<PAGE> 1
As filed with the Securities and Exchange Commission on November 4, 1996
Registration No. 333-12501
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 CITY FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 6036 34-1839475
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. employer
incorporation or organization) Classification Code Number) identification
number)
63 WEST MAIN STREET
SPRINGFIELD, OHIO 45502
(513) 324-5736
(Address, including Zip Code, and telephone number, including
area code, of registrant's principal executive offices)
DOUGLAS L. ULERY
HOME CITY FINANCIAL CORPORATION
63 WEST MAIN STREET
SPRINGFIELD, OHIO 45502
(513) 324-5736
(Name, address, including Zip Code, and telephone number,
including area code, of agent for service)
With copies to:
John C. Vorys, Esq.
Rick J. Landrum, Esq.
Vorys, Sater, Seymour and Pease
Atrium Two, 221 East Fourth Street
Cincinnati, Ohio 45202
(513) 723-4059
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 of the Securities
Act of 1933, check the following box: /X/
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Title of each class Proposed maximum Proposed maximum
of securities to be Amount to offering price aggregate Amount of
registered be registered per share offering price(1) registration fee
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common shares,
without par value 952,200 shares $10.00 $9,522,000 $3,283
==============================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
CROSS REFERENCE SHEET
Showing the location in the Prospectus of the Items of Form S-1
<TABLE>
<CAPTION>
Form S-1 Item and Caption Prospectus Heading
<S> <C>
1. Forepart of the Registration Statement and Outside Front
Cover Page of Prospectus ............................... Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus ............................................. Cover Page, Back Cover Page
3. Summary Information, Risk Factors and Ratio of Earnings to
Fixed Charges .......................................... PROSPECTUS SUMMARY; RISK FACTORS
4. Use of Proceeds .......................................... USE OF PROCEEDS
5. Determination of Offering Price .......................... Cover Page; THE CONVERSION - Pricing and Number of
Common Shares to be Sold
6. Dilution ................................................. Not Applicable
7. Selling Security Holders ................................. Not Applicable
8. Plans of Distribution .................................... Cover Page; THE CONVERSION - General;
- Subscription Offering;
- Community Offering; and
- Plan of Distribution
9. Description of Securities to be Registered ............... DESCRIPTION OF AUTHORIZED SHARES
10.Interest of Named Experts and Counsel .................... Not Applicable
11.Information with Respect to the Registrant
(a) Description of Business ............................. HOME CITY FINANCIAL CORPORATION; HOME CITY FEDERAL
SAVINGS BANK OF SPRINGFIELD; THE BUSINESS OF HOME CITY
(b) Description of Property ............................. THE BUSINESS OF HOME CITY - Properties
(c) Legal Proceedings ................................... THE BUSINESS OF HOME CITY - Legal Proceedings
(d) Market Price and Dividends .......................... Cover Page; MARKET FOR THE COMMON SHARES; DIVIDEND
POLICY
(e) Financial Statements ................................ Index to Financial Statements
(f) Selected Financial Data ............................. SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER
DATA
(g) Supplementary Financial Information ................. Not Applicable
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
(h) Management's Discussion and Analysis of Financial
Condition and Results of Operations ............... MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF HOME CITY
(i) Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ............... Not Applicable
(j) Directors and Executive Officers .................... MANAGEMENT OF HCFC;
MANAGEMENT OF HOME CITY
(k) Executive Compensation .............................. MANAGEMENT OF HOME CITY - Compensation; Stock Option
Plan; Employee Stock Ownership Plan; Recognition and
Retention Plan; Retirement Benefit Plans; and
Employment Agreements
(l) Security Ownership of Certain Beneficial Owners and
Management ........................................ THE CONVERSION - Shares to be Purchased by Management
Pursuant to Subscription Rights
(m) Certain Relationships and Related
Transactions ....................................... MANAGEMENT OF HOME CITY -
Certain Transactions with Home City
12.Disclosure of Commission Position on Indemnification for
Securities Act Liability ............................... Not Applicable
</TABLE>
<PAGE> 4
PROSPECTUS HOME CITY FINANCIAL CORPORATION
(HOLDING COMPANY FOR HOME CITY FEDERAL SAVINGS BANK OF SPRINGFIELD)
UP TO 828,000 COMMON SHARES
$10 PURCHASE PRICE PER SHARE
Home City Financial Corporation, an Ohio corporation ("HCFC"), is
hereby offering for sale up to 828,000 common shares, without par value (the
"Common Shares"), in connection with its acquisition of all of the capital stock
to be issued by Home City Federal Savings Bank of Springfield, a federal savings
bank ("Home City"), upon the conversion of Home City from a mutual savings bank
to a permanent capital stock savings bank chartered under the laws of the United
States (the "Conversion"). The consummation of the Conversion and the sale of
the Common Shares are subject to the approval of Home City's Plan of Conversion
(the "Plan") and the adoption of the Federal Stock Charter and Federal Stock
Bylaws of Home City at a Special Meeting of the members of Home City to be held
at ____ p.m., Eastern Time, on ___________, 1996, at the office of Home City at
63 West Main Street, Springfield, Ohio (the "Special Meeting").
THE COMMON SHARES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), THE OFFICE OF THRIFT
SUPERVISION OF THE DEPARTMENT OF THE TREASURY (THE "OTS"), THE FEDERAL DEPOSIT
INSURANCE CORPORATION (THE "FDIC"), OR THE SECURITIES COMMISSION OF ANY STATE,
NOR HAS THE SEC, THE OTS, THE FDIC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Based on an independent appraisal of the pro forma market value of Home
City, as converted, as of September 6, 1996, the aggregate purchase price of the
Common Shares offered in connection with the Conversion ranges from a minimum of
$6,120,000 to a maximum of $8,280,000 (the "Valuation Range"), resulting in a
range of 612,000 to 828,000 Common Shares at $10.00 per share. The actual number
of Common Shares sold in connection with the Conversion will be determined in
the sole discretion of HCFC's Board of Directors and will be based upon the
final valuation of Home City, as converted. The final valuation will be
determined by the independent appraiser upon the completion of this offering. If
the final valuation is within the Valuation Range, or does not exceed the
maximum of the Valuation Range by more than 15%, the number of Common Shares to
be issued in connection with the Conversion will not be less than 612,000, nor
more than 952,200. If, due to changing market or regulatory conditions, the
final valuation is not between the minimum of the Valuation Range and 15% above
the maximum of the Valuation Range, subscribers will be given notice of such
final valuation and the right to affirm, increase, decrease or rescind their
subscriptions. Any such subscriber who does not affirmatively elect to continue
his subscription or elects to rescind his subscription before the date specified
in the notice will have all of his funds promptly refunded with interest. Any
person who elects to decrease his subscription will have the appropriate portion
of his funds promptly refunded with interest. See "THE CONVERSION - Pricing and
Number of Common Shares to be Sold." Any upward or downward adjustment in the
number of Common Shares sold will have a corresponding effect on the estimated
net proceeds of the Conversion and the pro forma capitalization and book value
per share of HCFC. See "USE OF PROCEEDS," "CAPITALIZATION" and "PRO FORMA DATA."
THE COMMON SHARES BEING OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
SAVINGS DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION (THE "FDIC") OR ANY OTHER GOVERNMENT AGENCY.
FOR A DISCUSSION OF CERTAIN RISKS AND OTHER FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON SHARES, SEE "RISK FACTORS"
BEGINNING AT PAGE 9 OF THIS PROSPECTUS.
FOR INFORMATION ON HOW TO SUBSCRIBE, CALL THE CONVERSION INFORMATION
CENTER AT (513) 324-3830.
<TABLE>
<CAPTION>
===================================================================================================================================
Estimated Underwriting
Subscription Commissions Estimated Net
Price And Other Expenses(1) Proceeds
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share Minimum $10.00 $0.58 $9.42
Per share Mid-Point $10.00 $0.52 $9.48
Per share Maximum $10.00 $0.47 $9.53
Per share Maximum, as adjusted (2) $10.00 $0.42 $9.58
Total Minimum $6,120,000 $357,000 $5,763,000
Total Mid-point $7,200,000 $372,000 $6,828,000
Total Maximum $8,280,000 $387,000 $7,893,000
Total Maximum, as adjusted (2) $9,522,000 $404,000 $9,118,000
===================================================================================================================================
</TABLE>
(1) Consists of estimated printing, postage, legal, accounting, filing fee,
appraisal and miscellaneous costs to Home City and HCFC in connection
with the Conversion, including estimated fees, sales commissions and
reimbursable expenses to be paid to Charles Webb & Company, a division of
Keefe, Bruyette & Woods, Inc. ("Webb"), a company which has been engaged
by Home City to consult, advise and assist in the sale of the Common
Shares on a best efforts basis. Actual Conversion expenses may be more or
less than estimated amounts. See "THE CONVERSION - Plan of Distribution."
(2) Gives effect to the increase in the number of Common Shares sold in
connection with the Conversion of up to 15% above the maximum of the
Valuation Range. Such shares may be offered without the resolicitation of
persons who subscribe for Common Shares. See "THE CONVERSION - Pricing
and Number of Common Shares to be Sold."
The date of this Prospectus is _______, 1996.
CHARLES WEBB & COMPANY
A Division of
Keefe, Bruyette & Woods, Inc.
<PAGE> 5
In accordance with the Plan, nontransferable subscription rights to
purchase Common Shares are offered hereby in a subscription offering to (a) each
account holder who, as of June 30, 1995 (the "Eligibility Record Date"), had
deposit accounts with deposit balances, in the aggregate, of $50 or more (a
"Qualifying Deposit") with Home City; (b) the Home City Financial Corporation
Employee Stock Ownership Plan (the "ESOP"); (c) each account holder who, as of
September 30, 1996 (the "Supplemental Eligibility Record Date"), had a
Qualifying Deposit with Home City; and (d) each depositor of Home City having a
savings deposit of record on October 31, 1996 (the "Voting Record Date") and
borrowers of Home City of record on the Voting Record Date whose loan was
outstanding on May 1, 1996 (the "Subscription Offering"). All subscription
rights to purchase Common Shares in the Subscription Offering are
nontransferable and will expire at 4:00 p.m., Eastern Time, on _______________
(the "Subscription Expiration Date"), unless extended. PERSONS FOUND TO BE
TRANSFERRING SUBSCRIPTION RIGHTS WILL BE SUBJECT TO FORFEITURE OF SUCH RIGHTS
AND POSSIBLE FURTHER PENALTIES IMPOSED BY THE OTS. See "THE CONVERSION -
Subscription Offering."
To the extent that all of the Common Shares are not subscribed for in
the Subscription Offering, the remaining shares are hereby concurrently being
offered to the general public in a direct community offering in which preference
will be given to natural persons residing in Clark County, Ohio (the "Community
Offering"). See "THE CONVERSION - Community Offering." If the Community Offering
extends beyond ________, 1997, 45 days after the Subscription Expiration Date,
persons who have subscribed for Common Shares in the Subscription Offering or in
the Community Offering will receive a notice that, until a date specified in the
notice, they have the right to affirm, increase, decrease or rescind their
subscriptions for Common Shares. Any person who does not affirmatively elect to
continue his subscription or elects to rescind his subscription during any such
extension will have all of his funds promptly refunded with interest. Any person
who elects to decrease his subscription will have the appropriate portion of his
funds promptly refunded with interest. See "THE CONVERSION - Effect of Extension
of Community Offering." The Community Offering may end at any time after orders
for at least 952,200 Common Shares have been received, but in no event later
than 45 days after the Subscription Expiration Date or __________, 1997, unless
extended by HCFC and Home City with the approval of the OTS, if necessary. In
accordance with the Plan, the Subscription Offering and the Community Offering
may not be extended beyond ___________, 1997. See "THE CONVERSION - Subscription
Offering; and - Plan of Distribution."
Home City has engaged Webb to consult, advise and assist in the sale of
the Common Shares on a best efforts basis in the Subscription Offering and the
Community Offering (together, the "Offering"). See "THE CONVERSION - Plan of
Distribution."
The Plan and federal regulations limit the number of Common Shares
which may be purchased by various categories of persons, including the
limitation that no person may purchase fewer than 25 shares, nor more than 1%,
in the Subscription Offering or the Community Offering, of the total number of
Common Shares sold in connection with the Conversion (9,522 Common Shares at the
maximum of the Valuation Range, as adjusted). In addition, no person, together
with such person's Associates (hereinafter defined) and persons Acting in
Concert (hereinafter defined) with such person, may purchase more than 2% of the
total number of Common Shares sold in connection with the Conversion (19,044
Common Shares at the maximum of the Valuation Range, as adjusted). Such
limitations do not apply to the ESOP. SUBJECT TO APPLICABLE OTS REGULATIONS, THE
LIMITATIONS SET FORTH IN THE PLAN MAY BE CHANGED AT ANY TIME IN THE SOLE
DISCRETION OF THE BOARD OF DIRECTORS OF HOME CITY AND HCFC. See "THE CONVERSION
- - Limitations on Purchases of Common Shares."
Common Shares may be subscribed for in the Subscription Offering or
ordered in the Community Offering only by returning the accompanying Stock Order
Form and Certification Form (the "Stock Order Form"), along with full payment of
the subscription or order price per share for all shares for which subscription
is made or order is submitted, no later than 4:00 p.m., Eastern Time, _________,
1996. See "THE CONVERSION - Use of Stock Order Forms." Payment may be made in
cash or by check or money order and will be held in a segregated account at Home
City, insured by the FDIC up to the applicable limit and earning interest at
Home City's passbook rate, currently 2.5% annual percentage yield, from the date
of receipt until the completion of the Conversion. Payment may also be made by
authorized withdrawal from an existing Home City savings account, the amount in
which will continue to earn interest until completion of the Conversion at the
rate normally in effect from time to time for such account. Neither payments
made in cash or by check or money order, nor payments made by authorized
withdrawal from an account at Home City will be available during the
Subscription Offering and the Community Offering. See "THE CONVERSION - Payment
for Common Shares." Payment by wire will not be accepted. AN EXECUTED STOCK
ORDER FORM, ONCE RECEIVED BY HCFC, MAY NOT BE MODIFIED, AMENDED OR RESCINDED
WITHOUT THE CONSENT OF HCFC UNLESS THE COMMUNITY OFFERING IS NOT COMPLETED
WITHIN 45 DAYS AFTER THE SUBSCRIPTION EXPIRATION DATE.
There is presently no market for the Common Shares and no assurance can
be given that an active and liquid trading market will develop. The aggregate
offering price for the Common Shares is based upon an independent appraisal of
Home City performed by Keller & Company, Inc. ("Keller"). The appraisal is not a
recommendation as to the advisability of purchasing Common Shares. See "THE
CONVERSION - Pricing and Number of Common Shares to be Sold." No assurance can
be given that persons purchasing Common Shares will thereafter be able to sell
such shares at a price at or above the offering price. See "RISK FACTORS -
Limited Market for the Common Shares."
In connection with the completion of the Conversion, HCFC will register
the Common Shares with the SEC under the Securities Exchange Act of 1934 (the
"Exchange Act"). The Exchange Act requires that HCFC file an Annual Report on
Form 10-KSB with the SEC containing audited consolidated financial statements
and other information concerning the consolidated financial condition and
operations of HCFC and its subsidiaries. HCFC will also be subject to the proxy
solicitation rules of the SEC, including the requirement that HCFC provide its
shareholders with an Annual Report containing audited consolidated financial
statements and management's discussion and analysis of financial condition and
results of operations. OTS regulations require that the Common Shares remain
registered for at least three years after the completion of the Conversion. In
the unlikely event that HCFC has fewer than 300 shareholders of record at the
expiration of such three-year period, HCFC may deregister the Common Shares.
THE CONVERSION OF HOME CITY FROM A MUTUAL SAVINGS BANK TO A PERMANENT
CAPITAL STOCK SAVINGS BANK IS CONTINGENT UPON (I) THE APPROVAL OF THE PLAN AND
THE ADOPTION OF THE FEDERAL STOCK CHARTER AND FEDERAL STOCK BYLAWS BY HOME
CITY'S VOTING MEMBERS, (II) THE SALE OF THE REQUISITE NUMBER OF COMMON SHARES,
AND (III) THE SATISFACTION OR WAIVER OF CERTAIN OTHER CONDITIONS. SEE "THE
CONVERSION."
-ii-
<PAGE> 6
HOME CITY FEDERAL SAVINGS BANK OF SPRINGFIELD
SPRINGFIELD, OHIO
[MAP OF CLARK COUNTY, OHIO]
<PAGE> 7
PROSPECTUS SUMMARY
The following information is not complete and is qualified in its
entirety by the detailed information and the financial statements and
accompanying notes appearing elsewhere in this Prospectus:
HOME CITY FINANCIAL CORPORATION
HCFC was incorporated under Ohio law in August 1996 at the direction of
Home City for the purpose of purchasing all of the capital stock of Home City to
be issued in connection with the Conversion. HCFC has not conducted and will not
conduct any business before the completion of the Conversion other than business
related to the Conversion. Upon the consummation of the Conversion, HCFC will be
a unitary savings and loan holding company, the principal assets of which
initially will be the capital stock of Home City, a loan made to the ESOP for
the purchase of Common Shares and the investments made with 50% of the net
proceeds retained from the sale of HCFC shares in connection with the
Conversion. See "USE OF PROCEEDS."
The main office of HCFC is located at 63 West Main Street, Springfield,
Ohio 45502-1309, and its telephone number is (513) 324-5736.
HOME CITY FEDERAL SAVINGS BANK OF SPRINGFIELD
Home City is a federal mutual savings bank which has served the
Springfield, Ohio, area since 1925. Originally formed under the name "Home City
Savings and Loan Association," Home City changed its name on May 1, 1996, to
"Home City Savings Bank."
As a federal savings bank, Home City is subject to supervision and
regulation by the OTS and the FDIC and is a member of the Federal Home Loan Bank
(the "FHLB") of Cincinnati. The deposits of Home City are insured up to
applicable limits by the FDIC in the Savings Association Insurance Fund (the
"SAIF"). See "REGULATION." At June 30, 1996, $31.9 million, or approximately 66%
of Home City's loan portfolio, consisted of loans secured by first mortgages on
one- to four-family homes, virtually all of which were located within Clark
County, Ohio, and adjacent counties. See "THE BUSINESS OF HOME CITY - Lending
Activities -- One- to Four-Family Real Estate Loans."
Home City's capital exceeds by a substantial margin all regulatory
requirements. At June 30, 1996, Home City's tangible and core capital both
equaled $5.4 million, or 9.8% of assets, an amount which exceeded the minimum
tangible and core capital requirements by approximately $4.4 million and $3.6
million, respectively. On a pro forma basis, assuming the sale of 720,000 Common
Shares (the mid-point of the Valuation Range) and the retention by HCFC of 50%
of the net proceeds from such sale, Home City's tangible and core capital ratios
will both equal 13.45%. See "REGULATORY CAPITAL COMPLIANCE," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF HOME
CITY Liquidity and Capital Resources," and "REGULATION - OTS Regulations --
Regulatory Capital Requirements."
Home City conducts business from its office in Springfield, Ohio. Home
City's primary market area consists of Clark County, Ohio, and adjacent
counties. The office of Home City is located at 63 West Main Street,
Springfield, Ohio, and its telephone number is (513) 324-5736.
THE CONVERSION
On September 3, 1996, the Board of Directors of Home City unanimously
approved the Plan of Conversion. The OTS approved the Plan, subject to the
approval of the Plan by Home City's voting members at the Special Meeting, to be
held at ____ p.m., Eastern Time, on ___________, 1996, at the offices of Home
City at 63 West Main Street, Springfield, Ohio.
THE SUBSCRIPTION AND COMMUNITY OFFERINGS
The Plan provides for the formation of HCFC for the purpose of
acquiring all of the capital stock to be issued by Home City in the Conversion.
Pursuant to the Plan, subscription rights to purchase Common Shares are hereby
offered at a price of $10 per share to (a) depositors of Home City with
Qualifying Deposits as of June 30, 1995 ("Eligible Account Holders"), (b) the
ESOP, (c) depositors of Home City with Qualifying Deposits as of September 30,
1996 ("Supplemental Eligible Account Holders"), and (d) account holders of Home
City having savings deposits of record on October 31, 1996 (the "Voting Record
Date"), and borrowers of record on the Voting Record Date whose loans were
outstanding on May 1, 1996 (such depositors and
<PAGE> 8
borrowers as of October 31, 1996, collectively, the "Voting Members"). See "THE
CONVERSION Subscription Offering." Common Shares not subscribed for in the
Subscription Offering are hereby being concurrently offered to those members of
the general public receiving this Prospectus in the Community Offering, in which
preference will be given to natural persons residing in Clark County, Ohio. See
"THE CONVERSION - Community Offering."
The Plan authorizes the Boards of Directors of HCFC and Home City to
establish limits on the number of Common Shares that may be purchased by various
categories of persons. The Plan also permits the Board of Directors of HCFC and
Home City, subject to any required regulatory approval and the requirements of
applicable laws and regulations, to increase or decrease such purchase
limitations in their sole discretion. Pursuant to such authority, the Boards of
Directors have established the limitation that, generally, an Eligible Account
Holder or a Supplemental Eligible Account Holder may purchase in the
Subscription Offering a number of Common Shares equal to the greater of (i) 1%
of the Common Shares sold in connection with the Conversion (9,522 Common Shares
at the maximum of the Valuation Range, as adjusted) or (ii) 15 times the product
(rounded down to the next whole number) obtained by multiplying the total number
of Common Shares to be sold in connection with the Conversion by a fraction, the
numerator of which is the amount of such Eligible Account Holder's or
Supplemental Eligible Account Holder's Qualifying Deposit and the denominator of
which is the total amount of Qualifying Deposits of all Eligible Account Holders
or Supplemental Eligible Account Holders, as the case may be. A Voting Member
may purchase in the Subscription Offering 1% of the Common Shares sold in
connection with the Conversion (9,522 Common Shares at the maximum of the
Valuation Range, as adjusted).
The Board of Directors has also established the limitation that any
person may purchase in the Community Offering a number of Common Shares equal to
1% of the total number of Common Shares sold in connection with the Conversion
(9,522 Common Shares at the maximum of the Valuation Range, as adjusted).
Subscriptions and orders for Common Shares in the Conversion are also
subject to the limitation that no person, together with any Associates or
persons Acting in Concert, may purchase more than 2% of the Common Shares sold
in connection with the Conversion (19,044 Common Shares at the maximum of the
Valuation Range, as adjusted). Such limitation does not apply to the ESOP, which
intends to purchase 8% of the Common Shares sold in connection with the
Conversion. The ESOP may purchase Common Shares if shares remain available after
satisfying the subscriptions of Eligible Account Holders up to $8,280,000, the
maximum of the Valuation Range. If Common Shares in excess of the maximum of the
Valuation Range are sold, the ESOP will have the first right to purchase such
excess Common Shares. If the ESOP is unable to purchase all or part of the
Common Shares for which it subscribes, the ESOP may purchase Common Shares in
the open market or may purchase authorized but unissued Common Shares from HCFC.
If the ESOP purchases authorized but unissued Common Shares from HCFC, such
purchases could have a dilutive effect on the interest of HCFC's shareholders.
Subject to applicable regulations, the purchase limitations may be increased or
decreased after the commencement of the Offering in the sole discretion of the
Boards of Directors. See "THE CONVERSION - Limitations on Purchases of Common
Shares" and "RESTRICTIONS ON ACQUISITION OF HCFC AND HOME CITY." The sale of
Common Shares pursuant to subscriptions or orders received in the Offering will
be subject to the approval of the Plan by the voting members of Home City at the
Special Meeting, to the sale of the requisite number of Common Shares and to
certain other conditions. See "THE CONVERSION - Subscription Offering; -
Community Offering; and - Pricing and Number of Common Shares to be Sold."
Home City has retained Webb to consult, advise and assist in the sale
of the Common Shares in the Subscription Offering and in the Community Offering.
Webb has been paid a management fee of $25,000 and will receive a commission
equal to 1.5% of the aggregate amount received by HCFC in the Offering,
excluding any amounts paid for Common Shares by Home City's directors, executive
officers and employees (and members of their immediate families) and by the
ESOP. Home City will reimburse Webb for legal and out-of-pocket expenses. See
"THE CONVERSION - Plan of Distribution."
The Subscription Offering will terminate at 4:00 p.m., Eastern Time, on
_________, 1996. The Community Offering may be terminated at any time after
orders for at least 952,200 shares have been received, but in no event later
than __________, 1996, unless extended. If the Community Offering extends beyond
45 days after the Subscription Expiration Date, persons who have subscribed for
Common Shares in the Subscription Offering or in the Community Offering will
receive a notice that, until a date specified in the notice, they have the right
to affirm, increase, decrease or rescind their subscriptions or orders for
Common Shares. Any person who does not affirmatively elect to continue his
subscription or order or elects to rescind his subscription or order during such
time will have all of his funds promptly refunded with interest. Any person who
elects to decrease his subscription or order will have the appropriate portion
of his funds promptly refunded with interest. The sale of Common Shares pursuant
to subscriptions or orders received in the Offering will be subject to the
approval of the Plan by the voting members of Home City at the Special Meeting,
to the determination by the Board of Directors of HCFC of the total number of
Common
-2-
<PAGE> 9
Shares to be sold and to the satisfaction or waiver of certain other
conditions. See "THE CONVERSION - Subscription Offering; - Community Offering;
and - Pricing and Number of Common Shares to be Sold."
Assuming 720,000 Common Shares are sold in connection with the
Conversion, all directors and executive officers of HCFC and Home City and their
Associates intend to purchase an aggregate amount of 75,000 Common Shares in
connection with the Conversion, which would constitute 10.4% of the Common
Shares sold. The aggregate number of Common Shares proposed to be purchased by
the directors, the executive officers and the ESOP is 132,600, which would
constitute 18.4% of the Common Shares sold. Such percentages may increase or
decrease if more or less than 720,000 Common Shares are sold in the Conversion.
See "THE CONVERSION -- Shares to be Purchased by Management Pursuant to
Subscription Rights."
NON-TRANSFERABILITY OF SUBSCRIPTION RIGHTS
Federal regulations prohibit any person from transferring or entering
into any agreement or understanding before the completion of the Conversion to
transfer the ownership of the subscription rights issued in the Conversion or
the shares to be issued upon the exercise of such subscription rights. Persons
attempting to violate such provision may lose their rights to purchase Common
Shares in the Conversion and may be subject to penalties imposed by the OTS.
Each person exercising subscription rights will be required to certify that a
purchase of Common Shares is solely for the subscriber's own account and that
there is no agreement or understanding regarding the sale or transfer of such
Common Shares.
PRICING OF THE COMMON SHARES
Keller, an independent firm experienced in valuing thrift institutions,
has prepared a valuation of the estimated pro forma market value of Home City,
as converted. Keller's valuation of the estimated pro forma market value of Home
City, as converted, is $7,200,000 as of September 6, 1996 (the "Pro Forma
Value"). The Board of Directors reviewed the valuation, including the
methodology and the appropriateness of the assumptions used by Keller, and
determined that the valuation was not unreasonable. HCFC will issue the Common
Shares at a fixed price of $10 per share and, by dividing the price per share
into the Pro Forma Value, will determine the number of shares to be issued.
Applicable regulations require, however, that Home City establish a range of 15%
above and below the Pro Forma Value to allow for fluctuations in the aggregate
value of the Common Shares due to changes in the market for thrift shares and
other factors from the time of the commencement of the Subscription Offering
until the completion of the offering of the Common Shares. Based on the Pro
Forma Value of Home City as of September 6, 1996, the Valuation Range is
$6,120,000 to $8,280,000, resulting in the offer of between 612,000 and 828,000
Common Shares at a purchase price of $10 per share. The valuation should not be
considered a recommendation as to the advisability of purchasing the Common
Shares. Keller has assumed and relied upon the accuracy and completeness of the
financial information provided by Home City and did not independently value Home
City's assets and liabilities.
The actual number of Common Shares sold in connection with the
Conversion will be determined in the discretion of HCFC's Board of Directors
upon the completion of the Subscription Offering and the Community Offering, if
any, and will be based upon the final valuation of Home City, as converted. The
final valuation will be determined by Keller at the time of the closing of the
Offering. If the final valuation is within the Valuation Range, or does not
exceed the maximum of the Valuation Range by more than 15%, the number of Common
Shares to be issued in connection with the Conversion will not be less than
612,000 or more than 952,200. If, due to changing market conditions, the final
valuation is not between the minimum of the Valuation Range and 15% above the
maximum of the Valuation Range, subscribers will be given the opportunity to
affirm, increase, decrease or rescind their subscriptions. See "THE CONVERSION -
Pricing and Number of Common Shares to be Sold." If the final valuation is
between the minimum and 15% above the maximum of the Valuation Range,
subscribers will not be permitted to increase, decrease or rescind their
subscriptions.
USE OF PROCEEDS
HCFC will retain 50% of the net proceeds from the sale of the Common
Shares, or approximately $3,414,000 at the mid-point of the Valuation Range,
including the value of a promissory note from the ESOP, which HCFC intends to
accept in exchange for the issuance of Common Shares to the ESOP. Such proceeds
will be used to fund the Home City Financial Corporation Recognition and
Retention Plan (the "RRP") and will be invested in short-term and
intermediate-term government securities.
The remainder of the net proceeds received from the sale of the Common
Shares, $3,414,000 at the mid-point of the Valuation Range, will be invested by
HCFC in the capital stock to be issued by Home City to HCFC as a result of the
Conversion. Such investment will increase the regulatory capital of Home City
and will permit Home City to expand its lending
-3-
<PAGE> 10
and investment activities. Home City anticipates that such net proceeds
initially will be invested in short-term interest-bearing deposits. Eventually,
however, Home City will attempt to use such net proceeds to originate mortgage,
consumer and other loans in Home City's market area. Home City may also use the
proceeds from the Conversion to expand operations through the establishment of a
branch office, which would include space for administrative operations. Home
City estimates that the cost of establishing a new branch will be approximately
$1.25 million, including land acquisition and construction costs. Neither HCFC
nor Home City has, however, entered into any agreements concerning the
establishment of a branch office. Although HCFC and Home City could use the
proceeds from the Conversion to acquire other financial institutions or for HCFC
to purchase its own outstanding shares, HCFC and Home City have no current
intentions to do so. See "USE OF PROCEEDS."
OFFICER AND DIRECTOR BENEFITS
In connection with the Conversion, HCFC will establish the ESOP. Common
Shares will be purchased by the ESOP in the Conversion with a loan from HCFC.
The ESOP intends to repay the loan with discretionary contributions made by Home
City to the ESOP. As the loan is repaid, the Common Shares held by the ESOP will
be allocated to the accounts of employees of Home City and HCFC, including
executive officers. See "MANAGEMENT OF HOME CITY - Employee Stock Ownership
Plan."
At a meeting of the shareholders of HCFC to be held at least six months
after the consummation of the Conversion, the Boards of Directors of HCFC and
Home City intend to present to the shareholders for approval both the RRP and
the Home City Financial Corporation 1997 Stock Option and Incentive Plan (the
"Stock Option Plan"). If the RRP is approved at such meeting, HCFC will form a
trust (the "RRP Trust") to which HCFC will contribute sufficient amounts for the
purchase by the RRP Trust of an unspecified number of HCFC common shares equal
to up to 4% of the number of Common Shares sold in the Conversion. Such HCFC
common shares may be purchased after shareholder approval of the RRP in the open
market or from the authorized, but unissued, common shares of HCFC, and will be
awarded by a committee of the HCFC Board of Directors to the officers and
directors of HCFC and Home City for services rendered to Home City. See
"MANAGEMENT OF HOME CITY - Stock Option Plan; and - Recognition and Retention
Plan and Trust."
If the Stock Option Plan is approved at a meeting of shareholders
following the Conversion, directors, officers and employees of HCFC and Home
City will be granted options to purchase, in the aggregate, a number of Common
Shares equal to up to 10% of the Common Shares sold in the Conversion. The
exercise price for options granted will equal the HCFC market price on the date
of grant. The grant of such options, in combination with purchases of Common
Shares by such officers and directors and certain anti-takeover provisions in
the Articles of Incorporation and Code of Regulations of HCFC and the Amended
Charter of Home City, may facilitate the perpetuation of current management and
discourage proxy contests and takeover attempts. See "RESTRICTIONS ON
ACQUISITIONS OF HOME CITY AND HCFC AND RELATED ANTI-TAKEOVER PROVISIONS."
Assuming the purchase by directors and executive officers of 10.4% of
the Common Shares sold at the mid-point of the Valuation Range, the purchase by
the RRP of a number of Common Shares equal to 4% of the Common Shares sold in
the Conversion, the exercise by directors and executive officers of all options
authorized pursuant to the Stock Option Plan and the control by directors and
executive officers of the 8% of the Common Shares purchased by the ESOP in the
Conversion, directors and executive officers could own or control up to 29.5% of
the outstanding common shares of HCFC. See "RISK FACTORS-Controlling Influence
of Management and Anti-Takeover Provisions Which May Discourage Sales of Common
Shares for Premium Prices."
MARKET FOR THE COMMON SHARES
There is presently no market for the Common Shares. The aggregate
offering price for the Common Shares is based upon an independent appraisal of
Home City. The appraisal is not a recommendation as to the advisability of
purchasing Common Shares. See "THE CONVERSION - Pricing and Number of Common
Shares to be Sold." No assurance can be given that persons purchasing Common
Shares will thereafter be able to sell such shares at a price at or above the
$10 offering price.
HCFC has received approval to have the Common Shares quoted on The
Nasdaq Small Cap Market under the symbol "__________" upon the closing of the
Conversion, subject to certain conditions which HCFC and Home City believe will
be satisfied, although no assurance can be provided that the conditions will be
met. In connection with such approval, Webb has informed Home City that Keefe,
Bruyette & Woods, Inc., intends to make a market in the Common Shares. No
assurance can be given, however, that an active or liquid market for the Common
Shares will develop after the completion of the Conversion or, if such a market
does develop, that such market will continue. Investors should consider,
therefore, the potentially illiquid and long-term nature of an investment in the
Common Shares. See "RISK FACTORS - Market for the Common Shares."
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<PAGE> 11
DIVIDEND POLICY
The declaration and payment of dividends by HCFC will be subject to the
discretion of the Board of Directors of HCFC and will be based on the earnings
and financial condition of HCFC and general economic conditions. Other than the
earnings on the investment of proceeds retained by HCFC, the only source of
income of HCFC will be dividends periodically declared and paid by the Board of
Directors of Home City on the common shares of Home City owned by HCFC. The
payment of dividends by Home City to HCFC will be subject to various regulatory
restrictions. On a pro forma basis, as of June 30, 1996, assuming (i) receipt by
Home City of $3.4 million of net conversion proceeds, (ii) the investment of
such net proceeds in assets having a risk weighting of 20% and (iii) the
establishment of a Liquidation Account (hereinafter defined) in the amount of
$5.4 million (the regulatory capital of Home City at June 30, 1996), Home City
would have $4.19 million available for the payment of dividends to HCFC.
In an effort to manage the capital of HCFC, the Board of Directors of
HCFC may determine that the payment of a regular or a special cash dividend or
both may be prudent. No assurance can be given, however, that any dividend will
be declared, what the amount will be or whether such dividends, if declared,
will continue in the future. See "DIVIDEND POLICY."
INVESTMENT RISKS
Special attention should be given to the matters discussed under "RISK
FACTORS," beginning on page 9, prior to investing in the Common Shares.
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<PAGE> 12
SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA
The following tables set forth certain information concerning the
consolidated financial condition, earnings and other data regarding Home City at
the dates and for the periods indicated. The financial information should be
read in conjunction with the consolidated financial statements and notes thereto
included elsewhere herein. In addition, the financial information should be read
in conjunction with the "Recent Developments" section, beginning on page 31, for
the impact of the special SAIF assessment on Home City's capital and earnings
for the three months ended September 30, 1996. However, in the opinion of
management of Home City, all adjustments necessary for a fair presentation of
such financial data have been included. All such adjustments are of a normal
recurring nature.
SELECTED FINANCIAL CONDITION
AND OTHER DATA:
<TABLE>
<CAPTION>
At June 30,
-------------------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Total amount of:
Assets $55,728 $48,578 $39,680 $40,769 $42,325
Cash and cash equivalents (1) 1,843 2,377 987 3,358 5,889
Investment securities available for sale 2,188 259 314 1,398 20
Investment securities held to maturity -- 1,901 2,098 2,473 4,484
Mortgage-backed securities
available for sale 2,975 -- -- -- --
Mortgage-backed securities
held to maturity -- 3,667 4,257 5,314 2,064
Loans receivable - net 45,225 38,960 31,103 28,648 28,875
FHLB stock - at cost 394 288 248 216 205
Deposits 47,174 40,936 34,816 36,688 39,398
FHLB advances 2,903 2,618 424 460 --
Retained earnings, substantially
restricted-net (2) 5,271 4,757 4,202 3,497 2,832
Number of offices, all full service 1 1 1 1 1
</TABLE>
<TABLE>
<CAPTION>
At June 30,
---------------------------------------------------------------
SUMMARY OF EARNINGS: 1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C>
Interest income $4,507 $3,835 $3,542 $3,565 $3,439
Interest expense 2,542 1,942 1,446 1,710 2,370
------ ------ ------ ------ ------
Net interest income 1,965 1,893 2,096 1,855 1,069
Provision for loan losses 50 109 113 83 52
------ ------ ------ ------ ------
Net interest income after
provision for loan losses 1,915 1,784 1,983 1,772 1,017
Noninterest income 58 9 12 44 1
Noninterest expense 1,216 998 923 727 845
------ ------ ------ ------ ------
Income before income tax 757 795 1,072 1,089 173
Income tax expense (2) 243 240 367 424 73
------ ------ ------ ------ ------
Net income (2) $ 514 $ 555 $ 705 $ 665 $ 100
====== ====== ====== ====== ======
</TABLE>
- ---------------------------
(Footnotes on next page)
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<PAGE> 13
<TABLE>
<CAPTION>
At or for the year ended June 30,
-----------------------------------------------------------
SELECTED FINANCIAL RATIOS: 1996 1995 1994 1993 1992
------ ------ ------ ----- ------
<S> <C> <C> <C> <C> <C>
Return on assets (3) 0.98% 1.24% 1.69% 1.66% 0.26%
Return on equity (4) 10.46 12.20 17.23 21.08 3.52
Interest rate spread (5) 3.42 3.95 4.88 4.58 3.12
Net interest margin (6) 3.86 4.36 5.28 4.81 2.92
Noninterest expense to average assets (7) 2.31 2.22 2.28 1.82 2.21
Average equity to average assets 9.55 10.21 10.09 7.88 7.42
Equity to assets at period end 9.69 10.06 10.87 8.58 6.69
Nonperforming loans to total loans 0.54 0.53 0.11 1.35 0.17
Nonperforming assets to total assets (8) 0.44 0.43 0.09 0.96 0.12
Allowance for loan losses to total loans 0.80 0.82 0.74 0.69 0.38
Allowance for loan losses to
nonperforming loans 146.56 154.11 673.53 50.77 222.00
Net charge-offs to average loans 0.02 0.05 0.27 (0.01) -
</TABLE>
- ----------------------------
(1) Includes cash and amounts due from depository institutions and
interest-bearing deposits in other financial institutions.
(2) Effective January 1, 1993, Home City adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes".
The effect of adopting SFAS No. 109 on income tax expense in 1994 and
1993 was not material.
(3) Net income divided by average total assets.
(4) Net income divided by average total equity.
(5) Average yield on interest-earning assets less average cost of
interest-bearing liabilities.
(6) Net interest income as a percentage of average interest-earning assets.
(7) Noninterest expense divided by average total assets.
(8) Nonperforming assets consist of nonaccruing loans, accruing loans 90
days or more past due and real estate acquired (or deemed acquired) in
foreclosure proceedings or in lieu thereof. See "THE BUSINESS OF HOME
CITY - Delinquent Loans, Nonperforming Assets and Classified Assets."
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<PAGE> 14
REGULATORY CAPITAL COMPLIANCE
The following table sets forth the historical and pro forma regulatory
capital of Home City at June 30, 1996, based on the receipt of proceeds for the
number of Common Shares indicated, less estimated expenses of $357,000,
$372,000, $387,000 and $404,000 at the minimum, mid-point, maximum and maximum,
as adjusted, of the Valuation Range, respectively, assuming all of such shares
are sold in the Subscription Offering.
<TABLE>
<CAPTION>
Pro forma capital at June 30, 1996, assuming the sale of
-----------------------------------------------------------------------------
612,000 720,000 828,000 952,200
Common Shares Common Shares Common Shares Common Shares
Historical at (offering price (offering price (offering price (offering price
June 30, 1996 of $10 per of $10 per of $10 per of $10 per
(1) share) share) share) share)
---------------- ---------------- ---------------- ---------------- -----------------
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital under
generally
accepted accounting
principles, before $5,398 9.68% $7,545 13.07% $7,545 13.67% $8,351 14.27% $8,847 14.99%
adjustments (2)(3)
Current tangible
capital (2)(3):
Capital level $5,271 9.48% $7,418 12.85% $7,821 13.45% $8,224 14.05% $8,720 14.77%
Requirement 834 1.50 866 1.50 872 1.50 878 1.50 886 1.50
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Excess $4,437 7. 98% $6,552 11.35% $6,949 11.95% $7,346 12.55% $7,834 13.27%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Current core
capital (2)(3):
Capital level $5,271 9.48% $7,418 12.85% $7,821 13.45% $8,224 14.88% $8,720 15.83%
Requirement 1,668 3.00 1,732 3.00 1,744 3.00 1,756 3.00 1,771 3.00
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Excess $3,603 6.48% $5,686 9.85% $6,077 10.45% $6,468 11.88% $6,949 11.77%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Current risk-based
capital (4):
Capital level $5,633 18.77% $7,780 25.57% $8,183 26.82% $8,586 28.07% $9,082 29.59%
Requirement 2,400 8.00 2,434 8.00 2,441 8.00 2,447 8.00 2,455 8.00
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Excess $3,233 10.77% $5,346 17.57% $5,742 18.82% $6,139 20.07% $6,627 21.59%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
- -----------------------------------
(1) See Note N of the Notes to Financial Statements.
(2) Pro forma amounts assume Home City will receive 50% of the conversion
proceeds before reduction for the ESOP loan. Also reflects a deduction
from capital for unearned ESOP shares equal to 8% of the shares offered
and unearned RRP shares equal to 4% of the shares offered.
(3) Historical tangible and core capital percentages are based on adjusted
total assets of $56.0 million. Pro forma tangible and core capital
percentages are based on adjusted total assets of $52.7 million, $58.1
million, $58.5 million, and $59.0 million, which assumes the receipt by
Home City of net proceeds from the sale of Common Shares of $2.9
million, $3.4 million, $3.9 million and $4.6 million, at the minimum,
mid-point, maximum and maximum, as adjusted, of the Valuation Range,
respectively. The OTS has proposed a new regulation which would
increase the core capital requirement to between 4% and 5% of adjusted
total assets, with the specific requirement to be determined on a
case-by-case basis. See "REGULATION - OTS Regulations -- Regulatory
Capital Requirements."
(4) Historical risk-based capital percentages are based on risk-weighted
assets of $30.0 million. Pro forma risk-based capital percentages are
based on the receipt by Home City of net proceeds of $2.9 million, $3.4
million, $3.9 million and $4.6 million, and assumes the net proceeds
will be invested in short-term interest-bearing deposits having a risk
weighting of 20%.
-8-
<PAGE> 15
RISK FACTORS
Investment in the Common Shares involves certain risks. Before
investing, prospective purchasers should consider carefully the following
matters, in addition to the other information discussed elsewhere in this
Prospectus:
INTEREST RATE RISK
Home City's operating results are dependent to a significant degree on
its net interest income, which is the difference between interest income from
loans and investments and interest expense on deposits. Like most thrift
institutions, the interest income and interest expense of Home City change as
the interest rates on mortgages, securities and other assets and on deposits and
other liabilities change. Interest rates may change because of general economic
conditions, the policies of various regulatory authorities and other factors
beyond Home City's control. The interest rates on specific assets and
liabilities of Home City will change or "reprice" in accordance with the
contractual terms of the asset or liability instrument and in accordance with
customer reaction to general economic trends.
Home City, like other financial institutions, is subject to interest
rate risk to the extent that its interest-earning assets reprice differently
than its interest-bearing liabilities. As part of its effort to monitor and
manage interest rate risk, Home City uses the "net portfolio value" ("NPV")
methodology recently adopted by the OTS as part of its capital regulations.
Although Home City is not currently subject to the NPV regulation because such
regulation does not apply to institutions with less than $300 million in assets
and risk-based capital in excess of 12%, the application of the NPV methodology
may illustrate Home City's interest rate risk.
Generally, NPV is the difference between incoming cash flows on
interest-earning and other assets and outgoing cash flows on interest-bearing
and other liabilities, discounted to their economic value. The application of
the methodology attempts to quantify interest rate risk as the change in the NPV
which would result from a theoretical 200 basis point (1 basis point equals
.01%) change in market interest rates. Both a 200 basis point increase in market
interest rates and a 200 basis point decrease in market interest rates are
considered. If the NPV would decrease more than 2% of the economic value of the
institution's assets with either an increase or a decrease in market rates, the
institution must, in determining its risk-based capital, deduct from its capital
50% of the amount of the decrease in excess of such 2%.
At June 30, 1996, 2% of the economic value of Home City's assets was
approximately $1.2 million. Because the interest rate risk of a 200 basis point
increase in market interest rates (which was greater than the interest rate risk
of a 200 basis point decrease) was $1.6 million at June 30, 1996, Home City
would have been required to deduct approximately $200,000 (half of the
approximate $400,000 difference) from its capital in determining whether Home
City met its risk-based capital requirement. Regardless of such reduction,
however, Home City's risk-based capital at June 30, 1996, would still have
exceeded the regulatory requirement by approximately $ 3.0 million.
Home City's NPV is more sensitive to rising rates than declining rates.
Such difference in sensitivity occurs principally because, as rates rise,
borrowers do not prepay fixed-rate loans as quickly as they do when interest
rates are declining. Because Home City has not originated loans in accordance
with traditional secondary market guidelines, the sale of fixed-rate loans may
be difficult. As a result, in a rising interest rate environment, the amount of
interest Home City would receive on its loans would increase relatively slowly
as loans are slowly prepaid and new loans at higher rates are made. Moreover,
the interest Home City would pay on its deposits would increase rapidly because
Home City's deposits generally have shorter periods to repricing. In addition,
increases in interest rates can also result in the flow of funds away from
savings institutions into direct investments or other investment vehicles, such
as mutual funds, which may pay higher rates of return than savings institutions.
As with any method of measuring interest rate risk, certain
shortcomings are inherent in the NPV approach. For example, although certain
assets and liabilities may have similar maturities or periods of repricing, they
may react in different degrees to changes in market interest rates. Also, the
interest rates on certain types of assets and liabilities may fluctuate in
advance of changes in market interest rates, while interest rates on other types
may lag behind changes in market rates. Further, in the event of a change in
interest rates, expected rates of prepayment on loans and mortgage-backed
securities and early withdrawal levels from certificates of deposit would likely
deviate significantly from those assumed in making the risk calculations. For
further discussion of the NPV methodology, the risks to Home City and the steps
Home City is taking to reduce such risks, see "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF HOME CITY - Asset
and Liability Management."
-9-
<PAGE> 16
If interest rates continue to rise from the recent levels, Home City's
net interest income will be negatively affected. Moreover, rising interest rates
may negatively affect Home City's earnings due to diminished loan demand. A
negative effect on interest income and earnings will adversely affect the value
of an investment in the Common Shares.
RISK ASSOCIATED WITH LOANS SECURED BY NONRESIDENTIAL REAL ESTATE
Over the last three years, up to 17% of Home City's loan portfolio has
been comprised of loans secured by nonresidential real estate. The security for
nonresidential real estate loans currently in Home City's portfolio includes
retail stores, office buildings and business premises. At June 30, 1996, Home
City had a total of $7.3 million invested in nonresidential real estate loans,
which comprised 14.9% of Home City's total loans at such date. Of such amount,
$197,000 was delinquent and classified as substandard. See "THE BUSINESS OF HOME
CITY - Lending Activities -- Delinquent Loans, Nonperforming Assets and
Classified Assets."
Nonresidential real estate lending is generally considered to involve a
higher degree of risk than residential lending due to the relatively larger loan
amounts and the effects of general economic conditions on the successful
operation of income-producing properties. If the cash flow on the property is
reduced, for example, as leases are not obtained or renewed, the borrower's
ability to repay may be impaired. Home City has endeavored to reduce such risk
by evaluating the credit history and past performance of the borrower, the
location of the real estate, the quality of the management constructing and
operating the property, the debt service ratio, the quality and characteristics
of the income stream generated by the property and appraisals supporting the
property's valuation. Although management considers its allowance for loan
losses to be sufficient to cover anticipated losses on classified assets, the
amount of any actual loss could adversely affect Home City's net income and
regulatory capital.
LIMITED MARKET FOR THE COMMON SHARES
There is presently no market for the Common Shares. The aggregate
offering price for the Common Shares is based upon an independent appraisal of
Home City. The appraisal is not a recommendation as to the advisability of
purchasing Common Shares. See "THE CONVERSION - Pricing and Number of Common
Shares to be Sold." No assurance can be given that persons purchasing Common
Shares will thereafter be able to sell such shares at a price at or above the
offering price.
HCFC has received approval to have the Common Shares quoted on The
Nasdaq Small Cap Market under the symbol "_______" upon the closing of the
Conversion, subject to certain conditions which HCFC and Home City believe will
be satisfied, although no assurance can be provided that the conditions will be
met. In connection with such approval, Webb has informed Home City that Keefe,
Bruyette & Woods, Inc., intends to make a market in the Common Shares. No
assurance can be given, however, that an active or liquid market for the Common
Shares will develop after the completion of the Conversion or, if such a market
does develop, that it will continue. Investors should consider, therefore, the
potentially illiquid and long-term nature of an investment in the Common Shares.
COMPETITION IN MARKET AREA
Home City faces strong direct competition in its market area for
deposits and loans from commercial banks, other savings associations, credit
unions and mortgage banking companies. Mortgage banking companies and other
non-FDIC insured providers of financial services are not subject to the same
degree of regulatory oversight as savings associations and thus have greater
operational flexibility, without the costs and burdens associated with
compliance with OTS and FDIC regulations.
POSSIBLE INADEQUACY OF THE ALLOWANCE FOR LOAN LOSSES
Home City maintains an allowance for loan losses based upon a number of
relevant factors, including, but not limited to, trends in the level of
nonperforming assets and classified loans, current and anticipated economic
conditions in the lending area, past loss experience, possible losses arising
from specific problem assets and changes in the composition of the loan
portfolio. While the Board of Directors believes that it uses the best
information available to determine the amount of the allowance for loan losses,
unforeseen market conditions could result in material adjustments, and net
income could be significantly adversely affected, if circumstances differ
substantially from the assumptions used in making the determination of the
allowance for loan losses.
-10-
<PAGE> 17
LEGISLATION AND REGULATION WHICH MAY ADVERSELY AFFECT HOME CITY'S EARNINGS
Home City is subject to extensive regulation by the OTS and the FDIC
and is periodically examined by such regulatory agencies to test compliance with
various regulatory requirements. As a savings and loan holding company, HCFC
will also be subject to regulation and examination by the OTS. Such supervision
and regulation of Home City and HCFC are intended primarily for the protection
of depositors and not for the maximization of shareholder value and may affect
the ability of HCFC to engage in various business activities. The assessments,
filing fees and other costs associated with reports, examinations and other
regulatory matters are significant and may have an adverse effect on HCFC's net
earnings. See "REGULATION."
The FDIC is authorized to establish separate annual assessment rates
for deposit insurance for members of the Bank Insurance Fund (the "BIF") and the
SAIF. The FDIC may increase assessment rates for either fund if necessary to
restore the fund's ratio of reserves to insured deposits to the target level
within a reasonable time and may decrease such rates if such target level has
been met. The FDIC has established a risk-based assessment system for both SAIF
and BIF members. Under such system, assessments may vary depending on the risk
the institution poses to its deposit insurance fund. Such risk level is
determined by reference to the institution's capital level and the FDIC's level
of supervisory concern about the institution.
Legislation to recapitalize the SAIF and to eliminate the significant
premium disparity between the SAIF and the BIF became effective September 30,
1996. The recapitalization plan provides for the payment by November 29, 1996,
of a special assessment equal to $.657 per $100 of SAIF deposits held at March
31, 1995. The special assessment will increase SAIF reserves to the level
required by law. Certain BIF institutions holding SAIF insured deposits will pay
a lower special assessment. In addition, the cost of prior thrift failures will
be shared by both the SAIF and the BIF, which will increase BIF assessments.
After the payment of the special assessment, SAIF assessments for healthy
savings associations will be set at a significantly lower level but can never be
reduced below the level set for healthy BIF institutions
On the basis of its $40.4 million in deposits at March 31, 1995, Home
City will pay, by November 29, 1996, an additional pre-tax assessment of
$265,000. Such payment was recorded as an expense and accounted for by Home City
as of September 30, 1996. Earnings and capital were, therefore, negatively
affected for the quarter ended September 30, 1996, by an after-tax amount of
approximately $175,000.
The recapitalization plan also provides for the merger of the SAIF and
BIF effective January 1, 1999, assuming all savings associations have become
banks. As a result, it is expected that the thrift charter or the separate
federal regulation of thrifts will be eliminated. As a result, Home City would
be regulated under federal law as a bank and, therefore, would become subject to
the more restrictive activity limitations imposed on national banks. See
"REGULATION - FDIC Regulations -- Assessments."
CONTROLLING INFLUENCE OF MANAGEMENT AND ANTI-TAKEOVER PROVISIONS WHICH MAY
DISCOURAGE SALES OF COMMON SHARES FOR PREMIUM PRICES
The Articles of Incorporation and Code of Regulations of HCFC and the
Charter of Home City contain certain provisions that could deter or prohibit
non-negotiated changes in the control of HCFC and Home City. Such provisions
include a restriction on the acquisition of more than 10% of the outstanding
shares of HCFC by any person during the five-year period following the effective
date of the Conversion, the ability to issue additional common shares and a
supermajority voting requirement for certain transactions. See "DESCRIPTION OF
AUTHORIZED SHARES" and "RESTRICTIONS ON ACQUISITION OF HOME CITY AND HCFC AND
RELATED ANTI-TAKEOVER PROVISIONS."
The Articles of Incorporation of HCFC provide that for five years after
the effective date of the Conversion, no person, except the ESOP, may acquire
the beneficial ownership of more than 10% of any class of outstanding equity
securities of HCFC. If such a prohibited acquisition occurs, the securities
owned by such person in excess of the 10% limit may not be voted on any matter
submitted to the shareholders of HCFC. Such provision may not be waived by
management. The ability of management or any other person to solicit revocable
proxies from shareholders and vote on behalf of such shareholders will not be
restricted by such 10% limit.
The Articles of Incorporation of HCFC also provide that if the Board of
Directors recommends that shareholders approve certain matters, including
mergers, acquisitions of a majority of the shares of HCFC or the transfer of
substantially all of the assets of HCFC, the affirmative vote of the holders of
only a majority of the voting shares of HCFC is required to approve such matter.
If, however, the Board of Directors recommends against the approval of any such
matter, the affirmative vote of the holders of at least 75% of the voting shares
of HCFC is required to approve such matters. The existence of such 75% provision
-11-
<PAGE> 18
in the Articles of Incorporation of HCFC may make more difficult actions which
certain shareholders deem to be in their best interests.
Officers and directors of HCFC are expected to purchase approximately
10.4% of the shares issued in connection with the Conversion at the mid-point of
the Valuation Range. In addition, the ESOP intends to purchase approximately 8%
of the shares issued in connection with the Conversion. The ESOP trustee must
vote shares allocated under the ESOP as directed by the participants to whom the
shares are allocated and vote unallocated shares in his sole discretion in the
best interest of the participants. The RRP may acquire Common Shares in the open
market or acquire authorized but unissued common shares from HCFC following
approval of the RRP by the shareholders of HCFC at a meeting of the shareholders
in an amount equal to up to 4% of the Common Shares issued in connection with
the Conversion. The RRP trustees, who are expected to be two directors of HCFC,
will vote shares awarded but not distributed under the RRP in their discretion.
In view of the various provisions of the Articles of Incorporation and
the stock benefit plans of HCFC and Home City, as well as an employment
agreement which Home City proposes to enter into with its President, the
aggregate ownership by the ESOP, the RRP and the directors and officers of HCFC
and Home City may have the effect of facilitating the perpetuation of current
management and discouraging proxy contests and takeover attempts. Thus, officers
and directors, who are anticipated to be allocated or awarded shares under such
plans, will have a significant influence over the vote on such a transaction and
may be able to defeat such a proposal. The Boards of Directors of HCFC and Home
City believe that such provisions will be in the best interests of shareholders
by encouraging prospective acquirers to negotiate a proposed acquisition with
the directors. Such provisions could, however, adversely affect the market value
of the Common Shares or deprive shareholders of the opportunity to sell their
shares for premium prices.
Federal and Ohio law also restrict the acquisition of control of HCFC
and Home City. Any or all of these provisions may facilitate the perpetuation of
current management and discourage proxy contests or takeover attempts not first
negotiated with the Board of Directors. See "RESTRICTIONS ON ACQUISITION OF HOME
CITY AND HCFC AND RELATED ANTI-TAKEOVER PROVISIONS."
Regulations of the OTS also restrict the ability of any person to
acquire the beneficial ownership of more than 10% of any class of voting equity
security of Home City or HCFC without the prior written approval of or lack of
objection by the OTS. Such restrictions could restrict the use of revocable
proxies. See "RESTRICTIONS ON ACQUISITION OF HOME CITY AND HCFC AND RELATED
ANTI-TAKEOVER PROVISIONS."
POSSIBLE ADVERSE EFFECTS IF PREFERRED SHARES ARE ISSUED
The HCFC Articles of Incorporation authorize the issuance of one
million preferred shares. The Board of Directors is authorized to issue, without
shareholder approval, preferred shares and to fix the designations, preferences
or other special rights of such shares and the qualifications, limitations and
restrictions thereof. If preferred shares are issued, each holder of preferred
shares will be entitled to one vote for each preferred share held of record on
all matters submitted to a vote of shareholders. The issuance of preferred
shares and any conversion rights which may be specified by the Board of
Directors for the preferred shares could adversely affect the voting power of
holders of the Common Shares. In addition, if the purchase price of the
preferred shares is less than the book value of the Common Shares, the book
value of the Common Shares could be adversely affected. No preferred shares will
be issued in connection with the Conversion, and the Board of Directors has no
present intention to issue any of the preferred shares. See "DESCRIPTION OF
AUTHORIZED SHARES" and "RESTRICTIONS ON ACQUISITION OF HOME CITY AND HCFC AND
RELATED ANTI-TAKEOVER PROVISIONS - Articles of Incorporation of HCFC -- Ability
of the Board of Directors to Issue Additional Shares."
RISK OF DELAYED OFFERING
HCFC and Home City expect to complete the Conversion by December 31,
1996. It is possible, however, that adverse market, economic or other factors
could delay the completion of the Conversion. If the Community Offering is
extended beyond ______________, 1997, each subscriber will be given a notice of
such delay and the right to affirm, increase, decrease or rescind his
subscription. In such event, any person who does not affirmatively elect to
continue his subscription or elects to rescind his subscription will have all of
his funds promptly refunded with interest. Any person who elects to decrease his
subscription will have the appropriate portion of his funds promptly refunded
with interest. If the Community Offering is extended, the cost of the Conversion
could increase and the valuation of Home City could change. Extensions of the
Community Offering will not extend past ____________, 1997.
-12-
<PAGE> 19
DILUTIVE EFFECT OF INCREASE IN VALUATION RANGE
The number of Common Shares to be sold in the Conversion may be as much
as 15% greater than the maximum of the Valuation Range due to changes in market
and financial conditions following the commencement of the Offering. An increase
in the number of Common Shares sold will decrease net earnings per share and
shareholders' equity per share on a pro forma basis.
See "CAPITALIZATION" and "PRO FORMA DATA."
DILUTIVE EFFECT OF PURCHASES BY THE ESOP AND THE RRP AND OF ESTABLISHMENT OF THE
STOCK OPTION PLAN
If the ESOP is unable to purchase Common Shares in the Conversion due
to an oversubscription by Eligible Account Holders, the ESOP may purchase
authorized but unissued shares from HCFC or purchase in the open market a number
of shares equal to up to 8% of the Common Shares issued in connection with the
Conversion. If the ESOP shares are purchased from authorized but unissued
shares, shareholders would experience a dilution of their ownership interests of
up to 7.4%. In addition, the RRP may purchase authorized but unissued shares
from HCFC or purchase in the open market a number of shares equal to 4% of the
Common Shares issued in connection with the Conversion. The purchase of
authorized but unissued shares by the RRP would have a dilutive effect on the
ownership interests of HCFC's shareholders of up to 3.85%. See "CAPITALIZATION"
and "PRO FORMA DATA." The exercise of stock options, assuming implementation of
the Stock Option Plan, will also have a dilutive effect on the ownership
interests of then-existing shareholders.
NEGATIVE EFFECT ON EARNINGS AND RETURN ON EQUITY OF CONVERSION PROCEEDS AND
ESOP AND RRP EXPENSE
Because the investment of the proceeds of the Conversion in loans will
not occur immediately upon receipt and because HCFC's total shareholders'
equity will increase significantly, the return on equity of HCFC may decrease
substantially for some time after the completion of the Conversion. Moreover,
net earnings and return on equity may be negatively affected by the purchase of
shares by the ESOP and the implementation of the RRP. HCFC will be required to
record as compensation expense the fair value of shares as they are committed
to be released to participants pursuant to the ESOP. In addition, if the RRP is
implemented, the fair value of the shares held by the RRP will be recorded as
compensation expense as the shares are earned. See "'PRO FORMA DATA."
HOME CITY FINANCIAL CORPORATION
HCFC was incorporated under Ohio law in August 1996 at the direction of
Home City for the purpose of serving as the holding company for Home City. HCFC
has not conducted and will not conduct any business other than business related
to the Conversion prior to the completion of the Conversion. HCFC has received
approval of the OTS to acquire the capital stock to be issued by Home City in
the Conversion. Upon the consummation of the Conversion, HCFC will be a unitary
savings and loan holding company, the principal assets of which will initially
be the capital stock of Home City, a loan to the ESOP for the purchase of Common
Shares and the investments made with the proceeds retained by HCFC from the sale
of Common Shares. See "USE OF PROCEEDS." As a savings and loan holding company,
HCFC will be required to register with, and will be subject to examination and
supervision by, the OTS. See "REGULATION - OTS Regulations -- Holding Company
Regulation." The types of business activities in which a unitary savings and
loan holding company may engage are virtually unrestricted. See, however, "RISK
FACTORS - Legislation and Regulation Which May Adversely Affect Home City's
Earnings."
The office of HCFC is located at 63 West Main Street, Springfield, Ohio
45502-1309, and its telephone number is (513) 324-5736.
HOME CITY FEDERAL SAVINGS BANK OF SPRINGFIELD
Home City is a federal mutual savings bank which has served the
Springfield, Ohio, area since 1925. Originally formed under the name "Home City
Savings and Loan Association," Home City changed its name to "Home City Federal
Savings Bank" on May 1, 1996. As a federal savings bank chartered under the laws
of the United States, Home City is subject to supervision and regulation by the
OTS and the FDIC and is a member of the FHLB of Cincinnati. The deposits of Home
City are insured up to applicable limits by the FDIC in the SAIF. See
"REGULATION."
Home City is principally engaged in the business of making conventional
first mortgage loans secured by one- to four-family residential real estate and
nonresidential real estate located within Clark County, Ohio, and adjacent
counties and investing in U.S. Government agency obligations, interest-bearing
deposits in other financial institutions, mortgage-backed securities and
municipal securities. Home City also makes loans secured by multifamily real
estate (over four units) and construction, consumer and commercial loans. Loan
funds are obtained primarily from savings deposits, loan repayments and
borrowings from the FHLB of Cincinnati. See "THE BUSINESS OF HOME CITY - Lending
Activities; and - Investment Activities."
Interest on loans and mortgage-backed securities is Home City's primary
source of income. The principal expense of Home City is interest paid on deposit
accounts. Operating results are dependent to a significant degree on the net
interest income of Home City, which is the difference between interest earned on
loans and mortgage-backed securities and interest paid on deposits. Like most
thrift institutions, Home City's interest income and interest expense are
significantly affected by general
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<PAGE> 20
economic conditions and by the policies of various regulatory authorities. See
"RISK FACTORS" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF HOME CITY."
Home City conducts business from its office at 63 West Main Street,
Springfield, Ohio 45502-1309. The telephone number of Home City is (513)
324-5736. See "THE BUSINESS OF HOME CITY."
USE OF PROCEEDS
The following table presents the estimated gross and net proceeds from
the sale of the Common Shares in connection with the Conversion based on the
Valuation Range:
<TABLE>
<CAPTION>
Maximum,
Minimum Mid-point Maximum as adjusted
------- --------- ------- -----------
<S> <C> <C> <C> <C>
Gross proceeds $6,120,000 $7,200,000 $8,280,000 $9,522,000
Less estimated expenses 357,000 372,000 387,000 404,000
----------
Total net proceeds $5,763,000 $6,828,000 $7,893,000 $9,118,000
========== ========== ========== ==========
</TABLE>
The net proceeds from the sale of the Common Shares may be outside the Valuation
Range, depending upon financial and market and regulatory conditions at the time
of the completion of the Offering. See "THE CONVERSION - Pricing and Number of
Common Shares to be Sold." The expenses are estimated assuming that (a) all of
the indicated number of Common Shares are sold in the Subscription Offering; (b)
the directors, officers and their Associates purchase 75,000 Common Shares and
(c) the ESOP purchases 8% of the Common Shares sold. Actual expenses may be more
or less than estimated. See "THE CONVERSION - Plan of Distribution."
HCFC will retain 50% of the net proceeds from the sale of the Common
Shares, or approximately $3,414,000 at the mid-point of the Valuation Range,
including the value of a promissory note from the ESOP which HCFC intends to
accept in exchange for the issuance of Common Shares to the ESOP. Such proceeds
will be used to fund the RRP and will be invested in short-term and
intermediate-term government securities. The remainder of the net proceeds
received from the sale of the Common Shares, $3,414,000 at the mid-point of the
Valuation Range, will be invested by HCFC in the capital stock to be issued by
Home City to HCFC as a result of the Conversion. Such investment will increase
the regulatory capital of Home City and will permit Home City to expand its
lending and investment activities and to enhance customer services.
Home City anticipates that such net proceeds initially will be invested
in short-term interest-bearing deposits in other financial institutions.
Eventually, however, Home City will attempt to use the net proceeds to originate
mortgage, consumer and other loans in Home City's market areas and may also use
the proceeds from the Conversion to expand operations through the establishment
of a branch office, which would include space for administrative operations.
Home City estimates that the cost of establishing a new branch would be
approximately $1.25 million, including land acquisition and construction costs.
Although HCFC and Home City could use the increase in capital which will result
from the Conversion to acquire other financial institutions or for HCFC to
repurchase its own outstanding shares, HCFC and Home City have no current plans
or agreements, written or oral, and are not negotiating, to acquire any other
institution and have no current plans for HCFC to repurchase any of its shares.
See "THE BUSINESS OF HOME CITY."
MARKET FOR COMMON SHARES
There is presently no market for the Common Shares. The aggregate
offering price for the Common Shares is based upon an independent appraisal of
Home City. The appraisal is not a recommendation as to the advisability of
purchasing Common Shares. See "THE CONVERSION - Pricing and Number of Common
Shares to be Sold." No assurance can be given that persons purchasing Common
Shares will thereafter be able to sell such shares at a price at or above the
offering price.
HCFC has received approval to have the Common Shares quoted on The
Nasdaq Small Cap Market under the symbol "____" upon the closing of the
Conversion, subject to certain conditions which HCFC and Home City believe will
be satisfied, although no assurance can be provided that the conditions will be
met. In connection with such approval, Webb has informed
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<PAGE> 21
Home City that Keefe, Bruyette & Woods, Inc., intends to make a market in the
Common Shares. No assurance can be given, however, that an active or liquid
market for the Common Shares will develop after the completion of the Conversion
or, if such a market does develop, that such market will continue. Investors
should consider, therefore, the potentially illiquid and long-term nature of an
investment in the Common Shares. See "RISK FACTORS - Limited Market for the
Common Shares."
DIVIDEND POLICY
The declaration and payment of dividends by HCFC will be subject to the
discretion of the Board of Directors of HCFC and will be based on the earnings
and financial condition of HCFC and general economic conditions. In an effort to
manage the capital of HCFC, the Board of Directors may determine that the
payment of a regular or special cash dividend or both may be prudent. No
assurance can be given that any dividend will be declared or that any dividend,
if declared, will continue in the future.
Other than earnings on the investment of the proceeds retained by HCFC,
the only source of income of HCFC will be dividends periodically declared and
paid by the Board of Directors of Home City on the common stock of Home City
held by HCFC. The declaration and payment of dividends by Home City to HCFC will
be subject to the discretion of the Board of Directors of Home City, to the
earnings and financial condition of Home City, to general economic conditions
and to federal restrictions on the payment of dividends by thrift institutions.
Under regulations of the OTS applicable to converted associations, Home City
will not be permitted to pay a cash dividend on its capital stock after the
Conversion if its regulatory capital would, as a result of the payment of such
dividend, be reduced below the amount required for the Liquidation Account or
the applicable regulatory capital requirement prescribed by the OTS. See "THE
CONVERSION - Principal Effects of the Conversion -- Liquidation Account" and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF HOME CITY - Liquidity and Capital Resources." Home City may not
pay a dividend unless such dividend also complies with a regulation of the OTS
limiting capital distributions by savings associations.
Capital distributions, for purposes of such regulation, include,
without limitation, payments of cash dividends, repurchases and certain other
acquisitions by an association of its shares and payments to stockholders of
another association in an acquisition of such other association. The capital
distribution regulation adopts a 3-tier classification of associations based
upon their capital immediately before and, on a pro forma basis, after giving
effect to the capital distribution. A tier 1 association is an association which
has capital immediately before and after giving effect to a proposed capital
distribution that is equal to or greater than the amount of its fully phased-in
capital requirement. A tier 2 association is an association which has capital
immediately before and after giving effect to a capital distribution which is
equal to or in excess of its minimum capital requirement, but is less than the
amount of its fully phased-in capital requirement. A tier 3 association is an
association which fails to meet its minimum capital requirement immediately
before or after giving effect to a capital distribution.
A tier 1 association may make capital distributions equal to up to the
higher of (1) 100% of its net earnings to date during the calendar year in which
the distribution is made, plus the amount that would reduce by one-half its
"surplus capital ratio" at the beginning of the calendar year or (2) 75% of its
net income over the most recent four-quarter period. The "surplus capital ratio"
is the percentage by which an association's capital-to-assets ratio exceeds Home
City's ratio of fully phased-in capital requirement to assets. A tier 2
association may make capital distributions up to 75% of its net earnings over
the most recent four-quarter period, if Home City meets the current risk-based
capital standard. A tier 3 association may make capital distributions only with
the prior written approval of the Regional Director of the OTS or in accordance
with an approved capital plan.
If an association meeting the tier 1 criteria has been notified by the
OTS that Home City requires more than normal supervision, such association will
be treated as a tier 2 or tier 3 association, unless the OTS determines that
such treatment is not necessary to ensure Home City's safe and sound operation.
Moreover, the OTS may prohibit any capital distribution otherwise permitted by
the regulation if the OTS determines that such distribution would constitute an
unsafe or unsound practice. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF HOME CITY - Liquidity and
Capital Resources."
At June 30, 1996, Home City met the fully phased-in capital
requirement. Other than the earnings on the investment of proceeds retained by
HCFC, the only source of income of HCFC will be dividends periodically declared
and paid by the Board of Directors of Home City on the common stock of Home City
held by HCFC. The payment of dividends by Home City will be subject to various
regulatory restrictions. On a pro forma basis, as of June 30, 1996, assuming (i)
receipt by Home City of $3.4 million of net conversion proceeds, (ii) the
investment of such net proceeds in assets having a risk weighting of 20% and
(iii) the
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<PAGE> 22
establishment of a Liquidation Account in the amount of $5.4 million
(the regulatory capital of Home City at June 30, 1996), Home City would have
$4.19 million available for the payment of dividends to HCFC. See "REGULATORY
CAPITAL COMPLIANCE."
CAPITALIZATION
Set forth below is the capitalization of Home City as of June 30, 1996,
and the consolidated pro forma capitalization of HCFC, as adjusted to give
effect to the sale of Common Shares based on the Valuation Range and estimated
expenses. A change in the number of Common Shares sold in the Conversion would
materially affect such pro forma capitalization. See "USE OF PROCEEDS" and "THE
CONVERSION - Pricing and Number of Common Shares to be Sold."
<TABLE>
<CAPTION>
Pro forma capitalization of HCFC at June 30, 1996,
assuming the sale of:
------------------------------------------------------------------
612,000 720,000 828,000 952,200
Home City's Common Common Common Common
historical Shares Shares Shares Shares
capitalization (offering (offering (offering (offering
at price of price of price of price of
June 30, 1996 $10 per share) $10 per share) $10 per share) $10 per share)
------------- -------------- -------------- -------------- --------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Deposits (1) $47,174 $ 47,174 $ 47,174 $ 47,174 $ 47,174
Borrowings 2,903 2,903 2,903 2,903 2,903
Preferred shares, no par value:
authorized - 1,000,000 shares; -- -- -- -- --
assumed outstanding - none
Common Shares, no par value:
authorized - 5,000,000 shares; -- -- -- -- --
assumed outstanding - as shown(2)
Additional paid-in capital -- 5,763 6,828 7,893 9,118
Unrealized gain on securities 127 127 127 127 127
Less Common Shares acquired by the
ESOP (3) -- (490) (576) (662) (762)
Less Common Shares acquired by the
RRP (4) -- (245) (288) (331) (381)
Retained earnings (5) $ 5,271 $ 5,271 $ 5,271 $ 5,271 $ 5,271
Total capital and retained earnings $ 5,398 $ 10,426 $ 11,362 $ 12,298 $ 13,373
</TABLE>
- ----------------------
(1) Withdrawals from deposit accounts for the purchase of Common Shares
have not been reflected in these adjustments. Any deposit withdrawals
will reduce pro forma deposits by the amount of such withdrawals.
(2) The number of Common Shares to be issued will be determined on the
basis of the final valuation of Home City. See "THE CONVERSION -
Pricing and Number of Common Shares to be Sold." Common Shares assumed
to be outstanding does not reflect the issuance of any Common Shares
reserved for issuance under the Stock Option Plan. See "MANAGEMENT OF
HOME CITY - Stock Option Plan."
(3) Assumes that 8% of the Common Shares sold in connection with the
Conversion will be acquired by the ESOP trust, a separate entity, and
that the funds used to acquire such shares will be borrowed by the ESOP
trust from HCFC, with repayment thereof secured solely by the Common
Shares purchased by the ESOP trust. Home City has agreed, however, to
use its best efforts to fund the ESOP based on future earnings, which
best efforts funding will reduce the total capital and retained
earnings, as reflected in the table. See "MANAGEMENT OF HOME CITY
-Employee Stock Ownership Plan."
(4) Assumes the establishment of the RRP and its acquisition of Common
Shares equal to 4% of the shares sold in the Conversion. The pro forma
table assumes the Common Shares for the RRP will be purchased in the
open market at a price of $10 per share. The Board of Directors may
elect, however, to issue the RRP shares from authorized but unissued
shares. In the event the RRP shares are obtained from authorized but
unissued shares or in the event the RRP is not ratified by the
shareholders of HCFC, pro forma shareholders' equity would increase by
$245,000, $288,000, $331,000 and $381,000 at the minimum, mid-point,
maximum and 15% above the maximum of the Valuation Range, respectively.
The issuance of shares to the RRP would have the effect of diluting the
percentage interest of existing shareholders by 3.85%.
(5) Retained earnings are substantially restricted. See "THE CONVERSION -
Principal Effects of the Conversion -- Liquidation Account" for
information concerning the Liquidation Account to be established in
connection with the Conversion and "TAXATION - Federal Taxation" for
information concerning restricted retained earnings for federal tax
purposes.
-16-
<PAGE> 23
PRO FORMA DATA
Set forth below are the pro forma consolidated net earnings of HCFC for
the year ended June 30, 1996, and the pro forma shareholders' equity of HCFC at
such date, along with the related pro forma per share amounts, giving effect to
the sale of the Common Shares in connection with the Conversion. The
computations are based on the assumed issuance of 612,000 Common Shares (minimum
of the Valuation Range), 720,000 Common Shares (mid-point of the Valuation
Range), 828,000 Common Shares (maximum of the Valuation Range) and 952,200
Common Shares (15% above the maximum of the Valuation Range). See "THE
CONVERSION - Pricing and Number of Common Shares to be Sold." The pro forma data
is based on the following assumptions: (i) the sale of the Common Shares
occurred at the beginning of the periods and yielded the net proceeds indicated;
(ii) such net proceeds were invested by HCFC and Home City at the beginning of
the specified periods at 5.78%; (iii) no withdrawals from existing deposit
accounts were made to purchase the Common Shares; (iv) HCFC will accept a
promissory note from the ESOP in exchange for the issuance of Common Shares; and
(v) the cash proceeds retained by HCFC will be used to fund the RRP and, pending
such investment, will be invested in short-term and intermediate-term government
securities. The assumed return is based upon the market rate for FHLB 90-day
deposits because management intends to invest the initial cash proceeds in
short-term interest-bearing deposits with the FHLB. In calculating pro forma net
earnings, a statutory federal income tax rate of 34% has been assumed for the
period, resulting in an after-tax yield of 3.81%. In the opinion of management,
the assumed after-tax yield does not differ materially from the estimated
after-tax yield which will be obtained on the initial investment of the cash
proceeds in short-term, interest-bearing deposits and is viewed as being more
relevant in the current low interest rate environment than the use of an
arithmetic average of the fiscal year 1996 weighted average yield on
interest-earning assets and weighted average rates paid on deposits during such
period. Management also believes that utilization of savings withdrawals to fund
stock purchases would not have a material impact on the pro forma data
presented.
NO ASSURANCE CAN BE PROVIDED THAT THE YIELDS OR RESULTS SET FORTH IN
THE PRO FORMA DATA WILL BE ACHIEVED ON INVESTMENT OF THE CONVERSION PROCEEDS.
MOREOVER, THE PRO FORMA NET EARNINGS AMOUNTS DERIVED FROM THE ASSUMPTIONS SET
FORTH HEREIN SHOULD NOT BE CONSIDERED INDICATIVE OF THE ACTUAL RESULTS OF
OPERATIONS OF HCFC THAT WOULD HAVE BEEN ATTAINED FOR ANY PERIOD IF THE
CONVERSION HAD BEEN ACTUALLY CONSUMMATED AT THE BEGINNING OF SUCH PERIOD.
FURTHER, THE RATIO OF SHARE OFFERING PRICE TO THE PRO FORMA BOOK VALUE IS NOT
REPRESENTATIVE OF ANY POTENTIAL PRICE APPRECIATION ON THE COMMON SHARES. NO
EFFECT HAS BEEN GIVEN IN THE PRO FORMA SHAREHOLDERS' EQUITY FOR ANY ASSUMED
EARNINGS ON THE NET PROCEEDS OF THE CONVERSION.
-17-
<PAGE> 24
<TABLE>
<CAPTION>
At or for the year ended June 30, 1996
-------------------------------------------------------------------------------
612,000 720,000 828,000 952,200
Common Shares Common Shares Common Shares Common Shares
(offering price of (offering price of (offering price of (offering price of
$10 per share) $10 per share) $10 per share) $10 per share) (1)
-------------- -------------- -------------- ------------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross proceeds $ 6,120 $ 7,200 $ 8,280 $ 9,522
Less offering expenses and commissions (357) (372) (387) (404)
-------- -------- -------- --------
Estimated conversion proceeds 5,763 6,828 7,893 9,118
Less common shares acquired by ESOP (490) (576) (662) (762)
Less common shares acquired by RRP (245) (288) (331) (381)
-------- -------- -------- --------
Net cash proceeds $ 5,029 $ 5,964 $ 6,899 $ 7,975
======== ======== ======== ========
Consolidated net income:
Historical net income $ 514 $ 514 $ 514 $ 514
Pro forma income on net proceeds(2) 192 227 263 304
Pro forma ESOP adjustment(3) (46) (54) (62) (72)
Pro forma RRP adjustment(4) (32) (38) (44) (50)
-------- -------- -------- --------
Pro forma net income $ 628 $ 649 $ 671 $ 696
======== ======== ======== ========
Per share net income:(5)
Historical net income(6) $ .84 $ .71 $ .62 $ .54
Pro forma income on net proceeds(2) .32 .32 .32 .32
Pro forma ESOP adjustment(3) (.08) (.08) (.08) (.08)
Pro forma RRP adjustment(4) (.05) (.05) (.05) (.05)
-------- -------- -------- --------
Pro forma net income per share $ 1.03 $ 0.90 $ 0.81 $ 0.73
======== ======== ======== ========
Offering price to pro forma net income per share
("P/E Ratio") 9.71X 11.11X 12.35X 13.70X
Shareholders' equity:(7)
Historical $ 5,398 $ 5,398 $ 5,398 $ 5,398
Estimated conversion proceeds 5,763 6,828 7,893 9,118
Less Common Shares acquired by:
ESOP(3) (490) (576) (662) (762)
RRP(4) (245) (288) (331) (381)
-------- -------- -------- --------
Pro forma shareholders' equity $ 10,426 $ 11,362 $ 12,298 $ 13,373
======== ======== ======== ========
Shareholders' equity per share:
Historical(6) $ 8.82 $ 7.49 $ 6.51 $ 5.66
Estimated conversion proceeds 9.42 9.48 9.53 9.58
Less Common Shares acquired by:
ESOP(8) (0.80) (0.80) (0.80) (0.80)
RRP(4) (0.40) (0.40) (0.40) (0.40)
-------- -------- -------- --------
Pro forma shareholders' equity per share $ 17.04 $ 15.77 $ 14.84 $ 14.04
======== ======== ======== ========
Offering price as a percentage of pro forma
shareholders' equity per share 58.70% 63.37% 67.33% 71.20%
======== ======== ======== ========
</TABLE>
- -------------------------------------
(1) Reflects an increase in the number of shares which could occur due to
an increase in the Valuation Range of up to 15% to reflect changes in
market and financial conditions following the commencement of the
Subscription and Community Offerings.
(2) Pro forma net income is calculated using pro forma income earned on net
cash proceeds, as discussed above.
(3) It is assumed that 8% of the Common Shares sold in connection with the
Conversion will be acquired by the ESOP trust from HCFC, with repayment
thereof secured solely by the Common Shares purchased by the ESOP
trust. Home City intends to make contributions to the ESOP in amounts
equal to the principal and interest requirement of the debt. Home
City's payment of the ESOP debt is based upon equal installments of
principal over a seven-year period, plus interest. Interest income
earned by HCFC on the ESOP debt offsets the interest paid by Home City
on the ESOP loan. Accordingly, only the principal payments on the ESOP
debt are recorded as an expense (tax-effected) to HCFC on a
consolidated basis. The amount borrowed is reflected as a reduction of
shareholders' equity. No reinvestment is assumed on proceeds
contributed to fund the ESOP. The ESOP expense has been computed in
accordance with the American Institute of Certified Public Accountants'
Statement of Position 93-6 ("SOP 93-6"), which requires recognition of
expense based upon shares committed to be released as security for the
loan. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF HOME CITY - Impact of New Accounting
Standards." The valuation of shares committed to be released is based
upon the average market value of the shares during the year, which for
purposes of this calculation was assumed to be equal to the $10 per
share offering price. See "MANAGEMENT OF HOME CITY -- Employee Stock
Ownership Plan."
(Footnotes continued on next page)
-18-
<PAGE> 25
(4) Assumes the establishment of the RRP, which will require approval by
the shareholders of HCFC at a meeting to be held not sooner than six
months following the completion of the Conversion, its acquisition of
Common Shares equal to 4% of the shares sold in the Conversion and that
one-fifth of such Common Shares will be earned by participants in each
of the first five years following approval of the RRP. The pro forma
table assumes the Common Shares for the RRP will be purchased in the
open market at a price of $10 per share. The effect reported on pro
forma consolidated net income includes the expense related to the
vested RRP shares as well as the reduction in income due to a decline
in cash proceeds available for investment. The Board of Directors may
elect, however, to issue to the RRP authorized but unissued shares. In
the event RRP shares are obtained from authorized but unissued shares,
pro forma net income per share would decrease $.05 at each level of the
Valuation Range. See "MANAGEMENT OF HOME CITY - Recognition and
Retention Plan and Trust." The issuance of shares to the RRP would have
the effect of diluting the percentage interest of existing shareholders
by 3.85%. In the event the RRP is not approved by the shareholders of
HCFC, pro forma net income per share would increase $.05 at each level
of the Valuation Range. In the event RRP shares are obtained from
authorized but unissued shares or in the event the RRP is not ratified
by shareholders, pro forma book value per share would increase by $.40
per share at each level of Valuation Range. No effect has been given to
the shares reserved for issuance under the Stock Option Plan.
(5) Per share amounts are based upon the weighted average number of shares
outstanding of 612,000, 720,000, 828,000 and 952.200 at the minimum,
mid-point, maximum and 15% above the maximum of the Valuation Range,
respectively. Per share amounts also reflect the effect of SOP 93-6.
(6) Historical per share amounts have been computed as if the Common Shares
expected to be issued in the Conversion had been outstanding during the
period or on the dates shown, but without any adjustments of historical
net income or historical retained earnings to reflect the investment of
the estimated net proceeds of the sale of shares in the Conversion or
the additional ESOP or RRP expense. At June 30, 1996, per share amounts
are based upon shares outstanding of 612,000, 720,000, 828,000 and
952,200 at the minimum, mid-point, maximum and 15% above the maximum of
the Valuation Range, respectively.
(7) The effect of the Liquidation Account is not included in these
computations. For additional information concerning the Liquidation
Account, see "THE CONVERSION -- Principal Effects of the Conversion --
Liquidation Account." The amounts shown do not reflect the federal
income tax consequences of the potential restoration of the bad debt
reserves to income for tax purposes, which would be required in the
event of liquidation. See "TAXATION -- Federal Taxation."
(8) Not intended to represent or suggest possible future appreciation or
depreciation of Common Shares.
SUMMARY CONSOLIDATED STATEMENTS OF INCOME
The following Summary Consolidated Statements of Income set forth
information concerning Home City for the periods indicated:
<TABLE>
<CAPTION>
Year ended June 30
--------------------------------
1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
Interest income:
Interest on loans $4,094 $3,344 $3,074
Interest on mortgage-backed securities 209 274 314
Interest on investments and deposits 204 217 154
------ ------ ------
4,507 3,835 3,542
Interest expense:
Interest on deposits 2,370 1,835 1,408
Interest on borrowing 172 107 38
------ ------ ------
2,542 1,942 1,446
Net interest income 1,965 1,893 2,096
Provision for loan losses 50 109 113
------ ------ ------
Interest income after provision for loan losses 1,915 1,784 1,983
Noninterest income 58 9 12
Noninterest expense 1,216 998 923
------ ------ ------
Income before income tax 757 795 1,072
Income tax expense 243 240 367
------ ------ ------
Net income $ 514 $ 555 $ 705
====== ====== ======
</TABLE>
-19-
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF HOME CITY
Home City is primarily engaged in the business of attracting savings
deposits from the general public and investing such funds in permanent mortgage
loans secured by one- to four-family residential and nonresidential real estate
located primarily within Clark County, Ohio, and adjacent counties and in U. S.
Government obligations, interest-bearing deposits in other financial
institutions, mortgage-backed securities, municipal securities and other
investments permitted by applicable law. Home City also originates loans for the
construction of one- to four-family residential real estate, loans secured by
multifamily (over four units) real estate and consumer and commercial loans.
ANALYSIS OF FINANCIAL CONDITION
GENERAL. Home City's assets totaled $55.7 million at June 30, 1996, an
increase of $7.1 million, or 14.7%, from $48.6 million at June 30, 1995. The
principal factor in such growth was an increase in loans receivable, offset by
decreases in mortgage-backed securities and cash and cash equivalents.
CASH AND CASH EQUIVALENTS, INVESTMENT SECURITIES, MORTGAGE-BACKED
SECURITIES AND FHLB STOCK. Cash and cash equivalents, investment securities,
mortgage-backed securities and FHLB stock decreased to $8.5 million at June 30,
1996, from $8.9 million at June 30, 1995. The decrease in cash and cash
equivalents and mortgage-backed securities at June 30, 1996, is directly related
to the increase in mortgage lending during the past several years. Home City did
not sell any mortgage-backed securities during the fiscal year ended June 30,
1996, 1995 or 1994. See "THE BUSINESS OF HOME CITY - Lending Activities."
Mortgage-backed securities include Federal Home Loan Mortgage Corporation
("FHLMC") and Government National Mortgage Association ("GNMA") securities.
Investment securities are composed of U. S. Government and federal agency
securities, municipal securities, FHLB common stock, an $18,000 investment in a
joint venture and a $20,000 investment in a service corporation.
At June 30, 1996, all of Home City's investment securities were
classified as available-for-sale. During the three months ended December 31,
1995, management reclassified certain investment securities, with total
amortized costs of $1.4 million at December 31, 1995, from held-to-maturity to
available-for-sale. Such securities had an unrealized gain of approximately
$6,000. The increase in the carrying value of the investment securities
portfolio reflects, in addition to such reclassification, maturities and
purchases of securities, as well as a $49,000 increase in the market value of
FHLMC stock held in the portfolio during the year.
LOANS RECEIVABLE. Net loans receivable equaled $45.2 million at June
30, 1996, an increase of $6.2 million, or 16.2%, from $39.0 million at June 30,
1995. Home City originated approximately $15.8 million in loans during the
fiscal year ended June 30, 1996. Principal payments during the same period were
approximately $8.8 million.
Such growth was primarily attributable to an increase in one- to
four-family real estate loans, which increase resulted from high loan demand in
Home City's market area. Of the $6.2 million in loan growth, $1.4 million
occurred in consumer lending. During the quarter ended December 31, 1995, Home
City expanded its loan product line to include consumer loans for other than
real estate related purchases. Management plans, however, to continue
emphasizing single-family residential lending, which has traditionally been Home
City's strength.
DEPOSITS. Loan growth during the fiscal year ended June 30, 1996, was
primarily funded by an increase of $6.2 million, or 15.2%, in savings deposits,
from $40.9 million at June 30, 1995, to $47.2 million at June 30, 1996. As the
interest rate environment changed during 1995 and 1996, impacting the rates paid
on Home City's deposits, customers moved their deposits from passbook accounts
into certificate accounts. As a result, total passbook accounts decreased
$939,000, or 8.9%, from $10.5 million at June 30, 1995, to $9.6 million at June
30, 1996. Customers also began to take advantage of new deposit product
offerings, namely NOW accounts and interest-bearing checking accounts. Deposit
balances in the 1-3 year and 3-5 year certificate categories increased $500,000
and $1.8 million, respectively, at June 30, 1996, compared to June 30, 1995, and
at June 30, 1995, compared to June 30, 1994. Short-term certificate accounts
also increased $5.3 million at June 30, 1996, compared to June 30, 1995. The
change in the deposit mix did not significantly affect Home City's interest rate
risk at June 30, 1996. See "Asset and Liability Management."
-20-
<PAGE> 27
Total equity increased $513,000, from $4.9 million at June 30, 1995, to
$5.4 million at June 30, 1996. Such increase resulted from net income of
$514,000 and a $1,000 decrease in unrealized gains (net of deferred taxes) in
fiscal 1996.
COMPARISON OF RESULTS OF OPERATIONS
GENERAL. Home City's net income is primarily dependent upon net
interest income, which is a function of the difference, or spread, between the
average yield earned on loans and other investments and the average rate paid on
deposits and advances, as well as the related amounts of such assets and
liabilities. The interest rate spread is affected by economic and competitive
factors that influence interest rates, loan demand and deposit flows. Home City,
like other financial institutions, is subject to interest rate risk to the
degree that its interest-bearing liabilities mature or reprice at different
times, or on a different basis, than its interest-earning assets. See "RISK
FACTORS - Interest Rate Risk" and "Asset and Liability Management." Home City
had net income of $514,000 for the fiscal year ended June 30, 1996, compared to
$555,000 in fiscal 1995 and $705,000 in fiscal 1994. The decrease in net income
from June 30, 1995 to June 30, 1996, was primarily attributable to an increase
in other expenses of $218,000, offset by an increase of $72,000 in net interest
income and a decrease in provision for loan losses from $109,000 to $50,000.
The decrease in net income during the fiscal year ended June 30, 1995,
was primarily attributable to a $203,000 decrease in net interest income and an
increase of $75,000 in other expenses, which were partially offset by a
reduction of $127,000 in federal income taxes.
NET INTEREST INCOME. Home City's net interest income increased $72,000
for the fiscal year ended June 30, 1996, compared to the fiscal year ended June
30, 1995, and decreased $203,000 for the fiscal year ended June 30, 1995,
compared to the same period in 1994. The increase in fiscal 1996 was primarily
attributable to the increase in loan volume exceeding the increase in deposit
volume, even though the interest rate spread decreased from 3.95% to 3.42%. The
decrease in the interest rate spread was due primarily to the increasing
interest cost on certificates of deposit and FHLB advances. The increases in
deposits and FHLB advances, combined with the increases in deposit interest
rates, resulted in an increase in the average rate paid on deposits from 4.81%
at June 30, 1995, to 5.37% at June 30, 1996, and on FHLB advances from 6.57% to
6.66% at such dates. The average yield on interest-earning assets increased
slightly, from 8.83% during the fiscal year ended June 30, 1995, to 8.86% in
fiscal 1996, due primarily to the increased demand to fund loans, both new and
existing, at lower rates and a change in the mix of interest-earning assets.
The decrease in net interest income for the fiscal year ended June 30,
1995, compared to fiscal 1994, was primarily caused by a decrease in the yields
on interest-earning assets from 8.92% to 8.83%. The decrease in such yields was
due to lower market interest rates, coupled with increasing demand to fund
loans. The decrease in asset yields was accompanied by an increase in the cost
of deposits from 3.98% to 4.81% and a decrease in the cost of borrowed funds
from 8.74% to 6.57%. The decrease in net interest income was partially offset by
a decrease in the provision for loan losses of $4,000.
Gross interest income increased $672,000, or 17.5%, for the fiscal year
ended June 30, 1996, compared to the fiscal year ended June 30, 1995, due
primarily to the average loan balance increasing by $8.6 million, or 24.4%. The
average yield on loans was 9.37% and 9.52% in fiscal 1996 and 1995,
respectively. Home City's loan portfolio is composed primarily of loans secured
by real estate, with either fixed or adjustable interest rates. At June 30,
1996, approximately 48% of the loans outstanding had adjustable interest rates,
providing for repricing at one, three or ten years (a fixed rate for ten years
followed by one-year adjustment periods) intervals. Home City's interest income
on interest-bearing deposits, investment securities, and mortgage-backed
securities decreased by $78,000, or 15.9%, for the fiscal year ended June 30,
1996, compared to the same period in 1995. Such decrease resulted from
reallocation of investable funds to loan originations, due primarily to
increased loan demand.
Gross interest income increased $293,000, or 8.3%, for the fiscal year
ended June 30, 1995, compared to the same period in 1994, due primarily to a
$4.8 million, or 15.9%, increase in the average outstanding loan balances. Of
such increase in interest income, $468,000 was attributable to an increase in
loan volume and $288,000 was the result of an increase in interest-bearing
deposits, primarily for liquidity purposes. Such increases were offset by a
$218,000 decrease in interest income caused by a decrease in the loan portfolio
yield to 9.52% from 10.14%, and further offset by decreases of $211,000 and
$590,000 in investments and mortgage-backed securities, respectively.
Total interest expense increased $600,000, or 30.9%, for the fiscal
year ended June 30, 1996, compared to the fiscal year ended June 30, 1995, and
increased $496,000, or 34.3%, for fiscal 1995, compared to fiscal 1994. The
increase in fiscal
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<PAGE> 28
1996 was primarily attributable to a $6.9 million increase in average
interest-bearing liabilities and an increase in the weighted average interest
rate to 5.44% in fiscal 1996 from 4.88% in fiscal 1995. The increase in the
weighted average rate can be attributed to an increase in certificate account
rates to 6.19% from 5.65% in fiscal 1996, compared to fiscal 1995, as a result
of competitive rates offered throughout the year and special rates offered to
obtain funds for loans. The $496,000 increase in fiscal 1995, compared to fiscal
1994, was attributable to rising interest rates and rising interest-bearing
liability volume. Average deposits increased $2.8 million and advances increased
$1.2 million in fiscal 1995, compared to fiscal 1994. The weighted average
interest rate on all interest-bearing liabilities also increased in fiscal
1995, to 4.88% from 4.04% in fiscal 1994.
PROVISION FOR LOAN LOSSES. Home City maintains an allowance for loan
losses account which, in management's judgment, is adequate to absorb reasonably
foreseeable losses inherent in the loan portfolio. See "THE BUSINESS OF HOME
CITY - Lending Activities--Allowance for Loan Loses." While management utilizes
its best judgment and information available, the ultimate adequacy of the
allowance is dependent upon a variety of factors, including the performance of
Home City's loan portfolio, the economy, changes in real estate values and
interest rates and regulatory requirements regarding asset classifications. The
provision for loan losses is determined by management as the amount to be added
to the allowance for loan losses, after net charge-offs have been deducted, to
bring the allowance to a level which is considered adequate to absorb losses
inherent in the loan portfolio in accordance with generally accepted accounting
principles ("GAAP"). The amount of the provision is based on management's
regular review of the loan portfolio and consideration of such factors as
historical loss experience, general prevailing economic conditions, changes in
the size and composition of the loan portfolio and considerations relating to
specific loans, including the ability of the borrower to repay the loan and the
estimated value of the underlying collateral. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
Home City's allowance for loan losses. Such agencies may require Home City to
provide additions to the allowance based on judgments different from those of
management. Although management uses the best information available, future
adjustments to the allowance may be necessary due to economic, operating,
regulatory, and other conditions that may be beyond Home City's control. There
can be no assurance that the amount of past or future provisions for loan losses
or the balance of the allowance for loan losses account will be adequate to
absorb actual loan losses in the future.
Home City had net charge-offs of $7,000, $19,000 and $82,000 during the
fiscal years ended June 30, 1996, 1995 and 1994, respectively. Home City's
charge-off history is a product of a variety of factors, including Home City's
underwriting guidelines and the composition of it's loan portfolio. Loans
secured by real estate make up 96% of Home City's loan portfolio, and loans
secured by first mortgages on one- to four-family residential real estate make
up 66% of total loans at June 30, 1996. Such loans typically present less risk
to a lender than loans which are not secured by real estate. Substantially all
of Home City's loans are secured by properties in its primary market area. The
provision for loan losses was $50,000, $109,000 and $113,000 for the fiscal
years ended June 30, 1996, 1995, and 1994, respectively. The ratio of
nonperforming loans to total loans increased to 0.54% in fiscal 1996 from 0.53%
in fiscal 1995, following an increase from 0.11% in fiscal 1994. At June 30,
1996, 1995, and 1994, respectively, Home City had a ratio of allowance for loan
losses to total loans of 0.80%, 0.82% and 0.74% and a ratio of allowance for
loan losses to nonperforming loans of 146.56%, 154.11% and 673.53%. Due to low
ratios of nonperforming loans to total loans, low historical charge-offs and low
delinquency history, provisions of $109,000 and $113,000 were made in 1995 and
1994. Primarily as a result of the recent addition of consumer installment loan
products to Home City's product line and the greater risk to a lender inherent
in consumer lending, compared to loans secured by real estate, management
determined that a $50,000 provision for loan losses was prudent for the year
ended June 30, 1996.
At June 30, 1996, Home City had no real estate owned and acquired
through foreclosure.
OTHER INCOME. Other income increased by $49,000, or 544.4%, in fiscal
1996, compared to fiscal 1995 and decreased $3,000, or 25.0%, in fiscal 1995,
compared to fiscal 1994. An increase in the cash surrender value of life
insurance policies which Home City maintains on four directors to fund a
deferred compensation plan for directors' fees accounted for $46,000 of the
total increase in fiscal 1996. Service charge income also increased by $7,000
and other miscellaneous income decreased by $4,000 during fiscal 1996. The
$3,000 decrease in fiscal 1995 was attributable to a $4,000 decline in
miscellaneous income, offset by a $1,000 increase in service charge income.
OTHER EXPENSES. Salaries and employee benefits expenses increased
$134,000, or 33.7%, for the year ended June 30, 1996, compared to the year ended
June 30, 1995, as a result of the adoption in September 1995 of a deferred
compensation plan for directors' fees, staff expansion and normal pay raises of
2% to 3%. Federal deposit insurance premiums increased $13,000, to $96,000, in
fiscal 1996, primarily as a result of an increase in Home City's deposit base.
State franchise taxes increased by 14.3%, or $9,000, in fiscal 1996, compared to
fiscal 1995, as a result of earnings and the
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<PAGE> 29
related equity growth. Fees paid to professionals for legal, tax accounting and
general management consulting increased $27,000, or 32.5%, during fiscal 1996. A
number of such professional fees were associated with Home City's product and
service expansion. Compensation and benefits expenses increased by $87,000, or
28.0%, for the fiscal year ended June 30, 1995, compared to the same period in
1994, as a result of staff expansion, increases in profit sharing bonus payments
and normal wage increases. State franchise taxes increased $10,000 in fiscal
1995, compared to fiscal 1994, as a result of earnings and equity growth and
occupancy and equipment expenses decreased $16,000, or 13.3%. Management expects
that Home City will experience some increase in non-interest expense relating to
compliance with securities laws, ESOP and RRP expenses, and other monetary
consequences of the Conversion. With the exception of expenses associated with
the ESOP and RRP, such expenses cannot be quantified at this time, although
management does not expect that such expenses will have a material effect on
non-interest expenses. See "PRO FORMA DATA."
INCOME TAX EXPENSE. Effective January 1, 1993, Home City adopted SFAS
109, "Accounting for Income Taxes." The cumulative effect of the change in
accounting for income taxes was immaterial to fiscal 1994 and 1993 income tax
expense. Federal income tax expense increased $3,000, or 1.3%, in fiscal 1996
compared to fiscal 1995. Federal income tax expense decreased by $127,000, or
34.6%, in fiscal 1995 compared to fiscal 1994, due to a decrease in income
before federal income taxes of $277,000, or 25.8%. The effective tax rate of
Home City was 32.1% in 1996, 30.2% in 1995 and 34.2% in 1994.
YIELDS EARNED AND RATES PAID. The net interest rate spread decreased
from 3.95% for the fiscal year ended June 30, 1995, to 3.42% for the fiscal year
ended June 30, 1996. The yield on average interest-earning assets remained
almost constant, increasing only 3 basis points, from 8.83% for fiscal 1995 to
8.86% for fiscal 1996, primarily as a result of loans receivable yielding less
in fiscal 1996 than in fiscal 1995, even though loan volume increased. The
decrease in the interest rate spread was caused by an increase in the cost of
funds, primarily due to an increase in certificate account rates from 5.65% in
fiscal 1995 to 6.19% in fiscal 1996. The interest rate spread decreased from
4.88% in fiscal 1994 to 3.95% in fiscal 1995. The yield on average
interest-earning assets decreased from 8.92% in fiscal 1994 to 8.83% in fiscal
1995, primarily as a result of a decrease in the yield on loans receivable. The
average rate paid on deposits increased from 3.98% to 4.81% during the same
period, as a result of an increase in certificate account rates. The average
rate paid on advances decreased from 8.74% to 6.57% during the same period. The
net interest margin for the three-year period ended June 30, 1996, decreased
from 5.28% at June 30, 1994, to 3.86%.
-23-
<PAGE> 30
The following table presents certain information relating to Home City's average
balance sheet information and reflects the average yield on interest-earning
assets and the average cost of customer deposits for the periods indicated. Such
yields and costs are derived by dividing annual income or expense by the average
monthly balance of interest-earning assets or customer deposits, respectively,
for the years presented. Average balances are derived from daily balances, which
include nonaccruing loans in the loan portfolio, net of the allowance for loan
losses.
<TABLE>
<CAPTION>
Year ended June 30,
----------------------------------------------------------------------------------------------
1996 1995 1994
------------------------------ ------------------------------ ------------------------------
Average Interest Average Interest Average Interest
outstanding earned/ Yield/ outstanding earned/ Yield/ outstanding earned/ Yield/
balance paid rate balance paid rate balance paid rate
------- ---- ---- ------- ---- ---- ------- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing deposits $ 1,373 $ 61 4.44% $ 1,344 $ 72 5.36% $ 1,233 $ 51 4.14%
Investment securities 2,396 143 5.97 2,996 145 4.84 3,395 103 3.03
Mortgage-backed securities 3,367 209 6.21 3,947 274 6.94 4,753 314 6.61
Loans receivable (1) 43,711 4,094 9.37 35,139 3,344 9.52 30,317 3,074 10.14
-------- -------- -------- -------- -------- --------
Total interest-earning assets 50,847 4,507 8.86 43,426 3,835 8.83 39,698 3,542 8.92
Non-interest-earning assets:
Cash and amounts due from
depository institutions 742 6,721 131
Less: Allowance for loan losses (320) (283) (213)
Premises and equipment, net 829 468 440
Other nonearning assets 829 575 506
-------- -------- --------
Total assets $ 52,577 $ 44,213 $ 40,562
======== ======== ========
Interest-bearing liabilities:
NOW accounts $ 146 $ 2 1.37% $ -- $ -- -- $ -- $ -- --
Money market accounts 48 1 2.08 -- -- -- -- -- --
Passbook savings accounts 9,748 251 2.57 12,678 395 3.12 18,756 609 3.25
Certificates of deposit 34,189 2,116 6.19 25,504 1,440 5.65 16,629 799 4.80
-------- -------- -------- -------- -------- --------
Total deposits 44,131 2,370 5.37 38,182 1,835 4.81 35,385 1,408 3.98
FHLB advances 2,582 172 6.66 1,628 107 6.57 435 38 8.74
-------- -------- -------- -------- -------- --------
Total interest-bearing
liabilities 46,713 2,542 5.44 39,810 1,942 4.88 35,820 1,446 4.04
Non-interest-bearing liabilities 842 467 650
-------- -------- --------
Total liabilities 47,555 40,277 36,470
Unrealized gains on securities 109 32 --
Retained earnings 4,913 4,549 4,092
-------- -------- --------
Total liabilities and retained $ 52,577 $ 44,858 $ 40,562
======== ======== ========
earnings
Net interest income; net interest
rate spread $ 1,965 3.42% $ 1,893 3.95% $ 2,096 4.88%
======== ====== ======== ====== ======== ======
Net interest margin (net interest
income as a percent of average
interest-earning assets) 3.86% 4.36% 5.28%
====== ====== ======
Average interest-earning assets to
interest-bearing liabilities 108.85% 109.08% 110.83%
====== ====== ======
</TABLE>
- ------------------------------------
(1) Calculated net of deferred loan fees, loan discounts, loans in process
and allowance for loan losses.
-24-
<PAGE> 31
The following table sets forth, for the periods indicated, the weighted
average yields earned on Home City's interest-earning assets, the weighted
average interest rates paid on interest-bearing liabilities, the interest rate
spread and the net interest margin on interest-earning assets. Such yields and
costs are derived by dividing income or expense by the average balances of
assets or liabilities, respectively, for the periods presented.
<TABLE>
<CAPTION>
Year ended June 30,
-----------------------------
At June 30, 1996 1996 1995 1994
---------------- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average yield on loan portfolio 9.26% 9.37% 9.52% 10.14%
Weighted average yield on mortgage-backed securities 6.69 6.21 6.94 6.61
Weighted average yield on investment securities 6.51 5.97 4.84 3.03
Weighted average yield on interest-bearing deposits 3.08 4.44 5.36 4.14
Weighted average yield on all interest-earning assets 8.76 8.86 8.83 8.92
Weighted average interest rate paid on all
interest-bearing liabilities 5.48 5.44 4.88 4.04
Interest rate spread (spread between weighted
average interest rate on all interest-bearing assets and
all interest-bearing liabilities) 3.28 3.42 3.95 4.88
Net interest margin (net interest income as a percentage
of average interest-earning assets) 3.80 3.86 4.36 5.28
</TABLE>
The table below describes the extent to which changes in interest rates
and changes in volume of interest-earning assets and interest-bearing
liabilities have affected Home City's interest income and expense during the
years indicated. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable to
(i) changes in volume (change in volume multiplied by prior year rate), (ii)
changes in rate (change in rate multiplied by prior year volume) and (iii) total
changes in rate and volume. The combined effects of changes in both volume and
rate, which cannot be separately identified, have been allocated proportionately
to the change due to volume and the change due to rate:
<TABLE>
<CAPTION>
Year ended June 30,
----------------------------------------------------------------------
1996 vs. 1995 1995 vs. 1994
------------------------------- -------------------------------
Increase Increase
(decrease) (decrease)
due to due to
------------------ -----------------
Volume Rate Total Volume Rate Total
------ ---- ----- ------ ---- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income attributable to:
Interest-bearing deposits $ 2 $ (13) $ (11) $ 5 $ 16 $ 21
Investment securities (29) 27 (2) (12) 54 42
Mortgage-backed securities (40) (25) (65) (53) 13 (40)
Loans receivable 816 (66) 750 488 (218) 270
----- ----- ----- ----- ----- -----
Total interest income 749 (77) 672 428 (135) 293
----- ----- ----- ----- ----- -----
Interest expense attributable to:
NOW accounts 2 -- 2 -- -- --
Money market accounts 1 -- 1 -- -- --
Passbook savings accounts (91) (53) (144) (197) (17) (214)
Certificates of deposit 491 185 676 426 215 641
Borrowed funds 63 2 65 104 (35) 69
----- ----- ----- ----- ----- -----
Total interest expense 466 134 600 333 163 496
----- ----- ----- ----- ----- -----
Increase (decrease) in net
interest income $ 283 $(211) $ 72 $ 95 $(298) $(203)
===== ===== ===== ===== ===== =====
</TABLE>
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<PAGE> 32
ASSET AND LIABILITY MANAGEMENT
Home City, like other financial institutions, is subject to interest
rate risk to the extent that its interest-earning assets reprice differently
than its interest-bearing liabilities. As part of its effort to monitor and
manage interest rate risk, Home City uses the NPV methodology recently adopted
by the OTS as part of its capital regulations. Although Home City is not
currently subject to the NPV regulation because such regulation does not apply
to institutions with less than $300 million in assets and risk-based capital in
excess of 12%, the application of the NPV methodology may illustrate Home City's
interest rate risk.
Generally, NPV is the discounted economic value of the difference
between incoming cash flows on interest-earning and other assets and outgoing
cash flows on interest-bearing and other liabilities. The application of the
methodology attempts to quantify interest rate risk as the change in the NPV
which would result from a theoretical 200 basis point (1 basis point equals
.01%) change in market interest rates. Both a 200 basis point increase in market
interest rates and a 200 basis point decrease in market interest rates are
considered. If the NPV would decrease more than 2% of the economic value of the
institution's assets with either an increase or a decrease in market rates, the
institution must deduct 50% of the amount of the decrease in excess of such 2%
in the calculation of the institution's risk-based capital. See "Liquidity and
Capital Resources."
At June 30, 1996, 2% of the economic value of Home City's assets was
approximately $1.2 million. Because the interest rate risk of a 200 basis point
increase in market interest rates (which was greater than the interest rate risk
of a 200 basis point decrease) was $1.6 million at June 30, 1996, Home City
would have been required to deduct approximately $200,000 (half of the
approximate $400,000 difference) from its capital in determining whether Home
City met its risk-based capital requirement. Regardless of such reduction,
however, Home City's risk-based capital at June 30, 1996, would still have
exceeded the regulatory requirement by approximately $ 3.0 million.
Presented below, as of June 30, 1996, is an analysis of Home City's
interest rate risk as measured by changes in NPV for instantaneous and sustained
parallel shifts of 100 basis points in market interest rates. The table also
contains the policy limits set by the Board of Directors of Home City as the
maximum change in NPV that the Board of Directors deems advisable in the event
of various changes in interest rates. Such limits have been established with
consideration of the dollar impact of various rate changes and Home City's
strong capital position.
As illustrated in the table, Home City's NPV is more sensitive to
rising rates than declining rates. Such difference in sensitivity occurs
principally because, as rates rise, borrowers do not prepay fixed-rate loans as
quickly as they do when interest rates are declining. Because Home City has not
originated loans in accordance with traditional secondary market guidelines, the
sale of fixed-rate loans may be difficult. As a result, in a rising interest
rate environment, the amount of interest Home City would receive on its loans
would increase relatively slowly as loans are slowly prepaid and new loans at
higher rates are made. Moreover, the interest Home City would pay on its
deposits would increase rapidly because Home City's deposits generally have
shorter periods to repricing. In addition, increases in interest rates can also
result in the flow of funds away from savings institutions into direct
investments or other investment vehicles, such as mutual funds, which may pay
higher rates of return than savings institutions. Assumptions used in
calculating the amounts in this table are OTS assumptions.
<TABLE>
<CAPTION>
June 30, 1996
---------------------------
Change in interest rate Board limit $ change % change
(basis points) % change in NPV in NPV
-------------- -------- ------ ------
(Dollars in thousands)
<S> <C> <C> <C>
+400 (50)% $(3,482) (52)%
+300 (35) (2,562) (38)
+200 (25) (1,643) (25)
+100 (10) (772) (12)
0 0 0 0
-100 10 573 9
-200 25 918 14
-300 35 1,394 21
-400 50 1,986 30
</TABLE>
-26-
<PAGE> 33
The NPV table indicates that at each 100 basis point increment, the
change in Home City's NPV that would have been caused by an increase in interest
rates would have exceeded the policy limits set by the Board of Directors. The
Board of Directors will consider the June 30, 1996, analysis and will factor
such information into its decisions in adjusting the pricing of loans and
deposits in the future.
As with any method of measuring interest rate risk, however, certain
shortcomings are inherent in the NPV approach. For example, although certain
assets and liabilities may have similar maturities or periods of repricing, they
may react in different degrees to changes in market interest rates. Also, the
interest rates on certain types of assets and liabilities may fluctuate in
advance of changes in market interest rates, while interest rates on other types
may lag behind changes in market rates. Further, in the event of a change in
interest rates, expected rates of prepayment on loans and mortgage-backed
securities and early withdrawal levels from certificates of deposit would likely
deviate significantly from those assumed in making the risk calculations.
If interest rates continue to rise from the recent levels, Home City's
net interest income will be negatively affected. Moreover, rising interest rates
may negatively affect Home City's earnings due to diminished loan demand.
LIQUIDITY AND CAPITAL RESOURCES
Home City's liquidity, primarily represented by cash equivalents, is a
result of its operating, investing and financing activities. These activities
are summarized below for the periods presented.
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------
1996 1995 1994
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Net income $ 514 $ 555 $ 705
Adjustments to reconcile net income to net cash from
operating activities 29 43 50
------- ------- -------
Net cash provided by operating activities 543 598 755
Net cash provided by (used in) investing activities (7,585) (7,522) (97)
Net cash provided by (used in) financing activities 6,508 8,314 (1,908)
------- ------- -------
Net change in cash and cash equivalents (534) 1,390 (1,250)
Cash and cash equivalents at beginning of period 2,377 987 2,237
------- ------- -------
Cash and cash equivalents at end of period $ 1,843 $ 2,377 $ 987
======= ======= =======
</TABLE>
Home City's principal sources of funds are deposits, loan and
mortgage-backed securities repayments, maturities of securities and other funds
provided by operations. Home City also has the ability to borrow from the FHLB
of Cincinnati. While scheduled loan repayments and maturing investments are
relatively predictable, deposit flows and early loan and mortgage-backed
security prepayments are more influenced by interest rates, general economic
conditions and competition. Home City maintains investments in liquid assets
based upon management's assessment of (i) the need for funds, (ii) expected
deposit flows, (iii) the yields available on short-term liquid assets and (iv)
the objectives of the asset/liability management program. In the ordinary
course of business, part of such liquid investments portfolio is composed of
deposits at correspondent banks. Although the amount on deposit at such banks
often exceeds the $100,000 limit covered by FDIC insurance, Home City monitors
the capital of such institutions to ensure that such deposits do not expose
Home City to undue risk of loss.
OTS regulations presently require Home City to maintain an average
daily balance of investments in United States Treasury, federal agency
obligations and other investments having maturities of five years or less in an
amount equal to 5% of the sum of Home City's average daily balance of net
withdrawable deposit accounts and borrowings payable in one year or less. The
liquidity requirement, which may be changed from time to time by the OTS to
reflect changing economic conditions, is intended to provide a source of
relatively liquid funds upon which Home City may rely if necessary to fund
deposit withdrawals or other short-term funding needs. At June 30, 1996, Home
City's regulatory liquidity ratio was 8.45%. At such date, Home City had
commitments to originate loans totaling $1.3 million and no commitments to
purchase or sell loans. Home City considers its liquidity and capital reserves
sufficient to meet its outstanding short and long-term needs. See Note O of the
Notes to the Consolidated Financial Statements.
Home City is required by applicable law and regulations to meet certain
minimum capital standards. Such capital standards include a tangible capital
requirement, a core capital requirement or leverage ratio and a risk-based
capital
-27-
<PAGE> 34
requirement. See "REGULATION - OTS Regulations -- Regulatory Capital
Requirements." Home City exceeded all of its capital requirements at June 30,
1996, June 30, 1995, and June 30, 1994.
Savings associations are required to maintain "tangible capital" of not
less than 1.5% of such association's adjusted total assets. Tangible capital is
defined in OTS regulations as core capital and intangible assets.
"Core capital" is comprised of common stockholders' equity (including
retained earnings), noncumulative preferred stock and related surplus, minority
interests in consolidated subsidiaries, certain nonwithdrawable accounts and
pledged deposits of mutual associations. OTS regulations require savings
associations to maintain core capital of at least 3% of Home City's total
assets. The OTS has proposed to increase such requirement to 4% to 5%, except
for those associations with the highest examination rating and acceptable levels
of risk. See "REGULATION - OTS Regulations -- Regulatory Capital Requirements."
OTS regulations require that savings associations maintain "risk-based
capital" in an amount not less that 8% of risk-weighted assets. Risk-based
capital is defined as core capital plus certain additional items of capital,
which in the case of Home City includes a general loan loss allowance of
$362,000, at June 30, 1996.
The following table summarizes Home City's regulatory capital
requirements and actual capital (see Note N of the Notes to Financial Statements
for a reconciliation of capital under GAAP and regulatory capital amounts) at
June 30, 1996.
<TABLE>
<CAPTION>
Excess of actual
capital over current
Actual capital Current requirement requirement
-------------- ------------------- ----------- Applicable
Amount Percent Amount Percent Amount Percent asset total
------ ------- ------ ------- ------ ------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Tangible Capital $ 5,271 9.48% $ 834 1.5% $ 4,437 7.98% $55,585
Core Capital 5,271 9.48 1,688 3.0 3,603 6.48 55,585
Risk-based Capital 5,633 18.77 2,400 8.0 3,233 10.77 29,999
</TABLE>
For information concerning regulatory capital on a pro forma basis
after the Conversion, see "REGULATORY CAPITAL COMPLIANCE."
At June 30, 1996, Home City had no material commitments for capital
expenditures.
SAIF ASSESSMENT
Home City, a SAIF-insured institution, is subject to regulation by the
OTS and the FDIC. The FDIC is authorized to establish different annual
assessment rates for deposit insurance for members of the BIF and the SAIF.
Legislation to recapitalize the SAIF and eliminate the significant premium
disparity between the SAIF and the BIF became effective September 30, 1996. The
recapitalization plan provides for the payment by November 29, 1996, of a
special assessment of $.657 per $100 of SAIF deposits held at March 31, 1995.
Based on its $40.4 million in deposits at March 31, 1995, Home City will pay an
additional assessment of $265,000. The payment of the assessment was recorded as
an expense as of September 30, 1996, reducing capital and earnings for the three
months ended September 30, 1996, by an after-tax amount of approximately
$175,000.
The recapitalization plan also provides for the merger of the SAIF and
BIF effective January 1, 1999, assuming all savings associations have become
banks. As a result, it is expected that the thrift charter or the separate
regulation of thrifts will be eliminated. As a result, Home City would be
regulated under federal law as a bank, and, as a result, would become subject to
the more restrictive activity limitations imposed on national banks. See "RISK
FACTORS - Legislation and Regulation Which May Adversely Affect Home City's
Earnings," and "REGULATION - FDIC Regulations -- Assessments."
IMPACT OF NEW ACCOUNTING STANDARDS
In May 1993, the FASB issued SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," which revised the accounting
treatment, classification and carrying value of investment securities. This new
accounting standard results in adjusting certain investment securities to market
value. Under SFAS No. 115, investment securities are
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<PAGE> 35
classified for balance sheet purposes based on whether such securities are
either held in trading accounts, available for sale or strictly to be held to
maturity. Under the new standard, trading account securities are marked to
market and the corresponding unrealized gains and losses are reflected in
income. Investment securities "available for sale" are adjusted to market value
with the corresponding unrealized gain or loss shown as an adjustment to
shareholders' equity net of deferred income taxes. Investment securities
earmarked to be held to maturity are carried at amortized cost. Home City
adopted SFAS No. 115 for the fiscal year beginning July 1, 1994. The effect of
adoption was to initially increase retained earnings by approximately $91,000 on
July 1, 1994, representing the unrealized market value appreciation of Home
City's securities net of applicable deferred federal income taxes. As of June
30, 1996, the amount of unrealized gains on securities designated as available
for sale had increased to approximately $127,000, which is reflected in Home
City's equity accounts.
In November 1995, the FASB issued a "Special Report" on implementation
of SFAS No. 115 (the "Special Report"). The Special Report allowed an entity to
reclassify securities, including held-to-maturity debt securities, without
calling into question the intent of the entity to hold debt securities to
maturity in the future. Any transfers from the held-to-maturity category to an
available-for-sale classification would result in unrealized gains or losses
being recognized as a separate component of equity, net of related tax effects.
Pursuant to the provisions of the Special Report, management transferred
approximately $1.4 million of securities to an available-for-sale
classification.
In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," which further clarifies the accounting treatment,
classification and valuation of impaired loans. SFAS No. 114, as amended by SFAS
No. 118 in December 1994 as to certain income recognition and financial
statement disclosure provisions, will result in applying discounted cash flow
analysis and other valuation techniques to impaired or other nonperforming loans
as those terms are defined in the Statement. Based upon the composition of Home
City's loan portfolio, SFAS No. 114 did not have a material effect on Home
City's financial position at the implementation date of October 1, 1995.
In November 1993, the American Institute of Certified Public
Accountants issued SOP 93-6, "Employers' Accounting for Employee Stock Ownership
Plans." SOP 93-6 addresses the accounting for shares of stock issued to
employees by an employee stock ownership plan ("Employee Plan"). SOP 93-6
requires that the employer record compensation expense in an amount equal to the
fair value of shares committed to be released to employees from the Employee
Plan to employees. SOP 93-6 is effective for fiscal years beginning after
December 31, 1993, and relates to shares purchased by an Employee Plan after
December 31, 1992. Assuming the Common Shares appreciate in value over time, the
adoption of SOP 93-6 will likely increase compensation expense relative to the
ESOP, as compared with prior guidance which required the recognition of
compensation expense based on the cost of shares acquired by the ESOP. However,
the amount of the increase has not been determined as the expense will be based
on the fair value of the shares committed to be released to employees, which is
not yet determinable.
In December 1994, the Accounting Standards Division of the AICPA
approved SOP 94-6, "Disclosure of Certain Significant Risks and Uncertainties."
SOP 94-6 requires disclosures in the financial statements beyond those now being
required or generally made in the financial statements about the risk and
uncertainties existing as of the date of those financial statements in the
following areas: nature of operation, use of estimates in the preparation of
financial statements, certain significant estimates, and current vulnerability
due to certain concentrations. The standard is effective for financial
statements issued for fiscal years ending after December 15, 1995. The
implementation of SOP 94-6 has not had a significant impact on the financial
statements of Home City.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
SFAS No. 121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles and goodwill related to those assets to
be held and used and for long-lived assets and certain identifiable intangibles
to be disposed of. The standard requires an impairment loss to be recognized
when the carrying amount of the asset exceeds the fair value of the asset. The
fair value of an asset is the amount at which the asset could be bought or sold
in a current transaction between willing parties, that is, other than in a
forced liquidation sale. An entity that recognizes an impairment loss shall
disclose additional information in the financial statements related to the
impaired asset. All long-lived assets and certain identifiable intangibles to be
disposed of and for which management has committed to a plan to dispose of the
assets, whether by sale or abandonment, shall be reported at the lower of the
carrying amount or fair value less cost to sell. Subsequent revisions in
estimates of fair value less cost to sell shall be reported as adjustments to
the carrying amount of assets to be disposed of, provided that the carrying
amount of the asset does not exceed the carrying amount of the asset before an
adjustment was made to reflect the decision to dispose of the asset. The
statement requires additional disclosure in the footnotes regarding assets to be
disposed of. SFAS No. 121 is effective for fiscal years beginning after December
15, 1995. SFAS No. 121 has not had and is not expected to have a material
effect on Home City's financial condition or results of operations.
