As filed with the Securities and Exchange Commission on September 25, 1996
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
VISION BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its articles of incorporation)
Indiana 6711
------------------------------- ---------------------------------------
(State or other jurisdiction of (Primary Standard
incorporation or organization) Industrial Classification Code Number)
To be applied for
-------------------
(I.R.S. Employer
Identification No.)
118 Walnut Street
Lawrenceburg, Indiana 47025-1838
(812) 537-0940
- --------------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Donald C. Siemers
President and Chief Executive Officer
Vision Bancorp, Inc.
118 Walnut Street
Lawrenceburg, Indiana 47025-1838
(812) 537-0940
- --------------------------------------------------------------------------------
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
Jeffrey D. Haas, Esq.
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W., 12th Floor
Washington, D.C. 20005
---------------------
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ X ]
<TABLE>
<CAPTION>
===============================================================================================================================
Proposed
Proposed Maximum
Title of each Class of Amount Maximum Aggregate Amount of
Securities to be to be Offering Price Offering Registration
Registered Registered Per Share Price(1) Fee
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par
value $.10 per share 580,445 shares(2) $10.00(2) $5,804,450 $2,001.53
- --------------------------------------------------------------------------------------------------------------------------------
Common Stock, par
value $.10 per share 449,746 shares(3) $ 7.28(3) $3,274,151 $1,129.02(3)
- --------------------------------------------------------------------------------------------------------------------------------
Total 1,030,478 shares $9,080,690 $3,130.55
================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Represents a maximum of 580,445 shares that may be issued in the offering.
The registration fee for these shares is calculated in accordance with Rule
457(a).
(3) Represents a maximum of 449,746 shares that may be issued in exchange for
shares of common stock of Dearborn Savings Association, F.A. (inclusive of
shares which may be issued upon exercise of outstanding stock options). The
registration fee for these shares is calculated in accordance with Rule
457(f) based upon an assumed exchange ratio of 2.0443 and the book value of
a share of Dearborn Savings Association, F.A. common stock of $14.89 on
June 30, 1996.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
VISION BANCORP, INC.
Cross Reference Sheet Showing Location in the Prospectus of
Information Required by Items of Form S-1
<TABLE>
<CAPTION>
Registration Statement Item and Caption Prospectus Headings
- -------------------------------------------------------------------- ---------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Front Cover Page
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Back
Prospectus Cover Pages
3. Summary Information, Risk Factors and Ratio Summary; Risk Factors
of Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price The Conversion and Reorganization
-- Stock Pricing, Exchange Ratio and
Number of Shares to be Issued
6. Dilution Not applicable
7. Selling Security Holders Not applicable
8. Plan of Distribution Front Cover Page; The Conversion
and Reorganization -- The
Offerings; -- Stock Pricing, Exchange
Ratio and Number of Shares to be
Issued; and -- Marketing
Arrangements
9. Description of Securities to be Registered Restrictions on Acquisition of the
Company; Description of Capital
Stock of the Company
10. Interests of Named Experts and Counsel Not applicable
11. Information with Respect to the Registrant Front Cover Page; Vision Bancorp,
Inc.; Dearborn Savings Association,
F.A.; Dividend Policy; Dearborn
Savings Association, F.A Statements
of Earnings; Management's
Discussion and Analysis of Financial
Condition and Results of
Operations; Business; Regulation;
Management of the Company;
Management of the Association; The
Conversion and Reorganization;
Description of Capital Stock of the
Company; Financial Statements
12. Disclosure of Commission Position on Not applicable
Indemnification for Securities Act Liabilities
</TABLE>
<PAGE>
PROSPECTUS
VISION BANCORP, INC.
(Proposed Holding Company for Dearborn Bank)
Up to 874,000 Shares of Common Stock
Vision Bancorp, Inc. (the "Company"), an Indiana corporation, is offering
up to 874,000 shares (which may be increased to 1,005,100 shares under certain
circumstances described below) of its common stock, par value $.10 per share
(the "Common Stock"), in connection with (i) the Exchange described herein to be
effected in connection with the reorganization of Dearborn Savings Association,
F.A. ("Dearborn" or the "Association") as a subsidiary of the Company and (ii)
the Offerings described herein.
