ======
</TABLE>
- ---------------------
(1) Total loans represent gross loans less deferred loan fees and loans in
process.
59
<PAGE>
Real Estate Owned. Property acquired by the Association as a result of
foreclosure or deed in lieu of foreclosure is classified as real estate owned
("REO"). When property is acquired, it is recorded at the lower of cost or
estimated fair value, less the estimated cost of disposition. After
acquisition, all costs incurred in maintaining the property are expensed. Costs
relating to the development and improvement of the property, however, are
capitalized to the extent of net realizable value. The Association obtains an
independent appraisal on an REO property as soon as practicable after it takes
possession of the property. There was a decrease in REO of $119,000 from
$496,000 at December 31, 1995 to $377,000 at March 31, 1996 due to the
disposition of two properties, which dispositions resulted in a net gain to the
Association of $18,000.
Non-Performing Assets. Loans 90 days or more delinquent are reviewed by the
Association's Asset Classification Committee quarterly, and any loan whose
collectibility is doubtful is placed on non-accrual status. It is the
Association's policy to place loans on non-accrual status when either principal
or interest is 90 days or more past due, unless, in the judgment of management,
the loan is well collateralized and in the process of collection. Interest
accrued and unpaid at the time a loan is placed on non-accrual status is charged
against interest income. Subsequent payments are either applied to the
outstanding principal balance or recorded as interest income, depending on the
assessment of the ultimate collectibility of the loan. For all periods
presented, the Association has had no troubled-debt restructurings (which
involved forgiving a portion of interest or principal on any loans or making
loans at a rate materially less than that of market rates).
The following table sets forth information regarding the Association's non-
performing assets at the dates indicated.
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
MARCH 31, ------------------------------------------------
1996 1995 1994 1993 1992 1991
---------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Non-accrual mortgage loans:
One- to four-family.................... $1,077 $ 915 $ 974 $1,642 $2,354 $1,775
Multifamily............................ -- -- -- -- -- 144
Construction and land.................. -- -- 12 -- -- --
Commercial............................. -- -- -- -- -- --
Other loans............................ -- 1 -- -- 2 1
------ ------ ------ ------ ------ ------
Total non-performing loans.......... 1,077 916 986 1,642 2,356 1,920
------ ------ ------ ------ ------ ------
Total real estate owned and in judgment.. 377 496 514 433 629 198
------ ------ ------ ------ ------ ------
Total non-performing assets........... $1,454 $1,412 $1,500 $2,075 $2,985 $2,118
====== ====== ====== ====== ====== ======
Total non-performing loans to 0.41% 0.34% 0.36% 0.54% 0.81% 0.72%
total loans(1)..........................
Total non-performing assets to 0.47% 0.46% 0.49% 0.62% 0.86% 0.66%
total assets............................
</TABLE>
- ----------
(1) Total loans represent gross loans less deferred loan fees and loans in
process.
Classified Assets. Federal regulations and the Association's Classification
of Assets Policy require that the Association utilize an internal asset
classification system as a means of reporting problem and potential problem
assets. The Association has incorporated the OTS internal asset classifications
as a part of its credit monitoring system. The Association currently classifies
problem and potential problem assets as "special mention," "substandard,"
"doubtful" or "loss" assets. An asset is considered "substandard" if it is
inadequately protected by the current net worth and paying capacity of the
obligor or of the collateral pledged, if any. "Substandard" assets include
those characterized by the"distinct possibility" that the Association will
60
<PAGE>
sustain "some loss" if the deficiencies are not corrected. Assets classified as
"doubtful" have all of the weaknesses inherent in those classified "substandard"
with the added characteristic that the weaknesses present make "collection or
liquidation in full," on the basis of currently existing facts, conditions and
values, "highly questionable and improbable." Assets classified as "loss" are
those considered "uncollectible" and of such little value that their continuance
as assets without the establishment of a specific loss reserve is not warranted.
Assets which do not currently expose the Association to sufficient risk to
warrant classification in one of the aforementioned categories but possess
weaknesses or unwarranted financial risk that, if uncorrected, could weaken the
asset and increase risk in the future are required to be designated "special
mention."
When a savings association classifies one or more assets, or portions
thereof, as substandard or doubtful, it is required to establish a general
valuation allowance for loan losses in an amount deemed prudent by management.
The general valuation allowance, which is a regulatory term, represents a loss
allowance which has been established to recognize the inherent risk associated
with lending activities, but which, unlike specific allowances, has not been
allocated to particular problem assets. When a savings association classifies
one or more assets, or portions thereof, as "loss," it is required either to
establish a specific allowance for losses equal to 100% of the amount of the
asset so classified or to charge off such amount.
The Association's Mortgage Servicing Manager reviews the Association's loans
on a monthly basis and provides delinquency reports to the Board of Directors.
The Association's Asset Classification Committee meets on a quarterly basis and
classifies assets in accordance with the management guidelines described herein.
61
<PAGE>
The following table sets forth at March 31, 1996, the Association's carrying
value of assets classified as "substandard," "doubtful" or "loss" or designated
as "special mention:"
<TABLE>
<CAPTION>
SPECIAL MENTION SUBSTANDARD DOUBTFUL LOSS
--------------- --------------- -------------- --------------
NUMBER AMOUNT NUMBER AMOUNT NUMBER AMOUNT NUMBER AMOUNT
------- ------ ------ ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Mortgage loans:
One- to four-family.......... 7 $701 18 $1,077 -- $ -- -- $ --
------- ------ -- ------ ------ ------ ------ ------
Total mortgage loans............ 7 701 18 1,077 -- -- -- --
------- ------ -- ------ ------ ------ ------ ------
Real estate owned and in
judgement:
One- to four-family.......... -- -- 3 338 -- -- -- --
Multifamily.................. -- -- -- -- -- -- -- --
Construction and land........ -- -- 1 39 -- -- -- --
Commercial................... -- -- -- -- -- -- -- --
------- ------ -- ------ ------ ------ ------ ------
Total real estate owned -- -- 4 377 -- -- -- --
and in judgment............... ------- ------ -- ------ ------ ------ ------ ------
Total........................... 7 $701 22 $1,454 -- $ -- -- $ --
======= ====== == ====== ====== ====== ====== ======
</TABLE>
Allowance for Loan Losses. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the
risks inherent in its loan portfolio and the general economy. The allowance for
loan losses is maintained at an amount management considers adequate to cover
estimated losses in loans receivable which are deemed probable and estimable
based on information currently known to management. The Asset Classification
Committee reviews and approves the allowance for loan loss on a quarterly basis.
The allowance is based upon a number of factors, including current regional and
national economic conditions, actual loss experience and industry trends. In
addition, the OTS, as an integral part of its examination process, periodically
reviews the Association's allowance for loan losses. The OTS may require the
Association to make additional general or specific loan loss allowances based
upon judgments different from those of management. At March 31, 1996, the
Association's allowance for loan losses was 0.32% of total loans as compared to
0.31% as of December 31, 1995. The Association had non-accrual loans of $1.1
million and $916,000 at March 31, 1996 and December 31, 1995, respectively,
representing 0.41% and 0.34% of total loans at such respective dates. The
Association will continue to monitor and modify its allowance for loan losses as
conditions dictate.
The OTS, in conjunction with the other federal banking agencies, recently
adopted an interagency policy statement on the allowance for loan and lease
losses. The policy statement provides guidance for financial institutions on
both the responsibilities of management for the assessment and establishment of
adequate allowances and guidance for banking agency examiners in determining the
adequacy of general valuation guidelines. Generally, the policy statement
recommends that institutions have effective systems and controls to identify,
monitor and address asset quality problems; that management analyzes all
significant factors that affect the collectibility of the portfolio in a
reasonable manner; and that management establishes acceptable allowance
evaluation processes that meet the objectives set forth in the policy statement.
While the Association believes that it has established an adequate allowance for
loan losses, there can be no assurance that regulators, in reviewing the
Association's loan portfolio, will not request the Association to materially
increase its allowance for loan losses, thereby negatively affecting the
Association's financial condition and earnings at that time. Management
believes that adequate loan loss allowances have been established; however,
actual losses are dependent upon future events and, as such, further additions
to the level of loan loss allowances may become necessary.
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<PAGE>
The following table sets forth activity in the Association's allowance for
loan losses and other ratios at or for the dates indicated.
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS ENDED
MARCH 31, AT OR FOR THE YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Total loans outstanding at end of period(1)..... $264,938 $271,488 $267,979 $271,689 $302,085 $289,734 $267,836
-------- -------- -------- -------- -------- -------- --------
Balance at beginning of year.................... 826 649 649 409 548 355 127
Provision for loan losses....................... 30 45 180 240 240 256 232
Charge-offs:
One- to four-family........................... -- -- -- -- -- -- --
Multifamily................................... -- -- -- -- (141) -- --
Construction and land......................... -- -- -- -- -- -- --
Commercial.................................... -- -- -- -- -- -- --
Other......................................... -- -- (3) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total charge-offs.......................... -- -- (3) -- (141) -- --
-------- -------- -------- -------- -------- -------- --------
Allocation to reserve for uncollected interest.. -- -- -- -- (238) (63) (4)
-------- -------- -------- -------- -------- -------- --------
Balance at end of year.......................... $ 856 $ 694 $ 826 $ 649 $ 409 $ 548 $ 355
======== ======== ======== ======== ======== ======== ========
Net charge-offs during the period to average
loans outstanding during the period........ -- % -- % -- % -- % 0.05% -- % -- %
Allowance for loan losses to total
loans at end of period..................... 0.32 0.26 0.31 0.24 0.14 0.19 0.13
Allowance for loan losses to total
non-performing loans at end of period...... 79.48 71.77 90.17 65.82 24.91 23.26 18.49
</TABLE>
- -------------------
(1) Total loans represent gross loans less deferred loan fees and loans in
process.
63
<PAGE>
The following table sets forth the Association's allowance for loan losses
allocated by loan category and the percent of loans in each category to total
loans at the dates indicated.
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------------------------------------
AT MARCH 31, 1996 1995 1994 1993
----------------------- ----------------------- ----------------------- -----------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF
LOANS IN LOANS IN LOANS IN LOANS IN
EACH EACH EACH EACH
ALLOWANCE CATEGORY TO ALLOWANCE CATEGORY TO ALLOWANCE CATEGORY TO ALLOWANCE CATEGORY TO
AMOUNT GROSS LOANS AMOUNT GROSS LOANS AMOUNT GROSS LOANS AMOUNT GROSS LOANS
--------- ------------ --------- ------------ --------- ------------ --------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One- to four-family.... $805 98.10% $779 98.09% $602 97.63% $378 97.54%
Multifamily............ 26 1.14 25 1.15 25 1.50 16 1.50
Construction and land.. 10 0.22 7 0.17 11 0.31 8 0.37
Commercial............. 15 0.33 15 0.33 11 0.31 7 0.34
Other.................... -- 0.21 -- 0.26 -- 0.25 -- 0.25
---- ------ ---- ------ ---- ------ ---- ------
Total............... $856 100.00% $826 100.00% $649 100.00% $409 100.00%
==== ====== ==== ====== ==== ====== ==== ======
</TABLE>
64
<PAGE>
INVESTMENT ACTIVITIES
Investment Policy. The investment policy of the Association, which is
established by the Board of Directors, is based upon its asset/liability
management goals and emphasizes high credit quality and diversified investments
while seeking to optimize net interest income within acceptable limits of safety
and liquidity. The Association's investment goal has been to invest available
funds in short-term, highly liquid instruments that have fixed rates. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Management Strategy," "-- Management of Interest Rate Risk" and "-
- - Liquidity and Capital Resources." The policy is designed to provide and
maintain liquidity to meet day-to-day, cyclical and long-term changes in the
Association's asset/liability structure.
The Association's investment policy permits it to invest in U.S. government
obligations; certain securities of various government-sponsored agencies,
including mortgage-backed securities issued/guaranteed by FNMA, FHLMC and the
Government National Mortgage Association ("GNMA"); certificates of deposit of
insured banks and savings associations; and federal funds. The Association's
investment policy prohibits investment in derivative securities.
Mortgage-Backed Securities. At March 31, 1996, the carrying value of
mortgage-backed securities totalled $173,000, or 0.06%, of total assets. The
fair value of these mortgage-backed securities totalled $173,000 at March 31,
1996. All mortgage-backed securities in the Association's portfolio were held-
to-maturity and carried at amortized cost.
At March 31, 1996, all securities in the Association's mortgage-backed
securities portfolio were directly insured or guaranteed by GNMA, thereby
providing the certificate holder a guarantee of timely payments of interest and
scheduled principal payments, whether or not they have been collected. The
Association's mortgage-backed securities portfolio had a weighted average rate
of 6.99% at March 31, 1996.
Mortgage-backed securities generally yield less than the loans that underlie
such securities because of the cost of payment guarantees or credit enhancements
that reduce credit risk. In addition, mortgage-backed securities are more
liquid than individual mortgage loans and may be used to collateralize
borrowings of the Association. In general, mortgage-backed securities issued or
guaranteed by GNMA, FNMA, and FHLMC and certain AAA-rated mortgage-backed pass-
through securities are weighted at no more than 20% for risk-based capital
purposes, compared to the 50% risk weighting assigned to most non-securitized
residential mortgage loans.
U.S. Treasury Securities. At March 31, 1996, the carrying value of U.S.
Treasury securities totalled $6.0 million, or 1.94% of total assets. All U.S.
Treasury securities in the Association's portfolio were held-to-maturity and
carried at amortized cost.
65
<PAGE>
The following table sets forth activity in the Association's mortgage-backed
securities held to maturity portfolio for the periods indicated.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
---------------------------- ----------------------------------
1996 1995 1995 1994 1993
------------- ------------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Amortized cost at beginning of period... $ 187 $ 243 $ 243 $ 296 $ 384
Purchases/sales (net)................... -- -- -- -- --
Principal repayments.................... (14) (13) (56) (52) (89)
Premium and discount amortization, net.. -- -- -- (1) 1
----- ----- ----- ----- -----
Amortized cost at end of period......... $ 173 $ 230 $ 187 $ 243 $ 296
===== ===== ===== ===== =====
</TABLE>
The following table sets forth the amortized cost and fair value of the
Association's mortgage-backed and investment securities held to maturity at the
dates indicated.
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------------
AT MARCH 31, 1996 1995 1994 1993
------------------ ------------------ ------------------ ----------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE COST VALUE COST VALUE
--------- ------- --------- ------- --------- ------- --------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage-backed securities $ 173 $ 173 $ 187 $ 193 $ 243 $ 233 $296 $306
--GNMA.................... ====== ====== ====== ====== ====== ====== ==== =====
Other debt securities $5,955 $5,985 $5,948 $6,030 $5,918 $5,663 $ -- $ --
--U.S. Treasury and ====== ====== ====== ====== ====== ====== ========= =====
Agency...................
</TABLE>
66
<PAGE>
The following table sets forth certain information regarding the amortized
cost, fair value and weighted average rate of the Association's mortgage-backed
and investment securities held to maturity at March 31, 1996, by remaining
period to contractual maturity. With respect to mortgage-backed securities, the
entire amount is reflected in the maturity period that includes the final
security payment date, and, accordingly, no effect has been given to periodic
repayments or possible prepayments.
<TABLE>
<CAPTION>
AT MARCH 31, 1996
-----------------------------
WEIGHTED
AMORTIZED FAIR AVERAGE
COST VALUE RATE
--------- ------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Mortgage-backed securities:
Due after 1 year but within 5 years.... $ 26 $ 27 7.70%
Due after 5 years but within 10 years.. 147 146 6.87
------ ------ ----
Total............................... $ 173 $ 173 6.99%
====== ====== ====
U.S. Treasury and Agency:
Due after 1 year but within 5 years.... $5,955 $5,985 6.05%
====== ====== ====
Total:
Due after 1 year but within 5 years.... $5,981 $6,012 6.05%
Due after 5 years but within 10 years.. 147 146 6.87
------ ------ ----
Total.............................. $6,128 $6,158 6.07%
====== ====== ====
</TABLE>
SOURCES OF FUNDS
General. Savings deposits, loan and security repayments and prepayments and
cash flows generated from operations are the primary sources of the
Association's funds for use in lending, investing and for other general
purposes. To a significantly lesser extent, the Association also utilizes funds
borrowed from the FHLB of Chicago.
Savings Deposits. The Association offers a variety of savings deposit accounts
with a range of interest rates and terms. The Association's savings deposits
consist of passbook accounts, NOW/Super Now accounts, money market accounts,
checking accounts and certificates of deposit. The Association offers
certificates of deposit with maturities of up to 60 months. The flow of
deposits is influenced significantly by general economic conditions, changes in
money market rates, prevailing interest rates and competition. The
Association's deposits are obtained predominantly from the areas in which its
branch offices are located. The Association relies primarily on customer
service and long-standing relationships with customers to attract and retain
these deposits; however, market interest rates and rates offered by competing
financial institutions significantly affect the Association's ability to attract
and retain deposits. Certificate accounts in excess of $100,000 are not
actively solicited by the Association nor does the Association use brokers to
obtain deposits.
67
<PAGE>
The following table presents the savings deposit activity of the Association
for the periods indicated.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE YEAR ENDED DECEMBER 31,
----------------------------------
ENDED MARCH 31, 1996 1995 1994 1993
--------------------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Deposits.................................. $ 190,083 $ 764,098 $ 876,134 $952,634
Withdrawals............................... (188,013) (781,552) (889,520) 969,871
--------- --------- --------- --------
Deposits in excess of (less than) 2,070 (17,454) (13,386) (17,237)
withdrawals.............................
Deposits of branches sold................. -- -- (21,822) (18,113)
Interest credited......................... 2,443 9,488 9,214 10,311
--------- --------- --------- --------
Total increase (decrease) in savings $ 4,513 $ (7,966) $ (25,994) $(25,039)
deposits........................... ========= ========= ========= ========
</TABLE>
At March 31, 1996, the Association had $17.4 million in jumbo certificates of
deposit (accounts in amounts over $100,000) maturing as follows:
<TABLE>
<CAPTION>
WEIGHTED
AMOUNT AVERAGE RATE
-------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
MATURITY PERIOD
Within three months................ $ 7,467 5.37%
After three but within six months.. 1,585 5.25
After six but within 12 months..... 1,569 5.59
After 12 months.................... 6,794 6.65
------- ----
Total........................... $17,415 5.88%
======= ====
</TABLE>
68
<PAGE>
The following table sets forth the distribution of the Association's savings
deposits and the related weighted average interest rates at the dates indicated.
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------
AT MARCH 31, 1996 1995
------------------------------- -------------------------------
PERCENT PERCENT
OF WEIGHTED OF WEIGHTED
TOTAL AVERAGE TOTAL AVERAGE
AMOUNT DEPOSITS RATE AMOUNT DEPOSITS RATE
-------- --------- --------- ---------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
NOW/Super NOW accounts..... $ 46,134 17.5% 2.25% $ 45,001 17.3% 2.25%
Money market accounts...... 17,790 6.7 3.22 17,684 6.8 3.22
Passbook accounts.......... 66,342 25.1 3.00 65,261 25.1 3.04
Certificates of deposit.... 129,318 48.9 5.68 126,847 48.8 5.89
Noninterest bearing 4,901 1.8 -- 5,179 2.0 --
NOW accounts.............. -------- ---- ---- -------- ---- ----
Totals................ $264,485 100.00% 4.14% $259,972 100.00% 4.25%
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------------------------
1994 1993
------------------------------- -------------------------------
PERCENT PERCENT
OF WEIGHTED OF WEIGHTED
TOTAL AVERAGE TOTAL AVERAGE
AMOUNT DEPOSITS RATE AMOUNT DEPOSITS RATE
-------- --------- --------- ---------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
NOW/Super NOW accounts..... $ 48,834 18.2% 2.25% $ 54,836 18.7% 2.25%
Money market accounts...... 23,545 8.8 3.22 30,348 10.3 2.85
Passbook accounts.......... 74,524 27.8 3.00 85,690 29.1 3.00
Certificates of deposit.... 121,035 45.2 4.46 123,058 41.9 4.73
Noninterest bearing -- -- -- -- -- --
NOW accounts.............. -------- ---- ---- -------- ---- ----
Totals................ $267,938 100.00% 3.83% $293,932 100.00% 3.58%
======== ======== ======== ======== ======== ========
</TABLE>
The following table presents, by interest rate ranges, the amount of
certificates of deposit outstanding at the dates indicated and the periods to
maturity of the certificates of deposit outstanding at March 31, 1996.
<TABLE>
<CAPTION>
PERIOD TO MATURITY AT MARCH 31, 1996
------------------------------------ AT AT DECEMBER 31,
LESS THAN ONE TO FOUR TO MARCH 31, -------------------------------
INTEREST RATE RANGE ONE YEAR THREE YEARS FIVE YEARS 1996 1995 1994 1993
- --------------------- ---------- ------------ ---------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Below 4.00%.......... $ 16 $ -- $ -- $ 16 $ 16 $ 12,885 $ 53,848
4.00% to 4.99%....... 10,845 427 10 11,282 7,548 48,001 21,146
5.00% to 5.99%....... 49,482 17,756 2,034 69,272 69,542 31,067 19,001
6.00% to 6.99%....... 9,958 8,949 9,240 28,147 27,216 13,689 10,723
7.00% and above...... 3,322 32 17,247 20,601 22,525 15,393 18,340
------- ------- ------- -------- -------- -------- --------
Total........... $73,623 $27,164 $28,531 $129,318 $126,847 $121,035 $123,058
======= ======= ======= ======== ======== ======== ========
</TABLE>
69
<PAGE>
Borrowed Funds. The Association utilizes advances from the FHLB of Chicago
as an alternative to retail deposits to fund its operations and may do so in the
future as part of its operating strategy. The Association generally only
utilizes FHLB of Chicago borrowings as a source of liquidity. These FHLB of
Chicago advances are collateralized primarily by certain of the Association's
mortgage loans and mortgage-backed securities and secondarily by the
Association's investment in the stock of the FHLB of Chicago. FHLB of Chicago
advances are made pursuant to several different credit programs, each of which
has its own interest rate and range of maturities. The maximum amount that the
FHLB of Chicago will advance to member institutions, including the Association,
fluctuates from time to time in accordance with the policies of the OTS and the
FHLB of Chicago. See "Regulation -- Federal Home Loan Bank System." At March
31, 1996, the maximum amount of FHLB of Chicago advances available to the
Association was $54 million, based on the Association's current investment in
FHLB of Chicago stock.
The following table sets forth certain information regarding the Association's
borrowed funds for the periods indicated.
<TABLE>
<CAPTION>
AT OR FOR THE THREE
MONTHS AT OR FOR THE
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------
1996 1995 1995 1994 1993
----------- ------- -------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
FHLB of Chicago advances: $4,000 -- $6,000 $9,000 $17,000
Maximum amount outstanding at any month-
end during the period.................
Average balance outstanding................ 1,333 -- 1,250 583 3,583
Balance outstanding at end of period....... -- -- 4,000 -- 7,000
Weighted average interest rate during the
period................................... 11.10% -- 6.16% 6.69% 3.63%
Weighted average interest rate at end of
period................................... -- -- 5.31 -- 3.24
</TABLE>
70
<PAGE>
PROPERTIES
The Association conducts its business through five offices set forth in the
table below. The Association's main office is located at 16 North Spring
Street, Elgin, Illinois. The Association believes that its current facilities
(including the new South Elgin office under construction) are adequate to meet
the present and immediately foreseeable needs of the Association and the
Company.
<TABLE>
<CAPTION>
DATE
LEASED OR LEASED OR NET BOOK VALUE AT
OWNED ACQUIRED MARCH 31,1996
--------- --------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Main Office:
16 North Spring St.
Elgin, IL....................... Owned 1923 $2,447
Branches:
180 Virginia St.
Crystal Lake, IL................ Owned 4/01/74 813
56 E. Irving Park Road
Roselle, IL..................... Owned 7/28/75 323
310 N. LaFox St.
South Elgin, IL/(1)/............ Leased 12/81 --
200 Bartlett Ave.
Bartlett, IL.................... Owned 9/20/79 923
Check Processing:
Mail and Record Retention
Facility (No Customer Service)
Annex
Fulton St., Elgin, IL........... Owned 2/06/86 437
</TABLE>
- -------------------
(1) This lease expires on September 30, 1996. Upon expiration, the Association
plans to move into a new branch office that the Association will own, which
office is presently under construction at 300 North McLean Street, South
Elgin at an estimated cost of $1.0 million.
LEGAL PROCEEDINGS
The Association is not involved in any pending legal proceedings other than
routine legal proceedings occurring in the ordinary course of business. Such
routine legal proceedings in the aggregate are believed by management to be
immaterial to the Association's financial condition and results of operations.
PERSONNEL
As of March 31, 1996, the Association has 99 full-time employees and 54 part-
time employees. The Association had experienced a low turnover rate among its
employees and, as of March 31, 1996, 67 of the Association's employees had been
with the Association for more than five years. The employees are not
represented by a collective bargaining unit and the Association considers its
relationship with its employees
71
<PAGE>
to be good. See "Management of the Association -- Benefits" for a description
of certain compensation and benefit programs offered to the Association's
employees.
FEDERAL AND STATE TAXATION
FEDERAL TAXATION
General. The following is a discussion of material tax matters and does not
purport to be a comprehensive description of the tax rules applicable to the
Association or the Company. The Association has not been audited by the IRS
during the last five years. For federal income tax purposes, after the
Conversion, the Company and the Association may file consolidated income tax
returns and report their income on a calendar year basis using the accrual
method of accounting and will be subject to federal income taxation in the same
manner as other corporations with some exceptions, including particularly the
Association's tax reserve for bad debts, discussed below.
Tax Bad Debt Reserves. Savings institutions such as the Association which meet
certain definitional tests primarily relating to their assets and the nature of
their business ("qualifying thrifts") are permitted to establish a tax reserve
for bad debts and to make annual additions thereto, which additions may, within
specified formula limits, be deducted in arriving at their taxable income. The
Association's deduction with respect to "qualifying loans," which are generally
loans secured by certain interests in real property, may be computed using an
amount based on the Association's actual loss experience (the "Experience
Method"), or a percentage equal to 8% of the Association's taxable income (the
"PTI Method"), computed without regard to this deduction and with additional
modifications and reduced by the amount of any permitted addition to the non-
qualifying reserve. Use of the PTI Method has the effect of reducing the
marginal rate of federal tax on the Association's income to 31.3%, exclusive of
any minimum or environmental tax, as compared to the generally applicable
maximum corporate federal income tax rate of 34%. (The marginal rate of tax
would be 32.2% if the Association's taxable income exceeds $10,000,000 and is
therefore subject to a maximum tax rate of 35%). The Association's deduction
with respect to non-qualifying loans must be computed under the Experience
Method which is based on the Association's actual charge-offs. Each year the
Association reviews the most favorable way to calculate the deduction
attributable to an addition to the tax bad debt reserve. See "Risk Factors --
Pending Legislation Regarding Bad Debt Reserves."
The Association presently satisfies the qualifying thrift definitional tests.
If the Association failed to satisfy such tests in any taxable year, it would be
unable to use the PTI Method in computing additions to its tax bad debt reserve
and may be required to recapture (i.e., take into income) a portion of its bad
debt reserves over a six year period. Such bad debt reserve recapture could
cause the Association to incur substantial tax liability. Among other things,
the qualifying thrift definitional tests require the Association to hold at
least 60% of its assets as "qualifying assets." Qualifying assets generally
include cash, obligations of the United States or any agency or instrumentality
thereof, certain obligations of a state or political subdivision thereof, loans
secured by interests in improved residential real property or by savings
accounts, student loans and property used by the Association in the conduct of
its banking business. The Association's ratio of qualifying assets to total
assets exceeded 60% through the close of its last taxable year. Although there
can be no assurance that the Association will satisfy the 60% test in the
future, management believes that this level of qualifying assets can be
maintained by the Association.
The amount of the addition to the reserve for losses on qualifying real
property loans under the PTI Method cannot exceed the amount necessary to
increase the balance of the reserve for losses on qualifying real property loans
at the close of the taxable year to 6 percent of the balance of the qualifying
real property loans outstanding at such time. As of the close of its last
taxable year, the Association's tax reserve for bad debts on qualifying real
property loans was less than 6 percent of its qualifying real property loans
outstanding. Also, if the Association uses the PTI Method, its aggregate
addition to its reserve for losses on
72
<PAGE>
qualifying real property loans cannot, when added to the addition to the reserve
for losses on non-qualifying loans, exceed the amount by which: (i) 12 percent
of the amount that the total deposits or withdrawable accounts of depositors of
the Association at the close of the taxable year exceeds (ii) the sum of the
Association's surplus, undivided profits and reserves at the beginning of such
year As of the close of its last taxable year, 12 percent of the Association's
deposits and withdrawable accounts was greater than its surplus, undivided
profits and reserves at the beginning of its taxable year.
Under pending legislative proposals, the PTI Method would be repealed for
thrifts and the Association would be permitted to use only the Experience Method
of computing additions to its bad debt reserves. In addition, the Association
would be required to recapture (i.e., take into income) over a six year period
the excess of the balance of its bad debt reserves as of December 31, 1995 over
the greater of (a) the balance of such reserves as of December 31, 1987 (or a
lesser amount since the Association's loan portfolio has decreased since
December 31, 1987) or (b) an amount that would have been the balance of such
reserves as of December 31, 1995 had the Association always computed the
additions to its reserves using the bank six-year moving average Experience
Method. The Association's post-December 31, 1987 nonqualifying and qualifying
bad debt reserves at December 31, 1995 were approximately $4.5 million. If that
amount were recaptured, the Association would incur an additional tax liability
of approximately $1.9 million. See "Risk Factors -- Pending Legislation
Regarding Bad Debt Reserves."
Distributions. To the extent that: (i) the Association's tax bad debt reserve
for losses on qualifying real property loans exceeds the amount that would have
been allowed under the Experience Method (the "Excess Bad Debt Reserve") and the
Association maintains a supplemental reserve for losses on loans; and (ii) the
Association makes "non-dividend distributions" to the Company, such
distributions will be considered to have been made from the Excess Bad Debt
Reserve or the supplemental reserve for losses on loans ("Excess
Distributions"), and an amount based on the amount distributed will be included
in the Association's taxable income. Non-dividend distributions include
distributions in excess of the Association's current and accumulated earnings
and profits, as calculated for federal income tax purposes, distributions in
redemption of stock, and distributions in partial or complete liquidation.
However, dividends paid out of the Association's current or accumulated earnings
and profits will not be considered to result in a distribution from the
Association's Excess Bad Debt Reserve or supplemental reserve.
The amount of additional taxable income created from an Excess Distribution is
an amount that, when reduced by the tax attributable to the income, is equal to
the amount of the Excess Distribution. Thus, if, after the Conversion, the
Association makes a "non-dividend distribution" that is an Excess Distribution,
approximately one and one-half times the amount so used would be includable in
gross income for federal income tax purposes, assuming a 34% federal corporate
income tax rate. See "Regulation" and "Dividend Policy" for limits on the
payment of dividends by the Association. The Association does not intend to pay
dividends that would result in a recapture of any portion of its tax bad debt
reserves.
Under pending legislative proposals, if the Association makes a non-dividend
distribution, as defined above, an amount, as computed above, will be included
in the Association's taxable income, but the maximum amount of reserves subject
to such inclusion will be the balance of the Association's bad debt reserves as
of December 31, 1987, or a lesser amount since the Association's loan portfolio
has decreased since December 31, 1987.
Corporate Alternative Minimum Tax. The Internal Revenue Code of 1986, as
amended (the "Code"), imposes a tax ("AMT") on alternative minimum taxable
income ("AMTI") at a rate of 20%. AMTI is increased by certain preference
items, including the excess of the tax bad debt reserve deduction using the PTI
Method over the deduction that would have been allowable under the Experience
Method. Only 90% of AMTI can be offset by net operating loss carryovers of
which the Association currently has none. AMTI is also adjusted by determining
the tax treatment of certain items in a manner that negates the deferral of
income resulting from the regular tax treatment of those items. Thus, the
Association's AMTI is increased by an
73
<PAGE>
amount equal to 75% of the amount by which the Association's adjusted current
earnings exceeds its AMTI (determined without regard to this adjustment and
prior to reduction for net operating losses). In addition, for taxable years
beginning after December 31, 1986 and before January 1, 1996, an environmental
tax of 0.12% of the excess of AMTI (with certain modifications) over $2 million
is imposed on corporations, including the Association, whether or not an AMT is
paid. Under pending legislative proposals, the environmental tax would be
extended to taxable years beginning before January 1, 2007. The Association does
not expect to be subject to the AMT, but may be subject to the environmental tax
liability.
Elimination of Dividends; Dividends Received Deduction. The Company may
exclude from its income 100% of dividends received from the Association as a
member of the same affiliated group of corporations. A 70% dividends received
deduction generally applies with respect to dividends received from domestic
corporations that are not members of such affiliated group, except that an 80%
dividends received deduction applies if the Company and the Association own more
than 20% of the stock of a corporation paying a dividend. Under pending
legislative proposals, the 70% dividends received deduction would be reduced to
50% with respect to dividends paid after enactment of such legislation.
STATE AND LOCAL TAXATION
State of Illinois. The Association files a separate Illinois income tax return.
For Illinois income tax purposes, the Association is taxed at an effective rate
equal to 7.3% of Illinois Taxable Income. For these purposes, "Illinois Taxable
Income" generally means federal taxable income, subject to certain adjustments
(including the addition of interest income on state and municipal obligations
and the exclusion of interest income on United States Treasury obligations).
The exclusion of income on United States Treasury obligations has the effect of
reducing the Illinois Taxable Income of the Association.
As a Delaware holding company, the Company will register as a foreign
corporation authorized to transact business in Illinois. As such, it will file
an Illinois Foreign Corporation Annual Report and pay an annual franchise tax to
the State of Illinois.
State of Delaware. As a Delaware holding company not earning income in
Delaware, the Company is exempted from Delaware corporate income tax but is
required to file an annual report with and pay an annual franchise tax to the
State of Delaware.
74
<PAGE>
REGULATION
GENERAL
The Association is subject to extensive regulation, examination, and
supervision by the OTS, as its chartering agency, and the FDIC, as its deposit
insurer. The Association's savings deposit accounts are insured up to
applicable limits by the SAIF administered by the FDIC, and it is a member of
the FHLB of Chicago. The Association must file reports with the OTS and the
FDIC concerning its activities and financial condition, and it must obtain
regulatory approvals prior to entering into certain transactions, such as
mergers with, or acquisitions of, other depository institutions. The OTS and
the FDIC conduct periodic examinations to assess the Association's compliance
with various regulatory requirements. This regulation and supervision
establishes a comprehensive framework of activities in which a savings
association can engage and is intended primarily for the protection of the
insurance fund and depositors. Assuming that the holding company form of
organization is utilized, the Company, as a savings association holding company,
will also be required to file certain reports with, and otherwise comply with,
the rules and regulations of the OTS and of the Securities and Exchange
Commission (the "SEC") under the federal securities laws.
The OTS and the FDIC have significant discretion in connection with their
supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes. Any change in such
policies, whether by the OTS, the FDIC or the Congress, could have a material
adverse impact on the Company, the Association and the operations of both.
The following discussion is intended to be a summary of the material statutes
and regulations applicable to savings associations and their holding companies,
and it does not purport to be a comprehensive description of all such statutes
and regulations.
REGULATION OF FEDERAL SAVINGS ASSOCIATIONS
Business Activities. The Association derives its lending and investment powers
from the Home Owners' Loan Act, as amended (the "HOLA"), and the regulations of
the OTS thereunder. Under these laws and regulations, the Association may
invest in mortgage loans secured by residential and commercial real estate,
commercial and consumer loans, certain types of debt securities, and certain
other assets. The Association may also establish service corporations that may
engage in activities not otherwise permissible for the Association, including
certain real estate equity investments and securities and insurance brokerage.
These investment powers are subject to various limitations, including (a) a
prohibition against the acquisition of any corporate debt security that is not
rated in one of the four highest rating categories; (b) a limit of 400% of an
association's capital on the aggregate amount of loans secured by non-
residential real estate property; (c) a limit of 10% of an association's assets
on the aggregate amount of commercial loans; (d) a limit of 35% of an
association's assets on the aggregate amount of consumer loans and acquisitions
of certain debt securities; (e) a limit of 5% of assets on non-conforming loans
(loans in excess of the specific limitations of the HOLA); and (f) a limit of
the greater of 5% of assets or an association's capital on certain construction
loans made for the purpose of financing what is or is expected to become
residential property.
Loans to One Borrower. Under the HOLA, savings associations are generally
subject to the same limits on loans to one borrower as are imposed on national
banks. Generally, under these limits, a savings association may not make a loan
or extend credit to a single or related group of borrowers in excess of 15% of
the association's unimpaired capital and surplus. Additional amounts may be
lent, not in excess of 10% of unimpaired capital and surplus, if such loans or
extensions of credit are fully secured by readily-marketable collateral. Such
collateral is defined to include certain debt and equity securities and bullion,
but generally does not include real estate. At March 31, 1996, the
Association's regulatory limit on loans to one borrower was $5.6 million.
However, the Association limits loans to any one borrower to an aggregate of $1
million.
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At March 31, 1996, the Association's largest aggregate amount of loans to one
borrower was $382,000, and the second largest borrower had an aggregate balance
of $366,000. The Association is in compliance with all applicable limitations
on loans to one borrower.
QTL Test. The HOLA requires a savings association to meet a qualified thrift
lender, or "QTL" test. Under the QTL test, a savings association is required to
maintain at least 65% of its "portfolio assets" in certain "qualified thrift
investments" in at least nine months of the most recent 12-month period.
"Portfolio assets" means, in general, an association's total assets less the sum
of (a) specified liquid assets up to 20% of total assets, (b) certain
intangibles, including goodwill and credit card and purchased mortgage servicing
rights, and (c) the value of property used to conduct the association's
business. "Qualified thrift investments" includes various types of loans made
for residential and housing purposes, investments related to such purposes,
including certain mortgage-backed and related securities, and consumer loans up
to 10% of the association's portfolio assets. At March 31, 1996, the
Association maintained 98.3% of its portfolio assets in qualified thrift
investments. The Association had also met the QTL test in each of the prior 12
months and was, therefore, a qualified thrift lender.
A savings association that fails the QTL test must either operate under certain
restrictions on its activities or convert to a bank charter. The initial
restrictions include prohibitions against (a) engaging in any new activity not
permissible for a national bank, (b) paying dividends not permissible under
national bank regulations, (c) obtaining new advances from any Federal Home Loan
Bank and (d) establishing any new branch office in a location not permissible
for a national bank in the association's home state. In addition, within one
year of the date that a savings association ceases to meet the QTL test, any
company controlling the association would have to register under, and become
subject to the requirements of, the Bank Holding Company Act of 1956, as amended
(the "BHC Act"). If the savings association does not requalify under the QTL
test within the three-year period after it failed the QTL test, it would be
required to terminate any activity and to dispose of any investment not
permissible for a national bank and would have to repay as promptly as possible
any outstanding advances from a Federal Home Loan Bank. A savings association
that has failed the QTL test may requalify under the QTL test and be free of
such limitations, but it may do so only once.
Capital Requirements. The OTS regulations require savings associations to meet
three minimum capital standards: a tangible capital ratio requirement of 1.5% of
total assets as adjusted under the OTS regulations, a leverage ratio requirement
of 3% of core capital to such adjusted total assets and a risk-based capital
ratio requirement of 8% of core and supplementary capital to total risk-based
assets. In determining the amount of risk-weighted assets for purposes of the
risk-based capital requirement, a savings association must compute its risk-
based assets by multiplying its assets and certain off-balance sheet items by
risk-weights, which range from 0% for cash and obligations issued by the United
States Government or its agencies to 100% for consumer and commercial loans, as
assigned by the OTS capital regulation based on the risks OTS believes are
inherent in the type of asset.
Tangible capital is defined, generally, as common stockholders' equity
(including retained earnings), certain noncumulative perpetual preferred stock
and related earnings and minority interests in equity accounts of fully
consolidated subsidiaries, less intangibles (other than certain purchased
mortgage servicing rights) and investments in and loans to subsidiaries engaged
in activities not permissible for a national bank. Core capital is defined
similarly to tangible capital, but core capital also includes certain qualifying
supervisory goodwill and certain purchased credit card relationships.
Supplementary capital currently includes cumulative and other perpetual
preferred stock, mandatory convertible securities, subordinated debt and
intermediate preferred stock and the allowance for loan and lease losses. The
allowance for loan and lease losses includable in supplementary capital is
limited to a maximum of 1.25% of risk-weighted assets, and the amount of
supplementary capital that may be included as total capital cannot exceed the
amount of core capital.
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When determining its compliance with the risk-based capital requirement, a
savings association with "above normal" interest rate risk is required to hold
additional capital to account for the Association's "above normal" interest rate
risk. A savings association's interest rate risk is measured by the decline in
the net portfolio value of its assets (i.e., the difference between incoming and
outgoing discounted cash flows from assets, liabilities and off-balance sheet
contracts) resulting from a hypothetical 2% increase or decrease in market rates
of interest, divided by the estimated economic value of the association's
assets, as calculated in accordance with guidelines set forth by the OTS. At
the times when the 3-month Treasury bond equivalent yield falls below 4%, an
association may compute its interest rate risk on the basis of a decrease equal
to one-half of that Treasury rate rather than on the basis of 2%. A savings
association whose measured interest rate risk exposure exceeds 2% would be
considered to have "above normal" risk. The interest rate risk component is an
amount equal to one-half of the difference between the association's measured
interest rate risk and 2%, multiplied by the estimated economic value of the
association's assets. That dollar amount is deducted from an association's
total capital in calculating compliance with its risk-based capital requirement.
Any required deduction for interest rate risk becomes effective on the last day
of the third quarter following the reporting date of the association's financial
data on which the interest rate risk was computed.
At March 31, 1996, the Association met each of its capital requirements. See
"Regulatory Capital Compliance" for a table that sets forth, in terms of dollars
and percentages, the OTS tangible, leverage, and risk-based capital requirements
and the Association's historical amounts and percentages at March 31, 1996, and
pro forma amounts and percentages based upon the issuance of the shares within
the Estimated Price Range and assuming that a portion of the net proceeds are
retained by the Company.
The table below presents the Association's regulatory capital as compared to
the OTS regulatory capital requirements at March 31, 1996:
<TABLE>
<CAPTION>
ASSOCIATION CAPITAL REQUIREMENTS EXCESS
------------------- -------------------------------- -------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
--------- -------- ---------------- -------------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Tangible capital....................................... $37,195 12.04A% $ 4,634 1.50A% $32,561 10.54A%
Core capital........................................... 37,195 12.04 9,268 3.00 27,927 9.04
Risk-based capital..................................... 38,051 23.65 12,872 8.00 25,129 15.65
</TABLE>
A reconciliation between regulatory capital and
GAAP capital at March 31, 1996 is presented below:
<TABLE>
<CAPTION>
TANGIBLE CAPITAL CORE CAPITAL RISK-BASED CAPITAL
---------------- ------------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C>
GAAP capital........................................... $37,195 $37,195 $ 37,195
Allowance for loan losses includable -- -- 856
in supplementary capital............................. ------- ------------- ---------
Regulatory capital..................................... $37,195 $37,195 $ 38,051
======= ============= =========
</TABLE>
Limitation on Capital Distributions. OTS regulations currently impose
limitations upon capital distributions by savings associations, such as cash
dividends, payments to repurchase or otherwise acquire its shares, payments to
stockholders of another institution in a cash-out merger and other distributions
charged against capital. At least 30-days written notice must be given to the
OTS of a proposed capital distribution by a savings association, and capital
distributions in excess of specified earnings or by certain institutions are
subject to approval by the OTS. An association that has capital in excess of
all fully phased-in regulatory capital requirements before and after a proposed
capital distribution and that is not otherwise restricted in making capital
distributions, may, after prior notice but without the approval of the OTS, make
capital distributions during a calendar year equal to the greater of (a) 100% of
its net earnings to date during the
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calendar year plus the amount that would reduce by one-half its "surplus capital
ratio" (the excess capital over its fully phased-in capital requirements) at the
beginning of the calendar year, or (b) 75% of its net earnings for the previous
four quarters. Any additional capital distributions would require prior OTS
approval. In addition, the OTS can prohibit a proposed capital distribution,
otherwise permissible under the regulation, if the OTS has determined that the
association is in need of more than normal supervision or if it determines that
a proposed distribution by an association would constitute an unsafe or unsound
practice. Furthermore, under the OTS prompt corrective action regulations, the
Association would be prohibited from making any capital distribution if, after
the distribution, the Association failed to meet its minimum capital
requirements, as described above. See "-- Prompt Corrective Regulatory Action."
The OTS has proposed regulations that would simplify the existing procedures
governing capital distributions by savings associations. Under the proposed
regulations, the approval of the OTS would be required only for an association
that is deemed to be in troubled condition or that is undercapitalized or would
be undercapitalized after the capital distribution. A savings association would
be able to make a capital distribution without notice to or approval of the OTS
if it is not held by a savings association holding company, is not deemed to be
in troubled condition, has received either of the two highest composite
supervisory ratings and would continue to be adequately capitalized after such
distribution. Notice would have to be given to the OTS by any association that
is held by a savings association holding company or that had received a
composite supervisory rating below the highest two composite supervisory
ratings. An association's capital rating would be determined under the prompt
corrective action regulations. See "-- Prompt Corrective Regulatory Action."
Liquidity. The Association is required to maintain an average daily balance of
liquid assets (cash, certain time deposits, bankers' acceptances, specified
United States Government, state or federal agency obligations, shares of certain
mutual funds and certain corporate debt securities and commercial paper) equal
to a monthly average of not less than a specified percentage of its net
withdrawable deposit accounts plus short-term borrowings. This liquidity
requirement may be changed from time to time by the OTS to any amount within the
range of 4% to 10% depending upon economic conditions and the savings flows of
member institutions, and is currently 5%. OTS regulations also require each
savings association to maintain an average daily balance of short-term liquid
assets at a specified percentage (currently 1%) of the total of its net
withdrawable deposit accounts and borrowings payable in one year or less.
Monetary penalties may be imposed for failure to meet these liquidity
requirements. The Association's average liquidity ratio for the month ended
March 31, 1996 was 10.27% which exceeded the applicable requirements. The
Association has never been subject to monetary penalties for failure to meet its
liquidity requirements.
Assessments. Savings associations are required by OTS regulation to pay
assessments to the OTS to fund the operations of the OTS. The general
assessment, paid on a semi-annual basis, is computed upon the savings
association's total assets, including consolidated subsidiaries, as reported in
the association's latest quarterly Thrift Financial Report. During January
1996, the Association paid an assessment of $39,342.
Branching. Subject to certain limitations, the HOLA and the OTS regulations
permit federally chartered savings associations to establish branches in any
state of the United States. The authority to establish such branches is
available (a) in states that expressly authorize branches of savings
associations located in another state or (b) to an association that qualifies as
a "domestic building and loan association" under the Internal Revenue Code of
1986, which imposes qualification requirements similar to those for a "qualified
thrift lender" under the HOLA. See "-- QTL Test." The authority for a federal
savings association to establish an interstate branch network would facilitate a
geographic diversification of the association's activities. This authority
under the HOLA and the OTS regulations preempts any state law purporting to
regulate branching by federal savings associations.
Community Reinvestment. Under the Community Reinvestment Act (the "CRA"), as
implemented by OTS regulations, a savings association has a continuing and
affirmative obligation consistent with its safe
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and sound operation to help meet the credit needs of its entire community,
including low and moderate income neighborhoods. The CRA does not establish
specific lending requirements or programs for financial institutions nor does it
limit an institution's discretion to develop the types of products and services
that it believes are best suited to its particular community, consistent with
the CRA. The CRA requires the OTS, in connection with its examination of a
savings association, to assess the association's record of meeting the credit
needs of its community and to take such record into account in its evaluation of
certain applications by such association. The CRA also requires all
institutions to make public disclosure of their CRA ratings. The Association
received a "Satisfactory" CRA rating in its most recent examination.
In April 1995, the OTS and the other federal banking agencies adopted
amendments revising their CRA regulations. Among other things, the amended CRA
regulations substitute for the prior process-based assessment factors a new
evaluation system that would rate an institution based on its actual performance
in meeting community needs. In particular, the proposed system would focus on
three tests: (a) a lending test, to evaluate the institution's record of making
loans in its assessment areas; (b) an investment test, to evaluate the
institution's record of investing in community development projects, affordable
housing, and programs benefiting low or moderate income individuals and
businesses; and (c) a service test, to evaluate the institution's delivery of
services through its branches, ATMs and other offices. The amended CRA
regulations also clarify how an institution's CRA performance would be
considered in the application process.
Transactions with Related Parties. The Association's authority to engage in
transactions with its "affiliates" is limited by the OTS regulations and by
Sections 23A and 23B of the Federal Reserve Act (the "FRA"). In general, an
affiliate of the Association is any company that controls the Association or any
other company that is controlled by a company that controls the Association,
excluding the Association's subsidiaries other than those that are insured
depository institutions. The OTS regulations prohibit a savings association (a)
from lending to any of its affiliates that is engaged in activities that are not
permissible for bank holding companies under Section 4(c) of the BHC Act and (b)
from purchasing the securities of any affiliate other than a subsidiary.
Section 23A limits the aggregate amount of transactions with any individual
affiliate to 10% of the capital and surplus of the savings association and also
limits the aggregate amount of transactions with all affiliates to 20% of the
savings association's capital and surplus. Extensions of credit to affiliates
are required to be secured by collateral in an amount and of a type described in
Section 23A, and the purchase of low quality assets from affiliates is generally
prohibited. Section 23B provides that certain transactions with affiliates,
including loans and asset purchases, must be on terms and under circumstances,
including credit standards, that are substantially the same or at least as
favorable to the association as those prevailing at the time for comparable
transactions with nonaffiliated companies. In the absence of comparable
transactions, such transactions may only occur under terms and circumstances,
including credit standards, that in good faith would be offered to or would
apply to nonaffiliated companies.
The Association's authority to extend credit to its directors, executive
officers, and 10% stockholders, as well as to entities controlled by such
persons, is currently governed by the requirements of Sections 22(g) and 22(h)
of the FRA and Regulation O of the FRB thereunder. Among other things, these
provisions require that extensions of credit to insiders (a) be made on terms
that are substantially the same as, and follow credit underwriting procedures
that are not less stringent than, those prevailing for comparable transactions
with unaffiliated persons and that do not involve more than the normal risk of
repayment or present other unfavorable features and (b) not exceed certain
limitations on the amount of credit extended to such persons, individually and
in the aggregate, which limits are based, in part, on the amount of the
association's capital. In addition, extensions of credit in excess of certain
limits must be approved by the association's board of directors.
Enforcement. Under the Federal Deposit Insurance Act (the "FDI Act"), the OTS
has primary enforcement responsibility over savings associations and has the
authority to bring enforcement action against all "institution-affiliated
parties," including any controlling stockholder or any stockholder, attorney,
appraiser and accountant who knowingly or recklessly participates in any
violation of applicable law or regulation or
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breach of fiduciary duty or certain other wrongful actions that causes or is
likely to cause a more than a minimal loss or other significant adverse effect
on an insured savings association. Civil penalties cover a wide range of
violations and actions and range from $5,000 for each day during which
violations of law, regulations, orders, and certain written agreements and
conditions continue, up to $1 million per day for such violations if the person
obtained a substantial pecuniary gain as a result of such violation or knowingly
or recklessly caused a substantial loss to the institution. Criminal penalties
for certain financial institution crimes include fines of up to $1 million and
imprisonment for up to 30 years. In addition, regulators have substantial
discretion to take enforcement action against an institution that fails to
comply with its regulatory requirements, particularly with respect to its
capital requirements. Possible enforcement actions range from the imposition of
a capital plan and capital directive to receivership, conservatorship, or the
termination of deposit insurance. Under the FDI Act, the FDIC has the authority
to recommend to the Director of OTS that enforcement action be taken with
respect to a particular savings association. If action is not taken by the
Director of the OTS, the FDIC has authority to take such action under certain
circumstances.
Standards for Safety and Soundness. The FDI Act, as amended by FDICIA and the
Riegle Community Development and Regulatory Improvement Act of 1994 (the
"Community Development Act"), requires the OTS, together with the other federal
bank regulatory agencies, to prescribe standards, by regulations or guidelines,
relating to internal controls, information systems and internal audit systems,
loan documentation, credit underwriting, interest rate risk exposure, asset
growth, asset quality, earnings, stock valuation, and compensation, fees and
benefits and such other operational and managerial standards as the agencies
deem appropriate. The OTS and the federal bank regulatory agencies have
adopted, effective August 9, 1995, a set of guidelines prescribing safety and
soundness standards pursuant to FDICIA, as amended. The guidelines establish
general standards relating to internal controls and information systems,
internal audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, and compensation, fees and benefits. In general, the
guidelines require, among other things, appropriate systems and practices to
identify and manage the risks and exposures specified in the guidelines. The
guidelines prohibit excessive compensation as an unsafe and unsound practice and
describe compensation as excessive when the amounts paid are unreasonable or
disproportionate to the services performed by an executive officer, employee,
director or principal stockholder. The OTS and the other agencies determined
that stock valuation standards were not appropriate. In addition, the OTS
adopted regulations that authorize, but do not require, the OTS to order an
institution that has been given notice by the OTS that it is not satisfying any
of such safety and soundness standards to submit a compliance plan. If, after
being so notified, an institution fails to submit an acceptable compliance plan
or fails in any material respect to implement an accepted compliance plan, the
OTS must issue an order directing action to correct the deficiency and may issue
an order directing other actions of the types to which an undercapitalized
association is subject under the "prompt corrective action" provisions of
FDICIA. If an institution fails to comply with such an order, the OTS may seek
to enforce such order in judicial proceedings and to impose civil money
penalties. The OTS and the federal bank regulatory agencies also proposed
guidelines for asset quality and earnings standards.
Real Estate Lending Standards. The OTS and the other federal banking agencies
adopted regulations to prescribe standards for extensions of credit that (a) are
secured by real estate or (b) are made for the purpose of financing the
construction of improvements on real estate. The OTS regulations require each
savings association to establish and maintain written internal real estate
lending standards that are consistent with safe and sound banking practices and
appropriate to the size of the association and the nature and scope of its real
estate lending activities. The standards also must be consistent with
accompanying OTS guidelines, which include loan-to-value ratios for the
different types of real estate loans. Associations are also permitted to make a
limited amount of loans that do not conform to the proposed loan-to-value
limitations so long as such exceptions are reviewed and justified appropriately.
The guidelines also list a number of lending situations in which exceptions to
the loan-to-value standards are justified.
Prompt Corrective Regulatory Action. Under the OTS prompt corrective action
regulations, the OTS is required to take certain, and is authorized to take
other, supervisory actions against undercapitalized savings
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associations. For this purpose, a savings association would be placed in one of
five categories based on the association's capital. Generally, a savings
association is treated as "well capitalized" if its ratio of total capital to
risk-weighted assets is at least 10.0%, its ratio of core capital to risk-
weighted assets is at least 6.0%, its ratio of core capital to total assets is
at least 5.0%, and it is not subject to any order or directive by the OTS to
meet a specific capital level. A savings association will be treated as
"adequately capitalized" if its ratio of total capital to risk-weighted assets
is at least 8.0%, its ratio of core capital to risk-weighted assets is at least
4.0%, and its ratio of core capital to total assets is at least 4.0% (3.0% if
the association receives the highest rating on the CAMEL financial institutions
rating system). A savings association that has a total risk-based capital of
less than 8.0% or a leverage ratio or a Tier 1 capital ratio that is less than
4.0% (3.0% leverage ratio if the association receives the highest rating on the
CAMEL financial institutions rating system) is considered to be
"undercapitalized." A savings association that has a total risk-based capital
of less than 6.0% or a Tier 1 risk-based capital ratio or a leverage ratio of
less than 3.0% is considered to be "significantly undercapitalized." A savings
association that has a tangible capital to assets ratio equal to or less than 2%
is deemed to be "critically undercapitalized." The elements of an association's
capital for purposes of the prompt corrective action regulations are defined
generally as they are under the regulations for minimum capital requirements.
See "-- Capital Requirements."
The severity of the action authorized or required to be taken under the prompt
corrective action regulations increases as an association's capital deteriorates
within the three undercapitalized categories. All associations are prohibited
from paying dividends or other capital distributions or paying management fees
to any controlling person if, following such distribution, the association would
be undercapitalized. An undercapitalized association is required to file a
capital restoration plan within 45 days of the date the association receives
notice that it is within any of the three undercapitalized categories. The OTS
is required to monitor closely the condition of an undercapitalized association
and to restrict the asset growth, acquisitions, branching, and new lines of
business of such an association. Significantly undercapitalized associations
are subject to restrictions on compensation of senior executive officers; such
an association may not, without OTS consent, pay any bonus or provide
compensation to any senior executive officer at a rate exceeding the officer's
average rate of compensation (excluding bonuses, stock options and profit-
sharing) during the 12 months preceding the month when the association became
undercapitalized. A significantly undercapitalized association may also be
subject, among other things, to forced changes in the composition of its board
of directors or senior management, additional restrictions on transactions with
affiliates, restrictions on acceptance of deposits from correspondent
associations, further restrictions on asset growth, restrictions on rates paid
on deposits, forced termination or reduction of activities deemed risky, and any
further operational restrictions deemed necessary by the OTS.
If one or more grounds exist for appointing a conservator or receiver for an
association, the OTS may require the association to issue additional debt or
stock, sell assets, be acquired by a depository association holding company or
combine with another depository association. The OTS and the FDIC have a broad
range of grounds under which they may appoint a receiver or conservator for an
insured depositary association. Under FDICIA, the OTS is required to appoint a
receiver (or with the concurrence of the FDIC, a conservator) for a critically
undercapitalized association within 90 days after the association becomes
critically undercapitalized or, with the concurrence of the FDIC, to take such
other action that would better achieve the purposes of the prompt corrective
action provisions. Such alternative action can be renewed for successive 90-day
periods. However, if the association continues to be critically
undercapitalized on average during the quarter that begins 270 days after it
first became critically undercapitalized, a receiver must be appointed, unless
the OTS makes certain findings with which the FDIC concurs and the Director of
the OTS and the Chairman of the FDIC certify that the association is viable. In
addition, an association that is critically undercapitalized is subject to more
severe restrictions on its activities, and is prohibited, without prior approval
of the FDIC from, among other things, entering into certain material
transactions or paying interest on new or renewed liabilities at a rate that
would significantly increase the association's weighted average cost of funds.
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When appropriate, the OTS can require corrective action by a savings
association holding company under the "prompt corrective action" provisions of
FDICIA.
Insurance of Deposit Accounts. The Association is a member of the SAIF, and
the Association pays its deposit insurance assessments to the SAIF. The FDIC
also maintains another insurance fund, the Bank Insurance Fund (the "BIF"),
which primarily insures the deposits of banks and state chartered savings banks.
Pursuant to FDICIA, the FDIC established a new risk-based assessment system for
determining the deposit insurance assessments to be paid by insured depositary
institutions. Under the new assessment system, which began in 1993, the FDIC
assigns an institution to one of three capital categories based on the
institution's financial information as of the reporting period ending seven
months before the assessment period. The three capital categories consist of
(a) well capitalized, (b) adequately capitalized, or (c) undercapitalized. The
FDIC also assigns an institution to one of three supervisory subcategories
within each capital group. The supervisory subgroup to which an institution is
assigned is based on a supervisory evaluation provided to the FDIC by the
institution's primary federal regulator and information that the FDIC determines
to be relevant to the institution's financial condition and the risk posed to
the deposit insurance funds. An institution's assessment rate depends on the
capital category and supervisory category to which it is assigned. Under the
regulation, there are nine assessment risk classifications (i.e., combinations
of capital groups and supervisory subgroups) to which different assessment rates
are applied. Beginning in 1993, the assessment rates for both the BIF and the
SAIF had ranged from 0.23% of deposits for an institution in the highest
category (i.e., well-capitalized and financially sound, with no more than a few
minor weaknesses) to 0.31% of deposits for an institution in the lowest category
(i.e., undercapitalized and substantial supervisory concern).
The FDI Act requires that the BIF and the SAIF funds each be recapitalized
until reserves are at least 1.25% of the deposits insured by that fund. After a
fund reached the 1.25% reserve ratio, the assessment rates for that fund could
be reduced. The FDIC has reported that the BIF reached the required reserve
ratio during May 1995. As a result of the recapitalization of the BIF, the FDIC
reduced BIF assessment rates. The FDIC initially reduced the BIF assessment
rates, effective June 1, 1995, to a range of 0.04% to 0.27% of deposits. Having
subsequently determined that the BIF had sufficient reserves in excess of the
required 1.25% ratio, the FDIC reduced the BIF assessment rate for "well
capitalized" institutions without any significant supervisory concerns to the
statutory minimum of $2,000 annually beginning with the first half of 1996, and
the rates for other BIF-insured institutions will range from 0.03% to 0.27% of
deposits.
The FDIC has reported that, under current law and reasonably optimistic
financial projections, the SAIF is not expected to be recapitalized until 2001.
SAIF reserves have not grown as quickly as the BIF reserves due to a number of
factors, including the fact that a significant portion of SAIF premiums have
been and are currently being used to make payments on bonds (the "FICO bonds")
issued in the late 1980s by the Financing Corporation to recapitalize the now
defunct Federal Savings and Loan Insurance Corporation. Accordingly, the FDIC
has determined that SAIF-insured institutions should continue to pay assessments
at the current SAIF assessment rates, which range from 0.23% of deposits to
0.31% of deposits. The Association's assessment rate for 1996 is 0.23% of
deposits.
The resulting disparity in deposit insurance assessments rates between the SAIF
members and the BIF members is likely to provide institutions paying only the
BIF assessments with certain competitive advantages in the pricing of loans and
deposits, and in lowered operating costs, pending any legislative action to
remedy the disparity. Congress has considered proposed legislation to address
these issues. See "Risk Factors -- Recapitalization of the SAIF; SAIF Premiums
and Possible Special Assessment of SAIF and SAIF Premiums."
Under the FDI Act, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC or
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the OTS. The management of the Association does not know of any practice,
condition or violation that might lead to termination of deposit insurance.
Federal Home Loan Bank System. The Association is a member of the FHLB of
Chicago, which is one of the regional Federal Home Loan Banks composing the
Federal Home Loan Bank System. Each Federal Home Loan Bank provides a central
credit facility primarily for its member institutions. The Association, as a
member of the FHLB of Chicago, is required to acquire and hold shares of capital
stock in the FHLB of Chicago in an amount at least equal to the greater of 1% of
the aggregate principal amount of its unpaid residential mortgage loans and
similar obligations at the beginning of each year or 1/20 of its advances
(borrowings) from the FHLB of Chicago. The Association was in compliance with
this requirement with an investment in the capital stock of the FHLB of Chicago
at March 31, 1996, of $2.7 million. Any advances from a Federal Home Loan Bank
must be secured by specified types of collateral, and all long-term advances may
be obtained only for the purpose of providing funds for residential housing
finance.
The Federal Home Loan Banks are required to provide funds for the resolution of
insolvent thrifts and to contribute funds for affordable housing programs.
These requirements could reduce the amount of earnings that the Federal Home
Loan Banks can pay as dividends to their members and could also result in the
Federal Home Loan Banks imposing a higher rate of interest on advances to their
members. The FHLB of Chicago paid dividends on the capital stock of $49,000 and
$46,000 for the three months ended March 31, 1996 and 1995 and $202,000,
$187,000 and $217,000 during the years ended December 31, 1995, 1994 and 1993,
respectively. If dividends were reduced, or interest on future Federal Home
Loan Bank advances increased, the Association's net interest income would likely
also be reduced. Further, there can be no assurance that the impact of FDICIA
and the Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") on the Federal Home Loan Banks will not also cause a decrease in the
value of the FHLB of Chicago stock held by the Association.
Federal Reserve System. The Association is subject to provisions of the FRA
and the FRB's regulations pursuant to which depositary institutions may be
required to maintain non-interest-earning reserves against their deposit
accounts and certain other liabilities. Currently, reserves must be maintained
against transaction accounts (primarily NOW and regular checking accounts). The
FRB regulations generally require that reserves be maintained in the amount of
3% of the aggregate of transaction accounts up to $52.0 million. The amount of
aggregate transaction accounts in excess of $52.0 million are currently subject
to a reserve ratio of 10%, which ratio the FRB may adjust between 8% and 12%.
The FRB regulations currently exempt $4.3 million of otherwise reservable
balances from the reserve requirements, which exemption is adjusted by the FRB
at the end of each year. The Association is in compliance with the foregoing
reserve requirements. Because required reserves must be maintained in the form
of either vault cash, a non-interest-bearing account at a Federal Reserve Bank,
or a pass-through account as defined by the FRB, the effect of this reserve
requirement is to reduce the Association's interest-earning assets. The
balances maintained to meet the reserve requirements imposed by the FRB may be
used to satisfy liquidity requirements imposed by the OTS. Federal Home Loan
Bank System members are also authorized to borrow from the Federal Reserve
"discount window," but FRB regulations require such institutions to exhaust all
Federal Home Loan Bank sources before borrowing from a Federal Reserve Bank.
REGULATION OF SAVINGS ASSOCIATION HOLDING COMPANIES
The Company, if utilized, will be a non-diversified unitary savings association
holding company within the meaning of HOLA, as amended. As such, the Company
will be required to register with the OTS and will be subject to OTS
regulations, examinations, supervision and reporting requirements. In addition,
the OTS has enforcement authority over the Company and its non-savings
association subsidiaries, if any. Among other things, this authority permits
the OTS to restrict or prohibit activities that are determined to be a serious
risk to the financial safety, soundness, or stability of a subsidiary savings
association.
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HOLA prohibits a savings association holding company, directly or indirectly,
or through one or more subsidiaries, from acquiring another savings association
or holding company thereof, without prior written approval of the OTS; acquiring
or retaining, with certain exceptions, more than 5% of a non-subsidiary savings
association, a non-subsidiary holding company, or a non-subsidiary company
engaged in activities other than those permitted by HOLA; or acquiring or
retaining control of a depository institution that is not insured by the FDIC.
In evaluating an application by a holding company to acquire a savings
association, the OTS must consider the financial and managerial resources and
future prospects of the company and savings association involved, the effect of
the acquisition on the risk to the insurance funds, the convenience and needs of
the community, and competitive factors.
As a unitary savings association holding company, the Company generally will
not be restricted under existing laws as to the types of business activities in
which it may engage, provided that the Association continues to satisfy the QTL
test. See "-- Regulation of Federal Savings Associations -- QTL Test" for a
discussion of the QTL requirements. Upon any non-supervisory acquisition by the
Company of another savings association or savings bank that meets the QTL test
and is deemed to be a savings association by the OTS and that will be held as a
separate subsidiary, the Company would become a multiple savings association
holding company and would be subject to limitations on the types of business
activities in which it could engage. HOLA limits the activities of a multiple
savings association holding company and its non-insured association subsidiaries
primarily to activities permissible for bank holding companies under Section
4(c)(8) of the BHC Act, subject to the prior approval of the OTS, and to other
activities authorized by OTS regulation.
The OTS is prohibited from approving any acquisition that would result in a
multiple savings association holding company controlling savings associations in
more than one state, subject to two exceptions: an acquisition of a savings
association in another state (a) in a supervisory transaction, and (b) pursuant
to authority under the laws of the state of the association to be acquired that
specifically permit such acquisitions. The conditions imposed upon interstate
acquisitions by those states that have enacted authorizing legislation vary.
Some states impose conditions of reciprocity, which have the effect of requiring
that the laws of both the state in which the acquiring holding company is
located (as determined by the location of its subsidiary savings association)
and the state in which the association to be acquired is located, have each
enacted legislation allowing its savings associations to be acquired by out-of-
state holding companies on the condition that the laws of the other state
authorize such transactions on terms no more restrictive than those imposed on
the acquiror by the state of the target association. Some of these states also
impose regional limitations, which restrict such acquisitions to states within a
defined geographic region. Other states allow full nationwide banking without
any condition of reciprocity. Some states do not authorize interstate
acquisitions of savings associations.
Transactions between the Association and the Company and its other subsidiaries
would be subject to various conditions and limitations. See "-- Regulation of
Federal Savings Associations -- Transactions with Related Parties." The
Association would have to give 30-days written notice to the OTS prior to any
declaration of the payment of any dividends or other capital distributions to
the Company. See "-- Regulation of Federal Savings Associations -- Limitation
on Capital Distributions."
FEDERAL SECURITIES LAWS
The Company has filed with the SEC a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), for the registration
of the Common Stock to be issued pursuant to the Conversion. Upon completion of
the Conversion, the Company's Common Stock will be registered with the SEC under
the Exchange Act. The Company will then be subject to the information, proxy
solicitation, insider trading restrictions and other requirements under the
Exchange Act.
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The registration under the Securities Act of shares of the Common Stock to be
issued in the Conversion does not cover the resale of such shares. Shares of
the Common Stock purchased by persons who are not affiliates of the Company may
be resold without registration. Shares purchased by an affiliate of the Company
will be subject to the resale restrictions of Rule 144 under the Securities Act.
If the Company meets the current public information requirements of Rule 144
under the Securities Act, each affiliate of the Company who complies with the
other conditions of Rule 144 (including those that require the affiliate's sale
to be aggregated with those of certain other persons) would be able to sell in
the public market, without registration, a number of shares not to exceed, in
any three-month period, the greater of (a) 1% of the outstanding shares of the
Company or (b) the average weekly volume of trading in such shares during the
preceding four calendar weeks. Provision may be made in the future by the
Company to permit affiliates to have their shares registered for sale under the
Securities Act under certain circumstances.
In the event that the holding company form of organization is not utilized, the
shares of the Association's common stock to be issued and sold in the Conversion
would be exempt from registration under Section 3(a)(5) of the Securities Act.
Prior to the sale of all shares of its common stock in such a case, the
Association would register its capital stock under Section 12(g) of the Exchange
Act. Upon such registration, the proxy rules, tender offer rules, insider
trading restrictions, annual and periodic reporting and other requirements of
the Exchange Act would also be applicable to the Association but under the
jurisdiction of the OTS. The Association would be required by the OTS to
maintain said registration for a period of at least three years following
Conversion. The Association will, however, register with and report to the OTS
and not to the SEC.
MANAGEMENT OF THE COMPANY
The Board of Directors of the Company is divided into three classes, each of
which contains approximately one-third of the Board. The directors shall be
elected by the stockholders of the Company for staggered three-year terms, or
until their successors are elected and qualified. One class of directors,
consisting of Henry R. Hines, Thomas S. Rakow and Richard S. Scheflow, has a
term of office expiring at the first annual meeting of stockholders; a second
class, consisting of George L. Perucco, Lyle N. Dolan and Donald E. Laird, has a
term of office expiring at the second annual meeting of stockholders; and a
third class, consisting of Orval M. Graening and Leigh C. O'Connor, has a term
of office expiring at the third annual meeting of stockholders. Biographical
information with respect to each individual is set forth under "Management of
the Association -- Biographical Information."
The following individuals are executive officers of the Company and hold the
offices set forth below opposite their names.
<TABLE>
<CAPTION>
NAME POSITION HELD WITH THE COMPANY
- ----------------------- -----------------------------------------------
<S> <C>
George L. Perucco...... President and Chief Executive Officer
Lyle N. Dolan.......... Executive Vice President and Treasurer
Kenneth L. Moran....... Senior Vice President and Chief Lending Officer
David G. Towe.......... Vice President, Loan Operations and Marketing
Raymond G. Bandemer.... Vice President
Kathleen A. Schroeder.. Vice President and Secretary
Pat A. Lenart.......... Vice President
</TABLE>
The executive officers of the Company are elected annually and hold office
until their respective successors have been elected and qualified or until
death, resignation or removal by the Board of Directors.
Since the formation of the Company, none of the executive officers, directors
or other personnel has received remuneration from the Company. It is currently
expected that, unless and until the Company becomes actively involved in
business activities separate from those conducted by the Association, no
separate
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compensation will be paid to the directors and employees of the Company.
However, directors of the Company or the Association who are not employees of
the Company or the Association or any of their subsidiaries ("Outside
Directors") may be entitled to participate in certain retirement and stock
incentive plans established by the Company. See "Management of the
Association." The Company will also guarantee certain obligations of the
Association to the Association's executive officers, employees and directors, as
described below. Information concerning the principal occupations, employment
and compensation of the directors and officers of the Company during the past
five years is set forth under "Management of the Association -- Biographical
Information."
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MANAGEMENT OF THE ASSOCIATION
DIRECTORS
The following table sets forth certain information regarding the Board of
Directors of the Association.
POSITIONS HELD WITH THE TERM
NAME AGE(1) ASSOCIATION DIRECTOR SINCE EXPIRES
- --------------------- ------ ------------------------ -------------- -------
George L. Perucco.... 69 President and Chief 1965 1998
Executive Officer,
Director
Lyle N. Dolan........ 54 Executive Vice 1984 1998
President
and Treasurer, Director
Orval M. Graening.... 85 Director 1967 1999
Thomas S. Rakow...... 53 Director 1980 1997
Henry R. Hines....... 76 Director 1975 1997
Donald E. Laird...... 64 Director 1985 1998
Leigh C. O'Connor.... 83 Director 1967 1999
Richard S. Scheflow.. 71 Director 1974 1997
- ----------------
(1) At March 31, 1996.
EXECUTIVE OFFICERS
The executive officers of the Association are Mr. Perucco and Mr. Dolan, who
are directors of the Association, and Mr. Moran, Mr. Towe, Mr. Bandemer, Ms.
Schroeder and Ms. Lenart, who are not directors of the Association. See
"Management of the Company." Each of the executive officers of the Association
will retain his or her office in the converted Association until the annual
meeting of the Board of Directors of the Association held immediately after the
first annual meeting of stockholders of the Company subsequent to Conversion and
until their successors are elected and qualified or until they are removed or
replaced. Officers are re-elected by the Board of Directors annually.
BIOGRAPHICAL INFORMATION
Positions held by a director or officer have been held for at least the past
five years unless stated otherwise.
DIRECTORS
George L. Perucco has served as the President and Chief Executive Officer of
the Association since 1965. Mr. Perucco joined the Association in 1961 and has
also served as Assistant Secretary, Secretary and Executive Vice President of
the Association. Prior to joining the Association, Mr. Perucco was an executive
in the Accounting Division of the United States League of Savings Associations.
Lyle N. Dolan has served as the Association's Executive Vice President and
Treasurer since 1986 and as a director of the Association since 1984. Prior to
that, Mr. Dolan served as Vice President and Treasurer of the Association since
1974 and Treasurer of the Association since 1970.
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Orval M. Graening has served as a director of the Association since 1967. He
is the former President of Woodruff & Edwards, Inc., a foundry company, and
retired in 1990
Henry R. Hines has served as a director of the Association since 1975. He
retired from his position as Vice President of Williams Manufacturing Co., a
medical equipment manufacturer, in 1980.
Donald E. Laird has served as a director of the Association since 1985. He is
the President of Laird Funeral Home, PC.
Leigh C. O'Connor has served as a director of the Association since 1967. He
retired from his position as Office Manager of Illinois Hydraulic Inc., a
construction company, in 1980.
Thomas S. Rakow has served as a director of the Association since 1980. He is
the President of IHC Group, Inc., a general contractor, the President of Rakow
Enterprises, Inc., an equipment leasing company and a partner in Harkow
Partnership, a real estate rental company.
Richard S. Scheflow has served as a director of the Association since 1974.
He is a partner with the law firm of Scheflow, Rydell, Travis & Scheflow,
located in Elgin, Illinois.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Kenneth L. Moran, age 50, has served as the Association's Senior Vice
President and Chief Lending Officer since 1989. He has worked at the
Association in various capacities since 1970.
David G. Towe, age 43, has served as the Association's Vice President, Loan
Operations & Marketing since 1989. He has served the Association in various
capacities since 1973.
Raymond G. Bandemer, age 53, has served as Vice President of the Association
since 1989 and has served the Association since 1981. Prior to that, he was
employed at Tel-A-Data Corporation and was Assistant Vice President at Unity
Savings Association of Chicago.
Kathleen A. Schroeder, age 48, has served as Vice President and Secretary of
the Association since 1989. She has been employed by the Association since
1964.
Pat A. Lenart, age 55, has served as the Association's Vice President,
Personnel Director since 1989. She has worked at the Association in various
capacities since 1976.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS OF THE COMPANY AND THE
ASSOCIATION
The Board of Directors of the Association meets on a monthly basis and may
have additional special meetings from time to time. During the fiscal year
ended December 31, 1995, the Board of Directors met 13 times. No current
director attended fewer than 75% of the total number of Board meetings and
committee meetings of which such director was a member.
The Company and the Association have established the following committees of
each of their respective Boards of Directors:
The Executive Committee of each of the Company and the Association consists of
Messrs. O'Connor (Chairman), Dolan, Graening, Rakow, Perucco, Hines, Scheflow
and Laird. Each such committee is authorized to exercise certain powers of the
respective board of directors in the interim period between meetings of the
Board. The Executive Committees will meet periodically to review and monitor
operating
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expenses with a particular emphasis on post-conversion expense savings. The
Executive Committees will also consider longer-term strategic and industry
issues.
The Audit Committee of each of the Company and the Association consists of
Messrs. Graening (Chairman), Rakow, Hines, Scheflow, Laird and O'Connor. The
Audit Committee of the Association meets periodically to arrange the
Association's annual financial statement audit through its independent Certified
Public Accountants and to review and evaluate recommendations made during the
annual audit. It is expected that the Audit Committee of the Company will
perform a similar function.
The Loan Committee of the Association consists of Messrs. Perucco, Graening,
Rakow, Hines, Scheflow, Laird and O'Connor. Rotating members of this committee
meet periodically with senior loan staff members to review and monitor each loan
commitment to confirm compliance with underwriting standards established by the
Board of Directors. This review process ensures high asset quality and provides
an opportunity for recommendations in connection with the Association's
underwriting standards.
DIRECTORS' COMPENSATION
Fee Arrangements. Currently, each director of the Association, other than
Messrs. Perucco and Dolan, receives an annual retainer of $26,460. No
additional fees are paid for attendance at board committee meetings. Directors
of the Company will not be separately compensated for their services as such.
It is anticipated that directors will also be covered by the Stock Option Plans
and Stock Programs expected to be implemented by the Company. See "-- Benefits
- -- Stock Option Plans," and "-- Benefits -- Stock Programs."
EXECUTIVE COMPENSATION
Cash Compensation. The following table sets forth the cash compensation paid
by the Association for services rendered in all capacities during the fiscal
year ended December 31, 1995, to the Chief Executive Officer and all executive
officers of the Association who received compensation in excess of $100,000 (the
"Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
------------------------------------------
ANNUAL COMPESATION(1) AWARRDS PAYOUTS
-----------------------------------------------------------------------
OTHER RESTRICTED
ANNUAL STOCK LTIP ALL OTHER
NAME AND PRINCIPAL COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
POSITIOSNS YEAR SALARY($) BONUS($) ($)(2) ($)(3) (#)(3) ($)(3) ($)(4)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George L. Perucco, President and
$ 734
Chief Executive Officer................. 1995 $204,433 -- 2,884 -- -- -- $ 734
Lyle N. Dolan, Executive Vice
$1,430
President and Treasurer............... 1995 $128,336 -- 4,635 -- -- -- $ 1,430
Kenneth L. Moran, Senior Vice
$1,145
President and Chief Lending
Officer............................... 1995 $104,040 -- 3,625 -- -- -- $ 1,145
</TABLE>
- -----------------
(1) Under Annual Compensation, the column titled "Salary" includes base salary,
director's fees and payroll deductions for health insurance under the
Association's health insurance plan.
(2) Represents amounts reimbursed for the payment of taxes. For 1995, there
were no: (a) perquisites with an aggregate value for any named individual
in excess of the lesser of $50,000 or 10% of the total of the individual's
salary and bonus for the year; (b) payments of above-market preferential
earnings on deferred compensation; (c) payments of earnings with respect to
long-term incentive plans prior to settlement or maturation; or (d)
preferential discounts on stock. For 1995, the Association had no
restricted stock or stock related plans in existence.
(3) During the fiscal year ended December 31, 1995, neither the Association nor
the Company maintained any restricted stock, stock options or other long-
term incentive plans.
(4) Includes the dollar value of premiums, if any, paid by the Association with
respect to term life insurance (other than group term insurance coverage
under a plan available to substantially all salaried employees) for the
benefit of the executive officer.
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EMPLOYMENT AGREEMENTS
Effective upon the Conversion, the Company and (subject to non-objection by
the OTS) the Association intend to enter into Employment Agreements with each of
Messrs. Perucco, Dolan and Moran (the "Senior Executives"). These Employment
Agreements establish the respective duties and compensation of the Senior
Executives and are intended to ensure that the Association and the Company will
be able to maintain a stable and competent management base after the Conversion.
The continued success of the Association and the Company depends to a
significant degree on the skills and competence of the Senior Executives.
The Employment Agreements provide for a three-year term for Mr. Perucco and
two-year terms for Messrs. Dolan and Moran. The Association's Employment
Agreements provide that, commencing on the first anniversary date and continuing
each anniversary date thereafter, the Board of Directors may, with the Senior
Executive's concurrence, extend its Employment Agreements for an additional
year, so that the remaining terms shall be three years, after conducting a
performance evaluation of the Senior Executive. The Company's Employment
Agreements provide for automatic daily extensions such that the remaining terms
of the Employment Agreements shall be three years unless written notice of non-
renewal is given by the Board of Directors or the Senior Executive. The
Employment Agreements provide that the Senior Executive's base salary will be
reviewed annually. It is anticipated that this review will be performed by non-
employee members of the Board, and the Senior Executive's base salary may be
increased on the basis of his job performance and the overall performance of the
Association. The base salaries for Messrs. Perucco, Dolan and Moran as of
January 1, 1996 were $214,655, $134,753 and $109,242, respectively. In addition
to the base salary, the Employment Agreements provide for, among other things,
entitlement to participation in stock, retirement and welfare benefit plans and
eligibility for fringe benefits applicable to executive personnel such as a
company car and fees for club and organization memberships deemed appropriate by
the Association or Company and the Senior Executive. The Employment Agreements
provide for termination by the Association or the Company at any time for cause
as defined in the Employment Agreements.
In the event of the termination of the Senior Executive's due to death or
disability, or in the event the Association or the Company chooses to terminate
the Senior Executive's employment for reasons other than for cause, or in the
event of the Senior Executive's resignation from the Association and the Company
for the reasons specified in the Employment Agreements, the Senior Executive or,
in the event of death, his beneficiary would be entitled to a lump sum cash
payment in an amount equal to the present value of the remaining base salary and
bonus payments due to the Senior Executive and the additional contributions or
benefits that would have been earned under any employee benefit plans of the
Association or the Company during the remaining terms of the Employment
Agreements and payments that would have been made under any incentive
compensation plan during the remaining terms of the Employment Agreements.
Provision is also made for the cash out of stock options, appreciation rights or
restricted stock as if the Senior Executive was fully vested. The Association
and the Company would also continue the Senior Executive's life, health and
disability insurance coverage for the remaining terms of the Employment
Agreements. Reasons specified as grounds for resignation for purposes of the
Employment Agreements are: failure to elect or re-elect the Senior Executive to
his offices; failure to vest in him the functions, duties or authority
associated with such offices; any material breach of contract by the Association
or the Company which is not cured within 30 days after written notice thereof;
and, following a Change of Control (as defined in the Employment Agreements),
include demotion, loss of title, office or significant authority or
responsibility, any reduction in any element of compensation or benefits, any
adverse change on location of the principal place of employment or working
conditions or resignation for any other reason. In general, for purposes of the
Employment Agreements and the plans maintained by the Company or the
Association, a "change of control" will generally be deemed to occur when a
person or group of persons acting in concert acquires beneficial ownership of
25% or more of any class of equity security of the Company or the Association,
upon stockholder approval of a merger or consolidation or a change of the
majority of the Board of Directors of the Company or the Association, or
liquidation or sale of substantially all the assets of the Company or the
Association.
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Payments to the Senior Executives under the Association's Employment
Agreements will be guaranteed by the Company in the event that payments or
benefits are not paid by the Association. Payment under the Company's
Employment Agreements would be made by the Company. To the extent that payments
under the Company's Employment Agreements and the Association's Employment
Agreements are duplicative, payments due under the Company's Employment
Agreements would be offset by amounts actually paid by the Association. Senior
Executives would be entitled to reimbursement of certain costs incurred in
interpreting or enforcing the Employment Agreements.
Cash and benefits paid to a Senior Executive under the Employment Agreements
together with payments under other benefit plans following a "change of control"
of the Association or the Company may constitute an "excess parachute" payment
under Section 280G of the Code, resulting in the imposition of a 20% excise tax
on the recipient and the denial of the deduction for such excess amounts to the
Company and the Association. The Company's Employment Agreements include a
provision indemnifying each Senior Executive on an after-tax basis for any
"golden parachute" excise taxes.
EMPLOYEE RETENTION AGREEMENTS
Effective upon the Conversion, the Association (subject to the non-objection
of the OTS) and the Company intend to enter into Employee Retention Agreements
with the following four executive officers: Mr. Towe, Mr. Bandemer, Ms.
Schroeder and Ms. Lenart ("Contract Employee" or "Contract Employees"). The
purpose of the Retention Agreements is to secure the Contract Employees'
continued availability and attention to the Association's affairs, relieved of
distractions arising from the possibility of a corporate change of control. The
Retention Agreements do not impose an immediate obligation on the Association to
continue the Contract Employees' employment but provide for a period of assured
employment ("Assurance Period") following a change of control of the Association
or Company. The Retention Agreements provide for an initial Assurance Period of
one year commencing on the date of a change of control. In general, the
applicable Assurance Periods will be automatically extended on a daily basis
under the Retention Agreements until written notice of non-extension is given by
the Association or the Contract Employee, in which case an Assurance Period
would end on the first anniversary of the date such notice is given.
If, upon a change of control, or within 12 months of, and in connection with,
a change of control, a Contract Employee is discharged without "cause" (as
defined in the Retention Agreements) or he voluntarily resigns within one year
following a material adverse change in his position, duties, salary or due to a
material breach of the Agreement by the Association or Company, the Contract
Employee (or, in the event of his death, his estate) would be entitled to a lump
sum cash payment equal to the present value of the remaining base salary and
bonus payments due during the Assurance Period plus any additional contributions
and benefits that the Contract Employee would have earned under the Association
or Company's employee benefit plans during the Assurance Period. Each Contract
Employee's life, health, and disability coverage would also be continued during
the Assurance Period. The total amount of termination benefits payable to each
Contract Employee under the Retention Agreements is limited to three times the
Contract Employee's average total compensation for the prior five calendar
years. Payments to the Contract Employees under their respective Retention
Agreements will be guaranteed by the Company to the extent that the required
payments are not made by the Association.
EMPLOYEE SEVERANCE COMPENSATION PLAN
The Association has adopted, subject to the non-objection of the OTS, an
Employee Severance Pay Plan (the "Severance Plan") which will provide eligible
employees of the Association with severance benefits in the event of a change of
control as defined in the Severance Plan. Conversion to stock form is not
considered a change in control under the Severance Plan. Management and other
personnel with Employment Agreements or Employee Retention Agreements will not
be eligible to participate in the Severance Plan. The purpose of the Severance
Plan is to recognize the valuable services and contributions of these employees
and
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the uncertainties relating to continuing employment, reduced employee benefits,
management changes and relocations in the event of a change of control. The
Association believes that the Severance Plan will assist it in attracting and
retaining highly qualified individuals and reduce the distractions and other
adverse effects on employees' performance in the event of a change of control.
Eligible salaried employees of the Association with one year of service will
automatically participate in the Severance Plan and will have a contractual
right to severance benefits if they are terminated from or terminate their
employment within one year (for reasons specified under the Severance Plan)
following a change of control of the Association or the Company. A participating
employee would be eligible to receive a severance payment upon an employment
termination equal to one week's pay for each year of service up to 26 weeks of
pay. A participating officer would be eligible for a severance payment upon
employment termination equal to two weeks of pay for each year of service up to
39 weeks of pay. Payments under the Severance Plan may increase the costs to be
incurred in acquiring the Association or the Company. Management cannot estimate
the potential financial effect of the Severance Plan in the event of a change of
control. The Severance Plan may be amended or terminated by the Board of
Directors provided participants are given six months' advance written notice of
any adverse change to current or prospective rights. Payments required to be
made by the Association to participants due under the Severance Plan may be
guaranteed by the Company.
BENEFITS
Pension Plan. The Association maintains a non-contributory, tax-qualified
defined benefit pension plan (the "Pension Plan") for eligible employees. All
employees, except leased employees, who have attained age 21 and completed one
year of service are eligible to participate in the Pension Plan. The Pension
Plan provides for a benefit for each participant, including executive officers
named in the Summary Compensation Table above. The benefit is equal to the sum
of (a) a participant's accrued benefit as of March 31, 1989 adjusted for final
average compensation determined after March 31, 1989, plus (2) 1.9% times final
average compensation multiplied by benefit service earned after March 31, 1989,
plus (3) 0.5936% times final average compensation in excess of covered
compensation multiplied by benefit service after March 31, 1989. Benefit service
after March 31, 1989 is limited to a maximum of 25 years and all benefit service
is limited to a maximum of 35 years. Final average compensation is one-twelfth
of the highest average of a Participant's compensation during five (5)
consecutive calendar years of employment out the last ten (10) calendar years of
employment. A participant is incrementally vested in his or her pension after
three (3) years of service and is 100% vested in his or her pension benefit
after seven (7) years of service. The Pension Plan is funded by the Association
on an actuarial basis and all assets are held in trust by the Pension Plan
trustee.
The Association currently intends to terminate the Pension Plan and distribute
to each participant or beneficiary his or her accrued benefits thereunder on
March 31, 1997. Plan benefits will cease to accrue on June 30, 1996. It is
expected that the Pension Plan will be terminated on August 31, 1996, and, upon
termination, all benefits will become 100% vested, and all persons entitled to
benefits will be eligible to request an immediate, lump sum settlement of their
benefit entitlement, valued using interest rate assumptions prescribed by law.
The estimated cost of terminating the Pension Plan is $1.0 million.
The following table illustrates the annual benefit payable upon normal
retirement at age 65 in the normal form of benefit under the Pension Plan (a 10-
year certain and life annuity) at various levels of compensation and years of
service under the Pension Plan:
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YEARS OF SERVICE AT RETIREMENT
------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
$ 125,000 $ 54,940 $ 62,155 $ 66,514 $ 69,329 $ 71,285
150,000(1) 66,788 75,726 81,119 84,623 87,072
175,000(1) 74,072 84,123 90,183 94,136 96,909
200,000(1) 74,451 84,668 90,823 94,851 97,683
225,000(1) 74,746 85,091 91,321 95,407 98,286
250,000(1) 78,818 90,070 96,843 101,293 104,433
300,000(1)(2) 90,017 103,719 111,963 114,276 114,276
400,000(1)(2) 112,417 114,276 114,276 114,276 114,276
450,000(1)(2) 114,276 114,276 114,276 114,276 114,276
500,000(1)(2) 114,276 114,276 114,276 114,276 114,276
- -------------
(1) For the Pension Plan year ending March 31, 1996, the compensation for
calculating benefits may not exceed $150,000 (as adjusted for subsequent
years pursuant to Code provisions).
(2) For the Pension Plan year ending March 31, 1996, the maximum annual benefit
under the Pension Plan may not exceed $114,276 ($120,000 adjusted for the
normal form of payment). The maximum annual benefit will be adjusted in
subsequent years pursuant to Code provisions.
The following table sets forth the years of credited service and the Average
Annual Earnings (as defined above) determined as of March 31, 1996, the end of
the 1995 plan year, for each of the individuals named in the Executive
Compensation Table. The Average Annual Earnings includes the salary and bonus
columns of the Executive Compensation Table.
AVERAGE
YEARS OF CREDITED SERVICE ANNUAL EARNINGS
------------------------- ---------------
YEARS MONTHS
----------- ------------
Mr. Perucco.. 33 6 $150,000
Mr. Dolan.... 25 0 128,000
Mr. Moran.... 25 0 105,000
Employee Stock Ownership Plan and Trust. The Company has established, and the
Association has adopted, for the benefit of eligible employees, an ESOP and
related trust to become effective upon completion of the Conversion.
Substantially all employees of the Association or the Company who have attained
age 21 and have completed one year of service may be eligible to become
participants in the ESOP. The ESOP intends to purchase eight percent (8%) (7% in
the absence of OTS approval) of the Common Stock issued in the Conversion. As
part of the Conversion and in order to fund the ESOP's purchase of the Common
Stock to be issued in the Conversion, the Association or the Company expects to
contribute to the ESOP sufficient funds to pay the par value of the Common Stock
to be purchased and the ESOP intends to borrow funds from the Company equal to
the balance of the aggregate purchase price of the Common Stock. Although
contributions to the ESOP will be discretionary, the Company or the Association
intends to make annual contributions to the ESOP in an aggregate amount at least
equal to the principal and interest requirement on the debt. It is expected
that this loan will be for a term of up to 10 years, will bear interest at the
rate of 8% per annum and will call for level annual payments of principal and
interest designed to amortize the loan over its term. It is anticipated that
the loan will also permit optional pre-payment. The Company and the Association
may make additional annual contributions to the ESOP to the maximum extent
deductible for federal income purposes.
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Shares purchased by the ESOP will initially be pledged as collateral for the
loan, and will be held in a suspense account until released for allocation among
participants in the ESOP as the loan is repaid. The pledged shares will be
released annually from the suspense account in an amount proportional to the
repayment of the ESOP loan for each plan year. The released shares will be
allocated among the accounts of participants on the basis of the participant's
compensation for the year of allocation. Benefits generally become vested at the
rate of 10% per year for the first two years of service and 20% per year for the
next three years, with 100% vesting after five years of service. Participants
also become immediately vested upon termination of employment due to death,
retirement at age 65 or older, permanent disability or upon the occurrence of a
change of control. Forfeitures will be reallocated among remaining
participating employees, in the same proportion as contributions. Vested
benefits may be paid in a single sum or installment payments and are payable
upon death, retirement at age 65 or older, disability or separation from
service.
In connection with the establishment of the ESOP, a Committee of the Company's
Board of Directors was appointed to administer the ESOP (the "ESOP Committee").
An unrelated corporate trustee for the ESOP will be appointed prior to the
Conversion and will continue thereafter. The ESOP Committee may instruct the
trustee regarding investment of funds contributed to the ESOP. The ESOP trustee,
subject to its fiduciary duty, must vote all allocated shares held in the ESOP
in accordance with the instructions of the participating employees. Under the
ESOP, unallocated shares will be voted in a manner calculated to most accurately
reflect the instructions it has received from participants regarding the
allocated stock as long as such vote is in accordance with the provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
The ESOP may purchase additional shares of Common Stock in the future, and may
do so either on a leveraged basis with borrowed funds or with cash dividends,
periodic employer contributions or other cash flow. Whether such purchases will
be made and the terms and conditions of any such purchases will be determined by
the ESOP's fiduciaries taking into account such factors as they consider
relevant at the time, including their judgment as to the attractiveness of the
Common Stock as an investment, the price at which Common Stock may be purchased
and, in the case of leveraged purchases, the terms and conditions on which
borrowed funds are available and the willingness of the Company or the
Association to offer purchase money financing or guarantee purchase money
financing offered by third parties.
Stock Option Plans. Following the Conversion, the Board of Directors of the
Company intends to adopt the Stock Option and Incentive Plan for Employees (the
"Employees' Option Plan") and the Stock Option Plan for Outside Directors (the
"Directors' Option Plan") (collectively, the "Stock Option Plans"). If
implemented prior to the first anniversary of the Conversion, OTS regulations
require that the adoption of the Stock Option Plans be subject to stockholder
approval obtained at a meeting of stockholders to be held no earlier than six
months after the completion of the Conversion. An amount of shares of Common
Stock equal to 10% of the shares of Common Stock to be issued in the Conversion
is expected to be reserved for issuance under the Stock Option Plans. No
determinations have been made by the Board of Directors as to the specific terms
of the Stock Option Plans or the amount of awards thereunder. However, OTS
regulations provide that no individual officer or employee may receive more than
25% of the options granted, and Outside Directors may not receive more than 5%
individually or more than 30% in the aggregate of the options granted, under
option plans implemented within one year after the Conversion.
The purpose of the anticipated adoption of the Employees' Option Plan will be
to attract and retain qualified personnel in key positions, provide officers and
key employees with a proprietary interest in the Company as an incentive to
contribute to the success of the Company and its subsidiaries and reward
officers and key employees for outstanding performance. Although the terms of
the Employees' Option Plan have not yet been determined, it is expected that the
Employees' Option Plan will provide for the grant of: (i) options to purchase
the Company's Common Stock intended to qualify as incentive stock options under
Section 422 of the Code ("Incentive Stock Options"); (ii) options that do not so
qualify ("Non-Statutory Stock Options"); and (iii) Limited Rights (discussed
below) which will be exercisable only upon a change of control of the
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Association or the Company. Unless sooner terminated, any Employees' Option
Plan adopted will be in effect for a period of ten years.
Any Employees' Option Plan will be administered by a Committee of the Board of
Directors (the "Stock Option Committee") and such committee will determine which
officers and employees will be granted options and Limited Rights, whether such
options will be incentive or non-statutory stock options, the number of shares
subject to each option, the exercise price of each non-statutory stock option,
whether such options may be exercised by delivering other shares of Common Stock
and when such options become exercisable. It is expected that any Employees'
Option Plan will permit options to be granted for terms of up to 10 years (5
years in the case of Incentive Stock Options granted to employees who are 10%
stockholders) and at exercise prices no less than the fair market value at date
of grant (110% of fair market value in the case of Incentive Stock Options
granted to employees who are 10% stockholders).
The Stock Option Plans are expected to provide for the exercisability and
vesting of options granted thereunder in the manner specified by the Stock
Option Committee. OTS regulations generally require that options granted under
plans implemented within one year after the Conversion begin vesting no earlier
than one year from the date of stockholder approval of the plan and thereafter
vest at a rate of no more than 20% per year. It is also expected that, in the
event of death, grants would be 100% vested, and, in the event of disability,
grants would be 100% vested upon termination of employment of an officer or
employee, or upon termination of service as a director.
It is anticipated that the Stock Option Plans, to the extent permitted by OTS
regulations, will also provide for Limited Rights which, upon a change of
control, will allow the holder to exercise such Limited Rights and thereby be
entitled to receive a lump sum cash payment equal to the difference between the
exercise price of the related option and the fair market value of the shares of
Common Stock subject to the option on the date of exercise of the right in lieu
of purchasing the stock underlying the option. It is also anticipated that
these Limited Rights could be cancelled by an acquiror in the contract for an
acquisition if such acquiror commits to substitute other consideration
(including substitute options on the acquiror's stock) having equivalent value
to the options being cancelled.
An employee will not be deemed to have received taxable income upon grant or
exercise of any Incentive Stock Option; provided, that shares received through
the exercise of such option are not disposed of for at least one year after the
date the stock is received in connection with the option exercise and two years
after the date of grant of the option. No compensation deduction may be taken
by the Company as a result of the grant or exercise of Incentive Stock Options,
provided such shares are not disposed of before the expiration of the period
described above (a "disqualifying disposition"). In the case of a Non-Statutory
Stock Option and in the case of a disqualifying disposition of an Incentive
Stock Option, an employee will be deemed to receive ordinary income upon
exercise of the stock option in an amount equal to the amount by which the
exercise price is exceeded by the fair market value of the Common Stock
purchased on the date of exercise. The amount of any ordinary income deemed to
be received by an optionee upon the exercise of a Non-Statutory Stock Option or
due to a disqualifying disposition of an Incentive Stock Option may be a
deductible expense for tax purposes for the Company. In the case of Limited
Rights, upon exercise, the option holder would have to include the amount paid
to him or her upon exercise in his or her gross income for federal income tax
purposes in the year in which the payment is made and the Company may be
entitled to a deduction for federal income tax purposes of the amount paid.
Under the Directors' Option Plan, it is anticipated that the exercise price
per share of each option granted thereunder will be equal to the fair market
value of the shares of Common Stock on the date the option is granted.
Stock Programs. Following the Conversion, the Company also intends to
establish Stock Programs as a method of providing officers, employees and
Outside Directors of the Association and Company with a
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proprietary interest in the Company in a manner designed to encourage such
persons to remain with the Association and the Company. It is anticipated that
one Stock Program would cover eligible officers and employees of the Association
and the Company and the other would cover eligible Outside Directors of the
Association and the Company. If implemented prior to the first anniversary of
the Conversion, OTS regulations require that the adoption of the Stock Programs
and awards thereunder be subject to stockholder approval obtained at a meeting
of stockholders held no earlier than six months after the completion of the
Conversion.
Subject to stockholder approval, the Company expects to contribute funds to
the Stock Programs to enable the Stock Programs trusts to acquire, in the
aggregate, an amount up to 4% (3% unless OTS approval is obtained) of the shares
of Common Stock issued in the Conversion. Shares used to fund the Stock
Programs may be acquired through open market purchases, if permitted, or from
authorized but unissued shares. No determinations have been made as to the
specific terms of the Stock Programs or the amount of awards thereunder.
Although no specific award determinations have been made, the Company
anticipates that, if stockholder approval is obtained, it will provide awards to
eligible officers, employees and directors to the extent permitted by applicable
regulations. Current OTS regulations provide that no individual employee may
receive more than 25% of the shares of any plan, and that non-employee directors
may not receive more than 5% of the shares individually or 30% in the aggregate
for all directors,in the case of plans implemented within one year following the
Conversion.
Any Stock Programs adopted shall be administered by a Committee of the Board
of Directors (the "Stock Programs Committee"). Any Stock Programs for the
benefit of Outside Directors are expected to be self-administered with respect
to grants or allocations made thereunder. Under the Stock Programs, awards are
expected to be granted in the form of shares of Common Stock held by the Stock
Programs. The Board intends to appoint an independent fiduciary to serve as
trustee of the trusts to be established pursuant to any Stock Programs. The
Stock Programs are expected to provide for the vesting of awards granted
thereunder in the manner specified by the Stock Programs Committee and
consistent with OTS conversion regulations, which currently require that awards
under plans implemented within one year following the Conversion begin vesting
no earlier than one year from the date of stockholder approval and thereafter
vest at a rate of no more than 20% per year. It is also expected that in the
event of death, grants would be 100% vested, and, in the event of disability,
grants would be 100% vested upon termination of employment of an officer or
employee, or upon termination of service as a director.
When shares become vested in accordance with the Stock Programs, the
participants will recognize income equal to the fair market value of the Common
Stock at that time. The amount of income recognized by the participants may be
a deductible expense for tax purposes for the Company. When shares become
vested and are actually distributed in accordance with the Stock Programs, the
participants will also receive amounts equal to any accrued dividends with
respect thereto. Prior to vesting, recipients of grants may direct the voting
of the shares awarded to them. Shares not subject to grants will be voted by
the trustee of the Stock Programs in proportion to the directions provided with
respect to shares subject to grants. Vested shares will be distributed to
recipients as soon as practicable following the day on which they are vested.
Any awards to Outside Directors under the Stock Programs and the material terms
and conditions thereof, will be specified in a plan document approved by
stockholders.
In the event that additional authorized but unissued shares are acquired by
the Stock Programs after the Conversion, the interests of existing stockholders
will be diluted. See "Pro Forma Data."
TRANSACTIONS WITH CERTAIN RELATED PERSONS
The FIRREA requires that all loans or extensions of credit to executive
officers and directors must be made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with the general public and must not involve more than the normal
risk of
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repayment or present other unfavorable features. The Association has made loans
or extended credit to executive officers and directors and also to certain
persons related to executive officers and directors. All such loans were made
by the Association in the ordinary course of business and were not made with
more favorable terms nor did they involve more than the normal risk of
collectibility or present unfavorable features. The outstanding principal
balance of such loans to officers, directors, executive officers and their
associates totaled $815,000 or 2.2% of the Association's retained earnings at
March 31, 1996 and 1.3% of the Association's pro forma stockholders' equity at
March 31, 1996, after giving effect to the Conversion, and assuming the sale of
Common Stock at the maximum of the Estimated Price Range.
The Company intends that all transactions in the future between the Company
and its executive officers, directors, holders of 10% or more of the shares of
any class of its common stock and affiliates thereof, will contain terms no less
favorable to the Company than could have been obtained by it in arm's-length
negotiations with unaffiliated persons and will be approved by a majority of
independent outside directors of the Company not having any interest in the
transaction.
Richard S. Scheflow, a director of the Association and the Company, is a
general partner in the law firm of Scheflow, Rydell, Travis & Scheflow, which
firm represents the Association on corporate matters and foreclosure
proceedings. In connection with such representation of the Association,
Scheflow, Rydell, Travis & Scheflow received fees of approximately $28,000 for
the year ended December 31, 1995.
Thomas S. Rakow, a director of the Association and the Company, is the
President of IHC Group, Inc., which is involved in general construction work.
IHC Group, Inc. is the subcontractor performing site utility work on the
construction of the Association's South Elgin branch. The maximum amount
payable to IHC Group, Inc. under such subcontract is $83,900.
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SUBSCRIPTIONS BY EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the number of shares of Common Stock the
Association's executive officers and directors propose to purchase in the
Offerings, assuming shares of Common Stock are issued at the minimum and maximum
of the Estimated Price Range and that sufficient shares will be available to
satisfy their subscriptions. The table also sets forth the total expected
beneficial ownership of Common Stock as to all directors and executive officers
as a group.
<TABLE>
<CAPTION>
AT THE MINIMUM AT THE MAXIMUM
OF THE ESTIMATED OF THE ESTIMATED
PRICE RANGE(1) PRICE RANGE(1)
------------------------ ------------------------
AS A PERCENT AS A PERCENT
NUMBER OF SHARES NUMBER OF SHARES
NAME AMOUNT OF SHARES OFFERED OF SHARES OFFERED
- ----------------------- ----------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C>
George L. Perucco...... $ 200,000 20,000 0.41% 20,000 0.30%
Lyle N. Dolan.......... 100,000 10,000 0.20 10,000 0.15
Orval M. Graening...... 200,000 20,000 0.41 20,000 0.30
Thomas S. Rakow........ 200,000 20,000 0.41 20,000 0.30
Henry R. Hines......... 100,000 10,000 0.20 10,000 0.15
Donald G. Laird........ 50,000 5,000 0.10 5,000 0.08
Leigh C. O'Connor...... 75,000 7,500 0.15 7,500 0.11
Richard S. Scheflow.... 30,000 3,000 0.06 3,000 0.04
Kenneth L. Moran....... 10,000 1,000 0.02 1,000 0.02
David G. Towe.......... 100,000 10,000 0.20 10,000 0.15
Raymond G. Bandemer.... 150,000 15,000 0.30 15,000 0.23
Kathleen A. Schroeder.. 100,000 10,000 0.20 10,000 0.15
Pat A. Lenart.......... 50,000 5,000 0.10 5,000 0.08
---------- ------- ---- ------- ----
All directors and ..........
executive officers
as a group............ $1,365,000 136,500 2.79% 136,500 2.06%
========== ======= ==== ======= ====
</TABLE>
(1) Includes proposed subscriptions, if any, by Associates (See "The Conversion
-- Limitations on Common Stock Purchases"). Does not include subscription
orders by the ESOP. The ESOP is expected to purchase 8% (7% if OTS approval
is not obtained) of the shares issued in the Conversion. See "-- Executive
Compensation."
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THE CONVERSION
THE BOARD OF DIRECTORS OF THE ASSOCIATION, AND THE OTS, HAVE APPROVED THE PLAN
OF CONVERSION, SUBJECT TO APPROVAL BY THE MEMBERS OF THE ASSOCIATION ENTITLED TO
VOTE ON THE MATTER AND THE SATISFACTION OF CERTAIN OTHER CONDITIONS. SUCH OTS
APPROVAL, HOWEVER, DOES NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE
PLAN BY SUCH AGENCY.
GENERAL
On April 18, 1996, the Association's Board of Directors unanimously adopted
the Plan of Conversion pursuant to which the Association will be converted from
a federally chartered mutual savings and loan association to a federally
chartered stock savings and loan association. The Plan was amended by the Board
of Directors on June 6, 1996. It is currently intended that all of the
outstanding capital stock issued by the Association pursuant to the Plan will be
held by the Company, which is incorporated under Delaware law. The Plan was
approved by the OTS, subject to, among other things, approval of the Plan by the
Association's members. A special meeting of members has been called for this
purpose to be held on [______ __, 1996].
The Company has received approval from the OTS to become a savings association
holding company and to acquire all of the Common Stock of the Association to be
issued in the Conversion. The Company plans to retain up to 50% of the net
proceeds from the sale of the Common Stock and to use the remaining net proceeds
to purchase all of the then to be issued and outstanding capital stock of the
Association. The Conversion will be effected only upon completion of the sale of
all of the shares of Common Stock of the Company (or of the Association, if the
holding company form of organization is not utilized) to be issued pursuant to
the Plan.
The Plan provides that the Board of Directors of the Association may, at any
time prior to the issuance of the Common Stock and for any reason, decide not to
use the holding company form of organization. Such reasons may include possible
delays resulting from overlapping regulatory processing or policies which could
adversely affect the Association's or the Company's ability to consummate the
Conversion and transact its business as contemplated herein and in accordance
with the Association's operating policies. In the event such a decision is made,
the Association will withdraw the Company's registration statement from the SEC
and take steps necessary to complete the Conversion without the Company,
including filing any necessary documents with the OTS. In such event, and
provided there is no regulatory action, directive or other consideration upon
which basis the Association determines not to complete the Conversion, if
permitted by the OTS, the Association will issue and sell the common stock of
the Association and subscribers will be notified of the elimination of a holding
company and will be solicited (i.e., be permitted to affirm their orders, in
which case they will need to affirmatively reconfirm their subscriptions prior
to the expiration of the resolicitation offering or their funds will be promptly
refunded with interest at the Association's passbook rate of interest; or be
permitted to modify or rescind their subscriptions), and notified of the time
period within which the subscriber must affirmatively notify the Association of
his intention to affirm, modify or rescind his subscription. The following
description of the Plan assumes that a holding company form of organization will
be used in the Conversion. In the event that a holding company form of
organization is not used, all other pertinent terms of the Plan as described
below will apply to the conversion of the Association from the mutual to stock
form of organization and the sale of the Association's common stock.
The Plan provides generally that (i) the Association will convert from a
mutual savings and loan association to a capital stock savings and loan
association and (ii) the Company will offer shares of Common Stock for sale in
the Subscription Offering in the following order of priority: the Association's
Eligible Account Holders, the ESOP, the Association's Supplemental Eligible
Account Holders and the Association's Other Members. The Plan also provides
that shares not subscribed for in the Subscription Offering may be
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offered in a Community Offering to certain members of the general public, with a
preference to be given, in the event of an oversubscription in the Community
Offering, to natural persons residing in Kane, DuPage, and McHenry counties in
Illinois, the counties in which the Association's offices are located. The
Company and the Association have an option to reserve 25% of the stock available
in the Community Offering for sale to certain institutional investors. It is
anticipated that all shares not subscribed for in the Subscription and Community
Offerings will be offered for sale by the Company to the general public in a
Syndicated Community Offering. The Company and the Association have reserved the
right to accept or reject, in whole or in part, any orders to purchase shares of
the Common Stock received in the Community Offering or in the Syndicated
Community Offering. See "-- Community Offering" and "-- Syndicated Community
Offering."
The aggregate price of the shares of Common Stock to be issued in the
Conversion within the Estimated Price Range, currently estimated to be between
$48.9 million and $66.1 million, will be determined based upon an independent
appraisal, prepared by RP Financial, a consulting firm experienced in the
valuation and appraisal of savings institutions, of the estimated pro forma
market value of the Common Stock of the Company. All shares of Common Stock to
be issued and sold in the Conversion will be sold at the same price. The
independent appraisal will be affirmed or, if necessary, updated at the
completion of the Offerings. See "-- Stock Pricing" for additional information
as to the determination of the estimated pro forma market value of the Common
Stock.
The following is a brief summary of pertinent aspects of the Conversion. The
summary is qualified in its entirety by reference to the provisions of the Plan.
A copy of the Plan is available for inspection at the offices of the Association
and at the Central Region (Chicago, Illinois) and Washington, D.C. offices of
the OTS. The Plan is also filed as an Exhibit to the Registration Statement of
which this Prospectus is a part, copies of which may be obtained from the SEC.
See "Additional Information."
PURPOSES OF CONVERSION
The Association, as a federally chartered mutual savings and loan association,
does not have stockholders and has no authority to issue capital stock. By
converting to the capital stock form of organization, the Association will be
structured in the form used by commercial banks, many other business entities
and a growing number of savings institutions. The Conversion will enhance the
Association's ability to access capital markets, expand its current operations,
acquire other financial institutions or branch offices, provide affordable home
financing opportunities to the communities it serves or diversify into other
financial services to the extent allowable by applicable law and regulation.
The holding company form of organization, if used, would provide additional
flexibility to diversify the Association's business activities through newly-
formed subsidiaries, or through acquisitions of or mergers with both mutual and
stock institutions, as well as other companies. Although there are no current
arrangements, understandings or agreements, written or oral, regarding any such
opportunities, the Company will be in a position after the Conversion, subject
to regulatory limitations and the Company's financial position, to take
advantage of any such opportunities that may arise.
The potential impact of the Conversion upon the Association's capital base is
significant. The Association had equity in accordance with GAAP of $37.2
million, or 12.13% of assets at March 31, 1996. Assuming that $64.3 million of
gross proceeds are realized from the sale of Common Stock (being the maximum of
the Estimated Price Range established by the Board of Directors based on the
Valuation Range which has been estimated by RP Financial to be from a minimum of
$48,875,000 to a maximum of $66,125,000 (see "Pro Forma Data" for the basis of
this assumption) and assuming that $32.2 million of the net proceeds are used by
the Company to purchase the capital stock of the Association, the Association's
ratio of GAAP capital to assets, on a pro forma basis, will increase to 18.56%
after the Conversion. In the event that the holding company form of
organization is not utilized and all of the net proceeds from the Offerings, at
the maximum of the Estimated Price Range, are retained by the Association, the
Association's ratios of
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tangible and core capital to adjusted assets, on a pro forma basis, each will
increase to 27.36% after Conversion. The investment of the net proceeds from the
sale of the Common Stock will provide the Association with additional income to
further enhance its capital position. The additional capital may also assist the
Association in offering new programs and expanded services to its customers.
After completion of the Conversion, the unissued common and preferred stock
authorized by the Company's Certificate of Incorporation will permit the
Company, subject to market conditions and regulatory approval of an offering, to
raise additional equity capital through further sales of securities and to issue
securities in connection with possible acquisitions. At the present time, the
Company has no plans with respect to additional offerings of securities, other
than the issuance of additional shares upon exercise of stock options or the
possible issuance of authorized but unissued shares to the Stock Programs.
Following the Conversion, the Company will also be able to use stock-related
incentive programs to attract and retain executive and other personnel for
itself and its subsidiaries. See "Management of the Association -- Executive
Compensation."
EFFECTS OF CONVERSION
General. Each depositor in a mutual savings and loan association has both a
deposit account in the institution and a pro rata ownership interest in the
equity of the institution based upon the balance in such depositor's account,
which interest may only be realized in the event of a liquidation of the
institution. However, this ownership interest is tied to the depositor's account
and has no tangible market value separate from such deposit account. Any
depositor who opens a deposit account obtains a pro rata ownership interest in
the equity of the institution without any additional payment beyond the amount
of the deposit. A depositor who reduces or closes such depositor's account
receives the balance in the account but receives nothing for such depositor's
ownership interest in the equity of the institution, which is lost to the extent
that the balance in the account is reduced.
Consequently, mutual savings and loan association depositors normally have no
way to realize the value of their ownership interest, which has realizable value
only in the unlikely event that the mutual savings and loan association is
liquidated. In such event, the depositors of record at that time, as owners,
would share pro rata in any residual surplus and reserves after other claims,
including claims of depositors to the amounts of their deposits, are paid.
When a mutual savings and loan association converts to stock form, permanent
non-withdrawable capital stock is created to represent the ownership of the
institution's equity and the former pro rata ownership of depositors is
thereafter represented by their liquidation rights. See "-- Liquidation
Rights." Such common stock is separate and apart from deposit accounts and
cannot be and is not insured by the FDIC or any other governmental agency.
Certificates are issued to evidence ownership of the capital stock. The stock
certificates are transferable, and, therefore, the stock may be sold or traded
if a purchaser is available with no effect on any account the seller may hold in
the institution.
Continuity. While the Conversion is being accomplished, and after the
consummation of the Conversion, the normal business of the Association of
accepting deposits and making loans will continue without interruption. The
Association will continue to be subject to regulation by the OTS and the FDIC.
The Directors serving the Association at the time of Conversion will serve as
Directors of the Association after the Conversion. The Directors of the Company
will consist of all of the individuals currently serving on the Board of
Directors of the Association. It is anticipated that all officers of the
Association at the time of Conversion will retain their positions after the
Conversion.
Savings Deposit Accounts and Loans. Under the Plan, each depositor in the
Association at the time of Conversion will automatically continue as a depositor
after the Conversion, and each such deposit account will remain the same with
respect to deposit balance, interest rate and other terms, except to the extent
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affected by withdrawals made to purchase Common Stock in the Conversion. See "--
Procedure for Purchasing Shares in Subscription and Community Offerings." Each
such account will be insured by the FDIC to the same extent as before the
Conversion (i.e., up to $100,000 per depositor). Depositors will continue to
hold their existing certificates, passbooks and other evidences of their
accounts.
Furthermore, no loan outstanding from the Association will be affected by the
Conversion, and the amount, interest rate, maturity and security for each loan
will remain as they were contractually fixed prior to the Conversion.
Effect on Voting Rights of Members. At present, all depositors of and
borrowers from the Association are members of, and have voting rights in, the
Association as to all matters requiring membership action. Upon Conversion,
depositors and borrowers will cease to be members and will no longer be entitled
to vote at meetings of the Association. Upon Conversion, all voting rights in
the Association will be vested in the Company as the sole shareholder of the
Association. Exclusive voting rights with respect to the Company will be vested
in the holders of Common Stock. Depositors of and borrowers from the Association
will not have voting rights after the Conversion except to the extent that they
become stockholders of the Company through the purchase of Common Stock.
Liquidation Rights. In the unlikely event of a complete liquidation of the
Association in its present mutual form, each depositor would receive such
depositor's pro rata share of any assets of the Association remaining after
payment of claims of all creditors (including the claims of all depositors to
the withdrawal value of their accounts). Each depositor's pro rata share of such
remaining assets would be in the same proportion as the value of such
depositor's deposit account was to the total value of all deposit accounts in
the Association at the time of liquidation. After the Conversion, each
depositor, in the event of a complete liquidation, would have a claim as a
creditor of the same general priority as the claims of all other general
creditors of the Association. However, except as described below, such
depositor's claim would be solely in the amount of the balance in such
depositor's deposit account plus accrued interest. Such depositor would not have
an interest in the value or assets of the Association above that amount.
The Plan provides for the establishment, upon the completion of the
Conversion, of a special "liquidation account" for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in an amount equal to
the surplus and reserves of the Association as of the date of its latest balance
sheet contained in the final Prospectus used in connection with the Conversion.
Each Eligible Account Holder and Supplemental Eligible Account Holder, if such
account holder were to continue to maintain such account holder's deposit
account at the Association, would be entitled, on a complete liquidation of the
Association after the Conversion, to an interest in the liquidation account
prior to any payment to the shareholders of the Association. Each Eligible
Account Holder and Supplemental Eligible Account Holder would have an initial
interest in such liquidation account for each deposit account, including
passbook accounts, transaction accounts such as NOW/Super NOW accounts, money
market deposit accounts and certificates of deposit, with an aggregate balance
of $50 or more held in the Association on March 31, 1995 (with respect to an
Eligible Account Holder) and June 30, 1996 (with respect to a Supplemental
Eligible Account Holder) (each a "Qualifying Deposit"). Each Eligible Account
Holder and Supplemental Eligible Account Holder will have a pro rata interest in
the total liquidation account for such account holder's deposit accounts based
on the proportion that the aggregate balance of such person's Qualifying
Deposits on the Eligibility Record Date or Supplemental Eligibility Record Date,
respectively, bore to the total amount of all Qualifying Deposits of all
Eligible Account Holders and Supplemental Eligible Account Holders in the
Association. For deposit accounts in existence at both dates, separate
subaccounts shall be determined on the basis of the Qualifying Deposits in such
deposit accounts on each such record date.
If, however, on any annual closing date (i.e., the date that is one year after
the Eligibility Record Date) of the Association, commencing March 31, 1996, the
amount in any deposit account is less than the amount in such deposit account on
March 31, 1995 (with respect to an Eligible Account Holder) and June 30,
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1996 (with respect to a Supplemental Eligible Account Holder) or any other
annual closing date, then the interest in the liquidation account relating to
such deposit account would be reduced from time to time by the proportion of any
such reduction, and such interest will cease to exist if such deposit account is
closed. In addition, no interest in the liquidation account would ever be
increased despite any subsequent increase in the related deposit account. Any
assets remaining after the above liquidation rights of Eligible Account Holders
and Supplemental Eligible Account Holders are satisfied would be distributed to
the Company as the sole shareholder of the Association.
Tax Aspects. Consummation of the Conversion is expressly conditioned upon the
receipt by the Association of either a favorable ruling from the IRS and
Illinois taxing authorities or opinions of counsel with respect to federal and
Illinois income taxation, to the effect that the Conversion will not be a
taxable transaction to the Company, the Association, Eligible Account Holders or
Supplemental Eligible Account Holders, except as noted below.
No private ruling will be received from the IRS with respect to the proposed
Conversion. Instead, the Association has received an opinion of its counsel,
Thacher Proffitt & Wood, to the effect that for federal income tax purposes,
among other matters: (i) the Association's change in form from mutual to stock
ownership will constitute a reorganization under section 368(a)(1)(F) of the
Internal Revenue Code and neither the Association nor the Company will recognize
any gain or loss as a result of the Conversion; (ii) no gain or loss will be
recognized by the Association or the Company upon the purchase of the
Association's capital stock by the Company or by the Company upon the purchase
of its Common Stock in the Conversion; (iii) no gain or loss will be recognized
by Eligible Account Holders or by Supplemental Eligible Account Holders upon the
issuance to them of deposit accounts in the Association in its stock form plus
their interests in the liquidation account in exchange for their deposit
accounts in the Association; (iv) the tax basis of the depositors' deposit
accounts in the Association immediately after the Conversion will be the same as
the basis of their deposit accounts immediately prior to the Conversion; (v) the
tax basis of each Eligible Account Holder's and each Supplemental Eligible
Account Holder's interest in the liquidation account will be zero; (vi) no gain
or loss will be recognized by Eligible Account Holders or by Supplemental
Eligible Account Holders upon the distribution to them of nontransferable
subscription rights to purchase shares of the Common Stock, provided, that the
amount to be paid for the Common Stock is equal to the fair market value of such
stock; and (vii) the tax basis to the stockholders of the Common Stock of the
Company purchased in the Conversion pursuant to the subscription rights will be
the amount paid therefore and the holding period for the shares of Common Stock
purchased by such persons will begin on the date on which their subscription
rights are exercised.
KPMG Peat Marwick LLP has also opined, subject to the limitations and
qualifications in its opinion, that the Conversion will not be a taxable
transaction to the Company or to the Association for Illinois income tax
purposes or to Eligible Account Holders or to Supplemental Eligible Account
Holders for Illinois income tax purposes.
Unlike private rulings, opinions of counsel are not binding on the IRS or the
Illinois taxing authorities and the IRS or the Illinois taxing authorities could
disagree with conclusions reached therein. In the event of such disagreement,
there can be no assurance that the IRS or the Illinois taxing authorities would
not prevail in a judicial or administrative proceeding.
Certain portions of both the federal and the state tax opinions are based upon
the opinion of RP Financial that subscription rights issued in connection with
the Conversion will have no value. In the opinion of RP Financial, which
opinion is not binding on the IRS or the Illinois taxing authorities, the
subscription rights do not have any value, based on the fact that such rights
are acquired by the recipients without cost, are nontransferable and of short
duration, and afford the recipients the right only to purchase the Common Stock
at a price equal to its estimated fair market value, which will be the same
price as the Purchase Price for the unsubscribed shares of Common Stock. If the
subscription rights granted to Eligible Account Holders,
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Supplemental Eligible Account Holders or Other Members are deemed to have an
ascertainable value, such Eligible Account Holders, Supplemental Eligible
Account Holders or Other Members could be taxed upon the receipt or exercise of
the subscription rights in an amount equal to such value, and the Association
could recognize gain on such distribution. Eligible Account Holders and
Supplemental Eligible Account Holders are encouraged to consult with their own
tax advisors as to the tax consequences in the event that such subscription
rights are deemed to have an ascertainable value.
STOCK PRICING
The Plan of Conversion requires that the purchase price of the Common Stock
must be based on the appraised pro forma market value of the Common Stock, as
determined on the basis of an independent valuation. The Association and the
Company have retained RP Financial to make such valuation. For its services in
making such appraisal, RP Financial will receive a fee of $35,000, plus out-of-
pocket expenses. The Association and the Company have agreed to indemnify RP
Financial and its employees and affiliates against certain losses (including any
losses in connection with claims under the federal securities laws) arising out
of its services as appraiser, except where RP Financial's liability results from
its negligence or bad faith.
An appraisal has been made by RP Financial in reliance upon the information
contained in this Prospectus, including the financial statements. RP Financial
also considered the following factors, among others: the present and projected
operating results and financial condition of the Company and the Association,
and the economic and demographic conditions in the Association's existing market
area; certain historical, financial and other information relating to the
Association; a comparative evaluation of the operating and financial statistics
of the Association with those of other similarly situated publicly-traded
savings associations and savings institutions located in the Association's
market area and the State of Illinois; the aggregate size of the offering of the
Common Stock; the impact of Conversion on the Association's equity and earnings
potential; the proposed dividend policy of the Company and the Association; and
the trading market for securities of comparable institutions and general
conditions in the market for such securities.
On the basis of the foregoing, RP Financial has advised the Company and the
Association that, in its opinion, dated June 7, 1996, the estimated pro forma
market value of the Common Stock ranged from a minimum of $48,875,000 to a
maximum of $66,125,000 with a midpoint of $57,500,000. On June 6, 1996, the
Board of Directors of the Association held a meeting to review and discuss the
appraisal report prepared by RP Financial. A representative of RP Financial was
present at the meeting to explain the contents of the appraisal report. In
connection with its review of the reasonableness and adequacy of such appraisal
consistent with OTS regulations and policies, the Board of Directors reviewed
the methodology that RP Financial employed to determine the pro forma market
value of the Common Stock and the appropriateness of the assumptions that RP
Financial used in determining this value. Based upon the Valuation Range and
the Purchase Price of $10.00 per share for the Common Stock established by the
Board of Directors, the Board of Directors has established the Estimated Price
Range of $48.9 million to $66.1 million, with a midpoint of $57.5 million, and
the Company expects to issue between 4,887,500 and 6,125,000 shares of Common
Stock. The Estimated Price Range may be amended with the approval of the OTS (if
required), if necessitated by subsequent developments in the financial condition
of the Company or the Association or market conditions generally.
THE VALUATION PREPARED BY RP FINANCIAL IS NOT INTENDED, AND MUST NOT BE
CONSTRUED, AS A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING
SUCH SHARES. RP FINANCIAL DID NOT INDEPENDENTLY VERIFY THE FINANCIAL STATEMENTS
AND OTHER INFORMATION PROVIDED BY THE ASSOCIATION, NOR DID RP FINANCIAL VALUE
INDEPENDENTLY THE ASSETS OR LIABILITIES OF THE ASSOCIATION. THE VALUATION
CONSIDERS THE ASSOCIATION AS A GOING CONCERN AND SHOULD NOT BE CONSIDERED AS AN
INDICATION OF THE LIQUIDATION VALUE OF THE ASSOCIATION. 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 SUCH SHARES IN THE CONVERSION WILL THEREAFTER
BE ABLE TO SELL SUCH SHARES AT PRICES
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AT OR ABOVE THE PURCHASE PRICE OR IN THE RANGE OF THE FOREGOING VALUATION OF THE
PRO FORMA MARKET VALUE THEREOF.
Following commencement of the Subscription Offering, the maximum of the
Estimated Price Range may be increased up to 15% and the number of shares of
Common Stock to be issued in the Conversion may be increased to 7,604,375 shares
due to regulatory considerations, changes in the market and general financial
and economic conditions, without the resolicitation of subscribers. See "--
Limitations on Common Stock Purchases" as to the method of distribution and
allocation of additional shares that may be issued in the event of an increase
in the Estimated Price Range to fill unfilled orders in the Subscription and
Community Offerings.
No sale of shares of Common Stock may be consummated unless, prior to such
consummation, RP Financial confirms to the Association and the OTS that, to the
best of its knowledge, nothing of a material nature has occurred which, taking
into account all relevant factors, would cause RP Financial to conclude that the
value of the Common Stock at the price so determined is incompatible with its
estimate of the pro forma market value of the Common Stock at the conclusion of
the Subscription Offering and, if applicable, the Community Offering.
If, based on RP Financial's estimate, the pro forma market value of the Common
Stock, as of the date that RP Financial so confirms to the Association and the
OTS, is not more than 15% above the maximum and not less than the minimum of the
Estimated Price Range then, (1) with the approval of the OTS, the number of
shares of Common Stock to be issued in the Conversion may be increased or
decreased, pro rata to the increase or decrease in value, without resolicitation
of subscriptions, to no more than 7,604,375 shares or no less than 4,887,500
shares, and (2) all shares purchased in the Subscription and Community Offerings
will be purchased for the Purchase Price of $10.00 per share. If the number of
shares issued in the Conversion is increased due to an increase of up to 15% in
the Estimated Price Range to reflect changes in market or financial conditions,
persons who subscribed for the maximum number of shares will not be given the
opportunity to subscribe for an adjusted maximum number of shares, except for
the ESOP which will be able to subscribe for such adjusted amount up to its 8%
subscription. See "-- Limitations on Common Stock Purchases."
If the pro forma market value of the Common Stock is either more than 15%
above the maximum of the Estimated Price Range or less than the minimum of the
Estimated Price Range, the Association and the Company, after consulting with
the OTS, may terminate the Plan and return all funds promptly with interest at
the Association's passbook rate of interest on payments made by check, draft or
money order, extend or hold new Subscription and Community Offerings, establish
a new Estimated Price Range, commence a resolicitation of subscribers or take
such other actions as permitted by the OTS in order to complete the Conversion.
In the event that a resolicitation is commenced, unless an affirmative response
is received within a reasonable period of time, all funds will be promptly
returned to investors as described above. A resolicitation, if any, following
the conclusion of the Subscription Offering or, if applicable, the Community
Offering would not exceed 45 days unless further extended by the OTS for periods
of up to 90 days not to extend beyond [ ], 1998.
If all shares of Common Stock are not sold through the Subscription Offering
or the Community Offering, then the Association and the Company expect to offer
the remaining shares in a Syndicated Community Offering, which would occur as
soon as practicable following the close of the Subscription Offering or the
Community Offering but may commence during the Subscription Offering or the
Community Offering subject to the prior rights of subscribers. All shares of
Common Stock will be sold at the same price per share in the Syndicated
Community Offering as in the Subscription and Community Offerings. See "--
Syndicated Community Offering."
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No sale of shares of Common Stock may be consummated unless, prior to such
consummation, RP Financial confirms to the Association, the Company and the OTS
that, to the best of its knowledge, nothing of a material nature has occurred
which, taking into account all relevant factors, including those which would be
involved in a cancellation of the Syndicated Community Offering, would cause RP
Financial to conclude that the aggregate value of the Common Stock at the
Purchase Price is incompatible with its estimate of the pro forma market value
of the Common Stock of the Company at the time of the Syndicated Community
Offering. Any change which would result in an aggregate purchase price which is
below, or more than 15% above, the Estimated Price Range would be subject to OTS
approval. If such confirmation is not received, the Association may extend the
Conversion, extend, reopen or commence new Subscription and Community Offerings
or a Syndicated Community Offering, establish a new Estimated Price Range and
commence a resolicitation of all subscribers with the approval of the OTS or
take such other actions as permitted by the OTS in order to complete the
Conversion, or terminate the Plan and cancel the Subscription and Community
Offerings and/or the Syndicated Community Offering. In the event market or
financial conditions change so as to cause the aggregate purchase price of the
shares to be below the minimum of the Estimated Price Range or more than 15%
above the maximum of such range, and the Company and the Association determine
to continue the Conversion, subscribers will be resolicited (i.e., be permitted
to continue their orders, in which case they will need to affirmatively
reconfirm their subscriptions prior to the expiration of the resolicitation
offering or their subscription funds will be promptly refunded with interest at
the Association's passbook rate of interest, or be permitted to decrease or
cancel their subscriptions). Any change in the Estimated Price Range must be
approved by the OTS. A resolicitation, if any, following the conclusion of the
Subscription Offering or the Community Offering would not exceed 45 days, or if
following the Syndicated Community Offering, 90 days, unless further extended by
the OTS for periods up to 90 days not to extend beyond [ ], 1998. If
such resolicitation is not effected, the Association will return with interest
all funds promptly at the Association's passbook rate of interest on payments
made by check, savings and loan association draft or money order.
Copies of the appraisal report of RP Financial, including any amendments
thereto, and the detailed memorandum of the appraiser setting forth the method
and assumptions for such appraisal are available for inspection at the offices
of the Association and the other locations specified under "Additional
Information."
NUMBER OF SHARES TO BE ISSUED
Depending upon market or financial conditions following the commencement of
the Subscription and Community Offerings, the total number of shares to be
issued in the Conversion may be increased or decreased without a resolicitation
of subscribers; provided, that the product of the total number of shares times
the price per share is not below the minimum or more than 15% above the maximum
of the Estimated Price Range, and the total number of shares to be issued in the
Conversion is not less than 4,887,500 or greater than 6,612,500 (or 7,604,375 if
the Estimated Price Range is increased by 15%).
In the event market or financial conditions change so as to cause the
aggregate purchase price of the shares to be below the minimum of the Estimated
Price Range or more than 15% above the maximum of such range, if the Plan is not
terminated by the Company and the Association after consultation with the OTS,
purchasers will be resolicited (i.e., permitted to continue their orders, in
which case they will need to affirmatively reconfirm their subscriptions prior
to the expiration of the resolicitation offering or their subscription funds
will be promptly refunded, or be permitted to modify or rescind their
subscriptions). Any change in the Estimated Price Range must be approved by the
OTS. If the number of shares issued in the Conversion is increased due to an
increase of up to 15% in the Estimated Price Range to reflect changes in market
or financial condition, persons who subscribed for the maximum number of shares
will not be given the opportunity to subscribe for an adjusted maximum number of
shares, except for the ESOP which will be able to subscribe for such adjusted
amount up to its 8% subscription. See "-- Limitations on Common Stock
Purchases."
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An increase in the number of shares to be issued in the Conversion as a result
of an increase in the estimated pro forma market value would decrease both a
subscriber's ownership interest and the Company's pro forma net earnings and
stockholders' equity on a per share basis while increasing pro forma net
earnings and stockholders' equity on an aggregate basis. A decrease in the
number of shares to be issued in the Conversion would increase both a
subscriber's ownership interest and the Company's pro forma net earnings and
stockholders' equity on a per share basis while decreasing pro forma net
earnings and stockholder's equity on an aggregate basis. For a presentation of
the effects of such changes see "Pro Forma Data."
SUBSCRIPTION OFFERING AND SUBSCRIPTION RIGHTS
In accordance with the Plan of Conversion, rights to subscribe for the
purchase of Common Stock have been granted under the Plan of Conversion to the
following persons in the following order of descending priority: (1) depositors
whose deposits in qualifying accounts in the Association totaled $50 or more as
of March 31, 1995 ("Eligible Account Holders"), (2) the ESOP, (3) depositors
whose deposits in qualifying accounts in the Association totaled $50 or more as
of June 30, 1996, other than (i) those members who would otherwise qualify as
Eligible Account Holders or (ii) directors or officers of the Association or
their Associates (as defined under "-- Limitations on Common Stock Purchases")
("Supplemental Eligible Account Holders") and (4) members of the Association,
consisting of depositors and borrowers of the Association as of [____ ___,
1996], the Voting Record Date, other than Eligible Account Holders or
Supplemental Eligible Account Holders ("Other Members"). All subscriptions
received will be subject to the availability of Common Stock after satisfaction
of all subscriptions of all persons having prior rights in the Subscription
Offering and to the maximum and minimum purchase limitations set forth in the
Plan of Conversion and as described below under "-- Limitations on Common Stock
Purchases."
Priority 1: Eligible Account Holders. Each Eligible Account Holder will
receive, without payment therefor, first priority, nontransferable subscription
rights to subscribe for in the Subscription Offering up to the greater of (i)
the amount permitted to be purchased in the Community Offering, which amount is
currently $200,000 of the Common Stock offered, (ii) one-tenth of one percent
(0.10%) of the total offering of shares of Common Stock or (iii) fifteen times
the product (rounded down to the next whole number) obtained by multiplying the
total number of shares of Common Stock to be issued by a fraction of which the
numerator is the amount of the Eligible Account Holder's qualifying deposit and
the denominator is the total amount of qualifying deposits of all Eligible
Account Holders, in each case on the Eligibility Record Date, subject to the
overall purchase limitation and exclusive of an increase in the shares issued
pursuant to an increase in the Estimated Price Range of up to 15%. See "--
Limitations on Common Stock Purchases."
In the event that Eligible Account Holders exercise subscription rights for a
number of shares in excess of the total number of shares eligible for
subscription, the shares will be allocated so as to permit each subscribing
Eligible Account Holder to purchase a number of shares sufficient to make his
total allocation equal to the lesser of 100 shares or the number of shares
subscribed for. Thereafter, unallocated shares will be allocated among the
remaining subscribing Eligible Account Holders whose subscriptions remain
unfilled in the proportion that the amounts of their respective qualifying
deposits bear to the total amount of qualifying deposits of all remaining
Eligible Account Holders whose subscriptions remain unfilled, exclusive of any
increase in the shares issued pursuant to an increase in the Estimated Price
Range of up to 15%.
To ensure proper allocation of stock, each Eligible Account Holder must list
on his or her stock order form all accounts in which such Eligible Account
Holder has an ownership interest. Failure to list an account could result in
fewer shares being allocated than if all accounts had been disclosed. The
subscription rights of Eligible Account Holders who are also directors or
officers of the Association or their associates will be subordinated to the
subscription rights of other Eligible Account Holders to the extent attributable
to increased deposits in the one-year period preceding March 31, 1995.
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Priority 2: ESOP. To the extent that there are sufficient shares remaining
after satisfaction of the subscriptions by Eligible Account Holders, the ESOP
will receive, without payment therefor, second priority, nontransferable
subscription rights or, in the event of any increase in the number of shares of
Common Stock to be issued in the Conversion after the date hereof as a result
of an increase of up to 15% in the maximum of the Estimated Price Range, first
priority with respect to such increase, nontransferable subscription rights to
purchase up to 8% of the Common Stock issued in the Conversion, subject to the
purchase limitations set forth in the Plan of Conversion and as described below
under "-- Limitations on Common Stock Purchases." The ESOP intends to purchase
8% of the shares to be issued in the Conversion, or 391,000 shares and 529,000
shares, based on the issuance of 4,887,500 shares and 6,612,500, respectively.
Subscriptions by the ESOP will not be aggregated with shares of Common Stock
purchased directly by or which are otherwise attributable to any other
participants in the Subscription and Community Offerings, including
subscriptions of any of the Association's directors, officers, employees or
associates thereof. See "Management of the Association -- Benefits -- Employee
Stock Ownership Plan and Trust."
Priority 3: Supplemental Eligible Account Holders. Each Supplemental Eligible
Account Holder will receive, without payment therefor, third priority,
nontransferable subscription rights to subscribe for in the Subscription
Offering up to the greater of (i) the amount permitted to be purchased in the
Community Offering, is currently an $200,000 of the Common Stock offered, (ii)
one-tenth of one percent (0.10%) of the total offering of shares of Common Stock
or (iii) fifteen times the product (rounded down to the next whole number)
obtained by multiplying the total number of shares of Common Stock to be issued
by a fraction of which the numerator is the amount of the Supplemental Eligible
Account Holder's qualifying deposit and the denominator is the total amount of
qualifying deposits of all Supplemental Eligible Account Holders, in each case
on the Supplemental Eligibility Record Date, subject to the overall purchase
limitation and exclusive of an increase in the shares issued pursuant to an
increase in the Estimated Price Range of up to 15%. See "-- Limitations on
Common Stock Purchases."
In the event that Supplemental Eligible Account Holders exercise subscription
rights for a number of shares in excess of the total number of shares eligible
for subscription, the shares will be allocated so as to permit each subscribing
Supplemental Eligible Account Holder, to the extent possible, to purchase a
number of shares sufficient to make his total allocation equal to the lesser of
100 shares or the number of shares subscribed for. Thereafter, unallocated
shares will be allocated among the remaining subscribing Supplemental Eligible
Account Holders whose subscriptions remain unfilled in the proportion that the
amounts of their respective qualifying deposits bear to the total amount of
qualifying deposits of all remaining Supplemental Eligible Account Holders whose
subscriptions remain unfilled, exclusive of any increase in the shares issued
pursuant to an increase in the Estimated Price Range of up to 15%.
To ensure proper allocation of stock, each Supplemental Eligible Account
Holder must list on his or her stock order form all accounts in which such
Supplemental Eligible Account Holder has an ownership interest. Failure to list
an account could result in fewer shares being allocated than if all accounts had
been disclosed. The subscription rights received by Eligible Account Holders
will be applied in partial satisfaction of the subscription rights to be
received as a Supplemental Eligible Account Holder.
Priority 4: Other Members. To the extent that there are sufficient shares
remaining after satisfaction of subscriptions by the Eligible Account Holders,
the ESOP and the Supplemental Eligible Account Holders, each Other Member will
receive, without payment therefor, fourth priority nontransferable subscription
rights to subscribe for Common Stock in the Subscription Offering up to the (i)
greater of the amount permitted to be purchased in the Community Offering, which
amount is currently $200,000 of the Common Stock offered, or (ii) one-tenth of
one percent (0.10%) of the total offering of shares of Common Stock, subject to
the overall purchase limitation and exclusive of an increase in the shares
issued pursuant to an increase in the Estimated Price Range of up to 15%.
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In the event that Other Members exercise subscription rights for a number of
shares in excess of the total number of shares eligible for subscription, the
shares will be allocated so as to permit each subscribing Other Member, to the
extent possible, to purchase a number of shares sufficient to make his total
allocation equal to the lesser of 100 shares or the number of shares subscribed
for. Thereafter, unallocated shares will be allocated among the remaining
subscribing Other Members whose subscriptions remain unfilled on a pro rata
basis in the same proportion as a subscribing Other Member's total votes on the
Voting Record Date for the Special Meeting bears to the total votes of all
subscribing Other Members on such date.
Expiration Date for the Subscription Offering. The Subscription Offering will
expire on [ , 1996], unless extended for up to 45 days by the Association
or such additional periods with the approval of the OTS. Subscription rights
which have not been exercised prior to the Expiration Date will become void.
The Association will not execute orders until all shares of Common Stock have
been subscribed for or otherwise sold. If all shares have not been subscribed
for or sold within 45 days after the Subscription Expiration Date, unless such
period is extended with the consent of the OTS, all funds delivered to the
Association pursuant to the Subscription Offering will be returned with interest
promptly to the subscribers with interest and all withdrawal authorizations will
be cancelled. If an extension beyond the 45-day period following the
Subscription Expiration Date is granted, the Association will notify subscribers
of the extension of time and of any rights of subscribers to modify or rescind
their subscriptions. Such extensions may not go beyond [ ], 1998.
COMMUNITY OFFERING
To the extent that shares remain available for purchase after satisfaction of
all subscriptions of the Eligible Account Holders, the ESOP, the Supplemental
Eligible Account Holders and Other Members, the Association has determined to
offer shares pursuant to the Plan to certain members of the general public. Any
excess of shares available will be available for purchase by the general public,
with natural persons residing in Kane, DuPage and McHenry counties in Illinois
(such natural persons referred to as "Preferred Subscribers") having first
priority, subject to the right of the Company and the Association, to accept or
reject any such orders, in whole or in part, in its sole discretion. Such
persons, together with associates of and persons acting in concert with such
persons, may purchase up to $200,000 of Common Stock subject to the maximum
purchase limitation. See "-- Limitations on Common Stock Purchases." This
amount may be increased to up to a maximum of 5% or decreased to less than
$200,000 of Common Stock at the discretion of the Company and the Association.
THE OPPORTUNITY TO SUBSCRIBE FOR SHARES OF COMMON STOCK IN THE COMMUNITY
OFFERING CATEGORY IS SUBJECT TO THE RIGHT OF THE ASSOCIATION AND THE COMPANY, IN
THEIR DISCRETION, TO ACCEPT OR REJECT ANY SUCH ORDERS IN WHOLE OR IN PART EITHER
AT THE TIME OF RECEIPT OF AN ORDER OR AS SOON AS PRACTICABLE FOLLOWING THE
EXPIRATION DATE OF THE SUBSCRIPTION OFFERING. IF THE COMPANY REJECTS A
SUBSCRIPTION IN PART, THE SUBSCRIBER WILL NOT HAVE THE RIGHT TO CANCEL THE
REMAINDER OF HIS OR HER SUBSCRIPTION.
Subject to the foregoing, if the amount of stock remaining is insufficient to
fill the orders of Preferred Subscribers after completion of the Subscription
and Community Offerings, such stock will be allocated first to each Preferred
Subscriber whose order is accepted by the Association, in an amount equal to the
lesser of 100 shares or the number of shares subscribed for by each such
Preferred Subscriber, if possible. Thereafter, unallocated shares will be
allocated among the Preferred Subscribers whose order remains unsatisfied on a
100 shares per order basis until all such orders have been filled or the
remaining shares have been allocated. To the extent that there are shares
remaining after all subscriptions by Preferred Subscribers have been filled,
shares will be allocated, applying the same allocation as described above for
Preferred Subscribers, to natural persons maintaining an office or a residence
in the State of Illinois. Thereafter, if there are any shares remaining, shares
will be allocated to other persons of the general public who purchase in the
Community Offering applying the same allocation described above for Preferred
Subscribers.
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In offering the unsubscribed-for shares to the public in the Community
Offering, a number of shares equal to the lesser of (i) 25% of the Common Stock
offered in the Conversion or (ii) the Common Stock not subscribed for in the
Subscription Offering, at the option of the Company and the Association, may be
initially reserved for certain institutional investors.
Persons in Non-qualified States or Foreign Countries. The Company and the
Association will make reasonable efforts to comply with the securities laws of
all states in the United States in which persons entitled to subscribe for stock
pursuant to the Plan reside. However, the Association and the Company are not
required to offer stock in the Subscription Offering to any person who resides
in a foreign country or resides in a state of the United States with respect to
which the Company or the Association determines that compliance with the
securities laws of such state would be impracticable for reasons of cost or
otherwise, including but not limited to, a request that the Company and the
Association or their officers, directors or trustees register as a broker,
dealer, salesman or selling agent, under the securities laws of such state, or a
request to register or otherwise qualify the subscription rights or Common Stock
for sale or submit any filing with respect thereto in such state. Where the
number of persons eligible to subscribe for shares in one state is small, the
Association and the Company will base their decision as to whether or not to
offer the Common Stock in such state on a number of factors, including the size
of accounts held by account holders in the state, the cost of registering or
qualifying the shares or the need to register the Company, its officers,
directors or employees as brokers, dealers or salesmen.
MARKETING AND UNDERWRITING ARRANGEMENTS
The Association and the Company have engaged Hovde as a financial and
marketing advisor in connection with the offering of the Common Stock and Hovde
has agreed to use its best efforts to assist the Company with the solicitation
of subscriptions and purchase orders for shares of Common Stock in the
Offerings. Based upon negotiations between the Association and the Company,
Hovde has received a management fee of $37,500 and will receive a fee for
services provided in connection with the Offerings equal to 1.50% of the
aggregate Purchase Price of Common Stock sold in the Subscription Offering to
Eligible Account Holders and other current depositors of the Association and in
the Community Offering. No fees will be paid to Hovde with respect to any
shares of Common Stock purchased by any director, executive officer or employee
of the Association or the Company or members of their immediate families or the
ESOP. In the event that a selected dealers agreement is entered into in
connection with a Syndicated Community Offering, the Association will pay a fee
(to be negotiated at such time under such agreement) to such selected dealer,
any sponsoring dealers' fees, and a management fee to Hovde of [__]% for shares
sold by an NASD member firm pursuant to a selected dealers agreement; provided,
however, that any fees payable to Hovde for Common Stock sold by them pursuant
to such a selected dealer's agreement shall not exceed [___]% of the Purchase
Price in the aggregate; and provided further, that the aggregate fees payable to
Hovde and any other selected dealer will not exceed [__]% of the aggregate
Purchase Price of the Common Stock sold by the selected dealer. Fees to Hovde
and to any other broker-dealer may be deemed to be underwriting fees and Hovde
and such broker-dealers may be deemed to be underwriters. Hovde will also be
reimbursed for its reasonable out-of-pocket expenses, including legal fees, in
an amount not to exceed $60,000. Notwithstanding the foregoing, in the event the
Offerings are not consummated or Hovde ceases, under certain circumstances after
the subscription solicitation activities are commenced, to provide assistance to
the Company, Hovde will be entitled to reimbursement for its reasonable out-of-
pocket expenses as described above. The Company and the Association have agreed
to indemnify Hovde for costs and expenses in connection with certain claims or
liabilities related to or arising out of the services to be provided by Hovde
pursuant to its engagement by the Association and the Company as financial
advisor in connection with the Conversion, including certain liabilities under
the Securities Act. Total marketing fees to Hovde are estimated to be $643,763
and $881,813 at the minimum and the maximum of the Estimated Price Range,
respectively. See "Pro Forma Data" for the assumptions used to arrive at these
estimates.
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The Association also has engaged Crowe Chizek and Company, LLP ("Crowe
Chizek") as its conversion agent. Pursuant to such engagement, Crowe Chizek
will perform conversion and records management services for the Association in
the Conversion and will receive a fee for this service of $20,000, plus
reimbursement of reasonable out-of-pocket expenses, to be billed to the
Association, and indemnification against certain liabilities.
Directors and executive officers of the Company and Association may
participate in the solicitation of offers to purchase Common Stock. Questions of
prospective purchasers will be directed to executive officers or registered
representatives. Other employees of the Association may participate in the
Offerings in ministerial capacities or providing clerical work in effecting a
sales transaction. Such other employees have been instructed not to solicit
offers to purchase Common Stock or provide advice regarding the purchase of
Common Stock. The Company will rely on Rule 3a4-1 under the Exchange Act, and
sales of Common Stock will be conducted within the requirements of Rule 3a4-1,
so as to permit officers, directors and employees to participate in the sale of
Common Stock. No officer, director or employee of the Company or the Association
will be compensated in connection with his participation by the payment of
commissions or other remuneration based either directly or indirectly on the
transactions in the Common Stock.
PROCEDURE FOR PURCHASING SHARES IN SUBSCRIPTION AND COMMUNITY OFFERINGS
To ensure that each purchaser receives a Prospectus at least 48 hours prior to
the respective expiration dates for the Offerings, in accordance with Rule 15c2-
8 of the Exchange Act, no Prospectus will be mailed any later than five days
prior to such date or hand delivered any later than two days prior to such date.
Execution of the stock order form will confirm receipt or delivery in accordance
with Rule 15c2-8. Stock order forms will only be distributed with a Prospectus
and a certification form requiring each prospective investor to acknowledge,
among other things, that the shares of Common Stock are not insured by the
Association, the FDIC or any other governmental agency and that such prospective
investor has received a copy of this Prospectus, which, among other things,
describes the risks involved in the investment of the Common Stock.
To purchase shares in the Subscription and Community Offerings, an executed
order form with the required payment for each share subscribed for, or with
appropriate authorization for withdrawal from the Association's deposit account
(which may be given by completing the appropriate blanks in the stock order
form), must be received by the Association at its office by 12:00 Noon, Central
Time, on the Expiration Date. Stock order forms which are not received by such
time or are executed defectively or are received without full payment (or
appropriate withdrawal instructions) are not required to be accepted. In
addition, the Company and Association are not obligated to accept orders
submitted on photocopied or facsimiled order forms and will not accept order
forms unaccompanied by an executed certification form. The Company and the
Association have the right to waive or permit the correction of incomplete or
improperly executed forms, but do not represent that they will do so. Once
received, an executed order form may not be modified, amended or rescinded
without the consent of the Association unless the Conversion has not been
completed within 45 days after the end of the Subscription and Community
Offerings, unless such period has been extended.
In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priorities, depositors as of the Eligibility Record Date (March 31,
1995) and/or the Supplemental Eligibility Record Date (June 30, 1996) and/or the
Voting Record Date (_______ __, 1996) must list all accounts on the stock order
form giving all names in each account and the account numbers.
Payment for subscriptions may be made (i) in cash if delivered in person to
the office of the Association, (ii) by check, savings and loan association draft
or money order, or (iii) by authorization of withdrawal from deposit accounts
maintained with the Association. No wire transfers will be accepted. Interest
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will be paid on payments made by cash, check, savings and loan association draft
or money order at the Association's passbook rate of interest from the date
payment is received until the completion or termination of the Conversion. If
payment is made by authorization of withdrawal from deposit accounts, the funds
authorized to be withdrawn from a deposit account will continue to accrue
interest at the contractual rates until completion or termination of the
Conversion, but a hold will be placed on such funds, thereby making them
unavailable to the depositor until completion or termination of the Conversion.
Notwithstanding the foregoing, the Company shall have the right, in its sole
discretion, to permit institutional investors to submit irrevocable orders
together with a legally binding commitment for payment and to thereafter pay for
the shares of Common Stock for which they subscribe in the Community Offering at
any time prior to 48 hours before the completion of the Conversion.
If a subscriber authorizes the Association to withdraw the amount of the
purchase price from his deposit account, the Association will do so as of the
effective date of the Conversion. The Association will waive any applicable
penalties for early withdrawal from certificate accounts. If the remaining
balance in a certificate account is reduced below the applicable minimum balance
requirement at the time that the funds actually are transferred under the
authorization, the certificate will be cancelled at the time of the withdrawal,
without penalty, and the remaining balance will earn interest at the passbook
rate. Upon completion of the Conversion, funds withdrawn from depositors'
accounts will no longer be insured by the FDIC.
The ESOP will not be required to pay for the shares subscribed for at the time
it subscribes but, rather, may pay for such shares of Common Stock subscribed
for at the Purchase Price upon consummation of the Offerings; provided, that
there is in force from the time of its subscription until such time, a loan
commitment acceptable to the Company from an unrelated financial institution or
the Company to lend to the ESOP, at such time, the aggregate Purchase Price of
the shares for which it subscribed. The Company intends to provide such a loan
to the ESOP.
Owners of self-directed Individual Retirement Accounts ("IRAs") may use the
assets of such IRAs to purchase shares of Common Stock in the Subscription and
Community Offerings, provided that such IRAs are not maintained at the
Association. Persons with self-directed IRAs maintained at the Association must
have their accounts transferred to an unaffiliated institution or broker to
purchase shares of Common Stock in the Subscription and Community Offerings. In
addition, the provisions of ERISA and IRS regulations require that officers,
directors and ten percent stockholders who use self-directed IRA funds to
purchase shares of Common Stock in the Subscription and Community Offerings make
such purchases for the exclusive benefit of the IRAs.
Certificates representing shares of Common Stock purchased will be mailed to
purchasers at the last address of such persons appearing on the records of the
Association, or to such other address as may be specified in properly completed
order forms, as soon as practicable following consummation of the sale of all
shares of Common Stock. Any certificates returned as undeliverable will be
disposed of in accordance with applicable law.
RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES OF COMMON STOCK
Prior to the completion of the Conversion, the OTS conversion regulations
prohibit any person with subscription rights, including the Eligible Account
Holders, the ESOP, the Supplemental Eligible Account Holders and Other Members,
from transferring or entering into any agreement or understanding to transfer
the legal or beneficial ownership of the subscription rights issued under the
Plan or the shares of Common Stock to be issued upon their exercise. Such rights
may be exercised only by the person to whom they are granted and only for his
account. Each person exercising such subscription rights will be required to
certify that he is purchasing shares solely for his own account and that he has
no agreement or understanding regarding the sale or transfer of such shares. The
regulations also prohibit any person from offering or making
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an announcement of an offer or an intent to make an offer to purchase such
subscription rights or shares of Common Stock prior to the completion of the
Conversion.
THE ASSOCIATION AND THE COMPANY WILL PURSUE ANY AND ALL LEGAL AND EQUITABLE
REMEDIES (INCLUDING FORFEITURE) IN THE EVENT THEY BECOME AWARE OF THE TRANSFER
OF SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS KNOWN BY THEM TO INVOLVE THE
TRANSFER OF SUCH RIGHTS.
SYNDICATED COMMUNITY OFFERING
As a final step in the Conversion, the Plan provides that, if feasible, all
shares of Common Stock not purchased in the Subscription Offering or the
Community Offering, if any, will be offered for sale to the general public in a
Syndicated Community Offering through a syndicate of registered broker-dealers
to be formed and managed by Hovde acting as agent of the Company. There are no
known agreements between Hovde and any broker-dealer in connection with a
possible Syndicated Community Offering. As an alternative to a Syndicated
Community Offering, the Company and the Association may instead elect to offer
for sale such remaining shares to or through underwriters in a public offering,
as described under "-- Public Offering Alternative." The Company and the
Association have reserved the right to reject orders in whole or in part in
their sole discretion in the Syndicated Community Offering. If the Company or
the Association rejects an order in part, the subscriber will not have the right
to cancel the remainder of his subscription. Neither Hovde nor any registered
broker-dealer shall have any obligation to take or purchase any shares of the
Common Stock in the Syndicated Community Offering; however, Hovde has agreed to
use its best efforts in the sale of shares in the Syndicated Community Offering.
The price at which Common Stock is sold in the Syndicated Community Offering
will be determined as described above under "-- Stock Pricing." Subject to
overall purchase limitations, no person, together with any associate or group of
persons acting in concert, will be permitted to subscribe in the Syndicated
Community Offering for more than $200,000 of the Common Stock offered in the
Conversion; provided, however, that shares of Common Stock purchased in the
Community Offering by any persons, together with associates of or persons acting
in concert with such persons, will be aggregated with purchases in the
Syndicated Community Offering and be subject to a maximum purchase limitation of
$200,000 of the Common Stock offered.
Payments made in the form of a check, savings and loan association draft,
money order or in cash will earn interest at the Association's passbook rate of
interest from the date such payment is actually received by the Association
until completion or termination of the Conversion.
In addition to the foregoing, if a syndicate of broker-dealers ("selected
dealers") is formed to assist in the Syndicated Community Offering, a purchaser
may pay for his shares with funds held by or deposited with a selected dealer.
If an order form is executed and forwarded to the selected dealer or if the
selected dealer is authorized to execute the order form on behalf of a
purchaser, the selected dealer is required to forward the order form and funds
to the Association for deposit in a segregated account on or before noon of the
business day following receipt of the order form or execution of the order form
by the selected dealer. Alternatively, selected dealers may solicit indications
of interest from their customers to place orders for shares. Such selected
dealers shall subsequently contact their customers who indicated an interest and
seek their confirmation as to their intent to purchase. Those indicating an
intent to purchase shall execute order forms and forward them to their selected
dealer or authorize the selected dealer to execute such forms. The selected
dealer will acknowledge receipt of the order to its customer in writing on the
following business day and will debit such customer's account on the third
business day after the customer has confirmed his intent to purchase (the "debit
date") and on or before noon of the next business day following the debit date,
will send order forms and funds to the Association for deposit in a segregated
account. Although purchasers' funds are not required to be in their accounts
with selected dealers until the debit date, in the event that such
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alternative procedure is employed once a confirmation of an intent to purchase
has been received by the selected dealer, the purchaser has no right to rescind
his order.
Certificates representing shares of Common Stock purchased, together with any
refund due, will be mailed to purchasers at the address specified in the order
form, as soon as practicable following consummation of the sale of the Common
Stock. Any certificates returned as undeliverable will be disposed of in
accordance with applicable law.
The Syndicated Community Offering will terminate no more than 45 days
following the Subscription Expiration Date, unless extended by the Company with
the approval of the OTS. Such extensions may not be beyond [ ], 1998. See "--
Stock Pricing" above for a discussion of rights of subscribers, if any, in the
event an extension is granted.
PUBLIC OFFERING ALTERNATIVE
Shares of Common Stock not sold in the Subscription Offering or the Community
Offering may, as an alternative to a Syndicated Community Offering as described
above, be offered for sale by the Company to or through underwriters (the
"Public Offering"). Certain provisions restricting the purchase and transfer of
Common Stock shall not be applicable to sales to underwriters for purposes of
such Public Offering. Any such underwriter shall agree to purchase such shares
from the Company with a view to reoffering them to the general public, use their
best efforts to sell, for the account of the Company, such shares to the general
public or a combination of the preceding two provisions, subject to certain
terms and conditions described in the Plan.
LIMITATIONS ON COMMON STOCK PURCHASES
The Plan includes the following limitations on the number of shares of Common
Stock which may be purchased during the Conversion:
(1) No subscription for fewer than 25 shares will be accepted;
(2) Each Eligible Account Holder may subscribe for and purchase Common
Stock in the Subscription Offering in an amount up to the greater of (a) the
amount permitted to be purchased in the Community Offering, currently $200,000
of the Common Stock offered, (b) one-tenth of one percent (0.10%) of the total
offering of shares of Common Stock or (c) 15 times the product (rounded down
to the net whole number) obtained by multiplying the total number of shares of
Common Stock to be issued in the Conversion by a fraction of which the
numerator is the amount of the qualifying deposit of the Eligible Account
Holder and the denominator is the total amount of qualifying deposits of all
Eligible Account Holders in each case on the Eligibility Record Date subject
to the overall limitation in (8) below and exclusive of an increase in the
total number of shares issued due to an increase in the Estimated Price Range
of up to 15%;
(3) The ESOP is permitted and intends to purchase up to 8% of the shares
of Common Stock issued in the Conversion, including shares issued in the event
of an increase in the Estimated Price Range of up to 15%;
(4) Each Supplemental Eligible Account Holder may subscribe for and
purchase in the Subscription Offering in an amount up to the greater of (a)
the amount permitted to be purchased in the Community Offering, currently
$200,000 of the Common Stock Offered, (b) one-tenth of one percent (0.10%) of
the total offering of shares of Common Stock or (c) 15 times the product
(rounded down to the net whole number) obtained by multiplying the total
number of shares of Common Stock to be issued by a fraction of which the
numerator is the amount of the qualifying deposit of the
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Supplemental Eligible Account Holder and the denominator is the total amount
of qualifying deposits of all Supplemental Eligible Account Holders in each
case on the Supplemental Eligibility Record Date subject to the overall
limitation in (8) below and exclusive of an increase in the total number of
shares issued due to an increase in the Estimated Price Range of up to 15%;
provided, that the subscription rights received as an Eligible Account Holder
will be applied in partial satisfaction of the subscription rights to be
received as a Supplemental Eligible Account Holder;
(5) Each Other Member may subscribe for and purchase Common Stock in the
Subscription Offering in an amount up to the greater of the amount permitted
to be purchased in the Community Offering, currently $200,000 of the Common
Stock offered, or one-tenth of one percent (0.10%) of the total offering of
shares of Common Stock subject to the overall limitation in (8) below and
exclusive of an increase in the total number of shares issued due to an
increase in the Estimated Price Range of up to 15%;
(6) Persons purchasing shares of Common Stock in the Community Offering,
together with associates of and groups of persons acting in concert with such
persons, may purchase Common Stock in the Community Offering in an amount up
to $200,000 of the Common Stock offered in the Conversion subject to the
overall limitation in (8) below;
(7) Persons purchasing shares of Common Stock in the Syndicated Community
Offering, or the Public Offering alternative (exclusive of underwriters),
together with associates of and persons acting in concert with such persons,
may purchase Common Stock in the Syndicated Offering in an amount up to
$200,000 of the shares of Common Stock offered in the Conversion subject to
the overall limitation in (8) below; provided, that shares of Common Stock
purchased in the Community Offering by any persons, together with associates
of and persons acting in concert with such persons, will be aggregated with
purchases by such persons in the Syndicated Community Offering in applying
$200,000 purchase limitation;
(8) Eligible Account Holders, Supplemental Eligible Account Holders,
Other Members and certain members of the general public may purchase stock in
the Community Offering and Syndicated Community Offering or Public Offering
Alternative subject to the purchase limitations described in (6) and (7)
above; provided, that, except for the ESOP, the maximum number of shares of
Common Stock subscribed for or purchased in all categories of the Conversion
by any person, together with associates of and groups of persons acting in
concert with such persons, shall not exceed 1.0% of the shares of Common Stock
offered in the Conversion; and
(9) The directors and officers of the Association and their associates in
the aggregate, excluding purchases by the ESOP, may purchase up to the maximum
number of shares offered for sale in the Conversion as provided by Section
563b.3(c)(8) of the OTS Regulations. Based on the Association's total assets
of $306.7 million at March 31, 1996, such aggregate purchase limitation is
approximately 29.3% of the shares of Common Stock offered in the Conversion.
Subject to any required regulatory approval and the requirements of applicable
laws and regulations, but without further approval of the members of the
Association, both the individual amount permitted to be subscribed for and the
overall maximum purchase limitation may be increased to up to a maximum of 5% of
the shares offered in the Offering at the sole discretion of the Company and the
Association. If such amount is increased, subscribers for the maximum amount
will be, and certain other large subscribers in the sole discretion of the
Company and the Association may be, given the opportunity to increase their
subscriptions up to the then applicable limit. In addition, the Boards of
Directors of the Company and the Association may, in their sole discretion,
increase the maximum purchase limitation referred to above up to 9.99% of the
shares offered in the Offering; provided, that, orders for shares exceeding 5%
of the shares being offered in the Subscription and Community Offerings shall
not exceed, in the aggregate, 10% of the shares being offered
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in the Subscription and Community Offerings. Requests to purchase additional
shares of Common Stock under this provision will be determined by the Boards of
Directors and, if approved, allocated on a pro rata basis giving priority in
accordance with the priority rights set forth in the Plan and described herein.
The overall maximum purchase limitation may not be reduced to less than 1.0%,
but the individual amount permitted to be subscribed for in the Offerings may be
reduced by the Association to less than $200,000 of the Common Stock offered,
subject to paragraphs (3) and (4) above without the further approval of members
or resolicitation of subscribers. An individual Eligible Account Holder,
Supplemental Eligible Account Holder or Other Member may not purchase
individually in the Subscription Offering the overall maximum purchase limit of
1.0% of the shares offered, but may make such purchase, together with associates
of and persons acting in concert with such person, by also purchasing in other
available categories of the Conversion, subject to availability of shares and
the maximum overall purchase limit for purchases in the Conversion.
In the event of an increase in the total number of shares offered in the
Conversion due to an increase in the Estimated Price Range of up to 15% (the
"Adjusted Maximum"), the additional shares will be allocated in the following
order or priority in accordance with the Plan: (i) to fill the ESOP's
subscription of 8% of the Adjusted Maximum number of shares; (ii) in the event
that there is an oversubscription by Eligible Account Holders, to fill
unfulfilled subscriptions of Eligible Account Holders exclusive of the Adjusted
Maximum; (iii) in the event that there is an oversubscription by Supplemental
Eligible Account Holders, to fill unfulfilled subscriptions of Supplemental
Eligible Account Holders, exclusive of the Adjusted Maximum; (iv) in the event
that there is an oversubscription by Other Members, to fill unfulfilled
subscriptions of Other Members exclusive of the Adjusted Maximum; and (v) to
fill unfulfilled subscriptions in the Community Offering to the extent possible,
exclusive of the Adjusted Maximum, with preference to Preferred Subscribers.
The term "Associate" of a person is defined to mean: (i) any corporation or
organization (other than the Company, the Association or a majority-owned
subsidiary of the Association) of which such person is an officer, partner or is
directly or indirectly, either alone or with one or more members of his or her
immediate family, the beneficial owner of 10% or more of any class of equity
securities; (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity, except that the term "Associate" does not
include any employee stock benefit plan maintained by the Company or the
Association in which a person has a substantial beneficial interest or serves as
a trustee or in a similar fiduciary capacity, and except that, for purposes of
aggregating total shares that may be acquired or held by officers and directors
and their Associates, the term "Associate" does not include any tax-qualified
employee stock benefit plan; and (iii) any relative or spouse of such person, or
any relative of such spouse, who has the same home as such person or who is a
director or officer of the Company or the Association. Directors and officers
are not treated as associates of each other solely by virtue of holding such
positions. For a further discussion of limitations on purchases of a converting
institution's stock at the time of Conversion and subsequent to Conversion, see
"-- Certain Restrictions on Purchase or Transfer of Shares After Conversion,"
"Management of the Association -- Subscriptions by Executive Officers and
Directors" and "Restrictions on Acquisition of the Company and the Association."
CERTAIN RESTRICTIONS ON PURCHASE OR TRANSFER OF SHARES AFTER CONVERSION
All shares of Common Stock purchased in connection with the Conversion by a
director or an executive officer of the Association will be subject to a
restriction that the shares not be sold for a period of one year following the
Conversion, except in the event of the death of such director or executive
officer. Each certificate for restricted shares will bear a legend giving notice
of this restriction on transfer, and instructions will be issued to the effect
that any transfer within such time period of any certificate or record ownership
of such shares other than as provided above is a violation of the restriction.
Any shares of Common Stock issued at a later date as a stock dividend, stock
split, or otherwise, with respect to such restricted stock will be subject to
the same restrictions. The directors and executive officers of the Association
will also be subject
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to the insider trading rules promulgated pursuant to the Exchange Act and any
other applicable requirements of the federal securities laws.
Purchases of outstanding shares of Common Stock of the Company by directors,
executive officers (or any person who was an executive officer or director of
the Association after adoption of the Plan of Conversion) and their associates
during the three-year period following Conversion may be made only through a
broker or dealer registered with the SEC, except with the prior written approval
of the OTS. This restriction does not apply, however, to negotiated transactions
involving more than 1.0% of the Company's outstanding Common Stock or to the
purchase of stock pursuant to the Stock Option Plans to be established after the
Conversion.
Pursuant to OTS regulations, the Company will be prohibited from repurchasing
any shares of the Common Stock for three years except (i) for an offer to all
stockholders on a pro rata basis or (ii) for the repurchase of qualifying shares
of a director, unless the Company receives the prior approval of the OTS.
Notwithstanding the foregoing, beginning one year following completion of the
Conversion the Company may repurchase its Common Stock so long as (i) the
repurchases within the following two years are part of an open-market program
not involving greater than 5% of its outstanding capital stock during a twelve-
month period; (ii) the repurchases do not cause the Company to become
undercapitalized; and (iii) the Company provides to the Regional Director of the
OTS no later than 10 days prior to the commencement of a repurchase program
written notice containing a full description of the program to be undertaken and
such program is not disapproved by the Regional Director. However, the OTS
Regional Directors have the authority to approve stock repurchases during the
first three years after the Conversion that are in excess of these limits.
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RESTRICTIONS ON ACQUISITION OF THE COMPANY
AND THE ASSOCIATION
GENERAL
The Association's Plan of Conversion provides for the Conversion of the
Association from the mutual to the stock form of organization and, in connection
therewith, a new Federal Stock Charter and Bylaws to be adopted by members of
the Association. The Plan also provides for the concurrent formation of a
holding company, which form of organization may or may not be utilized at the
option of the Board of Directors of the Association. See "The Conversion --
General." In the event that the holding company form of organization is
utilized, as described below, certain provisions in the Company's Certificate of
Incorporation and Bylaws and in its management remuneration plans and agreements
entered into in connection with the Conversion, together with provisions of
Delaware corporate law, may have anti-takeover effects. In the event that the
holding company form of organization is not utilized, the Association's Federal
Stock Charter and Bylaws and management remuneration plans and agreements
entered into in connection with the Conversion may have anti-takeover effects as
described below. In addition, regulatory restrictions may make it difficult for
persons or companies to acquire control of either the Company or the
Association.
RESTRICTIONS IN THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
The following discussion is a general summary of certain provisions of the
Company's Certificate of Incorporation and Bylaws and certain other statutory
and regulatory provisions relating to stock ownership and transfers, the Board
of Directors and business combinations, that might have a potential "anti-
takeover" effect. The Certificate of Incorporation and Bylaws of the Company
are filed as exhibits to the Registration Statement, of which this Prospectus is
a part, and the descriptions herein of such documents are qualified in their
entirety by reference to such documents. A number of provisions of the Company's
Certificate of Incorporation and Bylaws deal with matters of corporate
governance and certain rights of stockholders. These provisions might have the
effect of discouraging future takeover attempts which are not approved by the
Board of Directors but which individual Company stockholders may deem to be in
their best interests or in which stockholders may receive substantial premiums
for their shares over then current market prices. As a result, stockholders who
might desire to participate in such transactions may not have an opportunity to
do so. Such provisions will also render the removal of the current Board of
Directors or management of the Company more difficult. The following description
of certain of the provisions of the Certificate of Incorporation and Bylaws of
the Company is necessarily general and reference should be made in each case to
such Certificate of Incorporation and Bylaws, which are incorporated herein by
reference. See "Additional Information" as to how to obtain a copy of these
documents.
Limitation on Voting Rights. The Certificate of Incorporation of the Company
provides that any record owner of any outstanding Common Stock which is
beneficially owned, directly or indirectly, by a person who beneficially owns in
excess of 10% of the then outstanding shares of Common Stock (the "Limit") shall
be entitled or permitted to only one one-hundredth (1/100) of a vote with
respect of each share held in excess of the Limit. Beneficial ownership of
shares includes shares beneficially owned by such person or any of his
affiliates, shares which such person or his affiliates have the right to acquire
upon the exercise of conversion rights or options and shares as to which such
person and his affiliates have or share investment or voting power, but shall
not include shares beneficially owned by the ESOP or shares that are subject to
a revocable proxy and that are not otherwise beneficially owned or deemed by the
Company to be beneficially owned by such person and his affiliates. The
Certificate of Incorporation further provides that this provision limiting
voting rights may only be amended upon the approval of the Board of Directors
and the vote of two-thirds of the votes eligible to be cast by holders of all
outstanding shares of voting stock (after giving effect to the limitation on
voting rights).
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Board of Directors. The Board of Directors of the Company is divided into
three classes, each of which shall contain approximately one-third of the whole
number of members of the Board. Each class shall serve a staggered term, with
approximately one-third of the total number of directors being elected each
year. The Company's Certificate of Incorporation and Bylaws provide that the
size of the Board shall be determined by a majority of the directors but shall
not be less than five nor more than 15. The Certificate of Incorporation and the
Bylaws provide that any vacancy occurring in the Board, including a vacancy
created by an increase in the number of directors or resulting from death,
resignation, retirement, disqualification, removal from office or other cause,
shall be filled for the remainder of the unexpired term exclusively by a
majority vote of the directors then in office. The classified Board is intended
to provide for continuity of the Board of Directors and to make it more
difficult and time consuming for a stockholder group to fully use its voting
power to gain control of the Board of Directors without the consent of the
incumbent Board of Directors of the Company. The Certificate of Incorporation of
the Company provides that a director may be removed from the Board of Directors
prior to the expiration of his term only for cause, upon the vote of 80% of the
outstanding shares of voting stock. In the absence of these provisions, the
vote of the holders of a majority of the shares could remove the entire Board,
with or without cause, and replace it with persons of such holders' choice.
Cumulative Voting, Special Meetings and Action by Written Consent. The
Certificate of Incorporation does not provide for cumulative voting for any
purpose. Moreover, special meetings of stockholders of the Company may be called
only by the Board of Directors or by the President of the Company. The
Certificate of Incorporation also provides that any action required or permitted
to be taken by the stockholders of the Company may be taken only at an annual or
special meeting and prohibits stockholder action by written consent in lieu of a
meeting.
Authorized Shares. The Certificate of Incorporation authorizes the issuance
of fifteen million (15,000,000) shares of capital stock, consisting of twelve
million (12,000,000) shares of Common Stock and three million (3,000,000) shares
of preferred stock (the "Preferred Stock"). The shares of Common Stock and
Preferred Stock were authorized in an amount greater than that to be issued in
the Conversion to provide the Company's Board of Directors with as much
flexibility as possible to effect, among other transactions, financings,
acquisitions, stock dividends, stock splits and employee stock options. However,
these additional authorized shares may also be used by the Board of Directors
consistent with its fiduciary duty to deter future attempts to gain control of
the Company. The Board of Directors also has sole authority to determine the
terms of any one or more series of Preferred Stock, including voting rights,
conversion rates, and liquidation preferences. As a result of the ability to fix
voting rights for a series of Preferred Stock, the Board has the power, to the
extent consistent with its fiduciary duty, to issue a series of Preferred Stock
to persons friendly to management in order to attempt to block a post-tender
offer merger or other transaction by which a third party seeks control, and
thereby assist management to retain its position. The Company's Board of
Directors currently has no plans for the issuance of additional shares, other
than the issuance of additional shares pursuant to the terms of the Stock
Programs and upon exercise of stock options to be issued pursuant to the terms
of the Stock Option Plans, all of which are to be established and presented to
stockholders at a meeting of stockholders to be held no earlier than six months
after completion of the Conversion.
Stockholder Vote Required to Approve Business Combinations with Principal
Stockholders. The Certificate of Incorporation requires the approval of the
holders of at least 80% of the Company's outstanding shares of voting stock,
together with the affirmative vote of at least 50% of the Company's outstanding
shares of voting stock not beneficially owned by an Interested Stockholder (as
defined below) to approve certain "Business Combinations," as defined therein,
and related transactions. Under Delaware law, absent this provision, Business
Combinations, including mergers, consolidations and sales of all or
substantially all of the assets of a corporation must, subject to certain
exceptions, be approved by the vote of the holders of only a majority of the
outstanding shares of Common Stock of the Company and any other affected class
of stock. Under the Certificate of Incorporation, at least 80% approval of
stockholders is required in connection with any transaction involving an
Interested Stockholder except (i) in cases where the proposed transaction has
been
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approved in advance by a majority of those members of the Company's Board of
Directors who are unaffiliated with the Interested Stockholder and were
directors prior to the time when the Interested Stockholder became an Interested
Stockholder or (ii) if the proposed transaction meets certain conditions set
forth therein which are designed to afford the stockholders a fair price in
consideration for their shares in which case, if a stockholder vote is required,
approval of only a majority of the outstanding shares of voting stock would be
sufficient. The term "Interested Stockholder" is defined to include any
individual, corporation, partnership or other entity (other than the Company or
its subsidiary or any employee benefit plan maintained by the Company or its
subsidiary) which owns beneficially or controls, directly or indirectly, 10% or
more of the outstanding shares of voting stock of the Company. This provision of
the Certificate of Incorporation applies to any "Business Combination," which is
defined to include (i) any merger or consolidation of the Company or any of its
subsidiaries with or into any Interested Stockholder or Affiliate (as defined in
the Certificate of Incorporation) of an Interested Stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer, or other disposition to or with any
Interested Stockholder or Affiliate of 5% or more of the assets of the Company
or combined assets of the Company and its subsidiary; (iii) the issuance or
transfer to any Interested Stockholder or its Affiliate by the Company (or any
subsidiary) of any securities of the Company other than on a pro rata basis to
all stockholders; (iv) the adoption of any plan for the liquidation or
dissolution of the Company proposed by or on behalf of any Interested
Stockholder or Affiliate thereof; (v) any reclassification of securities,
recapitalization, merger or consolidation of the Company which has the effect of
increasing the proportionate share of Common Stock or any class of equity or
convertible securities of the Company owned directly or indirectly by an
Interested Stockholder or Affiliate thereof; and (vi) the acquisition by the
Company or its subsidiary of any securities of an Interested Stockholder or its
Affiliates or Associates.
The directors and executive officers of the Association are purchasing in the
aggregate approximately 2.1% of the shares of the Common Stock at the maximum of
the Estimated Price Range. In addition, the ESOP intends to purchase 8% of the
Common Stock sold in the Conversion. Additionally, if, at a meeting of
stockholders to be held no earlier than six months after completion of the
Conversion, stockholder approval of the proposed Stock Programs and Stock
Options Plans is received, the Company expects to acquire 4% of the Common Stock
issued in the Conversion on behalf of the Stock Programs and expects to issue an
amount equal to 10% of the Common Stock issued in the Conversion under the Stock
Option Plans to directors and executive officers. As a result, assuming the
Stock Programs and Stock Option Plans are approved by the stockholders, the
directors, executive officers and employees have the potential to control the
voting of approximately 24.1% of the Company's Common Stock, thereby enabling
them to prevent the approval of the transactions requiring the approval of at
least 80% of the Company's outstanding shares of voting stock described
hereinabove.
Evaluation of Offers. The Certificate of Incorporation of the Company further
provides that the Board of Directors of the Company, when evaluating any offer
to the Company from another party to (i) make a tender or exchange offer for any
outstanding equity security of the Company, (ii) merge or consolidate the
Company with another corporation or entity or (iii) purchase or otherwise
acquire all or substantially all of the properties and assets of the Company,
shall, in connection with the exercise of its judgment in determining what is in
the best interest of the Company and the stockholders of the Company, give due
consideration to the extent permitted by law to all relevant factors, including,
without limitation, the financial and managerial resources and future prospects
of the other party, the possible effects on the business of the Company and its
subsidiaries and on the employees, customers, suppliers and creditors of the
Company and its subsidiaries, and the effects on the communities in which the
Company's and its subsidiaries' facilities are located. By having these
standards in the Certificate of Incorporation of the Company, the Board of
Directors may be in a stronger position to oppose such a transaction if the
Board concludes that the transaction would not be in the best interests of the
Company, even if the price offered is significantly greater than the then market
price of any equity security of the Company.
Amendment of Certificate of Incorporation and Bylaws. The Certificate of
Incorporation provides that certain provisions of the Certificate of
Incorporation may not be altered, amended, repealed or rescinded
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without the affirmative vote of either (1) not less than a majority of the
authorized number of directors and, if one or more Interested Stockholders
exist, by not less than a majority of the Disinterested Directors (as defined in
the Certificate of Incorporation) or (2) the holders of not less than two-thirds
of the total votes eligible to be cast by the holders of all outstanding shares
of the capital stock of the Company entitled to vote thereon and, if the
alteration, amendment, repeal, or rescission is proposed by or on behalf of an
Interested Stockholder or a director who is an Affiliate or Associate of an
Interested Stockholder, by the affirmative vote of the holders of not less than
a majority of the total votes eligible to be cast by holders of all outstanding
shares entitled to vote thereon not beneficially owned by an Interested
Stockholder or an Affiliate or Associate thereof. Amendment of the provision
relating to business combinations must also be approved by either (i) a majority
of the Disinterested Directors, or (ii) the affirmative vote of not less than
eighty percent (80%) of the total number of votes eligible to be cast by the
holders of all outstanding shares of the Voting Stock, voting together as a
single class, together with the affirmative vote of not less than fifty percent
(50%) of the total number of votes eligible to be cast by the holders of all
outstanding shares of the Voting Stock not beneficially owned by any Interested
Stockholder or Affiliate or Associate thereof, voting together as a single
class. Furthermore, the Company's Certificate of Incorporation provides that
provisions of the Bylaws that contain supermajority voting requirements may not
be altered, amended, repealed or rescinded without a vote of the Board or
holders of capital stock entitled to vote thereon that is not less than the
supermajority specified in such provision. Absent these provisions, the
Delaware General Corporation Law (the "DGCL") provides that a corporation's
certificate of incorporation and bylaws may be amended by the holders of a
majority of the corporation's outstanding capital stock. The Certificate of
Incorporation also provides that the Board of Directors is authorized to make,
alter, amend, rescind or repeal any of the Company's Bylaws in accordance with
the terms thereof, regardless of whether the Bylaw was initially adopted by the
stockholders. However, this authorization neither divests the stockholders of
their right, nor limits their power to adopt, amend, rescind or repeal any Bylaw
under the DGCL. These provisions could have the effect of discouraging a tender
offer or other takeover attempt where the ability to make fundamental changes
through Bylaw amendments is an important element of the takeover strategy of the
acquiror.