-29-
<PAGE> 36
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights and Excess Servicing Receivables and for Securitization of
Mortgage Loans." SFAS No. 122, which is effective for years beginning after
December 15, 1995, will require Home City, to the extent it services mortgage
loans for others in return for servicing fees, to recognize these servicing
rights as assets, regardless of how such assets were acquired. Additionally,
Home City would be required to assess the fair value of these assets at each
reporting date to determine any potential impairment. The adoption of SFAS No.
122 has not had and is not expected to have a material effect on financial
condition or results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation," establishing financial accounting and reporting
standards for stock-based employee compensation plans. SFAS No. 123 encourages
all entities to adopt a new method of accounting to measure compensation cost of
all employee stock compensation plans based on the estimated fair value of the
award at the date it is granted. Companies are, however, allowed to continue to
measure compensation cost for those plans using the intrinsic value based method
of accounting, which generally does not result in compensation expense
recognition for most plans. Companies that elect to remain with the existing
accounting are required to disclose in a footnote to the financial statements
pro forma net income and, if presented, earnings per share, as if SFAS No. 123
had been adopted. The accounting requirements of SFAS No. 123 are effective for
transactions entered into during fiscal years that begin after December 15,
1995; however, companies are required to disclose information for awards granted
in their first fiscal year beginning after December 15, 1994. As Home City is
currently a mutual savings and loan association, management of Home City cannot
complete an analysis of the potential effects of SFAS No. 123 on its financial
condition or results of operations.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," which
established accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. The standards are based on
a consistent application of a financial components approach that focuses on
control. Under that approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished. SFAS No. 125 provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. SFAS No. 125 supersedes SFAS No. 122.
SFAS No. 125 is effective for transactions occurring after December 31, 1996.
Management does not expect an impact from adoption of SFAS No. 125.
IMPACT OF INFLATION AND CHANGING PRICES
The Financial Statements and Notes included herein have been prepared
in accordance with GAAP. GAAP requires Home City to measure financial position
and operating results in terms of historical dollars, and changes in the
relative value of money due to inflation or recession are generally not
considered.
In management's opinion, changes in interest rates affect the financial
condition of a financial institution to a far greater degree than changes in the
inflation rate. While interest rates are greatly influenced by changes in the
inflation rate, they do not change at the same rate or in the same magnitude as
the inflation rate. Rather, interest rate volatility is based on changes in the
expected rate of inflation, as well as on changes in monetary and fiscal
policies.
-30-
<PAGE> 37
RECENT DEVELOPMENTS
The following tables set forth selected financial condition data for
Home City at September 30, 1996, and June 30, 1996, and selected earnings data
for Home City for the three months ended September 30, 1996, and 1995. The
results of operations presented below are not necessarily indicative of the
results that may be expected for any other period. This information should be
read in conjunction with the financial statements and notes thereto included
herein.
<TABLE>
<CAPTION>
September 30, June 30,
SELECTED FINANCIAL CONDITION AND OTHER DATA: 1996 1996
------ -----
(Dollars in thousands)
<S> <C> <C>
Total amount of:
Assets $58,380 $55,728
Cash and cash equivalents (1) 2,328 2,904
Investment securities available for sale 2,189 2,188
Investment securities held to maturity -- --
Mortgage-backed securities
available for sale 2,873 2,975
Mortgage-backed securities
held to maturity -- --
Loans receivable - net 47,761 45,225
FHLB stock - at cost 401 394
Deposits 49,260 47,174
FHLB advances 2,673 2,903
Retained earnings, substantially
restricted-net (2) 5,262 5,271
Number of offices, all full service 1 1
<CAPTION>
Three months ended
September 30,
-----------------------
SUMMARY OF EARNINGS: 1996 1995
------- ------
(Dollars in thousands)
<S> <C> <C>
Interest and dividend income $ 1,170 $1,041
Interest expense 692 602
Net interest income 478 439
Provision for loan losses -- --
Net interest income after
provision for loan losses 478 439
Noninterest income 120 68
Noninterest expense 610 323
Income before income tax (12) 184
Income tax expense (2) (3) 59
Net income (2) (9) 125
(Footnotes on next page)
</TABLE>
-31-
<PAGE> 38
<TABLE>
<CAPTION>
At or for the three months ended
September 30,
-----------------------------------
SELECTED FINANCIAL RATIOS: 1996 1995
------ -----
<S> <C> <C>
Return on assets (3) (0.02)% 0.25%
Return on equity (4) (0.17)% 2.56%
Interest rate spread (5) 3.30% 3.07%
Net interest margin (6) 3.53% 3.63%
Noninterest expense to average assets (7) 4.32% 2.62%
Average equity to average assets 9.60% 9.93%
Equity to assets at period end 9.01% 9.64%
Nonperforming loans to total loans 0.55% 0.36%
Nonperforming assets to total assets (8) 0.43% 0.30%
Allowance for loan losses to total loans 0.80% 0.76%
Allowance for loan losses to nonperforming
loans 145.74% 208.84%
Net charge-offs to average loans 0.01% 0.02%
</TABLE>
- ------------------------------------
(1) Includes cash and amounts due from depository institutions and
interest-bearing deposits in other financial institutions.
(2) Effective January 1, 1993, Home City adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes".
The effect of adopting SFAS No. 109 on income tax expense in 1994 and
1993 was not material.
(3) Net income divided by average total assets.
(4) Net income divided by average total equity.
(5) Average yield on interest-earning assets less average cost of
interest-bearing liabilities.
(6) Net interest income as a percentage of average interest-earning assets.
(7) Noninterest expense divided by average total assets.
(8) Nonperforming assets consist of nonaccruing loans, accruing loans 90
days or more past due and real estate acquired (or deemed acquired) in
foreclosure proceedings or in lieu thereof. See "THE BUSINESS OF HOME
CITY - Delinquent Loans, Nonperforming Assets and Classified Assets."
The following table summarizes the Association's regulatory capital
requirements and actual capital at September 30, 1996:
<TABLE>
<CAPTION>
Excess of actual capital
Actual capital Current requirement over current requirement Applicable
-------------------- -------------------- ------------------------ -----------
Amount Percent Amount Percent Amount Percent asset total
------ ------- ------ ------- ------ ------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Tangible capital $5,208 8.95% $ 872 1.50% $4,336 7.45% $58,164
Core capital 5,208 8.95 1,745 3.00 3,463 5.95 $58,164
Risk-based capital 5,572 17.38 2,564 8.00 3,008 9.38 $32,052
</TABLE>
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<PAGE> 39
ANALYSIS OF FINANCIAL CONDITION
GENERAL. Home City's assets totaled $58.4 million at September 30,
1996, an increase of $2.6 million, or 4.8%, from $55.7 million at June 30,
1996. Such growth was primarily attributable to an increase in loans receivable
which was funded by an increase in deposits.
LOANS RECEIVABLE. Net loans receivable equaled $47.8 million at
September 30, 1996, compared to $45.2 million at June 30, 1996, a 5.6%
increase attributable to increased mortgage loan demand and the addition of
consumer loans to the product line. Management is continuing to emphasize
single-family residential lending.
DEPOSITS. Total deposits increased by $2.1 million, to $49.3 million,
at September 30, 1996, from $47.2 million at June 30, 1996.
COMPARISON OF RESULTS OF OPERATIONS
GENERAL. Home City recorded a net loss of $9,000 for the three months
ended September 30, 1996, compared to income of $125,000 for the same period in
1995. Such loss resulted primarily from the accrual of a $265,000 expense due to
the SAIF assessment recognized as of September 30, 1996. If not for such
assessment, Home City would have had approximately $165,000 of net income for
the three months ended September 30, 1996.
NET INTEREST INCOME. Home City's net interest income for the three
months ended September 30, 1996, increased by $39,000, to $478,000, compared to
the same period in 1995, due to an increase of $129,000 in interest income,
partially offset by an increase in interest expenses of $90,000.
NONINTEREST INCOME AND EXPENSE. Noninterest income was $120,000 for the
three months ended September 30, 1996, compared to $68,000 for the same period
in 1995. Such increase resulted from fees related to the initiation of new
services and increased volume of transactions. The $287,000 increase in
noninterest expense for the three months ended September 30, 1996, compared to
the same period in 1995, is primarily attributable to the SAIF assessment. It is
management's goal to continue to manage controllable costs as much as possible.
YIELDS EARNED AND RATES PAID. Home City's net interest rate spread was
3.30% for the three months ended September 30, 1996, compared to 3.07% for the
three months ended September 30, 1995. The average yield on interest earning
assets was 8.85% for the three months ended September, 1996, compared to 8.52%
for the same period in 1995, while the average cost of interest bearing
liabilities was 5.55% for the three months ended September 30, 1996, compared to
5.45% for the same period in 1995.
OTHER SIGNIFICANT RATIOS. The ratio of average equity to average assets
decreased 33 basis points at September 30, 1996, compared to September 30, 1995,
as a direct result of Home City's asset growth and continued profitability. At
September 30, 1996, Home City's ratio of average assets to average equity was
9.60% compared to 9.93% at September 30, 1995.
THE BUSINESS OF HOME CITY
GENERAL
Home City is principally engaged in the business of making permanent
first and second mortgage loans secured by one- to four-family residential and
nonresidential real estate located in Home City's primary lending area and
investing in U.S. Government and agency obligations, interest-bearing deposits
in other financial institutions, mortgage-backed securities, and municipal
securities. Home City also originates loans for the construction of residential
real estate and loans secured by multifamily real estate (over four units),
commercial, consumer and nonresidential real estate. The origination of consumer
loans, including unsecured loans and loans secured by deposits, constitutes a
growing portion of Home City's lending activities. Loan funds are obtained
primarily from deposits, which are insured up to applicable limits by the FDIC,
and loan and mortgage-backed securities repayments.
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<PAGE> 40
MARKET AREA
Home City conducts business from its main office, located in
Springfield, Ohio. Springfield is located 25 miles east of Dayton, 40 miles west
of Columbus and 80 miles north of Cincinnati. Home City's primary market area
consists of Clark County, Ohio, and adjacent counties. Clark County, Ohio, is
characterized by lower than average levels of income and housing values and a
slightly higher unemployment level. Its strongest employment categories are
wholesale/retail trade, services and manufacturing, with smaller numbers of
residents employed in the finance, insurance and real estate industry category.
During the period from 1990 to 1995, Clark County experienced an
increase of 0.2% in population, compared to an increase of 2.8% in Ohio and 5.7%
in the United States. From 1990 to 1995, Clark County witnessed an increase of
0.3% in the number of households. Such increase was lower than Ohio's increase
of 2.7% and the 5.6% increase in households in the United States for the same
period.
Median household income figures for Clark County were at lower levels
than both Ohio and the United States for 1990 and 1995. In 1990, the median
household income for Clark County was $27,868. The median household income
levels for Ohio and the United States were $29,276 and $28,255, respectively.
From 1990 to 1995, Clark County's median household income increased by 16.0%,
to $32,325. During such period, Ohio's median household income level grew
12.9%, to $33,038, and the United States experienced an increase in its median
household income level by 19.0%, to $33,610.
The major source of employment by industry group, based on number of
employees, for Clark County is the wholesale/retail industry, which accounted
for 30.4% of jobs in 1993. In 1993, the services industry was the second major
employer in Clark County, at 30.1%, and manufacturing was the third major
employer in Clark County, at 27.3%. Construction, finance, insurance and real
estate, transportation/utilities, and agriculture/mining combined to account for
12.0% of employment in Clark County in 1993.
An economic indicator that pertains more directly to the banking and
thrift industries, because of its direct relationship to lending activity, is
the issuance of new housing permits. In 1992, the issuance of new housing
permits remained relatively unchanged in Clark County while Ohio and the United
States witnessed positive growth rates of 16.3% and 20.1%, respectively. In
1993, Clark County once again remained relatively unchanged, while Ohio and the
United States witnessed increases in the number of new housing permits
authorized.
Another key economic indicator is the unemployment rate. Clark County
experienced a decrease in the unemployment rate from 4.9% to 4.6% in 1995.
Ohio experienced a decrease from 5.5% to 4.9% and the unemployment rate in the
United States decreased from 6.1% to 5.2% in 1995. In June 1996, unemployment
increased to 5.7%, 5.0% and 5.5% in Clark County, Ohio and the United States,
respectively.
LENDING ACTIVITIES
GENERAL. Home City's primary lending activity is the origination of
conventional mortgage loans and home equity loans secured by one to four-family
homes located in Home City's primary lending area and loans secured by
nonresidential real estate. Loans for the construction of one- to four-family
homes and mortgage loans on multifamily properties containing five units or more
are also offered by Home City. Home City does not originate loans insured by the
Federal Housing Administration or loans guaranteed by the Veterans
Administration. In addition to mortgage lending, Home City makes commercial
loans secured by assets of the borrower other than real estate, unsecured loans
and consumer loans secured by deposits. Home City does not originate its loans
in accordance with traditional secondary market guidelines.
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<PAGE> 41
LOAN PORTFOLIO COMPOSITION. The following table presents certain
information with respect to the composition of Home City's loan portfolio at the
dates indicated:
<TABLE>
<CAPTION>
At June 30,
---------------------------------------------------------------------------
1996 1995 1994
------------------- ---------------------- ------------------------
Percent Percent Percent
of total of total of total
Amount loans Amount loans Amount loans
------ -------- ------ -------- ------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Residential real estate loans:
One- to four-family (first mortgage) $31,580 64.89% $24,724 58.85% $19,784 57.63%
Multifamily 3,233 6.64 3,288 7.82 2,581 7.52
Home equity (second mortgage) 313 0.64 232 0.55 121 0.35
Nonresidential real estate loans 7,255 14.91 7,309 17.39 5,197 15.14
Land loans 2,223 4.57 1,684 4.01 1,020 2.97
Construction loans 2,350 4.83 4,582 10.90 5,444 15.86
------- ------ ------- ------ ------- ------
Total real estate loans 46,954 96.48 4,819 99.52 34,147 99.47
Commercial loans 73 0.15 -- -- -- --
Consumer loans:
Loans on deposits 160 0.33 201 0.48 183 0.53
Other consumer loans 1,481 3.04 -- -- -- --
------- ------ ------- ------- ------- ------
Total consumer loans 1,641 3.37 201 0.48 183 0.53
------- ------ ------- ------- ------- ------
Total loans 48,668 100.00% 42,020 100.00% 34,330 100.00%
====== ====== ======
Less:
Unearned and deferred (income)
expense, net (447) (420) (324)
Loans in process (2,634) (2,321) (2,674)
Allowance for loan losses (362) (319) (229)
------- ------- -------
Net loans $45,225 $38,960 $31,103
======= ======= =======
</TABLE>
LOAN MATURITY SCHEDULE. The following table sets forth certain
information as of June 30, 1996, regarding the dollar amount of loans maturing
in Home City's portfolio based on their contractual terms to maturity. Demand
loans and loans having no stated schedule of repayments and no stated maturity
are reported as due in one year or less.
<TABLE>
<CAPTION>
Due during the
year ending June 30, Due 4-5 Due 6-10 Due 11-20 Due more than
----------------------- years after years after years after 20 years after
1997 1998 1999 6/30/96 6/30/96 6/30/96 6/30/96 Total
---- ---- ---- ------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Residential $1,004 $8,092 $8,223 $205 $ 721 $ 9,309 $3,549 $31,103
Nonresidential 283 585 364 129 3,082 6,465 1,814 12,722
Consumer loans 213 101 151 652 344 200 28 1,689
Commercial loans 50 -- 10 13 -- -- -- 73
------ ------ ------ ---- ------ ------- ------ -------
Total loans $1,550 $8,778 $8,748 $999 $4,147 $15,974 $5,391 $45,587
====== ====== ====== ==== ====== ======= ====== =======
</TABLE>
Of the loans due more than one year after June 30, 1996, loans with
aggregate balances of $22.7 million have fixed rates of interest, and loans with
aggregate balances of $21.3 million have adjustable interest rates.
ONE- TO FOUR-FAMILY RESIDENTIAL REAL ESTATE LOANS. The primary lending
activity of Home City has been the origination of permanent conventional loans
secured by one- to four-family residences, primarily single-family residences,
located within Home City's designated lending area. Home City also originates
loans for the construction of one- to four-
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<PAGE> 42
family residences and home equity loans. Each of such loans is secured by a
mortgage on the underlying real estate and improvements thereon, if any.
OTS regulations limit the amount that Home City may lend in
relationship to the appraised value of the real estate and improvements at the
time of loan origination. In accordance with such regulations, Home City makes
fixed-rate first mortgage loans on one- to four-family, owner occupied
residences up to 95% of the value of the real estate and improvements (the
"Loan-to-Value Ratio" or "LTV"). Low-to-moderate income loans are granted up to
95% on one- to four-family, owner occupied residences. Home City makes
adjustable-rate first mortgage loans for investment purposes on one- to
four-family, non-owner occupied residences in amounts up to 75% LTV. Home City
generally requires private mortgage insurance ("PMI") for the amount of a loan
in excess of 80% of the value of the real estate securing such loan. PMI is
required for the amount of any loan in excess of 85% of the value of the real
estate and improvements for low-to-moderate income loans. Fixed-rate residential
real estate loans are offered by Home City for terms of up to 15 years.
Home City has been originating adjustable-rate mortgage loans ("ARMs")
for several years. ARMs are offered by Home City for terms of up to 30 years and
with various alternative features. The interest rate adjustment periods on the
ARMs are either one year, three years or a fixed rate for 10 years followed by
one-year adjustment periods. The interest rate adjustments on ARMs presently
originated by Home City are tied to changes in the weekly average yield on the
one and three-year U.S. Treasury constant maturities index, respectively. Rate
adjustments are computed by adding a stated margin, typically 2.75%, but up to
3.5%, to the index. The maximum allowable adjustment at each adjustment date had
been 1% with a maximum adjustment of 3% over the term of the loan, although Home
City now offers an ARM with a 2% maximum adjustment at each adjustment date and
a maximum adjustment of 6% over the term of the loan. The initial rate is
dependent, in part, on how often the rate can be adjusted. Home City originates
ARMs which have initial interest rates lower than the sum of the index plus the
margin. Such loans are subject to increased risk of delinquency or default due
to increasing monthly payments as the interest rates on such loans increase to
the fully-indexed level, although such increase is generally lower than industry
standards and is considered in Home City's underwriting of any such loans with a
one-year adjustment period. See "USE OF PROCEEDS."
The aggregate amount of Home City's one- to four-family residential
real estate loans equaled approximately $31.8 million at June 30, 1996, and
represented 68% of loans at such date. The largest individual loan balance on a
one- to four-family loan at such date was $299,000. At such date, loans secured
by one- to four-family residential real estate with outstanding balances of
$247,000, or .54% of its one- to four-family residential real estate loan
balance, were more than 90 days delinquent or nonaccruing. See "Delinquent
Loans, Nonperforming Assets and Classified Assets."
MULTIFAMILY RESIDENTIAL REAL ESTATE LOANS. In addition to loans on one-
to four-family properties, Home City makes loans secured by multifamily
properties containing over four units. Such loans are made with adjustable
interest rates, maximum LTVs of 75% and maximum terms of 15 years.
Multifamily lending is generally considered to involve a higher degree
of risk because the loan amounts are larger and the borrower typically depends
upon income generated by the property to cover operating expenses and debt
service. The profitability of a project can be affected by economic conditions,
government policies and other factors beyond the control of the borrower. Home
City attempts to reduce the risk associated with multifamily lending by
evaluating the creditworthiness of the borrower and the projected income from
the project and by obtaining personal guarantees on loans made to corporations
and partnerships. Home City currently requires that borrowers agree to submit
financial statements, rent rolls and tax returns annually to enable Home City to
monitor the loans.
At June 30, 1996, loans secured by multifamily properties totaled
approximately $3.2 million, all of which were secured by property located within
Home City's primary market area, and all of which were performing in accordance
with their terms. The largest loan secured by a multifamily property had a
balance at June 30, 1996, of approximately $332,000.
HOME EQUITY LOANS. Home City offers home equity loans secured by second
mortgages on one- to four-family residential real estate located in Clark
County, Ohio, and adjacent counties. Such loans are made for various purposes,
including home improvement, debt consolidation and consumer purchases. The
interest rates on loans secured by such second mortgages are fixed, with a
maximum combined LTV for the first and second mortgage of 100%.
At June 30, 1996, home equity loans totaled approximately $313,000,
0.64% of Home City's total loan portfolio. All of such loans were secured by
property located within Home City's primary market area and all were performing
in accordance with their terms. The balance of the largest single home equity
loan was $39,200 at June 30, 1996.
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<PAGE> 43
NONRESIDENTIAL REAL ESTATE LOANS. Home City also makes loans secured by
nonresidential real estate consisting of retail stores, office buildings and
businesses. Such loans generally are originated with adjustable interest rates,
terms of up to 15 years, a minimum loan amount of $10,000 and a maximum loan
amount of $800,000. Such loans have a maximum LTV of 75%.
Nonresidential real estate lending is generally considered to involve a
higher degree of risk than residential lending due to the relatively larger loan
amounts and the effects of general economic conditions on the successful
operation of income-producing properties. If the cash flow on the property is
reduced, for example, as leases are not obtained or renewed, the borrower's
ability to repay may be impaired. Home City has endeavored to reduce such risk
by evaluating the credit history and past performance of the borrower, the
location of the real estate, the quality of the management constructing and
operating the property, the debt service ratio, the quality and characteristics
of the income stream generated by the property and appraisals supporting the
property's valuation. Home City also requires personal guarantees on such loans.
At June 30, 1996, Home City had a total of $7.3 million invested in
nonresidential real estate loans, all of which were secured by property located
within Home City's primary market area. Such loans comprised approximately 15%
of Home City's total loans at such date. At such date, Home City had $197,000 in
delinquent nonresidential real estate loans, or 0.43% of total loans. See
"Delinquent Loans, Nonperforming Assets and Classified Assets."
Federal regulations limit the amount of nonresidential mortgage loans
which a savings bank may make to 400% of its tangible capital. At June 30, 1996,
Home City's nonresidential mortgage loans totaled 138% of Home City's tangible
capital.
LAND LOANS. Home City makes two varieties of land loans. Loans are made
for the acquisition of land to be developed for construction. Such loans are
usually made for relatively short periods of time, generally not more than three
years, with fixed interest rates. Loans are also made to borrowers who purchase
and hold land for various reasons, such as the future construction of a
residence. Such loans are generally originated with adjustable interest rates
and terms of up to 15 years. Land loans are secured by the land being purchased
with the loan proceeds and have maximum LTVs of 75%.
At June 30, 1996, land loans totaled approximately $2.2 million, 4.57%
of Home City's total loan portfolio. All of such loans were secured by property
located within Home City's primary market area and all were performing in
accordance with their terms. The largest land loan at June 30, 1996, had a
balance of approximately $421,100.
CONSTRUCTION LOANS. Home City makes loans for the construction of
residential and nonresidential real estate. Such loans are structured as
permanent loans with fixed rates of interest and for terms of up to 15 years.
Most of the construction loans originated by Home City have been made to
owner-occupants for the construction of single-family homes by a general
contractor.
Construction loans generally involve greater underwriting and default
risks than do loans secured by mortgages on existing properties due to the
concentration of principal in a limited number of loans and borrowers and the
effects of general economic conditions on real estate developments, developers,
managers and builders. In addition, such loans are more difficult to evaluate
and monitor. Loan funds are advanced upon the security of the project under
construction, which is more difficult to value before the completion of
construction. Moreover, because of the uncertainties inherent in estimating
construction costs, it is relatively difficult to evaluate accurately the LTV
and the total loan funds required to complete a project. In the event a default
on a construction loan occurs and foreclosure follows, Home City must take
control of the project and attempt either to arrange for completion of
construction or dispose of the unfinished project. Additional risk exists with
respect to loans made to developers who do not have a buyer for the property, as
the developer may lack funds to pay the loan if the property is not sold upon
completion. Home City attempts to reduce such risks on loans to developers by
requiring personal guarantees and reviewing current personal financial
statements and tax returns and other projects undertaken by the developers.
At June 30, 1996, a total of $2.3 million, or approximately 4.8% of
Home City's total loans, consisted of construction loans. All of Home City's
construction loans are secured by property located within Home City's primary
market area, and the economy of such lending area had been relatively stable. At
June 30, 1996, all of such loans were performing in accordance with their terms.
COMMERCIAL LOANS. Home City occasionally makes loans for commercial
purposes. Such loans may be secured by assets of the borrower other than real
estate, such as equipment or receivables. At June 30, 1996, Home City had three
commercial loans in the aggregate amount of $73,000, each of which was
performing in accordance with its terms.
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<PAGE> 44
CONSUMER LOANS. Home City makes various types of consumer loans,
including unsecured loans and loans secured by deposits. Such loans are made
only at fixed rates of interest for terms of up to 10 years. Home City has been
attempting to increase its consumer loan portfolio as part of its interest rate
risk management efforts and because a higher rate of interest is received on
consumer loans. See "RISK FACTORS" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF HOME CITY."
Consumer loans may entail greater credit risk than do residential
mortgage loans. The risk of default on consumer loans increases during periods
of recession, high unemployment and other adverse economic conditions. Although
Home City has not had significant delinquencies on consumer loans, no assurance
can be provided that delinquencies will not increase.
At June 30, 1996, Home City had approximately $1.6 million, or 3.4% of
its total loans, invested in consumer loans, and none of such loans were more
than 90 days delinquent or nonaccruing. See "Delinquent Loans, Nonperforming
Assets and Classified Assets."
LOAN SOLICITATION AND PROCESSING. Loan originations are developed from
a number of sources, including continuing business with depositors, borrowers
and real estate developers, periodic newspaper solicitations by Home City's
lending staff and walk-in customers.
Loan applications for permanent mortgage loans are taken by loan
personnel. Home City obtains a credit report, verification of employment and
other documentation concerning the credit-worthiness of the borrower. Home City
limits the ratio of mortgage loan payments to the borrower's income to 25% and
the ratio of the borrower's total debt payments to income to 35-42%. An
appraisal of the fair market value of the real estate on which Home City will be
granted a mortgage to secure the loan is prepared by an independent fee
appraiser approved by the Board of Directors.
Unless Home City is aware of factors which may lead to an environmental
concern, Home City generally does not require any form of specific environmental
study at the time a loan secured by one- to four-family residential real estate
is made. If, however, Home City is aware of any such factor at the time of loan
origination, Home City requires the completion and satisfactory review of a
Phase I Environmental Assessment before such loan is made. For loans secured by
multifamily and nonresidential real estate, a Phase I Environmental Assessment
is generally required before the loan is made.
Upon the completion of the appraisal and the receipt of information on
the borrower, the application for a loan is submitted to various management
officials for approval or rejection if the loan amount does not exceed $300,000.
If the loan amount exceeds $300,000, or if the application does not conform in
all respects with Home City's underwriting guidelines, the application is
submitted to the Executive Loan Committee or the Board of Directors for review
and for final disposition. If a mortgage loan application is approved, an
attorney's opinion of title is obtained on the title to the real estate which
will secure the mortgage loan. Borrowers are required to carry satisfactory fire
and casualty insurance and flood insurance, if applicable, and to name Home City
as an insured mortgagee.
The procedure for approval of construction loans is the same as for
permanent mortgage loans, except that an appraiser evaluates the building plans,
construction specification and estimates of construction costs. Home City also
evaluates the feasibility of the proposed construction project and the
experience and record of the builder. Consumer loans are underwritten on the
basis of the borrower's credit history and an analysis of the borrower's income
and expenses, ability to repay the loan and the value of the collateral, if any.
Commercial loans are underwritten on the basis of the source of the cash flow
required to service the debt and the value of the security for the loan.
Home City's loans carry no pre-payment penalties, but do provide the
entire balance of the loan is due upon sale of the property securing the loan.
Home City generally enforces such due-on-sale provisions.
LOAN ORIGINATIONS, PURCHASES AND SALES. Home City originates an almost
equal number of fixed and adjustable rate loans. See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF HOME CITY -
Asset and Liability Management." Home City occasionally participates in loans by
other institutions. For a discussion of Home City's strategy for loan
originations, see "THE BUSINESS OF HOME CITY - General."
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<PAGE> 45
The following table presents Home City's mortgage loan origination,
repayment and sales activity for the periods indicated:
<TABLE>
<CAPTION>
Year ended June 30,
-------------------------------------
1996 1995 1994
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Loans originated:
One- to four-family residential (1) $14,091 $ 9,269 $11,599
Multifamily residential 280 1,468 516
Nonresidential 2,210 3,303 2,478
Commercial 133 -- --
Consumer 1,797 37 96
------- ------- -------
Total loans originated 18,511 14,077 14,689
------- ------- -------
Reductions:
Principal repayments (9,287) (5,623) 11,804)
Loans sold (2,760) (338) (131)
Increase (decrease) in other items, net (2) (199) (148) (186)
------- ------- -------
Net increase $ 6,265 $ 7,968 $ 2,568
======= ======= =======
</TABLE>
- -------------
(1) Includes construction loans.
(2) Consists of unearned and deferred fees, costs and the allowance for loan
losses.
OTS regulations generally limit the aggregate amount that a savings
association may lend to any one borrower to an amount equal to 15% of Home
City's total capital under the regulatory capital requirements plus any
additional loan reserve not included in total capital. A savings association may
lend to one borrower an additional amount not to exceed 10% of total capital
plus additional reserves if the additional amount is fully secured by certain
forms of "readily marketable collateral." Real estate is not considered "readily
marketable collateral." In addition, the regulations require that loans to
certain related or affiliated borrowers be aggregated for purposes of such
limits. An exception to these limits permits loans to one borrower of up to
$500,000 "for any purpose."
Based on such limits, Home City was able to lend approximately $842,000
to one borrower at June 30, 1996. The largest amount Home City had outstanding
to one borrower at June 30, 1996, was $653,000. Such loans were secured by
several one- to four-family residential loans and a property under construction.
All of such loans were current at June 30, 1996.
DELINQUENT LOANS, NONPERFORMING ASSETS AND CLASSIFIED ASSETS. When a
borrower fails to make a required payment on a loan, Home City attempts to cause
the delinquency to be cured by contacting the borrower. In most cases,
delinquencies are cured promptly.
When a loan is fifteen days or more delinquent, the borrower is sent a
delinquency notice. When a loan is thirty days delinquent, Home City generally
telephones the borrower. Depending upon the circumstances, Home City may also
inspect the property and inform the borrower of the availability of credit
counseling from Home City and counseling agencies. Before a loan becomes 90 days
delinquent, Home City will make further contact with the borrower and, depending
upon the circumstances, may arrange appropriate alternative payment
arrangements. After a loan becomes 90 days delinquent, Home City may refer the
matter to an attorney for foreclosure. A decision as to whether and when to
initiate foreclosure proceedings is based on such factors as the amount of the
outstanding loan in relation to the original indebtedness, the extent of the
delinquency and the borrower's ability and willingness to cooperate in curing
delinquencies. If a foreclosure occurs, the real estate is sold at public sale
and may be purchased by Home City.
Real estate acquired, or deemed acquired, by Home City as a result of
foreclosure proceedings is classified as real estate owned ("REO") until it is
sold. When property is so acquired, or deemed to have been acquired, it is
initially recorded by Home City at the lower of cost or fair value of the real
estate, less estimated costs to sell. Any reduction in fair value is
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<PAGE> 46
reflected in a valuation allowance account established by a charge to income.
Costs incurred to carry other real estate are charged to expense.
Home City places a loan on nonaccrual status when the principal and
interest is delinquent 90 days or more and deducts from income the interest
previously accrued.
The following table reflects the amount of loans in a delinquent status
as of the dates indicated:
<TABLE>
<CAPTION>
June 30,
---------------------------------------------------------------------------------------------
1996 1995 1994
---------------------------- ----------------------------- ----------------------------
Percent Percent Percent
of total of total of total
Number Amount loans Number Amount loans Number Amount loans
------ ------ -------- ------ ------ -------- ------ ------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans delinquent for (1):
30 - 59 days 17 $565 1.24% 11 $296 1.01% 26 $804 2.57%
60 - 89 days 4 170 0.37 4 83 0.28 5 152 0.49
90 days and over 14 247 0.54 14 207 0.71 4 34 0.11
-- ---- ---- -- ---- ---- -- ----- ----
Total delinquent loans 35 $982 2.15% 29 $586 2.00% 35 $990 3.17%
== ==== ==== == ==== ==== == ==== ====
</TABLE>
- -------------------
(1) The number of days a loan is delinquent is measured from the day the
payment was due under the terms of the loan agreement.
The following table sets forth information with respect to the accrual
and nonaccrual status of Home City's loans which are 90 days or more past due
and other nonperforming assets at the dates indicated:
<TABLE>
<CAPTION>
At June 30,
-------------------------------
1996 1995 1994
------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Loans accounted for on a nonaccrual basis:
Real estate:
Residential $ 247 $ 207 $ 34
Nonresidential -- -- --
Commercial -- -- --
Consumer -- -- --
------- ------- -------
Total nonperforming loans 247 207 34
Real estate owned -- -- --
------- ------- -------
Total nonperforming assets $ 247 $ 207 $ 34
======= ======= =======
Total loan loss allowance $ 362 $ 319 $ 229
Total nonperforming assets as a
percentage of total assets 0.44% 0.43% 0.09%
Loan loss allowance as a percent of
nonperforming loans 146.56% 154.11% 673.53%
</TABLE>
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<PAGE> 47
During the year ended June 30, 1996, $8,000 in interest income was
recognized and an additional $16,000 would have been recorded as interest income
on nonaccruing loans had such loans been accruing pursuant to contractual terms.
During the periods shown, Home City had no restructured loans within the meaning
of SFAS No. 115. There are no loans which are not currently classified as
nonaccrual, more than 90 days past due or restructured but which may be so
classified in the near future because management has concerns as to ability of
the borrowers to comply with repayment terms. For additional information, see
Note D of the Notes to Financial Statements.
OTS regulations require that each thrift institution classify its own
assets on a regular basis. Problem assets are classified as "substandard,"
"doubtful" or "loss." "Substandard" assets have one or more defined weaknesses
and are characterized by the distinct possibility that the insured institution
will sustain some loss if the deficiencies are not corrected. "Doubtful" assets
have the same weaknesses as "substandard" assets, with the additional
characteristics that (i) the weaknesses make collection or liquidation in full
on the basis of currently existing facts, conditions and values questionable and
(ii) there is a high possibility of loss. An asset classified "loss" is
considered uncollectible and of such little value that its continuance as an
asset of the institution is not warranted. The regulations also contain a
"special mention" category, consisting of assets which do not currently expose
an institution to a sufficient degree of risk to warrant classification but
which possess credit deficiencies or potential weaknesses deserving management's
close attention.
Generally, Home City classifies as "substandard" all loans that are
delinquent more than 90 days, unless management believes the delinquency status
is short-term due to unusual circumstances. Loans delinquent fewer than 90 days
may also be classified if the loans have the characteristics described above
rendering classification appropriate.
The aggregate amount of Home City's classified assets at the dates
indicated were as follows:
<TABLE>
<CAPTION>
At June 30,
--------------------------------
1996 1995 1994
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Classified assets:
Substandard $518 $349 $515
Doubtful 19 -- --
Loss 102 106 106
---- ---- ----
Total classified assets $639 $455 $621
==== ==== ====
</TABLE>
Federal examiners are authorized to classify an association's assets.
If an association does not agree with an examiner's classification of an asset,
it may appeal this determination to the Regional Director of the OTS. Home City
had no disagreements with the examiners regarding the classification of assets
at the time of the last examination.
OTS regulations require that Home City establish prudent general
allowances for loan losses for any loan classified as substandard or doubtful.
If an asset, or portion thereof, is classified as loss, Home City must either
establish specific allowances for losses in the amount of 100% of the portion of
the asset classified loss, or charge-off such amount.
ALLOWANCE FOR LOAN LOSSES. Home City maintains an allowance for loan
losses based upon a number of relevant factors, including but not limited to,
trends in the level of nonperforming assets and classified loans, current and
anticipated economic conditions in the primary lending area, past loss
experience, possible losses arising from specific problem assets and changes in
the composition of the loan portfolio.
The single largest component of Home City's loan portfolio consists of
one- to four-family residential real estate loans. Substantially all of these
loans are secured by residential real estate and require down payments of 20% of
the lower of the sales price or appraisal value of the real estate. In addition,
such loans are secured by property in Home City's primary lending area. Home
City's practice of making loans only in the market area and requiring a 20% down
payment have contributed to a low historical charge-off history.
In addition to one- to four-family residential real estate loans, Home
City makes additional real estate loans including home equity, multifamily
residential real estate, nonresidential real estate and construction loans.
These real estate loans are secured by property in Home City's lending area and
also require the borrower to provide a down payment. Home City has not
experienced any charge-offs from these other real estate loan categories.
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<PAGE> 48
The allowance for loan losses is reviewed quarterly by the Board of
Directors. While the Board of Directors believes that it uses the best
information available to determine the allowance for loan losses, unforeseen
market conditions could result in material adjustments, and net earnings could
be significantly adversely affected, if circumstances differ substantially from
the assumptions used in marketing the final determination.
The following table sets forth an analysis of Home City's allowance for
loan losses for the periods indicated.
<TABLE>
<CAPTION>
For the year ended June 30,
---------------------------------
1996 1995 1994
----- ----- -----
(Dollars in thousands)
<S> <C> <C> <C>
Balance at beginning of period $ 319 $ 229 $ 198
Charge-offs (7) (19) (107)
Recoveries -- -- 25
Provision for loan losses (charged to operations) 50 109 113
----- ----- -----
Balance at end of period $ 362 $ 319 $ 229
===== ===== =====
Ratio of net charge-offs (recoveries) to average
net loans outstanding during the period 0.02 % 0.05 % 0.27 %
Ratio of allowance for loan losses to total loans 0.79 % 0.81 % 0.73 %
</TABLE>
For the year ended June 30, 1996, $250,000 of the allowance for loan
losses was allocated to loans secured by nonresidential real estate and $162,000
was allocated to loans secured by one- to four-family real estate. The allowance
was unallocated for the years ended June 30, 1995 and 1994.
MORTGAGE-BACKED SECURITIES
Home City maintains a portfolio of mortgage-backed securities in the
form of FHLMC and GNMA participation certificates, as well as two
mortgage-backed securities not issued by government agencies. Mortgage-backed
securities generally entitle Home City to receive a portion of the cash flows
from an identified pool of mortgages. FHLMC and GNMA securities are each
guaranteed by their respective agencies as to principal and interest.
The FHLMC is a corporation chartered by the U.S. Government and
guarantees the timely payment of interest and the ultimate return of principal
on participation certificates. Although FHLMC securities are not backed by the
full faith and credit of the U.S. Government, these securities are generally
considered among the highest quality investments with minimal credit risk. GNMA
is a government agency. GNMA securities are backed by Federal Housing Authority
insured and Veterans Administration guaranteed loans. The timely payment of
principal and interest on GNMA securities is guaranteed by GNMA and backed by
the full faith and credit of the U.S. Government.
The following table sets forth the value of Home City's mortgage-backed
securities at the dates indicated.
<TABLE>
<CAPTION>
At June 30,
-------------------------------
1996 1995
------ --------------------
Fair Amortized Fair
Value Cost Value
------ --------- -----
(In thousands)
<S> <C> <C> <C>
GNMA certificates $2,946 $3,635 $3,567
FHLMC certificates 29 32 36
------ ------ ------
Total mortgage-backed securities $2,975 $3,667 $3,603
====== ====== ======
</TABLE>
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<PAGE> 49
The following table sets forth information regarding scheduled
maturities, amortized costs, market value and weighted average yields of Home
City's mortgage-backed securities at June 30, 1996. Expected maturities will
differ from contractual maturities due to scheduled repayments and because
borrowers may have the right to call or prepay obligations with or without
prepayment penalties. The following table does not take into consideration the
effects of scheduled repayments or the effects of possible prepayments.
<TABLE>
<CAPTION>
At June 30, 1996
--------------------------------------------------------------------------------------------------------------
One year After one to After five to After ten Total mortgage-backed
or less five years ten years years portfolio
----------------- ----------------- ------------------ ------------------- ----------------------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Market Average
value yield value yield value yield value yield value value yield
-------- ------- -------- ------- -------- ------- -------- ------- -------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GNMA certificates $-- --% $-- --% $904 7.51% $2,042 7.67% $2,946 $2,946 7.62%
FHLMC certificates -- -- -- -- -- -- 29 10.35 29 29 10.35
--- -- --- -- ---- ---- ------ ----- ------ ------ -----
Total $-- --% $-- --% $904 7.51% $2,071 7.70% $2,975 $2,975 7.64%
=== == === == ==== ==== ====== ===== ====== ====== =====
</TABLE>
For additional information, see Note C of the Notes to Financial Statements.
-43-
<PAGE> 50
INVESTMENT ACTIVITIES
OTS regulations require that Home City maintain a minimum amount of
liquid assets, which may be invested in U. S. Treasury obligations, securities
of various federal agencies, certificates of deposit at insured banks, bankers'
acceptances and federal funds. Home City is also permitted to make investments
in certain commercial paper, corporate debt securities rated in one of the four
highest rating categories by one or more nationally recognized statistical
rating organizations, and mutual funds, as well as other investments permitted
by federal regulations. See "REGULATION" and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF HOME CITY."
The following table sets forth information concerning Home City's
investments at the dates indicated:
<TABLE>
<CAPTION>
At June 30,
---------------------------------------------------------------------------------------------------
1996 1995 1994
-------------------------------- -------------------------------- --------------------------------
Carrying % of Market % of Carrying % of Market % of Carrying % of Market % of
value Total value Total value Total value Total value Total value Total
-------- ------ ------ ----- -------- ----- ------ ----- -------- ----- ------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing demand
deposits in other $ 588 12.70% $ 588 12.72% $ 307 6.65% $ 307 6.64% $ 77 2.42% $ 77 2.42%
financial institutions
Federal funds sold 400 8.64 400 8.65 1,500 32.50 1,500 32.45 450 14.12 450 14.15
Time deposits in other
financial institutions 1,061 22.91 1,053 22.78 360 7.80 360 7.79 -- -- -- --
Investment securities:
U.S. government and
federal agency 997 21.53 997 21.57 1,496 32.42 1,496 32.36 2,098 65.83 2,092 65.77
securities
Municipal securities (1) 883 19.07 883 19.10 405 8.78 413 8.93 -- -- -- --
Equity securities 270 5.83 270 5.84 221 4.79 221 4.78 273 8.57 273 8.58
Investment in joint 18 0.39 18 0.39 18 0.39 18 0.39 18 0.56 18 0.57
venture (2)
Service corporation (3) 20 0.43 20 0.43 20 0.43 20 0.43 23 0.72 23 0.72
FHLB stock 394 8.51 394 8.52 288 6.24 288 6.23 248 7.78 248 7.80
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total investments $4,631 100.00% $4,623 100.00% $4,615 100.00% $4,623 100.00% $3,187 100.00% $3,181 100.00%
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
- ------------
(1) Bonds issued by local school districts.
(2) Home City has a 50% ownership interest in a joint venture that is
primarily involved in the development of low income housing.
(3) Home City owns 100% of Homciti Service Corp., whose assets consist of
common shares of Intrieve, a data service provider, and a 0.875%
interest in a joint venture which owns The Springfield Inn, a hotel in
Springfield, Ohio.
-44-
<PAGE> 51
The following tables set forth the contractual maturities, carrying
values, market values and average yields for Home City's investments at June 30,
1996.
<TABLE>
<CAPTION>
At June 30, 1996
--------------------------------------------------------------------
One year or less After one to five years After five years
------------------- ----------------------- -------------------
Carrying Average Carrying Average Carrying Average
value yield value yield value yield
-------- ------- -------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing demand deposits
in other financial institutions $ 588 5.10% $ -- --% $ -- --%
Federal funds sold 400 5.07 -- -- -- --
Time deposits in other financial
institutions 1,038 5.23 -- -- 23 1.25
Investment securities:
U.S. government and federal
agency securities -- -- 997 6.10% -- --
Municipal securities 134 5.04 568 5.36 181 5.36
Equity securities -- -- -- -- 270 1.44
Investment in joint venture -- -- -- -- 18 --
Service corporation -- -- -- -- 20 --
FHLB stock -- -- -- -- 394 6.43
------ ---- ------ ---- ---- ----
Total investments $2,160 5.15% $1,565 5.83% $906 4.90%
====== ==== ====== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
At June 30, 1996
--------------------------------------------------
Average Weighted
life Carrying Market average
in years value value yield
-------- -------- ------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Certificates of deposit in FHLB .33 $1,061 $1,053 4.57%
and other financial institutions
Investment securities:
U.S. government and federal
agency securities 2.11 997 997 --
FHLB and FHLMC stock -- 650 650 --
Municipal securities 3.52 883 883 5.31
------ ------
Total $3,591 $3,583
====== ======
</TABLE>
DEPOSITS AND BORROWINGS
GENERAL. Deposits have traditionally been the primary source of Home
City's funds for use in lending and other investment activities. In addition to
deposits, Home City derives funds from FHLB advances, interest payments and
principal repayments on loans and mortgage-backed securities, income on earning
assets, service charges and gains on the sale of assets. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF HOME
CITY." Loan payments are a relatively stable source of funds, while deposit
inflows and outflows fluctuate more in response to general interest rates and
money market conditions. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF HOME CITY - Analysis of Financial
Condition."
DEPOSITS. Deposits are attracted principally from within Home City's
primary market area through the offering of a broad selection of deposit
instruments, including NOW accounts, money market accounts, passbook savings
accounts and term certificate accounts. Home City also offers individual
retirement accounts ("IRA"), both in passbook and certificate
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<PAGE> 52
form. Interest rates paid, maturity terms, service fees and withdrawal penalties
for the various types of accounts are established periodically by the management
of Home City based on Home City's liquidity requirements, growth goals and
interest rates paid by competitors. Home City does not use brokers to attract
deposits.
At June 30, 1996, Home City's certificates of deposit totaled $37.0
million, or 78% of total deposits. Of such amount, approximately $5.7 million in
certificates of deposit mature within one year. Based on past experience and
Home City's prevailing pricing strategies, management believes that a
substantial percentage of such certificates will renew with Home City at
maturity. If there is a significant deviation from historical experience, Home
City can utilize borrowings from the FHLB as an alternative to this source of
funds.
The following table sets forth the dollar amount of deposits in the
various types of savings programs offered by Home City at the dates indicated:
<TABLE>
<CAPTION>
At June 30,
-----------------------------------------------------------------------------------
1996 1995 1994
----------------------- --------------------- ------------------------
Percent Percent Percent
of total of total of total
Amount deposits Amount deposits Amount deposits
------ -------- ------ -------- ------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Transaction accounts:
Demand $ 302 0.64% $ -- --% $ -- --%
NOW accounts(1) 395 0.84 -- -- -- --
Passbook savings accounts(2) 9,561 20.27 10,500 25.65 15,128 43.45
------- ------ ------- ------ ------- ------
Total transaction accounts 10,258 21.75 10,500 25.65 15,128 43.45
Certificates of deposit:
2.01 - 4.00% -- -- 600 1.47 5,873 16.87
4.01 - 6.00% 15,810 33.51 13,287 32.46 10,849 31.16
6.01 - 8.00% 21,106 44.74 16,549 40.42 2,966 8.52
Total certificates of deposit 36,916 78.25 30,436 74.35 19,688 56.55
------- ------ ------- ------ ------- ------
Total deposits(3) $47,174 100.00% $40,936 100.00% $34,816 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
- --------------------
(1) Home City's weighted average interest rate paid on NOW accounts
fluctuates with the general movement of interest rates. At June 30,
1996, the weighted average rate on NOW accounts was 1.41%.
(2) Home City's weighted average rate on passbook savings accounts
fluctuates with the general movement of interest rates. The weighted
average interest rate on passbook accounts was 2.52%, 2.97% and 3.41%
at June 30, 1996, 1995 and 1994, respectively.
(3) IRAs are included in the various certificates of deposit balances. IRAs
totaled $5.5 million, $4.4 million and $2.7 million as of June 30,
1996, 1995 and 1994.
-46-
<PAGE> 53
The following table shows rate and maturity information for Home City's
certificates of deposit as of June 30, 1996:
<TABLE>
<CAPTION>
Amount Due
--------------------------------------------------------------
Over Over
Up to 1 year to 2 years to Over
Rate one year 2 years 3 years 3 years Total
---- -------- --------- ---------- ------- -----
(In thousands)
<S> <C> <C> <C> <C> <C>
2.01 - 4.00% $ -- $ -- $ -- $ -- $ --
4.01 - 6.00 10,409 2,913 2,304 184 15,810
6.01 - 8.00 5,000 13,660 1,950 496 21,106
------- ------- ------ ---- -------
Total certificates
of deposit $15,409 $16,573 $4,254 $680 $36,916
======= ======= ====== ==== =======
</TABLE>
The following table presents the amount of Home City's certificates of
deposit of $100,000 or more by the time remaining until maturity as of June 30,
1996:
<TABLE>
<CAPTION>
Maturity Amount
-------- ------
(In thousands)
<S> <C>
Three months or less $1,244
Over 3 months to 6 months 782
Over 6 months to 12 months 661
Over 12 months 4,529
-------
Total $7,216
======
</TABLE>
The following table sets forth Home City's deposit account balance
activity for the periods indicated:
<TABLE>
<CAPTION>
Year ended June 30,
-------------------------------------
1996 1995 1994
------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Beginning balance $40,936 $ 34,816 $ 36,688
Deposits 42,110 24,327 15,447
Withdrawals (38,242) (20,052) (18,727)
------- -------- --------
Net increases (decreases) before
interest credited 3,868 4,275 (3,280)
Interest credited 2,370 1,845 1,408
------- -------- --------
Ending balance $47,174 $ 40,936 $ 34,816
======= ======== ========
Net increase (decrease) $ 6,238 $ 6,120 $ (1,872)
Percent increase (decrease) 15.24 % 17.58 % (5.10)%
</TABLE>
BORROWINGS. The FHLB System functions as a central reserve bank
providing credit for its member institutions and certain other financial
institutions. See "REGULATION - Federal Home Loan Banks." As a member in good
standing of the FHLB of Cincinnati, Home City is authorized to apply for
advances from the FHLB of Cincinnati, provided certain standards of
creditworthiness have been met. Under current regulations, an association must
meet certain qualifications to be eligible for FHLB advances. The extent to
which an association is eligible for such advances will depend upon whether it
meets the Qualified Thrift Lender Test (the "QTL Test"). See "REGULATION - OTS
Regulations -- Qualified Thrift Lender Test." If an association meets the QTL
Test, it will be eligible for 100% of the advances it would otherwise be
eligible to receive. If an
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<PAGE> 54
association does not meet the QTL Test, it will be eligible for such advances
only to the extent it holds specified QTL Test assets. At June 30, 1996, Home
City was in compliance with the QTL Test.
Home City obtained advances from the FHLB of Cincinnati as set forth in
the following table:
<TABLE>
<CAPTION>
June 30,
--------------------------------
1996 1995 1994
------ ------ -----
(Dollars in thousands)
<S> <C> <C> <C>
Average balance outstanding $2,582 $1,628 $ 435
Maximum amount outstanding at any month
during the period 3,564 2,715 457
Balance outstanding at end of period 2,903 2,618 424
Weighted average interest rate during the period 6.66% 6.57% 8.74%
Weighted average interest rate at end of period 6.49% 6.69% 5.91%
</TABLE>
COMPETITION
Home City competes for deposits with other savings associations,
commercial banks and credit unions and with the issuers of commercial paper and
other securities, such as shares in money market mutual funds. The primary
factors in competing for deposits are interest rates and convenience of office
location. In making loans, Home City competes with other savings associations,
commercial banks, consumer finance companies, credit unions, leasing companies,
mortgage companies and other lenders. Home City competes for loan originations
primarily through the interest rates and loan fees offered and through the
efficiency and quality of services provided. Competition is affected by, among
other things, the general availability of lendable funds, general and local
economic conditions, current interest rate levels and other factors which are
not readily predictable. Three savings associations, seven banks and seven
credit unions have offices in Clark County. At June 30, 1995, Home City had
approximately 3.22% of all financial institution deposits in Clark County.
The size of financial institutions competing with Home City is likely
to increase as a result of changes in statutes and regulations eliminating
various restrictions on interstate and inter-industry branching and
acquisitions. Such increased competition may have an adverse effect upon Home
City.
SUBSIDIARIES
Home City owns all of the outstanding shares of Homciti Service
Corporation, an Ohio corporation ("Homciti"). Homciti owns common stock in
Intrieve, a data processing company which serves Home City, and an .875%
ownership interest in a joint venture which owns the Springfield Inn, a local
hotel. At June 30, 1996, the aggregate value of the Intrieve stock and the joint
venture investment equaled approximately $38,000.
-48-
<PAGE> 55
PROPERTIES
The following table sets forth certain information at June 30, 1996,
regarding the ownership by Home City of the land and improvements at 63 West
Main Street, Springfield, Ohio, the office of Home City:
<TABLE>
<CAPTION>
Year Square Net
acquired footage book value(1)
-------- ------- ----------
<S> <C> <C>
1975 5,839 $367,000
</TABLE>
- -------------------
(1) At June 30, 1996, Home City's office premises and equipment had a total
net book value of $488,000. For additional information regarding Home
City's office premises and equipment, see Notes A and F of Notes to
Financial Statements.
PERSONNEL
As of June 30, 1996, Home City had 11 full-time employees and three
part-time employees. Home City believes that relations with its employees are
good. Home City offers health and life insurance benefits. None of the employees
of Home City are represented by a collective bargaining unit.
LEGAL PROCEEDINGS
Home City is not presently involved in any legal proceedings of a
material nature. From time to time, Home City is a party to legal proceedings
incidental to its business to enforce its security interest in collateral
pledged to secure loans made by Home City.
MANAGEMENT OF HCFC
The Board of Directors of HCFC consists of five members. Each of the
directors of Home City is also a director of HCFC. See "MANAGEMENT OF HOME CITY"
for information on each of such directors. The term of each of the directors
expires in 1997.
The following persons serve as the officers of HCFC:
Name Office
---- ------
Douglas L. Ulery President
P. Clark Engelmeier Chairman of the Board
Jo Ann Holdeman Secretary
Gary E. Brown Treasurer
MANAGEMENT OF HOME CITY
DIRECTORS AND EXECUTIVE OFFICERS
The Charter of Home City provides for a Board of Directors consisting
of not less than five nor more than 15 directors, such number to be fixed or
changed in the Bylaws or by the members. The Board of Directors currently
consists of five directors, divided into three classes. One class of directors
is elected each year. Each director serves for a three-year term. The Board of
Directors met 12 times during the fiscal year ended June 30, 1996, for regular
and special meetings. No director attended fewer than 75% of the aggregate of
such meetings and all meetings of the committees of which such director was a
member.
-49-
<PAGE> 56
The following table presents certain information with respect to the
present directors and executive officers of Home City:
<TABLE>
<CAPTION>
Name Age(1) Position with Home City Director since Term expires
- ---- --- ----------------------- -------------- ------------
<S> <C> <C> <C> <C>
John D. Conroy 46 Director 1988 1998
P. Clark Engelmeier 65 Director, Chairman of the Board 1977 1997
James Foreman 56 Director 1995 1997
Terry A. Hoppes 47 Director 1994 1999
Douglas L. Ulery 49 Director, President, CEO 1993 1999
Gary E. Brown 56 Vice President and Treasurer N/A N/A
JoAnn Holdeman 40 Vice President and Secretary N/A N/A
</TABLE>
- ------------------------------
(1) At November 1, 1996.
Since 1971, Mr. Conroy has been the owner and President of Conroy
Funeral Home, Inc., in Springfield, Ohio. Mr. Conroy is a licensed funeral
director and embalmer. From January 1995 to March 1996, Mr. Conroy was the
Secretary of Home City.
Mr. Engelmeier has been a self-employed life insurance agent and
securities broker during the past 40 years and is a Chartered Life Underwriter.
Mr. Engelmeier retired from the U.S. Army in 1991 as a lieutenant colonel.
Mr. Foreman has been the President, Chief Executive Officer and owner
of Jim Foreman Pontiac-Nissan and the President and owner of SKDP Insurance
Agency for the past 26 years. Mr. Foreman is a member of the Board of Directors
of the Springfield Chamber of Commerce. Mr. Foreman served as Vice President of
Home City from 1995 to March 1996.
Mr. Hoppes is a professional engineer and surveyor and has been the
owner and the President of Hoppes Engineering and Surveying Company since 1977
and the President of Hoppes Builders and Development Company since 1981. From
January 1995 to March 1996, Mr. Hoppes was the Treasurer of Home City.
Mr. Ulery has been the President and the Chief Executive Officer of
Home City since 1992 and a director of Home City since 1994. From 1985 until
joining Home City, Mr. Ulery was the Vice President of Regional Banking Offices
Operation with Society Corporation.
Mr. Brown has been employed at Home City since October 1995, as
Assistant Vice President from October 1995 to March 1996 and as Vice President
and Treasurer since March 1996. During the five years prior to joining Home
City, Mr. Brown was employed as an Assistant Vice President at Huntington Bank.
Ms. Holdeman has been employed at Home City since 1986. Ms. Holdeman
served as Assistant Vice President and Assistant Secretary from 1992 to March
1996 and has served as Vice President and Secretary since March 1996.
COMMITTEES OF DIRECTORS
Neither Home City nor HCFC maintains an audit, nominating or
compensation committee.
COMPENSATION
Each director of Home City receives a retainer fee of $1,000 per month
for service as a director of Home City. In addition, the Chairman of the Board
of Directors receives an additional fee of $150 per month. Edgar Witten, a
Director Emeritus, receives a fee of $200 per month.
Four of Home City's directors participate in a deferred compensation
plan whereby payment of part or all of such their directors' fees is deferred.
Home City records the deferred fees as expenses and in a liability account.
Interest is periodically credited on each account. Each director is fully vested
in his account, and the balance is payable upon termination of directorship
prior to death or retirement. Home City has provided for the contingent
liability created by the deferred
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<PAGE> 57
compensation plan by purchasing a single-premium universal life insurance policy
on each director. Upon retirement or death, a director or his estate will
receive the benefits payable pursuant to the policy on his life.
The following table presents certain information regarding the cash
compensation received by the President and Chief Executive Officer of Home City.
No other executive officer of Home City received compensation exceeding $100,000
during the fiscal year ended June 30, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
Annual Compensation
---------------------------------
Name and Principal Fiscal Year All Other
Position ended June 30 Salary ($)(1) Bonus ($) Compensation(2)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Douglas L. Ulery 1996 $100,000 $30,000 $3,338
President and Chief
Executive Officer
-------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------
(1) Includes directors' fees of $12,000. Does not include amounts
attributable to other miscellaneous benefits received by executive
officers. The cost to Home City of providing such benefits to Mr. Ulery
was less than 10% of his cash compensation.
(2) Consists of Home City's contribution to Mr. Ulery's 401(k) defined
contribution plan account.
EMPLOYEE STOCK OWNERSHIP PLAN
HCFC has established the ESOP for the benefit of employees of HCFC and
Home City age 21 or older who have completed at least one year of full-time
service with HCFC or Home City. The establishment of the ESOP and the purchase
by the ESOP of the Common Shares of HCFC are subject to the receipt of a
favorable determination letter on the qualified status of the ESOP under
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), from the Commissioner of Internal Revenue ("Commissioner"). HCFC will
submit to the Commissioner an application for a favorable determination letter
on the qualified status of the ESOP. Although no assurances can be given, HCFC
expects that the ESOP will receive a favorable determination letter from the
Commissioner.
HCFC intends to accept a promissory note from the ESOP in payment for
8% of the Common Shares sold in connection with the Conversion. The loan will be
secured by the shares purchased with the loan proceeds and will be repaid by the
ESOP over a period of seven years with funds from Home City's discretionary
contributions to the ESOP and earnings on ESOP assets. Shares purchased with
such loan proceeds will be held in a suspense account for allocation among
participants as the loan is repaid. As payments are made and the shares are
released from the suspense account, such shares will be validly issued, fully
paid and non-assessable.
Contributions to the ESOP and shares released from the suspense account
will be allocated pro rata to participants on the basis of compensation. Except
for participants who retire, become disabled or die during the plan year, all
other participants must have completed at least 1,000 hours of service and be
employed on the last day of the plan year in order to receive an allocation.
Benefits become vested at a rate of 20% per year commencing after three years of
service and are fully vested after seven years of service. Vesting will be
accelerated upon retirement at or after age 65, death, disability or termination
of the ESOP. Forfeitures will be reallocated among remaining participating
employees. Benefits may be paid either in HCFC Common Shares or in cash.
Benefits may be payable upon retirement, death, disability or separation from
service. Benefits payable under the ESOP cannot be estimated.
A committee appointed by the Board of Directors of HCFC will administer
the ESOP. The Common Shares and other ESOP funds will be held and invested by a
trustee (the "ESOP Trustee"). The ESOP Committee may instruct the ESOP Trustee
regarding investments of funds contributed to the ESOP. The ESOP Trustee must
vote all allocated shares held in the ESOP in accordance with the instructions
of the participating employees. Shares for which employees do not give
instructions and unallocated shares will be voted by the ESOP Trustee in its
sole discretion.
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From time to time, the ESOP may purchase additional Common Shares of
HCFC through purchases in the market or directly from HCFC. No such purchases
are currently contemplated. If the ESOP purchases newly issued shares from HCFC,
such purchases would have a dilutive effect on the interests of HCFC's
shareholders.
STOCK OPTION PLAN
The Board of Directors of HCFC expects to adopt the Stock Option Plan,
subject to the approval by the shareholders of HCFC. A number of Common Shares
equal to 10% of the Common Shares to be issued in connection with the Conversion
is expected to be reserved for issuance by HCFC upon the exercise of options to
be granted to certain directors, officers and employees of Home City and HCFC
from time to time under the Stock Option Plan. The purposes of the Stock Option
Plan include retaining and providing incentives to the directors, officers and
employees of HCFC and Home City by facilitating their purchase of a stock
interest in HCFC.
Options granted to the officers and employees under the Stock Option
Plan may be "incentive stock options" within the meaning of Section 422 of the
Code (an "ISO"). Options granted under the Stock Option Plan to directors who
are not full-time employees of HCFC or Home City will not qualify under the Code
and thus will not be incentive stock options ("non-qualified stock options").
Although any eligible director, officer or employee of Home City and HCFC may
receive non-qualified stock options, Home City anticipates that the non-employee
directors of Home City and HCFC will receive non-qualified stock options, and
other eligible participants will receive incentive stock options.
The option exercise price of each option granted under the Stock Option
Plan will be determined at the time of grant by a committee of at least three
directors appointed to administer the Stock Option Plan (the "Committee"),
subject to the requirement that the exercise price for an option must not be
less than 100% of the fair market value of the shares on the date of the grant.
No stock option will be exercisable after the expiration of ten years from the
date that it is granted, except that in the case of an ISO granted to an
employee who owns more than 10% of HCFC's outstanding Common Shares at the time
an ISO is granted under the Stock Option Plan, the exercise price of such an ISO
may not be less than 110% of the fair market value of the shares on the date of
the grant, and the ISO shall not be exercisable after the expiration of five
years from the date it is granted.
An option recipient cannot transfer or assign an option other than by
will or in accordance with the laws of descent and distribution. "Termination
for cause," as defined in the Stock Option Plan, will result in the annulment of
any outstanding options.
HCFC will receive no monetary consideration for the granting of options
under the Stock Option Plan. Upon the exercise of options, HCFC will receive
payment of cash, HCFC Common Shares or a combination of cash and Common Shares
from option recipients in exchange for shares issued.
The Committee may grant options under the Stock Option Plan at such
times as the committee members deem most beneficial to Home City and HCFC on the
basis of the individual participant's position, duties and responsibilities, the
value of his or her services to Home City and HCFC and any other factors deemed
relevant. A grant of options under the Stock Option Plan is expected to occur on
the date of approval of the Stock Option Plan by the shareholders of HCFC. The
members of the Committee have not yet been appointed and no specific grants have
been proposed. The directors of HCFC intend, however, to make such grants in
accordance with OTS regulations which provide that no individual may receive
options to purchase more than 25% of the shares which may be the subject of
options pursuant to the Stock Option Plan, and directors who are not employees
of HCFC or Home City may not receive options to purchase more than 5% of such
shares individually or 30% in the aggregate.
Pursuant to OTS regulations, the Stock Option Plan may not be approved
by the shareholders of HCFC until at least six months after the Conversion is
completed. It is expected that options will be granted immediately after the
shareholders approve the Stock Option Plan.
RECOGNITION AND RETENTION PLAN AND TRUST
The Board of Directors of Home City intends to adopt the RRP, subject
to approval of the shareholders of HCFC, as a means of providing directors and
certain key employees of Home City with an ownership interest in HCFC in a
manner designed to compensate such directors and key employees for services to
Home City. Home City expects to contribute sufficient funds to enable the RRP to
purchase Common Shares in the open market or to purchase authorized but unissued
shares from HCFC in an
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amount equal to up to 4% of the Common Shares sold in connection with the
Conversion. Assuming the sale of 720,000 shares in connection with the
Conversion, 28,800 shares would be purchased by the RRP. The purchase of
authorized but unissued shares would have a dilutive effect on the interests of
HCFC's shareholders. See "CAPITALIZATION" and "PRO FORMA DATA." While no
specific awards have yet been proposed, the directors of Home City intend to
make such awards in accordance with OTS regulations, which provide that no
individual may receive more than 25% of the shares awarded pursuant to the RRP,
and directors who are not employees of HCFC or Home City may not receive more
than 5% of such shares individually or 30% in the aggregate.
Until shares awarded are earned by the participant, such shares will be
forfeited in the event that the employment of the employee is terminated for
cause. One-fifth of such shares will be earned and nonforfeitable on each of the
first five anniversaries of the date of the awards. In the event of the death or
disability of a participant, however, the participant's shares will be deemed to
be earned and nonforfeitable upon such date. A committee to be appointed by the
Board of Directors of Home City will administer the RRP and determine the number
of shares to be awarded to eligible participants. Two directors of Home City are
expected to serve as the trustees of the RRP Trust. Each participant will be
entitled to the benefit of any dividends or other distributions paid on shares
awarded but not yet earned, but such unearned shares will be voted by the
trustees in their discretion. Compensation expense in the amount of the fair
market value of the Common Shares at the date of the award to the employee will
be recognized as the shares are earned. In the event of a termination of a
participant's employment following a change in control of Home City or HCFC, all
shares awarded to such participant in the RRP become earned and nonforfeitable.
The RRP must be approved by the shareholders of HCFC. Pursuant to OTS
regulations, the shareholders may not approve the RRP until six months after the
completion of the Conversion. It is expected that the RRP will purchase shares
of HCFC and that awards will be made immediately after shareholder approval of
the RRP.
EMPLOYMENT AGREEMENT
Home City intends to enter into an employment agreement with Douglas L.
Ulery (the "Employment Agreement"). Home City currently has no employment
agreements with any of its officers. The Employment Agreement, which will become
effective upon completion of the Conversion, provides for a term of three years
and a salary and performance review by the Board of Directors not less often
than annually, as well as inclusion of the employee in any formally established
employee benefit, bonus, pension and profit-sharing plans for which senior
management personnel are eligible. The Employment Agreement also provides for
vacation and sick leave.
The Employment Agreement is terminable by Home City at any time. In the
event of termination by Home City for "just cause," as defined in the Employment
Agreement, Mr. Ulery will have no right to receive any compensation or other
benefits for any period after such termination. In the event of termination by
Home City other than for just cause, at the end of the term of the Employment
Agreement or in connection with a "change of control," as defined in the
Employment Agreement, Mr. Ulery will be entitled to a continuation of salary
payments for a period of time equal to the term of the Employment Agreement and
a continuation of benefits substantially equal to those being provided at the
date of termination of employment until the earliest to occur of the end of the
term of the Employment Agreement or the date the employee becomes employed
full-time by another employer.
The Employment Agreement also contains provisions with respect to the
occurrence within one year of a "change of control" of (1) the termination of
employment of Mr. Ulery for any reason other than just cause, retirement or
termination at the end of the term of the agreement, (2) a change in the
capacity or circumstances in which he is employed or (3) a material reduction in
his responsibilities, authority, compensation or other benefits provided under
the Employment Agreement without his written consent. In the event of any such
occurrence, Mr. Ulery will be entitled to payment of an amount equal to (a) the
amount of compensation to which he would be entitled for the remainder of the
term of the Employment Agreement, plus (b) the difference between (i) three
times his average annual compensation for the three taxable years immediately
preceding the termination of employment, less (ii) the amount paid to Mr. Ulery
as compensation for the remainder of the employment term. In addition, Mr. Ulery
would be entitled to continued coverage under all benefit plans until the
earliest of the end of the term of the Employment Agreement or the date on which
he is included in another employer's benefit plans as a full-time employee. The
maximum he may receive, however, is limited to an amount which will not result
in the imposition of a penalty tax pursuant to Section 280G(b)(3) of the Code or
exceed limitations imposed by the OTS. "Control," as defined in the Employment
Agreement, generally refers to the acquisition by any person or entity of the
ownership or power to vote 10% or more of the voting stock of Home City or HCFC,
the control of the election of a majority of Home City's or HCFC's directors or
the exercise of a controlling influence over the management or policies of Home
City or HCFC.
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The aggregate payment that would have been made to Mr. Ulery assuming
his termination at June 30, 1996, following a change of control, would have been
approximately $264,000.
CERTAIN TRANSACTIONS WITH HOME CITY
In accordance with OTS regulations, Home City makes loans to executive
officers and directors of Home City in the ordinary course of business and on
the same terms and conditions, including interest rates and collateral, as those
of comparable loans to other persons. All outstanding loans to executive
officers and directors were made pursuant to such policy, do not involve more
than the normal risk of collectibility or present other unfavorable features and
are current in their payments. Loans to all directors and executive officers of
Home City and their immediate family members totaled $822,000 at June 30, 1996,
which would equal less than eight percent of HCFC's shareholder's equity
assuming completion of the Conversion at the mid-point of the Valuation Range.
PROXY HOLDERS
When a deposit account is established at Home City, a general proxy is
typically obtained from the depositor, authorizing the Board of Directors to
cast all votes which the depositor is entitled to cast on all matters to be
submitted to a vote of Home City's members. In the past, the proxyholders
appointed by the Board of Directors have been able to elect all members of the
Board of Directors and otherwise control the affairs of Home City. After the
Conversion, only HCFC, as the sole shareholder of Home City, will be entitled to
vote on matters requiring approval by the shareholders of Home City.
REGULATION
GENERAL
As a savings association organized under the laws of the United States,
Home City is subject to regulatory oversight by the OTS. Because Home City's
deposits are insured by the FDIC, Home City is also subject to examination and
regulation by the FDIC. Home City must file periodic reports with the OTS
concerning its activities and financial condition. Examinations are conducted
periodically by the OTS to determine whether Home City is in compliance with
various regulatory requirements and is operating in a safe and sound manner.
Home City is a member of the FHLB of Cincinnati.
HCFC also will be subject to regulation, examination and oversight by
the OTS as the holding company of Home City and will be required to submit
periodic reports to the OTS.
Legislation to recapitalize the SAIF became effective September 30,
1996. See "FDIC Regulations -- Assessments." In connection with such
legislation, Home City may be regulated under federal law in the same fashion as
banks. As a result, Home City may become subject to additional regulation,
examination and oversight by the FDIC. In addition, HCFC might become a bank
holding company, subject to examination, regulation and oversight by the Board
of Governors of the Federal Reserve ("FRB"), including greater activity and
capital requirements than imposed on it by the OTS.
OTS REGULATIONS
GENERAL. The OTS is an office in the Department of the Treasury and is
responsible for the regulation and supervision of all savings associations the
deposits of which are insured by the FDIC in the SAIF and all federally
chartered savings institutions. The OTS issues regulations governing the
operation of savings associations, regularly examines such institutions and
imposes assessments on savings associations based on their asset size to cover
the costs of this supervision and examination. It also promulgates regulations
that prescribe the permissible investments and activities of federally chartered
savings associations, including the type of lending that such associations may
engage in and the investments in real estate, subsidiaries and securities they
may make. The OTS also may initiate enforcement actions against savings
associations and certain persons affiliated with them for violations of laws or
regulations or for engaging in unsafe or unsound practices. If the grounds
provided by law exist, the OTS may appoint a conservator or receiver for a
savings association.
Federally chartered savings associations are subject to regulatory
oversight by the OTS under various consumer protection and fair lending laws.
These laws govern, among other things, truth-in-lending disclosure, equal credit
opportunity, fair credit reporting and community reinvestment. Failure to abide
by federal laws and regulations governing community reinvestment could limit the
ability of an association to open a new branch or engage in a merger
transaction. Community
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reinvestment regulations evaluate how well and to what extent an institution
lends and invests in its designated service area, with particular emphasis on
low-to-moderate income areas and borrowers. Home City has received a
"Satisfactory" examination rating under those regulations.
REGULATORY CAPITAL REQUIREMENTS. Home City is required by OTS
regulations to meet certain minimum capital requirements. These requirements
call for tangible capital of 1.5% of adjusted total assets, core capital (which
for Home City is equal to tangible capital) of 3% of adjusted total assets, and
risk-based capital (which for Home City consists of core capital and general
valuation allowances) equal to 8% of risk-weighted assets. Assets and certain
off balance sheet items are weighted at percentage levels ranging from 0% to
100% depending on their relative risk.
The OTS has proposed to amend the core capital requirement so that
those associations that do not have the highest examination rating and exceed an
acceptable level of risk will be required to maintain core capital of from 4% to
5%, depending on Home City's examination rating and overall risk. Home City does
not anticipate that it will be adversely affected if the core capital
requirement regulation is amended as proposed. Home City's core capital ratio at
June 30, 1996, was 9.48% and will increase to 13.45% on a pro forma basis at
June 30, 1996, assuming the receipt of approximately $3.4 million in net
proceeds from the sale of the Common Shares at the mid-point of the Valuation
Range and the investment of 50% of the net proceeds by HCFC in Home City. For
information concerning Home City's capital, see "REGULATORY CAPITAL COMPLIANCE."
The OTS has adopted an interest rate risk component to the risk-based
capital requirement, though the implementation of that component has been
delayed. Pursuant to that requirement, a savings association would have to
measure the effect of an immediate 200 basis point change in interest rates on
the value of its portfolio as determined under the methodology of the OTS. If
the measured interest rate risk is above the level deemed normal under the
regulation, Home City will be required to deduct one-half of such excess
exposure from its total capital when determining its risk-based capital. In
general, an association with less than $300 million in assets and a risk-based
capital ratio in excess of 12% will not be subject to the interest rate risk
component, and Home City currently qualifies for such exemption. Pending
implementation of the interest rate risk component, the OTS has the authority to
impose a higher individualized capital requirement on any savings association it
deems to have excess interest rate risk. The OTS also may adjust the risk-based
capital requirement on an individualized basis to take into account risks due to
concentrations of credit and non-traditional activities.
The OTS has adopted regulations governing prompt corrective action to
resolve the problems of capital deficient and otherwise troubled savings
associations. At each successively lower capital category, an institution is
subject to more restrictive and numerous mandatory or discretionary regulatory
actions or limits, and the OTS has less flexibility in determining how to
resolve the problems of the institution. In addition, the OTS can downgrade an
association's designation notwithstanding its capital level, based on less than
satisfactory examination ratings in areas other than capital or, after notice
and an opportunity for hearing, if the institution is deemed to be in an unsafe
or unsound condition or to be engaging in an unsafe or unsound practice. Each
undercapitalized association must submit a capital restoration plan to the OTS
within 45 days after it becomes undercapitalized. Such institution will be
subject to increased monitoring and asset growth restrictions and will be
required to obtain prior approval for acquisitions, branching and engaging in
new lines of business. A critically undercapitalized institution must be placed
in conservatorship or receivership within 90 days after reaching such
capitalization level, except under limited circumstances. Home City's capital at
June 30, 1996, meets the standards for a well-capitalized association.
Federal law prohibits an insured institution from making a capital
distribution to anyone or paying management fees to any person having control of
the institution if, after such distribution or payment, the institution would be
undercapitalized. In addition, each company controlling an undercapitalized
institution must guarantee that the institution will comply with the terms of an
OTS-approved capital plan until the institution has been adequately capitalized
on an average during each of four consecutive calendar quarters and must provide
adequate assurances of performance. The aggregate liability pursuant to such
guarantee is limited to the lesser of (a) an amount equal to 5% of the
institution's total assets at the time the institution became undercapitalized
or (b) the amount which is necessary to bring the institution into compliance
with all capital standards applicable to such institution at the time the
institution fails to comply with its capital restoration plan.
LIMITATIONS ON CAPITAL DISTRIBUTIONS. The OTS imposes various
restrictions or requirements on the ability of associations to make capital
distributions according to ratings of associations based on their capital level
and supervisory condition. Capital distributions, for purposes of such
regulation, include, without limitation, payments of cash dividends, repurchases
and certain other acquisitions by an association of its shares and payments to
stockholders of another association in an acquisition of such other association.
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The first rating category is Tier 1, consisting of associations that,
before and after the proposed capital distribution, meet their fully phased-in
capital requirement. Associations in this category may make capital
distributions during any calendar year equal to the greater of 100% of its net
income, current year-to-date, plus 50% of the amount by which the lesser of Home
City's tangible, core or risk-based capital exceeds its fully phased-in capital
requirement for such capital component, as measured at the beginning of the
calendar year, or the amount authorized for a Tier 2 association. The second
category, Tier 2, consists of associations that, before and after the proposed
capital distribution, meet their current minimum, but not fully phased-in
capital requirement. Associations in this category may make capital
distributions up to 75% of their net income over the most recent four quarters.
Tier 3 associations do not meet their current minimum capital requirement and
must obtain OTS approval of any capital distribution. A Tier 1 association
deemed to be in need of more than normal supervision by the OTS may be treated
as a Tier 2 or a Tier 3 association.
Home City meets the requirements for a Tier 1 association and has not
been notified of any need for more than normal supervision. As a subsidiary of
HCFC, Home City will also be required to give the OTS 30 days' notice prior to
declaring any dividend on its common shares. The OTS may object to the dividend
during that 30-day period based on safety and soundness concerns. Moreover, the
OTS may prohibit any capital distribution otherwise permitted by regulation if
the OTS determines that such distribution would constitute an unsafe or unsound
practice.
In December 1994, the OTS issued a proposal to amend the capital
distribution limits. Under that proposal, an association not owned by a holding
company and having a CAMEL examination rating of 1 or 2 could make a capital
distribution without notice to the OTS, if it remains adequately capitalized, as
described above, after the distribution is made. Any other association seeking
to make a capital distribution that would not cause Home City to fall below the
capital levels to qualify as adequately capitalized or better would have to
provide notice to the OTS. Except under limited circumstances and with OTS
approval, no capital distribution would be permitted if it would cause Home City
to become undercapitalized or worse.
LIQUIDITY. OTS regulations require that each savings association
maintain an average daily balance of liquid assets (cash, certain time deposits,
bankers' acceptances and specified United States government, state or federal
agency obligations) equal to a monthly average of not less than 5% of its net
withdrawable savings deposits plus borrowings payable in one year or less.
Federal regulations also require each member institution to maintain an average
daily balance of short-term liquid assets of 1% of the total of its net
withdrawable savings accounts and borrowings payable in one year or less.
Monetary penalties may be imposed upon member institutions failing to meet these
liquidity requirements. The eligible liquidity of Home City, as computed under
current regulations, at June 30, 1996, was approximately $4.0 million, or 8.5%,
and exceeded the then applicable 5% liquidity requirement by approximately $1.6
million, or 3.5%.
QUALIFIED THRIFT LENDER TEST. Savings associations are required to
maintain a specified level of investments in assets that are designated as
qualifying thrift investments. Such investments are generally related to
domestic residential real estate and manufactured housing and include stock
issued by any FHLB, the FHLMC or the FNMA. The QTL test requires that 65% of an
institution's "portfolio assets" (total assets less goodwill and other
intangibles, property used to conduct business and 20% of liquid assets) consist
of qualified thrift investments on a monthly average basis in 9 out of every 12
months. The OTS may grant exceptions to the QTL test under certain
circumstances. If a savings association fails to meet the QTL Test, Home City
and its holding company will be subject to certain operating restrictions. A
savings association that fails to meet the QTL Test will not be eligible for
FHLB advances to the fullest possible extent. See "Federal Home Loan Banks." At
June 30, 1996, Home City had QTL investments equal to approximately 78.3% of its
total portfolio assets.
LENDING LIMIT. OTS regulations generally limit the aggregate amount
that a savings association can lend to one borrower to an amount equal to 15% of
Home City's total capital under the regulatory capital requirements plus any
additional loan reserve not included in total capital. A savings association may
loan to one borrower an additional amount not to exceed 10% of total capital
plus additional reserves if the additional loan amount is fully secured by
certain forms of "readily marketable collateral." Real estate is not considered
"readily marketable collateral." Certain types of loans are not subject to these
limits. In applying these limits, loans to certain borrowers may be aggregated.
Based on such limits, Home City is able to lend up to $834,000 to one borrower.
Notwithstanding the specified limits, an association may lend to one borrower up
to $500,000 "for any purpose." See "THE BUSINESS OF HOME CITY - Lending
Activities -- Loan Originations, Purchases and Sales."
TRANSACTIONS WITH INSIDERS AND AFFILIATES. Loans to executive officers,
directors and principal shareholders and their related interests must conform to
the lending limits on loans to one borrower and the total of such loans cannot
exceed Home City's total regulatory capital plus additional loan reserves (or
200% of such capital amount for qualifying institutions with less than $100
million in assets). Most loans to directors, executive officers and principal
shareholders must be approved in advance by a majority of the "disinterested"
members of the board of directors of Home City with any "interested" director
not
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participating. All loans to directors, executive officers and principal
shareholders must be made on terms substantially the same as offered in
comparable transactions to the general public. Loans to executive officers are
subject to additional limitations. Home City was in compliance with such
restrictions at June 30, 1996. See "MANAGEMENT OF HOME CITY - Certain
Transactions with Home City."
Savings associations must comply with Sections 23A and 23B of the
Federal Reserve Act (the "FRA") pertaining to transactions with affiliates. An
affiliate of a savings association is any company or entity that controls, is
controlled by or is under common control with the savings association. After the
Conversion, HCFC will be an affiliate of Home City. Generally, Sections 23A and
23B of the FRA (i) limit the extent to which the savings institution or its
subsidiaries may engage in "covered transactions" with any one affiliate to an
amount equal to 10% of such institution's capital stock and surplus, (ii) limit
the aggregate of all such transactions with all affiliates to an amount equal to
20% of such capital stock and surplus, and (iii) require that all such
transactions be on terms substantially the same, or at least as favorable to the
institution, as those provided in transactions with a non-affiliate. The term
"covered transaction" includes the making of loans, purchase of assets, issuance
of a guarantee and other similar types of transactions. In addition to the
limits in Sections 23A and 23B, a savings association may not make any loan or
other extension of credit to an affiliate unless the affiliate is engaged only
in activities permissible for a bank holding company and may not purchase or
invest in securities of any affiliate except shares of a subsidiary. Home City
was in compliance with these requirements and restrictions at June 30, 1996.
HOLDING COMPANY REGULATION. Upon consummation of the Conversion, HCFC
will be a savings and loan holding company within the meaning of the Home
Owners' Loan Act (the "HOLA"). As such, HCFC will register with the OTS and will
be subject to OTS regulations, examination, supervision and reporting
requirements, in addition to the reporting requirements of the Securities and
Exchange Commission (the "SEC"). Congress is considering legislation which may
require that HCFC become a bank holding company regulated by the FRB. Bank
holding companies with more than $150 million in assets are subject to capital
requirements similar to those imposed on Home City and have more extensive
interstate acquisition authority than savings and loan holding companies. They
are also subject to more restrictive activity and investment limits than savings
and loan holding companies. No assurances can be given that such legislation
will be enacted, and HCFC cannot be certain of the legislation's impact on its
future operations until it is enacted.
The HOLA generally prohibits a savings and loan holding company from
controlling any other savings association or savings and loan holding company
without prior approval of the OTS, or from acquiring or retaining more than 5%
of the voting shares of a savings association or holding company thereof which
is not a subsidiary. Under certain circumstances, a savings and loan holding
company is permitted to acquire, with the approval of the OTS, up to 15% of the
previously unissued voting shares of an undercapitalized savings association for
cash without such savings association being deemed to be controlled by the
holding company. Except with the prior approval of the OTS, no director or
officer of a savings and loan holding company or person owning or controlling by
proxy or otherwise more than 25% of such company's stock may also acquire
control of any savings institution, other than a subsidiary institution, or any
other savings and loan holding company.
The Board of Directors presently intends to operate HCFC as a unitary
savings and loan holding company. There are generally no restrictions on the
activities of a unitary savings and loan holding company, and such companies are
the only financial institution holding companies which may engage in commercial,
securities and insurance activities without limitation. Congress is considering,
however, either limiting unitary savings and loan holding companies to the same
activities as other financial institution holding companies or permitting
certain bank holding companies to engage in commercial activities and expanded
securities and insurance activities. HCFC cannot predict if and in what form
these proposals might become law. The broad latitude to engage in activities
under current law can be restricted, however, if the OTS determines that there
is reasonable cause to believe that the continuation by a savings and loan
holding company of an activity constitutes a serious risk to the financial
safety, soundness or stability of its subsidiary savings association. The OTS
may impose such restrictions as deemed necessary to address such risk, including
limiting (i) payment of dividends by the savings association, (ii) transactions
between the savings association and its affiliates, and (iii) any activities of
the savings association that might create a serious risk that the liabilities of
the holding company and its affiliates may be imposed on the savings
association. Notwithstanding the foregoing rules as to permissible business
activities of a unitary savings and loan holding company, if the savings
association subsidiary of a holding company fails to meet the QTL Test, then
such unitary holding company would become subject to the activities restrictions
applicable to multiple holding companies. At June 30, 1996, Home City met the
QTL Test. See "Qualified Thrift Lender Test."
If HCFC were to acquire control of another savings institution other
than through a merger or other business combination with Home City, HCFC would
thereupon become a multiple savings and loan holding company. Except where such
acquisition is pursuant to the authority to approve emergency thrift
acquisitions and where each subsidiary savings
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association meets the QTL Test, the activities of HCFC and any of its
subsidiaries (other than Home City or other subsidiary savings associations)
would thereafter be subject to further restrictions. The HOLA provides that,
among other things, no multiple savings and loan holding company or subsidiary
thereof which is not a savings institution shall commence, or shall continue
after becoming a multiple savings and loan holding company or subsidiary
thereof, any business activity other than (i) furnishing or performing
management services for a subsidiary savings institution, (ii) conducting an
insurance agency or escrow business, (iii) holding, managing or liquidating
assets owned by or acquired from a subsidiary savings institution, (iv) holding
or managing properties used or occupied by a subsidiary savings institution, (v)
acting as trustee under deeds of trust, (vi) those activities previously
directly authorized by federal regulation as of March 5, 1987, to be engaged in
by multiple holding companies, or (vii) those activities authorized by the FRB
as permissible for bank holding companies, unless the OTS by regulation
prohibits or limits such activities for savings and loan holding companies.
Those activities described in (vii) above must also be approved by the OTS prior
to being engaged in by a multiple holding company.
The OTS may also approve acquisitions resulting in the formation of a
multiple savings and loan holding company that controls savings associations in
more than one state, if the multiple savings and loan holding company involved
controls a savings association which operated a home or branch office in the
state of Home City to be acquired as of March 5, 1987, or if the laws of the
state in which the institution to be acquired is located specifically permit
institutions to be acquired by state-chartered institutions or savings and loan
holding companies located in the state where the acquiring entity is located (or
by a holding company that controls such state-chartered savings institutions).
As under prior law, the OTS may approve an acquisition resulting in a multiple
savings and loan holding company controlling savings associations in more than
one state in the case of certain emergency thrift acquisitions.
FDIC REGULATIONS
DEPOSIT INSURANCE. The FDIC is an independent federal agency that
insures the deposits, up to prescribed statutory limits, of federally insured
banks and thrifts and safeguards the safety and soundness of the bank and thrift
industries. The FDIC administers two separate insurance funds, the BIF for
commercial banks and state savings banks and the SAIF for savings associations
and banks that have acquired deposits from savings associations. The FDIC is
required to maintain designated levels of reserves in each fund. The reserves of
the SAIF are below the level required by law because a significant portion of
the assessments paid into the fund are used to pay the cost of prior thrift
failures. The reserves of the BIF met the level required by law in May 1995.
Depository institutions are generally prohibited from converting from
one insurance fund to the other until the SAIF meets its designated reserve
level, except with the prior approval of the FDIC in certain limited cases,
provided applicable exit and entrance fees are paid. The insurance fund
conversion provisions do not prohibit a SAIF member from converting to a bank
charter or merging with a bank during the moratorium, as long as the resulting
bank continues to pay the applicable insurance assessments to the SAIF during
that period and certain other conditions are met.
Home City is a member of the SAIF and its deposit accounts are insured
by the FDIC up to the prescribed limits. The FDIC has examination authority over
all insured depository institutions, including Home City, and has authority to
initiate enforcement actions against federally insured savings associations if
the FDIC does not believe the OTS has taken appropriate action to safeguard
safety and soundness and the deposit insurance fund.
ASSESSMENTS. The FDIC is authorized to establish separate annual
assessment rates for deposit insurance for members of the BIF and members of the
SAIF. The FDIC may increase assessment rates for either fund if necessary to
restore the fund's ratio of reserves to insured deposits to the target level
within a reasonable time and may decrease such rates if such target level has
been met. The reserves of the SAIF are below the level required by law because a
significant portion of the assessments paid into the SAIF are used to pay the
costs of prior thrift failures. The BIF has, however, met its required reserve
level.
Assessments paid by healthy savings associations exceeded those paid by
healthy commercial banks by approximately $.19 per $100 in deposits in late 1995
and no BIF assessments have been required of healthy commercial banks in 1996,
except a $2,000 minimum fee. Such premium disparity could have a negative
competitive impact on HCFC and other institutions with SAIF deposits.
Legislation to recapitalize the SAIF and to eliminate the significant
premium disparity between the BIF and the SAIF became effective September 30,
1996. The recapitalization plan provides for a special assessment to be paid by
November 29, 1996, equal to $.657 per $100 of SAIF deposits held at March 31,
1995. The special assessment will increase
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SAIF reserves to the level required by law. Certain BIF institutions holding
SAIF insured deposits will pay a lower special assessment. In addition, the cost
of prior thrift failures will be shared by both the SAIF and the BIF, which will
increase BIF assessments. After the payment of the special assessment, SAIF
assessments for healthy savings associations will be set at a significantly
lower level but can never be reduced below the level set for healthy BIF
institutions
On the basis of its $40.4 million in deposits at March 31, 1995, Home
City will pay, by November 29, 1996, an additional pre-tax assessment of
$265,000. Such payment was recorded as an expense and accounted for by Home City
as of September 30, 1996. Earnings and capital were, therefore, negatively
affected for the quarter ended September 30, 1996.
The recapitalization plan also provides for the merger of the SAIF and
BIF effective January 1, 1999, assuming all savings associations have become
banks. As a result, it is expected that the thrift charter or the separate
federal regulation of thrifts will be eliminated. As a result, Home City would
be regulated under federal law as a bank, and would become subject to the more
restrictive activity limitations imposed on national banks.
In addition, HCFC would become a bank holding company, which would be
subject to more restrictive activity limits and capital requirements similar to
those imposed on Home City. HCFC cannot predict the impact of the conversion of
Home City to, or regulation of Home City as, a bank until the legislation
requiring such charge is enacted.
FRB REGULATIONS
RESERVE REQUIREMENTS. FRB regulations require savings associations to
maintain reserves against their transaction accounts (primarily NOW accounts) of
3% of deposits in net transaction accounts for that portion of accounts in
excess of $4.3 million up to $52 million, and to maintain reserves of 10% of
deposits in net transaction accounts against that portion of total transaction
accounts in excess of $52 million. These percentages are subject to adjustment
by the FRB. At June 30, 1996, Home City was in compliance with its reserve
requirements.
FEDERAL HOME LOAN BANKS
The FHLBs, under the regulatory oversight of the Federal Housing
Financing Board, provide credit to their members in the form of advances. Home
City is a member of the FHLB of Cincinnati and must maintain an investment in
the capital stock of the FHLB of Cincinnati in an amount equal to the greater of
1.0% of the aggregate outstanding principal amount of Home City's residential
mortgage loans, home purchase contracts and similar obligations at the beginning
of each year, or 5% of its advances from the FHLB. Home City is in compliance
with this requirement with an investment in FHLB of Cincinnati stock of $394,000
at June 30, 1996.
FHLB advances to members such as Home City who meet the QTL test are
generally limited to the lower of (i) 25% of the member's assets and (ii) 20
times the member's investment in FHLB stock. At June 30, 1996, Home City's
maximum limit on advances was approximately $7.9 million. The granting of
advances is subject also to the FHLB's collateral and credit underwriting
guidelines. At June 30, 1996, the FHLB of Cincinnati offered advances with fixed
and variable interest rates ranging from 5.6% to 8.3%, which included the
following types of borrowings: short-term advances with terms ranging from one
day to one year, including cash management accounts and lines of credit;
fixed-rate, long-term advances with terms ranging from seven months to 20 years;
and various customized advances with terms ranging from one month to 30 years
and with call, balloon or mortgage-matching features.
Upon the origination or renewal of a loan or advance, the FHLB of
Cincinnati is required by law to obtain and maintain a security interest in
collateral in one or more of the following categories: fully disbursed, whole
first mortgage loans on improved residential property or securities representing
a whole interest in such loans; securities issued, insured or guaranteed by the
United States government or an agency thereof; deposits in any FHLB; or other
real estate related collateral (up to 30% of the member association's capital)
acceptable to the applicable FHLB, if such collateral has a readily
ascertainable value and the FHLB can perfect its security interest in the
collateral.
Each FHLB is required to establish standards of community investment or
service that its members must maintain for continued access to long-term
advances from the FHLBs. The standards take into account a member's performance
under the Community Reinvestment Act and its record of lending to first-time
home buyers. All long-term advances by each FHLB must be made only to provide
funds for residential housing finance. The FHLBs have established an "Affordable
Housing Program" to subsidize the interest rate of advances to member
associations engaged in lending for long-term, low- and moderate-income,
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owner-occupied and affordable rental housing at subsidized rates. The FHLB of
Cincinnati reviews and accepts proposals for subsidies under that program twice
a year. Home City has participated in such program.
TAXATION
FEDERAL TAXATION
HCFC is subject to the federal tax laws and regulations which
apply to corporations generally. Home City is also subject to the federal tax
laws and regulations which apply to corporations generally. However, certain
thrift institutions such as Home City were, prior to the enactment of the Small
Business Jobs Protection Act, which was signed into law on August 21, 1996,
allowed deductions for bad debts under methods more favorable to those granted
to other taxpayers. Qualified thrift institutions could compute deductions for
bad debts using either the specific charge off method of Section 166 of the Code
or the reserve method of Section 593 of the Code.
Under Section 593, a thrift institution annually could elect
to deduct bad debts under either (i) the "percentage of taxable income" method
applicable only to thrift institutions, or (ii) the "experience" method that
also was available to small banks. Under the "percentage of taxable income"
method, a thrift institution generally was allowed a deduction for an addition
to its bad debt reserve equal to 8% of its taxable income (determined without
regard to this deduction and with additional adjustments). Under the experience
method, a thrift institution was generally allowed a deduction for an addition
to its bad debt reserve equal to the greater of (i) an amount based on its
actual average experience for losses in the current and five preceding taxable
years, or (ii) an amount necessary to restore the reserve to its balance as of
the close of the base year. A thrift institution could elect annually to compute
its allowable addition to bad debt reserves for qualifying loans either under
the experience method or the percentage of taxable income method. For tax years
1993, 1992 and 1991, Home City used the percentage of taxable income method
because such method provided a higher bad debt deduction than the experience
method.
Section 1616(a) of the Small Business Job Protection Act
repealed the Section 593 reserve method of accounting for bad debts by thrift
institutions, effective for taxable years beginning after 1995. Thrift
institutions that would be treated as small banks are allowed to utilize the
experience method applicable to such institutions, while thrift institutions
that are treated as large banks are required to use only the specific charge off
method. The percentage of taxable income method of accounting for bad debts is
no longer available for any financial institution.
A thrift institution required to change its method of
computing reserves for bad debt will treat such change as a change in the method
of accounting, initiated by the taxpayer, and having been made with the consent
of the Secretary of the Treasury. Any adjustments under Section 481(a) of the
Code required to be recaptured with respect to such change generally will be
determined solely with respect to the "applicable excess reserves" of the
taxpayer. The amount of the applicable excess reserves will be taken into
account ratably over a six-taxable year period, beginning with the first taxable
year beginning after 1995, subject to the residential loan requirement described
below. In the case of a thrift institution that becomes a large bank, the amount
of the institution's applicable excess reserves generally is the excess of (i)
the balances of its reserve for losses on qualifying real property loans
(generally loans secured by improved real estate) and its reserve for losses on
nonqualifying loans (all other types of loans) as of the close of its last
taxable year beginning before January 1, 1996, over (ii) the balances of such
reserves as of the close of its last taxable year beginning before January 1,
1988 (i.e., the "pre-1988 reserves"). In the case of a thrift institution that
becomes a small bank, like Home City, the amount of the institution's applicable
excess reserves generally is the excess of (i) the balances of its reserve for
losses on qualifying real property loans and its reserve for losses on
nonqualifying loans as of the close of its last taxable year beginning before
January 1, 1996, over (ii) the greater of the balance of (a) its pre-1988
reserves or (b) what the thrift's reserves would have been at the close of its
last year beginning before January 1, 1996, had the thrift always used the
experience method.
For taxable years that begin after December 31, 1995, and
before January 1, 1998, if a thrift meets the residential loan requirement for a
tax year, the recapture of the applicable excess reserves otherwise required to
be taken into account as a Code Section 481(a) adjustment for the year will be
suspended. A thrift meets the residential loan requirement if, for the tax year,
the principal amount of residential loans made by the thrift during the year is
not less then its base amount. The "base amount" generally is the average of the
principal amounts of the residential loans made by the thrift during the six
most recent tax years beginning before January 1, 1996.
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A residential loan is a loan as described in Section
7701(a)(19)(C)(v) (generally a loan secured by residential real and church
property and certain mobile homes), but only to the extent that the loan is made
to the owner of the property to acquire, construct, or improve the property.
In addition to the regular income tax, HCFC and Home City are
subject to a minimum tax. An alternative minimum tax is imposed at a minimum tax
rate of 20% on "alternative minimum taxable income" (which is the sum of a
corporation's regular taxable income, with certain adjustments, and tax
preference items), less any available exemption. Such tax preference items
include interest on certain tax-exempt bonds issued after August 7, 1986. In
addition, 75% of the amount by which a corporation's "adjusted current earnings"
exceeds its alternative minimum taxable income computed without regard to this
preference item and prior to reduction by net operating losses, is included in
alternative minimum taxable income. Net operating losses can offset no more than
90% of alternative minimum taxable income. The alternative minimum tax is
imposed to the extent it exceeds the corporation's regular income tax. Payments
of alternative minimum tax may be used as credits against regular tax
liabilities in future years. In addition, for taxable years after 1986 and
before 1996, HCFC and Home City are also subject to an environmental tax equal
to 0.12% of the excess of alternative minimum taxable income for the taxable
year (determined without regard to net operating losses and the deduction for
the environmental tax) over $2.0 million.
The balance of the pre-1988 reserves is subject to the
provisions of Section 593(e) as modified by the Small Business Job Protection
Act which requires recapture in the case of certain excessive distributions to
shareholders. The pre-1988 reserves may not be utilized for payment of cash
dividends or other distributions to a shareholder (including distributions in
dissolution or liquidation) or for any other purpose (except to absorb bad debt
losses). Distribution of a cash dividend by a thrift institution to a
shareholder is treated as made: first, out of the institution's post-1951
accumulated earnings and profits; second, out of the pre-1988 reserves; and
third, out of such other accounts as may be proper. To the extent a distribution
by Home City to HCFC is deemed paid out of its pre-1988 reserves under these
rules, the pre-1988 reserves would be reduced and Home City's gross income for
tax purposes would be increased by the amount which, when reduced by the income
tax, if any, attributable to the inclusion of such amount in its gross income,
equals the amount deemed paid out of the pre-1988 reserves. As of June 30, 1996,
Home City's pre-1988 reserves for tax purposes totaled approximately $1.1
million. Home City believes it had approximately $4.2 million of accumulated
earnings and profits for tax purposes as of June 30, 1996, which would be
available for dividend distributions, provided regulatory restrictions
applicable to the payment of dividends are met. No representation can be made as
to whether Home City will have current or accumulated earnings and profits in
subsequent years.
The tax returns of Home City have been audited or closed
without audit through fiscal year 1992. In the opinion of management, any
examination of open returns would not result in a deficiency which could have a
material adverse effect on the financial condition of Home City.
OHIO TAXATION
HCFC is subject to the Ohio corporation franchise tax, which, as
applied to HCFC, is a tax measured by both net earnings and net worth. The rate
of tax is the greater of (i) 5.1% on the first $50,000 of computed Ohio taxable
income and 8.9% of computed Ohio taxable income in excess of $50,000 or (ii)
0.582% times taxable net worth.
In computing its tax under the net worth method, HCFC may exclude 100%
of its investment in the capital stock of Home City after the Conversion, as
reflected on the balance sheet of HCFC, in computing its taxable net worth as
long as it owns at least 25% of the issued and outstanding capital stock of Home
City. The calculation of the exclusion from net worth is based on the ratio of
the excludable investment (net of any appreciation or goodwill included in such
investment) to total assets multiplied by the net value of the stock. As a
holding company, HCFC may be entitled to various other deductions in computing
taxable net worth that are not generally available to operating companies.
A special litter tax is also applicable to all corporations, including
HCFC, subject to the Ohio corporation franchise tax other than "financial
institutions." If the franchise tax is paid on the net income basis, the litter
tax is equal to .11% of the first $50,000 of computed Ohio taxable income and
.22% of computed Ohio taxable income in excess of $50,000. If the franchise tax
is paid on the net worth basis, the litter tax is equal to .014% times taxable
net worth.
Home City is a "financial institution" for State of Ohio tax purposes.
As such, it is subject to the Ohio corporate franchise tax on "financial
institutions," which is imposed annually at a rate of 1.5% of Home City's book
net worth determined
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in accordance with GAAP. As a "financial institution," Home City is not subject
to any tax based upon net income or net profits imposed by the State of Ohio.
THE CONVERSION
THE OTS HAS APPROVED THE PLAN, SUBJECT TO THE APPROVAL OF THE PLAN BY
THE MEMBERS OF HOME CITY ENTITLED TO VOTE ON THE PLAN AND SUBJECT TO THE
SATISFACTION OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS. OTS APPROVAL DOES
NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN.
GENERAL
On September 3, 1996, the Board of Directors of Home City unanimously
adopted a Plan of Conversion and recommended that the voting members of Home
City approve the Plan at the Special Meeting to be held on ___________, 1996.
During and upon completion of the Conversion, Home City will continue to provide
the services presently offered to depositors and borrowers, will maintain its
existing offices and will retain its existing management and employees.
Based on the current Valuation Range, between 612,000 and 952,200
Common Shares are expected to be offered in the Subscription Offering and the
Community Offering in which preference will be given to natural persons residing
in Clark County, Ohio, at a price of $10 per share. Federal regulations require,
with certain exceptions, that shares offered in connection with the Conversion
must be sold up to at least the minimum point of the Valuation Range in order
for the Conversion to become effective. The actual number of shares sold in
connection with the Conversion will be determined upon completion of the
Conversion in the sole discretion of the Board of Directors based upon the final
determination of the pro forma market value of Home City at the completion of
the Subscription Offering and the Community Offering. See "Pricing and Number of
Common Shares to be Sold."
The Common Shares will be offered in the Subscription Offering to (1)
each account holder of Home City who, as of June 30, 1995, had a Qualifying
Deposit ("Eligible Account Holders"), (2) the ESOP, (3) each account holder of
Home City who, as of September 30, 1996, had a Qualifying Deposit ("Supplemental
Eligible Account Holders"), and (4) each account holder of Home City having a
savings deposit of record with Home City on October 31, 1996 (the "Voting Record
Date"), and each borrower of record on the Voting Record Date whose loan was
outstanding on May 1, 1996 (such depositors and borrowers as of October 31,
1996, collectively, the "Voting Members"). Any Common Shares not subscribed for
in the Subscription Offering may be sold to the general public in the Community
Offering in a manner which will seek to achieve the widest distribution of the
Common Shares, but which will give preference to natural persons residing in
Clark County, Ohio. Under OTS regulations, the Community Offering must be
completed within 45 days after completion of the Subscription Offering, unless
such period is extended by Home City with the approval of the OTS. If the
Community Offering is determined not to be feasible, an occurrence that is not
currently anticipated, the Board of Directors of Home City will consult with the
OTS to determine an appropriate alternative method of selling unsubscribed
Common Shares. No alternative sales methods are currently planned.
OTS regulations require the completion of the Conversion within 24
months after the date of the approval of the Plan by the Voting Members of Home
City. The commencement and completion of the Conversion will be subject to
market conditions and other factors beyond Home City's control. Due to changing
economic and market conditions, no assurance can be given as to the length of
time that will be required to complete the sale of the Common Shares. If delays
are experienced, significant changes may occur in the estimated pro forma market
value of Home City, together with corresponding changes in the aggregate
offering price and the net proceeds realized by HCFC from the sale of the Common
Shares. In such circumstances, Home City may also incur substantial additional
printing, legal and accounting expenses in completing the Conversion. In the
event the Conversion is not successfully completed, Home City will be required
to charge all Conversion expenses against current earnings.
The following is a summary of the material aspects of the Conversion.
The summary is qualified in its entirety by reference to the provisions of the
Plan, a copy of which may be inspected at each office of Home City and at the
office of the OTS. The Plan is also filed as an exhibit to the Registration
Statement of which this Prospectus is a part, and copies of the Registration
Statement may be obtained from the SEC. See "ADDITIONAL INFORMATION."
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PRINCIPAL EFFECTS OF THE CONVERSION
VOTING RIGHTS. Savings account holders who are members of Home City in
its mutual form will have no voting rights in Home City as converted and will
not participate, therefore, in the election of directors or otherwise control
Home City's affairs. After the Conversion, voting rights in Home City will be
vested exclusively in HCFC as the sole shareholder of Home City. Voting rights
in HCFC will be held exclusively by its shareholders. Each holder of HCFC's
Common Shares will be entitled to one vote for each Common Share owned on any
matter to be considered by HCFC's shareholders. See "DESCRIPTION OF AUTHORIZED
SHARES."
SAVINGS ACCOUNTS AND LOANS. Savings accounts in Home City, as
converted, will be equivalent in amount, interest rate and other terms to the
present savings accounts in Home City, and the existing FDIC insurance on such
deposits will not be affected by the Conversion. The Conversion will not affect
the terms of loan accounts or the rights and obligations of borrowers under
their individual contractual arrangements with Home City.
TAX CONSEQUENCES. The consummation of the Conversion is expressly
conditioned on receipt by Home City of a private letter ruling from the Internal
Revenue Service (the "IRS") or an opinion of counsel to the effect that the
Conversion will constitute a tax-free reorganization as defined in Section
368(a) of the Code. Home City intends to proceed with the Conversion based upon
an opinion rendered by its special counsel, Vorys, Sater, Seymour and Pease,
which opinion is an exhibit to the Registration Statement on Form S-1 (File No.
333-12501) filed with the SEC by HCFC, addressing the following federal tax
consequences, which are all of the material federal tax consequences of the
Conversion:
(1) The Conversion constitutes a reorganization within the meaning of
Section 368(a)(1)(F) of the Code, and no gain or loss will be recognized
by Home City in its mutual form or in its stock form as a result of the
Conversion. Home City in its mutual form and Home City in its stock form
will each be a "party to a reorganization" within the meaning of Section
368(B) of the Code;
(2) No gain or loss will be recognized by Home City upon the receipt of
money from HCFC in exchange for the capital stock of Home City, as
converted;
(3) The assets of Home City will have the same basis in its hands
immediately after the Conversion as it had in its hands immediately
prior to the Conversion, and the holding period of the assets of Home
City after the Conversion will include the period during which the
assets were held by Home City before the Conversion;
(4) No gain or loss will be recognized to the deposit account holders
of Home City upon the issuance to them, in exchange for their respective
withdrawable deposit accounts in Home City immediately prior to the
Conversion, of withdrawable deposit accounts in Home City immediately
after the Conversion, in the same dollar amount as their withdrawable
deposit accounts in Home City immediately prior to the Conversion, plus,
in the case of Eligible Account Holders and Supplemental Eligible
Account Holders, the interests in the Liquidation Account of Home City,
as described below;
(5) The basis of the withdrawable deposit accounts in Home City held by
its deposit account holders immediately after the Conversion will be the
same as the basis of their deposit accounts in Home City immediately
prior to the Conversion. The basis of the interests in the Liquidation
Account received by the Eligible Account Holders and Supplemental
Eligible Account Holders will be zero. The basis of the nontransferable
subscription rights received by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Eligible Members (hereinafter
defined) will be zero (assuming that at distribution such rights have no
ascertainable fair market value);
(6) No gain or loss will be recognized to Eligible Account Holders,
Supplemental Eligible Account Holders or Other Eligible Members upon the
distribution to them of nontransferable subscription rights to purchase
Common Shares (assuming that at distribution such rights have no
ascertainable fair market value), and no taxable income will be realized
by such Eligible Account Holders, Supplemental Eligible Account Holders
or Other Eligible Members as a result of their exercise of such
nontransferable subscription rights;
(7) The basis of the Common Shares purchased by members of Home City
pursuant to the exercise of subscription rights will be the purchase
price thereof (assuming that such rights have no ascertainable fair
market value and that the purchase price is not less than the fair
market value of the shares on the date of such exercise), and the
holding period of such shares will commence on the date of such
exercise. The basis of the Common Shares purchased
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other than by the exercise of subscription rights will be the purchase
price thereof (assuming in the case of the other subscribers that the
opportunity to buy in the Subscription Offering has no ascertainable
fair market value), and the holding period of such shares will commence
on the day after the date of the purchase;
(8) For purposes of Section 381 of the Code, Home City will be treated
as if there had been no reorganization. The taxable year of Home City
will not end on the effective date of the Conversion and, immediately
after the Conversion, Home City in its stock form will succeed to and
take into account the tax attributes of Home City in its mutual form
immediately prior to the Conversion, including Home City's earnings and
profits or deficit in earnings and profits;
(9) The bad debt reserves of Home City in its mutual form immediately
prior to the Conversion will not be required to be restored to the gross
income of Home City in its stock form as a result of the Conversion, and
immediately after the Conversion such bad debt reserves will have the
same character in the hands of Home City in its stock form as they would
have had if there had been no Conversion. Home City in its stock form
will succeed to and take into account the dollar amounts of those
accounts of Home City in its mutual form which represent bad debt
reserves in respect of which Home City in its mutual form has taken a
bad debt deduction for taxable years ending on or before the Conversion;
and
(10) Regardless of book entries made for the creation of the
Liquidation Account, the Conversion will not diminish the accumulated
earnings and profits of Home City available for the subsequent
distribution of dividends within the meaning of Section 316 of the Code.
The creation of the Liquidation Account on the records of Home City will
have no effect on its taxable income, deductions for additions to
reserves for bad debts under Section 593 of the Code or distributions to
stockholders under Section 593(e) of the Code.
Home City has received an opinion from Keller to the effect that the
subscription rights have no ascertainable fair market value because the rights
are received by specified persons at no cost, may not be transferred and are of
short duration. The IRS could challenge the assumption that the subscription
rights have no ascertainable fair market value.
For Ohio tax purposes, the tax consequences of the Conversion will be
as follows:
(1) Home City is a "financial institution" for State of Ohio tax
purposes, and the Conversion will not change such status;
(2) Home City is subject to the Ohio corporate franchise tax on
"financial institutions," which is imposed annually at a rate of 1.5% of
Home City's equity capital determined in accordance with GAAP, and the
Conversion will not change such status;
(3) As a "financial institution," Home City is not subject to any tax
based upon net income or net profit imposed by the State of Ohio, and
the Conversion will not change such status;
(4) The Conversion will not be a taxable transaction to Home City in
its mutual or stock form for purposes of the Ohio corporate franchise
tax; however, as a consequence of the Conversion, the annual Ohio
corporate franchise tax liability of Home City will increase if the
taxable net worth of Home City (i.e., book net worth computed in
accordance with GAAP at the close of Home City's taxable year for
federal income tax purposes) increases thereby; and
(5) The Conversion will not be a taxable transaction to any deposit
account holder or borrower member of Home City in its mutual or stock
form for purposes of the Ohio corporate franchise tax and the Ohio
personal income tax.
Each Eligible Account Holder, Supplemental Eligible Account Holder and
Other Eligible Member is urged to consult his or her own tax advisor with
respect to the effect of such tax consequences on his or her own particular
facts and circumstances.
LIQUIDATION ACCOUNT. In the unlikely event of a complete liquidation of
Home City in its present mutual form, each depositor in Home City would receive
a pro rata share of any assets of Home City remaining after payment of the
claims of all creditors, including the claims of all depositors to the
withdrawable value of their savings accounts. A depositor's pro rata share of
such remaining assets would be the same proportion of such assets as the value
of such depositor's savings deposits bears to the total aggregate value of all
savings deposits in Home City at the time of liquidation.
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In the event of a complete liquidation of Home City in its stock form
after the Conversion, each savings depositor as of June 30, 1995, and September
30, 1996, would have a claim of the same general priority as the claims of all
other general creditors of Home City. Except as described below, each
depositor's claim would be solely in the amount of the balance in such
depositor's savings account plus accrued interest. The depositor would have no
interest in the assets of Home City above that amount. Such assets would be
distributed to HCFC as the sole shareholder of Home City.
For the purpose of granting a limited priority claim to the assets of
Home City in the event of a complete liquidation thereof to Eligible Account
Holders and Supplemental Eligible Account Holders who continue to maintain
savings accounts at Home City after the Conversion, Home City will, at the time
of Conversion, establish the Liquidation Account in an amount equal to the
regulatory capital of Home City as of the latest practicable date prior to the
Conversion at which such regulatory capital can be determined. For this purpose,
Home City shall use the regulatory capital figure no later than that set forth
in its latest statement of financial condition contained in the Prospectus. The
Liquidation Account will not operate to restrict the use or application of any
of the regulatory capital of Home City.
Each Eligible Account Holder and Supplemental Eligible Account Holder
will have a separate inchoate interest (the "Subaccount") in a portion of the
Liquidation Account for Qualifying Deposits held on the Eligibility Record Date
or the Supplemental Eligibility Record Date, as the case may be.
The balance of each initial Subaccount shall be an amount determined by
multiplying the amount in the Liquidation Account by a fraction, the numerator
of which is the closing balance in the account holder's account as of the close
of business on the Eligibility Record Date or the Supplemental Eligibility
Record Date, as the case may be, and the denominator of which is the total
amount of Qualifying Deposits of all Eligible Account Holders and Supplemental
Eligible Account Holders on the corresponding record date. The balance of each
Subaccount may be decreased but will never be increased. If, at the close of
business on any annual closing date of Home City subsequent to the respective
record dates the balance in the savings account to which a Subaccount relates is
less than the lesser of (i) the deposit balance in such savings account at the
close of business on any other annual closing date subsequent to the Eligibility
Record Date or Supplemental Eligibility Record Date or (ii) the amount of the
Qualifying Deposit as of the Eligibility Record Date or the Supplemental
Eligibility Record Date, the balance of the Subaccount for such savings account
shall be adjusted proportionately to the reduction in such savings account
balance. In the event of any such downward adjustment, such Subaccount balance
shall not be subsequently increased notwithstanding any increase in the deposit
balance of the related savings account. If any savings account is closed, its
related Subaccount shall be reduced to zero upon such closing.
In the event of a complete liquidation of the converted Home City (and
only in such event), each Eligible Account Holder and Supplemental Eligible
Account Holder shall receive from the Liquidation Account a distribution equal
to the current balance in each of such account holder's Subaccounts before any
liquidation distribution may be made to HCFC as the sole shareholder of Home
City. Any assets remaining after satisfaction of such liquidation rights and the
claims of Home City's creditors would be distributed to HCFC as the sole
shareholder of Home City. No merger, consolidation, purchase of bulk assets or
similar combination or transaction with another institution, the deposits of
which are insured by the FDIC, will be deemed to be a complete liquidation for
this purpose and, in any such transaction, the Liquidation Account shall be
assumed by the surviving institution.
COMMON SHARES. SHARES ISSUED UNDER THE PLAN CANNOT AND WILL NOT BE
INSURED BY THE FDIC. For a description of the characteristics of the Common
Shares, see "DESCRIPTION OF AUTHORIZED SHARES."
INTERPRETATION AND AMENDMENT OF THE PLAN
The Boards of Directors of Home City and HCFC will interpret the Plan.
To the extent permitted by law, all interpretations of the Plan by the Boards of
Directors of Home City and HCFC will be final. The Plan may be amended by the
Boards of Directors of Home City and HCFC at any time before completion of the
Conversion with the concurrence of the OTS. If Home City and HCFC determine upon
advice of counsel and after consultation with the OTS that any such amendment is
material, subscribers will be notified of the amendment and will be provided the
opportunity to affirm, increase, decrease or cancel their subscriptions. Any
person who does not affirmatively elect to continue his subscription or elects
to rescind his subscription before the date specified in the notice will have
all of his funds promptly refunded with interest. Any person who elects to
decrease his subscription will have the appropriate portion of his funds
promptly refunded with interest.
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CONDITIONS AND TERMINATION
The completion of the Conversion requires the approval of the Plan and
the adoption of the Federal Stock Charter and Federal Stock Bylaws by the Voting
Members of Home City at the Special Meeting and the sale of the requisite amount
of Common Shares within 24 months following the date of such approval. If these
conditions are not satisfied, the Plan will automatically terminate and Home
City will continue its business in the mutual form of organization. The Plan may
be voluntarily terminated by the Board of Directors at any time before the
Special Meeting and at any time thereafter with the approval of the OTS.
SUBSCRIPTION OFFERING
THE SUBSCRIPTION OFFERING WILL EXPIRE AT 4:00 P.M., EASTERN TIME, ON
THE SUBSCRIPTION EXPIRATION DATE. SUBSCRIPTION RIGHTS NOT EXERCISED BEFORE THE
SUBSCRIPTION EXPIRATION DATE WILL BE VOID, WHETHER OR NOT HCFC HAS BEEN ABLE TO
LOCATE EACH PERSON ENTITLED TO SUCH SUBSCRIPTION RIGHTS.
Nontransferable subscription rights to purchase Common Shares are being
issued at no cost to all eligible persons and entities in accordance with the
preference categories established by the Plan, as described below. Each
subscription right may be exercised only by the person to whom it is issued and
only for his or her own account. Each person subscribing for shares must
represent to HCFC that he or she is purchasing such shares for his or her own
account and that he or she has no agreement or understanding with any other
person for the sale or transfer of such shares.
The number of Common Shares which a person who has subscription rights
may purchase will be determined, in part, by the total number of Common Shares
to be issued and the availability of such shares for purchase under the
preference categories set forth in the Plan and certain other limitations. See
"Limitations on Purchases of Common Shares." The sale of any Common Shares
pursuant to subscriptions received is contingent upon approval of the Plan by
the Voting Members of Home City at the Special Meeting.
The preference categories for the allocation of Common Shares, which
have been established by the Plan in accordance with applicable regulations, are
as follows:
Category 1. Eligible Account Holders will receive, without
payment, nontransferable subscription rights to purchase up to the
greater of (i) the amount permitted to be purchased in the Community
Offering, (ii) .10% of the total number of Common Shares sold in
connection with the Conversion, or (iii) 15 times the product (rounded
down to the next whole number) obtained by multiplying the total number
of Common Shares sold in connection with the Conversion by a fraction of
which the numerator is the amount of the Eligible Account Holder's
Qualifying Deposit and the denominator of which 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 limitations set
forth in Section 10 of the Plan. See "Limitations on Purchases of Common
Shares."
If the exercise of subscription rights in this Category 1
results in an over-subscription, Common Shares will be allocated among
subscribing Eligible Account Holders in a manner which will, to the
extent possible, make the total allocation of each subscriber equal 100
shares or the amount subscribed for, whichever is less. Any Common
Shares remaining after such allocation has been made will be allocated
among the subscribing Eligible Account Holders whose subscriptions
remain unfilled in the proportion which the amount of their respective
Qualifying Deposits on the Eligibility Record Date bears to the total
Qualifying Deposits of all subscribing Eligible Account Holders on such
date. No fractional shares will be issued. The subscription rights of
the Eligible Account Holders are subordinate to the limited priority
right of the ESOP set forth in the following paragraph.
Category 2. The ESOP will receive, without payment,
nontransferable subscription rights to purchase up to 10% of the Common
Shares sold in connection with the Conversion. The subscription rights
of the ESOP will be subordinate to the subscription rights in Category
1, except that if the final pro forma market value of Home City exceeds
the maximum of the Valuation Range, the ESOP shall have first priority
with respect to the amount sold in excess of the maximum of the
Valuation Range. If the ESOP is unable to purchase all or part of the
Common Shares for which it subscribes due to an oversubscription in
Category 1, the ESOP may purchase Common Shares on the open market or
may purchase authorized but unissued shares of HCFC. If the ESOP
purchases authorized but unissued shares from HCFC, such purchases would
have a dilutive effect on the interests of HCFC's shareholders.
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Category 3. Supplemental Eligible Account Holders, will
receive, without payment, non-transferable subscription rights to
purchase up to the greater of (i) the amount permitted to be purchased
in the Community Offering, (ii) .10% of the total number of Common
Shares sold in connection with the Conversion, or (iii) 15 times the
product (rounded down to the next whole number) obtained by multiplying
the total number of Common Shares sold in connection with the Conversion
by a fraction of which the numerator is the amount of the Supplemental
Eligible Account Holder's Qualifying Deposit and the denominator of
which 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 limitations set forth in
Section 10 of the Plan. See "Limitations on Purchases of Common Shares."
If the exercise of subscription rights in this Category 3
results in an over-subscription, Common Shares will be allocated among
subscribing Supplemental Eligible Account Holders in a manner which
will, to the extent possible, make the total allocation of each
subscriber equal 100 shares or the amount subscribed for, whichever is
lesser. Any Common Shares remaining after such allocation has been made
will be allocated among the subscribing Supplemental Account Holders
whose subscriptions remain unfilled in the proportion which the amount
of their respective Qualifying Deposits on the Supplemental Eligibility
Record Date bears to the total Qualifying Deposits of all subscribing
Supplemental Eligible Account Holders on such date. No fractional shares
will be issued.
Subscription rights received in this Category 3 will be
subordinate to the subscription rights in Categories 1 and 2.
Category 4. All Voting Members who are not Eligible Account
Holders or Supplemental Eligible Account Holders ("Other Eligible
Members") will receive nontransferable subscription rights to purchase
Common Shares in an amount up to the greater of the amount permitted to
be purchased in the Community Offering or .10% of the total number of
Common Shares sold in connection with the Conversion, subject to the
overall purchase limitations set forth in Section 10 of the Plan. See
"Limitations on Purchases of Common Shares." In the event of an
oversubscription in this Category 4, the available shares will be
allocated among subscribing Other Eligible Members on an equitable basis
in the same proportion that their respective subscriptions bear to the
total amount of all subscriptions in this Category 4.
Subscription rights received in this Category 4 will be
subordinate to the subscription rights in Categories 1 through 3.
The Board of Directors may reject any one or more subscriptions if,
based upon the Board of Directors' interpretation of applicable regulations,
such subscriber is not entitled to the shares for which he or she has subscribed
or if the sales of the shares subscribed for would be in violation of any
applicable statutes, regulations or rules.
