<PAGE>
REGISTRATION NO. 333-05909
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
HOME BANCORP OF ELGIN, INC.
(Exact name of registrant as specified in its charter)
--------------------------
<TABLE>
<S> <C> <C>
DELAWARE 6035 36-4090333
(State or other jurisdiction (Primary Standard (IRS Employer
of incorporation or organization) Classification Code No.) Identification No.)
</TABLE>
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 $.01 7,604,375 $10.00 $76,043,750 (3)
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.
(3) A Registration fee of $26,222 was paid with the Registrant's filing of the
Form S-1 with the Commission on June 13, 1996.
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; Recent Developments;
Registrant Selected Consolidated 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
FOR INFORMATION ON HOW TO SUBSCRIBE FOR THE COMMON STOCK, CALL THE STOCK
INFORMATION CENTER AT (847) 289-3010
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR, SEE "RISK FACTORS" BEGINNING ON PAGE ___ OF THE
PROSPECTUS.
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 $10.00, 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
<PAGE>
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 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
National Market of The Nasdaq Stock Market under the symbol "HBEI." 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>
ESTIMATED NET
ESTIMATED PROCEEDS OF
NET SUBSCRIPTION,
ESTIMATED PROCEEDS OF COMMUNITY AND
SYNDICATED UNDERWRITING SYNDICATED SYNDICATED
COMMUNITY COMMISSIONS AND COMMUNITY COMMUNITY
OFFERING PRICE OTHER 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)
6,095,000 SHARES OF COMMON STOCK
$10.00 PER SHARE
-------------------
Home Bancorp of Elgin, Inc. (the "Company"), a Delaware corporation, is
offering up to 6,095,000 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 7,009,250 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." Consummation of the Conversion is subject to, among other things,
(i) the approval of the Plan of Conversion by the members of the Association and
(ii) the receipt of subscription orders for at least 4,505,000 shares of the
Common Stock. See "The Conversion."
(continued on following page)
FOR INFORMATION ON HOW TO SUBSCRIBE FOR THE COMMON STOCK, CALL THE STOCK
INFORMATION CENTER AT (847) 289-3010.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE
INVESTOR, SEE "RISK FACTORS" BEGINNING ON PAGE 24 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
COMMISSIONS AND OTHER PROCEEDS(3)
EXPENSES(2)
<S> <C> <C> <C>
Minimum Per Share............... $ 10.00 $ 0.34 $ 9.66
Midpoint Per Share.............. $ 10.00 $ 0.31 $ 9.69
Maximum Per Share............... $ 10.00 $ 0.29 $ 9.71
Total Minimum(1)................ $45,050,000 $1,521,000 $43,529,000
Total Midpoint(1)............... $53,000,000 $1,631,000 $51,369,000
Total Maximum(1)................ $60,950,000 $1,741,000 $59,209,000
Total Maximum, as adjusted (4).. $70,092,500 $1,867,000 $68,225,500
==========================================================================================
</TABLE>
(1) Determined in accordance with an independent appraisal prepared by RP
Financial, LC. ("RP Financial") dated June 7, 1996 and updated July 19,
1996, which states that the aggregate estimated pro forma market value of
the Common Stock ranged from $45,050,000 to $60,950,000 with a midpoint
of $53,000,000 (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 $45.1 million to $61.0 million (the "Estimated Price
Range"), or between 4,505,000 and 6,095,000 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."
1
<PAGE>
PROSPECTUS
(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 $601,000 and $821,000,
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 August ___, 1996.
2
<PAGE>
(continued from previous 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"). 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, although no such institutional investors have
been selected. 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"). If shares of Common Stock
are offered by the Company in a Syndicated Community Offering, the Company will
incur additional underwriting commissions, in accordance with agreements to be
entered into at the time of such offering. See "The Conversion -- Syndicated
Community Offering."
The ESOP intends to subscribe for 8% of the total number of shares of Common
Stock issued in the Conversion. 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 to the extent necessary to fill the ESOP's
subscription. Except for the subscription of the ESOP, no other person's or
entity's subscription will have a priority as a result of such an increase. It
is anticipated that the subscription of the ESOP will be filled in the
Subscription and Community Offerings. Shares purchased by the ESOP in the
Subscription and Community Offerings 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%. 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.
The ESOP may purchase additional shares of Common Stock in the future, at the
open market or otherwise, and may do so either on a leveraged basis with
borrowed funds or with cash dividends, periodic employer contributions or other
cash flow.
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
3
<PAGE>
(continued from previous page)
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
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 National Market of The Nasdaq Stock Market (the "Nasdaq National Market")
under the symbol "HBEI" upon completion of the Conversion. One of the
requirements for continued quotation of the Common Stock on the Nasdaq National
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 and Recent Performance of Conversion Offerings."
At a meeting of stockholders to be held no earlier than six months following
the completion of the Conversion (which meeting is anticipated to be held during
March 1997), 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"). Assuming the receipt of stockholder approval, an
amount of shares of Common Stock equal to 10% of the Common Stock issued in the
Conversion is expected to be reserved for
4
<PAGE>
issuance under the Stock Option Plans, and the Association expects to contribute
funds to the Stock Programs to enable their related trusts to acquire, in the
open market or otherwise, an aggregate of up to 4% (3% unless OTS approval is
obtained) of the shares of Common Stock issued in the Conversion. See
"Management of the Association -- Benefits."
5
<PAGE>
MAP
[MAP SHOWING BRANCH OFFICES IN ELGIN, CRYSTAL LAKE, ROSELLE, BARTLETT AND
SOUTH ELGIN, ILLINOIS TO BE PROVIDED]
6
<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 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").
BUSINESS 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
7
<PAGE>
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 automated teller machines ("ATMs") at convenient locations
throughout the Association's market area.
The Association's business strategy has focused on improving the Association's
profitability and capital position and increasing transactional deposit accounts
and loans made at market rates. Certain steps taken by management to implement
such strategy, including branch sales, have succeeded in increasing the
Association's capital level and reducing its operating expenses, but have also
had the effect of decreasing total assets and total savings deposits. Such
reductions in assets and savings deposits, when combined with the Association's
sensitivity to interest rates, also resulted in a reduction in net income. See
"-- Financial Highlights." In addition, management has determined that paying a
rate higher than market rates to attract deposits and originating loans at rates
below market rates would not be prudent strategies as they would not improve
profitability and the associated asset growth would have a much greater negative
effect by diluting the Association's capital level.
In particular, the effects of management's business strategy as noted above
include the following. Total assets decreased from $347.2 million at December
31, 1992 to $306.7 million at March 31, 1996. This reduction was primarily the
result of branch sales of $17.1 million and $19.4 million in 1993 and 1994,
respectively, which branch sales also resulted in increasing the Association's
capital by $1.5 million and reducing general and administrative expenses. Gross
loans declined from $305.6 million at December 31, 1993 to $274.2 at December
31, 1994. The funds generated from the repayments of loans were primarily used
to fund branch sales. Gross loans declined from $274.2 million at December 31,
1994 to $267.1 million at March 31, 1996. This decline was due to competitive
market conditions and the Association's decision not to offer loan products at
rates below market rates. The Association's savings deposits declined from its
five-year high of $319.0 million at December 31, 1992 to $267.9 million at
December 31, 1994, primarily due to the sale of branches in 1993 and 1994 with
savings deposits totaling $39.9 million. The remainder of the decline was due to
competitive market conditions and the Association's decision not to offer above-
market rates on its savings deposits. Competitive market conditions also account
for the decrease in deposits from $267.9 million at December 31, 1994 to $264.5
million at March 31, 1996. See "Risk Factors -- Potential Impact of Changes in
Interest Rates." The Company intends to utilize proceeds from the Conversion to
implement its business strategy of increasing the origination of high quality
mortgage loans, coupled with increasing transactional deposit accounts, which
management believes could, although there can be no assurance that it would,
reverse the recent trend of decreasing total asset size and reduced levels of
net income.
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
8
<PAGE>
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."
Net Income. 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. Net income in 1994 and 1993
would have been $3.4 million and $3.8 million, respectively, had the gains on
sale of branches not been recognized, and return on average assets would have
been 1.03% and 1.08%, respectively. The gain on sale of branches in 1994
represented 22.5% of net income. The gain on sale of branches in 1993 and the
impact of the change in accounting for income taxes represented 3.5% of net
income. See "Selected Financial and Other Data of the Association." See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Comparison of Operating Results for the Three Months Ended March
31, 1996 and 1995," "-- Comparison of Operating Results for the Years Ended
December 31, 1995 and 1994" and "-- Comparison of Operating Results for the
Years Ended December 31, 1994 and 1993" for a discussion of the changes in net
income and net interest income for these periods.
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."
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
9
<PAGE>
was 4.14%. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and "Business of the
Association-- 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 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 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
10
<PAGE>
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, although no such institutional investors have
been selected. 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."
The Board of Directors of the Association received information about various
types of benefit plans typically utilized by public companies in general and
implemented by converting thrift institutions in particular. Management
reviewed the anticipated costs of establishing a customary program of benefits
and the anticipated positive effects of such programs on the Company.
Management determined that such benefit plans significantly enhance the ability
of a public company to retain and attract executives of the caliber needed to
run a successful public company, to maintain their dedication and loyalty in
change in control situations and to align their interests with those of the
Company's stockholders. Ultimately, the Board of Directors concluded that the
cost of establishing and maintaining these benefit plans, coupled with the
savings to be recognized in future periods as a result of the termination of the
Association's pension plan (see "Management of the Association -- Benefits --
Pension Plan"), would be justified by the foregoing positive effects on the
Company.
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 (which meeting is
anticipated to be held during March 1997), the Company intends to seek
stockholder approval of the Stock Option Plans and 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."
11
<PAGE>
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
or process 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 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 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 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,
12
<PAGE>
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, although
such a decrease is not currently anticipated. 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. It is currently anticipated that the overall maximum purchase limitation
may be increased if, after a Community Offering, the Company has not received
subscriptions for a minimum of 4,505,000 shares of Common Stock. 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 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 $45,050,000 to $60,950,000, with a
midpoint of $53,000,000. RP Financial's appraisal is included as an exhibit to
the Company's Registration Statement, of which this Prospectus is a part. See
"Additional Information." The Board of Directors of the Association has
established the Estimated Price Range of $45.1 million to $61.0 million,
assuming the issuance of between 4,505,000 and 6,095,000 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 4,505,000 shares to a maximum of
6,095,000 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 7,009,250 shares due to regulatory considerations, changes in
the market and general financial and economic conditions. No resolicitation of
subscribers will be made and
13
<PAGE>
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
$43.5 million and $59.2 million (or $68.2 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 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 $21.8 million and $29.6 million (or
$34.1 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 shares to
be issued in the Conversion. The amount of the loan to the ESOP is estimated to
be between $3.6 million and $4.9 million (or $5.6 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 portion of the net proceeds not retained by the Company, estimated to be
between $21.8 million at the minimum of the Estimated Price Range and $29.6
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. See "Use of
Proceeds."
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 does not presently intend to declare dividends on the Common Stock.
In the future, 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
14
<PAGE>
Company. Assuming the shares of Common Stock are sold at the maximum of the
Estimated Price Range, at March 31, 1996, after giving pro forma effect to (i)
the Conversion, (ii) the deduction from capital of the amount expected to be
borrowed by the ESOP and the cost of shares of Common Stock to be acquired by
the Stock Programs and (iii) the retention by the Association of 50% of the net
proceeds of the Conversion, the Association would be permitted to make capital
distributions of up to approximately $8.8 million to the Company without prior
OTS approval. 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 (450,500 shares and 609,500
shares at the minimum and maximum of the Estimated Price Range, having an
aggregate fair market value of $4.5 million and $6.1 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 180,200 shares and
243,800 shares at the minimum and maximum of the Estimated Price Range,
respectively, having an aggregate fair market value of $1.8 million and $2.4
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 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.
15
<PAGE>
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 "Recent
Developments" and "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."
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 have the effect of increasing the cost of acquiring the Company,
which could result in stockholders receiving less for their shares of Common
Stock than might otherwise be available in the event of an acquisition of 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 $570,000. However, the actual
16
<PAGE>
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."
Subscriptions by Executive Officers and Directors. The Association's
executive officers and directors propose to purchase in the Offerings an
aggregate of 136,500 (or 3.03%, based on the minimum of the Estimated Price
Range, or 2.24%, based on the maximum of the Estimated Price Range) of the
shares to be issued in the Offerings. See "Management of the Association --
Subscriptions by Executive Officers and Directors."
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.
17
<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>
<S> <C> <C> <C> <C> <C> <C> <C>
AT MARCH AT DECEMBER 31,
31, -------------------------------------------------------------
1996(1) 1995 1994 1993 1992 1991
----------- ----------- --------- --------- ---------- ----------
(IN THOUSANDS)
SELECTED FINANCIAL CONDITION DATA:
Total assets................................ $306,688 $304,520 $306,956 $ 334,390 $347,173 $320,650
Loans receivable, net(2).................... 264,082 267,153 271,040 301,676 289,186 267,481
Investment securities held to maturity...... 5,955 5,948 5,918 -- 6,019 16,092
Savings deposits............................ 264,485 259,972 267,938 293,932 318,971 296,212
Borrowed funds.............................. -- 4,000 -- 7,000 -- --
Retained earnings, substantially restricted. 37,195 36,683 34,319 29,961 25,701 21,933
FOR THE THREE FOR THE YEAR ENDED DECEMBER 31,
MONTHS ENDED ---------------------------------------------------------
MARCH 31,
-----------------------
1996(1) 1995(1) 1995 1994 1993 1992 1991
-------- -------- -------- ------- ------- -------- --------
(IN THOUSANDS)
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 2,773 2,548 10,850 10,484 11,791 14,068 19,071
borrowed funds............................. -------- -------- -------- ------- ------- -------- --------
Net interest income before provision 2,856 3,200 12,075 14,185 15,861 14,571 11,904
for loan losses.......................
Provision for loan losses................... 30 45 180 240 240 256 232
-------- -------- -------- ------- ------- -------- --------
Net interest income after provision 2,826 3,155 11,895 13,945 15,621 14,315 11,672
for loan losses.......................
Noninterest income, excluding gain on sale 319 269 1,150 1,471 1,566 1,244 1,178
of 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 842 1,136 3,976 7,475 7,607 6,033 3,832
cumulative 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 -- -- -- -- 348 -- --
for income taxes (3)....................... -------- -------- -------- ------- ------- -------- --------
Net income............................. $ 512 $ 695 $ 2,364 $ 4,358 $ 4,261 $ 3,768 $ 2,391
======== ======== ======== ======= ======= ======== ========
</TABLE>
(Notes on following page)
18
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE THREE AT OR FOR THE YEAR ENDED DECEMBER 31,
MONTHS ENDED ----------------------------------------------------
MARCH 31,
-------------------------
1996(1) 1995(1) 1995 1994(4) 1993(4) 1992 1991
------------ ----------- -------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
SELECTED FINANCIAL RATIOS(5):
PERFORMANCE RATIOS:
Return on average assets(4)................. 0.68% 0.91% 0.78% 1.03% 1.08% 1.13% 0.73%
Return on average equity(4)................. 5.53 7.87 6.53 10.42 13.48 15.89 11.51
Average interest rate spread(6)............. 3.53 4.03 3.78 4.31 4.60 4.45 3.71
Net interest margin(7)...................... 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(5)(8):
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:(5)
Total non-performing loans(9)................ $ 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(10)............................ 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) The data presented at and for the three months ended March 31, 1996 and
1995 were derived from unaudited financial statements and reflect, in the
opinion of management, all adjustments (consisting only of normal recurring
adjustments) which are necessary to present fairly the results for such
interim periods. Interim results at and for the three months ended March
31, 1996 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1996.
(2) Loans receivable, net, represents gross loans less net deferred loan fees,
loans in process and allowance for loan losses.
(3) 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.
(4) Excludes gain on sale of branches. Return on average assets including the
gain on sale of branches was 1.33% and 1.22% in 1994 and 1993,
respectively. Return on average equity including the gain on sale of
branches was 13.45% and 15.26% in 1994 and 1993, respectively.
(5) 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 Capital Ratios are end-of-period
ratios.
(6) 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.
(7) The net interest margin represents net interest income as a percent of
average interest-earning assets.
(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.
19
<PAGE>
(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.
20
<PAGE>
RECENT DEVELOPMENTS
SELECTED FINANCIAL AND OTHER DATA OF THE ASSOCIATION
The following tables set forth financial data of the Association at and for
the three and six month periods ended June 30, 1996 and 1995, which are
unaudited. The selected financial 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 included elsewhere in this
Prospectus. In the opinion of management of the Association, all adjustments
for the three and six month periods ended June 30, 1996 and 1995, respectively,
consisting only of normal recurring accruals necessary for a fair presentation,
have been included. Operating results for the interim periods are not
necessarily indicative of the results of operations to be expected for the
remainder of the fiscal year.
<TABLE>
<CAPTION>
AT AT
JUNE 30, DECEMBER 31,
1996 1995
--------- ------------
(IN THOUSANDS)
SELECTED FINANCIAL CONDITION DATA:
<S> <C> <C> <C> <C>
Total assets.................................. $300,397 $304,520
Loans receivable, net(1)...................... 263,892 267,153
Investment securities held to maturity........ 5,963 5,948
Savings deposits.............................. 258,622 259,972
Borrowed funds................................ -- 4,000
Retained earnings, substantially restricted... 37,184 36,683
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------- ---------
1996 1995 1996 1995
------ ------ -------- --------
(IN THOUSANDS)
SELECTED OPERATING DATA:
Interest income............................... $5,578 $5,793 $ 11,207 $ 11,540
Interest expense on savings deposits and 2,713 2,701 5,486 5,249
borrowed funds............................... ------ ------ -------- --------
Net interest income before 2,865 3,092 5,721 6,291
provision for loan losses...............
Provision for loan losses..................... 30 45 60 90
------ ------ -------- --------
Net interest income after provision for 2,835 3,047 5,661 6,201
loan losses............................. ------ ------ -------- --------
Noninterest income............................ 308 273 627 542
Noninterest expense, excluding 2,323 2,245 4,626 4,532
curtailment of pension plan..................
Curtailment of pension plan................... 837 -- 837 --
Income (loss) before income tax expense....... (17) 1,075 825 2,211
Income tax expense (benefit).................. (6) 457 324 898
------ ------ -------- --------
Net income (loss)......................... $ (11) $ 618 $ 501 $ 1,313
====== ====== ======== ========
</TABLE>
(Notes on following page)
21
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR AT OR FOR
THE THREE MONTHS THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------- ------------------
1996 1995 1996 1995
--------- -------- -------- --------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
SELECTED FINANCIAL RATIOS (2):
PERFORMANCE RATIOS:
Return on average assets (3)................. (0.01)% 0.81% 0.33% 0.86%
Return on average equity (3)................. (0.11) 6.87 2.69 7.37
Average interest rate spread (4)............. 3.55 3.84 3.54 3.94
Net interest margin (5)...................... 4.01 4.25 3.99 4.33
Average interest-earning assets to average 111.93 110.88 111.90 110.86
interest-bearing liabilities................
Noninterest expense to average assets (3).... 4.18 2.93 3.61 2.97
CAPITAL RATIOS (2)(6):
Average equity to average assets............. 12.34 11.74 12.29 11.67
Equity to total assets at end of period...... 12.38 11.84 12.38 11.84
Tangible capital............................. 12.38 11.74 12.38 11.74
Core capital................................. 12.38 11.74 12.38 11.74
Total risk-based capital..................... 23.80 23.06 23.80 23.06
ASSET QUALITY RATIOS AND OTHER DATA:(2)
Total non-performing loans (7)............... $ 1,127 $ 864 $ 1,127 $ 864
Real estate owned, net....................... 331 516 331 516
Non-performing loans to total loans.......... 0.43% 0.32% 0.43% 0.32%
Non-performing assets to total assets........ 0.49% 0.45% 0.49% 0.45%
ALLOWANCE FOR LOAN LOSSES TO:
Non-performing loans....................... 78.62 85.58 78.62 85.58
Total loans (8)............................ 0.33% 0.27% 0.33% 0.27%
Full service offices......................... 5 5 5 5
- --------
</TABLE>
(1) Loans receivable, net, represents gross loans less net deferred loan fees,
loans in process and allowance for loan losses.
(2) 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 Capital Ratios are end-of-period
ratios.
(3) Includes loss on curtailment of pension plan of $837,000 for the three and
six month periods ended June 30, 1996. Excluding the loss on curtailment,
the return on average assets and average equity would have been 0.64% and
5.16%, respectively, for the three months ended June 30, 1996 and 0.67% and
5.42%, respectively, for the six months ended June 30, 1996, and noninterest
expense to average assets would have been 3.07% and 3.06%, respectively, for
the three months and six months ended June 30, 1996.
(4) 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.
(5) The net interest margin represents net interest income as a percent of
average interest-earning assets.
(6) The definitions and further information relating to the Association's
regulatory capital requirements, see "Regulation -- Regulation of Federal
Savings Associations -- Capital
22
<PAGE>
Requirements." See "Regulatory Capital Compliance" for the Association's pro
forma capital levels as a result of the Offerings.
(7) Non-performing loans consist 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.
(8) Total loans represent gross loans less deferred loan fees and loans in
process.
23
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1996 AND DECEMBER 31, 1995
Total assets decreased $4.1 million or 1.4% from $304.5 million at December
31, 1995 to $300.4 million at June 30, 1996. The decrease in assets is due
primarily to a decrease in borrowed funds of $4.0 million and a decrease in
savings deposits of $1.3 million. These were offset by an increase of $626,000
in accrued interest payable and other liabilities and an increase of $501,000 in
retained earnings for the six months ended June 30, 1996. The decrease in
savings deposits of $1.3 million represents a 0.5% decrease for the six months
ended June 30, 1996. Borrowed funds of $4.0 million were repaid in February,
1996. The increase of $626,000 in accrued interest payable and other
liabilities was primarily the result of the accrual for pension benefits
associated with the recognition of an $837,000 expense related to the
curtailment of pension benefits as a result of the Association's termination of
its pension plan. See "Management of the Association -- Benefits -- Pension
Plan." The $501,000 increase in retained earnings represents the net income
earned for the six months ended June 30, 1996.
The components of the Association's asset base also changed from December 31,
1995 to June 30, 1996. Interest earning deposits decreased $1.0 million due
primarily to the funds disbursed in connection with the decrease in savings
deposits of $1.3 million and repayment of borrowed funds of $4.0 million, which
was offset by the funds received from the $3.3 million decrease of loans
receivable and $378,000 decrease in Federal Home Loan Bank of Chicago (the "FHLB
of Chicago") stock. The decrease in loans receivable of $3.3 million was a
result of loan repayments exceeding loan originations. The decrease in FHLB of
Chicago stock was the result of stock redemption by the FHLB of Chicago.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND
1995
General. For the three months ended June 30, 1996, there was a net loss of
$11,000 compared to net income of $618,000 for the three months ended June 30,
1995. This was due primarily to the recognition of an $837,000 expense in 1996
related to the curtailment of pension benefits as a result of the Association's
termination of its pension plan. There was also a decrease of $227,000 in net
interest income before provision for loan losses. These were offset by a
decrease in income tax expense of $463,000.
Interest Income. Interest income decreased $215,000 or 3.7% from $5.8 million
for the three months ended June 30, 1995 to $5.6 million for the comparable
period in 1996. The decrease was due to decreases in both the average yield and
the average balance of interest-earning assets. The average yield on the
Association's interest-earning assets decreased 16 basis points from 7.96% for
the three months ended June 30, 1995 to 7.80% for the three months ended June
30, 1996. The average balance of interest-earning assets decreased $5.1 million
or 1.8% from $291.0 million for the three months ended June 30, 1995 to $286.9
million for the three months ended June 30, 1996, as a result of the
Association's repayment of $4.0 million in borrowings, competitive market
conditions and the Association's decision not to offer loan products at below
market interest rates.
Interest Expense. Interest Expense increased $12,000 or 0.4% from $2.7
million for the three months ended June 30, 1995 to $2.71 million for the
comparable period in 1996. This increase was due to an increase in the cost of
average interest-bearing liabilities resulting primarily from new certificates
of deposit earning higher rates than the maturing certificates of deposit.
These increases were offset by lower average balances in total interest-bearing
liabilities. The average rate paid on interest-bearing liabilities increased 13
basis points from 4.12% for the three months ended June 30, 1995 to 4.25% for
the three months ended June 30, 1996. The average amount of interest-bearing
liabilities decreased $7.0 million or 2.7% to $255.5 million for the three
months ended June 30, 1996 from $262.5 million for the three months ended June
30, 1995. The decrease in interest-bearing liabilities was due to the
Association's repayment of $4.0 million in borrowings, competitive market
conditions and the Association's decision not to offer above market interest
rates on its savings deposits.
24
<PAGE>
Net Interest Income before Provision for Loan Losses. Net interest income
before provision for loan losses decreased $227,000 or 7.3% from $3.1 million
for the three months ended June 30, 1995 to $2.9
million for the comparable period in 1996. This was due to the average interest
rate spread decreasing 29 basis points from 3.84% for the three months ended
June 30, 1995 to 3.55% for the comparable period in 1996 and the decrease in the
average balance of interest-earning assets of $5.1 million or 1.8%. These were
offset by the decline in the average amount of interest-bearing liabilities of
$7.0 million or 2.7%.
Provision for Loan Losses. The provision for loan losses decreased by $15,000
or 33.3% from $45,000 for the three months ended June 30, 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, delinquent and non-performing loans
and the national and regional economies. At June 30, 1996 and 1995, the ratio
of the allowances for loan losses to non-performing loans was 78.6% and 85.6%,
respectively, and the ratio of the allowance for loan losses to total loans was
0.33% and 0.27%, respectively.
Noninterest Income. Noninterest income increased $35,000 or 13.2% from
$273,000 for the three months ended June 30, 1995 to $308,000 for the three
months ended June 30, 1996. This increase was due primarily to an increase in
service fee income of $32,000 from $268,000 for the three months ended June 30,
1995 to $300,000 for the comparable period in 1996, which was due primarily to
an increase in ATM fee income. Due to a change in ATM processors, service fee
income and expense are now accounted for on a gross basis as a part of both
noninterest income and noninterest expense.
Noninterest Expense. Noninterest expense increased $916,000 or 40.8% from
$2.2 million for the three months ended June 30, 1995 to $3.2 million for the
three months ended June 30, 1996. This was due primarily to an increase in
compensation and benefits expense of $897,000 or 96.9% from $925,000 for the
three months ended June 30, 1995 to $1.8 million for the comparable period in
1996. The increase in compensation and benefit expense was primarily
attributable to $837,000 of pension curtailment expense, and the remaining
$60,000 increase was attributable primarily to normal salary increases and
benefit costs. The Association terminated its defined benefit plan in June,
1996, which resulted in the curtailment loss. In addition, ATM expense
increased $36,000 or 50.7% from $71,000 for the three months ended June 30, 1995
to $107,000 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 as a part of both noninterest income and noninterest expense.
Income Tax Expense (Benefit). Income tax expense decreased $464,000 from a
$457,000 tax expense for the three months ended June 30, 1995 to a $6,000 tax
benefit for the three months ended June 30, 1996. This is due to the decrease
in income before income taxes of $1.09 million from $1.08 million for the three
months ended June 30, 1995 to a loss of $17,000 before income taxes for the
comparable period in 1996. The effective tax rate was 41.2% for the three month
period ended June 30, 1996 compared to 42.5% for the three month period ended
June 30, 1995.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
General. For the six months ended June 30, 1996, net income was $501,000 a
decrease of $812,000 or 61.8% from $1.3 million for the six months ended June
30, 1995. This was due primarily to the recognition of an $837,000 expense in
1996 related to the curtailment of pension benefits as a result of the
Association's termination of its pension plan. There was also a decrease of
$570,000 in net interest income before provision for loan losses, which was
offset by a decrease in income tax expense of $574,000.
Interest Income. Interest income decreased $333,000 or 2.9% from $11.5
million for the six months ended June 30, 1995 to $11.2 million for the six
months ended June 30, 1996. The reduction
25
<PAGE>
was due to decreases in both the average yield and the average balance of
interest-earning assets. The average yield on the Association's interest-earning
assets decreased 12 basis points from 7.95% for the six months ended June 30,
1995 to 7.83% for the six months ended June 30, 1996. The average balance of
interest-earning assets decreased $4.0 million or 1.4% from $290.4 million for
the six months ended June 30, 1995 to $286.4 million for the comparable period
in 1996, as a result of the Association's repayment of $4.0 million in
borrowings, competitive market conditions and the Association's decision not to
offer loan products at below-market interest rates.
Interest Expense. Interest expense increased $237,000 or 4.5% from $5.2
million for the six months ended June 30, 1995 to $5.5 million for the six
months ended June 30, 1996. This increase was due to an increase in the cost of
average interest-bearing liabilities resulting primarily from new certificates
of deposit earning higher rates than maturing certificates of deposit. These
increases were offset by lower average balances in total interest-bearing
liabilities. The average rate paid on interest-bearing liabilities increased 28
basis points from 4.01% for the six months ended June 30, 1995 to 4.29% for the
six months ended June 30, 1996. The average amount of interest-bearing
liabilities decreased $6.0 million or 2.3% from $262.0 million for the six
months ended June 30, 1995 to $256.0 million for the comparable period in 1996.
The decrease in interest-bearing liabilities was due to the Association's
repayment of $4.0 million in borrowings, 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 $570,000 or 9.1% from $6.3 million
for the six months ended June 30, 1995 to $5.7 million for the comparable period
in 1996. This was due to the average interest rate spread decreasing 40 basis
points from 3.94% for the six months ended June 30, 1995 to 3.54% for the six
months ended June 30, 1996 and the decrease in the average balance of interest-
earning assets of $4.0 million or 1.4%. These were offset by the decline in the
average amount of interest-bearing liabilities of $6.0 million or 2.3%. The
reduction in the average interest rate spread was due to the average yield on
interest-earning assets decreasing 12 basis points and the average rate paid on
interest-bearing liabilities increasing 28 basis points.
Provision for Loan Losses. The provision for loan losses decreased by $30,000
or 33.3% from $90,000 for the six months ended June 30, 1995 to $60,000 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, delinquent and non-performing loans and the national
and regional economies. At June 30, 1996 and 1995, the ratio of the allowance
for loan losses to non-performing loans was 78.6% and 85.6%, respectively, and
the ratio of the allowance for loan losses to total loans was 0.33% and 0.27%,
respectively.
Noninterest Income. Noninterest income increased $85,000 or 15.7% from
$542,000 for the six months ended June 30, 1995 to $627,000 for the six months
ended June 30, 1996. This increase was due primarily to an increase in service
fee income of $61,000 from $533,000 for the six months ended June 30, 1995 to
$594,000 for the comparable period in 1996, which was due primarily to an
increase in ATM fee income. Due to a change in ATM processors, service fee
income and expense are now accounted for on a gross basis. There was also a
gain of $21,000 on the sale of real estate owned during the six months ended
June 30, 1996. There was no gain in the comparable period in 1995.
Noninterest Expense. Noninterest expense increased $931,000 or 20.5% from
$4.5 million for the six months ended June 30, 1995 to $5.5 million for the six
months ended June 30, 1996. This was due primarily to an increase in
compensation and benefit expense of $939,000 or 50.9% from $1.8 million for the
six months ended June 30, 1995 to $2.8 million for the comparable period in
1996. The increase in compensation and benefit expense was attributable
primarily to $837,000 of pension curtailment expense, and the remaining $102,000
increase was primarily attributable to normal salary increases and benefits
expense. The Association terminated its defined benefit pension plan in June,
26
<PAGE>
1996, which resulted in the curtailment loss. In addition, ATM expense
increased $84,000 or 61.3% from $137,000 for the six months ended June 30, 1995
to $221,000 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. This was offset by decreases in occupancy expense, federal deposit
insurance premium and other expense of $28,000, $23,000, and $34,000,
respectively. The decrease in occupancy expense was due primarily to a decrease
in office building improvement depreciation of $44,000 or 43.6% from $101,000
for the six months ended June 30, 1995 to $57,000 for the six months ended June
30, 1996. This was the result of the building improvements to the leased South
Elgin Office fully depreciating in 1995 and no depreciation expense in 1996. The
decrease in federal deposit insurance premium of $23,000 from $362,000 for the
six months ended June 30, 1995 to $339,000 for the comparable period in 1996 was
due to lower deposit balances. The decrease in other noninterest expense of
$34,000 or 4.6% from $735,000 for the six months ended June 30, 1995 to $701,000
for the six months ended June 30, 1996 was due primarily to a $19,000 decrease
in real estate owned expense and a $16,000 decrease in postage and express mail
expense.
Income Tax Expense. Income tax expense decreased $574,000 or 63.9% from
$898,000 for the six months ended June 30, 1995 to $324,000 for the six months
ended June 30, 1996. This is due primarily to the decrease in income before
income taxes of $1.4 million or 62.7% from $2.2 million for the six months ended
June 30, 1995 to $825,000 for the six months ended June 30, 1996. The effective
tax rate was 39.3% for the six months ended June 30, 1996 compared to 40.6% for
the six months ended June 30, 1995.
27
<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.
The Association has experienced reduced levels of net income and net interest
income in 1994, 1995 and for the three months ended March 31, 1996 as a result
of, among other reasons, the Association's sensitivity to increases in interest
rates, as well as the Association's reduction in total asset size during those
periods. In addition, the Association experienced a reduced level of net income
and net interest income for the three and six months ended June 30, 1996. See
"Summary -- Home Federal Savings and Loan Association of Elgin," "Recent
Developments" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for a discussion of these results. There can be no
assurance that the Association will not continue to experience reduced levels of
net income and net interest income during periods of increasing interest rates
or until the Association's sensitivity to increases in interest rates is
reduced.
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. As indicated in the second table under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Management of Interest Rate Risk," at March 31, 1996, a 200 basis
point increase in interest rates would cause more than a 2% decrease in the
ratio of the Association's net portfolio value (as defined therein) to the
economic value of the Association's assets. Accordingly, while such decrease is
within the target limits established by the Board of Directors, under OTS
regulations the Association is considered to have "above normal" interest rate
risk and, at March 31, 1996, would have had its risk-based capital requirement
increased by $816,000 had the interest rate risk component of the OTS risk-based
capital requirement been in effect at such date. See "Regulation -- Regulation
of Federal Savings Associations -- Capital Requirements." 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
28
<PAGE>
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 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")
29
<PAGE>
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 (as herein defined) 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 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.
30
<PAGE>
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 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."
31
<PAGE>
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. This greater risk is attributable to several factors, including the
higher 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 sufficient cash flow from the
related real estate project to cover operating expenses and debt service. 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.
Circumstances outside the borrower's control may adversely affect income from
the multifamily or commercial 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 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."
32
<PAGE>
Voting Control of Directors, Officers and Employees. Directors and executive
officers of the Association and the Company expect to purchase approximately
3.0% or 2.2% 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 23.1% 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."
Provisions in Management Contracts and Benefit Plans. Certain provisions
contained in the proposed Employment Agreements, Employee Retention Agreements,
Employee Severance Compensation Plan, the ESOP, the Stock Option Plans and the
Stock Programs that provide for cash payments or the vesting of benefits upon a
change of control of the Company or the Association may be deemed to have an
anti-takeover effect and could result in stockholders receiving less for their
shares of Common Stock than otherwise might be available in the event of an
acquisition of the Company. See "Management of the Association -- Employment
Agreements," " -- Employee Retention Agreements" and " -- Employee Severance
Compensation Plan" and "Management of the Association -- Benefits -- Employee
Stock Ownership Plan and Trust," " -- Stock Option Plans" and " -- Stock
Programs."
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 National Market under the symbol "HBEI"
upon completion of the Conversion. One of the requirements for continued
quotation of the Common Stock on the Nasdaq National 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 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."
33
<PAGE>
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 7,009,250 shares of
Common Stock at the Purchase Price for aggregate proceeds of up to $70.1
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 taxed
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 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."
34
<PAGE>
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.
35
<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
approximately 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
36
<PAGE>
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."
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 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.
37
<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 $43.5 million
and $59.2 million (or $68.2 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 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 $21.8 million and $29.6 million (or
$34.1 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 4,505,000 shares or
6,095,000 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 $3.6 million or $4.9 million, respectively, (or $5.6
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 portion of the net proceeds not retained by the Company, estimated to be
between $21.8 million at the minimum of the Estimated Price Range and $29.6
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
agreement, arrangement or understanding regarding any such establishment or
acquisition, or any other transaction related to the possible expansion of its
operations.
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 -- Limitation 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
38
<PAGE>
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 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 does not presently intend to declare dividends on the Common Stock but
may do so 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."
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.
39
<PAGE>
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 does not presently intend to declare dividends on the Common Stock.
In the future, 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.
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." Assuming the shares of
Common Stock are sold at the maximum of the Estimated Price Range, at March 31,
1996, after giving pro forma effect to (i) the Conversion, (ii) the deduction
from capital of the amount expected to be borrowed by the ESOP and the cost of
shares of Common Stock to be acquired by the Stock Programs and (iii) the
retention by the Association of 50% of the net proceeds of the Conversion, the
Association would be permitted to make capital distributions of up to
approximately $8.8 million to the Company without prior OTS approval.
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 National Market under the symbol "HBEI" upon completion of the
Conversion. One of the requirements for continued quotation of the Common Stock
on the Nasdaq National 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,
40
<PAGE>
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 National Market as contemplated.
41
<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)
----------------------------------------------------------------------------------
4,505,000 SHARES 5,300,000 SHARES 6,095,000 SHARES 7,009,250 SHARES
HISTORICAL AT (MINIMUM OF (MIDPOINT OF (MAXIMUM OF (15% ABOVE
MARCH 31, 1996 ESTIMATED ESTIMATED ESTIMATED MAXIMUM OF
------------------- PRICE RANGE) PRICE RANGE) PRICE RANGE) ESTIMATED
------------------- ------------------- ------------------- PRICE RANGE) (2)
-------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
--------- OF --------- OF --------- OF --------- OF --------- OF
ASSETS ASSETS ASSETS ASSETS ASSETS
(3) (3) (3) (3) (3)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
GAAP Capital............... $37,195 12.13% $53,554 16.58% $56,520 17.34 % $59,576 18.10% $62,897 18.92%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Tangible Capital: (3)
Capital level........... $37,195 12.04% $53,554 16.46% $56,520 17.22% $59,576 17.98% $62,897 18.80%
Requirement............. 4,634 1.50 4,879 1.50 4,924 1.50 4,970 1.50 5,020 1.50
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess.................. $32,561 10.54% $48,695 14.96% $51,596 15.72% $54,606 16.48 % $57,877 17.30%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Core Capital: (3)
Capital level........... $37,195 12.04% $53,554 16.46% $56,520 17.22% $59,576 17.98% $62,897 18.80%
Requirement............. 9,268 3.00 9,759 3.00 9,848 3.00 9,940 3.00 10,039 3.00
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess.................. $27,927 9.04% $43,795 13.46% $46,672 14.22% $49,636 14.98% $52,858 15.80%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Risk-Based Capital: (4)
Capital level........... $38,051 23.65% $54,410 32.18% $57,376 33.64% $60,432 35.12% $63,753 36.69%
Requirement (5)......... 12,872 8.00 13,526 8.00 13,645 8.00 13,767 8.00 13,900 8.00
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess.................. $25,179 15.65% $40,884 24.18% $43,731 25.64% $46,665 27.12% $49,853 28.69%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</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.
42
<PAGE>
(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.
43
<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
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
7,009,250
4,505,000 5,300,000 6,095,000 SHARES
ASSOCIATION SHARES SHARES SHARES (15% ABOVE
HISTORICAL (MINIMUM OF (MIDPOINT OF (MAXIMUM OF MAXIMUM OF
ESTIMATED ESTIMATED ESTIMATED ESTIMATED
PRICE RANGE RICE RANGE) PRICE RANGE) PRICE RANGE)(1)
------------ ---------- ---------- ----------- ---------------
(IN THOUSANDS)
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..............................
-- 45 53 61 70
Additional paid-in capital (3)(4)........... -- 43,484 51,316 59,148 68,156
Retained earnings, substantially 37,195 37,195 37,195 37,195 37,195
restricted (5).............................
LESS:
Common Stock acquired by ESOP (6)........... -- (3,604) (4,240) (4,876) (5,607)
Common Stock acquired by Stock -- (1,802) (2,120) (2,438) (2,804)
Programs (7).............................. -------- --------- --------- --------- ---------
Total stockholders' equity.................... $ 37,195 $75,318 $82,204 $89,090 $97,010
======== ========= ========= ========= ==========
- --------------------
</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 $1.5
million, $1.6 million, $1.7 million, and $1.9 million, respectively,
corresponding to the issuance of 4,505,000 shares, 5,300,000 shares,
6,095,000 shares, and 7,009,250 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."
44
<PAGE>
(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" and "Pro Forma
Data" regarding the dilutive effect of the Stock Programs.
45
<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 $43.5 million and $59.2 million (or $68.2 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 is 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."
46
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE THREE MONTHS ENDED MARCH 31, 1996
--------------------------------------------------------------
<S> <C> <C> <C> <C>
4,505,000 5,300,000 6,095,000 7,009,250
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)
Gross proceeds............................................ $ 45,050 $ 53,000 $ 60,950 $ 70,093
Less offering expenses and commissions.................... (1,521) (1,631) (1,741) (1,867)
---------- ---------- ---------- ----------
Estimated net proceeds.................................... 43,529 51,369 59,209 68,226
Less: Common Stock purchased by ESOP (2)................. (3,604) (4,240) (4,876) (5,607)
Common Stock purchased by Stock Programs (3)....... (1,802) (2,120) (2,438) (2,804)
---------- ---------- ---------- ----------
Estimated net proceeds, as adjusted....................... $ 38,123 $ 45,009 $ 51,895 $ 59,815
========== ========== ========== ==========
Net earnings:
Historical............................................. $ 512 $ 512 $ 512 $ 512
Pro forma net earnings on net proceeds................. 350 413 476 549
Pro forma ESOP adjustment (2).......................... (78) (93) (106) (122)
Pro forma Stock Programs adjustment (3)................ (55) (64) (74) (85)
---------- ---------- ---------- ----------
Pro forma net earnings.............................. $ 729 $ 768 $ 808 $ 854
========== ========== ========== ==========
Per share net earnings:
Historical............................................. $ 0.12 $ 0.11 $ 0.09 $ 0.08
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)................... $ 0.17 $ 0.16 $ 0.14 $ 0.13
========== ========== ========== ==========
Shares used in calculation (2)......................... 4,157,500 4,891,000 5,625,000 6,468,500
Stockholders' equity:
Historical............................................. $ 37,195 $ 37,195 $ 37,195 $ 37,195
Estimated net proceeds................................. 43,529 51,369 59,209 68,226
Less: Common Stock acquired by ESOP (2).................. (3,604) (4,240) (4,876) (5,607)
Common Stock acquired by Stock Programs (2)............... (1,802) (2,120) (2,438) (2,804)
---------- ---------- ---------- ----------
Pro forma stockholders' equity (2)(3)(4)(5)............ $ 75,318 $ 82,204 $ 89,090 $ 97,010
========== ========== ========== ==========
Stockholders' equity per share: (4)
Historical............................................. $ 8.26 $ 7.02 $ 6.10 $ 5.31
Estimated net proceeds................................. 9.66 9.69 9.72 9.73
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).. $ 16.72 $ 15.51 $ 14.62 $ 13.84
========== ========== ========== ==========
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE THREE MONTHS ENDED MARCH 31, 1996
--------------------------------------------------------------
<S> <C> <C> <C> <C>
4,505,000 5,300,000 6,095,000 7,009,250
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)
Shares used in calculation............................. 4,505,000 5,300,000 6,095,000 7,009,250
Offering price as a percentage of pro forma
stockholders' equity per share............................ 59.81% 64.47% 68.40% 72.25%
========== ========== ========== ==========
Offering price to pro forma net earnings per share........ 14.71x 15.63x 17.86x 19.23x
========== ========== ========== ==========
</TABLE>
(Notes following tables)
48
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE THREE MONTHS ENDED DECEMBER 31, 1996
--------------------------------------------------------------
<S> <C> <C> <C> <C>
4,505,000 5,300,000 6,095,000 7,009,250
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)
Gross proceeds............................................ $ 45,050 $ 53,000 $ 60,960 $ 70,093
Less offering expenses and commissions.................... (1,521) (1,631) (1,741) (1,867)
---------- ---------- ---------- ----------
Estimated net proceeds.................................... 43,529 51,369 59,209 68,226
Less: Common Stock purchased by ESOP (2)................. (3,604) (4,240) (4,876) (5,607)
Common Stock purchased by Stock Programs (3).............. (1,802) (2,120) (2,438) (2,804)
---------- ---------- ---------- ----------
Estimated net proceeds, as adjusted....................... $ 38,123 $ 45,009 $ 51,895 $ 59,815
========== ========== ========== ==========
Net earnings:
Historical............................................. $ 2,364 $ 2,364 $ 2,364 $ 2,364
Pro forma net earnings on net proceeds.................. 1,369 1,616 1,863 2,147
Pro forma ESOP adjustment (2).......................... (306) (360) (414) (477)
Pro forma Stock Programs adjustment (3)................ (214) (252) (290) (334)
---------- ---------- ---------- ----------
Pro forma net earnings.............................. $ 3,213 $ 3,368 $ 3,523 $ 3,700
========== ========== ========== ==========
Per share net earnings:
Historical............................................. $ 0.56 $ 0.47 $ 0.41 $ 0.36
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)................... $ 0.77 $ 0.68 $ 0.62 $ 0.57
========== ========== ========== ==========
Shares used in calculation (2)......................... 4,196,000 4,936,500 5,677,000 6,528,500
Stockholders' equity:
Historical............................................. $ 36,683 $ 36,683 $ 36,683 $ 36,683
Estimated net proceeds................................. 43,529 51,369 59,209 68,226
Less: Common Stock acquired by ESOP (5)............... (3,604) (4,240) (4,876) (5,607)
Common Stock acquired by Stock Programs (3)............ (1,802) (2,120) (2,438) (2,804)
---------- ---------- ---------- ----------
Pro forma stockholders' equity (2)(3)(4)(5)............ $ 74,806 $ 81,692 $ 88,578 $ 96,498
========== ========== ========== ==========
Stockholders' equity per share: (4)
Historical............................................. $ 8.14 $ 6.92 $ 6.02 $ 5.24
Estimated net proceeds................................. 9.66 9.69 9.71 9.73
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).. $ 16.60 $ 15.41 $ 14.53 $ 13.77
========== ========== ========== ==========
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE THREE MONTHS ENDED DECEMBER 31, 1996
--------------------------------------------------------------
<S> <C> <C> <C> <C>
4,505,000 5,300,000 6,095,000 7,009,250
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)
Shares used in calculation............................. 4,505,000 5,300,000 6,095,000 7,009,250
Offering price as a percentage of pro forma
stockholders' equity per share.......................... 60.24% 64.89% 68.82% 72.62%
============= ============= ============= ==============
Offering price to pro forma net earnings per share........ 12.99x 14.71x 16.13x 17.54x
============= ============= ============= ==============
</TABLE>
(Notes on following page)
50
<PAGE>
(1) As adjusted to give effect to an increase of up to 15% in the number of
shares offered 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 of the
Association -- Benefits -- Employee Stock Ownership Plan and Trust."
(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 180,200, 212,000,
243,800 and 280,400 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
51
<PAGE>
March 31, 1996 and the year ended December 31, 1995, pro forma net earnings
per share would be $0.16, $0.15, $0.13 and $0.12 at the minimum, midpoint,
maximum and 15% above the maximum of the range, respectively, for the three
months ended March 31, 1996 and $0.74, $0.66, $0.60 and $0.55 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 $16.46, $15.30, $14.44 and $13.69 at the minimum,
midpoint, maximum and 15% above the maximum of the range, respectively, for
the three months ended March 31, 1996 and $16.35, $15.21, $14.36 and $13.62
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 450,500, 530,000, 609,500 and 700,925 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, $0.15, $0.13 and $0.12,
respectively, at the minimum, midpoint, maximum and 15% above the maximum of
the range for the three months ended March 31, 1996 and $0.70, $0.62, $0.56
and $0.52 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 $16.11, $15.01, $14.20 and $13.49,
respectively, at the minimum, midpoint, maximum and 15% above the maximum of
the range for the three months ended March 31, 1996 and $16.00, $14.92,
$14.12 and $13.42, 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."
52
<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
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Interest income:
Loans secured by real estate......................... $5,311,628 $5,462,414 $21,719,506 $23,163,269 $26,407,715
Other loans.......................................... 14,752 14,268 60,009 60,004 90,160
Mortgage-backed securities held to maturity.......... 3,276 3,989 15,131 17,948 24,488
Investment securities held to maturity............... 90,000 90,000 360,000 263,689 279,279
Interest-earning deposits............................ 160,962 130,405 568,537 977,355 632,560
FHLB of Chicago stock................................ 48,736 46,385 201,817 186,586 217,942
---------- ---------- ----------- ----------- -----------
Total interest income............................ 5,629,354 5,747,461 22,925,000 24,668,851 27,652,144
Interest expense: ---------- ---------- ----------- ----------- -----------
Savings deposits..................................... 2,735,951 2,547,846 10,773,428 10,444,459 11,660,777
Borrowed funds....................................... 37,261 -- 76,961 39,424 130,403
---------- ---------- ----------- ----------- -----------
Total interest expense........................... 2,773,212 2,547,846 10,850,389 10,483,883 11,791,180
---------- ---------- ----------- ----------- -----------
Net interest income before provision for loan losses.... 2,856,142 3,199,615 12,074,611 14,184,968 15,860,964
Provision for loan losses............................... 30,000 45,000 180,000 240,000 240,000
---------- ---------- ----------- ----------- -----------
Net interest income after provision for loan losses.. 2,826,142 3,154,615 11,894,611 13,944,968 15,620,964
Noninterest income:
Service fee income................................... 294,642 265,339 1,129,082 1,361,371 1,363,789
Gain on sale of branches............................. -- -- -- 1,683,298 822,381
Gain on sale of real estate owned.................... 17,879 -- -- -- 10,071
Gain on sale of office properties and equipment...... 1,216 -- -- 47,699 --
Other income......................................... 5,057 3,806 21,073 61,135 192,105
---------- ---------- ----------- ----------- -----------
Total noninterest income......................... 318,794 269,145 1,150,155 3,153,503 2,388,346
---------- ---------- ------------ ----------- -----------
Noninterest expense:
Compensation and benefits.......................... 963,495 922,033 3,691,859 4,143,962 4,507,814
Occupancy expense.................................. 379,274 377,041 1,607,595 1,682,715 1,722,084
Federal deposit insurance premiums................. 168,832 180,918 709,346 766,734 688,889
Advertising and promotion.......................... 81,300 83,518 371,421 334,289 329,579
Automated teller machines.......................... 113,766 65,946 313,886 321,269 332,860
Data processing.................................... 252,367 256,556 949,789 858,033 866,806
Other.............................................. 343,706 402,214 1,424,957 1,516,851 1,954,399
---------- ---------- ----------- ----------- -----------
Total noninterest expense........................ 2,302,740 2,288,226 9,068,853 9,623,853 10,402,431
---------- ---------- ----------- ----------- -----------
Income before income taxes and cumulative 842,196 1,135,534 3,975,913 7,474,618 7,606,879
effect of change in accounting principle..............
Income tax expense...................................... 330,264 440,587 1,611,896 3,116,871 2,997,585
---------- ---------- ----------- ----------- -----------
Income before cumulative effect of change in 511,932 694,947 2,364,017 4,357,747 4,609,294
accounting principle..................................
Cumulative effect of change in accounting for income -- -- -- -- 348,742
taxes................................................. ---------- ---------- ----------- ----------- -----------
Net income....................................... $ 511,932 $ 694,947 $ 2,364,017 $ 4,357,747 $ 4,260,552
========== ========== =========== =========== ===========
</TABLE>
53
<PAGE>
See accompanying "Notes to Financial Statements" presented elsewhere in this
Prospectus.
54
<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. During the years ended December 31, 1994 and 1993, the
Association sold branches, which resulted in gains of $1.7 million and $822,000,
respectively. These non-recurring gains represented approximately 22.5% of
income before income tax expense in 1994 and 10.8% in 1993. The Association
does not intend to sell any branches in the foreseeable future. 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.
The Association's business strategy has focused on improving the Association's
profitability and capital position and increasing transactional deposit accounts
and loans made at market rates. Certain steps taken by management to implement
such strategy, including branch sales, have succeeded in increasing the
Association's capital level and reducing its operating expenses, but have also
had the effect of decreasing total assets and total savings deposits. Such
reductions in assets and savings deposits, when combined with the Association's
sensitivity to interest rates, also resulted in a reduction in net income. See
"-- Financial Highlights." In addition, management has determined that paying a
rate higher than market rates to attract deposits and originating loans at rates
below market rates would not be prudent strategies as they would not improve
profitability and the associated asset growth would have a much greater negative
effect by diluting the Association's capital level.
55
<PAGE>
In particular, the effects of management's business strategy as noted above
include the following. Total assets decreased from $347.2 million at December
31, 1992 to $306.7 million at March 31, 1996. This reduction was primarily the
result of branch sales of $17.1 million and $19.4 million in 1993 and 1994,
respectively, which branch sales also resulted in increasing the Association's
capital by $1.5 million and reducing general and administrative expenses. Gross
loans declined from $305.6 million at December 31, 1993 to $274.2 at December
31, 1994. The funds generated from the repayments of loans were primarily used
to fund branch sales. Gross loans declined from $274.2 million at December 31,
1994 to $267.1 million at March 31, 1996. This decline was due to competitive
market conditions and the Association's decision not to offer loan products at
rates below market rates. The Association's savings deposits declined from its
five-year high of $319.0 million at December 31, 1992 to $267.9 million at
December 31, 1994, primarily due to the sale of branches in 1993 and 1994 with
savings deposits totaling $39.9 million. The remainder of the decline was due to
competitive market conditions and the Association's decision not to offer above-
market rates on its savings deposits. Competitive market conditions also account
for the decrease in deposits from $267.9 million at December 31, 1994 to $264.5
million at March 31, 1996. See "Risk Factors -- Potential Impact of Changes in
Interest Rates." The Company intends to utilize proceeds from the Conversion to
implement its business strategy of increasing the origination of high quality
mortgage loans, coupled with increasing transactional deposit accounts, which
management believes could, although there can be no assurance that it would,
reverse the recent trend of decreasing total asset size and reduced levels of
net income.
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 through its Asset/Liability Management
Committee (the "ALCO Committee") which reports to the Association's Board of
Directors on at least a quarterly basis. The ALCO Committee is responsible for
monitoring the interest rate risk position of the Association. In addition, the
ALCO Committee reviews the Association's interest rate risk position to ensure
compliance with the Association's business plan. The ALCO Committee is also
responsible for informing the Board of Directors of regulatory developments
affecting the Association's policy regarding asset and liability management.
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 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
56
<PAGE>
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. Management believes that maintaining a high level of
capital also serves to reduce the effects of the Association's exposure to
interest rate risk, and certain techniques that reduce interest rate risk but
give rise to other forms of risk are not acceptable solutions.
Despite the efforts taken by the Association to seek to reduce its level of
interest rate risk, and the Association's intent to continue to seek to reduce
its exposure to interest rate risk, the Association has remained vulnerable to
increases in interest rates and has experienced reduced levels of net income and
net interest income in 1994, 1995 and for the three months ended March 31, 1996
as a result of the Association's level of interest rate risk, as well as the
Association's reduction in total asset size during those periods. There can be
no assurance that the Association will not continue to experience reduced levels
of net income and net interest income during periods of increasing interest
rates, unless the Association's sensitivity to increases in interest rates is
reduced.
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.
57
<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 (10.82)% (21.91)% (28.83)% (11.36)% (10.64)% 9.56%
as a percent of total assets................
Cumulative total interest-earning assets 49.80% 40.09% 48.04% 83.37% 86.71% 111.30%
as a percent of cumulative total interest-
bearing liabilities.........................
- --------------------
</TABLE>
(1) Loans receivable represents gross loans less net deferred loan fees and
loans in process.
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 (measured in 100 basis point increments). The Association's asset and
liability structure results in a decrease in NPV in a rising interest rate
scenario and an increase in NPV in a declining interest rate scenario. During
periods of rising interest rates, the value of monetary assets declines more
rapidly than the value of monetary liabilities rises. Conversely, during
periods of falling interest rates, the value of monetary assets rises more
rapidly than the value of monetary liabilities declines. However, the amount of
change in value of specific assets and liabilities due to changes in interest
rates is not the same in a rising rate environment as in a falling interest rate
environment (i.e., the amount of value increase under a specific rate decline
may not equal the amount of value decrease under an identical upward interest
rate movement). 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.
58
<PAGE>
<TABLE>
<CAPTION>
NET PORTFOLIO VALUE NPV AS % OF ECONOMIC
VALUE OF ASSETS
CHANGE IN AMOUNT $ % NPV RATIO %
INTEREST RATES CHANGE CHANGE CHANGE (1)
IN BASIS POINTS
(RATE SHOCK)
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
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. The result of being characterized as having "above
normal" interest rate risk is that, upon the effectiveness of the interest rate
risk component of the OTS' risk-based capital requirements, the Association
would be required to hold additional capital with respect thereto. At March 31,
1996, the Association would have had its risk-based capital requirement
increased by $816,000 had the interest rate risk component of the OTS risk-based
capital requirement been in effect at such date. See "Regulation -- Regulation
of Federal Savings Associations -- Capital Requirements."
At March 31, 1996, the Association's Board of Directors had adopted interest
rate risk target limits which established maximum potential decreases in the
Association's NPV of 20%, 40%, 60% and 75% in the event of 1%, 2%, 3% and 4%
immediate and sustained increases in market interest rates, respectively. As
indicated in the table above, at March 31, 1996, the Association was within such
Board-approved limits. The Association's target limits are reviewed by the
Board of Directors regularly and are changed in light of market conditions and
other factors.
Certain shortcomings are inherent in the methods of analysis presented in both
the computation of NPV and in the analysis presented in the prior table setting
forth the maturing and repricing of interest-earning assets and interest-bearing
liabilities. 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 a result, the actual effect of
changing interest rates may differ from that presented in the foregoing tables.
ANALYSIS OF NET INTEREST INCOME
59
<PAGE>
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.
60
<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
--------------- ------------------------------------------ --------------------------------------
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>
(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 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 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 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. $ 2.25% $ 43,066 $ 229 2.13% $ 43,105 $ 236 2.19%
$ 46,134 3.22 17,678 142 3.21 22,114 160 2.89
Money market accounts..
17,790 3.00 65,773 516 3.14 72,630 550 3.03
Passbook accounts......
66,342 5.68 127,401 1,849 5.81 123,677 1,602 5.18
Certificates of deposit 129,318 -- 2,601 37 5.69 -- -- --
Borrowed funds......... --
-------- ------ -------- ------ ------ -------- ------ ------
Total
interest-bearing
liabilities......... 259,584 4.22% 256,519 $2,773 4.32% 261,526 $2,548 3.90%
-------- ------ -------- ====== ------ -------- ====== ------
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
and equity..........
$306,688 $302,761 $304,205
======== ======== ========
Net interest income........
====== ======
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>
__________________
61
<PAGE>
(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.
62
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------
1995 1994 1993
-------------------------------- -------------------------------- --------------------------------
AVERAGE INTEREST AVERAGE AVERAGE INTEREST AVERAGE AVERAGE INTEREST AVERAGE
BALANCE --------- YIELD/ BALANCE --------- YIELD/ BALANCE --------- YIELD/
----------- COST ----------- COST ----------- 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 259,394 10,850 4.18% 292,793 10,484 3.58% 317,614 11,791 3.71%
liabilities........... -------- ------- ------ -------- ------- ------ -------- ------- ------
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.
63
<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. In general,
increases in the volume or amount of interest-bearing liabilities, as well as
increases in the interest rates paid on interest-bearing liabilities, and
decreases in the volume or amount of interest-earning assets, as well as
decreases in the yields earned on interest-earning assets, have the effect of
reducing the Associations's net interest income. Conversely, increases in the
volume or amount of the Association's interest-earning assets, as well as
increases in the yields earned on interest-earning assets, and decreases in the
volume or amount of interest-bearing liabilities, as well as decreases in the
rates paid on interest-bearing liabilities, have the effect of increasing the
Association's net interest income. 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 separately reflect the changes due to the
volume and the changes due to rate.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
COMPARED TO COMPARED TO COMPARED TO
THREE MONTHS ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1995 DECEMBER 31, 199 DECEMBER 31, 1993
--------------------------- ----------------------------- -------------------------------
INCREASE/DECREASE DUE TO
--------------------------------------------------------------------------------------------
VOLUME RATE NET VOLUME RATE NET VOLUME RATE NET
------- --------- ------- --------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Interest-earning assets:
Real estate loans............... $(119) $ (33) $(152) $ (968) $ (473) $(1,441) $(1,821) $(1,427) $(3,248)
Other loans..................... (1) 2 1 (7) 4 (3) (10) (17) (27)
Mortgage-backed securities...... (1) -- (1) (4) 1 (3) (5) (1) (6)
Investment securities........... -- -- -- 91 5 96 (5) (10) (15)
Interest-earning deposits....... 40 (10) 30 (2,119) 1,711 (408) 97 247 344
FHLB of Chicago stock........... (2) 5 3 (5) 20 15 (35) 4 (31)
----- ----- ----- ------- ------ ------- ------- ------- -------
Total...................... $ (83) $ (36) $(119) $(3,012) $1,268 $(1,744) $(1,779) $(1,204) $(2,983)
===== ===== ===== ======= ====== ======= ======= ======= =======
Interest-bearing liabilities:
NOW/Super Now accounts......... $ -- $ (7) $ (7) $ (273) $ 187 $ (86) $ (62) $ (23) $ (85)
Money market accounts.......... (40) 22 (18) (215) 13 (202) (190) (44) (234)
Passbook accounts.............. (55) 21 (34) (515) 25 (490) (41) (50) (91)
Certificates of deposit........ 66 181 247 (6) 1,112 1,106 (516) (290) (806)
Borrowed funds................. 37 -- 37 41 (3) 38 (154) 63 (91)
----- ----- ----- ------- ------ ------- ------- ------- -------
Total..................... $ 8 $ 217 $ 225 $ (968) $1,334 $ 366 $ (963) $ (344) $(1,307)
===== ===== ===== ======= ====== ======= ======= ======= =======
Net change in net interest income.. $ (91) ( 53 ) $(344) $(2,044) $ (66) $(2,110) $ (816) $ (860) $(1,676)
===== ===== ===== ======= ====== ======= ======= ======= =======
</TABLE>
64
<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
65
<PAGE>
of the Association's loan portfolio, asset quality, trends in the Association's
delinquent and non-performing 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.
Management believes that the provision for loan losses and the allowance for
loan losses are reasonable and adequate to cover any known losses and any losses
reasonably expected in the existing loan portfolio. While management estimates
loan losses using the best available information, such as independent appraisals
for significant collateral properties, no assurance can be given that future
additions to the allowance will not be necessary based on changes in economic
and real estate market conditions, further information obtained regarding known
problem loans, identification of additional problem loans and other factors,
both within and outside of management's control. The directors of the
Association and the Company have reviewed the provision for loan losses and the
allowance for loan losses and the assumptions utilized by management as to their
reasonableness and adequacy. See "The Conversion -- Stock Pricing" for a
discussion of RP Financial's slight downward adjustment in the pro forma market
value of the Common Stock as a result of the Association's relatively lower
level of reserves and a higher ratio of risk-weighted assets to assets as
compared to its peer group.
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. Due to a change in the
Association's ATM processors, service fee income and expenses are now accounted
for on a gross basis as a part of both noninterest income and noninterest
expense. 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 as a part of both
noninterest income and noninterest expense. 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. See "The Conversion -- Stock Pricing" for a
discussion of RP Financial's slight downward adjustment in the pro forma market
value of the Common Stock due to the Association's relatively higher level of
operating expenses as compared to its peer group.
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
66
<PAGE>
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. Net income
before the gain on sale of branches in 1994 would have been $3.4 million. Net
income for the year ended December 31, 1995 decreased $1.0 million or 29.4% from
1994 levels excluding the gain on sale of branches.
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 $19.4 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.
67
<PAGE>
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, improving asset quality, a slightly smaller loan
portfolio, 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. Management believes that the provision
for loan losses and the allowance for loan losses are reasonable and adequate to
cover any known losses and any losses reasonably expected in the existing loan
portfolio. While management estimates loan losses using the best available
information, such as independent appraisals for significant collateral
properties, no assurance can be given that future additions to the allowance
will not be necessary based on changes in economic and real estate market
conditions, further information obtained regarding known problem loans,
identification of additional problem loans and other factors, both within and
outside of management's control. The directors of the Association and the
Company have reviewed the provision for loan losses and the allowance for loan
losses and the assumptions utilized by management as to their reasonableness and
adequacy. See "The Conversion -- Stock Pricing" for a discussion of RP
Financial's slight downward adjustment in the pro forma market value of the
Common Stock as a result of the Association's relatively lower level of reserves
and a higher ratio of risk weighted assets to assets as compared to its peer
group.
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 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. See
"The Conversion -- Stock Pricing" for a discussion of RP Financial's slight
downward adjustment in the pro forma market value of the Common Stock due to the
Association's relatively higher level of operating expenses as compared to its
peer group.
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
68
<PAGE>
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. Net
income for the year ended December 31, 1994 excluding the gain on sale of
branches was $3.4 million. Net income for the year ended December 31, 1993
excluding the gain on sale of branches and the impact of change in accounting
for income taxes was $4.1 million, a decrease of $700,000, or 20.6%.
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.
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.
Although asset quality improved slightly, uncertainty relative to the local
economy required management to provide for additional loan losses. 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.
Management believes that the provision for loan losses and the allowance for
loan losses are reasonable and adequate to cover any known losses and any losses
reasonably expected in the existing loan portfolio. While management estimates
loan losses using the best available information, such as independent appraisals
for significant collateral properties, no assurance can be given that future
additions to the allowance will not be necessary based on changes in economic
and real estate market conditions, further information obtained regarding known
problem loans, identification
69
<PAGE>
of additional problem loans and other factors, both within and outside of
management's control. The directors of the Association and the Company have
reviewed the provision for loan losses and the allowance for loan losses and the
assumptions utilized by management as to their reasonableness and adequacy.
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. Cash flows
from operating activities amounted to $600,000 and $400,000 for the three months
ended March 31, 1996 and 1995, respectively, and $1.7 million, $4.5 million and
$5.3 million for the years ended December 31, 1995, 1994 and 1993, respectively.
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. Management believes it will have adequate resources to
fund all commitments on a short term and long term basis in accordance with its
business strategy.
70
<PAGE>
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 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. Cash flows provided by investing activities amounted
to $3.5 million for the three months ended March 31, 1996 and $2.8 million and
$25.4 million for the years ended December 31, 1995 and 1994, respectively. Cash
flows used in investing activities amounted to $100,000 for the three months
ended March 31, 1995, and $6.9 million for the year ended December 31, 1993.
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. Management
does not expect savings deposits to continue to decrease in the future other
than the deposit decrease that may be experienced as a result of depositors
purchasing Common Stock of the Company with the use of deposits. In fact,
management expects some growth of deposits in the future although no assurance
can be given that such growth will occur. Steps that management has taken to
seek to increase transaction accounts have included the opening of additional
drive-up lanes at the Bartlett branch office and providing drive-up lanes for
the first time at the new South Elgin branch office, which is expected to open
in the fall of 1996. The growth is expected to have a positive effect on the
financial condition, liquidity and operations of the Association. See "Business
of the Association -- Sources of Funds --Savings Deposits" for a discussion of
the Association's level of certificate of deposit accounts.
Cash flows provided by financing activities amounted to $1.6 million for the
three months ended March 31, 1996. Cash used in financing activities amounted
to $1.7 million for the three months ended March 31, 1995, and $4.2 million,
$31.3 million and $17.0 million for the years ended December 31, 1995, 1994 and
1993, respectively.
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" for a
reconciliation of GAAP capital to regulatory capital.
71
<PAGE>
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 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 65"). 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
72
<PAGE>
standards for stock-based employee compensation plans. SFAS 123 permits the
Company 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. The Company expects to account for its stock-based
compensation arrangements as prescribed in APB Opinion 25 upon the consummation
of the Conversion.
In June 1996, the FASB issued Statement of Financial Accounting Standards No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("SFAS 125"), which supersedes FASB Statements
No. 76, "Extinguishments of Debt," and No. 77, "Reporting by Transferors for
Transfers of Receivables with Recourse." This statement amends FASB Statement
No. 115, "Accounting for Certain Investments in Debt and Equity Securities," and
amends and extends to all servicing assets and liabilities, the accounting
standards for mortgage servicing rights now set forth in SFAS 65, and supersedes
SFAS 122. SFAS 125 provides accounting and reporting standards for transfers
and servicing of financial assets and extinguishments of liabilities. After a
transfer of financial assets, an entity recognizes the financial and servicing
assets it controls and the liabilities it has incurred, derecognizes financial
assets when control has been surrendered and derecognizes liabilities when
extinguished. SFAS 125 provides consistent standards for distinguishing
transfers of financial assets that are sales from transfers that are secured
borrowings. A transfer of financial assets in which the transferor surrenders
control over those assets is accounted for as a sale to the extent that
consideration other than beneficial interests in the transferred assets is
received in exchange.
SFAS 125 further requires that liabilities and derivatives incurred or
obtained by transferors as part of a transfer of financial assets be initially
measured at fair value, if practicable. It also requires that servicing assets
and other retained interests in the transferred assets be measured by allocating
the previous carrying amount between the assets sold, if any, and retained
interests, if any, based on their relative fair values on the date of the
transfer. SFAS 125 also requires that servicing assets and liabilities be
subsequently measured by (a) amortization in proportion to and over the period
of estimated net servicing income or loss and (b) assessment for asset
impairment or increased obligation based on their fair values. SFAS 125
requires that debtors reclassify financial assets pledged as collateral and that
secured parties recognize those assets and their obligation to return them to
certain circumstances in which the secured party has taken control of those
assets. SFAS 125 requires that a liability be derecognized if and only if
either (i) the debtor pays the creditor and is relieved of its obligation for
the liability or (ii) the debtor is legally released from being the primary
obligor under the liability either judicially or by the creditor. Therefore, a
liability is not considered extinguished by an in-substance defeasance.
73
<PAGE>
SFAS 125 is effective for transfers and servicing of financial assets
and extinguishments of liabilities occurring after December 31, 1996, and is to
be applied prospectively. Earlier or retroactive application is not permitted.
Management of the Association has not evaluated the impact, if any, of the
adoption of SFAS 125 on the Association's financial condition or results of
operations.
74
<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.
75
<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.
76
<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.
77
<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 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 483 0.18 627 0.23 576 0.21 631 0.21
by savings and time
deposits)..............
Consumer installment 82 0.03 92 0.03 100 0.04 120 0.04
loans...................
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 798 0.27 775 0.29
by savings and time
deposits)..............
Consumer installment 134 0.04 150 0.06
loans...................
Home improvement loans... 17 0.01 58 0.01
-------- ----- -------- ------
Total other loans..... 949 0.32 983 0.36
-------- ----- -------- ------
Gross loans...... $293,602 00.00% $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>
78
<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
------------ ---------- ------------ ---------- ----- ---------
<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>
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
------------ ---------- ---------
<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.
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.
79
<PAGE>
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
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 FOR THE YEAR ENDED DECEMBER 31,
ENDED MARCH 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>
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.
80
<PAGE>
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 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.
81
<PAGE>
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 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
82
<PAGE>
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 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.
83
<PAGE>
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. 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.
84
<PAGE>
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
-------- ---------- -------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
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)....... ====== ====== ====== ======
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)
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.
85
<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. The Asset
Classification Committee provides the Association's Board of Directors with a
quarterly assessment of asset quality. 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. During the three months ended March 31, 1996 and
1995, the amounts of additional interest income that would have been recorded on
non-accrual loans, had they been current, totaled $88,000 and $86,000,
respectively, and for the years ended December 31, 1995, 1994, and 1993 totaled
$81,000, $83,000 and $191,000 respectively. These amounts were not included in
interest income for the respective periods. 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). Other loans which may be potential
problems are designated by management as special mention, and such loans totaled
$701,000 at March 31, 1996. See "-- Classified Assets."
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
---------- -------- -------- -------- -------- --------
<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>
86
<PAGE>
- ------------
(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
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.
87
<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. See "The
Conversion -- Stock Pricing" for a discussion of RP Financial's slight downward
adjustment in the pro forma market value of the Common Stock as a result of the
Association's relatively lower level of reserves and a higher ratio of risk-
weighted assets to assets as compared to its peer group. 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
88
<PAGE>
condition and earnings at that time. Management believes that the provision for
loan losses and the allowance for loan losses are reasonable and adequate to
cover any known losses and any losses reasonably expected in the existing loan
portfolio. While management estimates loan losses using the best available
information, such as independent appraisals for significant collateral
properties, no assurance can be given that future additions to the allowance
will not be necessary based on changes in economic and real estate market
conditions, further information obtained regarding known problem loans,
identification of additional problem loans and other factors, both within and
outside of management's control. The directors of the Association and the
Company have reviewed the provision for loan losses and the allowance for loan
losses and the assumptions utilized by management as to their reasonableness and
adequacy.
89
<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
---------- ---------- ---------- ---------- ---------- ---------- ----------
<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.
90
<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)
Mortgage loans:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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>
91
<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.
92
<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 FOR THE YEAR ENDED DECEMBER 31,
MARCH 31, ----------------------------------
----------------------------
1996 1995 1995 1994 1993
------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
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
--------- ------- --------- ------- --------- ------- --------- -----
<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>
93
<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
-----------------------------
AMORTIZED FAIR WEIGHTED
COST VALUE AVERAGE
--------- ------- RATE
---------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
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.
94
<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
--------------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
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
deposits........................... $ 4,513 $ (7,966) $ (25,994) $(25,039)
========= ========= ========= ========
</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
-------- -------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
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>
95
<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 MARCH 31, 1996
------------------------------
PERCENT
OF WEIGHTED
TOTAL AVERAGE
AMOUNT DEPOSITS RATE
-------- -------- --------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
NOW/Super NOW accounts..... $ 46,134 17.5% 2.25%
Money market accounts...... 17,790 6.7 3.22
Passbook accounts.......... 66,342 25.1 3.00
Certificates of deposit.... 129,318 48.9 5.68
Noninterest bearing 4,901 1.8 --
NOW accounts.............. -------- ------- ------
Totals................ $264,485 100.00% 4.14
======== ======= ======
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------------------------------------------------------------
1995 1994 1993
------------------------------ -------------------------------- -------------------------------
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..... $ 45,001 17.3% 2.25% $ 48,834 18.2% 2.25% $ 54,836 18.7% 2.25%
Money market accounts...... 17,684 6.8 3.22 23,545 8.8 3.22 30,348 10.3 2.85
Passbook accounts.......... 65,261 25.1 3.04 74,524 27.8 3.00 85,690 29.1 3.00
Certificates of deposit.... 126,847 48.8 5.89 121,035 45.2 4.46 123,058 41.9 4.73
Noninterest bearing 5,179 2.0 -- -- -- -- -- -- --
NOW accounts.............. -------- ------ ---- -------- ------ ---- -------- ------ ----
Totals................ $259,972 100.00% 4.25% $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
- -------------------- ---------- ------------ ---------- --------- --------- --------- ---------
<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>
96
<PAGE>
Certificates of deposit have increased $8.3 million from $121.0 million or
45.2% of total savings deposits at December 31, 1994 to $129.3 million or 48.9%
of total savings deposits at March 31, 1996. During this same period, passbook
accounts decreased $8.2 million from $74.5 million or 27.8% of total savings
deposits at December 31, 1994 to $66.3 million or 25.1% of total savings
deposits at March 31, 1996. This change was due primarily to the increase in
market interest rates of certificates of deposit and the migration of funds from
lower paying passbook accounts to higher paying certificates of deposit in
periods of rising interest rates. As part of the Association's business
strategy, management's goal is to increase the number and amount of transaction
accounts. Steps taken by management have included the opening of additional
drive-up lanes at the Bartlett branch office and providing drive-up lanes for
the first time at the new South Elgin branch office, which is expected to open
in the fall of 1996. Management believes these steps will help attract
additional transaction accounts.
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 -- Regulation of Federal Savings Associations
- -- 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 AT OR FOR THE
MONTHS YEAR ENDED DECEMBER 31,
ENDED MARCH 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................ 2,601 -- 1,250 583 3,583
Balance outstanding at end of period....... -- -- 4,000 -- 7,000
Weighted average interest rate during the
period................................... 5.69% -- 6.16% 6.69% 3.63%
Weighted average interest rate at end of
period................................... -- -- 5.31 -- 3.24
</TABLE>
97
<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
--------- --------- -----------------
<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.
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
98
<PAGE>
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 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.
99
<PAGE>
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 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.
100
<PAGE>
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 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.
101
<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 the Association 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
102
<PAGE>
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's
lending policy limits loans to any one borrower to an aggregate of $1 million.
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-weighted
assets. In determining compliance with the risk-based capital requirement, a
savings association must compute its risk-weighted 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
103
<PAGE>
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.
The OTS has promulgated a regulation that requires a savings association with
"above normal" interest rate risk, when determining compliance with its risk-
based capital requirement, to hold additional capital to account for its "above
normal" interest rate risk. Pending the resolution of related regulatory
issues, the OTS has deferred enforcement of this regulation. 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
--------- -------- ---------------- -------------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Tangible capital....................................... $37,195 12.04% $ 4,634 1.50% $32,561 10.54%
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
A reconciliation between regulatory capital and
GAAP capital at March 31, 1996 is presented below:
TANGIBLE CAPITAL CORE CAPITAL RISK-BASED CAPITAL
---------------- ------------- ------------------
(IN THOUSANDS)
GAAP capital........................................... $37,195 $37,195 $ 37,195
Allowance for loan losses includable
in supplementary capital............................. -- -- 856
------- ------------- -----------
Regulatory capital..................................... $37,195 $37,195 $ 38,051
======= ============= ===========
</TABLE>
104
<PAGE>
Limitation on Capital Distributions. OTS regulations currently impose
limitations upon capital distributions by a savings association, 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 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 capital
distributions by 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
105
<PAGE>
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 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% shareholders, 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
106
<PAGE>
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 or accountant who knowingly or recklessly participates in any
violation of applicable law or regulation or 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.
107
<PAGE>
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 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
108
<PAGE>
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.
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
109
<PAGE>
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."
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 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
110
<PAGE>
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 the 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.
The 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 the 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. The 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 or (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
111
<PAGE>
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.
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."
112
<PAGE>
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 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."
113
<PAGE>
MANAGEMENT OF THE ASSOCIATION
DIRECTORS
The following table sets forth certain information regarding the Board of
Directors of the Association.
<TABLE>
<CAPTION>
POSITIONS HELD WITH THE TERM
NAME AGE(1) ASSOCIATION DIRECTOR SINCE EXPIRES
- --------------------- ------ ------------------------ -------------- -------
<S> <C> <C> <C> <C>
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
</TABLE>
- --------------------
(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.
114
<PAGE>
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
115
<PAGE>
meetings of the Board. The Executive Committees will meet periodically to review
and monitor operating 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.
In addition to the committees of the Boards of Directors of the Association
listed above, the Association also maintains an Asset/Liability Management
Committee, which consists of Messrs. Dolan, Moran and Towe and Ms. Schroeder
(see "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Management of Interest Rate Risk") and an Asset Classification
Committee, which consists of Messers. Moran, Dolan and Towe (see "Business of
the Association -- Delinquencies and Non-Performing Assets -- Non-Performing
Assets" and "-- Classified Assets").
DIRECTORS' COMPENSATION
Fee Arrangements. Currently, each director of the Association, other than
Messrs. Perucco and Dolan, receives an annual retainer of $26,460 for attendance
at board meetings. The aggregate amount of fees paid to such directors by the
Association for the year ended December 31, 1995 was approximately $151,000. 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."
116
<PAGE>
EXECUTIVE COMPENSATION
Compensation Decisions. Decisions regarding the Company's executive
compensation will be made by the Company's Board of Directors, exclusive of
those directors employed by the Company, acting as a compensation committee.
Under this structure, no interlocks exist between members of the compensation
committee and employees of the Company.
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 $100,000 (the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------------------
ANNUAL COMPENSATION(1) AWARDS PAYOUTS
--------------------------------- -------------------------------------------
OTHER RESTRICTED
ANNUAL STOCK LTIP ALL OTHER
NAME AND PRINCIPAL COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
POSITIONS YEAR SALARY($) BONUS($) ($)(2) ($)(3) (#)(3) ($)(3) ($)(4)
- ----------------------------------------- ---- -------- ------- ------------- ---------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George L. Perucco, President and
Chief Executive Officer................. 1995 $204,433 -- 2,884 -- -- -- $ 734
Lyle N. Dolan, Executive Vice
President and Treasurer............... 1995 $128,336 -- 4,635 -- -- -- $1,430
Kenneth L. Moran, Senior Vice
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.
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
117
<PAGE>
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. 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.
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
118
<PAGE>
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. 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.
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
119
<PAGE>
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 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. 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 $570,000. 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. 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.
120
<PAGE>
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:
<TABLE>
<CAPTION>
YEARS OF SERVICE AT RETIREMENT
------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 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
</TABLE>
(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.
<TABLE>
<CAPTION>
AVERAGE
YEARS OF CREDITED SERVICE ANNUAL EARNINGS
------------------------- ---------------
YEARS MONTHS
----------- ------------
<S> <C> <C> <C>
Mr. Perucco.. 33 6 $150,000
Mr. Dolan.... 25 0 128,000
Mr. Moran.... 25 0 105,000
</TABLE>
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%
121
<PAGE>
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.
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, at the
open market or otherwise, 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 (which meeting is currently
anticipated to be held during March 1997). 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.
122
<PAGE>
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
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
123
<PAGE>
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 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-executing 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
124
<PAGE>
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 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.
125
<PAGE>
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 0.44% 20,000 0.33%
Lyle N. Dolan.......... 100,000 10,000 0.22 10,000 0.16
Orval M. Graening...... 200,000 20,000 0.44 20,000 0.33
Thomas S. Rakow........ 200,000 20,000 0.44 20,000 0.33
Henry R. Hines......... 100,000 10,000 0.22 10,000 0.16
Donald G. Laird........ 50,000 5,000 0.12 5,000 0.09
Leigh C. O'Connor...... 75,000 7,500 0.17 7,500 0.12
Richard S. Scheflow.... 30,000 3,000 0.07 3,000 0.05
Kenneth L. Moran....... 10,000 1,000 0.02 1,000 0.01
David G. Towe.......... 100,000 10,000 0.22 10,000 0.16
Raymond G. Bandemer.... 150,000 15,000 0.33 15,000 0.25
Kathleen A. Schroeder.. 100,000 10,000 0.22 10,000 0.16
Pat A. Lenart.......... 50,000 5,000 0.12 5,000 0.09
---------- ------- ---- ------- ----
All directors and
executive officers
as a group............ $1,365,000 136,500 3.03% 136,500 2.24%
========== ======= ==== ======= ====
</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."
126
<PAGE>
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
127
<PAGE>
Other Members. The Plan also provides that shares not subscribed for in the
Subscription Offering may be 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
$45.1 million and $61.0 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 Board of Directors of the Association received information about various
types of benefit plans typically utilized by public companies in general and
implemented by converting thrift institutions in particular. Management
reviewed the anticipated costs of establishing a customary program of benefits
and the anticipated positive effects of such programs on the Company.
Management determined that such benefit plans significantly enhance the ability
of a public company to retain and attract executives of the caliber needed to
run a successful public company, to maintain their dedication and loyalty in
change in control situations and to align their interests with those of the
Company's stockholders. Ultimately, the Board of Directors concluded that the
cost of establishing and maintaining these benefit plans, coupled with the
savings to be recognized in future periods as a result of the termination of the
Association's pension plan, would be justified by the foregoing positive effects
on the Company.
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
128
<PAGE>
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 $59.2 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
$45,050,000 to a maximum of $60,950,000 (see "Pro Forma Data" for the basis of
this assumption) and assuming that $29.6 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 18.10%
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 tangible and core capital to adjusted assets, on a pro
forma basis, each will increase to 24.87% 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
129
<PAGE>
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
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
130
<PAGE>
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, 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, 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. THE OPINION OF THACHER PROFFITT & WOOD HAS BEEN FILED AS AN EXHIBIT
TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART.
131
<PAGE>
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. The opinion of KPMG Peat Marwick LLP
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
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, 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. IN APPRAISING THE PRO FORMA
MARKET VALUE OF THE COMMON STOCK, RP FINANCIAL DISCOUNTED THE VALUE OF THE
COMMON STOCK RELATIVE TO THE STOCK OF THE INSTITUTIONS IN THE ASSOCIATION'S
COMPARATIVE GROUP (i.e., OTHER PUBLICLY-TRADED THRIFTS WITH ASSETS BETWEEN $150
MILLION TO $750 MILLION LOCATED IN ILLINOIS AND NEIGHBORING STATES) AS A RESULT
OF THE ASSOCIATION'S (i) RELATIVELY LOWER LEVEL OF RESERVES AND HIGHER RATIO OF
RISK-WEIGHTED ASSETS TO ASSETS; (ii) RELATIVELY LOWER REPORTED EARNINGS
ATTRIBUTABLE TO A HIGHER LEVEL OF OPERATING EXPENSES; AND (iii) RELATIVELY LOWER
LEVEL OF CORE EARNINGS.
132
<PAGE>
On the basis of the foregoing, RP Financial has advised the Company and the
Association that, in its opinion, dated June 7 and updated July 19, 1996, the
estimated pro forma market value of the Common Stock ranged from a minimum of
$45,050,000 to a maximum of $60,950,000 with a midpoint of $53,000,000. 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 $45.1 million to $61.0 million, with a midpoint of
$53.0 million, and the Company expects to issue between 4,505,000 and 6,095,000
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 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 7,009,250 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 7,009,250 shares or no less than 4,505,000
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
133
<PAGE>
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."
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.
134
<PAGE>
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 4,505,000 or greater than 6,095,000 (or 7,009,250 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."
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."
135
<PAGE>
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.
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 to the extent necessary to fulfill the
ESOP's subscription, 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 360,400 shares and 487,600 shares, based on the
issuance of 4,505,000 shares and 6,095,000, 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
136
<PAGE>
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%.
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.
137
<PAGE>
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.
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, ALTHOUGH NO SUCH
INSTITUTIONAL INVESTORS HAVE BEEN SELECTED.
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.
138
<PAGE>
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 in the
Community Offering and in the Syndicated 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 of a Syndicated
Community Offering, Hovde will negotiate with the Company for the receipt of an
additional fee to be remitted to selected dealers under one or more selected
dealer agreements to be entered into by Hovde with certain dealers; provided,
however, that the aggregate fees payable to Hovde (which represent the 1.5% fee
referenced above and the fees to be remitted to selected dealers) in connection
with any Syndicated Community Offering will not exceed 7% of the aggregate
Purchase Price of the Common Stock sold in the Syndicated Community Offering.
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 $601,000 and $821,000 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.
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
139
<PAGE>
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
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
140
<PAGE>
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 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
141
<PAGE>
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 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.
142
<PAGE>
PUBLIC OFFERING ALTERNATIVE
THE COMPANY ANTICIPATES THAT THE SHARES OF COMMON STOCK WILL BE SOLD IN THE
SUBSCRIPTION OFFERING AND, IF NECESSARY, IN THE COMMUNITY OFFERING. HOWEVER,
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. IF THE PUBLIC OFFERING IS UTILIZED,
THEN THE COMPANY WILL AMEND THE REGISTRATION STATEMENT, OF WHICH THIS PROSPECTUS
IS A PART, TO REFLECT THE SPECIFIC TERMS OF SUCH PUBLIC OFFERING ALTERNATIVE,
INCLUDING, WITHOUT LIMITATION, THE TERMS OF ANY UNDERWRITING AGREEMENTS,
COMMISSION STRUCTURE AND PLAN OF DISTRIBUTION.