Certain Bylaw Provisions. The Bylaws of the Company also require a
stockholder who intends to nominate a candidate for election to the Board of
Directors, or to raise new business at a stockholder meeting to give
approximately 90 days advance notice to the Secretary of the Company. The notice
provision requires a stockholder who desires to raise new business to provide
certain information to the Company concerning the nature of the new business,
the stockholder and the stockholder's interest in the business matter.
Similarly, a stockholder wishing to nominate any person for election as a
director must provide the Company with certain information concerning the
nominee and the proposing stockholder.
ANTI-TAKEOVER EFFECTS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
AND MANAGEMENT REMUNERATION ADOPTED IN CONVERSION
The provisions described above are intended to reduce the Company's
vulnerability to takeover attempts and certain other transactions which have not
been negotiated with and approved by members of its Board of Directors. The
provisions of the employment agreements with officers, the Stock Programs and
the Stock Option Plans to be established may also discourage takeover attempts
by increasing the costs to be incurred by the Association and the Company in the
event of a takeover. See "Management of the Association -- Employment
Agreements," and "-- Benefits -- Stock Option Plans."
The Company's Board of Directors believes that the provisions of the
Certificate of Incorporation, Bylaws and management remuneration plans to be
established are in the best interests of the Company and its stockholders. An
unsolicited non-negotiated proposal can seriously disrupt the business and
management of a corporation and cause it great expense. Accordingly, the Board
of Directors believes it is in the best interests of the Company and its
stockholders to encourage potential acquirors to negotiate directly with
management and that these provisions will encourage such negotiations and
discourage non-negotiated takeover attempts. It is also the Board of Directors'
view that these provisions should not discourage persons from
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proposing a merger or other transaction at a price that reflects the true value
of the Company and that otherwise is in the best interests of all stockholders.
DELAWARE CORPORATE LAW
The State of Delaware has a statute designed to provide Delaware corporations
with additional protection against hostile takeovers. The takeover statute,
which is codified in Section 203 of the DGCL ("Section 203"), is intended to
discourage certain takeover practices by impeding the ability of a hostile
acquiror to engage in certain transactions with the target company.
In general, Section 203 provides that a "Person" (as defined therein) who owns
15% or more of the outstanding voting stock of a Delaware corporation (a "DGCL
Interested Stockholder") may not consummate a merger or other business
combination transaction with such corporation at any time during the three-year
period following the date such "Person" became a DGCL Interested Stockholder.
The term "business combination" is defined broadly to cover a wide range of
corporate transactions including mergers, sales of assets, issuances of stock,
transactions with subsidiaries and the receipt of disproportionate financial
benefits.
The statute exempts the following transactions from the requirements of
Section 203: (i) any business combination if, prior to the date a person became
a DGCL Interested Stockholder, the Board of Directors approved either the
business combination or the transaction which resulted in the stockholder
becoming a DGCL Interested Stockholder; (ii) any business combination involving
a person who acquired at least 85% of the outstanding voting stock in the
transaction in which he became a DGCL Interested Stockholder, with the number of
shares outstanding calculated without regard to those shares owned by the
corporation's directors who are also officers and by certain employee stock
plans; (iii) any business combination with an Interested Stockholder that is
approved by the Board of Directors and by a two-thirds vote of the outstanding
voting stock not owned by the DGCL Interested Stockholder; and (iv) certain
business combinations that are proposed after the corporation had received other
acquisition proposals and which are approved or not opposed by a majority of
certain continuing members of the Board of Directors. A corporation may exempt
itself from the requirement of the statute by adopting an amendment to its
Certificate of Incorporation or Bylaws electing not to be governed by Section
203 of the DGCL. At the present time, the Board of Directors does not intend to
propose any such amendment.
RESTRICTIONS IN THE ASSOCIATION'S NEW CHARTER AND BYLAWS
Although the Board of Directors of the Association is not aware of any effort
that might be made to obtain control of the Association after the Conversion,
the Board of Directors believes that it is appropriate to adopt certain
provisions permitted by federal regulations to protect the interests of the
converted Association and its shareholders from any hostile takeover. Such
provisions may, indirectly, inhibit a change in control of the Company, as the
Association's sole stockholder. See "Risk Factors -- Certain Anti-Takeover
Provisions."
The Association's Federal Stock Charter will contain a provision whereby the
acquisition of or offer to acquire beneficial ownership of more than 10% of the
issued and outstanding shares of any class of equity securities of the
Association by any person (i.e., any individual, corporation, group acting in
concert, trust, partnership, joint stock company or similar organization),
either directly or indirectly, will be prohibited for a period of five years
following the date of completion of the Conversion. Any stock in excess of 10%
acquired in violation of the Federal Stock Charter provision will not be counted
as outstanding for voting purposes. This limitation shall not apply to any
transaction in which the Association forms a holding company without a change in
the respective beneficial ownership interests of its shareholders other than
pursuant to the exercise of any dissenter or appraisal rights, the purchase of
shares by underwriters in connection with a public offering or the purchase of
shares by a tax qualified employee stock benefit plan which is exempt from
certain approval requirements set forth in the OTS regulations. In the event
that holders of revocable proxies
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for more than 10% of the shares of the Common Stock of the Company seek, among
other things, to elect one-third or more of the Company's Board of Directors, to
cause the Company's stockholders to approve the acquisition or corporate
reorganization of the Company or to exert a continuing influence on a material
aspect of the business operations of the Company, which actions could indirectly
result in a change in control of the Association, the Board of Directors of the
Association will be able to assert this provision of the Association's Federal
Stock Charter against such holders. Although the Board of Directors of the
Association is not currently able to determine when and if it would assert this
provision of the Association's Federal Stock Charter, the Board of Directors, in
exercising its fiduciary duty, may assert this provision if it were deemed to be
in the best interests of the Association, the Company and its shareholders. It
is unclear, however, whether this provision, if asserted, would be successful
against such persons in a proxy contest which could result in a change in
control of the Association indirectly through a change in control of the
Company. Finally, for five years, shareholders will not be permitted to call a
special meeting of shareholders relating to a change of control of the
Association or a charter amendment. Furthermore, the staggered terms of the
Board of Directors could have an anti-takeover effect by making it more
difficult for a majority of shares to force an immediate change in the Board of
Directors since only one-third of the Board is elected each year. The purpose of
these provisions is to assure stability and continuity of management of the
Association in the years immediately following the Conversion.
Although the Association has no arrangements, understandings or plans at the
present time, the Board of Directors believes that the availability of such
shares will provide the Association with increased flexibility in structuring
possible future financings and acquisitions and in meeting other corporate needs
which may arise. In the event of a proposed merger, tender offer or other
attempt to gain control of the Association of which management does not approve,
it might be possible for the Board of Directors to authorize the issuance of one
or more series of Preferred Stock with rights and preferences which could impede
the completion of such a transaction. An effect of the possible issuance of such
Preferred Stock, therefore, may be to deter a future takeover attempt. The Board
of Directors does not intend to issue any Preferred Stock except on terms which
the Board deems to be in the best interests of the Association and its then
existing shareholders.
REGULATORY RESTRICTIONS
The Plan of Conversion prohibits any person, prior to the completion of the
Conversion, from transferring, or from entering into any agreement or
understanding to transfer, to the account of another, legal or beneficial
ownership of the subscription rights issued under the Plan or the Common Stock
to be issued upon their exercise. The Plan also prohibits any person, prior to
the completion of the Conversion, from offering, or making an announcement of an
offer or intent to make an offer, to purchase such subscription rights or Common
Stock.
For three years following the Conversion, OTS regulations prohibit any person
from acquiring or making an offer to acquire more than 10% of the stock of any
converted savings institution, except for: (i) offers that, if consummated,
would not result in the acquisition by such person during the preceding 12-month
period of more than 1% of such stock; (ii) offers for up to 25% in the aggregate
by the ESOP or other tax qualified plans of the Association or the Company; or
(iii) offers which are not opposed by the Board of Directors of the Association
and which receive the prior approval of the OTS. Such prohibition is also
applicable to the acquisition of the stock of the Company. Such acquisition may
be disapproved by OTS if it is found, among other things, that the proposed
acquisition (a) would frustrate the purposes of the provisions of the
regulations regarding conversions, (b) would be manipulative or deceptive, (c)
would subvert the fairness of the conversion, (d) would be likely to result in
injury to the savings institution, (e) would not be consistent with economical
home financing, (f) would otherwise violate law or regulation, or (g) would not
contribute to the prudent deployment of the savings institution's conversion
proceeds. In the event that any person, directly or indirectly, violates this
regulation, the securities beneficially owned by such person in excess of 10%
shall not be counted as shares entitled to vote and shall not be voted by any
person or counted as voting shares in connection with any matters submitted to a
vote of stockholders. The definition of
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beneficial ownership for this regulation extends to persons holding revocable or
irrevocable proxies for the Company's stock under circumstances that give rise
to a conclusive or rebuttable determination of control under the OTS
regulations.
In addition, any proposal to acquire 10% of any class of equity security of
the Company generally would be subject to approval by the OTS under the Change
in Bank Control Act. The OTS requires all persons seeking control of a savings
institution, directly or indirectly through control of its holding company, to
obtain regulatory approval prior to offering to obtain control. Federal law
generally provides that no "person," acting directly or indirectly or through or
in concert with one or more other persons, may acquire "control," as that term
is defined in OTS regulations, of a federally-insured savings institution
without giving at least 60 days written notice to the OTS and providing the OTS
an opportunity to disapprove the proposed acquisition. Such acquisitions of
control may be disapproved by the OTS if it is determined, among other things,
that (i) the acquisition would substantially lessen competition; (ii) the
financial condition of the acquiring person might jeopardize the financial
stability of the savings institution or prejudice the interests of its
depositors; or (iii) the competency, experience or integrity of the acquiring
person or the proposed management personnel indicates that it would not be in
the interest of the depositors or the public to permit the acquisition of
control by such person. Such change in control restrictions on the acquisition
of holding company stock are not limited to three years after conversion but
will apply for as long as the regulations are in effect. Persons holding
revocable or irrevocable proxies may be deemed to be beneficial owners of such
securities under OTS regulations and therefore prohibited from voting all or the
portion of such proxies in excess of the 10% aggregate beneficial ownership
limit. Such regulatory restrictions may prevent or inhibit proxy contests for
control of the Company or the Association which have not received prior
regulatory approval.
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
GENERAL
The Company is authorized to issue twelve million (12,000,000) shares of
Common Stock having a par value of $.01 per share and three million (3,000,000)
shares of Preferred Stock having a par value of $.01 per share. The Company
currently expects to issue 6,612,500 shares of Common Stock (or 7,604,375 in the
event of an increase of 15% in the Estimated Price Range) and does not expect to
issue any shares of Preferred Stock. Except as discussed above in "Restrictions
on Acquisition of the Company and the Association," each share of the Company's
Common Stock will have the same relative rights as, and will be identical in all
respects with, each other share of Common Stock. Upon payment of the Purchase
Price for the common stock, in accordance with the Plan, all such stock will be
duly authorized, fully paid and nonassessable.
THE COMMON STOCK OF THE COMPANY WILL REPRESENT NON-WITHDRAWABLE CAPITAL, WILL
NOT BE AN ACCOUNT OF AN INSURABLE TYPE, AND WILL NOT BE INSURED BY THE FDIC.
COMMON STOCK
Dividends. The Company can pay dividends out of statutory surplus or from
certain net profits if, as and when declared by its Board of Directors. The
payment of dividends by the Company is subject to limitations which are imposed
by law and applicable regulation. See "Dividend Policy" and "Regulation." The
holders of Common Stock of the Company will be entitled to receive and share
equally in such dividends as may be declared by the Board of Directors of the
Company out of funds legally available therefor. If the Company issues Preferred
Stock, the holders thereof may have a priority over the holders of the Common
Stock with respect to dividends.
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Voting Rights. Upon Conversion, the holders of Common Stock of the Company
will possess exclusive voting rights in the Company. They will elect the
Company's Board of Directors and act on such other matters as are required to be
presented to them under Delaware law or the Company's Certificate of
Incorporation or as are otherwise presented to them by the Board of Directors.
Except as discussed in "Restrictions on Acquisition of the Company and the
Association," each holder of Common Stock will be entitled to one vote per share
and will not have any right to cumulate votes in the election of directors. If
the Company issues Preferred Stock, holders of the Preferred Stock may also
possess voting rights. Certain matters require an 80% or two-thirds stockholder
vote. See "Restrictions on Acquisition of the Company and the Association."
As a federal mutual savings and loan association, corporate powers and control
of the Association are vested in its Board of Directors, who elect the officers
of the Association and who fill any vacancies on the Board of Directors as it
exists upon Conversion. Subsequent to Conversion, voting rights will be vested
exclusively in the owners of the shares of capital stock of the Association,
which owner will be the Company, and voted at the direction of the Company's
Board of Directors. Consequently, the holders of the Common Stock will not have
direct control of the Association.
Liquidation. In the event of any liquidation, dissolution or winding up of
the Association, the Company, as holder of the Association's capital stock,
would be entitled to receive, after payment or provision for payment of all
debts and liabilities of the Association (including all deposit accounts and
accrued interest thereon) and after distribution of the balance in the special
liquidation account to Eligible Account Holders and Supplemental Eligible
Account Holders (see "The Conversion -- Effects of Conversion -- Liquidation
Rights"), all assets of the Association available for distribution. In the event
of liquidation, dissolution or winding up of the Company, the holders of its
Common Stock would be entitled to receive, after payment or provision for
payment of all its debts and liabilities, all of the assets of the Company
available for distribution. If Preferred Stock is issued, the holders thereof
may have a priority over the holders of the Common Stock in the event of the
liquidation or dissolution of the Company.
Preemptive Rights. Holders of the Common Stock of the Company will not be
entitled to preemptive rights with respect to any shares which may be issued.
The Common Stock is not subject to redemption.
PREFERRED STOCK
None of the shares of the Company's authorized Preferred Stock will be issued
in the Conversion. Such stock may be issued with such preferences and
designations as the Board of Directors may from time to time determine. The
Board of Directors can, without stockholder approval, issue preferred stock with
voting, dividend, liquidation and conversion rights which could dilute the
voting strength of the holders of the Common Stock and may assist management in
impeding an unsolicited takeover or attempted change in control.
DESCRIPTION OF CAPITAL STOCK OF THE ASSOCIATION
GENERAL
The Federal Stock Charter of the Association, to be effective upon the
Conversion, authorizes the issuance of capital stock consisting of 20,000,000
(twenty million) shares of common stock, par value $1.00 per share, and
5,000,000 (five million) shares of preferred stock, par value $1.00 per share,
which Preferred Stock may be issued in series and classes having such rights,
preferences, privileges and restrictions as the Board of Directors may
determine. Each share of common stock of the Association will have the same
relative rights as, and will be identical in all respects with, each other share
of common stock. After the Conversion, the Board of Directors will be authorized
to approve the issuance of Common Stock up to the amount authorized by the
Federal Stock Charter without the approval of the Association's shareholders,
except to the
125
<PAGE>
extent that such approval is required by governing law. All of the issued and
outstanding common stock of the Association (which is currently expected to be
1,000 shares) will be held by the Company as the Association's sole shareholder.
THE CAPITAL STOCK OF THE ASSOCIATION WILL REPRESENT NON-WITHDRAWABLE CAPITAL,
WILL NOT BE AN ACCOUNT OF AN INSURABLE TYPE, AND WILL NOT BE INSURED BY THE
FDIC.
COMMON STOCK
Dividends. The holders of the Association's common stock will be entitled to
receive and to share equally in such dividends as may be declared by the Board
of Directors of the Association out of funds legally available therefor. See
"Dividend Policy" for certain restrictions on the payment of dividends and
"Federal and State Taxation -- Federal Taxation" for a discussion of the
consequences of the payment of cash dividends from income appropriated to bad
debt reserves.
Voting Rights. Immediately after the Conversion, the holders of the
Association's common stock will possess exclusive voting rights in the
Association. Each holder of shares of common stock will be entitled to one vote
for each share held. During the five-year period after the effective date of the
Conversion, cumulation of votes will not be permitted. See "Restrictions on
Acquisition of the Company and the Association -- Anti-Takeover Effects of the
Company's Certificate of Incorporation and Bylaws and Management Remuneration
Adopted in Conversion."
Liquidation. In the event of any liquidation, dissolution, or winding up of
the Association, the holders of its common stock will be entitled to receive,
after payment of all debts and liabilities of the Association (including all
deposit accounts and accrued interest thereon), and distribution of the balance
in the special liquidation account to Eligible Account Holders and Supplemental
Eligible Account Holders, all assets of the Association available for
distribution in cash or in kind. If additional preferred stock is issued
subsequent to the Conversion, the holders thereof may also have priority over
the holders of common stock in the event of liquidation or dissolution.
Preemptive Rights and Redemption. Holders of the common stock of the
Association will not be entitled to preemptive rights with respect to any shares
of the Association which may be issued. The common stock will not be subject to
redemption. Upon receipt by the Association of the full specified purchase price
therefor, the common stock will be fully paid and nonassessable.
PREFERRED STOCK
None of the shares of the Association's authorized preferred stock will be
issued in the Conversion. Such stock may be issued with such preferences and
designations as the Board of Directors may from time to time determine. The
Board of Directors can, without shareholder approval, issue preferred stock with
voting, dividend, liquidation and conversion rights.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is [ ].
EXPERTS
The financial statements of the Association as of December 31, 1995 and 1994
and for each of the years in the three-year period ended December 31, 1995, have
been included herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, whose report is included herein and
upon such firm as experts in accounting and auditing.
126
<PAGE>
RP Financial, LC. has consented to the publication herein of the summary of
its report to the Association and Company setting forth its opinion as to the
estimated pro forma market value of the Common Stock upon Conversion and its
opinion with respect to subscription rights.
LEGAL AND TAX OPINIONS
The legality of the Common Stock and the federal income tax of the Conversion
will be passed upon for the Association and the Company by Thacher Proffitt &
Wood, New York, New York, special counsel to the Association and the Company.
The Illinois State tax consequences of the Conversion will be passed upon for
the Association by KPMG Peat Marwick LLP, independent public accountants.
Certain legal matters will be passed upon for Hovde by Barack, Ferrazzano,
Kirschbaum & Perlman, Chicago, Illinois.
ADDITIONAL INFORMATION
The Company has filed with the SEC the Registration Statement under the
Securities Act with respect to the Common Stock offered hereby. As permitted by
the rules and regulations of the SEC, this Prospectus does not contain all the
information set forth in the Registration Statement. Such information, including
the Conversion Valuation Appraisal Report which is an exhibit to the
Registration Statement, can be examined without charge at the public reference
facilities of the SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies of such material can be obtained from the SEC at prescribed rates.
Such information is also available on the SEC's Electronic Data Gathering
Analysis and Retrieval ("EDGAR") System.
The Association has filed an application for conversion with the OTS with
respect to the Conversion. Pursuant to the rules and regulations of the OTS,
this Prospectus omits certain information contained in that application. The
application may be examined at the principal office of the OTS, 1700 G Street,
N.W., Washington, D.C. 20552 and at the Office of the Regional Director of the
OTS located at 200 West Madison Street, Suite 1300, Chicago, Illinois, 60606.
In connection with the Conversion, the Company will register its Common Stock
with the SEC under Section 12(g) of the Exchange Act, and, upon such
registration, the Company and the holders of its stock will become subject to
the proxy solicitation rules, reporting requirements and restrictions on stock
purchases and sales by directors, officers and greater than 10% stockholders,
the annual and periodic reporting and certain other requirements of the Exchange
Act. Under the Plan of Conversion, the Company has undertaken that it will not
terminate such registration for a period of at least three years following the
Conversion. In the event that the Association amends the Plan to eliminate the
concurrent formation of the Company as part of the Conversion, the Association
will register its stock with the OTS under Section 12(g) of the Exchange Act
and, upon such registration, the Association and the holders of its stock will
become subject to the same obligations and restrictions.
Copies of the Certificate of Incorporation and the Bylaws of the Company and
the Federal Stock Charter and Bylaws of the Association are available without
charge from the Association.
127
<PAGE>
INDEX TO FINANCIAL STATEMENTS
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
PAGE
----
Independent Auditors' Report.................................. F-2
Financial Statements:
Balance Sheets as of March 31, 1996 (unaudited) and
December 31, 1995 and 1994............................. F-3
Statements of Earnings for the three months ended
March 31, 1996 and 1995 (unaudited) and for the years ended
December 31, 1995, 1994 and 1993....................... 35
Statements of Retained Earnings for the three months
ended March 31, 1996 (unaudited) and for the years ended
December 31, 1995, 1994 and 1993....................... F-4
Statements of Cash Flows for the three months ended
March 31, 1996 and 1995 (unaudited) and for the years ended
December 31, 1995, 1994 and 1993....................... F-5
Notes to Financial Statements............................... F-6 - F-21
All schedules are omitted, because they are not required or applicable, or the
required information is shown in the financial statements or notes thereto.
The financial statements of Home Bancorp of Elgin, Inc. have been omitted,
because Home Bancorp of Elgin, Inc. has not yet issued any stock, has no assets
and no liabilities and has not conducted any business other than of an
organizational nature.
F-1
<PAGE>
[LOGO] KPMG PEAT MARWICK LLP
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Home Federal Savings and
Loan Association of Elgin
Elgin, Illinois:
We have audited the accompanying balance sheets of Home Federal Savings and
Loan Association of Elgin (Association) as of December 31, 1995 and 1994, and
the related statements of earnings, retained earnings, and cash flows for each
of the years in the three-year period ended December 31, 1995. These
financial statements are the responsibility of the Association'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 Home Federal Savings and Loan
Association of Elgin as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in notes 1 and 9 to the financial statements, the Association
changed its method of accounting for income taxes to adopt the provisions of
the Financial Accounting Standards Board's SFAS No. 109, "Accounting for
Income Taxes," on January 1, 1993.
/s/ KPMG PEAT MARWICK LLP
Chicago, Illinois
March 8, 1996, except for note 14,
as to which the date is June 6, 1996
F-2
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Balance Sheets
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
December 31,
March 31, ---------------------------------------
ASSETS 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
Cash and due from banks $ 9,077,630 $ 10,021,150 $ 9,656,033
Interest-earning deposits 15,161,337 8,588,077 8,561,613
Investment securities held-to-maturity (note 2) 5,955,000 5,947,500 5,917,500
Loans receivable, net (note 3) 264,081,700 267,153,449 271,040,062
Government National Mortgage Association
mortgage-backed securities held-to-maturity 173,252 186,536 242,837
Accrued interest receivable (note 4) 1,546,742 1,483,915 1,270,541
Real estate owned and in judgment, at lower of cost
or fair value (net of allowance for losses of
$20,000 at March 31, 1996, December 31,
1995 and 1994) 377,151 495,882 514,314
Federal Home Loan Bank of Chicago stock, at cost 2,678,000 3,056,200 3,009,900
Office properties and equipment, net (note 5) 6,799,792 6,817,288 6,073,934
Prepaid expenses and other assets 837,051 770,447 669,410
- ---------------------------------------------------------------------------------------------------------------------------------
$ 306,687,655 $ 304,520,444 $ 306,956,144
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND RETAINED EARNINGS
- ---------------------------------------------------------------------------------------------------------------------------------
Savings deposits (note 6) $ 264,484,873 $ 259,971,796 $ 267,938,031
Borrowed funds (note 7) - 4,000,000 -
Advance payments by borrowers for taxes and
insurance 2,929,811 1,859,851 2,052,598
Accrued interest payable and other liabilities 2,078,043 2,005,801 2,646,536
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 269,492,727 267,837,448 272,637,165
Retained earnings substantially restricted
(notes 8 and 9) 37,194,928 36,682,996 34,318,979
Commitments and contingencies (notes 11 and 12)
- ---------------------------------------------------------------------------------------------------------------------------------
$ 306,687,655 $ 304,520,444 $ 306,956,144
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Statements of Retained Earnings
- -------------------------------------------------------------------------
Balance at December 31, 1992 $ 25,700,680
Net income 4,260,552
- -------------------------------------------------------------------------
Balance at December 31, 1993 29,961,232
Net income 4,357,747
- -------------------------------------------------------------------------
Balance at December 31, 1994 34,318,979
Net income 2,364,017
- -------------------------------------------------------------------------
Balance at December 31, 1995 36,682,996
Net income (unaudited) 511,932
- -------------------------------------------------------------------------
Balance at March 31, 1996 (unaudited) $ 37,194,928
- -------------------------------------------------------------------------
See accompanying notes to financial statements.
F-4
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Statements of Cash Flows
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Three months ended March 31, Year ended December 31,
---------------------------- --------------------------------------
1996 1995 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 511,932 $ 694,947 $ 2,364,017 $ 4,357,74 $ 4,260,552
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization expense 159,762 164,667 740,415 701,679 590,616
Provision for deferred income taxes 54,707 70,528 169,984 524,351 764,066
Provision for loan losses 30,000 45,000 180,000 240,000 240,000
Amortization (accretion) of premium and discounts (7,683) (7,400) (30,278) (21,860) 32,405
Increase (decrease) in deferred loan fees (64,244) 123,494 (513,104) (630,999) (56,696)
Gain on sale of real estate owned (17,879) - - - (10,071)
Gain on sale of branches - - - (1,683,298) (822,381)
Gain on sale of office properties and equipment (1,216) - - (47,699) -
Federal Home Loan Bank of Chicago stock dividend - - (46,300) - (50,500)
Decrease (increase) in accrued interest receivable (62,827) (14,788) 213,374) 277,140 120,873
Decrease (increase) in prepaid expenses and
other assets, net (66,604) (191,138) (101,037) 92,086 183,960
Increase (decrease) in accrued interest payable and
other liabilities, net 17,535 (447,134) (810,719) 661,237 62,446
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 553,483 438,176 1,739,604 4,470,384 5,315,270
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Net decrease (increase) in loans receivable 3,242,603 137,575 4,238,149 30,906,019 (12,297,023)
Net decrease in mortgage-backed securities
held-to-maturity 13,467 12,794 56,579 52,510 88,466
Purchase of investment securities held-to-maturity - - - (5,895,000) -
Purchase of office properties and equipment (142,266) (217,499) (1,483,769) (570,859) (729,649)
Proceeds from the sale of office properties and equipment 1,216 - - 243,528 -
Maturity of investment securities held-to-maturity - - - - 6,000,000
Redemption of stock in the Federal Home Loan Bank
of Chicago 378,200 - - 698,200 -
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 3,493,220 (67,130 2,810,959 25,434,398 (6,938,206)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase (decrease) in borrowed funds (4,000,000) - 4,000,000 (7,000,000) 7,000,000
Increase (decrease) in savings deposits, net of sale of
branch deposits 4,513,077 (2,653,956) (7,966,235) (4,902,273) (6,926,213)
Cash paid upon sale of branch deposits - - - (19,408,455) (17,290,354)
Net increase (decrease) in advance payments by borrowers
for taxes and insurance 1,069,960 969,232 (192,747) 17,191 202,584
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 1,583,037 (1,684,724) (4,158,982) (31,293,537) (17,013,983)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 5,629,740 (1,313,678) 391,581 (1,388,755) (18,636,919)
Cash and cash equivalents at beginning of year 18,609,227 18,217,646 18,217,646 19,606,401 38,243,320
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 24,238,967 $ 16,903,968 $ 18,609,227 $ 18,217,646 $19,606,401
- -----------------------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 2,801,644 $ 2,526,791 $ 10,810,205 $ 10,465,325 $11,705,122
Income taxes 25,000 647,572 1,298,000 1,881,000 2,562,723
Noncash transfer of loans receivable to real estate owned
and in judgment, net - - 194,218 272,300 712,334
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Notes to Financial Statements
March 31, 1996 and 1995 (unaudited) and
December 31, 1995, 1994, and 1993
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Home Federal Savings and Loan Association of Elgin (Association) prepares
its financial statements on the basis of generally accepted accounting
principles. The following is a description of the more significant of those
policies which the Association follows in preparing and presenting its
financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
INVESTMENT SECURITIES
Investments which the Association has the positive intent and ability to
hold to maturity are classified as held-to-maturity and recorded at
amortized cost. Investments purchased for the purpose of being sold are
classified as trading securities and recorded at fair value with any changes
in fair value included in earnings. All other investments that are not
classified as held-to-maturity or trading are classified as available for
sale. Investments available for sale are recorded at fair value with any
changes in fair value reflected as a separate component of retained
earnings, net of related tax effects. At March 31, 1996, December 31, 1995
and 1994, the Association classified all investment securities as held-to-
maturity. Gains and losses on the sale of securities are determined using
the specific identification method.
LOANS RECEIVABLE
Loans receivable are stated at unpaid principal balances less loans in
process, deferred loan fees, and allowance for loan losses.
The allowance for loan losses is increased by charges to operations and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the Association's
past loan loss experience, known and inherent risks in the portfolio,
adverse situations that may affect the borrower's ability to repay,
estimated value of any underlying collateral, and current and prospective
economic conditions. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the
Association's allowance. Such agencies may require the Association to
recognize additions to the allowance based on their judgments about
information available to them at the time of their examination. In the
opinion of management, the allowance is adequate to absorb foreseeable
losses. Interest income is not recognized on loans which are 90 days or
greater delinquent and on loans which management believes the interest is
uncollectible.
Certain nonrefundable loan fees and direct costs of loan origination are
deferred at the time a loan is originated. Net deferred loan fees are
recognized as yield adjustments over the contractual life of the loan using
the interest method.
(Continued)
F-6
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Association adopted Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan," (Statement 114) and
Statement 118, "Accounting by Creditors for Impairment of a Loan Income
Recognition Disclosures," (Statement 118) effective January 1, 1995.
Statement 114 requires that impaired loans be measured at the present value
of expected future cash flows discounted at the loan's effective interest
rate, or, as a practical expedient, at the loan's observable market price or
the fair value of the collateral if the loan is collateral dependent.
Statement 118 eliminates the provisions in Statement 114 that describe how a
creditor should report interest income on an impaired loan and allows a
creditor to use existing methods to recognize and measure interest income on
an impaired loan. Homogeneous loans that are collectively evaluated for
impairment, including real estate mortgage loans and consumer loans, are
excluded from the provisions of Statement 114.
MORTGAGE-BACKED SECURITIES
Amortization of premiums and accretion of discounts are recognized in
interest income over the contractual life of the related securities using
the interest method. Mortgage-backed securities are classified as held-to-
maturity and are recorded at amortized cost. There were no sales of
mortgage-backed securities for the three months ended March 31, 1996 and
1995 (unaudited) or in the years ended December 31, 1995, 1994, and 1993
DEPRECIATION AND AMORTIZATION
Depreciation and amortization of office properties and equipment are
computed using the straight-line method over the estimated useful lives of
the related assets.
INCOME TAXES
Effective January 1, 1993, the Association adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," (Statement 109) on a prospective basis. The cumulative effect of
the change in method of accounting for income taxes decreased earnings by
$348,742 and is reported separately in the statement of earnings for the
year ended December 31, 1993. Under Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes
the enactment date.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include
cash and due from banks and interest-earning deposits.
(Continued)
F-7
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Notes to Financial Statements
- --------------------------------------------------------------------------------
(2) INVESTMENT SECURITIES HELD-TO-MATURITY
The amortized cost and estimated fair value of investment securities
held-to-maturity are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March 31, 1996 (unaudited)
United States Government and
agency obligations $5,955,000 $30,000 $ $5,985,000
===============================================================================
December 31, 1995
United States Government and
agency obligations $5,947,500 $82,500 $ $6,030,000
===============================================================================
December 31, 1994
United States Government and
agency obligations $5,917,500 $ $250,000 $5,662,500
===============================================================================
The amortized cost and estimated fair value of investment securities
held-to-maturity at March 31, 1996 (unaudited) and December 31, 1995 by
contractual maturity are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
===============================================================================
<CAPTION>
March 31, 1996 December 31, 1995
---------------------- ---------------------
Estimated Estimated
Amortized fair Amortized fair
cost value cost value
- -------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
Due in one year through
five years $5,955,000 $5,985,000 $5,947,500 $6,030,000
===============================================================================
</TABLE>
There were no sales of investment securities held-to-maturity for the
three months ended March 31, 1996 and 1995 or for the years ended December
31, 1995, 1994, and 1993.
(Continued)
F-8
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Notes to Financial Statements
- --------------------------------------------------------------------------------
(3) LOANS RECEIVABLE
A comparative summary of loans receivable follows:
<TABLE>
<CAPTION>
December 31,
March 31, ---------------------------
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
Mortgage loans:
One- to -four family $262,056,343 $265,116,190 $267,727,537
Multi-family 3,055,864 3,105,626 4,118,036
Construction and land 577,616 456,295 858,798
Commercial 873,204 890,568 861,897
- -------------------------------------------------------------------------------------------------------------------------
Total mortgage loans 266,563,027 269,568,679 273,566,268
- -------------------------------------------------------------------------------------------------------------------------
Other loans:
Passbook savings 483,214 627,449 576,628
Consumer installment loans 81,493 91,634 99,887
- -------------------------------------------------------------------------------------------------------------------------
Total other loans 564,707 719,083 676,515
- -------------------------------------------------------------------------------------------------------------------------
Gross loans receivable 267,127,734 270,287,762 274,242,783
Less:
Loans in process (364,375) (418,468) (150,112)
Deferred loan fees (1,825,890) (1,890,134) (2,403,252)
Allowance for loan losses (855,711) (825,711) (649,357)
- -------------------------------------------------------------------------------------------------------------------------
$264,081,700 $267,153,449 $271,040,062
=========================================================================================================================
</TABLE>
Activity in the allowance for loan losses is summarized as
follows:
<TABLE>
<CAPTION>
Three months ended
March 31, Year ended December 31,
------------------- ---------------------------------
1996 1995 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $ 825,711 $ 649,357 $649,357 $ 409,357 $ 548,004
Provision for loan losses 30,000 45,000 180,000 240,000 240,000
Charge-offs - - (3,646) - (140,945)
Allocation to reserve for
uncollected interest - - - - (237,702)
- -----------------------------------------------------------------------------------------------------------------------------------
$ 855,711 $ 694,357 $825,711 $ 649,357 $ 409,357
===================================================================================================================================
</TABLE>
(Continued)
F-9
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Notes to Financial Statements
- --------------------------------------------------------------------------------
Loans receivable delinquent three months or more are as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percentage of
Number gross loans
of loans Amount receivable
- -------------------------------------------------------------------------
<S> <C> <C> <C>
March 31, 1996 (unaudited) 18 $1,077,316 .41
December 31, 1995 17 915,472 .34
December 31, 1994 19 985,856 .36
December 31, 1993 26 1,642,287 .54
=========================================================================
</TABLE>
The Association discontinues recognizing interest on loans 90 days and
greater delinquent and on loans where collection of interest is doubtful.
The reduction in interest income associated with loans 90 days and greater
delinquent, based on their original contractual terms, was approximately
$88,000 (unaudited) and $86,000 (unaudited) for the three months ended March
31, 1996 and 1995, respectively, and $81,000, $83,000 and $191,000 for the
years ended December 31, 1995, 1994, and 1993, respectively.
The Association adopted Statement 114 and Statement 118 on January 1,
1995. These statements establish procedures for determining the appropriate
allowance required for loans deemed impaired. The calculation of allowance
levels is based upon the discounted present value of expected future cash
flows received from the debtor or the fair value of the collateral if the
loan is collateral dependent. No loans were identified as impaired by the
Association at March 31, 1996 (unaudited) and December 31, 1995.
(4) ACCRUED INTEREST RECEIVABLE
Accrued interest receivable is summarized as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 -------------
(unaudited) 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Loans receivable $1,428,241 $1,443,745 $1,335,188
Mortgage-backed securities held-to-maturity 1,090 1,167 1,524
Investment securities held-to-maturity 165,000 82,500 82,500
FHLB of Chicago stock 48,736 53,923 49,313
Reserve for uncollected interest (96,325) (97,420) (197,984)
- -------------------------------------------------------------------------------------
$1,546,742 $1,483,915 $1,270,541
=====================================================================================
</TABLE>
(Continued)
F-10
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Notes to Financial Statements
- --------------------------------------------------------------------------------
(5) OFFICE PROPERTIES AND EQUIPMENT
A comparative summary of office properties and equipment follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 -------------------------
(unaudited) 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Land $ 1,582,241 $ 1,582,24 $ 1,825,079
Office buildings 4,869,134 4,823,178 4,613,996
Office building improvements 1,688,413 1,688,413 1,649,081
Leasehold improvements 230,656 230,656 230,656
Parking lot improvements 246,837 246,837 183,810
Furniture, fixtures, and equipment 5,452,319 5,383,454 5,032,536
Automobiles 152,551 152,551 157,518
- ------------------------------------------------------------------------------------------------
14,222,152 14,107,330 12,692,676
Less accumulated depreciation and amortization 7,422,359 7,290,042 6,618,742
- ------------------------------------------------------------------------------------------------
$ 6,799,792 $ 6,817,288 $ 6,073,934
================================================================================================
</TABLE>
Depreciation and amortization expense was $159,762 (unaudited) and
$164,667 (unaudited) for the three months ended March 31, 1996 and 1995,
respectively, and $740,415, $701,679 and $590,616 for the years ended
December 31, 1995, 1994, and 1993, respectively.
(Continued)
F-11
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Notes to Financial Statements
- --------------------------------------------------------------------------------
(6) SAVINGS DEPOSITS
Savings deposits are summarized as follows:
<TABLE>
<CAPTION>
Stated or weighted average interest rate
------------------------------------------
March 31, March 31, 1996
1996 December 31, (unaudited)
------------ ---------------------------- ---------------------------
(unaudited) 1995 1994 Amount Percent
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NOW/Super NOW accounts 2.25% 2.25% 2.25% $ 46,134,119 17.5%
Money market accounts 3.22 3.22 3.22 17,789,786 6.7
Passbook accounts 3.00 3.04 3.00 66,341,744 25.1
Noninterest-bearing NOW accounts - - - 4,901,430 1.8
- ----------------------------------------------------------------------------------------------------
135,167,079 51.1
- ----------------------------------------------------------------------------------------------------
Certificate accounts 5.68 5.89 4.46 129,317,794 48.9
- ----------------------------------------------------------------------------------------------------
4.14% 4.25% 3.83% $264,484,873 100.0%
====================================================================================================
<CAPTION>
December 31,
-----------------------------------------------
1995 1994
----------------------- ----------------------
Amount Percent Amount Percent
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NOW/Super NOW accounts $ 45,001,086 17.3% $ 48,834,207 18.2%
Money market accounts 17,684,571 6.8 23,545,363 8.8
Passbook accounts 65,260,988 25.1 74,523,876 27.8
Noninterest-bearing NOW accounts 5,178,954 2.0 - -
- -----------------------------------------------------------------------------------
133,125,599 51.2 146,903,446 54.8
- -----------------------------------------------------------------------------------
Certificate accounts 126,846,197 48.8 121,034,585 45.2
- -----------------------------------------------------------------------------------
$259,971,796 100.0% $267,938,031 100.0%
===================================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31,
March 31, 1996 ---------------------------------------------------------
(unaudited) 1995 1994
---------------------------- ----------------------------- --------------------------
Amount Percent Amount Percent Amount Percent
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contractual maturity of
certificate accounts:
Under 12 months $73,623,064 56.9% $ 73,924,892 58.3% $75,000,625 62.0%
12 months to 36 months 27,164,143 21.0 25,344,322 20.0 25,423,698 21.0
Over 36 months 28,530,587 22.1 27,576,983 21.7 20,610,262 17.0
- -------------------------------------------------------------------------------------------------------------------
$129,317,794 100.0% $126,846,197 100.0% $121,034,585 100.0%
===================================================================================================================
</TABLE>
(Continued)
F-12
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Notes to Financial Statements
- --------------------------------------------------------------------------------
The aggregate amount of savings deposits $100,000 and greater was
approximately $17,415,000 at March 31, 1996 (unaudited) and $17,068,000 and
$16,417,000 at December 31, 1995 and 1994, respectively.
In December 1994, the Association sold branches in Woodstock and DeKalb,
Illinois. Included in these sales was the assumption of savings deposits by
the purchaser of approximately $21,800,000. The Association recorded gains
on the sale of branches of approximately $1,683,000. In December 1993, the
Association sold a branch in St. Charles, Illinois. Included in the sale
was the assumption of savings deposits by the purchaser of approximately
$18,100,000. The Association recorded a gain on the sale of the branch of
approximately $822,000.
Interest expense on savings deposits is summarized as follows:
<TABLE>
<CAPTION>
Three months ended
March 31, Year ended December 31,
---------------- ------------------------------
1996 1995 1995 1994 1993
- ---------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C>
NOW/Super NOW
accounts $ 229,088 $ 235,359 $ 979,694 $ 1,066,214 $ 1,150,927
Money market
accounts 142,066 160,314 565,157 766,400 1,001,038
Passbook accounts 516,003 549,974 2,137,021 2,626,526 2,717,518
Certificate accounts 1,848,794 1,602,199 7,091,556 5,985,319 6,791,294
- ---------------------------------------------------------------------------------------------
$2,735,951 $2,547,846 $10,773,428 $10,444,459 $11,660,777
=============================================================================================
</TABLE>
(7) BORROWED FUNDS
At December 31, 1995, borrowed funds consisted of advances from the
Federal Home Loan Bank of Chicago of $4,000,000, which were due on demand
under an open line of credit. The interest rate on the advances at December
31, 1995 was 5.3%. The Association has a collateral pledge agreement whereby
it agrees to keep on hand, free of all other pledges, loans, and
encumbrances, performing loans with unpaid principal balances aggregating no
less than 167% of the outstanding secured advances. All stock in the
Federal Home Loan Bank of Chicago and all mortgage-backed securities are
also pledged as additional collateral for advances.
(8) REGULATORY CAPITAL
The Office of Thrift Supervision regulations require all savings
institutions to meet three capital requirements: a tangible capital to
adjusted total assets ratio of 1.5%, a core capital to adjusted total assets
ratio of 3.0%, and a risk-based capital to total risk weighted assets ratio
of 8.0%. At March 31, 1996 (unaudited) and December 31, 1995 and 1994, the
Association was in compliance with each of these capital requirements.
(Continued)
F-13
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Notes to Financial Statements
- --------------------------------------------------------------------------------
(9) INCOME TAXES
Income tax expense is summarized as follows:
<TABLE>
<CAPTION>
Three months ended
March 31, Year ended December 31,
------------------ ------------------------------
1996 1995 1995 1994 1993
- -----------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Current:
Federal $231,115 $305,629 $1,131,782 $2,137,909 $1,915,455
State 44,442 64,430 310,130 454,611 318,064
- -----------------------------------------------------------------------------
275,557 370,059 1,441,912 2,592,520 2,233,519
- -----------------------------------------------------------------------------
Deferred:
Federal 44,564 57,017 138,478 427,152 649,330
State 10,143 13,511 31,506 97,199 114,736
- -----------------------------------------------------------------------------
54,707 70,528 169,984 524,351 764,066
- -----------------------------------------------------------------------------
$330,264 $440,587 $1,611,896 $3,116,871 $2,997,585
=============================================================================
</TABLE>
The reasons for the difference between the effective tax rate and the
corporate Federal income tax rate are summarized as follows:
<TABLE>
<CAPTION>
Three months ended
March 31, Year ended December 31,
------------------ ----------------------------
1996 1995 1995 1994 1993
- --------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Federal income tax rate 34.0% 34.0% 34.0% 34.0% 34.0%
Items affecting Federal income tax rate:
State income taxes, net of Federal
income tax benefit 4.3 4.5 5.9 4.9 4.2
Tax expense on recomputed base
year tax reserve 2.4 3.4
Other, net .9 .3 .6 .4 (2.2)
- ------------------------------------------------------------------------------------------------
Effective income tax rate 39.2% 38.8% 40.5% 41.7% 39.4%
================================================================================================
</TABLE>
(Continued)
F-14
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Notes to Financial Statements
- --------------------------------------------------------------------------------
Effective January 1, 1993, the Association adopted the provisions of
Statement 109 on a prospective basis. The cumulative effect of the change
in method of accounting for income taxes decreased earnings by $348,742 for
the year ended December 31, 1993 and is reported separately in the statement
of earnings.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below (in thousands):
<TABLE>
<CAPTION>
December 31,
March 31, ---------------------
1996 1995 1994
- ----------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Deferred loan fees $ 783 $ 824 $ 990
General allowance for losses on loans 395 383 347
Future benefit state tax expense 46 58 47
Pension expense 46 46 5
- ----------------------------------------------------------------------------------
Total gross deferred tax assets 1,270 1,311 1,389
- ----------------------------------------------------------------------------------
Deferred tax liabilities:
Excess of tax bad debt reserve over base
year amount 1,865 1,849 1,731
Dividends received in stock, not recognized for
tax purposes 193 193 174
Depreciation 184 186 231
- ----------------------------------------------------------------------------------
Total gross deferred tax liabilities 2,242 2,228 2,136
- ----------------------------------------------------------------------------------
Net deferred tax liabilities $ 972 $ 917 $ 747
==================================================================================
</TABLE>
No valuation allowance for deferred tax assets at March 31, 1996
(unaudited), December 31, 1995 and 1994 has been recorded as the Association
believes it is more likely than not that the deferred tax assets will be
realized in the future.
Retained earnings at March 31, 1996 (unaudited) and December 31, 1995 and
1994 include $4,798,000 for which no provision for Federal income tax has
been made. These amounts represent allocations of income to bad debt
deductions for tax purposes only. Reduction of amounts so allocated for
purposes other than tax bad debt losses will create income for tax purposes
only, which will be subject to the then current corporate income tax rate.
(Continued)
F-15
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Notes to Financial Statements
- --------------------------------------------------------------------------------
(10) PENSION PLAN
The Association has a noncontributory pension covering qualified
employees. The Association's pension plan financial data is shown below:
FUNDED STATUS
================================================================================
<TABLE>
<CAPTION>
December 31,
--------------------------
1995 1994
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $1,193,042 and $695,123
at 1995 and 1994, respectively $1,244,941 $ 733,068
===========================================================================================
Projected benefit obligation 2,308,703 1,598,650
Plan assets at fair value 1,464,018 1,220,351
Projected benefit obligation greater than plan assets 844,685 378,299
Unrecognized net gain (loss) from past experience
different from that assumed and effects of changes
in assumptions (562,635) 16,288
Unrecognized net asset at January 1, 1987 being
recognized over 14 years 58,965 70,748
Unrecognized prior service cost (75,935) (82,521)
Accrued pension cost $ 265,080 $ 382,814
===========================================================================================
NET PERIODIC PENSION COST
===========================================================================================
Year ended December 31,
----------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------------------
Service cost $114,166 $ 202,076 $ 158,013
Interest cost on projected benefit
obligation 129,277 149,784 194,631
Actual return on plan assets (88,394) (223,275) (145,316)
Net amortization and deferral (15,921) 190,295 14,154
- -------------------------------------------------------------------------------------------
Net periodic pension cost $139,128 $ 318,880 $ 221,482
===========================================================================================
</TABLE>
(Continued)
F-16
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Notes to Financial Statements
- --------------------------------------------------------------------------------
The rates used in the actuarial valuations are as follows:
1995 1994 1993
- -----------------------------------------------------
Discount rate 7.25% 8.75% 7.25%
Long-term rate of return 8.00 8.00 8.00
Salary progression 6.00 6.00 6.00
=====================================================
Total pension expense was $69,315 (unaudited) and $42,727 (unaudited) for
the three months ended March 31, 1996 and 1995, respectively, and $170,907,
$348,731, and $674,726 for the years ended December 31, 1995, 1994 and 1993,
respectively.
(11) COMMITMENTS AND CONTINGENCIES
At December 31, 1995 the Association was obligated under operating leases
on property used for branch operations and for certain equipment. Rental
expense under these leases were approximately $20,000 (unaudited) and
$19,000 (unaudited) for the three months ended March 31, 1996 and 1995,
respectively, and $75,000, $144,000, and $223,000 for the years ended
December 31, 1995, 1994, and 1993, respectively. The lease term expires in
1996. Future required minimum annual rental payments under noncancelable
lease agreements are as follows:
Amount
Year ended December 31:
1996 $ 60,000
1997 28,000
1998 27,000
1999 27,000
2000 27,000
$187,000
The Association is involved in various legal proceedings incidental to
the normal course of business. Although the outcome of such litigation
cannot be predicted with any certainty, management is of the opinion, based
on the advice of legal counsel, that final disposition of any litigation
should not have a material effect on the financial statements of the
Association.
(Continued)
F-17
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Notes to Financial Statements
- --------------------------------------------------------------------------------
(12) CONCENTRATIONS OF CREDIT RISK AND FINANCIAL
INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Association is a party to financial instruments with off-balance
sheet risk in the normal course of its business. These instruments
represent commitments to originate first mortgage loans which the
Association plans to fund within the normal commitment period of 60 to 180
days.
Substantially all of the Association's mortgage loans are secured by
single-family homes in the northwestern suburban area of Chicago. The
Association evaluated each customer's creditworthiness on a loan-by-loan
basis, thus the Association adequately controls its credit risk on these
commitments, as it does for loans recorded on the balance sheet. At
December 31, 1995 the Association had commitments to originate fixed and
variable rate mortgage loans of approximately $2,638,000 and $1,035,000,
respectively, at rates ranging between 6.625% and 7.875%. At March 31,
1996, the Association had commitments to originate fixed and variable rate
mortgage loans of approximately $4,135,000 (unaudited) and $905,000
(unaudited), respectively, at rates ranging between 6.25% and 7.75%.
(13) FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments" (Statement 107), requires the
disclosure of estimated fair values of all asset, liability, and off-balance
sheet financial instruments. Statement 107 defines fair value as the amount
at which the instrument could be exchanged in a current transaction between
willing parties. Fair value estimates, methods, and assumptions are set
forth below for the Association's financial instruments.
<TABLE>
<CAPTION>
March 31, 1996 December 31, December 31,
(unaudited) 1995 1994
----------------------- ----------------------- -----------------------
Carrying Estimated Carrying Estimated Carrying Estimated
amount fair value amount fair value amount fair value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Financial assets:
Cash and due from banks $ 9,077,630 $ 9,077,630 $ 10,021,150 $ 10,021,150 $ 9,656,033 $ 9,656,033
Interest-earning deposits 15,161,337 15,161,337 8,588,077 8,588,077 8,561,613 8,561,613
Investment securities
held-to-maturity 5,955,000 5,985,000 5,947,500 6,030,000 5,917,500 5,662,500
Loans receivable 267,127,734 265,941,498 270,287,762 272,785,658 274,242,783 268,495,604
Mortgage-backed securities
held-to-maturity 173,252 172,702 186,536 192,829 242,837 233,310
Accrued interest receivable 1,546,742 1,546,742 1,483,915 1,483,915 1,270,541 1,270,541
Federal Home Loan Bank
of Chicago stock 2,678,000 2,678,000 3,056,200 3,056,200 3,009,900 3,009,900
- -------------------------------------------------------------------------------------------------------------------------------
Total financial assets $301,719,695 300,562,909 299,571,140 302,157,829 302,901,207 296,889,501
===============================================================================================================================
Financial liabilities:
Nonmaturing savings deposits $135,167,079 135,167,079 133,125,599 133,125,599 146,903,446 146,903,446
Savings deposits with
stated maturities 129,317,794 131,026,832 126,846,197 128,376,571 121,034,585 120,058,544
Borrowed funds 4,000,000 4,000,000
Accrued interest payable 111,343 111,343 160,262 160,262 120,078 120,078
- -------------------------------------------------------------------------------------------------------------------------------
Total financial liabilities $246,596,216 $266,305,254 $264,132,058 $265,612,432 $268,058,109 $267,082,068
===============================================================================================================================
</TABLE>
(Continued)
F-18
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Notes to Financial Statements
- --------------------------------------------------------------------------------
CASH AND DUE FROM BANKS AND INTEREST-EARNING DEPOSITS
The carrying value of cash and due from banks and interest-earning
deposits approximates fair value due to the short period of time between
origination of the instruments and their expected realization.
INVESTMENT AND MORTGAGE-BACKED SECURITIES HELD-TO-MATURITY
The fair value of investment and mortgage-backed securities held-to-
maturity is estimated based on quoted market prices.
LOANS RECEIVABLE
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type and then further segmented
into fixed and variable rate interest terms and by performing and
nonperforming categories. The fair value of performing fixed rate loans is
calculated by discounting contractual cash flows adjusted for prepayment
estimates using discount rates based on new loan rates adjusted to reflect
differences in servicing and credit costs. For variable rate loans, fair
value is estimated to be book value as these loans reprice frequently or
have a relatively short term to maturity and there has been little or no
change in credit quality since origination. Fair value for nonperforming
loans is calculated by discounting estimated future cash flows using a C-
rated bond yield with principal and interest assumed paid in 18 months.
ACCRUED INTEREST RECEIVABLE
The carrying amount of accrued interest receivable approximates its fair
value due to the relatively short period of time between accrual and
expected realization.
FEDERAL HOME LOAN BANK OF CHICAGO STOCK
The fair value of this stock is based on its redemption value.
SAVINGS DEPOSITS
Under Statement 107, the fair value of savings deposits with no stated
maturity, such as noninterest-bearing demand deposits, NOW/Super NOW
accounts, money market accounts, and passbook accounts, is equal to the
amount payable on demand as of March 31, 1996, December 31, 1995 and 1994.
The fair value of certificates of deposit is based on the discounted value
of contractual cash flows. The fair value estimates do not include the
benefit that results from the low-cost funding provided by the deposit
liabilities compared to the cost of borrowing funds in the market.
BORROWED FUNDS
The fair value of advances from the Federal Home Loan Bank of Chicago is
equal to the amount payable on demand as of December 31, 1995 due to the
variable interest rate on the debt.
(Continued)
F-19
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Notes to Financial Statements
- --------------------------------------------------------------------------------
ACCRUED INTEREST PAYABLE
The carrying amount of accrued interest payable approximates its fair
value due to the relatively short period of time between accrual and
expected realization.
LIMITATIONS
The fair value estimates are made at a specific point in time based on
relevant market information and information about the financial instrument.
Because no market exists for a significant portion of the Association's
financial instruments, fair value estimates are subjective in nature and
involve uncertainties and matters of significant judgment and therefore
cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
In addition, the fair value estimates are based on existing on- and off-
balance sheet financial instruments without attempting to estimate the value
of anticipated future business and the value of assets and liabilities that
are not considered financial instruments. Significant assets and
liabilities that are not considered financial assets or liabilities include
the mortgage origination operation, deferred taxes, and property, plant, and
equipment. In addition, the tax ramifications related to the realization of
unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in any of the estimates.
(14) CONVERSION TO STOCK FORM OF OWNERSHIP (UNAUDITED)
On April 18, 1996, the Board of Directors adopted a Plan of Conversion
(Plan) (which was amended on June 6, 1996) whereby the Association will
convert from a federally chartered mutual thrift to a federally chartered
stock savings and loan association. The Plan is subject to approval of
regulatory authorities and members at a special meeting. The stock of the
Association will be issued to a holding company formed in connection with
the conversion. Pursuant to the Plan, shares of capital stock of the
holding company are expected to be offered initially for subscription by
eligible members of the Association and certain other persons as of
specified dates subject to various subscription priorities as provided in
the Plan. The capital stock will be offered at a price to be determined by
the Board of Directors based upon an appraisal to be made by an independent
appraisal firm. The exact number of shares to be offered will be determined
by the Board of Directors in conjunction with the determination of the price
at which the shares will be sold. At least the minimum number of shares
offered in the conversion must be sold. Any stock not purchased in the
subscription offering will be sold in a community offering.
The Plan provides that when the conversion is completed, a "Liquidation
Account" will be established in an amount equal to the retained earnings of
the Association as of the date of the most recent financial statements
contained in the final conversion prospectus. The Liquidation Account is
established to provide a limited priority claim on the assets of the
Association to qualifying depositors (Eligible and Supplemental Eligible
Account Holders) who continue to maintain deposits in the Association after
conversion. In the unlikely event of a complete liquidation of the
Association, and only in such an event, each Eligible Account Holder would
then receive from the Liquidation Account a liquidation distribution based
on his proportionate share of the then total remaining qualifying deposits.
(Continued)
F-20
<PAGE>
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
Notes to Financial Statements
- --------------------------------------------------------------------------------
Current regulations allow the Association to pay dividends on its stock
after the conversion if its regulatory capital would not thereby be reduced
below the amount then required for the aforementioned Liquidation Account.
Also, capital distribution regulations limit the Association's ability to
make capital distributions which include dividends, stock redemptions or
repurchases, cash-out mergers, interest payments on certain convertible debt
and other transactions charged to the capital account based on their capital
level and supervisory condition. Federal regulations also preclude any
repurchase of the stock of the Association or its holding company for three
years after conversion except for repurchases of qualifying shares of a
director and repurchases pursuant to an offer made on a pro rata basis to
all stockholders and with prior approval of the Office of Thrift
Supervision; or pursuant to an open-market stock repurchase program that
complies with certain regulatory criteria. The Association has retained the
services of both an underwriting firm and legal counsel for the specific
purpose of implementing the Association's plan of conversion. At March 31,
1996, the Association had incurred approximately $47,350 (unaudited) in
costs relating to these services. These costs have been deferred and, upon
conversion, such costs and any additional costs will be charged against the
proceeds from the sale of stock. If the conversion is not completed, these
deferred costs will be charged to operations.
F-21
<PAGE>
================================================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY HOME BANCORP OF ELGIN, INC., HOME FEDERAL SAVINGS AND LOAN
ASSOCIATION OF ELGIN OR HOVDE SECURITIES, INC. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF HOME BANCORP OF
ELGIN, INC. OR HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN SINCE ANY OF
THE DATES AS OF WHICH INFORMATION IS FURNISHED HEREIN OR SINCE THE DATE HEREOF.
------------------------------------------
TABLE OF CONTENTS
------------------------------------------
PAGE
----
Summary............................................... 5
Selected Financial and Other Data of the Association.. 14
Risk Factors.......................................... 16
Home Bancorp of Elgin, Inc............................ 23
Home Federal Savings and Loan Association of Elgin.... 23
Use of Proceeds....................................... 25
Dividend Policy....................................... 26
Market for the Common Stock........................... 27
Regulatory Capital Compliance......................... 28
Capitalization........................................ 29
Pro Forma Data........................................ 30
Home Federal Savings and Loan Association of Elgin
Statements of Earnings............................... 35
Management's Discussion and Analysis
of Financial Condition and Results of Operations..... 36
Business of the Company............................... 50
Business of the Association........................... 51
Federal and State Taxation............................ 72
Regulation............................................ 75
Management of the Company............................. 85
Management of the Association......................... 87
The Conversion........................................ 99
Restrictions on Acquisition of the Company
and the Association.................................. 118
Description of Capital Stock of the Company........... 124
Description of Capital Stock of the Association....... 125
Transfer Agent and Registrar.......................... 126
Experts............................................... 126
Legal and Tax Opinions................................ 127
Additional Information................................ 127
Index to Financial Statements......................... F-1
------------------------
UNTIL _____________________________, ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================
6,612,500 SHARES
HOME BANCORP OF ELGIN, INC.
(PROPOSED HOLDING COMPANY FOR
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN)
COMMON STOCK
------------------------------------------
PROSPECTUS
------------------------------------------
HOVDE SECURITIES, INC.
_________, 1996
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
OTS application fee(1)................................... $ 8,400
SEC registration fee(1).................................. 26,222
NASD filing fee(1)....................................... 8,104
Nasdaq National Market Listing Fee(1).................... 36,511
Printing, postage and mailing............................ 200,000
Legal fees and expenses.................................. 265,000
Financial advisor expenses............................... 60,000
Accounting fees and expenses............................. 120,000
Appraiser's fees and expenses (including business plan).. 55,000
Transfer agent and registrar fees and expenses........... 10,000
Conversion agent fees and expenses....................... 21,000
Certificate printing..................................... 7,500
Telephone, temporary help and other equipment............ 25,000
Blue Sky fees and expenses (including fees of counsel)... 15,000
Miscellaneous............................................ 62,263
--------
TOTAL.................................................... $920,000
========
- -----------------
</TABLE>
(1) Actual expenses based upon the registration of 7,604,375 shares at $10.00
per share. All other expenses are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL"), inter alia,
empowers a Delaware corporation 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 (other than an action by or in the right of the corporation)
by reason of the fact that such person is or was a director, officer, employee
or agent of another corporation or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Similar indemnity is authorized for such person against expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of any such threatened, pending or completed action or
suit if such person 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 provided
further that (unless a court of competent jurisdiction otherwise provides) such
person shall not have been adjudged liable to the corporation. Any such
indemnification may be made only as authorized in each specific case upon a
determination by the stockholders or disinterested directors or by independent
legal counsel in a written opinion that indemnification is proper because the
indemnitee has met the applicable standard of conduct.
II-1
<PAGE>
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or 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 otherwise have the power to indemnify him under Section 145.
Article IX of the Certificate of Incorporation of Home Bancorp of Elgin,
Inc. (the "Company") provides that a director shall not be personally liable to
the Company or its stockholders for damages for breach of his fiduciary duty as
a director, except to the extent such exemption from liability or limitation
thereof is expressly prohibited by the DGCL. Article X of the Company's
Certificate of Incorporation requires the Company, among other things, to
indemnify to the fullest extent permitted by the DGCL, any person who is or was
or has agreed to become a director or officer of the Company, who was or is made
a party to, or is threatened to be made a party to, or has become a witness in,
any threatened, pending or completed action, suit or proceeding, including
actions or suits by or in the right of the Company, by reason of such agreement
or service or the fact that such person is, was or has agreed to serve as a
director, officer, employee or agent of another corporation or organization at
the request of the Company.
Article X also empowers the Company to purchase and maintain insurance to
protect itself and its directors and officers, and those who were or have agreed
to become directors or officers, against any liability, regardless of whether or
not the Company would have the power to indemnify those persons against such
liability under the law or the provisions set forth in the Certificate of
Incorporation. The Company is also authorized by its Certificate of
Incorporation to enter into individual indemnification contracts with directors
and officers. Home Federal Savings and Loan Association of Elgin currently
maintains and the Company expects to purchase directors' and officers' liability
insurance consistent with the provisions of the Certificate of Incorporation as
soon as practicable.
The Company expects to enter into employment agreements with certain
executive officers, which agreements are expected to require that the Company
will obtain a directors' and officers' liability policy for the benefit of such
officers or that the Company will indemnify such officers to the fullest extent
provided by law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not Applicable.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The exhibits filed as a part of this Registration Statement are as follows:
(a). LIST OF EXHIBITS. (Filed herewith unless otherwise noted.)
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1.1 Engagement Letter, dated March 22, 1996, between Home Federal
Savings and Loan Association of Elgin and Hovde Securities, Inc.
1.2 Form of Agency Agreement (To be filed by amendment)
2.1 Amended and Restated Plan of Conversion of Home Federal Savings
and Loan Association of Elgin
3.1 Certificate of Incorporation of Home Bancorp of Elgin, Inc.
3.2 Bylaws of Home Bancorp of Elgin, Inc.
3.3 Federal Stock Charter and Bylaws of Home Federal Savings and Loan
Association of Elgin (See Exhibits I and II to Exhibit 2.1)
4.1 Certificate of Incorporation of Home Bancorp of Elgin, Inc. (See
Exhibit 3.1)
4.2 Bylaws of Home Bancorp of Elgin, Inc. (See Exhibit 3.2)
4.3 Form of Stock Certificate of Home Bancorp of Elgin, Inc.
5.1 Form of Opinion of Thacher Proffitt & Wood regarding legality
8.1 Form of Opinion of Thacher Proffitt & Wood regarding federal
taxation
8.2 Form of Opinion of KPMG Peat Marwick LLP regarding State of
Illinois taxation
8.3 Opinion of RP Financial, LC. regarding Subscription Rights
10.1 Employee Stock Ownership Plan of Home Bancorp of Elgin, Inc. and
ESOP Trust Agreement
10.2 Form of ESOP Loan Commitment Letter and ESOP Loan Documents (To
be filed by amendment)
10.3 Form of Executive Employment Agreement between Home Bancorp of
Elgin, Inc. and certain executive officers
10.4 Form of Employment Agreement between Home Federal Savings and
Loan Association of Elgin and certain executive officers
10.5 Form of Employee Retention Agreement between Home Bancorp of
Elgin, Inc., Home Federal Savings and Loan Association of Elgin and
certain executive officers
II-3
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.6 Form of Severance Pay Plan between Home Federal Savings and Loan
Association of Elgin and certain executive officers
10.7 Engagement Letter, dated March 25, 1996, between Home Federal
Savings and Loan Association of Elgin and RP Financial, LC. for
conversion appraisal services
10.8 Engagement Letter, dated March 25, 1996, between Home Federal
Savings and Loan Association of Elgin and RP Financial, LC. for
services related to the preparation of a business plan
10.9 Engagement Letter, dated May 9, 1996, between Home Federal
Savings and Loan Association of Elgin and Crowe Chizek and Company LLP
for conversion agent services
10.10 Purchase and Assumption Agreement, dated July 18, 1994, between
Home Federal Savings and Loan Association of Elgin and First Bank North
for purchase and sale of DeKalb branch office (To be filed by
amendment)
10.11 Purchase and Assumption Agreement, dated June 29, 1994, between
Home Federal Savings and Loan Association of Elgin and Harris Bank
Woodstock for purchase and sale of Woodstock branch office (To be filed
by amendment)
10.12 Lease Agreement between Home Federal Savings and Loan
Association of Elgin and Pace, Holtz & Wood for South Elgin branch
10.13 Contract of Home Federal Savings and Loan Association of Elgin
and ATMI for construction of branch office in South Elgin, Illinois (To
be filed by amendment)
21.1 Subsidiaries of the Registrant
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Thacher Proffitt & Wood (Included in Exhibits 5.1 &
8.1)
23.3 Consent of RP Financial, LC.
24.1 Powers of Attorney (Included in Signature Page of this
Registration Statement)
27.1 Financial Data Schedule (Submitted only with filing in electronic
format)
99.1 Appraisal Report of RP Financial, LC.
99.2 Form of Marketing Materials to be used in connection with the
Offerings
(b). FINANCIAL STATEMENT SCHEDULES.
All schedules have been omitted as not applicable or not required under the
rules of Regulation S-X.
II-4
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(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. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective 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
Securities Act of 1933, 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.
The undersigned Registrant hereby undertakes to provide to the agent at the
closing specified in the Agency Agreement, certificates in such denominations
and registered in such names as required by the agent to permit prompt delivery
to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-5
<PAGE>
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form
of prospectus 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.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Elgin,
State of Illinois, on June 6, 1996.
HOME BANCORP OF ELGIN, INC.
By: /s/ George L. Perucco
------------------------------
George L. Perucco
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each person whose signature
appears below constitutes and appoints each of George L. Perucco and Lyle N.
Dolan as the true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities to sign the Form S-1 Registration Statement
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the U.S. Securities
and Exchange Commission, granting unto each said attorney-in-fact and agent full
power and authority to do and perform each and every act and thing requisite and
necessary to be done as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said attorney-in-
fact and agent, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement, has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
- ------------------------- ------------------------------- ------------
<S> <C> <C>
/s/ George L. Perucco Director, President and Chief June 6, 1996
- ------------------------- Executive Officer
George L. Perucco (Principal executive officer)
/s/ Lyle N. Dolan Executive Vice President and June 6, 1996
- ------------------------- Treasurer (Principal financial
Lyle N. Dolan and accounting officer)
/s/ Orval M. Graening Director June 6, 1996
- -------------------------
Orval M. Graening
/s/ Henry R. Hines Director June 6, 1996
- -------------------------
Henry R. Hines
/s/ Donald E. Laird Director June 6, 1996
- -------------------------
Donald E. Laird
/s/ Leigh O'Connor Director June 6, 1996
- -------------------------
Leigh O'Connor
/s/ Thomas S. Rakow Director June 6, 1996
- -------------------------
Thomas S. Rakow
/s/ Richard S. Scheflow Director June 6, 1996
- -------------------------
Richard S. Scheflow
</TABLE>
<PAGE>
EXHIBIT 1.1
HOVDE SECURITIES, INC.
INVESTMENT BANKERS & FINANCIAL ADVISORS
Personal and Confidential
March 22, 1996
Board of Directors
Home Federal Savings of Elgin
16 North Spring Street
Elgin, IL 60120
Members of the Board:
We understand that Home Federal Savings of Elgin ("the Bank") will be forming
a holding company (the "Holding Company") that intends to offer newly issued
shares of it common stock in connection with the conversion of the Bank from a
federal mutual savings bank to a federal stock savings bank ("the Conversion").
This letter confirms an agreement whereby the Holding Company and the Bank
(collectively, the "Company") have retained Hovde Securities, Inc. ("Hovde") to
serve as its investment banker in connection with this offering. This
confirmation is made pursuant to the following terms, conditions and fees:
1. Conversion services. As the Company's investment banker, Hovde will
--------------------
provide the Bank with a comprehensive program of conversion services designed to
ensure an orderly, efficient, cost-effective and long-term stock distribution.
These services will include, but not be limited to, those services set forth
more fully in Exhibit A to this letter.
2. Preparation of offering documents. The Company and its counsel will
---------------------------------
draft the Registration Statement and Application for Conversion to be used in
connection with the Conversion. Hovde will attend meetings to review these
documents and advise the Company on their form and content. Hovde and its
counsel will draft the Agency Agreement and other offering materials.
3. Due diligence review. Prior to filing the Registration Statement,
--------------------
Application for Conversion or any offering documents naming Hovde as the
Company's investment banker, Hovde and its representatives will undertake
substantial investigations to learn about the Company's business and operations
("due diligence review") in order to confirm information previously provided to
us and to evaluate factual information to be contained in the Company's offering
documents. The Company agrees that it will make available to Hovde all relevant
information, whether or not publicly available, which Hovde reasonably requests,
and will
<PAGE>
Board of Directors
Home Federal Savings of Elgin
Page 2
permit Hovde to discuss with management personnel the operations and prospects
of the Company. Hovde will treat all non-public information as confidential.
The Company acknowledges that Hovde will rely upon the accuracy and completeness
of all information received from the Company, its officers, directors,
employees, agents, representatives, accountants and counsel. This letter
agreement under which Hovde is to serve as the Company's investment banker is
subject to the satisfactory completion of such investigation and inquiries as
Hovde may deem appropriate under the circumstances and is subject to the
determination by Hovde that no unanticipated material adverse information is
discovered during the due diligence review.
4. Regulatory filings. If and when the Company deems appropriate, the
------------------
Company will cause appropriate offering documents to be filed with the Office of
Thrift Supervision ("OTS"), the Securities and Exchange Commission ("SEC") and
such state securities commissioners as may be jointly determined by Hovde and
the Company. All fillings with the OTS, the SEC and state securities
commissioners naming Hovde as the Company's investment banker will be subject to
the prior consent of Hovde, which consent shall not be unreasonably withheld.
5. Agency Agreement. This letter is a binding agreement between the Company
----------------
and Hovde. However, the specific terms of certain services contemplated in this
letter shall be set forth in an Agency Agreement between the Company and Hovde
to be executed on or about the date the Offering is to commence. The Agency
Agreement will be in form and substance acceptable to the Company and Hovde and
will provide for customary representations and warranties by the Company and for
the Company and Hovde to indemnify one another and their controlling persons
against certain liabilities, including liabilities under the Securities Act of
1933, as amended, subject to Section 8 hereof.
6. Fees. For the investment banking services hereunder, the Bank shall pay
----
Hovde the following amounts in the following manner: a management fee of
$37,500, of which $18,750 shall be due upon execution of this agreement and
$18,750 shall be paid upon initial filing of the application for conversion; and
sales commissions equal to 1.50% of the aggregate purchase price of the common
stock in the Subscription Offering and the Direct Community Offering, if any,
excluding shares sold to the Company's directors, executive officers and
employees, and any employee stock ownership plan ("ESOP") created by the
Company. The sales commissions due Hovde shall be paid upon closing of the
Conversion. The Bank will also be responsible for the commissions, fees and
other compensation payable to any NASD member firm other than Hovde which the
Bank allows to participate in the Conversion as a selected dealer, assisting
broker or other similar role.
<PAGE>
Board of Directors
Home Federal Savings of Elgin
Page 3
7. Expenses. The Bank will bear those expenses of the proposed offering
--------
customarily borne by issuers, including OTS, SEC, "Blue Sky", and NASD filing
and registration fees; the fees of the Bank's accountants, attorneys, transfer
agent and registrant; printing expenses association with the Conversion; the
fees set forth in Section 6; and fees for "Blue Sky" legal work, which will be
performed by either the Company's counsel or Hovde's counsel (at the expense of
the Company.) In addition, the Bank hereby agrees to reimburse Hovde, from
time-to-time upon Hovde's requests, for its reasonable and documented out-of-
pocket expenses, including legal fees of its underwriter's counsel, provided
that in no event will such expenses in the aggregate exceed $60,000 without
prior approval of the Bank.
8. Indemnification and contribution. Both the Holding Company and the Bank
--------------------------------
agree to indemnify and hold Hovde, its affiliates, directors, officers, agents
and employees, and each other person, if any, controlling Hovde or any of its
affiliates within the meaning of Section 15 of the Securities Act of 1933 or
Section 20(a) of the Securities Exchange Act of 1934, harmless from and against
any losses, claims, damages, expenses (including reasonable counsel fees), or
liabilities (collectively, "Losses") and will further promptly reimburse such
persons for any legal or other expenses reasonably incurred in investigating,
preparing to defend or defending against any such action, proceeding or claim
(whether commenced or threatened) arising out of or based upon the Conversion or
the engagement of Hovde hereunder unless it is determined by final judgment of a
court having jurisdiction over the matter that such Losses are primarily as a
result of the indemnified party's bad faith, willful misconduct or gross
negligence. If the foregoing indemnification were for any reason not to be
available, the Holding Company agrees to contribute to the Losses involved in
proportion that the Company's financial interest in the Conversion bears to the
indemnified party's financial interest in the Conversion.
9. Conditions. Hovde's obligations hereunder shall be subject to, among
----------
other things, there being in Hovde's opinion, which shall have been formed in
good faith by Hovde after reasonable determination and consideration of all
relevant factors: (a) satisfactory disclosure of all relevant financial
information in the disclosure documents and a determination that the sale of
stock is reasonable given such disclosures; (b) no material adverse change in
the condition or operations of the Bank subsequent to Hovde's due diligence
review; (c) the absence of market conditions which might render the sale of the
shares by the Company inadvisable; (d) agreement that the price established by
the independent appraiser is reasonable and equitable in the then prevailing
market conditions; and (e) no material adverse change in the regulation of the
Company.
<PAGE>
Board of Directors
Home Federal Savings of Elgin
Page 4
10. Term of agreement. This agreement shall commence upon execution of this
-----------------
letter agreement by the Bank and will remain in effect for a period of one year
from the date of such execution.
11. Advertisement. The Company agrees that Hovde may, at its own expense and
-------------
subject to the Bank's consent (which will not be unreasonably withheld), publish
an advertisement announcing the completion of this transaction and Hovde's role
therein.
12. Addresses for notices. All notices, requests, demands and other
---------------------
communications requested or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given when personally delivered or mailed
by first-class certified mail, return receipt request, to the applicable party
at it address indicated below:
If to Hovde:
-----------
Hovde Securities, Inc.
1110 Lake Cook Road
Suite 165
Buffalo Grove, IL 60089
Attn: Steven D. Hovde
If to the Company:
-----------------
Home Federal Savings of Elgin
16 North Spring Street
Elgin, IL 60120
Attn.: Mr. George Perucco
or, as to each party, at such address as shall be designated in a written
notice given to the other party.
13. Headings. The section headings in this Agreement is for convenience only
--------
and do not define, limit or construe the contents of such sections. References
made in this Agreement to numbered sections shall refer to numbered sections of
this Agreement unless otherwise indicated.
<PAGE>
Board of Directors
Home Federal Savings of Elgin
Page 5
14. Force majeure. If any provisions of this Agreement or any application to
-------------
any party or circumstances shall be determined by any court of competent
jurisdiction to be invalid and unenforceable to any extent, the remainder of
this Agreement or the application of such provision to such person or
circumstances other than those as to which it is so determined invalid or
unenforceable to any extent, shall not be affected thereby, and each provision
hereof shall be valid and shall be enforced to the fullest extent permitted by
law.
15. Governing law. The laws of the State of Illinois shall govern the
-------------
validity, performance and enforcement of this Agreement.
If the foregoing correctly sets forth our mutual understanding, please so
indicate by signing and returning the original copy of the letter to the
undersigned with a check in the amount of $18,750 payable to Hovde Securities,
Inc.
With warmest regards,
HOVDE SECURITIES, INC.
Steven D. Hovde
Executive Vice President
SDH/ag
Agreed to:
HOME FEDERAL SAVINGS OF ELGIN
By: /s/ George Perucco
---------------------------------
George Perucco
President
Date March 26, 1996
<PAGE>
Exhibit A
CONVERSION SERVICES
Hovde Securities, Inc. ("Hovde") provides thrift institutions converting from
the mutual-to-stock form of ownership with a comprehensive program of conversion
services designed to ensure an orderly, efficient, cost-effective and long-term
stock distribution. The following list is representative of the conversion
services we are prepared to perform on behalf of the Bank.
General Services
- ----------------
Counsel and train the Bank's directors, senior managers and staff members with
regard to their individual responsibilities during the conversion process.
Solicit, analyze and make recommendations on bids from appraisal, business plan
preparation, printing, conversion agent, and transfer agent firms.
Supervise appraisal, printing, conversion agent and transfer agent firms.
Assist officers and directors in obtaining loans to purchase stock.
Assist the Bank in obtaining a loan for the Employee Stock Ownership Plan.
Assist in drafting and distribution of press releases as required and
appropriate.
Conversion Strategy Services
- ----------------------------
Representatives of Hovde will conduct a thorough due diligence review of the
Bank; assess the individual and corporate objectives of senior management and
the Board of Directors; and evaluate market conditions for the Bank's conversion
offering. Hovde will then recommend a conversion strategy that address the
legal form of the issuer, valuation, dividend policy, anti-takeover strategies,
insider benefits, a comprehensive marketing strategy for the Bank's stock
offering, and post-conversion shareholder value enhancement strategies.
Subscription and Community Offering Services
- --------------------------------------------
Establish and manage Conversion Center at the Bank. The Conversion Center will
be staffed by several of the Bank's clerical employees and/or temporary clerical
personnel who will be recruited by Hovde and hired by the Bank. Hovde will
train Conversion Center personnel to solicit and process proxies; track
prospective investors; record stock orders; mail order confirmations; provide
the Bank's senior management with daily reports concerning proxy
1
<PAGE>
totals, stock orders and funds received; handle routine customer and investor
inquiries; and handle special situations as they arise.
Assign Hovde personnel to be at the Bank throughout the Subscription and
Community Offerings to manage the Conversion Center, meet with prospective
shareholders at individual and community information meetings, solicit local
investor interest through a telemarketing campaign, answer inquiries, and
otherwise assist in the sale of stock in the Subscription and Community
Offerings.
Create target investors list based upon review of the Bank's customer base and
input from the Bank's directors, officers and other employees.
Provide intensive financial and marketing input for drafting of offering
circular.
Prepare other marketing materials, including prospecting letters, brochures and
media advertisements.
Arrange logistics of community information meeting(s) as required.
Prepare audio-video presentation by senior management at community information
meeting(s).
Prepare script for presentation by senior management at community information
meeting(s).
Prepare management for question-and-answer period at community information
meeting(s).
Attend and address community information meeting(s) and be available to answer
questions.
Broker-Assisted and Syndicated Community Offering Services
- ----------------------------------------------------------
Hovde will advise the Bank as to whether to utilize a broker-assisted or
syndicated community offering. If brokers are allowed to participate in the
community offering, Hovde will advise the Bank as to the most cost-effective
form of such participation, as well as provide the following additional
services:
Arrange logistics of broker information meeting(s) as required.
Prepare audio-video presentation for broker information meeting(s).
Prepare script for presentation by senior management at broker information
meeting(s).
Prepare management for question-and-answer period at broker information
meeting(s).
Encourage and facilitate the attendance of brokers at the broker information
meeting(s).
2
<PAGE>
Attend and address broker information meeting(s) and be available to answer
questions.
Produce confidential broker memorandum to assist participating brokers in
selling the Bank's common stock.
Take all other necessary and appropriate steps to encourage and facilitate
broker participation in the Bank's broker- assisted or syndicated community
offering.
Standby Underwriting Services
- -----------------------------
Hovde will advise the Bank as to whether the Bank should retain one or more
investment banking firms ("standby underwriters") to manage an underwritten
public offering of any shares which have not been subscribed for the Bank's
Subscription and Community Offerings. If one or more standby underwriters are
to be retained, Hovde will assist the Bank in selecting the most qualified
firm(s), negotiating a favorable standby underwriting agreement, and supervising
the standby underwriters(s) to insure the completion of the Bank's conversion
offering.
Trading and Research Services
- -----------------------------
Hovde will assist the Bank in securing commitments from two or more market
makers to maintain a market in the Bank's common stock after Conversion is
completed. Hovde will also assist the Bank in obtaining research coverage from
investment analysts.
Post-Conversion Advisory Services
- ---------------------------------
For a period of one year subsequent to the consummation of the Bank's
conversion, Hovde will provide the Bank and the Holding Company with advice of a
general nature, and Hovde will serve as its exclusive financial advisor,
pertaining to anti-takeover defenses, mergers and acquisitions, dividend policy,
stock repurchases and other relevant matters. Hovde will render this general
advice for no fee for a period of one year subsequent to the consummation of the
Bank's Conversion. Thereafter, the Bank and/or the Holding Company may retain
Hovde to provide general financial advisory services subject to an agreement
setting forth fees, terms and conditions for such engagement to be negotiated at
the time such agreement is executed.
Hovde will have no obligation to provide financial advisory services with regard
to any specific transaction involving the Bank and/or the Holding Company.
However, the Bank and/or the Holding Company may retain Hovde as its financial
advisor with regard to such transaction under an agreement setting forth fees,
terms and conditions for such engagement to be negotiated at the time such
agreement is executed.
3
<PAGE>
EXHIBIT 2.1
================================================================================
PLAN OF CONVERSION
OF
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
ADOPTED BY THE BOARD OF DIRECTORS ON APRIL 18, 1996
AMENDED AND RESTATED BY THE BOARD OF DIRECTORS ON JUNE 6, 1996
================================================================================
<PAGE>
ARTICLE I
DEFINITIONS
ARTICLE II
PROCEDURE FOR APPROVAL OF CONVERSION
Section 2.01 Application and Notice.................................. 7
Section 2.02 Approval of Plan by Members; the Special Meeting........ 8
ARTICLE III
SALE OF COMMON STOCK
<TABLE>
<CAPTION>
<S> <C>
Section 3.01 In General................................................... 8
Section 3.02 Reorganization as Subsidiary of Holding Company.............. 9
Section 3.03 Pricing and Number of Shares of Common Stock;
the Independent Appraiser 10
Section 3.04 Subscription Rights.......................................... 12
Section 3.05 Community Offering........................................... 16
Section 3.06 Subscription Offering and Community Offering Procedures;
Order Forms 18
Section 3.07 Payment for Common Stock..................................... 19
Section 3.08 Syndicated Community Offering................................ 20
Section 3.09 Public Offering Alternative.................................. 21
Section 3.10 Restrictions on Purchase and Transfer of Common Stock........ 22
Section 3.11 Time Limits for Sale of Shares; Effect of Inability to Sell.. 23
Section 3.12 Enforcement of Terms and Conditions.......................... 24
</TABLE>
ARTICLE IV
CERTAIN RESTRICTIONS
<TABLE>
<CAPTION>
<S> <C>
Section 4.01 Sale of Shares Purchased by Directors or Officers......... 24
Section 4.02 Subsequent Purchases of Shares by Officers and Directors.. 25
Section 4.03 Acquisition of Control.................................... 25
</TABLE>
-i-
<PAGE>
ARTICLE V
EFFECT OF CONVERSION; CERTAIN COVENANTS AND AGREEMENTS
<TABLE>
<CAPTION>
<S> <C>
Section 5.01 Restated Charter and Adoption of New Bylaws; Name of Converted
Association............................................................. 26
Section 5.02 Effect of Conversion and Reorganization................................... 27
Section 5.03 Liquidation Account....................................................... 27
Section 5.04 Voting Rights............................................................. 28
Section 5.05 Issuance of Stock......................................................... 28
Section 5.06 Directors of Converted Association........................................ 29
Section 5.07 Employment Agreements..................................................... 29
Section 5.08 Market for the Common Stock............................................... 29
Section 5.09 Payment of Dividends and Repurchase of Stock.............................. 29
</TABLE>
ARTICLE VI
CONDITIONS TO CONVERSION; AMENDMENT AND TERMINATION;
MISCELLANEOUS
<TABLE>
<CAPTION>
<S> <C>
Section 6.01 Conditions to Conversion.................................................. 30
Section 6.02 Termination of Reorganization............................................. 30
Section 6.03 Amendment or Termination of the Plan...................................... 30
Section 6.04 Completion Date........................................................... 31
Section 6.05 Expenses of the Conversion................................................ 31
Section 6.06 Interpretation............................................................ 31
Section 6.07 Severability.............................................................. 31
Section 6.08 Miscellaneous............................................................. 31
</TABLE>
-ii-
<PAGE>
PLAN OF CONVERSION
OF
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
INTRODUCTORY STATEMENT
This Plan of Conversion (the "Plan") provides for the conversion of
Home Federal Savings and Loan Association of Elgin, Elgin, Illinois (the
"Association") into a federal capital stock savings and loan association. The
Association is currently a mutual savings and loan association duly organized
and validly existing under the laws of the United States. The principal office
of the Association is located at 16 North Spring Street, of Kane County, State
of Illinois.
The purpose of this conversion is to increase the Association's equity
capital base and facilitate future access to capital markets. The conversion
also will provide a more flexible operating structure, which will enable the
Association to compete more effectively with other financial institutions. The
larger capital base resulting from the conversion will enhance the Association's
ability to pursue lending and investment opportunities as well as opportunities
for growth and expansion.
The Board of Directors of the Association currently contemplates that
all of the stock of the Association shall be held by a business corporation (the
"Holding Company") organized under the laws of the State of Delaware and that
the Holding Company will issue and sell its capital stock pursuant to this Plan.
The use of the Holding Company, if so utilized, would provide greater
organizational flexibility.
This Plan has been unanimously approved by the Board of Directors of
the Association. This Plan must also be approved by the affirmative vote of a
majority of the total number of votes entitled to be cast by Voting Members of
the Association at a special meeting to be called for that purpose. Prior to
the submission of this Plan to the Voting Members for consideration, the Plan
must be approved by the Office of Thrift Supervision (the "OTS").
Upon conversion, each Person having a Savings Account at the
Association prior to the conversion will continue to have a Savings Account,
without payment therefor, in the same amount and subject to the same terms and
conditions (except for voting and liquidation rights) as in effect prior to
conversion. After conversion, the Association will succeed to all the rights,
interests, duties and obligations of the Association before conversion,
including, but not limited to, all rights and interests of the Association in
and to its assets and properties, whether real, personal or mixed. The
Association will continue to be a member of the Federal Home Loan Bank System,
and all of its insured Savings Accounts will continue to be insured by the
Savings Association Insurance Fund of the Federal Deposit Insurance Corporation
to the extent provided by applicable law.
<PAGE>
-2-
ARTICLE I
DEFINITIONS
As used in this Plan of Conversion, the following terms shall have the
following meanings, unless the context indicates otherwise:
"Account Holder" shall mean any Person holding a Savings Account in
the Association.
"Acting in Concert" shall mean (i) knowing participation in a joint
activity or interdependent conscious parallel action towards a common goal
whether or not pursuant to an express agreement or understanding; or (ii) a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise. A
Person or company which acts in concert with another Person ("other party")
shall also be deemed to be acting in concert with any Person who is also acting
in concert with that other party, except that any Tax-Qualified Employee Stock
Benefit Plan will not be deemed to be acting in concert with its trustee or a
Person who serves in a similar capacity solely for the purpose of determining
whether stock held by the trustee and stock held by the plan will be aggregated,
and participants or beneficiaries of any such Tax-Qualified Employee Stock
Benefit Plan will not be deemed to be acting in concert solely as a result of
their common interests as participants or beneficiaries.
"Actual Subscription Price" shall mean the price per share at which
the Common Stock is ultimately sold in accordance with the terms hereof.
"Affiliate" shall mean a Person who, directly or indirectly, through
one or more intermediaries, controls or is controlled by or is under common
control with the Person specified.
"Associate," when used to indicate a relationship with any Person,
shall mean (a) any corporation or organization (other than the Holding Company,
the Association or a majority-owned subsidiary of the Association) of which such
Person is an officer or partner or is, directly or indirectly, either alone or
with one or more members of his or her immediate family, 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, except that for the
purposes of Sections 3.04(a) and 3.10, the term "Associate" does not include any
Tax-Qualified Employee Stock Benefit Plan or any Non-Tax-Qualified Employee
Stock Benefit Plan in which a Person has a substantial beneficial interest or
serves as a trustee or in a similar fiduciary capacity, and except that, for
purposes of aggregating total shares that may be acquired or held by Officers
and Directors and their Associates, the term "Associate" does not include any
Tax-Qualified Employee Stock Benefit Plan; and (c) any relative or spouse of
such Person, or any relative of
<PAGE>
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such spouse, who has the same home as such Person or who is a Director or
Officer of the Holding Company, the Association or any of the Association's
subsidiaries.
"Association" shall mean Home Federal Savings and Loan Association of
Elgin, in its mutual form or Home Federal Savings and Loan Association of Elgin
in its stock form, as the context of the reference requires.
"Benefit Plan" shall mean any Tax-Qualified Employee Stock Benefit
Plan or any Non-Tax-Qualified Employee Stock Benefit Plan.
"Common Stock" shall mean all of the shares of common stock, par value
$.01 per share, offered and issued pursuant to this Plan by the Holding Company
or of the common stock, par value $1.00 per share, offered and issued pursuant
to this Plan by the Association if the Holding Company is not utilized. The
Common Stock will not be insured by the Federal Deposit Insurance Corporation.
"Community Offering" shall mean the offering for sale to certain
members of the general public directly by the Association or the Holding
Company, if utilized, of any shares of the Common Stock not subscribed for in
the Subscription Offering in accordance with Section 3.05.
"Control" (including the terms "controlling," "controlled by" and
"under common control with") with respect to a Person shall mean the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of such Person, whether by contract, through the
ownership of voting securities of such Person, through the ownership of voting
securities of any company that possesses such power, or otherwise.
"Conversion" shall mean (a) the restatement of the Association's
charter to authorize the issuance of capital stock in accordance with the
Conversion Regulations and to otherwise conform to the requirements applicable
to a federal stock savings and loan association and (b) the issuance and sale of
the common stock of the Association in accordance with this Plan.
"Conversion Regulations" shall mean Part 563b of the Rules and
Regulations of the OTS.
"Director" shall mean a member of the Board of Directors of the
Association or of the Holding Company.
"Effective Date" shall mean the effective date of the Conversion and
shall be the date on which all of the Common Stock is issued and sold.
<PAGE>
-4-
"Eligible Account Holder" shall mean any depositor of the Association
who held a Qualifying Deposit in one or more deposit accounts with the
Association on the Eligibility Record Date.
"Eligibility Record Date" shall mean the date established by the Board
of Directors of the Association as the date for determining Eligible Account
Holders. The Eligibility Record Date has been established as March 31, 1995.
"Estimated Price Range" shall mean the range of the minimum and
maximum aggregate values determined by the Board of Directors of the Association
within which the aggregate offering price of Common Stock sold in the Conversion
will fall. The Estimated Price Range will be within the estimated aggregate pro
forma market value of the Common Stock, as determined by the Independent
Appraiser in accordance with Section 3.04.
"Holders of Subscription Rights" shall mean the Tax-Qualified Employee
Stock Benefit Plans, Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members who have Subscription Rights under Section 3.04.
"Holding Company" shall mean, Home Bancorp of Elgin, Inc., a
corporation organized under the laws of the State of Delaware.
"Independent Appraiser" shall mean the independent Person retained by
the Association to prepare an appraisal of the estimated pro forma market value
of the Common Stock. Such Person shall be experienced and expert in the area of
corporate appraisal and acceptable to the OTS.
"Maximum Subscription Price" shall mean the price per share to be
remitted by subscribers for shares of Common Stock in the Subscription Offering
and the Community Offering.
"Member" shall mean any Person who qualifies as a member of the
Association pursuant to the Association's charter and bylaws.
"Minimum Subscription Price" shall mean the minimum price per share
established in accordance with the Estimated Price Range.
"Non-Tax-Qualified Employee Stock Benefit Plan" shall mean any stock
option, bonus stock or restricted stock plan or other employee benefit plan that
is not a "Tax-Qualified Employee Stock Benefit Plan" and that is maintained by
the Holding Company or the Association for the benefit of officers, employees or
directors of the Holding Company, the Association or any Affiliate of either of
them and that, by its terms, is authorized or required to purchase Common Stock.
<PAGE>
-5-
"Officer" shall mean an executive officer of the Association, which
includes the chairman of the board, chief executive officer, president, any vice
president in charge of a principal business function or functions or who
otherwise has a policy-making function, secretary, treasurer or principal
financial officer, comptroller or principal accounting officer, and any person
performing functions similar to those performed by the foregoing persons with
respect to any incorporated or unincorporated organization.
"Order Form" shall mean the form provided by the Holding Company or
the Association that subscribers must use to order Common Stock in the
Subscription Offering and Community Offering.
"Other Member" shall mean any Person, including any Benefit Plan, who
is a Member as of the Voting Record Date and who is either (i) a holder of a
Savings Account at the Association but is not an Eligible Account Holder or
Supplemental Eligible Account Holder or (ii) a borrower from the Association.
"OTS" shall mean the Office of Thrift Supervision of the Department of
the Treasury.
"Overallotment Option" shall mean the option, which may be granted to
the Underwriters in any Public Offering, to purchase, on the same terms as other
shares are purchased in the Public Offering, up to an additional 15% of the
shares of the Common Stock offered in the Subscription Offering.
"Oversubscription Provision" shall mean the increase in the number of
shares of Common Stock that may be offered to subscribers in the Subscription
Offering and Community Offering pursuant to Section 3.03(b) or in the Syndicated
Community Offering pursuant to Section 3.08.
"Person" shall mean a natural person, a corporation, a partnership, an
association, a trust (including trusts or custodial arrangements under an
Individual Retirement Account or a qualified retirement plan), an unincorporated
organization, a joint-stock company, a government or political subdivision
thereof, or any other entity.
"Plan" shall mean this Plan of Conversion as it exists on the date
hereof and as it may be hereafter amended pursuant to Section 6.03.
"Proxy Statement" shall mean the document to be used to solicit
proxies from Members to vote at the Special Meeting.
"Public Offering" shall mean the offering, if any, of certain shares
of Common Stock in accordance with Section 3.09.
<PAGE>
-6-
"Public Offering Price" shall mean the price at which the shares of
Common Stock are offered in any Public Offering.
"Qualifying Deposit" shall mean the Savings Accounts of a Person in
the Association at the close of business on the Eligibility Record Date having
an aggregate balance of at least $50. If the aggregate balance of a Persons's
Savings Accounts in the Association is less than $50, the Savings Accounts shall
not constitute a Qualifying Deposit.
"Reorganization" shall mean the issuance and sale of the Common Stock
and the purchase by the Holding Company of all of the capital stock to be issued
by the Association in connection with the Conversion.
"Savings Account" shall have the same meaning as in Section 561.42 of
the Rules and Regulations of the OTS, and it shall include time deposits and
certificates of deposit.
"Special Meeting" shall mean the Special Meeting of Members, and any
adjournments thereof, to be called and held for the purpose of submitting the
Plan to the Members for their approval.
"Subaccount Balance" shall mean, with respect to each Eligible Account
Holder and Supplemental Eligible Account Holder, the portion of the liquidation
account that such Eligible Account Holder or Supplemental Eligible Account
Holder would be entitled to receive pursuant to the Conversion Regulations in
the event of a complete liquidation of the Association subsequent to the
Conversion. The initial Subaccount Balance of each Eligible Account Holder and
Supplemental Eligible Account Holder shall be determined in accordance with
Section 563b.3(f) of the Conversion Regulations.
"Subscription Offering" shall mean the offering of the Common Stock to
the Holders of Subscription Rights in accordance with Section 3.04.
"Subscription Prospectus" shall mean the Subscription Prospectus to be
used in offering the Common Stock in the Subscription Offering, the Community
Offering and any Syndicated Community Offering or Public Offering.
"Subscription Rights" shall mean the rights described in Section 3.04.
"Supplemental Eligibility Record Date" shall mean the supplemental
record date for determining Supplemental Eligible Account Holders. The
Supplemental Eligibility Record Date shall be the last day of the calendar
quarter preceding the OTS's approval of the Application for Conversion.
"Supplemental Eligible Account Holder" shall mean any person (other
than an Eligible Account Holder) holding a Qualifying Deposit, except Officers,
Directors and their Associates, as of the Supplemental Eligibility Record Date.
<PAGE>
-7-
"Syndicated Community Offering" shall mean the offering of Common
Stock following the Subscription and Community Offerings through a syndicate of
broker-dealers.
"Syndicated Community Offering Price" shall mean the per share price
submitted with orders for shares of Common Stock in the Syndicated Community
Offering.
"Tax-Qualified Employee Stock Benefit Plan" shall mean any defined
benefit plan or defined contribution plan, such as an employee stock ownership
plan, stock bonus plan, profit-sharing plan or other plan, that is maintained by
the Holding Company or the Association for the benefit of the officers or
employees of the Holding Company, the Association, or any Affiliate of either of
them; that, by its terms, is authorized or required to purchase Common Stock;
and that, with its related trust, meets the requirements to be "qualified" under
Section 401 of the Internal Revenue Code. The Association may make scheduled
discretionary contributions to a tax-qualified employee stock benefit plan
provided, among other things, such contributions do not cause the Association to
fail to meet its regulatory capital requirements.
"Underwriter" shall mean any investment banking firm or firms
purchasing or distributing the Common Stock to be offered in a Public Offering,
if any.
"Underwriting Agreement" shall mean the agreement between the Holding
Company and an Underwriter pursuant to which the Underwriter agrees to purchase
or distribute certain shares of the Common Stock for offering in any Public
Offering.
"Voting Members" shall mean those Persons qualifying as voting members
of the Association pursuant to its charter and bylaws.
"Voting Record Date" shall mean the date fixed by the Directors in
accordance with the OTS regulations for determining eligibility to vote at the
Special Meeting.
ARTICLE II
PROCEDURE FOR APPROVAL OF CONVERSION
SECTION 2.01 APPLICATION AND NOTICE. This Plan, having been duly
adopted by the Board of Directors of the Association and the Board of Directors
of the Holding Company, will be submitted, together with an Application for
Conversion in the form required by the Conversion Regulations, to the OTS for
approval. The Association will cause notice of the adoption of the Plan and of
its intention to convert to stock form and to reorganize into holding company
form to be given by publication in a newspaper having general circulation in
each community in which an office of the Association is located. Copies of the
Plan will be made available at each office of the Association for inspection by
the Members. Upon the filing of the Application for Conversion, the Association
will cause notice of the adoption of the Plan to
<PAGE>
-8-
be conspicuously posted at its offices. The Association also will cause to be
published a notice of the filing with the OTS of an application to convert in
accordance with the provisions of the Plan and OTS regulations. The Association
may issue a press release containing all material terms of the proposed
Conversion and Reorganization.
SECTION 2.02 APPROVAL OF PLAN BY MEMBERS; THE SPECIAL MEETING.
Following approval by the OTS of the Association's Application for Conversion,
the Association shall submit the Plan for approval of the Association's Members
at the Special Meeting. The Association shall mail to each Member, at the
Member's last known address appearing on the records of the Association, a
Notice of Special Meeting and a Proxy Statement. The Notice of Special Meeting
will be conspicuously posted at each office of the Association. The Proxy
Statement will include a detailed description of the Conversion and the
Reorganization and information relating to the Subscription Offering, in the
form required by the Conversion Regulations. Each Member will also be given the
opportunity to request a copy of the Plan and the proposed Charter of the
Association and proposed Bylaws of the Association. The Special Meeting shall
be held upon written notice given not less than 20 days nor more than 45 days
from the last date on which such notice is mailed to Members. At the Special
Meeting, each Voting Member shall be entitled to cast one vote in person or by
proxy for every one hundred dollars ($100), or fraction thereof, such Voting
Member had on deposit with the Association as of the Voting Record Date, and
each Voting Member who qualifies as such by virtue of being a borrower from the
Association shall be entitled to cast one vote in person or by proxy in addition
to any votes such Voting Member is entitled to cast as a depositor; provided
however, that no Voting Member may cast more than one thousand (1,000) votes
under any circumstance.
The OTS shall be notified of the results of the Special Meeting within
five days after the conclusion of the Special Meeting. If the Plan is approved
by the affirmative vote of at least a majority of the total outstanding votes of
the Voting Members, the Association will take all other necessary steps to
effect the Conversion subject to the terms and conditions of this Plan. If the
Plan is not so approved upon conclusion of the Special Meeting and any
adjournment or adjournments thereof, the Plan shall not be implemented without
further vote, all funds submitted in the Subscription Offering and Community
Offering will be returned to subscribers, with interest as provided herein, and
all withdrawal authorizations will be canceled.
ARTICLE III
SALE OF COMMON STOCK
SECTION 3.01 IN GENERAL. As soon as practicable, the Holding Company
shall register the offering of the Common Stock under the Securities Act of
1933, as amended, and any applicable state laws. After registration of the
Common Stock and receipt of all required regulatory approvals, the Common Stock
will be offered for sale in a Subscription Offering to the Holders of
Subscription Rights in the respective priorities set forth in Section 3.04. No
offer
<PAGE>
-9-
for sale of the Common Stock shall be made prior to the mailing to Members of
the Proxy Statement for the Special Meeting. The Subscription Offering may be
commenced as early as the mailing of the Proxy Statement for the Special Meeting
of Members and must be commenced in time to complete the Conversion within the
time period specified in Section 6.04.
Any shares of Common Stock not subscribed for in the Subscription
Offering will be offered for sale in a Community Offering. Any Common Stock
remaining unsold upon completion of the Subscription Offering and Community
Offering may be offered for sale in a Syndicated Community Offering or a Public
Offering or in some other manner as determined by the Board of Directors of the
Association and the Board of Directors of the Holding Company with the approval
of the OTS. Any such Syndicated Community or Public Offering shall be conducted
in a manner that is intended to achieve the widest distribution of the Common
Stock.
The Community Offering may be commenced concurrently with the
Subscription Offering. In such case, any orders received in the Community
Offering shall be subject to availability of shares upon conclusion of the
Subscription Offering. The offer and sale of Common Stock prior to the Special
Meeting of Members shall, however, be conditioned upon approval of the Plan by
the Voting Members. The sale of all Common Stock subscribed for in the
Subscription and Community Offerings will be consummated simultaneously on the
date the sale of Common Stock in any Syndicated Community or Public Offering is
consummated and only if all Common Stock is sold.
The sales price per share of the Common Stock shall be a uniform price
determined in accordance with the Conversion Regulations and Section 3.03,
except that the price to be paid by or through the Underwriters in connection
with a Public Offering may be less a negotiated Underwriters' commission or
discount. The Association may also elect to offer to pay fees on a per share
basis to qualifying brokers, as determined by the Association in its sole
discretion, who assist Persons in determining to purchase shares in the
Subscription and Community Offerings.
SECTION 3.02 REORGANIZATION AS SUBSIDIARY OF HOLDING COMPANY. The
Board of Directors of the Association intends to take all necessary steps to
form the Holding Company. The Association will be a wholly-owned subsidiary of
the Holding Company unless the Holding Company is eliminated in the Conversion.
If the Holding Company is utilized, upon Conversion the Association
will issue its capital stock to the Holding Company, and the Holding Company
will issue and sell the Common Stock in accordance with this Plan. The Holding
Company will make timely applications for any requisite regulatory approvals,
including an Application to be filed with the OTS on Form H-(e)1 or on Form H-
(e)1-S, if available to the Holding Company, and a Registration Statement on
Form S-1 to be filed with the SEC.
Upon the issuance of the Common Stock, the Holding Company will
purchase from the Association all of the capital stock of the Association to be
issued by the Association
<PAGE>
-10-
in the Conversion in exchange for the Conversion proceeds that are not permitted
to be retained by the Holding Company. The Holding Company will apply to the
OTS to retain 50% of the net proceeds of the sale of the Common Stock. A lesser
percentage may be retained in the discretion of the Boards of Directors of the
Association and the Holding Company. The Association believes that the
Conversion proceeds will provide economic strength to the Holding Company and
the Association for the future in a highly competitive and regulated environment
and would facilitate possible expansion through acquisitions of financial
service organizations, possible diversification into other related businesses
and for other business and investment purposes, including the possible payment
of dividends and possible future repurchases of the Common Stock as permitted by
the OTS. The above activities may also be engaged in by the Association if the
Holding Company is eliminated.
The Board of Directors of the Association may determine for any reason
at any time prior to the issuance of the Common Stock not to utilize a holding
company form of organization in the Conversion. If the Board of Directors of
the Association determines not to complete the Conversion utilizing a holding
company form of organization, the capital stock of the Association will be
issued and sold in accordance with the Plan. In such case, the Holding
Company's registration statement on Form S-l will be withdrawn from the SEC, the
Association will take all steps necessary to complete the Conversion from the
mutual to the stock form of organization, including filing any necessary
documents with the OTS, and will issue and sell the Common Stock in accordance
with this Plan. In such event, any subscriptions or orders received for Common
Stock of the Holding Company shall be deemed to be subscriptions or orders for
Common Stock of the Association, and the Association shall take such steps as
permitted or required by the OTS or the SEC.
Any reference to the Holding Company in this Plan shall mean the
Association if the Holding Company is eliminated in the Conversion.
SECTION 3.03 PRICING AND NUMBER OF SHARES OF COMMON STOCK;
THE INDEPENDENT APPRAISER.
(a) All shares sold in the Conversion will be sold at a uniform price
per share. The aggregate price at which the Common Stock shall be sold shall
not be inconsistent with the estimated pro forma market value of such Common
Stock, based upon an independent valuation as provided for in this Section 3.03.
The Association shall cause the Independent Appraiser to prepare a pro forma
valuation of the aggregate market value of the Common Stock, which shall be
submitted to the OTS as part of the Association's Application for Conversion.
The valuation shall be prepared in accordance with Section 563b.7 of the
Conversion Regulations. Prior to the commencement of the Subscription Offering,
the Estimated Price Range will be established, the maximum of which shall be no
more than 15% above the average of the minimum and maximum of such price range
and the minimum of which shall be no more than 15% below such average. From
time to time, as appropriate or as required by the Conversion Regulations or the
OTS, the Association shall cause the Independent Appraiser to review
developments subsequent to its valuation to determine whether the Estimated
Price Range should be revised.
<PAGE>
-11-
(b) Based on the valuation by the Independent Appraiser pursuant to
this Section 3.04(a), the Board of Directors of the Association and the Board of
Directors of the Holding Company shall fix the Maximum Subscription Price and
the number of shares of Common Stock to be offered. The total number of shares
of Common Stock offered and the purchase price per share shall be subject to
increase or decrease at any time prior to any Syndicated Community Offering or
Public Offering or other method of sale to reflect changes in market and
financial conditions. In the event that the aggregate purchase price of the
Common Stock is below the minimum of the Estimated Price Range, or materially
above the maximum of the Estimated Price Range, resolicitation of purchasers may
be required; provided, that up to a 15% increase above the maximum of the
Estimated Price Range will not be deemed material so as to require a
resolicitation. Up to a 15% increase in the number of shares to be issued which
is supported by an appropriate change in the estimated pro forma market value of
the Common Stock will not be deemed to be material so as to require a
resolicitation of subscriptions. In the event that the aggregate purchase price
of the Common Stock is below the minimum of the Estimated Price Range or in
excess of 15% above the maximum of the Estimated Price Range, and a
resolicitation is required, such resolicitation shall be effected in such manner
and within such time as the Holding Company or the Association shall establish,
with the approval of the OTS, if required. The total number of shares of Common
Stock offered will also be subject to increase in connection with the exercise
of any Overallotment Option; provided, that any additional number of shares of
Common Stock issued for this purpose shall not exceed 15% of the total number of
shares of the Common Stock offered in the Subscription and Community Offerings.
If the number of shares of Common Stock to be sold in the Conversion,
excluding any number of shares to be issued in connection with any Overallotment
Option or the Oversubscription Provision, is increased after commencement of the
Subscription Offering, any Person who subscribed for the maximum number of
shares of Common Stock shall be permitted to subscribe for an additional number
of shares such that such Person shall be permitted to subscribe for the then
maximum number of shares permitted to be subscribed for by such Person as
adjusted taking into account the increase in the number of shares to be sold,
subject to the rights and preferences of any Person who has priority
Subscription Rights. If either the individual purchase limitations set forth in
Sections 3.04, 3.05 and 3.10 hereof or the number of shares of Common Stock,
excluding any number of shares to be issued in connection with any Overallotment
Option or the Oversubscription Provision, is decreased after commencement of the
Subscription Offering, the order of any Person who subscribed for the maximum
number of shares of Common Stock shall be decreased by the minimum amount
necessary so that such Person shall be in compliance with the then maximum
number of shares permitted to be subscribed for by such Person. The Holding
Company shall not otherwise be required to offer subscribers the right to modify
or rescind their subscriptions as a result of any increase or decrease in the
number of shares of Common Stock offered, unless otherwise required by this
Plan, by the OTS or by applicable law.
(c) If all of the shares of Common Stock are subscribed for in the
Subscription Offering and the Community Offering, if any, or are sold in some
manner other than a Public
<PAGE>
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Offering, the Board of Directors of the Association and the Board of Directors
of the Holding Company, in consultation with the Independent Appraiser, shall
determine the Actual Subscription Price, subject to approval by the OTS. If all
shares of the Common Stock are not subscribed for and there is a Public
Offering, the Board of Directors of the Association and the Board of Directors
of the Holding Company, in consultation with the Underwriters and the
Independent Appraiser, shall determine the Public Offering Price, subject to the
approval of the OTS. If there is a Public Offering, the Public Offering Price
will determine the Actual Subscription Price. Except for the purchase price of
shares sold upon the exercise of any Overallotment Option or the
Oversubscription Provision, the aggregate purchase price of the Common Stock
shall be within the Estimated Price Range, unless subscribers are offered the
right to modify or rescind their subscriptions.
(d) The Holding Company shall not consummate any sale unless the
Independent Appraiser shall have confirmed to the Holding Company, the
Association, and the OTS that nothing of a material nature shall have occurred
that would cause the Independent Appraiser to conclude that the aggregate
purchase price of the shares of Common Stock sold in the Conversion, exclusive
of the aggregate purchase price of shares sold upon the exercise of the
Overallotment Option or the Oversubscription Provision, is incompatible with its
estimate of the pro forma market value of the Association at the time of such
sale. If the Independent Appraiser is unable to so confirm, the offering may be
canceled or the Association and the Holding Company may extend the Conversion,
establish a new Estimated Price Range, Maximum Subscription Price or Actual
Subscription Price, extend, reopen or hold a new Subscription Offering and
Community Offering, Syndicated Community Offering or Public Offering or take
such other action as the Board of Directors of the Association and the Board of
Directors of the Holding Company shall determine and the OTS shall approve.
(e) The Common Stock to be issued pursuant to this Plan shall upon
issuance be fully paid and nonassessable.
SECTION 3.04 SUBSCRIPTION RIGHTS.
(a) Each Eligible Account Holder shall receive, as first priority and
without payment, nontransferable subscription rights to subscribe for shares of
Common Stock equal to an amount up to the greater of (i) the amount permitted to
be subscribed for in the Community Offering, which amount is currently equal to
$200,000 of the Common Stock offered in connection with the Conversion, as
specified in Section 3.05(e), and may be increased to 5% of the Common Stock
offered in the Conversion or decreased to less than $200,000, (ii) one-tenth of
one percent of the total offering of shares of Common Stock, or (iii) fifteen
times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Common Stock to be issued by a
fraction of which the numerator is the amount of the Qualifying Deposit of the
Eligible Account Holder and the denominator is the total amount of Qualifying
Deposits of all Eligible Account Holders, in each case on the Eligibility Record
Date. Such subscription is subject to the maximum purchase limitation specified
in Section
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3.10(a) and the minimum purchase limitation in Section 3.10(c) and exclusive of
an increase in the total number of shares issued due to an increase in the
Estimated Price Range of up to 15%.
If Eligible Account Holders subscribe for a number of shares of Common
Stock that exceeds the total number of shares of Common Stock being issued, the
Common Stock shall be allocated among subscribing Eligible Account Holders as
follows:
(i) first, to the extent possible, each Eligible Account Holder shall
be entitled to subscribe for the entire amount of his or her order, up to
100 shares;
(ii) second, each Eligible Account Holder subscribing for in excess of
100 shares shall be entitled, with respect to such excess, to subscribe for
the same percentage of the total remaining shares to be issued as the value
of his or her Qualifying Deposits represents to the aggregate value of the
Qualifying Deposits of all remaining Eligible Account Holders whose
subscriptions remain unsatisfied; provided, however, that no fractional
shares shall be issued; and
(iii) third, any shares then remaining shall be reallocated (one or
more times if necessary) among those Eligible Account Holders whose
subscriptions are not filled pursuant to subparagraphs (i) or (ii) above,
on the basis otherwise set forth in (ii) above until all available shares
have been allocated or all subscriptions satisfied.
Subscription Rights to purchase Common Stock received by Directors and
Officers of the Association, and their Associates, as Eligible Account Holders
that are based on their increased Savings Accounts in the Association in the one
year period preceding the Eligibility Record Date shall be subordinated to the
Subscription Rights of all other Eligible Account Holders granted pursuant to
the Conversion Regulations and this Plan.
(b) The Tax-Qualified Employee Stock Benefit Plans shall receive,
without payment, as a second priority after the filling of subscriptions of
Eligible Account Holders, non-transferable Subscription Rights to purchase
Common Stock up to a maximum of ten percent (10.0%) of the Common Stock. If,
after the filling of subscriptions of Eligible Account Holders, a sufficient
number of shares is not available to fill the subscriptions by such plan, the
subscription by such plan shall be filled to the maximum extent possible;
provided, however, that in the event of an increase in the total number of
shares issued due to an increase in the Estimated Price Range of up to 15%, the
additional shares may be sold to the Tax-Qualified Employee Stock Benefit Plans,
subject to the purchase limitations set forth above and in Section 3.10(a). A
Tax-Qualified Employee Stock Benefit Plan shall not be deemed to be an Associate
or Affiliate of, or a Person Acting in Concert with, any Director or Officer of
the Holding Company or the Association. Notwithstanding any provision contained
herein to the contrary, the Association may make scheduled discretionary
contributions to a Tax-Qualified Employee Stock Benefit Plan; provided, among
other things, that such contributions do not cause the Association to fail to
meet its regulatory capital requirements.
<PAGE>
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(c) Each Supplemental Eligible Account Holder shall receive, as third
priority and without payment, nontransferable subscription rights to subscribe
for shares of Common Stock equal to an amount up to the greater of (i) the
amount permitted to be subscribed for in the Community Offering, which amount is
currently $200,000 of the Common Stock offered in the Conversion, as specified
in Section 3.05(e), and may be increased to 5% of the Common Stock offered in
the Conversion or decreased to less than $200,000, (ii) one-tenth of one percent
of the total offering of shares of Common Stock, or (iii) fifteen times the
product (rounded down to the next whole number) obtained by multiplying the
total number of shares of Common Stock to be issued by a fraction of which the
numerator is the amount of the Qualifying Deposit of the Supplemental Eligible
Account Holder and the denominator is the total amount of Qualifying Deposits of
all Supplemental Eligible Account Holders, in each case on the Supplemental
Eligibility Record Date. Such subscription is subject to the maximum purchase
limitation specified in Section 3.10(a) and the minimum purchase limitation in
Section 3.10(c) and exclusive of an increase in the total number of shares
issued due to an increase in the Estimated Price Range of up to 15%.
If Supplemental Eligible Account Holders subscribe for a number of
shares of Common Stock that exceeds the total number of shares of Common Stock
being issued and available after purchases by Eligible Account Holders and Tax-
Qualified Employee Stock Benefit Plans, the Common Stock shall be allocated
among subscribing Supplemental Eligible Account Holders as follows:
(i) first, to the extent possible, each Supplemental Eligible Account
Holder shall be entitled to subscribe for the entire amount of his or her
order, up to 100 shares;
(ii) second, each Supplemental Eligible Account Holder subscribing for
in excess of 100 shares shall be entitled, with respect to such excess, to
subscribe for the same percentage of the total remaining shares to be
issued as the value of his or her Qualifying Deposits represents to the
aggregate value of the Qualifying Deposits of all remaining Supplemental
Eligible Account Holders whose subscriptions remain unsatisfied; provided,
however, that no fractional shares shall be issued; and
(iii) third, any shares then remaining shall be reallocated (one or
more times if necessary) among those Supplemental Eligible Account Holders
whose subscriptions are not filled pursuant to subparagraphs (i) or (ii)
above, on the basis otherwise set forth in (ii) above until all available
shares have been allocated or all subscriptions satisfied.
Subscription Rights received by an Eligible Account Holder pursuant to
Section 3.04(a) shall be applied in partial satisfaction of the Subscription
Rights received as a Supplemental Eligible Account Holder pursuant to this
Section 3.04(c).
(d) Each Other Member shall receive, as a fourth priority without
payment, nontransferable Subscription Rights to subscribe for shares of Common
Stock equal to an amount up to the greater of (i) the amount permitted to be
subscribed for in the Community Offering,
<PAGE>
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which amount is currently equal to $200,000 of the Common Stock offered in the
Conversion, as specified in Section 3.05(e), and may be increased to 5% of the
Common Stock offered in the Conversion or decreased to less than $200,000, or
(ii) one-tenth of one percent of the total offering of shares of Common Stock,
subject to the maximum purchase limitation specified in Section 3.10(a) and the
minimum purchase limitation specified in Section 3.10(c) and exclusive of an
increase in the total number of shares issued due to an increase in the
Estimated Price Range of up to 15%.
If such Other Members subscribe for a number of shares of Common Stock
that, when added to the shares of Common Stock subscribed for by the Eligible
Account Holders, the Tax-Qualified Employee Stock Benefit Plans and the
Supplemental Eligible Account Holders exceeds the total number of shares of
Common Stock being issued, the subscriptions of such Other Members will be
allocated as follows:
(i) first, to the extent possible, each Other Member shall be entitled
to subscribe for the entire amount of his or her order, up to 100 shares;
and
(ii) second, remaining shares will be allocated to each other member
whose subscription remains unsatisfied on a 100 share per order basis until
all such orders have been filled or the remaining shares have been
allocated.
(e) Subscription Rights are non-transferable and may not be exercised
by or on behalf of any Person other than the Holder of Subscription Rights.
Prior to the Effective Date, no Person shall offer to transfer, enter into any
agreement or understanding to transfer, or transfer the legal or beneficial
ownership of any shares of Common Stock, except pursuant to or as contemplated
by this Plan.
(f) Notwithstanding the foregoing, no Person will be offered or sold
any Common Stock in the Subscription Offering if such Person resides either in a
foreign jurisdiction or in a state or other jurisdiction of the United States
with respect to which both of the following apply:
(i) a small number of Persons otherwise eligible to subscribe for
shares of Common Stock under the Plan reside in such jurisdiction; and
(ii) the granting of the Subscription Rights or the offer or sale of
shares of Common Stock to such Persons would require the Association, the
Holding Company or their employees, officers or directors to register under
the securities laws or other laws of similar import of such jurisdiction as
a broker, dealer, salesman or selling agent (as defined in the laws or
regulations of such jurisdiction) or to register or otherwise qualify the
Common Stock for sale in such jurisdiction, and such registration or
qualification would be impracticable in the judgment of the Association or
the Holding Company for reasons of cost or otherwise.
<PAGE>
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No payment will be made in lieu of the granting of Subscription Rights to any
such Person.
(g) In the Subscription Offering, preference may be given to Eligible
Account Holders, Supplemental Eligible Account Holders and Other Members
residing in the counties in which the Association has offices.
SECTION 3.05 COMMUNITY OFFERING. Shares of Common Stock not
subscribed for in the Subscription Offering may be offered in a Community
Offering, commencing concurrently with or subsequent to the commencement of the
Subscription Offering, subject to the following terms and conditions:
(a) The Community Offering shall be made to the following:
(i) customers, employees, officers, and directors of the Association
and their immediate families;
(ii) Persons whose primary residence is in the State of Illinois;
(iii) a trust or custodial arrangement forming part of an Individual
Retirement Account established pursuant to Section 408 of the Internal
Revenue Code of 1986, or part of a qualified retirement plan established
pursuant to Section 401(a) of the Internal Revenue Code of 1986 and
maintained for the benefit of a natural person described in subparagraphs
(ii) or (iii) above;
(iv) certain other Persons to whom the Subscription Prospectus may be
delivered by the Holding Company; and
(v) certain institutional investors.
(b) The Community Offering shall be completed no later than 45 days
following the termination of the Subscription Offering, unless extended with the
approval of the OTS.
(c) The Community Offering shall be by means of a direct marketing
program. The Association or the Holding Company may, if the Board of Directors
of the Association and the Board of Directors of the Holding Company deem it
advisable, engage the services of a registered broker-dealer, consultant or
investment banking firm, experienced and expert in the sale of savings
institution securities, to assist the Holding Company in the direct marketing
program. The Holding Company and the Association shall make distribution of the
Common Stock to be sold in the Community Offering in such a manner as to promote
the widest distribution of Common Stock.
(d) In offering the unsubscribed for shares to the public in the
Community Offering, a number of shares equal to the lesser of 25% of the Common
Stock offered in the
<PAGE>
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Conversion or the Common Stock not subscribed for in the Subscription Offering,
at the option of the Association and the Holding Company, may be initially
reserved for institutional investors who need not be residents of Kane, Dupage
or McHenry counties, Illinois.
(e) Any Person subscribing for Common Stock pursuant to the provisions
of this Section 3.05 shall be required to purchase a minimum of 25 shares to the
extent such shares are available for purchase. The maximum amount that any
Person, together with any Associate or group of Persons Acting in Concert, may
subscribe for in the Community Offering shall be $200,000 of the Common Stock
offered in the Conversion; provided, however, that the amount permitted to be
purchased in the Community Offering may be increased to 5% of the Common Stock
offered in the Conversion or decreased to less than $200,000 without the further
approval of members or resolicitation of subscribers. If there are not
sufficient shares available to fill all subscription requests, the total number
of shares available in the Community Offering shall be allocated as follows:
(i) first, to each subscriber whose order is accepted and who is a
natural person maintaining his or her primary residence in Kane, Dupage or
McHenry counties in the State of Illinois (or a trust maintained for the
benefit of such person), the shares available to them will be allocated in
the manner which permits each such person, to the extent possible, to
purchase the number of shares necessary to make his total allocation of
Common Stock equal to the lesser of 100 shares or the number of shares
subscribed for by such persons, thereafter, unallocated shares will be
allocated among such persons whose subscriptions remain unsatisfied on a
100 shares per order basis until all such orders have been filled or the
remaining shares have been allocated;
(ii) second, to the extent that there are shares remaining after all
subscriptions by Persons described in (i) above, to each subscriber whose
order is accepted and who is a natural person maintaining an office or a
residence in the State of Illinois (or a trust maintained for the benefit
of such person), the shares available to them will be allocated in the same
manner as set forth in (i) above; and
(iii) third, to the extent that there are shares remaining after all
subscriptions by persons described in (i) and (ii) above, to each other
subscriber whose order is accepted, the shares available to them will be
allocated in the same manner as set forth in (i) above.
(f) Notwithstanding the foregoing:
(i) no Person will be offered or sold any shares of Common Stock in
the Community Offering if such Person resides either in a foreign
jurisdiction or in a state or other jurisdiction of the United States in
which the offer or sale of shares of Common Stock would require the Holding
Company or the Association or their employees, officers or directors to
register under the securities laws or other laws of similar import of such
jurisdiction as a broker, dealer, salesman or selling agent (as defined in
the laws
<PAGE>
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of such jurisdiction) or to register or otherwise qualify the Common Stock
for sale in such jurisdiction and such registration or qualification would
be impracticable in the judgment of the Holding Company or the Association
for reasons of cost or otherwise; and
(ii) the Holding Company reserves the absolute right to accept or
reject any or all orders in the Community Offering in whole or in part.
SECTION 3.06 SUBSCRIPTION OFFERING AND COMMUNITY OFFERING PROCEDURES;
ORDER FORMS.
(a) After the registration statement for the Common Stock has been
declared effective and all other required regulatory approvals have been
obtained, the Holding Company shall distribute or make available the
Subscription Prospectus, together with Order Forms for the purchase of Common
Stock, to the Holders of Subscription Rights for the purpose of enabling them to
exercise their respective Subscription Rights. Notwithstanding the foregoing,
the Holding Company may elect to send Order Forms only to those persons who
request them after such notice has been given as is approved by the OTS and is
adequate to apprise all Holders of Subscription Rights of the pendency of the
Subscription Offering. Such notice may be included with the Proxy Statement for
the Special Meeting and may also be included in a notice of the pendency of the
Conversion and the Special Meeting sent to all Eligible Account Holders and
Supplemental Eligible Account Holders in accordance with the regulations of the
OTS. Each Order Form must be preceded or accompanied by the Subscription
Prospectus describing the Holding Company, the Association, the Common Stock and
the Subscription Offering and the Community Offering. Each Order Form will
contain such information as may be required by the Rules and Regulations of the
OTS.
(b) The Holders of Subscription Rights shall have a period of time
within which to complete and deliver an Order Form to the Holding Company. The
exact date and time by which completed Order Forms must be received by the
Holding Company shall be set forth on the Order Form; provided, that if the
Holders of Subscription Rights are required to return a postage-paid request
card to receive a Subscription Prospectus and Order Form, the Subscription
Offering shall not terminate until the expiration of 30 days from such mailing
of the postage-paid communication, unless a shorter period of time is approved
by the OTS. Failure of any Holder of Subscription Rights to deliver a properly
executed Order Form to the Holding Company, together with full payment (or
authorization for payment by withdrawal from a time or savings account with the
Association) for the shares of Common Stock subscribed for, within the time
limits prescribed shall be deemed a waiver and release by such Person of any
Subscription Rights.
(c) The Holding Company shall also distribute or make available the
Subscription Prospectus, together with Order Forms for the purchase of Common
Stock, to certain other Persons, as described in Section 3.05. A subscriber in
the Community Offering shall have a period of time within which to complete and
deliver an Order Form to the Holding
<PAGE>
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Company, which period of time shall end at the same time that the Subscription
Offering terminates, unless extended pursuant to Section 3.05(b). The exact
date and time by which completed Order Forms must be received by the Holding
Company shall be set forth on the Order Form.
(d) The Holding Company may, subject to the provisions of this Plan
and any required approval of the OTS, extend the period during which an Order
Form must be completed and delivered to the Holding Company. Any such extension
shall be for a period that the Board of Directors of the Association and the
Board of Directors of the Holding Company determine is appropriate. The Holding
Company may, but will not be required to, waive any irregularity on any Order
Form, or require the submission of corrected Order Forms or the remittance of
full payment for subscribed shares of Common Stock by such date as the Holding
Company may specify. The interpretation by the Holding Company of the terms and
conditions of the Order Forms will be final and binding on all subscribers.
SECTION 3.07 PAYMENT FOR COMMON STOCK.
(a) Payment for shares of Common Stock subscribed for in the
Subscription Offering and in any Community, Syndicated Community, or Public
Offerings shall be equal to the Maximum Subscription Price multiplied by the
number of shares that are being subscribed for. Such payment must, in general,
be made at the time the Order Form is delivered to the Holding Company and may
be made:
(i) in cash, if delivered in person, or by check, bank draft, or money
order, or
(ii) if the subscriber has a Savings Account in the Association, the
subscriber may authorize the Association to withdraw from such Savings
Account an amount equal to the aggregate Maximum Subscription Price of the
shares for which the Person subscribed.
If the subscriber is a Benefit Plan, the subscribing Benefit Plan may pay for
the shares of Common Stock at the Actual Subscription Price on or prior to the
Effective Date. If the subscribing Benefit Plan is an employee stock ownership
plan, it may pay on or prior to the Effective Date only if it has received a
loan commitment from the Holding Company or a source of funding acceptable to
the Holding Company, committing to advance to the Benefit Plan on or before the
Effective Date the aggregated Maximum Subscription Price of the shares for which
the Benefit Plan subscribed.
Notwithstanding the foregoing, the Association and the Holding Company
shall have the right, in their sole discretion, to permit institutional
investors to submit contractually irrevocable orders in the Community Offering
and to thereafter submit payment for the Common Stock for which they are
subscribing in the Community Offering at any time prior to 48 hours
<PAGE>
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before the completion of the Conversion, unless such 48 hour period is waived by
the Association and the Holding Company, in their sole discretion.
(b) If the Actual Subscription Price is less than the Maximum
Subscription Price, the difference will either be promptly refunded to all
subscribers (or withdrawal authorizations from time or savings accounts shall be
reduced) or, if the subscriber has so elected on a space that may be provided on
the Order Form, the difference (excluding accrued interest) will be applied to
the purchase of additional whole shares of Common Stock to the extent available,
and any remaining difference will be promptly refunded to all subscribers (or
withdrawal authorizations from time or savings accounts shall be reduced).
(c) If a subscriber authorizes a withdrawal of the amount of the
Maximum Subscription Price from a time or savings account with the Association
as payment for the shares subscribed for, the Association will have the right
upon receipt of the Order Form by the Holding Company to make such withdrawal
immediately or to place a hold on such account equal to the aggregate Maximum
Subscription Price. The Association will allow withdrawal from certificates of
deposit for such payment without the assessment of penalties; however, if the
withdrawal results in the certificate failing to meet any applicable minimum
balance requirement, the certificate evidencing the account may be canceled and
the remaining balance transferred to a statement savings account that will earn
interest at the regular passbook rate. Where any applicable required minimum
balance is maintained in such certificate account, the rate of return on the
balance of the certificate account will remain the same as prior to such early
withdrawal. If the Association withdraws funds from a subscriber's time
account, or places a hold on such account, in accordance with this Section 3.06,
and the time account matures prior to the date the Conversion is completed or
terminated, the funds so withdrawn or placed under a hold shall be transferred
upon maturity of the time account to a statement savings account that will earn
interest at the regular passbook rate.
(d) The Association will pay interest, at not less than the passbook
rate, for all amounts paid in cash, by check, bank draft, or money order to
purchase shares of the Common Stock in the Subscription Offering or Community
Offering from the date payment is received until the date the Conversion is
completed or terminated. If any withdrawal from a time or savings account made
pursuant to paragraph (c) above is made at any time prior to the date the
Conversion is completed or terminated, the Association shall pay interest to the
Eligible Account Holder on the amount withdrawn as if such amount had remained
in the account from which it was withdrawn until the date the Conversion is
completed or terminated.
(e) The Association will not knowingly loan funds or otherwise extend
credit to any Person for the purpose of purchasing shares of the Common Stock.
SECTION 3.08 SYNDICATED COMMUNITY OFFERING.
(a) Shares of Common Stock not sold in the Subscription Offering or
the Community Offering may be offered for sale in a Syndicated Community
Offering, subject to
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such terms, conditions, and procedures as may be determined by the Association,
in a manner that is intended to achieve the widest distribution of the Common
Stock subject to the right of the Association to accept or reject in whole or in
part all subscriptions in the Syndicated Community Offering.
(b) In the Syndicated Community Offering, any Person together with any
Associate or group of Persons Acting in Concert may purchase up to $200,000 of
the Common Stock offered in the Conversion subject to the maximum purchase
limitation specified in Section 3.10(a) and the minimum purchase limitation
specified in Section 3.10(c) and exclusive of an increase in the total number of
shares issued due to an increase in the Estimated Price Range of up to 15%.
However, the shares purchased in the Community Offering by any Person together
with an Associate or group of Persons Acting in Concert pursuant to Section 3.06
shall be counted toward meeting the maximum purchase limitation found in this
Section 3.08.
(c) Provided that the Subscription Offering has commenced, the
Association may commence the Syndicated Community Offering at any time after the
mailing to the Members of the Proxy Statement to be used in connection with the
Special Meeting of Members, provided that the completion of the offer and sale
of the Common Stock shall be conditioned upon the approval of this Plan by the
Voting Members. If the Syndicated Community Offering is not sooner commenced
pursuant to the provisions of the preceding sentence, the Syndicated Community
Offering will be commenced as soon as practicable following the date upon which
the Subscription and Community Offerings terminate.
SECTION 3.09 PUBLIC OFFERING ALTERNATIVE.
(a) Shares of Common Stock not sold in the Subscription Offering or
the Community Offering may, as an alternative to a Syndicated Community Offering
pursuant to Section 3.08, be offered for sale by the Holding Company to or
through Underwriters. The provisions of Section 3.10 shall not be applicable to
sales to underwriters for purposes of such a Public Offering. Any such
Underwriter shall agree to (a) purchase such shares from the Holding Company
with a view to reoffering them to the general public; (b) use their best efforts
to sell, for the account of the Holding Company, such shares to the general
public; or (c) a combination of (a) and (b), subject to the following terms and
conditions:
(b) Any Underwriting Agreement shall provide that the Underwriters
shall agree to purchase all shares of the Common Stock not sold in the
Subscription Offering or the Community Offering, if any such shares are
purchased.
(c) The price paid to the Holding Company by or through the
Underwriters for the Common Stock shall be the aggregate Public Offering Price
for the shares of Common Stock so offered, less discounts and commissions as
negotiated between the Association, the Holding Company, and the Underwriters
and approved by the OTS and the National Association of Securities Dealers, Inc.
<PAGE>
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(d) The Underwriting Agreement shall be subject to the following
conditions and such other conditions as may be acceptable to the Association,
the Holding Company and the OTS:
(i) purchases in the Public Offering shall be subject to the
limitations of Section 3.10; and
(ii) the Holding Company and its Underwriters shall use reasonable
efforts to assure that the stock to be offered and sold in the Public
Offering shall be offered and sold in a manner that, to the extent
practicable, will achieve the widest distribution of such stock.
(e) If for any reason a Syndicated Community Offering or a Public
Offering of shares of Common Stock not sold in the Subscription and Community
Offerings cannot be effected, or if any insignificant residue of shares of
Common Stock is not sold in the Subscription and Community Offerings or in the
Syndicated Community or Public Offering, other arrangements will be made for the
disposition of unsubscribed shares by the Association, if possible. Such other
purchase arrangements will be subject to the approval of the OTS.
SECTION 3.10 RESTRICTIONS ON PURCHASE AND TRANSFER OF COMMON STOCK.
The following limitations shall apply to all purchases of Common Stock:
(a) No Person, acting alone, acting together with any other Person, or
Acting in Concert with any group of Persons, shall be entitled to purchase more
than 1.0% of the Common Stock offered, except for certain Eligible Account
Holders and Supplemental Eligible Account Holders which may subscribe for or
purchase shares in accordance with Section 3.04(a) and (c), respectively;
provided, however, that in the event the maximum purchase limitations set forth
in this Section 3.10(a) is increased pursuant to Section 3.10(e) below to more
than 1.0% of the shares of Common Stock offered, orders for Common Stock in the
Community Offering and in the Syndicated Community Offering (or the Public
Offering), if any, shall, as determined by the Association and the Holding
Company, first be filled to a maximum of 1.0% of the total number of shares of
Common Stock offered and thereafter remaining shares shall be allocated on an
equal number of shares per order basis until all orders have been filled. For
purposes of applying this purchase limitation, the purchases of any Tax-
Qualified Employee Stock Benefit Plan shall not be subject to such purchase
limitation, and the purchases of any Benefit Plan shall not be aggregated with
those of any other Benefit Plan or other Person; provided, however, that any one
or more Tax-Qualified Employee Stock Benefit Plans may subscribe for up to and
including 10% of the Common Stock issued.
(b) The Officers and Directors of the Association and the Holding
Company and their Associates, collectively, shall be entitled to purchase the
maximum number of shares of Common Stock issued in connection with the
Conversion as permitted by Section 563b.3(c)(8) of the Conversion Regulations.
In applying this limitation, Common Stock purchased by any one or more Tax-
Qualified Employee Stock Benefit Plan shall not be counted.
<PAGE>
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(c) Any Person exercising subscription rights to purchase Common Stock
shall be required to purchase a minimum of 25 shares to the extent such shares
are available for purchase. However, in the event the minimum number of shares
of Common Stock that must be purchased times the price per share exceeds five
hundred dollars ($500), then the minimum purchase requirement shall be reduced
to such number of shares that, when multiplied by the price per share, the
aggregate price for any such minimum purchase of shares of Common Stock shall
not exceed five hundred dollars ($500).
(d) Shares of Common Stock subscribed for in the Subscription
Offering, the Community Offering, and any Syndicated or Public Offering or
purchased in some other manner shall be aggregated for purposes of determining
if the limitations of this Section 3.10(a) and (b) have been violated.
(e) Depending upon market or financial conditions, the Board of
Directors of the Association and the Holding Company, without further approval
of the Members, may decrease or increase the purchase limitations in this Plan,
provided that the maximum purchase limitations may not be increased to a
percentage in excess of 5%. Notwithstanding the foregoing, the maximum purchase
limitation set forth in Section 3.10(a) above may be increased up to 9.99%
provided that orders for Common Stock exceeding 5% of the shares being offered
shall not exceed, in the aggregate, 10% of the total offering. If the
Association and the Holding Company increase the maximum purchase limitations,
the Association and the Holding Company are only required to resolicit Persons
who subscribed for the maximum purchase amount and may, in the sole discretion
of the Association and the Holding Company, resolicit certain other large
subscribers.
In the event shares of Common Stock are sold in excess of the maximum
of the Estimated Price Range (the "Adjusted Maximum"), such shares will be
allocated in the following order of priority: (i) to fill the Tax-Qualified
Employee Stock Benefit Plans' subscription to the Adjusted Maximum; (ii) in the
event that there is an oversubscription at the Eligible Account Holder level, to
fill unfulfilled subscriptions of Eligible Account Holders exclusive of the
Adjusted Maximum in accordance with Section 3.04(a); (iii) in the event there is
an oversubscription at the Supplemental Eligible Account Holder level, to fill
unfulfilled subscriptions of Supplemental Eligible Account Holders exclusive of
the Adjusted Maximum in accordance with Section 3.04(c); (iv) in the event that
there is an oversubscription at the Other Member level, to fill unfulfilled
subscriptions of Other Members exclusive of the Adjusted Maximum in accordance
with Section 3.04(d); and (v) to fill unfulfilled Subscriptions in the Community
Offering exclusive of the Adjusted Maximum in accordance with Section 3.05.
Each Person purchasing Common Stock in the Conversion shall be deemed
to confirm that such purchase does not conflict with the purchase limitations
set forth in this Plan.
(f) As used in this Section 3.10, the Officers and Directors of both
the Association and the Holding Company shall not be deemed to be Associates or
a group affiliated
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with each other or otherwise Acting in Concert solely as a result of their being
Officers or Directors of the Association or the Holding Company.
SECTION 3.11 TIME LIMITS FOR SALE OF SHARES; EFFECT OF INABILITY TO
SELL. All shares of Common Stock not subscribed for at the completion of the
Subscription Offering shall be sold within 45 days after completion of the
Subscription Offering, or such longer period as the OTS may approve. If all
shares are not sold as provided for herein, the Association and the Holding
Company will consult with the OTS to determine an alternative method of sale.
In such event and if required by the OTS or the Securities and Exchange
Commission, a resolicitation of those Persons who have subscribed for shares
will be made. If such an alternative method is not agreed upon, the Conversion
and the Reorganization will not be effected, the Association will remain in
mutual form, all funds submitted to the Association and the Holding Company as
payment for shares of the Common Stock will be returned to subscribers, with
interest as provided herein, and all withdrawal authorizations will be canceled.
SECTION 3.12 ENFORCEMENT OF TERMS AND CONDITIONS. The Association
and the Holding Company shall have the right to take all such action as they
may, in their sole discretion, deem necessary, appropriate, or advisable in
order to monitor and enforce the terms, conditions, limitations, and
restrictions contained in this Article III and elsewhere in this Plan and the
terms, conditions, and representations contained in the Order Forms, including,
but not limited to, the right to require any subscriber or purchaser to provide
evidence, in a form satisfactory to the Association, of such Person's
eligibility to subscribe for or purchase shares of the Common Stock under the
terms of this Plan and the absolute right (subject only to any necessary
regulatory approvals or concurrence) to reject, limit, or revoke acceptance of
any subscription or order and to delay, terminate, or refuse to consummate any
sale of Common Stock that they believe might violate, or is designed to, or is
any part of a plan to evade or circumvent such terms, conditions, limitations,
restrictions, and representations. Any such action shall be final, conclusive,
and binding on all Persons, and the Association and the Holding Company and
their respective Boards of Directors shall be free from any liability to any
Person on account of any such action.
ARTICLE IV
CERTAIN RESTRICTIONS
SECTION 4.01 SALE OF SHARES PURCHASED BY DIRECTORS OR OFFICERS. All
shares of the Common Stock purchased or acquired (either directly or indirectly)
by the Directors or Officers of the Association or of the Holding Company on
original issue in the Conversion either directly from the Holding Company (by
subscription or otherwise) or from the Underwriters (or otherwise beneficially
owned by such Directors or Officers immediately after such original issuance)
shall be subject to the restriction that the shares shall not be sold for a
period of one year following the date of purchase. Such restriction shall not
apply to the shares of any such
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Director or Officer in the event of the death of such Person. In addition, such
restriction shall not apply to shares held by any Tax-Qualified Employee Stock
Benefit Plan. In connection with the shares of the Common Stock that are
subject to this restriction on resale:
(a) Each certificate for such shares shall bear a legend giving
appropriate notice of such restriction.
(b) Appropriate instructions shall be issued to the transfer agent for
the Common Stock with respect to applicable restrictions on transfer of any
such restricted stock.
(c) Any shares issued as a stock dividend, stock split, or otherwise
with respect to any such restricted stock shall be subject to the same
restrictions as applicable to such originally restricted stock until the
restrictions respecting such originally restricted stock are terminated,
and any certificate for such shares shall bear a legend advising of such
restrictions.
SECTION 4.02 SUBSEQUENT PURCHASES OF SHARES BY OFFICERS AND
DIRECTORS. For a period of three years following the Effective Date, no Officer
or Director of the Association or the Holding Company (or any person who was an
Officer or Director of the Association or the Holding Company at any time after
the date on which the Board of Directors of the Association adopts this Plan),
or Associate of any of them, shall, without the prior written approval of the
OTS, purchase or acquire direct or indirect beneficial ownership of any shares
of the capital stock of the Holding Company, except through a registered broker
or dealer. This restriction shall not apply to any purchase or acquisition
effected pursuant to any Benefit Plan, nor to negotiated transactions involving
more than one percent (1%) of the outstanding shares of common stock of the
Holding Company. As used herein, the term "negotiated transaction" means a
transaction in which the securities are offered and the terms and arrangements
relating to any sale are arrived at through direct communications between the
seller or any person acting on its behalf and the purchaser or his investment
representative (a professional investment advisor acting as agent for the
purchaser and independent of the seller and not acting on behalf of the seller
in connection with the transaction).
SECTION 4.03 ACQUISITION OF CONTROL.
(a) In accordance with OTS regulations, for a period of not less than
three years (or such longer period as may be subsequently authorized under the
Conversion Regulations for savings associations converting to stock form)
following the Effective Date, no Person or group of Persons Acting in Concert
shall, directly or indirectly, offer to acquire or acquire the beneficial
ownership of more than ten percent (10%) of any class of any equity security of
the Holding Company or the Association without the prior consent of the OTS.
For purposes of this Section 4.03, the term "Person" shall not include the
Holding Company or any majority-owned subsidiary thereof, or any Tax-Qualified
Employee Stock Benefit Plan or any trust or custodial arrangement established in
connection with any such plan; provided, that the
<PAGE>
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plan or plans do not have beneficial ownership in the aggregate of more than
twenty-five percent (25%) of any class of equity security of the Association or
the Holding Company.
(b) The charter of the Association will contain a provision
stipulating that, for a period of five years following the Effective Date, no
Person or group of Persons Acting in Concert, except the Holding Company (if a
holding company form of organization is utilized), shall directly or indirectly
offer to acquire or acquire the beneficial ownership of more than ten percent
(10%) of any class of an equity security of the Association, without the prior
written approval of the OTS. In addition, such charter may also provide that
for a period of five years following conversion shares beneficially owned in
violation of the above-described charter provision shall not be entitled to vote
and shall not be voted by any Person or counted as voting stock in connection
with any matter submitted to stockholders for a vote. In addition, the charter
will contain provisions providing that special meetings of the stockholders
relating to changes in control or amendment of the charter may only be called by
the Board of Directors and that shareholders shall not be permitted to cumulate
their votes for the election of directors.
(c) The Certificate of Incorporation of the Holding Company contains a
provision to the effect that any record owner of any outstanding shares of the
Holding Company's common stock who beneficially owns in excess of 10% of such
outstanding shares shall be entitled to cast only one one-hundredth (1/100) of
one vote per share with respect to any shares held in excess of 10%. In
addition, the Certificate of Incorporation and Bylaws of the Holding Company
contain provisions for staggered terms of the directors, noncumulative voting
for directors, limitations on the calling of special meetings, a fair price
provision for certain business combinations, and certain notice requirements.
(d) For the purposes of this Section 4.03:
(i) The term "Person" includes an individual, a group Acting in
Concert, a corporation, a partnership, an association, a joint stock
company, a trust, an unincorporated organization or similar company, a
syndicate, or any other group formed for the purpose of acquiring, holding,
or disposing of securities of an insured institution;
(ii) The term "offer" includes every offer to buy or acquire,
solicitation of an offer to sell, tender offer for, or request or
invitation for tenders of, a security or interest in a security for value;
(iii) The term "acquire" includes every type of acquisition, whether
effected by purchase, exchange, operation of law, or otherwise; and
(iv) The term "security" includes non-transferable subscription rights
issued pursuant to a plan of conversion as well as a "security" as defined
in 15 U.S.C. (S) 8c(a)(10).
<PAGE>
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ARTICLE V
EFFECT OF CONVERSION; CERTAIN COVENANTS AND AGREEMENTS
SECTION 5.01 RESTATED CHARTER AND ADOPTION OF NEW BYLAWS; NAME OF
CONVERTED ASSOCIATION. The Association shall take all appropriate steps to
amend and restate its Charter to read in the form of a charter for a federal
stock savings and loan association as specified in the Rules and Regulations of
the OTS and approved by the Board of Directors of the Association. The
Association shall also take all appropriate steps to adopt Bylaws sufficient for
a federal stock savings and loan association. The name of the converted
Association shall be Home Federal Savings and Loan Association of Elgin. By
voting to adopt this Plan, Members of the Association will be voting to adopt a
Federal Stock Charter and Bylaws for a Federal Stock Savings Association
attached as Exhibits I and II to this Plan. The effective date of the
Association's stock charter and bylaws shall be the Effective Date.
SECTION 5.02 EFFECT OF CONVERSION AND REORGANIZATION. On the
Effective Date, the Association shall cease to be a mutual institution and shall
simultaneously become a stock institution. All of the property, rights, powers,
franchises, debts, liabilities, obligations, and duties of the mutual
institution shall continue as such in the stock institution, and all deposits in
the mutual institution shall remain as deposits of equal character and value in
the stock institution. The corporate existence of the Association shall not
terminate, and the converted Association shall be a continuation of the mutual
institution that existed immediately before the filing of the Federal Stock
Charter. The Holding Company shall purchase the common stock of the Association
with such amount from the net proceeds received by the Holding Company from the
sale of the Common Stock as shall be determined by the Board of Directors of the
Association and the Board of Directors of the Holding Company and as shall be
approved by the OTS, with the result that the Association will become a wholly-
owned subsidiary of the Holding Company.
SECTION 5.03 LIQUIDATION ACCOUNT. The Association shall establish at
the time of the Conversion a liquidation account (the "Liquidation Account") for
the benefit of Eligible Account Holders and Supplemental Eligible Account
Holders who continue to maintain a Savings Account in the Association. Each
Eligible Account Holder and Supplemental Eligible Account Holder shall, with
respect to his or her Savings Account, hold a related inchoate interest in a
portion of the liquidation account balance, in relation to his or her Savings
Account balance at the Eligibility Record Date or Supplemental Eligibility
Record Date, as applicable, or to such balance as it may be subsequently
reduced, as hereinafter provided.
The initial Liquidation Account balance shall be equal to the net
worth of the Association (adjusted to reflect generally accepted accounting
principles) as of the latest practicable date prior to the Conversion. The
initial Liquidation Account balance shall not be increased, and shall be subject
to downward adjustment to the extent of any downward
<PAGE>
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adjustment to the Subaccount Balance of any Eligible Account Holder or
Supplemental Eligible Account Holder in accordance with Section 563b.3(f)(5) of
the Conversion Regulations.
The initial Subaccount Balance for a Savings Account held by an
Eligible Account Holder or Supplemental Eligible Account Holder shall be
determined by multiplying the opening balance in the Liquidation Account by a
fraction, the numerator of which is the amount of such Eligible Account Holder's
or Supplemental Eligible Account Holder's Qualifying Deposit and the denominator
of which is the total amount of all Qualifying Deposits of all Eligible Account
Holders and Supplemental Eligible Account Holders in the Association.
Such initial Subaccount Balance shall not be increased, but shall be
subject to downward adjustment as follows. If, at the close of business on any
annual closing date, commencing on or after the Effective Date, the deposit
balance in the Savings Account of an Eligible Account Holder or Supplemental
Eligible Account Holder is less than the lesser of (i) the balance in the
Savings Account at the close of business on any other annual closing date
subsequent to the Eligibility Record Date or Supplemental Eligibility Record
Date, as applicable, or (ii) the amount of the Qualifying Deposit in such
Savings Account, the Subaccount Balance for such Savings Account shall be
adjusted by reducing such Subaccount Balance in an amount proportionate to the
reduction in such deposit balance. In the event of such downward adjustment,
the Subaccount Balance shall not be subsequently increased, notwithstanding any
subsequent increase in the deposit balance of the related Savings Account. If
any such Savings Account is closed, the related Subaccount shall be reduced to
zero. For this purpose, a time account shall be deemed to be closed upon its
maturity date regardless of any renewal thereof.
A distribution of each Subaccount Balance may be made only in the
event of a complete liquidation of the Association. Following all payments to
creditors (including those to Account Holders to the extent of their Savings
Accounts), each Eligible Account Holder and Supplemental Eligible Account Holder
shall be entitled to receive a liquidating distribution from the Liquidation
Account in the amount of the then adjusted Subaccount Balance for his or her
Savings Account then held. Liquidating distributions will be made to such
Eligible Account Holders and Supplemental Eligible Account Holders before any
liquidation distribution may be made to any holders of the Association's capital
stock. No merger, consolidation, purchase of bulk assets with assumption of
Savings Accounts and other liabilities, or similar transactions with an FDIC-
insured institution, in which the Association is not the surviving institution,
shall be deemed to be a complete liquidation for this purpose. In such a
transaction, the liquidation account shall be assumed by the surviving
institution.
The Association shall not be required to set aside funds for the
purpose of establishing the liquidation account and, except as provided in this
Section 5.03, the existence of such account shall not operate to restrict the
use or application of any of the net worth or shareholders' equity accounts of
the Association subsequent to the Conversion.
SECTION 5.04 VOTING RIGHTS. Except as may be provided in the Federal
Stock Charter of the Association pursuant to any amendment thereto subsequent to
the Effective Date,
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the holders of the common stock of the Association shall have exclusive voting
rights upon the Effective Date. Except as may be provided in the Certificate of
Incorporation of the Holding Company pursuant to any amendment thereto
subsequent to the Effective Date, the holders of the common stock of the Holding
Company shall have exclusive voting rights upon the Effective Date.
SECTION 5.05 ISSUANCE OF STOCK. Subsequent to the Effective Date,
the Board of Directors of the Association, subject to the provisions of the
Federal Stock Charter and the Bylaws of the Association, shall have the
authority to issue any of the authorized, unissued, and unreserved shares of
common and preferred stock and to fix the relative rights, preferences, and
limitations of such preferred stock. Except as may be required by the
Conversion Regulations or otherwise, the Board of Directors of the Association
shall have sole discretion in the decision to issue such shares, and no
shareholder approval will be required for the issuance of such shares.
Subsequent to the Effective Date, the Board of Directors of the
Holding Company, subject to the provisions of the Certificate of Incorporation
and the Bylaws of the Holding Company, shall have the authority to issue any of
the authorized, unissued, and unreserved shares of common and preferred stock
and to fix the relative designations, powers, preferences, rights,
qualifications, limitations, and restrictions of such preferred stock. Except
as may be required by the Delaware General Corporation Law or otherwise, the
Board of Directors of the Holding Company shall have sole discretion in the
decision to issue such shares, and no shareholder approval will be required for
the issuance of such shares.
SECTION 5.06 DIRECTORS OF CONVERTED ASSOCIATION. Following the
Conversion, the business and affairs of the Association shall be managed by a
Board of Directors. Upon the Effective Date, the Board of Directors of the
Association shall be divided into three classes with respect to term of office,
each class to contain, as near as may be possible, one-third of the entire Board
of Directors of the Association. Each person serving as a Director of the
Association on the Effective Date shall be appointed by the Board of Directors
to one of the three classes and shall serve as a director until the expiration
of his or her term and until his or her successor is elected and qualified. One
class of directors shall have a term of office expiring at the first annual
meeting of shareholders, the second class shall have a term of office expiring
at the second annual meeting of shareholders, and the third class shall have a
term of office expiring at the third annual meeting of shareholders. Directors
elected at each annual meeting of shareholders (other than directors elected to
fill vacancies) shall be elected to serve for a term of three years and until
their successors are elected and qualified.
SECTION 5.07 EMPLOYMENT AGREEMENTS. The Association and the Holding
Company may enter into employment agreements with such officers and employees
and upon such terms and conditions as the Board of Directors of the Association
and the Board of Directors of the Holding Company shall determine.
<PAGE>
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SECTION 5.08 MARKET FOR THE COMMON STOCK. Upon the Effective Date,
or as soon thereafter as practicable within the time period required by
applicable laws and regulations, the Common Stock shall be registered pursuant
to the Securities Exchange Act of 1934, as amended, and shall not be
deregistered for a period of three years following the Effective Date. The
requirement of maintenance of registration for three years may be fulfilled by
any successor to the Association or any holding company of the Association. In
addition, the Holding Company shall use its best efforts to list the Common
Stock on a national or regional securities exchange or on the National
Association of Securities Dealers Automated Quotation System and to encourage
and assist one or more market makers to establish and maintain a market for the
Common Stock.
SECTION 5.09 PAYMENT OF DIVIDENDS AND REPURCHASE OF STOCK. The
Association shall not declare or pay a cash dividend on, or repurchase any of,
its capital stock if the effect thereof would cause its regulatory capital to be
reduced below (i) the amount required for the Liquidation Account or (ii) the
federal regulatory capital requirement in Section 567.2 of the Rules and
Regulations of the OTS. Otherwise, the Association may declare dividends, make
capital distributions or repurchase its stock in accordance with applicable law
and regulations.
ARTICLE VI
CONDITIONS TO CONVERSION; AMENDMENT AND TERMINATION;
MISCELLANEOUS
SECTION 6.01 CONDITIONS TO CONVERSION. The conversion of the
Association pursuant to this Plan is expressly conditioned upon the following:
(a) Prior receipt by the Association of rulings of the United States
Internal Revenue Service and the State of Illinois taxing authorities, or
opinions of counsel, substantially to the effect that the Conversion will
not result in any adverse federal or state tax consequences to Eligible
Account Holders or to the Association and the Holding Company before or
after the Conversion;
(b) The sale of all of the Common Stock offered in the Conversion; and
(c) The completion of the Conversion within the time period specified
in Section 6.04.
SECTION 6.02 TERMINATION OF REORGANIZATION. If the proposed
Reorganization may result in tax consequences which, in the judgment of the
Board of Directors of the Association, are materially adverse to the Holding
Company, the Association, or the Members, or, if for any other reason, the Board
of Directors determines that the Reorganization is not in the best interests of
the Association or its members, then the Board of Directors of the
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Association may, in its discretion, elect not to proceed with the Reorganization
and substitute the common stock of the Association for the Common Stock; in such
event, all subscriptions received in the Subscription Offering, the Community
Offering, and any Public Offering will be deemed to be subscriptions to purchase
the common stock of the Association, all of the provisions of this Plan relating
to the Common Stock will be deemed to pertain to the common stock of the
Association on the same terms and conditions that such provisions pertain to the
Common Stock, and all of the references in this Plan to the Holding Company
shall be deemed to refer to the Association or shall have no effect, as the
context of the reference requires.
SECTION 6.03 AMENDMENT OR TERMINATION OF THE PLAN. If deemed
necessary or desirable by the Board of Directors of the Association and the
Board of Directors of the Holding Company, this Plan may be substantively
amended as a result of comments from regulatory authorities, as a result of any
provision contained in this Plan being held invalid, void or unenforceable by a
court or regulatory authority of competent jurisdiction, or otherwise, at any
time prior to solicitation of proxies from Members to vote on the Plan and at
any time thereafter with the concurrence of the OTS. Any amendment to this Plan
made after approval by the Members with the approval of the OTS shall not
necessitate further approval by the Members unless otherwise required by the
OTS. This Plan may be terminated by the Board of Directors of the Association
at any time prior to the Special Meeting and at any time thereafter with the
concurrence of the OTS.
By adoption of the Plan, the Members of the Association authorize the
Board of Directors to amend or terminate the Plan under the circumstances set
forth in this Section.
SECTION 6.04 COMPLETION DATE. The Conversion must be completed
within 24 months of the approval of the Plan by the Voting Members, unless a
longer time period is permitted by governing laws and regulations. The
Conversion shall be deemed to take place and be effective upon the completion of
all requisite organizational procedures for obtaining a Federal Stock Savings
Association Charter for the Association and sale of all Common Stock.
SECTION 6.05 EXPENSES OF THE CONVERSION. The Association shall use
its best efforts to assure that expenses incurred by it in connection with the
Conversion shall be reasonable.
SECTION 6.06 INTERPRETATION. Subject to applicable law as set forth
in Section 6.08, all interpretations of this Plan and all applications of the
provisions of this Plan to particular circumstances by a majority of the Board
of Directors of the Association shall be final, subject to the authority of the
OTS.
SECTION 6.07 SEVERABILITY. If any term, provision, covenant or
restriction contained in this Plan is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions contained in this Plan shall remain in full force and effect, and
shall in no way be affected, impaired or invalidated.
<PAGE>
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SECTION 6.08 MISCELLANEOUS. This Plan is to be governed by and
construed in accordance with the laws of the United States and of the State of
Illinois. None of the cover page, the table of contents, or the article or
section headings are to be considered a part of this Plan, but are included
solely for convenience of reference and shall in no way define, limit, extend,
or describe the scope or intent of any of the provisions hereof. Words in the
singular include the plural, and words in the plural include the singular.
Except for such rights as are set forth herein for Members, this Plan shall
create no rights in any Person.
<PAGE>
EXHIBIT I
---------
FEDERAL STOCK CHARTER
OF
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
SECTION 1. CORPORATE TITLE. The full corporate title of the
association is HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN, ( the
"Association").
SECTION 2. OFFICE. The home office of the Association shall be
located at Elgin, in the County of Kane, State of Illinois.
SECTION 3. DURATION. The duration of the Association is perpetual.
SECTION 4. PURPOSE AND POWERS. The purpose of the Association is to
pursue any or all of the lawful objectives of a Federal savings association
chartered under Section 5 of the Home Owners' Loan Act and to exercise all of
the express, implied, and incidental powers conferred thereby and by all acts
amendatory thereof and supplemental thereto, subject to the Constitution and
laws of the United States as they are now in effect, or as they may hereafter be
amended, and subject to all lawful and applicable rules, regulations, and orders
of the Office of Thrift Supervision (the "Office").
SECTION 5. CAPITAL STOCK. The total number of shares of all classes
of the capital stock which the Association has the authority to issue is twenty-
five million (25,000,000), of which twenty million (20,000,000) shall be common
stock of par value of one dollar ($1.00) per share and of which five million
(5,000,000) shall be preferred stock, par value of one dollar ($1.00) per share.
The shares may be issued from time to time as authorized by the board of
directors without the approval of the Association's shareholders, except as
otherwise provided in this Section 5 or to the extent that such approval is
required by governing law, rule, or regulation. The consideration for the
issuance of the shares shall be paid in full before their issuance and shall not
be less than the par value. Neither promissory notes nor future services shall
constitute payment or part payment for the issuance of shares of the
Association. The consideration for the shares shall be cash, tangible or
intangible property (to the extent direct investment in such property would be
permitted to the Association), labor or services actually performed for the
Association, or any combination of the foregoing. In the absence of actual
fraud in the transaction, the value of such property, labor or services, as
determined by the board of directors of the Association, shall be conclusive.
Upon payment of such consideration, such shares shall be deemed to be fully paid
and nonassessable. In the case of a stock dividend, that part of the surplus of
the Association which is transferred to stated capital upon the issuance of
shares as a share dividend shall be deemed to be the consideration for their
issuance.
Except for shares issuable in connection with the conversion of the
Association from the mutual to stock form of capitalization, no shares of
capital stock (including shares issuable upon conversion, exchange, or exercise
of other securities) shall be issued, directly or indirectly, to officers,
directors, or controlling persons of the Association other than as part of
<PAGE>
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a general public offering or as qualifying shares to a director, unless the
issuance or the plan under which they would be issued has been approved by a
majority of the total votes eligible to be cast at a legal meeting.
Nothing contained in this Section 5 (or in any supplementary sections
hereto) shall entitle the holders of any class or series of capital stock to
vote as a separate class or series or to more than one vote per share; provided,
that this restriction on voting separately by class or series shall not apply:
(i) To any provision which would authorize the holders of preferred
stock, voting as a class or series, to elect some members of the
board of directors, less than a majority thereof, in the event of
default in the payment of dividends on any class or series of
preferred stock;
(ii) To any provision which would require the holders of preferred
stock, voting as a class or series, to approve the merger or
consolidation of the Association with another corporation or the
sale, lease, or conveyance (other than by mortgage or pledge) of
properties or business in exchange for securities of a
corporation other than the Association if the preferred stock is
exchanged for securities of such other corporation; provided,
that no provision may require such approval for transactions
undertaken with the assistance or pursuant to the direction of
the Office or the Federal Deposit Insurance Corporation;
(iii) To any amendment which would adversely change the specific
terms of any class or series of capital stock as set forth in
this Section 5 (or in any supplementary sections hereto),
including any amendment which would create or enlarge any class
or series ranking prior thereto in rights and preferences. An
amendment which increases the number of authorized shares of any
class or series of capital stock, or substitutes the surviving
association in a merger or consolidation for the Association,
shall not be considered to be such an adverse change.
A description of the different classes and series (if any) of the
Association's capital stock and a statement of the designations, and the
relative rights, preferences, and limitations of the shares of each class of and
series (if any) of capital stock are as follows:
A. Common stock. Except as provided in this Section 5 (or in any
------------
supplementary sections thereto) the holders of the common stock
shall exclusively possess all voting power. Each holder of
shares of common stock shall be entitled to one vote for each
share held by such holder.
Whenever there shall have been paid, or declared and set aside
for payment, to the holders of the outstanding shares of any
class of stock having preference over the common stock as to the
payment of dividends, the full amount of dividends and of sinking
fund, retirement fund, or other retirement payments, if any, to
which such holders are respectively
<PAGE>
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entitled in preference to the common stock, then dividends may be
paid on the common stock and on any class or series of stock
entitled to participate therewith as to dividends out of any
assets legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of
the Association, the holders of the common stock (and the holders
of any class or series of stock entitled to participate with the
common stock in the distribution of assets) shall be entitled to
receive, in cash or in kind, the assets of the Association
available for distribution remaining after: (i) payment or
provision for payment of the Association's debts and liabilities;
(ii) distributions or provision for distributions in settlement
of its liquidation account; and (iii) distributions or provision
for distributions to holders of any class or series of stock
having preference over the common stock in the liquidation,
dissolution, or winding up of the Association. Each share of
common stock shall have the same relative rights as and be
identical in all respects with all the other shares of common
stock.
B. Preferred stock. The Association may provide in supplementary
---------------
sections to its charter for one or more classes of preferred
stock, which shall be separately identified. The shares of any
class may be divided into and issued in series, with each series
separately designated so as to distinguish the shares thereof
from the shares of all other series and classes. The terms of
each series shall be set forth in a supplementary section to the
charter. All shares of the same class shall be identical except
as to the following relative rights and preferences, as to which
there may be variations between different series:
(a) the distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rate or the amount of dividends to be paid on
the shares of such series, whether dividends shall be
cumulative and, if so, from which date(s), the payment
date(s) for dividends, and the participating or other
special rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of the shares of
such series;
(d) Whether the shares of such series shall be redeemable and,
if so, the price(s) at which, and the terms and conditions
on which, such shares may be redeemed;
<PAGE>
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(e) The amount(s) payable upon the shares of such series in the
event of voluntary or involuntary liquidation, dissolution,
or winding up of the Association;
(f) Whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the
purchase or redemption of such shares, and, if so entitled,
the amount of such fund and the manner of its application,
including the price(s) at which such shares may be redeemed
or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into,
or exchangeable for, shares of any other class or classes of
stock of the Association and, if so, the conversion price(s)
or the rate(s) of exchange, and the adjustments thereof, if
any, at which such conversion or exchange may be made, and
any other terms and conditions of such conversion or
exchange;
(h) The price or other consideration for which the shares of
such series shall be issued; and
(i) Whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued
shares of serial preferred stock and whether such shares may
be reissued as shares of the same or any other series of
serial preferred stock.
Each share of each series of serial preferred stock shall have the
same relative rights as and be identical in all respects with all the other
shares of the same series.
The board of directors shall have authority to divide, by the adoption
of supplementary charter sections, any authorized class of preferred stock into
series, and, within the limitations set forth in this section and the remainder
of this charter, fix and determine the relative rights and preferences of the
shares of any series so established.
Prior to the issuance of any preferred shares of a series established
by a supplementary charter section adopted by the board of directors, the
Association shall file with the Secretary to the Office a dated copy of that
supplementary section of this charter establishing and designating the series
and fixing and determining the relative rights and preferences thereof.
SECTION 6. PREEMPTIVE RIGHTS. Holders of the capital stock of the
Association shall not be entitled to preemptive rights with respect to any
shares of the Association which may be issued.
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SECTION 7. DIRECTORS. The Association shall be under the direction
of a board of directors. The authorized number of directors, as stated in the
Association's bylaws, shall not be fewer than five nor more than 15 except when
a greater number is approved by the Director of the Office.
SECTION 8. CERTAIN PROVISIONS APPLICABLE FOR FIVE YEARS.
Notwithstanding anything contained in the Association's charter or bylaws to the
contrary, for a period of five years from the date of completion of the
conversion of the Association from mutual to stock form, the following
provisions shall apply:
A. Beneficial Ownership Limitation. No person shall directly or
-------------------------------
indirectly offer to acquire or acquire the beneficial ownership
of more than 10 percent of any class of an equity security of the
Association. This limitation shall not apply to a transaction in
which the Association forms a holding company without change in
the respective beneficial ownership interests of its shareholders
other than pursuant to the exercise of any dissenter and
appraisal rights, the purchase of shares by underwriters in
connection with a public offering, or the purchase of shares by a
tax-qualified employee stock benefit plan which is exempt from
the approval requirements under (S) 574.3(c)(1)(vi) of the
Office's regulations.
In the event shares are acquired in violation of this Section 8,
all shares beneficially owned by any person in excess of 10%
shall be considered "excess shares" and shall not be counted as
shares entitled to vote and shall not be voted by any person or
counted as voting shares in connection with any matters submitted
to the shareholders for a vote.
For purposes of this Section 8, the following definitions apply:
(1) The term "person" includes an individual, a group acting in
concert, a corporation, a partnership, an association, a
joint stock company, a trust, an unincorporated organization
or similar company, a syndicate or any other group formed
for the purpose of acquiring, holding or disposing of the
equity securities of the Association.
(2) The term "offer" includes every offer to buy or otherwise
acquire, solicitation of an offer to sell, tender offer for,
or request or invitation for tenders of, a security or
interest in a security for value.
(3) The term "acquire" includes every type of acquisition,
whether effected by purchase, exchange, operation of law or
otherwise.
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(4) The term "acting in concert" means (a) knowing participation
in a joint activity or conscious parallel action towards a
common goal whether or not pursuant to an express agreement,
or (b) a combination or pooling of voting or other interests
in the securities of an issuer for a common purpose pursuant
to any contract, understanding, relationship, agreement or
other arrangements, whether written or otherwise.
B. Call for Special Meetings. Special meetings of shareholders
-------------------------
relating to changes in control of the Association or amendments
to its charter shall be called only upon direction of the board
of directors.
SECTION 9. NO CUMULATIVE VOTING. Shareholders shall not be permitted
to cumulate their votes for election of directors.
SECTION 10. AMENDMENT OF CHARTER. Except as provided in Section 5, no
amendment, addition, alteration, change or repeal of this charter shall be made,
unless such is first proposed by the board of directors of the Association, then
preliminarily approved by the Office, which preliminary approval may be granted
by the Office pursuant to regulations specifying preapproved charter amendments,
and thereafter approved by the shareholders by a majority of the total votes
eligible to be cast at a legal meeting. Any amendment, addition, alteration,
change or repeal so acted upon shall be effective upon filing with the Office in
accordance with regulatory procedures or on such other date as the Office may
specify in its preliminary approval.
SECTION 11. LIQUIDATION ACCOUNT. Pursuant to the requirements of
Office's regulations (12 C.F.R. subchapter D) the Association shall establish
and maintain a liquidation account for the benefit of its savings account
holders as of March 31, 1995 and _____________, 1996, as applicable, depending
on whether such savings account holders qualify as Eligible Account Holders or
Supplemental Eligible Account Holders, as defined in the Plan of Conversion,
adopted by the Board of Directors of the Association as of April 18, 1996 and as
amended and restated on June 6, 1996 ("eligible savers"). In the event of a
complete liquidation of the Association, it shall comply with such regulations
with respect to the amount and the priorities on liquidation of each of the
Association's eligible savers' inchoate interest in the liquidation account, to
the extent it is still in existence; provided, that an eligible saver's inchoate
interest in the liquidation account shall not entitle such eligible saver to any
voting rights at meetings of the Association's shareholders.
<PAGE>
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As adopted by the Association's members on ____________, 1996 to be
effective on the date the Association converts from mutual to stock form of
organization.
HOME FEDERAL SAVINGS AND LOAN
ASSOCIATION OF ELGIN
Attest:__________________________ By:___________________________________
Kathleen A. Schroeder George L. Perucco
Secretary of the Association President and Chief Executive Officer
of the Association
OFFICE OF THRIFT SUPERVISION
Attest:__________________________ By:__________________________________
Secretary of the Office of
Thrift Supervision
Declared effective on the
[ ] day of [ ], 1996.
<PAGE>
EXHIBIT II
----------
BYLAWS
OF
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
ARTICLE I
HOME OFFICE
-----------
The home office of Home Federal Savings and Loan Association of Elgin
(the "Association") shall be at 16 N. Spring Street, Elgin, in the County of
Kane, in the State of Illinois.
ARTICLE II
SHAREHOLDERS
------------
SECTION 1. PLACE OF MEETINGS. All annual and special meetings of
shareholders shall be held at the home office of the Association or at such
other place in the State in which the principal place of business of the
Association is located as the board of directors (the "Board") may determine.
SECTION 2. ANNUAL MEETING. A meeting of the shareholders of the
Association for the election of directors and for the transaction of any other
business of the Association shall be held annually within 120 days after the end
of the Association's fiscal year at such date and time within such 120-day
period as the Board may determine.
SECTION 3. SPECIAL MEETINGS. For a period of five years from the
date of the completion of the conversion of the Association from mutual to stock
form, special meetings of the shareholders relating to a change in control of
the Association or to an amendment of the charter of the Association may be
called only by the Board. Subject to the immediately preceding sentence,
special meetings of the shareholders for any purpose or purposes, unless
otherwise prescribed by the regulations of the Office of Thrift Supervision (the
"Office"), may be called at any time by the President or a resolution of at
least three-fourths of the entire Board, and shall be called by the President or
the Secretary upon the written request of the holders of not less than 10% of
all of the outstanding capital stock of the Association entitled to vote at the
meeting. Such written request shall state the purpose or purposes of the
meeting and shall be delivered to the home office of the Association addressed
to the President or the Secretary. Special meetings shall be held on the date
and at the time and place as may be designated by the Board. At a special
meeting, no business shall be transacted and no corporate action shall be taken
other than that stated in the notice of meeting.
SECTION 4. CONDUCT OF MEETINGS. The President shall serve as
chairman at all meetings of the shareholders. If the President is absent or
otherwise unable to so serve, such other person as shall be appointed by a
majority of the entire Board of Directors shall serve as
<PAGE>
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chairman at any meeting of shareholders held in such absence. The Secretary or,
in his or her absence, such other person as the chairman of the meeting shall
appoint, shall serve as secretary of the meeting. The chairman of the meeting
shall conduct all meetings of the shareholders in accordance with the best
interests of the Association and shall have the authority and discretion to
establish reasonable procedural rules for the conduct of such meetings,
including such regulation of the manner of voting and the conduct of discussion
as he or she shall deem appropriate.
SECTION 5. NOTICE OF MEETINGS. Written notice stating the place, day
and hour of the meeting and the purpose(s) for which the meeting is called shall
be delivered not fewer than 20 nor more than 50 days before the date of the
meeting, either personally or by mail, by or at the direction of the President,
the Secretary or the directors calling the meeting, to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the mail addressed to the shareholder at the
address as it appears on the stock transfer books or records of the Association
as of the record date prescribed in Section 6 of this Article II with postage
prepaid. When any shareholders' meeting, either annual or special, is adjourned
for 30 days or more, notice of the adjourned meeting shall be given as in the
case of an original meeting. It shall not be necessary to give any notice of
the time and place of any meeting adjourned for less than 30 days or of the
business to be transacted at the meeting, other than an announcement at the
meeting at which such adjournment is taken.
SECTION 6. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other proper purpose,
the Board shall fix in advance a date as the record date for any such
determination of shareholders. Such date in any case shall be not more than 60
days and, in case of a meeting of shareholders, not fewer than 20 days prior to
the date on which the particular action, requiring such determination of
shareholders, is to be taken. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this Section,
such determination shall apply to any adjournment.
SECTION 7. VOTING LISTS. At least 20 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer books for
shares of the Association shall make a complete list of the shareholders
entitled to vote at such meeting, or any adjournment, arranged in alphabetical
order, with the address and the number of shares held by each. This list of
shareholders shall be kept on file at the home office of the Association and
shall be subject to inspection by any shareholder at any time during usual
business hours for a period of 20 days prior to such meeting. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to inspection by any shareholder during the entire time of the meeting.
The original stock transfer books shall constitute prima facie evidence of the
shareholders entitled to examine such list or transfer books or to vote at any
meeting of shareholders.
In lieu of making the shareholder list available for inspection by
shareholders as provided in the preceding paragraph, the Board may elect to
follow the procedures prescribed in (S) 552.6(d) of the Office's regulations as
now or hereafter in effect.
<PAGE>
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SECTION 8. QUORUM. A majority of the outstanding shares of the
Association entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of
the outstanding shares is represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted that might have been transacted at the meeting as
originally notified. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to constitute less than a quorum.
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder
may vote by proxy executed in writing by the shareholder or by his or her duly
authorized attorney in fact and filed with the Secretary of the Association
before being voted. Proxies solicited on behalf of the management shall be
voted as directed by the shareholder or, in the absence of such direction, as
determined by a majority of the Board. No proxy shall be valid more than eleven
months from the date of its execution except for a proxy coupled with an
interest. The Association may treat any duly executed proxy as not revoked and
in full force and effect until it receives a duly executed instrument revoking
it, or a duly executed proxy bearing a later date.
SECTION 10. VOTING OF SHARES IN THE NAME OF TWO OR MORE PERSONS.
When ownership stands in the name of two or more persons, in the absence of
written directions to the Association to the contrary, at any meeting of the
shareholders of the Association any one or more of such shareholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose names shares of stock stand, the vote or votes to
which those persons are entitled shall be cast as directed by a majority of
those holding such and present in person or by proxy at such meeting, but no
votes shall be cast for such stock if a majority cannot agree.
SECTION 11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in
the name of another corporation may be voted by any officer, agent or proxy as
the bylaws of such corporation may prescribe, or, in the absence of such
provision, as the board of directors of such corporation may determine. Shares
held by an administrator, executor, guardian or conservator may be voted by him
or her, either in person or by proxy, without a transfer of such shares into his
or her name. Shares standing in the name of a trustee may be voted by him or
her, either in person or by proxy, but no trustee shall be entitled to vote
shares held by him or her without a transfer of such shares into his or her
name. Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer into his or her name if authority to do so is
contained in an appropriate order of the court or other public authority by
which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the Association nor
shares held by another corporation, if a majority of the shares entitled to vote
for the election of directors
<PAGE>
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of such other corporation are held by the Association, shall be voted at any
meeting or counted in determining the total number of outstanding shares at any
given time for purposes of any meeting.
SECTION 12. NO CUMULATIVE VOTING. Shareholders shall not be
permitted to cumulate their votes for the election of directors.
SECTION 13. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the Board may appoint any persons other than nominees for office
as inspectors of election to act at such meeting or any adjournment. The number
of inspectors shall be either one or three. Any such appointment shall not be
altered at the meeting. If inspectors of election are not so appointed, the
President may or, on the request of not fewer than 10 percent of the votes
represented at the meeting, shall make such appointment at the meeting. If
appointed at the meeting, the majority of the votes present shall determine
whether one or three inspectors are to be appointed. In case any person
appointed as inspector fails to appear or fails or refuses to act, the vacancy
may be filled by appointment by the Board in advance of the meeting or at the
meeting by the President.
Unless otherwise prescribed by regulations of the Office, the duties
of such inspectors shall include: determining the number of shares and the
voting power of each share, the shares represented at the meeting, the existence
of a quorum and the authenticity, validity and effect of proxies; receiving
votes, ballots or consents; hearing and determining all challenges and questions
in any way arising in connection with the rights to vote; counting and
tabulating all votes or consents; determining the result; and such acts as may
be proper to conduct the election or vote with fairness to all shareholders.
SECTION 14. NOMINATING COMMITTEE. The Nominating Committee of the
Board shall select the management nominees for election as directors. Except in
the case of a nominee substituted as a result of the withdrawal, death or other
incapacity of a management nominee, the Nominating Committee shall deliver
written nominations to the Secretary at least 20 days prior to the date of the
annual meeting. Upon delivery, such nominations shall be posted in a
conspicuous place in each office of the Association. No nominations for
directors except those made by the Nominating Committee shall be voted upon at
the annual meeting unless other nominations by shareholders are made in writing
and delivered to the Secretary of the Association at least five days prior to
the date of the annual meeting. In the event that a person is validly
designated as a nominee in accordance with this Section 14 and shall thereafter
become unwilling or unable to stand for election to the Board, the Board may
designate a substitute nominee upon delivery, not fewer than five days prior to
the date of the meeting for the election of such nominee, of a written notice to
the Secretary of the Association. Upon delivery, any such nomination by the
shareholders or by the Board shall be posted in a conspicuous place in each
office of the Association. Ballots bearing the names of all persons nominated
by the Nominating Committee and by shareholders shall be provided for use at the
annual meeting. However, if the Nominating Committee shall fail or refuse to
act at least 20 days prior to the annual meeting, nominations for directors may
be made at the annual meeting by any shareholder entitled to vote and shall be
voted upon.
<PAGE>
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SECTION 15. NEW BUSINESS. Any new business to be taken up at the
annual meeting shall be stated in writing and filed with the Secretary of the
Association at least five days before the date of the annual meeting, and all
business so stated, proposed and filed shall be considered at the annual
meeting; but no other proposal shall be acted upon at the annual meeting. Any
shareholder may make any other proposal at the annual meeting and the same may
be discussed and considered, but unless stated in writing and filed with the
Secretary at least five days before the meeting, such proposal shall be laid
over for action at an adjourned, special or annual meeting of the shareholders
taking place 30 days or more thereafter. This provision shall not prevent the
consideration and approval or disapproval at the annual meeting of reports of
officers, directors and committees; but in connection with such reports no new
business shall be acted upon at such annual meeting unless stated and filed as
herein provided.
SECTION 16. INFORMAL ACTION BY SHAREHOLDERS. Any action required to
be taken at a meeting of the shareholders, or any other action that may be taken
at a meeting of shareholders, may be taken without a meeting if consent in
writing, setting forth the action so taken, shall be given by all of the
shareholders entitled to vote with respect to the subject matter.
ARTICLE III
BOARD OF DIRECTORS
------------------
SECTION 1. GENERAL
POWERS. The business and affairs of the Association shall be under the
direction of its Board.
SECTION 2. NUMBER AND TERM. The Board shall consist of eight (8)
members and shall be divided into three classes as nearly equal in number as
possible. The members of each class shall be elected for a term of three years
and until their successors are elected and qualified, except when a nominee is
elected (a) for a shorter term to equalize the size of the classes or (b) by the
Board to fill a vacancy on the board, in which case a director so elected shall
serve until the next election of directors by the shareholders. One class shall
be elected by ballot annually. The Board may by a two-thirds vote of the full
Board increase or decrease the number of directors of the Association to not
fewer than five nor more than 15, except when a greater number is approved by
the Director of the Office.
SECTION 3. REGULAR MEETINGS. A regular meeting of the Board shall be
held without other notice than this bylaw immediately after, and at the same
place as, the annual meeting of shareholders. The Board may provide, by
resolution, the time and place, within the Association's normal lending
territory, for the holding of additional regular meetings without other notice
than such resolution.