HCFC will make reasonable efforts to comply with the securities laws of
all states in the United States in which persons having subscription rights
reside. However, no such person will be offered or receive any Common Shares
under the Plan who resides in a foreign country or in a state of the United
States with respect to which all of the following apply: (i) a small number of
persons otherwise eligible to subscribe for shares under the Plan resides in
such country or state; (ii) under the securities laws of such country or state,
the granting of subscription rights or the offer or sale of Common Shares to
such persons would require HCFC or its officers or directors, to register as a
broker or dealer or to register or otherwise qualify its securities for sale in
such country or state; and (iii) such registration or qualification would be
impracticable for reasons of cost or otherwise.
The term "resident" as used herein with respect to the Subscription
Offering means any person who, on the date of submission of a stock order form,
maintained a bona fide residence within a jurisdiction in which the Common
Shares are being offered for sale. If a person is a business entity, the
person's residence shall be the location of the principal place of business. If
the person is a personal benefit plan, the residence of the beneficiary shall be
the residence of the plan. In the case of all other benefit plans, the residence
of the trustee shall be the residence of the plan. In all cases, the
determination of a subscriber's residency shall be in the sole discretion of
Home City and HCFC.
COMMUNITY OFFERING
Concurrently with the Subscription Offering, HCFC is hereby offering
Common Shares in the Community Offering, subject to the limitations set forth
below, to the extent such shares remain available after the satisfaction of all
orders received in the Subscription Offering. If subscriptions are received in
the Subscription Offering for at least 952,200 Common Shares, Common Shares may
not be available for purchase in the Community Offering. All sales of Common
Shares in the Community Offering will be at the same price per share as in the
Subscription Offering. THE COMMUNITY OFFERING MAY BE TERMINATED AT
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ANY TIME AFTER ORDERS FOR AT LEAST 952,200 COMMON SHARES HAVE BEEN RECEIVED, BUT
IN NO EVENT LATER THAN ___________, 1996 (THE "COMMUNITY EXPIRATION DATE"),
WITHOUT THE CONSENT OF THE OTS.
In the event shares are available in the Community Offering, members of
the general public may purchase up to 1% of the Common Shares sold, which is
9,522 Common Shares at the maximum of the Valuation Range, as adjusted. See
"Limitations on Purchases of Common Shares." If an insufficient number of shares
is available to fill all of the orders received in the Community Offering, the
available shares will be allocated in a manner to be determined by the Board of
Directors of HCFC, subject to the following:
(i) Preference will be given to natural persons who are residents of
Clark County, Ohio, the county in which the offices of Home City are
located;
(ii) Orders received in the Community Offering will first be filled up
to a maximum of 2% of the total number of Common Shares offered, with
any remaining shares allocated on an equal number of shares per order
basis until all orders have been filled;
(iii) No person, together with any Associate and persons Acting in
Concert, may purchase more than 2% of the Common Shares; and
(iv) The right of any person to purchase Common Shares in the Community
Offering is subject to the right of HCFC and Home City to accept or
reject such purchases in whole or in part.
The term "resident" as used herein with respect to the Community
Offering means any natural person who, on the date of submission of a stock
order form, maintained a bona fide residence within, as appropriate, Clark
County or a jurisdiction in which the Common Shares are being offered for sale.
LIMITATIONS ON PURCHASES OF COMMON SHARES
The Plan provides for certain additional limitations to be placed upon
the purchase of Common Shares. To the extent such shares are available, the
minimum number of shares that may be purchased by any party is 25. No fractional
shares will be issued.
No person, together with Associates and persons Acting in Concert, may
purchase more than 2% of the Common Shares. Subject to any required regulatory
approval and the requirements of applicable laws and regulations, but without
further approval of the members of Home City, purchase limitations may be
increased or decreased at the sole discretion of the Boards of Directors of HCFC
and Home City at any time. If such amount is increased, persons who subscribed
for the maximum amount will be given the opportunity to increase their
subscriptions up to the then applicable limit, subject to the rights and
preferences of any person who has priority subscription rights. The Boards of
Directors of HCFC and Home City may, in their sole discretion, increase the
maximum purchase limitation referred to above up to 10%, provided that orders
for shares exceeding 5% of the shares to be issued in the Conversion shall not
exceed, in the aggregate, 10% of the shares to be issued in the Conversion. In
the event that the purchase limitation is decreased after commencement of the
Subscription Offering, the order of any person who subscribed for the maximum
number of Common Shares shall be decreased by the minimum amount necessary so
that such person shall be in compliance with the then maximum number of shares
permitted to be subscribed for by such person.
"Acting in Concert" is defined as "knowing participation in a joint
activity or independent conscious parallel action towards a common goal" or "a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose." Persons shall be presumed to be Acting in Concert
with each other if: (i) both are purchasing Common Shares in the Conversion and
are (a) executive officers, directors, trustees, or any one who performs, or
whose nominee or representative performs, a similar policy making function at a
company (other than Home City or HCFC) or principal business units or
subsidiaries of a company, or (b) any person who directly or indirectly owns or
controls 10% or more of the stock of a company (other than Home City or HCFC);
or (ii) one person provides credit to the other for the purchase of Common
Shares or is instrumental in obtaining that credit. In addition, if a person is
presumed to be Acting in Concert with another person, then the person is
presumed to Act in Concert with anyone else who is, or is presumed to be, Acting
in Concert with that other person.
For purposes of the Plan, (i) the directors of Home City are not deemed
to be Acting in Concert solely by reason of their membership on the Board of
Directors of Home City; (ii) an associate of a person (an "Associate") is (a)
any corporation or
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organization (other than Home City) of which such person is an officer, partner
or, directly or indirectly, the beneficial owner of 10% or more of any class of
equity securities; (b) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity; and (c) any relative or spouse of such person,
or relative of such spouse, who either has the same home as such person or who
is a director or officer of Home City. Executive officers and directors of Home
City and their Associates may not purchase, in the aggregate, more than 34.9% of
the total number of Common Shares sold in the Conversion. Shares acquired by the
ESOP will not, pursuant to regulations governing the Conversion, be aggregated
with the shares purchased by the directors, officers and employees of Home City.
Purchases of Common Shares are also subject to the change in control
regulations of the OTS. Such regulations restrict direct and indirect purchases
of 10% or more of the stock of any savings association by any person or group of
persons Acting in Concert. See "RESTRICTIONS ON ACQUISITION OF HOME CITY AND
HCFC AND RELATED ANTI-TAKEOVER PROVISIONS - Federal Law and Regulation."
After the Conversion, Common Shares, except for shares purchased by
officers and directors of HCFC, will be freely transferable, subject to OTS
regulations. See "Restrictions on Transferability of Common Shares by Directors
and Officers."
PLAN OF DISTRIBUTION
The offering of the Common Shares is made only pursuant to this
Prospectus, which is available to all eligible subscribers by mail. See
"ADDITIONAL INFORMATION." Additional copies are available at the offices of Home
City. Sales of Common Shares will be made primarily by registered
representatives affiliated with Webb. HCFC will rely on Rule 3a4-1 under the
Exchange Act, and sales of Common Shares will be conducted within the
requirements of Rule 3a4-1, which will permit officers, directors and employees
of HCFC and Home City to participate in the sale of Common Shares, in clerical
capacities, providing administrative support in effecting sales transactions or
answering questions relating to the proper execution of the Stock Order Form,
except that officers, directors and employees will not participate in the sale
of Common Shares to residents of any state in which such persons have not met
such state's requirements for participation. Management of Home City may answer
questions regarding the business of Home City. Other questions of prospective
purchasers, including questions as to the nature of the investment, will be
directed to registered representatives. Management and the employees of Home
City have been instructed not to solicit offers to purchase Common Shares or to
provide advice regarding the purchase of Common Shares. No officer, director or
employee of HCFC or Home City 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 Shares.
To assist HCFC in marketing the Common Shares, HCFC has retained Webb,
which are broker-dealers registered with the SEC and members of the National
Association of Securities Dealers, Inc. (the "NASD"). Webb will consult with and
advise HCFC and assist with the sale of the Common Shares on a best efforts
basis in connection with the Conversion. The services to be rendered by Webb
include assisting HCFC in conducting the Subscription Offering and the Community
Offering and educating Home City personnel about the Conversion process. Webb is
not obligated to purchase any of the Common Shares.
For its services, Webb has been paid a management fee in the amount of
$25,000. Webb will also receive a commission equal to 1.5% of the aggregate
purchase price paid for Common Shares sold in the Conversion, excluding
purchases by Home City's directors, executive officers, and Associates of such
directors and executive officers, and the ESOP. If Webb and HCFC deem necessary,
Webb may enter into agreements with other NASD members ("Selected Dealers") for
assistance in the sale of the Common Shares, in which event Webb and such
Selected Dealers will receive a commission not to exceed 5.5% of the purchase
price of Common Shares sold, if any, by the Selected Dealer. In addition, HCFC
will reimburse Webb for certain expenses, including reasonable legal fees. Webb
is not obligated to purchase any Common Shares.
HCFC and Home City have agreed to indemnify Webb and its directors,
officers, employees, agents and any controlling person against any and all loss,
liability, claim, damage or expense arising out of any untrue statement, or
alleged untrue statement, of a material fact contained in the Summary Proxy
Statement or the Prospectus, any application to regulatory authorities, any
"blue sky" application, or any other related document prepared or executed by or
on behalf of HCFC or Home City with its consent in connection with, or in
contemplation of, the Conversion, or any omission therefrom of a material fact
required to be stated therein, unless such untrue statement or omission, or
alleged untrue statement or omission, was made in reliance upon certain
information furnished to Home City by Webb expressly for use in the Summary
Proxy Statement or the Prospectus.
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The Common Shares will be offered principally by the distribution of
this Prospectus and through activities conducted at the Conversion Information
Center, which will be located at the office of Home City. The Conversion
Information Center will be staffed by one or more of Webb's employees, who will
be responsible for mailing materials relating to the Offering, responding to
questions regarding the Conversion and the Offering and processing stock orders.
A conspicuous legend that the Common Shares are not a federally-insured
or guaranteed deposit or account appears on all offering documents used in
connection with the Conversion and will appear on the certificates representing
the Common Shares. Any person purchasing Common Shares will be required to
execute the Stock Order Form certifying such person's knowledge that the Common
Shares are not federally-insured or guaranteed and that the purchaser has
received a Prospectus and understands the investment risk involved.
EFFECT OF EXTENSION OF COMMUNITY OFFERING
If the Community Offering extends beyond 45 days after the Subscription
Expiration Date, persons who have subscribed for Common Shares in the
Subscription Offering or in the Community Offering will receive a written notice
that until a date specified in the notice, they have the right to increase,
decrease or rescind their subscriptions for Common Shares. Any person who does
not affirmatively elect to continue his subscription or elects to rescind his
subscription during any such extension will have all of his funds promptly
refunded with interest. Any person who elects to decrease his subscription
during any such extension shall have the appropriate portion of his funds
promptly refunded with interest.
USE OF STOCK ORDER FORMS
Subscriptions for Common Shares in the Subscription Offering and the
Community Offering may be made only by completing and submitting a Stock Order
Form. Any person who desires to subscribe for Common Shares in the Subscription
Offering must do so by delivering to HCFC at 63 West Main Street, Springfield,
Ohio 45502-1309, by mail or in person, prior to 4:00 p.m., Eastern Time, on
_________, 1996, a properly executed and completed original Stock Order Form,
together with full payment of the subscription price of $10 for each share for
which subscription is made. Photocopies or telecopies of Stock Order Forms will
not be accepted. See "ADDITIONAL INFORMATION." THE FAILURE TO DELIVER A PROPERLY
EXECUTED ORIGINAL ORDER FORM AND FULL PAYMENT IN A MANNER BY WHICH THEY ARE
ACTUALLY RECEIVED BY HCFC NO LATER THAN 4:00 P.M. ON THE SUBSCRIPTION EXPIRATION
DATE WILL PRECLUDE THE PURCHASE OF COMMON SHARES IN THE OFFERING.
AN EXECUTED STOCK ORDER FORM, ONCE RECEIVED BY HCFC, MAY NOT BE
MODIFIED, AMENDED OR RESCINDED WITHOUT THE CONSENT OF HCFC, UNLESS (I) THE
COMMUNITY OFFERING IS NOT COMPLETED WITHIN 45 DAYS AFTER THE SUBSCRIPTION
EXPIRATION DATE, OR (II) THE FINAL VALUATION OF HOME CITY, AS CONVERTED, IS LESS
THAN $6,120,000 OR MORE THAN $9,522,000. IF EITHER OF THOSE EVENTS OCCUR,
PERSONS WHO HAVE SUBSCRIBED FOR COMMON SHARES IN THE SUBSCRIPTION OFFERING OR IN
THE COMMUNITY OFFERING WILL RECEIVE WRITTEN NOTICE THAT UNTIL A DATE SPECIFIED
IN THE NOTICE, THEY HAVE A RIGHT TO AFFIRM, INCREASE, DECREASE OR RESCIND THEIR
SUBSCRIPTIONS. ANY PERSON WHO DOES NOT AFFIRMATIVELY ELECT TO CONTINUE HIS
SUBSCRIPTION OR ELECTS TO RESCIND HIS SUBSCRIPTION DURING ANY SUCH EXTENSION
WILL HAVE ALL OF HIS FUNDS PROMPTLY REFUNDED WITH INTEREST. ANY PERSON WHO
ELECTS TO DECREASE HIS SUBSCRIPTION DURING ANY SUCH EXTENSION WILL HAVE THE
APPROPRIATE PORTION OF HIS FUNDS PROMPTLY REFUNDED WITH INTEREST.
PAYMENT FOR COMMON SHARES
Payment of the subscription price for all Common Shares for which
subscription is made must accompany all completed Stock Order Form in order for
subscriptions to be valid. Payment for Common Shares may be made (i) in cash, if
delivered in person, (ii) by check, bank draft or money order payable to the
order of Home City, or (iii) by authorization of withdrawal from savings
accounts in Home City (other than non-self-directed IRAs). Wire transfers will
not be accepted. Home City cannot lend money or otherwise extend credit to any
person to purchase Common Shares, other than the ESOP.
Payments made in cash or by check, bank draft or money order will be
placed in a segregated savings account insured by the FDIC up to applicable
limits. Interest will be paid by Home City on such accounts at Home City's
passbook rate, currently ____% annual percentage yield, from the date payment is
received until the Conversion is completed or terminated. Payments made by check
will not be deemed to have been received until such check has cleared for
payment.
Instructions for authorizing withdrawals from savings accounts are
provided in the Stock Order Form. Once a withdrawal has been authorized, none of
the designated withdrawal amount may be used by a subscriber for any purpose
other
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than to purchase Common Shares, unless the Conversion is terminated. All
sums authorized for withdrawal will continue to earn interest at the contract
rate for such account or certificate until the completion or termination of the
Conversion. Interest penalties for early withdrawal applicable to certificate
accounts will be waived in the case of withdrawals authorized for the purchase
of Common Shares. If a partial withdrawal from a certificate account results in
a balance less than the applicable minimum balance requirement, the certificate
will be cancelled and the remaining balance will earn interest at Home City's
passbook rate subsequent to the withdrawal.
Persons who are beneficial owners of IRAs maintained at Home City do
not personally have subscription rights related to such account. The account
itself, however, may have subscription rights. In order to utilize funds in an
IRA maintained at Home City, the funds must be transferred to a self-directed
IRA that permits the IRA funds to be invested in stock. The beneficial owner of
the IRA must direct the trustee of the IRA to use funds from such account to
purchase Common Shares in connection with the Conversion. Persons who are
interested in utilizing IRAs at Home City to subscribe for Common Shares should
contact the Home City Conversion Center at (513) 324-3830 for instructions and
assistance.
Subscriptions will not be filled by HCFC until subscriptions have been
received in the Subscription Offering and the Community Offering for up to
612,000 Common Shares, the minimum point of the Valuation Range. If the
Conversion is terminated, all funds delivered to HCFC for the purchase of Common
Shares will be returned with interest, and all charges to savings accounts will
be rescinded. Subscribers and other purchasers will be notified by mail,
promptly on completion of the sale of the Common Shares, of the number of shares
for which their subscriptions have been accepted. Certificates representing
Common Shares will be delivered promptly thereafter.
If the ESOP subscribes for Common Shares in the Subscription Offering,
the ESOP will not be required to pay for the shares subscribed for at the time
it subscribes but may pay for such Common Shares upon consummation of the
Conversion.
SHARES TO BE PURCHASED BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS
The following table sets forth certain information regarding the
subscription rights intended to be exercised by the directors and executive
officers of Home City and their Associates. For purposes of this table, it has
been assumed that 720,000 Common Shares will be sold in connection with the
Conversion at $10 per share and that a sufficient number of Common Shares will
be available to satisfy the intended purchases by directors and executive
officers. The number of Common Shares purchased may decrease or increase if
fewer or greater than 720,000 Common Shares are sold in connection with the
Conversion. See "Pricing and Number of Common Shares to be Sold."
<TABLE>
<CAPTION>
Percent Aggregate
Total of total purchase
Name shares offering price
- ---- ------ -------- ---------
<S> <C> <C> <C>
John D. Conroy 14,400 2.0% $144,000
P. Clark Engelmeier 14,400 2.0 144,000
James Foreman 14,400 2.0 144,000
Terry A. Hoppes 14,400 2.0 144,000
Douglas L. Ulery 14,400 2.0 144,000
Gary E. Brown 2,000 0.3 20,000
JoAnn Holdeman 1,000 0.1 10,000
------- ----- ----------
Total 75,000 10.4% $750,000
====== ==== ========
</TABLE>
All purchases by executive officers and directors of Home City are made
for investment purposes only and with no intent to resell.
PRICING AND NUMBER OF COMMON SHARES TO BE SOLD
The aggregate offering price of the Common Shares will be based on the
pro forma market value of the shares as determined by an independent appraisal
of Home City. Keller, a firm which evaluates and appraises financial
institutions, was retained by Home City to prepare an appraisal of the estimated
pro forma market value of Home City as converted. Keller will receive a fee of
$15,000 for its appraisal, which amount includes out-of-pocket expenses.
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The appraisal was prepared by Keller in reliance upon the information
contained herein. Keller also considered the following factors, among others:
the present and projected operating results and financial condition of Home City
and the economic and demographic conditions in Home City's existing market area;
the quality and depth of Home City's management and personnel; certain
historical financial and other information relating to Home City and a
comparative evaluation of the operating and financial statistics of Home City
with those of other thrift institutions; the aggregate size of the offering; the
impact of the Conversion on Home City's regulatory capital and earnings
potential; the trading market for stock of comparable thrift institutions; the
effect of Home City becoming a subsidiary of HCFC; and general conditions in the
markets for such stocks.
Keller's valuation of the estimated pro forma market value of Home
City, as converted, is $7,200,000 as of September 6, 1996 (the "Pro Forma
Value"). HCFC will issue the Common Shares at a fixed price of $10 per share
and, by dividing the price per share into the Pro Forma Value, will determine
the number of shares to be issued. Applicable regulations also require, however,
that the appraiser establish the Valuation Range of 15% on either side of the
Pro Forma Value to allow for fluctuations in the aggregate value of the Common
Shares due to changes in the market for thrift shares and other factors from the
time of commencement of the Subscription Offering until the completion of the
Conversion.
As of September 6, 1996, the Valuation Range was from $6,120,000 to
$8,280,000, which, based upon a per share offering price of $10, will result in
the sale of between 612,000 and 828,000 Common Shares. In the event that Keller
determines at the close of the Conversion that the aggregate pro forma value of
Home City is higher or lower than the Pro Forma Value, but is nevertheless
within the Valuation Range, or is not more than 15% above the maximum point of
the Valuation Range, HCFC will make an appropriate adjustment by raising or
lowering the total number of Common Shares sold in the Conversion consistent
with the final Valuation Range. The total number of Common Shares sold in the
Conversion will be determined in the discretion of the Board of Directors
consistent with the Valuation Range. If, due to changing market conditions, the
final valuation is not between the minimum of the Valuation Range and 15% above
the maximum of the Valuation Range, subscribers will be given a notice of such
final valuation and the right to affirm, increase, decrease or rescind their
subscriptions. Any person who does not affirmatively elect to continue his
subscription or elects to rescind his subscription before the date specified in
the notice will have all of his funds promptly refunded with interest. Any
person who elects to decrease his subscription will have the appropriate portion
of his funds promptly refunded with interest.
THE APPRAISAL BY KELLER IS NOT INTENDED, AND MUST NOT BE CONSTRUED, AS
A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING COMMON SHARES
OR VOTING TO APPROVE THE CONVERSION. IN PREPARING THE VALUATION, KELLER HAS
RELIED UPON AND ASSUMED THE ACCURACY AND COMPLETENESS OF FINANCIAL AND
STATISTICAL INFORMATION PROVIDED BY HOME CITY AND ITS INDEPENDENT AUDITORS.
KELLER DID NOT INDEPENDENTLY VERIFY THE FINANCIAL STATEMENTS AND OTHER
INFORMATION PROVIDED BY HOME CITY AND ITS INDEPENDENT AUDITORS, NOR DID KELLER
VALUE INDEPENDENTLY THE ASSETS OR LIABILITIES OF HOME CITY OR HCFC. THE
VALUATION CONSIDERS HOME CITY ONLY AS A GOING CONCERN AND SHOULD NOT BE
CONSIDERED AS AN INDICATION OF THE LIQUIDATION VALUE OF HOME CITY. MOREOVER,
BECAUSE SUCH VALUATION IS NECESSARILY BASED UPON ESTIMATES AND PROJECTIONS OF A
NUMBER OF MATTERS, ALL OF WHICH ARE SUBJECT TO CHANGE FROM TIME TO TIME, NO
ASSURANCE CAN BE GIVEN THAT PERSONS PURCHASING COMMON SHARES WILL THEREAFTER BE
ABLE TO SELL SUCH SHARES AT PRICES WITHIN THE ESTIMATED PRICE RANGE.
A copy of the complete appraisal is on file and open for inspection at
the offices of the OTS, 1700 G Street, N.W., Washington, D.C. 20552, at the
Central Regional Office of the OTS, 200 West Madison, Suite 1300, Chicago,
Illinois 60606, and at each of the offices of Home City.
RESTRICTION ON REPURCHASE OF COMMON SHARES
Federal regulations prohibit HCFC from repurchasing, without approval
by the OTS, any of its capital stock for three years following the date of
completion of the Conversion, except as part of an open-market stock repurchase
program during the second and third years following the Conversion involving no
more than 5% of HCFC's outstanding capital stock during a twelve-month period.
In addition, after such a repurchase, Home City's regulatory capital must equal
or exceed all regulatory capital requirements. Before commencement of such a
program, HCFC must provide notice to the OTS, and the OTS may disapprove the
program if the OTS determines that it would adversely affect the financial
condition of Home City or if it determines that there is no valid business
purpose for such repurchase. Such repurchase restrictions would not prohibit the
ESOP or the RRP from purchasing Common Shares during the first year following
Conversion.
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RESTRICTIONS ON TRANSFERABILITY OF COMMON SHARES BY DIRECTORS AND OFFICERS
Common Shares purchased by directors or executive officers of HCFC or
their Associates will be subject to the restriction that such shares may not be
sold for a period of one year following completion of the Conversion, except in
the event of the death of the shareholder. The certificates evidencing Common
Shares issued by HCFC to directors, executive officers and their Associates will
bear a legend giving appropriate notice of the restriction imposed upon the
transfer of such Common Shares. In addition, HCFC will give appropriate
instructions to the transfer agent (if any) for HCFC's Common Shares in respect
of the applicable restriction for transfer of any restricted shares. Any shares
issued as a stock dividend, stock split or otherwise in respect of restricted
shares will be subject to the same restrictions.
Subject to certain exceptions, for a period of three years following
the Conversion, no director or officer of HCFC or Home City, or any of their
Associates, may purchase any common shares of HCFC without the prior written
approval of the OTS, except through a broker-dealer registered with the SEC.
This restriction will not apply, however, to negotiated transactions involving
more than 1% of a class of outstanding common shares of HCFC or shares acquired
by any stock benefit plan of Home City or HCFC.
The Common Shares, like the stock of most public companies, are subject
to the registration requirements of the Securities Act. Accordingly, the Common
Shares may be offered and sold only in compliance with such registration
requirements or pursuant to an applicable exemption from registration. Common
Shares received in the Conversion by persons who are not "affiliates" of HCFC
may be resold without registration. Common Shares received by affiliates of HCFC
will be subject to resale restrictions. An "affiliate" of HCFC, for purposes of
Rule 144, is a person who directly, or indirectly through one or more
intermediaries, controls, or is controlled by or is under common control with,
HCFC. Rule 144 generally requires that there be publicly available certain
information concerning HCFC and that sales subject to Rule 144 be made in
routine brokerage transactions or through a market maker. If the conditions of
Rule 144 are satisfied, each affiliate (or group of persons acting in concert
with one or more affiliates) is entitled to sell in the public market, without
registration, in any three-month period, a number of shares which does not
exceed the greater of (i) 1% of the number of outstanding shares of HCFC or (ii)
if the shares are admitted to trading on a national securities exchange or
reported through the automated quotation system of a registered securities
association, the average weekly reported volume of trading during the four weeks
preceding the sale.
RIGHTS OF REVIEW
Any person aggrieved by a final action of the OTS which approves, with
or without conditions, or disapproves the Plan may obtain review of such action
by filing in the Court of Appeals of the United States for the circuit in which
the principal office or residence of such person is located or in the United
States Court of Appeals for the District of Columbia, a written petition praying
that the final action of the OTS be modified, terminated or set aside. Such
petition must be filed within 30 days after the date of mailing of proxy
materials to the Voting Members of Home City or within 30 days after the date of
publication in the Federal Register of notice of approval of the Plan by the
OTS, whichever is later.
RESTRICTIONS ON ACQUISITION OF HOME CITY AND HCFC
AND RELATED ANTI-TAKEOVER PROVISIONS
GENERAL
Federal law and regulation, Ohio law, the Articles of Incorporation and
Code of Regulations of HCFC, the Amended Charter of Home City and certain
employee benefit plans to be adopted by Home City and HCFC contain certain
provisions which may deter or prohibit a change of control of Home City or HCFC.
Such provisions are intended to encourage any acquiror to negotiate the terms of
an acquisition with the Board of Directors of HCFC, thereby reducing the
vulnerability of HCFC to takeover attempts and certain other transactions which
have not been negotiated with and approved by the Board of Directors.
Anti-takeover devices and provisions may have the effect, however, of
discouraging sudden or hostile takeover attempts, even under circumstances in
which shareholders may deem such takeovers to be in their best interests or in
which shareholders may receive a substantial premium for their shares over then
current market prices. As a result, shareholders who might desire to participate
in such a transaction may not have an opportunity to participate because of such
devices and provisions. Moreover, such devices and provisions may also benefit
management by discouraging changes of control in which incumbent management
would be removed from office.
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The following is a summary of certain provisions of such laws,
regulations and documents.
FEDERAL LAW AND REGULATION
FEDERAL DEPOSIT INSURANCE ACT. The FDIA provides that no person, acting
directly or indirectly or in concert with one or more persons, may acquire
control of any insured savings association or holding company unless both (i) 60
days' prior written notice has been given to the OTS and (ii) the OTS has not
issued a notice disapproving the proposed acquisition. Control, for purposes of
the FDIA, means the power, directly or indirectly, to direct the management or
policies of an insured institution or to vote 25% or more of any class of
securities of such institution. This provision of the FDIA is implemented by the
OTS in accordance with the Regulations for Acquisition of Control of an Insured
Institution, 12 C.F.R. Part 574 (the "Control Regulations"). Control, for
purposes of the Control Regulations, exists in situations in which either (a)
the acquiring party has direct or indirect voting control of at least 25% of the
institution's voting shares or controls in any manner the election of a majority
of the directors of such institution or (b) the Director of the OTS determines
that such person exercises a controlling influence over the management or
policies of such institution. In addition, control is presumed to exist, subject
to rebuttal, if the acquiring party (which includes a group "acting in concert")
has voting control of at least 10% of the institution's voting stock and any of
eight control factors specified in the Control Regulations exists. There are
also rebuttable presumptions in the Control Regulations concerning whether a
group "acting in concert" exists, including presumed action in concert among
members of an "immediate family." The Control Regulations apply to acquisitions
of Common Shares in connection with the Conversion and to acquisitions after the
Conversion.
CHANGE IN CONTROL OF CONVERTED ASSOCIATIONS. A regulation of the OTS
provides that, for a period of three years after the date of the completion of
the Conversion, no person shall, directly or indirectly, offer to acquire or
acquire beneficial ownership of more than 10% of any class of equity security of
Home City or HCFC without the prior written approval of the OTS. In addition to
the actual ownership of more than 10% of a class of equity securities, a person
is deemed to have acquired beneficial ownership of more than 10% of the equity
securities of HCFC or Home City if the person holds any combination of stock and
revocable and/or irrevocable proxies of HCFC under circumstances that give rise
to a conclusive control determination or rebuttable control determination under
the OTS's change of control regulations. Such circumstances include (i) holding
any combination of voting shares and revocable and/or irrevocable proxies
representing more than 25% of any class of voting stock of HCFC enabling the
acquirer (a) to elect one-third or more of the directors, (b) to cause HCFC's or
Home City's shareholders to approve the acquisition or corporate reorganization
of HCFC or Home City, or (c) to exert a controlling influence over a material
aspect of the business operations of HCFC or Home City, and (ii) acquiring any
combination of voting shares and irrevocable proxies representing more than 25%
of any class of voting shares.
Such three-year restriction does not apply (i) to any offer with a view
toward public resale made exclusively to Home City or HCFC or to any underwriter
or selling group acting on behalf of Home City or HCFC, (ii) unless made
applicable by the OTS by prior written advice, to any offer or announcement of
an offer which, if consummated, would result in the acquisition by any person,
together with all other acquisitions by any such person of the same class of
securities during the preceding 12-month period, of not more than 1% of the
class of securities, or (iii) to any offer to acquire or the acquisition of
beneficial ownership of more than 10% of any class of equity security of Home
City or HCFC by a corporation whose ownership is or will be substantially the
same as the ownership of Home City or HCFC if made more than one year following
the date of the Conversion. The foregoing restriction does not apply to the
acquisition of Home City or HCFC's capital stock by one or more tax-qualified
employee stock benefit plans of HCFC or Home City, provided that the plan or
plans do not have beneficial ownership in the aggregate of more than 25% of any
class of equity security of Home City or HCFC. See "Articles of Incorporation of
Home City" for a discussion of a five-year restriction on direct or indirect
beneficial ownership of 10% of the outstanding common stock of Home City.
HOLDING COMPANY RESTRICTIONS. Federal law generally prohibits a savings
and loan holding company, without prior approval of the Director of the OTS,
from (i) acquiring control of any other savings association or savings and loan
holding company, (ii) acquiring substantially all of the assets of a savings
association or holding company thereof, or (iii) acquiring or retaining more
than 5% of the voting shares of a savings association or holding company thereof
which is not a subsidiary. Acquisitions under the Holding Company Act are
governed by the Control Regulations. See "Federal Deposit Insurance Act."
Under certain circumstances, a savings and loan holding company is
permitted to acquire, with the approval of the Director of the OTS, up to 15% of
the previously unissued voting shares of an undercapitalized savings association
for cash without such savings association being deemed to be controlled by the
holding company. Except with the prior approval of the Director of the OTS, no
director or officer of a savings and loan holding company or person owning or
controlling by proxy or
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otherwise more than 25% of such company's voting shares may acquire control of
any savings institution, other than a subsidiary institution or any other
savings and loan holding company.
OHIO LAW
MERGER MORATORIUM STATUTE. Ohio has adopted a merger moratorium statute
regulating certain takeover bids affecting certain public corporations with
significant ties to Ohio. The statute prohibits, with some exceptions, any
merger, combination or consolidation and any of certain other sales, leases,
distributions, dividends, exchanges, mortgages or transfers between such an Ohio
corporation and any person who has the right to exercise, alone or with others,
10% or more of the voting power of such corporation (an "Interested
Shareholder"), for three years following the date on which such person first
becomes an Interested Shareholder. Such a business combination is permitted only
if, prior to the time such person first becomes an Interested Shareholder, the
Board of Directors of the issuing corporation has approved the purchase of
shares that resulted in such person first becoming an Interested Shareholder.
After the initial three-year moratorium, such a business combination
may not occur unless (1) an exception specifically enumerated in the statute is
applicable to the combination, (2) the combination is approved, at a meeting
held for such purpose, by the affirmative vote of the holders of the issuing
public corporation entitling them to exercise at least two-thirds of the voting
power of the issuing public corporation in the election of directors or of such
different proportion as the articles may provide, provided the combination is
also approved by the affirmative vote of the holders of at least a majority of
the disinterested shares, or (3) the business combination meets certain
statutory criteria designed to ensure that the issuing public corporation's
remaining shareholders receive fair consideration for their shares.
An Ohio corporation may, under certain circumstances, "opt out" of the
statute by specifically providing in its articles of incorporation that the
statute does not apply to any business combination of such corporation. However,
the statute still prohibits for twelve months any business combination that
would have been prohibited but for the adoption of such an opt-out amendment.
The statute also provides that it will continue to apply to any business
combination between a person who became an Interested Shareholder prior to the
adoption of such an amendment as if the amendment had not been adopted. The
Articles of Incorporation of HCFC do not opt out of the protection afforded by
Chapter 1704. Therefore, the merger moratorium statute applies to HCFC.
CONTROL SHARE ACQUISITION STATUTE. Section 1701.831 of the Ohio Revised
Code (the "Control Share Acquisition Statute") requires that certain
acquisitions of voting securities that would result in the acquiring shareholder
owning 20%, 33 1/3%, or 50% of the outstanding voting securities of HCFC must be
approved in advance by the holders of at least a majority of the outstanding
voting shares represented at a meeting at which a quorum is present and a
majority of the portion of the outstanding voting shares represented at such a
meeting, excluding the voting shares owned by the acquiring shareholder. The
Control Share Acquisition Statute was intended, in part, to protect shareholders
of Ohio corporations from coercive tender offers.
TAKEOVER BID STATUTE. Ohio law also contains a statute regulating
takeover bids for any Ohio corporation. Such statute provides that no offeror
may make a takeover bid unless (i) at least 20 days prior thereto the offeror
announces publicly the terms of the proposed takeover bid and files with the
Ohio Division of Securities (the "Securities Division") and provides the target
company with certain information in respect of the offeror, his ownership of the
company's shares and his plans for the company, and (ii) within ten days
following such filing either (a) no hearing is required by the Securities
Division, (b) a hearing is requested by the target company within such time but
the Securities Division finds no cause for hearing exists, or (c) a hearing is
ordered and upon such hearing the Securities Division adjudicates that the
offeror proposes to make full, fair and effective disclosure to offerees of all
information material to a decision to accept or reject the offer.
The takeover bid statute also states that no offeror shall make a
takeover bid if he owns 5% or more of the issued and outstanding equity
securities of any class of the target company, any of which were purchased
within one year before the proposed takeover bid, and the offeror, before making
any such purchase, failed to announce his intention to gain control of the
target company or otherwise failed to make full and fair disclosure of such
intention to the persons from whom he acquired such securities. The United
States District Court for the Southern District of Ohio has determined that the
Ohio takeover bid statute is preempted by federal regulation.
ARTICLES OF INCORPORATION OF HCFC
RESTRICTION ON ACQUISITION OF MORE THAN 10% OF THE COMMON SHARES. The
Articles of Incorporation of HCFC provide that for five years after the
effective date of the Conversion, no person, except the ESOP, may offer to
acquire or acquire
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the beneficial ownership of more than 10% of any class of outstanding equity
securities of HCFC. If such a prohibited acquisition occurs, the securities
owned by such person in excess of the 10% limit may not be voted on any matter
submitted to the shareholders of HCFC. The term "person" is defined as an
individual, a group acting in concert, a corporation, a partnership, an
association, a joint stock company, a trust, an unincorporated organization or
similar company, a syndicate or any other group formed for the purpose of
acquiring, holding or disposing of the equity securities of HCFC, but does not
include an employee stock ownership plan for the benefit of the employees of
Home City or HCFC. The term "offer" includes every offer to buy or otherwise
acquire, solicitation of an offer to sell, tender offer for, or request or
invitation for tenders of HCFC's Common Shares. The ability of management or any
other person to solicit revocable proxies from shareholders will not be
restricted by such 10% limit.
ABILITY OF THE BOARD OF DIRECTORS TO ISSUE ADDITIONAL SHARES. The
Articles of Incorporation of HCFC permit the Board of Directors of HCFC to issue
additional common shares and preferred shares. See "DESCRIPTION OF AUTHORIZED
SHARES - General." The ability of the Board of Directors to issue such
additional shares may create impediments to gaining, or otherwise discourage
persons from attempting to gain, control of HCFC.
MATTERS REQUIRING ENLARGED SHAREHOLDER VOTE. Generally, matters
requiring a vote of the shareholders of HCFC may be approved by the holders of a
majority of the voting shares of HCFC. Article Sixth of the Articles of
Incorporation of HCFC provides, however, that, in the event the Board of
Directors recommends against the approval of any of the following matters, the
holders of at least 75% of the voting shares of HCFC are required to adopt any
such matters.
(1) A proposed amendment to the Articles of Incorporation
of HCFC;
(2) A proposed amendment to the Code of Regulations of
HCFC;
(3) A proposal to change the number of directors by
action of the shareholders;
(4) An agreement of merger or consolidation providing for
the proposed merger or consolidation of HCFC with or
into one or more other corporations;
(5) A proposed combination or majority share acquisition
involving the issuance of shares of HCFC and
requiring shareholder approval;
(6) A proposal to sell, exchange, transfer or otherwise
dispose of all, or substantially all, of the assets,
with or without the goodwill of HCFC; or
(7) A proposed dissolution of HCFC.
Officers and directors of HCFC are expected to purchase approximately
10.4% of the Common Shares at the mid-point of the Valuation Range. In addition,
the ESOP intends to purchase approximately 8% of the Common Shares, and it is
anticipated that upon shareholder approval of the RRP, the RRP will purchase 4%
of the outstanding Common Shares. The ESOP trustee must vote shares allocated
under the ESOP as directed by the participants to whom the shares are allocated
and vote unallocated shares in his sole discretion on mergers, sales of
substantially all of HCFC's assets and similar transactions. The RRP trustees,
who are expected to be two directors of HCFC, will vote shares held by the RRP
Trust in their discretion. Thus, officers and directors will have a significant
influence over the vote on such a transaction and may be able to defeat such a
proposal.
ELIMINATION OF CUMULATIVE VOTING. Section 1701.55 of the Ohio Revised
Code provides in substance and effect that shareholders of a for profit
corporation which is not a savings and loan association and which is
incorporated under Ohio law must initially be granted the right to cumulate
votes in the election of directors. The right to cumulate votes in the election
of directors will exist at a meeting of shareholders if notice in writing is
given by any shareholder to the President, a Vice President or the Secretary of
an Ohio corporation, not less than 48 hours before a meeting at which directors
are to be elected, that the shareholder desires that the voting for the election
of directors shall be cumulative and if an announcement of the giving of such
notice is made upon the convening of such meeting by the Chairman or Secretary
or by or on behalf of the shareholder giving such notice. If cumulative voting
is invoked, each shareholder would have a number of votes equal to the number of
directors to be elected, multiplied by the number of shares owned by him, and
would be entitled to distribute his votes among the candidates as he sees fit.
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Section 1701.69 of the Ohio Revised Code provides that an Ohio
corporation may eliminate cumulative voting in the election of directors after
the expiration of 90 days after the date of initial incorporation by filing with
the Ohio Secretary of State an amendment to the articles of incorporation
eliminating cumulative voting. The Articles of Incorporation of HCFC have been
amended to eliminate cumulative voting. The elimination of cumulative voting may
make it more difficult for shareholders to elect as directors persons whose
election is not supported by the Board of Directors.
FEDERAL STOCK CHARTER OF HOME CITY
For a five-year period following the date of the completion of the
Conversion, no person may, directly or indirectly, acquire or offer to acquire
the beneficial ownership of more than 10% of Home City's outstanding common
shares. The acquisition of more than 10% of the Common Shares of HCFC would
constitute an indirect acquisition of the common shares of Home City and would,
therefore, be prohibited by the Federal Stock Charter of Home City. The
beneficial ownership limitation prohibition does not apply, however, to
purchases of Home City's common shares by one or more tax-qualified employee
stock benefit plans of Home City. Any holder of shares of HCFC or Home City
beneficially owned in violation of such prohibition will not be entitled to vote
on matters submitted to a vote of shareholders, and such shares shall not be
voted by any person or be counted as voting shares in connection with any matter
submitted to shareholders for a vote. The term "person" includes an individual,
a group acting in concert, a corporation, a partnership, an association, a joint
stock company, a trust, an unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of the equity securities of HCFC or Home City. The term "offer"
includes every offer to buy or otherwise acquire, solicitation of an offer to
sell, tender offer for, or request or invitation for tenders of HCFC's Common
Shares or Home City's common shares.
EMPLOYEE BENEFIT PLANS
Adoption of the ESOP may also have an anti-takeover effect. The ESOP
may become the owner of a sufficient percentage of the total outstanding Common
Shares that the decision whether to tender the shares held by the ESOP to a
potential acquirer may prevent a takeover. See "DESCRIPTION OF AUTHORIZED
SHARES" and "MANAGEMENT OF HOME CITY - Employee Stock Ownership Plan."
DESCRIPTION OF AUTHORIZED SHARES
GENERAL
The Articles of Incorporation of HCFC authorize the issuance of five
million common shares and one million preferred shares. The common shares and
the preferred shares authorized by HCFC's Articles of Incorporation have no par
value. Upon receipt by HCFC of the purchase price therefor and subsequent
issuance thereof, each Common Share will be fully paid and nonassessable. The
Common Shares of HCFC will represent nonwithdrawable capital and will not and
cannot be insured by the FDIC. Each Common Share will have the same relative
rights and will be identical in all respects to every other Common Share.
None of the preferred shares of HCFC will be issued in connection with
the Conversion. The Board of Directors of HCFC is authorized, without
shareholder approval, to issue preferred shares and to fix and state the
designations, preferences or other special rights of such shares and the
qualifications, limitations and restrictions thereof. The preferred shares may
rank prior to the common shares as to dividend rights, liquidation preferences
or both. Each holder of preferred shares will be entitled to one vote for each
preferred share held of record on all matters submitted to a vote of
shareholders. The issuance of preferred shares and any conversion rights which
may be specified by the Board of Directors for the preferred shares could
adversely affect the voting power of holders of the common shares. The Board of
Directors has no present intention to issue any of the preferred shares.
The following is a summary description of the rights of the common
shares of HCFC, including the material express terms of such shares as set forth
in HCFC's Articles of Incorporation.
LIQUIDATION RIGHTS
In the event of the complete liquidation or dissolution of HCFC, the
holders of the Common Shares will be entitled to receive all assets of HCFC
available for distribution, in cash or in kind, after payment or provision for
payment of (i) all debts and liabilities of HCFC, (ii) any accrued dividend
claims, and (iii) any interests in the Liquidation Account.
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VOTING RIGHTS
The holders of the Common Shares will possess exclusive voting rights
in HCFC, unless preferred shares are issued. Each holder of Common Shares will
be entitled to one vote for each share held of record on all matters submitted
to a vote of holders of common shares.
Section 1701.55 of the Ohio Revised Code provides in substance and
effect that shareholders of a for profit corporation which is not a savings and
loan association and which is incorporated under Ohio law must initially be
granted the right to cumulate votes in the election of directors. Section
1701.69 of the Ohio Revised Code provides that an Ohio corporation may eliminate
cumulative voting in the election of directors after the expiration of 90 days
after the date of initial incorporation by filing with the Ohio Secretary of
State an amendment to the articles of incorporation eliminating cumulative
voting. The Articles of Incorporation of HCFC have been amended to eliminate
cumulative voting. See "RESTRICTIONS ON ACQUISITION OF HOME CITY AND HCFC AND
RELATED ANTI-TAKEOVER PROVISIONS - Articles of Incorporation of HCFC --
Elimination of Cumulative Voting."
DIVIDENDS
The holders of the Common Shares will be entitled to the payment of
dividends when, as and if declared by the Board of Directors and paid out of
funds, if any, available under applicable laws and regulations for the payment
of dividends. The payment of dividends is subject to federal and state statutory
and regulatory restrictions. See "DIVIDEND POLICY" and "TAXATION - Federal
Taxation" for a description of restrictions on the payment of cash dividends.
PREEMPTIVE RIGHTS
After the consummation of the Conversion, no shareholder of HCFC will
have, as a matter of right, the preemptive right to purchase or subscribe for
shares of any class, now or hereafter authorized, or to purchase or subscribe
for securities or other obligations convertible into or exchangeable for such
shares or which by warrants or otherwise entitle the holders thereof to
subscribe for or purchase any such share.
RESTRICTIONS ON ALIENABILITY
See "THE CONVERSION - Restrictions on Repurchase of Common Shares" for
a description of the limitations on the repurchase of stock by HCFC; "THE
CONVERSION Restrictions on Transferability of Common Shares by Directors and
Officers" for a description of certain restrictions on the transferability of
Common Shares purchased by officers and directors; and "RESTRICTIONS ON
ACQUISITION OF HOME CITY AND HCFC AND RELATED ANTI-TAKEOVER PROVISIONS" for
information regarding regulatory restrictions on acquiring Common Shares.
REGISTRATION REQUIREMENTS
HCFC will register its common shares with the SEC pursuant to Section
12(g) of the Exchange Act prior to or promptly upon completion of the Conversion
and will not deregister such shares for a period of three years following the
completion of the Conversion. Upon such registration, the proxy and tender offer
rules, insider trading restrictions, annual and periodic reporting and other
requirements of the Exchange Act will apply.
LEGAL MATTERS
Certain legal matters pertaining to the Common Shares and the federal
and Ohio tax consequences of the Conversion will be passed upon for Home City by
Vorys, Sater, Seymour and Pease, 221 E. Fourth Street, Cincinnati, Ohio 45202.
The validity of the Common Shares to be issued in connection with the Conversion
will be passed upon for Webb by its counsel, Silver, Freedman, & Taff, L.L.P.,
1100 New York Avenue, N.W., Washington, D.C. 20005.
-78-
<PAGE> 85
EXPERTS
The consolidated financial statements of Home City as of June 30, 1996
and 1995, and for the years ended June 30, 1996, 1995 and 1994, included in this
Prospectus have been audited by Robb, Dixon, Francis, Davis, Oneson & Company,
certified public accountants, as stated in their report appearing herein and
have been so included in reliance upon such report given upon the authority of
that firm as experts in accounting and auditing.
Keller has consented to the publication herein of the summary of its
letter to Home City setting forth its opinion as to the estimated pro forma
market value of Home City as converted and to the use of its name and statements
with respect to it appearing herein.
ADDITIONAL INFORMATION
HCFC has filed with the SEC a Registration Statement on Form S-1 (File
No. 333-12501) under the Securities Act with respect to the Common Shares
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. Such information may be
inspected at the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies may be obtained from the SEC at
prescribed rates.
Home City has filed an Application for Approval of Conversion (the
"Application") with the OTS. This document omits certain information contained
in the Application. The Application, the exhibits and the financial statements
that are part thereof may be inspected at the offices of the OTS, 1700 G Street,
N.W., Washington, D.C. 20552, and the Central Regional Office, 200 W. Madison
Street, Suite 1300, Chicago, Illinois 60606.
The SEC maintains a World Wide Web site, (http://www.sec.gov), that
contains reports, proxy and information statements and other information
regarding registrants that file with the SEC, including HCFC.
-79-
<PAGE> 86
CONTENTS
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-2
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS F-3
(As of June 30, 1996 and 1995)
CONSOLIDATED STATEMENTS OF INCOME F-4
(For the years ended June 30, 1996, 1995 and 1994)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(For the years ended June 30, 1996, 1995 and 1994) F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS F-6
(For the years ended June 30, 1996, 1995 and 1994)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7
SCHEDULES: All schedules are omitted, as the information is either not
applicable or is included in the consolidated financial statements.
FINANCIAL STATEMENTS OF HOME CITY FINANCIAL CORPORATION: Financial statements of
Home City Financial Corporation are not presented, as that corporation was not
active during any of the periods presented.
F-1
<PAGE> 87
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Home City Federal Savings Bank of Springfield
Springfield, Ohio
We have audited the accompanying consolidated balance sheets of Home
City Federal Savings Bank of Springfield as of June 30, 1996 and 1995, and the
related statements of income, changes in equity and cash flows for the years
ended June 30, 1996, 1995 and 1994. These financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements 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 City Federal
Savings Bank of Springfield as of June 30, 1996 and 1995, and the results of its
operations and its cash flows for the years ended June 30, 1996, 1995 and 1994,
in conformity with generally accepted accounting principles.
ROBB, DIXON
FRANCIS, DAVIS, ONESON
& COMPANY
Granville, Ohio
July 17, 1996, except as to Note S and Note T,
which are as of September 30, 1996.
F-2
<PAGE> 88
HOME CITY FEDERAL SAVINGS BANK OF SPRINGFIELD
SPRINGFIELD, OHIO
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
=============================================================================================================
(Dollars in thousands)
June 30,
-----------------------
1996 1995
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents
Cash and amounts due from depository institutions $ 855 $ 570
Interest-bearing deposits in other banks 588 307
Federal Funds sold 400 1,500
------- -------
Total cash and cash equivalents 1,843 2,377
Time deposits with original maturities of 90 days or more 1,061 360
Investment securities
Securities held-to-maturity (fair value of $0 in 1996 and $1,909 in 1995) 0 1,901
Securities available-for-sale, at fair value 2,188 259
Mortgage-backed securities
Securities held-to-maturity (fair value of $0 in 1996 and $3,603 in 1995) 0 3,667
Securities available-for-sale, at fair value 2,975 0
Loans, net 45,225 38,960
Accrued interest receivable 273 169
Premises and equipment, net 488 468
Investment required by law - stock in Federal Home Loan Bank 394 288
Deferred income taxes 0 21
Cash surrender value of life insurance 1,044 0
Other assets 237 108
------- -------
TOTAL ASSETS $55,728 48,578
======= =======
LIABILITIES AND EQUITY
Deposits $47,174 $40,936
Advances from Federal Home Loan Bank 2,903 2,618
Accrued interest payable 49 42
Advance payments by borrowers for taxes and insurance 20 34
Deferred income taxes 68 0
Other liabilities 116 63
------- -------
TOTAL LIABILITIES 50,330 43,693
COMMITMENTS AND CONTINGENCIES 0 0
EQUITY
Retained earnings, substantially restricted 5,271 4,757
Unrealized gain on securities available-for-sale, net of applicable deferred
income taxes 127 128
------- -------
TOTAL EQUITY 5,398 4,885
------- -------
TOTAL LIABILITIES AND EQUITY $55,728 $48,578
======= =======
- -------------------------------------------------------------------------------------------------------------
See accompanying notes.
</TABLE>
F-3
<PAGE> 89
HOME CITY FEDERAL SAVINGS BANK OF SPRINGFIELD
SPRINGFIELD, OHIO
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
===================================================================================================
(Dollars in thousands)
Years ended June 30,
----------------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $4,094 $3,344 $3,074
Interest on investment securities 143 145 103
Interest on mortgage-backed securities 209 274 314
Interest on deposits in banks and federal funds sold 61 72 51
------ ------ ------
TOTAL INTEREST INCOME 4,507 3,835 3,542
------ ------ ------
INTEREST EXPENSE
Interest on interest-bearing checking accounts 3 0 1
Interest on savings accounts 251 395 608
Interest on certificates of deposits 2,116 1,440 799
Interest on advances from Federal Home Loan Bank 172 107 38
------ ------ ------
TOTAL INTEREST EXPENSE 2,542 1,942 1,446
------ ------ ------
NET INTEREST INCOME 1,965 1,893 2,096
Provision for loan losses 50 109 113
------ ------ ------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,915 1,784 1,983
OTHER INCOME
Service charges 9 2 1
Life insurance 46 0 0
Other 3 7 11
------ ------ ------
TOTAL OTHER INCOME 58 9 12
------ ------ ------
OTHER EXPENSES
Salaries and employee benefits 532 398 311
Supplies, telephone and postage 44 29 28
Occupancy and equipment 102 104 120
Deposit insurance 96 83 83
Data processing 54 47 63
Legal, accounting and exam 110 83 70
Franchise tax 72 63 53
Other 206 191 195
------ ------ ------
TOTAL OTHER EXPENSES 1,216 998 923
------ ------ ------
NET INCOME BEFORE FEDERAL INCOME TAX EXPENSE 757 795 1,072
Federal income tax expense 243 240 367
------ ------ ------
NET INCOME $ 514 $ 555 $ 705
====== ====== ======
- ---------------------------------------------------------------------------------------------------
See accompanying notes.
</TABLE>
F-4
<PAGE> 90
HOME CITY FEDERAL SAVINGS BANK OF SPRINGFIELD
SPRINGFIELD, OHIO
STATEMENTS OF CHANGES IN EQUITY
<TABLE>
<CAPTION>
=================================================================================================================
(Dollars in thousands)
Unrealized gain
(loss) on securities
available-for-sale
Retained net of applicable Total
earnings deferred income taxes equity
-------- --------------------- ------
<S> <C> <C> <C>
Balances at June 30, 1993 $ 3,497 $ 0 $ 3,497
Net income 705 0 705
Change in accounting principle to adopt SFAS 115, net
of applicable deferred income taxes of $47 0
91 91
Change in unrealized gain (loss) on securities
available-for-sale, net of applicable deferred
income taxes of $11 0 22 22
------- ------- -------
Balances at June 30, 1994 4,202 113 4,315
Net income 555 0 555
Change in unrealized gain on securities
available-for-sale, net of applicable deferred 0 15 15
income taxes of $8
------- ------- -------
Balances at June 30, 1995 4,757 128 4,885
Net income 514 0 514
Change in unrealized gain on securities
available-for-sale, net of applicable deferred 0 (1) (1)
income taxes
------- ------- -------
Balance of June 30, 1996 $ 5,271 $ 127 $ 5,398
======= ======= =======
- -----------------------------------------------------------------------------------------------------------------
See accompanying notes.
</TABLE>
F-5
<PAGE> 91
HOME CITY FEDERAL SAVINGS BANK OF SPRINGFIELD
SPRINGFIELD, OHIO
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
=======================================================================================================================
(Dollars in thousands)
(Dollars in thousands)
Years ending June 30,
------------------------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 514 $ 555 $ 705
Adjustments to reconcile net income to net cash provided by
operating activities:
Premium amortization, net of discount accretion 42 (17) (34)
Provision for loan losses 50 109 113
Gain on sale of real estate owned 0 0 1
Depreciation 39 33 32
Deferred income taxes 89 7 (12)
Life insurance income, net of expenses (19) 0 0
Changes in operating assets and liabilities:
Increase in accrued income receivable (103) (52) (47)
Increase in other assets (129) (66) (4)
Increase in accrued interest payable 7 25 8
Increase in other liabilities 53 4 (7)
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 543 598 755
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in time deposits (700) (361) 0
Purchases of held-to-maturity securities 0 (3,880) (3,293)
Proceeds from maturities of held-to-maturity securities 500 4,121 3,750
Purchases of available-for-sale securities (496) (3) (10)
Proceeds from sales of available-for-sale securities 0 78 1,129
Proceeds from maturities of available-for-sale securities 20 0 0
Payments on held-to-maturity mortgage backed securities 278 564 1,009
Payments on available-for-sale mortgage backed securities 319 0 0
Proceeds for sales of loans 2,760 338 131
Net increase in loans (9,075) (8,306) (2,699)
Purchases of premises and equipment (60) (35) (88)
Proceeds from sale of real estate held for investment 0 3 (19)
Proceeds from sale of real estate owned 0 0 25
Purchase of Federal Home Loan Bank stock (106) (41) (32)
Purchase of life insurance contracts (1,025) 0 0
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES (7,585) (7,522) (97)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 6,238 6,120 (1,872)
Proceeds from advances from Federal Home Loan Bank 500 2,310 2,200
Payments on advances from Federal Home Loan Bank (216) (116) (2,236)
Net decrease in advance payments by borrowers for tax and
insurance (14) 0 0
------- ------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
6,508 8,314 (1,908)
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(534) 1,390 (1,250)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
2,377 987 2,237
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,843 $ 2,377 $ 987
======= ======= =======
- ----------------------------------------------------------------------------------------------------------------------
See accompanying notes
</TABLE>
F-6
<PAGE> 92
HOME CITY FEDERAL SAVINGS BANK OF SPRINGFIELD
SPRINGFIELD, OHIO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of Home City
Federal Savings Bank of Springfield (the Bank) and its subsidiary, Homciti
Service Corp. All material intercompany balances and transactions have been
eliminated in consolidation.
NATURE OF OPERATIONS
The Bank provides a variety of financial services to individuals and
corporate customers, through its one office in Springfield, Ohio, which is
primarily a small industrial area. The Bank's primary deposit products are
savings accounts and certificates of deposit. Its primary lending products are
single-family residential loans. Homciti Service Corp. invests in stock of the
Bank's data service provider and a local joint venture. Both of such interests
are minority interests.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant
change relate to the determination of the allowance for losses on loans. In
connection with the determination of the allowances for losses on loans,
management obtains independent appraisals for significant properties.
A majority of the Bank's loan portfolio consists of single-family
residential loans in the Springfield, Ohio area. The regional economy depends
heavily on some 200 diversified industries. Accordingly, the ultimate
collectibility of a substantial portion of the Bank's loan portfolio are
susceptible to changes in local market conditions.
While management uses available information to recognize losses on
loans, future additions to the allowances may be necessary based on changes in
local economic conditions. In addition, regulatory agencies, as an integral part
of their examination process, periodically review the Bank's allowances for
losses on loans. Such agencies may require the Bank to recognize additions to
the allowances based on their judgments about information available to them at
the time of their examination. Because of these factors, it is reasonably
possible that the allowances for losses on loans may change materially in the
near term.
INVESTMENT SECURITIES
SECURITIES HELD TO MATURITY: Government, federal agency and municipal
debt securities that management has the positive intent and ability to hold to
maturity are reported at cost, adjusted for amortization of premiums and
accretion of discounts that are recognized in interest income using methods
approximating the interest method over the period to maturity.
SECURITIES AVAILABLE FOR SALE: Available-for-sale securities consist of
investment securities not classified as held-to-maturity. Unrealized holding
gains and losses, net of tax, on available-for-sale securities are reported as a
net amount in a separate component of equity until realized. Gains and losses on
the sale of available-for-sale securities are determined using the
specific-identification method. The amortization of premiums and the accretion
of discounts are recognized in interest income using methods approximating the
interest method over the period to maturity.
F-7
<PAGE> 93
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities represent participating interests in pools
of long-term first mortgage loans originated and serviced by issuers of the
securities. Mortgage-backed securities are carried as available-for-sale and are
carried at fair value. Unrealized gains and losses on securities
available-for-sale are recognized as direct increases or decreases in equity.
Cost of securities sold is recognized using the specific identification method.
LOANS
Loans are stated at unpaid principal balances, less the allowance for
loan losses, net deferred loan fees and loans-in-process.
Loan origination fees, as well as certain direct origination costs, are
deferred and amortized as a yield adjustment over the contractual lives of the
related loans using the interest method. Amortization of deferred loan fees is
discontinued when a loan is placed on nonaccrual status.
Loans are placed on nonaccrual when principal or interest is delinquent
for 90 days or more. Any unpaid interest previously accrued on those loans is
reversed from income. Interest income on nonaccrual loans is recognized only to
the extent of interest payments received.
The allowance for loan losses is maintained at a level which, in
management's judgment, is adequate to absorb credit losses inherent in the loan
portfolio. The amount of the allowance is based on management's evaluation of
the collectibility of the loan portfolio, including the nature of the portfolio,
credit concentrations, trends in historical loss experience, specific impaired
loans, and economic conditions. Allowances for impaired loans are generally
determined based on collateral values or the present value of estimated cash
flows. The allowance is increased by a provision for loan losses, which is
charged to expense, and reduced by charge-offs, net of recoveries.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation of property and equipment is computed principally on
the straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Buildings and improvements 10-50
Furniture and equipment 5-25
</TABLE>
INCOME TAXES
The Bank files a consolidated federal income tax return on a calendar
year basis. Income taxes are provided for the tax effects of the transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the basis of
available-for-sale securities, allowance for loan losses, accumulated
depreciation, partnership income, deferred loan fees, accrued pension expenses,
and non-accrual loans for financial and income tax reporting. The deferred tax
assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled.
PENSION PLAN
The Bank has a pension plan covering substantially all employees. It is
the policy of the Bank to fund the maximum amount that can be deducted for
federal income tax purposes but in amounts not less than the minimum amounts
required by law.
STATEMENTS OF CASH FLOWS
The Bank considers all cash and amounts due from depository
institutions, interest-bearing deposits in other banks, and federal funds sold
to be cash equivalents for purposes of the statements of cash flows. Only
investments with original maturities under 90 days are considered cash
equivalents.
F-8
<PAGE> 94
FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures about
Fair Value of Financial Instruments, requires disclosure of fair value
information about financial instruments, whether or not recognized in the
statement of financial condition. In cases where quoted market prices are not
available, fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instruments. Statement No. 107 excluded certain
financial instruments and all non-financial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Bank.
The following methods and assumptions were used by the Bank in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the
statement of financial condition for cash and cash equivalents approximate those
assets' fair values.
Time deposits: Fair values for time deposits are estimated using a
discounted cash flow analysis that applies interest rates currently being
offered on certificates to a schedule of aggregated contractual maturities on
such time deposits.
Investment securities (including mortgage-backed securities): Fair
values for investment securities are based on quoted market prices, where
available. If quoted market prices are not available, fair values are based on
quoted market prices of comparable instruments.
Loans: For variable-rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on carrying amounts.
The fair values for other loans (for example, fixed rate commercial real estate
and rental property mortgage loans and commercial and industrial loans) are
estimated using discounted cash flow analysis, based on interest rates currently
being offered for loans with similar terms to borrowers of similar credit
quality. Loan fair value estimates include judgments regarding future expected
loss experience and risk characteristics. The carrying amount of accrued
interest receivable approximates its fair value.
Deposits: The fair values disclosed for demand deposits (for example,
interest-bearing checking accounts and passbook accounts) are, by definition,
equal to the amount payable on demand at the reporting date (that is, their
carrying amounts). The fair values for certificates of deposit are estimated
using a discounted cash flow calculation that applies interest rates currently
being offered on certificates to a schedule of aggregated contractual maturities
on such time deposits. The carrying amount of accrued interest payable
approximates fair value.
Advances from Federal Home Loan Bank: The fair value for FHLB advances
are estimated using a discounted cash flow calculation that applies interest
rates currently being offered on FHLB advances of aggregated contractual
maturities of such advances.
RECLASSIFICATIONS
Certain amounts in 1995 have been reclassified to conform with the 1996
presentation.
F-9
<PAGE> 95
NOTE B - INVESTMENT SECURITIES
Securities held-to-maturity consist of the following at June 30, 1995:
<TABLE>
<CAPTION>
(Dollars in thousands)
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. government & federal agencies $1,496 $0 $ 0 $1,496
State & local governments 405 8 0 413
------ -- ------ ------
$1,901 $8 $ 0 $1,909
====== == ====== ======
<CAPTION>
Securities available-for-sale consist of the following:
June 30. 1996 June 30.1995
----------------------------------------------- ---------------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
------ ------ -------- ----- ------ ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S.
government &
federal agencies $1,001 $ 0 $ (4) $ 997 $ 0 $ 0 $ 0 $ 0
State & local
governments 879 6 (2) 883 0 0 0 0
Equity securities
65 243 0 308 65 194 0 259
------ ----- ------- ------ ---- ---- ---- ----
$1,945 $ 249 $ (6) $2,188 $ 65 $194 $ 0 $259
====== ===== ======= ====== ==== ==== ==== ====
<CAPTION>
The following is a summary of maturities of securities
available-for-sale as of June 30, 1996:
(Dollars in thousands)
Securities available-for-sale
Amortized Fair
Cost Value
<S> <C> <C>
AMOUNTS MATURING IN:
One year or less $ 134 $ 134
After one year through five years 1,569 1,565
After five years through ten years 177 181
After ten years 65 308
------ ------
$1,945 $2,188
====== ======
</TABLE>
During the year ended June 30, 1996, the Bank sold no securities.
During the year ended June 30, 1995, the Bank sold securities available-for-sale
for total proceeds of approximately $78,000, resulting in no gross realized
gains and no gross realized losses. During the year ended June 30, 1994, the
Bank sold securities for total proceeds of approximately $1,129,000, resulting
in no gross realized gains and no gross realized losses.
On December 31, 1995, debt securities with an amortized cost of
$1,405,000 were transferred from held-to- maturity to available-for-sale to
potentially reduce the Bank's state franchise tax expense. The securities had an
F-10
<PAGE> 96
unrealized gain of approximately $6,000. There were no securities transferred
between classifications during the year ended June 30, 1995 and 1994.
No investment securities were pledged to secure deposits as required or
permitted by law.
NOTE C - MORTGAGE-BACKED SECURITIES
Mortgage-backed securities consist of the following:
<TABLE>
<CAPTION>
(Dollars in thousands)
Available-for-sale Held-to-maturity
June 30, 1996 June 30, 1995
------------------------------------------------------ -------------------------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
------ ------- -------- ----- ------ ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GNMA $3,020 $ 2 $ (76) $2,946 $3,635 $ 9 $ (77) $3,567
FHLMC 26 3 0 29 32 4 0 36
------ ---- ------- ------ ------ ---- ------- ------
$3,046 $ 5 $ (76) $2,975 $3,667 $ 13 $ (77) $3,603
====== ==== ======= ====== ====== ==== ======= ======
</TABLE>
The amortized cost and fair value of mortgage-backed securities at June
30, 1996 by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations without call or prepayment penalties.
<TABLE>
<CAPTION>
(Dollars in thousands)
Amortized Fair
Cost Value
--------- ---------
<S> <C> <C>
Mortgage-backed securities:
After five years through ten years $ 915 $ 903
After ten years 2,131 2,072
------ ------
$3,046 $2,975
====== ======
</TABLE>
During the years ended June 30, 1996, 1995 and 1994, the Bank sold no
mortgage-backed securities.
On December 31, 1995, mortgage-backed securities with an amortized cost
of $3,358,000 were transferred from held-to-maturity to available-for-sale to
potentially reduce the Bank's state franchise tax expense. The mortgage-backed
securities had an unrealized gain of approximately $38,000. There were no
securities transferred between classifications during the year ended June 30,
1995.
Investment securities with a carrying amount of approximately $906,000
and $500,000 were pledged to secure deposits as required or permitted by law as
of June 30, 1996 and 1995, respectively.
F-11
<PAGE> 97
NOTE D-LOANS
Loans at June 30, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
1996 1995
------ -------
<S> <C> <C>
Loans secured by first mortgages on real estate:
1-4 family dwelling units $ 31,893 $ 24,956
5 or more dwelling units 3,233 3,288
Non-residential properties 7,255 7,309
Land 2,223 1,684
Construction 2,350 4,582
Consumer 1,641 201
Commercial 73 0
-------- --------
48,668 42,020
-------- --------
Allowance for loan losses (362) (319)
Net deferred loan origination fees (447) (420)
Loans in process (2,634) (2,321)
-------- --------
Total $ 45,225 $ 38,960
======== ========
<CAPTION>
An analysis of the allowance for loan losses is as follows:
(Dollars in thousands)
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $ 319 $ 229 $ 198
Provision for losses 50 109 113
Loans charged off (7) (19) (107)
----- ----- -----
Recoveries 0 0 25
----- ----- -----
Balance, end of year $ 362 $ 319 $ 229
===== ===== =====
</TABLE>
At June 30, 1996 and 1995, the Bank had loans amounting to
approximately $72,000 and $17,000, respectively, that were specifically
classified as impaired. The average balance of these loans amounted to
approximately $104,000 and $16,000 for the years ended June 30, 1996 and 1995,
respectively. The allowance for loan losses related to impaired loans amounted
to approximately $2,000 at June 30, 1996. No portion of the allowance for loan
loss related to impaired loans at June 30, 1995.
In addition, at June 30, 1996 and 1995, the Bank had other nonaccrual
loans of approximately $175,000 and $190,000, respectively, for which impairment
had not been recognized. Interest income that would have been recorded under the
original terms of such loans and the interest income actually recognized for
such loans are set forth in the following table:
<TABLE>
<CAPTION>
(Dollars in thousands)
1996 1995
------- ------
<S> <C> <C>
Interest income that would have
been recorded $16 $12
Interest income actually recognized 8 2
--- ---
Interest income foregone $ 4 $10
=== ===
</TABLE>
F-12
<PAGE> 98
The Bank has no commitments to loan additional funds to the borrowers
of impaired or nonaccrual loans.
At June 30, 1996 and 1995, the Bank serviced loans for others with a
principal balance of $3,358,000 and $2,797,000, respectively.
In the ordinary course of business, the Bank has and expects to
continue to have transactions, including borrowings, with its officers,
directors, and their affiliates. In the opinion of management, such transactions
were on substantially the same terms, including interest rates and collateral,
as those prevailing at the time of comparable transactions with other persons
and did not involve more than a normal risk of collectibility or present any
other unfavorable features to the Bank. All loans to such borrowers are
summarized as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
Balance, at June 30, 1995 $ 1,085
New loans 0
Payments (23)
-------
Balance, at June 30, 1996 $ 1,062
=======
<CAPTION>
NOTE E - ACCRUED INTEREST RECEIVABLE
Accrued interest receivable at June 30, 1996 and 1995 consists of the following:
(Dollars in thousands)
1996 1995
------ -----
<S> <C> <C>
Loans $246 $143
Mortgage-backed securities 19 23
Investments and other 8 3
---- ----
Totals $273 $169
==== ====
<CAPTION>
NOTE F - PREMISES AND EQUIPMENT
A summary of premises and equipment at June 30, 1996 and 1995 follows:
(Dollars in thousands)
<S> <C> <C>
Land $ 113 $ 113
Buildings and improvements 424 392
Furniture, fixtures, and equipment 275 249
----- -----
812 754
Accumulated depreciation (324) (286)
----- -----
Totals $ 488 $ 468
===== =====
</TABLE>
F-13
<PAGE> 99
NOTE G - SUPPLEMENTAL DISCLOSURES
The following are supplemental disclosures for the Statement of Cash
Flows for the years ended June 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
(Dollars in thousands)
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash paid during the year for interest $ 2,535 $1,927 $1,438
Cash paid during the year for income taxes 283 272 379
Total change in unrealized gain on securities available-for-sale (1) 23 124
<CAPTION>
NOTE H - CASH SURRENDER VALUE OF LIFE INSURANCE
In September 1995, the Bank purchased life insurance policies on each
of its directors other than Douglas C. Ulery. The Bank is the beneficiary of
such policies. At June 30, 1996 there were no notes payable to the insurance
company.
NOTE I - DEPOSITS
Deposit account balances at June 30, 1996 and 1995, are summarized as
follows:
(Dollars in thousands)
1996 1995
------------------------- --------------------------
Amount Percent Amount Percent
<S> <C> <C> <C> <C>
Non-interest bearing checking accounts $ 302 0.6% $ 0 0.0%
Now and money market accounts 395 0.8% 0 0.0%
Passbook savings accounts 9,561 20.3% 10,500 25.6%
Certificates of deposit 36,916 78.3% 30,436 74.4%
------- ------ ------- ------
Totals $47,174 100.00% $40,936 100.00%
======= ====== ======= ======
<CAPTION>
The aggregate amount of short-term jumbo CD's, each with a minimum
denomination of $100,000, was approximately $7,216,000 and $4,061,000 at June
30, 1996 and 1995, respectively. Deposits in excess of $100,000 are not insured
by the FDIC.
At June 30, 1996, the scheduled maturities of CD's are as follows:
(Dollars in thousands)
<S> <C>
July 1,1996 to June 30,1997 $15,409
July 1, 1997 to June 30, 1998 16,573
July 1, 1998 to June 30, 1999 4,254
July 1,1999 to June 30,2000 403
After June 30, 2000 277
-------
Totals $36,916
=======
</TABLE>
The Bank held deposits of approximately $806,000 for related parties at
June 30, 1996.
F-14
<PAGE> 100
NOTE J - ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank consist of the following at
June 30, 1996 and 1995, respectively:
<TABLE>
<CAPTION>
(Dollars in thousands)
Current interest Balance
----------------------
Rate 1996 1995
------ ------ -----
<S> <C> <C> <C>
Fixed rate advance, with monthly interest payments:
Advance due September 25, 1996 5.80% $ 500 $
Fixed rate advances, with monthly principal and interest payments:
Advance due February 1,2003 6.05% 110 122
Advance due March 1,2003 5.85% 236 263
Advance due December 31,2004 8.35% 510 570
Advance due January 1,2005 8.35% 303 326
Advance due January 1,2005 8.30% 601 671
Advance due February 1,2010 3.30% 643 666
------ ------
Totals $2,903 $2,618
====== ======
<CAPTION>
Federal Home Loan Bank ("FHLB") advances are collateralized by all
shares of FHLB stock owned by the Bank (totaling $394,000) and by 100% of the
Bank's qualified mortgage loan portfolio (totaling approximately $21,759,000).
Based on the carrying amount of FHLB stock owned by the Bank, total FHLB
advances are limited to approximately $7,882,000.
The aggregate minimum future principal payments on borrowings are as
follows:
<S> <C>
July 1, 1996 to June 30, 1997 $ 719
July 1,1997 to June 30,1998 221
July 1,1998 to June 30,1999 224
July 1, l999 to June 30, 2000 227
After June 30, 2000 1,512
------
Totals $2,903
------
<CAPTION>
NOTE K - FEDERAL INCOME TAXES
The consolidated provision for income taxes for the years ended June
30, 1996, 1995 and 1994 consists of the following:
(Dollars in thousands)
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Current federal tax expense $154 $233 $ 379
Deferred federal tax expense 89 7 (12)
---- ---- -----
$243 $240 $ 367
==== ==== =====
</TABLE>
F-15
<PAGE> 101
The provision for federal income taxes differs from that computed by
applying federal statutory rates to income (loss) before federal income tax
expense, as indicated in the following analysis:
<TABLE>
<CAPTION>
(Dollars in thousands)
1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
Statutory tax provision at a 34% rate $ 257 $ 268 $364
Effect of tax-exempt income (31) (11) 0
Other 17 (17) 3
----- ----- ----
$ 243 $ 240 $367
===== ===== ====
Effective tax rate 32.1% 30.2% 34.2%
<CAPTION>
Deferred tax assets and liabilities in other liabilities at June 30,
1996, and in other assets at June 30, 1995, consist of the following:
(Dollars in thousands)
1996 1995
------ ------
<S> <C> <C>
Deferred tax assets:
Deferred loan fees $ 5 $ 76
Nonaccrual loan interest 6 2
Allowance for loan loss 6 7
Other 3 9
---- ----
20 94
---- ----
Deferred tax liabilities
Accumulated depreciation (19) (8)
Net unrealized appreciation on
available-for-sale securities (69) (65)
---- ----
(88) (73)
---- ----
Net deferred tax assets (liabilities) $(68) $ 21
==== ====
</TABLE>
Included in retained earnings at June 30, 1996 and 1995 is
approximately $1,084,000 in bad debt reserves for which no deferred federal
income tax liability has been recorded. These amounts represent allocations of
income to bad debt deductions for tax purposes only. Reduction of these reserves
for purposes other than tax bad-debt losses or adjustments arising from
carryback of net operating losses would create income for tax purposes, which
would be subject to the then-current corporate income tax rate. The unrecorded
deferred liability on these amounts was approximately $369,000.
NOTE L - PENSION PLAN
In connection with the Financial Institutions' Retirement Fund, the
Bank participates with other companies in the financial institution industry in
a defined benefit plan. The plan covers all of the Bank's employees who are over
21 years old with at least one year of service. Pension expense amounted to
$25,000, $8,000 and $6,000 for the years ended June 30, 1996, 1995 and 1994,
respectively. Because the Bank participates in a group plan, separate
disclosures for the Bank pursuant to SFAS No. 87 are not available.
In 1994, the Bank also initiated a 401K Profit Sharing Plan. The plan
covers all of the Bank's employees who are over 21 years old with at least one
year of service. Participants may make salary savings contributions up to 15% of
their compensation, 50% of which will be matched by the Bank, up to 6% of each
employee's salary. Contributions charged to operations for the years ended June
30, 1996, 1995 and 1994 were $8,000, $5,000 and $0, respectively.
F-16
<PAGE> 102
NOTE M - INCENTIVE COMPENSATION PLAN
The Bank has an incentive compensation plan that covers all employees
who are normally scheduled to work 1,040 hours or more per year. The Bank's
contributions pursuant to the plan are based on a formula contained in the plan
which incorporates factors relating to the Bank's performance and are contingent
upon the Bank's attainment of certain levels of earnings, as defined in the
plan. During the years ended June 30, 1996, 1995 and 1994, contributions to the
plan charged to operations were $56,000, $38,000 and $0, respectively.
NOTE N - REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory--and possibly additional
discretionary--actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework from prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Qualitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set forth in
the table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of June 30, 1996, that the Bank
meets all adequacy requirements to which it is subject.
As of June 30, 1996, the most recent notification from the Bank's
regulators categorized the Bank as adequately capitalized under the regulatory
framework for prompt corrective action. To be categorized as adequately
capitalized the Bank must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the
institution's category.
The following reconciliation compares the Bank's capital under GAAP to
its regulatory capital:
<TABLE>
<CAPTION>
(Dollars in thousands)
Total Tier I
Capital Capital
------- -------
<S> <C> <C>
Equity per GAAP $5,398 $5,398
Less unrealized gain on securities available-
for-sale, net of applicable income taxes (127) (127)
Plus allowance for loan loss 362 0
------ ------
Regulatory capital $5,633 $5,271
====== ======
</TABLE>
F-17
<PAGE> 103
The Bank's actual capital amounts and ratios are also presented in the
table.
<TABLE>
<CAPTION>
(Dollars in thousands)
To be well capitalized
under prompt
For capital corrective
Actual adequacy purposes: action provisions
--------------- ------------------ ----------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1996:
Total Capital
(to Risk Weighted Assets) $5,633 18.8% $2,400 8.0% $2,999 10.0%
Tier I Capital
(to Risk Weighted Assets) 5,271 17.6% 900 3.0% 1,800 6.0%
Tier I Capital
(to Average Assets) 5,271 9.5% 834 1.5% 2,779 5.0%
As of June 30, 1995:
Total Capital
(to Risk Weighted Assets) 5,076 19.2% 2,117 8.0% 2,646 10.0%
Tier I Capital
(to Risk Weighted Assets) 4,757 18.0% 794 3.0% 1,587 6.0%
Tier I Capital
(to Average Assets) 4,757 9.8% 729 1.5% 2,430 5.0%
</TABLE>
NOTE O - COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Bank has various outstanding
commitments and contingent liabilities that are not reflected in the
accompanying consolidated financial statements. The principal commitments of the
Bank are as follows:
The Bank had outstanding commitments to originate loans as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
June 30,1996 June 30,1995
--------------------------------------- --------------------------------------
Fixed-rate Variable-rate Total Fixed-rate Variable-rate Total
---------- ------------- ----- ---------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
First mortgage $ 837 $169 $1,006 $50 $510 $560
Consumer and other loans 292 0 292 0 0 0
------ ---- ------ --- ---- ----
$1,129 $169 $1,298 $50 $510 $560
====== ==== ====== === ==== ====
</TABLE>
Interest rates on commitments at June 30, 1996, ranged from 7.75% to
10.00%. Interest rates on commitments at June 30, 1995, ranged from 7.125% to
11.00%. Loan commitments generally expire after 30 days.
In addition, the Bank is periodically a defendant in various legal
proceedings arising in connection with its business. It is the best judgment of
management that neither the financial position nor results of operations of the
Bank will be materially affected by the final outcome of these legal proceeding.
F-18
<PAGE> 104
NOTE P- FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit.
These instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amounts recognized in the statements of financial
condition.
The Bank's exposure to credit loss in the event of nonperformance by
the other party to the financial instruments for commitments to extend credit is
represented by the contractual notional amount of those instruments (see NOTE
O). The Bank uses the same credit policies in making commitments as it does for
on-balance-sheet-instruments.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses.
Since many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's creditworthiness on a
case-by-case basis. The amount and type of collateral obtained, if deemed
necessary by the Bank upon extension of credit, varies and is based on
management's credit evaluation of the counterparty.
At June 30, 1996, the Bank had deposits with the following banks in
excess of FDIC insurance of $100,000:
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
Huntington National Bank $ 705
Federal Home Loan Bank 1,288
Springfield Federal Savings Bank 700
</TABLE>
NOTE Q - FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values of the Bank's financial instruments are as
follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
June 30, 1996 June 30, 1995
-------------------------- -----------------------------
Carrying Carrying
amount Fair value amount Fair value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 1,843 $ 1,843 $ 2,377 $2,377
Time deposits 1,061 1,053 360 352
Investment securities 2,188 2,188 2,160 2,168
Mortgage-backed securities 2,975 2,975 3,667 3,603
Loans, net of allowance 45,225 45,364 38,960 Not available
Financial liabilities:
Deposits 47,174 47,311 40,936 Not available
Advances from FHLB 2,903 2,954 2,618 Not available
</TABLE>
The carrying amounts in the preceding table are included in the balance
sheet under the applicable captions. The Bank adopted SFAS No. 107 on June 30,
1996. Fair values for loans, deposits and borrowed funds before June 30, 1996,
are not available because the maintenance of such information was not required
for fiscal years which ended before December 15, 1995.
F-19
<PAGE> 105
NOTE R - SELECTED QUARTERLY FINANCIAL INFORMATION
The following table shows quarterly income and expense amounts
<TABLE>
<CAPTION>
(Dollars in thousands)
6/30/96 3/31/96 12/31/95 9/30/95
------- ------- -------- -------
<S> <C> <C> <C> <C>
Interest income $1,102 $1,094 $1,057 $1,027
Interest expense 662 653 633 600
Net interest income 440 441 424 427
Provision for loan loss 50 0 0 0
Security gains, net 0 0 0 0
Net income 121 149 119 125
<CAPTION>
6/30/95 3/31/95 12/31/94 9/30/94
------- ------- -------- -------
<S> <C> <C> <C> <C>
Interest income $1,007 $943 $911 $852
Interest expense 577 516 453 396
Net interest income 430 427 458 456
Provision for loan loss 22 15 63 9
Security gains, net 0 0 0 0
Net income 142 151 113 116
</TABLE>
NOTE S - SUBSEQUENT EVENT - ONE-TIME SAIF ASSESSMENT
The Bank, a SAIF-insured institution, is subject to regulation by the
OTS and the FDIC. The FDIC is authorized to establish different annual
assessment rates for deposit insurance for members of the BIF and the SAIF.
Legislation to recapitalize the SAIF and eliminate the significant premium
disparity between the SAIF and the BIF became effective September 30, 1996. The
recapitalization plan provides for the payment of a special assessment of $.657
per $100 of SAIF deposits held at March 31, 1995. Based on its $40.4 million in
deposits at March 31, 1995, the Bank will pay an additional assessment of
$265,000 by November 29, 1996.
The recapitalization plan also provides for the merger of the SAIF and
BIF effective January 1, 1999, assuming all savings associations have become
banks. As a result, it is expected that the thrift charter or the separate
regulation of thrifts will be eliminated. As a result, the Bank would be
regulated under federal law as a bank, and, as a result, would become subject to
the more restrictive activity limitations imposed on national banks.
NOTE T - SUBSEQUENT EVENT - PLAN FOR STOCK CONVERSION
On September 3, 1996, the board of directors of the Bank adopted a Plan
of Conversion, whereby the Bank will be converted from a mutual federal savings
bank to a permanent stock federal savings bank with the concurrent formation of
a holding company. Pursuant to the Plan of Conversion, shares of capital stock
of the holding company will be offered to eligible account holders and such
other persons as defined by the plan. The number of shares sold will be
determined by reference to an independent appraisal of the Bank and will reflect
its estimated pro forma market value, as converted. The plan provides that
nontransferable subscription rights to purchase stock will be offered first to
the Bank's eligible savings account holders; then to the Bank's tax-qualified
employee plans; then to supplemental eligible account holders; and then, to the
extent shares of the stock remain available, to other members of the Bank.
Concurrently, or promptly after the subscription offering, and on a lowest
priority basis, an opportunity to subscribe may also be offered to the general
public in a direct community offering.
Subsequent to the conversion, savings account holders and borrowers
will have no voting rights in the Bank. Voting rights will be vested exclusively
in the stockholders of the holding company. Savings deposits will continue to be
insured to the permissible extent in the Savings Association Insurance Fund; see
Note S.
F-20
<PAGE> 106
All costs associated with the conversion will be deferred and deducted
from the proceeds of the sale of stock. If the conversion is not completed, such
costs will be charged to expense. As of June 30, 1996, the Bank has incurred no
such costs.
At the time of the conversion, the Bank will establish a "Liquidation
Account" in an amount equal to the Bank's net worth as of the latest date of the
financial statements. The Liquidation Account will be maintained for the benefit
of depositors who continue to maintain their deposits in the Bank after the
conversion. In the event of a complete liquidation (and only in such event),
each eligible depositor will be entitled to receive a liquidation distribution
from the liquidation account in the proportionate amount of the then-current
adjusted balance for deposits then held, before any liquidation distribution may
be made with respect to the stockholders. The Bank may not declare or pay a
cash dividend on its common shares or repurchase any of its common shares if
after the payment of such dividend or the repurchase of such shares the Bank's
shareholders' equity would be reduced below the amount required for the
liquidation account or the Bank's regulatory capital would fail to satisfy
applicable regulatory requirements.
F-21
<PAGE> 107
================================================================================
No person has been authorized to give any information or to make any
representations other than as contained in this Prospectus, and, if given or
made, such information or representations must not be relied upon as having been
authorized by HCFC. This Prospectus does not constitute an offer to sell, or the
solicitation of an offer to buy, any security, other than the Common Shares
offered hereby, to any person in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom delivery of this
Prospectus would be unlawful. Neither the delivery of this Prospectus nor any
sale hereunder shall, under any circumstances, create any implication that the
information contained herein is correct as to any time subsequent to the date
hereof.
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY............................................................1
SELECTED CONSOLIDATED FINANCIAL
INFORMATION AND OTHER DATA.................................................6
REGULATORY CAPITAL COMPLIANCE.................................................8
RISK FACTORS..................................................................9
HOME CITY FINANCIAL CORPORATION..............................................13
HOME CITY FEDERAL SAVINGS BANK
OF SPRINGFIELD............................................................13
USE OF PROCEEDS..............................................................14
MARKET FOR COMMON SHARES.....................................................14
DIVIDEND POLICY..............................................................15
CAPITALIZATION...............................................................16
PRO FORMA DATA...............................................................17
SUMMARY CONSOLIDATED STATEMENTS OF INCOME....................................19
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF
HOME CITY..................................................................20
RECENT DEVELOPMENTS..........................................................31
THE BUSINESS OF HOME CITY....................................................33
MANAGEMENT OF HCFC...........................................................49
MANAGEMENT OF HOME CITY......................................................49
REGULATION...................................................................54
TAXATION.....................................................................60
THE CONVERSION...............................................................62
RESTRICTIONS ON ACQUISITION OF
HOME CITY AND HCFC AND RELATED
ANTI-TAKEOVER PROVISIONS...................................................73
DESCRIPTION OF AUTHORIZED SHARES.............................................77
REGISTRATION REQUIREMENTS....................................................78
LEGAL MATTERS................................................................78
EXPERTS......................................................................79
ADDITIONAL INFORMATION.......................................................79
FINANCIAL STATEMENTS........................................................F-1
================================================================================
================================================================================
Up to 882,000 Common Shares
HOME CITY FINANCIAL CORPORATION
(Holding Company for Home City Federal Savings
Bank of Springfield)
------------
PROSPECTUS
-------------
CHARLES WEBB & COMPANY
A Division of
Keefe, Bruyette & Woods, Inc.
November ___, 1996
================================================================================
-80-
<PAGE> 108
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
* Legal Fees and Expenses $98,000
* Printing, Postage and Mailing 40,000
Appraisal Fees and Expenses 15,000
* Accounting Fees and Expenses 50,000
* Blue Sky Filing Fees and Expenses 7,000
Federal Filing Fees 11,683
Conversion Agent Fees 7,000
* Other Expenses 9,317
** Underwriting Fees and Expenses 134,000
--------
Total estimated expenses $372,000
========
- -----------------------------
* Estimated.
** Home City and HCFC have retained Webb, to assist in the marketing of
the Common Shares. Webb will consult with and advise Home City and HCFC
and assist with the sale of the Common Shares in connection with the
Conversion on a best efforts basis. The services to be rendered by Webb
include assisting HCFC in conducting the Offering and educating Home
City personnel about the Conversion process.
Webb will receive a management fee in the amount of $25,000. Webb will
also receive a commission equal to 1.5% of the aggregate purchase price
paid for Common Shares sold in the Conversion, excluding purchases by
directors, officers and associates of such directors and officers, or
the Home City Financial Corporation Employee Stock Ownership Plan. In
addition, HCFC will reimburse Webb for certain expenses, including
reasonable legal fees. If HCFC and Webb deem necessary, Webb may enter
into Selected Dealers Agreements with other National Association of
Securities Dealers, Inc. member firms for assistance in the sale of the
Common Shares. Selected Dealers will receive fees equal to 5.5% of the
aggregate purchase price of the Common Shares sold, if any, pursuant to
Selected Dealer Agreements.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS OF HOME CITY.
(A) FEDERAL REGULATIONS
As a federal savings bank, Home City is subject to federal
regulations which provide that any person against whom any action, suit or other
judicial or administrative proceeding, or threatened proceeding, whether civil,
criminal, or otherwise, including any appeal or other proceeding for review (an
"Action"), is brought by reason of the fact that such person is or was a
director, officer or employee of Home City shall be indemnified by Home City for
the following:
(i) Reasonable costs and expenses, including
reasonable attorney's fees actually paid or incurred by such person in
connection with proceedings related to the defense or settlement of an Action:
(ii) Any amount for which such person becomes liable
by reason of any judgment in an Action; and
(iii) Reasonable costs and expenses, including
reasonable attorney's fees, actually paid or incurred in any Action to enforce
his rights under this section if the person attains a final judgment in favor of
such person in such Action.
Such indemnification shall be made to such officer, director
or employee only if the following requirements are met:
II-1
<PAGE> 109
(i) Home City shall make the indemnification in
connection with any Action which results in a final judgment on the merits in
favor of such director, officer or employee; and
(ii) Home City shall make the indemnification in case
of (A) settlement of any Action, (B) final judgment against such director,
officer or employee, or (C) final judgment in favor of such director, officer or
employee other than on the merits, only if a majority of the directors of Home
City determines that such director, officer or employee was acting in good faith
within what he or she reasonably believed under the circumstances was the scope
of his or her employment or authority and for a purpose which he or she
reasonably believed under the circumstances was in the best interest of Home
City or its stockholders.
Home City may authorize payment of reasonable costs and expenses,
including reasonable attorney's fees arising from the defense or settlement of
any Action, to any director, officer or employee if a majority of the directors
of Home City conclude that such person may become entitled to indemnification.
The directors of Home City may impose conditions on such payment, and, before
making an advance payment, Home City shall obtain an agreement from such person
that Home City will be repaid if the person on whose behalf payment is made is
later determined not to be entitled to such indemnification.
Home City currently maintains a directors' and officers' liability
policy providing for insurance of directors and officers for liability incurred
in connection with performance of their duties as directors and officers. Such
policy does not, however, provide insurance for losses resulting from willful or
criminal misconduct.
(B) HCFC'S CODE OF REGULATIONS
Article Five of HCFC's Code of Regulations provides for the
indemnification of officers and directors as follows:
Section 5.01. Mandatory Indemnification. The corporation shall
indemnify any officer or director of the corporation who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including, without limitation, any action threatened or instituted by or in the
right of the corporation), by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer, employee or agent of
another corporation (domestic or foreign, nonprofit or for profit), partnership,
joint venture, trust or other enterprise, against expenses (including, without
limitation, attorneys' fees, filing fees, court reporters' fees and transcript
costs), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal action
or proceeding, he had no reasonable cause to believe his conduct was unlawful. A
person claiming indemnification under this Section 5.01 shall be presumed, in
respect of any act or omission giving rise to such claim for indemnification, to
have acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal matter, to have had no reasonable cause to believe his conduct was
unlawful, and the termination of any action, suit or proceeding by judgment,
order, settlement or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, rebut such presumption.
II-2
<PAGE> 110
Section 5.02. Court-Approved Indemnification. Anything
contained in the Regulations or elsewhere to the contrary notwithstanding:
(A) the corporation shall not indemnify any officer or director of the
corporation who was a party to any completed action or suit instituted by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee or agent of another corporation (domestic
or foreign, nonprofit or for profit), partnership, joint venture, trust or other
enterprise, in respect of any claim, issue or matter asserted in such action or
suit as to which he shall have been adjudged to be liable for acting with
reckless disregard for the best interests of the corporation or misconduct
(other than negligence) in the performance of his duty to the corporation unless
and only to the extent that the Court of Common Pleas of Clark County, Ohio, or
the court in which such action or suit was brought shall determine upon
application that, despite such adjudication of liability, and in view of all the
circumstances of the case, he is fairly and reasonably entitled to such
indemnity as such Court of Common Pleas or such other court shall deem proper;
and
(B) the corporation shall promptly make any such unpaid indemnification
as is determined by a court to be proper as contemplated by this Section 5.02.
Section 5.03. Indemnification for Expenses. Anything contained in the
Regulations or elsewhere to the contrary notwithstanding, to the extent that an
officer or director of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section
5.01, or in defense of any claim, issue or matter therein, he shall be promptly
indemnified by the corporation against expenses (including, without limitation,
attorneys' fees, filing fees, court reporters' fees and transcript costs)
actually and reasonably incurred by him in connection therewith.
Section 5.04 Determination Required. Any indemnification required under
Section 5.01 and not precluded under Section 5.02 shall be made by the
corporation only upon a determination that such indemnification of the officer
or director is proper in the circumstances because he has met the applicable
standard of conduct set forth in Section 5.01. Such determination may be made
only (A) by a majority vote of a quorum consisting of directors of the
corporation who were not and are not parties to, or threatened with, any such
action, suit or proceeding, or (B) if such a quorum is not obtainable or if a
majority of a quorum of disinterested directors so directs, in a written opinion
by independent legal counsel other than an attorney, or a firm having associated
with it an attorney, who has been retained by or who has performed services for
the corporation, or any person to be indemnified, within the past five years, or
(C) by the shareholders, or (D) by the Court of Common Pleas of Clark County,
Ohio, or (if the corporation is a party thereto) the court in which such action,
suit or proceeding was brought, if any; any such determination may be made by a
court under division (D) of this Section 5.04 at any time including, without
limitation, any time before, during or after the time when any such
determination may be requested of, be under consideration by or have been denied
or disregarded by the disinterested directors under division (A) or by
independent legal counsel under division (B) or by the shareholders under
division (C) of this Section 5.04; and no failure for any reason to make any
such determination, and no decision for any reason to deny any such
determination, by the disinterested directors under division (A) or by
independent legal counsel under division (B) or by shareholders under division
(C) of this Section 5.04 shall be evidence in rebuttal of the presumption
recited in Section 5.01. Any determination made by the disinterested directors
under division (A) or by independent legal counsel under division (B) of this
Section 5.04 to make indemnification in respect of any claim, issue or matter
asserted in an action or suit threatened or brought by or in the right of the
corporation shall be promptly communicated to the person who threatened or
brought such action or suit, and within ten (10) days after receipt of such
notification such person shall have the right to petition the Court of Common
Pleas of Clark County, Ohio, or the court in which such action or suit was
brought, if any, to review the reasonableness of such determination.
Section 5.05. Advances for Expenses. Expenses (including, without
limitation, attorneys' fees, filing fees, court reporters' fees and transcript
costs) incurred in defending any action, suit or proceeding referred to in
Section 5.01 shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding to or on behalf of the officer or
director promptly as such expenses are incurred by him, but only if such officer
or director shall first agree, in writing, to repay all amounts so paid in
respect of any claim, issue or other matter asserted in such action, suit or
proceeding in defense of which he shall not have been successful on the merits
or otherwise:
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<PAGE> 111
(A) if it shall ultimately be determined as provided in Section 5.04
that he is not entitled to be indemnified by the corporation as provided under
Section 5.01; or
(B) if, in respect of any claim, issue or other matter asserted by or
in the right of the corporation in such action or suit, he shall have been
adjudged to be liable for acting with reckless disregard for the best interests
of the corporation or misconduct (other than negligence) in the performance of
his duty to the corporation, unless and only to the extent that the Court of
Common Pleas of Clark County, Ohio, or the court in which such action or suit
was brought shall determine upon application that, despite such adjudication of
liability, and in view of all the circumstances, he is fairly and reasonably
entitled to all or part of such indemnification.
Section 5.06. Article Five Not Exclusive. The indemnification provided
by this Article Five shall not be deemed exclusive of any other rights to which
any person seeking indemnification may be entitled under the Articles or the
Regulations or any agreement, vote of shareholders or disinterested directors,
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be an officer or director of the corporation and shall inure
to the benefit of the heirs, executors, and administrators of such a person.
Section 5.07. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, trustee, officer, employee, or agent of another corporation
(domestic or foreign, nonprofit or for profit), partnership, joint venture,
trust or other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the obligation or the power to
indemnify him against such liability under the provisions of this Article Five.
Section 5.08. Certain Definitions. For purposes of this Article Five,
and as examples and not by way of limitation:
(A) A person claiming indemnification under this Article 5 shall be
deemed to have been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 5.01, or in defense of any
claim, issue or other matter therein, if such action, suit or proceeding shall
be terminated as to such person, with or without prejudice, without the entry of
a judgment or order against him, without a conviction of him, without the
imposition of a fine upon him and without his payment or agreement to pay any
amount in settlement thereof (whether or not any such termination is based upon
a judicial or other determination of the lack of merit of the claims made
against him or otherwise results in a vindication of him); and
(B) References to an "other enterprise" shall include employee benefit
plans; references to a "fine" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee or agent with respect to
an employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the best
interests of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the corporation" within the meaning of that term as used in this Article Five.
Section 5.09. Venue. Any action, suit or proceeding to determine a
claim for indemnification under this Article Five may be maintained by the
person claiming such indemnification, or by the corporation, in the Court of
Common Pleas of Clark County, Ohio. The corporation and (by claiming such
indemnification) each such person consent to the exercise of jurisdiction over
its or his person by the Court of Common Pleas of Clark County, Ohio, in any
such action, suit or proceeding.
The Board of Directors is authorized, at their discretion, to obtain
policies of insurance insuring the Association against loss caused by the acts
of its directors, officers or employees and insuring its directors, officers or
employees for those expenses which an association may indemnify such director,
officer or employee under the authority of Revised Code Section 1151.151.
II-4
<PAGE> 112
(C) INDEMNIFICATION AGREEMENTS
(I) AGREEMENT WITH KELLER & COMPANY, INC.
Home City has agreed to indemnify Keller in connection with certain
matters related to the appraisal. Home City will indemnify Keller, its employees
and affiliates, for certain costs and expenses, including reasonable legal fees,
in connection with claims or litigation relating to the appraisal and arising
out of any misstatement or untrue statement of a material fact in information
supplied to Keller by Home City or by an intentional omission by Home City to
state a material fact in the information so provided, except where Keller has
been negligent or at fault.
(II) AGREEMENT WITH WEBB
Home City has agreed to indemnify and hold harmless Webb. In
general, the agency agreement with Webb (the "Agency Agreement") provides that
Home City will indemnify and hold harmless their directors, officers, employees,
agents and any controlling person against any and all loss, liability, claim,
damage or expense (including the fees and disbursements of counsel reasonably
incurred) arising out of any untrue statement, or alleged untrue statement, of a
material fact contained in the Summary Proxy Statement or the Prospectus, any
application to regulatory authorities, any "blue sky" application, or any other
related document prepared or executed by or on behalf of Home City with its
consent in connection with, or in contemplation of, the transactions
contemplated by the Agency Agreement, or any omission therefrom of a material
fact required to be stated therein, unless such untrue statement or omission, or
alleged untrue statement or omission, was made in reliance upon, and in
conformity with, written information regarding Webb furnished to Home City by
Webb expressly for use in the Summary Proxy Statement or the Prospectus.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
No securities of HCFC have been sold by HCFC without registration
pursuant to the Act, except as follows:
On August 14, 1996, in connection with the incorporation of HCFC,
100 common shares, without par value, of HCFC (the "Securities") were sold for
an aggregate purchase price of $100 pursuant to Section 4(2) of the Act in a
transaction not involving any public offering. The Securities were sold to
Douglas L. Ulery, the President of HCFC, who had access to all material
information about HCFC. The Securities were offered without the use of any form
of general solicitation or advertising. No underwriter was involved in the
transaction, and no commission, discount or other remuneration was paid or given
in connection with the sale of the Securities. Under the terms of the
Subscription Agreement between HCFC and Mr. Ulery, the Securities will be
repurchased by HCFC on the effective date of the Conversion.
II-5
<PAGE> 113
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
The exhibits filed as a part of this Registration Statement are as
follows:
*1.1 Engagement letter with Charles Webb & Company
1.2 Agency Agreement with Charles Webb & Company
(proposed)
*2 Plan of Conversion
*3.1 Articles of Incorporation of Home City Financial
Corporation
*3.2 Code of Regulations of Home City Financial
Corporation
*5 Opinion of Vorys, Sater, Seymour and Pease regarding
legality of securities being offered
*8 Opinion of Vorys, Sater, Seymour and Pease regarding
tax matters
*10.1 Home City Financial Corporation 1996 Stock Option
Plan (proposed)
*10.2 Home City Financial Corporation Recognition and
Retention Plan (proposed)
10.3 Home City Financial Corporation Employee Stock
Ownership Plan (proposed)
*10.4 Employment Agreement with Douglas L. Ulery (proposed)
*10.5 Tax Sharing Agreement (proposed)
*10.6 Management Services Agreement (proposed)
23.1 Consent of Robb, Dixon, Francis, Davis, Oneson &
Company
*23.2 Consent of Keller & Company, Inc.
*23.3 Consent of Vorys, Sater, Seymour and Pease
*27 Financial Data Schedule
99.1 Summary Proxy Statement
99.2 Order Form and Form of Certification
*99.3 Form of Proxy
*99.4 Solicitation and Marketing Material
*99.5 Appraisal Agreement with Keller & Company, Inc.
99.6 Appraisal Report prepared by Keller & Company, Inc.
- -------------------------
* Previously filed
(B) FINANCIAL STATEMENT SCHEDULES
No financial statement schedules are filed because the
required information is not applicable or is included in the consolidated
financial statements or related notes.
II-6
<PAGE> 114
ITEM 17. UNDERTAKINGS.
(a) The undersigned, HCFC, hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required
by Section 10(a)(3) of the Act;
(ii) To reflect in the prospectus any
facts or events arising after the
effective date of the Registration
Statement (or the most recent
post-effective amendment thereof)
which, individually or in the
aggregate, represent a fundamental
change in the information set forth
in the Registration Statement;
(iii) To include any material information
with respect to the plan of
distribution not previously
disclosed in the Registration
Statement or any material change to
such information in the Registration
Statement.
(2) That, for the purpose of determining any
liability under the Act, each such post-effective amendment shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) Insofar as indemnification for liabilities arising under
the Act may be permitted to directors, officers and controlling persons of HCFC,
pursuant to the foregoing provisions or otherwise, HCFC has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act, and is therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by HCFC of expenses incurred or paid by a director, officer or
controlling person of HCFC in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, HCFC will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-7
<PAGE> 115
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, duly authorized to do so, in the City of
Springfield, State of Ohio, on November 1, 1996.
By: Douglas L. Ulery
----------------------------------
Douglas L. Ulery
President, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-1 has been signed below by the following
persons in the capacities and as of the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Douglas L. Ulery President, Principal Executive Officer, November 1, 1996
- ------------------------ Principal Financial Officer, Principal
Douglas L. Ulery Accounting Officer and Director
- ------------------------ Director November 1, 1996
John D. Conroy
P. Clark Engelmeier
- ------------------------ Director November 1, 1996
P. Clark Engelmeier
James Foreman
- ------------------------ Director November 1, 1996
James Foreman
Terry A. Hoppes
- ------------------------ Director November 1, 1996
Terry A. Hoppes
</TABLE>
<PAGE> 1
EXHIBIT 1.2
HOME CITY FINANCIAL CORPORATION
828,000 Shares
COMMON STOCK
(No Par Value)
Subscription Price $10.00 Per Share
AGENCY AGREEMENT
_______ __, 1996
Charles Webb & Company, a division of
Keefe, Bruyette & Woods, Inc.
211 Bradenton Drive
Dublin, Ohio 43017-5034
Ladies and Gentlemen:
Home City Financial Corporation, an Ohio corporation (the "Company")
and Home City Federal Savings Bank of Springfield, Springfield, Ohio, a
federally chartered mutual savings bank (references to the "Bank" include the
Bank in the mutual or stock form, as indicated by the context), with its deposit
accounts insured by the Savings Association Insurance Fund ("SAIF") administered
by the Federal Deposit Insurance Corporation ("FDIC")), hereby confirm their
agreement with Charles Webb & Company, a division of Keefe, Bruyette & Woods,
Inc. ("Webb") or (the "Agent"), as follows:
SECTION 1. THE OFFERING. The Bank, in accordance with its plan of
conversion adopted by its Board of Directors (the "Plan"), intends to convert
from a federally chartered mutual savings bank to a federally chartered stock
savings bank, and will issue all of its issued and outstanding capital stock to
the Company. In addition, pursuant to the Plan, the Company will offer and sell
up to 828,000 shares of its common stock, no par value per share (the "Shares"
or "Common Stock"), in a subscription offering (the "Subscription Offering") to
(1) depositors of the Bank with Qualifying Deposits (as defined in the Bank's
Plan of Conversion) as of June 30, 1995 ("Eligible Account Holders"), (2) the
Bank's tax-qualified employee plans ("TQEPs"), (3) depositors of the Bank with
Qualifying Deposits as of September 30, 1996 ("Supplemental Eligible Account
Holders"), (4) the Bank's Other Eligible Members (as defined in the Bank's Plan
of Conversion) and (5) employees, officers and directors of the Bank. Subject to
the prior subscription rights of the above-listed parties, the Company is
offering for sale in a community offering (the "Community Offering" and when
referred to together with the Subscription Offering, the "Subscription and
Community Offering") conducted concurrently with the Subscription Offering, the
Shares not so subscribed for or ordered in the Subscription Offering to members
of the general public to whom a copy of the Prospectus (as hereinafter defined)
is
<PAGE> 2
delivered ("Other Subscribers") (all such offerees being referred to in the
aggregate as "Eligible Offerees"). It is anticipated that shares not subscribed
for in the Subscription and Community Offering will be offered to certain
members of the general public on a best efforts basis through a selected dealers
arrangement (the "Syndicated Community Offering") (the Subscription Offering,
Community Offering and Syndicated Community Offering are collectively referred
to as the "Offering"). It is acknowledged that the purchase of Shares in the
Offering is subject to the maximum and minimum purchase limitations as described
in the Plan and that the Company and the Bank may reject, in whole or in part,
any orders received in the Community Offering or Syndicated Community Offering.
Collectively, these transactions are referred to herein as the "Conversion."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (File No. ________) (the
"Registration Statement") containing a prospectus relating to the Offering for
the registration of the Shares under the Securities Act of 1933 (the "1933
Act"), and has filed such amendments thereof and such amended prospectuses as
may have been required to the date hereof. The term "Registration Statement"
shall include any documents incorporated by reference therein and all financial
schedules and exhibits thereto, as amended, including post-effective amendments.
The prospectus, as amended, on file with the Commission at the time the
Registration Statement initially became effective is hereinafter called the
"Prospectus," except that if any Prospectus is filed by the Company pursuant to
Rule 424(b) or (c) of the rules and regulations of the Commission under the 1933
Act (the "1933 Act Regulations") differing from the prospectus on file at the
time the Registration Statement initially becomes effective, the term
"Prospectus" shall refer to the prospectus filed pursuant to Rule 424(b) or (c)
from and after the time said prospectus is filed with the Commission.
In accordance with Title 12, Part 563b of the Code of Federal
Regulations (the "Conversion Regulations"), the Bank has filed with the Office
of Thrift Supervision (the "OTS") an Application for Approval of Conversion on
Form AC (the "Conversion Application"), including the Prospectus and the
Conversion Valuation Appraisal Report prepared by Keller & Company (the
"Appraisal") and has filed such amendments thereto as may have been required by
the OTS. The Conversion Application has been approved by the OTS and the related
Prospectus has been authorized for use by the OTS. In addition, the Company has
filed with the OTS its application on Form H-(e)1-S (the "Holding Company
Application") to become a registered savings and loan holding company under the
Home Owners' Loan Act, as amended ("HOLA"); and it has been approved.
SECTION 2. RETENTION OF AGENT; COMPENSATION; SALE AND DELIVERY OF THE
SHARES. Subject to the terms and conditions herein set forth, the Company and
the Bank hereby appoint Webb as their exclusive financial advisor and marketing
agent (i) to utilize its best efforts to solicit subscriptions for Shares of the
Company's Common Stock and to advise and assist the Company and the Bank with
2
<PAGE> 3
respect to the Company's sale of the Shares in the Offering and (ii) to
participate in the Offering in the areas of market making, research coverage and
in syndicate formation (if necessary).
On the basis of the representations, warranties, and agreements herein
contained, but subject to the terms and conditions herein set forth, the Agent
accepts such appointment and agrees to consult with and advise the Company and
the Bank as to the matters set forth in the letter agreement ("Letter
Agreement"), dated August 2, 1996 between the Bank and Webb (a copy of which is
attached hereto as Exhibit A). It is acknowledged by the Company and the Bank
that the Agent shall not be required to purchase any Shares or be obligated to
take any action which is inconsistent with all applicable laws, regulations,
decisions or orders.
The obligations of the Agent pursuant to this Agreement (other than
those set forth in Sections 2(d) and (e) hereof) shall terminate upon the
completion or termination or abandonment of the Plan by the Company or upon
termination of the Offering, but in no event later than 45 days after the
completion of the Subscription Offering (the "End Date"). All fees or expenses
due to the Agent but unpaid will be payable to the Agent in next day funds at
the earlier of the Closing Date (as hereinafter defined) or the End Date. In the
event the Offering is extended beyond the End Date, the Company, the Bank and
the Agent may agree to renew this Agreement under mutually acceptable terms.
In the event the Company is unable to sell a minimum of 612,000 Shares
within the period herein provided, this Agreement shall terminate and the
Company shall refund to any persons who have subscribed for any of the Shares,
the full amount which it may have received from them plus accrued interest as
set forth in the Prospectus; and none of the parties to this Agreement shall
have any obligation to the other parties hereunder, except as set forth in this
Section 2 and in Sections 6, 8 and 9 hereof.
In the event the Offering is terminated for any reason not attributable
to the action or inaction of the Agent, the Agent shall be paid the fees due to
the date of such termination pursuant to subparagraphs (a) and (d) below.
If all conditions precedent to the consummation of the Conversion,
including, without limitation, the sale of all Shares required by the Plan to be
sold, are satisfied, the Company agrees to issue, or have issued, the Shares
sold in the Offering and to release for delivery certificates for such Shares on
the Closing Date (as hereinafter defined) against payment to the Company by any
means authorized by the Plan; provided, however, that no funds shall be released
to the Company until the conditions specified in Section 7 hereof shall have
been complied with to the reasonable satisfaction of the Agent and their
counsel. The release of Shares against payment therefor shall be made at 10:00
a.m., Eastern Time, on a date and at a place acceptable to the Company, the Bank
and the Agent (it being understood that such date shall not be more than 10
business days after the expiration of the Offering) or such
3
<PAGE> 4
other time or place as shall be agreed upon by the Company, the Bank and the
Agent. Certificates for shares shall be delivered directly to the purchasers in
accordance with their directions. The date upon which the Company shall release
or deliver the Shares sold in the Offering, in accordance with the terms herein,
is called the "Closing Date."
The Agent shall receive the following compensation for its services
hereunder:
(a) A management fee of $25,000 payable on August 2, 1996. Such
fees shall be deemed to have been earned when due. Should the
Conversion be terminated for any reason not attributable to
the action or inaction of the Agent, the Agent shall have
earned and be entitled to be paid fees accruing through the
stage at which point the termination occurred, including any
accrued legal fees expended by the Agent.
(b) A Success Fee of 1.50% of the aggregate Purchase Price of
Common Stock sold in the Subscription Offering and Community
Offering excluding shares purchased by the Bank's officers,
directors, or employees (or members of their immediate
families) plus any ESOP, tax-qualified or stock based
compensation plans (except IRA's) or similar plan created by
the Bank for some or all of its directors or employees.
(c) If any shares of the Company's stock remain available after
the subscription offering, at the request of the Bank, Webb
will seek to form a syndicate of registered broker-dealers to
assist in the sale of such common stock on a best efforts
basis, subject to the terms and conditions set forth in the
selected dealers agreement. Webb will endeavor to distribute
the common stock among dealers in a fashion which best meets
the distribution objectives of the Bank and the Plan of
Conversion. Webb will be paid a fee not to exceed 5.5% of the
aggregate Purchase Price of the shares of common stock sold by
them. Webb will pass onto selected broker-dealers, who assist
in the syndicated community, an amount competitive with gross
underwriting discounts charged at such time for comparable
amounts of stock sold a comparable price per share in a
similar market environment. Fees with respect to purchases
affected with the assistance of a broker/dealer other than
Webb shall be transmitted by Webb to such broker/dealer. The
decision to utilize selected broker-dealers will be made by
the Bank upon consultation with Webb. In the event, with
respect to any stock purchases, fees paid pursuant to this
subparagraph 2(c), such fees shall be in lieu of, and not in
addition to, payment pursuant to subparagraph 2(a) and 2(b).
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<PAGE> 5
(d) The Bank and the Company hereby agree to reimburse the Agent,
from time to time upon the Agent's request, for its reasonable
out-of-pocket expenses, including without limitation,
accounting, legal counsel, and communication, excluding travel
expenses. The Bank will bear the expenses of the Offering
customarily borne by issuers including, without limitation,
OTS, SEC, "Blue Sky," and NASD filings and registration fees;
the fees of the Bank's accountants, conversion agent,
attorneys, appraiser, transfer agent and registrar, printing,
mailing and marketing expenses associated with the conversion;
and the fees set forth under this Section 2.
Full payment of Agent's actual and accountable expenses, advisory fees
and compensation shall be made in next day funds on the earlier of the Closing
Date or a determination by the Bank to terminate or abandon the Plan.
SECTION 3. PROSPECTUS; OFFERING. The Shares are to be
initially offered in the Offering at the Purchase Price as defined
and set forth on the cover page of the Prospectus.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Company and
the Bank jointly and severally represent and warrant to and agree
with each of the Agent as follows:
(a) The Registration Statement which was prepared by the Company
and the Bank and filed with the Commission was declared
effective by the Commission on __________, 1996. At the time
the Registration Statement, including the Prospectus contained
therein (including any amendment or supplement), became
effective, the Registration Statement contained all statements
that were required to be stated therein in accordance with the
1933 Act and the 1933 Act Regulations, complied in all
material respects with the requirements of the 1933 Act and
the 1933 Act Regulations and the Registration Statement,
including the Prospectus contained therein (including any
amendment or supplement thereto), and any information
regarding the Company or the Bank contained in Sales
Information (as such term is defined in Section 8 hereof)
authorized by the Company or the Bank for use in connection
with the Offering, did not contain an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading, and at the time any Rule 424(b) or (c) Prospectus
was filed with the Commission and at the Closing Date referred
to in Section 2, the Registration Statement, including the
Prospectus contained therein (including any amendment or
supplement thereto), any information regarding the
5
<PAGE> 6
Company or the Bank contained in Sales Information (as such
term is defined in Section 8 hereof) authorized by the Company
or the Bank for use in connection with the Offering will
contain all statements that are required to be stated herein
in accordance with the 1933 Act and the 1933 Act Regulations
and will not contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that the
representations and warranties in this Section 4(a) shall not
apply to statements or omissions made in reliance upon and in
conformity with written information furnished to the Company
or the Bank by the Agent or its counsel expressly regarding
the Agent for use in the Prospectus under the caption "The
Conversion-Marketing Arrangements" or statements in or
omissions from any Sales Information or information filed
pursuant to state securities or blue sky laws or regulations
regarding the Agent.
(b) The Conversion Application was approved by the OTS on
__________, 1996 and the related Prospectus has been
authorized for use by the OTS. At the time of the approval of
the Conversion Application, including the Prospectus
(including any amendment or supplement thereto), by the OTS
and at all times subsequent thereto until the Closing Date,
the Conversion Application, including the Prospectus
(including any amendment or supplement thereto), will comply
in all material respects with the Conversion Regulations
except to the extent waived in writing by the OTS. The
Conversion Application, including the Prospectus (including
any amendment or supplement thereto), does not include any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however,
that the representations and warranties in this Section 4(b)
shall not apply to statements or omissions made in reliance
upon and in conformity with written information furnished to
the Company or the Bank by the Agent or its counsel expressly
regarding the Agent for use in the Prospectus contained in the
Conversion Application under the caption "The Conversion-" or
statements in or omissions from any sales information or
information filed pursuant to state securities or blue sky
laws or regulations regarding the Agent. The Holding Company
Application for approval pursuant to the HOLA and the
regulations promulgated thereunder (the
6
<PAGE> 7
"Control Act Regulations"), has been prepared by the Bank and
the Company in material conformity with the requirements of
the Control Act Regulations and has been filed with and
approved by the OTS. A conformed copy of the Holding Company
Application has been delivered to the Agent.
(c) The Company has filed with the OTS the Holding Company
Application, and such Application was deemed complete by the
OTS. As of the Closing Date, approval of the Company's
acquisition of the Bank had been obtained from the OTS.
(d) No order has been issued by the OTS or the FDIC (hereinafter
any reference to the FDIC shall include the SAIF) preventing
or suspending the use of the Prospectus, and no action by or
before any such government entity to revoke any approval,
authorization or order of effectiveness related to the
Conversion is, to the best knowledge of the Company or the
Bank, pending or threatened.
(e) At the Closing Date referred to in Section 2, the Plan will
have been adopted by the Boards of Directors of both the
Company and the Bank and approved by the members of the Bank,
and the offer and sale of the Shares will have been conducted
in all material respects in accordance with the Plan, the
Conversion Regulations, and all other applicable laws,
regulations, decisions and orders, including all terms,
conditions, requirements and provisions precedent to the
Conversion imposed upon the Company or the Bank by the OTS,
the Commission, or any other regulatory authority and in the
manner described in the Prospectus. No person has sought to
obtain review of the final action of the OTS in approving the
Plan or in approving the Conversion or the Holding Company
Application pursuant to the HOLA, or any other statute or
regulation.
(f) The Bank has been organized and is a validly existing
federally chartered savings bank in mutual form of
organization and upon the Conversion will become a duly
organized and validly existing federally chartered savings
bank in capital stock form of organization, in both instances
duly authorized to conduct its business and own its property
as described in the Registration Statement and the Prospectus;
the Bank has obtained all material licenses, permits and other
governmental authorizations currently required for the conduct
of its business; all such licenses, permits and governmental
authorizations are in full force and effect, and the Bank is
in all material respects complying with all laws, rules,
regulations and
7
<PAGE> 8
orders applicable to the operation of its business; the Bank
is existing under the laws of the federal government and is
duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which its
ownership of property or leasing of property or the conduct of
its business requires such qualification, unless the failure
to be so qualified in one or more of such jurisdictions would
not have a material adverse effect on the condition, financial
or otherwise, or the business, operations or income of the
Bank. The Bank does not own equity securities or any equity
interest in any other business enterprise except as described
in the Prospectus or as would not be material to the
operations of the Bank. Upon completion of the sale by the
Company of the Shares contemplated by the Prospectus, (i) the
Bank will be converted pursuant to the Plan to a federally
chartered stock savings bank, (ii) all of the authorized and
outstanding capital stock of the Bank will be owned by the
Company, and (iii) the Company will have no direct
subsidiaries other than the Bank. The Conversion will have
been effected in all material respects 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
1933 Act Regulations, the OTS' resolutions or letters of
approval, all terms, conditions, requirements and provisions
with respect to the Conversion imposed by the Commission, the
OTS, and the FDIC, if any, will have been complied with by the
Company and the Bank in all material respects or appropriate
waivers will have been obtained and all material notice and
waiting periods will have been satisfied, waived or elapsed.
(g) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State
of Ohio with corporate power and authority to own, lease and
operate its properties and to conduct its business as
described in the Registration Statement and the Prospectus,
and at the Closing Date the Company will be qualified to do
business as a foreign corporation in each jurisdiction in
which the conduct of its business requires such qualification,
except where the failure to so qualify would not have a
material adverse effect on the condition, financial or
otherwise, or the business, operations or income of the
Company. The Company has obtained all material licenses,
permits and other governmental authorizations currently
required for the conduct
8
<PAGE> 9
of its business; all such licenses, permits and governmental
authorizations are in full force and effect, and the Company
is in all material respects complying with all laws, rules,
regulations and orders applicable to the operation of its
business.
(h) The Bank has one wholly owned subsidiary, Homciti Service
Corp, which is duly incorporated and validly existing as a
corporation in good standing under the laws of the State of
Ohio, and is duly licensed and possessed of full corporate
power and authority to own its properties and conduct its
business as described in the Prospectus.
(i) The Bank is a member of the Federal Home Loan Bank of Chicago
("FHLB-Chicago"). The deposit accounts of the Bank are insured
by the FDIC up to the applicable limits; and no proceedings
for the termination or revocation of such insurance are
pending or, to the best knowledge of the Company or the Bank,
threatened. Upon consummation of the Conversion, the
liquidation account for the benefit of Eligible Account
Holders will be duly established in accordance with the
requirements of the Conversion Regulations.
(j) The Company, the Bank and its subsidiaries have good and
marketable title to all real property and other assets
material to the business of the Company and the Bank taken as
a whole and to those properties and assets described in the
Registration Statement and Prospectus as owned by them, free
and clear of all liens, charges, encumbrances or restrictions,
except such as are described in the Registration Statement and
Prospectus, or are not material to the business of the Company
and the Bank taken as a whole; and all of the leases and
subleases material to the business of the Company and the Bank
taken as a whole under which the Company or the Bank hold
properties, including those described in the Registration
Statement and Prospectus, are in full force and effect.
(k) The Company and the Bank have received an opinion of their
special counsel, Vorys, Sater, Seymour and Pease with respect
to the federal and Ohio state income tax consequences of the
Conversion, the acquisition of the capital stock of the Bank
by the Company and the sale of the Shares as described in the
Registration Statement and the Prospectus, all material
aspects of the opinions of Vorys, Sater, Seymour and Pease are
accurately summarized in the Prospectus; and the facts and
representations upon which such opinions are based are
truthful, accurate and complete.
9
<PAGE> 10
(l) The Company and the Bank have all such power, authority,
authorizations, approvals and orders as may be required to
enter into this Agreement, to carry out the provisions and
conditions hereof and to issue and sell the Shares to be sold
by the Company as provided herein and as described in the
Prospectus. The consummation of the Conversion, the execution,
delivery and performance of this Agreement and the
consummation of the transactions herein contemplated have been
duly and validly authorized by all necessary corporate action
on the part of the Company and the Bank and this Agreement has
been validly executed and delivered by the Company and the
Bank and is the valid, legal and binding agreement of the
Company and the Bank enforceable in accordance with its terms
(except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar
laws relating to or affecting the enforcement of creditors'
rights generally or the rights of creditors of savings and
loan holding companies, the accounts of whose subsidiaries 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, and except to the extent if any, that the
provisions of Sections 8 and 9 hereof may be unenforceable as
against public policy).
(m) The Company and the Bank are not in violation of any directive
received from the OTS, the FDIC, or any other agency to make
any material change in the method of conducting their
businesses so as to comply in all material respects with all
applicable statutes and regulations (including, without
limitation, regulations, decisions, directives and orders of
the OTS, and the FDIC) and, except as may be set forth in the
Registration Statement and the Prospectus, there is no suit or
proceeding or charge or action before or by any court,
regulatory authority or governmental agency or body, pending
or, to the knowledge of the Company or the Bank, threatened,
which might materially and adversely affect the Conversion,
the performance of this Agreement or the consummation of the
transactions contemplated in the Plan and as described in the
Registration Statement and the Prospectus or which might
result in any material adverse change in the condition
(financial or otherwise), earnings, capital or properties of
the Company or the Bank, or which would materially affect
their properties and assets.