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 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;
143
<PAGE>
(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. IT IS CURRENTLY ANTICIPATED THAT THE OVERALL MAXIMUM PURCHASE
LIMITATION MAY BE INCREASED IF, AFTER A COMMUNITY OFFERING, THE COMPANY HAS NOT
RECEIVED SUBSCRIPTIONS FOR A MINIMUM OF 4,505,000 SHARES OF COMMON STOCK. 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 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.
144
<PAGE>
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. IT IS NOT CURRENTLY ANTICIPATED THAT THE
MAXIMUM PURCHASE LIMITATION WILL BE DECREASED. 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 to the insider trading rules promulgated pursuant to the
Exchange Act and any other applicable requirements of the federal securities
laws.
145
<PAGE>
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.
146
<PAGE>
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 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
147
<PAGE>
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
AMENDMENT 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.
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 RESOLUTION OF AT LEAST THREE-FOURTHS OF 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
148
<PAGE>
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 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 2.2% 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 23.1% 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
149
<PAGE>
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 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
150
<PAGE>
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 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."
151
<PAGE>
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 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 unissued
shares of Preferred Stock 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)
152
<PAGE>
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 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 6,095,000 shares of Common Stock (or 7,009,250 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.
153
<PAGE>
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.
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.
154
<PAGE>
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 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
155
<PAGE>
to time determine. The Board of Directors can, without shareholder approval,
issue preferred stock with voting, dividend, liquidation and conversion rights.
156
<PAGE>
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is HARRIS
TRUST AND SAVINGS BANK.
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.
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.
157
<PAGE>
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 UPON WRITTEN OR TELEPHONIC REQUEST.
----------------------------------
MARKED TO SHOW CHANGES FROM UNUSUAL FORMATTING DUE TO
PROSPECTUS FILED JUNE 13, 1996 158 COMPUTER BLACKLINING
<PAGE>
INDEX TO FINANCIAL STATEMENTS
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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 ........................................ 44
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
</TABLE>
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>
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.
Chicago, Illinois
March 8, 1996, except for note 14,
as to which the date is June 6, 1996
F-2
(Continued)
<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
- ------------------------------------------------------------------------------------------
Total assets $ 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)
- ------------------------------------------------------------------------------------------
Total liabilities and retained earnings $ 306,687,655 $ 304,520,444 $ 306,956,144
- ------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
(Continued)
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 $ 4,357,747 $ 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 premiums 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)
Repayment of 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. Estimated useful lives used in calculating depreciation
and amortization expense range from 3 years to 50 years.
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
================================================================================
</TABLE>
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.
<TABLE>
<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>
March 31, December 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
- ------------------------------------------------------------------------------
Activity in the reserve for uncollected interest is summarized as
follows:
- ------------------------------------------------------------------------------
Three month ended Year ended
March 31, December 31,
----------------- ----------------------------
1996 1995 1995 1994 1993
- ------------------------------------------------------------------------------
Balance at begining
of year $ 97,420 $ 197,984 $ 197,984 $ 237,954 $ -
Change in reserve for
for uncollected
interest (1,095) - (100,564) (39,970) 252
Allocation from
allowance for loan
losses - - - - 237,702
- ------------------------------------------------------------------------------
Balance at end of year $ 96,325 $ 197,984 $ 97,420 $ 197,984 $237,954
- ------------------------------------------------------------------------------
(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.
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. These savings
deposits are not insured by the Federal Deposit Insurance Corporation.
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
- --------------------------------------------------------------------------------
HOME FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ELGIN
(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
===========================================================================================
<CAPTION>
Year ended December 31,
------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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:
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
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
=============================================================================
</TABLE>
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
- ---------------------------------------------------
$169,000
===================================================
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 litigation, both
individually and in the aggregate, 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.
(Continued)
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.. 16
Recent Developments................................... 18
Risk Factors.......................................... 24
Home Bancorp of Elgin, Inc............................ 32
Home Federal Savings and Loan Association of Elgin.... 32
Use of Proceeds....................................... 34
Dividend Policy....................................... 35
Market for the Common Stock........................... 36
Regulatory Capital Compliance......................... 37
Capitalization........................................ 38
Pro Forma Data........................................ 39
Home Federal Savings and Loan Association of Elgin
Statements of Earnings.............................. 44
Management's Discussion and Analysis
of Financial Condition and Results of Operations.... 45
Business of the Company............................... 62
Business of the Association........................... 63
Federal and State Taxation............................ 85
Regulation............................................ 88
Management of the Company............................. 98
Management of the Association......................... 100
The Conversion........................................ 113
Restrictions on Acquisition of the Company
and the Association................................. 132
Description of Capital Stock of the Company........... 138
Description of Capital Stock of the Association....... 139
Transfer Agent and Registrar.......................... 141
Experts............................................... 141
Legal and Tax Opinions................................ 141
Additional Information................................ 141
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.
------------------------------------------
6,095,000 SHARES
HOME BANCORP OF ELGIN, INC.
(PROPOSED HOLDING COMPANY FOR
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN)
COMMON STOCK
------------------------------------------
PROSPECTUS
------------------------------------------
HOVDE SECURITIES, INC.
AUGUST __, 1996
------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
<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.
<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.
<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
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 Opinion of Thacher Proffitt & Wood regarding legality
8.1 Opinion of Thacher Proffitt & Wood regarding federal taxation
8.2 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
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
<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
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
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
21.1 Subsidiaries of the Registrant/*/
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Thacher Proffitt & Wood/*/
23.3 Consent of RP Financial, LC.
24.1 Powers of Attorney (Included in Signature Page of the
Registration Statement)/*/
27.1 Financial Data Schedule (Submitted only with filing in electronic
format)/*/
99.1 Appraisal Report of RP Financial, LC., dated June 7, 1996/*/
99.2 Form of Marketing Materials to be used in connection with the
Offerings
99.3 Updated Appraisal Report of RP Financial, LC., dated July 19,
1996
______________
/*/ Previously filed
<PAGE>
(b). FINANCIAL STATEMENT SCHEDULES.
All schedules have been omitted as not applicable or not required under the
rules of Regulation S-
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
<PAGE>
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.
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Amendment No. 1 to Registration Statement No.
333-05909 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Elgin, State of Illinois, on July 26, 1996.
HOME BANCORP OF ELGIN, INC.
By: /s/ George L. Perucco
-----------------------
George L. Perucco
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to Registration Statement No. 333-05909 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 July 26, 1996
- ----------------------- Executive Officer
George L. Perucco (Principal executive officer)
/s/ Lyle N. Dolan Executive Vice President and July 26, 1996
- ----------------------- Treasurer (Principal financial
Lyle N. Dolan and accounting officer)
* Director July 26, 1996
- -----------------------
Orval M. Graening
* Director July 26, 1996
- -----------------------
Henry R. Hines
* Director July 26, 1996
- -----------------------
Donald E. Laird
* Director July 26, 1996
- -----------------------
Leigh O'Connor
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name Title Date
- ----------------------- ------------------------------- -------------
<S> <C> <C>
* Director July 26, 1996
- -----------------------
Thomas S. Rakow
* Director July 26, 1996
- -----------------------
Richard S. Scheflow
</TABLE>
* By /s/ George L. Perucco (George L. Perucco) as attorney-in fact
---------------------
pursuant to Power of Attorney filed on June 13, 1996, included in Part II of the
Registration Statement.
<PAGE>
EXHIBIT 1.2
HOME BANCORP OF ELGIN, INC.
6,095,000 SHARES
(anticipated maximum)
(subject to increase to up to 7,009,250
shares in the event of an oversubscription)
COMMON STOCK
($.01 Par Value)
AGENCY AGREEMENT
----------------
______________, 1996
Hovde Securities, Inc.
1826 Jefferson Place, N..
Washington, D.C. 20036
Home Bancorp of Elgin, Inc., a Delaware corporation (the "Company"), and
Home Federal Savings and Loan Association of Elgin, a federally chartered mutual
savings association ( the "Association"), hereby confirm their agreement with
Hovde Securities, Inc. ("Hovde"), and Hovde hereby confirms its obligations with
respect to the sale of up to 6,095,000 shares (the "Shares") of common stock,
par value $.01 per share, of the Company (the "Common Stock"), as follows:
1. Introduction. On April 18, 1996 the Board of Directors of the
------------
Association adopted a plan of conversion (as amended and restated on June 6,
1996, the "Plan of Conversion"), which provides for the conversion of the
Association from a federal mutual savings association to a federal stock savings
association and the issuance of all of the Association's outstanding stock to
the Company (the "Conversion"). The Conversion will be accomplished through the
adoption by the Association of a new federal stock charter which authorizes the
issuance of capital stock. The Association will issue all of its outstanding
stock to the Company and will thereby become a wholly owned subsidiary of the
Company.
The Association has filed an application for conversion on Form AC,
including a proxy statement, prospectus, exhibits, and all amendments and
supplements required to be filed with respect thereto to the date hereof (as so
amended and supplemented, the "Form AC"), with the Office of Thrift Supervision
(the "OTS") for approval of the Conversion. The Form AC includes, among other
things, the Association's Plan of Conversion and the Association's proxy
statement for the Special Meeting of the Association's members to approve the
Plan of
<PAGE>
Conversion to be held on ____________, 1996 (the "Proxy Statement") and the
Prospectus (defined below). Pursuant to the terms and provisions of the Plan of
Conversion, non-transferable rights to subscribe ("Subscription Rights") for an
aggregate of up to 6,095,000 shares (subject to increase to up to 7,009,250
shares in the event of an oversubscription) of the Common Stock (the
"Subscription Offering") have been granted, in the following priority, to: (i)
the depositors of the Association with aggregate account balances of $50 or more
as of March 31, 1995 ("Eligible Account Holders" and "Eligibility Record Date",
respectively); (ii) the Employee Stock Ownership Plan of the Company (the
"ESOP"); (iii) the depositors of the Association with aggregate account balances
of $50 or more as of June 30, 1996 (other than depositors who otherwise qualify
as Eligible Account Holders or depositors who are directors or officers of the
Association or their Associates, as defined in the Prospectus (as hereinafter
defined)) ("Supplemental Eligible Account Holders" and "Supplemental Eligibility
Record Date," respectively); and (iv) depositors of the Association as of
____________________, 1996, other than Eligible Account Holders and Supplemental
Eligible Account Holders, and borrowers of the Association as of ____________,
1996 ("Other Members" and "Voting Record Date," respectively). Shares of Common
Stock not subscribed for in the Subscription Offering may be offered in a
direct community offering to members of the general public, with a first
preference to natural persons residing in Kane, DuPage and McHenry counties in
Illinois (the "Local Community") on the Voting Record Date (the "Community
Offering," and together with the Subscription Offering, as each may be extended
or reopened from time to time, the "Subscription and Community Offering"). Any
Shares not subscribed for in the Subscription and Community Offering may be
offered, subject to Section 3 hereof, to the general public in a syndicated
community offering (the "Syndicated Community Offering"). It is acknowledged
that the number of Shares to be sold in the Conversion may be increased or
decreased as described in the Prospectus (as hereinafter defined); that the
purchase of Shares in the Subscription and Community Offering is subject to
maximum and minimum purchase limitations as described in the Prospectus; and
that the Company and Association may reject, in whole or in part, any
subscription received in the Community Offering. If the number of Shares is
increased or decreased in accordance with the Plan of Conversion, the term
"Shares" shall mean such greater or lesser number where applicable.
Concurrently with the execution of this Agreement, the Company is
delivering to Hovde copies of the Prospectus dated ___________, 1996 of the
Company to be used in the Subscription Offering and Community Offering (if any),
and, if necessary, will deliver copies of the Prospectus or prospectus
supplement for use in a Syndicated Community Offering and/or Public Offering, as
defined in the Prospectus (as hereinafter defined).
2. Representations and Warranties of the Company and the Association. The
-----------------------------------------------------------------
Company and the Association hereby jointly and severally represent and warrant
to Hovde that:
(a) The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including exhibits, and pre-effective
amendment[s] thereto, on Form S-1 (No. 333-05909), including a prospectus, for
the registration of the Shares under the Securities Act of 1933, as amended (the
"1933 Act"), in the form heretofore delivered to Hovde; such registration
statement has become effective under the 1933 Act; and no order has been issued
by the Commission or any applicable state regulatory authority preventing or
2
<PAGE>
suspending the use of the Prospectus with respect thereto and no proceedings
regarding same have been initiated or, to the best knowledge of the Company,
threatened. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the registration
statement became effective, including the prospectus, financial statements,
schedules, exhibits and all other documents filed as part thereof, is herein
called the "Registration Statement," and the prospectus on file with the
Commission at the time the Registration Statement became effective is herein
called the "Prospectus," except that if any prospectus filed by the Company with
the Commission in a post-effective amendment or pursuant to Rule 424(b) of the
rules and regulations of the Commission promulgated under the 1933 Act (the
"Regulations") differs from the prospectus on file at the time the Registration
Statement became effective, the term "Prospectus" shall refer to the Rule 424(b)
prospectus from and after the time it is filed with or mailed for filing to the
Commission and shall include any amendments or supplements thereto from and
after their dates of effectiveness or use, respectively. Following completion
of the Subscription and Community Offering, in the event of a Syndicated
Community Offering, the Company: (i) will promptly file with the Commission a
post-effective amendment to such Registration Statement relating to the results
of the Subscription and Community Offering, any additional information with
respect to the proposed plan of distribution and any revised pricing
information; or (ii) if no such post-effective amendment is required, will file
with, or mail for filing to, the Commission a prospectus or prospectus
supplement containing information relating to the results of the Subscription
and Community Offering and pricing information pursuant to Rule 424(c) of the
Regulations, in either case in a form acceptable to Hovde.
(b) The Company has filed with the OTS an application for approval of the
acquisition of the Association by the Company on Form H-(e)1-S (the "Holding
Company Application") promulgated under the savings and loan holding company
provisions of the Home Owners' Loan Act, as amended, and the regulations
promulgated thereunder by the OTS (the Home Owners' Loan Act, as amended,
together with the regulations promulgated thereunder by the OTS, shall
hereinafter be referred to as the "HOLA"). The Holding Company Application has
been approved by the OTS as of __________, 1996. The Prospectus has been
approved for use by the OTS as of ________________, 1996. No order has been
issued by the OTS preventing or suspending the use of the Prospectus and no
action by or before the OTS to revoke such approvals or authorizations is
pending or, to the best knowledge of the Company or Association, threatened.
(c) As of the date of the Prospectus and at all times subsequent thereto
through and including the Closing Date: (i) the Registration Statement and the
Prospectus (as amended or supplemented, if amended or supplemented) complied and
will comply in all material respects with the 1933 Act and the Regulations; (ii)
the Registration Statement (as amended or supplemented, if amended or
supplemented) did not and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading; (iii) the Prospectus (as amended or supplemented, if
amended or supplemented) did not and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided, however, that none of
3
<PAGE>
the representations and warranties in this subsection shall apply to statements
in or omissions from the Prospectus, the Registration Statement or any amendment
or supplement thereto made in reliance upon and in conformity with written
information furnished to the Company or the Bank by Hovde expressly regarding
Hovde for use under the caption "The Conversion --Marketing and Underwriting
Arrangements;" and (iv) any Application (as defined in Section 8) (as amended or
supplemented, if amended or supplemented), other than the Holding Company
Application and the Form AC, did not and will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) At the date of the Holding Company Application and at all times
subsequent thereto through and including the Closing Date: (i) the Holding
Company Application (as amended or supplemented, if amended or supplemented)
complied and will comply in all material respects with the HOLA; and (ii) the
Holding Company Application (as amended or supplemented, if amended or
supplemented) did not and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(e) The Association has filed the Form AC with the OTS in the form
heretofore delivered to Hovde. The Form AC has been approved by the OTS as of
__________, 1996. The Proxy Statement has been approved by the OTS as of
__________, 1996. The form of stock charter of the Association has been
approved by the OTS as part of the Form AC. No order has been issued by the
Federal Deposit Insurance Corporation (the "FDIC"), the OTS or any applicable
state regulatory authority preventing or suspending the use of the Proxy
Statement and no action by or before any such governmental entity to revoke any
approvals or authorizations is pending or, to the best knowledge of the Company
and the Association, threatened.
(f) As of the date of their approval by the OTS and at all times subsequent
thereto, through and including the Closing Date: (i) the Form AC and the Proxy
Statement complied and will comply in all material respects with Title 12, Part
563b of the Code of Federal Regulations (the "Conversion Regulations"); (ii) the
Form AC did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; (iii) the Proxy Statement did not and will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and (iv) as of the
date of the special meeting of the Association's members with respect to which
the Proxy Statement is being distributed, the Proxy Statement will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they are made, not misleading.
(g) Except as disclosed in the Registration Statement and the Prospectus,
there is no suit, proceeding, charge, investigation or action (including, but
not limited to, any action
4
<PAGE>
related to expressions of dissatisfaction with the Conversion by any member of
the Association) before or by any court, regulatory authority or governmental
agency or body pending or, to the best knowledge of the Association and the
Company, threatened against the Association or the Company which might
materially and adversely affect the Conversion, the performance by the
Association or the Company of this Agreement or the consummation of the
transactions contemplated by the Plan of Conversion or which might result in any
material adverse change in the condition (financial or otherwise), business,
properties or results of operations of the Association and the Company, taken as
a whole.
(h) The execution, delivery and performance of this Agreement and the
issuance and sale of the Shares and the consummation of the transactions
contemplated by this Agreement and the Plan of Conversion have been duly
authorized by all necessary action on the part of the Company and the
Association. The Plan of Conversion has been duly adopted by the Board of
Directors of the Association, and the consummation of the transactions
contemplated by the Plan of Conversion has been duly authorized by all necessary
action on the part of the Association. The Plan of Conversion has not been
amended since June 6, 1996, or terminated and remains in full force and effect.
This Agreement has been duly executed and delivered by the Company and the
Association and is the legal, valid and binding agreement of the Company and the
Association, enforceable in accordance with its terms, except as enforceability
thereof may be limited by bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the enforceability of creditors' rights generally or the
rights of creditors of federally chartered savings associations, the accounts of
which are insured by the FDIC, or by general equity principles regardless of
whether such enforceability is considered in a proceeding in equity or at law.
(i) The Company and the Association have all such power and authority as
may be required to enter into this Agreement and to carry out the provisions and
conditions hereof. All consents, approvals, authorizations or orders necessary
to permit the issuance and sale of the Shares as provided herein (other than
approvals under the securities or Blue Sky laws of certain states, as to which
no representation is made) contemplated by the Plan of Conversion and this
Agreement, including, but not limited to, the approval of the OTS required to be
received as of the date hereof, have been received, and all transactions
contemplated by the Plan of Conversion will, as of the Closing Date, have been
duly consummated in accordance with all material terms of the Plan of
Conversion, and all regulatory consents, approvals, authorizations and orders,
including, but not limited to, the approval of the OTS (except with respect to
the filing of certain post-sale, post-Conversion reports and documents in
compliance with the OTS's resolutions or letters of approval and approvals under
the securities or Blue Sky laws of certain states, as to which no representation
is made), and any and all applicable waiting periods have expired, or will have
expired by the Closing Date, and all such regulatory consents, approvals,
authorizations and orders, including, but not limited to, the approval of the
OTS, will, as of the Closing Date, be in full force and effect.
(j) The Company has been duly organized as a Delaware corporation, and the
Association has been duly organized as a federally chartered mutual savings
association, and each of them is validly existing and in good standing under the
laws of the jurisdiction of its organization with full corporate power and
authority to own its property and conduct its business
5
<PAGE>
as described in the Registration Statement and the Prospectus. Each of the
Company and the Association is duly qualified to transact business and is in
good standing in each other jurisdiction in which the failure to so qualify
would have a material adverse effect on the condition (financial or otherwise)
or the business, properties or results of operations of the Company or the
Association. The Association does not own equity securities of or an equity
interest in any other business enterprise except as described in the Prospectus.
The Company and the Association have obtained all material licenses, permits and
other governmental authorizations required for the conduct of their respective
businesses; all such licenses, permits and governmental authorizations are in
full force and effect, and the Company and the Association are in compliance in
all material respects with all laws, rules, regulations and orders applicable to
the operation of their respective businesses. On the Closing Date, upon
amendment of the Association's charter and bylaws as provided in the rules and
regulations of the OTS and completion of the sale by the Company of the Shares
as contemplated by the Prospectus: (i) the Association will be converted
pursuant to the Plan of Conversion to a federally chartered stock savings
association with full power and authority to own its property and conduct its
business as described in the Prospectus; (ii) all of the outstanding capital
stock of the Association will be owned of record and beneficially by the
Company; and (iii) the Company will have no direct subsidiaries other than the
Association. At the Closing Date, the Conversion will have been effected in
accordance with all applicable statutes, regulations, decisions and orders; and,
except with respect to the filing of certain post-sale, post-Conversion reports
and documents in compliance with the OTS's resolutions or letters of approval,
all of the terms, conditions, requirements and provisions of and to the
Conversion imposed on the Association by the OTS will have been complied with by
the Association in all material respects or appropriate waivers will have been
obtained.
(k) Each of the Company and the Association has good and marketable title
to, or valid and enforceable leasehold estates in, all items of real and
personal property which are stated in the Prospectus to be owned or leased by
them, in each case free and clear of all liens, encumbrances, claims, security
interests and defects, other than (i) the lien of the Federal Home Loan Bank of
Chicago (ii) those referred to in the Prospectus or (iii) those which
individually or in the aggregate would not have a material adverse effect upon
the operations of the Company or the Association, taken as a whole, and all of
the leases and subleases material to the business of the Company and Association
under which either of them hold properties, including those described in the
Prospectus, are valid, subsisting and enforceable leases.
(l) All contracts and other documents required to be filed as exhibits to
the Registration Statement, the Form AC or the Holding Company Application have
been filed with the Commission or the OTS, as the case may be.
(m) The financial statements and schedules which are included in the
Registration Statement and Prospectus present fairly the financial condition,
results of operations, retained earnings and cash flows of the Association at
the dates thereof and for the periods covered thereby and comply as to form with
the applicable accounting requirements of the 1933 Act, the Regulations and the
Conversion Regulations. Such financial statements have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, and such financial statements are consistent
with the most
6
<PAGE>
recent financial statements and other reports filed by the Company or the
Association with supervisory and regulatory authorities, except that the
accounting principles employed in such filings conform to the requirements of
such authorities and not necessarily to generally accepted accounting
principles. The tables and other financial, statistical, and pro forma
information and related notes included in the Prospectus that relate to the
Company or the Association or both of them present fairly in all material
respects the information purported to be shown thereby at the respective dates
thereof for the respective periods covered thereby.
(n) Subsequent to the respective dates as of which information is given in
the Prospectus, except as may otherwise be disclosed therein, there has not
been: (i) any material adverse change in, or any adverse development that
materially affects, and neither the Company nor the Association is aware of any
prospective change or development (other than prospective changes or
developments affecting the savings institution industry generally) which
reasonably could be expected to have a material adverse effect on, the condition
(financial or otherwise), business, properties, or results of operations of the
Company and the Association taken as a whole; (ii) any change in the capital
stock, or material increase in the long-term debt of the Company or the
Association; (iii) the issuance of any securities or incurrence of any liability
or obligation, direct or contingent, for borrowing other than in the ordinary
course of business by the Company or the Association; or (iv) any material
transactions entered into by the Company or the Association other than in the
ordinary course of business. The capitalization, liabilities, assets,
properties and business of the Association conform in all material respects to
the descriptions thereof contained in the Prospectus and the Registration
Statement. The Association has no material liability of any kind, contingent or
otherwise, except as set forth in the Prospectus.
(o) No default exists, and no event has occurred which with notice or
passage of time, or both, would constitute a default on the part of the Company
or the Association in the due performance and observance of any term, covenant
or condition of any contract, lease, indenture, mortgage, deed of trust, note,
loan or credit agreement or any other instrument or agreement to which the
Company or the Association is a party or by which either of them or any of their
respective properties may be bound or affected in any respect which, in any such
case, would have a material adverse effect on the condition (financial or
otherwise), business, properties or results of operations of the Company or the
Association; such agreements are in full force and effect; and no other party to
any such agreements has instituted or, to the best knowledge of the Company or
the Association, threatened, any action or proceeding wherein the Company or the
Association is alleged to be in default thereunder. As of the date hereof,
neither the Company nor the Association is, and as of the Closing Date, neither
the Company nor the Association will be: (i) in breach of any term or provision
of its respective certificate of incorporation or charter or bylaws (and the
Association will not be in violation of its charter or bylaws in stock form upon
consummation of the Conversion); or (ii) in violation of any authorization,
approval, judgment, decree or order, or any material statute, rule or
regulation.
(p) The execution, delivery and performance of this Agreement and the Plan
of Conversion, the consummation of the transactions contemplated by this
Agreement and the Plan of Conversion, and compliance with the terms and
provisions hereof and thereof will not: (i) conflict with, or result in a
material breach of, any of the terms, provisions or conditions of,
7
<PAGE>
or constitute a default (or an event which with notice or passage of time, or
both, would constitute a default) under, the certificate of incorporation or
charter or bylaws of the Company or the Association; (ii) conflict with, or
result in a material breach of, any of the terms, provisions or conditions of or
constitute a default (or any event which with notice or passage of time, or
both, would constitute a default) under any material contract, lease, agreement,
indenture, mortgage, deed of trust, note or any other instrument or agreement to
which the Company or the Association is a party or by which either of them or
their respective properties is bound; (iii) violate any authorization, approval,
judgment, decree, order, statute, rule or regulation applicable to the Company
or the Association or any of their properties; or (iv) with the exception of the
liquidation account established in the Conversion, result in the creation of any
lien, charge or encumbrance upon any of the assets of the Company or the
Association.
(q) The Conversion, when consummated in accordance with the terms of the
Plan of Conversion, will conform in all material respects to the description
thereof contained in the Prospectus and the Proxy Statement. The issuance and
sale of the capital stock of the Association to the Company have been duly
authorized by all necessary action of the Association, the Company and
appropriate regulatory authorities and such capital stock, when issued and paid
for in accordance with the terms of the Plan of Conversion, will be fully paid
and non-assessable, will conform in all material respects to the description
thereof contained in the Prospectus and the Form AC and will not be subject to
any preemptive rights. There are no options, agreements, contracts or other
rights to purchase or acquire any shares of Common Stock or shares of the
Association's common stock (other than Subscription Rights, the purchase of the
Association common stock by the Company pursuant to the Conversion, rights to
purchase or acquire Common Stock pursuant to benefit plans of the Company as
expressly described in the Prospectus and any other rights expressly described
in the Plan of Conversion). The issuance and sale of the Shares by the Company
have been duly authorized: (i) by all necessary action of the Company; and (ii)
subject to the receipt of OTS approvals prior to the Closing Date, by the OTS.
The Shares, when issued and paid for in accordance with the terms of the Plan of
Conversion, will be duly and validly issued and fully paid and non-assessable,
will conform in all material respects to the description thereof contained in
the Prospectus and will not be subject to any preemptive rights. The purchasers
of the Shares from the Company, upon issuance thereof against payment therefor,
will acquire such Shares free and clear of all claims, encumbrances, security
interests and liens whatsoever created or suffered to be created by the Company.
The certificates representing the Shares will conform with the requirements of
applicable laws and regulations. Upon consummation of the Conversion, the
authorized, issued and outstanding equity capital of the Company will be within
the range that is set forth in the Prospectus under the caption
"Capitalization," based on the assumptions stated therein.
(r) No approval of any regulatory or supervisory or other public authority
is required in connection with the execution and delivery of this Agreement or
the issuance of the Shares, except for the declaration of effectiveness of the
Registration Statement and any required post-effective amendment to the
Registration Statement by the Commission, approval of the Form AC and Proxy
Statement and other marketing materials by the OTS, the issuance of the
Association's federal stock charter and bylaws by the OTS, the approval of the
Holding Company Application by the OTS and any necessary qualification or
registration under the
8
<PAGE>
securities or Blue Sky laws of the various states in which the Shares are to be
offered and as may be required under the regulations of The Nasdaq National
Market.
(s) KPMG Peat Marwick LLP, the firm which has certified the financial
statements of the Association included in the Prospectus, are independent
certified public accountants, as required by the 1933 Act, the Regulations and
the Conversion Regulations.
(t) RP Financial, L.C., which has prepared the Association's conversion
valuation appraisal report dated as of June 7, 1996 (the "Appraisal"), which
Appraisal (as amended or supplemented, if amended or supplemented) is referred
to in the Prospectus, is independent with respect to the Company and the
Association within the meaning of the Conversion Regulations and is believed by
the Company and the Association to be experienced and expert in rendering
corporate appraisals of thrift institutions.
(u) The Company and the Association have filed all federal income and state
and local franchise tax returns required to be filed (or have timely filed
extensions therefor) and have made timely payments of all taxes due and payable
in respect of such returns, and no deficiency has been asserted with respect
thereto by any taxing authority.
(v) Neither the Company nor the Association or, to the best knowledge of
the Company or the Association, any employee of the Company or the Association
has made any payment of funds of the Company or the Association which would be
prohibited by law, and no funds of the Company or the Association have been set
aside to be used for any payment so prohibited by law. Neither the Company nor
the Association, or, to the best knowledge of the Company and Association, any
employee of the Company or the Association has made any payment of funds of the
Company or the Association as a loan for the purchase of Shares. The Company
and the Association are in compliance with the applicable financial record-
keeping and reporting requirements of the Currency and Foreign Transaction
Reporting Act of 1970, as amended, and the regulations and rules thereunder.
(w) The Company has received approval, subject to notice of issuance, to
have the Shares quoted on The Nasdaq National Market effective on the Closing
Date.
(x) The Company is a savings and loan holding company duly registered with
the OTS. The deposit accounts of the Association are insured by the Savings
Association Insurance Fund of the FDIC up to the maximum amount allowed under
law, and no proceeding for the termination or revocation of such insurance is
pending or, to the best knowledge of the Company and the Association,
threatened. The Association is a member in good standing of the Federal Home
Loan Bank of Chicago. Neither the Company nor the Association is in violation
of any directive, order, agreement or understanding from the FDIC, the OTS or
any other agency to make any material change in the method of conducting its
business so as to comply in all material respects with all applicable statutes
and regulations (including, without limitation, regulations, decisions,
directives and orders of the FDIC and the OTS).
(y) Neither the Company nor the Association has relied upon Hovde or
Hovde's legal counsel for any legal, tax or accounting advice in connection with
the Conversion.
9
<PAGE>
(z) Neither the Company nor the Association is required to be registered
under the Investment Company Act of 1940, as amended.
(aa) There are no contracts, agreements or understandings between the
Company or the Association and any person granting such person the right to
require the Company or the Association to file a registration statement under
the 1933 Act with respect to any securities of the Company or the Association
owned or to be owned by such person or to require the Company or the Association
to include such securities in the Registration Statement or in any other
registration statement filed by the Company or the Association under the 1933
Act.
(bb) Neither the Company nor the Association has: (i) issued any securities
within the last 18 months (except for notes to evidence other bank loans and
reverse repurchase agreements or other liabilities and the issuance of the
minimum number of shares of Common Stock by the Company necessary to qualify as
a foreign corporation in Illinois); (ii) had any material dealings with respect
to sales of its securities within the 12 months prior to the date hereof with
any member of the National Association of Securities Dealers, Inc. (the "NASD"),
or any person related to or associated with such member, other than discussions
and meetings with Hovde relating to the Conversion; (iii) entered into a
financial or management consulting agreement with any member of the NASD with
respect to its securities or any person related to or associated with such
member, except as contemplated hereunder and except in connection with the
Conversion as described in the Prospectus under the caption "The Conversion -
Marketing and Underwriting Arrangements"; or (iv) engaged any intermediary
between Hovde and the Company in connection with the offering of the Shares, and
no person is being compensated in any manner for such service.
3. Appointment of Hovde; Sale and Delivery of the Shares. Subject to the
-----------------------------------------------------
terms and conditions herein set forth, the Company and the Association hereby
appoint Hovde as their agent to consult with and advise the Company and the
Association, and to solicit subscriptions and purchase orders for Shares on
behalf of the Company and the Association on a best efforts basis, in connection
with the Company's sale of the Shares in the Subscription Offering, the
Community Offering, if any, and the Syndicated Community Offering, if any. On
the basis of the representations and warranties herein contained, and subject to
the terms and conditions herein set forth, Hovde accepts such appointment and
agrees to provide, consult with and advise the Company and the Association as to
the Conversion services set forth as Exhibit A to the letter agreement between
Hovde and the Association dated as of March 22, 1996, which Exhibit A is
incorporated by reference herein; provided, however, that Hovde shall not be
obligated to take any action which is inconsistent with any applicable laws,
regulations, decisions or orders and, provided further, that Hovde shall not be
responsible for obtaining subscriptions or purchase orders for any specific
number of Shares and shall not be required to purchase any Shares. The
appointment of Hovde hereunder shall terminate upon consummation of the
Conversion. Except where specifically incorporated by reference herein, this
Agreement supersedes all other letter agreements, engagement letters or other
agreements previously entered into between Hovde and the Company and/or the
Association.
10
<PAGE>
In connection with the solicitation of offers to buy Shares in the
Syndicated Community Offering, if any, Hovde may use the services of other
brokers or dealers ("Selected Dealers") acceptable to the Company in its
reasonable discretion and, in that connection, it may invite (if requested to do
so by the Company) any Selected Dealer to become a "Sponsoring Dealer," that is,
a Selected Dealer who will solicit offers which result in sales on behalf of the
Company of at least the number of Shares specified by Hovde. Each Selected
Dealer, including each Sponsoring Dealer, shall enter into a Selected Dealer
Agreement substantially in the form attached hereto as Exhibit A.
---------
In the event the Company is unable to sell all of the minimum number of
Shares within the period provided in the Plan of Conversion and the Conversion
Regulations, and as described in the Prospectus, this Agreement shall terminate
and the Company shall refund to any persons who have subscribed for any of the
Shares the full amount which it may have received from them, together with
interest as provided in the Prospectus, and no party to this Agreement shall
have any obligation to the others hereunder, except for payment by the Company
as set forth in Sections 6, 8(a) and 8(d) hereof and payment by Hovde as
provided in Sections 8(b) and 8(d). Appropriate arrangements for placing the
funds received from subscriptions for Shares or other offers to purchase Shares
in special interest-bearing accounts with the Association pending consummation
or termination of the Subscription Offering, Community Offering (if any) and
Syndicated Community Offering (if any) were made prior to the commencement of
the Subscription and Community Offering, with provision for refund to the
purchasers as set forth above, or for delivery to the Company if all of the
Shares are sold.
If all of the minimum number of Shares are sold and all other conditions
precedent to the consummation of the Conversion are satisfied, the Company
agrees to issue or have issued the Shares sold and to release for delivery
certificates for such Shares on the Closing Date against payment therefor by
release of funds from the special interest-bearing accounts referred to above
and from a special account which the Company agrees to establish prior to the
retention of any Selected Dealer. The closing shall be held at the offices of
Thacher Proffitt & Wood, Two World Trade Center, New York, New York 10048 at
9:00 a.m., local time, or at such other place and time as shall be agreed upon
by the parties hereto, on a business day to be agreed upon by the parties
hereto. The Company shall notify Hovde by telephone, confirmed in writing, when
funds shall have been received for all of the Shares. Certificates for Shares
shall be delivered directly to the purchasers thereof or in accordance with the
Company's directions. Notwithstanding the foregoing, certificates for Shares
purchased through Selected Dealers shall be made available to Hovde for checking
at least 24 hours prior to the Closing Date at such office as Hovde and the
Company shall mutually designate. The hour and date upon which the Company
shall release for delivery all of the Shares, in accordance with the terms
hereof, are herein called the "Closing Date."
The Company and the Association (or their respective agents) shall advise
Hovde, whenever an allocation of the Shares does not strictly correspond to all
subscriptions for Shares, as to the allocation of the Shares. Hovde shall have
no liability to any party for the records or other information provided by the
Company and the Association (or their respective agents) to Hovde for use in
allocating the Shares. The Company and the Association shall indemnify and hold
harmless Hovde for any liability arising out of the allocation of the Shares in
accordance
11
<PAGE>
with the records or other information provided to Hovde by the Company and the
Association (or their respective agents).
The Company will pay any stock issue and transfer taxes which may be
payable with respect to the sale of the Shares.
In addition to the expenses specified in Section 6 hereof, Hovde has
received or will receive the following compensation from the Company for Hovde's
services hereunder:
(a) A management fee of $37,500 has been paid to Hovde.
(b) For services rendered by Hovde in connection with the sale of Shares in
the Subscription Offering, the Community Offering (if any) and the Syndicated
Community Offering (if any), a fee equal to one and one-half percent (1.50%) of
the aggregate purchase price of Shares sold in the Subscription Offering, the
Community Offering (if any), and the Syndicated Community Offering (if any),
excluding Shares sold to the Company's directors, officers and employees (or
members of their immediate families) and the ESOP, shall be paid to Hovde at
Closing.
(c) In connection with the solicitation of offers to buy Shares in the
Syndicated Community Offering (if any), Hovde and the Company agree to negotiate
an additional fee in an amount up to five and one-half percent (5.50%) of the
aggregate purchase price of Shares sold in the Syndicated Community Offering,
which fee shall be paid to Hovde at Closing for allocation by Hovde in
accordance with the Selected Dealers Agreement.
The fees specified in clauses (b) and (c) above shall be payable to Hovde
by wire transfer of immediately available funds or a check in next-day funds, as
agreed to by the parties hereto, at the time so indicated above.
Notwithstanding anything to the contrary contained in this Agreement (but
subject to Section 10 hereof) Hovde reserves the right to renegotiate the amount
of fees and expenses payable or reimbursable, as the case may be, by the Company
and the Association in the event that (i) the Company and/or the Association are
required to resolicit subscribers for Shares in the Subscription and Community
Offering, or (ii) the regulations governing the Conversion are changed.
4. Offering. The Company is offering up to 6,095,000 Shares (which number
--------
may be increased to up to 7,009,250 shares in the event of an oversubscription
or decreased as described in the Prospectus) in the Subscription Offering and
Community Offering, if any, and, if any Shares remain unsubscribed at the
conclusion of the Subscription Offering and Community Offering, if any, in the
Syndicated Community Offering.
5. Covenants of the Company and the Association. The Company and the
--------------------------------------------
Association jointly and severally covenant and agree with Hovde that:
12
<PAGE>
(a) The Company shall immediately upon the receipt of any information
concerning the events listed below notify Hovde and promptly confirm the notice
in writing: (i) when any post-effective amendment to the Registration Statement
or any supplement to the Prospectus has been filed; (ii) of the issuance by the
Commission of any order or other action suspending the use of the Prospectus or
of the initiation or the threat of any such action; (iii) of the receipt of any
notice with respect to the suspension of the qualification of the Shares for
offering or sale in any jurisdiction; and (iv) of the receipt of any comments or
requests for additional information or any amendment or supplement from the
staff of the Commission relating to the Registration Statement. The Company
will use its reasonable, good faith and diligent efforts to prevent the issuance
by the Commission or any other governmental authority of any such order and, if
any such order shall at any time be issued, to obtain the lifting, termination
or withdrawal thereof at the earliest possible time.
(b) During the time when a prospectus is required to be delivered under the
1933 Act, the Company will comply with all requirements imposed upon it by the
1933 Act, as now in effect and hereafter amended, and by the Regulations, as
from time to time in force, so far as necessary to permit the continuance of
offers and sales of or dealings in the Shares in accordance with the provisions
hereof and the Prospectus. If, at any time when the Prospectus is required to
be delivered under the 1933 Act, any event shall have occurred as a result of
which, in the opinion of counsel for the Company or counsel for Hovde, the
Prospectus as then amended or supplemented includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary at any time to
amend or supplement the Prospectus to comply with the 1933 Act, the Company
shall promptly notify Hovde in writing and prepare and file with the Commission
an appropriate amendment or supplement. The Company shall provide Hovde and
Hovde's counsel notice of the Company's intention to file any amendment or
supplement to the Registration Statement or the Prospectus and shall not file or
use any amendment or supplement to the Registration Statement or the Prospectus
of which Hovde has not first been furnished a copy and given a reasonable amount
of time to review such copy or to which Hovde shall reasonably object. For the
purposes of this subsection (b), each of the Company and the Association shall
timely furnish such information with respect to itself as Hovde may from time to
time reasonably request. The Association shall not amend, without Hovde's prior
written consent (which consent shall not be unreasonably withheld), the Plan of
Conversion in any manner that, in the reasonable opinion of Hovde, would
materially and adversely affect the sale of the Shares or the terms of this
Agreement. Prior to the Closing Date, neither the Company nor the Association
shall issue any press release or other public communication with respect to the
Company or the Association or the Conversion without first providing to Hovde a
copy of such release or other communication and allowing Hovde a reasonable
amount of time to review such copy. Except as otherwise required by law,
neither the Company nor the Association shall issue any release or other
communication prior to the Closing Date to which Hovde shall reasonably object.
(c) The Association shall not file any amendment or supplement to the Form
AC, including the Association's Proxy Statement and Prospectus contained
therein, without notifying Hovde and without providing Hovde and Hovde's counsel
an opportunity to review such amendment. The Association shall not file any
amendment or supplement to the Form AC
13
<PAGE>
to which Hovde shall reasonably object. Hovde shall have a reasonable amount of
time to review any amendment or supplement to the Form AC.
(d) The Company or the Association shall immediately upon receipt of any
information concerning the events listed below notify Hovde and promptly confirm
the notice in writing: (i) of the request by the OTS, or any other governmental
entity, for any amendment or supplement to the Form AC or for additional
information relating to the Form AC or the Holding Company Application; or (ii)
of the issuance by the OTS, or any other governmental entity, of any order or
other action suspending the use of the Prospectus, Proxy Statement or any other
filing of the Association under the HOLA or other applicable law or regulations,
or the initiation or threat of any such action. The Company and the Association
will each use its reasonable, good faith and diligent efforts to prevent the
issuance by the OTS, or any other governmental entity, of any such order and, if
any such order shall at any time be issued, to obtain the lifting, termination
or withdrawal thereof at the earliest possible time.
(e) During the time when the Proxy Statement is required to be delivered
under the Conversion Regulations, the Association will comply with all
requirements imposed upon it by the Conversion Regulations. If, at any time
prior to the date of the Special Meeting (as defined in the Prospectus) of the
Association's members with respect to which the Proxy Statement is delivered,
any event shall have occurred as a result of which, in the opinion of counsel
for the Association or counsel for Hovde, the Proxy Statement includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time to amend or supplement the Proxy Statement to comply with the
Conversion Regulations, the Association shall notify Hovde in writing and
prepare and file with the OTS, at the Association's expense, an appropriate
amendment or supplement. The Association shall not file or use any amendment or
supplement to the Proxy Statement of which Hovde has not first been furnished a
copy or to which Hovde shall reasonably object. For the purpose of this
subsection (e), the Association shall timely furnish such information with
respect to itself as Hovde may from time to time reasonably request.
(f) The Company and the Association shall deliver to Hovde, without charge,
such number of copies of the Registration Statement (including all exhibits),
the Holding Company Application (including all exhibits) and the Form AC
(including all exhibits) as originally filed and each amendment, including,
without limitation, any post-effective amendment, thereto as Hovde may
reasonably request. The Company will furnish to Hovde, from time to time during
such period as the Prospectus is required by law to be delivered in connection
with offers and sales of the Shares, such number of copies of the Prospectus (as
amended or supplemented, if amended or supplemented) as Hovde may reasonably
request. The Company authorizes Hovde, all members of any selling group which
may be formed in connection with the distribution of the Shares, and all dealers
to whom any of the Shares may be sold by members of the selling group, to use
the Prospectus (as amended or supplemented, if amended or supplemented) in
connection with the sale of the Shares.
14
<PAGE>
(g) The Company and the Association have taken or shall take all necessary
action, in cooperation with Hovde, to qualify or register the Shares for offer
and sale by the Company under the securities or "Blue Sky" laws of such
jurisdictions in which the Shares are required by the Conversion Regulations to
be offered or as Hovde and the Company shall reasonably agree to designate;
provided, however, that neither the Company nor the Association shall be
obligated to qualify as a foreign corporation to do business under the laws of
any such jurisdiction.
(h) The Company shall make generally available to its security holders as
soon as practicable, but not later than the first day of the 15th full calendar
month following the effective date of the Registration Statement, an earnings
statement of the Company and its consolidated subsidiaries (which need not be
certified by independent certified public accountants unless required by the
1933 Act or the Regulations, but which shall satisfy the provisions of Rule 158
under the 1933 Act) covering a period of at least 12 months beginning after the
effective date of the Registration Statement.
(i) The Company shall file a registration statement for the Common Stock
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), prior to completion of the stock offering pursuant to the Plan
of Conversion and will request that such registration statement be effective
upon completion of the Conversion. The Company will maintain the effectiveness
of such registration for not less than three years. The Company will use its
reasonable, good faith and diligent efforts to obtain approval for and maintain
quotation of the Shares on The Nasdaq National Market effective on or prior to
the Closing Date. The Company will not sell or issue, contract to sell or
otherwise dispose of, for a period of 90 days after the Closing Date, without
Hovde's prior written consent, which consent shall not be unreasonably withheld,
any shares of Common Stock other than in connection with any plan or arrangement
described in the Prospectus (and the Company shall notify Hovde of any such
sale, issuance, contract or disposition pursuant to such plan or arrangement).
(j) During the period of three years hereafter, the Company shall furnish:
(i) to its security holders and to Hovde, as soon as practicable after the end
of each fiscal year of the Company, an audited balance sheet and statements of
operations, stockholders' equity and changes in financial position as at the end
of and for such year; (ii) to Hovde, as soon as practicable after the end of
each of the first three quarters of each fiscal year, a balance sheet and
statement of operations of the Company (which need not be audited) as at the end
of and for such quarter and the year to date and as at the end of and for the
corresponding periods of the preceding fiscal year; (iii) to Hovde, as soon as
available, a copy of each other report of the Company mailed to its stockholders
or filed with the Commission pursuant to the Exchange Act or otherwise
(including, without limitation, reports on Forms 10-K, 10-Q and 8-K, and all
proxy statements and annual reports to stockholders), or the OTS or any other
supervisory or regulatory authority or any national securities exchange or
system on which any class of securities of the Company is listed or quoted,
including, but not limited to, the Nasdaq National Market, other than on a
confidential basis; (iv) to Hovde, each press release and material news item and
article released by the Company or the Association; and (v) such additional
publicly available documents and information with respect to and issued or
prepared by the Company and the Association as Hovde may reasonably request.
During any period when the Company has
15
<PAGE>
an active subsidiary or subsidiaries, such financial statements will be on a
consolidated basis to the extent the accounts of the Company and its subsidiary
or subsidiaries are consolidated.
(k) The Company shall furnish to Hovde as early as practicable prior to the
Closing Date, but no later than two full business days prior thereto, a copy of
the latest available unaudited interim financial statements of the Association
which have been read by KMPG Peat Marwick LLP, as stated in their letters to be
furnished pursuant to subsections (g) and (h) of Section 7 hereof.
(l) The Company and the Association shall take such actions and furnish
such information as are reasonably requested by Hovde in order for Hovde to
ensure compliance with the NASD's "Interpretation Relating to Free-Riding and
Withholding."
(m) The Company shall not deliver the Shares until the Company and the
Association each have satisfied or caused to be satisfied each condition set
forth in Section 7 hereof unless such condition is waived. The Company and the
Association shall use their reasonable, good faith and diligent efforts to
comply with or cause to be complied with the conditions precedent to the
obligations of Hovde as specified in Section 7 hereof.
(n) Prior to the Closing Date, the Company and the Association shall
conduct their respective businesses in compliance with, in all material
respects, all applicable federal and state laws, rules, regulations, decisions,
directives and orders, including all decisions, directives and orders of the
FDIC and the OTS and consistent with prior business practices of the Company and
the Association.
(o) The Company and the Association shall comply with any and all terms,
conditions, requirements and provisions with respect to the Conversion and the
transactions contemplated thereby imposed by the OTS, the HOLA, the Commission,
the 1933 Act, the Regulations (including, without limitation, the filing of
reports on Form SR pursuant to Rule 463 of the Regulations or any successor
provision), the Exchange Act and the regulations promulgated by the Commission
pursuant to the Exchange Act to be complied with subsequent to the Closing Date.
The Company will comply with all provisions of all undertakings contained in the
Registration Statement. The liquidation account for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders (as defined in the
Prospectus) of the Association shall be duly established and maintained in
accordance with the requirements of the OTS.
(p) The Company shall apply the proceeds from the sale of the Shares in the
manner set forth in the Prospectus under the caption "Use of Proceeds."
6. Payment of Expenses. Whether or not the sale of the Shares by the
-------------------
Company is consummated, the Association shall pay all expenses incident to the
performance of the obligations of the Company and the Association under this
Agreement, including but not limited to the following: (a) the preparation,
printing, issuance and delivery of certificates for the Common Stock; (b) the
fees and disbursements of the Company's and the Association's counsel,
accountants and other advisors; (c) the printing and delivery to Hovde in such
quantities as
16
<PAGE>
Hovde shall reasonably request of copies of the Registration Statement, the
Prospectus, the Proxy Statement, the Form AC and the Holding Company Application
as originally filed and as amended or supplemented and all other documents in
connection with the Conversion and this Agreement; (d) the fees for listing the
Shares on The Nasdaq National Market; (e) fees and expenses relating to the
preparation of the independent appraisal and all updates thereof; (f) fees and
expenses relating to advertising expenses, temporary personnel expenses and
conversion center expenses, investor meeting expenses, and other miscellaneous
expenses relating to the marketing of the Common Stock; (g) the fees and charges
of any transfer agent, registrar and other agents; (h) the preparation,
printing, filing, delivery and shipping of the Prospectus (including the
financial statements contained therein), and any amendments or supplements
thereto, this Agreement and related agreements and communications and related
documents; (i) filing fees and expenses in connection with the qualification or
registration of the Shares for offer and sale by the Company under the
securities or "Blue Sky" laws, including reasonable fees and expenses of counsel
in connection with such qualification or registration and all "Blue Sky"
memoranda; and (j) filing fees paid or incurred by Hovde in connection with the
filings with the NASD. In the event Hovde incurs any of the fees or expenses
enumerated above in connection with the Subscription Offering, the Community
Offering or the Syndicated Community Offering, the Association will reimburse
Hovde for such fees and expenses; provided, however, that Hovde shall not incur
any substantial expenses on behalf of the Association or the Company without the
prior written consent of the Association or the Company. In addition, the
Association shall reimburse Hovde for out-of-pocket expenses incurred by Hovde
relating to the offering of the Shares (including, without limitation, legal
fees and out-of-pocket disbursements of Hovde's legal counsel); provided,
however, subject to Section 3 hereof, that such out-of-pocket expenses of Hovde
shall not exceed $60,000 without the prior written consent of the Company or the
Association.
7. Conditions of Obligations of Hovde. The Company, the Association and
----------------------------------
Hovde agree that all obligations of Hovde provided herein shall be subject to
the accuracy of the representations and warranties contained herein as of the
date hereof and as of the Closing Date, to the accuracy of the statements of
officers and directors of the Company and the Association made pursuant to the
provisions hereof, to the performance by each of the Company and the Association
of its obligations hereunder to be performed at or prior to the Closing Date,
and to the following conditions:
(a) At the Closing Date, Hovde shall receive the favorable opinion of
Thacher Proffitt & Wood, counsel for the Company and the Association, dated the
Closing Date, addressed to Hovde, in form and substance satisfactory to counsel
for Hovde and to the effect that:
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware and has
full corporate power and authority to own its properties and conduct its
business as described in the Prospectus; and the Company is duly qualified to
transact business and is in good standing in each other jurisdiction in which
the failure to so qualify would have a material adverse effect on the condition
(financial or otherwise), or the business, properties or results of operations
of the Company;
17
<PAGE>
(ii) The Association has, prior to the Closing Date, been duly organized
and is validly existing as a federally chartered mutual savings association
under the laws of the United States with full corporate power and authority to
own its properties and to conduct its business as described in the Prospectus
and, as of the Closing Date, the Association will become duly organized and
validly existing as a federally chartered capital stock savings association in
good standing under the laws of the United States with full corporate power and
authority to own its properties and to conduct its business as described in the
Prospectus; and the Association is duly qualified to transact business in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on the condition (financial or otherwise), or the business, properties or
results of operations of the Association. The Association is a member of the
Federal Home Loan Bank of Chicago, and the deposit accounts of the Association
are insured by the Savings Association Insurance Fund of the FDIC up to the
maximum amount allowed under law;
(iii) The activities of the Association described in the Prospectus are
permitted under Delaware and federal law to subsidiaries of a savings
association holding company that is a Delaware business corporation. Each of
the Company and the Association has obtained all licenses, permits, and other
governmental authorizations currently required for the conduct of its business,
and all such licenses, permits and other governmental authorization are in full
force and effect, and to the best of such counsel's knowledge the Company and
the Association are complying therewith in all material respects;
(iv) The Plan of Conversion complies with, and the Conversion has been
effected in accordance with, all applicable laws, rules, regulations, decisions
and orders; and all of the terms, conditions, requirements and provisions with
respect to the Plan of Conversion and the Conversion (including those with
respect to the Subscription and Community Offering and the Syndicated Community
Offering) imposed by the OTS in writing or orally communicated to such counsel,
the Company or the Association have been complied with by the Company and the
Association or appropriate waivers have been obtained;
(v) As of the Closing Date, the Company has authorized Common Stock as set
forth in the Registration Statement and the Prospectus and the description of
such Common Stock in the Registration Statement and the Prospectus is accurate
and complete in all material respects. Other than as expressly disclosed in the
Prospectus or in the certificate of incorporation, charter, bylaws or minute
books of the Company, to the best of such counsel's knowledge, there is no
commitment, plan or arrangement to issue, and no outstanding option, warrant or
other right calling for the issuance or sale of, any shares of capital stock of
the Company or the Association or any security or other instrument which by its
terms is convertible into, exercisable for or exchangeable for capital stock of
the Company or of the Association. To the best of such counsel's knowledge,
there are no options, agreements, contracts or other rights in existence to
purchase or acquire from the Company any issued and outstanding shares of the
common stock of the Association;
(vi) The issuance and sale of the Shares have been duly and validly
authorized by all necessary action on the part of the Company and have received
all necessary regulatory approvals; the Shares, when issued and paid for in
accordance with the terms of the
18
<PAGE>
Plan of Conversion and this Agreement, will be duly and validly issued and fully
paid and non-assessable and not subject to any preemptive rights, and the
purchasers of the Shares from the Company, upon issuance thereof against payment
therefor, will acquire such Shares free and clear of all claims, encumbrances,
security interests and liens whatsoever created or suffered to be created by the
Company (other than encumbrances created by statute or regulation);
(vii) The issuance and sale of the capital stock of the Association to the
Company, the Plan of Conversion and the Conversion have been duly authorized by
all necessary action of the Association and have received the approval of the
OTS and such capital stock, when issued and paid for in accordance with the
terms of the Plan of Conversion, will be validly issued, fully paid and non-
assessable and owned beneficially and of record by the Company;
(viii) The certificates for the Shares comply with applicable requirements
of Delaware law;
(ix) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of the Company and the
Association, and this Agreement constitutes the legal, valid and binding
agreement of the Company and the Association, enforceable in accordance with its
terms (except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting the
enforceability of creditors' rights generally or the rights of creditors of
federally chartered savings associations, the accounts of which are insured by
the FDIC or by general equity principles, regardless of whether such
enforceability is considered in a proceeding in equity or at law);
(x) Except as set forth in the Prospectus, there are no material legal or
governmental proceedings pending or, to the best of such counsel's knowledge,
threatened against, or involving the properties of, the Company or the
Association required to be disclosed in the Prospectus that have not been
disclosed therein; provided that for this purpose, any litigation or
governmental proceeding is not considered to be "threatened" unless the
potential litigant or governmental authority has manifested to the management of
the Company or the Association, or to such counsel, a present intention to
initiate such litigation or proceeding;
(xi) The statements in the Prospectus under the captions "Market for the
Common Stock," "Dividend Policy," "Regulation," "Restrictions on Acquisition of
the Company," "Description of Capital Stock of the Company" and "Description of
Capital Stock of the Association," insofar as they constitute statements of law
or legal conclusions, are correct in all material respects;
(xii) The Holding Company Application, the Form AC (including the
Prospectus, the Plan of Conversion and the Proxy Statement), the form of stock
charter and the Proxy Statement have been approved by the OTS; the stock charter
when issued to the Association will be in full force and effect; the
Registration Statement has been declared effective by the Commission; the OTS
has issued its order of approval under the savings and loan holding company
provisions of the HOLA, and, subject to the satisfaction of the conditions
19
<PAGE>
of the OTS's approval of the Conversion, no further approval of any other
governmental authority is required for the Conversion and the issuance and sale
of the Shares except any necessary qualifications or registration under the
securities or "Blue Sky" laws of the various jurisdictions in which the Shares
are offered (as to which no opinion need be rendered) and any approvals of the
NASD and The Nasdaq National Market; and no action has been taken or is pending
or, to the best of such counsel's knowledge, threatened or contemplated, to
revoke such approvals or to suspend the use of the Prospectus or the Proxy
Statement;
(xiii) The execution, delivery and performance of this Agreement and the
issuance and sale of the Shares will not result, and the consummation of the
transactions contemplated by the Plan of Conversion has not resulted and will
not result, in a breach or violation of any of the terms and provisions of, or
constitute a default under or, with the exception of the liquidation account
established in the Conversion, as described in the Plan of Conversion and the
Prospectus, result in the creation or imposition of any lien, charge or other
encumbrance upon (A) any of the properties or assets of the Company or the
Association, (B) the certificate of incorporation, charter or bylaws of the
Company or the Association (in mutual or stock form), or (C) any order or any
material statute, rule, regulation of any governmental agency or body or any
court having jurisdiction over the Company or the Association or any of their
properties, or (D) any material agreement or instrument to which the Company or
the Association is a party or by which the Company or the Association is bound
or to which any of the properties of the Company or the Association are subject;
(xiv) To the best of such counsel's knowledge, based upon the conferences
and other investigations referred to in subsection 7(b) below, the Company and
the Association have good and marketable title to, or valid and enforceable
leasehold estates in, the items of real and personal property stated in the
Prospectus to be owned or leased by them and are material to their business, in
each case free and clear of all liens, encumbrances, claims, security interests
and defects, other than (i) the lien of the Federal Home Loan Bank of Chicago,
(ii) those referred to in the Prospectus and (iii) those which individually or
in the aggregate would not have a material adverse effect upon the operations of
the Company or the Association, taken as a whole.
(xv) To the best of such counsel's knowledge, neither the Company nor the
Association is presently: (i) in breach of, or in default (nor has an event
occurred which with notice or passage of time or both would constitute a
material default) under, any material indenture, mortgage, deed of trust, note,
loan or credit agreement or any other instrument or agreement to which the
Company or the Association is a party or by which either of them or any of their
respective properties may be bound or affected, which contravention would be
material to the business of the Company or the Association taken as a whole; or
(ii) in violation of any term or provision of its certificate of incorporation,
charter or bylaws;
(xvi) The Registration Statement and the Prospectus (in each case as
amended or supplemented, if so amended or supplemented) comply as to form in all
material respects with the requirements of the 1933 Act and the rules,
regulations, and all written decisions and orders of the Commission (including,
without limitation, the Regulations) (except as to financial statements, notes
to financial statements, financial tables, the appraisal and other
20
<PAGE>
financial and statistical data included therein as to which no opinion need be
expressed) and the Form AC (including the Proxy Statement) (as amended or
supplemented, if so amended or supplemented) (except as to financial statements,
notes to financial statements, financial tables, the appraisal, business plan
and other financial and statistical data included therein as to which no opinion
need be expressed) complies as to form with the requirements of the Conversion
Regulations and any other applicable federal laws or regulations, decisions or
orders of the OTS; and
(xvii) To the best of such counsel's knowledge, neither the Company nor
the Association is in violation of any directive, order, agreement or
understanding from or with the FDIC, the OTS or any applicable state regulatory
agency to make any material change in the method of conducting its business, and
to the best of such counsel's knowledge, the Company and the Association have
conducted and are conducting their businesses so as to comply in all material
respects with all applicable statutes and regulations (including, without
limitation, regulations, decisions, directives and orders of the OTS, the FDIC
and applicable state regulatory agencies).
In rendering such opinion, such counsel may rely as to matters of fact on
certificates of officers, trustees and directors of the Company and the
Association and certificates of public officials, and as to matters of law other
than federal law, on opinions of other counsel admitted to practice the
applicable law reasonably acceptable to counsel for Hovde; provided, however,
that such counsel shall provide a letter addressed to Hovde which states that
with respect to the opinion of such other counsel, nothing has come to such
counsel's attention that would lead it to believe that it and Hovde are not
reasonably justified in relying upon such opinion. Such counsel may assume that
any agreement is the valid and binding obligation of any party to such agreement
other than the Company or the Association.
(b) At the Closing Date, Hovde shall receive the letter of Thacher Proffitt
& Wood, counsel for the Company and the Association, addressed to Hovde, dated
the Closing Date, in form and substance satisfactory to Hovde's counsel to the
following effect: During the preparation of the Registration Statement and the
Prospectus and any amendments or supplements thereto, such counsel participated
in conferences with management of and the independent public accountants for the
Company and the Association. Based upon such conferences and a review of
corporate records of the Company and the Association as such counsel conducted
in connection with the preparation of the Registration Statement and the
Prospectus, such counsel has no knowledge that would lead them to believe that
the Registration Statement, as amended or supplemented, if amended or
supplemented (except as to financial statements, notes to financial statements,
financial tables and other financial and statistical data contained therein with
respect to which no opinion need be expressed), at the time it became effective
and at the time any post-effective amendment thereto became effective, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they are made, not misleading, or that
the Prospectus, as amended or supplemented, if amended or supplemented (except
as to financial statements, notes to financial statements, financial tables, the
appraisal and other financial and statistical data included therein as to which
no opinion need be expressed), at the time the Registration Statement became
effective or at the time any
21
<PAGE>
amendment or supplement to the Prospectus was filed with the Commission or
transmitted to the Commission for filing or on such Closing Date, contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(c) At the Closing Date, Hovde shall receive the letter of Thacher Proffitt
& Wood, counsel for the Company and the Association, addressed to Hovde, dated
the Closing Date, in form and substance satisfactory to Hovde's counsel to the
effect that: nothing has come to their attention that would lead them to
believe that the Form AC and the Proxy Statement, as amended or supplemented, if
amended or supplemented (except as to financial statements, notes to financial
statements, financial tables, the business plan and the appraisal and other
financial and statistical data contained therein with respect to which no
opinion need be expressed), at the time it was approved by the OTS, contained
any untrue statement of material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading, or
that the Form AC and the Proxy Statement, as amended or supplemented, if amended
or supplemented (except as to financial statements, notes to financial
statements, financial tables, the business plan and the appraisal and other
financial and statistical data included therein as to which no opinion need be
expressed), at the time the Form AC and the Proxy Statement was approved by the
OTS or at the time the Proxy Statement was distributed to the Association's
members, contained any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) At the Closing Date, Hovde shall receive the favorable opinion of
Barack, Ferrazzano, Kirschbaum & Perlman, counsel for Hovde, dated the Closing
Date and addressed to Hovde, with respect to such matters as Hovde reasonably
may require. In rendering such opinion, such counsel may rely as to matters of
fact upon certificates of officers and directors of the Company and the
Association delivered pursuant hereto and as to matters of law relating to other
jurisdictions upon any opinion of local counsel.
(e) Prior to and at the Closing Date: (i) in the reasonable opinion of
Hovde, there shall have been no material adverse change in the condition
(financial or otherwise) or the business, properties or results of operations of
the Company or the Association, from the latest dates as of which such condition
is set forth in the Registration Statement and the Prospectus except as referred
to therein; (ii) there shall have been no material transaction entered into by
the Company or the Association without the prior written consent of Hovde (which
consent shall not be unreasonably withheld) from the latest date as of which the
financial condition of the Company or the Association is set forth in the
Registration Statement and Prospectus, other than transactions referred to or
contemplated therein or transactions in the ordinary course of business; (iii)
except as disclosed in the Registration Statement and the Prospectus, neither
the Company nor the Association shall have received from the OTS any direction
(oral or written) to make any material change in the method of conducting its
business with which it has not complied (which direction, if any, shall have
been disclosed to Hovde) or which materially and adversely would affect the
condition (financial or otherwise), or the business, properties or results of
operations of the Company or the Association; (iv) neither the Company nor the
Association shall have been in material default (nor shall an event have
occurred which, with
22
<PAGE>
notice or passage of time or both, would constitute a material default) under
any provision of any agreement or instrument relating to any outstanding
indebtedness; (v) no action, suit or proceeding, at law or in equity or before
or by any federal or state commission, board or other administrative agency,
shall be pending or, to the best knowledge of the Company or the Association,
threatened against the Company or the Association, or affecting any of their
properties wherein an unfavorable decision, ruling or finding would have a
material adverse effect on the condition (financial or otherwise), or the
business, properties or results of operations of the Company and the
Association, taken as a whole; (vi) the Shares shall have been qualified or
registered for offering and sale under the securities or "Blue Sky" laws of the
designated jurisdictions; (vii) there shall have been no suspension or
limitation in trading in securities generally on the Nasdaq National Market or
the New York Stock Exchange ("NYSE"), or the fixing of minimum or maximum prices
or the requiring of maximum ranges for prices for securities on or by the NYSE
or on or by The Nasdaq National Market; (viii) there shall have been no domestic
or international event, act or occurrence which has materially disrupted the
offering, sale or delivery of the Shares on the terms and in the manner
contemplated in the Registration Statement, the Form AC and the Prospectus; and
(ix) there shall have been no material decline in the price of equity or debt
securities traded on the NYSE or The Nasdaq National Market if the effect of
such a decline, in Hovde's good faith opinion, would make it impracticable or
inadvisable to proceed with the offering, sale or delivery of the Shares on the
terms and in the manner contemplated in the Registration Statement, the Form AC
and the Prospectus.
(f) At the Closing Date, Hovde shall receive a certificate of the chief
executive officer and of the principal financial or accounting officer of each
of the Company and the Association, dated the Closing Date, to the effect that:
(i) since the date as of which information is given in the Prospectus, the Proxy
Statement and the Registration Statement, there has been no material adverse
change in the condition (financial or otherwise), the business, properties or
results of operations of the Company or the Association, whether or not arising
in the ordinary course of business, except as disclosed in the Prospectus, the
Proxy Statement and the Registration Statement; (ii) the representations and
warranties of the Company and the Association in Section 2 hereof are true and
correct with the same force and effect as though expressly made at and as of the
Closing Date; (iii) the Company has complied in all material respects with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to the Closing Date under the Plan of Conversion; (iv) no order
revoking the approval of the Holding Company Application, the Form AC, the Proxy
Statement or the effectiveness of the Registration Statement or the Prospectus
has been initiated or threatened by the Commission, the OTS, the FDIC or any
applicable state authority; and (v) the conditions set forth in clauses (ii)
through (v) of subsection (e) of this Section 7 have been satisfied.
(g) Concurrently with the execution of this Agreement, Hovde shall receive
a letter form KPMG Peat Marwick LLP dated the date hereof and addressed to
Hovde: (i) confirming that KPMG Peat Marwick LLP is a firm of independent public
accountants within the meaning of the Code of Ethics of the American Institute
of Certified Public Accountants, the Regulations and the HOLA, and that no
information concerning its relationship with or interest in the Company or the
Association is required by Item 509 of Regulation S-K promulgated under the 1933
Act; (ii) stating in effect that in their opinion the financial statements of
the Company and
23
<PAGE>
the Association included in the Registration Statement and the Prospectus and
covered by their opinion included therein comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act, the
Regulations and applicable OTS regulations; (iii) stating in effect that, on the
basis of certain agreed upon procedures (but not an audit in accordance with
generally accepted auditing standards) consisting of a reading of the latest
available unaudited interim financial statements of the Association prepared by
the Association and consultations with officers of the Company and the
Association responsible for financial and accounting matters, and any other
procedures which may be specified by such firm, nothing came to their attention
which caused them to believe that: (A) any unaudited financial statements
included in the Registration Statement or the Prospectus fail to comply as to
form in any material respect with the applicable requirements of the 1933 Act,
the Regulations or the HOLA; (B) such unaudited financial statements are not in
conformity with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements included
in the Registration Statement and the Prospectus; (C) during the period from the
date of the latest audited financial statements (or unaudited financial
statements, if any later statements are included) included in the Registration
Statement or the Prospectus to a specified date not more than five business days
prior to the date of such letter, there was any material increase in borrowings
(other than as disclosed in the Prospectus or in the ordinary course of
business) by the Company or the Association; (D) at a specified date not more
than five business days prior to the date of such letter there was any decrease
in consolidated net assets of the Company or the Association as compared with
amounts shown in the latest statement of condition (or unaudited statement of
condition if a later statement is included) included in the Registration
Statement or the Prospectus other than as disclosed in the Prospectus; or (E)
during the period from the date of the latest audited statement of earnings (or
unaudited statement of earnings if a later statement is included) included in
the Registration Statement or the Prospectus to a specified date not more than
five business days prior to the date of such letter there was any decrease in
net income or the Association as compared with the comparable period in the
prior year, except in all instances as set forth in or contemplated by the
Registration Statement and the Prospectus or in such letter; and (iv) stating
that, in addition to the examination referred to in their opinion included in
the Registration Statement and the Prospectus and the performance of the
procedures referred to in clause (iii) of this subsection (g), they have
compared with the general accounting records of the Company or the Association
which are subject to the internal controls of the accounting system of the
Company or the Association, as appropriate, and other data prepared by the
Company or the Association directly from such accounting records, to the extent
specified in such letter, such amounts and/or percentages set forth in the
Registration Statement and the Prospectus as Hovde may reasonably request; and
they have found such amounts and percentages to be in agreement therewith
(subject to rounding).
(h) At the Closing Date, Hovde shall receive a letter from KPMG Peat
Marwick LLP dated the Closing Date and addressed to Hovde confirming the
statements made by them in the letter delivered by them pursuant to subsection
(g) of this Section 7, the "specified date" referred to in clauses (iii)(C), (D)
and (E) thereof to be a date specified in such letter, which shall be not more
than five business days prior to the Closing Date.
(i) At the Closing Date, the Company and the Association will have
received favorable opinions of: Thacher Proffitt & Wood, counsel to the Company
and the Association,
24
<PAGE>
with respect to the federal tax consequences of the Conversion; and KPMG Peat
Marwick LLP with respect to the Illinois tax consequences of the Conversion.
(j) No order suspending the sale of the Shares in any designated
jurisdiction shall have been issued on or prior to the Closing Date, and no
proceedings for that purpose shall have been instituted or, to the knowledge of
Hovde or the Company, shall be contemplated.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to Hovde and to counsel for Hovde. Any certificates
signed by an officer of the Company or the Association and delivered to Hovde or
to counsel for Hovde shall be deemed a representation and warranty by the
Company or the Association, as the case may be, to Hovde as to the statements
made therein. If any condition to Hovde's obligations hereunder to be fulfilled
prior to or at the Closing Date is not fulfilled, Hovde may terminate this
Agreement (provided that if this Agreement is so terminated but the sale of
Shares is nevertheless consummated, Hovde shall be entitled to the compensation
provided for in Section 3 hereof) or, if Hovde so elects, may waive any such
conditions which have not been fulfilled or may extend the time of their
fulfillment.
8. Indemnification and Contribution.
--------------------------------
(a) The Company and the Association jointly and severally agree to
indemnify and hold harmless Hovde, its affiliates, directors, officers, agents
and employees and each person, if any, who controls Hovde or any of its
affiliates within the meaning of Section 15 of the 1933 Act or Section 20(a) of
the Exchange Act against any and all losses, liabilities, claims, damages and
expenses (including, without limitation, reasonable attorneys' fees) whatsoever
and shall further promptly reimburse such persons for any legal or other
expenses reasonably incurred by each or any of them in investigating, preparing
to defend or defending against any such action, proceeding or claim (whether
commenced or threatened) arising out of or based upon (A) any untrue or alleged
untrue statement of a material fact or the omission or alleged omission of a
material fact required to be stated in or necessary to make not misleading any
statements contained in (i) the Registration Statement, the Prospectus, the
Proxy Statement or the Form AC (as from time to time amended and supplemented)
or (ii) any application to regulatory authorities or other document,
advertisement or communication (in this Section 8, collectively called
"Application") prepared or executed by or on behalf of the Company or the
Association with its consent or based upon information furnished by or on behalf
of the Company or the Association, whether or not filed in any jurisdiction in
order to qualify the Shares under the securities laws thereof or with the OTS or
the Commission, unless such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company or the
Association with respect to Hovde by or on behalf of Hovde expressly for use in
the Registration Statement, the Prospectus, the Proxy Statement, the Form AC or
any amendment or supplement thereof or in any Application, as the case may be;
or (B) the participation by Hovde in the Conversion in accordance with the terms
of this Agreement. This indemnity shall be in addition to any liability the
Company or the Association may otherwise have to Hovde; provided, however, that,
with respect to the Association, such indemnification shall be to the full
extent permitted by the OTS, the FDIC and the Board of Governors of the Federal
Reserve System. If any action is brought against Hovde or any other
25
<PAGE>
person the Company and the Association are obligated hereby to indemnify (an
"Indemnified Party"), then such Indemnified Party shall promptly notify in
writing the party or parties against whom indemnification is to be sought of
such action. The Company and the Association agree to promptly notify Hovde of
the commencement of any litigation or proceeding against the Company or the
Association or any of their officers or directors in connection with sale of the
Shares or in connection with the Registration Statement, the Prospectus, the
Proxy Statement, the Form AC or any amendment or supplement thereto or any
Application. In any and each such instance, Hovde shall be entitled to counsel
of its own choice.
(b) Hovde agrees to indemnify and hold harmless the Company and the
Association and their directors, officers, agents and employees and each person,
if any, who controls the Company or the Association within the meaning of
Section 15 of the 1933 Act or Section 20(a) of the Exchange Act, to the same
extent as the foregoing indemnity from the Company and the Association to Hovde,
but only with respect to statements or omissions, if any, made in the
Registration Statement, the Prospectus, the Proxy Statement or any amendment or
supplement thereto or in any Application in reliance upon, and in conformity
with, written information furnished to the Company or the Association with
respect to Hovde by or on behalf of Hovde expressly for use in the Registration
Statement, the Prospectus, the Proxy Statement or any amendment or supplement
thereto or in any Application. In case any action shall be brought against the
Company or the Association or any person so indemnified based on the
Registration Statement, the Prospectus, the Proxy Statement or any amendment or
supplement thereto or in any Application, and in respect of which indemnity may
be sought against Hovde, Hovde shall have the rights and duties given to the
Company and the Association and each person so indemnified shall have the rights
and duties given to Hovde by the provisions of subsection (a) above.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made by the indemnified party
against the indemnifying party under such subsection, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 8). In case any such action is
brought against any indemnified party, and it notifies an indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel satisfactory to
such indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by one of the indemnifying parties in connection
with the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to have charge of the defense of such action within a
reasonable time after notice of commencement of the action or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct and defense of such
action on behalf of
26
<PAGE>
the indemnified party or parties), in any of which events such fees and expenses
shall be borne by the indemnifying parties. Anything in this subsection to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
provided, however, that such consent was not unreasonably withheld.
(d) If the indemnification provided for in subsection (a) or (b), as the
case may be, is unavailable or insufficient to hold harmless Hovde, an
Indemnified Party or the Company and the Association, as the case may be, in
respect of any losses, claims, damages or liabilities (or actions in respect
thereof) referred to therein, then the Company and the Association or Hovde, as
the case may be, in lieu of indemnifying such Indemnified Party thereunder,
shall contribute to the amount paid or payable for such loses, claims, damages
or liabilities (or actions in respect thereof): (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Association on the one hand and Hovde on the other from the offering of the
Shares; or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company or the Association on the one hand and of Hovde on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Association on the one hand and Hovde on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Shares (before deducting expenses) received by the Company and the
Association bear to the total compensation received by Hovde. The relative
fault of the Company and the Association on the one hand, and of Hovde on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Company or the Association
on the one hand or by Hovde on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company, the Association and Hovde agree that it would not be just and
equitable if contribution pursuant to this subsection (d) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party or the Company
and the Association, as the case may be, as a result of the losses, claims,
damages and liabilities (or action in respect thereof) referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party or the Company and the Association, as the case may be,
in connection with investigating or defending any such action or claim.
Notwithstanding anything to the contrary contained in this Agreement, Hovde
shall not be required to contribute any amount in excess of the amount by which
the total compensation received by Hovde pursuant to this Agreement exceeds the
amount of any damages which Hovde has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution form any person who was
not guilty of such fraudulent misrepresentation.
27
<PAGE>
9. Survival of Agreements, Representations and Indemnities. The
-------------------------------------------------------
respective indemnities of the Company, the Association and Hovde and the
representations and warranties of the Company and the Association set forth in
or made pursuant to this Agreement shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of Hovde, the Company and the Association or
any controlling person referred to in Section 8 hereof, and shall survive any
termination of this Agreement and/or issuance of the Shares, and any successor
or assign of Hovde, the Company, the Association or any such controlling person
or any legal representative of such controlling person shall be entitled to the
benefit of the respective indemnities, agreements, warranties and
representations.
10. Termination.
-----------
(a) Hovde shall have the right to terminate this Agreement at any time
prior to the Closing Date: (i) if the United States, having become involved in a
war or major hostilities, has materially disrupted or in Hovde's good faith
opinion will in the immediate future materially disrupt, or any domestic or
international event or act or occurrence has materially disrupted, or in Hovde's
good faith opinion will in the immediate future materially disrupt, the
offering, sale or delivery of the Shares on the terms and in the manner
contemplated in the Registration Statement and the Prospectus; (ii) if trading
in securities generally on the Nasdaq National Market or the NYSE shall have
been suspended, or minimum or maximum prices for trading shall have been fixed,
or maximum ranges of prices for securities shall have been required, on or by
the NYSE, on or by The Nasdaq National Market or by the order of the Commission
or any other governmental authority having jurisdiction; (iii) if a banking
moratorium has been declared by an Illinois, Delaware or federal authority or
any other state authority having an adverse impact on the national banking
community; (iv) if the Company or the Association shall have sustained a loss
material to the Company and the Association, taken as a whole, by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act, whether or not covered by insurance, which in Hovde's good faith opinion
would make it inadvisable to proceed with the offering, sale or delivery of the
Shares; (v) if there shall have been such material adverse change or any
development involving a prospective material adverse change, in the condition
(financial or otherwise), business, properties or results of operations of the
Company or the Association taken as a whole or the prospective market for the
Company's securities as in Hovde's good faith opinion would make it inadvisable
to proceed with the offering, sale or delivery of the Shares; (vi) if there is
material decline in the price of equity or debt securities traded on the NYSE or
the Nasdaq National Market if the effect of such a decline, in Hovde's good
faith judgement, makes it impracticable or inadvisable to proceed with the
offering, sale or delivery of the Shares on the terms and in the manner
contemplated in the Registration Statement, the Form AC and the Prospectus; and
(vii) if the Company fails to receive orders for all of the minimum number of
Shares within the period of time specified by, and in accordance with, the
provisions of the Plan of Conversion and the Conversion Regulations.
(b) If Hovde elects to terminate this Agreement as provided in this Section
10, the Company shall be notified promptly by Hovde by telephone or telegram,
confirmed by letter. A termination pursuant to this Section 10 shall not
prevent the sale or delivery of the Shares by
28
<PAGE>
the Company or the Conversion, but such sale, delivery or consummation of the
Conversion shall in no way limit Hovde's legal rights, if any, against the
Association or the Company hereunder.
(c) Notwithstanding anything contained herein to the contrary, if the
Conversion is not consummated as a result of the termination of this Agreement
pursuant to Section 10(a) hereof or because the Plan of Conversion is terminated
or the period prescribed by regulations (including all extensions) in which the
conversion must be completed expires prior to the completion of the Conversion,
Hovde shall be entitled to retain any fees paid to Hovde through the date of
termination, and thereafter the sole liability of the Company and the
Association to Hovde will be to reimburse Hovde pursuant to Section 6 and for
obligations assumed by the Company and the Association pursuant to subsections
(a) and (c) of Section 8 hereof. Upon demand and receipt of proper invoices for
expenses, the Company and the Association will pay Hovde the full amount so
owing. To the extent that Hovde has received any amounts in excess of those to
which it is entitled hereunder it shall repay them to the Company and the
Association.
11. Notices. All communications hereunder, except as herein otherwise
-------
specifically provided, shall be in writing and if sent to Hovde shall be mailed,
delivered or telegraphed and confirmed to Hovde Securities, Inc., 1826 Jefferson
Place, N.W., Washington, D.C. 20036, attention: Eugene S. Weil, Esq., General
Counsel (with a copy, in the case of communications under Section 8 hereof, to
Barack, Ferrazzano, Kirschbaum & Perlman, 333 West Wacker Drive, Suite 2700,
Chicago, Illinois 60606, Attention: John E. Freechack, Esq.); if sent to the
Company or the Association shall be mailed, delivered or telegraphed and
confirmed to Home Federal Savings and Loan Association of Elgin, 16 North Spring
Street, Elgin, Illinois 60120, attention: Mr. George L. Perucco, President
(with a copy in the case of communications under Section 8 hereof to Thacher
Proffitt & Wood, 1500 K Street, N.W., Suite 200, Washington, D.C. 20005,
attention: V. Gerard Comizio, Esq.).
12. Parties. This Agreement shall inure solely to the benefit of, and
-------
shall be binding upon, Hovde, the Company, the Association and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
13. Construction. This Agreement shall be construed in accordance with
------------
the laws of the State of Illinois.
14. Severability. In the event that any term, provision or covenant
------------
herein or the application thereof to any circumstance or situation shall be
invalid or unenforceable, in whole or in part, the remainder hereof and the
application of said term, provision or covenant to any other circumstance or
situation shall not be affected thereby, and each term, provision or covenant
herein shall be valid and enforceable to the full extent permitted by law.
29
<PAGE>
15. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which so executed and delivered shall be an original, but
all of which together shall constitute but one and the same instrument.
Time shall be of the essence of this Agreement.
If the foregoing correctly sets forth the understanding between Hovde and
the Company and the Association, please so indicate in the space provided below
for the purpose, whereupon this letter shall constitute a binding agreement
between us.
Yours very truly,
HOME BANCORP OF ELGIN, INC.
By: ____________________________________
George L. Perucco
President
HOME FEDERAL SAVINGS AND LOAN
ASSOCIATION OF ELGIN
By: ____________________________________
George L. Perucco.
President
Accepted as of the date first
above written.
HOVDE SECURITIES, INC.
By: ____________________________________
Steven D. Hovde
Managing Director
30
<PAGE>
EXHIBIT 1.2(A)
HOME BANCORP OF ELGIN, INC.
6,095,000 SHARES
(anticipated maximum)
(subject to increase to up to 7,009,250
shares in the event of an oversubscription)
COMMON STOCK
(par Value $.01 Per Share)
SELECTED DEALER'S AGREEMENT
---------------------------
_______________, 1996
We have agreed to assist Home Bancorp of Elgin, Inc., a Delaware
corporation (the "Company"), in connection with the offer and sale of shares
(the "Shares") of Common Stock, par value $.01 per share, of the Company, to be
issued in connection with the conversion of Home Federal Savings and Loan
Association of Elgin, a federally chartered savings association (the
"Association"), from mutual to stock form. The Company, in connection with this
plan to effect such conversion, offered 6,095,000 Shares for subscription by
certain of the Association's depositors and borrowers in a subscription offering
and to certain members of the general public in a direct community offering.
The Shares which were not subscribed for pursuant to such subscription and
direct community offerings are being offered to the public in a syndicated
community offering ( the "Syndicated Community Offering") in accordance with the
rules of the Office of Thrift Supervision, Department of the Treasury. The
Shares, the bases on which the number of Shares to be issued may change, and
certain of the terms on which they are being offered are more fully described in
the enclosed Prospectus (the "Prospectus").
We are offering to Selected Dealers (of which you are one) the opportunity
to participate in the solicitation of offers to buy the Shares in the Syndicated
Community Offering and we will pay you a fee in the amount of ___________
percent (__%) of the dollar amount of the Shares sold on behalf of the Company
by you. The number of Shares sold by you shall be determined based on the
authorized designation of your firm on the order form or forms for such Shares
accompanying the funds transmitted for payment therefor (whether in the form of
a check payable to the Association or a withdrawal from an existing account at
the Association) to the special account established by the Company for the
purpose of holding such funds. It is understood, of course, that payment of
your fee will be made only out of compensation received by us for the Shares
sold on behalf of the Company by you, as evidenced in accordance with the
preceding sentence. The Company has requested us to invite you to become a
"Sponsoring Dealer," that is, a Selected Dealer who solicits offers which result
in the sale on behalf of the Company of at least __________ Shares. You may
become a Sponsoring Dealer (subject to your fulfillment of the requirement in
the preceding sentence) by checking the box on the confirmation at the end of
this letter. If you become a Sponsoring Dealer, you shall be entitled to an
additional fee in the amount of ________________ percent (____%) of the dollar
amount of the Shares sold on behalf of the Company by you as evidenced in the
manner set forth above.
<PAGE>
Each order form for the purchase of Shares must set forth the identity,
---- --------
address and tax identification number of each person ordering Shares regardless
- ------- -------------------------
of whether the Shares will be registered in a street name or in the purchaser's
name. Such order form should clearly identify your firm.
As soon as practicable after all the Shares are sold, we will remit to you,
out of our compensation as provided above, the fees to which you are entitled
hereunder, including your Sponsoring Dealer fee.
This offer is made subject to the terms and conditions herein set forth and
is made only to Selected Dealers which are: (i) members in good standing of the
National Association of Securities Dealers, Inc. (the "NASD") which agree to
comply with all applicable rules of the NASD, including, without limitation, the
NASD's Interpretation With Respect to Free-Riding and Withholding and Section 24
of Article III of the NASD's Rules of Fair Practice; or (ii) foreign dealers not
eligible for membership in the NASD which agree (A) not to sell any Shares
within the United States, its territories or possessions or to person who are
citizens thereof or resident therein and (B) in making other sales to comply
with the above-mentioned NASD Interpretation, Sections 8, 24 and 36 of the
above-mentioned Article III as if they were NASD members and Section 25 of such
Article III as it applies to non-member brokers or dealers in a foreign country.
Orders for Shares will be strictly subject to confirmation and we, acting
on behalf of the Company, reserve the right in our absolute discretion to reject
any order in whole or in part, to accept or reject orders in the order of their
receipt or otherwise, and to allot. Neither you nor any other person is
authorized by the Company, the Association or us to give any information or make
any representations other than those contained in the Prospectus in connection
with the sale of any of the Shares. No Selected Dealer is authorized to act as
agent for us when soliciting offers to buy the Shares from the public or
otherwise. No Selected Dealer shall engage in any stabilizing (as defined in
Rule 10b-7 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) with respect to the Company's Common Stock during the
offering.
We and each Selected Dealer assisting in selling Shares pursuant hereto
agree to comply with the applicable requirements of the Exchange Act and
applicable rules and regulations issued by the Office of Thrift Supervision. In
addition, we and each Selected Dealer confirm that the Securities and Exchange
Commission interprets Rule 15c2-8 promulgated under the Exchange Act as
requiring that a prospectus be supplied to each person who is expected to
receive a confirmation of sale 48 hours prior to delivery of such person's order
form.