The Exchange. Pursuant to a Plan of Conversion and Agreement and Plan of
Reorganization (the "Plan" or "Plan of Conversion") adopted by the Association
and Dearborn Mutual Holding Company (the "Mutual Holding Company"), the
Association will become a subsidiary of the Company upon consummation of the
transactions described herein (collectively, with the Offerings, the "Conversion
and Reorganization"). As a result of the Conversion and Reorganization, each
share of common stock, par value $.10 per share, of the Association
("Association Common Stock") held by the Mutual Holding Company, which currently
holds 250,000 shares or 54.62% of the outstanding Association Common Stock, will
be cancelled and each share of Association Common Stock held by the
Association's public stockholders (the "Public Association Shares"), which
amounted to 207,726 shares or 45.38% of the outstanding Association Common Stock
at June 30, 1996, will be converted into shares of Common Stock (the "Exchange
Shares") pursuant to a ratio (the "Exchange Ratio") that will result in the
holders of such shares (the "Public Stockholders") owning in the aggregate
approximately 42.25% of the Company before giving effect to (a) the payment of
cash in lieu of fractional Exchange Shares, (b) any shares of Common Stock
purchased by such stockholders in the Offerings described herein or (c) any
exercise of dissenters' rights (the "Exchange"). The dilution of Public
Stockholder ownership interest from a 45.38% actual ownership interest in the
Association to a 42.25% ownership interest in the Company reflects the downward
adjustment pursuant to OTS policy which requires the Exchange Ratio to reflect
the amount of the special dividends declared by the Association and waived by
the Mutual Holding Company. As discussed under "Independent Valuation" below and
herein, the final Exchange Ratio will be determined based on the Public
Stockholders' ownership interest and not on the market value of the Public
Association Shares.
The Offerings. In addition to the Exchange, nontransferable subscription
rights to subscribe for up to 504,735 shares (which may be increased to 580,445
shares under certain circumstances described below) of Common Stock (the
"Conversion Stock") have been granted to certain depositors of the Association
as of specified record dates, directors, officers and employees of the Mutual
Holding Company and the Association, and the Public
<PAGE>
Stockholders, subject to the limitations described herein (the "Subscription
Offering"). Commencing concurrently with the Subscription Offering, and subject
to the prior rights of holders of subscription rights, the right of the Company,
the Mutual Holding Company and the Association (the "Primary Parties") to reject
such orders in whole or in part and the other limitations described herein, the
Company is offering the shares of Conversion Stock not subscribed for in the
Subscription Offering, if any, for sale in a community offering (the "Community
Offering") to certain members of the general public to whom a copy of this
Prospectus is delivered by or on behalf of the Company, with preference given to
natural persons residing in Dearborn County, Indiana.
It is anticipated that shares of Conversion Stock not subscribed for in the
Subscription and Community Offerings, if any, may be offered by the Company to
members of the general public to whom a copy of this Prospectus is delivered by
or on behalf of the Company in a syndicated community offering (the "Syndicated
Community Offering"). In the alternative, any shares not subscribed for in the
Subscription and Community Offerings, if any, may be sold in an underwritten
public offering (the "Public Offering") in which Charles Webb & Company
("Webb"), a division of Keefe, Bruyette & Woods, Inc. ("KB&W"), will act as the
underwriter. The Subscription Offering, Community Offering and any Syndicated
Community Offering or Public Offering are referred to collectively as the
"Offerings." The Primary Parties have also engaged Webb to consult with and
advise them in the Conversion and Reorganization, and Webb has agreed to use its
best efforts to solicit subscriptions and purchase orders for shares of
Conversion Stock in the Subscription and Community Offerings. See "The
Conversion and Reorganization - Marketing Arrangements."
The Subscription Offering will terminate at 5:00 p.m., Eastern Time, on
________ __, 1996 (the "Expiration Date"), unless extended by the Primary
Parties, with approval of the Office of Thrift Supervision ("OTS"), if
necessary. The Community Offering is expected to terminate at the same time as
the Subscription Offering. The Community Offering and/or any Syndicated
Community Offering or Public Offering must be completed within 45 days after the
close of the Subscription Offering, or __________ __, 1996, unless extended by
the Primary Parties with the approval of the OTS, if necessary. Orders submitted
are irrevocable until the completion of the Conversion and Reorganization;
provided that, if the Conversion and Reorganization is not completed within the
45-day period referred to above, unless such period has been extended with the
consent of the OTS, if necessary, all subscribers will have their funds returned
promptly with interest, and all withdrawal authorizations will be cancelled. See
"The Conversion and Reorganization - The Offerings - Subscription Offering."