10
<PAGE> 11
(n) The financial statements, schedules and notes related thereto
which are included in the Prospectus fairly present the
consolidated financial condition, results of operations,
retained earnings and cash flows of the Bank at the respective
dates indicated and for the respective periods covered thereby
and comply as to form in all material respects with the
applicable accounting requirements of Title 12 of the Code of
Federal Regulations and generally accepted accounting
principles (including those requiring the recording of certain
assets at their current market value). Such financial
statements, schedules and notes related thereto have been
prepared in accordance with generally accepted accounting
principles consistently applied through the periods involved,
present fairly in all material respects the information
required to be stated therein and are consistent with the most
recent financial statements and other reports filed by the
Bank with the OTS. The other financial, statistical and pro
forma information and related notes included in the Prospectus
present fairly the information shown therein on a basis
consistent with the audited and unaudited financial statements
of the Bank included in the Prospectus, and as to the pro
forma adjustments, the adjustments made therein have been
properly applied on the basis described therein.
(o) Since the respective dates as of which information is given in
the Registration Statement including the Prospectus: (i) there
has not been any material adverse change, financial or
otherwise, in the condition of the Company or the Bank and its
subsidiaries considered as one enterprise, or in the earnings,
capital or properties of the Company or the Bank, whether or
not arising in the ordinary course of business; (ii) there has
not been any material increase in the long-term debt of the
Bank or in the principal amount of the Bank's assets which are
classified by the Bank as substandard, doubtful or loss or in
loans past due 90 days or more or real estate acquired by
foreclosure, by deed-in-lieu of foreclosure or deemed
in-substance foreclosure or any material decrease in retained
earnings or total assets of the Bank nor has the Company or
the Bank issued any securities (other than in connection with
the incorporation of the Company) or incurred any liability or
obligation for borrowing other than in the ordinary course of
business; (iii) there have not been any material transactions
entered into by the Company or the Bank; (iv) there has not
been any material adverse change in the aggregate dollar
amount of the Bank's
11
<PAGE> 12
deposits or its consolidated net worth or spread; (v) there
has been no material adverse change in the Company's or the
Bank's relationship with its insurance carriers, including,
without limitation, cancellation or other termination of the
Company's or the Bank's fidelity bond or any other type of
insurance coverage; (vi) except as disclosed in the Prospectus
there has been no material change in management of the Company
or the Bank, neither of which has any material undisclosed
liability of any kind, contingent or otherwise; (vii) the
Company or the Bank has not sustained any material loss or
interference with its respective business or properties from
fire, flood, windstorm, earthquake, accident or other
calamity, whether or not covered by insurance; (viii) the
Company or the Bank is not in default in the payment of
principal or interest on any outstanding debt obligations;
(ix) the capitalization, liabilities, assets, properties and
business of the Company, the Mutual Holding Company and the
Bank conform in all material respects to the descriptions
thereof contained in the Prospectus; and (x) neither the
Company, the Bank nor its wholly owned subsidiary has any
material contingent liabilities, except as set forth in the
Prospectus. All documents made available to or delivered or to
be made available to or delivered by the Bank or the Company
or their representatives in connection with the issuance and
sale of the Shares, including records of account holders,
depositors, borrowers and other members of the Bank, or in
connection with the Agent's exercise of due diligence, except
for those documents which were prepared by parties other than
the Bank, the Company or their representatives, to the best
knowledge of the Bank and the Company, were on the dates on
which they were delivered, or will be on the dates on which
they are to be delivered, true, complete and correct in all
material respects.
(p) As of the date hereof and as of the Closing Date, neither the
Company, the Bank nor its subsidiary is in violation of its
articles of incorporation or bylaws or charter or bylaws,
respectively (and the Bank will not be in violation of its
charter or bylaws in capital stock form upon consummation of
the Conversion), or in default in the performance or
observance of any material obligation, agreement, covenant, or
condition contained in any material contract, lease, loan
agreement, indenture or other instrument to which it is a
party or by which it or any of its property may be bound; the
consummation of the Conversion, the execution, delivery and
performance of this Agreement and the consummation of the
transactions herein
12
<PAGE> 13
contemplated have been duly and validly authorized by all
necessary corporate action on the part of the Company and the
Bank and this Agreement has been validly executed and
delivered by the Company and the Bank and is a valid, legal
and binding Agreement of the Company and the Bank enforceable
in accordance with its terms, except as the enforceability
thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, conservatorship, receivership or
other similar laws now or hereafter in effect relating to or
affecting the enforcement of creditors' rights generally or
the rights of creditors of federal savings institutions, (ii)
general equitable principles, (iii) laws relating to the
safety and soundness of insured depository institutions, and
(iv) applicable law or public policy with respect to the
indemnification and/or contribution provisions contained
herein, and except that no representation or warranty need be
made as to the effect or availability of equitable remedies or
injunctive relief (regardless of whether such enforceability
is considered in a proceeding in equity or at law). The
consummation of the transactions herein contemplated will not:
(i) conflict with or constitute a breach of, or default under,
or result in the creation of any material lien, charge or
encumbrance (with the exception of the liquidation account
established in the Conversion) upon any of the assets of the
Company or the Bank pursuant to the articles of incorporation
and bylaws of the Company or the charter and bylaws of the
Bank (in either mutual or capital stock form), or any material
contract, lease or other instrument to which the Company or
the Bank has a beneficial interest, or any applicable law,
rule, regulation or order; (ii) violate any authorization,
approval, judgement, decree, order, statute, rule or
regulation applicable to the Company or the Bank, except for
such violations which would not have a material adverse effect
on the financial condition and results of operations of the
Company and the Bank on a consolidated basis; or (iii) with
the exception of the liquidation account established in the
Conversion, result in the creation of any material lien,
charge or encumbrance upon any property of the Company or the
Bank.
(q) No default exists, and no event has occurred which with notice
or lapse of time, or both, would constitute a default, on the
part of the Company, the Bank or its subsidiary in the due
performance and observance of any term, covenant or condition
of any indenture, mortgage, deed of trust, note, bank loan or
credit agreement or any other
13
<PAGE> 14
instrument or agreement to which the Company or the Bank or
its subsidiary is a party or by which any of them or any of
their property is bound or affected, except such defaults
which would not have a material adverse affect on the
financial condition or results of operations of the Company,
the Bank and its subsidiary on a consolidated basis; 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, the Bank or its subsidiary, threatened any
action or proceeding wherein the Company, the Bank or its
subsidiary would or might be alleged to be in default
thereunder.
(r) Upon consummation of the Conversion, the authorized, issued
and outstanding equity capital of the Company will be within
the range set forth in the Prospectus under the caption
"Capitalization," and no shares of Common Stock have been or
will be issued and outstanding prior to the Closing Date
referred to in Section 2 herein (other than in connection with
the incorporation of the Company); the Shares will have been
duly and validly authorized for issuance and, when issued and
delivered by the Company pursuant to the Plan against payment
of the consideration calculated as set forth in the Plan and
in the Prospectus, will be duly and validly issued, fully paid
and non-assessable; no preemptive rights exist with respect to
the Shares; and the terms and provisions of the Shares will
conform in all material respects to the description thereof
contained in the Registration Statement and the Prospectus. To
the best knowledge of the Company and the Bank, upon the
issuance of the Shares, good title to the Shares will be
transferred from the Company to the purchasers thereof against
payment therefor, subject to such claims as may be asserted
against the purchasers thereof by third-party claimants.
(s) 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 approval of the Commission, the OTS, and any
necessary qualification, notification, registration or
exemption under the securities or blue sky laws of the various
states in which the Shares are to be offered, and except as
may be required under the rules and regulations of the NASD
and/or the National Association of Securities Dealers
Automated Quotation ("Nasdaq") Stock Market.
14
<PAGE> 15
(t) Robb, Dixon, Francis, Davis, Oneson & Company, which has
certified the consolidated audited financial statements and
schedules of the Bank included in the Prospectus, has advised
the Company and the Bank in writing that they are, with
respect to the Company and the Bank, independent public
accountants within the meaning of the Code of Professional
Ethics of the American Institute of Certified Public
Accountants and Title 12 of the Code of Federal Regulations
and Section 571.2(c)(3).
(u) Keller & Company, which has prepared the Bank's Conversion
Valuation Appraisal Report as of ____________, 1996 (as
amended or supplemented, if so amended or supplemented) (the
"Appraisal"), has advised the Company in writing that it is
independent of the Company and the Bank within the meaning of
the Conversion Regulations.
(v) The Company, the Bank and its subsidiary have timely filed all
required federal, state and local tax returns; the Company,
the Bank and its subsidiary have paid all taxes that have
become due and payable in respect of such returns, except
where permitted to be extended, have made adequate reserves
for similar future tax liabilities and no deficiency has been
asserted with respect thereto by any taxing authority.
(w) The Bank is in compliance in all material respects with the
applicable financial record-keeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of
1970, as amended, and the regulations and rules thereunder.
(x) To the knowledge of the Company and the Bank, neither the
Company, the Bank nor employees of the Company or the Bank
have made any payment of funds of the Company or the Bank as a
loan for the purchase of the Shares or made any other payment
of funds prohibited by law, and no funds have been set aside
to be used for any payment prohibited by law.
(y) Prior to the Conversion, neither the Company nor the Bank 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 in the ordinary course of
business or as described in the Prospectus, and except for any
shares issued in connection with the incorporation of the
Company); (ii) had any material dealings within the 12 months
prior to the date hereof with any member of the NASD, or any
person related to or associated with such member,
15
<PAGE> 16
other than discussions and meetings relating to the proposed
Offering and routine purchases and sales of United States
government and agency securities; (iii) entered into a
financial or management consulting agreement except as
contemplated hereunder; and (iv) engaged any intermediary
between the Agent and the Company and the Bank in connection
with the offering of the Shares, and no person is being
compensated in any manner for such service. Appropriate
arrangements have been made for placing the funds received
from subscriptions for Shares in a special interest-bearing
account with the Bank until all Shares are sold and paid for,
with provision for refund to the purchasers in the event that
the Conversion is not completed for whatever reason or for
delivery to the Company if all Shares are sold.
(z) The Company and the Bank have not relied upon the Agent or its
legal counsel or other advisors for any legal, tax or
accounting advice in connection with the Conversion.
(aa) The Company is not required to be registered under the
Investment Company Act of 1940, as amended.
(bb) Any certificates signed by an officer of the Company or the
Bank pursuant to the conditions of this Agreement and
delivered to the Agent or their counsel that refers to this
Agreement shall be deemed to be a representation and warranty
by the Company or the Bank to the Agent as to the matters
covered thereby with the same effect as if such representation
and warranty were set forth herein.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
Webb represents and warrants to the Company and the Bank that:
(i) Webb is a corporation and is validly existing in good
standing under the laws of the State of Ohio with full power and
authority to provide the services to be furnished to the Bank and the
Company hereunder.
(ii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary action on the part of Webb, and
this Agreement has been duly and validly executed and delivered by Webb
and is a legal, valid and binding agreement of Webb, enforceable in
accordance with its terms.
(iii) Each of Webb and its employees, agent and
representatives who shall perform any of the services hereunder shall
be duly authorized and empowered, and
16
<PAGE> 17
shall have all licenses, approvals and permits necessary to perform
such services.
(iv) The execution and delivery of this Agreement by Webb, the
consummation of the transactions contemplated hereby and compliance
with the terms and provisions hereof will not conflict with, or result
in a breach of, any of the terms, provisions or conditions of, or
constitute a default (or an event which with notice or lapse of time or
both would constitute a default) under, the articles of incorporation
of Webb or any agreement, indenture or other instrument to which Webb
is a party or by which it or its property is bound.
(v) No approval of any regulatory or supervisory or other
public authority is required in connection with Webb's execution and
delivery of this Agreement, except as may have been received.
(vi) There is no suit or proceeding or charge or action before
or by any court, regulatory authority or government agency or body or,
to the knowledge of Webb, pending or threatened, which might materially
adversely affect Webb's performance of this Agreement.
SECTION 5.1 COVENANTS OF THE COMPANY AND THE BANK. The Company and the
Bank hereby jointly and severally covenant with each of the Agent as follows:
(a) The Company has filed the Registration Statement with the
Commission. The Company will not, at any time after the date
the Registration Statement is declared effective, file any
amendment or supplement to the Registration Statement without
providing the Agent and its counsel an opportunity to review
such amendment or supplement or file any amendment or
supplement to which amendment or supplement the Agent or its
counsel shall reasonably object.
(b) The Bank has filed the Conversion Application with the OTS.
The Bank will not, at any time after the Conversion
Application is approved by, the OTS, file any amendment or
supplement to such Conversion Application without providing
the Agent and its counsel an opportunity to review such
amendment or supplement or file any amendment or supplement to
which amendment or supplement the Agent or its counsel shall
reasonably object.
(c) The Company has filed the Holding Company Application with the
OTS. The Company will not, at any time before the Holding
Company Application is approved by the OTS, file any amendment
or
17
<PAGE> 18
supplement to such Holding Company Application without
providing the Agent and its counsel an opportunity to review
the nonconfidential portions of such amendment or supplement
or file any amendment or supplement to which amendment or
supplement the Agent or its counsel shall reasonably object.
(d) The Company and the Bank will use their best efforts to cause
any post-effective amendment to the Registration Statement to
be declared effective by the Commission and any post-effective
amendment to the Conversion Application to be approved by the
OTS and will immediately upon receipt of any information
concerning the events listed below notify the Agent: (i) when
the Registration Statement, as amended, has become effective;
(ii) when the Conversion Application, as amended, has been
approved by the OTS; (iii) any comments from the Commission,
the OTS or any other governmental entity with respect to the
Conversion or the transactions contemplated by this Agreement;
(iv) of the request by the Commission, the OTS or any other
governmental entity for any amendment or supplement to the
Registration Statement, the Conversion Application or for
additional information; (v) of the issuance by the Commission,
the OTS or any other governmental entity of any order or other
action suspending the Offering or the use of the Registration
Statement or the Prospectus or any other filing of the Company
or the Bank under the Conversion Regulations, or other
applicable law, or the threat of any such action; (vi) the
issuance by the Commission, the OTS or any authority of any
stop order suspending the effectiveness of the Registration
Statement or of the initiation or threat of initiation or
threat of any proceedings for that purpose; or (vii) of the
occurrence of any event mentioned in paragraph (h) below. The
Company and the Bank will make every reasonable effort (i) to
prevent the issuance by the Commission, the OTS or any state
authority of any such order and, if any such order shall at
any time be issued, (ii) to obtain the lifting thereof at the
earliest possible time.
(e) The Company and the Bank will deliver to the Agent and to its
counsel two conformed copies of the Registration Statement,
the Conversion Application and the Holding Company
Application, as originally filed and of each amendment or
supplement thereto, including all exhibits. Further, the
Company and the Bank will deliver such additional copies of
the foregoing documents to counsel to the Agent as may be
required for any NASD and "blue sky" filings.
18
<PAGE> 19
(f) The Company and the Bank will furnish to the Agent, from time
to time during the period when the Prospectus (or any later
prospectus related to this offering) is required to be
delivered under the 1933 Act or the Securities Exchange Act of
1934 (the "1934 Act"), such number of copies of such
Prospectus (as amended or supplemented) as the Agent may
reasonably request for the purposes contemplated by the 1933
Act, the 1933 Act Regulations, the 1934 Act or the rules and
regulations promulgated under the 1934 Act (the "1934 Act
Regulations"). The Company authorizes the Agent to use the
Prospectus (as amended or supplemented, if amended or
supplemented) in any lawful manner contemplated by the Plan in
connection with the sale of the Shares by the Agent.
(g) The Company and the Bank will comply with any and all material
terms, conditions, requirements and provisions with respect to
the Conversion and the transactions contemplated thereby
imposed by the Commission, the OTS or the Conversion
Regulations, and by the 1933 Act, the 1933 Act Regulations,
the 1934 Act and the 1934 Act Regulations to be complied with
prior to or subsequent to the Closing Date and when the
Prospectus is required to be delivered, and during such time
period the Company and the Bank will comply, at their own
expense, with all material requirements imposed upon them by
the Commission, the OTS or the Conversion Regulations, and by
the 1933 Act, the 1933 Act Regulations, the 1934 Act and the
1934 Act Regulations, including, without limitation, Rule
10b-5 under the 1934 Act, in each case as from time to time in
force, so far as necessary to permit the continuance of sales
or dealing in shares of Common Stock during such period in
accordance with the provisions hereof and the Prospectus.
(h) If, at any time during the period when the Prospectus relating
to the Shares is required to be delivered, any event relating
to or affecting the Company, the Bank or its subsidiary shall
occur, as a result of which it is necessary or appropriate, in
the opinion of counsel for the Company and the Bank or in the
reasonable opinion of the Agent's counsel, to amend or
supplement the Registration Statement or Prospectus in order
to make the Registration Statement or Prospectus not
misleading in light of the circumstances existing at the time
the Prospectus is delivered to a purchaser, the Company and
the Bank will immediately so inform the Agent and prepare and
file, at their own expense, with the Commission and the OTS
and furnish to the
19
<PAGE> 20
Agent a reasonable number of copies of an amendment or
amendments of, or a supplement or supplements to, the
Registration Statement or Prospectus (in form and substance
reasonably satisfactory to the Agent and its counsel after a
reasonable time for review) which will amend or supplement the
Registration Statement or Prospectus so that as amended or
supplemented it will not contain an untrue statement of a
material fact or omit to state a material fact necessary in
order to make the statements therein, in light of the
circumstances existing at the time the Prospectus is delivered
to a purchaser, not misleading. For the purpose of this
Agreement, the Company and the Bank each will timely furnish
to the Agent such information with respect to itself as the
Agent may from time to time reasonably request.
(i) The Company and the Bank will take all necessary actions, in
cooperating with the Agent, and furnish to whomever the Agent
may direct, such information as may be required to qualify or
register the Shares for offering and sale by the Company or to
exempt such Shares from registration, or to exempt the Company
as a broker-dealer and its officers, directors and employees
as broker-dealers or agent under the applicable securities or
blue sky laws of such jurisdictions in which the Shares are
required under the Conversion Regulations to be sold or as the
Agent and the Company and the Bank may reasonably agree upon;
provided, however, that the Company shall not be obligated to
file any general consent to service of process, to qualify to
do business in any jurisdiction in which it is not so
qualified, or to register its directors or officers as
brokers, dealers, salesmen or agent in any jurisdiction. In
each jurisdiction where any of the Shares shall have been
qualified or registered as above provided, the Company will
make and file such statements and reports in each fiscal
period as are or may be required by the laws of such
jurisdiction.
(j) The liquidation account for the benefit of Eligible Account
Holders and Supplemental Eligible Account Holders will be duly
established and maintained in accordance with the requirements
of the OTS, and such Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain their
savings accounts in the Bank will have an inchoate interest in
their pro rata portion of the liquidation account which shall
have a priority superior to that of the holders of shares of
Common Stock in the event of a complete liquidation of the
Bank.
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(k) The Company and the Bank will not sell or issue, contract to
sell or otherwise dispose of, for a period of 90 days after
the Closing Date, without the Agent's prior written consent,
any shares of Common Stock other than the Shares or other than
in connection with any plan or arrangement described in the
Prospectus, including existing stock benefit plans.
(l) The Company shall register its Common Stock under Section
12(g) of the 1934 Act concurrent with the Offering pursuant to
the Plan and shall request that such registration be effective
upon completion of the Conversion. The Company shall maintain
the effectiveness of such registration for not less than three
years or such shorter period as may be required by the OTS.
(m) During the period during which the Company's Common Stock is
registered under the 1934 Act or for three (3) years from the
date hereof, whichever period is greater, the Company will
furnish to its stockholders as soon as practicable after the
end of each fiscal year an annual report of the Company
(including a consolidated balance sheet and statements of
consolidated income, stockholders' equity and cash flows of
the Company and its subsidiaries as at the end of and for such
year, certified by independent public accountants in
accordance with Regulation S-X under the 1933 Act and the 1934
Act).
(n) During the period of three years from the date hereof, the
Company will furnish to the Agent: (i) as soon as practicable
after such information is publicly available, a copy of each
report of the Company furnished to or filed with the
Commission under the 1934 Act or any national securities
exchange or system on which any class of securities of the
Company is listed or quoted (including, but not limited to,
reports on Forms 10-K, 10-Q and 8-K and all proxy statements
and annual reports to stockholders), (ii) a copy of each other
non-confidential report of the Company mailed to its
stockholders or filed with the Commission, the 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, each press release and
material news items and additional documents and information
with respect to the Company or the Bank as the Agent may
reasonably request; and (iii) from time to time, such other
nonconfidential information concerning the Company or the Bank
as the Agent may reasonably request.
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<PAGE> 22
(o) The Company and the Bank will use the net proceeds from the
sale of the Shares in the manner set forth in the Prospectus
under the caption "Use of Proceeds."
(p) Other than as permitted by the Conversion Regulations, the
HOLA, the 1933 Act, the 1933 Act Regulations, and the laws of
any state in which the Shares are registered or qualified for
sale or exempt from registration, neither the Company nor the
Bank will distribute any prospectus, offering circular or
other offering material in connection with the offer and sale
of the Shares.
(q) The Company will use its best efforts to (i) encourage and
assist a market maker to establish and maintain a market for
the Shares and (ii) list and maintain quotation of the Shares
on a national or regional securities exchange or on the Nasdaq
Stock Market effective on or prior to the Closing Date.
(r) The Bank will maintain appropriate arrangements for depositing
all funds received from persons mailing subscriptions for or
orders to purchase Shares in the Offering on an
interest-bearing basis at the rate described in the Prospectus
until the Closing Date and satisfaction of all conditions
precedent to the release of the Bank's obligation to refund
payments received from persons subscribing for or ordering
Shares in the Offering in accordance with the Plan and as
described in the Prospectus or until refunds of such funds
have been made to the persons entitled thereto or withdrawal
authorizations canceled in accordance with the Plan and as
described in the Prospectus. The Bank will maintain such
records of all funds received to permit the funds of each
subscriber to be separately insured by the FDIC (to the
maximum extent allowable) and to enable the Bank to make the
appropriate refunds of such funds in the event that such
refunds are required to be made in accordance with the Plan
and as described in the Prospectus.
(s) The Company will promptly take all necessary action to
register as a savings and loan holding company under the HOLA.
(t) The Company and the Bank will take such actions and furnish
such information as are reasonably requested by the Agent in
order for the Agent to ensure compliance with the NASD's
"Interpretation Relating to Free Riding and Withholding."
22
<PAGE> 23
(u) Neither the Company nor the Bank will amend the Plan of
Conversion without notifying the Agent prior thereto.
(v) The Company shall assist the Agent, if necessary, in
connection with the allocation of the Shares in the event of
an oversubscription and shall provide the Agent with any
information necessary to assist the Company in allocating the
Shares in such event and such information shall be accurate
and reliable.
(w) Prior to the Closing Date, the Company and the Bank will
inform the Agent of any event or circumstances of which it is
aware as a result of which the Registration Statement and/or
Prospectus, as then amended or supplemented, would contain an
untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements
therein not misleading.
(x) Subsequent to the date the Registration Statement is declared
effective by the Commission and prior to the Closing Date,
except as otherwise may be indicated or contemplated therein
or set forth in an amendment or supplement thereto, neither
the Company nor the Bank will have: (i) issued any securities
or incurred any liability or obligation, direct or contingent,
for borrowed money, except borrowings from the same or similar
sources indicated in the Prospectus in the ordinary course of
its business, or (ii) entered into any transaction which is
material in light of the business and properties of the
Company and the Bank, taken as a whole.
SECTION 6. PAYMENT OF EXPENSES. Whether or not the Conversion is
completed or the sale of the Shares by the Company is consummated, the Company
and the Bank jointly and severally agree to pay or reimburse the Agent for: (a)
all filing fees in connection with all filings related to the Offering with the
NASD; (b) any stock issue or transfer taxes which may be payable with respect to
the sale of the Shares; (c) all reasonable expenses of the Conversion, including
but not limited to the Company's and the Bank's, and the Agency's attorneys'
fees and expenses, blue sky fees, transfer agent, registrar and other agent
charges, fees relating to auditing and accounting or other advisors and costs of
printing all documents necessary in connection with the Conversion; provided,
however, there will be no out-of-pocket expenses charged by the Agent for
expenses such as travel, lodging and meals. However, such out-of-pocket expenses
do not include expenses incurred with respect to the matters set forth in (a),
(b) or (c) above. In the event the Company is unable to sell a minimum of
612,000 Shares or the Conversion is terminated or otherwise
23
<PAGE> 24
abandoned, the Company and the Bank shall promptly reimburse the Agent in
accordance with Section 2 hereof.
SECTION 7. CONDITIONS TO THE AGENT'S OBLIGATIONS. The obligations of
the Agent hereunder, as to the Shares to be delivered at the Closing Date, are
subject, to the extent not waived in writing by the Agent, to the condition that
all representations and warranties of the Company and the Bank herein are, at
and as of the commencement of the Offering and at and as of the Closing Date,
true and correct in all material respects, the condition that the Company and
the Bank shall have performed all of their obligations hereunder to be performed
on or before such dates, and to the following further conditions:
(a) At the Closing Date, the Company and the Bank shall have
conducted the Conversion in all material respects in
accordance with the Plan, the Conversion Regulations, and all
other applicable laws, regulations, decisions and orders,
including all terms, conditions, requirements and provisions
precedent to the Conversion imposed upon them by the OTS.
(b) The Registration Statement shall have been declared effective
by the Commission and the Conversion Application approved by
the OTS not later than 5:30 p.m. on the date of this
Agreement, or with the Agent's consent at a later time and
date; and at the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been
issued under the 1933 Act or proceedings therefore initiated
or threatened by the Commission or any state authority, and no
order or other action suspending the authorization of the
Prospectus or the consummation of the Conversion shall have
been issued or proceedings therefore initiated or, to the
Company's or the Bank's knowledge, threatened by the
Commission, the OTS, the FDIC, or any state authority.
(c) At the Closing Date, the Agent shall have received:
(1) The favorable opinion, dated as of the Closing Date and
addressed to the Agent and for its benefit, of Vorys, Sater,
Seymour and Pease, special counsel for the Company and the
Bank, in form and substance to the effect that:
(i) The Company has been duly incorporated
and is validly existing as a corporation under the
laws of the State of Ohio.
(ii) The Company has corporate power and
authority to own, lease and operate its properties and
to conduct its business as described in the
Registration Statement and the Prospectus; and the
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<PAGE> 25
Company is duly qualified as a foreign corporation to
transact business and is in good standing in each
jurisdiction listed below in which it owns or leases
properties or in which the conduct of its business
requires such qualification or in which the conduct
of its business upon consummation of the Conversion
will require such qualifications, except where the
failure so to qualify would not have a material
adverse effect on the business assets or financial
condition of the Company.
(iii) The Bank has been and is a duly
organized and is a validly existing federally
chartered savings bank in mutual form and upon the
Conversion will become a duly organized and validly
existing federally chartered savings bank in capital
stock form of organization, in both instances duly
authorized to conduct its business and own its
property as described in the Registration Statement
and the Prospectus. The Bank is in good standing and
is duly qualified as a foreign corporation to
transact business and is in good standing in each
jurisdiction in which its ownership of property or
leasing of property or the conduct of its business
requires such qualification, unless the failure to be
so qualified in one or more of such jurisdictions
would not have a material adverse effect on the
condition, financial or otherwise, or the business,
operations or income of the Bank. All of the
outstanding capital stock of the Bank upon completion
of the Conversion will be duly authorized and, upon
payment therefor, will be validly issued, fully paid
and non-assessable and will be owned by the Company,
free and clear of any liens, encumbrances, claims or
other restrictions.
(iv) The Bank has one subsidiary, Homciti
Service Corp, which is duly incorporated and validly
existing as a corporation in good standing under the
laws of the State of Ohio, and which has full
corporate power and authority to own its own
properties and conduct its business as described in
the Prospectus; and the subsidiary is duly qualified
to do business as a foreign corporation under the
laws of Ohio, and is in good standing as such in each
jurisdiction in which such qualification is required,
except where the failure to so qualify would not have
a material adverse effect on the business, assets or
financial condition of the Bank on a consolidated
basis. The subsidiary holds all licenses,
certificates and permits from governmental
authorities necessary for the conduct of its business
as described in the Prospectus except where the
failure to hold such
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<PAGE> 26
licenses, certificates or permits would not have a
material adverse effect on the business, assets or
financial condition of the Bank on a consolidated
basis; and such subsidiary is not in material
violation of its articles of incorporation or bylaws.
All of the outstanding stock of the subsidiary has
been duly authorized and is validly issued, fully
paid and nonassessable, and all such stock is owned
directly by the Bank, free and clear of any liens,
encumbrances, claims or other restrictions.
(v) The Bank is a member of the
FHLB-Chicago. The deposit accounts of the Bank are
insured by the FDIC up to the maximum amount allowed
under law and no proceedings for the termination or
revocation of such insurance are pending or, to such
counsel's Actual Knowledge, threatened; the
description of the liquidation account as set forth
in the Prospectus under the captions "The
Conversion-Liquidation Account," to the extent that
such information constitutes matters of law and legal
conclusions, has been reviewed by such counsel and is
accurately described in all material respects.
(vi) Upon consummation of the Conversion,
the authorized, issued and outstanding capital stock
of the Company will be within the range set forth in
the Prospectus under the caption "Capitalization,"
and, except for shares issued upon incorporation of
the Company, no shares of Common Stock have been
issued prior to the Closing Date; at the time of the
Conversion, the Shares subscribed for pursuant to the
Offering will have been duly and validly authorized
for issuance, and when issued and delivered by the
Company pursuant to the Plan against payment of the
consideration calculated as set forth in the Plan and
Prospectus, will be duly and validly issued and fully
paid and non-assessable; the issuance of the Shares
is not subject to preemptive rights and the terms and
provisions of the Shares conform in all material
respects to the description thereof contained in the
Prospectus. To such counsel's Actual Knowledge, upon
the issuance of the Shares, good title to the Shares
will be transferred from the Company to the
purchasers thereof against payment therefor, subject
to such claims as may be asserted against the
purchasers thereof by third-party claimants.
(vii) The Bank and the Company have full
corporate power and authority to enter into the
Agreement and to consummate the transactions
26
<PAGE> 27
contemplated thereby and by the Plan of Conversion.
The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby
have been duly and validly authorized by all
necessary action on the part of the Company and the
Bank; and this Agreement is a valid and binding
obligation of the Company and the Bank, enforceable
in accordance with its terms, except as the
enforceability thereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium,
conservatorship, receivership or other similar laws
now or hereafter in effect relating to or affecting
the enforcement of creditors' rights generally or the
rights of creditors of federal savings institutions,
(ii) general equitable principles, (iii) laws
relating to the safety and soundness of insured
depository institutions, and (iv) applicable law or
public policy with respect to the indemnification
and/or contribution provisions contained herein,
including without limitations the provision of
Sections 23A and 23B of the Federal Reserve Act and
except that no opinion need to be expressed as to the
effect or availability of equitable remedies or
injunctive relief (regardless of whether such
enforceability is considered in a proceeding in
equity or at law).
(viii) The Conversion Application has been
approved by the OTS and the Prospectus has been
authorized for use by the OTS. The OTS has approved
the Holding Company Application and issued its order
of approval under the savings and loan holding
company provisions of the HOLA, the purchase by the
Company of all of the issued and outstanding capital
stock of the Bank has been authorized by the OTS and
no action has been taken, and to such counsel's
Actual Knowledge, none is pending or threatened, to
revoke any such authorization or approval.
(ix) The Plan has been duly adopted by the
required vote of the directors of the Company and the
Bank, and based upon the certificate of the inspector
of election, by the members of the Bank.
(x) Subject to the satisfaction of the
conditions to the OTS' approval of the Conversion, no
further approval, registration, authorization,
consent or other order of any federal regulatory
agency, is required in connection with the execution
and delivery of this Agreement, the issuance of the
Shares and the consummation of the Conversion, except
as may be required under the securities or blue sky
laws of various jurisdictions (as to which no opinion
need be
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<PAGE> 28
rendered) and except as may be required under the
rules and regulations of the NASD and/or the Nasdaq
Stock Market (as to which no opinion need by
rendered). To such counsel's Actual Knowledge, the
Conversion has been consummated in all material
respects in accordance with all applicable provisions
of the HOLA and the Conversion Regulations.
(xi) The Registration Statement is effective
under the 1933 Act and no stop order suspending the
effectiveness has been issued under the 1933 Act or
proceedings therefor initiated or, to such counsel's
Actual Knowledge, threatened by the Commission.
(xii) At the time the Conversion
Application, including the Prospectus contained
therein, was approved by the OTS, the Conversion
Application, including the Prospectus contained
therein, complied as to form in all material respects
with the requirements of the Conversion Regulations,
federal law and all applicable rules and regulations
promulgated thereunder (other than the financial
statements, the notes thereto, and other tabular,
financial, statistical and appraisal data included
therein, as to which no opinion need be rendered).
(xiii) At the time that the Registration
Statement became effective, (i) the Registration
Statement (as amended or supplemented, if so amended
or supplemented) (other than the financial
statements, the notes thereto, and other tabular,
financial, statistical and appraisal data included
therein, as to which no opinion need be rendered),
complied as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act
Regulations, and (ii) the Prospectus (other than the
financial statements, the notes thereto, and other
tabular, financial, statistical and appraisal data
included therein, as to which no opinion need be
rendered) complied as to form in all material
respects with the requirements of the 1933 Act, the
1933 Act Regulations, the Conversion Regulations and
federal law.
(xiv) The terms and provisions of the Shares
of the Company conform, in all material respects, to
the description thereof contained in the Registration
Statement and Prospectus, and the form of certificate
used to evidence the Shares is in due and proper
form.
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<PAGE> 29
(xv) There are no legal or governmental
proceedings pending, or to such counsel's Actual
Knowledge, threatened which are required to be
disclosed in the Registration Statement and
Prospectus, other than those disclosed therein, and
to such counsel's Actual Knowledge, all pending legal
and governmental proceedings to which the Company or
the Bank is a party or of which any of their property
is the subject, which are not described in the
Registration Statement and the Prospectus, including
ordinary routine litigation incidental to the
Company's or the Bank's business, are, considered in
the aggregate, not material.
(xvi) To such counsel's Actual Knowledge,
there are no material contracts, indentures,
mortgages, loan agreements, notes, leases or other
instruments required to be described or referred to
in the Conversion Application, the Registration
Statement or the Prospectus or required to be filed
as exhibits thereto other than those described or
referred to therein or filed as exhibits thereto in
the Conversion Application, the Registration
Statement or the Prospectus. The description in the
Conversion Application, the Registration Statement
and the Prospectus of such documents and exhibits is
accurate in all material respects and fairly presents
the information required to be shown.
(xvii) To such counsel's Actual Knowledge,
the Company and the Bank have conducted the
Conversion, in all material respects, in accordance
with all applicable requirements of the Plan and
applicable federal law. The Plan complies in all
material respects with all applicable federal laws,
rules, regulations, decisions and orders including,
but not limited to, the Conversion Regulations; no
order has been issued by the OTS, the Commission, the
FDIC, or any state authority to suspend the Offering
or the use of the Prospectus, and no action for such
purposes has been instituted or, to such counsel's
Actual Knowledge, threatened by the OTS, the
Commission, the FDIC, or any state authority and, to
such counsel's Actual Knowledge, no person has sought
to obtain regulatory or judicial review of the final
action of the OTS, approving the Plan, the Conversion
Application, the Holding Company Application or the
Prospectus.
(xviii) To such counsel's Actual Knowledge, the
Company and the Bank have obtained all material
licenses, permits and other governmental
authorizations currently required for the conduct of
their businesses and all such licenses, permits
29
<PAGE> 30
and other governmental authorizations are in full
force and effect, and the Company and the Bank are in
all material respects complying therewith.
(xix) To such counsel's Actual Knowledge,
neither the Company nor the Bank is in violation of
its articles of incorporation and bylaws or its
Charter and bylaws, as appropriate or, to such
counsel's Actual Knowledge, in default or violation
of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which
it is a party or by which it or its property may be
bound, except for such defaults or violations which
would not have a material adverse impact on the
financial condition or results of operations of the
Company, the Bank and its subsidiary on a
consolidated basis; to such counsel's Actual
Knowledge, the execution and delivery of this
Agreement, the occurrence of the obligations herein
set forth and the consummation of the transactions
contemplated herein will not conflict with or
constitute a breach of, or default under, or result
in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the
Company or the Bank pursuant to any material
contract, indenture, mortgage, loan agreement, note,
lease or other instrument to which the Company or the
Bank is a party or by which any of them may be bound,
or to which any of the property or assets of the
Company or the Bank are subject (other than the
establishment of the liquidation account); and, such
action will not result in any violation of the
provisions of the articles of incorporation or bylaws
of the Company or the Charter or bylaws of the Bank
or, to such counsel's actual knowledge, result in any
violation of any applicable federal law, act,
regulation need be rendered (except that no opinion
with respect to the securities and blue sky laws of
various jurisdictions or the rules or regulations of
the NASD and/or the Nasdaq Stock Market) or order or
court order, writ, injunction or decree.
(xxi) The Company's Articles of
Incorporation and bylaws comply in all materials
respects with the laws of the State of Ohio. The
Bank's Charter and bylaws comply in all material
respects with the federal law and the Rules and
Regulations of the Office of Thrift Supervision.
(xxi) To such counsel's Actual Knowledge,
neither the Company nor the Bank is in violation of
any directive from the OTS or the FDIC to make any
30
<PAGE> 31
material change in the method of conducting its
respective business.
(xxii) The information in the Prospectus
under the captions "Regulation," "The Conversion,"
"Restrictions on Acquisition of the Company and the
Bank" and "Description of Capital Stock of the
Company," to the extent that such information
constitutes matters of law, summaries of legal
matters, documents or proceedings, or legal
conclusions, has been reviewed by such counsel and is
correct in all material respects. The description of
the Conversion process under the caption "The
Conversion" in the Prospectus has been reviewed by
such counsel and fairly describes such process in all
material respects. The discussion of statutes or
regulations described or referred to in the
Prospectus are accurate summaries and fairly present
the information required to be shown. The information
under the caption "The Conversion-Tax Aspects" has
been reviewed by such counsel and fairly describes
the opinions rendered by them to the Company and the
Bank with respect to such matters.
In addition, such counsel shall state that
during the preparation of the Conversion Application,
the Registration Statement and the Prospectus, they
participated in conferences with certain officers of,
the independent public and internal accountants for,
and other representatives of the Company and the
Bank, at which conferences the contents of the
Conversion Application, the Registration Statement
and the Prospectus and related matters were discussed
and, while such counsel have not confirmed the
accuracy or completeness of or otherwise verified the
information contained in the Conversion Application,
the Registration Statement or the Prospectus, and do
not assume any responsibility for such information,
based upon such conferences and a review of documents
deemed relevant for the purpose of rendering their
opinion (relying as to materiality as to factual
matters on certificates of officers and other factual
representations by the Company and the Bank, nothing
has come to their attention that would lead them to
believe that the Conversion Application, the
Registration Statement, the Prospectus, or any
amendment or supplement thereto (other than the
financial statements, the notes thereto, and other
tabular, financial, statistical and appraisal data
included therein as to which no view need be
rendered) contained an untrue statement of a material
fact or omitted to state a material fact required to
be stated therein
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<PAGE> 32
or necessary to make the statements therein, in light
of the circumstances under which they were made, not
misleading.
In giving such opinion, such counsel may
rely as to all matters of fact on certificates of
officers or directors of the Company and the Bank and
certificates of public officials. Such counsel's
opinion shall be limited to matters governed by
federal laws and by the laws of the State of Ohio.
The opinion of Vorys, Sater, Seymour and Pease shall
be governed by the Legal Opinion Accord ("Accord") of
the American Bar Association Section of Business Law
(1991). The term "Actual Knowledge" as used herein
shall have the meaning set forth in the Accord. For
purposes of such opinion, no proceedings shall be
deemed to be pending, no order or stop order shall be
deemed to be issued, and no action shall be deemed to
be instituted unless, in each case, a director or
executive officer of the Company or the Bank shall
have received a copy of such proceedings, order, stop
order or action. In addition, such opinion may be
limited to present statutes, regulations and judicial
interpretations and to facts as they presently exist;
in rendering such opinion, such counsel need assume
no obligation to revise or supplement it should the
present laws be changed by legislative or regulatory
action, judicial decision or otherwise; and such
counsel need express no view, opinion or belief with
respect to whether any proposed or pending
legislation, if enacted, or any proposed or pending
regulations or policy statements issued by any
regulatory agency, whether or not promulgated
pursuant to any such legislation, would affect the
validity of the Conversion or any aspect thereof.
Such counsel may assume that any agreement is the
valid and binding obligation of any parties to such
agreement other than the Company or the Bank.
(d) The favorable opinion, dated as of the Closing
Date, of Silver, Freedman & Taff, L.L.P., the
Agent's counsel, with respect to such matters as
the Agent may reasonably require. Such opinion may
rely upon the opinions of counsel to the Company
and the Bank, and as to matters of fact, upon
certificates of officers and directors of the
Company and the Bank delivered pursuant hereto or
as such counsel shall reasonably request.
(e) At the Closing Date, the Agent shall receive a
certificate of the Chief Executive Officer and the
principal accounting officer of the Company and the
Bank in form and substance reasonably satisfactory
32
<PAGE> 33
to the Agent's Counsel, dated as of such Closing
Date, to the effect that: (i) they have carefully
examined the Prospectus and, in their opinion, at the
time the Prospectus became authorized for final use,
the Prospectus did not contain any untrue statement
of a material fact or omit to state a material fact
necessary in order to make the statements therein, in
light of the circumstances under which they were
made, not misleading; (ii) since the date the
Prospectus became authorized for final use, no event
has occurred which should have been set forth in an
amendment or supplement to the Prospectus which has
not been so set forth, including specifically, but
without limitation, any material adverse change in
the condition, financial or otherwise, or in the
earnings, capital, properties or business of the
Company, the Bank or its subsidiary, and the
conditions set forth in this Section 7 have been
satisfied; (iii) since the respective dates as of
which information is given in the Registration
Statement and the Prospectus, there has been no
material adverse change in the condition, financial
or otherwise, or in the earnings, capital or
properties of the Company, the Bank or its
subsidiary, independently, or of the Company, the
Bank or its subsidiary considered as one enterprise,
whether or not arising in the ordinary course of
business; (iv) the representations and warranties in
Section 4 are true and correct with the same force
and effect as though expressly made at and as of the
Closing Date; (v) the Company, and the Bank have
complied in all material respects with all agreements
and satisfied all conditions on their part to be
performed or satisfied at or prior to the Closing
Date and will comply in all material respects with
all obligations to be satisfied by them after the
Conversion; (vi) no stop order suspending the
effectiveness of the Registration Statement has been
initiated or, to the best knowledge of the Company or
the Bank, threatened by the Commission or any state
authority; (vii) no order suspending the Offering,
the Conversion, the acquisition of all of the shares
of the Bank by the Company or the effectiveness of
the Prospectus has been issued and no proceedings for
that purpose are pending or, to the best knowledge of
the Company or the Bank, threatened by the OTS, the
Commission, the FDIC, or any state authority; and
(viii) to the best knowledge of the Company or the
Bank, no person has sought to obtain review of the
final action of the OTS approving the Plan.
(f) Prior to and at the Closing Date: (i) in the
reasonable opinion of the Agent, there shall have
33
<PAGE> 34
been no material adverse change in the condition,
financial or otherwise, or in the earnings or
business of the Company, the Bank or its subsidiary
independently, or of the Company, the Bank and its
subsidiary considered as one enterprise, from that as
of the latest dates as of which such condition is set
forth in the Prospectus other than transactions
referred to or contemplated therein; (iii) the
Company or the Bank shall not have received from the
OTS or the FDIC any direction (oral or written) to
make any material change in the method of conducting
their business with which it has not complied (which
direction, if any, shall have been disclosed to the
Agent) or which materially and adversely would affect
the business, operations or financial condition or
income of the Company and the Bank (together with its
Subsidiary) taken as a whole; (iv) the Company, the
Bank and its subsidiary shall not have been in
default (nor shall an event have occurred which, with
notice or lapse of time or both, would constitute a
default) under any provision of any agreement or
instrument relating to any outstanding indebtedness;
(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 knowledge of the Company,
the Bank or its subsidiary, threatened against the
Company, the Bank or its subsidiary or affecting any
of their properties wherein an unfavorable decision,
ruling or finding would materially and adversely
affect the business, operations, financial condition
or income of the Company, the Bank and its subsidiary
taken as a whole; and (vi) the Shares have been
qualified or registered for offering and sale or
exempted therefrom under the securities or blue sky
laws of the jurisdictions as the Agent shall have
reasonably requested and as agreed to by the Company
and the Bank.
(g) Concurrently with the execution of this Agreement,
the Agent shall receive a letter from Robb, Dixon,
Francis, Davis, Oneson & Company dated as of the
date of the Prospectus and addressed to the Agent:
(i) confirming that Robb, Dixon, Francis, Davis,
Oneson & Company is a firm of independent public
accounts within the meaning of Rule 101 of the Code
of Professional Ethics of the American Institute of
Certified Public Accountants and applicable
regulations of the OTS and stating in effect that
in its opinion the consolidated financial
statements, schedules and related notes of the Bank
as of June 30, 1996 and 1995 and for each of the
three years in the period ended June 30, 1996, as
are included in the Prospectus and covered by their
34
<PAGE> 35
opinion included therein, comply as to form in all
material respects with the applicable accounting
requirements and related published rules and
regulations of the OTS and the 1933 Act; (ii) 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
consolidated financial statements of the Bank
prepared by the Bank, a reading of the minutes of the
meetings of the Board of Directors and members of the
Bank and consultations with officers of the Bank
responsible for financial and accounting matters,
nothing came to their attention which caused them to
believe that: (A) the unaudited financial statements
included in the Prospectus are not in conformity with
the 1933 Act, applicable accounting requirements of
the OTS and generally accepted accounting principles
applied on a basis substantially consistent with that
of the audited financial statements included in the
Prospectus; or (B) during the period from the date of
the latest unaudited consolidated financial
statements included in the Prospectus to a specified
date not more than three business days prior to the
date of the Prospectus, except as has been described
in the Prospectus, there was any increase in
borrowings, other than normal deposit fluctuations,
by the Bank; or (C) there was any decrease in the
consolidated net assets of the Bank at the date of
such letter as compared with amounts shown in the
latest unaudited consolidated statement of condition
included in the Prospectus; and (iii) stating that,
in addition to the audit referred to in their opinion
included in the Prospectus and the performance of the
procedures referred to in clause (ii) of this
subsection (f), they have compared with the general
accounting records of the Bank, which are subject to
the internal controls of the Bank, the accounting
system and other data prepared by the Bank, directly
from such accounting records, to the extent specified
in such letter, such amounts and/or percentages set
forth in the Prospectus as the Agent may reasonably
request; and they have reported on the results of
such comparisons.
(h) At the Closing Date, the Agent shall receive a letter
dated the Closing Date, addressed to the Agent,
confirming the statements made by Robb, Dixon,
Francis, Davis, Oneson & Company in the letter
delivered by it pursuant to subsection (f) of this
Section 7, the "specified date" referred to in clause
(ii) of subsection (f) thereof to be a
35
<PAGE> 36
date specified in such letter, which shall not be
more than three business days prior to the Closing
Date.
(i) At the Closing Date, the Agent shall receive a
letter from Keller & Company, dated the date
thereof and addressed to counsel for the Agent (i)
confirming that said firm is independent of the
Company and the Bank and is experienced and expert
in the area of corporate appraisals within the
meaning of Title 12 of the Code of Federal
Regulations, Section 563b.7(f)(1)(i), (ii) stating
in effect that the Appraisal prepared by such firm
complies in all material respects with the
applicable requirements of Title 12 of the Code of
Federal Regulations, and (iii) further stating that
their opinion of the aggregate pro forma market
value of the Company and the Bank expressed in
their Appraisal dated as of _________ __, 1996, and
most recently updated, remains in effect.
(j) The Company and the Bank shall not have sustained
since the date of the latest financial statements
included in the Prospectus any material loss or
interference with its business from fire,
explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or
court or governmental action, order or decree,
otherwise than as set forth or contemplated in the
Registration Statement and Prospectus and since the
respective dates as of which information is given
in the Registration Statement and Prospectus, there
shall not have been any change in the long-term
debt of the Company or the Bank other than debt
incurred in relation to the purchase of Shares by
the Bank's Eligible Plans, or any change, or any
development involving a prospective change, in or
affecting the general affairs, management,
financial position, stockholders' equity or results
of operations of the Company or the Bank, otherwise
than as set forth or contemplated in the
Registration Statement and Prospectus, the effect
of which, in any such case described above, is in
Webb's reasonable judgment sufficiently material
and adverse as to make it impracticable or
inadvisable to proceed with the Subscription
Offering or the delivery of the Shares on the terms
and in the manner contemplated in the Prospectus.
(k) At or prior to the Closing Date, the Agent shall
receive: (i) a copy of the letter from the OTS
approving the Conversion Application and
authorizing the use of the Prospectus; (ii) a copy
of the order from the Commission declaring the
Registration Statement effective; (iii) a
36
<PAGE> 37
certificate from the OTS evidencing the existence of
the Bank; (iv) certificate of good standing from the
State of Ohio evidencing the good standing of the
Company and the Bank's subsidiary; (v) a certificate
from the FDIC evidencing the Bank's insurance of
accounts; (vi) a certificate of the FHLB-Chicago
evidencing the Bank's membership thereof; (vii) a
copy of the letter from the OTS approving the
Company's Holding Company Application; and (viii) a
copy of the Bank's federal stock charter.
(l) Subsequent to the date hereof, there shall not have
occurred any of the following: (i) a suspension or
limitation in trading in securities generally on
the New York Stock Exchange or in the
over-the-counter market, or quotations halted
generally on the Nasdaq Stock Market, or minimum or
maximum prices for trading have been fixed, or
maximum ranges for prices for securities have been
required by either of such exchanges or the NASD or
by order of the Commission or any other
governmental authority; (ii) a general moratorium
on the operations of commercial banks, Ohio savings
banks or federal savings banks or a general
moratorium on the withdrawal of deposits from
commercial banks, Ohio savings banks or federal
savings banks declared by federal or state
authorities; (iii) the engagement by the United
States in hostilities which have resulted in the
declaration, on or after the date hereof, of a
national emergency or war; or (iv) a material
decline in the price of equity or debt securities
if the effect of such a declaration or decline, in
the Agent's reasonable judgement, makes it
impracticable or inadvisable to proceed with the
Offering or the delivery of the shares on the terms
and in the manner contemplated in the Registration
Statement and the Prospectus.
(m) At or prior to the Closing Date, counsel to Webb
shall have been furnished with such documents and
opinions as they may reasonably require for the
purpose of enabling them to pass upon the sale of
the Shares as herein contemplated and related
proceedings or in order to evidence the occurrence
or completeness of any of the representations or
warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings
taken by the Company or the Bank in connection with
the Conversion and the sale of the Shares as herein
contemplated shall be satisfactory in form and
substance to Webb and its counsel.
37
<PAGE> 38
SECTION 8. INDEMNIFICATION.
(a) The Company and the Bank jointly and severally
agree to indemnify and hold harmless the
Agent, its respective officers and directors,
employees and agents, and each person, if any,
who controls the Agent within the meaning of
Section 15 of the 1933 Act or Section 20(a) of
the 1934 Act, against any and all loss,
liability, claim, damage or expense whatsoever
(including but not limited to settlement
expenses), joint or several, that the Agent or
any of them may suffer or to which the Agent
and any such persons may become subject under
all applicable federal or state laws or
otherwise, and to promptly reimburse the Agent
and any such persons upon written demand for
any expense (including reasonable fees and
disbursements of counsel) incurred by the
Agent or any of them in connection with
investigating, preparing or defending any
actions, proceedings or claims (whether
commenced or threatened) to the extent such
losses, claims, damages, liabilities or
actions: (i) arise out of or are based upon
any untrue statement or alleged untrue
statement of a material fact contained in the
Registration Statement (or any amendment or
supplement thereto), preliminary or final
Prospectus (or any amendment or supplement
thereto), the Conversion Application (or any
amendment or supplement thereto), the Holding
Company Application or any instrument or
document executed by the Company or the Bank
or based upon written information supplied by
the Company or the Bank filed in any state or
jurisdiction to register or qualify any or all
of the Shares or to claim an exemption
therefrom, or provided to any state or
jurisdiction to exempt the Company as a
broker-dealer or its officers, directors and
employees as broker-dealers or agent, under
the securities laws thereof (collectively, the
"Blue Sky Application"), or any document,
advertisement, oral statement or communication
("Sales Information") prepared, made or
executed by or on behalf of the Company or the
Bank with their consent or based upon written
or oral information furnished by or on behalf
of the Company or the Bank, whether or not
filed in any jurisdiction, in order to qualify
or register the Shares or to claim an
exemption therefrom under the securities laws
thereof; (ii) arise out of or based upon the
omission or alleged omission to state in any
38
<PAGE> 39
of the foregoing documents or information, a material
fact required to be stated therein or necessary to
make the statements therein, in light of the
circumstances under which they were made, not
misleading; or (iii) arise from any theory of
liability whatsoever relating to or arising from or
based upon the Registration Statement (or any
amendment or supplement thereto), preliminary or
final Prospectus (or any amendment or supplement
thereto), the Conversion Application (or any
amendment or supplement thereto), any Blue Sky
Application or Sales Information or other
documentation distributed in connection with the
Conversion; provided, however, that no
indemnification is required under this paragraph (a)
to the extent such losses, claims, damages,
liabilities or actions arise out of or are based upon
any untrue material statement or alleged untrue
material statement in, or material omission or
alleged material omission from, the Registration
Statement (or any amendment or supplement thereto),
preliminary or final Prospectus (or any amendment or
supplement thereto), the Conversion Application, any
Blue Sky Application or Sales Information made in
reliance upon and in conformity with information
furnished in writing to the Company or the Bank by
the Agent or its counsel regarding the Agent and,
provided further, that such indemnification shall be
to the extent permitted by the Commissioner, the OTS,
the FDIC and the Board of Governors of the Federal
Reserve.
(b) The Agent agrees to indemnify and hold harmless the
Company and the Bank, their directors and officers
and each person, if any, who controls the Company or
the Bank within the meaning of Section 15 of the 1933
Act or Section 20(a) of the 1934 Act against any and
all loss, liability, claim, damage or expense
whatsoever (including but not limited to settlement
expenses), joint or several, which they, or any of
them, may suffer or to which they, or any of them may
become subject under all applicable federal and state
laws or otherwise, and to promptly reimburse the
Company, the Bank, and any such persons upon written
demand for any expenses (including reasonable fees
and disbursements of counsel) incurred by them, or
any of them, in connection with investigating,
preparing or defending any actions, proceedings or
claims (whether commenced or threatened) to the
39
<PAGE> 40
extent such losses, claims, damages, liabilities or
actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material
fact contained in the Registration Statement (or any
amendment or supplement thereto), the Conversion
Application (or any amendment or supplement thereto),
the preliminary or final Prospectus (or any amendment
or supplement thereto), any Blue Sky Application or
Sales Information or are based upon the omission or
alleged omission to state in any of the foregoing
documents a material fact required to be stated
therein or necessary to make the statements therein,
in the light of the circumstances under which they
were made, not misleading; provided, however, that
the Agent's obligations under this Section 8(b) shall
exist only if and only to the extent (i) that such
untrue statement or alleged untrue statement was made
in, or such material fact or alleged material fact
was omitted from, the Registration Statement (or any
amendment or supplement thereto), the preliminary or
final Prospectus (or any amendment or supplement
thereto), the Conversion Application (or any
amendment or supplement thereto), any Blue Sky
Application or Sales Information in reliance upon and
in conformity with information furnished in writing
to the Company or the Bank by the Agent or its
counsel regarding the Agent. It is expressly agreed,
however, that the Agent shall not be liable for any
loss, liability, claim, damage or expense, or be
required to contribute any amount which in the
aggregate exceeds the fees paid to the Agent pursuant
to Section 2 of this Agreement (not including
expenses).
(c) Each indemnified party shall give prompt
written notice to each indemnifying party of
any action, proceeding, claim (whether
commenced or threatened), or suit instituted
against it in respect of which indemnity may
be sought hereunder, but failure to so notify
an indemnifying party shall not relieve it
from any liability which it may have on
account of this Section 8 or otherwise. An
indemnifying party may participate at its own
expense in the defense of such action. In
addition, if it so elects within a reasonable
time after receipt of such notice, an
indemnifying party, jointly with any other
indemnifying parties receiving such notice,
may assume defense of such action with counsel
40
<PAGE> 41
chosen by it and approved by the indemnified parties
that are defendants in such action, unless such
indemnified parties reasonably object to such
assumption on the ground that there may be legal
defenses available to them that are different from or
in addition to those available to such indemnifying
party. If an indemnifying party assumes the defense
of such action, the indemnifying parties shall not be
liable for any fees and expenses of counsel for the
indemnified parties incurred thereafter in connection
with such action, proceeding or claim, other than
reasonable costs of investigation. In no event shall
the indemnifying parties be liable for the fees and
expenses of more than one separate firm of attorneys
(and any special counsel that said firm may retain)
for each indemnified party in connection with any one
action, proceeding or claim or separate but similar
or related actions, proceedings or claims in the same
jurisdiction arising out of the same general
allegations or circumstances.
(d) The agreements contained in this Section 8 and
in Section 9 hereof and the representations
and warranties of the Company and the Bank set
forth in this Agreement shall remain operative
and in full force and effect regardless of:
(i) any investigation made by or on behalf of
agent or their officers, directors or
controlling persons, agent or employees or by
or on behalf of the Company or the Bank or any
officers, directors or controlling persons,
agent or employees of the Company or the Bank;
(ii) delivery of and payment hereunder for the
Shares; or (iii) any termination of this
Agreement.
SECTION 9. CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 8 is due in accordance with its terms but is for any reason held by a
court to be unavailable from the Company, the Bank or the Agent, the Company,
the Bank and the Agent shall contribute to the aggregate losses, claims, damages
and liabilities (including any investigation, legal and other expenses incurred
in connection with, and any amount paid in settlement of, any action, suit or
proceeding of any claims asserted, but after deducting any contribution received
by the Company, the Bank or the Agent from persons other than the other party
thereto, who may also be liable for contribution) in such proportion so that the
Agent is responsible for that portion represented by the percentage that the
fees paid to the Agent pursuant to Section 2 of this Agreement (not including
expenses) bears to the gross proceeds received by the Company from the sale
41
<PAGE> 42
of the Shares in the Offering, and the Company and the Bank shall be responsible
for the balance. If, however, the allocation provided above is not permitted by
applicable law or if the indemnified party failed to give the notice required
under Section 8 above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative fault of the Company and the Bank
on the one hand and the Agent on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions, proceedings or claims in respect thereto), but also the relative
benefits received by the Company and the Bank on the one hand and the Agent on
the other from the Offering (before deducting expenses). The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company and/or
the Bank on the one hand or the Agent on the other and the parties' relative
intent, good faith, knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Company, the Bank and the Agent agree
that it would not be just and equitable if contribution pursuant to this Section
9 were determined by pro-rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to above
in this Section 9. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions, proceedings or
claims in respect thereof) referred to above in this Section 9 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action, proceeding
or claim. It is expressly agreed that the Agent shall not be liable for any
loss, liability, claim, damage or expense or be required to contribute any
amount which in the aggregate exceeds the amount paid (excluding reimbursable
expenses) to the Agent under this Agreement. It is understood that the above
stated limitation on the Agent's liability is essential to the Agent and that
the Agent would not have entered into this Agreement if such limitation had not
been agreed to by the parties to this Agreement. No person found guilty of any
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not found guilty
of such fraudulent misrepresentation. The obligations of the Company and the
Bank under this Section 9 and under Section 8 shall be in addition to any
liability which the Company and the Bank may otherwise have. For purposes of
this Section 9, each of the Agent's, the Company's or the Bank's officers and
directors and each person, if any, who controls the Agent or the Company or the
Bank within the meaning of the 1933 Act and the 1934 Act shall have the same
rights to contribution as the Agent, the Company or the Bank. Any party entitled
to contribution, promptly after receipt of notice of commencement of any action,
suit, claim or proceeding against such party in respect of which a claim for
contribution may be made against another party under this Section 9, will notify
such party from whom contribution may be sought, but the omission to so notify
42
<PAGE> 43
such party shall not relieve the party from whom contribution may be sought from
any other obligation it may have hereunder or otherwise than under this Section
9.
SECTION 10. SURVIVAL OF AGREEMENTS, REPRESENTATIONS AND INDEMNITIES.
The respective indemnities of the Company, the Bank and the Agent and the
representations and warranties and other statements of the Company, the Bank and
the Agent 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 the Agent, the Company,
the Bank or any controlling person referred to in Section 8 hereof, and shall
survive the issuance of the Shares, and any successor or assign of the Agent,
the Company, the Bank, and any such controlling person shall be entitled to the
benefit of the respective agreements, indemnities, warranties and
representations.
SECTION 11. TERMINATION. Webb may terminate this Agreement
by giving the notice indicated below in this Section 11 at any time
after this Agreement becomes effective as follows:
(a) In the event the Company fails to sell the
required minimum number of the Shares by
September 30, 1997, and in accordance with the
provisions of the Plan or as required by the
Conversion Regulations, and applicable law,
this Agreement shall terminate upon refund by
the Company to each person who has subscribed
for or ordered any of the Shares the full
amount which it may have received from such
person, together with interest as provided in
the Prospectus, and no party to this Agreement
shall have any obligation to the other
hereunder, except for payment by the Company
and/or the Bank as set forth in Sections 2(a),
6, 8 and 9 hereof.
(b) If any of the conditions specified in Section
7 shall not have been fulfilled when and as
required by this Agreement unless waived in
writing, or by the Closing Date, this
Agreement and all of the Agent's obligations
hereunder may be cancelled by the Agent by
notifying the Company and the Bank of such
cancellation in writing or by telegram at any
time at or prior to the Closing Date, and any
such cancellation shall be without liability
of any party to any other party except as
otherwise provided in Sections 2(a), 6, 8 and
9 hereof.
(c) If Webb elects to terminate this Agreement as
provided in this Section , the Company and the Bank
shall be notified promptly by telephone or telegram,
confirmed by letter.
43
<PAGE> 44
The Company and the Bank may terminate this Agreement in the event Webb
is in material breach of the representations and warranties or covenants
contained in Section 5 and such breach has not been cured after the Company and
the Bank have provided Webb with notice of such breach.
This Agreement may also be terminated by mutual written consent of the
parties hereto.
SECTION 12. NOTICES. All communications hereunder, except as
herein otherwise specifically provided, shall be mailed in writing
and if sent to Webb shall be mailed, delivered or telegraphed and
confirmed to Charles Webb & Company, 211 Bradenton, Dublin, Ohio
43017-5034, Attention: Patricia A. McJoynt (with a copy to Silver,
Freedman & Taff, L.L.P., Attention: Jeffrey M. Werthan, P.C. and,
if sent to the Company and the Bank, shall be mailed, delivered or
telegraphed and confirmed to the Company and the Bank at 63 West
Main Street, Springfield, Ohio 45502, Attention: Douglas L. Ulery,
President (with a copy to Vorys, Sater, Seymour and Pease,
Attention: Rick J. Landrum).
SECTION 13. PARTIES. The Company and the Bank shall be entitled to act
and rely on any request, notice, consent, waiver or agreement purportedly given
on behalf of the Agent when the same shall have been given by the undersigned.
The Agent shall be entitled to act and rely on any request, notice, consent,
waiver or agreement purportedly given on behalf of the Company or the Bank, when
the same shall have been given by the undersigned or any other officer of the
Company or the Bank. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Agent, the Company, the Bank, and their respective
successors 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. It is understood and
agreed that this Agreement is the exclusive agreement among the parties hereto,
and supersedes any prior agreement among the parties and may not be varied
except in writing signed by all the parties.
SECTION 14. CLOSING. The closing for the sale of the Shares shall take
place on the Closing Date at such location as mutually agreed upon by the Agent
and the Company and the Bank. At the closing, the Company and the Bank shall
deliver to the Agent in next day funds the commissions, fees and expenses due
and owing to the Agent as set forth in Sections 2 and 6 hereof and the opinions
and certificates required hereby and other documents deemed reasonably necessary
by the Agent shall be executed and delivered to effect the sale of the Shares as
contemplated hereby and pursuant to the terms of the Prospectus.
SECTION 15. PARTIAL INVALIDITY. In the event that any term, provision
or covenant herein or the application thereof to any circumstance or situation
shall be invalid or unenforceable, in whole or in part, the remainder hereof and
the application of said term, provision or covenant to any other circumstances
or situation
44
<PAGE> 45
shall not be affected thereby, and each term, provision or covenant herein shall
be valid and enforceable to the full extent permitted by law.
SECTION 16. CONSTRUCTION. This Agreement shall be construed in
accordance with the laws of the State of Ohio.
SECTION 17. 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.
If the foregoing correctly sets forth the arrangement among the
Company, the Bank and Webb, please indicate acceptance thereof in the space
provided below for that purpose, whereupon this letter and the Agent's
acceptance shall constitute a binding agreement.
SECTION 18. ENTIRE AGREEMENT. This Agreement, including schedules and
exhibits hereto, which are integral parts hereof and incorporated as though set
forth in full, constitutes the entire agreement between the parties pertaining
to the subject matter hereof superseding any and all prior or contemporaneous
oral or prior written agreements, proposals, letters of intent and
understandings, and cannot be modified, changed, waived or terminated except by
a writing which expressly states that it is an amendment, modification or
waiver, refers to this Agreement and is signed by the party to be charged. No
course of conduct or dealing shall be construed to modify, amend or otherwise
affect any of the provisions hereof.
Very truly yours,
HOME CITY FINANCIAL CORPORATION HOME CITY FEDERAL SAVINGS BANK
By: By:
---------------------------- ------------------------------
Douglas L. Ulery Douglas L. Ulery
President President
Accepted as of the date first above written
CHARLES WEBB & COMPANY, A DIVISION OF
KEEFE, BRUYETTE & WOODS, INC.
By:
----------------------------------------
Patricia A. McJoynt
Executive Vice President
45
<PAGE> 1
EXHIBIT 10.3
HOME CITY FINANCIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Effective January 1, 1996
<PAGE> 2
HOME CITY FINANCIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<S> <C> <C>
1 PARTICIPATION ...................................................................... 1
-------------
1.01 Eligibility Requirements.............................................. 1
1.02 Service for Eligibility............................................... 1
2 CONTRIBUTIONS ...................................................................... 1
-------------
2.01 Regular Employer Contribution......................................... 1
2.02 Employer Contribution to Reduce
Loan Obligation..................................................... 2
2.03 Rollover Contributions/Participant
Contributions....................................................... 2
2.04 Limitations on Annual Additions....................................... 2
2.05 Dual Plan Limitation.................................................. 3
2.06 Corrective Adjustments................................................ 4
2.07 Contributions Conditioned on
Plan Qualification.................................................... 4
3 ALLOCATION OF EMPLOYER CONTRIBUTIONS................................................ 5
------------------------------------
3.01 Allocation of Regular Contributions
and Forfeitures..................................................... 5
3.02 Allocation of Employer Shares Purchased
with Proceeds of Plan Loan.......................................... 5
3.03 Special Restriction on Allocation..................................... 5
4 PARTICIPANTS' ACCOUNTS.............................................................. 6
----------------------
4.01 Establishment of Employer Contributions
Accounts............................................................ 6
4.02 Establishment of Suspense Account..................................... 6
5 PLAN INVESTMENTS.................................................................... 6
----------------
5.01 Primary Investments................................................... 6
5.02 Diversification Requirements.......................................... 7
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<S> <C> <C>
6 VALUATION OF PARTICIPANTS' ACCOUNTS................................................. 7
-----------------------------------
6.01 Valuations............................................................ 7
6.02 Method of Adjustment.................................................. 8
7 RETIREMENT BENEFITS................................................................. 9
-------------------
7.01 Time of Retirement.................................................... 9
7.02 Amount of Retirement Benefits......................................... 9
8 DEATH BENEFITS...................................................................... 9
--------------
8.01 Amount of Death Benefit............................................... 9
8.02 Designation of Beneficiary............................................ 9
8.03 Distribution of Death Benefit......................................... 10
9 DISABILITY BENEFITS................................................................. 11
-------------------
9.01 Amount of Disability Benefit.......................................... 11
9.02 Determination of Total and Permanent
Disability.......................................................... 11
10 TERMINATION OF EMPLOYMENT........................................................... 11
-------------------------
10.01 Amount of Benefits Upon Termination of
Employment.......................................................... 11
11 VESTING ...................................................................... 12
-------
11.01 Determination of Vested Benefits...................................... 12
11.02 Service for Vesting...................................................
11.03 Full Vesting at Normal Retirement Age,
Death or Disability................................................. 12
11.04 Termination After Eligibility for
Retirement.......................................................... 12
12 PAYMENT OF BENEFITS................................................................. 13
-------------------
12.01 Method of Payment..................................................... 13
12.02 Timing of Payments.................................................... 13
12.03 Installment Payments.................................................. 13
12.04 Distributions After Death............................................. 14
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<S> <C> <C>
12.05 Cash-Outs............................................................. 15
12.06 Put Option............................................................ 15
12.07 Right of First Refusal................................................ 16
12.08 Eligible Rollover Distributions....................................... 17
13 BREAK IN SERVICE RULES.............................................................. 18
----------------------
13.01 Effect of Break in Service on
Eligibility......................................................... 18
13.02 Effect of Break in Service on Vesting................................. 19
13.03 Authorized Leaves of Absence.......................................... 19
14 TRUST AGREEMENT..................................................................... 20
---------------
14.01 Description of Trust Agreement............................................... 20
15 PLAN ADMINISTRATION................................................................. 20
-------------------
15.01 Plan Administrator.................................................... 20
15.02 Duties of Plan Administrator.......................................... 20
16 AMENDMENTS ...................................................................... 21
----------
16.01 Employer's Right to Amend Plan............................................... 21
17 DISTRIBUTIONS ON PLAN TERMINATION................................................... 22
---------------------------------
17.01 Full Vesting on Plan Termination...................................... 22
17.02 Payment on Plan Termination........................................... 22
17.03 Discontinuance of Contributions;
Partial Termination of Plan......................................... 22
18 CREDITORS OF PARTICIPANTS........................................................... 22
-------------------------
18.01 Non-Assignability..................................................... 22
18.02 Qualified Domestic Relations Orders................................... 23
19 CLAIMS PROCEDURES................................................................... 23
-----------------
19.01 Filing a Claim for Benefits........................................... 23
19.02 Denial of Claim....................................................... 23
19.03 Remedies Available to Participants.................................... 24
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<S> <C> <C>
20 VOTING RIGHTS ...................................................................... 24
-------------
20.01 Participant Voting Rights with
Respect to Allocated Shares......................................... 24
20.02 Participant Voting Rights with
Respect to Unallocated Shares......................................... 25
21 TOP HEAVY RULES..................................................................... 25
---------------
21.01 Definitions........................................................... 25
21.02 Top Heavy Status...................................................... 26
21.03 Minimum Contributions................................................. 27
22 EXEMPT LOANS ...................................................................... 28
------------
22.01 Authority to Borrow................................................... 28
22.02 Requirements for Plan Loans........................................... 28
23 MISCELLANEOUS ...................................................................... 30
-------------
23.01 Employment Rights..................................................... 30
23.02 Gender................................................................ 30
23.03 Notice Requirement.................................................... 30
23.04 Merger or Consolidation............................................... 30
23.05 Social Security Benefits.............................................. 30
23.06 Forfeitures........................................................... 31
23.07 Named Fiduciaries..................................................... 31
23.08 Limitations on Payment................................................ 31
23.09 Interpretation of Document............................................ 31
23.10 Nonterminable Protections and Rights.................................. 32
23.11 Use of Income With Respect to
Employer Shares..................................................... 32
24 CERTAIN DEFINITIONS................................................................. 32
-------------------
24.01 Account............................................................... 32
24.02 Adjustment Factor..................................................... 32
24.03 Affiliate............................................................. 32
24.04 Annual Additions...................................................... 33
24.05 Beneficiary........................................................... 33
24.06 Code.................................................................. 33
24.07 Compensation.......................................................... 34
24.08 Current Participant................................................... 34
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<S> <C> <C>
24.09 Intentionally Omitted................................................. 34
24.10 Effective Date........................................................ 34
24.11 Employee.............................................................. 34
24.12 Employer.............................................................. 35
24.13 Employer Contributions Account........................................ 35
24.14 Employer Shares or Shares............................................. 35
24.15 Employment Commencement Date.......................................... 35
24.16 Entry Date............................................................ 35
24.17 ERISA................................................................. 35
24.18 Family Member......................................................... 35
24.19 Forfeiture............................................................ 36
24.20 Full Time............................................................. 36
24.21 Highly-Compensated Employee........................................... 36
24.22 Hour of Service....................................................... 37
24.23 Late Retirement Date.................................................. 38
24.24 Leased Employee....................................................... 39
24.25 Limitation Year....................................................... 39
24.26 Normal Retirement Age................................................. 39
24.27 Normal Retirement Date................................................ 39
24.28 One-Year Break in Service............................................. 40
24.29 Participant........................................................... 40
24.30 Plan.................................................................. 40
24.31 Plan Administrator.................................................... 40
24.32 Plan Year............................................................. 40
24.33 Projected Annual Benefit.............................................. 40
24.34 Spouse or Surviving Spouse............................................ 41
24.35 Trust Agreement....................................................... 41
24.36 Trust Fund............................................................ 41
24.37 Trustee............................................................... 41
24.38 Valuation Date........................................................ 41
24.39 Year of Service....................................................... 41
25 MULTIEMPLOYER PROVISIONS............................................................ 42
------------------------
25.01 Adoption by Affiliates of Home City
Financial Corporation............................................... 42
25.02 Administration........................................................ 42
25.03 Common Fund........................................................... 42
25.04 Withdrawal-Termination................................................ 42
</TABLE>
<PAGE> 7
HOME CITY FINANCIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Home City Financial Corporation hereby adopts the following employee stock
ownership plan (hereinafter referred to as the "Plan"), effective as of the
Effective Date. The Plan shall be for the exclusive benefit of eligible
Employees and, where applicable, the designated Beneficiaries of such Employees.
It is intended that this Plan, together with the Trust Agreement, shall comply
with the applicable provisions of the Code and ERISA.
SECTION l
---------
PARTICIPATION
-------------
1.01. Eligibility Requirements
- ------------------------------
Each Employee who was (i) a Full-Time Employee during the 12 month period
immediately preceding the Effective Date, and (ii) employed by the Employer and
at least 21 years of age on the Effective Date, shall become a Participant in
the Plan on the Effective Date. Each other Employee of the Employer shall be
eligible to participate in the Plan on the Entry Date coinciding with or first
following the date on which he has attained 21 years of age and has completed 12
months of service as a Full-Time Employee.
1.02. Service for Eligibility
- -----------------------------
The 12-month period during which the Employee must meet the Full-Time
requirement shall initially be the 12 consecutive months beginning with his
Employment Commencement Date, and, thereafter shall be each Plan Year beginning
with the Plan Year that includes the first anniversary of the Employee's
Employment Commencement Date.
<PAGE> 8
SECTION 2
---------
CONTRIBUTIONS
-------------
2.01. Regular Employer Contribution
- -----------------------------------
Subject to its right to terminate or amend this Plan, the Employer may
contribute and pay to the Trustee of the Trust Fund created for the purpose of
carrying out this Plan a contribution in cash or Employer Shares as the Board of
Directors of the Employer may in its discretion determine.
The amount of such contribution by the Employer to be paid to the Plan in
any year shall be such amount as the Board of Directors of the Employer may in
its discretion determine; provided, however, that in any year the amount
contributed shall not exceed the maximum amount deductible from the Employer's
income for such year under Section 404(a)(3) of the Code, or any succeeding
statute of similar import.
2.02. Employer Contribution to Reduce Loan Obligation
- -----------------------------------------------------
In addition to the contributions authorized by Section 2.01, the Employer
may in its discretion contribute amounts sufficient to enable the Trustee to
pay, on or before the due date thereof, each installment of principal and
interest on any Plan loan used to acquire Employer Shares; provided, that the
amounts contributed by the Employer pursuant to this Section 2.02, in any year,
shall not exceed the maximum amount deductible from the Employer's income for
such year under Section 404(a)(9) of the Code, or any succeeding statute of
similar import.
2.03. Rollover Contributions/Participant Contributions
- ------------------------------------------------------
Neither rollover contributions nor participant contributions to the Plan
are permitted.
2.04. Limitations on Annual Additions
- -------------------------------------
Annual Additions to each Participant's Account shall not exceed the lesser
of (a) $30,000 [or if greater, 1/4th of the defined benefit dollar limitation in
effect under Code Section 415(b)(l) for the Limitation Year]; or (b) 25% of the
Participant's compensation for the Limitation Year; provided,
2
<PAGE> 9
however, that for any Plan Year in which the conditions of Code Section
415(c)(6) are satisfied by the Plan, the limitations contained in this Section
2.04 shall be adjusted to the maximum amount permitted under such section of the
Code. For purposes of this Section 2.04, the portion of such Employer
contribution which is deemed to be allocated to a Participant's Account shall be
an amount which bears the same ratio to the total contribution made by or on
behalf of the Employer for such Plan Year which is used to repay principal on
one or more Plan loans, or to purchase Employer Shares, as the number of
Employer Shares allocated to such Participant's Account in respect of such Plan
Year bears to the total number of Employer Shares allocated to the Accounts of
all Participants in respect of such Plan Year.
For purposes of this Section 2.04, "compensation" shall mean compensation
as defined in Treasury Regulation Section 1.415-2(d) and shall include wages,
salaries, fees for professional services, percentage of profits, earned income
in the case of a self-employed Participant, disability payments under Code
Section 105(d), paid or reimbursed moving expenses to the extent not deductible
by the Participant, medical reimbursement items and the value of a non-qualified
stock option to the extent includable in an Employee's gross income upon making
the election under Code Section 83(b). Specifically excluded are salary deferral
contributions; contributions to or distributions from most deferred compensation
plans; amounts realized from the sale of a non-qualified stock option plan or
from the sale, exchange or other disposition of stock acquired under a qualified
stock option plan and most amounts which receive special tax benefits.
2.05. Dual Plan Limitation
- --------------------------
If the Participant is, or was, covered under a defined benefit plan and a
defined contribution plan maintained by the Employer, the sum of the
Participant's defined benefit plan fraction and defined contribution plan
fraction may not exceed 1.0 in any Limitation Year.
The defined benefit plan fraction is a fraction, the numerator of which is
the sum of the Participant's Projected Annual Benefits under all defined benefit
plans (whether or not terminated) maintained by the Employer and the denominator
of which is the lesser of (a) 1.25 times the dollar limitation of
3
<PAGE> 10
Section 415(b)(1)(A) of the Code in effect for the Limitation Year; or (b) 1.4
times the Participant's average compensation for the three consecutive years
that produced the highest average.
The defined contribution plan fraction is a fraction, the numerator of
which is the sum of the Annual Additions to the Participant's Accounts under all
defined contribution plans maintained by the Employer (whether or not
terminated) for the current and all prior Limitation Years, and the denominator
of which is the sum of the lesser of the following amounts determined for such
year and for each prior Year of Service with the Employer: (a) 1.25 times the
dollar limitation in effect under Section 415(c)(1)(A) of the Code for such
year; or (b) 1.4 times the amount which may be taken into account under Section
415(c)(1)(B) of the Code.
For any years in which the Plan is "top heavy," "1.0" shall be substituted
for "1.25" in the preceding two paragraphs.
If, in any Limitation Year, the sum of the defined benefit plan fraction
and the defined contribution plan fraction exceeds 1.0, the rate of benefit
accruals under this Plan will be reduced so that the sum of the fractions equals
1.0.
2.06. Corrective Adjustments
- ----------------------------
If, due to a reasonable error in estimating a Participant's annual
compensation or due to the allocation of Forfeitures an excess Annual Addition
exists, such excess will be used to reduce Employer contributions for such
Participant in the next, and succeeding, Limitation Years. If the Participant
was not covered by the Plan at the end of the Limitation Year, such excess will
be applied to reduce Employer contributions for all remaining Participants in
the next, and succeeding, Limitation Years.
2.07. Contributions Conditioned on Plan Qualification
- -----------------------------------------------------
All Employer contributions under this Plan will be made with the
understanding that the Plan will qualify under the provisions of Section 401(a)
of the Code. In the event the Internal Revenue Service initially determines that
this Plan fails to meet the requirements for a qualified plan and the Employer
is unable to amend the Plan so as to receive a favorable
4
<PAGE> 11
determination, then all Employer contributions under the Plan, less any expenses
and adjusted by any gains or losses, will be refunded to the Employer.
SECTION 3
---------
ALLOCATION OF EMPLOYER CONTRIBUTIONS
------------------------------------
3.01. Allocation of Regular Contributions and Forfeitures
- ---------------------------------------------------------
Each Plan Year, the Employer's regular contribution made pursuant to
Section 2.01, and any Forfeitures available for such year, shall be allocated to
the Accounts of Current Participants. In that regard, the amount allocated to
the Account of a particular Current Participant shall be in the same proportion
to the total amounts available for allocation as the Compensation of such
Current Participant for the Plan Year bears to the Compensation of all Current
Participants for such Plan Year.
3.02. Allocation of Employer Shares Purchased with Proceeds of Plan Loan
- ------------------------------------------------------------------------
Any Employer Shares purchased with the proceeds of Plan loans shall be held
in a suspense account and allocated to Participants' Employer Contributions
Accounts as such loans are reduced and such Shares are released pursuant to the
terms of the loans. Each year the number of Employer Shares released under all
Plan loans shall be allocated to each Participant's Employer Contributions
Account in the same manner as the Employer's regular contribution is allocated
under Section 3.01.
3.03. Special Restriction on Allocation
- ---------------------------------------
Notwithstanding any provision contained herein, no portion of the assets of
the Plan attributable to Employer Shares acquired by the Plan in a sale to which
either Sections 1042 or 2057 of the Code applies may be allocated, either
directly or indirectly, (i) to the Employer Contributions Account of a
Participant who owns, after application of Section 318(a) of the Code, more than
25% of either (a) any class of outstanding stock of the Employer; or (b) the
total value of any outstanding stock of the Employer; or (ii) during the
nonallocation period [as defined in Code Section 409(n)] to the Employer
Contributions
5
<PAGE> 12
Account of a Participant -- or any person related to such Participant within the
meaning of Code Section 267(b) -- who makes an election under Code Section
1042(a) with respect to Employer Shares.
SECTION 4
---------
PARTICIPANTS' ACCOUNTS
----------------------
4.01. Establishment of Employer Contributions Accounts
- ------------------------------------------------------
The Plan Administrator shall establish and maintain an Employer
Contributions Account for each Participant to record:
(a) his share of the Employer contributions and Forfeitures allocated under
Section 3; and
(b) his share of the net income, or net losses, resulting from the
investment thereof.
4.02. Establishment of Suspense Account
- ---------------------------------------
The Plan Administrator shall establish and maintain a suspense account to
record the number of Employer Shares encumbered under all outstanding Plan
loans. As described in Section 3.02, Employer Shares shall be transferred from
the suspense account and allocated to the Participants' Employer Contributions
Accounts as such Shares are released from encumbrance under the terms of such
Plan loans.
SECTION 5
---------
PLAN INVESTMENTS
----------------
5.01. Primary Investments
- -------------------------
As an employee stock ownership plan, this Plan shall invest primarily in
Employer Shares. Any Plan assets not invested in Employer Shares shall be
invested in other investment vehicles by the Trustee, in its discretion,
pursuant to the provisions of the Trust Agreement.
6
<PAGE> 13
5.02. Diversification Requirements
- ----------------------------------
(a) Any Participant who has completed at least ten years of participation
in the Plan and who has attained age 55 (the "diversification requirements"),
may elect within the first 90 days of each of the six Plan Years immediately
following the Plan Year in which he first satisfies the diversification
requirements, to direct the Plan as to the investment of up to 25% of the total
balance of his Account attributable to Employer Shares (to the extent such 25%
portion exceeds the amount to which a prior election under this paragraph
applies). In the case of the Plan Year in which the Participant can make his
last such election, the preceding sentence shall be applied by substituting
"50%" for "25%." The Participant's direction (i) shall be provided to the Plan
Administrator in writing.
(b) The Plan shall, in each instance, distribute [notwithstanding Section
409(d) of the Code] the portion of the Participant's Account that is covered by
the election within the first 180 days of the Plan Year in which the election is
made. This paragraph (b) shall apply notwithstanding any other provision of the
Plan other than such provisions as require the consent of the Participant to a
distribution with a present value in excess of $3,500. If the Participant does
not consent, such amount shall be retained in the Plan.
(c) In lieu of making the distribution described in paragraph (b) above,
the Plan may satisfy the requirements of paragraph (a) by offering at least
three investment options (other than Employer Shares) to each Participant making
the election described in paragraph (a); and if the Participant so elects by
investing, within the 180 day period specified in paragraph (b), the amount in
question in the option(s) selected by the Participant.
SECTION 6
---------
VALUATION OF PARTICIPANTS' ACCOUNTS
-----------------------------------
6.01. Valuations
- ----------------
As of each Valuation Date, or more frequently at the election of the Plan
Administrator, the Plan Administrator shall obtain an evaluation of the assets
of the Trust Fund from the
7
<PAGE> 14
Trustee on the basis of the market value of the assets of the Trust Fund. On the
basis of such valuation, the Participants' Accounts shall be adjusted as of such
Valuation Date to reflect the effect of income received or accrued, realized and
unrealized profits and losses, expenses, Forfeitures, payments to Participants
and all other transactions in the period since the last preceding Valuation
Date.
For purposes of valuation of Employer Shares under this Section and with
respect to all other activities carried on by the Plan which require the
valuation of Employer Shares, at all times during which the Employer Shares are
not readily tradable on an established securities market, such valuations shall
be made by an independent appraiser, within the meaning of Section 401(a)(28)(C)
of the Code.
6.02. Method of Adjustment
- --------------------------
The amount to the credit of each Participant's Account as of each Valuation
Date shall be adjusted as of each succeeding Valuation Date by the following
credits and charges in the order specified:
(a) In the case of each Participant to, for or on behalf of whom
disbursements from the Plan have been made, there shall be debited the total
amount of any disbursements made to him or for his account from his Account
during the period since the last Valuation Date.
(b) In the case of each Participant (including former Employees for whom
Accounts are being maintained), there shall be credited or debited to his
Account that portion of the net increase (including an amount equal to the
non-distributed dividends on allocated Employer Shares) or net decrease of the
value of the assets of the Trust Fund since the last Valuation Date which the
balance of his Account (after completion of the adjustment called for in Section
6.02(a) above) bears to the total balance of all Accounts after completion of
the adjustments called for in Section 6.02(a) above.
(c) In the case of each Current Participant, there shall be credited to his
Account the Employer's contributions, Forfeiture and Employer Shares released
under Plan loans that are allocable to him under Section 3 of this Plan. In
allocating
8
<PAGE> 15
Forfeitures, Employer Shares shall be allocated only after other assets in the
terminated Participants' Accounts have been allocated.
SECTION 7
---------
RETIREMENT BENEFITS
-------------------
7.01. Time of Retirement
- ------------------------
A Participant may retire from the employ of the Employer on his Normal
Retirement Date or his Late Retirement Date.
7.02. Amount of Retirement Benefits
- -----------------------------------
The amount which a Participant shall be entitled to receive upon reaching
his Normal Retirement Date or his Late Retirement Date shall be an amount equal
to the value of the Employer Shares credited to his Account and the net value of
the other assets of such Account as of the first Valuation Date following his
Normal Retirement Date or his Late Retirement Date.
SECTION 8
---------
DEATH BENEFITS
--------------
8.01. Amount of Death Benefit
- -----------------------------
The death benefit under this Plan shall be an amount equal to the value of
the Employer Shares and the net value of the other assets credited to the
deceased Participant's Account as of the first Valuation Date following the date
of his death.
8.02. Designation of Beneficiary
- --------------------------------
Subject to the provisions of Section 8.03, each Participant shall
designate, by a written instrument filed with the Plan Administrator, one or
more Beneficiaries who, upon the death of the Participant, shall be entitled to
receive the death benefit described in Section 8.01. If more than one
Beneficiary is named, the Participant may specify the sequence and/or proportion
in which payments must be made to each Beneficiary. In the absence of such
specification, payments shall be made in
9
<PAGE> 16
equal shares to all named Beneficiaries then living at the time of the
Participant's death. To the extent otherwise consistent with this Plan, a
Participant may change his Beneficiary from time to time by written notice
delivered to the Plan Administrator in the manner prescribed by the Plan
Administrator. The Plan Administrator may, in its discretion, limit the number
of Beneficiaries that may be designated by a Participant. If no Beneficiary has
been designated or if no designated Beneficiary is living at the time of the
Participant's death, payment of such death benefit, if any, to the extent
permitted by law, shall be made to the surviving person or persons in the first
of the following classes of successive preference of beneficiaries: (a)
Surviving Spouse; (b) issue, then living, per stirpes; (c) executors or
administrators. Any minor's share shall be paid to such adult or adults as have,
in the opinion of the Plan Administrator, assumed custody and support of such
minor. Proof of death satisfactory to the Plan Administrator must be furnished
prior to the payment of any death benefit under the Plan. Once benefits begin to
be paid to a Beneficiary pursuant to this Section, such Beneficiary shall name
an individual or individuals to receive the remainder of such benefit, if any,
upon the death of the Beneficiary. In the absence of such a designation by the
Beneficiary, such remaining benefit, if any, shall be paid to the estate of the
Beneficiary.
8.03. Distribution of Death Benefit
- -----------------------------------
If a Participant dies without a Surviving Spouse either before retirement
or after retirement, but before a complete distribution of his Accounts, the
death benefit described in Section 8.01 shall be distributed to the person or
persons specified in Section 8.02, in accordance with the provisions of Section
12 hereof.
If a Participant dies with a Surviving Spouse either before retirement or
after retirement, but before a complete distribution of his Accounts, then,
notwithstanding the provisions of Section 8.02 hereof, the death benefit
described in Section 8.01 shall be paid to his Surviving Spouse in accordance
with the provisions of Section 12 hereof, UNLESS such Surviving Spouse, in
accordance with the provisions of this paragraph, has consented to an alternate
Beneficiary, in which case, such death benefit shall be distributed to such
alternate Beneficiary in accordance with the provisions of Section 12. For
purposes
10
<PAGE> 17
of the preceding sentence, the consent of the Spouse must (a) be in writing; (b)
designate a specific Beneficiary, including any class of beneficiaries or
contingent beneficiaries, which may not be changed without spousal consent (or
the Spouse expressly permits designations by the Participant without further
spousal consent); (c) acknowledge the effect of such consent; and (d) be
witnessed by a Plan representative or notary public.
SECTION 9
---------
DISABILITY BENEFITS
-------------------
9.01. Amount of Disability Benefit
- ----------------------------------
If a Participant becomes "totally and permanently disabled" as defined in
Section 9.02 below, such Participant shall be entitled to receive as a
disability benefit an amount equal to the value of the Employer Shares credited
to his Account and the net value of other assets of such Account as of the first
Valuation Date following the date that the Plan Administrator determines him to
be "totally and permanently disabled".
9.02. Determination of Total and Permanent Disability
- -----------------------------------------------------
A Participant shall be considered to be "totally and permanently disabled"
if it is established by a licensed physician selected by the Plan Administrator
that (i) the Participant has suffered a disability which is expected to result
in his death or last for not less than 12 months; and (ii) the Participant is
not able to perform his job or any job for which he is reasonably suited as a
result of his education, training and experience. The determination by the Plan
Administrator with respect to whether a Participant is totally and permanently
disabled shall be made in a nondiscriminatory manner.
SECTION 10
----------
TERMINATION OF EMPLOYMENT
-------------------------
10.01. Amount of Benefits Upon Termination of Employment
- --------------------------------------------------------
If a Participant leaves the employ of the Employer for any reason other
than retirement, death or disability in accordance with Sections 7, 8 or 9
hereof, he shall be entitled
11
<PAGE> 18
to receive an amount equal to the nonforfeitable percentage of the value of the
Employer Shares and the net value of the other assets credited to his Account as
of the first Valuation Date following the date of his termination of employment.
Such nonforfeitable percentage shall be determined in accordance with Section
11.01 hereof.
SECTION 11
----------
VESTING
-------
11.01. Fully Vested Benefits
- ----------------------------
Employer contributions allocated to a Participant's Employer Contributions
Account shall become vested in accordance with the table shown below:
<TABLE>
<CAPTION>
NONFORFEITABLE
YEARS OF SERVICE PERCENTAGE
---------------- ----------
<S> <C>
Less than 1 0
1 20%
2 40%
3 60%
4 80%
5 or more 100%
</TABLE>
11.02. Service for Vesting
- --------------------------
Years of Service for vesting purposes shall include all Years of Service
with the Employer.
11.03. Full Vesting at Normal Retirement Age, Death or Disability
- -----------------------------------------------------------------
Notwithstanding any provision in this Plan to the contrary, the value of a
Participant's Account shall be fully vested and nonforfeitable upon the
Participant's (i) attaining his Normal Retirement Age, (ii) becoming totally and
permanently disabled, or (iii) death.
11.04. Termination After Eligibility for Retirement
- ---------------------------------------------------
12
<PAGE> 19
The termination of a Participant's employment after he has attained his
Normal Retirement Age shall be considered a retirement for purposes of this
Plan.
SECTION 12
----------
PAYMENT OF BENEFITS
-------------------
12.01. Method of Payment
- ------------------------
At the time a Participant becomes entitled to receive any amount because of
his retirement, death, disability or termination of employment, the Trustee,
acting in accordance with the written instructions of the Plan Administrator,
shall make payment from the Trust Fund to such individual (or his Beneficiary)
in a lump sum. All such payments shall be made by the Trustee, at the option of
the Participant (or his Beneficiary) in Employer Shares, in cash or both.
12.02. Timing of Payments
- -------------------------
Unless the Participant or Beneficiary elects otherwise, the payment of
retirement, death, disability and termination benefits shall begin no later than
60 days after the close of the Plan Year in which the Participant retires, dies,
becomes disabled or otherwise terminates service with the Employer.
Notwithstanding any provisions hereof to the contrary, benefit payments
under this Plan shall in all instances commence by the April 1 following the end
of the calendar year in which the Participant attains age 70 1/2.
12.03. Installment Payments
- ---------------------------
Notwithstanding any provisions in this Plan to the contrary, if a
Participant's entire interest is to be distributed in other than an immediate
lump sum, minimum annual payments under the Plan must be paid over one of the
following periods (or a combination thereof):
(a) a period certain not extending beyond the life expectancy of the
Participant; or
13
<PAGE> 20
(b) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated Beneficiary.
If a Participant's entire interest is to be distributed in other than a
lump sum, then the amount to be distributed each year must be at least an amount
equal to the quotient obtained by dividing the Participant's entire interest by
the life expectancy of the Participant or joint and last survivor expectancy of
the Participant and designated Beneficiary. If the Participant's Spouse is not
the designated Beneficiary, the method of distribution selected must assure that
at least 50% of the present value of the amount available for distribution is
paid within the life expectancy of the Participant.
12.04. Distributions After Death
- --------------------------------
If the distribution of the Participant's Account has begun and he dies
before his entire Account has been distributed to him, the remaining portion of
such Account will be distributed at least as rapidly as under the method of
distribution being used prior to the Participant's death.
Subject to the succeeding paragraph, if the Participant dies before his
distribution has begun, his entire Account shall be distributed within five
years of his death unless (a) a portion of his Account is payable to or on
behalf of a designated Beneficiary; (b) such portion will be distributed over
the life of such designated Beneficiary; and (c) such distribution begins not
later than one year after the date of the Participant's death (or such date as
prescribed by the Secretary of Treasury).
Notwithstanding the preceding paragraph if the designated Beneficiary is
the Participant's Surviving Spouse, the date by which distribution must commence
under (c) in the preceding paragraph shall be the date the Participant would
have attained age 70 1/2. If the Surviving Spouse dies before distribution to
said Spouse begins, this section shall apply as if the Surviving Spouse were the
Participant. Life expectancy of a Surviving Spouse may be recalculated annually;
however, in the case of any other designated Beneficiary, such life expectancy
will be calculated at the time that payment first commences without further
calculations. In addition, any amount paid to a child of the Participant will be
treated as if it had been paid
14
<PAGE> 21
to the Surviving Spouse if the amount becomes payable to the Surviving Spouse
when the child reaches the age of majority.
The provisions of this Section 12.04 are subject to the provisions of
Section 12.01 hereof.
12.05. Cash-Outs
- ----------------
If for any reason a Participant terminates service and the value of his
nonforfeitable Accounts does not exceed (or at the time of any prior
distribution has not exceeded) $3,500, the Participant shall receive a
distribution of the value of the entire nonforfeitable portion of such Accounts
as soon as administratively feasible after the first Valuation Date following
his date of termination; and the remainder of such Accounts will be treated as a
Forfeiture. For purposes of this section, if the value of a Participant's
nonforfeitable Accounts is zero, the Participant shall be deemed to have
received a distribution of such nonforfeitable Account.
If a Participant receives a distribution pursuant to this Section which is
less than the value of his Employer Contributions Account and resumes employment
covered under this Plan, the Participant's Accounts will be restored to the
amount on the date of distribution if he repays to the Plan the full amount of
his distribution before the earlier of (a) five years after the first date on
which the Participant is subsequently reemployed by the Employer; or (b) the
date on which he incurs five consecutive One Year Breaks in Service following
the date of distribution.
12.06. Put Option
- -----------------
Except as otherwise provided in this Section 12.06, any Employer Shares
which are not publicly traded at the time they are distributed to Participants
or former Participants shall be subject to a put option which will permit the
Participant to put those Employer Shares to the Employer. Put options shall be
exercisable at least during the 16-month period which begins on the date the
Employer Shares subject to the option are distributed by this Plan. Such an
option may be exercised by the holder of the Shares notifying the Employer in
writing that the put option is being exercised. The price at which the put
option must be exercisable is the fair market value of the Shares
15
<PAGE> 22
determined in accordance with the provisions of Treasury Regulation
section 54.4975-11(d)(5).
If, pursuant to this Section, the Employer is required to repurchase
Employer Shares which are distributed to a Participant within one taxable year
in a distribution that represents the balance to the credit of the Participant's
Account, the amount to be paid for such Employer Shares shall be paid in
substantially equal periodic payments (not less frequently than annually) over a
period beginning not later than 30 days after the exercise of the put option
described in this Section and not exceeding five years. Adequate security shall
be provided and reasonable interest shall be paid on the unpaid amounts referred
to in the preceding sentence.
If, pursuant to this Section, the Employer is required to repurchase
Employer Shares which are distributed to a Participant as part of an installment
distribution, the amount to be paid for such Employer Shares shall be paid not
later than 30 days after the exercise of the put option described in this
Section.
Notwithstanding any provision of this Plan to the contrary, to the extent
that the Employer is prohibited by law from redeeming or purchasing it own
securities, consistent with the provisions of Section 409(h)(3) of the Code,
Employer Shares under this Plan shall not be subject to the put option described
in this Section 12.06 and, as such, a Participant will not be permitted to put
such Employer Shares to the Employer.
12.07. Right of First Refusal
- -----------------------------
(a) During any period when Employer Shares are not publicly traded, all
distributions of Employer Shares to any Participant or his Beneficiary by the
Plan shall be subject to a "right of first refusal" upon the terms and
conditions hereinafter set forth. The "right of first refusal" shall provide
that prior to any transfer (as determined by the Plan Administrator) of the
Employer Shares, the Participant or Beneficiary must first offer to sell such
shares to the Plan; and if the Plan refuses to exercise its right to purchase
the Employer Shares, then the Employer shall have a "right of first refusal" to
purchase such Shares. Neither the Plan nor the Employer shall be required to
exercise the "right of first
16
<PAGE> 23
refusal." This Section 12.07 shall not be operative unless and until the Board
of Directors of the Employer so directs.
(b) The terms and conditions of the "right of first refusal" shall be
determined as follows:
(i) If the Participant or Beneficiary receives a bona
fide offer for the purchase of all or any part of his Employer
Shares from a third party, the Participant or Beneficiary
shall forthwith deliver (by registered mail, return receipt
requested) a copy of any such offer to the Plan Administrator.
The Trustee (as directed by the Plan Administrator) or the
Employer, as the case may be, shall then have 14 days after
receipt by the Plan Administrator of the written offer to
exercise the right to purchase all or any portion of the
Employer Shares.
(ii) The selling price and other terms under the
"right of first refusal" must not be less favorable to the
Participant or Beneficiary than the purchase price and other
terms offered by a buyer other than the Employer or the Plan,
making a good faith offer to purchase the security.
12.08. Eligible Rollover Distributions
- --------------------------------------
(a) Notwithstanding any provision of this Plan to the contrary that would
otherwise limit a distributee's election under the Plan, a distributee may elect
at the time and in the manner prescribed by the Plan Administrator, to have any
portion of an eligible rollover distribution made on or after January l, 1993
paid directly to an eligible retirement plan specified by the distributee in a
direct rollover.
(b) The following definitions will apply for purposes of this Section
12.08:
(i) Eligible rollover distribution: An eligible
rollover distribution is any distribution of all or any
portion of the balance to the credit of the distributee,
except that an eligible rollover distribution does not
include: (A) any distribution that is one of a series of
substantially equal periodic
17
<PAGE> 24
payments (not less frequently than annually) made for the
life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and
the distributee's designated Beneficiary; (B) any
distribution that is for a specified period of ten years or
more; (C) any distribution to the extent such distribution
is required under Code Section 401(a)(9); and (D) the
portion of any distribution that is not includable in gross
income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer
securities).
(ii) Eligible retirement plan: An eligible retirement
plan is an individual retirement account described in Code
Section 408(a), an individual retirement annuity described in
Code Section 408(b), an annuity plan described in Code Section
403(a) or a qualified trust described in Code Section 401(a)
that accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to
the Surviving Spouse, an eligible retirement plan is an
individual retirement account or individual retirement
annuity.
(iii) Distributee: A distributee includes an Employee
or former Employee. In addition, the Spouse or Surviving
Spouse of an Employee or former Employee is a distributee with
regard to the interest of the Spouse or Surviving Spouse.
(iv) Direct rollover: A direct rollover is a payment
by the Plan to the eligible retirement plan specified by the
distributee.
SECTION l3
----------
BREAK IN SERVICE RULES
----------------------
13.01. Effect of Break in Service on Eligibility
- ------------------------------------------------
If a Participant terminates his employment with the Employer and
subsequently resumes employment after incurring a
18
<PAGE> 25
One Year Break in Service, the rehired Participant shall again participate in
the Plan as of the date of his reemployment.
13.02. Effect of Break in Service on Vesting
- --------------------------------------------
In the case of a Participant who has five or more consecutive One-Year
Breaks in Service, Years of Service performed by such Participant after such
One-Year Breaks in Service will be disregarded for the purpose of determining
the vested percentage of any Employer Contributions that accrued to his Account
before the commencement of such One-Year Breaks in Service. Accordingly, upon
the occurrence of five consecutive One-Year Breaks in Service, the non-vested
portion of the Participant's Account, if any, shall be treated as a Forfeiture.
Moreover, if a Participant incurs five or more consecutive One-Year Breaks
in Service, such Participant's pre-break service will be disregarded in
determining the vested percentage of any post-break Employer Contributions that
accrue to his Account if (a) he has no vested interest in his Account at the
time of his separation from service, and (b) upon returning to service, the
number of his consecutive One-Year Breaks in Service is greater than the number
of his pre-break Years of Service.
Separate accounts will be maintained for the Participant's pre-break and
post-break Employer contributions. Both accounts will share in the earnings and
losses of the Trust Fund.
In the case of a Participant who does not have five consecutive One-Year
Breaks in Service, both pre-break and post- break Years of Service will count in
determining the vested percentage of pre-break and post-break Employer
contributions that accrue to his Account.
13.03. Authorized Leaves of Absence
- -----------------------------------
Authorized leaves of absence, as determined by the Plan Administrator,
including military service recognized by law as leave of absence, will be
included in determining Years of Service for both eligibility and vesting
purposes. All Employees in similar circumstances will be treated alike.
19
<PAGE> 26
SECTION 14
----------
TRUST AGREEMENT
---------------
14.01. Description of Trust Agreement
- -------------------------------------
The Employer proposes to enter into a Trust Agreement with the Trustee to
provide for the administration of the Trust Fund. The Trust Agreement shall be
deemed to form a part of this Plan, and any and all rights or benefits which may
accrue to any person under this Plan shall be subject to all the terms and
provisions of the Trust Agreement. The Plan is designed to invest primarily in
Employer Shares. If and to the extent that Employer Shares are not available at
a price acceptable to the Trustee, the Trustee is authorized to make other
investments as provided in the Trust Agreement.
SECTION 15
----------
PLAN ADMINISTRATION
-------------------
15.01. Plan Administrator
- -------------------------
The Plan shall be administered by a Plan Administrator. Such Plan
Administrator shall be a committee of one or more entities or individuals who
shall be appointed by and serve at the pleasure of the Employer. In the event
that no such appointment is made, Home City Financial Corporation shall serve as
Plan Administrator.
15.02. Duties of Plan Administrator
- -----------------------------------
The Plan Administrator shall supervise the maintenance of such accounts and
records as shall be necessary or desirable to show the contributions of the
Employer, allocation to Participants' Accounts, payments from Participants'
Accounts, valuations of the Trust Fund and all other transactions pertinent to
the Plan.
The Plan Administrator is authorized to perform all functions necessary to
administer the Plan, including, without limitation, to determine the eligibility
and qualification of Employees for benefits under the Plan; to determine the
allocation and vesting of contributions, earnings and profits of
20
<PAGE> 27
the Plan; to interpret and construe the terms of Plan; to adopt rules,
regulations and procedures consistent therewith and to decide all disputes with
respect to the rights and obligations of Participants in the Plan. If the Trust
Agreement permits, the Plan Administrator may direct the Trustee with respect to
investment of the assets of the Trust Fund or may employ investment counsel to
do so. The Plan Administrator will have absolute discretion in carrying out its
duties and responsibilities under this paragraph.
The Plan Administrator may employ one or more persons to render advice with
regard to any responsibility it has under the Plan and may designate others to
carry out any of' its responsibilities.
SECTION 16
----------
AMENDMENTS
----------
16.01. Employer's Right to Amend Plan
- -------------------------------------
The Employer shall have the right at any time, by an instrument in writing,
to modify, alter or amend this Plan in whole or in part; provided, that no such
change shall in any way affect the vested rights of the Employees under this
Plan; and provided further, that the provisions of this Plan with respect to the
amount, price and timing of awards to officers shall not be amended more than
once every six months, other than to comply with applicable provisions of the
Code, ERISA or regulations thereunder. If an amendment changes the
nonforfeitable rights provided in Section 11, each Participant having not less
than three Years of Service may elect, during the period beginning when the
amendment is adopted and ending no earlier than the latest of (a) 60 days after
the amendment's adoption; (b) 60 days after the amendment's effective date; or
(c) 60 days after the Participant is issued a written notice of the amendment,
to have his nonforfeitable rights computed without regard to such amendment. No
amendment to the Plan shall decrease a Participant's Account balance or
eliminate an optional form of distribution. Any amendment to the Plan shall be
executed by any individual authorized by the Board of Directors of the Employer.
21
<PAGE> 28
SECTION 17
----------
DISTRIBUTIONS ON PLAN TERMINATION
---------------------------------
17.01. Full Vesting on Plan Termination
- ---------------------------------------
When and if this Plan is terminated, or upon dissolution or liquidation of
the Employer, after the payment of all expenses and after all adjustments of
Participants' Accounts to reflect such expenses, fund profits or losses, income
and allocations-to date of termination, each Participant shall be entitled to
receive that number of Employer Shares as is then credited to his Accounts and
the net value of other assets of such Accounts.
17.02. Payment on Plan Termination
- ----------------------------------
The Plan Administrator shall make payment of each Participant's Account in
cash or Employer Shares. Such payment shall be made to each Participant in a
single lump sum payment.
17.03. Discontinuance of Contributions; Partial Termination of Plan
- -------------------------------------------------------------------
Any complete discontinuance of contributions by the Employer or partial
termination of the Plan will be treated as a termination with all affected
Participants acquiring nonforfeitable interests in amounts contributed to such
date of termination.
SECTION 18
----------
CREDITORS OF PARTICIPANTS
-------------------------
18.01. Non-Assignability
- ------------------------
Except to the extent permitted by ERISA, assignment, pledge or encumbrance
of any character of the benefits under the Plan is not permitted or recognized
under any circumstances; and such benefits shall not be subject to claims of
creditors, execution, attachment, garnishment or any other legal process.
22
<PAGE> 29
18.02. Qualified Domestic Relations Orders
- ------------------------------------------
Section 18.01 shall also apply to the creation, assignment or recognition
of a right to any benefit payable with respect to a Participant pursuant to a
domestic relations order, unless such order is determined to be a qualified
domestic relations order [as defined in Section 414(p) of the Code], or any
domestic relations order entered before January l, 1985.
SECTION 19
----------
CLAIMS PROCEDURES
-----------------
19.01. Filing a Claim for Benefits
- ----------------------------------
A Participant or Beneficiary, or the Employer acting on behalf of such
Participant or Beneficiary, shall notify the Plan Administrator of a claim for
benefits under the Plan. Such request shall be in writing to the Plan
Administrator and shall set forth the basis of such claim and shall authorize
the Plan Administrator to conduct such examinations as may be necessary to
determine the validity of the claim and to take such steps as may be necessary
to facilitate the payment of benefits to which the Participant or Beneficiary
may be entitled under the terms of the Plan.
A decision by the Plan Administrator shall be made promptly and not later
than 90 days after the Plan Administrator's receipt of the claim for benefits
under the Plan, unless special circumstances require an extension of the time
for processing, in which case a decision shall be rendered as soon as possible,
but not later than 180 days after the initial receipt of the claim for benefits.
19.02. Denial of Claim
- ----------------------
Whenever a claim for benefits by any Participant or Beneficiary has been
denied by the Plan Administrator, a written notice prepared in a manner
calculated to be understood by the Participant or Beneficiary shall be provided
setting forth (a) the specific reasons for the denial; (b) the specific
reference to the pertinent Plan provisions on which the denial is based; (c) a
description of any additional material or information necessary for the claimant
to perfect the claim and an
23
<PAGE> 30
explanation of why such material or information is necessary; and (d) an
explanation of the Plan's claim review procedure.
19.03. Remedies Available to Participants
- -----------------------------------------
Upon denial of his claim by the Plan Administrator, a Participant or
Beneficiary
(a) may request a review by a named fiduciary, other than the Plan
Administrator, upon written application to the Plan;
(b) may review pertinent Plan documents; and
(c) may submit issues and comments in writing to a named fiduciary.
A Participant or Beneficiary shall have 60 days after receipt by the
claimant of written notification of a denial of a claim to request a review of a
denied claim.
A decision by a named fiduciary shall be made promptly and not later than
60 days after the named fiduciary's receipt of a request for review, unless
special circumstances require an extension of the time for processing; in which
case, a decision shall be rendered as soon as possible, but not later than 120
days after receipt of a request for review. The decision on review by a named
fiduciary shall be in writing and shall include specific reasons for the
decision, written in a manner calculated to be understood by the claimant, and
specific references to the pertinent Plan provisions on which the decision is
based.
SECTION 20
----------
VOTING RIGHTS
-------------
20.01. Participant Voting Rights with Respect to Allocated Shares
- -----------------------------------------------------------------
All Employer Shares held in the Trust Fund and allocated to Participants'
Accounts shall be voted by the Trustee pursuant to written instructions received
from the Participants. With respect to Allocated Shares for which the Trustee
does not
24
<PAGE> 31
receive written instructions from Participants, such Shares shall be voted by
the Trustee in its sole discretion.
20.02. Participant Voting Rights with Respect to Unallocated Shares
- -------------------------------------------------------------------
All Employer Shares held in the Trust Fund and not allocated
to Participants' Accounts shall be voted by the Trustee in its sole discretion.
SECTION 21
----------
TOP HEAVY RULES
---------------
21.01. Definitions
- ------------------
If the Plan is or becomes top heavy in any Plan Year, the provisions of
this Section 21 will supersede any conflicting provisions in the Plan. The
following definitions and rules are necessary to comply with related federal tax
requirements:
(a) Key Employee: Any Employee or former Employee (and the Beneficiaries of
such Employee) who at any time during the determination period was (i) an
officer of the Employer if such individual's annual compensation exceeds 50% of
the dollar limitation under Code Section 415(b)(1)(A); (ii) an owner (or
considered an owner under Code Section 318) of one of the ten largest interests
in the Employer if such individual's annual compensation exceeds the dollar
limitation under Code Section 415(c)(l)(A); (iii) a 5% owner of the Employer; or
(iv) a 1% owner of the Employer who has annual compensation of more than
$150,000. For purposes of this section, annual compensation means compensation
as defined in Code Section 415(c)(3), but including amounts contributed by the
Employer pursuant to a salary reduction agreement which are excludable from the
Employee's gross income under Code Section 125, 402(a)(8), 402(h) or 403(b). The
determination period is the Plan Year containing the Determination Date and the
four preceding Plan Years. The determination of who is a Key Employee will be
made in accordance with Code Section 416(i)(1) and the regulations thereunder.
(b) Non-Key Employee: Any Employee or former Employee of the Employer who
is not a Key Employee. The Beneficiary of a Non-Key Employee will be treated as
a Non-Key Employee, and the
25
<PAGE> 32
Beneficiary of a former Non-Key Employee will be treated as a former Non-Key
Employee.
(c) Determination Date: For any Plan Year subsequent to the first Plan
Year, the last day of the preceding Plan Year. For the first Plan Year, the last
day of such Plan Year.
(d) Permissive Aggregation Group: The Required Aggregation Group of plans
plus any other plan or plans of the Employer which, when considered as a group
with the Required Aggregation Group, would continue to satisfy the requirements
of Code Sections 401(a)(4) and 410.
(e) Required Aggregation Group: (i) Each qualified plan of the Employer in
which at least one Key Employee participates or participated at any time during
the determination period (regardless of whether the Plan has terminated); and
(ii) any other qualified plan of the Employer which enables a plan described in
(i) to meet the requirements of Code Sections 401(a)(4) or 410.
(f) Top-Heavy Plan: The Plan, if it meets the requirements of Section
21.02.
21.02. Top Heavy Status
- -----------------------
This Plan, and any other plans aggregated with it, will become top heavy
pursuant to this Section 21.02, as of the Determination Date, if the present
value of accrued benefits for Key Employees is more than 60% (90% in the case of
"super top heavy") of the sum of the present value of accrued benefits of all
Employees, excluding former Key Employees. In the case of more than one plan
which is to be aggregated, the present value of the accrued benefits (including
distributions for Key Employees and all Employees) is first determined
separately for each plan as of each plan's determination date. The plans then
will be aggregated by adding the results of each plan as of the determination
dates for such plans that fall within the same calendar year. The combined
results will indicate whether the plans are top heavy.
The account balances and accrued benefits of a Participant who has not been
credited with an Hour of Service for
26
<PAGE> 33
the Employer maintaining the Plan during the five-year period ending on the
Determination Date will be disregarded.
The present value of accrued benefits as of the Determination Date for any
individual is the sum of (a) the Account balance as of the most recent Valuation
Date occurring within a 12-month period ending on the Determination Date; (b) an
adjustment for contributions due as of the Determination Date; and (c) the
aggregate distributions made with respect to such individual under the Plan
during the five-year period ending on the Determination Date. For an employee
stock-ownership plan, the adjustment in (b) is generally the amount of
contributions actually made after the Valuation Date but on or before the
Determination Date.
In determining whether the Plan is top heavy, it must be aggregated with
each plan included in the Required Aggregation Group. In addition, the Employer
may aggregate plans included in the Permissive Aggregation Group.
21.03. Minimum Contributions
- ----------------------------
For each Plan Year in which the Plan is top heavy, each Participant who is
a Non-Key Employee (including those Participants who did not complete 1,000
Hours of Service in the Plan Year) must receive an annual allocation of
contributions and Forfeitures (disregarding Social Security benefits) equal to
at least 3% of his Compensation; provided that if the largest percentage of
Compensation allocated to a Key Employee for a Plan Year is less than 3%, that
largest percentage will be substituted for 3%. For any year in which the
Employer maintains a defined benefit plan in addition to this Plan, the
requirements of this paragraph will be satisfied by providing each Non-Key
Employee with the minimum annual benefit provided under the top heavy provisions
of the defined benefit plan. For any year in which the Employer maintains
another defined contribution plan in addition to this Plan, the minimum benefit
described in this paragraph shall be provided by such other defined contribution
plan.
SECTION 22
----------
EXEMPT LOANS
------------
27
<PAGE> 34
22.01. Authority to Borrow
- --------------------------
The Trustee may borrow funds on behalf of the Plan to purchase Employer
Shares, provided that any Plan loan is an exempt loan within the meaning of
Treasury Regulation Section 54.4975-7(b)(l)(iii).
22.02. Requirements for Plan Loans
- ----------------------------------
Any loan made to the Plan pursuant to this Section 22 must meet the
following requirements:
(a) The proceeds of the loan must be used within a reasonable time after
their receipt by the Plan either (i) to acquire Employer Shares; (ii) to repay
such loan; or (iii) to repay a prior exempt loan.
(b) The interest rate of the loan must not be in excess of a reasonable
rate of interest. All relevant factors will be considered in determining a
reasonable rate of interest, including the amount and duration of the loan, the
security and guarantee (if any) involved, the credit standing of the Plan and
the guarantor (if any) and the interest rate prevailing for comparable loans.
(c) The loan must be for a specific term. Such loan may not be payable at
the demand of any person, except in the case of default.
(d) The loan must be without recourse against the Plan. Furthermore, the
only assets of the Plan that may be given as collateral for the loan are
Employer Shares of two classes--those acquired with the proceeds of the loan and
those that were used as collateral on a prior exempt loan repaid with the
proceeds of the current loan. No person entitled to payment under the exempt
loan shall have any rights to assets of the Plan other than (i) collateral given
for the loan; (ii) contributions (other than contributions of Employer Shares)
that are made under the Plan to meet its obligations under the loan; and (iii)
earnings attributable to such collateral and the investment of such
contributions.
(e) The loan must provide for the release from encumbrance of Plan assets
used as collateral for the loan. For
28
<PAGE> 35
each Plan Year during the duration of the loan, the number of securities
released must equal the number of encumbered securities held immediately before
release for the current Plan Year multiplied by a fraction. The numerator of the
fraction is the amount of principal and interest paid for the year. The
denominator of the fraction is the sum of the numerator plus the principal and
interest to be paid for all future years. The number of future years under the
loan must be definitely ascertainable and must be determined without taking into
account any possible extensions or renewal periods. If the interest rate under
the loan is variable, the interest to be paid in future years must be computed
by using the interest rate applicable as of the end of the Plan Year. If
collateral includes more than one class of securities, the number of securities
of each class to be released for a Plan Year must be determined by applying the
same fraction to each class.
(f) All other requirements of Treasury Regulation Section 54.4975-7(b).
SECTION 23
----------
MISCELLANEOUS
-------------
23.01. Employment Rights
- ------------------------
The right of the Employer to terminate the employment of any of its
Employees shall not in any way be affected by the Employee's participation in
this Plan.
23.02. Gender
- -------------
Wherever used in this Plan the masculine pronoun refers to both men and
women.
23.03. Notice Requirement
- -------------------------
Notice of the existence and provisions of the Plan and of any amendment
thereto shall be communicated by the Employer to those entitled to notice
thereof.
29
<PAGE> 36
23.04. Merger or Consolidation
- ------------------------------
In case of any merger or consolidation with, or transfer of assets or
liabilities to, any other plan, each Participant in the Plan would (if this Plan
then terminated) receive a benefit immediately after the merger, consolidation
or transfer which is equal to, or greater than, the benefit he would have been
entitled to receive immediately before the merger, consolidation or transfer (if
the Plan then terminated).
23.05. Social Security Benefits
- -------------------------------
Post-separation Social Security benefit increases shall not affect benefits
under this Plan.
23.06. Forfeitures
- ------------------
Forfeitures resulting from termination of employment shall be allocated to
other Participants as of the first day of the month coincident with or following
the earlier of the date on which the Participant (a) receives an actual
distribution of his nonforfeitable Account; or (b) incurs five consecutive
One-Year Breaks in Service. In the event that a Participant who received a
distribution of his nonforfeitable Account returns to the employment of the
Employer before he incurs five consecutive One Year Breaks in Service and takes
such action as is necessary to reinstate the portion of his account that was
previously forfeited, the forfeited portion of his Account shall be restored
first from Forfeitures available for allocation in that year and then from
additional Employer contributions, if necessary.
23.07. Named Fiduciaries
- ------------------------
The named fiduciary of this Plan shall be Home City Financial Corporation.
23.08. Limitations on Payment
- -----------------------------
No payment shall be made to any incompetent person (through minority or
otherwise) until the Plan Administrator shall have been furnished evidence
satisfactory to it of the person to whom such payment shall be made and his
right to receive the same. Until furnished such evidence, all amounts so payable
shall be held in trust for the person or persons entitled
30
<PAGE> 37
to receive them, separate and apart from the Plan's general Trust Fund.
23.09. Interpretation of Document
- ---------------------------------
The construction and interpretation of the Plan provisions are vested with
the Plan Administrator, in its absolute discretion, including, without
limitation, the determination of benefits, eligibility and interpretation of
Plan provisions. All such decisions, determinations and interpretations shall be
final, conclusive and binding upon all parties having an interest in the Plan.
23.10. Nonterminable Protections and Rights
- -------------------------------------------
Notwithstanding anything contained herein to the contrary, no security
acquired with the proceeds of an exempt loan may be subject to a put, call or
other option, or buy-sell or similar arrangement while held by and or
distributed from this Plan. The rights and protections specified in the
preceding sentence, together with the put option rights provided for in Section
12.06 hereof, shall be non-terminable regardless of whether this Plan ceases to
be an employee stock ownership plan or an exempt loan is paid in full.
23.11. Use of Income With Respect to Employer Shares
- ----------------------------------------------------
The Plan reserves the right to use income with respect to Employer Shares
acquired with the proceeds of an exempt loan to repay such loan.
SECTION 24
----------
CERTAIN DEFINITIONS
-------------------
Whenever used in this Plan, the following words and phrases shall have the
meanings specified below. Additional words and phrases may be defined in the
text of the Plan.
24.01. Account
- --------------
"Account" means a Participant's Employer Contributions Account.
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<PAGE> 38
24.02. Adjustment Factor
- ------------------------
"Adjustment Factor" means the cost-of-living adjustment prescribed by the
Secretary of the Treasury under Code Section 415(d) for years beginning after
December 31, 1987, as applied to such items and in such manner as the Secretary
shall provide.
24.03. Affiliate
- ----------------
"Affiliate" means any other employer which, together with Home City
Financial Corporation, is a member of a controlled group of corporations or of a
commonly controlled trade or business [as defined in Code Sections 414(b) and
(c) and as modified by Code Section 415(h)] or of an affiliated service group
[as defined in Code Section 414(m)] or other organization described in Code
Section 414(o).
24.04. Annual Additions
- -----------------------
"Annual Additions" means the sum of the following amounts credited to a
Participant for the Limitation Year under all defined contribution plans
maintained by the Employer:
(a) Employer contributions;
(b) Forfeitures;
(c) amounts allocated after March 31, 1984 to an
individual medical account, as defined in Section 415(l) (l) of the Code, which
is part of a defined benefit plan maintained by the Employer; and
(d) amounts derived from contributions paid or
accrued after December 31, 1985 in taxable years ending after such date which
are attributable to post-retirement medical benefits allocated to the separate
account of a key employee [as defined in Section 416(i) of the Code] under a
welfare benefit fund [as defined in Section 419(e) of the Code] maintained by
the Employer. The amounts described under this paragraph (d) shall not be
subject to the 25% of compensation limit provided in Section 2.04.
24.05. Beneficiary
- ------------------
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"Beneficiary" means the individual, individuals or trust designated by the
Participant under the terms of Section 8.02 hereof to receive the death benefit
payable under the Plan.
24.06. Code
- -----------
"Code" means the Internal Revenue Code of 1986, as may be amended from time
to time, and corresponding provisions of future federal internal revenue codes.
24.07. Compensation
- -------------------
"Compensation" means compensation, as defined in Section 2.04 hereof,
including, to the extent applicable, Earned Income; provided, however, that
Compensation shall not include (i) any amounts paid or accrued to Participant
during any Plan Year under any Recognition and Retention Plan adopted by the
Employer after the Effective Date, or (ii) any amounts paid by the Employer
during any Plan Year in excess of $150,000, adjusted under Code Section
401(a)(17). In determining the compensation of a Participant for purposes of the
$150,000 limit, the family aggregation rules of Code Section 414(g)(6) will
apply, except in applying such rules, the term "family" will include only the
Spouse of the participant and any lineal descendants of the participant who have
not attained age 19 before the close of the year. If, as a result of the
application of such rules, compensation would exceed the adjusted $150,000
limitation, then the limitation will be prorated among the affected persons in
proportion to each such person's compensation as determined under this paragraph
prior to the application of this limitation. For purposes of a Participant's
first Plan Year of eligibility, only Compensation paid to such Participant after
the Entry Date on which he begins to participate in the Plan shall be considered
for purposes of determining allocations under Section 3 hereof.