We and each Selected Dealer further agree to the extent that our customers
desire to pay for Shares with funds held by or to be deposited with us, in
accordance with the interpretation of the Securities and Exchange Commission of
Rule 15c2-4 promulgated under the Exchange Act either: (a) upon receipt of an
executed order form or direction to execute an order form on behalf of a
customer, to forward the Syndicated Community Offering price for the Shares
ordered at or before 12:00 p.m. on the business day following receipt or
execution of any order form by us to the Association for deposit in a segregated
account; or (b) to solicit indications
2
<PAGE>
of interest in which event (i) we will subsequently contact any customer
indicating interest to confirm the interest and give instructions to execute and
return an order form or to receive authorization to execute an order form on
their behalf, (ii) we will mail acknowledgments of receipt of order to each
customer confirming interest on the business day following such confirmation,
(iii) we will debit accounts of such customers on the fifth business day (the
"debit date") following receipt of the confirmation referred to in clause (i)
above and (iv) we will forward completed order forms together with such funds to
the Association on or before 12:00 p.m. on the next business day following the
debit date for deposit in a segregated account. We acknowledge that if the
procedure in (b) is adopted, our customers' funds are not required to be in
their accounts until the debit date. We and each Selected Dealer further
acknowledge that, in order to use the foregoing "sweep arrangements," we comply
with the net capital requirements for broker/dealers under Rule 15c3-1(a)(1) of
the Exchange Act.
Unless earlier terminated by us, this Agreement shall terminate forty-five
(45) full business days after the date hereof, but may be extended by us for an
additional period or periods not exceeding thirty (30) full business days in the
aggregate. We may terminate this Agreement or any provisions hereof at any time
by written or telegraphic notice to you. The obligations hereunder are subject
to the successful completion of the offering, including the sale of all of the
Shares.
You agree that at any time or times prior to the termination of this
Agreement you will, upon our request, report to us the number of Shares sold on
behalf of the Company by you under this Agreement.
We shall have full authority to take such actions as we may deem advisable
in respect of all matters pertaining to the offering. We shall be under no
liability to you except for lack of good faith and for obligations expressly
assumed by us in this Agreement.
Upon application to us, we will inform you as to the states in which we
believe the Shares have been qualified for sale under, or are exempt from the
requirements of, the respective "Blue Sky"laws of such states, but we assume no
responsibility or obligation as to your rights to sell Shares in any state.
Additional copies of the Prospectus and any supplements thereto will be
supplied in reasonable quantities upon request.
Any notice from us to you shall be deemed to have been duly given if
mailed, telephoned or telegraphed to you at the address to which this Agreement
is mailed.
This Agreement shall be construed in accordance with the laws of the State
of Illinois.
Please confirm your agreement hereto by signing and returning the
confirmation accompanying this letter at once to us at Hovde Securities, Inc.,
1826 Jefferson Place, N.W., Washington, D.C. 20036. The enclosed duplicate copy
will evidence the agreement between us.
3
<PAGE>
Very truly yours,
HOVDE SECURITIES, INC.
By: ____________________________________
Steven D. Hovde
Managing Director
4
<PAGE>
Hovde Securities, Inc.
1826 Jefferson Place, N.W.
Washington, D.C. 20036
Re: Home Bancorp of Elgin, Inc.
---------------------------
We hereby confirm our agreement to all the terms and conditions stated in
the foregoing letter. We acknowledge receipt of the Prospectus relating to the
Shares and we further state that in agreeing thereto we have relied upon the
Prospectus and no other statement whatsoever, written or oral. We confirm that
we are (i) a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD"), which agrees to comply with all applicable rules of
the NASD, including, without limitation, the NASD's Interpretation With Respect
to Free-Riding and Withholding and Section 24 of Article III of the NASD's Rules
of Fair Practice, or (ii) a foreign dealer not eligible for membership in the
NASD which agrees (A) not to sell any Shares within the United States, its
territories or possessions or to person who are citizens thereof or resident
therein and (B) in making other sales to comply with the above mentioned NASD
Interpretation, Sections 8, 24 and 36 of the above-mentioned Article III as if
we were NASD members and Section 25 of such Article III as it applies to a non-
member broker or dealer in a foreign country.
_______ We wish to become a "Sponsoring Dealer."
---------------------------------------
(Please print or type name of firm)
---------------------------------------
(Authorized Representative)
Dated:________________
5
<PAGE>
EXHIBIT 5.1
THACHER PROFFITT & WOOD
July 22, 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 7,009,250 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.
July, 22, 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 /s/ V. Gerard Comizio
V. Gerard Comizio
<PAGE>
THACHER PROFFITT & WOOD
Two World Trade Center
New York, New York 10048
(212) 912-7628
July 24, 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 7,009,250 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 July 24, 1996 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
July 24, 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
July 24, 1996 Page 3.
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: /s/ James R. Shorter
--------------------
James R. Shorter
AJC:jwl
<PAGE>
[HOME BANCORP OF ELGIN, INC. LETTERHEAD]
September __, 1996
Home Bancorp of Elgin, Inc.
Employee Stock Ownership Plan Trust
c/o Home Bancorp of Elgin, Inc.
16 North Central Street
Elgin, Illinois 60120-5569
Attention: Mr. George L. Perucco
Chief Executive Officer
-----------------------
Dear Mr. Perucco:
This letter confirms Home Bancorp of Elgin, Inc.'s commitment to fund
a leveraged ESOP in an amount up to $6,612,500. The commitment is subject to
the following terms and conditions:
1. Lender: Home Bancorp of Elgin, Inc. (the "Company").
------
2. Borrower: Home Bancorp of Elgin, Inc. Employee Stock Ownership Plan
--------
Trust ("Borrower").
3. Trustee: [___________________]
-------
4. Security: Unreleased shares of stock of the Company held in the Home
--------
Bancorp of Elgin, Inc. Employee Stock Ownership Plan .
5. Maturity: Generally, up to 10 years from takedown.
--------
6. Amortization: Equal principal payments on annual basis, with pro-
------------
rated principal payments for partial years. Certain principal
payments may be deferred to the extent that such payments would be
nondeductible for federal income tax purposes or our consolidated
annual return on average assets or annual return on average equity
(after provision for the payment) would be less than [0.5% or 4%,]
respectively, for the fiscal year in which the payment would otherwise
be due.
7. Pricing: Eight percent (8%) per annum.
-------
8. Interest Payments: Annually, 365 day basis.
-----------------
<PAGE>
Page 2.
9. Funding: In full by September ___, 1996, unless such date is waived by
-------
the Company.
10. Prepayment: Voluntary prepayments are permitted at any time provided
----------
advance notice is given by the Borrower to the Company.
11. Conditions Precedent to Closing: Receipt by the Company of all
-------------------------------
supporting loan documents in a form and with terms and conditions
satisfactory to the Company and its counsel.
12. Closing Date: Not later than September ___, 1996, unless such date is
------------
waived by the Company.
13. Other: Loan to be structured to comply in all respects with the
-----
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
If the terms and conditions are agreeable to you, please indicate your
acceptance by signing the enclosed copy and returning it to my attention.
Sincerely,
Home Bancorp of Elgin, Inc.
By:
-----------------------------
Accepted on Behalf of
Home Bancorp of Elgin, Inc.
Employee Stock Ownership Plan Trust
By: [________________], as Trustee Date:
Name: ----------------------
Title:
<PAGE>
LOAN AGREEMENT
BY AND BETWEEN
HOME BANCORP OF ELGIN, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
AND
HOME BANCORP OF ELGIN, INC.
MADE AND ENTERED INTO AS OF
SEPTEMBER, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
---------
DEFINITIONS
-----------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1.1 BUSINESS DAY.......................................... 1
SECTION 1.2 CODE.................................................. 1
SECTION 1.3 DEFAULT............................................... 2
SECTION 1.4 ERISA................................................. 2
SECTION 1.5 EVENT OF DEFAULT...................................... 2
SECTION 1.6 FISCAL YEAR........................................... 2
SECTION 1.7 INDEPENDENT COUNSEL................................... 2
SECTION 1.8 LOAN.................................................. 2
SECTION 1.9 LOAN DOCUMENTS........................................ 2
SECTION 1.10 PLEDGE AGREEMENT...................................... 2
SECTION 1.11 PRINCIPAL AMOUNT...................................... 2
SECTION 1.12 PROMISSORY NOTE....................................... 2
SECTION 1.13 REGISTER.............................................. 2
</TABLE>
ARTICLE II
----------
THE LOAN; PRINCIPAL AMOUNT;
INTEREST; SECURITY; INDEMNIFICATION
-----------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 2.1 THE LOAN; PRINCIPAL AMOUNT............................. 2
SECTION 2.2 INTEREST............................................... 3
SECTION 2.3 PROMISSORY NOTE........................................ 4
SECTION 2.4 PAYMENT OF TRUST LOAN.................................. 4
SECTION 2.5 PREPAYMENT............................................. 5
SECTION 2.6 METHOD OF PAYMENTS..................................... 5
SECTION 2.7 USE OF PROCEEDS OF LOAN................................ 6
SECTION 2.9 REGISTRATION OF THE PROMISSORY NOTE.................... 6
</TABLE>
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
----------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 3.1 POWER, AUTHORITY, CONSENTS............................. 7
SECTION 3.2 DUE EXECUTION, VALIDITY, ENFORCEABILITY................ 7
SECTION 3.3 PROPERTIES, PRIORITY OF LIENS.......................... 7
SECTION 3.4 NO DEFAULTS, COMPLIANCE WITH LAWS...................... 7
SECTION 3.5 PURCHASES OF COMMON STOCK.............................. 8
</TABLE>
<PAGE>
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF THE LENDER
--------------------------------------------
Page
----
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 4.1 POWER, AUTHORITY, CONSENTS............................. 8
SECTION 4.2 DUE EXECUTION, VALIDITY, ENFORCEABILITY................ 8
SECTION 4.3 ESOP; CONTRIBUTIONS.................................... 9
SECTION 4.4 TRUSTEE; COMMITTEE..................................... 9
SECTION 4.5 COMPLIANCE WITH LAWS; ACTIONS.......................... 9
</TABLE>
ARTICLE V
---------
EVENTS OF DEFAULT
-----------------
SECTION 5.1 EVENTS OF DEFAULT UNDER LOAN AGREEMENT................... 9
SECTION 5.2 LENDER'S RIGHTS UPON EVENT OF DEFAULT.................... 10
ARTICLE VI
----------
MISCELLANEOUS PROVISIONS
------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 6.1 PAYMENTS DUE TO THE LENDER............................ 10
SECTION 6.2 PAYMENTS.............................................. 10
SECTION 6.3 SURVIVAL.............................................. 11
SECTION 6.4 MODIFICATIONS, CONSENTS AND WAIVERS; ENTIRE AGREEMENT. 11
SECTION 6.5 REMEDIES CUMULATIVE................................... 11
SECTION 6.6 FURTHER ASSURANCES; COMPLIANCE WITH COVENANTS......... 11
SECTION 6.7 NOTICES............................................... 12
SECTION 6.8 COUNTERPARTS.......................................... 13
SECTION 6.9 CONSTRUCTION; GOVERNING LAW........................... 13
SECTION 6.10 SEVERABILITY.......................................... 13
SECTION 6.11 BINDING EFFECT; NO ASSIGNMENT OR DELEGATION........... 14
EXHIBIT A FORM OF PROMISSORY NOTE..................................... A-1
EXHIBIT B FORM OF PLEDGE AGREEMENT.................................... B-1
EXHIBIT C FORM OF ASSIGNMENT.......................................... C-1
EXHIBIT D FORM OF IRREVOCABLE PROXY................................... D-1
</TABLE>
<PAGE>
LOAN AGREEMENT
--------------
This LOAN AGREEMENT ("Loan Agreement") is made and entered into as of
the _____th day of ________, 1996, by and between the HOME BANCORP OF ELGIN,
INC. EMPLOYEE STOCK OWNERSHIP PLAN TRUST ("Borrower"), a trust forming part of
the Home Bancorp of Elgin, Inc. Employee Stock Ownership Plan ("ESOP"), acting
through and by its Trustee, [____________________] ("Trustee"), a banking
corporation organized under the laws of the State of Illinois and having an
office at [________________________]; and HOME BANCORP OF ELGIN, INC.
("Lender"), a corporation organized and existing under the laws of the state of
Illinois, having an office at 16 North Spring Street, Elgin, Illinois 60120-
5569.
W I T N E S S E T H :
-------------------
WHEREAS, the Board of Directors of the Lender ("Board") has authorized
the Borrower to purchase shares of common stock of Home Bancorp of Elgin, Inc.
("Common Stock"), either directly from Home Bancorp of Elgin, Inc. or in open
market purchases, in an amount not to exceed 661,250 shares of Common Stock or,
if less, shares of Common Stock having an aggregate purchase price of Six
Million Six Hundred and Twelve Thousand and Five Hundred Dollars
($6,612,500.00); and
WHEREAS, the Board has further authorized the Borrower to borrow funds
from the Lender for the purpose of financing authorized purchases of Common
Stock; and
WHEREAS, the Lender is willing to make a loan to the Borrower for such
purpose;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
The following definitions shall apply for purposes of this Loan
Agreement, except to the extent that a different meaning is plainly indicated by
the context:
SECTION 1.1 BUSINESS DAY means any day other than a Saturday, Sunday
------------
or other day on which banks are authorized or required to close under federal
law or the laws of the State of Illinois.
SECTION 1.2 CODE means the Internal Revenue Code of 1986 (including
----
the corresponding provisions of any succeeding law).
<PAGE>
-2-
SECTION 1.3 DEFAULT means an event or condition which would
-------
constitute an Event of Default. The determination as to whether an event or
condition would constitute an Event of Default shall be determined without
regard to any applicable requirement of notice or lapse of time.
SECTION 1.4 ERISA means the Employee Retirement Income Security Act
-----
of 1974, as amended (including the corresponding provisions of any succeeding
law).
SECTION 1.5 EVENT OF DEFAULT means an event or condition described in
----------------
Article 5.
SECTION 1.6 FISCAL YEAR means the fiscal year of Home Bancorp of
-----------
Elgin, Inc.
SECTION 1.7 INDEPENDENT COUNSEL means Thacher Proffitt & Wood or
-------------------
other counsel mutually satisfactory to both the Lender and the Borrower.
SECTION 1.8 LOAN means the loan described in section 2.1.
----
SECTION 1.9 LOAN DOCUMENTS means, collectively, this Loan Agreement,
--------------
the Promissory Note and the Pledge Agreement and all other documents now or
hereafter executed and delivered in connection with such documents, including
all amendments, modifications and supplements of or to all such documents.
SECTION 1.10 PLEDGE AGREEMENT means the agreement described in
----------------
section 2.8(a).
SECTION 1.11 PRINCIPAL AMOUNT means the face amount of the Promissory
----------------
Note, determined as set forth in section 2.1(c).
SECTION 1.12 PROMISSORY NOTE means the promissory note described in
---------------
section 2.3.
SECTION 1.13 REGISTER means the register described in section 2.9.
--------
ARTICLE II
----------
THE LOAN; PRINCIPAL AMOUNT;
INTEREST; SECURITY; INDEMNIFICATION
-----------------------------------
SECTION 2.1 THE LOAN; PRINCIPAL AMOUNT.
--------------------------
(a) The Lender hereby agrees to lend to the Borrower such amounts, and
at such times, as shall be determined under this section 2.1; provided, however,
that in no event shall the aggregate amount lent under this Loan Agreement from
time to time exceed the lesser
<PAGE>
-3-
of (i) Six Million, Six Hundred Twelve Thousand, Five Hundred Dollars
($6,612,500.00) or (ii) the aggregate amount paid by the Borrower, exclusive of
commissions, fees and other charges, to purchase 661,250 shares of Common Stock.
(b) Subject to the limitations of section 2.1(a), the Borrower shall
determine the amounts borrowed under this Agreement, and the times at which such
borrowings are effected. Each such determination shall be evidenced in a
writing which shall set forth the amount to be borrowed and the date on which
the Lender shall disburse such amount, and such writing shall be furnished to
the Lender by notice from the Borrower. The Lender shall disburse to the
Borrower the amount specified in each such notice on the date specified therein
or, if later, as promptly as practicable following the Lender's receipt of such
notice; provided, however, that the Lender shall have no obligation to disburse
funds pursuant to this Agreement following the occurrence of a Default or an
Event of Default until such time as such Default or Event of Default shall have
been cured.
(c) For all purposes of this Loan Agreement, the Principal Amount on
any date shall be equal to the excess, if any, of:
(i) the aggregate amount disbursed by the Lender pursuant to section
2.1(b) on or before such date; over
(ii) the aggregate amount of any repayments of such amounts made
before such date.
The Lender shall maintain on the Register a record of, and shall record on the
Promissory Note, the Principal Amount, any changes in the Principal Amount and
the effective date of any changes in the Principal Amount.
SECTION 2.2 INTEREST.
--------
(a) The Borrower shall pay to the Lender interest on the Principal
Amount, for the period commencing on the date of this Loan Agreement and
continuing until the Principal Amount shall be paid in full, the rate of eight
percent (8%) per annum. Interest payable under this Agreement shall be computed
on the basis of a year of 365 days and actual days elapsed (including the first
day but excluding the last) occurring in the period to which the computation
relates.
(b) Except as otherwise provided in this section 2.2(b), accrued
interest on the Principal Amount shall be payable by the Borrower annually in
arrears commencing on the last Business Day of the first calendar year to end
following the date of this Agreement and continuing on the last Business Day of
each calendar year thereafter and upon the payment or prepayment of such Loan.
All interest on the Principal Amount shall be paid by the Borrower in
immediately available funds. The Lender shall remit to the Borrower, at least
three (3) Business Days before the end of each calendar year, a statement of the
interest payment due under section 2.2(a) for such year; provided, however, that
a delay or failure by the Lender in providing the Borrower with such statement
shall not alter the Borrower's obligation to make such payment.
<PAGE>
-4-
(c) Anything in this Loan Agreement or the Promissory Note to the
contrary notwithstanding, the obligation of the Borrower to make payments of
interest shall be subject to the limitation that payments of interest shall not
be required to be made to the Lender to the extent that the Lender's receipt
thereof would not be permissible under the law or laws applicable to the Lender
limiting rates of interest which may be charged or collected by the Lender. Any
such payment referred to in the preceding sentence shall be made by the Borrower
to the Lender on the earliest interest payment date or dates on which the
receipt thereof would be permissible under the laws applicable to the Lender
limiting rates of interest which may be charged or collected by the Lender.
Such deferred interest shall not bear interest.
SECTION 2.3 PROMISSORY NOTE.
---------------
The Loan shall be evidenced by a Promissory Note of the Borrower in
substantially the form of Exhibit A attached hereto, dated the date hereof,
payable to the order of the Lender in the Principal Amount and otherwise duly
completed.
SECTION 2.4 PAYMENT OF TRUST LOAN.
---------------------
(a) The Principal Amount of the Loan shall be repaid in annual
installments payable on the last Business Day of each Fiscal Year ending after
the date of this Agreement. The amount of each such annual installment shall be
equal to a fraction of the Principal Amount on the due date of such installment,
determined in accordance with the following schedule:
<TABLE>
<CAPTION>
INSTALLMENT DUE ON FRACTION OF OUTSTANDING
LAST BUSINESS DAY OF PRINCIPAL AMOUNT
------------------- ----------------
FISCAL YEAR ENDING
------------------
IN
--
<S> <C>
1996 1/120
1997 1/10
1998 1/10
1999 1/10
2000 1/10
2001 1/10
2002 1/10
2003 1/10
2004 1/10
2005 1/10
10th anniversary of loan entire outstanding
Principal Amount
</TABLE>
; provided, however, that the Borrower shall not be required to make any payment
of principal due to be made in any Fiscal Year to the extent that (i) following
such payment, the consolidated return on average assets of Home Bancorp of
Elgin, Inc. for such Fiscal Year would be less than one-half of one percent
(0.5%) or the consolidated return on average equity for such Fiscal Year
<PAGE>
-5-
would be less than [four percent (4%)] or (ii) such payment would not be
deductible for federal income tax purposes for such Fiscal Year under section
404 of the Code.
(b) Any payment not required to made pursuant to the clause (i) of the
proviso in section 2.4(a) shall be deferred to and be payable on the earlier of
the twentieth (20th) anniversary of the loan origination date or the last
Business Day of the first Fiscal Year in which such proviso would not apply to
alleviate a requirement of payment; and payment not required to be made pursuant
to clause (ii) of section 2.4(a) shall be deferred to and be payable on the last
day of the first Fiscal Year in which such payment may be made on a tax
deductible basis.
SECTION 2.5 PREPAYMENT.
----------
The Borrower shall be entitled to prepay the Loan in whole or in part,
at any time and from time to time; provided, however, that the Borrower shall
give notice to the Lender of any such prepayment; and provided, further, that
any partial prepayment of the Loan shall be in an amount not less than TEN
THOUSAND DOLLARS ($10,000.00). Any such prepayment shall be: (a) permanent and
irrevocable: (b) accompanied by all accrued interest through the date of such
prepayment; (c) made without premium or penalty; and (d) applied in the inverse
order of the maturity of the installments thereof unless the Lender and the
Borrower agree to apply such prepayments in some other order.
SECTION 2.6 METHOD OF PAYMENTS.
------------------
(a) All payments of principal, interest, other charges (including
indemnities) and other amounts payable by the Borrower hereunder shall be made
in lawful money of the United States, in immediately available funds, to the
Lender at the address specified in or pursuant to this Loan Agreement for
notices to the Lender, not later than 3:00 P.M., Chicago time, on the date on
which such payment shall become due. Any such payment made on such date but
after such time shall, if the amount paid bears interest, and except as
expressly provided to the contrary herein, be deemed to have been made on, and
interest shall continue to accrue and be payable thereon until, the next
succeeding Business Day. If any payment of principal or interest becomes due on
a day other than a Business Day, such payment may be made on the next succeeding
Business Day, and when paid, such payment shall include interest to the day on
which such payment is in fact made.
(b) Notwithstanding anything to the contrary contained in this Loan
Agreement or the Promissory Note, neither the Borrower nor the Trustee shall be
obligated to make any payment, repayment or prepayment on the Promissory Note or
take or refrain from taking any other action hereunder or under the Promissory
Note if doing so would cause the ESOP to cease to be an employee stock ownership
plan within the meaning of section 4975(e)(7) of the Code or qualified under
section 401(a) of the Code or cause the Borrower to cease to be a tax exempt
trust under section 501(a) of the Code or if such act or failure to act would
cause the Borrower or the Trustee to engage in any "prohibited transaction" as
such term is defined in section 4975(c) of the Code and the regulations
promulgated thereunder which is not exempted by section 4975(c)(2) or (d) of the
Code and the regulations promulgated thereunder or in section 406 of ERISA and
the regulations promulgated thereunder which is not exempted by section 408(b)
of ERISA and the regulations promulgated thereunder; provided, however, that in
each
<PAGE>
-6-
case, the Borrower or the Trustee or both, as the case may be, may act or
refrain from acting pursuant to this section 2.6(b) on the basis of an opinion
of Independent Counsel. The Borrower and the Trustee may consult with
Independent Counsel, and any opinion of such Independent Counsel shall be full
and complete authorization and protection in respect of any action taken or
suffered or omitted by it hereunder in good faith and in accordance with such
opinion of Independent Counsel. Nothing contained in this section 2.6(b) shall
be construed as imposing a duty on either the Borrower or the Trustee to consult
with Independent Counsel. Any obligation of the Borrower or the Trustee to make
any payment, repayment or prepayment on the Promissory Note or to take or
refrain from taking any other act hereunder or under the Promissory Note which
is excused pursuant to this section 2.6(b) shall be considered a binding
obligation of the Borrower or the Trustee, or both, as the case may be, for the
purposes of determining whether a Default or Event of Default has occurred
hereunder or under the Promissory Note and nothing in this section 2.6(b) shall
be construed as providing a defense to any remedies otherwise available upon a
Default or an Event of Default hereunder (other than the remedy of specific
performance).
SECTION 2.7 USE OF PROCEEDS OF LOAN.
-----------------------
The entire proceeds of the Loan shall be used solely for acquiring
shares of Common Stock, and for no other purpose whatsoever.
SECTION 2.8 SECURITY.
--------
(a) In order to secure the due payment and performance by the Borrower
of all of its obligations under this Loan Agreement, simultaneously with the
execution and delivery of this Loan Agreement by the Borrower, the Borrower
shall:
(i) pledge to the Lender as Collateral (as defined in the Pledge
Agreement), and grant to the Lender a first priority lien on and security
interest in, the Common Stock purchased with the Principal Amount, by the
execution and delivery to the Lender of a Pledge Agreement in the form
attached hereto as Exhibit B; and
(ii) execute and deliver, or cause to be executed and delivered, such
other agreements, instruments and documents as the Lender may reasonably
require in order to effect the purposes of the Pledge Agreement and this
Loan Agreement.
(b) The Lender shall release from encumbrance under the Pledge
Agreement and transfer to the Borrower, as of the date on which any payment or
prepayment of the Principal Amount is made, a number of shares of Common Stock
held as Collateral pursuant to section 6.4 of the ESOP.
SECTION 2.9 REGISTRATION OF THE PROMISSORY NOTE.
-----------------------------------
(a) The Lender shall maintain a Register providing for the
registration of the Principal Amount and any stated interest and of transfer and
exchange of the Promissory Note.
<PAGE>
-7-
Transfer of the Promissory Note may be effected only by the surrender of the old
instrument and either the reissuance by the Borrower of the old instrument to
the new holder or the issuance by the Borrower of a new instrument to the new
holder. The old Promissory Note so surrendered shall be cancelled by the Lender
and returned to the Borrower after such cancellation.
(b) Any new Promissory Note issued pursuant to section 2.9(a) shall
carry the same rights to interest (unpaid and to accrue) carried by the
Promissory Note so transferred or exchanged so that there will not be any loss
or gain of interest on the note surrendered. Such new Promissory Note shall be
subject to all of the provisions and entitled to all of the benefits of this
Agreement. Prior to due presentment for registration or transfer, the Borrower
may deem and treat the registered holder of any Promissory Note as the holder
thereof for purposes of payment and all other purposes. A notation shall be
made on each new Promissory Note of the amount of all payments of principal and
interest theretofore paid.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
----------------------------------------------
The Borrower hereby represents and warrants to the Lender as follows:
SECTION 3.1 POWER, AUTHORITY, CONSENTS.
--------------------------
The Borrower has the power to execute, deliver and perform this Loan
Agreement, the Promissory Note and the Pledge Agreement, all of which have been
duly authorized by all necessary and proper corporate or other action.
SECTION 3.2 DUE EXECUTION, VALIDITY, ENFORCEABILITY.
---------------------------------------
Each of the Loan Documents, including, without limitation, this Loan
Agreement, the Promissory Note and the Pledge Agreement, have been duly executed
and delivered by the Borrower; and each constitutes the valid and legally
binding obligation of the Borrower, enforceable in accordance with its terms.
SECTION 3.3 PROPERTIES, PRIORITY OF LIENS.
-----------------------------
The liens which have been created and granted by the Pledge Agreement
constitute valid, first liens on the properties and assets covered by the Pledge
Agreement, subject to no prior or equal lien.
SECTION 3.4 NO DEFAULTS, COMPLIANCE WITH LAWS.
---------------------------------
The Borrower is not in default in any material respect under any
agreement, ordinance, resolution, decree, bond, note, indenture, order or
judgment to which it is a party
<PAGE>
-8-
or by which it is bound, or any other agreement or other instrument by which any
of the properties or assets owned by it is materially affected.
SECTION 3.5 PURCHASES OF COMMON STOCK.
-------------------------
Upon consummation of any purchase of Common Stock by the Borrower with
the proceeds of the Loan, the Borrower shall acquire valid, legal and marketable
title to all of the Common Stock so purchased, free and clear of any liens,
other than a pledge to the Lender of the Common Stock so purchased pursuant to
the Pledge Agreement. Neither the execution and delivery of the Loan Documents
nor the performance of any obligation thereunder violates any provision of law
or conflicts with or results in a breach of or creates (with or without the
giving of notice or lapse of time, or both) a default under any agreement to
which the Borrower is a party or by which it is bound or any of its properties
is affected. No consent of any federal, state or local governmental authority,
agency or other regulatory body, the absence of which could have a materially
adverse effect on the Borrower or the Trustee, is or was required to be obtained
in connection with the execution, delivery or performance of the Loan Documents
and the transactions contemplated therein or in connection therewith, including,
without limitation, with respect to the transfer of the shares of Common Stock
purchased with the proceeds of the Loan pursuant thereto.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF THE LENDER
--------------------------------------------
The Lender hereby represents and warrants to the Borrower as follows:
SECTION 4.1 POWER, AUTHORITY, CONSENTS.
--------------------------
The Lender has the power to execute, deliver and perform this Loan
Agreement, the Pledge Agreement and all documents executed by the Lender in
connection with the Loan, all of which have been duly authorized by all
necessary and proper corporate or other action. No consent, authorization or
approval or other action by any governmental authority or regulatory body, and
no notice by the Lender to, or filing by the Lender with, any governmental
authority or regulatory body is required for the due execution, delivery and
performance of this Loan Agreement.
SECTION 4.2 DUE EXECUTION, VALIDITY, ENFORCEABILITY.
---------------------------------------
This Loan Agreement and the Pledge Agreement have been duly executed
and delivered by the Lender; and each constitutes a valid and legally binding
obligation of the Lender, enforceable in accordance with its terms.
<PAGE>
-9-
SECTION 4.3 ESOP; CONTRIBUTIONS.
-------------------
The ESOP and the Borrower have been duly created, organized and
maintained by the Lender in compliance with all applicable laws, regulations and
rulings. The ESOP qualifies as an "employee stock ownership plan" as defined in
section 4975(e) (7) the Code. The ESOP provides that the Lender may make
contributions to the ESOP in an amount necessary to enable the Trustee to
amortize the Loan in accordance with the terms of the Promissory Note and this
Loan Agreement, and the Lender will make such contributions; provided, however,
that no such contributions shall be required if they would adversely affect the
qualification of the ESOP under section 401(a) of the Code.
SECTION 4.4 TRUSTEE; COMMITTEE.
------------------
The Lender has taken such action as is required to be taken by it to
duly appoint the Trustee and the members of the Board. The Lender expressly
acknowledges and agrees that this Loan Agreement, the Promissory Note and the
Pledge Agreement are being executed by the Trustee not in its individual
capacity but solely as trustee of and on behalf of the Borrower.
SECTION 4.5 COMPLIANCE WITH LAWS; ACTIONS.
-----------------------------
Neither the execution and delivery by the Lender of this Loan
Agreement or any instruments required thereby, nor compliance with the terms and
provisions of any such documents by the Lender, constitutes a violation of any
provision of any law or any regulation, order, writ, injunction or decree or any
court or governmental instrumentality, or an event of default under any
agreement, to which the Lender is a party or by which the Lender is bound or to
which the Lender is subject, which violation or event of default would have a
material adverse effect on the Lender. There is no action or proceeding pending
or threatened against either of the ESOP or the Borrower before any court or
administrative agency.
ARTICLE V
---------
EVENTS OF DEFAULT
-----------------
SECTION 5.1 EVENTS OF DEFAULT UNDER LOAN AGREEMENT.
--------------------------------------
Each of the following events shall constitute an "Event of Default"
hereunder:
(a) Failure to make any payment or mandatory prepayment of principal
of the Promissory Note when due, or failure to make any payment of interest on
the Promissory Note not later than five (5) Business Days after the date when
due.
(b) Failure by the Borrower to perform or observe any term, condition
or covenant of this Loan Agreement or of any of the other Loan Documents,
including, without limitation, the Promissory Note and the Pledge Agreement.
<PAGE>
-10-
(c) Any representation or warranty made in writing to the Lender in
any of the Loan Documents or any certificate, statement or report made or
delivered in compliance with this Loan Agreement, shall have been false or
misleading in any material respect when made or delivered.
SECTION 5.2 LENDER'S RIGHTS UPON EVENT OF DEFAULT.
-------------------------------------
If an Event of Default under this Loan Agreement shall occur and be
continuing, the Lender shall have no rights to assets of the Borrower other
than: (a) contributions (other than contributions of Common Stock) that are
made by the Lender to enable the Borrower to meet its obligations pursuant to
this Loan Agreement and earnings attributable to the investment of such
contributions and (b) "Eligible Collateral" (as defined in the Pledge
Agreement); provided, however, that: (i) the value of the Borrower's assets
transferred to the Lender following an Event of Default in satisfaction of the
due and unpaid amount of the Loan shall not exceed the amount in default
(without regard to amounts owing solely as a result of any acceleration of the
Loan); (ii) the Borrower's assets shall be transferred to the Lender following
an Event of Default only to the extent of the failure of the Borrower to meet
the payment schedule of the Loan; and (iii) all rights of the Lender to the
Common Stock purchased with the proceeds of the Loan covered by the Pledge
Agreement following an Event of Default shall be governed by the terms of the
Pledge Agreement.
ARTICLE VI
----------
MISCELLANEOUS PROVISIONS
------------------------
SECTION 6.1 PAYMENTS DUE TO THE LENDER.
--------------------------
If any amount is payable by the Borrower to the Lender pursuant to any
indemnity obligation contained herein, then the Borrower shall pay, at the time
or times provided therefor, any such amount and shall indemnify the Lender
against and hold it harmless from any loss or damage resulting from or arising
out of the nonpayment or delay in payment of any such amount. If any amounts as
to which the Borrower has so indemnified the Lender hereunder shall be assessed
or levied against the Lender, the Lender may notify the Borrower and make
immediate payment thereof, together with interest or penalties in connection
therewith, and shall thereupon be entitled to and shall receive immediate
reimbursement therefor from the Borrower, together with interest on each such
amount as provided in section 2.2(c). Notwithstanding any other provision
contained in this Loan Agreement, the covenants and agreements of the Borrower
contained in this section 6.1 shall survive: (a) payment of the Promissory Note
and (b) termination of this Loan Agreement.
SECTION 6.2 PAYMENTS.
--------
All payments hereunder and under the Promissory Note shall be made
without set-off or counterclaim and in such amounts as may be necessary in order
that all such payments
<PAGE>
-11-
shall not be less than the amounts otherwise specified to be paid under this
Loan Agreement and the Promissory Note, subject to any applicable tax
withholding requirements. Upon payment in full of the Promissory Note, the
Lender shall mark such Promissory Note "Paid" and return it to the Borrower.
SECTION 6.3 SURVIVAL.
--------
All agreements, representations and warranties made herein shall
survive the delivery of this Loan Agreement and the Promissory Note.
SECTION 6.4 MODIFICATIONS, CONSENTS AND WAIVERS; ENTIRE AGREEMENT.
-----------------------------------------------------
No modification, amendment or waiver of or with respect to any
provision of this Loan Agreement, the Promissory Note, the Pledge Agreement, or
any of the other Loan Documents, nor consent to any departure from any of the
terms or conditions thereof, shall in any event be effective unless it shall be
in writing and signed by the party against whom enforcement thereof is sought.
Any such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. No consent to or demand on a party in any case
shall, of itself, entitle it to any other or further notice or demand in similar
or other circumstances. This Loan Agreement embodies the entire agreement and
understanding between the Lender and the Borrower and supersedes all prior
agreements and understandings relating to the subject matter hereof.
SECTION 6.5 REMEDIES CUMULATIVE.
-------------------
Each and every right granted to the Lender hereunder or under any
other document delivered hereunder or in connection herewith, or allowed it by
law or equity, shall be cumulative and may be exercised from time to time. No
failure on the part of the Lender or the holder of the Promissory Note to
exercise, and no delay in exercising, any right shall operate as a waiver
thereof, nor shall any single or partial exercise of any right preclude any
other or future exercise thereof or the exercise of any other right. The due
payment and performance of the obligations under the Loan Documents shall be
without regard to any counterclaim, right of offset or any other claim
whatsoever which the Borrower may have against the Lender and without regard to
any other obligation of any nature whatsoever which the Lender may have to the
Borrower, and no such counterclaim or offset shall be asserted by the Borrower
in any action, suit or proceeding instituted by the Lender for payment or
performance of such obligations.
SECTION 6.6 FURTHER ASSURANCES; COMPLIANCE WITH COVENANTS.
---------------------------------------------
At any time and from time to time, upon the request of the Lender,
the Borrower shall execute, deliver and acknowledge or cause to be executed,
delivered and acknowledged, such further documents and instruments and do such
other acts and things as the Lender may reasonably request in order to fully
effect the terms of this Loan Agreement, the Promissory Note, the Pledge
Agreement, the other Loan Documents and any other agreements, instruments and
documents delivered pursuant hereto or in connection with the Loan.
<PAGE>
-12-
SECTION 6.7 NOTICES.
-------
Except as otherwise specifically provided for herein, all notices,
requests, reports and other communications pursuant to this Loan Agreement shall
be in writing, either by letter (delivered by hand or commercial messenger
service or sent by registered or certified mail, return receipt requested,
except for routine reports delivered in compliance with Article VI hereof which
may be sent by ordinary first-class mail) or telex or facsimile, addressed as
follows:
(a) If to the Borrower:
Home Bancorp of Elgin, Inc.
Employee Stock Ownership Plan Trust
c/o Home Bancorp of Elgin, Inc.
16 North Spring Street
Elgin, Illinois 60120-5569
Attention: Mr. George L. Perucco
Chief Executive Officer
-----------------------
with copies to:
[Trustee]
_____________________
_____________________
Attention: ______________
______________
Thacher Proffitt & Wood
Two World Trade Center, 39th Floor
New York New York 10048
Attention: W. Edward Bright, Esq.
----------------------
[Trustee Counsel]
_____________________
_____________________
Attention: ______________
______________
(b) If to the Lender:
Home Bancorp of Elgin, Inc.
16 North Spring Street
Elgin, Illinois 60120-5569
Attention: Mr. George L. Perucco
Chief Executive Officer
-----------------------
<PAGE>
-13-
with a copy to:
Thacher Proffitt & Wood
Two World Trade Center, 39th Floor
New York New York 10048
Attention: W. Edward Bright, Esq.
----------------------
Any notice, request or communication hereunder shall be deemed to have been
given on the day on which it is delivered by hand or by commercial messenger
service, or sent by telex or facsimile, to such party at its address specified
above, or, if sent by mail, on the third Business Day after the day deposited in
the mail, postage prepaid, addressed as aforesaid. Any party may change the
person or address to whom or which notices are to be given hereunder, by notice
duly given hereunder; provided, however, that any such notice shall be deemed to
have been given only when actually received by the party to whom it is
addressed.
SECTION 6.8 COUNTERPARTS.
------------
This Loan Agreement may be signed in any number of counterparts which,
when taken together, shall constitute one and the same document.
SECTION 6.9 CONSTRUCTION; GOVERNING LAW.
---------------------------
The headings used in the table of contents and in this Loan Agreement
are for convenience only and shall not be deemed to constitute a part hereof.
All uses herein of any gender or of singular or plural terms shall be deemed to
include uses of the other genders or plural or singular terms, as the context
may require. All references in this Loan Agreement to an Article or section
shall be to an Article or section of this Loan Agreement, unless otherwise
specified. This Loan Agreement, the Promissory Note, the Pledge Agreement and
the other Loan Documents shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Illinois.
SECTION 6.10 SEVERABILITY.
------------
Wherever possible, each provision of this Loan Agreement shall be
interpreted in such manner as to be effective and valid under applicable law;
however, the provisions of this Loan Agreement are severable, and if any clause
or provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision in this Loan Agreement in any jurisdiction. Each of
the covenants, agreements and conditions contained in this Loan Agreement is
independent, and compliance by a party with any of them shall not excuse non-
compliance by such party with any other. The Borrower shall not take any action
the effect of which shall constitute a breach or violation of any provision of
this Loan Agreement.
<PAGE>
-14-
SECTION 6.11 BINDING EFFECT; NO ASSIGNMENT OR DELEGATION.
-------------------------------------------
This Loan Agreement shall be binding upon and inure to the benefit of
the Borrower and its successors and the Lender and its successors and assigns.
The rights and obligations of the Borrower under this Agreement shall not be
assigned or delegated without the prior written consent of the Lender, and any
purported assignment or delegation without such consent shall be void.
<PAGE>
-15-
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be duly executed as of the date first above written.
HOME BANCORP OF ELGIN, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
By [Trustee], as Trustee
By:
-----------------------------
Title:
-----------------------------
HOME BANCORP OF ELGIN, INC.
By:
-----------------------------
Title:
-----------------------------
<PAGE>
EXHIBIT A
TO LOAN AGREEMENT
BY AND BETWEEN
HOME BANCORP OF ELGIN, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
AND
HOME BANCORP OF ELGIN, INC.
------------------------------------------------
FORM OF PROMISSORY NOTE
-----------------------
$6,612,500 Elgin, Illinois
PRINCIPAL AMOUNT ____________, 1996
FOR VALUE RECEIVED, the undersigned, Home Bancorp of Elgin, Inc.
Employee Stock Ownership Plan Trust ("Borrower"), acting by and through its
Trustee, [_______________] ("Trustee"), hereby promises to pay to the order of
Home Bancorp of Elgin, Inc. ("Lender") SIX MILLION, SIX HUNDRED TWELVE THOUSAND
AND FIVE HUNDRED DOLLARS ($6,612,500.00) payable in accordance with the Loan
Agreement made and entered into between the Borrower and the Lender as of
[_________], 1996 ("Loan Agreement") pursuant to which this Promissory Note is
issued, in one annual installment of $[_______], payable on [_____________],
1996 and nine annual installments of [_________________________________________
__________________________________________] DOLLARS ($_________) commencing on
the last Business Day of [___], 1997 and continuing on the last Business Day of
September of each calendar year until the last Business Day of September, 2006,
and one annual installment payable on September ___, 2007, at which time the
entire Principal Amount then outstanding and all accrued interest shall become
due and payable; provided, however, that the Borrower shall not be required to
make any payment of principal due to be made in any Fiscal Year to the extent
that (i) following such payment, the consolidated return on average assets of
Home Bancorp of Elgin, Inc. for such Fiscal Year would be less than [one-half of
one percent (0.5%)] or the consolidated return on average equity for such Fiscal
Year would be less than [four percent (4%)] or (ii) such payment would not be
deductible for federal income tax purposes for such Fiscal Year under section
404 of the Code. Any payment not required to made pursuant to the clause (i) of
the above proviso shall be deferred to and be payable on the earlier of the
tenth (10th) anniversary of the loan origination date or the last day of the
first Fiscal Year in which such proviso would not apply to alleviate a
requirement of payment; and payment not required to be made pursuant to clause
(ii) of the above proviso shall be deferred to and be payable on the last day of
the first Fiscal Year in which such payment may be made on a tax deductible
basis.
This Promissory Note shall bear interest at the rate per annum set
forth or established under the Loan Agreement, such interest to be payable
annually in arrears, commencing on September 30, 1996 and thereafter on the last
Business Day of each calendar quarter and upon payment or prepayment of this
Promissory Note.
<PAGE>
A-2
Anything herein to the contrary notwithstanding, the obligation of the
Borrower to make payments of interest shall be subject to the limitation that
payments of interest shall not be required to be made to the Lender to the
extent that the Lender's receipt thereof would not be permissible under the law
or laws applicable to the Lender limiting rates of interest which may be charged
or collected by the Lender. Any such payments of interest which are not made as
a result of the limitation referred to in the preceding sentence shall be made
by the Borrower to the Lender on the earliest interest payment date or dates on
which the receipt thereof would be permissible under the laws applicable to the
Lender limiting rates of interest which may be charged or collected by the
Lender. Such deferred interest shall not bear interest.
Payments of both principal and interest on this Promissory Note are to
be made at the principal office of the Lender at 16 North Spring Street, Elgin,
Illinois 60120-5569, or such other place as the holder hereof shall designate to
the Borrower in writing, in lawful money of the United States of America in
immediately available funds.
Failure to make any payment of principal on this Promissory Note when
due, or failure to make any payment of interest on this Promissory Note not
later than five (5) Business Days after the date when due, shall constitute a
default hereunder, whereupon the principal amount of and accrued interest on
this Promissory Note shall immediately become due and payable in accordance with
the terms of the Loan Agreement.
This Promissory Note is secured by a Pledge Agreement between the
Borrower and the Lender of even date herewith and is entitled to the benefits
thereof.
HOME BANCORP OF ELGIN, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
BY [TRUSTEE], AS TRUSTEE
BY:
----------------------------------
TITLE:
----------------------------------
<PAGE>
A-3
after any of the Liabilities shall become due and payable, without notice to the
Pledgor, take all or any of the following actions: (i) notify the parties
obligated on any of the Eligible Collateral to make payment to the Pledgee of
any amounts due or to become due thereunder, (ii) release or exchange all or any
part of the Eligible Collateral, or compromise or extend or renew for any period
(whether or not longer than the original period) any obligations of any nature
of any party with respect thereto, and (iii) take control of any proceeds of the
Eligible Collateral.
SECTION 5. DELIVERY.
--------
(a) The Pledgor shall deliver to the Pledgee upon execution of this
Pledge Agreement (i) an assignment by the Pledgor of all the Pledgor's rights to
and interest in the Pledged Shares and (ii) an irrevocable proxy, in form and
substance satisfactory to the Pledgee, signed by the Pledgor with respect to the
Pledged Shares.
(b) So long as no Default or Event of Default shall have occurred and
be continuing, (i) the Pledgor shall be entitled to exercise any and all voting
and other rights pertaining to the Collateral or any part thereof for any
purpose not inconsistent with the terms of this Pledge Agreement, and (ii) the
Pledgor shall be entitled to receive any and all cash dividends or other
distributions paid in respect of the Collateral.
SECTION 6. EVENTS OF DEFAULT.
-----------------
(a) If a Default or an Event of Default shall be existing, in addition
to the rights it may have under the Loan Agreement, the Promissory Note, and
this Pledge Agreement, or by virtue of any other instrument, (i) the Pledgee may
exercise, with respect to the Eligible Collateral, from time to time any rights
and remedies available to it under the Uniform Commercial Code as in effect from
time to time in the State of Illinois or otherwise available to it and (ii) the
Pledgee shall have the right, for and in the name, place and stead of the
Pledgor, to execute endorsements, assignments, stock powers and other
instruments of conveyance or transfer with respect to all or any of the Eligible
Collateral. Written notification of intended disposition of any of the Eligible
Collateral shall be given by the Pledgee to the Pledgor at least three (3)
Business Days before such disposition. Subject to section 13 below, any
proceeds of any disposition of Eligible Collateral may be applied by the Pledgee
to the payment of expenses in connection with the Eligible Collateral,
including, without limitation, reasonable attorneys' fees and legal expenses,
and any balance of such proceeds may be applied by the Pledgee toward the
payment of such of the Liabilities as are in Default, and in such order of
application, as the Pledgee may from time to time elect. No action of the
Pledgee permitted hereunder shall impair or affect its rights in and to the
Eligible Collateral. All rights and remedies of the Pledgee expressed hereunder
are in addition to all other rights and remedies possessed by it, including,
without limitation, those contained in the documents referred to in the
definition of Liabilities in section 1 hereof.
(b) In any sale of any of the Eligible Collateral after a Default or
an Event of Default shall have occurred, the Pledgee is hereby authorized to
comply with any limitation or restriction in connection with such sale as it may
be advised by counsel is necessary in order to avoid any violation of applicable
law (including, without limitation, compliance with such procedures as may
restrict the number of prospective bidders and purchasers or further restrict
<PAGE>
A-4
such prospective bidders or purchasers to persons who will represent and agree
that they are purchasing for their own account for investment and not with a
view to the distribution or resale of such Eligible Collateral), or in order to
obtain such required approval of the sale or of the purchase by any governmental
regulatory authority or official, and the Pledgor further agrees that such
compliance shall not result in such sale's being considered or deemed not to
have been made in a commercially reasonable manner, nor shall the Pledgee be
liable or accountable to the Pledgor for any discount allowed by reason of the
fact that such Eligible Collateral is sold in compliance with any such
limitation or restriction.
SECTION 7. PAYMENT IN FULL. Upon the payment in full of all
---------------
outstanding Liabilities, this Pledge Agreement shall terminate and the Pledgee
shall forthwith assign, transfer and deliver to the Pledgor, against receipt and
without recourse to the Pledgee, all Collateral then held by the Pledgee
pursuant to this Pledge Agreement.
SECTION 8. NO WAIVER. No failure or delay on the part of the Pledgee
---------
in exercising any right or remedy hereunder or under any other document which
confers or grants any rights in the Pledgee in respect of the Liabilities shall
operate as a waiver thereof nor shall any single or partial exercise of any such
right or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy of the Pledgee.
SECTION 9. BINDING EFFECT; NO ASSIGNMENT OR DELEGATION. This Pledge
-------------------------------------------
Agreement shall be binding upon and inure to the benefit of the Pledgor, the
Pledgee and their respective successors and assigns, except that the Pledgor may
not assign or transfer its rights hereunder without the prior written consent of
the Pledgee (which consent shall not unreasonably be withheld). Each duty or
obligation of the Pledgor to the Pledgee pursuant to the provisions of this
Pledge Agreement shall be performed in favor of any person or entity designated
by the Pledgee, and any duty or obligation of the Pledgee to the Pledgor may be
performed by any other person or entity designated by the Pledgee.
SECTION 10. GOVERNING LAW. This Pledge Agreement shall be governed
-------------
by and construed in accordance with the laws of the State of Illinois applicable
to agreements to be performed wholly within the State of Illinois.
SECTION 11. NOTICES. All notices, requests, instructions or
-------
documents hereunder shall be in writing and delivered personally or sent by
United States mail, registered or certified, return receipt requested, with
proper postage prepaid, as follows:
(a) If to the Pledgee:
Home Bancorp of Elgin, Inc.
16 North Spring Street
Elgin, Illinois 60120-5569
Attention: Mr. George L. Perucco
Chief Executive Officer
-----------------------
with a copy to:
<PAGE>
A-5
Thacher Proffitt & Wood
Two World Trade Center, 39th Floor
New York, New York 10048
Attention: W. Edward Bright, Esq.
----------------------
(b) If to the Pledgor:
Home Bancorp of Elgin, Inc.
Employee Stock Ownership Plan Trust
c/o Home Bancorp of Elgin, Inc.
16 North Spring Street
Elgin, Illinois 60120-5569
Attention: Mr. George L. Perucco
Chief Executive Officer
-----------------------
with copies to:
[Trustee]
_____________________
_____________________
Attention: ______________
______________
Thacher Proffitt & Wood
Two World Trade Center, 39th Floor
New York, New York 10048
Attention: W. Edward Bright, Esq.
----------------------
or at such other address as either of the parties may designate by written
notice to the other party. If delivered personally, the date on which a notice,
request, instruction or document is delivered shall be the date on which such
delivery is made, and, if delivered by mail, the date on which such notice,
request, instruction or document is deposited in the mail shall be the date of
delivery. Each notice, request, instruction or document shall bear the date on
which it is delivered.
SECTION 12. INTERPRETATION. Wherever possible each provision of this
--------------
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision hereof shall be prohibited by
or invalid under such law, such provisions shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions hereof.
SECTION 13. CONSTRUCTION. All provisions hereof shall be construed
------------
so as to maintain (a) the ESOP as a qualified leveraged employee stock ownership
plan under section 401(a) and 4975(e)(7) of the Internal Revenue Code of 1986
(the "Code"), (b) the Trust as exempt from taxation under section 501(a) of the
Code and (c) the Trust Loan as an exempt loan under section 54.4975-7(b) of the
Treasury Regulations and as described in Department of Labor Regulation section
2550.408b-3.
<PAGE>
A-6
IN WITNESS WHEREOF, this Pledge Agreement has been duly executed by
the parties hereto as of the day and year first above written.
HOME BANCORP OF ELGIN, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
BY [TRUSTEE], AS TRUSTEE
AND NOT IN ANY OTHER CAPACITY
BY:
--------------------------------
TITLE:
--------------------------------
HOME BANCORP OF ELGIN, INC.
BY:
--------------------------------
TITLE:
--------------------------------
<PAGE>
EXHIBIT B
TO LOAN AGREEMENT
BY AND BETWEEN
HOME BANCORP OF ELGIN, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
AND
HOME BANCORP OF ELGIN, INC.
------------------------------------------------
FORM OF PLEDGE AGREEMENT
------------------------
This PLEDGE AGREEMENT ("Pledge Agreement") is made as of the ___th day
of ______, 1996, by and between the HOME BANCORP OF ELGIN, INC. EMPLOYEE STOCK
OWNERSHIP PLAN TRUST, acting by and through its Trustee, [TRUSTEE], a banking
corporation organized under the laws of the State of Illinois and having an
office at [____________________________________] ("Pledgor"), and Home Bancorp
of Elgin, Inc., a corporation organized and existing under the laws of the State
of Illinois, having an office at 16 North Spring Street, Elgin, Illinois 60120-
5569 ("Pledgee").
W I T N E S S E T H :
-------------------
WHEREAS, this Pledge Agreement is being executed and delivered to the
Pledgee pursuant to the terms of a Loan Agreement of even date herewith ("Loan
Agreement"), by and between the Pledgor and the Pledgee;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and in the Loan Agreement, the parties hereto do hereby covenant and
agree as follows:
SECTION 1. DEFINITIONS. The following definitions shall apply for
-----------
purposes of this Pledge Agreement, except to the extent that a different meaning
is plainly indicated by the context; all capitalized terms used but not defined
herein shall have the respective meanings assigned to them in the Loan
Agreement:
(a) Collateral shall mean the Pledged Shares and, subject to section 5
----------
hereof, and to the extent permitted by applicable law, all rights with
respect thereto, and all proceeds of such Pledged Shares and rights.
(b) Event of Default shall mean an event so defined in the Loan
----------------
Agreement.
(c) Liabilities shall mean all the obligations of the Pledgor to the
-----------
Pledgee, howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, now or hereafter existing, or due or to
become due, under the Loan Agreement and the Promissory Note.
<PAGE>
(d) Pledged Shares shall mean all the shares of Common Stock of Home
--------------
Bancorp of Elgin, Inc. purchased by the Pledgor with the proceeds of the
loan made by the Pledgee to the Pledgor pursuant to the Loan Agreement, but
excluding any such shares previously released pursuant to section 4.
SECTION 2. PLEDGE. To secure the payment of and performance of all
------
the Liabilities, the Pledgor hereby pledges to the Pledgee, and grants to the
Pledgee a security interest in and lien upon, the Collateral.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PLEDGOR. The
---------------------------------------------
Pledgor represents, warrants, and covenants to the Pledgee as follows:
(a) the execution, delivery and performance of this Pledge Agreement
and the pledging of the Collateral hereunder do not and will not conflict
with, result in a violation of, or constitute a default under any agreement
binding upon the Pledgor;
(b) the Pledged Shares are and will continue to be owned by the
Pledgor free and clear of any liens or rights of any other person except
the lien hereunder and under the Loan Agreement in favor of the Pledgee,
and the security interest of the Pledgee in the Pledged Shares and the
proceeds thereof is and will continue to be prior to and senior to the
rights of all others;
(c) this Pledge Agreement is the legal, valid, binding and enforceable
obligation of the Pledgor in accordance with its terms;
(d) the Pledgor shall, from time to time, upon request of the Pledgee,
promptly deliver to the Pledgee such stock powers, proxies, and similar
documents, satisfactory in form and substance to the Pledgee, with respect
to the Collateral as the Pledgee may reasonably request; and
(e) subject to the first sentence of section 4(b), the Pledgor shall
not, so long as any Liabilities are outstanding, sell, assign, exchange,
pledge or otherwise transfer or encumber any of its rights in and to any of
the Collateral.
SECTION 4. ELIGIBLE COLLATERAL.
-------------------
(a) As used herein the term "Eligible Collateral" shall mean that
amount of Collateral which has an aggregate fair market value equal to the
amount by which the Pledgor is in default (without regard to any amounts owing
solely as the result of an acceleration of the Loan Agreement) or such lesser
amount of Collateral as may be required pursuant to section 13 of this Pledge
Agreement.
(b) The Pledged Shares shall be released from this Pledge Agreement in
a manner conforming to the requirements of Treasury Regulations Section 54.4975-
7(b)(8), as the same may be from time to time amended or supplemented, and
section 6.4(b) of the ESOP. Subject to such Regulations, the Pledgee may from
time to time, after any Default or Event of Default, and without prior notice to
the Pledgor, transfer all or any part of the Eligible Collateral into the name
of the Pledgee or its nominee, with or without disclosing that such Eligible
Collateral is subject to any rights of the Pledgor and may from time to time,
whether before or
<PAGE>
EXHIBIT C
TO LOAN AGREEMENT
BY AND BETWEEN
HOME BANCORP OF ELGIN, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
AND
HOME BANCORP OF ELGIN, INC.
------------------------------------------------
FORM OF ASSIGNMENT
------------------
In consideration of the loan made by Home Bancorp of Elgin, Inc.
("Lender") to the Home Bancorp of Elgin, Inc. Employee Stock Ownership Plan
Trust ("Borrower") pursuant to the Loan Agreement of even date herewith between
the Lender and the Borrower ("Loan Agreement") and pursuant to the Pledge
Agreement between the Lender and the Borrower of even date herewith pertaining
thereto, the undersigned Borrower hereby transfers, assigns and conveys to
Lender all its right, title and interest in and to those certain shares of
common stock of the Lender which it shall purchase with the proceeds of the loan
made pursuant to the Loan Agreement, and agrees to transfer and endorse to
Lender the certificates representing such shares as and when required pursuant
to the Loan Agreement or Pledge Agreement.
HOME BANCORP OF ELGIN, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
BY [TRUSTEE], AS TRUSTEE
AND NOT IN ANY OTHER CAPACITY
BY:
----------------------------------
TITLE:
----------------------------------
SEPTEMBER 26, 1996
<PAGE>
EXHIBIT D
TO LOAN AGREEMENT
BY AND BETWEEN
HOME BANCORP OF ELGIN, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
AND
HOME BANCORP OF ELGIN, INC.
------------------------------------------------
FORM OF IRREVOCABLE PROXY
-------------------------
In consideration of the loan made by Home Bancorp of Elgin, Inc. ("Lender")
to the Home Bancorp of Elgin, Inc. Employee Stock Ownership Plan Trust
("Borrower") pursuant to the Loan Agreement of even date herewith between the
Lender and the Borrower ("Loan Agreement") and the Pledge Agreement between the
Lender and the Borrower of even date herewith pertaining thereto, the
undersigned Borrower hereby appoints the Lender as its proxy, with power of
substitution, to represent and to vote those certain shares of common stock of
the Lender which it shall purchase with the proceeds of the loan made pursuant
to the Loan Agreement. This proxy, when properly executed, shall be irrevocable
and shall give the Lender full power and authority to vote on any and all
matters for which other holders of shares of common stock of the Lender are
entitled to vote.
HOME BANCORP OF ELGIN, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
By: [TRUSTEE], as Trustee
and not in any other capacity
BY:
---------------------------------
TITLE:
---------------------------------
SEPTEMBER 26, 1996
<PAGE>
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
Page 1 of 19
<PAGE>
("Board") shall review the terms of this Agreement and Executive's performance
of services 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, including but not limited to
[________________________]. 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
Page 2 of 19
<PAGE>
(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 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
Page 3 of 19
<PAGE>
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 appropriate in connection with
the performance of his assigned duties under this Agreement. The Association
shall reimburse Executive for his ordinary and necessary business expenses,
including, without limitation, fees for memberships in such clubs and
organizations (except for country club membership) 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
Page 4 of 19
<PAGE>
compensation package), unless, during such thirty (30) day period, the
Association fully cures such failure; or
(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
Page 5 of 19
<PAGE>
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 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) and (vii); 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; and
Page 6 of 19
<PAGE>
(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 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.
Page 7 of 19
<PAGE>
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 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 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) 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
Page 9 of 19
<PAGE>
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 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 and does 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:
Page 10 of 19
<PAGE>
(A) individuals who were members of the Board of the Association
on the date of this Agreement; or
(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
Page 11 of 19
<PAGE>
relocation of his principal place of employment by more than thirty (30)
miles or any material adverse change in working conditions;
(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
Page 12 of 19
<PAGE>
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 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))
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
19 of 19
<PAGE>
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
<PAGE>
-2-
WHEREAS, the Officer is willing to make the Officer's services
available to the Association on the terms and conditions set forth herein;
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.
<PAGE>
-3-
(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 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.
<PAGE>
-4-
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 group life, health
(including hospitalization, medical and major medical), dental, accident and
long term disability insurance plans, and such other employee benefit plans and
programs, including, but not limited to, any incentive compensation plans or
programs (whether or not employee benefit 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's 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:
<PAGE>
-5-
(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;
(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, other than in connection
with an across-the-board reduction in compensation and benefits
uniformly applied to all employees of the Association and all
subsidiaries and affiliates of the Association, 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 in excess of thirty (30) miles; 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
<PAGE>
-6-
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):
(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
<PAGE>
-7-
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 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); and
(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"); and
(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
<PAGE>
-8-
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.
<PAGE>
-9-
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 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>
-10-
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) 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 and does result in the reorganization, merger or
consolidation of the Association, respectively, with one or more other
persons, other than a transaction following which:
<PAGE>
-11-
(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 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; or
(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
<PAGE>
-12-
by affirmative vote of three-quarters (3/4) of the members of the
Board, or of a nominating committee thereof, in office at this
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;
(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.
<PAGE>
-13-
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 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)) 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 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.
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>
PURCHASE AND ASSUMPTION AGREEMENT
THIS PURCHASE AND ASSUMPTION AGREEMENT (the "Agreement") is made and
entered into as of the 18th day of July, 1994, by and between First Bank North,
an Illinois State chartered bank with its principal office at 101 West
Stephenson Street, Freeport, Illinois 61032 ("Buyer"), and HOME FEDERAL SAVINGS
AND LOAN ASSOCIATION OF ELGIN, a federally chartered savings and loan
association with its principal office at 16 North Spring Street, Elgin, Illinois
60120 ("Seller").
W I T N E S S E T H
-------------------
WHEREAS, subject to the approval of the Office of Thrift Supervision
("OTS") and, to the extent necessary, the Federal Deposit Insurance Corporation
("FDIC"), or other regulatory agency with jurisdiction over the transaction,
Seller desires to sell assets and transfer liabilities, and Buyer desires to
purchase assets and assume liabilities, associated with Seller's branch office
located at 301-9 East Lincoln Highway, DeKalb, Illinois 60115 (hereinafter
referred to as the "Branch").
NOW, THEREFORE, for and in consideration of the mutual promises and
agreements set forth herein, the parties agree as follows:
ARTICLE I
PURCHASE OF ASSETS
------------------
Section 1.01 Purchase and Sale of Assets. Subject to the terms and
----------------------------
conditions set forth herein, Seller agrees to sell, convey, assign and transfer
to Buyer, and Buyer agrees to purchase, at the Closing (as defined in Section
6.01), all right, title and interest of Seller in and to the following assets
(collectively the "Assets") as of the close of business at the Branch on the
Closing Date (as defined in Section 6.01) except as otherwise specifically set
forth herein:
(a) Records. All records, files, documents, books and papers
--------
(excluding transaction histories) relating to the Assets and Liabilities (as
defined in Section 2.01) being transferred to Buyer hereunder.
(b) Real Property. The lease covering the real property comprising
--------------
the Branch (the "Lease"), a true and complete copy of which is attached as
Exhibit A hereto, and all of Seller's rights therein (collectively, the "Real
Property"). Nothing contained herein shall have the effect of transferring
rights in any real property other than that set forth in the Lease.
(c) Personal Property. All furniture, fixtures, equipment, automated
------------------
teller machines and other items of tangible personal property located at the
Branch (including the building leasehold improvements, as applicable), as of the
close of business at the Branch on the Closing Date, including sign structures,
but excluding any signs or property that identify Seller by name or logo-type
(collectively, the "Personal Property"). A true and complete list of the
<PAGE>
Personal Property as of the date hereof is set forth on Schedule 1.01(c) which
----------------
has been delivered to Buyer prior to the date hereof. The parties acknowledge
that Schedule 1.01(c) shall be updated as of the Closing Date in accordance with
----------------
Section 6.02. If prior to Closing an item of Personal Property is stolen,
destroyed, damaged by fire or other casualty or otherwise lost, such item shall
be excluded from the sale contemplated hereby (and the term "Personal Property"
as used herein shall exclude such item).
(d) Account Loans. All loans of Seller made on the security of the
--------------
accounts (as defined in Section 2.01(a)) as of the close of business at the
Branch on the Closing Date (the "Account Loans"), which are not delinquent as of
the Closing Date, or if delinquent as of such date, are accepted by Buyer in
writing, in the exercise of its discretion, on a case-by-case basis. For
purposes of this Agreement, an Account Loan is deemed to be delinquent if, as of
the Closing Date, any payment due thereon is delinquent by more than sixty (60)
days. A true and complete list of Account Loans as of a date no earlier than
June 30, 1994 is set forth on Schedule 1.01(d) attached hereto. The parties
----------------
acknowledge that five (5) business days prior to the Closing, Seller shall
deliver to Buyer a revised copy of Schedule 1.01(d) updated as of the date ten
----------------
(10) days prior to the Closing which sets forth whether and to what extent the
Account Loans listed thereon are delinquent as of such date. The parties
further acknowledge that Schedule 1.01(d) shall be updated as of the Closing
----------------
Date in accordance with Section 6.02. Buyer may, within thirty (30) days of the
date hereof, refuse to purchase any Account Loans based upon Buyer's
determination that document deficiencies exist with respect to such Account
Loans. If Buyer elects not to purchase a particular Account Loan, it will not
assume the related Account.
(e) Overdraft Loans. All of Seller's unsecured overdraft loans,
----------------
including negotiable order of withdrawal line of credit accounts, relating to
the Accounts, as of the close of business at the Branch on the Closing Date (the
"Overdraft Loans"), which are not delinquent as of the Closing Date, or if
delinquent as of such date, are accepted by Buyer in writing, in the exercise of
its discretion, on a case-by-case basis. For purposes of this Agreement, an
Overdraft Loan is deemed to be delinquent if, as of the Closing Date, any
payment due thereon is delinquent by more than sixty (60) days. A true and
complete list of Overdraft Loans as of a date no earlier than June 30, 1994 set
forth on Schedule 1.01(e) attached hereto. The parties acknowledge that five
----------------
(5) business days prior to the Closing Seller shall deliver to Buyer a revised
copy of Schedule 1.01(e) updated as of the date ten (10) days prior to the
----------------
Closing which sets forth whether and to what extent the Overdraft Loans listed
thereon are delinquent as of such
date. The parties further acknowledge that Schedule 1.01(e) shall be updated as
----------------
of the Closing Date in accordance with Section 6.02. Buyer may, within thirty
(30) days of the date hereof, refuse to purchase any Overdraft Loan based upon
Buyer's determination that document deficiencies exist with respect to such
Overdraft Loan. If Buyer elects not to purchase a particular Overdraft Loan, it
will not assume the related Account.
(f) Cash on Hand. All teller working cash and vault cash at the
-------------
Branch as of the close of business at the Branch on the Closing Date (the "Cash
on Hand").
2
<PAGE>
(g) Core Deposit Relationship. A core deposit relationship intangible
--------------------------
asset relating to the deposit liabilities to be transferred to Buyer hereunder
(the "Core Deposit Relationship").
(h) Covenant Not To Compete. Seller's Covenant Not To Compete (as
------------------------
defined in Section 5.03).
(i) Residual Goodwill. All of the remaining goodwill associated with
------------------
the Assets and Liabilities being transferred to Buyer hereunder (the "Residual
Goodwill").
Section 1.02. Calculation of Purchase Price. The purchase price for the
------------------------------
Assets as set forth in Section 1.01, and the Covenant Not To Compete as set
forth in Section 5.03 (the "Purchase Price"), shall be the sum of the following
as of the close of business at the Branch on the Closing Date, subject to
adjustment as provided in Section 6 04:
(i) the net book value of the Personal Property as of the close of
business at the Branch on the last day of the month immediately preceding
the Closing Date depreciated in accordance with generally accepted
accounting principles consistently applied through the close of business at
the Branch on the Closing Date; provided, however, that Buyer shall not be
------------------
obligated to pay for any additions to the Personal Property between the
date hereof and the Closing Date which were not approved by Buyer pursuant
to Section 4.02; plus
(ii) the Cash on Hand; plus
(iii) net book value of the Account Loans and Overdraft Loans; plus
(iv) an amount equal to $1,269,000. In the event that the Accounts,
excluding accrued but unpaid interest, thereon, on the Closing Date are less
than $12,690,000, the Purchase Price set forth in this Section 1.02(iv) shall be
reduced by an amount calculated as the difference between $12,690,000 and the
actual Accounts, excluding accrued but unpaid interest, thereon, on the Closing
Date times .10.
As used herein, the term "net book value" shall mean net book value as
determined from the books and records of Seller, in
accordance with generally accepted accounting principles consistently applied.
ARTICLE II
ASSUMPTION OF LIABILITIES
-------------------------
Section 2.01 Assumption of Liabilities. Subject to the terms and
--------------------------
conditions set forth herein, Buyer agrees to assume and discharge, by
documentation reasonably satisfactory as to the form and substance to Seller, as
of the close of business at the Branch on the Closing Date, the following
liabilities (collectively the "Liabilities"):
3
<PAGE>
(a) Deposit Liabilities. All deposit liabilities related to accounts
--------------------
associated with the Branch, as shown on the books and records of Seller as of
the close of business at the Branch on the Closing Date, including accrued but
unpaid interest and any obligations related to such accounts, including the
terms and conditions of the individual agreements related thereto, but excluding
(i) any account that on the Closing Date has a negative balance if such account
had no overdraft privileges or the negative balance of such account exceeded its
corresponding overdraft privileges, (ii) accounts subject to or involved in any
form of litigation, and (iii) accounts which are due to be reported or escheated
to the State of Illinois as of the Closing Date, (collectively, the "Accounts").
A true and complete list of the Accounts as of a date no earlier than June 30,
1994, is set forth on Schedule 2.01(a) attached hereto. The parties acknowledge
----------------
that Schedule 2.01(a) shall be updated as of the Closing Date in accordance with
----------------
Section 6.02. As used in this Section 2.01(a), the term "deposit liabilities"
shall include all of the deposit products offered by Seller out of the Branch,
including without limitation passbook accounts, statement accounts, checking
accounts, money market accounts, and certificates of deposit.
(b) Lease. The rights, duties, and obligations of Seller contained
------
in the Lease, as amended prior to the date of this Agreement.
In addition, Buyer shall reimburse Seller, on a pro-rata basis, for each of
the following expenses of Seller (if applicable): (i) any amounts being held by
the lessor of the Lease as a security deposit, (ii) any rental payment made by
Seller for any period following the Closing Date, (iii) any utilities expenses
paid by Seller for any period following the Closing Date, (iv) any pre-paid FDIC
insurance premium with respect to deposits located at the Branch; and (v)
prepaid expenses, if any, arising in the ordinary course of Seller's business,
which would accrue to the benefit of Buyer.
Section 2.02 Excluded Liabilities. It is understood and agreed that,
---------------------
except as expressly set forth in this Agreement, Buyer shall not assume or be
liable for any of the debts, obligations, or liabilities of Seller of any kind
or nature whatsoever, including, but not limited to, (i) any Tax (as defined
herein) or debt of Seller, (ii) any liability of Seller to its employees with
respect to continued employment, compensation, accrued vacation pay, sick leave,
or pursuant to any pension plan or profit sharing arrangements, any other
employee benefit plan, or for unfair labor practices (such as wrongful
termination or employment discrimination), (iii) any liability or obligation
(other than the Accounts and Liabilities) of Seller arising out of any
threatened or pending litigation, (iv) any liability or obligation of Seller,
arising prior to the Closing Date, to any of its customers, depositors, or
borrowers (other than the Accounts, including obligations arising from the terms
and conditions of the Account agreements, and Liabilities), (v) any liability of
Seller with respect to personal injury or property damage claims arising out of
any act or omission of Seller which arises or accrues prior to the Closing Date,
or (vi) any liability for payment of fees, charges and/or penalties associated
with Seller's termination of any leases, contracts or other agreements which
Buyer does not assume hereunder (collectively, the "Excluded Liabilities"). For
purposes of this Agreement, "Tax" or "Taxes" shall include federal, state and
local income taxes, sales, use, franchise, employment, excise, property (real
and personal) and any other similar type of charge, expense or levy including
any interest thereon.
4
<PAGE>
Section 2.03 Calculation of Assumption Price. The price to be paid by
--------------------------------
Seller in consideration of the assumption of the Liabilities by Buyer in
accordance with Section 2.01 (the "Assumption Price") shall be an amount equal
to (i) the total balance of all Accounts as of the close of business at the
Branch on the Closing Date (including accrued but unpaid interest thereon), less
(ii) the amount of any prepaid expenses as of the close of business at the
Branch on the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.01 Representations and Warranties of Seller.
-----------------------------------------
Seller represents and warrants to Buyer, as of the date hereof and as of the
Closing Date, as follows:
(a) Good Standing and Corporate Power. Seller is a federal savings
----------------------------------
association duly organized, validly existing and in good standing under the laws
of the United States, the deposits of which are insured by the FDIC, and has the
requisite corporate power and authority to carry on its business as the same is
being conducted, and to execute and deliver this Agreement, and to carry out all
the transactions contemplated hereby. Seller is not a "foreign person" as
defined in Section 1445 of the Internal Revenue Code of 1986, as amended (the
"Code"), and any related regulations.
(b) Authorization. The execution, delivery and performance by Seller
--------------
of this Agreement, and the consummation by Seller of the transactions
contemplated hereby, have been duly and validly authorized and all requisite
corporate actions have been taken by Seller so that this Agreement is a legal,
valid and binding obligation of Seller, enforceable against Seller in accordance
with its terms, except that the enforceability hereof may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and the rights of
creditors of federally chartered savings associations and that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceedings therefore may be brought.
(c) Non-Contravention. The execution and delivery of this Agreement
------------------
and the other instruments and documents contemplated hereby do not and will not
conflict with, violate, breach or cause a default under the charter or bylaws of
Seller or under any agreement or instrument to which Seller is a party or by
which it is bound, or any applicable Law, provided that prior to Closing, Seller
obtains the consents and approvals referred to in Section 3.01(d).
(d) Consents to Transaction. The consummation of the transactions
------------------------
contemplated by this Agreement do not require Seller to obtain prior to
consummating the transactions contemplated hereby the consent or approval of any
person, other than the OTS, the FDIC and the lessor under the Lease.
5
<PAGE>
(e) Compliance with Laws. Seller has not violated any applicable Laws
---------------------
(as defined in Section 12.08) which would materially affect any of the Assets or
Liabilities, its ability to perform hereunder or Buyer's operation of the Branch
after the Closing Date. Seller has not been required to obtain approval from
any regulatory or governmental agency in order to conduct its business, other
than the OTS and FDIC approval or such other regulatory authority listed in
Section 3.01(d) herein.
(f) Litigation. There are no governmental or administrative
-----------
proceedings or other proceedings, litigation, judgments or claims pending or
threatened against Seller which would affect any of the Assets or Liabilities,
the ability of Seller to carry out this Agreement or any of the transactions
contemplated hereby or Buyer's operation of the Branch after the Closing Date.
(g) Books and Records. The books and records of the Seller respecting
------------------
the operations of the Branch and the Assets and Liabilities accurately reflect
in accordance with generally accepted accounting principles consistently applied
the net book value of each of the Assets and Liabilities being transferred to
Buyer hereunder, including without limitation the Real Property, the Personal
Property, the amount of the Cash on Hand, the outstanding principal balance of
each of the Account Loans and Overdraft Loans, the total balance of each
Account, including accrued but unpaid interest thereon, and the net book value
of each of the other Assets and Liabilities (excluding the Lease) being
transferred to Buyer hereunder. The Records include all information necessary
to service the Accounts, Account Loans and Overdraft Loans on an ongoing basis,
and to otherwise operate the business being acquired under this Agreement.
(h) Schedules. Schedule 1.01(c) contains, and at each time set forth
---------------------------
in Section 6.02 will contain an accurate and complete description of each item
of the Personal Property, including, without limitation, all furniture,
fixtures, equipment and other items of tangible personal property located at the
Branch (excluding the building improvements), together with all personal
property being transferred hereunder. Schedule 1.01(d) contains, and at each
----------------
time set forth in Section 6.02 will contain an accurate and complete description
(including without limitation the type, identification number, date of origin,
borrower, outstanding principal amount, interest rate and maturity date) of each
of the Account Loans. Schedule 1.01(e) contains, and at each time set forth in
----------------
Section 6.02 will contain an accurate and complete description (including
without limitation the identification number, date of origin, borrowers,
outstanding principal amount, interest rate and maturity date) of each of the
Overdraft Loans. Schedule 2.01(a) contains, and at each time set forth in
----------------
Section 6.02 will contain an accurate and complete description of each Account
(including without limitation the type of the Account, the interest rate on the
Account and the balance of the Account). Such Schedule 2.01(a) shall include
(except for the version of Schedule 2.01(a) dated July 5, 1994) the accrued but
unpaid interest on the Accounts.
(i) Title To Assets. Seller has, and at Closing Buyer will acquire,
----------------
good and marketable title to the Personal Property, Account Loans, and Overdraft
Loans, free and clear of any encumbrances, claims, liens, charges, pledges,
options, licenses, restrictions, conditions, covenants, judgments, security
interests, rights of first refusal, agreements, obligations, commitments,
arrangements and understandings, except as otherwise provided herein
(collectively, "Encumbrances").
6
<PAGE>
(j) State of the Real Property. The following are true statements
---------------------------
with respect to the Real Property:
(i) To the best of Seller's knowledge, after sufficient inquiry of the
lessor named in the Lease, there are no eminent domain proceedings,
litigation or other proceedings or actions pending or threatened with
respect to the Real Property.
(ii) Seller has not received any notices stating that the Real
Property or Seller's use and occupancy thereof is in violation of
applicable law or private covenants, nor does Seller have reason to believe
that any such notices are forthcoming.
(iii) Seller has not entered into or undertaken any written or oral
commitments, arrangements, agreements or obligations of any kind affecting
its ability to transfer the Real Property and no person other than Buyer
has any right of possession to the Real Property, or any part thereof,
except as otherwise provided herein or in the Lease. There are no
commitments to or agreements, to which Seller is a party, with any federal,
state, or local government authority or agency affecting the Real Property.
(iv) Seller is not in default with respect to any of its obligations
or liabilities pertaining to the Lease, nor are there any facts,
circumstances, conditions, or events which, but for notice or lapse of
time, or both, would constitute or result in any such default; nor has
Seller any reason to believe that there is likely to be a default or breach
in the future with respect to any of its obligations or liabilities
pertaining to the Lease.
(v) The improvements and building systems comprising the Real
Property are in good operating condition and repair.
(vi) The present use, operation and physical condition of the Real
Property are in substantial compliance with all applicable Laws, including
zoning restrictions, and private covenants and restrictions.
(vii) To the best of Seller's knowledge after reasonable inquiry,
there has never been any event at, or in connection with, the Real
Property, that would be deemed a release or a disposal of any hazardous,
toxic or dangerous substance, waste or material, including any petroleum or
crude oil or fraction thereof, friable asbestos containing material,
polychlorinated biphenyls or urea formaldehyde foam insulation (any or all
of the foregoing are herein referred to as "Hazardous Material") as defined
in, regulated by, or for the purpose of, or in violation of, the
Comprehensive Environmental Response, Liability and Compensation Act, 42
U.S.C. (S) 9601, et seq., the Resource Conversation and Recovery Act, 42
-- ---
U.S. (S) 6901, et seq., the Toxic Substances Control Act, 15 U.S.C. (S)
-- ---
2601 et seq., the Federal Water Pollution Control Act, 33 U.S.C. (S) 1251
-- ---
et seq., the Safe Drinking Water Act, 42 U.S.C. (S) 201, et seq., or the
-- --- -- ---
Clean Air Act, 42 U.S.C. (S) 7401 et seq., as any of the foregoing may be
-- ---
amended to the date of this Agreement, or any so-called "superfund" or
"superlien" law or any other federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to,
or imposing liability or standards of conduct concerning any such
substance,
7
<PAGE>
waste or material now in effect ("Environmental Laws"). To the best of
Seller's knowledge after reasonable inquiry, no Hazardous Material,
underground storage tanks, ACMs or PCBs are present on, or exist in or on,
the Real Property. There are no actions, suits or proceedings or, demands,
claims, notices or investigations (including, without limitation, notices,
demand letters or requests for information from any environmental agency)
instituted or pending or, to the knowledge of Seller, threatened, with
respect to the Real Property, under any Environmental Law.
(k) Personal Property. Schedule 1.01(c) reflects the true and
------------------------------------
accurate net book value of the Personal Property in accordance with generally
accepted accounting principles consistently applied. The Personal Property is
in good working condition, ordinary wear and tear excepted.
(l) Account Loans and Overdraft Loans. To the best of Seller's
----------------------------------
knowledge, each of the Account Loans and Overdraft Loans, and every extension or
credit made pursuant thereto, and all actions in connection therewith, have
complied and now comply with all applicable Laws (as defined in Section 12.08),
-------
including without limitation, to the extent applicable, the Federal Truth-in-
Lending Act and all regulations promulgated thereunder, and all applicable
consumer credit or usury laws of applicable jurisdictions. To the best of
Seller's knowledge, each of the Account Loans and Overdraft Loans (1) is a
legal, valid and binding obligation of the obligor, maker, co-maker, guarantor,
endorser or debtor (such Persons referred to herein as "Obligors"), (ii) is
enforceable in accordance with its terms (except as enforceability may be
limited by bankruptcy laws, and any other laws relating to creditors' rights, as
well as principles of equity) and (iii) is not subject to any defense,
counterclaim or set-off of any kind. Seller is not in default under any of the
Account Loans or Overdraft Loans. Each of the Account Loans and Overdraft Loans
may be assigned to Buyer without the approval or consent of any Obligor. Each
Account Loan is properly and fully secured by an Account of Seller being assumed
by Buyer hereunder, such Account is indicated on the loan instruments relating
to such loan, and the security interest in such Account has been properly
perfected and is a legal, valid and binding lien on such Account, enforceable by
Buyer (except as enforceability may be limited by bankruptcy laws and other laws
of similar nature relating to creditors' rights). At the Closing, Seller will
have delivered to Buyer the originals of all documentation evidencing the
Account Loans and Overdraft Loans (the "Loan Instruments"), including without
limitation the promissory notes and other documentation relating to the Account
Loans and Overdraft Loans and the documentation relating to the collateral
securing the Account Loans.
(m) Accounts. All of the Accounts were originated and are in
---------
compliance with the documents governing the Accounts and all applicable Laws.
Seller has properly accrued interest on the Accounts and the records respecting
the Accounts accurately reflect such accruals of interest. Seller has delivered
to Buyer a true and complete copy of each of the documents governing the
Accounts and a true and complete copy of the current forms for each of the types
of Accounts offered by Seller out of the Branch. None of the Accounts
constitute "brokered deposits" as defined in 12 C.F.R. (S) 337.6.
(n) Governmental Notices. Seller has not received, nor does Seller
---------------------
reasonably expect to receive, any notice from any federal, state or other
governmental agency indicating that such agency would oppose or not grant or
issue its consent or approval, if requested, with
8
<PAGE>
respect to the transactions contemplated hereby and Seller has no knowledge of
any facts which would reasonably afford a basis for any such opposition or
failure to grant or issue consent or approval.
(o) Information Reporting. With respect to the Accounts, Seller has
----------------------
established "reasonable cause" pursuant to Section 6724 of the Code for
information returns required to be filed on or after December 31, 1989.
(p) General. No representation or warranty by Seller contained in
--------
this Agreement (including without limitation the Schedules hereto) contains any
untrue statement of fact or omits any statement of fact necessary to make the
statements herein not misleading.
(q) No Broker. No agent, broker, investment banker or other Person
----------
acting on behalf or under authority of Seller is or will be entitled to any
broker's or finder's fee or any other commission or similar fee directly or
indirectly in connection with any of the transactions contemplated by this
Agreement with the exception of Hovde Financial, Inc. which will be paid a
commission by the Seller.
The representations and warranties made by Seller herein shall survive
the Closing for a period not to exceed one hundred eighty (180) days from the
Closing Date. Seller will have no liability after such one hundred eighty (180)
day period for any inaccuracy or breach of any representation or warranty set
forth herein. Seller makes no other representation or warranty except those
contained in this Section 3.01 or elsewhere in this Agreement.
Section 3.02 Representations and Warranties of Buyer.
----------------------------------------
Buyer represents and warrants to Seller, as of the date hereof and as of the
Closing Date, as follows:
(a) Good Standing and Corporate Power. Buyer is a bank duly
----------------------------------
organized, validly existing and in good standing under the laws of the State of
Illinois, the deposits of which are insured by the FDIC, and has the requisite
corporate power and authority to carry on its business as the same is being
conducted, and to execute and deliver this Agreement, and carry out all the
transactions contemplated hereby.
(b) Authorization of Agreement. The execution, delivery and
---------------------------
performance by Buyer of this Agreement, and the consummation by Buyer of the
transactions contemplated hereby, have been duly and validly authorized and
approved, to the extent necessary, by the Board of Directors of Buyer. All
requisite corporate actions have been taken so that this Agreement is a legal,
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms, except that the enforceability hereof may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and the rights of
creditors of federal or state chartered banks and that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings therefore may be brought.
9
<PAGE>
(c) Non-Contravention. The execution and delivery of this Agreement,
------------------
and the other instruments and documents contemplated hereby, do not and will not
conflict with, violate, breach or cause a default under the charter or bylaws of
Buyer or under any agreement or instrument to which Buyer is a party or by which
it is bound, or any applicable Law, provided that prior to Closing Buyer obtains
the consents and approvals referred to in Section 3.02(d).
(d) Consents to Transaction. The consummation of the transactions
------------------------
contemplated by this Agreement do not require Buyer to obtain prior to
consummating the transactions contemplated hereby the consent or approval of any
Person, other than the Federal Reserve Bank of Chicago and the Illinois
Commissioner of Banks and Trust Companies.
(e) Compliance with Laws. Buyer has not violated any applicable Laws
---------------------
(as defined in Section 12.08) which would materially affect its ability to
perform hereunder.
(f) Litigation. There are no governmental or administrative
-----------
proceedings or other proceedings, litigation, judgments or claims pending or
threatened against Buyer affecting the ability of Buyer to carry out this
Agreement, or any of the transactions contemplated hereby.
(g) No Broker. No agent, broker, investment banker or other Person
----------
acting on behalf or under authority of Buyer is or will be entitled to any
broker's or finder's fee or any other commission or similar fee directly or
indirectly in connection with any of the transactions contemplated by this
Agreement.
(h) Governmental Notices. Buyer has not received, nor does Buyer
---------------------
reasonably expect to receive, any notice from any federal, state or other
governmental agency indicating that such agency would oppose or not grant or
issue its consent or approval, if requested, with respect to the transactions
contemplated hereby and Buyer has no knowledge of any facts which would
reasonably afford a basis for any such opposition or failure to grant or issue
consent or approval.
(i) General. No representation or warranty by Buyer contained in this
--------
Agreement (including without limitation the Schedules hereto) contains any
untrue statement of fact or omits any statement of fact necessary to make the
statements herein not misleading.
The representations and warranties made by Buyer herein shall survive the
Closing for a period not to exceed one hundred eighty (180) days from the
Closing Date. Buyer will have no liability after such one hundred eighty (180)
day period for any inaccuracy or breach of any representation or warranty set
forth herein. Buyer makes no other representation or warranty except those
contained in this Section 3.02 or elsewhere in this Agreement.