Independent Valuation. Pursuant to regulations of the OTS, the offering of
Conversion Stock in the Offerings is required to be based on an independent
valuation of the pro forma market value of the Association and the Mutual
Holding Company. RP Financial, LC. ("RP Financial") has prepared an independent
appraisal, which states that the estimated pro forma market value of the
Association and the Mutual Holding Company on
-2-
<PAGE>
a combined basis was $7.6 million as of September 6, 1996 (the "Appraisal"). The
Appraisal was multiplied by 57.75% (which represents the Mutual Holding
Company's percentage interest in the Association, adjusted upward from 54.62% so
as to reflect the $403,000 of special dividends declared by the Association and
waived by the Mutual Holding Company) to determine a midpoint of the offering
range ($4,389,000), and the minimum and maximum range were set at 15% below and
above the midpoint, respectively, resulting in a range of $3,730,650 to
$5,047,350 (the "Offering Price Range").
The Boards of Directors of the Primary Parties determined that the
Conversion Stock would be sold at $10.00 per share (the "Purchase Price"),
resulting in a range of 373,065 to 504,735 shares of Conversion Stock being
offered. Upon consummation of the Conversion and Reorganization, the Conversion
Stock and the Exchange Shares will represent approximately 57.75% and 42.25%,
respectively, of the Company's total outstanding shares. Based upon the Offering
Price Range, the Exchange Ratio is expected to range from 1.3139 to 1.7777,
resulting in a range of 272,935 Exchange Shares to 369,265 Exchange Shares to be
issued in the Conversion and Reorganization. The 874,000 shares of Common Stock
offered hereby include up to 504,735 shares of Conversion Stock (subject to
adjustment up to 580,445 shares as described herein) and up to 369,265 shares of
Exchange Shares (subject to adjustment up to 424,655 shares as described
herein). As a result of the Company's engagement of Webb to act as the
underwriter in a Public Offering with respect to any shares remaining unsold
after completion of the Subscription and Community Offerings, the Company
currently anticipates that the Conversion Stock will be sold in accordance with
the upper end of the Offering Price Range. However, no assurance can be made
that the Company will be able to sell all of such shares either in the
Subscription and Community Offerings or in the Public Offering, if any. In
addition, the Offering Price Range may be increased or decreased to reflect
changes in market and economic conditions prior to completion of the Conversion
and Reorganization or to permit an increase in the number of shares of
Conversion Stock sold in the Conversion and Reorganization pursuant to an
over-allotment option which the Company intends to grant to Webb in the Public
Offering, and under certain circumstances specified herein subscribers will be
resolicited and given the right to modify or cancel their orders. See "The
Conversion and Reorganization - Stock Pricing, Exchange Ratio and Number of
Shares to be Issued."
Purchase Limitations. The Plan sets forth various purchase limitations
which are applicable in the Offerings. The minimum purchase is 25 shares. See
"The Conversion and Reorganization - The Offerings - Subscription Offering," "-
Community Offering," "- Syndicated Community Offering and Public Offering" and
"- Limitations on Conversion Stock Purchases."
Required Approvals. The consummation of the Conversion and Reorganization
is subject to the receipt of various regulatory approvals and the approval of
the members of the Mutual Holding Company and the stockholders of the
Association in the manner set forth herein.
-3-
<PAGE>
The Company has applied to the National Association of Securities Dealers
to have its Common Stock quoted on the Nasdaq SmallCap Market under the symbol
"VIBA." Prior to the Conversion and Reorganization, there has not been an active
and liquid market for the Public Association Shares, and there can be no
assurance that an active and liquid trading market for the Common Stock will
develop. See "Market for Common Stock."
For a discussion of certain factors that should be considered by each
prospective investor, see "Risk Factors" on page 18 hereof.
For information on how to subscribe for shares of Conversion Stock, please
call the Stock Information Center at (812) ___-____.