24.08. Current Participant
- --------------------------
"Current Participant" means, for any Plan Year, (i) a Participant who was
both a Full-Time Employee during such Plan Year and employed by the Employer on
the last day of such Plan Year, and (ii) a Participant who died, retired or
became totally and permanently disabled during such Plan Year.
24.09. Intentionally Omitted
- ----------------------------
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<PAGE> 40
24.10. Effective Date
- ---------------------
"Effective Date" means January 1, 1996.
24.11. Employee
- ---------------
"Employee" means any person who is an employee in the regular employment of
the Employer. For this purpose, the term "Employee" shall not include any Leased
Employee.
24.12. Employer
- ---------------
"Employer" means Home City Financial Corporation and any Affiliate that
adopts this Plan pursuant to the provisions of Section 25 hereof.
24.13. Employer Contributions Account
- -------------------------------------
"Employer Contributions Account" means the account established for each
Participant under this Plan pursuant to Section 4.01.
24.14. Employer Shares or Shares
- --------------------------------
"Employer Shares" or "Shares" means securities which constitute "employer
securities" under Section 409(l) of the Code and "qualifying employer
securities" under Section 4975(e)(8) of the Code and Section 407(d)(5) of ERISA.
24.15. Employment Commencement Date
- -----------------------------------
"Employment Commencement Date" means the date on which an Employee first
performs an Hour of Service for the Employer.
24.16. Entry Date
- -----------------
"Entry Date" means January 1 and July l of each year.
24.17. ERISA
- ------------
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
34
<PAGE> 41
24.18. Family Member
- --------------------
"Family Member" means, with respect to any individual, such individual's
Spouse and lineal ascendants or descendants and the spouses of such lineal
ascendants or descendants.
24.19. Forfeiture
- -----------------
"Forfeiture" means the amount of the value of any Participant's Account
that such Participant is not entitled to receive under Section 11 on the
termination of his employment.
24.20. Full Time
- ----------------
"Full Time" means employment with the Employer for not less than 1,000
hours during the 12 consecutive calendar months for which a determination is
made.
24.21. Highly-Compensated Employee
- ----------------------------------
"Highly-Compensated Employee" means a highly-compensated active employee
and a highly-compensated former employee. A highly-compensated active employee
includes any Employee who performs service for the Employer during the
determination year and who, during the look-back year (a) received compensation
from the Employer in excess of $75,000 multiplied by the Adjustment Factor; (b)
received compensation from the Employer in excess of $50,000 multiplied by the
Adjustment Factor and was a member of the top-paid group for such year; or (c)
was an officer of the Employer and received compensation during such year that
is greater than 50% of the dollar limitation in effect under Code Section
415(b)(l)(A).
The term Highly-Compensated Employee also includes: (a) Employees who are
both described in the preceding paragraph if the term "determination year" is
substituted for the term "look-back year" and the Employee is one of the 100
Employees who received the most compensation from the Employer during the
determination year; and (b) Employees who are 5% owners at any time during the
look-back year or determination year. If no officer has satisfied the
compensation requirement of (c) in the preceding paragraph during either a
determination year or look-back year, the highest paid officer for such year
shall be treated as a Highly-Compensated Employee. For this purpose, the
35
<PAGE> 42
determination year shall be the Plan Year. The look-back year shall be the
12-month period immediately preceding the determination year.
A highly-compensated former Employee includes any Employee who separated
from service (or was deemed to have separated) prior to the determination year,
performs no service for the Employer during the determination year and was a
highly compensated active employee for either the separation year or any
determination year ending on or after the Employee's 55th birthday. If an
Employee is, during a determination year or look-back year, a Family Member of
either a 5% owner who is an active or former Employee or a Highly-Compensated
Employee who is one of the 10 most highly-compensated employees ranked on the
basis of compensation paid by the Employer during such year, then the Family
Member and the 5% owner or top-10 highly-compensated employee shall be
aggregated. In such case, the Family Member and 5% owner or top-10
highly-compensated employee shall be treated as a single Employee receiving
compensation and Plan contributions or benefits equal to the sum of such
compensation and contributions or benefits of the Family Member and 5% owner or
top-10 highly-compensated employee.
The determination of who is a Highly-Compensated Employee, including the
determinations of the number and identity of Employees in the top-paid group,
the top 100 Employees, the number of Employees treated as officers and the
compensation that is considered, will be made in accordance with Code Section
414(q) and the regulations thereunder.
24.22. Hour of Service
- ----------------------
"Hour of Service" means
(a) each hour for which an Employee is paid, or entitled to payment, for
the performance of duties for the Employer or an Affiliate. These hours shall be
credited to the Employee for the computation period or periods in which the
duties are performed; and
(b) each hour for which an Employee is paid, or entitled to payment, by the
Employer or an Affiliate on account of a period of time during which no duties
are performed (irrespective of whether the employment relationship has
36
<PAGE> 43
terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, absence for maternity or paternity reasons, jury duty,
military duty or leave of absence. No more than 501 hours of service shall be
credited under this paragraph for any single continuous period (whether or not
such period occurs in a single computation period). Hours under this paragraph
shall be calculated and credited pursuant to Section 2530.200b-2 of the
Department of Labor Regulations, which are incorporated herein by this
reference; and
(c) each hour for which back pay, irrespective of mitigation of damages, is
either awarded or agreed to by the Employer or an Affiliate. The same hours of
service shall not be credited both under paragraph (a) or paragraph (b), as the
case may be, and under this paragraph (c). These hours shall be credited to the
computation period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or payment is made;
and
(d) in the case of a Participant who is absent from work for maternity or
paternity reasons, such Participant shall have credited, solely for purposes of
determining whether a One-Year Break in Service has occurred for eligibility and
vesting, in the year in which the absence begins if necessary to prevent a One
Year Break in Service for such year; or in the following year, the number of
hours that would normally have been credited but for such absence; or in any
case in which such hours cannot be determined, 8 hours of service per day of
such absence. The total number of hours treated as hours of service under this
paragraph shall not exceed 501 hours. For purposes of this paragraph, an absence
from work for maternity or paternity reasons means an absence (i) by reason of
pregnancy of the Participant; (ii) by reason of the birth of a child of the
Participant; (iii) by reason of the placement of a child with the Participant in
connection with the adoption of such child by such Participant; or (iv) for
purposes of caring for such child for a period beginning immediately following
such birth or placement.
24.23. Late Retirement Date
- ---------------------------
"Late Retirement Date" means the first day of the month following the date
on which a Participant elects to retire after his Normal Retirement Date.
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<PAGE> 44
24.24. Leased Employee
- ----------------------
"Leased Employee" means any person (other than an employee of the
recipient) who, pursuant to an agreement between the recipient and any other
person (leasing organization), has performed services for the recipient [or for
the recipient and related persons determined in accordance with Code Sections
414(n) and 414(o)] on a substantially full-time basis for a period of at least
one year, and such services are of a type historically performed by employees in
the business field of the recipient employer. Contributions or benefits provided
a Leased Employee by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by the
recipient employer.
A Leased Employee shall not be considered an employee of the recipient if
(a) such employee is covered by a money purchase pension plan providing (i) a
nonintegrated employer contribution rate of at least 10% of compensation, as
defined in Code Section 415(c)(3), but including amounts contributed by the
employer pursuant to a salary reduction agreement which are excludable from the
employee's gross income under Code Section 125, Section 402(a)(8), Section
402(h) or Section 403(b); (ii) immediate participation; and (iii) full and
immediate vesting; and (b) Leased Employees do not constitute more than 20% of
the recipient's non-highly-compensated work force.
24.25. Limitation Year
- ----------------------
"Limitation Year" means the Plan Year.
24.26. Normal Retirement Age
- ----------------------------
"Normal Retirement Age" means age 65.
24.27. Normal Retirement Date
- -----------------------------
"Normal Retirement Date" means the first day of the month coincident with
or following the date on which the Participant attains Normal Retirement Age;
provided, however, that this Plan shall not be interpreted to require that a
Participant retire prior to attaining any specific age.
38
<PAGE> 45
24.28. One-Year Break in Service
- --------------------------------
"One-Year Break in Service" means, for eligibility and vesting purposes, a
Plan Year during which a Participant has not completed more than 500 Hours of
Service.
24.29. Participant
- ------------------
"Participant" means either (a) an Employee who is participating in the Plan
in accordance with Section 1.01 for whom Accounts are being maintained; or (b) a
former Employee for whom Accounts are being maintained.
24.30. Plan
- -----------
"Plan" means the Home City Financial Corporation Employee Stock Ownership
Plan as in effect from time to time.
24.31. Plan Administrator
- -------------------------
"Plan Administrator" means the individual(s) or entity(ies) appointed by
the Employer to administer this Plan pursuant to Section 15, or if no such
appointment is made, Home City Financial Corporation.
24.32. Plan Year
- ----------------
"Plan Year" means the fiscal year of the Plan which begins each January l
and ends each December 31.
24.33. Projected Annual Benefit
- -------------------------------
"Projected Annual Benefit" means the annual benefit to which the
Participant would be entitled under all Employer sponsored defined benefit
plans, assuming that the Participant continues employment until his Normal
Retirement Date, that the Participant's Compensation continues until his Normal
Retirement Date at the rate in effect during the current calendar year and that
all other factors relevant for determining benefits under the plans remain
constant at the level in effect during the current calendar year.
39
<PAGE> 46
24.34. Spouse or Surviving Spouse
- ---------------------------------
"Spouse" or "Surviving Spouse" means an individual who is legally married
to the Participant, provided that an individual who was formerly married to the
Participant will be treated as the Spouse or Surviving Spouse to the extent
provided under a qualified domestic relations order as described in Section
414(p) of the Code.
24.35. Trust Agreement
- ----------------------
"Trust Agreement" means the agreement, and any amendments made thereto, by
and between the Employer and the Trustee for the management, investment and
disbursement of funds held in the Trust Fund.
24.36. Trust Fund
- -----------------
"Trust Fund" means the fund established pursuant to the terms of the Trust
Agreement.
24.37. Trustee
- --------------
"Trustee" means the bank, trust company and/or individual or individuals
designated by the Employer to hold and invest the Trust Fund and to pay benefits
and expenses as authorized by the Plan Administrator in accordance with the
terms and provisions of the agreement by and between the Employer and such bank,
trust company and/or individual or individuals.
24.38. Valuation Date
- ---------------------
"Valuation Date" means the last day of each Plan Year and any other date
fixed by the Plan Administrator for the valuation of assets and adjustments of
individual Accounts.
24.39. Year of Service
- ----------------------
"Year of Service" means a Plan Year during which a Participant is, and each
calendar year prior to the Effective Date during which such Participant was, a
Full-Time Employee of the Employer.
40
<PAGE> 47
SECTION 25
----------
MULTIEMPLOYER PROVISIONS
------------------------
25.01. Adoption by Affiliates of Home City Financial Corporation
- ----------------------------------------------------------------
Effective as of the Effective Date, any Affiliate may adopt the Plan with
the approval of the Board of Directors of Home City Financial Corporation.
However, notwithstanding such adoption by any Affiliate, or any other provision
of this Plan, Home City Financial Corporation shall have the sole and exclusive
right to amend the Plan or Trust Agreement and it shall not be necessary for any
adopting Affiliate to execute the original or any amended Plan or Trust
Agreement.
25.02. Administration
- ---------------------
Home City Financial Corporation shall have the exclusive right to appoint
the Plan Administrator under Section 15 hereof, and Home City Financial
Corporation and the Plan Administrator shall have exclusive administrative
authority over the Plan, although responsibility for those internal matters
peculiar to a particular Affiliate may be delegated to that Affiliate.
25.03. Common Fund.
- -------------------
The Trustee of the Plan need not earmark or keep separate the assets
attributable to each Affiliate, but may commingle them with assets attributable
to other Affiliates. The Trust shall be available to pay benefits to
Participants and their Beneficiaries without distinction as to the Affiliate to
which particular assets or amounts are attributable.
25.04. Withdrawal - Termination.
- --------------------------------
Any Affiliate, by action of its Board of Directors or other governing
authority, and notice to the Plan Administrator and the Trustee, may withdraw
from the Plan, or may terminate the Plan with respect to its employees, without
affecting any other Affiliates. A withdrawing Affiliate may arrange for the
continuation of this Plan in separate form for its own employees, with such
amendments as it may deem proper, and may arrange for
41
<PAGE> 48
continuation of the Plan by merger with an existing plan and trust, and transfer
of Trust Fund assets. Notwithstanding anything contained herein to the contrary,
by action of its Board of Directors, Home City Financial Corporation, in its
absolute discretion, may terminate the entire Plan or an Affiliate's
participation at any time, without the consent of any Affiliate, Participant or
Beneficiary.
IN WITNESS WHEREOF, the undersigned has caused this Plan to be executed by
its duly authorized officer effective as of the Effective Date.
HOME CITY FINANCIAL CORPORATION
By:____________________________
Name (Print):__________________
Title:_________________________
Date:_____________________
42
<PAGE> 1
Exhibit 23.1
CONSENT
We have issued our report dated June 17, 1996, accompanying the financial
statements of Home City Federal Savings Bank of Springfield in Forms S-1 and AC
and the Prospectus to be filed with the Securities and Exchange Commission and
the Office of Thrift Supervision on or about September 20, 1996. We consent to
the use of the aforementioned report in the Registration Statement and
Prospectus, and all amendments, thereto, and to the use of our name as it
appears under the caption "Experts".
ROBB, DIXON, FRANCIS, DAVIS,
ONESON & COMPANY
Granville, Ohio
November 1, 1996
<PAGE> 1
EXHIBIT 99.1
HOME CITY FEDERAL SAVINGS BANK OF SPRINGFIELD
63 WEST MAIN STREET
SPRINGFIELD, OHIO 45502
(513) 324-5736
NOTICE OF SPECIAL MEETING OF MEMBERS
Notice is hereby given that a Special Meeting of Members of Home City
Federal Savings Bank of Springfield ("Home City") will be held at the office of
Home City, 63 West Main Street, Springfield, Ohio, on December 19, 1996, at
_____ __.m., local time (the "Special Meeting"), for the following purposes, all
of which are more completely set forth in the accompanying Summary Proxy
Statement:
1. To consider and act upon a resolution to approve the Plan of
Conversion (the "Plan"), a copy of which is attached to the Summary
Proxy Statement as Exhibit A, pursuant to which Home City would convert
from a mutual savings bank chartered under the laws of the United States
to a permanent capital stock savings bank chartered under the laws of
the United States (the "Conversion") and become a wholly-owned
subsidiary of Home City Financial Corporation, an Ohio corporation
organized for the purpose of acquiring all of the capital stock to be
issued by Home City in the Conversion;
2. To consider and act upon a resolution to adopt the Federal
Stock Charter of Home City, a copy of which is attached to the Plan as
Exhibit I;
3. To consider and act upon a resolution to adopt the Federal
Stock Bylaws of Home City, a copy of which is attached to the Plan as
Exhibit II; and
4. To transact such other business as may properly come before
the Special Meeting and any adjournments thereof.
Only those members of Home City who have a savings deposit at Home City
at the close of business on October 31, 1996, and borrowers of record on May 1,
1996, whose loans remain outstanding on October 31, 1996, are members of Home
City entitled to notice of and to vote at the Special Meeting and any
adjournments thereof. WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING,
WE URGE YOU TO CONSIDER THE ACCOMPANYING SUMMARY PROXY STATEMENT CAREFULLY, TO
COMPLETE THE ENCLOSED PROXY CARD(S) AND TO RETURN THE COMPLETED PROXY CARD(S) TO
HOME CITY IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE AS SOON AS POSSIBLE TO
ASSURE THAT YOUR VOTE(S) WILL BE COUNTED.
By Order of the Board of Directors
Douglas L. Ulery,
President
Springfield, Ohio
November 12, 1996
<PAGE> 2
HOME CITY FEDERAL SAVINGS BANK OF SPRINGFIELD
63 WEST MAIN STREET
SPRINGFIELD, OHIO 45502
(513) 324-5736
SUMMARY PROXY STATEMENT
INTRODUCTION
The enclosed proxy (the "Proxy") is being solicited by the Board of
Directors of Home City Federal Savings Bank of Springfield (the "Bank") for use
at a Special Meeting of Members of Home City to be held at the office of Home
City, 63 West Main Street, Springfield, Ohio, on December 19, 1996, at ________
__.m., local time, and at any adjournments thereof (the "Special Meeting"). The
Special Meeting is being held for the following purposes:
1. To consider and act upon a resolution to approve the Plan of
Conversion (the "Plan"), a copy of which is attached to the Summary
Proxy Statement as Exhibit A, pursuant to which Home City would convert
from a mutual savings bank chartered under the laws of the United States
to a permanent capital stock savings bank chartered under the laws of
the United States (the "Conversion") and become a wholly-owned
subsidiary of Home City Financial Corporation, an Ohio corporation
organized for the purpose of acquiring all of the capital stock to be
issued by Home City in the Conversion (the "Holding Company");
2. To consider and act upon a resolution to adopt the Federal
Stock Charter of Home City, a copy of which is attached to the Plan as
Exhibit I;
3. To consider and act upon a resolution to adopt the Federal
Stock Bylaws of Home City, a copy of which is attached to the Plan as
Exhibit II; and
4. To transact such other business as may properly come before
the Special Meeting and any adjournments thereof.
The Board of Directors of Home City has unanimously adopted the Plan.
The Plan has also been approved by the Office of Thrift Supervision (the "OTS"),
subject to the approval of the Plan by the members of Home City at the Special
Meeting and the satisfaction of certain other conditions.
The approval of the Plan will have the effect of (i) terminating the
voting rights of the present members of Home City and (ii) modifying, and
eventually eliminating, their right to receive any surplus in the event of a
complete liquidation of Home City. Except for certain rights in the special
liquidation account established by the Plan (the "Liquidation Account"), such
voting and liquidation rights after the Conversion will vest exclusively in the
holders of the common shares of HCFC. See "THE CONVERSION - Principal Effects of
the Conversion."
During and upon the completion of the Conversion, Home City will
continue to provide services to depositors and borrowers pursuant to its current
policies, at its existing office. In addition, Home City will continue to be a
member of the Federal Home Loan Bank (the "FHLB") of Cincinnati and savings
accounts at Home City will continue to be insured up to applicable limits by the
Federal Deposit Insurance Corporation (the "FDIC").
This Summary Proxy Statement is dated November 12, 1996, and is first
being mailed to members of Home City, together with the Prospectus of HCFC dated
November 12, 1996 (the "Prospectus"), in respect of the common shares of HCFC to
be issued in connection with the Conversion (the "Common Shares"), on or about
November 20, 1996.
1
<PAGE> 3
VOTING RIGHTS AND VOTE REQUIRED FOR APPROVAL
All depositors, including beneficiaries of Individual Retirement
Accounts ("IRAs") at Home City, having a savings account of record with Home
City on October 31, 1996 (the "Voting Record Date"), and all borrowers of record
on the Voting Record Date whose loans were outstanding on May 1, 1996, are
members of Home City eligible to vote at the Special Meeting and at any
adjournments thereof ("Voting Members"). Voting Members who are depositors will
be entitled to cast one vote for each $100, or fraction thereof, of the
withdrawable value of their savings accounts on the Voting Record Date. Voting
Members who are borrowers will be entitled to cast one vote each. No Voting
Member may cast more than 1,000 votes.
A savings account or a loan account in which one or more persons has an
interest shall be deemed to be held by only one Voting Member for the purpose of
voting at the Special Meeting. Any questions as to the eligibility of a member
to vote, the number of votes allocated to each Voting Member or any other matter
relating to voting will be resolved at the time of the Special Meeting by
reference to the records of Home City.
Home City records disclose that, as of the Voting Record Date, there
were _______________ votes entitled to be cast at the Special Meeting, a
majority of which are required to approve the Plan. A majority of the votes cast
at the Special Meeting are also necessary to adopt the Federal Stock Charter and
Federal Stock Bylaws of Home City.
PROXIES
Voting Members may vote in person or by proxy at the Special Meeting.
For Voting Members wishing to vote in person, ballots will be distributed at the
Special Meeting. For Voting Members wishing to vote by proxy at the Special
Meeting, the enclosed Proxy may be completed and given in accordance with this
Summary Proxy Statement. Any other proxy held by Home City will not be used by
Home City for the Special Meeting.
A Proxy will be voted in the manner indicated thereon or, in the absence
of specific instructions, will be voted FOR the approval of the Plan, FOR the
adoption of the Amended Articles and FOR the adoption of the Amended
Constitution. Without affecting any vote previously taken, a Voting Member may
revoke a Proxy at any time before such proxy is exercised by executing and
delivering a later dated proxy or by giving Home City notice of revocation in
writing or in open meeting at the Special Meeting. Attendance at the Special
Meeting will not, of itself, revoke a Proxy.
Proxies may be solicited by the directors, officers and employees of
Home City in person or by telephone, telegraph or mail, for use only at the
Special Meeting and any adjournments thereof and will not be used for any other
meeting. The cost of soliciting Proxies will be borne by Home City.
MANAGEMENT'S RECOMMENDATIONS AND REASONS FOR CONVERSION
THE BOARD OF DIRECTORS RECOMMENDS THAT MEMBERS VOTE FOR THE APPROVAL OF
THE PLAN AND FOR THE ADOPTION OF THE FEDERAL STOCK CHARTER AND FEDERAL STOCK
BYLAWS.
In unanimously adopting the Plan, the Board of Directors determined
that Home City will derive substantial benefits from the Conversion and that the
Conversion is in the best interests of Home City, its members and the public.
The principal factors considered by Home City's Board of Directors in reaching
the decision to pursue a mutual-to-stock conversion are the numerous competitive
disadvantages which Home City faces if it continues in mutual form. These
disadvantages relate to a variety of factors, including growth opportunities,
employee retention and regulatory uncertainty. If Home City is to continue to
grow and prosper, the mutual form of organization is the least desirable from a
competitive standpoint. Although Home City does not have any specific
acquisitions planned at this time, the Conversion will position Home City to
take advantage of any acquisition opportunities which may present themselves.
Because a conversion to stock form is a time-consuming and complex process, Home
City cannot wait until an acquisition is imminent to begin the conversion
process.
2
<PAGE> 4
As an increasing number of Home City's competitors convert to stock
form and can use stock based compensation programs, Home City, as a mutual, is
at a disadvantage when it comes to attracting and retaining qualified
management. Home City believes that the ESOP for all employees and the Home City
Financial Corporation 1997 Stock Option and Incentive Plan (the "Stock Option
Plan") and the Home City Financial Corporation Recognition and Retention Plan
(the "RRP") for directors and management are important tools, even though Home
City will be required to wait until after the Conversion to implement the Stock
Option Plan and the RRP.
Another benefit of the Conversion will be an increase in capital.
Notwithstanding Home City's current capital position, the importance of higher
levels of capital cannot be ignored. As has been amply demonstrated in the past,
changing accounting principles, interest rate shifts and changing regulations
can threaten even well-capitalized institutions. As a mutual institution, Home
City can only increase capital through retained earnings or the issuance of
subordinated debentures, which do not count as Tier I capital for regulatory
capital purposes. Capital that may seem unnecessary now may support future
growth and help Home City withstand future threats to its capital.
In view of the competitive disadvantages and the ongoing debate about
the future of mutual institutions in the wake of regulatory consolidation and
other forces, Home City is choosing to reject the uncertainty inherent in the
mutual structure in favor of the more widely used, recognized and understood
stock form of ownership.
The Conversion will also give members of Home City, at their option,
the opportunity to become shareholders of HCFC. No member of Home City will be
obligated to subscribe or not to subscribe to common shares of HCFC (the "Common
Shares") by voting on the Plan, nor will any member's deposit account be
converted into Common Shares by such vote. After completion of the Conversion,
Home City will continue to provide the services presently offered to depositors
and borrowers, will maintain its existing offices and will retain its existing
management and employees.
Upon the consummation of the Conversion the Federal Stock Charter of
Home City, a copy of which is attached to the Plan as Exhibit I, and the Federal
Stock Bylaws, a copy of which is attached to the Plan as Exhibit II, will be the
Charter and Bylaws of Home City as a stock savings bank.
THE BUSINESS OF HCFC
HCFC was incorporated under Ohio law in August 1996 at the direction of
Home City for the purpose of serving as the holding company for Home City. HCFC
has not conducted and will not conduct any business other than business related
to the Conversion prior to the completion of the Conversion. HCFC has received
approval of the OTS to acquire the capital stock to be issued by Home City in
the Conversion. Upon the consummation of the Conversion, HCFC will be a unitary
savings and loan holding company, the principal assets of which will initially
be the capital stock of Home City, a loan to the ESOP for the purchase of Common
Shares and the investments made with the proceeds retained by HCFC from the sale
of Common Shares. See "USE OF PROCEEDS." As a savings and loan holding company,
HCFC will be required to register with, and will be subject to examination and
supervision by, the OTS. See "REGULATION - OTS Regulations -- Holding Company
Regulation" in the Prospectus. The types of business activities in which a
unitary savings and loan holding company may engage are virtually unrestricted.
See "RISK FACTORS - Legislation and Regulation Which May Adversely Affect Home
City's Earnings" in the Prospectus.
The office of HCFC is located at 63 West Main Street, Springfield, Ohio
45502, and its telephone number is (513) 324-5736.
THE BUSINESS OF HOME CITY
Home City is a federal mutual savings bank which has served the
Springfield, Ohio, area since 1925. Originally formed under the name "Home City
Savings and Loan Association," Home City changed its name to "Home City Federal
Savings Bank" on May 1, 1996. As a federal savings bank chartered under the laws
of the United States, Home City is subject to supervision and regulation by the
OTS and the FDIC and is a member of the FHLB of Cincinnati. The deposits of Home
City are insured up to applicable limits by the FDIC in the SAIF. See
"REGULATION" in the Prospectus.
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Home City is principally engaged in the business of making permanent
first and second mortgage loans secured by one- to four-family residential and
nonresidential real estate located in Home City's primary lending area and
investing in U.S. Government and agency obligations, interest-bearing deposits
in other financial institutions, mortgage-backed securities, and municipal
securities. Home City also originates loans for the construction of residential
real estate and loans secured by multifamily real estate (over four units),
commercial, consumer and nonresidential real estate. The origination of consumer
loans, including unsecured loans and loans secured by deposits, constitutes a
growing portion of Home City's lending activities. Loan funds are obtained
primarily from deposits, which are insured up to applicable limits by the FDIC,
and loan and mortgage-backed securities repayments. See "THE BUSINESS OF HOME
CITY - Lending Activities; and - Investment Activities" in the Prospectus.
Interest on loans and mortgage-backed securities is Home City's primary
source of income. The principal expense of Home City is interest paid on deposit
accounts. Operating results are dependent to a significant degree on the net
interest income of Home City, which is the difference between interest earned on
loans and mortgage-backed securities and interest paid on deposits. Like most
thrift institutions, Home City's interest income and interest expense are
significantly affected by general economic conditions and by the policies of
various regulatory authorities. See "RISK FACTORS" and "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF HOME CITY" in
the Prospectus.
Home City conducts business from its office at 63 West Main Street,
Springfield, Ohio 45502. The telephone number of Home City is (513) 324-5736.
See "THE BUSINESS OF HOME CITY" in the Prospectus.
THE CONVERSION
THE OTS HAS APPROVED THE PLAN, SUBJECT TO THE APPROVAL OF THE PLAN BY
THE MEMBERS OF HOME CITY ENTITLED TO VOTE ON THE PLAN AND SUBJECT TO THE
SATISFACTION OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS. OTS APPROVAL DOES
NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN.
GENERAL
On September 3, 1996, the Board of Directors of Home City unanimously
adopted a Plan of Conversion and recommended that the voting members of Home
City approve the Plan at the Special Meeting to be held on ___________, 1996.
During and upon completion of the Conversion, Home City will continue to provide
the services presently offered to depositors and borrowers, will maintain its
existing offices and will retain its existing management and employees.
Based on the current Valuation Range, between 612,000 and 952,200
Common Shares are expected to be offered in the Subscription Offering and the
Community Offering in which preference will be given to natural persons residing
in Clark County, Ohio, at a price of $10 per share. Federal regulations require,
with certain exceptions, that shares offered in connection with the Conversion
must be sold up to at least the minimum point of the Valuation Range in order
for the Conversion to become effective. The actual number of shares sold in
connection with the Conversion will be determined upon completion of the
Conversion in the sole discretion of the Board of Directors based upon the final
determination of the pro forma market value of Home City at the completion of
the Subscription Offering and the Community Offering. See "Pricing and Number of
Common Shares to be Sold."
The Common Shares will be offered in the Subscription Offering to (1)
each account holder of Home City who, as of June 30, 1995, had a Qualifying
Deposit ("Eligible Account Holders"), (2) the ESOP, (3) each account holder of
Home City who, as of September 30, 1996, had a Qualifying Deposit ("Supplemental
Eligible Account Holders"), and (4) each account holder of Home City having a
savings deposit of record with Home City on October 31, 1996 (the "Voting Record
Date"), and each borrower of record on the Voting Record Date whose loan was
outstanding on May 1, 1996 (such depositors and borrowers as of October 31,
1996, collectively, the "Voting Members"). Any Common Shares not subscribed for
in the Subscription Offering may be sold to the general public in the Community
Offering in a manner which will seek to achieve the widest distribution of the
Common Shares, but which will give preference to natural persons residing in
Clark County, Ohio. Under OTS regulations, the Community Offering must be
completed within 45 days after completion
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of the Subscription Offering, unless such period is extended by Home City with
the approval of the OTS. If the Community Offering is determined not to be
feasible, an occurrence that is not currently anticipated, the Board of
Directors of Home City will consult with the OTS to determine an appropriate
alternative method of selling unsubscribed Common Shares. No alternative sales
methods are currently planned.
OTS regulations require the completion of the Conversion within 24
months after the date of the approval of the Plan by the Voting Members of Home
City. The commencement and completion of the Conversion will be subject to
market conditions and other factors beyond Home City's control. Due to changing
economic and market conditions, no assurance can be given as to the length of
time that will be required to complete the sale of the Common Shares. If delays
are experienced, significant changes may occur in the estimated pro forma market
value of Home City, together with corresponding changes in the aggregate
offering price and the net proceeds realized by HCFC from the sale of the Common
Shares. In such circumstances, Home City may also incur substantial additional
printing, legal and accounting expenses in completing the Conversion. In the
event the Conversion is not successfully completed, Home City will be required
to charge all Conversion expenses against current earnings.
The following is a summary of the material aspects of the Conversion.
The summary is qualified in its entirety by reference to the provisions of the
Plan, a copy of which may be inspected at each office of Home City and at the
office of the OTS. The Plan is also filed as an exhibit to the Registration
Statement of which this Prospectus is a part, and copies of the Registration
Statement may be obtained from the Securities and Exchange Commission (the
"SEC"). See "ADDITIONAL INFORMATION AND ORDER FORMS."
PRINCIPAL EFFECTS OF THE CONVERSION
VOTING RIGHTS. Savings account holders who are members of Home City in
its mutual form will have no voting rights in Home City as converted and will
not participate, therefore, in the election of directors or otherwise control
Home City's affairs. After the Conversion, voting rights in Home City will be
vested exclusively in HCFC as the sole shareholder of Home City. Voting rights
in HCFC will be held exclusively by its shareholders. Each holder of HCFC's
Common Shares will be entitled to one vote for each Common Share owned on any
matter to be considered by HCFC's shareholders. See "DESCRIPTION OF AUTHORIZED
SHARES."
SAVINGS ACCOUNTS AND LOANS. Savings accounts in Home City, as
converted, will be equivalent in amount, interest rate and other terms to the
present savings accounts in Home City, and the existing FDIC insurance on such
deposits will not be affected by the Conversion. The Conversion will not affect
the terms of loan accounts or the rights and obligations of borrowers under
their individual contractual arrangements with Home City.
TAX CONSEQUENCES. The consummation of the Conversion is expressly
conditioned on receipt by Home City of a private letter ruling from the Internal
Revenue Service (the "IRS") or an opinion of counsel to the effect that the
Conversion will constitute a tax-free reorganization as defined in Section
368(a) of the Code. Home City intends to proceed with the Conversion based upon
an opinion rendered by its special counsel, Vorys, Sater, Seymour and Pease,
which opinion is an exhibit to the Registration Statement on Form S-1 (File No.
333-12501) filed with the SEC by HCFC, addressing the following federal tax
consequences, which are all of the material federal tax consequences of the
Conversion:
(1) The Conversion constitutes a reorganization within the
meaning of Section 368(a)(1)(F) of the Code, and no gain or loss will be
recognized by Home City in its mutual form or in its stock form as a
result of the Conversion. Home City in its mutual form and Home City in
its stock form will each be a "party to a reorganization" within the
meaning of Section 368(B) of the Code;
(2) No gain or loss will be recognized by Home City upon the
receipt of money from HCFC in exchange for the capital stock of Home
City, as converted;
(3) The assets of Home City will have the same basis in its
hands immediately after the Conversion as it had in its hands
immediately prior to the Conversion, and the holding period of the
assets of Home City after the Conversion will include the period during
which the assets were held by Home City before the Conversion;
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(4) No gain or loss will be recognized to the deposit account
holders of Home City upon the issuance to them, in exchange for their
respective withdrawable deposit accounts in Home City immediately prior
to the Conversion, of withdrawable deposit accounts in Home City
immediately after the Conversion, in the same dollar amount as their
withdrawable deposit accounts in Home City immediately prior to the
Conversion, plus, in the case of Eligible Account Holders and
Supplemental Eligible Account Holders, the interests in the Liquidation
Account of Home City, as described below;
(5) The basis of the withdrawable deposit accounts in Home City
held by its deposit account holders immediately after the Conversion
will be the same as the basis of their deposit accounts in Home City
immediately prior to the Conversion. The basis of the interests in the
Liquidation Account received by the Eligible Account Holders and
Supplemental Eligible Account Holders will be zero. The basis of the
nontransferable subscription rights received by Eligible Account
Holders, Supplemental Eligible Account Holders and Other Eligible
Members (hereinafter defined) will be zero (assuming that at
distribution such rights have no ascertainable fair market value);
(6) No gain or loss will be recognized to Eligible Account
Holders, Supplemental Eligible Account Holders or Other Eligible Members
upon the distribution to them of nontransferable subscription rights to
purchase Common Shares (assuming that at distribution such rights have
no ascertainable fair market value), and no taxable income will be
realized by such Eligible Account Holders, Supplemental Eligible Account
Holders or Other Eligible Members as a result of their exercise of such
nontransferable subscription rights;
(7) The basis of the Common Shares purchased by members of Home
City pursuant to the exercise of subscription rights will be the
purchase price thereof (assuming that such rights have no ascertainable
fair market value and that the purchase price is not less than the fair
market value of the shares on the date of such exercise), and the
holding period of such shares will commence on the date of such
exercise. The basis of the Common Shares purchased other than by the
exercise of subscription rights will be the purchase price thereof
(assuming in the case of the other subscribers that the opportunity to
buy in the Subscription Offering has no ascertainable fair market
value), and the holding period of such shares will commence on the day
after the date of the purchase;
(8) For purposes of Section 381 of the Code, Home City will be
treated as if there had been no reorganization. The taxable year of Home
City will not end on the effective date of the Conversion and,
immediately after the Conversion, Home City in its stock form will
succeed to and take into account the tax attributes of Home City in its
mutual form immediately prior to the Conversion, including Home City's
earnings and profits or deficit in earnings and profits;
(9) The bad debt reserves of Home City in its mutual form
immediately prior to the Conversion will not be required to be restored
to the gross income of Home City in its stock form as a result of the
Conversion, and immediately after the Conversion such bad debt reserves
will have the same character in the hands of Home City in its stock form
as they would have had if there had been no Conversion. Home City in its
stock form will succeed to and take into account the dollar amounts of
those accounts of Home City in its mutual form which represent bad debt
reserves in respect of which Home City in its mutual form has taken a
bad debt deduction for taxable years ending on or before the Conversion;
and
(10) Regardless of book entries made for the creation of the
Liquidation Account, the Conversion will not diminish the accumulated
earnings and profits of Home City available for the subsequent
distribution of dividends within the meaning of Section 316 of the Code.
The creation of the Liquidation Account on the records of Home City will
have no effect on its taxable income, deductions for additions to
reserves for bad debts under Section 593 of the Code or distributions to
stockholders under Section 593(e) of the Code.
Home City has received an opinion from Keller & Company, Inc.
("Keller") to the effect that the subscription rights have no ascertainable fair
market value because the rights are received by specified persons at no cost,
may not be transferred and are of short duration. The IRS could challenge the
assumption that the subscription rights have no ascertainable fair market value.
For Ohio tax purposes, the tax consequences of the Conversion will be
as follows:
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(1) Home City is a "financial institution" for State of Ohio
tax purposes, and the Conversion will not change such status;
(2) Home City is subject to the Ohio corporate franchise tax on
"financial institutions," which is imposed annually at a rate of 1.5% of
Home City's equity capital determined in accordance with GAAP, and the
Conversion will not change such status;
(3) As a "financial institution," Home City is not subject to
any tax based upon net income or net profit imposed by the State of
Ohio, and the Conversion will not change such status;
(4) The Conversion will not be a taxable transaction to Home
City in its mutual or stock form for purposes of the Ohio corporate
franchise tax; however, as a consequence of the Conversion, the annual
Ohio corporate franchise tax liability of Home City will increase if the
taxable net worth of Home City (i.e., book net worth computed in
accordance with GAAP at the close of Home City's taxable year for
federal income tax purposes) increases thereby; and
(5) The Conversion will not be a taxable transaction to any
deposit account holder or borrower member of Home City in its mutual or
stock form for purposes of the Ohio corporate franchise tax and the Ohio
personal income tax.
Each Eligible Account Holder, Supplemental Eligible Account Holder and
Other Eligible Member is urged to consult his or her own tax advisor with
respect to the effect of such tax consequences on his or her own particular
facts and circumstances.
LIQUIDATION ACCOUNT. In the unlikely event of a complete liquidation of
Home City in its present mutual form, each depositor in Home City would receive
a pro rata share of any assets of Home City remaining after payment of the
claims of all creditors, including the claims of all depositors to the
withdrawable value of their savings accounts. A depositor's pro rata share of
such remaining assets would be the same proportion of such assets as the value
of such depositor's savings deposits bears to the total aggregate value of all
savings deposits in Home City at the time of liquidation.
In the event of a complete liquidation of Home City in its stock form
after the Conversion, each savings depositor as of June 30, 1995, and September
30, 1996, would have a claim of the same general priority as the claims of all
other general creditors of Home City. Except as described below, each
depositor's claim would be solely in the amount of the balance in such
depositor's savings account plus accrued interest. The depositor would have no
interest in the assets of Home City above that amount. Such assets would be
distributed to HCFC as the sole shareholder of Home City.
For the purpose of granting a limited priority claim to the assets of
Home City in the event of a complete liquidation thereof to Eligible Account
Holders and Supplemental Eligible Account Holders who continue to maintain
savings accounts at Home City after the Conversion, Home City will, at the time
of Conversion, establish the Liquidation Account in an amount equal to the
regulatory capital of Home City as of the latest practicable date prior to the
Conversion at which such regulatory capital can be determined. For this purpose,
Home City shall use the regulatory capital figure no later than that set forth
in its latest statement of financial condition contained in the Prospectus. The
Liquidation Account will not operate to restrict the use or application of any
of the regulatory capital of Home City.
Each Eligible Account Holder and Supplemental Eligible Account Holder
will have a separate inchoate interest (the "Subaccount") in a portion of the
Liquidation Account for Qualifying Deposits held on the Eligibility Record Date
or the Supplemental Eligibility Record Date, as the case may be.
The balance of each initial Subaccount shall be an amount determined by
multiplying the amount in the Liquidation Account by a fraction, the numerator
of which is the closing balance in the account holder's account as of the close
of business on the Eligibility Record Date or the Supplemental Eligibility
Record Date, as the case may be, and the denominator of which is the total
amount of Qualifying Deposits of all Eligible Account Holders and Supplemental
Eligible Account Holders on the corresponding record date. The balance of each
Subaccount may be decreased but will never be
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increased. If, at the close of business on any annual closing date of Home City
subsequent to the respective record dates the balance in the savings account to
which a Subaccount relates is less than the lesser of (i) the deposit balance in
such savings account at the close of business on any other annual closing date
subsequent to the Eligibility Record Date or Supplemental Eligibility Record
Date or (ii) the amount of the Qualifying Deposit as of the Eligibility Record
Date or the Supplemental Eligibility Record Date, the balance of the Subaccount
for such savings account shall be adjusted proportionately to the reduction in
such savings account balance. In the event of any such downward adjustment, such
Subaccount balance shall not be subsequently increased notwithstanding any
increase in the deposit balance of the related savings account. If any savings
account is closed, its related Subaccount shall be reduced to zero upon such
closing.
In the event of a complete liquidation of the converted Home City (and
only in such event), each Eligible Account Holder and Supplemental Eligible
Account Holder shall receive from the Liquidation Account a distribution equal
to the current balance in each of such account holder's Subaccounts before any
liquidation distribution may be made to HCFC as the sole shareholder of Home
City. Any assets remaining after satisfaction of such liquidation rights and the
claims of Home City's creditors would be distributed to HCFC as the sole
shareholder of Home City. No merger, consolidation, purchase of bulk assets or
similar combination or transaction with another institution, the deposits of
which are insured by the FDIC, will be deemed to be a complete liquidation for
this purpose and, in any such transaction, the Liquidation Account shall be
assumed by the surviving institution.
COMMON SHARES. SHARES ISSUED UNDER THE PLAN CANNOT AND WILL NOT BE
INSURED BY THE FDIC. For a description of the characteristics of the Common
Shares, see "DESCRIPTION OF AUTHORIZED SHARES."
INTERPRETATION AND AMENDMENT OF THE PLAN
The Boards of Directors of Home City and HCFC will interpret the Plan.
To the extent permitted by law, all interpretations of the Plan by the Boards of
Directors of Home City and HCFC will be final. The Plan may be amended by the
Boards of Directors of Home City and HCFC at any time before completion of the
Conversion with the concurrence of the OTS. If Home City and HCFC determine upon
advice of counsel and after consultation with the OTS that any such amendment is
material, subscribers will be notified of the amendment and will be provided the
opportunity to affirm, increase, decrease or cancel their subscriptions. Any
person who does not affirmatively elect to continue his subscription or elects
to rescind his subscription before the date specified in the notice will have
all of his funds promptly refunded with interest. Any person who elects to
decrease his subscription will have the appropriate portion of his funds
promptly refunded with interest.
CONDITIONS AND TERMINATION
The completion of the Conversion requires the approval of the Plan and
the adoption of the Federal Stock Charter and Federal Stock Bylaws by the Voting
Members of Home City at the Special Meeting and the sale of the requisite amount
of Common Shares within 24 months following the date of such approval. If these
conditions are not satisfied, the Plan will automatically terminate and Home
City will continue its business in the mutual form of organization. The Plan may
be voluntarily terminated by the Board of Directors at any time before the
Special Meeting and at any time thereafter with the approval of the OTS.
SUBSCRIPTION OFFERING
THE SUBSCRIPTION OFFERING WILL EXPIRE AT 4:00 P.M., EASTERN TIME, ON
THE SUBSCRIPTION EXPIRATION DATE. SUBSCRIPTION RIGHTS NOT EXERCISED BEFORE THE
SUBSCRIPTION EXPIRATION DATE WILL BE VOID, WHETHER OR NOT HCFC HAS BEEN ABLE TO
LOCATE EACH PERSON ENTITLED TO SUCH SUBSCRIPTION RIGHTS.
Nontransferable subscription rights to purchase Common Shares are being
issued at no cost to all eligible persons and entities in accordance with the
preference categories established by the Plan, as described below. Each
subscription right may be exercised only by the person to whom it is issued and
only for his or her own account. Each person subscribing for shares must
represent to HCFC that he or she is purchasing such shares for his or her own
account and that he or she has no agreement or understanding with any other
person for the sale or transfer of such shares.
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The number of Common Shares which a person who has subscription rights
may purchase will be determined, in part, by the total number of Common Shares
to be issued and the availability of such shares for purchase under the
preference categories set forth in the Plan and certain other limitations. See
"Limitations on Purchases of Common Shares." The sale of any Common Shares
pursuant to subscriptions received is contingent upon approval of the Plan by
the Voting Members of Home City at the Special Meeting.
The preference categories for the allocation of Common Shares, which
have been established by the Plan in accordance with applicable regulations, are
as follows:
Category 1. Eligible Account Holders will receive, without
payment, nontransferable subscription rights to purchase up to the
greater of (i) the amount permitted to be purchased in the Community
Offering, (ii) .10% of the total number of Common Shares sold in
connection with the Conversion, or (iii) 15 times the product (rounded
down to the next whole number) obtained by multiplying the total number
of Common Shares sold in connection with the Conversion by a fraction of
which the numerator is the amount of the Eligible Account Holder's
Qualifying Deposit and the denominator of which 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 limitations set
forth in Section 10 of the Plan. See "Limitations on Purchases of Common
Shares."
If the exercise of subscription rights in this Category 1
results in an over-subscription, Common Shares will be allocated among
subscribing Eligible Account Holders in a manner which will, to the
extent possible, make the total allocation of each subscriber equal 100
shares or the amount subscribed for, whichever is less. Any Common
Shares remaining after such allocation has been made will be allocated
among the subscribing Eligible Account Holders whose subscriptions
remain unfilled in the proportion which the amount of their respective
Qualifying Deposits on the Eligibility Record Date bears to the total
Qualifying Deposits of all subscribing Eligible Account Holders on such
date. No fractional shares will be issued. The subscription rights of
the Eligible Account Holders are subordinate to the limited priority
right of the ESOP set forth in the following paragraph.
Category 2. The ESOP will receive, without payment,
nontransferable subscription rights to purchase up to 10% of the Common
Shares sold in connection with the Conversion. The subscription rights
of the ESOP will be subordinate to the subscription rights in Category
1, except that if the final pro forma market value of Home City exceeds
the maximum of the Valuation Range, the ESOP shall have first priority
with respect to the amount sold in excess of the maximum of the
Valuation Range. If the ESOP is unable to purchase all or part of the
Common Shares for which it subscribes due to an oversubscription in
Category 1, the ESOP may purchase Common Shares on the open market or
may purchase authorized but unissued shares of HCFC. If the ESOP
purchases authorized but unissued shares from HCFC, such purchases would
have a dilutive effect on the interests of HCFC's shareholders.
Category 3. Supplemental Eligible Account Holders, will
receive, without payment, non-transferable subscription rights to
purchase up to the greater of (i) the amount permitted to be purchased
in the Community Offering, (ii) .10% of the total number of Common
Shares sold in connection with the Conversion, or (iii) 15 times the
product (rounded down to the next whole number) obtained by multiplying
the total number of Common Shares sold in connection with the Conversion
by a fraction of which the numerator is the amount of the Supplemental
Eligible Account Holder's Qualifying Deposit and the denominator of
which 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 limitations set forth in
Section 10 of the Plan. See "Limitations on Purchases of Common Shares."
If the exercise of subscription rights in this Category 3
results in an over-subscription, Common Shares will be allocated among
subscribing Supplemental Eligible Account Holders in a manner which
will, to the extent possible, make the total allocation of each
subscriber equal 100 shares or the amount subscribed for, whichever is
lesser. Any Common Shares remaining after such allocation has been made
will be allocated among the subscribing Supplemental Account Holders
whose subscriptions remain unfilled in the proportion which the amount
of their respective Qualifying Deposits on the Supplemental Eligibility
Record Date bears to the total
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Qualifying Deposits of all subscribing Supplemental Eligible Account
Holders on such date. No fractional shares will be issued.
Subscription rights received in this Category 3 will be
subordinate to the subscription rights in Categories 1 and 2.
Category 4. All Voting Members who are not Eligible Account
Holders or Supplemental Eligible Account Holders ("Other Eligible
Members") will receive nontransferable subscription rights to purchase
Common Shares in an amount up to the greater of the amount permitted to
be purchased in the Community Offering or .10% of the total number of
Common Shares sold in connection with the Conversion, subject to the
overall purchase limitations set forth in Section 10 of the Plan. See
"Limitations on Purchases of Common Shares." In the event of an
oversubscription in this Category 4, the available shares will be
allocated among subscribing Other Eligible Members on an equitable basis
in the same proportion that their respective subscriptions bear to the
total amount of all subscriptions in this Category 4.
Subscription rights received in this Category 4 will be
subordinate to the subscription rights in Categories 1 through 3.
The Board of Directors may reject any one or more subscriptions if,
based upon the Board of Directors' interpretation of applicable regulations,
such subscriber is not entitled to the shares for which he or she has subscribed
or if the sales of the shares subscribed for would be in violation of any
applicable statutes, regulations or rules.
HCFC will make reasonable efforts to comply with the securities laws of
all states in the United States in which persons having subscription rights
reside. However, no such person will be offered or receive any Common Shares
under the Plan who resides in a foreign country or in a state of the United
States with respect to which all of the following apply: (i) a small number of
persons otherwise eligible to subscribe for shares under the Plan resides in
such country or state; (ii) under the securities laws of such country or state,
the granting of subscription rights or the offer or sale of Common Shares to
such persons would require HCFC or its officers or directors, to register as a
broker or dealer or to register or otherwise qualify its securities for sale in
such country or state; and (iii) such registration or qualification would be
impracticable for reasons of cost or otherwise.
The term "resident" as used herein with respect to the Subscription
Offering means any person who, on the date of submission of a stock order form,
maintained a bona fide residence within a jurisdiction in which the Common
Shares are being offered for sale. If a person is a business entity, the
person's residence shall be the location of the principal place of business. If
the person is a personal benefit plan, the residence of the beneficiary shall be
the residence of the plan. In the case of all other benefit plans, the residence
of the trustee shall be the residence of the plan. In all cases, the
determination of a subscriber's residency shall be in the sole discretion of
Home City and HCFC.
COMMUNITY OFFERING
Concurrently with the Subscription Offering, HCFC is hereby offering
Common Shares in the Community Offering, subject to the limitations set forth
below, to the extent such shares remain available after the satisfaction of all
orders received in the Subscription Offering. If subscriptions are received in
the Subscription Offering for at least 952,200 Common Shares, Common Shares may
not be available for purchase in the Community Offering. All sales of Common
Shares in the Community Offering will be at the same price per share as in the
Subscription Offering. THE COMMUNITY OFFERING MAY BE TERMINATED AT ANY TIME
AFTER ORDERS FOR AT LEAST 952,200 COMMON SHARES HAVE BEEN RECEIVED, BUT IN NO
EVENT LATER THAN ___________, 1996 (THE "COMMUNITY EXPIRATION DATE"), WITHOUT
THE CONSENT OF THE OTS.
In the event shares are available in the Community Offering, members of
the general public may purchase up to 1% of the Common Shares sold, which is
9,522 Common Shares at the maximum of the Valuation Range, as adjusted. See
"Limitations on Purchases of Common Shares." If an insufficient number of shares
is available to fill all of the orders received in the Community Offering, the
available shares will be allocated in a manner to be determined by the Board of
Directors of HCFC, subject to the following:
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(i) Preference will be given to natural persons who are
residents of Clark County, Ohio, the county in which the offices of Home
City are located;
(ii) Orders received in the Community Offering will first be
filled up to a maximum of 2% of the total number of Common Shares
offered, with any remaining shares allocated on an equal number of
shares per order basis until all orders have been filled;
(iii) No person, together with any Associate and persons Acting
in Concert, may purchase more than 2% of the Common Shares; and
(iv) The right of any person to purchase Common Shares in the
Community Offering is subject to the right of HCFC and Home City to
accept or reject such purchases in whole or in part.
The term "resident" as used herein with respect to the Community
Offering means any natural person who, on the date of submission of a stock
order form, maintained a bona fide residence within, as appropriate, Clark
County or a jurisdiction in which the Common Shares are being offered for sale.
LIMITATIONS ON PURCHASES OF COMMON SHARES
The Plan provides for certain additional limitations to be placed upon
the purchase of Common Shares. To the extent such shares are available, the
minimum number of shares that may be purchased by any party is 25. No fractional
shares will be issued.
No person, together with Associates and persons Acting in Concert, may
purchase more than 2% of the Common Shares. Subject to any required regulatory
approval and the requirements of applicable laws and regulations, but without
further approval of the members of Home City, purchase limitations may be
increased or decreased at the sole discretion of the Boards of Directors of HCFC
and Home City at any time. If such amount is increased, persons who subscribed
for the maximum amount will be given the opportunity to increase their
subscriptions up to the then applicable limit, subject to the rights and
preferences of any person who has priority subscription rights. The Boards of
Directors of HCFC and Home City may, in their sole discretion, increase the
maximum purchase limitation referred to above up to 10%, provided that orders
for shares exceeding 5% of the shares to be issued in the Conversion shall not
exceed, in the aggregate, 10% of the shares to be issued in the Conversion. In
the event that the purchase limitation is decreased after commencement of the
Subscription Offering, the order of any person who subscribed for the maximum
number of Common Shares shall be decreased by the minimum amount necessary so
that such person shall be in compliance with the then maximum number of shares
permitted to be subscribed for by such person.
"Acting in Concert" is defined as "knowing participation in a joint
activity or independent conscious parallel action towards a common goal" or "a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose." Persons shall be presumed to be Acting in Concert
with each other if: (i) both are purchasing Common Shares in the Conversion and
are (a) executive officers, directors, trustees, or any one who performs, or
whose nominee or representative performs, a similar policy making function at a
company (other than Home City or HCFC) or principal business units or
subsidiaries of a company, or (b) any person who directly or indirectly owns or
controls 10% or more of the stock of a company (other than Home City or HCFC);
or (ii) one person provides credit to the other for the purchase of Common
Shares or is instrumental in obtaining that credit. In addition, if a person is
presumed to be Acting in Concert with another person, then the person is
presumed to Act in Concert with anyone else who is, or is presumed to be, Acting
in Concert with that other person.
For purposes of the Plan, (i) the directors of Home City are not deemed
to be Acting in Concert solely by reason of their membership on the Board of
Directors of Home City; (ii) an associate of a person (an "Associate") is (a)
any corporation or organization (other than Home City) of which such person is
an officer, partner or, directly or indirectly, the beneficial owner of 10% or
more of any class of equity securities; (b) any trust or other estate in which
such person has a substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity; and (c) any relative or
spouse of such person, or relative of such spouse, who either has the same home
as such person or who is a director or officer of Home City. Executive officers
and directors of Home City and their Associates may not purchase, in
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<PAGE> 13
the aggregate, more than 34.9% of the total number of Common Shares sold in the
Conversion. Shares acquired by the ESOP will not, pursuant to regulations
governing the Conversion, be aggregated with the shares purchased by the
directors, officers and employees of Home City.
Purchases of Common Shares are also subject to the change in control
regulations of the OTS. Such regulations restrict direct and indirect purchases
of 10% or more of the stock of any savings association by any person or group of
persons Acting in Concert. See "RESTRICTIONS ON ACQUISITION OF HOME CITY AND
HCFC AND RELATED ANTI-TAKEOVER PROVISIONS Federal Law and Regulation" in the
Prospectus.
After the Conversion, Common Shares, except for shares purchased by
officers and directors of HCFC, will be freely transferable, subject to OTS
regulations. See "Restrictions on Transferability of Common Shares by Directors
and Officers."
PLAN OF DISTRIBUTION
The offering of the Common Shares is made only pursuant to this
Prospectus, which is available to all eligible subscribers by mail. See
"ADDITIONAL INFORMATION AND ORDER FORMS." Additional copies are available at the
offices of Home City. Sales of Common Shares will be made primarily by
registered representatives affiliated with Webb. HCFC will rely on Rule 3a4-1
under the Exchange Act, and sales of Common Shares will be conducted within the
requirements of Rule 3a4-1, which will permit officers, directors and employees
of HCFC and Home City to participate in the sale of Common Shares, in clerical
capacities, providing administrative support in effecting sales transactions or
answering questions relating to the proper execution of the Stock Order Form,
except that officers, directors and employees will not participate in the sale
of Common Shares to residents of any state in which such persons have not met
such state's requirements for participation. Management of Home City may answer
questions regarding the business of Home City. Other questions of prospective
purchasers, including questions as to the nature of the investment, will be
directed to registered representatives. Management and the employees of Home
City have been instructed not to solicit offers to purchase Common Shares or to
provide advice regarding the purchase of Common Shares. No officer, director or
employee of HCFC or Home City 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 Shares.
To assist HCFC in marketing the Common Shares, HCFC has retained Webb,
which are broker-dealers registered with the SEC and members of the National
Association of Securities Dealers, Inc. (the "NASD"). Webb will consult with and
advise HCFC and assist with the sale of the Common Shares on a best efforts
basis in connection with the Conversion. The services to be rendered by Webb
include assisting HCFC in conducting the Subscription Offering and the Community
Offering and educating Home City personnel about the Conversion process. Webb is
not obligated to purchase any of the Common Shares.
For its services, Webb has been paid a management fee in the amount of
$25,000. Webb will also receive a commission equal to 1.5% of the aggregate
purchase price paid for Common Shares sold in the Conversion, excluding
purchases by Home City's directors, executive officers, and Associates of such
directors and executive officers, and the ESOP. If Webb and HCFC deem necessary,
Webb may enter into agreements with other NASD members ("Selected Dealers") for
assistance in the sale of the Common Shares, in which event Webb and such
Selected Dealers will receive a commission not to exceed 5.5% of the purchase
price of Common Shares sold, if any, by the Selected Dealer. In addition, HCFC
will reimburse Webb for certain expenses, including reasonable legal fees. Webb
is not obligated to purchase any Common Shares.
HCFC and Home City have agreed to indemnify Webb and its directors,
officers, employees, agents and any controlling person against any and all loss,
liability, claim, damage or expense arising out of any untrue statement, or
alleged untrue statement, of a material fact contained in the Summary Proxy
Statement or the Prospectus, any application to regulatory authorities, any
"blue sky" application, or any other related document prepared or executed by or
on behalf of HCFC or Home City with its consent in connection with, or in
contemplation of, the Conversion, or any omission therefrom of a material fact
required to be stated therein, unless such untrue statement or omission, or
alleged untrue statement or omission, was made in reliance upon certain
information furnished to Home City by Webb expressly for use in the Summary
Proxy Statement or the Prospectus.
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<PAGE> 14
The Common Shares will be offered principally by the distribution of
this Prospectus and through activities conducted at the Conversion Information
Center, which will be located at the office of Home City. The Conversion
Information Center will be staffed by one or more of Webb's employees, who will
be responsible for mailing materials relating to the Offering, responding to
questions regarding the Conversion and the Offering and processing stock orders.
A conspicuous legend that the Common Shares are not a federally-insured
or guaranteed deposit or account appears on all offering documents used in
connection with the Conversion and will appear on the certificates representing
the Common Shares. Any person purchasing Common Shares will be required to
execute the Stock Order Form certifying such person's knowledge that the Common
Shares are not federally-insured or guaranteed and that the purchaser has
received a Prospectus and understands the investment risk involved.
EFFECT OF EXTENSION OF COMMUNITY OFFERING
If the Community Offering extends beyond 45 days after the Subscription
Expiration Date, persons who have subscribed for Common Shares in the
Subscription Offering or in the Community Offering will receive a written notice
that until a date specified in the notice, they have the right to increase,
decrease or rescind their subscriptions for Common Shares. Any person who does
not affirmatively elect to continue his subscription or elects to rescind his
subscription during any such extension will have all of his funds promptly
refunded with interest. Any person who elects to decrease his subscription
during any such extension shall have the appropriate portion of his funds
promptly refunded with interest.
USE OF STOCK ORDER FORMS
Subscriptions for Common Shares in the Subscription Offering and the
Community Offering may be made only by completing and submitting a Stock Order
Form. Any person who desires to subscribe for Common Shares in the Subscription
Offering must do so by delivering to HCFC at 63 West Main Street, Springfield,
Ohio 45502-1309, by mail or in person, prior to 4:00 p.m., Eastern Time, on
December 13, 1996, a properly executed and completed original Stock Order Form,
together with full payment of the subscription price of $10 for each share for
which subscription is made. Photocopies or telecopies of Stock Order Forms will
not be accepted. See "ADDITIONAL INFORMATION AND ORDER FORMS." THE FAILURE TO
DELIVER A PROPERLY EXECUTED ORIGINAL ORDER FORM AND FULL PAYMENT IN A MANNER BY
WHICH THEY ARE ACTUALLY RECEIVED BY HCFC NO LATER THAN 4:00 P.M. ON THE
SUBSCRIPTION EXPIRATION DATE WILL PRECLUDE THE PURCHASE OF COMMON SHARES IN THE
OFFERING.
AN EXECUTED STOCK ORDER FORM, ONCE RECEIVED BY HCFC, MAY NOT BE
MODIFIED, AMENDED OR RESCINDED WITHOUT THE CONSENT OF HCFC, UNLESS (I) THE
COMMUNITY OFFERING IS NOT COMPLETED WITHIN 45 DAYS AFTER THE SUBSCRIPTION
EXPIRATION DATE, OR (II) THE FINAL VALUATION OF HOME CITY, AS CONVERTED, IS LESS
THAN $6,120,000 OR MORE THAN $9,522,000. IF EITHER OF THOSE EVENTS OCCUR,
PERSONS WHO HAVE SUBSCRIBED FOR COMMON SHARES IN THE SUBSCRIPTION OFFERING OR IN
THE COMMUNITY OFFERING WILL RECEIVE WRITTEN NOTICE THAT UNTIL A DATE SPECIFIED
IN THE NOTICE, THEY HAVE A RIGHT TO AFFIRM, INCREASE, DECREASE OR RESCIND THEIR
SUBSCRIPTIONS. ANY PERSON WHO DOES NOT AFFIRMATIVELY ELECT TO CONTINUE HIS
SUBSCRIPTION OR ELECTS TO RESCIND HIS SUBSCRIPTION DURING ANY SUCH EXTENSION
WILL HAVE ALL OF HIS FUNDS PROMPTLY REFUNDED WITH INTEREST. ANY PERSON WHO
ELECTS TO DECREASE HIS SUBSCRIPTION DURING ANY SUCH EXTENSION WILL HAVE THE
APPROPRIATE PORTION OF HIS FUNDS PROMPTLY REFUNDED WITH INTEREST.
PAYMENT FOR COMMON SHARES
Payment of the subscription price for all Common Shares for which
subscription is made must accompany all completed Stock Order Form in order for
subscriptions to be valid. Payment for Common Shares may be made (i) in cash, if
delivered in person, (ii) by check, bank draft or money order payable to the
order of Home City, or (iii) by authorization of withdrawal from savings
accounts in Home City (other than non-self-directed IRAs). Wire transfers will
not be accepted. Home City cannot lend money or otherwise extend credit to any
person to purchase Common Shares, other than the ESOP.
Payments made in cash or by check, bank draft or money order will be
placed in a segregated savings account insured by the FDIC up to applicable
limits. Interest will be paid by Home City on such accounts at Home City's
passbook
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<PAGE> 15
rate, currently ____% annual percentage yield, from the date payment is received
until the Conversion is completed or terminated. Payments made by check will not
be deemed to have been received until such check has cleared for payment.
Instructions for authorizing withdrawals from savings accounts are
provided in the Stock Order Form. Once a withdrawal has been authorized, none of
the designated withdrawal amount may be used by a subscriber for any purpose
other than to purchase Common Shares, unless the Conversion is terminated. All
sums authorized for withdrawal will continue to earn interest at the contract
rate for such account or certificate until the completion or termination of the
Conversion. Interest penalties for early withdrawal applicable to certificate
accounts will be waived in the case of withdrawals authorized for the purchase
of Common Shares. If a partial withdrawal from a certificate account results in
a balance less than the applicable minimum balance requirement, the certificate
will be cancelled and the remaining balance will earn interest at Home City's
passbook rate subsequent to the withdrawal.
Persons who are beneficial owners of IRAs maintained at Home City do
not personally have subscription rights related to such account. The account
itself, however, may have subscription rights. In order to utilize funds in an
IRA maintained at Home City, the funds must be transferred to a self-directed
IRA that permits the IRA funds to be invested in stock. The beneficial owner of
the IRA must direct the trustee of the IRA to use funds from such account to
purchase Common Shares in connection with the Conversion. Persons who are
interested in utilizing IRAs at Home City to subscribe for Common Shares should
contact the Home City Conversion Center at (513) 324-3830 for instructions and
assistance.
Subscriptions will not be filled by HCFC until subscriptions have been
received in the Subscription Offering and the Community Offering for up to
612,000 Common Shares, the minimum point of the Valuation Range. If the
Conversion is terminated, all funds delivered to HCFC for the purchase of Common
Shares will be returned with interest, and all charges to savings accounts will
be rescinded. Subscribers and other purchasers will be notified by mail,
promptly on completion of the sale of the Common Shares, of the number of shares
for which their subscriptions have been accepted. Certificates representing
Common Shares will be delivered promptly thereafter.
If the ESOP subscribes for Common Shares in the Subscription Offering,
the ESOP will not be required to pay for the shares subscribed for at the time
it subscribes but may pay for such Common Shares upon consummation of the
Conversion.
SHARES TO BE PURCHASED BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS
The following table sets forth certain information regarding the
subscription rights intended to be exercised by the directors and executive
officers of Home City and their Associates. For purposes of this table, it has
been assumed that 720,000 Common Shares will be sold in connection with the
Conversion at $10 per share and that a sufficient number of Common Shares will
be available to satisfy the intended purchases by directors and executive
officers. The number of Common Shares purchased may decrease or increase if
fewer than 720,000 Common Shares are sold in connection with the Conversion. See
"Pricing and Number of Common Shares to be Sold."
<TABLE>
<CAPTION>
Percent Aggregate
Total of total purchase
Name shares offering price
- ---- ------ -------- -----
<S> <C> <C> <C>
John D. Conroy 14,400 2.0% $144,000
P. Clark Engelmeier 14,400 2.0 144,000
James Foreman 14,400 2.0 144,000
Terry A. Hoppes 14,400 2.0 144,000
Douglas L. Ulery 14,400 2.0 144,000
Gary E. Brown 2,000 0.3 20,000
JoAnn Holdeman 1,000 0.1 10,000
------- ----- ----------
Total 75,000 10.4% $750,000
====== ==== ========
</TABLE>
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<PAGE> 16
All purchases by executive officers and directors of Home City are made
for investment purposes only and with no intent to resell.
PRICING AND NUMBER OF COMMON SHARES TO BE SOLD
The aggregate offering price of the Common Shares will be based on the
pro forma market value of the shares as determined by an independent appraisal
of Home City. Keller, a firm which evaluates and appraises financial
institutions, was retained by Home City to prepare an appraisal of the estimated
pro forma market value of Home City as converted. Keller will receive a fee of
$15,000 for its appraisal, which amount includes out-of-pocket expenses.
The appraisal was prepared by Keller in reliance upon the information
contained herein. Keller also considered the following factors, among others:
the present and projected operating results and financial condition of Home City
and the economic and demographic conditions in Home City's existing market area;
the quality and depth of Home City's management and personnel; certain
historical financial and other information relating to Home City and a
comparative evaluation of the operating and financial statistics of Home City
with those of other thrift institutions; the aggregate size of the offering; the
impact of the Conversion on Home City's regulatory capital and earnings
potential; the trading market for stock of comparable thrift institutions; the
effect of Home City becoming a subsidiary of HCFC; and general conditions in the
markets for such stocks.
Keller's valuation of the estimated pro forma market value of Home
City, as converted, is $7,200,000 as of September 6, 1996 (the "Pro Forma
Value"). HCFC will issue the Common Shares at a fixed price of $10 per share
and, by dividing the price per share into the Pro Forma Value, will determine
the number of shares to be issued. Applicable regulations also require, however,
that the appraiser establish the Valuation Range of 15% on either side of the
Pro Forma Value to allow for fluctuations in the aggregate value of the Common
Shares due to changes in the market for thrift shares and other factors from the
time of commencement of the Subscription Offering until the completion of the
Conversion.
As of September 6, 1996, the Valuation Range was from $6,120,000 to
$8,280,000, which, based upon a per share offering price of $10, will result in
the sale of between 612,000 and 828,000 Common Shares. In the event that Keller
determines at the close of the Conversion that the aggregate pro forma value of
Home City is higher or lower than the Pro Forma Value, but is nevertheless
within the Valuation Range, or is not more than 15% above the maximum point of
the Valuation Range, HCFC will make an appropriate adjustment by raising or
lowering the total number of Common Shares sold in the Conversion consistent
with the final Valuation Range. The total number of Common Shares sold in the
Conversion will be determined in the discretion of the Board of Directors
consistent with the Valuation Range. If, due to changing market conditions, the
final valuation is not between the minimum of the Valuation Range and 15% above
the maximum of the Valuation Range, subscribers will be given a notice of such
final valuation and the right to affirm, increase, decrease or rescind their
subscriptions. Any person who does not affirmatively elect to continue his
subscription or elects to rescind his subscription before the date specified in
the notice will have all of his funds promptly refunded with interest. Any
person who elects to decrease his subscription will have the appropriate portion
of his funds promptly refunded with interest.
THE APPRAISAL BY KELLER IS NOT INTENDED, AND MUST NOT BE CONSTRUED, AS
A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING COMMON SHARES
OR VOTING TO APPROVE THE CONVERSION. IN PREPARING THE VALUATION, KELLER HAS
RELIED UPON AND ASSUMED THE ACCURACY AND COMPLETENESS OF FINANCIAL AND
STATISTICAL INFORMATION PROVIDED BY HOME CITY AND ITS INDEPENDENT AUDITORS.
KELLER DID NOT INDEPENDENTLY VERIFY THE FINANCIAL STATEMENTS AND OTHER
INFORMATION PROVIDED BY HOME CITY AND ITS INDEPENDENT AUDITORS, NOR DID KELLER
VALUE INDEPENDENTLY THE ASSETS OR LIABILITIES OF HOME CITY OR HCFC. THE
VALUATION CONSIDERS HOME CITY ONLY AS A GOING CONCERN AND SHOULD NOT BE
CONSIDERED AS AN INDICATION OF THE LIQUIDATION VALUE OF HOME CITY. MOREOVER,
BECAUSE SUCH VALUATION IS NECESSARILY BASED UPON ESTIMATES AND PROJECTIONS OF A
NUMBER OF MATTERS, ALL OF WHICH ARE SUBJECT TO CHANGE FROM TIME TO TIME, NO
ASSURANCE CAN BE GIVEN THAT PERSONS PURCHASING COMMON SHARES WILL THEREAFTER BE
ABLE TO SELL SUCH SHARES AT PRICES WITHIN THE ESTIMATED PRICE RANGE.
A copy of the complete appraisal is on file and open for inspection at
the offices of the OTS, 1700 G Street, N.W., Washington, D.C. 20552, at the
Central Regional Office of the OTS, 200 West Madison, Suite 1300, Chicago,
Illinois 60606, and at each of the offices of Home City.
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<PAGE> 17
RESTRICTION ON REPURCHASE OF COMMON SHARES
Federal regulations prohibit HCFC from repurchasing any of its capital
stock for three years following the date of completion of the Conversion, except
as part of an open-market stock repurchase program during the second and third
years following the Conversion involving no more than 5% of HCFC's outstanding
capital stock during a twelve-month period. In addition, after such a
repurchase, Home City's regulatory capital must equal or exceed all regulatory
capital requirements. Before commencement of such a program, HCFC must provide
notice to the OTS, and the OTS may disapprove the program if the OTS determines
that it would adversely affect the financial condition of Home City or if it
determines that there is no valid business purpose for such repurchase. Such
repurchase restrictions would not prohibit the ESOP or the RRP from purchasing
Common Shares during the first year following Conversion.
RESTRICTIONS ON TRANSFERABILITY OF COMMON SHARES BY DIRECTORS AND OFFICERS
Common Shares purchased by directors or executive officers of HCFC or
their Associates will be subject to the restriction that such shares may not be
sold for a period of one year following completion of the Conversion, except in
the event of the death of the shareholder. The certificates evidencing Common
Shares issued by HCFC to directors, executive officers and their Associates will
bear a legend giving appropriate notice of the restriction imposed upon the
transfer of such Common Shares. In addition, HCFC will give appropriate
instructions to the transfer agent (if any) for HCFC's Common Shares in respect
of the applicable restriction for transfer of any restricted shares. Any shares
issued as a stock dividend, stock split or otherwise in respect of restricted
shares will be subject to the same restrictions.
Subject to certain exceptions, for a period of three years following
the Conversion, no director or officer of HCFC or Home City, or any of their
Associates, may purchase any common shares of HCFC without the prior written
approval of the OTS, except through a broker-dealer registered with the SEC.
This restriction will not apply, however, to negotiated transactions involving
more than 1% of a class of outstanding common shares of HCFC or shares acquired
by any stock benefit plan of Home City or HCFC.
The Common Shares, like the stock of most public companies, are subject
to the registration requirements of the Securities Act. Accordingly, the Common
Shares may be offered and sold only in compliance with such registration
requirements or pursuant to an applicable exemption from registration. Common
Shares received in the Conversion by persons who are not "affiliates" of HCFC
may be resold without registration. Common Shares received by affiliates of HCFC
will be subject to resale restrictions. An "affiliate" of HCFC, for purposes of
Rule 144, is a person who directly, or indirectly through one or more
intermediaries, controls, or is controlled by or is under common control with,
HCFC. Rule 144 generally requires that there be publicly available certain
information concerning HCFC and that sales subject to Rule 144 be made in
routine brokerage transactions or through a market maker. If the conditions of
Rule 144 are satisfied, each affiliate (or group of persons acting in concert
with one or more affiliates) is entitled to sell in the public market, without
registration, in any three-month period, a number of shares which does not
exceed the greater of (i) 1% of the number of outstanding shares of HCFC or (ii)
if the shares are admitted to trading on a national securities exchange or
reported through the automated quotation system of a registered securities
association, the average weekly reported volume of trading during the four weeks
preceding the sale.
RIGHTS OF REVIEW
Any person aggrieved by a final action of the OTS which approves, with
or without conditions, or disapproves the Plan may obtain review of such action
by filing in the Court of Appeals of the United States for the circuit in which
the principal office or residence of such person is located or in the United
States Court of Appeals for the District of Columbia, a written petition praying
that the final action of the OTS be modified, terminated or set aside. Such
petition must be filed within 30 days after the date of mailing of proxy
materials to the Voting Members of Home City or within 30 days after the date of
publication in the Federal Register of notice of approval of the Plan by the
OTS, whichever is later.
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<PAGE> 18
USE OF PROCEEDS
The following table presents the estimated gross and net proceeds from
the sale of the Common Shares in connection with the Conversion based on the
Valuation Range:
<TABLE>
<CAPTION>
Maximum,
Minimum Mid-point Maximum as adjusted
------- --------- ------- -----------
<S> <C> <C> <C> <C>
Gross proceeds $6,120,000 $7,200,000 $8,280,000 $9,522,000
Less estimated expenses 357,000 372,000 387,000 404,000
---------- ---------- ---------- ----------
Total net proceeds $5,763,000 $6,828,000 $7,893,000 $9,118,000
========== ========== ========== ==========
</TABLE>
The net proceeds from the sale of the Common Shares may be outside the Valuation
Range, depending upon financial and market and regulatory conditions at the time
of the completion of the Offering. See "THE CONVERSION - Pricing and Number of
Common Shares to be Sold." The expenses are estimated assuming that (a) all of
the indicated number of Common Shares are sold in the Subscription Offering; (b)
the directors, officers and their Associates purchase 75,000 Common Shares and
(c) the ESOP purchases 8% of the Common Shares sold. Actual expenses may be more
or less than estimated. See "THE CONVERSION - Plan of Distribution."
HCFC will retain 50% of the net proceeds from the sale of the Common
Shares, or approximately $3,414,000 at the mid-point of the Valuation Range,
including the value of a promissory note from the ESOP which HCFC intends to
accept in exchange for the issuance of Common Shares to the ESOP. Such proceeds
will be used to fund the RRP and will be invested in short-term and
intermediate-term government securities. The remainder of the net proceeds
received from the sale of the Common Shares, $3,414,000 at the mid-point of the
Valuation Range, will be invested by HCFC in the capital stock to be issued by
Home City to HCFC as a result of the Conversion. Such investment will increase
the regulatory capital of Home City and will permit Home City to expand its
lending and investment activities and to enhance customer services.
Home City anticipates that such net proceeds initially will be invested
in short-term interest-bearing deposits in other financial institutions.
Eventually, however, Home City will attempt to use the net proceeds to originate
mortgage, consumer and other loans in Home City's market areas and may also use
the proceeds from the Conversion to expand operations through the establishment
of a branch office, which would include space for administrative operations.
Home City estimates that the cost of establishing a new branch would be
approximately $1.25 million, including land acquisition and construction costs.
Although HCFC and Home City could use the increase in capital which will result
from the Conversion to acquire other financial institutions or for HCFC to
repurchase its own outstanding shares, HCFC and Home City have no current plans
or agreements, written or oral, and are not negotiating, to acquire any other
institution and have no current plans for HCFC to repurchase any of its shares.
See "THE BUSINESS OF HOME CITY" in the Prospectus.
MARKET FOR COMMON SHARES
There is presently no market for the Common Shares. The aggregate
offering price for the Common Shares is based upon an independent appraisal of
Home City. The appraisal is not a recommendation as to the advisability of
purchasing Common Shares. See "THE CONVERSION - Pricing and Number of Common
Shares to be Sold." No assurance can be given that persons purchasing Common
Shares will thereafter be able to sell such shares at a price at or above the
offering price.
HCFC has received approval to have the Common Shares quoted on The
Nasdaq Small Cap Market under the symbol "____" upon the closing of the
Conversion, subject to certain conditions which HCFC and Home City believe will
be satisfied, although no assurance can be provided that the conditions will be
met. In connection with such approval, Webb has informed Home City that Keefe,
Bruyette & Woods, Inc., intends to make a market in the Common Shares. No
assurance can be given, however, that an active or liquid market for the Common
Shares will develop after the completion of the Conversion or, if such a market
does develop, that such market will continue. Investors should consider,
therefore,
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<PAGE> 19
the potentially illiquid and long-term nature of an investment in the Common
Shares. See "RISK FACTORS - Limited Market for the Common Shares" in the
Prospectus.
DIVIDEND POLICY
The declaration and payment of dividends by HCFC will be subject to the
discretion of the Board of Directors of HCFC and will be based on the earnings
and financial condition of HCFC and general economic conditions. In an effort to
manage the capital of HCFC, the Board of Directors may determine that the
payment of a regular or special cash dividend or both may be prudent. No
assurance can be given that any dividend will be declared or that any dividend,
if declared, will continue in the future.
Other than earnings on the investment of the proceeds retained by HCFC,
the only source of income of HCFC will be dividends periodically declared and
paid by the Board of Directors of Home City on the common stock of Home City
held by HCFC. The declaration and payment of dividends by Home City to HCFC will
be subject to the discretion of the Board of Directors of Home City, to the
earnings and financial condition of Home City, to general economic conditions
and to federal restrictions on the payment of dividends by thrift institutions.
Under regulations of the OTS applicable to converted associations, Home City
will not be permitted to pay a cash dividend on its capital stock after the
Conversion if its regulatory capital would, as a result of the payment of such
dividend, be reduced below the amount required for the Liquidation Account or
the applicable regulatory capital requirement prescribed by the OTS. See "THE
CONVERSION Principal Effects of the Conversion -- Liquidation Account" and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF HOME CITY - Liquidity and Capital Resources" in the Prospectus.
Home City may not pay a dividend unless such dividend also complies with a
regulation of the OTS limiting capital distributions by savings associations.
Capital distributions, for purposes of such regulation, include,
without limitation, payments of cash dividends, repurchases and certain other
acquisitions by an association of its shares and payments to stockholders of
another association in an acquisition of such other association. The capital
distribution regulation adopts a 3-tier classification of associations based
upon their capital immediately before and, on a pro forma basis, after giving
effect to the capital distribution. A tier 1 association is an association which
has capital immediately before and after giving effect to a proposed capital
distribution that is equal to or greater than the amount of its fully phased-in
capital requirement. A tier 2 association is an association which has capital
immediately before and after giving effect to a capital distribution which is
equal to or in excess of its minimum capital requirement, but is less than the
amount of its fully phased-in capital requirement. A tier 3 association is an
association which fails to meet its minimum capital requirement immediately
before or after giving effect to a capital distribution.
A tier 1 association may make capital distributions equal to up to the
higher of (1) 100% of its net earnings to date during the calendar year in which
the distribution is made, plus the amount that would reduce by one-half its
"surplus capital ratio" at the beginning of the calendar year or (2) 75% of its
net income over the most recent four-quarter period. The "surplus capital ratio"
is the percentage by which an association's capital-to-assets ratio exceeds Home
City's ratio of fully phased-in capital requirement to assets. A tier 2
association may make capital distributions up to 75% of its net earnings over
the most recent four-quarter period, if Home City meets the current risk-based
capital standard. A tier 3 association may make capital distributions only with
the prior written approval of the Regional Director of the OTS or in accordance
with an approved capital plan.
If an association meeting the tier 1 criteria has been notified by the
OTS that Home City requires more than normal supervision, such association will
be treated as a tier 2 or tier 3 association, unless the OTS determines that
such treatment is not necessary to ensure Home City's safe and sound operation.
Moreover, the OTS may prohibit any capital distribution otherwise permitted by
the regulation if the OTS determines that such distribution would constitute an
unsafe or unsound practice. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF HOME CITY - Liquidity and
Capital Resources" in the Prospectus.
At June 30, 1996, Home City met the fully phased-in capital
requirement. Other than the earnings on the investment of proceeds retained by
HCFC, the only source of income of HCFC will be dividends periodically declared
and
18
<PAGE> 20
paid by the Board of Directors of Home City on the common stock of Home City
held by HCFC. The payment of dividends by Home City will be subject to various
regulatory restrictions. On a pro forma basis, as of June 30, 1996, assuming (i)
receipt by Home City of $3.4 million of net conversion proceeds, (ii) the
investment of such net proceeds in assets having a risk weighting of 20% and
(iii) the establishment of a Liquidation Account in the amount of $5.4 million
(the regulatory capital of Home City at June 30, 1996), Home City would have
$4.19 million available for the payment of dividends to HCFC. See "REGULATORY
CAPITAL COMPLIANCE" in the Prospectus.
DESCRIPTION OF AUTHORIZED SHARES
GENERAL
The Articles of Incorporation of HCFC authorize the issuance of five
million common shares and one million preferred shares. The common shares and
the preferred shares authorized by HCFC's Articles of Incorporation have no par
value. Upon receipt by HCFC of the purchase price therefor and subsequent
issuance thereof, each Common Share will be fully paid and nonassessable. The
Common Shares of HCFC will represent nonwithdrawable capital and will not and
cannot be insured by the FDIC. Each Common Share will have the same relative
rights and will be identical in all respects to every other Common Share.
None of the preferred shares of HCFC will be issued in connection with
the Conversion. The Board of Directors of HCFC is authorized, without
shareholder approval, to issue preferred shares and to fix and state the
designations, preferences or other special rights of such shares and the
qualifications, limitations and restrictions thereof. The preferred shares may
rank prior to the common shares as to dividend rights, liquidation preferences
or both. Each holder of preferred shares will be entitled to one vote for each
preferred share held of record on all matters submitted to a vote of
shareholders. The issuance of preferred shares and any conversion rights which
may be specified by the Board of Directors for the preferred shares could
adversely affect the voting power of holders of the common shares. The Board of
Directors has no present intention to issue any of the preferred shares.
The following is a summary description of the rights of the common
shares of HCFC, including the material express terms of such shares as set forth
in HCFC's Articles of Incorporation.
LIQUIDATION RIGHTS
In the event of the complete liquidation or dissolution of HCFC, the
holders of the Common Shares will be entitled to receive all assets of HCFC
available for distribution, in cash or in kind, after payment or provision for
payment of (i) all debts and liabilities of HCFC, (ii) any accrued dividend
claims, and (iii) any interests in the Liquidation Account.
VOTING RIGHTS
The holders of the Common Shares will possess exclusive voting rights
in HCFC, unless preferred shares are issued. Each holder of Common Shares will
be entitled to one vote for each share held of record on all matters submitted
to a vote of holders of common shares.
Section 1701.55 of the Ohio Revised Code provides in substance and
effect that shareholders of a for profit corporation which is not a savings and
loan association and which is incorporated under Ohio law must initially be
granted the right to cumulate votes in the election of directors. Section
1701.69 of the Ohio Revised Code provides that an Ohio corporation may eliminate
cumulative voting in the election of directors after the expiration of 90 days
after the date of initial incorporation by filing with the Ohio Secretary of
State an amendment to the articles of incorporation eliminating cumulative
voting. The Articles of Incorporation of HCFC have been amended to eliminate
cumulative voting. See "RESTRICTIONS ON ACQUISITION OF HOME CITY AND HCFC AND
RELATED ANTI-TAKEOVER PROVISIONS Articles of Incorporation of HCFC --
Elimination of Cumulative Voting" in the Prospectus.
DIVIDENDS
19
<PAGE> 21
The holders of the Common Shares will be entitled to the payment of
dividends when, as and if declared by the Board of Directors and paid out of
funds, if any, available under applicable laws and regulations for the payment
of dividends. The payment of dividends is subject to federal and state statutory
and regulatory restrictions. See "DIVIDEND POLICY" and "TAXATION - Federal
Taxation" in the Prospectus for a description of restrictions on the payment of
cash dividends.
PREEMPTIVE RIGHTS
After the consummation of the Conversion, no shareholder of HCFC will
have, as a matter of right, the preemptive right to purchase or subscribe for
shares of any class, now or hereafter authorized, or to purchase or subscribe
for securities or other obligations convertible into or exchangeable for such
shares or which by warrants or otherwise entitle the holders thereof to
subscribe for or purchase any such share.
RESTRICTIONS ON ALIENABILITY
See "THE CONVERSION - Restrictions on Repurchase of Common Shares" for
a description of the limitations on the repurchase of stock by HCFC; "THE
CONVERSION - Restrictions on Transferability of Common Shares by Directors and
Officers" for a description of certain restrictions on the transferability of
Common Shares purchased by officers and directors; and "RESTRICTIONS ON
ACQUISITION OF HOME CITY AND HCFC AND RELATED ANTI-TAKEOVER PROVISIONS" in the
Prospectus for information regarding regulatory restrictions on acquiring Common
Shares.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Each director of Home City receives a retainer fee of $1,000 per month
for service as a director of Home City. In addition, the Chairman of the Board
of Directors receives an additional fee of $150 per month. Edgar Witten, a
Director Emeritus, receives a fee of $200 per month.
Four of Home City's directors participate in a deferred compensation
plan whereby payment of part or all of such their directors' fees is deferred.
Home City records the deferred fees as expenses and in a liability account.
Interest is periodically credited on each account. Each director is fully vested
in his account, and the balance is payable upon termination of directorship
prior to death or retirement. Home City has provided for the contingent
liability created by the deferred compensation plan by purchasing a
single-premium universal life insurance policy on each director. Upon retirement
or death, a director or his estate will receive the benefits payable pursuant to
the policy on his life.
The following table presents certain information regarding the cash
compensation received by the President and Chief Executive Officer of Home City.
No other executive officer of Home City received compensation exceeding $100,000
during the fiscal year ended June 30, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
Annual Compensation
---------------------------------
Name and Principal Fiscal Year All Other
Position ended June 30 Salary ($)(1) Bonus ($) Compensation(2)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Douglas L. Ulery 1996 $100,000 $30,000 $3,338
President and Chief
Executive Officer
-------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------
(1) Includes directors' fees of $12,000. Does not include amounts
attributable to other miscellaneous benefits received by executive
officers. The cost to Home City of providing such benefits to Mr. Ulery
was less than 10% of his cash compensation.
20
<PAGE> 22
(2) Consists of Home City's contribution to Mr. Ulery's 401(k) defined
contribution plan account.
EXPERTS
The consolidated financial statements of Home City as of June 30, 1996
and 1995, and for the years ended June 30, 1996, 1995 and 1994, included in this
Prospectus have been audited by Robb, Dixon, Francis, Davis, Oneson & Company,
certified public accountants, as stated in their report appearing herein and
have been so included in reliance upon such report given upon the authority of
that firm as experts in accounting and auditing.
Keller has consented to the publication herein of the summary of its
letter to Home City setting forth its opinion as to the estimated pro forma
market value of Home City as converted and to the use of its name and statements
with respect to it appearing herein.
LEGAL PROCEEDINGS
Home City is not presently involved in any material legal proceedings.
From time to time, Home City is a party to legal proceedings incidental to its
business to enforce its security interest in collateral pledged to secure loans
made by Home City.
ADDITIONAL INFORMATION AND ORDER FORMS
The Prospectus contains the following: audited financial statements of
Home City, including statements of income and retained earnings, for the three
fiscal years ended June 30, 1996, 1995 and 1994; management's discussion and
analysis of financial condition and results of operations of Home City; selected
financial information of Home City for the five fiscal years ended June 30,
1996, 1995, 1994, 1993 and 1992; information concerning the capitalization of
Home City; a description of Home City's lending, savings and investment
activities; and additional information about the business and financial
condition of Home City. A copy of the Prospectus accompanies this Summary Proxy
Statement. To obtain an additional copy of the Prospectus, contact Home City's
Conversion Information Center at (513) 324-5736.
The Subscription Offering will commence on November 20, 1996, and end at
4:00 p.m., Eastern Time, on December 13, 1996. Stock Order Forms for purchases
of Common Shares in the Subscription Offering must be received by Home City on
or before 4:00 p.m. Eastern Time, December 13, 1996.
21
<PAGE> 1
EXHIBIT 99.2
STOCK ORDER FORM & HOME CITY FINANCIAL
CERTIFICATE FORM CORPORATION
Note: Please read the Stock Order Form Guide and Instructions on the back of
this form before completion.
- --------------------------------------------------------------------------------
DEADLINE
The Subscription and Community Offering ends at 5:00 p.m., Springfield, Ohio
time XXXX xx, 1996. Your Stock Order Form and Certification Form, properly
executed and with the correct payment, must be received at the address on the
bottom of this form by this deadline, or it will be considered void.
- --------------------------------------------------------------------------------
NUMBER OF SHARES
(1) Number of Shares Price Per Share (2) Total Amount Due
--------------------------- ----------------------
| | x $10.00 = | |
--------------------------- ----------------------
THE MINIMUM NUMBER OF SHARES THAT A PERSON MAY SUBSCRIBE FOR IS 25 and the
maximum purchase is 1% of the total number of shares sold in the Offering (up
to xx,xxx shares, based on anticipated sales of xxx,xxx shares). No person,
together with his Associates and other persons acting in concert with him, may
purchase in the Community Offering more than 1% of the total shares sold in the
Offering and no person, together with his associates and other persons acting
in concert with him, may purchase in the Subscription Offering more than 2% of
the total Common Shares sold in the offering (up to xx,xxx shares, based on
anticipated sales of xxx,xxx shares).
- --------------------------------------------------------------------------------
METHOD OF PAYMENT | PURCHASER INFORMATION
(3) / / Enclosed is a check, bank draft | (5) / / Check here if you are a
or money order payable to Home | director, officer or employee
City Financial Corporation for | of Home City Federal Savings
$_____________ (or cash if | Bank of Springfield or a
presented in person). | member of such person's
| immediate family.
(4) / / I authorize Home City Federal | / / Check here if you are a
Savings Bank of Springfield to | depositor or a borrower and
make withdrawals from my Home | enter below information for
City Federal Savings Bank of | all accounts you had at the
Springfield account(s) shown | Eligibility Record Date
below, and understand that the | (June 30, 1995), Supplemental
amounts will not otherwise be | Eligibility Record Date
available for withdrawal | (September 30, 1996) or the
(there is no penalty for an | Voting Record Date (XXXX,
early CD withdrawal): | 1996). If additional space is
| needed, please utilize the
ACCOUNT NUMBER(S) | AMOUNTS | back of this form. Please
| | confirm account(s) by
- ---------------------- | ------------- | initialing here. _____________
| |
- ---------------------- | ------------- | ACCOUNT TITLE | ACCOUNT NUMBER
| | (Names on Accounts)|
- ---------------------- | ------------- | |
| | |
- ---------------------- | ------------- | ------------------ | ----------------
| | |
TOTAL WITHDRAWAL | ------------- | ------------------ | ----------------
- --------------------------------------------------------------------------------
(6) STOCK REGISTRATION
/ / Individual / / Uniform Transfer to Minors / / Partnership
/ / Joint Tenants / / Uniform Gift to Minors / / Individual
Retirement Account
/ / Tenants in / / Corporation / / Fiduciary/Trust
Common (Under Agreement
Dated____________)
- --------------------------------------------------------------------------------
Name | Social Security or Tax I.D.
|
- --------------------------------------------------------------------------------
Name | Daytime Telephone
|
- --------------------------------------------------------------------------------
Street Address | Evening Telephone
|
- -------------------------------------------------------------------------------
City State Zip | County of Residence
|
- -------------------------------------------------------------------------------
NASD AFFILIATION (This section only applies to those individuals who meet the
delineated criteria)
/ / Check here if you are a member of the National Association of Securities
Dealers, Inc. ("NASD"), a person associated with an NASD member, a member of the
immediate family of any such person to whose support such person contributes,
directly or indirectly, or the holder of an account in which an NASD member or
person associated with an NASD member has a beneficial interest. To comply with
conditions under which an exemption from the NASD's Interpretation With Respect
to Free-Riding and Withholding is available, you agree, if you have checked the
NASD affiliation box: (1) not to sell, transfer or hypothecate the stock for a
period of 90 days following the issuance, and (2) to report this subscription in
writing to the applicable NASD member within one day of the payment therefor.
- -------------------------------------------------------------------------------
ACKNOWLEDGMENT By signing below, I acknowledge receipt of the Prospectus dated
XXXX xx, 1996, and understand I may not change or revoke my order once it is
received by Home City Financial Corporation. I also certify that this stock
order is for my account and there is no agreement or understanding regarding any
further sale or transfer of these shares. Federal regulations prohibit any
persons from transferring, or entering into any agreement directly or indirectly
to transfer, the legal or beneficial ownership of conversion subscription rights
or the underlying securities to the account of another person. Home City
Financial Corporation will pursue any and all legal and equitable remedies in
the event it becomes aware of the transfer of subscription rights and will not
honor orders known by it to involve such transfer. Under penalties of perjury, I
further certify that: (1) the social security number or taxpayer identification
number given above is correct; and (2) I am not subject to backup withholding.
You must cross out his item, (2) above, if you have been notified by the
Internal Revenue Service that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. BY SIGNING BELOW, I
ALSO ACKNOWLEDGE THAT I HAVE NOT WAIVED ANY RIGHTS UNDER THE SECURITIES ACT OF
1933, AND THE SECURITIES EXCHANGE ACT OF 1934.
- -------------------------------------------------------------------------------
SIGNATURE Sign and date this form. When purchasing as a custodian, corporate
officer, etc., include your full title. An additional signature is required only
if payment is by withdrawal from an account that requires more than one
signature to withdraw funds. YOUR ORDER WILL BE FILLED IN ACCORDANCE WITH THE
PROVISIONS OF THE PROSPECTUS. THIS ORDER IS NOT VALID IF THE STOCK ORDER FORM
AND CERTIFICATION FORM ARE NOT BOTH SIGNED. If you need help completing this
Form, you may call the Conversion Information Center at (513) 324-3830.
THE COMMON SHARES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS AND ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE SAVINGS ASSOCIATION INSURANCE
FUND OR ANY OTHER GOVERNMENTAL AGENCY.
----------------------------------------------------------------------
| Signature Title (if applicable) Date |
| |
----------------------------------------------------------------------
| Signature Title (if applicable) Date |
| |
----------------------------------------------------------------------
- ------------------------------------------------------------------------------
---------------------------------------------- CONVERSION INFORMATION CENTER
| OFFICE USE | 63 West Main Street
| | Springfield, Ohio
| Date Rec'd__/__/__ Order#________ Batch#____ | (513) 324-3830
| Check#____________ Category______ |
| Amount $__________ Initials______ |
----------------------------------------------
<PAGE> 2
HOME CITY FINANCIAL CORPORATION
STOCK OWNERSHIP GUIDE
- --------------------------------------------------------------------------------
Instructions: See your legal advisor if you are unsure about the correct
registration of your shares.
INDIVIDUAL - The shares are to be registered in an individual's name only. You
may not list beneficiaries for this ownership.
JOINT TENANTS - Joint tenants with right of survivorship identifies two or more
owners. When shares are held by joint tenants with rights of survivorship,
ownership automatically passes to the surviving joint tenant(s) upon the death
of any joint tenant. You may not list beneficiaries for this ownership.
TENANTS IN COMMON - Tenants in common may also identify two or more owners. When
shares are to be held by tenants in common, upon the death of one co-tenant,
ownership of the shares will be held by the surviving co-tenant(s) and by the
heirs of the deceased co-tenant. All parties must agree to the transfer or sale
of shares held by tenants in common. You may not list beneficiaries for this
ownership.
INDIVIDUAL RETIREMENT ACCOUNT - Individual Retirement Account ("IRA") holders
may make purchases from their deposits through a pre-arranged
"trustee-to-trustee" transfer. Shares may only be held in a self-directed IRA.
Home City Federal Savings Bank of Springfield does not offer a self-directed
IRA. Please contact the Conversion Information Center if you have any questions
about your IRA account or to obtain a list of local brokers who will open a
self-directed IRA, or check with your broker. There will be no early withdrawal
or IRS penalties incurred by these transactions.
UNIFORM GIFT TO MINORS - For residents of many states, shares may be held in the
name of a custodian for the benefit of a minor under the Uniform Transfer to
Minors Act. For residents in other states, shares may be held in a similar type
of ownership under the Uniform Gift to Minors Act of the Individual states. For
either ownership, the minor is the actual owner of the shares with the adult
custodian being responsible for the investment until the child reaches legal
age.
On the first line, print the first name, middle initial and last name of the
custodian, with the abbreviation "CUST" and "Unif Tran Min Act" or "Unif Gift
Min Act" after the name. Standard U.S. Postal Service state abbreviation should
be used to describe the appropriate state. For example, shares held by John Doe
as custodian for Susan Doe under the Ohio Uniform Transfer to Minors Act will be
abbreviated John Doe, CUST Susan Doe Unif Tran Min Act, OH. Use the minor's
Social Security Number. Print the first name, middle initial and last name of
the minor on the second "NAME" line. Only one custodian and one minor may be
designated.
CORPORATION/PARTNERSHIP - Corporations/Partnerships may purchase shares. Please
provide the Corporation/Partnership's legal name and Tax I.D. To have depositor
rights the Corporation/Partnership must have an account in the legal name.
Please contact the Conversion Information Center to verify depositor rights and
purchase limitations.
FIDUCIARY/TRUST - Generally, fiduciary relationships (such as Trusts, Estates,
Guardianships, etc.) are established under a form of trust agreement or are
pursuant to a court order. Without a legal document establishing a fiduciary
relationship, your shares may not be registered in a fiduciary capacity.
Instructions: On the first "NAME" line, print the first name, middle initial and
last name of the fiduciary if the fiduciary is an individual. If the fiduciary
is a corporation, list the corporate title on the first "NAME" line. Following
the name, print the fiduciary "title" such as trustee, executor, personal
representative, etc.
On the second "NAME" line, print either the name of the maker, donor or testator
OR the name of the beneficiary. Following the name, indicate the type of legal
document establishing the fiduciary relationship (agreement, court order, etc.).
In the blank after "Under Agreement Dated", fill in the date of the document
governing the relationship. The date of the document need not be provided for a
trust created by a will.
An example of fiduciary ownership of shares in the case of a trust is: John D.
Smith, Trustee for Thomas A. Smith Under Agreement Dated 06/09/87.
DEFINITION OF ASSOCIATE
- --------------------------------------------------------------------------------
The term "associate" of a person defined to mean (a) any corporation or other
organization (other than Home City) of which such person is an officer, partner,
or directly or indirectly, the beneficial owner of 10% or more of any class of
equity securities; (b) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity, and (c) any relative or spouse of such person,
or any relative of such spouse, who either has the same home as such person or
who is a director or officer of Home City.
<PAGE> 3
CERTIFICATION FORM
(This Form Must Accompany A Signed Stock Order Form)
I ACKNOWLEDGE THAT THE COMMON SHARES, NO PAR VALUE PER SHARE ("COMMON
SHARES"), OF HOME CITY FINANCIAL CORPORATION ("HOME CITY") ARE NOT FEDERALLY
INSURED AND ARE NOT GUARANTEED BY HOME CITY OR THE FEDERAL GOVERNMENT.
If anyone asserts that the Common Shares are federally insured or guaranteed,
or are as safe as an insured deposit, I should call the Office of Thrift
Supervision Central Regional Director, Ronald N. Karr, at (312) 917-5000.
I further certify that, before purchasing the Common Shares of Home City, I
received a copy of the Prospectus dated, XXXXX xx, 1996 which discloses the
nature of the Common Shares being offered thereby and describes the following
risks involved in an investment in the Common Shares under the heading "Risk
Factors" beginning on page X of the Prospectus:
1. Interest Rate Risk
2. Limited Market for the Common Shares
3. Possible Inadequacy of the Allowance for Loan Losses
4. Legislation and Regulation Which May Adversely Affect Home City's
Earnings
5. Controlling Influence of Management and Anti-Takeover Provisions
Which May Discourage Sales of Common Shares for Premium Prices
6. Possible Adverse Effects if Preferred Shares Are Issued
7. Risk of Delayed Offering
8. Dilutive Effect of Increase in Valuation Range
9. Dilutive Effect of Purchases by the ESOP and the RRP
__________________________________ __________________________________
| Signature | | Signature |
| | | |
|__________________________________| |__________________________________|
(Note: If shares are to be held jointly, both parties must sign)
----
Date: ____________________________
<PAGE> 4
HOME CITY FINANCIAL
CORPORATION
ITEM INSTRUCTION
- --------------------------------------------------------------------------------
ITEMS 1 AND 2 -
Fill in the number of shares that you wish to purchase and the total payment
due. The amount due is determined by multiplying the number of shares by the
subscription price of $10.00 per share. The minimum purchase is 25 shares. The
maximum purchase by any person is 1% of the total number of shares sold in the
Offering (up to xx,xxx shares, based on anticipated sales of xxx,xxx). No
person, together with associates of and persons acting in concert with such
person, may purchase in the Subscription Offering more than 2% of the total
number of shares in the Offering (up to xx,xxx shares, based on anticipated
sales of xxx,xxx) and no person, together with Associates of and persons acting
in concert with such person, may purchase in the Community Offering more than 1%
of the total number of shares sold in the Offering (up to xx,xxx shares, based
on anticipated sales of xxx,xxx).
The Home City Federal Savings Bank of Springfield has reserved the right to
reject the subscription of any order received in the Community Offering, in
whole or in part.
ITEM 3 - Payment for shares may be made in cash (only if delivered by you in
person) or by check, bank draft or money order made payable to Home City
Financial Corporation. DO NOT MAIL CASH. If you choose to make a cash payment,
take your Stock Order Form, signed Certification Form and payment in person to
Home City Federal Savings Bank of Springfield. Your funds will earn interest at
Home City Federal Savings Bank of Springfield's passbook rate, currently 2.50%
per annum.
ITEM 4 - To pay by withdrawal from a savings account or certificate at Home City
Federal Savings Bank of Springfield, insert the account number(s) and the
Amount(s) you wish to withdraw from each account. If more than one signature is
required to withdraw, each must sign in the Signature box on the front of this
form. To withdraw from an account with checking privileges, please write a
check. No early withdrawal penalty will be charged on funds used to purchase
shares. A hold will be placed on the account(s) for the amount(s) you show.
Payments will remain in certificate account(s) until the offering closes.
However, if a partial withdrawal reduces the balance of a certificate account to
less than the applicable minimum, the remaining balance will thereafter earn
interest in the passbook rate.
ITEM 5 - Please check this box if you were a depositor on the Eligibility Record
Date (June 30, 1995), and/or a depositor on the Supplemental Eligibility Record
Date (September 30, 1996) or a depositor or borrower on the Voting Record Date
(XXXX XX, 1996) and list all names on the account(s) and all account number(s)
of those accounts you had at these dates to ensure proper identification of your
purchase rights.
ITEMS 6 and 7 - The stock transfer industry has developed a uniform system of
shareholder registrations that we will use in the issuance of Home City
Financial Corporation common shares. Print the name(s) in which you want the
shares registered and the mailing address of the registration. Include the first
name, middle initial and last name of the shareholder. Avoid the use of two
initials. Please omit words that do not affect ownership rights, such as "Mrs.",
"Mr.", "Dr.", "special account", etc.
Subscription rights are not transferable. If you are a qualified member, to
protect your priority over other purchasers as described in the Prospectus, you
must take ownership in at least one of the account holder's name.
Enter the Social Security or Tax I.D. number of one registered owner. This
registered owner must be listed on the first "NAME" line. Be sure to include
your telephone number because we will need to contact you if we cannot execute
your order as given. Review the Stock Ownership Guide on this page and refer to
the instructions for Uniform Gift to Minors/Uniform Transfer to Minors and
Fiduciaries.
Account Title (Names on Account(s) Account Number
____________________________________________________________________
| | |
| ------------------------------------ | |
| _____________________________________|____________________________ |
| | |
| ------------------------------------ | |
| _____________________________________|____________________________ |
| | |
| ------------------------------------ | |
| _____________________________________|____________________________ |
| | |
| ------------------------------------ | |
| _____________________________________|____________________________ |
<PAGE> 1
Exhibit 99.6
CONVERSION VALUATION APPRAISAL REPORT
Prepared For:
HOME CITY FEDERAL SAVINGS BANK
and
HOME CITY FINANCIAL CORPORATION
Springfield, Ohio
As Of:
September 6, 1996
Prepared By:
KELLER & COMPANY, INC.
555 Metro Place North
Suite 524
Dublin, Ohio 43017
(614) 766-1426
KELLER & COMPANY
<PAGE> 2
CONVERSION VALUATION APPRAISAL REPORT
Prepared for:
HOME CITY FINANCIAL CORPORATION
and
HOME CITY FEDERAL SAVINGS BANK
Springfield, Ohio
As Of:
September 6, 1996
Prepared By:
Michael R. Keller
President
<PAGE> 3
[KELLER & COMPANY, INC. LETTERHEAD]
September 23, 1996
Board of Directors
Home City Federal Savings Bank
63 West Main Street
Springfield, OH 45502
Gentlemen:
We hereby submit an independent appraisal of the pro forma market value of the
to-be-issued stock of Home City Financial Corporation (the "Corporation"), which
is the newly formed holding company of Home City Federal Savings Bank,
Springfield, Ohio ("Home City Federal" or the "Bank"). The Corporation will hold
all of the shares of the common stock of the bank. Such stock is to be issued is
connection with the Bank's conversion from a federally chartered mutual savings
bank to a federally chartered stock savings bank in accordance with the Bank's
Plan of Conversion. The appraisal was prepared and provided to the bank in
accordance with the conversion requirements and regulations of the Office of
Thrift Supervision if the United States Department of the Treasury.
Keller & Company, Inc. is an independent financial institution consulting firm
that serves both banks and thrift institutions. the firm is a full-service
consulting organization, as described in more detail in Exhibit A, specializing
in market studies, business and strategic plans, stock valuations, conversions
appraisals, and fairness opinions for thrift institutions and banks. the firm ha
affirmed its independence in this transaction with the preparation of its
Affidavit of Independence, a copy of which is included as Exhibit C.
Our appraisal is based on the assumption that the data provided to us by Home
City Federal and the material provided by the independent auditor, Robb, Dixon,
Francis, Oneson, & Company, Granville, Ohio, are both accurate and complete. We
did not proceed to verify the financial statements provided to us , nor did we
conduct independent valuations of the Bank's assets and liabilities. We have
also used information from other public sources, but we cannot assure the
accuracy of such material.
<PAGE> 4
Board of Directors
Home City Federal Savings Bank
September 23, 1996
Page 2
In the completion of this appraisal, we held discussions with the management of
Home City Federal, with the law firm of Vorys, Seymour & Pease, Cincinnati,
Ohio, the Bank's conversion counsel, and with Robb, Dixon, Francis, Oneson &
Company. Further, we viewed the Bank's local economy and primary market area.
This valuation must not be considered as a recommendation as to the purchase of
stock in the Corporation, and we can provide no guarantee or assurance that any
person who purchases shares of the Corporation's stock in this conversion will
be able to later sell such shares at a price equivalent to the price designated
in this appraisal.
Our valuation will be updated as required and will give consideration to any new
developments in the Bank's operation that have an impact on operations or
financial condition. Further, we will give consideration to any changes in
general market conditions and to specific changes in the market for
publicly-traded thrift institutions. Based on the material impact of any such
changes on the pro forma market value of the Bank as determined by this firm, we
will proceed to make necessary adjustments to the Bank's appraised value in such
appraisal update.
It is our opinion that as of September 6, 1996, the pro forma market value or
appraised value of the Corporation is $7,200,000. Further, a range for this
valuation is from a minimum of $6,120,000 to a maximum of $8,280,000, with a
super-maximum of $9,522,000.
Very truly yours,
KELLER & COMPANY, INC.
/s/ Michael R. Keller
Michael R. Keller
President
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION 1
I. Description of Home City Federal Savings Bank
General 4
Performance Overview 9
Income and Expense 11
Yields and Costs 16
Interest Rate Sensitivity 17
Lending Activities 19
Non-Performing Assets 23
Investments 25
Deposit Activities 26
Borrowings 26
Subsidiaries 27
Office Properties 27
Management 27
II. Description of Primary Market Area 28
III. Comparable Group Selection
Introduction 34
General Parameters
Merger/Acquisition 35
Mutual Holding Companies 36
Trading Exchange 36
IPO Date 37
Geographic Location 37
Asset Size 38
Balance Sheet Parameters
Introduction 39
Cash and Investments to Assets 39
Mortgage-Backed Securities to Assets 40
One- to Four-Family Loans to Assets 40
Total Net Loans to Assets 41
Total Net Loans and Mortgage-Backed Securities to Assets 41
Borrowed Funds to Assets 41
Equity to Assets 42
Performance Parameters
Introduction 43
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
TABLE OF CONTENTS (CONT.)
PAGE
<S> <C>
III. Comparable Group Selection (cont.)
Performance Parameters (cont.)
Return on Average Assets 43
Return on Average Equity 44
Net Interest Margin 44
Operating Expenses to Assets 45
Noninterest Income to Assets 45
Asset Quality Parameters
Introduction 46
Nonperforming Assets to Asset Ratio 46
Repossessed Assets to Assets 46
Loans Loss Reserves to Assets 47
The Comparable Group 47
Summary of Comparable Group Institutions 49
IV. Analysis of Financial Performance 51
V. Market Value Adjustments
Earnings Performance 54
Market Area 54
Financial Condition 58
Dividend Payments 60
Subscription Interest 60
Liquidity of Stock 61
Management 61
Marketing of the Issue 62
VI. Valuation Methods 64
Price to Book Value Ratio Method 65
Price to Earnings Method 66
Price to Net Assets Method 67
Valuation Conclusion 69
</TABLE>
<PAGE> 7
LIST OF EXHIBITS
<TABLE>
<CAPTION>
NUMERICAL PAGE
EXHIBITS
<S> <C> <C>
1 Balance Sheet - June 30, 1996 70
2 Balance Sheet - June 30, 1992 through 1995 71
3 Income Statement - Year Ended June 30, 1996 72
4 Income Statement - June 30, 1992 through 1995 73
5 Selected Consolidated Financial Data 74
6 Income and Expense Trends 75
7 Normalized Earnings Trend 76
8 Performance Indicators 77
9 Volume/Rate Analysis 78
10 Yield and Cost Trends 79
11 Interest Rate Sensitivity of Net Portfolio Value 80
12 Loan Portfolio Composition 81
13 Loan Maturity Schedule 82
14 Loan Portfolio Originations 83
15 Delinquent Loans 84
16 Nonperforming Assets 85
17 Classified Assets 86
18 Allowance for Loan Losses 87
19 Investment Portfolio Composition 88
20 Mix of Deposits 89
21 Deposit Activity 90
22 Borrowed Funds 91
23 List of Key Officers and Directors 92
24 Key Demographic Data and Trends 93
25 Key Housing Data 94
26 Major Sources of Employment 95
27 New Housing Permits and Growth Rates 96
28 Unemployment Rates 97
29 Market Share of Deposits 98
30 National Interest Rates by Quarter 99
31 Thrift Stock Prices and Pricing Ratios 100
32 Key Financial Data and Ratios 111
33 Recently Converted Thrift Institutions 123
34 Acquisitions and Pending Acquisitions 125
35 Thrift Stock Prices and Pricing Ratios -
Mutual Holding Companies 126
</TABLE>
<PAGE> 8
LIST OF EXHIBITS (CONT.)
<TABLE>
<CAPTION>
NUMERICAL PAGE
EXHIBITS
<S> <C> <C>
36 Key Financial Data and Ratios -
Mutual Holding Companies 127
37 Balance Sheets Parameters -
Comparable Group Selection 128
38 Operating Performance and Asset Quality Parameters -
Comparable Group Selection 131
39 Balance Sheet Ratios -
Final Comparable Group 134
40 Operation Performance and Asset Quality Ratios
Final Comparable Group 135
41 Balance Sheet Totals - Final Comparable Group 136
42 Market Area Comparison - Final Comparable Group 137
43 Balance Sheet - Asset Composition
Most Recent Quarter 138
44 Balance Sheet - Liability and Equity
Most Recent Quarter 139
45 Income and Expense Comparison
Trailing Four Quarters 140
46 Income and Expense Comparison as a Percent of
Average Assets - Trailing Four Quarters 141
47 Yields, Costs & Earnings Ratios
Trailing Four Quarters 142
48 Dividends, Reserves and Supplemental Data 143
49 Market Pricings and Financial Ratios - Stock Prices
Comparable Group 144
50 Valuation Analysis and Conclusions 145
51 Pro Forma Minimum Valuation 146
52 Pro Forma Mid-Point Valuation 147
53 Pro Forma Maximum Valuation 148
54 Pro Forma Superrange Valuation 149
55 Summary of Valuation Premium or Discount 150
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
ALPHABETICAL EXHIBITS
PAGE
<S> <C> <C>
A Background and Qualifications 151
B RB 20 Certification 155
C Affidavit of Independence 156
</TABLE>
<PAGE> 10
INTRODUCTION
Keller & Company, Inc., an independent appraisal firm for financial
institutions, has prepared this Conversion Appraisal Report ("Report") which
provides the pro forma market value of the to-be-issued common stock of Home
City Financial Corporation (the "Corporation"), an Ohio corporation, formed as a
holding company to own all of the to-be-issued shares of common stock of Home
City Federal Savings Bank, ("Home City Federal" or the "Bank"). The stock is to
be issued in connection with the Bank's Application for Approval of Conversion
from a federally chartered mutual savings Bank to a federally chartered stock
savings bank. The Application is being filed with the Office of Thrift
Supervision ("OTS") of the Department of the Treasury and the Securities and
Exchange Commission ("SEC"). In accordance with the Bank's conversion, there
will be a simultaneous issuance of all the Bank's stock to the Corporation,
which will be formed by the Bank. Such Application for Conversion has been
reviewed by us, including the Prospectus and related documents, and discussed
with the Bank's management and the Bank's conversion counsel, Vorys, Sater,
Seymour & Pease, Cincinnati, Ohio.
This conversion appraisal was prepared based on the guidelines provided
by OTS entitled "Guidelines for Appraisal Reports for the Valuation of Savings
Institutions Converting from the Mutual to Stock Form of Organization", in
accordance with the OTS application requirements of Regulation ss.563b and the
OTS's Revised Guidelines for Appraisal Reports, and represents a full appraisal
report. The Report provides detailed exhibits based on the Revised Guidelines
and a discussion on each of the fourteen factors that need to be considered. Our
valuation will be updated in accordance with the Revised Guidelines and will
consider any changes in market conditions for thrift institutions.
The pro forma market value is defined as the price at which the stock
of the Corporation after conversion would change hands between a typical willing
buyer and a
1
<PAGE> 11
INTRODUCTION (CONT.)
typical willing seller when the former is not under any compulsion to buy and
the latter is not under any compulsion to sell, and with both parties having
reasonable knowledge of relevant facts in an arms-length transaction. The
appraisal assumes the Bank is a going concern and that the shares issued by the
Corporation in the conversion are sold in non-control blocks.
In preparing this conversion appraisal, we have reviewed the audited
financial statements for the five fiscal years ended June 30, 1992 through 1996,
and discussed them with Home City Federal's management and with Home City
Federal's independent auditors, Robb, Dixon, Francis Davis, Oneson & Company,
Granville, Ohio. We have also discussed and reviewed with management other
financial matters. We have reviewed the Corporation's preliminary Form S-1 and
the Bank's preliminary Form AC and discussed them with management and with the
Bank's conversion counsel.
We have visited Home City Federal's home office and have traveled the
surrounding area. We have studied the economic and demographic characteristics
of the Bank's primary market area relative to Ohio and the United States. We
have also examined the competitive financial institution environment within
which Home City Federal operates, giving consideration to the area's key
characteristics, both positive and negative.
We have given consideration to the market conditions for securities in
general and for publicly-traded thrift stocks in particular. We have examined
the performance of selected publicly-traded thrift institutions and compared the
performance of Home City Federal to those selected institutions.
2
<PAGE> 12
INTRODUCTION (CONT.)
Our valuation is not intended to represent and must not be interpreted
to be a recommendation of any kind as to the desirability of purchasing the
to-be-outstanding shares of common stock of the Corporation. Giving
consideration to the fact that this appraisal is based on numerous factors that
can change over time, we can provide no assurance that any person who purchases
the stock of the Corporation in this mutual-to-stock conversion will
subsequently be able to sell such shares at prices similar to the pro forma
market value of the Corporation as determined in this conversion appraisal.
3
<PAGE> 13
I. DESCRIPTION OF HOME CITY FEDERAL SAVINGS BANK
GENERAL
Home City Federal Savings Bank, Springfield, Ohio, was organized in
1925 as an Ohio savings and loan Association with the name of Home City Savings
and Loan Association. The Bank later converted to a mutual federal savings and
loan Association and then converted to a federal savings bank in May, 1996,
changing its name to Home City Federal Savings Bank.
Home City Federal conducts its business from its home office in
Springfield, Ohio, and has no branch offices. The Bank's primary market area
consists of Clark County with Springfield being the county seat and largest
community in the county. Home City Federal's deposits are insured up to
applicable limits by the Federal Deposit Insurance Corporation ("FDIC") in the
Savings Association Insurance Fund ("SAIF"). The Bank is also subject to certain
reserve requirements of the Board of Governors of the Federal Reserve Bank (the
"FRB"). Home City Federal is a member of the Federal Home Loan Bank (the "FHLB")
of Cincinnati and is regulated by the OTS, and by the FDIC. As of June 30, 1996,
Home City Federal had assets of $55,728,000, deposits of $47,174,000 and equity
of $5,398,000.
In the past five years, legislation has had an impact on the operations
in the financial institution industry. In 1989, the Financial Institution
Reform, Recovery, and Enforcement Act ("FIRREA") became effective and put into
place more stringent supervisory standards and higher capital requirements for
the thrift industry. FIRREA established new capital requirements and
strengthened OTS' enforcement powers. These capital requirements continue today
under the FDIC and the FRB and include a tier one capital requirement of 4.0
percent of total assets, and a risk-based capital requirement of 8.0 percent of
risk-weighted assets. OTS now has the power to assess civil money penalties and
issue cease and desist orders for violations of regulations deemed unsafe and
unsound practices.
4
<PAGE> 14
GENERAL (CONT.)
FIRREA also resulted in an increase in deposit insurance premiums which
thrifts must pay to the FDIC. A plan for a one-time premium of 0.65 percent to
0.75 percent of deposits or possibly less to capitalize the SAIF does exist, and
such an increase would have an adverse effect on Home City Federal's equity and
net income. Further, there has been a recent significant decrease in premiums on
Bank Insurance Fund ("BIF") deposits, which has an adverse competitive impact on
Home City Federal and could affect its ability to compete effectively with
BIF-insured banks for deposits. Such impact could result in a downward impact on
prices of publicly traded thrift institutions.
FIRREA's objective was strengthened when the Federal Deposit Insurance
Corporation Improvement Act ("FDICIA") was passed, resulting in additional
provisions relating to thrift institutions. FDICIA provided for the
recapitalization of the insurance fund. FDICIA requires federally-insured
financial institutions to be examined at least annually and submit independently
audited financial reports based on the size of the institution. Home City
Federal meets the standards for a well capitalized institution.
Home City Federal is a community-oriented institution which has been
principally engaged in the business of serving the financial needs of the public
in Springfield City and throughout its market area. Home City Federal has been
actively and consistently involved in the origination of residential mortgage
loans for the purchase of one- to four-family dwellings, comprising 76.1 percent
of its loan originations during the year ended June 30, 1996, and 66.2 percent
of its loan originations during the fiscal year ended June 30, 1995. At June 30,
1996, 64.9 percent of its gross loans consisted of residential real estate loans
on one- to four-family dwellings, not including residential construction loans
of 4.8 percent compared to a lower 57.6 percent at June 30, 1994, with the
primary source of its funds being retail deposits from residents in its local
communities. The Bank is also an originator of multifamily loans, nonresidential
real estate loans, construction loans and also offers consumer loans on a less
active basis. Consumer loans include automobile
5
<PAGE> 15
GENERAL (CONT.)
loans, secured and unsecured personal loans and loans on savings accounts.
Nonresidential real estate and land loans represented a strong 19.5 percent
share of the Bank's total loans at June 30, 1996 and multifamily loans
represented 6.6 percent.
The Bank had $5.4 million, or 9.7 percent of its assets in cash and
investments including FHLB stock. The Bank had an additional $3.0 million, or
5.4 percent of its assets, in mortgage-backed securities, with the combined
total of investment securities, mortgage-backed securities and cash and cash
equivalents being $8.4 million or 15.1 percent of assets. Deposits and retained
earnings have been the primary sources of funds for the Bank's lending and
investment activities with FHLB advances having also served as an additional
source of funds.
The management of Home City Federal is aware of the emphasis being
placed on matching the maturities of assets and liabilities and monitoring the
Bank's interest rate sensitivity position and market value of portfolio equity.
The Bank understands the nature of interest rate risk and the potential earnings
impact during times of rapidly changing rates, either rising or falling. Home
City Federal also recognizes the need and importance of attaining a competitive
net interest margin due to its more moderate levels of fee and other income.
The Bank's gross amount of stock to be sold in the conversion will be
$7,200,000 or 720,000 shares at $10 per share based on the midpoint of the
appraised value, with net conversion proceeds of $6,828,000 reflecting
conversion expenses of $372,000. The actual cash proceeds to the Bank of $3.4
million will represent fifty percent of the net conversion proceeds, including
the ESOP of $576,000, and will be invested in mortgage loans, construction
loans, and consumer loans over time, and initially invested in short term
investments. A portion of the Bank's conversion proceeds, approximately $1.5
million will be invested in the Bank's planned new home office to begin
construction in
6
<PAGE> 16
GENERAL (CONT.)
1997. The Bank may also use the proceeds to expand services, expand operations
or other financial service organizations, diversification into other businesses,
or for any other purposes authorized by law. The Holding Company will use its
proceeds to fund the ESOP and to invest in short- and intermediate-term
government securities.
Home City Federal has seen strong overall deposit growth over the past
five fiscal years with deposits increasing a moderate 19.7 percent from June 30,
1992, to June 30, 1996, or an average of 4.9 percent per year. The Bank
anticipates consistent growth in the future. The Bank has focused on increasing
its residential and nonresidential real estate loan portfolio during the past
five years, decreasing its level of cash and investments, increasing its
mortgage-backed securities, reducing nonperforming assets, monitoring its
earnings and increasing its capital to assets ratio. Equity to assets increased
from 6.69 percent of assets at June 30, 1992, to 9.75 percent at June 30, 1996.
Home City Federal's primary lending strategy has been to originate and
retain both adjustable-rate and fixed-rate residential mortgage loans with
emphasis on fixed-rate mortgage loans with a higher level of nonresidential real
estate loans.
Home City Federal's share of one- to four-family mortgage loans has
risen moderately, increasing from 57.6 percent of gross loans at June 30, 1994,
to 64.9 percent as of June 30, 1996. Construction loans decreased from 15.9
percent of gross loans at June 30, 1994, to 4.8 percent at June 30, 1996.