10
<PAGE>
ARTICLE IV
PRE-CLOSING COVENANTS
---------------------
The covenants set forth in this Article IV are intended to govern conduct
during the period from the date hereof to the Closing and shall be so construed,
unless otherwise set forth herein.
Section 4.01 Investigations. Seller shall permit Buyer and its agents,
---------------
upon reasonable and timely request by Buyer or its agents, to inspect the
premises and facilities at the Branch and the books and records of Seller
regarding the Assets and Liabilities being purchased and assumed hereunder at
all reasonable times and upon reasonable notice; provide, however, that any such
----------------
inspection shall be conducted in such manner so as not to interfere unreasonably
with the operation of the business of Seller. In addition, Seller shall furnish
Buyer and its agents with copies of such documents and records with respect to
the Branch and the Assets and Liabilities being purchased and assumed hereunder
as Buyer shall from time to time reasonably request, including without
limitation all documents and records reasonably necessary or advisable in order
for Buyer to select the Assets being purchased pursuant to Sections 1.01(d) and
(e).
Buyer acknowledges that all documents and records provided by Seller will
remain the property of Seller and will not be disseminated by Buyer or its
agents to any other individual or entity. In the event the Closing Date does
not occur or this Agreement is terminated, Buyer will, if requested by Seller,
return to Seller any documents delivered by Seller to Buyer. Further, in the
event the Closing Date does not occur or this Agreement is terminated, Buyer
shall, at its sole cost, restore the Branch to substantially the same condition
it was in immediately prior to any testing or other activities undertaken by
Buyer which caused damage to such Branch. Buyer hereby agrees to indemnify,
reimburse, defend and hold harmless Seller for, from and against all demands,
claims, actions or causes of action, losses, damages, liabilities, costs and
expenses caused by Buyer, its agents or contractors on or about the Branch
related to such investigations.
All information, materials and documents provided to Buyer by Seller, or
Seller's agents or representatives, during Buyer's investigations pertaining to
any of the Assets or Liabilities being transferred hereunder, or relating in any
way to Seller's use and operations of the Branch shall be true and correct, and
shall not omit any additional information or statement of fact necessary to make
such information, materials and documents not misleading.
Except to the extent disclosure may be required by applicable Laws, Buyer
shall maintain and cause its agents to maintain the confidentiality of all
information obtained from Seller which is not publicly available, and Buyer
shall use such information and cause its agents to use such information only for
purposes reasonably related to this Agreement and the transactions contemplated
hereby.
Section 4.02 Operations in the Ordinary Course. Seller shall conduct the
----------------------------------
operations of the Branch only in the ordinary course of business consistent with
past practices. Seller shall maintain the books and records of the Branch in a
manner consistent with past practices and
11
<PAGE>
generally accepted accounting principles. Seller shall conduct the operations of
the Branch in compliance with all applicable Laws (as defined in Section 12.08).
Seller shall maintain all of the Personal Property in good working order. Seller
shall notify Buyer, and obtain Buyer's consent, before purchasing, during the
period between the date hereof and the Closing Date, Personal Property which, in
total, costs in excess of ten thousand dollars ($10,000.00). Seller shall use
reasonable efforts to retain for Buyer's benefit the relationship with Seller's
depositors and the lessor of the Lease for the Real Property. Seller shall use
reasonable efforts to retain the services of Seller's present employees who are
located in the Branch up to the Closing Date; provided, however, that Seller
-----------------
shall not enter into any agreement with, or otherwise make any commitment or
representation to, any of such employees with respect to their employment by
Buyer. Seller shall not increase the compensation or other benefits paid to any
of such employees, except in accordance with Seller's normal compensation
policies, and except for bonus and severance packages offered to such employees
in connection with the transactions contemplated hereby. Seller shall not
relocate the Branch. Seller shall not transfer from the Branch any Accounts to
be assumed by Buyer hereunder, except for Accounts which depositors specifically
request be transferred, without any solicitation or encouragement of such
transfer by Seller. Seller shall not sell, encumber or otherwise transfer or
dispose of any of the Assets (or enter into any agreement to do so) other than
in the ordinary course of business consistent with past practices. Seller shall
perform all of its obligations under the Lease and shall not amend the Lease or
waive or terminate any of its rights thereunder.
Section 4.03 Deposit Pricing. Seller shall continue to use the
----------------
procedures used by Seller prior to the date hereof to set the rates on deposit
products offered to customers at the Branch. Without limiting the generality of
the foregoing, Seller shall not make any material adjustments in the rates
offered on the Accounts unless such adjustments are dictated solely by
fundamental changes in prevailing market rates. Seller shall not reduce the
service charges on any deposit product or any fee-based product (e.g., money
orders, traveler's checks and cashier's checks).
Section 4.04 Employees. The parties shall follow the following
----------
procedure in dealing with employees of Seller who are employed in, or work
directly for, the Branch (the "Employees") regarding employment after the
Closing Date:
(a) Within seven (7) days of the date hereof, Seller shall deliver to
Buyer a true and complete list of all Employees by name, date of hire and
position in the Branch as of the date hereof. In addition, Seller shall
deliver, upon receipt of written consent from each affected Employee, the most
recent performance evaluations, current salaries and other compensation
arrangements concerning such Employee. Upon reasonable notice from Buyer,
Seller shall allow Buyer to interview any and all Employees for the purposes set
forth in this Section 4.04.
(b) Buyer shall interview all Employees who are interested in seeking
employment with Buyer and whom Buyer has an interest in employing and, within
thirty (30) days of the date hereof, shall deliver to Seller a confidential list
setting forth those Employees to whom Buyer intends to offer employment on the
Closing Date (the "Designated Employees") and the position to be offered to each
Designated Employee. After Buyer provides to Seller the
12
<PAGE>
list of Designated Employees, Seller may at its option approach any Employee,
other than a Designated Employee, to discuss opportunities for such Employee to
transfer to other positions with Seller or its affiliates after the Closing
Date. Notwithstanding anything herein to the contrary, Buyer shall have no
obligation to offer employment to any of Seller's Employees.
(c) On the Closing Date, Seller shall terminate, and Buyer shall offer
employment to, each of the Designated Employees who are actively employed by
Seller immediately prior to the Closing Date. Buyer's offers of employment
shall be on an "at-will" basis, and Buyer shall have no obligation to continue
employment and may at its option terminate employment at any time. Past service
credit shall be granted to the Designated Employees for purposes of determining
their participation, eligibility and vesting right in the following benefit
plans or programs maintained by Buyer or its parent company; provided that the
granting of such past service credit is permitted under the terms and conditions
of such plan or program and applicable law: medical, dental, life and disability
insurance, prescription, long-term care, sick day eligibility, short-term and
long-term disability, vacation eligibility, child and dependent care, matching
gift program and service recognition plan. Nothing in the preceding sentence
shall be deemed to impose upon Buyer any obligation to permit the Designated
Employees to participate in any employee benefit plan maintained by Buyer which
constitutes an employee benefit plan within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (an "ERISA Plan"),
including, without limitation, any defined benefit or pension plan maintained by
Buyer. Seller shall remain solely liable to the Employees for any obligation or
liability to such Employees arising out of any ERISA Plan maintained or
previously maintained, by Seller. With regard to those Employees who are
terminated by Seller, and to whom Buyer makes no offer of employment, Seller
shall be solely responsible for payment of any termination-related benefits
(including, but not limited to, severance benefits), as well as for any costs
and expenses arising from or related to compliance with provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1986.
(d) Nothing in this Section 4.04 is intended, nor shall it be
construed, to confer any rights or benefits upon any person, including any
Employee, other than Buyer or Seller.
Section 4.05 The Real Property.
------------------
(a) Seller shall permit Buyer to inspect and review, at Buyer's
expense except as otherwise provided, the physical condition of the Real
Property, title thereto, and all legal and contractual matters relating to the
Real Property during the period beginning on the date hereof. Buyer may, at its
sole option and expense, conduct a preliminary environmental evaluation of the
Real Property ("Phase I Report") to determine whether the potential for a
hazardous materials problem exist. If such evaluation results in a determination
that such a problem may exist, Buyer shall, unless it has exercised its option
to refuse to accept assignment of the lease, obtain environmental assessment of
the Real Property from a qualified environmental consultant acceptable to Buyer
(the "Phase II Report"), and the cost thereof shall be borne exclusively by
Buyer. Seller shall deliver to Buyer all documents and information reasonably
requested by Buyer pursuant to this section 4.05(a) and shall otherwise
cooperate with Buyer in the making of its inspections.
13
<PAGE>
(b) Upon review of the Phase I Report or the Phase II Report, if
obtained, Seller shall either (i) correct any deficiency at Seller's sole
expense and to Buyer's satisfaction, (ii) deduct from the Purchase Price the
estimated cost of remediation of any deficiency as indicated in either the Phase
I Report or the Phase II Report, provided that the expense of such correction,
--------
or the amount of such deduction, shall not be greater than the Purchase Price;
or (iii) elect not to transfer the Real Property to Buyer. Seller must notify
Buyer of its intention herein within ten (10) days of receiving written notice
from Buyer of any deficiency noted in the Phase I or Phase II report. If Seller
elects any option other than correcting the deficiency in accordance with clause
(i) of the preceding sentence or fails to adequately correct the deficiencies
within a reasonable time as determined by Buyer, Buyer may refuse to accept
assignment of the Lease. If Buyer refuses to accept assignment of the Lease,
Buyer shall nonetheless retain the right to assume the Accounts, and purchase
the Account Loans, Overdraft Loans, and the Personal Property related thereto,
pursuant to the terms of this Agreement, provided that nothing contained herein
--------
shall obligate Buyer to exercise such right if Seller elects not to transfer the
Real Property.
(c) From the date hereof through the Closing Date: (i) Seller shall
use best efforts to comply with all applicable Laws and private covenants and
restrictions relating to the Branch; (ii) Seller shall perform all conditions to
any permits or approvals necessary to operate the Branch; (iii) Seller shall
maintain the Branch in substantially its present condition; (iv) Seller shall
timely perform all its obligations under the Lease; and (v) Seller shall not
modify or extend any existing management, employee, maintenance, operating,
service or other contracts or arrangements, nor enter into any new contracts or
arrangements, which will affect the Branch on or after the Closing Date, without
the prior written approval of Buyer; provided, however, that Seller shall
cooperate and work with Buyer to obtain an extension of the term of the Lease
for the Branch covering the period ending August 31, 1995. Nothing contained in
this Section 4.05(c) shall affect Seller's other obligations under Section 4.02.
(d) From the date hereof until the closing, Seller shall maintain in
full force and effect fire and casualty insurance policies relating to the Real
Property, to the extent required by the Lease, and the Personal Property.
Seller represents and warrants to Buyer that (i) such insurance is and will be
customary in type and amount for Assets of the nature just described, (ii) such
insurance is and will be sufficient, along with payment of any applicable
deductible, to replace any leasehold improvements on the Real Property, or any
of the Personal Property which is damaged, destroyed or lost prior to Closing,
and (iii) any proceeds payable to Seller under Seller's insurance can be
assigned to Buyer without the consent of any Person except, if applicable, the
lessor under the Lease. In the case of damage to the Real Property, Buyer shall
have the right to either (i) consummate the Agreement and accept the proceeds of
insurance, (ii) refuse to accept assignment of the Lease or (iii) in the event
that such damage materially interferes with Buyer's intended use of the Real
Property, terminate the Agreement.
(e) If prior to the Closing Date the Real Property is taken, entirely
or in part, under the power of eminent domain, Buyer shall have the right to
either (i) consummate the Agreement and accept any compensation paid for the
Real Property in any action in eminent domain, (ii) refuse to accept assignment
of the Lease or (iii) in the event that such condemnation materially interferes
with Buyer's intended use of the Real Property, terminate the Agreement.
14
<PAGE>
Section 4.06 Regulatory Approvals. Buyer and Seller shall, on a timely
---------------------
basis, each prepare, submit and file, and to the extent the other is responsible
for a filing, cooperate in the preparation, submission and filing of, all
applications for approvals, consents and authorizations, as may be required by
applicable Laws with respect to the transactions contemplated by this Agreement,
including without limitation, the OTS's approval and the FDIC's approval. Each
party shall use its best efforts to obtain such approvals and to satisfy any
conditions to such approvals imposed by such governmental authorities
expeditiously, and shall keep the other party closely informed as to the
developments and progress of such applications. The party responsible for a
filing as set forth above shall deliver to the other party evidence of the
filing of all applications, filings, registrations and notifications relating
thereto (except for any confidential portions thereof), and any supplement,
amendment or item of additional information in connection therewith (except for
any confidential portions thereof). The party responsible for a filing shall
also deliver to the other party a copy of each material notice, order, opinion
and other item of correspondence received by such filing party from any
governmental authority in respect of any such application (except for any
confidential portions thereof).
Section 4.07 Best Efforts. Buyer shall use its best efforts to
-------------
accomplish or satisfy expeditiously, and in any event by closing the conditions
set forth in Article VIII and Article IX. Seller shall use its best efforts to
accomplish or satisfy expeditiously, and in any event by Closing the conditions
set forth in Article VII and Article IX.
Section 4.08 Notice of Breach. Seller and Buyer shall each notify the
-----------------
other party promptly of any breach of any of its representations, warranties or
covenants herein.
Section 4.09 Notice of Claims. Seller and Buyer shall each promptly
-----------------
notify the other party upon obtaining knowledge of the institution or the
threatened institution of any action, claim or proceeding of any nature
regarding or which might in any way adversely affect the business, condition or
prospects of the Branch, any of the Assets and Liabilities to be purchased and
assumed hereunder, or any of the transactions contemplated hereby.
Section 4.10 Notice to Customers. Following the receipt of all
--------------------
required regulatory approvals of the transactions contemplated hereunder, but no
later than forty-five (45) days before the Closing, each party shall mail to
each owner of an Account at the Branch being sold a notice of Seller's
contemplated transfer of the associated Accounts and the Branch to Buyer. Buyer
shall mail such notices five (5) days after the date Seller mails its notices.
The form and content of each such notice shall be agreed upon, to the extent
reasonably practicable, by both parties within five (5) business days after
receipt of the other party's proposed notice. In addition, Seller shall notify
the Obligors under the Account Loans and Overdraft Loans by a letter in a form
mutually acceptable to Buyer and Seller, of the pending transfer of the Account
Loans and Overdraft Loans to Buyer. All notices sent by Buyer shall be at the
sole expense of Buyer, and all notices sent by Seller shall be at the sole
expense of Seller. Seller shall provide the names and addresses of the owners
of the Accounts to Buyer in connection with the mailing of such materials.
Section 4.11 Disclosures. From the date hereof until and through the
------------
Closing, neither party shall issue or publicly disclose, or permit any of its
affiliates to issue or publicly disclose, any press release or other information
concerning the transactions contemplated hereby,
15
<PAGE>
without first providing a copy of such press release or other information to the
other and obtaining such other party's consent thereto; provided, however, that
------------------
this Section 4.11 shall not restrict or prohibit either party or its affiliates
from (i) submitting or filing any documents or information to or with any
federal or state regulatory agency or similar body (including without limitation
the OTS, FDIC, Securities and Exchange Commission, National Association of
Securities Dealers, Inc. and New York Stock Exchange); (ii) providing written
notice to affected customers of the closing of any branch offices which closings
arise from or are related to the transactions contemplated hereunder; or (iii)
complying with any Laws applicable to such party or its affiliates.
Section 4.12 Conversion. From the date hereof through the Closing Date
-----------
or the date of completing the data processing conversion of the Accounts from
Seller's data processing system to Buyer's data processing system, whichever is
later, Seller shall cooperate and work with Buyer to complete the tasks required
to facilitate the conversion. Such tasks include, but are not limited to,
providing Buyer with tapes, reports, name and address labels, and other items as
are necessary to complete the conversion process and related testing procedures.
Within seven (7) days from the date Buyer provides Seller with adequate
specifications, Seller shall provide Buyer with the initial test tapes and
related documentation of the Accounts in a format reasonably acceptable to
Buyer. Seller agrees to cooperate in resolving any conversion-related issues
arising from the conversion of the Accounts for a period of ninety (90) days
following the date that the conversion is completed. Buyer, with the
cooperation of Seller, shall complete all reasonable steps prior to the Closing
Date to effect a conversion to its own system of accounting and electronic data
processing of all information necessary to operate the Branch, and to properly
service the Assets and Liabilities, by the day following the Closing Date.
ARTICLE V
POST-CLOSING COVENANTS
----------------------
Section 5.01 Further Assurances. From and after the Closing, each
-------------------
party shall cause to be furnished to the other party such instruments and other
documents as may be reasonably required, including any necessary powers of
attorney, for the purpose of carrying out or evidencing the transactions
contemplated by this Agreement, and each party shall cooperate with the other
party to the extent required to accomplish the transactions contemplated by this
Agreement and to put Buyer in possession and control of the Assets. Without
limiting the generality of the foregoing, Seller shall promptly remit to Buyer
any funds received by Seller which are included in the Assets, and Seller hereby
authorizes Buyer to endorse in the name of Seller any check or instrument made
payable to Seller which represents funds which are included in the Assets.
Without limiting the generality of the foregoing, Seller shall provide to
the Internal Revenue Service and to depositors, to the extent required by
applicable laws, Forms 1099 with respect to each of the Accounts and Forms 5498
with respect to each of the individual retirement accounts, and all other
required information returns or reports, for the period prior to the close of
business at the Branch on the Closing Date, and Buyer shall provide to the
Internal Revenue Service and to depositors, to the extent required by applicable
laws, Forms 1099 with respect to each of the Accounts and Forms 5498 with
respect to each of the individual retirement
16
<PAGE>
accounts, and all other required information returns or reports, for the period
after the Closing Date.
Without limiting the generality of the foregoing, at any time after
Closing, as Buyer may request from time to time, Seller shall endorse to Buyer
any or all payments received under any of the Account Loans and Overdraft Loans.
Section 5.02 Transitional Matters. Buyer and Seller hereby agree to
---------------------
enter into good faith negotiations for the purpose of executing, prior to the
Closing Date, an agreement which shall set forth each party's duties and
responsibilities, during the period after the Closing Date, with respect to the
following:
(i) Payment of checks;
(ii) In-clearing Items;
(iii) Automated Clearinghouse Payments; and
(iv) Settlements and Reimbursements.
Section 5.03 Covenant Not to Compete. For a period of one (1) year
------------------------
following the Closing Date, Seller shall not itself, and shall not allow any of
its affiliates to, (i) solicit any deposit or lending business of the Branch,
(ii) use the name and address file or customer records of the Branch for the
solicitation of business, or (iii) establish a branch office or other physical
facility including a proprietary ATM facility for the purpose of accepting
deposits within the towns of DeKalb or Sycamore, Illinois (the "Covenant Not To
Compete"). Nothing contained herein shall limit Seller's ability to contact
customers who maintain relationships with Seller which are not subject to this
Agreement, nor shall it limit Seller's ability to continue its general
advertising activities. If any term of the Covenant Not to Compete, as set
forth in this Section 5.03, or the application of such term to any Person or set
of circumstances, shall be determined to be invalid, unlawful or unenforceable
to any extent at any time after the Closing Date, the remainder of the Covenant
Not To Compete, and the application of such terms to persons or circumstances
other than those as to which it is determined to be invalid, unlawful or
unenforceable, shall not be affected and shall continue to be enforceable to the
fullest extent permitted by law.
Section 5.04 Assistance Clause. In connection with any audit or other
------------------
examination by any taxing authority, or any judicial or administrative
proceeding relating to the Assets transferred to Buyer or Liabilities assumed by
Buyer as contemplated by this Agreement, Seller and Buyer agree to provide each
other such assistance as may be reasonably requested. In the event that Seller
must obtain information regarding the Assets transferred to Buyer or the
Liabilities assumed by Buyer, and such information is in the possession or
control of Buyer, Buyer shall perform the required research on behalf of Seller
and make copies of, and excerpts from, such books and records as reasonably
required by Seller. In the event that Buyer must obtain information regarding
the Assets transferred to Buyer or the Liabilities assumed by Buyer and such
information is in the possession or control of Seller, Seller shall perform the
required research on behalf of Buyer and make copies of, and excerpts from, such
books and records as
17
<PAGE>
reasonably required by Buyer. Buyer shall retain all records received from
Seller with respect to the Accounts and Account Loans as required by applicable
Laws and Buyer's record retention practices.
Section 5.05 Performance of Certain Liabilities. From and after the
-----------------------------------
Closing Date, Buyer agrees to pay, to the extent of sufficient available funds
on deposit, all properly drawn checks, drafts, and non-negotiable withdrawal
orders timely presented to it by mail, over its counters, or through clearings
by depositors whose deposits or accounts on which such items are drawn are
included within the Accounts, whether drawn on the check or draft forms provided
by Seller or by Buyer, all in accordance with applicable Laws, customary banking
practices and the provisions of such accounts in effect as of the Closing Date,
until such provisions are properly modified or canceled by Buyer.
Section 5.06 Account Loans and Overdraft Loans. Subsequent to the
----------------------------------
Closing Date, Buyer shall continue to honor and provide credit under the Account
Loans and the Overdraft Loans in accordance with applicable Laws, customary
banking practices and the provisions of the Account Loans and the Overdraft
Loans transferred under this Agreement.
Section 5.07 Conduct of Business. Between the date hereof and the
--------------------
Closing Date, Buyer and its affiliates shall not undertake any marketing or
advertising efforts specifically directed to Seller's customers, except as set
forth herein or as mutually agreed by the parties, and shall not take any
actions which may be expected to adversely affect Seller's efforts to maintain
all existing customer and business relations at the Branch.
Section 5.08 Retirement Accounts. Subsequent to the Closing Date, Buyer
--------------------
shall, with respect to the individual retirement accounts assumed by Buyer and
included within the Accounts, (i) assume and perform all of the fiduciary duties
of Seller that relate to such accounts and (ii) succeed to the fiduciary
relationships of Seller related to such accounts as fully and to the same extent
as if Buyer had originally acquired, incurred or entered into such fiduciary
relationships as of the Closing Date.
Section 5.09 Signs. Buyer agrees to allow Seller access to the Branch,
------
during the period between the Closing Date and the Monday after the Closing
Date, so that Seller may remove any or all interior or exterior signs
identifying the Branch as a "Home Federal Savings of Elgin" branch office.
Seller shall be liable for any structural damage caused by or in connection with
the removal of signs.
ARTICLE VI
Section 6.01 Closing. The transfer of the Assets and assumption of the
--------
Liabilities required by Articles I and II, including the delivery of the
instruments, updated schedules and documents referred to herein, and all other
transactions to be consummated at the same time pursuant hereto, shall take
place at a closing (the "Closing") to occur on a date no later than thirty (30)
days after the receipt of all necessary regulatory approvals obtained pursuant
to Section 1.06 herein, unless otherwise agreed to in writing by the parties
(the "Closing Date").
18
<PAGE>
Nothing contained in this Section 6.01 shall relieve either party from liability
for any breach of its representations or warranties set forth herein.
Section 6.02 Updating Schedules. At least five (5) business days prior
-------------------
to closing, Seller shall deliver to Buyer updated versions of 1.01(c), 1.01(d),
-----------------
1.01(e), and 2.01(a) reflecting the latest information available to Seller as of
- --------------------
ten (10) business days prior to the Closing Date. Within five (5) days after
-----
closing, Seller shall deliver to Buyer final versions of Schedules 1.01(c),
- ------- ------------------
1.01(d), 1.01(e), and 2.01(a) covering all transactions through the close of
- -----------------------------
business on the Closing Date. No updating of Schedules pursuant to this Section
shall relieve Seller from any liability for a breach of Seller's representations
and warranties set forth herein.
Section 6.03 Actions At Closing. At Closing, the following shall occur:
-------------------
(a) Seller shall pay to Buyer by wire transfer in immediately
available Funds the difference between the Assumption Price and the Purchase
Price.
(b) Seller shall deliver to Buyer the Records, the Personal Property
and Cash On Hand.
(c) Seller shall deliver to Buyer, in form and substance reasonably
satisfactory to Buyer, a valid assignment of the Lease, including necessary
estoppel letters for the Real Property, and a bill of sale for the Personal
Property thereon. Seller and Buyer shall share equally the cost of all transfer
and conveyance Taxes imposed by any governmental authority upon such transfer.
(d) Seller shall deliver to Buyer, in form and substance reasonably
satisfactory to Buyer, an omnibus bill of sale with respect to the Personal
Property. Seller and Buyer shall share equally any sales and transfer Taxes, if
any, arising from the sale of the Personal Property to Buyer.
(e) Seller shall deliver to Buyer, and Buyer shall deliver to Seller,
in form and substance reasonably satisfactory to the other, such other
assignments or instruments as either party may reasonably require to accomplish
the transfer of the Assets, or the assumption of the Liabilities.
(f) Buyer shall execute and deliver to Seller, in form and substance
reasonably satisfactory to Seller, documentation by which Buyer agrees to assume
and discharge the Liabilities set forth in Section 2.01.
(g) Seller shall deliver to Buyer a duly executed Certificate of Non-
Foreign Status in accordance with the requirements of Section 1445 of the
Internal Revenue Code of 1986, as amended.
(h) Seller shall deliver to Buyer the opinion of counsel referred to
in Section 7.04, and Buyer shall deliver to Seller the opinion of counsel
referred to in Section 8.04.
19
<PAGE>
(i) Seller shall make available to Buyer conversion tapes and reports
no later than 2:00 a.m. Central time on the day immediately following the
Closing Date. Seller shall provide to Buyer within sixty (60) days after the
Closing a master file tape as of the Closing, in which the total balance of the
Accounts as reflected on the tape equals the total balance of the Accounts on
the Closing Date as reflected on the updated settlement sheet data referred to
in Section 6.04(b).
Section 6.04 Method of Settlement. Notwithstanding the transactions
---------------------
herein described occurring on the Closing Date, the settlement for the
transactions contemplated herein shall occur in two phases as follows:
(a) On the Closing Date, the parties will conduct a preliminary
settlement using settlement sheet data delivered pursuant to Section 6.02.
Based upon such preliminary settlement sheet data, the amount due under Section
6.03(a) shall be calculated and transferred by Seller to Buyer on the Closing
Date.
(b) Within ten (10) business days following the Closing Date, the
parties will conduct an adjusting settlement using such updated settlement sheet
data. An appropriate adjusting settlement payment from Seller to Buyer or from
Buyer to Seller, as the case may be, will be made together with accrued interest
calculated at the Federal Funds rate in effect on the Closing Date for the
number of days lapsed from but not including the Closing Date and the date of
such adjusting settlement payment calculated on the basis of a 365-day year.
Payments sent after 2:00 p.m. (CST) on any day shall be deemed, for purposes of
this Agreement, have been made on the next business day. The adjusted
settlement sheet shall be executed by both parties.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER
----------------------------------
The obligations of Buyer hereunder are subject to the satisfaction, or the
waiver in writing by Buyer, on or before the Closing Date of each of the
following conditions:
Section 7.01 Covenants. All the terms, covenants and
----------
conditions of this Agreement to be complied with and performed by Seller on or
before the Closing Date shall have been duly complied with and performed in all
respects, and Seller shall have delivered to Buyer a certificate to such effect
dated as of the Closing Date.
Section 7.02 Representations. All of the representations and warranties
----------------
made by Seller herein shall be true in all respects as of the Closing Date with
the same force and effect as though such representations and warranties had been
made as of the Closing Date, and Seller shall have delivered to Buyer a
certificate to such effect dated as of the Closing Date.
Section 7.03 Litigation. No order in any legal, administrative or other
-----------
proceeding shall have been entered and remain in force at the Closing Date
restraining or prohibiting any of the transactions contemplated by this
Agreement.
20
<PAGE>
Section 7.04 Amount of Deposit Liabilities. As of the Closing Date, the
------------------------------
total amount of the Accounts shall not be less than $11,000,000 excluding
accrued but unpaid interest.
Section 7.05 No Material Condemnation of, or Damage to, the Branch. No
------------------------------------------------------
condemnation proceedings shall have occurred or have been initiated against the
Real Property which would materially interfere with Buyer's ability to conduct
the operations of the Branch after the Closing Date. No damage shall have
occurred to the Branch as the result of fire or other calamity which would
materially interfere with Buyer's ability to conduct the operations of the
Branch after the Closing Date.
Section 7.06 Opinion of Counsel. Buyer shall have received an opinion of
-------------------
Seller's counsel with respect to the matters set forth in Sections 3.01(a)
through 3.01(d). With regard to Section 3.01(c), Seller's counsel may rely upon
a certification by Seller's chief executive officer or other authorized person
that the execution and delivery of this Agreement and the other instruments and
documents contemplated hereby do not conflict with, violate, breach or cause a
default under any agreement or instrument to which Seller is a party or is
otherwise bound.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
-----------------------------------
The obligations of Seller hereunder are subject to the satisfaction, or the
waiver in writing by Seller, on or before the Closing Date of each of the
following conditions:
Section 8.01 Covenants. All the terms, covenants and conditions of this
----------
Agreement to be complied with and performed by Buyer on or before the Closing
Date shall have been duly complied with and performed in all respects, and Buyer
shall have delivered to Seller a certificate to such effect dated as of the
Closing Date.
Section 8.02 Representations. All the representations and warranties
----------------
made by Buyer herein shall be true in all respects as of the Closing Date with
the same force and effect as though such representations and warranties had been
made as of the Closing Date, and Buyer shall have delivered to Seller a
certificate to such effect dated as of the Closing Date.
Section 8.03 Litigation. No order in any legal, administrative or other
-----------
proceeding shall have been entered and remain in force at the Closing Date
restraining or prohibiting any of the transactions contemplated by this
Agreement.
Section 8.04 Opinion or Counsel. Seller shall have received an opinion of
-------------------
Buyer's counsel with respect to the matters set forth in Section 4.02(a) through
4.02(d). With regard to Section 4.01(c), Buyer's counsel may rely upon a
certification by Buyer's chief executive officer or other authorized person that
the execution and delivery of this Agreement and the other instruments and
documents contemplated hereby do not conflict with, violate, breach or cause a
default under any agreement or instrument to which Buyer is a party or is
otherwise bound.
21
<PAGE>
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF BOTH PARTIES
-----------------------------------------
Section 9.01 Conditions to Obligations of Both Parties. The obligations
------------------------------------------
of both parties to this Agreement are subject to the satisfaction, on or before
the Closing Date, of the conditions that (i) all actions shall have been taken
in order for the transactions contemplated by this Agreement to comply with all
applicable Laws, and to the extent required by applicable Laws, the OTS and
FDIC, and any other regulatory or governmental body having jurisdiction, shall
have approved, consented to and authorized all of the transactions contemplated
by this Agreement (including without limitation the transfer of Assets and
Liabilities to Buyer
hereunder) and all applicable waiting periods shall have expired, and (ii)
Seller shall have obtained all necessary consents to assign the Lease to Buyer;
provided, however, that any such approval, consent or authorization required to
- ------------------
be obtained shall have been granted without the imposition of any condition
which either party reasonably and in good faith deems to be materially
burdensome to it or its parent company.
ARTICLE X
TERMINATION
-----------
Section 10.01 Termination. Upon the occurrence of any of the following
------------
events, this Agreement shall terminate and be of no further force or effect
between the parties hereto, and neither party shall bear any liability as a
result of or in connection with such termination.
(a) Seller and Buyer agree in writing to terminate this Agreement; or
(b) on the date on which the Closing is scheduled to occur, Seller
elects in writing to terminate this Agreement because any condition set forth in
Article VIII has not been satisfied or waived in writing by Seller; or
(c) on the date on which the Closing is scheduled to occur, Buyer
elects in writing to terminate this Agreement because any condition set forth in
Article VII has not been satisfied or waived in writing by Buyer; or
(d) at or prior to Closing, Buyer or Seller elects in writing to
terminate this Agreement if the other party has breached in any material respect
any of its representations, warranties or covenants contained herein, and such
breach (if capable of being cured) has not been cured by the earlier of (i)
thirty (30) days after the giving of written notice of such breach to the
breaching party or (ii) the Closing Date; or
(e) at or prior to Closing, Seller or Buyer reasonably determines that
the conditions set forth in Article IX will not be satisfied; or
22
<PAGE>
(f) the Closing does not take place on or prior to a date no later
than thirty (30) days after the receipt of all necessary regulatory approvals
obtained pursuant to Section 4.06 herein, or such later date as the parties
prior to such date may agree upon; or
(g) the Closing does not take place within six (6) months of the date
of this Agreement for any reason.
ARTICLE XI
Section 11.01 Indemnification by Seller. Seller shall indemnify and hold
--------------------------
harmless Buyer, and its successors and assigns, against and from any loss,
liability, obligation, claim, demand, damage or expense, including without
limitation attorneys' fees and disbursements, which is directly or indirectly
suffered or incurred at any time by Buyer or any of its successors or assigns,
and which arises directly or indirectly out of or by virtue of, or relates
directly or indirectly to, any of the following:
(a) for the period one hundred eighty (180) days from the Closing
Date, any false, misleading or inaccurate representation or warranty made by
Seller in this Agreement, or any breach of any such representation or warranty;
(b) any breach, violation or nonfulfillment by Seller of, or any
failure by Seller to perform, any covenant, agreement, obligation or other
provision contained in this Agreement, unless previously waived in writing by
Buyer;
(c) any contract, written or oral, express or implied, between Seller
and any of Seller's employees;
(d) Seller's preparation or submission of the Form 1099s, Form 5498s
or other information, returns or reports required by applicable Laws, except to
the extent that such claim liability or obligation is caused by Buyer's
negligence;
(e) Seller's failure to properly meet its
responsibilities with respect to former employees under the Consolidated Omnibus
Budget Reconciliation Act;
(f) Seller's failure to properly record accrued interest on the
Accounts, in accordance with the terms and conditions of the Account agreements
and standard banking practices;
(g) Seller's failure to properly report or escheat, to the State of
Illinois, personal property with regard to the Accounts, during the period up to
the Closing Date;
(h) the operation of the Branch or the administration of any of the
Accounts, Account Loans, Overdraft Loans or the Records by Seller prior to the
Closing;
(i) the ownership or possession of the Personal Property and the Real
Property, where such loss, liability, obligation, claim, demand, damage or
expense arises from the
23
<PAGE>
ownership or possession by Seller of the Personal Property or the Real Property
and arises or accrues prior to the Closing; or
(j) any action, lawsuit or other proceeding arising from or relating
to any of the foregoing.
Section 11.02 Indemnification by Buyer. Buyer shall indemnify and hold
-------------------------
harmless Seller, and its successors and assigns, against and from any loss,
liability, obligation, claim, demand, damage or expense including, without
limitation, attorneys' fees and disbursements, which is directly or indirectly
suffered or incurred at any time by Seller or any of its successors or assigns,
and which arises directly or indirectly out of or by virtue of, or relates
directly or indirectly to, any of the following:
(a) for the period one hundred eighty (180) days from the Closing
Date, any false, misleading or inaccurate representation or warranty made by
Buyer in this Agreement, or any breach of any such representation or warranty;
(b) any breach, violation or nonfulfillment by Buyer of, or any
failure by Buyer to perform, any covenant, agreement, obligation or other
provision contained in this Agreement unless previously waived in writing by
Seller;
(c) the operation of the Branch or the administration of any of the
Accounts, Account Loans, Overdraft Loans, or the Records by Buyer subsequent to
the Closing;
(d) the ownership or possession of the Personal Property and the Real
Property, where such loss, liability, obligation, claim, demand, damage or
expense arises from the ownership or possession by Buyer of the Personal
Property or the Real Property and arises or accrues subsequent to the Closing;
or
(e) any action, lawsuit or other proceeding arising from or relating
to any of the foregoing.
ARTICLE XII
Section 12.01 Notices. Any notice or other communication required or
--------
permitted hereunder shall be sufficiently given if it is in writing, and
delivered in person or by overnight carrier, or transmitted by facsimile or sent
by registered or certified mail, postage prepaid, in each case delivered or
addressed as follows:
If to Buyer:
First Bank North
c/o Premier Financial Services, Inc.
27 West Main Street, Suite 101
Freeport, Illinois 61032
Attention: Richard L. Geach, President
24
<PAGE>
With copies to:
Schiff Hardin & Waite
7300 Sears Tower
Chicago, Illinois 60606
Attention: Gary L. Mowder, Esq.
If to Seller:
Home Federal Savings and Loan Association of Elgin
16 North Spring Street
Elgin, Illinois 60120
Attention: George L. Perucco, President
With copies to:
Gomberg, Sharfman, Gold & Ostler, P.C.
208 South LaSalle Street
Suite 1200
Chicago, Illinois 60604
Attention: Lawrence A. Gold, Esq.
or such other address(es) as shall be furnished in writing by either party, and
such notice or communication shall be deemed to have been given as of two (2)
business days after the date so mailed, or if delivered in person or by
overnight carrier, or transmitted by facsimile, on the date so delivered or
transmitted.
Section 12.02 Expenses. Except as provided otherwise in this Agreement,
---------
each party shall pay its own expenses in negotiating and closing the
transactions contemplated by this Agreement.
Section 12.03 Entire Agreement, Modifications. This Agreement shall
--------------------------------
include all of the Schedules attached hereto and all updates made thereto
pursuant to Section 6.02, and all of such Schedules are incorporated herein by
this reference. This Agreement constitutes the entire agreement between the
parties hereto pertaining to the subject matter hereof, and supersedes all prior
and contemporaneous agreements and understandings of the parties in connection
therewith. No modification of this Agreement shall be binding unless executed in
writing by both of the parties hereto.
Section 12.04 Successors and Assigns. This Agreement shall be binding
-----------------------
upon and inure to the benefit of each of the parties hereto and their respective
successors and assigns; provided, however, that neither party shall assign any
------------------
rights or delegate any obligations under this Agreement, or otherwise transfer
any interest herein, without the prior written consent of the other party
hereto, and any attempt to make any such assignment, delegation or transfer
without such consent shall be void and of no effect. Notwithstanding the
preceding sentence, either party shall be permitted to assign all of its rights
and delegate all of its obligations under this
25
<PAGE>
Agreement to any Person which acquires all or substantially all of the assets of
such party or its parent, or any Person which merges with such party or its
parent.
Section 12.05 Counterparts. This Agreement may be executed in one or
-------------
more counterparts, all of which taken together shall constitute one instrument.
Section 12.06 Governing Law. This Agreement shall be construed and
--------------
enforced in accordance with the laws of the State of Illinois, except to the
extent matters may be governed as a matter of law by federal law.
Section 12.07 Enforcement; Specific Performance. In any action to
----------------------------------
enforce this Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees and expenses. The parties agree that there is no adequate
remedy at law for breach of the obligations contained in Section 5.03 of this
Agreement and agree that such obligations shall be enforceable by specific
performance and injunctive relief, without the need to post bond in the event of
such breach.
Section 12.08 Construction. The parties hereto acknowledge that each
-------------
party hereto and its counsel have reviewed and revised this Agreement, and agree
that the normal rule of construction to the effect that any ambiguities are to
be resolved against the drafting party shall not be employed in the
interpretation of either agreement. Except as expressly provided herein, no
provision in this Agreement shall be construed to constitute any party hereto
(or any of the directors, officers or employees thereof) the partner, agent or
legal representative of any other party hereto. The underlined headings
contained herein are for convenience of reference only, shall not be deemed to
be a part of this Agreement and shall not be referred to in connection with the
interpretation hereof. Whenever required by the context hereof, the singular
number shall include the plural, and vice versa; the masculine gender shall
include the feminine and neuter genders; and the neuter gender shall include the
masculine and feminine genders. As used herein, the term "Laws" shall mean all
federal, state, city and county laws, rules, regulations, orders, judgments,
injunctions, decrees and awards (and interpretations thereof) with the exception
of the Americans with Disabilities Act and any city or county zoning provisions,
building codes or subdivision regulations. As used herein, the term "Person"
shall include without limitation any individual, corporation, partnership,
trust, organization, firm or other entity, or any governmental or regulatory
agency or other body.
Section 12.09 Severability. If any provision of this Agreement, or the
-------------
application of such provision to any Person or set of circumstances, shall be
determined to be invalid, unlawful or unenforceable to any extent at any time
after the Closing Date, the remainder of this Agreement, and the application of
such provision to persons or circumstances other than those as to which it is
determined to be invalid, unlawful or unenforceable, shall not be affected and
shall continue to be enforceable to the fullest extent permitted by law.
Section 12.10 Waiver. No failure or delay on the part of any party hereto
-------
in exercising any power, right or privilege hereunder shall operate as a waiver
thereof; and no single or partial exercise of any such power, right or privilege
shall preclude any other or Further exercise thereof or of any other power,
right or privilege. No waiver shall be binding unless in a writing executed by
the party making the waiver.
26
<PAGE>
Section 12.11 Parties In Interest. None of the provisions of this
--------------------
Agreement is intended to provide any rights or remedies to any Person (including
without limitation any depositors, employees or creditors of any of the parties
hereto) other than the parties hereto and their respective permitted successors
and assigns, if any.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
Buyer
FIRST BANK NORTH
By: /s/ Richard L. Geach
------------------------------------------
Richard L. Geach, President
Seller
HOME FEDERAL SAVINGS AND LOAN
ASSOCIATION OF ELGIN
By: /s/George L. Perucco
-----------------------------------------
George L. Perucco, President
27
<PAGE>
PURCHASE AND ASSUMPTION AGREEMENT
THIS PURCHASE AND ASSUMPTION AGREEMENT (the "Agreement") is made and
entered into as of the 29th day of June, 1994, by and between State Bank of
Woodstock, an Illinois banking corporation with its principal office at 101
South Benton Street Woodstock, Illinois 60098 ("Buyer"), and HOME FEDERAL
SAVINGS AND LOAN ASSOCIATION OF ELGIN, a federally chartered savings and loan
association, with its principal office at 16 North Spring Street, Elgin,
Illinois 60120 ("Seller").
W I T N E S S E T H
-------------------
WHEREAS, subject to the approval of the Office of Thrift Supervision
("OTS") and, to the extent necessary, the Federal Deposit Insurance Corporation
("FDIC"), the Illinois Commissioner of Banks and Trust Companies, the Board of
Governors of the Federal Reserve System or other regulatory agency with
jurisdiction Seller desires to sell assets and transfer liabilities, and Buyer
desires to purchase assets and assume liabilities, associated with Seller's
branch office located at 111 Benton Street, Woodstock, Illinois 60098
(hereinafter referred to as the "Branch").
NOW, THEREFORE, for and in consideration of the mutual promises and
agreements set forth herein, the parties agree as follows:
ARTICLE I
PURCHASE OF ASSETS
------------------
Section 1.01 Purchase and Sale of Assets. Subject to the terms and
----------------------------
conditions set forth herein, Seller agrees to sell, convey, assign and transfer
to Buyer, and Buyer agrees to purchase at the Closing (as defined in Section
6.01), all right, title and interest of Seller in and to the following assets
(collectively the "Assets") as of the close of business at the Branch on the
Closing Date (as defined in Section 6.01) except as otherwise specifically set
forth herein:
(a) Records. All records, files, documents, books and papers
--------
(excluding transaction histories), including hard copy and data stored
electronically relating to the Assets and Liabilities (as defined in Section
2.01) being transferred to Buyer hereunder.
(b) Real Property. Purchase of the real property comprising the
--------------
Branch and all of Seller's rights therein (collectively, the "Real Property").
(c) Personal Property. All furniture, fixtures, equipment, automated
------------------
teller machine and other items of tangible personal property located at the
Branch as of the close of business at the Branch on the Closing Date, including
sign structures, but excluding any signs or property that identify Seller by
name or logo-type (collectively, the "Personal Property"). A true and complete
list of the Personal Property as of the date hereof is set forth on Schedule
1.01(c) which has been delivered to Buyer prior to the date hereof. The parties
acknowledge that Schedule 1.01(c) shall be updated as of the Closing Date in
accordance with Section 6.02. If prior to Closing an item of Personal Property
is stolen, destroyed, damaged by fire or other
<PAGE>
casualty or otherwise lost, such item shall be excluded from the sale
contemplated hereby (and the term "Personal Property" as used herein shall
exclude such item).
(d) Account Loans. All loans of Seller made on the security of the
--------------
Accounts (as defined in Section 2.01(a)) as of the close of business at the
Branch on the Closing Date (the "Account Loans"), which are not delinquent as of
the Closing Date, or if delinquent as of such date, are accepted by Buyer in
writing, in the exercise of its discretion, on a case-by-case basis. For
purposes of this Agreement, an Account Loan is deemed to be delinquent if, as of
the Closing Date, any payment due thereon is delinquent by more than thirty (30)
days. A true and complete list of Account Loans as of date no earlier than June
15, 1994 is set forth on Schedule 1.01(d) attached hereto. The parties
acknowledge that five (5) business days prior to the Closing, Seller shall
deliver to Buyer a revised copy of Schedule 1.01(d) updated as of the date ten
(10) days prior to the Closing which sets forth whether and to what extent the
Account Loans listed thereon are delinquent as of such date. The parties
further acknowledge that Schedule 1.01(d) shall be updated as of the Closing
Date in accordance with Section 6.02. Buyer may, within thirty (30) days of the
date hereof, refuse to purchase any Account Loans described in Schedule 1.01(d)
attached hereto on the date hereof based upon Buyer's determination that
document deficiencies exist with respect to such Account Loans. Buyer may
within ten (10) days of receiving any updated Schedule 1.01(d) refuse to
purchase any Account Loans added thereto based upon Buyer determining that
document deficiencies exist with respect to such Account Loans. If Buyer elects
not to purchase a particular Account Loan, it will not assume the related
Account.
(e) Overdraft Loans. All of Seller's unsecured overdraft loans,
----------------
including negotiable order of withdrawal line of credit accounts, relating to
the Accounts, as of the close of business at the Branch on the Closing Date (the
"Overdraft Loans"), which are not delinquent as of the Closing Date, or if
delinquent as of such date, are accepted by Buyer in writing, in the exercise of
its discretion, on a case-by-case basis. For purposes of this Agreement, an
Overdraft Loan is deemed to be delinquent if, as of the Closing Date, any
payment due thereon is delinquent by more than thirty (30) days. A true and
complete list of Overdraft Loans as of a date no earlier than June 15,1994 is
set forth on Schedule 1.01(e) attached hereto. The parties acknowledge that
five (5) business days prior to the Closing Seller shall deliver to Buyer a
revised copy of Schedule 1.01(e) updated as of the date ten (10) days prior to
the Closing which sets forth whether and to what extent the Overdraft Loans
listed thereon are delinquent as of such date. The parties further acknowledge
that Schedule 1.01(e) shall be updated as of the Closing Date in accordance with
Section 6.02. Buyer may, within thirty (30) days of the date hereof, refuse to
purchase any Overdraft Loan described on Schedule 1.01(e) attached hereto on the
date hereof based upon Buyer's determination that document deficiencies exist
with respect to such Overdraft Loan. Buyer may within ten (10) days of receiving
any updated Schedule 1.01(e) refuse to purchase any Overdraft Loans added
thereto based upon Buyer determining that document deficiencies exist with
respect to such Overdraft Loans. If Buyer elects not to purchase a particular
Overdraft Loan, it will not assume the related Account.
(f) Cash on Hand. All teller working cash and vault cash at the
-------------
Branch as of the close of business at the Branch on the Closing Date (the "Cash
on Band").
2
<PAGE>
(g) Core Deposit Relationship. A core deposit relationship intangible
--------------------------
asset relating to the deposit liabilities to be transferred to Buyer hereunder
(the "Core Deposit Relationship").
(h) Covenant Not To Complete. Seller's Covenant Not To Compete (as
-------------------------
defined in Section 5.03).
(i) Residual Goodwill. All of the remaining goodwill associated with
------------------
the Assets and Liabilities being transferred to Buyer hereunder (the "Residual
Goodwill").
Section 1.02. Calculation of Purchase Price. The purchase price for the
------------------------------
Assets as set forth in Section 1.01, and the Covenant Not To Compete as set
forth in Section 5.03 (the "Purchase Price"), shall be the sum of the following
as of the close of business at the Branch on the Closing Date, subject to
adjustment as provided in Section 6.04:
(i) the net book value of the Personal Property as of the close of
business at the Branch on the last day of the month immediately
preceding the Closing Date depreciated in accordance with generally
accepted accounting principles consistently applied through the close
of business at the Branch on the Closing Date; provided, however, that
------------------
Buyer shall not be obligated to pay for any additions to the Personal
Property between the date hereof and the Closing Date which were not
approved by Buyer pursuant to Section 4.02; plus
(ii) the Cash on Hand; plus
(iii) net book value of the Account Loans and Overdraft Loans; plus
(iv) an amount equal to 6.25% of the Accounts (as defined in
Section 2.01(a) hereof); plus
(v) the purchase price of the Real Property of $250,000.00 plus or
minus prorations pursuant to the Contract to Purchase Property
attached hereto as Exhibit A (the "Contract to Purchase Property").
As used herein, the term "net book value" shall mean net book value as
determined from the books and records of Seller, in accordance with generally
accepted accounting principles consistently applied.
ARTICLE II
ASSUMPTION OF LIABILITIES
-------------------------
Section 2.01 Assumption of Liabilities. Subject to the terms and
--------------------------
conditions set forth herein, Buyer agrees to assume and discharge, by
documentation in the form of Exhibit B attached hereto (the "Assumption
Agreement"), as of the close of business at the Branch on the Closing Date, the
following liabilities (collectively the "Liabilities"):
3
<PAGE>
(a) Deposit Liabilities. All deposit liabilities related to accounts
--------------------
associated with the Branch, as shown on the books and records of Seller as of
the close of business at the Branch on the Closing Date, including accrued but
unpaid interest and any obligations related to such accounts, including the
terms and conditions of the individual agreements related thereto, but excluding
(i) any account that on the Closing Date has a negative balance if such account
had no overdraft privileges or the negative balance of such account exceeded its
corresponding overdraft privileges, (ii) accounts subject to or involved in any
form of litigation, and (iii) accounts which are due to be reported or escheated
to the State of Illinois as of the Closing Date (collectively, the "Accounts").
A true and complete list of the Accounts as of a date no earlier than June 15,
1994, is set forth on Schedule 2.01(a) attached hereto. The parties acknowledge
that Schedule 2.01(a) shall be updated as of the Closing Date in accordance with
Section 6.02. As used in this Section 2.01(a), the term "deposit liabilities"
shall include all of the deposit products offered by Seller out of the Branch,
including without limitation passbook accounts, statement accounts, checking
accounts, money market accounts, and certificates of deposit.
(b) In addition, Buyer shall reimburse Seller, on a pro-rata basis,
for each of the following expenses of Seller (if applicable): (i) any utilities
expenses paid by Seller for any period following the Closing Date, (ii) any pre-
paid FDIC insurance premium with respect to deposits located at the Branch; and
(iii) prepaid expenses, if any, arising in the ordinary course of Seller's
business, which would accrue to the benefit of Buyer.
Section 2.02 Excluded Liabilities. It is understood and agreed that,
---------------------
except as expressly set forth in this Agreement, Buyer shall not assume or be
liable for any of the debts, obligations, or liabilities of Seller of any kind
or nature whatsoever, including, but not limited to, (i) any Tax (as defined
herein) or debt of Seller, (ii) any liability of Seller to its employees with
respect to continued employment, compensation, accrued vacation pay, sick leave,
or pursuant to any pension plan or profit sharing arrangements, any other
employee benefit plan, or for unfair labor practices (such as wrongful
termination or employment discrimination), (iii) any liability or obligation of
Seller arising out of any threatened or pending litigation, (iv) any liability
or obligation of Seller, arising prior to the Closing Date, to any of its
customers, depositors, or borrowers, (v) any liability of Seller with respect to
personal injury or property damage claims arising out of any act or omission of
Seller which arises or accrues prior to the Closing Date, or (vi) any liability
for payment of fees, charges and/or penalties associated with Seller's
termination of any leases, contracts or other agreements (collectively, the
"Excluded Liabilities"). For purposes of this Agreement, "Tax" or "Taxes" shall
include federal, state and local income taxes, sales, use, franchise,
employment, excise, property (real and personal) and any other similar type of
charge, expense or levy including any interest thereon.
Section 2.03 Calculation of Assumption Price. The price to be paid by
--------------------------------
Seller in consideration of the assumption of the Liabilities by Buyer in
accordance with Section 2.01 (the "Assumption Price") shall be an amount equal
to (i) the total balance of all Accounts as of the close of business at the
Branch on the Closing Date, less (ii) the amount of reimbursement determined in
accordance with Section 2.01(b) hereof. As used in this Section 2.03 only, the
"total balance" of an Account shall include accrued but unpaid interest on the
Account calculated through the close of business at the Branch on the Closing
Date in accordance with the documents governing the Account.
4
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.01 Representations and Warranties of Seller.
-----------------------------------------
Seller represents and warrants to Buyer, as of the date hereof and as of the
Closing Date, as follows:
(a) Good Standing and Corporate Power. Seller is a federal savings
----------------------------------
association duly organized, validly existing and in good standing under the laws
of the United States, the deposits of which are insured by the FDIC, and has the
requisite corporate power and authority to carry on its business as the same is
being conducted, and to execute and deliver this Agreement, and to carry out all
the transactions contemplated hereby. Seller is not a "foreign person" as
defined in Section 1445 of the Internal Revenue Code of 1986, as amended, and
any related regulations.
(b) Authorization. The execution, delivery and performance by Seller
--------------
of this Agreement, and the consummation by Seller of the transactions
contemplated hereby, have been duly and validly authorized and all requisite
corporate actions have been taken by Seller so that this Agreement is a legal,
valid and binding obligation of Seller, enforceable against Seller in accordance
with its terms, except that the enforceability hereof may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and the rights of
creditors of federally chartered savings associations and that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceedings therefore may be brought.
(c) Non-Contravention. Subject to the receipt of all necessary
------------------
regulatory approvals and all required consents, the execution and delivery of
this Agreement and the other instruments and documents contemplated hereby do
not and will not conflict with, violate, breach or cause a default under the
charter or bylaws of Seller or under any material agreement or instrument to
which Seller is a party or by which it is bound, or any applicable Law.
(d) Consents to Transaction. The consummation of the transactions
------------------------
contemplated by this Agreement do not require Seller to obtain prior to
consummating the transactions contemplated hereby the consent or approval of any
person, other than the OTS and the FDIC.
(e) Compliance with Laws. Seller has not violated any applicable Laws
---------------------
(as defined in Section 12.08) which would materially affect its ability to
perform hereunder. Seller has not been required to obtain approval from any
regulatory or governmental agency in order to conduct its business, other than
the OTS and FDIC approval or such other regulatory authority listed in Section
3.01(d) herein.
(f) Litigation. There are no governmental or administrative
-----------
proceedings or other proceedings, litigation, judgments or claims pending or
threatened against or relating to
5
<PAGE>
Seller arising out of Seller's operation of the Branch or relating to any of the
Assets or Liabilities nor is Seller aware that there is a basis for any of the
foregoing.
(g) Books and Records. The books and records of the Seller respecting
------------------
the operations of the Branch and the Assets and Liabilities accurately reflect
in accordance with generally accepted accounting principles consistently applied
the net book value of each of the Assets and Liabilities being transferred to
Buyer hereunder, including without limitation the Real Property, the Personal
Property, the amount of the Cash on Hand, the outstanding principal balance of
each of the Account Loans and Overdraft Loans, the total balance of each Account
and the net book value of each of the other Assets and Liabilities being
transferred to Buyer hereunder. The Records include all information necessary
to service the Accounts, Account Loans and Overdraft Loans on an ongoing basis,
and to otherwise operate the business being acquired under this Agreement.
(h) Schedules. Schedule 1.01(c) contains, and at each time set forth
---------------------------
in Section 6.02 will contain an accurate and complete description of each item
of the Personal Property, including, without limitation, all furniture,
fixtures, equipment and other items of tangible personal property located at the
Branch (excluding the building improvements), together with all personal
property being transferred hereunder. Schedule 1.01(d) contains, and at each
time set forth in Section 6.02 will contain, an accurate and complete
description (including without limitation identification number, date of origin,
borrower, outstanding principal amount, interest rate and maturity date) of each
of the Account Loans. Schedule 1.01(e) contains, and at each time set forth in
Section 6.02 will contain, an accurate and complete description (including
without limitation the identification number, date of origin, borrowers,
outstanding principal amount, interest rate and maturity date) of each of the
Overdraft Loans. Schedule 2.01(a) contains, and at each time set forth in
Section 6.02 will contain an accurate and complete description of each Account
(including without limitation the type of the Account, the interest rate on the
Account and the balance of the Account).
(i) Title To Assets. Seller has, and at Closing Buyer will acquire,
----------------
good and marketable title to the Personal Property, Account Loans, and Overdraft
Loans, free and clear of any encumbrances, claims, liens, charges, pledges,
options, licenses, restrictions, conditions, covenants, judgments, security
interests, rights of first refusal, agreements, obligations, commitments,
arrangements and understandings.
(j) State of the Real Property. All representations and warranties of
---------------------------
Seller in regard to the Real Property are set forth in the Contract to Purchase
Property.
(k) Personal Property. Schedule 1.01(c) reflects the true and
------------------------------------
accurate net book value of the Personal Property in accordance with generally
accepted accounting principles consistently applied.
(l) Account Loans and Overdraft Loans. Each of the Account Loans and
----------------------------------
Overdraft Loans, and every extension or credit made pursuant thereto, and all
actions in connection therewith, have complied and now comply with all
applicable Laws (as defined in Section 12.08), including without limitation, to
the extent applicable, the Federal Truth-in-Lending Act and all regulations
promulgated thereunder, and all applicable consumer credit or
6
<PAGE>
usury laws of applicable Jurisdictions. Each of the Account Loans and Overdraft
Loans (i) is a legal, valid and binding obligation of the obligor, maker, co-
maker, guarantor, endorser or debtor (such Persons referred to herein as
"Obligors"), and (ii) is enforceable in accordance with its terms (except as
enforceability may be limited by bankruptcy laws, and any other laws relating to
creditors' rights, as well as principles of equity). Seller is not in default
under any of the Account Loans or Overdraft Loans. Each of the Account Loans and
Overdraft Loans may be assigned to Buyer without the approval or consent of any
Obligor. Each Account Loan is properly and fully secured by an Account of
Seller being assumed by Buyer hereunder. At the Closing, Seller will have
delivered to Buyer the originals of all available documentation evidencing the
Account Loans and Overdraft Loans (the "Loan Instruments"), including without
limitation any promissory notes and other documentation in Seller's possession
relating to the Account Loans and Overdraft Loans and the documentation relating
to the collateral securing the Account Loans.
(m) Accounts. All of the Accounts were originated and are in
---------
compliance with the documents governing the Accounts and all applicable Laws.
Seller has properly accrued interest on the Accounts and the records respecting
the Accounts accurately reflect such accruals of interest.
(n) Governmental Notices. Seller has not received, nor does Seller
---------------------
reasonably expect to receive, any notice from any federal, state or other
governmental agency indicating that such agency would oppose or not grant or
issue its consent or approval, if requested, with respect to the transactions
contemplated hereby and Seller has no knowledge of any facts which would
reasonably afford a basis for any such opposition or failure to grant or issue
consent or approval.
(o) Information Reporting. With respect to the Accounts, Seller has
----------------------
established "reasonable cause" pursuant to Section 6724 of the Code for
information returns required to be filed on or after December 31, 1989.
(p) No Broker. No agent, broker, investment banker or other Person
----------
acting on behalf or under authority of Seller is or will be entitled to any
broker's or finder's fee or any other commission or similar fee directly or
indirectly in connection with any of the transactions contemplated by this
Agreement, except with respect to Hovde Financial Inc. the fees and expenses of
which shall be paid by Seller.
(q) General. No representation or warranty by Seller contained in this
--------
Agreement (including without limitation the Schedules hereto) contains any
untrue statement of fact or omits any statement of fact necessary to make the
statements herein not misleading.
Seller makes no other representation or warranty except those contained in
this Section 3.01 or elsewhere in this Agreement or in the Contract to Purchase
Property.
Section 3.02 Representations and Warranties of Buyer.
----------------------------------------
Buyer represents and warrants to Seller, as of the date hereof and as of the
Closing Date, as follows:
7
<PAGE>
(a) Good Standing and Corporate Power. Buyer is a banking corporation
----------------------------------
duly organized, validly existing and in good standing under the laws of
Illinois, the deposits of which are insured by the FDIC, and has the requisite
corporate power and authority to carry on its business as the same is being
conducted, and to execute and deliver this Agreement, and carry out all the
transactions contemplated hereby.
(b) Authorization of Agreement. The execution, delivery and
---------------------------
performance by Buyer of this Agreement, and the consummation by Buyer of the
transactions contemplated hereby, have been duly and validly authorized and
approved, to the extent necessary, by the Board of Directors of Buyer. All
requisite corporate actions have been taken so that this Agreement is a legal,
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms, except that the enforceability hereof may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and the rights of
creditors of federal or state chartered banks and that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings therefore may be brought.
(c) Non-Contravention. The execution and delivery of this Agreement, and
------------------
the other instruments and documents contemplated hereby, do not and will not
conflict with, violate, breach or cause a default under the articles of
incorporation or bylaws of Buyer or under any agreement or instrument to which
Buyer is a party or by which it is bound, or any applicable Law, provided that
prior to Closing Buyer obtains the consents and approvals referred to in Section
3.02(d).
(d) Consents to Transaction. The consummation of the transactions
------------------------
contemplated by this Agreement do not require Buyer to obtain prior to
consummating the transactions contemplated hereby the consent or approval of any
Person, other than the OTS, FDIC, Illinois Commissioner of Banks and Trust
Companies and the Board of Governors of the Federal Reserve System.
(e) Compliance with Laws. Buyer has not violated any applicable Laws (as
---------------------
defined in Section 12.08) which would materially affect its ability to perform
hereunder.
(f) Litigation. There are no governmental or administrative proceedings or
-----------
other proceedings, litigation, judgments or claims pending or threatened against
Buyer affecting the ability of Buyer to carry out this Agreement, or any of the
transactions contemplated hereby.
(g) No Broker. No agent, broker, investment banker or other Person acting on
----------
behalf or under authority of Buyer is or will be entitled to any broker's or
finder's fee or any other commission or similar fee directly or indirectly in
connection with any of the transactions contemplated by this Agreement.
(h) Governmental Notices. Buyer has not received, nor does Buyer reasonably
---------------------
expect to receive, any notice from any federal, state or other governmental
agency indicating that such agency would oppose or not grant or issue its
consent or approval, if requested, with respect to the transactions contemplated
hereby and Buyer has no knowledge of facts which
8
<PAGE>
would reasonably afford a basis for any such opposition or failure to grant or
issue consent or approval.
(i) General. No representation or warranty by Buyer contained in this
--------
Agreement (including without limitation the Schedules hereto) contains any
untrue statement of fact or omits any statement of fact necessary to make the
statements herein not misleading.
Buyer makes no other representation or warranty except those confined in
this Section 3.02 or elsewhere in this Agreement or in the Contract to Purchase
Property.
ARTICLE IV
PRE-CLOSING COVENANTS
---------------------
The covenants set forth in this Article IV are intended to govern conduct
during the period from the date hereof to the Closing and shall be so construed,
unless otherwise set forth herein.
Section 4.01 Investigations. Seller shall permit Buyer and its agents,
---------------
upon reasonable and timely request by Buyer or its agents, to inspect the
premises and facilities at the Branch and the books and records of Seller
regarding the Assets and Liabilities being purchased and assumed hereunder at
all reasonable times and upon reasonable notice; provided, however, that any
------------------
such inspection shall be conducted in such manner so as not to interfere
unreasonably with the operation of the business of Seller. In addition, Seller
shall furnish Buyer and its agents with copies of such documents and records
with respect to the Branch and the Assets and Liabilities being purchased and
assumed hereunder as Buyer shall from time to time reasonably request, including
without limitation all documents and records reasonably necessary or advisable
in order for Buyer to select the Assets being purchased pursuant to Sections
1.01(d) and (e).
Buyer acknowledges that all documents and records provided by Seller will
remain the property of Seller and will not be disseminated by Buyer to any other
individual or entity. In the event the Closing Date does not occur or this
Agreement is terminated, Buyer will, if requested by Seller, return to Seller
any documents delivered by Seller to Buyer. Further, in the event the Closing
Date does not occur or this Agreement is terminated, Buyer shall, at its sole
cost, restore the Branch to substantially the same condition they were in
immediately prior to any testing or other activities undertaken by Buyer which
caused damage to such Branch. Buyer hereby agrees to indemnify, reimburse,
defend and hold harmless Seller for, from and against all demands, claims,
actions or causes of action, losses, damages, liabilities, costs and expenses
caused by Buyer, its agents or contractors on or about the Branch related to
such investigations.
All information, materials and documents provided to Buyer by Seller, or
Seller's agents or representatives, during Buyer's investigations pertaining to
any of the Assets or Liabilities being transferred hereunder, or relating in any
way to Seller's use and operations of the Branch shall, to the Seller's
knowledge, be true and correct, and shall not omit any additional information or
statement of fact necessary to make such information, materials and documents
not misleading.
9
<PAGE>
Except to the extent disclosure may be required by applicable Laws, Buyer
shall maintain and cause its agents to maintain the confidentiality of all
information obtained from Seller which is not publicly available, and Buyer
shall use such information and cause its agents to use such information only for
purposes reasonably related to this Agreement and the transactions contemplated
hereby.
Section 4.02 Operations in the Ordinary Course. Seller shall conduct the
----------------------------------
operations of the Branch only in the ordinary course of business consistent with
past practices. Seller shall maintain the books and records of the Branch in a
manner consistent with past practices and generally accepted accounting
principles. Seller shall conduct the operations of the Branch in compliance with
all applicable Laws (as defined in Section 12.08). Seller shall maintain all of
the Personal Property in good working order. Seller shall notify Buyer, and
obtain Buyer's consent, before purchasing, during the period between the date
hereof and the Closing Date, Personal Property which, in total, costs in excess
of one thousand dollars ($1,000.00). Seller shall use reasonable efforts to
retain for Buyer's benefit the relationship with Seller's depositors. Seller
shall use reasonable efforts to retain the services of Seller's present
employees who are located in the Branch up to the Closing Date; provided,
---------
however, that Seller shall not enter into any agreement with, or otherwise make
- --------
any commitment or representation to, any of such employees with respect to their
employment by Buyer. Seller shall not increase the compensation or other
benefits paid to any of such employees, except in accordance with Seller's
normal compensation policies, and except for bonus and severance packages
offered to such employees in connection with the transactions contemplated
hereby. Seller shall not relocate the Branch. Seller shall not transfer from
the Branch any Accounts to be assumed by Buyer hereunder, except for Accounts
which depositors specifically request be transferred. Seller shall not sell,
encumber or otherwise transfer or dispose of any of the Assets (or enter into
any agreement to do so) other than in the ordinary course of business consistent
with past practices.
Section 4.03 Deposit Pricing. Seller shall continue to use the
----------------
procedures used by Seller prior to the date hereof to set the rates on deposit
products offered to customers at the Branch. Without limiting the generality of
the foregoing, Seller shall not make any material adjustments in the rates
offered on the Accounts unless such adjustments are dictated solely by
fundamental changes in prevailing market rates. Seller shall not reduce the
service charges on any deposit product or any fee-based product (e.g., money
orders, traveler's checks and cashier's checks).
Section 4.04 Employees. The parties shall follow the following procedure
----------
in dealing with employees of Seller who are employed in, or work directly for,
the Branch (the "Employees") regarding employment after the Closing Date:
(a) Within seven (7) days of the date hereof, Seller shall deliver to
Buyer a true and complete list of all Employees by name, date of hire and
position in the Branch as of the date hereof. In addition, Seller shall
deliver, upon receipt of written consent from each affected Employee, the most
recent performance evaluations, current salaries and other compensation
arrangements concerning such Employee. Upon reasonable notice from Buyer,
Seller shall allow Buyer to interview any and all Employees for the purposes set
forth in this Section 4.04.
(b) Buyer may interview any Employee who is interested in seeking
employment with Buyer and, within sixty (60) days of the date hereof, shall
deliver to Seller a confidential
10
<PAGE>
list setting forth those Employees to which Buyer intends to offer employment on
the Closing Date (the "Designated Employees") and the position to be offered to
each Designated Employee. After Buyer provides to Seller the list of Designated
Employees, Seller may at its option approach any Employee, other than a
Designated Employee, to discuss opportunities for such Employee to transfer to
other positions with Seller or its affiliates after the Closing Date.
Notwithstanding anything herein to the contrary, Buyer shall have no obligation
to offer employment to any of Seller's employees.
(c) On the Closing Date, Seller shall terminate, and Buyer shall offer
employment to, each of the Designated Employees who are actively employed by
Seller immediately prior to the Closing Date. Buyer's offers of employment
shall be on an "at-will" basis, and Buyer shall have no obligation to continue
employment and may at its option terminate employment at any time. Past service
credit shall be granted to the Designated Employees for purposes of determining
their participation, eligibility and vesting right in the following benefit
plans or programs maintained by Buyer or its parent company: medical, dental,
life and disability insurance, prescription, long-term care, sick day
eligibility, short-term and long-term disability, vacation eligibility, child
and dependent care, matching gift program and service recognition plan. With
regard to those Employees who are terminated by Seller, and to whom Buyer makes
no offer of employment, Seller shall be solely responsible for any and all
liabilities and obligations to such Employees, including without limitation,
payment of any termination-related benefits (including, but not limited to,
severance benefits), as well as for any costs and expenses arising from or
related to compliance with provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1986.
(d) Nothing in this Section 4.04 is intended, nor shall it be
construed, to confer any rights or benefits upon any person, including any
Employee, other than Buyer or Seller.
Section 4.05 The Real Property.
------------------
(a) Subject to the provisions of the Contract to Purchase Property Seller
shall permit Buyer to inspect and review, at Buyer's expense except as otherwise
provided, the physical condition of the Real Property, title thereto, and all
legal and contractual matters relating to the Real Property. Buyer may, at its
sole option and expense, conduct a preliminary environmental evaluation of the
Real Property ("Phase I Report") to determine whether the potential for a
hazardous materials problem exists. If such evaluation results in a
determination that such a problem may exist, Buyer shall, obtain environmental
assessment of the Real Property from a qualified environmental consultant
acceptable to Buyer (the "Phase II Report"), and the cost thereof shall be borne
exclusively by Buyer. Seller shall deliver to Buyer all documents and
information reasonably requested by Buyer pursuant to this section 4.05(a) and
shall otherwise cooperate with Buyer in the making of its inspections.
(b) Upon review of the Phase I Report or the Phase II Report, if obtained,
Buyer shall either (i) correct any deficiency at Buyer's sole expense without
delaying the Closing; or (ii) elect to terminate this Agreement and the Contract
to Purchase Property. Buyer must notify Seller of its intention herein within
ten (10 days of receiving the Phase I or Phase II report.
11
<PAGE>
(c) From the date hereof through the Closing Date: (i) Seller shall use
best efforts to comply with all applicable Laws and private covenants and
restrictions relating to the Branch; (ii) Seller shall perform all conditions to
any permits or approvals necessary to operate the Branch; (iii) Seller shall
maintain the Branch in substantially its present condition and; (iv) Seller
shall not modify or extend any existing management, employee, maintenance,
operating, service or other contracts or arrangements, nor enter into any new
contracts or arrangements, which will affect the Branch on or after the Closing
Date, without the prior written approval of Buyer. Nothing contained in this
Section 4.05(c) shall affect Seller's other obligations under Section 4.02.
(d) From the date hereof until the Closing, Seller shall maintain in full
force and effect fire and casualty insurance policies relating to the Real
Property and the Personal Property. Seller represents and warrants to Buyer that
(i) such insurance is and will be customary in type and amount for Assets of the
nature just described, (ii) such insurance is and will be sufficient, along with
payment of any applicable deductible, to replace any improvements on the Real
Property, or any of the Personal Property which is damaged, destroyed or lost
prior to Closing, and (iii) any proceeds payable to Seller under Seller's
insurance can be assigned to Buyer without the consent of any Person. In the
case of damage to the Real Property, Buyer shall have the right to either (i)
consummate the Agreement and accept the proceeds of insurance, or (ii) refuse to
purchase the Real Property.
(e) If prior to the Closing Date the Real Property is taken, entirely or
in part, under the power of eminent domain, Buyer shall have the right to either
(i) consummate the Agreement and accept any compensation paid for the Real
Property in any action in eminent domain, or (ii) refuse to purchase the Real
Property.
Section 4.06 Regulatory Approvals. Buyer and Seller shall, on a timely
---------------------
basis, each prepare, submit and file, and to the extent the other is responsible
for a filing, cooperate in the preparation, submission and filing of, all
applications for approvals, consents and authorizations, as may be required by
applicable Laws with respect to the transactions contemplated by this Agreement,
including without limitation, the OTS's approval and the FDIC's approval. Each
party shall use its best efforts to obtain such approvals and to satisfy any
conditions to such approvals imposed by such governmental authorities
expeditiously, and shall keep the other party closely informed as to the
developments and progress of such applications. The party responsible for a
filing as set forth above shall deliver to the other party evidence of the
filing of all applications, filings, registrations and notifications relating
thereto (except for any confidential portions thereof), and any supplement,
amendment or item of additional information in connection therewith (except for
any confidential portions thereof). The party responsible for a filing shall
also deliver to the other party a copy of each material notice, order, opinion
and other item of correspondence received by such filing party from any
governmental authority in respect of any such application (except for any
confidential portions thereof).
Section 4.07 Best Efforts. Buyer shall use its best efforts to accomplish
-------------
or satisfy expeditiously, and in any event by closing the conditions set forth
in Sections 8.01, 8.02, 8.04, and Article IX. Seller shall use its best efforts
to accomplish or satisfy expeditiously, and in any event by Closing the
conditions set forth in Sections 7.01, 7.02, 7.04 and Article IX.
12
<PAGE>
Section 4.08 Notice of Breach. Seller and Buyer shall each notify the
-----------------
other party promptly if any of its representations or warranties made herein
shall no longer be true or of any breach of any covenants herein by such party.
Section 4.09 Notice of Claims. Seller and Buyer shall each promptly notify
-----------------
the other party upon obtaining knowledge of the institution or the threatened
institution of any action, claim or proceeding of any nature regarding or which
might in any way adversely affect the business, condition or prospects of the
Branch, any of the Assets and Liabilities to be purchased and assumed hereunder,
or any of the transactions contemplated hereby.
Section 4.10 Notice to Customers. Following the receipt of all required
--------------------
regulatory approvals of the transactions contemplated hereunder, but no later
than fifteen (15) days before the Closing, each party shall mail to each owner
of an Account at the Branch being sold a notice of Seller's contemplated
transfer of the associated Accounts and the Branch to Buyer. Buyer shall mail
such notices five (5) days after the date Seller mails its notices. The form
and content of each such notice shall be agreed upon, to the extent reasonably
practicable, by both parties within five (5) business days after receipt of the
other party's proposed notice. In addition, Seller shall notify the Obligors
under the Account Loans and Overdraft Loans by a letter in a form mutually
acceptable to Buyer and Seller, of the pending transfer of the Account Loans and
Overdraft Loans to Buyer. All notices sent by Buyer shall be at the sole
expense of Buyer, and all notices sent by Seller shall be at the sole expense of
Seller. Seller shall provide the names and addresses of the owners of the
Accounts to Buyer in connection with the mailing of such materials.
Section 4.11 Disclosures. From the date hereof until and through the
------------
Closing, neither party shall issue or publicly disclose, or permit any of its
affiliates to issue or publicly disclose, any press release or other information
concerning the fact or possibility that Seller will cease to operate the Branch
or the transactions contemplated hereby, without the prior written consent of
the other party; provided, however, that this Section 4.11 shall not restrict or
prohibit either party or its affiliates from (i) submitting or filing any
documents or information to or with any federal or state regulatory agency or
similar body (including without limitation the OTS, FDIC, Securities and
Exchange Commission, National Association of Securities Dealers, Inc. and New
York Stock Exchange); (ii) complying with Section 4.10 hereof; or (iii)
complying with any Laws applicable to such party or its affiliates.
Section 4.12 Conversion. From the date hereof through the Closing Date or
-----------
the date of completing the data processing conversion of the Accounts from
Seller's data processing system to Buyer's data processing system, whichever is
later, Seller shall cooperate and work with Buyer to complete the tasks required
to facilitate the conversion. Such tasks include, but are not limited to,
providing Buyer with tapes, reports, name and address labels, and other items as
are necessary to complete the conversion process and related testing procedures.
Within seven (7) days from the date Buyer provides Seller with adequate
specifications, Seller shall provide Buyer with the initial test tapes and
related documentation of the Accounts. Seller agrees to cooperate in resolving
any conversion-related issues arising from the conversion of the Accounts for a
period of ninety (90) days following the date that the conversion is completed.
Buyer, with the cooperation of Seller, shall complete all reasonable steps prior
to the Closing Date to effect a conversion to its own system of accounting and
electronic data processing of all information
13
<PAGE>
necessary to operate the Branch, and to properly service the Assets and
Liabilities, by the day following the Closing Date.
Section 4.13 Conduct of Business. Between the date hereof and the Closing
--------------------
Date, Buyer and its affiliates shall not undertake any marketing or advertising
efforts specifically directed to Seller's customers, except as set forth herein
or as mutually agreed by the parties, and shall not take any actions which may
be expected to adversely affect Seller's efforts to maintain until Closing all
existing customer and business relations at the Branch.
ARTICLE V
POST-CLOSING COVENANTS
----------------------
Section 5.01 Further Assurances. From and after the Closing, each party
-------------------
shall cause to be furnished to the other party such instruments and other
documents as may be reasonably required, including any necessary powers of
attorney, for the purpose of carrying out or evidencing the transactions
contemplated by this Agreement, and each party shall cooperate with the other
party to the extent required to accomplish the transactions contemplated by this
Agreement and to put Buyer in possession and control of the Assets. Without
limiting the generality of the foregoing, Seller shall promptly remit to Buyer
any funds received by Seller which are included in the Assets, and Seller hereby
authorizes Buyer to endorse in the name of Seller any check or instrument made
payable to Seller which represents funds which are included in the Assets.
Without limiting the generality of the foregoing, Seller shall provide to
the Internal Revenue Service and to depositors, to the extent required by
applicable laws, Forms 1099 with respect to each of the Accounts and Forms 5498
with respect to each of the individual retirement accounts, and all other
required information returns or reports, for the period prior to the close of
business at the Branch on the Closing Date, and Buyer shall provide to the
Internal Revenue Service and to depositors, to the extent required by applicable
laws, Form 1099s with respect to each of the Accounts and Form 5498s with
respect to each of the individual retirement accounts, and all other required
information returns or reports, for the period after the Closing Date.
Without limiting the generality of the foregoing, at any time after
Closing, as Buyer may request from time to time, Seller shall endorse to Buyer
any or all of the Account Loans and Overdraft Loans.
Section 5.02 Transitional Matters. Buyer and Seller hereby agree to enter
---------------------
into good faith negotiations for the purpose of executing, prior to the Closing
Date, an agreement which shall set forth each party's duties and
responsibilities, during the period after the Closing Date, with respect to the
following:
(i) Payment of checks;
(ii) In-clearing Items;
14
<PAGE>
(iii) Automated Clearinghouse Payments; and
(iv) Settlements and Reimbursements.
Section 5.03 Covenant Not to Compete. For a period of three (3) years
------------------------
following the Closing Date, Seller shall not itself, and shall not allow any of
its affiliates to, solicit any deposit or lending business of the Branch, nor
establish a branch office or other physical facility for the purpose of
accepting deposits within the town of Woodstock, Illinois (the "Covenant Not To
Compete"). Nothing contained herein shall limit Seller's ability to contact
customers who maintain relationships with Seller which are not subject to this
Agreement, nor shall it limit Seller's ability to continue its general
advertising activities. If any term of the Covenant Not to Compete, as set
forth in this Section 5.03, or the application of such term to any Person or set
of circumstances, shall be determined to be invalid, unlawful or unenforceable
to any extent at any time after the Closing Date, the remainder of the Covenant
Not To Compete, and the application of such terms to persons or circumstances
other than those as to which it is determined to be invalid, unlawful or
unenforceable, shall not be affected and shall continue to be enforceable to the
fullest extent permitted by law.
Section 5.04 Assistance Clause. In connection with any audit or other
------------------
examination by any taxing authority, or any judicial or administrative
proceeding relating to the Assets transferred to Buyer or Liabilities assumed by
Buyer as contemplated by this Agreement, Seller and Buyer agree to provide each
other such assistance as may be reasonably requested. In the event that Seller
must obtain information regarding the Assets transferred to Buyer or the
Liabilities assumed by Buyer, and such information is in the possession or
control of Buyer, Buyer shall perform the required research on behalf of Seller
and make copies of, and excerpts from, such books and records as reasonably
required by Seller. In the event that Buyer must obtain information regarding
the Assets transferred to Buyer or the Liabilities assumed by Buyer and such
information is in the possession or control of Seller, Seller shall perform the
required research on behalf of Buyer and make copies of, and excerpts from, such
books and records as reasonably required by Buyer. Buyer shall retain all
records received from Seller with respect to the Accounts and Account Loans as
required by applicable Laws and Buyer's record retention practices.
Section 5.05 Performance of Certain Liabilities. From and after the
-----------------------------------
Closing Date, Buyer agrees to pay, to the extent of sufficient available finds
on deposit, all properly drawn checks, drafts, and non-negotiable withdrawal
orders timely presented to it by mail over its counters, or through clearings by
depositors whose deposits or accounts on which such items are drawn are included
within the Accounts, whether drawn on the check or draft forms provided by
Seller or by Buyer, all in accordance with applicable Laws, customary banking
practices and the provisions of such accounts in effect as of the Closing Date,
until such provisions are properly modified or canceled by Buyer.
Section 5.06 Account Loans and Overdraft Loans. Subsequent to the Closing
----------------------------------
Date, Buyer shall continue to honor and provide credit in accordance with
applicable Laws, customary banking practices and the provisions of the Account
Loans and the Overdraft Loans transferred under this Agreement.
15
<PAGE>
Section 5.07 Fiduciary Relationships. Buyer shall perform all of the
------------------------
fiduciary relationships of Seller arising out of any retirement accounts
included within the Accounts, and with respect to such Accounts, Buyer shall
assume all of the obligations and duties of Seller as fiduciary and succeed to
all such fiduciary relationships of Seller as fully and to the same extent as if
Buyer had originally acquired, incurred, or entered into such fiduciary
relationships.
Section 5.08 Retirement Accounts. Subsequent to the Closing Date, Buyer
--------------------
shall, with respect to the individual retirement accounts assumed by Buyer and
included within the Accounts, (i) assume and perform all of the fiduciary duties
of Seller that relate to such accounts and (ii) succeed to the fiduciary
relationships of Seller related to such accounts as fully and to the same extent
as if Buyer had originally acquired, incurred or entered into such fiduciary
relationships as of the Closing Date.
Section 5.09 Signs. Buyer agrees to allow Seller access to the Branch,
------
during the period between the Closing Date and the Monday after the Closing
Date, so that Seller may remove any or all interior or exterior signs
identifying the Branch as a "Home Federal Savings of Elgin" branch office.
Seller shall be liable for any and all damage caused by or in connection with
the removal of signs.
ARTICLE VI
Section 6.01 Closing. The transfer of the Assets and assumption of the
--------
Liabilities required by Articles I and II, including the delivery of the
instruments, updated schedules and documents referred to herein, and all other
transactions to be consummated at the same time pursuant hereto, shall take
place at a closing (the "Closing") to occur on a date no later than thirty (30)
days after the receipt of all necessary regulatory approvals obtained pursuant
to Section 4.06 herein, unless otherwise agreed to in writing by the parties
(the "Closing Date"). Nothing contained in this Section 6.01 shall relieve
either party from liability for any breach of its representations or warranties
set forth herein.
Section 6.02 Updating Schedules. At least five (5) business days prior to
-------------------
closing, Seller shall deliver to Buyer updated versions of 1.01(c), 1.01(d),
1.01(e), and 2.01(a) reflecting the latest information available to Seller as of
ten (10) business days prior to the Closing Date. Within five (5) days after
closing, Seller shall deliver to Buyer final versions of Schedules 1.01(c),
1.01(d), 1.01(e), and 2.01(a) covering all transactions through the close of
business on the Closing Date. No updating of Schedules pursuant to this Section
shall relieve Seller from any liability for a breach of Seller's representations
and warranties set forth herein.
Section 6.03 Actions At Closing. At Closing, the following shall occur:
-------------------
(a) Seller shall pay to Buyer by wire transfer in immediately available
Funds the difference between the Assumption Price and the Purchase Price.
(b) Seller shall deliver to Buyer the Records, the Personal Property and
Cash On Hand.
(c) Seller and Buyer shall deliver to each other all documents necessary
to transfer the Real Property to the Buyer pursuant to the Contract to Purchase
Property. Conveyance Taxes
16
<PAGE>
imposed by any governmental authority upon such transfer shall be paid by the
parties as set forth in said Contract to Purchase Property.
(d) Seller shall deliver to Buyer, in form and substance reasonably
satisfactory to Buyer, an omnibus bill of sale with respect to the Personal
Property. Seller shall pay any sales and transfer Taxes, if any, arising from
Personal Property to Buyer.
(e) Seller shall deliver to Buyer, and Buyer shall deliver to Seller, in
form and substance reasonably satisfactory to the other, such other assignments
or instruments as either party may reasonably require to accomplish the transfer
of the Assets, or the assumption of the Liabilities.
(f) Buyer shall execute and deliver to Seller the Assumption Agreement.
(g) Seller shall deliver to Buyer a duly executed Certificate of Non-
Foreign Status in accordance with the requirements of Section 1445 of the
Internal Revenue Code of 1986, as amended.
(h) Seller shall deliver to Buyer the opinion of counsel referred to in
Section 7.04, and Buyer shall deliver to Seller the opinion of counsel referred
to in Section 8.04.
(i) Seller shall make available to Buyer conversion tapes and reports no
later than 10:00 a.m. Central time on the day immediately following the Closing
Date. Seller shall provide to Buyer within thirty (30) days after the Closing a
master file tape as of the Closing, in which the total balance of the Accounts
as reflected on the tape equals the total balance of the Accounts on the Closing
Date as reflected on the updated settlement sheet data referred to in Section
6.04(b).
Section 6.04 Method of Settlement. Notwithstanding the transactions herein
---------------------
described occurring on the Closing Date, the settlement for the transactions
contemplated herein shall occur in two phases as follows:
(a) On the Closing Date, the parties will conduct a preliminary settlement
using settlement sheet data accumulated through the close of business at the
Branch three (3) business days prior to the Closing Date. Based upon such
preliminary settlement sheet data, the amount due under Section 6.03(a) shall be
calculated and transferred by Seller to Buyer on the Closing Date. In the event
that a wire transfer is commenced on the Closing Date but is not received until
the day after the Closing Date, then Seller agrees to pay interest, at the
Federal Funds rate in effect on the Closing Date, for each day such amount due
is not transferred to Buyer after the Closing Date.
(b) Within ten (10) business days following the Closing Date, the parties
will conduct an adjusting settlement using such updated settlement sheet data.
An appropriate adjusting settlement payment from Seller to Buyer or from Buyer
to Seller, as the case may be, will be made together with accrued interest
calculated at the Federal Funds rate in effect on the Closing Date for the
number of days lapsed between the Closing Date and the date of such adjusting
17
<PAGE>
settlement payment calculated on the basis of a 365-day year. The adjusted
settlement sheet shall be executed by both parties.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER
----------------------------------
The obligations of Buyer hereunder are subject to the satisfaction, or the
waiver in writing by Buyer, on or before the Closing Date of each of the
following conditions:
Section 7.01 Covenants. All the terms, covenants and
----------
conditions of this Agreement to be complied with and performed by Seller on or
before the Closing Date shall have been duly complied with and performed in all
respects, and Seller shall have delivered to Buyer a certificate to such effect
dated as of the Closing Date.