----------------------------------
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF
THRIFT SUPERVISION, OR ANY OTHER FEDERAL AGENCY
OR STATE SECURITIES COMMISSION, NOR HAS SUCH
COMMISSION, OFFICE OR OTHER AGENCY PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-4-
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================================================
Estimated
Underwriting
Fees,
Commissions and
Conversion and Estimated
Subscription Reorganization Net
Price(1) Expenses(2) Proceeds(3)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Minimum Per Share $10.00 $0.94 $9.06
- -----------------------------------------------------------------------------------------------------------------------------
Midpoint Per Share $10.00 $0.80 $9.20
- -----------------------------------------------------------------------------------------------------------------------------
Maximum Per Share $10.00 $0.69 $9.31
- -----------------------------------------------------------------------------------------------------------------------------
Maximum Per Share, as adjusted $10.00 $0.60 $9.40
- -----------------------------------------------------------------------------------------------------------------------------
Total Minimum(1) $3,730,650 $350,000 $3,380,650
- -----------------------------------------------------------------------------------------------------------------------------
Total Midpoint(1) $4,389,000 $350,000 $4,039,000
- -----------------------------------------------------------------------------------------------------------------------------
Total Maximum(1) $5,047,350 $350,000 $4,697,350
- -----------------------------------------------------------------------------------------------------------------------------
Total Maximum, as adjusted(1) $5,804,450 $350,000 $5,454,450
=============================================================================================================================
</TABLE>
- ------------------------------------
(1) Based upon the minimum, midpoint, maximum and 15% above the maximum of the
Offering Price Range, respectively.
(2) Consists of the estimated costs to the Primary Parties to be incurred in
connection with the Conversion and Reorganization (which include an
estimate of the marketing fees and expenses to be paid to Webb in
connection with the Offerings). See "The Conversion and Reorganization -
Marketing Arrangements." The actual fees and expenses may vary from the
estimates. Such fees paid to Webb may be deemed to be underwriting fees.
See "Pro Forma Data."
(3) Actual net proceeds may vary substantially from estimated amounts depending
on the number of shares sold in the Offerings and other factors.
-------------------------
CHARLES WEBB & COMPANY,
a Division of Keefe, Bruyette & Woods, Inc.
-------------------------
The date of this Subscription and Community Offering Prospectus
is _______ __, 1996.
-5-
<PAGE>
[MAP]
IN CONNECTION WITH THE POSSIBLE PUBLIC OFFERING, WEBB MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
-6-
<PAGE>
SUMMARY
This summary is qualified in its entirety by the more detailed information
regarding the Association and the Mutual Holding Company and the Financial
Statements of the Association appearing elsewhere in this Prospectus.
Vision Bancorp, Inc.
Vision Bancorp, Inc. is an Indiana corporation organized in August 1996 by
the Association for the purpose of holding all of the capital stock of the
Association and in order to facilitate the Conversion and Reorganization. Upon
completion of the Conversion and Reorganization, the only significant assets of
the Company will be all of the outstanding Association Common Stock and the
portion of the net proceeds from the Offerings retained by the Company. The
business of the Company will initially consist of the business of the
Association. See "Business" and "Regulation - The Company."
Dearborn Savings Association, F.A.
Dearborn Savings Association, F.A. is a federally chartered stock
savings association that was organized on October 22, 1993 as a subsidiary of
the Mutual Holding Company. Prior to that date, Dearborn Savings Association,
F.A. in its mutual form (the "Mutual Association") had operated in the market
area now served by the Association. In connection with the organization of the
Mutual Holding Company (the "MHC Reorganization"), the Mutual Association
transferred substantially all of its assets and liabilities to the Association
in exchange for 250,000 shares of Association Common Stock and converted its
charter to that of a federal mutual holding company known as Dearborn Mutual
Holding Company. As part of the MHC Reorganization, the Association also sold an
additional 200,000 shares of Association Common Stock to certain members of the
general public. As of June 30, 1996, there was a total of 457,726 shares of
Association Common Stock issued and outstanding, 207,726 shares of which
consisted of Public Association Shares. Upon consummation of the Conversion and
Reorganization, the Association intends to change its name to "Dearborn Bank."
At June 30, 1996, the Association had $63.5 million of total assets, $56.7
million of total liabilities, including $41.4 million of deposits, and $6.8
million of stockholders' equity. The Association Common Stock is registered with
the OTS under Section 12(g) of the Securities Exchange Act of 1934, as amended
("Exchange Act").
Dearborn Mutual Holding Company
Dearborn Mutual Holding Company is a federally chartered mutual holding
company chartered on October 22, 1993 in connection with the MHC Reorganization.