Nonresidential real estate and land loans increased from 18.1 percent of gross
loans at June 30, 1994, to 19.5 percent at June 30, 1996. Multifamily loans
decreased from 7.5 percent in 1994 to 6.6 percent in 1996. The significant
decrease in construction loans was offset by the Bank's increase in consumer
loans and residential loans. The Bank's share of consumer loans witnessed an
increase from 0.5 percent at June 30, 1994, to 3.4 percent at June 30, 1996.
7
<PAGE> 17
GENERAL (CONT.)
Management's internal strategy has also included continued emphasis on
maintaining an adequate and appropriate allowance for loan losses relative to
loans and nonperforming assets in recognition of the more stringent requirements
within the industry to establish and maintain a higher level of general
valuation allowances and also in recognition of the Bank's planned increase in
lending. At June 30, 1994, Home City Federal had $229,000 in its loan loss
allowance or 0.67 percent of gross loans, which increased to $362,000 and
represented a higher 0.79 percent of gross loans at June 30, 1996.
Interest income from loans and investments has been the basis of
earnings with the net interest margin being the key determinant of net earnings.
With a dependence on net interest margin for earnings, current management will
focus on maintaining the Bank's net interest margin without undertaking
excessive credit risk and will not pursue any significant change in its interest
rate risk position.
8
<PAGE> 18
PERFORMANCE OVERVIEW
Home City Federal's financial position over the past five fiscal years
of June 30, 1992, through June 30, 1996, is highlighted through the use of
selected financial data in Exhibit 5. Home City Federal has focused on
strengthening its equity position, controlling its overhead ratio, increasing
its savings and loan levels, and maintaining its net interest margin. Home City
Federal has experienced a relatively strong rise in assets from 1992 to 1996 and
a smaller but still moderate rate of increase in deposits with a greater than
average increase in equity over the past five fiscal years. Due to the strong
growth, the resultant impact has been a moderate increase in the Bank's equity
to assets ratio from 1992 to 1996.
Home City Federal witnessed a total increase in assets of $13.4 million
or 31.6 percent for the period of June 30, 1992, to June 30, 1996, representing
an average annual increase in assets of 7.91 percent. For the year ended June
30, 1996, assets increased $7.1 million or 14.7 percent. Of those fiscal
periods, the Bank experienced its largest dollar rise in assets of $8.9 million
in fiscal year 1995, which represented a 22.5 percent increase in assets due
primarily to a rise in deposits and increase in FHLB advances. This increase was
succeeded by a $7.1 million or 14.7 percent increase in assets in fiscal year
1996.
The Bank's net loan portfolio, including mortgage loans and
non-mortgage loans, increased from $28.9 million at June 30, 1992, to $45.2
million at June 30, 1996, and represented a total increase of $16.3 million, or
56.4 percent. The average annual increase during that period was 14.1 percent.
That increase was the result of high levels of loan originations of one- to
four-family loans. For the year ended June 30, 1996, loans increased $6.2
million or 15.9 percent.
Home City Federal has pursued obtaining funds through deposit growth in
accordance with the demand for loans, and has also made use of FHLB advances
during the past four years. The Bank's competitive rates for savings in its
local market in conjunction with its focus on services have been the sources of
retail deposits. Deposits
9
<PAGE> 19
PERFORMANCE OVERVIEW (CONT.)
actually decreased from 1992 to 1993, followed by a smaller decrease in fiscal
year 1994 and then strong increases in 1995 and in 1996, with an average annual
rate of increase of 4.9 percent from June 30, 1992, to June 30, 1996. The Bank's
strongest fiscal year deposit growth was in fiscal year 1993, when deposits
increased $8.3 million or 13.8 percent.
Home City Federal has been able to increase its equity each fiscal year
from 1992 through 1996. At June 30, 1992, the Bank had equity (GAAP basis) of
$2.8 million representing a 6.69 percent equity to assets ratio, increasing to
$5.3 million at June 30, 1996, and representing a 9.69 percent equity to assets
ratio. The rise in the equity to assets ratio is the result of the Bank's
stronger earnings performance in 1992 through 1996 combined with a strong rise
in assets. Equity increased 86.1 percent from June 30, 1992, to June 30, 1996,
representing an average annual increase of 21.53 percent.
10
<PAGE> 20
INCOME AND EXPENSE
Exhibit 6 presents selected operating data for Home City Federal,
reflecting the Bank's income and expense trends. This table provides selected
audited income and expense figures in dollars for the fiscal years of 1992
through 1996.
Home City Federal has witnessed an increase in its dollar level of
interest income from June 30, 1992, through June 30, 1996, ranging from a high
of $4.5 million in 1996 to a low of $3.4 million in 1992, and representing a
five year increase of 33.6 percent, or an average increase of 8.4 percent per
year. This overall trend was a combination of a moderate increase from 1992 to
1995 followed by a strong increase from 1995 to 1996. In fiscal year 1996,
interest income increased $672,000, or 17.5 percent to $4.5 million. The overall
increase in interest income was due primarily to the Bank's increase in loan
volume.
The Bank's interest expense experienced a declining trend from fiscal
year 1992 to 1994, followed by strong increases in 1995 and 1996. Interest
expense decreased $924,000, or 39.0 percent, from 1992 to 1994, compared to an
increase in interest income of $103,000, or 3.0 percent, for the same time
period. Interest expense then increased $496,000 or 34.3 percent from 1994 to
1995, compared to an increase in interest income of $293,000 or 8.3 percent.
Such increase in interest income, was more than offset by the increase in
interest expense and resulted in a decrease in annual net interest income to
$1,893,000 for the fiscal year ended June 30, 1995, and a decrease in net
interest margin. Net interest income increased from $1,069,000 in 1992 to its
highest level of $2,096,000 in 1994. For the year ended June 30, 1996, interest
expense increased $600,000 or 30.9 percent compared to an increase in interest
income of a smaller $672,000 or 17.5 percent and resulting in an increase in net
interest income.
The Bank has made provisions for loan losses in each of the past five
fiscal years of 1992 through 1996. The amounts of those provisions were
determined in recognition
11
<PAGE> 21
INCOME AND EXPENSE (CONT.)
of the Bank's level of nonperforming assets, charge-offs and repossessed assets.
The loan loss provisions were $52,000 in 1992, $83,000 in 1993, $113,000 in
1994, $109,000 in 1995 and $50,000 in 1996. The impact of these loan loss
provisions has been to provide Home City Federal with a general valuation
allowance of $362,000 at June 30, 1996, or 0.79 percent of gross loans and 146.6
percent of nonperforming loans.
Total other income or noninterest income indicated volatile levels in
fiscal years 1992 to 1996, with higher than average levels in 1992 and 1993. The
highest level of noninterest income was in fiscal year 1996 at $58,000 or 0.10
percent of assets and the lowest level at $1,000 was in 1992, representing zero
percent of assets. The average noninterest income level for the past five fiscal
years was $24,800 or 0.06 percent of average assets using actual noninterest
income. In 1996, noninterest income was 0.10 percent of assets. Noninterest
income consists primarily of service charges and other fees.
The Bank's general and administrative expenses or noninterest expenses
increased from $845,000 for the fiscal year of 1992 to $1,216,000 for the fiscal
year ended June 30, 1996. The dollar increase in noninterest expenses was
$371,000 from 1992 to 1996, representing an average annual increase of $92,750
or 9.5 percent. The average annual increase in other expenses was due to the
Bank's normal rise in overhead expenses. On a percent of average assets basis,
operating expenses increased from 2.21 percent of average assets for the fiscal
year ended June 30, 1992, to 2.31 percent for the fiscal year ended June 30,
1996, which was similar to current industry averages of approximately 2.35
percent.
The net earnings position of Home City Federal has indicated profitable
performance in each of the past five fiscal years ended June 30, 1992 through
1996. The annual net income figures for the past five fiscal years of 1992,
1993, 1994, 1995 and 1996 have been $100,000, $665,000, $705,000, $555,000, and
$514,000, representing
12
<PAGE> 22
INCOME AND EXPENSE (CONT.)
returns on average assets of 0.26 percent, 1.66 percent, 1.69 percent, 1.24
percent, and 0.98 percent, respectively. The average return on assets for the
past five fiscal years was 1.17 percent.
Exhibit 7 provides the Bank's normalized earnings or core earnings for
fiscal years 1994 to 1996. The Bank's normalized earnings eliminate any
nonrecurring income and expense items. There was a downward income adjustment of
$46,000 in 1996 to reflect a one-time life insurance payment. This was the only
adjustment for any of the periods.
The key performance indicators comprised of selected operating ratios,
asset quality ratios and capital ratios are shown in Exhibit 8 to reflect the
results of performance. The Bank's return on assets increased from .26 percent
in fiscal year 1992 to its highest level of 1.69 percent in fiscal year 1994,
decreasing to 1.24 percent in fiscal year 1995, and then down to 0.98 percent in
1996.
The Bank's average net interest rate spread strengthened from 3.12
percent in fiscal year 1992 to 4.58 percent in fiscal year 1993, then increased
in 1994 to 4.88 percent followed by decreases in 1995 and 1996 to 3.42 percent.
The Bank's net interest margin indicated a similar trend, increasing from 2.92
percent in fiscal year 1992 to 5.28 percent in fiscal year 1994 then decreasing
to 4.36 percent in fiscal 1995, and then decreasing to 3.86 percent for the year
ended June 30, 1996. Home City Federal's net interest rate spread increased 146
basis points in 1993 to 4.58 percent from 3.12 percent in 1992 and then
increased 30 basis points in 1994 to 4.88 percent as the result of a decrease in
yield. Net interest rate spread then decreased 93 basis points to 3.95 percent
for fiscal year 1995 and decreased another 53 basis points to 3.42 percent for
the fiscal year ended June 30, 1996. The Bank's net interest margin followed a
similar trend, increasing 189 basis
13
<PAGE> 23
INCOME AND EXPENSE (CONT.)
points to 4.81 percent in 1993 and then increasing 47 basis points to 5.28
percent in 1994. Net interest margin decreased 92 basis points to 4.36 percent
in 1995 and continued to decrease to 3.86 percent in 1996.
The Bank's return on average equity increased from 1992 to 1993, but
decreased in 1993 through 1995. The return on average equity increased from 3.52
percent in 1992 to 21.08 percent in fiscal year 1993, and then went down to
17.23 percent in fiscal year 1994. The return on equity then decreased to 12.20
percent in fiscal year 1995, and decreased further to 10.46 percent for the
fiscal year ended June 30, 1996.
The Bank's ratio of non-interest expenses to average assets increased
modestly from 2.21 percent in fiscal year 1992 to 2.31 percent in fiscal year
1996. Another key noninterest expense ratio reflecting efficiency of operation
is the ratio of noninterest expenses to net interest income referred to as the
"efficiency ratio". The industry norm is 60.0 percent. The Bank has been
recently characterized with a normal efficiency reflected, which changed from
80.1 percent in 1992 reflective of lower earnings, to 60.1 percent in 1996.
Earnings performance can be affected by an institution's asset quality
position. The ratio of nonperforming assets to total assets is a key indicator
of asset quality. Home City Federal has witnessed a volatility in its
nonperforming asset ratio from 1992 to 1996. Nonperforming assets consist of
loans delinquent 90 days or more, nonaccruing loans and repossessed assets. The
ratio of nonperforming assets to total assets was .12 percent at June 30, 1992,
and increased to 0.96 percent at June 30, 1993. The ratio then decreased to 0.09
percent in 1994, up to 0.43 percent in 1995 and to 0.44 percent in 1996. The
Bank's allowance for loan losses was 222.0 percent of nonperforming assets at
June 30,
14
<PAGE> 24
INCOME AND EXPENSE (CONT.)
1992, and was a lower 146.56 percent at June 30, 1996. As a percentage of loans,
Home City Federal's allowance for loan losses increased 0.69 percent in 1993,
0.73 percent in 1994, 0.81 percent in 1995 and 0.79 percent in 1996.
Exhibit 9 provides the changes in net interest income due to rate and
volume changes for the past two fiscal years of 1995 and 1996. In fiscal year
1995, net interest income decreased $203,000, due to an increase in interest
expense of $496,000 partially offset by a $293,000 increase in interest income.
The increase in interest income was due to an increase due to a change in volume
of $428,000 reduced by a decrease due to change in rate of $135,000. The
increase in interest expense was due to an increase due to rate of $163,000
accented by an increase due to a change in volume of $333,000.
In fiscal year 1996, net interest income increased $72,000, due to a
$600,000 increase in interest expense more than offset by a $672,000 increase in
interest income. The increase in interest income was due to a $749,000 increase
due to volume reduced by a $77,000 decrease due to rate. The increase in
interest expense was due to a $283,000 increase due to volume reduced by a
$211,000 decrease due to rate.
15
<PAGE> 25
YIELDS AND COSTS
The overview of yield and cost trends for the years ended June 30, 1994
to 1996, can be seen in Exhibit 10, which offers a summary of key yields on
interest-earning assets and costs of interest-bearing liabilities.
Home City Federal's weighted average yield on its loan portfolio
decreased 77 basis points from fiscal year 1994 to 1996, from 10.14 percent to
9.37 percent. The yield on mortgage-backed securities decreased 40 basis points
from fiscal year 1994 to 1996 from 6.61 percent to 6.21 percent. The yield on
investment securities increased 294 basis points from 3.03 percent in 1994 to
5.97 percent in 1996. Other interest-bearing deposits indicated an increase in
their yield of 30 basis points from 4.14 percent in 1994 to 4.44 percent in
1996. The combined weighted average yield on all interest-earning assets
decreased 6 basis points to 8.86 percent from 1994 to 1996.
Home City Federal's weighted average cost of interest-bearing
liabilities increased 84 basis points to 4.88 percent from fiscal year 1994 to
1995, which was greater than the Bank's 9 basis point decrease in yield,
resulting in the decline in the Bank's interest rate spread of 93 basis points
from 4.88 percent to 3.95 percent from 1994 to 1995. The Bank's average cost of
interest-bearing liabilities then increased from 1995 to 1996 by 56 basis points
to 5.44 percent compared to a 3 basis point decrease in yield on
interest-earning assets. The result was a continued decrease in the Bank's
interest rate spread of 53 basis points to 3.42 percent for fiscal year 1996.
The Bank's net interest margin decreased from 5.28 percent in fiscal year 1994
to 4.36 percent in fiscal year 1995, decreasing further to 3.86 percent for the
year ended June 30, 1996.
16
<PAGE> 26
INTEREST RATE SENSITIVITY
Home City Federal has monitored its interest rate sensitivity position
due to its focus on the origination of fixed rate mortgage loans and its modest
level of liquid assets at June 30, 1996. Home City Federal is aware of the
thrift industry's historically higher interest rate risk exposure in the 1980's,
which caused a negative impact on earnings and market value of portfolio equity
as a result of significant fluctuations in interest rates, specifically rising
rates. Such exposure was due to the disparate rate of maturity and/or repricing
of assets relative liabilities commonly referred to as an institution's "gap".
The larger an institution's gap, the greater the risk (interest rate risk) of
earnings loss due to a decrease in net interest margin and a decrease in market
value of equity or portfolio loss. In response to the potential impact of
interest rate volatility and negative earnings impact, many institutions have
taken steps in the 1990's to minimize their gap position. This frequently
results in a decline in the institution's net interest margin and overall
earnings performance.
The Bank measures its interest rate risk through the use of its net
portfolio value ("NPV") of the expected cash flows from interest-earning assets
and interest-bearing liabilities and any off-balance sheet contracts. The NPV
for the Bank is calculated on a quarterly basis by the OTS as well as the change
in the NPV for the Bank under rising and falling interest rates. Such changes in
NPV under changing rates is reflective of the Bank's interest rate risk
exposure.
There are other factors which have a measurable influence on interest
rate sensitivity. Such key factors to consider when analyzing interest rate
sensitivity include the loan payoff schedule, accelerated principal payments,
deposit maturities, interest rate caps on adjustable-rate mortgage loans, and
deposit withdrawals.
17
<PAGE> 27
INTEREST RATE SENSITIVITY (CONT.)
Exhibit 11 provides the Bank's NPV as of June 30, 1996, and the change
in the Bank's NPV under rising and declining interest rates. Such calculations
are provided by OTS, and the focus of this exposure table is a 200 basis points
change in interest rates either up or down.
The Bank's change in its NPV at June 30, 1996, based on a rise in
interest rates of 200 basis points was a 25.0 percent decrease, representing a
dollar decrease in equity value of $1,643,000. In contrast, based on a decline
in interest rates of 200 basis points, the Bank's NPV was estimated to increase
14.0 percent or $918,000 at June 30, 1996. The Bank's exposure at June 30, 1996,
increases to a 52.0 percent decrease under a 400 basis point rise in rates, and
the NPV is estimated to increase 30.0 percent based on a 400 basis point
decrease in rates.
The Bank is aware of its higher interest rate risk exposure under
rapidly rising rates and strongly positive exposure under falling rates. Due to
Home City Federal's recognition of the need to control its interest rate
exposure, the Bank has been more active in short term consumer loans and more
rate sensitive nonresidential real estate loans.
18
<PAGE> 28
LENDING ACTIVITIES
Home City Federal has focused its lending activity on the origination
of conventional mortgage loans secured by one- to four-family dwellings. Exhibit
12 provides a summary of Home City Federal's loan portfolio, by loan type, at
June 30, 1994 through 1996.
Residential loans secured by one- to four-family dwellings excluding
residential construction loans was the primary loan type representing a moderate
64.9 percent of the Bank's gross loans as of June 30, 1996. This share has seen
a modest increase from 57.6 percent at June 30, 1994. The second largest real
estate loan type as of June 30, 1996, was nonresidential real estate loans which
comprised 14.9 percent of gross loans compared to a similar 15.1 percent as of
June 30, 1994. The nonresidential real estate loan category was the third
largest real estate loan type in 1994. The third key real estate loan type was
multifamily loans, which represented 6.6 percent of gross loans as of June 30,
1996, compared to a slightly larger 7.5 percent at June 30, 1994. Multifamily
loans were the fourth largest loan category in 1994. Construction loans were the
fourth largest real estate loan type at June 30, 1996, with 4.8 percent of gross
loans compared to a much higher 15.9 percent in 1994 and making it the second
largest loan category in 1994. Most of the Bank's construction loans are
single-family residential loans. These four real estate loan categories
represented 91.9 percent of gross loans at June 30, 1996, compared to a larger
96.5 percent of gross loans at June 30, 1994. Land loans represented 4.6 percent
of loans in 1996 and commercial loans represented a minimal 0.2 percent of gross
loans at June 30, 1996, and did not exist at fiscal year end 1994.
The consumer loan category was the other loan type at June 30, 1996,
and represented 3.4 percent of gross loans compared to only 0.5 percent at June
30, 1994. Consumer loans were the sixth largest overall loan type at June 30,
1996, and the sixth largest loan type in 1994. The Bank originates savings
account loans, automobile loans, and other secured and unsecured personal loans.
The overall mix of loans has witnessed
19
<PAGE> 29
LENDING ACTIVITIES (CONT.)
moderate change from fiscal year-end 1994 to June 30, 1996, with the Bank having
increased its share of consumer nonresidential real estate loans, and one- to
four-family loans to offset its decrease in multifamily loans and construction
loans.
The emphasis of Home City Federal's lending activity is the origination
of conventional mortgage loans secured by one- to four-family residences. Such
residences are located in Home City Federal's market area of Clark County. The
Bank also originates interim construction loans on single-family residences
primarily to individual owners and to developers and residential land loans. At
June 30, 1996, 64.9 percent of Home City Federal's gross loans consisted of
loans secured by one- to four-family residential properties, excluding
construction loans. Construction loans represent another 4.8 percent of gross
loans.
The Bank originates adjustable-rate mortgage loans, ("ARMs") with
adjustment/maturity periods of one and three years. The interest rates on ARMs
are indexed to the weekly average yield on the one- and three-year U.S. Treasury
constant maturities index. The one-year and three-year ARMs have a maximum rate
adjustment of 2.0 percent at each adjustment period and a 6.0 percent maximum
adjustment over the life of the loan with payments based on up to a 30 year loan
term.
The majority of ARMs have terms of up to 30 years, and fixed rate loans
have normal terms of up to 15 years. The Bank normally retains all of its fixed
rate loans. Historically, the majority of Home City Federal's mortgage loans are
fixed-rate mortgage loans, which represented 50.3 percent of mortgage loans due
after June 30, 1996. All of Home City Federal's consumer loans were fixed rate.
20
<PAGE> 30
LENDING ACTIVITIES (CONT.)
The original loan to value ratio for conventional mortgage loans to
purchase or refinance one-to four-family dwellings generally does not exceed 80
percent at Home City Federal, even though the Bank will grant loans with up to
an 85 percent loan to value ratio, but private mortgage insurance is required
for loans in excess of 85 percent. For loans in excess of 80 percent but less
than 85 percent, private mortgage insurance can be waived by the Bank if the
borrower has an approved co-signer.
Home City Federal has also been an originator of nonresidential real
estate loans, and has been less active in multifamily loans in the past. The
Bank will continue to make multifamily and nonresidential real estate loans. The
Bank had a total of $9.5 million in nonresidential real estate loans at June 30,
1996, or 19.5 percent of gross loans, compared to $6.2 million or 18.1 percent
of gross loans at June 30, 1994. Multifamily loans have increased from $2.6 or
at June 30, 1994, to $3.2 million at June 30, 1996, but their share of loans has
actually decreased from 7.5 percent to 6.6 percent over the same time period.
The major portion of nonresidential real estate loans are secured by office
buildings, churches, nursing homes, large farms, retail stores and other
commercial properties.
Home City Federal has not been active in consumer lending in the past
but has been relatively active in 1996. Consumer loans originated consist
primarily of automobile loans, savings account loans, and personal loans, which
represented a combined total of 3.4 percent of gross loans at June 30, 1996, up
from 0.5 percent in 1994. At June 30, 1996, consumer loans totaled $1.7 million.
Exhibit 13 provides a breakdown and summary of Home City Federal's
fixed- and adjustable-rate loans, indicating a predominance of fixed-rate loans.
At June 30, 1996, 51.6 percent of the Bank's total loans due after June 30,
1997, were fixed-rate and 48.4 percent were adjustable-rate. While most loans
are fixed-rate, it is evident that a relatively strong 57.4 percent of one- to
four-family residential mortgage loans and 51.9 percent of total loans have
maturities of less than 10 years.
21
<PAGE> 31
LENDING ACTIVITIES (CONT.)
As indicated in Exhibit 14, Home City Federal experienced a modest
decrease in its one-to four-family loan originations but a moderate increase in
total loan originations from fiscal years 1994 to 1996. Total loan originations
in fiscal year 1996 were $18.5 million compared to $14.6 million in fiscal year
1994, with fiscal year 1995 indicating a lower $14.0 million, reflective of a
reduction in one-to four-family loans. The increase in one-to four-family
residential loan originations from 1994 to 1996 constituted a $2.5 million
increase with total loan originations increasing $3.8 million due to the
increase in one- to four-family and consumer loans. Loan originations for the
purchase of one- to four-family residences, including construction loans,
represented 79.0 percent of total loan originations in fiscal year 1994,
compared to a lower 65.8 percent in fiscal year 1995 and a higher 76.1 percent
in fiscal year 1996. Overall, loan originations exceeded principal payments and
repayments in fiscal 1994 by $2.6 million, exceeded reductions in fiscal year
1995 by $8.0 million, and exceeded reductions in fiscal 1996 by $6.3 million.
22
<PAGE> 32
NONPERFORMING ASSETS
Home City Federal understands asset quality risk and the direct
relationship of such risk to delinquent loans and nonperforming assets including
real estate owned. The quality of assets has been a key concern to financial
institutions throughout many regions of the country. A number of financial
institutions have been confronted with rapid increases in their levels of
nonperforming assets and have been forced to recognize significant losses,
setting aside major valuation allowances. A sharp increase in nonperforming
assets has often been related to specific regions of the country and has
frequently been associated with higher risk loans, including purchased
nonresidential real estate loans. Home City Federal has witnessed some
volatility in its nonperforming assets and has made a concerted effort to
control its nonperforming assets during the past five years.
Exhibit 15 provides a summary of Home City Federal's delinquent loans
at June 30, 1994 through 1996, indicating a modest level of delinquent loans.
Loans delinquent 90 days or more totaled $34,000 at June 30, 1994, and increased
to $247,000 or 0.54 percent of gross loans at June 30, 1996, with delinquent
loans of 30 days or more totaling only $982,000 or 2.15 percent of gross loans
at June 30, 1996.
Home City Federal reviews each loan when it becomes delinquent 60 days
or more, to assess its collectibility and to initiate direct contact with the
borrower. The Bank sends the borrower a late payment notice within 15 days after
the payment is due. The Bank then initiates both written and oral communication
with the borrower if the loan remains delinquent. When the loan becomes
delinquent at least 90 days, the Bank will consider foreclosure proceedings. The
Bank does not normally accrue interest on loans past due 90 days or more. Most
loans delinquent 90 days or more are placed on a non-accrual status, and at that
point in time, the Bank may contact an attorney to pursue foreclosure
procedures. Home City Federal had no real estate owned as of June 30, 1996, or
at June 30, 1995.
23
<PAGE> 33
NONPERFORMING ASSETS (CONT.)
Exhibit 16 provides a summary of Home City Federal's nonperforming
assets at June 30, 1992 through 1996. Nonperforming assets consist of
non-accrual loans, which includes loans delinquent 90 days or more, real estate
acquired by foreclosure or by deed in lieu, and repossessed assets. The Bank has
historically carried a lower than average level of nonperforming assets when
compared to its peer group and the thrift industry in general. Home City
Federal's level of nonperforming assets ranged from a high of $247,000 or 0.44
percent of total assets at June 30, 1996, to a low of $34,000 or 0.09 percent of
assets at June 30, 1994.
Home City Federal's level of nonperforming assets is lower than its
level of classified assets. The Bank's level of classified assets was $639,000
or 1.15 percent of assets at June 30, 1996 (reference Exhibit 17). The Bank's
classified assets consisted of $518,000 in substandard assets, with $19,000 in
assets classified as doubtful and $102,000 classified as loss.
Exhibit 18 shows Home City Federal's allowance for loan losses for
fiscal years 1994 through 1996, indicating the activity and the resultant
balances. Home City Federal has witnessed a moderate increase in its balance of
allowance for loan losses from $229,000 in 1994 to $362,000 at June 30, 1996,
with provisions of $113,000 in 1994, and $109,000 in fiscal 1995 and $50,000 in
1996. The Bank had charge-offs of $107,000 in 1994, $19,000 in 1995, and $7,000
in 1996 and recoveries of $25,000 in 1994. The Bank's ratio of allowance for
loan losses to gross loans increased from 0.67 percent at June 30, 1994, to 0.80
percent at June 30, 1996, due to an increase in allowances with a significant
increase in loans. Allowance for loan losses to nonperforming assets were 146.56
percent at June 30, 1996.
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<PAGE> 34
INVESTMENTS
The investment and securities portfolio of Home City Federal has been
comprised of municipal securities, U.S. government and federal agency
securities, interest-bearing deposits in other financial institutions,
mortgage-backed securities, FHLMC stock and FHLB stock. Exhibit 19 provides a
summary of Home City Federal's investment portfolio at June 30, 1994 through
1996. Investments were $4.6 million at June 30, 1996, compared to $4.6 million
at June 30, 1995, and $3.2 million at June 30, 1994. The primary component of
investments at June 30, 1996, was time deposits in other financial institutions,
representing 22.9 percent, followed by U.S. government and federal agency
securities representing 21.5 percent, for a combined total of 44.4 percent. The
third key component was municipal securities representing 19.1 percent of
investment securities. The securities portfolio had a weighted average yield of
5.42 percent, and the mortgage-backed securities had a weighted average yield of
6.21 percent for fiscal year 1996. The Bank also had cash and cash equivalents
of $1.8 million or 3.3 percent of assets at June 30, 1996.
The Bank had mortgage-backed securities with a book value of $3.0
million at June 30, 1996, which decreased from $4.3 million at June 30, 1994,
but increased from $2.1 million at June 30, 1992. Mortgage-backed securities are
included in total investments and shown in Exhibit 19. Mortgage-backed
securities represented a strong 46.9 percent of total investments including
mortgage-backed securities at June 30, 1996, and a stronger 63.5 percent at June
30, 1994.
25
<PAGE> 35
DEPOSIT ACTIVITIES
The change in the mix of deposits from June 30, 1994, to June 30, 1996,
is provided in Exhibit 20. There has been a relatively strong change in both
total deposits and in the deposit mix during this period. Certificates of
deposit witnessed a strong increase in their share of deposits, rising from a
modest 56.6 percent of deposits at June 30, 1994, to a strong 78.3 percent of
deposits at June 30, 1996. The major component of certificates had rates between
6.0 percent and 8.0 percent and represented 57.2 percent of certificates at June
30, 1996. At June 30, 1994, the major component of certificates was the 4.01
percent to 6.00 percent category with 55.1 percent of certificates. Passbook
accounts decreased in dollar amount from $16.0 million to $9.6 million, and
their share decreased from 43.5 percent to 20.3 percent from June 30, 1994, to
June 30, 1996, with modest decreases in rates during that period. NOW and demand
accounts were introduced in 1996 and as a result, indicated an increase in their
share of deposits from zero 1994 to 1.5 percent at June 30, 1996.
Exhibit 21 shows the Bank's deposit activity for the three years ended
June 30, 1994 to 1996. Excluding interest credited, Home City Federal
experienced net increases in deposits in fiscal years 1995 and 1996 and a net
decrease in 1994. In fiscal year 1994, there was a net decrease in deposits of
$1.9 million or 5.1 percent, followed by a $6.1 million increase or 17.6
percent in 1995. In fiscal year 1996, an increase in deposits of $6.2 million
resulted in a 15.2 percent increase in deposits.
BORROWINGS
Home City Federal has relied on retail deposits as its primary source
of funds but has made use of FHLB advances during the past four fiscal years
ended June 30, 1996. Exhibit 22 shows the Bank's FHLB advances activity during
the past three fiscal years. The Bank's balance of FHLB advances has increased
from $424,000 at June 30, 1994, to $2,903,000 at June 30, 1996.
26
<PAGE> 36
SUBSIDIARIES
Home City Federal has one wholly-owned subsidiary, Homeciti Service
Corporation ("Homeciti"), an Ohio corporation, whose primary purpose is to own
stock in Intrieve Corporation, the Bank's data processing company. Homeciti also
has an .875 percent ownership interest in a joint venture which owns a local
hotel, Springfield Inn. At June 30, 1996, the Bank's investment in the
subsidiary was $54,000.
OFFICE PROPERTIES
Home City Federal has one office, its home office located in downtown
Springfield. Home City Federal owns its home office which provides off-street
parking and one drive-in window facility but no ATM access. The Bank's
investment in its office premises, excluding furniture, fixtures and equipment,
totaled $537,000 or 0.96 percent of assets at June 30, 1996. The Bank does have
long term plans to build a new home office due to the need for additional space.
The estimated cost of a new home office is $1.5 million with completion expected
in 1999. By June 30, 1997, the Bank does foresee spending approximately $250,000
for a site for the proposed new home office.
MANAGEMENT
The president, chief executive officer, and managing officer of Home
City Federal is Douglas L. Ulery. Mr. Ulery joined the Bank in 1992, as
president. Mr. Ulery became a director in 1994. Mr. Ulery was previously
employed with Society National Bank as vice president of Regional Banking
Offices Operation and worked in their Dayton office (reference Exhibit 22).
27
<PAGE> 37
II. DESCRIPTION OF PRIMARY MARKET AREA
Home City Federal Savings Bank's primary market area encompasses the
city of Springfield and those outer communities surrounding its office,
including all of Clark County, Ohio ("the market area"). The Bank's home office
is located in downtown Springfield, Ohio.
The market area is characterized by lower than average levels of income
and housing values and a slightly higher unemployment level. The market area's
strongest employment categories are wholesale/retail trade, services and
manufacturing with a lower level of residents employed in the finance, insurance
and real estate industry category.
Exhibit 24 provides a summary of key demographic data and trends for
the market area, Ohio and the United States for the periods of 1990, 1995, and
2000. The market area showed a lower increase in population than Ohio, while the
United States showed the highest increases. Overall, the period of 1990 to 1995
was characterized by a small increase of 0.2 percent in the market area
population, which increased from 147,548 to 147,906 residents, compared to an
increase in population of 2.8 percent in Ohio and a rise in the national
population level by 5.7 percent. During the period of 1995 through 2000,
population is projected to continue to rise in the market area by a small 0.2
percent, increasing to 148,255 residents, while population is expected to
increase in Ohio by 2.7 percent, and in the United States by 5.4 percent.
In conformance with its relatively unchanging trend in population, the
market area witnessed a small increase in households (families) of 0.3 percent
and 0.2 percent, from 1990 to 1995 and from 1995 to 2000, respectively. These
increases are much lower than Ohio's increase in households of 2.7 percent for
the same time periods. The United States continued to have the largest
increases, growing by 5.6 percent from 1990 to 1995, and 5.3 percent from 1995
to 2000. From 1990 to 1995, the market area increased its households from 55,198
to 55,351. By the year 2000, the market area is projected to have 55,482
households.
28
<PAGE> 38
DESCRIPTION OF PRIMARY MARKET AREA (CONT.)
The market area had lower per capita income levels than Ohio or the
United States in 1990 and 1995. In 1990, the market area had an average per
capita income of $11,587. Ohio had a per capita income of $12,788, while the
United States also had a higher per capita income of $12,313. From 1990 to 1995,
the United States had the largest percent increase in per capita income,
followed by the market area and then by Ohio. The market area increased its per
capita income level by 27.1 percent to $14,727 in 1995, Ohio increased its per
capita income by 22.8 percent to $15,708, while the United States had an
increase in its per capita income of 33.2 percent to $16,405.
Median household income figures for the market area were at lower
levels than Ohio or the United States for 1990 and 1995, and are projected to
remain lower through the year 2000. In 1990, the average median household income
for the market area was $27,868. The median household income levels for Ohio and
the United States were $29,276 and $28,255, respectively. From 1990 to 1995, the
market area's median household income increased by 16.0 percent to $32,325.
Ohio's median household income level grew by a smaller 12.9 percent to $33,038
and the United States had an increase in its median household income level by a
larger 19.0 percent to $33,610. By the year 2000, the market area, Ohio and the
United States are projected to witness declines in their median household income
levels to $31,771, $32,477 and $32,972, respectively.
Exhibit 25 provides a summary of key housing data for the market area,
Ohio, and the United States. Home City Federal's market area has a 69.1 percent
rate of owner-occupancy, slightly higher than the 67.5 percent owner-occupancy
rate for Ohio and moderately higher than the 64.2 percent for the United States.
As a result, the market area supports a lower rate of renter-occupied housing at
30.9 percent compared to 32.5 percent for Ohio and a higher 35.8 percent for the
United States.
29
<PAGE> 39
DESCRIPTION OF PRIMARY MARKET AREA (CONT.)
The market area's median housing value of $54,900 is lower than both
Ohio and the United States in median housing value. Ohio's median housing value
of $63,457 is 13.5 percent higher than the market area's median housing value.
The United States' $79,098 median housing value is 30.6 percent greater than
that of the market area. The average median rent of the market area is surpassed
by the median rent of Ohio and the United States. Clark County had a median rent
of $256, which was lower than Ohio's median rent of $296 and the United States'
median rent value of $374.
The major business source of employment by industry group, based on
number of employees for the market area was the wholesale/retail industry
responsible for 30.4 percent of jobs in 1993 which was higher than Ohio at 27.7
percent and also higher than the United States at 27.5 percent (reference
Exhibit 26). The major employer in Ohio and the United States was the services
industry responsible for a 31.6 percent and a 34.0 percent share of total
employment in 1993, respectively. The services industry was the second major
employer in the market area at 30.1 percent. The manufacturing group was the
third major employer in the market area at 27.3 percent, a lower 24.5 percent in
Ohio and 19.2 percent in the United States. The construction group, finance,
insurance and real estate group, transportation/utilities group, and the
agriculture/mining group combined to 12.0 percent of employment in the market
area, 16.2 percent of employment in Ohio, and 19.3 percent in the United States.
30
<PAGE> 40
DESCRIPTION OF PRIMARY MARKET AREA (CONT.)
The leading employers in the market area are:
<TABLE>
<CAPTION>
Employer Product/Service Number of Employees
- -------- --------------- -------------------
<S> <C> <C>
Navistar International Trucks and related items 5,400
Wright-Patterson Air Force Base Government 2,281
Emro Marketing - Speedway Service station 580
Olan Mills of Ohio Photography 450
O'Cedar/Vining Household
Products Co. Stock goods 395
Moyno Industrial Products Pumps and parts 390
Cooper Cameron Corporation Large engines and compressors 385
</TABLE>
An economic indicator that pertains more directly to the banking and
thrift industries is the issuance of new housing permits and permits for
commercial buildings because of its direct relationship to lending activity
(reference Exhibit 27). In 1991, 423 new housing permits were authorized in the
market area, 29,542 in Ohio, and 796,647 in the United States. In 1992, the
issuance of new housing permits authorized remained relatively unchanged in the
market area as permits decreased by 0.2 percent to 422 new permits. Ohio and the
United States witnessed positive growth rates of 16.3 percent and 20.1 percent,
respectively, with 34,361 and 956,494 new housing permits authorized. In 1993,
the market area once again remained relatively unchanged, while Ohio and the
United States witnessed increases in the number of new housing permits
authorized. The market area authorized 426 new permits, an increase of 0.9
percent, Ohio authorized 37,477 new permits, a growth of 9.1 percent, while the
United States exhibited a growth of 8.6 percent with 1,038,907 new permits.
31
<PAGE> 41
DESCRIPTION OF PRIMARY MARKET AREA (CONT.)
Commercial building permits in Ohio followed a similar pattern for the
years 1991 through 1993, with a large increase in 1992 followed by a smaller
increase in 1993. Ohio increased its permit activity by 1.9 percent from 1991 to
1992 issuing commercial building permits with a value of $2.34 billion in 1992
compared to $2.3 billion in 1991. In 1993, Ohio experienced a slight decrease of
1.3 percent in commercial building permit valuations to $2.31 billion. In 1992,
the United States witnessed a slight decline in commercial building permit
valuations of 0.1 percent, from $56.9 billion in 1991 to $56.8 billion in 1992.
The United States rebounded in 1993 with growth of 8.1 percent, rising to $61.43
billion in the value of new commercial building permits issued.
The unemployment rate is another key economic indicator. Exhibit 28
shows the average unemployment rates in the market area, Ohio, and the United
States in 1994, 1995 and June, 1996. The market area has historically been
characterized by a similar yet lower unemployment rates than Ohio and the United
States. The market area had a decrease in its unemployment rate from 4.9 percent
to 4.6 percent in 1995. Ohio had a decrease in its unemployment rate from 5.5
percent to 4.9 percent and the United States' unemployment rate decreased from
6.1 percent to 5.2 percent in that same time period. In June 1996, unemployment
increased in the market area, Ohio and the United States. The market area had
the highest unemployment at 5.7 percent, compared to the United States at 5.5
percent, and Ohio at 5.0 percent.
Exhibit 29 provides deposit data for banks, thrifts and credit unions
in Clark County. Home City Federal's deposit base in Clark County was $40.9
million or 20.5 percent of the $200.0 million total thrift deposits but a much
smaller 3.2 percent share of total deposits which totaled $1.3 billion. The
market area is clearly dominated by the banking industry. Total deposits were
$974.7 million with 76.6 percent in bank deposits, compared to a lower $200.1
million or 15.7 percent of deposits for thrifts, and a strong $98.4 million or
7.7 percent of total deposits held by credit unions. It is evident from the
32
<PAGE> 42
DESCRIPTION OF PRIMARY MARKET AREA (CONT.)
size of both thrift deposits and bank deposits that Clark County has a moderate
deposit base with the Bank having a moderate level of market penetration of all
thrift deposits, but a small level of market penetration for total deposits.
Exhibit 30 provides interest rate data for each quarter for the years
1992 through 1995 and for the first quarter of 1996. The interest rates tracked
are the Prime Rate, as well as 90-Day, One-Year and Thirty-Year Treasury Bills.
Interest rates experienced a declining trend in the first two quarters of 1992,
but then began to rise in the second half of the year. In 1993 rates experienced
slight volatility until the last two quarters, which indicated the beginning of
a rising trend. This rising trend continued throughout all of 1994 and into the
first quarter of 1995 with prime at 9.00 percent. However, throughout 1995,
interest rates saw dramatic decreases, as the prime rate fell to its 1994 year
end level of 8.50 percent. Such decrease in the prime rate continued through the
first quarter of 1996 as it fell to 8.25 percent and then remained at 8.25
percent through the second quarter in 1996. Rates on T-bills, however, witnessed
an increase with 30-Year Treasury Bills experiencing the largest increase.
SUMMARY
To summarize, Home City Federal's market area represents an area with a
stagnant population and no significant change in the number of households during
the mid 1990s. Clark County has evidenced lower per capita income and median
household income compared to both Ohio and the United States. The market area
also has a lower median housing value and average median rent level than Ohio
and the United States. Further, the market area has a moderately competitive
financial institution market dominated by banks with a total deposit base of
approximately $1.3 billion for all of Clark County.
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III. COMPARABLE GROUP SELECTION
INTRODUCTION
Integral to the valuation of Home City Financial Corporation is the
selection of an appropriate group of publicly-traded thrift institutions,
hereinafter referred to as the "comparable group". This section identifies the
comparable group and describes each parameter used in the selection of each
institution in the group, resulting in a comparable group based on such specific
and detailed parameters, current financials and recent trading prices. The
various characteristics of the selected comparable group provide the primary
basis for making the necessary adjustments to the Corporation's pro forma value
relative to the comparable group. There is also a recognition and consideration
of financial comparisons with all publicly-traded, SAIF- insured thrifts in the
United States and all publicly-traded, SAIF-insured thrifts in the Midwest and
Ohio.
Exhibits 31 and 32 present Thrift Stock Prices and Pricing Ratios and
Key Financial Data and Ratios, respectively, both individually and in aggregate,
for the universe of 338 publicly-traded, SAIF-insured thrifts in the United
States ("all thrifts"), excluding mutual holding companies, used in the
selection of the comparable group and other financial comparisons. Exhibits 31
and 32 also subclassify all thrifts by region, including the 154 publicly-traded
Midwest thrifts ("Midwest thrifts") and the 31 publicly-traded thrifts in Ohio
("Ohio thrifts"), and by trading exchange. Exhibit 33 presents prices, pricing
ratios and price trends for all SAIF-insured thrifts completing their
conversions between January 1, 1996, and September 6, 1996.
The selection of the comparable group was based on the establishment of
both general and specific parameters using financial, operating and asset
quality characteristics of Home City Federal as determinants for defining those
parameters. The determination of parameters was also based on the uniqueness of
each parameter as a normal indicator
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<PAGE> 44
INTRODUCTION (Cont.)
of a thrift institution's operating philosophy and perspective. The parameters
established and defined are considered to be both reasonable and reflective of
Home City Federal's basic operation. In as much as the comparable group must
consist of at least ten institutions, the parameters relating to asset size and
geographic location have been expanded as necessary in order to fulfill this
requirement.
GENERAL PARAMETERS
MERGER/ACQUISITION
The comparable group will not include any institution that is in the
process of a merger or acquisition due to the price impact of such a pending
transaction. The thrift institutions that were potential comparable group
candidates but were not considered due to their involvement in a
merger/acquisition or a potential merger/acquisition include the following:
Institution State
----------- -----
Financial Security Corp. Illinois
Workingmens Capital Holdings Indiana
Marshalltown Financial Corp. Iowa
Circle Financial Corp. Ohio
Seven Hills Financial Corp. Ohio
Third Financial Corp. Ohio
Bridgeville Savings Bank Pennsylvania
No thrift institution in Home City Federal's city, county or market
area is currently involved in merger/acquisition activity or have been recently
so involved, as indicated in Exhibit 34.
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<PAGE> 45
MUTUAL HOLDING COMPANIES
The comparable group will not include any mutual holding companies.
Mutual holding companies typically demonstrate higher price to book valuation
ratios that are the result of their minority ownership structure that are
inconsistent with those of conventional, publicly-traded institutions. Exhibit
35 presents pricing ratios and Exhibit 36 presents key financial data and ratios
for all publicly-traded, SAIF-insured mutual holding companies in the United
States. The following thrift institutions were potential comparable group
candidates, but were not considered due to their mutual holding company form:
Institution State
----------- -----
Webster City Federal Savings Bank, MHC Iowa
Wayne Savings & Loan Co., MHC Ohio
Greater Delaware Valley Savings Bank, MHC Pennsylvania
TRADING EXCHANGE
It is necessary that each institution in the comparable group be listed
on one of the two major stock exchanges, the New York Stock Exchange or the
American Stock Exchange, or traded over-the-counter ("OTC") and listed on the
National Association of Securities Dealers Automated Quotation System
("NASDAQ"). Such a listing indicates that an institution's stock has
demonstrated trading activity and is responsive to normal market conditions,
which are requirements for listing. Of the 356 publicly-traded, SAIF-insured
institutions, including 18 mutual holding companies, 14 are traded on the New
York Stock Exchange, 17 are traded on the American Stock Exchange and 325 are
listed on NASDAQ.
36
<PAGE> 46
IPO DATE
Another general parameter for the selection of the comparable group is the
initial public offering ("IPO") date, which must be at least four quarterly
periods prior to the trading date of September 6, 1996, used in this report, in
order to insure at least four consecutive quarters of reported data as a
publicly-traded institution. The resulting parameter is a required IPO date
prior to June 30, 1995.
GEOGRAPHIC LOCATION
The geographic location of an institution is a key parameter due to the
impact of various economic and thrift industry conditions on the performance and
trading prices of thrift institution stocks. Although geographic location and
asset size are the two parameters that have been developed incrementally to
fulfill the comparable group requirements, the geographic location parameter has
definitely eliminated regions of the United States distant to Citizens Federal,
including the western states, the Southeastern states and the New England
states.
The geographic location parameter consists of Ohio, its surrounding
states of Pennsylvania, Michigan, West Virginia, Kentucky and Indiana, as well
as the states of Illinois, Iowa and Wisconsin, for a total of nine states. To
extend the geographic parameter beyond those states could result in the
selection of similar thrift institutions with regard to financial conditions and
operating characteristics, but with different pricing ratios due to their
geographic regions. The result could then be an unrepresentative comparable
group with regard to price relative to the parameters and, therefore, an
inaccurate value.
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<PAGE> 47
ASSET SIZE
Asset size was another key parameter used in the selection of the
comparable group. The maximum total assets for any comparable group institution
considered was $300 million, due to the typically different operating
strategies, expansion capabilities, liquidity of stock and acquisition appeal of
larger institutions when compared to Citizens Federal, with assets of
approximately $56 million. Such an asset size parameter was necessary to obtain
a comparable group of at least ten institutions.
In connection with asset size, we did not consider the number of
offices or branches in selecting or eliminating candidates since this
characteristic is directly related to operating expenses, which are recognized
as an operating performance parameter.
SUMMARY
Exhibits 37 and 38 show the 45 institutions considered as comparable
group candidates after applying the general parameters, with the shaded lines
denoting the institutions ultimately selected for the comparable group using the
balance sheet, performance and asset quality parameters established in this
section.
38
<PAGE> 48
BALANCE SHEET PARAMETERS
INTRODUCTION
The balance sheet parameters focused on seven balance sheet ratios as
determinants for selecting a comparable group, as presented in Exhibit 36. The
balance sheet ratios consist of the following:
1. Cash and Investments/Assets
2. Mortgage-Backed Securities/Assets
3. One- to Four-Family Loans/Assets
4. Total Net Loans/Assets
5. Total Net Loans and Mortgage-Backed Securities/Assets
6. Borrowed Funds/Assets
7. Equity/Assets
The parameters enable the identification and elimination of thrift
institutions that are distinctly and functionally different from Home City
Federal with regard to asset mix. The balance sheet parameters also distinguish
institutions with a significantly different capital position from Home City
Federal. The ratio of deposits to assets was not used as a parameter as it is
directly related to and affected by an institution's equity and borrowed funds
ratios, which are separate parameters.
CASH AND INVESTMENTS TO ASSETS
Home City Federal's level of cash and investments to assets was 9.5
percent at June 30, 1996, and reflects the Bank's level of investments lower
than national and regional averages. The Bank's investments consist primarily of
FHLB deposits, U. S. government securities, deposits in other institutions,
municipal securities and equity securities. During its last five fiscal years,
Home City Federal's ratio of cash and investments to assets has
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<PAGE> 49
CASH AND INVESTMENTS TO ASSETS (CONT.)
averaged 12.2 percent, from a high of 18.8 percent at June 30, 1992, to a low of
8.5 percent in fiscal year 1994. It should be noted that Federal Home Loan Bank
stock is not included in cash and investments, but rather is part of other
assets in order to be consistent with reporting requirements and sources of
statistical and comparative analysis.
The parameter range for cash and investments is broad due to the
volatility of this parameter and to prevent the elimination of otherwise good
potential comparable group candidates. The range has been defined as 5.0 percent
of assets to 40.0 of assets, with a midpoint of 22.5 percent.
MORTGAGE-BACKED SECURITIES TO ASSETS
At June 30, 1996, Home City Federal's ratio of mortgage-backed
securities to assets was 5.3 percent, much lower than both the regional average
of 10.3 percent and the national average of 13.7 percent. Inasmuch as many
institutions purchase mortgage-backed securities as an alternative to lending
relative to cyclical loan demand and prevailing interest rates, this parameter
is moderately broad at 20.0 percent or less of assets and a midpoint of 10.0
percent.
ONE- TO FOUR-FAMILY LOANS TO ASSETS
Home City Federal's lending activity is focused on the origination of
residential mortgage loans secured by one- to four-family dwellings. One- to
four-family loans, not including construction loans, represented 57.5 percent of
the Bank's assets at June 30, 1996, which is similar to industry averages. The
parameter for this characteristic requires any comparable group institution to
have from 40.0 percent to 70.0 percent of its assets in one- to four-family
loans with a midpoint of 55.0 percent.
40
<PAGE> 50
TOTAL NET LOANS TO ASSETS
At June 30, 1996, Home City Federal had a ratio of total net loans to
assets of 81.2 percent and a five fiscal year average of 75.7 percent, which is
moderately higher than the national and regional averages of 67.3 percent and
68.0 percent, respectively. The parameter for the selection of the comparable
group is from 50.0 percent to 95.0 percent with a midpoint of 72.5 percent. The
wider range is simply due to the fact that, as the referenced national and
regional averages indicate, many larger institutions purchase a greater volume
of investment securities and/or mortgage-backed securities as a cyclical
alternative to lending, but may otherwise be similar to Home City Federal.
TOTAL NET LOANS AND MORTGAGE-BACKED SECURITIES TO ASSETS
As discussed previously, Home City Federal's shares of mortgage-backed
securities to assets and total net loans to assets were 5.4 percent and 81.2
percent, respectively, for a combined share of 86.6 percent. Recognizing the
industry and regional ratios of 13.7 percent and 10.3 percent, respectively, of
mortgage-backed securities to assets, the parameter range for the comparable
group in this category is 60.0 percent to 97.0 percent, with a midpoint of 78.5
percent.
BORROWED FUNDS TO ASSETS
Home City Federal had FHLB advances of $2.9 million or 5.2 percent of
total assets at June 30, 1996, which was similar to its balance of $2.6 million
or 5.4 percent of total assets at June 30, 1995. At the end of fiscal years
1992, 1993 and 1994, the Bank indicated no advances, resulting in a five year
average of 2.12 percent. The use of borrowed funds by some thrift institutions
indicates an alternative to retail deposits and may provide a source of term
funds for lending. The federal insurance premium on deposits has also increased
the attractiveness of borrowed funds.
41
<PAGE> 51
BORROWED FUNDS TO ASSETS (CONT.)
The public demand for longer term funds increased in 1995 and the first
half of 1996 due to the higher cost of deposits. The result was competitive
rates on longer term Federal Home Loan Bank advances, and an increase in
borrowed funds by many institutions as an alternative to higher cost, long term
certificates. The ratio of borrowed funds to assets, therefore, does not
typically indicate higher risk or more aggressive lending, but primarily an
alternative to retail deposits.
The range of borrowed funds to assets is 30.0 percent or less with a
midpoint of 15.0 percent, similar to the national average of 13.2 percent.
EQUITY TO ASSETS
Home City Federal's equity to assets ratio as of June 30, 1996, was
9.69 percent. After conversion, based on the midpoint value of $7,200,000 and
net proceeds to the Bank of approximately $3.4 million, Home City Federal's
equity is projected to stabilize in the area of 15.0 percent. Based on those
equity ratios, we have defined the equity ratio parameter to be 6.0 percent to
20.0 percent with a midpoint ratio of 13.0 percent.
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<PAGE> 52
PERFORMANCE PARAMETERS
INTRODUCTION
Exhibit 38 presents five parameters identified as key indicators of
Home City Federal's earnings performance and the basis for such performance. The
primary performance indicator is the Bank's return on average assets ("ROAA").
The second performance indicator is the Bank's return on average equity
("ROAE"). To measure the Bank's ability to generate net interest income, we have
used net interest margin. The supplemental source of income for the Bank is
noninterest income, and the parameter used to measure this factor is noninterest
income to assets. The final performance indicator that has been identified is
the Bank's ratio of operating expenses, also referred to as noninterest
expenses, to assets, a key factor in distinguishing different types of
operations, particularly institutions that are aggressive in secondary market
activities, which often results in much higher operating costs and overhead
ratios.
RETURN ON AVERAGE ASSETS
The key performance parameter is the ROAA. Home City Federal's most
recent ROAA was 0.98 percent for the twelve months ended June 30, 1996, based on
net earnings after taxes and 0.89 percent based on core earnings after taxes, as
detailed in Item I of this report and presented in Exhibit 7. The Bank's ROAA
over the past five fiscal years, based on net earnings, has ranged from a low of
0.26 percent in 1992 to a high of 1.69 percent in 1994 with an average ROAA of
1.17 percent. ROAA has declined steadily since June 30, 1994. For the four
quarters following conversion in late 1996, Home City Federal's ROAA is
projected to range between 1.10 percent and 1.20 percent.
Considering the historical, current and projected earnings performance
of Home City Federal, the range for the ROAA parameter based on net income has
been defined as 0.60 percent to a high of 1.30 percent with a midpoint of 0.95
percent.
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<PAGE> 53
RETURN ON AVERAGE EQUITY
The ROAE has been used as a secondary parameter to eliminate any
institutions with an unusually high or low ROAE that is inconsistent with the
Bank's position. This parameter does not provide as much meaning for a newly
converted thrift institution as it does for established stock institutions, due
to the newness of the capital structure of the newly converted thrift and the
inability to accurately reflect a mature ROAE for the newly converted thrift
relative to other stock institutions.
The consolidated ROAE for the Bank and the Corporation on a pro forma
basis at the time of conversion will be 4.58 percent based on the midpoint
valuation. Prior to conversion, the Bank's ROAE was 10.23 percent for the twelve
months ended June 30, 1996, based on net income and 9.34 percent based on core
income, with a five year average net ROAE of 12.85 percent. The parameter range
for the comparable group, based on net income, is from 3.0 percent to 15.0
percent with a midpoint of 9.0 percent.
NET INTEREST MARGIN
Home City Federal had a net interest margin of 3.86 percent based on
the twelve months ended June 30, 1996, indicating a declining trend since June
30, 1994. The Bank's range of net interest margin for the past five fiscal years
has been from a low of 3.37 percent in 1996 to a high of 4.37 percent in 1994
with an average of 4.25 percent.
The parameter range for the selection of the comparable group is from a
low of 2.65 percent to a high of 4.50 percent with a midpoint of 3.58 percent.
44
<PAGE> 54
OPERATING EXPENSES TO ASSETS
Home City Federal had an average operating expense to average assets
ratio of 2.31 percent for the twelve months ended June 30, 1996. The Bank's
operating expenses have been stable in recent years, ranging from a low of 1.82
percent in fiscal year 1993 to a high of 2.31 percent in its most recent fiscal
year of 1996, with an average of 2.17 percent, modestly lower than the current
industry average of 2.29 percent.
The operating expense to assets parameter for the selection of the
comparable group is from a low of 1.50 percent to a high of 3.00 percent with a
midpoint of 2.25 percent.
NONINTEREST INCOME TO ASSETS
Home City Federal has experienced a lower than average dependence on
noninterest income as a source of additional income. The Bank's noninterest
income to average assets was 0.11 percent for the twelve months ended June 30,
1996, which is considerably below the industry average of 0.44 percent for that
period. Home City Federal's noninterest income for the past five fiscal years
has fluctuated from a high of 0.11 percent of average assets in both fiscal
years 1996 and 1993 to a low of $1,000 or less than 0.01 percent in fiscal year
1992 with an average ratio of 0.05 percent.
The range for this parameter for the selection of the comparable group
is 0.45 percent or less of average assets with a midpoint of 0.23 percent,
considerably lower than the national average of 0.44 percent.
45
<PAGE> 55
ASSET QUALITY PARAMETERS
INTRODUCTION
The final set of financial parameters used in the selection of the
comparable group are asset quality parameters, also shown in Exhibit 38. The
purpose of these parameters is to insure that any thrift institution in the
comparable group has an asset quality position reasonably similar to that of
Home City Federal. The three defined asset quality parameters are the ratios of
nonperforming assets to total assets, repossessed assets to total assets and
loan loss reserves to total assets at the end of the most recent period.
NONPERFORMING ASSETS TO ASSETS RATIO
Home City Federal's ratio of nonperforming assets to assets was 0.44
percent at June 30, 1996, which is lower than the national average of 1.20
percent, lower than the Midwest regional average of 0.56 percent and similar to
its ratio of 0.43 percent at June 30, 1995. For the five fiscal years ended June
30, 1992 to 1996, the Bank's ratio fluctuated considerably, from a high of 0.96
percent at June 30, 1993, to a low of 0.09 percent at June 30, 1994, with a five
year average of 0.41 percent.
The parameter range for nonperforming assets to assets has been defined
as .080 percent of assets or less with a midpoint of .040 percent.
REPOSSESSED ASSETS TO ASSETS
Home City Federal was absent repossessed assets at June 30, 1996, and
had a like zero balance at June 30, 1994 and 1995. For its five most recent
fiscal years, the Bank had ratios of repossessed assets ranging from a high of
0.50 percent at June 30, 1992, to
46
<PAGE> 56
REPOSSESSED ASSETS TO ASSETS (CONT.)
a low of 0.06 percent at the end of fiscal year 1993, with a five fiscal year
average of 0.11 percent. National and regional averages were 0.65 percent and
0.47 percent, respectively, at June 30, 1996.
The range for the repossessed assets to total assets parameter is 0.20
percent of assets or less with a midpoint of 0.10 percent.
LOANS LOSS RESERVES TO ASSETS
Home City Federal had a loan loss reserve or allowance for loan losses
of $362,000, representing a loan loss allowance to total assets ratio of 0.65
percent at June 30, 1996, which is similar to its ratios of 0.66 percent at June
30, 1995. For its last three fiscal years, the Bank's loan loss reserve averaged
0.63 percent of assets.
The loan loss allowance to assets parameter range used for the
selection of the comparable group focused on a minimum required ratio of 0.15
percent of assets.
THE COMPARABLE GROUP
With the application of the parameters previously identified and
applied, the final comparable group represents ten institutions identified in
Exhibits 39, 40 and 41. The comparable group institutions range in size from
$76.4 million to $216.5 million with an average asset size of $139.5 million and
have an average of 3.4 offices per institution compared to Home City Federal
with assets of $55.7 million and one office. One of the comparable group
institutions was converted in 1988, two in 1993, six in 1994, and one in 1995.
47
<PAGE> 57
THE COMPARABLE GROUP (CONT.)
Exhibit 42 presents a comparison of Home City Federal's market area
demographic data with that of each of the institutions in the comparable group.
48
<PAGE> 58
SUMMARY OF COMPARABLE GROUP INSTITUTIONS
COMMUNITY INVESTORS BANCORP, INC., Bucyrus, Ohio, is the holding
company for First Federal Savings and Loan Association of Bucyrus. The
Association serves its Crawford County, Ohio, market with three offices, two in
Bucyrus and one in New Washington. As of its most recent quarter, the
Association had assets of $85.8 million and equity of $11.9 million, and
reported an ROAA of 1.01 percent and an ROAE of 6.98 percent.
ENTERPRISE FEDERAL BANCORP, Lockland, Ohio, is the holding company for
Enterprise Federal Savings Bank, which operates five offices in the Cincinnati,
Ohio, area. With assets of $213.9 million and equity of $31.6 million,
Enterprise reported an ROAA of 0.92 percent and an ROAE of 5.39 percent for its
most recent four quarters.
FFW CORPORATION, Wabash, Indiana, is the holding company of First
Federal Savings Bank of Wabash, and operates three offices, two of which are in
Wabash County, Indiana. The third office is located in nearby Kosciusko County,
giving the Bank a combined market area population of 102,500. The Company has an
asset size of $150.5 million with equity of $15.5 million and reported an ROAA
of 1.09 percent for its most recent four quarters.
FIRST FINANCIAL BANCORP, INC., Belvidere, Illinois, is the holding
company for First Federal Savings Bank of Belvidere. The Bank serves Boone and
Winnebago Counties in Illinois with two full service offices in Belvidere and a
loan origination office in Rockford, Illinois. The Bank has assets of $94.5
million and equity of $7.8 million, and reported an ROAA of 0.68 percent for its
most recent four quarters.
FIRST FRANKLIN CORPORATION, Cincinnati, Ohio, is the holding company of
Franklin Savings & Loan Company which operates seven branches in the Greater
Cincinnati Metropolitan Area, all in Hamilton County. The Company has assets of
$216.5 million and equity of $20.3 million. For its most recent four quarters,
the Company reported an ROAA of 0.62 percent and an ROAE of 6.56 percent.
49
<PAGE> 59
SUMMARY OF COMPARABLE GROUP INSTITUTIONS (CONT.)
HARVEST HOME FINANCIAL CORPORATION, Cincinnati, Ohio, is the holding
company for Harvest Home Savings Bank, which operates three offices serving the
Greater Cincinnati area. The Bank had assets of 76.4 million and equity of 12.7
million at the end of its most recent quarter, and reported an ROAA of 0.75
percent for its trailing four quarters.
MFB CORP., Mishawaka, Indiana, is the holding company for Mishawaka
Federal Savings. Mishawaka Federal operates four offices in Mishawaka and
surrounding St. Joseph County. As of the most recent quarter, Mishawaka Federal
had total assets of $210.6 million, and total equity of $37.7 million. For the
most recent four quarters, Mishawaka Federal reported an ROAA of 0.73 percent.
MILTON FEDERAL FINANCIAL CORPORATION, West Milton, Ohio, is the holding
company for Milton Federal Savings and Loan Association. The Association
operates two full service offices, one in West Milton, Ohio, in Miami County and
the other in Englewood, Ohio, in Montgomery County. Milton Federal has assets of
$178.3 million, equity of $33.8 million and an ROAA of 1.04 percent for its most
recent four quarters.
NORTHWEST EQUITY CORPORATION, Amery, Wisconsin, is the unitary thrift
holding company for Northwest Savings Bank, a community oriented institution
with three offices serving Polk County. The Bank had assets of $91.8 million and
equity of $11.7 million at the close of its most recent quarter and reported an
ROAA of 1.00 percent and an ROAE of 6.91 percent for its trailing four quarters.
STATEFED FINANCIAL CORP., Des Moines, Iowa, is the holding company for
State Federal Savings and Loan Association of Des Moines, operating two offices
in Polk County, Iowa. The Association has total assets of $76.7 million and
equity of $14.9 million and reported an ROAA of 1.19 percent for its most recent
four quarters.
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IV. ANALYSIS OF FINANCIAL PERFORMANCE
This section reviews and compares the financial performance of Home
City Federal to all thrifts, regional thrifts, Ohio thrifts and the ten
institutions constituting Home City Federal's comparable group, as selected and
described in the previous section. The comparative analysis focuses on financial
condition, earning performance and pertinent ratios as presented in Exhibits 43
through 48.
As presented in Exhibits 43 and 44, at June 30, 1996, Home City
Federal's total equity of 9.69 percent of assets was lower than the 14.24
percent for the comparable group, the 13.10 for all thrifts, the 14.69 percent
ratio for Midwest thrifts, and the 13.30 percent ratio for Ohio thrifts. The
Bank had a 81.15 percent share of net loans in its asset mix, higher than the
comparable group at 69.41 percent, and also much than all thrifts at 67.29
percent, Midwest thrifts at 67.95 percent and Ohio thrifts at 72.63 percent.
Home City Federal's share of net loans, higher than industry averages, is
primarily the result of its lower levels of cash and investments and
mortgage-backed securities of 9.14 percent 5.34 percent, respectively. The
comparable group had a higher 8.51 percent share of mortgage-backed securities,
and also a higher 19.86 percent share of cash and investments. All thrifts had
13.73 percent of assets in mortgage-backed securities and 15.09 percent in cash
and investments. Home City Federal's share of deposits of 84.65 percent was
higher than the comparable group, and also higher than the three geographic
categories, reflecting the Bank's lower 5.21 percent share of FHLB advances. The
comparable group had deposits of 71.42 percent and borrowings of 13.60 percent.
All thrifts averaged a 72.25 percent share of deposits and 13.16 percent of
borrowed funds, while Midwest thrifts had a 71.03 percent share of deposits and
an 13.07 percent share of borrowed funds. Ohio thrifts averaged a 75.93 percent
share of deposits and a 9.76 percent share of borrowed funds. Home City Federal
was absent goodwill and other intangibles, compared to a nominal 0.01 percent
for the comparable group, 0.32 percent for all thrifts, 0.15 percent for Midwest
thrifts and 0.18 percent for Ohio thrifts.
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<PAGE> 61
ANALYSIS OF FINANCIAL PERFORMANCE (CONT.)
Operating performance indicators are summarized in Exhibits 45 and 46
and provide a synopsis of key sources of income and key expense items for Home
City Federal in comparison to the comparable group, all thrifts, and regional
thrifts for the trailing four quarters.
As shown in Exhibit 47, for the twelve months ended June 30, 1996, Home
City Federal had a yield on average interest-earning assets higher than the
comparable group and also higher than the three geographical categories. The
Bank's yield on interest-earning assets was 8.86 percent compared to the
comparable group at 7.70 percent, all thrifts at 7.73 percent, Midwest thrifts
at 7.70 percent and Ohio thrifts at 7.83 percent.
The Bank's cost of funds for the twelve months ended June 30, 1996, was
also higher than the comparable group and the three geographical categories.
Home City Federal had an average cost of interest-bearing liabilities of 5.44
percent compared to 5.09 percent for the comparable group, 4.92 percent for all
thrifts, 5.02 percent for Midwest thrifts and 4.99 for Ohio thrifts. The Bank's
interest income and interest expense ratios resulted in an interest rate spread
of 3.42 percent, which was higher than the comparable group at 2.61 percent, all
thrifts at 2.80 percent, Midwest thrifts at 2.68 percent and Ohio thrifts at
2.84 percent. Home City Federal demonstrated a net interest margin of 3.86
percent for the twelve months ended June 30, 1996, based on average
interest-earning assets, which was higher than the comparable group ratio of
3.32 percent. All thrifts also averaged a lower 3.35 percent net interest margin
for the trailing four quarters, as did Midwest thrifts at 3.33 percent and Ohio
thrifts at 3.44 percent.
Home City Federal's major source of income is interest earnings, as is
evidenced by the operations ratios presented in Exhibit 46. The Bank made a
$50,000 provision for loan losses during the twelve months ended June 30, 1996,
representing 0.10 percent of average assets and reflecting the Bank's objective
to strengthen its reserves for loan losses as it increases its level of consumer
loans following conversion. The comparable group
52
<PAGE> 62
ANALYSIS OF FINANCIAL PERFORMANCE (CONT.)
indicated a provision representing 0.05 percent of assets, with all thrifts at
0.12 percent, Midwest thrifts at 0.08 percent and Ohio thrifts at 0.05 percent.
The Bank's non-interest income was $58,000 or 0.11 percent of average
assets for the twelve months ended June 30, 1996. Such non-interest income was
significantly lower than the comparable group at 0.22 percent, all thrifts at
0.44 percent, Midwest thrifts at 0.40 percent and Ohio thrifts at 0.27. Net of a
non-recurring income item in the amount of $46,000, the Bank's non-interest
income would have been only $12,000 or a much lower 0.02 percent of average
assets. For the twelve months ended June 30, 1996, Home City Federal's operating
expense ratio was 2.31 percent, higher than the comparable group but similar to
the three geographical averages. The comparable group's operating expense ratio
was 2.11 percent, while all thrifts averaged 2.29 percent, Midwest thrifts
averaged 2.20 percent and Ohio thrifts averaged 2.21 percent.
The overall impact of Home City Federal's income and expense ratios is
reflected in the Bank's net income and return on assets. For the twelve months
ended June 30, 1996, the Bank had an ROAA of 0.98 percent based on net income
and a lower ROAA of 0.89 percent based core income. For its most recent four
quarters, the comparable group had a lower net ROAA of 0.90 percent, and also a
lower ROAA of 0.84 percent based on core income. All thrifts averaged a lower
net ROAA of 0.88 percent, while Midwest thrifts and Ohio thrifts averaged a
lower 0.93 percent and 0.91 percent, respectively. All thrifts indicated a core
ROAA of 0.81 percent, while Midwest thrifts and Ohio thrifts averaged a core
ROAA of 0.87 percent and 0.88 percent, respectively, both of which were higher
than the core ROAA of Home City Federal.
53
<PAGE> 63
V. MARKET VALUE ADJUSTMENTS
This is a conclusive section where adjustments are made to determine
the pro forma market value or appraised value of the Corporation based on a
comparison of Home City Federal with the comparable group. These adjustments
will take into consideration such key items as earnings performance, market
area, financial condition, dividend payments, subscription interest, liquidity
of the stock to be issued, management, and market conditions or marketing of the
issue. It must be noted, however, that all of the institutions in the comparable
group have their differences, and as a result, such adjustments become
necessary.
EARNINGS PERFORMANCE
In analyzing earnings performance, consideration was given to the level
of net interest income, the level and volatility of interest income and interest
expense relative to changes in market area conditions and to changes in overall
interest rates, the quality of assets as it relates to the presence of problem
assets which may result in adjustments to earnings, the level of current and
historical classified assets and real estate owned, the level of valuation
allowances to support any problem assets or nonperforming assets, the level and
volatility of non-interest income, and the level of non-interest expenses.
As discussed earlier, the Bank's historical business philosophy has
focused on maintaining its net interest income, further reducing its current
ratio of nonperforming assets, increasing its level of interest sensitive assets
relative to interest sensitive liabilities and thereby improving its sensitivity
measure and its overall interest rate risk, maintaining an adequate level of
general valuation allowances to reduce the impact of any unforeseen losses, and
closely monitoring and improving its reasonable level of overhead expenses. The
Bank's current philosophy will continue to focus on maintaining its net interest
spread, net interest margin, net income and return on assets, generating
additional non-interest income, and increasing its level of interest sensitive
assets relative to interest sensitive liabilities.
54
<PAGE> 64
EARNINGS PERFORMANCE (CONT.)
Earnings are often related to an institution's ability to generate
loans. The Bank was an active originator of mortgage loans in fiscal years 1994
to 1996. During the twelve months ended June 30, 1996, originations exceeded
those in fiscal year 1995 by 31.5 percent, with the increases in the categories
of one- to four family residential mortgage loans and consumer loans.
Originations during the twelve months ended June 30, 1996, were approximately
$18.5 million compared to $14.1 million in fiscal year 1995 and a similar $14.7
million in fiscal year 1994.
Home City Federal experienced a significant decrease in principal
repayment levels from fiscal year 1994 to fiscal year 1995, resulting in a net
increase of $8.0 million in its outstanding loans. Notwithstanding generally
comparable increases in both originations and principal repayments in fiscal
year 1996, related to moderating interest rates in late 1995, a significant
increase in loans sold produced a smaller $6.3 million net loan growth in the
Bank's most recent twelve month period. The Bank's focus has historically been
on the origination of one- to four-family mortgage loans, with that loan
category constituting 79.0 percent, 65.8 percent, 76.1 percent total origination
in fiscal years 1994, 1995 and 1996, respectively. In those three periods, the
second largest category of originations was nonresidential loans, with
multi-family loans being the third largest, followed closely by consumer loans.
In Home City Federal's most recent fiscal year of 1996, however, the origination
of consumer loans exceeded multi-family loans and that trend is expected to
continue. The impact of these primary lending efforts has been to generate a
yield on average interest-earning assets of 8.86 percent for Home City Federal
for the twelve months ended June 30, 1996, compared to 7.70 percent for the
comparable group, 7.73 percent for all thrifts and 7.70 for Midwest thrifts. The
Bank's level of interest income to average assets was 7.79 percent for the
twelve months ended June 30, 1996, which was modestly higher than the comparable
group at 7.46 percent, all thrifts and Midwest thrifts both at 7.42 percent and
Ohio thrifts at 7.58 percent for their most recent four quarters.
55
<PAGE> 65
EARNINGS PERFORMANCE (CONT.)
The Bank's net interest margin of 3.86 percent, based on average
interest-earning assets for the twelve months ended June 30, 1996, was higher
than the comparable group at 3.32 percent and also higher than all thrifts at
3.35 percent. Notwithstanding its higher yield and net interest margin, Home
City Federal's cost of interest-bearing liabilities of 5.44 percent for the
twelve months ended June 30, 1996, was higher than the comparable group at 5.09
percent, and also higher than all thrifts at 4.92 percent and Midwest thrifts at
5.02 percent. Home City Federal's net interest spread of 3.42 percent for the
twelve months ended June 30, 1996, was, nevertheless, higher than the comparable
group at 2.61 percent, all thrifts at 2.80 percent and Midwest thrifts at 2.84
percent.
The Bank's ratio of noninterest income to assets was 0.11 percent for
the twelve months ended June 30, 1996, considerably lower than the comparable
group at 0.22 percent, all thrifts at 0.44 percent and Midwest thrifts at 0.40
percent. As previously noted, a major component of Home City Federal's
non-interest income in fiscal year 1996 was a non-recurring item in the amount
of $46,000, which was the basis of the Bank's lower core income as detailed in
Exhibit 7. The Bank has indicated noninterest income lower than the comparable
group, but its operating expenses have been higher than the comparable group and
Midwest thrifts and similar to all thrifts. For the twelve months ended June 30,
1996, Home City Federal had an operating expenses to assets ratio of 2.31
percent compared to a lower 2.11 percent for the comparable group, 2.29 percent
for all thrifts and 2.20 percent for Midwest thrifts.
For the twelve months ended June 30, 1996, Home City Federal generated
much lower noninterest income, a higher ratio of noninterest expenses, and a
higher net interest margin relative to its comparable group. As a result, the
Bank's net income level was modestly higher than its comparable group for the
twelve months ended June 30, 1996. Based on net earnings, the Bank had a return
on average assets of 0.26 percent in fiscal year 1992, 1.66 percent in fiscal
year 1993, 1.69 percent in fiscal year 1994, 1.24 percent in fiscal year 1995,
and 0.98 percent in fiscal year 1996. For its most recent four
56
<PAGE> 66
EARNINGS PERFORMANCE (CONT.)
quarters, the comparable group had a lower net ROAA of 0.90 percent, while all
thrifts indicated a slightly lower 0.88 percent. The Bank's core or normalized
earnings, as shown in Exhibit 7, were $469,000, indicating a 0.89 percent core
return on assets for the most recent twelve months ended June 30, 1996. That
core ROAA was only slightly higher than the comparable group at 0.84 percent,
all thrifts at 0.81 and Midwest thrifts at 0.87 percent.
Home City Federal's earnings stream will continue to be dependent on
the overall trends in interest rates, with little reliance on its non-interest
income, with net interest income having been generally flat during the most
recent four fiscal years of 1993 through 1996. The Bank's cost of
interest-bearing liabilities will continue to adjust upward as deposits reprice
at higher rates and continue their gradual movement toward medium term
instruments. This upward pressure on savings costs is likely to continue based
on current rates, although the rate of increase may subside somewhat during the
next few years. It has also been recognized that although Home City Federal's
current ROAA is higher than that of its comparable group for the most recent
four quarters, the Bank has also experienced a consistent downward trend in its
ROAA, net interest margin and net interest spread since June 30, 1994. In
recognition of the foregoing earnings related factors, a minimum upward
adjustment has been made to Home City Federal's pro forma market value for
earnings performance.
MARKET AREA
Home City Federal's primary market area for retail deposits consists of
Clark County, Ohio, including the city of Springfield, the location of the
Bank's home office. As discussed in Section II, this market area has evidenced
no significant population growth and higher unemployment levels compared to the
comparable group markets, Ohio and the United States. The unemployment rate in
Home City Federal's market area county averaged 5.7 percent in June, 1996,
compared to 5.0 percent for Ohio and 5.5 percent for
57
<PAGE> 67
MARKET AREA (CONT.)
the United States. Per capita and household income levels in Clark County are
below state averages and the comparable group average. The market area is also
characterized by lower median housing values than Ohio, the United States and
the comparable group. The market area is generally rural and agricultural, with
the wholesale/retail and services sectors indicating similar shares of market
area employment, followed closely by the manufacturing sector. The level of
financial competition in the Bank's market area is moderate and dominated by the
banking industry. Home City Federal, nevertheless, had net increases in deposits
in its most recent five fiscal years of 1992 through 1996, as deposits,
including interest, exceeded withdrawals. In recognition of all these factors,
we believe that a moderate downward adjustment is warranted for the Bank's
market area.
FINANCIAL CONDITION
The financial condition of Home City Federal is discussed in Section I
and shown in Exhibits 1, 2, 5, 15, 16 and 17, and is compared to the comparable
group in Exhibits 42, 44 and 45. The Bank's total equity ratio before conversion
was 9.69 percent at June 30, 1996, which was lower than the comparable group at
14.24 percent, Midwest thrifts at 14.69 percent and all thrifts at 13.10
percent. With a conversion at the midpoint, the Corporation's pro forma equity
to assets ratio will increase to 18.16 percent, and the Bank's pro forma equity
to assets ratio will increase to approximately 15.5 percent.
The Bank's mix of assets indicates some areas of significant variation
from its comparable group. Home City Federal had a higher share of net loans at
81.15 percent of total assets at June 30, 1996, compared to the comparable group
at 69.41 percent and all thrifts at 67.29 percent. The Bank's share of cash and
investments was a significantly lower 9.14 percent compared to 19.86 percent for
the comparable group and 15.09 percent for all thrifts. Home City Federal's
ratio of mortgage-backed securities to total assets was only 5.34 percent, below
the comparable group at 8.51 percent and significantly lower
58
<PAGE> 68
FINANCIAL CONDITION (CONT.)
than all thrifts at 13.73 percent. The Bank's 84.65 percent share of deposits
and 5.21percent share of FHLB advances were both below the comparable group's
71.42 percent of deposits and 13.60 percent of borrowed funds.
The Bank was absent both goodwill and repossessed real estate compared
to percentages of 0.04 and 0.65 of repossessed real estate for the comparable
group and all thrifts, respectively. The financial condition of Home City
Federal is further affected by its level of nonperforming assets at 0.44 percent
of assets at June 30, 1996, compared to a lower 0.35 percent for the comparable
group. The Bank's ratio of nonperforming assets to total assets in fiscal year
1996 was similar to its fiscal year 1995 ratio of 0.43 percent, which increased
from 0.09 percent at June 30, 1994, but lower than its ratio of 0.96 percent at
June 30, 1993.
The Bank had a considerably higher share of high risk real estate loans
at 23.37 percent compared to 9.98 percent for the comparable group, and the
Bank's share was also higher than all thrifts at 14.49 percent. Home City
Federal had $362,000 in general valuation allowances or 146.56 percent of
nonperforming assets at June 30, 1996, compared to the comparable group's higher
218.69 percent, with Midwest thrifts at 157.22 percent and all thrifts at a
lower 91.98 percent. The Bank's ratio is reflective of its historically average
levels of non-performing assets and classified loans. Home City Federal has also
experienced higher levels of interest rate risk, as reflected by its higher
exposure under conditions of rising interest rates. Overall, we believe that a
minimum downward adjustment is warranted for Home City Federal's current
financial condition.
59
<PAGE> 69
DIVIDEND PAYMENTS
Home City Federal has not indicated its intention to pay an initial
cash dividend. The future payment of cash dividends will be dependent upon such
factors as earnings performance, capital position, growth level, and regulatory
limitations. Eight of the ten institutions in the comparable group pay cash
dividends for an average dividend yield of 2.94 percent for those nine
institutions, and an average dividend yield of 2.35 percent for all ten
institutions.
Currently, many thrifts are committing to initial cash dividends in
comparison to the more common absence of such a dividend commitment in 1994 and
some 1995 conversions. As a result, we believe that a minimum downward
adjustment to the pro forma market value is warranted at this time related to
dividend payments.
SUBSCRIPTION INTEREST
The general interest in thrift conversion offerings was often difficult
to gauge in 1995. Based upon recent offerings, subscription and community
interest weakened significantly in early 1995 but regained some strength by the
second half of the year. In the first half of 1996, interest in new issues was
mixed, with the number of conversions decreasing from the same period in 1995.
Such interest has frequently been directly related to the financial performance
and condition of the thrift institution converting, the strength of the local
economy, general market conditions and aftermarket price trends.
Home City Federal will focus its offering to depositors and residents
in its market area. The board of directors and officers anticipate purchasing
approximately $720,000 or 10.0 percent of the conversion stock based on the
appraised midpoint valuation. Home City Federal will form an 8.0 percent ESOP,
which plans to purchase stock in the initial offering. Additionally, the
Prospectus restricts to 2.0 percent of the total number of shares
60
<PAGE> 70
SUBSCRIPTION INTEREST (CONT.)
to be issued in the conversion the amount of conversion stock that may be
purchased by a single person, or by persons and associates acting in concert.
The Bank has secured the services of Charles Webb & Company ("Webb") to
assist the Bank in the marketing and sale of the conversion stock. Based on the
size of the offering, current market conditions, local market interest and the
terms of the offering, we believe that a minimum upward adjustment is warranted
for the Bank's anticipated subscription interest.
LIQUIDITY OF THE STOCK
Home City Federal will offer its shares through concurrent subscription
and community offerings with the assistance of Webb. If necessary, Webb will
conduct a syndicated community offering upon the completion of the subscription
and community offering. Home City Federal will pursue two market makers for the
stock. The Bank's offering is much smaller in size to that of the comparable
group, considerably below the national average and, more significantly,
approximately 92.6 percent below the Ohio average. It is likely, therefore, that
the stock of Citizens Federal will be less liquid than thrift stocks nationally
and in its Ohio market area. Therefore, we believe that a moderate downward
adjustment to the pro forma market value is warranted at this time relative to
the liquidity of the stock.
MANAGEMENT
The president and chief executive officer of Home City Federal is
Douglas L. Ulery. Mr. Ulery joined the Bank as president and CEO in 1992 and
became a director in 1994. Previously, Mr. Ulery was vice president of Regional
Banking Offices Operation with Society Corporation, recently purchased by Key
Corp.
61
<PAGE> 71
MANAGEMENT (CONT.)
Mr. Ulery and the management of Home City Federal have made a concerted
effort to increase deposits and market share, and to strengthen lending activity
asset quality.
Home City Federal has been able to strengthen its equity level and
increase its equity ratio over the past few years and its asset quality has
improved since 1992. Earnings, net interest spread and net interest margin are
currently above comparable group and industry averages, although they have
declined modestly since 1994. The Bank's non-interest expenses are currently
somewhat higher than the comparable group, but similar to all thrifts and
Midwest thrifts, and have historically been lower than industry averages. It is
our opinion that a minimum upward adjustment to the pro forma market value is
warranted for management.
MARKETING OF THE ISSUE
The response to a newly issued thrift institution stock is more
difficult to predict, due to the volatility of new thrift stocks. Further, with
each conversion, there is a high level of uncertainty with regard to the stock
market particularly thrift institution stocks and interest rate trends. The
impact of recent increases in interest rates has made it more difficult for more
thrift institutions to strengthen their earnings and resulted in downward market
prices. Recent conflicts of opinion on interest rate trends and the recent rise
in interest rates have resulted in some significant stock volatility. Further,
the impact of the difference in a thrift's premium level on deposits compared to
BIF-insured institutions is another key concern, along with the one time
assessment of SAIF-insured thrifts to increase the capitalization of the SAIF
insurance fund.
The necessity to build a new issue discount into the stock price of a
converting thrift has prevailed in the thrift industry in recognition of higher
uncertainty among investors as a result of the thrift industry's dependence on
interest rate trends. We believe that a new
62
<PAGE> 72
MARKETING OF THE ISSUE (CONT.)
issue discount applied to the price to book valuation approach continues and is
considered to be reasonable and necessary in the pricing of the Corporation, and
we have made a maximum downward adjustment to the Corporation's pro forma market
value in recognition of the new issue discount.
63
<PAGE> 73
VI. VALUATION METHODS
Under normal stock market conditions, the most frequently used method
for determining the pro forma market value of common stock for thrift
institutions by this firm is the price to book value ratio method. The focus on
the price to book value method is due to the volatility of earnings in the
thrift industry. As earnings in the thrift industry improved in late 1993, 1994
and 1995, there has been more emphasis placed on the price to earnings method,
but the price to book value method continues to be the primary valuation method.
These two pricing methods have both been used in determining the pro forma
market value of the Corporation.
In recognition of the volatility and variance in earnings due to
fluctuations in interest rates, the continued differences in asset and liability
repricing and the frequent disparity in value between the price to book approach
and the price to earnings approach, a third valuation method has been used, the
price to net assets method. The price to net assets method is used less often
for valuing ongoing institutions; however, this method becomes more useful in
valuing converting institutions when the equity position and earnings
performance of the institutions under consideration are different.
In addition to the pro forma market value, we have defined a valuation
range with the minimum of the range being 85.0 percent of the pro forma market
value, the maximum of the range being 115.0 percent of the pro forma market
value, and a super maximum being 115.0 percent of the maximum. The pro forma
market value or appraised value will also be referred to as the "midpoint
value".
64
<PAGE> 74
PRICE TO BOOK VALUE METHOD
The price to book value method focuses on a thrift institution's
financial condition, and does not give as much consideration to the
institution's performance as measured by net earnings. Therefore, this method is
sometimes considered less meaningful for institutions that do provide a
consistent earnings trend. Due to the earnings volatility of many thrift stocks,
the price to book value method is frequently used by investors who rely on an
institution's financial condition rather than earnings performance.
Consideration was given to the adjustments to the Bank's pro forma
market value discussed in Section V. Minimum upward adjustments were made for
earnings performance and management. Minimum downward adjustments were made for
market area, financial condition and dividend payments. A moderate downward
adjustment was made for the liquidity of Home City Federal's stock and a maximum
downward adjustment was made for the marketing of the issue. No adjustment was
made for the Bank's subscription interest.
Exhibit 50 shows the average and median price to book value ratios for
the comparable group which were 85.57 percent and 87.39 percent, respectively.
The total comparable group indicated a moderately wide range, from a low of
72.29 percent (Harvest Home Financial Corporation) to a high of 93.03 percent
(Community Investors Bancorp). This variance cannot be attributed to any one
factor such as the institution's equity ratio or earnings performance. Excluding
the low and the high in this group, the price to book value range narrowed
moderately from a low of 76.21 percent to a high of 92.22 percent.
Taking into consideration all of the previously mentioned items in
conjunction with the adjustments made in Section V, we have determined a pro
forma price to book value ratio of 63.38 percent at the midpoint, and ranging
from a low of 58.70 percent at the minimum to a high of 71.20 percent at the
super maximum for the Corporation.
65
<PAGE> 75
PRICE TO BOOK VALUE METHOD (CONT.)
The Corporation's price to book value ratio of 63.38 is strongly
influenced by the Bank's financial condition, local market and subscription
interest in thrift stocks. Further, the Bank's equity to assets after conversion
will be approximately 15.00 percent compared to a similar 14.24 percent for the
comparable group. Based on this price to book value ratio and the Bank's equity
of $5,398,000 at June 30, 1996, the indicated pro forma market value for the
Bank using this approach is $7,202,008 at the midpoint (reference Exhibit 50).
PRICE TO EARNINGS METHOD
The focal point of this method is the determination of the earnings
base to be used and secondly, the determination of an appropriate price to
earnings multiple. The recent earnings position of Home City Federal is
displayed in Exhibit 3, indicating after tax net earnings for the twelve months
ended June 30, 1996, of $514,000. Exhibit 7 indicates the derivation of the
Bank's lower core or normalized earnings of $469,000 for the twelve months ended
June 30, 1996. To arrive at the pro forma market value of the Bank by means of
the price to earnings method, we used the core earnings base of $469,000.
In determining the appropriate price to earnings multiple for the Bank,
we reviewed the range of price to core earnings multiples for the comparable
group and all publicly-traded thrifts. The average price to core earnings
multiple for the comparable group was 15.68, while the median was 14.71. The
average price to net earnings multiple was 14.46 and the median multiple was
13.98. The comparable group's price to core earnings multiple was lower than the
average for all publicly-traded, SAIF-insured thrifts of 17.46, but higher than
their median of 14.84. The price to net earnings multiple for all thrifts was
also higher than the comparable group with an average at 16.25 times core
earnings and a median at 13.71 times core earnings. The range in the price to
core earnings multiple for the comparable group was from a low of 9.51 (FFW
Corp.) to a high of 22.46
66
<PAGE> 76
PRICE TO EARNINGS METHOD (CONT.)
(MFB Corp.). The primary range in the price to net earnings multiple for the
comparable group, excluding the high and low ranges, was from a low price to
earnings multiple of 11.78 to a high of 20.52 times earnings for eight of the
ten institutions in the group.
Consideration was given to the adjustments to the Corporation's pro
forma market value discussed in Section V. In recognition of these adjustments,
we have determined a price to core earnings multiple of 12.27 at the midpoint,
based on Home City Federal's core earnings of $469,000 for twelve months ended
June 30, 1996. The price to core earnings multiple is from 10.81 times earnings
at the minimum of the valuation range to 16.76 times earnings at the
supermaximum. The corresponding price to net earnings multiple is 11.40 at the
midpoint.
Based on such the Bank's core earnings base of $469,000 (reference
Exhibits 49 and 50), the pro forma market value of the Corporation using the
price to earnings method is $7,201,537 at the midpoint.
PRICE TO NET ASSETS METHOD
The final valuation method is the price to net assets method. This
method is not as frequently used due to the fact that it does not focus as much
on an institution's equity position or earnings performance. Exhibit 49
indicates that the average price to net assets ratio for the comparable group
was 12.20 percent and the median was 12.29 percent. The range in the price to
net assets ratios for the comparable group varied from a low of 7.64 percent
(First Financial Bancorp) to a high of 17.46 percent (Milton Federal Financial
Corporation). It narrows only slightly with the elimination of the two extremes
in the group to a low of 8.21 percent and a high of 16.96 percent.
67
<PAGE> 77
PRICE TO ASSETS METHOD (CONT.)
Based on the adjustments made previously for Home City Federal, it is
our opinion that an appropriate price to net assets ratio for the Corporation is
11.51 percent at the midpoint, which is slightly lower than the comparable group
at 12.20 and ranges from a low of 9.95 percent at the minimum to 14.68 percent
at the super maximum.
Based on the Bank's June 30, 1996, asset base of $55,728,000, the
indicated pro forma market value of the Corporation using the price to net
assets method is $7,198,801 at the midpoint (reference Exhibit 50).
68
<PAGE> 78
VALUATION CONCLUSION
Exhibit 55 provides a summary of the valuation premium or discount for
each of the valuation ranges when compared to the comparable group based on each
of the valuation approaches. At the midpoint value, the price to book value
ratio of 63.38 percent for the Corporation represents a discount of 25.94
percent relative to the comparable group and decreases to 16.79 percent at the
super maximum. The price to core earnings multiple of 12.27 for the Corporation
at the midpoint value indicates a discount of 21.75 percent, changing to a
premium of 6.88 percent at the super maximum. The price to assets ratio at the
midpoint represents a discount of 5.70 percent, changing to a premium of 20.32
percent at the super maximum.
It is our opinion that as of September 6, 1996, the pro forma market
value of the Corporation is $7,200,000 at the midpoint, representing 720,000
shares at $10.00 per share. The valuation range for this stock is from a minimum
of $6,120,000 or 612,500 shares at $10.00 per share to a maximum of $8,280,000
or 828,000 shares at $10.00 per share, with such range being defined as 15
percent below the appraised value to 15 percent above the appraised value. The
super maximum is $9,522,000 or 952,200 shares at $10.00 per share (reference
Exhibits 49 to 54). The appraised value of Home City Financial Corporation as of
September 6, 1996, is $7,200,000.
69
<PAGE> 79
NUMERICAL
EXHIBITS
<PAGE> 80
EXHIBIT 1
HOME CITY FEDERAL SAVINGS BANK
SPRINGFIELD, OHIO
CONSOLIDATED BALANCE SHEETS
AT JUNE 30, 1996
(In thousands)
<TABLE>
<CAPTION>
June 30,
1996
------------
ASSETS
- ------
<S> <C>
Cash and cash equivalents
Cash and amounts due from depository institutions $ 855
Interest-bearing deposits in other banks 588
Federal funds sold 400
------------
Total cash and cash equivalents 1,843
Time deposits 1,061
Investment securities
Securities held-to-maturity (fair value of $0 in 1996) 0
Securities available-for-sale, at fair value 2,188
Mortgage-backed securities
Securities held-to-maturity (fair value of $0 in 1996) 0
Securities available-for-sale, at fair value 2,975
Loans, net 45,225
Accrued interest receivable 273
Premises and equipment, net 488
Investment required by law-stock in Federal Home Loan Bank 394
Deferred income taxes 0
Cash surrender value of life insurance 1,044
Other assets 237
------------
Total assets $ 55,728
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Deposits 47,174
Advances from Federal Home Loan Bank 2,903
Accrued interest payable 49
Advance payments by borrowers for taxes and insurance 20
Deferred income taxes 68
Other liabilities 116
------------
Total Liabilities 50,330
SHAREHOLDERS' EQUITY
- --------------------
Retained earnings, substantially restricted 5,271
Unrealized gain on securities available for sale,
net of applicable deferred income taxes 127
------------
Total equity 5,398
------------
Total liabilities and equity $ 55,728
============
</TABLE>
Source: Home City Federal's audited financial statements
70
<PAGE> 81
EXHIBIT 2
HOME CITY FEDERAL SAVINGS AND LOAN ASSOCIATION
SPRINGFIELD, OHIO
CONSOLIDATED BALANCE SHEETS
AT JUNE 30, 1992 THROUGH 1995
<TABLE>
<CAPTION>
Year ended June 30,
--------------------------------------------------------
1995 1994 1993 1992
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
- ------
Cash and cash equivalents
Cash and amounts due from depository institutions $ 570 $ 460 $ 433 $ 5,889
Interest-bearing deposits in other banks 307 77 129 -
Federal funds sold 1,500 450 1,675 -
------------ ------------ ----------- ------------
Total cash and cash equivalents 2,377 987 2,237 5,889
Time deposits 360 - - -
Investment securities
Securities held-to-maturity (fair value of $1,909 in 1995,
$2,092 in 1994, $2,472 in 1993, and $4,436 in 1992 1,901 2,098 2,473 -
Securities available-for-sale, at fair value 259 273 1,220 2,064
Mortgage-backed securities (fair value of $3,603 in 1995,
$3,995 in 1994, $5,439 in 1993, and $2,080 in 1992 3,667 4,257 5,314 4,484
Loans, net 38,960 31,103 28,648 28,875
Accrued interest receivable 169 128 81 93
Premises and equipment, net 468 467 411 415
Foreclosed real estate, net of allowance for losses
of $0 in 1993 and $85 in 1992 - - 26 211
Real estate held for investment - 41 22 20
Investment required by law - stock in Federal Home
Loan Bank, at cost 288 248 216 -
Deferred income taxes 21 36 83 36
Other assets 108 42 38 238
------------ ------------ ----------- ------------
Total Assets 48,578 39,680 40,769 42,325
============ ========== ========= ==========
LIABILITIES AND EQUITY
- ----------------------
Deposits 40,936 34,816 36,688 39,398
Advances from Federal Home Loan Bank 2,618 - - -
Borrowed funds - 424 460 -
Accrued interest payable 42 18 10 -
Advance payments by borrowers for taxes and insurance 34 - - -
Deferred income taxes - - - 19
Other liabilities 63 107 114 76
------------ ------------ ----------- ------------
Total Liabilities 43,693 35,365 37,272 39,493
SHAREHOLDERS' EQUITY
- --------------------
Retained earnings, substantially restricted 4,757 4,202 3,497 2,832
Net unrealized gain on securities available for sale,
net of deferred taxes 128 113 - -
------------ ------------ ----------- ------------
Total equity 4,885 4,315 3,497 2,832
------------ ------------ ----------- ------------
Total liabilities and equity $ 48,578 $ 39,680 $ 40,769 $ 42,325
============ ============ =========== ============
</TABLE>
Source: Home City Federal's audited financial statements
71
<PAGE> 82
EXHIBIT 3
HOME CITY FEDERAL SAVINGS BANK
SPRINGFIELD, OHIO
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Year ended
June 30,
1996
-------------
(In thousands)
<S> <C>
Interest income:
Interest and fees on loans $ 4,094
Interest on investment securities 143
Interest on mortgage backed securities 209
Other interest income 61
-------------
Total interest income 4,507
-------------
Interest expense:
Interest on interest-bearing checking accounts 3
Interest on savings accounts 251
Interest on certificates of deposits 2,116
Interest on advances form Federal Home Loan Bank 172
-------------
Total interest expense 2,542
-------------
Net interest income 1,965
Provision for loan losses 50
-------------
Net interest income after provision for loan losses 1,915
Other income:
Service charges 9
Life insurance 46
Other 3
-------------
Total other income 58
-------------
Other expenses
Salaries and employee benefits 532
Supplies, telephone and postage 44
Occupancy and equipment 102
Deposit insurance 96
Data processing 54
Legal, accounting and exam 110
Franchise tax 72
Other 206
-------------
Total other expenses 1,216
-------------
Net income before federal income tax expense 757
Federal income tax expense 243
-------------
Net income $ 514
=============
</TABLE>
Source: Home City Federal's audited financial statements
72
<PAGE> 83
EXHIBIT 4
HOME CITY FEDERAL SAVINGS & LOAN ASSOCIATION
SPRINGFIELD, OHIO
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JUNE 30, 1992 THROUGH 1995
<TABLE>
<CAPTION>
Year ended June 30,
------------------------------------------------------------
1995 1994 1993 1992
-------------- ------------- ------------- --------------
(In thousands)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 3,344 $ 3,074 $ 3,145 $ 2,919
Interest and dividends on investment securities 145 103 151 321
Interest on mortgage-backed securities 274 314 215 66
Other interest income 72 51 54 133
-------------- ------------- ------------- --------------
Total interest income 3,835 3,542 3,565 3,439
-------------- ------------- ------------- --------------
Interest expense:
Interest on deposits 1,835 1,408 1,701 2,370
Interest on advances from Federal Home Loan Bank 107 38 9 0
-------------- ------------- ------------- --------------
Total interest expense 1,942 1,446 1,710 2,370
-------------- ------------- ------------- --------------
Net interest income 1,893 2,096 1,855 1,069
Provision for loan losses 109 113 83 52
-------------- ------------- ------------- --------------
Net interest income after provision
for loan losses 1,784 1,983 1,772 1,017
-------------- ------------- ------------- --------------
Other income:
Gain on sales of interest-earnings assets, net - - 27 -
Income from real estate operations - - 2 -
Loan origination fees and service charges 2 1 - -
Other 7 11 15 1
-------------- ------------- ------------- --------------
Total other income 9 12 44 1
-------------- ------------- ------------- --------------
Other expenses
Salaries and employee benefits 398 311 247 206
Supplies, telephone and postage 29 28 10 -
Occupancy and equipment 104 120 102 93
Deposit insurance 83 83 69 72
(Income) loss on foreclosed real estate, net 0 4 (10) 91
Other operating expenses 384 377 309 383
-------------- ------------- ------------- --------------
Total other expenses 998 923 727 845
-------------- ------------- ------------- --------------
Income before federal income tax expense 795 1,072 1,089 173
Federal income tax expense 240 367 388 73
-------------- ------------- ------------- --------------
Income before cumulative effect of change
in accounting principle 555 705 701 100
Cumulative effect of a change in accounting
for income taxes - - 36 -
-------------- ------------- ------------- --------------
Net income $ 555 $ 705 $ 665 $ 100
============== ============= ============= ==============
</TABLE>
Source: Home City Federal's audited financial statements
73
<PAGE> 84
EXHIBIT 5
SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA
AT JUNE 30, 1992 THROUGH 1996
<TABLE>
<CAPTION>
At June 30,
------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ----------- ----------- ------------ -----------
(In thousands)
SELECTED FINANCIAL CONDITION
AND OTHER DATA:
<S> <C> <C> <C> <C> <C>
Total amount of:
Assets $ 55,728 $ 48,578 $ 39,680 $ 40,769 $ 42,325
Cash and cash equivalents(1) 2,904 2,737 987 3,358 5,889
Investment securities available
for sale 2,188 259 314 1,398 20
Investment securities held to
maturity - 1,901 2,098 2,473 4,484
Mortgage-backed and related
securities available-for-sale 2,975 - - - -
Mortgage-backed and related
securites held-to-maturity - 3,667 4,257 5,314 2,064
Loans receivable - net 45,225 38,960 31,103 28,648 28,875
FHLB stock - at cost 394 288 248 216 205
Deposits 47,174 40,936 34,816 36,688 39,398
FHLB advances 2,903 2,618 424 460 -
Retained earnings, substantially
restricted-net(2) 5,271 4,757 4,202 3,497 2,832
<FN>
(1) Includes cash and amounts due from depository institutions and
interest-bearing deposits in other financial institutions.
(2) Effective January 1, 1993, Home City Federal retroactively adopted Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes". The effect of adopting SFAS No. 109 on income tax
expenses in 1995, 1994, 1993 and 1992 was [not] material.
</TABLE>
Source: Home City Financial Corporation's Prospectus
74
<PAGE> 85
EXHIBIT 6
INCOME AND EXPENSE TRENDS
FOR THE FISCAL YEARS ENDED JUNE 30, 1992 THROUGH 1996
<TABLE>
<CAPTION>
For the years ended June 30,
--------------------------------------------------------
1996 1995 1994 1993 1992
--------- ---------- ---------- --------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
SUMMARY OF EARNINGS:
Interest and dividend income $ 4,507 $ 3,835 $ 3,542 $ 3,565 $ 3,439
Interest expense 2,542 1,942 1,446 1,710 2,370
--------- ---------- ---------- --------- ----------
Net interest income 1,965 1,893 2,096 1,855 1,069
Provision for loan losses 50 109 113 83 52
--------- ---------- ---------- --------- ----------
Net interest income after
provision for loan losses 1,915 1,784 1,983 1,772 1,017
Noninterest income 58 9 12 44 1
Noninterest expense 1,216 998 923 727 845
--------- ---------- ---------- --------- ----------
Income before income tax 757 795 1,072 1,089 173
Income tax expense(1) 243 240 367 424 73
--------- ---------- ---------- --------- ----------
Net income(1) $ 514 $ 555 $ 705 $ 665 $ 100
========= ========== ========== ========= ==========
<FN>
(1) Effective January 1, 1993, Home City Federal retroactively adopted Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes". The effect of adopting SFAS
No. 109 on income tax expense in 1995, 1994, 1993 and 1992 was [not] material.
</TABLE>
Source: Home City Financial Corporation's prospectus
75
<PAGE> 86
EXHIBIT 7
NORMALIZED EARNINGS TREND
FOR THE FISCAL YEARS ENDED JUNE 30, 1994 THROUGH 1996
<TABLE>
<CAPTION>
Fiscal years ended
June 30,
---------------------------------
1996 1995 1994
-------- ------- --------
(In thousands)
<S> <C> <C> <C>
Net income after taxes $ 514 $ 555 $ 705
Net income before taxes and effect
of accounting adjustments 757 795 1,072
Income adjustments (46) 0 0
Expense adjustments 0 0 0
Normalized earnings before taxes 711 795 1,072
Taxes 242 (1) 240 367
---------- ---------- ----------
Normalized earnings after taxes $ 469 $ 555 $ 705
========== ========== ==========
<FN>
(1) Based on tax rate of 34.0 percent
</TABLE>
Source: Home City Federal's audited financials.
76
<PAGE> 87
EXHIBIT 8
PERFORMANCE INDICATORS
FOR THE FISCAL YEARS ENDED JUNE 30, 1992 THROUGH 1996
<TABLE>
<CAPTION>
Years ended June 30,
--------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(In thousands)
SELECTED FINANCIAL RATIOS:
<S> <C> <C> <C> <C> <C>
Return on assets(1) 0.98% 1.24% 1.69% 1.66% 0.26%
Return on equity(2) 10.46% 12.20% 17.23% 21.08% 3.52%
Interest rate spread(3) 3.42% 3.95% 4.88% 4.58% 3.12%
Non interest margin(4) 3.86% 4.36% 5.28% 4.81% 2.92%
Noninterest expense to average assets(5) 2.31% 2.22% 2.28% 1.82% 2.21%
Average equity to average assets 9.55% 10.21% 10.09% 7.88% 7.42%
Equity to assets at period end 9.69% 10.06% 10.87% 8.58% 6.69%
Nonperforming loans to total loans 0.41% 0.53% 0.11% 1.35% 0.17%
Nonperforming assets to total assets 0.44% 0.43% 0.09% 0.96% 0.12%
Allowance for loan losses to total loans 0.79% 0.81% 0.73% 0.69% 0.38%
Allowance for loan losses to
nonperforming loans 146.56% 154.11% 673.53% 50.77% 222.00%
Net charge-offs to average loans 0.02% 0.05% 0.27% (0.01)% -
<FN>
(1) Net income divided by average total assets.
(2) Net income divided by average total equity.
(3) Average yield on interest-earning assets less average cost of interest-bearing liabilities.
(4) Net interest income as a percentage of average interest-earning assets.
(5) Noninterest expense divided by average total assets.
</TABLE>
Source: Home City Financial Corporation's prospectus
77
<PAGE> 88
EXHIBIT 9
VOLUME/RATE ANALYSIS
FOR THE FISCAL YEARS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
Year ended June 30,
------------------------------------------------------------
1996 vs. 1995 1995 vs. 1994
----------------------------- -----------------------------
Increase Increase
(Decrease) (Decrease)
Due to Due to
------------------- -------------------
Volume Rate Total Volume Rate Total
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Interest income attributable to:
Interest-bearing deposits $ 2 $ (13) $ (11) $ 5 $ 16 $ 21
Investment securities (29) 27 (2) (12) 54 42
Mortgage-backed and related securities (40) (25) (65) (53) 13 (40)
Loans receivable 816 (66) 750 488 (218) 270
--------- --------- --------- --------- --------- ---------
Total interest income 749 (77) 672 428 (135) 293
--------- --------- --------- --------- --------- ---------
Interest expense attributable to:
NOW accounts 2 - 2 - - -
Money market accounts 1 - 1 - - -
Passbook savings accounts (91) (53) (144) (197) (17) (214)
Certificates of deposits 491 185 676 426 215 641
Borrowed funds 63 2 65 104 (35) 69
--------- --------- --------- --------- --------- ---------
Total interest expense 466 134 600 333 163 496
--------- --------- --------- --------- --------- ---------
Increase (decrease) in net interest income$ 283 $ (211) $ 72 $ 95 $ (298) $ (203)
========= ========= ========= ========= ========= =========
</TABLE>
Source: Home City Financial Corporation's prospectus
78
<PAGE> 89
EXHIBIT 10
YIELD AND COST TRENDS
FOR FISCAL YEARS JUNE 30, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
Year ended June 30,
------------------------------------
1996 1995 1994
---------- ---------- ---------
Yield/ Yield/ Yield/
Rate Rate Rate
---------- ---------- ---------
<S> <C> <C> <C>
INTEREST-EARNING ASSETS:
Interest-bearing deposits 4.44% 5.36% 4.14%
Investment securities 5.97% 4.84% 3.03%
Mortgage-backed securities 6.21% 6.94% 6.61%
Loans receivable(1) 9.37% 9.52% 10.14%
--------- ---------- ---------
Total interest-earning assets 8.86% 8.83% 8.92%
INTEREST-BEARING LIABILITIES:
NOW accounts 1.37% - -
Money market accounts 2.08% - -
Passbook savings accounts 2.57% 3.12% 3.25%
Certificates of deposit 6.19% 5.65% 4.80%
---------- ---------- ---------
Total deposits 5.37% 4.81% 3.98%
FHLB advances 6.66% 6.57% 8.74%
---------- ---------- ---------
Total interest-bearing liabilities 5.44% 4.88% 4.04%
Net interest rate margin (net interest income as a
percent of average interest-earning assets) 3.86% 4.36% 5.28%
---------- ---------- ---------
Net interest rate spread 3.42% 3.95% 4.88%
---------- ---------- ---------
Average interest-earning assets to interest-bearing
liabilities 108.85% 109.08% 110.83%
========== ========== =========
<FN>
(1) Calculated net of deferred loan fees, loan discounts, loans in process and
allowance for loan losses.
</TABLE>
Source: Home City Financial Corporation's prospectus
79
<PAGE> 90
EXHIBIT 11
INTEREST RATE SENSITIVITY OF NET PORTFOLIO VALUE (NPV)
AT JUNE 30, 1996
<TABLE>
<CAPTION>
June 30, 1996
---------------------------
Change in
interest rate Board limit $ change % change
(basis points) % change in NPV in NPV
---------------- ------------- ------------ -----------
(Dollars in thousands)
<S> <C> <C> <C>
+400 (50.00)% $(3,482) (52.00)%
+300 (35.00)% (2,562) (38.00)%
+200 (25.00)% (1,643) (25.00)%
+100 (10.00)% (772) (12.00)%
0 0.00 % 0 0
-100 (10.00)% 573 9.00 %
-200 (25.00)% 918 14.00 %
-300 (35.00)% 1,394 21.00 %
-400 (50.00)% 1,986 30.00 %
</TABLE>
Source: Home City Financial Corporation's prospectus
80
<PAGE> 91
EXHIBIT 12
LOAN PORTFOLIO COMPOSITION
AT JUNE 30, 1994 THROUGH 1996
<TABLE>
<CAPTION>
At June 30,
------------------------------------------------------------------------
1996 1995 1994
----------------------- ----------------------- ----------------------
Percent Percent Percent
of total of total of total
Amount loans Amount loans Amount loans
----------- ----------- ----------- ----------- ----------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Residential real estate loans:
One- to four-family (first mortgage) $ 31,580 64.89% $ 24,724 58.85% $ 19,784 57.63%
One- to four-family (second mortgage) 313 0.64 232 0.55 121 0.35
Multifamily 3,233 6.64 3,288 7.82 2,581 7.52
Nonresidential real estate loans 7,255 14.91 7,309 17.39 5,197 15.14
Land loans 2,223 4.57 1,684 4.01 1,020 2.97
Construction loans 2,350 4.83 4,582 10.90 5,444 15.86
----------- ----------- ----------- ----------- ----------- ----------
Total real estate loans $ 46,954 96.48% $ 41,819 99.52% 34,147 99.47
Commercial loans 73 0.15 - - - -
Consumer loans:
Loans on deposits 160 0.33 201 0.48 183 0.53
Other consumer loans 1,481 3.04 - - - -
----------- ----------- ----------- ----------- ----------- ----------
Total consumer loans $ 1,714 3.37 $ 201 0.48 183 0.53
----------- ----------- ----------- ----------- ----------- ----------
Total loans 48,668 100.00% 42,020 100.00% 34,330 100.00%
----------- ----------- ----------
Less:
Unearned and deferred (income)
expense, net (447) (420) (324)
Loans in process (2,634) (2,321) (2,674)
Allowance for loan losses (362) (319) (229)
----------- ----------- -----------
Net loans $ 45,225 $ 38,960 $ 31,103
=========== =========== ===========
</TABLE>
Source: Home City Financial Corporation's prospectus
81
<PAGE> 92
EXHIBIT 13
LOAN MATURITY SCHEDULE
AT JUNE 30, 1996
<TABLE>
<CAPTION>
Due during the year ending
June 30, Due 4-5 Due 6-10 Due 11-20 Due more than
--------------------------------------- years after years after years after 20 years after
1997 1998 1999 6/30/96 6/30/96 6/30/96 6/30/96 Total
------------ ------------ ------------ ---------- ---------- ----------- ---------- -----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Residential $ 1,004 $ 8,092 $ 8,223 $ 205 $ 721 $ 9,309 $ 3,549 $ 31,103
Nonresidential 283 585 364 129 3,082 6,465 1,814 12,722
Consumer loans 213 101 151 652 344 200 28 1,689
Commercial loans 50 - 10 13 - - - 73
------------ ------------ ------------ ---------- ---------- ----------- ---------- -----------
Total due after
Gross loans receivable $ 1,550 $ 8,778 $ 8,748 $ 999 $ 4,147 $ 15,974 $ 5,391 $ 45,587
============ ============ ============ ========== ========== =========== ========== ===========
Amount Percent
------------ ------------
Adjustable-rate loans $ 21,300 48.41%
Fixed-rate loans 22,700 51.59%
------------ ------------
Total $ 44,000 100.00%
</TABLE>
Source: Home City Financial Corporation's prospectus
82
<PAGE> 93
EXHIBIT 14
LOAN ORIGINATIONS
FOR THE YEARS ENDED JUNE 30, 1994 THROUGH 1996
<TABLE>
<CAPTION>
Year ended June 30,
-------------------------------------------
1996 1995 1994
------------ ------------ ------------
(In thousands)
<S> <C> <C> <C>
Loans originated:
One- to four-family residential(1) $ 14,091 $ 9,269 $ 11,599
Multifamily residential 280 1,468 516
Nonresidential 2,210 3,303 2,478
Consumer 1,797 37 96
Commercial 133 - -
------------ ------------ ----------
Total loans originated 18,511 14,077 14,689
------------ ------------ ------------
Reductions:
Principal repayments (9,287) (5,623) (11,804)
Sales of loans (2,760) (338) (131)
Increase (decrease) in other items, net(2) (149) (148) (186)
------------ ------------ ------------
Net increase (decrease) $ 6,315 $ 7,968 $ 2,568
============ ============ ============
<FN>
(1) Includes construction loans.
(2) Consists of unearned and deferred fees, costs and the allowance for loan losses.
</TABLE>
Source: Home City Financial Corporation's prospectus
83
<PAGE> 94
EXHIBIT 15
DELINQUENT LOANS AT JUNE 30, 1994 THROUGH 1996
<TABLE>
<CAPTION>
June 30,
--------------------------------------------------------------------------------------------------------
1996 1995 1994
------------------------------------ --------------------------------- -------------------------------
Percent Percent Percent
of total of total of total
Number Amount Loans Number Amount Loans Number Amount Loans
---------- ---------- ----------- ---------- ---------- ---------- --------- ---------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans delinquent for(1):
30 - 59 days 17 $565 1.24% 11 $296 1.01% 26 $804 2.57%
60 - 89 days 4 170 0.37% 4 83 0.28% 5 152 0.49%
90 days and over 14 247 0.54% 14 207 0.71% 4 34 0.11%
---------- ---------- ----------- ---------- ---------- ---------- --------- ---------- --------
Total delinquent loans 35 $982 2.15% 29 $586 2.00% 35 $990 3.17%
========== ========== =========== ========== ========== ========== ========= ========== ========
<FN>
(1) The number of days a loan is delinquent is measured from the day the payment was due under the terms of the loan agreement.
</TABLE>
Source: Home City Financial Corporation's prospectus
84
<PAGE> 95
EXHIBIT 16
NONPERFORMING ASSETS
AT JUNE 30, 1994 THROUGH 1996
<TABLE>
<CAPTION>
At June 30,
---------------------------------------------
1996 1995 1994
------------- ------------- -------------
(In thousands)
<S> <C> <C> <C>
Loans accounted for on a nonaccrual basis:
Real estate:
Residential $ 247 $ 207 $ 34
Nonresidential - - -
Commercial - - -
Consumer - - -
------------- ------------- -------------
Total nonperforming loans 247 207 34
Real Estate Owned - - -
------------- ------------- -------------
Total nonperforming assets $ 247 $ 207 $ 34
============= ============= =============
Total loan loss allowance $ 362 $ 319 $ 229
Total nonperforming assets as a
percentage of total assets 0.44% 0.43% 0.09%
Loan loss allowance as a percent of
nonperforming loans 146.56% 154.11% 673.53%
</TABLE>
Source: Home City Financial Corporation's prospectus
85
<PAGE> 96
EXHIBIT 17
CLASSIFIED ASSETS
AT JUNE 30, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
At June 30,
1996 1995 1994
----------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
Classified Assets:
Substandard $ 518 $ 349 $ 515
Doubtful 19 - -
Loss 102 106 106
----------- ----------- -----------
Total classified assets $ 639 $ 455 $ 621
=========== =========== ===========
</TABLE>
Source: Home City Financial Corporation's prospectus
86
<PAGE> 97
EXHIBIT 18
ALLOWANCE FOR LOAN LOSSES
FOR THE YEARS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
Years ended June 30,
------------------------------------------
1996 1995 1994
------------ ----------- -----------
(In thousands)
<S> <C> <C> <C>
Balance at beginning of period $ 319 $ 229 $ 198
Charge-offs (7) (19) (107)
Recoveries - - 25
Provision for loan losses (charged to operations) 50 109 113
------------ ----------- -----------
Balance at end of period $ 362 $ 319 $ 229
============ =========== ===========
Ratio of net charge-offs (recoveries) to average
net loans outstanding during the period 0.02% 0.05% 0.27%
Ratio of allowance for loan losses to total loans 0.79% 0.81% 0.73%
</TABLE>
Source: Home City Financial Corporation's prospectus
87
<PAGE> 98
EXHIBIT 19
INVESTMENT PORTFOLIO COMPOSITION
AT JUNE 30, 1994 THROUGH 1996
<TABLE>
<CAPTION>
At June 30,
-----------------------------------------------------------------------
1996 1995
---------------------------------- ----------------------------------
Carrying % of Market % of Carrying % of Market % of
Value Total Value Total Value Total Value Total
------- ------ ------ ------ ------ ------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing demand
deposits in other banks $ 588 12.70% $ 588 12.72% $ 307 6.65% $ 307 6.64%
Federal funds sold 400 8.64 400 8.65 1,500 32.50 1,500 32.45
Time deposits in other banks 1,061 22.91 1,053 22.78 360 7.80 360 7.79
Investment securities:
U.S. treasury securities and
obligations of U.S.
government agencies 997 21.53 997 21.57 1,496 32.42 1,496 32.36
Obligations of state and
local governments 883 19.06 883 19.10 405 8.78 413 8.93
Equity securities 270 5.83 270 5.84 221 4.79 221 4.78
Investment in joint venture(1) 18 0.39 18 0.39 18 0.39 18 0.39
Service corporation(2) 20 0.43 20 0.43 20 0.43 20 0.43
Stock in FHLB 394 8.51 394 8.52 288 6.24 288 6.23
------ ------ ------ ------ ------ ------ ------ ------
Total interest-bearing deposits
and investment securities $4,631 100.00% $4,623 100.00% $4,615 100.00% $4,623 100.00%
====== ====== ====== ====== ====== ====== ====== ======
<CAPTION>
At June 30,
----------------------------------
1994
----------------------------------
Carrying % of Market % of
Value Total Value Total
------ ------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest-bearing demand
deposits in other banks $ 77 2.42% $ 77 2.42%
Federal funds sold 450 14.12 450 14.15
Time deposits in other banks 0 -- 0 --
Investment securities:
U.S. treasury securities and
obligations of U.S.
government agencies 2,098 65.83 2,092 65.77
Obligations of state and
local governments -- -- -- --
Equity securities 273 8.57 273 8.58
Investment in joint venture(1) 18 0.56 18 0.56
Service corporation(2) 23 0.72 23 0.72
Stock in FHLB 248 7.78 248 7.80
------ ------ ------ ------
Total interest-bearing deposits
and investment securities $3,187 100.00% $3,181 100.00%
====== ====== ====== ======
<CAPTION>
At June 30,
--------------------------------------
1996 1995 1994
------ ------ ------
(In thousands)
<S> <C> <C> <C>
GNMA certificates $2,946 $3,634 $4,217
FHLMC certificates 29 33 40
------ ------ ------
Total mortgage-backed
securities $2,975 $3,667 $4,257
====== ====== ======
<FN>
(1) Home City has a 50 percent ownership interest in a joint venture that is
primarily involved in the development of low income housing.
(2) Home City owns 100 percent of Homciti Service Corp which in turn holds
common shares of Intrieve, a data service provider and 0.875 percent
ownership in a joint venture which owns the Springfield Inn, a local
hotel.
</TABLE>
Source: Home City Financial Corporation's prospectus
<PAGE> 99
EXHIBIT 20
MIX OF DEPOSITS
AT JUNE 30, 1994 THROUGH 1996
<TABLE>
<CAPTION>
At June 30,
------------------------------------------------------------------------------
1996 1995 1994
------------------------- ------------------------- -------------------------
Percent Percent Percent
of total of Total of Total
Amount deposits Amount deposits Amount deposits
------------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Transaction accounts:
Demand $ 302 0.64% $ - - % $ - - %
NOW accounts(1) 395 0.84 - - - -
Passbook savings accounts(2) 9,561 20.27 10,500 25.65 15,128 43.45
------------- ----------- ------------- ----------- ------------- -----------
Total transaction accounts 10,258 21.75 10,500 25.65 15,128 43.45
Certificate of deposit:
2.01 to 4.00% - - 600 1.47 5,873 16.87
4.01 to 6.00% 15,810 33.51 13,287 32.46 10,849 31.16
6.01 to 8.00% 21,106 44.74 16,549 40.42 2,966 8.52
------------- ----------- ------------- ----------- ------------- -----------
Total certificates of deposit 36,916 78.25 30,436 74.35 19,688 56.55
Total deposits(3) $ 47,174 100.00% $ 40,936 100.00% $ 34,816 100.00%
============= =========== ============= =========== ============= ===========
<FN>
(1) Home City's weighted average interest rate paid on NOW accounts fluctuates
with the general movement of interest rates. At June 30, 1996, 1995 and
1994, the weighted average rates on NOW accounts were 1.41%, 0% and 0%,
respectively.
(2) Home City's weighted average rate on passbook savings accounts fluctuates
with the general movement of interest rates. The weighted average interest
rate on passbook accounts was 2.52%, 2.97% and 3.41% at June 30, 1996,
1995 and 1994, respectively.
(3) IRAs are included in the various certificates of deposit balances. IRAs
totaled $5,535,000, $4,441,000, and $2,733,000 as of June 30, 1996, 1995
and 1994.
</TABLE>
Source: Home City Financial Corporation's prospectus
89
<PAGE> 100
EXHIBIT 21
DEPOSIT ACTIVITY
FOR THE YEARS ENDED JUNE 30, 1994 THROUGH 1996
<TABLE>
<CAPTION>
Year ended June 30,
----------------------------------------------
1996 1995 1994
------------- ------------- -------------
(In thousands)
<S> <C> <C> <C>
Beginning balance $ 40,936 $ 34,816 $ 36,688
Deposits 42,110 24,327 15,447
Withdrawals (38,242) (20,052) (18,727)
------------- ------------- -------------
Net increase (decrease) before
interest credited 3,868 4,275 (3,280)
Interest credited 2,370 1,845 1,408
------------- ------------- -------------
Ending balance $ 47,174 $ 40,936 $ 34,816
============= ============= =============
Net increase (decrease) $ 6,238 $ 6,120 $ (1,872)
Percent increase (decrease) 15.24% 17.58% (5.10)%
</TABLE>
Source: Home City Financial Corporation's prospectus
90
<PAGE> 101
EXHIBIT 22
BORROWED FUNDS
FOR THE YEARS ENDED JUNE 30, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
At or for the year ended
June 30,
-----------------------------------
1996 1995 1994
---------- ---------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Average balance outstanding $ 2,582 $ 1,628 $ 435
Maximum amount outstanding at any
month during the period 3,564 2,715 457
Balance outstanding at end of period 2,903 2,618 424
Weighted average interest rate during the period 6.66% 6.57% 8.74%
Weighted average interest rate at end of period 6.49% 6.69% 5.91%
</TABLE>
Source: Home City Financial Corporation's prospectus
91
<PAGE> 102
EXHIBIT 23
LIST OF KEY OFFICERS AND DIRECTORS
JUNE 30, 1996
<TABLE>
<CAPTION>
Year of
Term Commencement
Name Expires Age(1) Position(s) Held with the Bank of Directorship
- --------------------------- ------------ ---------- ------------------------------------- -------------------
<S> <C> <C> <C> <C>
P. Clark Engelmeier 1997 65 Director, Chairman 1977
Douglas L. Ulery 1999 49 Director, President, CEO 1993
James Foreman 1997 56 Director 1995
Terry A. Hoppes 1999 47 Director 1994
John D. Conroy 1998 46 Director 1988
JoAnn Holdeman - 40 Vice President and Secretary -
Gary A. Brown - 56 Vice President and Treasurer -
<FN>
(1) At June 30, 1996
</TABLE>
Source: Home City Financial Corporation's prospectus
92
<PAGE> 103
EXHIBIT 24
KEY DEMOGRAPHIC DATA AND TRENDS
CLARK COUNTY, OHIO AND THE UNITED STATES
1990, 1995 AND 2000
<TABLE>
<CAPTION>
1990 1995 % Chg. 2000 % Chg.