Section 7.02 Representations. All of the representations and warranties
----------------
made by Seller herein shall be true in all respects as of the Closing Date with
the same force and effect as though such representations and warranties had been
made as of the Closing Date, and Seller shall have delivered to Buyer a
certificate to such effect dated as of the Closing Date.
Section 7.03 Litigation. No order in any legal, administrative or other
-----------
proceeding shall have been entered and remain in force at the Closing Date
restraining or prohibiting any of the transactions contemplated by this
Agreement.
Section 7.04 Opinion of Counsel. Buyer shall have received from the law
-------------------
firm of Gomberg, Sharfman, Gold & Ostler, P.C., counsel to Seller, dated the
Closing Date, in form and substance reasonably acceptable to Buyer and its
counsel, to the effect that:
(a) Seller is a federal savings association duly organized, validly
existing and in good standing under the laws of the United States, the deposits
of which are insured by the FDIC, and has the requisite corporate power and
authority to carry on its business as the same is being conducted, and to
execute and deliver this Agreement, and to carry out all the transactions
contemplated hereby.
(b) The execution, delivery and performance by Seller of this Agreement,
and the consummation by Seller of the transactions contemplated hereby, have
been duly and validly authorized and all requisite corporate actions have been
taken by Seller so that this agreement is a legal, valid and binding obligation
of Seller, enforceable against Seller in accordance with its terms, except that
the enforceability hereof may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and the rights of creditors of federally
chartered savings associations and that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceedings
therefore may be brought.
(c) Neither the execution and delivery of this Agreement by Seller, nor
Seller's compliance with the terms and provisions hereof, (i) has resulted or
will result in the violation
18
<PAGE>
or breach of any statute or regulation of the United States of America, the
State of Illinois, or Seller's charter of bylaws; or (ii) to the best knowledge
of counsel, based on certifications from Seller, will violate or conflict with
or constitute a default or result in or permit the acceleration of any
obligation or give rise to any lien under, or any agreement or other instrument,
order, decree or award of or applicable to Seller, known to such counsel, or any
agreement or other instrument to which Seller is a party or by which Seller or
any of its assets are bound which is known to such counsel.
(d) The consummation of the transactions contemplated by this Agreement do
not require Seller to obtain prior to consummating the transactions contemplated
hereby the consent or approval of, or the filing with or notice to, any person
or governmental authority, other than the OTS and the FDIC.
(e) Such counsel has no knowledge of any material litigation, proceeding,
governmental investigation or labor dispute, whether pending or threatened,
against or relating to the Branch or the Assets. [The opinion expressed in this
paragraph may be based upon a certification from Seller].
Section 7.05 Absence of Material Changes. Since the date hereof, there
----------------------------
shall not have been any material adverse change in the business, financial
condition or results of operations of the Branch or in the Assets or
Liabilities.
Section 7.06 Certain Consents. Buyer shall have received on or before July
-----------------
8, 1994 the written consent of Bank of Montreal and Harris Bankmont, Inc. to
Buyer entering into this Agreement, the Contract to Purchase and the
transactions contemplated hereby and thereby. Unless notice is received by
Seller on or before July 8, 1994 that such consent has not been received, such
consent shall be presumed to have been given to the Buyer and this Agreement
shall not be subject to this Section 7.06.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
-----------------------------------
The obligations of Seller hereunder are subject to the satisfaction, or the
waiver in writing by Seller, on or before the Closing Date of each of the
following conditions:
Section 8.01 Covenants. All the terms, covenants and conditions of this
----------
Agreement to be complied with and performed by Buyer on or before the Closing
Date shall have been duly complied with and performed in all respects, and Buyer
shall have delivered to Seller a certificate to such effect dated as of the
Closing Date.
Section 8.02 Representations. All the representations and warranties made
----------------
by Buyer herein shall be true in all respects as of the Closing Date with the
same force and effect as though such representations and warranties had been
made as of the Closing Date, and Buyer shall have delivered to Seller a
certificate to such effect dated as of the Closing Date.
19
<PAGE>
Section 8.03 Litigation. No order in any legal, administrative or other
-----------
proceeding shall have been entered and remain in force at the Closing Date
restraining or prohibiting any of the transactions contemplated by this
Agreement.
Section 8.04 Opinion of Counsel. Seller shall have received from the law
-------------------
firm of Freeborn & Peters, counsel to Buyer, dated the Closing Date, in form and
substance reasonably acceptable to Seller and its counsel, to the effect that:
(a) Buyer is a banking corporation duly organized, validly existing and in
good standing under the laws of Illinois, the deposits of which are insured by
the FDIC, and has the requisite corporate power and authority to carry on its
business as the same is being conducted, and to execute and deliver this
Agreement, and to carry out all the transactions contemplated hereby.
(b) The execution, delivery and performance by Buyer of this Agreement,
and the consummation by Buyer of the transactions contemplated hereby, have been
duly and validly authorized and all requisite corporate actions have been taken
by Buyer so that this Agreement is a legal, valid and binding obligation of
buyer, enforceable against Buyer in accordance with its terms, except that the
enforceability hereof may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and the rights of creditors of banks chartered by
the State of Illinois and that the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceedings therefore may be
brought.
(c) Neither the execution and delivery of this Agreement by Buyer, nor
Buyer's compliance with the terms and provisions hereof,(i) has resulted or will
result in the violation or breach of any statute or regulation of the United
States of America, the State of Illinois, or Buyers charter or bylaws, or (ii)
to the best knowledge of such counsel, based on certification from Buyer, will
violate or conflict with or constitute a default or result in or permit the
acceleration of any obligation or give rise to any lien under, or any agreement
or other instrument, order, decree or award of or applicable to Buyer, known to
such counsel, or any agreement or other instrument to which Buyer is a party or
by which Buyer or any of its assets are bound which is known to such counsel.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF BOTH PARTIES
-----------------------------------------
Section 9.01 Conditions to Obligations of Both Parties. The obligations of
------------------------------------------
both parties to this Agreement are subject to the satisfaction, on or before the
Closing Date, of the condition that all actions shall have been taken in order
for the transactions contemplated by this Agreement to comply with all
applicable Laws, and to the extent required by applicable Laws, the OTS, FDIC,
the Illinois Commissioner of Banks and Trust Companies, the Board of Governors
of the Federal Reserve System and any other regulatory or governmental body
having jurisdiction, shall have approved, consented to and authorized all of the
transactions contemplated by this Agreement (including without limitation the
transfer of Assets and
20
<PAGE>
Liabilities to Buyer hereunder) and all applicable waiting periods shall have
expired; provided, however, that any such approval, consent or authorization
-------------------
required to be obtained shall have been granted without the imposition of any
condition which either party reasonably and in good faith deems to be materially
burdensome to it or its parent company. Further, the obligations of both
parties to this Agreement are subject to the contemporaneous closing of the
Contract to Purchase Property.
ARTICLE X
TERMINATION
-----------
Section 10.01 Termination. Upon the occurrence of any of the following
------------
events, this Agreement (except for Articles XI and XII) shall terminate and be
of no further force or effect between the parties hereto, and neither party
shall bear any liability as a result of or in connection with such termination,
except for any liability provided in Article XI.
(a) Seller and Buyer agree in writing to terminate this Agreement or Buyer
elects to terminate this Agreement pursuant to Section 4.05(b) hereof; or
(b) on the date on which the Closing is scheduled to occur, Seller elects
in writing to terminate this Agreement because any condition set forth in
Article VIII has not been satisfied or waived in writing by Seller; or
(c) on the date on which the Closing is scheduled to occur, Buyer elects
in writing to terminate this Agreement because the conditions set forth in
Article VII has not been satisfied or waived in writing by Buyer; or
(d) at or prior to Closing, Buyer or Seller elects in writing to terminate
this Agreement if the other party has breached in any respect any of its
representations, warranties or covenants contained herein, and such breach (if
capable of being cured) has not been cured by the earlier of (i) thirty (30)
days after the giving of written notice of such breach to the breaching party;
or
(e) at or prior to Closing, Seller or Buyer reasonably determines that the
conditions set forth in Article IX will not be satisfied; or
(f) the Closing does not take place on or prior to a date no later than
sixty (60) days after the receipt of all necessary regulatory approvals obtained
pursuant to Section 4.6 herein, or such later date as the parties prior to such
date may agree upon.
(g) the termination of the Contract to Purchase Property.
(h) the Closing does not take place within six months of this Agreement
for any reason.
21
<PAGE>
ARTICLE XI
Section 11.01 Indemnification by Seller. Notwithstanding any investigation
by or knowledge of Buyer, Seller shall defend, indemnify and hold harmless
Buyer, and its officers, directors, shareholders, agents and all other persons,
by, through or under Buyer and their respective heirs, executors and personal
representatives, successors and assigns against and from any loss, liability,
obligation, claim, demand, damage, judgment, suit or expense, including without
limitation attorneys' fees and disbursements, which is directly or indirectly
suffered or incurred by Buyer or any of such parties, and which arises directly
or indirectly out of or by virtue of, or relates directly or indirectly to, any
of the following:
(a) any false, misleading or inaccurate representation or warranty made by
Seller in this Agreement or in the Contract to Purchase Property or any breach
of any such representation or warranty;
(b) any breach, violation or nonfulfillment by Seller of, or any failure
by Seller to perform, any covenant, agreement, obligation or other provision
contained in this Agreement or in the Contract to Purchase Property, unless
previously waived in writing by Buyer;
(c) any contract, written or oral, express or implied, between Seller and
any of Seller's employees;
(d) Seller's preparation or submission of the Form 1099s, Form 5498s or
other information, returns or reports required by applicable Laws, except to the
extent that such claim liability or obligation is caused by Buyer's negligence;
(e) Seller's failure to properly meet its
responsibilities with respect to former employees under the Consolidated Omnibus
Budget Reconciliation Act;
(f) Seller's failure to properly record accrued interest on the Accounts,
in accordance with the terms and conditions of the Account agreements and
standard banking practices;
(g) Seller's failure to properly report or escheat, to the State of
Illinois, personal property with regard to the Accounts, during the period up to
the Closing Date;
(h) any action, lawsuit or other proceeding arising from or relating to
any of the foregoing;
(i) any liability, debt or obligation of Seller not expressly assumed by
Buyer hereunder; or
(j) Any other claim, suit, cause of action, investigation or proceeding of
any kind whatsoever, whether instituted or commenced prior to or after the
Closing Date, which relates to, or arises from the business or assets of Seller
on or before the Closing Date.
22
<PAGE>
Section 11.02 Indemnification By Buyer. Buyer shall defend, indemnify,
-------------------------
hold harmless Seller, and its officers, directors, agents and all other persons
by through or under Seller and their respective heirs, executors and personal
representatives, successors and assigns against and from any loss, liability,
obligation, claim, demand, damage, judgment, suit or expense including, without
limitation, attorneys' fees and disbursements, which is directly or indirectly
suffered or incurred by Seller or any such parties, and which arises directly or
indirectly out of or by virtue of, or relates directly or indirectly to, any of
the following:
(a) any false, misleading or inaccurate representation or warranty made by
Buyer in this Agreement or in the Contract to Purchase Property or any breach of
any such representation or warranty;
(b) any breach, violation or nonfulfillment by Buyer of, or any failure by
Buyer to perform, any covenant, agreement, obligation or other provision
contained in this Agreement or in the Contract to Purchase Property;
(c) the operation of the Branch or the administration of any of the
Accounts, Account Loans, Overdraft Loans, or the Records by Buyer subsequent to
the Closing;
(d) the ownership or possession of the Personal Property and the Real
Property, where such action, suit, proceeding, claim or demand arises from the
ownership or possession by Buyer of the Personal Property or the Real Property,
and arises or accrues subsequent to the Closing; or
(e) any action, lawsuit or other proceeding arising from or relating to
any of the foregoing.
Section 11.03 Procedure for Indemnification. (a) The party which is
------------------------------
entitled to be indemnified hereunder (the "Indemnified Party") shall promptly
give notice hereunder to the indemnifying party after obtaining written notice
of any claim as to which recovery may be sought against the indemnifying party
because of the terms of this Article XI and, if such indemnity shall arise from
the claim of a third party, shall permit the indemnifying party to assume the
defense of any such claim and any litigation resulting from such claim with
counsel and representatives selected by it that are reasonably acceptable to the
Indemnified Party. Notwithstanding the foregoing, the right to indemnification
hereunder shall not be affected by any failure of an Indemnified Party to give
such notice or delay by an Indemnified Party in giving such notice unless, and
then only to the extent that, the rights and remedies of the indemnifying party
shall have been prejudiced as a result of the failure to give, or delay in
giving, such notice. Failure by an indemnifying party to notify an Indemnified
Party of its election to defend any such claim or action by a third party within
twenty-one (21) days after notice hereof shall have been given to the
indemnifying party shall be deemed a waiver by the indemnifying party of its
right to defend such claim or action.
(b) If the indemnifying party assumes the defense of such claim or
litigation resulting therefrom, the obligations of the indemnifying party
hereunder as to such claim shall include taking all steps necessary in the
defense or settlement of such claim or litigation and holding the Indemnified
Party harmless from and against any and all damages caused by or arising out of
23
<PAGE>
any settlement approved by the indemnifying party or any judgment in connection
with such claim or litigation. The indemnifying party shall not, in the defense
of such claim or any litigation resulting therefrom, consent to entry of any
judgment (other than a judgment of dismissal on the merits without costs) except
with the written consent of the Indemnified Party or enter into any settlement
(except with the written consent of the Indemnified Party) which does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party a release from all liability in respect of
such claim or litigation. Anything in this Section 11.03(b) to the contrary
notwithstanding, the Indemnified Party may, with counsel of its choice and at
its expense, participate in the defense of any such claim or litigation.
(c) If the indemnifying party shall not assume the defense of any such
claim by a third party or litigation resulting therefrom after receipt of notice
from such Indemnified Party, the Indemnified Party may defend against such
claims or litigation in such manner as it deems appropriate, and unless the
indemnifying party shall deposit with the Indemnified Party a sum equivalent to
the total amount demanded in such claim or litigation plus the Indemnified
Party's estimate of the costs of defending the same, the Indemnified Party may
settle such claim or litigation on such terms as it may deem appropriate and the
indemnifying party shall promptly reimburse the Indemnified Party for the amount
of such settlement and for all damage incurred by the Indemnified Party in
connection with the defense against or settlement of such claim or litigation.
(d) The indemnifying party shall promptly reimburse the Indemnified Party
for the amount of any judgment rendered with respect to any claim by a third
party in such litigation and for all damages incurred by the Indemnified Party
in connection with the defense against such claim or litigation, whether or not
resulting from, arising out of, or incurred with respect to, the act of a third
party.
(e) It is expressly understood and agreed that the obligations of Seller
to Purchaser under this Article XI shall be without regard to fault on the part
of Seller or any party other than Purchaser with respect to the violation or
condition for which indemnification is sought pursuant hereto.
Section 11.04 Survival. All covenants and agreements of any party hereto
---------
set forth herein and in the Contract to Purchase Property shall survive the
Closing. Further, all representations and warranties in this Agreement, the
Contract to Purchase, or pursuant hereto or thereto or in any certificate or
other writing delivered pursuant hereto or thereto or in connection herewith or
therewith shall survive the Closing and shall remain in effect for a period of
fifteen (15) months after the Closing Date; provided that, (i) any
representations or warranties regarding tax liabilities shall not expire until
the running of their respective statutes of limitation, (ii) with respect to any
claim for indemnification arising out of or relating to any breach of Seller's
representations and warranties contained in Section 3.01(i) hereof, the
foregoing limitations period set forth in this Section 11.04 shall not apply and
such claim shall survive the Closing Date without any such limitation period
being applicable hereunder, and (iii) any representation or warranty which is
not true when made and which is made fraudulently or with intent to defraud or
mislead shall survive such fifteen (15) month period.
24
<PAGE>
ARTICLE XII
Section 12.01 Notices. Any notice or other communication required or
--------
permitted hereunder shall be sufficiently given if it is in writing, and
delivered in person or by overnight carrier, or transmitted by facsimile or sent
by registered or certified mail, postage prepaid, in each case delivered or
addressed as follows:
If to Buyer:
State Bank of Woodstock
101 South Benton Street
Woodstock, Illinois 60098
Attention: Mr. David A. Stearns, President
With copies to:
Freeborn & Peters
311 South Wacker Drive
Suite 3000
Chicago, Illinois 60606
Attention: Craig C. Bradley, Esq.
If to Seller:
Home Federal Savings and Loan Association of Elgin
16 North Spring Street
Elgin, Illinois 60120
Attention: George L. Perucco, President
With copies to:
Gomberg, Sharfman, Gold & Ostler, P.C.
208 South LaSalle Street
Suite 1200
Chicago, Illinois 60604
Attention: Lawrence A. Gold, Esq.
or such other address(es) as shall be furnished in writing by either party, and
such notice or communication shall be deemed to have been given as of two (2)
business days after the date so mailed, or if delivered in person or by
overnight carrier, or transmitted by facsimile, on the date so delivered or
transmitted.
Section 12.02 Expenses. Except as provided otherwise in this Agreement,
---------
each party shall pay its own expenses in negotiating and closing the
transactions contemplated by this Agreement.
Section 12.03 Entire Agreement. Modifications. This Agreement shall
---------------------------------
include all of the Schedules attached hereto and all updates made thereto
pursuant to Section 6.02, and all of such
25
<PAGE>
Schedules are incorporated herein by this reference. This Agreement and the
Contract to Purchase Property constitutes the entire agreement between the
parties here pertaining to the subject matter hereof, and supersedes all prior
and contemporaneous agreements and understandings of the parties in connection
therewith. No modification of this Agreement and the Contract to Purchase
Property shall be binding unless executed in writing by both of the parties
hereto.
Section 12.04 Successors and Assigns. This Agreement shall be binding upon
-----------------------
and inure to the benefit of each of the parties hereto and their respective
successors and assigns; provided, however, that neither party shall assign any
------------------
rights or delegate any obligations under this Agreement, or otherwise transfer
any interest herein, without the prior written consent of the other party
hereto, and any attempt to make any such assignment, delegation or transfer
without such consent shall be void and of no effect. Notwithstanding the
preceding sentence, either party shall be permitted to assign all of its rights
and delegate all of its obligations under this Agreement to any Person which
acquires all or substantially all of the assets of such party or its parent, or
any Person which merges with such party or its parent.
Section 12.05 Counterparts. This Agreement may be executed in one or more
-------------
counterparts, all of which taken together shall constitute one instrument.
Section 12.06 Governing Law. This Agreement shall be construed and
--------------
enforced in accordance with the laws of the State of Illinois, except to the
extent matters may be governed as a matter of law by federal law.
Section 12.07 Enforcement. In any action to enforce this
------------
Agreement, the prevailing party shall be entitled to reasonable attorneys' fees
and expenses.
Section 12.08 Construction. Except as expressly provided herein, no
-------------
provision in this Agreement shall be construed to constitute any party hereto
(or any of the directors, officers or employees thereof) the partner, agent or
legal representative of any other party hereto. The underlined headings
contained herein are for convenience of reference only, shall not be deemed to
be a part of this Agreement and shall not be referred to in connection with the
interpretation hereof. Whenever required by the context hereof, the singular
number shall include the plural, and vice versa; the masculine gender shall
include the feminine and neuter genders; and the neuter gender shall include the
masculine and feminine genders. As used herein, the term "Laws" shall mean all
federal, state, city and county laws, rules, regulations, orders, judgments,
injunctions, decrees and awards (and interpretation thereof) with the exception
of the Americans with Disabilities Act. As used herein, the term "Person" shall
include without limitation any individual, corporation, partnership, trust,
organization, firm or other entity, or any governmental or regulatory agency or
other body.
Section 12.09 Severability. If any provision of this Agreement, or the
-------------
application of such provision to any person or set of circumstances, shall be
determined to be invalid, unlawful or unenforceable to any extent at any time
after the Closing Date, the remainder of this Agreement, and the application of
such provision to persons or circumstances other than those as to which it is
determined to be invalid, unlawful or unenforceable, shall not be affected and
shall continue to be enforceable to the fullest extent permitted by law.
26
<PAGE>
Section 12.10 Waiver. No failure or delay on the part of any party hereto
-------
in exercising any power, right or privilege hereunder shall operate as a waiver
thereof; and no single or partial exercise of any such power, right or privilege
shall preclude any other or further exercise thereof or of any other power,
right or privilege. No waiver shall be binding unless in a writing executed by
the party making the waiver.
Section 12.11 Parties In Interest. None of the provisions of this Agreement
--------------------
is intended to provide any rights or remedies to any Person (including without
limitation any depositors, employees or creditors of any of the parties hereto)
other than the parties hereto and their respective permitted successors and
assigns, if any.
Section 12.12 Specific Performance and Injunctive Relief. The parties
-------------------------------------------
hereto expressly acknowledge and agree that the Assets are special and unique
and that a breach of any of the terms or provisions of this Agreement in respect
to the sale and purchase thereof will result in irreparable injury for which
there is no adequate remedy at law, and therefore, Purchaser shall be entitled
to equitable relief and specific performance to compel compliance hereunder.
Furthermore, if Seller shall breach, or in any manner violate, any of its
covenants provided in Section 5.03 hereof, then Buyer shall be entitled to
equitable relief against Seller by way of an injunction (in addition to, but not
in substitution for, any and all other relief to which Buyer may be entitled,
either at law or in equity) to restrain Seller from such breach and to compel
27
<PAGE>
compliance by Seller with its obligations hereunder, and Seller does hereby
waive any proof that such breach will cause irreparable injury to Buyer, or that
there is no adequate remedy at law.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
Purchaser
STATE BANK OF WOODSTOCK
By: /s/David A. Stearns
-----------------------------------
David A. Stearns, President
Seller
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
By: /s/George L. Perucco
-----------------------------------
George L. Perucco, President
28
<PAGE>
Exhibit B
To Purchase and Assumption Agreement
Assumption Agreement
Pursuant to the provisions of Section 2.01 of the Purchase and Assumption
Agreement dated as of June 29, 1994 (the "Agreement"), by and between Home
Federal Savings and Loan Association of Elgin ("Seller") and State Bank of
Woodstock ("Buyer"), the Buyer hereby assumes and hereby agrees to hereafter
faithfully honor and fully and timely pay, perform, and discharge all of the
liabilities represented by the accounts set forth on Schedule 2.01(a) attached
hereto, together with all unpaid accrued interest attributed thereto.
All capitalized terms that are defined in the Agreement and are not
otherwise defined shall have the meaning given to them in the Agreement.
IN WITNESS WHEREOF, the Buyer has duly executed this Assumption Agreement
as of the day and year first above written.
STATE BANK OF WOODSTOCK
By: /s/David A. Sterns
-----------------------------------------------
David A. Sterns, President
<PAGE>
AIA Document A101
STANDARD FORM OF AGREEMENT BETWEEN
OWNER AND CONTRACTOR
where the basis of payment is a
STIPULATED SUM
1987 EDITION
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH
AN ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION.
The 1987 Edition of AIA Document A201, General Conditions of the Contract for
Construction, is adopted in this document by reference. Do not use with other
general conditions unless this document is modified.
This document has been approved and endorsed by The Associated General
Contractors of America.
- --------------------------------------------------------------------------------
AGREEMENT
made as of the 28th day of March in the year of Nineteen Hundred and Ninety-Six
BETWEEN the Owner: HOME FEDERAL SAVINGS
(Name and address) 16 N. Spring St.
Elgin, IL 60120
and the Contractor: ATMI
(Name and address) 111 W. Downer Place
Aurora, IL 60506
The Project is: New branch facility located at northwest corner of
(Name and address) McLean Blvd. & Hopps Rd., in the Village of South
Elgin, IL
The Architect is: ATMI
(Name and address) 111 W. Downer Place
Aurora, IL 60506
The Owner and Contractor agree as set forth below.
- --------------------------------------------------------------------------------
Copyright 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977,
(C)1987 by The American Institute of Archi-tects, 1735 New York Avenue,
N.W., Washington, D.C. 20006. Reproduction of the material herein or
substantial quotation of its provisions without written permission of the
AIA violates the copyright laws of the United States and will be subject to
legal prosecution.
- --------------------------------------------------------------------------------
<PAGE>
ARTICLE 1
---------
THE CONTRACT DOCUMENTS
The Contract Documents consist of this Agreement, Conditions of the Contract
(General, Supplementary and other Conditions), Drawings, Specifications, Addenda
issued prior to execution of this Agreement, other documents listed in this
Agreement and Modifications issued after execution of this Agreement; these form
the Contract, and are as fully a part of the Contract as if attached to this
Agreement or repeated herein. The Contract represents the entire and integrated
agreement between the parties hereto and supersedes prior negotiations,
representations or agreements, either written or oral. An enumeration of the
Contract Documents, other than Modifications, appears in Article 9.
ARTICLE 2
---------
THE WORK OF THIS CONTRACT
The Contractor shall execute the entire Work described in the Contract
Documents, except to the extent specifically indicated in the Contract Documents
to be the responsibility of others, or as follows:
ARTICLE 3
---------
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
3.1 The date of commencement is the date from which the Contract Time of
Paragraph 3.2 is measured, and shall be the date of this Agreement, as first
written above, unless a different date is stated below or provision is made for
the date to be fixed in a notice to proceed issued by the Owner.
(Insert the date of commencement, if it differs from the date of this Agreement
or, if applicable, state that the date will be fixed in a notice to proceed.)
April 1, 1996
Unless the date of commencement is established by a notice to proceed issued by
the Owner, the Contractor shall notify the Owner in writing not less than five
days before commencing the Work to permit the timely filing of mortgages,
mechanic's liens and other security interests.
3.2 The Contractor shall achieve Substantial Completion of the entire Work not
later than
(Insert the calendar date or number of calendar days after the date of
commencement. Also insert any requirements for earlier Substantial Completion
of certain portions of the Work, if not stated elsewhere in the Contract
Documents.)
September 30, 1996
, subject to adjustments of this Contract Time as provided in the Contract
Documents.
(Insert provisions, if any, for liquidated damages relating to failure to
complete on time.)
<PAGE>
ARTICLE 4
---------
CONTRACT SUM
4.1 The Owner shall pay the Contractor in current funds for the Contractor's
performance of the Contract the Contract Sum of Nine hundred forty eight
thousand two hundred ninety six and no/100 Dollars ($948,296.00), subject to
additions and deductions as provided in the Contract Documents.
4.2 The Contract Sum is based upon the following alternates, if any, which are
described in the Contract Documents and are hereby accepted by the Owner.
(State the numbers or other identification of accepted alternates. If decisions
on other alternates are to be made by the Owner subsequent to the execution of
this Agreement, attach a schedule of such other alternates showing the amount
for each and the date until which that amount is valid.)
The above contract sum includes a cost of $83,900.00 from Illinois
Hydraulic Corp. for site utility work. Illinois Hydraulic Corp. has agreed
to complete work according to the construction documents on a time-and-
material basis, with a guaranteed not-to-exceed amount of $83,900.00. If
the final cost from Illinois Hydraulic Corp. is less than the $83,900.00
figure, the total contract sum will be credit accordingly.
4.3 Unit prices, if any, are as follows:
Any approved additions/deletions to the contract sum will include a ten
percent (10%) overhead & profit amount reflecting the amount of the
increase or decrease. All additions/deletions to the contract sum will be
handled through Change Orders issued by the contractor.
If the owner-requested change also involves design work, it will be billed
on an hourly basis with any anticipated design services exceeding $100
being approved by Home Federal Savings prior to proceeding.
<PAGE>
ARTICLE 5
---------
PROGRESS PAYMENTS
5.1 Based upon Applications for Payment submitted to the Architect by the
Contractor and Certificates for Payment issued by the Architect, the Owner shall
make progress payments on account of the Contract Sum to the Contract or as
provided below and elsewhere in the Contract Documents.
5.2 The period covered by each Application for Payments shall be one calendar
month ending on the last day of the month, or as follows:
5.3 Provided an Application for Payment is received by the Architect not later
than the tenth (10th) day of a month, the Owner shall make payment to the
Contractor not later than the twentieth (20th) day of the same month. If an
Application for Payment is received by the Architect after the application date
fixed above, payment shall be made by the Owner not later than ten (10) days
after the Architect receives the Application for Payment.
5.4 Each Application for Payment shall be based upon the Schedule of Values
submitted by the Contractor in accordance with the Contract Documents. The
Schedule of Values shall allocate the entire Contract Sum among the various
portions of the Work and be prepared in such form and supported by such data to
substantiate its accuracy as the Architect may require. This Schedule, unless
objected to by the Architect, shall be used as a basis for reviewing the
Contractor's Applications for Payment.
5.5 Applications for Payment shall indicate the percentage of completion of
each portion of the Work as of the end of the period covered by the Application
for Payment.
5.6 Subject to the provisions of the Contract Documents, the amount of each
progress payment shall be computed as follows:
5.6.1 Take that portion of the Contract Sum properly allocable to completed
Work as determined by multiplying the percentage completion of each portion of
the Work by the share of the total Contract Sum allocated to that portion of the
Work in the Schedule of Values, less retainage of ten percent (10%). Pending
final determination of cost to the Owner of changes in the Work, amounts not in
dispute may be included as provided in Subparagraph 7.3.7 of the General
Conditions even though the Contract Sum has not yet been adjusted by Change
Order;
5.6.2 Add that portion of the Contract Sum properly allocable to materials and
equipment delivered and suitably stored at the site for subsequent incorporation
in the completed construction (or, if approved in advance by the Owner, suitably
stored off the site at a location agreed upon in writing), less retainage of
_____________ percent (0%);
5.6.3 Subtract the aggregate of previous payments made by the Owner; and
5.6.4 Subtract amounts, if any, for which the Architect has withheld or
nullified a Certificate for Payment as provided in Paragraph 9.5 of the General
Conditions.
5.7 The progress payment amount determined in accordance with Paragraph 5.6
shall be further modified under the following circumstances: N/A
<PAGE>
5.7.1 Add, upon Substantial Completion of the Work, a sum sufficient to
increase the total payments to one hundred percent (100%) of the Contract Sum,
less such amounts as the Architect shall determine for incomplete Work and
unsettled claims; and
5.7.2 Add, if final completion of the Work is thereafter materially delayed
through no fault of the Contractor, any additional amounts payable in accordance
with Subparagraph 9.10.3 of the General Conditions.
5.8 Reduction or limitation of retainage, if any, shall be as follows:
Discretion of Owner and Architect
(If it is intended, prior to Substantial Completion of the entire Work, to
reduce or limit the retainage resulting from the percentages inserted in
Subparagraphs 5.6.1 and 5.6.2 above, and this is not explained elsewhere in the
Contract Documents, insert here provisions for such reduction or limitation.)
<PAGE>
ARTICLE 6
---------
FINAL PAYMENT
Final payment, constituting the entire unpaid balance of the Contract Sum, shall
be made by the Owner to the Contractor when (1) the Contract has been fully
performed by the Contractor except for the Contractor's responsibility to
correct nonconforming Work as provided in Subparagraph 12.2.2 of the General
Conditions and to satisfy other requirements, if any, which necessarily survive
final payment; and (2) a final Certificate for Payment has been issued by the
Architect; such final payment shall be made by the Owner not more than 30 days
after the issuance of the Architect's final Certificate for Payment, or as
follows:
ARTICLE 7
---------
MISCELLANEOUS PROVISIONS
7.1 Where reference is made in this Agreement to a provision of the General
Conditions or another Contract Document, the reference refers to that provision
as amended or supplemented by other provisions of the Contract Documents.
7.2 Payments due and unpaid under the Contract shall bear interest from the
date payment is due at the rate stated below, or in the absence thereof, at the
legal rate prevailing from time to time at the place where the Project is
located.
(Insert rate of interest agreed upon, if any.)
N/A
(Usury laws and requirements under the Federal Truth in Lending Act, similar
state and local consumer credit laws and other regulations at the Owner's and
Contractor's principal places of business, the location of the Project and
elsewhere may affect the validity of this provision. Legal advice should be
obtained with respect to deletions or modifications, and also regarding
requirements such as written disclosures or waivers.)
7.3 Other provisions:
N/A
ARTICLE 8
---------
TERMINATION OR SUSPENSION
8.1 The Contract may be terminated by the Owner or the Contractor as provided
in Article 14 of the General Conditions.
8.2 The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions.
<PAGE>
ARTICLE 9
---------
ENUMERATION OF CONTRACT DOCUMENTS
9.1 The Contract Documents, except for Modifications issued after execution
of this Agreement, are enumerated as follows:
9.1.1 The Agreement is this Standard Form of Agreement Between Owner and
Contractor, AIA Document A101, 1987 Edition.
9.1.2 The General Conditions are the General Conditions of the Contract for
Construction, AIA Document A201, 1987 Edition.
9.1.3 The Supplementary and other Conditions of the Contract are those
contained in the Project Manual dated 2/9/96, and are as follows:
DOCUMENT TITLE PAGES
Bid specifications booklet Home Federal Savings Sections 00300 - 16050
9.1.4 The Specifications are those contained in the Project Manual dated as in
Subparagraph 9.1.3, and are as follows: (Either list the Specifications here or
refer to an exhibit attached to this Agreement.)
SECTION TITLE PAGES
Same as 9.1.3, above
9.1.5 The Drawings are as follows, and are dated 2/1/96 unless a different date
is shown below:
(Either list the Drawings here or refer to an exhibit attached to this
Agreement.)
NUMBER TITLE DATE
T1
C1-C3
A1-A15
S1-S5
MPE
M1-M2
P1-P2
E1-E5
LS1
FP1-FP2
9.1.6 The Addenda, if any, are as follows: (Bid Addendums)
<TABLE>
<CAPTION>
NUMBER TITLE DATE
<S> <C> <C>
1 2/27/96 3
2 2/27/96 2
3 3/1/96 2
4 3/4/96 1
</TABLE>
Portions of Addenda relating to bidding requirements are not part of the
Contract Documents unless the bidding requirements are also enumerated in this
Article 9.
<PAGE>
9.1.7 Other documents, if any, forming part of the Contract Documents are as
follows:
(List here any additional documents which are intended to form part of the
Contract Documents. The General Conditions provide that bidding requirements
such as advertisement or invitation to bid, Instructions to Bidders, sample
forms and the Contractor's bid are not part of the Contract Documents unless
enumerated in this Agreement. They should be listed only if intended to be part
of the Contract Documents.)
Attachment "A"
This Agreement is entered into as of the day and year first written above and is
executed in at least three original copies of which one is to be delivered to
the Contractor, one to the Architect for use in the administration of the
Contract, and the remainder to the Owner.
OWNER HOME FEDERAL SAVINGS CONTRACTOR ATMI
/s/ George Perucco 4/12/96 /s/ Jerald C. Pocus 4/15/96
- ------------------ ------- ------------------- -------
(Signature) (Signature)
George L. Perucco, President Jerald C. Pocus, President
- ---------------------------- --------------------------
(Printed name and title) (Printed name and title)
<PAGE>
<TABLE>
<CAPTION>
Attachment "A" ATMI
<S> <C> <C> <C> <C> <C> <C> <C>
HOME FEDERAL SAVINGS, SOUTH ELGIN 3/26/96 3:30 PM
EXTRA COST SUMMARY FOR USE OF DESIGNATED SUBS
270 SITE
UTILITIES
COMPETITIVE PERELLO $ 62,640 (incl. $3,000
BID SUB from plumbing
BANK DESIRED IHC $ 83,900 NOT TO EXCEED
PUB
add incl. downspout
connections
add incl. upsize sewer
deduct incl. revise sewer
connection
ADDITIONAL TIME & MATERIALS $ 21,260 NOT TO EXCEED
COST
15400 PLUMBING
COMPETITIVE PERELLO $ 24,820 (excludes
BID SUB $3,000 for
downspout)
BANK DESIRED TESSENDORF $ 27,906
SUB
add $ 2,056
deduct ($2,962)
to be by add $ 1,056
others
ADDITIONAL $ 3,236
COST
NOTE:
Tessendorf
doesn't
really want
to do the
drain tile
and stone
work for the
drain tile.
This work
can be
completed by
alternate
others for amount shown
above.
15800 HVAC
COMPETITIVE ABRAHAMSO $ 30,000
BID SUB
BANK DESIRED ELGIN S.M. $ 46,353
SUB
deduct ($3,353) negotiation
ADDITIONAL $ 13,000
COST
16000 ELECTRIC
COMPETITIVE KELLENBERG $ 94,500 (88K bid -
BID SUB 6500 for fire
alarms)
BANK DESIRED MILLER $114,900
SUB
deduct ($3,353) negotiation
ADDITIONAL $ 13,000
COST
16000 ELECTRIC
COMPETITIVE KELLENBURG $ 94,500 (88K bid +
BID SUB 6500 for fire
alarms)
BANK DESIRED MILLER $114,900
SUB
deduct $ 4,900 negotiation
ADDITIONAL $ 15,500
COST
SUB-TOTAL ADDITIONAL COST FOR USING DESIGNATED SUBS $ 52,996 less T&M
savings by
IHC if any
ATM OVERHEAD & PROFIT ON ABOVE 10% $ 5,300
TOTAL ADDITIONAL COST FOR USING DESIGNATED SUBS $ 58,296
ATMI bid proposal dated $890.00
3/7/96
REVISED CONTRACT AMOUNT $948,296 less T&M
savings
*not
including
additional city requirements
pending.
truss loading guess 750
plumbing guess 1000
revisions
foundation guess 5000
revisions
other possible changes
all site guess
lighting
fixtures
alt. sewer guess -2500
connect
==========================================================
</TABLE>
<PAGE>
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," "Effects of Conversion - Tax Aspects," and
"Legal and Tax Opinions" in the prospectus.
Chicago, Illinois
July 25, 1996
<PAGE>
RP FINANCIAL, LC.
- --------------------------------------------
Financial Services Industry Consultants
July 26, 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/ Gregory E. Dunn
Gregory E. Dunn
Senior Vice President
- --------------------------------------------------------------------------------
WASHINGTON HEADQUARTERS
Rossyln Center
1700 North Moore Street, Suite 2210 Telephone: (703) 528-1700
Arlington, VA 22209 Fax No.: (703) 528-1788
<PAGE>
EXHIBIT 99.2
DEAR FRIEND (CLOSED ACCOUNTS)-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 will
increase Home Federal's capital which 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") Home Bancorp will own all of the common
stock of Home Federal. Home Bancorp 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 August xx, 1996, you have a preferential right to
subscribe to purchase the common stock of Home Bancorp 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 common stock. Payment by check or money order 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 September xx, 1996.
<PAGE>
If you would like to purchase Home Bancorp 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) 289-3010.
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) 289-3010.
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>
{DEAR STOCK HOLDER-HOME BANCORP 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>
QUESTIONS AND ANSWERS
ABOUT INVESTING
You can be one of the charter stockholders of Home Bancorp of Elgin, Inc. ("Home
Bancorp"), the proposed holding company of Home Federal Savings and Loan
Association of Elgin ("Home Federal"). Home Bancorp 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.
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, 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 AND WHY IS IT BEING FORMED?
A: Home Bancorp 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 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 and
enable it to:
1
<PAGE>
. 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.
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 account (unless you elect to purchase stock in the
Conversion and pay for your stock by authorizing a withdrawal from a Home
Federal account). Deposit accounts at Home Federal will continue to be
insured by the Federal Deposit Insurance Corporation (the "FDIC") to the
maximum legal limit. Your 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,
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 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;
. 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 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'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'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 certification and be
received by 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 rate of interest paid by Home
Federal 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 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)
4
<PAGE>
289-3010 so that we may assist you with the appropriate procedures for
such a 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 has applied to have its common stock quoted on The NASDAQ
Stock Market under the symbol _________." If the stock is quoted on
NASDAQ, 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 Home Bancorp'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 initially does not intend to pay a
cash dividend. Any future dividend policy will be determined by the Board
of Directors, and 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) 289-3010.
5
<PAGE>
[HOME FEDERAL'S LOGO]
STOCK INFORMATION CENTER
16 NORTH SPRING STREET
ELGIN, ILLINOIS 60120-5569
(847) 289-3010
This does not constitute an offer to sell or the solicitation of an offer
to buy any shares of Common Stock of Home Bancorp 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 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 Common Stock in any state or jurisdiction in which any
offer, solicitation of an offer or sale of Home Bancorp 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) 289-3010.
THE SHARES OF HOME BANCORP 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. ("Home Bancorp"), will be
owned by stockholders who will have voting rights with respect to certain
key business matters. Home Bancorp 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 AND WHY IS IT BEING FORMED?
A: Home Bancorp is a newly organized holding company created by Home Federal
specifically to purchase 100% ownership in Home Federal upon its conversion
to stock form. Home Bancorp 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 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 and
enable 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 deposit account (unless you purchase stock in the Conversion
and pay for your stock by authorizing a withdrawal from a Home Federal
account). Deposit accounts at Home Federal will continue to be insured by
the Federal Deposit Insurance Corporation (the "FDIC") to the maximum legal
limit. Your savings deposit account is 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,
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?
2
<PAGE>
A: No. However, failure to vote is the same as voting against the Conversion.
Therefore, all members are urged to vote for the Conversion.
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 account 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) 289-3010.
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
you.
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) 289-3010
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) 289-3010.
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>
[FULL CUSTOMER MAILING-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 will
increase Home Federal's capital which 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"). Home Bancorp will own all of the
common stock of Home Federal. Home Bancorp 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 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 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
not later than 12:00 Noon, Central Time, on _____, 1996.
If you would like to purchase Home Bancorp 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) 289-3010.
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) 289-3010.
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.
<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 (UNLESS YOU ELECT
TO PURCHASE STOCK IN THE CONVERSION AND PAY FOR THE STOCK BY AUTHORIZING A
WITHDRAWAL FROM A HOME FEDERAL DEPOSIT). 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) 289-3010.
THANK YOU!
THE BOARD OF DIRECTORS
OF
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
This does not constitute an offer to sell or a solicitation of an offer to
buy any shares of Home Bancorp of Elgin, Inc. Common Stock offered 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 by means of the Prospectus. There shall be no
<PAGE>
sale of Home Bancorp of Elgin, Inc. Common stock in any state 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. A prospectus may be obtained
by calling the Stock Information Center at (847) 289-3010.
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>
INTERESTED INVESTOR-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 will
increase Home Federal's 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. (the "Company"). The Company will own all of the common
-----------------------------
stock of Home Federal. The Company 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 the common stock of the Company,
--- --------------
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, we are not
accepting orders from the local community or general public until the conclusion
--------------------
of the subscription offering to customers and members of Home Federal, which is
- -------------------------------------------------------------------------------
expected to recur on ____________. If you have any questions, please call the
- ---------------------------------
Stock Information Center at (847) 289-3010.
--------
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.
<PAGE>
This is not an offer to sell or a solicitation to buy common stock. The
offer is made only by the Prospectus.
<PAGE>
FOREIGN ACCOUNTS-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 will
increase Home Federal's capital which 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., the proposed holding company for Home Federal, 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) 289-3010.
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.
<PAGE>
This is not an offer to sell or a solicitation to buy common stock. The
offer is made only by the Prospectus.
<PAGE>
DARKSKIED STATES-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 will
increase Home Federal's capital which 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., the proposed holding Company for Home Federal, 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) 289-3010.
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.
<PAGE>
This is not an offer to sell or a solicitation to buy common stock. The
offer is made only by the Prospectus.
<PAGE>
[BLUE SKY-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 September xx, 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) 289-3010. 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>
- --------------------------------------------------------------------------------
STOCK GRAM
{HOME FEDERAL LETTERHEAD}
- --------------------------------------------------------------------------------
DEAR HOME FEDERAL CUSTOMER:
WE ARE PLEASED TO ANNOUNCE THAT HOME BANCORP OF ELGIN, INC. IS OFFERING UP TO
6,612,500 SHARES OF ITS COMMON STOCK IN CONNECTION WITH THE CONVERSION OF HOME
FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN ("HOME FEDERAL") FROM A FEDERALLY
CHARTERED MUTUAL SAVINGS AND LOAN ASSOCIATION TO A FEDERALLY CHARTERED STOCK
SAVINGS AND LOAN ASSOCIATION.
HOME FEDERAL 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. WE PREVIOUSLY MAILED YOU A SUBSCRIPTION AND
COMMUNITY OFFERING PROSPECTUS PROVIDING YOU DETAILED INFORMATION ABOUT HOME
FEDERAL AND THE PROPOSED STOCK OFFERING. WE ASK YOU TO PLEASE READ THESE
MATERIALS.
WE INVITE OUR LOYAL CUSTOMERS TO BECOME CHARTER STOCKHOLDERS OF HOME BANCORP OF
ELGIN, INC. IF YOU ARE INTERESTED IN PURCHASING SHARES OF COMMON STOCK IN HOME
BANCORP OF ELGIN, INC., YOU MUST SUBMIT YOUR STOCK ORDER FORM, CERTIFICATION
FORM, AND PAYMENT PRIOR TO 12:00 P.M., SEPTEMBER XX, 1996.
IF YOU HAVE ANY QUESTIONS REGARDING THE STOCK OFFERING PLEASE CALL THE STOCK
INFORMATION CENTER AT (847) 289-3010 OR STOP BY OUR OFFICE LOCATED AT 16 NORTH
SPRING STREET, ELGIN, ILLINOIS 60120.
THANK YOU!
THE BOARD OF DIRECTORS
OF
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
- --------------------------------------------------------------------------------
This does not constitute an offer to sell or the solicitation of an offer
to buy any shares of Home Bancorp of Elgin, Inc. Common Stock offered 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. There shall be no sale of
Home Bancorp of Elgin, Inc. Common Stock in any state 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. A Prospectus may be obtained by
calling the Stock Information Center at (847) 289-3010.
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>
[INTEREST ONLY-HOME BANCORP LETTERHEAD]
{INSERT DATE}
Dear Subscriber,
I want to thank you for your interest in Home Federal's common stock. We are
extremely proud of the support we received from our customers and the community
as we successfully completed the sale of xxx,xxx shares of common stock.
As you purchased your stock with a check or cash, we are enclosing a check for
payment of the interest on those funds. Your stock certificate(s) are being
mailed directly to you from our Transfer Agent, XXXXXXXX.
Again, thank you for your interest. If you have any questions, please do not
hesitate to contact me.
Sincerely,
George L. Perucco
President and Chief Executive Officer
<PAGE>
[OVERSUBSCRIPTION LETTER-HOME BANCORP LETTERHEAD]
{INSERT DATE}
Dear Subscriber:
I want to thank you for your interest in Home Bancorp of Elgin, Inc. common
stock. We are extremely proud of the support we received from our customers and
the community as we successfully completed the sale of xxx,xxx shares of common
stock.
However, due to the oversubscription of our common stock during the Subscription
Offering, we regret we were unable to fill a portion of your order. Enclosed is
a refund check for the amount of your order we were unable to fill plus
interest. The stock certificates for the balance of your order are being sent
to you directly from our transfer agent, xxxxxxx.
If you continue to be interest in acquiring common shares of Home Bancorp of
Elgin, Inc., the stock should begin trading on the Nasdaq National Market on or
about September xx, 1996 under the symbol HBEI.
Again, thank you for your interest. If you have any questions, please do not
hesitate to contact me.
Sincerely,
George L. Perucco
President and Chief Executive Officer
<PAGE>
CONVERSION APPRAISAL UPDATE REPORT
HOME BANCORP OF ELGIN, INC.
PROPOSED HOLDING COMPANY FOR
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
ELGIN, ILLINOIS
DATED AS OF:
JULY 19, 1996
PREPARED BY:
RP FINANCIAL, LC.
1700 NORTH MOORE STREET
SUITE 2210
ARLINGTON, VIRGINIA 22209
<PAGE>
EXHIBIT 99.3
[LETTERHEAD OF RP FINANCIAL,LC.]
July 19, 1996
Board of Directors
Home Federal Savings and Loan Association
of Elgin
16 North Spring Street
Elgin, Illinois 60120
Gentlemen:
We have completed and hereby provide an updated appraisal of the estimated
pro forma market value of the common stock of Home Federal Savings and Loan
Association of Elgin, Elgin, Illinois ("Home Federal" or the "Association"). The
stock will be issued in connection with the Association's Plan of Conversion, by
which the Association will convert from the mutual-to-stock form of
organization, and simultaneously issue its shares to a newly-organized holding
company, Home Bancorp of Elgin, Inc. ("Home Bancorp" or the "Holding Company").
This appraisal update is being furnished to the Office of Thrift Supervision,
Washington, D.C. ("OTS"). Our original appraisal report, dated June 7, 1996 (the
"original appraisal") is incorporated herein by reference. As in the preparation
of our original appraisal, we believe the data and information used herein is
reliable; however, we cannot guarantee the accuracy and completeness of such
information.
This updated appraisal reflects the following noteworthy items: (1) a
review of recent developments in the Association's financial condition,
including updated financial data through June 30, 1996; (2) an updated
comparison of Home Federal's financial condition and operating results versus
the Peer Group companies identified in the original appraisal; and (3) a review
of stock market conditions since the original appraisal date, along with updated
stock prices as of July 19, 1996.
Pro forma market value is defined as the price at which Home Federal's
stock immediately upon its conversion from a mutual to a stock institution 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.
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 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.
Discussion of Relevant Considerations
- -------------------------------------
1. Financial Results
-----------------
Table 1 presents summary balance sheet and income statement details
for the twelve months ended March 31, 1996 and updated unaudited financial
information through June 30, 1996. The overall composition of Home Federal's
June 30, 1996 balance sheet was comparable to the March 31, 1996 data, with
<PAGE>
RP Financial, LC.
Board of Directors
July 19, 1996
Page 2
the Association posting a modest decline in assets during the quarter. Updated
reported earnings for the Association showed a fairly significant decline, which
was largely attributable to a non-recurring expense associated with the
termination of Home Federal's current pension plan. On a recurring earnings
basis, the Association's updated earnings were slightly lower.
Home Federal's total assets declined by $6.3 million, or 2.1 percent,
from March 31, 1996 to June 30, 1996, with the shrinkage consisting mostly of
liquidity. To a lesser extent, declines were recorded in loans, investments and
mortgage-backed securities. Overall, the concentration of loans comprising total
assets increased from 86.1 percent to 87.8 percent as of March 31, 1996 and June
30, 1996, respectively, while the cash and investments ratio (including FHLB
stock) declined from 10.7 percent to 8.9 percent of assets over the same time
period. Home Federal's balance of mortgage-backed securities was nominal for
both periods shown in Table 1. Limited credit risk exposure continued to
indicated by the Association's updated credit quality measures, with non-
performing assets amounting to 0.49 percent of assets at June 30, 1996.
Similarly, Home Federal's non-performing assets-to-assets ratio equaled 0.47
percent at March 31, 1996.
Home Federal's deposits declined by $5.9 million during the quarter
ended June 30, 1996, and remained the only interest-bearing source of funds
utilized by the Association. The deposit shrinkage was funded by the
Association's liquidity. Home Federal's equity was slightly lower as the result
of the net loss recorded during the quarter ended June 30, 1996; however, due to
the asset shrinkage, the Association's equity-to-assets ratio increased from
12.1 percent at March 31, 1996 to 12.4 percent at June 30, 1996.
Home Federal's operating results for the twelve months ended March 31,
1996 and June 30, 1996 are also set forth in Table 1. Updated earnings for the
Association were lower, based on comparative ratios of 0.71 percent and 0.51
percent of average assets for the twelve months ended March 31, 1996 and June
30, 1996, respectively. Most of the decline in the Association's earnings was
attributable to the one time expense resulting from the termination of Home
Federal's defined benefit plan, which resulted in a pension curtailment expense
of $837,000. In terms of Home Federal's core or recurring earnings, the
Association's updated earnings exhibited a slight decline. The decline in core
earnings stemmed from lower net interest income and higher operating expenses,
which were partially negated by an increase in non-interest operating income.
The modest decline exhibited in the Association's updated net interest
margin was the result of a more notable increase in the interest expense ratio
relative to the interest income ratio. Home Federal's lower net margin
paralleled the narrowing of its yield-cost spread, reflecting the more notable
upward repricing of the Association's interest-bearing liabilities relative to
its interest-earning assets. For the quarter ended June 30, 1996, the
Association maintained an annualized net interest rate spread of 3.55 percent,
versus an annualized net interest rate spread of 3.84 percent for the
comparative year ago period. Overall, Home Federal's net interest income to
average assets ratio declined from 3.81 percent to 3.78 percent for the twelve
months ended March 31, 1996 and June 30, 1996, respectively.
Operating expenses, excluding the curtailment of the pension plan
expense, were slightly higher in the Association's updated earnings, increasing
as a percent of average assets from 2.95 percent to 3.01 percent for the twelve
months ended March 31, 1996 and June 30, 1996, respectively. Higher operating
expenses largely resulted from higher compensation costs, reflecting normal
salary increases, and higher ATM expenses. The increase in ATM expenses reflects
the change in accounting for such expenses on a gross basis, due to a change in
the ATM processor utilized by Home Federal. In addition to higher operating
expenses, asset shrinkage further contributed to the increase exhibited in Home
Federal's updated operating expense ratio. Accordingly, the trend of
experiencing earnings compression from the two major components of core earnings
continued to be reflected in the Association's updated earnings. Home Federal's
lower net interest margin and higher operating expense ratio translated into an
updated expense coverage ratio of 1.26x for the
<PAGE>
RP Financial, LC.
Board of Directors
July 19, 1996
Page 3
twelve months ended June 30, 1996, versus a comparative ratio of 1.29x recorded
for the twelve months ended March 31, 1996.
Table 1
Home Federal Savings and Loan Association of Elgin
Recent Financial Data
At March 31, 1996 At June 30, 1996
----------------- ----------------
(% of (% of
Amount Assets) Amount Assets)
------ ------- ------ -------
($000) (%) ($000) (%)
Balance Sheet Data
Total assets $306,688 100.0% $300,397 100.0%
Cash and cash
equivalents 24,239 7.9 17,975 6.0
Investments 5,955 1.9 5,963 2.0
Loans receivable, net 264,082 86.1 263,892 87.8
Mortgage-backed
securities 173 0.1 160 0.1
FHLB stock 2,678 0.9 2,678 0.9
Deposits 264,485 86.2 258,622 86.1
Borrowings --- 0.0 --- 0.0
Equity 37,195 12.1 37,184 12.4
12 Months Ended 12 Months Ended
March 31, 1996 June 30, 1996
--------------- -------------
(% of (% of
Avg. Avg.
Amount Assets) Amount Assets)
------ ------- ------ -------
($000) (%) ($000) (%)
Summary Income Statement
Interest income $22,806 7.41% $22,592 7.43%
Interest expense (11,075) (3.60) (11,087) (3.65)
-------- ------ -------- ------
Net interest income 11,731 3.81 11,505 3.78
Provision for losses (165) (0.05) (150) (0.05)
Other operating income 1,181 0.38 1,213 0.40
Net gain(loss) on REO 18 0.01 21 0.01
Other non-operating
income 1 0.00 1 0.00
Non-interest operating
expenses (9,084) (2.95) (9,163) (3.01)
Curtailment of pension
plan --- 0.00 (837) (0.28)
---- ----- ----- ------
Income before taxes 3,682 1.20 2,590 0.85
Income taxes (1,501) (0.49) (1,038) (0.34)
------- ------ ------- ------
Net income $2,181 0.71% $1,552 0.51%
Sources: Home Federal's prospectus, data provided by Home Federal
and RP Financial calculations.
<PAGE>
RP Financial, LC.
Board of Directors
July 19, 1996
Page 4
Sources of non-interest operating income made a slightly larger
contribution to the Association's updated earnings, increasing from 0.38 percent
of average assets to 0.40 percent of average assets for the twelve months ended
March 31, 1996 and June 30, 1996, respectively. Service fee income continued to
account for the substantial portion of the Association's non-interest operating
income, with such income supporting the increase posted in the Association's
non-interest operating income. The increase in service fee income reflects the
change in accounting for service fee income to a gross basis, due to a change in
Home Federal's ATM processor. Loan loss provisions remained a minor factor in
the Association's update earnings, amounting to 0.05 percent of average assets
for both periods shown in Table 1. Valuation allowances maintained as a percent
of loans receivable and non-performing loans equaled 0.33 percent and 78.62
percent, respectively, at June 30, 1996, versus comparative ratios of 0.32
percent and 79.48 percent at March 31, 1996.
Sources of non-operating income remained a nominal factor in the
Association's updated earnings, with such income consisting mostly of minor
gains realized from the sale of real estate owned. The non-recurring expense
stemming from the termination of the Association's defined benefit plan reduced
pre-tax earnings by $837,000, or 0.28 percent of average assets for the twelve
months ended June 30, 1996. The pension curtailment expense was recorded during
the quarter ended June 30, 1996 and, thus, was not a factor in Home Federal's
earnings for the twelve months ended March 31, 1996. Further expenses related to
the termination of the pension plan are expected to be minimal. The employee
stock ownership plan ("ESOP") to be implemented in conjunction with Home
Federal's conversion will replace the pension plan that was terminated.
2. Peer Group Financial Comparisons
--------------------------------
Tables 2 and 3 present the financial characteristics and operating
results for Home Federal, the Peer Group and all publicly-traded SAIF-insured
thrifts. Home Federal's and the Peer Group's ratios are based on financial
results through June 30, 1996 and March 31, 1996, respectively.
In general, the comparative balance sheet ratios for the Association
and the Peer Group did not vary significantly from the ratios exhibited in the
original appraisal. Relative to the Peer Group, the Association's interest-
earning asset composition continued to reflect lower concentrations of cash and
investments and mortgage-backed securities and a higher level of loans. Overall,
consistent with the original appraisal, Home Federal maintained a slightly lower
level of interest-earning assets than the Peer Group, based on updated interest-
earning assets to assets ratios of 96.8 percent and 97.4 percent, respectively.
The mix of deposits and borrowings maintained by Home Federal and the
Peer Group also did not change considerably. Home Federal's funding composition
continued to reflect a higher concentration of deposits and a lower
concentration of borrowings, relative to the comparative Peer Group measures.
Deposits remained the only interest-bearing source of funds utilized by the
Association, while the Peer Group's borrowings-to-assets ratio equaled 7.7
percent. Updated interest-bearing liabilities to assets ratios equaled 86.1
percent and 81.4 percent for the Association and the Peer Group, respectively,
with Home Federal's higher ratio continuing to be largely attributable to the
maintenance of a lower capital position. Home Federal posted an updated equity-
to-assets ratio of 12.4 percent, versus a comparative ratio of 17.2 percent for
the Peer Group. Both the Association's and the Peer Group's updated capital
positions consisted entirely of tangible capital, which was consistent with the
original appraisal. Overall, Home Federal's updated interest-earning assets to
interest-bearing liabilities ("IEA/IBL") ratio equaled 112.4 percent, which
remained below the comparative Peer Group average of 119.7 percent. As noted in
the original appraisal, the additional capital realized from the stock
conversion should serve to address the lower IEA/IBL ratio currently maintained
by the Association.
Credit quality measures continued to indicate limited credit risk
exposure for both Home Federal and the Peer Group. The Association's and the
Peer Group's updated non-performing assets to assets
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 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
_____________________
June 30, 1996 8.9 87.8 0.1 86.1 0.0 0.0 12.4 0.0 12.4 0.0
SAIF-Insured Thrifts 19.4 64.5 12.9 73.8 11.8 0.1 12.8 0.2 12.6 0.1
State of IL 19.5 65.2 11.5 74.7 10.2 0.1 13.6 0.1 13.5 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
_____________________
June 30, 1996 -2.71 -25.45 -2.46 -1.03 -100.00 2.73 2.73 12.38 12.38 23.80
SAIF-Insured Thrifts 11.71 10.69 9.47 6.74 -1.01 6.66 6.17 10.59 10.68 23.05
State of IL 12.82 18.01 10.33 6.95 1.39 2.76 2.30 9.74 11.02 22.10
Comparable Group Average 6.81 13.16 7.86 4.24 27.42 -4.17 -4.16 12.15 13.61 28.80
Mid-West Companies 6.81 13.16 7.86 4.24 27.42 -4.17 -4.16 12.15 13.61 28.80
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 NM NM NM
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 NM NM NM
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 7.83 7.83 15.65
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>
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>
!R! RES; FTMD 15; FONT 36; EXIT;
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 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
Net Provis. After Loan R.E. Other
Income Income Expense NII on IEA Provis. Fees Oper. Income
______ ______ _______ ______ _______ _______ ____ _____ ______
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Home Federal of Elgin
_____________________
June 30, 1996 0.51 7.43 3.65 3.78 0.05 3.73 0.00 0.01 0.40
SAIF-Insured Thrifts 0.84 7.32 4.19 3.13 0.11 3.02 0.11 -0.01 0.30
State of IL 0.73 7.18 4.13 3.05 0.08 2.97 0.08 0.04 0.30
Comparable Group Average 0.99 7.34 4.10 3.24 0.05 3.19 0.03 0.02 0.18
Mid-West Companies 0.99 7.34 4.10 3.24 0.05 3.19 0.03 0.02 0.18
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
FFYF FFY Financial Corp. of OH 1.21 7.56 3.84 3.72 0.06 3.66 0.00 0.00 0.18
FBCI Fidelity Bancorp of Chicago IL 0.81 7.69 4.33 3.35 0.05 3.31 0.00 0.00 0.27
FMBD First Mutual Bancorp of IL 0.99 7.09 3.60 3.50 0.01 3.49 0.04 -0.01 0.25
HMNF HMN Financial, Inc. of MN 1.10 7.35 4.39 2.96 0.06 2.90 0.00 0.00 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
LARK Landmark Bancshares of KS 0.91 7.13 4.40 2.73 0.03 2.70 0.08 0.00 0.15
MFBC MFB Corp. of Mishawaka IN 0.69 6.83 3.88 2.94 0.02 2.93 0.00 0.00 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
SWBI Southwest Bancshares of IL 1.19 7.56 4.14 3.41 0.01 3.41 0.04 0.16 0.15
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
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
________________ ______________ _________________________
Total
Other G&A Goodwill Net Extrao. Yield Cost Yld-Cost
Income Expense Amort. Gains Items On Assets Of Funds Spread
______ _______ _______ _______ _______ _________ ________ ______
Home Federal of Elgin
_____________________
June 30, 1996 0.41 3.01 0.00 0.00 0.28 7.91 4.33 3.58
SAIF-Insured Thrifts 0.41 2.20 0.02 0.09 0.00 7.54 4.82 2.71
State of IL 0.42 2.35 0.01 0.07 0.00 7.51 4.86 2.65
Comparable Group Average 0.23 1.94 0.00 0.06 0.00 7.51 5.05 2.46
Mid-West Companies 0.23 1.94 0.00 0.06 0.00 7.51 5.05 2.46
Comparable Group
________________
Mid-West Companies
__________________
CBCI Calumet Bancorp of Chicago IL 0.31 1.98 0.00 0.01 0.00 8.14 5.08 3.07
FFYF FFY Financial Corp. of OH 0.18 1.99 0.00 -0.06 0.00 7.77 4.80 2.96
FBCI Fidelity Bancorp of Chicago IL 0.27 2.32 0.02 0.07 0.00 7.46 4.88 2.58
FMBD First Mutual Bancorp of IL 0.28 2.28 0.00 0.06 0.00 7.35 4.85 2.50
HMNF HMN Financial, Inc. of MN 0.12 1.44 0.00 0.18 0.00 7.47 5.40 2.07
HBFW Home Bancorp of Fort Wayne IN 0.07 1.49 0.00 0.00 0.00 7.36 5.34 2.01
LARK Landmark Bancshares of KS 0.24 1.65 0.00 0.18 0.00 7.26 5.40 1.86
MFBC MFB Corp. of Mishawaka IN 0.18 1.98 0.00 0.01 0.00 6.94 4.96 1.98
MFFC Milton Fed. Fin. Corp. of OH 0.14 2.15 0.00 0.12 0.00 7.61 4.94 2.67
SWBI Southwest Bancshares of IL 0.35 2.02 0.00 0.01 0.00 7.92 4.87 3.05
WEFC Wells Fin. Corp. of Wells MN 0.45 2.00 0.00 0.04 0.00 7.32 5.02 2.29
MEMO: MEMO:
Assets/ Effective
I FTE Emp. Tax Rate
_________ ________
Home Federal of Elgin
_____________________
June 30, 1996 2,434 40.08
SAIF-Insured Thrifts 4,037 36.27
State of IL 3,635 35.10
Comparable Group Average 3,924 36.51
Mid-West Companies 3,924 36.51
Comparable Group
________________
Mid-West Companies
__________________
CBCI Calumet Bancorp of Chicago IL 3,694 31.70
FFYF FFY Financial Corp. of OH 3,275 32.51
FBCI Fidelity Bancorp of Chicago IL 4,287 39.89
FMBD First Mutual Bancorp of IL 2,594 36.13
HMNF HMN Financial, Inc. of MN 5,891 37.70
HBFW Home Bancorp of Fort Wayne IN 4,010 39.92
LARK Landmark Bancshares of KS 4,298 37.85
MFBC MFB Corp. of Mishawaka IN 4,100 39.90
MFFC Milton Fed. Fin. Corp. of OH 3,816 33.75
SWBI Southwest Bancshares of IL 3,567 31.73
WEFC Wells Fin. Corp. of Wells MN 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.
Board of Directors
July 19, 1996
Page 7
ratios remained highly comparable, equaling 0.49 percent and 0.46 percent,
respectively. Similarly, there were no material changes in the reserve levels
maintained by the Association and the Peer Group, with the Peer Group continuing
to maintain higher loss reserves as a percent of loans (0.54 percent versus 0.33
percent for the Association) and non-performing loans (265.5 percent versus 78.6
percent for the Association).
Updated growth rates for Home Federal reflect annualized growth for
the six months ended June 30, 1996, while the Peer Group's growth rates reflect
growth for the twelve months ended March 31, 1996. The Peer Group continued to
post stronger asset growth than the Association, based on updated asset growth
rates of negative 2.7 percent and positive 6.8 percent, respectively. Home
Federal's asset shrinkage reflected declines in both interest-earning asset
categories, with the more notable decline occurring in cash and investments.
Comparatively, the Peer Group's growth rates exhibited positive growth in both
interest-earning asset categories, with a higher growth rate being realized in
cash and investments. Accordingly, as in the original appraisal, the
Association's asset growth measures remained less favorable than the Peer
Group's, in terms of supporting potential earnings growth. However, following
the conversion, Home Federal's leverage capacity will be greater than the Peer
Group's.
Asset shrinkage and retained earnings funded a slight decline in the
Association's deposits, as well as the repayment of all borrowings. Deposit
growth and borrowings funded the Peer Group's asset growth, with the Peer
Group's lower balance of borrowings continuing to exhibit a higher growth rate
than deposits. As noted in the original appraisal, the Peer Group's borrowings
growth rate is somewhat understated, as the "NM" borrowings growth rates
indicated for four of the Peer Group companies includes companies with
borrowings growth rates in excess of 100 percent. For the period shown in Table
2, two out of the four of the Peer Group companies with "NMs" recorded borrowing
growth rates in excess of 100 percent, and the other two Peer Group companies
recorded no change in their balance of borrowings. Consistent with the original
appraisal, the Association posted a stronger capital growth rate than the Peer
Group (2.7 percent versus negative 4.2 percent for the Peer Group), despite the
higher return on average assets ratio exhibited by the Peer Group. As noted in
the original appraisal, dividend payments, stock repurchases, as well as
possible negative SFAS 115 adjustments, were likely factors that accounted for
the Peer Group's negative capital growth rate. Additionally, the Peer Group's
capital growth rate was understated by the two companies with "NM" capital
growth rates, which each had capital growth rates of more than 100 percent as
the result of conversion proceeds being added to capital during the 12 month
period.
Table 3 displays comparative operating results for Home Federal and
the Peer Group, based on their respective earnings for the twelve months ended
June 30, 1996 and March 31, 1996. The difference between the Association's and
the Peer Group's earnings widened, primarily due to the decline in Home
Federal's earnings resulting from the pension plan curtailment expense. On a
recurring earnings basis, there were no notable changes in the Association's and
the Peer Group's updated earnings, with the Peer Group continuing to post higher
core earnings than the Association. The Peer Group's more favorable core
earnings remained attributable to the maintenance of a lower level of operating
expenses, which continued to be partially negated by Home Federal's higher net
interest margin and higher level of non-interest operating income. Home
Federal's and the Peer Group's return on average assets ratios equaled 0.51
percent and positive 0.99 percent, respectively.
In terms of core earnings strength, updated expense coverage ratios
(net interest income divided by operating expenses) posted by Home Federal and
the Peer Group equaled 1.26x and 1.67x, respectively. The Peer Group's higher
expense coverage ratio was attributable to a considerably lower operating
expense to average assets ratio (1.94 percent versus 3.01 percent for the
Association), which was partially offset by the Association's higher net
interest income to average assets ratio (3.78 percent versus 3.24 percent for
the Peer Group). The Association's lower interest expense ratio remained the
primary difference
<PAGE>
RP Financial, LC.
Board of Directors
July 19, 1996
Page 8
between the Association's and the Peer Group's net interest margins, reflecting
Home Federal's relatively low cost of deposits.
Non-interest operating income (exclusive of real estate operations)
remained a slightly larger contributor to the Association's earnings, with such
income amounting to 0.40 percent and 0.21 percent of the Association's and the
Peer Group's average assets, respectively. As noted in the original appraisal,
Home Federal's higher level of non-interest operating income was supported by
the maintenance of a relatively high concentration of fee-oriented transaction
accounts. Real estate operations remained a nominal factor in both the
Association's and the Peer Group's updated earnings.
The Association's and the Peer Group's favorable credit quality
measures continued to limit the impact of loss provisions on their respective
earnings, as indicated by loss provisions to average assets ratios of 0.05
percent for both Home Federal and the Peer Group. Gains remained a slightly
positive factor in the Peer Group's earnings and a non-factor in the
Association's earnings. As noted in the original appraisal, given the non-
recurring nature of gains, 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. Similarly, the expense related to the
termination of the Association's pension plan, which is shown as an
extraordinary item, will be eliminated from our comparative earnings analysis.
3. Stock Market Conditions
-----------------------
Since the date of the original appraisal, the overall stock market has
declined. A relatively narrow trading range was exhibited by the stock market
throughout most of June 1996, as investors awaited second quarter earnings
results. Expectations that the Federal Reserve would not tighten interest rates
at its July meeting provided for a rally in the bond market in late-June, as the
30-year bond yield dropped below 7.0 percent. The positive interest rate outlook
also served to boost the stock market in early-July, but the rally was cut short
by a larger than expected drop in June unemployment. Bond and stock prices
tumbled following the June unemployment report, as indicated by a 115 point
decline in the Dow Jones Industrial Average ("DJIA") and an increase in the 30-
year bond yield to 7.18 percent. The release of second quarter earnings reports
provided for a volatile stock market in mid-July, especially among the
technology stocks. Overall, the stock market declined due to earnings
disappointments, with a more severe decline occurring in the technology driven
NASDAQ Composite Index. At the same time bond prices recovered, as the 30-year
bond yield dropped below 7.0 percent following statements by the Federal Reserve
Chairman which indicated he expected the economy to slow down in the second half
of 1996. On July 19, 1996 the DJIA closed at 5426.82, a decline of 4.7 percent
since the date of the original appraisal.
In comparison to the overall stock market, the market for thrift
issues has been relatively stable since the original appraisal date, although
thrift prices have declined as well since early-June 1996. The Supreme Court's
ruling in favor of thrifts seeking damages for goodwill served to boost thrift
prices in the beginning of July, but the upturn was abbreviated by a sharp
increase in interest rates in early-July. The sharp rise in interest rates,
which was prompted by the stronger than expected June unemployment report,
pushed interest sensitive issues in general lower. Generally favorable second
quarter earnings and lower interest rates supported a modest recovery in thrift
prices in mid-July, although concerns about future interest rate trends
moderated the impact of the healthy second quarter earnings. On July 19, 1996,
the SNL Index for all publicly-traded thrifts closed at 378.9, a decline of 1.6
percent since the date of the original appraisal.
Consistent with the SNL index, the pricing ratios for the all
publicly-traded SAIF-insured and the Peer Group averages generally exhibited
modest declines since the date of the original appraisal. Overall, the Peer
Group's P/B ratio and P/E multiples remained below and above the comparative
ratios for all publicly-
<PAGE>
RP Financial, LC.
Board of Directors
July 19, 1996
Page 9
traded SAIF insured thrifts. Since the date of the original appraisal, only
three of the eleven Peer Group companies were trading at higher prices as of
July 19, 1996. More detailed pricing information for all publicly-traded SAIF-
insured institutions, as well as the Peer Group and recent conversions, is shown
below.
Average Pricing Characteristics
At June 7, At July 19, %
1996 1996 Change
---------- ----------- ------
Peer Group
- ----------
Price/Earnings (x) 16.44x 16.03x (2.5)%
Price/Core Earnings (x) 17.13 16.69 (2.6)
Price/Book (%) 92.02% 90.03% (2.2)
Price/Assets (%) 15.55 15.20 (2.3)
Dividend Yield (%) 1.63 1.85 13.5
Avg. Mkt. Capitalization ($Mil) $53.92 $52.76 (2.2)
SAIF-Insured Thrifts
- --------------------
Price/Earnings (x) 14.25x 14.22x (0.2)%
Price/Core Earnings (x) 15.15 15.09 (0.4)
Price/Book (%) 104.71% 102.41% (2.2)
Price/Assets (%) 13.08 12.88 (1.5)
Dividend Yield (%) 1.97 2.07 5.1
Avg. Mkt. Capitalization ($Mil) $118.72 $116.15 (2.2)
Recent Conversions(1)
- ---------------------
Price/Core Earnings (x) 17.95x 16.97x (5.5)%
Price/Book (%) 76.11% 74.73% (1.8)
(1) Ratios based on conversions completed for prior three months.
The "new issue" market is separate and distinct from the market for
seasoned issues like the Peer Group companies. Accordingly, as discussed in the
original appraisal, RP Financial has considered the pro forma pricing and
trading level of recently converted companies in this updated appraisal. In
general, the market for the most recent converting issues (offerings completed
within the past three months) has shown some signs of weakness, as indicated by
fewer oversubscriptions and generally weak aftermarket trading activity. In
comparison to recent prior quarters, the price appreciation exhibited in the
most recent offerings has been limited, despite lower closing P/B ratios on
average, and in some cases recent converting thrift issues have been trading
below their IPO prices. Such weakness in the aftermarket trading indicates that
new issues are now trading more on fundamentals, rather than speculative factors
which tended to support price appreciation in all of the converting issues
during most of 1995 and early-1996. As shown in Table 4, the median one week
change in price for offerings completed during the latest three months equaled
positive 5.6 percent.
Shown in Table 5 is a summary of recently completed conversions which
closed in the last three months. Relative to the original appraisal date, which
reflected pricing ratios as of June 7, 1996, the newly converted companies
declined in value by 5.5 percent on a price-to-book basis, from an average 76.11
percent pro forma P/B ratio at June 7, 1996 to an average 74.73 percent pro
forma P/B ratio at July 19, 1996. The decline in the recent conversions P/B
ratio provides another indication that the new issue market for thrift
<PAGE>
<TABLE>
<CAPTION>
Table 4
Recent Conversions (Last Three Months)
Conversion Pricing Characteristics: Sorted Chronologically
----------------------------------------------------------
Institutional Information Pre-Conversion Data
------------------------------ Offering
Financial Info. Asset Quality Information Insider Purchases
- -----------------------------------------------------------------------------------------------------------------------------------
Benefit Plans
--------------
Conversion Equity/ NPAs/ Res. Gross % of Exp./ Recog. Mgmt.
Institution State Date Ticker Assets Assets Assets Cov. Proc. Mid. Proc. ESOP Plans & Dirs.
- ----------- ----- ---- ------ ------ ------- ------ ---- ----- ----- ----- ---- ------ -------
($Mil) (%) (%)(2) (%) ($Mil) (%) (%) (%) (%) (%)(3)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lenox Bancorp. OH . 07/17/96 P. Sheet $44 8.55% 0.21% 65% $4.3 85% 10.6% 8.0% 4.0% 4.1%
Acadiana Bancshares LA . 07/16/96 ANA 230 7.69% 1.00% 103% 32.8 115% 3.0% 8.0% 4.0% 2.4%
Pennwood SB PA . 07/15/96 PWBK 42 9.63% 2.64% 44% 6.1 94% 6.6% 8.0% 4.0% 11.1%
Algiers Bancorp LA 07/09/96 P. Sheet 44 9.46% 0.27% 447% 6.5 132% 5.4% 8.0% 4.0% 6.7%
Ocean Financial Corp. NJ . 07/03/96 OCFC 1,130 8.15% 1.01% 52% 167.8 132% 2.6% 8.0% 4.0% 1.2%
Home Financial Bancorp(1) IN 07/02/96 HWEN 34 9.85% 0.24% 148% 5.1 89% 6.1% 8.0% 4.0% 7.1%
First Lancaster Bancshares KY . 07/01/96 FLKY 35 13.95% 1.57% 22% 9.6 132% 4.6% 8.0% 4.0% 9.4%
Heartland Bancshares IL 07/01/96 P. Sheet 61 7.75% 0.93% 53% 8.8 125% 5.8% 8.0% 4.0% 14.8%
Kenwood Bancorp(7) OH . 07/01/96 P. Sheet 48 6.88% 0.00% NM 1.6 102% 22.2% 8.0% 4.0% 6.4%
Eagle BancGroup IL . 07/01/96 EGLB 152 7.40% 0.93% 64% 13.0 90% 5.3% 8.0% 4.0% 6.3%
Provident Financial Holdings CA . 06/28/96 PROV 558 7.10% 1.80% 50% 51.3 101% 2.2% 8.0% 4.0% 2.9%
Prstige Bancorp PA 06/27/96 PRBC 94 7.56% 0.33% 95% 9.6 96% 5.0% 8.0% 4.0% 6.9%
Wayne Bancorp NJ 06/27/96 WYNE 196 8.91% 1.79% 46% 22.3 89% 4.4% 8.0% 4.0% 4.4%
Mechanics SB(1) CT 06/26/96 MECH 670 3.68% 2.75% 56% 52.9 132% 3.6% 2.3% 0.0% 1.5%
Dime Community Bancorp NY . 06/26/96 DIME 1,094 7.46% 0.75% 77% 145.5 132% 2.5% 8.0% 4.0% 2.7%
Commonwealth Bancorp(7) PA . 06/17/96 CMSB 2,054 6.71% 0.51% 109% 98.7 110% 1.9% 8.0% 4.0% 0.1%
CNS Bancorp MO . 06/12/96 CNSB 87 10.66% 0.19% 189% 16.5 132% 3.3% 8.0% 4.0% 8.0%
Westwood Financial Corp.(7) NJ 06/07/96 WWFC 85 7.05% 0.00% NM 3.9 99% 9.9% 0.0% 0.0% 2.5%
Lexington B&L Fin. Corp. MO . 06/06/96 LXMO 51 14.66% 1.88% 21% 12.7 115% 4.2% 8.0% 4.0% 4.3%
First Fed. Fin. Bancorp OH 06/04/96 P. Sheet 53 9.58% 0.08% 626% 6.7 103% 6.3% 8.0% 4.0% 13.4%
First Fed. Bancshares AR 05/03/96 FFBH 454 7.77% 0.13% 201% 51.5 94% 2.7% 8.0% 4.0% 2.6%
Citizens First Fin. Corp. IL 05/01/96 CBK 229 6.79% 0.33% 55% 28.2 123% 3.6% 8.0% 4.0% 6.5%
North Cincinnati SB(1) OH 05/01/96 P. Sheet 56 4.74% 0.03% 268% 4.0 132% 6.9% 6.0% 0.0% 16.1%
Reliance Bancshares(10 WI . 04/19/96 RELI 32 31.16% 0.00% NM 20.5 132% 2.9% 4.0% 4.0% 9.5%
Catskill Financial Corp. NY 04/18/96 CATB 231 12.75% 0.70% 112% 56.7 132% 3.3% 8.0% 4.0% 2.6%
Yonkers Financial Corp. NY . 04/18/96 YFCB 210 7.72% 1.73% 23% 35.7 132% 2.7% 8.0% 4.0% 3.7%
Average: $307 9.37% 0.84% 127% $33.5 114% 5.3% 7.2% 3.5% 6.0%
Medians: 90 7.76% 0.61% 65% 14.8 115% 4.3% 8.0% 4.0% 5.4%
Averages, Excluding 2nd Steps $252 9.69% 0.93% 128% $33.4 115% 4.5% 7.5% 3.7% 6.4%
Medians, Excluding 2nd Steps 94 8.15% 0.75% 64% 16.5 123% 4.2% 8.0% 4.0% 6.3%
<CAPTION>
Institutional Information Pro Forma Data
----------------------------------------
Pricing Ratios(4) Fin. Characteristics
- ---------------------------------------------------------------------------------------------
Conversion IPO
Institution State Date Ticker P/TB P/E P/A ROA TE/A ROE Price
- ----------- ----- ---- ------ ---- --- --- ---- ---- --- -----
(%) (x) (%) (%) (%) (%) ($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lenox Bancorp. OH . 07/17/96 P. Sheet 60.0% 29.7 8.9% 0.3% 14.9% 2.0% $10.00
Acadiana Bancshares LA . 07/16/96 ANA 72.0% 20.0 12.7% 0.6% 17.7% 3.6% 12.00
Pennwood SB PA . 07/15/96 PWBK 67.4% 19.3 12.8% 0.7% 18.9% 3.5% 10.00
Algiers Bancorp LA 07/09/96 P. Sheet 68.4% 19.6 13.3% 0.7% 19.4% 3.5% 10.00
Ocean Financial Corp. NJ . 07/03/96 OCFC 75.9% 15.4 14.2% 0.9% 18.8% 4.9% 20.00
Home Financial Bancorp(1) IN 07/02/96 HWEN 67.5% 13.4 13.3% 1.0% 19.6% 5.0% 10.00
First Lancaster Bancshares KY . 07/01/96 FLKY 74.2% 18.5 22.2% 1.2% 29.8% 4.0% 10.00
Heartland Bancshares IL 07/01/96 P. Sheet 73.3% NM 12.8% NM 17.5% NM 10.00
Kenwood Bancorp(7) OH . 07/01/96 P. Sheet 67.6% NM 6.0% 0.1% 8.8% 1.7% 10.00
Eagle BancGroup IL . 07/01/96 EGLB 59.2% NM 8.0% 0.1% 13.5% 0.6% 10.00
Provident Financial Holdings CA . 06/28/96 PROV 61.4% NM 8.5% 0.2% 13.9% 1.1% 10.00
Prstige Bancorp PA 06/27/96 PRBC 63.9% 24.7 9.4% 0.4% 14.7% 2.6% 10.00
Wayne Bancorp NJ 06/27/96 WYNE 61.8% 18.6 10.4% 0.6% 16.8% 3.3% 10.00
Mechanics SB(1) CT 06/26/96 MECH 77.3% NM 7.3% NM 9.5% NM 10.00
Dime Community Bancorp NY . 06/26/96 DIME 80.3% 15.9 11.9% 0.7% 16.9% 4.0% 10.00
Commonwealth Bancorp(7) PA . 06/17/96 CMSB 09.3% 12.1 8.4% 0.7% 6.7% 10.4% 10.00
CNS Bancorp MO . 06/12/96 CNSB 71.1% 22.3 16.4% 0.7% 23.1% 3.2% 10.00
Westwood Financial Corp.(7) NJ 06/07/96 WWFC 80.0% 10.1 7.3% 0.7% 9.2% 7.9% 10.00
Lexington B&L Fin. Corp. MO . 06/06/96 LXMO 70.1% 16.2 20.6% 1.3% 29.4% 4.3% 10.00
First Fed. Fin. Bancorp OH 06/04/96 P. Sheet 63.6% 17.4 11.5% 0.7% 18.0% 3.7% 10.00
First Fed. Bancshares AR 05/03/96 FFBH 65.0% 10.4 10.3% 1.0% 15.9% 6.3% 10.00
Citizens First Fin. Corp. IL 05/01/96 CBK 71.7% 17.8 11.2% 0.6% 15.6% 4.0% 10.00
North Cincinnati SB(1) OH 05/01/96 P. Sheet 65.0% NM 6.7% NM 10.3% NM 10.00
Reliance Bancshares(10 WI . 04/19/96 RELI 72.3% 27.3 40.7% 1.5% 56.2% 2.7% 8.00
Catskill Financial Corp. NY 04/18/96 CATB 73.2% 21.2 20.4% 1.0% 27.8% 3.5% 10.00
Yonkers Financial Corp. NY . 04/18/96 YFCB 76.5% 16.6 14.8% 0.9% 19.4% 4.6% 10.00
Average: 71.1% 18.3 13.1% 0.7% 18.5% 3.9% $10.00
Medians: 70.6% 18.2 11.7% 0.7% 17.2% 3.6% 10.00
Averages, Excluding 2nd Steps 69.2% 19.1 13.8% 0.7% 19.9% 3.5% $10.00
Medians, Excluding 2nd Steps 70.1% 18.6 12.7% 0.7% 17.7% 3.6% 10.00
<CAPTION>
Institutional Information Post-IPO Pricing Trends
------------------------------------------------
Closing Price:
- ----------------------------------------------------- ------------------------------------------------
First After After
Conversion Trading % First % First %
Institution State Date Ticker Day Chg. Week(5) Chg. Month(6) Chg.
- ----------- ----- ---- ------ --- ---- ------- ---- -------- ----
($) (%) ($) (%) ($) (%)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lenox Bancorp. OH . 07/17/96 P. Sheet NT NA NT NA NT NA
Acadiana Bancshares LA . 07/16/96 ANA $12.00 0.0% NA NA NA NA
Pennwood SB PA . 07/15/96 PWBK 9.50 -5.0% $9.25 -7.5% NT NA
Algiers Bancorp LA 07/09/96 P. Sheet NT NA NT NA NT NA
Ocean Financial Corp. NJ . 07/03/96 OCFC 21.25 6.3% 20.13 1.9% $19.75 0.0%
Home Fianncial Bancorp(1) IN 07/02/96 HWEN 10.25 2.5% 9.88 -1.3% 10.00 0.0%
First Lancaster Bancshares KY . 07/01/96 FLKY 13.25 32.5% 13.38 -0.9% 13.50 0.0%
Heartland Bancshares IL 07/01/96 P. Sheet NT NA NT NA NT NA
Kenwood Bancorp(7) OH . 07/01/96 P. Sheet NT NA NT NA NT NA
Eagle BancGroup IL . 07/01/96 EGLB 11.25 12.5% 11.25 7.1% 10.50 0.0%
Provident Financial Holdings CA . 06/28/96 PROV 10.97 9.7% 10.81 4.1% 10.38 0.0%
Prstige Bancorp PA 06/27/96 PRBC 10.38 3.8% 10.25 5.1% 9.75 0.0%
Wayne Bancorp NJ 06/27/96 WYNE 11.13 11.3% 11.38 5.8% 10.75 0.0%
Mechanics SB(1) CT 06/26/96 MECH 11.50 15.0% 11.50 2.2% 11.25 0.0%
Dime Community Bancorp NY . 06/26/96 DIME 12.00 20.0% 12.00 2.1% 11.75 0.0%
Commonwealth Bancorp(7) PA . 06/17/96 CMSB 10.50 5.0% 10.75 5.5% 10.19 0.0%
CNS Bancorp MO . 06/12/96 CNSB 11.00 10.0% 12.00 4.3% 11.50 0.0%
Westwood Financial Corp.(7) NJ 06/07/96 WWFC 10.75 7.5% 10.38 -2.3% 10.62 0.0%
Lexington B&L Fin. Corp. MO . 06/06/96 LXMO 9.50 -5.0% 9.75 -3.7% 10.12 0.0%
First Fed. Fin. Bancorp OH 06/04/96 P. Sheet 10.75 7.5% 10.62 -3.5% 11.00 0.0%
First Fed. Bancshares AR 05/03/96 FFBH 13.00 30.0% 13.38 -1.9% 13.63 0.0%
Citizens First Fin. Corp. IL 05/01/96 CBK 10.50 5.0% 10.00 -1.2% 10.13 0.0%
North Cincinnati SB(1) OH 05/01/96 P. Sheet NT NA NT NA NT NA
Reliance Bancshares(10 WI . 04/19/96 RELI 8.38 4.7% 8.25 3.9% 7.94 0.0%
Catskill Financial Corp. NY 04/18/96 CATB 10.38 3.8% 10.50 1.2% 10.38 0.0%
Yonkers Financial Corp. NY . 04/18/96 YFCB 9.75 -2.5% 10.00 0.6% 9.94 0.0%
Average: $11.33 8.3% $11.27 8.7% $11.21 8.0%
Medians: 10.75 6.3% 10.69 5.6% 10.50 3.8%
Averages, Excluding 2nd Steps $11.41 8.5% $11.35 9.1% $11.31 8.5%
Medians, Excluding 2nd Steps 10.97 6.3% 10.72 5.6% 10.50 3.8%
<FN>
Note:* - Appraisal performed by RP Financial;"NT" - Not Traded;"NA" - Not Applicable, Not Available
(1) Non-OTS regulated thrifts.