The Mutual Holding Company's primary asset is 250,000 shares of Association
Common Stock, which represents 54.6% of the shares of Association Common Stock
outstanding as of the date of this Prospectus. The Mutual Holding Company's only
other assets consist of deposit
-7-
<PAGE>
accounts in the amount of $80,000 as of June 30, 1996 (which will become assets
of the Association upon consummation of the Conversion and Reorganization). As
part of the Conversion and Reorganization, the Mutual Holding Company will
convert from mutual form to a federal interim stock savings institution and
simultaneously merge with and into the Association, with the Association being
the surviving entity and operating under the name "Dearborn Bank."
The Conversion and Reorganization
Purposes of the Conversion and Reorganization. In their decision to pursue
the Conversion and Reorganization, the Mutual Holding Company and the
Association considered various regulatory uncertainties associated with the
mutual holding company structure including the ability to waive dividends in the
future as well as the general uncertainty regarding a possible elimination of
the federal savings association charter. See "Risk Factors - Recapitalization of
SAIF and Related Legislative Proposals." In addition, the Mutual Holding Company
and the Association considered the various advantages of a stock holding company
form of organization including: (1) a stock holding company's ability to
diversify the Company's and the Association's business activities which will
enhance the long-term value of the Company on a consolidated basis; (2) the
larger capital base of a stock holding company; (3) the enhancement of the
Company's future access to the capital markets; (4) the increase in the number
of outstanding shares of publicly traded stock (which may increase the liquidity
of the Common Stock); (5) a stock holding company's enhanced ability to
repurchase shares of its common stock; and (6) the greater ability to acquire
other financial institutions. For additional information see "The Conversion and
Reorganization - Purposes of the Conversion and Reorganization."
Description of the Conversion and Reorganization. On August 8, 1996, the
Boards of Directors of the Association and the Mutual Holding Company adopted
the Plan, which was amended on August 22, 1996, and in August 1996 the
Association incorporated the Company under Indiana law as a first-tier wholly
owned subsidiary of the Association. Pursuant to the Plan, (i) the Mutual
Holding Company will convert to an interim federal stock savings institution and
simultaneously merge with and into the Association, pursuant to which the Mutual
Holding Company will cease to exist and the 250,000 shares or 54.6% of the
outstanding Association Common Stock held by the Mutual Holding Company will be
cancelled, and (ii) an interim savings association ("Interim") to be formed as a
wholly owned subsidiary of the Company solely for such purpose will then merge
with and into the Association. As a result of the merger of Interim with and
into the Association, the Association will become a wholly owned subsidiary of
the Company and the outstanding Public Association Shares, which amounted to
207,726 shares or 45.4% of the outstanding Association Common Stock at June 30,
1996, will be converted into the Exchange Shares pursuant to the Exchange Ratio,
which will result in the holders of such shares owning in the aggregate
approximately the same percentage of the Common Stock to be outstanding upon the
completion of the Conversion and Reorganization (i.e., the Conversion Stock and
the Exchange Shares) as the percentage of Association Common Stock owned by them
in
-8-
<PAGE>
the aggregate immediately prior to consummation of the Conversion and
Reorganization, adjusted downward pursuant to OTS policy in order to reflect the
$403,000 of special dividends declared by the Association and waived by the
Mutual Holding Company, before giving effect to (a) the payment of cash in lieu
of issuing fractional Exchange Shares, (b) any shares of Conversion Stock
purchased by the Association's stockholders in the Offerings, and (c) any
exercise of dissenters' rights. For diagrams of the corporate structure of the
Mutual Holding Company and the Association prior to consummation of the
Conversion and Reorganization and the corporate structure of the Company and the
Association thereafter, see "The Conversion and Reorganization - Description of
the Conversion and Reorganization."
In addition to shares of Common Stock to be issued pursuant to the
Exchange, pursuant to the Plan, the Company is offering shares of Conversion
Stock in the Offerings as part of the Conversion and Reorganization. See "- The
Offerings" below and "The Conversion and Reorganization - The Offerings."