---- ---- ------ ---- ------
<S> <C> <C> <C> <C> <C>
Population
- ----------
Clark County 147,548 147,906 0.2% 148,255 0.2%
Ohio 10,847,115 11,151,720 2.8% 11,457,175 2.7%
United States 248,709,873 263,006,245 5.7% 277,083,635 5.4%
Households
- ----------
Clark County 55,198 55,351 0.3% 55,482 0.2%
Ohio 4,087,546 4,198,418 2.7% 4,311,607 2.7%
United States 91,947,410 97,069,804 5.6% 102,201,641 5.3%
Per Capita Income
- -----------------
Clark County $ 11,587 $ 14,727 27.1% --- ---
Ohio 12,788 15,708 22.8% --- ---
United States 12,313 16,405 33.2% --- ---
Median Household Income
- -----------------------
Clark County $ 27,868 $ 32,325 16.0% $ 31,771 (1.7)%
Ohio 29,276 33,038 12.9% 32,477 (1.7)%
United States 28,255 33,610 19.0% 32,972 (1.9)%
</TABLE>
Source: Data Users Center and CACI
93
<PAGE> 104
EXHIBIT 25
KEY HOUSING DATA
CLARK COUNTY, OHIO AND THE UNITED STATES
1990
<TABLE>
<CAPTION>
<S> <C>
Occupied Housing Units
- ----------------------
Clark County 55,198
Ohio 4,087,546
United States 91,947,410
Occupancy Rate
- --------------
Clark County
Owner-Occupied 69.1%
Renter-Occupied 30.9%
Ohio
Owner-Occupied 67.5%
Renter-Occupied 32.5%
United States
Owner-Occupied 64.2%
Renter-Occupied 35.8%
Median Housing Values
- ---------------------
Clark County $ 54,900
Ohio 63,457
United States 79,098
Median Rent
- -----------
Clark County $ 256
Ohio 296
United States 374
</TABLE>
Source: U.S. Department of Commerce and CACI Sourcebook
94
<PAGE> 105
EXHIBIT 26
MAJOR SOURCES OF EMPLOYMENT BY INDUSTRY GROUP
CLARK COUNTY, OHIO AND THE UNITED STATES
1993
<TABLE>
<CAPTION>
Clark United
Industry Group County Ohio States
- -------------- ------ ---- ------
<S> <C> <C> <C>
Agriculture/Mining 0.5% 0.9% 1.3%
Construction 3.5% 4.2% 4.8%
Manufacturing 27.3% 24.5% 19.2%
Transportation/Utilities 4.8% 4.9% 5.9%
Wholesale/Retail 30.4% 27.7% 27.5%
Finance, Insurance, &
Real Estate 3.2% 6.2% 7.3%
Services 30.1% 31.6% 34.0%
</TABLE>
Source: Bureau of the Census County Business Patterns
95
<PAGE> 106
EXHIBIT 27
NEW HOUSING PERMITS
CLARK COUNTY, OHIO AND THE UNITED STATES
1991-1993
New Housing Permits
1-4 Family Homes
<TABLE>
<CAPTION>
1991 1992 % Chg. 1993 % Chg.
-------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Clark County 423 422 (0.2)% 426 0.9%
Ohio 29,542 34,361 16.3% 37,477 9.1%
United States 796,647 956,494 20.1% 1,038,907 8.6%
</TABLE>
Source: Bureau of the Census
Commercial Permit Valuations
(In millions of dollars)
<TABLE>
<CAPTION>
1991 1992 % Chg. 1993 % Chg.
-------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Clark County N/A N/A N/A N/A N/A
Ohio $ 2,300 $ 2,344 1.9% $ 2,316 (1.2)%
United States 56,862 56,798 (0.1)% 61,427 8.1%
</TABLE>
N/A = Not Available
Source: Commerce Department Construction Review
96
<PAGE> 107
EXHIBIT 28
UNEMPLOYMENT RATES
CLARK COUNTY, OHIO AND THE UNITED STATES
1994, 1995 AND 1996
<TABLE>
<CAPTION>
Location 1994 1995 1996*
- -------- ---- ---- -----
<S> <C> <C> <C>
Clark County 4.9% 4.6% 5.7%
Ohio 5.5% 4.9% 5.0%
United States 6.1% 5.2% 5.5%
* June 1996
</TABLE>
Source: Ohio Bureau of Employment Services
97
<PAGE> 108
EXHIBIT 29
MARKET SHARE OF DEPOSITS
CLARK COUNTY
<TABLE>
<CAPTION>
Clark Home City Home City
County's Federal Savings Federal Savings
Deposits Bank's Share Bank's Share
($000) ($000) (%)
------------------ ------------------ ------------------
<S> <C> <C> <C>
Banks $ 974,704 --- ---
Thrifts 200,053 $ 40,936 20.5%
Credit Unions 98,381 --- ---
------------------ ------------------ ------------------
$ 1,273,138 $ 40,936 3.2%
</TABLE>
Source: Sheshunoff
98
<PAGE> 109
EXHIBIT 30
NATIONAL INTEREST RATES BY QUARTER
1992-1996
<TABLE>
<CAPTION>
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1992 1992 1992 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
Prime Rate 6.50% 6.50% 6.00% 6.00%
90-Day Treasury Bills 4.14% 3.63% 2.73% 3.13%
1-Year Treasury Bills 4.49% 4.03% 3.04% 3.57%
30-Year Treasury Bills 7.98% 7.78% 7.67% 7.39%
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1993 1993 1993 1993
---- ---- ---- ----
Prime Rate 6.00% 6.00% 6.00% 6.00%
90-Day Treasury Bills 2.93% 3.07% 2.96% 3.05%
1-Year Treasury Bills 3.27% 3.43% 3.35% 3.58%
30-Year Treasury Bills 6.92% 6.67% 6.03% 6.35%
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1994 1994 1994 1994
---- ---- ---- ----
Prime Rate 6.25% 7.25% 7.75% 8.50%
90-Day Treasury Bills 3.54% 4.23% 5.14% 5.66%
1-Year Treasury Bills 4.40% 5.49% 6.13% 7.15%
30-Year Treasury Bills 7.11% 7.43% 7.82% 7.88%
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1995 1995 1995 1995
---- ---- ---- ----
Prime Rate 9.00% 9.00% 8.75% 8.50%
90-Day Treasury Bills 5.66% 5.58% 5.40% 5.06%
1-Year Treasury Bills 6.51% 5.62% 5.45% 5.14%
30-Year Treasury Bills 7.43% 6.71% 5.69% 5.97%
1st Qtr. 2nd Qtr.
1996 1996
---- ----
Prime Rate 8.25% 8.25%
90-Day Treasury Bills 5.18% 5.25%
1-Year Treasury Bills 5.43% 5.91%
30-Year Treasury Bills 6.73% 7.14%
</TABLE>
Source: The Wall Street Journal
-----------------------
99
<PAGE> 110
KELLER & COMPANY Page 1
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
PER SHARE
--------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly Book 12 Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
----- -------- ---------------- --------------- -------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PLE Pinnacle Bank AL AMSE 17.625 19.250 4.000 4.44 10.16 17.04 209.56 0.72
SRN Southern Banc Company, Inc AL AMSE 13.250 13.375 11.375 4.95 0.00 15.32 75.45 NA
SZB SouthFirst Bancshares, Inc AL AMSE 12.750 16.000 10.625 2.00 6.25 15.12 104.89 2.48
VAFD Valley Federal Savings Bank AL NASDAQ 39.000 39.000 8.500 25.81 21.88 26.15 323.08 0.60
FFBH First Federal Bancshares of AR AR NASDAQ 15.000 15.000 12.750 11.11 9.09 16.19 97.98 NA
FTF Texarkana First Financial AR AMSE 14.125 16.875 10.000 -8.87 -13.74 16.93 84.04 NA
AHM Ahmanson & Company (H.F.) CA NYSE 25.375 28.625 2.688 -2.40 -5.58 19.78 461.87 0.88
AFFFZ America First Financial Fund CA NASDAQ 30.250 30.750 14.500 6.14 16.35 25.86 378.34 1.60
BPLS Bank Plus Corp. CA NASDAQ 10.000 14.000 5.000 -3.61 8.11 9.55 180.71 0.00
BVFS Bay View Capital Corp. CA NASDAQ 37.625 38.250 11.250 5.61 12.73 29.94 492.19 0.60
BYFC Broadway Financial Corp. CA NASDAQ 9.750 11.000 9.750 -2.50 -2.50 14.61 125.31 NA
CAL Cal Fed Bancorp, Inc. CA NYSE 23.000 200.000 6.250 1.66 21.05 13.83 284.34 0.00
CFHC California Financial Holding CA NASDAQ 22.813 23.125 5.909 3.70 11.28 18.54 283.06 0.44
CENF CENFED Financial Corp. CA NASDAQ 24.250 24.250 5.000 5.43 15.48 21.27 426.22 0.33
CSA Coast Savings Financial CA NYSE 31.375 35.125 1.625 -5.64 -6.69 23.13 449.36 0.00
DSL Downey Financial Corp. CA NYSE 24.750 26.190 2.081 5.88 13.14 23.09 277.64 0.47
FSSB First FS&LA of San Bernardino CA NASDAQ 9.875 14.500 6.875 -1.25 -1.25 14.43 312.02 0.00
FED FirstFed Financial Corp. CA NYSE 18.375 26.600 1.125 3.52 5.76 17.96 390.61 0.00
GLN Glendale Federal Bank, FSB CA NYSE 17.500 589.500 5.250 -3.45 -6.67 14.97 309.37 0.00
GDW Golden West Financial CA NYSE 55.000 58.000 3.875 -4.14 0.00 40.78 617.63 0.37
GWF Great Western Financial CA NYSE 25.000 27.125 3.950 2.04 4.71 18.49 318.21 0.94
HTHR Hawthorne Financial Corp. CA NASDAQ 7.500 35.500 2.250 -14.29 0.00 13.29 292.87 0.00
HEMT HF Bancorp, Inc. CA NASDAQ 9.375 10.250 8.188 -1.97 -5.06 12.91 131.64 0.00
HBNK Highland Federal Bank FSB CA NASDAQ 14.250 17.000 11.000 -3.39 -12.98 15.20 192.18 0.00
MBBC Monterey Bay Bancorp, Inc. CA NASDAQ 13.250 13.500 8.750 7.61 11.58 15.28 95.96 0.00
NHSL NHS Financial, Inc. CA NASDAQ 11.125 11.250 3.696 1.14 2.30 9.92 112.65 0.16
PSSB Palm Springs Savings Bank CA NASDAQ 14.031 14.125 4.500 -0.67 2.04 10.60 165.64 0.12
PFFB PFF Bancorp, Inc. CA NASDAQ 11.625 11.750 10.375 3.33 5.11 14.64 108.19 NA
PROV Provident Financial Holding CA NASDAQ 11.250 11.375 10.125 2.27 NA NA NA NA
QCBC Quaker City Bancorp, Inc. CA NASDAQ 14.313 15.000 7.500 -4.58 -0.43 17.81 190.13 0.00
REDF RedFed Bancorp Inc. CA NASDAQ 10.125 14.500 7.750 9.46 3.85 12.11 205.79 0.00
SGVB SGV Bancorp, Inc. CA NASDAQ 8.813 10.125 7.750 -3.42 3.68 11.94 122.11 NA
WES Westcorp CA NYSE 20.875 21.905 3.703 15.97 7.05 12.04 116.54 0.36
FFBA First Colorado Bancorp, Inc CO NASDAQ 14.000 14.500 3.189 -1.75 4.17 12.17 74.57 NA
<CAPTION>
PRICING RATIOS
--------------------------------------
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
(X) (%) (%) (X)
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PLE Pinnacle Bank 9.58 103.43 8.41 10.75
SRN Southern Banc Company, Inc NA 86.49 17.56 NA
SZB SouthFirst Bancshares, Inc 21.61 84.33 12.16 37.50
VAFD Valley Federal Savings Bank 68.42 149.14 12.07 79.59
FFBH First Federal Bancshares of AR NA 92.65 15.31 NA
FTF Texarkana First Financial NA 83.43 16.81 NA
AHM Ahmanson & Company (H.F.) 7.51 128.29 5.49 32.53
AFFFZ America First Financial Fund 9.63 116.98 8.00 9.70
BPLS Bank Plus Corp. NM 104.71 5.53 NM
BVFS Bay View Capital Corp. 129.74 125.67 7.64 24.27
BYFC Broadway Financial Corp. NA 66.74 7.78 NA
CAL Cal Fed Bancorp, Inc. 11.17 166.31 8.09 12.78
CFHC California Financial Holding 14.91 123.05 8.06 16.65
CENF CENFED Financial Corp. 10.78 114.01 5.69 14.88
CSA Coast Savings Financial 14.59 135.65 6.98 15.93
DSL Downey Financial Corp. 12.96 107.19 8.91 14.56
FSSB First FS&LA of San Bernardino NM 68.43 3.16 NM
FED FirstFed Financial Corp. 20.19 102.31 4.70 20.88
GLN Glendale Federal Bank, FSB 50.00 116.90 5.66 26.52
GDW Golden West Financial 11.41 134.87 8.91 11.63
GWF Great Western Financial 11.90 135.21 7.86 12.76
HTHR Hawthorne Financial Corp. NM 56.43 2.56 NM
HEMT HF Bancorp, Inc. 28.41 72.62 7.12 28.41
HBNK Highland Federal Bank FSB 19.52 93.75 7.41 19.79
MBBC Monterey Bay Bancorp, Inc. 40.15 86.71 13.81 41.41
NHSL NHS Financial, Inc. 21.39 112.15 9.88 21.39
PSSB Palm Springs Savings Bank 13.11 132.37 8.47 15.94
PFFB PFF Bancorp, Inc. NA 79.41 10.74 NA
PROV Provident Financial Holdings NA NA NA NA
QCBC Quaker City Bancorp, Inc. 15.56 80.36 7.53 16.08
REDF RedFed Bancorp Inc. NM 83.61 4.92 NM
SGVB SGV Bancorp, Inc. NA 73.81 7.22 NA
WES Westcorp 13.82 173.38 17.91 34.22
FFBA First Colorado Bancorp, Inc NA 115.04 18.77 NA
</TABLE>
100
<PAGE> 111
KELLER & COMPANY Page 2
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
PER SHARE
---------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly Book 12 Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
----- -------- ---------------- --------------- -------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MORG Morgan Financial Corp. CO NASDAQ 13.000 13.000 6.750 6.12 6.12 12.42 88.88 0.81
EGFC Eagle Financial Corp. CT NASDAQ 25.250 27.750 6.198 3.06 9.78 22.66 310.49 0.90
FFES First Federal of East Hartford CT NASDAQ 19.500 21.500 4.000 11.43 14.71 21.95 364.96 0.58
NTMG Nutmeg Federal S&LA CT NASDAQ 7.250 8.000 4.645 0.00 -3.33 7.35 128.36 0.04
WBST Webster Financial Corporation CT NASDAQ 32.000 32.750 3.864 9.87 14.29 24.42 473.65 0.64
IFSB Independence Federal Savings DC NASDAQ 7.125 10.250 0.250 -1.72 -3.39 13.44 197.80 0.22
BANC BankAtlantic Bancorp, Inc. FL NASDAQ 12.375 12.800 0.223 6.45 9.51 9.49 132.34 0.14
BKUNA BankUnited Financial Corp. FL NASDAQ 7.625 12.750 2.320 3.39 -1.61 7.95 140.56 0.00
FFFG F.F.O. Financial Group, Inc FL NASDAQ 2.750 10.000 0.563 4.76 2.23 2.27 36.42 0.00
FFLC FFLC Bancorp, Inc. FL NASDAQ 18.250 20.250 12.750 0.00 -1.67 21.54 126.81 0.34
FFML First Family Financial Corp FL NASDAQ 21.500 23.000 5.000 0.00 1.78 16.92 286.04 0.16
FFPB First Palm Beach Bancorp, FL NASDAQ 22.875 24.875 14.000 9.58 7.65 21.93 277.55 0.35
FFPC Florida First Bancorp, Inc FL NASDAQ 11.125 11.250 0.750 0.00 1.14 6.31 89.43 0.24
HOFL Home Financial Corp. FL NASDAQ 13.875 16.250 5.803 -2.63 -0.89 12.86 49.19 0.75
SCSL Suncoast Savings and Loan FL NASDAQ 7.000 10.682 1.250 3.70 8.19 6.66 201.59 0.00
CCFH CCF Holding Company GA NASDAQ 12.375 12.750 10.750 0.00 7.61 14.86 70.15 NA
EBSI Eagle Bancshares GA NASDAQ 16.000 19.000 1.875 5.35 -3.03 12.57 136.52 0.54
FGHC First Georgia Holding, Inc GA NASDAQ 7.000 7.833 1.222 16.67 3.70 5.92 71.17 0.07
FLFC First Liberty Financial Corp. GA NASDAQ 22.750 25.000 4.000 10.98 3.41 17.09 247.67 0.52
FLAG FLAG Financial Corp. GA NASDAQ 10.500 15.000 3.200 -14.29 -17.65 10.72 112.35 0.31
NFSL Newnan Savings Bank, FSB GA NASDAQ 22.500 23.000 2.955 15.38 13.92 14.22 111.14 0.38
CASH First Midwest Financial, Inc. IA NASDAQ 23.250 24.250 13.250 6.90 -1.06 21.94 192.34 0.41
GFSB GFS Bancorp, Inc. IA NASDAQ 21.000 21.000 11.000 2.44 2.44 19.52 163.47 0.33
HZFS Horizon Financial Svcs Corp. IA NASDAQ 14.500 16.375 10.375 3.57 -6.45 18.73 164.01 0.32
MFCX Marshalltown Financial Corp. IA NASDAQ 16.250 16.750 8.500 3.17 4.84 13.86 88.78 0.00
MIFC Mid-Iowa Financial Corp. IA NASDAQ 6.500 7.875 2.474 1.96 4.00 6.42 68.49 0.08
MWBI Midwest Bancshares, Inc. IA NASDAQ 24.500 27.125 11.750 0.00 -4.85 26.46 396.78 0.52
FFFD North Central Bancshares, IA NASDAQ 11.875 12.683 8.071 2.70 11.76 13.90 48.44 NA
PMFI Perpetual Midwest Financial IA NASDAQ 17.250 17.750 10.000 -2.82 1.47 17.90 192.79 0.23
SFFC StateFed Financial Corporation IA NASDAQ 16.000 19.750 10.500 1.59 0.00 18.35 94.29 0.40
AVND Avondale Financial Corp. IL NASDAQ 14.125 15.250 11.500 2.73 4.63 16.33 164.52 0.00
CBCI Calumet Bancorp, Inc. IL NASDAQ 28.000 28.500 10.333 0.90 0.00 33.23 206.72 0.00
CBSB Charter Financial, Inc. IL NASDAQ 11.625 12.250 6.361 1.09 -2.11 13.08 75.29 NA
CBK Citizens First Financial Corp IL AMSE 10.875 11.000 9.500 6.10 8.75 14.43 87.98 NA
<CAPTION>
PRICING RATIOS
----------------------------------------
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
(X) (%) (%) (X)
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
ORG Morgan Financial Corp. 15.12 104.67 14.63 15.66
GFC Eagle Financial Corp. 7.11 111.43 8.13 14.11
FES First Federal of East Hartford 10.26 88.84 5.34 10.37
TMG Nutmeg Federal S&LA 12.08 98.64 5.65 21.97
BST Webster Financial Corporation 13.11 131.04 6.76 12.45
FSB Independence Federal Savings 8.28 53.01 3.60 18.27
ANC BankAtlantic Bancorp, Inc. 10.06 130.40 9.35 13.03
KUNA BankUnited Financial Corp. 5.45 95.91 5.42 NM
FFG F.F.O. Financial Group, Inc 16.18 121.15 7.55 13.10
FLC FFLC Bancorp, Inc. 15.60 84.73 14.39 15.60
FML First Family Financial Corp 8.27 127.07 7.52 14.83
FPB First Palm Beach Bancorp, 11.98 104.31 8.24 12.71
FPC Florida First Bancorp, Inc 13.73 176.31 12.44 14.83
OFL Home Financial Corp. 21.35 107.89 28.21 17.13
CSL Suncoast Savings and Loan 11.48 105.11 3.47 NM
CFH CCF Holding Company NA 83.28 17.64 NA
BSI Eagle Bancshares 10.88 127.29 11.72 11.03
GHC First Georgia Holding, Inc 12.07 118.24 9.84 12.96
LFC First Liberty Financial Corp. 10.34 133.12 9.19 12.36
LAG FLAG Financial Corp. 11.29 97.95 9.35 13.29
FSL Newnan Savings Bank, FSB 9.18 158.23 20.24 10.51
ASH First Midwest Financial, Inc. 13.29 105.97 12.09 13.44
FSB GFS Bancorp, Inc. 12.21 107.58 12.85 12.57
ZFS Horizon Financial Svcs Corp. 17.26 77.42 8.84 21.32
FCX Marshalltown Financial Corp. 50.78 117.24 18.30 54.17
IFC Mid-Iowa Financial Corp. 10.83 101.25 9.49 11.02
WBI Midwest Bancshares, Inc. 6.84 92.59 6.17 9.84
FFD North Central Bancshares, NA 85.43 24.51 NA
MFI Perpetual Midwest Financial 23.31 96.37 8.95 26.14
FFC StateFed Financial Corporation 14.41 87.19 16.97 14.41
VND Avondale Financial Corp. 15.19 86.50 8.59 21.08
BCI Calumet Bancorp, Inc. 11.97 84.26 13.54 11.97
BSB Charter Financial, Inc. NA 88.88 15.44 NA
BK Citizens First Financial Corp NA 75.36 12.36 NA
</TABLE>
<PAGE> 112
KELLER & COMPANY Page 3
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
PER SHARE
---------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly Book 12 Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
----- -------- ---------------- --------------- -------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CSBF CSB Financial Group, Inc. IL NASDAQ 9.125 9.625 8.810 1.39 1.39 12.40 40.12 NA
DFIN Damen Financial Corp. IL NASDAQ 11.375 11.940 11.000 -0.55 -1.09 13.85 59.81 NA
EGLB Eagle BancGroup, Inc. IL NASDAQ 11.875 11.875 10.500 2.15 NA NA NA NA
FBCI Fidelity Bancorp, Inc. IL NASDAQ 16.750 17.063 9.500 4.28 0.75 16.99 155.90 0.22
FNSC Financial Security Corp. IL NASDAQ 25.750 26.500 11.875 -0.96 1.48 25.69 166.65 0.00
FFBI First Financial Bancorp, Inc. IL. NASDAQ 15.500 16.250 9.000 0.00 0.00 16.90 202.80 0.00
FMBD First Mutual Bancorp, Inc. IL NASDAQ 13.063 14.750 11.125 4.50 4.50 16.83 73.11 NA
FFDP FirstFed Bancshares IL NASDAQ 16.500 17.625 8.000 1.54 3.13 16.12 186.84 0.30
GTPS Great American Bancorp IL NASDAQ 13.500 15.125 11.875 0.00 -4.42 18.01 64.67 0.38
HNFC Hinsdale Financial Corp. IL NASDAQ 23.500 26.750 9.000 0.53 0.00 20.62 246.26 0.00
HMCI HomeCorp, Inc. IL NASDAQ 18.250 18.875 5.000 1.39 1.39 18.72 300.36 0.00
KNK Kankakee Bancorp, Inc. IL AMSE 20.250 21.000 13.625 6.58 4.52 24.76 250.52 0.40
LBCI Liberty Bancorp, Inc. IL NASDAQ 24.000 30.625 12.750 1.05 5.49 25.84 262.90 0.60
MAFB MAF Bancorp, Inc. IL NASDAQ 26.500 26.810 2.727 4.95 8.16 23.42 301.45 0.32
NBSI North Bancshares, Inc. IL NASDAQ 15.750 16.250 11.000 -3.08 -0.79 16.62 107.25 0.20
PFED Park Bancorp, Inc. IL NASDAQ 10.313 10.625 10.188 NA NA NA NA NA
SWBI Southwest Bancshares IL NASDAQ 26.875 28.250 11.750 -0.92 -0.92 22.30 198.77 1.06
SPBC St. Paul Bancorp, Inc. IL NASDAQ 26.250 27.000 3.833 9.95 9.38 20.88 241.13 0.35
STND Standard Financial, Inc. IL NASDAQ 16.250 16.500 9.125 0.00 6.56 16.29 139.15 0.16
SFSB SuburbFed Financial Corp. IL NASDAQ 17.250 18.167 6.667 5.34 -2.13 20.72 301.02 0.32
WCBI Westco Bancorp IL NASDAQ 21.500 22.000 7.667 0.00 -2.27 18.40 119.07 0.45
FBCV 1ST Bancorp IN NASDAQ 31.500 34.286 4.190 8.62 12.50 32.60 395.29 0.39
AMFC AMB Financial Corp. IN NASDAQ 10.438 11.000 9.750 -0.59 -0.59 14.42 70.64 NA
ASBI Ameriana Bancorp IN NASDAQ 13.250 14.438 2.750 0.00 1.92 13.51 121.72 0.54
ATSB AmTrust Capital Corp. IN NASDAQ 9.000 11.250 7.750 0.00 -10.00 13.32 128.88 0.00
CBCO CB Bancorp, Inc. IN NASDAQ 19.000 19.250 7.125 7.04 9.35 16.44 166.49 0.00
CBIN Community Bank Shares IN NASDAQ 12.875 14.750 12.000 -0.96 -5.50 13.00 117.63 0.32
FFWC FFW Corp. IN NASDAQ 19.500 20.000 12.500 -2.50 -1.27 21.74 211.61 0.51
FFED Fidelity Federal Bancorp IN NASDAQ 11.000 14.773 1.534 2.33 -8.33 5.73 105.09 0.79
FISB First Indiana Corporation IN NASDAQ 22.938 25.190 1.797 0.83 -6.38 16.40 177.60 0.51
HFGI Harrington Financial Group IN NASDAQ 10.500 11.000 9.875 5.00 1.20 7.10 128.41 0.00
HBFW Home Bancorp IN NASDAQ 16.375 16.375 12.500 3.97 11.02 16.96 109.43 0.05
HBBI Home Building Bancorp IN NASDAQ 18.250 21.250 10.000 2.82 3.17 20.13 130.06 0.30
HOMF Home Federal Bancorp IN NASDAQ 26.250 27.750 3.222 -0.94 2.94 23.14 282.99 0.45
<CAPTION>
PRICING RATIOS
--------------------------------------
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
(X) (%) (%) (X)
-------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
CSBF CSB Financial Group, Inc. NA 73.59 22.74 NA
DFIN Damen Financial Corp. NA 82.13 19.02 NA
EGLB Eagle BancGroup, Inc. NA NA NA NA
FBCI Fidelity Bancorp, Inc. 17.09 98.59 10.74 17.09
FNSC Financial Security Corp. 19.36 100.23 15.45 16.30
FFBI First Financial Bancorp, Inc. 13.14 91.72 7.64 14.90
FMBD First Mutual Bancorp, Inc. NA 77.62 17.87 NA
FFDP FirstFed Bancshares 17.74 102.36 8.83 33.67
GTPS Great American Bancorp 32.14 74.96 20.88 32.93
HNFC Hinsdale Financial Corp. 15.16 113.97 9.54 16.91
HMCI HomeCorp, Inc. 15.87 97.49 6.08 25.00
KNK Kankakee Bancorp, Inc. 15.94 81.79 8.08 15.94
LBCI Liberty Bancorp, Inc. 18.05 92.88 9.13 18.05
MAFB MAF Bancorp, Inc. 9.60 113.15 8.79 9.53
NBSI North Bancshares, Inc. 28.64 94.77 14.69 31.50
PFED Park Bancorp, Inc. NA NA NA NA
SWBI Southwest Bancshares 13.71 120.52 13.52 13.78
SPBC St. Paul Bancorp, Inc. 13.67 125.72 10.89 13.96
STND Standard Financial, Inc. 15.93 99.75 11.68 17.47
SFSB SuburbFed Financial Corp. 12.87 83.25 5.73 14.74
WCBI Westco Bancorp 15.58 116.85 18.06 15.36
FBCV 1ST Bancorp 3.65 96.63 7.97 NM
AMFC AMB Financial Corp. NA 72.39 14.78 NA
ASBI Ameriana Bancorp 13.52 98.08 10.89 13.80
ATSB AmTrust Capital Corp. 25.00 67.57 6.98 100.00
CBCO CB Bancorp, Inc. 9.05 115.57 11.41 9.13
CBIN Community Bank Shares 13.55 99.04 10.95 13.84
FFWC FFW Corp. 9.15 89.70 9.22 9.51
FFED Fidelity Federal Bancorp 9.40 191.97 10.47 11.00
FISB First Indiana Corporation 11.24 139.87 12.92 13.49
HFGI Harrington Financial Group 18.42 147.89 8.18 17.21
HBFW Home Bancorp 18.61 96.55 14.96 18.61
HBBI Home Building Bancorp 30.93 90.66 14.03 33.18
HOMF Home Federal Bancorp 8.15 113.44 9.28 9.62
</TABLE>
102
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KELLER & COMPANY Page 4
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
PER SHARE
---------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly Book 12 Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
----- -------- ---------------- --------------- -------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HWEN Home Financial Bancorp IN NASDAQ 12.750 13.750 9.875 8.51 NA NA NA NA
INCB Indiana Community Bank, SB IN NASDAQ 13.250 16.750 11.000 0.00 -5.36 15.35 102.46 0.33
IFSL Indiana Federal Corporation IN NASDAQ 20.000 21.500 4.000 8.11 3.90 14.84 156.92 0.79
LOGN Logansport Financial Corp. IN NASDAQ 14.000 14.000 11.250 12.00 6.67 14.99 58.37 0.40
MARN Marion Capital Holdings IN NASDAQ 20.250 21.000 14.250 1.25 1.25 21.47 91.94 0.74
MFBC MFB Corp. IN NASDAQ 15.500 16.250 10.500 3.33 10.71 19.09 106.67 0.00
NEIB Northeast Indiana Bancorp IN NASDAQ 12.250 13.500 11.250 0.00 4.26 14.13 74.76 0.23
PFDC Peoples Bancorp IN NASDAQ 19.875 22.500 5.375 -0.63 -3.64 18.46 118.51 0.54
PERM Permanent Bancorp, Inc. IN NASDAQ 16.500 18.500 9.750 4.76 3.13 18.82 192.10 0.20
SOBI Sobieski Bancorp, Inc. IN NASDAQ 12.000 13.250 10.000 -1.03 0.00 16.87 91.25 0.00
WCHI Workingmens Capital Holdings IN NASDAQ 21.156 21.250 4.313 1.35 6.45 14.63 115.12 0.35
FFSL First Independence Corp. KS NASDAQ 19.000 19.250 10.875 2.70 7.04 22.37 181.29 0.35
LARK Landmark Bancshares, Inc. KS NASDAQ 15.625 16.000 9.750 1.63 2.46 17.27 104.74 0.40
MCBS Mid Continent Bancshares Inc. KS NASDAQ 19.125 19.250 9.750 5.52 2.68 18.94 154.43 0.40
WBCI WFS Bancorp, Inc. KS NASDAQ 23.125 23.125 11.000 0.54 1.38 21.99 171.20 0.40
CKFB CKF Bancorp, Inc. KY NASDAQ 19.750 20.750 11.375 1.28 1.28 17.34 61.00 0.40
CLAS Classic Bancshares, Inc. KY NASDAQ 11.875 12.125 10.375 5.56 13.10 14.75 51.99 NA
FSBS First Ashland Financial Corp. KY NASDAQ 18.250 18.750 12.500 0.00 0.00 16.35 59.75 0.30
FFKY First Federal Financial Corp. KY NASDAQ 21.000 22.000 3.063 -2.33 0.00 11.87 83.80 0.46
FLKY First Lancaster Bancshares KY NASDAQ 14.500 14.500 13.125 1.75 NA NA NA NA
FTSB Fort Thomas Financial Corp. KY NASDAQ 14.000 17.750 11.250 -21.13 -16.42 13.75 56.47 0.25
FKKY Frankfort First Bancorp, Inc. KY NASDAQ 10.750 15.875 10.750 -10.42 -7.53 13.87 40.18 NA
GWBC Gateway Bancorp, Inc. KY NASDAQ 13.250 16.250 11.000 1.92 -5.36 15.64 62.93 1.50
GTFN Great Financial Corporation KY NASDAQ 28.000 29.000 13.875 3.70 3.23 19.38 197.98 0.44
HFFB Harrodsburg First Fin Banc KY NASDAQ 16.250 16.750 12.375 0.00 7.44 15.47 50.75 NA
KYF Kentucky First Bancorp, Inc. KY AMSE 13.625 15.250 11.375 -8.40 0.93 13.84 63.59 NA
SFNB Security First Network Bank KY NASDAQ 27.750 41.500 24.250 0.91 -28.85 6.58 13.22 NA
ANA Acadiana Bancshares, Inc. LA AMSE 13.313 13.500 11.690 13.30 NA NA NA NA
CZF CitiSave Financial Corp LA AMSE 14.000 16.500 12.750 1.82 -11.11 14.26 78.91 NA
ISBF ISB Financial Corporation LA NASDAQ 14.875 17.000 12.938 -1.65 -5.56 16.50 96.40 0.31
JEBC Jefferson Bancorp, Inc. LA NASDAQ 22.500 22.500 12.750 1.12 1.69 16.42 120.96 0.30
MERI Meritrust Federal SB LA NASDAQ 30.750 34.000 13.500 -2.38 -9.56 22.40 295.05 0.58
TSH Teche Holding Co. LA AMSE 13.000 14.500 11.375 2.97 -2.80 14.72 95.77 0.50
AFCB Affiliated Community Bancorp MA NASDAQ 21.625 21.625 16.060 23.57 27.21 19.30 193.66 NA
<CAPTION>
PRICING RATIOS
--------------------------------------
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
(X) (%) (%) (X)
-------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
HWEN Home Financial Bancorp NA NA NA NA
INCB Indiana Community Bank, SB 18.93 86.32 12.93 18.93
IFSL Indiana Federal Corporation 14.71 134.77 12.75 13.89
LOGN Logansport Financial Corp. 16.47 93.40 23.98 17.50
MARN Marion Capital Holdings 16.60 94.32 22.03 16.60
MFBC MFB Corp. 21.83 81.19 14.53 22.46
NEIB Northeast Indiana Bancorp 15.31 86.69 16.39 15.31
PFDC Peoples Bancorp 11.62 107.67 16.77 11.62
PERM Permanent Bancorp, Inc. 25.38 87.67 8.59 25.38
SOBI Sobieski Bancorp, Inc. 32.43 71.13 13.15 32.43
WCHI Workingmens Capital Holdings 20.74 144.61 18.38 20.54
FFSL First Independence Corp. 10.33 84.94 10.48 12.03
LARK Landmark Bancshares, Inc. 16.62 90.47 14.92 18.60
MCBS Mid Continent Bancshares Inc. 10.87 100.98 12.38 10.87
WBCI WFS Bancorp, Inc. 18.65 105.16 13.51 17.26
CKFB CKF Bancorp, Inc. 26.69 113.90 32.38 26.69
CLAS Classic Bancshares, Inc. NA 80.51 22.84 NA
FSBS First Ashland Financial Corp. 27.65 111.62 30.54 27.65
FFKY First Federal Financial Corp. 16.15 176.92 25.06 17.80
FLKY First Lancaster Bancshares NA NA NA NA
FTSB Fort Thomas Financial Corp. 17.07 101.82 24.79 17.07
FKKY Frankfort First Bancorp, Inc. NA 77.51 26.75 NA
GWBC Gateway Bancorp, Inc. 20.08 84.72 21.06 20.08
GTFN Great Financial Corporation 16.87 144.48 14.14 21.54
HFFB Harrodsburg First Fin Banc NA 105.04 32.02 NA
KYF Kentucky First Bancorp, Inc. NA 98.45 21.43 NA
SFNB Security First Network Bank NA 421.73 209.91 NA
ANA Acadiana Bancshares, Inc. NA NA NA NA
CZF CitiSave Financial Corp NA 98.18 17.74 NA
ISBF ISB Financial Corporation 14.03 90.15 15.43 14.17
JEBC Jefferson Bancorp, Inc. 18.75 137.03 18.60 18.75
MERI Meritrust Federal SB 11.06 137.28 10.42 11.35
TSH Teche Holding Co. 13.83 88.32 13.57 13.98
AFCB Affiliated Community Bancorp NA 112.05 11.17 NA
</TABLE>
103
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KELLER & COMPANY Page 5
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
PER SHARE
---------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly Book 12 Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
----- -------- ---------------- --------------- -------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BFD BostonFed Bancorp, Inc. MA AMSE 13.000 13.125 10.000 9.47 7.22 14.55 118.06 NA
FMLY Family Bancorp MA NASDAQ 27.250 27.375 1.167 7.92 13.54 16.60 219.50 0.42
ANBK American National Bancorp MD NASDAQ 11.500 11.625 4.639 13.58 13.58 12.87 112.80 NA
EQSB Equitable Federal Savings MD NASDAQ 24.750 26.250 11.250 2.06 2.06 23.64 446.29 0.00
FCIT First Citizens Financial Corp. MD NASDAQ 16.625 19.091 0.375 -2.21 -10.14 13.63 221.53 0.00
FFWM First Financial-W. Maryland MD NASDAQ 24.000 27.250 7.167 7.87 19.25 19.16 147.92 0.48
HRBF Harbor Federal Bancorp, Inc. MD NASDAQ 14.250 15.500 9.750 14.00 10.68 15.84 114.58 0.30
HFMD Home Federal Corp. MD NASDAQ 10.438 15.873 0.750 1.83 1.83 7.63 87.23 0.12
MFSL Maryland Federal Bancorp MD NASDAQ 29.500 34.125 4.545 1.72 -0.84 29.95 357.10 0.61
WSB Washington Savings Bank, FSB MD AMSE 5.125 6.917 0.281 2.50 -8.89 4.97 60.42 0.09
WHGB WHG Bancshares Corp. MD NASDAQ 11.500 11.750 10.875 3.37 2.22 NA NA NA
MCBN Mid-Coast Bancorp, Inc. ME NASDAQ 19.000 20.250 8.095 -6.17 -0.65 21.67 239.77 0.50
BWFC Bank West Financial Corp. MI NASDAQ 11.000 12.250 8.500 -8.33 7.32 11.99 60.63 0.21
CFSB CFSB Bancorp, Inc. MI NASDAQ 18.250 21.818 3.169 0.37 -0.86 13.25 161.11 0.41
DNFC D & N Financial Corp. MI NASDAQ 13.000 18.875 2.500 -0.95 4.00 10.30 180.31 0.00
MSBF MSB Financial, Inc. MI NASDAQ 18.000 19.500 10.750 5.88 7.46 19.21 91.72 0.43
MSBK Mutual Savings Bank, FSB MI NASDAQ 5.750 25.500 3.000 12.20 4.55 9.03 159.10 0.00
OFCP Ottawa Financial Corp. MI NASDAQ 16.250 16.750 10.250 0.78 -0.37 14.84 144.45 0.32
SJSB SJS Bancorp MI NASDAQ 19.875 20.750 10.810 -0.63 -1.85 17.90 153.42 0.30
SFB Standard Federal Bancorp MI NYSE 42.875 43.125 4.750 4.26 8.54 30.74 486.52 0.74
THR Three Rivers Financial Corp MI AMSE 13.000 13.625 11.375 -0.95 -2.80 15.17 99.04 NA
BDJI First Federal Bancorporation MN NASDAQ 14.750 14.750 10.625 13.46 13.46 17.88 134.85 0.00
FFHH FSF Financial Corp. MN NASDAQ 12.000 13.500 7.750 2.67 2.39 15.58 95.29 0.50
HMNF HMN Financial, Inc. MN NASDAQ 15.938 16.500 9.313 4.51 1.58 17.73 112.77 0.00
MIVI Mississippi View Holding Co. MN NASDAQ 11.750 12.250 8.500 8.05 4.44 14.02 76.20 0.16
QCFB QCF Bancorp, Inc. MN NASDAQ 15.000 15.250 11.000 1.69 7.14 17.82 81.68 NA
TCB TCF Financial Corp. MN NYSE 38.000 38.500 2.813 -0.33 11.76 14.98 200.25 0.66
WEFC Wells Financial Corp. MN NASDAQ 12.250 12.500 9.000 3.70 11.36 13.36 92.29 0.00
CMRN Cameron Financial Corp MO NASDAQ 14.500 15.500 10.688 1.75 6.42 16.26 61.69 0.28
CAPS Capital Savings Bancorp, Inc. MO NASDAQ 19.250 19.750 12.250 2.67 6.94 20.34 194.94 0.33
CNSB CNS Bancorp, Inc. MO NASDAQ 12.750 12.750 11.000 12.09 NA 14.64 59.48 NA
FBSI First Bancshares, Inc. MO NASDAQ 16.750 17.000 10.250 3.08 6.35 18.70 113.24 0.20
GSBC Great Southern Bancorp, Inc. MO NASDAQ 28.500 29.500 2.292 3.64 6.54 15.39 151.63 0.70
HFSA Hardin Bancorp, Inc. MO NASDAQ 11.250 13.000 11.000 -6.25 -4.26 14.75 85.90 NA
<CAPTION>
PRICING RATIOS
--------------------------------------
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
(X) (%) (%) (X)
-------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
BFD BostonFed Bancorp, Inc. NA 89.35 11.01 NA
FMLY Family Bancorp 14.49 164.16 12.41 15.06
ANBK American National Bancorp NA 89.36 10.20 NA
EQSB Equitable Federal Savings 7.88 104.70 5.55 7.91
FCIT First Citizens Financial Corp. 11.96 121.97 7.50 14.98
FFWM First Financial-W. Maryland 14.55 125.26 16.22 15.00
HRBF Harbor Federal Bancorp, Inc. 25.91 89.96 12.44 25.91
HFMD Home Federal Corp. 16.84 136.80 11.97 17.40
MFSL Maryland Federal Bancorp 10.65 98.50 8.26 15.05
WSB Washington Savings Bank, FSB 9.32 103.12 8.48 12.20
WHGB WHG Bancshares Corp. NA NA NA NA
MCBN Mid-Coast Bancorp, Inc. 13.67 87.68 7.92 14.84
BWFC Bank West Financial Corp. 24.44 91.74 18.14 42.31
CFSB CFSB Bancorp, Inc. 12.59 137.74 11.33 13.42
DNFC D & N Financial Corp. 7.43 126.21 7.21 8.13
MSBF MSB Financial, Inc. 11.76 93.70 19.62 12.00
MSBK Mutual Savings Bank, FSB NM 63.68 3.61 NM
OFCP Ottawa Financial Corp. 18.68 109.50 11.25 19.12
SJSB SJS Bancorp 21.60 111.03 12.95 22.08
SFB Standard Federal Bancorp 10.80 139.48 8.81 12.39
THR Three Rivers Financial Corp NA 85.70 13.13 NA
BDJI First Federal Bancorporation 16.76 82.49 10.94 16.76
FFHH FSF Financial Corp. 21.05 77.02 12.59 21.05
HMNF HMN Financial, Inc. 12.75 89.89 14.13 14.76
MIVI Mississippi View Holding Co. 11.52 83.81 15.42 12.91
QCFB QCF Bancorp, Inc. NA 84.18 18.36 NA
TCB TCF Financial Corp. 13.33 253.67 18.98 13.97
WEFC Wells Financial Corp. 15.12 91.69 13.27 14.94
CMRN Cameron Financial Corp 14.50 89.18 23.50 14.80
CAPS Capital Savings Bancorp, Inc. 10.64 94.64 9.87 10.64
CNSB CNS Bancorp, Inc. NA 87.09 21.44 NA
FBSI First Bancshares, Inc. 17.63 89.57 14.79 17.82
GSBC Great Southern Bancorp, Inc. 11.63 185.19 18.80 12.50
HFSA Hardin Bancorp, Inc. NA 76.27 13.10 NA
</TABLE>
104
<PAGE> 115
KELLER & COMPANY Page 6
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
PER SHARE
---------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly Book 12 Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
----- -------- ---------------- --------------- -------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JSBA Jefferson Savings Bancorp MO NASDAQ 23.500 30.750 13.250 -1.05 -12.15 21.82 269.13 0.16
JOAC Joachim Bancorp, Inc. MO NASDAQ 12.750 13.500 11.500 0.49 2.00 14.19 47.99 NA
LXMO Lexington B&L Financial Corp. MO NASDAQ 10.063 10.188 9.500 1.26 5.93 14.81 48.45 NA
MBLF MBLA Financial Corp. MO NASDAQ 21.750 26.000 12.750 2.35 -9.38 20.68 142.21 0.40
MFSB Mutual Bancompany MO NASDAQ 21.000 21.750 10.000 0.00 0.00 18.70 159.85 0.00
NASB North American Savings Bank MO NASDAQ 31.500 32.375 2.500 5.22 5.88 22.21 326.41 0.56
NSLB NS&L Bancorp, Inc. MO NASDAQ 12.000 13.750 11.750 -4.00 -6.80 16.71 71.70 0.45
PCBC Perry County Financial Corp. MO NASDAQ 17.500 21.500 12.375 12.90 1.45 17.62 93.87 0.30
RFED Roosevelt Financial Group MO NASDAQ 18.125 19.750 2.167 12.40 -2.68 10.98 221.32 0.59
SMFC Sho-Me Financial Corp. MO NASDAQ 20.000 20.000 9.375 17.65 29.03 19.59 161.62 0.00
SMBC Southern Missouri Bancorp, Inc MO NASDAQ 14.250 17.500 8.875 1.79 1.79 15.41 93.96 0.50
CFTP Community Federal Bancorp MS NASDAQ 13.375 13.750 12.250 2.88 0.94 14.37 43.56 NA
FFBS FFBS BanCorp, Inc. MS NASDAQ 21.500 24.250 12.000 4.88 -6.52 16.60 79.65 1.45
MGNL Magna Bancorp, Inc. MS NASDAQ 21.000 22.500 0.844 0.00 20.00 9.18 95.50 0.25
GBCI Glacier Bancorp, Inc. MT NASDAQ 24.000 24.000 1.495 17.07 11.63 11.45 121.53 0.59
SFBM Security Bancorp MT NASDAQ 21.750 23.250 4.250 7.41 6.10 21.00 254.58 0.67
UBMT United Financial Corp. MT NASDAQ 18.750 22.500 5.625 4.17 2.40 20.03 85.17 0.85
WSTR WesterFed Financial Corp. MT NASDAQ 15.125 17.125 11.375 7.08 5.22 17.88 128.31 0.36
COOP Cooperative Bankshares, Inc. NC NASDAQ 19.000 22.500 3.467 8.57 7.80 19.77 212.28 0.00
SOPN First Savings Bancorp, Inc. NC NASDAQ 17.000 21.000 13.500 -2.86 -9.33 17.84 68.64 0.54
GSFC Green Street Financial Corp. NC NASDAQ 14.000 14.625 12.125 9.80 9.29 14.60 41.64 NA
HFNC HFNC Financial Corp. NC NASDAQ 17.625 18.125 13.125 7.63 11.90 14.21 41.66 NA
KSAV KS Bancorp, Inc. NC NASDAQ 20.000 22.000 11.625 0.00 11.11 20.86 141.02 1.10
MBSP Mitchell Bancorp, Inc. NC NASDAQ 12.125 12.625 10.190 14.12 NA NA NA NA
PDB Piedmont Bancorp, Inc. NC AMSE 15.000 15.125 12.000 13.21 13.21 14.01 48.66 NA
SSB Scotland Bancorp, Inc NC AMSE 12.375 12.625 11.625 3.13 1.02 13.43 38.31 NA
SSM Stone Street Bancorp, Inc. NC AMSE 17.375 18.500 16.250 3.73 2.96 21.00 59.17 NA
UFRM United Federal Savings Bank NC NASDAQ 7.250 8.750 1.750 -3.33 -9.38 6.73 83.35 0.18
CFB Commercial Federal Corporation NE NYSE 39.500 39.500 1.625 2.93 2.93 27.39 437.89 0.40
EBCP Eastern Bancorp NH NASDAQ 19.250 19.250 3.000 8.45 17.86 17.77 230.19 0.43
NHTB New Hampshire Thrift Bncshrs NH NASDAQ 9.875 13.000 1.750 0.00 -2.47 11.51 152.81 0.50
FBER 1st Bergen Bancorp NJ NASDAQ 10.000 10.500 9.000 0.00 8.11 13.54 79.43 NA
CJFC Central Jersey Financial NJ NASDAQ 33.125 33.125 2.645 5.16 6.43 20.98 175.88 0.64
COFD Collective Bancorp, Inc. NJ NASDAQ 26.875 28.250 1.351 11.98 10.26 17.88 252.55 0.85
<CAPTION>
PRICING RATIOS
--------------------------------------
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
(X) (%) (%) (X)
-------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
JSBA Jefferson Savings Bancorp 12.77 107.70 8.73 14.07
JOAC Joachim Bancorp, Inc. NA 89.85 26.57 NA
LXMO Lexington B&L Financial Corp. NA 67.95 20.77 NA
MBLF MBLA Financial Corp. 22.66 105.17 15.29 22.66
MFSB Mutual Bancompany 61.76 112.30 13.14 53.85
NASB North American Savings Bank 8.63 141.83 9.65 9.13
NSLB NS&L Bancorp, Inc. 17.65 71.81 16.74 20.34
PCBC Perry County Financial Corp. 20.59 99.32 18.64 18.62
RFED Roosevelt Financial Group 14.38 165.07 8.19 10.48
SMFC Sho-Me Financial Corp. 15.87 102.09 12.37 16.39
SMBC Southern Missouri Bancorp, Inc 18.04 92.47 15.17 19.52
CFTP Community Federal Bancorp NA 93.08 30.70 NA
FFBS FFBS BanCorp, Inc. 19.72 129.52 26.99 19.72
MGNL Magna Bancorp, Inc. 14.00 228.76 21.99 14.09
GBCI Glacier Bancorp, Inc. 13.19 209.61 19.75 13.19
SFBM Security Bancorp 12.95 103.57 8.54 17.26
UBMT United Financial Corp. 13.99 93.61 22.01 14.76
WSTR WesterFed Financial Corp. 14.14 84.59 11.79 14.98
COOP Cooperative Bankshares, Inc. 33.33 96.11 8.95 33.93
SOPN First Savings Bancorp, Inc. 17.35 95.29 24.77 17.35
GSFC Green Street Financial Corp. NA 95.89 33.62 NA
HFNC HFNC Financial Corp. NA 124.03 42.31 NA
KSAV KS Bancorp, Inc. 14.39 95.88 14.18 14.18
MBSP Mitchell Bancorp, Inc. NA NA NA NA
PDB Piedmont Bancorp, Inc. NA 107.07 30.83 NA
SSB Scotland Bancorp, Inc NA 92.14 32.30 NA
SSM Stone Street Bancorp, Inc. NA 82.74 29.36 NA
UFRM United Federal Savings Bank 10.98 107.73 8.70 12.95
CFB Commercial Federal Corporation 10.59 144.21 9.02 10.70
EBCP Eastern Bancorp 12.18 108.33 8.36 16.89
NHTB New Hampshire Thrift Bncshrs 10.29 85.79 6.46 10.97
FBER 1st Bergen Bancorp NA 73.86 12.59 NA
CJFC Central Jersey Financial 17.53 157.89 18.83 18.00
COFD Collective Bancorp, Inc. 10.07 150.31 10.64 10.18
</TABLE>
105
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KELLER & COMPANY Page 7
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
PER SHARE
---------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly Book 12 Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
----- -------- ---------------- --------------- -------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FSPG First Home Bancorp, Inc. NJ NASDAQ 18.000 19.000 2.531 1.41 1.41 15.19 236.11 0.48
FSFI First State Financial Services NJ NASDAQ 13.000 14.125 1.625 -0.95 26.83 10.17 169.47 0.22
FMCO FMS Financial Corporation NJ NASDAQ 15.500 17.500 1.500 -6.06 -4.62 13.91 209.90 0.20
IBSF IBS Financial Corp. NJ NASDAQ 14.375 15.455 8.409 2.68 1.77 13.55 68.05 0.21
LVSB Lakeview Financial NJ NASDAQ 22.750 22.875 8.068 7.06 16.67 19.99 200.89 0.23
LFBI Little Falls Bancorp, Inc. NJ NASDAQ 10.375 11.500 9.500 0.00 1.22 14.40 92.79 NA
OCFC Ocean Financial Corp. NJ NASDAQ 22.500 22.875 19.625 7.46 NA NA NA NA
PBCI Pamrapo Bancorp, Inc. NJ NASDAQ 19.625 26.125 2.563 3.29 1.95 17.23 111.42 0.90
PFSB PennFed Financial Services NJ NASDAQ 17.500 18.125 9.063 3.70 14.75 20.50 225.25 0.00
PULS Pulse Bancorp NJ NASDAQ 16.875 18.000 4.000 -5.59 -2.51 12.90 165.62 0.78
SFIN Statewide Financial Corp. NJ NASDAQ 12.500 13.750 11.250 5.26 0.00 13.28 134.12 NA
WYNE Wayne Bancorp, Inc. NJ NASDAQ 13.500 13.500 10.750 10.20 NA 16.44 94.88 NA
WWFC Westwood Financial Corporation NJ NASDAQ 10.875 11.000 10.250 5.45 NA NA NA NA
FSBC First Savings Bank, FSB NM NASDAQ 5.500 10.417 1.750 0.00 -9.09 7.98 161.62 0.00
GUPB GFSB Bancorp, Inc. NM NASDAQ 14.125 15.000 12.875 0.89 0.89 17.09 74.23 NA
ALBK ALBANK Financial Corporation NY NASDAQ 29.563 30.625 9.167 14.81 8.49 23.83 250.27 0.44
ALBC Albion Banc Corp. NY NASDAQ 17.000 18.750 10.500 -2.86 0.00 23.67 229.02 0.31
ASFC Astoria Financial Corporation NY NASDAQ 26.750 28.125 12.688 0.00 -2.28 26.11 329.08 0.41
BFSI BFS Bankorp, Inc. NY NASDAQ 52.000 52.000 2.500 28.00 35.06 29.73 379.90 0.00
CARV Carver Federal Savings Bank NY NASDAQ 7.938 10.750 6.250 -6.61 2.43 15.03 156.57 0.00
FIBC Financial Bancorp, Inc. NY NASDAQ 15.000 16.250 8.500 9.09 16.50 14.60 146.15 0.25
HAVN Haven Bancorp, Inc. NY NASDAQ 27.063 28.875 10.000 -1.59 -2.48 21.77 358.85 0.45
LISB Long Island Bancorp, Inc. NY NASDAQ 28.250 32.875 12.090 0.44 -4.24 21.03 210.48 0.40
NYB New York Bancorp Inc. NY NYSE 30.250 32.125 2.425 9.01 19.21 13.78 253.93 0.80
PEEK Peekskill Financial Corp. NY NASDAQ 12.750 13.000 11.125 5.70 5.72 14.58 46.67 NA
PKPS Poughkeepsie Savings Bank, NY NASDAQ 4.938 26.750 0.875 1.29 -8.13 5.65 66.97 0.09
RELY Reliance Bancorp, Inc. NY NASDAQ 18.000 18.000 8.875 5.88 14.29 16.83 195.27 0.46
SFED SFS Bancorp, Inc. NY NASDAQ 13.000 13.500 11.000 2.97 10.64 17.24 127.17 0.00
TPNZ Tappan Zee Financial, Inc. NY NASDAQ 12.125 13.500 11.250 -4.90 0.54 13.84 76.73 NA
YFCB Yonkers Financial Corporation NY NASDAQ 11.625 11.625 9.310 13.41 19.23 13.73 68.00 NA
ASBP ASB Financial Corp. OH NASDAQ 14.500 16.500 11.375 -1.69 -3.33 15.93 65.92 0.33
CAFI Camco Financial Corporation OH NASDAQ 17.500 19.286 12.245 -2.78 -8.13 14.13 169.86 0.41
COFI Charter One Financial OH NASDAQ 38.625 38.875 3.445 4.04 5.82 20.76 309.97 0.82
CRCL Circle Financial Corp. OH NASDAQ 36.000 37.000 10.500 -2.70 6.38 34.60 338.11 0.64
<CAPTION>
PRICING RATIOS
--------------------------------------
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
(X) (%) (%) (X)
-------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
FSPG First Home Bancorp, Inc. 8.37 118.50 7.62 8.57
FSFI First State Financial Services NM 127.83 7.67 NM
FMCO FMS Financial Corporation 9.51 111.43 7.38 9.51
IBSF IBS Financial Corp. 19.69 106.09 21.12 19.17
LVSB Lakeview Financial 10.83 113.81 11.32 17.77
LFBI Little Falls Bancorp, Inc. NA 72.05 11.18 NA
OCFC Ocean Financial Corp. NA NA NA NA
PBCI Pamrapo Bancorp, Inc. 13.44 113.90 17.61 13.44
PFSB PennFed Financial Services 11.29 85.37 7.77 11.36
PULS Pulse Bancorp 12.23 130.81 10.19 12.23
SFIN Statewide Financial Corp. NA 94.13 9.32 NA
WYNE Wayne Bancorp, Inc. NA 82.12 14.23 NA
WWFC Westwood Financial Corporation NA NA NA NA
FSBC First Savings Bank, FSB 10.00 68.92 3.40 12.79
GUPB GFSB Bancorp, Inc. NA 82.65 19.03 NA
ALBK ALBANK Financial Corporation 14.21 124.06 11.81 14.21
ALBC Albion Banc Corp. 31.48 71.82 7.42 32.08
ASFC Astoria Financial Corporation 11.73 102.45 8.13 12.86
BFSI BFS Bankorp, Inc. 8.72 174.91 13.69 9.03
CARV Carver Federal Savings Bank 22.68 52.81 5.07 24.81
FIBC Financial Bancorp, Inc. 17.44 102.74 10.26 17.86
HAVN Haven Bancorp, Inc. 11.28 124.31 7.54 11.67
LISB Long Island Bancorp, Inc. 15.11 134.33 13.42 16.62
NYB New York Bancorp Inc. 10.65 219.52 11.91 11.33
PEEK Peekskill Financial Corp. NA 87.45 27.32 NA
PKPS Poughkeepsie Savings Bank, 4.61 87.40 7.37 3.41
RELY Reliance Bancorp, Inc. 13.74 106.95 9.22 14.52
SFED SFS Bancorp, Inc. 15.48 75.41 10.22 15.29
TPNZ Tappan Zee Financial, Inc. NA 87.61 15.80 NA
YFCB Yonkers Financial Corporation NA 84.67 17.10 NA
ASBP ASB Financial Corp. 21.01 91.02 22.00 21.01
CAFI Camco Financial Corporation 8.62 123.85 10.30 11.01
COFI Charter One Financial 33.88 186.05 12.46 12.34
CRCL Circle Financial Corp. 23.08 104.05 10.65 23.08
</TABLE>
106
<PAGE> 117
KELLER & COMPANY Page 8
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
PER SHARE
---------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly Book 12 Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
----- -------- ---------------- --------------- -------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CTZN CitFed Bancorp, Inc. OH NASDAQ 37.500 39.500 9.250 -1.64 -1.96 30.80 467.55 0.28
CIBI Community Investors Bancorp OH NASDAQ 15.750 17.500 10.750 5.00 6.78 16.93 122.33 0.12
EFBI Enterprise Federal Bancorp OH NASDAQ 12.875 18.000 11.250 0.98 -11.21 15.23 103.11 3.00
FFDF FFD Financial Corp. OH NASDAQ 10.188 10.750 10.000 -0.60 0.62 NA NA NA
FFYF FFY Financial Corp. OH NASDAQ 24.063 24.250 12.250 0.79 2.94 20.06 113.28 0.58
FFOH Fidelity Financial of Ohio OH NASDAQ 9.750 10.890 3.112 -1.27 -3.70 12.54 61.66 NA
FDEF First Defiance Financial OH NASDAQ 10.750 11.000 5.790 7.50 0.56 12.14 49.91 NA
FFBZ First Federal Bancorp, Inc. OH NASDAQ 26.500 26.500 6.250 12.77 12.77 16.84 226.57 0.40
FFHS First Franklin Corporation OH NASDAQ 15.250 17.500 3.500 5.17 1.67 17.41 185.79 0.29
FFSW FirstFederal Financial Svcs OH NASDAQ 30.250 31.000 2.232 -0.41 8.52 15.09 291.48 0.45
GFCO Glenway Financial Corp. OH NASDAQ 20.250 23.333 15.419 1.25 0.06 23.12 239.12 0.49
HHFC Harvest Home Financial Corp OH NASDAQ 9.875 13.750 8.750 -17.71 -24.04 13.66 81.72 0.40
HVFD Haverfield Corporation OH NASDAQ 17.125 19.250 5.165 -9.87 -8.05 14.90 175.30 0.53
INBI Industrial Bancorp OH NASDAQ 10.500 16.000 9.875 5.66 -12.94 10.95 56.45 NA
LONF London Financial Corporation OH NASDAQ 10.750 11.250 9.750 2.38 2.38 15.02 70.30 NA
MFFC Milton Federal Financial Corp. OH NASDAQ 13.750 17.125 10.000 12.24 0.92 14.91 78.76 1.37
OHSL OHSL Financial Corp. OH NASDAQ 20.250 22.000 11.500 -1.22 -2.41 20.94 171.71 0.72
PTRS Potters Financial Corp. OH NASDAQ 16.250 18.500 9.000 4.84 0.78 20.93 226.63 0.23
PVFC PVF Capital Corp. OH NASDAQ 13.500 14.000 4.316 6.58 6.58 9.18 136.91 0.00
SFSL Security First Corp. OH NASDAQ 13.250 17.250 1.625 -8.62 0.00 11.31 119.40 0.41
SHFC Seven Hills Financial Corp. OH NASDAQ 17.750 18.125 11.000 1.43 22.41 17.99 84.83 0.86
SSBK Strongsville Savings Bank OH NASDAQ 21.000 22.250 15.500 -5.62 -2.33 16.81 209.10 0.45
SBCN Suburban Bancorporation, Inc. OH NASDAQ 16.125 18.500 10.500 9.32 9.32 17.48 133.13 0.55
THIR Third Financial Corp. OH NASDAQ 32.250 33.000 14.500 0.00 3.20 25.23 137.25 0.64
WOFC Western Ohio Financial Corp OH NASDAQ 20.625 24.375 14.750 -2.94 -8.33 24.09 143.99 1.00
WFCO Winton Financial Corp. OH NASDAQ 11.250 15.000 3.750 0.00 -8.16 10.61 142.40 0.41
FFWD Wood Bancorp, Inc. OH NASDAQ 14.500 14.500 8.000 9.43 16.00 13.44 97.65 0.23
KFBI Klamath First Bancorp OR NASDAQ 14.375 14.625 12.500 5.50 1.77 14.38 51.49 NA
BRFC Bridgeville Savings Bank PA NASDAQ 15.000 15.375 11.750 -1.64 5.26 14.24 49.91 0.41
CVAL Chester Valley Bancorp Inc. PA NASDAQ 18.000 19.501 3.879 2.16 1.48 15.51 165.60 0.35
CMSB Commonwealth Bancorp, Inc. PA NASDAQ 10.875 12.389 5.790 2.35 -1.32 12.67 114.14 NA
FSBI Fidelity Bancorp, Inc. PA NASDAQ 17.875 18.182 3.756 11.72 11.72 15.73 231.70 0.29
FBBC First Bell Bancorp, Inc. PA NASDAQ 13.875 14.250 10.000 1.83 2.78 14.24 69.88 0.10
FKFS First Keystone Financial PA NASDAQ 17.750 20.875 10.250 5.97 2.90 17.73 224.80 0.00
<CAPTION>
PRICING RATIOS
--------------------------------------
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
(X) (%) (%) (X)
-------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
CTZN CitFed Bancorp, Inc. 12.63 121.75 8.02 14.15
CIBI Community Investors Bancorp 12.50 93.03 12.88 13.24
EFBI Enterprise Federal Bancorp 13.70 84.54 12.49 19.81
FFDF FFD Financial Corp. NA NA NA NA
FFYF FFY Financial Corp. 17.56 119.96 21.24 17.07
FFOH Fidelity Financial of Ohio NA 77.75 15.81 NA
FDEF First Defiance Financial NA 88.55 21.54 NA
FFBZ First Federal Bancorp, Inc. 11.42 157.36 11.70 11.62
FFHS First Franklin Corporation 14.25 87.59 8.21 14.52
FFSW FirstFederal Financial Svcs 15.43 200.46 10.38 18.67
GFCO Glenway Financial Corp. 15.00 87.59 8.47 15.23
HHFC Harvest Home Financial Corp 15.67 72.29 12.08 15.67
HVFD Haverfield Corporation 13.28 114.93 9.77 14.04
INBI Industrial Bancorp NA 95.89 18.60 NA
LONF London Financial Corporation NA 71.57 15.29 NA
MFFC Milton Federal Financial Corp. 18.84 92.22 17.46 20.52
OHSL OHSL Financial Corp. 13.32 96.70 11.79 13.59
PTRS Potters Financial Corp. 14.91 77.64 7.17 15.05
PVFC PVF Capital Corp. 9.44 147.06 9.86 10.71
SFSL Security First Corp. 10.11 117.15 11.10 9.60
SHFC Seven Hills Financial Corp. 59.17 98.67 20.92 61.21
SSBK Strongsville Savings Bank 10.94 124.93 10.04 12.28
SBCN Suburban Bancorporation, Inc. 30.42 92.25 12.11 20.94
THIR Third Financial Corp. 18.22 127.82 23.50 20.28
WOFC Western Ohio Financial Corp 21.71 85.62 14.32 34.38
WFCO Winton Financial Corp. 9.07 106.03 7.90 10.82
FFWD Wood Bancorp, Inc. 13.55 107.89 14.85 14.08
KFBI Klamath First Bancorp NA 99.97 27.92 NA
BRFC Bridgeville Savings Bank 23.81 105.34 30.05 23.81
CVAL Chester Valley Bancorp Inc. 12.24 116.05 10.87 12.86
CMSB Commonwealth Bancorp, Inc. NA 85.83 9.53 NA
FSBI Fidelity Bancorp, Inc. 13.14 113.64 7.71 13.24
FBBC First Bell Bancorp, Inc. 12.61 97.44 19.86 12.73
FKFS First Keystone Financial 14.09 100.11 7.90 13.05
</TABLE>
107
<PAGE> 118
KELLER & COMPANY Page 9
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
PER SHARE
---------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly Book 12 Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
----- -------- ---------------- --------------- -------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHEN First Shenango Bancorp, Inc. PA NASDAQ 20.750 22.250 12.750 0.00 1.22 20.53 161.88 0.42
GAF GA Financial, Inc. PA AMSE 12.375 12.375 10.250 6.45 15.12 14.43 63.19 NA
HARL Harleysville Savings Bank PA NASDAQ 17.750 19.750 3.535 -0.70 -2.74 15.38 231.24 0.38
LARL Laurel Capital Group, Inc. PA NASDAQ 15.500 16.500 3.627 3.33 0.00 13.94 130.20 0.29
MLBC ML Bancorp, Inc. PA NASDAQ 25.625 25.750 12.438 5.13 7.33 24.29 300.31 0.49
PVSA Parkvale Financial Corporation PA NASDAQ 28.250 28.500 2.688 8.65 0.89 21.56 284.10 0.52
PBIX Patriot Bank Corp. PA NASDAQ 15.000 15.000 12.310 14.29 14.29 14.33 110.83 NA
PWBC PennFirst Bancorp, Inc. PA NASDAQ 13.750 15.915 4.019 0.00 0.00 12.30 176.83 0.86
PWBK Pennwood Savings Bank PA NASDAQ 10.000 10.000 9.000 3.90 NA NA NA NA
PHFC Pittsburgh Home Financial PA NASDAQ 10.500 11.125 9.500 2.44 5.00 13.93 84.32 NA
PRBC Prestige Bancorp, Inc. PA NASDAQ 10.750 10.750 9.750 4.88 NA 15.86 106.55 NA
PSAB Prime Bancorp, Inc. PA NASDAQ 19.250 20.682 3.194 1.32 6.94 15.58 173.03 0.66
PFNC Progress Financial Corporation PA NASDAQ 6.375 18.750 0.750 6.25 -1.92 5.23 93.26 0.00
SVRN Sovereign Bancorp, Inc. PA NASDAQ 10.813 11.250 1.005 8.13 4.22 7.75 185.25 0.08
THRD TF Financial Corporation PA NASDAQ 14.625 16.000 9.750 3.08 0.86 17.97 117.17 0.29
THBC Troy Hill Bancorp, Inc. PA NASDAQ 13.625 14.000 10.250 4.81 5.83 16.73 75.37 0.32
WVFC WVS Financial Corporation PA NASDAQ 21.750 22.250 13.000 7.41 6.10 19.60 149.49 2.06
YFED York Financial Corp. PA NASDAQ 16.000 18.864 4.731 -3.03 -3.76 15.37 182.30 0.56
AMFB American Federal Bank, FSB SC NASDAQ 16.875 17.125 0.625 6.72 5.47 9.82 126.43 0.31
CFCP Coastal Financial Corp. SC NASDAQ 19.500 21.000 1.918 -1.27 21.88 8.04 131.77 0.41
FFCH First Financial Holdings Inc. SC. NASDAQ 18.750 22.250 4.000 0.00 -1.32 15.26 238.85 0.62
FSFC First Southeast Financial SC NASDAQ 9.500 20.250 9.125 -1.30 -47.95 7.67 74.42 10.48
PALM Palfed, Inc. SC NASDAQ 14.000 18.500 3.500 8.74 10.89 10.27 122.09 0.04
SCCB S. Carolina Community Bancshrs SC NASDAQ 15.500 20.500 12.625 -3.13 -6.06 16.73 60.05 0.60
HFFC HF Financial Corp. SD NASDAQ 15.313 16.750 5.500 -1.21 0.41 16.97 181.93 0.33
LFCT Leader Financial Corp. TN NASDAQ 52.250 52.250 14.500 13.90 13.28 26.78 322.79 0.66
TWIN Twin City Bancorp TN NASDAQ 17.250 18.250 10.500 -1.43 7.81 15.74 115.22 0.61
BNKU Bank United Corp. TX NASDAQ 24.125 24.625 22.500 NA NA NA NA NA
CBSA Coastal Bancorp, Inc. TX NASDAQ 19.625 19.750 9.875 10.56 5.37 18.89 563.56 0.36
ETFS East Texas Financial Services TX NASDAQ 14.500 16.750 11.000 -4.53 -1.69 19.24 101.72 0.10
FBHC Fort Bend Holding Corp. TX NASDAQ 16.875 20.250 10.375 -0.74 -4.93 21.98 310.96 0.28
LOAN Horizon Bancorp TX NASDAQ 14.500 15.750 7.250 16.00 38.10 7.69 94.41 0.14
JXVL Jacksonville Bancorp, Inc. TX NASDAQ 11.500 11.990 7.141 9.52 10.84 13.37 81.72 NA
BFSB Bedford Bancshares, Inc. VA NASDAQ 16.500 18.750 10.250 -2.94 1.54 16.96 104.88 0.43
<CAPTION>
PRICING RATIOS
--------------------------------------
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
(X) (%) (%) (X)
-------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
SHEN First Shenango Bancorp, Inc. 13.65 101.07 12.82 14.31
GAF GA Financial, Inc. NA 85.76 19.58 NA
HARL Harleysville Savings Bank 10.44 115.41 7.68 9.92
LARL Laurel Capital Group, Inc. 9.01 111.19 11.90 9.23
MLBC ML Bancorp, Inc. 13.28 105.50 8.53 17.20
PVSA Parkvale Financial Corporation 9.88 131.03 9.94 10.58
PBIX Patriot Bank Corp. NA 104.68 13.53 NA
PWBC PennFirst Bancorp, Inc. 13.61 111.79 7.78 14.32
PWBK Pennwood Savings Bank NA NA NA NA
PHFC Pittsburgh Home Financial NA 75.38 12.45 NA
PRBC Prestige Bancorp, Inc. NA 67.78 10.09 NA
PSAB Prime Bancorp, Inc. 11.88 123.56 11.13 12.75
PFNC Progress Financial Corporation 7.16 121.89 6.84 8.85
SVRN Sovereign Bancorp, Inc. 10.11 139.52 5.84 10.50
THRD TF Financial Corporation 14.48 81.39 12.48 14.92
THBC Troy Hill Bancorp, Inc. 12.73 81.44 18.08 13.90
WVFC WVS Financial Corporation 10.56 110.97 14.55 11.45
YFED York Financial Corp. 9.82 104.10 8.78 11.03
AMFB American Federal Bank, FSB 11.18 171.84 13.35 10.29
CFCP Coastal Financial Corp. 15.73 242.54 14.80 17.89
FFCH First Financial Holdings Inc. 10.71 122.87 7.85 10.53
FSFC First Southeast Financial 31.67 123.86 12.77 12.03
PALM Palfed, Inc. 16.47 136.32 11.47 19.44
SCCB S. Carolina Community Bancshrs 23.13 92.65 25.81 23.13
HFFC HF Financial Corp. 10.28 90.24 8.42 12.55
LFCT Leader Financial Corp. 11.96 195.11 16.19 12.24
TWIN Twin City Bancorp 13.37 109.59 14.97 15.00
BNKU Bank United Corp. NM NA NA NM
CBSA Coastal Bancorp, Inc. 9.17 103.89 3.48 9.53
ETFS East Texas Financial Services 17.26 75.36 14.25 19.08
FBHC Fort Bend Holding Corp. 9.48 76.77 5.43 10.75
LOAN Horizon Bancorp 13.55 188.56 15.36 16.86
JXVL Jacksonville Bancorp, Inc. NA 86.01 14.07 NA
BFSB Bedford Bancshares, Inc. 12.50 97.29 15.73 12.50
</TABLE>
108
<PAGE> 119
KELLER & COMPANY Page 11
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
PER SHARE
-------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly Book 12 Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
----- -------- ---------------- --------------- -------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALL THRIFTS
AVERAGE 17.774 21.760 8.040 3.25 3.36 16.59 164.99 0.42
MEDIAN 16.063 17.875 9.146 2.15 2.27 15.73 132.34 0.35
HIGH 61.750 589.500 25.000 78.43 89.58 56.63 617.63 10.48
LOW 1.875 6.917 0.223 -21.13 -47.95 0.54 13.22 0.00
AVERAGE FOR STATE
OH 18.661 20.541 8.882 1.04 0.42 17.43 160.34 0.60
AVERAGE BY REGION
MIDWEST 18.314 19.918 9.060 1.87 1.47 17.63 152.91 0.39
NEW ENGLAND 19.400 20.463 5.878 6.76 9.82 17.78 243.15 0.50
MID ATLANTIC 17.146 18.944 7.178 4.11 5.10 16.19 169.48 0.38
SOUTHEAST 16.456 18.634 7.001 5.94 4.77 14.08 133.08 0.67
SOUTHWEST 16.012 17.502 10.482 3.42 1.60 15.37 159.91 0.34
WEST 18.757 39.593 6.452 2.59 5.01 16.70 228.40 0.32
AVERAGE BY EXCHANGE
NYSE 30.144 89.717 3.243 2.25 5.79 20.84 354.17 0.43
AMEX 12.941 14.933 9.936 2.54 1.12 14.38 107.51 0.70
OTC/NASDAQ 17.533 19.282 8.132 3.33 3.38 16.52 159.96 0.41
<CAPTION>
PRICING RATIOS
--------------------------------------
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
(X) (%) (%) (X)
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
ALL THRIFTS
AVERAGE 16.25 110.16 13.85 17.46
MEDIAN 13.71 102.19 11.93 14.84
HIGH 129.74 421.73 209.91 100.00
LOW 3.65 52.81 0.65 3.41
AVERAGE FOR STATE
OH 17.605 108.407 13.430 17.882
AVERAGE BY REGION
MIDWEST 17.04 106.83 15.56 18.50
NEW ENGLAND 11.65 107.73 8.32 14.58
MID ATLANTIC 13.15 106.36 11.57 14.16
SOUTHEAST 15.98 123.92 15.46 18.40
SOUTHWEST 13.23 103.77 13.16 14.29
WEST 20.58 113.39 10.41 19.01
AVERAGE BY EXCHANGE
NYSE 15.30 150.54 9.48 17.71
AMEX 14.06 105.46 16.09 18.07
OTC/NASDAQ 16.35 108.65 13.91 17.44
</TABLE>
110
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KELLER & COMPANY Page 1
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
----------------------------------- -----------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PLE Pinnacle Bank AL 186,475 15,165 14,634 0.85 0.76 10.96 9.77
SRN Southern Banc Company, Inc AL 109,768 22,293 22,059 0.54 0.54 3.96 3.96
SZB SouthFirst Bancshares, Inc. AL 90,542 13,050 13,050 0.57 0.32 3.50 1.96
VAFD Valley Federal Savings Bank AL 118,525 9,593 9,593 0.17 0.15 2.13 1.93
FFBH First Federal Bancshares of AR AR 504,939 83,431 83,431 NA NA NA NA
FTF Texarkana First Financial Corp AR 164,064 33,043 33,043 1.83 1.83 9.59 9.59
AHM Ahmanson & Company (H.F.) CA 49,506,630 2,777,356 2,637,334 0.92 0.26 15.84 4.52
AFFFZ America First Financial Fund CA 2,274,053 161,228 157,795 0.89 0.88 13.53 13.45
BPLS Bank Plus Corp. CA 3,296,633 174,998 174,647 -1.74 -1.74 -31.62 -31.74
BVFS Bay View Capital Corp. CA 3,388,847 206,177 181,928 0.06 0.36 0.85 5.12
BYFC Broadway Financial Corp. CA 111,863 13,954 13,954 0.28 0.31 3.60 3.95
CAL Cal Fed Bancorp, Inc. CA 14,045,400 683,200 683,200 0.82 0.73 14.79 13.13
CFHC California Financial Holding CA 1,327,178 86,924 86,431 0.57 0.52 8.53 7.65
CENF CENFED Financial Corp. CA 2,148,344 107,221 106,989 0.55 0.40 11.33 8.16
CSA Coast Savings Financial CA 8,350,710 429,883 423,104 0.49 0.45 9.90 9.08
DSL Downey Financial Corp. CA 4,712,294 391,919 385,323 0.69 0.61 8.44 7.49
FSSB First FS&LA of San Bernardino CA 102,436 4,737 4,501 -1.10 -1.28 -19.76 -22.88
FED FirstFed Financial Corp. CA 4,104,854 188,766 185,646 0.23 0.22 4.98 4.82
GLN Glendale Federal Bank, FSB CA 14,456,564 957,451 898,235 0.28 0.43 4.45 6.85
GDW Golden West Financial CA 35,775,375 2,362,246 2,224,420 0.81 0.79 12.46 12.25
GWF Great Western Financial CA 43,719,958 2,834,725 2,529,871 0.72 0.67 11.60 10.83
HTHR Hawthorne Financial Corp. CA 761,162 46,137 45,982 0.61 -0.03 12.77 -0.66
HEMT HF Bancorp, Inc. CA 826,916 81,072 NA 0.26 0.26 2.31 2.31
HBNK Highland Federal Bank FSB CA 441,245 34,897 34,897 0.30 0.29 4.69 4.55
MBBC Monterey Bay Bancorp, Inc. CA 317,347 46,799 46,300 0.32 0.30 2.16 2.04
NHSL NHS Financial, Inc. CA 284,191 25,033 24,987 0.45 0.45 5.34 5.34
PSSB Palm Springs Savings Bank CA 187,327 11,992 11,992 0.64 0.53 10.87 8.98
PFFB PFF Bancorp, Inc. CA 2,146,293 290,480 287,172 0.22 0.22 2.74 2.77
PROV Provident Financial Holdings CA 567,186 37,323 37,323 -0.72 -0.80 -9.81 -10.93
QCBC Quaker City Bancorp, Inc. CA 725,085 67,926 67,628 0.53 0.51 5.25 5.08
REDF RedFed Bancorp Inc. CA 840,142 49,425 49,425 -0.22 -0.33 -3.88 -5.84
<CAPTION>
CAPITAL ISSUES
-----------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
PLE Pinnacle Bank 12/17/86 AMSE 889,824 14.57
SRN Southern Banc Company, Inc 10/05/95 AMSE 1,454,750 17.09
SZB SouthFirst Bancshares, Inc. 02/14/95 AMSE 863,200 11.01
VAFD Valley Federal Savings Bank 10/15/87 NASDAQ 366,860 11.74
FFBH First Federal Bancshares of AR 05/03/96 NASDAQ 5,153,751 71.51
FTF Texarkana First Financial Corp 07/07/95 AMSE 1,952,263 30.75
AHM Ahmanson & Company (H.F.) 10/25/72 NYSE 107,188,014 2894.08
AFFFZ America First Financial Fund NA NASDAQ 6,010,589 161.53
BPLS Bank Plus Corp. NA NASDAQ 18,242,465 159.62
BVFS Bay View Capital Corp. 05/09/86 NASDAQ 6,885,242 234.10
BYFC Broadway Financial Corp. 01/09/96 NASDAQ 892,688 8.93
CAL Cal Fed Bancorp, Inc. 03/01/83 NYSE 49,395,947 901.48
CFHC California Financial Holding 04/01/83 NASDAQ 4,688,652 101.98
CENF CENFED Financial Corp. 10/25/91 NASDAQ 5,040,437 112.15
CSA Coast Savings Financial 12/23/85 NYSE 18,583,617 608.61
DSL Downey Financial Corp. 01/01/71 NYSE 16,972,905 371.28
FSSB First FS&LA of San Bernardino 02/02/93 NASDAQ 328,296 3.28
FED FirstFed Financial Corp. 12/16/83 NYSE 10,508,897 182.59
GLN Glendale Federal Bank, FSB 10/01/83 NYSE 46,729,698 846.98
GDW Golden West Financial 05/29/59 NYSE 57,923,709 3243.73
GWF Great Western Financial NA NYSE 137,392,481 3280.25
HTHR Hawthorne Financial Corp. NA NASDAQ 2,599,000 22.74
HEMT HF Bancorp, Inc. 06/30/95 NASDAQ 6,281,875 61.25
HBNK Highland Federal Bank FSB NA NASDAQ 2,295,983 36.74
MBBC Monterey Bay Bancorp, Inc. 02/15/95 NASDAQ 3,307,063 39.27
NHSL NHS Financial, Inc. NA NASDAQ 2,522,827 27.44
PSSB Palm Springs Savings Bank NA NASDAQ 1,130,946 15.55
PFFB PFF Bancorp, Inc. 03/29/96 NASDAQ 19,837,500 220.69
PROV Provident Financial Holdings 06/28/96 NASDAQ NA NA
QCBC Quaker City Bancorp, Inc. 12/30/93 NASDAQ 3,813,600 52.21
REDF RedFed Bancorp Inc. 04/08/94 NASDAQ 4,082,511 35.21
</TABLE>
111
<PAGE> 121
KELLER & COMPANY Page 2
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
----------------------------------- -----------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SGVB SGV Bancorp, Inc. CA 333,064 32,581 32,581 0.12 0.11 1.10 1.08
WES Westcorp CA 3,027,248 312,836 311,864 1.28 0.51 13.55 5.37
FFBA First Colorado Bancorp, Inc. CO 1,501,330 245,056 242,168 1.09 1.09 8.16 8.13
MORG Morgan Financial Corp. CO 74,130 10,358 10,358 1.02 0.99 6.82 6.61
EGFC Eagle Financial Corp. CT 1,402,417 102,356 74,772 1.27 0.63 17.56 8.71
FFES First Federal of East Hartford CT 947,807 57,007 56,846 0.57 0.57 8.65 8.58
NTMG Nutmeg Federal S&LA CT 91,158 5,672 5,672 0.67 0.40 10.72 6.33
WBST Webster Financial Corporation CT 3,837,220 214,669 167,767 0.60 0.63 10.69 11.19
IFSB Independence Federal Savings DC 252,970 17,194 14,905 0.43 0.20 6.58 3.01
BANC BankAtlantic Bancorp, Inc. FL 1,975,287 141,651 130,883 1.12 0.88 15.74 12.46
BKUNA BankUnited Financial Corp. FL 801,531 69,660 67,159 1.16 0.25 14.30 3.07
FFFG F.F.O. Financial Group, Inc. FL 307,055 19,105 19,105 0.50 0.60 7.76 9.32
FFLC FFLC Bancorp, Inc. FL 332,087 56,404 56,404 0.94 0.94 5.51 5.51
FFML First Family Financial Corp. FL 155,890 9,222 9,222 0.90 0.50 16.56 9.23
FFPB First Palm Beach Bancorp, Inc FL 1,438,024 113,606 110,733 0.74 0.70 8.92 8.44
FFPC Florida First Bancorp, Inc. FL 302,689 21,349 21,349 0.90 0.83 13.27 12.31
HOFL Home Financial Corp. FL 1,215,712 301,582 301,582 1.23 1.53 4.77 5.97
SCSL Suncoast Savings and Loan FL 402,569 25,538 25,490 0.56 -0.03 9.55 -0.47
CCFH CCF Holding Company GA 79,325 16,807 16,807 0.97 0.92 4.91 4.68
EBSI Eagle Bancshares GA 621,474 57,231 57,231 0.93 0.92 11.91 11.75
FGHC First Georgia Holding, Inc. GA 144,022 11,955 10,646 0.89 0.83 10.65 9.96
FLFC First Liberty Financial Corp. GA 991,226 75,953 65,464 1.03 0.87 13.29 11.17
FLAG FLAG Financial Corp. GA 228,710 21,840 21,840 0.87 0.74 9.35 7.93
NFSL Newnan Savings Bank, FSB GA 162,199 20,752 20,644 2.25 1.97 19.85 17.35
CASH First Midwest Financial, Inc. IA 342,095 39,029 36,450 1.06 1.05 8.14 8.05
GFSB GFS Bancorp, Inc. IA 83,305 9,945 9,945 1.16 1.13 9.19 8.93
HZFS Horizon Financial Svcs Corp. IA 73,464 8,390 8,390 0.53 0.43 4.38 3.55
MFCX Marshalltown Financial Corp. IA 125,308 19,563 19,563 0.38 0.36 2.43 2.31
MIFC Mid-Iowa Financial Corp. IA 115,260 10,807 10,791 0.93 0.92 10.00 9.79
MWBI Midwest Bancshares, Inc. IA 138,628 9,244 9,244 1.01 0.70 14.64 10.14
FFFD North Central Bancshares, Inc IA 194,283 55,736 55,736 1.65 1.64 8.13 8.10
<CAPTION>
CAPITAL ISSUES
-----------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
SGVB SGV Bancorp, Inc. 06/29/95 NASDAQ 2,727,656 24.55
WES Westcorp 05/01/86 NYSE 25,977,094 461.09
FFBA First Colorado Bancorp, Inc. 01/02/96 NASDAQ 20,134,256 266.78
MORG Morgan Financial Corp. 01/11/93 NASDAQ 834,058 10.01
EGFC Eagle Financial Corp. 02/03/87 NASDAQ 4,516,744 114.05
FFES First Federal of East Hartford 06/23/87 NASDAQ 2,597,010 46.75
NTMG Nutmeg Federal S&LA NA NASDAQ 710,169 5.15
WBST Webster Financial Corporation 12/12/86 NASDAQ 8,101,382 226.84
IFSB Independence Federal Savings 06/06/85 NASDAQ 1,278,935 9.59
BANC BankAtlantic Bancorp, Inc. 11/29/83 NASDAQ 14,926,166 167.17
BKUNA BankUnited Financial Corp. 12/11/85 NASDAQ 5,702,523 41.34
FFFG F.F.O. Financial Group, Inc. 10/13/88 NASDAQ 8,430,000 22.13
FFLC FFLC Bancorp, Inc. 01/04/94 NASDAQ 2,618,763 47.14
FFML First Family Financial Corp. 10/22/92 NASDAQ 545,000 11.45
FFPB First Palm Beach Bancorp, Inc 09/29/93 NASDAQ 5,181,187 110.75
FFPC Florida First Bancorp, Inc. 11/06/86 NASDAQ 3,384,645 37.65
HOFL Home Financial Corp. 10/25/94 NASDAQ 24,716,619 321.32
SCSL Suncoast Savings and Loan 07/30/85 NASDAQ 1,996,930 11.86
CCFH CCF Holding Company 07/12/95 NASDAQ 1,130,738 13.85
EBSI Eagle Bancshares 04/01/86 NASDAQ 4,552,200 72.27
FGHC First Georgia Holding, Inc. 02/11/87 NASDAQ 2,023,711 13.66
FLFC First Liberty Financial Corp. 12/06/83 NASDAQ 4,002,190 88.05
FLAG FLAG Financial Corp. 12/11/86 NASDAQ 2,035,740 24.43
NFSL Newnan Savings Bank, FSB 03/01/86 NASDAQ 1,459,407 28.82
CASH First Midwest Financial, Inc. 09/20/93 NASDAQ 1,778,577 39.13
GFSB GFS Bancorp, Inc. 01/06/94 NASDAQ 509,600 10.32
HZFS Horizon Financial Svcs Corp. 06/30/94 NASDAQ 447,937 6.72
MFCX Marshalltown Financial Corp. 03/31/94 NASDAQ 1,411,475 21.88
MIFC Mid-Iowa Financial Corp. 10/14/92 NASDAQ 1,682,880 10.10
MWBI Midwest Bancshares, Inc. 11/12/92 NASDAQ 349,379 9.00
FFFD North Central Bancshares, Inc 03/21/96 NASDAQ 4,011,057 44.12
</TABLE>
112
<PAGE> 122
KELLER & COMPANY Page 3
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
----------------------------------- ------------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PMFI Perpetual Midwest Financial IA 383,273 35,588 35,588 0.41 0.36 4.16 3.70
SFFC StateFed Financial Corporation IA 76,705 14,928 14,928 1.19 1.19 5.99 5.99
AVND Avondale Financial Corp. IL 592,771 58,842 58,842 0.62 0.45 5.82 4.21
CBCI Calumet Bancorp, Inc. IL 500,814 80,507 80,507 1.31 1.31 7.85 7.84
CBSB Charter Financial, Inc. IL 366,983 63,777 59,323 1.18 1.17 7.39 7.36
CBK Citizens First Financial Corp IL 247,882 40,669 40,669 0.53 0.44 6.58 5.52
CSBF CSB Financial Group, Inc. IL 41,524 12,837 12,837 0.89 0.89 3.67 3.67
DFIN Damen Financial Corp. IL 237,296 54,955 54,955 0.89 0.87 4.28 4.16
EGLB Eagle BancGroup, Inc. IL 162,519 22,345 22,345 NA NA NA NA
FBCI Fidelity Bancorp, Inc. IL 456,896 49,801 49,630 0.74 0.74 5.68 5.67
FNSC Financial Security Corp. IL 258,452 39,841 39,841 0.76 0.90 5.47 6.48
FFBI First Financial Bancorp, Inc. IL 94,486 7,873 7,873 0.68 0.59 6.79 5.93
FMBD First Mutual Bancorp, Inc. IL 301,690 69,445 69,445 0.98 0.94 3.80 3.65
FFDP FirstFed Bancshares IL 635,096 54,810 52,341 0.58 0.31 6.32 3.39
GTPS Great American Bancorp IL 119,662 33,331 33,331 0.70 0.69 2.44 2.39
HNFC Hinsdale Financial Corp. IL 662,482 55,463 53,831 0.63 0.57 8.18 7.37
HMCI HomeCorp, Inc. IL 338,985 21,133 21,133 0.40 0.25 6.66 4.23
KNK Kankakee Bancorp, Inc. IL 359,171 35,498 32,989 0.56 0.56 5.37 5.37
LBCI Liberty Bancorp, Inc. IL 651,198 64,017 63,854 0.55 0.55 5.61 5.61
MAFB MAF Bancorp, Inc. IL 3,117,149 242,226 206,596 0.85 0.86 14.21 14.30
NBSI North Bancshares, Inc. IL 119,436 18,514 18,514 0.59 0.54 3.19 2.92
PFED Park Bancorp, Inc. IL 155,216 17,658 17,658 NA NA NA NA
SWBI Southwest Bancshares IL 356,692 40,010 40,010 1.15 1.14 8.95 8.89
SPBC St. Paul Bancorp, Inc. IL 4,337,546 375,542 374,234 0.91 0.88 9.81 9.56
STND Standard Financial, Inc. IL 2,274,536 266,294 265,772 0.81 0.73 6.06 5.53
SFSB SuburbFed Financial Corp. IL 378,388 26,045 25,898 0.50 0.44 6.91 6.12
WCBI Westco Bancorp IL 312,158 48,236 48,236 1.30 1.31 8.37 8.44
FBCV 1ST Bancorp IN 263,483 21,729 21,729 2.05 -0.13 29.45 -1.87
AMFC AMB Financial Corp. IN 79,408 16,209 16,209 0.63 0.63 4.65 4.65
ASBI Ameriana Bancorp IN 402,051 44,609 44,547 0.92 0.91 7.38 7.28
ATSB AmTrust Capital Corp. IN 73,072 7,553 7,472 0.31 0.07 2.75 0.60
<CAPTION>
CAPITAL ISSUES
-----------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
PMFI Perpetual Midwest Financial 03/31/94 NASDAQ 1,988,082 33.80
SFFC StateFed Financial Corporation 01/05/94 NASDAQ 813,485 13.42
AVND Avondale Financial Corp. 04/07/95 NASDAQ 3,602,968 48.42
CBCI Calumet Bancorp, Inc. 02/20/92 NASDAQ 2,422,678 67.83
CBSB Charter Financial, Inc. 12/29/95 NASDAQ 4,874,380 55.76
CBK Citizens First Financial Corp 05/01/96 AMSE 2,817,500 28.53
CSBF CSB Financial Group, Inc. 10/09/95 NASDAQ 1,035,000 9.57
DFIN Damen Financial Corp. 10/02/95 NASDAQ 3,967,500 46.12
EGLB Eagle BancGroup, Inc. 07/01/96 NASDAQ NA NA
FBCI Fidelity Bancorp, Inc. 12/15/93 NASDAQ 2,930,608 47.99
FNSC Financial Security Corp. 12/29/92 NASDAQ 1,550,846 40.32
FFBI First Financial Bancorp, Inc. 10/04/93 NASDAQ 465,896 7.45
FMBD First Mutual Bancorp, Inc. 07/05/95 NASDAQ 4,126,600 51.07
FFDP FirstFed Bancshares 07/01/92 NASDAQ 3,399,116 59.91
GTPS Great American Bancorp 06/30/95 NASDAQ 1,850,247 26.37
HNFC Hinsdale Financial Corp. 07/07/92 NASDAQ 2,690,155 67.93
HMCI HomeCorp, Inc. 06/22/90 NASDAQ 1,128,579 20.31
KNK Kankakee Bancorp, Inc. 01/06/93 AMSE 1,433,718 27.78
LBCI Liberty Bancorp, Inc. 12/24/91 NASDAQ 2,477,022 61.93
MAFB MAF Bancorp, Inc. 01/12/90 NASDAQ 10,340,673 253.35
NBSI North Bancshares, Inc. 12/21/93 NASDAQ 1,113,631 16.98
PFED Park Bancorp, Inc. 08/12/96 NASDAQ NA NA
SWBI Southwest Bancshares 06/24/92 NASDAQ 1,794,474 48.68
SPBC St. Paul Bancorp, Inc. 05/18/87 NASDAQ 17,988,321 413.73
STND Standard Financial, Inc. 08/01/94 NASDAQ 16,345,875 269.71
SFSB SuburbFed Financial Corp. 03/04/92 NASDAQ 1,257,019 21.68
WCBI Westco Bancorp 06/26/92 NASDAQ 2,621,643 56.04
FBCV 1ST Bancorp 04/07/87 NASDAQ 666,561 17.33
AMFC AMB Financial Corp. 04/01/96 NASDAQ 1,124,125 11.80
ASBI Ameriana Bancorp 03/02/87 NASDAQ 3,303,130 44.59
ATSB AmTrust Capital Corp. 03/28/95 NASDAQ 566,964 5.81
</TABLE>
113
<PAGE> 123
KELLER & COMPANY Page 4
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
----------------------------------- ----------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CBCO CB Bancorp, Inc. IN 195,658 19,319 19,319 1.38 1.37 14.66 14.51
CBIN Community Bank Shares IN 233,347 25,792 25,792 0.88 0.86 7.36 7.19
FFWC FFW Corp. IN 150,467 15,458 15,458 1.09 1.05 9.89 9.51
FFED Fidelity Federal Bancorp IN 262,216 14,295 14,295 1.18 1.00 23.76 20.21
FISB First Indiana Corporation IN 1,473,094 136,048 134,184 1.19 0.99 13.57 11.33
HFGI Harrington Financial Group IN 418,196 23,117 23,117 0.37 0.40 9.49 10.12
HBFW Home Bancorp IN 315,901 48,974 48,974 0.84 0.84 4.99 4.99
HBBI Home Building Bancorp IN 43,135 6,015 6,015 0.41 0.38 2.86 2.64
HOMF Home Federal Bancorp IN 630,015 51,517 49,619 1.23 1.04 15.14 12.85
HWEN Home Financial Bancorp IN 39,426 3,410 3,410 0.82 0.82 8.77 8.77
INCB Indiana Community Bank, SB IN 94,476 14,156 14,156 0.67 0.67 4.39 4.39
IFSL Indiana Federal Corporation IN 742,269 70,283 65,437 0.91 0.96 9.37 9.98
LOGN Logansport Financial Corp. IN 77,195 19,821 19,821 1.50 1.42 5.55 5.25
MARN Marion Capital Holdings IN 177,767 41,511 41,511 1.41 1.41 5.86 5.86
MFBC MFB Corp. IN 210,559 37,691 37,691 0.73 0.71 3.69 3.59
NEIB Northeast Indiana Bancorp IN 154,128 29,125 29,125 1.19 1.19 5.46 5.46
PFDC Peoples Bancorp IN 277,958 43,298 43,298 1.45 1.44 9.51 9.49
PERM Permanent Bancorp, Inc. IN 411,213 40,231 39,728 0.38 0.38 3.47 3.46
SOBI Sobieski Bancorp, Inc. IN 76,362 14,120 14,120 0.42 0.42 2.24 2.24
WCHI Workingmens Capital Holdings IN 208,203 26,459 26,459 0.86 0.87 7.04 7.09
FFSL First Independence Corp. KS 105,771 13,050 13,050 1.10 0.94 8.51 7.28
LARK Landmark Bancshares, Inc. KS 200,469 33,050 33,050 0.93 0.83 5.45 4.86
MCBS Mid Continent Bancshares Inc. KS 313,759 36,704 36,668 1.27 1.27 9.59 9.59
WBCI WFS Bancorp, Inc. KS 267,829 34,405 34,390 0.67 0.73 5.71 6.18
CKFB CKF Bancorp, Inc. KY 58,734 15,636 15,636 1.19 1.19 4.26 4.26
CLAS Classic Bancshares, Inc. KY 68,754 19,505 19,505 0.72 0.62 3.14 2.71
FSBS First Ashland Financial Corp KY 87,422 23,921 23,921 0.99 0.99 3.70 3.68
FFKY First Federal Financial Corp. KY 352,671 49,946 46,681 1.60 1.46 11.28 10.28
FLKY First Lancaster Bancshares KY 33,812 4,643 4,643 1.50 1.50 11.24 11.24
FTSB Fort Thomas Financial Corp. KY 88,874 21,638 21,638 1.33 1.33 5.39 5.39
FKKY Frankfort First Bancorp, Inc. KY 138,616 47,836 47,836 1.06 1.12 3.82 4.04
<CAPTION>
CAPITAL ISSUES
--------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
CBCO CB Bancorp, Inc. 12/28/92 NASDAQ 1,175,226 20.86
CBIN Community Bank Shares 04/10/95 NASDAQ 1,983,722 25.04
FFWC FFW Corp. 04/05/93 NASDAQ 711,060 13.69
FFED Fidelity Federal Bancorp 08/31/87 NASDAQ 2,495,040 29.32
FISB First Indiana Corporation 08/02/83 NASDAQ 8,294,482 199.07
HFGI Harrington Financial Group NA NASDAQ 3,256,738 34.20
HBFW Home Bancorp 03/30/95 NASDAQ 2,886,815 44.02
HBBI Home Building Bancorp 02/08/95 NASDAQ 331,660 6.47
HOMF Home Federal Bancorp 01/23/88 NASDAQ 2,226,282 57.88
HWEN Home Financial Bancorp 07/02/96 NASDAQ NA NA
INCB Indiana Community Bank, SB 12/15/94 NASDAQ 922,039 14.06
IFSL Indiana Federal Corporation 02/04/87 NASDAQ 4,730,329 95.20
LOGN Logansport Financial Corp. 06/14/95 NASDAQ 1,322,500 17.60
MARN Marion Capital Holdings 03/18/93 NASDAQ 1,933,613 40.12
MFBC MFB Corp. 03/25/94 NASDAQ 1,973,980 27.14
NEIB Northeast Indiana Bancorp 06/28/95 NASDAQ 2,061,670 24.22
PFDC Peoples Bancorp 07/07/87 NASDAQ 2,345,512 46.32
PERM Permanent Bancorp, Inc. 04/04/94 NASDAQ 2,140,672 33.72
SOBI Sobieski Bancorp, Inc. 03/31/95 NASDAQ 836,860 10.67
WCHI Workingmens Capital Holdings 06/07/90 NASDAQ 1,808,560 36.85
FFSL First Independence Corp. 10/08/93 NASDAQ 583,421 10.36
LARK Landmark Bancshares, Inc. 03/28/94 NASDAQ 1,914,022 29.19
MCBS Mid Continent Bancshares Inc. 06/27/94 NASDAQ 2,031,750 37.59
WBCI WFS Bancorp, Inc. 06/03/94 NASDAQ 1,564,387 36.07
CKFB CKF Bancorp, Inc. 01/04/95 NASDAQ 962,899 18.90
CLAS Classic Bancshares, Inc. 12/29/95 NASDAQ 1,322,500 13.89
FSBS First Ashland Financial Corp 04/07/95 NASDAQ 1,463,039 26.70
FFKY First Federal Financial Corp. 07/15/87 NASDAQ 4,208,490 88.38
FLKY First Lancaster Bancshares 07/01/96 NASDAQ NA NA
FTSB Fort Thomas Financial Corp. 06/28/95 NASDAQ 1,573,775 27.54
FKKY Frankfort First Bancorp, Inc. 07/10/95 NASDAQ 3,450,000 48.73
</TABLE>
114
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KELLER & COMPANY Page 5
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
----------------------------------- -----------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GWBC Gateway Bancorp, Inc. KY 71,260 17,714 17,714 1.05 1.05 4.05 4.05
GTFN Great Financial Corporation KY 2,808,092 274,841 264,468 1.00 0.78 8.68 6.78
HFFB Harrodsburg First Fin Bancorp KY 109,578 30,828 30,828 1.17 1.17 4.52 4.52
KYF Kentucky First Bancorp, Inc. KY 88,296 19,225 19,225 1.12 1.12 6.44 6.44
SFNB Security First Network Bank KY 106,971 55,277 54,641 NA NA NA NA
ANA Acadiana Bancshares, Inc. LA 274,304 17,751 17,751 NA NA NA NA
CZF CitiSave Financial Corp LA 76,128 12,738 12,730 1.21 1.11 6.68 6.17
ISBF ISB Financial Corporation LA 686,549 117,545 114,141 1.17 1.16 6.04 5.98
JEBC Jefferson Bancorp, Inc. LA 265,594 36,060 36,060 0.94 0.94 7.22 7.21
MERI Meritrust Federal SB LA 228,419 17,338 17,338 1.01 0.98 13.70 13.38
TSH Teche Holding Co. LA 370,722 56,978 56,978 1.10 1.08 6.08 5.96
AFCB Affiliated Community Bancorp MA 983,904 96,871 96,159 0.74 0.88 6.71 7.98
BFD BostonFed Bancorp, Inc. MA 777,997 88,947 88,947 0.49 0.45 4.63 4.25
FMLY Family Bancorp MA 925,239 69,952 64,294 0.90 0.87 11.79 11.33
ANBK American National Bancorp MD 449,019 49,011 49,011 0.34 0.33 3.88 3.80
EQSB Equitable Federal Savings Bank MD 267,776 14,182 14,182 0.78 0.78 14.98 14.89
FCIT First Citizens Financial Corp. MD 645,824 39,728 39,728 0.71 0.57 11.59 9.27
FFWM First Financial-W. Maryland MD 321,994 41,707 41,707 1.11 1.07 8.98 8.69
HRBF Harbor Federal Bancorp, Inc. MD 201,030 27,782 27,782 0.56 0.56 3.19 3.19
HFMD Home Federal Corp. MD 219,737 19,224 18,997 0.73 0.71 8.56 8.29
MFSL Maryland Federal Bancorp MD 1,128,449 94,654 93,158 0.79 0.56 9.60 6.77
WSB Washington Savings Bank, FSB MD 254,968 20,959 20,959 0.94 0.71 12.56 9.48
WHGB WHG Bancshares Corp. MD 111,704 23,008 23,008 NA NA NA NA
MCBN Mid-Coast Bancorp, Inc. ME 55,048 4,976 4,976 0.60 0.55 6.65 6.10
BWFC Bank West Financial Corp. MI 139,217 27,540 27,540 0.69 0.41 3.41 2.03
CFSB CFSB Bancorp, Inc. MI 791,610 65,067 65,067 0.96 0.90 11.70 10.96
DNFC D & N Financial Corp. MI 1,364,024 78,954 77,886 1.08 0.99 19.53 17.89
MSBF MSB Financial, Inc. MI 60,130 12,594 12,594 1.83 1.79 7.66 7.51
MSBK Mutual Savings Bank, FSB MI 680,033 38,616 38,616 0.01 -0.08 0.18 -1.56
OFCP Ottawa Financial Corp. MI 782,145 80,338 64,443 0.91 0.90 5.72 5.66
SJSB SJS Bancorp MI 150,752 17,587 17,587 0.63 0.61 5.00 4.87
<CAPTION>
CAPITAL ISSUES
--------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
GWBC Gateway Bancorp, Inc. 01/18/95 NASDAQ 1,132,372 15.99
GTFN Great Financial Corporation 03/31/94 NASDAQ 14,183,732 367.00
HFFB Harrodsburg First Fin Bancorp 10/04/95 NASDAQ 2,159,085 33.20
KYF Kentucky First Bancorp, Inc. 08/29/95 AMSE 1,388,625 19.09
SFNB Security First Network Bank NA NASDAQ 8,092,792 267.06
ANA Acadiana Bancshares, Inc. 07/16/96 AMSE NA NA
CZF CitiSave Financial Corp 07/14/95 AMSE 964,707 13.51
ISBF ISB Financial Corporation 04/07/95 NASDAQ 7,122,183 105.05
JEBC Jefferson Bancorp, Inc. 08/18/94 NASDAQ 2,195,635 48.30
MERI Meritrust Federal SB NA NASDAQ 774,176 24.19
TSH Teche Holding Co. 04/19/95 AMSE 3,871,000 50.81
AFCB Affiliated Community Bancorp 10/19/95 NASDAQ 5,080,666 88.28
BFD BostonFed Bancorp, Inc. 10/24/95 AMSE 6,589,617 79.08
FMLY Family Bancorp 11/07/86 NASDAQ 4,215,211 104.85
ANBK American National Bancorp 10/31/95 NASDAQ 3,980,500 40.30
EQSB Equitable Federal Savings Bank 09/10/93 NASDAQ 600,000 14.85
FCIT First Citizens Financial Corp. 12/17/86 NASDAQ 2,915,238 51.02
FFWM First Financial-W. Maryland 02/11/92 NASDAQ 2,176,739 45.17
HRBF Harbor Federal Bancorp, Inc. 08/12/94 NASDAQ 1,754,420 21.93
HFMD Home Federal Corp. 02/10/84 NASDAQ 2,519,010 26.45
MFSL Maryland Federal Bancorp 06/02/87 NASDAQ 3,160,068 93.22
WSB Washington Savings Bank, FSB NA AMSE 4,220,206 21.10
WHGB WHG Bancshares Corp. 04/01/96 NASDAQ NA NA
MCBN Mid-Coast Bancorp, Inc. 11/02/89 NASDAQ 229,588 4.39
BWFC Bank West Financial Corp. 03/30/95 NASDAQ 2,296,040 22.52
CFSB CFSB Bancorp, Inc. 06/22/90 NASDAQ 4,913,415 92.69
DNFC D & N Financial Corp. 02/13/85 NASDAQ 7,564,730 105.91
MSBF MSB Financial, Inc. 02/06/95 NASDAQ 655,566 10.82
MSBK Mutual Savings Bank, FSB 07/17/92 NASDAQ 4,274,154 24.04
OFCP Ottawa Financial Corp. 08/19/94 NASDAQ 5,414,546 87.99
SJSB SJS Bancorp 02/16/95 NASDAQ 982,622 18.18
</TABLE>
115
<PAGE> 125
KELLER & COMPANY Page 6
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
----------------------------------- -----------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SFB Standard Federal Bancorp MI 15,239,983 962,935 754,005 0.95 0.82 14.09 12.27
THR Three Rivers Financial Corp. MI 85,138 13,044 12,986 NA NA NA NA
BDJI First Federal Bancorporation MN 104,969 13,918 13,918 0.70 0.69 4.74 4.72
FFHH FSF Financial Corp. MN 331,395 47,624 47,624 0.64 0.64 3.79 3.76
HMNF HMN Financial, Inc. MN 554,979 87,263 87,263 1.11 0.96 6.48 5.59
MIVI Mississippi View Holding Co. MN 69,322 12,752 12,752 1.31 1.16 6.73 5.96
QCFB QCF Bancorp, Inc. MN 145,608 31,760 31,760 1.51 1.51 7.61 7.61
TCB TCF Financial Corp. MN 7,000,871 523,788 500,956 1.43 1.37 20.06 19.14
WEFC Wells Financial Corp. MN 191,787 27,760 27,760 0.84 0.85 5.71 5.77
CMRN Cameron Financial Corp MO 175,841 46,337 46,337 1.60 1.56 5.77 5.64
CAPS Capital Savings Bancorp, Inc. MO 202,554 21,136 21,136 0.95 0.95 8.96 8.96
CNSB CNS Bancorp, Inc. MO 98,326 24,196 24,196 NA NA NA NA
FBSI First Bancshares, Inc. MO 143,671 23,729 23,686 0.85 0.83 4.90 4.82
GSBC Great Southern Bancorp, Inc. MO 668,105 67,808 66,706 1.75 1.63 17.28 16.07
HFSA Hardin Bancorp, Inc. MO 86,949 14,932 14,932 0.76 0.75 4.25 4.23
JSBA Jefferson Savings Bancorp MO 1,125,393 82,243 67,611 0.63 0.57 9.07 8.24
JOAC Joachim Bancorp, Inc. MO 36,492 10,792 10,792 0.74 0.72 3.07 2.97
LXMO Lexington B&L Financial Corp. MO 61,294 18,738 18,738 NA NA NA NA
MBLF MBLA Financial Corp. MO 195,074 28,365 28,365 0.70 0.70 4.83 4.81
MFSB Mutual Bancompany MO 53,311 6,236 6,236 0.20 0.23 1.84 2.10
NASB North American Savings Bank MO 740,298 50,380 48,478 1.26 1.19 17.33 16.38
NSLB NS&L Bancorp, Inc. MO 57,288 13,351 13,351 0.97 0.83 4.08 3.50
PCBC Perry County Financial Corp. MO 80,394 15,088 15,088 0.88 0.98 4.36 4.81
RFED Roosevelt Financial Group MO 9,327,772 516,317 492,923 0.64 0.86 12.31 16.46
SMFC Sho-Me Financial Corp. MO 280,027 30,787 30,787 0.85 0.83 6.89 6.66
SMBC Southern Missouri Bancorp, Inc. MO 161,992 26,572 26,572 0.87 0.82 4.98 4.67
CFTP Community Federal Bancorp MS 201,650 66,523 66,523 1.29 1.27 6.12 5.99
FFBS FFBS BanCorp, Inc. MS 125,228 24,639 24,639 1.37 1.37 6.88 6.88
MGNL Magna Bancorp, Inc. MS 1,308,658 125,819 119,043 1.71 1.70 17.51 17.38
GBCI Glacier Bancorp, Inc. MT 408,467 38,472 38,425 1.59 1.59 16.40 16.41
SFBM Security Bancorp MT 372,239 30,704 26,327 0.71 0.53 8.22 6.18
<CAPTION>
CAPITAL ISSUES
--------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
SFB Standard Federal Bancorp 01/21/87 NYSE 31,324,268 1205.98
THR Three Rivers Financial Corp. 08/24/95 AMSE 859,625 11.39
BDJI First Federal Bancorporation 04/04/95 NASDAQ 778,406 10.17
FFHH FSF Financial Corp. 10/07/94 NASDAQ 3,477,694 41.30
HMNF HMN Financial, Inc. 06/30/94 NASDAQ 4,921,200 81.20
MIVI Mississippi View Holding Co. 03/24/95 NASDAQ 909,714 10.58
QCFB QCF Bancorp, Inc. 04/03/95 NASDAQ 1,782,750 25.63
TCB TCF Financial Corp. 06/17/86 NYSE 34,960,450 1162.43
WEFC Wells Financial Corp. 04/11/95 NASDAQ 2,078,125 23.90
CMRN Cameron Financial Corp 04/03/95 NASDAQ 2,850,180 39.19
CAPS Capital Savings Bancorp, Inc. 12/29/93 NASDAQ 1,039,079 18.44
CNSB CNS Bancorp, Inc. 06/12/96 NASDAQ 1,653,125 19.42
FBSI First Bancshares, Inc. 12/22/93 NASDAQ 1,268,686 19.35
GSBC Great Southern Bancorp, Inc. 12/14/89 NASDAQ 4,406,048 121.17
HFSA Hardin Bancorp, Inc. 09/29/95 NASDAQ 1,012,180 11.51
JSBA Jefferson Savings Bancorp 04/08/93 NASDAQ 4,181,563 106.63
JOAC Joachim Bancorp, Inc. 12/28/95 NASDAQ 760,437 9.51
LXMO Lexington B&L Financial Corp. 06/06/96 NASDAQ 1,265,000 12.65
MBLF MBLA Financial Corp. 06/24/93 NASDAQ 1,371,738 28.81
MFSB Mutual Bancompany 02/02/95 NASDAQ 333,500 5.59
NASB North American Savings Bank 09/27/85 NASDAQ 2,267,984 66.91
NSLB NS&L Bancorp, Inc. 06/08/95 NASDAQ 799,034 9.99
PCBC Perry County Financial Corp. 02/13/95 NASDAQ 856,452 14.99
RFED Roosevelt Financial Group 01/23/87 NASDAQ 42,145,561 811.30
SMFC Sho-Me Financial Corp. 07/01/94 NASDAQ 1,732,674 26.86
SMBC Southern Missouri Bancorp, Inc. 04/13/94 NASDAQ 1,724,013 23.92
CFTP Community Federal Bancorp 03/26/96 NASDAQ 4,628,750 62.49
FFBS FFBS BanCorp, Inc. 07/01/93 NASDAQ 1,572,183 36.55
MGNL Magna Bancorp, Inc. 03/13/91 NASDAQ 13,702,868 255.22
GBCI Glacier Bancorp, Inc. 03/30/84 NASDAQ 3,361,133 71.42
SFBM Security Bancorp 11/20/86 NASDAQ 1,462,182 30.89
</TABLE>
116
<PAGE> 126
KELLER & COMPANY Page 7
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
----------------------------------- -----------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UBMT United Financial Corp. MT 104,195 24,507 24,507 1.52 1.44 6.66 6.30
WSTR WesterFed Financial Corp. MT 563,931 78,607 78,607 0.79 0.75 5.90 5.57
COOP Cooperative Bankshares, Inc. NC 316,654 29,494 26,038 0.29 0.28 3.14 3.06
SOPN First Savings Bancorp, Inc. NC 256,986 66,811 66,811 1.53 1.53 5.86 5.86
GSFC Green Street Financial Corp. NC 178,965 62,755 62,755 NA NA NA NA
HFNC HFNC Financial Corp. NC 716,277 244,362 244,362 NA NA NA NA
KSAV KS Bancorp, Inc. NC 93,536 13,835 13,821 1.11 1.12 6.88 6.97
MBSP Mitchell Bancorp, Inc. NC 27,596 6,078 6,078 0.92 0.92 4.24 4.24
PDB Piedmont Bancorp, Inc. NC 128,711 37,050 37,050 1.46 1.48 6.69 6.79
SSB Scotland Bancorp, Inc NC 70,488 24,706 24,706 NA NA NA NA
SSM Stone Street Bancorp, Inc. NC 107,991 38,328 38,328 NA NA NA NA
UFRM United Federal Savings Bank NC 255,485 20,634 20,634 0.79 0.67 10.03 8.44
CFB Commercial Federal Corporation NE 6,607,670 413,277 372,543 0.84 0.83 14.74 14.59
EBCP Eastern Bancorp NH 840,534 64,880 61,257 0.72 0.54 9.60 7.16
NHTB New Hampshire Thrift Bncshrs NH 258,526 19,475 19,475 0.65 0.61 8.48 7.98
FBER 1st Bergen Bancorp NJ 252,095 42,986 42,986 NA NA NA NA
CJFC Central Jersey Financial NJ 469,289 55,989 52,288 1.11 1.09 9.69 9.45
COFD Collective Bancorp, Inc. NJ 5,145,471 364,304 339,997 1.07 1.06 15.71 15.51
FSPG First Home Bancorp, Inc. NJ 479,314 30,836 30,076 0.97 0.95 14.89 14.51
FSFI First State Financial Services NJ 665,937 39,955 37,756 0.02 -0.12 0.23 -1.74
FMCO FMS Financial Corporation NJ 517,943 34,327 33,491 0.83 0.83 12.68 12.66
IBSF IBS Financial Corp. NJ 748,745 149,085 149,085 1.05 1.06 4.99 5.05
LVSB Lakeview Financial NJ 455,155 45,287 34,781 1.15 0.70 10.25 6.23
LFBI Little Falls Bancorp, Inc. NJ 282,232 43,813 40,416 NA NA NA NA
OCFC Ocean Financial Corp. NJ 1,191,812 92,088 92,088 NA NA NA NA
PBCI Pamrapo Bancorp, Inc. NJ 365,553 56,543 56,058 1.34 1.34 8.52 8.52
PFSB PennFed Financial Services,Inc. NJ 1,086,524 90,564 72,134 0.82 0.81 8.36 8.29
PULS Pulse Bancorp NJ 505,034 39,338 39,338 1.19 1.19 10.28 10.28
SFIN Statewide Financial Corp. NJ 678,406 67,168 66,979 NA NA NA NA
WYNE Wayne Bancorp, Inc. NJ 211,717 36,679 36,679 NA NA NA NA
WWFC Westwood Financial Corporation NJ 84,779 5,978 4,717 0.67 0.67 9.40 9.40
<CAPTION>
CAPITAL ISSUES
--------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
UBMT United Financial Corp. 09/23/86 NASDAQ 1,223,312 22.33
WSTR WesterFed Financial Corp. 01/10/94 NASDAQ 4,395,204 65.38
COOP Cooperative Bankshares, Inc. 08/21/91 NASDAQ 1,491,698 25.36
SOPN First Savings Bancorp, Inc. 01/06/94 NASDAQ 3,744,000 69.04
GSFC Green Street Financial Corp. 04/04/96 NASDAQ 4,298,125 55.88
HFNC HFNC Financial Corp. 12/29/95 NASDAQ 17,192,500 255.74
KSAV KS Bancorp, Inc. 12/30/93 NASDAQ 663,263 11.94
MBSP Mitchell Bancorp, Inc. 07/12/96 NASDAQ NA NA
PDB Piedmont Bancorp, Inc. 12/08/95 AMSE 2,645,000 34.72
SSB Scotland Bancorp, Inc 04/01/96 AMSE 1,840,000 22.54
SSM Stone Street Bancorp, Inc. 04/01/96 AMSE 1,825,050 30.80
UFRM United Federal Savings Bank 07/01/80 NASDAQ 3,065,064 24.52
CFB Commercial Federal Corporation 12/31/84 NYSE 15,089,701 577.18
EBCP Eastern Bancorp 11/17/83 NASDAQ 3,651,534 59.34
NHTB New Hampshire Thrift Bncshrs 05/22/86 NASDAQ 1,691,803 16.50
FBER 1st Bergen Bancorp 04/01/96 NASDAQ 3,174,000 28.96
CJFC Central Jersey Financial 09/01/84 NASDAQ 2,668,269 80.72
COFD Collective Bancorp, Inc. 02/07/84 NASDAQ 20,374,141 481.34
FSPG First Home Bancorp, Inc. 04/20/87 NASDAQ 2,030,009 36.03
FSFI First State Financial Services 12/18/87 NASDAQ 3,929,455 51.08
FMCO FMS Financial Corporation 12/14/88 NASDAQ 2,467,593 39.79
IBSF IBS Financial Corp. 10/13/94 NASDAQ 11,002,393 143.03
LVSB Lakeview Financial 12/22/93 NASDAQ 2,265,704 44.46
LFBI Little Falls Bancorp, Inc. 01/05/96 NASDAQ 3,041,750 31.56
OCFC Ocean Financial Corp. 07/03/96 NASDAQ NA NA
PBCI Pamrapo Bancorp, Inc. 11/14/89 NASDAQ 3,280,964 63.16
PFSB PennFed Financial Services,Inc. 07/15/94 NASDAQ 4,823,665 74.77
PULS Pulse Bancorp 09/18/86 NASDAQ 3,049,378 53.36
SFIN Statewide Financial Corp. 10/02/95 NASDAQ 5,058,152 62.59
WYNE Wayne Bancorp, Inc. 06/27/96 NASDAQ 2,231,383 24.82
WWFC Westwood Financial Corporatio 06/07/96 NASDAQ NA NA
</TABLE>
117
<PAGE> 127
KELLER & COMPANY Page 8
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
----------------------------------- -----------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FSBC First Savings Bank, FSB NM 112,436 5,551 5,551 0.34 0.26 7.13 5.56
GUPB GFSB Bancorp, Inc. NM 70,422 16,216 16,216 1.25 1.25 4.87 4.87
ALBK ALBANK Financial Corporation NY 3,325,592 316,703 279,777 0.97 0.97 9.50 9.49
ALBC Albion Banc Corp. NY 57,784 5,973 5,973 0.24 0.24 2.33 2.28
ASFC Astoria Financial Corporation NY 7,078,383 561,667 456,987 0.74 0.67 8.56 7.82
BFSI BFS Bankorp, Inc. NY 621,324 48,620 48,620 1.84 1.78 24.09 23.30
CARV Carver Federal Savings Bank NY 362,369 34,875 33,259 0.21 0.18 2.15 1.94
FIBC Financial Bancorp, Inc. NY 262,497 26,224 26,076 0.66 0.65 5.75 5.64
HAVN Haven Bancorp, Inc. NY 1,550,275 94,068 93,515 0.74 0.71 11.42 11.05
LISB Long Island Bancorp, Inc. NY 5,221,019 521,711 521,711 0.93 0.85 8.78 7.99
NYB New York Bancorp Inc. NY 2,918,120 158,374 158,374 1.27 1.20 21.77 20.51
PEEK Peekskill Financial Corp. NY 191,323 59,774 59,774 1.23 1.27 4.96 5.09
PKPS Poughkeepsie Savings Bank, FSB NY 840,491 70,958 70,958 1.70 2.36 21.07 29.34
RELY Reliance Bancorp, Inc. NY 1,782,550 153,619 104,190 0.83 0.79 7.61 7.23
SFED SFS Bancorp, Inc. NY 164,366 22,287 22,287 0.69 0.70 4.88 4.95
TPNZ Tappan Zee Financial, Inc. NY 119,167 21,499 21,499 0.80 0.74 5.22 4.85
YFCB Yonkers Financial Corporation NY 242,826 49,021 49,021 NA NA NA NA
ASBP ASB Financial Corp. OH 112,988 25,643 25,643 1.01 1.01 4.30 4.30
CAFI Camco Financial Corporation OH 352,576 29,337 29,337 1.22 0.95 15.13 11.81
COFI Charter One Financial OH 13,951,846 934,478 863,715 0.42 1.12 6.39 17.06
CRCL Circle Financial Corp. OH 241,758 24,742 21,590 0.51 0.51 4.66 4.67
CTZN CitFed Bancorp, Inc. OH 2,661,006 175,271 152,777 0.71 0.64 10.20 9.11
CIBI Community Investors Bancorp OH 85,785 11,869 11,869 1.01 0.96 6.98 6.63
EFBI Enterprise Federal Bancorp OH 213,876 31,594 31,536 0.92 0.64 5.39 3.74
FFDF FFD Financial Corp. OH 76,159 8,302 8,302 0.87 0.82 6.92 6.51
FFYF FFY Financial Corp. OH 575,602 101,921 101,921 1.20 1.24 6.58 6.79
FFOH Fidelity Financial of Ohio OH 251,188 51,087 51,087 0.87 0.87 5.60 5.59
FDEF First Defiance Financial OH 520,666 126,605 126,605 1.21 1.19 5.29 5.21
FFBZ First Federal Bancorp, Inc. OH 177,778 14,022 14,003 1.14 1.12 15.12 14.89
FFHS First Franklin Corporation OH 216,508 20,287 20,080 0.62 0.61 6.56 6.47
FFSW FirstFederal Financial Svcs OH 1,044,608 82,838 71,588 1.12 0.95 13.85 11.82
<CAPTION> CAPITAL ISSUES
--------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
FSBC First Savings Bank, FSB 08/08/86 NASDAQ 695,698 3.83
GUPB GFSB Bancorp, Inc. 06/30/95 NASDAQ 948,750 12.81
ALBK ALBANK Financial Corporation 04/01/92 NASDAQ 13,287,933 350.47
ALBC Albion Banc Corp. 07/26/93 NASDAQ 252,314 4.23
ASFC Astoria Financial Corporation 11/18/93 NASDAQ 21,509,444 583.44
BFSI BFS Bankorp, Inc. 05/12/88 NASDAQ 1,635,488 61.74
CARV Carver Federal Savings Bank 10/25/94 NASDAQ 2,314,375 18.52
FIBC Financial Bancorp, Inc. 08/17/94 NASDAQ 1,796,122 22.45
HAVN Haven Bancorp, Inc. 09/23/93 NASDAQ 4,320,060 121.50
LISB Long Island Bancorp, Inc. 04/18/94 NASDAQ 24,805,349 758.05
NYB New York Bancorp Inc. 01/28/88 NYSE 11,491,858 293.04
PEEK Peekskill Financial Corp. 12/29/95 NASDAQ 4,099,750 48.17
PKPS Poughkeepsie Savings Bank, FSB 11/19/85 NASDAQ 12,549,325 62.75
RELY Reliance Bancorp, Inc. 03/31/94 NASDAQ 9,128,739 142.64
SFED SFS Bancorp, Inc. 06/30/95 NASDAQ 1,292,450 16.48
TPNZ Tappan Zee Financial, Inc. 10/05/95 NASDAQ 1,553,062 18.64
YFCB Yonkers Financial Corporation 04/18/96 NASDAQ 3,570,750 34.89
ASBP ASB Financial Corp. 05/11/95 NASDAQ 1,713,960 25.71
CAFI Camco Financial Corporation NA NASDAQ 2,075,641 40.03
COFI Charter One Financial 01/22/88 NASDAQ 45,009,764 1569.72
CRCL Circle Financial Corp. 08/06/91 NASDAQ 715,033 25.03
CTZN CitFed Bancorp, Inc. 01/23/92 NASDAQ 5,691,322 222.67
CIBI Community Investors Bancorp 02/07/95 NASDAQ 701,246 10.34
EFBI Enterprise Federal Bancorp 10/17/94 NASDAQ 2,074,328 29.04
FFDF FFD Financial Corp. 04/03/96 NASDAQ NA NA
FFYF FFY Financial Corp. 06/28/93 NASDAQ 5,081,198 120.68
FFOH Fidelity Financial of Ohio 03/04/96 NASDAQ 4,073,589 40.74
FDEF First Defiance Financial 10/02/95 NASDAQ 10,432,476 108.24
FFBZ First Federal Bancorp, Inc. 07/13/92 NASDAQ 784,658 18.44
FFHS First Franklin Corporation 01/26/88 NASDAQ 1,165,318 17.48
FFSW FirstFederal Financial Svcs 03/31/87 NASDAQ 3,583,829 104.83
</TABLE>
118
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KELLER & COMPANY Page 9
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
----------------------------------- -----------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GFCO Glenway Financial Corp. OH 273,890 26,485 25,854 0.56 0.55 5.82 5.75
HHFC Harvest Home Financial Corp. OH 76,399 12,769 12,769 0.75 0.75 4.14 4.14
HVFD Haverfield Corporation OH 334,226 28,414 28,352 0.71 0.67 8.57 8.10
INBI Industrial Bancorp OH 313,563 60,799 60,799 1.57 1.57 7.13 7.13
LONF London Financial Corporation OH 37,189 7,945 7,945 NA NA NA NA
MFFC Milton Federal Financial Corp. OH 178,289 33,756 33,756 1.04 0.96 4.80 4.41
OHSL OHSL Financial Corp. OH 209,037 25,494 25,494 0.95 0.93 7.55 7.41
PTRS Potters Financial Corp. OH 114,714 10,594 10,594 0.51 0.50 5.27 5.21
PVFC PVF Capital Corp. OH 318,100 21,325 21,325 1.13 1.00 17.86 15.90
SFSL Security First Corp. OH 588,592 55,732 54,624 1.21 1.27 13.36 13.98
SHFC Seven Hills Financial Corp. OH 45,511 9,651 9,651 0.36 0.34 1.69 1.61
SSBK Strongsville Savings Bank OH 529,187 42,554 41,701 0.99 0.88 11.83 10.53
SBCN Suburban Bancorporation, Inc. OH 197,137 25,639 25,639 0.39 0.57 2.95 4.30
THIR Third Financial Corp. OH 155,911 28,655 28,655 1.37 1.23 7.66 6.86
WOFC Western Ohio Financial Corp. OH 332,524 55,632 52,331 0.89 0.56 3.88 2.44
WFCO Winton Financial Corp. OH 282,833 21,083 20,544 0.94 0.80 12.39 10.50
FFWD Wood Bancorp, Inc. OH 146,249 20,122 20,122 1.19 1.14 8.40 8.05
KFBI Klamath First Bancorp OR 629,943 161,804 161,804 1.43 1.43 6.06 6.06
BRFC Bridgeville Savings Bank PA 56,109 16,004 16,004 1.27 1.27 4.34 4.34
CVAL Chester Valley Bancorp Inc. PA 272,932 25,564 25,564 0.91 0.87 9.88 9.44
CMSB Commonwealth Bancorp, Inc. PA 2,049,062 227,521 173,218 0.74 0.65 8.08 7.04
FSBI Fidelity Bancorp, Inc. PA 317,315 21,544 21,434 0.65 0.65 8.66 8.53
FBBC First Bell Bancorp, Inc. PA 570,649 116,265 116,265 1.62 1.61 7.34 7.30
FKFS First Keystone Financial PA 290,549 22,920 22,920 0.56 0.60 6.48 6.99
SHEN First Shenango Bancorp, Inc. PA 369,279 46,836 46,836 1.03 0.98 7.45 7.10
GAF GA Financial, Inc. PA 562,351 128,420 128,420 0.78 0.96 5.90 7.26
HARL Harleysville Savings Bank PA 298,172 19,826 19,826 0.81 0.85 11.83 12.43
LARL Laurel Capital Group, Inc. PA 196,947 21,086 21,086 1.39 1.35 13.29 12.99
MLBC ML Bancorp, Inc. PA 1,876,018 141,239 135,607 0.72 0.56 8.30 6.45
PVSA Parkvale Financial Corporation PA 919,242 69,765 69,489 1.06 0.99 15.13 14.14
PBIX Patriot Bank Corp. PA 417,746 54,003 54,003 0.63 0.65 4.91 5.08
<CAPTION>
CAPITAL ISSUES
--------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
GFCO Glenway Financial Corp. 11/30/90 NASDAQ 1,145,431 23.45
HHFC Harvest Home Financial Corp. 10/10/94 NASDAQ 934,857 11.69
HVFD Haverfield Corporation 03/19/85 NASDAQ 1,906,591 36.23
INBI Industrial Bancorp 08/01/95 NASDAQ 5,554,500 62.49
LONF London Financial Corporation 04/01/96 NASDAQ 529,000 5.55
MFFC Milton Federal Financial Corp. 10/07/94 NASDAQ 2,263,797 27.73
OHSL OHSL Financial Corp. 02/10/93 NASDAQ 1,217,386 24.35
PTRS Potters Financial Corp. 12/31/93 NASDAQ 506,169 8.13
PVFC PVF Capital Corp. 12/30/92 NASDAQ 2,323,436 30.20
SFSL Security First Corp. 01/22/88 NASDAQ 4,929,612 70.25
SHFC Seven Hills Financial Corp. 12/31/93 NASDAQ 536,472 7.78
SSBK Strongsville Savings Bank NA NASDAQ 2,530,800 51.88
SBCN Suburban Bancorporation, Inc. 09/30/93 NASDAQ 1,480,732 23.88
THIR Third Financial Corp. 03/25/93 NASDAQ 1,135,954 36.35
WOFC Western Ohio Financial Corp. 07/29/94 NASDAQ 2,309,342 51.96
WFCO Winton Financial Corp. 08/04/88 NASDAQ 1,986,152 28.30
FFWD Wood Bancorp, Inc. 08/31/93 NASDAQ 1,497,705 18.97
KFBI Klamath First Bancorp 10/05/95 NASDAQ 12,233,125 178.91
BRFC Bridgeville Savings Bank 10/07/94 NASDAQ 1,124,125 16.86
CVAL Chester Valley Bancorp Inc. 03/27/87 NASDAQ 1,648,185 28.65
CMSB Commonwealth Bancorp, Inc. 06/17/96 NASDAQ 17,952,693 190.75
FSBI Fidelity Bancorp, Inc. 06/24/88 NASDAQ 1,369,511 22.60
FBBC First Bell Bancorp, Inc. 06/29/95 NASDAQ 8,166,450 112.29
FKFS First Keystone Financial 01/26/95 NASDAQ 1,292,500 22.30
SHEN First Shenango Bancorp, Inc. 04/06/93 NASDAQ 2,281,250 46.20
GAF GA Financial, Inc. 03/26/96 AMSE 8,900,000 97.90
HARL Harleysville Savings Bank 08/04/87 NASDAQ 1,289,442 22.89
LARL Laurel Capital Group, Inc. 02/20/87 NASDAQ 1,512,667 22.31
MLBC ML Bancorp, Inc. 08/11/94 NASDAQ 6,246,900 151.49
PVSA Parkvale Financial Corporation 07/16/87 NASDAQ 3,235,643 81.70
PBIX Patriot Bank Corp. 12/04/95 NASDAQ 3,769,125 48.06
</TABLE>
119
<PAGE> 129
KELLER & COMPANY Page 10
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
----------------------------------- -----------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PWBC PennFirst Bancorp, Inc. PA 696,467 48,456 43,798 0.62 0.59 7.68 7.36
PWBK Pennwood Savings Bank PA 42,366 4,081 4,081 NA NA NA NA
PHFC Pittsburgh Home Financial Corp PA 184,002 30,406 30,406 0.51 0.51 6.53 6.53
PRBC Prestige Bancorp, Inc. PA 102,609 15,273 15,273 NA NA NA NA
PSAB Prime Bancorp, Inc. PA 644,560 58,048 54,425 1.02 0.95 10.90 10.19
PFNC Progress Financial Corporation PA 347,858 19,508 19,374 0.91 0.71 18.78 14.73
SVRN Sovereign Bancorp, Inc. PA 9,183,447 461,466 344,022 0.79 0.76 14.64 14.24
THRD TF Financial Corporation PA 528,910 75,122 75,122 0.91 0.88 5.94 5.72
THBC Troy Hill Bancorp, Inc. PA 80,484 17,865 17,865 1.38 1.26 6.09 5.57
WVFC WVS Financial Corporation PA 259,622 34,038 34,038 1.51 1.39 10.19 9.38
YFED York Financial Corp. PA 1,109,804 93,540 93,540 0.99 0.88 11.57 10.31
AMFB American Federal Bank, FSB SC 1,382,171 107,260 98,902 1.30 1.41 16.02 17.49
CFCP Coastal Financial Corp. SC 452,809 27,641 27,641 1.04 0.92 17.09 15.04
FFCH First Financial Holdings Inc. SC 1,523,224 97,330 97,330 0.78 0.79 11.81 11.97
FSFC First Southeast Financial Corp SC 326,573 33,669 33,669 0.31 0.82 1.61 4.26
PALM Palfed, Inc. SC 638,002 53,666 51,136 0.69 0.58 8.53 7.16
SCCB S. Carolina Community Bancshrs SC 44,161 12,309 12,309 1.11 1.11 3.80 3.80
HFFC HF Financial Corp. SD 555,189 51,793 51,641 0.85 0.69 9.35 7.63
LFCT Leader Financial Corp. TN 3,211,064 266,390 266,390 1.48 1.45 18.45 18.01
TWIN Twin City Bancorp TN 103,300 14,113 14,113 1.09 0.96 7.94 7.02
BNKU Bank United Corp. TX 11,002,448 804,627 788,566 1.31 1.07 18.87 15.41
CBSA Coastal Bancorp, Inc. TX 2,796,568 95,091 78,680 0.40 0.38 11.70 11.27
ETFS East Texas Financial Services TX 115,339 21,815 21,815 0.81 0.74 4.17 3.82
FBHC Fort Bend Holding Corp. TX 254,739 18,008 18,008 0.70 0.62 9.62 8.50
LOAN Horizon Bancorp TX 130,930 11,195 10,830 1.47 1.18 16.04 12.84
JXVL Jacksonville Bancorp, Inc. TX 217,730 35,616 35,616 0.93 0.93 7.63 7.63
BFSB Bedford Bancshares, Inc. VA 121,783 18,530 18,530 1.29 1.28 7.96 7.94
CNIT CENIT Bancorp, Inc. VA 655,771 47,716 46,010 0.48 0.54 6.76 7.51
CFFC Community Financial Corp. VA 158,835 22,297 22,297 1.31 1.31 9.68 9.67
ESX Essex Bancorp, Inc. VA 305,223 15,573 13,395 -1.63 -1.52 -26.06 -24.35
FFFC FFVA Financial Corp. VA 522,811 81,442 79,774 1.24 1.22 7.51 7.37
<CAPTION>
CAPITAL ISSUES
--------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
PWBC PennFirst Bancorp, Inc. 06/13/90 NASDAQ 3,938,712 51.20
PWBK Pennwood Savings Bank 07/15/96 NASDAQ NA NA
PHFC Pittsburgh Home Financial Corp 04/01/96 NASDAQ 2,182,125 21.95
PRBC Prestige Bancorp, Inc. 06/27/96 NASDAQ 963,023 10.11
PSAB Prime Bancorp, Inc. 11/21/88 NASDAQ 3,725,056 69.14
PFNC Progress Financial Corporation 07/18/83 NASDAQ 3,730,000 24.25
SVRN Sovereign Bancorp, Inc. 08/12/86 NASDAQ 49,573,278 495.73
THRD TF Financial Corporation 07/13/94 NASDAQ 4,514,057 68.12
THBC Troy Hill Bancorp, Inc. 06/27/94 NASDAQ 1,067,917 14.42
WVFC WVS Financial Corporation 11/29/93 NASDAQ 1,736,760 36.04
YFED York Financial Corp. 02/01/84 NASDAQ 6,087,722 101.97
AMFB American Federal Bank, FSB 01/19/89 NASDAQ 10,931,985 183.11
CFCP Coastal Financial Corp. 09/26/90 NASDAQ 3,436,403 61.17
FFCH First Financial Holdings Inc. 11/10/83 NASDAQ 6,377,369 114.79
FSFC First Southeast Financial Corp 10/08/93 NASDAQ 4,388,231 43.88
PALM Palfed, Inc. 12/15/85 NASDAQ 5,225,571 65.32
SCCB S. Carolina Community Bancshrs 07/07/94 NASDAQ 735,410 11.86
HFFC HF Financial Corp. 04/08/92 NASDAQ 3,051,739 45.78
LFCT Leader Financial Corp. 09/30/93 NASDAQ 9,947,794 445.16
TWIN Twin City Bancorp 01/04/95 NASDAQ 896,564 14.79
BNKU Bank United Corp. NA NASDAQ NA NA
CBSA Coastal Bancorp, Inc. NA NASDAQ 4,962,344 89.32
ETFS East Texas Financial Services 01/10/95 NASDAQ 1,133,890 16.58
FBHC Fort Bend Holding Corp. 06/30/93 NASDAQ 819,198 14.54
LOAN Horizon Bancorp NA NASDAQ 1,386,757 15.60
JXVL Jacksonville Bancorp, Inc. 04/01/96 NASDAQ 2,664,405 27.98
BFSB Bedford Bancshares, Inc. 08/22/94 NASDAQ 1,161,169 19.30
CNIT CENIT Bancorp, Inc. 08/06/92 NASDAQ 1,612,952 54.84
CFFC Community Financial Corp. 03/30/88 NASDAQ 1,272,048 26.39
ESX Essex Bancorp, Inc. NA AMSE 1,051,790 2.30
FFFC FFVA Financial Corp. 10/12/94 NASDAQ 5,180,952 94.55
</TABLE>
120
<PAGE> 130
KELLER & COMPANY Page 11
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
----------------------------------- -----------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFRV Fidelity Financial Bankshares VA 325,814 28,010 27,993 1.00 0.97 12.03 11.71
GSLC Guaranty Financial Corp. VA 102,967 6,373 6,373 0.68 0.42 10.91 6.77
LIFB Life Bancorp, Inc. VA 1,240,520 148,718 143,199 0.87 0.91 6.25 6.56
VABF Virginia Beach Fed. Financial VA 608,832 41,206 41,206 0.29 0.10 4.81 1.56
VFFC Virginia First Financial Corp. VA 746,867 60,996 59,075 1.74 0.84 22.49 10.79
CASB Cascade Financial Corp. WA 334,431 20,815 20,815 0.71 0.40 11.28 6.39
FWWB First SB of Washington Bancorp WA 764,685 148,840 148,840 1.23 1.20 6.56 6.43
IWBK InterWest Bancorp, Inc. WA 1,413,926 96,338 93,662 1.11 1.05 15.69 14.79
MSEA Metropolitan Bancorp WA 761,014 51,166 46,402 0.78 0.83 11.41 12.23
STSA Sterling Financial Corp. WA 1,477,699 85,745 74,140 0.45 0.43 7.73 7.39
WFSL Washington Federal, Inc. WA 5,040,588 597,495 569,151 1.78 1.71 14.47 13.84
AADV Advantage Bancorp, Inc. WI 996,245 94,116 81,912 0.90 0.81 9.41 8.45
ABCW Anchor BanCorp Wisconsin WI 1,822,248 117,895 114,841 0.90 0.87 12.75 12.32
FCBF FCB Financial Corp. WI 265,172 46,655 46,655 1.09 1.07 5.71 5.62
FFEC First Fed Bncshrs Eau Claire WI 706,672 97,457 93,632 0.87 0.91 5.70 5.91
FTFC First Federal Capital Corp. WI 1,389,163 95,278 89,847 0.97 0.72 13.98 10.44
FFHC First Financial Corp. WI 5,579,294 407,905 388,953 1.31 1.26 18.55 17.93
FNGB First Northern Capital Corp. WI 580,128 70,754 70,754 0.78 0.75 6.12 5.85
HALL Hallmark Capital Corp. WI 377,157 27,011 27,011 0.60 0.57 7.17 6.80
MWFD Midwest Federal Financial WI 187,601 16,901 16,160 1.28 1.04 13.41 10.85
NWEQ Northwest Equity Corp. WI 91,804 11,720 11,720 1.00 0.95 6.91 6.54
OSBF OSB Financial Corp. WI 250,003 31,400 31,400 0.21 0.36 1.63 2.85
RELI Reliance Bancshares, Inc. WI 47,752 29,348 NA 1.28 1.29 2.64 2.65
SECP Security Capital Corporation WI 3,437,317 559,048 559,048 0.99 1.04 5.85 6.13
STFR St. Francis Capital Corp. WI 1,329,903 130,656 124,711 1.18 0.87 10.78 7.95
FOBC Fed One Bancorp WV 343,028 41,188 39,077 1.00 1.00 7.93 7.92
CRZY Crazy Woman Creek Bancorp WY 50,324 15,453 15,453 NA NA NA NA
TRIC Tri-County Bancorp, Inc. WY 76,718 12,408 12,408 0.95 0.92 5.13 4.99
<CAPTION>
CAPITAL ISSUES
--------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
FFRV Fidelity Financial Bankshares 05/01/86 NASDAQ 2,291,681 31.51
GSLC Guaranty Financial Corp. NA NASDAQ 919,168 7.12
LIFB Life Bancorp, Inc. 10/11/94 NASDAQ 10,097,094 142.62
VABF Virginia Beach Fed. Financial 11/01/80 NASDAQ 4,965,094 34.14
VFFC Virginia First Financial Corp. 01/01/78 NASDAQ 5,740,503 78.93
CASB Cascade Financial Corp. 09/16/92 NASDAQ 2,045,894 32.22
FWWB First SB of Washington Bancorp 11/01/95 NASDAQ 10,474,200 163.66
IWBK InterWest Bancorp, Inc. NA NASDAQ 6,450,308 154.00
MSEA Metropolitan Bancorp 01/09/90 NASDAQ 3,710,205 50.09
STSA Sterling Financial Corp. NA NASDAQ 5,426,398 80.04
WFSL Washington Federal, Inc. 11/17/82 NASDAQ 42,246,383 866.05
AADV Advantage Bancorp, Inc. 03/23/92 NASDAQ 3,392,694 115.35
ABCW Anchor BanCorp Wisconsin 07/16/92 NASDAQ 4,839,392 168.17
FCBF FCB Financial Corp. 09/24/93 NASDAQ 2,459,614 43.04
FFEC First Fed Bncshrs Eau Claire 10/12/94 NASDAQ 6,855,379 105.40
FTFC First Federal Capital Corp. 11/02/89 NASDAQ 6,231,168 126.18
FFHC First Financial Corp. 12/24/80 NASDAQ 29,905,406 672.87
FNGB First Northern Capital Corp. 12/29/83 NASDAQ 4,394,725 67.02
HALL Hallmark Capital Corp. 01/03/94 NASDAQ 1,413,280 21.20
MWFD Midwest Federal Financial 07/08/92 NASDAQ 1,634,880 25.34
NWEQ Northwest Equity Corp. 10/11/94 NASDAQ 945,392 9.81
OSBF OSB Financial Corp. 07/01/92 NASDAQ 1,110,984 26.11
RELI Reliance Bancshares, Inc. 04/19/96 NASDAQ 2,562,344 20.50
SECP Security Capital Corporation 01/03/94 NASDAQ 9,314,365 554.20
STFR St. Francis Capital Corp. 06/21/93 NASDAQ 5,586,837 139.67
FOBC Fed One Bancorp 01/19/95 NASDAQ 2,558,191 38.37
CRZY Crazy Woman Creek Bancorp 03/29/96 NASDAQ 1,058,000 10.71
TRIC Tri-County Bancorp, Inc. 09/30/93 NASDAQ 608,749 10.96
</TABLE>
121
<PAGE> 131
KELLER & COMPANY Page 12
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
----------------------------------- -----------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALL THRIFTS
AVERAGE 1,327,408 104,568 99,048 0.88 0.81 8.08 7.26
MEDIAN 313,759 37,050 36,668 0.89 0.83 7.37 6.80
HIGH 49,506,630 2,834,725 2,637,334 2.25 2.36 29.45 29.34
LOW 27,596 3,410 3,410 -1.74 -1.74 -31.62 -31.74
AVERAGE FOR STATE
OH 794,055 68,537 64,845 0.91 0.88 7.88 7.70
AVERAGE BY REGION
MIDWEST 902,529 78,650 73,760 0.90 0.84 7.85 7.14
NEW ENGLAND 940,345 77,329 75,365 0.69 0.58 6.48 5.23
MID ATLANTIC 587,865 61,477 59,018 0.97 0.92 8.49 8.05
SOUTHEAST 885,540 77,712 72,670 0.95 0.87 9.56 8.39
SOUTHWEST 890,833 90,274 88,070 0.57 0.51 5.36 4.69
WEST 5,289,469 331,057 318,052 0.60 0.53 6.44 5.33
AVERAGE BY EXCHANGE
NYSE 16,112,744 999,750 928,067 0.83 0.68 12.82 10.83
AMEX 236,679 35,191 34,884 0.74 0.70 4.49 4.16
OTC/NASDAQ 765,270 70,729 67,499 0.88 0.82 8.04 7.25
<CAPTION>
CAPITAL ISSUES
--------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
-----------------------------------------------
<S> <C> <C> <C> <C>
ALL THRIFTS
AVERAGE 5,860,310 124.09
MEDIAN 2,472,308 36.80
HIGH 137,392,481 3,280.25
LOW 229,588 2.30
AVERAGE FOR STATE
OH 3,863,010 95.07
AVERAGE BY REGION
MIDWEST 4,724,667 101.91
NEW ENGLAND 5,630,561 88.54
MID ATLANTIC 4,068,133 75.13
SOUTHEAST 4,969,255 76.19
SOUTHWEST 6,262,901 108.96
WEST 14,554,888 378.58
AVERAGE BY EXCHANGE
NYSE 43,349,126 1,232.98
AMEX 2,562,757 30.17
OTC/NASDAQ 4,398,289 80.63
</TABLE>
122
<PAGE> 132
Page 1
KELLER & COMPANY
Columbus, Ohio
614-766-1426
RECENTLY CONVERTED, SAIF-INSURED THRIFT INSTITUTIONS
PRICES AND PRICING RATIOS
<TABLE>
<CAPTION>
PRO FORMA RATIOS CURRENT RATIOS
--------------------------------------- ---------------------------------
Price/ Price/ Price/ Price/
Price/ Book Tang.Bk. Price/ Price/ Book Tang.Bk. Price/
IPO Earnings Value Value Assets Earnings Value Value Assets
Date (X) (%) (%) (%) (X) (%) (%) (%)
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFBA First Colorado Bancorp, Inc. CO 01/02/96 NA NA NA NA 13.46 115.04 116.36 18.77
LFBI Little Falls Bancorp, Inc. NJ 01/05/96 31.90 71.40 71.43 13.40 17.29 72.05 70.13 11.10
BYFC Broadway Financial Corp. CA 01/09/96 13.30 68.50 68.48 8.00 NM 66.74 66.74 7.76
FFOH Fidelity Financial of Ohio OH 03/04/96 NA NA NA NA 15.23 77.75 77.75 15.81
FFFD North Central Bancshares, Inc. IA 03/21/96 NA NA NA NA 11.42 85.43 85.43 24.51
GAF GA Financial, Inc. PA 03/26/96 13.80 70.50 70.52 15.70 11.90 65.76 85.76 19.58
CFTP Community Federal Bancorp MS 03/26/96 14.00 71.40 71.35 22.20 16.72 93.06 93.08 30.70
PFFB PFF Bancorp, Inc. CA 03/29/96 26.60 69.00 68.99 9.50 22.36 79.41 80.34 10.74
CRZY Crazy Woman Creek Bancorp WY 03/29/96 16.40 69.70 69.72 22.00 19.42 74.44 74.44 22.86
SSM Stone Street Bancorp, Inc. NC 04/01/96 19.70 74.90 74.92 24.40 NA 82.74 82.74 29.36
JXVL Jacksonville Bancorp, Inc. TX 04/01/96 NA NA NA NA NA 86.01 86.01 14.07
WHG WHG Bancshares Corp. MD 04/01/96 15.50 71.10 71.08 16.00 NA NA NA NA
PHFC Pittsburgh Home Financial Corp PA 04/01/96 17.50 72.80 72.83 12.20 NA 75.38 75.38 12.45
LONF London Financial Corporation OH 04/01/96 22.40 68.50 68.46 13.40 NA 71.57 71.57 15.29
SSB Scotland Bancorp, Inc NC 04/01/96 16.20 74.80 74.83 24.20 NA 92.14 92.14 32.30
AMFC AMB Financial Corp. IN 04/01/96 18.20 70.80 70.83 14.00 NA 72.39 72.39 14.78
FBER 1st Bergen Bancorp NJ 04/01/96 21.70 74.80 74.81 12.50 NA 73.86 73.86 12.59
FFDF FFD Financial Corp. OH 04/03/96 17.40 69.90 69.87 19.80 NA NA NA NA
GSFC Green Street Financial Corp. NC 04/04/96 14.80 71.00 71.03 22.20 NA 95.89 95.89 33.62
YFCB Yonkers Financial Corporation NY 04/18/96 16.10 74.90 74.93 14.60 NA 84.67 84.67 17.10
RELI Reliance Bancshares, Inc. WI 04/19/96 22.50 72.50 72.47 38.90 NA 73.14 NA 44.93
CBK Citizens First Financial Corp. IL 05/01/96 15.30 73.10 73.10 11.00 NA 75.36 75.36 12.36
FFBH First Federal Bancshares of AR AR 05/03/96 9.80 63.40 63.39 10.20 NM 92.65 92.65 15.31
LXMO Lexington B&L Financial Corp. MO 06/06/96 14.40 69.10 69.10 20.20 NA 67.95 67.95 20.77
WWF Westwood Financial Corporation NJ 06/07/96 NA NA NA NA NA NA NA NA
CNSB CNS Bancorp, Inc. MO 06/12/96 26.10 69.30 69.35 16.20 NA 87.09 87.09 21.44
CMSB Commonwealth Bancorp, Inc. PA 06/17/96 NA NA NA NA NA 85.83 112.69 9.53
PRBC Prestige Bancorp, Inc. PA 06/27/96 24.60 61.90 61.90 9.50 NA 67.78 67.78 10.09