SECTION 4. QUALIFICATION. Each director shall at all times be the
beneficial owner of not less than 100 shares of capital stock of the Association
unless the Association is a wholly owned subsidiary of a holding company.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board may be
called by or at the request of the President or at least sixty percent (60%) of
the directors then in
<PAGE>
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office. The persons authorized to call special meetings of the Board may fix
any place, within the Association's normal lending territory, as the place for
holding any special meeting of the Board called by such persons.
SECTION 6. NOTICE. Written notice of any special meeting shall be
given to each director at least twenty-four (24) hours prior thereto when
delivered personally or by overnight courier, telegram, electronic transmission
or fax or at least five days prior thereto when delivered by mail. Such notice
shall be sent to the address at which the director is most likely to be reached.
Such notice shall be deemed to be delivered when deposited in the mail so
addressed, with postage prepaid, when delivered to the telegraph company if sent
by telegram, when transmission is made if sent by electronic transmission or by
fax or when delivered to the recipient if sent by overnight courier. Any
director may waive notice of any meeting by a writing filed with the Secretary.
The attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any meeting of the Board need be specified in the notice or waiver
of notice of such meeting.
SECTION 7. QUORUM. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board; but if less than such majority is present
at a meeting, a majority of the directors present may adjourn the meeting from
time to time. Notice of any adjourned meeting shall be given in the same manner
as prescribed by Section 6 of this Article III.
SECTION 8. MANNER OF ACTING. The act of the majority of the Board
present at a meeting at which a quorum is present shall be the act of the Board,
unless a greater number is prescribed by regulation of the Office or by these
bylaws.
SECTION 9. CONDUCT OF MEETINGS; ATTENDANCE AT MEETINGS BY CONFERENCE
TELEPHONE. Meetings of the Board shall be presided over by the President or
such other director or officer as the President shall designate. If the
President is absent from any meeting of the Board, the presiding officer shall
be the then senior member of the Board in terms of length of service on the
Board (which length of service shall include length of service on the Board of
Directors of any predecessors to the Association). The Secretary or, in his or
her absence, a person appointed by the President (or other presiding person)
shall act as secretary of the meeting. The President (or other person
presiding) shall conduct all meetings of the Board in accordance with the best
interests of the Association and shall have the authority and discretion to
establish reasonable procedural rules for the conduct of Board meetings. Any
one or more directors may participate in a meeting of the Board or a committee
of the Board by means of a conference telephone or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation by such means shall constitute presence in
person at any such meeting.
SECTION 10. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken by the Board, or by any committee thereof, at a meeting
may be taken without a meeting if a consent in writing, setting forth the action
so taken, shall be signed by all of the members of the Board or of the
committee, as the case may be.
<PAGE>
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SECTION 11. RESIGNATION. Any director may resign at any time by
sending a written notice of such resignation to the home office of the
Association addressed to the President or the Secretary. Unless otherwise
specified, such resignation shall take effect upon receipt by the President or
the Secretary. More than three consecutive absences from regular meetings of
the Board, unless excused by resolution of the Board, shall automatically
constitute a resignation, effective when such resignation is accepted by the
Board.
SECTION 12. VACANCIES. Any vacancy occurring on the Board may be
filled by the affirmative vote of a majority of the remaining directors although
less than a quorum of the Board. A director elected to fill a vacancy shall be
elected to serve until the next election of directors by the shareholders. Any
directorship to be filled by reason of an increase in the number of directors
may be filled by election by the Board for a term of office continuing only
until the next election of directors by the shareholders.
SECTION 13. COMPENSATION. Directors, as such, may receive a stated
salary for their services. By resolution of the Board, a reasonable fixed sum,
and reasonable expenses of attendance, if any, may be allowed for actual
attendance at each regular or special meeting of the Board. Members of either
standing or special committees may be allowed such compensation for actual
attendance at committee meetings as the Board may determine.
SECTION 14. PRESUMPTION OF ASSENT. A director of the Association who
is present at a meeting of the Board at which action on any Bank matter is taken
shall be presumed to have assented to the action taken unless his or her dissent
or abstention shall be entered in the minutes of the meeting or unless he or she
shall file a written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the Association within five days
after the date a copy of the minutes of the meeting is received. Such right to
dissent shall not apply to a director who voted in favor of such action.
SECTION 15. REMOVAL OF DIRECTORS. At a meeting of shareholders
called expressly for that purpose, any director may be removed for cause by a
vote of the holders of a majority of the shares then entitled to vote at an
election of directors. Whenever the holders of the shares of any class are
entitled to elect one or more directors by the provisions of the Association's
charter or supplemental sections thereto, the provisions of this section shall
apply, in respect to the removal of a director or directors so elected, to the
vote of the holders of the outstanding shares of that class and not to the vote
of the outstanding shares as a whole.
SECTION 16. DIRECTOR EMERITUS. Each director who has served as a
member of the Board who voluntarily resigns or retires as a director shall be
eligible to be elected to the honorary position of director emeritus by vote of
the Board at any meeting and will be privileged to attend all meetings of the
Board but shall not be eligible to vote on any matter.
<PAGE>
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ARTICLE IV
EXECUTIVE AND OTHER COMMITTEES
------------------------------
SECTION 1. APPOINTMENT. The board of directors, by resolution adopted
by a majority of the full board, may designate the chief executive officer and
two or more of the other directors to constitute an executive committee. The
designation of any committee pursuant to this Article IV and the delegation of
authority shall not operate to relieve the board of directors, or any director,
of any responsibility imposed by law or regulation.
SECTION 2. AUTHORITY. The executive committee, when the board of
directors is not in session, shall have and may exercise all of the authority of
the board of directors except to the extent, if any, that such authority shall
be limited by the resolution appointing the executive committee; and except also
that the executive committee shall not have the authority of the board of
directors with reference to: the declaration of dividends; the amendment of the
charter or bylaws of the Association, or recommending to the stockholders a plan
of merger, consolidation, or conversion; the sale, lease, or other disposition
of all or substantially all of the property and assets of the Association
otherwise than in the usual and regular course of its business; a voluntary
dissolution of the association; a revocation of any of the foregoing; or the
approval of a transaction in which any member of the executive committee,
directly or indirectly, has any material beneficial interest.
SECTION 3. TENURE. Subject to the provisions of Section 8 of this
Article IV, each member of the executive committee shall hold office until the
next regular annual meeting of the board of directors following his or her
designation and until a successor is designated as a member of the executive
committee.
SECTION 4. MEETINGS. Regular meetings of the executive committee may
be held without notice at such times and places as the executive committee may
fix from time to time by resolution. Special meetings of the executive committee
may be called by any member thereof upon not less than one day's notice stating
the place, date, and hour of the meeting, which notice may be written or oral.
Any member of the executive committee may waive notice of any meeting and no
notice of any meeting need be given to any member thereof who attends in person.
The notice of a meeting of the executive committee need not state the business
proposed to be transacted at the meeting.
SECTION 5. QUORUM. A majority of the members of the executive
committee shall constitute a quorum for the transaction of business at any
meeting thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
SECTION 6. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken by the executive committee at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the members of the executive committee.
<PAGE>
-9-
SECTION 7. VACANCIES. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full board of directors.
SECTION 8. RESIGNATIONS AND REMOVAL. Any member of the executive
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full board of directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the president or secretary of the Association. Unless otherwise
specified, such resignation shall take effect upon its receipt; the acceptance
of such resignation shall not be necessary to make it effective.
SECTION 9. PROCEDURE. The executive committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these bylaws. It shall keep regular minutes of its
proceedings and report the same to the board of directors for its information at
the meeting held next after the proceedings shall have occurred.
SECTION 10. OTHER COMMITTEES. The board of directors may by
resolution establish an audit, loan or other committee composed of directors as
they may determine to be necessary or appropriate for the conduct of the
business of the Association and may prescribe the duties, constitution, and
procedures thereof.
ARTICLE V
OFFICERS
--------
SECTION 1. POSITIONS. The officers of the Association shall be a
president, one or more vice presidents, a secretary, and a treasurer, each of
whom shall be elected by the board of directors. The board of directors may also
designate a chairman of the board as an officer. The president shall be the
chief executive officer, unless the board of directors designates the chairman
of the board as chief executive officer. The president shall be a director of
the Association. The offices of the secretary and treasurer may be held by the
same person, and a vice president may also be either the secretary or the
treasurer. The board of directors may designate one or more vice presidents as
executive vice president or senior vice president. The board of directors may
also elect or authorize the appointment of such other officers as the business
of the Association may require. The officers shall have such authority and
perform such duties as the board of directors may from time to time authorize or
determine. In the absence of action by the board of directors, the officers
shall have such powers and duties as generally pertain to their respective
offices.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the
Association shall be elected annually at the first meeting of the board of
directors held after each annual meeting of the shareholders. If the election of
officers is not held at such meeting, such election shall be held as soon
thereafter as possible. Each officer shall hold office until a successor has
been duly elected and qualified or until the officer's death, resignation, or
removal in the manner hereinafter provided. Election or appointment of an
officer, employee, or agent shall not of itself create contractual rights. The
board of directors may authorize the Association to enter into an employment
contract with any officer in accordance with regulations of the Office; but no
such
<PAGE>
-10-
contract shall impair the right of the board of directors to remove any officer
at any time in accordance with Section 3 of this Article V.
SECTION 3. REMOVAL. Any officer may be removed by the board of
directors whenever in its judgment the best interests of the Association will be
served thereby, but such removal, other than for cause, shall be without
prejudice to the contractual rights, if any, of the person so removed.
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise may be filled by the board
of directors for the unexpired portion of the term.
SECTION 5.
REMUNERATION. The remuneration of the officers shall be fixed from time to time
by the board of directors.
SECTION 6. AGE LIMITATION OF OFFICERS. No officer of the Association
who is described in section 12(c) of the Age Discrimination in Employment Act of
1967, as amended, shall continue to serve as an officer of the Association
beyond the end of the month in which his or her seventieth (70th) birthday
occurs. Unless otherwise provided by the board of directors by resolution, the
provisions of this Section 6 shall not be applicable to any person who has
served continuously as an officer of the Association from and after the date of
the adoption of these Bylaws.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
SECTION 1. CONTRACTS. To the extent permitted by regulations of the
Office, and except as otherwise prescribed by these bylaws with respect to
certificates for shares, the Board may authorize any officer, employee or agent
of the Association to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Association. Such authority may
be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
Association and no evidence of indebtedness shall be issued in its name unless
authorized by the Board. Such authority may be general or confined to specific
instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders
for the payment or money, notes or other evidences of indebtedness issued in the
name of the Association shall be signed by one or more officers, employees or
agents of the Association in such manner as shall from time to time be
determined by the Board.
SECTION 4. DEPOSITS. All funds of the Association not otherwise
employed shall be deposited from time to time to the credit of the Association
in any duly authorized depositories as the Board may select.
<PAGE>
-11-
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
------------------------------------------
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares
of capital stock of the Association shall be in such form as shall be determined
by the Board and approved by the Office. Such certificates shall be signed by
the chief executive officer or by any other officer of the Association
authorized by the Board, attested by the Secretary or an assistant secretary and
sealed with the corporate seal or a facsimile thereof. The signatures of such
officers upon a certificate may be facsimiles if the certificate is manually
signed on behalf of a transfer agent or a registrar other than the Association
itself or one of its employees. Each certificate for shares of capital stock
shall be consecutively numbered or otherwise identified. The name and address
of the person to whom the shares are issued, with the number of shares and date
of issue shall be entered on the stock transfer books of the Association. All
certificates surrendered to the Association for transfer shall be canceled, and
no new certificate shall be issued until the former certificate for a like
number of shares has been surrendered and canceled, except that in the case of a
lost or destroyed certificate, a new certificate may be issued upon such terms
and indemnity to the Association as the Board may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of capital stock
of the Association shall be made only on its stock transfer books. Authority
for such transfer shall be given only by the holder of record or by his or her
legal representative, who shall furnish proper evidence of such authority, or by
his or her attorney authorized by a duly executed power of attorney and filed
with the Association. Such transfer shall be made only on surrender for
cancellation of the certificate for such shares. The person in whose name
shares of capital stock stand on the books of the Association shall be deemed by
the Association to be the owner for all purposes.
ARTICLE VIII
FISCAL YEAR; ANNUAL AUDIT
-------------------------
The fiscal year of the Association shall end on the 31st day of
December of each year. The Association shall be subject to an annual audit as
of the end of its fiscal year by independent public accountants appointed by and
responsible to the Board. The appointment of such accountants shall be subject
to annual ratification by the shareholders.
ARTICLE IX
DIVIDENDS
---------
Subject to the terms of the Association's charter and the regulations
and orders of the Office, the Board may, from time to time, declare, and the
Association may pay, dividends on its outstanding shares of capital stock.
<PAGE>
-12-
ARTICLE X
CORPORATE SEAL
--------------
The Board shall provide a seal for the Association, which shall be two
concentric circles between which shall be the name of the Association. The year
of incorporation or an emblem may appear in the center.
ARTICLE XI
AMENDMENTS
----------
These bylaws may be amended in a manner consistent with regulations of
the Office at any time by a majority vote of the full Board or by a majority
vote of the votes cast by the shareholders of the Association at any legal
meeting.
ARTICLE XII
INDEMNIFICATION AND INSURANCE
-----------------------------
The Association shall indemnify its directors, officers and employees
in accordance with the following requirements:
SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION. (a) The following
definitions apply for purposes of this Article XII:
(i) Action. The term "action" means any judicial or administrative
proceeding, or threatened proceeding, whether civil, criminal or otherwise,
including any appeal or other proceeding for review;
(ii) Court. The term "court" includes, without limitation, any court
to which or in which any appeal or any proceeding for review is brought.
(iii) Final judgment. The term "final judgment" means a judgment,
decree or order that is not appealable or as to which the period for appeal
has expired with no appeal taken.
(iv) Settlement. The term "settlement" includes entry of a judgment
by consent or confession or a plea of guilty or nolo contendere.
(b) References in this Article XII to any individual or other person,
including any savings bank, shall include legal representatives, successors and
assigns thereof.
SECTION 2. INDEMNIFICATION. Subject to Sections 3 and 7 of this
Article XII, the Association shall indemnify any person against whom an action
is brought or threatened because that person is or was a director, officer or
employee of the Association for:
<PAGE>
-13-
(a) Any amount for which that person becomes liable under a judgment in
such action; and
(b) Reasonable costs and expenses, including reasonable attorneys'
fees, actually paid or incurred by that person in defending or settling
such action, or in enforcing his or her rights under this Article XII if he
or she attains a favorable judgment in such action.
SECTION 3. REQUIREMENTS FOR INDEMNIFICATION. Indemnification shall
be made to such person under Section 2 of this Article XII only if:
(a) Final judgment on the merits is in his or her favor; or
(b) In case of:
(i) settlement;
(ii) final judgment against him or her; or
(iii) final judgment in his or her favor, other than on the
merits,
if a majority of the disinterested directors of the Association
determines that he or she was acting in good faith within the scope of
his or her employment or authority as he or she could have reasonably
perceived it under the circumstances and for a purpose he or she could
reasonably have believed under the circumstances was in the best
interests of the Association or its shareholders.
However, no indemnification shall be made unless the Association gives the
Office at least 60 days notice of its intention to make such indemnification.
Such notice shall state the facts on which the action arose, the terms of any
settlement and any disposition of the matter by a court. Such notice, a copy
thereof and a certified copy of the resolution containing the required
determination by the Board shall be sent to the District Director of the Office,
who shall promptly acknowledge receipt thereof. The notice period shall run
from the date of such receipt. No such indemnification shall be made if the
Director of the Office advises the Association in writing, within such notice
period, of his or her objection thereto.
SECTION 4. INSURANCE. The Association may obtain insurance to
protect it and its directors, officers and employees from potential losses
arising from claims against any of them for alleged wrongful acts, or wrongful
acts committed in their capacity as directors, officers or employees. However,
the Association may not obtain insurance that provides for payment of losses of
any person incurred as a consequence of his or her willful or criminal
misconduct.
SECTION 5. PAYMENT OF EXPENSES. If a majority of the directors of
the Association concludes that, in connection with an action, any person
ultimately may become entitled to indemnification under this Article XII, the
directors may authorize payment of reasonable costs and expenses, including
reasonable attorneys' fees, arising from the defense or settlement of such
action. Nothing in this Section 5 shall prevent the directors of the
Association
<PAGE>
-14-
from imposing such conditions on a payment of expenses as they deem warranted
and in the interests of the Association. Before making advance payment of
expenses under this Section 5, the Association shall obtain an agreement that
the Association will be repaid if the person on whose behalf payment is made is
later determined not to be entitled to such indemnification.
SECTION 6. EXCLUSIVENESS OF PROVISIONS. The Association shall not
indemnify any person referred to in Section 2 of this Article XII or obtain
insurance referred to in Section 4 of this Article XII other than in accordance
with this Article XII.
SECTION 7. STATUTORY LIMITATION. The indemnification provided for in
Section 2 of this Article XII is subject to and qualified by 12 U.S.C. (S)
1821(k).
SECTION 8. SUBSEQUENT LEGISLATION OR REGULATION. If law and
regulations thereunder applicable to federal stock savings associations are
amended to expand the indemnification permitted to directors and officers of the
Association, then the Association shall indemnify such persons to the extent
permitted by such applicable law and regulations, as so amended.
<PAGE>
HOME BANCORP OF ELGIN, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF
COMMON STOCK, $.01 PAR VALUE PER SHARE, OF
HOME BANCORP OF ELGIN, INC.
(the "Corporation"), a corporation formed under the laws of the State of
Delaware. The shares represented by this certificate are transferable only on
the stock transfer books of the Corporation by the holder of record hereof, or
by his duly authorized attorney or legal representative, upon the surrender of
this certificate properly endorsed. This certificate is not valid until
countersigned and registered by the Corporation's transfer agent and registrar.
The shares represented by this certificate are not insured by the Federal
Deposit Insurance Corporation or any other government agency.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
executed by the facsimile signature of its duly authorized officers and has
caused a facsimile of its corporate seal to be hereunto affixed.
Dated:
By: By:
Kathleen A. Schroeder George L. Perucco
Secretary President and Chief
Executive Officer
<PAGE>
HOME BANCORP OF ELGIN, INC.
The shares represented by this certificate are issued subject to all the
provisions of the Certificate of Incorporation and Bylaws of HOME BANCORP OF
ELGIN, INC. (the "Corporation"), as from time to time amended (copies of which
are on file at the principal office of the Corporation), to all of which the
holder by acceptance hereof assents. The following description constitutes a
summary of certain provisions of, and is qualified in its entirety by reference
to, the Certificate of Incorporation.
The Certificate of Incorporation of the Corporation contains certain
provisions, applicable upon the effective date of the conversion of Home Federal
Savings and Loan Association of Elgin (the "Association") from a federally
chartered mutual savings and loan association to a federally chartered stock
savings and loan association under the name Home Federal Savings and Loan
Association of Elgin and the concurrent acquisition by the Corporation of all of
the outstanding capital stock of the Association, that restrict persons from
directly or indirectly acquiring or holding, or attempting to acquire or hold,
the beneficial ownership of in excess of 10% of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors ("Voting Stock"). The Certificate of Incorporation contains a
provision pursuant to which the holders of shares in excess of 10% of the Voting
Stock of the Corporation are limited to one one-hundredth (1/100) of one vote
per share with respect to such shares in excess of the 10% limitation. In
addition, the Corporation is authorized to refuse to recognize a transfer or
attempted transfer of any shares of Voting Stock to any person who beneficially
owns, or who the Corporation believes would become by virtue of such transfer
the beneficial owner of, in excess of 10% of the Voting Stock. These
restrictions are not applicable to underwriters in connection with a public
offering of the common stock, certain reorganization transactions described in
the Certificate of Incorporation or to acquisitions of Voting Stock by the
Corporation, any majority-owned subsidiary of the Corporation or any pension,
profit-sharing, stock bonus or other compensation plan maintained by the
Corporation or by a member of a controlled group of corporations or trades or
businesses of which the Corporation is a member for the benefit of the employees
of the Corporation and for any subsidiary, or any trust or custodial arrangement
established in connection with any such plan.
The Certificate of Incorporation of the Corporation contains provisions
providing that the affirmative vote of the holders of at least 80% of the Voting
Stock of the Corporation may be required to approve certain business
combinations and other transactions with persons who directly or indirectly
acquire or hold the beneficial ownership of in excess of 10% of the Voting Stock
of the Corporation.
The Corporation will furnish to any stockholder upon written request and
without charge, a statement of the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights. Such request may be made to the Corporation or to
its transfer agent and registrar.
_________________________
The following abbreviations when used in the inscription on the face of
this certificate shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT.....Custodian........
TEN ENT - as tenants by the (Cust) (Minor)
entireties
JT TEN - as joint tenants with under Uniform Gifts to Minors
right of survivorship Act...................
and not as tenants in (State)
common
Additional abbreviations may also be used though not in the above list
For value received,
________________________________________________________________________________
____________________________________ hereby sell, assign and transfer unto
_______________________________________________________________________shares of
Common Stock evidenced by this Certificate, and do hereby irrevocably constitute
and appoint
_______________________________________________________________________as
Attorney, to transfer the said shares on the books of the herein named
Association, with full power of substitution.
Date:______________________ ________________________________________________
Signature
________________________________________________
Signature
NOTICE: The signature to this assignment must correspond
with the name as written upon the face of the
Certificate, in every particular, without alteration or
enlargement, or any change whatsoever.
_________________________
<PAGE>
RESTRICTION
[Note: to be used only on certain shares]
The shares, or any interest therein, represented by this certificate may not
be sold or otherwise disposed of, directly or indirectly, by the registered
holder hereof for a period of one year from the date of issuance hereof, except
in the event of the death or judicial declaration of incompetency of the
registered holder.
<PAGE>
EXHIBIT 3.1
================================================================================
CERTIFICATE OF INCORPORATION
OF
HOME BANCORP OF ELGIN, INC.
UNDER SECTION 102 OF
THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
===============================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
NAME................................... 1
ARTICLE II
REGISTERED OFFICE AND AGENT...................... 1
ARTICLE III
PURPOSE................................ 1
ARTICLE IV
CAPITAL STOCK
Section 1. Shares, Classes and Series Authorized.......................... 1
Section 2. Designations, Powers, Preferences, Rights, Qualifications,
Limitations and Restrictions Relating to the Capital Stock... 2
ARTICLE V
LIMITATION ON BENEFICIAL OWNERSHIP OF STOCK
<TABLE>
<CAPTION>
<S> <C>
Section 1. Applicability of Article....................................... 3
Section 2. Prohibitions Relating to Beneficial Ownership of Voting Stock.. 3
Section 3. Excess Shares.................................................. 4
Section 4. Powers of the Board of Directors............................... 4
Section 5. Severability................................................... 5
Section 6. Exclusions..................................................... 5
</TABLE>
ARTICLE VI
BOARD OF DIRECTORS
<TABLE>
<CAPTION>
<S> <C>
Section 1. Number of Directors............................................ 5
Section 2. Classification of Board........................................ 6
Section 3. Vacancies...................................................... 6
Section 4. Removal of Directors........................................... 6
Section 5. Directors Elected by Preferred Stockholders.................... 7
Section 6. Evaluation of Acquisition Proposals............................ 7
Section 7. Power to Call Special Meeting of Stockholders.................. 7
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VII
<S> <C>
ACTION BY STOCKHOLDERS WITHOUT A MEETING................................. 7
</TABLE>
ARTICLE VIII
CERTAIN BUSINESS COMBINATIONS
<TABLE>
<CAPTION>
<S> <C>
Section 1. Higher Vote Required for Certain Business Combinations.......................... 8
Section 2. When Higher Vote is Not Required................................................ 8
Section 3. Definitions..................................................................... 11
Section 4. Powers of the Disinterested Directors........................................... 15
Section 5. Effect on Fiduciary Obligations of Interested Stockholders...................... 15
Section 6. Amendment, Repeal, Etc.......................................................... 15
</TABLE>
<TABLE>
<CAPTION>
ARTICLE IX
<S> <C>
LIMITATION OF DIRECTOR LIABILITY...................................... 16
</TABLE>
ARTICLE X
INDEMNIFICATION
<TABLE>
<CAPTION>
<S> <C>
Section 1. Actions, Suits or Proceedings Other than by or in the Right of the Corporation.. 16
Section 2. Actions or Suits by or in the Right of the Corporation.......................... 17
Section 3. Indemnification for Costs, Charges and Expenses of a Successful Party........... 18
Section 4. Indemnification for Expenses of a Witness....................................... 18
Section 5. Determination of Right to Indemnification....................................... 18
Section 6. Advancement of Costs, Charges and Expenses...................................... 19
Section 7. Procedure for Indemnification................................................... 19
Section 8. Settlement...................................................................... 20
Section 9. Other Rights; Continuation of Right to Indemnification;
Individual Contracts 20
Section 10. Savings Clause................................................................. 20
Section 11. Insurance...................................................................... 21
Section 12. Definitions.................................................................... 21
Section 13. Subsequent Amendment and Subsequent Legislation................................ 22
</TABLE>
ARTICLE XI
AMENDMENTS
<TABLE>
<CAPTION>
<S> <C>
Section 1. Amendments of Certificate of Incorporation...................................... 22
Section 2. Amendments of Bylaws............................................................ 23
</TABLE>
ii
[CAPTION]
<PAGE>
Page
----
ARTICLE XII
NOTICES......................................................... 24
iii
<PAGE>
CERTIFICATE OF INCORPORATION
OF
HOME BANCORP OF ELGIN, INC.
THE UNDERSIGNED, for the purpose of forming a corporation pursuant to
Section 102 of the General Corporation Law of the State of Delaware, does hereby
certify that this Certificate of Incorporation of Home Bancorp of Elgin, Inc.
was duly adopted in accordance with the provisions of Section 102 of the General
Corporation Law of the State of Delaware, and further certifies as follows:
ARTICLE I
NAME
The name of the corporation is Home Bancorp of
Elgin, Inc. (the "Corporation").
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of the registered office of the Corporation in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
CAPITAL STOCK
SECTION 1. SHARES, CLASSES AND SERIES AUTHORIZED. The total number
of shares of all classes of capital stock which the Corporation shall have
authority to issue is fifteen million (15,000,000) shares, of which three
million (3,000,000) shares shall be preferred stock,
<PAGE>
-2-
par value one cent ($.01) per share (the "Preferred Stock"), and twelve million
(12,000,000) shares shall be common stock, par value one cent ($.01) per share
(the "Common Stock"). The Preferred Stock and Common Stock are sometimes
hereinafter, collectively, referred to as the "Capital Stock."
SECTION 2. DESIGNATIONS, POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS RELATING TO THE CAPITAL STOCK. The following is a
statement of the designations, powers, preferences and rights in respect of the
classes of the Capital Stock, and the qualifications, limitations or
restrictions thereof, and of the authority with respect thereto expressly vested
in the Board of Directors of the Corporation (the "Board of Directors"):
(a) Preferred Stock. The Preferred Stock may be issued from time to
---------------
time in one or more series, the number of shares and any designation of each
series and the powers, preferences and rights of the shares of each series, and
the qualifications, limitations or restrictions thereof, to be as stated and
expressed in a resolution or resolutions providing for the issue of such series
adopted by the Board of Directors, subject to the limitations prescribed by law.
The Board of Directors in any such resolution or resolutions is expressly
authorized to state for each such series:
(i) the voting powers, if any, of the holders of stock of such series
in addition to any voting rights affirmatively required by law;
(ii) the rights of stockholders in respect of dividends, including,
without limitation, the rate or rates per annum and the time or times at
which (or the formula or other method pursuant to which such rate or rates
and such time or times may be determined) and conditions upon which the
holders of stock of such series shall be entitled to receive dividends and
other distributions, and whether any such dividends shall be cumulative or
non-cumulative and, if cumulative, the terms upon which such dividends
shall be cumulative;
(iii) whether the stock of each such series shall be redeemable by
the Corporation at the option of the Corporation or the holder thereof and,
if redeemable, the terms and conditions upon which the stock of such series
may be redeemed;
(iv) the amount payable and the rights or preferences to which the
holders of the stock of such series shall be entitled upon any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation;
(v) the terms, if any, upon which shares of stock of such series
shall be convertible into, or exchangeable for, shares of stock of any
other class or classes or of any other series of the same or any other
class or classes, including the price or prices or the rate or rates of
conversion or exchange and the terms of adjustment, if any; and
<PAGE>
-3-
(vi) any other powers, designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, so far as they are not inconsistent
with the provisions of this Certificate of Incorporation and to the full
extent now or hereafter permitted by the laws of the State of Delaware.
Subject to any limitations or restrictions stated in the resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting a series, the Board of Directors may by resolution or resolutions
likewise adopted increase (but not above the total number of authorized shares
of Preferred Stock) or decrease (but not below the number of shares of the
series then outstanding) the number of shares of the series subsequent to the
issue of shares of that series; and, in case the number of shares of any series
shall be so decreased, the shares constituting the decrease shall resume that
status that they had prior to the adoption of the resolution originally fixing
the number of shares constituting such series.
(b) Common Stock. All shares of Common Stock shall be identical to
------------
each other in every respect. The shares of Common Stock shall entitle the
holders thereof to one vote for each share on all matters on which stockholders
have the right to vote. The holders of Common Stock shall not be permitted to
cumulate their votes for the election of directors.
Subject to the preferences, privileges and powers with respect to each
class or series of Preferred Stock having any priority over the Common Stock,
and the qualifications, limitations or restrictions thereof, the holders of the
Common Stock shall have and possess all rights pertaining to the Capital Stock.
ARTICLE V
LIMITATION ON BENEFICIAL OWNERSHIP OF STOCK
SECTION 1. APPLICABILITY OF ARTICLE. The provisions of this Article
V shall become effective upon (i) the consummation of the conversion of Home
Federal Savings and Loan Association of Elgin, a savings and loan association
organized under the laws of the United States (the "Bank"), from a mutual to a
stock savings bank and (ii) the concurrent acquisition by the Corporation of all
of the outstanding capital stock of the Bank (the "Effective Date"). All terms
used in this Article V and not otherwise defined herein shall have the meanings
ascribed to such terms in Section 3 of Article VIII, below.
SECTION 2. PROHIBITIONS RELATING TO BENEFICIAL OWNERSHIP OF VOTING
STOCK. No Person (other than the Corporation, any Subsidiary or any pension,
profit-sharing, stock bonus or other compensation plan maintained by the
Corporation or by a member of a controlled group of corporations or trades or
businesses of which the Corporation is a member for the benefit of the employees
of the Corporation and/or any Subsidiary, or any trust or custodial arrangement
established in connection with any such plan) shall directly or indirectly
acquire or hold the beneficial ownership of more than ten percent (10%) of the
issued and outstanding shares of
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Voting Stock of the Corporation. Any Person so prohibited who directly or
indirectly acquires or holds the beneficial ownership of more than ten percent
(10%) of the issued and outstanding shares of Voting Stock in violation of this
Section 2 shall be subject to the provisions of Sections 3 and 4 of this Article
V, below. The Corporation is authorized to refuse to recognize a transfer or
attempted transfer of any shares of Voting Stock to any Person who beneficially
owns, or who the Corporation believes would become by virtue of such transfer
the beneficial owner of, more than ten percent (10%) of shares of the Voting
Stock.
SECTION 3. EXCESS SHARES. If, notwithstanding the foregoing
prohibition, a Person shall, voluntarily or involuntarily, become or attempt to
become the purported beneficial owner (the "Purported Owner") of shares of
Voting Stock in excess of ten percent (10%) of the issued and outstanding shares
of Voting Stock, the number of shares in excess of ten percent (10%) shall be
deemed to be "Excess Shares," and the holder thereof shall be entitled to cast
one one-hundredth (1/100) of one vote per share for each Excess Share.
The restrictions set forth in this Article V shall be noted
conspicuously on all certificates evidencing ownership of shares of Voting
Stock.
SECTION 4. POWERS OF THE BOARD OF DIRECTORS.
(a) The Board of Directors may, to the extent permitted by law, from
time to time establish, modify, amend or rescind, by Bylaw or otherwise,
regulations and procedures not inconsistent with the express provisions of this
Article V for the orderly application, administration and implementation of the
provisions of this Article V. Such procedures and regulations shall be kept on
file with the Secretary of the Corporation and with the Transfer Agent, shall be
made available for inspection by the public and, upon request, shall be mailed
to any holder of shares of Voting Stock of the Corporation.
(b) When it appears that a particular Person has become a Purported
Owner of Excess Shares in violation of Section 2 of this Article V, or of the
regulations or procedures of the Board of Directors with respect to this Article
V, and that the provisions of this Article V require application, interpretation
or construction, then a majority of the directors of the Corporation shall have
the power and duty to interpret all of the terms and provisions of this Article
V and to determine on the basis of information known to them after reasonable
inquiry all facts necessary to ascertain compliance with this Article V,
including, without limitation, (i) the number of shares of Voting Stock
beneficially owned by any Person or Purported Owner, (ii) whether a Person or
Purported Owner is an Affiliate or Associate of, or is acting in concert with,
any other Person or Purported Owner, (iii) whether a Person or Purported Owner
has an agreement, arrangement or understanding with any other Person or
Purported Owner as to the voting or disposition of any shares of the Voting
Stock, (iv) the application of any other definition or operative provision of
this Article V to the given facts or (v) any other matter relating to the
applicability or effect of this Article V.
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The Board of Directors shall have the right to demand that any Person
who is reasonably believed to be a Purported Owner of Excess Shares (or who
holds of record shares of Voting Stock beneficially owned by any Person
reasonably believed to be a Purported Owner in excess of such limit) supply the
Corporation with complete information as to (i) the record owner(s) of all
shares of Voting Stock beneficially owned by such Person or Purported Owner and
(ii) any other factual matter relating to the applicability or effect of this
Article V as may reasonably be requested of such Person or Purported Owner.
Any applications, interpretations, constructions or any other
determinations made by the Board of Directors pursuant to this Article V, in
good faith and on the basis of such information and assistance as was then
reasonably available for such purpose, shall be conclusive and binding upon the
Corporation and its stockholders, and neither the Corporation nor any of its
stockholders shall have the right to challenge any such application,
interpretation, construction, or determination.
SECTION 5. SEVERABILITY. In the event any provision (or portion
thereof) of this Article V shall be found to be invalid, prohibited or
unenforceable for any reason, the remaining provisions (or portions thereof) of
this Article V shall remain in full force and effect, and shall be construed as
if such invalid, prohibited or unenforceable provision had been stricken
herefrom or otherwise rendered inapplicable, it being the intent of this
Corporation and its stockholders that each such remaining provision (or portion
thereof) of this Article V remain, to the fullest extent permitted by law,
applicable and enforceable as to all stockholders, including Purported Owners,
if any, notwithstanding any such finding.
SECTION 6. EXCLUSIONS. This Article V shall not apply to (a) any
offer or sale with a view towards public resale made exclusively by the
Corporation to any underwriter or underwriters acting on behalf of the
Corporation, or to the selling group acting on such underwriter's or
underwriters' behalf, in connection with a public offering of the Common Stock;
or (b) any reclassification of securities (including any reverse stock split),
or recapitalization of the Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other transaction or
reorganization that does not have the effect, directly or indirectly, of
changing the beneficial ownership interests of the Corporation's stockholders,
other than pursuant to the exercise of any dissenters' appraisal rights, except
as a result of immaterial changes due to fractional share adjustments, which
changes do not exceed, in the aggregate, one percent (1%) of the issued and
outstanding shares of such class of equity or convertible securities.
ARTICLE VI
BOARD OF DIRECTORS
SECTION 1. NUMBER OF DIRECTORS. The number of directors of the
Corporation shall be as determined only by resolution of the Board of Directors,
but shall not be less than
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five (5) nor more than fifteen (15) (other than directors elected by holders of
shares of one or more series of Preferred Stock).
SECTION 2. CLASSIFICATION OF BOARD. Subject to the rights of any
holders of shares of any series of Preferred Stock that may be issued by the
Corporation pursuant to a resolution or resolutions of the Board of Directors
providing for such issuance, and subject to the provisions hereof, the directors
of the Corporation shall be divided into three classes with respect to term of
office, each class to contain, as near as may be possible, one-third of the
entire number of the Board, with the terms of office of one class expiring each
successive year. One class of directors shall be initially elected for a term
expiring at the annual meeting of stockholders to be held in 1997, another class
shall be initially elected for a term expiring at the annual meeting of
stockholders to be held in 1998 and another class shall be initially elected for
a term expiring at the annual meeting of stockholders to be held in 1999. At
each annual meeting of stockholders, the successors to the class of directors
(other than directors elected by holders of shares of one or more series of
Preferred Stock) whose term expires at that time shall be elected by the
stockholders to serve until the annual meeting of stockholders held three years
next following and until their successors shall be elected and qualified.
In the event of any intervening changes in the authorized number of
directors (other than directors elected by holders of shares of one or more
series of Preferred Stock), only the Board of Directors shall designate the
class or classes to which the increases or decreases in directorships shall be
apportioned in order more nearly to achieve equality of number of directors
among the classes; provided, however, that no such apportionment or
redesignation shall shorten the term of any incumbent director.
Unless and to the extent that the Bylaws so provide, elections of
directors need not be by written ballot.
SECTION 3. VACANCIES. Subject to the limitations prescribed by law
and this Certificate of Incorporation, all vacancies in the office of director,
including vacancies created by newly created directorships resulting from an
increase in the number of directors (subject to the provisions of Section 5 of
this Article VI relating to directors elected by holders of shares of one or
more series of Preferred Stock), shall be filled only by a vote of a majority of
the directors then holding office, whether or not a quorum, and any director so
elected shall serve for the remainder of the full term of the class of directors
in which the new directorship was created or the vacancy occurred and until such
director's successor shall be elected and qualified.
SECTION 4. REMOVAL OF DIRECTORS. Any or all of the directors
(subject to the provisions of Section 5 of Article VI relating to directors
elected by holders of shares of one or more series of Preferred Stock) may be
removed at any time, but only for cause, and any such removal shall require the
vote, in addition to any vote required by law, of not less than eighty percent
(80%) of the total votes eligible to be cast by the holders of all outstanding
shares of Capital Stock entitled to vote generally in the election of directors
at a meeting of stockholders expressly called for that purpose. For purposes of
this Section 4, conduct worthy of removal
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for "cause" shall include, but not be limited to (a) conduct as a director of
the Corporation or any subsidiary of the Corporation, which conduct involves
willful material misconduct, breach of fiduciary duty involving personal
pecuniary gain or gross negligence in the performance of duties, (b) conduct,
whether or not as a director of the Corporation or a subsidiary of the
Corporation, which conduct involves dishonesty or breach of fiduciary duty and
is punishable by imprisonment for a term exceeding one year under state or
federal law or (c) removal of such person from the Board of Directors of the
Bank, if such person is so serving, in accordance with the Federal Stock Charter
and Bylaws of the Bank.
SECTION 5. DIRECTORS ELECTED BY PREFERRED STOCKHOLDERS.
Notwithstanding anything set forth in this Certificate of Incorporation to the
contrary, the qualifications, term of office and provisions governing vacancies,
removal and other matters pertaining to directors elected by holders of shares
of one or more series of Preferred Stock shall be as set forth in a resolution
or resolutions adopted by the Board of Directors setting forth the designations,
preferences and rights relating to any such series of Preferred Stock pursuant
to Article IV, Section 2 hereof.
SECTION 6. EVALUATION OF ACQUISITION PROPOSALS. The Board of
Directors of the Corporation, when evaluating any offer to the Corporation or to
the stockholders of the Corporation from another party to (a) purchase for cash,
or exchange any securities or property for, any outstanding equity securities of
the Corporation, (b) merge or consolidate the Corporation with another
corporation or (c) purchase or otherwise acquire all or substantially all of the
properties and assets of the Corporation, shall, in connection with the exercise
of its judgment in determining what is in the best interests of the Corporation
and its stockholders, give due consideration to the extent permitted by law not
only to the price or other consideration being offered, but also to all other
relevant factors including, without limitation, the financial and managerial
resources and future prospects of the other party, the possible effects on the
business of the Corporation and its subsidiaries and on the employees,
customers, suppliers and creditors of the Corporation and its subsidiaries and
the effects on the communities in which the Corporation's and its subsidiaries'
facilities are located.
SECTION 7. POWER TO CALL SPECIAL MEETING OF STOCKHOLDERS. Special
meetings of stockholders for any purpose may be called at any time only by
resolution of at least three-fourths of the Directors of the Corporation then in
office or by the President. At a special meeting, no business shall be
transacted and no corporate action shall be taken other than that stated in the
notice of meeting prescribed by the Bylaws of the Corporation.
ARTICLE VII
ACTION BY STOCKHOLDERS WITHOUT A MEETING
Except as otherwise provided for or fixed pursuant to the provisions
of Article IV of this Certificate of Incorporation relating to the rights of
holders of shares of any series of
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Preferred Stock, no action that is required or permitted to be taken by the
stockholders of the Corporation at any annual or special meeting of stockholders
may be effected by written consent of stockholders in lieu of a meeting of
stockholders.
ARTICLE VIII
CERTAIN BUSINESS COMBINATIONS
SECTION 1. HIGHER VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS.
In addition to any affirmative vote required by law, by this Certificate of
Incorporation or by the provisions of any series of Preferred Stock that may at
the time be outstanding, and except as otherwise expressly provided for in
Section 2 of this Article VIII, any Business Combination, as hereinafter
defined, shall require the affirmative vote of not less than eighty percent
(80%) (to the extent permitted by law, but in no event less than two-thirds) of
the total number of votes eligible to be cast by the holders of all outstanding
shares of Voting Stock, voting together as a single class (it being understood,
that for purposes of this Article VIII, each share of the Voting Stock shall
have the number of votes granted to it pursuant to Article IV and Article V of
this Certificate of Incorporation or in any resolution or resolutions of the
Board of Directors for issuance of shares of Preferred Stock), together (to the
extent permitted by law) with the affirmative vote of at least fifty percent
(50%) of the total number of votes eligible to be cast by the holders of all
outstanding shares of the Voting Stock not beneficially owned by the Interested
Stockholder involved or any Affiliate or Associate thereof, voting together as a
single class. Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage may be specified, by
law or in any agreement with any national securities exchange or otherwise.
SECTION 2. WHEN HIGHER VOTE IS NOT REQUIRED. The provisions of
Section 1 of this Article VIII shall not be applicable to any particular
Business Combination, and such Business Combination shall require only such
affirmative vote as is required by law or any other provision of this
Certificate of Incorporation, if either (i) the Business Combination shall have
been approved by a majority of the Disinterested Directors then in office or
(ii) all of the conditions specified in the following subsections (a) through
(g) are met:
(a) The aggregate amount of the cash and the Fair Market Value as of
the Consummation Date of consideration other than cash to be received per share
by holders of Common Stock in such Business Combination shall be at least equal
to the higher of the following:
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes, soliciting dealers' fees, dealer-
management compensation and other expenses, including, but not limited to,
costs of newspaper advertisements, printing expenses and attorneys' fees
and expenses) paid by the Interested Stockholder for any shares of Common
Stock acquired by it (A) within the two year period
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immediately prior to the Announcement Date, or (B) in the transaction in
which it became an Interested Stockholder, whichever is higher, plus
interest compounded annually from the Determination Date through the
Consummation Date at the prime rate of interest of Citibank, N.A. (or other
major bank headquartered in New York City selected by a majority of the
Disinterested Directors then in office) from time to time in effect in New
York City, less the aggregate amount of any cash dividends paid and the
Fair Market Value of any dividends paid, other than in cash, per share of
Common Stock from the Determination Date through the Consummation Date in
an amount up to but not exceeding the amount of such interest payable per
share of Common Stock; or
(ii) the Fair Market Value per share of Common Stock on the
Announcement Date or on the Determination Date, whichever is higher.
(b) The aggregate amount of the cash and the Fair Market Value as of
the Consummation Date of consideration other than cash to be received per share
by holders of shares of any class or series of outstanding Voting Stock, other
than Common Stock, in such Business Combination shall be at least equal to the
highest of the following (such requirement being applicable to each such class
or series of outstanding Voting Stock, whether or not the Interested Stockholder
has previously acquired any shares of such class or series of Voting Stock):
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes, soliciting dealers' fees, dealer-
management compensation, and other expenses, including, but not limited to,
costs of newspaper advertisements, printing expenses and attorneys' fees
and expenses) paid by the Interested Stockholder for any shares of such
class or series of Voting Stock acquired by it (A) within the two year
period immediately prior to the Announcement Date, or (B) in the
transaction in which it became an Interested Stockholder, whichever is
higher, plus interest compounded annually from the Determination Date
through the Consummation Date at the prime rate of interest of Citibank,
N.A. (or other major bank headquartered in New York City selected by a
majority of the Disinterested Directors then in office) from time to time
in effect in New York City, less the aggregate amount of any cash dividends
paid, and the Fair Market Value of any dividends paid other than in cash,
per share of such class or series of Voting Stock from the Determination
Date through the Consummation Date in an amount up to but not exceeding the
amount of such interest payable per share of such class or series of Voting
Stock;
(ii) (if applicable) the highest preferential amount per share to
which the holders of shares of such class or series of Voting Stock are
entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; or
(iii) the Fair Market Value per share of such class or series of
Voting Stock on the Announcement Date or on the Determination Date,
whichever is higher.
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(c) The consideration to be received by holders of any particular
class or series of outstanding Voting Stock (including Common Stock) in such
Business Combination shall be in cash or in the same form as the Interested
Stockholder has previously paid for shares of such class or series of Voting
Stock. If the Interested Stockholder has paid for shares of any class or series
of Voting Stock with varying forms of consideration, the form of consideration
for such class or series of Voting Stock in such Business Combination shall be
either cash or the form used to acquire the largest number of shares of such
class or series of Voting Stock previously acquired by it.
(d) The holders of all outstanding shares of Voting Stock not
beneficially owned by the Interested Stockholder immediately prior to the
Consummation Date shall be entitled to receive in such Business Combination cash
or other consideration for their shares in compliance with subsections (a), (b)
and (c) of this Section 2.
(e) After the Determination Date and prior to the Consummation Date:
(i) except as approved by a majority of the Disinterested Directors
then in office, there shall have been no failure to declare and pay, or set
aside for payment, at the regular date therefor any full quarterly
dividends (whether or not cumulative) on any outstanding Preferred Stock;
(ii) there shall have been (A) no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to reflect any
subdivision of the Common Stock), except as approved by a majority of the
Disinterested Directors then in office, and (B) an increase in such annual
rate of dividends as necessary to reflect any reclassification (including
any reverse stock split), recapitalization, reorganization or any similar
transaction that has the effect of reducing the number of outstanding
shares of the Common Stock, unless the failure so to increase such annual
rate is approved by a majority of the Disinterested Directors then in
office; and
(iii) such Interested Stockholder shall not have become the
beneficial owner of any additional shares of Voting Stock except (a) as
part of the transaction that results in such Interested Stockholder
becoming an Interested Stockholder, (b) as the result of a stock dividend
paid by the Corporation or (c) upon the exercise or conversion of
securities of the Corporation issued pro rata to all holders of Common
Stock which are exercisable for or convertible into shares of Voting Stock.
(f) After the Determination Date, the Interested Stockholder shall not
have received the benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided by or through the
Corporation or an Affiliate of the Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise.
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(g) A proxy or information statement describing the proposed Business
Combination in accordance with the requirements of the Securities Exchange Act
of 1934, as amended, whether or not the Corporation is then subject to such
requirements, and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations) shall be mailed to
stockholders of the Corporation at least thirty (30) days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act or
subsequent provisions). The first page of such proxy or information statement
shall prominently display the recommendation, if any, that a majority of the
Disinterested Directors then in office may choose to make to the holders of
Voting Stock regarding the proposed Business Combination. Such proxy or
information statement shall also contain, if a majority of the Disinterested
Directors then in office so requests, an opinion of a reputable investment
banking firm (which firm shall be engaged solely on behalf of the stockholders
of the Corporation other than the Interested Stockholder and shall be selected
by a majority of the Disinterested Directors then in office, furnished with all
information it reasonably requests and paid a reasonable fee for its services by
the Corporation upon the Corporation's receipt of such opinion) as to the
fairness (or lack of fairness) of the terms of the proposed Business Combination
from the point of view of the holders of Voting Stock other than the Interested
Stockholder.
SECTION 3. DEFINITIONS. For purposes of this Article VIII, the
following terms shall have the following meanings:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended, as in effect on the date of
filing by the Secretary of State of the State of Delaware of this Certificate of
Incorporation, whether or not the Corporation was then subject to such rule.
(b) "Announcement Date" shall mean the date of the first public
announcement of the proposal of the Business Combination.
(c) A Person shall be deemed the "beneficial owner," or to have
"beneficial ownership," of any shares of Voting Stock that:
(i) such Person or any of its Affiliates or Associates beneficially
owns, directly or indirectly; or
(ii) such Person or any or its Affiliates or Associates, directly or
indirectly, has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (but a Person shall not be deemed to be the
beneficial owner of any Voting Stock solely by reason of an agreement,
arrangement or understanding with the Corporation to effect a Business
Combination) or upon the exercise of conversion rights, exchange rights,
warrants or
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options, or otherwise, or (B) the right to vote, or to direct the vote of,
pursuant to any agreement, arrangement or understanding; or
(iii) is beneficially owned, directly or indirectly, by any other
Person with which such first mentioned Person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of any shares of Voting Stock;
provided, however, that no director or officer of the Corporation (nor any
Affiliate or Associate of any such director or officer) (y) shall, solely by
reason of any or all of such directors or officers acting in their capacities as
such, be deemed, for any purposes hereof, to beneficially own any Voting Stock
of the Corporation beneficially owned by any other such director or officer (or
any Affiliate or Associate thereof) or (z) shall be deemed to beneficially own
any Voting Stock of the Corporation owned by any pension, profit-sharing, stock
bonus or other compensation plan maintained by the Corporation or by a member of
a controlled group of corporations or trades or businesses of which the
Corporation is a member for the benefit of employees of the Corporation and/or
any Subsidiary, or any trust or custodial arrangement established in connection
with any such plan, not specifically allocated to such Person's personal
account.
(d) The term "Business Combination" shall mean any transaction that is
referred to in any one or more of the following paragraphs (i) through (vi):
(i) any merger or consolidation of the Corporation or any Subsidiary
(other than a merger pursuant to Section 253 of the General Corporation Law
of the State of Delaware) with (A) any Interested Stockholder or (B) any
other entity (whether or not such other entity is itself an Interested
Stockholder) which is, or after such merger or consolidation would be, an
Affiliate or Associate of any Interested Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder of any assets of the Corporation or any Subsidiary having an
aggregate Fair Market Value equal to five percent (5%) or more of the total
assets of the Corporation or the Subsidiary in question, as of the end of
its most recent fiscal year ending prior to the time the determination is
being made; or
(iii) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder other than (A) on a
pro rata basis to all holders of Voting Stock, (B) in connection with the
exercise or conversion of securities issued pro rata that are exercisable
for, or convertible into, securities of the Corporation or any Subsidiary
of the Corporation or (C) the issuance or transfer of such securities
having an aggregate Fair
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Market Value equal to less than one percent (1%) of the aggregate Fair
Market Value of all of the outstanding Capital Stock; or
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder; or
(v) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Stockholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class
or series of equity or convertible securities of the Corporation or any
Subsidiary that is directly or indirectly owned by any Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder,
except as a result of immaterial changes due to fractional share
adjustments, which changes do not exceed, in the aggregate, 1% of the
issued and outstanding shares of such class or series of equity or
convertible securities; or
(vi) the acquisition by the Corporation or a Subsidiary of any
securities of an Interested Stockholder or its Affiliates or Associates.
(e) "Consummation Date" shall mean the date of the consummation of the
Business Combination.
(f) "Determination Date" shall mean the date on which the Interested
Stockholder became an Interested Stockholder.
(g) "Disinterested Director" shall mean any member of the Board of
Directors of the Corporation who is not an Affiliate or Associate of, or
otherwise affiliated with, the Interested Stockholder and who either was a
member of the Board of Directors prior to the Determination Date, or was
recommended for election by a majority of the Disinterested Directors in office
at the time such director was nominated for election. If there is no Interested
Stockholder, each member of the Board of Directors shall be a Disinterested
Director.
(h) "Fair Market Value" shall mean (i) in the case of stock, the
highest closing price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange listed stocks or, if such stock is not quoted on the Composite Tape,
the New York Stock Exchange, or, if such stock is not listed on such Exchange,
on the principal United States securities exchange registered under the
Securities Exchange Act of 1934, as amended, on which such stock is listed, or,
if such stock is not listed on any such exchange, the highest closing bid
quotation with respect to a share of such stock during the 30-day period
preceding the date in question on the Nasdaq Stock Market or any system then in
use, or, if no such quotation is available, the fair market value on the date in
question of a share of such stock as determined in good faith by a majority of
the
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Disinterested Directors then in office, in each case with respect to any class
of stock, appropriately adjusted for any dividend or distribution in shares of
such stock or any stock split or reclassification of outstanding shares of such
stock into a greater number of shares of such stock or any combination or
reclassification of outstanding shares of such stock into a smaller number of
shares of such stock; and (ii) in the case of property other than cash or stock,
the fair market value of such property on the date in question as determined in
good faith by a majority of the Disinterested Directors then in office.
(i) References to "highest per share price" shall in each case with
respect to any class of stock reflect an appropriate adjustment for any dividend
or distribution in shares of such stock or any stock split or reclassification
of outstanding shares of such stock into a greater number of shares of such
stock or any combination or reclassification of outstanding shares of such stock
into a smaller number of shares of such stock.
(j) "Interested Stockholder" shall mean any Person (other than the
Corporation, any Subsidiary or any pension, profit-sharing, stock bonus or other
compensation or employee benefit plan maintained by the Corporation or by a
member of a controlled group of corporations or trades or businesses of which
the corporation is a member for the benefit of employees of the Corporation
and/or any Subsidiary, or any trust or custodial arrangement established in
connection with any such plan) who or which:
(i) is the beneficial owner of ten percent (10%) or more of the
Voting Stock; or
(ii) is an Affiliate or Associate of the Corporation and at any time
within the two-year period immediately prior to the date in question was
the beneficial owner of ten percent (10%) or more of the then outstanding
shares of Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares of
Voting Stock that were at any time within the two-year period immediately
prior to the date in question beneficially owned by any other Interested
Stockholder, if such assignment or succession shall have occurred in the
course of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933, as amended, and
not executed on any exchange or in the over-the-counter market through a
registered broker or dealer.
In determining whether a Person is an Interested Stockholder pursuant to this
subsection (j), the number of shares of Voting Stock deemed to be outstanding
shall include shares deemed owned through application of subsection (c) of this
Section 3 but shall not include any other shares of Voting Stock that may be
issuable pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
(k) "Person" shall mean any corporation, partnership, trust,
unincorporated organization or association, syndicate, any other entity or a
natural person, together with any Affiliate or Associate of such Person or any
other Person acting in concert with such Person.
<PAGE>
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(l) "Subsidiary" shall mean any corporation or entity of which a
majority of any class or series of equity securities is owned, directly or
indirectly, by the Corporation; provided, however, that for the purposes of the
definition of Interested Stockholder set forth in subsection (j) of this Section
3, the term "Subsidiary" shall mean only a corporation or entity of which a
majority of each class or series of outstanding voting securities is owned,
directly or indirectly, by the Corporation.
(m) "Voting Stock" shall mean all of the outstanding shares of Capital
Stock entitled to vote generally in the election of directors.
SECTION 4. POWERS OF THE DISINTERESTED DIRECTORS. When it appears
that a particular Person may be an Interested Stockholder and that the
provisions of this Article VIII need to be applied or interpreted, then a
majority of the directors of the Corporation who would qualify as Disinterested
Directors shall have the power and duty to interpret all of the terms and
provisions of this Article VIII, and to determine on the basis of information
known to them after reasonable inquiry of all facts necessary to ascertain
compliance with this Article VIII, including, without limitation, (a) whether a
Person is an Interested Stockholder, (b) the number of shares of Voting Stock
beneficially owned by any Person, (c) whether a Person is an Affiliate or
Associate of another, (d) the Fair Market Value of (i) the assets that are the
subject of any Business Combination, (ii) the securities to be issued or
transferred by the Corporation or any Subsidiary in any Business Combination,
(iii) the consideration other than cash to be received by holders of shares of
any class or series of Common Stock or Voting Stock other than Common Stock in
any Business Combination, (iv) the outstanding Capital Stock or (v) any other
item the Fair Market Value of which requires determination pursuant to this
Article VIII and (e) whether all of the applicable conditions set forth in
Section 2 of this Article VIII have been met with respect to any Business
Combination.
Any construction, application or determination made by the Board of
Directors or the Disinterested Directors pursuant to this Article VIII, in good
faith and on the basis of such information and assistance as was then reasonably
available for such purpose, shall be conclusive and binding upon the Corporation
and its stockholders, and neither the Corporation nor any of its stockholders
shall have the right to challenge any such construction, application or
determination.
SECTION 5. EFFECT ON FIDUCIARY OBLIGATIONS OF INTERESTED
STOCKHOLDERS. Nothing contained in this Article VIII shall be construed to
relieve any Interested Stockholder from any fiduciary obligations imposed by
law.
SECTION 6. AMENDMENT, REPEAL, ETC. Notwithstanding any other
provisions of this Certificate of Incorporation or the Bylaws (and
notwithstanding the fact that a lesser percentage may be specified by law, this
Certificate of Incorporation or the Bylaws of the Corporation), in addition to
any affirmative vote required by applicable law and any voting rights granted to
or held by holders of Preferred Stock, any amendment, alteration, repeal or
rescission of any provision of this Article VIII must also be approved by either
(i) a majority
<PAGE>
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of the Disinterested Directors or (ii) the affirmative vote of not less than
eighty percent (80%) of the total number of votes eligible to be cast by the
holders of all outstanding shares of the Voting Stock, voting together as a
single class, together with the affirmative vote of not less than fifty percent
(50%) of the total number of votes eligible to be cast by the holders of all
outstanding shares of the Voting Stock not beneficially owned by any Interested
Stockholder or Affiliate or Associate thereof, voting together as a single
class.
ARTICLE IX
LIMITATION OF DIRECTOR LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is expressly prohibited by the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended.
Any amendment, termination or repeal of this Article IX or any
provisions hereof shall not adversely affect or diminish in any way any right or
protection of a director of the Corporation existing with respect to any act or
omission occurring prior to the time of the final adoption of such amendment,
termination or repeal.
In addition to any requirements of law or of any other provisions of
this Certificate of Incorporation, the affirmative vote of the holders of not
less than eighty percent (80%) of the total number of votes eligible to be cast
by the holders of all outstanding shares of Capital Stock entitled to vote
thereon shall be required to amend, alter, rescind or repeal any provision of
this Article IX.
ARTICLE X
INDEMNIFICATION
SECTION 1. ACTIONS, SUITS OR PROCEEDINGS OTHER THAN BY OR IN THE
RIGHT OF THE CORPORATION. To the fullest extent permitted by the General
Corporation Law of the State of Delaware, the Corporation shall indemnify any
person who is or was or has agreed to become a director or officer of the
Corporation who was or is made a party to 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 or she is or was or has
agreed to become a director or officer of the Corporation, or is was serving or
has agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and the Corporation may indemnify any other person who
is or was
<PAGE>
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or has agreed to become an employee or agent of the Corporation who was or is
made a party to 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 or she is or was or has agreed to become an employee
or agent of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or by reason
of any action alleged to have been taken or omitted in such capacity, against
costs, charges, expenses (including attorneys' fees and expenses), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him or
her or on his or her behalf in connection with such action, suit or proceeding
and any appeal therefrom, if he or she acted in good faith and in a manner he or
she 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 or her 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 which he
or she reasonably believed to be in, or not opposed to, the best interests of
the Corporation and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
Notwithstanding anything contained in this Article X, the Corporation shall not
be obligated to indemnify any director or officer in connection with an action,
suit or proceeding, or part thereof, initiated by such person against the
Corporation unless such action, suit or proceeding, or part thereof, was
authorized or consented to by the Board of Directors.
SECTION 2. ACTIONS OR SUITS BY OR IN THE RIGHT OF THE CORPORATION.
To the fullest extent permitted by the General Corporation Law of the State of
Delaware, the Corporation shall indemnify any person who is or was or has agreed
to become a director or officer of the Corporation 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 or she is or was or has agreed to become a director
or officer of the Corporation, or is was serving or has agreed to serve at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or by reason
of any action alleged to have been taken or omitted in such capacity, and the
Corporation may indemnify any other person who is or was or has agreed to become
an employee or agent of the Corporation who was or is made 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 or she is or was or has agreed to become an employee
or agent of the Corporation, or is was serving or has agreed to serve at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or by reason
of any action alleged to have been taken or omitted in such capacity, against
costs, charges and expenses (including attorneys' fees and expenses) actually
and reasonably incurred by him or her or on his or her behalf in connection with
the defense or settlement of such action or suit and any appeal therefrom, if he
or she acted in good faith and in a manner he or she reasonably believed
<PAGE>
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to be in, or not opposed to, the best interests of the Corporation, except no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of such liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such costs, charges and expenses which the Court of Chancery or
such other court shall deem proper. Notwithstanding anything contained in this
Article X, the Corporation shall not be obligated to indemnify any director or
officer in connection with an action or suit, or part thereof, initiated by such
person against the Corporation unless such action or suit, or part thereof, was
authorized or consented to by the Board of Directors.
SECTION 3. INDEMNIFICATION FOR COSTS, CHARGES AND EXPENSES OF A
SUCCESSFUL PARTY. To the extent that a director, officer, employee or agent of
the Corporation has been successful, on the merits or otherwise (including,
without limitation, the dismissal of an action without prejudice), in defense of
any action, suit or proceeding referred to in Section 1 or 2 of this Article X,
or in defense of any claim, issue or matter therein, such person shall be
indemnified against all costs, charges and expenses (including attorneys' fees
and expenses) actually and reasonably incurred by such person or on such
person's behalf in connection therewith.
SECTION 4. INDEMNIFICATION FOR EXPENSES OF A WITNESS. To the extent
that any person who is or was or has agreed to become a director or officer of
the Corporation is made a witness to any action, suit or proceeding to which he
or she is not a party by reason of the fact that he or she was, is or has agreed
to become a director or officer of the Corporation, or is or was serving or has
agreed to serve as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, at the
request of the Corporation, such person shall be indemnified against all costs,
charges and expenses actually and reasonably incurred by such person or on such
person's behalf in connection therewith.
To the extent that any person who is or was or has agreed to become an
employee or agent of the Corporation is made a witness to any action, suit or
proceeding to which he or she is not a party by reason of the fact that he or
she was, is or has agreed to become an employee or agent of the Corporation, or
is or was serving or has agreed to serve as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, at the request of the Corporation, such person may be indemnified
against all costs, charges and expenses actually and reasonably incurred by such
person or on such person's behalf in connection therewith.
SECTION 5. DETERMINATION OF RIGHT TO INDEMNIFICATION. Any
indemnification under Section 1 or 2 of this Article X (unless ordered by a
court) shall be made, if at all, by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper under the circumstances because he or she
has met the applicable standard of conduct set forth in Section 1 or 2 of this
Article X. Any indemnification under Section 4 of this Article X (unless
ordered by a court) shall be made, if at
<PAGE>
-19-
all, by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper under the circumstances. Such determinations shall be made by (a) a
majority vote of directors who were not parties to such action, suit or
proceeding even though less than a quorum of the Board of Directors or (b) if
there are no such directors, or if such directors so direct, by independent
counsel in a written opinion or (c) by the stockholders of the Corporation. To
obtain indemnification under this Article X, any person referred to in Section
1, 2, 3 or 4 of this Article X shall submit to the Corporation a written
request, including therewith such documents as are reasonably available to such
person and are reasonably necessary to determine whether and to what extent such
person is entitled to indemnification.
SECTION 6. ADVANCEMENT OF COSTS, CHARGES AND EXPENSES. Costs,
charges and expenses (including attorneys' fees and expenses) incurred by or on
behalf of a director or officer in defending a civil or criminal action, suit or
proceeding referred to in Section 1 or 2 of this Article X shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding; provided, however, that the payment of such costs, charges and
expenses incurred by or on behalf of a director or officer in advance of the
final disposition of such action, suit or proceeding shall be made only upon
receipt of a written undertaking, by or on behalf of the director or officer to
repay all amounts so advanced in the event that it shall ultimately be
determined that such director or officer is not entitled to be indemnified by
the Corporation as authorized in this Article X or by law. No security shall be
required for such undertaking and such undertaking shall be accepted without
reference to the recipient's financial ability to make repayment. The majority
of the directors who were not parties to such action, suit or proceeding may,
upon approval of such director or officer of the Corporation, authorize the
Corporation's counsel to represent such person, in any action, suit or
proceeding, whether or not the Corporation is a party to such action, suit or
proceeding.
SECTION 7. PROCEDURE FOR INDEMNIFICATION. Any indemnification under
Section 1, 2, 3 or 4 of this Article X or advancement of costs, charges and
expenses under Section 6 of this Article X shall be made promptly, and in any
event within sixty (60) days (except indemnification to be determined by
stockholders which will be determined at the next annual meeting of
stockholders), upon the written request of the director or officer. The right
to indemnification or advancement of expenses as granted by this Article X shall
be enforceable by the director, officer, employee or agent in any court of
competent jurisdiction in the event the Corporation denies such request, in
whole or in part, or if no disposition of such request is made within sixty (60)
days of the request. Such person's costs, charges and expenses incurred in
connection with successfully establishing his or her right to indemnification or
advancement, to the extent successful, in any such action shall also be
indemnified by the Corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for the advancement of costs, charges
and expenses under Section 6 of this Article X where the required undertaking,
if any, has been received by the Corporation) that the claimant has not met the
standard of conduct set forth in Section 1 or 2 of this Article X, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its directors, its independent counsel and its
stockholders) to have made a determination prior to
<PAGE>
-20-
the commencement of such action that indemnification of the claimant is proper
in the circumstances because he or she has met the applicable standard of
conduct set forth in Section 1 or 2 of this Article X, nor the fact that there
has been an actual determination by the Corporation (including its directors,
its independent counsel and its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
SECTION 8. SETTLEMENT. The Corporation shall not be obligated to
reimburse the costs, charges and expenses of any settlement to which it has not
agreed. If, in any action, suit or proceeding (including any appeal) within the
scope of Section 1 or 2 of this Article X, the person to be indemnified shall
have unreasonably failed to enter into a settlement thereof offered or assented
to by the opposing party or parties in such action, suit or proceeding, then,
notwithstanding any other provision of this Article X, the indemnification
obligation of the Corporation to such person in connection with such action,
suit or proceeding shall not exceed the total of the amount at which settlement
could have been made and the expenses incurred by or on behalf of such person
prior to the time such settlement could reasonably have been effected.
SECTION 9. OTHER RIGHTS; CONTINUATION OF RIGHT TO INDEMNIFICATION;
INDIVIDUAL CONTRACTS. The indemnification and advancement of costs, charges and
expenses provided by or granted pursuant to this Article X shall not be deemed
exclusive of any other rights to which any person seeking indemnification or
advancement of costs, charges and expenses may be entitled under law (common or
statutory) or any Bylaw, agreement, policy of indemnification insurance or vote
of stockholders or directors or otherwise, both as to action in his or her
official capacity and as to action in any other capacity while holding office,
and shall continue as to any person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the legatees, heirs,
distributees, executors and administrators of any such person. Nothing
contained in this Article X shall be deemed to prohibit the Corporation from
entering into, and the Corporation is specifically authorized to enter into,
agreements with directors, officers, employees and agents providing
indemnification rights and procedures different from those set forth herein.
All rights to indemnification under this Article X shall be deemed to be a
contract between the Corporation and each director, officer, employee or agent
of the Corporation who serves or served in such capacity (or is was serving or
has agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise) at any time while this Article X is in effect.
SECTION 10. SAVINGS CLAUSE. If this Article X or any portion shall
be invalidated on any ground by any court of competent jurisdiction, the
Corporation shall nevertheless indemnify each director or officer, and may
indemnify each employee or agent, of the Corporation as to any costs, charges,
expenses (including attorneys' fees and expenses), judgments, fines and amounts
paid in settlement with respect to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (including an action by or in
the right of the Corporation), to the full extent permitted by any applicable
portion of this Article X that shall not have been invalidated and to the
fullest extent permitted by applicable law.
<PAGE>
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SECTION 11. INSURANCE. The Corporation may purchase and maintain
insurance, at its expense, to protect itself and any person who is or was a
director, officer, employee or agent of the Corporation or is was serving or has
agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any costs, charges or expenses, liability or loss
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the Corporation would have the power to indemnify
such person against such costs, charges or expenses, liability or loss under the
Certificate of Incorporation or applicable law; provided, however, that such
insurance is available on acceptable terms as determined by a vote of the Board
of Directors. To the extent that any director, officer, employee or agent is
reimbursed by an insurance company under an indemnification insurance policy for
any costs, charges, expenses (including attorneys' fees and expenses),
judgments, fines and amounts paid in settlement to the fullest extent permitted
by any applicable portion of this Article X, the Bylaws, any agreement, the
policy of indemnification insurance or otherwise, the Corporation shall not be
obligated to reimburse the person to be indemnified in connection with such
proceeding.
SECTION 12. DEFINITIONS. For purposes of this Article X, the
following terms shall have the following meanings:
(a) "The Corporation" shall include, in addition to the resulting
corporation, any constituent corporation or entity (including any constituent of
a constituent) absorbed by way of an acquisition, consolidation, merger or
otherwise, which, if its separate existence had continued, would have had power
and authority to indemnify its directors, officers, employees or agents so that
any person who is or was a director, officer, employee or agent of such
constituent corporation or entity, or is or was serving at the written request
of such constituent corporation or entity as a director or officer of another
corporation, entity, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article X with
respect to the resulting or surviving corporation or entity as such person would
have with respect to such constituent corporation or entity if its separate
existence had continued;
(b) "Other enterprises" shall include employee benefit plans,
including, but not limited to, any employee benefit plan of the Corporation;
(c) "Director or officer" of the Corporation shall include any
director, officer, partner or trustee who is or was or has agreed to serve at
the request of the Corporation as a director, officer, partner or trustee of
another corporation, partnership, joint venture, trust or other enterprise;
(d) "Serving at the request of the Corporation" shall include any
service that imposes duties on, or involves services by a director, officer,
employee or agent of the Corporation with respect to an employee benefit plan,
its participants or beneficiaries, including acting as a fiduciary thereof;
<PAGE>
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(e) "Fines" shall include any penalties and any excise or similar
taxes assessed on a person with respect to an employee benefit plan;
(f) To the fullest extent permitted by law, a person shall be deemed
to have acted in "good faith and in a manner he or she 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 or
her conduct was unlawful," if his or her action is based on the records or books
of account of the Corporation or another enterprise, or on information supplied
to him or her by the officers of the Corporation or another enterprise in the
course of their duties, or on the advice of legal counsel for the Corporation or
another enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the
Corporation or another enterprise; and
(g) A person shall be deemed to have acted in a manner "not opposed to
the best interests of the Corporation," as referred to in Sections 1 and 2 of
this Article X if such person acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan.
SECTION 13. SUBSEQUENT AMENDMENT AND SUBSEQUENT LEGISLATION. Neither
the amendment, termination or repeal of this Article X or of relevant provisions
of the General Corporation Law of the State of Delaware or any other applicable
laws, nor the adoption of any provision of this Certificate of Incorporation or
the Bylaws of the Corporation or of any statute inconsistent with this Article X
shall eliminate, affect or diminish in any way the rights of any director,
officer, employee or agent of the Corporation to indemnification under the
provisions of this Article X with respect to any action, suit or proceeding
arising out of, or relating to, any actions, transactions or facts occurring
prior to the final adoption of any such amendment, termination, repeal,
provision or statute.
If the General Corporation Law of the State of Delaware is amended to
expand further the indemnification permitted to directors and officers of the
Corporation, then the Corporation shall indemnify such persons to the fullest
extent permitted by the General Corporation Law of the State of Delaware, as so
amended.
ARTICLE XI
AMENDMENTS
SECTION 1. AMENDMENTS OF CERTIFICATE OF INCORPORATION. In addition
to any affirmative vote required by applicable law and any voting rights granted
to or held by holders of shares of any Series of Preferred Stock, any
alteration, amendment, repeal or rescission (collectively, any "Change") of any
provision of this Certificate of Incorporation must be approved by the Board of
Directors and by the affirmative vote of the holders of a majority (or
<PAGE>
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such greater proportion as may otherwise be required pursuant to any specific
provision of this Certificate of Incorporation) of the total votes eligible to
be cast by the holders of all outstanding shares of Capital Stock entitled to
vote thereon; provided, however, that if any such Change relates to Section 13
of Article X or Articles V, VI, VII or XI of this Certificate of Incorporation,
such Change must also be approved either by (i) not less than a majority of the
authorized number of directors and, if one or more Interested Stockholders (as
defined in Article VIII hereof) exists, by not less than a majority of the
Disinterested Directors (as defined in Article VIII hereof), or (ii) the
affirmative vote of the holders of not less than two-thirds of the total votes
eligible to be cast by the holders of all outstanding shares of Capital Stock
entitled to vote thereon and, if the Change is proposed by or on behalf of an
Interested Stockholder or a director who is an Affiliate or Associate (as such
terms are defined in Article VIII hereof) of an Interested Stockholder, by the
affirmative vote of the holders of not less than a majority of the total votes
eligible to be cast by holders of all outstanding shares of Capital Stock
entitled to vote thereon not beneficially owned by an Interested Stockholder or
an Affiliate or Associate thereof. Subject to the foregoing, the Corporation
reserves the right to amend this Certificate of Incorporation from time to time
in any and as many respects as may be desired and as may be lawfully contained
in an original certificate of incorporation filed at the time of making such
amendment.
Except as may otherwise be provided in this Certificate of
Incorporation, the Corporation reserves the right at any time, and from time to
time, to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation and to add or insert herein any other provisions
authorized by the laws of the State of Delaware at the time in force, in the
manner now or hereafter prescribed by law, and all rights, preferences and
privileges of any nature conferred upon stockholders, directors or any other
persons whomsoever by and pursuant to this Certificate of Incorporation in its
present form or as hereafter amended are granted subject to the rights reserved
in this Section 1.
SECTION 2. AMENDMENTS OF BYLAWS. In furtherance and not in
limitation of the powers conferred by statute, the Board of Directors of the
Corporation is expressly authorized to make, alter, amend, rescind or repeal
from time to time any of the Bylaws of the Corporation in accordance with the
terms thereof; provided, however, that any Bylaw made by the Board of Directors
may be altered, amended, rescinded or repealed in accordance with the terms
thereof by the holders of shares of Capital Stock entitled to vote thereon at
any annual meeting or at any special meeting called for that purpose.
Notwithstanding the foregoing, any provision of the Bylaws that contains a
supermajority voting requirement shall only be altered, amended, rescinded or
repealed by a vote of the Board of Directors or holders of shares of Capital
Stock entitled to vote thereon that is not less than the supermajority specified
in such provision.
<PAGE>
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ARTICLE XII
NOTICES
The name and mailing address of the incorporator of this Corporation
is:
Home Federal Savings and Loan Association of Elgin
16 North Spring Street
Elgin, Illinios 60210
Home Federal Savings and Loan Association of Elgin caused this
Certificate of Incorporation to be signed by George L. Perucco, its President,
and attested to by Kathleen A. Schroeder, its Secretary, this ____th day of May,
1996.
Home Federal Savings and Loan Association of Elgin
By:/s/ George L. Perucco
-----------------------------------
George L. Perucco
President
Attest:
/s/ Kathleen A. Schroeder
- ----------------------------
Kathleen A. Schroeder
Secretary
<PAGE>
EXHIBIT 3.2
===============================================================================
BYLAWS
OF
HOME BANCORP OF ELGIN, INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
OFFICES
Section 1. Registered Office............................ 1
Section 2. Additional Offices........................... 1
ARTICLE II
STOCKHOLDERS
Section 1. Place of Meetings......................... 1
Section 2. Annual Meetings........................... 1
Section 3. Special Meetings.......................... 1
Section 4. Notice of Meetings........................ 1
Section 5. Waiver of Notice.......................... 2
Section 6. Fixing of Record Date..................... 2
Section 7. Quorum.................................... 2
Section 8. Conduct of Meetings....................... 3
Section 9. Voting; Proxies........................... 3
Section 10. Inspectors of Election.................... 4
Section 11. Procedure for Nominations................. 4
Section 12. Substitution of Nominees.................. 5
Section 13. New Business.............................. 5
ARTICLE III
CAPITAL STOCK
Section 1. Certificates of Stock...................... 7
Section 2. Transfer Agent and Registrar............... 7
Section 3. Registration and Transfer of Shares........ 7
Section 4. Lost, Destroyed and Mutilated Certificates. 8
Section 5. Holder of Record........................... 8
ARTICLE IV
BOARD OF DIRECTORS
Section 1. Responsibilities; Number of Directors...... 8
Section 2. Qualifications............................. 8
Section 3. Regular and Annual Meetings................ 8
-i-
<PAGE>
Section 4. Special Meetings...................... 9
Section 5. Notice of Meetings; Waiver of Notice.. 9
Section 6. Conduct of Meetings................... 9
Section 7. Quorum and Voting Requirements........ 9
Section 8. Informal Action by Directors.......... 10
Section 9. Resignation........................... 10
Section 10. Vacancies............................. 10
Section 11. Compensation.......................... 10
Section 12. Amendments Concerning the Board....... 10
ARTICLE V
COMMITTEES
Section 1. Standing Committees................... 11
Section 2. Executive Committee................... 11
Section 3. Audit Committee....................... 11
Section 4. Other Committees...................... 12
ARTICLE VI
OFFICERS
Section 1. Number................................ 12
Section 2. Term of Office and Removal............ 13
Section 3. Age Limitation of Officers............ 13
Section 4. President............................. 13
Section 5. Vice Presidents....................... 13
Section 6. Secretary............................. 14
Section 7. Treasurer............................. 14
Section 8. Other Officers and Employees.......... 14
Section 9. Compensation of Officers and Others... 14
ARTICLE VII
DIVIDENDS.................. 14
ARTICLE VIII
AMENDMENTS................. 14
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BYLAWS
OF
HOME BANCORP OF ELGIN, INC.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of Home
Bancorp of Elgin, Inc. (the "Corporation") in the State of Delaware shall be in
the City of Wilmington, County of New Castle.
SECTION 2. ADDITIONAL OFFICES. The Corporation may also have
offices and places of business at such other places, within or without the State
of Delaware, as the Board of Directors (the "Board") may from time to time
designate or the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of stockholders of the
Corporation shall be held at such place, within or without the State of
Delaware, as may be fixed by the Board and designated in the notice of meeting.
If no place is so fixed, such meetings shall be held at the principal
administrative office of the Corporation.
SECTION 2. ANNUAL MEETINGS. The annual meeting of stockholders of
the Corporation for the election of directors and the transaction of any other
business which may properly come before such meeting shall be held each year on
a date and at a time to be designated by the Board.
SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders,
for any purpose, may be called at any time only by the President or by
resolution of at least three-fourths of the directors then in office. Special
meetings shall be held on the date and at the time and place as may be
designated by the Board. At a special meeting, no business shall be transacted
and no corporate action shall be taken other than that stated in the notice of
meeting.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise required by
law, written notice stating the place, date and hour of any meeting of
stockholders and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered to each stockholder of record
entitled to vote at such meeting, either personally or by mail not less than ten
(10) nor more than sixty (60) days before the date of such meeting. If mailed,
such
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notice shall be deemed to be delivered when deposited in the U.S. mail, with
postage thereon prepaid, addressed to the stockholder at his or her address as
it appears on the stock transfer books or records of the Corporation as of the
record date prescribed in Section 6 of this Article II, or at such other address
as the stockholder shall have furnished in writing to the Secretary. Notice of
any special meeting shall indicate that the notice is being issued by or at the
direction of the person or persons calling such meeting. When any meeting of
stockholders, either annual or special, is adjourned to another time or place,
no notice of the adjourned meeting need be given, other than an announcement at
the meeting at which such adjournment is taken giving the time and place to
which the meeting is adjourned; provided, however, that if the adjournment is
for more than thirty (30) days, or, if after adjournment, the Board fixes a new
record date for the adjourned meeting, notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
SECTION 5. WAIVER OF NOTICE. Notice of any annual or special
meeting need not be given to any stockholder who submits a signed waiver of
notice of any meeting, in person or by proxy or by his or her duly authorized
attorney-in-fact, whether before or after the meeting. The attendance of any
stockholder at a meeting, in person or by proxy, shall constitute a waiver of
notice by such stockholder, except where a stockholder attends a meeting for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called or convened.
SECTION 6. FIXING OF RECORD DATE. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or stockholders entitled to receive payment of any
dividend or other distribution or the allotment of any rights, or in order to
make a determination of stockholders for any other proper purpose, the Board
shall fix a date as the record date for any such determination of stockholders,
which date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board. Such date in any case shall be not more
than sixty (60) days and, in the case of a meeting of stockholders, not less
than ten (10) days prior to the date on which the particular action requiring
such determination of stockholders is to be taken. When a determination of
stockholders entitled to vote at any meeting of stockholders has been made as
provided in this Section 6, such determination shall, unless otherwise provided
by the Board, also apply to any adjournment thereof. If no record date is
fixed, (a) the record date for determining stockholders entitled to notice of or
vote at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which the notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held, and (b) the record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board adopts the
resolution relating thereto.
SECTION 7. QUORUM. The holders of record of a majority of the
total number of votes eligible to be cast in the election of directors generally
by the holders of the outstanding shares of the capital stock of the Corporation
entitled to vote thereat, represented in person or by proxy, shall constitute a
quorum for the transaction of business at a meeting of stockholders, except as
otherwise provided by law, these Bylaws or the Certificate of Incorporation. If
less
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than a majority of such total number of votes is represented at a meeting, a
majority of the number of votes so represented may adjourn the meeting from time
to time without further notice, provided, that if such adjournment is for more
than thirty (30) days, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. At such adjourned
meeting at which a quorum is present, any business may be transacted that might
have been transacted at the meeting as originally called. When a quorum is once
present to organize a meeting of stockholders, such quorum is not broken by the
subsequent withdrawal of any stockholders.
SECTION 8. CONDUCT OF MEETINGS. The President shall serve as
chairman at all meetings of the stockholders or, if the President is absent or
otherwise unable to so serve, such other person as shall be appointed by a
majority of the entire Board shall serve as chairman at any meeting of
stockholders held in such absence. The Secretary or, in his or her absence,
such other person as the chairman of the meeting shall appoint, shall serve as
secretary of the meeting. The chairman of the meeting shall conduct all
meetings of the stockholders in accordance with the best interests of the
Corporation and shall have the authority and discretion to establish reasonable
procedural rules for the conduct of such meetings, including such regulation of
the manner of voting and the conduct of discussion as he or she shall deem
appropriate.
SECTION 9. VOTING; PROXIES. Each stockholder entitled to vote at
any meeting may vote either in person or by proxy. Unless otherwise specified
in the Certificate of Incorporation or in a resolution, or resolutions, of the
Board providing for the issuance of preferred stock, each stockholder entitled
to vote shall be entitled to one vote for each share of capital stock registered
in his or her name on the transfer books or records of the Corporation. Each
stockholder entitled to vote may authorize another person or persons to act for
him or her by proxy. All proxies shall be in writing, signed by the stockholder
or by his or her duly authorized attorney-in-fact, and shall be filed with the
Secretary before being voted. No proxy shall be valid after three (3) years
from the date of its execution unless otherwise provided in the proxy. The
attendance at any meeting by a stockholder who shall have previously given a
proxy applicable thereto shall not, as such, have the effect of revoking the
proxy. The Corporation may treat any duly executed proxy as not revoked and in
full force and effect until it receives a duly executed instrument revoking it,
or a duly executed proxy bearing a later date. If ownership of a share of
voting stock of the Corporation stands in the name of two or more persons, in
the absence of written directions to the Corporation to the contrary, any one or
more of such stockholders may cast all votes to which such ownership is
entitled. If an attempt is made to cast conflicting votes by the several
persons in whose names shares of stock stand, the vote or votes to which those
persons are entitled shall be cast as directed by a majority of those holding
such stock and present at such meeting. If such conflicting votes are evenly
split on any particular matter, each faction may vote the securities in question
proportionally, or any person voting the shares, or a beneficiary, if any, may
apply to the Court of Chancery or such other court as may have jurisdiction to
appoint an additional person to act with the persons so voting the shares, which
shall then be voted as determined by a majority of such persons and the person
appointed by the Court. Except for the election of directors or as otherwise
provided by law, the Certificate of Incorporation or these Bylaws, at all
meetings of stockholders, all matters shall
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be determined by a vote of the holders of a majority of the number of votes
eligible to be cast by the holders of the outstanding shares of capital stock of
the Corporation present and entitled to vote thereat. Directors shall, except
as otherwise required by law, these Bylaws or the Certificate of Incorporation,
be elected by a plurality of the votes cast by each class of shares entitled to
vote at a meeting of stockholders, present and entitled to vote in the election.
SECTION 10. INSPECTORS OF ELECTION. In advance of any meeting of
stockholders, the Board shall appoint one or more persons, other than officers,
directors or nominees for office, as inspectors of election to act at such
meeting or any adjournment thereof. Such appointment shall not be altered at
the meeting. If inspectors of election are not so appointed, the chairman of
the meeting shall make such appointment at the meeting. If any person appointed
as inspector fails to appear or fails or refuses to act at the meeting, the
vacancy so created may be filled by appointment by the Board in advance of the
meeting or at the meeting by the chairman of the meeting. The duties of the
inspectors of election shall include determining the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, receiving votes,
ballots or consents, hearing and deciding all challenges and questions arising
in connection with the right to vote, counting and tabulating all votes, ballots
or consents, determining the results and doing such acts as are proper to the
conduct of the election or the vote with fairness to all stockholders. Any
report or certificate made by them shall be prima facie evidence of the facts
stated and of the vote as certified by them. Each inspector shall be entitled
to a reasonable compensation for his or her services, to be paid by the
Corporation.
SECTION 11. PROCEDURE FOR NOMINATIONS. Subject to the provisions
hereof, the Board, or a committee thereof, shall select nominees for election as
directors. Except in the case of a nominee substituted as a result of the
death, incapacity, withdrawal or other inability to serve of a nominee, the
Board, or a committee thereof, shall deliver written nominations to the
Secretary at least sixty (60) days prior to the date of the annual meeting.
Provided the Board, or committee thereof, makes such nominations, no nominations
for directors except those made by the Board or such committee shall be voted
upon at the annual meeting of stockholders unless other nominations by
stockholders are made in accordance with the provisions of this Section 11.
Nominations of individuals for election to the Board at an annual meeting of
stockholders may be made by any stockholder of record of the Corporation
entitled to vote for the election of directors at such meeting who provides
timely notice in writing to the Secretary as set forth in this Section 11. To
be timely, a stockholder's notice must be delivered to or received by the
Secretary not later than the following dates: (i) with respect to an election
of directors to be held at an annual meeting of stockholders, sixty (60) days in
advance of such meeting if such meeting is to be held on a day which is within
thirty (30) days preceding the anniversary of the previous year's annual
meeting, or ninety (90) days in advance of such meeting if such meeting is to be
held on or after the anniversary of the previous year's annual meeting; and (ii)
with respect to an election to be held at an annual meeting of stockholders held
at a time other than within the time periods set forth in the immediately
preceding clause (i), or at a special meeting of stockholders for the election
of directors, the close of business on the tenth (10th) day following the date
on which notice of such meeting is first given to
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stockholders. For purposes of this Section 11, notice shall be deemed to first
be given to stockholders when disclosure of such date of the meeting of
stockholders is first made in a press release reported to Dow Jones News
Services, Associated Press or comparable national news service, or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as
amended. Such stockholder's notice shall set forth (a) as to each person whom
the stockholder proposes to nominate for election or re-election as a director,
(i) the name, age, business address and residence address of such person, (ii)
the principal occupation or employment of such person, (iii) such person's
written consent to serve as a director, if elected, and (iv) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission (whether or not the Corporation is
then subject to such rules); and (b) as to the stockholder giving the notice (i)
the name and address of such stockholder, (ii) the class and number of shares of
the Corporation which are owned of record by such stockholder and the dates upon
which he or she acquired such shares, (iii) a description of all arrangements or
understandings between the stockholder and nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder and (iv) the identification of any person employed,
retained or to be compensated by the stockholder submitting the nomination or by
the person nominated, or any person acting on his or her behalf to make
solicitations or recommendations to stockholders for the purpose of assisting in
the election of such director, and a brief description of the terms of such
employment, retainer or arrangement for compensation. At the request of the
Board, any person nominated by the Board for election as a director shall
furnish to the Secretary that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee together with
the required written consent. No person shall be elected as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 11.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not properly brought before the
meeting in accordance with the provisions hereof, and, if he should so
determine, he shall declare to the meeting that such nomination was not properly
brought before the meeting and shall not be considered.
SECTION 12. SUBSTITUTION OF NOMINEES. In the event that a person
is validly designated as a nominee in accordance with Section 11 of this Article
II and shall thereafter become unwilling or unable to stand for election to the
Board, the Board or a committee thereof may designate a substitute nominee upon
delivery, not fewer than five (5) days prior to the date of the meeting for the
election of such nominee, of a written notice to the Secretary setting forth
such information regarding such substitute nominee as would have been required
to be delivered to the Secretary pursuant to Section 11 of this Article II had
such substitute nominee been initially proposed as a nominee. Such notice shall
include a signed consent to serve as a director of the Corporation, if elected,
of each such substituted nominee.
SECTION 13. NEW BUSINESS. Any new business to be taken up at the
annual meeting at the request of the President or by resolution of at least
three-fourths of the directors
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then in office shall be stated in writing and filed with the Secretary at least
fifteen (15) days before the date of the annual meeting, and all business so
stated, proposed and filed shall be considered at the annual meeting, but,
except as provided in this Section 13, no other proposal shall be acted upon at
the annual meeting. Any proposal offered by any stockholder may be made at the
annual meeting and the same may be discussed and considered, but unless properly
brought before the meeting such proposal shall not be acted upon at the meeting.
For a proposal to be properly brought before an annual meeting by a stockholder,
the stockholder must be a stockholder of record and have given timely notice
thereof in writing to the Secretary. To be timely, a stockholder's notice must
be delivered to or received by the Secretary not later than the following dates:
(i) with respect to an annual meeting of stockholders, sixty (60) days in
advance of such meeting if such meeting is to be held on a day which is within
thirty (30) days preceding the anniversary of the previous year's annual
meeting, or ninety (90) days in advance of such meeting if such meeting is to be
held on or after the anniversary of the previous year's annual meeting; and (ii)
with respect to an annual meeting of stockholders held at a time other than
within the time periods set forth in the immediately preceding clause (i), the
close of business on the tenth (10th) day following the date on which notice of
such meeting is first given to stockholders. For purposes of this Section 13,
notice shall be deemed to first be given to stockholders when disclosure of such
date of the meeting of stockholders is first made in a press release reported to
Dow Jones News Services, Associated Press or comparable national news service,
or in a document publicly filed by the Corporation with the Securities and
Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities
Exchange Act of 1934, as amended. A stockholder's notice to the Secretary shall
set forth as to the matter the stockholder proposes to bring before the annual
meeting (a) a brief description of the proposal desired to be brought before the
annual meeting; (b) the name and address of the stockholder proposing such
business; (c) the class and number of shares of the Corporation which are owned
of record by the stockholder and the dates upon which he or she acquired such
shares; (d) the identification of any person employed, retained, or to be
compensated by the stockholder submitting the proposal, or any person acting on
his or her behalf, to make solicitations or recommendations to stockholders for
the purpose of assisting in the passage of such proposal, and a brief
description of the terms of such employment, retainer or arrangement for
compensation; and (e) such other information regarding such proposal as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission or required to be delivered to the
Corporation pursuant to the proxy rules of the Securities and Exchange
Commission (whether or not the Corporation is then subject to such rules). This
provision shall not prevent the consideration and approval or disapproval at an
annual meeting of reports of officers, directors and committees of the Board or
the management of the Corporation, but in connection with such reports, no new
business shall be acted upon at such annual meeting unless stated and filed as
herein provided. This provision shall not constitute a waiver of any right of
the Corporation under the proxy rules of the Securities and Exchange Commission
or any other rule or regulation to omit a stockholder's proposal from the
Corporation's proxy materials.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that any new business was not properly brought before the
meeting in accordance
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with the provisions hereof, and, if the chairman should so determine, the
chairman shall declare to the meeting that such new business was not properly
brought before the meeting and shall not be considered.
ARTICLE III
CAPITAL STOCK
SECTION 1. CERTIFICATES OF STOCK. Certificates representing
shares of stock shall be in such form as shall be determined by the Board. Each
certificate shall state that the Corporation will furnish to any stockholder
upon request and without charge a statement of the powers, designations,
preferences and relative, participating, optional or other special rights of the
shares of each class or series of stock and the qualifications or restrictions
of such preferences and/or rights, or shall set forth such statement on the
certificate itself. The certificates shall be numbered in the order of their
issue and entered in the books of the Corporation or its transfer agent or
agents as they are issued. Each certificate shall state the registered holder's
name and the number and class of shares and shall be signed by the President and
the Secretary or any Assistant Secretary, and may, but need not, bear the seal
of the Corporation or a facsimile thereof. Any or all of the signatures on the
certificates may be facsimiles. In case any officer who shall have signed any
such certificate shall cease to be such officer of the Corporation, whether
because of death, resignation or otherwise, before such certificate shall have
been delivered by the Corporation, such certificate may nevertheless be adopted
by the Corporation and be issued and delivered as though the person or persons
who signed such certificate or certificates had not ceased to be such officer or
officers of the Corporation.
SECTION 2. TRANSFER AGENT AND REGISTRAR. The Board shall have the
power to appoint one or more Transfer Agents and Registrars for the transfer and
registration of certificates of stock of any class and may require that stock
certificates be countersigned and registered by one or more of such Transfer
Agents and Registrars.
SECTION 3. REGISTRATION AND TRANSFER OF SHARES. Subject to the
provisions of the Certificate of Incorporation of the Corporation, the name of
each person owning a share of the capital stock of the Corporation shall be
entered on the books of the Corporation together with the number of shares held
by him or her, the numbers of the certificates covering such shares and the
dates of issue of such certificates. Subject to the provisions of the
Certificate of Incorporation of the Corporation, the shares of stock of the
Corporation shall be transferable on the books of the Corporation by the holders
thereof in person, or by their duly authorized attorneys or legal
representatives, on surrender and cancellation of certificates for a like number
of shares, accompanied by an assignment or power of transfer endorsed thereon or
attached thereto, duly executed, with such guarantee or proof of the
authenticity of the signature as the Corporation or its agents may reasonably
require and with proper evidence of payment of any
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applicable transfer taxes. Subject to the provisions of the Certificate of
Incorporation of the Corporation, a record shall be made of each transfer.
SECTION 4. LOST, DESTROYED AND MUTILATED CERTIFICATES. The holder
of any shares of stock of the Corporation shall immediately notify the
Corporation of any loss, theft, destruction or mutilation of the certificates
therefor. The Corporation may issue, or cause to be issued, a new certificate
of stock in the place of any certificate theretofore issued by it alleged to
have been lost, stolen or destroyed upon evidence satisfactory to the
Corporation of the loss, theft or destruction of the certificate and, in the
case of mutilation, the surrender of the mutilated certificate. The Corporation
may, in its discretion, require the owner of the lost, stolen or destroyed
certificate, or his or her legal representatives, to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft, destruction or mutilation of any such
certificate and the issuance of such new certificate, or may refer such owner to
such remedy or remedies as he or she may have under the laws of the State of
Delaware.
SECTION 5. HOLDER OF RECORD. Subject to the provisions of the
Certificate of Incorporation of the Corporation, the Corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder thereof in fact and shall not be bound to recognize any equitable or
other claim to or interest in such shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by law.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 1. RESPONSIBILITIES; NUMBER OF DIRECTORS. The business
and affairs of the Corporation shall be under the direction of the Board. The
Board shall consist of not less than five (5) nor more than fifteen (15)
directors (other than directors elected by the holders of shares of any series
of preferred stock). Within the foregoing limits, the number of directors shall
be determined only by resolution of the Board. A minimum of two (2) directors
shall be persons other than officers or employees of the Corporation or its
subsidiaries and shall not have a relationship which, in the opinion of the
Board (exclusive of such persons), could interfere with the exercise of
independent judgment in carrying out the responsibilities of a director. No
more than two directors shall be officers or employees of the Corporation or its
subsidiaries.
SECTION 2. QUALIFICATIONS. Each director shall be at least
eighteen (18) years of age.
SECTION 3. REGULAR AND ANNUAL MEETINGS. An annual meeting of the
Board for the election of officers shall be held, without notice other than
these Bylaws, immediately after, and at the same place as, the annual meeting of
the stockholders, or, with notice, at such other time or place as the Board may
fix by resolution. The Board may provide, by resolution, the
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time and place, within or without the State of Delaware, for the holding of
regular meetings of the Board without notice other than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board may be
called for any purpose at any time by or at the request of the President.
Special meetings of the Board shall also be called by the Secretary upon the
written request, stating the purpose or purposes of the meeting, of at least
sixty percent (60%) of the directors then in office, but in any event not less
than five (5) directors. The persons authorized to call special meetings of the
Board shall give notice of such meetings in the manner prescribed by these
Bylaws and may fix any place, within or without the Corporation's regular
business area, as the place for holding any special meeting of the Board called
by such persons. No business shall be conducted at a special meeting other than
that specified in the notice of meeting.
SECTION 5. NOTICE OF MEETINGS; WAIVER OF NOTICE. Except as
otherwise provided in Section 3 of this Article IV, at least twenty-four (24)
hours notice of meetings shall be given to each director if given in person or
by telephone, telegraph, telex, facsimile or other electronic transmission, and
at least five (5) days notice of meetings shall be given if given in writing and
delivered by courier or by postage prepaid mail. The purpose of any special
meeting shall be stated in the notice. Such notice shall be deemed given when
sent or given to any mail or courier service or company providing electronic
transmission service. Any director may waive notice of any meeting by
submitting a signed waiver of notice with the Secretary, whether before or after
the meeting. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 6. CONDUCT OF MEETINGS. Meetings of the Board shall be
presided over by the President or such other director or officer as the
President shall designate, and, in the absence or incapacity of the President,
the presiding officer shall be the then senior member of the Board in terms of
length of service on the Board (which length of service shall include length of
service on the Board of Directors of Home Federal Savings and Loan Association
of Elgin and any predecessors thereto). The Secretary or, in his absence, a
person appointed by the President (or other presiding person), shall act as
secretary of the meeting. The President (or other person presiding) shall
conduct all meetings of the Board in accordance with the best interests of the
Corporation and shall have the authority and discretion to establish reasonable
procedural rules for the conduct of Board meetings. At the discretion of the
President, any one or more directors may participate in a meeting of the Board
or a committee of the Board by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at any such meeting.
SECTION 7. QUORUM AND VOTING REQUIREMENTS. A quorum at any
meeting of the Board shall consist of not less than a majority of the directors
then in office or such greater number as shall be required by law, these Bylaws
or the Certificate of Incorporation, but not less
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than one-third (1/3) of the total number. If less than a required quorum is
present, the majority of those directors present shall adjourn the meeting to
another time and place without further notice. At such adjourned meeting at
which a quorum shall be represented, any business may be transacted that might
have been transacted at the meeting as originally noticed. Except as otherwise
provided by law, the Certificate of Incorporation or these Bylaws, a majority
vote of the directors present at a meeting, if a quorum is present, shall
constitute an act of the Board.
SECTION 8. INFORMAL ACTION BY DIRECTORS. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board, or of any
committee thereof, may be taken without a meeting if all members of the Board or
such committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board or such
committee.
SECTION 9. RESIGNATION. Any director may resign at any time by
sending a written notice of such resignation to the principal office of the
Corporation addressed to the President. Unless otherwise specified therein,
such resignation shall take effect upon receipt thereof.
SECTION 10. VACANCIES. To the extent not inconsistent with the
Certificate of Incorporation and subject to the limitations prescribed by law
and the rights of holders of Preferred Stock, vacancies in the office of
director, including vacancies created by newly created directorships resulting
from an increase in the number of directors, shall be filled only by a vote of a
majority of the directors then holding office, whether or not a quorum, at any
regular or special meeting of the Board called for that purpose. Subject to the
rights of holders of Preferred Stock, no person shall be so elected a director
unless nominated by the Nominating Committee. Subject to the rights of holders
of Preferred Stock, any director so elected shall serve for the remainder of the
full term of the class of directors in which the new directorship was created or
the vacancy occurred and until his or her successor shall be elected and
qualified.
SECTION 11. COMPENSATION. From time to time, as the Board deems
necessary, the Board shall fix the compensation of directors, and officers of
the Corporation in such one or more forms as the Board may determine.
SECTION 12. AMENDMENTS CONCERNING THE BOARD. The number and other
restrictions and qualifications for directors of the Corporation as set forth in
these Bylaws may be altered only by a vote, in addition to any vote required by
law, of two-thirds of the entire Board or by the affirmative vote of the holders
of record of not less than eighty percent (80%) of the total votes eligible to
be cast by holders of all outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors at a meeting of the
stockholders called for that purpose.
<PAGE>
-11-
ARTICLE V
COMMITTEES
SECTION 1. STANDING COMMITTEES. At each annual meeting of the
Board, the directors shall designate from their own number, by resolution
adopted by a majority of the entire Board, the following committees:
(a) Executive Committee
(b) Audit Committee
which shall be standing committees of the Board. The Board shall appoint a
director to fill any vacancy on any committee of the Board. The members of the
committees shall serve at the pleasure of the Board.
SECTION 2. EXECUTIVE COMMITTEE. There shall be an Executive
Committee of the Board, consisting of at least five (5) members, as shall be
appointed by Board resolution or these Bylaws. The President and the Secretary
shall be ex-officio members of the Executive Committee, with power to vote on
all matters so long as they are also directors of the Corporation. Four (4)
members of the Executive Committee, at least three (3) of whom must be non-
officer directors, or such other number of members as the Board may establish by
resolution, shall constitute a quorum for the transaction of business. The vote
of a majority of members present at any meeting including the presiding member,
who shall be eligible to vote, shall constitute the action of the Executive
Committee.
The President or such other director or officer as the President shall
designate shall serve as chairman of the Executive Committee. In the absence of
the chairman of the Executive Committee, the committee shall designate, from
among its membership present, a person to preside at any meeting held in such
absence. The Executive Committee shall designate, from its membership or
otherwise, a secretary who shall report to the Board at its next regular meeting
all proceedings and actions taken by the Executive Committee. The Executive
Committee shall meet as necessary at the call of the President or at the call of
a majority of the members of the Executive Committee.
The Executive Committee shall, to the extent not inconsistent with
law, these Bylaws, the Certificate of Incorporation or resolutions adopted by
the Board, exercise all the powers and authority of the Board in the management
of the business and affairs of the Corporation in the intervals between the
meetings of the Board.
SECTION 3. AUDIT COMMITTEE. The Audit Committee shall consist of
at least three (3) members whose background and experience are financial and/or
business management related, none of whom shall be an officer or salaried
employee of the Corporation or its subsidiaries, an attorney who receives a fee
or other compensation for legal services rendered to
<PAGE>
-12-
the Corporation or any other individual having a relationship which, in the
opinion of the Board, would interfere with the exercise of independent judgment
in carrying out the responsibilities of a director. At any regular meeting of
the Board, any director who is otherwise eligible to serve on the Audit
Committee may be elected to fill a vacancy that has occurred on the Audit
Committee. The Board shall designate one member of the committee to serve as
chairman of the committee. The Audit Committee shall meet annually, at the call
of the chairman of the committee and may hold such additional meetings as the
chairman of the committee may deem necessary, to examine, or cause to be
examined, the records and affairs of the Corporation to determine its true
financial condition, and shall present a report of examination to the Board at
the Board's next regular meeting following the meeting of the Audit Committee.
The committee shall appoint, from its membership or otherwise, a secretary who
shall cause to be kept written minutes of all meetings of the committee. The
Audit Committee shall make, or cause to be made, such other examinations as it
may deem advisable or whenever so directed by the Board and shall report thereon
in writing at a regular meeting of the Board. The Audit Committee shall make
recommendations to the Board in relation to the employment of accountants and
independent auditors and arrange for such other assistance as it may deem
necessary or desirable. The Audit Committee shall review and evaluate the
procedures and performance of the Corporation's internal auditing staff. A
quorum shall consist of at least one-third of the members of the committee, and
in no event less than two (2) members of the committee.
SECTION 4. OTHER COMMITTEES. The Board may by resolution
authorize such other committees as from time to time it may deem necessary or
appropriate for the conduct of the business of the Corporation. The members of
each committee so authorized shall be appointed by the Board from members of the
Board. In addition, the President and the Secretary shall be ex-officio members
of each such committee. Each such committee shall exercise such powers as may
be assigned by the Board to the extent not inconsistent with law, these Bylaws,
the Certificate of Incorporation or resolutions adopted by the Board.
ARTICLE VI
OFFICERS
SECTION 1. NUMBER. The Board shall, at each annual meeting, elect
a Chief Executive Officer, a President, a Secretary and such other officers as
the Board from time to time may deem necessary or the business of the
Corporation may require. Any number of offices may be held by the same person
except that no person may simultaneously hold the offices of President and
Secretary.
The election of all officers shall be by the Board. If such election
is not held at the meeting held annually for the election of officers, such
officers may be so elected at any subsequent regular meeting or at a special
meeting called for that purpose, in the same manner above provided. Each person
elected shall have such authority, bear such title and perform such duties as
provided in these Bylaws and as the Board may prescribe from time to time. All
officers elected or appointed by the Board shall assume their duties immediately
upon their elec-
<PAGE>
-13-
tion and shall hold office at the pleasure of the Board. Whenever a vacancy
occurs among the officers, it may be filled at any regular or special meeting
called for that purpose, in the same manner as above provided.
SECTION 2. TERM OF OFFICE AND REMOVAL. Each officer shall serve
until his or her successor is elected and duly qualified, the office is
abolished or he or she is removed. Except for the Chief Executive Officer and
the President, any officer may be removed at any regular meeting of the Board
with or without cause by the Board. The Board may remove the Chief Executive
Officer and the President at any time, with or without cause, only by a vote of
two-thirds of the non-officer directors then holding office at any regular or
special meeting of the Board called for that purpose.
SECTION 3. AGE LIMITATION OF OFFICERS. No officer of the
Corporation who is described in section 12(c) of the Age Discrimination in
Employment Act of 1967, as amended, shall continue to serve as an officer of the
Association beyond the end of the month in which his or her seventieth (70th)
birthday occurs. Unless otherwise provided by the Board by resolution, the
provisions of this Section 3 shall not be applicable to any person who has
served continuously as an officer of the Corporation from and after the date of
the date of the adoption until that person has been re-elected to another full
or partial term as an officer of the Corporation.
SECTION 4. PRESIDENT. The President shall be the Chief Executive
Officer of the Corporation and shall, subject to the direction of the Board,
oversee all the major activities of the Corporation and its subsidiaries and be
responsible for assuring that the policy decisions of the Board are implemented
as formulated. The President shall preside at all meetings of the stockholders
and at all meetings of the Board and of the Executive Committee and make
recommendations to the Board regarding appointments to all committees. The
President shall be responsible, in consultation with such officers and members
of the Board the President deems appropriate, for planning the growth of the
Corporation. The President shall be responsible for stockholder relations and
relations with investment bankers or other similar financial institutions and
shall be empowered to designate officers of the Corporation and its subsidiaries
to assist in such activities. The President shall be principally responsible
for exploring and reporting to the Board all opportunities for mergers,
acquisitions and new business. The President, under authority given to the
President shall have the authority to sign instruments in the name of the
Corporation. The President shall have general supervision and direction of all
of the Corporation's officers and personnel, subject to and consistent with
policies enunciated by the Board. The President shall have such other powers as
may be assigned to the President by the Board or its committees.
SECTION 5. VICE PRESIDENTS. Executive Vice Presidents, Senior
Vice Presidents and Vice Presidents may be appointed by the Board to perform
such duties as may be prescribed by these Bylaws, the Board or the President as
permitted by the Board.
<PAGE>
-14-
SECTION 6. SECRETARY. The Secretary shall attend all meetings of the
Board and of the stockholders and shall record, or cause to be recorded, all
votes and minutes of all proceedings of the Board and of the stockholders in a
book or books to be kept for that purpose. The Secretary shall perform such
executive and administrative duties as may be assigned by the Board or the
President. The Secretary shall have charge of the seal of the Corporation,
shall submit such reports and statements as may be required by law or by the
Board, shall conduct all correspondence relating to the Board and its
proceedings and shall have such other powers and duties as are generally
incident to the office of Secretary and as may be assigned to him or her by the
Board or the President.
SECTION 7. TREASURER. The Treasurer shall be the chief accounting
officer of the Corporation and shall be responsible for the maintenance of
adequate systems and records. The Treasurer shall also be the chief financial
officer of the Corporation and shall keep a record of all assets, liabilities,
receipts, disbursements and other financial transactions and shall see that all
expenditures are made in accordance with procedures duly established from time
to time by the Board. The Treasurer shall make such reports as may be required
by the Board or as are required by law.
SECTION 8. OTHER OFFICERS AND EMPLOYEES. Other officers and
employees appointed by the Board shall have such authority and shall perform
such duties as may be assigned to them, from time to time, by the Board or the
President.
SECTION 9. COMPENSATION OF OFFICERS AND OTHERS. The compensation of
all officers, employees and agents shall be fixed from time to time by the
Board, or by any committee or officer authorized by the Board to do so.
ARTICLE VII
DIVIDENDS
The Board shall have the power, subject to the provisions of law and
the requirements of the Certificate of Incorporation, to declare and pay
dividends out of surplus (or, if no surplus exists, out of net profits of the
Corporation, for the fiscal year in which the dividend is declared and/or the
preceding fiscal year, except where there is an impairment of capital stock), to
pay such dividends to the stockholders in cash, in property or in shares of the
capital stock of the Corporation and to fix the date or dates for the payment of
such dividends.
ARTICLE VIII
AMENDMENTS
These Bylaws, except as provided by applicable law or the Certificate
of Incorporation, or as otherwise set forth in these Bylaws, may be amended or
repealed at any regular meeting of the entire Board by the vote of two-thirds of
the Board; provided, however,
<PAGE>
-15-
that (a) a notice specifying the change or amendment shall have been given at a
previous regular meeting and entered in the minutes of the Board; (b) a written
statement describing the change or amendment shall be made in the notice mailed
to the directors of the meeting at which the change or amendment shall be acted
upon; and (c) any Bylaw made by the Board may be altered, amended, rescinded or
repealed by the holders of shares of capital stock entitled to vote thereon at
any annual meeting or at any special meeting called for that purpose in
accordance with the percentage requirements set forth in the Certificate of
Incorporation and/or these Bylaws. Notwithstanding the foregoing, any provision
of these Bylaws that contains a supermajority voting requirement shall only be
altered, amended, rescinded or repealed by a vote of the Board or holders of
capital stock entitled to vote thereon that is not less than the supermajority
specified in such provision.
<PAGE>
EXHIBIT 4.3
HOME BANCORP OF ELGIN, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF
COMMON STOCK, $.01 PAR VALUE PER SHARE, OF
HOME BANCORP OF ELGIN, INC.
(the "Corporation"), a corporation formed under the laws of the State of
Delaware. The shares represented by this certificate are transferable only on
the stock transfer books of the Corporation by the holder of record hereof, or
by his duly authorized attorney or legal representative, upon the surrender of
this certificate properly endorsed. This certificate is not valid until
countersigned and registered by the Corporation's transfer agent and registrar.
The shares represented by this certificate are not insured by the Federal
Deposit Insurance Corporation or any other government agency.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
executed by the facsimile signature of its duly authorized officers and has
caused a facsimile of its corporate seal to be hereunto affixed.
Dated:
By: By:
Kathleen A. Schroeder George L. Perucco
Secretary President and Chief
Executive Officer
<PAGE>
HOME BANCORP OF ELGIN, INC.
The shares represented by this certificate are issued subject to all the
provisions of the Certificate of Incorporation and Bylaws of HOME BANCORP OF
ELGIN, INC. (the "Corporation"), as from time to time amended (copies of which
are on file at the principal office of the Corporation), to all of which the
holder by acceptance hereof assents. The following description constitutes a
summary of certain provisions of, and is qualified in its entirety by reference
to, the Certificate of Incorporation.
The Certificate of Incorporation of the Corporation contains certain
provisions, applicable upon the effective date of the conversion of Home Federal
Savings and Loan Association of Elgin (the "Association") from a federally
chartered mutual savings and loan association to a federally chartered stock
savings and loan association under the name Home Federal Savings and Loan
Association of Elgin and the concurrent acquisition by the Corporation of all of
the outstanding capital stock of the Association, that restrict persons from
directly or indirectly acquiring or holding, or attempting to acquire or hold,
the beneficial ownership of in excess of 10% of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors ("Voting Stock"). The Certificate of Incorporation contains a
provision pursuant to which the holders of shares in excess of 10% of the Voting
Stock of the Corporation are limited to one one-hundredth (1/100) of one vote
per share with respect to such shares in excess of the 10% limitation. In
addition, the Corporation is authorized to refuse to recognize a transfer or
attempted transfer of any shares of Voting Stock to any person who beneficially
owns, or who the Corporation believes would become by virtue of such transfer
the beneficial owner of, in excess of 10% of the Voting Stock. These
restrictions are not applicable to underwriters in connection with a public
offering of the common stock, certain reorganization transactions described in
the Certificate of Incorporation or to acquisitions of Voting Stock by the
Corporation, any majority-owned subsidiary of the Corporation or any pension,
profit-sharing, stock bonus or other compensation plan maintained by the
Corporation or by a member of a controlled group of corporations or trades or
businesses of which the Corporation is a member for the benefit of the employees
of the Corporation and for any subsidiary, or any trust or custodial arrangement
established in connection with any such plan.
The Certificate of Incorporation of the Corporation contains provisions
providing that the affirmative vote of the holders of at least 80% of the Voting
Stock of the Corporation may be required to approve certain business
combinations and other transactions with persons who directly or indirectly
acquire or hold the beneficial ownership of in excess of 10% of the Voting Stock
of the Corporation.
The Corporation will furnish to any stockholder upon written request and
without charge, a statement of the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights. Such request may be made to the Corporation or to
its transfer agent and registrar.
_________________________
The following abbreviations when used in the inscription on the face of
this certificate shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT. . . . . . . . . .
TEN ENT - as tenants by the .Custodian
entireties (Cust) (Minor)
JT TEN - as joint tenants with under Uniform Gifts to Minors Act
right of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above list
For value received,
________________________________________________________________________________
____________________________________ hereby sell, assign and transfer unto
_______________________________________________________________________shares of
Common Stock evidenced by this Certificate, and do hereby irrevocably constitute
and appoint
_______________________________________________________________________as
Attorney, to transfer the said shares on the books of the herein named
Association, with full power of substitution.
Date:
Signature
Signature
NOTICE: The signature to this assignment must correspond
with the name as written upon the face of the
Certificate, in every particular, without alteration or
enlargement, or any change whatsoever.
_________________________
<PAGE>
RESTRICTION
[Note: to be used only on certain shares]
The shares, or any interest therein, represented by this certificate may not
be sold or otherwise disposed of, directly or indirectly, by the registered
holder hereof for a period of one year from the date of issuance hereof, except
in the event of the death or judicial declaration of incompetency of the
registered holder.
<PAGE>
EXHIBIT 5.1
June __, 1996
Home Bancorp of Elgin, Inc.
c/o Home Federal Savings and Loan Association of Elgin
16 North Spring Street
Elgin, Illinois 60120
Ladies and Gentlemen:
We have acted as special counsel to Home Bancorp of Elgin, Inc., a
Delaware corporation (the "Corporation"), in connection with the registration
under the Securities Act of 1933, as amended, by the Corporation of an aggregate
of 7,604,375 shares of Common Stock, par value $.01 per share (the "Shares"), of
the Corporation, and the related preparation and filing by the Corporation with
the Securities and Exchange Commission of a Registration Statement on Form S-1
(the "Registration Statement"). In rendering the opinion set forth below, we do
not express any opinion concerning law other than the federal law of the United
States and the corporate law of the State of Delaware.
We have examined originals or copies, certified or otherwise identified,
of such documents, corporate records and other instruments, and have examined
such matters of law, as we have deemed necessary or advisable for purposes of
rendering the opinion set forth below. As to matters of fact, we have examined
and relied upon the representations of the Corporation contained in the
Registration Statement and, where we have deemed appropriate, representations or
certificates of officers of the Corporation or public officials. We have
assumed the authenticity of all documents submitted to us as originals, the
genuineness of all signatures, the legal capacity of natural persons and the
conformity to the originals of all documents submitted to us as copies. In
making our examination of any documents, we have assumed that all parties, other
than the Corporation, had the corporate power and authority to enter into and
perform all obligations thereunder, and, as to such parties, we have also
assumed the due authorization by all requisite action, the due execution and
delivery of such documents and the validity and binding effect and
enforceability thereof.
Based on the foregoing, we are of the opinion that the Shares to be
issued and sold by the Corporation have been duly authorized and, when issued
and sold as contemplated in the Registration
<PAGE>
Home Bancorp of Elgin, Inc.
June __,1996 Page 2.
Statement and the Plan of Conversion of Home Federal Savings and Loan
Association of Elgin, will be validly issued and outstanding, fully paid and
non-assessable.
In rendering the opinion set forth above, we have not passed upon and do
not purport to pass upon the application of securities or "blue-sky" laws of any
jurisdiction (except federal securities laws).
This opinion is given solely for the benefit of the Corporation and
investors who purchase Shares pursuant to the Registration Statement and may not
be relied upon by any other person or entity, nor quoted in whole or in part, or
otherwise referred to in any document without our express written consent.
We consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the Association's Application for Conversion on
Form AC (the "Form AC") and to the reference to our firm under the heading
"Legal Matters" in the prospectus which is part of such Registration Statement
and to the reference to our firm in the Form AC.
Very truly yours,
Thacher Proffitt & Wood
By
V. Gerard Comizio
<PAGE>
EXHIBIT 8.1
(212) 912-7633
June , 1996
Home Federal Savings and Loan Association of Elgin
16 North Spring Street
Elgin, Illinois 60120-5569
Dear Sirs:
You have requested our opinion regarding certain federal income tax
consequences of the proposed conversion of Home Federal Savings and Loan
Association of Elgin (the "Association") from a federally chartered mutual
savings and loan association to a federally chartered capital stock savings and
loan association (the "Conversion"), the sale of all of the outstanding capital
stock of the Association to Home Bancorp of Elgin, Inc., a Delaware corporation
(the "Company"), and the sale by the Company of up to 7,604,375 shares of its
common stock, par value of $.01 per share (the "Common Stock") to the
Association's Eligible Account Holders, Supplemental Eligible Account Holders
and certain other parties, pursuant to the Plan of Conversion of Home Federal
Savings and Loan Association of Elgin, adopted by the Board of Directors of the
Association on April 18, 1996 (the "Plan"). These and related transactions are
described in the Plan and in the prospectus included in the Company's
Registration Statement filed on Form S-1 with the Securities and Exchange
Commission in connection with the Conversion (the "Prospectus"). We are
rendering this opinion pursuant to Article VI of the Plan. All capitalized terms
used but not defined in this letter shall have the meanings set forth in the
Plan or Prospectus.
In connection with the opinions expressed below, we have examined and
relied upon originals, or copies certified or otherwise identified to our
satisfaction, of the Plan and the Prospectus and of such corporate records of
the Association and the Company as we have deemed appropriate. We have also
relied, without independent verification, upon the [_______] letter of the
Association and the Company to Thacher Proffitt and Wood containing certain
representations. We have assumed that the Association, the Company and other
parties will act in accordance with the Plan, and that the representations made
by the Association and the Company in the foregoing letter are true. In
addition, we have made such investigations of law as we have deemed appropriate
to form a basis for the opinions expressed below.
<PAGE>
Home Federal Savings and Loan Association of Elgin
June , 1996 Page 2.
Based on and subject to the foregoing, it is our opinion that, for
federal income tax purposes, under current law:
1. The Association's change in form from mutual to stock ownership
will constitute a reorganization under section 368(a)(1)(F) of the Internal
Revenue Code of 1986, and neither the Association nor the Company will recognize
any gain or loss as a result of the Conversion.
2. No gain or loss will be recognized by the Association or the
Company upon the purchase of the Association's capital stock by the Company in
the Conversion, or by the Company upon the purchase of shares of Common Stock
pursuant to the Plan.
3. No gain or loss will be recognized by Eligible Account Holders or
by Supplemental Eligible Account Holders upon the issuance to them of deposit
accounts in, and interests in the liquidation account of, the Association in its
stock form in exchange for their deposit accounts in the Association in its
mutual form.
4. The tax basis of the depositors' deposit accounts in the
Association in its stock form immediately after the Conversion will be the same
as the basis of their deposit accounts in the Association in its mutual form
immediately prior to the Conversion.
5. The tax basis of each Eligible Account Holder's and each
Supplemental Eligible Account Holder's interest in the liquidation account of
the Association will be zero.
6. No gain or loss will be recognized by Eligible Account Holders or
by Supplemental Eligible Account Holders upon the distribution to them of
nontransferable subscription rights to purchase shares of the Common Stock,
provided that the amount to be paid for the Common Stock pursuant to such
subscription rights is equal to the fair market value of such stock.
7. The tax basis to the stockholders of the shares of Common Stock
purchased in the Conversion pursuant to the subscription rights will be the
amount paid therefor, and the holding period for such shares of Common Stock
will begin on the date on which such subscription rights are exercised.
In rendering opinion 6, above, and our opinion regarding the tax basis
of shares of Common Stock in 7, above, we have relied, without independent
verification, on the opinion of RP Financial that the nontransferable
subscription rights have no value.
This opinion is given solely for the benefit of the parties to the Plan
and Eligible Account Holders, Supplemental Eligible Account Holders and other
investors who purchase shares pursuant to the Company's Registration Statement
on Form S-1 (the "Registration Statement"), and may not be relied upon by any
other party or entity or referred to in any document without our express written
<PAGE>
Home Federal Savings and Loan Association of Elgin
June , 1996 Page 2.
consent. We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the Application for Conversion on Form AC of the
Association.
Very truly yours,
THACHER PROFFITT & WOOD
By:
AJC:jwl
<PAGE>
EXHIBIT 8.2
June 11, 1996
Board of Directors
Home Federal Savings & Loan Association of Elgin
16 North Spring Street
Elgin, Illinois 60120-5569
Board of Directors
Home Bancorp of Elgin, Inc.
16 North Spring Street
Elgin, Illinois 60120-5569
Re: State of Illinois Tax Consequences of the Conversion of Home Federal
Savings & Loan Association of Elgin from a Federally Chartered Mutual
Savings & Loan Association to a Federally Chartered Stock Savings
Bank and Sale of Common Stock of Home Bancorp of Elgin, Inc.
You have requested an opinion of the potential State of Illinois income tax
consequences of the proposed conversion of Home Federal Savings & Loan
Association of Elgin from a federally chartered mutual savings and loan
association ("Home Federal") to a federally chartered stock savings bank
("Home Federal Stock") and the acquisition of Home Federal Stock's capital
stock by Home Bancorp of Elgin, Inc. ("Bancorp"), a newly formed holding
company, pursuant to the plan of conversion (Conversion).
You have submitted for our consideration the prospectus (Prospectus) for the
Conversion of Home Federal from the mutual to stock form of organization.
Based upon our review of the Prospectus and our understanding of the Facts (as
detailed in Section I) and your Representations (as detailed in Section II),
we have rendered our opinion (in Section III) regarding the potential State of
Illinois income tax effect of the proposed Conversion.
<PAGE>
Board of Directors
Home Federal Savings & Loan Association of Elgin
Home Bancorp of Elgin, Inc.
June 11, 1996
Page 2
Our opinion is restricted solely to the State of Illinois income tax
consequences discussed herein regarding the Conversion of Home Federal from
the mutual to the stock form of organization, the issuance of Home Federal
Stock's outstanding shares to Bancorp, and the granting of non-transferable
rights to subscribe to Bancorp's stock to an employer's stock ownership plan,
eligible account holders supplemental eligible account holders, and certain
other members and recipients. We express no opinion regarding matters not
expressly addressed herein and no inference should be made regarding any
matter not expressly addressed.
This opinion is exclusively for the use of Bancorp, Home Federal Stock and
Home Federal in their submission to the Office of Thrift Supervision or other
appropriate governmental body or agency for approval of the proposed
Conversion and related transactions described herein and is not to be used for
any other purpose without our written consent. We do consent to the inclusion
of this opinion as an Exhibit to the Form S-1 Registration Statement of
Bancorp and the references to this opinion in such Registration Statement.
Our conclusions reflect our professional judgment based on the facts and
representations delineated herein as well as existing tax authorities that are
subject to change. Any changes in facts, representations, or in existing tax
authority could, of course, affect our conclusions. Further, our opinion
represents merely our view of the transactions. No assurance can be given
that either the Treasury, the Internal Revenue Service, or the Illinois
Department of Revenue will agree with our opinion. The views of the Internal
Revenue Service and the Illinois Department of Revenue may differ from those
expressed herein.
SECTION I
---------
STATEMENT OF FACTS
------------------
Home Federal, with administrative offices in Elgin, Illinois, is a federally
chartered mutual savings and loan association. As a mutual savings and loan
association, Home Federal has never been authorized to issue stock. Instead,
the proprietary interest in the reserves and undivided profits of Home Federal
belong to the deposit account
<PAGE>
Board of Directors
Home Federal Savings & Loan Association of Elgin
Home Bancorp of Elgin, Inc.
June 11, 1996
Page 3
holders of Home Federal, hereinafter sometimes referred to as "depositors". A
depositor of Home Federal has a right to share, pro rata, with respect to the
withdrawal value of his respective deposit account of any liquidation proceeds
distributed in the event Home Federal is ever liquidated. In addition, a
depositor of Home Federal is entitled to interest on his account balance as
fixed and paid by Home Federal.
In order to provide organizational and economic strength to Home Federal, the
Board of Directors adopted a plan of conversion ("Plan of Conversion") whereby
Home Federal will convert itself into a federally chartered stock savings bank
(Home Federal Stock), the stock of which will be held entirely by Bancorp, a
newly organized Delaware corporation. Bancorp will acquire the stock of Home
Federal Stock by purchase, using proceeds received from the sale of its own
stock under the Plan of Conversion. In connection with the Conversion,
Bancorp will issue shares of its $.01 par value common stock ("Common Stock")
in the Subscription and Community Offering. The price of the Common Stock
will be based on an independent appraiser's valuation of the estimated
proforma market value of the Common Stock as determined by the estimated total
proforma market value of Home Federal Stock and Bancorp after conversion. The
Conversion will be subject to the approval of the Office of Thrift
Supervision, Department of Treasury ("OTS").
In accordance with the Plan of Conversion, non-transferable rights to
subscribe for the purchase of Common Stock have been granted under the Plan of
Conversion to the following persons in a subscription offering ("Subscription
Offering"), (1) holders of qualifying deposit accounts as of the close of
business on March a1, 1995 ("Eligible Account Holders"), (2) Home Federal's
Employee Stock Ownership Plan (the "ESOP"), (3) Supplemental Eligible Account
Holders, a term which is defined to mean any person who is a holder of a
qualified deposit account at Home Federal (other than Eligible Account
Holders), directors, officers and employees of Home Federal as of June 30,
1996, and (4) members of Home Federal, consisting of depositors and borrowers
of Home Federal as of the voting record date other than Eligible Account
Holders or Supplemental Eligible Account Holders. All subscriptions received
will be subject to the availability of Common Stock after satisfaction of all
subscriptions of all persons having prior rights in the Subscription Offering
and to the maximum and minimum purchase limitations set forth in the Plan
<PAGE>
Board of Directors
Home Federal Savings & Loan Association of Elgin
Home Bancorp of Elgin, Inc.
June 11, 1996
Page 4
of Conversion. Currently, and subject to the prior rights of holders of
subscription rights, any shares of Common Stock not subscribed for in the
Subscription Offering will be offered in a community offering ("Community
Offering") to certain members of the general public, with preference given to
natural persons residing in the counties in which Home Federal maintains an
office. It is anticipated that all shares not subscribed for in the
Subscription and Community Offerings will be offered by Bancorp to the general
public in a syndicated community offering ("Syndicated Community Offering").
The Conversion will not affect Home Federal's deposit accounts, individual
account balances or existing FDIC insurance coverage, nor will it affect Home
Federal's loan accounts, loan balances or the obligations of the borrowers to
Home Federal. Upon Conversion, voting rights with respect to Home Federal's
corporate matters shall vest exclusively in Bancorp, which will be the sole
shareholder of Home Federal's Stock's stock.
Home Federal Stock will continue, after completion of the Conversion, to
provide existing services to depositors and borrowers pursuant to existing
policies and will maintain existing offices, management and employees. Home
Federal Stock will continue to be insured by the FDIC up to applicable limits
and will continue to be regulated by the FDIC. The affairs of Home Federal
Stock will be directed by the existing Board of Directors of Home Federal, who
will become directors of Home Federal Stock. Home Federal's depositors will
pay expenses of the Conversion solely attributable to them, if any, Home
Federal and Bancorp will each pay their own expenses of the Conversion and
will not pay any expenses solely attributable to the shareholders of Bancorp.
The proposed Conversion of Home Federal does not include a receivership,
foreclosure or similar proceeding before a federal or state agency involving a
financial institution.
After the Conversion, each depositor of Home Federal Stock shall have a claim
upon complete liquidation of Home Federal Stock of the same priority as
general creditors. The claim of a depositor shall be limited to the amount of
the depositor's account balance plus accrued interest.
<PAGE>
Board of Directors
Home Federal Savings & Loan Association of Elgin
Home Bancorp of Elgin, Inc.
June 11, 1996
Page 5
A liquidation account for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders shall be established upon Conversion in
an amount equal to the net worth of Home Federal as of the latest balance
sheet contained in the financial Prospectus used in connection with the
Conversion. After Conversion, each Eligible Account Holder and Supplemental
Eligible Account Holder shall be entitled, upon a complete liquidation of Home
Federal Stock, to his pro rata interest in the liquidation account. The
establishment of the liquidation account will not operate to restrict the use
of application of any of the net worth accounts of Home Federal Stock, except
that Home Federal Stock will not declare or pay cash dividends or repurchase
any of its stock if the result thereof would be to reduce its net worth below
the amount required for the liquidation account. Each Eligible Account Holder
and Supplemental Eligible Account Holder will have a pro rata interest in the
total liquidation account for the amount each of Holder's deposit Accounts on
March 31, 1995 and June 30, 1996, respectively, the eligibility record dates,
bore to the balance of all Deposit Accounts in Home Federal on such dates.
If however, on any annual closing date of Home Federal Stock, commencing
March 31, 1996 (with respect to an Eligible Account Holder) and June 30, 1996
(with respect to a Supplemental Eligible Account Holder) the amount in any
Deposit Account is less than the amount in such Deposit Account on March 31,
1995 (with respect to an Eligible Account Holder) and June 30, 1996 (with
respect to a Supplemental Eligible Account Holder) or any other annual closing
date, then an Eligible Account Holder's or Supplemental Eligible Account
Holder's interest in the liquidation account relating to such Deposit account
would be reduced from time to time by the proportion of any such reduction,
and such interest will cease to exist if such Deposit Account is closed. In
addition, no interest in the liquidation account would ever be increased
despite any subsequent increase in the related Deposit Account. Any assets
remaining after the above liquidation rights of Eligible Account Holders and
Supplemental Eligible Account Holders are satisfied would be distributed to
Bancorp as the sole stockholder of Home Federal Stock.
The assets and liabilities, including deposits, of Home Federal shall become
the assets and liabilities of Home Federal Stock. All account balances at the
termination of
<PAGE>
Board of Directors
Home Federal Savings & Loan Association of Elgin
Home Bancorp of Elgin, Inc.
June 11, 1996
Page 6
operations under Home Federal's charter will be transferred by operation of
law intact to Home Federal Stock.
SECTION II
----------
REPRESENTATIONS
---------------
You have also provided the following representations concerning this
transaction:
(1) Home Federals' Eligible Account Holders, Supplemental Eligible Account
Holders and Members will pay the expenses of the Conversion solely
applicable to them, if any. Bancorp, and Home Federal will each pay
expenses of the transaction attributable to them and will not pay any
expenses solely attributable to the depositors or to Bancorp's
shareholders.
(2) The proposed transactions do not involve the payment to Bancorp, Home
Federal, or Home Federal Stock of financial assistance from Federal
agencies within the meaning of Notice 89-102, 1989-40, C.B.1.
(3) The fair market value of the withdrawable deposit accounts plus
interest in the liquidation account of Home Federal Stock to be
constructively received under the Plan of Conversion will, in each
instance, be equal to the fair market value of the withdrawable deposit
accounts in Home Federal surrendered in exchange therefor.
(4) No amount of an individual's total qualifying deposits in Home Federal
as of the eligibility record date will be excluded from participating
in the liquidation account.
(5) No Eligible Account Holder or Supplemental Eligible Account Holder as
of the eligibility record dates will be excluded from participating in
the liquidation account.
<PAGE>
Board of Directors
Home Federal Savings & Loan Association of Elgin
Home Bancorp of Elgin, Inc.
June 11, 1996
Page 7
(6) None of the shares of Common Stock to be purchased by the depositor-
employees of Home Federal will be issued or acquired at a discount.
However, shares will be given to certain employees as a compensation by
means of Home Federal Stock's stock award plans. Compensation to be
paid to such depositor-employees will be commensurate with amounts paid
to third parties bargaining at arm's length for similar services.
(7) No cash or property will be given to Eligible Account Holders, or
Supplemental Eligible Account Holders, or others in lieu of (a) non-
transferable subscription rights, or (b) an interest in the liquidation
account of Home Federal Stock.
(8) The exercise price of the subscription rights received by Home
Federal's Eligible Account Holders or Supplemental Eligible Account
Holders to purchase Bancorp Common Stock will be equal to the fair
market value of the stock of Bancorp at the time of the completion of
the proposed transactions determined by an independent appraisal and
they will have no purchase price advantage.
(9) The Eligible Account Holders' or Supplemental Eligible Account Holders'
proprietary interest in Home Federal arise solely by virtue of the fact
that they are account holders in Home Federal. None of the compensation
to be received by Eligible Account Holder or Supplemental Eligible
Account Holder-Employees of Home Federal will be separate consideration
for any of their deposits in Home Federal.
(10) To the best of knowledge of management of Home Federal, there is not
now, nor will there be at the time of reorganization, any plan or
intention on the part of the depositors in Home Federal to withdraw
their deposits from Home Federal Stock following the Conversion.
(11) All distributions to deposit holders in their capacity as deposit
holders (except for normal interest payments made by Home Federal)
will, in the aggregate, constitute less than one percent of the fair
market value of the net assets of Home Federal.
<PAGE>
Board of Directors
Home Federal Savings & Loan Association of Elgin
Home Bancorp of Elgin, Inc.
June 11, 1996
Page 8
(12) Home Federal has received or will receive an opinion from RP Financial
("RP Opinion") which concludes that the subscription rights to be
received by Eligible Account Holders, Supplemental Eligible Account
Holders, and other eligible subscribers do not have any value, since
they are acquired by the recipients without cost, are non-transferable
and of short duration, and afford the recipients a right only to
purchase conversion stock at a price equal to its estimated fair market
value, which will be the same price as the public offering price for
unsubscribed shares of conversion stock.
(13) Bancorp has no plan or intention to sell, liquidate or otherwise
dispose of the stock of Home Federal Stock or sell the assets of Home
Federal Stock other than in the ordinary course of business.
(14) Bancorp and Home Federal Stock have no current plan or intention to
redeem or otherwise acquire any of the shares of Common Stock issued in
the Conversion transaction.
(15) Home Federal, Home Federal Stock, and Bancorp are corporations within
the meaning of Section 7701(a)(3) of the Internal Revenue Code of 1986,
as amended (the "Code") and are not investment companies within the
meaning of Code Section 368(a)(2)(F)(iii) and (iv).
(16) Upon the completion of the Conversion, Bancorp will own and hold 100%
of the issued and outstanding capital stock of Home Federal Stock and
no other shares of capital stock of Home Federal Stock will be issued
and/or outstanding. At the time of the Conversion, Home Federal Stock
does not have any plan or intention to issue additional shares of its
stock following the transaction. Further, no shares of preferred stock
of Home Federal Stock, if any, will be issued and/or outstanding.
(17) There is no plan or intention for Home Federal Stock to be liquidated
or merged with another corporation following this proposed transaction.
<PAGE>
Board of Directors
Home Federal Savings & Loan Association of Elgin
Home Bancorp of Elgin, Inc.
June 11, 1996
Page 9
(18) If all of the net proceeds from the sale of conversion stock had been
contributed by Bancorp to Home Federal Stock in exchange for common
stock of Home Federal Stock in the transaction, as opposed to Bancorp
retaining a portion of such net proceeds (the "retained proceeds,") and
Home Federal Stock immediately thereafter made a distribution of the
retained proceeds to Bancorp, Home Federal Stock would have sufficient
current and accumulated earnings and profits for tax purposes such that
the distribution would not result in the recapture of any portion of
the tax bad debt reserves of Home Federal Stock under Code Section
593(e).
(19) After the Conversion, Home Federal Stock will continue the business of
Home Federal in the same manner as prior to the Conversion. Following
the Conversion, Home Federal Stock has no plan or intention and Bancorp
has no plan or intention to cause Home Federal Stock to sell its assets
other than in the ordinary course of business.
(20) Home Federal Stock has no plan or intention to issue additional shares
of stock following the proposed transaction, other than shares that may
be issued to employees and/or directors pursuant to certain stock
option or stock award plans or that may be issued to employee benefit
plans.
(21) Immediately after the Conversion, the assets and liabilities of Home
Federal Stock will be identical to the assets and liabilities of Home
Federal immediately prior to the Conversion, plus substantially all the
net proceeds from the sale of Home Federal Stock's common stock to
Bancorp.
(22) The fair market value of the assets of Home Federal, which will be
transferred to Home Federal Stock in the Conversion, will be equal to
or exceed the sum of the liabilities of Home Federal which will be
assumed by Home Federal Stock and any liabilities to which the
transferred assets are subject. Home Federal will have a positive
regulatory net worth at the time of the transaction.
(23) The applicable authority, as defined in Code Section 368(a)(3)(D), has
not made the certification of insolvency described in Code Section
<PAGE>
Board of Directors
Home Federal Savings & Loan Association of Elgin
Home Bancorp of Elgin, Inc.
June 11, 1996
Page 10
368(a)(3)(D), nor will such certification be made prior to or otherwise
in connection with the proposed transaction. Home Federal is not under
the jurisdiction of a Bankruptcy or similar court.
(24) Upon the completion of the Conversion, there will be no rights,
warrants, contracts, agreements, or commitments or understanding with
respect to the capital stock of Home Federal Stock, nor will there be
any securities outstanding which are convertible into the capital stock
of Home Federal Stock.
(25) Home Federal utilizes a reserve for bad debts in accordance with Code
Section 593 and, following the Conversion, Home Federal Stock shall
likewise utilize a reserve for bad debts in accordance with Code
Section 593.
(26) Home Federal currently satisfies the 60% "qualified assets" test of
Code Section 7701(a)(19). Management expects Home Federal Stock to be
able to continue to satisfy the test in the future.
(27) The liabilities of Home Federal assumed by Home Federal Stock plus the
liabilities, if any, to which the transferred assets are subject were
incurred by Home Federal in the ordinary course of its business and are
associated with the assets transferred.
(28) Home Federal will not have any net operating loss carryovers or capital
loss carryovers at the time of the Conversion.
(29) The tax basis of Home Federal Stock's assets (excluding cash, goodwill
and any marketable security whose fair market value is at least 95% of
its adjusted basis) immediately before the acquisition of its
<PAGE>
Board of Directors
Home Federal Savings & Loan Association of Elgin
Home Bancorp of Elgin, Inc.
June 11, 1996
Page 11
stock by Bancorp does not exceed the fair market value of Home Federal
Stock's assets by more than 15%. Further, the difference between the
fair market value of Home Federal Stock's assets, within the meaning of
Code Section 382(h), and its tax basis in such assets immediately
before the acquisition of its shares by Bancorp is not greater than the
lesser of (a) $10,000,000 or (b) 15% of the fair market value of its
assets.
(30) Assets used to pay expenses of the Conversion and all distributions
(except for regular, normal interest payments and other payments in the
normal course of business made by Home Federal immediately preceding
the transaction) will in the aggregate constitute less than 1% of the
net assets of Home Federal and any such expenses and distributions will
be paid by Home Federal Stock from the proceeds of the sale of the
conversion stock.
SECTION III
-----------
OPINION
-------
The State of Illinois has adopted federal law as currently amended as the
starting point for computing Illinois taxable income [35 ILCS 5/203(b)].
Income tax terms are defined in relation to the Internal Revenue code [35 ILCS
5/102]. Taxpayers are required to use the same taxable year and accounting
methods as are used in computing federal taxable income [35 ILCS 5/401(a) and
5/402(a)].
For State of Illinois tax purposes, the Internal Revenue Code and related
regulations, rulings and case law are controlling unless specifically provided
in the Illinois statutes. There are no specific provisions in the Illinois
statutes governing the proposed transactions. Thus, our opinion below
addresses our view as to the Federal income tax consequences of the proposed
transactions which, as indicated above, should also be the Illinois income tax
consequences.
Based solely upon the facts and representations listed above and provided that
the facts and representations are correct, we render the following opinion
with respect to the Federal and State of Illinois income tax consequences of
the proposed transaction. Our opinion is only applicable to the tax effects
of those Internal Revenue Code Sections specifically discussed below. No
opinion is expressed nor can any inferences be drawn as to the applicability
of any other Code Section.
<PAGE>
Board of Directors
Home Federal Savings & Loan Association of Elgin
Home Bancorp of Elgin, Inc.
June 11, 1996
Page 12
1. The proposed Conversion of Home Federal from a Federally chartered
mutual savings and loan association ("Home Federal") to a Federally
chartered stock savings bank ("Home Federal Stock") will constitute a
tax-free reorganization within the meaning of Code Section 368(a)(1)(F),
and no gain or loss will be recognized to Home Federal or Home Federal
Stock as a result or such Conversion.
2. No gain or loss will be recognized to Home Federal Stock upon the
receipt of money from Bancorp in exchange for common stock of Home
Federal Stock [Code Section 1032(a).]
3. No gain or loss will be recognized by Bancorp upon the receipt of money
for stock issued in the Conversion. [Code Section 1032(a)].
4. The assets of Home Federal Stock following the proposed Conversion will
have the same basis as in the hands of Home Federal immediately before
the Conversion [Code Section 362(b).]
5. The holding period of Home Federal Stock's assets following the proposed
Conversion will include the period such assets were held by Home Federal
immediately before the Conversion [Code Section 1223(2).]
6. No gain or loss will be recognized by Eligible Account Holders or
Supplemental Eligible Account Holders of Home Federal upon the issuance
to them of accounts in Home Federal Stock in the same dollar amount as
their accounts in Home Federal, plus interests in the liquidation
account of Home Federal Stock, because the fair market value of the
withdrawable accounts coupled with the liquidation account interest in
Home Federal Stock at the time of the Conversion is deemed to be equal
to the basis of the accounts in Home Federal (Code Section 1001; see
Paulsen v. Commissioner, 469 U.S. 131, 139 (1985), quoting Society for
----------------------- -----------
Savings v. Bowers, 349 U.S. 143 (1955); but see Revenue Rulings 69-3,
-----------------
1969-1 CB 103 and 69-646, 1969-2 CB54, the interest received rises to
the level of "stock" and, thus, Code Section 354 applies).
<PAGE>
Board of Directors
Home Federal Savings & Loan Association of Elgin
Home Bancorp of Elgin, Inc.
June 11, 1996
Page 13
7. Provided that the amount to be paid for such stock pursuant to the
subscription rights is equal to the fair market value of the stock, no
gain or loss will be recognized by Eligible Account Holders,
Supplemental Eligible Account Holders, other members, directors,
officers, and employees of Home Federal, upon the distribution to them
of stock in Bancorp [Code Section 356(a)]. Gain realized, if any, by the
Eligible Account Holders, Supplemental Eligible Account Holders, and
other recipients on the distribution to them of the nontransferable
subscription rights to purchase shares of Common Stock will be
recognized but only in an amount not in excess of the fair market value
of such subscription rights [Code Section 356(a)]. Eligible Account
Holders, Supplemental Eligible Account Holders, and other recipients
will not realize any taxable income as a result of the exercise by them
of the non-transferable subscription rights (Rev. Rul. 56-572, 1956-2
C.B. 182). This opinion is predicated on the representation that no
person shall receive any payment in lieu of the issuance of subscription
rights and upon the RP Opinion that the subscription rights do not have
any value. However, notwithstanding the RP Opinion, if the subscription
rights are subsequently found to have a fair market value, income may be
recognized by the various recipients of the subscription rights (in
certain cases whether or not the rights are exercised) and Bancorp and
Home Federal Stock may be taxable on the distribution of subscription
rights (Code Section 311).
8. Pursuant to Code Section 1012, the basis of the savings accounts in Home
Federal Stock to be constructively received by the account holders of
Home Federal will be equal to the cost of such property. The cost will
be the fair market value of their savings account in Home Federal Stock
constructively received in exchange for their savings account in Home
Federal. For this purpose, the fair market value of the deposit accounts
in Home Federal Stock after the proposed Conversion will be equal to the
basis the Eligible Account Holders and Supplemental Eligible Account
Holders have in their deposits in Home Federal immediately before the
proposed Conversion. The basis for each account holder's interest in the
liquidation account of Home Federal Stock will be equal to the cost of
such property. The cost will be the same as the fair market value of the
proprietary interest received in Home Federal
<PAGE>
Board of Directors
Home Federal Savings & Loan Association of Elgin
Home Bancorp of Elgin, Inc.
June 11, 1996
Page 14
Stock, in exchange for their proprietary interest in Home Federal. The
account holders' interest in the liquidation account in Home Federal
Stock will be deemed to have a basis and fair market value equal to
zero. [See Paulsen v. Commissioner, 469 U.S. at 139 (1985) and Rev.
-----------------------
Rul. 71-233, 1971-1 C.B. 113].
9. The basis of Bancorp's stock to its stockholders will be the purchase
price paid therefore plus the basis, if any, of non-transferable
subscription rights (Code Section 1012). Accordingly, assuming the
subscription rights have no value, the basis of the Common Stock to the
Eligible Account Holders and Supplemental Eligible Account Holders will
be the amount paid therefore. Our opinion is predicated upon the RP
Opinion that the subscription rights do not have any value. The holding
period of the Common Stock purchased pursuant to the exercise of
subscription rights shall commence on the date on which the right to
acquire such stock was exercised [Code Section 1223 (6)].
10. For purposes of Code Section 381, Home Federal Stock will be treated as
if there had been no reorganization. Accordingly, the taxable year of
Home Federal will not end on the effective date of the Conversion and
the tax attributes of Home Federal will be taken into account by Home
Federal Stock as if there had been no reorganization [Treasury
Regulation Section 1.381(b)-(1)(a)(2)]. The part of the taxable year of
Home Federal before the Conversion through Home Federal's normal year
end will constitute a single taxable year of Home Federal Stock (Revenue
Ruling 57-276, 1957-1 C.B. 126).
11. Pursuant to the provisions of Code Section 381(c)(2) and Treasury
Regulation Section 1.381(c)(2)-1, Home Federal Stock will succeed and
take into account the earnings and profits of Home Federal as of the
date of the Conversion. The Conversion will not diminish the accumulated
earnings and profits of Home Federal Stock available for the subsequent
distribution of dividends within the meaning of Code Section 316 and
Treasury Regulations Section 1.312-11(b) and (c) as well as Code Section
593(e).
<PAGE>
Board of Directors
Home Federal Savings & Loan Association of Elgin
Home Bancorp of Elgin, Inc.
June 11, 1996
Page 15
12. Pursuant to the provisions of Code Section 381(c)(3) and Treasury
Regulation Section 1.381(c)(3)-1, and subject to the restrictions
therein, Home Federal Stock will succeed to and take into account
capital loss carryovers, if any, of Home Federal in its first taxable
year ending after the date of the Conversion subject to the limitations
of Code Section 382.
13. Pursuant to the provisions of Code Section 381(c)(4) and Treasury
Regulation Section 1.381(c)(4)-1(a)(1)(ii), Home Federal Stock will
succeed to and take into account, immediately after the Conversion,
those accounts of Home Federal that represent bad debt reserves in
respect of which Home Federal has taken a bad debt deduction for taxable
years ending on or before the date of transfer. The bad debt reserves
will not be required to be restored to the gross income of Home Federal
or Home Federal Stock for the taxable year of the Conversion, and the
bad debt reserves will have the same character in the hands of Home
Federal Stock as they would have in the hands of Home Federal if no
transfer occurred.
14. The creation of the liquidation account on the records of Home Federal
Stock will have no effect on Home Federal Stock's or Home Federal's
taxable income, deductions, or additions to reserves for bad debts under
Code Section 593, or distributions to shareholders under Code Section
593(e).
15. Pursuant to the provisions of Code Section 381(c)(1) and Treasury
Regulation Section 1.381(c)(1)-1, and subject to restrictions therein,
Home Federal Stock will succeed to and take into account net operating
loss carryovers, if any, of Home Federal in its first taxable year
ending after the date of the Conversion, subject to the limitations of
Code Section 382.
16. Bancorp's acquisition of the stock of Home Federal Stock will result in
an ownership change of Home Federal Stock within the meaning of Code
Section 382(b)(2). Accordingly, if Home Federal Stock had any net
operating loss carryovers or net built-in losses, their use in the
future years would be limited to the product of the pre-ownership fair
market value of Home Federal Stock and the long-term Federal tax-exempt
rate on the effective date of the ownership change or, if higher, the
rate in effect for
<PAGE>
Board of Directors
Home Federal Savings & Loan Association of Elgin
Home Bancorp of Elgin, Inc.
June 11, 1996
Page 16
either of the two calendar months immediately preceding the ownership
change [Code Sections 382(a)(1) and 382 (f)(1)].
17. The limitations on the deduction of built-in deductions pursuant to
Treasury Regulations Section 1.1502-15(a) and built-in losses pursuant
to Code Section 382(h)(3)(B)(i) with respect to Home Federal Stock's
assets upon the acquisition of its shares by Bancorp will not apply.
SUMMARY
-------
Based on the foregoing, it is our view that there should be no material
adverse State of Illinois income tax consequences to Bancorp, Home Federal
(mutual or stock), Eligible Account Holders or Supplemental Eligible Account
Holders and other recipients of conversion stock, as a result of the proposed
transactions. However, as indicated earlier, our opinion is based upon the
facts and representations detailed herein as well as current Federal and State
of Illinois income tax law, related cases, rulings, etc. Any changes in the
proposed transactions or in Federal and State of Illinois income tax law prior
to consummation of the proposed transactions or which are retroactive in
effect, could cause us to modify our opinion.
We consent to the inclusion of this opinion as an exhibit to the Form S-1
Registration Statement of Bancorp and the references to and summary of this
opinion in such Registration Statement.
Very truly yours,
KPMG Peat Marwick
Vincent L. Lanuza
Partner
VLL:pjh
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
EXHIBIT 8.3
June 12, 1996
Broad of Directors
Home Federal Savings and Loan Association of Elgin
16 North Spring Street
Elgin, Illinois 60120
Re: Plan of Conversion: Subscription Rights
Home Federal Savings and Loan Association of Elgin
Gentlemen:
All capitalized terms not otherwise defined in this letter have the meanings
given such terms in the Plan of Conversion adopted by the Board of Directors of
Home Federal Savings and Loan Association of Elgin ("Home Federal" or the
"Association") whereby the Association will convert from a federally chartered
mutual savings and loan association to a federally chartered stock savings and
loan association and issue all of the Association's outstanding capital stock to
Home Bancorp of Elgin, Inc. (the "Holding Company"). Simultaneously, the Holding
Company will issue shares of common stock.
We understand that in accordance with the Plan of Conversion, Subscription
Rights to purchase shares of Common Stock in the Holding Company are to be
issued to: (1) Eligible Account Holders; (2) the ESOP; (3) Supplemental Eligible
Account Holders; and (4) Other Members. Based solely upon our observation that
the Subscription Rights will be available to such parties without cost, will be
legally non-transferable and of short duration, and will afford such parties the
right only to purchase shares of Common Stock at the same price as will be paid
by members of the general public in the Community Offering, but without
undertaking any independent investigation of state or federal law or the
position of the Internal Revenue Service with respect to this issue, we are of
the belief that, pursuant to our valuation of the Subscription Rights:
(1) the Subscription Rights will have no ascertainable market value; and,
(2) the price at which the Subscription Rights are exercisable will not be
more or less than the pro form market value of the shares upon
issuance.
Changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates, and other external forces (such
as natural disasters or significant world events) may occur from time to time,
often with great unpredictability and may materially impact the value of thrift
stocks as a whole or the Holding Company's value alone. Accordingly, no
assurance can be given that persons who subscribe to shares of common stock in
the conversion will thereafter be able to buy or sell such shares at the same
price paid in the Subscription Offering.
Sincerely,
/s/ William E. Pommerening
William E. Pommerening
Chief Executive Officer
- --------------------------------------------------------------------------------
Washington Headquarters
Rosslyn Center
1700 North Moore Street, Suite 2210 Telephone: (703)528-1700
Arlington, VA 22209 Fax No.: (703)528-1788
<PAGE>
EXHIBIT 10.1
HOME BANCORP OF ELGIN, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
ADOPTED ON MAY 16, 1996
EFFECTIVE JANUARY 1, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
---------
DEFINITIONS
-----------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1.1 ACCOUNT..................................................... 1
SECTION 1.2 AFFILIATED EMPLOYER......................................... 1
SECTION 1.3 ALLOCATION COMPENSATION..................................... 1
SECTION 1.4 BOARD....................................................... 2
SECTION 1.5 BENEFICIARY................................................. 2
SECTION 1.6 BREAK IN SERVICE............................................ 2
SECTION 1.7 CHANGE IN CONTROL........................................... 2
SECTION 1.8 CODE........................................................ 2
SECTION 1.9 COMMITTEE................................................... 2
SECTION 1.10 COMPUTATION PERIOD.......................................... 2
SECTION 1.11 DISABILITY.................................................. 2
SECTION 1.12 DOMESTIC RELATIONS ORDER.................................... 3
SECTION 1.13 EFFECTIVE DATE.............................................. 3
SECTION 1.14 ELIGIBLE EMPLOYEE........................................... 3
SECTION 1.15 ELIGIBLE PARTICIPANT........................................ 3
SECTION 1.16 EMPLOYEE.................................................... 3
SECTION 1.17 EMPLOYER.................................................... 3
SECTION 1.18 EMPLOYMENT COMMENCEMENT DATE................................ 3
SECTION 1.19 ERISA....................................................... 3
SECTION 1.20 ESOP CONTRIBUTION........................................... 3
SECTION 1.21 FAIR MARKET VALUE........................................... 3
SECTION 1.22 FAMILY MEMBER............................................... 4
SECTION 1.23 FINANCED SHARE.............................................. 4
SECTION 1.24 FIVE PERCENT OWNER.......................................... 4
SECTION 1.25 FORFEITURES................................................. 4
SECTION 1.26 FORMER PARTICIPANT.......................................... 4
SECTION 1.27 GENERAL INVESTMENT ACCOUNT.................................. 4
SECTION 1.28 HIGHLY COMPENSATED EMPLOYEE................................. 5
SECTION 1.29 HOUR OF SERVICE............................................. 6
SECTION 1.30 INVESTMENT ACCOUNT.......................................... 6
SECTION 1.31 INVESTMENT FUND............................................. 6
SECTION 1.32 LOAN REPAYMENT ACCOUNT...................................... 6
SECTION 1.33 LOAN REPAYMENT CONTRIBUTION................................. 7
SECTION 1.34 MATERNITY OR PATERNITY LEAVE................................ 7
SECTION 1.35 MILITARY SERVICE............................................ 7
SECTION 1.36 NAMED FIDUCIARY............................................. 7
SECTION 1.37 OFFICER..................................................... 7
SECTION 1.38 ONE-YEAR BREAK IN SERVICE................................... 7
SECTION 1.39 PARTICIPANT................................................. 7
SECTION 1.40 PERIOD OF SERVICE........................................... 7
SECTION 1.41 PERIOD OF SEVERANCE......................................... 7
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1.42 PLAN....................................................... 8
SECTION 1.43 PLAN ADMINISTRATOR......................................... 8
SECTION 1.44 PLAN YEAR.................................................. 8
SECTION 1.45 QUALIFIED DOMESTIC RELATIONS ORDER......................... 8
SECTION 1.46 QUALIFIED PARTICIPANT...................................... 8
SECTION 1.47 RETIREMENT................................................. 8
SECTION 1.48 SHARE...................................................... 8
SECTION 1.49 SHARE ACQUISITION LOAN..................................... 8
SECTION 1.50 SHARE INVESTMENT ACCOUNT................................... 8
SECTION 1.51 TENDER OFFER............................................... 9
SECTION 1.52 TOTAL COMPENSATION......................................... 9
SECTION 1.53 TRUST...................................................... 9
SECTION 1.54 TRUST AGREEMENT............................................ 9
SECTION 1.55 TRUST FUND................................................. 9
SECTION 1.56 TRUSTEE.................................................... 9
SECTION 1.57 VALUATION DATE............................................. 9
SECTION 1.58 YEAR OF ENROLLMENT SERVICE................................. 10
</TABLE>
ARTICLE II
----------
PARTICIPATION
-------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 2.1 ELIGIBILITY FOR PARTICIPATION............................... 10
SECTION 2.2 COMMENCEMENT OF PARTICIPATION............................... 10
SECTION 2.3 TERMINATION OF PARTICIPATION................................ 10
</TABLE>
ARTICLE III
-----------
SPECIAL PROVISIONS
------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 3.1 MILITARY SERVICE............................................ 11
SECTION 3.2 MATERNITY OR PATERNITY LEAVE................................ 11
SECTION 3.3 ADJUSTMENTS TO YEARS OF ENROLLMENT SERVICE.................. 12
SECTION 3.4 ADJUSTMENTS TO PERIOD OF SERVICE............................ 13
SECTION 3.5 LEAVE OF ABSENCE............................................ 13
</TABLE>
ARTICLE IV
----------
CONTRIBUTIONS BY PARTICIPANTS NOT PERMITTED
-------------------------------------------
SECTION 4.1 CONTRIBUTIONS BY PARTICIPANTS NOT PERMITTED................... 14
(ii)
<PAGE>
ARTICLE V
---------
CONTRIBUTIONS BY THE EMPLOYER
-----------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 5.1 IN GENERAL.................................................. 14
SECTION 5.2 LOAN REPAYMENT CONTRIBUTIONS................................ 14
SECTION 5.3 ESOP CONTRIBUTIONS.......................................... 15
SECTION 5.4 TIME AND MANNER OF PAYMENT.................................. 15
</TABLE>
ARTICLE VI
----------
SHARE ACQUISITION LOANS
-----------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 6.1 IN GENERAL.................................................. 15
SECTION 6.2 COLLATERAL; LIABILITY FOR REPAYMENT......................... 16
SECTION 6.3 LOAN REPAYMENT ACCOUNT...................................... 17
SECTION 6.4 RELEASE OF FINANCED SHARES.................................. 17
SECTION 6.5 RESTRICTIONS ON FINANCED SHARES............................. 18
</TABLE>
ARTICLE VII
-----------
ALLOCATION OF CONTRIBUTIONS
---------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 7.1 ALLOCATION AMONG ELIGIBLE PARTICIPANTS...................... 19
SECTION 7.2 ALLOCATION OF RELEASED SHARES OR OTHER PROPERTY............. 19
SECTION 7.3 ALLOCATION OF ESOP CONTRIBUTIONS............................ 19
</TABLE>
ARTICLE VIII
------------
LIMITATIONS ON ALLOCATIONS
--------------------------
SECTION 8.1 OPTIONAL LIMITATIONS ON ALLOCATIONS OF ESOP CONTRIBUTIONS..... 19
SECTION 8.2 GENERAL LIMITATIONS ON CONTRIBUTIONS.......................... 20
ARTICLE IX
----------
VESTING
-------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 9.1 VESTING..................................................... 24
SECTION 9.2 VESTING ON DEATH, DISABILITY, RETIREMENT OR CHANGE IN
CONTROL..................................................... 24
SECTION 9.3 FORFEITURES ON TERMINATION OF EMPLOYMENT.................... 24
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
19SECTION 9.4 AMOUNTS CREDITED UPON RE-EMPLOYMENT...................... 25
19 SECTION 9.5 ALLOCATION OF FORFEITURES............................... 25
</TABLE>
ARTICLE X
---------
THE TRUST FUND
--------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 10.1 THE TRUST FUND............................................. 25
SECTION 10.2 INVESTMENTS................................................ 26
SECTION 10.3 DIVERSIFICATION OF INVESTMENTS............................. 26
SECTION 10.4 USE OF COMMINGLED TRUST FUNDS.............................. 27
SECTION 10.5 MANAGEMENT AND CONTROL OF ASSETS........................... 27
</TABLE>
ARTICLE XI
----------
VALUATION OF INTERESTS IN THE TRUST FUND
----------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 11.1 ESTABLISHMENT OF INVESTMENT ACCOUNTS....................... 28
SECTION 11.2 SHARE INVESTMENT ACCOUNTS.................................. 28
SECTION 11.3 GENERAL INVESTMENT ACCOUNTS................................ 28
SECTION 11.4 VALUATION OF INVESTMENT ACCOUNTS........................... 29
SECTION 11.5 ANNUAL STATEMENTS.......................................... 29
</TABLE>
ARTICLE XII
-----------
SHARES
------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 12.1 SPECIFIC ALLOCATION OF SHARES.............................. 29
SECTION 12.2 DIVIDENDS.................................................. 29
SECTION 12.3 VOTING RIGHTS.............................................. 30
SECTION 12.4 TENDER OFFERS.............................................. 32
</TABLE>
ARTICLE XIII
------------
PAYMENT OF BENEFITS
-------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 13.1 IN GENERAL................................................. 34
SECTION 13.2 DESIGNATION OF BENEFICIARIES............................... 35
SECTION 13.3 DISTRIBUTIONS TO PARTICIPANTS AND FORMER PARTICIPANTS...... 36
SECTION 13.4 MANNER OF PAYMENT.......................................... 39
SECTION 13.5 PUT OPTIONS................................................ 39
</TABLE>
(iv)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 13.6 RIGHT OF FIRST REFUSAL..................................... 40
SECTION 13.7 MINIMUM REQUIRED DISTRIBUTIONS............................. 41
SECTION 13.8 DIRECT ROLLOVER OF ELIGIBLE ROLLOVER DISTRIBUTIONS......... 42
SECTION 13.9 VALUATION OF SHARES UPON SETTLEMENT TO A PARTICIPANT....... 43
</TABLE>
ARTICLE XIV
-----------
CHANGE IN CONTROL
-----------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 14.1 DEFINITION OF CHANGE IN CONTROL............................ 44
SECTION 14.2 VESTING ON CHANGE OF CONTROL............................... 45
SECTION 14.3 REPAYMENT OF LOAN.......................................... 45
SECTION 14.4 PLAN TERMINATION AFTER CHANGE IN CONTROL................... 46
SECTION 14.5 AMENDMENT OF ARTICLE XIV................................... 47
</TABLE>
ARTICLE XV
----------
ADMINISTRATION
--------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 15.1 NAMED FIDUCIARIES......................................... 47
SECTION 15.2 PLAN ADMINISTRATOR......................................... 47
SECTION 15.3 COMMITTEE RESPONSIBILITIES................................. 49
SECTION 15.4 CLAIMS PROCEDURE........................................... 50
SECTION 15.5 CLAIMS REVIEW PROCEDURE................................... 50
SECTION 15.6 ALLOCATION OF FIDUCIARY RESPONSIBILITIES AND EMPLOYMENT
OF ADVISORS............................................... 51
SECTION 15.7 OTHER ADMINISTRATIVE PROVISIONS........................... 51
</TABLE>
ARTICLE XVI
-----------
AMENDMENT, TERMINATION AND TAX QUALIFICATION
--------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 16.1 AMENDMENT AND TERMINATION BY HOME BANCORP OF ELGIN, INC.... 52
SECTION 16.2 AMENDMENT OR TERMINATION OTHER THAN BY HOME BANCORP OF
ELGIN, INC................................................. 53
SECTION 16.3 CONFORMITY TO INTERNAL REVENUE CODE........................ 53
SECTION 16.4 CONTINGENT NATURE OF CONTRIBUTIONS......................... 53
</TABLE>
(v)
<PAGE>
ARTICLE XVII
------------
SPECIAL RULES FOR TOP HEAVY PLAN YEARS
--------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 17.1 IN GENERAL................................................. 54
SECTION 17.2 DEFINITION OF TOP HEAVY PLAN............................... 54
SECTION 17.3 DETERMINATION DATE......................................... 55
SECTION 17.4 CUMULATIVE ACCRUED BENEFITS................................ 55
SECTION 17.5 KEY EMPLOYEES.............................................. 56
SECTION 17.6 REQUIRED AGGREGATION GROUP................................. 57
SECTION 17.7 PERMISSIBLE AGGREGATION GROUP.............................. 57
SECTION 17.8 SPECIAL REQUIREMENTS DURING TOP HEAVY PLAN YEARS........... 57
</TABLE>
ARTICLE XVIII
-------------
MISCELLANEOUS PROVISIONS
------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 18.1 GOVERNING LAW.............................................. 58
SECTION 18.2 NO RIGHT TO CONTINUED EMPLOYMENT........................... 58
SECTION 18.3 CONSTRUCTION OF LANGUAGE................................... 58
SECTION 18.4 HEADINGS................................................... 59
SECTION 18.5 MERGER WITH OTHER PLANS.................................... 59
SECTION 18.6 NON-ALIENATION OF BENEFITS................................. 59
SECTION 18.7 PROCEDURES INVOLVING DOMESTIC RELATIONS ORDERS............. 59
SECTION 18.8 LEASED EMPLOYEES........................................... 60
SECTION 18.9 STATUS AS AN EMPLOYEE STOCK OWNERSHIP PLAN................. 61
</TABLE>
(vi)
<PAGE>
HOME BANCORP OF ELGIN, INC.
---------------------------
EMPLOYEE STOCK OWNERSHIP PLAN
-----------------------------
ARTICLE I
---------
DEFINITIONS
-----------
The following definitions shall apply for the purposes of the Plan,
unless a different meaning is clearly indicated by the context:
SECTION 1.1 ACCOUNT means an account established for each Participant
-------
to which is allocated such Participant's share, if any, of all Financed Shares
and other property that are released from the Loan Repayment Account in
accordance with section 6.4, together with his share, if any, of any ESOP
Contributions that may be made by the Employer.
SECTION 1.2 AFFILIATED EMPLOYER means any corporation which is a
-------------------
member of a controlled group of corporations (as defined in section 414(b) of
the Code) that includes the Employer; any trade or business (whether or not
incorporated) that is under common control (as defined in section 414(c) of the
Code) with the Employer; any organization (whether or not incorporated) that is
a member of an affiliated service group (as defined in section 414(m) of the
Code) that includes the Employer; any leasing organization (as defined in
section 414(n) of the Code) to the extent that any of its employees are required
pursuant to section 414(n) of the Code to be treated as employees of the
Employer; and any other entity that is required to be aggregated with the
Employer pursuant to regulations under section 414(o) of the Code.
SECTION 1.3 ALLOCATION COMPENSATION during any period means the
-----------------------
compensation taken into account in determining the allocation of benefits and
contributions among Participants and consists of the aggregate compensation
received by an Employee from the Employer with respect to such period as
reported to the Internal Revenue Service as wages for such period pursuant to
section 6041(a) of the Code, plus the amount by which such Employee's
compensation with respect to such period has been reduced pursuant to a
compensation reduction agreement under the terms of any of the following plans
which may be maintained by the Employer:
(a) a qualified cash or deferred arrangement described in section
401(k) of the Code;
(b) a salary reduction simplified employee pension plan described in
section 408(k) of the Code;
(c) a tax deferred annuity plan described in section 403(b) of the
Code; or
<PAGE>
-2-
(d) a cafeteria plan described in section 125 of the Code.
In no event, however, shall an Employee's Allocation Compensation for any
calendar year include any compensation in excess of $150,000. The $150,000
limitation set forth in the preceding sentence shall be indexed in accordance
with regulations prescribed under section 401(a)(17) of the Code. If there are
less than twelve (12) months in the Plan Year, the $150,000 limitation (as
adjusted) shall be prorated by multiplying such limitation by a fraction, the
numerator of which is the number of months in the Plan Year and the denominator
of which is twelve (12). For purposes of applying the foregoing limitations to
any person who is a Five Percent Owner or who is one of the ten Highly
Compensated Employees with the highest Total Compensation (determined prior to
the application of this sentence), any Allocation Compensation paid to the
spouse of such person or to any lineal descendant of such person who has not
attained age 19 on or before the last day of such calendar year shall be deemed
to have been paid to such person and, in such case, the dollar limitation on
compensation in section 401(a)(17) of the Code shall be allocated among such
persons in proportion to the Allocation Compensation actually paid to each
person.
SECTION 1.4 BOARD means the Board of Directors of Home Bancorp of
-----
Elgin, Inc.
SECTION 1.5 BENEFICIARY means the person or persons designated by a
-----------
Participant or Former Participant or other person entitled to a benefit under
the Plan, or otherwise determined to be entitled to a benefit under the Plan.
If more than one person is designated, each shall have an equal share unless the
person making the designation directed otherwise. The word "person" includes an
individual, a trust, an estate or any other person that is permitted to be named
as a Beneficiary.
SECTION 1.6 BREAK IN SERVICE means a Period of Severance of at
----------------
least 365 consecutive days.
SECTION 1.7 CHANGE IN CONTROL means an event described in section
-----------------
9.6(b).
SECTION 1.8 CODE means the Internal Revenue Code of 1986 (including
----
the corresponding provisions of any succeeding law).
SECTION 1.9 COMMITTEE means the Committee described in section
---------
15.3.
SECTION 1.10 COMPUTATION PERIOD means, with respect to any person,
------------------
(a) the 12-consecutive month period beginning on such person's Employment Date
and (b) each 12-consecutive month period that begins on an anniversary of such
person's Employment Date.
SECTION 1.11 DISABILITY means a condition of total incapacity,
----------
mental or physical, for further performance of duty with the Employer, which the
Plan Administrator shall have determined, on the basis of competent medical
evidence, is likely to be permanent.
<PAGE>
-3-
SECTION 1.12 DOMESTIC RELATIONS ORDER means a judgment, decree or
------------------------
order (including the approval of a property settlement) that is made pursuant to
a state domestic relations or community property law and relates to the
provision of child support, alimony payments, or marital property rights to a
spouse, child or other dependent of a Participant or Former Participant.
SECTION 1.13 EFFECTIVE DATE means January 1, 1996.
--------------
SECTION 1.14 ELIGIBLE EMPLOYEE means an Employee who is eligible for
-----------------
participation in the Plan in accordance with Article II.
SECTION 1.15 ELIGIBLE PARTICIPANT means, for any Plan Year, an
--------------------
Employee who is or was a Participant during all or part of such Plan Year;
provided, however, that no Employee shall be an Eligible Participant for the
Plan Year that includes the effective date of the transaction pursuant to which
the Home Federal Savings & Loan Association of Elgin becomes a wholly owned
subsidiary of Home Bancorp of Elgin, Inc. if he terminates employment with the
Employer prior to such effective date.
SECTION 1.16 EMPLOYEE means any person, including an officer, who is
--------
employed by the Employer.
SECTION 1.17 EMPLOYER means Home Bancorp of Elgin, Inc., and any
--------
successor thereto and any Affiliated Employer which, with the prior written
approval of the Board of Directors of Home Bancorp of Elgin, Inc. and subject to
such terms and conditions as may be imposed by the Board of Directors of Home
Bancorp of Elgin, Inc., shall adopt this Plan.
SECTION 1.18 EMPLOYMENT COMMENCEMENT DATE means the date on which a
----------------------------
person first performs an Hour of Service, except that if an Employee separates
from service with the Employer, incurs a Break in Service or a One-Year Break in
Service and subsequently returns to service with the Employer, his Employment
Commencement Date shall be the date on which he first performs an Hour of
Service following the Break in Service.
SECTION 1.19 ERISA means the Employee Retirement Income Security Act
-----
of 1974, as amended from time to time (including the corresponding provisions of
any succeeding law).
SECTION 1.20 ESOP CONTRIBUTION means Shares or amounts of money
-----------------
contributed to the Plan by the Employer in accordance with section 5.3.
SECTION 1.21 FAIR MARKET VALUE on any date means:
-----------------
(a) with respect to a Share:
(i) the final quoted sale price on the date in question (or, if
there is no reported sale on such date, on the last preceding date on
which
<PAGE>
-4-
any reported sale occurred) as reported in the principal consolidated
reporting system with respect to securities listed or admitted to
trading on the principal United States securities exchange on which
like Shares are listed or admitted to trading; or
(ii) if like Shares are not listed or admitted to trading on any
such exchange, the closing bid quotation with respect to a Share on
such date on the National Association of Securities Dealers Automated
Quotation System, or, if no such quotation is provided, on another
similar system, selected by the Committee, then in use; or
(iii) if sections 1.21(a)(i) and (ii) are not applicable, the
fair market value of a Share as determined by an appraiser independent
of the Employer and experienced and expert in the field of corporate
appraisal.
(b) with respect to property other than Shares, the fair market value
determined in the manner determined by the Trustee.
SECTION 1.22 FAMILY MEMBER means, with respect to any person, such
-------------
person's spouse and lineal ascendants or descendants and the spouses of such
lineal ascendants or descendants.
SECTION 1.23 FINANCED SHARE means: (a) a Share that has been
--------------
purchased with the proceeds of a Share Acquisition Loan, that has been allocated
to the Loan Repayment Account in accordance with section 6.3 and that has not
been released in accordance with section 6.4; or (b) a Share that constitutes a
dividend paid with respect to a Share described in section 1.23(a), that has
been allocated to the Loan Repayment Account in accordance with section 6.3 and
that has not been released in accordance with section 6.4.
SECTION 1.24 FIVE PERCENT OWNER means, for any Plan Year, a person
------------------
who, during such Plan Year, owned (or was considered as owning for purposes of
section 318 of the Code): (a) more than 5% of the value of all classes of
outstanding stock of the Employer; or (b) stock possessing more than 5% of the
combined voting power of all classes of outstanding stock of the Employer.
SECTION 1.25 FORFEITURES means the amounts forfeited by Participants
-----------
and Former Participants on termination of employment prior to full vesting,
pursuant to section 9.3, less amounts credited because of re-employment,
pursuant to section 9.4.
SECTION 1.26 FORMER PARTICIPANT means a Participant whose
------------------
participation in the Plan has terminated pursuant to section 2.3.
SECTION 1.27 GENERAL INVESTMENT ACCOUNT means an Investment Account
--------------------------
established and maintained in accordance with Article XI.
<PAGE>
-5-
SECTION 1.28 HIGHLY COMPENSATED EMPLOYEE means, for any Plan Year, an
---------------------------
Employee who:
(a) at any time during such Plan Year or the immediately preceding
Plan Year was a Five Percent Owner; or
(b) is a member of the group consisting of the 100 Employees and
persons employed by any Affiliated Employer who received the greatest Total
Compensation for such Plan Year and during such Plan Year:
(i) received Total Compensation for such Plan Year in excess of
$75,000 (or such higher amount as may be permitted under section
414(q) of the Code); or
(ii) received Total Compensation for such Plan Year that was in
excess of both (A) $50,000 (or such higher amount as may be permitted
under section 414(q) of the Code) and (B) the Total Compensation for
such Plan Year of at least 80% of the Employees and persons employed
by any Affiliated Employer for such Plan Year; or
(iii) was an Officer of the Employer or any Affiliated Employer
and received Total Compensation for such Plan Year in excess of 50% of
the amount in effect under section 415(b)(1)(A) of the Code for such
Plan Year; or
(c) during the immediately preceding Plan Year:
(i) received Total Compensation for such Plan Year in excess of
$75,000 (or such higher amount as may be permitted under section
414(q) of the Code); or
(ii) received Total Compensation for such Plan Year that was in
excess of both (A) $50,000 (or such higher amount as may be permitted
under section 414(q) of the Code) and (B) the Total Compensation for
such Plan Year of at least 80% of the Employees and persons employed
by an Affiliated Employer for such Plan Year; or
(iii) was an Officer of the Employer or any Affiliated Employer
and received Total Compensation for such Plan Year in excess of 50% of
the amount in effect under section 415(b)(1)(A) of the Code for such
Plan Year.
The determination of who is a Highly Compensated Employee will be made in
accordance with section 414(q) of the Code and the regulations thereunder. For
purposes of applying any provisions of the Plan applicable to Highly Compensated
Employees, any person who is a
<PAGE>
-6-
Family Member of a Five Percent Owner or one of the ten Highly Compensated
Employees with the highest Total Compensation for a Plan Year shall not be
treated as a separate person for such Plan Year, and any Total Compensation or
Allocation Compensation paid to such person for such Plan Year, as well as his
share of allocations of contributions or Shares under this Plan, shall be
attributed to the Five Percent Owner or Highly Compensated Employee and, in such
case, the provisions of the Plan shall apply to each person as based on the
ratio of his Total Compensation or Allocation Compensation to the sum of the
Total Compensation or Allocation Compensation of all persons treated as one
person with him.
SECTION 1.29 HOUR OF SERVICE means
---------------
(a) Each hour for which a person is paid, or entitled to payment, for
the performance of duties for the Bank or any Affiliated Employer. These
hours shall be credited to the person for the Computation Period or
Computation Periods in which the duties are performed; and
(b) Each hour for which a person is paid, or entitled to payment, by
the Bank or any Affiliated Employer on account of a period of time during
which no duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty, or leave of
absence. No more than 501 Hours of Service shall be credited under this
section 1.29(b) for any single continuous period (whether or not such
period occurs in a single Computation Period). Hours under this section
1.29(b) shall be calculated and credited pursuant to section 2530.200b-2 of
the Department of Labor's regulations (or any successor regulation), which
are incorporated herein by reference; and
(c) Each hour for which back pay, irrespective of any mitigation of
damages, is either awarded or agreed to by the Bank or any Affiliated
Employer. The same Hours of Service shall not be credited both under
section 1.29(a) or (b), as the case may be, and under this section 1.29(c).
Hours under this section 1.29(c) shall be credited to the person for the
Computation Period or Computation Periods to which the award or agreement
pertains, rather than the Computation Period in which the award, agreement
or payment is made.
SECTION 1.30 INVESTMENT ACCOUNT means either a General Investment
------------------
Account or a Share Investment Account.
SECTION 1.31 INVESTMENT FUND means any one of the three or more
---------------
funds as may be established from time to time by the Committee which, together
with any and all Shares and other investments held under the Plan, constitute
the Trust Fund.
SECTION 1.32 LOAN REPAYMENT ACCOUNT means an account established and
----------------------
maintained in accordance with section 6.3.
<PAGE>
-7-
SECTION 1.33 LOAN REPAYMENT CONTRIBUTION means amounts of money
---------------------------
contributed to the Plan by the Employer in accordance with section 5.2.
SECTION 1.34 MATERNITY OR PATERNITY LEAVE means a person's absence
----------------------------
from work for the Employer and all Affiliated Employers: (a) by reason of the
pregnancy of such person; (b) by reason of the birth of a child of such person;
(c) by reason of the placement of a child with the person in connection with the
adoption of such child by such person; or (d) for purposes of caring for a child
of such person immediately following the birth of the child or the placement of
the child with such person.
SECTION 1.35 MILITARY SERVICE means service in the armed forces of
----------------
the United States. It may also include, if and to the extent that the Board so
provides and if all Participants and Former Participants in like circumstances
are similarly treated, special service for the government of the United States
and other public service.
SECTION 1.36 NAMED FIDUCIARY means any person, committee,
---------------
corporation or organization as described in section 14.1.
SECTION 1.37 OFFICER means an employee who is an administrative
-------
executive in regular and continued service with the Employer or any Affiliated
Employer; provided, however, that at no time shall more than the lesser of (a)
50 employees or (b) the greater of: (i) 3 employees or (ii) 10% of all employees
be treated as Officers. The determination of whether an employee is to be
considered an Officer shall be made in accordance with section 416(i) of the
Code.
SECTION 1.38 ONE-YEAR BREAK IN SERVICE means, with respect to any
-------------------------
person, a Computation Period during which such person is credited with fewer
than 501 Hours of Service.
SECTION 1.39 PARTICIPANT means any person who has satisfied the
-----------
eligibility requirements set forth in section 2.1, who has become a Participant
in accordance with section 2.2, and whose participation has not terminated under
section 2.3.
SECTION 1.40 PERIOD OF SERVICE means a period of consecutive days
-----------------
commencing on a person's Employment Commencement Date and ending on the date a
Period of Severance begins, with any adjustments required under section 2.4.
Whenever used in the Plan, a Period of Service "of year(s)" means the quotient
of the Period of Service divided by 365, and any fractional part of a year shall
for such purposes be disregarded.
SECTION 1.41 PERIOD OF SEVERANCE means a period of consecutive days
-------------------
commencing with the earlier of:
(a) the date on which a person terminates service with the Employer
and all Affiliated Employers by reason of resignation, retirement,
discharge or death; or
<PAGE>
-8-
(b) the first anniversary of the date on which a person terminates
service with the Employer and all Affiliated Employers for any other reason
including layoff, disability, leave of absence or any other cessation of
service not otherwise included as service under the Plan;
and ending on the first date following such separation from service on which
such person performs an Hour of Service.
SECTION 1.42 PLAN means the Home Bancorp of Elgin, Inc. Employee
----
Stock Ownership Plan, as amended from time to time.
SECTION 1.43 PLAN ADMINISTRATOR means any person, committee,
------------------
corporation or organization designated in section 14.2, or appointed pursuant to
section 14.2, to perform the responsibilities of that office.
SECTION 1.44 PLAN YEAR means the period commencing on the Effective
---------
Date and ending on December 31, 1996 and each calendar year thereafter.
SECTION 1.45 QUALIFIED DOMESTIC RELATIONS ORDER means a Domestic
----------------------------------
Relations Order that: (a) clearly specifies (i) the name and last known mailing
address of the Participant or Former Participant and of each person given rights
under such Domestic Relations Order, (ii) the amount or percentages of the
Participant's or Former Participant's benefits under this Plan to be paid to
each person covered by such Domestic Relations Order, (iii) the number of
payments or the period to which such Domestic Relations Order applies, and (iv)
the name of this Plan; and (b) does not require the payment of a benefit in a
form or amount that is (i) not otherwise provided for under the Plan, or (ii)
inconsistent with a previous Qualified Domestic Relations Order.
SECTION 1.46 QUALIFIED PARTICIPANT means a Participant who has
---------------------
attained age 55 and who has been a Participant in the Plan for at least 10
years.
SECTION 1.47 RETIREMENT means: (a) any termination of participation
----------
in the Plan at or after attainment of age 65; and (b) any retirement under an
applicable qualified defined benefit plan of the Employer as in effect from time
to time with entitlement to a normal or early retirement allowance.