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Latest price if offering less than one week old.
(6) Latest price if offering more than one week but less than one month old.
(7) Second-step conversions.
</FN>
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 5
Market Pricing Comparatives
Prices As of July 19, 1996
Per Share Data
Market _______________
Capitalization Book Pricing Ratios(3)
_______________ _______________________________________
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
--------------------- _______ _______ _______ _______ _______ _______ _______ _______ _______
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 16.83 116.15 1.22 16.54 14.22 102.41 12.88 105.61 15.09
Converted Last 3 Mths (no MHC) 11.15 47.71 0.41 15.00 17.40 74.73 15.64 77.25 16.97
Comparable Group
________________
Converted Last 3 Mths (no MHC)
______________________________
ANA Acadiana Bancshares of LA 12.00 39.34 -0.27 16.67 NM 71.99 12.72 71.99 20.00
CNSB CNS Bancorp of MO 11.50 19.01 0.45 14.07 NM 81.73 18.86 81.73 NM
CATB Catskill Fin. Corp. of NY 10.00 56.87 0.47 13.65 21.28 73.26 20.36 73.26 18.52
CBK Citizens First Fin.Corp. of IL 9.75 27.48 0.56 13.95 17.41 69.89 10.88 69.89 15.98
CMSB Cmnwealth Bancorp of PA 10.12 181.99 0.83 12.41 12.19 81.55 8.49 110.60 12.65
DIME Dime Community Bancorp of NY 11.97 174.14 0.63 14.17 19.00 84.47 14.29 96.14 20.64
EGLB Eagle BancGroup of IL 11.12 14.49 0.10 16.89 NM 65.84 8.91 65.84 NM
FFBH First Fed. Bancshares of AR 12.94 66.69 0.96 15.38 13.48 84.14 13.38 84.14 13.48
FLKY First Lancaster Bncshrs of KY 13.37 12.82 0.54 13.47 24.76 99.26 29.61 99.26 24.76
HWEN Home Financial Bancorp of IN 10.50 5.31 0.75 14.81 14.00 70.90 13.93 70.90 14.00
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
MECH Mechanics SB of Hartford CT 11.37 60.15 -2.10 12.94 NM 87.87 8.34 87.87 NM
MBSP Mitchell Bancorp of NC 10.62 10.41 0.30 14.34 NM 74.06 28.68 74.06 NM
OCFC Ocean Fin. Corp. of NJ 19.62 164.57 1.27 26.36 15.45 74.43 13.96 74.43 15.09
PWBK Pennwood SB of PA 9.12 5.56 0.52 14.83 17.54 61.50 11.64 61.50 12.00
PRBC Prestige Bancorp of PA 10.12 9.75 0.41 15.66 24.68 64.62 9.51 64.62 24.68
PROV Provident Fin. Holdings of CA 10.37 53.24 0.18 16.29 NM 63.66 8.85 63.66 20.74
RELI Reliance Bancshares Inc of WI 8.25 21.14 0.29 11.06 NM 74.59 41.94 74.59 NM
WYNE Wayne Bancorp of NJ 11.62 25.92 0.54 16.17 21.52 71.86 12.10 71.86 17.88
WWFC Westwood Fin. Corp. of NJ 10.62 6.87 0.99 14.61 10.73 72.69 7.78 84.89 10.73
YFCB Yonkers Fin. Corp. of NY 9.50 33.92 0.60 13.07 15.83 72.69 14.10 72.69 14.39
<CAPTION>
Dividends(4) Financial Characteristics(6)
_______________________ _______________________________________________________
Amount/ Payout Total Equity/ NPAs/ Reported Core
________________ _______________
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
--------------------- ________ ______ _______ ______ _______ _______ _______ _______ _______ _______
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.36 2.07 26.64 1,294 13.31 0.96 0.85 7.82 0.80 7.13
Converted Last 3 Mths (no MHC) 0.01 0.12 1.59 399 20.83 1.42 0.62 2.65 0.77 3.88
Comparable Group
________________
Converted Last 3 Mths (no MHC)
______________________________
ANA Acadiana Bancshares of LA 0.00 0.00 NM 309 17.67 1.09 -0.29 -1.62 0.64 3.60
CNSB CNS Bancorp of MO 0.00 0.00 0.00 101 23.07 0.70 0.74 3.20 0.62 2.70
CATB Catskill Fin. Corp. of NY 0.00 0.00 0.00 279 27.79 NA 0.96 3.44 1.10 3.96
CBK Citizens First Fin.Corp. of IL 0.00 0.00 0.00 252 15.57 NA 0.63 4.01 0.68 4.37
CMSB Cmnwealth Bancorp of PA 0.25 2.47 30.17 2,140 10.41 0.44 0.70 6.69 0.67 6.45
DIME Dime Community Bancorp of NY 0.00 0.00 0.00 1,218 16.92 2.59 0.75 4.45 0.69 4.09
EGLB Eagle BancGroup of IL 0.00 0.00 0.00 163 13.53 0.80 0.08 0.59 0.08 0.59
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
FLKY First Lancaster Bncshrs of KY 0.00 0.00 0.00 43 29.83 1.23 1.20 4.01 1.20 4.01
HWEN Home Financial Bancorp of IN 0.00 0.00 0.00 38 19.64 0.39 0.99 5.06 0.99 5.06
LXMO Lexington B&L Fin. Corp. of MO 0.00 0.00 0.00 61 29.42 1.15 1.28 4.34 1.26 4.27
MECH Mechanics SB of Hartford CT 0.00 0.00 NM 721 9.49 5.43 -1.54 -16.23 0.00 0.00
MBSP Mitchell Bancorp of NC 0.00 0.00 0.00 36 38.73 1.41 0.81 2.09 0.78 2.02
OCFC Ocean Fin. Corp. of NJ 0.00 0.00 0.00 1,179 18.75 0.97 0.90 4.82 0.92 4.93
PWBK Pennwood SB of PA 0.00 0.00 0.00 48 18.92 3.50 0.66 3.51 0.97 5.12
PRBC Prestige Bancorp of PA 0.00 0.00 0.00 102 14.72 0.38 0.39 2.62 0.39 2.62
PROV Provident Fin. Holdings of CA 0.00 0.00 0.00 602 13.90 2.22 0.15 1.10 0.43 3.07
RELI Reliance Bancshares Inc of WI 0.00 0.00 0.00 50 56.23 NA 1.47 2.62 1.47 2.62
WYNE Wayne Bancorp of NJ 0.00 0.00 0.00 214 16.83 1.46 0.56 3.34 0.68 4.02
WWFC Westwood Fin. Corp. of NJ 0.00 0.00 0.00 88 10.71 0.02 0.73 6.78 0.73 6.78
YFCB Yonkers Fin. Corp. of NY 0.00 0.00 0.00 241 19.39 1.63 0.89 4.59 0.98 5.05
<FN>
(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.
</FN>
</TABLE>
<PAGE>
RP Financial, LC.
Board of Directors
July 19, 1996
Page 12
stocks has become less favorable in recent months. In comparison to the average
P/B ratio of all publicly-traded thrifts, which equaled 102.41 percent at July
19, 1996, the average P/B ratio of the recent conversions was discounted by 27.0
percent, and the average core P/E ratio of 16.97 times for the recent
conversions reflected a premium of 12.5 percent from the all SAIF-insured
average core P/E ratio of 15.09 times. As noted in the original appraisal, the
pricing ratios of the better capitalized but lower earning recently converted
thrifts suggest that the investment community has determined to discount their
stock price on a book basis, until the earnings improve through redeployment and
leveraging of the proceeds over the longer term.
Summary of Adjustments
- ----------------------
In the original appraisal, we made the following adjustments to Home
Federal's pro forma value based upon our comparative analysis to the Peer Group:
<TABLE>
<CAPTION>
Previous Valuation
Key Valuation Parameters: Adjustment
------------------------- ----------
<S> <C>
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
</TABLE>
The factors concerning the valuation parameters of primary market
area, dividends, liquidity of the shares, management and effect of government
regulation and regulatory reform did not change since the original appraisal
date. Accordingly, those parameters were not discussed further in this update.
There were no material changes in the updated financial conditions of
the Association and the Peer Group, with both Home Federal's and the Peer
Group's balance sheets remaining indicative of low risk traditional thrift
operating strategies. Home Federal's current lower capital position and lower
level of liquidity will be addressed by the infusion of conversion proceeds,
which will initially be deployed into short-term investments. The slight
advantage maintained by the Peer Group in terms of credit quality, due to higher
reserve coverage ratios, and by the Association in terms of funding composition,
due to the absence of borrowings and lower funding costs, did not change from
the original appraisal. Therefore, as compared to the Peer Group, RP Financial
concluded no adjustment continues to be appropriate for Home Federal's financial
condition and asset growth potential. The Association's updated reported
earnings were depressed by a one time expense stemming from the termination of
the current pension plan, which widened the gap between the reported return on
average assets ratios posted by the Association and the Peer Group (0.51 percent
versus 0.99 percent for the Peer Group). On a core earnings basis, the updated
earnings for Home Federal and the Peer Group did not exhibit any material
changes from the original appraisal, with the Peer Group continuing to exhibit a
core earnings advantage as the result of lower operating expenses. Also
consistent with the original appraisal, the Association's stronger net interest
margin and higher level of non-operating income partially negated the lower
level of operating expenses maintained by the Peer Group. The redeployment of
conversion proceeds into interest-earning assets by Home Federal will serve to
reduce the Peer Group's core earnings advantage on a return on average assets
basis, although on a return on equity basis the Peer Group will realize a more
notable earnings advantage following the Association's conversion. Accordingly,
we continue to believe
<PAGE>
RP Financial, LC.
Board of Directors
July 19, 1996
Page 13
a moderate downward adjustment remains appropriate for the quality,
predictability and growth of the Association's earnings relative to the Peer
Group's.
The general market for thrift stocks declined since the date of the
original appraisal, with all publicly-traded SAIF-insured thrifts and the Peer
Group exhibiting lower pricing ratios compared to the original appraisal date.
Similarly, a decline was recorded in the SNL Index for all publicly-traded
thrifts since the original appraisal date. Recent thrift offerings have shown
signs of weakness, as indicated by fewer oversubscriptions and generally minimal
price appreciation in aftermarket trading activity. In some cases, the recent
conversions have traded below their IPO prices, despite generally more
attractive pro forma pricing compared to earlier in the year. Therefore, taking
into consideration the trading activity of recent conversions, as well as market
conditions for all publicly-traded thrifts and the Peer Group, we believe a
downward adjustment is appropriate for marketing of the issue.
Valuation Approaches
- --------------------
In applying the accepted valuation methodology promulgated by the OTS,
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, the
valuation parameters for effective tax rate, reinvestment rate, and stock
benefit plan assumptions utilized in the original appraisal did not change in
this update. Offering expenses were revised, in light of the reduction in value
and resulting lower commission fees The pro assumptions are summarized in
Exhibits 3 and 4.
Consistent with the original appraisal, this updated appraisal continues to
be based primarily on fundamental analysis techniques applied to the Peer Group,
including the P/E approach, the P/B approach and the P/A approach. To capture
the anticipated aftermarket trading of Home Federal's stock, the updated
appraisal also incorporates a technical analysis of recently completed stock
conversions, including principally the P/B approach which (as discussed in the
original appraisal) is the most meaningful pricing ratio as the pro forma P/E
ratios reflect an assumed reinvestment rate and do not yet reflect the actual
use of proceeds.
Based on the foregoing, we have concluded that the pro forma market value
range of Home Federal's stock is subject to a reduction. Therefore, as of July
19, 1996, the pro forma market value of Home Federal's stock has been reduced
from $57,500,000 to $53,000,000 at the midpoint of the valuation range.
The valuation analysis for the updated appraisal, and the rationale for the
valuation conclusion, are set forth in the following paragraphs. Consistent with
the original appraisal, RP Financial's updated valuation placed a similar
emphasis on the three valuation approaches as in our previous valuation.
The Association has adopted Statement of Position ("SOP" 93-6) which will
cause earnings per share computations to be based on shares issued and
outstanding excluding shares owned by an ESOP where there is not a commitment to
release such shares. For the purpose of preparing the pro forma pricing tables
and exhibits, we have reflected all shares issued in the offering including
shares purchased by the ESOP as outstanding to capture the full dilutive impact
of such stock to the Association's shareholders. However, we have considered the
impact of the Association's adoption of SOP 93-6 in the determination of Home
Federal's pro forma value.
1. P/E Approach. In applying the P/E approach, RP Financial's
valuation conclusions were based on the Association's and the Peer Group's
recurring or "core" earnings estimates. Home Federal's
<PAGE>
RP Financial, LC.
Board of Directors
July 19, 1996
Page 14
reported earnings for the twelve months ended June 30, 1996 were $1.552 million.
Consistent with the original appraisal, the Association's reported earnings
continued to be representative of core earnings, with the exception of the one
time expense resulting from the termination of the current pension plan.
Accordingly, in deriving Home Federal's core earnings, the only adjustment
required was to eliminate the curtailment pension plan expense of $837,000. As
shown below, after tax effecting the adjustment at 39.20 percent, Home Federal's
core earnings were determined to equal $2.061 million for the twelve months
ended June 30, 1996. (Note: see Exhibit 2 for the adjustments applied to the
Peer Group's earnings in the calculation of core earnings).
Amount
------
($000)
Net income $1,552
Non-recurring pension plan expense(1) 509
---
Estimated core earnings $2,061
(1) Net of an effective tax rate of 39.20 percent.
Based on Home Federal's core earnings, and incorporating the impact of
the pro forma assumptions discussed previously, the Association's core P/E
multiple at the $53.0 million midpoint value equaled 17.18 times (versus the
17.45x midpoint valuation in the original appraisal). Comparatively, the Peer
Group posted an average core P/E multiple of 16.69 times, which indicated a
premium of 2.9 percent in the Association's core P/E multiple (versus a premium
of 1.9 percent as indicated in the original appraisal). The Association's
slightly higher premium P/E multiple was accounted for in the slightly higher
discount reflected in its updated pro forma P/B ratio. The implied conversion
pricing ratios relative to the Peer Group's pricing ratios are indicated in
Table 6, and the updated pro forma calculations are detailed in Exhibits 3 and
4.
2. 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. Based on the $53.0 million midpoint value, Home Federal's
pro forma P/B ratio was 64.48 percent (versus the 66.77 percent midpoint
valuation in the original appraisal). Relative to the average P/B ratio
indicated for the Peer Group of 90.03 percent, Home Federal's updated valuation
reflected a 28.4 percent discount relative to the Peer Group (versus the 27.4
percent discount applied in the original appraisal). The slightly higher
discount reflected under the P/B approach was consistent with the downward
adjustment applied for marketing of the issue. In addition to the downward
adjustments applied to the Association's value for earnings, and marketing of
the issue, Home Federal's discounted P/B ratio takes into consideration its
lower pro forma ROE (3.75 percent, based on core earnings, versus 5.59 percent
for the Peer Group) and resulting premium P/E multiple.
In addition to the fundamental analysis applied to the Peer Group, RP
Financial utilized a technical analysis of recently completed conversions as a
proxy for anticipated aftermarket trading in Home Federal's conversion stock.
The recent conversions indicated an average P/B ratio of 74.73 percent. Since
complete financial data is not readily available for the recent conversions, RP
Financial's valuation analysis in this regard is necessarily limited -- focused
primarily on how the market is pricing recent conversions and estimating how
such pricing can reasonably be applied to Home Federal's conversion stock. For
reasons discussed above, the P/B ratios of the recent conversions provide the
most meaningful pricing information. At the $53.0 million midpoint value, Home
Federal's pro forma valuation resulted in a 13.7 percent discount relative to
the average of the newly converted companies, which was similar to the 12.3
percent discount reflected in the original appraisal. At the super maximum of
the valuation range, Home Federal's updated pro forma P/B ratio of 72.26 percent
was discounted by 3.3 percent from the recent conversion average P/B ratio.
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 6
Public Market Pricing
Home Federal of Elgin and the Comparables
As of July 19, 1996
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization _______________ Pricing Ratios(3)
_______________ Book _______________________________________
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
_______ _______ _______ _______ _______ _______ _______ _______ _______
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Home Federal of Elgin
_____________________
Superrange 10.00 70.09 0.42 13.84 24.03 72.26 19.46 72.26 20.46
Range Maximum 10.00 60.95 0.45 14.62 22.29 68.42 17.30 68.42 18.79
Range Midpoint 10.00 53.00 0.49 15.51 20.57 64.48 15.34 64.48 17.18
Range Minimum 10.00 45.05 0.54 16.72 18.63 59.82 13.31 59.82 15.39
SAIF-Insured Thrifts(7)
_______________________
Averages 16.83 116.15 1.22 16.54 14.22 102.41 12.88 105.61 15.09
Medians --- --- --- --- 14.00 98.00 11.62 100.23 15.07
All Non-MHC State of IL(7)
__________________________
Averages 17.10 68.52 1.16 18.61 14.41 90.86 12.45 91.64 15.87
Medians --- --- --- --- 15.17 90.13 10.88 90.13 16.29
Comparable Group Averages
_________________________
Averages 17.24 52.76 1.15 18.93 16.03 90.03 15.20 90.06 16.69
Medians --- --- --- --- 15.97 87.53 14.59 87.53 16.85
State of IL
___________
AVND Avondale Fin. Corp. of IL 12.75 51.19 0.93 15.35 13.71 83.06 8.83 83.06 19.62
CSBF CSB Financial Group Inc of IL 9.25 9.57 0.32 12.30 NM 75.20 23.23 75.20 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 11.00 54.71 0.65 12.95 16.92 84.94 18.19 87.23 16.92
CBK Citizens First Fin.Corp. of IL 9.75 27.48 0.56 13.95 17.41 69.89 10.88 69.89 15.98
DFIN Damen Fin. Corp. of Chicago IL 11.75 46.61 0.44 14.34 NM 81.94 19.81 81.94 NM
EGLB Eagle BancGroup of IL 11.12 14.49 0.10 16.89 NM 65.84 8.91 65.84 NM
FBCI Fidelity Bancorp of Chicago IL 15.50 45.43 0.98 16.91 15.82 91.66 11.04 91.99 16.85
FNSC Financial Security Corp. of IL(7) 26.00 39.60 1.42 25.85 18.31 100.58 14.45 100.58 18.98
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 11.69 50.87 0.61 16.56 19.16 70.59 17.83 70.59 19.81
FFDP FirstFed Bancshares of IL 16.25 55.23 1.10 16.62 14.77 97.77 8.82 102.39 23.55
GTPS Great American Bancorp of IL 13.87 25.66 0.42 17.95 NM 77.27 21.29 77.27 NM
HNFC Hinsdale Financial Corp. of IL 23.75 63.89 1.58 20.20 15.03 117.57 9.37 121.30 15.63
HMCI Homecorp, Inc. of Rockford IL 17.12 19.28 1.12 18.41 15.29 92.99 5.64 92.99 22.53
KNK Kankakee Bancorp of IL 18.50 26.62 1.15 24.73 16.09 74.81 7.33 80.65 16.37
LBCI Liberty Bancorp of Chicago IL 23.50 58.44 1.45 25.66 16.21 91.58 8.72 91.83 16.21
MAFB MAF Bancorp of IL 23.75 124.55 3.11 20.91 7.64 113.58 6.29 113.58 7.42
NBSI North Bancshares of Chicago IL 15.25 16.99 0.54 16.92 NM 90.13 15.63 90.13 NM
SWBI Southwest Bancshares of IL 27.50 49.34 2.37 23.38 11.60 117.62 14.11 117.62 11.65
SPBC St. Paul Bancorp, Inc. of IL 23.25 418.22 1.95 20.64 11.92 112.65 10.41 113.03 12.24
STND Standard Fin. of Chicago IL 15.63 255.49 1.03 16.05 15.17 97.38 11.98 97.44 16.81
SFSB SuburbFed Fin. Corp. of IL 16.62 20.96 1.41 20.52 11.79 80.99 5.79 81.47 13.74
WCBI WestCo Bancorp of IL 22.00 58.92 1.50 18.07 14.67 121.75 19.05 121.75 14.77
</TABLE>
<TABLE>
<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 0.00 360 26.93 0.40 0.81 3.01 0.95 3.53
Range Maximum 0.00 0.00 0.00 352 25.29 0.41 0.78 3.07 0.92 3.64
Range Midpoint 0.00 0.00 0.00 345 23.80 0.42 0.75 3.13 0.89 3.75
Range Minimum 0.00 0.00 0.00 339 22.25 0.43 0.71 3.21 0.86 3.89
SAIF-Insured Thrifts(7)
_______________________
Averages 0.36 2.07 26.64 1,294 13.31 0.96 0.85 7.82 0.80 7.13
Medians --- --- --- --- --- --- --- --- --- ---
All Non-MHC State of IL(7)
__________________________
Averages 0.27 1.49 23.40 649 14.28 0.64 0.75 6.21 0.72 5.83
Medians --- --- --- --- --- --- --- --- --- ---
Comparable Group Averages
_________________________
Averages 0.32 1.85 29.88 340 17.21 0.46 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
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 2.18 36.92 301 21.41 0.49 1.12 6.95 1.12 6.95
CBK Citizens First Fin.Corp. of IL 0.00 0.00 0.00 252 15.57 NA 0.63 4.01 0.68 4.37
DFIN Damen Fin. Corp. of Chicago IL 0.24 2.04 54.55 235 24.17 0.14 0.81 5.02 0.79 4.91
EGLB Eagle BancGroup of IL 0.00 0.00 0.00 163 13.53 0.80 0.08 0.59 0.08 0.59
FBCI Fidelity Bancorp of Chicago IL 0.24 1.55 24.49 411 12.05 NA 0.77 5.66 0.73 5.31
FNSC Financial Security Corp. of IL(7) 0.00 0.00 0.00 274 14.37 2.77 0.77 5.70 0.75 5.50
FFBI First Financial Bancorp of IL 0.00 0.00 0.00 89 8.87 0.53 0.69 6.63 0.72 6.93
FMBD First Mutual Bancorp of IL 0.28 2.40 45.90 285 25.26 0.16 0.98 4.24 0.95 4.10
FFDP FirstFed Bancshares of IL 0.40 2.46 36.36 626 9.02 NA 0.63 6.51 0.39 4.08
GTPS Great American Bancorp of IL 0.40 2.88 NM 121 27.55 0.45 0.68 2.55 0.66 2.49
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 2.16 34.78 363 9.80 0.59 0.50 4.56 0.49 4.48
LBCI Liberty Bancorp of Chicago IL 0.60 2.55 41.38 670 9.53 0.12 0.56 5.51 0.56 5.51
MAFB MAF Bancorp of IL 0.32 1.35 10.29 1,980 5.54 0.46 0.88 15.21 0.90 15.65
NBSI North Bancshares of Chicago IL 0.40 2.62 74.07 109 17.34 NA 0.57 3.03 0.52 2.75
SWBI Southwest Bancshares of IL 1.08 3.93 45.57 350 12.00 0.13 1.19 8.95 1.19 8.91
SPBC St. Paul Bancorp, Inc. of IL 0.48 2.06 24.62 4,017 9.24 0.49 0.88 9.69 0.86 9.44
STND Standard Fin. of Chicago IL 0.32 2.05 31.07 2,132 12.31 NA 0.87 6.21 0.79 5.61
SFSB SuburbFed Fin. Corp. of IL 0.32 1.93 22.70 362 7.14 0.27 0.51 7.04 0.44 6.04
WCBI WestCo Bancorp of IL 0.48 2.18 32.00 309 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 6
Public Market Pricing
Home Federal of Elgin and the Comparables
As of July 19, 1996
<TABLE>
<CAPTION>
Market Per Share Data
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
_______ _______ _______ _______ _______ _______ _______ _______ _______
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Comparable Group
________________
CBCI Calumet Bancorp of Chicago IL 28.00 74.70 2.28 31.99 12.28 87.53 14.87 87.53 12.33
FFYF FFY Financial Corp. of OH 24.00 124.63 1.34 20.25 17.91 118.52 21.75 118.52 17.39
FBCI Fidelity Bancorp of Chicago IL 15.50 45.43 0.98 16.91 15.82 91.66 11.04 91.99 16.85
FMBD First Mutual Bancorp of IL 11.69 50.87 0.61 16.56 19.16 70.59 17.83 70.59 19.81
HMNF HMN Financial, Inc. of MN 15.25 79.00 1.13 17.54 13.50 86.94 14.57 86.94 15.10
HBFW Home Bancorp of Fort Wayne IN 14.75 45.64 0.86 16.60 17.15 88.86 14.59 88.86 17.15
LARK Landmark Bancshares of KS 15.25 29.75 0.94 17.05 16.22 89.44 15.38 89.44 18.60
MFBC MFB Corp. of Mishawaka IN 14.00 27.64 0.66 19.66 21.21 71.21 13.76 71.21 21.54
MFFC Milton Fed. Fin. Corp. of OH 12.25 28.19 0.79 14.91 15.51 82.16 16.42 82.16 16.78
SWBI Southwest Bancshares of IL 27.50 49.34 2.37 23.38 11.60 117.62 14.11 117.62 11.65
WEFC Wells Fin. Corp. of Wells MN 11.50 25.16 0.72 13.40 15.97 85.82 12.83 85.82 16.43
</TABLE>
<TABLE>
<CAPTION>
Dividends(4) Financial Characteristics(6)
_______________________ _______________________________________________________
Reported Core
Amount/ Payout Total Equity/ NPAs/ _______________ _______________
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
_______ _______ _______ _______ _______ _______ _______ _______ _______ _______
($) (%) (%) ($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 2.50 44.78 573 18.35 0.88 1.21 6.53 1.25 6.73
FBCI Fidelity Bancorp of Chicago IL 0.24 1.55 24.49 411 12.05 NA 0.77 5.66 0.73 5.31
FMBD First Mutual Bancorp of IL 0.28 2.40 45.90 285 25.26 0.16 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 0.24 1.71 36.36 201 19.32 NA 0.69 3.40 0.68 3.35
MFFC Milton Fed. Fin. Corp. of OH 0.52 4.24 65.82 172 19.98 0.40 1.13 4.93 1.05 4.56
SWBI Southwest Bancshares of IL 1.08 3.93 45.57 350 12.00 0.13 1.19 8.95 1.19 8.91
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 (common earnings per share) is based on actual trailing twelve
month data and is shown on a pro forma basis.
(3) P/E = Price to Earnings; P/B = Price to Book; P/A = Price to Assets;
P/TB = Price to Tangible Book; and P/CORE = Price to Core Earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend
declared.
(5) Indicated twelve month dividend as a percent of trailing twelve month
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common
equity and total assets balances.
(7) Excludes from averages and medians those companies the subject of
actual or rumored acquisition activities or unusual operating
characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been
obtained from sources we believe are reliable, but we cannot
guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, Inc.
<PAGE>
RP Financial, LC.
Board of Directors
July 19, 1996
Page 17
3. P/A Approach. P/A ratios are generally not as a 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. At the $53.0 million midpoint value, Home Federal exhibited
a pro forma P/A ratio of 15.34 percent. In comparison to the Peer Group's
average P/A ratio of 15.20 percent, Home Federal's P/A ratio indicated a premium
of 0.9 percent (versus a premium of 4.0 percent at the midpoint valuation in the
original appraisal).
Summary
- -------
We have concluded that the Association's estimated pro forma market value
should be reduced since the date of the original appraisal, based on recent
events in the new issue market, as well as the general downturn in thrift stock
market conditions, including the Peer Group's pricing ratios. Based on the
foregoing, it is our opinion that, as of July 19, 1996, the aggregate pro forma
market value of the Association was $53,000,000 at the midpoint, equal to
5,300,000 shares offered at $10.00 per share. Pursuant to the conversion
guidelines, the 15 percent offering range includes a minimum value of
$45,050,000 and a maximum value of $60,950,000. Based on the $10.00 per share
offering price, this valuation range equates to an offering of 4,505,000 shares
at the minimum to 6,095,000 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 $70,092,500, equal to 7,009,250 shares at
the $10.00 per share offering price. The comparative pro forma valuation ratios
relative to the Peer Group are shown in Table 6, and the key valuation
parameters are detailed in Exhibit 3 and Exhibit 4.
Respectfully submitted,
RP FINANCIAL, LC.
/s/ Gregory E. Dunn
Gregory E. Dunn
Senior Vice President
<PAGE>
EXHIBITS
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS
Exhibit
Number Description
- ------- -----------
1 Stock Prices: As of July 19, 1996
2 Peer Group Core Earnings Analysis
3 Pro Forma Analysis Sheet
4 Pro Forma Effect of Conversion Proceeds
5 Firm Qualifications Statement
<PAGE>
EXHIBIT 1
Stock Prices
As of July 19, 1996
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Weekly Thrift Market Line - Part One
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
Shares Market 52 Week (1) % Change From
--------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(331) 16.91 5,923 121.7 18.68 14.40 16.89 0.06 128.96 -0.03
NYSE Traded Companies(12) 27.84 45,853 1,263.4 30.81 22.01 27.47 1.38 178.29 0.58
AMEX Traded Companies(17) 13.78 3,282 49.5 15.12 12.29 13.85 -1.09 203.48 0.26
NASDAQ Listed OTC Companies(302) 16.62 4,323 75.7 18.36 14.19 16.60 0.07 121.15 -0.08
California Companies(27) 18.04 22,424 538.5 20.19 14.51 17.93 0.00 47.84 0.03
Florida Companies(9) 13.94 5,702 65.1 15.98 12.01 13.73 2.33 89.05 2.55
Mid-Atlantic Companies(68) 16.37 6,001 104.3 18.03 14.17 16.31 0.21 112.71 -0.03
Mid-West Companies(152) 17.52 3,768 81.6 19.25 14.94 17.50 0.11 152.21 -0.36
New England Companies(9) 17.12 3,675 72.2 18.63 14.52 16.90 1.26 157.62 -0.46
North-West Companies(6) 17.47 13,480 262.0 19.09 13.79 18.05 -3.28 62.54 3.71
South-East Companies(45) 16.06 3,533 56.5 18.10 13.77 16.08 -0.24 168.62 0.86
South-West Companies(7) 13.13 1,880 27.4 14.96 12.01 13.24 -0.57 -18.52 -8.23
Western Companies (Excl CA)(8) 15.91 4,137 61.0 16.88 13.50 16.08 -0.94 219.77 3.91
Thrift Strategy(254) 15.90 3,490 58.6 17.59 13.80 15.90 0.03 100.67 -0.30
Mortgage Banker Strategy(41) 20.41 11,659 308.6 22.42 16.69 20.33 0.00 207.07 1.52
Real Estate Strategy(17) 17.60 7,497 126.7 19.28 13.35 17.48 0.68 92.80 0.98
Diversified Strategy(15) 25.03 29,909 678.1 27.54 20.25 24.91 0.50 184.12 1.04
Retail Banking Strategy(4) 11.59 3,445 42.0 13.88 10.47 11.72 -1.42 155.68 -7.86
Companies Issuing Dividends(250) 18.13 6,195 136.7 20.02 15.39 18.12 0.00 148.02 0.17
Companies Without Dividends(81) 13.09 5,074 74.8 14.51 11.31 13.05 0.25 48.91 -0.87
Equity/Assets less than 6%(29) 17.03 20,395 413.9 18.88 13.32 16.90 0.39 77.08 2.04
Equity/Assets 6-12%(150) 19.00 5,574 132.9 21.03 15.86 18.98 -0.04 147.84 0.33
Equity/Assets greater than 12%(152) 14.88 3,571 56.6 16.38 13.19 14.87 0.09 95.06 -0.94
Converted Last 3 Mths (no MHC)(15) 11.52 4,473 53.9 12.17 11.12 11.51 0.35 0.00 -9.72
Actively Traded Companies(53) 23.01 17,442 435.5 25.30 19.09 22.84 0.45 156.13 1.46
Market Value Below $20 Million(85) 13.85 947 12.2 15.42 12.27 13.86 -0.09 93.46 -4.08
Holding Company Structure(284) 17.27 5,960 127.2 19.06 14.80 17.23 0.22 120.61 -0.23
Assets Over $1 Billion(65) 23.49 18,845 448.2 25.74 19.04 23.37 0.35 152.51 2.40
Assets $500 Million-$1 Billion(57) 17.07 5,093 76.9 18.81 14.63 17.01 0.36 164.22 0.62
Assets $250-$500 Million(78) 15.59 2,625 37.3 17.47 13.70 15.67 -0.66 97.87 -0.27
Assets less than $250 Million(131) 14.15 1,406 18.9 15.61 12.27 14.13 0.18 81.30 -1.68
Goodwill Companies(137) 19.14 9,884 220.3 21.23 15.93 19.10 0.07 150.53 1.42
Non-Goodwill Companies(194) 15.33 3,110 51.7 16.87 13.32 15.32 0.05 89.58 -1.19
Acquirors of FSLIC Cases(14) 24.28 34,137 937.4 26.78 19.66 24.06 0.23 186.34 -3.93
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(331) 1.24 1.12 16.74 16.30 162.42
NYSE Traded Companies(12) 2.35 1.96 21.36 20.01 355.85
AMEX Traded Companies(17) 0.79 0.75 15.13 14.97 104.02
NASDAQ Listed OTC Companies(302) 1.22 1.10 16.63 16.22 157.34
California Companies(27) 0.80 0.66 18.02 17.56 270.19
Florida Companies(9) 1.32 1.06 13.43 13.10 166.02
Mid-Atlantic Companies(68) 1.34 1.28 16.53 15.86 164.80
Mid-West Companies(152) 1.30 1.15 17.46 17.16 148.59
New England Companies(9) 1.49 1.25 17.78 16.29 241.42
North-West Companies(6) 1.28 1.15 13.04 12.36 163.81
South-East Companies(45) 1.12 1.06 14.66 14.37 123.06
South-West Companies(7) 1.12 1.05 16.25 15.66 213.57
Western Companies (Excl CA)(8) 1.07 1.00 16.40 16.00 113.11
Thrift Strategy(254) 1.08 1.02 16.59 16.24 143.01
Mortgage Banker Strategy(41) 1.93 1.43 17.35 16.36 240.78
Real Estate Strategy(17) 1.24 1.19 16.49 16.29 200.60
Diversified Strategy(15) 2.00 1.97 18.69 18.19 236.98
Retail Banking Strategy(4) 1.13 0.86 13.56 13.05 158.37
Companies Issuing Dividends(250) 1.40 1.25 17.31 16.81 165.36
Companies Without Dividends(81) 0.76 0.71 14.98 14.72 153.22
Equity/Assets less than 6%(29) 1.42 1.17 14.57 13.69 293.58
Equity/Assets 6-12%(150) 1.63 1.43 17.28 16.56 208.94
Equity/Assets greater than 12%(152) 0.83 0.81 16.62 16.54 93.20
Converted Last 3 Mths (no MHC)(15) 0.63 0.66 15.44 14.97 93.88
Actively Traded Companies(53) 2.00 1.88 18.81 18.03 252.96
Market Value Below $20 Million(85) 1.03 0.83 16.24 16.15 131.73
Holding Company Structure(284) 1.23 1.11 17.21 16.76 161.14
Assets Over $1 Billion(65) 1.85 1.69 19.76 18.47 265.89
Assets $500 Million-$1 Billion(57) 1.31 1.22 16.23 15.80 171.37
Assets $250-$500 Million(78) 1.24 1.01 15.94 15.60 154.91
Assets less than $250 Million(131) 0.89 0.84 15.84 15.80 108.36
Goodwill Companies(137) 1.49 1.34 17.38 16.32 213.05
Non-Goodwill Companies(194) 1.06 0.96 16.29 16.29 126.46
Acquirors of FSLIC Cases(14) 2.19 1.93 18.92 17.73 297.28
</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 a re 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 a verage 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 infor mation provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
Shares Market 52 Week (1) % Change From
--------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(75) 16.01 6,472 105.6 17.61 13.08 16.07 -0.30 100.28 5.03
NYSE Traded Companies(3) 18.58 52,040 933.5 20.00 15.00 17.87 1.53 108.20 6.24
AMEX Traded Companies(5) 14.27 3,148 44.7 15.77 12.77 14.12 1.02 27.57 -6.15
NASDAQ Listed OTC Companies(67) 16.03 4,437 68.7 17.64 13.01 16.15 -0.51 105.47 5.59
California Companies(3) 11.62 5,430 67.2 13.21 9.71 11.58 0.17 197.11 8.15
Mid-Atlantic Companies(20) 17.90 12,726 225.5 19.81 15.13 17.81 0.01 70.09 0.41
Mid-West Companies(1) 8.25 2,562 21.1 8.50 7.50 8.37 -1.43 0.00 0.00
New England Companies(44) 16.25 3,901 58.9 17.78 12.86 16.42 -0.59 112.87 7.33
North-West Companies(4) 13.49 6,364 89.0 15.13 11.13 13.08 3.19 29.22 2.20
South-East Companies(2) 11.31 2,129 24.9 11.37 11.19 11.25 0.57 0.00 0.00
South-West Companies(1) 9.00 1,387 12.5 11.50 7.75 9.75 -7.69 0.00 0.00
Thrift Strategy(47) 16.19 4,486 83.6 17.49 13.21 16.17 0.18 100.96 8.40
Mortgage Banker Strategy(11) 17.68 15,664 219.6 19.94 14.45 18.10 -2.16 132.51 1.11
Real Estate Strategy(8) 15.36 4,034 70.3 17.07 11.78 15.36 -0.56 133.15 6.47
Diversified Strategy(7) 13.03 12,881 178.8 15.36 11.27 12.97 0.35 27.36 -9.97
Retail Banking Strategy(2) 14.47 1,330 17.8 17.13 13.13 15.06 -3.18 16.56 -7.04
Companies Issuing Dividends(48) 18.63 5,336 111.1 20.37 14.91 18.69 -0.32 109.30 6.84
Companies Without Dividends(27) 11.62 8,382 96.4 12.97 10.01 11.68 -0.27 65.21 0.81
Equity/Assets less than 6-12%(53) 10.67 23,161 262.7 12.69 8.93 10.85 -1.60 55.96 -8.67
Equity/Assets 6-12%(53) 16.86 5,042 95.8 18.59 13.64 16.95 -0.39 108.74 6.79
Equity/Assets greater than 12%(14) 15.35 4,053 69.4 16.23 12.93 15.25 0.65 0.37 4.97
Converted Last 3 Mths (no MHC)(6) 10.23 3,068 32.2 10.54 9.98 10.27 -0.54 0.00 0.00
Actively Traded Companies(29) 17.44 8,939 135.6 18.90 14.12 17.57 -0.61 123.83 5.43
Market Value Below $20 Million(14) 12.40 1,354 12.2 13.42 9.95 12.63 -1.79 73.15 6.11
Holding Company Structure(46) 16.62 5,123 84.4 18.23 13.68 16.68 -0.16 105.74 6.08
Assets Over $1 Billion(16) 21.26 19,876 365.9 23.36 16.97 21.35 -0.66 92.52 4.09
Assets $500 Million-$1 Billion(19) 18.55 4,712 77.2 20.09 15.40 18.43 0.46 130.36 2.64
Assets $250-$500 Million(23) 13.54 3,561 39.6 15.27 11.21 13.58 0.47 98.28 6.44
Assets less than $250 Million(17) 12.67 1,476 14.8 13.74 10.23 12.90 -1.69 72.40 6.69
Goodwill Companies(35) 17.80 9,363 165.7 19.83 14.62 17.97 -1.22 108.52 3.94
Non-Goodwill Companies(40) 14.57 4,129 56.8 15.80 11.83 14.53 0.45 88.38 6.13
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- --------
($) ($) ($) ($) ($)
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
<S> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(75) 1.28 1.26 15.13 14.52 167.00
NYSE Traded Companies(3) 1.02 1.13 18.11 13.88 246.88
AMEX Traded Companies(5) 0.85 0.69 14.92 14.35 139.06
NASDAQ Listed OTC Companies(67) 1.33 1.32 15.00 14.57 165.31
California Companies(3) 0.67 0.61 10.12 10.12 149.72
Mid-Atlantic Companies(20) 1.38 1.40 17.16 16.35 183.51
Mid-West Companies(1) 0.29 0.29 11.06 11.06 19.67
New England Companies(44) 1.39 1.34 15.00 14.34 177.00
North-West Companies(4) 1.03 1.02 12.45 12.45 95.01
South-East Companies(2) 0.01 0.45 15.51 15.51 65.69
South-West Companies(1) 1.24 0.97 7.91 7.64 91.48
Thrift Strategy(47) 1.20 1.22 15.71 15.02 157.86
Mortgage Banker Strategy(11) 1.60 1.59 16.51 15.77 232.21
Real Estate Strategy(8) 1.35 1.25 11.97 11.93 118.37
Diversified Strategy(7) 1.70 1.50 11.47 11.01 161.57
Retail Banking Strategy(2) 0.19 0.20 16.33 15.86 258.61
Companies Issuing Dividends(48) 1.67 1.61 16.70 15.82 192.67
Companies Without Dividends(27) 0.62 0.69 12.50 12.33 123.89
Equity/Assets less than 6%(8) 0.92 0.79 9.66 9.56 180.00
Equity/Assets 6-12%(53) 1.47 1.43 15.26 14.42 187.12
Equity/Assets more than 12%(14) 0.75 0.85 17.20 17.20 86.74
Converted Last 3 Mths (no MHC)(6) -0.13 0.41 13.92 13.92 69.15
Actively Traded Companies(29) 1.55 1.54 16.02 15.28 194.05
Market Value Below $20 Million(14) 1.01 0.93 14.03 13.60 148.41
Holding Company Structure(46) 1.43 1.42 15.55 15.10 160.19
Assets Over $1 Billion(16) 1.90 1.88 18.52 17.01 228.91
Assets $500 Million-$1 Billion(19) 1.36 1.35 16.35 15.96 183.19
Assets $250-$500 Million(23) 1.03 1.04 12.99 12.57 140.77
Assets less than $250 Million(17) 1.04 0.99 14.04 13.68 136.84
Goodwill Companies(35) 1.49 1.38 16.44 15.07 211.31
Non-Goodwill Companies(40) 1.10 1.17 14.07 14.07 131.08
</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 ar e 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 av erage 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.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
Shares Market 52 Week (1) % Change From
--------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(18) 15.45 5,020 23.4 18.09 12.89 15.37 0.50 103.10 -7.39
BIF-Insured Thrifts(2) 15.50 21,543 127.3 18.06 13.69 15.56 -0.28 166.84 -3.07
NASDAQ Listed OTC Companies(20) 15.45 6,672 33.8 18.09 12.97 15.39 0.42 124.35 -6.96
Florida Companies(3) 18.00 5,507 45.0 21.50 15.96 17.50 2.58 0.00 -11.68
Mid-Atlantic Companies(8) 13.75 7,697 25.4 16.56 11.97 13.78 -0.36 62.50 -8.98
Mid-West Companies(7) 15.67 1,911 11.3 17.80 12.31 15.64 0.59 143.70 -5.94
New England Companies(1) 21.00 39,813 248.1 23.12 17.75 21.12 -0.57 166.84 10.53
North-West Companies(1) 14.37 2,155 11.3 17.00 11.82 14.37 0.00 0.00 -1.17
Thrift Strategy(18) 15.20 5,082 23.2 17.87 12.76 15.12 0.50 103.10 -8.25
Mortgage Banker Strategy(1) 14.37 2,155 11.3 17.00 11.82 14.37 0.00 0.00 -1.17
Diversified Strategy(1) 21.00 39,813 248.1 23.12 17.75 21.12 -0.57 166.84 10.53
Companies Issuing Dividends(20) 15.45 6,672 33.8 18.09 12.97 15.39 0.42 124.35 -6.96
Equity/Assets less than 6%(1) 14.50 1,610 10.8 17.25 11.00 14.50 0.00 0.00 -8.63
Equity/Assets 6-12%(12) 17.00 8,139 44.4 19.73 14.14 16.97 0.04 124.35 -6.69
Equity/Assets greater than 12%(7) 12.94 4,880 19.1 15.39 11.23 12.80 1.13 0.00 -7.17
Actively Traded Companies(1) 16.25 6,512 32.5 17.50 13.25 15.75 3.17 62.50 -1.52
Market Value Below $20 Million(1) 13.00 1,250 7.3 14.25 10.50 13.00 0.00 0.00 -6.27
Holding Company Structure(1) 16.25 6,512 32.5 17.50 13.25 15.75 3.17 62.50 -1.52
Assets Over $1 Billion(3) 16.04 24,800 108.8 19.04 14.42 16.21 -1.39 166.84 -6.04
Assets $500 Million-$1 Billion(6) 16.21 5,835 37.9 19.42 14.25 15.92 1.61 62.50 -9.23
Assets $250-$500 Million(3) 17.41 2,255 15.3 20.87 13.87 17.67 -1.43 143.70 -7.90
Assets less than $250 Million(8) 13.93 2,159 9.7 15.69 11.12 13.83 0.91 0.00 -5.24
Goodwill Companies(9) 15.76 11,295 53.0 18.50 13.35 15.73 0.28 124.35 -6.39
Non-Goodwill Companies(11) 15.20 2,890 18.2 17.75 12.65 15.10 0.54 0.00 -7.42
MHC Institutions(20) 15.45 6,672 33.8 18.09 12.97 15.39 0.42 124.35 -6.96
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(18) 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(20) 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(8) 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(1) 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(20) 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%(12) 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(3) 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(9) 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(20) 0.88 0.84 13.00 12.77 126.33
</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 a re 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 a verage 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. calc ulations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
Shares Market 52 Week (1) % Change From
--------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 24.75 107,188 2,652.9 27.75 21.00 25.00 -1.00 32.00 -6.60
CAL CalFed Inc. of Los Angeles CA 19.25 49,313 949.3 19.25 13.50 17.37 10.82 -4.66 22.22
CSA Coast Savings Financial of CA 30.75 18,583 571.4 35.12 19.37 30.75 0.00 166.00 -11.18
CFB Commercial Federal Corp. of NE 37.00 15,067 557.5 39.00 30.75 36.12 2.44 902.71 -1.99
DME Dime Savings Bank, FSB of NY* 12.00 98,847 1,186.2 13.75 10.12 12.50 -4.00 19.28 3.27
DSL Downey Financial Corp. of CA 20.50 16,973 347.9 24.05 17.02 21.00 -2.38 19.60 -5.75
FRC First Republic Bancorp of CA* 13.37 7,349 98.3 15.37 11.00 13.62 -1.84 197.11 1.91
FED FirstFed Fin. Corp. of CA 17.37 10,624 184.5 18.50 12.37 17.37 0.00 7.55 23.02
GLN Glendale Fed. Bk, FSB of CA 17.50 44,085 771.5 19.62 12.50 17.25 1.45 7.69 -0.68
GDW Golden West Fin. Corp. of CA 53.87 57,924 3,120.4 56.69 44.37 52.87 1.89 105.69 -2.50
GWF Great Western Fin. Corp. of CA 22.62 137,392 3,107.8 27.12 20.25 21.88 3.38 30.22 -10.84
GPT GreenPoint Fin. Corp. of NY* 30.37 49,924 1,516.2 30.87 23.87 27.50 10.44 N.A. 13.53
SFB Standard Fed. Bancorp of MI 38.50 31,324 1,206.0 43.12 33.62 38.50 0.00 313.53 -2.21
TCB TCF Financial Corp. of MN 34.50 35,924 1,239.4 37.62 24.75 33.37 3.39 420.36 4.17
WES Westcorp Inc. of Orange CA 17.50 25,836 452.1 21.91 14.64 18.12 -3.42 138.74 -0.68
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 12.00 3,278 39.3 12.12 12.00 12.00 0.00 N.A. N.A.
BKC American Bank of Waterbury CT* 25.75 2,286 58.9 27.62 21.62 25.37 1.50 37.33 -5.50
BFD BostonFed Bancorp of MA 11.75 6,590 77.4 12.62 10.00 11.87 -1.01 N.A. 0.00
CFX Cheshire Fin. Corp. of NH* 13.00 7,566 98.4 17.50 12.50 13.00 0.00 9.24 -16.83
CZF Citisave Fin. Corp. of LA 14.12 965 13.6 16.50 12.75 14.50 -2.62 N.A. -4.27
CBK Citizens First Fin.Corp. of IL 9.75 2,818 27.5 10.50 9.62 9.94 -1.91 N.A. N.A.
ESX Essex Bancorp of VA(8) 2.69 1,051 2.8 5.50 1.75 2.62 2.67 -83.94 43.09
FCB Falmouth Co-Op Bank of MA* 10.75 1,455 15.6 11.37 10.25 10.50 2.38 N.A. N.A.
GAF GA Financial Corp. of PA 10.87 8,900 96.7 11.50 10.37 10.75 1.12 N.A. N.A.
KNK Kankakee Bancorp of IL 18.50 1,439 26.6 21.00 18.25 18.87 -1.96 85.00 -1.96
KYF Kentucky First Bancorp of KY 14.87 1,389 20.7 15.25 11.37 15.00 -0.87 N.A. 20.21
NYB New York Bancorp, Inc. of NY 26.87 11,725 315.1 26.87 19.00 25.87 3.87 278.98 19.42
PDB Piedmont Bancorp of NC 12.87 2,645 34.0 13.62 12.00 12.62 1.98 N.A. 2.96
PLE Pinnacle Bank of AL 16.87 890 15.0 19.25 15.50 16.62 1.50 149.93 -6.28
SSB Scotland Bancorp of NC 12.25 1,840 22.5 12.62 11.62 12.12 1.07 N.A. N.A.
SZB SouthFirst Bancshares of AL 12.25 855 10.5 16.00 11.37 12.50 -2.00 N.A. -20.97
SRN Southern Banc Company of AL 12.75 1,455 18.6 13.37 11.37 12.62 1.03 N.A. -0.93
SSM Stone Street Bancorp of NC 16.50 1,825 30.1 18.50 16.25 16.62 -0.72 N.A. N.A.
TSH Teche Holding Company of LA 12.50 4,094 51.2 14.50 12.00 12.87 -2.87 N.A. -9.09
FTF Texarkana Fst. Fin. Corp of AR 15.63 1,984 31.0 16.50 12.50 16.00 -2.31 N.A. 10.69
THR Three Rivers Fin. Corp. of MI 12.75 860 11.0 13.62 11.37 13.12 -2.82 N.A. 4.08
TBK Tolland Bank of CT* 9.87 1,157 11.4 10.25 7.50 9.75 1.23 36.14 3.89
WSB Washington SB, FSB of MD 5.00 4,220 21.1 6.25 3.75 5.63 -11.19 300.00 0.00
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 27.00 666 18.0 32.86 26.00 27.00 0.00 N.A. -7.44
WFSB 1st Washington Bancorp of VA(8) 8.00 9,883 79.1 8.03 5.00 7.94 0.76 100.00 14.29
ALBK ALBANK Fin. Corp. of Albany NY 25.37 13,288 337.1 30.62 22.81 25.62 -0.98 9.12 1.48
AMFC AMB Financial Corp. of IN 10.75 1,124 12.1 11.00 9.75 10.25 4.88 N.A. N.A.
ASBP ASB Financial Corp. of OH 14.25 1,714 24.4 16.50 11.62 15.00 -5.00 N.A. -10.21
ABBK Abington Savings Bank of MA(8)* 15.75 1,884 29.7 18.50 13.75 15.94 -1.19 137.92 -8.70
AADV Advantage Bancorp of WI 33.00 3,449 113.8 34.50 24.60 33.25 -0.75 258.70 9.27
AFCB Affiliated Comm BC, Inc of MA 17.62 5,072 89.4 18.00 16.06 16.75 5.19 N.A. 1.44
ALBC Albion Banc Corp. of Albion NY 16.50 261 4.3 18.75 14.75 14.75 -1.49 26.92 0.00
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Financial Institution Trailing 12 Mo. Book Book
- ---------------------
12 Mo. Core Value/ Value/ Assets
EPS(3) EPS(3) Share Share(4) Share
-------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NYSE Traded Companies
- ---------------------
<S> <C> <C> <C> <C> <C>
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 1.69 1.59 12.64 12.64 289.58
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* 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
- ---------------------
ANA Acadiana Bancshares of LA* -0.27 0.60 16.67 16.67 94.34
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 11.98 10.69 126.66
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 0.59 0.44 4.97 4.97 60.42
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 0.78 0.45 32.89 12.45 123.76
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- ------------------------------------------------
Shares Market 52 Week (1) % Change From
---------------- ------------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- -------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
ATSB AmTrust Capital Corp. of IN 9.00 567 5.1 11.25 8.50 8.56 5.14 N.A. -12.20
AHCI Ambanc Holding Co. of NY* 9.50 5,422 51.5 10.31 9.38 9.50 0.00 N.A. -6.03
ASBI Ameriana Bancorp of IN 13.25 3,325 44.1 14.44 12.19 13.31 -0.45 43.55 -7.02
AFFFZ America First Fin. Fund of CA 26.50 6,011 159.3 29.75 24.50 26.25 0.95 41.33 -10.92
AMFB American Federal Bank of SC 16.25 10,921 177.5 16.75 14.25 15.87 2.39 242.11 6.56
ANBK American Nat'l Bancorp of MD 9.87 3,980 39.3 10.62 8.51 10.50 -6.00 N.A. 1.23
ABCW Anchor Bancorp Wisconsin of WI 35.00 4,934 172.7 36.25 25.90 34.62 1.10 19.17 -2.43
ANDB Andover Bancorp, Inc. of MA* 24.12 4,243 102.3 27.00 19.00 24.75 -2.55 124.37 14.20
ASFC Astoria Financial Corp. of NY 25.75 21,509 553.9 28.13 18.50 26.19 -1.68 -1.90 12.89
AVND Avondale Fin. Corp. of IL 12.75 4,015 51.2 15.25 12.50 12.62 1.03 N.A. -12.07
BFSI BFS Bankorp, Inc. of NY 38.00 1,635 62.1 39.75 26.00 38.25 -0.65 319.43 7.80
BKCT Bancorp Connecticut of CT* 21.25 2,706 57.5 23.50 13.75 22.75 -6.59 142.86 43.68
BPLS Bank Plus Corp. of CA 8.87 18,242 161.8 10.50 5.00 8.88 -0.11 N.A. -1.44
BWFC Bank West Fin. Corp. of MI 11.75 2,296 27.0 11.75 8.75 11.50 2.17 N.A. 16.11
BANC BankAtlantic Bancorp of FL 13.62 11,743 159.9 16.00 12.00 13.25 2.79 161.92 -9.20
BKUNA BankUnited SA of FL 7.50 5,693 42.7 8.75 6.12 7.25 3.45 38.12 22.55
BKCO Bankers Corp. of NJ* 17.50 12,794 223.9 18.78 16.25 17.25 1.45 180.00 7.69
BVFS Bay View Capital Corp. of CA 33.62 6,885 231.5 35.25 24.00 32.50 3.45 70.23 17.96
BFSB Bedford Bancshares of VA 16.50 1,195 19.7 18.75 15.75 16.50 0.00 57.14 -5.01
BSBC Branford SB of CT* 3.00 6,559 19.7 3.50 2.12 3.00 0.00 41.51 4.53
BRFC Bridgeville SB, FSB of PA(8) 15.37 1,124 17.3 15.37 12.25 15.00 2.47 7.86 6.00
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 13.00 17.00 1.47 56.82 -4.17
CCFH CCF Holding Company of GA 11.75 1,131 13.3 12.75 10.75 11.87 -1.01 N.A. -7.84
CENF CENFED Financial Corp. of CA 21.62 5,031 108.8 23.41 17.95 21.62 0.00 37.88 -0.92
CFSB CFSB Bancorp of Lansing MI 21.00 4,467 93.8 24.00 18.64 20.25 3.70 133.33 -2.33
CKFB CKF Bancorp of Danville KY 19.50 932 18.2 20.25 13.25 19.50 0.00 N.A. 1.30
CNSB CNS Bancorp of MO 11.50 1,653 19.0 12.00 11.00 11.50 0.00 N.A. N.A.
CSBF CSB Financial Group Inc of IL 9.25 1,035 9.6 9.62 8.81 9.25 0.00 N.A. -2.63
CFHC California Fin. Hld. Co. of CA 22.31 4,689 104.6 22.75 16.25 22.37 -0.27 112.48 8.83
CBCI Calumet Bancorp of Chicago IL 28.00 2,668 74.7 28.50 26.75 28.00 0.00 38.27 0.90
CAFI Camco Fin. Corp. of OH 18.00 2,070 37.3 19.29 13.81 19.25 -6.49 N.A. 5.02
CMRN Cameron Fin. Corp. of MO 13.62 2,850 38.8 15.50 11.87 13.50 0.89 N.A. -5.22
CAPS Capital Savings Bancorp of MO 18.62 1,039 19.3 19.50 16.50 18.12 2.76 40.53 0.65
CARV Carver FSB of New York, NY 7.75 2,314 17.9 10.75 6.88 8.00 -3.13 24.00 -13.89
CASB Cascade SB of Everett WA 14.12 2,040 28.8 17.25 12.40 16.50 -14.42 10.31 6.17
CATB Catskill Fin. Corp. of NY* 10.00 5,687 56.9 10.75 9.87 10.00 0.00 N.A. N.A.
CNIT Cenit Bancorp of Norfolk VA 32.94 1,606 52.9 40.25 32.50 32.50 1.35 107.43 -10.37
CTBK Center Banks, Inc. of NY* 13.69 932 12.8 15.25 13.50 13.50 1.41 24.45 -2.63
CFCX Center Fin. Corp of CT(8)* 24.28 14,487 351.7 24.31 15.12 24.25 0.12 259.70 38.74
CEBK Central Co-Op. Bank of MA* 16.50 1,933 31.9 17.75 10.75 17.75 -7.04 214.29 10.00
CJFC Central Jersey Fin. Corp of NJ(8) 29.62 2,668 79.0 31.31 21.00 30.00 -1.27 217.81 18.48
CBSB Charter Financial Inc. of IL 11.00 4,974 54.7 12.25 9.54 11.00 0.00 N.A. 1.76
COFI Charter One Financial of OH(8) 34.38 45,115 1,551.1 38.00 25.50 33.62 2.26 96.46 12.28
CVAL Chester Valley Bancorp of PA 19.00 1,580 30.0 20.48 18.12 18.25 4.11 67.70 -1.30
CRCL Circle Financial Corp.of OH(8) 34.00 708 24.1 35.50 25.00 35.00 -2.86 209.09 25.93
CTZN CitFed Bancorp of Dayton OH 37.25 5,686 211.8 39.50 31.00 36.25 2.76 313.89 7.97
CLAS Classic Bancshares of KY 10.87 1,322 14.4 11.75 10.37 10.69 1.68 N.A. -7.49
CMSB Cmnwealth Bancorp of PA 10.12 17,953 182.0 12.39 8.65 10.19 -0.69 N.A. -9.72
CBSA Coastal Bancorp of Houston TX 18.00 4,962 89.3 18.75 15.63 18.50 -2.70 N.A. 2.86
CFCP Coastal Fin. Corp. of SC 19.50 3,427 66.8 19.50 11.84 22.00 -11.36 95.00 54.27
COFD Collective Bancorp Inc. of NJ 24.12 20,374 491.4 28.25 21.75 23.25 3.74 216.54 -4.93
CMSV Commty. Svgs, MHC of FL(47.6) 16.25 4,869 38.7 18.25 14.25 16.00 1.56 N.A. -4.41
CBIN Community Bank Shares of IN 12.75 1,984 25.3 14.75 12.00 12.00 6.25 N.A. -10.53
CBNH Community Bankshares Inc of NH* 18.25 2,423 44.2 19.75 15.75 18.50 -1.35 386.67 -3.29
<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)
- ---------------------------------------
ATSB AmTrust Capital Corp. of IN 0.37 0.08 13.32 13.18 128.87
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 2.21 2.19 26.16 21.28 306.07
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
BPLS Bank Plus Corp. of CA -3.75 -3.91 12.47 12.45 179.78
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
BSBC Branford SB of CT* 0.20 0.20 2.31 2.31 26.59
BRFC Bridgeville SB, FSB of PA(8) 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
CNSB CNS Bancorp of MO 0.45 0.38 14.07 14.07 60.98
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 18.40 18.23 272.46
CBCI Calumet Bancorp of Chicago IL 2.28 2.27 31.99 31.99 188.31
CAFI Camco Fin. Corp. of OH 2.02 1.54 13.83 13.83 166.04
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 0.33 0.33 15.02 14.30 158.88
CASB Cascade SB of Everett WA 0.86 0.45 9.94 9.94 159.93
CATB Catskill Fin. Corp. of NY* 0.47 0.54 13.65 13.65 49.12
CNIT Cenit Bancorp of Norfolk VA 1.57 1.84 29.00 27.92 415.61
CTBK Center Banks, Inc. of NY* 1.27 1.31 16.32 16.32 230.66
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 Bancorp of PA 0.83 0.80 12.41 9.15 119.19
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 17.50 16.25 248.29
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
(continued)
Weekly Thrift Market Line - Part One
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- ------------------------------------------------
Shares Market 52 Week (1) % Change From
---------------- ------------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- -------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
CFTP Community Fed. Bancorp of MS 12.75 4,629 59.0 13.75 12.25 13.00 -1.92 N.A. N.A.
CFFC Community Fin. Corp. of VA 20.75 1,270 26.4 21.00 15.00 19.50 6.41 196.43 15.28
CIBI Community Inv. Corp. of OH 15.00 701 10.5 17.50 13.50 15.00 0.00 N.A. -1.64
COOP Cooperative Bk.for Svgs. of NC 17.50 1,492 26.1 22.50 16.50 16.50 6.06 75.00 -14.63
CNSK Covenant Bank for Svgs. of NJ* 12.00 1,959 23.5 13.22 8.84 12.00 0.00 N.A. -9.23
CRZY Crazy Woman Creek Bncorp of WY 10.25 1,058 10.8 11.00 10.00 10.12 1.28 N.A. N.A.
DNFC D&N Financial Corp. of MI 12.50 7,565 94.6 14.25 10.37 12.62 -0.95 42.86 3.14
DSBC DS Bancor Inc. of Derby CT* 33.50 3,029 101.5 36.50 23.33 34.50 -2.90 103.65 31.37
DFIN Damen Fin. Corp. of Chicago IL 11.75 3,967 46.6 11.94 11.00 11.50 2.17 N.A. 3.34
DIME Dime Community Bancorp of NY 11.97 14,548 174.1 12.12 11.69 11.75 1.87 N.A. N.A.
DIBK Dime Financial Corp. of CT* 14.75 5,024 74.1 15.63 10.37 15.00 -1.67 40.48 9.26
EGLB Eagle BancGroup of IL 11.12 1,303 14.5 11.75 10.50 11.00 1.09 N.A. N.A.
EBSI Eagle Bancshares of Tucker GA 15.00 3,117 46.8 19.00 14.00 14.75 1.69 106.90 -21.05
EGFC Eagle Financial Corp. of CT 24.25 4,491 108.9 27.75 21.25 24.75 -2.02 177.14 -7.62
ETFS East Texas Fin. Serv. of TX 14.75 1,194 17.6 16.75 13.75 14.50 1.72 N.A. -9.23
EBCP Eastern Bancorp of NH 17.00 3,597 61.1 18.33 14.33 16.00 6.25 35.46 -4.66
ESBK Elmira SB of Elmira NY* 16.75 706 11.8 18.75 14.50 18.00 -6.94 16.56 -10.67
EFBI Enterprise Fed. Bancorp of OH 14.00 2,085 29.2 18.00 13.75 14.00 0.00 N.A. -5.08
EQSB Equitable FSB of Wheaton MD 24.00 600 14.4 26.25 21.00 24.00 0.00 N.A. -4.00
FFFG F.F.O. Financial Group of FL 2.75 8,430 23.2 3.00 2.25 2.62 4.96 -66.91 7.42
FCBF FCB Fin. Corp. of Neenah WI 17.25 2,513 43.3 18.50 15.50 17.25 0.00 N.A. -6.76
FFBS FFBS Bancorp of Columbus MS 23.00 1,573 36.2 24.25 16.00 22.50 2.22 N.A. 35.29
FFDF FFD Financial Corp. of OH 10.50 1,455 15.3 10.75 10.00 10.25 2.44 N.A. N.A.
FFLC FFLC Bancorp of Leesburg FL 18.50 2,619 48.5 20.25 17.25 18.00 2.78 N.A. -1.33
FFFC FFVA Financial Corp. of VA 16.75 5,426 90.9 18.25 13.37 17.00 -1.47 N.A. 21.82
FFWC FFW Corporation of Wabash IN 19.25 739 14.2 20.00 16.50 19.25 0.00 N.A. -2.53
FFYF FFY Financial Corp. of OH 24.00 5,193 124.6 24.00 19.75 23.75 1.05 N.A. 14.29
FMCO FMS Financial Corp. of NJ 16.00 2,468 39.5 17.50 14.75 16.25 -1.54 77.78 -5.88
FFHH FSF Financial Corp. of MN 11.87 3,861 45.8 13.50 11.50 11.62 2.15 N.A. -8.69
FMLY Family Bancorp of Haverhill MA(8)* 23.37 4,215 98.5 25.25 14.92 23.87 -2.09 348.56 30.78
FMCT Farmers & Mechanics Bank of CT(8)* 30.37 1,661 50.4 30.37 16.00 30.25 0.40 N.A. 38.05
FOBC Fed One Bancorp of Wheeling WV 14.00 2,558 35.8 16.25 13.25 14.12 -0.85 40.00 -7.41
FFRV Fid. Fin. Bkshrs. Corp. of VA 12.75 2,279 29.1 14.75 12.00 12.75 0.00 45.71 -8.07
FBCI Fidelity Bancorp of Chicago IL 15.50 2,931 45.4 17.00 13.50 15.75 -1.59 N.A. 0.85
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) 12.75 6,720 40.4 17.00 12.00 12.50 2.00 N.A. -21.54
FFED Fidelity Fed. Bancorp of IN 11.75 2,493 29.3 14.77 10.46 11.25 4.44 66.67 -20.45
FFOH Fidelity Financial of OH 9.87 4,074 40.2 10.89 5.61 9.81 0.61 N.A. -9.37
FIBC Financial Bancorp of NY 13.25 1,796 23.8 14.87 12.37 12.37 7.11 N.A. -3.64
FNSC Financial Security Corp. of IL(8) 26.00 1,523 39.6 26.50 17.00 25.37 2.48 160.00 16.85
FSBS First Ashland Fin. Corp. of KY(8) 18.25 1,463 26.7 18.37 13.00 18.25 0.00 N.A. 25.86
FBSI First Bancshares of MO 15.75 1,302 20.5 17.00 15.25 15.63 0.77 23.53 -1.56
FBBC First Bell Bancorp of PA 13.87 8,166 113.3 14.25 11.87 13.37 3.74 N.A. 3.74
FBER First Bergen Bancorp of NJ 9.25 3,174 29.4 10.00 9.00 9.12 1.43 N.A. N.A.
FCIT First Cit. Fin. Corp of MD 16.25 2,914 47.4 19.09 14.09 16.25 0.00 87.00 -5.91
FFBA First Colorado Bancorp of Co 13.50 20,134 271.8 13.62 8.25 13.62 -0.88 309.09 22.84
FDEF First Defiance Fin.Corp. of OH 10.12 10,978 111.1 11.00 8.11 10.12 0.00 N.A. 0.00
FESX First Essex Bancorp of MA* 10.44 6,046 63.1 12.00 8.62 10.25 1.85 74.00 -8.18
FFES First FS&LA of E. Hartford CT 17.25 2,594 44.7 21.50 16.50 17.50 -1.43 165.38 -13.75
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) 24.37 1,706 18.4 28.62 18.00 24.75 -1.54 143.70 -8.90
FFML First Family Bank, FSB of FL 21.00 545 11.4 23.00 14.50 21.00 0.00 223.08 0.00
FFSW First Fed Fin. Serv. of OH 29.50 3,275 96.6 29.50 18.24 29.50 0.00 73.53 36.64
BDJI First Fed. Bancorp. of MN 13.00 819 10.6 14.75 12.00 12.25 6.12 N.A. -5.45
FFBH First Fed. Bancshares of AR 12.94 5,154 66.7 14.00 12.75 13.12 -1.37 N.A. N.A.
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
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
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
DIME Dime Community Bancorp of NY 0.63 0.58 14.17 12.45 83.75
DIBK Dime Financial Corp. of CT* 1.93 2.17 10.63 10.10 133.64
EGLB Eagle BancGroup of IL 0.10 0.10 16.89 16.89 124.84
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 1.40 1.16 17.65 16.62 229.33
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 1.15 1.16 21.42 21.42 126.20
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(8)* 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) 1.42 1.37 25.85 25.85 179.89
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
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued )
Weekly Thrift Market Line - Part One
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
Shares Market 52 Week (1) % Change From
--------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FFEC First Fed. Bancshares of WI 15.12 6,855 103.6 16.19 12.25 14.75 2.51 N.A. -0.85
FTFC First Fed. Capital Corp. of WI 19.75 6,298 124.4 22.87 15.75 19.75 0.00 75.56 9.72
FFKY First Fed. Fin. Corp. of KY 21.50 4,215 90.6 22.00 14.12 20.00 7.50 36.51 39.88
FFBZ First Federal Bancorp of OH 24.50 785 19.2 24.50 16.00 24.50 0.00 145.00 20.99
FFWM First Fin. Corp of Western MD 21.00 2,188 45.9 23.75 17.75 21.12 -0.57 110.00 6.33
FFCH First Fin. Holdings Inc. of SC 18.50 6,366 117.8 22.25 17.50 19.00 -2.63 51.02 -3.90
FFBI First Financial Bancorp of IL 15.50 472 7.3 16.25 15.00 15.50 0.00 N.A. -3.13
FFHC First Financial Corp. of WI 22.12 29,905 661.5 24.00 17.00 22.75 -2.77 40.44 -3.83
FFHS First Franklin Corp. of OH 15.00 1,187 17.8 17.50 13.50 15.50 -3.23 14.33 -5.48
FGHC First Georgia Hold. Corp of GA 6.00 2,024 12.1 7.83 4.17 6.50 -7.69 56.66 -21.77
FSPG First Home SB, SLA of NJ 17.75 2,030 36.0 19.00 15.75 17.75 0.00 195.83 -6.58
FFSL First Independence Corp. of KS 17.87 583 10.4 19.25 15.75 17.75 0.68 N.A. -4.69
FISB First Indiana Corp. of IN 21.62 8,294 179.3 25.19 17.34 22.25 -2.83 60.15 0.75
FKFS First Keystone Fin. Corp of PA 17.00 1,292 22.0 20.87 14.37 17.25 -1.45 N.A. -18.54
FLKY First Lancaster Bncshrs of KY 13.37 959 12.8 13.62 13.12 13.62 -1.84 N.A. N.A.
FLFC First Liberty Fin. Corp. of GA 20.75 3,982 82.6 22.75 17.00 21.00 -1.19 172.31 -2.35
CASH First Midwest Fin. Corp. of IA 21.75 1,790 38.9 24.25 18.25 21.75 0.00 N.A. -7.45
FMBD First Mutual Bancorp of IL 11.69 4,352 50.9 14.75 11.50 12.00 -2.58 N.A. -14.17
FMSB First Mutual SB of Bellevue WA* 12.25 2,447 30.0 16.00 9.28 12.25 0.00 58.06 -9.53
FNGB First Northern Cap. Corp of WI 15.25 4,557 69.5 16.50 13.25 15.25 0.00 4.74 -7.58
FFPB First Palm Beach Bancorp of FL 20.25 5,181 104.9 24.87 19.94 20.25 0.00 N.A. -4.12
FSNJ First SB of NJ, MHC (45.0) 14.00 3,062 19.0 19.50 13.00 14.62 -4.24 N.A. -18.84
FSBC First SB, FSB of Clovis NM 5.50 696 3.8 7.00 5.25 5.50 0.00 -18.52 -18.52
FSLA First SB, SLA MHC of NJ (37.6) 16.25 6,512 32.5 17.50 13.25 15.75 3.17 62.50 -1.52
SOPN First SB, SSB, Moore Co. of NC 17.75 3,744 66.5 20.25 17.00 18.00 -1.39 N.A. -0.34
FWWB First Savings Bancorp of WA* 14.75 10,065 148.5 15.63 12.37 14.50 1.72 N.A. 12.42
SHEN First Shenango Bancorp of PA 20.37 2,308 47.0 22.25 19.00 20.06 1.55 N.A. -0.63
FSFC First So.east Fin. Corp. of SC(8) 9.38 4,101 38.5 20.25 9.12 9.62 -2.49 N.A. -50.63
FSFI First State Fin. Serv. of NJ(8) 12.81 4,025 51.6 14.12 10.00 12.87 -0.47 215.52 -5.95
FFDP FirstFed Bancshares of IL 16.25 3,399 55.2 17.62 12.67 16.37 -0.73 143.99 14.68
FLAG Flag Financial Corp of GA 12.00 2,008 24.1 15.00 11.25 11.50 4.35 22.45 -12.73
FFPC Florida First Bancorp of FL(8) 11.12 3,374 37.5 11.25 6.25 11.00 1.09 491.49 50.88
FFIC Flushing Fin. Corp. of NY* 17.12 7,958 136.2 18.25 14.12 16.87 1.48 N.A. 11.39
FBHC Fort Bend Holding Corp. of TX 17.00 817 13.9 20.25 17.00 17.25 -1.45 N.A. -5.56
FTSB Fort Thomas Fin. Corp. of KY 16.37 1,574 25.8 17.75 11.25 16.37 0.00 N.A. 35.07
FKKY Frankfort First Bancorp of KY 12.00 3,450 41.4 15.87 11.00 12.25 -2.04 N.A. -9.43
GFSB GFS Bancorp of Grinnell IA 20.25 515 10.4 20.75 15.75 20.25 0.00 N.A. 1.25
GUPB GFSB Bancorp of Gallup NM 13.25 949 12.6 15.00 12.87 13.56 -2.29 N.A. -7.02
GWBC Gateway Bancorp of KY 13.50 1,176 15.9 16.25 13.50 13.75 -1.82 N.A. -5.26
GBCI Glacier Bancorp of MT 21.12 3,360 71.0 22.27 16.14 21.25 -0.61 337.27 14.72
GLBK Glendale Co-op. Bank of MA* 16.50 247 4.1 19.00 13.00 16.50 0.00 N.A. -12.00
GFCO Glenway Financial Corp. of OH 19.75 1,091 21.5 24.50 18.50 20.50 -3.66 N.A. -19.39
GTPS Great American Bancorp of IL 13.87 1,850 25.7 15.12 11.87 13.25 4.68 N.A. -4.74
GTFN Great Financial Corp. of KY 26.12 14,653 382.7 27.37 20.00 25.50 2.43 N.A. 11.15
GSBC Great Southern Bancorp of MO 27.00 4,434 119.7 27.75 20.75 27.00 0.00 824.66 9.09
GDVS Greater DV SB,MHC of PA(19.9)* 10.00 3,272 6.5 13.00 9.62 10.00 0.00 N.A. -16.67
GRTR Greater New York SB of NY* 10.50 13,289 139.5 13.31 10.00 10.62 -1.13 12.78 -12.50
GSFC Green Street Fin. Corp. of NC 12.87 4,298 55.3 13.12 12.12 13.00 -1.00 N.A. N.A.
GROV GroveBank for Savings of MA* 29.00 1,542 44.7 31.25 23.25 29.50 -1.69 226.94 17.17
GFED Guaranty FS&LA,MHC of MO(31.1) 11.75 3,125 9.1 12.50 8.00 11.25 4.44 N.A. -1.01
GSLC Guaranty Svgs & Loan FA of VA 7.50 919 6.9 8.50 6.37 7.75 -3.23 N.A. -3.23
HEMT HF Bancorp of Hemet CA 9.25 6,612 61.2 10.25 8.37 9.25 0.00 N.A. -6.28
HFFC HF Financial Corp. of SD(8) 15.25 3,055 46.6 16.75 13.44 15.25 0.00 205.00 0.00
HFNC HFNC Financial Corp. of NC 16.00 17,192 275.1 16.62 13.12 16.00 0.00 N.A. 21.95
HMNF HMN Financial, Inc. of MN 15.25 5,180 79.0 16.50 13.75 15.50 -1.61 N.A. -4.69
<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)
- ---------------------------------------
FFEC First Fed. Bancshares of WI 0.82 0.80 14.04 13.47 98.07
FTFC First Fed. Capital Corp. of WI 1.88 1.38 15.03 14.15 219.45
FFKY First Fed. Fin. Corp. of KY 1.32 1.15 11.69 10.91 83.28
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
FFBI First Financial Bancorp of IL 1.12 1.17 16.66 16.66 187.74
FFHC First Financial Corp. of WI 2.33 2.27 13.29 12.62 181.21
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
FLKY First Lancaster Bncshrs of KY 0.54 0.54 13.47 13.47 45.15
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(8) 0.78 0.77 17.19 17.19 87.66
FSFI First State Fin. Serv. of NJ(8) 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 2.06 1.81 21.51 21.51 298.86
FTSB Fort Thomas Fin. Corp. of KY 0.70 0.70 13.58 13.58 55.88
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 0.42 0.41 17.95 17.95 65.16
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
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
Shares Market 52 Week (1) % Change From
--------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HALL Hallmark Capital Corp. of WI 14.50 1,443 20.9 16.25 13.75 14.75 -1.69 N.A. -6.45
HARB Harbor FSB, MHC of FL (45.7) 25.00 4,933 56.0 29.25 21.62 24.00 4.17 N.A. -9.09
HRBF Harbor Federal Bancorp of MD 12.50 1,754 21.9 15.50 12.50 12.50 0.00 25.00 -13.79
HFSA Hardin Bancorp of Hardin MO 11.75 1,058 12.4 13.00 11.00 11.75 0.00 N.A. -7.84
HARL Harleysville SA of PA 17.50 1,287 22.5 19.75 15.00 17.50 0.00 -1.41 16.67
HARS Harris SB, MHC of PA (23.1) 16.12 11,211 40.3 20.50 15.50 16.00 0.75 N.A. -19.40
HFFB Harrodsburg 1st Fin Bcrp of KY 16.12 2,182 35.2 16.75 12.37 16.75 -3.76 N.A. 7.47
HHFC Harvest Home Fin. Corp. of OH 13.25 895 11.9 13.25 10.25 12.50 6.00 N.A. 8.16
HAVN Haven Bancorp of Woodhaven NY 28.75 4,320 124.2 28.75 18.62 28.00 2.68 N.A. 21.72
HVFD Haverfield Corp. of OH 18.25 1,904 34.7 19.25 12.27 18.00 1.39 17.74 35.19
HTHR Hawthorne Fin. Corp. of CA 7.50 2,599 19.5 9.00 2.25 8.25 -9.09 -72.73 50.00
HSBK Hibernia SB of Quincy MA* 14.25 1,556 22.2 18.00 14.00 14.12 0.92 87.01 -12.31
HBNK Highland Federal Bank of CA 15.00 2,296 34.4 17.00 11.00 15.00 0.00 N.A. -3.23
HIFS Hingham Inst. for Sav. of MA* 14.00 1,297 18.2 14.75 10.75 14.00 0.00 207.02 -5.08
HNFC Hinsdale Financial Corp. of IL 23.75 2,690 63.9 26.75 19.20 23.62 0.55 137.50 10.47
HBFW Home Bancorp of Fort Wayne IN 14.75 3,094 45.6 16.00 12.87 15.31 -3.66 N.A. -3.28
HBBI Home Building Bancorp of IN 20.00 322 6.4 21.25 13.00 20.25 -1.23 N.A. 21.21
HOMF Home Fed Bancorp of Seymour IN 26.25 2,224 58.4 27.25 23.50 26.75 -1.87 75.00 -0.94
HFMD Home Federal Corporation of MD(8) 10.00 2,519 25.2 11.37 6.25 10.25 -2.44 2.56 29.03
HWEN Home Financial Bancorp of IN 10.50 506 5.3 10.50 9.87 10.12 3.75 N.A. N.A.
HOFL Home Financial Corp. of FL(8) 13.12 24,771 325.0 16.25 12.62 13.44 -2.38 162.40 -15.35
HPBC Home Port Bancorp, Inc. of MA* 13.37 1,842 24.6 15.00 11.00 13.50 -0.96 67.12 13.79
HMCI Homecorp, Inc. of Rockford IL 17.12 1,126 19.3 18.50 14.00 17.12 0.00 71.20 3.01
LOAN Horizon Bancorp, Inc of TX* 9.00 1,387 12.5 11.50 7.75 9.75 -7.69 N.A. 0.00
HZFS Horizon Fin'l. Services of IA 14.75 448 6.6 16.37 12.12 14.75 0.00 N.A. -3.28
HRZB Horizon Financial Corp. of WA* 13.48 6,580 88.7 13.75 11.75 12.50 7.84 0.37 3.69
IBSF IBS Financial Corp. of NJ 13.19 11,410 150.5 15.46 12.50 12.94 1.93 N.A. -3.30
ISBF ISB Financial Corp. of LA 14.62 7,381 107.9 17.00 13.62 13.81 5.87 N.A. -2.53
ITLA Imperial Thrift & Loan of CA* 13.12 5,980 78.5 15.25 11.37 12.63 3.88 N.A. 7.10
IFSB Independence FSB of DC 7.37 1,279 9.4 9.25 6.75 7.75 -4.90 268.50 -12.68
INCB Indiana Comm. Bank, SB of IN 13.75 922 12.7 16.75 12.25 13.87 -0.87 N.A. -9.84
IFSL Indiana Federal Corp. of IN 18.75 4,737 88.8 21.50 16.25 19.50 -3.85 148.67 -11.76
INBI Industrial Bancorp of OH 10.50 5,554 58.3 16.00 10.25 10.75 -2.33 N.A. -23.64
IWBK Interwest SB of Oak Harbor WA 24.25 6,434 156.0 25.12 14.25 24.75 -2.02 142.50 19.05
IPSW Ipswich SB of Ipswich MA* 11.25 1,178 13.3 12.62 4.75 11.87 -5.22 N.A. 36.36
IROQ Iroquois Bancorp of Auburn NY* 15.00 2,349 35.2 16.00 12.25 16.00 -6.25 114.29 15.38
JSBF JSB Financial, Inc. of NY 32.87 10,333 339.6 34.87 29.25 32.75 0.37 185.83 3.95
JXVL Jacksonville Bancorp of TX 10.25 2,662 27.3 11.99 7.58 10.12 1.28 N.A. -11.94
JXSB Jcksnville SB,MHC of IL(43.3%) 13.00 1,250 7.3 14.25 10.50 13.00 0.00 N.A. -6.27
JEBC Jefferson Bancorp of Gretna LA(8) 22.12 2,196 48.6 22.50 19.00 22.00 0.55 N.A. 14.91
JSBA Jefferson Svgs Bancorp of MO 23.75 4,182 99.3 30.75 18.75 24.50 -3.06 N.A. -14.41
JOAC Joachim Bancorp of MO 12.37 760 9.4 13.50 11.50 12.44 -0.56 N.A. -8.37
KSAV KS Bancorp of Kenly NC 20.00 663 13.3 22.00 16.50 20.00 0.00 N.A. 14.29
KSBK KSB Bancorp of Kingfield ME* 22.50 374 8.4 22.50 15.50 22.50 0.00 N.A. 16.88
KFBI Klamath First Bancorp of OR 14.00 11,254 157.6 14.62 12.50 14.12 -0.85 N.A. 1.82
LBFI L&B Financial of S. Springs TX(8) 16.50 1,584 26.1 17.00 12.12 16.37 0.79 N.A. 15.79
LSBI LSB Bancorp of Lafayette IN 15.00 965 14.5 17.37 13.75 15.00 0.00 N.A. -13.04
LVSB Lakeview SB of Paterson NJ 19.75 2,266 44.8 20.75 15.68 20.25 -2.47 N.A. 15.84
LARK Landmark Bancshares of KS 15.25 1,951 29.8 15.87 13.00 15.25 0.00 N.A. 10.91
LARL Laurel Capital Group of PA 15.25 1,508 23.0 16.50 14.33 14.75 3.39 19.14 -1.61
LSBX Lawrence Savings Bank of MA* 5.56 4,245 23.6 6.62 4.00 5.34 4.12 61.63 20.35
LFCT Leader Fin. Corp of Memphis TN(8) 43.00 9,924 426.7 46.37 31.25 43.50 -1.15 N.A. 15.07
LFED Leeds FSB, MHC of MD (35.3) 13.37 3,448 16.7 16.75 12.62 13.75 -2.76 N.A. -6.18
LXMO Lexington B&L Fin. Corp. of MO 9.75 1,265 12.3 10.12 9.50 9.87 -1.22 N.A. N.A.
LBCI Liberty Bancorp of Chicago IL 23.50 2,487 58.4 26.87 22.25 24.50 -4.08 135.00 -6.93
<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 0.57 0.57 15.90 15.90 112.18
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
HWEN Home Financial Bancorp of IN 0.75 0.75 14.81 14.81 75.39
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
ITLA Imperial Thrift & Loan of CA* 0.73 0.73 7.54 7.54 83.80
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
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
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
Shares Market 52 Week (1) % Change From
--------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
LIFB Life Bancorp of Norfolk VA 14.12 10,403 146.9 16.62 14.00 14.25 -0.91 N.A. -5.87
LFBI Little Falls Bancorp of NJ 10.25 3,042 31.2 11.50 9.50 10.25 0.00 N.A. N.A.
LOGN Logansport Fin. Corp. of IN 12.50 1,322 16.5 13.75 11.37 13.50 -7.41 N.A. -3.85
LONF London Financial Corp. of OH 10.50 529 5.6 11.25 9.75 10.25 2.44 N.A. N.A.
LISB Long Island Bancorp of NY 29.00 24,859 720.9 32.87 18.75 29.25 -0.85 N.A. 9.97
MAFB MAF Bancorp of IL 23.75 5,244 124.5 26.81 21.36 23.50 1.06 179.41 -5.00
MBLF MBLA Financial Corp. of MO(8) 22.00 1,372 30.2 26.00 15.00 22.50 -2.22 N.A. 13.58
MFBC MFB Corp. of Mishawaka IN 14.00 1,974 27.6 16.25 13.00 14.00 0.00 N.A. -5.08
MLFB MLF Bancorp of Villanova PA 24.50 6,247 153.1 25.00 19.56 24.50 0.00 N.A. 10.11
MSBB MSB Bancorp of Middletown NY* 17.50 2,833 49.6 27.25 15.00 16.50 6.06 75.00 -5.41
MSBF MSB Financial Corp. of MI 17.00 676 11.5 19.50 14.75 17.25 -1.45 N.A. -10.53
MGNL Magna Bancorp of MS 35.00 6,959 243.6 37.25 25.00 35.00 0.00 600.00 21.74
MARN Marion Capital Holdings of IN 20.00 2,003 40.1 21.00 18.75 21.00 -4.76 N.A. 0.00
MFCX Marshalltown Fin. Corp. of IA(8) 15.63 1,411 22.1 16.75 13.75 15.50 0.84 N.A. -0.76
MFSL Maryland Fed. Bancorp of MD 28.75 3,160 90.8 33.25 28.25 29.31 -1.91 173.81 -4.17
MASB MassBank Corp. of Reading MA* 34.25 2,734 93.6 34.50 26.81 32.75 4.58 177.78 7.87
MFLR Mayflower Co-Op. Bank of MA* 14.00 873 12.2 14.75 9.50 14.00 0.00 180.00 27.27
MECH Mechanics SB of Hartford CT* 11.37 5,290 60.1 11.75 11.00 11.25 1.07 N.A. N.A.