Pursuant to OTS regulations, consummation of the Conversion and
Reorganization is conditioned upon the approval of the Plan by the OTS, as well
as (1) the approval of the holders of at least a majority of the total number of
votes eligible to be cast by the members of the Mutual Holding Company (which
consist of depositors of the Association) ("Members") as of the close of
business on _______ __, 1996 (the "Voting Record Date") at a special meeting of
Members called for the purpose of submitting the Plan for approval (the
"Members' Meeting"), and (2) the approval of the holders of at least two-thirds
of the shares of the outstanding Association Common Stock held by the Mutual
Holding Company and the Public Stockholders (collectively, the "Stockholders"),
as of the Voting Record Date at an annual meeting of Stockholders which will
consider the Plan (the "Stockholders' Meeting"). In addition, the Primary
Parties have conditioned the consummation of the Conversion and Reorganization
on the approval of the Plan by at least a majority of the votes cast, in person
or by proxy, by the Public Stockholders at the Stockholders' Meeting. The Mutual
Holding Company intends to vote its shares of Association Common Stock, which
amount to 54.6% of the outstanding shares, in favor of the Plan at the
Stockholders' Meeting. In addition, as of ___________ __, 1996, directors and
executive officers of the Association as a group (nine persons) beneficially
owned 71,693 shares (not including stock options) or 15.7% of the outstanding
Association Common Stock, which shares can also be expected to be voted in favor
of the Plan at the Stockholders' Meeting.
The Offerings
Pursuant to the Plan and in connection with the Conversion and
Reorganization, the Company is offering up to 504,735 shares of Conversion Stock
in the Offerings. Conversion Stock is first being offered in the Subscription
Offering with nontransferable subscription rights being granted, in the
following order of priority, to (i) depositors of the Association with account
balances of $50.00 or more as of the close of business on December 31, 1994
("Eligible Account Holders"); (ii) depositors of the Association with account
balances of
-9-
<PAGE>
$50.00 or more as of the close of business on September 30, 1996 ("Supplemental
Eligible Account Holders"); (iii) depositors of the Association as of the Voting
Record Date (other than Eligible Account Holders and Supplemental Eligible
Account Holders) ("Other Members"); (iv) directors, officers and employees of
the Mutual Holding Company and the Association; and (v) Public Stockholders.
Although the Plan of Conversion permits the Association to provide priority
subscription rights to the Association's Employee Stock Ownership Plan ("ESOP"),
the Association has determined not to allow its ESOP to purchase additional
shares of Common Stock in the Offerings. However, the ESOP may purchase
additional shares of Common Stock not earlier than one year following completion
of the Conversion and Reorganization. Subscription rights will expire if not
exercised by 5:00 p.m., Eastern Time, on _________ __, 1996, unless extended.
Subject to the prior rights of holders of subscription rights, Conversion
Stock not subscribed for in the Subscription Offering is being offered in the
Community Offering to certain members of the general public to whom a copy of
this Prospectus is delivered, with preference given to natural persons residing
in Dearborn County, Indiana. It is anticipated that shares not subscribed for in
the Subscription and Community Offerings may be offered to certain members of
the general public in a Syndicated Community Offering. The Primary Parties
reserve the absolute right to reject or accept any orders in the Community
Offering or the Syndicated Community Offering, in whole or in part, either at
the time of receipt of an order or as soon as practicable following the
Expiration Date. In the alternative, any shares not ordered in the Subscription
and Community Offerings may be sold in an underwritten Public Offering in which
Webb will serve as the underwriter. In the event of a Public Offering, the
Company intends to grant Webb an option to purchase up to an additional 75,710
shares to cover any over-allotments in the Public Offering. In the event Webb
exercises such over-allotment option, the total number of shares of Conversion
Stock sold in the Offerings would amount to 580,445 shares. The closing of all
shares sold in the Subscription and Community Offerings and any Public Offering
will occur simultaneously, and all shares of Conversion Stock will be sold at a
uniform price.
The Primary Parties have also retained Webb as consultant and advisor in
connection with the Offerings and to assist in soliciting subscriptions in the
Subscription and Community Offerings. See "The Conversion and Reorganization -
The Offerings - Subscription Offering," "- Community Offering," "- Syndicated
Community Offering and Public Offering" and "- Marketing Arrangements."