SECTION 1.48 SHARE means a share of any class of stock issued by the
-----
Employer or any Affiliated Employer; provided, however, that such share is a
"qualifying employer security" within the meaning section 409(l) of the Code and
section 407(d)(5) of ERISA.
SECTION 1.49 SHARE ACQUISITION LOAN means a loan obtained by the
----------------------
Trustee in accordance with Article VI.
SECTION 1.50 SHARE INVESTMENT ACCOUNT means an Investment Account
------------------------
established and maintained in accordance with Article XI.
<PAGE>
-9-
SECTION 1.51 TENDER OFFER means a tender offer made to holders of any
------------
one or more classes of Shares generally, or any other offer, made to holders of
any one or more classes of Shares generally, to purchase, exchange, redeem or
otherwise transfer Shares, whether for cash or other consideration.
SECTION 1.52 TOTAL COMPENSATION during any period means an
------------------
employee's aggregate total compensation paid by the Employer and any Affiliated
Employer with respect to such period and reportable for federal income tax
purposes pursuant to section 6041(a) of the Code. In addition, solely for
purposes of identifying those employees who are Highly Compensated Employees,
each employee's Total Compensation shall include any amounts by which the
employee's compensation paid by the Employer or any Affiliated Employer has been
reduced pursuant to a compensation reduction agreement under the terms of any
qualified cash or deferred arrangement described in section 401(k) of the Code,
any salary reduction simplified employee pension plan described in section
408(k) of the Code, any tax deferred annuity plan described in section 403(b) of
the Code, or any cafeteria plan described in section 125 of the Code. In no
event, however, shall an employee's Total Compensation for any calendar year
include any compensation in excess of $150,000 (or such higher amount as may be
permitted under section 401(a)(17) of the Code). For purposes of applying the
foregoing limitations to any person who is a Five Percent Owner or who is one of
the ten Highly Compensated Employees with the highest Total Compensation
(determined prior to the application of this sentence), any Total Compensation
paid to the spouse of such person or to any lineal descendant of such person who
has not attained age 19 on or before the last day of such calendar year, shall
be deemed to have been paid to such person.
SECTION 1.53 TRUST means the legal relationship created by the Trust
-----
Agreement pursuant to which the Trustee holds the Trust Fund in trust. The
Trust may be referred to as the "Home Bancorp of Elgin, Inc. Employee Stock
Ownership Plan Trust."
SECTION 1.54 TRUST AGREEMENT means the agreement between Home
---------------
Bancorp of Elgin, Inc. and the Trustee therein named or its successors pursuant
to which the Trust Fund shall be held in trust.
SECTION 1.55 TRUST FUND means the corpus (consisting of
----------
contributions paid over to the Trustee, and investments thereof), and all
earnings, appreciations or additions thereof and thereto, held by the Trustee
under the Trust Agreement in accordance with the Plan, less any depreciation
thereof and any payments made therefrom pursuant to the Plan.
SECTION 1.56 TRUSTEE means the Trustee of the Trust Fund from time
-------
to time in office. The Trustee shall serve as Trustee until it is removed or
resigns from office and is replaced by a successor Trustee appointed in
accordance with the terms of the Trust Agreement.
SECTION 1.57 VALUATION DATE means the last business day of March,
--------------
June, September and December.
<PAGE>
-10-
SECTION 1.58 YEAR OF ENROLLMENT SERVICE means, with respect to any
--------------------------
person, a Computation Period during which such person receives credit for at
least 1,000 Hours of Service.
ARTICLE II
----------
PARTICIPATION
-------------
SECTION 2.1 ELIGIBILITY FOR PARTICIPATION.
-----------------------------
(a) Only Eligible Employees may be or become Participants in the Plan.
An Employee shall be an Eligible Employee if he is a common-law employee of an
Employer, has completed at least one Year of Enrollment Service, has attained
age 21 and is not excluded under section 2.1(b).
(b) An Employee is not an Eligible Employee if he:
(i) is an Employee who has waived any claim to participation in the
Plan; or
(ii) is an Employee or in a unit of Employees covered by a collective
bargaining agreement with the Employer where retirement benefits were the
subject of good faith bargaining, unless such agreement expressly provides
that Employees such as he be covered under the Plan; or
(iii) is a "leased employee" as defined in section 17.8(a).
SECTION 2.2 COMMENCEMENT OF PARTICIPATION.
-----------------------------
Every Employee who is an Eligible Employee on the Effective Date shall
automatically become a Participant on the Effective Date. An Employee who
becomes an Eligible Employee after the Effective Date shall automatically become
a Participant on the first day of the month following the month in which he
becomes an Eligible Employee.
SECTION 2.3 TERMINATION OF PARTICIPATION.
----------------------------
Participation in the Plan shall cease, and a Participant shall become
a Former Participant, upon termination of employment with the Employer, death,
Disability or Retirement, failure to return to work upon the expiration of a
leave of absence granted by the Employer
<PAGE>
-11-
pursuant to section 3.3 or becoming an Employee who is excluded under section
2.1(b) or distribution of the entire vested interest in his Account.
ARTICLE III
-----------
SPECIAL PROVISIONS
------------------
SECTION 3.1 MILITARY SERVICE.
----------------
In the case of a termination of employment of any Employee to enter
directly into Military Service, the entire period of his absence shall be
treated, for purposes of vesting and eligibility for participation (but not,
except as required by law, for purposes of eligibility to share in allocations
of contributions in accordance with Article VII), as if he had worked for the
Employer during the period of his absence. In the event of the re-employment of
such person by the Employer within a period of not more than six months:
(a) after he becomes entitled to release or discharge, if he has
entered into the armed forces; or
(b) after such service terminates, if he has entered into other
service defined as Military Service;
such period, also, shall be deemed to be Military Service.
SECTION 3.2 MATERNITY OR PATERNITY LEAVE.
----------------------------
(a) Subject to section 3.2(c), in the event of an Employee's absence
from work in the service of the Employer and all Affiliated Employers for a
period:
(i) that commences on or after October 1, 1985;
(ii) for which the person is not paid or entitled to payment by the
Employer or any Affiliated Employer; and
(iii) that constitutes Maternity or Paternity Leave;
then the rules of section 3.2(b) shall apply.
(b) In cases of absence described in section 3.2(a):
<PAGE>
-12-
(i) solely for purposes of determining whether a One-Year Break in
Service has occurred, the person shall be credited for the period of an
absence described in section 3.2(a) with the number of Hours of Service
equal to the lesser of:
(A) (I) the number of Hours of Service that would have been
credited to the person if he had continued working for the Bank during
the period of such absence, or (II) if the number of Hours of Service
prescribed under section 3.2(b)(i)(A)(I) cannot be determined, 8 Hours
of Service for each working day during the period of absence, or
(B) 501 Hours of Service.
Such credit shall be given during the Computation Period during which such
absence began, if necessary to prevent a One-Year Break in Service from
occurring during such Computation Period, and in all other cases, such
credit shall be given during the immediately following Computation Period.
(ii) then solely for purposes of determining when a Break in Service
has occurred or when the Period of Severance of five years has occurred for
purposes of section 9.4, the period of such an absence commencing on the
first anniversary of such absence and ending on the second anniversary of
the commencement of such absence (or, if earlier, on the last day of such
absence) shall not be treated as a Period of Service.
(c) Notwithstanding anything in the Plan to the contrary, this section
3.2 shall not apply unless the person furnishes to the Plan Administrator such
information as the Plan Administrator may reasonably require in order to
establish (i) that the person's absence is one described in section 3.2(a), and
(ii) the number of working days during such absence.
SECTION 3.3 ADJUSTMENTS TO YEARS OF ENROLLMENT SERVICE.
------------------------------------------
The Years of Enrollment Service of an Employee who returns to the
employment of the Bank or any Affiliated Employer following a separation from
service shall include his Years of Enrollment Service prior to such separation
from service, and such an Employee shall be readmitted to participation
immediately upon his return to service if he is then an Eligible Employee;
provided, however, that if such separation from service includes a One-Year
Break in Service, such prior Years of Enrollment Service shall not be included
until he has completed one Year of Enrollment Service following his return to
service, and upon completion of such one Year of Enrollment Service, he shall be
readmitted to participation in the Plan with retroactive effect to the date of
his return to employment, if he is then an Eligible Employee.
<PAGE>
-13-
SECTION 3.4 ADJUSTMENTS TO PERIOD OF SERVICE.
--------------------------------
(a) The Period of Service of an Employee shall include any period
during which the Employee is separated from the service of the Employer and all
Affiliated Employers if such period is less than 365 consecutive days measured
from the date on which such Employee terminates service and ending with the
first date following such termination for which the Employer is credited with an
Hour of Service.
(b) The Period of Service of an Employee who returns to the service of
the Employer and all Affiliated Employers following a separation from service
shall commence with the first date following such separation from service for
which the Employer is credited with an Hour of Service, and he shall be given
credit for any Period of Service prior to such separation, except that if such
separation includes a Break in Service, such credit shall not be given until he
completes a Period of Service of one year following such Break in Service.
(c) The Period of Service of an Employee who is absent on Maternity or
Paternity Leave shall exclude any period of such absence that occurs after the
first anniversary of the commencement of such absence.
(d) An Employee's Period of Service shall also be adjusted to the
extent required by the Family and Medical Leave Act or any regulations
promulgated thereunder.
SECTION 3.5 LEAVE OF ABSENCE.
----------------
In the event of temporary absence from work in the service of the
Employer and all Affiliated Employers for any period of two years or less for
which a Participant shall have been granted a leave of absence by the Employer,
the entire period of his absence shall be treated for purposes of vesting and
eligibility for participation (but not for purposes of eligibility to share in
the allocation of contributions in accordance with Article VII), as if he had
worked for the Employer during the period of his absence. Absence from work for
a period greater than, or failure to return to work upon the expiration of, the
period of leave of absence granted by the Employer shall terminate participation
in the Plan as of the date on which such period ended. In granting leaves of
absence for purposes of the Plan, all Employees in like circumstances shall be
similarly treated.
<PAGE>
-14-
ARTICLE IV
----------
CONTRIBUTIONS BY PARTICIPANTS NOT PERMITTED
-------------------------------------------
SECTION 4.1 CONTRIBUTIONS BY PARTICIPANTS NOT
---------------------------------
PERMITTED.
- ---------
Participants shall not be required, nor shall
they be permitted, to make contributions to the Plan.
ARTICLE V
---------
CONTRIBUTIONS BY THE EMPLOYER
-----------------------------
SECTION 5.1 IN GENERAL.
----------
Subject to the limitations of Article VIII, for each Plan Year, the
Employer shall contribute to the Plan the amount, if any, determined by the
Board, but in no event less than the amount described in section 5.2(a). The
amount contributed for any Plan Year shall be treated as a Loan Repayment
Contribution, an ESOP Contribution, or a combination thereof, in accordance with
the provisions of this Article V.
SECTION 5.2 LOAN REPAYMENT CONTRIBUTIONS.
----------------------------
For each Plan Year, a portion of the Employer's
contributions, if any, to the Plan for such Plan Year equal to the sum of:
(a) the minimum amount required to be added to the Loan Repayment
Account in order to provide adequate funds for the payment of the principal
and interest then required to be repaid under the terms of any outstanding
Share Acquisition Loan obtained by the Trustee; plus
(b) the additional amount, if any, designated by the Committee to be
applied to the prepayment of principal or interest under the terms of any
outstanding Share Acquisition Loan obtained by the Trustee;
shall be treated as a Loan Repayment Contribution for such Plan Year. A Loan
Repayment Contribution for a Plan Year shall be allocated to the Loan Repayment
Account and shall be applied by the Trustee, in the manner directed by the
Committee, to the payment of accrued interest and to the reduction of the
principal balance of any Share Acquisition Loan obtained by the Trustee that is
outstanding on the date on which the Loan Repayment Contribution is made.
<PAGE>
-15-
To the extent that a Loan Repayment Contribution for a Plan Year results in a
release of Financed Shares in accordance with section 6.4, such Shares shall be
allocated among the Accounts of Eligible Participants for such Plan Year in
accordance with section 7.2.
SECTION 5.3 ESOP CONTRIBUTIONS.
------------------
In the event that the amount of the Employer's contributions to the
Plan for a Plan Year exceeds the amount of the Loan Repayment Contributions for
such Plan Year, such excess shall be treated as an ESOP Contribution and shall
be allocated among the Accounts of the Eligible Participants for such Plan Year
in accordance with section 7.3.
SECTION 5.4 TIME AND MANNER OF PAYMENT.
--------------------------
(a) Payment of contributions made pursuant to this Article V shall be
made:
(i) in cash, in the case of a Loan Repayment Contribution; and
(ii) in cash, in Shares or in a combination of cash and Shares, in the
case of an ESOP Contribution.
(b) Contributions made pursuant to this Article V for a Plan Year
shall be paid to the Trust Fund on or before the due date (including any
extensions thereof) of the Employer's federal income tax return for its taxable
year during which such Plan Year ends. All such contributions shall be
allocated to the Accounts of the Eligible Participants, in the case of an ESOP
Contribution, or to the Loan Repayment Account, in the case of a Loan Repayment
Contribution, as soon as is practicable following the payment thereof to the
Trust Fund.
ARTICLE VI
----------
SHARE ACQUISITION LOANS
-----------------------
SECTION 6.1 IN GENERAL.
----------
The Committee may, with the prior approval of the Board, direct the
Trustee to obtain a Share Acquisition Loan on behalf of the Plan, the proceeds
of which shall be applied on the earliest practicable date:
(a) to purchase Shares; or
<PAGE>
-16-
(b) to make payments of principal or interest, or a combination of
principal and interest, with respect to such Share Acquisition Loan; or
(c) to make payments of principal and interest, or a combination of
principal and interest, with respect to a previously obtained Share
Acquisition Loan that is then outstanding.
Any such Share Acquisition Loan shall be obtained on such terms and conditions
as the Committee may approve; provided, however, that such terms and conditions
shall provide for the payment of interest at no more than a reasonable rate and
shall permit such Share Acquisition Loan to satisfy the requirements of section
4975(d)(3) of the Code and section 408(b)(3) of ERISA.
SECTION 6.2 COLLATERAL; LIABILITY FOR REPAYMENT.
-----------------------------------
(a) The Committee may direct the Trustee to pledge, at the time a
Share Acquisition Loan is obtained, the following assets of the Plan as
collateral for such Share Acquisition Loan:
(i) any Shares purchased with the proceeds of such Share Acquisition
Loan and any earnings attributable thereto;
(ii) any Financed Shares then pledged as collateral for a prior Share
Acquisition Loan which is repaid with the proceeds of such Share
Acquisition Loan and any earnings attributable thereto; and
(iii) pending the application thereof to purchase Shares or repay a
prior Share Acquisition Loan, the proceeds of such Share Acquisition Loan
and any earnings attributable thereto.
Except as specifically provided in this section 6.2(a), no assets of the Plan
shall be pledged as collateral for the repayment of any Share Acquisition Loan.
(b) No person entitled to payment under a Share Acquisition Loan shall
have any right to the assets of the Plan except for:
(i) Financed Shares that have been pledged as collateral for such
Share Acquisition Loan pursuant to section 6.2(a);
(ii) Loan Repayment Contributions made pursuant to section 5.2; and
(iii) earnings attributable to Financed Shares described in section
6.2(b)(i) and to Loan Repayment Contributions described in section
6.2(b)(ii).
<PAGE>
-17-
Except in the event of a default or a refinancing pursuant to which an existing
Share Acquisition Loan is repaid, the aggregate amount of all payments of
principal and interest made by the Trustee with respect to all Share Acquisition
Loans obtained on behalf of the Plan shall at no time exceed the aggregate
amount of all Loan Repayment Contributions theretofore made plus the aggregate
amount of all earnings (other than dividends paid in the form of Shares)
attributable to Financed Shares and to such Loan Repayment Contributions.
(c) Any Share Acquisition Loan shall be without recourse against the
Plan and Trust.
SECTION 6.3 LOAN REPAYMENT ACCOUNT.
----------------------
In the event that one or more Share Acquisition Loans shall be
obtained, a Loan Repayment Account shall be established under the Plan. The
Loan Repayment Account shall be credited with all Shares acquired with the
proceeds of a Share Acquisition Loan, all Loan Repayment Contributions and all
earnings (including dividends paid in the form of Shares) or appreciation
attributable to such Shares and Loan Repayment Contributions. The Loan
Repayment Account shall be charged with all payments of principal and interest
made by the Trustee with respect to any Share Acquisition Loan, all Shares
released in accordance with section 6.4 and all losses, depreciation or expenses
attributable to Shares or to other property credited thereto. The Financed
Shares, as well as any earnings thereon, shall be allocated to such Loan
Repayment Account and shall be accounted for separately from all other amounts
contributed under the Plan.
SECTION 6.4 RELEASE OF FINANCED SHARES.
--------------------------
As of the last day of each Plan Year during which a Share Acquisition
Loan is outstanding, a portion of the Financed Shares purchased with the
proceeds of such Share Acquisition Loan and allocated to the Loan Repayment
Account shall be released. The number of Financed Shares released in any such
Plan Year shall be equal to the amount determined according to one of the
following methods:
(a) by computing the product of: (i) the number of Financed Shares
purchased with the proceeds of such Share Acquisition Loan and allocated to
the Loan Repayment Account immediately before the release is effected;
multiplied by (ii) a fraction, the numerator of which is the aggregate
amount of the principal and interest payments (other than payments made
upon the refinancing of a Share Acquisition Loan as contemplated by section
6.1(c)) made with respect to such Share Acquisition Loan during such Plan
Year, and the denominator of which is the aggregate amount of all principal
and interest remaining to be paid with respect to such Share Acquisition
Loan as of the first day of such Plan Year; or
<PAGE>
-18-
(b) by computing the product of: (i) the number of Financed Shares
purchased with the proceeds of such Share Acquisition Loan and allocated to
the Loan Repayment Account immediately before the release is effected;
multiplied by (ii) a fraction, the numerator of which is the aggregate
amount of the principal payments (other than payments made upon the
refinancing of a Share Acquisition Loan as contemplated by section 6.1(c))
made with respect to such Share Acquisition Loan during such Plan Year, and
the denominator of which is the aggregate amount of all of principal
remaining to be paid with respect to such Share Acquisition Loan as of the
first day of such Plan Year; provided, however, that the method described
in this section 6.4(b) may be used only if the Share Acquisition Loan does
not extend for a period in excess of 10 years after the date of origination
and only to the extent that principal payments on such Share Acquisition
Loan are made at least as rapidly as under a loan of like principal amount
with a like interest rate and term requiring level amortization of
principal and interest.
The method to be used shall be specified in the documents governing the Share
Acquisition Loan or, if not specified therein, prescribed by the Committee, in
its discretion. In the event that property other than, or in addition to,
Financed Shares shall be held in the Loan Repayment Account and pledged as
collateral for a Share Acquisition Loan, then the property to be released
pursuant to this section 6.4 shall be property having a Fair Market Value
determined by applying the method to be used to the Fair Market Value of all
property pledged as collateral for such Share Acquisition Loan; provided,
however, that no property other than Financed Shares shall be released pursuant
to this section 6.4 unless all Financed Shares have previously been released.
SECTION 6.5 RESTRICTIONS ON FINANCED SHARES.
-------------------------------
Except to the extent required under any applicable law, rule or
regulation, no Shares purchased with the proceeds of a Share Acquisition Loan
shall be subject to a put, call or other option, or to any buy-sell or similar
arrangement, while held by the Trustee or when distributed from the Plan. The
provisions of this section 6.5 shall continue to apply in the event that this
Plan shall cease to be an employee stock ownership plan, within the meaning of
section 4975(e)(7) of the Code.
<PAGE>
-19-
ARTICLE VII
-----------
ALLOCATION OF CONTRIBUTIONS
---------------------------
SECTION 7.1 ALLOCATION AMONG ELIGIBLE
-------------------------
PARTICIPANTS.
- ------------
Subject to the limitations of Article VIII, ESOP Contributions for a
Plan Year made in accordance with section 5.3 and Financed Shares and other
property that are released from the Loan Repayment Account for a Plan Year in
accordance with section 6.4 shall be allocated among the Eligible Participants
for such Plan Year, in the manner provided in this Article VII.
SECTION 7.2 ALLOCATION OF RELEASED SHARES OR
--------------------------------
OTHER PROPERTY.
- --------------
Subject to the limitations of Article VIII, in the event that Financed
Shares or other property are released from the Loan Repayment Account for a Plan
Year in accordance with section 6.4, such released Shares or other property
shall be allocated among the Accounts of the Eligible Participants for the Plan
Year in the proportion that each such Eligible Participant's Allocation
Compensation for the portion of the Plan Year during which he was a Participant
bears to the aggregate Allocation Compensation of all Eligible Participants for
the portion of the Plan Year during which they were Participants.
SECTION 7.3 ALLOCATION OF ESOP CONTRIBUTIONS.
--------------------------------
Subject to the limitations of Article VIII, in the event that the
Employer makes an ESOP Contribution for a Plan Year, such ESOP Contribution
shall be allocated among the Accounts of the Eligible Participants for such Plan
Year in the proportion that each such Eligible Participant's Allocation
Compensation for the portion of the Plan Year during which he was a Participant
bears to the aggregate Allocation Compensation of all Eligible Participants for
the portion of such Plan Year during which they were Eligible Participants.
ARTICLE VIII
------------
LIMITATIONS ON ALLOCATIONS
--------------------------
SECTION 8.1 OPTIONAL LIMITATIONS ON
-----------------------
ALLOCATIONS OF ESOP CONTRIBUTIONS.
- ---------------------------------
If, for any Plan Year, the application of sections 7.2 and 7.3 would
result in more than one-third of the number of Shares or of the amount of money
or property to be allocated
<PAGE>
-20-
thereunder being allocated to the Accounts of Eligible Participants for such
Plan Year who are also Highly Compensated Employees for such Plan Year, then the
Committee may, but shall not be required to, direct that this section 8.1 shall
apply in lieu of sections 7.2 and 7.3. If the Committee gives such a direction,
then the Committee shall impose a maximum dollar limitation on the amount of
Allocation Compensation that may be taken into account for each Eligible
Participant. The dollar limitation which shall be imposed shall be the
limitation which produces the result that the aggregate Allocation Compensation
taken into account for Eligible Participants who are Highly Compensated
Employees, constitutes exactly one-third of the aggregate Allocation
Compensation taken into account for all Eligible Participants. In determining
whether more than one-third of the number of Shares or of the amount of money or
property to be allocated under the Plan for a Plan Year would be allocated to
the Highly Compensated Employees, any allocation to be made to the Account of a
Family Member of a Highly Compensated Employee who is either a Five Percent
Owner or one of the ten Highly Compensated Employees with the highest Total
Compensation, shall be treated as an allocation to such Highly Compensated
Employee.
SECTION 8.2 GENERAL LIMITATIONS ON
----------------------
CONTRIBUTIONS.
- -------------
(a) No amount shall be allocated to a Participant's Account under this
Plan for any Limitation Year, to the extent that such an allocation would result
in an Annual Addition of an amount greater than the lesser of (i) $30,000 (or
such other amount as is permissible under section 415(c)(1)(A) of the Code, or
(ii) 25% of the Participant's Total Compensation for such Limitation Year.
(b) In the case of a Participant who may be entitled to benefits under
any qualified defined benefit plan (whether or not terminated) now in effect or
ever maintained by the Employer, such Participant's Annual Additions under this
Plan shall, in addition to the limitations provided under section 8.2(a), be
further limited so that the sum of the Participant's Defined Contribution Plan
Fraction plus his Defined Benefit Plan Fraction does not exceed 1.0 for any
Limitation Year; provided, however, that for any Limitation Year ending prior to
January 1, 1983, the sum of his Defined Contribution Plan Fraction plus his
Defined Benefit Plan Fraction shall not exceed 1.4; and provided further, that
this limitation shall only apply if and to the extent that the benefits under
the Employer's Retirement Plan or any other defined contribution plan are not
limited so that such sum is not exceeded.
(c) For purposes of this section 8.2, the
following special definitions shall apply:
(i) Annual Addition means the sum of the following amounts allocated
---------------
on behalf of a Participant for a Limitation Year:
(A) all contributions by the Employer (including contributions
made under a salary reduction agreement pursuant to sections 401(k),
408(k) or 403(b) of the Code) under any qualified defined contribution
<PAGE>
-21-
plan (other than this Plan) maintained by the Employer, as well as the
Participant's allocable share, if any, of any forfeitures under such
plans; plus
(B) (I) for Limitation Years that began prior to January 1, 1987,
the lesser of (1) 50% of the Participant's voluntary nondeductible
contributions to all qualified defined contribution plans maintained
by the Employer, or (2) the amount by which the Participant's
nondeductible voluntary contributions to such plans exceeds 6% of his
Total Compensation; and (II) for Limitation Years that begin after
December 31, 1986, all of the Participant's voluntary nondeductible
contributions to such plans; plus
(C) all ESOP Contributions under this Plan; plus
(D) except as hereinafter provided in this section 8.2(c)(i), a
portion of the Employer's Loan Repayment Contributions to the Plan for
such Limitation Year which bears the same proportion to the total
amount of the Employer's Loan Repayment Contributions for the
Limitation Year that the number of Shares (or the Fair Market Value of
property other than Shares) allocated to the Participant's Account
pursuant to section 7.2 or 8.1, whichever is applicable, bears to the
aggregate number of Shares (or Fair Market Value of property other
than Shares) so allocated to all Participants for such Limitation
Year.
Notwithstanding section 8.2(c)(i)(D), if, for any Limitation Year, the
aggregate amount of ESOP Contributions allocated to the Accounts of the
individuals who are Highly Compensated Employees for such Limitation Year,
when added to such Highly Compensated Employees' allocable share of any
Loan Repayment Contributions for such Limitation Year, does not exceed one-
third of the total of all ESOP Contributions and Loan Repayment
Contributions for such Limitation Year, then that portion, if any, of the
Loan Repayment Contributions for such Limitation Year that is applied to
the payment of interest on a Share Acquisition Loan shall not be included
as an Annual Addition. In determining whether more than one-third of the
number of Shares or of the amount of money or property to be allocated
under the Plan for a Plan Year would be allocated to the Highly Compensated
Employees, any allocation to be made to the Account of a Family Member of a
Highly Compensated Employee who is either a Five Percent Owner or one of
the ten Highly Compensated Employees with the highest Total Compensation,
shall be treated as an allocation to such Highly Compensated Employee. In
no event shall any Financed Shares, any dividends or other earnings
thereon, any proceeds of the sale thereof or any portion of the value of
the foregoing be included as an Annual Addition.
<PAGE>
-22-
(ii) Employer means Home Bancorp of Elgin, Inc., and all members of a
--------
controlled group of corporations, as defined in section 414(b) of the Code,
as modified by section 415(h) of the Code, all commonly controlled trades
or businesses, as defined in section 414(c) of the Code, as modified by
section 415(h) of the Code, all affiliated service groups, as defined in
section 414(m) of the Code, of which Home Bancorp of Elgin, Inc. is a
member, as well as any leasing organization, as defined in section 17.8,
that employs any person who is considered an employee under section 17.8
and any other entity that is required to be aggregated with the Employer
pursuant to regulations under section 414(o) of the Code.
(iii) Defined Benefit Plan Fraction means, for any Participant for
-----------------------------
any Limitation Year, a fraction, the numerator of which is the Projected
Annual Benefit (determined as of the end of such Limitation Year) of the
Participant under any qualified defined benefit plans (whether or not
terminated) maintained by the Employer for the current and all prior
Limitation Years, and the denominator of which is as follows: (A) for
Limitation Years ending prior to January 1, 1983, the lesser of (I) the
dollar limitation in effect under section 415(b)(1) (A) of the Code for
such Limitation Year, or (II) the amount which may be taken into account
under section 415(b)(1)(B) of the Code with respect to such Participant for
such Limitation Year; and (B) in all other cases, the lesser of (I) (except
as provided in section 16.8(b) for a Top Heavy Plan Year) the product of
1.25 multiplied by the dollar limitation in effect under section
415(b)(1)(A) of the Code for such Limitation Year, or (II) the product of
1.4 multiplied by the amount which may be taken into account under section
415(b)(1)(B) of the Code with respect to such Participant for such
Limitation Year.
(iv) Defined Contribution Plan Fraction means, for any Participant for
----------------------------------
any Limitation Year, a fraction (A) the numerator of which is the sum of
such Participant's Annual Additions (determined as of the end of such
Limitation Year) under this Plan and any other qualified defined
contribution plans (whether or not terminated) maintained by the Employer
for the current and all prior Limitation Years, and (B) the denominator of
which is as follows: (I) for Limitation Years ending prior to January 1,
1983, the sum of the lesser of the following amounts for such Limitation
Year and for each prior Limitation Year during which such Participant was
employed by the Employer: (1) the Maximum Permissible Amount for such
Limitation Year (without regard to section 415(c)(6) of the Code), or (2)
the amount which may be taken into account under section 415(c)(1)(B) of
the Code with respect to such Participant for such Limitation Year; and
(II) in all other cases, the sum of the lesser of the following amounts for
such Limitation Year and for each prior Limitation during which such
Participant was employed by the Employer: (1) (except as provided in
section 16.8(b) for a Top Heavy Plan Year) the product of 1.25 multiplied
by the Maximum Permissible Amount for such Limitation Year (determined
without
<PAGE>
-23-
regard to section 415(c)(6) of the Code), or (2) the product of 1.4
multiplied by the amount which may be taken into account under section
415(c)(1)(B) of the Code (or section 415(c)(7) of the Code, if applicable)
with respect to such Participant for such Limitation Year; provided,
however, that the Plan Administrator may, at his election, adopt the
transition rule set forth in section 415(e)(6) of the Code in making the
computation set forth in this section 8.2(c)(iv). If the sum of a
Participant's Defined Benefit Plan Fraction and Defined Contribution Plan
Fraction exceeded 1.0 as of September 30, 1983, then such Participant's
Defined Contribution Plan Fraction shall be determined under regulations to
be prescribed by the Secretary of the Treasury so that the sum of the
fractions does not exceed 1.0.
(v) Limitation Year means the Plan Year; provided, however, that if
---------------
the Employer changes the Limitation Year, the new Limitation Year shall
begin on a date within the Limitation Year in which the amendment is made.
(vi) Maximum Permissible Amount means (A) $25,000 (or such higher
--------------------------
amount as may be permitted under section 415(d) of the Code because of cost
of living increases) for Limitation Years beginning prior to January 1,
1983, and (B) the greater of (I) $30,000, or (II) 25% of the dollar
limitation in effect under section 415(b)(1)(A) of the Code for Limitation
Years beginning on or after January 1, 1983.
(vii) Projected Annual Benefit means a Participant's annual
------------------------
retirement benefit (adjusted to the actuarial equivalent of a straight life
annuity if expressed in a form other than a straight life or qualified
joint and survivor annuity) under any qualified defined benefit plan
maintained by the Employer, whether or not terminated, assuming that the
Participant will continue employment until the later of current age or
normal retirement age under such plan, and that the Participant's Total
Compensation for the Limitation Year and all other relevant factors used to
determine benefits under such plan will remain constant for all future
Limitation Years.
(d) When a Participant's Annual Addition to this Plan must be reduced
to satisfy the limitations of section 8.2(a) or (b), such reduction shall be
applied first to ESOP Contributions; and second, if necessary, to Shares
allocated as a result of a Loan Repayment Contribution which are included as an
Annual Addition in such order as shall result in the smallest reduction in the
number of Shares allocable to the Participant's Account. The amount by which
any Participant's Annual Addition to this Plan is reduced shall be allocated in
accordance with Articles V and VII as a contribution by the Employer in the next
succeeding Limitation Year.
(e) Prior to determining a Participant's actual Total Compensation for
a Limitation Year, the Employer may determine the limitations under this section
8.2 for a Participant on the basis of a reasonable estimation of the
Participant's Total Compensation for
<PAGE>
-24-
the Limitation Year that is uniformly determined for all Participants who are
similarly situated. As soon as it is administratively feasible after the end of
the Limitation Year, the limitations of this section 8.2 shall be determined on
the basis of the Participant's actual Total Compensation for the Limitation
Year.
ARTICLE IX
----------
VESTING
-------
SECTION 9.1 VESTING.
-------
Subject to the provisions of section 9.6(a), the balance credited to
each Employee's Account shall become vested in accordance with the following
schedule:
Period of Service Vested
In Years Percentage
----------------- ----------
0 but less than 1 10%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
SECTION 9.2 VESTING ON DEATH, DISABILITY, RETIREMENT OR CHANGE IN
-----------------------------------------------------
CONTROL.
- ------
Any previously unvested portion of the remainder of the balance
credited to the Account of a Participant or of a person who is a Former
Participant solely because he is excluded from participation under section
2.1(b) shall become fully vested in him immediately upon attainment of age 65,
or, if earlier, upon the termination of his participation by reason of death,
Disability, Retirement or upon the occurrence of a Change in Control of the
Employer.
SECTION 9.3 FORFEITURES ON TERMINATION OF EMPLOYMENT.
----------------------------------------
Upon the termination of employment of a Participant or Former
Participant for any reason other than death, Disability, Retirement, that
portion of the balance credited to his Account which is not vested at the date
of such termination shall be forfeited as of the last Valuation Date for the
Plan Year in which such termination of employment occurs. The proceeds of such
forfeitures, less amounts, if any, required to be credited because of re-
<PAGE>
-25-
employment pursuant to section 9.4, shall be treated as Forfeitures and shall be
disposed of as provided in section 9.5.
SECTION 9.4 AMOUNTS CREDITED UPON RE-EMPLOYMENT.
----------------------------------
If an Employee forfeited any amount of the balance credited to his
Account upon his termination of employment with the Employer, and is re-employed
prior to the occurrence of a Period of Severance of five years, then:
(i) an amount equal to the Fair Market Value of the Shares forfeited,
determined as of the date of forfeiture; and
(ii) the amount credited to his General Investment Account that was
forfeited, determined as of the date of forfeiture;
shall be credited back to his Account from the proceeds of forfeitures which are
redeemed pursuant to section 9.3 during the Plan Year in which he is re-
employed, unless such proceeds are insufficient, in which case the Employer
shall make an additional contribution in the amount of such deficiency.
SECTION 9.5 ALLOCATION OF FORFEITURES.
-------------------------
Any Forfeitures that occur during a Plan Year shall be used to reduce
the contributions required of the Employer under the Plan and shall be treated
as Loan Repayment Contributions and ESOP Contributions in the proportions
designated by the Committee in accordance with Article V.
ARTICLE X
---------
THE TRUST FUND
--------------
SECTION 10.1 THE TRUST FUND.
--------------
The Trust Fund shall be held and invested under the Trust Agreement
with the Trustee. The provisions of the Trust Agreement shall vest such powers
in the Trustee as to investment, control and disbursement of the Trust Fund, and
such other provisions not inconsistent with the Plan, including provision for
the appointment of one or more "investment managers" within the meaning of
section 3(38) of ERISA to manage and control (including acquiring and disposing
of) all or any of the assets of the Trust Fund, as the Board may from
<PAGE>
-26-
time to time authorize. Except as required by ERISA, no bond or other security
shall be required of any Trustee at any time in office.
SECTION 10.2 INVESTMENTS.
-----------
Except to the extent provided to the contrary in section 10.3, the
Trust Fund shall be invested in:
(a) Shares;
(b) such Investment Funds as may be established from time to time by
the Committee; and
(c) such other investments as may be permitted under the Trust
Agreement;
in such proportions as shall be determined by the Committee or, if so provided
under the Trust Agreement, as directed by one or more investment managers or by
the Trustee, in its discretion; provided, however, that the investments of the
Trust Fund shall consist primarily of Shares. Notwithstanding the immediately
preceding sentence, the Trustee may temporarily invest the Trust Fund in short-
term obligations of, or guaranteed by, the United States Government or an agency
thereof, or may retain uninvested, or sell investments to provide, amounts of
cash required for purposes of the Plan.
SECTION 10.3 DIVERSIFICATION OF INVESTMENTS.
------------------------------
(a) Notwithstanding section 10.2, each Qualified Participant may:
(i) during the first 90 days of each of the first four Plan Years to
begin after the Plan Year in which he first becomes a Qualified
Participant, elect that such percentage of the balance credited to his
Account as he may specify, but in no event more than 25% of the balance
credited to his Account, be invested in one or more of the Investment
Funds; and
(ii) during the first 90 days of the fifth Plan Year to begin after
the Plan Year in which he first becomes a Qualified Participant or of any
Plan Year thereafter, elect that such percentage of the balance credited to
his Account as he may specify, but in no event more than 50% of the balance
credited to his Account, be invested in one or more of the Investment
Funds.
For purposes of an election under this section 10.3, the balance credited to a
Participant's Account shall be the balance credited to his Account determined as
of the last Valuation Date to occur in the Plan Year immediately preceding the
Plan Year in which such election is made.
<PAGE>
-27-
(b) An election made under section 10.3(a) shall be made in writing,
in the form and manner prescribed by the Plan Administrator, and shall be filed
with the Plan Administrator during the election period specified in section
10.3(a). As soon as is practicable following the end of the election period
during which such election is made, the Plan Administrator shall take such
actions as are necessary to cause the specified percentage of the balance
credited to the Account of the Qualified Participant making the election to be
invested in the specified Investment Funds. Any investments made pursuant to
this section 10.3 shall be specifically allocated to the General Investment
Account of the Qualified Participant for whom they are made.
(c) An election made under section 10.3(a) may be changed or revoked
at any time during the election period described in section 10.3(a) during which
it is initially made, during any subsequent election period described in section
10.3(a) or, upon at least 15 days' advance written notice given in the form and
manner prescribed by the Plan Administrator, as of the first day of any calendar
quarter of any Plan Year that begins after the Participant first becomes a
Qualified Participant. In no event, however, shall any election under this
section 10.3 result in more than 25% of the balance credited to the
Participant's Account being invested at the direction of the Participant, if
such election is made during a Plan Year to which section 10.3(a)(i) applies, or
result in more than 50% of the balance credited to the Participant's Account
being invested at the direction of the Participant, if such election is made
during the Plan Year to which section 10.3(a)(ii) applies or thereafter.
SECTION 10.4 USE OF COMMINGLED TRUST FUNDS.
-----------------------------
Subject to the provisions of the Trust Agreement, amounts held in the
Trust Fund may be invested in:
(a) any commingled or group trust fund described in section 401(a) of
the Code and exempt under section 501(a) of the Code; or
(b) any common trust fund exempt under section 584 of the Code
maintained exclusively for the collective investment of the assets of
trusts that are exempt under section 501(a) of the Code;
provided that the trustee of such commingled, group or common trust fund is a
bank or trust company.
SECTION 10.5 MANAGEMENT AND CONTROL OF ASSETS.
--------------------------------
All assets of the Plan shall be held by the Trustee in trust for the
exclusive benefit of Participants, Former Participants and their Beneficiaries.
No part of the corpus or income of the Trust Fund shall be used for, or diverted
to, purposes other than for the exclusive benefit of Participants, Former
Participants and their Beneficiaries, and for defraying reasonable
<PAGE>
-28-
administrative expenses of the Plan and Trust Fund. No person shall have any
interest in or right to any part of the earnings of the Trust Fund, or any
rights in, to or under the Trust Fund or any part of its assets, except to the
extent expressly provided in the Plan.
ARTICLE XI
----------
VALUATION OF INTERESTS IN THE TRUST FUND
----------------------------------------
SECTION 11.1 ESTABLISHMENT OF INVESTMENT ACCOUNTS.
------------------------------------
The Plan Administrator shall establish, or cause to be established,
for each person for whom an Account is maintained a Share Investment Account and
a General Investment Account. Such Share Investment Accounts and General
Investment Accounts shall be maintained in accordance with this Article XI.
SECTION 11.2 SHARE INVESTMENT ACCOUNTS.
-------------------------
The Share Investment Account established for a person in accordance
with section 11.1 shall be credited with: (a) all Shares allocated to such
person's Account; (b) all Shares purchased with amounts of money or property
allocated to such person's Account; (c) all dividends paid in the form of Shares
with respect to Shares credited to his Account; and (d) all Shares purchased
with amounts credited to such person's General Investment Account. Such Share
Investment Account shall be charged with all Shares that are sold or exchanged
to acquire other investments or to provide cash and with all Shares that are
distributed in kind.
SECTION 11.3 GENERAL INVESTMENT ACCOUNTS.
---------------------------
The General Investment Account that is established for a person in
accordance with section 11.1 shall be credited with: (a) all amounts, other
than Shares, allocated to such person's Account; (b) all dividends paid in a
form other than Shares with respect to Shares credited to such person's Share
Investment Account; (c) the proceeds of any sale of Shares credited to such
person's Share Investment Account; and (d) any earnings attributable to amounts
credited to such person's General Investment Account. Such General Investment
Account shall be charged with all amounts credited thereto that are applied to
the purchase of Shares, any losses or depreciation attributable to amounts
credited thereto, any expenses allocable thereto and any distributions of
amounts credited thereto.
<PAGE>
-29-
SECTION 11.4 VALUATION OF INVESTMENT ACCOUNTS.
--------------------------------
(a) The Plan Administrator shall determine, or cause to be determined,
the aggregate value of each person's Share Investment Account as of each
Valuation Date by multiplying the number of Shares credited to such Share
Investment Account on such Valuation Date by the Fair Market Value of a Share on
such Valuation Date.
(b) As of each Valuation Date, the Accounts of each Participant shall
be separately adjusted to reflect their proportionate share of any appreciation
or depreciation in the fair market value of the Investment Funds, any income
earned by the Investment Funds and any expenses incurred by the Investment
Funds, as well as any contributions, withdrawals or distributions and investment
transfers not posted as of the last Valuation Date.
SECTION 11.5 ANNUAL STATEMENTS.
-----------------
There shall be furnished, by mail or otherwise, at least once in each
Plan Year to each person who would then be entitled to receive all or part of
the balance credited to any Account if the Plan were then terminated, a
statement of his interest in the Plan as of such date as shall be selected by
the Plan Administrator, which statement shall be deemed to have been accepted as
correct and be binding on such person unless the Plan Administrator receives
written notice to the contrary within 30 days after the statement is mailed or
furnished to such person.
ARTICLE XII
-----------
SHARES
------
SECTION 12.1 SPECIFIC ALLOCATION OF SHARES.
-----------------------------
All Shares purchased under the Plan shall be specifically allocated to
the Share Investment Accounts of Participants, Former Participants and their
Beneficiaries in accordance with section 11.2, with the exception of Financed
Shares, which shall be allocated to the Loan Repayment Account.
SECTION 12.2 DIVIDENDS.
---------
(a) Dividends paid with respect to Shares held under the Plan shall be
credited to the Loan Repayment Account, if paid with respect to Financed Shares.
Such dividends shall be: (i) applied to the payment of principal and accrued
interest with respect to any Share Acquisition Loan, if paid in cash; or (ii)
held in the Loan Repayment Account as Financed Shares for release in accordance
with section 6.4, if paid in the form of Shares.
<PAGE>
-30-
(b) Dividends paid with respect to Shares allocated to a person's
Share Investment Account shall be credited to such person's Share Investment
Account. Cash dividends credited to a person's General Investment Account shall
be, at the direction of the Board, either: (i) held in such General Investment
Account and invested in accordance with sections 10.2 and 11.2; (ii) distributed
immediately to such person; (iii) distributed to such person within 90 days of
the close of the Plan Year in which such dividends were paid; or (iv) used to
make payments of principal or interest on a Share Acquisition Loan; provided,
however, that the Fair Market Value of Financed Shares released from the Loan
Repayment Account equals or exceeds the amount of the dividend.
SECTION 12.3 VOTING RIGHTS.
-------------
(a) Each person shall direct the manner in which all voting rights
appurtenant to Shares allocated to his Share Investment Account will be
exercised, provided that such Shares were allocated to his Share Investment
Account as of the applicable record date. Such person shall, for such purpose,
be deemed a "named fiduciary" within the meaning of section 402(a)(2) of ERISA.
Such a direction shall be given by completing and filing with the inspector of
elections, the Trustee or such other person who shall be independent of the
Employer as the Committee shall designate, at least 10 days prior to the date of
the meeting of holders of Shares at which such voting rights will be exercised,
a written direction in the form and manner prescribed by the Committee. The
inspector of elections, the Trustee or such other person designated by the
Committee shall tabulate the directions given on a strictly confidential basis,
and shall provide the Committee with only the final results of the tabulation.
The final results of the tabulation shall be followed by the Committee in
directing the Trustee as to the manner in which such voting rights shall be
exercised. The Plan Administrator shall make a reasonable effort to furnish, or
cause to be furnished, to each person for whom a Share Investment Account is
maintained all annual reports, proxy materials and other information known by
the Plan Administrator to have been furnished by the issuer of the Shares, or by
any solicitor of proxies, to the holders of Shares.
(b) To the extent that any person shall fail to give instructions with
respect to the exercise of voting rights appurtenant to Shares allocated to his
Share Investment Account:
(i) the Trustee shall, with respect to each matter to be voted upon:
(A) cast a number of affirmative votes equal to the product of (I) the
number of allocated Shares for which no written instructions have been
given, multiplied by (II) a fraction, the numerator of which is the number
of allocated Shares for which affirmative votes will be cast in accordance
with written instructions given as provided in section 12.3(a) and the
denominator of which is the aggregate number of affirmative and negative
votes which will be cast in accordance with written instructions given as
aforesaid, and (B) cast a number of negative votes equal to the excess (if
any) of (I) the number of allocated Shares for which no written
instructions have been given over (II) the number of affirmative votes
<PAGE>
-31-
being cast with respect to such allocated Shares pursuant to section
12.3(b)(i)(A); or
(ii) if the Trustee shall determine that it may not, consistent with
its fiduciary duties, vote the allocated Shares for which no written
instructions have been given in the manner described in section 12.3(b)(i),
it shall vote such Shares in such manner as it, in its discretion, may
determine to be in the best interests of the persons to whose Share
Investment Accounts such Shares have been allocated.
(c) (i) The voting rights appurtenant to Financed Shares shall be
exercised as follows with respect to each matter as to which holders of Shares
may vote:
(A) a number of votes equal to the product of (I) the total number of
votes appurtenant to Financed Shares allocated to the Loan Repayment
Account on the applicable record date; multiplied by (II) a fraction, the
numerator of which is the total number of affirmative votes cast by
Participants, Former Participants and the Beneficiaries of deceased Former
Participants with respect to such matter pursuant to section 12.3(a) and
the denominator of which is the total number of affirmative and negative
votes cast by Participants, Former Participants and the Beneficiaries of
deceased Former Participants, shall be cast in the affirmative; and
(B) a number of votes equal to the excess of (I) the total number of
votes appurtenant to Financed Shares allocated to the Loan Repayment
Account on the applicable record date, over (II) the number of affirmative
votes cast pursuant to section 12.3(c)(i)(A) shall be cast in the negative.
To the extent that the Financed Shares consist of more than one class of Shares,
this section 12.3(c)(i) shall be applied separately with respect to each class
of Shares.
(ii) If voting rights are to be exercised with respect to Financed
Shares as provided in section 12.3(c)(i)(A) and (B) at a time when there are no
Shares allocated to the Share Investment Accounts of Participants, Former
Participants and the Beneficiaries of deceased Former Participants, then the
voting rights appurtenant to Financed Shares shall be exercised as follows with
respect to each matter as to which holders of Shares may vote:
(A) Each person who is a Participant on the applicable record date and
who was a Participant on the last day of the Plan Year ending on or
immediately prior to such record date will be granted a number of votes
equal to the quotient, rounded to the nearest integral number, of (I) such
Participant's Allocation Compensation for the Plan Year ending on or
immediately prior to such record date (or for the portion of such Plan Year
during which he was a Participant); divided by (II) $1,000.00; and
<PAGE>
-32-
(B) a number of votes equal to the product of (I) the total number of
Financed Shares allocated to the Loan Repayment Account on the applicable
record date; multiplied by (II) a fraction, the numerator of which is the
total number of votes that are cast in the affirmative with respect to such
matter pursuant to section 12.3(c)(ii)(A) and the denominator of which is
the total number of votes that are cast either in the affirmative or in the
negative with respect to such matter pursuant to section 12.3(c)(ii)(A),
shall be cast in the affirmative; and
(C) a number of votes equal to the excess of (I) the total number of
Financed Shares allocated to the Loan Repayment Account on the applicable
record date, over (II) the number of affirmative votes cast with respect to
such matter pursuant to section 12.3(c)(ii)(B), shall be cast in the
negative.
To the extent that the Financed Shares consist of more than one class of Shares,
this section 12.3(c)(ii) shall be applied separately with respect to each class
of Shares.
SECTION 12.4 TENDER OFFERS.
-------------
(a) Each person shall direct whether Shares allocated to his Share
Investment Account will be delivered in response to any Tender Offer. Such
person shall, for such purpose, be deemed a "named fiduciary" within the meaning
of section 402(a)(2) of ERISA. Such a direction shall be given by completing
and filing with the Trustee or such other person who shall be independent of the
Employer as the Committee shall designate, at least 10 days prior to the latest
date for exercising a right to deliver Shares pursuant to such Tender Offer, a
written direction in the form and manner prescribed by the Committee. The
Trustee or other person designated by the Committee shall tabulate the
directions given on a strictly confidential basis, and shall provide the
Committee with only the final results of the tabulation. The final results of
the tabulation shall be followed by the Committee in directing the number of
Shares to be delivered. The Plan Administrator shall make a reasonable effort
to furnish, or cause to be furnished, to each person for whom a Share Investment
Account is maintained, all information known by the Plan Administrator to have
been furnished by the issuer or by or on behalf of any person making such Tender
Offer, to the holders of Shares in connection with such Tender Offer.
(b) To the extent that any person shall fail to give instructions with
respect to Shares allocated to his Share Investment Account:
(i) the Trustee shall (A) tender or otherwise offer for purchase,
exchange or redemption a number of such Shares equal to the product of (I)
the number of allocated Shares for which no written instructions have been
given, multiplied by (II) a fraction, the numerator of which is the number
of allocated Shares tendered or otherwise offered for purchase, exchange or
redemption in accordance with written instructions given as provided in
section 12.4(a) and the
<PAGE>
-33-
denominator of which is the aggregate number of allocated Shares for which
written instructions have been given as aforesaid, and (B) withhold a
number of Shares equal to the excess (if any) of (I) the number of
allocated Shares for which no written instructions have been given over
(II) the number of Shares being tendered or otherwise offered pursuant to
section 12.4(b)(i)(A); or
(ii) if the Trustee shall determine that it may not, consistent with
its fiduciary duties, exercise the tender or other rights appurtenant to
allocated Shares for which no written instructions have been given in the
manner described in section 12.4(b)(i), it shall tender, or otherwise
offer, or withhold such Shares in such manner as it, in its discretion, may
determine to be in the best interests of the persons to whose Share
Investment Accounts such Shares have been allocated.
(c) In the case of any Tender Offer, any Financed Shares held in the
Loan Repayment Account shall be dealt with as follows:
(i) If such Tender Offer occurs at a time when there are no Shares
allocated to the Share Investment Accounts of Participants, Former
Participants and the Beneficiaries of deceased Former Participants, then
the disposition of the Financed Shares shall be determined as follows:
(A) each person who is a Participant on the applicable record
date and who was a Participant on the last day of the Plan Year ending
on or immediately prior to such record date will be granted a number
of tender rights equal to the quotient, rounded to the nearest
integral number, of (I) such Participant's Allocation Compensation for
the Plan Year ending on or immediately prior to such record date (or
for the portion of such Plan Year during which he was a Participant),
divided by (II) $1,000.00; and
(B) on the last day for delivering Shares or otherwise responding
to such Tender Offer, a number of Shares equal to the product of (I)
the total number of Financed Shares allocated to the Loan Repayment
Account on the last day of the effective period of such Tender Offer;
multiplied by (II) a fraction, the numerator of which is the total
number of tender rights exercised in favor of the delivery of Shares
in response to the Tender Offer pursuant to section 12.4(c)(i)(A) and
the denominator of which is the total number of tender rights that are
exercisable in response to the Tender Offer pursuant to section
12.4(c)(i)(A), shall be delivered in response to the Tender Offer; and
(C) a number of Shares equal to the excess of (I) the total
number of Financed Shares allocated to the Loan Repayment Account on
the last day of the effective period of such Tender Offer; over (II)
the
<PAGE>
-34-
number of Shares to be delivered in response to the Tender Offer
pursuant to section 12.4(c)(i)(B), shall be withheld from delivery.
(ii) If such Tender Offer occurs at a time when the voting rights
appurtenant to such Financed Shares are to be exercised in accordance with
section 12.3(c)(i), then:
(A) on the last day for delivering Shares or otherwise responding
to such Tender Offer, a number of Financed Shares equal to the product
of (I) the total number of Financed Shares allocated to the Loan
Repayment Account on the last day of the effective period of such
Tender Offer; multiplied by (II) a fraction, the numerator of which is
the total number of Shares delivered from the Share Investment
Accounts of Participants, Former Participants and the Beneficiaries of
deceased Former Participants in response to such Tender Offer pursuant
to section 12.4(a), and the denominator of which is the total number
of Shares allocated to the Share Investment Accounts of Participants,
Former Participants and Beneficiaries of deceased Former Participants
immediately prior to the last day for delivering Shares or otherwise
responding to such Tender Offer, shall be delivered; and
(B) a number of Financed Shares equal to the excess of (I) the
total number of Financed Shares allocated to the Loan Repayment
Account on the last day for delivering Shares or otherwise responding
to such Tender Offer; over (II) the number of Financed Shares to be
delivered pursuant to section 12.4(c)(ii)(A), shall be withheld from
delivery.
To the extent that the Financed Shares consist of more than one class of Shares,
this section 12.4(c) shall be applied separately with respect to each class of
Shares.
ARTICLE XIII
------------
PAYMENT OF BENEFITS
-------------------
SECTION 13.1 IN GENERAL.
----------
The balance credited to a Participant's or Former Participant's
Account under the Plan shall be paid only at the times, to the extent, in the
manner and to the persons provided in this Article XIII.
<PAGE>
-35-
SECTION 13.2 DESIGNATION OF BENEFICIARIES.
----------------------------
(a) Subject to section 13.2(b), any person entitled to a benefit under
the Plan may designate a Beneficiary to receive any amount to which he is
entitled that remains undistributed on the date of his death. Such person shall
designate his Beneficiary (and may change or revoke any such designation) in
writing in the form and manner prescribed by the Plan Administrator. Such
designation, and any change or revocation thereof, shall be effective only if
received by the Plan Administrator prior to such person's death and shall become
irrevocable upon such person's death.
(b) A Participant or Former Participant who is married shall
automatically be deemed to have designated his spouse as his Beneficiary,
unless, prior to the time such designation would, under section 13.2(a), become
irrevocable:
(i) the Participant or Former Participant designates an additional or
a different Beneficiary in accordance with this section 13.2; and
(ii) (A) the spouse of such Participant or Former Participant
consents to such designation in a writing that acknowledges the effect of
such consent and is witnessed by a Plan representative or a notary public;
or (B) the spouse of such Participant or Former Participant has previously
consented to such designation by signing a written waiver of any right to
consent to any designation made by the Participant or Former Participant,
and such waiver acknowledged the effect of the waiver and was witnessed by
a Plan representative or a notary public; or (C) it is established to the
satisfaction of a Plan representative that the consent required under
section 13.2(b)(ii)(A) may not be obtained because such spouse cannot be
located or because of other circumstances permitted under regulations
issued by the Secretary of the Treasury.
(c) In the event that a Beneficiary entitled to payments hereunder
shall die after the death of the person who designated him but prior to
receiving payment of his entire interest in the Account of the person who
designated him, then such Beneficiary's interest in the Account of such person,
or any unpaid balance thereof, shall be paid as provided in section 13.3 to the
Beneficiary who has been designated by the deceased Beneficiary, or if there is
none, to the executor or administrator of the estate of such deceased
Beneficiary, or if no such executor or administrator is appointed within such
time as the Plan Administrator, in his sole discretion, shall deem reasonable,
to such one or more of the spouse and descendants and blood relatives of such
deceased Beneficiary as the Plan Administrator may select. If a person entitled
to a benefit under the Plan and any of the Beneficiaries designated by him shall
die in such circumstances that there shall be substantial doubt as to which of
them shall have been the first to die, for all purposes of the Plan, the person
who made the Beneficiary designation shall be deemed to have survived such
Beneficiary.
(d) If no Beneficiary survives the person entitled to the benefit
under the Plan or if no Beneficiary has been designated by such person, such
benefit shall be paid to the
<PAGE>
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executor or administrator of the estate of such person, or if no such executor
or administrator is appointed within such time as the Plan Administrator, in his
sole discretion, shall deem reasonable, to such one or more of the spouse and
descendants and blood relatives of such deceased person as the Plan
Administrator may select.
SECTION 13.3 DISTRIBUTIONS TO PARTICIPANTS AND FORMER PARTICIPANTS.
-----------------------------------------------------
(a)(i) Subject to the provisions of section 13.7 with respect to
required minimum distributions, the vested portion of the balance credited to a
Participant's or a Former Participant's Account shall be distributed to him
commencing as of the last Valuation Date to occur in the Plan Year in which the
Participant or Former Participant terminates employment with the Employer or
attains age 65, whichever is later; unless the Participant or Former Participant
elects otherwise pursuant to section 13.3(a)(ii), and the payment, or first in a
series of payments, is actually made within three months following such
Valuation Date.
(ii) A Participant or Former Participant may, upon request on a form
provided by the Plan Administrator and filed with the Plan Administrator not
later than 15 days prior to the date on which his employment with the Employer
terminates, elect that his vested interest in his Account be paid commencing as
of any earlier or later Valuation Date after his termination of employment, but
in no event later than the last Valuation Date to occur in the calendar year in
which the Participant or Former Participant attains age 70 1/2, in which case
the payment, or first in a series of payments, shall be made within three months
following such Valuation Date.
(b)(i) Subject to section 13.3(b)(ii), the vested portion of the
balance credited to the Account of a Participant or Former Participant will be
paid to him, commencing as of the Valuation Date determined under section
13.3(a), in substantially equal annual installments over a fixed period equal to
the greater of:
(A) five years; or
(B) if the vested portion of the balance credited to the Account of
the Participant or Former Participant, determined as of the Valuation Date
determined under section 13.3(a), is greater than $500,000 (or such larger
amount as may be prescribed by the Secretary of the Treasury pursuant to
section 409(o) of the Code), the sum of five years plus the lesser of (I)
five additional years, or (II) one additional year for each $100,000 (or
fraction thereof) by which the vested portion of the balance credited to
the Participant's or Former Participant's Account exceeds $500,000 (or such
larger amount as may be prescribed by the Secretary of the Treasury
pursuant to section 409(o) of the Code).
(ii) A Participant or Former Participant may, upon request on a form
provided by the Plan Administrator and filed with the Plan Administrator not
later than 15 days prior to the date on which his employment terminates, elect
that the vested portion of the balance
<PAGE>
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credited to his Account be paid, commencing as of the Valuation Date determined
under section 13.3(a):
(A) in substantially equal annual installments over a fixed period not
to exceed the lesser of (I) 10 years, or (II) the life expectancy of the
Participant or Former Participant, or, if his Beneficiary is a natural
person, the joint life and last survivor expectancy of the Participant or
Former Participant and his Beneficiary; or
(B) subject to section 13.4, in a lump sum payment.
(c) If any person entitled to a benefit under the Plan dies before his
entire benefit has been distributed to him, then the remainder of such benefit
shall be paid to the Beneficiary designated by him under section 13.2 either:
(i) in a lump sum distribution as of the Valuation Date next following
the date of his death, and the amount thereof shall be based upon the
vested portion of the balance credited to his Account as of such Valuation
Date; or
(ii) if, prior to the death of the Participant or Former Participant
whose vested Account is being distributed, an election pursuant to section
13.3(b)(ii)(B) is in effect for him, in a lump sum distribution as of the
Valuation Date specified in such election, or, if earlier, as of the latest
Valuation Date that would permit payment to be made within five years after
the Participant's or Former Participant's death, and the amount thereof
shall be based upon the vested portion of the balance credited to his
Account as of such Valuation Date; or
(iii) if, prior to the death of the Participant or Former Participant
whose vested Account is being distributed, an election pursuant to section
13.3(b)(ii)(A) is in effect for him:
(A) over the period and at the times set forth in such election,
if distribution has begun prior to the Participant's or Former
Participant's death; or
(B) commencing at the time set forth in such election and over
the period set forth in such election (or, if less, over a period
equal to the life expectancy of the Beneficiary of the deceased
Participant or Former Participant), if the deceased Participant's or
Former Participant's spouse is his Beneficiary and distribution has
not begun prior to the deceased Participant's or Former Participant's
death; or
(C) commencing on the date specified in such election (or, if
earlier, the last Valuation Date that will permit payment to begin
within one year after the deceased Participant's or Former
Participant's death)
<PAGE>
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and over the period set forth in such election (or, if less, over a
period equal to the life expectancy of the Beneficiary of the deceased
Participant or Former Participant), if the deceased Participant's or
Former Participant's Beneficiary is a natural person other than his
spouse and distribution has not begun prior to the deceased
Participant's or Former Participant's death;
and the amount thereof shall be based upon the vested portion of the
balance credited to his Account as of the Valuation Dates as of which
payments are determined; or
(iv) upon written application of the Beneficiary made in such form and
manner as the Plan Administrator may prescribe, at another time or in
another manner permitted under section 13.3(a) or (b), subject to the
following limitations:
(A)(I) If such Beneficiary is a natural person other than the
spouse of the deceased Participant or Former Participant whose vested
Account is being distributed, a distribution that commences within one
year after such deceased Participant's or Former Participant's death
shall be made over a fixed period that does not exceed the life
expectancy of such Beneficiary when distribution commences.
(II) If such Beneficiary is the spouse of the deceased
Participant or Former Participant whose vested Account is being
distributed, a distribution that commences no later than the later of:
(1) the date on which the deceased Participant or Former Participant
would have attained age 70 1/2 had he lived; or (2) the first
anniversary of the death of such deceased Participant or Former
Participant; shall be made over a fixed period that does not exceed
the life expectancy of such Beneficiary when distribution commences.
(III) In all other cases where the spouse of the deceased
Participant or Former Participant whose vested Account is being
distributed is not the Beneficiary, payment must be completed within
five years after the death of such deceased Participant or Former
Participant.
(B) In cases where distribution has commenced prior to the death
of the deceased Participant or Former Participant whose vested Account
is being distributed, distribution must be completed as least as
rapidly as under the method in effect prior to such deceased
Participant's or Former Participant's death.
<PAGE>
-39-
SECTION 13.4 MANNER OF PAYMENT.
-----------------
(a) Subject to section 13.4(b), payments of distributions made
pursuant to section 13.3 or section 13.7 shall be paid, in accordance with the
written direction of the person requesting the payment, in whole Shares, in
cash, or in a combination of cash and whole Shares. Such written direction
shall be given in such form and manner as the Plan Administrator may prescribe.
If no such direction is given, then payment shall be made in the maximum number
of whole Shares that may be acquired with the amount of the payment, plus, if
necessary, an amount of money equal to any remaining amount of the payment that
is less than the Fair Market Value of a whole Share.
(b) No distribution of a lump sum payment shall be made in cash to the
extent that the making of such distribution, when combined with all other
distributions to be made in cash as of the same Valuation Date, would require
the sale of Shares constituting 1% or more of all outstanding Shares; provided,
however, that this section 13.4(b) shall not apply to or in respect of a
Participant or Former Participant:
(i) following such Participant's or Former Participant's termination
of employment with the Employer on account of his Retirement or Disability;
or
(ii) following such Participant's or Former Participant's 65th
birthday; or
(iii) following the death of such Participant or Former Participant.
SECTION 13.5 PUT OPTIONS.
-----------
(a) Except as provided otherwise in section 13.5(b), each Participant
or Former Participant to whom Shares are distributed under the Plan, each
Beneficiary of a deceased Participant or Former Participant, including the
estate of a deceased Participant or Former Participant, to whom Shares are
distributed under the Plan, and each person to whom such a Participant, Former
Participant or Beneficiary gives Shares that have been distributed under the
Plan shall have the right to require the Employer to purchase from him all or
any portion of such Shares. A person shall exercise such right by delivering to
the Employer a written notice, in such form and manner as the Employer may by
written notice to such person prescribe, setting forth the number of Shares to
be purchased by the Employer, the number of the stock certificate evidencing
such person's ownership of such Shares, and the effective date of purchase.
Such notice shall be given, and the effective date of the purchase specified
therein shall be, no later than the last day of the fifteenth calendar month to
begin after the date on which the Shares to be purchased by the Employer were
distributed from the Plan. As soon as practicable following its receipt of such
notice, the Employer shall take such actions as are necessary to purchase the
Shares specified in such notice at a price per Share equal to the Fair Market
Value of a Share determined as of the effective date of the purchase.
<PAGE>
-40-
(b) The Employer shall have no obligation to purchase any Share (i)
pursuant to a notice given, or on an effective date of purchase, after the last
day of the fifteenth calendar month to begin after the date on which such Share
was distributed from the Plan; (ii) following the earliest date on which Shares
are publicly traded on an established market; or (iii) if the Employer is a
"bank" within the meaning of section 581 of the Code and is prohibited by law
from redeeming or purchasing its own securities.
SECTION 13.6 RIGHT OF FIRST REFUSAL.
----------------------
(a) For any period during which Shares are not publicly traded on any
established market, no person who owns Shares that were distributed from the
Plan, other than a person to whom such Shares were sold in compliance with this
section 13.6, shall sell such Shares to any person other than the Employer
without first offering to sell such Shares to the Employer (or person designated
by the Employer) in accordance with this section 13.6.
(b) In the event that a person to whom this section 13.6 applies shall
receive and desire to accept from a person other than the Employer a bona fide
offer to purchase Shares to which this section 13.6 applies, he shall furnish to
the Employer a written notice which shall:
(i) include a copy of such offer to purchase;
(ii) offer to sell to the Employer the Shares subject to such offer to
purchase at a price per Share that is equal to the greater of:
(A) the price per Share specified in such offer to purchase; or
(B) the Fair Market Value of a Share as of the date of purchase;
and otherwise upon the same terms and conditions as those specified in such
offer to purchase; and
(iii) include an indication of his intention to accept such offer to
purchase if the Employer does not accept his offer to sell.
(c) The Employer shall have the right to purchase the Shares covered
by the offer to sell contained in a notice given pursuant to section 13.6(b), on
the terms and conditions specified in such notice, by written notice given to
the party making the offer to sell not later than the fourteenth day after the
notice described in section 13.6(b) is given. If the Employer does not give
such a notice during the prescribed fourteen day period, then the person owning
such Shares may accept the offer to purchase described in the notice.
<PAGE>
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SECTION 13.7 MINIMUM REQUIRED DISTRIBUTIONS.
------------------------------
(a) Required minimum distributions of a Participant's or Former
Participant's Account shall commence no later than:
(i) if the Participant or Former Participant attained age 70 1/2 prior
to January 1, 1988 and was not a Five Percent Owner at any time during the
Plan Year ending in the calendar year in which he attained age 70 1/2,
during any of the four preceding Plan Years or during any subsequent years,
the later of (A) the calendar year in which he attains or attained age 70
1/2 or (B) the calendar year in which he terminates employment with the
Employer; or
(ii) if the Participant or Former Participant attained age 70 1/2
prior to January 1, 1988 and is or was a Five Percent Owner at any time
during the Plan Year ending in the calendar year in which he attained age
70 1/2, or during any of the four preceding Plan Years or during any
subsequent years, the later of (A) the calendar year in which he attains
age 70 1/2 or (B) the calendar year in which he first becomes a Five
Percent Owner; or
(iii) in all other cases, the calendar year in which the Participant
or Former Participant attains age 70 1/2.
(b) The required minimum distributions contemplated by section 13.7(a)
shall be made as follows:
(i) The minimum required distribution to be made for the calendar year
for which the first minimum distribution is required shall be no later than
April 1st of the immediately following calendar year and shall be equal to
the quotient obtained by dividing (A) the vested balance credited to the
Participant's or Former Participant's Account as of the last Valuation Date
to occur in the calendar year immediately preceding the calendar year in
which the first minimum distribution is required (adjusted to account for
any additions thereto or subtractions therefrom after such Valuation Date
but on or before December 31st of such calendar year); by (B) the
Participant's or Former Participant's life expectancy (or, if his
Beneficiary is a natural person, the joint life and last survivor
expectancy of him and his Beneficiary); and
(ii) the minimum required distribution to be made for each calendar
year following the calendar year for which the first minimum distribution
is required shall be made no later than December 31st of the calendar year
for which the distribution is required and shall be equal to the quotient
obtained by dividing (A) the vested balance credited to the Participant's
or Former Participant's Account as of the last Valuation Date to occur in
the calendar year prior to the calendar year for which the distribution is
required (adjusted to account for any additions thereto or subtractions
therefrom after such Valuation
<PAGE>
-42-
Date but on or before December 31st of such calendar year and, in the case
of the distribution for the calendar year immediately following the
calendar year for which the first minimum distribution is required, reduced
by any distribution for the prior calendar year that is made in the current
calendar year); by (B) the Participant's or Former Participant's life
expectancy (or, if his Beneficiary is a natural person, the joint life and
last survivor expectancy of him and his Beneficiary).
For purposes of this section 13.7, the life expectancy of a Participant or
Former Participant (or the joint life and last survivor expectancy of a
Participant or Former Participant and his designated Beneficiary) for the
calendar year in which the Participant or Former Participant attains age 70 1/2
shall be determined on the basis of Tables V and VI, as applicable, of section
1.72-9 of the Income Tax Regulations as of the Participant's or Former
Participant's and Beneficiary's birthday in such year. Such life expectancy or
joint life and last survivor expectancy for any subsequent year shall be equal
to the excess of (1) the life expectancy or joint life and last survivor
expectancy for the year in which the Participant or Former Participant attains
age 70 1/2, over (2) the number of whole years that have elapsed since the
Participant or Former Participant attained age 70 1/2.
(c) Payment of the distributions required to be made to a Participant
or Former Participant under this section 13.7 shall be made in accordance with
section 13.4.
SECTION 13.8 DIRECT ROLLOVER OF ELIGIBLE ROLLOVER DISTRIBUTIONS.
--------------------------------------------------
(a) A Distributee may elect, at the time and in the manner prescribed
by the Plan Administer, to have any portion of an Eligible Rollover Distribution
paid directly to an Eligible Retirement Plan specified by the Distributee in a
Direct Rollover.
(b) The following rules shall apply with respect to Direct Rollovers
made pursuant to this section 13.8:
(i) A Participant may only elect to make a Direct Rollover of an
Eligible Rollover Distribution if such Eligible Rollover Distribution (when
combined with other Eligible Rollover Distributions made or to be made in
the same calendar year) is reasonably expected to be at least $200;
(ii) If a Participant elects a Direct Rollover of a portion of an
Eligible Rollover Distribution, that portion must be equal to at least
$500; and
(iii) A Participant may not divide his or her Eligible Rollover
Distribution into separate distributions to be transferred to two or more
Eligible Retirement Plans.
<PAGE>
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(c) For purposes of this section 13.8 and any other applicable section
of the Plan, the following definitions shall have the following meanings:
(i) "Direct Rollover" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
(ii) "Distributee" means an Employee or former Employee. In addition,
the Employee's or former Employee's surviving spouse and the Employee's
spouse or former spouse who is the alternate payee under a Qualified
Domestic Relations Order are considered Distributees with regard to the
interest of the spouse or former spouse.
(iii) "Eligible Retirement Plan" means an individual retirement
account described in section 408(a) of the Code, an individual retirement
annuity described in section 408(b) or the Code, an annuity plan described
in section 403(a) of the Code, or a qualified trust described in section
401(a) of the Code that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover Distribution to
the current or former spouse who is the alternative payee under a Qualified
Domestic Relations Order or to a surviving spouse, an Eligible Retirement
Plan is an individual retirement account or individual retirement annuity.
(iv) "Eligible Rollover Distribution" means any distribution of all or
any portion of the balance to the credit of the Distributee, except that an
Eligible Rollover Distribution does not include: any distribution that is
one of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of the
Distributee's designated Beneficiary, or for a specified period of ten (10)
years or more; any distribution to the extent such distribution is required
under section 401(a)(9) of the Code; and the portion of any distribution
that is not includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to employer
securities).
SECTION 13.9 VALUATION OF SHARES UPON SETTLEMENT TO A PARTICIPANT.
----------------------------------------------------
Notwithstanding any contrary provision in this Article XIII, in the
event that all or a portion of a payment of a distribution to a Participant is
to be made in cash, such Participant shall only be entitled to receive the
proceeds of the Shares allocated to his Account that are sold in connection with
such distribution and which are valued as of the date of such sale.
<PAGE>
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ARTICLE XIV
-----------
CHANGE IN CONTROL
-----------------
SECTION 14.1 DEFINITION OF CHANGE IN CONTROL.
-------------------------------
A Change in Control of the Employer shall be deemed to have occurred
upon the happening of any of the following events:
(a) the occurrence of any event upon which any "person" (as such term
is used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended ("Exchange Act")), other than (A) a trustee or other fiduciary
holding securities under an employee benefit plan maintained for the
benefit of employees of Home Bancorp of Elgin, Inc.; (B) a corporation
owned, directly or indirectly, by the stockholders of Home Bancorp of
Elgin, Inc. in substantially the same proportions as their ownership of
stock of Home Bancorp of Elgin, Inc.; or (C) any group constituting a
person in which employees of Home Bancorp of Elgin, Inc. are substantial
members, becomes the "beneficial owner" (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities
issued by Home Bancorp of Elgin, Inc. representing 25% or more of the
combined voting power of all of Home Bancorp of Elgin, Inc.'s then
outstanding securities; or
(b) the occurrence of any event upon which the individuals who on the
date the Plan is adopted are members of the Board, together with
individuals whose election by the Board or nomination for election by Home
Bancorp of Elgin, Inc.'s stockholders was approved by the affirmative vote
of at least two-thirds of the members of the Board then in office who were
either members of the Board on the date this Plan is adopted or whose
nomination or election was previously so approved, cease for any reason to
constitute a majority of the members of the Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of directors of Home Bancorp of Elgin, Inc. (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act);
or
(c) the shareholders of Home Bancorp of Elgin, Inc. approve either:
(i) a merger or consolidation of Home Bancorp of Elgin, Inc. with
any other corporation, other than a merger or consolidation following
which both of the following conditions are satisfied:
(A) either (1) the members of the Board of Home Bancorp of
Elgin, Inc. immediately prior to such merger or
<PAGE>
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consolidation constitute at least a majority of the members of
the governing body of the institution resulting from such merger
or consolidation; or (2) the shareholders of Home Bancorp of
Elgin, Inc. own securities of the institution resulting from such
merger or consolidation representing 80% or more of the combined
voting power of all such securities then outstanding in
substantially the same proportions as their ownership of voting
securities of Home Bancorp of Elgin, Inc. before such merger or
consolidation; and
(B) the entity which results from such merger or
consolidation expressly agrees in writing to assume and perform
Home Bancorp of Elgin, Inc.'s obligations under the Plan; or
(ii) a plan of complete liquidation of Home Bancorp of Elgin,
Inc. or an agreement for the sale or disposition by Home Bancorp of
Elgin, Inc. of all or substantially all of its assets; and
(d) any event that would be described in section 14.1(b)(i), (ii) or
(iii) if "Home Federal Savings & Loan Association of Elgin" were
substituted for "Home Bancorp of Elgin, Inc." therein; and
In no event, however, shall the transaction by which Home Federal Savings & Loan
Association of Elgin converts from a mutual savings association to a stock
savings association, or any transaction by which a company wholly owned by Home
Federal Savings & Loan Association of Elgin becomes the parent company of Home
Federal Savings & Loan Association of Elgin be deemed a Change in Control.
SECTION 14.2 VESTING ON CHANGE OF CONTROL.
----------------------------
Upon the effective date of a Change in Control, the Account of each person who
would then, upon termination of the Plan, be entitled to a benefit, shall be
fully vested and nonforfeitable.
SECTION 14.3 REPAYMENT OF LOAN.
-----------------
(a) Upon a Change in Control described in section 14.1(c) (or which
would be described in section 14.1(c) if "Home Federal Savings & Loan
Association of Elgin" were substituted for "Home Bancorp of Elgin, Inc."
thereunder), the Committee shall direct the Trustee to sell a sufficient number
of Shares to repay any outstanding Share Acquisition Loan in full. The proceeds
of such sale shall be used to repay such Share Acquisition Loan. After repayment
of the Share Acquisition Loan, all remaining Shares which had been unallocated
(or the proceeds thereof, if applicable) shall be allocated among the accounts
of all Participants who were employed by an Employer on the effective date of
such Change in Control. Such allocation of Shares or proceeds shall be credited
as of the date on which the Change in Control occurs to
<PAGE>
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the Accounts of each Participant who has not had a termination of participation
under section 2.3 as of such date (each, an "Affected Participant"), in
proportion to their Allocation Compensation, for the period, beginning on the
January 1 immediately preceding the date on which the Change in Control occurs
and ending on the date on which the Change in Control occurs. If any amount
cannot be allocated to an Affected Participant in the year of such Change in
Control as a result of the limitations of section 415 of the Code, the amounts
will be allocated in subsequent years to those persons who were Affected
Participants and who continue to be Participants in the Plan until finally
distributed to Affected Participants.
(b) In the event that the application of section 415 of the Code
prevents the allocation of all of the Shares or other assets released from the
Loan Repayment Account as provided in section 14.3(a) as of the effective date
of the Change in Control, each Affected Participant shall be entitled to receive
a supplemental benefit payment directly from the Employer. The supplemental
benefit payment to each Affected Participant shall be an amount equal to the
excess of:
(i) the total amount of Shares or other property that would be
allocated to such Affected Participant's Account under section 14.3(a) if
section 415 of the Code did not apply; over
(ii) the total of Shares or other property actually allocated to such
Affected Participant's Account under section 14.3(a).
Such payment (without offset for any allocations which may occur under this Plan
subsequent to the Change in Control) shall be made as soon as practicable, but
in any event within ten (10) business days, after the effective date of the
Change in Control. This section 14.3(b) shall be treated as a separate, non-
qualified "excess benefit plan" within the meaning of section 3(34) of ERISA and
shall be interpreted, administered and enforced in a manner consistent with this
intention. To the extent that any Affected Participant is entitled to the same
or a similar payment under any other non-qualified plan, program or arrangement
of the Employer, any payment under this section 14.3(b) shall be coordinated
with the payments under such other non-qualified programs, plan or arrangements
in such manner as shall be determined by the Committee to be necessary to
prevent the duplication of benefits.
SECTION 14.4 PLAN TERMINATION AFTER CHANGE IN CONTROL.
----------------------------------------
After repayment of the loan and allocation of shares or proceeds as provided in
section 14.2, the Plan shall be terminated and all amounts shall be distributed
as soon as practicable.
<PAGE>
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SECTION 14.5 AMENDMENT OF ARTICLE XIV.
------------------------
Article XIV of the Plan may not be amended after a Change in Control of the
Employer unless required by the Internal Revenue Service as a condition to the
continued treatment of the Plan as a tax-qualified plan under section 401(a) of
the Code.
ARTICLE XV
----------
ADMINISTRATION
--------------
SECTION 15.1 NAMED FIDUCIARIES.
-----------------
The term "Named Fiduciary" shall mean (but only to the extent of the
responsibilities of each of them) the Plan Administrator, the Committee, the
Board and the Trustee. This Article XV is intended to allocate to each Named
Fiduciary the responsibility for the prudent execution of the functions assigned
to him or it, and none of such responsibilities or any other responsibility
shall be shared by two or more of such Named Fiduciaries. Whenever one Named
Fiduciary is required by the Plan or Trust Agreement to follow the directions of
another Named Fiduciary, the two Named Fiduciaries shall not be deemed to have
been assigned a shared responsibility, but the responsibility of the Named
Fiduciary giving the directions shall be deemed his sole responsibility, and the
responsibility of the Named Fiduciary receiving those directions shall be to
follow them insofar as such instructions are on their face proper under
applicable law.
SECTION 15.2 PLAN ADMINISTRATOR.
------------------
There shall be a Plan Administrator, who shall be the Senior Human
Resources Officer of Home Bancorp of Elgin, Inc., or such Employee or officer as
may be designated by the Committee, as hereinafter provided, and who shall,
subject to the responsibilities of the Committee and the Board, have the
responsibility for the day-to-day control, management, operation and
administration of the Plan (except trust duties). The Plan Administrator shall
have the following responsibilities:
(a) To maintain records necessary or appropriate for the
administration of the Plan;
(b) To give and receive such instructions, notices, information,
materials, reports and certifications to the Trustee as may be necessary or
appropriate in the administration of the Plan;
<PAGE>
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(c) To prescribe forms and make rules and regulations consistent with
the terms of the Plan and with the interpretations and other actions of the
Committee;
(d) To require such proof of age or evidence of good health of an
Employee, Participant or Former Participant or the spouse of either, or of
a Beneficiary as may be necessary or appropriate in the administration of
the Plan;
(e) To prepare and file, distribute or furnish all reports, plan
descriptions, and other information concerning the Plan, including, without
limitation, filings with the Secretary of Labor and communications with
Participants, Former Participants and other persons, as shall be required
of the Plan Administrator under ERISA;
(f) To determine any question arising in connection with the Plan, and
the Plan Administrator's decision or action in respect thereof shall be
final and conclusive and binding upon the Employer, the Trustee,
Participants, Former Participants, Beneficiaries and any other person
having an interest under the Plan; provided, however, that any question
relating to inconsistency or omission in the Plan, or interpretation of the
provisions of the Plan, shall be referred to the Committee by the Plan
Administrator and the decision of the Committee in respect thereof shall be
final;
(g) Subject to the provisions of section 15.5, to review and dispose
of claims under the Plan filed pursuant to section 15.4;
(h) If the Plan Administrator shall determine that by reason of
illness, senility, insanity, or for any other reason, it is undesirable to
make any payment to a Participant, Former Participant, Beneficiary or any
other person entitled thereto, to direct the application of any amount so
payable to the use or benefit of such person in any manner that he may deem
advisable or to direct in his discretion the withholding of any payment
under the Plan due to any person under legal disability until a
representative competent to receive such payment in his behalf shall be
appointed pursuant to law;
(i) To discharge such other responsibilities or follow such directions
as may be assigned or given by the Committee or the Board; and
(j) To perform any duty or take any action which is allocated to the
Plan Administrator under the Plan.
The Plan Administrator shall have the power and authority necessary or
appropriate to carry out his responsibilities. The Plan Administrator may
resign only by giving at least 30 days' prior written notice of resignation to
the Committee, and such resignation shall be effective on the date specified in
such notice.
<PAGE>
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SECTION 15.3 COMMITTEE RESPONSIBILITIES.
--------------------------
There shall be a Committee consisting of not less than three persons,
who may, but need not be officers of the Company and who shall be appointed by
the Board and serve at the pleasure of the Board. The Committee shall, subject
to the responsibilities of the Board, have the following responsibilities:
(a) To review the performance of the Plan Administrator;
(b) To hear and decide appeals, pursuant to the claims procedure
contained in section 15.5 of the Plan, taken from the decisions of the Plan
Administrator;
(c) To hear and decide questions, including interpretation of the
Plan, as may be referred to the Committee by the Plan Administrator;
(d) To review the performance of the Trustee and such investment
managers as may be appointed in or pursuant to the Trust Agreement in
investing, managing and controlling the assets of the Plan;
(e) To the extent required by ERISA, to establish a funding policy and
method consistent with the objectives of the Plan and the requirements of
ERISA, and to review such policy and method at least annually;
(f) To report and make recommendations to the Board regarding changes
in the Plan, including changes in the operation and management of the Plan
and removal and replacement of the Trustee and such investment managers as
may be appointed in or pursuant to the Trust Agreement;
(g) To designate an Alternate Plan Administrator to serve in the event
that the Plan Administrator is absent or otherwise unable to discharge his
responsibilities;
(h) To remove and replace the Plan Administrator or Alternate, or both
of them, and to fill a vacancy in either office;
(i) To the extent provided under and subject to the provisions of the
Trust Agreement, to appoint "investment managers" as defined in section
3(38) of ERISA to manage and control (including acquiring and disposing of)
all or any of the assets of the Plan;
(j) With the prior approval of the Board, to direct the Trustee to
obtain one or more Share Acquisition Loans;
<PAGE>
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(k) To develop and provide procedures and forms necessary to enable
Participants to give voting and tendering directions on a confidential
basis;
(l) To discharge such other responsibilities or follow such directions
as may be assigned or given by the Board; and
(m) To perform any duty or take any action which is allocated to the
Committee under the Plan.
The Committee shall have the power and authority necessary or appropriate to
carry out its responsibilities.
SECTION 15.4 CLAIMS PROCEDURE.
----------------
Any claim relating to benefits under the Plan shall be filed with the
Plan Administrator on a form prescribed by him. If a claim is denied in whole
or in part, the Plan Administrator shall give the claimant written notice of
such denial, which notice shall specifically set forth:
(a) The reasons for the denial;
(b) The pertinent Plan provisions on which the denial was based;
(c) Any additional material or information necessary for the claimant
to perfect his claim and an explanation of why such material or information
is needed; and
(d) An explanation of the Plan's procedure for review of the denial of
the claim.
In the event that the claim is not granted and notice of denial of a claim is
not furnished by the 30th day after such claim was filed, the claim shall be
deemed to have been denied on that day for the purpose of permitting the
claimant to request review of the claim.
SECTION 15.5 CLAIMS REVIEW PROCEDURE.
-----------------------
Any person whose claim filed pursuant to section 15.5 has been denied
in whole or in part by the Plan Administrator may request review of the claim by
the Committee, upon a form prescribed by the Plan Administrator. The claimant
shall file such form (including a statement of his position) with the Committee
no later than 60 days after the mailing or delivery of the written notice of
denial provided for in section 15.5, or, if such notice is not provided, within
60 days after such claim is deemed denied pursuant to section 15.5. The
claimant shall be permitted to review pertinent documents. A decision shall be
rendered by the Committee and
<PAGE>
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communicated to the claimant not later than 30 days after receipt of the
claimant's written request for review. However, if the Committee finds it
necessary, due to special circumstances (for example, the need to hold a
hearing), to extend this period and so notifies the claimant in writing, the
decision shall be rendered as soon as practicable, but in no event later than
120 days after the claimant's request for review. The Committee's decision
shall be in writing and shall specifically set forth:
(a) The reasons for the decision; and
(b) The pertinent Plan provisions on which the decision is based.
Any such decision of the Committee shall be binding upon the claimant and the
Employer, and the Plan Administrator shall take appropriate action to carry out
such decision.
SECTION 15.6 ALLOCATION OF FIDUCIARY RESPONSIBILITIES AND
EMPLOYMENT OF ADVISORS.
-----------------------
Any Named Fiduciary may:
(a) Allocate any of his or its responsibilities (other than trustee
responsibilities) under the Plan to such other person or persons as he or
it may designate, provided that such allocation and designation shall be in
writing and filed with the Plan Administrator;
(b) Employ one or more persons to render advice to him or it with
regard to any of his or its responsibilities under the Plan; and
(c) Consult with counsel, who may be counsel to the Employer.
SECTION 15.7 OTHER ADMINISTRATIVE PROVISIONS.
-------------------------------
(a) Any person whose claim has been denied in whole or in part must
exhaust the administrative review procedures provided in section 15.5 prior to
initiating any claim for judicial review.
(b) No bond or other security shall be required of a member of the
Committee, the Plan Administrator, or any officer or Employee of the Employer to
whom fiduciary responsibilities are allocated by a Named Fiduciary, except as
may be required by ERISA.
(c) Subject to any limitation on the application of this section
15.7(c) pursuant to ERISA, neither the Plan Administrator, nor a member of the
Committee, nor any officer or Employee of the Employer to whom fiduciary
responsibilities are allocated by a Named
<PAGE>
-52-
Fiduciary, shall be liable for any act of omission or commission by himself or
by another person, except for his own individual willful and intentional
malfeasance.
(d) The Plan Administrator or the Committee may, except with respect
to actions under section 15.5, shorten, extend or waive the time (but not beyond
60 days) required by the Plan for filing any notice or other form with the Plan
Administrator or the Committee, or taking any other action under the Plan.
(e) The Plan Administrator or the Committee may direct that the costs
of services provided pursuant to section 15.6, and such other reasonable
expenses as may be incurred in the administration of the Plan, shall be paid out
of the funds of the Plan unless the Employer shall pay them.
(f) Any person, group of persons, committee, corporation or
organization may serve in more than one fiduciary capacity with respect to the
Plan.
(g) Any action taken or omitted by any fiduciary with respect to the
Plan, including any decision, interpretation, claim denial or review on appeal,
shall be conclusive and binding on all interested parties and shall be subject
to judicial modification or reversal only to the extent it is determined by a
court of competent jurisdiction that such action or omission was arbitrary and
capricious and contrary to the terms of the Plan.
ARTICLE XVI
-----------
AMENDMENT, TERMINATION AND TAX QUALIFICATION
--------------------------------------------
SECTION 16.1 AMENDMENT AND TERMINATION BY HOME BANCORP OF ELGIN,
---------------------------------------------------
INC.
- ----
The Employer expects to continue the Plan indefinitely, but
specifically reserves the right, in its sole discretion, at any time, by
appropriate action of the Board, to amend, in whole or in part, any or all of
the provisions of the Plan and to terminate the Plan at any time. Subject to
the provisions of section 16.2, no such amendment or termination shall permit
any part of the Trust Fund to be used for or diverted to purposes other than for
the exclusive benefit of Participants, Former Participants, Beneficiaries or
other persons entitled to benefits, and no such amendment or termination shall
reduce the accrued benefit of any Participant, Former Participant, Beneficiary
or other person who may be entitled to benefits, without his consent. In the
event of a termination or partial termination of the Plan, or in the event of a
complete discontinuance of the Employer's contributions to the Plan, the
Accounts of each affected person shall forthwith become nonforfeitable and shall
be payable in accordance with the provisions of Article XIII.
<PAGE>
-53-
SECTION 16.2 AMENDMENT OR TERMINATION OTHER THAN BY HOME BANCORP OF
ELGIN, INC.
-----------
In the event that a corporation or trade or business other than Home
Bancorp of Elgin, Inc. shall adopt this Plan, such corporation or trade or
business shall, by adopting the Plan, empower Home Bancorp of Elgin, Inc. to
amend or terminate the Plan, insofar as it shall cover employees of such
corporation or trade or business, upon the terms and conditions set forth in
section 16.1; provided, however, that any such corporation or trade or business
may, by action of its board of directors or other governing body, amend or
terminate the Plan, insofar as it shall cover employees of such corporation or
trade or business, at different times and in a different manner. In the event
of any such amendment or termination by action of the board of directors or
other governing body of such a corporation or trade or business, a separate plan
shall be deemed to have been established for the employees of such corporation
or trade or business, and the assets of such plan shall be segregated from the
assets of this Plan at the earliest practicable date and shall be dealt with in
accordance with the documents governing such separate plan.
SECTION 16.3 CONFORMITY TO INTERNAL REVENUE CODE.
-----------------------------------
The Employer has established the Plan with the intent that the Plan
and Trust will at all times be qualified under section 401(a) and exempt under
section 501(a) of the Code and with the intent that contributions under the Plan
will be allowed as deductions in computing the net income of the Employer for
federal income tax purposes, and the provisions of the Plan and Trust Agreement
shall be construed to effectuate such intentions. Accordingly, notwithstanding
anything to the contrary hereinbefore provided, the Plan and the Trust Agreement
may be amended at any time without prior notice to Participants, Former
Participants, Beneficiaries or any other persons entitled to benefits, if such
amendment is deemed by the Board to be necessary or appropriate to effectuate
such intent.
SECTION 16.4 CONTINGENT NATURE OF CONTRIBUTIONS.
----------------------------------
(a) All ESOP Contributions to the Plan are conditioned upon the
issuance by the Internal Revenue Service of a determination that the Plan and
Trust are qualified under section 401(a) of the Code and exempt under section
501(a) of the Code. If the Employer applies to the Internal Revenue Service for
such a determination within 90 days after the date on which it files its federal
income tax return for its taxable year that includes the last day of the Plan
Year in which the Plan is adopted, and if the Internal Revenue Service issues a
determination that the Plan and Trust are not so qualified or exempt, all ESOP
Contributions made by the Employer prior to the date of receipt of such a
determination may, at the election of the Employer, be returned to the Employer
within one year after the date of such determination.
<PAGE>
-54-
(b) All ESOP Contributions and Loan Repayment Contributions to the
Plan are made upon the condition that such ESOP Contributions and Loan Repayment
Contributions will be allowed as a deduction in computing the net income of the
Employer for federal income tax purposes. To the extent that any such deduction
is disallowed, the amount disallowed may, at the election of the Employer, be
returned to the Employer within one year after the deduction is disallowed.
(c) Any contribution to the Plan made by the Employer as a result of a
mistake of fact may, at the election of the Employer, be returned to the
Employer within one year after such contribution is made.
ARTICLE XVII
------------
SPECIAL RULES FOR TOP HEAVY PLAN YEARS
--------------------------------------
SECTION 17.1 IN GENERAL.
----------
As of the Determination Date for each Plan Year, the Plan
Administrator shall determine whether the Plan is a Top Heavy Plan in accordance
with the provisions of this Article XVII. If, as of such Determination Date,
the Plan is a Top Heavy Plan, then the Plan Year immediately following such
Determination Date shall be a Top Heavy Plan Year and the special provisions of
this Article XVII shall be in effect; provided, however, that if, as of the
Determination Date for the Plan Year in which the Effective Date occurs, the
Plan is a Top Heavy Plan, such Plan Year shall be a Top Heavy Plan Year, and the
provisions of this Article XVII shall be given retroactive effect for such Plan
Year.
SECTION 17.2 DEFINITION OF TOP HEAVY PLAN.
----------------------------
(a) Subject to section 17.2(c), the Plan is a Top Heavy Plan if, as
of a Determination Date: (i) it is not a member of a Required Aggregation
Group, and (ii)(A) the sum of the Cumulative Accrued Benefits of all Key
Employees exceeds 60% of (B) the sum of the Cumulative Accrued Benefits of all
Employees (excluding former Key Employees), former Employees (excluding former
Key Employees and other former Employees who have not performed any services for
the Employer or any Affiliated Employer during the immediately preceding five
Plan Years), and their Beneficiaries.
(b) Subject to section 17.2(c), the Plan is a Top Heavy Plan if, as
of a Determination Date: (i) the Plan is a member of a Required Aggregation
Group, and (ii)(A) the sum of the Cumulative Accrued Benefits of all Key
Employees under all plans that are members of the Required Aggregation Group
exceeds 60% of (B) the sum of the Cumulative Accrued Benefits of all Employees
(excluding former Key Employees), former Employees (excluding
<PAGE>
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former Key Employees and other former Employees who have not performed any
services for the Employer or any Affiliated Employer during the immediately
preceding five Plan Years), and their Beneficiaries under all plans that are
members of the Required Aggregation Group.
(c) Notwithstanding sections 17.2(a) and 17.2(b), the Plan is not a
Top Heavy Plan if, as of a Determination Date: (i) the Plan is a member of a
Permissible Aggregation Group, and (ii)(A) the sum of the Cumulative Accrued
Benefits of all Key Employees under all plans that are members of the
Permissible Aggregation Group does not exceed 60% of (B) the sum of the
Cumulative Accrued Benefits of all Employees (excluding former Key Employees),
former Employees (excluding former Key Employees and other former Employees who
have not performed any services for the Employer or any Affiliated Employer
during the immediately preceding five Plan Years), and their Beneficiaries under
all plans that are members of the Permissible Aggregation Group.
SECTION 17.3 DETERMINATION DATE.
------------------
The Determination Date for the Plan Year in which the Effective Date
occurs shall be the last day of such Plan Year, and the Determination Date for
each Plan Year beginning after the Plan Year in which the Effective Date occurs
shall be the last day of the preceding Plan Year. The Determination Date for
any other qualified plan maintained by the Employer for a plan year shall be the
last day of the preceding plan year of each such plan, except that in the case
of the first plan year of such plan, it shall be the last day of such first plan
year.
SECTION 17.4 CUMULATIVE ACCRUED BENEFITS.
---------------------------
(a) An individual's Cumulative Accrued Benefits under this Plan as of
a Determination Date are equal to the sum of:
(i) the balance credited to such individual's Account under this Plan
as of the most recent Valuation Date preceding the Determination Date;
(ii) the amount of any ESOP Contributions or Loan Repayment
Contributions made after such Valuation Date but on or before the
Determination Date; and
(iii) the amount of any distributions of such individual's Cumulative
Accrued Benefits under the Plan during the five year period ending on the
Determination Date.
For purposes of this section 17.4(a), the computation of an individual's
Cumulative Accrued Benefits, and the extent to which distributions, rollovers
and transfers are taken into account, will be made in accordance with section
416 of the Code and the regulations thereunder.
<PAGE>
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(b) For purposes of this Plan, the term "Cumulative Accrued Benefits"
with respect to any other qualified plan, shall mean the cumulative accrued
benefits determined for purposes of section 416 of the Code under the provisions
of such plans.
(c) For purposes of determining the top heavy status of a Required
Aggregation Group or a Permissible Aggregation Group, the Cumulative Accrued
Benefits under this Plan and the Cumulative Accrued Benefits under any other
plan shall be determined as of the Determination Date that falls within the same
calendar year as the Determination Dates for all other members of such Required
Aggregation Group or Permissible Aggregation Group.
SECTION 17.5 KEY EMPLOYEES.
-------------
(a) For purposes of the Plan, the term Key Employee means any employee
or former employee of the Employer or any Affiliated Employer who is at any time
during the current Plan Year or was at any time during the immediately preceding
four Plan Years:
(i) a Five Percent Owner;
(ii) a person who would be described in section 1.24 if the number
"1%" were substituted for the number "5%" in section 1.24 and who has an
annual Total Compensation from the Employer and any Affiliated Employer of
more than $150,000;
(iii) an Officer of the Employer or any Affiliated Employer who has
an annual Total Compensation greater than 50% of the amount in effect under
section 415(b)(1)(A) of the Code for any such Plan Year; or
(iv) one of the ten persons owning the largest interests in the
Employer and having an annual Total Compensation from the Employer or any
Affiliated Employer in excess of the dollar limitation in effect under
section 415(c)(1)(A) of the Code for such Plan Year.
(b) For purposes of section 17.5(a):
(i) for purposes of section 17.5(a)(iii), in the event the Employer or
any Affiliated Employer has more officers than are considered Officers, the
term Key Employee shall mean those officers, up to the maximum number, with
the highest annual compensation in any one of the five consecutive Plan
Years ending on the Determination Date; and
(ii) for purposes of section 17.5(a)(iv), if two or more persons have
equal ownership interests in the Employer, each such person shall be
considered as having a larger ownership interest than any such person with
a lower annual compensation from the Employer or any Affiliated Employer.
<PAGE>
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(c) For purposes of section 17.5(a): (i) a person's compensation from
Affiliated Employers shall be aggregated, but his ownership interests in
Affiliated Employers shall not be aggregated; (ii) an employee shall only be
deemed to be an officer if he has the power and responsibility of a person who
is an officer within the meaning of section 416 of the Code; and (iii) the term
Key Employee shall also include the Beneficiary of a deceased Key Employee.
SECTION 17.6 REQUIRED AGGREGATION GROUP.
--------------------------
For purposes of this Article XVII, a Required Aggregation Group shall
consist of (a) this Plan; (b) any other qualified plans maintained by the
Employer and any Affiliated Employers that cover Key Employees; and (c) any
other qualified plans that are required to be aggregated for purposes of
satisfying the requirements of sections 401(a)(4) or 410(b) of the Code.
SECTION 17.7 PERMISSIBLE AGGREGATION GROUP.
-----------------------------
For purposes of this Article XVII, a Permissible Aggregation Group
shall consist of (a) the Required Aggregation Group and (b) any other qualified
plans maintained by the Employer and any Affiliated Employers; provided,
however, that the Permissible Aggregation Group must satisfy the requirements of
sections 401(a)(4) and 410(b) of the Code.
SECTION 17.8 SPECIAL REQUIREMENTS DURING TOP HEAVY PLAN YEARS.
------------------------------------------------
(a) Notwithstanding any other provision of the Plan to the contrary,
for each Top Heavy Plan Year, in the case of a Participant (other than a Key
Employee) on the last day of such Top Heavy Plan Year who is not also a
participant in another qualified plan which satisfies the minimum contribution
and benefit requirements of section 416 of the Code with respect to such
Participant, the sum of the ESOP Contributions and Loan Repayment Contributions
made with respect to such Participant, when expressed as a percentage of his
Total Compensation for such Top Heavy Plan Year, shall not be less than 3% of
such Participant's Total Compensation for such Top Heavy Plan Year or, if less,
the highest combined rate, expressed as a percentage of Total Compensation at
which ESOP Contributions and Loan Repayment Contributions were made on behalf of
a Key Employee for such Top Heavy Plan Year. The Employer shall make an
additional contribution to the Account of each Participant to the extent
necessary to satisfy the foregoing requirement.
(b) For any Top Heavy Plan Year, the number "1.0" shall be substituted
for the number "1.25" in sections 8.2(c)(iii) and 8.2(c)(iv), except that:
(i) this section 17.8(b) shall not apply to any individual for a Top
Heavy Plan Year that is not a Super Top Heavy Plan Year if the requirements
of
<PAGE>
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section 17.8(a) would be satisfied for such Super Top Heavy Plan Year if
the number "4%" were substituted for the number 3% in section 17.8(a); and
(ii) this section 17.8(b) shall not apply to an individual for a Top
Heavy Plan Year if, during such Top Heavy Plan Year, there are no ESOP
Contributions or Loan Repayment Contributions allocated to such individual
under this Plan, there are no contributions under any other qualified
defined contribution plan maintained by the Employer, and there are no
accruals for such individual under any qualified defined benefit plan
maintained by the Employer.
For purposes of this section 17.8(b), the term Super Top Heavy Plan Year means a
Top Heavy Plan Year in which the Plan would meet the definitional requirements
of sections 17.2(a) or 17.2(b) if the term "90%" were substituted for the term
"60%" in sections 17.2(a), 17.2(b) and 17.2(c).
ARTICLE XVIII
-------------
MISCELLANEOUS PROVISIONS
------------------------
SECTION 18.1 GOVERNING LAW.
-------------
The Plan shall be construed, administered and enforced according to
the laws of the State of Illinois without giving effect to the conflict of laws
principles thereof, except to the extent that such laws are preempted by federal
law.
SECTION 18.2 NO RIGHT TO CONTINUED EMPLOYMENT.
--------------------------------
Neither the establishment of the Plan, nor any provisions of the Plan
or of the Trust Agreement establishing the Trust Fund nor any action of the Plan
Administrator, the Committee or the Trustee, shall be held or construed to
confer upon any Employee any right to a continuation of employment by the
Employer. The Employer reserves the right to dismiss any Employee or otherwise
deal with any Employee to the same extent as though the Plan had not been
adopted.
SECTION 18.3 CONSTRUCTION OF LANGUAGE.
------------------------
Wherever appropriate in the Plan, words used in the singular may be
read in the plural, words used in the plural may be read in the singular, and
words importing the masculine gender may be read as referring equally to the
feminine and the neuter. Any reference to an
<PAGE>
-59-
Article or section number shall refer to an Article or section of the Plan,
unless otherwise indicated.
SECTION 18.4 HEADINGS.
--------
The headings of Articles and sections are included solely for
convenience of reference. If there is any conflict between such headings and
the text of the Plan, the text shall control.
SECTION 18.5 MERGER WITH OTHER PLANS.
-----------------------
The Plan shall not be merged or consolidated with, nor transfer its
assets or liabilities to, any other plan unless each Participant, Former
Participant, Beneficiary and other person entitled to benefits, would (if that
plan then terminated) receive a benefit immediately after the merger,
consolidation or transfer which is equal to or greater than the benefit he would
have been entitled to receive if the Plan had terminated immediately before the
merger, consolidation or transfer.
SECTION 18.6 NON-ALIENATION OF BENEFITS.
--------------------------
(a) Except as provided in section 18.6(b), the right to receive a
benefit under the Plan shall not be subject in any manner to anticipation,
alienation or assignment, nor shall such right be liable for or subject to
debts, contracts, liabilities or torts. Should any Participant, Former
Participant or other person attempt to anticipate, alienate or assign his
interest in or right to a benefit, or should any person claiming against him
seek to subject such interest or right to legal or equitable process, all the
interest or right of such Participant or Former Participant or other person
entitled to benefits in the Plan shall cease, and in that event such interest or
right shall be held or applied, at the direction of the Plan Administrator, for
or to the benefit of such Participant or Former Participant, or other person or
his spouse, children or other dependents in such manner and in such proportions
as the Plan Administrator may deem proper.
(b) This section 18.6 shall not prohibit the Plan Administrator from
recognizing a Domestic Relations Order that is determined to be a Qualified
Domestic Relations Order in accordance with section 18.7.
SECTION 18.7 PROCEDURES INVOLVING DOMESTIC RELATIONS ORDERS.
----------------------------------------------
Upon receiving a Domestic Relations Order, the Plan Administrator
shall segregate in a separate account or in an escrow account or separately
account for the amounts payable to any person pursuant to such Domestic
Relations Order, pending a determination whether such Domestic Relations Order
constitutes a Qualified Domestic Relations Order, and
<PAGE>
-60-
shall give notice of the receipt of the Domestic Relations Order to the
Participant or Former Participant and each other person affected thereby. If,
within 18 months after receipt of such Domestic Relations Order, the Plan
Administrator, a court of competent jurisdiction or another appropriate
authority determines that such Domestic Relations Order constitutes a Qualified
Domestic Relations Order, the Plan Administrator shall direct the Trustee to pay
the segregated amounts (plus any interest thereon) to the person or persons
entitled thereto under the Qualified Domestic Relations Order. If it is
determined that the Domestic Relations Order is not a Qualified Domestic
Relations Order or if no determination is made within the prescribed 18-month
period, the segregated amounts shall be distributed as though the Domestic
Relations Order had not been received, and any later determination that such
Domestic Relations Order constitutes a Qualified Domestic Relations Order shall
be applied only with respect to benefits that remain undistributed on the date
of such determination. The Plan Administrator shall be authorized to establish
such reasonable administrative procedures as he deems necessary or appropriate
to administer this section 18.7. This section 18.7 shall be construed and
administered so as to comply with the requirements of section 401(a)(13) of the
Code.
SECTION 18.8 LEASED EMPLOYEES.
----------------
(a) Subject to section 18.8(b), a leased employee shall be treated as
an Employee for purposes of the Plan. For purposes of this section 18.8, the
term "leased employee" means any person (i) who would not, but for the
application of this section 18.8, be an Employee and (ii) who pursuant to an
agreement between the Employer and any other person ("leasing organization") has
performed for the Employer (or for the Employer and related persons determined
in accordance with section 414(n)(6) of the Code), on a substantially full-time
basis for a period of at least one year, services of a type historically
performed by employees in the business field of the Employer.
(b) For purposes of the Plan:
(i) contributions or benefits provided to the leased employee by the
leasing organization which are attributable to services performed for the
Employer shall be treated as provided by the Employer; and
(ii) section 18.8(a) shall not apply to a leased employee if:
(A) the number of leased employees performing services for the
Employer does not exceed 20% of the number of the Employer's Employees
who are not Highly Compensated Employees; and
(B) such leased employee is covered by a money purchase pension
plan providing (I) a nonintegrated contribution rate of at least 10%
of the leased employee's compensation; (II) immediate participation;
(III) full and immediate vesting; and (IV) coverage for all of the
<PAGE>
-61-
employees of the leasing organization (other than employees who
perform substantially all of their services for the leasing
organization).
SECTION 18.9 STATUS AS AN EMPLOYEE STOCK OWNERSHIP PLAN.
------------------------------------------
It is intended that the Plan constitute an "employee stock ownership
plan," as defined in section 4975(e)(7) of the Code and section 407(d)(6) of
ERISA. The Plan shall be construed and administered to give effect to such
intent.
<PAGE>
EXHIBIT 10.3
HOME BANCORP OF ELGIN, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
______________, 1996 by and between HOME BANCORP OF ELGIN, INC., a publicly held
business corporation organized and operating under the laws of the State of
Delaware and having an office at 16 North Spring Street, Elgin, Illinois 60120-
5569 ("Company") and [EXECUTIVE], an individual residing at
_________________________________________ ("Executive").
W I T N E S S E T H :
-------------------
WHEREAS, Executive currently serves the Company in the capacity of
________________________; and
WHEREAS, effective as of the date of this Agreement, Home Federal
Savings and Loan Association of Elgin ("Association") has converted from a
federal mutual savings and loan association to a federal stock savings and loan
association and has become the wholly owned subsidiary of the Company; and
WHEREAS, the Company desires to assure for itself the continued
availability of Executive's services and the ability of Executive to perform
such services with a minimum of personal distraction in the event of a pending
or threatened Change of Control (as hereinafter defined); and
WHEREAS, Executive is willing to continue to serve the Company on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions hereinafter set forth, the Company and Executive hereby
agree as follows:
SECTION 1. EMPLOYMENT.
----------
The Company agrees to continue to employ Executive, and Executive
hereby agrees to such continued employment, during the period and upon the terms
and conditions set forth in this Agreement.
SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT PERIOD.
-------------------------------------------------------
(a) The terms and conditions of this Agreement shall be and remain in
effect during the period of employment established under this section 2
("Employment Period"). The Employment Period shall be for an initial term of
[_______] years beginning on the date of this Agreement and ending on the
[_____] anniversary date of this Agreement (each, an "Anniversary Date"), plus
such extensions, if any, as are provided by the Board of Directors of the
Company ("Board") pursuant to section 2(b).
Page 1 of 19
<PAGE>
(b) Except as provided in section 2(c), beginning on the date of this
Agreement, the Employment Period shall automatically be extended for one (1)
additional day each day, unless either the Company or Executive elects not to
extend the Agreement further by giving written notice to the other party, in
which case the Employment Period shall end on the [______] anniversary of the
date on which such written notice is given. For all purposes of this Agreement,
the term "Remaining Unexpired Employment Period" as of any date shall mean the
period beginning on such date and ending on: (i) if a notice of non-extension
has been given in accordance with this section 2(b), the [_________] anniversary
of the date on which such notice is given; and (ii) in all other cases, the
[_______] anniversary of the date as of which the Remaining Unexpired Employment
Period is being determined. Upon termination of Executive's employment with the
Company for any reason whatsoever, any daily extensions provided pursuant to
this section 2(b), if not therefore discontinued, shall automatically cease.
(c) Nothing in this Agreement shall be deemed to prohibit the Company
at any time from terminating Executive's employment during the Employment Period
with or without notice for any reason; provided, however, that the relative
rights and obligations of the Company and Executive in the event of any such
termination shall be determined under this Agreement.
SECTION 3. DUTIES.
------
Executive shall serve as [_________] of the Company, having such
power, authority and responsibility and performing such duties as are prescribed
by or under the By-Laws of the Company and as are customarily associated with
such position. Executive shall devote his full business time and attention
(other than during weekends, holidays, approved vacation periods, and periods of
illness or approved leaves of absence) to the business and affairs of the
Company and shall use his best efforts to advance the interests of the Company.
SECTION 4. CASH COMPENSATION.
-----------------
In consideration for the services to be rendered by Executive
hereunder, the Company shall pay to him a salary at an initial annual rate of
_______________________ DOLLARS ($_______), payable in approximately equal
installments in accordance with the Company's customary payroll practices for
senior officers. The Board shall review Executive's annual rate of salary at
such times during the Employment Period as it deems appropriate, but not less
frequently than once every twelve months, and may, in its discretion, approve an
increase therein. In addition to salary, Executive may receive other cash
compensation from the Company for services hereunder at such times, in such
amounts and on such terms and conditions as the Board may determine from time to
time.
SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
-----------------------------------
During the Employment Period, Executive shall be treated as an
employee of the Company and shall be entitled to participate in and receive
benefits under any and all qualified or non-qualified retirement, pension,
savings, profit-sharing or stock bonus plans, any and all group life, health
(including hospitalization, medical and major medical), dental, accident and
Page 2 of 19
<PAGE>
long term disability insurance plans, and any other employee benefit and
compensation plans (including, but not limited to, any incentive compensation
plans or programs, stock option and appreciation rights plans and restricted
stock plans) as may from time to time be maintained by, or cover employees of,
the Company, in accordance with the terms and conditions of such employee
benefit plans and programs and compensation plans and programs and consistent
with the Company's customary practices.
SECTION 6. INDEMNIFICATION AND INSURANCE.
-----------------------------
(a) During the Employment Period and for a period of six (6) years
thereafter, the Company shall cause Executive to be covered by and named as an
insured under any policy or contract of insurance obtained by it to insure its
directors and officers against personal liability for acts or omissions in
connection with service as an officer or director of the Company or service in
other capacities at the request of the Company. The coverage provided to
Executive pursuant to this section 6 shall be of the same scope and on the same
terms and conditions as the coverage (if any) provided to other officers or
directors of the Company.
(b) To the maximum extent permitted under applicable law, during the
Employment Period and for a period of six (6) years thereafter, the Company
shall indemnify Executive against and hold him harmless from any costs,
liabilities, losses and exposures to the fullest extent and on the most
favorable terms and conditions that similar indemnification is offered to any
director or officer of the Company or any subsidiary or affiliate thereof.
SECTION 7. OUTSIDE ACTIVITIES.
------------------
Executive may serve as a member of the boards of directors of such
business, community and charitable organizations as he may disclose to and as
may be approved by the Board (which approval shall not be unreasonably
withheld); provided, however, that such service shall not materially interfere
with the performance of his duties under this Agreement. Executive may also
engage in personal business and investment activities which do not materially
interfere with the performance of his duties hereunder; provided, however, that
such activities are not prohibited under any code of conduct or investment or
securities trading policy established by the Company and generally applicable to
all similarly situated executives. Executive may also serve as an officer or
director of the Association on such terms and conditions as the Company and the
Association may mutually agree upon, and such service shall not be deemed to
materially interfere with Executive's performance of his duties hereunder or
otherwise result in a material breach of this Agreement. If Executive is
discharged or suspended, or is subject to any regulatory prohibition or
restriction with respect to participation in the affairs of the Association, he
shall continue to perform services for the Company in accordance with this
Agreement but shall not directly or indirectly provide services to or
participate in the affairs of the Association in a manner inconsistent with the
terms of such discharge or suspension or any applicable regulatory order.
Page 3 of 19
<PAGE>
SECTION 8. WORKING FACILITIES AND EXPENSES.
-------------------------------
Executive's principal place of employment shall be at the Company's
executive offices at the address first above written, or at such other location
within _________ County at which the Company shall maintain its principal
executive offices, or at such other location as the Company and Executive may
mutually agree upon. The Company shall provide Executive at his principal place
of employment with a private office, secretarial services, an automobile, and
other support services and facilities suitable to his position with the Company
and necessary or appropriate in connection with the performance of his assigned
duties under this Agreement. The Company shall provide to Executive for his
exclusive use an automobile owned or leased by the Company and appropriate to
his position, to be used in the performance of his duties hereunder, including
commuting to and from his personal residence. The Company shall reimburse
Executive for his ordinary and necessary business expenses, including, without
limitation, all expenses associated with his business use of the aforementioned
automobile, fees for memberships in such clubs and organizations as Executive
and the Company shall mutually agree are necessary and appropriate for business
purposes, and his travel and entertainment expenses incurred in connection with
the performance of his duties under this Agreement, in each case upon
presentation to the Company of an itemized account of such expenses in such form
as the Company may reasonably require.
SECTION 9. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.
------------------------------------------------
(a) Executive's shall be entitled to the severance benefits described
herein in the event that his employment with the Company terminates during the
Employment Period under any of the following circumstances:
(i) Executive's voluntary resignation from employment with the Company
within ninety (90) days following:
(A) the failure of the Board to appoint or re-appoint or elect or
re-elect Executive to the position stated in section 3 of this
Agreement (or a more senior office of the Company);
(B) if the Executive is a member of the Board as of the date of
this Agreement, the failure of the stockholders of the Company to
elect or re-elect Executive to the Board or the failure of the Board
(or the nominating committee thereof) to nominate Executive for such
election or re-election;
(C) the expiration of a thirty (30) day period following the date
on which Executive gives written notice to the Company of its material
failure, whether by amendment of the Company's Organization
Certificate or By-laws, action of the Board or the Company's
stockholders or otherwise, to vest in Executive the functions, duties,
or responsibilities prescribed in section 3 of this Agreement, unless,
during such thirty (30) day period, the Company cures such failure in
a manner determined by Executive, in his discretion, to be
satisfactory; or
Page 4 of 19
<PAGE>
(D) the expiration of a thirty (30) day period following the date
on which Executive gives written notice to the Company of its material
breach of any term, condition or covenant contained in this Agreement
(including, without limitation any reduction of Executive's rate of
base salary in effect from time to time and any change in the terms
and conditions of any compensation or benefit program in which
Executive participates which, either individually or together with
other changes, has a material adverse effect on the aggregate value of
his total compensation package), unless, during such thirty (30) day
period, the Company cures such failure in a manner determined by
Executive, in his discretion, to be satisfactory; or
(ii) subject to the provisions of section 10, the termination of
Executive's employment with the Company for any other reason not described
in section 9(a);
(iii) Executive's death; or
(iv) a determination that Executive is eligible for long-term
disability benefits under the Company's long-term disability insurance
program or, if there is no such program, under the federal Social Security
Act;
then, the Company shall provide the benefits and pay to Executive the amounts
described in section 9(b).
(b) Upon the termination of Executive's employment with the Company
under circumstances described in section 9(a) of this Agreement, the Company
shall pay and provide to Executive (or, in the event of his death, to his
estate):
(i) his earned but unpaid compensation as of the date of the
termination of his employment with the Company, such payment to be made at
the time and in the manner prescribed by law applicable to the payment of
wages but in no event later than thirty (30) days after termination of
employment;
(ii) the benefits, if any, to which he is entitled as a former
employee under the employee benefit plans and programs and compensation
plans and programs maintained for the benefit of the Company's officers and
employees;
(iii) continued group life, health (including hospitalization,
medical and major medical), dental, accident and long term disability
insurance benefits, in addition to that provided pursuant to section
9(b)(ii), and after taking into account the coverage provided by any
subsequent employer, if and to the extent necessary to provide for
Executive, for the Remaining Unexpired Employment Period, coverage
equivalent to the coverage to which he would have been entitled under such
plans (as in effect on the date of his termination of employment, or, if
his termination of employment occurs after a Change of Control, on the date
of such Change of Control, whichever benefits are greater), if he had
continued working for the Company during the Remaining Unexpired Employment
Period at the highest annual rate of compensation achieved during that
portion of the Employment Period which is prior to Executive's termination
of employment with the Company;
(iv) within thirty (30) days following his termination of employment
with the Company, a lump sum payment, in an amount equal to the present
value
Page 5 of 19
<PAGE>
of the salary that Executive would have earned if he had continued working
for the Company during the Remaining Unexpired Employment Period at the
highest annual rate of salary achieved during that portion of the
Employment Period which is prior to Executive's termination of employment
with the Company, where such present value is to be determined using a
discount rate equal to the applicable short-term federal rate prescribed
under section 1274(d) of the Internal Revenue Code of 1986 ("Code"),
compounded using the compounding period corresponding to the Company's
regular payroll periods for its officers, such lump sum to be paid in lieu
of all other payments of salary provided for under this Agreement in
respect of the period following any such termination;
(v) within thirty (30) days following his termination of employment
with the Company, a lump sum payment in an amount equal to the excess, if
any, of:
(A) the present value of the aggregate benefits to which he would
be entitled under any and all qualified and non-qualified defined
benefit pension plans maintained by, or covering employees of, the
Company, if he were 100% vested thereunder and had continued working
for the Company during the Remaining Unexpired Employment Period, such
benefits to be determined as of the date of termination of employment
by adding to the service actually recognized under such plans an
additional period equal to the Remaining Unexpired Employment Period
and by adding to the compensation recognized under such plans for the
year in which termination of employment occurs all amounts payable
under sections 9(b)(i), (iv), (vii), (viii) and (ix); over
(B) the present value of the benefits to which he is actually
entitled under such defined benefit pension plans as of the date of
his termination;
where such present values are to be determined using the mortality tables
prescribed under section 415(b)(2)(E)(v) of the Code and a discount rate,
compounded monthly equal to the annualized rate of interest prescribed by
the Pension Benefit Guaranty Corporation for the valuation of immediate
annuities payable under terminating single-employer defined benefit plans
for the month in which Executive's termination of employment occurs
("Applicable PBGC Rate");
(vi) within thirty (30) days following his termination of employment
with the Company, a lump sum payment in an amount equal to the present
value of the additional employer contributions (or if greater in the case
of a leveraged employee stock ownership plan or similar arrangement, the
additional assets allocable to him through debt service, based on the fair
market value of such assets at termination of employment) to which he would
have been entitled under any and all qualified and non-qualified defined
contribution plans maintained by, or covering employees of, the Company, as
if he were 100% vested thereunder and had continued working for the Company
during the Remaining Unexpired Employment Period at the highest annual rate
of compensation achieved during
Page 6 of 19
<PAGE>
that portion of the Employment Period which is prior to the Executive's
termination of employment with the Company, and making the maximum amount
of employee contributions, if any, required under such plan or plans, such
present value to be determined on the basis of a discount rate, compounded
using the compounding period that corresponds to the frequency with which
employer contributions are made to the relevant plan, equal to the
Applicable PBGC Rate;
(vii) the payments that would have been made to Executive under any
cash bonus or long-term or short-term cash incentive compensation plan
maintained by, or covering employees of, the Company if he had continued
working for the Company during the Remaining Unexpired Employment Period
and had earned the maximum bonus or incentive award in each calendar year
that ends during the Remaining Unexpired Employment Period, such payments
to be equal to the product of:
(A) the maximum percentage rate at which an award was ever
available to Executive under such incentive compensation plan;
multiplied by
(B) the salary that would have been paid to Executive during each
such calendar year at the highest annual rate of salary achieved
during that portion of the Employment Period which is prior to
Executive's termination of employment with the Company:
such payments to be made (without discounting for early payment) within
thirty (30) days following Executive's termination of employment;
(viii) at the election of the Company made within thirty (30) days
following his termination of employment with the Company, upon the
surrender of options or appreciation rights issued to Executive under any
stock option and appreciation rights plan or program maintained by, or
covering employees of, the Company, a lump sum payment in an amount equal
to the product of:
(A) the excess of (I) the fair market value of a share of stock
of the same class as the stock subject to the option or appreciation
right, determined as of the date of termination of employment, over
(II) the exercise price per share for such option or appreciation
right, as specified in or under the relevant plan or program;
multiplied by
(B) the number of shares with respect to which options or
appreciation rights are being surrendered.
For purposes of this section 9(b)(viii), Executive shall be deemed fully
vested in all options and appreciation rights under any stock option or
appreciation rights plan or program maintained by, or covering employees
of, the Company, even if he is not vested under such plan or program; and
Page 7 of 19
<PAGE>
(ix) at the election of the Company made within thirty (30) days
following Executive's termination of employment with the Company, upon the
surrender of any shares awarded to Executive under any restricted stock
plan maintained by, or covering employees of, the Company, a lump sum
payment in an amount equal to the product of:
(A) the fair market value of a share of stock of the same class
of stock granted under such plan, determined as of the date of
Executive's termination of employment; multiplied by
(B) the number of shares which are being surrendered.
For purposes of this section 9(b)(ix), Executive shall be deemed fully
vested in all shares awarded under any restricted stock plan maintained by,
or covering employees of, the Company, even if he is not vested under such
plan.
The Company and Executive hereby stipulate that the damages which may be
incurred by Executive following any such termination of employment are not
capable of accurate measurement as of the date first above written and that the
payments and benefits contemplated by this section 9(b) constitute reasonable
damages under the circumstances and shall be payable without any requirement of
proof of actual damage and without regard to Executive's efforts, if any, to
mitigate damages. The Company and Executive further agree that the Company may
condition the payments and benefits (if any) due under sections 9(b)(iii), (iv),
(v), (vi) and (vi) on the receipt of Executive's resignation from any and all
positions which he holds as an officer, director or committee member with
respect to the Company, the Association or any subsidiary or affiliate of either
of them.
SECTION 10. TERMINATION WITHOUT ADDITIONAL COMPANY LIABILITY.
------------------------------------------------
(a) In the event that Executive's employment with the Company shall
terminate during the Employment Period on account of:
(i) the discharge of the Executive for "cause," which, for purposes of
this Agreement shall mean personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease and desist order, or any material breach of this Agreement, in each
case as measured against standards generally prevailing at the relevant
time in the savings and community banking industry; provided, however,
that the Executive shall not be deemed to have been discharged for cause
unless and until the following procedures shall have been followed:
(A) the Board shall adopt a resolution duly approved by
affirmative vote of a majority of the entire Board at a meeting called
and held for such purpose calling for the Executive's termination for
cause and
Page 8 of 19
<PAGE>
setting forth the purported grounds for such termination ("Proposed
Termination Resolution");
(B) as soon as practicable, and in any event within five (5)
days, after adoption of such resolution, the Board shall furnish to
the Executive a written notice of termination which shall be
accompanied by a certified copy of the Proposed Termination Resolution
("Notice of Proposed Termination");
(C) the Executive shall be afforded a reasonable opportunity to
to make oral and written presentations to the members of the Board, on
his own behalf, or through a representative, who may be his legal
counsel, to refute the grounds set forth in the Proposed Termination
Resolution at one or more meetings of the Board to be held no sooner
than fifteen (15) days and no later than thirty (30) after the
Executive's receipt of the Proposed Termination Notice ("Termination
Hearings"); and
(D) within ten (10) days following the end of the Termination
Hearings, the Board shall adopt a resolution duly approved by
affirmative vote of a majority of the entire Board at a meeting called
and held for such purpose (A) finding that in the good faith opinion
of the Board the grounds for termination set forth in the Proposed
Termination Resolution exist and (B) terminating the Executive's
employment ("Termination Resolution"); and
(E) as promptly as practicable, and in any event within one (1)
business day after adoption of the Termination Resolution, the Board
shall furnish to the Exective written notice of termination, which
notice shall include a copy of the Termination Resolution and specify
an effective date of termination that is not later than the date on
which such notice is given;
(ii) Executive's voluntary resignation from employment with the
Company for reasons other than those specified in section 9(a);
(iii) Executive's death; or
(iv) a determination that Executive is eligible for long-term
disability benefits under the Company's long-term disability insurance
program or, if there is no such program, under the federal Social Security
Act;
then the Company shall have no further obligations under this Agreement, other
than the payment to Executive (or, in the event of his death, to his estate) of
his earned but unpaid salary as of the date of the termination of his
employment, and the provision of such other benefits, if any, to which he is
entitled as a former employee under the employee benefit plans and programs and
compensation plans and programs maintained by, or covering employees of, the
Company.
(b) For purposes of section 10(a)(i)(A) or (B), no act or failure to
act, on the part of Executive, shall be considered "willful" unless it is done,
or omitted to be done, by Executive in bad faith or without reasonable belief
that Executive's action or omission was in
Page 9 of 19
<PAGE>
the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based upon
the written advice of counsel for the Company shall be conclusively presumed to
be done, or omitted to be done, by Executive in good faith and in the best
interests of the Company. The cessation of employment of Executive shall not be
deemed to be for "cause" within the meaning of section 10(a)(i) unless and until
there shall have been delivered to Executive a copy of a resolution duly adopted
by the affirmative vote of three-fourths of the non-employee members of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to Executive and Executive is given an
opportunity, together with counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, Executive is guilty of the conduct
described in section 10(a)(i) above, and specifying the particulars thereof in
detail.
SECTION 11. TERMINATION UPON OR FOLLOWING A CHANGE OF CONTROL.
-------------------------------------------------
(a) A Change of Control of the Company ("Change of Control") shall be
deemed to have occurred upon the happening of any of the following events:
(i) approval by the stockholders of the Company of a transaction that
would result in the reorganization, merger or consolidation of the Company,
respectively, with one or more other persons, other than a transaction
following which:
(A) at least 51% of the equity ownership interests of the entity
resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) in
substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51%
of the outstanding equity ownership interests in the Company; and
(B) at least 51% of the securities entitled to vote generally in
the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the securities entitled to vote
generally in the election of directors of the Company;
(ii) the acquisition of all or substantially all of the assets of the
Company or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the outstanding
securities of the Company entitled to vote generally in the election of
directors by any person or by any persons acting in concert, or approval by
the stockholders of the Company of any transaction which would result in
such an acquisition;
Page 10 of 19
<PAGE>
(iii) a complete liquidation or dissolution of the Company, or
approval by the stockholders of the Company of a plan for such liquidation
or dissolution;
(iv) the occurrence of any event if, immediately following such event,
at least 50% of the members of the board of directors of the Company do not
belong to any of the following groups:
(A) individuals who were members of the Board of the Company on
the date of this Agreement; or
(B) individuals who first became members of the Board of the
Company after the date of this Agreement either:
(I) upon election to serve as a member of the Board of
directors of the Company by affirmative vote of three-quarters of
the members of such board, or of a nominating committee thereof,
in office at the time of such first election; or
(II) upon election by the stockholders of the Board to serve
as a member of the board of directors of the Board, but only if
nominated for election by affirmative vote of three-quarters of
the members of the board of directors of the Board, or of a
nominating committee thereof, in office at the time of such first
nomination;
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the
meaning of Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf of the
Board of the Company; or
(v) any event which would be described in section 11(a)(i), (ii),
(iii) or (iv) if the term "Association" were substituted for the term
"Company" therein.
In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, the
Association, or a subsidiary of either of them, by the Company, the Association,
or a subsidiary of either of them, or by any employee benefit plan maintained by
any of them. For purposes of this section 11(a), the term "person" shall have
the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange
Act.
(b) In the event of a Change of Control, Executive shall be entitled
to the payments and benefits contemplated by section 9(b) in the event of his
termination employment
Page 11 of 19
<PAGE>
with the Company under any of the circumstances described in section 9(a) of
this Agreement or under any of the following circumstances:
(i) resignation, voluntary or otherwise, by Executive at any time
during the Employment Period following his demotion, loss of title, office
or significant authority or responsibility, or following any reduction in
any element of his package of compensation and benefits;
(ii) resignation, voluntary or otherwise, by Executive at any time
during the Employment Period following any relocation of his principal
place of employment or any change in working conditions at such principal
place of employment which Executive, in his reasonable discretion,
determines to be embarrassing, derogatory or otherwise adverse;
(iii) resignation, voluntary or otherwise, by Executive at any time
during the Employment Period following the failure of any successor to the
Company in the Change of Control to include Executive in any compensation
or benefit program maintained by it or covering any of its executive
officers, unless Executive is already covered by a substantially similar
plan of the Company which is at least as favorable to him; or
(iv) resignation, voluntary or otherwise, for any reason whatsoever
following the effective date of the Change of Control.
SECTION 12. TAX INDEMNIFICATION.
-------------------
(a) This section 12 shall apply if Executive's employment is
terminated upon or following (i) a Change of Control (as defined in section 11
of this Agreement); or (ii) a change "in the ownership or effective control" of
the Company or the Association or "in the ownership of a substantial portion of
the assets" of the Company or the Association within the meaning of section 280G
of the Code. If this Section 12 applies, then, if for any taxable year,
Executive shall be liable for the payment of an excise tax under section 4999 of
the Code with respect to any payment in the nature of compensation made by the
Company, the Association or any direct or indirect subsidiary or affiliate of
the Company or the Association to (or for the benefit of) Executive, the Company
shall pay to Executive an amount equal to X determined under the following
formula:
X= E x P
---------------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under section 4999
of the Code;
P = the amount with respect to which such excise tax is assessed,
determined without regard to this section 12;
Page 12 of 19
<PAGE>
FI = the highest marginal rate of income tax applicable to Executive
under the Code for the taxable year in question;
SLI = the sum of the highest marginal rates of income tax applicable
to Executive under all applicable state and local laws for the
taxable year in question; and
M = the highest marginal rate of Medicare tax applicable to
Executive under the Code for the taxable year in question.
With respect to any payment in the nature of compensation that is made to (or
for the benefit of) Executive under the terms of this Agreement, or otherwise,
and on which an excise tax under section 4999 of the Code will be assessed, the
payment determined under this section 12(a) shall be made to Executive on the
earlier of (i) the date the Company, the Association or any direct or indirect
subsidiary or affiliate of the Company or the Association is required to
withhold such tax, or (ii) the date the tax is required to be paid by Executive.
(b) Notwithstanding anything in this section 12 to the contrary, in
the event that Executive's liability for the excise tax under section 4999 of
the Code for a taxable year is subsequently determined to be different than the
amount determined by the formula (X + P) x E, where X, P and E have the meanings
provided in section 12(a), Executive or the Company, as the case may be, shall
pay to the other party at the time that the amount of such excise tax is finally
determined, an appropriate amount, plus interest, such that the payment made
under section 12(a), when increased by the amount of the payment made to
Executive under this section 12(b) by the Company, or when reduced by the amount
of the payment made to the Company under this section 12(b) by Executive, equals
the amount that should have properly been paid to Executive under section 12(a).
The interest paid under this section 12(b) shall be determined at the rate
provided under section 1274(b)(2)(B) of the Code. To confirm that the proper
amount, if any, was paid to Executive under this section 12, Executive shall
furnish to the Company a copy of each tax return which reflects a liability for
an excise tax payment made by the Company, at least 20 days before the date on
which such return is required to be filed with the Internal Revenue Service.
SECTION 13. COVENANT NOT TO COMPETE.
-----------------------
Executive hereby covenants and agrees that, in the event of his
termination of employment with the Company prior to the expiration of the
Employment Period, for a period of one (1) year following the date of his
termination of employment with the Company (or, if less, for the Remaining
Unexpired Employment Period), he shall not, without the written consent of the
Company, become an officer, employee, consultant, director or trustee of any
savings bank, savings and loan association, savings and loan holding company,
bank or bank holding company, or any direct or indirect subsidiary or affiliate
of any such entity, that entails working within one hundred (100) miles of the
headquarters of the Company on the date of Executive's termination of
employment; provided, however, that this section 13 shall not apply if
Executive's employment is terminated for the reasons set forth in section 9(a);
and provided, further, that if Executive's employment shall be terminated on
account of disability as provided in section 10(d) of this Agreement, this
section 13 shall not prevent Executive from accepting any position
Page 13 of 19
<PAGE>
or performing any services if (a) he first offers, by written notice, to accept
a similar position with, or perform similar services for, the Company on
substantially the same terms and conditions and (b) the Company declines to
accept such offer within ten (10) days after such notice is given.
SECTION 14. CONFIDENTIALITY.
---------------
Unless he obtains the prior written consent of the Company, Executive
shall keep confidential and shall refrain from using for the benefit of himself,
or any person or entity other than the Company or any entity which is a
subsidiary of the Company or of which the Company is a subsidiary, any material
document or information obtained from the Company, or from its parent or
subsidiaries, in the course of his employment with any of them concerning their
properties, operations or business (unless such document or information is
readily ascertainable from public or published information or trade sources or
has otherwise been made available to the public through no fault of his own)
until the same ceases to be material (or becomes so ascertainable or available);
provided, however, that nothing in this section 14 shall prevent Executive, with
or without the Company's consent, from participating in or disclosing documents
or information in connection with any judicial or administrative investigation,
inquiry or proceeding to the extent that such participation or disclosure is
required under applicable law.
SECTION 15. SOLICITATION.
------------
Executive hereby covenants and agrees that, for a period of one (1)
year following his termination of employment with the Company, he shall not,
without the written consent of the Company, either directly or indirectly:
(a) solicit, offer employment to, or take any other action intended,
or that a reasonable person acting in like circumstances would expect, to
have the effect of causing any officer or employee of the Company, the
Association or any affiliate, as of the date of this Agreement, of either
of them, to terminate his or his employment and accept employment or become
affiliated with, or provide services for compensation in any capacity
whatsoever to, any savings bank, savings and loan association, bank, bank
holding company, savings and loan holding company, or other institution
engaged in the business of accepting deposits and making loans, doing
business within one hundred (100) miles of the headquarters of the Company,
the Association or any affiliate, as of the date of this Agreement, of
either of them;
(b) provide any information, advice or recommendation with respect to
any such officer or employee of any savings bank, savings and loan
association, bank, bank holding company, savings and loan holding company,
or other institution engaged in the business of accepting deposits and
making loans, doing business within one hundred (100) miles of the
headquarters of the Company, the Association, or any affiliate, as of the
date of this Agreement, of either of them, that is intended, or that a
reasonable person acting in like circumstances would expect, to have the
effect of causing any officer or employee
Page 14 of 19
<PAGE>
of the Company, the Association, or any affiliate, as of the date of this
Agreement, of either of them, to terminate his employment and accept
employment or become affiliated with, or provide services for compensation
in any capacity whatsoever to, any savings bank, savings and loan
association, bank, bank holding company, savings and loan holding company,
or other institution engaged in the business of accepting deposits and
making loans, doing business within one hundred (100) miles of the
headquarters of the Company, the Association, or any affiliate, as of the
date of this Agreement, of either of them; or
(c) solicit, provide any information, advice or recommendation or take
any other action intended, or that a reasonable person acting in like
circumstances would expect, to have the effect of causing any customer of
the Company to terminate an existing business or commercial relationship
with the Company.
SECTION 16. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.
-----------------------------------------------
The termination of Executive's employment during the term of this
Agreement or thereafter, whether by the Company or by Executive, shall have no
effect on the rights and obligations of the parties hereto under the Company's
qualified or non-qualified retirement, pension, savings, thrift, profit-sharing
or stock bonus plans, group life, health (including hospitalization, medical and
major medical), dental, accident and long term disability insurance plans or
such other employee benefit plans or programs, or compensation plans or
programs, as may be maintained by, or cover employees of, the Company from time
to time.
SECTION 17. SUCCESSORS AND ASSIGNS.
----------------------
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributees, and
the Company and its successors and assigns, including any successor by merger or
consolidation or a statutory receiver or any other person or firm or corporation
to which all or substantially all of the assets and business of the Company may
be sold or otherwise transferred. Failure of the Company to obtain from any
successor its express written assumption of the Company's obligations hereunder
at least sixty (60) days in advance of the scheduled effective date of any such
succession shall be deemed a material breach of this Agreement.
SECTION 18. NOTICES.
-------
Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five (5) days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
Page 15 of 19
<PAGE>
If to Executive:
______________________
______________________
______________________
If to the Company:
Home Bancorp of Elgin, Inc.
16 North Spring Street
Elgin, Illinois 60120-5569
Attention: Board of Directors -- Non-Employee Directors
--------------------------------------------
with a copy to:
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Attention: W. Edward Bright, Esq.
---------------------
SECTION 19. INDEMNIFICATION FOR ATTORNEYS' FEES.
-----------------------------------
The Company shall indemnify, hold harmless and defend Executive
against reasonable costs, including legal fees, incurred by him in connection
with or arising out of any action, suit or proceeding in which he may be
involved, as a result of his efforts, in good faith, to defend or enforce the
terms of this Agreement; provided, however, that Executive shall have
substantially prevailed on the merits pursuant to a judgment, decree or order of
a court of competent jurisdiction or of an arbitrator in an arbitration
proceeding, or in a settlement. For purposes of this Agreement, any settlement
agreement which provides for payment of any amounts in settlement of the
Company's obligations hereunder shall be conclusive evidence of Executive's
entitlement to indemnification hereunder, and any such indemnification payments
shall be in addition to amounts payable pursuant to such settlement agreement,
unless such settlement agreement expressly provides otherwise.
SECTION 20. SEVERABILITY.
------------
A determination that any provision of this Agreement is invalid or
unenforceable shall not affect the validity or enforceability of any other
provision hereof.
SECTION 21. WAIVER.
------
Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver
Page 16 of 19
<PAGE>
of any provision of this Agreement must be made in writing, designated as a
waiver, and signed by the party against whom its enforcement is sought. Any
waiver or relinquishment of any right or power hereunder at any one or more
times shall not be deemed a waiver or relinquishment of such right or power at
any other time or times.
SECTION 22. COUNTERPARTS.
------------
This Agreement may be executed in two (2) or more counterparts, each
of which shall be deemed an original, and all of which shall constitute one and
the same Agreement.
SECTION 23. GOVERNING LAW.
-------------
This Agreement shall be governed by and construed and enforced in
accordance with the federal laws of the United States and, to the extent that
federal law is inapplicable, in accordance with the laws of the State of
Illinois applicable to contracts entered into and to be performed entirely
within the State of Illinois.
SECTION 24. HEADINGS AND CONSTRUCTION.
-------------------------
The headings of sections in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any section. Any
reference to a section number shall refer to a section of this Agreement, unless
otherwise stated.
SECTION 25. ENTIRE AGREEMENT; MODIFICATIONS.
-------------------------------
This instrument contains the entire agreement of the parties relating
to the subject matter hereof, and supersedes in its entirety any and all prior
agreements, understandings or representations relating to the subject matter
hereof. No modifications of this Agreement shall be valid unless made in
writing and signed by the parties hereto.
SECTION 26. GUARANTEE.
---------
The Company hereby agrees to guarantee the payment by the Association
of any benefits and compensation to which Executive is or may be entitled to
under the terms and conditions of the employment agreement dated as of
______________________, 1996 between the Association and Executive, a copy of
which is attached hereto as Exhibit A ("Association Agreement").
SECTION 27. NON-DUPLICATION.
---------------
In the event that Executive shall perform services for the Association
or any other direct or indirect subsidiary of the Company, any compensation or
benefits provided to Executive by such other employee shall be applied to offset
the obligations of the Company
Page 17 of 19
<PAGE>
hereunder, it being intended that this Agreement set forth the aggregate
compensation and benefits payable to Executive for all services to the Company
and all of its direct or indirect subsidiaries.
SECTION 28. REQUIRED REGULATORY PROVISIONS.
------------------------------
Notwithstanding anything herein contained to the contrary, any
payments to Executive by the Company, whether pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with section
18(k) of the Federal Deposit Insurance Act, 12 U.S.C. (S)1828(k), and any
regulations promulgated thereunder.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and Executive has hereunto set his hand, all as of the day and year
first above written.
________________________________
Executive
ATTEST: HOME BANCORP OF ELGIN, INC.
By __________________________
Secretary By _______________________________
Name:
Title:
[Seal]
Page 18 of 19
<PAGE>
STATE OF ILLINOIS )
: ss.:
COUNTY OF )
On this ________ day of ____________________, 1996, before me
personally came __________________, to me known, and known to me to be the
individual described in the foregoing instrument, who, being by me duly sworn,
did depose and say that he resides at the address set forth in said instrument,
and that he signed his name to the foregoing instrument.
______________________________
Notary Public
STATE OF ILLINOIS )
: ss.:
COUNTY OF )
On this ________ day of ____________________, 1996, before me
personally came ___________, to me known, who, being by me duly sworn, did
depose and say that he resides at
______________________________________________, that he is a member of the Board
of Directors of HOME BANCORP OF ELGIN, INC., the Delaware corporation described
in and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such seal; that it was
so affixed by order of the Board of Directors of said corporation; and that he
signed his name thereto by like order.
___________________________
Notary Public
Page 19 of 19
<PAGE>
EXHIBIT 10.4
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
_______________ by and between HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF
ELGIN, a savings and loan association organized and operating under the federal
laws of the United States and having an office at 16 Spring Street, Elgin,
Illinois 60120 ("Association") and [EXECUTIVE], an individual residing at
_________________________________________ ("Executive").
W I T N E S S E T H :
-------------------
WHEREAS, Executive currently serves the Association in the capacity of
[___________]; and
WHEREAS, effective as of the date of this Agreement, the Association
has converted from a federal mutual savings and loan association to a federal
stock savings and loan association and has become the wholly owned subsidiary of
Home Bancorp of Elgin, Inc., a publicly held Delaware corporation ("Holding
Company"); and
WHEREAS, the Association desires to assure for itself the continued
availability of Executive's services and the ability of Executive to perform
such services with a minimum of personal distraction in the event of a pending
or threatened Change of Control (as hereinafter defined); and
WHEREAS, Executive is willing to continue to serve the Association on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions hereinafter set forth, the Association and Executive
hereby agree as follows:
SECTION 1. EMPLOYMENT.
----------
The Association agrees to continue to employ Executive, and Executive
hereby agrees to such continued employment, during the period and upon the terms
and conditions set forth in this Agreement.
SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT PERIOD.
-------------------------------------------------------
(a) The terms and conditions of this Agreement shall be and remain in
effect during the period of employment established under this section 2
("Employment Period"). The Employment Period shall be for an initial term of
three years beginning on the date of this Agreement. Prior to the first
anniversary of the date of this Agreement and on each anniversary date
thereafter (each, an "Anniversary Date"), the Board of Directors of the
Association ("Board") shall review the terms of this Agreement and Executive's
performance of services
Page 1 of 19
<PAGE>
hereunder and may, in the absence of objection from Executive, approve an
extension of the Employment Agreement. In such event, the Employment Agreement
shall be extended to the third anniversary of the relevant Anniversary Date.
(b) For all purposes of this Agreement, the term "Remaining Unexpired
Employment Period" as of any date shall mean the period beginning on such date
and ending on the Anniversary Date on which the Employment Period (as extended
pursuant to section 2(a) of this Agreement) is then scheduled to expire.
(c) Nothing in this Agreement shall be deemed to prohibit the
Association at any time from terminating Executive's employment during the
Employment Period with or without notice for any reason; provided, however, that
the relative rights and obligations of the Association and Executive in the
event of any such termination shall be determined under this Agreement.
SECTION 3. DUTIES.
------
Executive shall serve as [___________________] of the Association,
having such power, authority and responsibility and performing such duties as
are prescribed by or under the By-Laws of the Association and as are customarily
associated with such position. Executive shall devote his full business time
and attention (other than during weekends, holidays, approved vacation periods,
and periods of illness or approved leave of absence) to the business and affairs
of the Association and shall use his best efforts to advance the interests of
the Association.
SECTION 4. CASH COMPENSATION.
-----------------
In consideration for the services to be rendered by Executive
hereunder, the Association shall pay to him a salary at an initial annual rate
of [______________________] ($____________), payable in approximately equal
installments in accordance with the Association's customary payroll practices
for senior officers. The Board shall review Executive's annual rate of salary
at such times as it deems appropriate, but not less frequently than once every
twelve months, and may, in its discretion, approve an increase therein. In
addition to salary, Executive may receive other cash compensation from the
Association for services hereunder at such times, in such amounts and on such
terms and conditions as the Board may determine from time to time.
SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
-----------------------------------
During the Employment Period, Executive shall be treated as an
employee of the Association and shall be eligible to participate in and receive
benefits under any and all qualified or non-qualified retirement, pension,
savings, profit-sharing or stock bonus plans, any and all group life, health
(including hospitalization, medical and major medical), dental, accident and
long term disability insurance plans, and any other employee benefit and
compensation plans (including, but not limited to, any incentive compensation
plans or programs, stock option and appreciation rights plans and restricted
stock plans) as may from time to time be maintained by,
Page 2 of 19
<PAGE>
or cover employees of, the Association, in accordance with the terms and
conditions of such employee benefit plans and programs and compensation plans
and programs and consistent with the Association's customary practices.
SECTION 6. INDEMNIFICATION AND INSURANCE.
-----------------------------
(a) During the Employment Period and for a period of six (6) years
thereafter, the Association shall cause Executive to be covered by and named as
an insured under any policy or contract of insurance obtained by it to insure
its directors and officers against personal liability for acts or omissions in
connection with service as an officer or director of the Association or service
in other capacities at the request of the Association. The coverage provided to
Executive pursuant to this section 6 shall be of the same scope and on the same
terms and conditions as the coverage (if any) provided to other officers or
directors of the Association.
(b) To the maximum extent permitted under applicable law, during the
Employment Period and for a period six (6) years thereafter, the Association
shall indemnify, and shall cause its subsidiaries and affiliates to indemnify
Executive against and hold him harmless from any costs, liabilities, losses and
exposures to the fullest extent and on the most favorable terms and conditions
that similar indemnification is offered to any director or officer of the
Association or any subsidiary or affiliate thereof. This section 6(b) shall not
be applicable where section 18 is applicable.
SECTION 7. OUTSIDE ACTIVITIES.
------------------
Executive may serve as a member of the boards of directors of such
business, community and charitable organizations as he may disclose to and as
may be approved by the Board (which approval shall not be unreasonably
withheld); provided, however, that such service shall not materially interfere
with the performance of his duties under this Agreement. Executive may also
engage in personal business and investment activities which do not materially
interfere with the performance of his duties hereunder; provided, however, that
such activities are not prohibited under any code of conduct or investment or
securities trading policy established by the Association and generally
applicable to all similarly executives. Executive may also serve as an officer
or director of the Holding Company on terms and conditions as the Association
and the Holding Company may mutually agree upon, and such service shall not be
deemed to materially interfere with Executive's performance of his duties
hereunder or otherwise to result in a material breach of this Agreement.
SECTION 8. WORKING FACILITIES AND EXPENSES.
-------------------------------
Executive's principal place of employment shall be at the
Association's executive offices at the address first above written, or at such
other location within [___________] County at which the Association shall
maintain its principal executive offices, or at such other location as the
Association and Executive may mutually agree upon. The Association shall
provide Executive at his principal place of employment with a private office,
secretarial services and other support services and facilities suitable to his
position with the Association and necessary or
Page 3 of 19
<PAGE>
appropriate in connection with the performance of his assigned duties under this
Agreement. The Association shall provide to Executive for his exclusive use an
automobile owned or leased by the Association and appropriate to his position,
to be used in the performance of his duties hereunder, including commuting to
and from his personal residence. The Association shall reimburse Executive for
his ordinary and necessary business expenses, including, without limitation, all
expenses associated with his business use of the aforementioned automobile, fees
for memberships in such clubs and organizations as Executive and the Association
shall mutually agree are necessary and appropriate for business purposes, and
his travel and entertainment expenses incurred in connection with the
performance of his duties under this Agreement, in each case upon presentation
to the Association of an itemized account of such expenses in such form as the
Association may reasonably require.
SECTION 9. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.
-------------------------------------------------
(a) Executive's shall be entitled to the severance benefits described
herein in the event that his employment with the Association terminates during
the Employment Period under any of the following circumstances:
(i) Executive's voluntary resignation from employment with the
Association within ninety (90) days following:
(A) the failure of the Board to appoint or re-appoint or elect or
re-elect Executive to the office described in section 3 of this
Agreement (or a more senior office) of the Association;
(B) the failure of the stockholders of the Association to elect
or re-elect Executive or the failure of the Board (or the nominating
committee thereof) to nominate Executive for such election or re-
election;
(C) the expiration of a thirty (30) day period following the date
on which Executive gives written notice to the Association of its
material failure, whether by amendment of the Association's
Organization Certificate or By-laws, action of the Board or the
Association's stockholders or otherwise, to vest in Executive the
functions, duties, or responsibilities prescribed in section 3 of this
Agreement, unless, during such thirty (30) day period, the Association
fully cures such failure;
(D) the expiration of a thirty (30) day period following the date
on which Executive gives written notice to the Association of its
material breach of any term, condition or covenant contained in this
Agreement (including, without limitation any reduction of Executive's
rate of base salary in effect from time to time and any change in the
terms and conditions of any compensation or benefit program in which
Executive participates which, alone together with other changes, has a
material adverse effect on the aggregate value of his total
compensation package), unless, during such thirty (30) day period, the
Association fully cures such failure; or
Page 4 of 19
<PAGE>
(ii) the termination of Executive's employment with the Association
for any other reason not described in section 10(a);
then, subject to section 25, the Association shall provide the benefits and pay
to Executive the amounts described in section 9(b).
(b) Upon the termination of Executive's employment with the
Association under circumstances described in section 9(a) of this Agreement, the
Association shall pay and provide to Executive (or, in the event of his death,
to his estate):
(i) his earned but unpaid compensation (including, without limitation,
all items which constitute wages under applicable law and the payment of
which is not otherwise provided for under this section 9(b)) as of the date
of the termination of his employment with the Association, such payment to
be made at the time and in the manner prescribed by law applicable to the
payment of wages but in no event later than thirty (30) days after
termination of employment;
(ii) the benefits, if any, to which he is entitled as a former
employee under the employee benefit plans and programs and compensation
plans and programs maintained for the benefit of the Association's officers
and employees;
(iii) continued group life, health (including hospitalization,
medical and major medical), dental, accident and long term disability
insurance benefits, in addition to that provided pursuant to section
9(b)(ii), and after taking into account the coverage provided by any
subsequent employer, if and to the extent necessary to provide for
Executive, for the Remaining Unexpired Employment Period, coverage
equivalent to the coverage to which he would have been entitled under such
plans (as in effect on the date of his termination of employment, or, if
his termination of employment occurs after a Change of Control, on the date
of such Change of Control, whichever benefits are greater) if he had
continued working for the Association during the Remaining Unexpired
Employment Period at the highest annual rate of compensation achieved
during that portion of the Employment Period which is prior to Executive's
termination of employment with the Association;
(iv) within thirty (30) days following his termination of employment
with the Association, a lump sum payment, in an amount equal to the present
value of the salary that Executive would have earned if he had continued
working for the Association during the Remaining Unexpired Employment
Period at the highest annual rate of salary achieved during that portion of
the Employment Period which is prior to Executive's termination of
employment with the Association, where such present value is to be
determined using a discount rate equal to the applicable short-term federal
rate prescribed under section 1274(d) of the Internal Revenue Code of 1986
("Code"), compounded using the compounding period corresponding to the
Association's regular payroll periods for its officers, such lump sum to be
paid in lieu of all other payments of salary provided for under this
Agreement in respect of the period following any such termination;
Page 5 of 19
<PAGE>
(v) within thirty (30) days following his termination of employment
with the Association, a lump sum payment in an amount equal to the excess,
if any, of:
(A) the present value of the aggregate benefits to which he would
be entitled under any and all qualified and non-qualified defined
benefit pension plans maintained by, or covering employees of, the
Association) if he were 100% vested thereunder and had continued
working for the Association during the Remaining Unexpired Employment
Period (such benefits to be determined as of the date of termination
of employment by adding to the service actually recognized under such
plans an additional period equal to the Remaining Unexpired Employment
Period and by adding to the compensation recognized under such plans
for the year in which termination of employment occurs all amounts
payable under sections 9(b)(i), (iv), (vii), (viii) and (ix); over
(B) the present value of the benefits to which he is actually
entitled under such defined benefit pension plans as of the date of
his termination;
where such present values are to be determined using the mortality tables
prescribed under section 415(b)(2)(E)(v) of the Code and a discount rate,
compounded monthly, equal to the annualized rate of interest prescribed by
the Pension Benefits Guaranty Corporation for the valuation of immediate
annuities payable under terminating single-employer defined benefit plans
for the month in which Executive's termination of employment occurs
("Applicable PBGC Rate").
(vi) within thirty (30) days following his termination of employment
with the Association, a lump sum payment in an amount equal to the present
value of the additional employer contributions (or if greater in the case
of a leveraged employee stock ownership plan or similar arrangement, the
additional assets allocable to him through debt service, based on the fair
market value of such assets at termination of employment) to which he would
have been entitled under any and all qualified and non-qualified defined
contribution plans maintained by, or covering employees of, the
Association, if he were 100% vested thereunder and had continued working
for the Association during the Remaining Unexpired Employment Period at the
highest annual rate of compensation achieved during that portion of the
Employment Period which is prior to Executive's termination of employment
with the Association, and making the maximum amount of employee
contributions, if any, required under such plan or plans, such present
value to be determined on the basis of a discount rate, compounded using
the compounding period that corresponds to the frequency with which
employer contributions are made to the relevant plan, equal to the
Applicable PBGC Rate;
(vii) the payments that would have been made to Executive under any
cash bonus or long-term or short-term cash incentive compensation plan
maintained by, or covering employees of, the Association if he had
continued working
Page 6 of 19
<PAGE>
for the Association during the Remaining Unexpired Employment Period and
had earned the maximum bonus or incentive award in each calendar year that
ends during the Remaining Unexpired Employment Period, such payments to be
equal to the product of:
(A) the maximum percentage rate at which an award was ever
available to Executive under such incentive compensation plan;
multiplied by
(B) the salary that would have been paid to Executive during each
such calendar year at the highest annual rate of salary achieved
during that portion of the Employment Period which is prior to
Executive's termination of employment with the Association:
such payments to be made (without discounting for early payment) within
thirty (30) days following Executive's termination of employment;
(viii) at the election of the Association made within thirty (30)
days following his termination of employment with the Association, upon the
surrender of options or appreciation rights issued to Executive under any
stock option and appreciation rights plan or program maintained by, or
covering employees of, the Association, a lump sum payment in an amount
equal to the product of:
(A) the excess of (I) the fair market value of a share of stock
of the same class as the stock subject to the option or appreciation
right, determined as of the date of termination of employment, over
(II) the exercise price per share for such option or appreciation
right, as specified in or under the relevant plan or program;
multiplied by
(B) the number of shares with respect to which options or
appreciation rights are being surrendered.
For purposes of this section 9(b)(viii), Executive shall be deemed fully
vested in all options and appreciation rights under any stock option or
appreciation rights plan or program maintained by, or covering employees
of, the Association, even if he is not vested under such plan or program;
(ix) at the election of the Association made within thirty (30) days
following Executive's termination of employment with the Association, upon
the surrender of any shares awarded to Executive under any restricted stock
plan maintained by, or covering employees of, the Association, a lump sum
payment in an amount equal to the product of:
(A) the fair market value of a share of stock of the same class
of stock granted under such plan, determined as of the date of
Executive's termination of employment; multiplied by
(B) the number of shares which are being surrendered.
Page 7 of 19
<PAGE>
For purposes of this section 9(b)(ix), Executive shall be deemed fully
vested in all shares awarded under any restricted stock plan maintained by,
or covering employees of, the Association, even if he is not vested under
such plan.
The Association and Executive hereby stipulate that the damages which may be
incurred by Executive following any such termination of employment are not
capable of accurate measurement as of the date first above written and that the
payments and benefits contemplated by this section 9(b) constitute reasonable
damages under the circumstances and shall be payable without any requirement of
proof of actual damage and without regard to Executive's efforts, if any, to
mitigate damages. The Association and Executive further agree that the
Association may condition the payments and benefits (if any) due under sections
9(b)(iii), (iv), (v), (vi) and (vi) on the receipt of Executive's resignation
from any and all positions which he holds as an officer, director or committee
member with respect to the Association, the Holding Company or any subsidiary or
affiliate of either of them.
SECTION 10. TERMINATION WITHOUT ADDITIONAL ASSOCIATION LIABILITY.
----------------------------------------------------
In the event that Executive's employment with the Association shall
terminate during the Employment Period on account of:
(a) the discharge of the Executive for "cause," which, for purposes of
this Agreement shall mean personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease and desist order, or any material breach of this Agreement, in each
case as measured against standards generally prevailing at the relevant
time in the savings and community banking industry; provided, however,
that the Executive shall not be deemed to have been discharged for cause
unless and until the following procedures shall have been followed:
(i) the Board shall adopt a resolution duly approved by
affirmative vote of a majority of the entire Board at a meeting called
and held for such purpose calling for the Executive's termination for
cause and setting forth the purported grounds for such termination
("Proposed Termination Resolution");
(ii) as soon as practicable, and in any event within five (5)
days, after adoption of such resolution, the Board shall furnish to
the Executive a written notice of termination which shall be
accompanied by a certified copy of the Proposed Termination Resolution
("Notice of Proposed Termination");
(iii) the Executive shall be afforded a reasonable opportunity
to to make oral and written presentations to the members of the Board,
on his own behalf, or through a representative, who may be his legal
counsel, to refute the grounds set forth in the Proposed Termination
Resolution at
Page 8 of 19
<PAGE>
one or more meetings of the Board to be held no sooner than fifteen
(15) days and no later than thirty (30) after the Executive's receipt
of the Proposed Termination Notice ("Termination Hearings"); and
(iv) within ten (10) days following the end of the Termination
Hearings, the Board shall adopt a resolution duly approved by
affirmative vote of a majority of the entire Board at a meeting called
and held for such purpose (A) finding that in the good faith opinion
of the Board the grounds for termination set forth in the Proposed
Termination Resolution exist and (B) terminating the Executive's
employment ("Termination Resolution"); and
(v) as promptly as practicable, and in any event within one (1)
business day after adoption of the Termination Resolution, the Board
shall furnish to the Exective written notice of termination, which
notice shall include a copy of the Termination Resolution and specify
an effective date of termination that is not later than the date on
which such notice is given;
(b) Executive's voluntary resignation from employment with the
Association for reasons other than those specified in section 9(a)(i);
(c) Executive's death; or
(d) a determination that Executive is eligible for long-term
disability benefits under the Association's long-term disability insurance
program or, if there is no such program, under the federal Social Security
Act;
then the Association shall have no further obligations under this
Agreement, other than the payment to Executive (or, in the event of his
death, to his estate) of his earned but unpaid salary as of the date of the
termination of his employment, and the provision of such other benefits, if
any, to which he is entitled as a former employee under the employee
benefit plans and programs and compensation plans and programs maintained
by, or covering employees of, the Association.
(b) For purposes of section 10(a)(i)(A) or (B), no act or failure to
act, on the part of Executive, shall be considered "willful" unless it is done,
or omitted to be done, by Executive in bad faith or without reasonable belief
that Executive's action or omission was in the best interests of the Company.
Any act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or based upon the written advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by
Executive in good faith and in the best interests of the Company. The cessation
of employment of Executive shall not be deemed to be for "cause" within the
meaning of section 10(a)(i) unless and until there shall have been delivered to
Executive a copy of a resolution duly adopted by the affirmative vote of three-
fourths of the non-employee members of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to
Executive and Executive is given an opportunity, together with counsel, to be
heard before the Board), finding that, in the good faith opinion of the Board,
Executive is guilty of the conduct described in section 10(a)(i) above, and
specifying the particulars thereof in detail.
Page 9 of 19
<PAGE>
SECTION 11. TERMINATION UPON OR FOLLOWING A CHANGE OF CONTROL.
-------------------------------------------------
(a) A Change of Control of the Association ("Change of Control") shall
be deemed to have occurred upon the happening of any of the following events:
(i) approval by the stockholders of the Association of a transaction
that would result in the reorganization, merger or consolidation of the
Association, respectively, with one or more other persons, other than a
transaction following which:
(A) at least 51% of the equity ownership interests of the entity
resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) in
substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51%
of the outstanding equity ownership interests in the Association; and
(B) at least 51% of the securities entitled to vote generally in
the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the securities entitled to vote
generally in the election of directors of the Association;
(ii) the acquisition of all or substantially all of the assets of the
Association or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the outstanding
securities of the Association entitled to vote generally in the election of
directors by any person or by any persons acting in concert, or approval by
the stockholders of the Association of any transaction which would result
in such an acquisition; or
(iii) a complete liquidation or dissolution of the Association, or
approval by the stockholders of the Association of a plan for such
liquidation or dissolution; or
(iv) the occurrence of any event if, immediately following such event,
at least 50% of the members of the board of directors of the Association do
not belong to any of the following groups:
(A) individuals who were members of the Board of the Association
on the date of this Agreement; or
Page 10 of 19
<PAGE>
(B) individuals who first became members of the Board of the
Association after the date of this Agreement either:
(I) upon election to serve as a member of the Board of
directors of the Association by affirmative vote of three-
quarters of the members of such board, or of a nominating
committee thereof, in office at the time of such first election;
or
(II) upon election by the stockholders of the Board to serve
as a member of the board of directors of the Board, but only if
nominated for election by affirmative vote of three-quarters of
the members of the board of directors of the Board, or of a
nominating committee thereof, in office at the time of such first
nomination;
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the
meaning of Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf of the
Board of the Association;
(iv) any event which would be described in section 11(a)(i), (ii),
(iii) or (iv) if the term "Holding Company" were substituted for the term
"Association" therein.
In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Holding Company, the
Association, or a subsidiary of either of them, by the Holding Company, the
Association, or a subsidiary of either of them, or by any employee benefit plan
maintained by any of them. For purposes of this section 11 the term "person"
shall have the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the
Exchange Act.
(b) In the event of a Change of Control, Executive shall be entitled
to the payments and benefits contemplated by section 9(b) in the event of his
termination employment with the Association under any of the circumstances
described in section 9(a) of this Agreement or under any of the following
circumstances:
(i) resignation, voluntary or otherwise, by Executive at any time
during the Employment Period and within ninety (90) days following his
demotion, loss of title, office or significant authority or responsibility,
or following any reduction in any element of his package of compensation
and benefits;
(ii) resignation, voluntary or otherwise, by Executive at any time
during the Employment Period and within ninety (90) days following any
relocation of his principal place of employment or any change in working
conditions at such principal place of employment which is embarrassing,
derogatory or otherwise materially adverse;
Page 11 of 19
<PAGE>
(iii) resignation, voluntary or otherwise, by Executive at any time
during the Employment Period following the failure of any successor to the
Association in the Change of Control to include Executive in any
compensation or benefit program maintained by it or covering any of its
executive officers, unless Executive is already covered by a substantially
similar plan of the Association which is at least as favorable to him; or
(iv) resignation, voluntary or otherwise, for any reason whatsoever
following the expiration of a transition period of thirty days beginning on
the effective date of the Change of Control (or such longer period, not to
exceed ninety (90) days beginning on the effective date of the Change in
Control, as the Association or its successor may reasonably request) to
facilitate a transfer of management responsibilities.
SECTION 12. COVENANT NOT TO COMPETE.
-----------------------
Executive hereby covenants and agrees that, in the event of his
termination of employment with the Association prior to the expiration of the
Employment Period, for a period of one (1) year following the date of his
termination of employment with the Association (or, if less, for the Remaining
Unexpired Employment Period), he shall not, without the written consent of the
Association, become an officer, employee, consultant, director or trustee of any
savings bank, savings and loan association, savings and loan holding company,
bank or bank holding company, or any direct or indirect subsidiary or affiliate
of any such entity, that entails working within one hundred (100) miles of the
headquarters of the Association on the date of Executive's termination of
employment; provided, however, that this section 12 shall not apply if
Executive's employment is terminated for the reasons set forth in section 9(a);
and provided, further, that if Executive's employment shall be terminated on
account of disability as provided in section 9(d) of this Agreement, this
section 10 shall not prevent Executive from accepting any position or performing
any services if (a) he first offers, by written notice, to accept a similar
position with, or perform similar services for, the Association on substantially
the same terms and conditions and (b) the Association declines to accept such
offer within ten (10) days after such notice is given.
SECTION 13. CONFIDENTIALITY.
---------------
Unless he obtains the prior written consent of the Association,
Executive shall keep confidential and shall refrain from using for the benefit
of himself, or any person or entity other than the Association or any entity
which is a subsidiary of the Association or of which the Association is a
subsidiary, any material document or information obtained from the Association,
or from its parent or subsidiaries, in the course of his employment with any of
them concerning their properties, operations or business (unless such document
or information is readily ascertainable from public or published information or
trade sources or has otherwise been made available to the public through no
fault of his own) until the same ceases to be material (or becomes so
ascertainable or available); provided, however, that nothing in this section 13
shall prevent Executive, with or without the Association's consent, from
participating in or disclosing
Page 12 of 19
<PAGE>
documents or information in connection with any judicial or administrative
investigation, inquiry or proceeding to the extent that such participation or
disclosure is required under applicable law.
SECTION 14. SOLICITATION.
------------
Executive hereby covenants and agrees that, for a period of one (1)
year following his termination of employment with the Association, he shall not,
without the written consent of the Association, either directly or indirectly:
(a) solicit, offer employment to, or take any other action intended,
or that a reasonable person acting in like circumstances would expect, to
have the effect of causing any officer or employee of the Association, the
Holding Company or any affiliate, as of the date of this Agreement, of
either of them to terminate his employment and accept employment or become
affiliated with, or provide services for compensation in any capacity
whatsoever to, any savings bank, savings and loan association, bank, bank
holding company, savings and loan holding company, or other institution
engaged in the business of accepting deposits and making loans, doing
business within one hundred (100) miles of the headquarters of the
Association, the Holding Company or any affiliate, as of the date of this
Agreement, of either of them;
(b) provide any information, advice or recommendation with respect to
any such officer or employee of any savings bank, savings and loan
association, bank, bank holding company, savings and loan holding company,
or other institution engaged in the business of accepting deposits and
making loans, doing business within one hundred (100) miles of the
headquarters of the Association, the Holding Company or any affiliate, as
of the date of this Agreement, of either of them that is intended, or that
a reasonable person acting in like circumstances would expect, to have the
effect of causing any officer or employee of the Association, the Holding
Company or any affiliate, as of the date of this Agreement, of either of
them to terminate his employment and accept employment or become affiliated
with, or provide services for compensation in any capacity whatsoever to,
any savings bank, savings and loan association, bank, bank holding company,
savings and loan holding company, or other institution engaged in the
business of accepting deposits and making loans, doing business within one
hundred (100) miles of the headquarters of the Association, the Holding
Company, or any affiliate, as of the date of this Agreement, of either of
them;
(c) solicit, provide any information, advice or recommendation or take
any other action intended, or that a reasonable person acting in like
circumstances would expect, to have the effect of causing any customer of
the Association to terminate an existing business or commercial
relationship with the Association.
Page 13 of 19
<PAGE>
SECTION 15. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.
-----------------------------------------------
The termination of Executive's employment during the term of this
Agreement or thereafter, whether by the Association or by Executive, shall have
no effect on the rights and obligations of the parties hereto under the
Association's qualified or non-qualified retirement, pension, savings, thrift,
profit-sharing or stock bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long term
disability insurance plans or such other employee benefit plans or programs, or
compensation plans or programs, as may be maintained by, or cover employees of,
the Association from time to time.
SECTION 16. SUCCESSORS AND ASSIGNS.
----------------------
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributees, and
the Association and its successors and assigns, including any successor by
merger or consolidation or any other person or firm or corporation to which all
or substantially all of the assets and business of the Association may be sold
or otherwise transferred. Failure of the Association to obtain from any
successor its express written assumption of the Association's obligations
hereunder at least sixty (60) days in advance of the scheduled effective date of
any such succession shall be deemed a material breach of this Agreement unless
cured within ten (10) days after notice thereof by Executive to the Association.
SECTION 17. NOTICES.
-------
Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five (5) days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to Executive:
______________________
______________________
______________________
Page 14 of 19
<PAGE>
If to the Association:
Home Federal Savings and Loan Association of Elgin
16 Spring Street
Elgin, Illinois 60120
Attention: Board of Directors -- Non-Employee Directors
--------------------------------------------
with a copy to:
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Attention: W. Edward Bright, Esq.
---------------------
SECTION 18. INDEMNIFICATION FOR ATTORNEYS' FEES.
-----------------------------------
The Association shall indemnify, hold harmless and defend Executive
against reasonable costs, including legal fees, incurred by him in connection
with or arising out of any action, suit or proceeding in which he may be
involved, as a result of his efforts, in good faith, to defend or enforce the
terms of this Agreement; provided, however, that Executive shall have
substantially prevailed on the merits pursuant to a judgment, decree or order of
a court of competent jurisdiction or of an arbitrator in an arbitration
proceeding, or in a settlement. For purposes of this Agreement, any settlement
agreement which provides for payment of any amounts in settlement of the
Association's obligations hereunder shall be conclusive evidence of Executive's
entitlement to indemnification hereunder, and any such indemnification payments
shall be in addition to amounts payable pursuant to such settlement agreement,
unless such settlement agreement expressly provides otherwise.
SECTION 19. SEVERABILITY.
------------
A determination that any provision of this Agreement is invalid or
unenforceable shall not affect the validity or enforceability of any other
provision hereof.
SECTION 20. WAIVER.
------
Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be
made in writing, designated as a waiver, and signed by the party against whom
its enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
Page 15 of 19
<PAGE>
SECTION 21. COUNTERPARTS.
------------
This Agreement may be executed in two (2) or more counterparts, each
of which shall be deemed an original, and all of which shall constitute one and
the same Agreement.
SECTION 22. GOVERNING LAW.
-------------
This Agreement shall be governed by and construed and enforced in
accordance with the federal laws of the United States and, to the extent that
federal law is inapplicable, in accordance with the laws of the State of
Illinois applicable to contracts entered into and to be performed entirely
within the State of Illinois.
SECTION 23. HEADINGS AND CONSTRUCTION.
-------------------------
The headings of sections in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any section. Any
reference to a section number shall refer to a section of this Agreement, unless
otherwise stated.
SECTION 24. ENTIRE AGREEMENT; MODIFICATIONS.
-------------------------------
This instrument contains the entire agreement of the parties relating
to the subject matter hereof, and supersedes in its entirety any and all prior
agreements, understandings or representations relating to the subject matter
hereof. No modifications of this Agreement shall be valid unless made in
writing and signed by the parties hereto.
SECTION 25. REQUIRED REGULATORY PROVISIONS.
------------------------------
The following provisions are included for the purposes of complying
with various laws, rules and regulations applicable to the Association:
(a) Notwithstanding anything herein contained to the contrary, in no
event shall the aggregate amount of compensation payable to Executive under
section 9(b) hereof (exclusive of amounts described in section 9(b)(i),
(viii) and (ix)) exceed the three times Executive's average annual total
compensation for the last five consecutive calendar years to end prior to
his termination of employment with the Association (or for his entire
period of employment with the Association if less than five calendar
years).
(b) Notwithstanding anything herein contained to the contrary, any
payments to Executive by the Association, whether pursuant to this
Agreement or otherwise, are subject to and conditioned upon their
compliance with section 18(k) of the Federal Deposit Insurance Act ("FDI
Act"), 12 U.S.C. (S)1828(k), and any regulations promulgated thereunder.
Page 16 of 19
<PAGE>
(c) Notwithstanding anything herein contained to the contrary, if
Executive is suspended from office and/or temporarily prohibited from
participating in the conduct of the affairs of the Association pursuant to
a notice served under section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C.
(S)1818(e)(3) or 1818(g)(1), the Association'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 such notice
are dismissed, the Association, in its discretion, may (i) pay to Executive
all or part of the compensation withheld while the Association's
obligations hereunder were suspended and (ii) reinstate, in whole or in
part, any of the obligations which were suspended.
(d) Notwithstanding anything herein contained to the contrary, if
Executive is removed and/or permanently prohibited from participating in
the conduct of the Association's affairs by an order issued under section
8(e)(4) or 8(g)(1) of the FDI Act, 12 U.S.C. (S)1818(e)(4) or (g)(1), all
prospective obligations of the Association under this Agreement shall
terminate as of the effective date of the order, but vested rights and
obligations of the Association and Executive shall not be affected.
(e) Notwithstanding anything herein contained to the contrary, if the
Association is in default (within the meaning of section 3(x)(1) of the FDI
Act, 12 U.S.C. (S)1813(x)(1), all prospective obligations of the
Association under this Agreement shall terminate as of the date of default,
but vested rights and obligations of the Association and Executive shall
not be affected.
(f) Notwithstanding anything herein contained to the contrary, all
prospective obligations of the Association hereunder shall be terminated,
except to the extent that a continuation of this Agreement is necessary for
the continued operation of the Association: (i) by the Director of the
Office of Thrift Supervision ("OTS") or his designee or the Federal Deposit
Insurance Corporation ("FDIC"), at the time the FDIC enters into an
agreement to provide assistance to or on behalf of the Association under
the authority contained in section 13(c) of the FDI Act, 12 U.S.C.
(S)1823(c); (ii) by the Director of the OTS or his designee at the time
such Director or designee approves a supervisory merger to resolve problems
related to the operation of the Association or when the Association is
determined by such Director to be in an unsafe or unsound condition. The
vested rights and obligations of the parties shall not be affected.
If and to the extent that any of the foregoing provisions shall cease to be
required or by applicable law, rule or regulation, the same shall become
inoperative as though eliminated by formal amendment of this Agreement.
Page 17 of 19
<PAGE>
IN WITNESS WHEREOF, the Association has caused this Agreement to be
executed and Executive has hereunto set his hand, all as of the day and year
first above written.
_____________________________
[Executive]
ATTEST: HOME FEDERAL SAVINGS AND LOAN
ASSOCIATION OF ELGIN
By _____________________
Secretary By ________________________________
Name:
Title:
[Seal]
Page 18 of 19
<PAGE>
STATE OF ILLINOIS )
: ss.:
COUNTY OF )
On this ________ day of ____________________, 1996, before me
personally came __________________, to me known, and known to me to be the
individual described in the foregoing instrument, who, being by me duly sworn,
did depose and say that he resides at the address set forth in said instrument,
and that he signed his name to the foregoing instrument.
________________________
Notary Public
STATE OF ILLINOIS )
: ss.:
COUNTY OF )
On this ________ day of ____________________, 1996, before me
personally came ___________, to me known, who, being by me duly sworn, did
depose and say that he resides at
______________________________________________, that he is a member of the Board
of Directors of HOME FEDERAL SAVINGS AND LOAN ASSOCIATION, the savings and loan
association described in and which executed the foregoing instrument; that he
knows the seal of said mutual savings and loan association; that the seal
affixed to said instrument is such seal; that it was so affixed by order of the
Board of Directors of said savings and loan association; and that he signed his
name thereto by like order.
_________________________
Notary Public
Page 19 of 19
<PAGE>
EXHIBIT 10.5
EMPLOYEE RETENTION AGREEMENT
This EMPLOYEE RETENTION AGREEMENT ("Agreement") is made and entered into as
of the ___th day of _____________, 1996, by and among HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN, a mutual savings and loan association organized and
operating under the federal laws of the United States and having its executive
offices at 16 North Spring Street, Elgin, Illinois 60120 ("Association"); HOME
BANCORP OF ELGIN, INC., a business corporation organized and existing under the
laws of the State of Delaware and also having its executive offices at 16 North
Spring Street, Elgin, Illinois 60120 ("Company"); and ________________________
_____________________, an individual residing at______________________________
_____________ ("Officer").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, effective as of the date of this Agreement, the Association has
converted from a federal mutual savings and loan association to a federal stock
savings and loan association and has become a wholly-owned subsidiary of the
Company; and
WHEREAS, the Association desires to secure for itself the continued
availability of the Officer's services; and
WHEREAS, the Association recognizes that a third party may at some time in
the future pursue a Change of Control of the Association or the Company and that
this possibility may result in the departure or distraction of the Association's
officers; and
WHEREAS, the Association has determined that appropriate steps should be
taken to encourage the continued attention and dedication of the Association's
officers, including the Officer, to their duties for the Association without the
distraction that may arise from the possibility of a Change of Control of the
Association or the Company; and
WHEREAS, the Association believes that, by assuring certain officers,
including the Officer, of reasonable financial security in the event of a Change
of Control of the Association or the Company, such officers will be in a
position to perform their duties free from financial self interest and in the
best interests of the Association and its shareholders; and
WHEREAS, for purposes of securing the Officer's services for the
Association, the Board of Directors of the Association ("Board") has authorized
the proper officers of the Association to enter into an employee retention
agreement with the Officer on the terms and conditions set forth herein; and
WHEREAS, the Board of Directors of the Company has authorized the Company
to guarantee the Association's obligations under such an employee retention
agreement; and
WHEREAS, the Officer is willing to make the Officer's services available to
the Association on the terms and conditions set forth herein;
<PAGE>
-2-
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and obligations hereinafter set forth, the Association, the Company and the
Officer hereby agree as follows:
SECTION 1. EFFECTIVE DATE.
--------------
(a) This Agreement shall be effective as of the date first above written
and shall remain in effect during the term of this Agreement which shall be for
a period of three (3) years commencing on the date of this Agreement, plus such
extensions as are provided pursuant to section 1(b); provided, however, that if
the term of this Agreement has not otherwise terminated, the term of this
Agreement will terminate on the date of the Officer's termination of employment
with the Association; and provided, further, that the obligations under section
8 of this Agreement shall survive the term of this Agreement if payments become
due hereunder.
(b) Prior to each anniversary date of this Agreement, the Board shall
consider the advisability of an extension of the term in light of the
circumstances then prevailing and may, in its discretion, approve an extension
to take effect as of the upcoming anniversary date. If an extension is
approved, the term of this Agreement shall be extended so that it will expire
three (3) years after such anniversary date.
(c) Notwithstanding anything herein contained to the contrary: (i) the
Officer's employment with the Association may be terminated at any time, subject
to the terms and conditions of this Agreement; and (ii) nothing in this
Agreement shall mandate or prohibit a continuation of the Officer's employment
following the expiration of the Assurance Period upon such terms and conditions
as the Association and the Officer may mutually agree upon.
SECTION 2. ASSURANCE PERIOD.
----------------
(a) The assurance period ("Assurance Period") shall be for a period
commencing on the date of a Change of Control, as defined in section 10 of this
Agreement, and ending on the _______ (____) anniversary of the date on which the
Assurance Period commences, plus such extensions as are provided pursuant to the
following sentence. The Assurance Period shall be automatically extended for
one (1) additional day each day, unless either the Association or the Officer
elects not to extend the Assurance Period further by giving written notice to
the other party, in which case the Assurance Period shall become fixed and shall
end on the _______ (____) anniversary of the date on which such written notice
is given; provided, however, that if, following a Change of Control, the Office
of Thrift Supervision (or its successor) is the Association's primary federal
regulator, the Agreement shall be subject to extension not more frequently than
annually and only upon review and approval of the Board.
(b) Upon termination of the Officer's employment with the Association, any
daily extensions provided pursuant to the preceding sentence, if not theretofore
discontinued, shall cease and the remaining unexpired Assurance Period under
this Agreement shall be a fixed period ending on the later of the _______ (____)
anniversary of the date of the Change of
<PAGE>
-3-
Control, as defined in section 10 of this Agreement, or the ______ anniversary
of the date on which the daily extensions were discontinued.
SECTION 3. DUTIES.
------
During the period of the Officer's employment that falls within the
Assurance Period, the Officer shall: (a) except to the extent allowed under
section 6 of this Agreement, devote his full business time and attention (other
than during weekends, holidays, vacation periods, and periods of illness,
disability or approved leave of absence) to the business and affairs of the
Association and use his best efforts to advance the Association's interests; (b)
serve in the position to which the Officer is appointed by the Association,
which, during the Assurance Period, shall be the position that the Officer held
on the day before the Assurance Period commenced or any higher office at the
Association to which he may subsequently be appointed; and (c) subject to the
direction of the Board and the By-laws of the Association, have such functions,
duties, responsibilities and authority commonly associated with such position.
SECTION 4. COMPENSATION.
------------
In consideration for the services rendered by the Officer during the
Assurance Period, the Association shall pay to the Officer during the Assurance
Period a salary at an annual rate equal to the greater of:
(a) the annual rate of salary in effect for the Officer on the day before
the Assurance Period commenced; or
(b) such higher annual rate as may be prescribed by or under the authority
of the Board;
provided, however, that in no event shall the Officer's annual rate of salary
under this Agreement in effect at a particular time during the Assurance Period
be reduced without the Officer's prior written consent. The annual salary
payable under this section 4 shall be subject to review at least once annually
and shall be paid in approximately equal installments in accordance with the
Association's customary payroll practices. Nothing in this section 4 shall be
deemed to prevent the Officer from receiving additional compensation other than
salary for his services to the Association, or additional compensation for his
services to the Company, upon such terms and conditions as may be prescribed by
or under the authority of the Board or the Board of Directors of the Company.
SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
-----------------------------------
Except as otherwise provided in this Agreement, the Officer shall, during
the Assurance Period, be treated as an employee of the Association and be
eligible to participate in and receive benefits under Home Federal Savings and
Loan Association of Elgin Pension Plan ("Retirement Plan"), a group life, health
(including hospitalization, medical and major medical), dental, accident and
long term disability insurance plans, and such other employee benefits plans.
<PAGE>
-4-
and programs, including, but not limited to, any incentive compensation plans or
programs (whether or not employee benefits plans or programs), any stock option
and appreciation rights plan, employee stock ownership plan and restricted stock
plan, as may from time to time be maintained by, or cover employees of, the
Association, in accordance with the terms and conditions of such employee
benefit plans and programs and compensation plans and programs and with the
Association customary practices.
SECTION 6. BOARD MEMBERSHIPS.
-----------------
The Officer may serve as a member of the boards of directors of such
business, community and charitable organizations as he may disclose to and as
may be approved by the Board (which approval shall not be unreasonably
withheld), and he may engage in personal business and investment activities for
his own account; provided, however, that such service and personal business and
investment activities shall not materially interfere with the performance of his
duties under this Agreement.
SECTION 7. WORKING FACILITIES AND EXPENSES.
--------------------------------
During the Assurance Period, the Officer's principal place of employment
shall be at the Association's executive offices at the address first above
written, or at such other location within [_____________] County at which the
Association shall maintain its principal executive offices, or at such other
location as the Association and the Officer may mutually agree upon. The
Association shall provide the Officer, at his principal place of employment,
with a private office, stenographic services and other support services and
facilities suitable to his position with the Association and necessary or
appropriate in connection with the performance of his assigned duties under this
Agreement. The Association shall reimburse the Officer for his ordinary and
necessary business expenses, including, without limitation, the Officer's travel
and entertainment expenses, incurred in connection with the performance of the
Officer's duties under this Agreement, upon presentation to the Association of
an itemized account of such expenses in such form as the Association may
reasonably require.
SECTION 8. TERMINATION OF EMPLOYMENT WITH ASSOCIATION LIABILITY.
-----------------------------------------------------
(a) In the event that the Officer's employment with the Association shall
terminate during the Assurance Period, or prior to the commencement of the
Assurance Period but within three (3) months of and in connection with a Change
of Control as defined in section 10 of this Agreement, on account of:
(i) The Officer's voluntary resignation from employment with the
Association within ninety (90) days following:
(A) the failure of the Association's Board to appoint or re-appoint or
elect or re-elect the Officer to serve in the same position in which
the Officer was serving on the day before the Assurance Period
commenced, or a more senior office;
<PAGE>
-5-
(B) the failure of the stockholders of the Company to elect or re-elect
the Officer as a member of the Board, if he was a member of the Board
on the day before the Assurance Period commenced;
(C) the expiration of a thirty (30) day period following the date on which
the Officer gives written notice to the Association of its material
failure, whether by amendment of the Association's Organization
Certificate or By-laws, action of the Board or the Company's
stockholders or otherwise, to vest in the Officer the functions,
duties, or responsibilities vested in the Officer on the day before
the Assurance Period commenced (or the functions, duties and
responsibilities of a more senior office to which the Officer may be
appointed), unless during such thirty (30) day period, the Association
fully cures such failure;
(D) the failure of the Association to cure a material breach of this
Agreement by the Association, within thirty (30) days following
written notice from the Officer of such material breach;
(E) a reduction in the compensation provided to the Officer, or a material
reduction in the benefits provided to the Officer under the
Association's program of employee benefits, compared with the
compensation and benefits that were provided to the Officer on the day
before the Assurance Period commenced;
(F) a change in the Officer's principal place of employment that would
result in a one-way commuting time in excess of the greater of (I) 30
minutes or (II) the Officer's commuting time immediately prior to such
change; or
(ii) the discharge of the Officer by the Association for any reason other
than for "cause" as provided in section 9(a);
then, subject to section 21, the Association shall provide the benefits and pay
to the Officer the amounts provided for under section 8(b) of this Agreement;
provided, however, that if benefits or payments become due hereunder as a result
of the Officer's termination of employment prior to the commencement of the
Assurance Period, the benefits and payments provided for under section 8(b) of
this Agreement shall be determined as though the Officer had remained in the
service of the Association (upon the terms and conditions in effect at the time
of his actual termination of service) and had not terminated employment with the
Association until the date on which the Officer's Assurance Period would have
commenced.
(b) Upon the termination of the Officer's employment with the Association
under circumstances described in section 8(a) of this Agreement, the Association
shall pay and provide to the Officer (or, in the event of the Officer's death,
to the Officer's estate):
<PAGE>
-6-
(i) the Officer's earned but unpaid compensation (including, without
limitation, all items which constitute wages under applicable law and the
payment of which is not otherwise provided for under this section 8(b)) as
of the date of the termination of the Officer's employment with the
Association, such payment to be made at the time and in the manner
prescribed by law applicable to the payment of wages but in no event later
than thirty (30) days after termination of employment;
(ii) the benefits, if any, to which the Officer is entitled as a former
employee under the employee benefit plans and programs and compensation
plans and programs maintained for the benefit of the Association's officers
and employees;
(iii) continued group life, health (including hospitalization, medical
and major medical), dental, accident and long term disability insurance
benefits, in addition to that provided pursuant to section 8(b)(ii) and
after taking into account the coverage provided by any subsequent employer,
if and to the extent necessary to provide for the Officer, for the
remaining unexpired Assurance Period, coverage equivalent to the coverage
to which the Officer would have been entitled under such plans (as in
effect on the date of his termination of employment, or, if his termination
of employment occurs after a Change of Control, on the date of such Change
of Control, whichever benefits are greater) if the Officer had continued
working for the Association during the remaining unexpired Assurance Period
at the highest annual rate of compensation achieved during the Officer's
period of actual employment with the Association;
(iv) within thirty (30) days following the Officer's termination of
employment with the Association, a lump sum payment, in an amount equal to
the present value of the salary that the Officer would have earned if the
Officer had continued working for the Association during the remaining
unexpired Assurance Period at the highest annual rate of salary achieved
during the Officer's period of actual employment with the Association,
where such present value is to be determined using a discount rate equal to
the applicable short-term federal rate prescribed under section 1274(d) of
the Internal Revenue Code of 1986 ("Code"), compounded using the
compounding periods corresponding to the Association's regular payroll
periods for its officers, such lump sum to be paid in lieu of all other
payments of salary provided for under this Agreement in respect of the
period following any such termination;
(v) within thirty (30) days following the Officer's termination of
employment with the Association, a lump sum payment in an amount equal to
the excess, if any, of:
(A) the present value of the aggregate benefits to which the
Officer would be entitled under any and all qualified and non-qualified
<PAGE>
-7-
defined benefit pension plans maintained by, or covering employees of,
the Association if the Officer were 100% vested thereunder and had
continued working for the Association during the remaining unexpired
Assurance Period such benefits to be determined as of the date of
termination of employment by adding to the service actually recognized
under such plans an additional period equal to the remaining unexpired
Assurance Period and by adding to the compensation recognized under
such plans for the year in which termination of employment occurs all
amounts payable under sections 8(b)(i), (vii), (viii) and (ix);
(B) the present value of the benefits to which the Officer is
actually entitled under such defined benefit pension plans as of the
date of his termination;
where such present values are to be determined using the mortality tables
prescribed under section 415(b)(2)(E)(v) of the Code and a discount rate,
compounded monthly, equal to the annualized rate of interest prescribed by
the Pension Benefit Guaranty Corporation for the valuation of immediate
annuities payable under terminating single-employer defined benefit plans
for the month in which the Officer's termination of employment occurs
("Applicable PBGC Rate").
(vi) within thirty (30) days following his termination of employment
with the Company, a lump sum payment in an amount equal to the present
value of the additional employer contributions (or if greater in the case
of a leveraged employee stock ownership plan or similar arrangement, the
additional assets allocable to him through debt service, based on the fair
market value of such assets at termination of employment) to which he would
have been entitled under any and all qualified and non-qualified defined
contribution plans maintained by, or covering employees of, the Company, as
if he were 100% vested thereunder and had continued working for the Company
during the Remaining Unexpired Employment Period at the highest annual rate
of compensation achieved during that portion of the Employment Period which
is prior to the Executive's termination of employment with the Company, and
making the maximum amount of employee contributions, if any, required under
such plan or plans, such present value to be determined on the basis of a
discount rate, compounded using the compounding period that corresponds to
the frequency with which employer contributions are made to the relevant
plan, equal to the Applicable PBGC Rate;
(vii) the payments that would have been made to the Officer under any
cash bonus or long-term or short-term cash incentive compensation plan
maintained by, or covering employees of, the Association, if he had
continued working for the Association during the remaining unexpired
Assurance Period and had earned the maximum bonus or incentive award in
each calendar year that ends during the remaining unexpired Assurance
Period, such payments to be equal to the product of:
<PAGE>
-8-
(A) the maximum percentage rate at which an award was ever
available to the Officer under such incentive compensation plan;
multiplied by
(B) the salary that would have been paid to the Officer during
each such calendar year at the highest annual rate of salary achieved
during the remaining unexpired Assurance Period, such payments to be
made (without discounting for early payment) within thirty (30) days
following the Officer's termination of employment.
(viii) at the election of the Association made within thirty (30) days
following the Officer's termination of employment with the Association, upon the
surrender of options or appreciation rights issued to the Officer under any
stock option and appreciation rights plan or program maintained by, or covering
employees of, the Association, a lump sum payment in an amount equal to the
product of:
(A) the excess of (I) the fair market value of a share of stock of
the same class as the stock subject to the option or appreciation
right, determined as of the date of termination of employment, over
(II) the exercise price per share for such option or appreciation
right, as specified in or under the relevant plan or program;
multiplied by
(B) the number of shares with respect to which options or
appreciation rights are being surrendered.
For purposes of this section 8(b)(viii), the Officer shall be deemed to be fully
vested in all options and appreciation rights under any stock option or
appreciation rights plan or program maintained by, or covering employees of, the
Association, even if the Officer is not vested under such plan or program; and
(ix) at the election of the Association made within thirty (30) days
following the Officer's termination of employment with the Association,
upon the surrender of any shares awarded to the Officer under any
restricted stock plan maintained by, or covering employees of, the
Association, a lump sum payment in an amount equal to the product of:
(A) the fair market value of a share of stock of the same class of
stock granted under such plan, determined as of the date of the
Officer's termination of employment; multiplied by
(B) the number of shares which are being surrendered.
For purposes of this section 8(b)(ix), the Officer shall be deemed to be fully
vested in all shares awarded under any restricted stock plan maintained by, or
<PAGE>
-9-
covering employees of, the Association, even if the Officer is not vested
under such plan.
The Association and the Officer hereby stipulate that the damages which may be
incurred by the Officer following any such termination of employment are not
capable of accurate measurement as of the date first above written and that the
payments and benefits contemplated by this section 8(b) constitute reasonable
damages under the circumstances and shall be payable without any requirement of
proof of actual damage and without regard to the Officer's efforts, if any, to
mitigate damages.
SECTION 9. TERMINATION WITHOUT ADDITIONAL ASSOCIATION LIABILITY.
----------------------------------------------------
In the event that the Officer's employment with the Association shall
terminate during the Assurance Period on account of:
(a) the discharge of the Executive for "cause," which, for purposes
of this Agreement shall mean personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease and desist order, or any material breach of this Agreement, in each
case as measured against standards generally prevailing at the relevant
time in the savings and community banking industry; provided, however, that
the Executive shall not be deemed to have been discharged for cause unless
and until the following procedures shall have been followed:
(i) the Board shall adopt a resolution duly approved by
affirmative vote of a majority of the entire Board at a meeting called
and held for such purpose calling for the Executive's termination for
cause and setting forth the purported grounds for such termination
("Proposed Termination Resolution");
(ii) as soon as practicable, and in any event within five (5)
days, after adoption of such resolution, the Board shall furnish to
the Executive a written notice of termination which shall be
accompanied by a certified copy of the Proposed Termination
Resolution ("Notice of Proposed Termination");
(iii) the Executive shall be afforded a reasonable opportunity
to make oral and written presentations to the members of the Board, on
his own behalf, or through a representative, who may be his legal
counsel, to refute the grounds set forth in the Proposed Termination
Resolution at one or more meetings of the Board to be held no sooner
than fifteen (15) days and no later than thirty (30) after the
Executive's receipt of the Proposed Termination Notice ("Termination
Hearings"); and
<PAGE>
-10-
(iv) within ten (10) days following the end of the Termination
Hearings, the Board shall adopt a resolution duly approved by
affirmative vote of a majority of the entire Board at a meeting called
and held for such purpose (A) finding that in the good faith opinion
of the Board the grounds for termination set forth in the Proposed
Termination Resolution exist and (B) terminating the Executive's
employment ("Termination Resolution"); and
(v) as promptly as practicable, and in any event within one (1)
business day after adoption of the Termination Resolution, the Board
shall furnish to the Executive written notice of termination, which
notice shall include a copy of the Termination Resolution and specify
an effective date of termination that is not later than the date on
which such notice is given;
(b) the Officer's voluntary resignation from employment with the
Association for reasons other than those specified in section 8(a)(i); or
(c) the Officer's death; or
(d) a determination that the Officer is eligible for long-term
disability benefits under the Association's long-term disability insurance
program or, if there is no such program, under the federal Social Security
Act;
then the Association shall have no further obligations under this Agreement,
other than the payment to the Officer (or, in the event of his death, to his
estate) of his earned but unpaid salary as of the date of the termination of his
employment, and the provision of such other benefits, if any, to which the
Officer is entitled as a former employee under the employee benefit plans and
programs and compensation plans and programs maintained by, or covering
employees of, the Association.
SECTION 10. CHANGE OF CONTROL.
-----------------
(a) A Change of Control of the Association ("Change of Control") shall be
deemed to have occurred upon the happening of any of the following events:
(i) approval by the stockholders of the Association of a transaction that
would result in the reorganization, merger or consolidation of the
Association, respectively, with one or more other persons, other than a
transaction following which:
(A) at least 51% of the equity ownership interests of the entity resulting
from such transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3
<PAGE>
-11-
promulgated under the Exchange Act) at least 51% of the outstanding
equity ownership interests in the Association; and
(B) at least 51% of the securities entitled to vote generally in
the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the securities entitled to vote
generally in the election of directors of the Association;
(ii) the acquisition of substantially all of the assets of the
Association or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the outstanding
securities of the Association entitled to vote generally in the election of
directors by any person or by any persons acting in concert, or approval by
the stockholders of the Association of any transaction which would result
in an acquisition; or
(iii) a complete liquidation or dissolution of the Association, or
approval by the stockholders of the Association of a plan for such
liquidation or dissolution;
(iv) the occurrence of any event if, immediately following such
event, at least fifty percent (50%) of the members of the Board do not
belong to any of the following groups:
(A) individuals who were members of the Board on the date of
this Agreement;
(B) individuals who first became members of the Board after the
date of this Agreement either:
(1) upon election to serve as a member of the Board by
affirmative vote of three-quarters (3/4) of the members of such
Board, or a nominating committee thereof, in office at the time
of such first election; or
(2) upon election by the stockholders of the Board to
serve as a member of the Board, but only if nominated for
election by affirmative vote of three-quarters (3/4) of the
members of the Board, or of a nominating committee thereof, in
office at the time of such first nomination;
<PAGE>
-12-
provided, however, that such individual's election or nomination did not result
from an actual or threatened election contest (within the meaning of Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents (within the meaning of Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) other than by or on
behalf of the Board of the Association;
(v) any event which would be described in section 10(a)(i), (ii), (iii) or
(iv) if the term "Company" were substituted for the term "Association" therein.
(b) In no event, however, shall a Change of Control be deemed to have
occurred as a result of any acquisition of securities or assets of the Company,
the Association or any subsidiary of either of them, by the Company, the
Association or any subsidiary of either of them, or by any employee benefit plan
maintained by any of them.
SECTION 11. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.
-----------------------------------------------
The termination of the Officer's employment during the Assurance Period or
thereafter, whether by the Association or by the Officer, shall have no effect
on the rights and obligations of the parties hereto under the Association's
Pension Plan, group life, health (including hospitalization, medical and major
medical), dental, accident and long term disability insurance plans or such
other employee benefit plans or programs, or compensation plans or programs
(whether or not employee benefit plans or programs) and any defined contribution
plan, employee stock ownership plan, stock option and appreciation rights plan,
and restricted stock plan, as may be maintained by, or cover employees of, the
Association from time to time; provided, however, that nothing in this Agreement
shall be deemed to duplicate any compensation or benefits provided under any
agreement, plan or program covering the Officer to which the Association or the
Company is a party and any duplicative amount payable under any such agreement,
plan or program shall be applied as an offset to reduce the amounts otherwise
payable hereunder.
SECTION 12. SUCCESSORS AND ASSIGNS.
----------------------
This Agreement will inure to the benefit of and be binding upon the
Officer, his legal representatives and testate or intestate distributees, and
the Association and the Company, their respective successors and assigns,
including any successor by merger or consolidation or a statutory receiver or
any other person or firm or corporation to which all or substantially all of the
respective assets and business of the Association or the Company may be sold or
otherwise transferred.
SECTION 13. NOTICES.
-------
Any communication required or permitted to be given under this Agreement,
including any notice, direction, designation, consent, instruction, objection or
waiver, shall be
<PAGE>
-13-
in writing and shall be deemed to have been given at such time as it is
delivered personally, or five (5) days after mailing if mailed, postage prepaid,
by registered or certified mail, return receipt requested, addressed to such
party at the address listed below or at such other address as one such party may
by written notice specify to the other party:
If to the Officer:
__________________
__________________
__________________
If to the Association:
Home Federal Savings and Loan Association
16 North Spring Street
Elgin, Illinois 60120
Attention: Corporate Secretary
-------------------
with a copy to:
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Attention: W. Edward Bright, Esq.
----------------------
If to the Company:
Home Bancorp of Elgin, Inc.
16 North Spring Street
Elgin, Illinois 60120
Attention: Board of Directors
------------------
<PAGE>
-14-
with a copy to:
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Attention: W. Edward Bright, Esq.
----------------------
SECTION 14. INDEMNIFICATION AND ATTORNEYS' FEES.
-----------------------------------
The Association shall indemnify, hold harmless and defend the Officer
against reasonable costs, including legal fees, incurred by the Officer in
connection with or arising out of any action, suit or proceeding in which the
Officer may be involved, as a result of the Officer's efforts, in good faith, to
defend or enforce the terms of this Agreement; provided, however, that the
Officer shall have substantially prevailed on the merits pursuant to a judgment,
decree or order of a court of competent jurisdiction or of an arbitrator in an
arbitration proceeding, or in a settlement. For purposes of this Agreement, any
settlement agreement which provides for payment of any amounts in settlement of
the Association's obligations hereunder shall be conclusive evidence of the
Officer's entitlement to indemnification hereunder, and any such indemnification
payments shall be in addition to amounts payable pursuant to such settlement
agreement, unless such settlement agreement expressly provides otherwise.
SECTION 15. SEVERABILITY.
------------
A determination that any provision of this Agreement is invalid or
unenforceable shall not affect the validity or enforceability of any other
provision hereof.
SECTION 16. WAIVER.
------
Failure to insist upon strict compliance with any of the terms, covenants
or conditions hereof shall not be deemed a waiver of such term, covenant, or
condition. A waiver of any provision of this Agreement must be made in writing,
designated as a waiver, and signed by the party against whom its enforcement is
sought. Any waiver or relinquishment of any right or power hereunder at any one
or more times shall not be deemed a waiver or relinquishment of such right or
power at any other time or times.
SECTION 17. COUNTERPARTS.
------------
This Agreement may be executed in two (2) or more counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same Agreement.
<PAGE>
-15-
SECTION 18. GOVERNING LAW.
-------------
This Agreement shall be governed by and construed and enforced in
accordance with the federal laws of the United States, and in the absence of
controlling federal law, the laws of the State of Illinois, without reference to
conflicts of law principles.
SECTION 19. HEADINGS AND CONSTRUCTION.
-------------------------
The headings of sections in this Agreement are for convenience of reference
only and are not intended to qualify the meaning of any section. Any reference
to a section number shall refer to a section of this Agreement, unless otherwise
stated.
SECTION 20. ENTIRE AGREEMENT; MODIFICATIONS.
-------------------------------
This instrument contains the entire agreement of the parties relating to
the subject matter hereof, and supersedes in its entirety any and all prior
agreements, understandings or representations relating to the subject matter
hereof. No modifications of this Agreement shall be valid unless made in
writing and signed by the parties hereto.
SECTION 21. REQUIRED REGULATORY PROVISIONS.
------------------------------
The following provisions are included for the purposes of complying with
various laws, rules and regulations applicable to the Association:
(a) Notwithstanding anything herein contained to the contrary, in no
event shall the aggregate amount of compensation payable to the Officer
under section 8(b) hereof (exclusive of amounts described in section
8(b)(i), (viii) and (ix)) exceed the three times the Officer's average
annual total compensation for the last five consecutive calendar years to
end prior to his termination of employment with the Association (or for his
entire period of employment with the Association if less than five calendar
years).
(b) Notwithstanding anything herein contained to the contrary, any
payments to the Officer by the Association, whether pursuant to this
Agreement or otherwise, are subject to and conditioned upon their
compliance with section 18(k) of the Federal Deposit Insurance Act ("FDI
Act"), 12 U.S.C. (S)1828(k), and any regulations promulgated thereunder.
(c) Notwithstanding anything herein contained to the contrary, if the
Officer is suspended from office and/or temporarily prohibited from
participating in the conduct of the affairs of the Association pursuant to
a notice served under section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C.
(S)1818(e)(3) or 1818(g)(1), the Association'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 such notice
are dismissed, the Association, in its discretion, may (i)
<PAGE>
-16-
pay to the Officer all or part of the compensation withheld while the
Association's obligations hereunder were suspended and (ii) reinstate, in
whole or in part, any of the obligations which were suspended.
(d) Notwithstanding anything herein contained to the contrary, if the
Officer is removed and/or permanently prohibited from participating in the
conduct of the Association's affairs by an order issued under section
8(e)(4) or 8(g)(1) of the FDI Act, 12 U.S.C. (S)1818(e)(4) or (g)(1), all
prospective obligations of the Association under this Agreement shall
terminate as of the effective date of the order, but vested rights and
obligations of the Association and the Officer shall not be affected.
(e) Notwithstanding anything herein contained to the contrary, if the
Association is in default (within the meaning of section 3(x)(1) of the FDI
Act, 12 U.S.C. (S)1813(x)(1), all prospective obligations of the
Association under this Agreement shall terminate as of the date of default,
but vested rights and obligations of the Association and the Officer shall
not be affected.
(f) Notwithstanding anything herein contained to the contrary, all
prospective obligations of the Association hereunder shall be terminate,
except to the extent that a continuation of this Agreement is necessary for
the continued operation of the Association: (i) by the Director of the
Office of Thrift Supervision ("OTS") or his designee or the Federal Deposit
Insurance Corporation ("FDIC"), at the time the FDIC enters into an
agreement to provide assistance to or on behalf of the Association under
the authority contained in section 13(c) of the FDI Act, 12 U.S.C.
(S)1823(c); (ii) by the Director of the OTS or his designee at the time
such Director or designee approves a supervisory merger to resolve problems
related to the operation of the Association or when the Association is
determined by such Director to be in an unsafe or unsound condition. The
vested rights and obligations of the parties shall not be affected.
SECTION 22 GUARANTY.
--------
The Company hereby irrevocably and unconditionally guarantees to the
Officer the payment of all amounts, and the performance of all other
obligations, due from the Association in accordance with the terms of this
Agreement as and when due without any requirement of presentment, demand of
payment, protest or notice of dishonor or nonpayment.
<PAGE>
-17-
IN WITNESS WHEREOF, the Association and the Company have caused this
Agreement to be executed and the Officer has hereunto set his hand, all as of
the day and year first above written.
________________________________
[Officer]
ATTEST: HOME FEDERAL SAVINGS AND LOAN
ASSOCIATION OF ELGIN
By_______________________
Secretary By______________________________
Name:
[Seal] Title:
ATTEST: HOME BANCORP OF ELGIN, INC.
By____________________________
Secretary By______________________________
Name:
[Seal] Title:
<PAGE>
STATE OF ILLINOIS )
: ss.:
COUNTY OF )
On this _____ day of _____________, 19__, before me personally came Valerie
Wilson, to me known, and known to me to be the individual described in the
foregoing instrument, who, being by me duly sworn, did depose and say that he
resides at the address set forth in said instrument, and that he signed his name
to the foregoing instrument.
____________________________
Notary Public
STATE OF ILLINOIS )
: ss.:
COUNTY OF )
On this _____ day of __________________, 19__, before me personally came
______ _______________, to me known, who, being by me duly sworn, did depose and
say that he resides at ______________________________________________, that he
is a member of the Board of Directors of Home Federal Savings and Loan
Association of Elgin, the savings association described in and which executed
the foregoing instrument; that he knows the seal of said savings association;
that the seal affixed to said instrument is such seal; that it was so affixed by
authority of the Board of Directors of said savings association; and that he
signed his name thereto by like authority.
__________________________
Notary Public
STATE OF ILLINOIS )
: ss.:
COUNTY OF )
On this ____ day of _________________, 19__, before me personally came
___________, to me known, who, being by me duly sworn, did depose and say that
he resides at __________ _________________________________, that he is a member
of the Board of Directors of Home Bancorp of Elgin, Inc., the corporation
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such seal; that
it was so affixed by order of the Board of Directors of said corporation; and
that he signed his name thereto by like order.
______________________________
Notary Public
<PAGE>
EXHIBIT 10.6
SEVERANCE PAY PLAN
OF
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
ADOPTED ON __________, 1996
EFFECTIVE ON __________, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
---------
PURPOSE
-------
SECTION 1 STATEMENT OF PURPOSE................................ 1
ARTICLE II
----------
DEFINITIONS
-----------
SECTION 2.1 ASSOCIATION.................................... 1
SECTION 2.2 BOARD.......................................... 1
SECTION 2.3 CAUSE.......................................... 1
SECTION 2.4 CHANGE OF CONTROL.............................. 2
SECTION 2.5 EMPLOYEE....................................... 3
SECTION 2.6 FDI ACT........................................ 4
SECTION 2.7 INVOLUNTARY SEVERANCE.......................... 4
SECTION 2.8 OFFICER........................................ 4
SECTION 2.9 OTS............................................ 4
SECTION 2.10 PLAN........................................... 4
SECTION 2.11 PLAN ADMINISTRATOR............................. 4
SECTION 2.12 PLAN YEAR...................................... 4
SECTION 2.13 SALARY......................................... 4
SECTION 2.14 SERVICE........................................ 4
ARTICLE III
-----------
BENEFITS
--------
SECTION 3.1 SEVERANCE BENEFITS FOR EMPLOYEES................ 5
SECTION 3.2 VESTING......................................... 6
SECTION 3.3 INDEMNIFICATION................................. 6
(i)
<PAGE>
PAGE
----
ARTICLE IV
----------
ADMINISTRATION
--------------
SECTION 4.1 NAMED FIDUCIARIES.............................. 6
SECTION 4.2 PLAN ADMINISTRATOR............................. 7
SECTION 4.3 CLAIMS PROCEDURE............................... 8
SECTION 4.4 CLAIMS REVIEW PROCEDURE........................ 8
SECTION 4.5 ALLOCATION OF FIDUCIARY RESPONSIBILITIES
AND EMPLOYMENT OF ADVISORS................... 9
SECTION 4.6 OTHER ADMINISTRATIVE PROVISIONS................ 9
ARTICLE V
---------
MISCELLANEOUS
-------------
SECTION 5.1 RIGHTS OF EMPLOYEES........................... 10
SECTION 5.2 NON-ALIENATION OF BENEFITS.................... 10
SECTION 5.3 NON-DUPLICATION OF BENEFITS................... 10
SECTION 5.4 CONSTRUCTION.................................. 11
SECTION 5.5 HEADINGS...................................... 11
SECTION 5.6 GOVERNING LAW................................. 11
SECTION 5.7 SEVERABILITY.................................. 11
SECTION 5.8 TERMINATION OR AMENDMENT...................... 11
SECTION 5.9 REQUIRED REGULATORY PROVISIONS................ 11
SECTION 5.10 WITHHOLDING................................... 13
SECTION 5.11 STATUS AS WELFARE BENEFIT PLAN UNDER ERISA.... 13
(ii)
<PAGE>
SEVERANCE PAY PLAN OF HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
ARTICLE I
PURPOSE
-------
SECTION 1 STATEMENT OF PURPOSE.
--------------------
Home Federal Savings and Loan Association of Elgin adopts this
Severance Pay Plan for the benefit of its eligible Employees. The Association
recognizes that, as a public company, it will be subject to the possibility of a
negotiated or unsolicited change of control which may result in a loss of
employment for some of its Employees. The purpose of the Plan is to encourage
the Association's Employees to continue working for their employer with their
full time and attention devoted to their employer's affairs by providing
prescribed income security and job placement assistance in the event of an
Involuntary Severance following a Change of Control.
ARTICLE II
DEFINITIONS
-----------
For purposes of the Plan, the following terms shall have the meanings
assigned to them below, unless a different meaning is plainly indicated by the
context:
SECTION 2.1 ASSOCIATION means Home Federal Savings and Loan
-----------
Association of Elgin (or its successors or assigns, whether by merger,
consolidation, sale of assets, statutory receivership, operation of law or
otherwise) and any affiliate of Home Federal Savings and Loan Association of
Elgin which, with the approval of the Board of Directors of Home Federal Savings
and Loan Association of Elgin, and subject to such conditions as may be imposed
by such Board, adopts this Plan.
SECTION 2.2 BOARD means the Board of Directors
-----
of Home Federal Savings and Loan Association of Elgin.
SECTION 2.3 CAUSE means, with respect to the conduct of an Employee
-----
in connection with his employment with the Association, personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule or regulation (other than traffic violations or similar offenses) or
final cease and desist order in each case as measured against standards
generally prevailing at the relevant time in the savings and community banking
industry; provided, however, that following a Change of Control of the
Association or a company which owns 100% of the outstanding common stock of the
Association, an Employee shall not be deemed to have been discharged for Cause
unless and until he shall have received a written
<PAGE>
-2-
notice of termination from the Board, accompanied by a resolution duly adopted
by affirmative vote of a majority of the entire Board at a meeting called and
held for such purpose (after reasonable notice to the Employee and a reasonable
opportunity for the Employee to make oral and written presentations to the
members of the Board, on his own behalf, or through a representative, who may be
his legal counsel, to refute the grounds for the proposed determination) finding
that in the good faith opinion of the Board grounds exist for discharging the
Employee for "Cause".
SECTION 2.4 CHANGE OF CONTROL means:
-----------------
(a) with respect to Home Federal Savings and Loan Association of
Elgin:
(i) the occurrence of any event upon which any "person" (as such
term is used in sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended ("Exchange Act")), other than (A) a trustee or
other fiduciary holding securities under an employee benefit plan
maintained for the benefit of employees of Home Federal Savings and
Loan Association of Elgin; (B) a corporation owned, directly or
indirectly, by the stockholders of Home Federal Savings and Loan
Association of Elgin in substantially the same proportions as their
ownership of stock of Home Federal Savings and Loan Association of
Elgin; or (C) any group constituting a person in which employees of
Home Federal Savings and Loan Association of Elgin are substantial
members, becomes the "beneficial owner" (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of
securities issued by Home Federal Savings and Loan Association of
Elgin representing 25% or more of the combined voting power of all of
Home Federal Savings and Loan Association of Elgin's then outstanding
securities; or
(ii) the occurrence of any event upon which the individuals who
on the date the Plan is adopted are members of the Board, together
with individuals whose election by the Board or nomination for
election by Home Federal Savings and Loan Association of Elgin's
stockholders was approved by the affirmative vote of at least two-
thirds of the members of the Board then in office who were either
members of the Board on the date this Plan is adopted or whose
nomination or election was previously so approved, cease for any
reason to constitute a majority of the members of the Board, but
excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened
election contest relating to the election of directors of Home Federal
Savings and Loan Association of Elgin (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act); or
(iii) the shareholders of Home Federal Savings and Loan
Association of Elgin (or, if Home Federal Savings and Loan Association
<PAGE>
-3-
of Elgin is not then a stock form institution, the Board of Home
Federal Savings and Loan Association of Elgin) approve either:
(A) a merger or consolidation of Home Federal Savings and
Loan Association of Elgin with any other corporation, other than
a merger or consolidation following which both of the following
conditions are satisfied:
(I) either (1) the members of the Board of Home Federal
Savings and Loan Association of Elgin immediately prior to
such merger or consolidation constitute at least a majority
of the members of the governing body of the institution
resulting from such merger or consolidation; or (2) the
shareholders of Home Federal Savings and Loan Association of
Elgin own securities of the institution resulting from such
merger or consolidation representing 80% or more of the
combined voting power of all such securities then
outstanding in substantially the same proportions as their
ownership of voting securities of Home Federal Savings and
Loan Association of Elgin before such merger or
consolidation; and
(II) the entity which results from such merger or
consolidation expressly agrees in writing to assume and
perform Home Federal Savings and Loan Association of Elgin's
obligations under the Plan; or
(B) a plan of complete liquidation of Home Federal Savings
and Loan Association of Elgin or an agreement for the sale or
disposition by Home Federal Savings and Loan Association of Elgin
of all or substantially all of its assets; and
(b) with respect to any company which owns 100% of the outstanding
common stock Home Federal Savings and Loan Association of Elgin, any event
that would be described in section 2.6(a) if the name of such company were
substituted for "Home Federal Savings and Loan Association of Elgin"
therein.
In no event, however, shall the transaction by which Home Federal Savings and
Loan Association of Elgin converts from a mutual savings bank to a stock savings
bank, or any transaction by which a company wholly owned by Home Federal Savings
and Loan Association of Elgin becomes the parent company of Home Federal Savings
and Loan Association of Elgin be deemed a Change of Control.
SECTION 2.5 EMPLOYEE means any person, including an Officer, who is
--------
employed by the Association, other than: (a) a person who is compensated on an
hourly rate basis; (b) a person who works for the Association on a part-time or
temporary basis; (c) an Employee receiving long-term disability benefits; or (d)
a person who has an employment contract, change
<PAGE>
-4-
of control agreement or other agreement with the Association or who is covered
by other programs which provide severance benefits or by their terms exclude
such person from participation in this Plan.
SECTION 2.6 FDI ACT means the Federal Deposit Insurance Act, as the
-------
same may be amended from time to time, and the corresponding provisions of any
successor statute.
SECTION 2.7 INVOLUNTARY SEVERANCE means (a) the discharge or
---------------------
dismissal of an Employee by the Association other than for Cause, or the
resignation by the Employee from his position with the Association, which
resignation the Employee is asked or compelled by the Association to tender
other than for Cause; or (b) termination of employment at an Employee's election
within sixty (60) days after any action following a Change of Control which,
either alone or together with other actions, results in: (i) the reduction in
the Employee's Salary by more than 20%; (ii) the assignment of the Employee to a
job requiring relocation of his residence in order to be able to commute without
unreasonable difficulty, expense or inconvenience; (iii) the assignment of the
Employee to duties or to an office or working space which involves unreasonable
personal embarrassment; or (iv) a material adverse change in the Employee's
title, position or responsibilities at the Association.
SECTION 2.8 OFFICER means, in the case of an Employee, an officer
-------
of the Association and in the case of an Acquired Employee, a person who is an
officer of the Acquired Company immediately prior to the closing of the
transaction pursuant to which such company becomes an Acquired Company.
SECTION 2.9 OTS means the Office of Thrift Supervision of the
---
United States Department of the Treasury, and its successors.
SECTION 2.10 PLAN means this Severance Pay Plan of Home Federal
----
Savings and Loan Association of Elgin, as the same may be amended from time to
time.
SECTION 2.11 PLAN ADMINISTRATOR means the committee consisting of
------------------
all non-employee directors of the Board of Directors of Home Federal Savings and
Loan Association of Elgin who perform functions normally associated with a
compensation committee.
SECTION 2.12 PLAN YEAR means the calendar year.
---------
SECTION 2.13 SALARY means the highest basic annual rate of salary of
------
the Employee for his services to the Association (excluding overtime, bonuses
and other forms of additional compensation) attained by the Employee during his
employment with the Association.
SECTION 2.14 SERVICE means service rendered by an Employee that is,
-------
or would be, recognized under the Home Bancorp of Elgin Employee Stock Ownership
Plan for vesting purposes as of the date of the Employee's Involuntary
Severance.
<PAGE>
-5-
ARTICLE III
BENEFITS
--------
SECTION 3.1 SEVERANCE BENEFITS FOR EMPLOYEES.
--------------------------------
(a) An Employee with at least one (1) year of Service whose employment
with the Association is terminated under circumstances constituting an
Involuntary Severance, other than for Cause, as a result of, within twelve
months following or within three (3) months prior to, a Change of Control with
respect to the Association or any company which owns 100% of the outstanding
common stock of the Association shall be entitled to the following benefits:
(i) if the Employee is or has, at any time after the date of the
conversion of the Association from a mutual savings and loan institution to
a stock form savings and loan institution, been an Officer of the
Association, he shall be entitled, as severance pay, to a weekly payment in
an amount equal to one week's Salary, commencing with the first week
following the date of the Employee's Involuntary Severance and continuing
for twice the number of weeks as the Employee has whole years of Service,
or, if less, for thirty-nine (39) weeks; or
(ii) if the Employee is not an Employee described in section
3.1(a)(i), he shall be entitled, as severance pay, to a weekly payment in
an amount equal to one week's Salary, commencing with the first week
following the date of the Employee's Involuntary Severance and continuing
for the same number of weeks as the Employee has whole years of Service,
or, if less, for twenty-six (26) weeks;
provided, however, that in no event shall any Employee described in section
3.1(a)(i) or (ii) receive, as severance pay under this Plan, less than four
weeks' Salary.
(b) Each Employee who is entitled to payments under section 3.1(a)(i)
or (ii) shall, for the duration of such payments, continue to be eligible for
all of the benefits provided under the Association's employee benefit plans and
programs (excluding tax-qualified plans and other plans which by law must
restrict participation to active employees) as if he were still an Employee and
working at the Association, except that he shall cease to accrue vacation and
shall be paid a lump sum payment at the date of his Involuntary Severance in
lieu of any unused accrued vacation.
(c) Each Employee who is entitled to benefits under section 3.1(a)(i)
or (ii) shall also be entitled to outplacement services as follows:
(i) an Employee described in section 3.1(a)(i) shall be entitled to
utilize the services of an outplacement counseling firm at the
Association's expense for assistance in preparing a resume, developing
interviewing skills, identifying career opportunities and evaluating job
offers and for access to office
<PAGE>
-6-
and secretarial facilities, provided that the fee for such services shall
not exceed 12% of the Employee's Salary; and
(ii) if the Employee is not an Employee described in section
3.1(a)(i), he shall be entitled to utilize the services of an outplacement
counseling firm at the Association's expense, for assistance in preparing a
resume, developing interviewing skills, identifying career opportunities
and evaluating job offers, provided that the fee for such services shall
not exceed 6% of the Employee's Salary or $1,000, whichever is higher.
The outplacement firm utilized by any Employee or group of Employees shall be
selected by the Plan Administrator or, if permitted by the Plan Administrator
selected by the Employee or Employees subject to the Plan Administrator's
approval.
SECTION 3.2 VESTING.
-------
The benefits to be provided under this Article III of the Plan to an
Employee shall be completely vested and nonforfeitable upon the occurrence of a
Change of Control with respect to the Association or any company which owns 100%
of the outstanding common stock of the Association.
SECTION 3.3 INDEMNIFICATION.
---------------
The Association shall indemnify, hold harmless and defend each
Employee against costs or expenses, including reasonable attorneys' fees,
incurred by him or arising out of any action, suit or proceeding in which he may
be involved, as a result of his efforts, in good faith, to defend or enforce his
rights under this Plan; provided, however, that the Employee shall have
substantially prevailed on the merits pursuant to a judgment, decree or order of
a court of competent jurisdiction or of an arbitrator in an arbitration
proceeding, or in a settlement. For purposes of this Agreement, any settlement
agreement which provides for payment of any amounts in settlement of the
Association's obligations hereunder shall be conclusive evidence of the
Employee's entitlement to indemnification hereunder, and any such
indemnification payments shall be in addition to amounts payable pursuant to
such settlement agreement, unless such settlement agreement expressly provides
otherwise.
ARTICLE IV
ADMINISTRATION
--------------
SECTION 4.1 NAMED FIDUCIARIES.
-----------------
The term "Named Fiduciary" shall mean (but only to the extent of the
responsibilities of each of them) the Plan Administrator and the Board. This
Article V is intended to
<PAGE>
-7-
allocate to each Named Fiduciary the responsibility for the prudent execution of
the functions assigned to him or it, and none of such responsibilities or any
other responsibility shall be shared by two or more of such Named Fiduciaries.
Whenever one Named Fiduciary is required by the Plan to follow the directions of
another Named Fiduciary, the two Named Fiduciaries shall not be deemed to have
been assigned a shared responsibility, but the responsibility of the Named
Fiduciary giving the directions shall be deemed his sole responsibility, and the
responsibility of the Named Fiduciary receiving those directions shall be to
follow them insofar as such instructions are on their face proper under
applicable law.
SECTION 4.2 PLAN ADMINISTRATOR.
------------------
The Plan Administrator shall subject to the responsibilities of the
Board, have the responsibility for the day-to-day control, management, operation
and administration of the Plan. The Plan Administrator shall have the following
responsibilities:
(a) To maintain records necessary or appropriate for the
administration of the Plan;
(b) To give and receive such instructions, notices, information,
materials, reports and certifications as may be necessary or appropriate in
the administration of the Plan;
(c) To prescribe forms and make rules and regulations consistent with
the terms of the Plan and with the interpretations and other actions of the
Board;
(d) To require such proof or evidence of any matter from any person as
may be necessary or appropriate in the administration of the Plan;
(e) To prepare and file, distribute or furnish all reports, plan
descriptions, and other information concerning the Plan, including, without
limitation, filings with the Secretary of Labor and employee communications
as shall be required of the Plan Administrator under ERISA;
(f) To determine any question arising in connection with the Plan,
including any question of Plan interpretation, and the Plan Administrator's
decision or action in respect thereof shall be final and conclusive and
binding upon all persons having an interest under the Plan;
(g) To review and dispose of claims under the Plan filed pursuant to
section 4.3 and appeals of claims decisions pursuant to section 4.4;
(h) If the Plan Administrator shall determine that by reason of
illness, senility, insanity, or for any other reason, it is undesirable to
make any payment to the person entitled thereto, to direct the application
of any amount so payable to the use or benefit of such person in any manner
that the Plan Administrator may deem advisable or to direct in the Plan
Administrator's discretion the with-
<PAGE>
-8-
holding of any payment under the Plan due to any person under legal
disability until a representative competent to receive such payment in his
behalf shall be appointed pursuant to law;
(i) To discharge such other responsibilities or follow such directions
as may be assigned or given by the Board; and
(j) To perform any duty or take any action which is allocated to the
Plan Administrator under the Plan.
The Plan Administrator shall have the power and authority necessary or
appropriate to carry out his responsibilities.
SECTION 4.3 CLAIMS PROCEDURE.
----------------
Any claim relating to benefits under the Plan shall be filed with the
Plan Administrator on a form prescribed by it. If a claim is denied in whole or
in part, the Plan Administrator shall give the claimant written notice of such
denial, which notice shall specifically set forth:
(a) The reasons for the denial;
(b) The pertinent Plan provisions on which the denial was based;
(c) Any additional material or information necessary for the claimant
to perfect his claim and an explanation of why such material or information
is needed; and
(d) An explanation of the Plan's procedure for review of the denial of
the claim.
In the event that the claim is not granted and notice of denial of a claim is
not furnished by the 30th day after such claim was filed, the claim shall be
deemed to have been denied on that day for the purpose of permitting the
claimant to request review of the claim.
SECTION 4.4 CLAIMS REVIEW PROCEDURE.
-----------------------
Any person whose claim filed pursuant to section 4.3 has been denied
in whole or in part by the Plan Administrator may request review of the claim by
the Plan Administrator, upon a form prescribed by the Plan Administrator. The
claimant shall file such form (including a statement of his position) with the
Plan Administrator no later than 60 days after the mailing or delivery of the
written notice of denial provided for in section 4.3, or, if such notice is not
provided, within 60 days after such claim is deemed denied pursuant to section
4.3. The claimant shall be permitted to review pertinent documents. A decision
shall be rendered by the Plan Administrator and communicated to the claimant not
later than 30 days after receipt of the
<PAGE>
-9-
claimant's written request for review. However, if the Plan Administrator finds
it necessary, due to special circumstances (for example, the need to hold a
hearing), to extend this period and so notifies the claimant in writing, the
decision shall be rendered as soon as practicable, but in no event later than
120 days after the claimant's request for review. The Plan Administrator's
decision shall be in writing and shall specifically set forth:
(a) The reasons for the decision; and
(b) The pertinent Plan provisions on which the decision is based.
Any such decision of the Plan Administrator shall be binding upon the claimant
and the Association, and the Plan Administrator shall take appropriate action to
carry out such decision.
SECTION 4.5 ALLOCATION OF FIDUCIARY RESPONSIBILITIES AND
EMPLOYMENT OF ADVISORS.
--------------------------------------------
Any Named Fiduciary may:
(a) Allocate any of his or its responsibilities (other than trustee
responsibilities) under the Plan to such other person or persons as he or
it may designate, provided that such allocation and designation shall be in
writing and filed with the Plan Administrator;
(b) Employ one or more persons to render advice to him or it with
regard to any of his or its responsibilities under the Plan; and
(c) Consult with counsel, who may be counsel to the Association.
SECTION 4.6 OTHER ADMINISTRATIVE PROVISIONS.
-------------------------------
(a) Any person whose claim has been denied in whole or in part must
exhaust the administrative review procedures provided in section 4.4 prior to
initiating any claim for judicial review.
(b) No bond or other security shall be required of the Plan
Administrator, or any officer or Employee of the Association to whom fiduciary
responsibilities are allocated by a Named Fiduciary, except as may be required
by ERISA.
(c) Subject to any limitation on the application of this section
4.6(c) pursuant to ERISA, neither the Plan Administrator, nor any officer or
Employee of the Association to whom fiduciary responsibilities are allocated by
a Named Fiduciary, shall be liable for any act of omission or commission by
himself or by another person, except for his own individual willful and
intentional malfeasance.
<PAGE>
-10-
(d) The Plan Administrator may, except with respect to actions under
section 4.4, shorten, extend or waive the time (but not beyond 60 days) required
by the Plan for filing any notice or other form with the Plan Administrator, or
taking any other action under the Plan.
(e) Any person, group of persons, committee, corporation or
organization may serve in more than one fiduciary capacity with respect to the
Plan.
(f) Any action taken or omitted by any fiduciary with respect to the
Plan, including any decision, interpretation, claim denial or review on appeal,
shall be conclusive and binding on the Association and all interested parties
and shall be subject to judicial modification or reversal only to the extent it
is determined by a court of competent jurisdiction that such action or omission
was arbitrary and capricious and contrary to the terms of the Plan.
ARTICLE V
MISCELLANEOUS
-------------
SECTION 5.1 RIGHTS OF EMPLOYEES.
-------------------
No Employee shall have any right or claim to any benefit under the
Plan except in accordance with the provisions of the Plan. The establishment of
the Plan shall not be construed as conferring upon any Employee or other person
any legal right to a continuation of employment or to any terms or conditions of
employment, nor as limiting or qualifying the right of the Association to
discharge any Employee.
SECTION 5.2 NON-ALIENATION OF BENEFITS.
--------------------------
The right to receive a benefit under the Plan shall not be subject in
any manner to anticipation, alienation, or assignment, nor shall such right be
liable for or subject to debts, contracts, liabilities, or torts.
SECTION 5.3 NON-DUPLICATION OF BENEFITS.
---------------------------
No provisions in this Plan shall be deemed to duplicate any
compensation or benefits provided under any agreement, plan or program covering
the Employee to which the Association is a party and any duplicative amount
payable under any such agreement, plan or program shall be applied as an offset
to reduce the amounts otherwise payable hereunder.
<PAGE>
-11-
SECTION 5.4 CONSTRUCTION.
------------
Whenever appropriate in the Plan, words used in the singular may be
read in the plural; words used in the plural may be read in the singular; and
the masculine gender shall be deemed equally to refer to the feminine gender or
the neuter. Any reference to a section number shall refer to a section of this
Plan, unless otherwise stated.
SECTION 5.5 HEADINGS.
--------
The headings of sections are included solely for convenience of
reference, and if there is any conflict between such headings and the text of
the Plan, the text shall control.
SECTION 5.6 GOVERNING LAW.
-------------
Except to the extent preempted by federal law, the Plan shall be
construed, administered and enforced according to the laws of the State of
Illinois applicable to contracts between citizens and residents of the State of
Illinois entered into and to be performed entirely within such jurisdiction.
SECTION 5.7 SEVERABILITY.
------------
The invalidity or unenforceability, in whole or in part, of any
provision of this Plan shall in no way affect the validity or enforceability of
the remainder of such provision or of any other provision of this Plan, and any
provision, or part thereof, deemed to be invalid or unenforceable shall be
reformed as necessary to render it valid and enforceable to the maximum possible
extent.
SECTION 5.8 TERMINATION OR AMENDMENT.
------------------------
The Association intends to keep this Plan in effect, but, subject to
the provisions of section 4 hereunder, the Association expressly reserves the
right to terminate or amend the Plan, in whole or in part, at any time by action
of the Board; provided, however, that no such amendment or termination which
adversely affects the current or prospective rights of any Employee shall be
effective earlier than six (6) months after written notice thereof is given to
such Employee.
SECTION 5.9 REQUIRED REGULATORY PROVISIONS.
------------------------------
The following provisions are included for the purposes of complying
with various laws, rules and regulations applicable to the Association:
<PAGE>
-12-
(a) Notwithstanding anything herein contained to the contrary, in no
event shall the aggregate amount of compensation payable to any person
under Article III of this Plan exceed the three times such person's average
annual total compensation for the last five consecutive calendar years to
end prior to his termination of employment with the Association (or for his
entire period of employment with the Association and its predecessors, if
less than five calendar years).
(b) Notwithstanding anything herein contained to the contrary, any
payments to the Employee by the Association, whether pursuant to this Plan
or otherwise, are subject to and conditioned upon their compliance with
section 18(k) of the FDI Act and any regulations promulgated thereunder.
(c) Notwithstanding anything herein contained to the contrary, if the
Employee is suspended from office and/or temporarily prohibited from
participating in the conduct of the affairs of the Association pursuant to
a notice served under section 8(e)(3) or 8(g)(1) of the FDI Act, the
Association's obligations under this Plan shall be suspended as of the date
of service of such notice, unless stayed by appropriate proceedings. If
the charges in such notice are dismissed, the Association, in its
discretion, may (i) pay to the Employee all or part of the compensation
withheld while the Association's obligations hereunder were suspended and
(ii) reinstate, in whole or in part, any of the obligations which were
suspended.
(d) Notwithstanding anything herein contained to the contrary, if the
Employee is removed and/or permanently prohibited from participating in the
conduct of the Association's affairs by an order issued under section
8(e)(4) or 8(g)(1) of the FDI Act, all prospective obligations of the
Association under this Plan shall terminate as of the effective date of the
order, but vested rights and obligations of the Association and the
Employee shall not be affected.
(e) Notwithstanding anything herein contained to the contrary, if the
Association is in default (within the meaning of section 3(x)(1) of the FDI
Act, all prospective obligations of the Association under this Plan shall
terminate as of the date of default, but vested rights and obligations of
the Association and the Employee shall not be affected.
(f) Notwithstanding anything herein contained to the contrary, all
prospective obligations of the Association hereunder shall be terminated,
except to the extent that a continuation of this Plan is necessary for the
continued operation of the Association: (i) by the Director of the OTS or
his designee or the FDIC, at the time the FDIC enters into an agreement to
provide assistance to or on behalf of the Association under the authority
contained in section 13(c) of the FDI Act; (ii) by the Director of the OTS
or his designee at the time such Director or designee approves a
supervisory merger to resolve problems related to the operation of the
Association or when the Association is determined by such
<PAGE>
-13-
Director to be in an unsafe or unsound condition. The vested rights and
obligations of the parties shall not be affected.
If and to the extent that any of the foregoing provisions shall cease to be
required by applicable law, rule or regulation, the same shall become
inoperative automatically as though eliminated by formal amendment of the Plan.
SECTION 5.10 WITHHOLDING.
-----------
Payments from this Plan shall be subject to all applicable federal,
state and local income withholding taxes.
SECTION 5.11 STATUS AS WELFARE BENEFIT PLAN UNDER ERISA.
------------------------------------------
This Plan is an "employee welfare benefit plan" within the meaning of
section 3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and shall be construed, administered and enforced according to the
provisions of ERISA.
<PAGE>
EXHIBIT 10.7
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
March 25, 1996
Mr. George L. Perucco
President and Chief Executive Officer
Home Federal Savings and Loan Association of Elgin
16 North Spring Street
Elgin, Illinois 60120
Dear Mr. Perucco:
This letter sets forth the agreement between Home Federal Savings and Loan
Association of Elgin, Illinois ("Home Federal" or the "Association") and RP
Financial, LC. ("RP Financial") for certain conversion appraisal services
pertaining to the Association's mutual-to-stock conversion and simultaneous
holding company formation. The specific services to be rendered byRP Financial
are described below. These services will be rendered by a team of two to three
senior consultants within our firm, as well as myself.
Description of Conversion Appraisal Services
--------------------------------------------
As part of this engagement, RP Financial represents and warrants that it is
experienced and expert in the area of corporate appraisal, including the
appraisal of mutual savings institutions undertaking a conversion from
mutual-to-stock form pursuant to 12 C.F.R. Part 563b. RP Financial is
independent of the Association and, to the best of its knowledge, acceptable to
the Office of Thrift Supervision ("OTS") to serve as an independent appraiser of
a converting institution.
Prior to preparing the valuation report, RP Financial will conduct a
financial due diligence, including on-site interviews of senior management and
reviews of financial and other documents and records, to gain insight into the
Association's operations, financial condition, profitability, risks and external
factors which impact the Association. RP Financial will prepare a written
detailed valuation report of Home Federal which will be fully consistent with
applicable regulatory guidelines and standard valuation practices. The
valuation will include an in-depth analysis of the Association's financial
condition and operating results, as well as assess the Association's interest
rate risk, credit risk and liquidity risk. The valuation report will comply
with the recent amendments to the OTS conversion regulations and will describe
the Assocation's business strategies and market area and prospects for the
future. A peer group analysis relative to publicly-traded savings institutions
will be conducted for the purpose of determining appropriate valuation
adjustments relative to the group. The valuation report will conclude with a
midpoint pro forma valuation as well as a range of value around the midpoint
value. The valuation report may be periodically updated throughout the
conversion process and there will be at least one updated valuation prepared at
the time of the closing of the stock offering.
RP Financial agrees to deliver the valuation appraisal and subsequent
updates, in writing, to Home Federal at the above address in conjunction with
the filing of the regulatory application. Subsequent updates will be filed
promptly as certain events occur which would warrant the preparation and filing
of such valuation updates. Further, RP Financial agrees to perform such other
services as are necessary or required in connection with the regulatory review
of the appraisal and respond to the regulatory comments, if any, regarding the
valuation appraisal and subsequent updates.
<PAGE>
RP Financial L.C.
Mr. George L. Perucco
March 25, 1996
Page 2
Fee Structure and Payment Schedule
- ----------------------------------
Home Federal agrees to pay RP Financial a fixed fee of $35,000 for these
services, plus reimbursable expenses. Payment of these fees shall be made
according to the following schedule:
. $5,000 upon execution of the letter of agreement engaging RP
Financial's services as outlined herein, which will be credited
against future services;
. $27,500 upon delivery of the completed original appraisal report;
and
. $2,500 upon completion of the conversion to cover all subsequent
valuation updates that may be required.
The Association will reimburse RP Financial for out-of-pocket expenses
incurred in preparation of the valuation. Such out-of-pocket expenses will
likely include travel, printing, telephone, facsimile, shipping, computer and
data services. RP Financial agrees to limit reimbursable expenses for the
appraisal and related business plan engagement to $7,500 without the prior
written authorization from the Association to exceed such level.
In The event Home Federal shall, for any reason, discontinue the proposed
conversion prior to delivery of the completed documents set forth above and
payment of the respective progress payment fees, Home Federal agrees to
compensate RP Financial according to RP Financial's standard billing rates for
consulting services based on accumulated and verifiable time and expenses. not
to exceed the respective fee caps noted above, after giving full credit to the
initial retainer fee. RP Financial's standard billing rates range from $75
per hour for research associates to $250 per hour for managing consultants.
If during the course of the proposed transaction, unforeseen events occur so
as to materially change the nature or the work content of the services
described in this contract, the terms of said contract shall be subject to
renegotiation by Home Federal and RP Financial. Such unforeseen events shall
include, but not be limited to, major changes in the conversion regulations,
appraisal guidelines or processing procedures as they relate to conversion
appraisals (exclusive of the recent amendments to the OTS regulations), major
changes in management or procedures, operating policies or philosophies, and
excessive delays or suspension of processing of conversion applications by the
regulators such that completion of the conversion transaction requires the
preparation by RP Financial of a new appraisal or financial projections.
Representations and Warranties
- ------------------------------
Home Federal and RP Financial agree to the following:
1. The Association agrees to make available or to supply to RP Financial
such information with respect to its business and financial condition as RP
Financial may reasonably request in order to provide the aforesaid valuation.
Such information heretofore or hereafter supplied or made available to RP
Financial shall include: annual financial statements, periodic regulatory
filings and material agreements, debt instruments, off balance sheet assets or
liabilities, commitments and contingencies, unrealized gains or losses and
corporate books and records. All information provided by the Association to RP
Financial shall remain strictly confidential(unless such information is
otherwise made available to the public), and if conversion is not consummated or
the services of RP Financial are terminated hereunder, RP Financial shall upon
request promptly return to the Association the original and any copies of such
information.
<PAGE>
RP Financial, LC.
Mr. George L. Perucco
March 25, 1996
Page 3
2. The Association hereby represents and warrants to RP Financial that any
information provided to RP Financial does not and will not, to the best of the
Association's knowledge, at the times it is provided to RP Financial, contain
any untrue statement of a material fact.
3. (a) The Association agrees that it will indemnify and hold harmless RP
Financial, any affiliates of RP Financial, the respective directors, officers,
agents and employees of RP Financial or their successors and assigns who act
for or on behalf of RP Financial in connection with the services called for
under this agreement (hereinafter referred to as "RP Financial"), from and
against any and all losses, claims, damages and liabilities (including, but not
limited to, all losses and expenses in connection with claims under the federal
securities laws) attributable to (i) any untrue statement or alleged untrue
statement of a material fact contained in the financial statements or other
information furnished or otherwise provided by the Association to RP Financial,
either orally or in writing which has not been corrected or superseded by
additional other information provided by the Association; (ii) the omission or
alleged omission of a material fact from the financial statements or other
information furnished or otherwise made available by the Association to RP
Financial which has not been corrected or superseded by additional other
information provided by the Association; or (iii) any action or omission to act
by the Association, or the Association's respective officers, directors,
employees or agents which action or omission is willful or negligent. The
Association will be under no obligation to indemnify RP Financial hereunder if a
court determines that RP Financial was negligent or acted in bad faith with
respect to any actions or omissions of RP Financial related to a matter for
which indemnification is sought hereunder. Any time expended by employees of RP
Financial to any action for which RP Financial is entitled to indemnification as
provided for hereunder, shall be an indemnifiable cost payable by the
Association at the normal hourly professional rate chargeable by such employee.
(b) RP Financial shall give written notice to the Association of such claim
or facts within twenty days of the assertion of any claim or discovery of
material facts upon which RP Financial intends to base a claim for
indemnification hereunder. In the event the Association elects, within
twenty days of the receipt of the original notice thereof, to contest such
claim by written notice to RP Financial, RP Financial will be entitled to be
paid any amounts payable by the Association hereunder, together with interest
on such costs from the date incurred at the Prime rate of interest as published
in The Wall Street Journal per annum within five days after a final
-----------------------
judgment of a court of competent jurisdiction determining that RP Financial is
entitled to indemnification under this letter. If the Association does not so
elect, RP Financial shall be paid promptly and in any event within thirty days
after receipt by the Association of the notice of the claim.
(c) The Association shall pay for or reimburse the reasonable expenses,
including attorneys' fees, incurred by RP Financial in advance of the final
disposition of any proceeding within thirty days of the receipt of such request
if RP Financial furnishes the Association: (1) a written statement of RP
Financial's good faith belief that it is entitled to indemnification hereunder;
and (2) a written undertaking to repay the advance if it ultimately is
determined in a final adjudication of such proceeding that it or he is not
entitled to such indemnification.
(d) In the event the Association does not pay any indemnified loss or
make advance reimbursements of expenses in accordance with the terms of
this agreement, RP Financial shall have all remedies available at law or in
equity to enforce such obligation.
It is understood that, in connection with RP Financial's above-mentioned
engagement, RP Financial may also be engaged to act for the Association in
one or more additional capacities as part of its mutual-to-stock conversion,
and that the terms of the original engagement may be embodied in one or more
separate agreements. The provisions of Paragraph 3 herein shall apply to the
original engagement, any such additional engagement, any modification of the
original engagement or such additional engagement and shall remain in full
force and effect following the completion or termination of RP Financial's
engagement(s). This agreement constitutes the
<PAGE>
entire understanding of the Association and RP Financial concerning the subject
matter addressed herein. This agreement may not be modified, supplemented or
amended except by written agreement executed by both parties.
Home Federal and RP Financial are not affiliated, and neither Home Federal
nor RP Financial has an economic interest in, or is held in common with, the
other and has not derived a significant portion of its gross revenues, receipts
or net income for any period from transactions with the other.
* * * * * * * * * * *
Please acknowledge your agreement to the foregoing by signing as indicated
below and returning to RP Financial a signed copy of this letter, together with
the initial retainer fee of $5,000.
Sincerely,
/s/ William E. Pommerening
Chief Executive Officer
and Managing Director
Agreed To and Accepted By: George L.Perucco /s/ George Perucco
--------------------
President and Chief Executive Officer
For: Home Federal Savings and Loan Association of Elgin
Elgin, Illinois
Date Executed: April 3, 1996
<PAGE>
EXHIBIT 10.8
March 25, 1996
Mr. George L. Perucco
President and Chief Executive Officer
Home Federal Savings and Loan Association of Elgin
16 North Spring Street
Elgin, Illinois 60120
Dear Mr. Perucco:
This letter sets forth agreement between Home Federal Savings and Loan
Association of Elgin, Illinois ("Home Federal" or the "Association"), and RP
Financial, LC. ("RP Financial"), whereby the Association has engaged RP
Financial to prepare the regulatory business plan and financial projections to
be adopted by the Association's Board of Directors pursuant to the formation of
a holding company, concurrent with the Association's mutual-to-stock
conversion. These services are described in greater detail below.
Description of Proposed Services
- --------------------------------
RP Financial's business planning services will include the following areas:
(1) evaluating Home Federal's current financial and operating condition,
business strategies and anticipated strategies in the future; (2) analyzing and
quantifying the impact of business strategies, incorporating the use of net
conversion proceeds both in the short and long term; (3) preparing detailed
financial projections on a quarterly basis for a period of at least three fiscal
years to reflect the impact of Board approved business strategies and use
of proceeds; (4) preparing the written business plan document which conforms
with applicable regulatory guidelines; and (5) addressing capitalization of
the holding company and cash flows between the holding company and the
Association. RP Financial will assist Home Federal in responding to regulatory
comments pertaining to the business plan.
Contents of the business plan will include: Philosophy/Goals; Economic
Environment and Background; Lending, Leasing and Investment Activities;
Deposit, Savings and Borrowing Activity; Asset and Liability Management;
Operations; Records, Systems and Controls; Growth, Profitability and
Capital; Responsibility for Monitoring this Plan.
Fee Structure and Payment Schedule
- -----------------------------------
The Association agrees to compensate RP Financial for preparation of the
business plan on a fixed fee basis of $12,500. Payment of the professional fees
shall be made upon delivery of the completed business plan.
The Association also agrees to reimburse RP Financial for those direct out-
of-pocket expenses necessary and incidental to providing the business
planning services. Reimbursable expenses will likely include shipping,
telephone/facsimile printing, computer and data services, and shall be
paid to RP Financial as incurred and billed. RP Financial will agree to
limit reimbursable expenses for the appraisal and business plan services to
$7,500, subject to written authorization from the Association to exceed such
level.
<PAGE>
RP Financial, LC.
Mr. George L. Perucco
March 25, 1996
Page 2
In the event the Association shall, for any reason, discontinue this planning
engagement prior to delivery of the completed business plan and payment of the
progress payment fee, the Association agrees to compensate RP Financial
according to RP Financial's standard billing rates for consulting services based
on accumulated and verifiable time expenses, not to exceed the fixed fee
described above, plus reimbursable expenses incurred.
If during the course of the planning engagement, unforeseen events occur so as
to materially change the nature or the work content of the business planning
services described in this contract, the terms of said contract shall be subject
to renegotiation by the Association and RP Financial. Such unforeseen events
may include changes in regulatory requirements as they specifically relate to
Home Federal or potential transactions which will dramatically impact the
Association such as a pending acquisition or a significant branch transaction.
* * * * * * * * * * *
Please acknowledge your agreement to the foregoing by signing as indicated
below and returning to RP Financial a signed copy of this letter.
Sincerely,
/s/ William E. Pommerening
William E. Pommerening
Chief Executive Officer
and Managing Director
Agreed To and Accepted By: George L. Perucco /s/ George L. Perucco
----------------------------
President and Chief Executive Officer
Upon Authorization by the Board of Director For: Home Federal Savings and
Loan Association of Elgin
Elgin, Illinois
Date Executed: April 3, 1996
<PAGE>
EXHIBIT 10.9
CROWE CHIZEK
May 9, 1996
Mr. George L. Perucco
President
Home Federal Savings & Loan
Association of Elgin
16 N. Spring Street
Elgin, IL 60120
Dear Mr. Perucco:
We are pleased to provide this proposal for conversion agent services to assist
with the conversion of Home Federal Savings & Loan Association of Elgin to a
stock savings bank. Choosing the right conversion agent is an important step to
ensuring a smooth and successful conversion. Crowe Chizek has been actively
involved in providing conversion accounting and EDP related services to the
thrift industry since 1977, and since that time we've provided conversion agent
services to over 125 converting thrifts. Enclosed for your review is a partial
listing of Crowe Chizek conversion engagements.
The personnel making up your project team are trained professional data
processing and business consultants with experience in conversion agent work. As
a certified public accounting and management consulting firm, we offer a wide
range of services and capabilities, as well as the flexibility to adapt to your
unique operating environment. We also provide numerous services designed to
reduce your printing and mailing costs, including:
. CONSOLIDATION OF MULTIPLE ACCOUNTS held by an individual
. HOUSEHOLD SORTING for member mailings - Household sorting allows
multiple family members living at the same address to be included in a
single mailing package. This often results in a significant reduction in
overall printing and mailing expenses.
. SORTING of all labels, proxy cards and/or stock order forms BY ZIP CODE
AND MULTIPLE MAILING CLASSES
In addition, Crowe Chizek provides software and services to complement your
marketing agent's efforts which far exceed those of other conversion agents. We
will work with you and your marketing agent to develop the most cost-effective
approach to meet your conversion objectives. To provide the utmost response and
turn-around time, all electronic data processing is done on
<PAGE>
Mr. George L. Perucco
May 9, 1996
Page 2
our own in-house computers. Contrary to other conversion agents who may require
your data to be submitted in a special format, our fees are not predicated on
any special processing by your data center. This service results in faster
turnaround time and lower overall conversion costs.
Based upon our understanding of the requirements of Home Federal Savings & Loan,
our fee to act as the conversion agent will be $20,000, payable as follows:
$5,000 upon signing of this letter, and the remainder upon closing of the
conversion. If for any reason the conversion should not close, fees will be
billed to the extent that the services as outlined below have been completed.
This fee does not include out-of-pocket expenses, which will be billed at actual
cost. However, out-of-pocket expenses will not exceed $1,000 without prior
approval by the bank. We believe that you will find our estimate to be based
upon reasonable expectations of the work required. Of course, should we
encounter a situation that would significantly alter our expectations, we would
discuss with you the required changes in effort and fees before proceeding.
SERVICES PROPOSED
- -----------------
We propose that Crowe Chizek provide electronic data processing services in the
following areas:
1. Data Extraction and Verification
2. Consolidation of Account Data
3. Blue Sky Laws Supporting Information
4. Household Identification for Mailing
5. Proxy Form Imprinting
6. Subscription Order Form Imprinting (if required)
7. Proxy Form Imprinting for Follow-up Mailings
8. Proxy Target Group Identification
9. Subscription Category Analysis Tools (software)
10. Proxy and/or Stock Solicitation Cards
11. Use of Crowe Chizek's Stock Subscription Management Software
12. Proxy Tabulation and Reporting
13. Inspectors of Election for the Special Meeting
14. Interest and Refund Check Generation
15. 1099 Form Preparation
16. 1099 Magnetic Media Reporting to the IRS
17. Transfer Agent Certificate Information (paper & magnetic media)
18. Liquidation Account Reporting
<PAGE>
Mr. George L. Perucco
May 9, 1996
Page 3
For more detail on each of the services outlined above, please refer to the
accompanying Description of Conversion Agent Services.
OVER-SUBSCRIPTION/UNDER-SUBSCRIPTION SERVICES
- ---------------------------------------------
Crowe Chizek will provide assistance as needed in the event of either an over or
under subscription. In the event of an over subscription, we will provide
assistance to your marketing agent in the allocation process. In the event of an
under subscription, we will provide similar assistance with resolicitation
processing.
STANDARD LIMITATIONS
- --------------------
In quoting the service fee estimates, and in engaging Crowe Chizek to work with
Home Federal Savings & Loan, the following standard limitations are understood:
. The Thrift will provide the necessary information in a fashion suitable
for the conduct of work specified above, and Crowe Chizek will hold all
non-public information made available to it strictly confidential;
. The Thrift will promptly notify Crowe Chizek of any changes in the Plan
of Conversion;
. The Thrift warrants the information provided to be accurate and Crowe
Chizek has no requirement to make any independent verification thereof;
and
. The Thrift agrees not to hold Crowe Chizek liable for any damages
sustained because of delays or errors occurring by reason of
circumstances beyond its control and not caused by Crowe Chizek
negligence or bad faith.
If the terms and objectives of our engagement as described above are acceptable,
please provide authorization to proceed by returning one copy of this letter
signed by the appropriate person at Home Federal Savings & Loan. A postage-paid
envelope is enclosed for your convenience.
<PAGE>
Mr. George L. Perucco
May 9, 1996
Page 4
We believe that stock conversion is a significant step for any thrift. We also
believe that our experience, audit discipline and proven electronic data
processing capabilities in this area can be an asset to your conversion process.
We will call you after you review this proposal to further discuss our services
and to offer our suggestions for the efficient processing of your conversion
effort. Of course, should you have any questions regarding the enclosed
information, or if we can be of service in any way, please do not hesitate to
call.
Sincerely,
/s/ Allan D. Jean
Allan D. Jean
Senior Manager
cc: Stephen E. Nelson - Hovde Financial, Inc.
Mark Sokolow - Thacher Proffitt & Wood
Accepted:
Home Federal Savings & Loan Association of Elgin
By: George Perucco
--------------
Title: President
Date May 13, 1996
<PAGE>
EXHIBIT 10.12
MODIFICATION AND EXTENSION TO LEASE
BETWEEN HOME FEDERAL SAVINGS AND LOAN
ASSOCIATION OF ELGIN, TENANT,
AND PACE, HOLTZ & WOOD, LANDLORD
--------------------------------
WHEREAS, Tenant desires to extend the term of the above-captioned
Lease for one year with a 90-day termination provision, and;
WHEREAS, Landlord and Tenant agree to such extension and modification:
NOW, THEREFORE, the Lease referred to herein above, a true copy of
which is attached hereto, is hereby extended and modified as follows:
1. The Lease is hereby extended for a one-year period beginning October 1,
1995, and ending September 30, 1996.
2. Tenant shall pay to Landlord during the extended term of the Lease the
sum of $2,500.00 in advance on the 1st day of each month until termination.
3. Tenant may terminate the Lease effective on the 90th day following the
date of mailing of written notice by certified mail to one of the
undersigned landlords, however, no such termination shall be effective
earlier than December 31, 1995.
4. That the Lease remains in full force and effect, in all other respects,
except to the extent modified herein.
<PAGE>
WITNESS the hands and seals of the parties hereto, as of the first day of
May, 1995.
TENANT: LANDLORD:
HOME FEDERAL SAVINGS AND LOAN
ASSOCIATION OF ELGIN /s/ James R. Pace
---------------------------
BY: /s/ Kenneth Moran /s/ David L. Holtz
- ------------------------------ ---------------------------
Kenneth L. Moran
Senior Vice President
/s/ Glenn T. Wood, Jr.
----------------------------
-2-
<PAGE>
THIS AGREEMENT, Made this ________ day of ____________________, 19___,
between Pace, Holtz & Wood, landlord(s), and Home Federal Savings & Loan
Association of Elgin, tenant(s),
WITNESSETH, That the said landlord(s) does hereby lease to the said
tenant(s), the following described property, situated in the Village of South
Elgin, County of Kane, State of Illinois, to be used only as a Loan Office and
ATM (money machine), viz: for the term of 5 years beginning on the 1st day of
October, 1990, and ending on the 30th day of September, 1995.
And the tenant agrees to pay as rent for the said premises, the sum of
$21,180.00, Twenty-one thousand one-hundred eighty DOLLARS, payable in advance
on the 1st day of each month, in payments of $1,765.00 dollars each from October
1, 1990 to September 30, 1991.
-- The Tenant also agrees to pay rent for said premises the sum of
$22,680.00 payable in advance on the 1st day of each month in payments
of $1,890.00 from October 1, 1991 to September 30, 1992.
-- The Tenant also agrees to pay rent for said premises the sum of
$24,240.00 payable in advance on the 1st day of each month in payments
of $2,020.00 from October 1, 1992 to September 30, 1993.
-- The Tenant also agrees to pay rent for said premises the sum of
$25,920.00 payable in advance on the 1st day of each month in payments
of $2,160.00 from October 1, 1993 to September 30, 1994.
-- The Tenant also agrees to pay rent for said premises the sum of
$27,720.00 payable in advance on the 1st day of each month in payments
of $2,310.00 from October 1, 1994 to September 30, 1995.
And the tenant covenants with the landlord, that at the expiration of the
term of this lease tenant will yield up the premises to the landlord without
further notice in as good condition as when the same were entered upon by the
tenant, loss by ordinary wear excepted; and _______________ will pay all
assessments that shall be levied upon said premises during said term for Water
Tax or Water Charges.
And the said tenant shall permit the landlord to have free access to the
premises hereby leased for the purpose of examining or exhibiting the same, or
to make any needful repairs or alterations of such premises, which said landlord
may see fit to make; also to allow to have placed upon said premises, at all
times, notices of "For Sale" or "To Rent," and will not interfere with the same.
It is Further Agreed by the said tenant that neither tenant nor tenant's
legal representatives will sublet said premises, or any part thereof, or assign
this Lease, or make any alterations, amendments or additions to the buildings on
said premises, without the written consent of the landlord had thereto, and that
neither tenant nor tenant's legal representatives will use said premises for any
purpose calculated to injure or deface the same or to injure the reputation or
credit of the premises or of the neighborhood.
<PAGE>
It is Further Agreed that the tenant shall keep said premises in a clean
and healthy condition, in accordance with the ordinances of the City, and the
directions of the Board of Health and Public Works, and all rules, regulations,
ordinances, laws or statutes of any governmental body.
-- Lessor also agrees that no other savings and loan, bank or finance
company will be allowed to have an office in said building during this
period of time.
-- It is further agreed that Lessee shall have an option to renew this
lease for an additional five years provided the Lessee gives the Lessor
written notice of its intention to exercise said option by June 1st,
1995. Rental fee will be negotiated at this time.
And it is Further Expressly Agreed between the parties, that if default
shall be made in the payment of the rent above reserved, or any part thereof, or
in any of the covenants or agreements herein contained to be kept by the tenant
or tenant's heirs, executors, administrators or assigns, it shall be lawful for
landlord or landlord's legal representatives to re-enter into and upon said
premises, or any part thereof, either with or without process of law, and re-
possess the same, and to distrain for any rent that may be due thereon, at the
election of said landlord; and in order to enforce a forfeiture for non-payment
of rent, it shall not be necessary to make a demand on the same day the rent
shall become due, but a demand and refusal or failure to pay at any time on the
same day, or at any time on any subsequent day, shall be sufficient; and after
such default shall be made, the tenant, and all persons in possession under
tenant shall be deemed guilty of forcible detainer of said premises under the
statute.
In Witness Whereof the parties have hereunto set their hands and seals the
day and year first above written.
HOME FEDERAL SAVINGS AND LOAN PACE, HOLTZ & WOOD (SEAL)
------------------
/s/ George L. Perucco /s/ James R. Pace (SEAL)
- --------------------- -----------------
/s/ David L. Holtz (SEAL)
- ---------------------- ------------------
/s/ Glenn T. Wood, Jr. (SEAL)
- ---------------------- ----------------------
<PAGE>
EXHIBIT 21.1
Exhibit 21.1 Subsidiaries of the Registrant
There are currently no subsidiaries of Home Bancorp of Elgin, Inc. (the
"Registrant"). Following the conversion of Home Federal Savings and Loan
Association of Elgin (the "Association") from a federally chartered mutual
savings and loan association to a federally chartered stock savings and loan
association and the issuance and sale of the issued and outstanding common stock
of the Association to the Registrant, the Association will be a wholly-owned
subsidiary of the Registrant.
<PAGE>
EXHIBIT 23.1
LETTERHEAD of KPMG Peat Marwick LLP
Consent of Independent
Certified Public Accountants
----------------------------
The Board of Directors
Home Federal Savings and Loan Association of Elgin:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in prospectus.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
June 12, 1996
<PAGE>
EXHIBIT 23.2
LETTERHEAD OF THACHER PROFFITT & WOOD
CONSENT OF THACHER PROFFITT & WOOD
We hereby consent to the reference to our firm under the heading "Legal
Matters" in the prospectus which is a part of (i) the Registration Statement on
Form S-1 of Home Bancorp of Elgin, Inc., filed with the Securities and Exchange
Commission and (ii) the Application for Conversion on Form AC of Home Federal
Savings and Loan Association of Elgin filed with the Office of Thrift
Supervision.
Very truly yours,
/s/ Thacher Proffitt & Wood
Thacher Proffitt & Wood
June 13, 1996
<PAGE>
EXHIBIT 23.3
June 12, 1996
Board of Directors
Home Federal Savings and Loan Association of Elgin
16 North Spring Street
Elgin, Illinois 60120
Gentlemen:
We hereby consent to the use of our firm's name in the Application for
Conversion of Home Federal Savings and Loan Association of Elgin, Elgin,
Illinois, and any amendments thereto, in the Form S-1 Registration Statement for
Home Bancorp of Elgin, Inc., and any amendments thereto, and in the Form AC for
Home Federal Savings and Loan Association of Elgin, and any amendments thereto.
We also hereby consent to the inclusion of, summary of and references to our
Appraisal Report and our statement concerning subscription rights in such
filings including the Prospectus of Home Bancorp of Elgin, Inc.
Very truly yours,
RP FINANCIAL, LC.
/s/ William E. Pommerening
William E. Pommerening
Chief Executive Officer
Washington Headquarters
Rosslyn Center
1700 North Moore Street, Suite 2210 Telephone: (703) 528-1700
Arlington, VA 22209 Fax No.: (703) 528-1788
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND THE STATEMENT OF EARNINGS OF HOME FEDERAL SAVINGS AND LOAN ASSOCIATION
OF ELGIN FOR THE PERIOD AT AND ENDING MARCH 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,077,630
<INT-BEARING-DEPOSITS> 15,161,337
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 6,128,252
<INVESTMENTS-MARKET> 6,157,702
<LOANS> 267,127,734<F1>
<ALLOWANCE> 855,711
<TOTAL-ASSETS> 306,687,655
<DEPOSITS> 264,484,873
<SHORT-TERM> 0
<LIABILITIES-OTHER> 5,007,854
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 37,194,928
<TOTAL-LIABILITIES-AND-EQUITY> 306,687,655
<INTEREST-LOAN> 5,326,380
<INTEREST-INVEST> 302,974
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 5,629,354
<INTEREST-DEPOSIT> 2,735,951
<INTEREST-EXPENSE> 2,773,212
<INTEREST-INCOME-NET> 2,856,142
<LOAN-LOSSES> 30,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,302,740
<INCOME-PRETAX> 842,196
<INCOME-PRE-EXTRAORDINARY> 511,932
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 511,932
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 3.98
<LOANS-NON> 1,077,316
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 700,532
<ALLOWANCE-OPEN> 825,711
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 855,711
<ALLOWANCE-DOMESTIC> 855,711
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>SEE NOTE 3 TO NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE>
EXHIBIT 99.1
CONVERSION APPRAISAL REPORT
HOME BANCORP OF ELGIN, INC.
PROPOSED HOLDING COMPANY FOR
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
ELGIN, ILLINOIS
DATED AS OF:
JUNE 7, 1996
PREPARED BY:
RP FINANCIAL, LC.
1700 NORTH MOORE STREET
SUITE 2210
ARLINGTON, VIRGINIA 22209
<PAGE>
[LETTERHEAD OF RP FINANCIAL, LC.]
June 7, 1996
Board of Directors
Home Federal Savings and Loan Association of Elgin
16 North Spring Street
Elgin, Illinois 60120
Gentlemen:
At your request, we have completed and hereby provide an independent
appraisal ("Appraisal") of the estimated pro forma market value of the common
stock which is to be issued in connection with the mutual-to-stock conversion of
Home Federal Savings and Loan Association of Elgin, Elgin, Illinois ("Home
Federal" or the "Association"). The common stock issued in connection with the
Association's conversion will simultaneously be acquired by a holding company,
Home Bancorp of Elgin, Inc. ("Home Bancorp" or the "Holding Company"). The
conversion involves the issuance of shares of common stock to depositors, tax-
qualified employee plans of Home Federal and the Holding Company, including Home
Bancorp's newly-formed employee stock ownership plan ("ESOP"), Home Federal's
employees, officers and directors, members of the local community and the public
at large.
This Appraisal is furnished pursuant to the conversion regulations
promulgated by the Office of Thrift Supervision ("OTS"). This Appraisal has been
prepared in accordance with the written valuation guidelines promulgated by the
OTS, most recently updated as of October 21, 1994. Specifically, this Appraisal
has been prepared in accordance with the "Guidelines for Appraisal Reports for
the Valuation of Savings and Loan Associations Converting from Mutual to Stock
Form of Organization" of the OTS, as successor to the Federal Home Loan Bank
Board ("FHLBB"), dated as of October 21, 1994; and applicable regulatory
interpretations thereof.
Description of Reorganization
- -----------------------------
The Board of Directors of the Association has adopted a Plan of
Conversion pursuant to which the Association will convert from a federally
chartered mutual savings and loan association to a federally chartered stock
savings and loan association and issue all of its outstanding shares to the
Holding Company. The Holding Company will sell in a Subscription Offering and,
if necessary, a Community Offering, Holding Company stock in the amount equal to
the appraised value of the Association. Immediately following the conversion,
the only significant assets of the Holding Company will be the capital stock of
the Association and the net conversion proceeds remaining after purchase of the
Association's common stock by the Holding Company. The Holding Company will use
50 percent of the net conversion proceeds to purchase the Association's common
stock. A portion of the remaining 50 percent of the net conversion proceeds will
be used to fund a loan to the ESOP with the remainder to be used as general
working capital.
RP Financial, LC.
- -----------------
RP Financial, LC. ("RP Financial") is a financial consulting firm
serving the financial services industry nationwide that, among other things,
specializes in financial valuations and analyses of business enterprises and
securities, including the pro forma valuation for savings institutions
converting from mutual-to-stock form. The background and experience of RP
Financial is detailed in Exhibit V-1. We believe that, except for the fee we
will receive for our appraisal and assisting the Association in the preparation
of its business plan, we are
<PAGE>
RP Financial, LC.
Board of Directors
June 7, 1996
Page 2
independent of the Association and the other parties engaged by the Association
to assist in the stock conversion process.
Valuation Methodology
- ---------------------
In preparing our appraisal, we have reviewed Home Federal's application
for Approval of Conversion, including the Proxy Statement, as filed with the
OTS, and the Holding Company's Form S-1 registration statement as filed with the
Securities Exchange Commission. We have conducted a financial analysis of the
Association that has included due diligence related discussions with the
Association's management; KPMG Peat Marwick LLP, the Association's independent
auditor; Thacher Proffitt & Wood, the Association's conversion counsel; and
Hovde Financial, Inc., which has been retained by the Association as a financial
and marketing advisor in connection with the Holding Company's stock offering.
All conclusions set forth in the appraisal were reached independently from such
discussions. In addition, where appropriate, we have considered information
based on other available published sources that we believe are reliable. While
we believe the information and data gathered from all these sources are
reliable, we cannot guarantee the accuracy and completeness of such information.
We have investigated the competitive environment within which the
Association operates and have assessed the Association's relative strengths and
weaknesses. We have kept abreast of the changing regulatory and legislative
environment and analyzed the potential impact on the Association and the
industry as a whole. We have analyzed the potential effects of conversion on the
Association's operating characteristics and financial performance as they relate
to the pro forma market value of Home Federal. We have reviewed the economy in
the Association's primary market area and have compared the Association's
financial performance and condition with selected publicly-traded thrift
institutions with similar characteristics as the Association's, as well as all
publicly-traded thrifts. We have reviewed conditions in the securities markets
in general and in the market for thrift stocks in particular, including the
market for existing thrift issues and the market for initial public offerings by
thrifts.
Our appraisal is based on the Association's representation that the
information contained in the regulatory applications and additional information
furnished to us by the Association and its independent auditors are truthful,
accurate and complete. We did not independently verify the financial statements
and other information provided by the Association and its independent auditors,
nor did we independently value the assets or liabilities of the Association. The
valuation considers the Association only as a going concern and should not be
considered as an indication of the liquidation value of Home Federal.
Our appraised value is predicated on a continuation of the current
operating environment for the Association and for all thrifts. Changes in the
local and national economy, the legislative and regulatory environment, the
stock market, interest rates, and other external forces (such as natural
disasters or significant world events) may occur from time to time, often with
great unpredictability and may materially impact the value of thrift stocks as a
whole or the Association's value alone. It is our understanding Home Federal
intends to remain an independent institution and there are no current plans for
selling control of the Association as a converted institution. To the extent
that such factors can be foreseen, they have been factored into our analysis.
Pro forma market value is defined as the price at which Home Federal's
stock, immediately upon completion of the conversion offering, would change
hands between a willing buyer and a willing seller, neither being under any
compulsion to buy or sell and both having reasonable knowledge of relevant
facts.
<PAGE>
RP Financial, LC.
Board of Directors
June 7, 1996
Page 3
Valuation Conclusion
- --------------------
It is our opinion that, as of June 7, 1996, the aggregate pro forma
market value of the shares to be issued was $57,500,000 at the midpoint, equal
to 5,750,000 shares offered at a per share value of $10.00. Pursuant to OTS
conversion guidelines, the 15 percent offering range indicates a minimum value
of $48,875,000 and a maximum value of $66,125,000. Based on the $10.00 per share
offering price, this valuation range equates to an offering of 4,887,500 shares
at the minimum to 6,612,500 shares at the maximum. In the event that the
Association's appraised value is subject to an increase, up to 7,604,375 shares
may be sold at an issue price of $10.00 per share, for an aggregate market value
of $76,043,750, without a resolicitation.
Limiting Factors and Considerations
- -----------------------------------
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of the
common stock. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject to
change from time to time, no assurance can be given that persons who purchase
shares of common stock in the conversion will thereafter be able to buy or sell
such shares at prices related to the foregoing valuation of the pro forma market
value thereof.
RP Financial's valuation was determined based on the financial condition
and operations of the Association as of March 31, 1996, the date of the
financial data included in the Holding Company's prospectus.
RP Financial is not a seller of securities within the meaning of any
federal and state securities laws and any report prepared by RP Financial shall
not be used as an offer or solicitation with respect to the purchase or sale of
any securities. RP Financial maintains a policy which prohibits the company, its
principals or employees from purchasing stock of its client institutions.
The valuation will be updated as provided for in the conversion
regulations and guidelines. These updates will consider, among other things, any
developments or changes in the Association's financial performance and
condition, management policies, and current conditions in the equity markets for
thrift shares. These updates may also consider changes in other external factors
which impact value including, but not limited to: various changes in the
legislative and regulatory environment, the stock market and the market for
thrift stocks, and interest rates. Should any such new developments or changes
be material, in our opinion, to the valuation of the shares, appropriate
adjustments to the estimated pro forma market value will be made. The reasons
for any such adjustments will be explained in the update at the date of the
release of the update.
Respectfully submitted,
RP FINANCIAL, LC.
/s/ William E. Pommerening
William E. Pommerening
Chief Executive Officer
/s/ Gregory E. Dunn
Gregory E. Dunn
Senior Vice President
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
Elgin, Illinois
PAGE
DESCRIPTION NUMBER
- ----------- ------
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
- -----------
Introduction 1.1
Strategic Overview 1.1
Balance Sheet Trends 1.4
Income and Expense Trends 1.7
Interest Rate Risk Management 1.11
Lending Activities and Strategy 1.12
Asset Quality 1.14
Funding Composition and Strategy 1.15
Legal Proceedings 1.15
CHAPTER TWO MARKET AREA
-----------
Introduction 2.1
Market Area Demographics 2.1
National Economy 2.3
Local Economy 2.4
Market Area Deposit Characteristics 2.5
CHAPTER THREE PEER GROUP ANALYSIS
-------------
Selection of Peer Group 3.1
Financial Condition 3.5
Income and Expense Components 3.8
Loan Composition 3.11
Interest Rate Risk 3.13
Credit Risk 3.13
Summary 3.16
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
Elgin, Illinois
(continued)
PAGE
DESCRIPTION NUMBER
- ----------- ------
CHAPTER FOUR VALUATION ANALYSIS
- ------------
Introduction 4.1
Appraisal Guidelines 4.1
RP Financial Approach to the Valuation 4.1
Valuation Analysis 4.2
1. Financial Condition 4.3
2. Profitability, Growth and Viability of Earnings 4.4
3. Asset Growth 4.5
4. Primary Market Area 4.6
5. Dividends 4.7
6. Liquidity of the Shares 4.8
7. Marketing of the Issue 4.9
A. The Public Market 4.9
B. The New Issue Market 4.13
C. The Acquisition Market 4.16
8. Management 4.17
9. Effect of Government Regulation and Regulatory Reform 4.17
Summary of Adjustments 4.18
Valuation Approaches 4.18
1. Price-to-Book ("P/B") 4.19
2. Price-to-Earnings ("P/E") 4.20
3. Price-to-Assets ("P/A") 4.20
Valuation Conclusion 4.20
<PAGE>
RP Financial, LC.
LIST OF TABLES
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
Elgin, Illinois
TABLE
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
1.1 Summary Balance Sheet Data 1.5
1.2 Historical Income Statements 1.8
2.1 Summary Demographic Data 2.2
2.2 Unemployment Trends 2.5
2.3 Deposit Summary 2.7
3.1 Peer Group of Publicly-Traded Thrifts 3.3
3.2 Balance Sheet Composition and Growth Rates 3.6
3.3 Income as a Percent of Average Assets and Yields, Costs, Spreads 3.9
3.4 Loan Portfolio Composition Comparative Analysis 3.12
3.5 Interest Rate Risk Comparative Analysis 3.14
3.6 Peer Group Credit Risk Comparative Analysis 3.15
4.1 Market Area Unemployment Rates 4.7
4.2 Conversion Pricing Characteristics 4.14
4.3 Market Pricing Comparatives 4.15
4.4 Public Market Pricing 4.21
<PAGE>
RP Financial, LC.
Page 1.1
I. OVERVIEW AND FINANCIAL ANALYSIS
Introduction
- ------------
Home Federal Savings and Loan Association of Elgin ("Home Federal" or the
"Association"), organized in 1883, is a federally chartered mutual savings and
loan association headquartered in Elgin, Illinois. In addition to its main
office facility, which includes a full service branch, the Association maintains
four full service branches. The offices are based in the Illinois cities of
Elgin, Crystal Lake, Roselle, South Elgin and Bartlett. In general, the
Association's maintains operations in the outlying suburbs of Chicago, with
Elgin being located approximately 40 miles northwest of downtown Chicago. The
substantial portion of the Association's depositors reside in close proximity to
one of the five branches. Home Federal's deposits are insured up to the maximum
allowable amount by the Savings Association Insurance Fund ("SAIF") of the
Federal Deposit Insurance Corporation ("FDIC"). At March 31, 1996, Home Federal
had $306.7 million in assets, $264.5 million in deposits and equity of $37.2
million or 12.1 percent of total assets. A summary of Home Federal's key
operating ratios for the past five and one quarter fiscal years are presented in
Exhibit I-3.
Home Bancorp of Elgin, Inc. ("Home Bancorp" or the "Holding Company"), a
Delaware corporation, was recently organized to facilitate the conversion of
Home Federal. In the course of the conversion, the Holding Company will acquire
all of the capital stock that the Association will issue upon its conversion
from the mutual to stock form of ownership. Going forward, Home Bancorp will
own 100 percent of the Association's stock, and the Association will be Home
Bancorp's sole subsidiary. Approximately 50 percent of the net proceeds
received from the sale of common stock will be used to purchase all of the then
to be issued and outstanding capital stock of the Association, with the balance
of the proceeds being retained by the Holding Company. At this time, no other
activities are contemplated for Home Bancorp other than the ownership of the
Association, a loan to the newly-formed employee stock ownership plan ("ESOP")
and investment of the cash retained at the holding company in investment
securities. In the future Home Bancorp may acquire or organize other operating
subsidiaries.
Strategic Overview
- ------------------
Home Federal is a community-oriented thrift, with a primary strategic
objective of meeting the borrowing and savings needs of its local customer base.
The market area served by the Association has been experiencing fairly strong
population and household growth, which has been fostered by a diversified and
expanding economy. The attractive characteristics of the market area, as well
as the market area's proximity to Chicago, has cultivated significant
competition for the Association from all aspects of the financial services
<PAGE>
RP Financial, LC.
Page 1.2
industry. In this operating environment the Association has pursued a strategy
of strengthening its capital position through asset shrinkage and the retention
of earnings. Asset shrinkage was in part facilitated by the sale of three
branches during fiscal years 1993 and 1994, which were primarily sold as a
measure to improve the efficiency of the branch network.
Throughout its history, Home Federal has pursued a traditional thrift
operating strategy and, thus, 1-4 family permanent mortgage loans and retail
deposits have consistently been the principal components of the Association's
assets and liabilities, respectively. While the Association's lending
activities include diversification into other types of lending, such lending has
typically been limited and in recent years has been substantially de-emphasized.
Home Federal's emphasis on originating 1-4 family permanent mortgage loans in
local and familiar markets, as well as the favorable real estate market
conditions of the primary market area, has been effective in limiting the
Association's credit risk exposure. Comparatively, the Association maintains a
greater degree of interest rate risk exposure, as Home Federal's emphasis on
fixed rate lending largely funded by short- and intermediate-term deposits has
resulted in a balance sheet that is liability sensitive.
As a traditional thrift, Home Federal's earnings base is largely dependent
upon net interest income and operating expense levels. Maintenance of a
liability sensitive balance sheet reflects the Association's philosophy that
earnings can be more fully maximized by incurring some interest rate risk, while
Home Federal's strong capital position and resultant favorable interest-earning
assets to interest-bearing liabilities ("IEA/IBL") ratio will sustain earnings
at lower but profitable levels during periods of rising and higher interest
rates. Home Federal's ability to take on a certain degree of interest rate risk
in the net margin is further enhanced by the limited risk that earnings will be
negatively impacted to any significant extent by credit quality related losses.
Interest rate risk associated with the net interest margin is also somewhat
negated by Home Federal's relatively high concentration of lower costing savings
and transaction accounts, which tend to be less interest sensitive than CDs.
Overall, Home Federal's operating strategy has provided for a relatively strong
net interest margin during the past five and one-quarter fiscal years.
The other major component of Home Federal's earnings, operating expenses,
have been maintained at a relatively high level for a traditional thrift.
Beyond the lack of asset growth, the same factors that have supported the
Association's healthy yield-cost spread have contributed to the maintenance of a
relatively high operating expense ratio. Most notably, the Association
maintains an asset and liability composition that tends to be costly to service,
due to the high concentrations of 1-4 family permanent mortgage loans and
checking accounts comprising assets and liabilities, respectively.
Retail deposits have consistently served as the primary funding source for
the Association, while borrowings have been used to a limited degree primarily
as a means to support control of funding costs. Home
<PAGE>
RP Financial, LC.
Page 1.3
Federal's deposits have generally declined in recent years, reflecting the sale
of three branches and a non-aggressive pricing strategy for CDs. Maintenance of
a relatively high concentration of transaction and savings accounts, along with
a CD pricing strategy that contains growth through offering less than premium
rates, has supported control of the Association's funding costs. Borrowings
utilized by the Association generally consist of FHLB advances. Most recently,
Home Federal added FHLB advances during fiscal 1995 to fund deposit run-off,
with the borrowings being repaid during the first quarter of fiscal 1996.
Over the past five and one-quarter fiscal years, Home Federal's operating
strategy has resulted in asset shrinkage, an increasing capital position and
moderate core earnings. An emphasis on originating 1-4 family fixed rate loans
for portfolio has served to limit the Association's credit risk exposure, while
the Association's interest rate exposure is more notable as indicated by its
negative short-term gap position. Earnings have been supported by a generally
favorable interest rate environment, in which the Association's maintenance of a
negative short-term gap position has been beneficial to the net interest margin.
Gains realized from the sale of three branches served to further enhance
earnings during fiscal years 1993 and 1994; however, absent the gains,
relatively high operating expenses have somewhat negated the strong net interest
margin that has been maintained by the Association. The Association's Board of
Directors has elected to convert to the stock form of ownership to improve the
competitive position of Home Federal. The additional capital realized from
conversion proceeds will increase liquidity to support funding of future loan
growth and other interest-earning assets, and reduce interest rate risk by
enhancing the Association's IEA/IBL ratio, which, will in turn reduce the
repricing mismatch between the Association's interest-sensitive assets and
interest-sensitive liabilities. The additional funds realized from the stock
offering will also serve as an alternative funding source to deposits in meeting
the Association's future funding needs, which will allow for competitive pricing
in the Association's deposit rates. Additionally, Home Federal's higher equity-
to-assets ratio will also better position the Association to take advantage of
expansion opportunities as they arise. Such expansion would most likely occur
through acquiring branches or other financial institutions in areas that would
provide for further penetration in the markets currently served by the
Association or nearby surrounding markets. At this time, the Association has no
other specific plans for expansion other than internal growth. The
Association's projected internal use of proceeds are highlighted below.
o Holding Company. Approximately 50 percent of the net conversion
---------------
proceeds will be retained by Home Bancorp. Such funds will initially
be used to provide a loan to the Association's ESOP trust, and the
balance will be invested into short-term investments. Over time, the
Holding Company funds may be utilized for various corporate purposes,
including payment of dividends and possible repurchase of common stock
consistent with OTS limitations.
o Home Federal. Approximately 50 percent of the net proceeds of the
------------
conversion will be infused into the Association in exchange for all of
the Association's newly issued stock. Proceeds infused into the
Association will initially be invested into short-term investments.
<PAGE>
RP Financial, LC.
Page 1.4
Over time, the proceeds are expected to be redeployed into the
Association's loan growth and normal investment activities.
Overall, it is the Association's objective to pursue growth that will serve
to increase returns, while, at the same time, growth will not be pursued that
compromises the credit quality or increases the overall risk associated with
Home Federal's operations. The Association has acknowledged that it intends to
operate with excess capital in the near term, operating with a below market
return on equity, until such time as the new capital can be leveraged in a safe
and sound manner over an extended period of time.
Balance Sheet Trends
- --------------------
From December 31, 1991 through March 31, 1996, Home Federal exhibited
annual asset growth of negative 1.0 percent (see Table 1.1). During this
period, the Association's interest-earning asset composition exhibited a mild
shift towards loans, with the balance of loans receivable increasing from 83.4
percent of assets at fiscal year end 1991 to 86.1 percent of assets at March 31,
1996. Assets have been funded primarily with retail deposits and retained
earnings.
Notwithstanding the increase in the proportion of loans receivable
comprising total assets, the balance of loans receivable declined modestly from
fiscal year end 1991 to March 31, 1996. The decline in the loan balance was
attributable to shrinkage in loan types other than 1-4 family permanent mortgage
loans, reflecting the Association's substantial de-emphasis on all types of
lending diversification. Multi-family, commercial real estate, construction and
land, and consumer loans all declined in balance from fiscal year end 1991 to
March 31, 1996, while a modest increase was recorded in 1-4 family permanent
mortgage loans over the same time period. The increase in the concentration of
loans comprising total assets resulted from a more notable decline in cash and
investments. As shown in Table 1.1, Home Federal's holding of investment
securities has been maintained at 2.0 percent or less of total assets since
peaking at 5.0 percent of assets at fiscal year end 1991. The general decline
in the investment balance reflects the use of those funds to fund loan growth,
deposit run-off, and the branch sales, as well as the Association's decision to
maintain a higher proportion of its liquidity in cash and cash equivalents.
The Association's traditional emphasis on 1-4 family lending is readily
apparent, as loans secured by 1-4 family residences have consistently accounted
for the largest portion of the loan portfolio. Furthermore, the concentration
of 1-4 family loans comprising total loans outstanding has increased during the
past five and one-quarter fiscal years, with such loans amounting to 96.2
percent and 98.1 percent of total loans outstanding at
<PAGE>
RP Financial, LC
Page 1.5
<TABLE>
<CAPTION>
Table 1.1
Home Federal Savings and Loan Association of Elgin
Historical Balance Sheets
(Amount and Percent of Assets)
For the Fiscal Year Ended December 31,
--------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995
------------------ ------------------ ----------------- ----------------- ------------------
Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct
------- ---- ------ --- ------ --- ------- --- ------ ----
($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Amount of:
Assets $320,650 100.0% $347,173 100.0% $334,390 100.0% $306,956 100.0% $304,520 100.0%
Loans receivable, net $267,481 83.4% 289,186 83.3% 301,676 90.2% 271,040 88.3% 267,153 87.7%
Investment securities $16,092 5.0% 6,019 1.7% 0 0.0% 5,918 1.9% 5,948 2.0%
Deposits $296,212 92.4% 318,971 91.9% 293,932 87.9% 267,938 87.3% 259,972 85.4%
Borrowings $0 0.0% 0 0.0% 7,000 2.1% 0 0.0% 4,000 1.3%
Total equity $21,933 6.8% 25,701 7.4% 29,961 9.0% 34,319 11.2% 36,683 12.0%
<CAPTION>
Table 1.1
Home Federal Savings and Loan Association of Elgin
Historical Balance Sheets
(Amount and Percent of Assets)
Annual
Growth
March 31, 1996 Rate
------------------- ------
Amount Pct Pct
------ --- ---
($000) (%) (%)
<S> <C> <C> <C>
Total Amount of:
Assets $306,688 100.0% -1.04%
Loans receivable, net $264,082 86.1% -0.30%
Investment securities $5,955 1.9% -20.86%
Deposits $264,485 86.2% -2.63%
Borrowings $0 0.0% 0.00%
Total equity $37,195 12.1% 13.23%
</TABLE>
____________________________
(1) Ratios are as a percent of ending assets.
Sources: Home Federal's prospectus and audited financial statements.
<PAGE>
RP Financial, LC.
Page 1.6
fiscal year end 1991 and March 31, 1996, respectively. The increase in the
concentration of 1-4 family loans has largely stemmed from the Association's
very limited activity in other lending areas, with commercial real estate and
multi-family loans representing the most notable area of lending diversification
amounting to 2.8 percent and 1.5 percent of total loans outstanding as of
December 31, 1991 and March 31, 1996, respectively. The balance of the loan
portfolio consists of nominal balances of construction and land loans and
consumer loans, which have also declined in balance since fiscal year end 1991.
From fiscal year end 1991 to March 31, 1996, construction and land loans
declined from 0.6 percent to 0.2 percent of total loans, while consumer loans
declined from 0.4 percent to 0.2 percent of total loans over the same time
period.
Subsequent to fiscal year end 1991, Home Federal has maintained a
relatively low balance of investments, ranging from a zero balance at fiscal
year end 1993 to 2.0 percent of assets at fiscal year end 1995. As of March 31,
1996, the investment portfolio consisted of a U.S. Treasury note, which was
scheduled to mature in September 1997. Consistent with the Association's
philosophy of not selling securities, the U.S. Treasury note has been classified
as held to maturity. Mortgage-backed securities, which are not shown in Table
1.1, have not been an active area of investment for the Association, as
indicated by the $173,000 balance maintained at March 31, 1996. Mortgage-backed
securities held by the Association consist of GNMA securities and are classified
as held to maturity. Exhibit I-4 provides historical detail of the
Association's investment portfolio.
In addition to investment securities, the Association holds cash and cash
equivalents and FHLB stock, which amounted to $24.2 million and $2.7 million,
respectively, at March 31, 1996. Accordingly, the Association's cash and
investments balance totaled $32.9 million, or 10.7 percent of assets, at March
31, 1996, versus comparative measures of $42.8 million, or 13.3 percent of total
assets, at December 31, 1991. In general, the Association currently targets
cash and investments to be maintained between 8.0 percent and 12.0 percent of
assets.
Over the past five and one-quarter fiscal years, Home Federal's funding
needs have been substantially met through retail deposits, internal cash flows
and retained earnings. From fiscal year end 1991 through March 31, 1996, the
Association's deposits declined at an annual rate of 2.6 percent. Most of the
decline in deposits resulted from the sale of three branches during fiscal years
1993 and 1994, although additional deposit shrinkage was recorded in fiscal 1995
as well. Comparatively, the trend of deposit shrinkage was reversed in the
first quarter of fiscal 1996, reflecting growth in both CDs and transaction and
savings accounts. Home Federal's use of borrowings typically has been limited,
with the Association's most prominent use of borrowings occurring during fiscal
1993. The borrowings added during fiscal 1993 were used to provide funding for
the sale of a branch and were repaid during fiscal 1994 through cash flow
provided by shrinkage in the loan portfolio. In fiscal 1995, Home Federal added
borrowings to fund deposit run-off, reflecting the Association's
<PAGE>
RP Financial, LC.
Page 1.7
strategy of controlling deposit costs through less competitive pricing. Deposit
growth and cash flow realized from a decline in the loan balance funded the
repayment of all of the Association's borrowings during the first quarter of
fiscal 1996.
Home Federal's deposit composition has consistently reflected a relatively
high concentration of lower costing transaction and savings accounts; however,
as CD rates became more attractive in 1994 and 1995, the Association's deposit
composition shifted towards CDs. The two branches sold during fiscal 1994 may
have also contributed to the decline in the Association's level of transaction
and savings accounts. As of March 31, 1996, CDs comprised 48.9 percent of the
Association's deposits, versus a comparative ratio of 41.9 percent at December
31, 1993.
Positive earnings during the past five and one-quarter fiscal years
translated into an annual capital growth rate of 13.2 percent for the
Association. Capital growth combined with a decline in assets served to
increase Home Federal's equity-to-assets ratio from 6.8 percent at the end of
fiscal 1991 to 12.1 percent at March 31, 1996. All of the Association's capital
is tangible capital, and the Association maintained capital surpluses relative
to all of its regulatory capital requirements at March 31, 1996. The addition
of conversion proceeds will serve to strengthen Home Federal's capital position
and competitive posture within its primary market area, as well as support
expansion into other nearby markets if favorable growth opportunities are
presented.
Income and Expense Trends
- -------------------------
The Association has reported positive earnings over the last five and one-
quarter fiscal years (see Table 1.2), ranging from a low of 0.71 percent of
average assets for the twelve months ended March 31, 1996 to a high of 1.33
percent of average assets in fiscal 1994. Consistent with the Association's
traditional thrift operating mode, net interest income and operating expenses
have been the dominant factors in Home Federal's earnings. Non-interest
operating income has been a fairly stable and moderate contributor to the
Association's earnings, while non-recurring items, such as gains and losses
realized from the sale of investments and other assets, have typically not been
a significant factor in the Association's earnings. However, the peak earnings
recorded in fiscal 1994 were supported by gains recorded on the sale of two
branches. Loan loss provisions established by the Association have been limited
over the past five and one-quarter fiscal years, in light of the Association's
favorable credit quality measures.
Home Federal's level of net interest income before provisions for loan
losses peaked at 4.54 percent of average assets in fiscal 1993 and has trended
lower during the past two and one-quarter fiscal years. The increases recorded
in Home Federal's net interest income to average assets ratio from fiscal 1991
to fiscal 1993
<PAGE>
RP Financial, LC
Page 1.8
<TABLE>
<CAPTION>
Table 1.2
Home Federal Savings and Loan Association of Elgin
Historical Income Statements
(Amount and Percent of Avg. Assets)(1)
For the Fiscal Year Ended December 31,
-----------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995
----------------- ------------------ ------------------ ----------------- ------------------
Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income $30,975 9.46% $28,639 8.59% $27,652 7.92% $24,669 7.53% $22,925 7.56%
Interest Expense (19,071) -5.82% (14,068) -4.22% (11,791) -3.38% (10,484) -3.20% (10,850) -3.58%
------- ---- ------ ---- ------ ---- ------ ----- ------ -----
Net Interest Income $11,904 3.63% $14,571 4.37% $15,861 4.54% $14,185 4.33% $12,075 3.98%
Provision for
Loan Losses (232) -0.07% (256) -0.08% (240) -0.07% (240) -0.07% (180) -0.06%
------- ---- ------ ---- ------ ---- ------ ----- ------ -----
Net Interest Income
after Provisions $11,672 3.56% $14,315 4.29% $15,621 4.47% $13,945 4.26% $11,895 3.92%
Other Income 1,144 0.35% 1,244 0.37% 1,556 0.45% 1,423 0.43% 1,150 0.38%
Operating Expense (9,017) -2.75% (9,526) -2.86% (10,402) -2.98% (9,624) -2.94% (9,069) -2.99%
------- ---- ------ ---- ------ ---- ------ ----- ------ -----
Net Operating Income $3,799 1.16% $6,033 1.81% $6,775 1.94% $5,744 1.75% $3,976 1.31%
Non-Operating Income
- --------------------
Net gain(loss) on
sale of IEA $0 0.00% $0 0.00% $0 0.00% $0 0.00% $0 0.00%
Net gain(loss) on REO 33 0.01% 0 0.00% 10 0.00% 0 0.00% 0 0.00%
Other Non-Op.
Income/(Expense) 0 0.00% 0 0.00% 822 0.24% 1,731 0.53% 0 0.00%
------- ---- ------ ---- ------ ---- ------ ----- ------ -----
Net Non-Operating
Income 33 0.01% 0 0.00% 832 0.24% 1,731 0.53% 0 0.00%
Net Income Before Tax $3,832 1.17% $6,033 1.81% $7,607 2.18% $7,475 2.28% $3,976 1.31%
Income Taxes (1,441) -0.44% (2,265) -0.68% (2,998) -0.86% (3,117) -0.95% (1,612) -0.53%
Change in Acctg.
Principle -- -- -- -- (348) -0.10% 0 0.00% -- --
------- ---- ------ ---- ------ ---- ------ ----- ------ -----
Net Income (Loss) $2,391 0.73% $3,768 1.13% $4,261 1.22% $4,358 1.33% $2,364 0.78%
Core Earnings
- -------------
Net Income Before
Ext. Items $2,391 0.73% $3,768 1.13% $4,261 1.22% $4,358 1.33% $2,364 0.78%
Addback: Non-Operating 0 0.00% 0 0.00% 0 0.00% 0 0.00% 0 0.00%
Deduct: Non-Operating
Gains (33) -0.01% 0 0.00% (10) -0.00% 0 0.00% 0 0.00%
Tax Effect Non-Op.
Item(2) 14 0.00% 0 0.00% 4 0.00% 0 0.00% 0 0.00%
------- ---- ------ ---- ------ ---- ------ ----- ------ -----
Core Net Income $2,372 0.72% $3,768 1.13% $4,255 1.22% $4,358 1.33% $2,364 0.78%
<CAPTION>
Table 1.2
Home Federal Savings and Loan Association of Elgin
Historical Income Statements
(Amount and Percent of Avg. Assets)(1)
For the 12 Months
Ended 3/31/96
------------------
Amount Pct
------ ----
($000) (%)
<S> <C> <C>
Interest Income $22,806 7.41%
Interest Expense (11,075) -3.60%
------- -------
Net Interest Income $11,731 3.81%
Provision for
Loan Losses (165) -0.05%
------- -------
Net Interest Income
after Provisions $11,566 3.76%
Other Income 1,181 0.38%
Operating Expense (9,084) -2.95%
------- -------
Net Operating Income $3,663 1.19%
Non-Operating Income
- --------------------
Net gain(loss) on sale $0 0.00%
Net gain(loss) on REO 18 0.01%
Other Non-Op.
Income/(Expense) 1 0.00%
------- -------
Net Non-Operating
income 19 0.01%
Net Income Before Tax $3,682 1.20%
Income Taxes (1,501) -0.49%
Change in Acctg.
Principle -- ---
------- -------
Net Income (Loss) $2,181 0.71%
Core Earnings
- -------------
Net Income Before
Ext. Items $2,181 0.71%
Addback: Non-Operating 0 0.00%
Deduct: Non-Operating
Gains (18) -0.01%
Tax Effect Non-Op.
Items(2) 7 0.00%
------- -------
Core Net Income $2,171 0.71%
</TABLE>
____________________________
(1) Ratios are as a percent of average assets.
(2) Assumes tax rate of 41.0 percent.
Sources: Home Federal's prospectus and audited financial statements.
<PAGE>
RP Financial, LC.
Page 1.9
were supported by a number of factors, including the declining interest rate
environment, an improving capital position, and a shift in the Association's
deposit composition towards lower costing savings and transaction accounts.
The impact of interest rates on Home Federal's net interest margin is
further revealed through examination of the Association's historical net
interest rate spreads and yields and costs as set forth in Exhibits I-3 and I-5.
As indicated by the upward trend in Home Federal's yield-cost spread from fiscal
1991 through fiscal 1993, the declining interest rate environment served as an
earnings benefit to the Association's net interest margin. In particular,
maintenance of a negative short-term gap position provided for a more rapid
decline in the Association's cost of funds relative to the yield earned on
interest-earning assets. The widening of the yield-cost spread was further
supported by a shift in the Association's deposit composition towards lower
costing savings and transaction accounts, in light of the relatively low market
rates being offered on CDs. Overall, the Association's yield-cost spread
increased from 3.71 percent in fiscal 1991 to 4.60 percent in fiscal 1993.
Comparatively, higher interest rates resulted in a narrowing of the
Association's yield-cost spread during the past two and one-quarter fiscal
years, reflecting the more immediate impact of interest rate movements on Home
Federal's cost of funds and the shift in deposit composition towards CDs. In
fact, despite the increase in interest rates, the Association's yield on
interest-earning assets has continued to decline, reflecting the ongoing
repayment of higher yielding fixed rate loans. From fiscal 1993 to the first
quarter of fiscal 1996, the Association's yield on interest-earning assets
declined from 8.31 percent to 7.85 percent, while, over the same time period,
Home Federal's cost of funds increased from 3.71 percent to 4.32 percent.
Overall, the Association's yield-cost spread narrowed from 4.60 percent during
fiscal 1993 to 3.53 percent during the first quarter of fiscal 1996. As of
March 31, 1996, the Association maintained a yield-cost spread of 3.29 percent,
indicating that the downward trend in Home Federal's net interest margin will
continue. However, Home Federal's net interest margin will likely be enhanced
by the stock offering, due to the reinvestment of interest-free capital into
interest-earning assets and the higher IEA/IBL ratio that will result from the
Association's increased capital position.
Consistent with the Association's adherence to a traditional thrift
operating philosophy and resultant limited diversification, sources of non-
interest operating income have not been a significant contributor to the
Association's earnings, although such income has been a relatively stable
contributor to Home Federal's earnings over the past five and one-quarter fiscal
years. Throughout the period shown in Table 1.2, sources of non-interest
operating income ranged from 0.35 percent to 0.45 percent of average assets, and
for the twelve months ended March 31, 1996 non-interest operating income equaled
0.38 percent of Home Federal's average assets. Service charges and other fees
earned from retail banking activities have accounted for most of the
<PAGE>
RP Financial, LC.
Page 1.10
Association's non-interest operating income, with such income being primarily
generated from Home Federal's checking account base. Home Federal has been
effective in competing for checking account deposits through offering attractive
fee structures for those accounts. As of March 31, 1996, checking accounts
comprised 19.3 percent of the Association's deposits. At this time, the
Association has no plans to further diversify into activities that would
generate additional non-interest operating income and, thus, Home Federal's
earnings can be expected to remain highly dependent upon the net interest
margin.
For a traditional thrift, the Association exhibited relatively high
operating expenses during the five and one-quarter period shown in Table 1.2.
From fiscal year end 1991 through fiscal year end 1995, operating expenses
trended higher from 2.75 percent of average assets to 2.99 percent of average
assets and then declined modestly to 2.95 percent of average assets for the
twelve months ended March 31, 1996. While the sale of the three branches during
fiscal years 1993 and 1994 served to reduce operating expenses, the reduction in
operating expenses was more than offset by asset shrinkage accompanied by the
branch sales and the continued decline in assets recorded during fiscal 1995.
Comparatively, modest asset growth in first quarter of 1996 served to leverage
operating expenses slightly. In general, the high servicing costs associated
with maintaining high concentrations of 1-4 family permanent mortgage loans and
checking accounts contribute to the relatively high operating expense ratio
maintained by the Association, reflecting Home Federal's strategy that the
relatively high servicing costs are more than offset by the yield-cost benefits
provided by 1-4 family permanent mortgage loans and checking accounts.
The recent trends in the Association's net interest margin and operating
expense ratio indicate that Home Federal has been experiencing earnings
compression from the major two components of its core earnings, as highlighted
by the decline in the Association's expense coverage ratio (net interest income
divided by operating expenses). Home Federal's expense coverage ratio equaled
1.52 times during fiscal 1993, versus a comparative ratio of 1.29 times during
the twelve months ended March 31,1996. The Association's conversion to stock
form will place further upward pressure on operating expenses, due to increase
costs associated with operating as a publicly-traded institution and expenses
related to the stock benefit plans. At the same time, Home Federal's stronger
capital position following the infusion of conversion proceeds will serve to
increase the Association's capacity to leverage operating expenses through
pursuing more aggressive asset growth.
Gains and losses resulting from the sale of investments have not been a
significant factor in the Association's earnings, reflecting Home Federal's
general philosophy of holding investment securities to maturity and retaining
all loan originations for portfolio. However, gains realized from the sale of
one branch in fiscal 1993 and two branches in fiscal 1994 added $822,000 and
$1.7 million to the Association's pre-tax earnings during fiscal years 1993 and
1994, respectively. Subsequent to fiscal 1994 gains have not been a material
factor in the Association's earnings. Likewise, gains and losses realized from
the sale of real estate
<PAGE>
RP Financial, LC.
Page 1.11
owned have had a limited impact on the Association's earnings over the past five
and one-quarter fiscal years, with Home Federal posting modest gains on the sale
of real estate owned during fiscal years 1993 and 1995 and for the twelve months
ended March 31, 1996. Accordingly, going forward, gains and losses from the sale
of investments, loans and real estate owned are expected to remain a minor
factor in the Association's earnings.
Loan loss provisions established by the Association have been fairly stable
during the past five and one-quarter fiscal years, ranging from a low of 0.05
percent of average assets for the twelve months ended March 31, 1996 to a high
of 0.08 percent of average assets in fiscal 1992. A low risk lending strategy
and favorable credit quality measures have served to contain the amount of loss
provisions established by the Association. As of March 31, 1996, the
Association maintained valuation allowances of $856,000, equal to 0.32 percent
of net loans receivable and 58.9 percent of non-performing assets. Exhibit I-6
sets forth the Association's loan loss allowance activity since fiscal 1991.
The Association paid taxes throughout the period shown in Table 1.2, with
effective tax rates ranging from a low of 37.5 percent in fiscal 1992 to a high
of 41.7 percent in fiscal 1994. For the twelve months ended March 31, 1996,
Home Federal posted an effective tax rate of 40.8 percent. Effective January 1,
1993, the Association adopted SFAS 109, with the cumulative effect of the
accounting change resulting in a one time reduction in after-tax earnings of
$348,000.
Interest Rate Risk Management
- -----------------------------
Home Federal's balance sheet is currently liability-sensitive, as indicated
by its one year cumulative gap to assets ratio of negative 28.8 percent (see
Exhibit I-7). An emphasis on fixed rate lending funded primarily by short- and
intermediate-term deposits have been the primary factors accounting for the
repricing mismatch between Home Federal's interest-sensitive assets and
interest-sensitive liabilities. As of March 31, 1996, of the total loans due
after one year from March 31, 1996, fixed rate loans comprised 80.4 percent of
those loans (see Exhibit I-8). Home Federal pursues management of interest rate
risk from both the asset and liability sides of the balance, with the intent of
maintaining a certain degree of interest rate risk that will provide for
enhanced profitability during periods of low and declining interest rates.
Strategies implemented by the Association to support control of interest rate
risk include maintaining approximately 10.0 percent of assets in short-term
investments and liquidity, placing a greater emphasis on the origination of 3
and 5 year ARM loans and 15 year fixed rate loans, and promoting certain longer
term CDs from time-to-time. Management of interest rate risk is further
supported by the Association's high concentration of transaction and savings
accounts, given the lower cost and less interest-sensitive characteristics of
those accounts.
<PAGE>
RP Financial, LC.
Page 1.12
The short-term repricing mismatch between the Association's interest-
sensitive assets and liabilities indicates that net interest income will be
somewhat inconsistent in various interest rate environments, with declining and
low interest rate environments being highly beneficial to Home Federal's net
interest margin. Comparatively, the Association's net interest margin is
adversely impacted by rising and higher interest rates, as highlighted by the
narrowing of Home Federal's yield-cost since fiscal 1993. As noted previously,
the Association's yield-cost spread narrowed from 4.60 percent during fiscal
1993 to 3.29 percent as of March 31, 1996. However, given the Association's
current IEA/IBL ratio of 112.4 percent, which will become stronger following the
infusion of conversion proceeds, Home Federal has the capacity to take on a
certain degree of interest rate risk and sustain positive, although lower, core
earnings during periods of moderately rising interest rates.
Lending Activities and Strategy
- -------------------------------
The Association's lending activities have traditionally concentrated on the
origination and retention of 1-4 family permanent mortgage loans (see Exhibits
I-9 and I-10, which reflect loan composition and lending activity,
respectively). As of March 31, 1996, $262.1 million, or 98.1 percent, of Home
Federal's Savings' total loan portfolio was comprised of loans secured by 1-4
family properties. Included in the balance of 1-4 family permanent mortgage
loans was $1.4 million of construction loans, which convert to permanent loans
upon completion of the construction. The Association has substantially de-
emphasized other types of lending in recent years, with multi-family and
commercial real estate loans, which totaled $3.9 million, or 1.5 percent of
total loans outstanding at March 31, 1996, comprising the second largest
component of Home Federal's loan portfolio. The balance of the loan portfolio
was comprised of minimal balances of construction and land loans and consumer
loans. Exhibit I-11 provides the contractual maturity of the Association's loan
portfolio, by loan type, as of March 31, 1996.
Home Federal originates both fixed rate and adjustable rate 1-4 family
loans, retaining all originations for portfolio. A substantial majority of
these loans are underwritten in accordance with FNMA requirements. To enhance
the interest sensitivity of the loan portfolio, ARM loans and 15 year fixed rate
loans are currently being emphasized by the Association. Various ARM loan
products are offered by Home Federal, and currently consist of loans with 3-year
and 5-year repricing periods. ARM loans are indexed to U.S. Treasury securities
of equal maturity as the repricing period, and typically have 2.0 percent and
6.0 percent annual and lifetime repricing caps, respectively. For conforming
single-family permanent mortgage loans, the Association will originate loans up
to a maximum loan-to-value ("LTV") ratio of 97.0 percent, with private mortgage
insurance ("PMI") being required for loans with LTV ratios of 90.0 percent and
above. Jumbo loans and 2-4 family owner occupied loans require PMI for loans
with LTV ratios above 80.0 percent. Second mortgage
<PAGE>
RP Financial, LC.
Page 1.13
loans require a minimum down payment of 20.0 percent, and are currently offered
as ARM loans with an initial fixed rate for 3 years and then convert to a one
year ARM thereafter. Second mortgage loans currently offered by Home Federal
have 10 year terms.
On a limited basis, the Association also originates construction loans to
finance the construction of 1-4 family residences. The Association's
construction lending activities consist of loans to finance the construction of
pre-sold single-family houses, and are originated as construction/permanent
loans to borrowers intending to live in the properties upon completion of the
construction. Construction/permanent loans require payment of interest only
during the construction period and are originated under the same terms as 1-4
family permanent mortgage loans. In recent years, the Association has been
substantially inactive in construction lending, and as March 31, 1996 Home
Federal maintained $1.4 million of construction/permanent loans.
Land loans serve as a complement to the Association's 1-4 family lending
activities, as they consist of single-family lot loans extended to individuals
for building their primary residence. Terms of land loans offered by the
Association generally require a LTV ratio of 80.0 percent or less and are five
year balloon loans priced at a higher rate than the comparable 1-4 family loan
rate. Both construction and land lending are expected to remain as very minor
areas of lending diversification for the Association.
Commercial real estate and multi-family loans held by the Association are
collateralized by properties in its normal lending territory. In recent year
years, Home Federal has been largely inactive in originating commercial real
estate and multi-family loans. Commercial real estate and multi-family loans
are generally extended up to a LTV ratio of 75.0 percent and are originated as
ARM and fixed rate loans. Consistent with the higher credit risk associated
with commercial real estate and multi-family loans, loan rates offered on those
loans are at a premium to the Association's 1-4 family loan rates. Properties
securing the commercial real estate and multi-family loan portfolio include
churches, small office buildings and local apartment buildings. The
Association's largest commercial real estate and multi-family loans had
outstanding balances of $219,000 and $327,000, respectively at March 31, 1996,
and both loans were performing in accordance with their terms.
Home Federal's diversification into non-mortgage lending has been limited,
consisting primarily of consumer loans secured by deposits. The only other
consumer loans held by the Association consist of unsecured personal loans for
check overdrafts. Home Federal does not offer other types of consumer loans or
commercial business loans. At this time, the Association's consumer lending
activities are expected to remain limited.
Exhibit I-10, which shows the Association's loan originations, sales and
repayments over the past three and one-quarter fiscal years, further highlights
Home Federal's emphasis on originating 1-4 family permanent
<PAGE>
RP Financial, LC.
Page 1.14
mortgage loans. Refinancing activity supported a notable increase in loan
originations during fiscal 1993 (total originations of $87.6 million), although
loan growth was moderated by accelerated repayments also resulting from
refinancing activity (total repayments of $74.8 million). Over the past two and
one-quarter fiscal years the Association's loan balance has declined, with the
most notable decline occurring in fiscal year 1994. Loan originations and
repayments amounted to $21.3 million and $52.3 million, respectively, during
fiscal 1994. Originations of loans other than 1-4 family permanent mortgage
loans has been very limited during the past three and one-quarter fiscal years,
as originations of 1-4 family permanent mortgage loans accounted for 93 percent
or more of the Association's total originations during fiscal years 1993 through
1995 and the first quarter of fiscal 1996. With the exception of two loans sold
in 1995 on a servicing-released basis to a community housing group for the
amount of $169,000, the Association has retained all loan originations for
portfolio during the past three and one-quarter fiscal years. Home Federal's
future lending strategy going forward is expected to remain consistent with
recent historical trends, and, thus, the origination of 1-4 family permanent
mortgage loans is expected to account for the substantial portion of the
Association's lending activities.
Asset Quality
- -------------
The Association's historical 1-4 family lending emphasis has generally
supported favorable credit quality measures. Over the past five and one-
quarter fiscal years, Home Federal's non-performing assets-to-assets ratio has
ranged from 0.86 percent at fiscal year end 1992 to 0.46 percent at fiscal year
end 1995. As of March 31, 1996, Home Federal's balance of non-performing assets
totaled $1.5 million, or 0.47 percent of total assets. As shown in Exhibit I-
11, non-performing assets held by the Association consisted of $1.1 million of
non-accruing loans and $0.4 million of real estate owned. Non-accruing loans
held by the Association at March 31, 1996 consisted entirely of 1-4 family
permanent mortgage loans.
The Association reviews and classifies assets on a regular basis and
establishes loan loss provisions based on the overall quality, size and
composition of the loan portfolio, as well other factors such as historical loss
experience, industry trends and local real estate market and economic
conditions. At March 31, 1996, the Association had $701,000 of assets
classified as Special Mention and $1.5 million of assets classified as
Substandard. The Association maintained valuation allowances of $856,000 at
March 31, 1996, equal to 0.32 percent of net loans receivable and 58.9 percent
of non-performing assets.
<PAGE>
RP Financial, LC.
Page 1.15
Funding Composition and Strategy
- --------------------------------
Deposits have consistently been the Association's primary source of funds
(see Exhibits I-13 and I-14), and at March 31, 1996 deposits constituted 100
percent of Home Federal's interest-bearing liabilities. The Association's
deposit composition has consistently reflected a relatively high concentration
of lower costing transaction and savings accounts, with such deposits accounting
for 51.1 percent of Home Federal's total deposits at March 31, 1996.
Notwithstanding the relatively high level of transaction and savings accounts
maintained by the Association at March 31, 1996, the recent trend in Home
Federal's deposit composition has reflected a shift back towards CDs, reflecting
the more attractive rates being paid on CDs during the past two and one-quarter
fiscal years. In comparison to the 51.1 percent ratio maintained at March 31,
1996, savings and transaction accounts comprised 58.1 percent of Home Federal's
deposits at fiscal year end 1993.
As with most thrifts today, the concentration of the Association's CDs have
short-term maturities. As of March 31, 1996, the CD portfolio totaled $129.3
million, with 56.9 percent of those CDs having maturities of one year or less.
Jumbo CDs (CD accounts with balances of $100,000 or more) amounted to $17.4
million, or 13.5 percent of Home Federal's total CDs at March 31, 1996. Home
Federal generally does not pay premium rates for higher balance CDs. The
Association does not utilize brokered CDs and typically offers CD rates that are
priced in the middle of the range of rates offered by its local competitors.
Home Federal's most recent use of borrowings consisted of short-term FHLB
advances, which were added in fiscal 1995 to fund deposit run-off and, thereby,
support control of deposit costs. Deposit growth in the first quarter of 1996
was adequate enough to fund asset growth, as well as repay all of the
Association's borrowings. Exhibit I-15 reflects the Association's borrowing
activities during the past three and one-quarter fiscal years. Home Federal's
deposit growth, internal funding and conversion proceeds are expected to be
adequate enough to fund the substantial portion of the Association's lending and
investment activities for the intermediate-term. If additional borrowings are
needed, the Association has ample borrowing capacity with the FHLB of Chicago.
As of March 31, 1996, the maximum amount of FHLB of Chicago advances available
to the Association was $54 million. The Association is expected to borrow from
the Holding Company to finance the purchase of ESOP shares.
Legal Proceedings
- -----------------
From time to time, Home Federal is involved as plaintiff or defendant in
various legal proceedings arising in the normal course of business. While the
ultimate outcome of these various legal proceedings cannot be predicted with
certainty, it is the opinion of management that the resolution of these
proceedings should not
<PAGE>
RP Financial, LC.
Page 1.16
have a material effect on the Holding Company's and Home Federal's financial
position or results of operations.
<PAGE>
RP Financial, LC.
Page 2.1
II. MARKET AREA
Introduction
- ------------
Chartered in 1883 and operating continuously since that time in Elgin,
Illinois, Home Federal currently conducts operations out of its home office in
Elgin and four additional full service branches. The offices are located in the
Illinois counties of DuPage, Kane and McHenry and are based in the cities of
Elgin, Crystal Lake, Roselle, South Elgin and Bartlett, Illinois. In general,
Home Federal's market area encompasses the outlying suburbs of Chicago and is
broadly defined to include a region covering portions of Kane, DeKalb, DuPage,
Cook, McHenry and Lake Counties. Exhibit II-1 provides information on the
Association's office facilities.
Home Federal's market area is largely suburban in nature, exhibiting a
fairly diversified, well-balanced economy which is not dominated by any single
industrial sector. The economy in the Association's market area is based on a
mixture of service, manufacturing, wholesale/retail trade, state and local
government, and commuters working in Chicago. Overall, the economic diversity
of the economy has fostered growth in the markets served by the Association,
which would tend to be beneficial to Home Federal in terms of realizing growth
opportunities. At the same time, the growth of the market area, as well as the
market area's proximity to Chicago, has provided for a highly competitive
environment among the hundreds of financial institutions competing for deposits
and loans in Home Federal's regional market area.
Future growth opportunities for Home Federal depend in part on national
economic factors, the future growth in the market area, which has been measured
by indicators such as demographic growth trends, the health and stability of the
regional and local economy, and the nature and intensity of the competitive
environment for financial institutions. These factors have been briefly
examined to help determine the growth potential that exists for the Association,
and the relative economic health of the Association's market area.
Market Area Demographics
- ------------------------
Demographic growth in the counties where the Association currently
maintains branches has been measured by changes in population, number of
households and median household income, with trends in those areas summarized by
the data presented in Table 2.1 on the following page. The Association's market
area exhibited more favorable growth characteristics than the comparative growth
rates for Illinois and the U.S., as measured by population and household growth.
While population and household growth in the primary market area counties are
generally projected to slow modestly during the next five years, both growth
rates are
<PAGE>
RP Financial, LC.
Page 2.2
-----------------------------------------
Table 2.1
Home Federal Savings and Loan Association
Summary Demographic Data
Sate, County and Zip code Within County
-----------------------------------------
<TABLE>
<CAPTION>
Year Growth Rate Growth Rate
-----------------------------------------
POPULATION (000) 1990 1995 2000 1990-95 1995-2000
- ----------------------------------------------------------------------------------------------------------------
(%) (%)
<S> <C> <C> <C> <C> <C>
STATES 248,710 263,006 277,084 1.1% 1.0%
ILLINOIS 11,431 11,821 12,201 0.7% 0.6%
DUPAGE COUNTY 782 857 930 1.9% 1.6%
KANE COUNTY 317 356 393 2.3% 2.0%
MCHENRY COUNTY 183 224 263 4.1% 3.2%
HOUSEHOLDS (000)
UNITED STATES 91,947 97,070 102,202 1.1% 1.0%
ILLINOIS 4,202 4,344 4,481 0.7% 0.6%
DUPAGE COUNTY 279 306 332 1.9% 1.6%
KANE COUNTY 107 120 133 2.4% 2.0%
MCHENRY COUNTY 63 77 90 4.1% 3.2%
MEDIAN HOUSEHOLD INCOME ($)
UNITED STATES $29,199 $33,610 $32,972 9.7% -0.4%
ILLINOIS 31,424 35,865 35,492 2.7% -0.2%
DUPAGE COUNTY 47,578 52,053 50,705 1.8% -0.5%
KANE COUNTY 38,440 44,705 46,442 3.1% 0.8%
MCHENRY COUNTY 39,494 46,296 49,218 3.2% 1.2%
PER CAPITA INCOME - 1995 ($)
UNITED STATES $13,179 $16,405 -------------- 4.5% ------------
ILLINOIS 13,705 17,047 -------------- 4.5% ------------
DUPAGE COUNTY 18,577 22,899 -------------- 4.3% ------------
KANE COUNTY 14,156 18,400 -------------- 5.4% ------------
MCHENRY COUNTY 14,766 18,670 -------------- 4.8% ------------
<CAPTION>
1995 AGE DISTRIBUTION (%) 0-14 Years 15-24 Years 25-44 Years 45-64 Years 65+ Years Median Age
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES 22.1 13.8 31.8 19.5 12.8 34.0
ILLINOIS 22.2 13.8 31.7 19.5 12.7 32.8
DUPAGE COUNTY 23.9 12.5 35.1 19.6 9.0 32.3
KANE COUNTY 26.0 14.2 32.4 18.3 9.2 30.9
MCHENRY COUNTY 26.1 11.9 33.7 19.1 9.1 32.2
<CAPTION>
Less Than $15,000 to $25,000 to $50,000 to $100,000 to
1995 HH INCOME DIST. (%) $15,000 24,999 $49,999 $99,999 $149,999 $150,000+
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES 20.5 15.8 33.8 23.7 4.2 2.0
ILLINOIS 18.9 14.7 34.3 25.5 4.4 2.2
DUPAGE COUNTY 6.6 8.4 31.8 40.5 8.5 4.2
KANE COUNTY 11.2 10.9 34.5 34.3 6.6 2.5
MCHENRY COUNTY 9.2 10.1 35.5 37.0 5.9 2.4
</TABLE>
Source: CACI, Inc.; U.S. Dept. of Commerce.
<PAGE>
RP Financial, LC.
Page 2.3
projected to remain above the comparative Illinois and U.S. growth rates. All
three of the primary market area counties exhibited higher median household
income and higher per capita income than the comparative Illinois and U.S.
measures, reflecting on the degree of wealth in the economy and the high cost of
living associated with living in areas nearby to Chicago. DuPage County is the
most affluent county in the primary market area, followed by McHenry and Kane
Counties, respectively. Household income growth was strongest in McHenry County
from 1990 through 1995 and that trend is projected to continue for the balance
of the decade, paralleling McHenry County's more favorable population and
household growth measures. Similar to the U.S. and Illinois, growth in
household income is projected to be less for the balance of the decade for the
primary market area counties. The general projected slow down in household
income growth reflects that most of the job growth is being realized in lower
paying service jobs.
National Economy
- ----------------
The national economy experienced moderate growth during 1995 with overall
GDP measured at 2.0 percent, down from the 1994 level of 3.5 percent. During
the first half of 1995, economic growth was sluggish as indicated by higher
unemployment, a decline in retail sales, and lower construction spending. GDP
growth during the second quarter of 1995 slowed to 1.3 percent annually, which
was the slowest growth in almost four years. In a move to revive the sagging
economy, the Federal Reserve cut short-term interest rates by 0.25 percent in
early-July 1995. Amid mixed economic data, such as a drop in July durable goods
orders and an increase in July new housing starts, the Fed held rates steady
during its meeting in late-August. During the balance of the third quarter, the
general economy showed signs of expansion with inflation under control. For
example, construction picked up in most regions of the U.S., while retail prices
were relatively stable in the late summer. While third quarter GDP growth was
stronger than expected, increasing at an annual rate of 4.2 percent, economic
data through most of the fourth quarter suggested that the economy was on track
for a soft landing. Weak retail sales during the holiday shopping season and a
slight increase in the November unemployment rate provided indications of a
slowing national economy at the end of the fourth quarter. Economic data
released in January 1996 continued to indicate a generally sluggish economy, as
highlighted by the Federal Reserve's mid-January "Beige Book" report which
indicated slowing economic growth in its latest nationwide survey of economic
conditions. Record-breaking winter weather conditions further slowed the
economy in January of 1996. However, unemployment declined sharply in February,
although the January figures were skewed by the weather and by striking GM
workers. A stronger than expected March employment report served to rekindle
inflation fears, although other economic indicators suggested that the pace of
economic growth was moderate and inflation was under control. An accelerating
economy was further indicated by first quarter GDP growth of 2.8 percent, which
was well above 1995 fourth quarter growth of 0.5
<PAGE>
RP Financial, LC.
Page 2.4
percent. Higher oil prices served to further heighten inflation concerns;
however, wages, which account for most of the inflation measures, did not signal
that inflation was heating up. In late-May, first quarter GDP growth was revised
downward to 2.3 percent; however, other economic data, such as consumer demand,
inventory levels and employment indicated that the economic growth was
accelerating in the second quarter. Signs of a strengthening economy led
economists to revise their estimate of second quarter GDP growth to 3.5 percent.
In terms of interest rate trends, a weakening economy in the first half of
1995 led to a decline in both short-term and long-term interest rates. The Fed
increased short-term interest rates in February and July 1995, but a rally in
the bond market pushed long term rates lower in late-August and early-September.
Rates remained relatively flat throughout October and November given the
uncertainty regarding the federal debt. The slow pace of the economy prompted
the Federal Reserve to cut interest rates by 0.25 percent in late-December 1995
and late-January 1996. Generally improving economic conditions forestalled an
additional rate cut by the Fed in its late-March meeting, which served to push
interest rates higher. Interest rates increased sharply in early-May following
the release of the stronger than expected first quarter GDP growth, as the 30-
year U.S. Treasury bond edged above 7.0 percent. Bond prices recovered modestly
on the release of other economic data, such as lower than expected increases in
April consumer and wholesale prices, which suggested that inflation remained in
check. In mid-May the Federal Reserve indicated that it would not tighten
interest rates in the near term, which further served to calm the bond market.
The decline in interest rates was short-lived, as the strength of the economic
data in late-May increased expectations that the Federal Reserve would move to
tighten rates at its next meeting in early-July. Bond prices were further
depressed in early-June by the unexpectedly strong job growth recorded in May,
despite a slightly increase in the May unemployment rate. As of June 7, 1996
one- and thirty-year U.S. Government bonds were yielding 5.83 percent and 7.03
percent, respectively. Exhibit II-2 provides historical interest rate trends
from 1991 through June 7, 1996.
Local Economy
- -------------
The market area served by Home Federal has a highly diversified, well-
balanced economy, with manufacturing serving as the economic base of the
regional economy. A variety of manufacturing concerns maintain operations in
the regional market area, which adds to the stability of the manufacturing base.
While manufacturing represents the cornerstone of the regional economy,
employment in other sectors, such as services, and wholesale/retail trade, have
increased in prominence over the past decades, consistent with national trends.
Tourism also serves to bolster the regional economy, most notably the Crystal
Lake market area where tourists are attracted by the 240-acre lake.
<PAGE>
RP Financial, LC.
Page 2.5
The economies of DuPage, Kane, and McHenry Counties are also heavily
influenced by the fortunes of the Chicago economy, as all three counties are
home to a large number of commuters who work in Chicago. Chicago's economic
roots are in manufacturing and transportation, and, today, Chicago remains the
nation's top manufacturing center and transportation hub. Manufacturing is
anchored by food related industries, paper products, rubber and plastic
products, fabricated metal and electronic machinery/equipment industries. Many
Fortune 500 companies, including United Airlines, McDonald's, Sears Roebuck,
Amoco and Beatrice make their home in Chicago.
Unemployment trends in the market area and Illinois are displayed in Table
2.2. March 1996 unemployment rates for Kane and McHenry Counties were
comparable to the U.S. and Illinois measures, while relatively low unemployment
was recorded for DuPage County. All three counties posted comparable
unemployment rates in March 1996, versus March 1995, indicating that the local
economy has been relatively stable. Going forward, it is not anticipated that
there will be any dramatic swings in the market area unemployment rates, based
on the economic characteristics of the market area.
Table 2.2
Home Federal Savings and Loan Association of Elgin
Unemployment Trends(1)
March 1995 March 1996
Region Unemployment Unemployment
------ ------------ ------------
United States 5.7% 5.8%
Illinois 5.3 5.4
DuPage County 3.7 3.5
Kane County 5.7 5.7
McHenry County 5.1 5.2
(1) Data is not seasonally adjusted.
Source: U.S. Bureau of Labor Statistics.
Market Area Deposit Characteristics
- -----------------------------------
Competition among financial institutions in the Association's market area
is notable, and as larger institutions compete for market share to achieve
economies of scale, the market environment for the Association's products and
services is expected to become increasingly competitive in the future. Smaller
institutions such as Home Federal will be forced to either to compete with
larger institutions on pricing, or to identify and operate in a "niche" that
will allow for operating margins to be maintained at profitable levels.
<PAGE>
RP Financial, LC.
Page 2.6
Table 2.3 displays deposit market trends for Illinois and the market area
counties where the Association maintained branches from June 30, 1992 through
June 30, 1994. The data indicates that deposit growth in the Association's
primary market area ranged from slightly positive to slightly negative, with
McHenry County recording the highest deposit growth at an annual rate of 3.9
percent. Thrift deposits declined in all five of the counties shown in Table
2.3, while commercial banks recorded positive deposit growth in every county
except for Cook County. The decline in thrift deposits was largely attributable
to the trend of consolidation, in which commercial banks have sought to expand
market share through acquiring thrifts.
Deposit growth for the Association was mixed during the period covered in
Table 2.3, as Home Federal's market share of deposits was maintained or declined
modestly in each of the five counties. Home Federal's largest market share of
deposits is in Kane County, where the Association is headquartered and maintains
one other branch office. The decline in market share exhibited in Kane County,
from 4.1 percent at June 30, 1992 to 3.9 percent at June 30, 1994, was largely
attributable to the sale of a branch office and is reflected in the
Association's negative 3.9 percent annual growth rate posted for Kane County.
Subsequent to the period covered in Table 2.3, Home Federal sold two other
branches and currently maintains branches only in the counties of DuPage, Kane
and McHenry. The branches were sold to provide for greater efficiencies in the
Association's branch network, as Home Federal's branches now serve a more
concentrated area which will allow for more focused marketing of its products
and services.
The conversion proceeds should enhance the Association's competitiveness by
providing increased operating flexibility. Home Federal should also continue to
benefit from its favorable image as a locally-owned and community-oriented
institution, as the trend of consolidation among financial institutions is
expected to continue to provide the Association with additional opportunities to
gain customers that become dissatisfied with their banking relationship as the
result of an acquisition. However, the Association's prospects for deposit
growth will be mitigated by the highly competitive market environment, which is
likely to intensify in light of the projected slow down in population and
household growth in the markets served by Home Federal's branches. Given the
competition faced by the Association, it will be difficult for Home Federal to
realize notable gains in deposit market share without paying above market rates
for deposits or further expanding its branch network. At this time, the
Association has no definite plans to add or acquire additional branches.
<PAGE>
<TABLE>
<CAPTION>
RP Financial, LC.
Page 2.7
Table 2.3
Home Federal Savings and Loan Association
Deposit Summary
-----------------------------------------
As of June 30,
-----------------------------------
1992
-----------------------------------
Market Number of
Deposits Share Branches
-------- ----- --------
(Dollars In Thousands)
<S> <C> <C> <C>
A. Deposit Summary
State of Ilinois $187,328,856 100.0% 3,257
Commercial Banks 136,257,479 72.7% 2,365
Savings and Loans 51,071,377 27.3% 892
Cook County $106,787,665 100.0% 954
Commercial Banks 75,913,556 71.1% 571
Savings and Loans 30,874,109 28.9% 383
Home FS&LA(1) 19,522 0.1% 1
Home FS&LA(2) 0.0%
DeKalb County $1,038,601 100.0% 25
Commercial Banks 924,766 89.0% 21
Savings and Loans 113,835 11.0% 4
Home FS&LA(1) 15,448 13.6% 1
Home FS&LA(2) 1.5%
DuPage County $12,131,804 100.0% 242
Commercial Banks 7,498,980 61.8% 152
Savings and Loans 4,632,824 38.2% 90
Home FS&LA(1) 21,043 0.5% 1
Home FS&LA(2) 0.2%
Kane County $4,121,858 100.0% 87
Commercial Banks 2,804,712 68.0% 64
Savings and Loans 1,317,146 32.0% 23
Home FS&LA(1) 168,585 12.8% 3
Home FS&LA(2) 4.1%
McHenry County $2,165,669 52.5% 57
Commercial Banks 1,557,888 37.8% 37
Savings and Loans 607,781 14.7% 20
Home FS&LA(1) 77,939 12.8% 2
Home FS&LA(2) 3.6%
<CAPTION>
As of June 30,
-----------------------------------
1994 Deposit
-----------------------------------
Market Number of Growth Rate
Deposits Share Branches 1992-1994
-------- ----- -------- ----------
(Dollars In Thousands) (%)
<S> <C> <C> <C> <C>
A. Deposit Summary
State of Ilinois $186,739,410 100.0% 3,363 -0.2%
Commercial Banks 140,889,175 75.4% 2,529 1.7%
Savings and Loans 45,850,235 24.6% 834 -5.2%
Cook County $104,420,135 100.0% 980 -1.1%
Commercial Banks 75,349,606 72.2% 598 -0.4%
Savings and Loans 29,070,529 27.8% 382 -3.0%
Home FS&LA(1) 20,643 0.1% 1 2.8%
Home FS&LA(2) 0.0%
DeKalb County $1,080,281 100.0% 26 2.0%
Commercial Banks 994,879 92.1% 22 3.7%
Savings and Loans 85,402 7.9% 4 -13.4%
Home FS&LA(1) 13,196 15.5% 1 -7.6%
Home FS&LA(2) 1.2%
DuPage County $12,818,042 100.0% 250 2.8%
Commercial Banks 8,387,670 65.4% 161 5.8%
Savings and Loans 4,430,372 34.6% 89 -2.2%
Home FS&LA(1) 24,236 0.5% 1 7.3%
Home FS&LA(2) 0.2%
Kane County $4,024,950 100.0% 95 -1.2%
Commercial Banks 3,148,015 78.2% 76 5.9%
Savings and Loans 876,935 21.8% 19 -18.4%
Home FS&LA(1) 155,813 17.8% 2 -3.9%
Home FS&LA(2) 3.9%
McHenry County $2,338,827 68.4% 65 3.9%
Commercial Banks 1,766,396 43.9% 43 6.5%
Savings and Loans 572,431 24.5% 22 -3.0%
Home FS&LA(1) 81,589 14.3% 2 2.3%
Home FS&LA(2) 3.5%
(1) Percent of county S&L deposits.
(2) Percent of total county deposits.
Sources: FDIC; OTS.
</TABLE>
<PAGE>
RP Financial, LC.
Page 3.1
III. PEER GROUP ANALYSIS
This chapter presents an analysis of Home Federal's operations versus a
group of comparable savings institutions (the "Peer Group") selected from the
universe of all publicly-traded savings institutions. The basis of the pro
forma market valuation of Home Federal is provided by these institutions.
Factors affecting the Association's pro forma value such as financial condition,
credit risk, interest rate risk, loan composition and recent operating results
can be readily assessed in relation to the Peer Group. Current market pricing
of the Peer Group, subject to appropriate adjustments to account for differences
between Home Federal and the Peer Group, will then be used as a basis for the
pro forma valuation of Home Federal's to-be-issued common stock.
Selection of Peer Group
- -----------------------
We consider the appropriate Peer Group to be comprised of only those
publicly-traded savings institutions whose common stock is either listed on a
national exchange or is NASDAQ listed, since the market for companies trading in
this fashion is regular and reported. We believe non-listed institutions are
inappropriate since the trading activity for thinly-traded stocks is typically
highly irregular in terms of frequency and price and may not be a reliable
indicator of market value. We have also excluded from the Peer Group those
companies under acquisition, mutual holding companies and recent conversions,
since their pricing ratios are subject to distortion and/or do not have a
seasoned trading history.
From the universe of publicly-traded thrifts, we selected ten institutions
with characteristics similar to those of Home Federal. In the selection
process, we applied two primary "screens" to the universe of all public
companies:
o Screen #1. Illinois institutions with assets of $150 to $750 million,
----------------------------------------------------------------------
equity-to-assets ratios of at least 12.0 percent, and return on
---------------------------------------------------------------
average assets ratios between 0.50 percent and 1.25 percent. Seven
------------------------------------------------------------
companies met the criteria for Screen #1 and four were included for
the Peer Group: Calumet Bancorp, Fidelity Bancorp, First Mutual
Bancorp and Southwest Bancshares. The institutions not selected for
the Peer Group were Charter Financial Inc., Citizens First Financial
Corp., and Damen Financial Corp.,which were excluded on the basis of
the recency of their conversions completed in December 1995, May 1996
and October 1995, respectively. Exhibit III-2 details the financial
characteristics of all publicly-traded Illinois institutions.
o Screen #2. Mid-West institutions with assets of $150 to $750 million,
----------------------------------------------------------------------
equity-to-assets ratios of at least 12.0 percent, return on average
-------------------------------------------------------------------
assets ratios between 0.50 percent and 1.25 percent, non-performing
-------------------------------------------------------------------
assets to assets ratios of less than 2.0 percent, and at least 75.0
-------------------------------------------------------------------
percent of the loan and mortgage-backed securities portfolio comprised
----------------------------------------------------------------------
of 1-4 family permanent mortgage loans and mortgage-backed securities.
----------------------------------------------------------------------
Apart from the Illinois institutions already selected, ten
institutions met the selection criteria for Screen #2 (see Exhibit
III-3), and seven were included as part of Home Federal's Peer Group:
FFY Financial Corp. of OH, HMN
<PAGE>
RP Financial, LC.
Page 3.2
Financial, Inc. of MN, Home Bancorp of Fort Wayne IN, Landmark
Bancshares of KS, MFB Corp. of Mishawaka IN, Milton Federal Financial
Corp. of OH, and Wells Financial Corp of Wells, MN.
Of the three institutions excluded, two were excluded as the result of
maintaining funding compositions that were not considered to be highly
comparable to Home Federal's funding composition. In particular,
Home Federal's use of borrowings has typically been limited and as of
March 31, 1996, the Association did not maintain any borrowings.
Comparatively, Enterprise Federal Bancorp of OH and First Federal
Bancshares of WI maintained borrowings-to-assets ratios of 19.3
percent and 28.8 percent, respectively. Fidelity Financial of OH was
the third institution excluded and was excluded due to the recency of
its conversion, which was completed in March 1996.
Table 3.1 on the following page shows the general characteristics of each
of the Peer Group companies and Exhibit III-4 provides summary demographic data
for the primary market areas served by each of the Peer Group companies. While
there are some differences between the Peer Group companies and Home Federal, we
believe that the Peer Group provides a good representation of publicly-traded
thrifts with operations comparable to those of the Association and, thus, will
provide a good basis for valuation. The following sections present a comparison
of Home Federal's financial condition, income and expense trends, loan
composition, interest rate risk and credit risk versus the Peer Group. The
conclusions drawn from the comparative analysis are then factored into the
valuation analysis discussed in the final chapter.
A summary description of the key characteristics of each of the Peer Group
companies, which we determined warranted their inclusion as a comparable
institution to Home Federal, is detailed below.
o Calumet Bancorp of Chicago IL. Selected due to Illinois market area,
traditional thrift operating strategy, same size of branch network, high
level of capital, and comparable net interest margin.
o FFY Financial Corp. of OH. Selected due to traditional thrift operating
strategy, high level of capital, comparable funding composition, comparable
net interest margin, high concentration of mortgage-backed securities and
1-4 family permanent mortgage loans, and favorable credit quality measures.
o Fidelity Bancorp of Chicago IL. Selected due to Illinois market area,
traditional thrift operating strategy, same size of branch network,
comparable return on average assets, and favorable credit quality measures.
o First Mutual Bancorp of IL. Selected due to Illinois market area,
traditional thrift operating strategy, similar size of branch network,
comparable asset size, high level of capital, high concentration of 1-4
family permanent mortgage loans, and favorable credit quality measures.
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 3.1
Peer Group of Publicly-Traded Thrifts
June 10, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ _______
($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFYF FFY Financial Corp. of OH OTC Youngstown OH Thrift 573 9 06-30 06/93 23.25 121
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 542 7 12-31 06/94 15.69 81
CBCI Calumet Bancorp of Chicago IL OTC Chicago IL Thrift 502 5 06-30 02/92 28.00 75
FBCI Fidelity Bancorp of Chicago IL OTC Chicago IL Thrift 433 5 09-30 12/93 16.62 51
SWBI Southwest Bancshares of IL OTC Chicago IL Thrift 350 5 12-31 06/92 27.25 51
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 313 8 09-30 03/95 14.75 46
FMBD First Mutual Bancorp of IL OTC Central IL Thrift 285 7 12-31 07/95 12.75 55
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 201 4 09-30 03/94 14.00 29
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 196 7 12-31 04/95 11.25 25
LARK Landmark Bancshares of KS OTC Central KS Thrift 193 5 09-30 03/94 15.25 30
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 172 2 09-30 10/94 12.87 30
NOTES: (1) Or most recent date available (M=March, S=September, D=December, J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage Banker, R.E.=Real Estate Developer,
Div.=Diversified, and Ret.=Retail Banking.
(3) FDIC savings bank institution.
Source: Corporate offering circulars, data derived from information published in SNL Securities Quarterly Thrift
Report, and financial reports of publicly-traded thrifts.
Date of Last Update: 06/10/96
</TABLE>
<PAGE>
RP Financial, LC.
Page 3.4
o HMN Financial, Inc. of MN. Selected due to traditional thrift operating
strategy, similar size of branch network, high level of capital, high
concentration of mortgage-backed securities and 1-4 family permanent
mortgage loans, and favorable credit quality measures.
o Home Bancorp of Fort Wayne IN. Selected due to traditional thrift
operating strategy, comparable asset size, high level of capital,
comparable funding composition, high concentration of 1-4 family permanent
mortgage loans, and favorable credit quality measures.
o Landmark Bancshares of KS. Selected due to traditional thrift operating
strategy, same size of branch network, strong capital position, high
concentration of mortgage-backed securities and 1-4 family permanent
mortgage loans, and favorable credit quality measures.
o MFB Corp. of Mishawaka IN. Selected due to traditional thrift operating
strategy, comparable size of branch network, high level of capital, similar
funding composition, comparable return on average assets, high
concentration of mortgage-backed securities and 1-4 family permanent
mortgage loans, and favorable credit quality measures.
o Milton Fed. Fin. Corp. of OH. Selected due to traditional thrift operating
strategy, high level of capital, similar funding composition, comparable
net interest margin, high concentration of mortgage-backed securities and
1-4 family permanent mortgage loans, and favorable credit quality measures.
o Southwest Bancshares of IL. Selected due to Illinois market area,
traditional thrift operating strategy, comparable asset size, same size of
branch network, comparable net interest margin and favorable credit quality
measures.
o Wells Fin. Corp. of Wells MN. Selected due to traditional thrift operating
strategy, comparable size of branch network, similar interest-earning asset
composition, similar funding composition, comparable return on average
assets, high concentration of 1-4 family permanent mortgage loans, and
favorable credit quality measures.
In aggregate, the Peer Group companies are more highly capitalized than the
industry average (17.21 percent of assets versus 13.24 percent for the all SAIF
average), generate higher earnings (0.99 percent ROAA versus 0.87 percent for
the all SAIF average), and generate a lower ROE (5.80 percent versus 8.09
percent for the all SAIF average). Overall, the Peer Group's average P/B ratio
and P/E multiple were below and above the respective comparable SAIF averages
(see next page).
Ideally, the Peer Group companies would be comparable to Home Federal in
terms of all of the selection criteria, but the universe of publicly-traded
thrifts does not provide for an appropriate number of such companies. However,
in general, the companies selected for the Peer Group were fairly comparable to
Home Federal, as will be highlighted in the following comparative analysis.
<PAGE>
RP Financial, LC.
Page 3.5
As of June 7, 1996
------------------
Peer All SAIF
Group Insured
------ --------
Equity-to-Assets 17.21% 13.24%
Return on Assets ("ROA") 0.99 0.87
Return on Equity ("ROE") 5.80 8.09
Price-to-Book ratio ("P/B") 92.02% 104.71%
Price-to-Earnings multiple ("P/E") 16.44x 14.25x
Price-to-Assets ratio ("P/A") 15.55% 13.08%
Source: Table 4.4 - Chapter IV Valuation Analysis.
Financial Condition
- -------------------
Table 3.2 shows comparative balance sheet measures for Home Federal and the
Peer Group, reflecting the expected similarities and some differences given the
selection procedures outlined above. The Association's and the Peer Group's
ratios reflect balances as of March 31, 1996. Home Federal's net worth base of
12.1 percent was below the Peer Group's average net worth ratio of 17.2 percent;
however, with the addition of stock proceeds, the Association's pro forma
capital position (consolidated with the holding company) can be expected to be
higher than the Peer Group's ratio. All of Home Federal's and the Peer Group's
capital consisted of tangible capital. Home Federal's higher pro forma capital
position will be favorable from a risk perspective and in terms of future
earnings potential that could be realized through leverage and lower funding
costs. However, at the same time, the Association's high pro forma
capitalization will result in a relatively low return on equity. Both the
Association's and the Peer Group's capital ratios reflected capital surpluses
with respect to the regulatory capital requirements, with the Peer Group's
ratios currently indicating slightly greater capital surpluses. Again, on a pro
forma basis, the Association should gain the advantage in terms of capital
surpluses.
The interest-earning asset compositions for the Association and the Peer
Group were somewhat similar, with loans and mortgage-backed securities
constituting the bulk of interest-earning assets for Home Federal and the Peer
Group. Home Federal's combined level of loans and mortgage-backed securities
was higher than the Peer Group's ratio (86.2 percent versus 76.9 percent for the
Peer Group), with the Association maintaining a higher concentration of loans
and a lower concentration of mortgage-backed securities relative to the
comparative Peer Group ratios. Comparatively, the Peer Group's cash and
investments to assets ratio was higher than the comparable ratio for Home
Federal (20.5 percent versus 10.7 percent for the Association). Overall, Home
Federal's interest-earning assets amounted to 96.9 percent of assets, which was
slightly below the comparable Peer Group ratio of 97.4 percent.
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 3.2
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of March 31, 1996
Balance Sheet as a Percent of Assets
________________________________________________________________________________________
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Investments Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
___________ ______ ______ ________ ________ _______ ________ ________ _______ __________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Home Federal of Elgin
_____________________
March 31, 1996 10.7 86.1 0.1 86.2 0.0 0.0 12.1 0.0 12.1 0.0
SAIF-Insured Thrifts 19.5 64.4 13.0 73.3 12.0 0.1 13.0 0.2 12.8 0.1
State of IL 19.8 65.5 11.5 73.9 10.6 0.1 13.9 0.1 13.8 0.0
Comparable Group Average 20.5 69.7 7.2 73.7 7.7 0.0 17.2 0.0 17.2 0.0
Mid-West Companies 20.5 69.7 7.2 73.7 7.7 0.0 17.2 0.0 17.2 0.0
Comparable Group
________________
Mid-West Companies
__________________
CBCI Calumet Bancorp of Chicago IL 17.0 73.9 3.9 72.9 8.6 0.0 17.0 0.0 17.0 0.0
FFYF FFY Financial Corp. of OH 20.6 74.2 2.6 80.1 0.0 0.0 18.3 0.0 18.3 0.0
FBCI Fidelity Bancorp of Chicago IL 22.3 70.2 5.6 69.6 16.8 0.0 12.0 0.0 12.0 0.0
FMBD First Mutual Bancorp of IL 16.1 80.7 0.0 68.6 4.5 0.0 25.3 0.0 25.3 0.0
HMNF HMN Financial, Inc. of MN 9.0 56.8 32.7 68.0 13.4 0.0 16.8 0.0 16.8 0.0
HBFW Home Bancorp of Fort Wayne IN 24.7 73.7 0.0 82.5 0.0 0.0 16.4 0.0 16.4 0.0
LARK Landmark Bancshares of KS 28.6 55.3 14.2 73.6 8.2 0.0 17.2 0.0 17.2 0.0
MFBC MFB Corp. of Mishawaka IN 30.5 65.3 2.7 74.7 4.7 0.0 19.3 0.0 19.3 0.0
MFFC Milton Fed. Fin. Corp. of OH 24.0 61.9 11.7 73.0 6.5 0.0 20.0 0.0 20.0 0.0
SWBI Southwest Bancshares of IL 19.5 69.5 6.0 72.4 14.2 0.0 12.0 0.0 12.0 0.0
WEFC Wells Fin. Corp. of Wells MN 13.1 84.9 0.0 75.8 8.2 0.0 14.9 0.0 14.9 0.0
<CAPTION>
Balance Sheet Annual Growth Rates Regulatory Capital
____________________________________________________________ _______________________
Cash and Loans Borrows. Net Tng Net
Assets Investments & MBS Deposits &Subdebt Worth Worth Tangible Core Reg.Cap.
______ ___________ ______ ________ ________ ________ _______ ________ _______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Home Federal of Elgin
_____________________
March 31, 1996 -0.07 16.15 -2.08 -1.03 0.00 6.62 6.62 12.04 12.04 23.65
SAIF-Insured Thrifts 11.71 10.06 9.56 6.50 -1.25 6.79 6.37 10.62 10.69 23.24
State of IL 13.20 17.40 10.35 7.06 -5.37 3.05 2.56 9.97 11.00 23.03
Comparable Group Average 6.81 13.16 7.86 4.24 27.42 -4.17 -4.16 12.23 13.42 28.88
Mid-West Companies 6.81 13.16 7.86 4.24 27.42 -4.17 -4.16 12.23 13.42 28.88
Comparable Group
________________
Mid-West Companies
__________________
CBCI Calumet Bancorp of Chicago IL 1.44 0.45 1.59 4.85 -23.42 5.38 5.38 11.99 11.99 19.94
FFYF FFY Financial Corp. of OH -0.38 -22.46 8.20 0.13 NM -3.06 -3.06 10.43 10.43 19.23
FBCI Fidelity Bancorp of Chicago IL 24.33 48.60 18.88 22.31 70.71 -3.14 -3.03 9.31 9.31 19.58
FMBD First Mutual Bancorp of IL 19.34 69.70 15.66 -1.25 47.67 NM NM NM 25.26 50.03
HMNF HMN Financial, Inc. of MN 6.75 -20.19 11.25 3.11 28.75 0.68 0.68 14.22 14.22 35.97
HBFW Home Bancorp of Fort Wayne IN 2.16 -20.22 12.92 3.10 NM -2.28 -2.28 12.84 12.84 30.01
LARK Landmark Bancshares of KS -3.76 -25.86 9.62 -0.82 -16.96 -8.11 -8.11 14.18 14.18 35.05
MFBC MFB Corp. of Mishawaka IN 8.04 16.76 4.51 3.63 NM 0.28 0.28 15.40 15.40 37.61
MFFC Milton Fed. Fin. Corp. of OH 13.95 53.53 5.52 12.17 NM -10.28 -10.28 15.11 15.11 33.82
SWBI Southwest Bancshares of IL -0.65 -2.43 -0.65 -1.38 25.16 -17.03 -17.03 8.25 8.25 16.98
WEFC Wells Fin. Corp. of Wells MN 3.75 46.86 -1.07 0.83 60.00 NM NM 10.60 10.60 19.50
Source: Audited and unaudited financial statements, corporate reports and offering circulars, and RP Financial, Inc.
calculations. The information provided in this table has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
</TABLE>
<PAGE>
RP Financial, LC.
Page 3.7
Home Federal's funding liabilities reflect a funding strategy similar to
that of the Peer Group's funding composition. The Association's deposits equaled
86.2 percent of assets, which was higher than the Peer Group average of 73.7
percent. Somewhat offsetting Home Federal's higher ratio of deposits was its
lower level of borrowings, as the Association did not maintain any borrowings at
March 31, 1996. Comparatively, the average borrowings maintained by the Peer
Group companies amounted to 7.7 percent of assets. Accordingly, both Home
Federal and the Peer Group were considered to have ample borrowing capacity.
Total interest-bearing liabilities maintained by the Association and the Peer
Group, as a percent of assets, equaled 86.2 percent and 81.4 percent,
respectively, with the Peer Group's lower ratio being supported by maintenance
of a higher capital position.
A key measure of balance sheet strength for a thrift institution is its
IEA/IBL ratio. Presently, the Association's IEA/IBL ratio is lower than the
Peer Group's ratio, based on respective ratios of 112.4 percent and 119.7
percent. The additional capital realized from stock proceeds should address the
lower IEA/IBL ratio currently maintained by the Association, as the interest
free capital realized in Home Federal's stock offering will be deployed into
interest-earning assets.
The growth rate section of Table 3.2 shows annual growth rates for key
balance sheet items. Home Federal's growth rates are based on annualized growth
for the fifteen months ended March 31, 1996, while the Peer Group's growth rates
are based on annual growth for the twelve months ended March 31, 1996. Asset
growth rates of negative 0.1 percent and 6.8 percent were posted by the
Association and the Peer Group, respectively. Home Federal's maintenance of an
approximately flat asset balance reflects cash flow realized from loan shrinkage
and retained earnings being redeployed into cash and investment. Comparatively,
growth in loans and mortgage-backed securities accounted for most of the Peer
Group's asset growth, although a higher growth rate was realized in the Peer
Group's lower balance of cash and investments. Overall, the Peer Group's asset
growth measures would tend to support greater earnings growth relative to the
Association's measures. However, following the conversion, Home Federal's
leverage capacity will be greater than the Peer Group's.
Retained earnings and asset shrinkage funded a slight decline in the
Association's deposits. The Peer Group's asset growth was funded by deposits
and borrowings, with the Peer Group's lower balance of borrowings exhibiting a
higher growth rate than deposits. In fact, the Peer Group's borrowings growth
rate shown in Table 3.2 was somewhat understated, as the "NM" borrowings growth
rate shown for four of the Peer Group companies included companies with
borrowings growth rates in excess of 100 percent. For the period shown in
Table 3.2, two of the Peer Group companies posted borrowing growth rates in
excess of 100 percent, and two of the Peer Group companies recorded no change in
their balance of borrowings. Despite recording a lower return on average assets
ratio, Home Federal posted a stronger capital growth rate than the Peer Group
<PAGE>
RP Financial, LC.
Page 3.8
(positive 6.6 percent versus negative 4.2 percent for the Peer Group). Dividend
payments and stock repurchases, as well as possible negative SFAS 115
adjustments, were likely factors that accounted for the Peer Group's slightly
negative capital growth rate. Following the increase in capital realized from
conversion proceeds, the Association's capital growth rate will be depressed by
its higher pro forma capital position.
Income and Expense Components
- -----------------------------
For the twelve months ended March 31, 1996, Home Federal and the Peer Group
reported net income to average assets ratios of 0.71 percent and 0.99 percent,
respectively (see Table 3.3). Both the Association's and the Peer Group's
earnings were fairly representative of their core earnings, as gains and other
non-recurring items were not material factors in their respective earnings. The
Peer Group's higher earnings were realized through lower operating expenses,
which was partially offset by Home Federal's stronger net interest margin and
higher level of non-interest operating income. Loss provisions recorded by Home
Federal and the Peer Group had a comparable impact on earnings, while gains and
real estate operations were a slightly larger factor in the Peer Group's
earnings.
The Association's stronger net interest margin resulted from both a higher
interest income ratio and a lower interest expense ratio. As highlighted in the
yield-cost section of Table 3.3, Home Federal's higher interest income ratio was
realized through earning a higher yield on interest-earning assets, which was
partially negated by the Peer Group's higher level of interest-earning assets
(97.4 percent versus 96.9 percent for Home Federal). The Association's higher
yield on interest-earning assets was consistent with an asset composition which
would tend to be higher yielding, based on Home Federal's higher concentration
of loans and, in particular, relatively high concentration of longer term fixed
rate loans. Likewise, the Association's lower cost of funds was supported by
its composition of interest-bearing liabilities, which reflected no borrowings
and a relatively high concentration of transaction and savings accounts.
Partially offsetting the Association's lower cost of funds was the lower level
of interest-bearing liabilities maintained by the Peer Group (81.4 percent
versus 86.2 percent for Home Federal). Overall, Home Federal and the Peer Group
reported net interest income to average assets ratios of 3.81 percent and 3.23
percent, respectively.
In another key area of core earnings strength, the Association maintained a
considerably higher level of operating expenses than the Peer Group. For the
period covered in Table 3.3, the Association and the Peer Group recorded
operating expense to average assets ratios of 2.95 percent and 1.93 percent,
respectively. Home Federal's higher operating expense ratio can in part be
explained by its less favorable proficiency, with respect to maintaining a
relatively high number of employees for its asset size. Assets per full time
equivalent employee equaled $2.4 million for the Association, versus a
comparative measure of $3.9 million for the Peer
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 3.3
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended March 31, 1996
Net Interest Income Other Income
____________________________ ___________________
Loss NII Total
Net Provis. After Loan R.E. Other Other
Income Income Expense NII on IEA Provis. Fees Oper. Income Income
______ ______ _______ ______ _______ _______ ____ _____ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Home Federal of Elgin
_____________________
March 31, 1996 0.71 7.41 3.60 3.81 0.05 3.76 0.00 0.01 0.38 0.39
SAIF-Insured Thrifts 0.87 7.35 4.19 3.16 0.10 3.06 0.12 -0.01 0.30 0.42
State of IL 0.76 7.17 4.08 3.09 0.08 3.01 0.08 0.04 0.30 0.42
Comparable Group Average 0.99 7.31 4.08 3.23 0.05 3.18 0.03 0.02 0.18 0.23
Mid-West Companies 0.99 7.31 4.08 3.23 0.05 3.18 0.03 0.02 0.18 0.23
Comparable Group
________________
Mid-West Companies
__________________
CBCI Calumet Bancorp of Chicago IL 1.21 7.74 4.15 3.59 0.16 3.43 0.06 0.06 0.19 0.31
FFYF FFY Financial Corp. of OH 1.21 7.56 3.84 3.72 0.06 3.66 0.00 0.00 0.18 0.18
FBCI Fidelity Bancorp of Chicago IL 0.77 7.30 4.12 3.19 0.04 3.14 0.00 0.00 0.25 0.25
FMBD First Mutual Bancorp of IL 0.99 7.09 3.60 3.50 0.01 3.49 0.04 -0.01 0.25 0.28
HMNF HMN Financial, Inc. of MN 1.10 7.35 4.39 2.96 0.06 2.90 0.00 0.00 0.12 0.12
HBFW Home Bancorp of Fort Wayne IN 0.85 7.23 4.38 2.85 0.02 2.84 0.00 0.00 0.07 0.07
LARK Landmark Bancshares of KS 0.91 7.13 4.40 2.73 0.03 2.70 0.08 0.00 0.15 0.24
MFBC MFB Corp. of Mishawaka IN 0.69 6.83 3.88 2.94 0.02 2.93 0.00 0.00 0.18 0.18
MFFC Milton Fed. Fin. Corp. of OH 1.13 7.41 3.77 3.64 0.05 3.59 0.01 0.00 0.13 0.14
SWBI Southwest Bancshares of IL 1.19 7.56 4.14 3.41 0.01 3.41 0.04 0.16 0.15 0.35
WEFC Wells Fin. Corp. of Wells MN 0.81 7.20 4.22 2.97 0.09 2.88 0.15 0.00 0.30 0.45
<CAPTION>
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
________________ ______________ _________________________
MEMO: MEMO:
G&A Goodwill Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Expense Amort. Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
_______ _______ _______ _______ _________ ________ ______ __________ ________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Home Federal of Elgin
_____________________
March 31, 1996 2.95 0.00 0.00 0.00 7.95 4.23 3.72 2,434 40.77
SAIF-Insured Thrifts 2.22 0.02 0.09 0.00 7.58 4.85 2.73 4,045 36.02
State of IL 2.35 0.01 0.07 0.00 7.48 4.84 2.65 3,642 35.33
Comparable Group Average 1.93 0.00 0.06 0.00 7.51 5.05 2.46 3,927 36.51
Mid-West Companies 1.93 0.00 0.06 0.00 7.51 5.05 2.46 3,927 36.51
Comparable Group
________________
Mid-West Companies
__________________
CBCI Calumet Bancorp of Chicago IL 1.98 0.00 0.01 0.00 8.14 5.08 3.07 3,694 31.70
FFYF FFY Financial Corp. of OH 1.99 0.00 -0.06 0.00 7.77 4.80 2.96 3,275 32.51
FBCI Fidelity Bancorp of Chicago IL 2.21 0.02 0.07 0.00 7.46 4.88 2.58 4,287 39.89
FMBD First Mutual Bancorp of IL 2.28 0.00 0.06 0.00 7.35 4.85 2.50 2,594 36.13
HMNF HMN Financial, Inc. of MN 1.44 0.00 0.18 0.00 7.47 5.40 2.07 5,891 37.70
HBFW Home Bancorp of Fort Wayne IN 1.49 0.00 0.00 0.00 7.36 5.34 2.01 4,010 39.92
LARK Landmark Bancshares of KS 1.65 0.00 0.18 0.00 7.26 5.40 1.86 4,298 37.85
MFBC MFB Corp. of Mishawaka IN 1.98 0.00 0.01 0.00 6.94 4.96 1.98 4,100 39.90
MFFC Milton Fed. Fin. Corp. of OH 2.15 0.00 0.12 0.00 7.61 4.94 2.67 3,816 33.75
SWBI Southwest Bancshares of IL 2.02 0.00 0.01 0.00 7.92 4.87 3.05 3,604 31.73
WEFC Wells Fin. Corp. of Wells MN 2.00 0.00 0.04 0.00 7.32 5.02 2.29 3,633 40.53
</TABLE>
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The
information provided in this table has been obtained from sources
we believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.10
Group. The relatively high number of employees maintained by the Association is
at least partially attributable to the high level of servicing associated with
maintaining high concentrations of 1-4 family loans and transaction deposits,
both of which serve to benefit the yield-cost spread. On a post-conversion
basis, the Association's operating expenses can be expected to increase with the
addition of public company reporting expenses and stock benefit plans, with such
expenses already impacting the Peer Group's operating expenses. However, at the
same time, Home Federal's higher pro forma capital position will better position
the Association to leverage operating expenses through increased asset growth.
When viewed together, net interest income and operating expenses provide
considerable insight into a thrift's earnings strength, since those sources of
income and expenses are typically the most prominent components of earnings and
are generally more predictable than losses and gains realized from the sale of
assets or other non-recurring activities. In this regard, as measured by their
expense coverage ratios (net interest income divided by operating expenses),
Home Federal's earnings strength was less favorable than the Peer Group's.
Expense coverage ratios posted by Home Federal and the Peer Group equaled 1.29x
and 1.67x, respectively. An expense coverage ratio of greater than 1.0x
indicates that an institution is able to sustain pre-tax profitability without
having to rely on non-interest sources of income.
Sources of non-interest operating income made a higher contribution to the
Association's earnings than the Peer Group's, based on comparative non-interest
operating income to average assets ratios of 0.39 percent and 0.23 percent,
respectively. The Association's maintenance of a higher level of deposits as a
percent of assets, which included a relatively high concentration of fee-
oriented transaction accounts, largely accounted for its higher ratio of non-
interest operating income, as service charges and fees accounted for the
substantial portion of Home Federal's non-interest operating income. Real
estate operations were not a material factor in either the Association's or the
Peer Group's earnings.
Favorable credit quality measures and low risk operating strategies
translated into minor loan loss provisions established by Home Federal and the
Peer Group. The traditional thrift operating strategies pursued by the
Association and the Peer Group were further reflected in the limited impact of
gains on their respective earnings. Gains and losses from the sale of loans and
investments were not a factor in the Association's earnings, while the Peer
Group recorded net gains on the sale of investments and loans amounting to 0.06
percent of average assets. Gains and losses resulting from the sale of loans
and investments are generally viewed as being non-recurring in nature, given
that they are highly dependent upon interest rate movements and typically do not
represent a core earnings activity for a thrift. Accordingly, the Peer Group's
gains will be discounted in evaluating the relative strengths and weaknesses of
the Association's and the Peer Group's respective earnings. Extraordinary items
were not a factor in either the Association's or the Peer Group's earnings.
<PAGE>
RP Financial, LC.
Page 3.11
Both the Association and the Peer Group exhibited effective tax rates which
indicated earnings were being fully taxed, with Home Federal recording a higher
effective tax rate than the Peer Group (40.77 percent versus 36.51 percent for
the Peer Group). Accordingly, overall, the Association's and the Peer Group's
reported earnings were fairly reflective of their core earnings.
Loan Composition
- ----------------
Table 3.4 presents data related to the loan composition of Home Federal and
the Peer Group. An emphasis on low risk residential lending was apparent in
both the Association's and the Peer Group's loan compositions, with 1-4 family
permanent mortgage loans and mortgage-backed securities accounting for 98.1
percent and 82.3 percent of Home Federal's and the Peer Group's loan and MBS
portfolios, respectively. Home Federal's higher ratio was attributable to its
higher concentration of 1-4 family permanent mortgage loans, as the Peer Group's
ratio of mortgage-backed securities was above the Association's ratio. Given
the Association's general philosophy of retaining all originations for
portfolio, loans serviced for others represented a more significant off-balance
sheet item for the Peer Group; however, the Peer Group's average balance of
loans serviced for others ($17.0 million) also indicated that most of the Peer
Group companies were originating loans primarily for portfolio. Only three of
the Peer Group companies (First Mutual Bancorp, Southwest Bancshares and Wells
Financial Corp.) maintained a modest amount of servicing intangibles.
As indicated by the higher percentage of 1-4 family loans maintained by the
Association, lending diversification was very limited for the Association.
Comparatively, while not extensive, the Peer Group exhibited a greater degree of
lending diversification than Home Federal. Multi-family/commercial real estate
loans accounted for both Home Federal's' and the Peer Group's primary area of
lending diversification, amounting to 1.5 percent and 10.9 percent of their
respective loan and MBS portfolios. Other areas of lending diversification for
the Association were nominal, consisting of consumer and land loans. The
balance of the Peer Group's lending diversification was comprised mostly of
consumer loans and construction and land loans, while commercial business loans
constituted a very modest area of lending diversification for the Peer Group.
Notwithstanding the Peer Group's greater diversification into higher risk types
of lending, the Association maintained a higher risk weighted assets-to-assets
ratio than the Peer Group (52.5 percent versus 47.6 percent for the Peer Group).
Home Federal's higher concentration of total loans, versus the Peer Group's
higher concentration of cash and investments, contributed to the higher risk
weighted assets ratio posted by the Association. Overall, both the
Association's and the Peer Group's risk weighted assets ratios were indicative
of relatively low risk operating strategies, as both ratios were similar to the
SAIF-insured average of 50.4 percent.