MDBK Medford Savings Bank of MA* 21.50 4,530 97.4 24.25 19.50 21.50 0.00 207.14 0.00
MERI Meritrust FSB of Thibodaux LA 31.25 774 24.2 34.00 20.62 31.25 0.00 N.A. 0.81
MWBX Metro West of MA* 3.87 13,882 53.7 4.87 3.50 3.75 3.20 -6.07 -6.07
MSEA Metropolitan Bancorp of WA(8) 16.75 3,710 62.1 16.94 10.12 16.94 -1.12 130.40 28.85
MCBS Mid Continent Bancshares of KS 18.00 2,061 37.1 19.25 15.50 18.00 0.00 N.A. -2.70
MIFC Mid Iowa Financial Corp. of IA 6.19 1,730 10.7 7.87 5.06 6.37 -2.83 23.80 -20.13
MCBN Mid-Coast Bancorp of ME 19.12 229 4.4 20.25 14.52 19.12 0.00 234.85 11.68
MIDC Midconn Bank of Kensington CT* 17.75 1,904 33.8 19.00 13.00 18.37 -3.38 69.05 26.79
MWBI Midwest Bancshares, Inc. of IA 25.50 357 9.1 27.12 23.50 25.75 -0.97 155.00 -0.97
MWFD Midwest Fed. Fin. Corp of WI 15.25 1,633 24.9 16.00 8.75 15.75 -3.17 205.00 41.86
MFFC Milton Fed. Fin. Corp. of OH 12.25 2,301 28.2 17.12 11.75 12.50 -2.00 N.A. -24.62
MIVI Miss. View Hold. Co. of MN 11.50 958 11.0 12.25 9.50 10.75 6.98 N.A. 1.14
MBSP Mitchell Bancorp of NC* 10.62 980 10.4 10.62 10.37 10.50 1.14 N.A. N.A.
MBBC Monterey Bay Bancorp of CA 11.62 3,414 39.7 13.06 9.87 11.75 -1.11 N.A. 0.00
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 13.00 21.00 0.00 N.A. 16.67
MSBK Mutual SB, FSB of Bay City MI 5.75 4,271 24.6 7.37 5.25 6.00 -4.17 -34.29 -4.17
NHTB NH Thrift Bancshares of NH 10.00 1,690 16.9 11.00 9.25 9.87 1.32 116.45 -1.19
NHSL NHS Financial, Inc. of CA(8) 10.75 2,523 27.1 11.00 7.75 10.87 -1.10 37.29 7.50
NSLB NS&L Bancorp of Neosho MO 12.25 888 10.9 13.75 12.00 12.56 -2.47 N.A. -7.55
NMSB Newmil Bancorp. of CT* 7.50 4,179 31.3 7.50 5.75 6.81 10.13 17.74 7.14
NFSL Newnan SB, FSB of Newnan GA 20.00 1,447 28.9 20.00 13.00 19.75 1.27 60.00 15.94
NASB North American SB of MO 29.69 2,276 67.6 32.37 25.00 29.75 -0.20 598.59 -7.22
NBSI North Bancshares of Chicago IL 15.25 1,114 17.0 16.25 13.00 15.25 0.00 N.A. 12.96
FFFD North Central Bancshares of IA 10.75 4,011 43.1 12.68 9.22 10.62 1.22 N.A. 1.90
NEBC Northeast Bancorp of ME* 12.50 1,203 15.0 13.50 10.75 13.50 -7.41 6.38 8.70
NEIB Northeast Indiana Bncrp of IN 12.12 2,062 25.0 13.50 11.25 12.12 0.00 N.A. 1.00
NSBK Northside SB of Bronx NY(8)* 39.50 4,834 190.9 39.50 24.25 35.25 12.06 147.65 29.51
NWEQ Northwest Equity Corp. of WI 10.50 981 10.3 11.37 9.25 10.50 0.00 N.A. -3.40
NWSB Northwest SB, MHC of PA(29.9) 11.00 23,376 38.0 13.50 10.00 11.50 -4.35 N.A. -9.24
NSSY Norwalk Savings Society of CT* 21.25 2,371 50.4 22.25 16.75 21.75 -2.30 N.A. 11.84
NSSB Norwich Financial Corp. of CT* 14.25 5,604 79.9 15.63 11.25 14.50 -1.72 103.57 10.72
NTMG Nutmeg FS&LA of CT 7.25 708 5.1 7.75 5.17 7.25 0.00 N.A. 8.70
OHSL OHSL Financial Corp. of OH 19.50 1,224 23.9 22.00 17.25 19.50 0.00 N.A. -9.30
OSBF OSB Fin. Corp. of Oshkosh WI 23.50 1,141 26.8 24.87 22.75 23.00 2.17 104.35 -1.05
OCFC Ocean Fin. Corp. of NJ 19.62 8,388 164.6 21.25 19.62 20.12 -2.49 N.A. N.A.
OFCP Ottawa Financial Corp. of MI 16.12 5,455 87.9 16.75 13.75 16.25 -0.80 N.A. 3.13
<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)
- ---------------------------------------
LIFB Life Bancorp of Norfolk VA 0.89 0.93 14.74 14.20 115.79
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 0.66 0.65 19.66 19.66 101.77
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* 1.04 0.98 12.42 12.15 129.65
MECH Mechanics SB of Hartford CT* -2.10 0.00 12.94 12.94 136.38
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
MWBX Metro West of MA* 0.41 0.41 2.57 2.57 34.41
MSEA Metropolitan Bancorp of WA(8) 1.39 1.50 13.71 12.41 209.75
MCBS Mid Continent Bancshares of KS 1.75 1.48 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
MBSP Mitchell Bancorp of NC* 0.30 0.29 14.34 14.34 37.03
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
NEBC Northeast Bancorp of ME* 1.08 0.83 13.72 11.53 181.37
NEIB Northeast Indiana Bncrp of IN 0.70 0.70 13.92 13.92 68.43
NSBK Northside SB of Bronx NY(8)* 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
OCFC Ocean Fin. Corp. of NJ 1.27 1.30 26.36 26.36 140.55
OFCP Ottawa Financial Corp. of MI 0.72 0.72 14.92 11.96 136.66
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 (continued)
Weekly Thrift Market Line - Part One
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
Shares Market 52 Week (1) % Change From
--------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ ------- ------- ------- ------ ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
PFFB PFF Bancorp of Pomona CA 10.62 19,837 210.7 11.75 10.37 10.75 -1.21 N.A. N.A.
PVFC PVF Capital Corp. of OH 20.00 1,549 31.0 20.75 13.00 18.00 11.11 199.85 9.59
PCCI Pacific Crest Capital of CA* 8.37 2,960 24.8 9.00 6.75 8.50 -1.53 N.A. 15.45
PALM Palfed, Inc. of Aiken SC 12.37 5,222 64.6 13.50 11.00 12.12 2.06 -19.52 4.21
PSSB Palm Springs SB of CA(8) 13.75 1,131 15.6 14.00 8.00 13.87 -0.87 204.20 57.14
PBCI Pamrapo Bancorp, Inc. of NJ 19.00 3,317 63.0 26.12 18.25 20.00 -5.00 237.48 -11.63
PVSA Parkvale Financial Corp of PA 25.87 3,236 83.7 28.50 21.60 24.50 5.59 212.44 -5.93
PBIX Patriot Bank Corp. of PA 13.12 3,498 45.9 13.12 12.31 13.00 0.92 N.A. 1.94
PEEK Peekskill Fin. Corp. of NY 11.33 4,100 46.5 12.12 11.12 11.87 -4.55 N.A. -6.52
PFSB PennFed Fin. Services of NJ 15.50 5,077 78.7 16.00 13.50 14.94 3.75 N.A. 5.08
PWBC PennFirst Bancorp of PA 14.00 3,996 55.9 14.75 11.87 13.75 1.82 75.44 3.70
PWBK Pennwood SB of PA* 9.12 610 5.6 9.50 9.12 9.50 -4.00 N.A. N.A.
PBKB People's SB of Brockton MA* 9.25 3,340 30.9 10.50 6.88 9.50 -2.63 55.72 -11.90
PFDC Peoples Bancorp of Auburn IN 19.50 2,356 45.9 22.50 18.75 19.50 0.00 11.43 -5.43
PBCT Peoples Bank, MHC of CT(32.3)* 21.00 39,813 248.1 23.12 17.75 21.12 -0.57 166.84 10.53
PHBK Peoples Heritage Fin Grp of ME* 19.56 25,175 492.4 22.75 17.50 19.50 0.31 27.76 -14.02
PBNB Peoples Sav. Fin. Corp. of CT* 21.75 1,915 41.7 22.37 19.00 21.75 0.00 120.36 12.99
PERM Permanent Bancorp of IN 15.87 2,135 33.9 18.50 14.00 15.75 0.76 N.A. -2.34
PMFI Perpetual Midwest Fin. of IA 17.25 2,017 34.8 17.75 14.50 17.00 1.47 N.A. 4.55
PCBC Perry Co. Fin. Corp. of MO 16.25 856 13.9 21.50 15.25 16.25 0.00 N.A. -16.67
PHFC Pittsburgh Home Fin. of PA 9.81 2,182 21.4 11.12 9.50 9.75 0.62 N.A. N.A.
PFSL Pocahnts Fed, MHC of AR (46.4) 14.50 1,610 10.8 17.25 11.00 14.50 0.00 N.A. -8.63
POBS Portsmouth Bank Shrs Inc of NH(8)* 13.00 5,737 74.6 15.20 11.40 13.00 0.00 24.88 -13.74
PKPS Poughkeepsie SB of NY 4.87 12,535 61.0 5.75 4.62 5.06 -3.75 -37.16 -7.24
PRBC Prestige Bancorp of PA 10.12 963 9.7 10.50 9.75 9.87 2.53 N.A. N.A.
PETE Primary Bank of NH* 12.19 1,953 23.8 15.50 11.75 12.12 0.58 N.A. -3.41
PSAB Prime Bancorp, Inc. of PA 18.37 3,725 68.4 20.68 17.27 18.50 -0.70 164.70 -9.28
PFNC Progress Financial Corp. of PA 6.12 3,730 22.8 7.25 5.12 6.25 -2.08 -44.41 8.70
PSBK Progressive Bank, Inc. of NY* 28.75 2,631 75.6 29.75 24.25 28.00 2.68 115.03 -2.54
PROV Provident Fin. Holdings of CA 10.37 5,134 53.2 11.00 10.37 10.50 -1.24 N.A. N.A.
PULB Pulaski SB, MHC of MO (29.0) 13.06 2,094 7.8 16.50 11.75 13.25 -1.43 N.A. -12.93
PULS Pulse Bancorp of S. River NJ 17.62 3,049 53.7 18.00 14.50 17.75 -0.73 42.44 3.65
QCFB QCF Bancorp of Virginia MN 14.87 1,783 26.5 15.25 12.37 15.25 -2.49 N.A. 0.81
QCBC Quaker City Bancorp of CA 13.00 3,928 51.1 14.75 12.37 12.87 1.01 73.33 -6.27
QCSB Queens County SB of NY* 47.25 6,110 288.7 49.00 32.37 47.00 0.53 N.A. 19.44
RCSB RCSB Financial, Inc. of NY* 24.87 12,409 308.6 26.87 21.12 25.75 -3.42 102.03 4.72
RARB Raritan Bancorp. of Raritan NJ* 21.12 1,427 30.1 22.50 20.25 20.50 3.02 116.62 -1.77
REDF RedFed Bancorp of Redlands CA 8.75 4,060 35.5 10.62 7.75 8.50 2.94 N.A. -13.54
RELY Reliance Bancorp of NY 16.00 9,129 146.1 16.50 13.12 16.00 0.00 N.A. 9.44
RELI Reliance Bancshares Inc of WI* 8.25 2,562 21.1 8.50 7.50 8.37 -1.43 N.A. N.A.
RFED Roosevelt Fin. Grp. Inc. of MO 16.62 42,146 700.5 19.75 15.25 17.37 -4.32 326.15 -14.20
RVSB Rvrview SB,FSB MHC of WA(40.3) 14.37 2,155 11.3 17.00 11.82 14.37 0.00 N.A. -1.17
SCCB S. Carolina Comm. Bnshrs of SC 15.50 747 11.6 20.50 15.50 16.00 -3.13 N.A. -14.46
SBFL SB Fing. Lakes MHC of NY(33.0) 16.25 1,785 9.6 16.75 10.37 16.00 1.56 N.A. 0.00
SFED SFS Bancorp of Schenectady NY 12.62 1,395 17.6 13.50 11.12 12.25 3.02 N.A. -2.92
SGVB SGV Bancorp of W. Covina CA 7.75 2,728 21.1 10.12 7.75 8.25 -6.06 N.A. -20.51
SISB SIS Bank of Sprinfield MA* 17.75 5,718 101.5 18.75 13.50 17.62 0.74 N.A. 8.43
SJSB SJS Bancorp of St. Joseph MI 20.75 983 20.4 20.75 15.25 20.70 0.24 N.A. 5.06
SWCB Sandwich Co-Op. Bank of MA* 20.00 1,873 37.5 21.50 16.50 20.25 -1.23 132.02 9.59
SFBM Security Bancorp of MT 20.25 1,462 29.6 21.25 19.87 20.87 -2.97 161.29 -3.57
SECP Security Capital Corp. of WI 59.75 9,536 569.8 62.50 50.25 59.75 0.00 N.A. -0.83
SFSL Security First Corp. of OH 13.75 3,532 48.6 15.75 11.50 13.50 1.85 -12.70 -3.51
SHFC Seven Hills Fin. Corp. of OH(8) 18.12 536 9.7 18.12 14.37 18.12 0.00 20.80 24.97
SMFC Sho-Me Fin. Corp. of MO 16.25 1,821 29.6 16.75 14.50 16.00 1.56 N.A. 8.33
SOBI Sobieski Bancorp of S. Bend IN 11.75 837 9.8 13.25 10.75 12.12 -3.05 N.A. -9.62
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
-------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
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
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
PWBK Pennwood SB of PA* 0.52 0.76 14.83 14.83 78.37
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 0.59 0.58 19.44 19.18 185.43
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
PRBC Prestige Bancorp of PA 0.41 0.41 15.66 15.66 106.41
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 15.43 14.43 163.48
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
PROV Provident Fin. Holdings of CA 0.18 0.50 16.29 16.29 117.23
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* 2.84 2.82 24.17 23.36 331.30
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(8) 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
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 (continued)
Weekly Thrift Market Line - Part One
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
Shares Market 52 Week (1) % Change From
---------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ ------- ------- ------ ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
SOSA Somerset Savings Bank of MA(8)* 1.62 16,652 27.0 1.88 1.12 1.50 8.00 -68.36 18.25
SMBC Southern Missouri Bncrp of MO 14.12 1,724 24.3 17.50 13.50 14.12 0.00 N.A. -5.87
SWBI Southwest Bancshares of IL 27.50 1,794 49.3 28.25 26.00 27.00 1.85 175.00 3.77
SVRN Sovereign Bancorp of PA 10.25 49,573 508.1 11.25 9.05 10.00 2.50 129.31 6.33
STFR St. Francis Cap. Corp. of WI 25.75 5,857 150.8 28.00 20.00 25.50 0.98 N.A. 10.75
SPBC St. Paul Bancorp, Inc. of IL 23.25 17,988 418.2 26.62 22.25 22.62 2.79 37.82 -8.82
STND Standard Fin. of Chicago IL 15.63 16,346 255.5 16.50 13.19 16.12 -3.04 N.A. 6.91
SFFC StateFed Financial Corp. of IA 15.25 823 12.6 19.75 15.25 15.75 -3.17 N.A. -15.84
SFIN Statewide Fin. Corp. of NJ 11.87 5,270 62.6 13.75 11.25 11.25 5.51 N.A. -9.11
STSA Sterling Financial Corp. of WA 13.87 5,426 75.3 15.00 10.23 13.75 0.87 52.59 0.87
SSBK Strongsville SB of OH 21.62 2,531 54.7 21.75 17.50 21.00 2.95 N.A. 10.87
SFSB SuburbFed Fin. Corp. of IL 16.62 1,261 21.0 18.17 16.00 16.75 -0.78 149.18 0.73
SBCN Suburban Bancorp. of OH 15.50 1,481 23.0 18.50 14.25 15.00 3.33 N.A. -16.22
SCSL Suncoast S&LA of Hollywood FL(8) 6.19 1,990 12.3 7.19 5.75 6.25 -0.96 -9.10 -0.96
THRD TF Financial Corp. of PA 14.31 4,523 64.7 16.00 13.87 14.25 0.42 N.A. -6.90
ROSE TR Financial Corp. of NY 27.31 8,948 244.4 27.75 17.37 26.50 3.06 N.A. 7.10
TPNZ Tappan Zee Fin. Corp. of NY 12.00 1,620 19.4 13.00 11.25 11.62 3.27 N.A. -4.91
PTRS The Potters S&L Co. of OH 16.25 533 8.7 18.50 16.00 16.12 0.81 N.A. -4.75
THIR Third Financial Corp. of OH(8) 31.62 1,136 35.9 32.00 18.50 32.00 -1.19 N.A. 20.46
TSBS Trenton SB, FSB MHC of NJ(35.0 13.00 8,912 40.5 15.00 11.37 12.62 3.01 N.A. 0.00
TRIC Tri-County Bancorp of WY 18.00 631 11.4 18.50 13.87 18.00 0.00 N.A. 9.09
THBC Troy Hill Bancorp of PA 13.12 1,068 14.0 14.00 12.00 13.00 0.92 N.A. 0.92
TWIN Twin City Bancorp of TN 16.25 898 14.6 18.25 13.50 16.25 0.00 N.A. -4.41
UFRM United FS&LA of Rocky Mount NC 7.75 3,065 23.8 8.50 6.25 8.25 -6.06 138.46 3.33
UBMT United SB, FA of MT 18.00 1,223 22.0 18.75 17.00 18.00 0.00 71.43 2.86
VABF Va. Beach Fed. Fin. Corp of VA 7.25 4,962 36.0 9.94 6.81 7.00 3.57 54.58 -6.45
VAFD Valley FSB of Sheffield AL(8) 31.00 367 11.4 35.25 24.87 31.00 0.00 195.24 -11.43
VFFC Virginia First Savings of VA 11.25 5,615 63.2 14.25 9.25 11.37 -1.06 992.23 -1.06
WBCI WFS Bancorp of Wichita KS(8) 22.87 1,561 35.7 23.06 19.00 22.87 0.00 N.A. 3.39
WHGB WHG Bancshares of MD 11.06 1,620 17.9 11.75 10.87 11.25 -1.69 N.A. N.A.
WSFS WSFS Financial Corp. of DE* 6.88 14,179 97.6 10.00 6.75 6.88 0.00 -5.10 -23.56
WVFC WVS Financial Corp. of PA* 20.25 1,736 35.2 22.25 16.00 20.50 -1.22 N.A. 5.91
WLDN Walden Bancorp of MA* 18.75 5,320 99.8 20.75 15.75 20.00 -6.25 163.34 -1.32
WRNB Warren Bancorp of Peabody MA* 12.50 3,683 46.0 13.25 8.13 12.50 0.00 270.92 11.11
WFSL Washington FS&LA of Seattle WA 21.12 42,246 892.2 23.46 19.55 21.12 0.00 44.76 -9.36
WAMU Washington Mutual Inc. of WA(8)* 30.12 72,087 2,171.3 32.00 22.75 29.62 1.69 62.28 4.33
WYNE Wayne Bancorp of NJ 11.62 2,231 25.9 11.75 10.75 10.75 8.09 N.A. N.A.
WAYN Wayne S&L Co., MHC of OH(46.7) 19.75 1,492 13.0 22.00 17.14 20.00 -1.25 N.A. -9.86
WCFB Webster CityFSB,MHC of IA(45.2 13.25 2,100 12.6 13.50 9.75 12.75 3.92 N.A. 6.00
WBST Webster Financial Corp. of CT 29.87 8,101 242.0 30.50 23.62 29.00 3.00 216.42 1.25
WEFC Wells Fin. Corp. of Wells MN 11.50 2,188 25.2 11.75 9.06 11.37 1.14 N.A. 4.55
WCBI WestCo Bancorp of IL 22.00 2,678 58.9 22.00 15.17 21.00 4.76 120.00 23.39
WSTR WesterFed Fin. Corp. of MT 13.87 4,396 61.0 17.12 13.87 14.50 -4.34 N.A. -16.55
WOFC Western Ohio Fin. Corp. of OH 19.50 2,309 45.0 24.37 19.50 20.00 -2.50 N.A. -16.13
WWFC Westwood Fin. Corp. of NJ 10.62 647 6.9 11.00 10.25 10.50 1.14 N.A. N.A.
WFCO Winton Financial Corp. of OH(8) 13.00 1,986 25.8 15.00 10.87 13.75 -5.45 N.A. 19.60
FFWD Wood Bancorp of OH 20.00 1,034 20.7 20.25 14.25 19.75 1.27 N.A. 11.11
WCHI Workingmens Cap. Hldgs of IN(8) 20.25 1,798 36.4 20.62 15.50 20.62 -1.79 305.00 15.71
YFCB Yonkers Fin. Corp. of NY 9.50 3,571 33.9 10.12 9.31 9.75 -2.56 N.A. N.A.
YFED York Financial Corp. of PA 16.25 6,050 98.3 18.86 15.11 16.75 -2.99 71.96 -3.68
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
-------- ------ ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
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 2.37 2.36 23.38 23.38 194.84
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
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(8) 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 1.90 1.82 14.16 13.47 116.67
WAMU Washington Mutual Inc. of WA(8)* 2.62 2.61 19.33 17.19 310.31
WYNE Wayne Bancorp of NJ 0.54 0.65 16.17 16.17 96.07
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
WWFC Westwood Fin. Corp. of NJ 0.99 0.99 14.61 12.51 136.46
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
Exhibit IV-1
Weekly Thrift Market Line - Part Two
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
Key Financial Ratios
__________________________________________________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
_____________________ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHCs)
______________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(331) 13.39 13.19 0.86 7.88 7.00 0.80 7.17
NYSE Traded Companies(12) 6.30 5.95 0.70 11.73 8.12 0.58 9.65
AMEX Traded Companies(17) 18.41 18.32 0.83 6.71 5.54 0.80 6.35
NASDAQ Listed OTC Companies(302) 13.41 13.21 0.87 7.78 7.03 0.81 7.10
California Companies(27) 7.84 7.71 0.23 3.37 3.75 0.18 2.40
Florida Companies(9) 8.45 8.24 0.81 12.89 9.44 0.68 10.24
Mid-Atlantic Companies(68) 11.94 11.56 0.84 8.68 7.90 0.82 8.34
Mid-West Companies(152) 14.87 14.74 0.94 7.76 6.94 0.87 7.02
New England Companies(9) 8.08 7.66 0.63 8.69 8.42 0.53 7.21
North-West Companies(6) 11.43 11.11 1.01 10.28 6.99 0.93 9.05
South-East Companies(45) 15.60 15.43 1.02 8.76 6.95 0.97 8.15
South-West Companies(7) 12.44 12.33 0.72 7.26 8.31 0.68 6.75
Western Companies (Excl CA)(8) 17.09 16.91 1.04 7.61 6.46 0.99 7.17
Thrift Strategy(254) 14.93 14.75 0.87 6.99 6.40 0.83 6.56
Mortgage Banker Strategy(41) 7.88 7.52 0.83 11.50 9.21 0.66 8.77
Real Estate Strategy(17) 9.07 8.96 0.68 7.13 9.07 0.70 7.22
Diversified Strategy(15) 7.96 7.77 0.97 12.93 8.20 0.92 12.64
Retail Banking Strategy(4) 9.43 9.18 0.73 9.92 10.37 0.58 7.67
Companies Issuing Dividends(250) 13.59 13.37 0.95 8.66 7.47 0.89 7.88
Companies Without Dividends(81) 12.77 12.62 0.57 5.44 5.50 0.54 4.94
Equity/Assets (less than) 6%(29) 5.06 4.79 0.52 10.63 7.27 0.44 8.93
Equity/Assets 6-12%(150) 8.61 8.28 0.82 9.89 8.61 0.74 8.75
Equity/Assets >12%(152) 19.55 19.48 0.96 5.43 5.40 0.94 5.31
Converted Last 3 Mths (no MHC)(15) 17.91 17.49 0.73 4.12 5.44 0.75 4.28
Actively Traded Companies(53) 8.62 8.35 0.92 11.36 8.49 0.88 10.63
Market Value Below $20 Million(85) 15.81 15.75 0.82 6.50 6.75 0.75 5.49
Holding Company Structure(284) 13.96 13.76 0.85 7.44 6.71 0.80 6.82
Assets Over $1 Billion(65) 8.38 7.87 0.78 10.04 8.24 0.72 9.09
Assets $500 Million-$1 Billion(57) 11.53 11.31 0.84 8.57 6.97 0.81 8.00
Assets $250-$500 Million(78) 11.54 11.34 0.84 8.38 7.58 0.75 7.18
Assets less than $250 Million(131) 17.93 17.90 0.91 6.15 6.03 0.87 5.77
Goodwill Companies(137) 9.42 8.93 0.80 9.18 7.74 0.72 8.20
Non-Goodwill Companies(194) 16.22 16.22 0.90 6.96 6.47 0.86 6.44
Acquirors of FSLIC Cases(14) 7.06 6.69 0.88 12.91 10.11 0.85 12.17
<CAPTION>
Asset Quality Ratios Pricing Ratios
_______________________ ______________________________________
Financial Institution Price/ Price/
--------------------- NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Market Averages. SAIF-Insured Thrifts(no MHCs) Assets NPAs Loans Earning Book Assets Book Earnings
______________________________________________ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(331) 0.98 124.83 0.88 14.13 101.42 12.80 104.65 14.99
NYSE Traded Companies(12) 1.55 70.12 1.34 12.61 132.92 8.51 140.99 15.21
AMEX Traded Companies(17) 0.61 132.94 0.70 15.86 92.95 16.13 93.63 16.19
NASDAQ Listed OTC Companies(302) 0.98 126.78 0.87 14.12 100.53 12.79 103.70 14.93
California Companies(27) 2.49 51.50 1.37 13.42 96.10 7.17 98.53 16.29
Florida Companies(9) 1.29 102.87 1.27 11.92 108.49 8.73 111.57 13.74
Mid-Atlantic Companies(68) 1.20 83.72 1.06 13.38 98.43 11.07 103.74 14.09
Mid-West Companies(152) 0.61 163.08 0.70 14.73 100.94 14.08 103.02 15.54
New England Companies(9) 1.35 48.97 1.09 11.62 95.29 7.54 104.92 13.26
North-West Companies(6) 0.93 78.60 0.66 15.11 134.20 13.88 142.65 15.23
South-East Companies(45) 1.01 121.75 0.87 14.28 110.59 16.05 113.14 14.64
South-West Companies(7) 0.92 42.73 0.86 13.29 79.53 9.69 83.25 14.20
Western Companies (Excl CA)(8) 0.26 212.29 0.67 14.96 101.49 16.05 103.57 15.86
Thrift Strategy(254) 0.85 133.19 0.80 14.94 96.44 13.76 98.84 15.53
Mortgage Banker Strategy(41) 1.37 78.73 0.96 11.06 115.60 9.06 124.09 13.09
Real Estate Strategy(17) 2.02 82.89 1.62 12.73 105.03 9.28 106.19 12.97
Diversified Strategy(15) 1.02 155.33 1.26 11.99 145.97 11.50 150.68 13.34
Retail Banking Strategy(4) 1.77 45.07 0.91 11.97 87.71 8.19 90.46 15.54
Companies Issuing Dividends(250) 0.80 137.06 0.83 13.98 105.80 13.49 109.46 14.85
Companies Without Dividends(81) 1.51 88.90 1.02 14.75 87.74 10.65 89.60 15.56
Equity/Assets (less than)6%(29) 1.91 81.60 1.08 10.93 118.41 6.01 127.66 12.69
Equity/Assets 6-12%(150) 1.14 119.11 1.03 12.45 110.66 9.41 115.53 13.37
Equity/Assets >12%(152) 0.65 138.80 0.70 16.77 89.34 17.33 89.88 17.28
Converted Last 3 Mths (no MHC)(15) 1.01 128.50 0.72 17.06 75.07 13.65 78.60 17.00
Actively Traded Companies(53) 1.48 93.10 1.01 11.58 123.38 10.44 130.24 12.22
Market Value Below $20 Million(85) 0.89 113.56 0.71 15.17 85.23 13.27 85.83 15.80
Holding Company Structure(284) 0.93 125.93 0.85 14.56 100.67 13.23 103.92 15.28
Assets Over $1 Billion(65) 1.25 109.10 1.06 12.27 121.53 9.85 131.54 13.51
Assets $500 Million-$1 Billion(57) 1.37 122.84 1.01 13.58 103.74 11.64 107.12 14.61
Assets $250-$500 Million(78) 0.92 136.60 0.91 13.39 101.71 11.29 103.61 14.55
Assets less than $250 Million(131) 0.73 126.22 0.71 15.98 89.64 15.74 90.00 16.37
Goodwill Companies(137) 1.20 104.21 0.97 12.81 110.79 10.15 118.57 13.95
Non-Goodwill Companies(194) 0.84 138.39 0.82 15.18 94.76 14.68 94.76 15.81
Acquirors of FSLIC Cases(14) 1.52 54.53 0.93 10.58 126.83 8.86 134.21 12.25
<CAPTION>
Dividend Data(6)
_____________________
Financial Institution Ind. Divi-
--------------------- Div./ dend Payout
Market Averages. SAIF-Insured Thrifts(no MHCs) Share Yield Ratio(7)
______________________________________________ _______ _______ _______
($) (%) (%)
<S> <C> <C> <C>
SAIF-Insured Thrifts(331) 0.34 1.95 26.92
NYSE Traded Companies(12) 0.42 1.54 16.50
AMEX Traded Companies(17) 0.37 2.54 29.54
NASDAQ Listed OTC Companies(302) 0.34 1.93 27.32
California Companies(27) 0.26 1.10 18.10
Florida Companies(9) 0.19 1.04 12.96
Mid-Atlantic Companies(68) 0.31 1.74 21.73
Mid-West Companies(152) 0.35 1.98 27.99
New England Companies(9) 0.49 2.75 33.12
North-West Companies(6) 0.34 1.67 22.59
South-East Companies(45) 0.41 2.50 35.04
South-West Companies(7) 0.30 2.19 21.99
Western Companies (Excl CA)(8) 0.47 2.82 45.13
Thrift Strategy(254) 0.34 2.03 29.44
Mortgage Banker Strategy(41) 0.36 1.70 18.31
Real Estate Strategy(17) 0.17 0.84 9.57
Diversified Strategy(15) 0.61 2.54 28.67
Retail Banking Strategy(4) 0.14 1.38 18.06
Companies Issuing Dividends(250) 0.45 2.56 35.40
Companies Without Dividends(81) 0.01 0.05 1.48
Equity/Assets (less than)6%(29) 0.25 1.28 14.54
Equity/Assets 6-12%(150) 0.38 1.91 23.38
Equity/Assets >12%(152) 0.33 2.12 33.21
Converted Last 3 Mths (no MHC)(15) 0.02 0.16 2.01
Actively Traded Companies(53) 0.52 2.27 26.62
Market Value Below $20 Million(85) 0.26 1.77 26.11
Holding Company Structure(284) 0.35 1.99 28.00
Assets Over $1 Billion(65) 0.48 1.99 23.96
Assets $500 Million-$1 Billion(57) 0.29 1.61 22.88
Assets $250-$500 Million(78) 0.34 2.08 26.64
Assets less than $250 Million(131) 0.30 2.01 30.77
Goodwill Companies(137) 0.40 1.98 25.45
Non-Goodwill Companies(194) 0.30 1.93 28.03
Acquirors of FSLIC Cases(14) 0.43 2.08 21.26
</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
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
Key Financial Ratios
__________________________________________________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
_____________________ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
_____________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(75) 11.15 10.86 0.87 9.94 8.01 0.87 9.57
NYSE Traded Companies(3) 7.10 5.57 0.46 5.41 4.99 0.52 6.34
AMEX Traded Companies(5) 13.30 12.95 0.54 6.29 5.62 0.55 5.20
NASDAQ Listed OTC Companies(67) 11.18 10.96 0.92 10.48 8.36 0.91 10.11
California Companies(3) 7.52 7.51 0.71 10.90 6.43 0.64 9.56
Mid-Atlantic Companies(20) 11.12 10.82 0.82 9.47 7.98 0.82 8.92
Mid-West Companies(1) 56.23 56.23 1.47 2.62 3.52 1.47 2.62
New England Companies(44) 9.04 8.69 0.88 10.50 8.53 0.87 10.21
North-West Companies(4) 16.21 16.21 1.19 11.16 7.86 1.18 11.03
South-East Companies(2) 28.20 28.20 0.26 0.24 0.29 0.71 2.81
South-West Companies(1) 8.65 8.35 1.54 17.77 13.78 1.20 13.90
Thrift Strategy(47) 12.90 12.58 0.84 8.66 7.22 0.88 8.78
Mortgage Banker Strategy(11) 7.24 6.88 0.76 10.13 8.64 0.75 10.11
Real Estate Strategy(8) 9.52 9.48 1.19 13.80 9.53 1.09 12.31
Diversified Strategy(7) 7.00 6.75 1.21 19.14 14.47 1.00 15.23
Retail Banking Strategy(2) 6.32 6.16 0.05 0.82 1.04 0.05 0.86
Companies Issuing Dividends(48) 9.33 8.93 1.02 11.49 9.35 0.98 10.95
Companies Without Dividends(27) 14.22 14.11 0.62 7.34 5.75 0.68 7.26
Equity/Assets (less than)6%(8) 5.38 5.31 0.74 14.03 10.10 0.58 10.93
Equity/Assets 6-12%(53) 8.39 8.00 0.89 10.92 8.81 0.88 10.64
Equity/Assets >12%(14) 24.01 24.01 0.84 4.44 4.10 0.95 5.01
Converted Last 3 Mths (no MHC)(6) 28.14 28.14 0.35 -1.03 -0.66 0.83 2.89
Actively Traded Companies(29) 8.59 8.20 0.90 10.57 8.89 0.89 10.46
Market Value Below $20 Million(14) 12.56 12.36 0.79 8.71 8.04 0.74 7.92
Holding Company Structure(46) 12.54 12.30 1.01 10.96 8.87 0.99 10.39
Assets Over $1 Billion(16) 8.17 7.57 0.98 12.61 9.90 0.94 11.59
Assets $500 Million-$1 Billion(19) 10.09 9.84 0.77 9.12 6.55 0.79 9.16
Assets $250-$500 Million(23) 10.52 10.31 0.84 9.92 7.97 0.87 9.83
Assets less than $250 Million(17) 15.20 15.04 0.92 8.70 7.99 0.88 8.11
Goodwill Companies(35) 7.99 7.35 0.82 10.52 8.67 0.74 9.32
Non-Goodwill Companies(40) 13.72 13.72 0.91 9.47 7.48 0.97 9.78
<CAPTION>
Asset Quality Ratios Pricing Ratios
_______________________ ______________________________________
Financial Institution Price/ Price/
--------------------- NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Market Averages. SAIF-Insured Thrifts(no MHCs) Assets NPAs Loans Earning Book Assets Book Earnings
______________________________________________ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(75) 1.82 87.63 1.49 11.42 107.91 11.19 112.11 11.89
NYSE Traded Companies(3) 2.75 31.12 1.32 16.30 104.15 7.37 130.85 13.61
AMEX Traded Companies(5) 2.73 51.78 1.37 10.95 93.99 11.48 98.88 15.24
NASDAQ Listed OTC Companies(67) 1.73 92.23 1.50 11.25 109.28 11.36 112.28 11.62
California Companies(3) 2.72 42.73 1.58 13.49 123.80 9.76 123.84 14.57
Mid-Atlantic Companies(20) 2.16 74.30 1.47 12.99 104.34 10.83 109.45 12.05
Mid-West Companies(1) 0.00 0.00 0.49 0.00 74.59 41.94 74.59 0.00
New England Companies(44) 1.74 84.08 1.60 10.74 110.81 9.74 115.57 11.58
North-West Companies(4) 0.21 321.71 0.92 10.35 110.14 17.06 110.14 10.41
South-East Companies(2) 1.25 59.08 0.93 0.00 73.02 20.70 73.02 20.00
South-West Companies(1) 0.42 127.82 0.78 7.26 113.78 9.84 117.80 9.28
Thrift Strategy(47) 1.82 80.50 1.45 11.89 104.47 12.26 109.20 12.35
Mortgage Banker Strategy(11) 1.23 124.29 1.20 11.26 108.69 7.87 113.59 11.16
Real Estate Strategy(8) 1.57 95.74 1.62 11.60 129.18 12.52 129.75 12.56
Diversified Strategy(7) 3.07 90.05 2.21 8.09 114.18 8.01 118.46 8.94
Retail Banking Strategy(2) 1.31 68.51 1.24 0.00 89.87 5.68 92.03 0.00
Companies Issuing Dividends(48) 1.20 109.04 1.39 10.82 113.54 10.51 119.41 11.18
Companies Without Dividends(27) 2.94 49.32 1.64 12.86 98.43 12.33 99.85 13.48
Equity/Assets (less than)6%(8) 3.69 44.18 1.81 11.58 115.11 6.16 116.75 12.18
Equity/Assets 6-12%(53) 1.64 89.55 1.52 10.86 113.21 9.50 118.88 11.36
Equity/Assets >12%(14) 1.57 105.20 1.23 15.34 84.99 19.74 84.99 14.97
Converted Last 3 Mths (no MHC)(6) 2.86 46.49 1.39 19.41 73.88 20.61 73.88 16.84
Actively Traded Companies(29) 1.34 88.49 1.53 11.26 110.53 9.48 115.73 11.44
Market Value Below $20 Million(14) 1.85 69.39 1.32 11.36 95.03 10.81 97.90 12.08
Holding Company Structure(46) 1.39 99.43 1.53 10.88 107.20 12.47 110.50 11.42
Assets Over $1 Billion(16) 2.43 63.81 1.59 11.12 114.17 9.48 124.15 10.81
Assets $500 Million-$1 Billion(19) 1.60 108.15 1.62 11.70 115.48 11.30 119.07 12.75
Assets $250-$500 Million(23) 1.75 82.92 1.47 11.56 107.86 10.61 110.46 12.16
Assets less than $250 Million(17) 1.61 92.63 1.30 11.22 96.05 13.10 98.41 11.73
Goodwill Companies(35) 1.62 78.89 1.41 11.59 109.26 8.72 118.66 12.22
Non-Goodwill Companies(40) 1.99 94.87 1.55 11.26 106.81 13.19 106.81 11.62
<CAPTION>
Dividend Data(6)
_____________________
Financial Institution Ind. Divi-
--------------------- Div./ dend Payout
Market Averages. SAIF-Insured Thrifts(no MHCs) Share Yield Ratio(7)
______________________________________________ _______ _______ _______
($) (%) (%)
<S> <C> <C> <C>
BIF-Insured Thrifts(75) 0.33 1.77 20.52
NYSE Traded Companies(3) 0.27 0.88 13.14
AMEX Traded Companies(5) 0.27 1.06 16.83
NASDAQ Listed OTC Companies(67) 0.34 1.88 21.21
California Companies(3) 0.00 0.00 0.00
Mid-Atlantic Companies(20) 0.36 1.57 19.47
Mid-West Companies(1) 0.00 0.00 0.00
New England Companies(44) 0.38 2.14 23.43
North-West Companies(4) 0.27 1.99 29.30
South-East Companies(2) 0.00 0.00 0.00
South-West Companies(1) 0.16 1.78 12.90
Thrift Strategy(47) 0.35 1.89 23.35
Mortgage Banker Strategy(11) 0.30 1.53 16.52
Real Estate Strategy(8) 0.32 1.44 14.29
Diversified Strategy(7) 0.23 1.61 13.86
Retail Banking Strategy(2) 0.32 1.91 0.00
Companies Issuing Dividends(48) 0.53 2.83 31.30
Companies Without Dividends(27) 0.00 0.00 0.00
Equity/Assets (less than)6%(8) 0.05 0.50 6.31
Equity/Assets 6-12%(53) 0.41 2.22 24.46
Equity/Assets >12%(14) 0.18 0.70 12.53
Converted Last 3 Mths (no MHC)(6) 0.00 0.00 0.00
Actively Traded Companies(29) 0.45 2.44 25.58
Market Value Below $20 Million(14) 0.18 1.29 11.30
Holding Company Structure(46) 0.37 1.95 22.97
Assets Over $1 Billion(16) 0.42 1.63 18.69
Assets $500 Million-$1 Billion(19) 0.42 2.09 26.21
Assets $250-$500 Million(23) 0.30 1.89 23.89
Assets less than $250 Million(17) 0.21 1.44 13.11
Goodwill Companies(35) 0.44 2.29 27.10
Non-Goodwill Companies(40) 0.24 1.36 15.30
</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
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
Key Financial Ratios
__________________________________________________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
_____________________ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%)
Market Averages. MHC Institutions
_________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(18) 11.89 11.67 0.78 6.84 5.38 0.73 6.57
BIF-Insured Thrifts(2) 10.14 10.14 0.80 9.31 6.27 0.69 7.88
NASDAQ Listed OTC Companies(20) 11.72 11.52 0.78 7.09 5.47 0.73 6.70
Florida Companies(3) 10.30 10.26 0.89 8.83 6.81 0.86 8.60
Mid-Atlantic Companies(8) 12.45 12.12 0.68 5.25 4.20 0.68 5.55
Mid-West Companies(7) 12.13 12.12 0.74 6.66 5.43 0.64 5.90
New England Companies(1) 8.00 8.00 1.11 14.66 9.05 0.89 11.81
North-West Companies(1) 11.02 9.75 1.30 11.97 8.42 1.17 10.78
Thrift Strategy(18) 11.97 11.81 0.74 6.39 5.11 0.70 6.19
Mortgage Banker Strategy(1) 11.02 9.75 1.30 11.97 8.42 1.17 10.78
Diversified Strategy(1) 8.00 8.00 1.11 14.66 9.05 0.89 11.81
Companies Issuing Dividends(20) 11.72 11.52 0.78 7.09 5.47 0.73 6.70
Equity/Assets (less than)6%(1) 5.95 5.95 0.56 9.43 8.48 0.58 9.66
Equity/Assets 6-12%(12) 9.93 9.69 0.68 7.17 5.39 0.68 7.14
Equity/Assets >12%(7) 15.61 15.44 1.00 6.61 5.19 0.83 5.53
Actively Traded Companies(1) 9.49 8.24 0.86 9.52 7.63 0.83 9.13
Market Value Below $20 Million(1) 11.79 11.79 0.43 3.82 3.69 0.35 3.10
Holding Company Structure(1) 9.49 8.24 0.86 9.52 7.63 0.83 9.13
Assets Over $1 Billion(3) 10.25 9.95 0.95 9.86 6.74 0.87 8.88
Assets $500 Million-$1 Billion(6) 11.26 10.96 0.90 7.95 6.12 0.83 7.78
Assets $250-$500 Million(3) 10.24 10.22 0.74 7.85 6.99 0.73 7.72
Assets less than $250 Million(8) 13.17 13.01 0.65 5.11 3.95 0.60 4.70
Goodwill Companies(9) 11.19 10.75 0.95 8.90 6.71 0.82 7.79
Non-Goodwill Companies(11) 12.15 12.15 0.65 5.60 4.46 0.66 5.82
MHC Institutions(20) 11.72 11.52 0.78 7.09 5.47 0.73 6.70
<CAPTION>
Asset Quality Ratios Pricing Ratios
_______________________ ______________________________________
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Assets NPAs Loans Earning Book Assets Book Earnings
Financial Institution _______ _______ _______ _______ _______ _______ _______ _______
--------------------- (%) (%) (%) (X) (%) (%) (%) (x)
Market Averages. MHC Institutions
---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(18) 0.69 84.03 0.82 15.92 118.97 14.26 121.71 16.97
BIF-Insured Thrifts(2) 2.21 48.00 1.42 11.05 130.80 12.88 130.80 13.73
NASDAQ Listed OTC Companies(20) 0.84 80.03 0.88 15.60 120.15 14.12 122.62 16.75
Florida Companies(3) 0.73 105.60 0.96 15.17 120.19 12.18 120.60 15.79
Mid-Atlantic Companies(8) 1.10 51.96 0.90 15.96 116.24 14.55 120.01 18.01
Mid-West Companies(7) 0.59 94.58 0.76 17.15 118.52 14.68 118.61 17.25
New England Companies(1) 1.37 73.39 1.66 11.05 148.73 11.89 148.73 13.73
North-West Companies(1) 0.26 119.16 0.51 11.88 134.17 14.78 151.58 13.18
Thrift Strategy(18) 0.84 78.00 0.86 16.24 117.79 14.21 119.56 17.26
Mortgage Banker Strategy(1) 0.26 119.16 0.51 11.88 134.17 14.78 151.58 13.18
Diversified Strategy(1) 1.37 73.39 1.66 11.05 148.73 11.89 148.73 13.73
Companies Issuing Dividends(20) 0.84 80.03 0.88 15.60 120.15 14.12 122.62 16.75
Equity/Assets (less than)6%(1) 0.26 146.44 1.14 11.79 106.30 6.32 106.30 11.51
Equity/Assets 6-12%(12) 0.87 88.36 0.91 14.72 121.39 12.04 124.61 16.28
Equity/Assets >12%(7) 0.87 46.77 0.79 17.95 120.01 18.80 121.55 19.26
Actively Traded Companies(1) 0.96 55.11 1.08 13.10 116.24 11.03 133.86 13.66
Market Value Below $20 Million(1) 0.52 90.42 0.60 0.00 96.94 11.43 96.94 0.00
Holding Company Structure(1) 0.96 55.11 1.08 13.10 116.24 11.03 133.86 13.66
Assets Over $1 Billion(3) 1.03 70.23 1.17 16.07 134.96 13.63 138.23 17.06
Assets $500 Million-$1 Billion(6) 0.76 81.87 0.97 14.20 112.21 12.72 115.80 16.80
Assets $250-$500 Million(3) 0.15 187.85 0.64 14.66 108.40 11.04 108.59 15.00
Assets less than $250 Million(8) 1.09 51.85 0.80 17.70 124.97 16.50 127.14 18.10
Goodwill Companies(9) 0.65 94.73 0.80 14.76 120.94 13.42 126.43 16.46
Non-Goodwill Companies(11) 0.99 65.33 0.95 16.56 119.51 14.69 119.51 17.08
MHC Institutions(20) 0.84 80.03 0.88 15.60 120.15 14.12 122.62 16.75
<CAPTION>
Dividend Data(6)
_____________________
Financial Institution Ind. Divi-
--------------------- Div./ dend Payout
Share Yield Ratio(7)
Market Averages. MHC Institutions _______ _______ _______
--------------------------------- ($) (%) (%)
<S> <C> <C> <C>
SAIF-Insured Thrifts(18) 0.61 3.99 41.45
BIF-Insured Thrifts(2) 0.58 3.70 42.11
NASDAQ Listed OTC Companies(20) 0.61 3.96 41.53
Florida Companies(3) 0.87 4.81 55.81
Mid-Atlantic Companies(8) 0.44 3.24 35.56
Mid-West Companies(7) 0.72 4.80 54.74
New England Companies(1) 0.80 3.81 42.11
North-West Companies(1) 0.22 1.53 18.18
Thrift Strategy(18) 0.62 4.11 45.33
Mortgage Banker Strategy(1) 0.22 1.53 18.18
Diversified Strategy(1) 0.80 3.81 42.11
Companies Issuing Dividends(20) 0.61 3.96 41.53
Equity/Assets (less than)6%(1) 0.80 5.52 65.04
Equity/Assets 6-12%(12) 0.60 3.46 38.98
Equity/Assets >12%(7) 0.60 4.61 33.33
Actively Traded Companies(1) 0.40 2.46 32.26
Market Value Below $20 Million(1) 0.40 3.08 0.00
Holding Company Structure(1) 0.40 2.46 32.26
Assets Over $1 Billion(3) 0.56 3.38 41.60
Assets $500 Million-$1 Billion(6) 0.64 3.86 40.47
Assets $250-$500 Million(3) 0.72 4.42 54.74
Assets less than $250 Million(8) 0.56 4.09 18.18
Goodwill Companies(9) 0.49 3.06 35.24
Non-Goodwill Companies(11) 0.71 4.70 60.43
MHC Institutions(20) 0.61 3.96 41.53
</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
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
Key Financial Ratios
__________________________________________________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
_____________________ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%)
NYSE Traded Companies
_____________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA 4.61 4.32 0.80 17.30 14.75 0.10 2.09
CAL CalFed Inc. of Los Angeles CA 4.36 4.36 0.58 13.97 8.78 0.55 13.14
CSA Coast Savings Financial of CA 5.16 5.08 0.46 9.62 6.80 0.40 8.33
CFB Commercial Federal Corp. of NE 6.05 5.43 0.84 15.46 9.38 0.84 15.37
DME Dime Savings Bank, FSB of NY* 5.08 5.03 0.34 6.97 5.67 0.46 9.54
DSL Downey Financial Corp. of CA 8.33 8.18 0.61 7.57 8.20 0.53 6.62
FRC First Republic Bancorp of CA* 5.65 5.64 0.14 2.38 2.62 0.13 2.31
FED FirstFed Fin. Corp. of CA 4.69 4.61 0.18 3.94 4.09 0.20 4.38
GLN Glendale Fed. Bk, FSB of CA 5.37 4.95 0.12 2.49 2.40 0.29 5.87
GDW Golden West Fin. Corp. of CA 6.66 6.27 0.75 11.76 8.20 0.74 11.63
GWF Great Western Fin. Corp. of CA 5.78 5.06 0.60 10.98 8.49 0.54 10.01
GPT GreenPoint Fin. Corp. of NY* 10.58 6.03 0.92 6.87 6.68 0.96 7.17
SFB Standard Fed. Bancorp of MI 6.96 5.93 0.94 13.84 10.18 0.85 12.50
TCB TCF Financial Corp. of MN 7.69 7.35 1.37 20.13 8.06 1.29 19.04
WES Westcorp Inc. of Orange CA 9.89 9.86 1.21 13.72 8.11 0.60 6.86
AMEX Traded Companies
_____________________
ANA Acadiana Bancshares of LA* 17.67 17.67 -0.29 -1.62 -2.25 0.64 3.60
BKC American Bank of Waterbury CT* 8.57 8.12 0.96 10.74 7.84 0.39 4.36
BFD BostonFed Bancorp of MA 13.51 13.51 0.21 2.42 1.70 0.18 2.05
CFX Cheshire Fin. Corp. of NH* 9.46 8.44 0.99 10.03 8.85 0.82 8.29
CZF Citisave Fin. Corp. of LA 18.18 18.17 1.28 9.16 7.22 0.88 6.28
CBK Citizens First Fin.Corp. of IL 15.57 15.57 0.63 4.01 5.74 0.68 4.37
ESX Essex Bancorp of VA(8) 2.57 -0.08 0.32 7.80 36.06 -0.78 -18.91
FCB Falmouth Co-Op Bank of MA* 24.56 24.56 0.45 2.40 2.33 0.47 2.50
GAF GA Financial Corp. of PA 22.44 22.44 0.58 4.73 3.04 0.78 6.30
KNK Kankakee Bancorp of IL 9.80 9.09 0.50 4.56 6.22 0.49 4.48
KYF Kentucky First Bancorp of KY 23.62 23.62 1.12 5.40 3.83 1.12 5.40
NYB New York Bancorp, Inc. of NY 5.78 5.78 1.18 19.84 10.12 1.12 18.82
PDB Piedmont Bancorp of NC 29.77 29.77 1.34 6.02 4.51 1.36 6.12
PLE Pinnacle Bank of AL 8.19 7.90 0.79 10.40 10.14 0.71 9.31
SSB Scotland Bancorp of NC 37.58 37.58 1.09 3.96 3.10 1.09 3.96
SZB SouthFirst Bancshares of AL 14.89 14.89 0.55 3.25 4.49 0.76 4.49
SRN Southern Banc Company of AL 20.38 20.15 0.50 4.33 2.82 0.50 4.33
SSM Stone Street Bancorp of NC 33.68 33.68 0.77 3.04 2.61 0.77 3.04
TSH Teche Holding Company of LA 17.16 17.16 1.17 7.06 7.36 1.14 6.91
FTF Texarkana Fst. Fin. Corp of AR 20.62 20.62 1.86 11.49 9.47 1.39 8.62
THR Three Rivers Fin. Corp. of MI 15.74 15.64 0.59 6.68 4.00 0.57 6.41
TBK Tolland Bank of CT* 6.25 5.96 0.61 9.90 11.35 0.44 7.25
WSB Washington SB, FSB of MD 8.23 8.23 0.94 12.58 11.80 0.70 9.38
NASDAQ Listed OTC Companies
___________________________
FBCV 1st Bancorp of Vincennes IN 7.88 7.88 2.25 35.91 36.33 -0.16 -2.60
WFSB 1st Washington Bancorp of VA(8) 5.95 5.95 0.64 11.09 6.38 0.26 4.57
ALBK ALBANK Fin. Corp. of Albany NY 9.62 8.49 0.99 9.39 8.71 0.99 9.39
AMFC AMB Financial Corp. of IN 20.06 20.06 0.49 4.30 2.88 0.49 4.30
ASBP ASB Financial Corp. of OH 23.07 23.07 1.03 4.75 4.49 1.03 4.75
ABBK Abington Savings Bank of MA(8)* 6.50 5.69 0.36 5.29 5.40 0.24 3.48
AADV Advantage Bancorp of WI 9.77 8.47 0.90 9.33 7.61 0.81 8.40
AFCB Affiliated Comm BC, Inc of MA 10.25 10.17 0.71 6.31 6.87 0.86 7.56
ALBC Albion Banc Corp. of Albion NY 10.71 10.71 0.30 2.87 4.00 0.25 2.43
ATSB AmTrust Capital Corp. of IN 10.34 10.23 0.31 2.75 4.11 0.07 0.59
<CAPTION>
Asset Quality Ratios Pricing Ratios
_______________________ ______________________________________
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Financial Institution Assets NPAs Loans Earning Book Assets Book Earnings
--------------------- _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (X) (%) (%) (%) (x)
NYSE Traded Companies
_____________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA 2.29 33.80 1.24 6.78 121.32 5.59 129.45 NM
CAL CalFed Inc. of Los Angeles CA 1.61 77.66 1.85 11.39 152.29 6.65 152.29 12.11
CSA Coast Savings Financial of CA 1.62 48.77 1.17 14.71 134.34 6.93 136.61 16.99
CFB Commercial Federal Corp. of NE 1.02 73.31 1.02 10.66 139.25 8.42 155.01 10.72
DME Dime Savings Bank, FSB of NY* NA NA 1.24 17.65 120.24 6.11 121.58 12.90
DSL Downey Financial Corp. of CA NA NA 0.66 12.20 89.79 7.48 91.40 13.95
FRC First Republic Bancorp of CA* 2.64 36.28 1.09 NM 88.13 4.98 88.25 NM
FED FirstFed Fin. Corp. of CA 2.56 73.84 2.55 24.46 94.50 4.43 96.13 21.99
GLN Glendale Fed. Bk, FSB of CA 2.08 65.06 1.78 NM 100.06 5.37 108.56 17.68
GDW Golden West Fin. Corp. of CA NA NA 0.56 12.19 135.39 9.02 143.92 12.33
GWF Great Western Fin. Corp. of CA 1.76 42.88 1.09 11.78 122.80 7.09 140.24 12.93
GPT GreenPoint Fin. Corp. of NY* 2.86 25.95 1.63 14.96 104.08 11.01 182.73 14.33
SFB Standard Fed. Bancorp of MI 0.54 58.81 0.45 9.82 128.25 8.92 150.33 10.88
TCB TCF Financial Corp. of MN 0.82 119.89 1.29 12.41 228.48 17.56 238.92 13.12
WES Westcorp Inc. of Orange CA 1.24 107.17 2.37 12.32 148.56 14.70 149.06 24.65
AMEX Traded Companies
_____________________
ANA Acadiana Bancshares of LA* 1.09 94.56 1.46 NM 71.99 12.72 71.99 20.00
BKC American Bank of Waterbury CT* 2.95 33.54 1.46 12.75 132.94 11.39 140.17 NM
BFD BostonFed Bancorp of MA 1.67 40.40 0.85 NM 84.53 11.42 84.53 NM
CFX Cheshire Fin. Corp. of NH* NA NA 1.02 11.30 108.51 10.26 121.61 13.68
CZF Citisave Fin. Corp. of LA 0.30 38.75 0.21 13.84 94.01 17.09 94.07 20.17
CBK Citizens First Fin.Corp. of IL NA NA 0.24 17.41 69.89 10.88 69.89 15.98
ESX Essex Bancorp of VA(8) 3.32 47.35 1.88 2.77 34.84 0.90 NM NM
FCB Falmouth Co-Op Bank of MA* NA NA 1.31 NM 72.44 17.79 72.44 NM
GAF GA Financial Corp. of PA 0.19 78.79 0.41 NM 75.80 17.01 75.80 24.70
KNK Kankakee Bancorp of IL 0.59 110.93 1.02 16.09 74.81 7.33 80.65 16.37
KYF Kentucky First Bancorp of KY 0.15 299.19 0.87 NM 104.13 24.59 104.13 NM
NYB New York Bancorp, Inc. of NY 1.63 45.81 1.22 9.88 197.86 11.44 197.86 10.41
PDB Piedmont Bancorp of NC 0.72 65.30 0.66 22.19 91.60 27.27 91.60 21.81
PLE Pinnacle Bank of AL 0.22 303.63 1.04 9.87 98.65 8.08 102.24 11.03
SSB Scotland Bancorp of NC NA NA 0.52 NM 85.19 32.01 85.19 NM
SZB SouthFirst Bancshares of AL 0.56 52.60 0.45 22.27 79.13 11.78 79.13 16.12
SRN Southern Banc Company of AL NA NA 0.25 NM 82.21 16.75 83.12 NM
SSM Stone Street Bancorp of NC 0.31 126.92 0.60 NM 76.99 25.94 76.99 NM
TSH Teche Holding Company of LA 0.24 362.84 1.10 13.59 86.15 14.79 86.15 13.89
FTF Texarkana Fst. Fin. Corp of AR 0.36 196.08 0.89 10.56 92.05 18.98 92.05 14.08
THR Three Rivers Fin. Corp. of MI 0.73 70.06 0.77 25.00 85.57 13.46 86.09 NM
TBK Tolland Bank of CT* 4.14 27.24 1.62 8.81 84.07 5.26 88.20 12.04
WSB Washington SB, FSB of MD NA NA 0.99 8.47 100.60 8.28 100.60 11.36
NASDAQ Listed OTC Companies
___________________________
FBCV 1st Bancorp of Vincennes IN 0.38 86.69 0.46 2.75 83.51 6.58 83.51 NM
WFSB 1st Washington Bancorp of VA(8) 0.87 86.57 1.70 15.69 167.01 9.94 167.01 NM
ALBK ALBANK Fin. Corp. of Albany NY NA NA 1.07 11.48 107.59 10.36 121.91 11.48
AMFC AMB Financial Corp. of IN 0.71 63.16 0.66 NM 74.81 15.00 74.81 NM
ASBP ASB Financial Corp. of OH 1.48 53.58 1.30 22.27 94.75 21.86 94.75 22.27
ABBK Abington Savings Bank of MA(8)* 0.37 88.30 0.58 18.53 95.34 6.20 109.00 NM
AADV Advantage Bancorp of WI 0.56 100.02 1.04 13.15 118.83 11.62 137.16 14.60
AFCB Affiliated Comm BC, Inc of MA 1.34 57.09 1.28 14.56 92.88 9.52 93.62 12.15
ALBC Albion Banc Corp. of Albion NY 0.72 61.31 0.55 25.00 70.94 7.60 70.94 NM
ATSB AmTrust Capital Corp. of IN 1.31 38.02 0.73 24.32 67.57 6.98 68.29 NM
<CAPTION>
Dividend Data(6)
_____________________
Ind. Divi-
Div./ dend Payout
Financial Institution Share Yield Ratio(7)
--------------------- _______ _______ _______
($) (%) (%)
NYSE Traded Companies
_____________________
<S> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA 0.88 3.56 24.11
CAL CalFed Inc. of Los Angeles CA 0.00 0.00 0.00
CSA Coast Savings Financial of CA 0.00 0.00 0.00
CFB Commercial Federal Corp. of NE 0.40 1.08 11.53
DME Dime Savings Bank, FSB of NY* 0.00 0.00 0.00
DSL Downey Financial Corp. of CA 0.48 2.34 28.57
FRC First Republic Bancorp of CA* 0.00 0.00 0.00
FED FirstFed Fin. Corp. of CA 0.00 0.00 0.00
GLN Glendale Fed. Bk, FSB of CA 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 0.38 0.71 8.60
GWF Great Western Fin. Corp. of CA 1.00 4.42 52.08
GPT GreenPoint Fin. Corp. of NY* 0.80 2.63 39.41
SFB Standard Fed. Bancorp of MI 0.76 1.97 19.39
TCB TCF Financial Corp. of MN 0.75 2.17 26.98
WES Westcorp Inc. of Orange CA 0.38 2.17 26.76
AMEX Traded Companies
_____________________
ANA Acadiana Bancshares of LA* 0.00 0.00 NM
BKC American Bank of Waterbury CT* 1.36 5.28 67.33
BFD BostonFed Bancorp of MA 0.20 1.70 NM
CFX Cheshire Fin. Corp. of NH* 0.00 0.00 0.00
CZF Citisave Fin. Corp. of LA 0.30 2.12 29.41
CBK Citizens First Fin.Corp. of IL 0.00 0.00 0.00
ESX Essex Bancorp of VA(8) 0.00 0.00 0.00
FCB Falmouth Co-Op Bank of MA* 0.00 0.00 0.00
GAF GA Financial Corp. of PA 0.00 0.00 0.00
KNK Kankakee Bancorp of IL 0.40 2.16 34.78
KYF Kentucky First Bancorp of KY 0.50 3.36 NM
NYB New York Bancorp, Inc. of NY 0.80 2.98 29.41
PDB Piedmont Bancorp of NC 0.48 3.73 NM
PLE Pinnacle Bank of AL 0.72 4.27 42.11
SSB Scotland Bancorp of NC 0.30 2.45 NM
SZB SouthFirst Bancshares of AL 0.50 4.08 NM
SRN Southern Banc Company of AL 0.35 2.75 NM
SSM Stone Street Bancorp of NC 0.44 2.67 NM
TSH Teche Holding Company of LA 0.50 4.00 54.35
FTF Texarkana Fst. Fin. Corp of AR 0.45 2.88 30.41
THR Three Rivers Fin. Corp. of MI 0.30 2.35 58.82
TBK Tolland Bank of CT* 0.00 0.00 0.00
WSB Washington SB, FSB of MD 0.10 2.00 16.95
NASDAQ Listed OTC Companies
___________________________
FBCV 1st Bancorp of Vincennes IN 0.40 1.48 4.08
WFSB 1st Washington Bancorp of VA(8) 0.12 1.50 23.53
ALBK ALBANK Fin. Corp. of Albany NY 0.48 1.89 21.72
AMFC AMB Financial Corp. of IN 0.00 0.00 0.00
ASBP ASB Financial Corp. of OH 0.40 2.81 62.50
ABBK Abington Savings Bank of MA(8)* 0.40 2.54 47.06
AADV Advantage Bancorp of WI 0.32 0.97 12.75
AFCB Affiliated Comm BC, Inc of MA 0.48 2.72 39.67
ALBC Albion Banc Corp. of Albion NY 0.31 1.88 46.97
ATSB AmTrust Capital Corp. of IN 0.00 0.00 0.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
Key Financial Ratios
__________________________________________________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
_____________________ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
_______________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AHCI Ambanc Holding Co. of NY* 19.17 19.17 -0.03 -0.23 -0.21 -0.04 -0.35
ASBI Ameriana Bancorp of IN 11.64 11.62 0.93 7.22 7.55 0.90 7.00
AFFFZ America First Fin. Fund of CA 6.80 6.64 0.81 12.56 12.08 0.81 12.48
AMFB American Federal Bank of SC 8.21 7.58 1.29 16.11 9.54 1.41 17.57
ANBK American Nat'l Bancorp of MD 10.91 10.91 0.34 3.61 3.75 0.33 3.51
ABCW Anchor Bancorp Wisconsin of WI 6.75 6.57 0.87 12.13 8.40 0.85 11.80
ANDB Andover Bancorp, Inc. of MA* 7.60 7.60 0.87 11.60 9.33 0.91 12.17
ASFC Astoria Financial Corp. of NY 8.55 6.95 0.75 8.45 8.58 0.74 8.37
AVND Avondale Fin. Corp. of IL 10.63 10.63 0.65 6.66 7.29 0.45 4.65
BFSI BFS Bankorp, Inc. of NY 8.14 8.14 1.84 24.85 16.32 1.78 24.01
BKCT Bancorp Connecticut of CT* 10.81 10.81 1.18 10.65 7.76 1.18 10.65
BPLS Bank Plus Corp. of CA 6.94 6.93 -2.04 -36.27 NM -2.13 -37.81
BWFC Bank West Fin. Corp. of MI 19.78 19.78 0.69 3.38 3.49 0.41 1.98
BANC BankAtlantic Bancorp of FL 8.33 7.65 0.97 14.59 10.57 0.76 11.35
BKUNA BankUnited SA of FL 6.11 5.77 1.02 26.11 14.93 0.78 20.05
BKCO Bankers Corp. of NJ* 9.81 9.60 1.12 11.36 9.26 1.18 11.99
BVFS Bay View Capital Corp. of CA 6.98 6.81 -0.10 -1.46 -1.37 0.26 3.66
BFSB Bedford Bancshares of VA 16.11 16.11 1.26 7.57 7.27 1.26 7.57
BSBC Branford SB of CT* 8.69 8.69 0.76 9.05 6.67 0.76 9.05
BRFC Bridgeville SB, FSB of PA(8) 28.51 28.51 1.24 4.21 3.84 1.24 4.21
BYFC Broadway Fin. Corp. of CA 11.42 11.42 0.40 6.29 4.90 0.45 7.06
CBCO CB Bancorp of Michigan City IN 9.16 9.16 1.36 13.92 12.00 1.36 13.92
CCFH CCF Holding Company of GA 21.23 21.23 0.86 5.17 5.02 0.82 4.91
CENF CENFED Financial Corp. of CA 5.00 4.99 0.48 9.87 9.11 0.33 6.81
CFSB CFSB Bancorp of Lansing MI 8.29 8.29 0.94 11.62 7.52 0.92 11.40
CKFB CKF Bancorp of Danville KY 27.30 27.30 1.24 4.40 3.85 1.24 4.40
CNSB CNS Bancorp of MO 23.07 23.07 0.74 3.20 3.91 0.62 2.70
CSBF CSB Financial Group Inc of IL 30.89 30.89 0.82 3.62 3.46 0.82 3.62
CFHC California Fin. Hld. Co. of CA 6.75 6.69 0.28 4.26 3.45 0.25 3.71
CBCI Calumet Bancorp of Chicago IL 16.99 16.99 1.21 7.25 8.14 1.20 7.22
CAFI Camco Fin. Corp. of OH 8.33 8.33 1.22 15.54 11.22 0.93 11.85
CMRN Cameron Fin. Corp. of MO 26.54 26.54 1.61 5.79 7.12 1.59 5.73
CAPS Capital Savings Bancorp of MO 10.43 10.43 0.95 8.92 9.40 0.95 8.92
CARV Carver FSB of New York, NY 9.45 9.00 0.21 2.19 4.26 0.21 2.19
CASB Cascade SB of Everett WA 6.22 6.22 0.56 8.94 6.09 0.29 4.68
CATB Catskill Fin. Corp. of NY* 27.79 27.79 0.96 3.44 4.70 1.10 3.96
CNIT Cenit Bancorp of Norfolk VA 6.98 6.72 0.42 5.90 4.77 0.49 6.92
CTBK Center Banks, Inc. of NY* 7.08 7.08 0.56 8.10 9.28 0.58 8.35
CFCX Center Fin. Corp of CT(8)* 6.10 5.70 0.70 11.37 6.59 0.47 7.75
CEBK Central Co-Op. Bank of MA* 9.95 8.69 0.60 6.40 6.00 0.57 6.01
CJFC Central Jersey Fin. Corp of NJ(8) 11.78 10.95 1.11 10.71 6.38 1.06 10.20
CBSB Charter Financial Inc. of IL 21.41 20.85 1.12 6.95 5.91 1.12 6.95
COFI Charter One Financial of OH(8) 6.90 6.79 0.18 2.81 1.08 1.18 18.12
CVAL Chester Valley Bancorp of PA 9.15 9.15 0.91 10.02 8.11 0.87 9.63
CRCL Circle Financial Corp.of OH(8) 10.65 9.24 0.50 4.34 4.32 0.43 3.72
CTZN CitFed Bancorp of Dayton OH 6.70 5.81 0.68 9.99 7.62 0.55 8.16
CLAS Classic Bancshares of KY 28.78 28.78 0.44 2.82 1.93 0.40 2.55
CMSB Cmnwealth Bancorp of PA 10.41 7.68 0.70 6.69 8.20 0.67 6.45
CBSA Coastal Bancorp of Houston TX 3.31 2.69 0.37 10.64 10.72 0.37 10.58
CFCP Coastal Fin. Corp. of SC 6.08 6.08 0.99 16.43 7.74 0.89 14.80
COFD Collective Bancorp Inc. of NJ 7.05 6.54 1.06 15.84 10.86 1.04 15.48
CMSV Commty. Svgs, MHC of FL(47.6) 11.82 11.82 0.83 6.60 6.09 0.81 6.40
CBIN Community Bank Shares of IN 11.36 11.36 0.90 8.26 7.53 0.88 8.09
CBNH Community Bankshares Inc of NH* 7.23 7.23 0.78 10.93 7.73 0.65 9.07
CFTP Community Fed. Bancorp of MS 33.10 33.10 1.17 6.28 3.37 1.14 6.13
CFFC Community Fin. Corp. of VA 13.70 13.70 1.29 9.70 7.61 1.29 9.70
<CAPTION>
Asset Quality Ratios Pricing Ratios
_______________________ ______________________________________
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Financial Institution Assets NPAs Loans Earning Book Assets Book Earnings
--------------------- _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (X) (%) (%) (%) (x)
NASDAQ Listed OTC Companies (continued)
_______________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHCI Ambanc Holding Co. of NY* 4.22 24.58 1.64 NM 68.49 13.13 68.49 NM
ASBI Ameriana Bancorp of IN 0.56 50.63 0.40 13.25 98.81 11.50 98.95 13.66
AFFFZ America First Fin. Fund of CA 0.65 46.82 0.50 8.28 100.34 6.83 102.75 8.33
AMFB American Federal Bank of SC 0.50 151.69 1.27 10.48 161.37 13.25 174.92 9.62
ANBK American Nat'l Bancorp of MD 1.40 69.89 1.61 NM 80.18 8.75 80.18 NM
ABCW Anchor Bancorp Wisconsin of WI 0.61 214.80 1.63 11.90 145.83 9.84 149.76 12.24
ANDB Andover Bancorp, Inc. of MA* 1.60 63.49 1.46 10.72 118.00 8.96 118.00 10.22
ASFC Astoria Financial Corp. of NY NA NA 0.55 11.65 98.43 8.41 121.01 11.76
AVND Avondale Fin. Corp. of IL 0.85 82.48 1.72 13.71 83.06 8.83 83.06 19.62
BFSI BFS Bankorp, Inc. of NY 1.48 69.83 1.13 6.13 134.75 10.97 134.75 6.34
BKCT Bancorp Connecticut of CT* 1.69 74.29 2.13 12.88 132.07 14.27 132.07 12.88
BPLS Bank Plus Corp. of CA 3.58 69.37 2.75 NM 71.13 4.93 71.24 NM
BWFC Bank West Fin. Corp. of MI 0.08 112.71 0.13 NM 98.00 19.38 98.00 NM
BANC BankAtlantic Bancorp of FL 1.25 91.39 2.12 9.46 116.91 9.74 127.29 12.16
BKUNA BankUnited SA of FL 0.90 32.13 0.38 6.70 94.58 5.78 100.13 8.72
BKCO Bankers Corp. of NJ* 1.59 24.80 0.56 10.80 119.13 11.69 121.70 10.23
BVFS Bay View Capital Corp. of CA NA NA 1.44 NM 114.12 7.97 117.06 NM
BFSB Bedford Bancshares of VA 1.24 43.93 0.64 13.75 104.10 16.77 104.10 13.75
BSBC Branford SB of CT* 2.31 87.06 2.77 15.00 129.87 11.28 129.87 15.00
BRFC Bridgeville SB, FSB of PA(8) 0.25 102.86 0.70 NM 108.78 31.01 108.78 NM
BYFC Broadway Fin. Corp. of CA 2.42 34.07 1.05 20.41 67.89 7.75 67.89 18.18
CBCO CB Bancorp of Michigan City IN 0.84 77.80 1.45 8.33 109.25 10.01 109.25 8.33
CCFH CCF Holding Company of GA 0.63 84.80 0.90 19.92 79.45 16.87 79.45 20.98
CENF CENFED Financial Corp. of CA 1.22 54.40 0.89 10.97 102.85 5.15 103.05 15.90
CFSB CFSB Bancorp of Lansing MI 0.09 661.63 0.66 13.29 146.85 12.18 146.85 13.55
CKFB CKF Bancorp of Danville KY 1.70 10.61 0.21 NM 113.31 30.93 113.31 NM
CNSB CNS Bancorp of MO 0.70 53.70 0.60 NM 81.73 18.86 81.73 NM
CSBF CSB Financial Group Inc of IL 0.78 37.38 0.55 NM 75.20 23.23 75.20 NM
CFHC California Fin. Hld. Co. of CA 1.26 44.64 0.78 NM 121.25 8.19 122.38 NM
CBCI Calumet Bancorp of Chicago IL 1.23 82.56 1.36 12.28 87.53 14.87 87.53 12.33
CAFI Camco Fin. Corp. of OH 0.56 54.79 0.36 8.91 130.15 10.84 130.15 11.69
CMRN Cameron Fin. Corp. of MO 0.79 86.49 0.81 14.04 84.81 22.50 84.81 14.19
CAPS Capital Savings Bancorp of MO 0.20 152.91 0.38 10.64 91.54 9.55 91.54 10.64
CARV Carver FSB of New York, NY 0.97 33.76 1.44 23.48 51.60 4.88 54.20 23.48
CASB Cascade SB of Everett WA 2.40 37.69 1.26 16.42 142.05 8.83 142.05 NM
CATB Catskill Fin. Corp. of NY* NA NA 1.63 21.28 73.26 20.36 73.26 18.52
CNIT Cenit Bancorp of Norfolk VA 0.51 109.75 1.17 20.98 113.59 7.93 117.98 17.90
CTBK Center Banks, Inc. of NY* 1.07 115.49 1.55 10.78 83.88 5.94 83.88 10.45
CFCX Center Fin. Corp of CT(8)* 2.61 44.33 1.46 15.18 157.05 9.59 168.14 22.28
CEBK Central Co-Op. Bank of MA* 2.31 41.68 1.39 16.67 100.73 10.02 115.38 17.74
CJFC Central Jersey Fin. Corp of NJ(8) 1.91 33.63 1.30 15.67 143.93 16.95 154.84 16.46
CBSB Charter Financial Inc. of IL 0.49 149.63 1.05 16.92 84.94 18.19 87.23 16.92
COFI Charter One Financial of OH(8) 0.42 117.80 0.92 NM 170.54 11.77 173.29 14.38
CVAL Chester Valley Bancorp of PA 1.03 92.67 1.20 12.34 119.50 10.93 119.50 12.84
CRCL Circle Financial Corp.of OH(8) 0.10 213.87 0.35 23.13 98.52 10.49 113.56 NM
CTZN CitFed Bancorp of Dayton OH 0.85 74.34 1.06 13.12 121.65 8.15 140.35 16.06
CLAS Classic Bancshares of KY 0.51 77.33 0.62 NM 73.64 21.20 73.64 NM
CMSB Cmnwealth Bancorp of PA 0.44 103.05 0.85 12.19 81.55 8.49 110.60 12.65
CBSA Coastal Bancorp of Houston TX 0.58 39.03 0.56 9.33 95.95 3.18 118.27 9.38
CFCP Coastal Fin. Corp. of SC 0.42 209.91 1.02 12.91 199.18 12.12 199.18 14.34
COFD Collective Bancorp Inc. of NJ 0.52 48.04 0.50 9.21 137.83 9.71 148.43 9.42
CMSV Commty. Svgs, MHC of FL(47.6) 1.24 44.70 1.02 16.41 105.86 12.51 105.86 16.93
CBIN Community Bank Shares of IN 0.12 219.42 0.50 13.28 99.30 11.28 99.30 13.56
CBNH Community Bankshares Inc of NH* 0.41 159.61 1.00 12.94 118.05 8.53 118.05 15.60
CFTP Community Fed. Bancorp of MS 0.34 84.38 0.53 NM 88.91 29.43 88.91 NM
CFFC Community Fin. Corp. of VA 0.45 139.66 0.70 13.13 120.36 16.49 120.36 13.13
<CAPTION>
Dividend Data(6)
_____________________
Ind. Divi-
Div./ dend Payout
Financial Institution Share Yield Ratio(7)
--------------------- _______ _______ _______
($) (%) (%)
NASDAQ Listed OTC Companies (continued)
_______________________________________
<S> <C> <C> <C> <C>
AHCI Ambanc Holding Co. of NY* 0.00 0.00 NM
ASBI Ameriana Bancorp of IN 0.56 4.23 56.00
AFFFZ America First Fin. Fund of CA 1.60 6.04 50.00
AMFB American Federal Bank of SC 0.40 2.46 25.81
ANBK American Nat'l Bancorp of MD 0.00 0.00 0.00
ABCW Anchor Bancorp Wisconsin of WI 0.50 1.43 17.01
ANDB Andover Bancorp, Inc. of MA* 0.60 2.49 26.67
ASFC Astoria Financial Corp. of NY 0.44 1.71 19.91
AVND Avondale Fin. Corp. of IL 0.00 0.00 0.00
BFSI BFS Bankorp, Inc. of NY 0.00 0.00 0.00
BKCT Bancorp Connecticut of CT* 0.72 3.39 43.64
BPLS Bank Plus Corp. of CA 0.00 0.00 NM
BWFC Bank West Fin. Corp. of MI 0.28 2.38 68.29
BANC BankAtlantic Bancorp of FL 0.18 1.32 12.50
BKUNA BankUnited SA of FL 0.00 0.00 0.00
BKCO Bankers Corp. of NJ* 0.64 3.66 39.51
BVFS Bay View Capital Corp. of CA 0.60 1.78 NM
BFSB Bedford Bancshares of VA 0.40 2.42 33.33
BSBC Branford SB of CT* 0.00 0.00 0.00
BRFC Bridgeville SB, FSB of PA(8) 0.32 2.08 54.24
BYFC Broadway Fin. Corp. of CA 0.20 2.00 40.82
CBCO CB Bancorp of Michigan City IN 0.00 0.00 0.00
CCFH CCF Holding Company of GA 0.40 3.40 67.80
CENF CENFED Financial Corp. of CA 0.36 1.67 18.27
CFSB CFSB Bancorp of Lansing MI 0.48 2.29 30.38
CKFB CKF Bancorp of Danville KY 0.44 2.26 58.67
CNSB CNS Bancorp of MO 0.00 0.00 0.00
CSBF CSB Financial Group Inc of IL 0.00 0.00 0.00
CFHC California Fin. Hld. Co. of CA 0.44 1.97 57.14
CBCI Calumet Bancorp of Chicago IL 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 0.44 2.44 21.78
CMRN Cameron Fin. Corp. of MO 0.28 2.06 28.87
CAPS Capital Savings Bancorp of MO 0.36 1.93 20.57
CARV Carver FSB of New York, NY 0.00 0.00 0.00
CASB Cascade SB of Everett WA 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 0.00 0.00 0.00
CNIT Cenit Bancorp of Norfolk VA 0.80 2.43 50.96
CTBK Center Banks, Inc. of NY* 0.24 1.75 18.90
CFCX Center Fin. Corp of CT(8)* 0.28 1.15 17.50
CEBK Central Co-Op. Bank of MA* 0.00 0.00 0.00
CJFC Central Jersey Fin. Corp of NJ(8) 1.12 3.78 59.26
CBSB Charter Financial Inc. of IL 0.24 2.18 36.92
COFI Charter One Financial of OH(8) 0.92 2.68 NM
CVAL Chester Valley Bancorp of PA 0.40 2.11 25.97
CRCL Circle Financial Corp.of OH(8) 0.68 2.00 46.26
CTZN CitFed Bancorp of Dayton OH 0.28 0.75 9.86
CLAS Classic Bancshares of KY 0.00 0.00 0.00
CMSB Cmnwealth Bancorp of PA 0.25 2.47 30.12
CBSA Coastal Bancorp of Houston TX 0.40 2.22 20.73
CFCP Coastal Fin. Corp. of SC 0.35 1.79 23.18
COFD Collective Bancorp Inc. of NJ 1.00 4.15 38.17
CMSV Commty. Svgs, MHC of FL(47.6) 0.80 4.92 NM
CBIN Community Bank Shares of IN 0.34 2.67 35.42
CBNH Community Bankshares Inc of NH* 0.60 3.29 42.55
CFTP Community Fed. Bancorp of MS 0.30 2.35 69.77
CFFC Community Fin. Corp. of VA 0.52 2.51 32.91
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
Key Financial Ratios
__________________________________________________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
_____________________ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
_______________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CIBI Community Inv. Corp. of OH 14.36 14.36 1.00 7.71 8.00 0.95 7.33
COOP Cooperative Bk.for Svgs. of NC 9.34 8.21 0.28 3.11 3.43 0.24 2.64
CNSK Covenant Bank for Svgs. of NJ* 5.05 5.05 0.62 11.55 8.08 0.62 11.55
CRZY Crazy Woman Creek Bncorp of WY 32.70 32.70 0.92 4.63 3.32 0.78 3.95
DNFC D&N Financial Corp. of MI 5.63 5.54 1.05 19.69 14.40 0.93 17.40
DSBC DS Bancor Inc. of Derby CT* 6.55 6.33 0.66 10.49 8.03 0.59 9.40
DFIN Damen Fin. Corp. of Chicago IL 24.17 24.17 0.81 5.02 3.74 0.79 4.91
DIME Dime Community Bancorp of NY 16.92 14.87 0.75 4.45 5.26 0.69 4.09
DIBK Dime Financial Corp. of CT* 7.95 7.56 1.50 19.84 13.08 1.69 22.30
EGLB Eagle BancGroup of IL 13.53 13.53 0.08 0.59 0.90 0.08 0.59
EBSI Eagle Bancshares of Tucker GA 6.65 6.65 0.97 13.73 10.20 0.94 13.29
EGFC Eagle Financial Corp. of CT 7.14 5.16 1.30 17.60 15.09 0.63 8.61
ETFS East Texas Fin. Serv. of TX 19.63 19.63 0.89 4.59 5.90 0.83 4.27
EBCP Eastern Bancorp of NH 7.70 7.25 0.60 8.23 8.24 0.50 6.82
ESBK Elmira SB of Elmira NY* 6.30 6.01 0.14 2.29 2.75 0.14 2.29
EFBI Enterprise Fed. Bancorp of OH 15.58 15.55 1.12 5.47 7.07 0.77 3.75
EQSB Equitable FSB of Wheaton MD 5.25 5.25 0.84 16.16 14.25 0.83 16.02
FFFG F.F.O. Financial Group of FL 6.01 6.01 0.46 6.98 5.45 0.46 6.98
FCBF FCB Fin. Corp. of Neenah WI 18.46 18.46 1.03 5.31 5.91 1.01 5.21
FFBS FFBS Bancorp of Columbus MS 19.57 19.57 1.31 6.46 4.35 1.31 6.46
FFDF FFD Financial Corp. of OH 28.03 28.03 1.04 3.69 4.95 1.04 3.69
FFLC FFLC Bancorp of Leesburg FL 16.97 16.97 0.94 5.43 6.22 0.95 5.48
FFFC FFVA Financial Corp. of VA 16.32 15.99 1.30 7.25 7.10 1.27 7.06
FFWC FFW Corporation of Wabash IN 10.80 10.80 0.90 8.12 9.04 1.01 9.05
FFYF FFY Financial Corp. of OH 18.35 18.35 1.21 6.53 5.58 1.25 6.73
FMCO FMS Financial Corp. of NJ 6.58 6.40 0.84 13.04 10.56 0.84 13.04
FFHH FSF Financial Corp. of MN 15.97 15.97 0.62 3.34 4.04 0.62 3.34
FMLY Family Bancorp of Haverhill MA(8)* 7.76 7.10 0.96 12.66 8.60 0.86 11.34
FMCT Farmers & Mechanics Bank of CT(8)* 5.55 5.55 0.06 1.13 0.66 -0.02 -0.39
FOBC Fed One Bancorp of Wheeling WV 12.12 11.47 1.00 7.73 9.36 1.00 7.73
FFRV Fid. Fin. Bkshrs. Corp. of VA 8.51 8.50 0.99 11.83 10.59 0.97 11.66
FBCI Fidelity Bancorp of Chicago IL 12.05 12.00 0.77 5.66 6.32 0.73 5.31
FSBI Fidelity Bancorp, Inc. of PA 7.28 7.22 0.60 7.78 7.81 0.59 7.65
FFFL Fidelity FSB, MHC of FL(47.2) 10.23 10.12 0.64 6.24 5.73 0.60 5.81
FFED Fidelity Fed. Bancorp of IN 5.07 5.07 1.30 26.09 11.74 1.22 24.57
FFOH Fidelity Financial of OH 20.37 20.37 0.82 5.54 4.66 0.82 5.54
FIBC Financial Bancorp of NY 10.66 10.60 0.65 5.40 6.04 0.64 5.33
FNSC Financial Security Corp. of IL(8) 14.37 14.37 0.77 5.70 5.46 0.75 5.50
FSBS First Ashland Fin. Corp. of KY(8) 26.33 26.33 0.87 4.09 2.79 0.87 4.09
FBSI First Bancshares of MO 16.92 16.89 0.78 4.33 5.08 0.77 4.27
FBBC First Bell Bancorp of PA 21.05 21.05 1.55 7.69 6.78 1.53 7.61
FBER First Bergen Bancorp of NJ 16.52 16.52 0.28 3.06 2.16 0.42 4.59
FCIT First Cit. Fin. Corp of MD 6.28 6.28 0.71 11.35 8.92 0.58 9.23
FFBA First Colorado Bancorp of Co 16.19 16.00 0.98 8.50 5.11 0.98 8.50
FDEF First Defiance Fin.Corp. of OH 25.39 25.39 1.15 5.36 5.24 1.13 5.26
FESX First Essex Bancorp of MA* 7.67 7.67 0.94 13.05 12.26 0.79 11.01
FFES First FS&LA of E. Hartford CT 6.19 6.17 0.60 8.87 11.48 0.59 8.78
FSSB First FS&LA of San Bern. CA 5.64 5.39 -0.17 -2.90 -5.20 -0.35 -6.09
FFSX First FS&LA. MHC of IA (45.0) 8.41 8.37 0.63 7.77 6.65 0.58 7.15
FFML First Family Bank, FSB of FL 5.61 5.61 0.82 16.10 11.14 0.48 9.50
FFSW First Fed Fin. Serv. of OH 5.32 4.84 0.85 15.68 8.17 0.69 12.62
BDJI First Fed. Bancorp. of MN 14.38 14.38 0.70 5.24 6.54 0.70 5.24
FFBH First Fed. Bancshares of AR 15.90 15.90 0.99 6.24 7.42 0.99 6.24
FFEC First Fed. Bancshares of WI 14.32 13.74 0.96 5.83 5.42 0.94 5.69
FTFC First Fed. Capital Corp. of WI 6.85 6.45 0.91 13.51 9.52 0.67 9.91
FFKY First Fed. Fin. Corp. of KY 14.04 13.10 1.65 11.51 6.14 1.44 10.03
<CAPTION>
Asset Quality Ratios Pricing Ratios
_______________________ ______________________________________
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Financial Institution Assets NPAs Loans Earning Book Assets Book Earnings
--------------------- _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (X) (%) (%) (%) (x)
NASDAQ Listed OTC Companies (continued)
_______________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CIBI Community Inv. Corp. of OH 0.73 69.06 0.68 12.50 85.96 12.34 85.96 13.16
COOP Cooperative Bk.for Svgs. of NC 0.22 95.46 0.28 NM 89.10 8.32 101.33 NM
CNSK Covenant Bank for Svgs. of NJ* 2.04 38.62 1.43 12.37 137.30 6.94 137.30 12.37
CRZY Crazy Woman Creek Bncorp of WY 0.70 85.20 1.14 NM 69.87 22.85 69.87 NM
DNFC D&N Financial Corp. of MI NA NA 0.92 6.94 123.03 6.93 125.00 7.86
DSBC DS Bancor Inc. of Derby CT* 1.82 31.42 0.79 12.45 124.12 8.13 128.55 13.90
DFIN Damen Fin. Corp. of Chicago IL 0.14 92.58 0.35 NM 81.94 19.81 81.94 NM
DIME Dime Community Bancorp of NY 2.59 30.10 1.20 19.00 84.47 14.29 96.14 20.64
DIBK Dime Financial Corp. of CT* 0.99 199.52 2.98 7.64 138.76 11.04 146.04 6.80
EGLB Eagle BancGroup of IL 0.80 75.39 1.01 NM 65.84 8.91 65.84 NM
EBSI Eagle Bancshares of Tucker GA 0.49 138.35 0.98 9.80 125.94 8.37 125.94 10.14
EGFC Eagle Financial Corp. of CT 1.23 55.16 1.20 6.63 106.83 7.62 147.69 13.55
ETFS East Texas Fin. Serv. of TX 0.45 55.47 0.65 16.95 78.04 15.32 78.04 18.21
EBCP Eastern Bancorp of NH 1.81 23.60 0.74 12.14 96.32 7.41 102.29 14.66
ESBK Elmira SB of Elmira NY* 0.80 89.84 1.00 NM 84.21 5.30 88.16 NM
EFBI Enterprise Fed. Bancorp of OH 0.01 NA 0.27 14.14 90.21 14.05 90.38 20.59
EQSB Equitable FSB of Wheaton MD 0.98 22.55 0.33 7.02 105.49 5.54 105.49 7.08
FFFG F.F.O. Financial Group of FL 3.77 45.17 2.74 18.33 126.15 7.58 126.15 18.33
FCBF FCB Fin. Corp. of Neenah WI NA NA 0.51 16.91 91.85 16.96 91.85 17.25