WYN Wayne Bancorp, Inc. NJ 06/27/96 16.70 60.90 60.94 9.70 NA 82.12 82.12 14.23
PROV Provident Financial Holdings CA 06/28/96 18.20 60.90 60.87 8.20 NA NA NA NA
FLKY First Lancaster Bancshares KY 07/01/96 19.00 72.50 72.51 21.30 NA NA NA NA
EGLB Eagle BancGroup, Inc. IL 07/01/96 58.10 57.10 57.11 7.90 NA NA NA NA
HWE Home Financial Bancorp IN 07/02/96 12.40 66.20 66.23 13.10 NA NA NA NA
OCFC Ocean Financial Corp. NJ 07/03/96 13.80 69.20 69.21 13.90 NA NA NA NA
<CAPTION>
PRICES AND TREND FROM IPO DATE
---------------------------------------------------
1 Day 1 Week 1 Mo.
IPO After After After
Price IPO % IPO % IPO %
($) ($) Change ($) Change ($) Change
------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FFBA First Colorado Bancorp, Inc. NA 11.44 NA 11.63 NA 12.00 NA
LFBI Little Falls Bancorp, Inc. 10.00 11.31 13.13 11.38 13.75 11.00 10.00
BYFC Broadway Financial Corp. 10.00 10.38 3.75 10.25 2.50 10.25 2.50
FFOH Fidelity Financial of Ohio NA 10.50 NA 10.00 NA 10.13 NA
FFFD North Central Bancshares, Inc. NA 10.88 NA 10.69 NA 10.44 NA
GAF GA Financial, Inc. 10.00 11.38 13.75 11.50 15.00 11.00 10.00
CFTP Community Federal Bancorp 10.00 12.63 26.25 12.88 28.75 12.63 26.25
PFFB PFF Bancorp, Inc. 10.00 11.38 13.75 11.63 16.25 11.63 16.25
CRZY Crazy Woman Creek Bancorp 10.00 NA NA 10.75 7.50 10.50 5.00
SSM Stone Street Bancorp, Inc. 15.00 17.50 16.67 18.00 20.00 17.75 18.33
JXVL Jacksonville Bancorp, Inc. NA 11.11 NA 9.63 NA 9.88 NA
WHG WHG Bancshares Corp. 10.00 11.13 11.25 11.06 10.60 11.25 12.50
PHFC Pittsburgh Home Financial Corp 10.00 11.00 10.00 11.00 10.00 10.63 6.25
LONF London Financial Corporation 10.00 10.81 8.12 10.63 6.25 10.13 1.25
SSB Scotland Bancorp, Inc 10.00 12.25 22.50 12.50 25.00 11.75 17.50
AMFC AMB Financial Corp. 10.00 10.50 5.00 10.50 5.00 10.50 5.00
FBER 1st Bergen Bancorp 10.00 10.00 0.00 9.50 (5.00) 9.63 (3.75)
FFDF FFD Financial Corp. 10.00 10.50 5.00 10.50 5.00 10.31 3.10
GSFC Green Street Financial Corp. 10.00 12.88 28.75 12.25 22.50 12.31 23.10
YFCB Yonkers Financial Corporation 10.00 9.75 (2.50) 10.13 1.25 9.94 (0.60)
RELI Reliance Bancshares, Inc. 8.00 8.38 4.69 8.25 3.13 7.94 (0.75)
CBK Citizens First Financial Corp. 10.00 10.50 5.00 10.00 0.00 10.13 1.25
FFBH First Federal Bancshares of AR 10.00 13.00 30.00 13.25 32.50 13.69 36.90
LXMO Lexington B&L Financial Corp. 10.00 9.50 (5.00) 9.75 (2.50) 10.13 1.25
WWF Westwood Financial Corporation NA 10.75 NA 10.38 NA 10.63 NA
CNSB CNS Bancorp, Inc. 10.00 11.00 10.00 11.63 16.25 11.50 15.00
CMSB Commonwealth Bancorp, Inc. NA 10.50 NA 10.75 NA 10.00 NA
PRBC Prestige Bancorp, Inc. 10.00 10.38 3.75 10.25 2.50 9.75 (2.50)
WYN Wayne Bancorp, Inc. 10.00 11.13 11.25 11.38 13.75 11.25 12.50
PROV Provident Financial Holdings 10.00 10.97 9.70 10.81 8.10 10.13 1.25
FLKY First Lancaster Bancshares 10.00 13.50 35.00 13.38 33.75 13.75 37.50
EGLB Eagle BancGroup, Inc. 10.00 11.25 12.50 11.25 12.50 11.13 11.25
HWE Home Financial Bancorp 10.00 10.25 2.50 9.88 (1.25) 10.50 5.00
OCFC Ocean Financial Corp. 20.00 21.25 6.25 20.13 0.63 21.00 5.00
</TABLE>
123
<PAGE> 133
Page 2
KELLER & COMPANY
Columbus, Ohio
614-766-1426
RECENTLY CONVERTED, SAIF-INSURED THRIFT INSTITUTIONS
PRICES AND PRICING RATIOS
<TABLE>
<CAPTION>
PRO FORMA RATIOS CURRENT RATIOS
----------------------- --------------------------------
Price/ Price/ Price/ Price/
Price/ Book Tang. Bk. Price/ Price/ Book Tang. Bk. Price/
IPO Earnings Value Value Assets Earnings Value Value Assets
Date (X) (%) (%) (%) (X) (%) (%) (%)
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MBSP Mitchell Bancorp, Inc. NC 07/12/96 94.50 68.10 68.13 25.80 NA NA NA NA
PWBK Pennwood Savings Bank PA 07/15/96 13.30 65.80 65.76 12.80 NA NA NA NA
ANA Acadiana Bancshares, Inc. LA 07/16/96 NA 69.90 69.92 12.70 NA NA NA NA
PFED Park Bancorp, Inc. IL 08/12/96 17.80 64.90 64.93 14.50 NA NA NA NA
PRICES AND TREND FROM IPO DATE
------------------------------------------------------
1 Day 1 Week 1 Mo.
IPO After After After
Price IPO % IPO % IPO %
($) ($) Change ($) Change ($) Change
------------------------------------------------------
MBSP Mitchell Bancorp, Inc. 10.00 NA NA 10.63 6.25 11.00 10.00
PWBK Pennwood Savings Bank 10.00 9.50 (5.00) 9.13 (8.75) 9.63 (3.75)
ANA Acadiana Bancshares, Inc. 12.00 12.00 0.00 11.75 (2.08) 12.38 3.13
PFED Park Bancorp, Inc. 10.00 10.25 2.50 10.44 4.38 10.50 5.00
</TABLE>
124
<PAGE> 134
EXHIBIT 34
KELLER & COMPANY
Columbus, Ohio
614-766-1426
ACQUISITIONS AND PENDING ACQUISITIONS
COUNTY, CITY OR MARKET AREA OF HOME CITY FEDERAL SAVINGS BANK
NONE
125
<PAGE> 135
KELLER & COMPANY
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED MUTUAL HOLDING COMPANIES
AS OF SEPTEMBER 4, 1996
<TABLE>
<CAPTION>
PER SHARE
------------------------------------------------------------------------
Latest All Time All TimeMonthly Quarterly Book 12 Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PFSL Pocahontas FS&LA, MHC AR NASDAQ 14.500 17.250 9.500 0.00 -7.94 13.78 232.28 0.72
CMSV Community Savings, MHC FL NASDAQ 16.125 18.250 10.000 0.78 9.32 15.38 128.26 0.70
FFFL Fidelity FSB of Florida, MHC FL NASDAQ 14.875 17.000 9.091 21.43 10.19 12.10 121.55 0.59
HARB Harbor Federal Savings Bk, MH FL NASDAQ 28.750 29.250 11.875 19.79 7.24 17.24 205.56 1.05
FFSX First Fed SB of Siouxland, MH IA NASDAQ 25.750 28.625 9.063 5.10 0.00 21.59 259.86 0.72
WCFB Webster City Federal SB, MHC IA NASDAQ 13.250 13.500 8.813 0.00 2.91 10.38 46.38 0.65
JXSB Jacksonville Savings Bank, MH IL NASDAQ 12.250 14.250 10.000 -5.77 -12.50 13.31 112.43 0.40
LFED Leeds Federal Savings Bk, MHC MD NASDAQ 13.125 16.750 9.875 0.96 -4.55 12.65 77.34 0.63
GFED Guaranty Federal SB, MHC MO NASDAQ 9.750 12.500 8.000 -7.14 -15.22 8.69 59.37 NA
PULB Pulaski Bank, Savings Bk, MHC MO NASDAQ 12.875 16.500 10.500 0.98 -8.04 10.93 85.70 0.80
FSLA First Savings Bank, MHC NJ NASDAQ 16.125 17.500 5.579 -0.77 4.03 14.07 147.79 0.38
FSNJ First Savings Bk of NJ, MHC NJ NASDAQ 15.000 19.500 10.750 6.66 3.45 16.01 212.47 0.50
SBFL SB of the Finger Lakes, MHC NY NASDAQ 14.750 17.000 8.125 -9.23 -10.61 11.31 110.61 NA
WAYN Wayne Savings & Loan Co. MHC OH NASDAQ 19.375 22.000 11.255 -1.90 -5.49 15.50 167.32 0.83
GDVS Greater Delaware Valley SB,MH PA NASDAQ 10.000 13.000 9.250 8.11 0.00 8.62 70.88 0.27
HARS Harris Savings Bank, MHC PA NASDAQ 14.875 20.500 12.750 -4.03 -11.19 13.32 137.45 0.55
NWSB Northwest Savings Bank, MHC PA NASDAQ 11.000 13.500 7.375 -1.68 -7.37 8.28 80.32 0.30
RVSB Riverview Savings Bank, MHC WA NASDAQ 14.500 17.000 9.711 0.00 -4.92 10.73 97.40 0.20
<CAPTION>
PRICING RATIOS
-------------------------------------
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
(X) (%) (%) (X)
-------------------------------------
<S> <C> <C> <C> <C> <C>
PFSL Pocahontas FS&LA, MHC 11.98 105.22 6.24 11.69
CMSV Community Savings, MHC 14.93 104.84 12.57 14.66
FFFL Fidelity FSB of Florida, MHC 18.83 122.93 12.24 20.10
HARB Harbor Federal Savings Bk, MH 13.07 166.76 13.99 13.07
FFSX First Fed SB of Siouxland, MH 14.39 119.27 9.91 15.42
WCFB Webster City Federal SB, MHC 24.54 127.65 28.57 25.48
JXSB Jacksonville Savings Bank, MH 23.11 92.04 10.90 28.49
LFED Leeds Federal Savings Bk, MHC 16.41 103.75 16.97 16.20
GFED Guaranty Federal SB, MHC NA 112.20 16.42 NA
PULB Pulaski Bank, Savings Bk, MHC 16.94 117.80 15.02 20.44
FSLA First Savings Bank, MHC 13.44 114.61 10.91 13.11
FSNJ First Savings Bk of NJ, MHC 40.54 93.69 7.06 17.44
SBFL SB of the Finger Lakes, MHC NA 130.42 13.34 NA
WAYN Wayne Savings & Loan Co. MHC 18.63 125.00 11.58 19.57
GDVS Greater Delaware Valley SB,MH 47.62 116.01 14.11 40.00
HARS Harris Savings Bank, MHC 28.07 111.67 10.82 19.57
NWSB Northwest Savings Bank, MHC 14.29 132.85 13.70 13.75
RVSB Riverview Savings Bank, MHC 11.60 135.14 14.89 12.61
</TABLE>
<TABLE>
<CAPTION>
PER SHARE
----------------------------------------------------------------------
Latest All Time All TimeMonthly Quarterly Book 12 Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALL MUTUAL HOLDING COMPANIES
AVERAGE 15.382 17.993 9.528 1.85 -2.82 12.99 130.72 0.58
MEDIAN 14.625 17.000 9.606 0.00 -4.74 12.98 116.99 0.61
HIGH 28.750 29.250 12.750 21.43 10.19 21.59 259.86 1.05
LOW 9.750 12.500 5.579 -9.23 -15.22 8.28 46.38 0.20
<CAPTION>
PRICING RATIOS
-------------------------------------
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
(X) (%) (%) (X)
-------------------------------------
<S> <C> <C> <C> <C>
ALL MUTUAL HOLDING COMPANIES 20.52 118.44 13.29 18.85
AVERAGE 16.68 116.91 12.96 16.82
MEDIAN 47.62 166.76 28.57 40.00
HIGH 11.60 92.04 6.24 11.69
LOW
</TABLE>
126
<PAGE> 136
<PAGE> 137
KELLER & COMPANY
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED MUTUAL HOLDING COMPANIES
AS OF SEPTEMBER 6, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
-------------------------------- --------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PFSL Pocahontas FS&LA, MHC AR 377,236 22,374 22,374 0.56 0.58 9.42 9.65
CMSV Community Savings, MHC FL 626,045 75,066 75,066 0.88 0.90 7.10 7.25
FFFL Fidelity FSB of Florida, MHC FL 816,869 80,577 79,672 0.67 0.63 6.57 6.19
HARB Harbor Federal Savings Bk, MH FL 1,014,013 85,062 81,880 1.18 1.18 13.57 13.56
FFSX First Fed SB of Siouxland, MH IA 443,632 36,857 36,502 0.70 0.65 8.44 7.86
WCFB Webster City Federal SB, MHC IA 97,391 21,805 21,805 1.16 1.12 5.24 5.05
JXSB Jacksonville Savings Bank, MH IL 143,044 16,931 16,930 0.48 0.39 4.16 3.41
LFED Leeds Federal Savings Bk, MHC MD 266,658 43,610 43,610 1.03 1.04 6.32 6.37
GFED Guaranty Federal SB, MHC MO 185,546 27,165 27,165 1.02 0.56 7.11 3.92
PULB Pulaski Bank, Savings Bk, MHC MO 179,457 22,881 22,881 0.88 0.74 7.15 5.95
FSLA First Savings Bank, MHC NJ 962,343 91,613 79,849 0.85 0.87 9.06 9.32
FSNJ First Savings Bk of NJ, MHC NJ 650,650 49,020 49,020 0.19 0.43 2.24 5.05
SBFL SB of the Finger Lakes, MHC NY 197,438 20,189 20,189 NA NA NA NA
WAYN Wayne Savings & Loan Co. MHC OH 250,266 23,186 23,186 0.62 0.59 6.73 6.36
GDVS Greater Delaware Valley SB,MH PA 231,971 28,202 28,202 0.31 0.35 2.50 2.89
HARS Harris Savings Bank, MHC PA 1,541,717 149,403 125,498 0.46 0.63 3.94 5.35
NWSB Northwest Savings Bank, MHC PA 1,877,529 190,651 181,003 1.05 1.08 9.48 9.84
RVSB Riverview Savings Bank, MHC WA 213,868 23,567 20,993 1.32 1.21 12.07 11.05
ALL MUTUAL HOLDING COMPANIES
AVERAGE 559,760 56,009 53,101 0.79 0.76 7.12 7.00
MEDIAN 321,947 32,530 32,352 0.85 0.65 7.10 6.36
HIGH 1,877,529 190,651 181,003 1.32 1.21 13.57 13.56
LOW 97,391 16,931 16,930 0.19 0.35 2.24 2.89
<CAPTION>
CAPITAL ISSUES
----------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
----------------------------------------------
<S> <C> <C> <C> <C> <C>
PFSL Pocahontas FS&LA, MHC 04/05/94 NASDAQ 1,624,088 23.96
CMSV Community Savings, MHC 10/24/94 NASDAQ 4,880,888 78.09
FFFL Fidelity FSB of Florida, MHC 01/07/94 NASDAQ 6,720,252 89.04
HARB Harbor Federal Savings Bk, MH 01/06/94 NASDAQ 4,932,854 124.55
FFSX First Fed SB of Siouxland, MH 07/13/92 NASDAQ 1,707,209 42.25
WCFB Webster City Federal SB, MHC 08/15/94 NASDAQ 2,100,000 27.30
JXSB Jacksonville Savings Bank, MH 04/21/95 NASDAQ 1,272,300 16.54
LFED Leeds Federal Savings Bk, MHC 05/02/94 NASDAQ 3,448,000 51.72
GFED Guaranty Federal SB, MHC 04/10/95 NASDAQ 3,125,000 36.72
PULB Pulaski Bank, Savings Bk, MHC 05/11/94 NASDAQ 2,094,000 29.32
FSLA First Savings Bank, MHC 07/10/92 NASDAQ 6,511,756 102.56
FSNJ First Savings Bk of NJ, MHC 01/09/95 NASDAQ 3,062,321 43.64
SBFL SB of the Finger Lakes, MHC 11/11/94 NASDAQ 1,785,000 28.56
WAYN Wayne Savings & Loan Co. MHC 06/25/93 NASDAQ 1,495,707 31.04
GDVS Greater Delaware Valley SB,MH 03/03/95 NASDAQ 3,272,500 32.73
HARS Harris Savings Bank, MHC 01/25/94 NASDAQ 11,216,400 182.27
NWSB Northwest Savings Bank, MHC 11/07/94 NASDAQ 23,376,000 262.98
RVSB Riverview Savings Bank, MHC 10/26/93 NASDAQ 2,195,781 31.56
ALL MUTUAL HOLDING COMPANIES
AVERAGE 4,712,225 68.60
MEDIAN 3,093,661 39.49
HIGH 23,376,000 262.98
LOW 1,272,300 16.54
</TABLE>
127
<PAGE> 138
Page 1
KELLER & COMPANY
Columbus, Ohio
614-766-1426
HOME CITY FEDERAL SAVINGS BANK
COMPARABLE GROUP SELECTION
BALANCE SHEET PARAMETERS
General Parameters:
States: IA IL IN KY MI OH PA WI WV
IPO Date: greater than 03/31/95
Asset size: greater than $300,000
<TABLE>
<CAPTION>
Total
Cash & 1-4 Fam. Total Net Net Loans Borrowed
Total Invest./ MBS/ Loans/ Loans/ & MBS/ Funds/ Equity/
Assets Assets Assets Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HOME CITY
FEDERAL SAVINGS BANK -- 55,728 9.14 5.34 57.45 81.15 86.49 5.21 9.69
DEFINED PARAMETERS FOR Prior to 5.00 - 40.00 - 50.00 - 60.00 - 6.00 -
INCLUSION IN COMPARABLE GROUP 03/31/95 $300,000 40.00 20.00 70.00 95.00 97.00 30.00 20.00
HBBI Home Building Bancorp IN 02/08/95 43,135 20.88 10.94 50.17 65.42 76.35 9.95 13.94
CKFB CKF Bancorp, Inc. KY 01/04/95 58,734 6.86 0.01 68.62 91.50 91.51 0.46 26.62
MSBF MSB Financial, Inc. MI 02/06/95 60,130 5.90 3.47 59.96 88.62 92.08 9.98 20.94
GWBC Gateway Bancorp, Inc. KY 01/18/95 71,260 33.13 41.47 22.74 24.17 65.64 0.00 24.86
ATSB AmTrust Capital Corp. IN 03/28/95 73,072 19.57 6.38 40.49 68.35 74.73 19.16 10.34
HZFS Horizon Financial Svcs Corp. IA 06/30/94 73,464 30.05 0.00 43.29 66.84 66.84 13.15 11.42
SOBI Sobieski Bancorp, Inc. IN 03/31/95 76,362 11.72 20.72 56.33 64.03 84.75 0.00 18.49
HHFC Harvest Home Financial Corp. OH 10/10/94 76,399 38.18 7.36 46.00 54.89 62.25 6.54 16.71
SFFC StateFed Financial Corporation IA 01/05/94 76,705 13.17 0.00 52.67 81.75 81.75 19.56 19.46
THBC Troy Hill Bancorp, Inc. PA 06/27/94 80,484 10.63 7.49 58.01 79.92 87.41 10.66 22.20
GFSB GFS Bancorp, Inc. IA 01/06/94 83,305 8.02 4.12 55.32 86.16 90.28 23.19 11.94
CIBI Community Investors Bancorp OH 02/07/95 85,785 21.76 2.74 59.73 74.02 76.76 2.28 13.84
NWEQ Northwest Equity Corp. WI 10/11/94 91,804 7.52 8.66 53.69 80.09 88.75 21.52 12.77
INCB Indiana Community Bank, SB IN 12/15/94 94,476 15.10 3.49 41.74 78.20 81.68 0.00 14.98
FFBI First Financial Bancorp, Inc. IL 10/04/93 94,486 15.16 7.76 55.47 74.68 82.43 18.94 8.33
PTRS Potters Financial Corp. OH 12/31/93 114,714 28.45 23.74 32.54 44.72 68.46 2.08 9.24
MIFC Mid-Iowa Financial Corp. IA 10/14/92 115,260 19.74 25.74 39.47 52.80 78.54 20.82 9.38
NBSI North Bancshares, Inc. IL 12/21/93 119,436 34.86 6.94 45.48 55.50 62.43 18.21 15.50
</TABLE>
128
<PAGE> 139
Page 2
KELLER & COMPANY
Columbus, Ohio
614-766-1426
HOME CITY FEDERAL SAVINGS BANK
COMPARABLE GROUP SELECTION
BALANCE SHEET PARAMETERS
General Parameters:
States: IA IL IN KY MI OH PA WI WV
IPO Date: greater than 03/31/95
Asset size: greater than $300,000
<TABLE>
<CAPTION>
Total
Cash & 1-4 Fam. Total Net Net Loans Borrowed
Total Invest./ MBS/ Loans/ Loans/ & MBS/ Funds/ Equity/
Assets Assets Assets Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HOME CITY
FEDERAL SAVINGS BANK -- 55,728 9.14 5.34 57.45 81.15 86.49 5.21 9.69
DEFINED PARAMETERS FOR Prior to 5.00 - 40.00 - 50.00 - 60.00 - 6.00 -
INCLUSION IN COMPARABLE GROUP 03/31/95 $300,000 40.00 20.00 70.00 95.00 97.00 30.00 20.00
MWBI Midwest Bancshares, Inc. IA 11/12/92 138,628 16.11 23.61 44.47 57.32 80.93 20.20 6.67
BWFC Bank West Financial Corp. MI 03/30/95 139,217 21.53 1.84 68.63 73.74 75.58 15.64 19.78
FFWD Wood Bancorp, Inc. OH 08/31/93 146,249 18.47 3.45 59.82 76.21 79.66 6.37 13.76
FFWC FFW Corp. IN 04/05/93 150,467 18.33 12.32 44.09 67.09 79.41 27.78 10.27
SJSB SJS Bancorp MI 02/16/95 150,752 26.46 9.72 42.45 61.74 71.46 14.63 11.67
MARN Marion Capital Holdings IN 03/18/93 177,767 12.67 0.02 47.76 80.54 80.56 3.51 23.35
FFBZ First Federal Bancorp, Inc. OH 07/13/92 177,778 7.30 0.96 55.98 87.69 88.65 17.74 7.89
MFFC Milton Federal Financial Corp. OH 10/07/94 178,289 23.80 10.57 53.84 63.08 73.65 9.00 18.93
MWFD Midwest Federal Financial WI 07/08/92 187,601 15.70 8.14 31.70 72.07 80.22 9.20 9.01
CBCO CB Bancorp, Inc. IN 12/28/92 195,658 44.87 4.64 38.49 46.18 50.82 22.53 9.87
LARL Laurel Capital Group, Inc. PA 02/20/87 196,947 16.49 7.90 56.05 73.70 81.61 3.21 10.71
SBCN Suburban Bancorporation, Inc. OH 09/30/93 197,137 6.99 15.29 55.19 75.47 90.76 21.65 13.01
OHSL OHSL Financial Corp. OH 02/10/93 209,037 20.05 6.91 48.56 71.45 78.36 8.12 12.20
MFBC MFB Corp. IN 03/25/94 210,559 30.47 2.70 60.71 65.90 68.60 8.31 17.90
EFBI Enterprise Federal Bancorp OH 10/17/94 213,876 18.97 13.55 44.77 65.28 78.83 18.70 14.77
FFHS First Franklin Corporation OH 01/26/88 216,508 11.23 19.40 53.54 67.30 86.69 3.34 9.37
OSBF OSB Financial Corp. WI 07/01/92 250,003 30.09 0.06 49.66 67.63 67.69 20.89 12.56
WVFC WVS Financial Corporation PA 11/29/93 259,622 34.10 6.71 43.63 57.40 64.11 18.74 13.11
</TABLE>
129
<PAGE> 140
Page 3
KELLER & COMPANY
Columbus, Ohio
614-766-1426
HOME CITY FEDERAL SAVINGS BANK
COMPARABLE GROUP SELECTION
BALANCE SHEET PARAMETERS
General Parameters:
States: IA IL IN KY MI OH PA WI WV
IPO Date: greater than 03/31/95
Asset size: greater than $300,000
<TABLE>
<CAPTION>
Total
Cash & 1-4 Fam. Total Net Net Loans Borrowed
Total Invest./ MBS/ Loans/ Loans/ & MBS/ Funds/ Equity/
Assets Assets Assets Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HOME CITY
FEDERAL SAVINGS BANK -- 55,728 9.14 5.34 57.45 81.15 86.49 5.21 9.69
DEFINED PARAMETERS FOR Prior to 5.00 - 40.00 - 50.00 - 60.00 - 6.00 -
INCLUSION IN COMPARABLE GROUP 03/31/95 $300,000 40.00 20.00 70.00 95.00 97.00 30.00 20.00
FFED Fidelity Federal Bancorp IN 08/31/87 262,216 7.25 4.80 50.14 82.44 87.24 24.02 5.45
FBCV 1ST Bancorp IN 04/07/87 263,483 30.87 1.04 66.22 64.27 65.31 38.29 8.25
FCBF FCB Financial Corp. WI 09/24/93 265,172 NA NA 50.04 83.00 NA 21.59 17.59
CVAL Chester Valley Bancorp Inc. PA 03/27/87 272,932 14.41 0.63 52.83 82.06 82.69 5.31 9.37
GFCO Glenway Financial Corp. OH 11/30/90 273,890 7.66 10.31 64.98 78.39 88.70 7.14 9.67
PFDC Peoples Bancorp IN 07/07/87 277,958 18.83 0.24 71.47 79.56 79.80 0.00 15.58
WFCO Winton Financial Corp. OH 08/04/88 282,833 8.68 4.40 43.03 84.63 89.03 15.69 7.45
FKFS First Keystone Financial PA 01/26/95 290,549 22.71 16.52 43.19 57.51 74.03 13.64 7.89
HARL Harleysville Savings Bank PA 08/04/87 298,172 18.62 4.66 69.48 74.58 79.24 11.53 6.65
</TABLE>
130
<PAGE> 141
Page 1
KELLER & COMPANY
Columbus, Ohio
614-766-1426
HOME CITY FEDERAL SAVINGS BANK
COMPARABLE GROUP SELECTION
OPERATING PERFORMANCE AND ASSET QUALITY PARAMETERS
Most Recent Four Quarters
General Parameters:
States: IA IL IN KY MI OH PA WI WV
IPO Date: greater than 03/31/95
Asset size: greater than $300,000
<TABLE>
<CAPTION>
OPERATING PERFORMANCE ASSET QUALITY *
--------------------------------------------- ---------------------
Net Operating Noninterest
Total Interest Expenses/ Income/ NPA/ REO/ Reserves/
Assets ROAA ROAE Margin** Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%) (%)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HOME CITY
FEDERAL SAVINGS BANK -- 55,728 0.98 10.23 3.86 2.31 0.11 0.44 0.00 0.65
DEFINED PARAMETERS FOR Prior to 0.60 - 3.00 - 2.65 - 1.50 -
INCLUSION IN COMPARABLE GROUP 03/31/95 300,000 1.30 15.00 4.50 3.00 0.45 0.80 0.20 0.15
HBBI Home Building Bancorp IN 02/08/95 43,135 0.41 2.86 3.74 2.53 0.32 0.27 0.00 0.12
CKFB CKF Bancorp, Inc. KY 01/04/95 58,734 1.19 4.26 3.86 2.01 0.08 1.50 0.00 0.19
MSBF MSB Financial, Inc. MI 02/06/95 60,130 1.83 7.66 5.67 3.31 0.50 0.86 0.00 0.58
GWBC Gateway Bancorp, Inc. KY 01/18/95 71,260 1.05 4.05 2.83 1.23 0.04 0.31 0.00 0.11
ATSB AmTrust Capital Corp. IN 03/28/95 73,072 0.31 2.75 2.81 2.95 0.44 1.31 0.00 0.50
HZFS Horizon Financial Svcs Corp. IA 06/30/94 73,464 0.53 4.38 3.50 2.64 0.50 NA NA NA
SOBI Sobieski Bancorp, Inc. IN 03/31/95 76,362 0.42 2.24 3.28 2.69 0.21 0.08 0.02 0.26
HHFC Harvest Home Financial Corp. OH 10/10/94 76,399 0.75 4.14 3.12 1.98 0.06 0.19 0.00 0.15
SFFC StateFed Financial Corporation IA 01/05/94 76,705 1.19 5.99 3.69 1.71 0.07 0.53 0.00 0.31
THBC Troy Hill Bancorp, Inc. PA 06/27/94 80,484 1.38 6.09 4.24 2.06 0.10 2.95 0.03 0.88
GFSB GFS Bancorp, Inc. IA 01/06/94 83,305 1.16 9.19 3.46 1.73 0.12 1.15 0.27 0.77
CIBI Community Investors Bancorp OH 02/07/95 85,785 1.01 6.98 3.60 2.06 0.17 0.73 0.11 0.50
NWEQ Northwest Equity Corp. WI 10/11/94 91,804 1.00 6.91 4.11 2.68 0.42 0.76 0.16 0.47
INCB Indiana Community Bank, SB IN 12/15/94 94,476 0.67 4.39 4.35 3.72 0.84 NA 0.00 0.48
FFBI First Financial Bancorp, Inc. IL 10/04/93 94,486 0.68 6.79 3.15 2.95 0.45 0.27 0.00 0.40
PTRS Potters Financial Corp. OH 12/31/93 114,714 0.51 5.27 3.37 2.64 0.23 2.33 0.01 1.83
</TABLE>
131
<PAGE> 142
Page 2
KELLER & COMPANY
Columbus, Ohio
614-766-1426
HOME CITY FEDERAL SAVINGS BANK
COMPARABLE GROUP SELECTION
OPERATING PERFORMANCE AND ASSET QUALITY PARAMETERS
MOST RECENT FOUR QUARTERS
General Parameters:
States: IA IL IN KY MI OH PA WI WV
IPO Date: greater than 03/31/95
Asset size: greater than $300,000
<TABLE>
<CAPTION>
OPERATING PERFORMANCE ASSET QUALITY *
---------------------------------------------- ---------------------
Net Operating Noninterest
Total Interest Expenses/ Income/ NPA/ REO/ Reserves/
Assets ROAA ROAE Margin** Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%) (%)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HOME CITY
FEDERAL SAVINGS BANK -- 55,728 0.98 10.23 3.86 2.31 0.11 0.44 0.00 0.65
DEFINED PARAMETERS FOR Prior to 0.60 - 3.00 - 2.65 - 1.50 -
INCLUSION IN COMPARABLE GROUP 03/31/95 300,000 1.30 15.00 4.50 3.00 0.45 0.80 0.20 0.15
MIFC Mid-Iowa Financial Corp. IA 10/14/92 115,260 0.93 10.00 2.83 2.18 0.80 0.05 0.00 0.24
NBSI North Bancshares, Inc. IL 12/21/93 119,436 0.59 3.19 3.27 2.50 0.14 0.00 0.00 0.17
MWBI Midwest Bancshares, Inc. IA 11/12/92 138,628 1.01 14.64 2.95 1.91 0.16 0.28 0.14 0.48
BWFC Bank West Financial Corp. MI 03/30/95 139,217 0.69 3.41 3.06 2.44 0.12 0.08 0.03 0.10
FFWD Wood Bancorp, Inc. OH 08/31/93 146,249 1.19 8.40 4.27 2.47 0.24 0.17 0.02 0.35
FFWC FFW Corp. IN 04/05/93 150,467 1.09 9.89 3.09 1.74 0.32 0.06 0.02 0.37
SJSB SJS Bancorp MI 02/16/95 150,752 0.63 5.00 2.89 2.32 0.34 0.29 0.06 0.42
MARN Marion Capital Holdings IN 03/18/93 177,767 1.41 5.86 4.18 2.14 0.18 1.07 0.10 1.13
FFBZ First Federal Bancorp, Inc. OH 07/13/92 177,778 1.14 15.12 3.91 2.43 0.47 0.56 0.01 0.87
MFFC Milton Federal Financial Corp. OH 10/07/94 178,289 1.04 4.80 3.61 2.16 0.13 0.40 0.02 0.23
MWFD Midwest Federal Financial WI 07/08/92 187,601 1.28 13.41 4.15 3.01 0.86 0.19 0.00 0.75
CBCO CB Bancorp, Inc. IN 12/28/92 195,658 1.38 14.66 4.30 2.02 0.66 1.51 1.10 0.80
LARL Laurel Capital Group, Inc. PA 02/20/87 196,947 1.39 13.29 3.94 1.96 0.27 0.62 0.11 0.96
SBCN Suburban Bancorporation, Inc. OH 09/30/93 197,137 0.39 2.95 3.01 2.29 0.24 0.20 0.16 1.59
OHSL OHSL Financial Corp. OH 02/10/93 209,037 0.95 7.55 3.39 2.06 0.15 0.12 0.00 0.25
MFBC MFB Corp. IN 03/25/94 210,559 0.73 3.69 3.06 1.95 0.15 0.05 0.00 0.16
</TABLE>
132
<PAGE> 143
Page 3
KELLER & COMPANY
Columbus, Ohio
614-766-1426
HOME CITY FEDERAL SAVINGS BANK
COMPARABLE GROUP SELECTION
OPERATING PERFORMANCE AND ASSET QUALITY PARAMETERS
MOST RECENT FOUR QUARTERS
General Parameters:
States: IA IL IN KY MI OH PA WI WV
IPO Date: greater than 03/31/95
Asset size: greater than $300,000
<TABLE>
<CAPTION>
OPERATING PERFORMANCE ASSET QUALITY *
----------------------------------------------- ---------------------
Net Operating Noninterest
Total Interest Expenses/ Income/ NPA/ REO/ Reserves/
Assets ROAA ROAE Margin** Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%) (%)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HOME CITY
FEDERAL SAVINGS BANK -- 55,728 0.98 10.23 3.86 2.31 0.11 0.44 0.00 0.65
DEFINED PARAMETERS FOR Prior to 0.60 - 3.00 - 2.65 - 1.50 -
INCLUSION IN COMPARABLE GROUP 03/31/95 300,000 1.30 15.00 4.50 3.00 0.45 0.80 0.20 0.15
EFBI Enterprise Federal Bancorp OH 10/17/94 213,876 0.92 5.39 2.99 1.98 0.05 0.03 0.00 0.18
FFHS First Franklin Corporation OH 01/26/88 216,508 0.62 6.56 2.74 1.91 0.18 0.50 0.09 0.43
OSBF OSB Financial Corp. WI 07/01/92 250,003 0.21 1.63 2.85 2.15 0.26 0.22 0.00 0.40
WVFC WVS Financial Corporation PA 11/29/93 259,622 1.51 10.19 4.05 1.88 0.13 0.38 0.00 0.76
FFED Fidelity Federal Bancorp IN 08/31/87 262,216 1.18 23.76 2.29 2.87 2.56 0.17 0.02 0.40
FBCV 1ST Bancorp IN 04/07/87 263,483 2.05 29.45 2.39 2.66 0.35 0.35 0.07 0.34
FCBF FCB Financial Corp. WI 09/24/93 265,172 1.09 5.71 3.48 1.82 0.26 0.12 0.00 0.42
CVAL Chester Valley Bancorp Inc. PA 03/27/87 272,932 0.91 9.88 3.73 2.64 0.37 0.86 0.04 0.98
GFCO Glenway Financial Corp. OH 11/30/90 273,890 0.56 5.82 3.02 2.23 0.22 0.66 0.12 0.23
PFDC Peoples Bancorp IN 07/07/87 277,958 1.45 9.51 3.78 1.50 0.22 0.34 0.03 0.32
WFCO Winton Financial Corp. OH 08/04/88 282,833 0.94 12.39 3.35 2.21 0.13 0.44 0.18 0.31
FKFS First Keystone Financial PA 01/26/95 290,549 0.56 6.48 3.29 2.59 0.39 2.53 0.55 0.52
HARL Harleysville Savings Bank PA 08/04/87 298,172 0.81 11.83 2.87 1.50 0.12 0.06 0.00 0.58
<FN>
* Asset quality ratios reflect balance sheet totals at the end of the most
recent quarter.
** Based on average interest-earning assets.
</TABLE>
133
<PAGE> 144
KELLER & COMPANY
Columbus, Ohio
614-766-1426
HOME CITY FEDERAL SAVINGS BANK
FINAL COMPARABLE GROUP
BALANCE SHEET RATIOS
<TABLE>
<CAPTION>
Total
Cash & 1-4 Fam. Total Net Net Loans Borrowed
Total Invest./ MBS/ Loans/ Loans/ & MBS/ Funds/ Equity/
Assets Assets Assets Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HOME CITY
FEDERAL SAVINGS BANK -- 55,728 9.14 5.34 57.45 81.15 86.49 5.21 9.69
DEFINED PARAMETERS FOR Prior to 5.00 - 40.00 - 50.00 - 60.00 - 6.00 -
INCLUSION IN COMPARABLE GROUP 03/31/95 $300,000 40.00 20.00 70.00 95.00 97.00 30.00 20.00
HHFC Harvest Home Financial Corp. OH 10/10/94 76,399 38.18 7.36 46.00 54.89 62.25 6.54 16.71
SFFC StateFed Financial Corporation IA 01/05/94 76,705 13.17 0.00 52.67 81.75 81.75 19.56 19.46
CIBI Community Investors Bancorp OH 02/07/95 85,785 21.76 2.74 59.73 74.02 76.76 2.28 13.84
NWEQ Northwest Equity Corp. WI 10/11/94 91,804 7.52 8.66 53.69 80.09 88.75 21.52 12.77
FFBI First Financial Bancorp, Inc. IL 10/04/93 94,486 15.16 7.76 55.47 74.68 82.43 18.94 8.33
FFWC FFW Corp. IN 04/05/93 150,467 18.33 12.32 44.09 67.09 79.41 27.78 10.27
MFFC Milton Federal Financial Corp. OH 10/07/94 178,289 23.80 10.57 53.84 63.08 73.65 9.00 18.93
MFBC MFB Corp. IN 03/25/94 210,559 30.47 2.70 60.71 65.90 68.60 8.31 17.90
EFBI Enterprise Federal Bancorp OH 10/17/94 213,876 18.97 13.55 44.77 65.28 78.83 18.70 14.77
FFHS First Franklin Corporation OH 01/26/88 216,508 11.23 19.40 53.54 67.30 86.69 3.34 9.37
AVERAGE 139,488 19.86 8.51 52.45 69.41 77.91 13.60 14.24
MEDIAN 122,477 18.65 8.21 53.61 67.19 79.12 13.85 14.30
HIGH 216,508 38.18 19.40 60.71 81.75 88.75 27.78 19.46
LOW 76,399 7.52 0.00 44.09 54.89 62.25 2.28 8.33
</TABLE>
134
<PAGE> 145
KELLER & COMPANY
Columbus, Ohio
614-766-1426
HOME CITY FEDERAL SAVINGS BANK
FINAL COMPARABLE GROUP
OPERATING PERFORMANCE AND ASSET QUALITY RATIOS
MOST RECENT FOUR QUARTERS
<TABLE>
<CAPTION>
OPERATING PERFORMANCE ASSET QUALITY *
-------------------------------------------- ----------------------
Net Operating Noninterest
Total Interest Expenses/ Income/ NPA/ REO/ Reserves/
Assets ROAA ROAE Margin** Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%) (%)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HOME CITY
FEDERAL SAVINGS BANK -- 55,728 0.98 10.23 3.86 2.31 0.11 0.44 0.00 0.65
DEFINED PARAMETERS FOR Prior to 0.60 - 3.00 - 2.65 - 1.50 -
INCLUSION IN COMPARABLE GROUP 03/31/95 300,000 1.30 15.00 4.50 3.00 0.45 0.80 0.20 0.15
HHFC Harvest Home Financial Corp. OH 10/10/94 76,399 0.75 4.14 3.12 1.98 0.06 0.19 0.00 0.15
SFFC StateFed Financial Corporation IA 01/05/94 76,705 1.19 5.99 3.69 1.71 0.07 0.53 0.00 0.31
CIBI Community Investors Bancorp OH 02/07/95 85,785 1.01 6.98 3.60 2.06 0.17 0.73 0.11 0.50
NWEQ Northwest Equity Corp. WI 10/11/94 91,804 1.00 6.91 4.11 2.68 0.42 0.76 0.16 0.47
FFBI First Financial Bancorp, Inc. IL 10/04/93 94,486 0.68 6.79 3.15 2.95 0.45 0.27 0.00 0.40
FFWC FFW Corp. IN 04/05/93 150,467 1.09 9.89 3.09 1.74 0.32 0.06 0.02 0.37
MFFC Milton Federal Financial Corp. OH 10/07/94 178,289 1.04 4.80 3.61 2.16 0.13 0.40 0.02 0.23
MFBC MFB Corp. IN 03/25/94 210,559 0.73 3.69 3.06 1.95 0.15 0.05 0.00 0.16
EFBI Enterprise Federal Bancorp OH 10/17/94 213,876 0.92 5.39 2.99 1.98 0.05 0.03 0.00 0.18
FFHS First Franklin Corporation OH 01/26/88 216,508 0.62 6.56 2.74 1.91 0.18 0.50 0.09 0.43
AVERAGE 139,488 0.90 6.11 3.32 2.11 0.20 0.35 0.04 0.32
MEDIAN 122,477 0.96 6.28 3.14 1.98 0.16 0.34 0.01 0.34
HIGH 216,508 1.19 9.89 4.11 2.95 0.45 0.76 0.16 0.50
LOW 76,399 0.62 3.69 2.74 1.71 0.05 0.03 0.00 0.15
<FN>
* Asset quality ratios reflect balance sheet totals at the end of the most
recent quarter.
** Based on average interest-earning assets.
</TABLE>
135
<PAGE> 146
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
HOME CITY FEDERAL SAVINGS BANK
COMPARABLE GROUP CHARACTERISTICS AND BALANCE SHEET TOTALS
Number Conversion
of (IPO)
Offices Exchange Date
--------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
SUBJECT
HOME CITY
FEDERAL SAVINGS BANK SPRINGFIELD OH 1 NA NA
COMPARABLE GROUP
CIBI Community Investors Bancorp, Inc. Bucyrus OH 3 NASDAQ 02/07/95
EFBI Enterprise Federal Bancorp, Inc. Lockland OH 5 NASDAQ 10/17/94
FFWC FFW Corporation Wabash IN 3 NASDAQ 04/05/93
FFBI First Financial Bancorp, Inc. Belvidere IL 2 NASDAQ 10/04/93
FFHS First Franklin Corporation Cincinnati OH 7 NASDAQ 01/26/88
HHFC Harvest Home Financial Corporation Cheviot OH 3 NASDAQ 10/10/94
MFBC MFB Corp. Mishawaka IN 4 NASDAQ 03/25/94
MFFC Milton Federal Financial Corporation West Milton OH 2 NASDAQ 10/07/94
NWEQ Northwest Equity Corporation Amery WI 3 NASDAQ 10/11/94
SFFC StateFed Financial Corporation Des Moines IA 2 NASDAQ 01/05/94
Average 3.4
Median 3.0
High 7.0
Low 2.0
<CAPTION>
Most Recent Quarter
--------------------------------------------------------------------------
Total Goodwill
Total Int. Earning Net and Total Total
Assets Assets Loans Intang. Deposits Equity
($000) ($000) ($000) ($000) ($000) ($000)
-------- ------------- -------- -------- --------- -----------
SUBJECT
<S> <C> <C> <C> <C> <C> <C> <C>
HOME CITY
FEDERAL SAVINGS BANK 55,728 54,138 45,225 0 47,174 5,398
COMPARABLE GROUP
CIBI Community Investors Bancorp, Inc. 85,785 83,103 63,498 0 71,548 11,869
EFBI Enterprise Federal Bancorp, Inc. 213,876 204,128 139,614 58 139,993 31,594
FFWC FFW Corporation 150,467 147,984 100,953 0 92,490 15,458
FFBI First Financial Bancorp, Inc. 94,486 89,081 70,558 0 67,354 7,873
FFHS First Franklin Corporation 216,508 210,224 145,703 207 188,336 20,287
HHFC Harvest Home Financial Corporation 76,399 73,037 41,936 0 58,226 12,769
MFBC MFB Corp. 210,559 202,589 138,762 0 153,962 37,691
MFFC Milton Federal Financial Corporation 178,289 170,995 112,468 0 127,456 33,756
NWEQ Northwest Equity Corporation 91,804 85,004 73,529 0 59,835 11,720
SFFC StateFed Financial Corporation 76,705 71,583 62,708 0 45,732 14,928
Average 139,488 133,773 94,973 27 100,493 19,795
Median 122,477 118,533 87,241 0 82,019 15,193
High 216,508 210,224 145,703 207 188,336 37,691
Low 76,399 71,583 41,936 0 45,732 7,873
</TABLE>
136
<PAGE> 147
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
HOME CITY FEDERAL SAVINGS BANK
COMPARABLE GROUP MARKET AREA COMPARISON
1990-1995 Median Median
Population Per Capita Household Housing
1995 Growth Income Income Value
Population (%) ($) ($) ($)
---------- ---------- ---------- --------- -------
SUBJECT
<S> <C> <C> <C> <C> <C> <C> <C>
HOME CITY FEDERAL
SAVINGS BANK OH
COMPARABLE GROUP
CIBI Community Investors Bancorp OH 47,870 0.2 16,237 32,915 56,087
EFBI Enterprise Federal Bancorp OH 866,222 1.2 18,004 34,401 72,243
FFWC FFW Corp. IN 34,831 0.3 13,428 30,573 43,401
FFBI First Financial Bancorp, Inc. IL 5,166,861 1.2 18,105 37,050 102,100
FFHS First Franklin Corporation OH 866,222 1.2 18,004 34,401 72,243
HHFC Harvest Home Financial Corporation OH 866,222 1.2 18,004 34,401 72,243
MFBC MFB Corp. IN 257,533 0.8 16,003 34,165 50,751
MFFC Milton Federal Financial Corp. OH 677,496 1.5 17,691 33,144 67,088
NWEQ Northwest Equity Corporation WI 37,147 6.8 12,167 25,900 53,600
SFFC StateFed Financial Corporation IA 350,024 1.3 16,864 33,804 59,700
Average 917,043 1.6 16,451 33,075 64,946
Median 513,760 1.2 17,278 33,985 63,394
High 5,166,861 6.8 18,105 37,050 102,100
Low 34,831 0.2 12,167 25,900 43,401
<CAPTION>
High Below
Median School College Poverty
Rent Graduates Graduates Level
($) (%) (%) (%)
------ --------- -------- --------
SUBJECT
<S> <C> <C> <C> <C> <C> <C>
HOME CITY FEDERAL
SAVINGS BANK OH
COMPARABLE GROUP
CIBI Community Investors Bancorp OH 309 73.8 16.8 14.1
EFBI Enterprise Federal Bancorp OH 304 75.6 23.7 13.3
FFWC FFW Corp. IN 304 75.4 12.7 10.2
FFBI First Financial Bancorp, Inc. IL 478 73.4 22.8 14.2
FFHS First Franklin Corporation OH 304 75.6 23.7 13.3
HHFC Harvest Home Financial Corporation OH 304 75.6 23.7 13.3
MFBC MFB Corp. IN 325 76.1 19.2 9.7
MFFC Milton Federal Financial Corp. OH 317 74.9 20.7 13.8
NWEQ Northwest Equity Corporation WI 254 78.0 11.4 11.8
SFFC StateFed Financial Corporation IA 369 85.4 23.9 9.2
Average 327 76.4 19.9 12.3
Median 307 75.6 21.8 13.3
High 478 85.4 23.9 14.2
Low 254 73.4 11.4 9.2
</TABLE>
137
<PAGE> 148
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
BALANCE SHEET
ASSET COMPOSITION - MOST RECENT QUARTER
As a Percent of Total Assets
---------------------------------------------------------------
Real
Total Cash & Net Loan Loss Estate Goodwill
Assets Invest. MBS Loans Reserves Owned & Intang.
($000) (%) (%) (%) (%) (%) (%)
---------- --------- ------- ------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
HOME CITY
FEDERAL SAVINGS BANK 55,728 9.14 5.34 81.15 0.65 0.00 0.00
COMPARABLE GROUP
CIBI Community Investors Bancorp 85,785 21.76 2.74 74.02 0.50 0.11 0.00
EFBI Enterprise Federal Bancorp 213,876 18.97 13.55 65.28 0.18 0.00 0.03
FFWC FFW Corp. 150,467 18.33 12.32 67.09 0.37 0.02 0.00
FFBI First Financial Bancorp, Inc. 94,486 15.16 7.76 74.68 0.40 0.00 0.00
FFHS First Franklin Corporation 216,508 11.23 19.40 67.30 0.43 0.09 0.10
HHFC Harvest Home Financial Corp. 76,399 38.18 7.36 54.89 0.15 0.00 0.00
MFBC MFB Corp. 210,559 30.47 2.70 65.90 0.16 0.00 0.00
MFFC Milton Federal Financial Corp. 178,289 23.80 10.57 63.08 0.23 0.02 0.00
NWEQ Northwest Equity Corp. 91,804 7.52 8.66 80.09 0.47 0.16 0.00
SFFC StateFed Financial Corporation 76,705 13.17 0.00 81.75 0.31 0.00 0.00
Average 139,488 19.86 8.51 69.41 0.32 0.04 0.01
Median 122,477 18.65 8.21 67.19 0.34 0.01 0.00
High 216,508 38.18 19.40 81.75 0.50 0.16 0.10
Low 76,399 7.52 0.00 54.89 0.15 0.00 0.00
ALL THRIFTS (338)
Average 2,823,757 15.09 13.73 67.29 0.65 0.65 0.32
MIDWEST THRIFTS (154)
Average 782,777 18.24 10.26 67.95 0.47 0.47 0.15
OHIO THRIFTS (31)
Average 794,055 15.46 8.64 72.63 0.52 0.06 0.18
<CAPTION>
As a Percent of Total Assets
-----------------------------------------------------------------------------
Interest Interest Capitalize
Other High Risk Non-Perf. Earning Bearing Loan
Assets R.E. Loan Assets Assets Liabilities Servicing
(%) (%) (%) (%) (%) (%)
-------- ---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
HOME CITY
FEDERAL SAVINGS BANK 3.50 23.37 0.44 97.15 89.86 0.00
COMPARABLE GROUP
CIBI Community Investors Bancorp 1.37 6.33 0.73 96.87 84.55 0.00
EFBI Enterprise Federal Bancorp 2.17 16.15 0.03 95.44 81.75 0.00
FFWC FFW Corp. 2.24 5.56 0.06 98.35 88.30 0.00
FFBI First Financial Bancorp, Inc. 2.32 5.90 0.27 94.28 84.69 0.00
FFHS First Franklin Corporation 1.89 13.05 0.50 97.10 89.16 0.00
HHFC Harvest Home Financial Corp. 2.20 6.56 0.19 95.60 80.39 0.00
MFBC MFB Corp. 1.51 1.45 0.05 96.21 78.59 0.00
MFFC Milton Federal Financial Corp. 2.53 6.07 0.40 95.91 78.62 0.00
NWEQ Northwest Equity Corp. 3.57 11.24 0.76 92.59 85.11 0.00
SFFC StateFed Financial Corporation 3.08 27.52 0.53 93.32 77.83 0.00
Average 2.29 9.98 0.35 95.57 82.90 0.01
Median 2.22 6.45 0.34 95.75 83.15 0.00
High 3.57 27.52 0.76 98.35 89.16 0.08
Low 1.37 1.45 0.03 92.59 77.83 0.00
ALL THRIFTS (338)
Average 2.94 14.49 1.20 93.85 86.34 0.34
MIDWEST THRIFTS (154)
Average 2.55 11.84 0.56 94.78 82.33 0.10
OHIO THRIFTS (31)
Average 2.36 15.29 0.53 95.32 83.77 0.04
</TABLE>
138
<PAGE> 149
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
BALANCE SHEET COMPARISON
LIABILITIES AND EQUITY - MOST RECENT QUARTER
As a Percent of Assets
-------------------------------------------------------------------------------------
Total Total Total Total Other Preferred Common
Liabilities Equity Deposits Borrowings Liabilities Equity Equity
($000) ($000) (%) (%) (%) (%) (%)
----------- --------- --------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
HOME CITY
FEDERAL SAVINGS BANK 50,330 5,398 84.65 5.21 0.45 -- --
COMPARABLE GROUP
CIBI Community Investors Bancorp 73,916 11,869 83.40 2.28 0.48 0.00 13.84
EFBI Enterprise Federal Bancorp 182,282 31,594 65.46 18.70 1.07 0.00 14.77
FFWC FFW Corp. 135,009 15,458 61.47 27.78 0.48 0.00 10.27
FFBI First Financial Bancorp, Inc. 86,613 7,873 71.28 18.94 1.44 0.00 8.33
FFHS First Franklin Corporation 196,221 20,287 86.99 3.34 0.30 0.00 9.37
HHFC Harvest Home Financial Corp. 63,630 12,769 76.21 6.54 0.53 0.00 16.71
MFBC MFB Corp. 172,868 37,691 73.12 8.31 0.67 0.00 17.90
MFFC Milton Federal Financial Corp. 144,533 33,756 71.49 9.00 0.58 0.00 18.93
NWEQ Northwest Equity Corp. 80,084 11,720 65.18 21.52 0.54 0.00 12.77
SFFC StateFed Financial Corporation 61,777 14,928 59.62 19.56 1.36 0.00 19.46
Average 119,693 19,795 71.42 13.60 0.74 0.00 14.24
Median 110,811 15,193 71.39 13.85 0.56 0.00 14.30
High 196,221 37,691 86.99 27.78 1.44 0.00 19.46
Low 61,777 7,873 59.62 2.28 0.30 0.00 8.33
ALL THRIFTS (338)
Average 1,222,840 104,568 72.25 13.16 1.49 0.08 13.02
MIDWEST THRIFTS (154)
Average 712,411 70,365 71.03 13.07 1.21 0.03 14.66
OHIO THRIFTS (31)
Average 725,518 68,537 75.93 9.76 1.01 0.07 13.23
<CAPTION>
As a Percent of Assets
------------------------------------------------------------------------------------
FASB 115 Reg. Reg. Reg.
Unrealized Retained Total Tangible Core Tangible Risk-Based
Gain (Loss) Earnings Equity Equity Capital Capital Capital
(%) (%) (%) (%) (%) (%) (%)
------------ --------- -------- --------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
HOME CITY
FEDERAL SAVINGS BANK 0.23 9.46 9.69 9.46 9.46 9.46 18.77
COMPARABLE GROUP
CIBI Community Investors Bancorp (0.00) 7.68 13.84 13.84 11.86 11.86 24.41
EFBI Enterprise Federal Bancorp NA 6.24 14.77 14.75 13.10 13.10 26.64
FFWC FFW Corp. 0.13 5.06 10.27 10.27 8.00 8.00 15.21
FFBI First Financial Bancorp, Inc. (0.59) 5.11 8.33 8.33 7.56 7.56 15.81
FFHS First Franklin Corporation (0.04) 3.80 9.37 9.28 6.45 6.45 14.87
HHFC Harvest Home Financial Corp. (0.11) 5.76 16.71 16.71 NA NA NA
MFBC MFB Corp. (0.16) 9.74 17.90 17.90 NA NA 37.61
MFFC Milton Federal Financial Corp. (0.06) 8.56 18.93 18.93 14.69 14.69 33.82
NWEQ Northwest Equity Corp. (0.05) 6.78 12.77 12.77 8.21 NA NA
SFFC StateFed Financial Corporation (0.03) 8.43 19.46 19.46 13.86 13.86 24.35
Average (0.10) 6.72 14.24 14.22 10.47 10.79 24.09
Median (0.05) 6.51 14.31 14.30 10.04 11.86 24.38
High 0.13 9.74 19.46 19.46 14.69 14.69 37.61
Low (0.59) 3.80 8.33 8.33 6.45 6.45 14.87
ALL THRIFTS (338)
Average (0.06) 6.32 13.10 12.79 10.85 10.74 23.23
MIDWEST THRIFTS (154)
Average (0.06) 7.07 14.69 14.25 11.59 11.57 24.40
OHIO THRIFTS (31)
Average (0.02) 6.70 13.30 13.14 10.81 10.98 22.80
</TABLE>
139
<PAGE> 150
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
INCOME AND EXPENSE COMPARISON
TRAILING FOUR QUARTERS
($000)
Net Gain Total Goodwill Net
Interest Interest Interest Provision (Loss) Non-Int. & Intang. Real Est.
Income Expense Income for Loss on Sale Income Amtz. Expense
-------- --------- -------- --------- ------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
HOME CITY
FEDERAL SAVINGS BANK 4,094 2,542 1,965 50 0 58 0 0
COMPARABLE GROUP
CIBI Community Investors Bancorp 6,651 3,668 2,983 149 65 148 0 54
EFBI Enterprise Federal Bancorp 14,999 9,045 5,954 60 876 106 29 0
FFWC FFW Corp. 11,164 6,799 4,365 95 145 483 0 0
FFBI First Financial Bancorp, Inc. 5,669 3,210 2,459 90 106 425 0 0
FFHS First Franklin Corporation 15,238 9,598 5,640 56 31 388 5 3
HHFC Harvest Home Financial Corp. 5,054 2,872 2,182 3 0 43 0 0
MFBC MFB Corp. 13,393 7,635 5,758 30 58 318 0 0
MFFC Milton Federal Financial Corp. 12,265 6,448 5,817 72 214 231 0 2
NWEQ Northwest Equity Corp. 6,806 3,576 3,230 24 68 386 0 (34)
SFFC StateFed Financial Corporation 5,785 3,194 2,591 24 0 57 0 (209)
Average 9,702 5,605 4,098 60 156 259 3 (18)
Median 8,985 5,058 3,798 58 67 275 0 0
High 15,238 9,598 5,954 149 876 483 29 54
Low 5,054 2,872 2,182 3 0 43 0 (209)
ALL THRIFTS (338)
Average 100,254 62,133 38,121 2,852 2,783 6,671 681 681
MIDWEST THRIFTS (154)
Average 57,370 34,752 22,618 590 562 4,470 346 (105)
OHIO THRIFTS (31)
Average 59,212 36,995 22,217 270 432 3,131 192 (17)
<CAPTION>
Net Net Inc.
Total Non- Income Before
Non-Int. Recurring Before Income Extraord. Extraord. Net Core
Expense Expense Taxes Taxes Items Items Income Income
------------ ---------- -------- -------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
HOME CITY
FEDERAL SAVINGS BANK 1,216 0 757 243 514 0 514 469
COMPARABLE GROUP
CIBI Community Investors Bancorp 1,749 0 1,298 443 855 0 855 813
EFBI Enterprise Federal Bancorp 4,018 0 2,858 999 1,859 0 1,859 1,290
FFWC FFW Corp. 2,535 51 2,312 726 1,586 0 1,586 1,525
FFBI First Financial Bancorp, Inc. 2,376 0 524 (21) 545 0 545 476
FFHS First Franklin Corporation 4,042 0 1,961 645 1,316 0 1,316 1,297
HHFC Harvest Home Financial Corp. 1,417 0 805 270 535 0 535 535
MFBC MFB Corp. 3,758 0 2,346 935 1,411 0 1,411 1,373
MFFC Milton Federal Financial Corp. 3,563 0 2,627 900 1,727 0 1,727 1,588
NWEQ Northwest Equity Corp. 2,222 0 1,438 607 831 0 831 787
SFFC StateFed Financial Corporation 1,266 0 1,358 475 883 0 883 883
Average 2,695 5 1,753 598 1,155 0 1,155 1,057
Median 2,456 0 1,700 626 1,100 0 1,100 1,087
High 4,042 51 2,858 999 1,859 0 1,859 1,588
Low 1,266 0 524 (21) 535 0 535 476
ALL THRIFTS (338)
Average 26,680 705 17,400 6,224 11,175 (28) 11,147 9,785
MIDWEST THRIFTS (154)
Average 15,565 1,004 10,517 3,679 6,838 (8) 6,830 7,108
OHIO THRIFTS (31)
Average 13,420 4,678 7,440 2,545 4,895 0 4,895 7,637
</TABLE>
140
<PAGE> 151
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
INCOME AND EXPENSE COMPARISON
AS A PERCENTAGE OF AVERAGE ASSETS
TRAILING FOUR QUARTERS
Net Gain Total Goodwill Net
Interest Interest Interest Provision (Loss) Non-Int. & Intang. Real Est.
Income Expense Income for Loss on Sale Income Amtz. Expense
(%) (%) (%) (%) (%) (%) (%) (%)
-------- -------- --------- --------- -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
HOME CITY
FEDERAL SAVINGS BANK 7.79 4.83 3.74 0.10 0.00 0.11 0.00 0.00
COMPARABLE GROUP
CIBI Community Investors Bancorp 7.82 4.31 3.51 0.18 0.08 0.17 0.00 0.06
EFBI Enterprise Federal Bancorp 7.39 4.46 2.93 0.03 0.43 0.05 0.01 0.00
FFWC FFW Corp. 7.67 4.67 3.00 0.07 0.10 0.33 0.00 0.00
FFBI First Financial Bancorp, Inc. 7.04 3.99 3.05 0.11 0.13 0.53 0.00 0.00
FFHS First Franklin Corporation 7.21 4.54 2.67 0.03 0.01 0.18 0.00 0.00
HHFC Harvest Home Financial Corp. 7.07 4.02 3.05 0.00 0.00 0.06 0.00 0.00
MFBC MFB Corp. 6.95 3.96 2.99 0.02 0.03 0.16 0.00 0.00
MFFC Milton Federal Financial Corp. 7.42 3.90 3.52 0.04 0.13 0.14 0.00 0.00
NWEQ Northwest Equity Corp. 8.22 4.32 3.90 0.03 0.08 0.47 0.00 (0.04)
SFFC StateFed Financial Corporation 7.82 4.32 3.50 0.03 0.00 0.08 0.00 (0.28)
Average 7.46 4.25 3.21 0.05 0.10 0.22 0.00 (0.03)
Median 7.41 4.32 3.05 0.03 0.08 0.17 0.00 0.00
High 8.22 4.67 3.90 0.18 0.43 0.53 0.01 0.06
Low 6.95 3.90 2.67 0.00 0.00 0.05 0.00 (0.28)
ALL THRIFTS (338)
Average 7.42 4.20 3.22 0.12 0.11 0.44 0.03 0.00
MIDWEST THRIFTS (154)
Average 7.42 4.21 3.21 0.08 0.09 0.40 0.02 (0.01)
OHIO THRIFTS (31)
Average 7.58 4.25 3.33 0.05 0.09 0.27 0.02 0.00
<CAPTION>
Net Net Inc.
Total Non- Income Before
Non-Int. Recurring Before Income Extraord. Extraord. Net Core
Expense Expense Taxes Taxes Items Items Income Income
(%) (%) (%) (%) (%) (%) (%) (%)
--------- --------- ------- -------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
HOME CITY
FEDERAL SAVINGS BANK 2.31 0.00 1.44 0.46 0.98 0.00 0.98 0.89
COMPARABLE GROUP
CIBI Community Investors Bancorp 2.06 0.00 1.53 0.52 1.01 0.00 1.01 0.96
EFBI Enterprise Federal Bancorp 1.98 0.00 1.41 0.49 0.92 0.00 0.92 0.64
FFWC FFW Corp. 1.74 0.04 1.59 0.50 1.09 0.00 1.09 1.05
FFBI First Financial Bancorp, Inc. 2.95 0.00 0.65 (0.03) 0.68 0.00 0.68 0.59
FFHS First Franklin Corporation 1.91 0.00 0.93 0.30 0.62 0.00 0.62 0.61
HHFC Harvest Home Financial Corp. 1.98 0.00 1.13 0.38 0.75 0.00 0.75 0.75
MFBC MFB Corp. 1.95 0.00 1.22 0.48 0.73 0.00 0.73 0.71
MFFC Milton Federal Financial Corp. 2.16 0.00 1.59 0.54 1.04 0.00 1.04 0.96
NWEQ Northwest Equity Corp. 2.68 0.00 1.74 0.73 1.00 0.00 1.00 0.95
SFFC StateFed Financial Corporation 1.71 0.00 1.84 0.64 1.19 0.00 1.19 1.19
Average 2.11 0.00 1.36 0.46 0.90 0.00 0.90 0.84
Median 1.98 0.00 1.47 0.50 0.96 0.00 0.96 0.85
High 2.95 0.04 1.84 0.73 1.19 0.00 1.19 1.19
Low 1.71 0.00 0.65 (0.03) 0.62 0.00 0.62 0.59
ALL THRIFTS (338)
Average 2.29 0.02 1.35 0.48 0.88 (0.00) 0.88 0.81
MIDWEST THRIFTS (154)
Average 2.20 0.02 1.43 0.50 0.93 (0.00) 0.93 0.87
OHIO THRIFTS (31)
Average 2.21 0.05 1.38 0.47 0.91 0.00 0.91 0.88
</TABLE>
141
<PAGE> 152
KELLER & COMPANY
Columbus, Ohio
614-766-1426
YIELDS, COSTS AND EARNINGS RATIOS
TRAILING FOUR QUARTERS
<TABLE>
<CAPTION>
Yield on Cost of Net Net
Int. Earning Int. Bearing Interest Interest Core Core
Assets Liabilities Spread Margin * ROAA ROAA ROAE ROAE
(%) (%) (%) (%) (%) (%) (%) (%)
---------------------------------------------------------------------------------------------
HOME CITY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FEDERAL SAVINGS BANK 8.86 5.44 3.42 3.86 0.98 0.89 10.23 9.34
CIBI Community Investors Bancorp 8.02 5.08 2.94 3.60 1.01 0.96 6.98 6.63
EFBI Enterprise Federal Bancorp 7.53 5.43 2.10 2.99 0.92 0.64 5.39 3.74
FFWC FFW Corp. 7.89 5.12 2.77 3.09 1.09 1.05 9.89 9.51
FFBI First Financial Bancorp, Inc. 7.25 4.58 2.67 3.15 0.68 0.59 6.79 5.93
FFHS First Franklin Corporation 7.41 5.06 2.35 2.74 0.62 0.61 6.56 6.47
HHFC Harvest Home Financial Corp. 7.23 4.95 2.28 3.12 0.75 0.75 4.14 4.14
MFBC MFB Corp. 7.12 5.02 2.10 3.06 0.73 0.71 3.69 3.59
MFFC Milton Federal Financial Corp. 7.62 5.04 2.58 3.61 1.04 0.96 4.80 4.41
NWEQ Northwest Equity Corp. 8.66 5.09 3.57 4.11 1.00 0.95 6.91 6.54
SFFC StateFed Financial Corporation 8.24 5.49 2.75 3.69 1.19 1.19 5.99 5.99
Average 7.70 5.09 2.61 3.32 0.90 0.84 6.11 5.70
Median 7.58 5.07 2.63 3.14 0.96 0.85 6.28 5.96
High 8.66 5.49 3.57 4.11 1.19 1.19 9.89 9.51
Low 7.12 4.58 2.10 2.74 0.62 0.59 3.69 3.59
ALL THRIFTS (338)
Average 7.73 4.92 2.80 3.35 0.88 0.81 8.08 7.26
MIDWEST THRIFTS (154)
Average 7.70 5.02 2.68 3.33 0.93 0.87 7.73 7.12
OHIO THRIFTS (31)
Average 7.83 4.99 2.84 3.44 0.91 0.88 7.88 7.70
<FN>
* Based on average interest-earning assets.
</TABLE>
142
<PAGE> 153
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
DIVIDENDS, RESERVES AND SUPPLEMENTAL DATA
RESERVES AND SUPPLEMENTAL DATA -
DIVIDENDS MOST RECENT PERIOD
--------------------------------------- ------------------------------------------
12 Month 12 Month Net
12 Month Common Current Dividend Reserves/ Reserves/ Chargeoffs/Provisions/
Preferred Div./ Dividend Payout Gross Non-Perf. Average Net
Dividends Share Yield Ratio Loans Assets Loans Chargeoffs
($000) ($) (%) (%) (%) (%) (%) (%)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
HOME CITY
FEDERAL SAVINGS BANK NA NA NA NA 0.79 146.56 0.02 714.29
COMPARABLE GROUP
CIBI Community Investors Bancorp 0 0.12 2.54 9.52 0.68 69.06 0.27 102.33
EFBI Enterprise Federal Bancorp 0 3.00 0.00 319.15 0.27 660.34 0.00 NM
FFWC FFW Corp. 0 0.51 3.08 23.94 0.55 602.17 0.08 223.81
FFBI First Financial Bancorp, Inc. 0 0.00 0.00 0.00 0.53 150.00 0.00 NM
FFHS First Franklin Corporation 0 0.29 2.10 27.10 0.63 84.85 0.04 133.33
HHFC Harvest Home Financial Corp. 0 0.40 4.05 63.49 0.26 75.51 0.00 NM
MFBC MFB Corp. 0 0.00 1.55 0.00 0.24 NA NA NA
MFFC Milton Federal Financial Corp. 0 1.37 3.78 187.67 0.36 56.05 0.00 NM
NWEQ Northwest Equity Corp. 0 0.35 3.90 38.04 0.59 51.54 0.02 150.00
SFFC StateFed Financial Corporation 0 0.40 2.50 36.04 0.38 NA NA NA
Average 0 0.64 2.35 70.50 0.45 218.69 0.05 152.37
Median 0 0.38 2.52 31.57 0.46 80.18 0.01 141.67
High 0 3.00 4.05 319.15 0.68 660.34 0.27 223.81
Low 0 0.00 0.00 0.00 0.24 51.54 0.00 102.33
ALL THRIFTS (338)
Average 370 0.30 1.41 25.35 0.66 91.98 0.13 112.12
MIDWEST THRIFTS (154)
Average 45 0.39 1.90 36.03 0.69 157.22 0.09 200.44
OHIO THRIFTS (31)
Average 62 0.60 2.37 64.06 0.74 150.64 0.02 216.10
<CAPTION>
RESERVES AND SUPPLEMENTAL DATA -
MOST RECENT PERIOD
-------------------------------------
1 Year Total
Repricing Effective Assets/
Gap Tax Rate Employee
(%) (%) ($000)
-------------------------------------
<S> <C> <C> <C>
SUBJECT
HOME CITY
FEDERAL SAVINGS BANK NA 0.32 5,066
COMPARABLE GROUP
CIBI Community Investors Bancorp NA 38.32 3,730
EFBI Enterprise Federal Bancorp NA 34.48 6,684
FFWC FFW Corp. 12.47 27.24 3,960
FFBI First Financial Bancorp, Inc. -10.61 33.01 2,700
FFHS First Franklin Corporation NA 33.06 4,419
HHFC Harvest Home Financial Corp. NA 32.85 NA
MFBC MFB Corp. NA 39.69 NA
MFFC Milton Federal Financial Corp. NA 34.13 3,962
NWEQ Northwest Equity Corp. -4.97 42.38 2,782
SFFC StateFed Financial Corporation NA 35.39 NA
Average -1.04 35.06 4,034
Median -4.97 34.31 3,960
High 12.47 42.38 6,684
Low -10.61 27.24 2,700
ALL THRIFTS (338)
Average -1.84 24.92 4,041
MIDWEST THRIFTS (154)
Average -3.79 33.87 3,892
OHIO THRIFTS (31)
Average -6.53 33.90 3,879
</TABLE>
143
<PAGE> 154
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
COMPARABLE GROUP MARKET, PRICING AND FINANCIAL RATIOS
Stock Prices as of September 6, 1996
Market Data Pricing Ratios
--------------------------------- --------------------------------------------
Book Price/ Price/ Price/
Market Price/ 12 Mo. Value/ Price/ Book Price/ Tang. Core
Value Share EPS Share Earnings Value Assets Bk. Val.Earnings
($M) ($) ($) ($) (X) (%) (%) (%) (%)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HOME CITY FEDERAL SAVINGS BANK
APPRAISED VALUE - MIDPOINT 7.20 10.00 0.88 15.78 11.40 63.38 11.51 63.37 12.27
Minimum of range 6.12 10.00 1.00 17.04 10.02 58.70 9.95 58.70 10.81
Maximum of range 8.28 10.00 0.75 14.85 13.27 67.33 13.01 67.33 14.30
Superrange maximum 9.52 10.00 0.64 14.04 15.53 71.20 14.68 71.20 16.76
ALL THRIFTS (338)
Average 126.28 17.77 1.35 16.59 16.25 110.16 13.85 113.19 17.46
Median 37.37 16.06 1.24 15.73 13.71 102.19 11.93 104.23 14.84
OHIO THRIFTS (31)
Average 97.29 18.66 1.32 17.43 17.61 108.41 13.43 112.13 17.88
Median 26.71 16.13 1.28 16.37 14.58 97.69 12.10 97.69 14.79
COMPARABLE GROUP (10)
Average 17.02 14.43 1.07 16.77 14.46 85.57 12.20 85.68 15.68
Median 13.45 15.38 1.01 16.92 13.98 87.39 12.29 87.85 14.71
COMPARABLE GROUP
CIBI Community Investors Bancorp 11.04 15.75 1.26 16.93 12.50 93.03 12.88 93.03 13.24
EFBI Enterprise Federal Bancorp 26.71 12.88 0.94 15.23 13.70 84.54 12.49 84.70 19.81
FFWC FFW Corp. 13.87 19.50 2.13 21.74 9.15 89.70 9.22 89.70 9.51
FFBI First Financial Bancorp, Inc. 7.22 15.50 1.18 16.90 13.14 91.72 7.64 91.72 14.90
FFHS First Franklin Corporation 17.77 15.25 1.07 17.41 14.25 87.59 8.21 88.51 14.52
HHFC Harvest Home Financial Corp. 9.23 9.88 0.63 13.66 15.67 72.29 12.08 72.29 15.67
MFBC MFB Corp. 30.60 15.50 0.71 19.09 21.83 81.19 14.53 81.19 22.46
MFFC Milton Federal Financial Corp. 31.06 13.75 0.73 14.91 18.84 92.22 17.46 92.22 20.52
NWEQ Northwest Equity Corp. 9.69 10.25 0.92 13.45 11.14 76.21 10.56 76.21 11.78
SFFC StateFed Financial Corporation 13.02 16.00 1.11 18.35 14.41 87.19 16.97 87.19 14.41
<CAPTION>
Dividends Financial Ratios
------------------------ ----------------------
Div./ Dividend Payout Equity/
Share Yield Ratio Assets ROA ROE
($) (%) (%) (%) (%) (%)
--------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
HOME CITY FEDERAL SAVINGS BANK
APPRAISED VALUE - MIDPOINT 0.00 0.00 0.00 18.16 1.01 5.56
Minimum of range 0.00 0.00 0.00 16.96 0.99 5.86
Maximum of range 0.00 0.00 0.00 19.33 0.98 5.08
Superrange maximum 0.00 0.00 0.00 20.62 0.95 4.58
ALL THRIFTS (338)
Average 0.42 1.85 35.55 13.10 0.88 8.08
Median 0.35 1.95 24.77 10.34 0.89 7.38
OHIO THRIFTS (31)
Average 0.60 2.37 64.06 13.30 0.91 7.88
Median 0.45 2.38 36.07 12.20 0.95 6.75
COMPARABLE GROUP (10)
Average 0.64 2.35 70.50 14.24 0.90 6.11
Median 0.38 2.52 31.57 14.31 0.96 6.28
COMPARABLE GROUP
CIBI Community Investors Bancorp 0.12 2.54 9.52 13.84 1.01 6.98
EFBI Enterprise Federal Bancorp 3.00 0.00 319.15 14.77 0.92 5.39
FFWC FFW Corp. 0.51 3.08 23.94 10.27 1.09 9.89
FFBI First Financial Bancorp, Inc. 0.00 0.00 0.00 8.33 0.68 6.79
FFHS First Franklin Corporation 0.29 2.10 27.10 9.37 0.62 6.56
HHFC Harvest Home Financial Corp. 0.40 4.05 63.49 16.71 0.75 4.14
MFBC MFB Corp. 0.00 1.55 0.00 17.90 0.73 3.69
MFFC Milton Federal Financial Corp. 1.37 3.78 187.67 18.93 1.04 4.80
NWEQ Northwest Equity Corp. 0.35 3.90 38.04 12.77 1.00 6.91
SFFC StateFed Financial Corporation 0.40 2.50 36.04 19.46 1.19 5.99
</TABLE>
144
<PAGE> 155
KELLER & COMPANY
Columbus, Ohio
614-766-1426
VALUATION ANALYSIS AND CONCLUSIONS
HOME CITY FINANCIAL CORPORATION/HOME CITY FEDERAL SAVINGS BANK
Stock Prices as of September 6, 1996
<TABLE>
<CAPTION>
VALUATION ASSUMPTIONS: Comparable Group All Thrifts
Symbol Value Average Median Average Median
------ ----- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Post conv. price to earnings P/E 11.40 14.46 13.98 16.25 13.71
Post conv. price to book value P/B 63.38% 85.57% 87.39% 110.16% 102.19%
Post conv. price to assets P/A 11.51% 12.20% 12.29% 13.85% 11.93%
Post conv. price to core earnings P/E 12.27 15.68 14.71 17.46 14.84
Pre conversion earnings ($) Y $ 514,000 For the twelve months ended June 30, 1996.
Pre conversion book value ($) B $ 5,398,000 At June 30, 1996.
Pre conversion assets ($) A $55,728,000 At June 30, 1996.
Pre conversion core earnings ($) $ 469,000 For the twelve months ended June 30, 1996.
Conversion expense ($) X $ 372,000
Proceeds not reinvested ($) Z $ 826,000 ESOP and fixed assets.
ESOP borrowings ($) E $ 576,000
ESOP cost of borrowings, net (%) S 6.11%
ESOP term of borrowings (yrs.) T 10
RRP amount ($) M $ 288,000
RRP expense ($) N $ 57,600
Tax rate (%) TAX 34.00%
Investment rate of return, net (%) R 3.81%
Investment rate of return, pretax (%) 5.78%
</TABLE>
<TABLE>
<CAPTION>
FORMULAE TO INDICATE VALUE AFTER CONVERSION:
<S> <C> <C>
1. P/E method: Value = P/E(Y-R(X+Z)-ES-(1-TAX)E/T-(1-TAX)N)) = $ 7,201,537
-------------------------------------
1-(P/E)R
2. P/B method: Value = P/B(B-X-E-M) = $ 7,202,008
------------
1-P/B
3. P/A method: Value = P/A(A-X) = $ 7,198,801
--------
1-P/A
</TABLE>
VALUATION CORRELATION AND CONCLUSIONS:
<TABLE>
<CAPTION>
Number of Price TOTAL
Shares Per Share VALUE
------------- -------------- --------------
<S> <C> <C> <C>
APPRAISED VALUE - MIDRANGE 720,000 $10.00 $7,200,000
Minimum - 85% of midrange 612,000 $10.00 $6,120,000
Maximum - 115% of midrange 828,000 $10.00 $8,280,000
Superrange - 115% of maximum 952,200 $10.00 $9,522,000
</TABLE>
145
<PAGE> 156
KELLER & COMPANY
Columbus, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Home City Financial Corporation/Home City Federal Savings Bank
At the MINIMUM of the Range
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. GROSS CONVERSION PROCEEDS
Minimum market value $6,120,000
Less: Estimated conversion expenses 357,000
Net conversion proceeds $5,763,000
2. GENERATION OF ADDITIONAL INCOME
Net conversion proceeds $5,763,000
Less: Proceeds not invested (1) 740,000
Total conversion proceeds invested $5,023,000
Investment rate 3.81%
Earnings increase - return on proceeds invested $ 191,617
Less: Estimated cost of ESOP borrowings 29,915
Less: Amortization of ESOP borrowings, net of taxes 32,314
Less: RRP expense, net of taxes 32,314
Net earnings increase $ 97,076
</TABLE>
<TABLE>
<CAPTION>
3. COMPARATIVE EARNINGS
Regular Core
----------------- -----------------
<S> <C> <C>
Before conversion - 12 months ended 06/30/96 $ 514,000 469,000
Net earnings increase 97,076 97,076
After conversion $ 611,076 566,076
</TABLE>
<TABLE>
<CAPTION>
4. COMPARATIVE NET WORTH (2)
<S> <C>
Before conversion - 06/30/96 $ 5,398,000
Conversion proceeds 5,028,600
After conversion $10,426,600
5. COMPARATIVE NET ASSETS
Before conversion - 06/30/96 $55,728,000
Conversion proceeds 5,763,000
After conversion $61,491,000
<FN>
(1) Represents ESOP borrowings and fixed assets.
(2) ESOP borrowings and RRP are omitted from net worth.
</TABLE>
146
<PAGE> 157
KELLER & COMPANY
Columbus, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Home City Financial Corporation/Home City Federal Savings Bank
At the MIDPOINT of the Range
<TABLE>
<CAPTION>
<S> <C> <C>
1. GROSS CONVERSION PROCEEDS
Midpoint market value $7,200,000
Less: Estimated conversion expenses 372,000
Net conversion proceeds $6,828,000
2. GENERATION OF ADDITIONAL INCOME
Net conversion proceeds $6,828,000
Less: Proceeds not invested (1) 826,000
Total conversion proceeds invested $6,002,000
Investment rate of return 3.81%
Earnings increase - return on proceeds invested $ 228,964
Less: Estimated cost of ESOP borrowings 35,194
Less: Amortization of ESOP borrowings, net of taxes 38,016
Less: RRP expense, net of taxes 38,016
Net earnings increase $ 117,739
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
3. COMPARATIVE EARNINGS
Regular Core
----------------- -----------------
Before conversion - 12 months ended 06/30/96 $ 514,000 469,000
Net earnings increase 117,739 117,739
After conversion $ 631,739 586,739
</TABLE>
<TABLE>
<CAPTION>
4. COMPARATIVE NET WORTH (2)
<S> <C>
Before conversion - 06/30/96 $ 5,398,000
Conversion proceeds 5,964,000
After conversion $11,362,000
5. COMPARATIVE NET ASSETS
Before conversion - 06/30/96 $55,728,000
Conversion proceeds 6,828,000
After conversion $62,556,000
<FN>
(1) Represents ESOP borrowings and fixed assets.
(2) ESOP borrowings and RRP are omitted from net worth.
</TABLE>
147
<PAGE> 158
KELLER & COMPANY
Columbus, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Home City Financial Corporation/Home City Federal Savings Bank
At the MAXIMUM of the Range
<TABLE>
<CAPTION>
<S> <C>
1. GROSS CONVERSION PROCEEDS
Maximum market value $8,280,000
Less: Estimated conversion expenses 387,000
Net conversion proceeds $7,893,000
2. GENERATION OF ADDITIONAL INCOME
Net conversion proceeds $7,893,000
Less: Proceeds not invested (1) 1,652,000
Total conversion proceeds invested $6,241,000
Investment rate 3.81%
Earnings increase - return on proceeds invested $ 238,082
Less: Estimated cost of ESOP borrowings 40,473
Less: Amortization of ESOP borrowings, net of taxes 43,718
Less: RRP expense, net of taxes 43,718
Net earnings increase $ 110,172
</TABLE>
3. COMPARATIVE EARNINGS
<TABLE>
<CAPTION>
Regular Core
----------------- -----------------
<S> <C> <C>
Before conversion - 12 months ended 06/30/96 $ 514,000 469,000
Net earnings increase 110,172 110,172
After conversion $ 624,172 579,172
</TABLE>
<TABLE>
<CAPTION>
4. COMPARATIVE NET WORTH (2)
<S> <C>
Before conversion - 06/30/96 $ 5,398,000
Conversion proceeds 6,899,400
After conversion $12,297,400
5. COMPARATIVE NET ASSETS
Before conversion - 06/30/96 $55,728,000
Conversion proceeds 7,893,000
After conversion $63,621,000
<FN>
(1) Represents ESOP borrowings and fixed assets.
(2) ESOP borrowings and RRP are omitted from net worth.
</TABLE>
148
<PAGE> 159
KELLER & COMPANY
Columbus, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Home City Financial Corporation/Home City Federal Savings Bank
At the SUPERRANGE Maximum
<TABLE>
<CAPTION>
<S> <C> <C>
1. GROSS CONVERSION PROCEEDS
Superrange market value $9,522,000
Less: Estimated conversion expenses 404,000
Net conversion proceeds $9,118,000
2. GENERATION OF ADDITIONAL INCOME
Net conversion proceeds $9,118,000
Less: Proceeds not invested (1) 2,664,000
Total conversion proceeds invested $6,454,000
Investment rate 3.81%
Earnings increase - return on proceeds invested $ 246,207
Less: Estimated cost of ESOP borrowings 46,544
Less: Amortization of ESOP borrowings, net of taxes 50,276
Less: RRP expense, net of taxes 50,276
Net earnings increase $ 99,111
</TABLE>
<TABLE>
<CAPTION>
3. COMPARATIVE EARNINGS
Regular Core
----------------- -----------------
<S> <C> <C>
Before conversion - 12 months ended 06/30/96 $514,000 469,000
Net earnings increase 99,111 99,111
After conversion $613,111 568,111
</TABLE>
<TABLE>
<CAPTION>
4. COMPARATIVE NET WORTH (2)
<S> <C>
Before conversion - 06/30/96 $ 5,398,000
Conversion proceeds 7,975,360
After conversion $13,373,360
5. COMPARATIVE NET ASSETS
Before conversion - 06/30/96 $55,728,000
Conversion proceeds 9,118,000
After conversion $64,846,000
<FN>
(1) Represents ESOP borrowings and fixed assets.
(2) ESOP borrowings and RRP are omitted from net worth.
</TABLE>
149
<PAGE> 160
KELLER & COMPANY
Columbus, Ohio
614-766-1426
SUMMARY OF VALUATION PREMIUM OR DISCOUNT
<TABLE>
<CAPTION>
Premium or (discount)
from comparable group.
----------------------------
Home City Average Median
--------- ------- ------
<S> <C> <C> <C>
MIDPOINT:
Price/earnings 11.40x (21.19)% (18.44)%
Price/book value 63.38% * (25.94)% (27.48)%
Price/assets 11.51% (5.70)% (6.32)%
Price/tangible book value 63.37% (26.04)% (27.87)%
Price/core earnings 12.27x (21.75)% (16.58)%
MINIMUM OF RANGE:
Price/earnings 10.02x (30.75)% (28.34)%
Price/book value 58.70% * (31.40)% (32.83)%
Price/assets 9.95% (18.45)% (18.99)%
Price/tangible book value 58.70% (31.49)% (33.19)%
Price/core earnings 10.81x (31.06)% (26.50)%
MAXIMUM OF RANGE:
Price/earnings 13.27x (8.28)% (5.08)%
Price/book value 67.33% * (21.31)% (22.95)%
Price/assets 13.01% 6.64% 5.94%
Price/tangible book value 67.33% (21.41)% (23.36)%
Price/core earnings 14.30x (8.84)% (2.81)%
SUPER MAXIMUM OF RANGE:
Price/earnings 15.53x 7.38% 11.13%
Price/book value 71.20% * (16.79)% (18.52)%
Price/assets 14.68% 20.32% 19.53%
Price/tangible book value 71.20% (16.89)% (18.95)%
Price/core earnings 16.76x 6.88% 13.94%
<FN>
* Represents pricing ratio associated with primary valuation
method.
</TABLE>
150
<PAGE> 161
ALPHABETICAL
EXHIBITS
<PAGE> 162
KELLER & COMPANY, INC.
555 METRO PLACE NORTH
SUITE 524
DUBLIN, OHIO 43017
(614) 766-1426
(614) 766-1459 FAX
PROFILE OF THE FIRM
KELLER & COMPANY, INC. is a full service consulting firm to financial
institutions, serving clients throughout the United States from its offices in
Columbus, Ohio. The firm consults primarily in the areas of regulatory
and compliance matters, financial analysis and strategic planning, stock
valuation and appraisal, mergers and acquisitions, mutual to stock conversions,
conversion/mergers and branching. Since its inception in 1985, KELLER & COMPANY
has provided a wide range of consulting services to over 80 financial
institutions including thrifts, banks, mortgage companies and holding companies.
KELLER & COMPANY is an affiliate member of the Community Bankers of America,
the Ohio League of Financial Institutions, and the Tri State League of Financial
Institutions.
Each of the firm's senior consultants has over fifteen years front line
experience and accomplishment in various areas of the thrift, banking, and real
estate industries. Each consultant provides to clients distinct and diverse
areas of expertise. Specific services and projects have included charter and
insurance applications, market studies, institutional mergers and acquisitions,
branch sales and acquisitions, operations and performance analyses, business
plans, strategic planning, financial projection and modeling, stock valuation,
fairness opinions, capital plans, policy development and revision, lending,
underwriting and investment criteria, data processing and management information
systems, and incentive compensation programs.
It is the goal of KELLER & COMPANY to provide specific and ongoing services that
are pertinent and responsive to the needs of the individual client institution
within the changing industry environment, and to offer those services at
reasonable fees on a timely basis. In recent years, KELLER & COMPANY has become
one of the leading consulting firms in the nation.
151
<PAGE> 163
CONSULTANTS IN THE FIRM
MICHAEL R. KELLER has over eighteen years experience as a consultant to the
financial institution industry. Immediately following his graduation from
college, he was employed by the Ohio Division of Savings and Loan Associations,
working for two years in the northeastern Ohio district as an examiner of thrift
institutions before pursuing graduate studies at the Ohio State University.
Mr. Keller later worked as an associate for a management consulting firm
specializing in services to thrift institutions. During his eight years with the
firm, he specialized in mergers and acquisitions, branch acquisitions and sales,
branch feasibility studies, stock valuations, charter applications, and site
selection analyses. By the time of his departure, he had attained the position
of Vice President, with experience in almost all facets of thrift operations.
Prior to forming Keller & Company, Mr. Keller also worked as a senior consultant
in a larger consulting firm. In that position, he broadened his activities and
experience, becoming more involved with institutional operations, business and
strategic planning, regulatory policies and procedures, conversion appraisals,
and fairness opinions. Mr. Keller established the firm in November, 1985 to
better serve the needs of the financial institution industry.
Mr. Keller graduated from Wooster College with a B.A. in Economics in 1972,
and later received an M.B.A. in Finance in 1976 from the Ohio State University
where he took courses in corporate stock valuations.
152
<PAGE> 164
Consultants in the Firm (cont.)
JOHN A. SHAFFER has over twenty years experience in banking, finance, real
estate lending, and development.
From 1971 to 1974, Mr. Shaffer was employed by a large real estate investment
trust as a lending officer, specializing in construction and development loans.
By 1974, having gained experience in loan underwriting, management and workout,
he joined Chemical Bank of New York and was appointed Vice President for Loan
Administration of Chemical Mortgage Company in Columbus, Ohio. At Chemical, he
managed all commercial and residential loan servicing, administering a portfolio
in excess of $1 billion. His responsibilities also included the analysis,
management and workout of problem commercial loans and properties, and the
structuring, negotiation, acquisition and sale of loan servicing and mortgage
and equity securities.
Mr. Shaffer later formed an independent real estate and financial consulting
firm, serving corporate and institutional clients, and also investing in and
developing real estate. His primary activities have included the planning,
analysis, financing, implementation, and administration of real estate projects,
as well as financial projection and modeling, cost and profit analysis, loan
management, budgeting, cash flow management and project design.
Mr. Shaffer graduated from Syracuse University in 1965 with a B.S. in Business
Administration, later receiving an M.B.A. in Finance and a Ph.D. in Economics
from New York University.
153
<PAGE> 165
Consultants in the Firm (cont.)
JOHN S. KORTING has eighteen years experience in the financial institution
industry working in such areas as data processing, software design, strategic
planning, productivity improvement, cash management, incentive compensation
planning, asset and liability management and organizational planning.
Mr. Korting began his career with Huntington Bank, Columbus., Ohio, in 1976 as
manager of the accounting department in the Bank's operations area, focusing on
system analysis for automated teller machines and electronic funds transfer. Mr.
Korting then became a system engineer with Electronic Data Systems, Dallas,
Texas, providing computer programming and implementation support. He then served
as a senior consultant with two big eight accounting firms, Deloitte & Touche
and Price Waterhouse. He worked on a wide variety of financial institution
projects, including strategic planning, Office of Thrift Supervision business
plans, financial analysis, computer, installations, computerized financial
modeling, and bank operations.
John Korting graduated from the Ohio State University with a B.S. in
Accounting and Computer Science in 1976.
154
<PAGE> 166
RB 20
CERTIFICATION
I hereby certify that I have not been the subject of any criminal,
civil or administrative judgments, consents, undertakings or orders,
or any past or ongoing indictments, formal investigations,
examinations, or administrative proceedings (excluding routine or
customary audits, inspections and investigations) issued by any
federal or state court, any department, agency, or commission of the
U.S. Government, any state or municipality, any self-regulatory trade
or professional organization, or any foreign government or
governmental entity, which involve:
(i) commission of a felony, fraud, moral turpitude, dishonesty or
breach of trust;
(ii) violation of securities or commodities laws or regulations;
(iii) violation of depository institution laws or regulations;
(iv) violation of housing authority laws or regulations;
(v) violation of the rules, regulations, codes of conduct or ethics
of a self-regulatory trade or professional organization:
(vi) adjudication of bankruptcy or insolvency or appointment of a
receiver, conservator, trustee, referee, or guardian.
I hereby certify that the statements I have made herein are true, complete, and
correct to the best of my knowledge and belief.
Conversion Appraiser
9/23/96 /s/ Michael R. Keller
- -------------------------- ---------------------
Date Michael R. Keller
155
<PAGE> 167
AFFIDAVIT OF INDEPENDENCE
-------------------------
STATE OF OHIO,
COUNTY OF FRANKLIN, ss:
I, Michael R. Keller, being first duly sworn hereby depose and say that:
The fee which I received directly from the applicant, Home City Federal
Savings Bank, Springfield, Ohio, in the amount of $15,000 for the performance of
my appraisal was not related to the value determined in the appraisal; that the
undersigned appraiser is independent and has fully disclosed to the Office of
Thrift Supervision any relationships which may have a material bearing upon the
question of my independence; and that any indemnity agreement with the applicant
has been fully disclosed in a written statement to the Office of Thrift
Supervision.
Further, affiant sayeth naught.
/s/ Michael R. Keller
----------------------
MICHAEL R. KELLER
Sworn to before me and subscribed in my presence this 23th day of
September, 1996.
/s/ Lori A. Kessen
----------------------
NOTARY PUBLIC
[seal] LORI A. KESSEN
NOTARY PUBLIC, STATE OF OHIO
MY COMMISSION EXPIRES
AUG. 10, 2000
156