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 3.4
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of March 31, 1996
Portfolio Composition as a Percent of MBS and Loans
_________________________________________________________
1-4 Constr. 5+Unit Commerc. RWA/ Serviced Servicing
Institution MBS Family & Land Comm RE Business Consumer Assets For Others Assets
___________ ______ ______ ______ ______ ______ ________ ______ __________ ______
(%) (%) (%) (%) (%) (%) (%) ($000) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Home Federal of Elgin 0.06 98.04 0.22 1.47 0.00 0.21 52.46 0 0
SAIF-Insured Thrifts 16.69 60.93 4.85 11.49 1.58 6.10 50.38 410,877 2,453
State of IL 15.62 61.77 1.87 12.22 1.72 7.18 49.81 106,665 155
Comparable Group Average 7.41 74.90 3.51 10.92 0.81 3.84 47.60 16,985 15
Comparable Group
________________
CBCI Calumet Bancorp of Chicago IL 5.23 51.04 11.16 35.18 0.58 0.18 60.28 410 0
FFYF FFY Financial Corp. of OH 3.34 73.68 4.40 10.09 0.12 9.58 53.29 0 0
FBCI Fidelity Bancorp of Chicago IL 8.37 68.13 0.02 17.09 2.11 4.29 47.10 15,664 0
FMBD First Mutual Bancorp of IL 0.01 84.54 1.45 10.34 1.94 1.72 51.33 46,177 41
HMNF HMN Financial, Inc. of MN 5.73 86.40 1.52 2.67 0.30 4.42 39.67 1,485 0
HBFW Home Bancorp of Fort Wayne IN 0.00 94.85 4.55 0.57 0.00 2.94 42.89 2,880 0
LARK Landmark Bancshares of KS 27.43 61.43 0.92 3.86 1.63 5.34 41.34 54,688 0
MFBC MFB Corp. of Mishawaka IN 8.30 89.01 1.41 0.38 1.38 0.05 41.22 0 0
MFFC Milton Fed. Fin. Corp. of OH 15.38 75.03 3.78 6.05 0.02 1.86 43.18 0 0
SWBI Southwest Bancshares of IL 7.73 59.25 7.79 27.31 0.11 0.36 48.49 9,267 41
WEFC Wells Fin. Corp. of Wells MN 0.00 80.48 1.61 6.62 0.69 11.54 54.85 56,263 81
Source: Audited and unaudited financial statements, corporate reports and offering circulars, and RP Financial, Inc.
calculations. The information provided in this table has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
</TABLE>
<PAGE>
RP Financial, LC.
Page 3.13
Interest Rate Risk
- ------------------
Table 3.5 reflects various key ratios highlighting the relative interest
rate risk exposure of the Association versus the Peer Group companies. The data
indicates cumulative one year gap to assets ratios of negative 28.8 percent and
negative 2.2 percent for Home Federal and the Peer Group, respectively. Home
Federal's one year gap ratio indicates that net interest income is exposed to a
relatively high degree of volatility due to interest rate movements, while the
Peer Group's more closely matched one year gap ratio should provide for greater
stability in the net interest margin in various interest rate environments.
Following the infusion of stock proceeds and the resulting decline in the
proportion of interest-sensitive liabilities meeting the Association's funding
needs, Home Federal's one year gap should narrow substantially; particularly, as
conversion proceeds will initially be invested into short-term investments.
In terms of balance sheet composition, Home Federal's interest rate risk
characteristics were considered to be less favorable than the Peer Group's. In
particular, Home Federal's lower capital position and resulting lower IEA/IBL
ratio indicate a greater dependence on the yield-cost spread to sustain the net
interest margin. Likewise, Home Federal's higher level non-interest earning
assets results in a lower capacity to generate interest income in comparison to
the Peer Group. However, on a pro forma basis, the infusion of stock proceeds
should serve to address the less favorable ratios currently maintained by the
Association.
Credit Risk
- -----------
Overall, Home Federal's credit risk exposure did not appear to be
materially different than the Peer Group's, with both the Association's and the
Peer Group's credit quality measures being representative of limited credit risk
exposure. As shown in Table 3.6, both Home Federal and the Peer Group posted
comparable non-performing assets (REO, non-accruing loans and accruing loans
more than 90 days past due) to assets ratios of 0.47 percent and 0.43 percent,
respectively. Comparatively, Home Federal's non-performing loans to loans ratio
was lower than the Peer Group's ratio (0.41 percent versus 0.49 percent for the
Peer Group). Loss reserve ratios as a percent of non-performing assets
indicated more limited credit risk exposure for the Peer Group, with the
Association and the Peer Group maintaining loss reserves as a percent of non-
performing assets of 58.9 percent and 158.2 percent, respectively. Likewise,
the Peer Group maintained a higher level of loss reserves as a percent of loans
than the Association (0.55 percent versus 0.32 percent for the Association),
which was consistent with the Peer Group's greater diversification into higher
risk types of loans. Net loan charge-offs were not a material factor for either
the Association or the Peer Group during the period covered in Table 3.6.
<PAGE>
RP Financial, LC.
Page 3.14
Table 3.5
Home Federal and the Peer Group
Interest Rate Risk Comparative Analysis
<TABLE>
<CAPTION>
Interest-Earning Non Interest-
Assets/ Earning
One Year Equity Interest-Bearing Assets(3)/
Gap/Assets(1) Assets Liabilities(2) Assets
------------------------------------------------------------
(%) (%) (%) (%)
<S> <C> <C> <C> <C>
Home Federal (4) -28.8% 12.1% 1124.4% 3.5%
Peer Group Average -2.2% 17.2% 119.7% 2.7%
Peer Group (5)
- --------------
Calumet Bancorp of Chicago IL 17.6% (D95) 17.0% 116.3% 6.0%
FFY Financial Corp. of OH 0.1% (S95) 18.3% 121.6% 3.3%
Fidelity Bancorp of Chicago IL -13.7% (S95) 12.0% 113.5% 2.1%
First Mutual Bancorp of IL -4.7% (D95) 25.3% 132.4% 3.1%
HMN Financial, Inc. of MN -5.6% (S95) 16.8% 121.0% 1.5%
Home Bancorp of Fort Wayne IN NA 16.4% 119.3% 1.5%
Landmark Bancshares of KS 2.7% (S95) 17.2% 119.9% 1.6%
MFB Corp. Mishawaka IN 1.0% (S95) 19.3% 124.1% 1.5%
Milton Fed. Fin. Corp. of OH NA 20.0% 122.8% 2.5%
Southwest Bancshares of IL -15.1% (D95) 12.0% 109.7% 4.7%
Wells Fin. Corp. of Wells MN NA 14.9% 116.7% 1.8%
</TABLE>
(1) Latest date as of: M=March, J=June, S=September, D=December.
(2) Interest-earning assets includes cash; interest-bearing liabilities
includes non interest-bearing deposits but excludes escrows.
(3) Comprised of REO, non-accruing loans, and other non interest-earning
assets.
(4) Home Federal's data is as of March 31, 1996.
(5) As of March 31, 1996 or most recent data available.
Sources: Home Federal's prospectus and SNL Securities.
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 3.6
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of March 31, 1996 or Most Recent Date Available
NPAs & Rsrves/
REO/ 90+Del/ NPLs/ Rsrves/ Rsrves/ NPAs & Net Loan NLCs/
Institution Assets Assets Loans Loans NPLs 90+Del Chargoffs Loans
___________ ______ ______ ______ ______ ______ ________ _________ __________
(%) (%) (%) (%) (%) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Home Federal of Elgin 0.12 0.47 0.41 0.32 79.48 58.87 0 0.00
SAIF-Insured Thrifts 0.21 0.95 1.05 0.87 164.93 123.46 242 0.13
State of IL 0.18 0.58 0.54 0.64 202.81 132.81 92 0.08
Comparable Group Average 0.06 0.43 0.49 0.55 229.84 158.19 22 0.00
Comparable Group
________________
CBCI Calumet Bancorp of Chicago IL 0.46 1.23 1.03 1.36 131.07 82.56 181 -0.03
FFYF FFY Financial Corp. of OH 0.00 0.88 1.17 0.78 66.89 66.89 21 0.02
FBCI Fidelity Bancorp of Chicago IL 0.02 0.53 0.74 0.16 21.30 20.66 13 0.02
FMBD First Mutual Bancorp of IL 0.02 0.09 0.07 0.52 751.25 471.37 4 -0.01
HMNF HMN Financial, Inc. of MN 0.05 0.14 0.15 0.73 485.84 305.95 1 0.00
HBFW Home Bancorp of Fort Wayne IN 0.00 NA NA 0.60 NA NA 0 0.00
LARK Landmark Bancshares of KS 0.04 0.37 0.20 0.64 315.98 97.05 0 0.00
MFBC MFB Corp. of Mishawaka IN 0.00 0.05 NA 0.25 NA 325.00 0 0.00
MFFC Milton Fed. Fin. Corp. of OH 0.02 0.40 0.29 0.35 121.24 54.24 0 0.00
SWBI Southwest Bancshares of IL 0.03 0.25 0.31 0.31 101.06 87.66 0 0.00
WEFC Wells Fin. Corp. of Wells MN 0.02 0.39 0.44 0.32 73.94 70.55 18 0.04
Source: Audited and unaudited financial statements, corporate reports and offering circulars, and RP Financial, Inc.
calculations. The information provided in this table has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
</TABLE>
<PAGE>
RP Financial, LC.
Page 3.16
Summary
- -------
Based on the above analysis and the criteria employed by RP Financial in
the selection of the companies for the Peer Group, RP Financial concluded that
the Peer Group forms a reasonable basis for determining the pro forma market
value of Home Federal. Such general characteristics as asset size, capital
position, interest-earning asset composition, funding composition, core earnings
measures and loan composition all tend to support the reasonability of the Peer
Group from a financial standpoint.
<PAGE>
RP Financial, LC.
Page 4.1
IV. VALUATION ANALYSIS
Introduction
- ------------
This chapter presents the valuation analysis, prepared pursuant to the
approved valuation methodology promulgated by the OTS, and valuation factors
used to determine the estimated pro forma market value of the common stock of
the Holding Company. The common stock will be issued in conjunction with the
conversion of Home Federal from the mutual-to-stock form of ownership. The
valuation has been prepared utilizing the pro forma valuation methodology
promulgated by the OTS, most recently set forth in their 1994 valuation
guidelines.
Appraisal Guidelines
- --------------------
The OTS appraisal guidelines, originally released in October 1983, specify
the methodology for estimating the pro forma market value of an institution.
The methodology provides for: (1) selection of a peer group of comparable
publicly-traded institutions, subsequent guidance from the OTS limited
eligibility to only seasoned public companies in the peer group; (2) a financial
and operational comparison of the subject company to the peer group; and (3) a
valuation analysis in which the pro forma market value of the subject company is
determined based on the market pricing of the peer group as of the date of
valuation.
On October 21, 1994, the OTS released written revisions to the appraisal
guidelines, which had already been implemented in practice by the OTS. As
outlined in the guideline revisions, the basic appraisal methodology to be
followed is unchanged from the October 1983 guidelines. The revised guidelines,
however, limit the amount of a new issue discount which may be incorporated into
the valuation and thereby curtail the potential price appreciation in the after-
market.
RP Financial Approach to the Valuation
- --------------------------------------
RP Financial's valuation analysis complies with the appraisal guidelines as
revised and issued as of October 21, 1994. Accordingly, the valuation
incorporates a detailed analysis based on the Peer Group discussed in Chapter
III, incorporating "fundamental analysis" techniques. Additionally, the
valuation incorporates a "technical analysis" of recently completed stock
conversions, given the significant weight in the valuation process of limiting
the new issue discount. The pricing characteristics of recent conversions serve
as the best proxy for near-term aftermarket trading activity in newly issued
thrift shares, and the pricing characteristics of such recent conversions have
been applied to Home Federal's valuation in order to evaluate
<PAGE>
RP Financial, LC.
Page 4.2
the Association's potential aftermarket trading characteristics. It should be
noted that such analysis cannot possibly fully account for all the market forces
which impact trading activity and pricing characteristics of a stock on a given
day.
The pro forma market value determined herein is a preliminary value for the
Holding Company's to-be-issued stock. Throughout the conversion process, RP
Financial will: (1) review changes in the Association's operations and
financial condition; (2) monitor the Association's operations and financial
condition relative to the Peer Group to identify any fundamental changes; (3)
monitor the external factors affecting value including, but not limited to,
local and national economic conditions, interest rates, and the stock market
environment, including the market for thrift stocks; and (4) monitor pending
conversion offerings (including those in the offering phase) both regionally and
nationally. If material changes should occur during the conversion process, RP
Financial will prepare updated valuation reports reflecting such changes and
their related impact on value, if any, over the course of the conversion
process. RP Financial will also prepare a final valuation update at the closing
of the conversion offering to determine if the preliminary range of value
continues to be appropriate.
The appraised value determined herein is based on the current market and
operating environment for the Association and for all thrifts. Subsequent
changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates, and other external forces (such
as natural disasters or major world events), which may occur from time to time
(often with great unpredictability) may materially impact the market value of
all thrift stocks, including Home Federal, or Home Federal's value alone. To
the extent a change in factors impacting the Association's value can be
reasonably anticipated and/or quantified, RP Financial has incorporated the
estimated impact into the valuation analysis.
Valuation Analysis
- ------------------
A fundamental analysis discussing similarities and differences relative to
the Peer Group was presented in Chapter III. The following sections focus on
differences between the Association and the Peer Group and how those differences
affect our pro forma valuation. Emphasis is placed on the specific strengths
and weaknesses of the Association relative to the Peer Group in such key areas
as financial condition, profitability, growth and viability of earnings, asset
growth, primary market area, dividends, liquidity of the issue, marketing of the
issue, management, and the effect of government regulations and/or regulatory
reform. We have also considered the market for thrift stocks, and in particular
new issues, to assess the impact on value of Home Federal coming to market at
this time.
<PAGE>
RP Financial, LC.
Page 4.3
1. Financial Condition
-------------------
The financial condition of an institution is an important determinant in
pro forma market value, because investors typically look to such factors as
liquidity, capital, asset composition and quality, and funding sources in
assessing investment attractiveness. The similarities and differences in the
Association's and the Peer Group's financial strengths are noted as follows:
o Overall A/L Composition. Residential assets, including 1-4 family
-----------------------
permanent mortgage loans and MBS, funded by retail deposits were the
primary components of both Home Federal's and the Peer Group's balance
sheets. The Association's interest-earning asset composition
exhibited a higher concentration of loans, while the Peer Group
exhibited a greater diversification into higher risk types of loans.
The higher credit risk associated with the Peer Group's greater
diversification into higher risk types of lending was more than offset
by the higher level of cash and investments maintained by the Peer
Group, as the Peer Group's risk weighted assets-to-asset ratio was
slightly lower than Home Federal's. Home Federal's higher
concentration of loans also translated into a higher yield earned on
interest-earning assets, in comparison to the Peer Group average.
Home Federal's funding composition reflected a higher level of
deposits and lower level of borrowings than the respective Peer Group
measures, although both the Association and the Peer Group maintained
ample borrowing capacities. For valuation purposes, RP Financial
concluded that the Association's and the Peer Group's A/L compositions
were similar and no adjustment was warranted.
o Credit Quality. Both the Association's and the Peer Group's credit
--------------
quality measures were indicative of limited credit risk exposure.
Home Federal and the Peer Group exhibited comparable non-performing
assets-to-assets ratios, while the Peer Group maintained higher
reserves than Home Federal as a percent of loans and as a percent of
non-performing assets. In light of the Peer Group's higher level of
reserves and lower risk weighted assets-to-assets ratio, we concluded
that the Association's credit quality warranted a slight downward
adjustment for valuation purposes.
o Balance Sheet Liquidity. The Peer Group operated with a higher balance
-----------------------
of cash and investment securities than the Association (20.5 percent
of assets versus 10.7 percent for Home Federal). Home Federal and the
Peer Group were considered to have ample borrowing capacities, as Home
Federal did not maintain any borrowings and the Peer Group's
borrowings amounted to 7.7 percent of assets. Overall, the
Association's current balance sheet liquidity is considered to be
slightly less favorable than Peer Group's; however, conversions
proceeds received by the Association and the Holding Company are
expected to be initially deployed into short-term investments and,
thus, address the lower level of cash and investments currently
maintained by Home Federal. Therefore, RP Financial concluded that
the Association's balance sheet liquidity was comparable to the Peer
Group's and no adjustment was warranted for valuation purposes.
o Funding Liabilities. Retail deposits served as the primary interest-
-------------------
bearing source of funds for the Association and the Peer Group, with
borrowings being utilized to a slightly greater degree by the Peer
Group. Home Federal's absence of borrowings was favorable in terms of
providing for lower funding costs and slightly greater future
borrowing capacity. For purposes of the valuation, RP Financial
concluded that Home Federal's funding composition warranted a slight
upward adjustment.
<PAGE>
RP Financial, LC.
Page 4.4
o Capital. The Association operates with a lower pre-conversion capital
-------
ratio than the Peer Group, 12.1 percent and 17.2 percent of assets,
respectively. This disadvantage will be addressed as a result of the
stock offering, as the Association's and the Holding Company's
consolidated pro forma capital position should exceed the Peer Group's
equity-to-assets ratio. However, the increase in capital will also
serve to depress the Association's return on equity, until the
proceeds can be effectively leveraged and redeployed into higher
yielding loans. Overall, RP Financial concluded that no valuation
adjustment is warranted for the Association's capital position.
On balance, the characteristics of the Association's and the Peer Group's
financial conditions were not materially different in most respects for
valuation purposes. While Home Federal's funding composition represented a
positive valuation consideration, it was offset by the slightly higher credit
risk characteristics associated with the Association's balance sheet. Overall,
we concluded that no valuation adjustment was warranted for the Association's
financial strength.
2. Profitability, Growth and Viability of Earnings
-----------------------------------------------
Earnings are an important factor in determining pro forma market value, as
the level and risk characteristics of an institution's earnings stream and the
prospects and ability to generate future earnings are typically heavily factored
into an investment decision. The historical income statements of Home Federal
and the Peer Group were generally reflective of traditional thrift operating
strategies, with net interest income and operating expenses being the major
determinants of their respective earnings. The specific factors considered in
the valuation include:
o Reported Earnings. The Association recorded lower earnings on a ROAA
-----------------
basis (0.71 percent of average assets versus 0.99 percent for the Peer
Group). The difference between the Association's and the Peer Group's
returns was largely attributable to the Peer Group's more favorable
core earnings and, in particular, the lower level of operating
expenses maintained by the Peer Group. Accordingly, for valuation
purposes, the disparity between the Association's and the Peer Group's
reported earnings was considered to be indicative of the Peer Group's
more favorable recurring earnings strength and, thus, Home Federal's
lower reported earnings warranted a slight downward adjustment for
valuation purposes.
o Core Earnings. Both the Association's and the Peer Group's earnings
-------------
were derived largely from recurring sources, including net interest
income, operating expenses, and non-interest operating income. In
these measures, the Association operated with a stronger net interest
margin, a higher operating expense ratio and a more favorable level of
non-interest operating income. The Association's stronger net
interest margin and higher level of operating expenses translated into
a lower expense coverage ratio (1.29x versus 1.67x for the Peer
Group). Partially offsetting the Association's lower expense coverage
ratio was the larger earnings contribution realized from sources of
non-interest operating income, which was supported by Home Federal's
relatively high level of transaction deposits. Consistent with the
Association's and the Peer Group's favorable credit quality measures,
loss provisions had a minimal impact on their respective earnings.
Overall, these measures, as well as the expected earnings benefits the
Association should realize from the redeployment of conversion
proceeds into
<PAGE>
RP Financial, LC.
Page 4.5
interest-earning assets, which will be partially offset
by expenses associated with the stock benefit plans and operating as a
publicly-traded company, indicate that the Association's core earnings
are not as strong as the Peer Group's. Accordingly, we concluded that
a slight downward valuation adjustment was warranted for the
Association's core earnings.
o Interest Rate Risk. One year cumulative gap ratios for Home Federal and
------------------
the Peer Group equaled negative 28.8 percent and negative 2.2 percent,
respectively, indicating that there is a higher degree of interest
rate risk associated with the Association's net interest margin.
Other measures of interest rate risk, such as equity-to-assets ratios,
IEA/IBL ratios, and the level of non-interest earning assets to total
assets were more favorable for the Peer Group, although on a pro forma
basis, the infusion of stock proceeds will address the less favorable
ratios currently maintained by the Association. Likewise, the
Association's negative gap position should be substantially moderated
by redeployment of stock proceeds into short-term investments.
Accordingly, RP Financial concluded that the interest rate risk
associated with the Association's and the Peer Group's earnings was
comparable.
o Credit Risk. Loan loss provisions were not a significant factor in
-----------
either Home Federal's or the Peer Group's earnings. In terms of
future exposure to credit quality related losses, both the
Association's and the Peer Group's operating strategies and credit
quality measures indicated relatively limited credit risk exposure.
Lending diversification into higher risk types of loans was more
notable for the Peer Group, while the higher concentration of loans
maintained by Home Federal translated into a modestly higher risk
weighted assets-to-assets ratio for the Association. Overall, RP
Financial concluded that the credit risk exposure associated with the
Association's earnings was similar to the Peer Group's and no
adjustment was warranted for valuation purposes.
o Earnings Growth Potential. Several factors were considered in assessing
-------------------------
earnings growth potential. First, after factoring the Association's
planned redeployment of conversion proceeds into cash and investments,
both the Association and the Peer Group will maintain strong liquidity
positions, indicating comparability in terms of capacity to fund loan
growth with liquidity. Second, opportunities for lending growth in
the Association's market area were considered to be more favorable
than in the primary market areas served by the Peer Group companies,
as indicated by demographic measures such as population growth and per
capita income (see Exhibit III-4). Lastly, the Association will have
greater capacity to leverage than the Peer Group, based on a pro forma
capital position that will be above the Peer Group's equity-to-assets
ratio. On balance On balance, the Association's earnings growth
potential was considered to be slightly more favorable than the Peer
Group's, and a slight upward adjustment was warranted for valuation
purposes.
Overall, in comparison to the Association, the Peer Group's more favorable
reported and core earnings were viewed as more than negating Home Federal's more
favorable earnings growth potential. Therefore, RP Financial concluded that a
moderate downward valuation adjustment was warranted for profitability, growth
and viability of the Association's earnings relative to the Peer Group's.
3. Asset Growth
------------
Home Federal's asset growth was lower than the Peer Group's, during the
period covered in our comparative analysis (negative 0.1 percent versus positive
6.8 percent for the Peer Group). This characteristic
<PAGE>
RP Financial, LC.
Page 4.6
would normally be considered as a negative, but was somewhat offset by the
potential asset growth the Association will be able to realize following the
infusion of stock proceeds. On a pro forma basis, the Association's equity-to-
assets ratio will be stronger than the Peer Group's, with both Home Federal's
and the Peer Group's capital positions providing for notable leverage potential.
Accordingly, future asset growth potential appears to be comparable for Home
Federal versus the Peer Group and no valuation adjustment was warranted for this
factor.
4. Primary Market Area
-------------------
The general condition of a financial institution's market area has an
impact on value, as future success is in part dependent upon opportunities for
profitable activities in the local market area. A diversified and stable
economy has supported relatively favorable demographic measures for the
Association's primary market area, as indicated by strong population and
household growth rates. The market area is also considered to be relatively
affluent, based on household and per capita income measures that were well above
the comparative Illinois and U.S. measures. Overall, a stable local economy,
strong demographic growth and moderate unemployment are viewed as being
favorable market area characteristics with respect to limiting credit risk
exposure and supporting growth opportunities. At the same time, given the
desirable features of the market area, Home Federal faces notable competition
from numerous other financial institutions, including many which are
significantly larger than the Association.
In general, the Peer Group companies also operate in MSAs where there is
significant competition from larger and more diversified financial institutions,
although, on average, the Peer Group companies maintained a high deposit market
share than Home Federal. Population growth in the markets served by the Peer
Group companies was not as favorable as exhibited by Kane County, and average
per capita income in the primary market areas served by the Peer Group companies
was slightly lower than Kane County's per capita income. Summary demographic
and deposit market share data for the Association and the Peer Group companies
is provided in Exhibit III-4. As shown in Table 4.1, March 1996 unemployment
rates in the markets served by the Peer Group companies were generally not
dramatically different than Kane County's March 1996 unemployment rate, and were
considered to be indicative of relatively stable economic environments.
Overall, the Peer Group companies operate in healthy and stable economic
environments, which would tend to provide for comparability with respect to the
degree of credit risk exposure associated with their primary market areas
compared to Kane County. In terms of growth potential, Kane County's higher
population growth and higher per capita income would tend to be more supportive
of growth opportunities; however, the competitive advantage represented by the
more significant market share of deposits maintained by the Peer Group companies
on average somewhat negates the more favorable demographic attributes of Home
Federal's
<PAGE>
RP Financial, LC.
Page 4.7
primary market area. Therefore, we concluded a slight upward adjustment was
appropriate for the Association's market area.
Table 4.1
Market Area Unemployment Rates
Home Federal and the Peer Group Companies (1)
March 1996
County Unemployment
------ ------------
Home Federal - IL Kane 5.7%
The Peer Group
--------------
Calumet Bancorp of Chicago - IL Cook 5.4%
FFY Financial Corp. - OH Mahoning 9.8
Fidelity Bancorp - IL Cook 5.4
First Mutual Bancorp - IL Macon 7.6
HMN Financial, Inc. - MN Fillmore 6.1
Home Bancorp of Fort Wayne - IN Allen 4.4
Landmark Bancshares - KS Ford 3.4
MFB Corp. of Mishawaka - IN St. Joseph 4.4
Milton Fed. Fin. Corp. - OH Miami 4.4
Southwest Bancshares - IL Cook 5.4
Wells Fin. Corp. of Wells - MN Faribault 5.9
(1) Unemployment rates are not seasonally adjusted.
Source: U.S. Bureau of Labor Statistics.
5. Dividends
---------
The Holding Company presently has not established a dividend policy, but
will consider instituting a cash dividend policy at some point in the future,
based on numerous factors including growth objectives, financial condition, the
amount of net proceeds retained by the Holding Company in the conversion,
investment opportunities available to the Holding Company and the Association,
profitability, tax considerations, minimum capital requirements, regulatory
limitations, stock market characteristics and general economic conditions.
Historically, thrifts typically have not established dividend policies at
the time of their conversion to stock ownership. Newly converted institutions,
in general, have preferred to gain market seasoning, establish an earnings track
record and fully invest the conversion proceeds before establishing a dividend
policy. However, during the late-1980s and early-1990s, with negative publicity
surrounding the thrift industry, there was a tendency for more thrifts to
initiate moderate dividend policies concurrent with their conversion as a
<PAGE>
RP Financial, LC.
Page 4.8
means of increasing the attractiveness of the stock offering. Today, fewer
institutions are compelled to initially establish dividend policies at the time
of their conversion offering to increase the attractiveness of the stock issue
as (1) industry profitability has improved, (2) the number of problem thrift
institutions has declined, and (3) the stock market cycle for thrift stocks is
generally more favorable than in the early-1990s. At the same time, with ROE
ratios under pressure, due to high equity levels, well-capitalized institutions
are subject to increased competitive pressures to offer dividends.
As publicly-traded thrifts' capital levels and profitability have improved
and as weakened institutions have been resolved, the proportion of institutions
with cash dividend policies has increased. Six out of the ten institutions in
the Peer Group presently pay regular cash dividends, with implied dividend
yields ranging from 1.36 percent to 3.96 percent. The average dividend yield on
the stocks of the Peer Group institutions was 1.63 percent as of June 7, 1996,
representing an average earnings payout ratio of 26.30 percent. As of June 7,
1996, approximately 75 percent of all publicly-traded SAIF-insured thrifts had
adopted cash dividend policies (see Exhibit IV-1), exhibiting an average yield
of 2.48 percent and an average payout ratio of 34.65 percent. The dividend
paying thrifts generally maintain higher than average profitability ratios,
facilitating their ability to pay cash dividends, which supports a market
pricing premium on average relative to non-dividend paying thrifts.
The Holding Company will have the capacity to pay a dividend that is
comparable to the Peer Group's average dividend yield, based on pro forma
profitability and capital. Accordingly, the Holding Company's decision to
forego establishing a dividend policy at the time of conversion is not believed
to represent a material impact on the attractiveness of its stock, relative to
the stocks of the Peer Group companies on average. Accordingly, no adjustment
has been applied for this factor.
6. Liquidity of the Shares
-----------------------
The Peer Group is by definition composed of companies that are traded in
the public markets, all of which trade on the NASDAQ system. Typically, the
number of shares outstanding and market capitalization provides an indication of
how much liquidity there will be in a particular stock. The market
capitalization of the Peer Group companies ranged from $24.7 million to $120.7
million as of June 7, 1996, with an average market value of $53.9 million. The
shares outstanding of the Peer Group members ranged from 1.9 million to 5.2
million, with average shares outstanding of approximately 3.1 million. The
Association's conversion offering will result in a market value and shares
outstanding that are not materially different in terms of providing for
liquidity in the stock. Accordingly, similar to the Peer Group companies, we
anticipate that there will be a liquid and efficient trading market for the
Association's stock and, thus, no adjustment was required for this factor.
<PAGE>
RP Financial, LC.
Page 4.9
7. Marketing of the Issue
----------------------
We believe that three separate markets exists for thrift stocks coming to
market such as Home Federal: (1) the after-market for public companies, in
which trading activity is regular and investment decisions are made based upon
financial condition, earnings, capital, ROE and dividends; (2) the new issue
market in which converting thrifts are evaluated on a pro forma basis without
the benefit of prior operations as a publicly-held company and stock trading
history; and (3) the acquisition market for thrift franchises in Illinois. All
three of these markets were considered in the valuation of the Association's to-
be-issued stock.
A. The Public Market
-----------------
The value of publicly-traded thrift stocks is easily measurable, and
is tracked by most investment houses and related organizations. In general,
thrift stock values react to market stimuli such as interest rates, inflation,
perceived industry health, projected rates of economic growth, regulatory issues
and stock market conditions in general. Exhibit IV-2 displays historical stock
market trends for various indices and includes historical stock price index
values for thrifts and commercial banks. Exhibit IV-3 displays historical stock
price indices for thrifts only.
In terms of assessing general stock market conditions, the stock
market has generally trended higher over the past year. Indications of a
slowing economy, which provided for a rally in the bond market, along with
surprisingly strong first quarter earnings, served as the basis for the gains
recorded in the stock market in April and May 1995. Profits of major U.S.
corporations increased by 48 percent in the first quarter of 1995 compared to
the year ago period, which was in part supported by earnings of companies with
international operations benefitting from the strong performance of European and
Asian currencies against the dollar. A strengthening dollar further contributed
to the rally in the stock market, as the dollar rebounded on signs that the U.S.
was moving to reduce its trade and budget deficits; particularly, in light of
U.S. trade sanctions that were looming against Japan.
The upward trend in the stock market extended into June 1995, as the
DJIA approached the 4500 mark in mid-June. Economic data which indicated that
the economy was slowing down, such as lower retail sales and a modest increase
in the May consumer price index, increased expectations of an interest rate cut
by the Federal Reserve. Technology stocks continued to lead the market,
reflecting the strong earnings growth recorded by the technology sector in
general. The first rate cut in nearly three years propelled the stock market to
further new highs in mid-July, as the DJIA closed above the 4700 mark in the
second week of July.
A more upbeat assessment of the economy by the Federal Reserve and
mixed economic data, both of which lessened the likelihood of further rate cuts
by the Federal Reserve, caused the stock market to
<PAGE>
RP Financial, LC.
Page 4.10
retract modestly in late-July and early-August 1995. Profit taking and
moderating expectations of earnings growth in the technology sector further
contributed to the pull-back in the stock market, while news of Disney's
acquisition of Cap Cities/ABC had little impact on the overall stock market. The
strengthening dollar also served to push the DJIA lower in late-August, as the
blue-chip multinational stocks experienced selling pressure in light of lower
earnings expectations from their foreign operations.
The sell-off in the stock market was brief, as the DJIA rebounded
during the first half of September 1995. Technology stocks initially led the
stock market upturn, as investors found technology issues more attractively
priced following the downturn in July and August. Favorable inflation data
bolstered the DJIA in mid-September, as well as provided for a rally in bond
prices. While the DJIA was further boosted by AT&T's breakup announcement,
weakness in the dollar and unfavorable inflation data pushed bond and stock
prices lower in late-September.
Quarterly earnings controlled the market in beginning of the fourth
quarter, with day-to-day fluctuations reflecting positive and negative earnings
surprises particularly in the technology sector. Economic data indicating that
the economy was on track for a soft landing provided for a rally in the bond
market and stability in stock in mid-October 1995, which was followed by a broad
sell-off in the stock market in late-October. The sell-off was primarily
attributable to increasing signs of consumer credit weakness and the possibility
that such weakness could lead to a recession. However, the downturn was brief,
as the DJIA rallied to new highs in early- and mid-November. The rally was
initially led by transportation issues, and continued strength in the bond
market. Investors poured into defensive issues during the first budget impasse,
with the DJIA posting several consecutive highs in mid-November. The DJIA
surged past the 5000 mark in late-November, reflecting strength in blue chip
issues and a mild rebound in the technology sector amid increasing expectations
that the Federal Reserve would cut short-term interest rates. Defensive issues
sustained the rally through early-December, while weakness in the technology
sector provided for a slight pull-back in the stock market in mid-December. At
the close of 1995, market activity was mixed. Favorable inflation data led to a
0.25 percent cut in short-term interest rates by the Federal Reserve in late-
December, which served to initially lift stock prices. However, the second
budget impasse and weak holiday retail sales quickly erased the positive impact
of the interest rate cut, as the DJIA dropped sharply one day after the Federal
Reserve action. Bond prices rallied on news of the sagging economy, as the 30-
year bond yield fell below 6.0 percent in late-December.
The stock market began 1996 on a down note, reflecting concern over
the budget stalemate in Washington. A sell-off in technology stocks further
sustained the decline in the stock market, as investors dumped technology stocks
on profit concerns. However, favorable inflation data and strong fourth quarter
earnings by some blue chip issues served to abbreviate the decline in the stock
market, with the DJIA posting
<PAGE>
RP Financial, LC.
Page 4.11
several new highs in the second half of January. Stock prices were further
boosted by increasing expectations of another rate cut by the Federal Reserve,
which occurred at the end of January. The stock market moved sharply higher in
early-February, as the cut in short-term interest rates and strong fourth
quarter earnings posted by some large technology companies served to renew
investor interest in technology stocks. Low inflation and modest economic growth
translated into renewed interest for cyclical stocks as well, with the DJIA
posting five consecutive all-time highs during the week ended February 9.
Congressional testimony by the Federal Reserve Chairman provided for significant
swings in the stock market in mid-February, reflecting changing investor
sentiment regarding the possibility of future rate cuts during the Chairman's
two-day testimony. The volatility continued through the end of February,
reflecting turbulence in the bond market and general uncertainty over future
interest rate trends. An unexpectedly large drop in the February unemployment
rate provided for a sharp one day sell-off in the stock market on March 8, as
bond prices plunged on news of the strong job growth and the possibility that an
accelerating economy may lead to higher inflation. However, the stock market
recovered the following week, as inflation fears were somewhat alleviated by
additional economic data which indicated a more modest pace of economic growth
than suggested by the unemployment data, including a 0.2 percent drop in
February wholesale prices. After trading in a narrow range through the end of
March, merger activity and a jump in IBM's stock propelled the DJIA to a new
record in early-April. The upturn was brief, as bond and stock prices slumped
following the stronger than expected March employment report which served to
rekindle inflation fears.
Earnings reports dominated the stock market in mid-April 1996, with
day-to-day fluctuations in the market reflecting changing investor sentiment
regarding the strength of first quarter earnings and future earnings
expectations. Favorable fourth quarter earnings among technology issues pushed
the NASDAQ Composite Index to new highs in late-April and early-May, while blue
chip stocks lagged the overall market. Stronger than expected first quarter GDP
growth stirred major sell-offs in stocks and bonds, resulting in the 30-year
bond edging above 7.0 percent and a one day drop in the DJIA of almost 77
points. Inflation concerns receded somewhat following a report mid-May report
by the Federal Reserve, which indicated that inflation remained in check and
near term rate increases were not likely. The positive reading on inflation by
the Federal Reserve, along with the Federal Reserve's decision to leave interest
rates unchanged at its late-May meeting, served to strengthen bond and stock
prices, with the DJIA posting new highs in late-May and the 30-year bond
dropping below 7.0 percent. However, signs of an accelerating economy and
revised upward estimates of second quarter GDP growth provided for a pullback in
the stock market at the end of May. On June 7, 1996, the DJIA closed at
5697.11, translating into an 11.3 percent increase from year end 1995.
The market for thrift stocks has generally been favorable during the
past twelve months. Following the stock market in general, thrift issues
continued to move higher through the second quarter of
<PAGE>
RP Financial, LC.
Page 4.12
1995. Lower interest rates, healthy economies in most regions of the U.S. and
acquisition speculation all contributed to the upward trend exhibited in thrift
prices. The run-up in thrift prices moderated somewhat during July and the first
half of August 1995, reflecting profit taking, as thrift prices approached
historically high pricing multiples, and indications of lower profitability due
to shrinking net interest margins. However, the trend in thrift issues remained
generally positive, as acquisitions of thrift issues continued at a healthy pace
during the first half of the third quarter.
The upward trend in thrift prices accelerated in late-August and the
first half of September 1995, as acquisition activity among financial
institutions became more pronounced. Most notably, acquisitions or mergers
involving some of the nation's largest banks were announced during the third
quarter, including the proposed merger between Chase Manhattan and Chemical Bank
which resulted in the largest banking entity in the U.S. A court ruling
favoring thrifts seeking damages against the U.S. government for breach-of-
contract involving the accounting treatment of supervisory goodwill further
heightened interest in thrift stocks, as the SNL index closed 2.4 percent higher
the day of the ruling. Following the significant run-up recorded through mid-
September, slightly higher interest rates and profit taking nudged thrift prices
lower in late-September.
Lower interest rates and generally favorable third quarter earnings
propelled thrift prices higher during the first half of October 1995, while
credit quality concerns sparked a widespread sell-off in financial stocks during
late October. In particular, the concerns were related to rising consumer
delinquencies, as indicated by a steady rise in the consumer delinquency index
maintained by the American Bankers Association. For the first time since 1991,
the index increased for three consecutive quarters. However, sustained by
acquisition activity and relatively low interest rates, thrift stocks edged
higher during the first half of November. A tax law change in the new
congressional budget, which would provide for the elimination of back taxes on
bad-debt reserves taken before 1988, served to push thrift stocks higher in
late-November, as investors speculated that the removal of the potential back
taxes would accelerate the pace of mergers and acquisitions in the thrift
industry. Uncertainty regarding the Federal Reserve's intentions on cutting
short-term interest rates provided for a relatively narrow trading range for
thrift stocks during the first half of December. The rate cut by the Fed and
reports of sluggish retail sales led to a rally in the bond market in late-
December, which, in turn, bolstered prices for thrift and bank issues.
Thrift stocks followed the stock market in general lower in early-
1996, reflecting concern that the absence of a budget agreement would lead to
higher interest rates. The downturn in thrift stocks was brief, as thrift
prices trended higher in the second half of January. Economic data which
indicated that inflation was low supported the recovery in thrift prices, with
the favorable inflation data serving to calm the credit markets amid increasing
expectations that interest rates would remain low. Thrift prices were further
boosted by the Federal Reserve's move to cut short-term interest rates at the
end of January and generally favorable fourth
<PAGE>
RP Financial, LC.
Page 4.13
quarter earnings. Mixed indications on the future direction of interest rates
translated into a relatively narrow trading range for thrift stocks throughout
February.
Interest sensitive issues were among the stocks most severely affected
by the sell-off precipitated by the decline in the February 1996 unemployment
rate, as prospects for further near-term rate cuts by the Federal Reserve were
substantially eliminated by the explosive job growth. Thrift prices rebounded
in late-March and early-April as interest rates stabilized. A bullish outlook
on the financial institution sector in general served to further bolster prices
in early-April, as a number of analysts forecasted healthy first quarter
earnings for thrift and bank stocks and that the financial institution sector
would outperform the market in general during the balance of 1996. However,
thrift prices declined following the March employment report, as interest
sensitive stocks were pulled lower by the unfavorable interest rate outlook.
The downturn was abbreviated by the generally strong first quarter earnings
posted by the bank and thrift issues, which provided for a mild upward trend in
thrift stocks in mid-April. Paralleling the stock market in general, thrift
prices dropped sharply in early-May following the rise in interest rates caused
by the strong first quarter GDP growth. Thrift prices rebounded in mid-May, as
interest rates declined slightly on the strength of tame inflation news. At the
end of May and early-June, uncertainty over future interest rate trends provided
for a flat thrift stock market. The SNL Index for all publicly-traded thrifts
closed at 385.1 on June 7, 1996, an increase of 23.4 percent from one year ago.
B. The New Issue Market
--------------------
In addition to thrift stock market conditions in general, the new
issue market for converting thrifts is also an important consideration in
determining the Association's pro forma market value. The market for converting
thrifts was favorable throughout most of 1995, as the improving market for
thrift stocks in general translated into stronger demand for converting thrifts
as well. Demand for converting issues remained strong in the first quarter of
1996, with most offerings being oversubscribed and posting healthy increases in
near term aftermarket trading. In general, the market for the most recent
converting issues (offering completed within the past three months) has begun to
show signs of weakness, as indicated by generally weak aftermarket trading
activity exhibited in the stocks of recently converted institutions despite
healthy Subscription and Community Offering takedowns. In comparison to recent
prior quarters, the price appreciation exhibited in the most recent offerings
has been limited, and in a few cases converting thrift issues have traded below
their IPO prices. As shown in Table 4.2, the median one week change in price
for offerings completed during the latest three months equaled positive 7.5
percent.
In examining the current pricing characteristics of institutions
completing their conversions during the last three months (see Table 4.3), we
note there exists a considerable difference in pricing ratios
<PAGE>
<TABLE>
<CAPTION>
RP Financial, LC.
Table 4.2
Recent Conversions (Last Three Months)
Conversion Pricing Characteristics: Sorted Chronologically
----------------------------------------------------------
Institutional Information Pre-Conversion Data Offering
-----------------------------
Financial Info. Asset Quality Information
- --------------------------------------------------------------------------------------------------------------
Conversion Equity/ NPAs/ Res. Gross % of Exp./
Institution State Date Ticker Assets Assets Assets Cov. Proc. Mid. Proc.
- ----------- ----- ---- ------ ------ ------ ------ ---- ----- ---- -----
($Mil) (%) (%)(2) (%) ($Mil) (%) (%)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lexington B&L Fin. Corp. MO *06/06/96 LXMO $51 14.66% 1.88% 21% $12.7 115% 4.2%
First Fed. Fin. Bancorp OH 06/04/96 FFFB 53 9.58% 0.08% 626% 6.7 103% 6.3%
First Fed. Bancshares AR 05/03/96 FFBH 454 7.77% 0.13% 201% 51.5 94% 2.7%
Citizens First Fin. Corp. IL 05/01/96 CBK 229 6.79% 0.33% 55% 28.2 123% 3.6%
North Cincinnati SB(1) OH 05/01/96 P. Sheet 56 4.74% 0.03% 268% 4.0 132% 6.9%
Reliance Bancshares WI *04/19/96 RELI 32 31.16% 0.00% NM 20.5 132% 2.9%
Catskill Financial Corp. NY 04/18/96 CATB 231 12.75% 0.70% 112% 56.7 132% 3.3%
Yonkers Financial Corp. NY *04/18/96 YFCB 210 7.72% 1.73% 23% 35.7 132% 2.7%
Green Street Financial Corp. NC 04/04/96 GSFC 151 14.97% 0.19% 76% 43.0 132% 2.9%
FFD Financial Corp. OH 04/02/96 FFDF 61 13.25% 0.16% 150% 14.5 132% 2.4%
Patapsco Bancorp MD 04/02/96 P. Sheet 75 7.95% 0.60% 48% 7.3 91% 8.6%
AMB Financial Corp. IN 04/01/96 AMFC 70 9.05% 0.53% 96% 11.2 132% 5.5%
First Bergen Bancorp NJ 04/01/96 FBER 225 6.52% 3.26% 88% 31.7 132% 3.0%
Heritage Financial Corp. IN 04/01/96 P. Sheet 14 27.53% 0.00% NM 4.9 99% 9.3%
Jacksonville Bancorp(7) TX 04/01/96 JXVL 198 10.47% 1.41% 36% 16.2 106% 4.4%
London Financial Corp. OH 04/01/96 LONF 35 9.45% 0.13% 416% 5.3 132% 6.9%
Pittsb. Home Fin. Corp.(1) PA *04/01/96 PHFC 162 6.89% 1.36% 42% 21.8 132% 3.3%
Scotland Bancorp(1) NC *04/01/96 SSB 58 15.36% 0.00% NM 18.4 115% 5.0%
Stone Street Bancorp(1) NC 04/01/96 SSM 88 14.33% 0.00% NM 27.4 132% 3.7%
WHG Bancshares MD 04/01/96 WHGB 85 10.14% 0.23% 77% 16.2 132% 3.5%
PFF Bancorp, Inc. CA *03/29/96 PFFB 1,925 5.75% 1.70% 54% 198.4 132% 2.2%
Crazy Woman Creek Bncrp WY *03/29/96 CRZY 38 15.80% 0.21% 349% 10.6 132% 3.9%
Falmouth Co-Op. Bank(1) MA 03/28/96 FCB 74 11.78% 0.00% NM 14.5 132% 4.5%
Community Federal Bancorp MS 03/26/96 CFTP 168 14.59% 0.39% 86% 46.3 132% 2.5%
GA Financial, Inc. PA 03/26/96 GAF 521 9.25% 0.28% 56% 89.0 132% 2.4%
North Central Bancshares(7) IA 03/21/96 FFFD 180 16.47% 0.17% 562% 26.3 106% 3.5%
Washington Bancorp IA 03/12/96 P. Sheet 56 8.00% 0.81% 46% 6.6 115% 6.1%
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Averages: $209 12.04% 0.62% 136% 31.5 124% 4.2%
Medians: 86 10.31% 0.26% 77% 19.4 132% 3.6%
Averages, Excluding 2nd Steps $204 11.95% 0.60% 158% 30.6 123% 4.3%
Medians, Excluding 2nd Steps 85 10.14% 0.23% 82% 18.4 132% 3.6%
<CAPTION>
Institutional Information Insider Purchases Pro Forma Data
------------------------------------------------
Pricing Ratios(4) Fin. Characteristics
- -----------------------------------------------------------------------------------------------------------------------------
Benefit Plans
----------------
Conversion Recog. Mgmt.
Institution State Date Ticker ESOP Plans & Dirs. P/TB P/E P/A ROA TE/A ROE
- ----------- ----- ---- ------ -------------- ------- ---- --- --- --- ---- ---
(%) (%) (%)(3) (%) (x) (%) (%) (%) (%)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lexington B&L Fin. Corp. MO *06/06/96 LXMO 8.0% 4.0% 4.3% 70.1% 16.2 20.6% 1.3% 29.4% 4.3%
First Fed. Fin. Bancorp OH 06/04/96 FFFB 8.0% 4.0% 13.4% 63.6% 17.4 11.5% 0.7% 18.0% 3.7%
First Fed. Bancshares AR 05/03/96 FFBH 8.0% 4.0% 2.6% 65.0% 10.4 10.3% 1.0% 15.9% 6.3%
Citizens First Fin. Corp. IL 05/01/96 CBK 8.0% 4.0% 6.5% 71.7% 17.8 11.2% 0.6% 15.6% 4.0%
North Cincinnati SB(1) OH 05/01/96 P. Sheet 6.0% 0.0% 16.1% 65.0% NM 6.7% NM 10.3% NM
Reliance Bancshares WI *04/19/96 RELI 4.0% 4.0% 9.5% 72.3% 27.3 40.7% 1.5% 56.2% 2.7%
Catskill Financial Corp. NY 04/18/96 CATB 8.0% 4.0% 2.6% 73.2% 21.2 20.4% 1.0% 27.8% 3.5%
Yonkers Financial Corp. NY *04/18/96 YFCB 8.0% 4.0% 3.7% 76.5% 16.6 14.8% 0.9% 19.4% 4.6%
Green Street Financial Corp. NC 04/04/96 GSFC 8.0% 4.0% 3.4% 72.6% 16.2 22.9% 1.4% 31.5% 4.5%
FFD Financial Corp. OH 04/02/96 FFDF 8.0% 4.0% 5.4% 71.0% 19.1 19.9% 1.0% 28.0% 3.7%
Patapsco Bancorp MD 04/02/96 P. Sheet 8.0% 4.0% 7.4% 61.7% NM 8.9% NM 14.5% NM
AMB Financial Corp. IN 04/01/96 AMFC 8.0% 4.0% 5.8% 72.1% 19.5 14.2% 0.7% 19.7% 3.7%
First Bergen Bancorp NJ 04/01/96 FBER 8.0% 4.0% 2.4% 76.2% 29.5 12.6% 0.4% 16.5% 2.6%
Heritage Financial Corp. IN 04/01/96 P. Sheet 8.0% 0.0% 13.2% 62.9% NM 27.2% 0.6% 43.2% 1.3%
Jacksonville Bancorp(7) TX 04/01/96 JXVL 8.0% 4.0% 2.0% 77.7% 14.9 12.6% 0.8% 16.2% 5.2%
London Financial Corp. OH 04/01/96 LONF 8.0% 4.0% 26.5% 70.0% 31.6 13.6% 0.4% 19.4% 2.2%
Pittsb. Home Fin. Corp.(1) PA *04/01/96 PHFC 8.0% 4.0% 7.5% 73.6% 18.5 12.1% 0.7% 16.4% 4.0%
Scotland Bancorp(1) NC *04/01/96 SSB 8.0% 4.0% 6.9% 76.3% 18.1 25.2% 1.4% 33.1% 4.2%
Stone Street Bancorp(1) NC 04/01/96 SSM 8.0% 4.0% 7.3% 76.8% 18.4 24.7% 1.3% 32.2% 4.2%
WHG Bancshares MD 04/01/96 WHGB 8.0% 4.0% 9.3% 72.8% 17.3 16.5% 1.0% 22.7% 4.2%
PFF Bancorp, Inc. CA *03/29/96 PFFB 8.0% 4.0% 0.9% 71.5% 25.4 9.5% 0.4% 13.2% 2.8%
Crazy Woman Creek Bncrp WY *03/29/96 CRZY 6.0% 4.0% 5.5% 70.2% 18.1 22.5% 1.2% 32.1% 3.9%
Falmouth Co-Op. Bank(1) MA 03/28/96 FCB 8.0% 0.0% 8.4% 67.8% 20.2 16.6% 0.8% 24.4% 3.4%
Community Federal Bancorp MS 03/26/96 CFTP 8.0% 4.0% 6.7% 72.2% 15.5 22.3% 1.4% 30.9% 4.7%
GA Financial, Inc. PA 03/26/96 GAF 8.0% 4.0% 1.7% 71.5% 15.7 14.9% 1.0% 20.8% 4.6%
North Central Bancshares(7) IA 03/21/96 FFFD 3.2% 0.0% 0.5% 74.2% 12.1 19.7% 1.6% 26.5% 6.1%
Washington Bancorp IA 03/12/96 P. Sheet 8.0% 4.0% 15.7% 66.6% 14.9 10.7% 0.7% 16.1% 4.5%
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Averages: 7.5% 3.4% 7.0% 71.2% 18.9 17.4% 1.0% 24.3% 4.0%
Medians: 8.0% 4.0% 6.1% 71.9% 18.1 15.7% 1.0% 21.7% 4.1%
Averages, Excluding 2nd Steps 7.5% 3.4% 7.2% 70.9% 18.8 17.1% 1.0% 24.1% 3.9%
Medians, Excluding 2nd Steps 8.0% 4.0% 6.5% 71.7% 17.9 14.9% 1.0% 20.8% 4.0%
<CAPTION>
Post-IPO Pricing Trends
------------------------------------------------
Closing Price:
------------------------------------------------
First After After
Conversion IPO Trading % First % First %
Institution State Date Ticker Price Day Chg. Week(5) Chg. Month(6) Chg.
- ----------- ----- ---- ------ ----- --- ---- ------- ---- -------- ----
($) ($) (%) ($) (%) ($) (%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lexington B&L Fin. Corp. MO *06/06/96 LXMO $10.00 $9.50 -5.0% NA NA NA NA
First Fed. Fin. Bancorp OH 06/04/96 FFFB 10.00 10.75 7.5% $10.27 2.7% NA NA
First Fed. Bancshares AR 05/03/96 FFBH 10.00 13.00 30.0% 13.38 33.8% $13.69 36.9%
Citizens First Fin. Corp. IL 05/01/96 CBK 10.00 10.50 5.0% 10.00 0.0% 10.13 1.3%
North Cincinnati SB(1) OH 05/01/96 P. Sheet 10.00 NT NA NT NA NT NA
Reliance Bancshares WI *04/19/96 RELI 8.00 8.38 4.7% 8.25 3.1% 7.94 -0.7%
Catskill Financial Corp. NY 04/18/96 CATB 10.00 10.38 3.8% 10.50 5.0% 10.38 3.8%
Yonkers Financial Corp. NY *04/18/96 YFCB 10.00 9.75 -2.5% 10.00 0.0% 9.94 -0.6%
Green Street Financial Corp. NC 04/04/96 GSFC 10.00 12.75 27.5% 12.25 22.5% 12.31 23.1%
FFD Financial Corp. OH 04/02/96 FFDF 10.00 10.50 5.0% 10.13 1.3% 10.50 5.0%
Patapsco Bancorp MD 04/02/96 P. Sheet 10.00 NT NA NT NA NT NA
AMB Financial Corp. IN 04/01/96 AMFC 10.00 10.50 5.0% 10.50 5.0% 10.5 5.0%
First Bergen Bancorp NJ 04/01/96 FBER 10.00 10.00 0.0% 9.50 -5.0% 9.63 -3.8%
Heritage Financial Corp. IN 04/01/96 P. Sheet 10.00 NT NA NT NA NT NA
Jacksonville Bancorp(7) TX 04/01/96 JXVL 10.00 9.75 -2.5% 9.63 -3.8% 9.88 -1.2%
London Financial Corp. OH 04/01/96 LONF 10.00 10.81 8.1% 10.63 6.3% 10.13 1.3%
Pittsb. Home Fin. Corp.(1) PA *04/01/96 PHFC 10.00 11.00 10.0% 11.00 10.0% 10.62 6.2%
Scotland Bancorp(1) NC *04/01/96 SSB 10.00 12.25 22.5% 12.50 25.0% 11.75 17.5%
Stone Street Bancorp(1) NC 04/01/96 SSM 15.00 17.50 16.7% 18.00 20.0% 17.75 18.3%
WHG Bancshares MD 04/01/96 WHGB 10.00 11.13 11.3% 11.44 14.4% 11.38 13.8%
PFF Bancorp, Inc. CA *03/29/96 PFFB 10.00 11.38 13.8% 11.62 16.2% 11.63 16.3%
Crazy Woman Creek Bncrp WY *03/29/96 CRZY 10.00 10.38 3.8% 10.75 7.5% 10.50 5.0%
Falmouth Co-Op. Bank(1) MA 03/28/96 FCB 10.00 10.75 7.5% 11.25 12.5% 10.75 7.5%
Community Federal Bancorp MS 03/26/96 CFTP 10.00 12.63 26.3% 13.13 31.3% 12.62 26.2%
GA Financial, Inc. PA 03/26/96 GAF 10.00 11.38 13.8% 11.50 15.0% 11.00 10.0%
North Central Bancshares(7) IA 03/21/96 FFFD 10.00 10.88 8.7% 10.69 6.9% 10.44 4.4%
Washington Bancorp IA 03/12/96 P. Sheet 10.00 NT NA NT NA NT NA
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Averages: $10.12 $11.14 9.7% $11.27 10.8% $11.12 9.3%
Medians: 10.00 10.78 7.8% 10.75 7.5% 10.50 5.0%
Averages, Excluding 2nd Steps $10.11 $11.12 9.6% $11.22 10.4% $11.12 9.3%
Medians, Excluding 2nd Steps 10.00 10.75 7.5% 10.72 7.2% 10.50 5.0%
</TABLE>
Note: * - Appraisal performed by RP Financial; "NT" - Not Traded;
"NA" - Not Applicable, Not Available.
(1) Non-OTS regulated thrifts. 7-Jun-96
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Latest price if offering less than one week old.
(6) Latest price if offering more than one week but less than one month old.
(7) Second-step conversions.
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 4.3
Market Pricing Comparatives
Prices As of June 7, 1996
Per Share Data
Market _______________
Capitalization Book Pricing Ratios(3)
_______________ _______________________________________
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
_______ _______ _______ _______ _______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Financial Institution
_____________________
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
SAIF-Insured Thrifts 17.27 118.72 1.26 16.67 14.25 104.71 13.08 107.87 15.15
Converted Last 3 Mths (no MHC) 10.94 41.25 0.45 14.33 17.75 76.11 19.49 76.15 17.95
Comparable Group
________________
Converted Last 3 Mths (no MHC)
______________________________
AMFC AMB Financial Corp. of IN 10.00 11.24 0.31 14.37 NM 69.59 13.96 69.59 NM
CATB Catskill Fin. Corp. of NY 10.25 58.29 0.47 13.65 21.81 75.09 20.87 75.09 18.98
CBK Citizens First Fin.Corp. of IL 10.00 28.18 0.56 13.95 17.86 71.68 11.16 71.68 16.39
CFTP Community Fed. Bancorp of MS 13.50 62.49 0.43 14.34 NM 94.14 31.16 94.14 NM
CRZY Crazy Woman Creek Bncorp of WY 10.37 10.97 0.34 14.67 NM 70.69 23.12 70.69 NM
FFDF FFD Financial Corp. of OH 10.37 15.09 0.52 14.08 19.94 73.65 20.64 73.65 19.94
FCB Falmouth Co-Op Bank of MA 10.25 14.91 0.25 14.84 NM 69.07 16.96 69.07 NM
FBER First Bergen Bancorp of NJ 9.25 29.36 0.20 13.46 NM 68.72 11.36 68.72 NM
FFBH First Fed. Bancshares of AR 13.75 70.87 0.96 15.38 14.32 89.40 14.22 89.40 14.32
GAF GA Financial Corp. of PA 10.75 95.68 0.33 14.34 NM 74.97 16.82 74.97 24.43
GSFC Green Street Fin. Corp. of NC 12.62 54.24 0.62 13.78 20.35 91.58 28.87 91.58 20.35
JXVL Jacksonville Bancorp of TX 10.12 26.94 0.59 13.37 17.15 75.69 12.64 75.69 17.15
LXMO Lexington B&L Fin. Corp. of MO 9.75 12.33 0.62 14.27 15.73 68.33 20.10 68.33 15.98
LONF London Financial Corp. of OH 10.50 5.55 0.37 14.81 NM 70.90 14.79 70.90 NM
FFFD North Central Bancshares of IA 10.25 41.11 0.65 13.72 15.77 74.71 21.57 74.71 16.80
PFFB PFF Bancorp of Pomona CA 11.25 223.17 0.10 14.57 NM 77.21 11.11 78.13 NM
PHFC Pittsburgh Home Fin. of PA 10.00 21.82 0.54 13.58 18.52 73.64 12.10 73.64 18.52
RELI Reliance Bancshares Inc of WI 7.50 19.22 0.29 11.06 NM 67.81 38.13 67.81 NM
SSB Scotland Bancorp of NC 12.12 22.30 0.38 14.38 NM 84.28 31.67 84.28 NM
SSM Stone Street Bancorp of NC 16.87 30.79 0.43 21.43 NM 78.72 26.52 78.72 NM
WHGB WHG Bancshares of MD 11.50 18.63 0.36 14.20 NM 80.99 16.68 80.99 NM
YFCB Yonkers Fin. Corp. of NY 9.62 34.35 0.60 13.07 16.03 73.60 14.28 73.60 14.58
<CAPTION>
Dividends(4) Financial Characteristics(6)
_______________________ _______________________________________________________
Amount/ Payout Total Equity/ NPAs/ Reported Core
________________ _______________
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
_______ ______ _______ ______ _______ _______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Financial Institution
_____________________
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
SAIF-Insured Thrifts 0.35 1.97 25.39 1,305 13.24 0.95 0.87 8.09 0.81 7.30
Converted Last 3 Mths (no MHC) 0.03 0.30 4.98 264 25.56 0.82 0.85 4.34 0.86 4.49
Comparable Group
________________
Converted Last 3 Mths (no MHC)
______________________________
AMFC AMB Financial Corp. of IN 0.00 0.00 0.00 81 20.06 0.71 0.49 4.30 0.49 4.30
CATB Catskill Fin. Corp. of NY 0.00 0.00 0.00 279 27.79 NA 0.96 3.44 1.10 3.96
CBK Citizens First Fin.Corp. of IL 0.00 0.00 0.00 252 15.57 NA 0.63 4.01 0.68 4.37
CFTP Community Fed. Bancorp of MS 0.00 0.00 0.00 201 33.10 0.34 1.17 6.28 1.14 6.13
CRZY Crazy Woman Creek Bncorp of WY 0.00 0.00 0.00 47 32.70 0.70 0.92 4.63 0.78 3.95
FFDF FFD Financial Corp. of OH 0.00 0.00 0.00 73 28.03 NA 1.04 3.69 1.04 3.69
FCB Falmouth Co-Op Bank of MA 0.00 0.00 0.00 88 24.56 NA 0.45 2.40 0.47 2.50
FBER First Bergen Bancorp of NJ 0.00 0.00 0.00 259 16.52 2.49 0.28 3.06 0.42 4.59
FFBH First Fed. Bancshares of AR 0.00 0.00 0.00 498 15.90 0.09 0.99 6.24 0.99 6.24
GAF GA Financial Corp. of PA 0.00 0.00 0.00 569 22.44 0.19 0.58 4.73 0.78 6.30
GSFC Green Street Fin. Corp. of NC 0.00 0.00 0.00 188 31.53 0.16 1.42 4.50 1.42 4.50
JXVL Jacksonville Bancorp of TX 0.42 4.15 71.19 213 16.70 0.86 0.79 6.76 0.79 6.76
LXMO Lexington B&L Fin. Corp. of MO 0.00 0.00 0.00 61 29.42 1.04 1.28 4.34 1.26 4.27
LONF London Financial Corp. of OH 0.00 0.00 0.00 38 20.86 0.21 0.57 4.73 0.57 4.73
FFFD North Central Bancshares of IA 0.25 2.44 38.46 191 28.87 0.13 1.48 7.67 1.39 7.19
PFFB PFF Bancorp of Pomona CA 0.00 0.00 0.00 2,008 14.39 2.29 0.10 1.37 0.10 1.37
PHFC Pittsburgh Home Fin. of PA 0.00 0.00 0.00 180 16.43 1.53 0.65 3.98 0.65 3.98
RELI Reliance Bancshares Inc of WI 0.00 0.00 0.00 50 56.23 NA 1.47 2.62 1.47 2.62
SSB Scotland Bancorp of NC 0.00 0.00 0.00 70 37.58 NA 1.09 3.96 1.09 3.96
SSM Stone Street Bancorp of NC 0.00 0.00 0.00 116 33.68 0.31 0.77 3.04 0.77 3.04
WHGB WHG Bancshares of MD 0.00 0.00 0.00 112 20.59 0.35 0.64 5.18 0.64 5.18
YFCB Yonkers Fin. Corp. of NY 0.00 0.00 0.00 241 19.39 1.73 0.89 4.59 0.98 5.05
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (earnings per share) is based on actual trailing twelve month data and is not shown on a pro forma basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB = Price to tangible book value; and P/CORE = Price
to estimated core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based on trailing twelve month earnings and average
equity and assets balances.
(7) Excludes from averages those companies the subject of actual or rumored acquisition activities or unusual operating
characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we cannot guarantee the accuracy or completeness
of such information.
Copyright (c) 1995 by RP Financial, Inc.
</TABLE>
<PAGE>
RP Financial, LC.
Page 4.16
compared to the universe of all publicly-traded thrifts. Specifically, the
current average P/B ratio of the conversions completed in the most recent three
month period of 76.11 percent reflects a discount of 27.3 percent from the
average P/B ratio of all publicly-traded SAIF-insured thrifts (equal to 104.71
percent), and the average core P/E ratio of 17.95 times reflects a premium of
18.5 percent from the all SAIF-insured public average core P/E ratio of 15.15
times. The pricing ratios of the better capitalized but lower earning recently
converted thrifts suggest that the investment community has determined to
discount their stocks on a book basis until the earnings improve through
redeployment and leveraging of the proceeds over the longer term.
In determining our valuation adjustment for marketing of the issue, we
considered trends in both the overall thrift market and the new issue market.
The overall market for thrift stocks is considered to be healthy, as thrift
stocks have traded in a relatively narrow range and are currently exhibiting
pricing ratios that are at historically high levels. Investor interest in the
new issue market has generally been strong, as indicated by strong takedowns in
recent Subscription and Community Offerings; however, fairly limited price
appreciation exhibited in post-conversion trading by recent conversions in
general may indicate a less robust market for forthcoming issues of converting
thrifts.
C. The Acquisition Market
----------------------
Also considered in the valuation was the potential impact on Home
Federal's stock price of recently completed and pending acquisitions of other
thrifts operating in Home Federal's market area. As shown in Exhibit IV-4,
there were 14 Illinois thrifts acquired in 1994, 1995 and year-to-date 1996 and
three acquisitions are currently pending. In light of the Association's strong
pro forma capital position, which would tend to make Home Federal a less
attractive acquisition candidate, acquisition speculation is not expected to
have a material influence on the Association's initial trading price. However,
at the same time, the fairly active acquisition market for Illinois thrifts, may
imply a certain degree of acquisition speculation for the Association's stock.
To the extent that acquisition speculation may impact the Association's
offering, we have largely taken this into account in selecting Illinois and
other Mid-West based companies, which operate in markets that have experienced a
comparable level of acquisition activity as the Association's market area and,
thus, are subject to the same type of acquisition speculation that may influence
Home Federal's trading price.
Taking these factors and trends into account, primarily recent trends
in the new issue market, market conditions overall, and recent trends in the
acquisition market, RP Financial concluded that no adjustment was appropriate in
the valuation analysis for purposes of marketing of the issue.
<PAGE>
RP Financial, LC.
Page 4.17
8. Management
----------
Home Federal's management team has experience and expertise in all of the
key areas of the Association's operations. Exhibit IV-5 provides summary
resumes of Home Federal's Board of Directors and executive management. While
the Association does not have the resources to develop a great deal of
management depth, given its asset size and the impact it would have on operating
expenses, management and the Board have been effective in implementing an
operating strategy that can be well managed by the Association's present
management structure as indicated by Home Federal's solid core earnings and
healthy capital position.
Similarly, the returns, capital positions, and other operating measures of
the Peer Group companies are indicative of well-managed financial institutions,
which have Boards and management teams that have been effective in implementing
conservative and competitive operating strategies. Therefore, on balance, we
concluded no valuation adjustment relative to the Peer Group was appropriate for
this factor.
9. Effect of Government Regulation and Regulatory Reform
-----------------------------------------------------
There have been two recent developments in the thrift industry which may
have an effect on the pricing of thrifts: (1) the recent discussions by
legislators regarding the recapitalizing of the SAIF through a special
assessment coupled with possible lower future annual deposit premiums; and, (2)
the possibility that back taxes on bad debt reserves taken before 1988 may be
eliminated. Since the Association and all of the Peer Group members are SAIF-
insured, we believe the effect of these discussions on the Association's pro
forma pricing has been implicitly accounted for in the pricing ratios of the
Peer Group. In summary, as a fully converted SAIF-insured savings institution,
Home Federal will operate in substantially the same regulatory environment as
the Peer Group members -- all of whom are adequately capitalized institutions
and are operating with no apparent restrictions. Exhibit IV-6 reflects the
Association's pro forma regulatory capital ratios. RP Financial concluded that
Home Federal's flexibility of operations are neither materially restricted nor
enhanced by its current regulatory status versus the Peer Group and no
adjustment was made for this factor.
<PAGE>
RP Financial, LC.
Page 4.18
Summary of Adjustments
- ----------------------
Overall, we believe the Association's pro forma market value should be
discounted relative to the Peer Group as follows:
Key Valuation Parameters: Valuation Adjustment
------------------------ --------------------
Financial Condition No Adjustment
Profitability, Growth and Viability of Earnings Moderate Downward
Asset Growth No Adjustment
Primary Market Area Slight Upward
Dividends No Adjustment
Liquidity of the Shares No Adjustment
Marketing of the Issue No Adjustment
Management No Adjustment
Effect of Government Regulations and Regulatory Reform No Adjustment
Valuation Approaches
- --------------------
In applying the accepted valuation methodology promulgated by the OTS and
adopted by the FDIC, i.e., the pro forma market value approach, we considered
the three key pricing ratios in valuing Home Federal's to-be-issued stock --
price/earnings ("P/E"), price/book ("P/B"), and price/assets ("P/A") approaches
- -- all performed on a pro forma basis including the effects of the conversion
proceeds. In computing the pro forma impact of the conversion and the related
pricing ratios, we have incorporated the valuation parameters disclosed in Home
Federal's prospectus for offering expenses, the effective tax rate, reinvestment
rate, and stock benefit plan assumptions (summarized in Exhibits IV-7 and IV-8).
A reinvestment rate of 6.03 percent was utilized, equal to the arithmetic
average of the Association's average yield on interest-earnings assets and cost
of deposits for the three months ended March 31, 1996 (the reinvestment rate
calculation specified by OTS conversion guidelines). The 6.03 percent
reinvestment rate is believed to be representative of the blended rate
reflecting the Association's business plan as converted and incorporating the
impact of deposit withdrawals to fund a portion of the stock issued in
conversion. In our estimate of value, we assessed the relationship of the pro
forma pricing ratios relative to the Peer Group and the recent conversions.
RP Financial's valuation placed emphasis on the following:
o P/E Approach. The P/E approach is generally the best indicator of long-
------------
term value for a stock. Given the similarities between the
Association's and the Peer Group's earnings and overall financial
condition, the P/E approach was carefully considered in this
valuation.
o P/B Approach. P/B ratios have generally served as a useful benchmark in
------------
the valuation of thrift stocks, with the greater determinant of long
term value being earnings. RP Financial
<PAGE>
RP Financial, LC.
Page 4.19
considered the P/B approach to be a reliable indicator of value given
current market conditions, particularly the market for new conversions
which often exhibit P/E multiples that are well above industry averages
and, thus, are viewed as a less meaningful indicator of value.
o P/A Approach. P/A ratios are generally a less reliable indicator of
------------
market value, as investors do not place significant weight on total
assets as a determinant of market value. Investors place
significantly greater weight on book value and earnings -- which have
received greater weight in our valuation analysis.
Based on the application of the three valuation approaches, taking into
consideration the valuation adjustments discussed above, and placing the
greatest weight on the P/E and P/B approaches, RP Financial concluded that the
pro forma market value of the Association's conversion stock is $57,500,000 at
the midpoint at this time.
1. Price-to-Book ("P/B"). The application of the P/B valuation method
---------------------
requires calculating the Association's pro forma market value by applying a
valuation P/B ratio to Home Federal's pro forma book value. Based on the $57.5
million midpoint valuation, Home Federal's pro forma P/B ratio was 66.77
percent. In comparison to the average P/B ratio for the Peer Group of 92.02
percent, Home Federal's valuation reflected a 27.4 percent discount relative to
the Peer Group. RP Financial considered the discount under the P/B approach to
be reasonable, in light of the downward adjustment applied to the Association's
value for earnings. Additionally, the discounted P/B ratio is also warranted by
the Association's lower pro forma ROE (3.83 percent, based on core earnings,
versus 5.59 percent for the Peer Group) and resulting pro forma P/E multiple.
Given the emphasis in the revised appraisal guidelines on limiting near
term aftermarket price increases in the stocks of converting institutions, RP
Financial also considered the pro forma P/B ratios of recent conversions in its
valuation analysis. It is these companies that provide the best proxy for
aftermarket trading for a new issue such as Home Federal's conversion stock (as
newly converted thrifts represent an "alternative investment" to purchasing
conversion stock), and it is the pro forma P/B ratio that investors have
recently tended to emphasize in evaluating the trading of new issues. At the
midpoint value of $57,500,000, Home Federal's forma P/B ratio of 66.77 percent
was discounted by approximately 12.3 percent from the average of the recently
completed stock conversions of 76.11 percent (see Table 4.3). At the super
maximum of the valuation range, Home Federal's pro forma P/B ratio of 74.43
percent was discounted by 2.2 percent from the recent conversion average P/B
ratio. As indicated at the beginning of this chapter, RP Financial's analysis
of recent conversion pricing characteristics has been limited to a technical
analysis and, thus, the pricing characteristics of recent conversions is not the
primary determinate of valuation.
<PAGE>
RP Financial, LC.
Page 4.20
2. Price-to-Earnings ("P/E"). The application of the P/E valuation method
-------------------------
requires calculating the Association's pro forma market value by applying a
valuation P/E multiple times the pro forma earnings base. Ideally, the pro
forma earnings base is composed principally of the Association's recurring
earnings base, that is, earnings adjusted to exclude any one-time non-operating
items, plus the estimated after-tax earnings benefit of the reinvestment of net
conversion proceeds. Home Federal's reported earnings equaled $2.181 million
for the twelve months ended March 31, 1996. Non-recurring sources of income did
not have a material impact on the Association's earnings and, thus, Home
Federal's reported earnings were considered to be representative of core
earnings for the twelve months ended March 31, 1996. (Note: see Exhibit IV-9
for the adjustments applied to the Peer Group's earnings in the calculation of
core earnings).
Based on Home Federal's trailing twelve month earnings, and incorporating
the impact of the pro forma assumptions discussed previously, the Association's
pro forma P/E multiple at the $57,500,000 midpoint value was 17.45 times,
resulting in a premium of 1.9 percent from the Peer Group average of 17.13 times
core earnings. The premium exhibited in the Association's P/E multiple was
accounted for in the discount reflected in its pro forma P/B ratio.
3. Price-to-Assets ("P/A"). The P/A valuation methodology determines
-----------------------
market value by applying a valuation P/A ratio to the Association's pro forma
asset base, conservatively assuming no deposit withdrawals are made to fund
stock purchases. In all likelihood there will be deposit withdrawals, which
results in understating the pro forma P/A ratio which is computed herein. At
the midpoint of the valuation range, Home Federal's value equaled 16.17 percent
of pro forma assets. Comparatively, the Peer Group companies exhibited an
average P/A ratio of 15.55 percent, which implies a 4.0 percent premium being
applied to the Association's pro forma P/A ratio.
Valuation Conclusion
- --------------------
Based on the foregoing, is our opinion that, as of June 7, 1996, the
aggregate pro forma market value of the Association was $57,500,000 at the
midpoint, equal to 5,750,000 shares offered at $10.00 per share. Pursuant to
the conversion guidelines, the 15 percent offering range includes a minimum of
$48,875,000 and a maximum of $66,125,000. Based on the $10.00 per share
offering price, this valuation range equates to an offering of 4,887,500 shares
at the minimum to 6,612,500 shares at the maximum. The Holding Company's
offering also includes a provision for a super maximum, which if exercised,
would result in an offering size of $76,043,750, equal to 7,604,375 shares at
the $10.00 per share offering price. The comparative pro forma valuation ratios
relative to the Peer Group are shown in Table 4.4, and the key valuation
assumptions are detailed in Exhibit IV-7. The pro forma calculations for the
range are detailed in Exhibit IV-8.
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 4.4
Public Market Pricing
Home Federal of Elgin and the Comparables
As of June 7, 1996
Per Share Data
Market _______________
Capitalization Book Pricing Ratios(3)
_______________ _______________________________________
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
_______ _______ _______ _______ _______ _______ _______ _______ _______
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Home Federal of Elgin
_____________________
Superrange 10.00 76.04 0.48 13.44 20.75 74.43 20.46 74.43 20.75
Range Maximum 10.00 66.13 0.52 14.15 19.07 70.66 18.21 70.66 19.07
Range Midpoint 10.00 57.50 0.57 14.98 17.45 66.77 16.17 66.77 17.45
Range Minimum 10.00 48.88 0.64 16.09 15.65 62.15 14.04 62.15 15.65
SAIF-Insured Thrifts(7)
_______________________
Averages 17.27 118.72 1.26 16.67 14.25 104.71 13.08 107.87 15.15
Medians --- --- --- --- 14.16 99.30 11.87 100.85 15.18
All Non-MHC State of IL(7)
__________________________
Averages 17.59 72.76 1.21 18.68 14.74 93.33 12.82 94.16 16.23
Medians --- --- --- --- 14.87 90.59 11.43 91.79 16.40
Comparable Group Averages
_________________________
Averages 17.43 53.92 1.14 18.75 16.44 92.02 15.55 92.05 17.13
Medians --- --- --- --- 16.29 89.44 14.87 89.44 17.15
State of IL
___________
AVND Avondale Fin. Corp. of IL 13.25 53.20 0.93 15.35 14.25 86.32 9.18 86.32 20.38
BELL Bell Bancorp of Chicago IL(7) 37.37 344.18 1.31 33.38 NM 111.95 17.76 111.95 NM
CSBF CSB Financial Group Inc of IL 9.00 9.32 0.32 12.30 NM 73.17 22.60 73.17 NM
CBCI Calumet Bancorp of Chicago IL 28.00 74.70 2.28 31.99 12.28 87.53 14.87 87.53 12.33
CBSB Charter Financial Inc. of IL 11.50 57.20 0.65 12.95 17.69 88.80 19.01 91.20 17.69
CBK Citizens First Fin.Corp. of IL 10.00 28.18 0.56 13.95 17.86 71.68 11.16 71.68 16.39
DFIN Damen Fin. Corp. of Chicago IL 11.62 46.10 0.44 14.34 NM 81.03 19.59 81.03 NM
FBCI Fidelity Bancorp of Chicago IL 16.62 51.27 0.98 16.91 16.96 98.29 11.84 98.64 18.07
FNSC Financial Security Corp. of IL(7) 25.37 38.66 1.41 25.83 17.99 98.22 14.11 98.22 19.37
FFBI First Financial Bancorp of IL 15.50 7.32 1.12 16.66 13.84 93.04 8.26 93.04 13.25
FMBD First Mutual Bancorp of IL 12.75 55.49 0.61 16.56 20.90 76.99 19.45 76.99 21.61
FFDP FirstFed Bancshares of IL 16.12 54.60 1.10 16.62 14.65 96.99 8.75 101.58 23.36
GTPS Great American Bancorp of IL 13.75 25.44 0.41 18.72 NM 73.45 21.61 73.45 NM
HNFC Hinsdale Financial Corp. of IL 23.50 63.22 1.58 20.20 14.87 116.34 9.27 120.02 15.46
HMCI Homecorp, Inc. of Rockford IL 17.50 19.71 1.12 18.41 15.63 95.06 5.77 95.06 23.03
KNK Kankakee Bancorp of IL 19.37 27.87 1.15 24.73 16.84 78.33 7.67 84.44 17.14
LBCI Liberty Bancorp of Chicago IL 22.75 56.58 1.45 25.66 15.69 88.66 8.45 88.90 15.69
MAFB MAF Bancorp of IL 24.50 128.48 3.11 20.91 7.88 117.17 6.49 117.17 7.66
NBSI North Bancshares of Chicago IL 15.63 18.32 0.54 16.92 NM 92.38 16.02 92.38 NM
SWBI Southwest Bancshares of IL 27.25 50.98 2.27 22.42 12.00 121.54 14.59 121.54 12.06
SPBC St. Paul Bancorp, Inc. of IL 23.50 435.93 1.95 20.64 12.05 113.86 10.52 114.24 12.37
STND Standard Fin. of Chicago IL 15.25 255.67 1.03 16.05 14.81 95.02 11.69 95.07 16.40
SFSB SuburbFed Fin. Corp. of IL 17.62 22.22 1.41 20.52 12.50 85.87 6.13 86.37 14.56
WCBI WestCo Bancorp of IL 22.00 58.92 1.50 18.07 14.67 121.75 19.05 121.75 14.77
<CAPTION>
Dividends(4) Financial Characteristics(6)
_______________________ _______________________________________________________
Reported Core
Amount/ Payout Total Equity/ NPAs/ _______________ _______________
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
_______ _______ _______ _______ _______ _______ _______ _______ _______ _______
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Home Federal of Elgin
_____________________
Superrange 0.00 0.00 0.00 372 27.49 0.39 0.99 3.59 0.99 3.59
Range Maximum 0.00 0.00 0.00 363 25.78 0.40 0.95 3.70 0.95 3.70
Range Midpoint 0.00 0.00 0.00 356 24.22 0.41 0.93 3.83 0.93 3.83
Range Minimum 0.00 0.00 0.00 348 22.59 0.42 0.90 3.97 0.90 3.97
SAIF-Insured Thrifts(7)
_______________________
Averages 0.35 1.97 25.39 1,305 13.24 0.95 0.87 8.09 0.81 7.30
Medians --- --- --- --- --- --- --- --- --- ---
All Non-MHC State of IL(7)
__________________________
Averages 0.25 1.29 20.73 680 14.40 0.58 0.78 6.48 0.75 6.09
Medians --- --- --- --- --- --- --- --- --- ---
Comparable Group Averages
_________________________
Averages 0.30 1.63 26.30 342 17.21 0.43 0.99 5.80 0.95 5.59
Medians --- --- --- --- --- --- --- --- --- ---
State of IL
___________
AVND Avondale Fin. Corp. of IL 0.00 0.00 0.00 580 10.63 0.85 0.65 6.66 0.45 4.65
BELL Bell Bancorp of Chicago IL(7) 0.45 1.20 34.35 1,938 15.86 1.40 0.63 4.03 0.61 3.87
CSBF CSB Financial Group Inc of IL 0.00 0.00 0.00 41 30.89 0.78 0.82 3.62 0.82 3.62
CBCI Calumet Bancorp of Chicago IL 0.00 0.00 0.00 502 16.99 1.23 1.21 7.25 1.20 7.22
CBSB Charter Financial Inc. of IL 0.24 2.09 36.92 301 21.41 0.49 1.12 6.95 1.12 6.95
CBK Citizens First Fin.Corp. of IL 0.00 0.00 0.00 252 15.57 NA 0.63 4.01 0.68 4.37
DFIN Damen Fin. Corp. of Chicago IL 0.00 0.00 0.00 235 24.17 0.14 0.81 5.02 0.79 4.91
FBCI Fidelity Bancorp of Chicago IL 0.24 1.44 24.49 433 12.05 0.53 0.77 5.66 0.73 5.31
FNSC Financial Security Corp. of IL(7) 0.00 0.00 0.00 274 14.36 2.77 0.77 5.66 0.71 5.26
FFBI First Financial Bancorp of IL 0.00 0.00 0.00 89 8.87 0.40 0.69 6.63 0.72 6.93
FMBD First Mutual Bancorp of IL 0.28 2.20 45.90 285 25.26 0.09 0.98 4.24 0.95 4.10
FFDP FirstFed Bancshares of IL 0.40 2.48 36.36 624 9.02 0.14 0.63 6.51 0.39 4.08
GTPS Great American Bancorp of IL 0.00 0.00 0.00 118 29.42 0.45 0.68 2.82 0.68 2.82
HNFC Hinsdale Financial Corp. of IL 0.00 0.00 0.00 682 7.97 0.13 0.62 8.20 0.59 7.88
HMCI Homecorp, Inc. of Rockford IL 0.00 0.00 0.00 342 6.07 3.24 0.37 6.28 0.25 4.26
KNK Kankakee Bancorp of IL 0.40 2.07 34.78 363 9.80 0.59 0.50 4.56 0.49 4.48
LBCI Liberty Bancorp of Chicago IL 0.60 2.64 41.38 670 9.53 0.12 0.56 5.51 0.56 5.51
MAFB MAF Bancorp of IL 0.32 1.31 10.29 1,980 5.54 0.46 0.88 15.21 0.90 15.65
NBSI North Bancshares of Chicago IL 0.40 2.56 74.07 114 17.34 NA 0.57 3.03 0.52 2.75
SWBI Southwest Bancshares of IL 1.08 3.96 47.58 350 12.00 0.25 1.19 8.94 1.19 8.90
SPBC St. Paul Bancorp, Inc. of IL 0.40 1.70 20.51 4,143 9.24 0.74 0.88 9.69 0.86 9.44
STND Standard Fin. of Chicago IL 0.32 2.10 31.07 2,187 12.31 0.14 0.87 6.21 0.79 5.61
SFSB SuburbFed Fin. Corp. of IL 0.32 1.82 22.70 362 7.14 0.27 0.51 7.04 0.44 6.04
WCBI WestCo Bancorp of IL 0.45 2.05 30.00 309 15.65 0.58 1.32 8.47 1.31 8.41
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 4.4
Public Market Pricing
Home Federal of Elgin and the Comparables
As of June 7, 1996
Per Share Data
Market _______________
Capitalization Book Pricing Ratios(3)
_______________ _______________________________________
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
_______ _______ _______ _______ _______ _______ _______ _______ _______
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Comparable Group
________________
CBCI Calumet Bancorp of Chicago IL 28.00 74.70 2.28 31.99 12.28 87.53 14.87 87.53 12.33
FFYF FFY Financial Corp. of OH 23.25 120.74 1.34 20.25 17.35 114.81 21.07 114.81 16.85
FBCI Fidelity Bancorp of Chicago IL 16.62 51.27 0.98 16.91 16.96 98.29 11.84 98.64 18.07
FMBD First Mutual Bancorp of IL 12.75 55.49 0.61 16.56 20.90 76.99 19.45 76.99 21.61
HMNF HMN Financial, Inc. of MN 15.69 81.27 1.13 17.54 13.88 89.45 14.99 89.45 15.53
HBFW Home Bancorp of Fort Wayne IN 14.75 45.64 0.86 16.60 17.15 88.86 14.59 88.86 17.15
LARK Landmark Bancshares of KS 15.25 29.75 0.94 17.05 16.22 89.44 15.38 89.44 18.60
MFBC MFB Corp. of Mishawaka IN 14.00 29.09 0.63 18.67 22.22 74.99 14.48 74.99 22.58
MFFC Milton Fed. Fin. Corp. of OH 12.87 29.61 0.79 14.91 16.29 86.32 17.25 86.32 17.63
SWBI Southwest Bancshares of IL 27.25 50.98 2.27 22.42 12.00 121.54 14.59 121.54 12.06
WEFC Wells Fin. Corp. of Wells MN 11.25 24.62 0.72 13.40 15.63 83.96 12.55 83.96 16.07
<CAPTION>
Dividends(4) Financial Characteristics(6)
_______________________ _______________________________________________________
Reported Core
Amount/ Payout Total Equity/ NPAs/ _______________ _______________
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
_______ _______ _______ _______ _______ _______ _______ _______ _______ _______
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Comparable Group
________________
CBCI Calumet Bancorp of Chicago IL 0.00 0.00 0.00 502 16.99 1.23 1.21 7.25 1.20 7.22
FFYF FFY Financial Corp. of OH 0.60 2.58 44.78 573 18.35 0.88 1.21 6.53 1.25 6.73
FBCI Fidelity Bancorp of Chicago IL 0.24 1.44 24.49 433 12.05 0.53 0.77 5.66 0.73 5.31
FMBD First Mutual Bancorp of IL 0.28 2.20 45.90 285 25.26 0.09 0.98 4.24 0.95 4.10
HMNF HMN Financial, Inc. of MN 0.00 0.00 0.00 542 16.76 0.14 1.10 6.35 0.99 5.67
HBFW Home Bancorp of Fort Wayne IN 0.20 1.36 23.26 313 16.42 NA 0.86 5.00 0.86 5.00
LARK Landmark Bancshares of KS 0.40 2.62 42.55 193 17.20 0.37 0.91 5.28 0.79 4.60
MFBC MFB Corp. of Mishawaka IN 0.00 0.00 0.00 201 19.31 0.05 0.69 3.41 0.68 3.36
MFFC Milton Fed. Fin. Corp. of OH 0.48 3.73 60.76 172 19.98 0.40 1.13 4.93 1.05 4.56
SWBI Southwest Bancshares of IL 1.08 3.96 47.58 350 12.00 0.25 1.19 8.94 1.19 8.90
WEFC Wells Fin. Corp. of Wells MN 0.00 0.00 0.00 196 14.95 0.39 0.81 6.24 0.79 6.07
(1) Average of high/low or bid/ask price per share.
(2) EPS (common earnings per share) is based on actual trailing twelve month data and is shown on a pro forma basis.
(3) P/E = Price to Earnings; P/B = Price to Book; P/A = Price to Assets; P/TB = Price to Tangible Book; and P/CORE = Price to
Core Earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated twelve month dividend as a percent of trailing twelve month earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based on trailing twelve month common earnings and
average common equity and total assets balances.
(7) Excludes from averages and medians those companies the subject of actual or rumored acquisition activities or unusual
operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc. calculations. The information provided in this report
has been obtained from sources we believe are reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1995 by RP Financial, Inc.
</TABLE>
<PAGE>
EXHIBITS
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS
Exhibit
Number Description
- ------- -----------
I-1 Map of Office Locations
I-2 Audited Financial Statements
I-3 Key Operating Ratios
I-4 Investment Portfolio Composition
I-5 Yields and Costs
I-6 Loan Loss Allowance Activity
I-7 Gap Table
I-8 Fixed Rate and Adjustable Rate Loans
I-9 Loan Portfolio Composition
I-10 Loan Originations, Purchases, and Sales
I-11 Contractual Maturity By Loan Type
I-12 Non-Performing Assets
I-13 Deposit Composition
I-14 Time Deposit Rate/Maturity
I-15 Borrowings
II-1 List of Branch Offices
II-2 Historical Interest Rates
III-1 General Characteristics of Publicly-Traded
Institutions
III-2 Financial Analysis of Illinois Institutions
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS(continued)
III-3 Financial Analysis of Peer Group Candidates
III-4 Peer Group Market Area Comparative Analysis
IV-1 Stock Prices: June 7, 1996
IV-2 Historical Stock Price Indices
IV-3 Historical Thrift Stock Indices
IV-4 Market Area Acquisition Activity
IV-5 Director and Senior Management Summary Resumes
IV-6 Pro Forma Regulatory Capital Ratios
IV-7 Pro Forma Analysis Sheet
IV-8 Pro Forma Effect of Conversion Proceeds
IV-9 Peer Group Core Earnings Analysis
V-1 Firm Qualifications Statement
<PAGE>
EXHIBIT I-1
Home Federal Savings and Loan Association of Elgin
Map of Office Locations
<PAGE>
COUNTY AND TOWN MAP OF ILLINOIS INDICATING LOCATION OF BRANCHES OF HOME FEDERAL
SAVINGS AND LOAN ASSOCIATION OF ELGIN
<PAGE>
EXHIBIT I-2
Home Federal Savings and Loan Association of Elgin
Audited Financial Statements
[Incorporated by Reference]
<PAGE>
EXHIBIT I-3
Home Federal Savings and Loan Association of Elgin
Key Operating Ratios
<TABLE>
<CAPTION>
AT OR FOR THE THREE
MONTHS ENDED
MARCH 31, AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------- ----------------------------------------------------
1996 1995 1995 1994(3) 1993(3) 1992 1991
---------- --------- -------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
SELECTED FINANCIAL RATIOS(4):
PERFORMANCE RATIOS:
Return on average assets.................... 0.68% 0.91% 0.78% 1.33% 1.22% 1.13% 0.73%
Return on average equity.................... 5.53 7.87 6.53 13.46 15.26 15.89 11.51
Average interest rate spread(5)............. 3.53 4.03 3.78 4.31 4.60 4.45 3.71
Net interest margin(6)...................... 3.98 4.41 4.19 4.53 4.77 4.60 3.82
Average interest-earning assets to average
interest-bearing liabilities............ 111.87 110.85 111.09 106.84 104.71 103.48 101.89
Noninterest expense to average assets....... 3.04 3.01 2.99 2.93 2.98 2.86 2.73
Efficiency ratio(7)......................... 73.67 66.83 69.52 62.62 60.56 61.12 70.40
CAPITAL RATIOS(4)(7):
Average equity to average assets............ 12.23 11.61 11.93 9.84 7.99 7.12 6.30
Equity to total assets at end of period..... 12.13 11.63 12.05 11.18 8.96 7.40 6.84
Tangible capital............................ 12.04 11.56 11.96 11.18 8.95 7.40 6.82
Core capital................................ 12.04 11.56 11.96 11.18 8.95 7.40 6.82
Total risk-based capital.................... 23.65 22.60 23.32 21.90 16.39 14.10 11.62
ASSET QUALITY RATIOS AND OTHER DATA:(4)
Total non-performing loans(8)................ $ 1,077 $ 967 $ 916 $ 986 $ 1,642 $ 2,356 $ 1,920
Real estate owned, net....................... 377 455 496 514 433 629 198
Non-performing loans to total loans.......... 0.41% 0.36% 0.34% 0.36% 0.54% 0.81% 0.72%
Non-performing assets to total assets........ 0.47 0.47 0.46 0.49 0.62 0.86 0.66
Allowance for loan losses to:
Non-performing loans....................... 79.48 71.77 90.17 65.82 24.91 23.26 18.49
Total loans(9)............................. 0.32% 0.26% 0.31% 0.24% 0.14% 0.19% 0.13%
Full service offices......................... 5 5 5 5 7 8 8
- --------------------
</TABLE>
(1) Loans receivable, net, represents gross loans less net deferred loan fees,
loans in process and allowance for loan losses.
(2) Pursuant to Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"), on January 1, 1993, the
Association changed prospectively from the deferred method to the liability
method of accounting for income taxes. The effect of the adoption of this
standard is reflected in the financial statements as the cumulative effect
of change in accounting principle.
(3) Includes gain on sale of branches of $1.7 million in 1994 and $822,000 in
1993.
(4) With the exception of end-of-period ratios, all ratios are based on average
monthly balances during the indicated periods and are annualized where
appropriate. Asset Quality Ratios and Regulatory Capital Ratios are end-
of-period ratios.
(5) The interest rate spread represents the difference between the weighted-
average yield on interest-earning assets and the weighted-average cost of
interest-bearing liabilities.
(6) The net interest margin represents net interest income as a percent of
average interest-earning assets.
(7) The efficiency ratio represents noninterest expense as a percentage of the
sum of net interest income [before][after] provision for loan losses and
noninterest income excluding any gains or losses on sales of assets and
branches.
(8) For definitions and further information relating to the Association's
regulatory capital requirements, see "Regulation -- Regulation of Federal
Savings Associations -- Capital Requirements." See "Regulatory Capital
Compliance" for the Association's pro forma capital levels as a result of
the Offerings.
(9) Non-performing loans consists of non-accrual loans; the Association did not
have any loans that were 90 days or more past due and still accruing at any
of the dates presented.
(10) Total loans represents gross loans less deferred loan fees and loans in
process.
Source: Home Federal's prospectus.
<PAGE>
EXHIBIT I-4
Home Federal Savings and Loan Association of Elgin
Investment Portfolio Composition
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------------
AT MARCH 31, 1996 1995 1994 1993
------------------ ------------------ ------------------ ----------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE COST VALUE COST VALUE
--------- ------- --------- ------- --------- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Mortgage-backed securities
--GNMA.................... $ 173 $ 173 $ 187 $ 193 $ 243 $ 233 $296 $306
========= ======= ====== ======= ====== ======= ========= =====
Other debt securities
--U.S. Treasury and
Agency................... $5,955 $5,985 $5,948 $6,030 $5,918 $5,663 $ -- $ --
========= ======= ====== ======= ====== ======= ========= =====
</TABLE>
Source: Home Federal's prospectus.
<PAGE>
EXHIBIT I-5
Home Federal Savings and Loan Association of Elgin
Yields and Costs
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------
1995 1994 1993
-------------------------------- ------------------------------- --------------------------------
AVERAGE AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST BALANCE INTEREST COST
----------- --------- -------- ----------- --------- -------- ----------- --------- --------
(DOLLARS IN THOUSANDS)
ASSETS:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Real estate loans(1)..... $269,323 $21,719 8.06% $281,240 $23,160 8.24% $302,977 $26,408 8.72%
Other loans.............. 670 60 8.96 747 63 8.43 855 90 10.53
Mortgage-backed
securities.............. 213 15 7.04 266 18 6.77 338 24 7.10
Investment securities.... 5,934 360 6.07 4,431 264 5.96 4,507 279 6.19
Interest-earning deposits 8,981 569 6.34 23,013 977 4.25 20,195 633 3.13
FHLB of Chicago stock.... 3,045 202 6.63 3,126 187 5.98 3,708 218 5.88
-------- ------- ------ -------- ------- ------ -------- ------- ------
Total interest-earning
assets................ 288,166 $22,925 7.96% 312,823 $24,669 7.89% 332,580 $27,652 8.31%
-------- ======= ------ -------- ======= ------ -------- ======= ------
Allowance for loan losses (746) (572) (544)
Non-interest-earning
assets.................. 15,769 16,628 17,306
-------- -------- --------
Total assets........... $303,189 $328,879 $349,342
======== ======== ========
LIABILITIES AND EQUITY:
Interest-bearing
liabilities:
NOW/Super Now accounts... $ 43,035 $ 980 2.28% $ 52,685 $ 1,066 2.02% $ 55,745 $ 1,151 2.06%
Money market accounts.... 19,927 565 2.84 27,517 767 2.79 34,271 1,001 2.92
Passbook accounts........ 69,362 2,137 3.08 86,062 2,627 3.05 87,397 2,718 3.11
Certificates of deposit.. 125,820 7,091 5.64 125,946 5,985 4.75 136,618 6,791 4.97
Borrowed funds........... 1,250 77 6.16 583 39 6.69 3,583 130 3.63
-------- ------- ------ -------- ------- ------ -------- ------- ------
Total interest bearing
liabilities........... 259,394 10,850 4.18% 292,793 10,484 3.58% 317,614 11,791 3.71%
-------- ------- ------ -------- ------- ------ -------- ------- ------
Non-interest-bearing NOW
accounts.................. 3,410 -- --
Other non-interest-bearing
liabilities............... 4,208 3,715 3,804
-------- -------- --------
Total liabilities..... 267,012 296,508 321,418
-------- -------- --------
Equity..................... 36,177 32,371 27,924
Total liabilities and -------- -------- --------
equity............... $303,189 $328,879 $349,342
======== ======== ========
Net interest income.......... $12,075 $14,185 $15,861
======= ======= =======
Interest rate spread(2)...... 3.78% 4.31% 4.60%
====== ====== ======
Net interest margin(3)....... 4.19% 4.53% 4.77%
====== ====== ======
Ratio of interest-earning
assets to interest-bearing
liabilities............... 111.09% 106.84% 104.71%
====== ====== ======
</TABLE>
__________________
(1) In computing the average balance of loans, non-accrual loans have been
included.
(2) Interest rate spread represents the difference between the average rate on
interest-earning assets and the average cost of interest-bearing
liabilities.
(3) Net interest margin on interest-earning assets represents net interest
income as a percentage of average interest-earning assets.
Source: Home Federal's prospectus.
<PAGE>
EXHIBIT I-5 (continued)
Home Federal Savings and Loan Association of Elgin
Yields and Costs
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
AT MARCH 31, -------------------------------------------------------------------
1996 1996 1995
--------------------------------- ------------------------------- ----------------------------------
WEIGHTED AVERAGE AVERAGE
AVERAGE AVERAGE YIELD/ AVERAGE YIELD/
BALANCE RATE (1) BALANCE INTEREST COST BALANCE INTEREST COST
----------------- -------------- ----------- -------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
ASSETS:
Interest-earning assets:
Real estate loans(2)... $264,373 7.68% $265,140 $5,311 8.01% $271,181 $5,463 8.06%
Other loans............ 565 9.29 623 15 9.63 665 14 8.42
Mortgage-backed
securities............ 173 6.99 177 3 6.78 234 4 6.84
Investment securities.. 5,955 6.05 5,953 90 6.05 5,923 90 6.08
Interest-earning
deposits.............. 15,161 5.15 12,140 161 5.30 8,891 131 5.89
FHLB of Chicago stock.. 2,678 6.50 2,930 49 6.69 3,010 46 6.11
-------- ------ -------- ------ ------ -------- ------ ------
Total
interest-earning
assets.............. 288,905 7.51% 286,963 $5,629 7.85% 289,904 $5,748 7.93%
-------- ------ -------- ====== ------ -------- ====== ------
Allowance for loan losses (856) (846) (679)
Non-interest-earning
assets.................. 18,639 16,644 14,980
-------- -------- --------
Total assets........ $306,688 $302,761 $304,205
======== ======== ========
LIABILITIES AND EQUITY:
Interest-bearing
liabilities:
NOW/Super Now accounts. $ 46,134 2.25% $ 43,066 $ 229 2.13% $ 43,105 $ 236 2.19%
Money market accounts.. 17,790 3.22 17,678 142 3.21 22,114 160 2.89
Passbook accounts...... 66,342 3.00 65,773 516 3.14 72,630 550 3.03
Certificates of deposit 129,318 5.68 128,669 1,849 5.75 123,677 1,602 5.18
Borrowed funds......... -- -- 1,333 37 11.10 -- -- --
-------- ------ -------- ------ ------ -------- ------ ------
Total
interest-bearing
liabilities......... 259,584 4.22% 256,519 $2,773 4.32% 261,526 $2,548 3.90%
-------- ------ -------- ====== ------ -------- ====== ------
Non-interest-bearing NOW
accounts................ 4,901 4,314 2,463
Other
non-interest-bearing
liabilities............. 5,008 4,904 4,897
-------- -------- --------
Total liabilities.... 269,493 265,737 268,886
Equity................... 37,195 37,024 35,319
-------- -------- --------
Total liabilities
and equity.......... $306,688 $302,761 $304,205
======== ======== ========
Net interest income........ $2,856 $3,200
====== ======
Interest rate spread(3).... 3.29% 3.53% 4.03%
====== ====== ======
Net interest margin(4)..... 3.98% 4.41%
====== ======
Ratio of interest-earning
assets to
interest-bearing
liabilities............. 111.30% 111.87% 110.85%
====== ====== ======
</TABLE>
__________________
(1) The weighted average rate represents the coupon associated with each asset
and liability, weighted by the principal balance associated with each asset
and liability.
(2) In computing the average balance of loans, non-accrual loans have been
included.
(3) Interest rate spread represents the difference between the average rate on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net interest margin represents net interest income as a percentage of
average interest-earning assets.
Source: Home Federal's prospectus.
<PAGE>
EXHIBIT I-6
Home Federal Savings and Loan Association of Elgin
Loan Loss Allowance Activity
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS ENDED
MARCH 31, AT OR FOR THE YEAR ENDED DECEMBER 31,
----------------------- ----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Total loans outstanding at end of period(1)..... $264,938 $271,488 $267,979 $271,689 $302,085 $289,734 $267,836
-------- -------- -------- -------- -------- -------- --------
Balance at beginning of year.................... 826 649 649 409 548 355 127
Provision for loan losses....................... 30 45 180 240 240 256 232
Charge-offs:
One- to four-family........................... -- -- -- -- -- -- --
Multifamily................................... -- -- -- -- (141) -- --
Construction and land......................... -- -- -- -- -- -- --
Commercial.................................... -- -- -- -- -- -- --
Other......................................... -- -- (3) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total charge-offs.......................... -- -- (3) -- (141) -- --
-------- -------- -------- -------- -------- -------- --------
Allocation to reserve for uncollected interest.. -- -- -- -- (238) (63) (4)
-------- -------- -------- -------- -------- -------- --------
Balance at end of year.......................... $ 856 $ 694 $ 826 $ 649 $ 409 $ 548 $ 355
======== ======== ======== ======== ======== ======== ========
Net charge-offs during the period to average
loans outstanding during the period........ -- % -- % -- % -- % 0.05% -- % -- %
Allowance for loan losses to total
loans at end of period..................... 0.32 0.26 0.31 0.24 0.14 0.19 0.13
Allowance for loan losses to total
non-performing loans at end of period...... 79.48 71.77 90.17 65.82 24.91 23.26 18.49
</TABLE>
- -------------------
(1) Total loans represent gross loans less deferred loan fees and loans in
process.
Source: Home Federal's prospectus.
<PAGE>
EXHIBIT I-7
Home Federal Savings and Loan Association of Elgin
Gap Table
<TABLE>
<CAPTION>
AT MARCH 31, 1996
--------------------------------------------------------------------------------------
MORE THAN MORE THAN MORE THAN MORE THAN
3 MONTHS 3 MONTHS TO 6 MONTHS TO 1 YEAR TO 3 YEARS MORE THAN
OR LESS 6 MONTHS 1 YEAR 3 YEARS TO 5 YEARS 5 YEARS TOTAL
---------- ------------ ------------ ---------- ----------- ---------- --------
INTEREST-EARNING ASSETS: (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Loans receivable(1)........................... $ 15,055 $ 12,063 $ 36,760 $ 86,978 $ 38,094 $75,988 $264,938
Investment securities held to maturity........ -- -- -- 5,955 -- -- 5,955
Mortgage-backed securities held to maturity... 12 10 17 58 40 36 173
Interest-earning deposits..................... 15,161 -- -- -- -- -- 15,161
FHLB of Chicago stock......................... 2,678 -- -- -- -- -- 2,678
-------- -------- -------- -------- -------- ------- --------
Total interest-earning assets............. $ 32,906 $ 12,073 $ 36,777 $ 92,991 $ 38,134 $76,024 $288,905
======== ======== ======== ======== ======== ======= ========
INTEREST-BEARING LIABILITIES:
NOW/Super NOW accounts...................... $ 8,754 $ 8,754 $ 10,864 $ 6,027 $ 3,982 $ 7,753 $ 46,134
Money market accounts....................... 3,999 3,999 4,402 3,289 1,282 819 17,790
Passbook accounts........................... 19,944 19,944 15,906 2,927 2,115 5,506 66,342
Certificates of deposit..................... 33,381 13,413 26,828 27,165 28,531 -- 129,318
-------- -------- -------- -------- -------- ------- --------
Total interest-bearing liabilities....... $ 66,078 $ 46,110 $ 58,000 $ 39,408 $ 35,910 $14,078 $259,584
======== ======== ======== ======== ======== ======= ========
Interest sensitivity gap per period........... $(33,172) $(34,037) $(21,223) $ 53,583 $ 2,224 $61,946
Cumulative interest sensitivity gap........... (33,172) (67,209) (88,432) (34,849) (32,625) 29,321
Cumulative interest sensitivity gap
as a percent of total assets................ (10.82)% (21.91)% (28.83)% (11.36)% (10.64)% 9.56%
Cumulative total interest-earning assets
as a percent of cumulative total interest-
bearing liabilities......................... 49.80% 40.09% 48.04% 83.37% 86.71% 111.30%
- --------------------
</TABLE>
(1) Loans receivable represents gross loans less net deferred loan fees and
loans in process.
Source: Home Federal's prospectus.
<PAGE>
EXHIBIT I-8
Home Federal Savings and Loan Association of Elgin
Fixed Rate and Adjustable Rate Loans
<TABLE>
<CAPTION>
DUE AFTER MARCH 31, 1997
-----------------------------------
FIXED(1) ADJUSTABLE TOTAL
------------ ---------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
MORTGAGE LOANS:
One- to four-family (1).. $200,973 $49,022 $249,995
Multifamily (1).......... 1,889 452 2,341
Construction and land.... 268 103 371
Commercial............... 631 242 873
Other loans................ 89 -- 89
-------- ------- --------
Total loans........... $203,850 $49,819 $253,669
======== ======= ========
- --------------------
</TABLE>
(1) FHA/VA loans are included in one- to four-family loans and multifamily.
Source: Home Federal's prospectus.
<PAGE>
EXHIBIT I-9
Home Federal Savings and Loan Association of Elgin
Loan Portfolio Composition
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT MARCH 31, ---------------------------------------------------------------
1996 1995 1994 1993
---------------------- ------------------- -------------------- --------------------
PERCENT PERCENT PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL
---------- -------- ---------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
MORTGAGE LOANS:
One- to four-family...... $262,056 98.10% $265,115 98.09% $267,727 97.63% $298,117 97.54%
Multifamily.............. 3,056 1.14 3,106 1.15 4,118 1.50 4,587 1.50
Construction and land.... 578 0.22 456 0.17 859 0.31 1,130 0.37
Commercial............... 873 0.33 891 0.33 862 0.31 1,039 0.34
-------- ------ -------- ------ -------- ------ -------- ------
Total mortgage loans.. 266,563 99.79 269,568 99.74 273,566 99.75 304,873 99.75
-------- ------ -------- ------ -------- ------ -------- ------
OTHER LOANS:
Passbook savings (secured
by savings and time
deposits).............. 483 0.18 627 0.23 576 0.21 631 0.21
Consumer installment
loans................... 82 0.03 92 0.03 100 0.04 120 0.04
Home improvement loans... -- -- -- -- -- -- -- --
-------- ------ -------- ------ -------- ------ -------- ------
Total other loans..... 565 0.21 719 0.26 676 0.25 751 0.25
-------- ------ -------- ------ -------- ------ -------- ------
Gross loans...... $267,128 100.00% $270,287 100.00% $274,242 100.00% $305,624 100.00%
======== ====== ======== ====== ======== ====== ======== ======
LESS:
Loans in process......... $ 364 $ 418 $ 150 $ 505
Deferred loan fees....... 1,826 1,890 2,403 3,034
Allowance for loan losses 856 826 649 409
-------- -------- -------- --------
Loans, net....... $264,082 $267,153 $271,040 $301,676
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------
1992 1991
-------------------- --------------------
PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
MORTGAGE LOANS:
One- to four-family...... $ 284,549 96.92% $260,519 96.22%
Multifamily.............. 5,165 1.76 5,247 1.94
Construction and land.... 1,371 0.47 1,717 0.63
Commercial............... 1,568 0.53 2,294 0.85
-------- ------ -------- ------
Total mortgage loans.. 292,653 99.68 269,777 99.64
-------- ------ -------- ------
OTHER LOANS:
Passbook savings (secured
by savings and time
deposits).............. 798 0.27 775 0.29
Consumer installment
loans................... 134 0.04 150 0.06
Home improvement loans... 17 0.01 58 0.01
--------- ------ -------- ------
Total other loans..... 949 0.32 983 0.36
--------- ------ -------- ------
Gross loans...... $293,602 100.00% $270,760 100.00%
========= ====== ======== ======
LESS:
Loans in process......... $ 876 $ 373
Deferred loan fees....... 2,992 2,551
Allowance for loan losses 548 355
-------- --------
Loans, net....... $289,186 $267,481
======== ========
</TABLE>
Source: Home Federal's prospectus.
<PAGE>
EXHIBIT I-10
Home Federal Savings and Loan Association of Elgin
Loan Originations, Purchases and Sales
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
LOANS (GROSS):
At beginning of period......................... $270,287 $274,242 $274,242 $305,624 $293,602
MORTGAGE LOANS ORIGINATED:
One- to four-family............................ 8,319 6,883 33,157 19,875 85,661
Multifamily.................................... -- -- -- 227 783
Construction and land.......................... 160 -- 76 266 464
Commercial..................................... -- 119 119 225 --
-------- -------- -------- -------- --------
TOTAL MORTGAGE LOANS ORIGINATED........... 8,479 7,002 33,352 20,593 86,908
OTHER LOANS ORIGINATED.............................. 64 140 614 755 658
-------- -------- -------- -------- --------
TOTAL LOANS ORIGINATED.................... 8,543 7,142 33,966 21,348 87,566
-------- -------- -------- -------- --------
Principal repayments........................... 11,702 7,347 37,560 52,269 74,826
Loans sold..................................... -- 169 169 -- --
Loans transferred to real estate in judgement.. -- -- 192 461 718
-------- -------- -------- -------- --------
LOANS (GROSS) AT END OF PERIOD...................... $267,128 $273,868 $270,287 $274,242 $305,624
======== ======== ======== ======== ========
</TABLE>
Source: Home Federal's prospectus.
<PAGE>
EXHIBIT I-11
Home Federal Savings and Loan Association of Elgin
Contractual Maturity By Loan Type
<TABLE>
<CAPTION>
AT MARCH 31, 1996
--------------------------------------------------------------------
MORTGAGE LOANS
--------------------------------------------------
ONE- TO
FOUR- MULTI- CONSTRUCTION OTHER TOTAL
FAMILY(1) FAMILY(1) AND LAND COMMERCIAL LOANS LOANS
------------ ---------- ------------ ---------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
AMOUNT DUE:
One year or less..................... $ 12,061 $ 715 $207 $ -- $476 $ 13,459
-------- ------ ---- ---- ---- --------
AFTER ONE YEAR:
One to three years................... 42,969 687 103 98 83 43,940
More than three years to five years.. 13,339 303 245 238 6 14,131
More than five years to ten years.... 27,894 408 23 167 -- 28,492
More than ten years to twenty years.. 96,141 943 -- 370 -- 97,454
Over twenty years.................... 69,652 -- -- -- -- 69,652
-------- ------ ---- ---- ---- --------
TOTAL DUE OR REPRICING AFTER ONE YEAR... 249,995 2,341 371 873 89 253,669
-------- ------ ---- ---- ---- --------
TOTAL AMOUNTS DUE OR REPRICING, GROSS... $262,056 $3,056 $578 $873 $565 $267,128
======== ====== ==== ==== ==== ========
</TABLE>
Source: Home Federal's prospectus.
<PAGE>
EXHIBIT I-12
Home Federal Savings and Loan Association of Elgin
Non-Performing Assets
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
MARCH 31, ------------------------------------------------
1996 1995 1994 1993 1992 1991
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Non-accrual mortgage loans:
One- to four-family.................... $1,077 $ 915 $ 974 $1,642 $2,354 $1,775
Multifamily............................ -- -- -- -- -- 144
Construction and land.................. -- -- 12 -- -- --
Commercial............................. -- -- -- -- -- --
Other loans............................ -- 1 -- -- 2 1
------ ------ ------ ------ ------ ------
Total non-performing loans.......... 1,077 916 986 1,642 2,356 1,920
------ ------ ------ ------ ------ ------
Total real estate owned and in judgment.. 377 496 514 433 629 198
------ ------ ------ ------ ------ ------
Total non-performing assets........... $1,454 $1,412 $1,500 $2,075 $2,985 $2,118
====== ====== ====== ====== ====== ======
Total non-performing loans to
total loans(1).......................... 0.41% 0.34% 0.36% 0.54% 0.81% 0.72%
Total non-performing assets to
total assets............................ 0.47% 0.46% 0.49% 0.62% 0.86% 0.66%
</TABLE>
(1) Total loans represent gross loans less deferred loan fees and loans in
process.
Source: Home Federal's prospectus.
<PAGE>
EXHIBIT I-13
Home Federal Savings and Loan Association of Elgin
Deposit Composition
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------------------
AT MARCH 31, 1996 1995 1994
--------------------------------- ------------------------------------------------------------------
PERCENT PERCENT PERCENT
OF WEIGHTED OF WEIGHTED OF WEIGHTED
TOTAL AVERAGE TOTAL AVERAGE TOTAL AVERAGE
AMOUNT DEPOSITS RATE AMOUNT DEPOSITS RATE AMOUNT DEPOSITS RATE
---------- --------- --------- ---------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
NOW/Super NOW accounts..... $ 46,134 17.5% 2.25% $ 45,001 17.3% 2.25% $ 48,834 18.2% 2.25%
Money market accounts...... 17,790 6.7 3.22 17,684 6.8 3.22 23,545 8.8 3.22
Passbook accounts.......... 66,342 25.1 3.00 65,261 25.1 3.04 74,524 27.8 3.00
Certificates of deposit.... 129,318 48.9 5.68 126,847 48.8 5.89 121,035 45.2 4.46
Noninterest bearing
NOW accounts.............. 4,901 1.8 -- 5,179 2.0 -- -- -- --
-------- ------ ---- -------- ------ ---- -------- ------ ----
Totals $264,485 100.00% 4.14% $259,972 100.00% 4.25% $267,938 100.00% 3.83%
======== ====== ==== ======== ====== ==== ======== ====== ====
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------
1993
---------------------------------
PERCENT
OF WEIGHTED
TOTAL AVERAGE
AMOUNT DEPOSITS RATE
---------- --------- ---------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
NOW/Super NOW accounts..... $ 54,836 18.7% 2.25%
Money market accounts...... 30,348 10.3 2.85
Passbook accounts ......... 85,690 29.1 3.00
Certificates of deposit.... 123,058 41.9 4.73
Noninterest bearing
NOW accounts............. -- -- --
-------- ------ ----
Totals $293,932 100.00% 3.58%
======== ====== ====
</TABLE>
Source: Home Federal's prospectus.
<PAGE>
EXHIBIT I-14
Home Federal Savings and Loan Association of Elgin
Time Deposit Rate/Maturity
<TABLE>
<CAPTION>
PERIOD TO MATURITY AT MARCH 31, 1996
------------------------------------ AT AT DECEMBER 31,
LESS THAN ONE TO FOUR TO MARCH 31, -------------------------------
INTEREST RATE RANGE ONE YEAR THREE YEARS FIVE YEARS 1996 1995 1994 1993
- --------------------- ---------- ------------ ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Below 4.00%.......... $ 16 $ -- $ -- $ 16 $ 16 $ 12,885 $ 53,848
4.00% to 4.99%....... 10,845 427 10 11,282 7,548 48,001 21,146
5.00% to 5.99%....... 49,482 17,756 2,034 69,272 69,542 31,067 19,001
6.00% to 6.99%....... 9,958 8,949 9,240 28,147 27,216 13,689 10,723
7.00% and above...... 3,322 32 17,247 20,601 22,525 15,393 18,340
------- ------- ------- -------- -------- -------- --------
Total........... $73,623 $27,164 $28,531 $129,318 $126,847 $121,035 $123,058
======= ======= ======= ======== ======== ======== ========
</TABLE>
Source: Home Federal's prospectus.
<PAGE>
EXHIBIT I-15
Home Federal Savings and Loan Association of Elgin
Borrowings
<TABLE>
<CAPTION>
AT OR FOR THE THREE
MONTHS AT OR FOR THE
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------
1996 1995 1995 1994 1993
----------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
FHLB of Chicago advances:
Maximum amount outstanding at any month-
end during the period................. $4,000 -- $6,000 $9,000 $17,000
Average balance outstanding................ 1,333 -- 1,250 583 3,583
Balance outstanding at end of period....... -- -- 4,000 -- 7,000
Weighted average interest rate during the
period................................... 11.10% -- 6.16% 6.69% 3.63%
Weighted average interest rate at end of
period................................... -- -- 5.31 -- 3.24
</TABLE>
Source: Home Federal's prospectus.
<PAGE>
EXHIBIT II-1
Home Federal Savings and Loan Association of Elgin
List of Branch Offices
<TABLE>
<CAPTION>
DATE
LEASED OR LEASED OR NET BOOK VALUE AT
OWNED ACQUIRED MARCH 31, 1996
--------- --------- ------------------
<S> <C> <C> <C>
(IN THOUSANDS)
Main Office:
16 North Spring St.
Elgin, IL....................... Owned 1923 $2,447
Branches:
180 Virginia St.
Crystal Lake, IL................ Owned 4/01/74 813
56 E. Irving Park Road
Roselle, IL..................... Owned 7/28/75 323
310 N. LaFox St.
South Elgin, IL/(1)/............ Leased 12/81 --
200 Bartlett Ave.
Bartlett, IL.................... Owned 9/20/79 923
Check Processing:
Mail and Record Retention
Facility (No Customer Service)
Annex
Fulton St., Elgin, IL........... Owned 2/06/86 437
</TABLE>
(1) This lease expires on September 30, 1996. Upon expiration, the Association
plans to move into a new branch office that the Association will own, which
office is presently under construction at 300 North McLean Street, South
Elgin at an estimated cost of $1.0 million.
Source: Home Federal's prospectus.
<PAGE>
EXHIBIT II-2
Historical Interest Rates
<PAGE>
<TABLE>
<CAPTION>
Historical Interest Rates(1)
<S> <C> <C> <C> <C> <C>
Prime 90 Day One Year 30 Year
Year/Qtr. Ended Rate T-Bill T-Bill T-Bond
- --------------- ---- ------ ------ ------
1991: Quarter 1 8.75% 5.92% 6.24% 8.26%
Quarter 2 8.50% 5.72% 6.35% 8.43%
Quarter 3 8.00% 5.22% 5.38% 7.80%
Quarter 4 6.50% 3.95% 4.10% 7.47%
1992: Quarter 1 6.50% 4.15% 4.53% 7.97%
Quarter 2 6.50% 3.65% 4.06% 7.79%
Quarter 3 6.00% 2.75% 3.06% 7.38%
Quarter 4 6.00% 3.15% 3.59% 7.40%
1993: Quarter 1 6.00% 2.95% 3.18% 6.93%
Quarter 2 6.00% 3.09% 3.45% 6.67%
Quarter 3 6.00% 2.97% 3.36% 6.03%
Quarter 4 6.00% 3.06% 3.59% 6.34%
1994: Quarter 1 6.25% 3.56% 4.44% 7.09%
Quarter 2 7.25% 4.22% 5.49% 7.61%
Quarter 3 7.75% 4.79% 5.94% 7.82%
Quarter 4 8.50% 5.71% 7.21% 7.88%
1995: Quarter 1 9.00% 5.86% 6.47% 7.43%
Quarter 2 9.00% 5.57% 5.63% 6.63%
Quarter 3 8.75% 5.42% 5.68% 6.51%
Quarter 4 8.50% 5.09% 5.14% 5.96%
1996: Quarter 1 8.25% 5.14% 5.38% 6.67%
As of June 7, 1996 8.25% 5.25% 5.83% 7.03%
(1) End of period data.
Source: SNL Securities.
</TABLE>
<PAGE>
EXHIBIT III-1
General Characteristics of Publicly-Traded Institutions
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 10, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
California Companies
____________________
AHM Ahmanson and Co. H.F. of CA NYSE Nationwide M.B. 49,782 335 12-31 10/72 26.50 2,982
GWF Great Western Fin. Corp. of CA NYSE CA,FL Div. 43,763 418 12-31 / 23.50 3,224
GDW Golden West Fin. Corp. of CA NYSE Nationwide M.B. 35,014 232 12-31 05/59 54.62 3,202
GLN Glendale Fed. Bk, FSB of CA NYSE CA Div. 14,368 148 06-30 10/83 18.75 827
CAL CalFed Inc. of Los Angeles CA NYSE CA,NV Div. 14,280 126 12-31 03/83 18.62 918
CSA Coast Savings Financial of CA NYSE California R.E. 8,240 89 12-31 12/85 33.37 620
DSL Downey Financial Corp. of CA NYSE Southern CA Thrift 4,653 52 12-31 01/71 21.62 367
FED FirstFed Fin. Corp. of CA NYSE Los Angeles CA R.E. 4,166 25 12-31 12/83 17.25 183
WES Westcorp Inc. of Orange CA NYSE California Div. 3,077 25 12-31 05/86 18.87 488
BVFS Bay View Capital Corp. of CA OTC San Francisco CA M.B. 2,910 27 12-31 05/86 33.00 228
AFFFZ America First Fin. Fund of CA OTC San Francisco CA Div. 2,333 36 12-31 / 26.00 156
CENF CENFED Financial Corp. of CA OTC Los Angeles CA Thrift 2,114 18 12-31 10/91 21.50 108
PFFB PFF Bancorp of Pomona CA OTC Southern CA Thrift 2,008 23 03-31 03/96 11.25 223
FRC First Republic Bancorp of CA (3) NYSE CA,NV M.B. 1,973 10 12-31 / 14.62 107
CFHC California Fin. Hld. Co. of CA OTC Central CA Thrift 1,278 22 12-31 04/83 20.50 96
REDF RedFed Bancorp of Redlands CA OTC Southern CA Thrift 858 14 12-31 04/94 9.62 39
HTHR Hawthorne Fin. Corp. of CA OTC Southern CA Thrift 773 9 12-31 / 7.50 19
HEMT HF Bancorp of Hemet CA OTC Southern CA Thrift 754 12 06-30 06/95 10.00 66
QCBC Quaker City Bancorp of CA OTC Los Angeles CA R.E. 693 8 06-30 12/93 14.50 57
HBNK Highland Federal Bank of CA OTC Los Angeles CA R.E. 442 11 12-31 / 16.37 38
SGVB SGV Bancorp of W. Covina CA OTC Los Angeles CA Thrift 333 6 06-30 06/95 8.62 24
MBBC Monterey Bay Bancorp of CA OTC West Central CA Thrift 319 6 12-31 02/95 11.87 41
NHSL NHS Financial, Inc. of CA OTC Central CA R.E. 293 3 12-31 / 10.87 27
PCCI Pacific Crest Capital of CA (3) OTC Southern CA R.E. 287 4 12-31 / 8.13 24
PSSB Palm Springs SB of CA OTC Southern CA Thrift 192 4 12-31 / 13.75 16
BYFC Broadway Fin. Corp. of CA OTC Los Angeles CA Thrift 115 4 12-31 01/96 10.00 9
FSSB First FS&LA of San Bern. CA OTC San Bernard. CA Thrift 103 4 06-30 12/92 10.00 3
Florida Companies
_________________
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 10, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Florida Companies (continued)
_____________________________
BANC BankAtlantic Bancorp of FL OTC Southeastern FL M.B. 1,643 40 12-31 11/83 14.00 164
FFPB First Palm Beach Bancorp of FL OTC Southeast FL Thrift 1,465 23 09-30 09/93 21.25 110
HOFL Home Financial Corp. of FL OTC Southern FL R.E. 1,227 8 09-30 10/94 13.81 342
HARB Harbor FSB, MHC of FL (45.7) OTC Eastern FL Thrift 933 22 09-30 01/94 27.00 133
FFFL Fidelity FSB, MHC of FL(47.2) OTC Southeast FL Thrift 792 20 12-31 01/94 13.50 91
BKUNA BankUnited SA of FL OTC Miami FL Thrift 738 6 09-30 12/85 7.75 44
CMSV Commty. Svgs, MHC of FL(47.6) OTC Southeast FL Thrift 632 17 09-30 10/94 14.75 72
SCSL Suncoast S&LA of Hollywood FL OTC Southeastern FL M.B. 466 4 06-30 11/85 6.25 12
FFLC FFLC Bancorp of Leesburg FL OTC Central FL Thrift 331 7 12-31 01/94 17.75 47
FFFG F.F.O. Financial Group of FL OTC Central FL R.E. 306 10 12-31 10/88 2.69 23
FFPC Florida First Bancorp of FL OTC Northwestern FL Thrift 304 9 12-31 11/86 11.12 38
FPRY First Financial Bancorp of FL OTC Northern FL Thrift 240 6 09-30 03/88 20.37 18
FFML First Family Bank, FSB of FL OTC Central FL Thrift 153 D 5 06-30 10/92 21.12 12
Mid-Atlantic Companies
______________________
DME Dime Savings Bank, FSB of NY (3) NYSE NY,NJ,FL M.B. 19,414 87 12-31 08/86 13.12 1,297
GPT GreenPoint Fin. Corp. of NY (3) NYSE New York City NY Thrift 14,469 84 06-30 01/94 29.75 1,561
SVRN Sovereign Bancorp of PA OTC PA,NJ,DE M.B. 8,411 121 12-31 08/86 10.37 496
ASFC Astoria Financial Corp. of NY OTC New York City NY Thrift 6,708 46 12-31 11/93 27.00 296
COFD Collective Bancorp Inc. of NJ OTC Southern NJ Thrift 5,059 79 06-30 02/84 24.12 492
LISB Long Island Bancorp of NY OTC Long Island NY M.B. 4,834 36 09-30 04/94 29.87 743
RCSB RCSB Financial, Inc. of NY (3) OTC NY M.B. 4,111 31 11-30 04/86 24.75 334
ALBK ALBANK Fin. Corp. of Albany NY OTC NY,MA Thrift 3,333 57 06-30 04/92 27.25 371
ROSE TR Financial Corp. of NY OTC New York, NY Thrift 3,002 15 12-31 06/93 26.12 234
NYB New York Bancorp, Inc. of NY AMEX Southeastern NY Thrift 2,754 27 09-30 01/88 25.25 296
GRTR Greater New York SB of NY (3) OTC New York NY Div. 2,576 14 12-31 06/87 11.00 146
BKCO Bankers Corp. of NJ (3) OTC Central NJ Thrift 1,916 14 12-31 03/90 17.25 221
NWSB Northwest SB, MHC of PA(29.9) OTC Pennsylvania Thrift 1,767 46 06-30 11/94 11.87 277
MLFB MLF Bancorp of Villanova PA OTC Philadelphia PA M.B. 1,766 17 03-31 08/94 23.75 148
RELY Reliance Bancorp of NY OTC NYC NY Thrift 1,744 17 06-30 03/94 15.50 143
CMSB Cmnwealth SB, MHC of PA (46.3) OTC Philadelphia PA M.B. 1,658 35 06-30 01/94 21.88 189
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 10, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Atlantic Companies (continued)
__________________________________
NSBK Northside SB of Bronx NY (3) OTC New York NY Thrift 1,580 17 09-30 04/86 36.12 174
JSBF JSB Financial, Inc. of NY OTC New York City R.E. 1,548 13 12-31 06/90 32.62 337
HAVN Haven Bancorp of Woodhaven NY OTC New York City NY Thrift 1,485 9 12-31 09/93 27.75 119
QCSB Queens County SB of NY (3) OTC New York City NY R.E. 1,260 9 12-31 11/93 47.62 291
WSFS WSFS Financial Corp. of DE (3) OTC DE Div. 1,259 13 12-31 11/86 7.87 112
HARS Harris SB, MHC of PA (23.1) OTC Southeast PA Thrift 1,249 25 12-31 01/94 16.75 188
MFSL Maryland Fed. Bancorp of MD OTC MD Thrift 1,143 25 02-28 06/87 29.62 93
YFED York Financial Corp. of PA OTC PA,MD Thrift 1,049 22 06-30 02/84 16.62 101
PFSB PennFed Fin. Services of NJ OTC Northern NJ Thrift 1,023 17 06-30 07/94 15.12 77
FSLA First SB, SLA MHC of NJ (37.6) OTC Eastern NJ Thrift 959 22 12-31 06/92 16.00 104
PVSA Parkvale Financial Corp of PA OTC Southwestern PA Thrift 914 28 06-30 07/87 26.00 84
PKPS Poughkeepsie SB of NY OTC Poughkeepsie NY R.E. 839 7 12-31 11/85 5.50 69
WFSB 1st Washington Bancorp of VA OTC DC Metro Area Thrift 795 17 06-30 05/87 7.94 78
PSBK Progressive Bank, Inc. of NY (3) OTC Eastern NY Thrift 786 15 12-31 08/84 29.00 76
IBSF IBS Financial Corp. of NJ OTC Southwest NJ Thrift 757 8 09-30 10/94 14.00 160
FFIC Flushing Fin. Corp. of NY (3) OTC New York, NY Thrift 739 7 12-31 11/95 15.75 125
PWBC PennFirst Bancorp of PA OTC Western PA Thrift 680 9 12-31 06/90 13.75 55
FSNJ First SB of NJ, MHC (45.0) OTC Northern NJ Thrift 657 D 4 05-31 01/95 14.12 43
SFIN Statewide Fin. Corp. of NJ OTC Northern NJ Thrift 634 14 03-31 10/95 12.12 64
FSFI First State Fin. Serv. of NJ OTC Northeastern NJ Thrift 629 12 09-30 12/87 10.00 40
FCIT First Cit. Fin. Corp of MD OTC DC Metro Area Thrift 624 14 12-31 12/86 17.75 52
PSAB Prime Bancorp, Inc. of PA OTC Southeastern PA Thrift 609 17 12-31 11/88 17.50 65
GAF GA Financial Corp. of PA AMEX Pittsburgh PA Thrift 569 10 12-31 03/96 10.75 96
BFSI BFS Bankorp, Inc. of NY OTC New York NY R.E. 566 5 09-30 05/88 39.50 65
FBBC First Bell Bancorp of PA OTC Pittsburgh PA Thrift 543 7 12-31 06/95 13.44 110
THRD TF Financial Corp. of PA OTC Philadelphia PA Thrift 519 11 06-30 07/94 14.62 66
TSBS Trenton SB, FSB MHC of NJ(35.0 OTC Central NJ Thrift 519 10 12-31 08/95 14.50 129
FMCO FMS Financial Corp. of NJ OTC Southern NJ Thrift 506 14 12-31 12/88 16.25 40
CONE Conestoga Bancorp of Roslyn NY OTC New York, NY Thrift 494 8 03-31 03/94 21.00 100
FSPG First Home SB, SLA of NJ OTC NJ,DE Thrift 466 10 12-31 04/87 17.75 36
CJFC Central Jersey Fin. Corp of NJ OTC Central NJ Thrift 466 D 6 03-31 09/84 30.25 81
LVSB Lakeview SB of Paterson NJ OTC Northern NJ Thrift 455 8 07-31 12/93 19.00 43
MSBB MSB Bancorp of Middletown NY (3) OTC Southeastern NY Thrift 454 D 9 09-30 08/92 15.75 45
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 10, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Atlantic Companies (continued)
__________________________________
PULS Pulse Bancorp of S. River NJ OTC Central NJ Thrift 452 4 09-30 09/86 17.31 67
IROQ Iroquois Bancorp of Auburn NY (3) OTC Central NY Thrift 451 9 12-31 01/86 14.50 34
ANBK American Nat'l Bancorp of MD OTC Baltimore MD R.E. 449 9 07-31 11/95 10.00 40
AHCI Ambanc Holding Co. of NY (3) OTC East-Central NY Thrift 392 9 12-31 12/95 9.38 51
PBCI Pamrapo Bancorp, Inc. of NJ OTC Northern NJ Thrift 368 8 12-31 10/89 19.00 63
CARV Carver FSB of New York, NY OTC New York, NY Thrift 363 D 8 03-31 10/94 7.62 18
SHEN First Shenango Bancorp of PA OTC Western PA Thrift 356 4 12-31 04/93 20.50 47
PFNC Progress Financial Corp. of PA OTC Southeastern PA M.B. 348 9 12-31 07/83 6.50 24
RARB Raritan Bancorp. of Raritan NJ (3) OTC Central NJ Thrift 347 5 12-31 03/87 21.19 30
FOBC Fed One Bancorp of Wheeling WV OTC Northern WV,OH Thrift 340 9 12-31 01/95 14.62 36
CNSK Covenant Bank for Svgs. of NJ (3) OTC Southern NJ Thrift 339 10 12-31 / 12.00 24
FFWM First Fin. Corp of Western MD OTC Western MD Thrift 326 9 06-30 01/92 20.00 44
PBIX Patriot Bank Corp. of PA OTC Southeast PA Thrift 313 7 12-31 12/95 13.00 45
FSBI Fidelity Bancorp, Inc. of PA OTC Southwestern PA Thrift 301 8 09-30 06/88 16.00 22
LFBI Little Falls Bancorp of NJ OTC New Jersey Thrift 286 6 12-31 01/96 9.87 30
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 279 P 3 09-30 04/96 10.25 58
FKFS First Keystone Fin. Corp of PA OTC Philadelphia PA Thrift 278 5 09-30 01/95 17.25 22
CVAL Chester Valley Bancorp of PA OTC Southeastern PA Thrift 275 6 06-30 03/87 18.62 29
HARL Harleysville SA of PA OTC Southeastern PA Thrift 274 4 09-30 08/87 18.37 24
LFED Leeds FSB, MHC of MD (35.3) OTC Baltimore MD Thrift 267 1 06-30 03/94 14.00 48
IFSB Independence FSB of DC OTC Washington DC Ret. 264 D 4 12-31 06/85 7.50 10
WSB Washington SB, FSB of MD AMEX Southeastern MD Thrift 263 D 3 07-31 / 5.63 24
EQSB Equitable FSB of Wheaton MD OTC Central MD Thrift 260 4 09-30 09/93 22.50 14
FBER First Bergen Bancorp of NJ OTC Northern NJ Thrift 259 2 09-30 04/96 9.25 29
FIBC Financial Bancorp of NY OTC New York, NY Thrift 252 5 09-30 08/94 12.87 24
YFCB Yonkers Fin. Corp. of NY OTC Yonkers NY Thrift 241 P 4 09-30 04/96 9.62 34
WVFC WVS Financial Corp. of PA (3) OTC Pittsburgh PA Thrift 240 5 06-30 11/93 20.75 36
GDVS Greater DV SB,MHC of PA(19.9) (3) OTC Southeast PA Thrift 236 7 12-31 03/95 10.00 33
ESBK Elmira SB of Elmira NY (3) OTC NY,PA Ret. 223 6 12-31 03/85 16.50 12
HFMD Home Federal Corporation of MD OTC Western MD Thrift 217 7 12-31 02/84 10.25 26
CTBK Center Banks, Inc. of NY (3) OTC Central NY Thrift 215 7 12-31 05/86 13.75 13
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 194 3 06-30 12/95 12.00 49
LARL Laurel Capital Group of PA OTC Southwestern PA Thrift 193 6 06-30 02/87 15.00 23
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 10, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Atlantic Companies (continued)
__________________________________
PHFC Pittsburgh Home Fin. of PA OTC Pittsburgh PA Thrift 180 P 6 09-30 04/96 10.00 22
SBFL SB Fing. Lakes MHC of NY(33.0) OTC Western NY Thrift 177 3 04-30 11/94 16.50 29
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 166 3 12-31 06/95 11.75 16
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 154 D 6 03-31 08/94 12.87 24
TPNZ Tappan Zee Fin. Corp. of NY OTC Southeast NY Thrift 115 1 03-31 10/95 12.00 19
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 112 5 09-30 04/96 11.50 19
THBC Troy Hill Bancorp of PA OTC Pittsburgh PA Thrift 80 2 06-30 06/94 13.37 14
ALBC Albion Banc Corp. of Albion NY OTC Western NY Thrift 57 2 09-30 07/93 17.00 4
BRFC Bridgeville SB, FSB of PA OTC Western PA Thrift 56 1 12-31 10/94 14.25 16
Mid-West Companies
__________________
SFB Standard Fed. Bancorp of MI NYSE MI,IN,OH M.B. 13,505 164 12-31 01/87 38.87 1,216
COFI Charter One Financial of OH OTC Northeastern OH Div. 13,174 94 12-31 01/88 35.62 1,607
RFED Roosevelt Fin. Grp. Inc. of MO OTC MO,IL,KS Div. 9,135 78 12-31 01/87 18.25 769
TCB TCF Financial Corp. of MN NYSE MN,IL,MI,WI,OH Div. 7,039 180 12-31 06/86 33.62 1,205
CFB Commercial Federal Corp. of NE NYSE NE,CO,KS,OK M.B. 6,617 91 06-30 12/84 38.12 574
FFHC First Financial Corp. of WI OTC WI,IL Div. 5,419 129 12-31 12/80 23.00 687
SPBC St. Paul Bancorp, Inc. of IL OTC Chicago IL Div. 4,143 52 12-31 05/87 23.50 436
SECP Security Capital Corp. of WI OTC Wisconsin Div. 3,345 42 06-30 01/94 61.00 582
CTZN CitFed Bancorp of Dayton OH OTC Dayton OH M.B. 2,598 33 03-31 01/92 36.75 209
GTFN Great Financial Corp. of KY OTC Kentucky M.B. 2,477 40 12-31 03/94 27.00 396
STND Standard Fin. of Chicago IL OTC Chicago IL Thrift 2,187 13 12-31 08/94 15.25 256
MAFB MAF Bancorp of IL OTC Chicago IL Thrift 1,980 13 06-30 01/90 24.50 128
BELL Bell Bancorp of Chicago IL OTC Chicago IL Thrift 1,938 14 03-31 12/91 37.37 344
ABCW Anchor Bancorp Wisconsin of WI OTC Wisconsin M.B. 1,755 32 03-31 07/92 34.50 170
FISB First Indiana Corp. of IN OTC Central IN M.B. 1,477 28 12-31 08/83 24.50 203
FTFC First Fed. Capital Corp. of WI OTC Southern WI M.B. 1,382 40 12-31 11/89 22.00 139
STFR St. Francis Cap. Corp. of WI OTC Milwaukee WI Thrift 1,296 13 09-30 06/93 25.50 149
DNFC D&N Financial Corp. of MI OTC MI,WI Ret. 1,232 33 12-31 02/85 12.37 84
JSBA Jefferson Svgs Bancorp of MO OTC St. Louis MO,TX Thrift 1,143 D 21 12-31 04/93 27.25 114
FFSW First Fed Fin. Serv. of OH OTC Northeastern OH Thrift 993 18 12-31 04/87 28.00 92
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 10, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
______________________________
AADV Advantage Bancorp of WI OTC WI,IL Thrift 980 15 09-30 03/92 34.00 117
CFSB CFSB Bancorp of Lansing MI OTC Central MI Thrift 772 18 12-31 06/90 20.62 92
OFCP Ottawa Financial Corp. of MI OTC Western MI Thrift 745 12 12-31 08/94 16.25 89
MSBK Mutual SB, FSB of Bay City MI OTC Michigan M.B. 719 24 12-31 07/92 5.50 23
IFSL Indiana Federal Corp. of IN OTC Northwestern IN Thrift 718 15 12-31 02/87 19.12 91
HNFC Hinsdale Financial Corp. of IL OTC Chicago IL M.B. 682 10 09-30 07/92 23.50 63
FFEC First Fed. Bancshares of WI OTC Northwest WI Thrift 672 18 12-31 10/94 16.00 110
LBCI Liberty Bancorp of Chicago IL OTC Chicago IL Thrift 670 4 12-31 12/91 22.75 57
NASB North American SB of MO OTC KS,MO M.B. 664 8 09-30 09/85 29.50 67
GSBC Great Southern Bancorp of MO OTC Southwest MO Div. 659 25 06-30 12/89 27.50 122
FFDP FirstFed Bancshares of IL OTC Chicago IL Thrift 624 3 12-31 07/92 16.12 55
HOMF Home Fed Bancorp of Seymour IN OTC Southern IN Thrift 606 15 06-30 01/88 26.75 59
AVND Avondale Fin. Corp. of IL OTC Chicago IL Ret. 580 6 03-31 04/95 13.25 53
HFFC HF Financial Corp. of SD OTC South Dakota Thrift 574 18 06-30 04/92 15.00 46
FFYF FFY Financial Corp. of OH OTC Youngstown OH Thrift 573 9 06-30 06/93 23.25 121
FNGB First Northern Cap. Corp of WI OTC Northeast WI Thrift 572 20 12-31 12/83 15.69 71
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 542 7 12-31 06/94 15.69 81
FDEF First Defiance Fin.Corp. of OH OTC Northwest OH Thrift 528 9 06-30 10/95 10.62 117
SSBK Strongsville SB of OH OTC Cleveland OH Thrift 505 12 12-31 / 21.50 54
CBCI Calumet Bancorp of Chicago IL OTC Chicago IL Thrift 502 5 06-30 02/92 28.00 75
FFBH First Fed. Bancshares of AR OTC Northern AR Thrift 498 P 8 12-31 05/96 13.75 71
SFSL Security First Corp. of OH OTC Northeastern OH R.E. 470 10 03-31 01/88 13.25 47
FFSX First FS&LA. MHC of IA (45.0) OTC Western IA Thrift 437 12 06-30 06/92 25.75 44
FBCI Fidelity Bancorp of Chicago IL OTC Chicago IL Thrift 433 5 09-30 12/93 16.62 51
ASBI Ameriana Bancorp of IN OTC Eastern IN,OH Thrift 383 8 12-31 02/87 13.00 43
PERM Permanent Bancorp of IN OTC Southwest IN Thrift 378 D 11 03-31 04/94 16.00 35
PMFI Perpetual Midwest Fin. of IA OTC EastCentral IA Thrift 374 4 12-31 03/94 17.00 34
PFSL Pocahnts Fed, MHC of AR (46.4) OTC Northeast AR Thrift 369 5 09-30 04/94 15.75 25
KNK Kankakee Bancorp of IL AMEX Illinois Thrift 363 10 03-31 12/92 19.37 28
SFSB SuburbFed Fin. Corp. of IL OTC IL,IN Thrift 362 12 12-31 02/92 17.62 22
FFKY First Fed. Fin. Corp. of KY OTC Central KY Thrift 351 7 06-30 07/87 42.00 89
SWBI Southwest Bancshares of IL OTC Chicago IL Thrift 350 5 12-31 06/92 27.25 51
CAFI Camco Fin. Corp. of OH OTC Eastern OH M.B. 344 7 12-31 / 20.00 39
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 10, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
______________________________
HMCI Homecorp, Inc. of Rockford IL OTC Northern IL Thrift 342 9 12-31 06/90 17.50 20
HVFD Haverfield Corp. of OH OTC Cleveland OH Thrift 340 11 12-31 03/85 17.75 34
HALL Hallmark Capital Corp. of WI OTC Milwaukee WI Thrift 339 3 06-30 01/94 14.81 21
INBI Industrial Bancorp of OH OTC Northern OH Thrift 327 10 12-31 08/95 11.75 65
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift 327 11 09-30 10/94 11.69 45
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 320 5 12-31 07/94 23.00 53
PVFC PVF Capital Corp. of OH OTC Cleveland OH R.E. 318 7 06-30 12/92 19.00 29
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 313 8 09-30 03/95 14.75 46
CASH First Midwest Fin. Corp. of IA OTC IA,SD R.E. 310 8 09-30 09/93 23.50 42
WCBI WestCo Bancorp of IL OTC Chicago IL Thrift 309 1 12-31 06/92 22.00 59
CBSB Charter Financial Inc. of IL OTC Southern IL Thrift 301 6 09-30 12/95 11.50 57
WBCI WFS Bancorp of Wichita KS OTC Wichita KS Thrift 292 D 4 09-30 06/94 22.87 36
MCBS Mid Continent Bancshares of KS OTC Central KS M.B. 291 7 09-30 06/94 18.62 38
FMBD First Mutual Bancorp of IL OTC Central IL Thrift 285 7 12-31 07/95 12.75 55
PFDC Peoples Bancorp of Auburn IN OTC Northeastern IN Thrift 281 6 09-30 07/87 20.62 49
FFED Fidelity Fed. Bancorp of IN OTC Southwestern IN Thrift 280 4 06-30 08/87 12.00 30
GFCO Glenway Financial Corp. of OH OTC Cincinnati OH Thrift 279 D 6 06-30 11/90 20.50 22
FNSC Financial Security Corp. of IL OTC Chicago IL Thrift 274 2 12-31 12/92 25.37 39
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 273 3 06-30 04/87 26.00 17
SMFC Sho-Me Fin. Corp. of MO OTC Southwest MO Thrift 264 6 12-31 06/94 15.63 28
WFCO Winton Financial Corp. of OH OTC Cincinnati OH R.E. 262 4 09-30 08/88 12.25 24
FCBF FCB Fin. Corp. of Neenah WI OTC Eastern WI Thrift 256 6 03-31 09/93 17.50 44
OSBF OSB Fin. Corp. of Oshkosh WI OTC Eastern WI Thrift 254 7 12-31 06/92 22.75 26
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 252 P 6 12-31 05/96 10.00 28
FFOH Fidelity Financial of OH OTC Cincinnati OH Thrift 249 4 12-31 03/96 10.00 41
WAYN Wayne S&L Co., MHC of OH(46.7) OTC Central OH Thrift 249 6 03-31 06/93 20.50 31
DFIN Damen Fin. Corp. of Chicago IL OTC Chicago IL Thrift 235 4 11-30 10/95 11.62 46
LFSB LFS Bancorp of Lexington KY OTC Lexington KY Thrift 234 4 12-31 04/94 19.25 66
CRCL Circle Financial Corp.of OH OTC Cincinnati OH Thrift 229 8 06-30 08/91 33.84 24
CBIN Community Bank Shares of IN OTC Southeast IN Thrift 224 6 12-31 04/95 13.62 27
FFHS First Franklin Corp. of OH OTC Cincinnati OH Thrift 216 7 12-31 01/88 15.12 18
WCHI Workingmens Cap. Hldgs of IN OTC South Central IN Thrift 214 2 12-31 06/90 19.87 36
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 208 D 5 09-30 10/94 14.25 30
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 10, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
______________________________
OHSL OHSL Financial Corp. of OH OTC Cincinnati, OH Thrift 205 4 12-31 02/93 20.75 25
CBCO CB Bancorp of Michigan City IN OTC Northwest IN Thrift 205 3 03-31 12/92 17.25 20
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 203 7 06-30 12/93 18.00 19
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 201 4 09-30 03/94 14.00 29
SBCN Suburban Bancorp. of OH OTC Cincinnati OH Thrift 197 8 06-30 09/93 14.50 21
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 196 7 12-31 04/95 11.25 25
MBLF MBLA Financial Corp. of MO OTC Northeast MO Thrift 195 2 06-30 06/93 23.75 33
LARK Landmark Bancshares of KS OTC Central KS Thrift 193 5 09-30 03/94 15.25 30
FFFD North Central Bancshares of IA OTC Central IA Thrift 191 4 12-31 03/96 10.25 41
GFED Guaranty FS&LA,MHC of MO(31.1) OTC Southwest MO Thrift 186 4 06-30 04/95 11.50 36
PULB Pulaski SB, MHC of MO (29.0) OTC St. Louis MO Thrift 179 5 09-30 05/94 14.00 29
MARN Marion Capital Holdings of IN OTC Central IN Thrift 179 2 06-30 03/93 20.00 40
MWFD Midwest Fed. Fin. Corp of WI OTC Central WI Thrift 178 9 12-31 07/92 16.00 26
FFBZ First Federal Bancorp of OH OTC Eastern OH Thrift 173 6 09-30 06/92 24.50 19
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift 172 3 09-30 04/95 14.00 40
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 172 2 09-30 10/94 12.87 30
LSBI LSB Bancorp of Lafayette IN OTC Central IN Thrift 163 3 12-31 02/95 15.75 15
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 162 8 06-30 04/94 14.00 24
THIR Third Financial Corp. of OH OTC Piqua OH Thrift 156 4 09-30 03/93 31.25 36
SJSB SJS Bancorp of St. Joseph MI OTC Southwest MI Thrift 151 4 06-30 02/95 20.75 20
FFWC FFW Corporation of Wabash IN OTC Central IN Thrift 149 3 06-30 03/93 19.25 14
QCFB QCF Bancorp of Virginia MN OTC Northeast MN Thrift 146 2 06-30 04/95 14.00 25
JXSB Jcksnville SB,MHC of IL(43.3%) OTC Central IL Thrift 142 4 12-31 04/95 14.00 18
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 141 3 12-31 06/95 11.50 24
FBSI First Bancshares of MO OTC Southcentral MO Thrift 140 5 06-30 12/93 15.75 21
FFWD Wood Bancorp of OH OTC Northern OH Thrift 140 6 06-30 08/93 18.75 19
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 139 2 06-30 03/95 10.75 25
FKKY Frankfort First Bancorp of KY OTC Frankfort KY Thrift 139 3 06-30 07/95 11.37 39
MWBI Midwest Bancshares, Inc. of IA OTC Southeast IA Thrift 137 5 12-31 11/92 25.75 9
MFCX Marshalltown Fin. Corp. of IA OTC Central IA Thrift 126 2 09-30 03/94 15.50 22
MIFC Mid Iowa Financial Corp. of IA OTC Central IA Thrift 119 6 09-30 10/92 6.25 11
GTPS Great American Bancorp of IL OTC East Central IL Thrift 118 D 3 09-30 06/95 13.75 25
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 114 2 06-30 12/93 15.63 18
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 10, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
______________________________
PTRS The Potters S&L Co. of OH OTC Northeast OH Thrift 114 5 12-31 12/93 16.25 9
ASBP ASB Financial Corp. of OH OTC Southern OH Thrift 112 1 06-30 04/95 15.00 26
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 109 2 09-30 10/95 15.25 33
FFSL First Independence Corp. of KS OTC Southeast KS Thrift 102 1 09-30 10/93 17.75 10
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 101 5 09-30 04/95 13.50 11
WCFB Webster CityFSB,MHC of IA(45.2 OTC Central IA Thrift 97 1 12-31 08/94 12.87 27
INCB Indiana Comm. Bank, SB of IN OTC Central IN Ret. 94 3 06-30 12/94 14.00 13
FSBS First Ashland Fin. Corp. of KY OTC Northeast KY Thrift 90 D 3 09-30 04/95 18.00 26
FFBI First Financial Bancorp of IL OTC Northern IL M.B. 89 2 12-31 10/93 15.50 7
FTSB Fort Thomas Fin. Corp. of KY OTC Northern KY Thrift 88 2 09-30 06/95 16.75 26
NWEQ Northwest Equity Corp. of WI OTC Northwest WI Thrift 86 3 03-31 10/94 10.25 10
CIBI Community Inv. Corp. of OH OTC NorthCentral OH Thrift 85 D 3 06-30 02/95 14.75 10
KYF Kentucky First Bancorp of KY AMEX Central KY Thrift 84 2 06-30 08/95 13.62 19
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 83 3 03-31 09/95 11.75 12
THR Three Rivers Fin. Corp. of MI AMEX Southwest MI Thrift 81 S 4 06-30 08/95 13.25 11
GFSB GFS Bancorp of Grinnell IA OTC Central IA Thrift 81 1 06-30 01/94 20.50 11
AMFC AMB Financial Corp. of IN OTC Northwest IN Thrift 81 4 12-31 04/96 10.00 11
PCBC Perry Co. Fin. Corp. of MO OTC EastCentral MO Thrift 77 D 1 09-30 02/95 17.25 15
LOGN Logansport Fin. Corp. of IN OTC Northern IN Thrift 76 1 12-31 06/95 12.75 17
SOBI Sobieski Bancorp of S. Bend IN OTC Northern IN Thrift 76 3 06-30 03/95 12.00 10
SFFC StateFed Financial Corp. of IA OTC Des Moines IA Thrift 74 2 06-30 01/94 16.00 13
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 73 P 1 06-30 04/96 10.37 15
ATSB AmTrust Capital Corp. of IN OTC Northcentral IN Thrift 73 3 06-30 03/95 10.00 6
GWBC Gateway Bancorp of KY OTC Eastern KY Thrift 73 2 06-30 01/95 14.00 16
HZFS Horizon Fin'l. Services of IA OTC Central IA Thrift 72 3 06-30 06/94 15.50 7
HHFC Harvest Home Fin. Corp. of OH OTC Southwest OH Thrift 70 D 3 09-30 10/94 13.00 12
MIVI Miss. View Hold. Co. of MN OTC Central MN Thrift 70 1 09-30 03/95 11.25 11
CLAS Classic Bancshares of KY OTC Eastern KY Thrift 68 D 1 03-31 12/95 11.12 15
LXMO Lexington B&L Fin. Corp. of MO OTC West Central MO Thrift 61 P 1 09-30 06/96 9.75 12
NSLB NS&L Bancorp of Neosho MO OTC Southwest MO Thrift 59 2 09-30 06/95 12.87 11
CKFB CKF Bancorp of Danville KY OTC Central KY Thrift 59 1 12-31 01/95 20.00 19
MSBF MSB Financial Corp. of MI OTC Southcentral MI Thrift 56 2 06-30 02/95 16.75 11
MFSB Mutual Bancompany of MO OTC Central MO Thrift 53 1 06-30 02/95 21.00 7
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 10, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
______________________________
RELI Reliance Bancshares Inc of WI (3) OTC Milwaukee WI Thrift 50 P 1 June 04/96 7.50 19
SHFC Seven Hills Fin. Corp. of OH OTC Cincinnati OH Thrift 46 3 06-30 12/93 14.50 8
HBBI Home Building Bancorp of IN OTC Southwest IN Thrift 42 2 09-30 02/95 17.69 6
CSBF CSB Financial Group Inc of IL OTC Centralia IL Thrift 41 1 09-30 10/95 9.00 9
LONF London Financial Corp. of OH OTC Central OH Thrift 38 1 09-30 04/96 10.50 6
JOAC Joachim Bancorp of MO OTC Eastern MO Thrift 37 1 03-31 12/95 12.75 10
New England Companies
_____________________
PBCT Peoples Bank, MHC of CT(32.3) (3) OTC Southwestern CT Div. 6,916 79 12-31 07/88 20.37 798
WBST Webster Financial Corp. of CT OTC Central CT Thrift 3,813 39 12-31 12/86 28.00 227
CFCX Center Fin. Corp of CT (3) OTC Western CT M.B. 3,670 36 12-31 08/86 20.87 302
PHBK Peoples Heritage Fin Grp of ME (3) OTC ME,NH Div. 3,302 76 12-31 12/86 20.12 343
SBOS Boston Bancorp of MA (3) OTC Eastern MA Thrift 1,715 D 7 10-31 11/83 42.00 221
EGFC Eagle Financial Corp. of CT OTC Western CT Thrift 1,429 23 09-30 02/87 23.50 106
DSBC DS Bancor Inc. of Derby CT (3) OTC Southwestern CT Thrift 1,248 22 12-31 12/85 31.37 95
ANDB Andover Bancorp, Inc. of MA (3) OTC Northeastern MA M.B. 1,142 10 12-31 05/86 25.75 109
SISB SIS Bank of Sprinfield MA (3) OTC Central MA Div. 1,135 20 12-31 02/95 16.87 96
WLDN Walden Bancorp of MA (3) OTC Eastern MA M.B. 1,019 16 04-30 12/85 18.75 100
MDBK Medford Savings Bank of MA (3) OTC Eastern MA Thrift 981 16 12-31 03/86 21.25 96
CFX Cheshire Fin. Corp. of NH (3) AMEX S.W. NH,MA M.B. 958 23 12-31 02/87 13.75 104
AFCB Affiliated Comm BC, Inc of MA OTC MA Thrift 938 13 12-31 / 16.62 84
FFES First FS&LA of E. Hartford CT OTC Central CT Thrift 933 12 12-31 06/87 17.00 44
FMLY Family Bancorp of Haverhill MA (3) OTC MA,NH Div. 887 21 12-31 11/86 24.12 99
MASB MassBank Corp. of Reading MA (3) OTC Eastern MA Thrift 859 14 12-31 05/86 33.25 91
EBCP Eastern Bancorp of NH OTC VT, NH M.B. 825 23 09-30 11/83 24.25 58
FESX First Essex Bancorp of MA (3) OTC MA,NH Div. 801 10 12-31 08/87 10.37 63
NSSB Norwich Financial Corp. of CT (3) OTC Southeastern CT Thrift 712 15 12-31 11/86 13.37 75
BFD BostonFed Bancorp of MA AMEX Boston MA M.B. 678 8 12-31 10/95 12.25 81
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 671 10 12-31 07/86 13.75 69
GROV GroveBank for Savings of MA (3) OTC Eastern MA Thrift 586 7 12-31 08/86 25.25 39
NSSY Norwalk Savings Society of CT (3) OTC Southwest CT Thrift 542 8 12-31 06/94 19.87 47
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 10, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
New England Companies (continued)
_________________________________
FMCT Farmers & Mechanics Bank of CT (3) OTC Central CT Thrift 537 12 12-31 11/93 19.12 32
PBKB People's SB of Brockton MA (3) OTC Southeastern MA Thrift 533 9 12-31 10/86 10.00 33
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 517 15 12-31 12/81 24.12 55
CBNH Community Bankshares Inc of NH (3) OTC Southcentral NH M.B. 517 5 06-30 05/86 17.37 42
SOSA Somerset Savings Bank of MA (3) OTC Eastern MA R.E. 510 5 12-31 07/86 1.50 25
ABBK Abington Savings Bank of MA (3) OTC Southeastern MA M.B. 478 7 12-31 06/86 14.50 27
FSBX Framingham SB of MA (3) OTC Eastern MA Thrift 478 9 12-31 10/86 4.25 59
SWCB Sandwich Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 424 11 04-30 07/86 19.37 36
PBNB Peoples Sav. Fin. Corp. of CT (3) OTC Central CT Thrift 406 8 12-31 08/86 20.50 39
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 403 3 12-31 07/86 19.56 53
PETE Primary Bank of NH (3) OTC Southern NH Ret. 393 8 12-31 10/93 12.25 24
MIDC Midconn Bank of Kensington CT (3) OTC Central CT Thrift 365 10 09-30 09/86 15.25 29
HSBK Hibernia SB of Quincy MA (3) OTC Eastern MA R.E. 355 5 12-31 09/86 14.75 23
WRNB Warren Bancorp of Peabody MA (3) OTC Eastern MA R.E. 355 6 12-31 07/86 12.50 46
LSBX Lawrence Savings Bank of MA (3) OTC Northeastern MA Thrift 324 6 12-31 05/86 5.37 23
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 318 D 11 04-30 10/86 15.25 29
NMSB Newmil Bancorp. of CT (3) OTC Eastern CT Thrift 292 12 06-30 02/86 7.50 31
POBS Portsmouth Bank Shrs Inc of NH (3) OTC Southeastern NH Thrift 267 3 12-31 02/88 13.75 79
NHTB NH Thrift Bancshares of NH OTC Central NH Thrift 252 10 12-31 05/86 10.12 17
BTHL Bethel Bancorp. of ME (3) OTC Eastern ME Thrift 218 8 06-30 08/87 13.00 16
TBK Tolland Bank of CT (3) AMEX Northern CT Thrift 217 7 12-31 12/86 9.62 11
HIFS Hingham Inst. for Sav. of MA (3) OTC Eastern MA Thrift 179 4 12-31 12/88 14.50 19
BSBC Branford SB of CT (3) OTC New Haven CT R.E. 174 5 12-31 11/86 3.37 22
HPBC Home Port Bancorp, Inc. of MA (3) OTC Southeastern MA Thrift 167 2 12-31 08/88 13.75 25
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 134 4 12-31 05/93 10.50 12
KSBK KSB Bancorp of Kingfield ME (3) OTC Western ME M.B. 127 10 12-31 06/93 22.25 8
MFLR Mayflower Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 111 D 4 04-30 12/87 14.25 12
FCB Falmouth Co-Op Bank of MA (3) AMEX Southeast MA Thrift 88 2 09-30 03/96 10.25 15
NTMG Nutmeg FS&LA of CT OTC CT M.B. 85 3 12-31 / 7.50 5
MCBN Mid-Coast Bancorp of ME OTC Eastern ME Thrift 54 2 03-31 11/89 19.12 4
GLBK Glendale Co-op. Bank of MA (3) OTC Boston MA Thrift 36 D 1 04-30 01/94 17.50 4
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 10, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WAMU Washington Mutual Inc. of WA (3) OTC WA,OR,ID,UT,MT Div. 22,344 246 12-31 03/83 30.00 2,160
WFSL Washington FS&LA of Seattle WA OTC Western US Thrift 4,929 87 09-30 11/82 21.56 918
STSA Sterling Financial Corp. of WA OTC WA,OR M.B. 1,498 41 06-30 / 14.00 76
IWBK Interwest SB of Oak Harbor WA OTC Western WA Div. 1,369 28 12-31 / 24.37 157
MSEA Metropolitan Bancorp of WA OTC Western WA R.E. 778 10 03-31 01/90 13.62 51
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 605 7 09-30 10/95 14.25 160
FWWB First Savings Bancorp of WA (3) OTC Central WA Thrift 595 D 15 03-31 11/95 15.00 151
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 489 12 03-31 08/86 12.75 84
FMSB First Mutual SB of Bellevue WA (3) OTC Western WA M.B. 371 6 12-31 12/85 13.12 32
CASB Cascade SB of Everett WA OTC Seattle WA Thrift 326 6 06-30 08/92 20.00 33
RVSB Rvrview SB,FSB MHC of WA(40.3) OTC Southwest WA M.B. 210 9 03-31 10/93 16.00 34
South-East Companies
____________________
LFCT Leader Fin. Corp of Memphis TN OTC Tennessee M.B. 3,178 22 12-31 09/93 45.62 453
FFCH First Fin. Holdings Inc. of SC OTC CHARLESTON SC Div. 1,449 32 09-30 11/83 18.50 118
AMFB American Federal Bank of SC OTC Northwest SC Thrift 1,339 41 12/31 01/89 16.00 175
MGNL Magna Bancorp of MS OTC MS,AL M.B. 1,291 61 06-30 03/91 34.00 237
LIFB Life Bancorp of Norfolk VA OTC Southeast VA Thrift 1,205 17 12-31 10/94 14.12 147
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 982 29 9-30 12/83 22.12 88
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 716 9 06-30 12/95 16.12 277
VFFC Virginia First Savings of VA OTC Petersburg VA M.B. 714 23 06-30 01/78 12.25 69
CNIT Cenit Bancorp of Norfolk VA OTC Southeastern VA Thrift 667 15 12-31 08/92 34.00 55
VABF Va. Beach Fed. Fin. Corp of VA OTC Southeast VA M.B. 625 11 12-31 11/80 7.62 38
ISBF ISB Financial Corp. of LA OTC SouthCentral LA Thrift 624 14 12-31 04/95 15.63 115
PALM Palfed, Inc. of Aiken SC OTC Southwest SC Thrift 624 16 12-31 12/85 12.62 66
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 558 D 10 03-31 04/86 16.00 50
FFFC FFVA Financial Corp. of VA OTC Southern VA Thrift 518 11 12-31 10/94 16.75 91
CFCP Coastal Fin. Corp. of SC OTC SC Thrift 441 8 09-30 09/90 20.00 55
FSFC First So.east Fin. Corp. of SC OTC Northwest SC Thrift 359 11 06-30 10/93 17.87 73
TSH Teche Holding Company of LA AMEX Southern LA Thrift 346 8 09-30 04/95 13.25 54
FFRV Fid. Fin. Bkshrs. Corp. of VA OTC Southern VA Thrift 322 7 12-31 05/86 12.50 28
ESX Essex Bancorp of VA AMEX VA,NC M.B. 316 14 12-31 / 2.31 2
COOP Cooperative Bk.for Svgs. of NC OTC Eastern NC Thrift 314 16 03-31 08/91 17.25 26
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 10, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
South-East Companies (continued)
________________________________
JEBC Jefferson Bancorp of Gretna LA OTC Southeast LA Thrift 265 6 12-31 08/94 22.50 49
SOPN First SB, SSB, Moore Co. of NC OTC Central NC Thrift 256 5 06-30 01/94 18.75 70
UFRM United FS&LA of Rocky Mount NC OTC Eastern NC M.B. 252 9 12-31 07/80 8.25 25
MERI Meritrust FSB of Thibodaux LA OTC Southeast LA Thrift 227 8 12-31 / 34.00 26
FLAG Flag Financial Corp of GA OTC Western GA M.B. 226 3 12-31 12/86 12.75 26
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 201 1 09-30 03/96 13.50 62
GSFC Green Street Fin. Corp. of NC OTC Southern NC Thrift 188 P 3 09-30 04/96 12.62 54
PLE Pinnacle Bank of AL AMEX Central AL Thrift 186 5 06-30 12/86 16.00 14
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 163 5 09-30 07/95 16.37 32
NFSL Newnan SB, FSB of Newnan GA OTC Western GA M.B. 161 D 8 03-31 03/86 18.25 26
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 160 3 03-31 03/88 21.00 27
FGHC First Georgia Hold. Corp of GA OTC Southeastern GA Thrift 142 6 09-30 02/87 7.00 14
PDB Piedmont Bancorp of NC AMEX Central NC Thrift 125 2 06-30 12/95 13.12 35
FFBS FFBS Bancorp of Columbus MS OTC Columbus MS Thrift 124 3 06-30 06/93 23.00 36
VAFD Valley FSB of Sheffield AL OTC Northern AL Thrift 119 4 09-30 10/87 32.00 12
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 118 3 09-30 08/94 16.00 19
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 116 2 12-31 04/96 16.87 31
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 111 D 4 06-30 10/95 13.25 19
GSLC Guaranty Svgs & Loan FA of VA OTC Charltsvl VA M.B. 103 3 06-30 / 8.50 8
TWIN Twin City Bancorp of TN OTC Northeast TN Thrift 102 3 12-31 01/95 16.00 14
KSAV KS Bancorp of Kenly NC OTC Central NC Thrift 90 3 12-31 12/93 18.00 12
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 89 2 09-30 02/95 12.00 10
CZF Citisave Fin. Corp. of LA AMEX Baton Rouge LA Thrift 80 5 12-31 07/95 15.75 15
CCFH CCF Holding Company of GA OTC Atlanta GA Thrift 79 3 09-30 07/95 11.50 13
SSB Scotland Bancorp of NC AMEX Thrift 70 1 09-30 04/96 12.12 22
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 44 1 06-30 07/94 16.50 12
South-West Companies
____________________
CBSA Coastal Bancorp of Houston TX OTC Houston TX M.B. 2,807 40 12-31 / 18.62 92
FBHC Fort Bend Holding Corp. of TX OTC Eastcentral TX M.B. 242 D 4 03-31 06/93 17.75 15
JXVL Jacksonville Bancorp of TX OTC East Central TX Thrift 213 6 09-30 04/96 10.12 27
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 10, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
South-West Companies (continued)
________________________________
LBFI L&B Financial of S. Springs TX OTC Northeast TX Thrift 143 5 06-30 09/94 16.50 26
LOAN Horizon Bancorp, Inc of TX (3) OTC Austin TX R.E. 127 D 7 04-30 / 10.50 15
FSBC First SB, FSB of Clovis NM OTC Eastern NM Thrift 115 3 12-31 08/86 5.50 4
ETFS East Texas Fin. Serv. of TX OTC Northeast TX Thrift 115 2 09-30 01/95 14.75 18
GUPB GFSB Bancorp of Gallup NM OTC Northwest NM Thrift 70 1 06-30 06/95 14.00 13
Western Companies (Excl CA)
___________________________
FFBA First Colorado Bancorp of Co OTC Denver CO Thrift 1,493 25 12-31 01/96 13.25 269
WSTR WesterFed Fin. Corp. of MT OTC MT Thrift 588 18 06-30 01/94 14.37 63
GBCI Glacier Bancorp of MT OTC Western MT Div. 398 13 06-30 03/84 21.75 73
SFBM Security Bancorp of MT OTC Southcentral MT Thrift 360 16 06-30 11/86 20.50 30
UBMT United SB, FA of MT OTC Central MT Thrift 105 4 12-31 09/86 18.25 22
TRIC Tri-County Bancorp of WY OTC Southeastern WY Thrift 73 2 12-31 09/93 18.50 12
MORG Morgan Financial Corp. of CO OTC Northeast CO Thrift 72 1 06-30 01/93 12.25 10
CRZY Crazy Woman Creek Bncorp of WY OTC Northeast WY Thrift 47 1 09-30 03/96 10.37 11
Other Areas
___________
NOTES: (1) Or most recent date available (M=March, S=September, D=December, J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage Banker, R.E.=Real Estate Developer,
Div.=Diversified, and Ret.=Retail Banking.
(3) FDIC savings bank.
Source: Corporate offering circulars, SNL Securities Quarterly Thrift Report, and financial reports of publicly
Traded Thrifts.
Date of Last Update: 06/10/96
</TABLE>
<PAGE>
Exhibit III-2
Financial Analysis of Illinois Institution
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-2
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of March 31, 1996
Balance Sheet as a Percent of Assets
________________________________________________________________________________________
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Investments Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
___________ ______ ______ ________ ________ _______ ________ ________ _______ __________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Home Federal of Elgin
_____________________
March 31, 1996 10.7 86.1 0.1 86.2 0.0 0.0 12.1 0.0 12.1 0.0
SAIF-Insured Thrifts 19.5 64.4 13.0 73.3 12.0 0.1 13.0 0.2 12.8 0.1
State of IL 19.8 65.5 11.5 73.9 10.6 0.1 13.9 0.1 13.8 0.0
Comparable Group
________________
State of IL
___________
AVND Avondale Fin. Corp. of IL 37.8 39.9 20.0 56.8 30.8 0.0 10.6 0.0 10.6 0.0
BELL Bell Bancorp of Chicago IL(2) 27.7 67.4 3.6 82.8 0.5 0.0 15.9 0.0 15.9 0.0
CSBF CSB Financial Group Inc of IL(3) 41.1 52.2 5.1 68.6 0.0 0.0 30.9 0.0 30.9 0.0
CBCI Calumet Bancorp of Chicago IL 17.0 73.9 3.9 72.9 8.6 0.0 17.0 0.0 17.0 0.0
CBSB Charter Financial Inc. of IL 22.3 69.2 5.6 66.6 10.8 0.0 21.4 0.5 20.9 0.0
CBK Citizens First Fin.Corp. of IL 8.0 82.0 6.4 91.8 0.0 0.0 6.8 0.0 6.8 0.0
DFIN Damen Fin. Corp. of Chicago IL 41.5 37.8 18.4 53.3 21.8 0.0 24.2 0.0 24.2 0.0
FBCI Fidelity Bancorp of Chicago IL 22.3 70.2 5.6 69.6 16.8 0.0 12.0 0.0 12.0 0.0
FNSC Financial Security Corp. of IL(2) 19.8 68.7 5.3 68.9 15.1 0.0 14.4 0.0 14.4 0.0
FFBI First Financial Bancorp of IL 16.8 72.0 8.9 78.7 11.3 0.0 8.9 0.0 8.9 0.0
FMBD First Mutual Bancorp of IL 16.1 80.7 0.0 68.6 4.5 0.0 25.3 0.0 25.3 0.0
FFDP FirstFed Bancshares of IL 19.3 53.0 24.8 73.1 16.2 0.0 9.0 0.4 8.6 0.0
GTPS Great American Bancorp of IL(1) 22.0 65.8 5.0 69.6 0.0 0.0 29.4 0.0 29.4 0.0
HNFC Hinsdale Financial Corp. of IL 7.4 89.4 0.9 69.2 20.1 0.0 8.0 0.2 7.7 0.0
HMCI Homecorp, Inc. of Rockford IL 8.8 77.0 7.1 92.7 0.0 0.0 6.1 0.0 6.1 0.0
JXSB Jcksnville SB,MHC of IL(43.3%) 7.5 78.2 9.6 86.7 0.3 0.0 11.8 0.0 11.8 0.0
KNK Kankakee Bancorp of IL 23.3 63.7 9.9 81.0 8.1 0.0 9.8 0.7 9.1 0.0
LBCI Liberty Bancorp of Chicago IL 7.5 74.4 15.0 75.1 14.0 0.0 9.5 0.0 9.5 0.0
MAFB MAF Bancorp of IL 19.8 75.1 2.0 69.3 21.5 1.3 5.5 0.0 5.5 0.0
NBSI North Bancshares of Chicago IL 39.2 50.9 7.8 65.6 14.6 0.0 17.3 0.0 17.3 0.0
SWBI Southwest Bancshares of IL 19.5 69.5 6.0 72.4 14.2 0.0 12.0 0.0 12.0 0.0
SPBC St. Paul Bancorp, Inc. of IL 9.7 67.3 19.7 79.8 8.6 0.8 9.2 0.0 9.2 0.0
STND Standard Fin. of Chicago IL 11.5 51.7 34.6 73.4 13.0 0.0 12.3 0.0 12.3 0.0
SFSB SuburbFed Fin. Corp. of IL 6.1 44.2 47.4 82.3 9.3 0.0 7.1 0.0 7.1 0.0
WCBI WestCo Bancorp of IL 30.0 68.5 0.0 81.6 0.0 0.0 15.6 0.0 15.6 0.0
<CAPTION>
Balance Sheet Annual Growth Rates Regulatory Capital
____________________________________________________________ _________________________
Cash and Loans Borrows. Net Tng Net
Assets Investments & MBS Deposits &Subdebt Worth Worth Tangible Core Reg.Cap.
______ ___________ ______ ________ ________ ________ _______ ________ ________ ________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Home Federal of Elgin
_____________________
March 31, 1996 -0.07 16.15 -2.08 -1.03 0.00 6.62 6.62 12.04 12.04 23.65
SAIF-Insured Thrifts 11.71 10.06 9.56 6.50 -1.25 6.79 6.37 10.62 10.69 23.24
State of IL 13.20 17.40 10.35 7.06 -5.37 3.05 2.56 9.97 11.00 23.03
Comparable Group
________________
State of IL
___________
AVND Avondale Fin. Corp. of IL 7.42 NM -17.56 -5.17 NM NM NM 10.44 10.44 23.79
BELL Bell Bancorp of Chicago IL(2) 1.62 27.73 -5.82 5.60 -87.44 4.92 4.92 12.69 12.69 28.65
CSBF CSB Financial Group Inc of IL( 24.41 37.74 17.24 -3.29 NM NM NM NM NM NM
CBCI Calumet Bancorp of Chicago IL 1.44 0.45 1.59 4.85 -23.42 5.38 5.38 11.99 11.99 19.94
CBSB Charter Financial Inc. of IL 10.65 8.31 11.32 11.82 -41.35 NM NM NM 16.96 30.16
CBK Citizens First Fin.Corp. of IL 57.30 73.73 56.05 59.97 -100.00 NM NM 6.89 6.89 12.94
DFIN Damen Fin. Corp. of Chicago IL 19.41 NM -17.30 -2.86 10.80 NM NM 16.57 16.57 48.10
FBCI Fidelity Bancorp of Chicago IL 24.33 48.60 18.88 22.31 70.71 -3.14 -3.03 9.31 9.31 19.58
FNSC Financial Security Corp. of IL -0.49 63.71 -9.80 -7.46 31.85 7.89 7.89 11.40 11.09 21.30
FFBI First Financial Bancorp of IL 23.37 -5.62 31.24 10.81 NM -0.43 -0.43 7.87 7.87 15.81
FMBD First Mutual Bancorp of IL 19.34 69.70 15.66 -1.25 47.67 NM NM NM 25.26 50.03
FFDP FirstFed Bancshares of IL 11.94 -4.95 17.19 -0.49 NM -2.90 -2.67 7.65 7.65 18.00
GTPS Great American Bancorp of IL(1 11.92 79.53 1.37 -5.23 -100.00 NM NM 21.65 21.65 36.11
HNFC Hinsdale Financial Corp. of IL 0.91 11.23 0.42 9.63 -23.34 10.46 7.08 7.24 7.47 13.57
HMCI Homecorp, Inc. of Rockford IL 1.87 -19.78 2.10 1.66 NM 6.70 6.70 5.30 5.30 9.39
JXSB Jcksnville SB,MHC of IL(43.3%) 2.96 NM -2.03 0.15 -61.10 38.97 38.99 11.86 11.86 17.52
KNK Kankakee Bancorp of IL 18.28 18.15 17.95 10.45 NM -1.91 -7.04 8.62 8.62 16.60
LBCI Liberty Bancorp of Chicago IL 12.71 27.85 11.92 9.40 61.21 -4.30 -4.28 7.73 7.73 15.73
MAFB MAF Bancorp of IL 14.57 -12.53 25.12 4.51 63.00 8.08 8.08 5.42 5.42 11.39
NBSI North Bancshares of Chicago IL 4.52 6.36 2.60 2.96 29.08 -6.02 -6.02 15.38 15.38 44.11
SWBI Southwest Bancshares of IL -0.65 -2.43 -0.65 -1.38 25.16 -17.03 -17.03 8.25 8.25 16.98
SPBC St. Paul Bancorp, Inc. of IL 0.86 23.01 -1.04 3.29 -19.63 7.17 7.25 9.00 9.00 17.52
STND Standard Fin. of Chicago IL 21.22 -21.10 31.32 10.59 NM -4.10 -4.07 9.56 9.56 24.08
SFSB SuburbFed Fin. Corp. of IL 10.43 1.59 11.49 15.15 -19.36 9.68 10.00 6.29 6.31 14.75
WCBI WestCo Bancorp of IL 4.49 8.16 3.13 4.62 NM 2.12 2.12 12.43 12.43 30.45
</TABLE>
(1) Financial information is for the quarter ending December 31, 1995.
(2) Excluded from averages due to announced or pending acquisition.