FFBS FFBS Bancorp of Columbus MS 0.70 76.75 0.79 23.00 149.64 29.28 149.64 23.00
FFDF FFD Financial Corp. of OH NA NA 0.32 20.19 74.57 20.90 74.57 20.19
FFLC FFLC Bancorp of Leesburg FL 0.13 239.95 0.50 16.09 86.37 14.66 86.37 15.95
FFFC FFVA Financial Corp. of VA 0.48 132.38 1.09 14.08 107.58 17.55 109.76 14.44
FFWC FFW Corporation of Wabash IN 0.06 620.00 0.52 11.06 88.47 9.55 88.47 9.92
FFYF FFY Financial Corp. of OH 0.88 66.89 0.78 17.91 118.52 21.75 118.52 17.39
FMCO FMS Financial Corp. of NJ NA NA NA 9.47 118.61 7.81 121.95 9.47
FFHH FSF Financial Corp. of MN 0.09 250.67 0.39 24.73 87.86 14.03 87.86 24.73
FMLY Family Bancorp of Haverhill MA(8)* 0.90 81.25 1.46 11.63 138.78 10.76 151.65 12.98
FMCT Farmers & Mechanics Bank of CT(8)* 2.52 33.97 1.43 NM 169.19 9.39 169.19 NM
FOBC Fed One Bancorp of Wheeling WV 0.30 139.14 1.10 10.69 84.69 10.26 89.46 10.69
FFRV Fid. Fin. Bkshrs. Corp. of VA 1.16 84.92 1.20 9.44 106.16 9.04 106.25 9.59
FBCI Fidelity Bancorp of Chicago IL NA NA 0.15 15.82 91.66 11.04 91.99 16.85
FSBI Fidelity Bancorp, Inc. of PA 0.81 55.09 1.02 12.80 99.63 7.26 100.44 13.01
FFFL Fidelity FSB, MHC of FL(47.2) 0.38 78.38 0.41 17.47 105.72 10.82 106.96 18.75
FFED Fidelity Fed. Bancorp of IN 0.07 428.14 0.35 8.51 206.14 10.46 206.14 9.04
FFOH Fidelity Financial of OH 0.55 60.52 0.43 21.46 79.15 16.12 79.15 21.46
FIBC Financial Bancorp of NY NA NA NA 16.56 92.46 9.85 92.98 16.77
FNSC Financial Security Corp. of IL(8) 2.77 30.87 1.23 18.31 100.58 14.45 100.58 18.98
FSBS First Ashland Fin. Corp. of KY(8) NA NA 0.17 NM 112.38 29.59 112.38 NM
FBSI First Bancshares of MO 0.43 83.74 0.44 19.69 86.25 14.60 86.44 19.94
FBBC First Bell Bancorp of PA 0.08 133.97 0.13 14.76 99.14 20.87 99.14 14.91
FBER First Bergen Bancorp of NJ 2.49 59.97 3.49 NM 68.72 11.36 68.72 NM
FCIT First Cit. Fin. Corp of MD 3.43 33.61 1.63 11.21 120.82 7.59 120.82 13.77
FFBA First Colorado Bancorp of Co 0.24 91.60 0.33 19.57 113.45 18.36 114.80 19.57
FDEF First Defiance Fin.Corp. of OH NA NA 0.48 19.09 82.82 21.03 82.82 19.46
FESX First Essex Bancorp of MA* 0.61 136.64 1.32 8.16 102.55 7.86 102.55 9.67
FFES First FS&LA of E. Hartford CT 0.83 40.36 1.94 8.71 77.39 4.79 77.63 8.80
FSSB First FS&LA of San Bern. CA 4.86 16.11 1.21 NM 56.27 3.18 58.93 NM
FFSX First FS&LA. MHC of IA (45.0) 0.17 229.25 0.53 15.04 113.19 9.52 113.77 16.36
FFML First Family Bank, FSB of FL 0.42 105.69 0.61 8.97 133.16 7.47 133.16 15.22
FFSW First Fed Fin. Serv. of OH 0.15 196.94 0.47 12.24 182.66 9.72 200.82 15.21
BDJI First Fed. Bancorp. of MN 0.23 211.89 0.98 15.29 73.65 10.59 73.65 15.29
FFBH First Fed. Bancshares of AR 0.09 278.68 0.35 13.48 84.14 13.38 84.14 13.48
FFEC First Fed. Bancshares of WI 0.13 104.41 0.19 18.44 107.69 15.42 112.25 18.90
FTFC First Fed. Capital Corp. of WI NA NA 0.84 10.51 131.40 9.00 139.58 14.31
FFKY First Fed. Fin. Corp. of KY 0.45 102.40 0.53 16.29 183.92 25.82 197.07 18.70
<CAPTION>
Dividend Data(6)
_____________________
Ind. Divi-
Div./ dend Payout
Financial Institution Share Yield Ratio(7)
--------------------- _______ _______ _______
($) (%) (%)
NASDAQ Listed OTC Companies (continued)
_______________________________________
<S> <C> <C> <C> <C>
CIBI Community Inv. Corp. of OH 0.40 2.67 33.33
COOP Cooperative Bk.for Svgs. of NC 0.00 0.00 0.00
CNSK Covenant Bank for Svgs. of NJ* 0.00 0.00 0.00
CRZY Crazy Woman Creek Bncorp of WY 0.20 1.95 58.82
DNFC D&N Financial Corp. of MI 0.00 0.00 0.00
DSBC DS Bancor Inc. of Derby CT* 0.24 0.72 8.92
DFIN Damen Fin. Corp. of Chicago IL 0.24 2.04 54.55
DIME Dime Community Bancorp of NY 0.00 0.00 0.00
DIBK Dime Financial Corp. of CT* 0.28 1.90 14.51
EGLB Eagle BancGroup of IL 0.00 0.00 0.00
EBSI Eagle Bancshares of Tucker GA 0.60 4.00 39.22
EGFC Eagle Financial Corp. of CT 0.92 3.79 25.14
ETFS East Texas Fin. Serv. of TX 0.20 1.36 22.99
EBCP Eastern Bancorp of NH 0.56 3.29 40.00
ESBK Elmira SB of Elmira NY* 0.64 3.82 NM
EFBI Enterprise Fed. Bancorp of OH 0.00 0.00 0.00
EQSB Equitable FSB of Wheaton MD 0.00 0.00 0.00
FFFG F.F.O. Financial Group of FL 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI 0.72 4.17 70.59
FFBS FFBS Bancorp of Columbus MS 0.50 2.17 50.00
FFDF FFD Financial Corp. of OH 0.20 1.90 38.46
FFLC FFLC Bancorp of Leesburg FL 0.40 2.16 34.78
FFFC FFVA Financial Corp. of VA 0.40 2.39 33.61
FFWC FFW Corporation of Wabash IN 0.60 3.12 34.48
FFYF FFY Financial Corp. of OH 0.60 2.50 44.78
FMCO FMS Financial Corp. of NJ 0.20 1.25 11.83
FFHH FSF Financial Corp. of MN 0.50 4.21 NM
FMLY Family Bancorp of Haverhill MA(8)* 0.48 2.05 23.88
FMCT Farmers & Mechanics Bank of CT(8)* 0.00 0.00 0.00
FOBC Fed One Bancorp of Wheeling WV 0.54 3.86 41.22
FFRV Fid. Fin. Bkshrs. Corp. of VA 0.20 1.57 14.81
FBCI Fidelity Bancorp of Chicago IL 0.24 1.55 24.49
FSBI Fidelity Bancorp, Inc. of PA 0.32 2.00 25.60
FFFL Fidelity FSB, MHC of FL(47.2) 0.60 4.71 NM
FFED Fidelity Fed. Bancorp of IN 0.80 6.81 57.97
FFOH Fidelity Financial of OH 0.20 2.03 43.48
FIBC Financial Bancorp of NY 0.30 2.26 37.50
FNSC Financial Security Corp. of IL(8) 0.00 0.00 0.00
FSBS First Ashland Fin. Corp. of KY(8) 0.00 0.00 0.00
FBSI First Bancshares of MO 0.20 1.27 25.00
FBBC First Bell Bancorp of PA 0.20 1.44 21.28
FBER First Bergen Bancorp of NJ 0.00 0.00 0.00
FCIT First Cit. Fin. Corp of MD 0.00 0.00 0.00
FFBA First Colorado Bancorp of Co 0.32 2.37 46.38
FDEF First Defiance Fin.Corp. of OH 0.28 2.77 52.83
FESX First Essex Bancorp of MA* 0.48 4.60 37.50
FFES First FS&LA of E. Hartford CT 0.60 3.48 30.30
FSSB First FS&LA of San Bern. CA 0.00 0.00 NM
FFSX First FS&LA. MHC of IA (45.0) 0.72 2.95 44.44
FFML First Family Bank, FSB of FL 0.16 0.76 6.84
FFSW First Fed Fin. Serv. of OH 0.48 1.63 19.92
BDJI First Fed. Bancorp. of MN 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 0.00 0.00 0.00
FFEC First Fed. Bancshares of WI 0.28 1.85 34.15
FTFC First Fed. Capital Corp. of WI 0.64 3.24 34.04
FFKY First Fed. Fin. Corp. of KY 0.48 2.23 36.36
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
Key Financial Ratios
__________________________________________________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
_____________________ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
_______________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FFBZ First Federal Bancorp of OH 7.81 7.80 1.10 14.70 9.76 1.08 14.45
FFWM First Fin. Corp of Western MD 12.53 12.53 0.42 3.52 3.05 0.39 3.24
FFCH First Fin. Holdings Inc. of SC 6.61 6.61 0.75 11.29 8.76 0.77 11.50
FFBI First Financial Bancorp of IL 8.87 8.87 0.69 6.63 7.23 0.72 6.93
FFHC First Financial Corp. of WI 7.33 6.96 1.28 18.90 10.53 1.24 18.41
FFHS First Franklin Corp. of OH 9.51 9.51 0.63 6.59 7.33 0.62 6.47
FGHC First Georgia Hold. Corp of GA 8.16 7.22 0.86 10.81 9.83 0.86 10.81
FSPG First Home SB, SLA of NJ 6.52 6.34 1.01 15.73 12.34 0.98 15.30
FFSL First Independence Corp. of KS 12.64 12.64 1.14 8.56 10.91 1.14 8.56
FISB First Indiana Corp. of IN 8.96 8.83 1.17 13.93 9.76 1.00 11.82
FKFS First Keystone Fin. Corp of PA 8.28 8.28 0.48 5.48 5.94 0.51 5.92
FLKY First Lancaster Bncshrs of KY 29.83 29.83 1.20 4.01 4.04 1.20 4.01
FLFC First Liberty Fin. Corp. of GA 6.83 5.74 0.96 14.60 10.36 0.76 11.54
CASH First Midwest Fin. Corp. of IA 12.55 11.70 1.22 9.29 8.97 0.97 7.38
FMBD First Mutual Bancorp of IL 25.26 25.26 0.98 4.24 5.22 0.95 4.10
FMSB First Mutual SB of Bellevue WA* 6.64 6.64 1.02 15.30 11.84 1.01 15.08
FNGB First Northern Cap. Corp of WI 12.73 12.73 0.84 6.54 6.75 0.72 5.58
FFPB First Palm Beach Bancorp of FL 7.64 7.44 0.68 8.13 8.35 0.67 8.08
FSNJ First SB of NJ, MHC (45.0) 8.13 8.13 0.04 0.52 0.57 0.37 4.27
FSBC First SB, FSB of Clovis NM 4.74 4.74 0.31 6.79 9.64 0.24 5.25
FSLA First SB, SLA MHC of NJ (37.6) 9.49 8.24 0.86 9.52 7.63 0.83 9.13
SOPN First SB, SSB, Moore Co. of NC 26.21 26.21 1.48 5.67 5.63 1.50 5.78
FWWB First Savings Bancorp of WA* 25.80 25.80 1.02 8.65 3.59 1.00 8.48
SHEN First Shenango Bancorp of PA 13.24 13.24 1.01 7.19 7.07 0.95 6.79
FSFC First So.east Fin. Corp. of SC(8) 19.61 19.61 0.90 4.60 8.32 0.89 4.55
FSFI First State Fin. Serv. of NJ(8) 6.84 6.49 0.63 9.28 7.49 0.49 7.25
FFDP FirstFed Bancshares of IL 9.02 8.61 0.63 6.51 6.77 0.39 4.08
FLAG Flag Financial Corp of GA 9.56 9.56 0.91 9.92 8.75 0.81 8.79
FFPC Florida First Bancorp of FL(8) 6.92 6.92 0.85 12.80 6.74 0.78 11.77
FFIC Flushing Fin. Corp. of NY* 18.72 18.72 0.58 4.55 2.80 0.56 4.36
FBHC Fort Bend Holding Corp. of TX 7.20 7.20 0.71 9.74 12.12 0.62 8.55
FTSB Fort Thomas Fin. Corp. of KY 24.30 24.30 1.30 5.84 4.28 1.30 5.84
FKKY Frankfort First Bancorp of KY 34.52 34.52 1.36 4.94 4.42 1.08 3.91
GFSB GFS Bancorp of Grinnell IA 12.04 12.04 1.09 8.45 7.75 1.06 8.29
GUPB GFSB Bancorp of Gallup NM 23.03 23.03 1.24 5.07 5.74 1.24 5.07
GWBC Gateway Bancorp of KY 25.00 25.00 1.05 3.92 4.89 1.05 3.92
GBCI Glacier Bancorp of MT 9.63 9.61 1.59 16.27 8.33 1.59 16.27
GLBK Glendale Co-op. Bank of MA* 16.31 16.31 0.78 4.96 6.85 0.65 4.17
GFCO Glenway Financial Corp. of OH 9.41 9.16 0.56 5.87 6.94 0.54 5.62
GTPS Great American Bancorp of IL 27.55 27.55 0.68 2.55 3.03 0.66 2.49
GTFN Great Financial Corp. of KY 11.35 11.17 1.00 8.15 5.93 0.81 6.62
GSBC Great Southern Bancorp of MO 10.12 9.95 1.72 17.10 9.19 1.62 16.07
GDVS Greater DV SB,MHC of PA(19.9)* 12.29 12.29 0.48 3.95 3.50 0.48 3.95
GRTR Greater New York SB of NY* 5.68 5.68 0.46 8.39 8.48 0.45 8.20
GSFC Green Street Fin. Corp. of NC 31.53 31.53 1.42 4.50 4.82 1.42 4.50
GROV GroveBank for Savings of MA* 6.24 6.23 0.81 13.33 10.21 0.77 12.57
GFED Guaranty FS&LA,MHC of MO(31.1) 14.64 14.64 1.02 7.29 4.94 0.55 3.89
GSLC Guaranty Svgs & Loan FA of VA 6.19 6.19 0.68 11.24 9.33 0.42 6.90
HEMT HF Bancorp of Hemet CA 11.44 11.43 0.19 1.70 2.16 0.19 1.70
HFFC HF Financial Corp. of SD(8) 8.97 8.95 0.78 8.71 9.25 0.61 6.80
HFNC HFNC Financial Corp. of NC 34.11 34.11 0.80 3.76 2.00 0.95 4.46
HMNF HMN Financial, Inc. of MN 16.76 16.76 1.10 6.35 7.41 0.99 5.67
HALL Hallmark Capital Corp. of WI 7.82 7.82 0.57 6.40 7.86 0.51 5.73
HARB Harbor FSB, MHC of FL (45.7) 8.86 8.86 1.19 13.64 8.60 1.18 13.58
HRBF Harbor Federal Bancorp of MD 14.17 14.17 0.61 3.19 4.56 0.61 3.19
HFSA Hardin Bancorp of Hardin MO 19.24 19.24 0.64 4.18 4.09 0.64 4.18
<CAPTION>
Asset Quality Ratios Pricing Ratios
_______________________ ______________________________________
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Financial Institution Assets NPAs Loans Earning Book Assets Book Earnings
--------------------- _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (X) (%) (%) (%) (x)
NASDAQ Listed OTC Companies (continued)
_______________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFBZ First Federal Bancorp of OH 0.62 144.45 1.01 10.25 142.19 11.10 142.36 10.43
FFWM First Fin. Corp of Western MD 2.02 116.36 3.17 NM 112.30 14.07 112.30 NM
FFCH First Fin. Holdings Inc. of SC 1.36 55.75 0.93 11.42 123.01 8.13 123.01 11.21
FFBI First Financial Bancorp of IL 0.53 75.27 0.55 13.84 93.04 8.26 93.04 13.25
FFHC First Financial Corp. of WI 0.43 100.08 0.67 9.49 166.44 12.21 175.28 9.74
FFHS First Franklin Corp. of OH 0.73 57.88 0.64 13.64 86.66 8.24 86.66 13.89
FGHC First Georgia Hold. Corp of GA 1.51 47.32 0.84 10.17 104.71 8.54 118.34 10.17
FSPG First Home SB, SLA of NJ 0.97 79.35 1.40 8.11 118.57 7.73 121.83 8.33
FFSL First Independence Corp. of KS 0.96 70.41 1.10 9.16 81.12 10.25 81.12 9.16
FISB First Indiana Corp. of IN NA NA 1.33 10.25 135.29 12.12 137.27 12.08
FKFS First Keystone Fin. Corp of PA 2.86 19.07 0.91 16.83 95.29 7.89 95.29 15.60
FLKY First Lancaster Bncshrs of KY 1.23 16.83 0.23 24.76 99.26 29.61 99.26 24.76
FLFC First Liberty Fin. Corp. of GA 0.88 92.83 1.12 9.65 123.22 8.42 146.75 12.21
CASH First Midwest Fin. Corp. of IA 0.39 148.22 0.81 11.15 100.14 12.57 107.41 14.03
FMBD First Mutual Bancorp of IL 0.16 256.84 0.52 19.16 70.59 17.83 70.59 19.81
FMSB First Mutual SB of Bellevue WA* 0.19 359.89 0.83 8.45 121.65 8.08 121.65 8.57
FNGB First Northern Cap. Corp of WI 0.13 358.40 0.52 14.81 95.43 12.15 95.43 17.33
FFPB First Palm Beach Bancorp of FL NA NA NA 11.98 93.75 7.16 96.29 12.05
FSNJ First SB of NJ, MHC (45.0) 0.92 49.72 1.31 NM 79.10 6.43 79.10 21.21
FSBC First SB, FSB of Clovis NM 1.44 21.82 0.98 10.38 69.97 3.31 69.97 13.41
FSLA First SB, SLA MHC of NJ (37.6) 0.96 55.11 1.08 13.10 116.24 11.03 133.86 13.66
SOPN First SB, SSB, Moore Co. of NC 0.03 936.92 0.35 17.75 98.94 25.93 98.94 17.40
FWWB First Savings Bancorp of WA* 0.23 283.53 1.12 NM 96.72 24.95 96.72 NM
SHEN First Shenango Bancorp of PA 0.49 146.55 1.10 14.15 99.85 13.22 99.85 14.98
FSFC First So.east Fin. Corp. of SC(8) 0.14 238.66 0.52 12.03 54.57 10.70 54.57 12.18
FSFI First State Fin. Serv. of NJ(8) 4.97 21.02 1.28 13.34 119.83 8.20 126.46 17.08
FFDP FirstFed Bancshares of IL NA NA 0.37 14.77 97.77 8.82 102.39 23.55
FLAG Flag Financial Corp of GA 1.69 36.23 0.90 11.43 111.52 10.66 111.52 12.90
FFPC Florida First Bancorp of FL(8) 0.82 150.67 2.11 14.83 178.21 12.34 178.21 16.12
FFIC Flushing Fin. Corp. of NY* 0.90 80.61 1.78 NM 98.45 18.43 98.45 NM
FBHC Fort Bend Holding Corp. of TX 1.29 42.72 1.42 8.25 79.03 5.69 79.03 9.39
FTSB Fort Thomas Fin. Corp. of KY 1.78 19.53 0.42 23.39 120.54 29.29 120.54 23.39
FKKY Frankfort First Bancorp of KY 0.10 66.67 0.09 22.64 86.52 29.87 86.52 NM
GFSB GFS Bancorp of Grinnell IA 0.97 52.35 0.61 12.90 107.09 12.89 107.09 13.15
GUPB GFSB Bancorp of Gallup NM NA NA 0.87 17.43 77.53 17.85 77.53 17.43
GWBC Gateway Bancorp of KY 0.19 57.04 0.46 20.45 86.98 21.75 86.98 20.45
GBCI Glacier Bancorp of MT 0.23 225.96 0.72 12.00 185.10 17.82 185.43 12.00
GLBK Glendale Co-op. Bank of MA* NA NA 0.70 14.60 69.59 11.35 69.59 17.37
GFCO Glenway Financial Corp. of OH NA NA 0.29 14.42 82.22 7.73 84.44 15.08
GTPS Great American Bancorp of IL 0.45 53.28 0.37 NM 77.27 21.29 77.27 NM
GTFN Great Financial Corp. of KY 4.16 11.85 0.67 16.85 136.11 15.45 138.35 20.73
GSBC Great Southern Bancorp of MO 2.03 106.34 2.54 10.89 179.52 18.17 182.56 11.59
GDVS Greater DV SB,MHC of PA(19.9)* 3.05 22.60 1.18 NM 112.87 13.87 112.87 NM
GRTR Greater New York SB of NY* 9.21 9.89 2.16 11.80 95.37 5.42 95.37 12.07
GSFC Green Street Fin. Corp. of NC 0.16 67.98 0.19 20.76 93.40 29.44 93.40 20.76
GROV GroveBank for Savings of MA* NA NA 0.79 9.80 121.90 7.61 122.16 10.39
GFED Guaranty FS&LA,MHC of MO(31.1) 0.07 NA 1.59 20.26 135.21 19.79 135.21 NM
GSLC Guaranty Svgs & Loan FA of VA 3.14 23.56 0.94 10.71 108.23 6.69 108.23 17.44
HEMT HF Bancorp of Hemet CA 0.59 60.30 1.21 NM 70.88 8.11 70.94 NM
HFFC HF Financial Corp. of SD(8) 0.69 93.68 0.88 10.82 90.45 8.12 90.72 13.86
HFNC HFNC Financial Corp. of NC 1.62 64.19 1.59 NM 112.60 38.41 112.60 NM
HMNF HMN Financial, Inc. of MN 0.14 305.95 0.73 13.50 86.94 14.57 86.94 15.10
HALL Hallmark Capital Corp. of WI 0.09 390.48 0.60 12.72 78.89 6.17 78.89 14.22
HARB Harbor FSB, MHC of FL (45.7) 0.57 193.72 1.46 11.63 148.99 13.20 148.99 11.68
HRBF Harbor Federal Bancorp of MD 0.23 97.99 0.37 21.93 78.62 11.14 78.62 21.93
HFSA Hardin Bancorp of Hardin MO 0.11 140.43 0.29 24.48 77.51 14.91 77.51 24.48
<CAPTION>
Dividend Data(6)
_____________________
Ind. Divi-
Div./ dend Payout
Financial Institution Share Yield Ratio(7)
--------------------- _______ _______ _______
($) (%) (%)
NASDAQ Listed OTC Companies (continued)
_______________________________________
<S> <C> <C> <C> <C>
FFBZ First Federal Bancorp of OH 0.44 1.80 18.41
FFWM First Fin. Corp of Western MD 0.48 2.29 NM
FFCH First Fin. Holdings Inc. of SC 0.64 3.46 39.51
FFBI First Financial Bancorp of IL 0.00 0.00 0.00
FFHC First Financial Corp. of WI 0.60 2.71 25.75
FFHS First Franklin Corp. of OH 0.32 2.13 29.09
FGHC First Georgia Hold. Corp of GA 0.00 0.00 0.00
FSPG First Home SB, SLA of NJ 0.48 2.70 21.92
FFSL First Independence Corp. of KS 0.40 2.24 20.51
FISB First Indiana Corp. of IN 0.56 2.59 26.54
FKFS First Keystone Fin. Corp of PA 0.00 0.00 0.00
FLKY First Lancaster Bncshrs of KY 0.00 0.00 0.00
FLFC First Liberty Fin. Corp. of GA 0.52 2.51 24.19
CASH First Midwest Fin. Corp. of IA 0.44 2.02 22.56
FMBD First Mutual Bancorp of IL 0.28 2.40 45.90
FMSB First Mutual SB of Bellevue WA* 0.20 1.63 13.79
FNGB First Northern Cap. Corp of WI 0.60 3.93 58.25
FFPB First Palm Beach Bancorp of FL 0.40 1.98 23.67
FSNJ First SB of NJ, MHC (45.0) 0.50 3.57 NM
FSBC First SB, FSB of Clovis NM 0.00 0.00 0.00
FSLA First SB, SLA MHC of NJ (37.6) 0.40 2.46 32.26
SOPN First SB, SSB, Moore Co. of NC 0.60 3.38 60.00
FWWB First Savings Bancorp of WA* 0.20 1.36 37.74
SHEN First Shenango Bancorp of PA 0.48 2.36 33.33
FSFC First So.east Fin. Corp. of SC(8) 0.16 1.71 20.51
FSFI First State Fin. Serv. of NJ(8) 0.22 1.72 22.92
FFDP FirstFed Bancshares of IL 0.40 2.46 36.36
FLAG Flag Financial Corp of GA 0.34 2.83 32.38
FFPC Florida First Bancorp of FL(8) 0.24 2.16 32.00
FFIC Flushing Fin. Corp. of NY* 0.00 0.00 0.00
FBHC Fort Bend Holding Corp. of TX 0.28 1.65 13.59
FTSB Fort Thomas Fin. Corp. of KY 0.25 1.53 35.71
FKKY Frankfort First Bancorp of KY 0.36 3.00 67.92
GFSB GFS Bancorp of Grinnell IA 0.40 1.98 25.48
GUPB GFSB Bancorp of Gallup NM 0.40 3.02 52.63
GWBC Gateway Bancorp of KY 0.40 2.96 60.61
GBCI Glacier Bancorp of MT 0.64 3.03 36.36
GLBK Glendale Co-op. Bank of MA* 0.00 0.00 0.00
GFCO Glenway Financial Corp. of OH 0.68 3.44 49.64
GTPS Great American Bancorp of IL 0.40 2.88 NM
GTFN Great Financial Corp. of KY 0.48 1.84 30.97
GSBC Great Southern Bancorp of MO 0.70 2.59 28.23
GDVS Greater DV SB,MHC of PA(19.9)* 0.36 3.60 NM
GRTR Greater New York SB of NY* 0.00 0.00 0.00
GSFC Green Street Fin. Corp. of NC 0.40 3.11 64.52
GROV GroveBank for Savings of MA* 0.72 2.48 24.32
GFED Guaranty FS&LA,MHC of MO(31.1) 0.64 5.45 NM
GSLC Guaranty Svgs & Loan FA of VA 0.10 1.33 14.29
HEMT HF Bancorp of Hemet CA 0.00 0.00 0.00
HFFC HF Financial Corp. of SD(8) 0.33 2.16 23.40
HFNC HFNC Financial Corp. of NC 0.00 0.00 0.00
HMNF HMN Financial, Inc. of MN 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 0.00 0.00 0.00
HARB Harbor FSB, MHC of FL (45.7) 1.20 4.80 55.81
HRBF Harbor Federal Bancorp of MD 0.40 3.20 70.18
HFSA Hardin Bancorp of Hardin MO 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
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
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 9.77 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 4.53 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 3.04 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 5.21 0.89 4.74 0.20 75.00 0.28
HAVN Haven Bancorp of Woodhaven NY 6.30 6.26 0.67 10.24 7.76 0.66 10.11 NA NA 1.46
HVFD Haverfield Corp. of OH 8.30 8.27 0.65 8.20 6.52 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 9.96 0.54 7.95 0.42 146.75 1.03
HBNK Highland Federal Bank of CA 7.83 7.83 0.22 2.87 2.87 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 10.36 1.11 10.78 NA NA 0.94
HNFC Hinsdale Financial Corp. of IL 7.97 7.72 0.62 8.20 6.65 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 2.95 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 12.11 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 10.00 1.16 13.98 4.75 35.71 2.59
HWEN Home Financial Bancorp of IN 19.64 19.64 0.99 5.06 7.14 0.99 5.06 0.39 76.34 0.37
HOFL Home Financial Corp. of FL(8) 25.51 25.51 1.71 6.69 6.33 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 11.74 1.76 15.32 0.65 216.13 1.75
HMCI Homecorp, Inc. of Rockford IL 6.07 6.07 0.37 6.28 6.54 0.25 4.26 3.24 15.53 0.65
LOAN Horizon Bancorp, Inc of TX* 8.65 8.35 1.54 17.77 13.78 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 4.88 0.43 3.44 1.57 28.85 0.67
HRZB Horizon Financial Corp. of WA* 16.19 16.19 1.53 9.53 8.16 1.53 9.53 NA NA 0.82
IBSF IBS Financial Corp. of NJ 20.39 20.39 1.10 5.11 5.38 1.12 5.18 0.07 198.42 0.66
ISBF ISB Financial Corp. of LA 19.37 19.36 1.26 6.94 6.70 1.26 6.94 NA NA 0.91
ITLA Imperial Thrift & Loan of CA* 9.00 9.00 0.90 9.88 5.56 0.90 9.88 2.77 50.81 1.82
IFSB Independence FSB of DC 6.48 5.57 0.55 8.92 14.93 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 4.87 0.68 4.41 NA NA 0.61
IFSL Indiana Federal Corp. of IN 9.82 9.13 1.02 10.77 8.32 0.96 10.08 1.41 65.46 1.20
INBI Industrial Bancorp of OH 19.12 19.12 1.48 8.08 7.81 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 8.54 1.00 13.71 0.59 59.11 0.62
IPSW Ipswich SB of Ipswich MA* 6.32 6.32 1.39 22.24 12.71 1.21 19.44 NA NA 1.25
IROQ Iroquois Bancorp of Auburn NY* 6.08 6.08 0.86 14.60 10.67 0.86 14.51 1.60 46.24 1.00
JSBF JSB Financial, Inc. of NY 21.82 21.82 1.47 6.73 6.66 1.55 7.13 NA NA 0.61
JXVL Jacksonville Bancorp of TX 16.70 16.70 0.79 6.76 5.76 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 3.69 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 5.47 1.00 7.78 0.46 54.63 1.08
JSBA Jefferson Svgs Bancorp of MO 7.02 5.75 0.60 8.20 6.40 0.59 8.04 0.97 48.62 0.66
JOAC Joachim Bancorp of MO 29.24 29.24 0.65 3.14 2.26 0.65 3.14 0.01 NA 0.31
KSAV KS Bancorp of Kenly NC 15.17 15.15 1.14 6.94 7.55 1.15 7.03 0.73 41.55 0.37
KSBK KSB Bancorp of Kingfield ME* 6.85 6.30 0.79 12.18 11.87 0.76 11.67 1.73 40.97 1.04
KFBI Klamath First Bancorp of OR 27.73 27.73 1.34 6.14 4.71 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
LSBI LSB Bancorp of Lafayette IN 10.66 10.66 0.82 6.96 8.53 0.78 6.58 0.19 295.51 0.65
LVSB Lakeview SB of Paterson NJ 9.95 7.64 1.15 10.31 11.14 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 11.21 1.31 12.75 0.70 142.16 1.31
LSBX Lawrence Savings Bank of MA* 7.56 7.56 1.12 14.66 14.03 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 9.40 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 5.83 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 1.15 35.02 0.49
LBCI Liberty Bancorp of Chicago IL 9.53 9.50 0.56 5.51 6.17 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 1.76 0.16 1.75 1.56 20.85 0.94
LOGN Logansport Fin. Corp. of IN 26.77 26.77 1.41 5.71 6.08 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 6.34 0.89 8.20 NA NA 1.45
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book 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 10.23 116.51 8.22 116.51 10.06 0.40 2.29 23.39
HARS Harris SB, MHC of PA (23.1) 22.08 119.85 14.46 127.94 22.39 0.58 3.60 NM
HFFB Harrodsburg 1st Fin Bcrp of KY NM 112.89 32.36 112.89 NM 0.40 2.48 NM
HHFC Harvest Home Fin. Corp. of OH 19.20 90.44 16.87 90.44 19.20 0.40 3.02 57.97
HAVN Haven Bancorp of Woodhaven NY 12.89 131.76 8.30 132.55 13.07 0.60 2.09 26.91
HVFD Haverfield Corp. of OH 15.34 123.23 10.23 123.64 16.29 0.54 2.96 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* 10.04 95.96 6.24 95.96 12.61 0.28 1.96 19.72
HBNK Highland Federal Bank of CA NM 99.47 7.79 99.47 NM 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA* 9.66 100.86 10.12 100.86 9.66 0.36 2.57 24.83
HNFC Hinsdale Financial Corp. of IL 15.03 117.57 9.37 121.30 15.63 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 107.47 15.19 107.47 NM 0.30 1.50 50.85
HOMF Home Fed Bancorp of Seymour IN 8.25 116.20 9.63 120.86 9.51 0.50 1.90 15.72
HFMD Home Federal Corporation of MD(8) 10.00 134.95 11.63 136.80 10.20 0.00 0.00 0.00
HWEN Home Financial Bancorp of IN 14.00 70.90 13.93 70.90 14.00 0.00 0.00 0.00
HOFL Home Financial Corp. of FL(8) 15.81 103.80 26.48 103.80 16.61 0.80 6.10 NM
HPBC Home Port Bancorp, Inc. of MA* 8.52 131.08 14.76 131.08 8.46 0.60 4.49 38.22
HMCI Homecorp, Inc. of Rockford IL 15.29 92.99 5.64 92.99 22.53 0.00 0.00 0.00
LOAN Horizon Bancorp, Inc of TX* 7.26 113.78 9.84 117.80 9.28 0.16 1.78 12.90
HZFS Horizon Fin'l. Services of IA 20.49 79.05 9.15 79.05 22.01 0.32 2.17 44.44
HRZB Horizon Financial Corp. of WA* 12.25 112.05 18.14 112.05 12.25 0.40 2.97 36.36
IBSF IBS Financial Corp. of NJ 18.58 97.49 19.88 97.49 18.32 0.24 1.82 33.80
ISBF ISB Financial Corp. of LA 14.92 89.31 17.30 89.36 14.92 0.32 2.19 32.65
ITLA Imperial Thrift & Loan of CA* 17.97 174.01 15.66 174.01 17.97 0.00 0.00 0.00
IFSB Independence FSB of DC 6.70 55.16 3.57 64.20 14.17 0.22 2.99 20.00
INCB Indiana Comm. Bank, SB of IN 20.52 89.58 13.42 89.58 20.52 0.35 2.55 52.24
IFSL Indiana Federal Corp. of IN 12.02 126.01 12.38 135.57 12.84 0.72 3.84 46.15
INBI Industrial Bancorp of OH 12.80 93.25 17.83 93.25 12.80 0.30 2.86 36.59
IWBK Interwest SB of Oak Harbor WA 11.71 165.76 11.40 170.65 12.70 0.52 2.14 25.12
IPSW Ipswich SB of Ipswich MA* 7.87 155.82 9.85 155.82 9.00 0.20 1.78 13.99
IROQ Iroquois Bancorp of Auburn NY* 9.38 128.53 7.81 128.53 9.43 0.32 2.13 20.00
JSBF JSB Financial, Inc. of NY 15.01 100.52 21.94 100.52 14.17 1.20 3.65 54.79
JXVL Jacksonville Bancorp of TX 17.37 76.66 12.81 76.66 17.37 0.50 4.88 NM
JXSB Jcksnville SB,MHC of IL(43.3%) NM 96.94 11.43 96.94 NM 0.40 3.08 NM
JEBC Jefferson Bancorp of Gretna LA(8) 18.28 137.14 18.33 137.14 18.28 0.30 1.36 24.79
JSBA Jefferson Svgs Bancorp of MO 15.63 123.76 8.69 151.08 15.94 0.32 1.35 21.05
JOAC Joachim Bancorp of MO NM 87.42 25.56 87.42 NM 0.50 4.04 NM
KSAV KS Bancorp of Kenly NC 13.25 97.28 14.75 97.42 13.07 0.60 3.00 39.74
KSBK KSB Bancorp of Kingfield ME* 8.43 96.44 6.61 104.80 8.79 0.22 0.98 8.24
KFBI Klamath First Bancorp of OR 21.21 93.96 26.06 93.96 21.21 0.26 1.86 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
LSBI LSB Bancorp of Lafayette IN 11.72 83.52 8.91 83.52 12.40 0.32 2.13 25.00
LVSB Lakeview SB of Paterson NJ 8.98 98.80 9.83 128.66 14.96 0.25 1.27 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 8.92 111.56 11.91 111.56 9.24 0.44 2.89 25.73
LSBX Lawrence Savings Bank of MA* 7.13 96.53 7.30 96.53 7.04 0.00 0.00 0.00
LFCT Leader Fin. Corp of Memphis TN(8) 10.64 167.25 13.43 167.25 10.89 0.72 1.67 17.82
LFED Leeds FSB, MHC of MD (35.3) 17.14 105.69 17.29 105.69 17.14 0.64 4.79 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 16.21 91.58 8.72 91.83 16.21 0.60 2.55 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 71.73 10.92 78.01 NM 0.10 0.98 55.56
LOGN Logansport Fin. Corp. of IN 16.45 80.70 21.60 80.70 16.67 0.40 3.20 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 15.76 139.49 14.91 139.49 16.86 0.40 1.38 21.74
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
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)
_______________________________________
MAFB MAF Bancorp of IL 5.54 5.54 0.88 15.21 13.09 0.90 15.65 0.46 104.05 0.63
MBLF MBLA Financial Corp. of MO(8) 14.54 14.54 0.70 4.81 4.55 0.70 4.81 0.33 83.20 0.51
MFBC MFB Corp. of Mishawaka IN 19.32 19.32 0.69 3.40 4.71 0.68 3.35 NA NA 0.24
MLFB MLF Bancorp of Villanova PA 7.95 7.75 0.70 8.06 7.59 0.62 7.15 0.59 125.65 1.64
MSBB MSB Bancorp of Middletown NY* 9.69 9.52 0.53 5.65 4.74 0.57 6.05 NA NA 0.57
MSBF MSB Financial Corp. of MI 22.64 22.64 1.93 7.88 9.00 1.76 7.21 0.60 100.59 0.69
MGNL Magna Bancorp of MS 9.77 9.18 1.76 18.10 8.80 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 1.86 0.33 2.14 NA NA 0.20
MFSL Maryland Fed. Bancorp of MD 8.22 8.08 0.75 9.08 9.43 0.65 7.94 0.48 83.49 0.46
MASB MassBank Corp. of Reading MA* 10.16 10.16 1.04 10.42 9.46 1.02 10.20 0.33 87.49 1.00
MFLR Mayflower Co-Op. Bank of MA* 9.58 9.37 0.88 8.50 7.43 0.83 8.01 1.23 76.96 1.50
MECH Mechanics SB of Hartford CT* 9.49 9.49 -1.54 -16.23 -18.47 0.00 0.00 5.43 32.22 2.19
MDBK Medford Savings Bank of MA* 8.88 8.06 1.02 11.63 10.00 1.00 11.41 0.55 135.58 1.38
MERI Meritrust FSB of Thibodaux LA 7.44 7.44 1.01 13.99 9.25 1.01 13.99 0.22 143.29 0.64
MWBX Metro West of MA* 7.47 7.47 1.25 17.15 10.59 1.25 17.15 2.43 38.37 1.37
MSEA Metropolitan Bancorp of WA(8) 6.54 5.92 0.71 10.67 8.30 0.77 11.51 NA NA 1.81
MCBS Mid Continent Bancshares of KS 12.53 12.50 1.37 9.90 9.72 1.16 8.37 0.21 59.97 0.25
MIFC Mid Iowa Financial Corp. of IA 9.03 9.01 0.83 8.92 8.56 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 3.61 0.32 3.45 2.04 24.62 0.72
MWBI Midwest Bancshares, Inc. of IA 6.94 6.94 0.99 14.20 14.55 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 8.00 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 6.45 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 8.26 1.25 6.40 0.14 888.89 2.07
MBSP Mitchell Bancorp of NC* 38.73 38.73 0.81 2.09 2.82 0.78 2.02 1.41 23.59 0.41
MBBC Monterey Bay Bancorp of CA 14.98 14.80 0.19 1.27 1.55 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 0.35 -0.09 -1.71 0.11 215.12 0.83
NHTB NH Thrift Bancshares of NH 7.69 7.69 0.57 7.35 8.30 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 1.77 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 4.82 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 10.50 1.62 15.29 0.67 128.82 1.07
NASB North American SB of MO 7.35 7.05 1.33 18.45 12.60 1.27 17.61 3.36 26.33 1.05
NBSI North Bancshares of Chicago IL 17.34 17.34 0.57 3.03 3.54 0.52 2.75 NA NA 0.31
FFFD North Central Bancshares of IA 28.87 28.87 1.48 7.67 6.05 1.39 7.19 0.13 743.80 1.18
NEBC Northeast Bancorp of ME* 7.56 6.36 0.61 8.16 8.64 0.47 6.27 NA NA 1.48
NEIB Northeast Indiana Bncrp of IN 20.34 20.34 1.10 5.50 5.78 1.10 5.50 0.25 272.13 0.74
NSBK Northside SB of Bronx NY(8)* 7.74 7.67 1.14 15.51 9.44 0.98 13.39 NA NA 1.00
NWEQ Northwest Equity Corp. of WI 13.73 13.73 1.08 6.99 8.19 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 6.64 1.05 9.37 0.98 70.63 0.94
NSSY Norwalk Savings Society of CT* 7.98 7.98 0.75 8.92 7.48 0.64 7.63 3.01 27.48 1.20
NSSB Norwich Financial Corp. of CT* 10.58 9.54 0.84 7.50 6.88 0.84 7.50 1.92 113.80 3.44
NTMG Nutmeg FS&LA of CT 5.98 5.98 0.63 10.78 10.48 0.38 6.52 NA NA 0.56
OHSL OHSL Financial Corp. of OH 12.42 12.42 0.96 7.50 7.85 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 1.62 0.30 2.31 0.14 258.58 0.56
OCFC Ocean Fin. Corp. of NJ 18.75 18.75 0.90 4.82 6.47 0.92 4.93 0.97 59.78 0.97
OFCP Ottawa Financial Corp. of MI 10.92 8.75 0.92 4.93 4.47 0.92 4.93 0.38 95.16 0.45
PFFB PFF Bancorp of Pomona CA 14.39 14.23 0.10 1.37 0.94 0.10 1.37 2.29 42.84 1.23
PVFC PVF Capital Corp. of OH 6.71 6.71 1.13 17.84 11.30 0.99 15.71 NA NA NA
PCCI Pacific Crest Capital of CA* 7.90 7.90 1.09 20.44 11.11 0.88 16.48 2.76 41.11 1.82
PALM Palfed, Inc. of Aiken SC 8.45 8.04 0.66 8.56 6.63 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
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
MAFB MAF Bancorp of IL 7.64 113.58 6.29 113.58 7.42 0.32 1.35 10.29
MBLF MBLA Financial Corp. of MO(8) 22.00 106.43 15.47 106.43 22.00 0.40 1.82 40.00
MFBC MFB Corp. of Mishawaka IN 21.21 71.21 13.76 71.21 21.54 0.24 1.71 36.36
MLFB MLF Bancorp of Villanova PA 13.17 109.08 8.67 111.87 14.85 0.76 3.10 40.86
MSBB MSB Bancorp of Middletown NY* 21.08 112.69 10.92 114.68 19.66 0.60 3.43 72.29
MSBF MSB Financial Corp. of MI 11.11 90.14 20.41 90.14 12.14 0.50 2.94 32.68
MGNL Magna Bancorp of MS 11.36 193.16 18.87 205.64 12.03 1.20 3.43 38.96
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 114.00 17.47 114.00 NM 0.00 0.00 0.00
MFSL Maryland Fed. Bancorp of MD 10.61 96.35 7.92 97.99 12.13 0.64 2.23 23.62
MASB MassBank Corp. of Reading MA* 10.57 107.33 10.90 107.33 10.80 0.96 2.80 29.63
MFLR Mayflower Co-Op. Bank of MA* 13.46 112.72 10.80 115.23 14.29 0.40 2.86 38.46
MECH Mechanics SB of Hartford CT* NM 87.87 8.34 87.87 NM 0.00 0.00 NM
MDBK Medford Savings Bank of MA* 10.00 111.75 9.93 123.21 10.19 0.68 3.16 31.63
MERI Meritrust FSB of Thibodaux LA 10.81 143.15 10.65 143.15 10.81 0.60 1.92 20.76
MWBX Metro West of MA* 9.44 150.58 11.25 150.58 9.44 0.10 2.58 24.39
MSEA Metropolitan Bancorp of WA(8) 12.05 122.17 7.99 134.97 11.17 0.00 0.00 0.00
MCBS Mid Continent Bancshares of KS 10.29 101.81 12.75 101.98 12.16 0.40 2.22 22.86
MIFC Mid Iowa Financial Corp. of IA 11.68 99.36 8.97 99.52 12.14 0.08 1.29 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* NM 97.90 9.25 117.47 NM 0.60 3.38 NM
MWBI Midwest Bancshares, Inc. of IA 6.87 95.94 6.65 95.94 7.04 0.52 2.04 14.02
MWFD Midwest Fed. Fin. Corp of WI 12.50 149.51 13.97 156.57 15.56 0.30 1.97 24.59
MFFC Milton Fed. Fin. Corp. of OH 15.51 82.16 16.42 82.16 16.78 0.52 4.24 65.82
MIVI Miss. View Hold. Co. of MN 12.11 83.45 15.74 83.45 12.78 0.16 1.39 16.84
MBSP Mitchell Bancorp of NC* NM 74.06 28.68 74.06 NM 0.00 0.00 0.00
MBBC Monterey Bay Bancorp of CA NM 83.06 12.44 84.08 NM 0.10 0.86 55.56
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 62.57 3.41 62.57 NM 0.00 0.00 0.00
NHTB NH Thrift Bancshares of NH 12.05 87.03 6.69 87.03 11.49 0.50 5.00 60.24
NHSL NHS Financial, Inc. of CA(8) NM 109.92 9.27 110.14 NM 0.16 1.49 NM
NSLB NS&L Bancorp of Neosho MO 20.76 78.43 18.42 78.43 22.27 0.50 4.08 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 9.52 155.52 18.01 156.62 10.93 0.44 2.20 20.95
NASB North American SB of MO 7.94 138.48 10.17 144.27 8.32 0.63 2.12 16.84
NBSI North Bancshares of Chicago IL NM 90.13 15.63 90.13 NM 0.40 2.62 74.07
FFFD North Central Bancshares of IA 16.54 78.35 22.62 78.35 17.62 0.25 2.33 38.46
NEBC Northeast Bancorp of ME* 11.57 91.11 6.89 108.41 15.06 0.32 2.56 29.63
NEIB Northeast Indiana Bncrp of IN 17.31 87.07 17.71 87.07 17.31 0.30 2.48 42.86
NSBK Northside SB of Bronx NY(8)* 10.59 155.51 12.03 157.00 12.27 1.00 2.53 26.81
NWEQ Northwest Equity Corp. of WI 12.21 86.85 11.93 86.85 12.80 0.36 3.43 41.86
NWSB Northwest SB, MHC of PA(29.9) 15.07 136.31 14.55 138.02 15.07 0.30 2.73 41.10
NSSY Norwalk Savings Society of CT* 13.36 116.50 9.30 116.50 15.63 0.00 0.00 0.00
NSSB Norwich Financial Corp. of CT* 14.54 106.11 11.22 117.57 14.54 0.40 2.81 40.82
NTMG Nutmeg FS&LA of CT 9.54 100.69 6.03 100.69 15.76 0.00 0.00 0.00
OHSL OHSL Financial Corp. of OH 12.75 93.53 11.62 93.53 13.09 0.76 3.90 49.67
OSBF OSB Fin. Corp. of Oshkosh WI NM 83.93 10.57 83.93 NM 0.64 2.72 NM
OCFC Ocean Fin. Corp. of NJ 15.45 74.43 13.96 74.43 15.09 0.00 0.00 0.00
OFCP Ottawa Financial Corp. of MI 22.39 108.04 11.80 134.78 22.39 0.32 1.99 44.44
PFFB PFF Bancorp of Pomona CA NM 72.89 10.49 73.75 NM 0.00 0.00 0.00
PVFC PVF Capital Corp. of OH 8.85 145.24 9.74 145.24 10.05 0.00 0.00 0.00
PCCI Pacific Crest Capital of CA* 9.00 109.27 8.64 109.27 11.16 0.00 0.00 0.00
PALM Palfed, Inc. of Aiken SC 15.09 122.60 10.36 128.85 17.93 0.08 0.65 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
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
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)
_______________________________________
PVSA Parkvale Financial Corp of PA 7.42 7.39 1.05 14.79 11.21 0.98 13.82 NA NA 2.19
PBIX Patriot Bank Corp. of PA 17.29 17.29 0.56 3.99 3.20 0.57 4.08 0.23 243.20 0.88
PEEK Peekskill Fin. Corp. of NY 30.67 30.67 1.06 4.96 3.88 1.11 5.19 0.83 31.67 1.32
PFSB PennFed Fin. Services of NJ 8.97 7.11 0.73 7.10 8.52 0.79 7.70 0.96 26.31 0.44
PWBC PennFirst Bancorp of PA 7.85 7.15 0.61 7.47 7.14 0.60 7.40 0.64 63.45 1.45
PWBK Pennwood SB of PA* 18.92 18.92 0.66 3.51 5.70 0.97 5.12 3.50 35.57 2.18
PBKB People's SB of Brockton MA* 4.93 4.67 0.73 12.13 8.00 0.53 8.69 1.27 76.25 1.93
PFDC Peoples Bancorp of Auburn IN 15.26 15.26 1.45 9.62 8.72 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 9.05 0.89 11.81 1.37 73.39 1.66
PHBK Peoples Heritage Fin Grp of ME* 8.38 7.20 1.21 14.20 10.94 1.19 14.00 1.14 127.88 2.00
PBNB Peoples Sav. Fin. Corp. of CT* 10.81 10.00 0.85 7.91 8.28 0.89 8.26 0.44 86.77 0.64
PERM Permanent Bancorp of IN 10.48 10.34 0.34 2.98 3.72 0.34 2.93 1.75 32.22 1.07
PMFI Perpetual Midwest Fin. of IA 9.64 9.64 0.41 4.10 4.23 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 5.42 1.00 5.36 0.04 31.25 0.10
PHFC Pittsburgh Home Fin. of PA 16.43 16.43 0.65 3.98 5.50 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 8.48 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 8.15 1.93 7.56 0.21 122.90 0.83
PKPS Poughkeepsie SB of NY 8.50 8.50 1.94 24.70 25.26 2.56 32.53 2.68 36.80 1.34
PRBC Prestige Bancorp of PA 14.72 14.72 0.39 2.62 4.05 0.39 2.62 0.38 82.47 0.47
PETE Primary Bank of NH* 6.34 6.31 -0.04 -0.64 -0.66 -0.04 -0.56 1.81 47.18 1.48
PSAB Prime Bancorp, Inc. of PA 9.44 8.83 1.02 10.92 8.76 0.91 9.70 NA NA 0.97
PFNC Progress Financial Corp. of PA 5.52 5.48 0.86 19.19 13.24 0.67 14.93 1.33 44.33 0.94
PSBK Progressive Bank, Inc. of NY* 8.86 8.86 0.98 10.51 9.50 1.01 10.82 1.09 97.07 1.52
PROV Provident Fin. Holdings of CA 13.90 13.90 0.15 1.10 1.74 0.43 3.07 2.22 40.31 0.99
PULB Pulaski SB, MHC of MO (29.0) 12.63 12.63 0.84 6.93 5.59 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 7.72 1.18 10.14 NA NA 1.84
QCFB QCF Bancorp of Virginia MN 21.81 21.81 1.52 7.75 8.61 1.52 7.75 NA NA NA
QCBC Quaker City Bancorp of CA 9.88 9.82 0.50 4.91 6.46 0.48 4.74 2.31 57.33 1.54
QCSB Queens County SB of NY* 16.98 16.98 1.72 9.78 7.17 1.77 10.10 0.75 120.88 1.09
RCSB RCSB Financial, Inc. of NY* 7.30 7.05 0.93 10.94 11.42 0.93 10.87 0.78 85.48 1.30
RARB Raritan Bancorp. of Raritan NJ* 7.24 7.06 0.81 10.82 9.19 0.80 10.65 0.48 155.58 1.32
REDF RedFed Bancorp of Redlands CA 5.63 5.63 -0.47 -8.41 -12.11 -0.45 -8.09 4.50 31.29 1.76
RELY Reliance Bancorp of NY 8.86 5.98 0.88 6.79 7.12 0.85 6.49 NA NA 0.55
RELI Reliance Bancshares Inc of WI* 56.23 56.23 1.47 2.62 3.52 1.47 2.62 NA NA 0.49
RFED Roosevelt Fin. Grp. Inc. of MO 4.86 4.59 0.63 13.98 8.12 0.85 18.94 0.85 27.42 0.54
RVSB Rvrview SB,FSB MHC of WA(40.3) 11.02 9.75 1.30 11.97 8.42 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 5.16 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 -3.20 -0.20 -1.63 1.68 29.38 1.02
SFED SFS Bancorp of Schenectady NY 14.05 14.05 0.63 4.91 5.86 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 1.55 0.11 1.12 1.84 13.07 0.31
SISB SIS Bank of Sprinfield MA* 7.42 7.42 1.26 17.35 12.90 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 9.60 0.79 9.63 1.34 64.69 1.31
SFBM Security Bancorp of MT 8.93 7.68 0.69 7.99 8.44 0.51 5.94 0.14 235.42 0.71
SECP Security Capital Corp. of WI 16.88 16.88 0.89 5.11 5.00 0.92 5.28 0.12 964.94 1.53
SFSL Security First Corp. of OH 8.71 8.47 1.18 13.57 10.91 1.23 14.21 0.44 208.07 1.02
SHFC Seven Hills Fin. Corp. of OH(8) 21.21 21.21 0.36 1.69 1.71 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 6.65 0.82 6.12 NA NA 0.75
SOBI Sobieski Bancorp of S. Bend IN 18.49 18.49 0.42 2.27 3.32 0.42 2.27 NA NA 0.41
SOSA Somerset Savings Bank of MA(8)* 5.46 5.46 0.32 6.25 6.17 0.32 6.25 9.10 14.87 1.74
SMBC Southern Missouri Bncrp of MO 16.40 16.40 0.88 5.01 5.52 0.82 4.69 0.97 39.01 0.66
SWBI Southwest Bancshares of IL 12.00 12.00 1.19 8.95 8.62 1.19 8.91 0.13 160.59 0.30
SVRN Sovereign Bancorp of PA 4.07 2.63 0.70 16.67 11.02 0.63 15.04 NA NA 0.60
STFR St. Francis Cap. Corp. of WI 10.43 9.96 1.30 11.85 10.49 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 8.39 0.86 9.44 0.49 175.47 1.21
STND Standard Fin. of Chicago IL 12.31 12.30 0.87 6.21 6.59 0.79 5.61 NA NA 0.48
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
PVSA Parkvale Financial Corp of PA 8.92 123.25 9.15 123.84 9.55 0.52 2.01 17.93
PBIX Patriot Bank Corp. of PA NM 84.81 14.66 84.81 NM 0.32 2.44 NM
PEEK Peekskill Fin. Corp. of NY NM 78.19 23.98 78.19 24.63 0.36 3.18 NM
PFSB PennFed Fin. Services of NJ 11.74 85.73 7.69 108.24 10.84 0.00 0.00 0.00
PWBC PennFirst Bancorp of PA 14.00 104.71 8.22 114.94 14.14 0.36 2.57 36.00
PWBK Pennwood SB of PA* 17.54 61.50 11.64 61.50 12.00 0.00 0.00 0.00
PBKB People's SB of Brockton MA* 12.50 117.53 5.80 124.16 17.45 0.28 3.03 37.84
PFDC Peoples Bancorp of Auburn IN 11.47 107.20 16.36 107.20 11.54 0.56 2.87 32.94
PBCT Peoples Bank, MHC of CT(32.3)* 11.05 148.73 11.89 148.73 13.73 0.80 3.81 42.11
PHBK Peoples Heritage Fin Grp of ME* 9.14 120.44 10.09 140.01 9.27 0.68 3.48 31.78
PBNB Peoples Sav. Fin. Corp. of CT* 12.08 94.81 10.25 102.50 11.57 0.92 4.23 51.11
PERM Permanent Bancorp of IN NM 81.64 8.56 82.74 NM 0.30 1.89 50.85
PMFI Perpetual Midwest Fin. of IA 23.63 96.53 9.30 96.53 23.63 0.30 1.74 41.10
PCBC Perry Co. Fin. Corp. of MO 18.47 86.25 17.99 86.25 18.47 0.30 1.85 34.09
PHFC Pittsburgh Home Fin. of PA 18.17 72.24 11.87 72.24 18.17 0.00 0.00 0.00
PFSL Pocahnts Fed, MHC of AR (46.4) 11.79 106.30 6.32 106.30 11.51 0.80 5.52 65.04
POBS Portsmouth Bank Shrs Inc of NH(8)* 12.26 111.30 27.89 111.30 14.61 0.60 4.62 56.60
PKPS Poughkeepsie SB of NY 3.96 85.59 7.27 85.59 3.01 0.10 2.05 8.13
PRBC Prestige Bancorp of PA 24.68 64.62 9.51 64.62 24.68 0.00 0.00 0.00
PETE Primary Bank of NH* NM 95.53 6.06 95.91 NM 0.00 0.00 NM
PSAB Prime Bancorp, Inc. of PA 11.41 119.05 11.24 127.30 12.85 0.68 3.70 42.24
PFNC Progress Financial Corp. of PA 7.56 118.83 6.56 119.77 9.71 0.08 1.31 9.88
PSBK Progressive Bank, Inc. of NY* 10.53 108.70 9.63 108.70 10.23 0.80 2.78 29.30
PROV Provident Fin. Holdings of CA NM 63.66 8.85 63.66 20.74 0.00 0.00 0.00
PULB Pulaski SB, MHC of MO (29.0) 17.89 120.70 15.24 120.70 18.93 0.80 6.13 NM
PULS Pulse Bancorp of S. River NJ 12.96 127.31 15.13 127.31 12.86 0.70 3.97 51.47
QCFB QCF Bancorp of Virginia MN 11.62 83.49 18.21 83.49 11.62 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA 15.48 74.58 7.37 75.01 16.05 0.00 0.00 0.00
QCSB Queens County SB of NY* 13.94 135.00 22.92 135.00 13.50 1.33 2.81 39.23
RCSB RCSB Financial, Inc. of NY* 8.76 102.90 7.51 106.46 8.82 0.48 1.93 16.90
RARB Raritan Bancorp. of Raritan NJ* 10.89 120.00 8.69 123.08 11.06 0.60 2.84 30.93
REDF RedFed Bancorp of Redlands CA NM 73.53 4.14 73.53 NM 0.00 0.00 NM
RELY Reliance Bancorp of NY 14.04 95.52 8.46 141.59 14.68 0.46 2.88 40.35
RELI Reliance Bancshares Inc of WI* NM 74.59 41.94 74.59 NM 0.00 0.00 0.00
RFED Roosevelt Fin. Grp. Inc. of MO 12.31 157.69 7.66 166.87 9.08 0.62 3.73 45.93
RVSB Rvrview SB,FSB MHC of WA(40.3) 11.88 134.17 14.78 151.58 13.18 0.22 1.53 18.18
SCCB S. Carolina Comm. Bnshrs of SC 19.38 92.26 26.26 92.26 19.38 0.60 3.87 75.00
SBFL SB Fing. Lakes MHC of NY(33.0) NM 142.54 16.43 142.54 NM 0.40 2.46 NM
SFED SFS Bancorp of Schenectady NY 17.05 75.66 10.63 75.66 17.05 0.24 1.90 32.43
SGVB SGV Bancorp of W. Covina CA NM 64.91 6.35 64.91 NM 0.00 0.00 0.00
SISB SIS Bank of Sprinfield MA* 7.75 120.50 8.94 120.50 7.62 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* 10.42 102.77 8.84 110.01 11.11 1.00 5.00 52.08
SFBM Security Bancorp of MT 11.84 92.13 8.22 107.03 15.94 0.64 3.16 37.43
SECP Security Capital Corp. of WI 19.98 100.93 17.04 100.93 19.34 0.60 1.00 20.07
SFSL Security First Corp. of OH 9.17 118.74 10.34 122.11 8.76 0.44 3.20 29.33
SHFC Seven Hills Fin. Corp. of OH(8) NM 100.61 21.34 100.61 NM 0.36 1.99 NM
SMFC Sho-Me Fin. Corp. of MO 15.05 93.61 11.21 93.61 15.19 0.00 0.00 0.00
SOBI Sobieski Bancorp of S. Bend IN NM 69.65 12.88 69.65 NM 0.00 0.00 0.00
SOSA Somerset Savings Bank of MA(8)* 16.20 97.01 5.29 97.01 16.20 0.00 0.00 0.00
SMBC Southern Missouri Bncrp of MO 18.10 91.63 15.03 91.63 19.34 0.50 3.54 64.10
SWBI Southwest Bancshares of IL 11.60 117.62 14.11 117.62 11.65 1.08 3.93 45.57
SVRN Sovereign Bancorp of PA 9.07 143.36 5.83 221.38 10.05 0.08 0.78 7.08
STFR St. Francis Cap. Corp. of WI 9.54 111.57 11.64 116.83 13.99 0.40 1.55 14.81
SPBC St. Paul Bancorp, Inc. of IL 11.92 112.65 10.41 113.03 12.24 0.48 2.06 24.62
STND Standard Fin. of Chicago IL 15.17 97.38 11.98 97.44 16.81 0.32 2.05 31.07
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of July 19, 1996
<TABLE>
<CAPTION>
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)
_______________________________________
SFFC StateFed Financial Corp. of IA 20.11 20.11 1.18 5.80 6.75 1.18 5.80 NA NA 0.38
SFIN Statewide Fin. Corp. of NJ 11.10 11.06 0.52 5.43 4.47 0.64 6.66 1.26 41.78 1.47
STSA Sterling Financial Corp. of WA 4.18 3.35 0.33 7.72 6.63 0.32 7.56 0.63 82.62 0.87
SSBK Strongsville SB of OH 8.28 8.10 1.00 11.90 8.70 0.85 10.06 NA NA 0.29
SFSB SuburbFed Fin. Corp. of IL 7.14 7.10 0.51 7.04 8.48 0.44 6.04 0.27 82.72 0.51
SBCN Suburban Bancorp. of OH 13.00 13.00 0.40 2.98 3.42 0.57 4.33 0.20 794.18 2.06
SCSL Suncoast S&LA of Hollywood FL(8) 2.81 2.80 0.33 11.53 11.95 -0.41 -14.33 0.31 47.77 0.19
THRD TF Financial Corp. of PA 14.31 14.31 0.92 5.57 6.57 0.89 5.39 0.35 82.72 0.53
ROSE TR Financial Corp. of NY 6.23 6.23 0.86 12.76 9.92 0.68 10.08 0.92 49.56 0.91
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 5.98 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 8.08 1.20 7.47 0.48 69.57 0.55
TRIC Tri-County Bancorp of WY 17.83 17.83 0.94 4.70 5.44 0.91 4.56 0.18 318.32 1.45
THBC Troy Hill Bancorp of PA 22.20 22.20 1.40 6.20 7.77 1.27 5.65 2.95 30.03 1.09
TWIN Twin City Bancorp of TN 13.76 13.76 1.07 7.77 7.45 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 9.42 0.77 9.97 0.66 178.39 1.90
UBMT United SB, FA of MT 23.53 23.53 1.50 6.68 7.33 1.49 6.63 NA NA 0.25
VABF Va. Beach Fed. Fin. Corp of VA 6.57 6.57 0.23 3.94 4.41 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 3.52 0.31 3.95 0.79 42.34 0.43
VFFC Virginia First Savings of VA 7.72 7.44 1.19 16.32 13.16 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 3.25 0.64 5.18 0.35 42.31 0.23
WSFS WSFS Financial Corp. of DE* 5.87 5.79 2.17 42.73 27.76 1.29 25.28 3.27 59.85 3.01
WVFC WVS Financial Corp. of PA* 15.12 15.12 1.23 8.09 8.05 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 NA NA 1.84
WRNB Warren Bancorp of Peabody MA* 8.95 8.95 1.64 19.67 12.48 1.56 18.79 NA NA 2.04
WFSL Washington FS&LA of Seattle WA 12.14 11.55 1.75 13.73 9.00 1.68 13.15 NA NA 0.37
WAMU Washington Mutual Inc. of WA(8)* 6.23 5.54 0.91 15.07 8.70 0.90 15.01 0.55 117.43 1.03
WYNE Wayne Bancorp of NJ 16.83 16.83 0.56 3.34 4.65 0.68 4.02 1.46 52.15 1.40
WAYN Wayne S&L Co., MHC of OH(46.7) 9.20 9.20 0.58 6.36 4.81 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 3.85 1.10 5.00 1.08 37.62 0.74
WBST Webster Financial Corp. of CT 5.16 3.92 0.51 10.33 6.70 0.55 11.05 1.45 82.08 1.75
WEFC Wells Fin. Corp. of Wells MN 14.95 14.95 0.81 6.24 6.26 0.79 6.07 0.39 70.55 0.32
WCBI WestCo Bancorp of IL 15.65 15.65 1.32 8.47 6.82 1.31 8.41 0.58 49.47 0.41
WSTR WesterFed Fin. Corp. of MT 13.28 13.28 0.76 5.73 7.14 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 5.64 0.83 3.18 0.34 78.86 0.44
WWFC Westwood Fin. Corp. of NJ 10.71 9.17 0.73 6.78 9.32 0.73 6.78 0.02 868.42 0.50
WFCO Winton Financial Corp. of OH(8) 7.89 7.68 0.93 12.26 8.00 0.76 10.02 0.53 64.84 0.41
FFWD Wood Bancorp of OH 14.59 14.59 1.17 8.14 7.80 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 5.28 0.90 7.45 0.23 72.95 0.19
YFCB Yonkers Fin. Corp. of NY 19.39 19.39 0.89 4.59 6.32 0.98 5.05 1.63 26.77 1.09
YFED York Financial Corp. of PA 8.78 8.78 0.98 11.40 10.15 0.85 9.95 2.24 26.68 0.68
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Earning Book Assets Book Earnings Share Yield Ratio(7)
_______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
SFFC StateFed Financial Corp. of IA 14.81 84.11 16.92 84.11 14.81 0.40 2.62 38.83
SFIN Statewide Fin. Corp. of NJ 22.40 88.85 9.86 89.11 18.26 0.00 0.00 0.00
STSA Sterling Financial Corp. of WA 15.08 120.09 5.03 149.78 15.41 0.00 0.00 0.00
SSBK Strongsville SB of OH 11.50 131.03 10.84 133.87 13.60 0.48 2.22 25.53
SFSB SuburbFed Fin. Corp. of IL 11.79 80.99 5.79 81.47 13.74 0.32 1.93 22.70
SBCN Suburban Bancorp. of OH NM 89.54 11.64 89.54 20.13 0.60 3.87 NM
SCSL Suncoast S&LA of Hollywood FL(8) 8.36 93.93 2.64 94.36 NM 0.00 0.00 0.00
THRD TF Financial Corp. of PA 15.22 87.10 12.47 87.10 15.73 0.32 2.24 34.04
ROSE TR Financial Corp. of NY 10.08 130.61 8.14 130.61 12.76 0.64 2.34 23.62
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) 16.73 127.14 23.07 127.14 18.71 0.68 2.15 35.98
TSBS Trenton SB, FSB MHC of NJ(35.0 12.38 117.33 22.34 120.04 18.57 0.35 2.69 33.33
TRIC Tri-County Bancorp of WY 18.37 86.75 15.47 86.75 18.95 0.50 2.78 51.02
THBC Troy Hill Bancorp of PA 12.86 78.42 17.41 78.42 14.11 0.40 3.05 39.22
TWIN Twin City Bancorp of TN 13.43 103.50 14.25 103.50 15.48 0.64 3.94 52.89
UFRM United FS&LA of Rocky Mount NC 10.62 113.80 9.42 113.80 12.11 0.20 2.58 27.40
UBMT United SB, FA of MT 13.64 89.46 21.05 89.46 13.74 0.88 4.89 66.67
VABF Va. Beach Fed. Fin. Corp of VA 22.66 87.56 5.76 87.56 NM 0.16 2.21 50.00
VAFD Valley FSB of Sheffield AL(8) NM 118.59 9.59 118.59 NM 0.60 1.94 55.05
VFFC Virginia First Savings of VA 7.60 114.56 8.85 118.92 9.22 0.10 0.89 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 77.89 16.04 77.89 NM 0.00 0.00 0.00
WSFS WSFS Financial Corp. of DE* 3.60 132.05 7.75 133.85 6.09 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA* 12.42 96.75 14.63 96.75 11.13 0.40 1.98 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 11.12 149.15 18.10 156.79 11.60 0.92 4.36 48.42
WAMU Washington Mutual Inc. of WA(8)* 11.50 155.82 9.71 175.22 11.54 0.92 3.05 35.11
WYNE Wayne Bancorp of NJ 21.52 71.86 12.10 71.86 17.88 0.00 0.00 0.00
WAYN Wayne S&L Co., MHC of OH(46.7) 20.79 128.92 11.86 128.92 22.19 0.88 4.46 NM
WCFB Webster CityFSB,MHC of IA(45.2 NM 128.39 28.61 128.39 NM 0.80 6.04 NM
WBST Webster Financial Corp. of CT 14.94 123.07 6.35 161.90 13.96 0.64 2.14 32.00
WEFC Wells Fin. Corp. of Wells MN 15.97 85.82 12.83 85.82 16.43 0.00 0.00 0.00
WCBI WestCo Bancorp of IL 14.67 121.75 19.05 121.75 14.77 0.48 2.18 32.00
WSTR WesterFed Fin. Corp. of MT 14.01 78.05 10.36 78.05 14.91 0.34 2.45 34.34
WOFC Western Ohio Fin. Corp. of OH 17.73 77.41 14.09 82.21 23.49 1.00 5.13 NM
WWFC Westwood Fin. Corp. of NJ 10.73 72.69 7.78 84.89 10.73 0.00 0.00 0.00
WFCO Winton Financial Corp. of OH(8) 12.50 124.76 9.84 128.21 15.29 0.42 3.23 40.38
FFWD Wood Bancorp of OH 12.82 101.42 14.80 101.42 13.25 0.36 1.80 23.08
WCHI Workingmens Cap. Hldgs of IN(8) 18.93 139.18 17.04 139.18 19.29 0.36 1.78 33.64
YFCB Yonkers Fin. Corp. of NY 15.83 72.69 14.10 72.69 14.39 0.00 0.00 0.00
YFED York Financial Corp. of PA 9.85 106.77 9.38 106.77 11.28 0.60 3.69 36.36
</TABLE>
<PAGE>
EXHIBIT 2
Core Earnings Analysis
<PAGE>
RP FINANCIAL, LC.
- ----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Core Earnings Analysis
Comparable Institution Analysis
For the Twelve Months Ended March 31, 1996
<TABLE>
<CAPTION>
Estimated
Net Income Less: Net Tax Effect Less: Extd Core Income Estimated
to Common Gains (Loss) @34% Items to Common Shares Core EPS
---------------------------------------------------------------------------------------
($000) ($000) ($000) ($000) ($000) ($000) ($)
Comparable Group
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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 2,931 0.97
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 1,974 0.65
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 1,794 2.36
WEFC Wells, Fin. Corp. of Wells MN 1,573 -79 27 0 1,521 2,188 0.70
</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>
EXHIBIT 3
Pro Forma Analysis Sheet
<PAGE>
RP Financial, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 3
PRO FORMA ANALYSIS SHEET -- PAGE 1
Home Federal of Elgin
Prices as of July 19, 1996
<TABLE>
<CAPTION>
Comparable All IL All SAIF
Companies Companies Companies
_____________ _____________ _____________
Price Multiple: Symbol Subject(1) Mean Median Mean Median Mean Median
______________ ______ __________ _____ ______ _____ ______ _____ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price-earnings ratio = P/E 20.57x 16.03x 15.97x 14.41x 15.17x 14.22x 14.00x
Price-core earnings = P/CORE 17.18x 16.69x 16.85x 15.87x 16.29x 15.09x 15.07x
Price-book ratio = P/B 64.48% 90.03% 87.53% 90.86% 90.13% 102.41% 98.00%
Price-tng book ratio = P/TB 64.48% 90.06% 87.53% 91.64% 90.13% 105.61% 100.23%
Price-assets ratio = P/A 15.34% 15.20% 14.59% 12.45% 10.88% 12.88% 11.62%
</TABLE>
<TABLE>
<CAPTION>
Valuation Parameters
____________________
<S> <C> <C>
Pre-Conv Earnings (Y) $ 1,552,000 Est ESOP Borrowings (E) $ 4,240,000
Pre-Conv Book Value (B) $ 37,184,000 Cost of ESOP Borrowings (S) 0.00% (4)
Pre-Conv Assets (A) $ 300,397,000 Amort of ESOP Borrowings (T) 7 Years
Reinvestment Rate(2) (R) 3.67% Recognition Plans Amount (M)$ 2,120,000
Est Conversion Exp(3) (X) 1,631,000 Recognition Plans Expense (N)$ 424,000
Proceeds Not Reinvested (Z) $ 6,360,000
</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 = $ 52,958,489
_________________________________________________
1-(P/E)R
2. V = P/B (B-X-E-M) V = $52,994,500
_______________________
1-P/B
3. V = P/A (A-X-M-E) V = $ 52,982,613
______________________
1-P/A
</TABLE>
<TABLE>
<CAPTION>
Total Price Total
Conclusion Shares Per Share Value
__________ ________ _________ ________
<S> <C> <C> <C>
Appraised Value 5,300,000 $10.00 $ 53,000,000
RANGE:
______
- Minimum 4,505,000 $10.00 $ 45,050,000
- Maximum 6,095,000 $10.00 $ 60,950,000
- Superrange 7,009,250 $10.00 $ 70,092,500
</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 3
PRO FORMA ANALYSIS SHEET -- PAGE 2
Home Federal of Elgin
Prices as of July 19, 1996
<TABLE>
<CAPTION>
Mean Pricing Median Pricing
_________________ _________________
Valuation Approach Subject Peers (Disc) Peers (Disc)
__________________ _______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
P/E Price-earnings 20.57x 16.03x 28.34% 15.97x 28.81%
P/CORE Price-core earnings 17.18x 16.69x 2.91% 16.85x 1.97%
P/B Price-book 64.48% 90.03% -28.38% 87.53% -26.33%
P/TB Price-tang. book 64.48% 90.06% -28.40% 87.53% -26.33%
P/A Price-assets 15.34% 15.20% 0.98% 14.59% 5.16%
Average Premium (Discount) -4.91% -3.34%
</TABLE>
<PAGE>
EXHIBIT 4
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 4
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Home Federal of Elgin
At the Minimum of the Range
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 45,050,000
Less: Estimated offering expenses --------------- 1,521,000
___________
Net Conversion Proceeds ----------------------------- $ 43,529,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 43,529,000
Less: Held in Non-Earning Assets(5)(1) ---------- 5,406,000
___________
Net Proceeds Reinvested ----------------------------- $ 38,123,000
Estimated net incremental rate of return ------------ 3.67 %
___________
Earnings Increase ----------------------------------- $ 1,397,681
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 313,033
Less: Recognition Plans Expense(4)--------------- 219,123
___________
Net Earnings Increase ------------------------------- $ 865,524
3. Pro-Forma Earnings (rounded)
<TABLE>
<CAPTION>
Period Before Conversion After Conversion
______ _________________ ________________
<S> <C> <C>
12 Months ended June 30, 1996 $ 1,552,000 $ 2,417,524
12 Months ended June 30, 1996 (Core) $ 2,061,000 $ 2,926,524
</TABLE>
4. Pro-Forma Net Worth (rounded)
<TABLE>
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ _______________
<S> <C> <C> <C>
June 30, 1996 $ 37,184,000 $ 38,123,000 (3)(4) $ 75,307,000
</TABLE>
5. Pro-Forma Net Assets (rounded)
<TABLE>
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ ________________
<S> <C> <C> <C>
June 30, 1996 $ 300,397,000 $ 38,123,000 $ 338,520,000
<FN>
NOTE: Shares for calculating per share amounts: 4,505,000
(1) Estimated ESOP borrowings of $ 3,604,000 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 $ 3,604,000 are omitted from net worth.
(4) $1,802,000 purchased by the Recognition Plans with an estimated pre-tax expense
of $ 360,400 and a tax rate of 39.20 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment income.
</FN>
</TABLE>
<PAGE>
RP Financial, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 4
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Home Federal of Elgin
At the Midpoint of the Range
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 53,000,000
Less: Estimated offering expenses --------------- 1,631,000
___________
Net Conversion Proceeds ----------------------------- $ 51,369,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 51,369,000
Less: Held in Non-Earning Assets(5)(1) ---------- 6,360,000
___________
Net Proceeds Reinvested ----------------------------- $ 45,009,000
Estimated net incremental rate of return ------------ 3.67 %
___________
Earnings Increase ----------------------------------- $ 1,650,138
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 368,274
Less: Recognition Plans Expense(4)--------------- 257,792
___________
Net Earnings Increase ------------------------------- $ 1,024,072
3. Pro-Forma Earnings (rounded)
<TABLE>
<CAPTION>
Period Before Conversion After Conversion
______ _________________ ________________
<S> <C> <C>
12 Months ended June 30, 1996 $ 1,552,000 $ 2,576,072
12 Months ended June 30, 1996 (Core) $ 2,061,000 $ 3,085,072
</TABLE>
4. Pro-Forma Net Worth (rounded)
<TABLE>
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ _______________
<S> <C> <C> <C>
June 30, 1996 $ 37,184,000 $ 45,009,000 (3)(4) $ 82,193,000
</TABLE>
5. Pro-Forma Net Assets (rounded)
<TABLE>
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ ________________
<S> <C> <C> <C>
June 30, 1996 $ 300,397,000 $ 45,009,000 $ 345,406,000
<FN>
NOTE: Shares for calculating per share amounts: 5,300,000
(1) Estimated ESOP borrowings of $ 4,240,000 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 $ 4,240,000 are omitted from net worth.
(4) $2,120,000 purchased by the Recognition Plans with an estimated pre-tax expense
of $ 424,000 and a tax rate of 39.20 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment income.
</FN>
</TABLE>
<PAGE>
RP Financial, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 4
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Home Federal of Elgin
At the Maximum of the Range
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 60,950,000
Less: Estimated offering expenses --------------- 1,741,000
___________
Net Conversion Proceeds ----------------------------- $ 59,209,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 59,209,000
Less: Held in Non-Earning Assets(5)(1) ---------- 7,314,000
___________
Net Proceeds Reinvested ----------------------------- $ 51,895,000
Estimated net incremental rate of return ------------ 3.67 %
___________
Earnings Increase ----------------------------------- $ 1,902,595
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 423,515
Less: Recognition Plans Expense(4)--------------- 296,461
___________
Net Earnings Increase ------------------------------- $ 1,182,619
3. Pro-Forma Earnings (rounded)
<TABLE>
<CAPTION>
Period Before Conversion After Conversion
______ _________________ ________________
<S> <C> <C>
12 Months ended June 30, 1996 $ 1,552,000 $ 2,734,619
12 Months ended June 30, 1996 (Core) $ 2,061,000 $ 3,243,619
</TABLE>
4. Pro-Forma Net Worth (rounded)
<TABLE>
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ _______________
<S> <C> <C> <C>
June 30, 1996 $ 37,184,000 $ 51,895,000 (3)(4) $ 89,079,000
</TABLE>
5. Pro-Forma Net Assets (rounded)
<TABLE>
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ ________________
<S> <C> <C> <C>
June 30, 1996 $ 300,397,000 $ 51,895,000 $ 352,292,000
<FN>
NOTE: Shares for calculating per share amounts: 6,095,000
(1) Estimated ESOP borrowings of $ 4,876,000 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 $ 4,876,000 are omitted from net worth.
(4) $2,438,000 purchased by the Recognition Plans with an estimated pre-tax expense
of $ 487,600 and a tax rate of 39.20 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment income.
</FN>
</TABLE>
<PAGE>
RP Financial, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 4
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Home Federal of Elgin
At the Superrange Maximum
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 70,092,500
Less: Estimated offering expenses --------------- 1,867,000
___________
Net Conversion Proceeds ----------------------------- $ 68,225,500
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 68,225,500
Less: Held in Non-Earning Assets(5)(1) ---------- 8,411,100
___________
Net Proceeds Reinvested ----------------------------- $ 59,814,400
Estimated net incremental rate of return ------------ 3.67 %
___________
Earnings Increase ----------------------------------- $ 2,192,939
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 487,043
Less: Recognition Plans Expense(4)--------------- 340,930
___________
Net Earnings Increase ------------------------------- $ 1,364,967
3. Pro-Forma Earnings (rounded)
<TABLE>
<CAPTION>
Period Before Conversion After Conversion
______ _________________ ________________
<S> <C> <C>
12 Months ended June 30, 1996 $ 1,552,000 $ 2,916,967
12 Months ended June 30, 1996 (Core) $ 2,061,000 $ 3,425,967
</TABLE>
4. Pro-Forma Net Worth (rounded)
<TABLE>
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ _______________
<S> <C> <C> <C>
June 30, 1996 $ 37,184,000 $ 59,814,400 (3)(4) $ 96,998,400
</TABLE>
5. Pro-Forma Net Assets (rounded)
<TABLE>
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ ________________
<S> <C> <C> <C>
June 30, 1996 $ 300,397,000 $ 59,814,400 $ 360,211,400
<FN>
NOTE: Shares for calculating per share amounts: 7,009,250
(1) Estimated ESOP borrowings of $ 5,607,400 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 $ 5,607,400 are omitted from net worth.
(4) $2,803,700 purchased by the Recognition Plans with an estimated pre-tax expense
of $ 560,740 and a tax rate of 39.20 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment income.
</FN>
</TABLE>
<PAGE>
EXHIBIT 5
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 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. Through a program referred
to as SAFE, Strategic Alternatives Financial Evaluations, RP Financial analyzes
strategic actions which will enhance shareholder value or otherwise achieve
desired results. Our planning services involve conducting situation analyses
and establishing mission statements, strategic goals and objectives, with
overall emphasis on enhancement of franchise value, capital management and
planning, earnings improvement and operational issues. Our planning services
include the development of strategies in the following areas: capital formation
and management, interest rate risk management, development of investment and
liquidity portfolio targets, development of loan and servicing portfolio targets
and development of funding composition targets. Our proprietary financial
simulation model provides the basis for evaluating the financial impact of
alternative strategies as well as assessing the feasibility and compatibility of
such strategies with regulations and accounting guidelines.
MERGER AND ACQUISITION SERVICES
RP Financial's merger and acquisition (M&A) services include targeting
candidates and potential acquirors, assessing acquisition merit, conducting
detailed due diligence, negotiating and structuring transactions, preparing
merger business plans and financial simulations, rendering fairness opinions and
assisting in implementing post-acquisition strategies. Through our financial
simulations, in-house data bases of public and non-public banks and savings
institutions, valuation expertise and regulatory and accounting knowledge, RP
Financial's M&A consulting focuses on structuring transactions to enhance
shareholder returns.
VALUATION SERVICES
RP Financial's extensive valuation practice includes valuations for a variety of
purposes including mergers and acquisitions, mutual-to-stock conversions, ESOPs,
subsidiary and related industry companies, mark-to-market transactions, loan and
servicing portfolios, non-traded securities, deposit portfolios and core
deposits. Our principals and staff are highly experienced in performing
valuation appraisals which conform with regulatory guidelines and appraisal
industry standards. RP Financial is the nation's leading valuation firm for
mutual-to-stock conversions of thrift 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 (9)
Timothy M. Biddle, Vice President (7)
Alan P. Carruthers, Senior Consultant-Community Banking (14)