(3) Growth rates have been annualized from available financial information.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE> <CAPTION>
Exhibit III-2
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended March 31, 1996
Net Interest Income Other Income
____________________________ ___________________
Loss NII Total
Net Provis. After Loan R.E. Other Other
Income Income Expense NII on IEA Provis. Fees Oper. Income Income
______ ______ _______ ______ _______ _______ ____ _____ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Home Federal of Elgin
_____________________
March 31, 1996 0.71 7.41 3.60 3.81 0.05 3.76 0.00 0.01 0.38 0.39
SAIF-Insured Thrifts 0.87 7.35 4.19 3.16 0.10 3.06 0.12 -0.01 0.30 0.42
State of IL 0.76 7.17 4.08 3.09 0.08 3.01 0.08 0.04 0.30 0.42
Comparable Group
________________
State of IL
___________
AVND Avondale Fin. Corp. of IL 0.65 7.60 4.42 3.18 0.31 2.86 0.03 -0.01 0.12 0.14
BELL Bell Bancorp of Chicago IL(2) 0.63 6.88 4.01 2.87 0.19 2.68 0.03 -0.04 0.03 0.01
CSBF CSB Financial Group Inc of IL 0.82 6.64 3.18 3.46 0.22 3.24 0.00 0.00 0.17 0.17
CBCI Calumet Bancorp of Chicago IL 1.21 7.74 4.15 3.59 0.16 3.43 0.06 0.06 0.19 0.31
CBSB Charter Financial Inc. of IL 1.11 7.56 3.89 3.68 0.12 3.55 0.10 -0.01 0.42 0.50
CBK Citizens First Fin.Corp. of IL 0.42 7.18 4.43 2.75 0.06 2.68 0.25 0.00 0.24 0.49
DFIN Damen Fin. Corp. of Chicago IL 0.81 7.12 4.53 2.59 0.02 2.57 0.04 0.00 0.07 0.12
FBCI Fidelity Bancorp of Chicago IL 0.77 7.30 4.12 3.19 0.04 3.14 0.00 0.00 0.25 0.25
FNSC Financial Security Corp. of IL(2) 0.77 7.68 4.54 3.14 0.00 3.14 0.00 -0.22 0.35 0.13
FFBI First Financial Bancorp of IL 0.69 6.97 3.83 3.14 0.09 3.05 0.23 0.00 0.29 0.52
FMBD First Mutual Bancorp of IL 0.99 7.09 3.60 3.50 0.01 3.49 0.04 -0.01 0.25 0.28
FFDP FirstFed Bancshares of IL 0.63 7.12 4.84 2.28 0.12 2.16 0.09 0.00 0.14 0.23
GTPS Great American Bancorp of IL(1) 0.68 7.15 2.69 4.46 0.13 4.33 0.00 0.03 0.40 0.43
HNFC Hinsdale Financial Corp. of IL 0.62 6.79 4.41 2.38 0.02 2.36 0.06 0.11 1.28 1.46
HMCI Homecorp, Inc. of Rockford IL 0.37 7.24 4.52 2.72 0.11 2.61 0.45 0.07 0.04 0.55
JXSB Jcksnville SB,MHC of IL(43.3%) 0.43 7.38 4.18 3.20 0.04 3.16 0.04 0.00 0.33 0.37
KNK Kankakee Bancorp of IL 0.50 7.20 4.12 3.08 0.04 3.05 0.04 -0.01 0.29 0.33
LBCI Liberty Bancorp of Chicago IL 0.56 6.96 4.44 2.52 0.00 2.52 0.02 0.00 0.12 0.14
MAFB MAF Bancorp of IL 0.88 7.13 4.70 2.42 0.03 2.39 0.13 0.38 0.46 0.96
NBSI North Bancshares of Chicago IL 0.57 6.98 3.85 3.13 0.03 3.10 0.00 0.00 0.14 0.14
SWBI Southwest Bancshares of IL 1.19 7.56 4.14 3.41 0.01 3.41 0.04 0.16 0.15 0.35
SPBC St. Paul Bancorp, Inc. of IL 0.88 6.86 4.01 2.85 0.04 2.81 0.04 0.03 0.71 0.77
STND Standard Fin. of Chicago IL 0.87 7.00 3.91 3.09 0.12 2.98 0.00 0.00 0.23 0.23
SFSB SuburbFed Fin. Corp. of IL 0.51 6.93 4.05 2.88 0.03 2.85 0.20 0.00 0.53 0.73
WCBI WestCo Bancorp of IL 1.32 7.49 3.91 3.57 0.00 3.57 0.07 0.00 0.15 0.22
<CAPTION>
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
________________ ______________ _________________________
G&A Goodwill Net Extrao. Yield Cost Yld-Cost
Expense Amort. Gains Items On Assets Of Funds Spread
_______ _______ _______ _______ _________ ________ ______
<S> <C> <C> <C> <C> <C> <C> <C>
Home Federal of Elgin
_____________________
March 31, 1996 2.95 0.00 0.00 0.00 7.95 4.23 3.72
SAIF-Insured Thrifts 2.22 0.02 0.09 0.00 7.58 4.85 2.73
State of IL 2.35 0.01 0.07 0.00 7.48 4.84 2.65
Comparable Group
________________
State of IL
___________
AVND Avondale Fin. Corp. of IL 2.26 0.00 0.29 0.00 7.78 5.16 2.62
BELL Bell Bancorp of Chicago IL(2) 1.68 0.00 0.03 0.00 6.97 4.80 2.17
CSBF CSB Financial Group Inc of IL 2.12 0.00 0.00 0.00 6.78 4.48 2.30
CBCI Calumet Bancorp of Chicago IL 1.98 0.00 0.01 0.00 8.14 5.08 3.07
CBSB Charter Financial Inc. of IL 2.17 0.05 0.00 0.00 7.79 4.70 3.09
CBK Citizens First Fin.Corp. of IL 2.60 0.00 0.13 0.00 8.89 5.72 3.17
DFIN Damen Fin. Corp. of Chicago IL 1.82 0.00 0.02 0.00 7.30 5.49 1.81
FBCI Fidelity Bancorp of Chicago IL 2.21 0.02 0.07 0.00 7.46 4.88 2.58
FNSC Financial Security Corp. of IL(2) 2.33 0.00 0.09 0.00 8.19 5.35 2.84
FFBI First Financial Bancorp of IL 3.13 0.00 -0.05 0.00 7.13 4.33 2.80
FMBD First Mutual Bancorp of IL 2.28 0.00 0.06 0.00 7.35 4.85 2.50
FFDP FirstFed Bancshares of IL 1.74 0.03 0.36 0.00 7.34 5.48 1.86
GTPS Great American Bancorp of IL(1) 3.63 0.00 0.01 0.00 7.76 3.58 4.18
HNFC Hinsdale Financial Corp. of IL 2.88 0.01 0.04 0.00 6.95 4.90 2.05
HMCI Homecorp, Inc. of Rockford IL 2.74 0.00 0.18 0.00 7.69 4.86 2.83
JXSB Jcksnville SB,MHC of IL(43.3%) 2.96 0.00 0.12 0.00 7.76 4.77 2.99
KNK Kankakee Bancorp of IL 2.62 0.04 0.01 0.00 7.44 4.68 2.76
LBCI Liberty Bancorp of Chicago IL 1.75 0.00 0.00 0.00 7.19 5.04 2.15
MAFB MAF Bancorp of IL 1.89 0.00 0.00 -0.03 7.36 5.11 2.25
NBSI North Bancshares of Chicago IL 2.47 0.00 0.07 0.00 7.11 4.93 2.18
SWBI Southwest Bancshares of IL 2.02 0.00 0.01 0.00 7.92 4.87 3.05
SPBC St. Paul Bancorp, Inc. of IL 2.22 0.00 0.03 0.00 7.09 4.49 2.60
STND Standard Fin. of Chicago IL 1.96 0.00 0.14 0.00 7.17 4.61 2.55
SFSB SuburbFed Fin. Corp. of IL 2.87 0.02 0.11 0.00 7.09 4.42 2.67
WCBI WestCo Bancorp of IL 1.75 0.00 0.01 0.00 7.59 4.79 2.81
<CAPTION>
MEMO: MEMO:
Assets/ Effective
FTE Emp. Tax Rate
________ ________
<S> <C> <C>
Home Federal of Elgin
_____________________
March 31, 1996 2,434 40.77
SAIF-Insured Thrifts 4,045 36.02
State of IL 3,642 35.33
Comparable Group
________________
State of IL
___________
AVND Avondale Fin. Corp. of IL 4,998 37.58
BELL Bell Bancorp of Chicago IL(2) 5,752 40.78
CSBF CSB Financial Group Inc of IL 4,579 36.28
CBCI Calumet Bancorp of Chicago IL 3,694 31.70
CBSB Charter Financial Inc. of IL 3,539 39.47
CBK Citizens First Fin.Corp. of IL 2,524 39.33
DFIN Damen Fin. Corp. of Chicago IL 7,131 5.00
FBCI Fidelity Bancorp of Chicago IL 4,287 39.89
FNSC Financial Security Corp. of IL(2) 4,091 25.22
FFBI First Financial Bancorp of IL 2,272 NM
FMBD First Mutual Bancorp of IL 2,594 36.13
FFDP FirstFed Bancshares of IL 5,474 35.45
GTPS Great American Bancorp of IL(1) 2,140 40.31
HNFC Hinsdale Financial Corp. of IL 2,186 42.24
HMCI Homecorp, Inc. of Rockford IL 1,931 38.73
JXSB Jcksnville SB,MHC of IL(43.3%) 1,948 37.34
KNK Kankakee Bancorp of IL 3,052 31.25
LBCI Liberty Bancorp of Chicago IL 4,012 37.82
MAFB MAF Bancorp of IL 3,640 38.81
NBSI North Bancshares of Chicago IL 3,573 32.58
SWBI Southwest Bancshares of IL 3,604 31.73
SPBC St. Paul Bancorp, Inc. of IL 3,843 36.53
STND Standard Fin. of Chicago IL 4,662 36.36
SFSB SuburbFed Fin. Corp. of IL 2,551 37.01
WCBI WestCo Bancorp of IL 5,523 35.69
</TABLE>
(1) Financial information is for the quarter ending December 31, 1995.
(2) Excluded from averages due to announced or pending acquisition.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The
information provided in this table has been obtained from sources
we believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-2
Market Pricing Comparatives
Prices As of June 7, 1996
Per Share Data
Market _______________
Capitalization Pricing Ratios(3)
_______________ Book _______________________________________
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
_______ _______ _______ _______ _______ _______ _______ _______ ________
Financial Institution ($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
_____________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 17.27 118.72 1.26 16.67 14.25 104.71 13.08 107.87 15.15
State of IL 17.43 69.93 1.17 18.45 14.74 93.81 12.79 94.61 16.23
Comparable Group
________________
State of IL
___________
AVND Avondale Fin. Corp. of IL 13.25 53.20 0.93 15.35 14.25 86.32 9.18 86.32 20.38
BELL Bell Bancorp of Chicago IL(7) 37.37 344.18 1.31 33.38 NM 111.95 17.76 111.95 NM
CSBF CSB Financial Group Inc of IL 9.00 9.32 0.32 12.30 NM 73.17 22.60 73.17 NM
CBCI Calumet Bancorp of Chicago IL 28.00 74.70 2.28 31.99 12.28 87.53 14.87 87.53 12.33
CBSB Charter Financial Inc. of IL 11.50 57.20 0.65 12.95 17.69 88.80 19.01 91.20 17.69
CBK Citizens First Fin.Corp. of IL 10.00 28.18 0.56 13.95 17.86 71.68 11.16 71.68 16.39
DFIN Damen Fin. Corp. of Chicago IL 11.62 46.10 0.44 14.34 NM 81.03 19.59 81.03 NM
FBCI Fidelity Bancorp of Chicago IL 16.62 51.27 0.98 16.91 16.96 98.29 11.84 98.64 18.07
FNSC Financial Security Corp. of IL(7) 25.37 38.66 1.41 25.83 17.99 98.22 14.11 98.22 19.37
FFBI First Financial Bancorp of IL 15.50 7.32 1.12 16.66 13.84 93.04 8.26 93.04 13.25
FMBD First Mutual Bancorp of IL 12.75 55.49 0.61 16.56 20.90 76.99 19.45 76.99 21.61
FFDP FirstFed Bancshares of IL 16.12 54.60 1.10 16.62 14.65 96.99 8.75 101.58 23.36
GTPS Great American Bancorp of IL 13.75 25.44 0.41 18.72 NM 73.45 21.61 73.45 NM
HNFC Hinsdale Financial Corp. of IL 23.50 63.22 1.58 20.20 14.87 116.34 9.27 120.02 15.46
HMCI Homecorp, Inc. of Rockford IL 17.50 19.71 1.12 18.41 15.63 95.06 5.77 95.06 23.03
JXSB Jcksnville SB,MHC of IL(43.3%) 14.00 7.81 0.48 13.41 NM 104.40 12.31 104.40 NM
KNK Kankakee Bancorp of IL 19.37 27.87 1.15 24.73 16.84 78.33 7.67 84.44 17.14
LBCI Liberty Bancorp of Chicago IL 22.75 56.58 1.45 25.66 15.69 88.66 8.45 88.90 15.69
MAFB MAF Bancorp of IL 24.50 128.48 3.11 20.91 7.88 117.17 6.49 117.17 7.66
NBSI North Bancshares of Chicago IL 15.63 18.32 0.54 16.92 NM 92.38 16.02 92.38 NM
SWBI Southwest Bancshares of IL 27.25 50.98 2.27 22.42 12.00 121.54 14.59 121.54 12.06
SPBC St. Paul Bancorp, Inc. of IL 23.50 435.93 1.95 20.64 12.05 113.86 10.52 114.24 12.37
STND Standard Fin. of Chicago IL 15.25 255.67 1.03 16.05 14.81 95.02 11.69 95.07 16.40
SFSB SuburbFed Fin. Corp. of IL 17.62 22.22 1.41 20.52 12.50 85.87 6.13 86.37 14.56
WCBI WestCo Bancorp of IL 22.00 58.92 1.50 18.07 14.67 121.75 19.05 121.75 14.77
<CAPTION>
Dividends(4) Financial Characteristics(6)
_______________________ _______________________________________________________
Amount/ Payout Total Equity/ NPAs/ Reported Core
________________ ____________
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
_______ ______ _______ ______ _______ _______ _______ _______ _______ _______
Financial Institution ($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
_____________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.35 1.97 25.39 1,305 13.24 0.95 0.87 8.09 0.81 7.30
State of IL 0.25 1.36 20.73 657 14.29 0.58 0.77 6.36 0.73 5.96
Comparable Group
________________
State of IL
___________
AVND Avondale Fin. Corp. of IL 0.00 0.00 0.00 580 10.63 0.85 0.65 6.66 0.45 4.65
BELL Bell Bancorp of Chicago IL(7) 0.45 1.20 34.35 1,938 15.86 1.40 0.63 4.03 0.61 3.87
CSBF CSB Financial Group Inc of IL 0.00 0.00 0.00 41 30.89 0.78 0.82 3.62 0.82 3.62
CBCI Calumet Bancorp of Chicago IL 0.00 0.00 0.00 502 16.99 1.23 1.21 7.25 1.20 7.22
CBSB Charter Financial Inc. of IL 0.24 2.09 36.92 301 21.41 0.49 1.12 6.95 1.12 6.95
CBK Citizens First Fin.Corp. of IL 0.00 0.00 0.00 252 15.57 NA 0.63 4.01 0.68 4.37
DFIN Damen Fin. Corp. of Chicago IL 0.00 0.00 0.00 235 24.17 0.14 0.81 5.02 0.79 4.91
FBCI Fidelity Bancorp of Chicago IL 0.24 1.44 24.49 433 12.05 0.53 0.77 5.66 0.73 5.31
FNSC Financial Security Corp. of IL(7) 0.00 0.00 0.00 274 14.36 2.77 0.77 5.66 0.71 5.26
FFBI First Financial Bancorp of IL 0.00 0.00 0.00 89 8.87 0.40 0.69 6.63 0.72 6.93
FMBD First Mutual Bancorp of IL 0.28 2.20 45.90 285 25.26 0.09 0.98 4.24 0.95 4.10
FFDP FirstFed Bancshares of IL 0.40 2.48 36.36 624 9.02 0.14 0.63 6.51 0.39 4.08
GTPS Great American Bancorp of IL 0.00 0.00 0.00 118 29.42 0.45 0.68 2.82 0.68 2.82
HNFC Hinsdale Financial Corp. of IL 0.00 0.00 0.00 682 7.97 0.13 0.62 8.20 0.59 7.88
HMCI Homecorp, Inc. of Rockford IL 0.00 0.00 0.00 342 6.07 3.24 0.37 6.28 0.25 4.26
JXSB Jcksnville SB,MHC of IL(43.3%) 0.40 2.86 NM 142 11.79 0.52 0.43 3.82 0.35 3.10
KNK Kankakee Bancorp of IL 0.40 2.07 34.78 363 9.80 0.59 0.50 4.56 0.49 4.48
LBCI Liberty Bancorp of Chicago IL 0.60 2.64 41.38 670 9.53 0.12 0.56 5.51 0.56 5.51
MAFB MAF Bancorp of IL 0.32 1.31 10.29 1,980 5.54 0.46 0.88 15.21 0.90 15.65
NBSI North Bancshares of Chicago IL 0.40 2.56 74.07 114 17.34 NA 0.57 3.03 0.52 2.75
SWBI Southwest Bancshares of IL 1.08 3.96 47.58 350 12.00 0.25 1.19 8.94 1.19 8.90
SPBC St. Paul Bancorp, Inc. of IL 0.40 1.70 20.51 4,143 9.24 0.74 0.88 9.69 0.86 9.44
STND Standard Fin. of Chicago IL 0.32 2.10 31.07 2,187 12.31 0.14 0.87 6.21 0.79 5.61
SFSB SuburbFed Fin. Corp. of IL 0.32 1.82 22.70 362 7.14 0.27 0.51 7.04 0.44 6.04
WCBI WestCo Bancorp of IL 0.45 2.05 30.00 309 15.65 0.58 1.32 8.47 1.31 8.41
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month earnings and average equity and assets balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, Inc.
<PAGE>
EXHIBIT III-3
Financial Analysis of Peer Group Candidates
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-3
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of March 31, 1996
Balance Sheet as a Percent of Assets
________________________________________________________________________________________
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Investments Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
___________ ______ ______ ________ ________ _______ ________ ________ _______ __________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Home Federal of Elgin
_____________________
March 31, 1996 10.7 86.1 0.1 86.2 0.0 0.0 12.1 0.0 12.1 0.0
SAIF-Insured Thrifts 19.5 64.4 13.0 73.3 12.0 0.1 13.0 0.2 12.8 0.1
Comparable Group Average 21.0 67.8 9.3 72.1 9.5 0.0 17.3 0.1 17.3 0.0
Mid-West Companies 21.0 67.8 9.3 72.1 9.5 0.0 17.3 0.1 17.3 0.0
Comparable Group
________________
Mid-West Companies
__________________
EFBI Enterprise Fed. Bancorp of OH(1) 24.4 58.6 15.4 64.2 19.3 0.0 15.6 0.0 15.5 0.0
FFYF FFY Financial Corp. of OH 20.6 74.2 2.6 80.1 0.0 0.0 18.3 0.0 18.3 0.0
FFOH Fidelity Financial of OH 12.1 75.0 11.1 73.1 5.8 0.0 20.4 0.0 20.4 0.0
FFEC First Fed. Bancshares of WI 23.0 72.0 2.3 55.8 28.8 0.0 14.3 0.6 13.7 0.0
HMNF HMN Financial, Inc. of MN 9.0 56.8 32.7 68.0 13.4 0.0 16.8 0.0 16.8 0.0
HBFW Home Bancorp of Fort Wayne IN 24.7 73.7 0.0 82.5 0.0 0.0 16.4 0.0 16.4 0.0
LARK Landmark Bancshares of KS 28.6 55.3 14.2 73.6 8.2 0.0 17.2 0.0 17.2 0.0
MFBC MFB Corp. of Mishawaka IN 30.5 65.3 2.7 74.7 4.7 0.0 19.3 0.0 19.3 0.0
MFFC Milton Fed. Fin. Corp. of OH 24.0 61.9 11.7 73.0 6.5 0.0 20.0 0.0 20.0 0.0
WEFC Wells Fin. Corp. of Wells MN 13.1 84.9 0.0 75.8 8.2 0.0 14.9 0.0 14.9 0.0
<CAPTION>
Balance Sheet Annual Growth Rates Regulatory Capital
____________________________________________________________ _________________________
Cash and Loans Borrows. Net Tng Net
Assets Investments & MBS Deposits &Subdebt Worth Worth Tangible Core Reg.Cap.
______ ___________ ______ ________ ________ ________ _______ ________ ________ ________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Home Federal of Elgin
_____________________
March 31, 1996 -0.07 16.15 -2.08 -1.03 0.00 6.62 6.62 12.04 12.04 23.65
SAIF-Insured Thrifts 11.71 10.06 9.56 6.50 -1.25 6.79 6.37 10.62 10.69 23.24
Comparable Group Average 10.83 20.40 9.89 6.60 30.75 -5.17 -5.67 13.22 13.22 29.39
Mid-West Companies 10.83 20.40 9.89 6.60 30.75 -5.17 -5.67 13.22 13.22 29.39
Comparable Group
________________
Mid-West Companies
__________________
EFBI Enterprise Fed. Bancorp of OH 31.88 71.72 22.49 13.82 NM -17.45 -17.42 NM NM NM
FFYF FFY Financial Corp. of OH -0.38 -22.46 8.20 0.13 NM -3.06 -3.06 10.43 10.43 19.23
FFOH Fidelity Financial of OH 14.30 NM 5.69 5.27 1.09 NM NM 16.65 16.65 32.47
FFEC First Fed. Bancshares of WI 31.58 83.48 19.80 24.73 80.88 -1.14 -5.16 9.58 9.58 20.81
HMNF HMN Financial, Inc. of MN 6.75 -20.19 11.25 3.11 28.75 0.68 0.68 14.22 14.22 35.97
HBFW Home Bancorp of Fort Wayne IN 2.16 -20.22 12.92 3.10 NM -2.28 -2.28 12.84 12.84 30.01
LARK Landmark Bancshares of KS -3.76 -25.86 9.62 -0.82 -16.96 -8.11 -8.11 14.18 14.18 35.05
MFBC MFB Corp. of Mishawaka IN 8.04 16.76 4.51 3.63 NM 0.28 0.28 15.40 15.40 37.61
MFFC Milton Fed. Fin. Corp. of OH 13.95 53.53 5.52 12.17 NM -10.28 -10.28 15.11 15.11 33.82
WEFC Wells Fin. Corp. of Wells MN 3.75 46.86 -1.07 0.83 60.00 NM NM 10.60 10.60 19.50
</TABLE>
(1) Financial information is for the quarter ending December 31, 1995.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The information
provided in this table has been obtained from sources we believe are reliable,
but we cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-3
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended March 31, 1996
<TABLE>
<CAPTION>
Net Interest Income Other Income
____________________________ ___________________
Loss NII Total
Net Provis. After Loan R.E. Other Other
Income Income Expense NII on IEA Provis. Fees Oper. Income Income
______ ______ _______ ______ _______ _______ ____ _____ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Home Federal of Elgin
_____________________
March 31, 1996 0.71 7.41 3.60 3.81 0.05 3.76 0.00 0.01 0.38 0.39
SAIF-Insured Thrifts 0.87 7.35 4.19 3.16 0.10 3.06 0.12 -0.01 0.30 0.42
Comparable Group Average 0.96 7.29 4.17 3.13 0.04 3.09 0.04 0.00 0.16 0.20
Mid-West Companies 0.96 7.29 4.17 3.13 0.04 3.09 0.04 0.00 0.16 0.20
Comparable Group
________________
Mid-West Companies
__________________
EFBI Enterprise Fed. Bancorp of OH(1) 1.12 7.19 4.06 3.13 0.00 3.13 0.00 0.02 0.06 0.08
FFYF FFY Financial Corp. of OH 1.21 7.56 3.84 3.72 0.06 3.66 0.00 0.00 0.18 0.18
FFOH Fidelity Financial of OH 0.82 7.57 4.55 3.02 0.03 2.98 0.00 0.00 0.16 0.16
FFEC First Fed. Bancshares of WI 0.96 7.44 4.14 3.30 0.02 3.28 0.12 0.00 0.23 0.35
HMNF HMN Financial, Inc. of MN 1.10 7.35 4.39 2.96 0.06 2.90 0.00 0.00 0.12 0.12
HBFW Home Bancorp of Fort Wayne IN 0.85 7.23 4.38 2.85 0.02 2.84 0.00 0.00 0.07 0.07
LARK Landmark Bancshares of KS 0.91 7.13 4.40 2.73 0.03 2.70 0.08 0.00 0.15 0.24
MFBC MFB Corp. of Mishawaka IN 0.69 6.83 3.88 2.94 0.02 2.93 0.00 0.00 0.18 0.18
MFFC Milton Fed. Fin. Corp. of OH 1.13 7.41 3.77 3.64 0.05 3.59 0.01 0.00 0.13 0.14
WEFC Wells Fin. Corp. of Wells MN 0.81 7.20 4.22 2.97 0.09 2.88 0.15 0.00 0.30 0.45
<CAPTION>
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
________________ ______________ _________________________
MEMO: MEMO:
G&A Goodwill Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Expense Amort. Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
_______ _______ _______ _______ _________ ________ ______ __________ ________
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Home Federal of Elgin
_____________________
March 31, 1996 2.95 0.00 0.00 0.00 7.95 4.23 3.72 2,434 40.77
SAIF-Insured Thrifts 2.22 0.02 0.09 0.00 7.58 4.85 2.73 4,045 36.02
Comparable Group Average 1.87 0.01 0.10 0.00 7.44 5.15 2.30 4,376 37.20
Mid-West Companies 1.87 0.01 0.10 0.00 7.44 5.15 2.30 4,376 37.20
Comparable Group
________________
Mid-West Companies
__________________
EFBI Enterprise Fed. Bancorp of OH(1) 2.00 0.02 0.52 0.00 7.31 5.16 2.15 6,490 34.63
FFYF FFY Financial Corp. of OH 1.99 0.00 -0.06 0.00 7.77 4.80 2.96 3,275 32.51
FFOH Fidelity Financial of OH 1.81 0.00 0.00 0.00 7.76 5.39 2.37 4,796 38.10
FFEC First Fed. Bancshares of WI 2.14 0.04 0.04 0.00 7.63 5.03 2.59 3,448 37.15
HMNF HMN Financial, Inc. of MN 1.44 0.00 0.18 0.00 7.47 5.40 2.07 5,891 37.70
HBFW Home Bancorp of Fort Wayne IN 1.49 0.00 0.00 0.00 7.36 5.34 2.01 4,010 39.92
LARK Landmark Bancshares of KS 1.65 0.00 0.18 0.00 7.26 5.40 1.86 4,298 37.85
MFBC MFB Corp. of Mishawaka IN 1.98 0.00 0.01 0.00 6.94 4.96 1.98 4,100 39.90
MFFC Milton Fed. Fin. Corp. of OH 2.15 0.00 0.12 0.00 7.61 4.94 2.67 3,816 33.75
WEFC Wells Fin. Corp. of Wells MN 2.00 0.00 0.04 0.00 7.32 5.02 2.29 3,633 40.53
</TABLE>
(1) Financial information is for the quarter ending December 31, 1995.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The
information provided in this table has been obtained from sources
we believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-3
Market Pricing Comparatives
Prices As of June 7, 1996
<TABLE>
<CAPTION>
Per Share Data
Market _______________
Capitalization Book Pricing Ratios(3)
_______________ _______________________________________
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
SAIF-Insured Thrifts 17.27 118.72 1.26 16.67 14.25 104.71 13.08 107.87 15.15
Comparable Group Average 14.73 54.08 0.87 16.05 17.44 91.38 15.73 91.88 18.71
Mid-West Companies 14.73 54.08 0.87 16.05 17.44 91.38 15.73 91.88 18.71
Comparable Group
________________
Mid-West Companies
__________________
EFBI Enterprise Fed. Bancorp of OH 14.25 29.71 0.99 15.52 14.39 91.82 14.31 91.99 20.96
FFYF FFY Financial Corp. of OH 23.25 120.74 1.34 20.25 17.35 114.81 21.07 114.81 16.85
FFOH Fidelity Financial of OH 10.00 40.73 0.46 12.47 21.74 80.19 16.33 80.19 21.74
FFEC First Fed. Bancshares of WI 16.00 109.68 0.82 14.04 19.51 113.96 16.31 118.78 20.00
HMNF HMN Financial, Inc. of MN 15.69 81.27 1.13 17.54 13.88 89.45 14.99 89.45 15.53
HBFW Home Bancorp of Fort Wayne IN 14.75 45.64 0.86 16.60 17.15 88.86 14.59 88.86 17.15
LARK Landmark Bancshares of KS 15.25 29.75 0.94 17.05 16.22 89.44 15.38 89.44 18.60
MFBC MFB Corp. of Mishawaka IN 14.00 29.09 0.63 18.67 22.22 74.99 14.48 74.99 22.58
MFFC Milton Fed. Fin. Corp. of OH 12.87 29.61 0.79 14.91 16.29 86.32 17.25 86.32 17.63
WEFC Wells Fin. Corp. of Wells MN 11.25 24.62 0.72 13.40 15.63 83.96 12.55 83.96 16.07
<CAPTION>
Dividends(4) Financial Characteristics(6)
_______________________ _______________________________________________________
Amount/ Payout Total Equity/ NPAs/ Reported Core
________________ _______________
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
_____________________ _______ ______ _______ ______ _______ _______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
SAIF-Insured Thrifts 0.35 1.97 25.39 1,305 13.24 0.95 0.87 8.09 0.81 7.30
Comparable Group Average 0.22 1.40 24.90 332 17.32 0.31 0.96 5.46 0.89 5.10
Mid-West Companies 0.22 1.40 24.90 332 17.32 0.31 0.96 5.46 0.89 5.10
Comparable Group
________________
Mid-West Companies
__________________
EFBI Enterprise Fed. Bancorp of OH 0.00 0.00 0.00 208 15.58 0.01 1.12 5.47 0.77 3.75
FFYF FFY Financial Corp. of OH 0.60 2.58 44.78 573 18.35 0.88 1.21 6.53 1.25 6.73
FFOH Fidelity Financial of OH 0.20 2.00 43.48 249 20.37 0.40 0.82 5.54 0.82 5.54
FFEC First Fed. Bancshares of WI 0.28 1.75 34.15 672 14.32 0.13 0.96 5.83 0.94 5.69
HMNF HMN Financial, Inc. of MN 0.00 0.00 0.00 542 16.76 0.14 1.10 6.35 0.99 5.67
HBFW Home Bancorp of Fort Wayne IN 0.20 1.36 23.26 313 16.42 NA 0.86 5.00 0.86 5.00
LARK Landmark Bancshares of KS 0.40 2.62 42.55 193 17.20 0.37 0.91 5.28 0.79 4.60
MFBC MFB Corp. of Mishawaka IN 0.00 0.00 0.00 201 19.31 0.05 0.69 3.41 0.68 3.36
MFFC Milton Fed. Fin. Corp. of OH 0.48 3.73 60.76 172 19.98 0.40 1.13 4.93 1.05 4.56
WEFC Wells Fin. Corp. of Wells MN 0.00 0.00 0.00 196 14.95 0.39 0.81 6.24 0.79 6.07
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (earnings per share) is based on actual trailing twelve month data
and is not shown on a pro forma basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets;
P/TB = Price to tangible book value; and P/CORE = Price to estimated
core earnings .
(4) Indicated twelve month dividend, based on last quarterly dividend
declared.
(5) Indicated dividend as a percent of trailing twelve month earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been
obtained from sources we believe are reliable, but we cannot
guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, Inc.
<PAGE>
EXHIBIT III-4
Peer Group Market Area Comparative Analysis
<PAGE>
<TABLE>
<CAPTION>
Exhibit III--4
Peer Group Primary Market Area Demographic/Competition Trends
Proj. Per Capita Income Deposit
-------------------
Population Pop. 1990-95 1995-2000 % State Market
-----------------
Institution County 1990 1995 2000 % Change % Change Median Age Amount Average Share(1)
------ ---- ---- ---- -------- -------- ---------- ------ ------- --------
(000) (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calumet Bancorp of Chicago IL Cook 5,105 5,144 5,182 0.8% 0.7% 34.0 17,825 104.6% 0.3%
FFY Financial Corp. of OH Mahoning 265 263 263 -0.6% -0.2% 37.7 12,991 82.7% 13.6%
Fidelity Bancorp of Chicago IL Cook 5,105 5,144 5,182 0.8% 0.7% 34.0 17,825 104.6% 0.2%
First Mutual Bancorp of IL Macon 117 116 116 -0.9% -0.4% 35.7 15,195 89.1% 11.0%
HMN Financial, Inc. of MN Fillmore 21 21 21 0.1% 0.0% 36.8 13,453 63.9% 21.2%
Home Bancorp of Fort Wayne IN Allen 301 309 317 2.7% 2.5% 33.0 17,838 107.0% 6.3%
Landmark Bancshares of KS Ford 27 29 30 5.1% 4.7% 30.7 11,422 80.3% 18.2%
MFB Corp. of Mishawaka IN St. Joseph 247 258 268 4.2% 3.9% 33.6 16,003 96.0% 5.3%
Milton Fed. Fin. Corp. of OH Miami 93 97 101 4.4% 4.0% 35.6 16,756 106.7% 6.8%
Southwest Bancshares of IL Cook 5,105 5,144 5,182 0.8% 0.7% 34.0 17,825 104.6% 0.2%
Wells Fin. Corp. of Wells MN Faribault 17 16 16 -2.7% -1.1% 39.2 14,843 70.5% 21.7%
-- -- -- ----- ----- --- ----- ----- -----
Averages: 1,491 1,504 1,516 1.3% 1.4% 34.9 15,634 91.8% 9.5%
Medians: 247.052 257.533 262.666 0.8% 0.7% 34.0 16,003 96.0% 6.8%
Home Federal of Elgin Kane 317 356 393 12.1% 10.3% 30.9 18,400 107.9% 3.4%
(1) Total institution deposits in headquarters county as percent of total county deposits.
Sources: CACI, Inc; FDIC; OTS.
</TABLE>
<PAGE>
EXHIBIT IV-1
Stock Prices:
As of June 7, 1996
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1
Weekly Thrift Market Line - Part One
Prices As Of June 7, 1996
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHC)
_____________________________________________
SAIF-Insured Thrifts(323) 17.35 5,821 124.5 18.85 14.17 17.36 -0.03 130.52 1.07
NYSE Traded Companies(12) 28.64 46,329 1,317.2 30.63 21.21 28.52 1.09 185.79 3.53
AMEX Traded Companies(17) 13.91 3,282 49.0 14.96 12.33 13.92 0.06 209.32 2.28
NASDAQ Listed OTC Companies(294) 17.05 4,153 75.4 18.55 13.96 17.06 -0.09 122.29 0.90
California Companies(25) 19.30 23,611 605.1 20.82 14.90 19.18 0.65 51.91 3.33
Florida Companies(10) 12.97 5,174 58.9 14.72 10.42 13.10 -1.92 72.21 2.99
Mid-Atlantic Companies(63) 16.69 5,551 99.0 18.25 14.04 16.80 -0.60 113.13 0.53
Mid-West Companies(150) 18.02 3,810 84.7 19.46 14.63 17.98 0.30 151.76 0.59
New England Companies(9) 17.60 3,542 69.6 19.65 14.86 17.64 -0.20 178.39 -1.76
North-West Companies(6) 17.97 11,841 232.4 18.81 13.52 17.83 0.84 77.82 7.12
South-East Companies(45) 16.37 3,530 57.4 18.06 13.49 16.45 -0.15 176.02 2.01
South-West Companies(7) 13.46 1,879 28.1 14.96 11.78 13.56 -1.77 -18.52 -6.26
Western Companies (Excl CA)(8) 16.16 4,158 61.3 16.88 13.47 16.28 -0.57 222.54 5.31
Thrift Strategy(249) 16.25 3,424 58.1 17.76 13.67 16.28 -0.19 100.46 0.30
Mortgage Banker Strategy(39) 21.17 11,484 324.5 22.57 15.98 21.17 0.30 212.41 4.23
Real Estate Strategy(16) 18.55 6,379 123.1 19.56 13.28 18.45 0.30 96.81 4.48
Diversified Strategy(15) 25.52 29,926 697.2 27.44 19.50 25.42 0.68 191.24 3.28
Retail Banking Strategy(4) 11.78 3,261 40.0 13.72 10.10 11.56 1.95 158.19 -6.47
Companies Issuing Dividends(241) 18.72 6,229 142.7 20.36 15.20 18.74 0.00 149.81 1.06
Companies Without Dividends(82) 13.33 4,624 70.9 14.41 11.15 13.30 -0.12 53.34 1.12
Equity/Assets Less Than 6%(29) 16.77 19,811 418.8 18.14 12.81 16.58 0.56 75.45 3.30
Equity/Assets 6-12%(147) 19.39 5,347 133.0 21.09 15.32 19.44 -0.18 153.32 1.76
Equity/Assets Greater Than 12%(147) 15.45 3,490 57.2 16.78 13.30 15.46 -0.01 88.96 -0.22
Converted Last 3 Mths (no MHC)(19) 11.19 3,787 42.9 11.96 10.69 11.22 -0.30 0.00 -7.95
Actively Traded Companies(54) 23.07 17,267 441.0 24.89 18.20 23.03 0.25 156.81 2.73
Market Value Below $20 Million(83) 14.02 981 12.7 15.49 11.94 14.03 0.01 72.83 -1.80
Holding Company Structure(276) 17.80 5,876 131.0 19.33 14.67 17.82 -0.09 123.42 0.66
Assets Over $1 Billion(62) 24.54 19,031 477.2 26.35 18.95 24.61 -0.08 155.09 3.89
Assets $500 Million-$1 Billion(56) 17.40 5,025 77.6 18.72 14.07 17.25 0.65 172.18 2.08
Assets $250-$500 Million(79) 16.09 2,606 38.3 17.71 13.62 16.21 -0.59 98.66 1.10
Assets less than $250 Million(126) 14.41 1,413 19.2 15.76 12.10 14.40 0.00 75.65 -1.09
Goodwill Companies(133) 19.70 9,559 223.9 21.39 15.54 19.70 0.17 153.40 2.84
Non-Goodwill Companies(190) 15.64 3,111 52.4 17.00 13.18 15.66 -0.19 89.04 -0.33
Acquirors of FSLIC Cases(14) 24.99 34,581 980.0 26.64 18.89 25.00 0.53 195.18 -0.56
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHC)
____________________________________________
SAIF-Insured Thrifts(323) 1.29 1.16 16.88 16.43 165.82
NYSE Traded Companies(12) 2.35 1.96 21.40 20.05 355.85
AMEX Traded Companies(17) 0.79 0.75 15.14 14.97 104.13
NASDAQ Listed OTC Companies(294) 1.27 1.14 16.79 16.36 160.97
California Companies(25) 1.03 0.86 18.35 17.86 280.83
Florida Companies(10) 1.23 0.77 12.43 12.14 175.66
Mid-Atlantic Companies(63) 1.42 1.34 16.83 16.15 172.58
Mid-West Companies(150) 1.33 1.17 17.62 17.31 150.71
New England Companies(9) 1.56 1.31 18.76 17.22 254.16
North-West Companies(6) 1.33 1.22 13.54 12.76 177.98
South-East Companies(45) 1.11 1.06 14.72 14.44 122.20
South-West Companies(7) 1.14 1.07 16.25 15.66 213.08
Western Companies (Excl CA)(8) 1.07 1.00 16.40 16.00 113.11
Thrift Strategy(249) 1.11 1.04 16.75 16.38 145.64
Mortgage Banker Strategy(39) 2.00 1.43 17.48 16.54 250.48
Real Estate Strategy(16) 1.64 1.61 16.59 16.29 202.91
Diversified Strategy(15) 2.00 1.97 18.72 18.22 236.99
Retail Banking Strategy(4) 1.13 0.86 13.56 13.05 158.37
Companies Issuing Dividends(241) 1.45 1.30 17.59 17.06 171.49
Companies Without Dividends(82) 0.81 0.74 14.82 14.59 149.17
Equity/Assets Less Than 6%(29) 1.39 1.09 14.29 13.44 291.39
Equity/Assets 6-12%(147) 1.69 1.49 17.54 16.80 213.51
Equity/Assets Greater Than 12%(147) 0.86 0.84 16.75 16.68 93.72
Converted Last 3 Mths (no MHC)(19) 0.47 0.48 14.51 14.51 66.03
Actively Traded Companies(54) 1.99 1.87 18.69 17.91 251.89
Market Value Below $20 Million(83) 1.03 0.80 16.17 16.11 135.68
Holding Company Structure(276) 1.29 1.17 17.43 16.97 165.09
Assets Over $1 Billion(62) 2.04 1.86 20.45 19.08 280.49
Assets $500 Million-$1 Billion(56) 1.34 1.24 16.25 15.78 174.93
Assets $250-$500 Million(79) 1.25 0.99 16.02 15.68 156.65
Assets less than $250 Million(126) 0.90 0.85 15.89 15.86 108.29
Goodwill Companies(133) 1.57 1.40 17.71 16.64 219.37
Non-Goodwill Companies(190) 1.08 0.98 16.28 16.28 126.99
Acquirors of FSLIC Cases(14) 2.19 1.93 18.94 17.75 297.22
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995. Percent change figures are actual year-to-date and
are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based on trailing twelve month common earnings and
average common equity and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk. Parentheses following market averages indicate the
number of institutions included in the respective averages. All figures have been adjusted for stock splits, stock
dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies, and RP Financial, Inc. calculations. The
information provided in this report has been obtained from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 7, 1996
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31, /
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHC)
____________________________________________
BIF-Insured Thrifts(71) 16.53 6,860 120.3 18.01 13.00 16.59 -0.15 98.13 4.18
NYSE Traded Companies(3) 13.87 53,098 702.2 14.19 10.38 13.69 1.64 127.65 12.17
AMEX Traded Companies(4) 14.44 3,115 46.3 16.69 13.16 14.65 -1.24 25.63 -7.42
NASDAQ Listed OTC Companies(64) 16.77 5,524 105.3 18.23 13.08 16.82 -0.13 101.99 4.52
California Companies(2) 11.38 5,155 65.8 11.75 7.88 11.50 -0.84 224.89 11.79
Mid-Atlantic Companies(19) 18.70 10,955 171.0 20.37 15.04 18.78 -0.57 74.94 0.89
Mid-West Companies(1) 7.50 2,562 19.2 8.50 7.50 8.13 -7.75 0.00 0.00
New England Companies(44) 16.05 3,591 53.4 17.50 12.51 16.10 0.23 108.79 5.04
North-West Companies(4) 17.72 22,775 606.8 19.28 13.79 17.52 0.34 41.95 3.30
South-West Companies(1) 10.50 1,387 14.6 11.50 7.50 10.50 0.00 0.00 16.67
Thrift Strategy(44) 16.41 3,506 53.4 17.85 13.14 16.52 -0.35 95.71 5.11
Mortgage Banker Strategy(11) 18.16 15,785 237.1 19.48 14.13 18.11 0.19 138.41 4.63
Real Estate Strategy(7) 16.15 3,715 70.2 17.06 11.26 16.13 0.79 141.15 11.41
Diversified Strategy(7) 16.04 21,376 486.6 18.14 12.08 15.86 0.66 38.52 -5.71
Retail Banking Strategy(2) 14.38 1,330 17.8 17.13 13.09 14.75 -2.71 14.82 -7.47
Companies Issuing Dividends(50) 18.61 5,716 123.4 20.14 14.55 18.61 0.36 102.46 5.27
Companies Without Dividends(21) 11.95 9,376 113.4 13.30 9.59 12.14 -1.27 77.53 1.36
Equity/Assets Less than 6%(8) 12.53 20,089 250.1 14.06 9.34 12.55 0.45 70.07 -3.38
Equity/Assets 6-12%(51) 17.10 5,331 108.8 18.69 13.44 17.13 0.05 104.21 5.30
Equity/Assets Greater Than 12%(12) 16.68 4,782 83.5 17.57 13.52 16.85 -1.49 -5.06 4.27
Converted Last 3 Mths (no MHC)(3) 9.33 3,235 30.8 10.21 9.27 9.58 -2.97 0.00 0.00
Actively Traded Companies(30) 17.66 11,015 209.4 18.89 13.84 17.59 0.30 119.54 4.41
Market Value Below $20 Million(12) 13.34 1,114 13.0 14.17 10.32 13.29 0.12 81.02 8.08
Holding Company Structure(45) 17.08 6,768 135.9 18.52 13.56 17.13 -0.28 102.67 5.76
Assets Over $1 Billion(17) 22.52 19,874 398.9 23.75 16.55 22.35 0.94 97.68 6.55
Assets $500 Million-$1 Billion(17) 18.75 4,384 73.2 20.56 15.52 18.94 -1.04 122.30 -1.81
Assets $250-$500 Million(22) 13.18 3,576 38.8 15.04 10.78 13.39 -0.76 91.96 3.52
Assets less than $250 Million(15) 13.20 1,567 16.0 14.05 10.13 13.12 0.55 77.12 9.52
Goodwill Companies(35) 18.02 9,700 185.9 19.80 14.42 18.01 0.18 103.09 3.00
Non-Goodwill Companies(36) 15.14 4,191 58.7 16.32 11.66 15.25 -0.46 90.41 5.40
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHC)
___________________________________________
BIF-Insured Thrifts(71) 1.41 1.33 15.30 14.82 178.37
NYSE Traded Companies(3) 0.52 0.64 12.58 12.51 232.41
AMEX Traded Companies(4) 1.14 0.71 14.49 13.78 150.26
NASDAQ Listed OTC Companies(64) 1.46 1.40 15.45 14.97 178.44
California Companies(2) 0.64 0.55 11.42 11.41 182.68
Mid-Atlantic Companies(19) 1.50 1.47 16.97 16.80 190.76
Mid-West Companies(1) 0.29 0.29 11.06 11.06 19.67
New England Companies(44) 1.45 1.34 15.14 14.47 181.84
North-West Companies(4) 1.43 1.42 14.17 13.64 148.84
South-West Companies(1) 1.24 0.97 7.91 7.64 91.48
Thrift Strategy(44) 1.37 1.29 15.78 15.33 170.06
Mortgage Banker Strategy(11) 1.55 1.54 16.29 15.55 229.21
Real Estate Strategy(7) 1.46 1.34 12.71 12.67 124.13
Diversified Strategy(7) 1.86 1.69 12.78 12.04 186.36
Retail Banking Strategy(2) 0.19 0.20 16.33 15.86 258.61
Companies Issuing Dividends(50) 1.71 1.63 16.52 15.89 194.35
Companies Without Dividends(21) 0.77 0.69 12.61 12.46 143.20
Equity/Assets Less Than 6%(8) 0.82 0.67 10.85 10.76 200.47
Equity/Assets 6-12%(51) 1.61 1.52 15.44 14.80 193.50
Equity/Assets Greater Than 12%(12) 0.93 0.94 17.77 17.77 91.78
Converted Last 3 Mths (no MHC)(3) 0.34 0.36 13.18 13.18 43.07
Actively Traded Companies(30) 1.58 1.56 16.07 15.28 197.35
Market Value Below $20 Million(12) 1.11 1.00 14.68 14.17 162.71
Holding Company Structure(45) 1.52 1.48 15.60 15.08 167.99
Assets Over $1 Billion(17) 2.04 1.98 18.17 17.50 236.53
Assets $500 Million-$1 Billion(17) 1.56 1.39 17.28 16.85 202.28
Assets $250-$500 Million(22) 1.09 1.06 12.80 12.36 143.09
Assets less than $250 Million(15) 1.12 1.04 13.97 13.57 147.21
Goodwill Companies(35) 1.57 1.44 16.35 15.36 215.23
Non-Goodwill Companies(36) 1.27 1.24 14.31 14.31 143.74
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995. Percent change figures are actual year-to-date and
are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based on trailing twelve month common earnings and
average common equity and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk. Parentheses following market averages indicate the
number of institutions included in the respective averages. All figures have been adjusted for stock splits, stock
dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies, and RP Financial, Inc. calculations. The
information provided in this report has been obtained from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 7, 1996
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31, /
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
_________________________________
SAIF-Insured Thrifts(19) 16.08 5,017 24.4 18.09 12.40 16.00 0.41 108.75 -3.72
BIF-Insured Thrifts(2) 15.19 21,219 123.6 18.06 12.25 15.62 -3.53 158.83 -4.73
NASDAQ Listed OTC Companies(21) 15.99 6,637 34.3 18.09 12.38 15.96 0.02 125.44 -3.82
Florida Companies(3) 18.42 5,505 46.1 21.50 14.55 18.67 -0.62 0.00 -10.66
Mid-Atlantic Companies(9) 14.22 7,692 26.6 16.56 11.45 14.23 -0.33 60.00 -5.60
Mid-West Companies(7) 16.34 1,911 11.7 17.80 12.27 16.21 0.16 157.50 -2.40
New England Companies(1) 20.37 39,166 240.7 23.12 15.12 20.62 -1.21 158.83 7.21
North-West Companies(1) 16.00 2,155 12.6 17.00 11.36 15.25 4.92 0.00 10.04
Thrift Strategy(18) 15.74 5,079 24.1 17.87 12.29 15.74 -0.18 108.75 -5.20
Mortgage Banker Strategy(2) 16.00 2,155 12.6 17.00 11.36 15.25 4.92 0.00 10.04
Diversified Strategy(1) 20.37 39,166 240.7 23.12 15.12 20.62 -1.21 158.83 7.21
Companies Issuing Dividends(21) 15.99 6,637 34.3 18.09 12.38 15.96 0.02 125.44 -3.82
Equity/Assets Less Than 6%(1) 15.75 1,610 11.8 17.25 10.75 15.75 0.00 0.00 -0.76
Equity/Assets 6-12%(13) 17.53 8,081 44.5 19.73 13.26 17.45 0.45 125.44 -3.81
Equity/Assets Greater Than 12%(7) 13.37 4,880 20.1 15.39 11.11 13.44 -0.71 0.00 -4.28
Actively Traded Companies(1) 16.00 6,512 32.0 17.50 12.50 16.00 0.00 60.00 -3.03
Market Value Below $20 Million(1) 14.00 1,250 7.8 14.25 10.50 14.00 0.00 0.00 0.94
Holding Company Structure(1) 16.00 6,512 32.0 17.50 12.50 16.00 0.00 60.00 -3.03
Assets Over $1 Billion(4) 16.33 24,584 107.8 19.04 13.21 16.54 -1.44 158.83 -3.70
Assets $500 Million-$1 Billion(6) 16.65 5,826 39.1 19.42 13.34 16.74 -0.08 60.00 -6.94
Assets $250-$500 Million(3) 18.50 2,255 16.2 20.87 13.58 17.83 3.04 157.50 -2.08
Assets less than $250 Million(8) 14.42 2,159 10.0 15.69 10.91 14.45 -0.50 0.00 -2.18
Goodwill Companies(10) 16.53 11,223 53.7 18.50 12.70 16.26 1.32 125.44 -1.36
Non-Goodwill Companies(11) 15.54 2,885 18.5 17.75 12.13 15.71 -1.05 0.00 -5.83
MHC Institutions(21) 15.99 6,637 34.3 18.09 12.38 15.96 0.02 125.44 -3.82
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
_________________________________
SAIF-Insured Thrifts(19) 0.85 0.83 13.16 12.91 126.55
BIF-Insured Thrifts(2) 1.13 0.94 11.49 11.49 124.34
NASDAQ Listed OTC Companies(21) 0.88 0.84 13.00 12.77 126.33
Florida Companies(3) 1.29 1.26 14.73 14.68 145.72
Mid-Atlantic Companies(9) 0.56 0.62 12.15 11.77 107.34
Mid-West Companies(7) 0.87 0.79 13.39 13.37 136.71
New England Companies(1) 1.90 1.53 14.12 14.12 176.59
North-West Companies(1) 1.21 1.09 10.71 9.48 97.22
Thrift Strategy(18) 0.80 0.79 13.06 12.88 125.16
Mortgage Banker Strategy(2) 1.21 1.09 10.71 9.48 97.22
Diversified Strategy(1) 1.90 1.53 14.12 14.12 176.59
Companies Issuing Dividends(21) 0.88 0.84 13.00 12.77 126.33
Equity/Assets Less Than 6%(1) 1.23 1.26 13.64 13.64 229.43
Equity/Assets 6-12%(13) 0.96 0.96 14.20 13.92 148.90
Equity/Assets Greater Than 12%(7) 0.68 0.58 10.84 10.68 72.92
Actively Traded Companies(1) 1.24 1.19 13.98 12.14 147.32
Market Value Below $20 Million(1) 0.48 0.39 13.41 13.41 113.76
Holding Company Structure(1) 1.24 1.19 13.98 12.14 147.32
Assets Over $1 Billion(4) 1.12 0.99 11.88 11.56 121.22
Assets $500 Million-$1 Billion(6) 1.04 1.06 14.49 14.12 143.41
Assets $250-$500 Million(3) 1.21 1.18 15.94 15.90 187.55
Assets less than $250 Million(8) 0.54 0.51 11.19 11.04 92.49
Goodwill Companies(10) 1.08 0.95 13.16 12.65 128.21
Non-Goodwill Companies(11) 0.71 0.76 12.87 12.87 124.80
MHC Institutions(21) 0.88 0.84 13.00 12.77 126.33
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995. Percent change figures are actual year-to-date and
are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based on trailing twelve month common earnings and
average common equity and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk. Parentheses following market averages indicate the
number of institutions included in the respective averages. All figures have been adjusted for stock splits, stock
dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies, and RP Financial, Inc. calculations. The
information provided in this report has been obtained from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 7, 1996
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
_____________________
AHM Ahmanson and Co. H.F. of CA 26.50 112,512 2,981.6 27.75 21.00 25.75 2.91 41.33 0.00
CAL CalFed Inc. of Los Angeles CA 18.62 49,313 918.2 19.00 12.12 18.37 1.36 -7.78 18.22
CSA Coast Savings Financial of CA 33.37 18,583 620.1 34.62 19.37 33.50 -0.39 188.67 -3.61
CFB Commercial Federal Corp. of NE 38.12 15,067 574.4 38.87 27.12 38.75 -1.63 933.06 0.98
DME Dime Savings Bank, FSB of NY* 13.12 98,847 1,296.9 13.12 9.75 12.50 4.96 30.42 12.91
DSL Downey Financial Corp. of CA 21.62 16,973 367.0 24.05 16.79 21.75 -0.60 26.14 -0.60
FRC First Republic Bancorp of CA* 14.62 7,349 107.4 15.25 11.00 14.87 -1.68 224.89 11.43
FED FirstFed Fin. Corp. of CA 17.25 10,624 183.3 18.50 12.37 16.62 3.79 6.81 22.17
GLN Glendale Fed. Bk, FSB of CA 18.75 44,085 826.6 18.75 12.37 18.00 4.17 15.38 6.41
GDW Golden West Fin. Corp. of CA 54.62 58,623 3,202.0 56.25 44.37 54.87 -0.46 108.55 -1.14
GWF Great Western Fin. Corp. of CA 23.50 137,205 3,224.3 27.12 20.25 23.00 2.17 35.29 -7.37
GPT GreenPoint Fin. Corp. of NY(8)* 29.75 52,457 1,560.6 30.25 22.19 29.75 0.00 N.A. 11.21
SFB Standard Fed. Bancorp of MI 38.87 31,289 1,216.2 43.12 31.25 39.37 -1.27 317.51 -1.27
TCB TCF Financial Corp. of MN 33.62 35,835 1,204.8 37.62 22.94 34.25 -1.84 407.09 1.51
WES Westcorp Inc. of Orange CA 18.87 25,836 487.5 21.91 14.52 18.00 4.83 157.44 7.09
AMEX Traded Companies
_____________________
BKC American Bank of Waterbury CT* 24.12 2,286 55.1 27.62 21.37 24.62 -2.03 28.64 -11.49
BFD BostonFed Bancorp of MA 12.25 6,590 80.7 12.62 10.00 12.25 0.00 N.A. 4.26
CFX Cheshire Fin. Corp. of NH* 13.75 7,561 104.0 17.50 13.50 14.00 -1.79 15.55 -12.03
CZF Citisave Fin. Corp. of LA 15.75 965 15.2 16.50 12.75 15.87 -0.76 N.A. 6.78
CBK Citizens First Fin.Corp. of IL 10.00 2,818 28.2 10.50 10.00 10.12 -1.19 N.A. N.A.
ESX Essex Bancorp of VA(8) 2.31 1,051 2.4 5.50 0.94 2.62 -11.83 -86.21 22.87
FCB Falmouth Co-Op Bank of MA* 10.25 1,455 14.9 11.37 10.25 10.37 -1.16 N.A. N.A.
GAF GA Financial Corp. of PA 10.75 8,900 95.7 11.50 10.75 10.87 -1.10 N.A. N.A.
KNK Kankakee Bancorp of IL 19.37 1,439 27.9 21.00 18.25 19.00 1.95 93.70 2.65
KYF Kentucky First Bancorp of KY 13.62 1,389 18.9 13.62 11.37 13.50 0.89 N.A. 10.11
NYB New York Bancorp, Inc. of NY 25.25 11,725 296.1 26.12 19.00 25.37 -0.47 256.14 12.22
PDB Piedmont Bancorp of NC 13.12 2,645 34.7 13.62 12.00 13.25 -0.98 N.A. 4.96
PLE Pinnacle Bank of AL 16.00 890 14.2 19.25 15.50 16.25 -1.54 137.04 -11.11
SSB Scotland Bancorp of NC 12.12 1,840 22.3 12.62 11.62 12.12 0.00 N.A. N.A.
SZB SouthFirst Bancshares of AL 12.00 855 10.3 16.00 11.25 12.12 -0.99 N.A. -22.58
SRN Southern Banc Company of AL 13.25 1,455 19.3 13.25 11.37 13.12 0.99 N.A. 2.95
SSM Stone Street Bancorp of NC 16.87 1,825 30.8 18.50 16.75 16.87 0.00 N.A. N.A.
TSH Teche Holding Company of LA 13.25 4,094 54.2 14.50 11.75 13.50 -1.85 N.A. -3.64
FTF Texarkana Fst. Fin. Corp of AR 16.37 1,984 32.5 16.50 10.00 16.25 0.74 N.A. 15.93
THR Three Rivers Fin. Corp. of MI 13.25 860 11.4 13.50 11.37 13.25 0.00 N.A. 8.16
TBK Tolland Bank of CT* 9.62 1,157 11.1 10.25 7.50 9.62 0.00 32.69 1.26
WSB Washington SB, FSB of MD 5.63 4,220 23.8 6.25 3.56 5.31 6.03 350.40 12.60
NASDAQ Listed OTC Companies
___________________________
FBCV 1st Bancorp of Vincennes IN 26.00 666 17.3 34.05 26.00 27.50 -5.45 N.A. -10.87
WFSB 1st Washington Bancorp of VA(8) 7.94 9,883 78.5 8.00 5.00 7.95 -0.13 98.50 13.43
ALBK ALBANK Fin. Corp. of Albany NY 27.25 13,605 370.7 30.62 21.46 27.37 -0.44 17.20 9.00
AMFC AMB Financial Corp. of IN 10.00 1,124 11.2 11.00 9.75 10.37 -3.57 N.A. N.A.
ASBP ASB Financial Corp. of OH 15.00 1,714 25.7 16.50 11.37 15.00 0.00 N.A. -5.48
ABBK Abington Savings Bank of MA(8)* 14.50 1,884 27.3 18.50 12.75 15.50 -6.45 119.03 -15.94
AADV Advantage Bancorp of WI 34.00 3,449 117.3 34.50 23.40 33.37 1.89 269.57 12.58
AFCB Affiliated Comm BC, Inc of MA 16.62 5,072 84.3 18.00 16.06 17.00 -2.24 N.A. -4.32
ALBC Albion Banc Corp. of Albion NY 17.00 261 4.4 18.75 14.25 16.62 2.29 30.77 3.03
ATSB AmTrust Capital Corp. of IN 10.00 567 5.7 11.25 8.13 9.75 2.56 N.A. -2.44
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NYSE Traded Companies
_____________________
AHM Ahmanson and Co. H.F. of CA 3.65 0.44 20.40 19.12 442.46
CAL CalFed Inc. of Los Angeles CA 1.68 1.58 13.08 13.08 289.58
CSA Coast Savings Financial of CA 2.09 1.81 22.89 22.51 443.41
CFB Commercial Federal Corp. of NE 3.47 3.45 26.57 23.87 439.20
DME Dime Savings Bank, FSB of NY* 0.68 0.93 9.98 9.87 196.40
DSL Downey Financial Corp. of CA 1.68 1.47 22.83 22.43 274.12
FRC First Republic Bancorp of CA* 0.35 0.34 15.17 15.15 268.42
FED FirstFed Fin. Corp. of CA 0.71 0.79 18.38 18.07 392.11
GLN Glendale Fed. Bk, FSB of CA 0.42 0.99 17.49 16.12 325.92
GDW Golden West Fin. Corp. of CA 4.42 4.37 39.79 37.43 597.27
GWF Great Western Fin. Corp. of CA 1.92 1.75 18.42 16.13 318.96
GPT GreenPoint Fin. Corp. of NY(8)* 2.03 2.12 29.18 16.62 275.83
SFB Standard Fed. Bancorp of MI 3.92 3.54 30.02 25.61 431.63
TCB TCF Financial Corp. of MN 2.78 2.63 15.10 14.44 196.44
WES Westcorp Inc. of Orange CA 1.42 0.71 11.78 11.74 119.08
AMEX Traded Companies
_____________________
BKC American Bank of Waterbury CT* 2.02 0.82 19.37 18.37 226.11
BFD BostonFed Bancorp of MA 0.20 0.17 13.90 13.90 102.85
CFX Cheshire Fin. Corp. of NH* 1.15 0.95 11.99 10.70 126.74
CZF Citisave Fin. Corp. of LA 1.02 0.70 15.02 15.01 82.61
CBK Citizens First Fin.Corp. of IL 0.56 0.61 13.95 13.95 89.59
ESX Essex Bancorp of VA(8) 0.97 -2.35 7.72 -0.25 300.25
FCB Falmouth Co-Op Bank of MA* 0.25 0.26 14.84 14.84 60.43
GAF GA Financial Corp. of PA 0.33 0.44 14.34 14.34 63.90
KNK Kankakee Bancorp of IL 1.15 1.13 24.73 22.94 252.38
KYF Kentucky First Bancorp of KY 0.57 0.57 14.28 14.28 60.46
NYB New York Bancorp, Inc. of NY 2.72 2.58 13.58 13.58 234.92
PDB Piedmont Bancorp of NC 0.58 0.59 14.05 14.05 47.20
PLE Pinnacle Bank of AL 1.71 1.53 17.10 16.50 208.76
SSB Scotland Bancorp of NC 0.38 0.38 14.38 14.38 38.27
SZB SouthFirst Bancshares of AL 0.55 0.76 15.48 15.48 103.98
SRN Southern Banc Company of AL 0.36 0.36 15.51 15.34 76.12
SSM Stone Street Bancorp of NC 0.43 0.43 21.43 21.43 63.62
TSH Teche Holding Company of LA 0.92 0.90 14.51 14.51 84.54
FTF Texarkana Fst. Fin. Corp of AR 1.48 1.11 16.98 16.98 82.35
THR Three Rivers Fin. Corp. of MI 0.51 0.49 14.90 14.81 94.69
TBK Tolland Bank of CT* 1.12 0.82 11.74 11.19 187.76
WSB Washington SB, FSB of MD 0.57 0.42 5.03 5.03 62.24
NASDAQ Listed OTC Companies
___________________________
FBCV 1st Bancorp of Vincennes IN 9.81 -0.71 32.33 32.33 410.09
WFSB 1st Washington Bancorp of VA(8) 0.51 0.21 4.79 4.79 80.47
ALBK ALBANK Fin. Corp. of Albany NY 2.21 2.21 23.58 20.81 244.99
AMFC AMB Financial Corp. of IN 0.31 0.31 14.37 14.37 71.65
ASBP ASB Financial Corp. of OH 0.64 0.64 15.04 15.04 65.18
ABBK Abington Savings Bank of MA(8)* 0.85 0.56 16.52 14.45 253.96
AADV Advantage Bancorp of WI 2.51 2.26 27.77 24.06 284.11
AFCB Affiliated Comm BC, Inc of MA 1.21 1.45 18.97 18.82 185.00
ALBC Albion Banc Corp. of Albion NY 0.66 0.56 23.26 23.26 217.21
ATSB AmTrust Capital Corp. of IN 0.37 0.08 13.32 13.18 128.87
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 7, 1996
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
AHCI Ambanc Holding Co. of NY* 9.38 5,422 50.9 10.31 9.38 9.62 -2.49 N.A. -7.22
ASBI Ameriana Bancorp of IN 13.00 3,325 43.2 14.44 11.25 13.12 -0.91 40.85 -8.77
AFFFZ America First Fin. Fund of CA 26.00 6,011 156.3 29.75 24.25 26.50 -1.89 38.67 -12.61
AMFB American Federal Bank of SC 16.00 10,921 174.7 16.50 13.75 15.75 1.59 236.84 4.92
ANBK American Nat'l Bancorp of MD 10.00 3,980 39.8 10.25 8.05 10.25 -2.44 N.A. 2.56
ABCW Anchor Bancorp Wisconsin of WI 34.50 4,934 170.2 36.25 25.80 34.00 1.47 17.47 -3.82
ANDB Andover Bancorp, Inc. of MA* 25.75 4,243 109.3 26.06 18.25 25.87 -0.46 139.53 21.92
ASFC Astoria Financial Corp. of NY 27.00 10,958 295.9 27.88 27.00 27.75 -2.70 2.86 18.37
AVND Avondale Fin. Corp. of IL 13.25 4,015 53.2 15.25 12.50 12.87 2.95 N.A. -8.62
BFSI BFS Bankorp, Inc. of NY 39.50 1,635 64.6 39.50 24.75 38.50 2.60 335.98 12.06
BKCT Bancorp Connecticut of CT* 19.56 2,706 52.9 21.04 12.71 20.42 -4.21 123.54 32.25
BWFC Bank West Fin. Corp. of MI 10.75 2,296 24.7 10.87 8.75 10.37 3.66 N.A. 6.23
BANC BankAtlantic Bancorp of FL 14.00 11,743 164.4 16.00 9.76 14.37 -2.57 169.23 -6.67
BKUNA BankUnited SA of FL 7.75 5,693 44.1 8.75 6.12 7.87 -1.52 42.73 26.63
BKCO Bankers Corp. of NJ* 17.25 12,794 220.7 18.78 16.25 17.25 0.00 176.00 6.15
BVFS Bay View Capital Corp. of CA 33.00 6,900 227.7 35.25 24.00 33.12 -0.36 67.09 15.79
BFSB Bedford Bancshares of VA 16.00 1,195 19.1 18.75 15.25 16.37 -2.26 52.38 -7.89
BELL Bell Bancorp of Chicago IL(8) 37.37 9,210 344.2 37.50 28.25 37.50 -0.35 198.96 4.53
BTHL Bethel Bancorp. of ME* 13.00 1,203 15.6 13.25 10.75 12.50 4.00 10.64 13.04
SBOS Boston Bancorp of MA(8)* 42.00 5,251 220.5 44.00 35.75 42.00 0.00 155.47 4.35
BSBC Branford SB of CT* 3.37 6,559 22.1 3.50 2.12 3.25 3.69 58.96 17.42
BRFC Bridgeville SB, FSB of PA 14.25 1,124 16.0 15.25 12.25 14.75 -3.39 0.00 -1.72
BYFC Broadway Fin. Corp. of CA 10.00 893 8.9 11.00 10.00 10.00 0.00 N.A. N.A.
CBCO CB Bancorp of Michigan City IN 17.25 1,188 20.5 19.25 12.50 17.50 -1.43 56.82 -4.17
CCFH CCF Holding Company of GA 11.50 1,131 13.0 12.75 10.75 11.50 0.00 N.A. -9.80
CENF CENFED Financial Corp. of CA 21.50 5,031 108.2 23.41 17.50 21.25 1.18 37.12 -1.47
CFSB CFSB Bancorp of Lansing MI 20.62 4,476 92.3 24.00 17.73 20.50 0.59 129.11 -4.09
CKFB CKF Bancorp of Danville KY 20.00 932 18.6 20.25 12.75 19.50 2.56 N.A. 3.90
CSBF CSB Financial Group Inc of IL 9.00 1,035 9.3 9.62 8.81 9.00 0.00 N.A. -5.26
CFHC California Fin. Hld. Co. of CA 20.50 4,668 95.7 21.88 15.00 20.81 -1.49 95.24 0.00
CBCI Calumet Bancorp of Chicago IL 28.00 2,668 74.7 28.50 26.50 28.00 0.00 38.27 0.90
CAFI Camco Fin. Corp. of OH 20.00 1,971 39.4 20.00 13.81 20.00 0.00 N.A. 11.11
CMRN Cameron Fin. Corp. of MO 14.00 2,850 39.9 15.50 11.31 13.50 3.70 N.A. -2.57
CAPS Capital Savings Bancorp of MO 18.00 1,039 18.7 19.50 16.50 18.06 -0.33 35.85 -2.70
CARV Carver FSB of New York, NY 7.62 2,314 17.6 10.75 6.81 8.00 -4.75 21.92 -15.33
CASB Cascade SB of Everett WA 20.00 1,632 32.6 20.50 15.20 19.50 2.56 56.25 20.34
CATB Catskill Fin. Corp. of NY* 10.25 5,687 58.3 10.75 10.06 10.25 0.00 N.A. N.A.
CNIT Cenit Bancorp of Norfolk VA 34.00 1,606 54.6 40.25 33.00 35.50 -4.23 114.11 -7.48
CTBK Center Banks, Inc. of NY* 13.75 932 12.8 15.25 13.00 14.00 -1.79 25.00 -2.20
CFCX Center Fin. Corp of CT(8)* 20.87 14,487 302.3 21.12 14.12 21.12 -1.18 209.19 19.26
CEBK Central Co-Op. Bank of MA* 15.25 1,933 29.5 17.00 10.75 15.63 -2.43 190.48 1.67
CJFC Central Jersey Fin. Corp of NJ(8) 30.25 2,668 80.7 31.31 19.00 30.62 -1.21 224.57 21.00
CBSB Charter Financial Inc. of IL 11.50 4,974 57.2 12.25 8.52 11.62 -1.03 N.A. 6.38
COFI Charter One Financial of OH(8) 35.62 45,115 1,607.0 38.00 24.25 36.37 -2.06 103.54 16.33
CVAL Chester Valley Bancorp of PA 18.62 1,580 29.4 20.48 18.12 18.25 2.03 64.34 -3.27
CRCL Circle Financial Corp.of OH(8) 33.84 708 24.0 35.12 25.00 34.09 -0.73 207.64 25.33
CTZN CitFed Bancorp of Dayton OH 36.75 5,686 209.0 38.87 26.50 37.75 -2.65 308.33 6.52
CLAS Classic Bancshares of KY 11.12 1,322 14.7 11.75 10.50 11.00 1.09 N.A. -5.36
CMSB Cmnwealth SB, MHC of PA (46.3)(8) 21.88 8,642 84.3 24.87 14.87 21.75 0.60 N.A. -2.76
CBSA Coastal Bancorp of Houston TX 18.62 4,958 92.3 18.75 15.63 18.37 1.36 N.A. 6.40
CFCP Coastal Fin. Corp. of SC 20.00 2,742 54.8 21.50 14.80 21.50 -6.98 100.00 26.58
COFD Collective Bancorp Inc. of NJ 24.12 20,407 492.2 28.25 20.00 24.50 -1.55 216.54 -4.93
CMSV Commty. Svgs, MHC of FL(47.6) 14.75 4,869 35.1 18.25 14.25 14.50 1.72 N.A. -13.24
CBIN Community Bank Shares of IN 13.62 1,984 27.0 14.75 12.00 13.75 -0.95 N.A. -4.42
CBNH Community Bankshares Inc of NH* 17.37 2,416 42.0 19.75 15.75 17.37 0.00 363.20 -7.95
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
AHCI Ambanc Holding Co. of NY* -0.02 -0.03 13.87 13.87 72.36
ASBI Ameriana Bancorp of IN 1.00 0.97 13.41 13.39 115.21
AFFFZ America First Fin. Fund of CA 3.20 3.18 26.41 25.79 388.14
AMFB American Federal Bank of SC 1.55 1.69 10.07 9.29 122.62
ANBK American Nat'l Bancorp of MD 0.37 0.36 12.31 12.31 112.82
ABCW Anchor Bancorp Wisconsin of WI 2.94 2.86 24.00 23.37 355.61
ANDB Andover Bancorp, Inc. of MA* 2.25 2.36 20.44 20.44 269.10
ASFC Astoria Financial Corp. of NY 4.43 4.38 52.31 42.56 612.17
AVND Avondale Fin. Corp. of IL 0.93 0.65 15.35 15.35 144.39
BFSI BFS Bankorp, Inc. of NY 6.20 5.99 28.20 28.20 346.45
BKCT Bancorp Connecticut of CT* 1.65 1.65 16.09 16.09 148.88
BWFC Bank West Fin. Corp. of MI 0.41 0.24 11.99 11.99 60.63
BANC BankAtlantic Bancorp of FL 1.44 1.12 11.65 10.70 139.90
BKUNA BankUnited SA of FL 1.12 0.86 7.93 7.49 129.72
BKCO Bankers Corp. of NJ* 1.62 1.71 14.69 14.38 149.72
BVFS Bay View Capital Corp. of CA -0.46 1.15 29.46 28.72 421.78
BFSB Bedford Bancshares of VA 1.20 1.20 15.85 15.85 98.41
BELL Bell Bancorp of Chicago IL(8) 1.31 1.26 33.38 33.38 210.47
BTHL Bethel Bancorp. of ME* 1.08 0.83 13.72 11.53 181.37
SBOS Boston Bancorp of MA(8)* 7.08 3.39 40.29 40.29 326.62
BSBC Branford SB of CT* 0.20 0.20 2.31 2.31 26.59
BRFC Bridgeville SB, FSB of PA 0.59 0.59 14.13 14.13 49.57
BYFC Broadway Fin. Corp. of CA 0.49 0.55 14.73 14.73 129.03
CBCO CB Bancorp of Michigan City IN 2.07 2.07 15.79 15.79 172.41
CCFH CCF Holding Company of GA 0.59 0.56 14.79 14.79 69.65
CENF CENFED Financial Corp. of CA 1.97 1.36 21.02 20.98 420.11
CFSB CFSB Bancorp of Lansing MI 1.58 1.55 14.30 14.30 172.40
CKFB CKF Bancorp of Danville KY 0.75 0.75 17.21 17.21 63.05
CSBF CSB Financial Group Inc of IL 0.32 0.32 12.30 12.30 39.82
CFHC California Fin. Hld. Co. of CA 0.77 0.67 18.48 18.32 273.69
CBCI Calumet Bancorp of Chicago IL 2.28 2.27 31.99 31.99 188.31
CAFI Camco Fin. Corp. of OH 2.12 1.62 14.52 14.52 174.38
CMRN Cameron Fin. Corp. of MO 0.97 0.96 16.06 16.06 60.52
CAPS Capital Savings Bancorp of MO 1.75 1.75 20.34 20.34 194.95
CARV Carver FSB of New York, NY 0.31 0.40 15.12 14.38 156.97
CASB Cascade SB of Everett WA 1.08 0.56 12.42 12.42 199.92
CATB Catskill Fin. Corp. of NY* 0.47 0.54 13.65 13.65 49.12
CNIT Cenit Bancorp of Norfolk VA 1.57 1.84 29.00 27.92 415.61
CTBK Center Banks, Inc. of NY* 1.27 1.31 16.32 16.32 230.66
CFCX Center Fin. Corp of CT(8)* 1.60 1.09 15.46 14.44 253.30
CEBK Central Co-Op. Bank of MA* 0.99 0.93 16.38 14.30 164.61
CJFC Central Jersey Fin. Corp of NJ(8) 1.89 1.80 20.58 19.13 174.74
CBSB Charter Financial Inc. of IL 0.65 0.65 12.95 12.61 60.48
COFI Charter One Financial of OH(8) 0.37 2.39 20.16 19.84 292.01
CVAL Chester Valley Bancorp of PA 1.54 1.48 15.90 15.90 173.78
CRCL Circle Financial Corp.of OH(8) 1.47 1.26 34.51 29.94 324.02
CTZN CitFed Bancorp of Dayton OH 2.84 2.32 30.62 26.54 456.89
CLAS Classic Bancshares of KY 0.21 0.19 14.76 14.76 51.28
CMSB Cmnwealth SB, MHC of PA (46.3)(8) 1.27 1.13 15.93 14.00 191.82
CBSA Coastal Bancorp of Houston TX 1.93 1.92 18.76 15.22 566.10
CFCP Coastal Fin. Corp. of SC 1.51 1.36 9.79 9.79 160.91
COFD Collective Bancorp Inc. of NJ 2.62 2.56 17.47 16.22 247.89
CMSV Commty. Svgs, MHC of FL(47.6) 0.99 0.96 15.35 15.35 129.90
CBIN Community Bank Shares of IN 0.96 0.94 12.84 12.84 113.06
CBNH Community Bankshares Inc of NH* 1.41 1.17 15.46 15.46 213.92
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 7, 1996
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
CFTP Community Fed. Bancorp of MS 13.50 4,629 62.5 13.50 12.50 13.12 2.90 N.A. N.A.
CFFC Community Fin. Corp. of VA 21.00 1,270 26.7 21.00 13.50 21.00 0.00 200.00 16.67
CIBI Community Inv. Corp. of OH 14.75 701 10.3 17.50 12.75 14.75 0.00 N.A. -3.28
CONE Conestoga Bancorp of Roslyn NY(8) 21.00 4,742 99.6 21.12 14.37 20.87 0.62 N.A. 4.37
COOP Cooperative Bk.for Svgs. of NC 17.25 1,492 25.7 22.50 17.25 17.62 -2.10 72.50 -15.85
CNSK Covenant Bank for Svgs. of NJ* 12.00 1,959 23.5 13.22 8.62 12.50 -4.00 N.A. -9.23
CRZY Crazy Woman Creek Bncorp of WY 10.37 1,058 11.0 11.00 10.37 10.37 0.00 N.A. N.A.
DNFC D&N Financial Corp. of MI 12.37 6,829 84.5 13.62 9.38 12.00 3.08 41.37 2.06
DSBC DS Bancor Inc. of Derby CT* 31.37 3,029 95.0 33.00 23.09 31.50 -0.41 90.70 23.02
DFIN Damen Fin. Corp. of Chicago IL 11.62 3,967 46.1 11.94 11.00 11.62 0.00 N.A. 2.20
DIBK Dime Financial Corp. of CT* 13.75 5,024 69.1 14.00 9.50 13.87 -0.87 30.95 1.85
EBSI Eagle Bancshares of Tucker GA 16.00 3,117 49.9 19.00 13.50 16.75 -4.48 120.69 -15.79
EGFC Eagle Financial Corp. of CT 23.50 4,491 105.5 27.75 20.50 23.00 2.17 168.57 -10.48
ETFS East Texas Fin. Serv. of TX 14.75 1,194 17.6 16.75 13.75 14.75 0.00 N.A. -9.23
EBCP Eastern Bancorp of NH 24.25 2,398 58.2 27.50 19.25 23.75 2.11 189.73 -9.35
ESBK Elmira SB of Elmira NY* 16.50 706 11.6 18.75 14.50 16.75 -1.49 14.82 -12.00
EFBI Enterprise Fed. Bancorp of OH 14.25 2,085 29.7 18.00 13.75 14.25 0.00 N.A. -3.39
EQSB Equitable FSB of Wheaton MD 22.50 600 13.5 24.25 20.37 22.50 0.00 N.A. 0.00
FFFG F.F.O. Financial Group of FL 2.69 8,430 22.7 3.00 2.25 2.94 -8.50 -67.63 5.08
FCBF FCB Fin. Corp. of Neenah WI 17.50 2,513 44.0 18.50 15.50 17.50 0.00 N.A. -5.41
FFBS FFBS Bancorp of Columbus MS 23.00 1,573 36.2 23.50 15.50 23.50 -2.13 N.A. 35.29
FFDF FFD Financial Corp. of OH 10.37 1,455 15.1 10.75 10.00 10.00 3.70 N.A. N.A.
FFLC FFLC Bancorp of Leesburg FL 17.75 2,638 46.8 20.25 16.00 18.00 -1.39 N.A. -5.33
FFFC FFVA Financial Corp. of VA 16.75 5,426 90.9 17.50 13.25 15.44 8.48 N.A. 21.82
FFWC FFW Corporation of Wabash IN 19.25 739 14.2 19.75 16.50 19.25 0.00 N.A. -2.53
FFYF FFY Financial Corp. of OH 23.25 5,193 120.7 23.50 18.62 23.37 -0.51 N.A. 10.71
FMCO FMS Financial Corp. of NJ 16.25 2,467 40.1 17.50 12.25 16.50 -1.52 80.56 -4.41
FFHH FSF Financial Corp. of MN 11.69 3,861 45.1 13.50 10.75 11.62 0.60 N.A. -10.08
FMLY Family Bancorp of Haverhill MA(8)* 24.12 4,087 98.6 24.12 14.67 23.75 1.56 362.96 34.97
FMCT Farmers & Mechanics Bank of CT* 19.12 1,661 31.8 23.00 15.75 19.62 -2.55 N.A. -13.09
FOBC Fed One Bancorp of Wheeling WV 14.62 2,489 36.4 16.25 13.00 15.25 -4.13 46.20 -3.31
FFRV Fid. Fin. Bkshrs. Corp. of VA 12.50 2,279 28.5 14.75 10.50 12.25 2.04 42.86 -9.88
FBCI Fidelity Bancorp of Chicago IL 16.62 3,085 51.3 17.00 13.00 16.62 0.00 N.A. 8.13
FSBI Fidelity Bancorp, Inc. of PA 16.00 1,367 21.9 17.50 13.41 16.00 0.00 106.99 6.67
FFFL Fidelity FSB, MHC of FL(47.2) 13.50 6,720 42.8 17.00 10.91 13.50 0.00 N.A. -16.92
FFED Fidelity Fed. Bancorp of IN 12.00 2,493 29.9 14.77 10.46 12.75 -5.88 70.21 -18.75
FFOH Fidelity Financial of OH 10.00 4,073 40.7 10.89 5.61 10.25 -2.44 N.A. -8.17
FIBC Financial Bancorp of NY 12.87 1,873 24.1 14.87 11.75 13.00 -1.00 N.A. -6.40
FNSC Financial Security Corp. of IL(8) 25.37 1,524 38.7 26.50 16.50 26.00 -2.42 153.70 14.02
FSBS First Ashland Fin. Corp. of KY(8) 18.00 1,463 26.3 18.37 13.00 18.00 0.00 N.A. 24.14
FBSI First Bancshares of MO 15.75 1,302 20.5 17.00 14.50 15.75 0.00 23.53 -1.56
FBBC First Bell Bancorp of PA 13.44 8,166 109.8 14.25 10.00 13.75 -2.25 N.A. 0.52
FBER First Bergen Bancorp of NJ 9.25 3,174 29.4 10.00 9.25 9.25 0.00 N.A. N.A.
FCIT First Cit. Fin. Corp of MD 17.75 2,914 51.7 19.09 14.09 18.06 -1.72 104.26 2.78
FFBA First Colorado Bancorp of Co 13.25 20,302 269.0 13.62 7.75 13.25 0.00 301.52 20.56
FDEF First Defiance Fin.Corp. of OH 10.62 10,978 116.6 11.00 7.29 10.69 -0.65 N.A. 4.94
FESX First Essex Bancorp of MA* 10.37 6,035 62.6 12.00 8.13 10.75 -3.53 72.83 -8.80
FFES First FS&LA of E. Hartford CT 17.00 2,594 44.1 21.50 16.75 17.50 -2.86 161.54 -15.00
FSSB First FS&LA of San Bern. CA 10.00 328 3.3 14.50 10.00 10.00 0.00 0.00 -20.00
FFSX First FS&LA. MHC of IA (45.0) 25.75 1,706 19.5 28.62 18.00 24.00 7.29 157.50 -3.74
FFML First Family Bank, FSB of FL 21.12 545 11.5 23.00 14.50 21.00 0.57 224.92 0.57
FFSW First Fed Fin. Serv. of OH 28.00 3,275 91.7 28.00 18.18 24.75 13.13 64.71 29.69
BDJI First Fed. Bancorp. of MN 13.50 819 11.1 14.75 11.25 13.25 1.89 N.A. -1.82
FFBH First Fed. Bancshares of AR 13.75 5,154 70.9 14.00 13.00 13.75 0.00 N.A. N.A.
FFEC First Fed. Bancshares of WI 16.00 6,855 109.7 16.00 12.00 15.12 5.82 N.A. 4.92
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
CFTP Community Fed. Bancorp of MS 0.43 0.42 14.34 14.34 43.32
CFFC Community Fin. Corp. of VA 1.58 1.58 17.24 17.24 125.82
CIBI Community Inv. Corp. of OH 1.20 1.14 17.45 17.45 121.56
CONE Conestoga Bancorp of Roslyn NY(8) 0.68 0.55 16.86 16.86 104.25
COOP Cooperative Bk.for Svgs. of NC 0.60 0.51 19.64 17.27 210.32
CNSK Covenant Bank for Svgs. of NJ* 0.97 0.97 8.74 8.74 172.93
CRZY Crazy Woman Creek Bncorp of WY 0.34 0.29 14.67 14.67 44.86
DNFC D&N Financial Corp. of MI 1.80 1.59 10.16 10.00 180.40
DSBC DS Bancor Inc. of Derby CT* 2.69 2.41 26.99 26.06 411.93
DFIN Damen Fin. Corp. of Chicago IL 0.44 0.43 14.34 14.34 59.32
DIBK Dime Financial Corp. of CT* 1.93 2.17 10.63 10.10 133.64
EBSI Eagle Bancshares of Tucker GA 1.53 1.48 11.91 11.91 179.12
EGFC Eagle Financial Corp. of CT 3.66 1.79 22.70 16.42 318.09
ETFS East Texas Fin. Serv. of TX 0.87 0.81 18.90 18.90 96.28
EBCP Eastern Bancorp of NH 2.10 1.74 26.48 24.93 343.99
ESBK Elmira SB of Elmira NY* 0.46 0.46 19.89 19.00 315.91
EFBI Enterprise Fed. Bancorp of OH 0.99 0.68 15.52 15.49 99.61
EQSB Equitable FSB of Wheaton MD 3.42 3.39 22.75 22.75 433.56
FFFG F.F.O. Financial Group of FL 0.15 0.15 2.18 2.18 36.26
FCBF FCB Fin. Corp. of Neenah WI 1.02 1.00 18.78 18.78 101.73
FFBS FFBS Bancorp of Columbus MS 1.00 1.00 15.37 15.37 78.55
FFDF FFD Financial Corp. of OH 0.52 0.52 14.08 14.08 50.24
FFLC FFLC Bancorp of Leesburg FL 1.14 1.15 21.26 21.26 125.29
FFFC FFVA Financial Corp. of VA 1.19 1.16 15.57 15.26 95.42
FFWC FFW Corporation of Wabash IN 1.74 1.94 21.76 21.76 201.48
FFYF FFY Financial Corp. of OH 1.34 1.38 20.25 20.25 110.37
FMCO FMS Financial Corp. of NJ 1.69 1.69 13.49 13.12 204.99
FFHH FSF Financial Corp. of MN 0.48 0.48 13.51 13.51 84.61
FMLY Family Bancorp of Haverhill MA(8)* 2.01 1.80 16.84 15.41 217.12
FMCT Farmers & Mechanics Bank of CT* 0.20 -0.07 17.95 17.95 323.27
FOBC Fed One Bancorp of Wheeling WV 1.31 1.31 16.53 15.65 136.43
FFRV Fid. Fin. Bkshrs. Corp. of VA 1.35 1.33 12.01 12.00 141.10
FBCI Fidelity Bancorp of Chicago IL 0.98 0.92 16.91 16.85 140.37
FSBI Fidelity Bancorp, Inc. of PA 1.25 1.23 16.06 15.93 220.51
FFFL Fidelity FSB, MHC of FL(47.2) 0.73 0.68 12.06 11.92 117.84
FFED Fidelity Fed. Bancorp of IN 1.38 1.30 5.70 5.70 112.37
FFOH Fidelity Financial of OH 0.46 0.46 12.47 12.47 61.22
FIBC Financial Bancorp of NY 0.80 0.79 14.33 14.25 134.48
FNSC Financial Security Corp. of IL(8) 1.41 1.31 25.83 25.83 179.85
FSBS First Ashland Fin. Corp. of KY(8) 0.51 0.51 16.24 16.24 61.67
FBSI First Bancshares of MO 0.80 0.79 18.26 18.22 107.89
FBBC First Bell Bancorp of PA 0.94 0.93 13.99 13.99 66.45
FBER First Bergen Bancorp of NJ 0.20 0.30 13.46 13.46 81.46
FCIT First Cit. Fin. Corp of MD 1.45 1.18 13.45 13.45 214.18
FFBA First Colorado Bancorp of Co 0.69 0.69 11.90 11.76 73.52
FDEF First Defiance Fin.Corp. of OH 0.53 0.52 12.22 12.22 48.12
FESX First Essex Bancorp of MA* 1.28 1.08 10.18 10.18 132.80
FFES First FS&LA of E. Hartford CT 1.98 1.96 22.29 22.22 359.84
FSSB First FS&LA of San Bern. CA -0.52 -1.09 17.77 16.97 314.90
FFSX First FS&LA. MHC of IA (45.0) 1.62 1.49 21.53 21.42 255.87
FFML First Family Bank, FSB of FL 2.34 1.38 15.77 15.77 281.19
FFSW First Fed Fin. Serv. of OH 2.41 1.94 16.15 14.69 303.35
BDJI First Fed. Bancorp. of MN 0.85 0.85 17.65 17.65 122.75
FFBH First Fed. Bancshares of AR 0.96 0.96 15.38 15.38 96.71
FFEC First Fed. Bancshares of WI 0.82 0.80 14.04 13.47 98.07
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 7, 1996
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
FTFC First Fed. Capital Corp. of WI 22.00 6,298 138.6 22.87 15.50 22.00 0.00 95.56 22.22
FFKY First Fed. Fin. Corp. of KY 42.00 2,108 88.5 43.25 28.25 43.25 -2.89 33.33 36.59
FFBZ First Federal Bancorp of OH 24.50 785 19.2 24.50 13.00 23.50 4.26 145.00 20.99
FFWM First Fin. Corp of Western MD 20.00 2,188 43.8 23.75 17.75 19.50 2.56 100.00 1.27
FFCH First Fin. Holdings Inc. of SC 18.50 6,366 117.8 22.25 17.75 19.75 -6.33 51.02 -3.90
FPRY First Financial Bancorp of FL(8) 20.37 894 18.2 21.12 17.50 20.37 0.00 173.79 0.59
FFBI First Financial Bancorp of IL 15.50 472 7.3 16.25 14.25 15.50 0.00 N.A. -3.13
FFHC First Financial Corp. of WI 23.00 29,885 687.4 24.00 16.37 23.00 0.00 46.03 0.00
FFHS First Franklin Corp. of OH 15.12 1,187 17.9 17.50 12.25 15.12 0.00 15.24 -4.73
FGHC First Georgia Hold. Corp of GA 7.00 2,024 14.2 7.83 4.17 7.00 0.00 82.77 -8.74
FSPG First Home SB, SLA of NJ 17.75 2,030 36.0 19.00 14.00 18.25 -2.74 195.83 -6.58
FFSL First Independence Corp. of KS 17.75 583 10.3 19.25 15.00 17.75 0.00 N.A. -5.33
FISB First Indiana Corp. of IN 24.50 8,278 202.8 25.19 16.25 24.75 -1.01 81.48 14.17
FKFS First Keystone Fin. Corp of PA 17.25 1,292 22.3 20.87 13.75 17.25 0.00 N.A. -17.35
FLFC First Liberty Fin. Corp. of GA 22.12 3,982 88.1 22.75 16.25 22.12 0.00 190.29 4.09
CASH First Midwest Fin. Corp. of IA 23.50 1,790 42.1 24.25 16.75 24.00 -2.08 N.A. 0.00
FMBD First Mutual Bancorp of IL 12.75 4,352 55.5 14.75 11.12 12.62 1.03 N.A. -6.39
FMSB First Mutual SB of Bellevue WA* 13.12 2,447 32.1 16.00 8.90 13.50 -2.81 69.29 -3.10
FNGB First Northern Cap. Corp of WI 15.69 4,557 71.5 16.50 13.25 15.75 -0.38 7.76 -4.91
FFPB First Palm Beach Bancorp of FL 21.25 5,181 110.1 24.87 18.50 21.25 0.00 N.A. 0.62
FSNJ First SB of NJ, MHC (45.0) 14.12 3,017 19.2 19.50 12.50 14.50 -2.62 N.A. -18.14
FSBC First SB, FSB of Clovis NM 5.50 696 3.8 7.00 5.12 6.00 -8.33 -18.52 -18.52
FSLA First SB, SLA MHC of NJ (37.6) 16.00 6,512 32.0 17.50 12.50 16.00 0.00 60.00 -3.03
SOPN First SB, SSB, Moore Co. of NC 18.75 3,744 70.2 20.25 17.00 19.25 -2.60 N.A. 5.28
FWWB First Savings Bancorp of WA* 15.00 10,065 151.0 15.37 12.37 15.37 -2.41 N.A. 14.33
SHEN First Shenango Bancorp of PA 20.50 2,308 47.3 22.25 18.50 20.75 -1.20 N.A. 0.00
FSFC First So.east Fin. Corp. of SC 17.87 4,101 73.3 20.25 16.87 17.75 0.68 N.A. -5.95
FSFI First State Fin. Serv. of NJ 10.00 4,025 40.3 14.12 10.00 10.75 -6.98 146.31 -26.58
FFDP FirstFed Bancshares of IL 16.12 3,387 54.6 16.62 12.00 16.00 0.75 142.04 13.76
FLAG Flag Financial Corp of GA 12.75 2,008 25.6 15.00 10.50 12.75 0.00 30.10 -7.27
FFPC Florida First Bancorp of FL(8) 11.12 3,374 37.5 11.12 5.50 11.12 0.00 491.49 50.88
FFIC Flushing Fin. Corp. of NY* 15.75 7,958 125.3 16.50 14.12 16.37 -3.79 N.A. 2.47
FBHC Fort Bend Holding Corp. of TX 17.75 817 14.5 20.25 16.00 17.75 0.00 N.A. -1.39
FTSB Fort Thomas Fin. Corp. of KY 16.75 1,574 26.4 17.00 11.25 16.12 3.91 N.A. 38.20
FSBX Framingham SB of MA* 4.25 13,882 59.0 4.87 3.25 3.87 9.82 3.16 3.16
FKKY Frankfort First Bancorp of KY 11.37 3,450 39.2 15.87 11.00 11.12 2.25 N.A. -14.19
GFSB GFS Bancorp of Grinnell IA 20.50 515 10.6 20.75 15.25 20.50 0.00 N.A. 2.50
GUPB GFSB Bancorp of Gallup NM 14.00 949 13.3 15.00 12.87 14.00 0.00 N.A. -1.75
GWBC Gateway Bancorp of KY 14.00 1,176 16.5 16.25 13.50 14.00 0.00 N.A. -1.75
GBCI Glacier Bancorp of MT 21.75 3,360 73.1 22.27 16.14 22.00 -1.14 350.31 18.14
GLBK Glendale Co-op. Bank of MA* 17.50 247 4.3 19.00 12.75 17.50 0.00 N.A. -6.67
GFCO Glenway Financial Corp. of OH 20.50 1,091 22.4 24.50 16.19 23.00 -10.87 N.A. -16.33
GTPS Great American Bancorp of IL 13.75 1,850 25.4 15.12 11.87 14.00 -1.79 N.A. -5.56
GTFN Great Financial Corp. of KY 27.00 14,653 395.6 27.37 18.12 26.87 0.48 N.A. 14.89
GSBC Great Southern Bancorp of MO 27.50 4,434 121.9 27.50 17.25 26.12 5.28 841.78 11.11
GDVS Greater DV SB,MHC of PA(19.9)* 10.00 3,272 6.5 13.00 9.38 10.62 -5.84 N.A. -16.67
GRTR Greater New York SB of NY* 11.00 13,289 146.2 13.31 9.25 11.12 -1.08 18.15 -8.33
GSFC Green Street Fin. Corp. of NC 12.62 4,298 54.2 13.12 12.12 13.00 -2.92 N.A. N.A.
GROV GroveBank for Savings of MA* 25.25 1,538 38.8 26.50 23.00 25.50 -0.98 184.67 2.02
GFED Guaranty FS&LA,MHC of MO(31.1) 11.50 3,125 8.9 12.50 8.00 11.87 -3.12 N.A. -3.12
GSLC Guaranty Svgs & Loan FA of VA 8.50 919 7.8 8.50 6.31 7.50 13.33 N.A. 9.68
HEMT HF Bancorp of Hemet CA 10.00 6,612 66.1 10.25 8.19 10.12 -1.19 N.A. 1.32
HFFC HF Financial Corp. of SD(8) 15.00 3,055 45.8 16.75 13.00 15.00 0.00 200.00 -1.64
HFNC HFNC Financial Corp. of NC 16.12 17,192 277.1 16.12 13.12 15.25 5.70 N.A. 22.87
HMNF HMN Financial, Inc. of MN 15.69 5,180 81.3 16.12 13.56 15.56 0.84 N.A. -1.94
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
FTFC First Fed. Capital Corp. of WI 1.88 1.38 15.03 14.15 219.45
FFKY First Fed. Fin. Corp. of KY 2.65 2.29 23.38 21.81 166.51
FFBZ First Federal Bancorp of OH 2.39 2.35 17.23 17.21 220.63
FFWM First Fin. Corp of Western MD 0.64 0.59 18.70 18.70 149.22
FFCH First Fin. Holdings Inc. of SC 1.62 1.65 15.04 15.04 227.64
FPRY First Financial Bancorp of FL(8) 1.47 1.10 17.07 17.07 268.88
FFBI First Financial Bancorp of IL 1.12 1.17 16.66 16.66 187.74
FFHC First Financial Corp. of WI 2.34 2.27 13.30 12.63 181.34
FFHS First Franklin Corp. of OH 1.10 1.08 17.31 17.31 182.08
FGHC First Georgia Hold. Corp of GA 0.59 0.59 5.73 5.07 70.22
FSPG First Home SB, SLA of NJ 2.19 2.13 14.97 14.57 229.74
FFSL First Independence Corp. of KS 1.95 1.95 22.03 22.03 174.32
FISB First Indiana Corp. of IN 2.11 1.79 15.98 15.75 178.41
FKFS First Keystone Fin. Corp of PA 1.01 1.09 17.84 17.84 215.33
FLFC First Liberty Fin. Corp. of GA 2.15 1.70 16.84 14.14 246.53
CASH First Midwest Fin. Corp. of IA 1.95 1.55 21.72 20.25 173.02
FMBD First Mutual Bancorp of IL 0.61 0.59 16.56 16.56 65.56
FMSB First Mutual SB of Bellevue WA* 1.45 1.43 10.07 10.07 151.61
FNGB First Northern Cap. Corp of WI 1.03 0.88 15.98 15.98 125.56
FFPB First Palm Beach Bancorp of FL 1.69 1.68 21.60 21.03 282.84
FSNJ First SB of NJ, MHC (45.0) 0.08 0.66 17.70 17.70 217.79
FSBC First SB, FSB of Clovis NM 0.53 0.41 7.86 7.86 165.94
FSLA First SB, SLA MHC of NJ (37.6) 1.24 1.19 13.98 12.14 147.32
SOPN First SB, SSB, Moore Co. of NC 1.00 1.02 17.94 17.94 68.45
FWWB First Savings Bancorp of WA* 0.53 0.52 15.25 15.25 59.11
SHEN First Shenango Bancorp of PA 1.44 1.36 20.40 20.40 154.12
FSFC First So.east Fin. Corp. of SC 0.78 0.77 17.19 17.19 87.66
FSFI First State Fin. Serv. of NJ 0.96 0.75 10.69 10.13 156.19
FFDP FirstFed Bancshares of IL 1.10 0.69 16.62 15.87 184.23
FLAG Flag Financial Corp of GA 1.05 0.93 10.76 10.76 112.53
FFPC Florida First Bancorp of FL(8) 0.75 0.69 6.24 6.24 90.11
FFIC Flushing Fin. Corp. of NY* 0.48 0.46 17.39 17.39 92.91
FBHC Fort Bend Holding Corp. of TX 2.13 1.93 21.52 21.52 295.91
FTSB Fort Thomas Fin. Corp. of KY 0.70 0.70 13.58 13.58 55.88
FSBX Framingham SB of MA* 0.41 0.41 2.57 2.57 34.41
FKKY Frankfort First Bancorp of KY 0.53 0.42 13.87 13.87 40.18
GFSB GFS Bancorp of Grinnell IA 1.57 1.54 18.91 18.91 157.11
GUPB GFSB Bancorp of Gallup NM 0.76 0.76 17.09 17.09 74.21
GWBC Gateway Bancorp of KY 0.66 0.66 15.52 15.52 62.08
GBCI Glacier Bancorp of MT 1.76 1.76 11.41 11.39 118.52
GLBK Glendale Co-op. Bank of MA* 1.13 0.95 23.71 23.71 145.36
GFCO Glenway Financial Corp. of OH 1.37 1.31 24.02 23.39 255.37
GTPS Great American Bancorp of IL 0.41 0.41 18.72 18.72 63.62
GTFN Great Financial Corp. of KY 1.55 1.26 19.19 18.88 169.06
GSBC Great Southern Bancorp of MO 2.48 2.33 15.04 14.79 148.62
GDVS Greater DV SB,MHC of PA(19.9)* 0.35 0.35 8.86 8.86 72.09
GRTR Greater New York SB of NY* 0.89 0.87 11.01 11.01 193.82
GSFC Green Street Fin. Corp. of NC 0.62 0.62 13.78 13.78 43.71
GROV GroveBank for Savings of MA* 2.96 2.79 23.79 23.74 381.30
GFED Guaranty FS&LA,MHC of MO(31.1) 0.58 0.31 8.69 8.69 59.37
GSLC Guaranty Svgs & Loan FA of VA 0.70 0.43 6.93 6.93 112.04
HEMT HF Bancorp of Hemet CA 0.20 0.20 13.05 13.04 114.09
HFFC HF Financial Corp. of SD(8) 1.41 1.10 16.86 16.81 187.90
HFNC HFNC Financial Corp. of NC 0.32 0.38 14.21 14.21 41.66
HMNF HMN Financial, Inc. of MN 1.13 1.01 17.54 17.54 104.64
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 7, 1996
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
HALL Hallmark Capital Corp. of WI 14.81 1,443 21.4 16.25 13.25 14.75 0.41 N.A. -4.45
HARB Harbor FSB, MHC of FL (45.7) 27.00 4,925 60.5 29.25 18.50 28.00 -3.57 N.A. -1.82
HRBF Harbor Federal Bancorp of MD 12.87 1,858 23.9 15.50 12.50 13.12 -1.91 28.70 -11.24
HFSA Hardin Bancorp of Hardin MO 11.75 1,058 12.4 13.00 11.25 11.62 1.12 N.A. -7.84
HARL Harleysville SA of PA 18.37 1,287 23.6 19.75 14.75 18.25 0.66 3.49 22.47
HARS Harris SB, MHC of PA (23.1) 16.75 11,211 41.9 20.50 15.50 16.75 0.00 N.A. -16.25
HFFB Harrodsburg 1st Fin Bcrp of KY 15.25 2,182 33.3 15.63 12.37 15.00 1.67 N.A. 1.67
HHFC Harvest Home Fin. Corp. of OH 13.00 895 11.6 13.00 10.00 12.50 4.00 N.A. 6.12
HAVN Haven Bancorp of Woodhaven NY 27.75 4,287 119.0 28.13 17.75 28.13 -1.35 N.A. 17.49
HVFD Haverfield Corp. of OH 17.75 1,904 33.8 18.62 12.27 17.75 0.00 14.52 31.48
HTHR Hawthorne Fin. Corp. of CA 7.50 2,599 19.5 7.50 2.25 7.37 1.76 -72.73 50.00
HSBK Hibernia SB of Quincy MA* 14.75 1,556 23.0 18.00 13.69 14.25 3.51 93.57 -9.23
HBNK Highland Federal Bank of CA 16.37 2,296 37.6 17.00 11.00 16.25 0.74 N.A. 5.61
HIFS Hingham Inst. for Sav. of MA* 14.50 1,297 18.8 14.75 10.50 13.75 5.45 217.98 -1.69
HNFC Hinsdale Financial Corp. of IL 23.50 2,690 63.2 23.50 17.80 21.25 10.59 135.00 9.30
HBFW Home Bancorp of Fort Wayne IN 14.75 3,094 45.6 16.00 12.87 14.75 0.00 N.A. -3.28
HBBI Home Building Bancorp of IN 17.69 322 5.7 18.00 12.87 18.00 -1.72 N.A. 7.21
HOMF Home Fed Bancorp of Seymour IN 26.75 2,224 59.5 27.00 20.25 25.25 5.94 78.33 0.94
HFMD Home Federal Corporation of MD(8) 10.25 2,519 25.8 11.37 5.87 10.75 -4.65 5.13 32.26
HOFL Home Financial Corp. of FL(8) 13.81 24,771 342.1 16.25 13.06 13.87 -0.43 176.20 -10.90
HPBC Home Port Bancorp, Inc. of MA* 13.75 1,842 25.3 15.00 10.00 13.50 1.85 71.88 17.02
HMCI Homecorp, Inc. of Rockford IL 17.50 1,126 19.7 18.50 14.00 18.00 -2.78 75.00 5.29
LOAN Horizon Bancorp, Inc of TX* 10.50 1,387 14.6 11.50 7.50 10.50 0.00 N.A. 16.67
HZFS Horizon Fin'l. Services of IA 15.50 448 6.9 16.37 11.75 15.50 0.00 N.A. 1.64
HRZB Horizon Financial Corp. of WA* 12.75 6,580 83.9 13.75 11.25 12.50 2.00 -5.06 -1.92
IBSF IBS Financial Corp. of NJ 14.00 11,410 159.7 15.46 11.82 14.00 0.00 N.A. 2.64
ISBF ISB Financial Corp. of LA 15.63 7,381 115.4 17.00 14.00 15.87 -1.51 N.A. 4.20
IFSB Independence FSB of DC 7.50 1,279 9.6 9.25 6.75 7.37 1.76 275.00 -11.14
INCB Indiana Comm. Bank, SB of IN 14.00 922 12.9 16.75 11.75 14.00 0.00 N.A. -8.20
IFSL Indiana Federal Corp. of IN 19.12 4,737 90.6 21.25 16.25 19.00 0.63 153.58 -10.02
INBI Industrial Bancorp of OH 11.75 5,554 65.3 16.00 11.75 12.00 -2.08 N.A. -14.55
IWBK Interwest SB of Oak Harbor WA 24.37 6,434 156.8 25.12 13.75 24.37 0.00 143.70 19.64
IPSW Ipswich SB of Ipswich MA* 10.50 1,174 12.3 10.87 4.60 10.87 -3.40 N.A. 27.27
IROQ Iroquois Bancorp of Auburn NY* 14.50 2,349 34.1 15.50 11.12 15.00 -3.33 107.14 11.54
JSBF JSB Financial, Inc. of NY 32.62 10,333 337.1 34.87 28.87 33.19 -1.72 183.65 3.16
JXVL Jacksonville Bancorp of TX 10.12 2,662 26.9 11.99 7.32 10.50 -3.62 N.A. -13.06
JXSB Jcksnville SB,MHC of IL(43.3%) 14.00 1,250 7.8 14.25 10.50 14.00 0.00 N.A. 0.94
JEBC Jefferson Bancorp of Gretna LA(8) 22.50 2,196 49.4 22.50 19.00 21.88 2.83 N.A. 16.88
JSBA Jefferson Svgs Bancorp of MO 27.25 4,182 114.0 30.75 18.00 27.25 0.00 N.A. -1.80
JOAC Joachim Bancorp of MO 12.75 760 9.7 13.50 11.50 12.25 4.08 N.A. -5.56
KSAV KS Bancorp of Kenly NC 18.00 663 11.9 22.00 15.75 18.00 0.00 N.A. 2.86
KSBK KSB Bancorp of Kingfield ME* 22.25 374 8.3 22.25 15.50 22.25 0.00 N.A. 15.58
KFBI Klamath First Bancorp of OR 14.25 11,254 160.4 14.25 12.50 13.87 2.74 N.A. 3.64
LBFI L&B Financial of S. Springs TX(8) 16.50 1,584 26.1 16.75 11.50 16.25 1.54 N.A. 15.79
LFSB LFS Bancorp of Lexington KY(8) 19.25 3,405 65.5 20.87 16.75 19.25 0.00 N.A. 3.38
LSBI LSB Bancorp of Lafayette IN 15.75 965 15.2 17.37 13.50 16.25 -3.08 N.A. -8.70
LVSB Lakeview SB of Paterson NJ 19.00 2,266 43.1 19.75 14.89 19.00 0.00 N.A. 11.44
LARK Landmark Bancshares of KS 15.25 1,951 29.8 15.25 11.75 15.25 0.00 N.A. 10.91
LARL Laurel Capital Group of PA 15.00 1,508 22.6 16.50 13.67 15.50 -3.23 17.19 -3.23
LSBX Lawrence Savings Bank of MA* 5.37 4,245 22.8 6.62 3.75 5.63 -4.62 56.10 16.23
LFCT Leader Fin. Corp of Memphis TN(8) 45.62 9,924 452.7 46.12 27.50 45.50 0.26 N.A. 22.08
LFED Leeds FSB, MHC of MD (35.3) 14.00 3,448 17.5 16.75 12.00 13.75 1.82 N.A. -1.75
LXMO Lexington B&L Fin. Corp. of MO 9.75 1,265 12.3 10.00 9.38 10.00 -2.50 N.A. N.A.
LBCI Liberty Bancorp of Chicago IL 22.75 2,487 56.6 26.87 22.75 23.25 -2.15 127.50 -9.90
LIFB Life Bancorp of Norfolk VA 14.12 10,403 146.9 16.62 13.81 14.37 -1.74 N.A. -5.87
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
HALL Hallmark Capital Corp. of WI 1.14 1.02 18.38 18.38 235.12
HARB Harbor FSB, MHC of FL (45.7) 2.15 2.14 16.78 16.78 189.41
HRBF Harbor Federal Bancorp of MD 0.67 0.67 15.79 15.79 83.00
HFSA Hardin Bancorp of Hardin MO 0.48 0.48 15.16 15.16 78.81
HARL Harleysville SA of PA 1.71 1.74 15.02 15.02 212.90
HARS Harris SB, MHC of PA (23.1) 0.73 0.72 13.45 12.60 111.45
HFFB Harrodsburg 1st Fin Bcrp of KY 0.49 0.49 14.28 14.28 49.82
HHFC Harvest Home Fin. Corp. of OH 0.69 0.69 14.65 14.65 78.56
HAVN Haven Bancorp of Woodhaven NY 2.23 2.20 21.82 21.69 346.41
HVFD Haverfield Corp. of OH 1.19 1.12 14.81 14.76 178.38
HTHR Hawthorne Fin. Corp. of CA -0.59 -0.76 11.26 11.19 297.46
HSBK Hibernia SB of Quincy MA* 1.42 1.13 14.85 14.85 228.19
HBNK Highland Federal Bank of CA 0.43 0.42 15.08 15.08 192.47
HIFS Hingham Inst. for Sav. of MA* 1.45 1.45 13.88 13.88 138.31
HNFC Hinsdale Financial Corp. of IL 1.58 1.52 20.20 19.58 253.54
HBFW Home Bancorp of Fort Wayne IN 0.86 0.86 16.60 16.60 101.09
HBBI Home Building Bancorp of IN 0.59 0.59 18.61 18.61 131.70
HOMF Home Fed Bancorp of Seymour IN 3.18 2.76 22.59 21.72 272.60
HFMD Home Federal Corporation of MD(8) 1.00 0.98 7.41 7.31 86.02
HOFL Home Financial Corp. of FL(8) 0.83 0.79 12.64 12.64 49.55
HPBC Home Port Bancorp, Inc. of MA* 1.57 1.58 10.20 10.20 90.59
HMCI Homecorp, Inc. of Rockford IL 1.12 0.76 18.41 18.41 303.50
LOAN Horizon Bancorp, Inc of TX* 1.24 0.97 7.91 7.64 91.48
HZFS Horizon Fin'l. Services of IA 0.72 0.67 18.66 18.66 161.22
HRZB Horizon Financial Corp. of WA* 1.10 1.10 12.03 12.03 74.31
IBSF IBS Financial Corp. of NJ 0.71 0.72 13.53 13.53 66.34
ISBF ISB Financial Corp. of LA 0.98 0.98 16.37 16.36 84.50
IFSB Independence FSB of DC 1.10 0.52 13.36 11.48 206.21
INCB Indiana Comm. Bank, SB of IN 0.67 0.67 15.35 15.35 102.47
IFSL Indiana Federal Corp. of IN 1.56 1.46 14.88 13.83 151.51
INBI Industrial Bancorp of OH 0.82 0.82 11.26 11.26 58.88
IWBK Interwest SB of Oak Harbor WA 2.07 1.91 14.63 14.21 212.71
IPSW Ipswich SB of Ipswich MA* 1.43 1.25 7.22 7.22 114.20
IROQ Iroquois Bancorp of Auburn NY* 1.60 1.59 11.67 11.67 192.02
JSBF JSB Financial, Inc. of NY 2.19 2.32 32.70 32.70 149.84
JXVL Jacksonville Bancorp of TX 0.59 0.59 13.37 13.37 80.04
JXSB Jcksnville SB,MHC of IL(43.3%) 0.48 0.39 13.41 13.41 113.76
JEBC Jefferson Bancorp of Gretna LA(8) 1.21 1.21 16.13 16.13 120.69
JSBA Jefferson Svgs Bancorp of MO 1.52 1.49 19.19 15.72 273.30
JOAC Joachim Bancorp of MO 0.28 0.28 14.15 14.15 48.39
KSAV KS Bancorp of Kenly NC 1.51 1.53 20.56 20.53 135.55
KSBK KSB Bancorp of Kingfield ME* 2.67 2.56 23.33 21.47 340.57
KFBI Klamath First Bancorp of OR 0.66 0.66 14.90 14.90 53.73
LBFI L&B Financial of S. Springs TX(8) 0.93 0.92 15.50 15.50 90.42
LFSB LFS Bancorp of Lexington KY(8) 0.49 0.49 19.66 19.66 68.86
LSBI LSB Bancorp of Lafayette IN 1.28 1.21 17.96 17.96 168.41
LVSB Lakeview SB of Paterson NJ 2.20 1.32 19.99 15.35 200.86
LARK Landmark Bancshares of KS 0.94 0.82 17.05 17.05 99.13
LARL Laurel Capital Group of PA 1.71 1.65 13.67 13.67 127.99
LSBX Lawrence Savings Bank of MA* 0.78 0.79 5.76 5.76 76.21
LFCT Leader Fin. Corp of Memphis TN(8) 4.04 3.95 25.71 25.71 320.21
LFED Leeds FSB, MHC of MD (35.3) 0.78 0.78 12.65 12.65 77.34
LXMO Lexington B&L Fin. Corp. of MO 0.62 0.61 14.27 14.27 48.50
LBCI Liberty Bancorp of Chicago IL 1.45 1.45 25.66 25.59 269.38
LIFB Life Bancorp of Norfolk VA 0.89 0.93 14.74 14.20 115.79
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 7, 1996
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
LFBI Little Falls Bancorp of NJ 9.87 3,042 30.0 11.50 9.50 9.75 1.23 N.A. N.A.
LOGN Logansport Fin. Corp. of IN 12.75 1,322 16.9 13.25 11.25 12.94 -1.47 N.A. -1.92
LONF London Financial Corp. of OH 10.50 529 5.6 11.25 9.75 10.50 0.00 N.A. N.A.
LISB Long Island Bancorp of NY 29.87 24,859 742.5 29.87 18.75 28.37 5.29 N.A. 13.27
MAFB MAF Bancorp of IL 24.50 5,244 128.5 26.81 20.45 24.37 0.53 188.24 -2.00
MBLF MBLA Financial Corp. of MO(8) 23.75 1,372 32.6 26.00 13.50 24.50 -3.06 N.A. 22.61
MFBC MFB Corp. of Mishawaka IN 14.00 2,078 29.1 16.25 13.00 14.00 0.00 N.A. -5.08
MLFB MLF Bancorp of Villanova PA 23.75 6,247 148.4 25.00 18.50 24.19 -1.82 N.A. 6.74
MSBB MSB Bancorp of Middletown NY* 15.75 2,833 44.6 27.25 15.00 17.00 -7.35 57.50 -14.86
MSBF MSB Financial Corp. of MI 16.75 676 11.3 19.50 14.50 16.50 1.52 N.A. -11.84
MGNL Magna Bancorp of MS 34.00 6,959 236.6 36.25 20.00 35.00 -2.86 580.00 18.26
MARN Marion Capital Holdings of IN 20.00 2,003 40.1 20.75 18.50 20.75 -3.61 N.A. 0.00
MFCX Marshalltown Fin. Corp. of IA(8) 15.50 1,411 21.9 16.75 12.75 16.00 -3.13 N.A. -1.59
MFSL Maryland Fed. Bancorp of MD 29.62 3,150 93.3 33.25 29.25 29.50 0.41 182.10 -1.27
MASB MassBank Corp. of Reading MA* 33.25 2,734 90.9 34.50 26.00 33.00 0.76 169.67 4.72
MFLR Mayflower Co-Op. Bank of MA* 14.25 873 12.4 14.25 9.50 13.25 7.55 185.00 29.55
MDBK Medford Savings Bank of MA* 21.25 4,530 96.3 24.25 17.00 22.00 -3.41 203.57 -1.16
MERI Meritrust FSB of Thibodaux LA 34.00 774 26.3 34.00 17.75 31.50 7.94 N.A. 9.68
MSEA Metropolitan Bancorp of WA 13.62 3,710 50.5 15.00 10.12 13.87 -1.80 87.35 4.77
MCBS Mid Continent Bancshares of KS 18.62 2,061 38.4 19.00 15.12 18.50 0.65 N.A. 0.65
MIFC Mid Iowa Financial Corp. of IA 6.25 1,730 10.8 7.87 4.75 6.25 0.00 25.00 -19.35
MCBN Mid-Coast Bancorp of ME 19.12 229 4.4 20.25 14.05 19.12 0.00 234.85 11.68
MIDC Midconn Bank of Kensington CT* 15.25 1,904 29.0 15.50 13.00 15.25 0.00 45.24 8.93
MWBI Midwest Bancshares, Inc. of IA 25.75 357 9.2 27.12 22.12 26.00 -0.96 157.50 0.00
MWFD Midwest Fed. Fin. Corp of WI 16.00 1,633 26.1 16.00 8.19 15.75 1.59 220.00 48.84
MFFC Milton Fed. Fin. Corp. of OH 12.87 2,301 29.6 17.12 11.50 13.75 -6.40 N.A. -20.80
MIVI Miss. View Hold. Co. of MN 11.25 958 10.8 12.25 9.25 11.50 -2.17 N.A. -1.06
MBBC Monterey Bay Bancorp of CA 11.87 3,414 40.5 13.06 9.87 11.87 0.00 N.A. 2.15
MORG Morgan Financial Corp. of CO 12.25 833 10.2 12.50 9.00 12.25 0.00 N.A. -2.00
MFSB Mutual Bancompany of MO(8) 21.00 333 7.0 21.75 12.00 21.00 0.00 N.A. 16.67
MSBK Mutual SB, FSB of Bay City MI 5.50 4,271 23.5 7.37 5.25 5.50 0.00 -37.14 -8.33
NHTB NH Thrift Bancshares of NH 10.12 1,690 17.1 11.00 8.94 10.00 1.20 119.05 0.00
NHSL NHS Financial, Inc. of CA(8) 10.87 2,523 27.4 11.00 7.75 11.00 -1.18 38.83 8.70
NSLB NS&L Bancorp of Neosho MO 12.87 888 11.4 13.75 11.75 12.50 2.96 N.A. -2.87
NMSB Newmil Bancorp. of CT* 7.50 4,179 31.3 7.50 5.75 6.75 11.11 17.74 7.14
NFSL Newnan SB, FSB of Newnan GA 18.25 1,447 26.4 19.75 12.00 18.50 -1.35 46.00 5.80
NASB North American SB of MO 29.50 2,276 67.1 32.37 21.50 29.75 -0.84 594.12 -7.81
NBSI North Bancshares of Chicago IL 15.63 1,172 18.3 16.25 12.75 16.12 -3.04 N.A. 15.78
FFFD North Central Bancshares of IA 10.25 4,011 41.1 12.68 9.22 10.37 -1.16 N.A. -2.84
NEIB Northeast Indiana Bncrp of IN 11.50 2,062 23.7 13.50 11.25 11.87 -3.12 N.A. -4.17
NSBK Northside SB of Bronx NY* 36.12 4,815 173.9 36.25 23.00 36.00 0.33 126.46 18.43
NWEQ Northwest Equity Corp. of WI 10.25 981 10.1 11.37 8.75 10.50 -2.38 N.A. -5.70
NWSB Northwest SB, MHC of PA(29.9) 11.87 23,376 41.0 13.50 9.00 12.25 -3.10 N.A. -2.06
NSSY Norwalk Savings Society of CT* 19.87 2,371 47.1 21.88 15.37 20.12 -1.24 N.A. 4.58
NSSB Norwich Financial Corp. of CT* 13.37 5,604 74.9 15.25 11.25 13.00 2.85 91.00 3.89
NTMG Nutmeg FS&LA of CT 7.50 708 5.3 7.75 5.17 7.50 0.00 N.A. 12.44
OHSL OHSL Financial Corp. of OH 20.75 1,224 25.4 22.00 17.25 20.50 1.22 N.A. -3.49
OSBF OSB Fin. Corp. of Oshkosh WI 22.75 1,141 26.0 24.87 22.75 23.00 -1.09 97.83 -4.21
OFCP Ottawa Financial Corp. of MI 16.25 5,455 88.6 16.75 13.25 16.25 0.00 N.A. 3.97
PFFB PFF Bancorp of Pomona CA 11.25 19,837 223.2 11.75 10.75 11.00 2.27 N.A. N.A.
PVFC PVF Capital Corp. of OH 19.00 1,549 29.4 20.75 12.04 19.00 0.00 184.86 4.11
PCCI Pacific Crest Capital of CA* 8.13 2,960 24.1 8.25 4.75 8.13 0.00 N.A. 12.14
PALM Palfed, Inc. of Aiken SC 12.62 5,222 65.9 13.50 10.50 12.12 4.13 -17.89 6.32
PSSB Palm Springs SB of CA(8) 13.75 1,131 15.6 14.00 7.62 13.75 0.00 204.20 57.14
PBCI Pamrapo Bancorp, Inc. of NJ 19.00 3,317 63.0 26.12 18.25 19.25 -1.30 237.48 -11.63
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
LFBI Little Falls Bancorp of NJ 0.18 0.13 14.29 13.14 93.87
LOGN Logansport Fin. Corp. of IN 0.76 0.75 15.49 15.49 57.86
LONF London Financial Corp. of OH 0.37 0.37 14.81 14.81 70.99
LISB Long Island Bancorp of NY 1.84 1.72 20.79 20.79 194.47
MAFB MAF Bancorp of IL 3.11 3.20 20.91 20.91 377.61
MBLF MBLA Financial Corp. of MO(8) 1.00 1.00 20.67 20.67 142.18
MFBC MFB Corp. of Mishawaka IN 0.63 0.62 18.67 18.67 96.68
MLFB MLF Bancorp of Villanova PA 1.86 1.65 22.46 21.90 282.67
MSBB MSB Bancorp of Middletown NY* 0.83 0.89 15.53 15.26 160.30
MSBF MSB Financial Corp. of MI 1.53 1.40 18.86 18.86 83.31
MGNL Magna Bancorp of MS 3.08 2.91 18.12 17.02 185.48
MARN Marion Capital Holdings of IN 1.23 1.23 21.48 21.48 89.53
MFCX Marshalltown Fin. Corp. of IA(8) 0.29 0.29 13.71 13.71 89.46
MFSL Maryland Fed. Bancorp of MD 2.71 2.37 29.84 29.34 362.96
MASB MassBank Corp. of Reading MA* 3.24 3.17 31.91 31.91 314.16
MFLR Mayflower Co-Op. Bank of MA* 0.95 0.89 12.51 12.23 126.78
MDBK Medford Savings Bank of MA* 2.15 2.11 19.24 17.45 216.55
MERI Meritrust FSB of Thibodaux LA 2.89 2.89 21.83 21.83 293.44
MSEA Metropolitan Bancorp of WA 1.39 1.50 13.71 12.41 209.75
MCBS Mid Continent Bancshares of KS 1.75 1.35 17.68 17.65 141.15
MIFC Mid Iowa Financial Corp. of IA 0.53 0.51 6.23 6.22 69.01
MCBN Mid-Coast Bancorp of ME 1.33 1.22 21.51 21.51 237.39
MIDC Midconn Bank of Kensington CT* 0.64 0.62 18.13 15.11 191.83
MWBI Midwest Bancshares, Inc. of IA 3.71 3.62 26.58 26.58 383.22
MWFD Midwest Fed. Fin. Corp of WI 1.22 0.98 10.20 9.74 109.15
MFFC Milton Fed. Fin. Corp. of OH 0.79 0.73 14.91 14.91 74.62
MIVI Miss. View Hold. Co. of MN 0.95 0.90 13.78 13.78 73.05
MBBC Monterey Bay Bancorp of CA 0.18 0.22 13.99 13.82 93.40
MORG Morgan Financial Corp. of CO 0.80 0.77 12.61 12.61 86.02
MFSB Mutual Bancompany of MO(8) 0.34 0.39 18.73 18.73 160.09
MSBK Mutual SB, FSB of Bay City MI 0.02 -0.16 9.19 9.19 168.46
NHTB NH Thrift Bancshares of NH 0.83 0.87 11.49 11.49 149.40
NHSL NHS Financial, Inc. of CA(8) 0.19 0.18 9.78 9.76 115.98
NSLB NS&L Bancorp of Neosho MO 0.59 0.55 15.62 15.62 66.50
NMSB Newmil Bancorp. of CT* 1.47 1.46 7.77 7.77 69.77
NFSL Newnan SB, FSB of Newnan GA 2.10 1.83 12.86 12.77 111.03
NASB North American SB of MO 3.74 3.57 21.44 20.58 291.85
NBSI North Bancshares of Chicago IL 0.54 0.49 16.92 16.92 97.56
FFFD North Central Bancshares of IA 0.65 0.61 13.72 13.72 47.52
NEIB Northeast Indiana Bncrp of IN 0.70 0.70 13.92 13.92 68.43
NSBK Northside SB of Bronx NY* 3.73 3.22 25.40 25.16 328.23
NWEQ Northwest Equity Corp. of WI 0.86 0.82 12.09 12.09 88.03
NWSB Northwest SB, MHC of PA(29.9) 0.73 0.73 8.07 7.97 75.61
NSSY Norwalk Savings Society of CT* 1.59 1.36 18.24 18.24 228.47
NSSB Norwich Financial Corp. of CT* 0.98 0.98 13.43 12.12 126.99
NTMG Nutmeg FS&LA of CT 0.76 0.46 7.20 7.20 120.33
OHSL OHSL Financial Corp. of OH 1.53 1.49 20.85 20.85 167.86
OSBF OSB Fin. Corp. of Oshkosh WI 0.38 0.66 28.00 28.00 222.36
OFCP Ottawa Financial Corp. of MI 0.72 0.72 14.92 11.96 136.66
PFFB PFF Bancorp of Pomona CA 0.10 0.10 14.57 14.40 101.23
PVFC PVF Capital Corp. of OH 2.26 1.99 13.77 13.77 205.36
PCCI Pacific Crest Capital of CA* 0.93 0.75 7.66 7.66 96.93
PALM Palfed, Inc. of Aiken SC 0.82 0.69 10.09 9.60 119.41
PSSB Palm Springs SB of CA(8) 1.07 0.57 10.34 10.34 169.84
PBCI Pamrapo Bancorp, Inc. of NJ 1.59 1.59 17.21 17.05 111.06
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 7, 1996
<CAPTION>
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
PVSA Parkvale Financial Corp of PA 26.00 3,233 84.1 28.50 19.40 27.62 -5.87 214.01 -5.45
PBIX Patriot Bank Corp. of PA 13.00 3,498 45.5 13.12 12.31 12.75 1.96 N.A. 1.01
PEEK Peekskill Fin. Corp. of NY 12.00 4,100 49.2 12.12 11.12 11.87 1.10 N.A. -0.99
PFSB PennFed Fin. Services of NJ 15.12 5,077 76.8 16.00 12.12 15.50 -2.45 N.A. 2.51
PWBC PennFirst Bancorp of PA 13.75 3,996 54.9 13.75 11.87 13.62 0.95 72.31 1.85
PBKB People's SB of Brockton MA* 10.00 3,340 33.4 10.50 5.50 9.75 2.56 68.35 -4.76
PFDC Peoples Bancorp of Auburn IN 20.62 2,356 48.6 22.50 18.00 20.25 1.83 17.83 0.00
PBCT Peoples Bank, MHC of CT(32.3)* 20.37 39,166 240.7 23.12 15.12 20.62 -1.21 158.83 7.21
PHBK Peoples Heritage Fin Grp of ME* 20.12 17,028 342.6 22.75 15.00 19.87 1.26 31.42 -11.56
PBNB Peoples Sav. Fin. Corp. of CT* 20.50 1,915 39.3 22.50 18.00 20.50 0.00 107.70 6.49
PERM Permanent Bancorp of IN 16.00 2,186 35.0 18.50 14.00 16.00 0.00 N.A. -1.54
PMFI Perpetual Midwest Fin. of IA 17.00 2,017 34.3 17.75 14.25 17.12 -0.70 N.A. 3.03
PCBC Perry Co. Fin. Corp. of MO 17.25 856 14.8 21.50 14.75 17.25 0.00 N.A. -11.54
PHFC Pittsburgh Home Fin. of PA 10.00 2,182 21.8 11.12 10.00 10.00 0.00 N.A. N.A.
PFSL Pocahnts Fed, MHC of AR (46.4) 15.75 1,610 11.8 17.25 10.75 15.75 0.00 N.A. -0.76
POBS Portsmouth Bank Shrs Inc of NH(8)* 13.75 5,737 78.9 15.20 10.78 14.25 -3.51 32.08 -8.76
PKPS Poughkeepsie SB of NY 5.50 12,535 68.9 6.00 4.62 5.37 2.42 -29.03 4.76
PETE Primary Bank of NH* 12.25 1,953 23.9 15.50 11.67 12.75 -3.92 N.A. -2.93
PSAB Prime Bancorp, Inc. of PA 17.50 3,723 65.2 20.68 15.68 18.00 -2.78 152.16 -13.58
PFNC Progress Financial Corp. of PA 6.50 3,730 24.2 7.25 4.75 6.75 -3.70 -40.96 15.45
PSBK Progressive Bank, Inc. of NY* 29.00 2,631 76.3 29.75 24.25 28.75 0.87 116.90 -1.69
PULB Pulaski SB, MHC of MO (29.0) 14.00 2,094 8.4 16.50 11.75 14.12 -0.85 N.A. -6.67
PULS Pulse Bancorp of S. River NJ 17.31 3,886 67.3 17.75 14.50 17.12 1.11 39.94 1.82
QCFB QCF Bancorp of Virginia MN 14.00 1,783 25.0 15.12 12.00 14.25 -1.75 N.A. -5.08
QCBC Quaker City Bancorp of CA 14.50 3,928 57.0 14.75 11.00 14.37 0.90 93.33 4.54
QCSB Queens County SB of NY* 47.62 6,110 291.0 47.87 31.50 47.87 -0.52 N.A. 20.37
RCSB RCSB Financial, Inc. of NY* 24.75 13,514 334.5 25.37 19.00 23.62 4.78 101.06 4.21
RARB Raritan Bancorp. of Raritan NJ* 21.19 1,427 30.2 22.50 20.50 21.50 -1.44 117.33 -1.44
REDF RedFed Bancorp of Redlands CA 9.62 4,060 39.1 10.62 7.75 9.87 -2.53 N.A. -4.94
RELY Reliance Bancorp of NY 15.50 9,226 143.0 16.50 13.12 15.75 -1.59 N.A. 6.02
RELI Reliance Bancshares Inc of WI* 7.50 2,562 19.2 8.50 7.50 8.13 -7.75 N.A. N.A.
RFED Roosevelt Fin. Grp. Inc. of MO 18.25 42,118 768.7 19.75 15.25 17.87 2.13 367.95 -5.78
RVSB Rvrview SB,FSB MHC of WA(40.3) 16.00 2,155 12.6 17.00 11.36 15.25 4.92 N.A. 10.04
SCCB S. Carolina Comm. Bnshrs of SC 16.50 747 12.3 20.50 14.75 16.50 0.00 N.A. -8.94
SBFL SB Fing. Lakes MHC of NY(33.0) 16.50 1,785 9.7 16.75 9.38 16.00 3.13 N.A. 1.54
SFED SFS Bancorp of Schenectady NY 11.75 1,395 16.4 13.50 11.00 12.00 -2.08 N.A. -9.62
SGVB SGV Bancorp of W. Covina CA 8.62 2,728 23.5 10.12 8.00 8.81 -2.16 N.A. -11.59
SISB SIS Bank of Sprinfield MA* 16.87 5,718 96.5 18.75 12.00 17.25 -2.20 N.A. 3.05
SJSB SJS Bancorp of St. Joseph MI 20.75 983 20.4 20.75 14.50 20.12 3.13 N.A. 5.06
SWCB Sandwich Co-Op. Bank of MA* 19.37 1,873 36.3 21.50 15.37 20.00 -3.15 124.71 6.14
SFBM Security Bancorp of MT 20.50 1,462 30.0 21.25 19.50 21.25 -3.53 164.52 -2.38
SECP Security Capital Corp. of WI 61.00 9,536 581.7 62.50 48.00 61.50 -0.81 N.A. 1.24
SFSL Security First Corp. of OH 13.25 3,532 46.8 15.75 11.50 12.00 10.42 -15.87 -7.02
SHFC Seven Hills Fin. Corp. of OH 14.50 536 7.8 17.37 14.37 14.50 0.00 -3.33 0.00
SMFC Sho-Me Fin. Corp. of MO 15.63 1,821 28.5 16.75 14.50 16.75 -6.69 N.A. 4.20
SOBI Sobieski Bancorp of S. Bend IN 12.00 837 10.0 13.25 10.12 12.25 -2.04 N.A. -7.69
SOSA Somerset Savings Bank of MA(8)* 1.50 16,652 25.0 1.88 1.09 1.56 -3.85 -70.70 9.49
SMBC Southern Missouri Bncrp of MO 14.00 1,724 24.1 17.50 13.50 14.00 0.00 N.A. -6.67
SWBI Southwest Bancshares of IL 27.25 1,871 51.0 28.25 25.50 27.12 0.48 172.50 2.83
SVRN Sovereign Bancorp of PA 10.37 47,838 496.1 11.25 8.45 10.50 -1.24 131.99 7.57
STFR St. Francis Cap. Corp. of WI 25.50 5,857 149.4 28.00 19.00 25.75 -0.97 N.A. 9.68
SPBC St. Paul Bancorp, Inc. of IL 23.50 18,550 435.9 26.62 22.06 23.12 1.64 39.30 -7.84
STND Standard Fin. of Chicago IL 15.25 16,765 255.7 15.37 12.87 15.12 0.86 N.A. 4.31
SFFC StateFed Financial Corp. of IA 16.00 823 13.2 19.75 15.25 16.50 -3.03 N.A. -11.70
SFIN Statewide Fin. Corp. of NJ 12.12 5,270 63.9 13.75 11.75 12.25 -1.06 N.A. -7.20
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
PVSA Parkvale Financial Corp of PA 2.90 2.71 20.99 20.89 282.71
PBIX Patriot Bank Corp. of PA 0.42 0.43 15.47 15.47 89.48
PEEK Peekskill Fin. Corp. of NY 0.44 0.46 14.49 14.49 47.24
PFSB PennFed Fin. Services of NJ 1.32 1.43 18.08 14.32 201.45
PWBC PennFirst Bancorp of PA 1.00 0.99 13.37 12.18 170.28
PBKB People's SB of Brockton MA* 0.74 0.53 7.87 7.45 159.62
PFDC Peoples Bancorp of Auburn IN 1.70 1.69 18.19 18.19 119.18
PBCT Peoples Bank, MHC of CT(32.3)* 1.90 1.53 14.12 14.12 176.59
PHBK Peoples Heritage Fin Grp of ME* 2.14 2.11 16.24 13.97 193.90
PBNB Peoples Sav. Fin. Corp. of CT* 1.80 1.88 22.94 21.22 212.15
PERM Permanent Bancorp of IN 0.53 0.53 19.26 18.98 172.88
PMFI Perpetual Midwest Fin. of IA 0.73 0.73 17.87 17.87 185.44
PCBC Perry Co. Fin. Corp. of MO 0.88 0.88 18.84 18.84 90.32
PHFC Pittsburgh Home Fin. of PA 0.54 0.54 13.58 13.58 82.64
PFSL Pocahnts Fed, MHC of AR (46.4) 1.23 1.26 13.64 13.64 229.43
POBS Portsmouth Bank Shrs Inc of NH(8)* 1.06 0.89 11.68 11.68 46.61
PKPS Poughkeepsie SB of NY 1.23 1.62 5.69 5.69 66.95
PETE Primary Bank of NH* -0.08 -0.07 12.76 12.71 201.31
PSAB Prime Bancorp, Inc. of PA 1.61 1.43 15.44 14.44 163.57
PFNC Progress Financial Corp. of PA 0.81 0.63 5.15 5.11 93.30
PSBK Progressive Bank, Inc. of NY* 2.73 2.81 26.45 26.45 298.58
PULB Pulaski SB, MHC of MO (29.0) 0.73 0.69 10.82 10.82 85.68
PULS Pulse Bancorp of S. River NJ 1.36 1.37 13.84 13.84 116.43
QCFB QCF Bancorp of Virginia MN 1.28 1.28 17.81 17.81 81.66
QCBC Quaker City Bancorp of CA 0.84 0.81 17.43 17.33 176.42
QCSB Queens County SB of NY* 3.39 3.50 35.00 35.00 206.14
RCSB RCSB Financial, Inc. of NY* 2.43 2.39 22.19 21.45 304.21
RARB Raritan Bancorp. of Raritan NJ* 1.94 1.91 17.60 17.16 243.06
REDF RedFed Bancorp of Redlands CA -1.06 -1.02 11.90 11.90 211.32
RELY Reliance Bancorp of NY 1.14 1.09 16.75 11.30 189.07
RELI Reliance Bancshares Inc of WI* 0.29 0.29 11.06 11.06 19.67
RFED Roosevelt Fin. Grp. Inc. of MO 1.35 1.83 10.54 9.96 216.88
RVSB Rvrview SB,FSB MHC of WA(40.3) 1.21 1.09 10.71 9.48 97.22
SCCB S. Carolina Comm. Bnshrs of SC 0.80 0.80 16.80 16.80 59.02
SBFL SB Fing. Lakes MHC of NY(33.0) -0.52 -0.19 11.40 11.40 98.92
SFED SFS Bancorp of Schenectady NY 0.74 0.74 16.68 16.68 118.69
SGVB SGV Bancorp of W. Covina CA 0.12 0.12 11.94 11.94 122.09
SISB SIS Bank of Sprinfield MA* 2.29 2.33 14.73 14.73 198.53
SJSB SJS Bancorp of St. Joseph MI 0.88 0.86 17.89 17.89 153.36
SWCB Sandwich Co-Op. Bank of MA* 1.92 1.80 19.46 18.18 226.31
SFBM Security Bancorp of MT 1.71 1.27 21.98 18.92 246.25
SECP Security Capital Corp. of WI 2.99 3.09 59.20 59.20 350.74
SFSL Security First Corp. of OH 1.50 1.57 11.58 11.26 132.97
SHFC Seven Hills Fin. Corp. of OH 0.31 0.29 18.01 18.01 84.91
SMFC Sho-Me Fin. Corp. of MO 1.08 1.07 17.36 17.36 144.91
SOBI Sobieski Bancorp of S. Bend IN 0.39 0.39 16.87 16.87 91.23
SOSA Somerset Savings Bank of MA(8)* 0.10 0.10 1.67 1.67 30.60
SMBC Southern Missouri Bncrp of MO 0.78 0.73 15.41 15.41 93.96
SWBI Southwest Bancshares of IL 2.27 2.26 22.42 22.42 186.82
SVRN Sovereign Bancorp of PA 1.13 1.02 7.15 4.63 175.82
STFR St. Francis Cap. Corp. of WI 2.70 1.84 23.08 22.04 221.20
SPBC St. Paul Bancorp, Inc. of IL 1.95 1.90 20.64 20.57 223.33
STND Standard Fin. of Chicago IL 1.03 0.93 16.05 16.04 130.43
SFFC StateFed Financial Corp. of IA 1.03 1.03 18.13 18.13 90.14
SFIN Statewide Fin. Corp. of NJ 0.53 0.65 13.36 13.32 120.39
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of June 7, 1996
<CAPTION>
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
STSA Sterling Financial Corp. of WA 14.00 5,426 76.0 14.50 10.23 13.75 1.82 54.02 1.82
SSBK Strongsville SB of OH 21.50 2,531 54.4 21.75 17.00 20.25 6.17 N.A. 10.26
SFSB SuburbFed Fin. Corp. of IL 17.62 1,261 22.2 18.17 14.83 17.00 3.65 164.17 6.79
SBCN Suburban Bancorp. of OH 14.50 1,481 21.5 18.50 14.50 15.25 -4.92 N.A. -21.62
SCSL Suncoast S&LA of Hollywood FL 6.25 1,990 12.4 7.19 5.81 6.25 0.00 -8.22 0.00
THRD TF Financial Corp. of PA 14.62 4,523 66.1 16.00 13.25 14.50 0.83 N.A. -4.88
ROSE TR Financial Corp. of NY 26.12 8,948 233.7 27.75 17.37 27.00 -3.26 N.A. 2.43
TPNZ Tappan Zee Fin. Corp. of NY 12.00 1,620 19.4 13.00 11.25 12.00 0.00 N.A. -4.91
PTRS The Potters S&L Co. of OH 16.25 533 8.7 18.50 15.25 16.12 0.81 N.A. -4.75
THIR Third Financial Corp. of OH(8) 31.25 1,136 35.5 32.00 18.25 31.25 0.00 N.A. 19.05
TSBS Trenton SB, FSB MHC of NJ(35.0 14.50 8,912 45.2 15.00 11.37 13.94 4.02 N.A. 11.54
TRIC Tri-County Bancorp of WY 18.50 631 11.7 18.50 13.75 18.00 2.78 N.A. 12.12
THBC Troy Hill Bancorp of PA 13.37 1,068 14.3 14.00 11.50 12.87 3.89 N.A. 2.85
TWIN Twin City Bancorp of TN 16.00 898 14.4 18.25 13.50 16.75 -4.48 N.A. -5.88
UFRM United FS&LA of Rocky Mount NC 8.25 3,065 25.3 8.50 5.25 8.25 0.00 153.85 10.00
UBMT United SB, FA of MT 18.25 1,223 22.3 18.75 17.00 18.75 -2.67 73.81 4.29
VABF Va. Beach Fed. Fin. Corp of VA 7.62 4,962 37.8 9.94 6.81 7.75 -1.68 62.47 -1.68
VAFD Valley FSB of Sheffield AL(8) 32.00 367 11.7 35.25 24.87 30.50 4.92 204.76 -8.57
VFFC Virginia First Savings of VA 12.25 5,615 68.8 12.25 8.37 12.25 0.00 ***.** 7.74
WBCI WFS Bancorp of Wichita KS(8) 22.87 1,561 35.7 22.87 18.75 22.87 0.00 N.A. 3.39
WHGB WHG Bancshares of MD 11.50 1,620 18.6 11.75 10.87 11.06 3.98 N.A. N.A.
WSFS WSFS Financial Corp. of DE* 7.87 14,179 111.6 10.00 5.50 7.50 4.93 8.55 -12.56
WVFC WVS Financial Corp. of PA* 20.75 1,736 36.0 22.25 16.00 20.50 1.22 N.A. 8.53
WLDN Walden Bancorp of MA* 18.75 5,312 99.6 20.00 15.50 19.00 -1.32 163.34 -1.32
WRNB Warren Bancorp of Peabody MA* 12.50 3,718 46.5 13.25 8.00 12.75 -1.96 270.92 11.11
WFSL Washington FS&LA of Seattle WA 21.56 42,592 918.3 23.46 19.32 21.62 -0.28 47.77 -7.47
WAMU Washington Mutual Inc. of WA* 30.00 72,007 2,160.2 32.00 22.62 28.69 4.57 61.64 3.91
WAYN Wayne S&L Co., MHC of OH(46.7) 20.50 1,492 13.5 22.00 17.14 20.75 -1.20 N.A. -6.44
WCFB Webster CityFSB,MHC of IA(45.2 12.87 2,100 12.2 13.50 9.75 13.00 -1.00 N.A. 2.96
WBST Webster Financial Corp. of CT 28.00 8,104 226.9 30.50 23.00 28.62 -2.17 196.61 -5.08
WEFC Wells Fin. Corp. of Wells MN 11.25 2,188 24.6 11.37 9.06 10.50 7.14 N.A. 2.27
WCBI WestCo Bancorp of IL 22.00 2,678 58.9 22.00 14.83 21.00 4.76 120.00 23.39
WSTR WesterFed Fin. Corp. of MT 14.37 4,396 63.2 17.12 14.25 14.37 0.00 N.A. -13.54
WOFC Western Ohio Fin. Corp. of OH 23.00 2,309 53.1 24.37 18.75 22.25 3.37 N.A. -1.08
WFCO Winton Financial Corp. of OH(8) 12.25 1,986 24.3 15.00 10.87 13.00 -5.77 N.A. 12.70
FFWD Wood Bancorp of OH 18.75 1,034 19.4 19.50 14.12 18.75 0.00 N.A. 4.17
WCHI Workingmens Cap. Hldgs of IN(8) 19.87 1,798 35.7 20.25 15.50 19.87 0.00 297.40 13.54
YFCB Yonkers Fin. Corp. of NY 9.62 3,571 34.4 10.12 9.62 9.87 -2.53 N.A. N.A.
YFED York Financial Corp. of PA 16.62 6,050 100.6 18.86 14.32 16.62 0.00 75.87 -1.48
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
STSA Sterling Financial Corp. of WA 0.92 0.90 11.55 9.26 276.01
SSBK Strongsville SB of OH 1.88 1.59 16.50 16.15 199.38
SFSB SuburbFed Fin. Corp. of IL 1.41 1.21 20.52 20.40 287.29
SBCN Suburban Bancorp. of OH 0.53 0.77 17.31 17.31 133.11
SCSL Suncoast S&LA of Hollywood FL 0.74 -0.92 6.59 6.56 234.42
THRD TF Financial Corp. of PA 0.94 0.91 16.43 16.43 114.79
ROSE TR Financial Corp. of NY 2.71 2.14 20.91 20.91 335.49
TPNZ Tappan Zee Fin. Corp. of NY 0.52 0.48 13.80 13.80 70.86
PTRS The Potters S&L Co. of OH 1.15 1.13 20.79 20.79 213.62
THIR Third Financial Corp. of OH(8) 1.89 1.69 24.87 24.87 137.05
TSBS Trenton SB, FSB MHC of NJ(35.0 1.05 0.70 11.08 10.83 58.20
TRIC Tri-County Bancorp of WY 0.98 0.95 20.75 20.75 116.38
THBC Troy Hill Bancorp of PA 1.02 0.93 16.73 16.73 75.36
TWIN Twin City Bancorp of TN 1.21 1.05 15.70 15.70 114.06
UFRM United FS&LA of Rocky Mount NC 0.73 0.64 6.81 6.81 82.27
UBMT United SB, FA of MT 1.32 1.31 20.12 20.12 85.51
VABF Va. Beach Fed. Fin. Corp of VA 0.32 0.01 8.28 8.28 125.95
VAFD Valley FSB of Sheffield AL(8) 1.09 1.06 26.14 26.14 323.23
VFFC Virginia First Savings of VA 1.48 1.22 9.82 9.46 127.15
WBCI WFS Bancorp of Wichita KS(8) 0.86 0.94 21.35 21.34 187.16
WHGB WHG Bancshares of MD 0.36 0.36 14.20 14.20 68.95
WSFS WSFS Financial Corp. of DE* 1.91 1.13 5.21 5.14 88.82
WVFC WVS Financial Corp. of PA* 1.63 1.82 20.93 20.93 138.41
WLDN Walden Bancorp of MA* 1.58 1.75 17.98 15.38 191.88
WRNB Warren Bancorp of Peabody MA* 1.56 1.49 8.54 8.54 95.45
WFSL Washington FS&LA of Seattle WA 1.88 1.80 14.04 13.36 115.73
WAMU Washington Mutual Inc. of WA* 2.62 2.61 19.33 17.19 310.31
WAYN Wayne S&L Co., MHC of OH(46.7) 0.95 0.89 15.32 15.32 166.56
WCFB Webster CityFSB,MHC of IA(45.2 0.51 0.51 10.32 10.32 46.31
WBST Webster Financial Corp. of CT 2.00 2.14 24.27 18.45 470.53
WEFC Wells Fin. Corp. of Wells MN 0.72 0.70 13.40 13.40 89.66
WCBI WestCo Bancorp of IL 1.50 1.49 18.07 18.07 115.48
WSTR WesterFed Fin. Corp. of MT 0.99 0.93 17.77 17.77 133.82
WOFC Western Ohio Fin. Corp. of OH 1.10 0.83 25.19 23.72 138.40
WFCO Winton Financial Corp. of OH(8) 1.04 0.85 10.42 10.14 132.09
FFWD Wood Bancorp of OH 1.56 1.51 19.72 19.72 135.12
WCHI Workingmens Cap. Hldgs of IN(8) 1.07 1.05 14.55 14.55 118.84
YFCB Yonkers Fin. Corp. of NY 0.60 0.66 13.07 13.07 67.39
YFED York Financial Corp. of PA 1.65 1.44 15.22 15.22 173.33
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1
Weekly Thrift Market Line - Part Two
Prices As Of June 7, 1996
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ _______________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
______________________________________________
SAIF-Insured Thrifts(323) 13.32 13.13 0.87 8.17 7.01 0.81 7.34 0.97 125.85 0.88
NYSE Traded Companies(12) 6.31 5.96 0.70 11.72 7.87 0.58 9.64 1.58 62.19 1.33
AMEX Traded Companies(17) 18.40 18.32 0.83 6.71 5.42 0.80 6.35 0.61 132.94 0.70
NASDAQ Listed OTC Companies(294) 13.33 13.14 0.88 8.09 7.06 0.82 7.30 0.96 128.65 0.87
California Companies(25) 7.62 7.48 0.33 5.18 3.73 0.27 4.11 2.34 50.59 1.32
Florida Companies(10) 7.64 7.46 0.75 12.69 9.66 0.53 6.73 1.08 105.23 1.01
Mid-Atlantic Companies(63) 11.93 11.63 0.87 9.02 8.08 0.84 8.63 1.25 86.41 1.09
Mid-West Companies(150) 14.74 14.60 0.94 7.85 6.91 0.87 7.10 0.59 165.13 0.71
New England Companies(9) 8.08 7.66 0.63 8.69 8.58 0.53 7.21 1.35 49.90 1.10
North-West Companies(6) 10.61 10.24 0.96 10.35 7.34 0.90 9.45 0.87 71.09 0.84
South-East Companies(45) 15.70 15.54 1.02 8.66 6.73 0.97 8.06 0.99 124.58 0.86
South-West Companies(7) 12.45 12.34 0.72 7.33 8.19 0.69 6.85 0.86 41.09 0.86
Western Companies (Excl CA)(8) 17.09 16.91 1.04 7.61 6.36 0.99 7.17 0.26 211.26 0.67
Thrift Strategy(249) 14.91 14.74 0.87 7.08 6.41 0.83 6.63 0.86 134.52 0.81
Mortgage Banker Strategy(39) 7.52 7.21 0.84 11.92 9.30 0.64 8.36 1.32 77.80 0.94
Real Estate Strategy(16) 9.03 8.89 0.90 10.74 8.81 0.92 11.02 1.86 84.24 1.54
Diversified Strategy(15) 7.97 7.78 0.97 12.92 8.05 0.92 12.63 1.02 151.77 1.27
Retail Banking Strategy(4) 9.43 9.18 0.73 9.92 10.26 0.58 7.67 1.37 76.19 0.92
Companies Issuing Dividends(241) 13.06 12.85 0.95 8.83 7.53 0.89 8.01 0.84 135.37 0.84
Companies Without Dividends(82) 14.07 13.95 0.64 6.23 5.47 0.60 5.39 1.36 96.38 0.98
Equity/Assets Less Than 6%(29) 4.98 4.73 0.52 10.66 7.40 0.41 8.06 1.74 83.49 1.06
Equity/Assets 6-12%(147) 8.54 8.24 0.84 10.30 8.54 0.75 9.15 1.17 110.62 1.03
Equity/Assets Greater Than 12%(147) 19.69 19.63 0.98 5.57 5.41 0.95 5.42 0.58 151.62 0.69
Converted Last 3 Mths (no MHC)(19) 23.88 23.87 0.83 4.58 4.25 0.84 4.72 0.82 129.00 0.78
Actively Traded Companies(54) 8.58 8.30 0.92 11.34 8.36 0.88 10.65 1.43 85.94 1.03
Market Value Below $20 Million(83) 15.60 15.55 0.82 6.55 6.64 0.74 5.20 1.01 108.02 0.74
Holding Company Structure(276) 13.88 13.69 0.87 7.76 6.74 0.82 7.11 0.93 128.31 0.84
Assets Over $1 Billion(62) 8.05 7.58 0.83 11.08 8.36 0.76 10.10 1.15 101.18 1.03
Assets $500 Million-$1 Billion(56) 11.31 11.07 0.85 8.76 7.03 0.81 8.14 1.34 133.20 1.03
Assets $250-$500 Million(79) 11.54 11.35 0.83 8.37 7.47 0.74 6.83 0.93 135.90 0.90
Assets less than $250 Million(126) 18.09 18.07 0.93 6.26 6.01 0.89 5.87 0.70 129.50 0.71
Goodwill Companies(133) 9.27 8.82 0.82 9.66 7.76 0.74 8.46 1.17 97.22 0.96
Non-Goodwill Companies(190) 16.26 16.26 0.91 7.08 6.46 0.87 6.53 0.81 148.67 0.81
Acquirors of FSLIC Cases(14) 7.07 6.70 0.88 12.89 9.68 0.84 12.16 1.45 51.18 0.92
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
______________________________________________
SAIF-Insured Thrifts(323) 14.12 103.54 12.98 106.71 15.00 0.34 1.85 25.61
NYSE Traded Companies(12) 12.94 136.20 8.76 144.50 14.64 0.42 1.48 16.50
AMEX Traded Companies(17) 16.14 94.02 16.33 94.71 17.34 0.32 2.16 27.95
NASDAQ Listed OTC Companies(294) 14.08 102.64 12.97 105.73 14.90 0.33 1.85 25.93
California Companies(25) 13.84 101.60 7.47 104.33 15.61 0.27 1.14 16.04
Florida Companies(10) 11.46 107.42 7.89 110.21 13.81 0.16 0.88 11.16
Mid-Atlantic Companies(63) 12.75 100.50 11.36 105.15 13.54 0.32 1.76 22.18
Mid-West Companies(150) 14.81 102.56 14.13 104.75 15.73 0.34 1.89 26.77
New England Companies(9) 11.34 93.73 7.45 102.91 12.99 0.51 2.75 32.40
North-West Companies(6) 14.73 132.89 13.03 141.75 14.19 0.27 1.31 18.23
South-East Companies(45) 14.84 112.83 16.45 115.41 15.24 0.36 2.16 30.84
South-West Companies(7) 13.48 81.23 9.91 85.07 14.35 0.28 2.01 30.11
Western Companies (Excl CA)(8) 15.15 102.97 16.25 105.07 16.07 0.43 2.49 36.99
Thrift Strategy(249) 14.90 97.90 13.95 100.24 15.55 0.33 1.94 28.10
Mortgage Banker Strategy(39) 11.23 120.25 9.11 128.35 13.24 0.34 1.52 16.80
Real Estate Strategy(16) 12.75 110.19 9.66 112.19 12.94 0.17 0.82 8.83
Diversified Strategy(15) 12.25 148.89 11.76 153.77 12.73 0.60 2.43 27.99
Retail Banking Strategy(4) 12.21 88.85 8.33 91.64 15.87 0.14 1.36 18.06
Companies Issuing Dividends(241) 14.10 108.07 13.34 111.73 14.95 0.45 2.48 34.65
Companies Without Dividends(82) 14.18 90.25 11.92 92.01 15.19 0.00 0.00 0.00
Equity/Assets Less Than 6%(29) 10.91 118.64 5.95 127.62 12.84 0.24 1.16 13.46
Equity/Assets 6-12%(147) 12.41 112.77 9.51 117.50 13.40 0.36 1.83 22.38
Equity/Assets Greater Than 12%(147) 16.87 91.42 17.80 91.91 17.31 0.33 2.02 31.59
Converted Last 3 Mths (no MHC)(19) 17.30 76.97 18.57 77.02 17.85 0.04 0.35 5.77
Actively Traded Companies(54) 11.68 124.38 10.48 131.37 12.31 0.49 2.13 25.20
Market Value Below $20 Million(83) 14.77 87.05 13.39 87.53 15.95 0.26 1.76 25.68
Holding Company Structure(276) 14.49 102.78 13.40 105.99 15.24 0.35 1.89 26.54
Assets Over $1 Billion(62) 12.15 125.27 9.86 135.19 13.23 0.48 1.99 23.61
Assets $500 Million-$1 Billion(56) 13.67 106.08 11.71 109.72 14.56 0.29 1.58 22.61
Assets $250-$500 Million(79) 13.80 103.52 11.54 105.38 14.76 0.33 1.95 25.27
Assets less than $250 Million(126) 15.79 91.19 16.07 91.48 16.47 0.28 1.85 28.44
Goodwill Companies(133) 12.64 112.81 10.21 120.35 13.81 0.39 1.88 23.53
Non-Goodwill Companies(190) 15.30 96.82 14.98 96.82 15.94 0.29 1.83 27.18
Acquirors of FSLIC Cases(14) 10.91 130.66 9.12 138.27 12.64 0.43 2.00 21.15
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and assets
balances; ROI (return on investment) is current EPS divided by current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 7, 1996
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ _______________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHCs)
_____________________________________________
BIF-Insured Thrifts(71) 10.35 10.11 0.92 10.82 8.66 0.87 10.01 1.69 92.47 1.49
NYSE Traded Companies(3) 5.37 5.33 0.24 4.68 3.79 0.30 5.92 2.64 36.28 1.17
AMEX Traded Companies(4) 12.21 11.77 0.75 8.27 7.70 0.53 5.60 2.73 45.60 1.37
NASDAQ Listed OTC Companies(64) 10.40 10.16 0.95 11.21 8.89 0.91 10.46 1.62 96.25 1.51
California Companies(2) 6.78 6.77 0.61 11.41 6.92 0.51 9.40 4.57 31.17 1.83
Mid-Atlantic Companies(19) 10.53 10.46 0.83 10.28 8.03 0.81 9.47 1.92 80.22 1.43
Mid-West Companies(1) 56.23 56.23 1.47 2.62 3.87 1.47 2.62 0.00 0.00 0.49
New England Companies(44) 8.94 8.59 0.92 10.94 9.16 0.86 10.19 1.59 86.16 1.60
North-West Companies(4) 13.71 13.54 1.12 12.13 7.99 1.11 12.03 0.31 256.34 0.95
South-West Companies(1) 8.65 8.35 1.54 17.77 11.81 1.20 13.90 0.42 127.82 0.78
Thrift Strategy(44) 11.85 11.61 0.92 9.81 8.33 0.88 9.29 1.60 86.71 1.45
Mortgage Banker Strategy(11) 7.24 6.88 0.74 10.13 8.23 0.73 10.10 1.16 121.43 1.22
Real Estate Strategy(7) 9.61 9.56 1.24 14.45 9.73 1.12 12.71 2.07 95.15 1.73
Diversified Strategy(7) 6.87 6.55 1.16 18.46 12.94 0.98 15.19 2.69 91.76 2.03
Retail Banking Strategy(2) 6.32 6.16 0.05 0.82 1.07 0.05 0.86 1.31 68.51 1.24
Companies Issuing Dividends(50) 9.20 8.89 1.01 11.72 9.40 0.97 11.11 1.14 108.75 1.39
Companies Without Dividends(21) 12.89 12.80 0.71 8.85 7.01 0.64 7.61 3.20 47.95 1.71
Equity/Assets Less Than 6%(8) 5.40 5.34 0.65 12.18 8.07 0.49 9.31 3.49 42.48 1.76
Equity/Assets 6-12%(51) 8.25 7.93 0.95 11.78 9.58 0.90 11.09 1.50 94.12 1.51
Equity/Assets Greater Than 12%(12) 23.69 23.69 0.97 5.38 4.73 0.99 5.44 1.31 137.58 1.19
Converted Last 3 Mths (no MHC)(3) 36.19 36.19 0.96 2.82 3.63 1.01 3.03 0.00 0.00 1.14
Actively Traded Companies(30) 8.50 8.10 0.90 10.73 8.91 0.89 10.63 1.29 95.02 1.52
Market Value Below $20 Million(12) 13.83 13.60 0.86 9.11 8.24 0.78 8.05 1.54 89.01 1.15
Holding Company Structure(45) 11.59 11.33 1.04 11.60 9.21 1.00 10.88 1.48 101.04 1.57
Assets Over $1 Billion(17) 7.83 7.54 0.98 13.40 9.66 0.93 12.27 1.99 79.90 1.57
Assets $500 Million-$1 Billion(17) 9.90 9.64 0.87 10.22 8.17 0.78 9.09 1.26 105.58 1.57
Assets $250-$500 Million(22) 10.17 9.94 0.89 10.50 8.60 0.88 10.14 2.02 80.14 1.51
Assets less than $250 Million(15) 13.41 13.22 0.94 9.44 8.27 0.88 8.67 1.43 108.50 1.31
Goodwill Companies(35) 7.85 7.35 0.82 10.93 8.70 0.74 9.68 1.44 84.25 1.41
Non-Goodwill Companies(36) 12.70 12.70 1.00 10.72 8.62 0.98 10.33 1.95 100.68 1.56
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHCs)
_____________________________________________
BIF-Insured Thrifts(71) 11.35 110.15 10.66 113.60 11.86 0.36 1.98 21.90
NYSE Traded Companies(3) 19.29 113.92 6.06 114.71 14.11 0.00 0.00 0.00
AMEX Traded Companies(4) 10.83 97.55 10.90 103.71 13.10 0.52 2.72 32.48
NASDAQ Listed OTC Companies(64) 11.22 110.89 10.80 114.25 11.77 0.37 2.00 21.93
California Companies(2) 8.74 101.26 6.92 101.32 10.84 0.00 0.00 0.00
Mid-Atlantic Companies(19) 12.51 110.13 10.82 111.24 12.03 0.37 1.62 19.16
Mid-West Companies(1) 0.00 67.81 38.13 67.81 0.00 0.00 0.00 0.00
New England Companies(44) 11.06 109.85 9.55 114.50 11.95 0.39 2.31 24.46
North-West Companies(4) 10.70 122.46 15.21 127.29 10.75 0.40 2.08 28.55
South-West Companies(1) 8.47 132.74 11.48 137.43 10.82 0.16 1.52 12.90
Thrift Strategy(44) 11.73 105.74 11.48 108.80 12.24 0.37 2.05 23.27
Mortgage Banker Strategy(11) 11.81 113.59 8.20 118.61 11.66 0.38 2.09 23.71
Real Estate Strategy(7) 11.08 127.75 12.53 128.54 12.26 0.31 1.51 15.05
Diversified Strategy(7) 8.80 124.41 8.48 131.33 9.58 0.34 1.82 17.14
Retail Banking Strategy(2) 0.00 89.48 5.65 91.61 0.00 0.32 1.94 0.00
Companies Issuing Dividends(50) 11.01 114.62 10.43 119.15 11.53 0.53 2.88 31.29
Companies Without Dividends(21) 12.44 100.32 11.16 101.40 12.92 0.00 0.00 0.00
Equity/Assets Less Than 6%(8) 12.33 121.38 6.54 122.93 12.99 0.04 0.40 5.41
Equity/Assets 6-12%(51) 10.82 113.12 9.31 117.58 11.40 0.45 2.47 26.26
Equity/Assets Greater Than 12%(12) 15.13 88.35 19.85 88.35 14.80 0.19 0.79 13.43
Converted Last 3 Mths (no MHC)(3) 21.81 70.66 25.32 70.66 18.98 0.00 0.00 0.00
Actively Traded Companies(30) 11.78 111.97 9.40 117.52 11.97 0.46 2.45 25.33
Market Value Below $20 Million(12) 10.68 95.54 11.63 99.00 12.25 0.21 1.45 13.37
Holding Company Structure(45) 10.89 110.29 11.88 114.18 11.19 0.40 2.18 24.86
Assets Over $1 Billion(17) 11.04 123.30 9.71 128.48 10.91 0.43 1.63 18.01
Assets $500 Million-$1 Billion(17) 10.87 109.61 10.55 113.40 12.03 0.49 2.64 30.22
Assets $250-$500 Million(22) 11.99 107.65 10.27 110.14 12.17 0.32 2.03 23.46
Assets less than $250 Million(15) 11.20 101.76 12.16 104.52 12.27 0.23 1.58 14.99
Goodwill Companies(35) 11.79 111.59 8.68 118.72 12.56 0.48 2.53 29.15
Non-Goodwill Companies(36) 10.89 108.80 12.51 108.80 11.16 0.25 1.46 15.56
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and assets
balances; ROI (return on investment) is current EPS divided by current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 7, 1996
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ _______________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
_________________________________
SAIF-Insured Thrifts(19) 11.89 11.67 0.78 6.84 5.14 0.73 6.57 0.69 83.87 0.82
BIF-Insured Thrifts(2) 10.14 10.14 0.80 9.31 6.41 0.69 7.88 2.36 44.03 1.42
NASDAQ Listed OTC Companies(21) 11.72 11.52 0.78 7.09 5.27 0.73 6.70 0.85 79.44 0.88
Florida Companies(3) 10.30 10.26 0.89 8.83 6.69 0.86 8.60 0.72 107.38 0.97
Mid-Atlantic Companies(9) 12.45 12.12 0.68 5.25 4.00 0.68 5.55 1.11 50.81 0.89
Mid-West Companies(7) 12.13 12.12 0.74 6.66 5.20 0.64 5.90 0.59 94.58 0.76
New England Companies(1) 8.00 8.00 1.11 14.66 9.33 0.89 11.81 1.66 65.45 1.65
North-West Companies(1) 11.02 9.75 1.30 11.97 7.56 1.17 10.78 0.26 119.16 0.51
Thrift Strategy(18) 11.97 11.81 0.74 6.39 4.91 0.70 6.19 0.84 77.83 0.85
Mortgage Banker Strategy(2) 11.02 9.75 1.30 11.97 7.56 1.17 10.78 0.26 119.16 0.51
Diversified Strategy(1) 8.00 8.00 1.11 14.66 9.33 0.89 11.81 1.66 65.45 1.65
Companies Issuing Dividends(21) 11.72 11.52 0.78 7.09 5.27 0.73 6.70 0.85 79.44 0.88
Equity/Assets Less Than 6%(1) 5.95 5.95 0.56 9.43 7.81 0.58 9.66 0.26 146.44 1.14
Equity/Assets 6-12%(13) 9.93 9.69 0.68 7.17 5.22 0.68 7.14 0.89 87.47 0.90
Equity/Assets Greater Than 12%(7) 15.61 15.44 1.00 6.61 4.98 0.83 5.53 0.87 46.77 0.79
Actively Traded Companies(1) 9.49 8.24 0.86 9.52 7.75 0.83 9.13 0.96 55.11 1.08
Market Value Below $20 Million(1) 11.79 11.79 0.43 3.82 3.43 0.35 3.10 0.52 90.42 0.60
Holding Company Structure(1) 9.49 8.24 0.86 9.52 7.75 0.83 9.13 0.96 55.11 1.08
Assets Over $1 Billion(4) 10.25 9.95 0.95 9.86 6.61 0.87 8.88 1.13 67.59 1.17
Assets $500 Million-$1 Billion(6) 11.26 10.96 0.90 7.95 5.94 0.83 7.78 0.76 81.42 0.95
Assets $250-$500 Million(3) 10.24 10.22 0.74 7.85 6.56 0.73 7.72 0.15 187.85 0.64
Assets less than $250 Million(8) 13.17 13.01 0.65 5.11 3.77 0.60 4.70 1.09 51.85 0.80
Goodwill Companies(10) 11.19 10.75 0.95 8.90 6.39 0.82 7.79 0.68 93.85 0.80
Non-Goodwill Companies(11) 12.15 12.15 0.65 5.60 4.35 0.66 5.82 0.99 65.03 0.94
MHC Institutions(21) 11.72 11.52 0.78 7.09 5.27 0.73 6.70 0.85 79.44 0.88
Pricing Ratios Dividend Data (6)
________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
_________________________________
SAIF-Insured Thrifts(19) 16.59 123.90 14.80 126.78 17.76 0.60 3.81 44.90
BIF-Insured Thrifts(2) 10.72 128.57 12.70 128.57 13.31 0.58 3.76 42.11
NASDAQ Listed OTC Companies(21) 16.20 124.36 14.59 126.96 17.46 0.60 3.81 44.59
Florida Companies(3) 15.32 122.98 12.36 123.42 15.94 0.83 4.54 63.26
Mid-Atlantic Companies(9) 16.77 120.62 15.20 124.45 18.84 0.44 3.13 35.56
Mid-West Companies(7) 17.86 122.82 15.01 122.90 18.28 0.71 4.62 54.74
New England Companies(1) 10.72 144.26 11.54 144.26 13.31 0.80 3.93 42.11
North-West Companies(1) 13.22 149.39 16.46 168.78 14.68 0.20 1.25 16.53
Thrift Strategy(18) 16.85 121.87 14.65 123.68 18.00 0.61 3.94 48.96
Mortgage Banker Strategy(2) 13.22 149.39 16.46 168.78 14.68 0.20 1.25 16.53
Diversified Strategy(1) 10.72 144.26 11.54 144.26 13.31 0.80 3.93 42.11
Companies Issuing Dividends(21) 16.20 124.36 14.59 126.96 17.46 0.60 3.81 44.59
Equity/Assets Less Than 6%(1) 12.80 115.47 6.86 115.47 12.50 0.80 5.08 65.04
Equity/Assets 6-12%(13) 15.17 125.54 12.45 128.91 16.72 0.59 3.30 43.28
Equity/Assets Greater Than 12%(7) 18.74 123.63 19.35 125.26 20.55 0.60 4.51 33.33
Actively Traded Companies(1) 12.90 114.45 10.86 131.80 13.45 0.40 2.50 32.26
Market Value Below $20 Million(1) 0.00 104.40 12.31 104.40 0.00 0.40 2.86 0.00
Holding Company Structure(1) 12.90 114.45 10.86 131.80 13.45 0.40 2.50 32.26
Assets Over $1 Billion(4) 16.64 138.63 14.09 142.04 17.61 0.56 3.31 41.60
Assets $500 Million-$1 Billion(6) 14.53 115.67 13.22 119.28 17.23 0.63 3.68 48.03
Assets $250-$500 Million(3) 15.55 115.25 11.68 115.45 15.91 0.72 4.15 54.74
Assets less than $250 Million(8) 18.45 128.96 16.89 131.38 19.33 0.56 3.97 16.53
Goodwill Companies(10) 15.53 127.39 14.26 133.16 17.35 0.48 2.91 34.96
Non-Goodwill Companies(11) 16.97 121.89 14.86 121.89 17.59 0.70 4.55 63.85
MHC Institutions(21) 16.20 124.36 14.59 126.96 17.46 0.60 3.81 44.59
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and assets
balances; ROI (return on investment) is current EPS divided by current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 7, 1996
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ ________________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
_____________________
AHM Ahmanson and Co. H.F. of CA 4.61 4.32 0.80 17.30 13.77 0.10 2.09 2.30 33.64 1.25
CAL CalFed Inc. of Los Angeles CA 4.52 4.52 0.58 13.78 9.02 0.55 12.96 1.61 77.66 1.85
CSA Coast Savings Financial of CA 5.16 5.08 0.46 9.62 6.26 0.40 8.33 1.62 48.77 1.17
CFB Commercial Federal Corp. of NE 6.05 5.43 0.84 15.46 9.10 0.84 15.37 1.02 73.31 1.02
DME Dime Savings Bank, FSB of NY* 5.08 5.03 0.34 6.97 5.18 0.46 9.54 NA NA 1.24
DSL Downey Financial Corp. of CA 8.33 8.18 0.61 7.57 7.77 0.53 6.62 2.03 29.06 0.66
FRC First Republic Bancorp of CA* 5.65 5.64 0.14 2.38 2.39 0.13 2.31 2.64 36.28 1.09
FED FirstFed Fin. Corp. of CA 4.69 4.61 0.18 3.94 4.12 0.20 4.38 2.56 73.84 2.55
GLN Glendale Fed. Bk, FSB of CA 5.37 4.95 0.12 2.49 2.24 0.29 5.87 2.08 65.06 1.78
GDW Golden West Fin. Corp. of CA 6.66 6.27 0.75 11.76 8.09 0.74 11.63 1.37 31.65 0.53
GWF Great Western Fin. Corp. of CA 5.78 5.06 0.60 10.98 8.17 0.54 10.01 1.81 43.93 1.15
GPT GreenPoint Fin. Corp. of NY(8)* 10.58 6.03 0.92 6.87 6.82 0.96 7.17 2.94 24.69 1.67
SFB Standard Fed. Bancorp of MI 6.96 5.93 0.94 13.84 10.08 0.85 12.50 0.45 59.52 0.38
TCB TCF Financial Corp. of MN 7.69 7.35 1.37 20.13 8.27 1.29 19.04 0.92 102.63 1.23
WES Westcorp Inc. of Orange CA 9.89 9.86 1.21 13.72 7.53 0.60 6.86 1.24 107.17 2.37
AMEX Traded Companies
_____________________
BKC American Bank of Waterbury CT* 8.57 8.12 0.96 10.74 8.37 0.39 4.36 2.95 33.54 1.46
BFD BostonFed Bancorp of MA 13.51 13.51 0.21 2.42 1.63 0.18 2.05 1.67 40.40 0.85
CFX Cheshire Fin. Corp. of NH* 9.46 8.44 0.99 10.03 8.36 0.82 8.28 1.09 76.02 1.08
CZF Citisave Fin. Corp. of LA 18.18 18.17 1.28 9.16 6.48 0.88 6.28 0.30 38.75 0.21
CBK Citizens First Fin.Corp. of IL 15.57 15.57 0.63 4.01 5.60 0.68 4.37 NA NA 0.24
ESX Essex Bancorp of VA(8) 2.57 -0.08 0.32 7.80 41.99 -0.78 -18.91 3.32 47.35 1.88
FCB Falmouth Co-Op Bank of MA* 24.56 24.56 0.45 2.40 2.44 0.47 2.50 NA NA 1.31
GAF GA Financial Corp. of PA 22.44 22.44 0.58 4.73 3.07 0.78 6.30 0.19 78.79 0.41
KNK Kankakee Bancorp of IL 9.80 9.09 0.50 4.56 5.94 0.49 4.48 0.59 110.93 1.02
KYF Kentucky First Bancorp of KY 23.62 23.62 1.12 5.40 4.19 1.12 5.40 0.15 299.19 0.87
NYB New York Bancorp, Inc. of NY 5.78 5.78 1.18 19.84 10.77 1.12 18.82 1.63 45.81 1.22
PDB Piedmont Bancorp of NC 29.77 29.77 1.34 6.02 4.42 1.36 6.12 0.72 65.30 0.66
PLE Pinnacle Bank of AL 8.19 7.90 0.79 10.40 10.69 0.71 9.31 0.22 303.63 1.04
SSB Scotland Bancorp of NC 37.58 37.58 1.09 3.96 3.14 1.09 3.96 NA NA 0.52
SZB SouthFirst Bancshares of AL 14.89 14.89 0.55 3.25 4.58 0.76 4.49 0.56 52.60 0.45
SRN Southern Banc Company of AL 20.38 20.15 0.50 4.33 2.72 0.50 4.33 NA NA 0.25
SSM Stone Street Bancorp of NC 33.68 33.68 0.77 3.04 2.55 0.77 3.04 0.31 126.92 0.60
TSH Teche Holding Company of LA 17.16 17.16 1.17 7.06 6.94 1.14 6.91 0.24 362.84 1.10
FTF Texarkana Fst. Fin. Corp of AR 20.62 20.62 1.86 11.49 9.04 1.39 8.62 0.36 196.08 0.89
THR Three Rivers Fin. Corp. of MI 15.74 15.64 0.59 6.68 3.85 0.57 6.41 0.73 70.06 0.77
TBK Tolland Bank of CT* 6.25 5.96 0.61 9.90 11.64 0.44 7.25 4.14 27.24 1.62
WSB Washington SB, FSB of MD 8.08 8.08 0.94 12.56 10.12 0.69 9.25 NA NA 0.95
NASDAQ Listed OTC Companies
___________________________
FBCV 1st Bancorp of Vincennes IN 7.88 7.88 2.25 35.91 37.73 -0.16 -2.60 0.38 86.69 0.46
WFSB 1st Washington Bancorp of VA(8) 5.95 5.95 0.64 11.09 6.42 0.26 4.57 0.87 86.57 1.70
ALBK ALBANK Fin. Corp. of Albany NY 9.62 8.49 0.99 9.39 8.11 0.99 9.39 1.03 70.00 1.09
AMFC AMB Financial Corp. of IN 20.06 20.06 0.49 4.30 3.10 0.49 4.30 0.71 63.16 0.66
ASBP ASB Financial Corp. of OH 23.07 23.07 1.03 4.75 4.27 1.03 4.75 1.48 53.58 1.30
ABBK Abington Savings Bank of MA(8)* 6.50 5.69 0.36 5.29 5.86 0.24 3.48 0.37 88.30 0.58
AADV Advantage Bancorp of WI 9.77 8.47 0.90 9.33 7.38 0.81 8.40 0.56 100.02 1.04
AFCB Affiliated Comm BC, Inc of MA 10.25 10.17 0.71 6.31 7.28 0.86 7.56 1.34 57.09 1.28
ALBC Albion Banc Corp. of Albion NY 10.71 10.71 0.30 2.87 3.88 0.25 2.43 0.72 61.31 0.55
ATSB AmTrust Capital Corp. of IN 10.34 10.23 0.31 2.75 3.70 0.07 0.59 1.31 38.02 0.73
AHCI Ambanc Holding Co. of NY* 19.17 19.17 -0.03 -0.23 -0.21 -0.04 -0.35 4.22 24.58 1.64
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
_____________________
AHM Ahmanson and Co. H.F. of CA 7.26 129.90 5.99 138.60 NM 0.88 3.32 24.11
CAL CalFed Inc. of Los Angeles CA 11.08 142.35 6.43 142.35 11.78 0.00 0.00 0.00
CSA Coast Savings Financial of CA 15.97 145.78 7.53 148.25 18.44 0.00 0.00 0.00
CFB Commercial Federal Corp. of NE 10.99 143.47 8.68 159.70 11.05 0.40 1.05 11.53
DME Dime Savings Bank, FSB of NY* 19.29 131.46 6.68 132.93 14.11 0.00 0.00 0.00
DSL Downey Financial Corp. of CA 12.87 94.70 7.89 96.39 14.71 0.48 2.22 28.57
FRC First Republic Bancorp of CA* NM 96.37 5.45 96.50 NM 0.00 0.00 0.00
FED FirstFed Fin. Corp. of CA 24.30 93.85 4.40 95.46 21.84 0.00 0.00 0.00
GLN Glendale Fed. Bk, FSB of CA NM 107.20 5.75 116.32 18.94 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 12.36 137.27 9.14 145.93 12.50 0.38 0.70 8.60
GWF Great Western Fin. Corp. of CA 12.24 127.58 7.37 145.69 13.43 1.00 4.26 52.08
GPT GreenPoint Fin. Corp. of NY(8)* 14.66 101.95 10.79 179.00 14.03 0.80 2.69 39.41
SFB Standard Fed. Bancorp of MI 9.92 129.48 9.01 151.78 10.98 0.76 1.96 19.39
TCB TCF Financial Corp. of MN 12.09 222.65 17.11 232.83 12.78 0.75 2.23 26.98
WES Westcorp Inc. of Orange CA 13.29 160.19 15.85 160.73 NM 0.38 2.01 26.76
AMEX Traded Companies
_____________________
BKC American Bank of Waterbury CT* 11.94 124.52 10.67 131.30 NM 1.36 5.64 67.33
BFD BostonFed Bancorp of MA NM 88.13 11.91 88.13 NM 0.20 1.63 NM
CFX Cheshire Fin. Corp. of NH* 11.96 114.68 10.85 128.50 14.47 0.72 5.24 62.61
CZF Citisave Fin. Corp. of LA 15.44 104.86 19.07 104.93 22.50 0.30 1.90 29.41
CBK Citizens First Fin.Corp. of IL 17.86 71.68 11.16 71.68 16.39 0.00 0.00 0.00
ESX Essex Bancorp of VA(8) 2.38 29.92 0.77 NM NM 0.00 0.00 0.00
FCB Falmouth Co-Op Bank of MA* NM 69.07 16.96 69.07 NM 0.00 0.00 0.00
GAF GA Financial Corp. of PA NM 74.97 16.82 74.97 24.43 0.00 0.00 0.00
KNK Kankakee Bancorp of IL 16.84 78.33 7.67 84.44 17.14 0.40 2.07 34.78
KYF Kentucky First Bancorp of KY 23.89 95.38 22.53 95.38 23.89 0.50 3.67 NM
NYB New York Bancorp, Inc. of NY 9.28 185.94 10.75 185.94 9.79 0.80 3.17 29.41
PDB Piedmont Bancorp of NC 22.62 93.38 27.80 93.38 22.24 0.40 3.05 68.97
PLE Pinnacle Bank of AL 9.36 93.57 7.66 96.97 10.46 0.72 4.50 42.11
SSB Scotland Bancorp of NC NM 84.28 31.67 84.28 NM 0.00 0.00 0.00
SZB SouthFirst Bancshares of AL 21.82 77.52 11.54 77.52 15.79 0.50 4.17 NM
SRN Southern Banc Company of AL NM 85.43 17.41 86.38 NM 0.35 2.64 NM
SSM Stone Street Bancorp of NC NM 78.72 26.52 78.72 NM 0.00 0.00 0.00
TSH Teche Holding Company of LA 14.40 91.32 15.67 91.32 14.72 0.50 3.77 54.35
FTF Texarkana Fst. Fin. Corp of AR 11.06 96.41 19.88 96.41 14.75 0.45 2.75 30.41
THR Three Rivers Fin. Corp. of MI NM 88.93 13.99 89.47 NM 0.30 2.26 58.82
TBK Tolland Bank of CT* 8.59 81.94 5.12 85.97 11.73 0.00 0.00 0.00
WSB Washington SB, FSB of MD 9.88 111.93 9.05 111.93 13.40 0.10 1.78 17.54
NASDAQ Listed OTC Companies
___________________________
FBCV 1st Bancorp of Vincennes IN 2.65 80.42 6.34 80.42 NM 0.40 1.54 4.08
WFSB 1st Washington Bancorp of VA(8) 15.57 165.76 9.87 165.76 NM 0.12 1.51 23.53
ALBK ALBANK Fin. Corp. of Albany NY 12.33 115.56 11.12 130.95 12.33 0.48 1.76 21.72
AMFC AMB Financial Corp. of IN NM 69.59 13.96 69.59 NM 0.00 0.00 0.00
ASBP ASB Financial Corp. of OH 23.44 99.73 23.01 99.73 23.44 0.30 2.00 46.88
ABBK Abington Savings Bank of MA(8)* 17.06 87.77 5.71 100.35 NM 0.40 2.76 47.06
AADV Advantage Bancorp of WI 13.55 122.43 11.97 141.31 15.04 0.32 0.94 12.75
AFCB Affiliated Comm BC, Inc of MA 13.74 87.61 8.98 88.31 11.46 0.48 2.89 39.67
ALBC Albion Banc Corp. of Albion NY NM 73.09 7.83 73.09 NM 0.31 1.82 46.97
ATSB AmTrust Capital Corp. of IN NM 75.08 7.76 75.87 NM 0.00 0.00 0.00
AHCI Ambanc Holding Co. of NY* NM 67.63 12.96 67.63 NM 0.00 0.00 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 7, 1996
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ ________________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
ASBI Ameriana Bancorp of IN 11.64 11.62 0.93 7.22 7.69 0.90 7.00 0.56 50.63 0.40
AFFFZ America First Fin. Fund of CA 6.80 6.64 0.81 12.56 12.31 0.81 12.48 0.65 46.82 0.50
AMFB American Federal Bank of SC 8.21 7.58 1.29 16.11 9.69 1.41 17.57 0.50 151.69 1.27
ANBK American Nat'l Bancorp of MD 10.91 10.91 0.34 3.61 3.70 0.33 3.51 1.40 69.89 1.61
ABCW Anchor Bancorp Wisconsin of WI 6.75 6.57 0.87 12.13 8.52 0.85 11.80 0.61 214.80 1.63
ANDB Andover Bancorp, Inc. of MA* 7.60 7.60 0.87 11.60 8.74 0.91 12.17 1.60 63.49 1.46
ASFC Astoria Financial Corp. of NY 8.55 6.95 0.75 8.47 16.41 0.74 8.37 0.85 23.49 0.62
AVND Avondale Fin. Corp. of IL 10.63 10.63 0.65 6.66 7.02 0.45 4.65 0.85 82.48 1.72
BFSI BFS Bankorp, Inc. of NY 8.14 8.14 1.84 24.85 15.70 1.78 24.01 1.48 69.83 1.13
BKCT Bancorp Connecticut of CT* 10.81 10.81 1.18 10.65 8.44 1.18 10.65 1.69 74.29 2.13
BWFC Bank West Fin. Corp. of MI 19.78 19.78 0.69 3.38 3.81 0.41 1.98 0.08 112.71 0.13
BANC BankAtlantic Bancorp of FL 8.33 7.65 0.97 14.59 10.29 0.76 11.35 1.25 91.39 2.12
BKUNA BankUnited SA of FL 6.11 5.77 1.02 26.11 14.45 0.78 20.05 0.90 32.13 0.38
BKCO Bankers Corp. of NJ* 9.81 9.60 1.12 11.36 9.39 1.18 11.99 1.59 24.80 0.56
BVFS Bay View Capital Corp. of CA 6.98 6.81 -0.10 -1.46 -1.39 0.26 3.66 1.23 76.86 1.33
BFSB Bedford Bancshares of VA 16.11 16.11 1.26 7.57 7.50 1.26 7.57 1.24 43.93 0.64
BELL Bell Bancorp of Chicago IL(8) 15.86 15.86 0.63 4.03 3.51 0.61 3.87 1.40 25.84 0.53
BTHL Bethel Bancorp. of ME* 7.56 6.36 0.61 8.16 8.31 0.47 6.27 NA NA 1.48
SBOS Boston Bancorp of MA(8)* 12.34 12.34 1.91 21.36 16.86 0.91 10.23 0.65 18.09 0.61
BSBC Branford SB of CT* 8.69 8.69 0.76 9.05 5.93 0.76 9.05 2.31 87.06 2.77
BRFC Bridgeville SB, FSB of PA 28.51 28.51 1.24 4.21 4.14 1.24 4.21 0.25 102.86 0.70
BYFC Broadway Fin. Corp. of CA 11.42 11.42 0.40 6.29 4.90 0.45 7.06 2.40 34.37 1.05
CBCO CB Bancorp of Michigan City IN 9.16 9.16 1.36 13.92 12.00 1.36 13.92 0.84 77.80 1.45
CCFH CCF Holding Company of GA 21.23 21.23 0.86 5.17 5.13 0.82 4.91 0.63 84.80 0.90
CENF CENFED Financial Corp. of CA 5.00 4.99 0.48 9.87 9.16 0.33 6.81 1.22 54.40 0.89
CFSB CFSB Bancorp of Lansing MI 8.29 8.29 0.94 11.62 7.66 0.92 11.40 0.09 662.31 0.69
CKFB CKF Bancorp of Danville KY 27.30 27.30 1.24 4.40 3.75 1.24 4.40 1.70 10.61 0.21
CSBF CSB Financial Group Inc of IL 30.89 30.89 0.82 3.62 3.56 0.82 3.62 0.78 37.38 0.55
CFHC California Fin. Hld. Co. of CA 6.75 6.69 0.28 4.24 3.76 0.24 3.69 1.39 46.09 0.87
CBCI Calumet Bancorp of Chicago IL 16.99 16.99 1.21 7.25 8.14 1.20 7.22 1.23 82.56 1.36
CAFI Camco Fin. Corp. of OH 8.33 8.33 1.22 15.53 10.60 0.93 11.87 0.56 54.79 0.36
CMRN Cameron Fin. Corp. of MO 26.54 26.54 1.61 5.79 6.93 1.59 5.73 0.79 86.49 0.81
CAPS Capital Savings Bancorp of MO 10.43 10.43 0.95 8.92 9.72 0.95 8.92 0.20 152.91 0.38
CARV Carver FSB of New York, NY 9.63 9.16 0.20 2.06 4.07 0.25 2.66 1.13 27.64 1.88
CASB Cascade SB of Everett WA 6.21 6.21 0.57 8.99 5.40 0.29 4.66 2.40 37.69 1.26
CATB Catskill Fin. Corp. of NY* 27.79 27.79 0.96 3.44 4.59 1.10 3.96 NA NA 1.63
CNIT Cenit Bancorp of Norfolk VA 6.98 6.72 0.42 5.90 4.62 0.49 6.92 0.51 109.75 1.17
CTBK Center Banks, Inc. of NY* 7.08 7.08 0.56 8.10 9.24 0.58 8.35 1.07 115.49 1.55
CFCX Center Fin. Corp of CT(8)* 6.10 5.70 0.70 11.37 7.67 0.47 7.75 2.61 44.33 1.46
CEBK Central Co-Op. Bank of MA* 9.95 8.69 0.60 6.40 6.49 0.57 6.01 2.31 41.68 1.39
CJFC Central Jersey Fin. Corp of NJ(8) 11.78 10.95 1.11 10.71 6.25 1.06 10.20 1.91 33.63 1.30
CBSB Charter Financial Inc. of IL 21.41 20.85 1.12 6.95 5.65 1.12 6.95 0.49 149.63 1.05
COFI Charter One Financial of OH(8) 6.90 6.79 0.18 2.81 1.04 1.18 18.12 0.42 117.80 0.92
CVAL Chester Valley Bancorp of PA 9.15 9.15 0.91 10.02 8.27 0.87 9.63 1.03 92.67 1.20
CRCL Circle Financial Corp.of OH(8) 10.65 9.24 0.50 4.34 4.34 0.43 3.72 0.10 213.87 0.35
CTZN CitFed Bancorp of Dayton OH 6.70 5.81 0.68 9.99 7.73 0.55 8.16 0.85 74.34 1.06
CLAS Classic Bancshares of KY 28.78 28.78 0.44 2.82 1.89 0.40 2.55 0.51 77.33 0.62
CMSB Cmnwealth SB, MHC of PA (46.3)(8) 8.30 7.30 0.78 8.32 5.80 0.69 7.40 0.44 103.05 0.85
CBSA Coastal Bancorp of Houston TX 3.31 2.69 0.37 10.64 10.37 0.37 10.58 0.67 32.48 0.54
CFCP Coastal Fin. Corp. of SC 6.08 6.08 0.99 16.43 7.55 0.89 14.80 0.42 209.91 1.02
COFD Collective Bancorp Inc. of NJ 7.05 6.54 1.06 15.87 10.86 1.04 15.51 0.57 45.24 0.53
CMSV Commty. Svgs, MHC of FL(47.6) 11.82 11.82 0.83 6.60 6.71 0.81 6.40 1.24 44.70 1.02
CBIN Community Bank Shares of IN 11.36 11.36 0.90 8.26 7.05 0.88 8.09 0.12 219.42 0.50
CBNH Community Bankshares Inc of NH* 7.23 7.23 0.78 10.93 8.12 0.65 9.07 0.46 159.64 1.09
CFTP Community Fed. Bancorp of MS 33.10 33.10 1.17 6.28 3.19 1.14 6.13 0.34 84.38 0.53
CFFC Community Fin. Corp. of VA 13.70 13.70 1.29 9.70 7.52 1.29 9.70 0.45 139.66 0.70
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
ASBI Ameriana Bancorp of IN 13.00 96.94 11.28 97.09 13.40 0.56 4.31 56.00
AFFFZ America First Fin. Fund of CA 8.13 98.45 6.70 100.81 8.18 1.60 6.15 50.00
AMFB American Federal Bank of SC 10.32 158.89 13.05 172.23 9.47 0.40 2.50 25.81
ANBK American Nat'l Bancorp of MD NM 81.23 8.86 81.23 NM 0.00 0.00 0.00
ABCW Anchor Bancorp Wisconsin of WI 11.73 143.75 9.70 147.63 12.06 0.40 1.16 13.61
ANDB Andover Bancorp, Inc. of MA* 11.44 125.98 9.57 125.98 10.91 0.60 2.33 26.67
ASFC Astoria Financial Corp. of NY 6.09 51.62 4.41 63.44 6.16 0.44 1.63 9.93
AVND Avondale Fin. Corp. of IL 14.25 86.32 9.18 86.32 20.38 0.00 0.00 0.00
BFSI BFS Bankorp, Inc. of NY 6.37 140.07 11.40 140.07 6.59 0.00 0.00 0.00
BKCT Bancorp Connecticut of CT* 11.85 121.57 13.14 121.57 11.85 0.72 3.68 43.64
BWFC Bank West Fin. Corp. of MI NM 89.66 17.73 89.66 NM 0.28 2.60 68.29
BANC BankAtlantic Bancorp of FL 9.72 120.17 10.01 130.84 12.50 0.18 1.29 12.50
BKUNA BankUnited SA of FL 6.92 97.73 5.97 103.47 9.01 0.00 0.00 0.00
BKCO Bankers Corp. of NJ* 10.65 117.43 11.52 119.96 10.09 0.56 3.25 34.57
BVFS Bay View Capital Corp. of CA NM 112.02 7.82 114.90 NM 0.60 1.82 NM
BFSB Bedford Bancshares of VA 13.33 100.95 16.26 100.95 13.33 0.36 2.25 30.00
BELL Bell Bancorp of Chicago IL(8) NM 111.95 17.76 111.95 NM 0.45 1.20 34.35
BTHL Bethel Bancorp. of ME* 12.04 94.75 7.17 112.75 15.66 0.32 2.46 29.63
SBOS Boston Bancorp of MA(8)* 5.93 104.24 12.86 104.24 12.39 0.76 1.81 10.73
BSBC Branford SB of CT* 16.85 145.89 12.67 145.89 16.85 0.00 0.00 0.00
BRFC Bridgeville SB, FSB of PA 24.15 100.85 28.75 100.85 24.15 0.32 2.25 54.24
BYFC Broadway Fin. Corp. of CA 20.41 67.89 7.75 67.89 18.18 0.20 2.00 40.82
CBCO CB Bancorp of Michigan City IN 8.33 109.25 10.01 109.25 8.33 0.00 0.00 0.00
CCFH CCF Holding Company of GA 19.49 77.76 16.51 77.76 20.54 0.40 3.48 67.80
CENF CENFED Financial Corp. of CA 10.91 102.28 5.12 102.48 15.81 0.33 1.53 16.75
CFSB CFSB Bancorp of Lansing MI 13.05 144.20 11.96 144.20 13.30 0.44 2.13 27.85
CKFB CKF Bancorp of Danville KY NM 116.21 31.72 116.21 NM 0.40 2.00 53.33
CSBF CSB Financial Group Inc of IL NM 73.17 22.60 73.17 NM 0.00 0.00 0.00
CFHC California Fin. Hld. Co. of CA NM 110.93 7.49 111.90 NM 0.44 2.15 57.14
CBCI Calumet Bancorp of Chicago IL 12.28 87.53 14.87 87.53 12.33 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 9.43 137.74 11.47 137.74 12.35 0.46 2.30 21.70
CMRN Cameron Fin. Corp. of MO 14.43 87.17 23.13 87.17 14.58 0.28 2.00 28.87
CAPS Capital Savings Bancorp of MO 10.29 88.50 9.23 88.50 10.29 0.36 2.00 20.57
CARV Carver FSB of New York, NY 24.58 50.40 4.85 52.99 19.05 0.00 0.00 0.00
CASB Cascade SB of Everett WA 18.52 161.03 10.00 161.03 NM 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 21.81 75.09 20.87 75.09 18.98 0.00 0.00 0.00
CNIT Cenit Bancorp of Norfolk VA 21.66 117.24 8.18 121.78 18.48 0.80 2.35 50.96
CTBK Center Banks, Inc. of NY* 10.83 84.25 5.96 84.25 10.50 0.24 1.75 18.90
CFCX Center Fin. Corp of CT(8)* 13.04 134.99 8.24 144.53 19.15 0.28 1.34 17.50
CEBK Central Co-Op. Bank of MA* 15.40 93.10 9.26 106.64 16.40 0.00 0.00 0.00
CJFC Central Jersey Fin. Corp of NJ(8) 16.01 146.99 17.31 158.13 16.81 0.48 1.59 25.40
CBSB Charter Financial Inc. of IL 17.69 88.80 19.01 91.20 17.69 0.24 2.09 36.92
COFI Charter One Financial of OH(8) NM 176.69 12.20 179.54 14.90 0.92 2.58 NM
CVAL Chester Valley Bancorp of PA 12.09 117.11 10.71 117.11 12.58 0.40 2.15 25.97
CRCL Circle Financial Corp.of OH(8) 23.02 98.06 10.44 113.03 NM 0.68 2.01 46.26
CTZN CitFed Bancorp of Dayton OH 12.94 120.02 8.04 138.47 15.84 0.28 0.76 9.86
CLAS Classic Bancshares of KY NM 75.34 21.68 75.34 NM 0.00 0.00 0.00
CMSB Cmnwealth SB, MHC of PA (46.3)(8) 17.23 137.35 11.41 156.29 19.36 0.50 2.29 39.37
CBSA Coastal Bancorp of Houston TX 9.65 99.25 3.29 122.34 9.70 0.40 2.15 20.73
CFCP Coastal Fin. Corp. of SC 13.25 204.29 12.43 204.29 14.71 0.50 2.50 33.11
COFD Collective Bancorp Inc. of NJ 9.21 138.07 9.73 148.71 9.42 0.80 3.32 30.53
CMSV Commty. Svgs, MHC of FL(47.6) 14.90 96.09 11.35 96.09 15.36 0.70 4.75 70.71
CBIN Community Bank Shares of IN 14.19 106.07 12.05 106.07 14.49 0.34 2.50 35.42
CBNH Community Bankshares Inc of NH* 12.32 112.35 8.12 112.35 14.85 0.60 3.45 42.55
CFTP Community Fed. Bancorp of MS NM 94.14 31.16 94.14 NM 0.00 0.00 0.00
CFFC Community Fin. Corp. of VA 13.29 121.81 16.69 121.81 13.29 0.52 2.48 32.91
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 7, 1996
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ ________________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
_______________________________________
CIBI Community Inv. Corp. of OH 14.36 14.36 1.00 7.71 8.14 0.95 7.33 0.73 69.06 0.68
CONE Conestoga Bancorp of Roslyn NY(8) 16.17 16.17 0.67 4.11 3.24 0.54 3.33 0.16 26.87 0.18
COOP Cooperative Bk.for Svgs. of NC 9.34 8.21 0.28 3.11 3.48 0.24 2.64 0.22 95.46 0.28
CNSK Covenant Bank for Svgs. of NJ* 5.05 5.05 0.62 11.55 8.08 0.62 11.55 2.04 38.62 1.43
CRZY Crazy Woman Creek Bncorp of WY 32.70 32.70 0.92 4.63 3.28 0.78 3.95 0.70 85.20 1.14
DNFC D&N Financial Corp. of MI 5.63 5.54 1.05 19.69 14.55 0.93 17.40 0.59 138.44 0.98
DSBC DS Bancor Inc. of Derby CT* 6.55 6.33 0.66 10.49 8.58 0.59 9.40 1.82 31.42 0.79
DFIN Damen Fin. Corp. of Chicago IL 24.17 24.17 0.81 5.02 3.79 0.79 4.91 0.14 92.58 0.35
DIBK Dime Financial Corp. of CT* 7.95 7.56 1.50 19.84 14.04 1.69 22.30 0.99 199.52 2.98
EBSI Eagle Bancshares of Tucker GA 6.65 6.65 0.97 13.73 9.56 0.94 13.29 0.49 138.35 0.98
EGFC Eagle Financial Corp. of CT 7.14 5.16 1.30 17.60 15.57 0.63 8.61 1.23 55.16 1.20
ETFS East Texas Fin. Serv. of TX 19.63 19.63 0.89 4.59 5.90 0.83 4.27 0.45 55.47 0.65
EBCP Eastern Bancorp of NH 7.70 7.25 0.60 8.23 8.66 0.50 6.82 1.81 23.60 0.74
ESBK Elmira SB of Elmira NY* 6.30 6.01 0.14 2.29 2.79 0.14 2.29 0.80 89.84 1.00
EFBI Enterprise Fed. Bancorp of OH 15.58 15.55 1.12 5.47 6.95 0.77 3.75 0.01 NA 0.27
EQSB Equitable FSB of Wheaton MD 5.25 5.25 0.84 16.16 15.20 0.83 16.02 0.98 22.55 0.33
FFFG F.F.O. Financial Group of FL 6.01 6.01 0.46 6.98 5.58 0.46 6.98 3.77 45.17 2.74
FCBF FCB Fin. Corp. of Neenah WI 18.46 18.46 1.03 5.31 5.83 1.01 5.21 NA NA 0.51
FFBS FFBS Bancorp of Columbus MS 19.57 19.57 1.31 6.46 4.35 1.31 6.46 0.70 76.75 0.79
FFDF FFD Financial Corp. of OH 28.03 28.03 1.04 3.69 5.01 1.04 3.69 NA NA 0.32
FFLC FFLC Bancorp of Leesburg FL 16.97 16.97 0.94 5.42 6.42 0.94 5.47 0.08 365.93 0.51
FFFC FFVA Financial Corp. of VA 16.32 15.99 1.30 7.25 7.10 1.27 7.06 0.48 132.38 1.09
FFWC FFW Corporation of Wabash IN 10.80 10.80 0.90 8.12 9.04 1.01 9.05 0.06 620.00 0.52
FFYF FFY Financial Corp. of OH 18.35 18.35 1.21 6.53 5.76 1.25 6.73 0.88 66.89 0.78
FMCO FMS Financial Corp. of NJ 6.58 6.40 0.84 13.04 10.40 0.84 13.04 1.11 49.19 0.95
FFHH FSF Financial Corp. of MN 15.97 15.97 0.62 3.34 4.11 0.62 3.34 0.09 250.67 0.39
FMLY Family Bancorp of Haverhill MA(8)* 7.76 7.10 0.96 12.66 8.33 0.86 11.34 1.19 61.53 1.42
FMCT Farmers & Mechanics Bank of CT* 5.55 5.55 0.06 1.13 1.05 -0.02 -0.39 2.52 33.97 1.43
FOBC Fed One Bancorp of Wheeling WV 12.12 11.47 1.00 7.73 8.96 1.00 7.73 0.28 152.99 1.16
FFRV Fid. Fin. Bkshrs. Corp. of VA 8.51 8.50 0.99 11.83 10.80 0.97 11.66 1.16 84.92 1.20
FBCI Fidelity Bancorp of Chicago IL 12.05 12.00 0.77 5.66 5.90 0.73 5.31 0.53 20.66 0.16
FSBI Fidelity Bancorp, Inc. of PA 7.28 7.22 0.60 7.78 7.81 0.59 7.65 0.81 55.09 1.02
FFFL Fidelity FSB, MHC of FL(47.2) 10.23 10.12 0.64 6.24 5.41 0.60 5.81 0.38 78.38 0.41
FFED Fidelity Fed. Bancorp of IN 5.07 5.07 1.30 26.09 11.50 1.22 24.57 0.07 428.14 0.35
FFOH Fidelity Financial of OH 20.37 20.37 0.82 5.54 4.60 0.82 5.54 0.40 80.88 0.43
FIBC Financial Bancorp of NY 10.66 10.60 0.65 5.40 6.22 0.64 5.33 2.80 19.48 1.07
FNSC Financial Security Corp. of IL(8) 14.36 14.36 0.77 5.66 5.56 0.71 5.26 2.77 31.27 1.24
FSBS First Ashland Fin. Corp. of KY(8) 26.33 26.33 0.87 4.09 2.83 0.87 4.09 NA NA 0.17
FBSI First Bancshares of MO 16.92 16.89 0.78 4.33 5.08 0.77 4.27 0.43 83.74 0.44
FBBC First Bell Bancorp of PA 21.05 21.05 1.55 7.69 6.99 1.53 7.61 0.11 97.74 0.14
FBER First Bergen Bancorp of NJ 16.52 16.52 0.28 3.06 2.16 0.42 4.59 2.49 59.97 3.49
FCIT First Cit. Fin. Corp of MD 6.28 6.28 0.71 11.35 8.17 0.58 9.23 3.43 33.61 1.63
FFBA First Colorado Bancorp of Co 16.19 16.00 0.98 8.50 5.21 0.98 8.50 0.25 84.38 0.33
FDEF First Defiance Fin.Corp. of OH 25.39 25.39 1.15 5.36 4.99 1.13 5.26 NA NA 0.48
FESX First Essex Bancorp of MA* 7.67 7.67 0.94 13.05 12.34 0.79 11.01 0.77 108.82 1.32
FFES First FS&LA of E. Hartford CT 6.19 6.17 0.60 8.87 11.65 0.59 8.78 0.83 40.36 1.94
FSSB First FS&LA of San Bern. CA 5.64 5.39 -0.17 -2.90 -5.20 -0.35 -6.09 4.86 16.11 1.21
FFSX First FS&LA. MHC of IA (45.0) 8.41 8.37 0.63 7.77 6.29 0.58 7.15 0.17 229.25 0.53
FFML First Family Bank, FSB of FL 5.61 5.61 0.82 16.10 11.08 0.48 9.50 0.42 105.69 0.61
FFSW First Fed Fin. Serv. of OH 5.32 4.84 0.85 15.68 8.61 0.69 12.62 0.15 196.94 0.47
BDJI First Fed. Bancorp. of MN 14.38 14.38 0.70 5.24 6.30 0.70 5.24 0.23 211.89 0.98
FFBH First Fed. Bancshares of AR 15.90 15.90 0.99 6.24 6.98 0.99 6.24 0.09 278.68 0.35
FFEC First Fed. Bancshares of WI 14.32 13.74 0.96 5.83 5.13 0.94 5.69 0.13 104.41 0.19
FTFC First Fed. Capital Corp. of WI 6.85 6.45 0.91 13.51 8.55 0.67 9.91 NA NA 0.84
FFKY First Fed. Fin. Corp. of KY 14.04 13.10 1.66 11.55 6.31 1.44 9.98 0.45 102.40 0.53
FFBZ First Federal Bancorp of OH 7.81 7.80 1.10 14.70 9.76 1.08 14.45 0.62 144.45 1.01
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
CIBI Community Inv. Corp. of OH 12.29 84.53 12.13 84.53 12.94 0.16 1.08 13.33
CONE Conestoga Bancorp of Roslyn NY(8) NM 124.56 20.14 124.56 NM 0.00 0.00 0.00
COOP Cooperative Bk.for Svgs. of NC NM 87.83 8.20 99.88 NM 0.00 0.00 0.00
CNSK Covenant Bank for Svgs. of NJ* 12.37 137.30 6.94 137.30 12.37 0.00 0.00 0.00
CRZY Crazy Woman Creek Bncorp of WY NM 70.69 23.12 70.69 NM 0.00 0.00 0.00
DNFC D&N Financial Corp. of MI 6.87 121.75 6.86 123.70 7.78 0.00 0.00 0.00
DSBC DS Bancor Inc. of Derby CT* 11.66 116.23 7.62 120.38 13.02 0.24 0.77 8.92
DFIN Damen Fin. Corp. of Chicago IL NM 81.03 19.59 81.03 NM 0.00 0.00 0.00
DIBK Dime Financial Corp. of CT* 7.12 129.35 10.29 136.14 6.34 0.28 2.04 14.51
EBSI Eagle Bancshares of Tucker GA 10.46 134.34 8.93 134.34 10.81 0.52 3.25 33.99
EGFC Eagle Financial Corp. of CT 6.42 103.52 7.39 143.12 13.13 0.92 3.91 25.14
ETFS East Texas Fin. Serv. of TX 16.95 78.04 15.32 78.04 18.21 0.20 1.36 22.99
EBCP Eastern Bancorp of NH 11.55 91.58 7.05 97.27 13.94 0.72 2.97 34.29
ESBK Elmira SB of Elmira NY* NM 82.96 5.22 86.84 NM 0.64 3.88 NM
EFBI Enterprise Fed. Bancorp of OH 14.39 91.82 14.31 91.99 20.96 0.00 0.00 0.00
EQSB Equitable FSB of Wheaton MD 6.58 98.90 5.19 98.90 6.64 0.00 0.00 0.00
FFFG F.F.O. Financial Group of FL 17.93 123.39 7.42 123.39 17.93 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI 17.16 93.18 17.20 93.18 17.50 0.72 4.11 70.59
FFBS FFBS Bancorp of Columbus MS 23.00 149.64 29.28 149.64 23.00 0.50 2.17 50.00
FFDF FFD Financial Corp. of OH 19.94 73.65 20.64 73.65 19.94 0.00 0.00 0.00
FFLC FFLC Bancorp of Leesburg FL 15.57 83.49 14.17 83.49 15.43 0.40 2.25 35.09
FFFC FFVA Financial Corp. of VA 14.08 107.58 17.55 109.76 14.44 0.40 2.39 33.61
FFWC FFW Corporation of Wabash IN 11.06 88.47 9.55 88.47 9.92 0.60 3.12 34.48
FFYF FFY Financial Corp. of OH 17.35 114.81 21.07 114.81 16.85 0.60 2.58 44.78
FMCO FMS Financial Corp. of NJ 9.62 120.46 7.93 123.86 9.62 0.20 1.23 11.83
FFHH FSF Financial Corp. of MN 24.35 86.53 13.82 86.53 24.35 0.50 4.28 NM
FMLY Family Bancorp of Haverhill MA(8)* 12.00 143.23 11.11 156.52 13.40 0.48 1.99 23.88
FMCT Farmers & Mechanics Bank of CT* NM 106.52 5.91 106.52 NM 0.00 0.00 0.00
FOBC Fed One Bancorp of Wheeling WV 11.16 88.45 10.72 93.42 11.16 0.54 3.69 41.22
FFRV Fid. Fin. Bkshrs. Corp. of VA 9.26 104.08 8.86 104.17 9.40 0.20 1.60 14.81
FBCI Fidelity Bancorp of Chicago IL 16.96 98.29 11.84 98.64 18.07 0.24 1.44 24.49
FSBI Fidelity Bancorp, Inc. of PA 12.80 99.63 7.26 100.44 13.01 0.29 1.81 23.20
FFFL Fidelity FSB, MHC of FL(47.2) 18.49 111.94 11.46 113.26 19.85 0.60 4.44 NM
FFED Fidelity Fed. Bancorp of IN 8.70 210.53 10.68 210.53 9.23 0.80 6.67 57.97
FFOH Fidelity Financial of OH 21.74 80.19 16.33 80.19 21.74 0.20 2.00 43.48
FIBC Financial Bancorp of NY 16.09 89.81 9.57 90.32 16.29 0.30 2.33 37.50
FNSC Financial Security Corp. of IL(8) 17.99 98.22 14.11 98.22 19.37 0.00 0.00 0.00
FSBS First Ashland Fin. Corp. of KY(8) NM 110.84 29.19 110.84 NM 0.00 0.00 0.00
FBSI First Bancshares of MO 19.69 86.25 14.60 86.44 19.94 0.20 1.27 25.00
FBBC First Bell Bancorp of PA 14.30 96.07 20.23 96.07 14.45 0.20 1.49 21.28
FBER First Bergen Bancorp of NJ NM 68.72 11.36 68.72 NM 0.00 0.00 0.00
FCIT First Cit. Fin. Corp of MD 12.24 131.97 8.29 131.97 15.04 0.00 0.00 0.00
FFBA First Colorado Bancorp of Co 19.20 111.34 18.02 112.67 19.20 0.30 2.26 43.48
FDEF First Defiance Fin.Corp. of OH 20.04 86.91 22.07 86.91 20.42 0.28 2.64 52.83
FESX First Essex Bancorp of MA* 8.10 101.87 7.81 101.87 9.60 0.48 4.63 37.50
FFES First FS&LA of E. Hartford CT 8.59 76.27 4.72 76.51 8.67 0.60 3.53 30.30
FSSB First FS&LA of San Bern. CA NM 56.27 3.18 58.93 NM 0.00 0.00 NM
FFSX First FS&LA. MHC of IA (45.0) 15.90 119.60 10.06 120.21 17.28 0.72 2.80 44.44
FFML First Family Bank, FSB of FL 9.03 133.93 7.51 133.93 15.30 0.16 0.76 6.84
FFSW First Fed Fin. Serv. of OH 11.62 173.37 9.23 190.61 14.43 0.48 1.71 19.92
BDJI First Fed. Bancorp. of MN 15.88 76.49 11.00 76.49 15.88 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 14.32 89.40 14.22 89.40 14.32 0.00 0.00 0.00
FFEC First Fed. Bancshares of WI 19.51 113.96 16.31 118.78 20.00 0.28 1.75 34.15
FTFC First Fed. Capital Corp. of WI 11.70 146.37 10.03 155.48 15.94 0.64 2.91 34.04
FFKY First Fed. Fin. Corp. of KY 15.85 179.64 25.22 192.57 18.34 0.96 2.29 36.23
FFBZ First Federal Bancorp of OH 10.25 142.19 11.10 142.36 10.43 0.44 1.80 18.41
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 7, 1996
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ _______________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
FFWM First Fin. Corp of Western MD 12.53 12.53 0.42 3.52 3.20 0.39 3.24 2.02 116.36 3.17
FFCH First Fin. Holdings Inc. of SC 6.61 6.61 0.75 11.29 8.76 0.77 11.50 1.36 55.75 0.93
FPRY First Financial Bancorp of FL(8) 6.35 6.35 0.57 8.93 7.22 0.43 6.68 NA NA 0.84
FFBI First Financial Bancorp of IL 8.87 8.87 0.69 6.63 7.23 0.72 6.93 0.40 98.60 0.55
FFHC First Financial Corp. of WI 7.33 6.96 1.28 18.96 10.17 1.24 18.40 0.52 85.22 0.67
FFHS First Franklin Corp. of OH 9.51 9.51 0.63 6.59 7.28 0.62 6.47 0.73 57.88 0.64
FGHC First Georgia Hold. Corp of GA 8.16 7.22 0.86 10.81 8.43 0.86 10.81 1.51 47.32 0.84
FSPG First Home SB, SLA of NJ 6.52 6.34 1.01 15.73 12.34 0.98 15.30 0.97 79.35 1.40
FFSL First Independence Corp. of KS 12.64 12.64 1.14 8.56 10.99 1.14 8.56 0.96 70.41 1.10
FISB First Indiana Corp. of IN 8.96 8.83 1.17 13.93 8.61 1.00 11.82 1.70 64.84 1.32
FKFS First Keystone Fin. Corp of PA 8.28 8.28 0.48 5.48 5.86 0.51 5.92 2.86 19.07 0.91
FLFC First Liberty Fin. Corp. of GA 6.83 5.74 0.96 14.60 9.72 0.76 11.54 0.88 92.83 1.12
CASH First Midwest Fin. Corp. of IA 12.55 11.70 1.22 9.29 8.30 0.97 7.38 0.39 148.22 0.81
FMBD First Mutual Bancorp of IL 25.26 25.26 0.98 4.24 4.78 0.95 4.10 0.09 471.37 0.52
FMSB First Mutual SB of Bellevue WA* 6.64 6.64 1.02 15.30 11.05 1.01 15.08 0.19 359.89 0.83
FNGB First Northern Cap. Corp of WI 12.73 12.73 0.84 6.54 6.56 0.72 5.58 0.13 358.40 0.52
FFPB First Palm Beach Bancorp of FL 7.64 7.44 0.68 8.13 7.95 0.67 8.08 0.81 48.51 0.55
FSNJ First SB of NJ, MHC (45.0) 8.13 8.13 0.04 0.52 0.57 0.37 4.27 0.98 41.68 1.18
FSBC First SB, FSB of Clovis NM 4.74 4.74 0.31 6.79 9.64 0.24 5.25 1.44 21.82 0.98
FSLA First SB, SLA MHC of NJ (37.6) 9.49 8.24 0.86 9.52 7.75 0.83 9.13 0.96 55.11 1.08
SOPN First SB, SSB, Moore Co. of NC 26.21 26.21 1.48 5.67 5.33 1.50 5.78 0.03 936.92 0.35
FWWB First Savings Bancorp of WA* 25.80 25.80 1.02 8.65 3.53 1.00 8.48 0.23 283.53 1.12
SHEN First Shenango Bancorp of PA 13.24 13.24 1.01 7.19 7.02 0.95 6.79 0.49 146.55 1.10
FSFC First So.east Fin. Corp. of SC 19.61 19.61 0.90 4.60 4.36 0.89 4.55 0.14 238.66 0.52
FSFI First State Fin. Serv. of NJ 6.84 6.49 0.63 9.28 9.60 0.49 7.25 4.97 21.02 1.28
FFDP FirstFed Bancshares of IL 9.02 8.61 0.63 6.51 6.82 0.39 4.08 0.14 145.75 0.38
FLAG Flag Financial Corp of GA 9.56 9.56 0.91 9.92 8.24 0.81 8.79 1.69 36.23 0.90
FFPC Florida First Bancorp of FL(8) 6.92 6.92 0.85 12.80 6.74 0.78 11.77 0.82 150.67 2.11
FFIC Flushing Fin. Corp. of NY* 18.72 18.72 0.58 4.55 3.05 0.56 4.36 0.90 80.61 1.78
FBHC Fort Bend Holding Corp. of TX 7.27 7.27 0.74 10.13 12.00 0.67 9.18 NA NA 1.42
FTSB Fort Thomas Fin. Corp. of KY 24.30 24.30 1.30 5.84 4.18 1.30 5.84 1.78 19.53 0.42
FSBX Framingham SB of MA* 7.47 7.47 1.25 17.15 9.65 1.25 17.15 2.43 38.37 1.37
FKKY Frankfort First Bancorp of KY 34.52 34.52 1.36 4.94 4.66 1.08 3.91 0.10 66.67 0.09
GFSB GFS Bancorp of Grinnell IA 12.04 12.04 1.09 8.45 7.66 1.06 8.29 0.97 52.35 0.61
GUPB GFSB Bancorp of Gallup NM 23.03 23.03 1.24 5.07 5.43 1.24 5.07 NA NA 0.87
GWBC Gateway Bancorp of KY 25.00 25.00 1.05 3.92 4.71 1.05 3.92 0.19 57.04 0.46
GBCI Glacier Bancorp of MT 9.63 9.61 1.59 16.27 8.09 1.59 16.27 0.23 225.96 0.72
GLBK Glendale Co-op. Bank of MA* 16.31 16.31 0.78 4.96 6.46 0.65 4.17 NA NA 0.70
GFCO Glenway Financial Corp. of OH 9.41 9.16 0.56 5.87 6.68 0.54 5.62 NA NA 0.29
GTPS Great American Bancorp of IL 29.42 29.42 0.68 2.82 2.98 0.68 2.82 0.45 53.28 0.37
GTFN Great Financial Corp. of KY 11.35 11.17 1.00 8.15 5.74 0.81 6.62 4.16 11.85 0.67
GSBC Great Southern Bancorp of MO 10.12 9.95 1.72 17.10 9.02 1.62 16.07 2.03 106.34 2.54
GDVS Greater DV SB,MHC of PA(19.9)* 12.29 12.29 0.48 3.95 3.50 0.48 3.95 3.05 22.60 1.18
GRTR Greater New York SB of NY* 5.68 5.68 0.46 8.39 8.09 0.45 8.20 9.21 9.89 2.16
GSFC Green Street Fin. Corp. of NC 31.53 31.53 1.42 4.50 4.91 1.42 4.50 0.16 67.98 0.19
GROV GroveBank for Savings of MA* 6.24 6.23 0.81 13.33 11.72 0.77 12.57 0.80 70.34 0.78
GFED Guaranty FS&LA,MHC of MO(31.1) 14.64 14.64 1.02 7.29 5.04 0.55 3.89 0.07 NA 1.59
GSLC Guaranty Svgs & Loan FA of VA 6.19 6.19 0.68 11.24 8.24 0.42 6.90 3.14 23.56 0.94
HEMT HF Bancorp of Hemet CA 11.44 11.43 0.19 1.70 2.00 0.19 1.70 0.59 60.30 1.21
HFFC HF Financial Corp. of SD(8) 8.97 8.95 0.78 8.71 9.40 0.61 6.80 0.69 93.68 0.88
HFNC HFNC Financial Corp. of NC 34.11 34.11 0.80 3.76 1.99 0.95 4.46 1.62 64.19 1.59
HMNF HMN Financial, Inc. of MN 16.76 16.76 1.10 6.35 7.20 0.99 5.67 0.14 305.95 0.73
HALL Hallmark Capital Corp. of WI 7.82 7.82 0.57 6.40 7.70 0.51 5.73 0.09 390.48 0.60
HARB Harbor FSB, MHC of FL (45.7) 8.86 8.86 1.19 13.64 7.96 1.18 13.58 0.54 199.07 1.48
HRBF Harbor Federal Bancorp of MD 19.02 19.02 0.81 3.82 5.21 0.81 3.82 0.06 547.06 0.46
HFSA Hardin Bancorp of Hardin MO 19.24 19.24 0.64 4.18 4.09 0.64 4.18 0.11 140.43 0.29
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
FFWM First Fin. Corp of Western MD NM 106.95 13.40 106.95 NM 0.48 2.40 NM
FFCH First Fin. Holdings Inc. of SC 11.42 123.01 8.13 123.01 11.21 0.64 3.46 39.51
FPRY First Financial Bancorp of FL(8) 13.86 119.33 7.58 119.33 18.52 0.80 3.93 54.42
FFBI First Financial Bancorp of IL 13.84 93.04 8.26 93.04 13.25 0.00 0.00 0.00
FFHC First Financial Corp. of WI 9.83 172.93 12.68 182.11 10.13 0.60 2.61 25.64
FFHS First Franklin Corp. of OH 13.75 87.35 8.30 87.35 14.00 0.28 1.85 25.45
FGHC First Georgia Hold. Corp of GA 11.86 122.16 9.97 138.07 11.86 0.00 0.00 0.00
FSPG First Home SB, SLA of NJ 8.11 118.57 7.73 121.83 8.33 0.48 2.70 21.92
FFSL First Independence Corp. of KS 9.10 80.57 10.18 80.57 9.10 0.40 2.25 20.51
FISB First Indiana Corp. of IN 11.61 153.32 13.73 155.56 13.69 0.56 2.29 26.54
FKFS First Keystone Fin. Corp of PA 17.08 96.69 8.01 96.69 15.83 0.00 0.00 0.00
FLFC First Liberty Fin. Corp. of GA 10.29 131.35 8.97 156.44 13.01 0.52 2.35 24.19
CASH First Midwest Fin. Corp. of IA 12.05 108.20 13.58 116.05 15.16 0.44 1.87 22.56
FMBD First Mutual Bancorp of IL 20.90 76.99 19.45 76.99 21.61 0.28 2.20 45.90
FMSB First Mutual SB of Bellevue WA* 9.05 130.29 8.65 130.29 9.17 0.20 1.52 13.79
FNGB First Northern Cap. Corp of WI 15.23 98.19 12.50 98.19 17.83 0.60 3.82 58.25
FFPB First Palm Beach Bancorp of FL 12.57 98.38 7.51 101.05 12.65 0.40 1.88 23.67
FSNJ First SB of NJ, MHC (45.0) NM 79.77 6.48 79.77 21.39 0.50 3.54 NM
FSBC First SB, FSB of Clovis NM 10.38 69.97 3.31 69.97 13.41 0.00 0.00 0.00
FSLA First SB, SLA MHC of NJ (37.6) 12.90 114.45 10.86 131.80 13.45 0.40 2.50 32.26
SOPN First SB, SSB, Moore Co. of NC 18.75 104.52 27.39 104.52 18.38 0.60 3.20 60.00
FWWB First Savings Bancorp of WA* NM 98.36 25.38 98.36 NM 0.20 1.33 37.74
SHEN First Shenango Bancorp of PA 14.24 100.49 13.30 100.49 15.07 0.48 2.34 33.33
FSFC First So.east Fin. Corp. of SC 22.91 103.96 20.39 103.96 23.21 0.48 2.69 61.54
FSFI First State Fin. Serv. of NJ 10.42 93.55 6.40 98.72 13.33 0.22 2.20 22.92
FFDP FirstFed Bancshares of IL 14.65 96.99 8.75 101.58 23.36 0.40 2.48 36.36
FLAG Flag Financial Corp of GA 12.14 118.49 11.33 118.49 13.71 0.34 2.67 32.38
FFPC Florida First Bancorp of FL(8) 14.83 178.21 12.34 178.21 16.12 0.24 2.16 32.00
FFIC Flushing Fin. Corp. of NY* NM 90.57 16.95 90.57 NM 0.00 0.00 0.00
FBHC Fort Bend Holding Corp. of TX 8.33 82.48 6.00 82.48 9.20 0.28 1.58 13.15
FTSB Fort Thomas Fin. Corp. of KY 23.93 123.34 29.97 123.34 23.93 0.25 1.49 35.71
FSBX Framingham SB of MA* 10.37 165.37 12.35 165.37 10.37 0.10 2.35 24.39
FKKY Frankfort First Bancorp of KY 21.45 81.98 28.30 81.98 NM 0.36 3.17 67.92
GFSB GFS Bancorp of Grinnell IA 13.06 108.41 13.05 108.41 13.31 0.30 1.46 19.11
GUPB GFSB Bancorp of Gallup NM 18.42 81.92 18.87 81.92 18.42 0.40 2.86 52.63
GWBC Gateway Bancorp of KY 21.21 90.21 22.55 90.21 21.21 0.40 2.86 60.61
GBCI Glacier Bancorp of MT 12.36 190.62 18.35 190.96 12.36 0.58 2.67 32.95
GLBK Glendale Co-op. Bank of MA* 15.49 73.81 12.04 73.81 18.42 0.00 0.00 0.00
GFCO Glenway Financial Corp. of OH 14.96 85.35 8.03 87.64 15.65 0.68 3.32 49.64
GTPS Great American Bancorp of IL NM 73.45 21.61 73.45 NM 0.00 0.00 0.00
GTFN Great Financial Corp. of KY 17.42 140.70 15.97 143.01 21.43 0.48 1.78 30.97
GSBC Great Southern Bancorp of MO 11.09 182.85 18.50 185.94 11.80 0.70 2.55 28.23
GDVS Greater DV SB,MHC of PA(19.9)* NM 112.87 13.87 112.87 NM 0.36 3.60 NM
GRTR Greater New York SB of NY* 12.36 99.91 5.68 99.91 12.64 0.00 0.00 0.00
GSFC Green Street Fin. Corp. of NC 20.35 91.58 28.87 91.58 20.35 0.00 0.00 0.00
GROV GroveBank for Savings of MA* 8.53 106.14 6.62 106.36 9.05 0.72 2.85 24.32
GFED Guaranty FS&LA,MHC of MO(31.1) 19.83 132.34 19.37 132.34 NM 0.64 5.57 NM
GSLC Guaranty Svgs & Loan FA of VA 12.14 122.66 7.59 122.66 19.77 0.10 1.18 14.29
HEMT HF Bancorp of Hemet CA NM 76.63 8.77 76.69 NM 0.00 0.00 0.00
HFFC HF Financial Corp. of SD(8) 10.64 88.97 7.98 89.23 13.64 0.33 2.20 23.40
HFNC HFNC Financial Corp. of NC NM 113.44 38.69 113.44 NM 0.00 0.00 0.00
HMNF HMN Financial, Inc. of MN 13.88 89.45 14.99 89.45 15.53 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 12.99 80.58 6.30 80.58 14.52 0.00 0.00 0.00
HARB Harbor FSB, MHC of FL (45.7) 12.56 160.91 14.25 160.91 12.62 1.20 4.44 55.81
HRBF Harbor Federal Bancorp of MD 19.21 81.51 15.51 81.51 19.21 0.40 3.11 59.70
HFSA Hardin Bancorp of Hardin MO 24.48 77.51 14.91 77.51 24.48 0.40 3.40 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 7, 1996
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ ________________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
HARL Harleysville SA of PA 7.05 7.05 0.82 11.92 9.31 0.83 12.13 0.05 NA 0.78
HARS Harris SB, MHC of PA (23.1) 12.07 11.31 0.69 5.54 4.36 0.68 5.47 0.75 66.68 0.92
HFFB Harrodsburg 1st Fin Bcrp of KY 28.66 28.66 1.05 4.73 3.21 1.05 4.73 0.60 45.62 0.40
HHFC Harvest Home Fin. Corp. of OH 18.65 18.65 0.89 4.74 5.31 0.89 4.74 0.20 75.00 0.28
HAVN Haven Bancorp of Woodhaven NY 6.30 6.26 0.67 10.24 8.04 0.66 10.11 1.17 50.83 1.48
HVFD Haverfield Corp. of OH 8.30 8.27 0.65 8.20 6.70 0.62 7.71 0.78 103.98 0.95
HTHR Hawthorne Fin. Corp. of CA 3.79 3.76 -0.21 -5.46 -7.87 -0.27 -7.03 11.39 17.41 2.44
HSBK Hibernia SB of Quincy MA* 6.51 6.51 0.68 9.99 9.63 0.54 7.95 0.42 146.75 1.03
HBNK Highland Federal Bank of CA 7.83 7.83 0.22 2.87 2.63 0.21 2.81 1.98 84.53 2.22
HIFS Hingham Inst. for Sav. of MA* 10.04 10.04 1.11 10.78 10.00 1.11 10.78 0.34 204.87 1.00
HNFC Hinsdale Financial Corp. of IL 7.97 7.72 0.62 8.20 6.72 0.59 7.88 0.13 277.71 0.39
HBFW Home Bancorp of Fort Wayne IN 16.42 16.42 0.86 5.00 5.83 0.86 5.00 NA NA 0.60
HBBI Home Building Bancorp of IN 14.13 14.13 0.45 3.17 3.34 0.45 3.17 0.23 446.39 1.48
HOMF Home Fed Bancorp of Seymour IN 8.29 7.97 1.20 15.06 11.89 1.04 13.07 0.47 102.67 0.58
HFMD Home Federal Corporation of MD(8) 8.61 8.50 1.18 14.27 9.76 1.16 13.98 4.75 35.71 2.59
HOFL Home Financial Corp. of FL(8) 25.51 25.51 1.71 6.69 6.01 1.63 6.37 0.06 499.44 1.43
HPBC Home Port Bancorp, Inc. of MA* 11.26 11.26 1.75 15.23 11.42 1.76 15.32 0.65 216.13 1.75
HMCI Homecorp, Inc. of Rockford IL 6.07 6.07 0.37 6.28 6.40 0.25 4.26 3.24 15.53 0.65
LOAN Horizon Bancorp, Inc of TX* 8.65 8.35 1.54 17.77 11.81 1.20 13.90 0.42 127.82 0.78
HZFS Horizon Fin'l. Services of IA 11.57 11.57 0.46 3.70 4.65 0.43 3.44 1.57 28.85 0.67
HRZB Horizon Financial Corp. of WA* 16.19 16.19 1.53 9.53 8.63 1.53 9.53 NA NA 0.82
IBSF IBS Financial Corp. of NJ 20.39 20.39 1.10 5.11 5.07 1.12 5.18 0.07 198.42 0.66
ISBF ISB Financial Corp. of LA 19.37 19.36 1.26 6.94 6.27 1.26 6.94 NA NA 0.91
IFSB Independence FSB of DC 6.48 5.57 0.55 8.92 14.67 0.26 4.22 2.68 7.66 0.38
INCB Indiana Comm. Bank, SB of IN 14.98 14.98 0.68 4.41 4.79 0.68 4.41 NA NA 0.61
IFSL Indiana Federal Corp. of IN 9.82 9.13 1.02 10.77 8.16 0.96 10.08 1.41 65.46 1.20
INBI Industrial Bancorp of OH 19.12 19.12 1.48 8.08 6.98 1.48 8.08 0.40 107.81 0.54
IWBK Interwest SB of Oak Harbor WA 6.88 6.68 1.08 14.86 8.49 1.00 13.71 0.59 59.11 0.62
IPSW Ipswich SB of Ipswich MA* 6.32 6.32 1.39 22.24 13.62 1.21 19.44 2.23 46.20 1.37
IROQ Iroquois Bancorp of Auburn NY* 6.08 6.08 0.86 14.60 11.03 0.86 14.51 1.60 46.24 1.00
JSBF JSB Financial, Inc. of NY 21.82 21.82 1.47 6.73 6.71 1.55 7.13 NA NA 0.61
JXVL Jacksonville Bancorp of TX 16.70 16.70 0.79 6.76 5.83 0.79 6.76 0.86 54.59 0.69
JXSB Jcksnville SB,MHC of IL(43.3%) 11.79 11.79 0.43 3.82 3.43 0.35 3.10 0.52 90.42 0.60
JEBC Jefferson Bancorp of Gretna LA(8) 13.36 13.36 1.00 7.78 5.38 1.00 7.78 0.46 54.63 1.08
JSBA Jefferson Svgs Bancorp of MO 7.02 5.75 0.60 8.20 5.58 0.59 8.04 0.97 48.62 0.66
JOAC Joachim Bancorp of MO 29.24 29.24 0.65 3.14 2.20 0.65 3.14 0.01 NA 0.31
KSAV KS Bancorp of Kenly NC 15.17 15.15 1.14 6.94 8.39 1.15 7.03 0.73 41.55 0.37
KSBK KSB Bancorp of Kingfield ME* 6.85 6.30 0.79 12.18 12.00 0.76 11.67 1.73 40.97 1.04
KFBI Klamath First Bancorp of OR 27.73 27.73 1.34 6.14 4.63 1.34 6.14 0.11 134.99 0.20
LBFI L&B Financial of S. Springs TX(8) 17.14 17.14 1.07 5.78 5.64 1.05 5.71 0.50 120.17 1.35
LFSB LFS Bancorp of Lexington KY(8) 28.55 28.55 0.72 2.54 2.55 0.72 2.54 NA NA 0.11
LSBI LSB Bancorp of Lafayette IN 10.66 10.66 0.82 6.96 8.13 0.78 6.58 0.19 295.51 0.65
LVSB Lakeview SB of Paterson NJ 9.95 7.64 1.15 10.31 11.58 0.69 6.19 1.89 34.35 1.75
LARK Landmark Bancshares of KS 17.20 17.20 0.91 5.28 6.16 0.79 4.60 0.37 97.05 0.64
LARL Laurel Capital Group of PA 10.68 10.68 1.36 13.21 11.40 1.31 12.75 0.70 142.16 1.31
LSBX Lawrence Savings Bank of MA* 7.56 7.56 1.12 14.66 14.53 1.13 14.85 1.98 62.75 2.73
LFCT Leader Fin. Corp of Memphis TN(8) 8.03 8.03 1.41 17.25 8.86 1.37 16.87 16.94 4.30 1.10
LFED Leeds FSB, MHC of MD (35.3) 16.36 16.36 1.03 6.35 5.57 1.03 6.35 0.01 NA 0.24
LXMO Lexington B&L Fin. Corp. of MO 29.42 29.42 1.28 4.34 6.36 1.26 4.27 1.04 38.13 0.49
LBCI Liberty Bancorp of Chicago IL 9.53 9.50 0.56 5.51 6.37 0.56 5.51 0.12 421.89 0.70
LIFB Life Bancorp of Norfolk VA 12.73 12.26 0.85 5.95 6.30 0.88 6.22 0.73 107.84 1.73
LFBI Little Falls Bancorp of NJ 15.22 14.00 0.22 2.42 1.82 0.16 1.75 1.56 20.85 0.94
LOGN Logansport Fin. Corp. of IN 26.77 26.77 1.41 5.71 5.96 1.40 5.63 0.37 79.86 0.44
LONF London Financial Corp. of OH 20.86 20.86 0.57 4.73 3.52 0.57 4.73 0.21 239.74 0.69
LISB Long Island Bancorp of NY 10.69 10.69 0.95 8.77 6.16 0.89 8.20 NA NA 1.45
MAFB MAF Bancorp of IL 5.54 5.54 0.88 15.21 12.69 0.90 15.65 0.46 104.05 0.63
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
HARL Harleysville SA of PA 10.74 122.30 8.63 122.30 10.56 0.40 2.18 23.39
HARS Harris SB, MHC of PA (23.1) 22.95 124.54 15.03 132.94 23.26 0.58 3.46 NM
HFFB Harrodsburg 1st Fin Bcrp of KY NM 106.79 30.61 106.79 NM 0.40 2.62 NM
HHFC Harvest Home Fin. Corp. of OH 18.84 88.74 16.55 88.74 18.84 0.40 3.08 57.97
HAVN Haven Bancorp of Woodhaven NY 12.44 127.18 8.01 127.94 12.61 0.40 1.44 17.94
HVFD Haverfield Corp. of OH 14.92 119.85 9.95 120.26 15.85 0.54 3.04 45.38
HTHR Hawthorne Fin. Corp. of CA NM 66.61 2.52 67.02 NM 0.00 0.00 NM
HSBK Hibernia SB of Quincy MA* 10.39 99.33 6.46 99.33 13.05 0.28 1.90 19.72
HBNK Highland Federal Bank of CA NM 108.55 8.51 108.55 NM 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA* 10.00 104.47 10.48 104.47 10.00 0.32 2.21 22.07
HNFC Hinsdale Financial Corp. of IL 14.87 116.34 9.27 120.02 15.46 0.00 0.00 0.00
HBFW Home Bancorp of Fort Wayne IN 17.15 88.86 14.59 88.86 17.15 0.20 1.36 23.26
HBBI Home Building Bancorp of IN NM 95.06 13.43 95.06 NM 0.30 1.70 50.85
HOMF Home Fed Bancorp of Seymour IN 8.41 118.42 9.81 123.16 9.69 0.50 1.87 15.72
HFMD Home Federal Corporation of MD(8) 10.25 138.33 11.92 140.22 10.46 0.16 1.56 16.00
HOFL Home Financial Corp. of FL(8) 16.64 109.26 27.87 109.26 17.48 0.80 5.79 NM
HPBC Home Port Bancorp, Inc. of MA* 8.76 134.80 15.18 134.80 8.70 0.60 4.36 38.22
HMCI Homecorp, Inc. of Rockford IL 15.63 95.06 5.77 95.06 23.03 0.00 0.00 0.00
LOAN Horizon Bancorp, Inc of TX* 8.47 132.74 11.48 137.43 10.82 0.16 1.52 12.90
HZFS Horizon Fin'l. Services of IA 21.53 83.07 9.61 83.07 23.13 0.32 2.06 44.44
HRZB Horizon Financial Corp. of WA* 11.59 105.99 17.16 105.99 11.59 0.32 2.51 29.09
IBSF IBS Financial Corp. of NJ 19.72 103.47 21.10 103.47 19.44 0.24 1.71 33.80
ISBF ISB Financial Corp. of LA 15.95 95.48 18.50 95.54 15.95 0.32 2.05 32.65
IFSB Independence FSB of DC 6.82 56.14 3.64 65.33 14.42 0.22 2.93 20.00
INCB Indiana Comm. Bank, SB of IN 20.90 91.21 13.66 91.21 20.90 0.35 2.50 52.24
IFSL Indiana Federal Corp. of IN 12.26 128.49 12.62 138.25 13.10 0.72 3.77 46.15
INBI Industrial Bancorp of OH 14.33 104.35 19.96 104.35 14.33 0.30 2.55 36.59
IWBK Interwest SB of Oak Harbor WA 11.77 166.58 11.46 171.50 12.76 0.48 1.97 23.19
IPSW Ipswich SB of Ipswich MA* 7.34 145.43 9.19 145.43 8.40 0.20 1.90 13.99
IROQ Iroquois Bancorp of Auburn NY* 9.06 124.25 7.55 124.25 9.12 0.32 2.21 20.00
JSBF JSB Financial, Inc. of NY 14.89 99.76 21.77 99.76 14.06 1.20 3.68 54.79
JXVL Jacksonville Bancorp of TX 17.15 75.69 12.64 75.69 17.15 0.42 4.15 71.19
JXSB Jcksnville SB,MHC of IL(43.3%) NM 104.40 12.31 104.40 NM 0.40 2.86 NM
JEBC Jefferson Bancorp of Gretna LA(8) 18.60 139.49 18.64 139.49 18.60 0.30 1.33 24.79
JSBA Jefferson Svgs Bancorp of MO 17.93 142.00 9.97 173.35 18.29 0.32 1.17 21.05
JOAC Joachim Bancorp of MO NM 90.11 26.35 90.11 NM 0.50 3.92 NM
KSAV KS Bancorp of Kenly NC 11.92 87.55 13.28 87.68 11.76 0.60 3.33 39.74
KSBK KSB Bancorp of Kingfield ME* 8.33 95.37 6.53 103.63 8.69 0.20 0.90 7.49
KFBI Klamath First Bancorp of OR 21.59 95.64 26.52 95.64 21.59 0.26 1.82 39.39
LBFI L&B Financial of S. Springs TX(8) 17.74 106.45 18.25 106.45 17.93 0.40 2.42 43.01
LFSB LFS Bancorp of Lexington KY(8) NM 97.91 27.96 97.91 NM 0.00 0.00 0.00
LSBI LSB Bancorp of Lafayette IN 12.30 87.69 9.35 87.69 13.02 0.32 2.03 25.00
LVSB Lakeview SB of Paterson NJ 8.64 95.05 9.46 123.78 14.39 0.25 1.32 11.36
LARK Landmark Bancshares of KS 16.22 89.44 15.38 89.44 18.60 0.40 2.62 42.55
LARL Laurel Capital Group of PA 8.77 109.73 11.72 109.73 9.09 0.32 2.13 18.71
LSBX Lawrence Savings Bank of MA* 6.88 93.23 7.05 93.23 6.80 0.00 0.00 0.00
LFCT Leader Fin. Corp of Memphis TN(8) 11.29 177.44 14.25 177.44 11.55 0.72 1.58 17.82
LFED Leeds FSB, MHC of MD (35.3) 17.95 110.67 18.10 110.67 17.95 0.64 4.57 NM
LXMO Lexington B&L Fin. Corp. of MO 15.73 68.33 20.10 68.33 15.98 0.00 0.00 0.00
LBCI Liberty Bancorp of Chicago IL 15.69 88.66 8.45 88.90 15.69 0.60 2.64 41.38
LIFB Life Bancorp of Norfolk VA 15.87 95.79 12.19 99.44 15.18 0.44 3.12 49.44
LFBI Little Falls Bancorp of NJ NM 69.07 10.51 75.11 NM 0.00 0.00 0.00
LOGN Logansport Fin. Corp. of IN 16.78 82.31 22.04 82.31 17.00 0.40 3.14 52.63
LONF London Financial Corp. of OH NM 70.90 14.79 70.90 NM 0.00 0.00 0.00
LISB Long Island Bancorp of NY 16.23 143.67 15.36 143.67 17.37 0.40 1.34 21.74
MAFB MAF Bancorp of IL 7.88 117.17 6.49 117.17 7.66 0.32 1.31 10.29
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 7, 1996
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ _______________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
MBLF MBLA Financial Corp. of MO(8) 14.54 14.54 0.70 4.81 4.21 0.70 4.81 0.33 83.20 0.51
MFBC MFB Corp. of Mishawaka IN 19.31 19.31 0.69 3.41 4.50 0.68 3.36 0.05 325.00 0.25
MLFB MLF Bancorp of Villanova PA 7.95 7.75 0.70 8.06 7.83 0.62 7.15 0.59 125.65 1.64
MSBB MSB Bancorp of Middletown NY* 9.69 9.52 0.53 5.65 5.27 0.57 6.05 NA NA 0.57
MSBF MSB Financial Corp. of MI 22.64 22.64 1.93 7.88 9.13 1.76 7.21 0.60 100.59 0.69
MGNL Magna Bancorp of MS 9.77 9.18 1.76 18.10 9.06 1.66 17.10 4.18 16.96 1.01
MARN Marion Capital Holdings of IN 23.99 23.99 1.40 5.77 6.15 1.40 5.77 0.93 120.08 1.42
MFCX Marshalltown Fin. Corp. of IA(8) 15.33 15.33 0.33 2.14 1.87 0.33 2.14 NA NA 0.20
MFSL Maryland Fed. Bancorp of MD 8.22 8.08 0.75 9.08 9.15 0.65 7.94 0.48 81.70 0.45
MASB MassBank Corp. of Reading MA* 10.16 10.16 1.04 10.42 9.74 1.02 10.20 0.33 87.49 1.00
MFLR Mayflower Co-Op. Bank of MA* 9.87 9.65 0.84 7.86 6.67 0.79 7.37 1.58 59.62 1.49
MDBK Medford Savings Bank of MA* 8.88 8.06 1.02 11.63 10.12 1.00 11.41 0.55 135.58 1.38
MERI Meritrust FSB of Thibodaux LA 7.44 7.44 1.01 13.99 8.50 1.01 13.99 0.23 131.08 0.62
MSEA Metropolitan Bancorp of WA 6.54 5.92 0.71 10.67 10.21 0.77 11.51 NA NA 1.76
MCBS Mid Continent Bancshares of KS 12.53 12.50 1.37 9.90 9.40 1.06 7.64 0.21 59.97 0.25
MIFC Mid Iowa Financial Corp. of IA 9.03 9.01 0.83 8.92 8.48 0.80 8.59 0.15 142.62 0.44
MCBN Mid-Coast Bancorp of ME 9.06 9.06 0.56 6.32 6.96 0.51 5.80 1.10 36.89 0.51
MIDC Midconn Bank of Kensington CT* 9.45 7.88 0.34 3.56 4.20 0.32 3.45 2.04 24.62 0.72
MWBI Midwest Bancshares, Inc. of IA 6.94 6.94 0.99 14.20 14.41 0.96 13.86 0.27 175.00 0.85
MWFD Midwest Fed. Fin. Corp of WI 9.34 8.92 1.19 12.30 7.63 0.96 9.88 0.26 294.77 1.06
MFFC Milton Fed. Fin. Corp. of OH 19.98 19.98 1.13 4.93 6.14 1.05 4.56 0.40 54.24 0.35
MIVI Miss. View Hold. Co. of MN 18.86 18.86 1.32 6.75 8.44 1.25 6.40 0.14 888.89 2.07
MBBC Monterey Bay Bancorp of CA 14.98 14.80 0.19 1.27 1.52 0.23 1.55 0.60 71.38 0.60
MORG Morgan Financial Corp. of CO 14.66 14.66 0.97 6.43 6.53 0.93 6.18 0.28 60.61 0.24
MFSB Mutual Bancompany of MO(8) 11.70 11.70 0.20 1.83 1.62 0.23 2.10 NA NA NA
MSBK Mutual SB, FSB of Bay City MI 5.46 5.46 0.01 0.21 0.36 -0.09 -1.71 0.11 215.12 0.83
NHTB NH Thrift Bancshares of NH 7.69 7.69 0.57 7.35 8.20 0.59 7.70 1.39 56.18 0.96
NHSL NHS Financial, Inc. of CA(8) 8.43 8.42 0.17 1.97 1.75 0.16 1.86 2.05 57.88 1.36
NSLB NS&L Bancorp of Neosho MO 23.49 23.49 0.93 4.27 4.58 0.87 3.98 0.18 40.95 0.15
NMSB Newmil Bancorp. of CT* 11.14 11.14 2.04 19.29 19.60 2.03 19.16 2.88 61.88 3.42
NFSL Newnan SB, FSB of Newnan GA 11.58 11.50 1.85 17.54 11.51 1.62 15.29 0.67 128.82 1.07
NASB North American SB of MO 7.35 7.05 1.33 18.45 12.68 1.27 17.61 3.36 26.33 1.05
NBSI North Bancshares of Chicago IL 17.34 17.34 0.57 3.03 3.45 0.52 2.75 NA NA 0.36
FFFD North Central Bancshares of IA 28.87 28.87 1.48 7.67 6.34 1.39 7.19 0.13 743.80 1.18
NEIB Northeast Indiana Bncrp of IN 20.34 20.34 1.10 5.50 6.09 1.10 5.50 0.25 272.13 0.74
NSBK Northside SB of Bronx NY* 7.74 7.67 1.14 15.51 10.33 0.98 13.39 0.51 84.90 1.67
NWEQ Northwest Equity Corp. of WI 13.73 13.73 1.08 6.99 8.39 1.03 6.67 0.92 54.33 0.61
NWSB Northwest SB, MHC of PA(29.9) 10.67 10.54 1.05 9.37 6.15 1.05 9.37 0.98 70.63 0.94
NSSY Norwalk Savings Society of CT* 7.98 7.98 0.75 8.92 8.00 0.64 7.63 3.01 27.48 1.20
NSSB Norwich Financial Corp. of CT* 10.58 9.54 0.84 7.50 7.33 0.84 7.50 1.92 113.80 3.44
NTMG Nutmeg FS&LA of CT 5.98 5.98 0.63 10.78 10.13 0.38 6.52 NA NA 0.56
OHSL OHSL Financial Corp. of OH 12.42 12.42 0.96 7.50 7.37 0.93 7.30 0.26 97.54 0.36
OSBF OSB Fin. Corp. of Oshkosh WI 12.59 12.59 0.17 1.33 1.67 0.30 2.31 0.14 258.58 0.56
OFCP Ottawa Financial Corp. of MI 10.92 8.75 0.92 4.93 4.43 0.92 4.93 0.38 95.16 0.45
PFFB PFF Bancorp of Pomona CA 14.39 14.23 0.10 1.37 0.89 0.10 1.37 2.29 42.84 1.23
PVFC PVF Capital Corp. of OH 6.71 6.71 1.13 17.84 11.89 0.99 15.71 NA NA NA
PCCI Pacific Crest Capital of CA* 7.90 7.90 1.09 20.44 11.44 0.88 16.48 6.49 26.06 2.56
PALM Palfed, Inc. of Aiken SC 8.45 8.04 0.66 8.56 6.50 0.56 7.20 4.14 31.72 1.69
PSSB Palm Springs SB of CA(8) 6.09 6.09 0.62 10.84 7.78 0.33 5.78 4.09 15.83 0.75
PBCI Pamrapo Bancorp, Inc. of NJ 15.50 15.35 1.42 9.06 8.37 1.42 9.06 3.05 24.34 1.26
PVSA Parkvale Financial Corp of PA 7.42 7.39 1.05 14.79 11.15 0.98 13.82 0.18 850.40 2.28
PBIX Patriot Bank Corp. of PA 17.29 17.29 0.56 3.99 3.23 0.57 4.08 0.23 243.20 0.88
PEEK Peekskill Fin. Corp. of NY 30.67 30.67 1.06 4.96 3.67 1.11 5.19 0.83 31.67 1.32
PFSB PennFed Fin. Services of NJ 8.97 7.11 0.73 7.10 8.73 0.79 7.70 0.96 26.31 0.44
PWBC PennFirst Bancorp of PA 7.85 7.15 0.61 7.47 7.27 0.60 7.40 0.64 63.45 1.45
PBKB People's SB of Brockton MA* 4.93 4.67 0.73 12.13 7.40 0.53 8.69 1.27 76.25 1.93
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
MBLF MBLA Financial Corp. of MO(8) 23.75 114.90 16.70 114.90 23.75 0.40 1.68 40.00
MFBC MFB Corp. of Mishawaka IN 22.22 74.99 14.48 74.99 22.58 0.00 0.00 0.00
MLFB MLF Bancorp of Villanova PA 12.77 105.74 8.40 108.45 14.39 0.76 3.20 40.86
MSBB MSB Bancorp of Middletown NY* 18.98 101.42 9.83 103.21 17.70 0.60 3.81 72.29
MSBF MSB Financial Corp. of MI 10.95 88.81 20.11 88.81 11.96 0.50 2.99 32.68
MGNL Magna Bancorp of MS 11.04 187.64 18.33 199.76 11.68 0.60 1.76 19.48
MARN Marion Capital Holdings of IN 16.26 93.11 22.34 93.11 16.26 0.80 4.00 65.04
MFCX Marshalltown Fin. Corp. of IA(8) NM 113.06 17.33 113.06 NM 0.00 0.00 0.00
MFSL Maryland Fed. Bancorp of MD 10.93 99.26 8.16 100.95 12.50 0.64 2.16 23.62
MASB MassBank Corp. of Reading MA* 10.26 104.20 10.58 104.20 10.49 0.88 2.65 27.16
MFLR Mayflower Co-Op. Bank of MA* 15.00 113.91 11.24 116.52 16.01 0.40 2.81 42.11
MDBK Medford Savings Bank of MA* 9.88 110.45 9.81 121.78 10.07 0.68 3.20 31.63
MERI Meritrust FSB of Thibodaux LA 11.76 155.75 11.59 155.75 11.76 0.60 1.76 20.76
MSEA Metropolitan Bancorp of WA 9.80 99.34 6.49 109.75 9.08 0.00 0.00 0.00
MCBS Mid Continent Bancshares of KS 10.64 105.32 13.19 105.50 13.79 0.40 2.15 22.86
MIFC Mid Iowa Financial Corp. of IA 11.79 100.32 9.06 100.48 12.25 0.08 1.28 15.09
MCBN Mid-Coast Bancorp of ME 14.38 88.89 8.05 88.89 15.67 0.50 2.62 37.59
MIDC Midconn Bank of Kensington CT* 23.83 84.11 7.95 100.93 24.60 0.60 3.93 NM
MWBI Midwest Bancshares, Inc. of IA 6.94 96.88 6.72 96.88 7.11 0.52 2.02 14.02
MWFD Midwest Fed. Fin. Corp of WI 13.11 156.86 14.66 164.27 16.33 0.15 0.94 12.30
MFFC Milton Fed. Fin. Corp. of OH 16.29 86.32 17.25 86.32 17.63 0.48 3.73 60.76
MIVI Miss. View Hold. Co. of MN 11.84 81.64 15.40 81.64 12.50 0.00 0.00 0.00
MBBC Monterey Bay Bancorp of CA NM 84.85 12.71 85.89 NM 0.00 0.00 0.00
MORG Morgan Financial Corp. of CO 15.31 97.15 14.24 97.15 15.91 0.24 1.96 30.00
MFSB Mutual Bancompany of MO(8) NM 112.12 13.12 112.12 NM 0.00 0.00 0.00
MSBK Mutual SB, FSB of Bay City MI NM 59.85 3.26 59.85 NM 0.00 0.00 0.00
NHTB NH Thrift Bancshares of NH 12.19 88.08 6.77 88.08 11.63 0.50 4.94 60.24
NHSL NHS Financial, Inc. of CA(8) NM 111.15 9.37 111.37 NM 0.16 1.47 NM
NSLB NS&L Bancorp of Neosho MO 21.81 82.39 19.35 82.39 23.40 0.50 3.89 NM
NMSB Newmil Bancorp. of CT* 5.10 96.53 10.75 96.53 5.14 0.20 2.67 13.61
NFSL Newnan SB, FSB of Newnan GA 8.69 141.91 16.44 142.91 9.97 0.40 2.19 19.05
NASB North American SB of MO 7.89 137.59 10.11 143.34 8.26 0.63 2.14 16.84
NBSI North Bancshares of Chicago IL NM 92.38 16.02 92.38 NM 0.40 2.56 74.07
FFFD North Central Bancshares of IA 15.77 74.71 21.57 74.71 16.80 0.25 2.44 38.46
NEIB Northeast Indiana Bncrp of IN 16.43 82.61 16.81 82.61 16.43 0.30 2.61 42.86
NSBK Northside SB of Bronx NY* 9.68 142.20 11.00 143.56 11.22 1.00 2.77 26.81
NWEQ Northwest Equity Corp. of WI 11.92 84.78 11.64 84.78 12.50 0.36 3.51 41.86
NWSB Northwest SB, MHC of PA(29.9) 16.26 147.09 15.70 148.93 16.26 0.30 2.53 41.10
NSSY Norwalk Savings Society of CT* 12.50 108.94 8.70 108.94 14.61 0.00 0.00 0.00
NSSB Norwich Financial Corp. of CT* 13.64 99.55 10.53 110.31 13.64 0.40 2.99 40.82
NTMG Nutmeg FS&LA of CT 9.87 104.17 6.23 104.17 16.30 0.00 0.00 0.00
OHSL OHSL Financial Corp. of OH 13.56 99.52 12.36 99.52 13.93 0.76 3.66 49.67
OSBF OSB Fin. Corp. of Oshkosh WI NM 81.25 10.23 81.25 NM 0.56 2.46 NM
OFCP Ottawa Financial Corp. of MI 22.57 108.91 11.89 135.87 22.57 0.32 1.97 44.44
PFFB PFF Bancorp of Pomona CA NM 77.21 11.11 78.13 NM 0.00 0.00 0.00
PVFC PVF Capital Corp. of OH 8.41 137.98 9.25 137.98 9.55 0.00 0.00 0.00
PCCI Pacific Crest Capital of CA* 8.74 106.14 8.39 106.14 10.84 0.00 0.00 0.00
PALM Palfed, Inc. of Aiken SC 15.39 125.07 10.57 131.46 18.29 0.08 0.63 9.76
PSSB Palm Springs SB of CA(8) 12.85 132.98 8.10 132.98 24.12 0.12 0.87 11.21
PBCI Pamrapo Bancorp, Inc. of NJ 11.95 110.40 17.11 111.44 11.95 0.90 4.74 56.60
PVSA Parkvale Financial Corp of PA 8.97 123.87 9.20 124.46 9.59 0.52 2.00 17.93
PBIX Patriot Bank Corp. of PA NM 84.03 14.53 84.03 NM 0.24 1.85 57.14
PEEK Peekskill Fin. Corp. of NY NM 82.82 25.40 82.82 NM 0.36 3.00 NM
PFSB PennFed Fin. Services of NJ 11.45 83.63 7.51 105.59 10.57 0.00 0.00 0.00
PWBC PennFirst Bancorp of PA 13.75 102.84 8.07 112.89 13.89 0.36 2.62 36.00
PBKB People's SB of Brockton MA* 13.51 127.06 6.26 134.23 18.87 0.28 2.80 37.84
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 7, 1996
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ _______________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
PFDC Peoples Bancorp of Auburn IN 15.26 15.26 1.45 9.62 8.24 1.44 9.56 0.33 97.48 0.41
PBCT Peoples Bank, MHC of CT(32.3)* 8.00 8.00 1.11 14.66 9.33 0.89 11.81 1.66 65.45 1.65
PHBK Peoples Heritage Fin Grp of ME* 8.38 7.20 1.21 14.20 10.64 1.19 14.00 1.24 130.41 2.11
PBNB Peoples Sav. Fin. Corp. of CT* 10.81 10.00 0.85 7.91 8.78 0.89 8.26 0.44 86.77 0.64
PERM Permanent Bancorp of IN 11.14 10.98 0.32 2.72 3.31 0.32 2.72 1.85 31.59 1.07
PMFI Perpetual Midwest Fin. of IA 9.64 9.64 0.41 4.10 4.29 0.41 4.10 0.53 136.14 0.93
PCBC Perry Co. Fin. Corp. of MO 20.86 20.86 1.00 5.36 5.10 1.00 5.36 0.04 31.25 0.10
PHFC Pittsburgh Home Fin. of PA 16.43 16.43 0.65 3.98 5.40 0.65 3.98 1.53 34.96 0.93
PFSL Pocahnts Fed, MHC of AR (46.4) 5.95 5.95 0.56 9.43 7.81 0.58 9.66 0.26 146.44 1.14
POBS Portsmouth Bank Shrs Inc of NH(8)* 25.06 25.06 2.29 9.01 7.71 1.93 7.56 0.21 122.90 0.83
PKPS Poughkeepsie SB of NY 8.50 8.50 1.94 24.70 22.36 2.56 32.53 2.68 36.80 1.34
PETE Primary Bank of NH* 6.34 6.31 -0.04 -0.64 -0.65 -0.04 -0.56 1.81 47.18 1.48
PSAB Prime Bancorp, Inc. of PA 9.44 8.83 1.02 10.92 9.20 0.91 9.69 0.60 105.04 1.05
PFNC Progress Financial Corp. of PA 5.52 5.48 0.86 19.19 12.46 0.67 14.93 1.33 44.33 0.94
PSBK Progressive Bank, Inc. of NY* 8.86 8.86 0.98 10.51 9.41 1.01 10.82 1.09 97.07 1.52
PULB Pulaski SB, MHC of MO (29.0) 12.63 12.63 0.84 6.93 5.21 0.79 6.55 0.67 37.37 0.31
PULS Pulse Bancorp of S. River NJ 11.89 11.89 1.17 10.07 7.86 1.18 10.14 1.45 38.35 1.88
QCFB QCF Bancorp of Virginia MN 21.81 21.81 1.52 7.75 9.14 1.52 7.75 NA NA NA
QCBC Quaker City Bancorp of CA 9.88 9.82 0.50 4.91 5.79 0.48 4.74 2.31 57.33 1.54
QCSB Queens County SB of NY* 16.98 16.98 1.72 9.78 7.12 1.77 10.10 0.75 120.88 1.09
RCSB RCSB Financial, Inc. of NY* 7.29 7.05 0.80 10.95 9.82 0.79 10.77 0.83 76.65 1.27
RARB Raritan Bancorp. of Raritan NJ* 7.24 7.06 0.81 10.82 9.16 0.80 10.65 0.48 155.58 1.32
REDF RedFed Bancorp of Redlands CA 5.63 5.63 -0.47 -8.41 -11.02 -0.45 -8.09 4.50 31.29 1.76
RELY Reliance Bancorp of NY 8.86 5.98 0.88 6.79 7.35 0.85 6.49 0.85 29.31 0.54
RELI Reliance Bancshares Inc of WI* 56.23 56.23 1.47 2.62 3.87 1.47 2.62 NA NA 0.49
RFED Roosevelt Fin. Grp. Inc. of MO 4.86 4.59 0.63 13.98 7.40 0.85 18.94 0.40 59.09 0.57
RVSB Rvrview SB,FSB MHC of WA(40.3) 11.02 9.75 1.30 11.97 7.56 1.17 10.78 0.26 119.16 0.51
SCCB S. Carolina Comm. Bnshrs of SC 28.46 28.46 1.36 4.54 4.85 1.36 4.54 NA NA 0.89
SBFL SB Fing. Lakes MHC of NY(33.0) 11.52 11.52 -0.54 -4.46 -3.15 -0.20 -1.63 1.68 29.38 1.02
SFED SFS Bancorp of Schenectady NY 14.05 14.05 0.63 4.91 6.30 0.63 4.91 0.71 52.95 0.59
SGVB SGV Bancorp of W. Covina CA 9.78 9.78 0.11 1.12 1.39 0.11 1.12 1.84 13.07 0.31
SISB SIS Bank of Sprinfield MA* 7.42 7.42 1.26 17.35 13.57 1.28 17.65 1.11 116.01 2.54
SJSB SJS Bancorp of St. Joseph MI 11.67 11.67 0.63 5.03 4.24 0.61 4.91 0.29 144.27 0.67
SWCB Sandwich Co-Op. Bank of MA* 8.60 8.03 0.85 10.27 9.91 0.79 9.63 1.34 64.69 1.31
SFBM Security Bancorp of MT 8.93 7.68 0.69 7.99 8.34 0.51 5.94 0.14 235.42 0.71
SECP Security Capital Corp. of WI 16.88 16.88 0.89 5.11 4.90 0.92 5.28 0.12 964.94 1.53
SFSL Security First Corp. of OH 8.71 8.47 1.18 13.57 11.32 1.23 14.21 0.44 208.07 1.02
SHFC Seven Hills Fin. Corp. of OH 21.21 21.21 0.36 1.69 2.14 0.34 1.58 0.22 51.02 0.14
SMFC Sho-Me Fin. Corp. of MO 11.98 11.98 0.83 6.18 6.91 0.82 6.12 NA NA 0.75
SOBI Sobieski Bancorp of S. Bend IN 18.49 18.49 0.42 2.27 3.25 0.42 2.27 NA NA 0.41
SOSA Somerset Savings Bank of MA(8)* 5.46 5.46 0.32 6.25 6.67 0.32 6.25 9.74 15.15 1.88
SMBC Southern Missouri Bncrp of MO 16.40 16.40 0.88 5.01 5.57 0.82 4.69 0.97 39.01 0.66
SWBI Southwest Bancshares of IL 12.00 12.00 1.19 8.94 8.33 1.19 8.90 0.25 87.66 0.31
SVRN Sovereign Bancorp of PA 4.07 2.63 0.70 16.67 10.90 0.63 15.04 0.55 74.40 0.68
STFR St. Francis Cap. Corp. of WI 10.43 9.96 1.30 11.85 10.59 0.89 8.08 0.04 906.03 0.76
SPBC St. Paul Bancorp, Inc. of IL 9.24 9.21 0.88 9.69 8.30 0.86 9.44 0.74 125.05 1.35
STND Standard Fin. of Chicago IL 12.31 12.30 0.87 6.21 6.75 0.79 5.61 0.14 189.20 0.49
SFFC StateFed Financial Corp. of IA 20.11 20.11 1.18 5.80 6.44 1.18 5.80 NA NA 0.38
SFIN Statewide Fin. Corp. of NJ 11.10 11.06 0.52 5.43 4.37 0.64 6.66 1.26 41.78 1.47
STSA Sterling Financial Corp. of WA 4.18 3.35 0.33 7.72 6.57 0.32 7.56 0.63 82.62 0.87
SSBK Strongsville SB of OH 8.28 8.10 1.00 11.90 8.74 0.85 10.06 0.49 46.78 0.31
SFSB SuburbFed Fin. Corp. of IL 7.14 7.10 0.51 7.04 8.00 0.44 6.04 0.27 82.72 0.51
SBCN Suburban Bancorp. of OH 13.00 13.00 0.40 2.98 3.66 0.57 4.33 0.20 794.18 2.06
SCSL Suncoast S&LA of Hollywood FL 2.81 2.80 0.33 11.53 11.84 -0.41 -14.33 0.31 47.77 0.19
THRD TF Financial Corp. of PA 14.31 14.31 0.92 5.57 6.43 0.89 5.39 0.35 82.72 0.53
ROSE TR Financial Corp. of NY 6.23 6.23 0.86 12.76 10.38 0.68 10.08 0.92 49.56 0.91
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
PFDC Peoples Bancorp of Auburn IN 12.13 113.36 17.30 113.36 12.20 0.56 2.72 32.94
PBCT Peoples Bank, MHC of CT(32.3)* 10.72 144.26 11.54 144.26 13.31 0.80 3.93 42.11
PHBK Peoples Heritage Fin Grp of ME* 9.40 123.89 10.38 144.02 9.54 0.68 3.38 31.78
PBNB Peoples Sav. Fin. Corp. of CT* 11.39 89.36 9.66 96.61 10.90 0.92 4.49 51.11
PERM Permanent Bancorp of IN NM 83.07 9.25 84.30 NM 0.20 1.25 37.74
PMFI Perpetual Midwest Fin. of IA 23.29 95.13 9.17 95.13 23.29 0.30 1.76 41.10
PCBC Perry Co. Fin. Corp. of MO 19.60 91.56 19.10 91.56 19.60 0.30 1.74 34.09
PHFC Pittsburgh Home Fin. of PA 18.52 73.64 12.10 73.64 18.52 0.00 0.00 0.00
PFSL Pocahnts Fed, MHC of AR (46.4) 12.80 115.47 6.86 115.47 12.50 0.80 5.08 65.04
POBS Portsmouth Bank Shrs Inc of NH(8)* 12.97 117.72 29.50 117.72 15.45 0.60 4.36 56.60
PKPS Poughkeepsie SB of NY 4.47 96.66 8.22 96.66 3.40 0.10 1.82 8.13
PETE Primary Bank of NH* NM 96.00 6.09 96.38 NM 0.00 0.00 NM
PSAB Prime Bancorp, Inc. of PA 10.87 113.34 10.70 121.19 12.24 0.68 3.89 42.24
PFNC Progress Financial Corp. of PA 8.02 126.21 6.97 127.20 10.32 0.00 0.00 0.00
PSBK Progressive Bank, Inc. of NY* 10.62 109.64 9.71 109.64 10.32 0.80 2.76 29.30
PULB Pulaski SB, MHC of MO (29.0) 19.18 129.39 16.34 129.39 20.29 0.80 5.71 NM
PULS Pulse Bancorp of S. River NJ 12.73 125.07 14.87 125.07 12.64 0.70 4.04 51.47
QCFB QCF Bancorp of Virginia MN 10.94 78.61 17.14 78.61 10.94 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA 17.26 83.19 8.22 83.67 17.90 0.00 0.00 0.00
QCSB Queens County SB of NY* 14.05 136.06 23.10 136.06 13.61 1.00 2.10 29.50
RCSB RCSB Financial, Inc. of NY* 10.19 111.54 8.14 115.38 10.36 0.48 1.94 19.75
RARB Raritan Bancorp. of Raritan NJ* 10.92 120.40 8.72 123.48 11.09 0.60 2.83 30.93
REDF RedFed Bancorp of Redlands CA NM 80.84 4.55 80.84 NM 0.00 0.00 NM
RELY Reliance Bancorp of NY 13.60 92.54 8.20 137.17 14.22 0.46 2.97 40.35
RELI Reliance Bancshares Inc of WI* NM 67.81 38.13 67.81 NM 0.00 0.00 0.00
RFED Roosevelt Fin. Grp. Inc. of MO 13.52 173.15 8.41 183.23 9.97 0.62 3.40 45.93
RVSB Rvrview SB,FSB MHC of WA(40.3) 13.22 149.39 16.46 168.78 14.68 0.20 1.25 16.53
SCCB S. Carolina Comm. Bnshrs of SC 20.63 98.21 27.96 98.21 20.63 0.60 3.64 75.00
SBFL SB Fing. Lakes MHC of NY(33.0) NM 144.74 16.68 144.74 NM 0.40 2.42 NM
SFED SFS Bancorp of Schenectady NY 15.88 70.44 9.90 70.44 15.88 0.00 0.00 0.00
SGVB SGV Bancorp of W. Covina CA NM 72.19 7.06 72.19 NM 0.00 0.00 0.00
SISB SIS Bank of Sprinfield MA* 7.37 114.53 8.50 114.53 7.24 0.00 0.00 0.00
SJSB SJS Bancorp of St. Joseph MI 23.58 115.99 13.53 115.99 24.13 0.40 1.93 45.45
SWCB Sandwich Co-Op. Bank of MA* 10.09 99.54 8.56 106.55 10.76 1.00 5.16 52.08
SFBM Security Bancorp of MT 11.99 93.27 8.32 108.35 16.14 0.64 3.12 37.43
SECP Security Capital Corp. of WI 20.40 103.04 17.39 103.04 19.74 0.60 0.98 20.07
SFSL Security First Corp. of OH 8.83 114.42 9.96 117.67 8.44 0.44 3.32 29.33
SHFC Seven Hills Fin. Corp. of OH NM 80.51 17.08 80.51 NM 0.36 2.48 NM
SMFC Sho-Me Fin. Corp. of MO 14.47 90.03 10.79 90.03 14.61 0.00 0.00 0.00
SOBI Sobieski Bancorp of S. Bend IN NM 71.13 13.15 71.13 NM 0.00 0.00 0.00
SOSA Somerset Savings Bank of MA(8)* 15.00 89.82 4.90 89.82 15.00 0.00 0.00 0.00
SMBC Southern Missouri Bncrp of MO 17.95 90.85 14.90 90.85 19.18 0.50 3.57 64.10
SWBI Southwest Bancshares of IL 12.00 121.54 14.59 121.54 12.06 1.08 3.96 47.58
SVRN Sovereign Bancorp of PA 9.18 145.03 5.90 223.97 10.17 0.08 0.77 7.08
STFR St. Francis Cap. Corp. of WI 9.44 110.49 11.53 115.70 13.86 0.40 1.57 14.81
SPBC St. Paul Bancorp, Inc. of IL 12.05 113.86 10.52 114.24 12.37 0.40 1.70 20.51
STND Standard Fin. of Chicago IL 14.81 95.02 11.69 95.07 16.40 0.32 2.10 31.07
SFFC StateFed Financial Corp. of IA 15.53 88.25 17.75 88.25 15.53 0.40 2.50 38.83
SFIN Statewide Fin. Corp. of NJ 22.87 90.72 10.07 90.99 18.65 0.00 0.00 0.00
STSA Sterling Financial Corp. of WA 15.22 121.21 5.07 151.19 15.56 0.00 0.00 0.00
SSBK Strongsville SB of OH 11.44 130.30 10.78 133.13 13.52 0.48 2.23 25.53
SFSB SuburbFed Fin. Corp. of IL 12.50 85.87 6.13 86.37 14.56 0.32 1.82 22.70
SBCN Suburban Bancorp. of OH NM 83.77 10.89 83.77 18.83 0.60 4.14 NM
SCSL Suncoast S&LA of Hollywood FL 8.45 94.84 2.67 95.27 NM 0.00 0.00 0.00
THRD TF Financial Corp. of PA 15.55 88.98 12.74 88.98 16.07 0.32 2.19 34.04
ROSE TR Financial Corp. of NY 9.64 124.92 7.79 124.92 12.21 0.64 2.45 23.62
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 7, 1996
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ _______________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
TPNZ Tappan Zee Fin. Corp. of NY 19.48 19.48 0.80 6.07 4.33 0.74 5.61 1.77 32.15 1.26
PTRS The Potters S&L Co. of OH 9.73 9.73 0.54 5.69 7.08 0.53 5.59 2.49 72.71 3.96
THIR Third Financial Corp. of OH(8) 18.15 18.15 1.40 7.87 6.05 1.26 7.03 0.23 325.62 0.91
TSBS Trenton SB, FSB MHC of NJ(35.0 19.04 18.61 1.81 11.21 7.24 1.20 7.47 0.48 69.57 0.55
TRIC Tri-County Bancorp of WY 17.83 17.83 0.94 4.70 5.30 0.91 4.56 0.18 318.32 1.45
THBC Troy Hill Bancorp of PA 22.20 22.20 1.40 6.20 7.63 1.27 5.65 2.95 30.03 1.09
TWIN Twin City Bancorp of TN 13.76 13.76 1.07 7.77 7.56 0.93 6.74 0.46 39.79 0.26
UFRM United FS&LA of Rocky Mount NC 8.28 8.28 0.87 11.37 8.85 0.77 9.97 0.66 178.39 1.90
UBMT United SB, FA of MT 23.53 23.53 1.50 6.68 7.23 1.49 6.63 NA NA 0.25
VABF Va. Beach Fed. Fin. Corp of VA 6.57 6.57 0.23 3.94 4.20 0.01 0.12 1.76 36.50 0.93
VAFD Valley FSB of Sheffield AL(8) 8.09 8.09 0.32 4.06 3.41 0.31 3.95 0.79 42.34 0.43
VFFC Virginia First Savings of VA 7.72 7.44 1.19 16.32 12.08 0.98 13.45 2.89 31.46 1.01
WBCI WFS Bancorp of Wichita KS(8) 11.41 11.40 0.47 4.13 3.76 0.51 4.51 NA NA 0.72
WHGB WHG Bancshares of MD 20.59 20.59 0.64 5.18 3.13 0.64 5.18 0.35 42.31 0.23
WSFS WSFS Financial Corp. of DE* 5.87 5.79 2.17 42.73 24.27 1.29 25.28 3.27 59.85 3.01
WVFC WVS Financial Corp. of PA* 15.12 15.12 1.23 8.09 7.86 1.38 9.04 0.45 178.29 1.35
WLDN Walden Bancorp of MA* 9.37 8.02 0.96 10.85 8.43 1.07 12.02 0.75 158.52 1.89
WRNB Warren Bancorp of Peabody MA* 8.95 8.95 1.64 19.67 12.48 1.56 18.79 2.05 62.35 2.12
WFSL Washington FS&LA of Seattle WA 12.13 11.54 1.75 13.70 8.72 1.67 13.12 0.60 41.03 0.35
WAMU Washington Mutual Inc. of WA* 6.23 5.54 0.91 15.07 8.73 0.90 15.01 0.51 125.59 1.04
WAYN Wayne S&L Co., MHC of OH(46.7) 9.20 9.20 0.58 6.36 4.63 0.54 5.96 1.35 26.40 0.43
WCFB Webster CityFSB,MHC of IA(45.2 22.28 22.28 1.10 5.00 3.96 1.10 5.00 1.08 37.62 0.74
WBST Webster Financial Corp. of CT 5.16 3.92 0.51 10.33 7.14 0.55 11.05 1.44 89.48 1.86
WEFC Wells Fin. Corp. of Wells MN 14.95 14.95 0.81 6.24 6.40 0.79 6.07 0.39 70.55 0.32
WCBI WestCo Bancorp of IL 15.65 15.65 1.32 8.47 6.82 1.31 8.41 0.58 49.47 0.41
WSTR WesterFed Fin. Corp. of MT 13.28 13.28 0.76 5.73 6.89 0.72 5.38 0.07 468.93 0.55
WOFC Western Ohio Fin. Corp. of OH 18.20 17.14 1.10 4.22 4.78 0.83 3.18 0.34 78.86 0.44
WFCO Winton Financial Corp. of OH(8) 7.89 7.68 0.93 12.26 8.49 0.76 10.02 0.53 64.84 0.41
FFWD Wood Bancorp of OH 14.59 14.59 1.17 8.14 8.32 1.14 7.88 0.18 192.22 0.46
WCHI Workingmens Cap. Hldgs of IN(8) 12.24 12.24 0.91 7.59 5.39 0.90 7.45 0.23 72.95 0.19
YFCB Yonkers Fin. Corp. of NY 19.39 19.39 0.89 4.59 6.24 0.98 5.05 1.73 22.48 0.97
YFED York Financial Corp. of PA 8.78 8.78 0.98 11.40 9.93 0.85 9.95 2.24 26.68 0.68
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
TPNZ Tappan Zee Fin. Corp. of NY 23.08 86.96 16.93 86.96 25.00 0.20 1.67 38.46
PTRS The Potters S&L Co. of OH 14.13 78.16 7.61 78.16 14.38 0.24 1.48 20.87
THIR Third Financial Corp. of OH(8) 16.53 125.65 22.80 125.65 18.49 0.68 2.18 35.98
TSBS Trenton SB, FSB MHC of NJ(35.0 13.81 130.87 24.91 133.89 20.71 0.35 2.41 33.33
TRIC Tri-County Bancorp of WY 18.88 89.16 15.90 89.16 19.47 0.50 2.70 51.02
THBC Troy Hill Bancorp of PA 13.11 79.92 17.74 79.92 14.38 0.40 2.99 39.22
TWIN Twin City Bancorp of TN 13.22 101.91 14.03 101.91 15.24 0.64 4.00 52.89
UFRM United FS&LA of Rocky Mount NC 11.30 121.15 10.03 121.15 12.89 0.20 2.42 27.40
UBMT United SB, FA of MT 13.83 90.71 21.34 90.71 13.93 0.88 4.82 66.67
VABF Va. Beach Fed. Fin. Corp of VA 23.81 92.03 6.05 92.03 NM 0.16 2.10 50.00
VAFD Valley FSB of Sheffield AL(8) NM 122.42 9.90 122.42 NM 0.60 1.88 55.05
VFFC Virginia First Savings of VA 8.28 124.75 9.63 129.49 10.04 0.10 0.82 6.76
WBCI WFS Bancorp of Wichita KS(8) NM 107.12 12.22 107.17 24.33 0.40 1.75 46.51
WHGB WHG Bancshares of MD NM 80.99 16.68 80.99 NM 0.00 0.00 0.00
WSFS WSFS Financial Corp. of DE* 4.12 151.06 8.86 153.11 6.96 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA* 12.73 99.14 14.99 99.14 11.40 0.40 1.93 24.54
WLDN Walden Bancorp of MA* 11.87 104.28 9.77 121.91 10.71 0.64 3.41 40.51
WRNB Warren Bancorp of Peabody MA* 8.01 146.37 13.10 146.37 8.39 0.44 3.52 28.21
WFSL Washington FS&LA of Seattle WA 11.47 153.56 18.63 161.38 11.98 0.88 4.08 46.81
WAMU Washington Mutual Inc. of WA* 11.45 155.20 9.67 174.52 11.49 0.88 2.93 33.59
WAYN Wayne S&L Co., MHC of OH(46.7) 21.58 133.81 12.31 133.81 23.03 0.84 4.10 NM
WCFB Webster CityFSB,MHC of IA(45.2 NM 124.71 27.79 124.71 NM 0.80 6.22 NM
WBST Webster Financial Corp. of CT 14.00 115.37 5.95 151.76 13.08 0.64 2.29 32.00
WEFC Wells Fin. Corp. of Wells MN 15.63 83.96 12.55 83.96 16.07 0.00 0.00 0.00
WCBI WestCo Bancorp of IL 14.67 121.75 19.05 121.75 14.77 0.45 2.05 30.00
WSTR WesterFed Fin. Corp. of MT 14.52 80.87 10.74 80.87 15.45 0.34 2.37 34.34
WOFC Western Ohio Fin. Corp. of OH 20.91 91.31 16.62 96.96 NM 1.00 4.35 NM
WFCO Winton Financial Corp. of OH(8) 11.78 117.56 9.27 120.81 14.41 0.42 3.43 40.38
FFWD Wood Bancorp of OH 12.02 95.08 13.88 95.08 12.42 0.36 1.92 23.08
WCHI Workingmens Cap. Hldgs of IN(8) 18.57 136.56 16.72 136.56 18.92 0.36 1.81 33.64
YFCB Yonkers Fin. Corp. of NY 16.03 73.60 14.28 73.60 14.58 0.00 0.00 0.00
YFED York Financial Corp. of PA 10.07 109.20 9.59 109.20 11.54 0.60 3.61 36.36
</TABLE>
<PAGE>
EXHIBIT IV-2
Historical Stock Price Indices
<PAGE>
HISTORICAL STOCK PRICE INDICES (1)
SNL SNL
S&P NASDAQ Thrift Bank
Year/Qtr.Ended DJIA 500 Composite Index Index
-------------- ------ ----- --------- ------ ------
1991: Quarter 1 2881.1 375.2 482.3 125.5 66.0
Quarter 2 2957.7 371.2 475.9 130.5 82.0
Quarter 3 3018.2 387.9 526.9 141.8 90.7
Quarter 4 3168.0 417.1 586.3 144.7 103.1
1992: Quarter 1 3235.5 403.7 603.8 157.0 113.3
Quarter 2 3318.5 408.1 563.6 173.3 119.7
Quarter 3 3271.7 417.8 583.3 167.0 117.1
Quarter 4 3301.1 435.7 677.0 201.1 136.7
1993: Quarter 1 3435.1 451.7 690.1 228.2 151.4
Quarter 2 3516.1 450.5 704.0 219.8 147.0
Quarter 3 3555.1 458.9 762.8 258.4 154.3
Quarter 4 3754.1 466.5 776.8 252.5 146.2
1994: Quarter 1 3625.1 445.8 743.5 241.6 143.1
Quarter 2 3625.0 444.3 706.0 269.6 152.6
Quarter 3 3843.2 462.6 764.3 279.7 149.2
Quarter 4 3834.4 459.3 752.0 244.7 137.6
1995: Quarter 1 4157.7 500.7 817.2 278.4 152.1
Quarter 2 4556.1 544.8 933.5 313.5 171.7
Quarter 3 4789.1 584.4 1,043.5 362.3 195.3
Quarter 4 5117.1 615.9 1,052.1 376.5 207.6
1996: Quarter 1 5587.1 645.5 1,101.4 382.1 225.1
As of June 5697.1 673.3 1,229.8 385.1 228.8
7, 1996
(1) End of period data.
Source: SNL Securities; Wall Street Journal.
<PAGE>
EXHIBIT IV-3
Historical Thrift Stock Indices
<PAGE>
MONTHLY MARKET REPORT
INDEX VALUES
<TABLE>
<CAPTION>
INDEX VALUES PERCENT CHANGE SINCE
---------------------------------------------------------------------------------
04/30/96 03/29/96 12/39/95 04/28/95 03/29/96 12/29/95 04/28/95
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
All Pub. Traded Thrifts 380.3 382.1 376.5 295.7 -0.5 1.0 28.6
MHC Index 459.0 464.5 458.5 337.9 -1.2 0.1 35.8
INSURANCE INDICES
- --------------------------------------------------------------------------------------------------------------------------
SAIF Thrifts 356.1 358.5 356.4 279.2 -.06 -0.1 27.5
BIF Thrifts 452.6 453.1 436.9 345.1 -0.1 3.6 31.1
STOCK EXCHANGE INDICES
- --------------------------------------------------------------------------------------------------------------------------
AMEX Thrifts 134.1 136.3 137.7 113.1 -1.6 -2.6 18.6
NYSE Thrifts 249.9 256.0 257.6 199.3 -2.4 -3.0 25.4
OTC Thrifts 460.3 458.7 449.5 354.9 0.3 2.4 29.7
GEOGRAPAHICAL INDICES
- --------------------------------------------------------------------------------------------------------------------------
New England Thrifts 320.2 325.9 316.1 246.2 -1.7 1.3 30.1
Mid-Atlantic Thrifts 745.4 744.2 720.1 581.2 0.2 3.5 28.3
Southwest Thrifts 253.4 250.4 241.7 188.1 1.2 4.9 34.7
Midwest Thrifts 981.7 972.0 951.5 732.1 1.0 3.2 34.0
Southeast Thrifts 381.8 381.4 367.2 292.9 0.1 4.0 30.3
Western Thrifts 363.8 372.2 380.4 296.0 -2.2 -4.4 22.9
ASSET SIZE INDICES
- --------------------------------------------------------------------------------------------------------------------------
Less than $250M 545.4 540.1 538.4 447.1 1.0 1.3 22.0
$250M TO $500M 690.9 687.8 680.3 558.4 0.4 1.6 23.7
$500M TO $1B 430.0 431.2 431.4 349.7 -0.3 -0.3 22.9
$1B to $5B 431.3 431.0 421.7 328.6 0.1 2.3 31.3
Over $5B 231.7 235.1 233.5 179.8 -1.4 -0.8 28.9
COMPARATIVE INDICES
- --------------------------------------------------------------------------------------------------------------------------
Dow Jones Industrials 5569.1 5587.1 5117.1 4316.1 -0.3 8.8 29.0
Standard and Poor's 654.2 645.5 615.9 514.3 1.3 6.2 27.2
</TABLE>
All SNL indices are market-value weighted: i.e., an institution's effect on an
index is proportionate to that institution's market capitalization. All SNL
thrift indices except for the SNL MHC Index, began at 100 on March 30, 1984. The
SNL MHC Index began at 201.082 on Dec. 31, 1992, the level of the SNL Index on
that date On March 30, 1994, the S&P 500 closed at 159.2 and the Dow ones
Industrials stood at 1165.9.
New England: CT, ME, MA, NH, RI, VT; Middle Atlantic: DE, DC, PA, MD, NJ, NY,
PR; Southeast: AL, AR, FL, GA, MS, NC, SC, TN, VA, WV; Midwest: IA, IL, IN, KS,
KY,MI, MN, MO, ND, NE, OH, SD, WI; Southwest: CO, LA, NM, OK, TX, UT; Western:
AZ, AK, CA, HI, ID, MT, NV, OR, WA, WY
Source:SNL Securities
<PAGE>
EXHIBIT IV-4
Market Area Acquisition Activity
<PAGE>
<TABLE>
<CAPTION>
RP Financial, LC.
Completed and Pending Acquisitions of Thrifts in Illinois, 1994-Present
---------------------------------------------------------------------
Transactions Target Company's Financial Date
At Completion Date
- -------------------------------------------------------------------------------------------------------------
Date Announced/ Target/State Pooling/ Equity/ T.T. T.T. NPAs/(1) Reserves/
Completed Acquiror/State Purchase Assets Assets ROAA ROAE Assets NPAs
--------- -------------- -------- ------ ------ ---- ---- ------ ----
($000) (%) (%) (%) (%) (%)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
4/22/96 Financial Security Corp/IL Pooling $277,057 13.99% 0.86% 6.50% 0.02 0.4124
Pending Pinnacle Bancgroup/IL
1/26/96 Barrington Bancorp, Barrington NA $67,775 16.98% 0.69% 4.12% 0.0063 0.8396
Pending First Chicago NBD Corp./IL
12/14/95 Bell Bancorp, Chicago Purchase$1,901,498 15.74% 0.69% 4.36% 0.0123 0.3013
Pending Standard Federal Bank/IL
11/29/95 N.S. Bancorp, Chicago Purchase$1,153,392 20.39% 1.87% 9.21% 0.003 2.3061
5/30/96 MAF Bancorp/IL
9/15/95 Metro Savings Bank, Wood River Pooling $83,511 6.82% 0.10% 1.52% 0.0027 2.2956
3/7/96 Mercantile Bancorp/IL
10/12/94 First Robinson Bncp., Robinson Pooling $106,506 9.72% 1.12% 12.63% 0.0005 10.8462
11/1/95 Ambanc Corp./IL
1/9/95 Deerbank Corp., Deerfield Pooling $757,787 8.19% 1.13% 14.40% 0.0041 1.4997
7/3/95 NBD Bancorp/MI
11/8/94 Peoples FS&LA, Chicago Purchase $32,385 18.91% 0.57% 3.28% 0.0039 0.4434
4/10/95 Mid-Citco, Inc./IL
8/26/94 First Moline Financial, Moline Pooling $83,264 6.96% 0.69% 9.07% 0.55% 48.11%
3/23/95 Firstar Corporation/WI
10/26/94 FirstRock Bancorp, Rockford Pooling $398,118 12.40% 1.16% 9.78% 0.0065 1.0526
2/28/95 First Financial Corp./WI
7/27/94 King City FSB, Mt. Vernon Pooling $176,281 6.00% 0.46% 7.86% 0.0013 6.5855
2/1/95 CNB Bancshares/IN
3/24/94 AmeriFed Fin. Corp., Joliet Purchase $909,733 10.23% 0.86% 8.50% 0.0053 0.9229
1/9/95 NBD Bancorp/MI
7/26/94 River Valley FSB, Peoria Purchase $502,718 5.73% 0.27% 4.10% 0.0065 0.2799
1/4/95 First Bank, Inc./MO
5/4/94 Amity Bancshares, Tinley Park Purchase $132,034 14.98% 0.75% 5.15% 0.0005 5.403
12/19/94 Advantage Bancorp/WI
7/6/93 Cragin Fin. Corp., Chicago Purchase$2,766,011 12.73% 1.23% 10.46% 0.0098 0.8241
6/6/94 ABN-AMRO Holdings/IL
10/12/93 LGF Bancorp, LaGrange Pooling $416,511 10.29% 0.88% 8.81% 0.0046 0.2481
4/29/94 First of America Bank Corp./MI
6/17/93 Heart of IL Bk. FSB, Sprg. Vly.Purchase $70,178 8.36% 1.63% 23.95% 0.0036 1.0687
1/7/94 Princeton National Bancorp/IL
<CAPTION>
Transactions Acquisition Terms Control Premium Acquisition Pricing
At Completion Date
- --------------------------------------------------------------------------------
Offer Price/
Total Offer Cash One Day
Date Announced/ Deal Price/ Debt Pre-Offer
Completed Value Share Stock Price P/B P/TB P/A P/E
--------- ----- ----- ----- ----- --- ---- --- ---
($Mil) ($) (x) (%) (%) (%) (x)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
4/22/96 $46.0 $28.50 Cash & 1.18 110% 110% 16.60% 21.10
Pending Stock
1/26/96 $17.1 $25.85 Stock 1.33 149% 149% 25.26% 35.90
Pending
12/14/95 $362.8 $37.50 Cash 1.14 115% 115% 18.05% 27.57
Pending
11/29/95 $267.0 $41.29 Cash & 1.14 107% 107% 23.15% 12.51
5/30/96 Stock
9/15/95 $9.0 $46.42 Stock Not Trade 156% 156% 10.88% 12.85
3/7/96
10/12/94 $20.4 $170.87 Stock Not Trade 197% 198% 19.15% 20.54
11/1/95
1/9/95 $119.8 $45.00 Stock 1.33 185% 186% 15.81% 14.20
7/3/95
11/8/94 $5.9 $19.00 Cash Not Trade 96% 96% 18.22% 30.26
4/10/95
8/26/94 $9.2 $31.00 Stock Not Trade 159% 159% 11.05% 16.46
3/23/95
10/26/94 $64.7 $27.10 Stock 1.22 133% 133% 16.25% 14.19
2/28/95
7/27/94 $19.8 $35.34 Stock 1.34 188% 199% 11.23% NM
2/1/95
3/24/94 $148.7 $45.00 Stock 1.37 156% 163% 16.35% 19.40
1/9/95
7/26/94 $37.4 $247.81 Cash Not Trade 129% 129% 7.44% NM
1/4/95
5/4/94 $24.8 $36.25 Cash 1.10 126% 126% 18.78% 25.00
12/19/94
7/6/93 $563.3 $38.00 Cash 1.51 150% 163% 20.37% 15.45
6/6/94
10/12/93 $70.8 $33.16 Stock 1.19 142% 142% 17.00% 16.30
4/29/94
6/17/93 $6.6 NA Stock Not Trade 112% 124% 9.40% 5.26
1/7/94 Princeton National Bancorp/IL
</TABLE>
(1) NPAs consist of REO, non-accruing loans, and loans 90+ days delinquent.
5-Jun-96
<PAGE>
EXHIBIT IV-5
Director and Senior Management Summary Resumes
<PAGE>
Home Federal Savings and Loan Association of Elgin
Summary Director Resumes
George L. Perucco has served as the President and Chief Executive
Officer of the Association since 1965. Mr. Perucco joined the Association in
1961 and has also served as Assistant Secretary, Secretary and Executive Vice
President of the Association. Prior to joining the Association, Mr. Perucco was
an executive in the Accounting Division of the United States League of Savings
Associations.
Lyle N. Dolan has served as the Association's Executive Vice President
and Treasurer since 1986 and as a director of the Association since 1984. Prior
to that, Mr. Dolan served as Vice President and Treasurer of the Association
since 1974 and Treasurer of the Association since 1970.
Orval M. Graening has served as a director of the Association since
1967. He is the former President of Woodruff & Edwards, Inc., a foundry company,
and retired in 1990
Henry R. Hines has served as a director of the Association since 1975.
He retired from his position as Vice President of Williams Manufacturing Co., a
medical equipment manufacturer, in 1980.
Donald E. Laird has served as a director of the Association since 1985.
He is the President of Laird Funeral Home, PC.
Leigh C. O'Connor has served as a director of the Association since
1967. He retired from his position as Office Manager of Illinois Hydraulic Inc.,
a construction company, in 1980.
Thomas S. Rakow has served as a director of the Association since 1980.
He is the President of IHC Group, Inc., a general contractor, the President of
Rakow Enterprises, Inc., an equipment leasing company and a partner in Harkow
Partnership, a real estate rental company.
Richard S. Scheflow has served as a director of the Association since
1974. He is a partner with the law firm of Scheflow, Rydell, Travis & Scheflow,
located in Elgin, Illinois.
Source: Home Federal's prospectus.
<PAGE>
Home Federal Savings and Loan Association of Elgin
Summary Senior Management Resumes
George L. Perucco has served as the President and Chief Executive
Officer of the Association since 1965. Mr. Perucco joined the Association in
1961 and has also served as Assistant Secretary, Secretary and Executive Vice
President of the Association. Prior to joining the Association, Mr. Perucco was
an executive in the Accounting Division of the United States League of Savings
Associations.
Lyle N. Dolan has served as the Association's Executive Vice President
and Treasurer since 1986 and as a director of the Association since 1984. Prior
to that, Mr. Dolan served as Vice President and Treasurer of the Association
since 1974 and Treasurer of the Association since 1970.
Kenneth L. Moran, age 50, has served as the Association's Senior Vice
President and Chief Lending Officer since 1989. He has worked at the Association
in various capacities since 1970.
David G. Towe, age 43, has served as the Association's Vice President,
Loan Operations & Marketing since 1989. He has served the Association in various
capacities since 1973.
Raymond G. Bandemer, age 53, has served as Vice President of the
Association since 1989 and has served the Association since 1981. Prior to that,
he was employed at Tel-A-Data Corporation and was Assistant Vice President at
Unity Savings Association of Chicago.
Kathleen A. Schroeder, age 48, has served as Vice President and
Secretary of the Association since 1989. She has been employed by the
Association since 1964.
Pat A. Lenart, age 55, has served as the Association's Vice President,
Personnel Director since 1989. She has worked at the Association in various
capacities since 1976.
Source: Home Federal's prospectus.
<PAGE>
EXHIBIT IV-6
Home Federal Savings and Loan Association of Elgin
Pro Forma Regulatory Capital Ratios
<PAGE>
EXHIBIT IV-6
Home Federal Savings and Loan Association of Elgin
Pro Forma Regulatory Capital Ratios
<TABLE>
<CAPTION>
PRO FORMA AT MARCH 31, 1996 BASED ON (1)
----------------------------------------------------------------------------------
7,604,375 SHARES
4,887,500 SHARES 5,750,000 SHARES 6,612,500 SHARES (15% ABOVE
(MINIMUM OF (MIDPOINT OF (MAXIMUM OF MAXIMUM OF
HISTORICAL AT ESTIMATED ESTIMATED ESTIMATED ESTIMATED
MARCH 31, 1996 PRICE RANGE) PRICE RANGE) PRICE RANGE) PRICE RANGE) (2)
------------------- ------------------- ------------------- ------------------- ------------------
PERCENT PERCENT PERCENT PERCENT PERCENT
OF OF OF OF OF
ASSETS ASSETS ASSETS ASSETS ASSETS
AMOUNT (3) AMOUNT (3) AMOUNT (3) AMOUNT (3) AMOUNT (3)
--------- -------- --------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
GAAP Capital............... $37,195 12.13% $54,986 16.95% $58,204 17.76 % $61,422 18.56% $65,122 19.46%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Tangible Capital: (3)
Capital level........... $37,195 12.04% $54,986 16.83% $58,204 17.64% $61,422 18.44% $65,122 19.33%
Requirement............. 4,634 1.50 4,901 1.50 4,949 1.50 4,998 1.50 5,053 1.50
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess.................. $32,561 10.54% $50,085 15.33% $53,255 16.14% $56,424 16.94 % $60,069 17.83%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Core Capital: (3)
Capital level........... $37,195 12.04% $54,986 16.83% $58,204 17.64% $61,422 18.44% $65,122 19.33%
Requirement............. 9,268 3.00 9,802 3.00 9,898 3.00 9,995 3.00 10,106 3.00
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess.................. $27,927 9.04% $45,184 13.83% $48,306 14.64% $51,427 15.44% $55,016 16.33%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Risk-Based Capital: (4)
Capital level........... $38,051 23.65% $55,842 32.89% $59,060 34.46% $62,278 36.00% $65,978 37.73%
Requirement (5)......... 12,872 8.00 13,584 8.00 13,712 8.00 13,841 8.00 13,989 8.00
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess.................. $25,179 15.65% $42,258 24.89% $45,348 26.46% $48,437 28.00% $51,989 29.73%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
___________________
(1) Pro forma capital levels assume receipt by the Association of 50% of the
net proceeds of the Conversion as reduced by the anticipated purchase of
Common Stock at a price of $10.00 per share by the ESOP and Stock Programs.
The amount expected to be borrowed by the ESOP and the cost of the shares
of Common Stock to be purchased by the Stock Programs (assuming a price of
$10.00 per share) are deducted from pro forma capital to illustrate the
possible impact on the Association. No effect has been given to the
possible issuance of up to 10% of the issued Common stock at the minimum,
midpoint, maximum and 15% above the maximum of the range pursuant to the
Stock Option Plan, which is expected to be adopted by the Company following
the Conversion, and which will require approval at a meeting of
stockholders to be held no earlier than six months after the completion of
the Conversion.
(2) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Price Range of up to 15% to
reflect changes in market or general financial and economic conditions
following the commencement of the Subscription Offering.
(3) Tangible capital and core capital levels are shown as a percentage of total
tangible assets as defined by the OTS. Risk-based capital levels are shown
as a percentage of risk-weighted assets.
(4) Regulatory risk-based capital reflects the inclusion of the allowance for
loan losses. See "Regulation -- Regulation of Federal Savings Associations
-- Capital Requirements."
(5) The current OTS total risk-based capital requirement is 8.0% of risk-
weighted assets. Assumes net proceeds are invested in assets that carry a
50% risk-weighting, which approximates the historical combined risk-
weighting of the Association's assets at March 31, 1996.
Source: Home Federal's prospectus.
<PAGE>
EXHIBIT IV-7
Pro Forma Analysis Sheet
<PAGE>
RP Financial, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-7
PRO FORMA ANALYSIS SHEET -- PAGE 1
Home Federal of Elgin
Prices as of June 7, 1996
Comparable All IL All SAIF
Companies Companies Companies
_____________ _____________ _____________
Price Multiple: Symbol Subject(1) Mean Median Mean Median Mean Median
______________ ______ __________ _____ ______ _____ ______ _____ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price-earnings ratio = P/E 17.45x 16.44x 16.29x 14.74x 14.87x 14.25x 14.16x
Price-core earnings = P/CORE 17.45x 17.13x 17.15x 16.23x 16.40x 15.15x 15.18x
Price-book ratio = P/B 66.77% 92.02% 89.44% 93.33% 90.59% 104.71% 99.30%
Price-tng book ratio = P/TB 66.77% 92.05% 89.44% 94.16% 91.79% 107.87% 100.85%
Price-assets ratio = P/A 16.17% 15.55% 14.87% 12.82% 11.43% 13.08% 11.87%
</TABLE>
<TABLE> <CAPTION>
Valuation Parameters
____________________
<S> <C> <C> <C>
Pre-Conv Earnings (Y) $ 2,181,000 Est ESOP Borrowings (E) $ 4,600,000
Pre-Conv Book Value (B) $ 37,195,000 Cost of ESOP Borrowings (S) 0.00% (4)
Pre-Conv Assets (A) $ 306,688,000 Amort of ESOP Borrowings (T) 7 Years
Reinvestment Rate(2) (R) 3.67% Recognition Plans Amount (M) $ 2,300,000
Est Conversion Exp(3) (X) 1,683,000 Recognition Plans Expense (N) $ 460,000
Proceeds Not Reinvested (Z) $ 6,900,000
</TABLE>
<TABLE> <CAPTION>
Calculation of Pro Forma Value After Conversion
_______________________________________________
<S> <C> <C>
1. V = P/E (Y-R(X+Z)-ES-(1-TAX)E/T-(1-TAX)N)) V = $ 57,503,043
_________________________________________________
1-(P/E)R
2. V = P/B (B-X-E-M) V = $ 57,490,919
_______________________
1-P/B
3. V = P/A (A-X-M-E) V = $ 57,501,585
______________________
1-P/A
</TABLE>
<TABLE> <CAPTION>
Total Price Total
Conclusion Shares Per Share Value
__________ ________ _________ ________
<S> <C> <C> <C>
Appraised Value 5,750,000 $10.00 $ 57,500,000
RANGE:
______
- Minimum 4,887,500 $10.00 $ 48,875,000
- Maximum 6,612,500 $10.00 $ 66,125,000
- Superrange 7,604,375 $10.00 $ 76,043,750
</TABLE>
(1) Pricing ratios shown reflect the midpoint appraised value.
(2) Net return assumes a reinvestment rate of 6.03 percent, and a tax rate
of 39.20 percent.
(3) Conversion expenses reflect estimated expenses as presented in offering
document.
(4) Assumes a borrowings cost of 0.00 percent and a tax rate of 39.20
percent.
<PAGE>
RP Financial, Inc.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-7
PRO FORMA ANALYSIS SHEET -- PAGE 2
Home Federal of Elgin
Prices as of June 7, 1996
<TABLE> <CAPTION>
Mean Pricing Median Pricing
_________________ _________________
Valuation Approach Subject Peers (Disc) Peers (Disc)
__________________ _______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
P/E Price-earnings 17.45x 16.44x 6.11% 16.29% 7.11%
P/CORE Price-core earnings 17.45x 17.13x 1.84% 17.15% 1.74%
P/B Price-book 66.77% 92.02% -27.43% 89.44% -25.35%
P/TB Price-tang. book 66.77% 92.05% -27.46% 89.44% -25.35%
P/A Price-assets 16.17% 15.55% 3.98% 14.87% 8.75%
Average Premium (Discount) -8.59% -6.62%
</TABLE>
<PAGE>
EXHIBIT IV-8
Pro Forma Effect of Conversion Proceeds
<PAGE>
RP Financial, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Home Federal of Elgin
At the Minimum of the Range
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 48,875,000
Less: Estimated offering expenses --------------- 1,564,000
___________
Net Conversion Proceeds ----------------------------- $ 47,311,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 47,311,000
Less: Held in Non-Earning Assets(5)(1) ---------- 5,865,000
___________
Net Proceeds Reinvested ----------------------------- $ 41,446,000
Estimated net incremental rate of return ------------ 3.67 %
___________
Earnings Increase ----------------------------------- $ 1,519,510
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 339,611
Less: Recognition Plans Expense(4)--------------- 237,728
___________
Net Earnings Increase ------------------------------- $ 942,170
3. Pro-Forma Earnings (rounded)
<TABLE> <CAPTION>
Period Before Conversion After Conversion
______ _________________ ________________
<S> <C> <C>
12 Months ended March 31, 1996 $ 2,181,000 $ 3,123,170
12 Months ended March 31, 1996 (Core) $ 2,181,000 $ 3,123,170
</TABLE>
4. Pro-Forma Net Worth (rounded)
<TABLE> <CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ _______________
<S> <C> <C> <C>
March 31, 1996 $ 37,195,000 $ 41,446,000 (3)(4) $ 78,641,000
</TABLE>
5. Pro-Forma Net Assets (rounded)
<TABLE> <CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ ________________
<S> <C> <C> <C>
March 31, 1996 $ 306,688,000 $ 41,446,000 $ 348,134,000
</TABLE>
NOTE: Shares for calculating per share amounts: 4,887,500
(1) Estimated ESOP borrowings of $ 3,910,000 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of
39.20 percent. ESOP financed by holding company - excluded from
reinvestment and total assets.
(2) ESOP borrowings are amortized over 7 years, amortization is tax-
effected.
(3) ESOP borrowings of $ 3,910,000 are omitted from net worth.
(4) $1,955,000 purchased by the Recognition Plans with an estimated pre-tax
expense of $ 391,000 and a tax rate of 39.20 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment
income.
<PAGE>
RP Financial, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Home Federal of Elgin
At the Midpoint of the Range
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 57,500,000
Less: Estimated offering expenses --------------- 1,683,000
___________
Net Conversion Proceeds ----------------------------- $ 55,817,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 55,817,000
Less: Held in Non-Earning Assets(5)(1) ---------- 6,900,000
___________
Net Proceeds Reinvested ----------------------------- $ 48,917,000
Estimated net incremental rate of return ------------ 3.67 %
___________
Earnings Increase ----------------------------------- $ 1,793,415
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 399,543
Less: Recognition Plans Expense(4)--------------- 279,680
___________
Net Earnings Increase ------------------------------- $ 1,114,192
3. Pro-Forma Earnings (rounded)
<TABLE> <CAPTION>
Period Before Conversion After Conversion
______ _________________ ________________
<S> <C> <C>
12 Months ended March 31, 1996 $ 2,181,000 $ 3,295,192
12 Months ended March 31, 1996 (Core) $ 2,181,000 $ 3,295,192
</TABLE>
4. Pro-Forma Net Worth (rounded)
<TABLE> <CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ _______________
<S> <C> <C> <C>
March 31, 1996 $ 37,195,000 $ 48,917,000 (3)(4) $ 86,112,000
</TABLE>
5. Pro-Forma Net Assets (rounded)
<TABLE> <CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ ________________
<S> <C> <C> <C>
March 31, 1996 $ 306,688,000 $ 48,917,000 $ 355,605,000
</TABLE>
NOTE: Shares for calculating per share amounts: 5,750,000
(1) Estimated ESOP borrowings of $ 4,600,000 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of
39.20 percent. ESOP financed by holding company - excluded from
reinvestment and total assets.
(2) ESOP borrowings are amortized over 7 years, amortization is tax-
effected.
(3) ESOP borrowings of $ 4,600,000 are omitted from net worth.
(4) $2,300,000 purchased by the Recognition Plans with an estimated pre-tax
expense of $ 460,000 and a tax rate of 39.20 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment
income.
<PAGE>
RP Financial, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Home Federal of Elgin
At the Maximum of the Range
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 66,125,000
Less: Estimated offering expenses --------------- 1,802,000
___________
Net Conversion Proceeds ----------------------------- $ 64,323,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 64,323,000
Less: Held in Non-Earning Assets(5)(1) ---------- 7,935,000
___________
Net Proceeds Reinvested ----------------------------- $ 56,388,000
Estimated net incremental rate of return ------------ 3.67 %
___________
Earnings Increase ----------------------------------- $ 2,067,319
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 459,474
Less: Recognition Plans Expense(4)--------------- 321,632
___________
Net Earnings Increase ------------------------------- $ 1,286,213
3. Pro-Forma Earnings (rounded)
<TABLE> <CAPTION>
Period Before Conversion After Conversion
______ _________________ ________________
<S> <C> <C>
12 Months ended March 31, 1996 $ 2,181,000 $ 3,467,213
12 Months ended March 31, 1996 (Core) $ 2,181,000 $ 3,467,213
</TABLE>
4. Pro-Forma Net Worth (rounded)
<TABLE> <CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ _______________
<S> <C> <C> <C>
March 31, 1996 $ 37,195,000 $ 56,388,000 (3)(4) $ 93,583,000
</TABLE>
5. Pro-Forma Net Assets (rounded)
<TABLE> <CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ ________________
<S> <C> <C> <C>
March 31, 1996 $ 306,688,000 $ 56,388,000 $ 363,076,000
</TABLE>
NOTE: Shares for calculating per share amounts: 6,612,500
(1) Estimated ESOP borrowings of $ 5,290,000 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of
39.20 percent. ESOP financed by holding company - excluded from
reinvestment and total assets.
(2) ESOP borrowings are amortized over 7 years, amortization is tax-
effected.
(3) ESOP borrowings of $ 5,290,000 are omitted from net worth.
(4) $2,645,000 purchased by the Recognition Plans with an estimated pre-tax
expense of $ 529,000 and a tax rate of 39.20 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment
income.
<PAGE>
RP Financial, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Home Federal of Elgin
At the Superrange Maximum
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 76,043,750
Less: Estimated offering expenses --------------- 1,939,000
___________
Net Conversion Proceeds ----------------------------- $ 74,104,750
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 74,104,750
Less: Held in Non-Earning Assets(5)(1) ---------- 9,125,250
___________
Net Proceeds Reinvested ----------------------------- $ 64,979,500
Estimated net incremental rate of return ------------ 3.67 %
___________
Earnings Increase ----------------------------------- $ 2,382,304
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 528,395
Less: Recognition Plans Expense(4)--------------- 369,877
___________
Net Earnings Increase ------------------------------- $ 1,484,032
3. Pro-Forma Earnings (rounded)
<TABLE> <CAPTION>
Period Before Conversion After Conversion
______ _________________ ________________
<S> <C> <C>
12 Months ended March 31, 1996 $ 2,181,000 $ 3,665,032
12 Months ended March 31, 1996 (Core) $ 2,181,000 $ 3,665,032
</TABLE>
4. Pro-Forma Net Worth (rounded)
<TABLE> <CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ _______________
<S> <C> <C> <C>
March 31, 1996 $ 37,195,000 $ 64,979,500 (3)(4) $102,174,500
</TABLE>
5. Pro-Forma Net Assets (rounded)
<TABLE> <CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ ________________
<S> <C> <C> <C>
March 31, 1996 $ 306,688,000 $ 64,979,500 $ 371,667,500
</TABLE>
NOTE: Shares for calculating per share amounts: 7,604,375
(1) Estimated ESOP borrowings of $ 6,083,500 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of
39.20 percent. ESOP financed by holding company - excluded from
reinvestment and total assets.
(2) ESOP borrowings are amortized over 7 years, amortization is tax-
effected.
(3) ESOP borrowings of $ 6,083,500 are omitted from net worth.
(4) $3,041,750 purchased by the Recognition Plans with an estimated pre-tax
expense of $ 608,350 and a tax rate of 39.20 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment
income.
<PAGE>
EXHIBIT IV-9
Peer Group Core Earnings Analysis
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Core Earnings Analysis
Comparable Institution Analysis
For the Twelve Months Ended March 31, 1996
Estimated
Net Income Less: Net Tax Effect Less: Extd Core Income Estimated
to Common Gains(Loss) @ 34% Items to Common Shares Core EPS
__________ ___________ __________ __________ __________ __________ _______
($000) ($000) $000) ($000) ($000) ($000) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Comparable Group
________________
CBCI Calumet Bancorp of Chicago IL 6,076 -49 17 0 6,044 2,668 2.27
FFYF FFY Financial Corp. of OH 6,941 347 -118 0 7,170 5,193 1.38
FBCI Fidelity Bancorp of Chicago IL 3,009 -271 92 0 2,830 3,085 0.92
FMBD First Mutual Bancorp of IL 2,661 -150 51 0 2,562 4,352 0.59
HMNF HMN Financial, Inc. of MN 5,843 -933 317 0 5,227 5,180 1.01
HBFW Home Bancorp of Fort Wayne IN 2,658 -2 1 0 2,657 3,094 0.86
LARK Landmark Bancshares of KS 1,835 -370 126 0 1,591 1,951 0.82
MFBC MFB Corp. of Mishawaka IN 1,300 -21 7 0 1,286 2,078 0.62
MFFC Milton Fed. Fin. Corp. of OH 1,808 -186 63 0 1,685 2,301 0.73
SWBI Southwest Bancshares of IL 4,256 -47 16 0 4,225 1,871 2.26
WEFC Wells Fin. Corp. of Wells MN 1,573 -79 27 0 1,521 2,188 0.70
Source: Audited and unaudited financial statements, corporate reports and offering circulars, and RP Financial, Inc.
calculations. The information provided in this table has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
</TABLE>
<PAGE>
EXHIBIT V-1
RP Financial, LC.
Firm Qualifications Statement
<PAGE>
FIRM QUALIFICATION
STATEMENT
RP Financial provides financial and management consulting and valuation
services to the financial services industry nationwide, with special emphasis on
federally-insured financial institutions. RP FinanciaL has earned national
recognition as being knowledgeable, innovative and effective in implementing
solutions to complex management, financial and regulatory situations. RP
Financial establishes long-term client relationships through its wide array of
services, emphasis on quality and timeliness, hands-on involvement by our
principals and senior consulting staff, and careful structuring of strategic
plans and transactions. RP Financial's staff draws from backgrounds in financial
institution consulting, regulatory agencies and investment banking, thereby
providing our clients with considerable resources.
STRATEGIC AND CAPITAL PLANNING
RP Financial's strategic and capital planning services are designed to provide
effective workable plans with quantifiable results. Our planning services
involve conducting situation analyses and establishing mission statements,
strategic goals and objectives, with overall emphasis on enhancement of
franchise value, capital management and planning, earnings improvement and
operational issues. Our planning services include the development of strategies
in the following areas: capital formation and management, interest rate risk
management, development Of investment and liquidity portfolio targets,
development of funding and servicing portfolio targets and development of
funding composition targets. Our proprietary financial simulation model provides
the basis for evaluating the financial impact of alternative strategies as well
as assessing the feasibility and compatibility of such strategies with
regulations and accounting guidelines.
MERGER AND ACQUISITION SERVICES
RP Financial's merger and acquisition (M&A) services include targeting
candidates and potential acquirors, assessing acquisition merit, conducting
detailed due diligence, negotiating and structuring transactions, preparing
merger business plans and financial simulations, rendering fairness opinions and
assisting in implementing post-acquisition strategies. Through our financial
simulations, in-house data bases of public and non-public banks and savings
institutions, valuation expertise and regulatory and accounting knowledge, RP
Financial's M&A cousulting focuses on structuring transactions to enhance
shareholder returns.
VALUATION SERVICES
RP Financial's extensive valuation practice includes valuations for a variety of
purposes including mergers and acquisitions, mutual-to-stock conversions, ESOPs,
subsidiary and related industry companies, mark-to-market transactions, loan
and servicing portfolios, non-traded securities, deposit portfolios and core
deposits. Our principals and staff are highly experienced in performing
valuation appraisals which conform with regulatory guidelines and appraisal
industry standards. RP Financial is the nation's leading valuation firm for
mutual-to-stock) conversions of mutual institutions.
OTHER CONSULTING SERVICES AND DATA BASES
RP Financial offers a variety of other services including branching strategies,
feasibility studies and special research studies, which are complemented by our
quantitative and computer skills. RP Financial's consulting services are aided
by its in-house data base resources for commercial banks and savings
institutions and proprietary valuation and financial simulation models.
RP Financial's Key Personnel (Years of Relevant Experience)
Ronald S. Riggins, Managing Director (16)
William E. Pommerening, Managing Director (11)
Gregory E. Dunn, Senior Vice President (15)
James P. Hennessey, Senior Vice President (10)
James J. Oren, Vice President (8)
Timothy M. Biddle, Vice President (7)
Alan P. Carruthers, Senior Consultant-Community Banking (14)
<PAGE>
EXHIBIT 99.2
HOME BANCORP OF ELGIN, INC. A PROPERLY COMPLETED ORIGINAL STOCK
Subscription and Community Offering ORDER FORM AND ORIGINAL CERTIFICATION
(Stock Order Form) FORM MUST BE USED TO PURCHASE COMMON
STOCK. THE ASSOCIATION IS NOT
REQUIRED TO ACCEPT COPIES OF THESE
FORMS.
- --------------------------------------------------------------------------------
- - -
Expiration Date
, 1996
12:00 Noon,
Central Time
- - - STOCK INFORMATION
CENTER
Home Federal
Savings and Loan
Association of
16 North Spring
Street Elgin,
Elgin, Illinois 60120
(847) XXX-XXXX
NOTE: PLEASE READ THE STOCK OWNERSHIP GUIDE AND ORDER FORM INSTRUCTIONS AS YOU
COMPLETE THIS FORM.
(1) Number of Shares Subscription Price (2) Total Payment Due
[ ] X $10.00 = [ $ ]
The minimum number of shares that may be subscribed for is 25 and the
maximum number that may be subscribed for by each Eligible Account Holder,
Supplemental Eligible Account Holder or Other Member in the Subscription
Offering, or by any person, together with associates and persons acting in
concert with such person, in the Community Offering, is $200,000 (20,000
shares). However, no person, together with associates or persons acting in
concert with such person, may purchase in the aggregate more than 1.0% of
the shares offered.
(3)[_] Check here if you are a
director, officer or employee of (6)a [_] Check here if you are an Eligible
Home Federal Savings and Loan Account Holder with a savings deposit
Association of Elgin or a member account(s) totaling $50.00 or more as
of such person's immediate of March 31, 1995. LIST ACCOUNT(S)
family. BELOW.
(6)b [_] Check here if you are a
Supplemental Eligible Account Holder
METHOD OF PAYMENT with a savings deposit account(s)
totaling $50.00 or more as of June 30,
(4)[_] Enclosed is a check, bank 1996. LIST ACCOUNT(S) BELOW.
draft or money order payable to (6)c[_] Check here if you are an Other
Home Federal Savings and Loan Member with a deposit account(s) as of
Association of Elgin. , 1996. LIST ACCOUNT(S) BELOW.
Cash can be
used only if Account Title [Names on Account Number(s)
[$ ] presented in Accounts]
person at a ------------------------------------------
branch office ..........................................
of Home Federal ..........................................
Savings and ------------------------------------------
Loan ..........................................
Association of ..........................................
Elgin. No wire ------------------------------------------
transfers will
be accepted.
(5)[_] The undersigned authorizes PLEASE NOTE: FAILURE TO LIST ALL YOUR
withdrawal from the following ACCOUNTS MAY RESULT IN THE LOSS OF PART
account(s) at Home Federal OR ALL OF YOUR SUBSCRIPTION RIGHTS. IF
Savings and Loan Association of ADDITIONAL SPACE IS NEEDED, PLEASE
Elgin. INDIVIDUAL RETIREMENT UTILIZE THE BACK OF THIS ORDER FORM.
ACCOUNTS AND QUALIFIED PLANS
MAINTAINED AT HOME FEDERAL
SAVINGS AND LOAN ASSOCIATION OF
ELGIN CANNOT BE USED.
Account Number(s) Amount
- ----------------------------------
$
- ----------------------------------
$
- ----------------------------------
$
- ----------------------------------
TOTAL WITHDRAWAL AMOUNT
$
-------------
There is no penalty for early
withdrawals used for this
payment.
STOCK REGISTRATION
(7) Form of Stock Ownership:
[_]Individual [_]Joint Tenants [_]Tenants in Common [_]IRA/Qualified Plan
[_]Fiduciary(i.e., trust, estate, etc.) [_] Corporation or Partnership
[_]Uniform Gifts to Minors Act (Beneficiary S.S. #____________)
(8) Name(s) in which stock is to be registered (Please print clearly)
Social Security No. or
Tax ID No.
- --------------------------------------------------------------------------------
Name(s), continued Social Security No. or
Tax ID No.
- -------------------------------------------------------------------------------
Street AddressCityStateZip Code County of
Residence
- -------------------------------------------------------------------------------
Daytime Phone Evening Phone
(9) TELEPHONE INFORMATION
( ) ( )
NASD AFFILIATION
(10) [_] Check here if you are a member of the National Association of
Securities Dealers, Inc. ("NASD"), a person associated with an NASD member, a
member of the immediate family of any such person to whose support such person
contributes, directly or indirectly, or the holder of an account in which an
NASD member or person associated with an NASD member has a beneficial interest.
To comply with conditions under which an exemption from the NASD's
Interpretation With Respect to Free-Riding and Withholding is available, you
agree, if you have checked the NASD Affiliation box, (i) not to sell, transfer
or hypothecate the stock for a period of three months following issuance, and
(ii) to report this subscription in writing to the applicable NASD member
within one day of payment therefor.
ASSOCIATES/ACTING IN CONCERT
(11) [_] Check here, and complete the reverse side of this Form, if you or any
associates (as defined on the reverse side of this Form) or persons acting in
concert with you have submitted other orders for shares in the Subscription
and/or Community Offerings.
ACKNOWLEDGEMENT
(12) To be effective, this Stock Order Form and accompanying Certification Form
must be properly completed and actually received by Home Federal Savings and
Loan Association of Elgin not later than 12:00 Noon, Central Time, on ,
1996, unless extended; otherwise this Stock Order Form and all subscription
rights will be void.
It is understood that this Stock Order Form will be accepted in accordance
with, and subject to, the terms and conditions of the Plan of Conversion of the
Association described in the accompanying Prospectus. The undersigned hereby
acknowledges receipt of the Prospectus at least 48 hours prior to delivery of
this Stock Order Form to the Association.
The undersigned agrees that after receipt by Home Federal Savings and Loan
Association of Elgin, this Stock Order Form may not be modified, withdrawn or
cancelled without the Association's consent and if authorization to withdraw
from savings deposit accounts at the Association has been given as payment for
shares, the amount authorized for withdrawal shall not otherwise be available
for withdrawal by the undersigned. If the Plan of Conversion is not approved by
the voting members of the Association at a Special Meeting to be held on
, 1996, or at any adjournment or postponement thereof, all orders will be
cancelled and funds received as payment, with accrued interest, (if any), will
be returned promptly.
Under penalty of perjury, I certify that the Social Security or Tax ID Number
and the information provided on this Stock Order Form are true, correct and
complete, that I am not subject to back-up withholding, and that I am
purchasing solely for my own account and that there is no agreement or
understanding regarding the sale or transfer of such shares or my right to
subscribe for shares herewith.
FEDERAL REGULATIONS PROHIBIT ANY PERSON FROM TRANSFERRING, OR ENTERING INTO ANY
AGREEMENT DIRECTLY OR INDIRECTLY TO TRANSFER, THE LEGAL OR BENEFICIAL OWNERSHIP
OF SUBSCRIPTION RIGHTS OR THE UNDERLYING SECURITIES TO THE ACCOUNT OF ANOTHER.
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN AND HOME BANCORP OF ELGIN,
INC., WILL PURSUE ANY AND ALL LEGAL AND EQUITABLE REMEDIES IN THE EVENT THEY
BECOME AWARE OF THE TRANSFER OF SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS
KNOWN BY THEM TO INVOLVE SUCH TRANSFER.
- --------------------------------------------------------------------------------
(13) Signature Date Signature Date
- --------------------------------------------------------------------------------
ALL ORDER FORMS MUST BE ACCOMPANIED BY A SIGNED CERTIFICATION FORM
<PAGE>
Item (6)a, (6)b, (6)c (continued)
Account Title [Names on Accounts] Account Number(s)
- --------------------------------------------------------------------------------
................................................................................
................................................................................
- --------------------------------------------------------------------------------
................................................................................
................................................................................
- --------------------------------------------------------------------------------
................................................................................
................................................................................
- --------------------------------------------------------------------------------
Item (11) (continued)
List below all other orders submitted by you or Associates (as defined below)
or by persons acting in concert with you.
Name(s) listed on other Stock Order Forms Number of Shares Ordered
- --------------------------------------------------------------------------------
................................................................................
................................................................................
- --------------------------------------------------------------------------------
................................................................................
................................................................................
- --------------------------------------------------------------------------------
................................................................................
................................................................................
- --------------------------------------------------------------------------------
................................................................................
................................................................................
- --------------------------------------------------------------------------------
"Associate" is defined as: (i) any corporation or organization (other than Home
Bancorp of Elgin, Inc., Home Federal Savings and Loan Association of Elgin or a
majority-owned subsidiary of Home Federal Savings and Loan Association of
Elgin) of which such person is a director, officer or partner or is, directly
or indirectly, either alone or with one or more members of his or her immediate
family, the beneficial owner of 10% or more of any class of equity securities;
(ii) any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as a trustee or in a
similar fiduciary capacity, except that the term "Associate" does not include
Home Bancorp of Elgin, Inc.'s or Home Federal Savings and Loan Association of
Elgin's employee stock benefit plans in which such person has a substantial
beneficial interest or serves as a trustee or in a similar fiduciary capacity,
and except that, for purposes of aggregating total shares that may be acquired
or held by officers and directors and their Associates, the term "Associate"
does not include any tax-qualified employee stock benefit plan; and (iii) any
relative or spouse of such person, or any relative of such spouse, who either
has the same home as such person or who is a director or officer of Home
Bancorp of Elgin, Inc. or Home Federal Savings and Loan Association of Elgin or
any subsidiaries thereof. Directors and officers of Home Bancorp of Elgin, Inc.
or Home Federal Savings and Loan Association of Elgin are not treated as
associates solely by virtue of holding such positions.
<PAGE>
YOU MUST SIGN THE FOLLOWING CERTIFICATION IN ORDER TO PURCHASE STOCK
CERTIFICATION FORM
I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC), AND IS
NOT GUARANTEED BY HOME BANCORP OF ELGIN, INC., HOME FEDERAL SAVINGS AND LOAN
ASSOCIATION OF ELGIN, THE FEDERAL GOVERNMENT OR BY ANY GOVERNMENT AGENCY.
If anyone asserts that this security is federally insured or guaranteed, or
is as safe as an insured deposit, I should call the Office of Thrift
Supervision, Regional Director, at the Central Regional Office at (312) 917-
5000.
I further certify that, before purchasing the common stock, par value $.01
per share, of Home Bancorp of Elgin, Inc. (the "Company"), the proposed
holding company for Home Federal Savings and Loan Association of Elgin, I
received a Prospectus of the Company dated , 1996 relating to such
offer of common stock.
The Prospectus that I received contains disclosure concerning the nature of
the common stock being offered by the Company and describes the risks involved
in the investment in this common stock, including but not limited to the:
1. Potential Impact of Changes in Interest Rates (page )
2. Impact of the Economy on Operations (page )
3. Competition (page )
4. Recapitalization of the SAIF; SAIF Premiums and
Possible Special Assessment (page )
5. Pending Tax Legislation Regarding
Tax Bad Debt Reserves (page )
6. Impact of Technological Advances (page )
7. Residential and Non-Residential Lending Risks (page )
8. Certain Anti-Takeover Provisions (page )
9. Absence of Market for Common Stock and Recent
Performance of Conversion Offerings (page )
10. Possible Increase in Estimated Price Range and
Number of Shares Issued (page )
11. Possible Dilutive Effect of Stock Options and Stock
Programs (page )
12. Possible Adverse Income Tax Consequences of the
Distribution of Subscription Rights (page )
13. Financial Institution Regulation and
Possible Legislation (page )
14. Risk of Delayed Offering (page )
Signature Date Signature Date
- -------------------------------------------------------------------------------
Name (please print) Name (please print)
- -------------------------------------------------------------------------------
<PAGE>
HOME BANCORP OF ELGIN, INC.
STOCK OWNERSHIP GUIDE AND
ORDER FORM INSTRUCTIONS
- -------------------------------------------------------------------------------
- ----------------------
STOCK OWNERSHIP GUIDE
- ----------------------
INDIVIDUAL
Include the first name, middle initial and last name of the shareholder. Avoid
the use of two initials. Please omit words that do not affect ownership
rights, such as "Mrs.", "Mr.", "Dr.", "special account", "single person", etc.
JOINT TENANTS
Joint tenants with right of survivorship may be specified to identify two or
more owners. When stock is held by joint tenants with right of survivorship,
ownership is intended to pass automatically to the surviving joint tenant(s)
upon the death of any joint tenant. All parties must agree to the transfer or
sale of shares held by joint tenants.
TENANTS IN COMMON
Tenants in common may also be specified to identify two or more owners. When
stock is held by tenants in common, upon the death of one co-tenant, ownership
of the stock will be held by the surviving co-tenant(s) and by the heirs of
the deceased co-tenant. All parties must agree to the transfer or sale of
shares held by tenants in common.
UNIFORM TRANSFERS TO MINORS ACT ("UTMA")
Stock may be held in the name of a custodian for a minor under the Uniform
Transfers to Minors Act. There may be only one custodian and one minor
designated on a stock certificate. The standard abbreviation for Custodian is
"CUST", while the Uniform Transfers to Minors Act is "UTMA". Standard U.S.
Postal Service state abbreviations should be used to describe the appropriate
state. For example, stock held by John Doe as custodian for Susan Doe under
the Illinois Revised Uniform Transfers to Minors Act will be abbreviated John
Doe, CUST Susan Doe UTMA, IL (use minor's social security number).
FIDUCIARIES
Information provided with respect to stock to be held in a fiduciary capacity
must contain the following:
. The name(s) of the fiduciary. If an individual, list the first name, middle
initial and last name. If a corporation, list the full corporate title
(name). If an individual and a corporation, list the corporation's title
before the individual.
. The fiduciary capacity, such as administrator, executor, personal
representative, conservator, trustee, committee, etc.
. A description of the document governing the fiduciary relationship, such as
a trust agreement or court order. Documentation establishing a fiduciary
relationship may be required to register your stock in a fiduciary capacity.
. The date of the document governing the relationship, except that the date of
a trust created by a will need not be included in the description.
. The name of the maker, donor or testator and the name of the beneficiary.
An example of fiduciary ownership of stock in the case of a trust is: John
Doe, Trustee Under Agreement Dated 10-1-87 for Susan Doe.
---------------------------------------
You may mail your completed Stock Order Form and Certification Form in the
envelope that has been provided, or you may deliver your Stock Order Form and
Certification Form to any branch of Home Federal Savings and Loan Association
of Elgin. Your Stock Order Form and Certification Form, properly completed,
and payment in full (or withdrawal authorization) at the subscription price
must be actually received by Home Federal Savings and Loan Association of
Elgin not later than 12:00 Noon, Central Time, on , 1996 or it will
become void. If you have any remaining questions, or if you would like
assistance in completing your Stock Order Form and Certification Form, you may
call our Stock Information Center Monday through Friday from 10:00 a.m. to
4:00 p.m., not later than 12:00 Noon, Central Time, on , 1996.
- ----------------
INSTRUCTIONS
- ----------------
ITEMS 1 AND 2--
Fill in the number of shares that you wish to purchase and the total payment
due. The amount due is determined by multiplying the number of shares by the
subscription price of $10.00 per share. The minimum purchase in the
Subscription and Community Offerings is 25 shares. In the Subscription
Offering, the maximum purchase by each Eligible Account Holder, Supplemental
Eligible Account Holder or Other Member is $200,000 (20,000 shares), and the
maximum purchase in the Community Offering by any person, together with
associates or persons acting in concert, is $200,000 (20,000 shares). However,
no person, together with associates and persons acting in concert with such
person, may purchase in the aggregate more than 1% of the shares offered.
Based on the offering of 6,612,500 shares, 1% of the shares offered amounts to
66,125 shares. Eligible Account Holders, Supplemental Eligible Account Holders
and Other Members, desiring to purchase shares in the Community Offering must
do so by obtaining from the Stock Information Center an additional Stock Order
Form and submitting a completed additional Stock Order Form which indicates
the number of shares to be purchased in the Community Offering. Home Federal
Savings and Loan Association of Elgin and Home Bancorp of Elgin, Inc. have
reserved the right to reject the subscription of any order received in the
Community Offering, in whole or in part.
ITEM 3--
Please check this box to indicate whether you are a director, officer or
employee of Home Federal Savings and Loan Association of Elgin or a member of
such person's immediate family.
ITEM 4--
Payment for shares may be made in cash (only if delivered by you in person) or
by check, bank draft or money order payable to Home Federal Savings and Loan
Association of Elgin. No wire transfers will be accepted. Your funds will earn
interest at the Association's passbook rate of interest from the date of
receipt until the Conversion is completed. DO NOT MAIL CASH TO PURCHASE STOCK!
Please check this box if your method of payment is by check, bank draft or
money order.
ITEM 5--
If you pay for your stock by a withdrawal from Home Federal Savings and Loan
Association of Elgin deposit account, insert the account number(s) and the
amount of your withdrawal authorization for each account. The total amount
withdrawn should equal the amount of your stock purchase. There will be no
penalty assessed for early withdrawals from certificate accounts used for
stock purchases. This form of payment may not be used if your account is an
Individual Retirement Account or Qualified Plan.
ITEM 6--
a. Please check this box if you are an Eligible Account Holder, that is you
had a savings deposit account(s) totaling $50.00 or more on March 31, 1995.
b. Please check this box if you are a Supplemental Eligible Account Holder,
that is you had a savings deposit account(s) totaling $50.00 or more on June
30, 1996.
c. Please check this box if you are an Other Member, that is you had a deposit
account(s) as of , 1996.
Please list all names on the account(s) and all account number(s) of accounts
you had at these dates in order to insure proper identification of your
purchase rights. Please note: Failure to list your accounts may result in the
loss of part or all of your subscription rights.
ITEMS 7, 8 AND 9--
The stock transfer industry has developed a uniform system of shareholder
registrations that we will use in the issuance of your Home Bancorp of Elgin,
Inc. Common Stock. Please complete items 7,8 and 9 as fully and accurately as
possible, and be certain to supply your social security or Tax I.D. number and
your daytime and evening telephone number(s). We will need to call you if we
cannot execute your order as given. If you have any questions regarding the
registration of your stock, please consult your legal advisor. Stock ownership
must be registered in one of the ways described above under "Stock Ownership
Guide."
ITEM 10--
Please check this box if your are a member of the NASD or if this item
otherwise applies to you.
ITEM 11--
Please check this box if you or any associate (as defined on the reverse side
of the Stock Order Form) or person acting in concert with you has submitted
another order for shares and complete the reverse side of the Stock Order
Form.
ITEMS 12 AND 13--
Please sign and date the Stock Order Form and Certification Form where
indicated. Before you sign, review the Stock Order Form, including the
acknowledgement, and the Certification Form. Normally, one signature is
required. An additional signature is required only when payment is to be made
by withdrawal from a deposit account that requires multiple signatures to
withdraw funds.
<PAGE>
HOME FEDERAL LETTERHEAD
INSERT DATE
Dear Valued Customer,
The Board of Directors of Home Federal Savings and Loan Association of Elgin
("Home Federal") has voted unanimously in favor of a plan to convert Home
Federal from a federally chartered mutual savings and loan association to a
federally chartered stock savings and loan association (the "Conversion"). As a
stock company, Home Federal will be structured under the same form of ownership
used by most businesses and banks. This Conversion to stock ownership means
Home Federal will increase its capital and will enable Home Federal to support
future banking activities. The Conversion will not affect your savings deposit
accounts or loans with Home Federal or existing FDIC insurance coverage for your
savings deposit accounts.
If you are a current depositor of Home Federal, you will find enclosed a proxy
statement and proxy card(s). On behalf of the Board, we ask that you help Home
Federal take this important step by signing the enclosed proxy card(s) and
casting your vote in favor of the Plan of Conversion. Your vote is very
important! Please mail your proxy card(s) today in the enclosed postage paid
return envelope. For your convenience this packet includes the following
material:
. PROXY STATEMENT: This gives detailed information about your right to vote on
the Conversion. Please read it carefully.
. PROXY QUESTIONS AND ANSWERS: This brochure highlights key information found
in the Proxy Statement. It also gives instructions for completing your proxy
card.
. PROXY CARD: Sign, date, and return the proxy card in the blue postage-paid
envelope. Your family may have received more than one card. All cards should
be signed and returned.
Home Bancorp of Elgin, Inc. is making an initial public offering of its common
stock in connection with the Conversion. However, the laws of your state would
require us to register (1) Home Bancorp of Elgin, Inc. common stock to be issued
in the offering or (2) an agent of Home Bancorp of Elgin, Inc. to solicit the
sale of such stock. Because the number of eligible subscribers in your state is
not sufficiently large to justify the expenses of such registration, we are
unable to offer you shares of common stock in the offering. If you have any
questions, please call the Stock Information Center at (847) xxx-xxxx.
Sincerely,
George L. Perucco
President and
Chief Executive Officer
Enclosures
The shares of common stock offered in the conversion are not savings accounts
or deposits and are not insured by the Federal Deposit Insurance Corporation or
any other government agency.
This is not an offer to sell or a solicitation to buy common stock. The
offer is made only by the Prospectus.
<PAGE>
HOME FEDERAL LETTERHEAD
INSERT DATE
Dear Interested Investor,
The Board of Directors of Home Federal Savings and Loan Association of Elgin
("Home Federal") has voted unanimously in favor of a plan to convert Home
Federal from a federally chartered mutual savings and loan association to a
federally chartered stock savings and loan association (the "Conversion"). As a
stock company, Home Federal will be structured under the same form of ownership
used by most businesses and banks. This Conversion to stock ownership means
Home Federal will increase its capital and will enable Home Federal to support
future banking activities.
As part of the Conversion, Home Federal has formed a holding company, Home
Bancorp of Elgin, Inc. Home Bancorp of Elgin, Inc. will own all of the common
stock of Home Federal. Home Bancorp of Elgin, Inc. is offering up to 6,612,500
shares of its common stock to certain customers of Home Federal at a
subscription price of $10.00 per share. As an interested investor in Home
Bancorp of Elgin, Inc. common stock, you have requested some information
regarding Home Federal and the Conversion. For your convenience this packet
includes the following material:
. PROSPECTUS: This document provides detailed information about Home
Federal's operations and the proposed stock offering. Please read it
carefully.
. STOCK QUESTIONS AND ANSWERS: This brochure answers key questions about the
Conversion.
We believe it is in the best interests of Home Federal to have our customers and
members of the communities we serve as our stockholders; therefore, currently,
we are not accepting orders from the local community or general public. If you
have any questions, please call the Stock Information Center at (847) xxx-xxxx.
Sincerely,
George L. Perucco
President and
Chief Executive Officer
Enclosures
The shares of common stock offered in the conversion are not savings
accounts or deposits and are not insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation to buy common stock. The
offer is made only by the Prospectus.
<PAGE>
[HOVDE SECURITIES LETTERHEAD]
INSERT DATE
Dear Members and Friends of Home Federal Savings and Loan Association of Elgin;
At the request of Home Bancorp of Elgin, Inc., and Home Federal Savings and
Loan Association of Elgin ("Home Federal"), we have enclosed certain materials
regarding the offering of Common Stock in connection with the conversion of
Home Federal from a mutual savings and loan association to a stock savings and
loan association. The materials include a Prospectus, as well as a stock order
form and certification form, which offer you the opportunity to subscribe for
shares of Common Stock.
It is urged that you study these materials carefully. If you decide to
subscribe for shares, you must return the properly completed stock order form
and signed certification form along with full payment for the shares (or
appropriate instructions authorizing withdrawal from a savings deposit account
at Home Federal) not later than 12:00 Noon, Central Time, on {insert date}, 1996
in the enclosed postage-paid envelope or deliver it to any office of Home
Federal Savings and Loan Association of Elgin. If you have any questions after
reading the enclosed materials, please call the Stock Information Center at
(847) XXX- XXXX. The Stock Information Center is open Monday through Friday
from 9:00 a.m. to 5:00 p.m., Central Time.
We have been asked to supply these documents to you in view of certain
requirements of the securities laws of your jurisdiction. We should not be
understood as recommending or soliciting in any way any action by you with
regard to the enclosed materials.
Sincerely,
HOVDE SECURITIES, INC.
The shares of Home Bancorp of Elgin, Inc. Common stock offered in the
conversion are not savings deposits and are not insured by the FDIC or any other
government agency.
This is not an offer to sell or a solicitation to buy common stock.
The offer is made only by the Prospectus.
<PAGE>
HOME FEDERAL LETTERHEAD
INSERT DATE
Welcome Stockholder:
We are pleased to enclose the stock certificate that represents your share of
ownership in Home Bancorp of Elgin, Inc. As a stockholder, you have our
commitment to keep you informed of Home Bancorp's financial performance and
condition.
Please examine your stock certificate to be certain that it is properly
registered and that it represents the correct number of shares that you have
purchased. If you have any questions or concerns about your certificate, you
should contact the Transfer Agent immediately at the following address:
(TRANSFER AGENT)
(Address & Telephone #)
Please remember that your certificate is a negotiable security which should be
kept in a secure place, such as a safe deposit box or on deposit with your
stockbroker.
On behalf of the Board of Directors and the employees of Home Bancorp of Elgin,
Inc. and Home Federal Savings and Loan Association of Elgin, we would like to
thank you for supporting our offering.
Sincerely,
George L. Perucco
President and Chief Executive Officer
THE SHARES OF HOME BANCORP OF ELGIN, INC. COMMON STOCK OFFERED IN THE CONVERSION
ARE NOT DEPOSITS AND ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
<PAGE>
- --------------------------------------------------------------------------------
PROXYGRAM
HOME FEDERAL LETTERHEAD
- --------------------------------------------------------------------------------
DEAR HOME FEDERAL CUSTOMER:
OUR RECORDS INDICATE THAT YOUR VOTE ON HOME FEDERAL'S PLAN OF CONVERSION HAS NOT
----
YET BEEN RECEIVED.
YOUR VOTE IS VERY IMPORTANT TO US. PLEASE ACT PROMPTLY! SIGN AND DATE ALL
-------------- ---
PROXY CARDS YOU HAVE RECEIVED, INCLUDING THOSE YOU RECEIVED WITH THIS LETTER,
AND MAIL THEM IN THE ENCLOSED POSTAGE PAID ENVELOPE OR DELIVER THEM TO ANY HOME
FEDERAL OFFICE.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PLAN OF CONVERSION AND
URGES YOU TO VOTE "FOR" THE PLAN.
REMEMBER, VOTING FOR THE PLAN OF CONVERSION DOES NOT OBLIGATE YOU TO BUY ANY
STOCK.
THE BALANCE, MATURITY AND WITHDRAWABILITY OF YOUR SAVINGS DEPOSITS WITH HOME
FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN WILL NOT CHANGE. SAVINGS DEPOSITS
WILL REMAIN INSURED BY THE FDIC TO THE MAXIMUM EXTENT PROVIDED BY LAW.
SHOULD YOU NEED FURTHER INFORMATION OR ASSISTANCE, PLEASE CALL OUR STOCK
INFORMATION CENTER AT (847) XXX-XXXX.
THANK YOU!
THE BOARD OF DIRECTORS
OF
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
The shares of common stock offered in the conversion are not savings
accounts or deposits and are not insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation to buy common stock. The
offer is made only by the Prospectus.
<PAGE>
QUESTIONS AND ANSWERS
ABOUT INVESTING
You can be one of the charter stockholders of Home Bancorp of Elgin, Inc., the
proposed holding company of Home Federal Savings and Loan Association of Elgin
("Home Federal"). Home Bancorp of Elgin, Inc. is "going public" as part of
Home Federal's conversion to a federally chartered stock savings and loan
association. Now you have the opportunity to become an owner of your bank.
This brochure answers some of the most frequently asked questions about the
conversion to stock ownership and about your opportunity to invest in Home
Bancorp of Elgin, Inc.
Investment in common stock involves certain risks. For a discussion of these
risks and other factors, investors are urged to read the accompanying
Prospectus.
ABOUT THE TRANSACTION
Q: WHAT IS A CONVERSION?
A: Home Federal presently operates as a federally chartered mutual savings and
loan association. It has no stockholders, and its directors are elected by
our member savers and borrowers. After the Conversion, we will be a
federally chartered stock savings and loan association owned by a holding
company. This holding company, Home Bancorp of Elgin, Inc., will be owned
by stockholders who will have voting rights with respect to certain key
business matters. The holding company is offering shares of its common
stock to Home Federal's members, employee stock ownership plan, employees
and directors. Any shares that remain unsold may then be offered to
members of the general public.
Q: WHAT IS HOME BANCORP OF ELGIN, INC. AND WHY IS IT BEING FORMED?
A: Home Bancorp of Elgin, Inc. is a newly organized Delaware holding company
created by Home Federal specifically to purchase 100% ownership in Home
Federal upon its conversion to stock form. The holding company is offering
shares of its Common Stock for sale to Home Federal's members and, if
shares are available, to the general public. All of the common stock to be
issued by Home Federal will be owned by the holding company. The
additional capital provided through the offering of Home Bancorp of Elgin,
Inc. stock will support future lending activities and local expansion of
the financial services currently offered through Home Federal.
Q: WHAT ARE THE BENEFITS OF CONVERSION?
A: The conversion and sale of stock will increase Home Federal's capital,
enabling it to:
. Enhance its ability to access capital markets;
1
<PAGE>
. Expand its current operations;
. Acquire other financial institutions or branch offices;
. Provide affordable home financing opportunities to the communities it
serves; and
. Diversify into other financial services to the extent allowable by
applicable law.
Q: WILL THE CONVERSION HAVE ANY EFFECT ON MY SAVINGS OR LOAN ACCOUNTS?
A: No. The Conversion will not affect the amount, interest rate or withdrawal
rights of your deposit savings account, which will continue to be insured
by the Federal Deposit Insurance Corporation (the "FDIC") to the maximum
legal limit. Your savings deposit accounts are not being converted to
stock. The rights and obligations of borrowers under their loan agreements
also will not be affected.
Q: HOW DO I BENEFIT FROM THE CONVERSION?
A: The Conversion is expected, among other things, to enable Home Federal to
provide the customers and communities it serves with a higher level of
service and access to a broader variety of financial products and services.
Also, while you are not obligated to become a stockholder of Home Bancorp
of Elgin, Inc., you will have the opportunity to purchase shares at the
initial public offering price and at no commission cost to you.
2
<PAGE>
ABOUT INVESTING
Q: WHO MAY PURCHASE STOCK?
A: Home Bancorp of Elgin, Inc. is currently conducting a Subscription
Offering. All of the persons listed below may subscribe to purchase common
stock during the Subscription Offering.
. Eligible Account Holders. Persons who had savings deposits totaling $50
or more at Home Federal on the Eligibility Record Date, March 31,
1995;
. Employee Stock Ownership Plan of Home Federal or Home Bancorp of Elgin,
Inc.;
. Supplemental Eligible Account Holders. Persons who had savings deposits
totaling $50 or more at Home Federal on the Supplemental Eligibility
Record Date, June 30, 1996, but not as of March 31, 1995 (and not
including directors, officers or their associates);
. Other Members. Depositors other than eligible account holders and
supplemental eligible account holders on the Voting Record Date,
_________, 1996, as well as borrowers on the Voting Record Date; and
. Home Bancorp of Elgin, Inc. may also conduct a direct Community Offering
after the Subscription Offering, with a first preference given in the
direct Community Offering to natural persons residing in the counties
in which Home Federal has offices.
Q: WHAT IS THE PRICE PER SHARE AND HOW MANY SHARES ARE BEING OFFERED?
A: The aggregate value of Home Bancorp of Elgin, Inc.'s stock has been
determined by an independent, nationally recognized appraisal firm. The
Subscription Price per share is $10.00. Up to 6,612,500 shares or, under
certain circumstances, up to 7,604,375 shares are being offered for sale.
Q: WILL EVERYONE PAY THE SAME PRICE FOR THE STOCK?
A: Yes. All the subscribers, including the Board of Directors and management,
pay the same price during the Subscription Offering.
Q: ARE DEPOSITORS OBLIGATED TO BUY STOCK?
A: No. But our members receive a priority subscription right to purchase the
common stock.
3
<PAGE>
Q: HOW MUCH COMMON STOCK MAY I PURCHASE?
A: The minimum purchase is 25 shares, or $250. The maximum amount which an
individual (or individuals exercising subscription rights through a single
Home Federal account) may purchase in the Subscription Offering is
$200,000. The maximum that an individual may purchase in the Community
Offering is also $200,000. No individual, together with associates and
persons acting in concert, may purchase in the Offering more than 1% of the
stock sold.
The Prospectus sections entitled "The Conversion--Subscription Offering and
Subscription Rights" and " -- Community Offering" more fully describe the
purchase limits and the stock allocation procedures in case of
oversubscription.
Q: IS THE STOCK INSURED BY THE FDIC?
A: No. Like any other common stock, Home Bancorp of Elgin, Inc.'s stock will
not be insured. However, your savings deposit accounts will continue to be
insured up to the maximum amount allowed by the FDIC.
Q: HOW DO I ORDER STOCK AND WHAT METHODS CAN BE USED FOR PAYMENT OF MY STOCK
PURCHASES?
A: Complete the stock order form and certification as instructed. Make sure
to indicate the number of shares you wish to purchase and the total amount
remitted (multiply the number of shares subscribed for by $10 per share).
Total payment must accompany the order form and be received by the Home
Federal prior to 12:00 Noon, Central Time, on ____________________, 1996.
The payment options for stock purchases are as follows:
. Check or money order sent or delivered to any of Home Federal's offices
or the Stock Information Center. If payment is made by check or money
order, interest will be earned at the Association's rate of interest
on passbook accounts from the date of receipt until the Conversion is
completed.
. Withdrawal of funds from an existing account of Home Federal in an
amount equal to the Purchase Price. Once authorization for withdrawal
of funds has been made, the subscriber may not withdraw the designated
amount unless the Plan of Conversion is terminated or as otherwise
required by regulatory authorities. All funds maintained in savings
deposit accounts are insured by the FDIC up to legally applicable
limits and will earn interest until closing on the conversion. There
will not be a penalty for early withdrawal of certificate accounts for
stock purchases in the Subscription Offering.
. IRA purchases. If you wish to purchase shares of Home Bancorp of Elgin,
Inc. stock for an IRA account, either at Home Federal or elsewhere, we
may be able to accommodate you. Please contact the Stock Information
Center at (847) xxx-xxxx so that we may assist you with the
appropriate procedures for such a
4
<PAGE>
purchase. Transfer of Such Funds takes time, so please make arrangements
as soon as possible.
Q: IN THE FUTURE, HOW MAY I PURCHASE MORE SHARES OR SELL MY SHARES?
A: Home Bancorp of Elgin, Inc. has applied to have its common stock quoted on
The Nasdaq Stock Market under the symbol "_________." If the stock is
quoted, most brokers should be able to assist you with future purchases and
sales. However, the marketability of the stock will depend upon the
presence in the marketplace of both willing buyers and willing sellers at a
given time, and no assurance can be given that an active trading market
will develop.
Q: WHEN WILL I RECEIVE MY STOCK CERTIFICATE(S)?
A: Stock certificates will be mailed by the holding company's transfer agent
as soon as practicable after the conversion is completed. Please be aware
that you may not be able to sell the shares that you purchased until you
receive your certificate.
Q: WILL THERE BE ANY DIVIDENDS?
A: The Board of Directors of Home Bancorp of Elgin, Inc. will have the
authority and may consider declaring dividends on the common stock.
However, no decision has been made as to the amount or timing of such
dividends, if any. Any future dividend policy is determined by the Board
of Directors, which will take into account various regulatory restrictions,
earnings and market conditions, among other factors.
Q: MAY I CHANGE MY MIND?
A: The stock order form you execute cannot be canceled or withdrawn. However,
you may order additional shares by completing another stock order form.
Q: ARE MY SUBSCRIPTION RIGHTS TRANSFERABLE?
A: NO. No person may transfer or enter into any agreement to transfer the
subscription rights issued under the Plan of Conversion, or the shares to
be issued upon their exercise. Persons violating such prohibition may lose
their right to purchase stock in the conversion.
Q: HOW MAY I GET MORE INFORMATION?
A: We hope that these questions and answers will help you to better understand
the Conversion and the stock offering. If you desire further information,
please contact our Stock Information Center at: (847) xxx-xxxx.
5
<PAGE>
[HOME FEDERAL'S LOGO]
STOCK INFORMATION CENTER
16 NORTH SPRING STREET
ELGIN, ILLINOIS 60120-5569
(847) XXX-XXXX
This does not constitute an offer to sell or the solicitation of an offer
to buy any shares of Common Stock of Home Bancorp of Elgin, Inc. offered in
connection with the Conversion, nor does it constitute the solicitation of a
proxy in connection with the Conversion. Offers to sell and solicitations of
offers to buy shares of Home Bancorp of Elgin, Inc. Common Stock in connection
with the Conversion are made only by means of the Prospectus. Solicitations of
proxies in connection with the Conversion are made only by means of the Proxy
Statement. There shall be no sale of Home Bancorp of Elgin, Inc. Common Stock
in any state or jurisdiction in which any offer, solicitation of an offer or
sale of Home Bancorp of Elgin, Inc. Common Stock would be unlawful prior to the
registration or qualification of such shares under the securities laws of any
such state or jurisdiction. A Prospectus and a Proxy Statement may be obtained
by calling Home Federal's Stock Information Center at (847) xxx-xxxx.
THE SHARES OF HOME BANCORP OF ELGIN, INC. COMMON STOCK OFFERED IN THE
CONVERSION ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER GOVERNMENT AGENCY.
6
<PAGE>
QUESTIONS AND ANSWERS
ABOUT VOTING
ABOUT THE TRANSACTION
Q: WHAT IS A CONVERSION?
A: Home Federal Savings and Loan Association of Elgin ("Home Federal")
presently operates as a federally chartered mutual savings and loan
association. It has no stockholders and its directors are elected by our
member savers and borrowers. After the Conversion, we will be a federally
chartered stock savings and loan association owned by a holding company.
This holding company, Home Bancorp of Elgin, Inc., will be owned by
stockholders who will have voting rights with respect to certain key
business matters. The holding company is offering shares of common stock
to Home Federal's members, employees plans, employees and directors. Any
shares that remain unsold may then be offered to members of the general
public.
Q: WHAT IS HOME BANCORP OF ELGIN, INC. AND WHY IS IT BEING FORMED?
A: Home Bancorp of Elgin, Inc. is a newly organized holding company created by
Home Federal specifically to purchase 100% ownership in Home Federal upon
its conversion to stock form. The holding company is offering shares of
its Common Stock for sale to Home Federal's members and, if shares are
available, to the general public. All of the common stock to be issued by
Home Federal will be owned by the holding company. The additional capital
provided through the offering of Home Bancorp of Elgin, Inc. stock will
support future lending activities and local expansion of the financial
services currently offered through Home Federal.
Q: WHAT ARE THE BENEFITS OF CONVERSION?
A: The conversion and sale of stock will increase Home Federal's capital,
enabling it to:
. Enhance its ability to access capital markets;
. Expand its current operations;
. Acquire other financial institutions or branch offices;
. Provide affordable home financing opportunities to the communities it
serves; and
. Diversify into other financial services to the extent allowable by
applicable law.
1
<PAGE>
Q: WILL THE CONVERSION HAVE ANY EFFECT ON MY SAVINGS OR LOAN ACCOUNT?
A: No. The Conversion will not affect the amount, interest rate or withdrawal
rights of your savings deposit accounts, which will continue to be insured
by the Federal Deposit Insurance Corporation (the "FDIC") to the maximum
legal limit. Your savings deposit accounts are not being converted to
stock. The rights and obligations of borrowers under their loan agreements
also will not be affected.
Q: HOW DO I BENEFIT FROM THE CONVERSION?
A: The Conversion is expected, among other things, to enable Home Federal to
provide the customers and communities it serves with a higher level of
service and access to a broader variety of financial products and services.
Also, while you are not obligated to become a stockholder of Home Bancorp
of Elgin, Inc., you will have the opportunity to purchase shares at the
initial public offering price and at no commission cost to you.
ABOUT MEMBERS' VOTING RIGHTS
Q: WHO IS ELIGIBLE TO VOTE ON THE PLAN OF CONVERSION?
A: Depositors on the Voting Record Date, which is _________________, 1996, as
well as borrowers as of the Voting Record Date, who will continue as such
through the date of the Special Meeting.
Q: HOW WAS MY NUMBER OF VOTES DETERMINED?
A: Each savings deposit account holder is entitled to cast one vote for each
$100, or fraction thereof, of the aggregate withdrawal value of all such
account holder's savings accounts on the Voting Record Date. Each borrower
member is entitled to one vote as a borrower in addition to any votes he or
she is entitled to as a saver. The maximum number of votes per member is
1,000.
Q: IF I VOTE FOR THE PLAN OF CONVERSION ON THE PROXY CARD, WILL I BE OBLIGATED
TO PURCHASE STOCK?
A: No. Signing the proxy card and voting for the Conversion in no way
obligates you to purchase stock. However, all members are urged to vote
for the Conversion. THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE
PLAN OF CONVERSION AND RECOMMENDS MEMBERS VOTE "FOR" APPROVAL OF THE PLAN
OF CONVERSION.
Q: AM I REQUIRED TO VOTE?
A: No. However, failure to vote is the same as voting against the Conversion.
Therefore, all members are urged to vote for the Conversion.
2
<PAGE>
Q: MAY I COME TO THE SPECIAL MEETING AND VOTE?
A: Yes. However, we encourage you to send a proxy card even if you plan to
attend the meeting. The proxy card is revocable and can be changed by
voting a later dated proxy or ballot at the meeting.
Q: WHY DID I RECEIVE SEVERAL PROXY CARDS?
A: If you have more than one account, you could receive more than one proxy
card, depending on the ownership structure of your accounts. PLEASE VOTE,
SIGN AND RETURN ALL PROXY CARDS!
Q: MUST BOTH PARTIES ON A JOINT SAVINGS ACCOUNT SIGN THE PROXY CARD?
A: No. Two or more signatures are required only when two or more signatures
are needed to withdraw funds from the account.
Q: IF I DON'T BUY STOCK MAY I STILL VOTE AT HOME FEDERAL'S ANNUAL MEETINGS?
A: After Conversion, only stockholders will have voting rights. However, the
operations of the Bank and the general terms and balances of your savings
deposit accounts and loans will remain unchanged.
Q: HOW MAY I GET MORE INFORMATION?
A: We hope that these questions and answers will help you to better understand
the Conversion. If you desire further information, please contact our
Stock Information Center at: (847) xxx-xxxx.
3
<PAGE>
VOTE YES FOR CONVERSION
YOUR VOTE COUNTS!
The Board of Directors of Home Federal Savings and Loan Association of
Elgin ("Home Federal") has unanimously adopted a plan to convert Home Federal
from a mutual savings and loan association to a stock savings and loan
association. The Board of Directors concluded that the conversion would be in
the best interests of Home Federal, its depositors, borrowers and the
communities served by Home Federal. As a member of Home Federal, you have the
right to vote on Home Federal's plan to convert to the stock form of
organization. Further details on the Conversion, including the background and
reasons for the Conversion, are contained in the Proxy Statement. Please read
it carefully.
HOW TO COMPLETE THE PROXY CARD
1. Check the appropriate box. Your Board of Directors unanimously recommends
voting "FOR" the Conversion.
2. Enter the date on the Proxy Card.
3. Sign the Proxy Card.
4. Return your completed Proxy Card in the postage-paid white envelope
provided, or bring it to the Home Federal office most convenient for your.
5. Please complete and return all Proxy Cards you receive.
4
<PAGE>
[HOME FEDERAL'S LOGO]
STOCK INFORMATION CENTER
16 NORTH SPRING STREET
ELGIN, ILLINOIS 60120-5569
(847) XXX-XXXX
This does not constitute an offer to sell or the solicitation of an offer
to buy any shares of Common Stock of Home Bancorp of Elgin, Inc. offered in
connection with the Conversion, nor does it constitute the solicitation of a
proxy in connection with the Conversion. Offers to sell and solicitations of
offers to buy shares of Home Bancorp of Elgin, Inc. Common Stock in connection
with the Conversion are made only by means of the Prospectus. Solicitations of
proxies in connection with the Conversion are made only by means of the Proxy
Statement. There shall be no sale of Home Bancorp of Elgin, Inc. Common Stock
in any state or jurisdiction in which any offer, solicitation of an offer or
sale of Home Bancorp of Elgin, Inc. Common Stock would be unlawful prior to the
registration or qualification of such shares under the securities laws of any
such state or jurisdiction. A Prospectus and a Proxy Statement may be obtained
by calling Home Federal's Stock Information Center at (847) xxx-xxxx.
THE SHARES OF HOME BANCORP OF ELGIN, INC. COMMON STOCK OFFERED IN THE CONVERSION
ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION (FDIC) OR ANY OTHER GOVERNMENT AGENCY.
5
<PAGE>
HOME FEDERAL LETTERHEAD
INSERT DATE
Dear Valued Customer,
The Board of Directors of Home Federal Savings and Loan Association of Elgin
("Home Federal") has voted unanimously in favor of a plan to convert Home
Federal from a federally chartered mutual savings and loan association to a
federally chartered stock savings and loan association (the "Conversion"). As a
stock company, Home Federal will be structured under the same form of ownership
used by most businesses and banks. This Conversion to stock ownership means
Home Federal will increase its capital and will enable Home Federal to support
future banking activities. The Conversion will not affect your savings deposit
accounts or loans with Home Federal or existing FDIC insurance coverage for your
savings deposit accounts.
As part of the Conversion, Home Federal has formed a holding company, Home
Bancorp of Elgin, Inc. Home Bancorp of Elgin, Inc. will own all of the common
stock of Home Federal. Home Bancorp of Elgin, Inc. is offering up to 6,612,500
shares of its common stock to certain customers of Home Federal at a
subscription price of $10.00 per share. As a depositor on either March 31,
1995, June 30, 1996, or _____, 1996, you have a preferential right to subscribe
to purchase the common stock of Home Bancorp of Elgin, Inc. during the
Subscription Offering without paying a fee or commission. For your convenience
this packet includes the following material:
. PROXY STATEMENT: This gives detailed information about your right to vote on
the Conversion. Please read it carefully.
. PROXY QUESTIONS AND ANSWERS: This brochure highlights key information found
in the Proxy Statement. It also gives instructions for completing your proxy
card.
. PROXY CARD: Sign, date, and return the proxy card in the blue postage-paid
envelope. Your family may have received more than one card. All cards should
be signed and returned.
. PROSPECTUS: This document provides detailed information about Home Federal's
operations and the proposed stock offering. Please read it carefully.
. STOCK QUESTIONS AND ANSWERS: This brochure answers key questions about the
Conversion.
<PAGE>
. STOCK ORDER FORM and CERTIFICATION FORM to be completed in order to purchase
shares of Home Bancorp of Elgin, Inc. stock. Payment by check or written
authorization to withdraw from a specified Home Federal account must
accompany each stock order form and certification. This order must be
received by Home Bancorp of Elgin, Inc. not later than 12:00 Noon, Central
Time, on _____, 1996.
If you would like to purchase Home Bancorp of Elgin, Inc. stock in your IRA
account, using IRA funds, we may be able to accommodate you. Please contact the
Stock Information Center as soon as possible at (847) xxx-xxxx.
If you are a current depositor of Home Federal, you will also find enclosed a
proxy statement and proxy card(s). On behalf of the Board, we ask that you help
Home Federal take this important step by signing the enclosed proxy card(s) and
casting your vote in favor of the Plan of Conversion. Your vote is very
important! Please mail your proxy card(s) today in the enclosed postage paid
return envelope.
We believe it is in the best interest of Home Federal to have our customers and
members of the communities we serve as our stockholders. We encourage you to
review this investment opportunity carefully. If you have any questions, please
call the Stock Information Center at (847) xxx-xxxx.
Sincerely,
George L. Perucco
President and
Chief Executive Officer
Enclosures
This letter is neither an offer to sell nor a solicitation of an offer to buy
the common stock. The offer is made only by the Prospectus, copies of which may
be obtained by contacting the stock information center.
The shares of common stock offered in the conversion are not savings accounts
or savings deposits and are not insured by the Federal Deposit Insurance
Corporation (FDIC) or any other governmental agency.
2
<PAGE>
HOME FEDERAL LETTERHEAD
INSERT DATE
Dear Friend,
The Board of Directors of Home Federal Savings and Loan Association of Elgin
("Home Federal") has voted unanimously in favor of a plan to convert Home
Federal from a federally chartered mutual savings and loan association to a
federally chartered stock savings and loan association (the "Conversion"). As a
stock company, Home Federal will be structured under the same form of ownership
used by most businesses and banks. This Conversion to stock ownership means
Home Federal will increase its capital and will enable Home Federal to support
future banking activities. The Conversion will not affect your savings deposit
accounts or loans with Home Federal or existing FDIC insurance coverage for your
savings deposit accounts.
As part of the Conversion, Home Federal has formed a holding company, Home
Bancorp of Elgin, Inc. Home Bancorp of Elgin, Inc. will own all of the common
stock of Home Federal. Home Bancorp of Elgin, Inc. is offering up to 6,612,500
shares of its common stock to certain customers of Home Federal at a
subscription price of $10.00 per share. As a former depositor of Home Federal
on either March 31, 1995, June 30, 1996, or _____, 1996, you have a preferential
right to subscribe to purchase the common stock of Home Bancorp of Elgin, Inc.
during the Subscription Offering without paying a fee or commission. For your
convenience this packet includes the following material:
. PROSPECTUS: This document provides detailed information about Home Federal's
operations and the proposed stock offering. Please read it carefully.
. STOCK QUESTIONS AND ANSWERS: This brochure answers key questions about the
Conversion.
. STOCK ORDER FORM and CERTIFICATION FORM to be completed in order to purchase
shares of Home Bancorp of Elgin, Inc. common stock. Payment by check or
written authorization to withdraw from a specified Home Federal account must
accompany each stock order form and certification form. This order must be
received by Home Bancorp of Elgin, Inc. not later than 12:00 Noon, Central
Time, on _____, 1996.
If you would like to purchase Home Bancorp of Elgin, Inc. stock in your IRA
account, using IRA funds, we may be able to accommodate you. Please contact the
Stock Information Center as soon as possible at (847) xxx-xxxx.
<PAGE>
We believe it is in the best interest of Home Federal to have our customers and
members of the communities we serve as our stockholders. We encourage you to
review this investment opportunity carefully. If you have any questions, please
call the Stock Information Center at (847) xxx-xxxx.
Sincerely,
George L. Perucco
President and
Chief Executive Officer
Enclosures
This letter is neither an offer to sell nor a solicitation of an offer to buy
the common stock. The offer is made only by the prospectus, copies of which may
be obtained by contacting the stock information center.
The shares of common stock offered in the conversion are not savings accounts
or savings deposits and are not insured by the Federal Deposit Insurance
Corporation (FDIC) or any other governmental agency.
2
<PAGE>
HOME FEDERAL LETTERHEAD
INSERT DATE
Dear Valued Customer,
The Board of Directors of Home Federal Savings and Loan Association of Elgin
("Home Federal") has voted unanimously in favor of a plan to convert Home
Federal from a federally chartered mutual savings and loan association to a
federally chartered stock savings and loan association (the "Conversion"). As a
stock company, Home Federal will be structured under the same form of ownership
used by most businesses and banks. This Conversion to stock ownership means
Home Federal will increase its capital and will enable Home Federal to support
future banking activities. The Conversion will not affect your savings deposit
accounts or loans with Home Federal or existing FDIC insurance coverage for your
savings deposit accounts.
If you are a current depositor of Home Federal, you will find enclosed a proxy
statement and proxy card(s). On behalf of the Board, we ask that you help Home
Federal take this important step by signing the enclosed proxy card(s) and
casting your vote in favor of the Plan of Conversion. Your vote is very
important! Please mail your proxy card(s) today in the enclosed postage paid
return envelope. For your convenience this packet includes the following
material:
. PROXY STATEMENT: This gives detailed information about your right to vote on
the Conversion. Please read it carefully.
. PROXY QUESTIONS AND ANSWERS: This brochure highlights key information found
in the Proxy Statement. It also gives instructions for completing your proxy
card.
. PROXY CARD: Sign, date, and return the proxy card in the blue postage-paid
envelope. Your family may have received more than one card. All cards should
be signed and returned.
Home Bancorp of Elgin, Inc. is making an initial public offering of its common
stock in connection with the Conversion. However, we regret to inform you that
we are unable to offer shares of common stock in the offering to members
residing outside of the United States. If you have any questions, please call
the Stock Information Center at (847) xxx-xxxx.
Sincerely,
George L. Perucco
President and
Chief Executive Officer
Enclosures
The shares of common stock offered in the conversion are not savings accounts
or deposits and are not insured by the Federal Deposit Insurance Corporation or
any other government agency.
This is not an offer to sell or a solicitation to buy common stock. The
offer is made only by the Prospectus.