Purchase Limitations
No Eligible Account Holder, Supplemental Eligible Account Holder, Other
Member, director, officer or employee or Public Stockholder may purchase in
their capacity as such in the Subscription Offering more than the number of
shares of Conversion Stock that, when combined with Exchange Shares received,
aggregate 2.5% of the Conversion Stock; no person may purchase in each of the
Community Offering, any Syndicated Community Offering and any Public Offering
more than the number of shares of Conversion Stock that
-10-
<PAGE>
when combined with Exchange Shares received aggregate 2.5% of the Conversion
Stock; and no person, together with associates of or persons acting in concert
with such person, may purchase in the Offerings more than the number of shares
of Conversion Stock that when combined with Exchange Shares received by such
person, together with associates of and persons acting in concert with such
person, aggregate more than 5.0% of the Conversion Stock. For purposes of the
purchase limitations set forth in the Plan of Conversion, Exchange Shares will
be valued at the $10.00 per share price that shares of Conversion Stock are
issued in the Offerings. At any time during the Offerings, and without further
approval by the Members or the Stockholders, the Primary Parties may in their
sole discretion decrease or increase any of the purchase limitations up to 5% of
the Common Stock issued in the Conversion and Reorganization. Under certain
circumstances, subscribers may be resolicited in the event of such an increase
and given the opportunity to increase, decrease or rescind their orders. The
minimum purchase is 25 shares. See "The Conversion and Reorganization -
Limitations on Conversion Stock Purchases." In the event of an oversubscription,
shares will be allocated in accordance with the Plan, as described under "The
Conversion and Reorganization - The Offerings - Subscription Offering" and
"Community Offering." Because the purchase limitations contained in the Plan of
Conversion include Exchange Shares to be issued to Public Stockholders for their
Public Association Shares, certain holders of Public Association Shares may be
limited in their ability to purchase Conversion Stock in the Offerings. See
"Risk Factors - Possible Dilution to Public Stockholders as a Result of Purchase
Limitations."
Stock Pricing, Exchange Ratio and Number of Shares to be Issued in the
Conversion and Reorganization
Federal regulations require the aggregate purchase price of the Conversion
Stock to be consistent with RP Financial's pro forma appraisal of the
Association and the Mutual Holding Company, which was $7.6 million as of
September 6, 1996. Because the holders of the Public Association Shares will
continue to hold the same aggregate percentage ownership interest in the Company
as they held in the Association, adjusted downward pursuant to OTS policy in
order to reflect the special dividends declared by the Association and waived by
the Mutual Holding Company (before giving effect to any shares of Common Stock
purchased by the Association's stockholders in the Offerings, the payment of
cash in lieu of issuing fractional Exchange Shares and any exercise of
dissenters' rights), the Appraisal was multiplied by 57.75% (which represents
the Mutual Holding Company's percentage interest in the Association adjusted
upward from 54.62% so as to reflect the $403,000 of special dividends declared
by the Association and waived by the Mutual Holding Company) to determine the
midpoint of the Offering Price Range, which is $4,389,000. In accordance with
OTS regulations, the minimum and maximum of the Offering Price Range were set at
15% below and above the midpoint, respectively, resulting in an offering range
of $3,730,650 to $5,047,350. The full text of the appraisal report of RP
Financial describes the procedures followed, the assumptions made, limitations
on the review undertaken and matters considered, which included the trading
market for the Association Common Stock (see "Market for Common Stock") but was
not dependent thereon. The appraisal report has
-11-
<PAGE>
been filed as an exhibit to the Registration Statement and Application for
Conversion of which this Prospectus is a part, and is available in the manner
set forth under "Additional Information." This appraisal of the Conversion Stock
is not intended and should not be construed as a recommendation of any kind as
to the advisability of purchasing such stock.
All shares of Conversion Stock will be sold at the Purchase Price of $10.00
per share, which was established by the Boards of Directors of the Primary
Parties. The actual number of shares to be issued in the Offerings will be
determined by the Primary Parties based upon the final updated valuation of the
estimated pro forma market value of the Conversion Stock at the completion of
the Offerings. The number of shares of Conversion Stock to be issued is expected
to range from a minimum of 373,065 shares to a maximum of 504,735 shares. As a
result of the Company's engagement of Webb to act as the underwriter in a Public
Offering with respect to any shares remaining unsold after completion of the
Subscription and Community Offerings, the Company currently anticipates that the
Conversion Stock will be sold in accordance with the upper end of the Offering
Price Range. However, no assurance can be made that the Company will be able to
sell all of such shares either in the Subscription and Community Offerings or in
the Public Offering, if any. In addition, subject to approval of the OTS, the
Offering Price Range may be increased or decreased to reflect market and
economic conditions prior to the completion of the Offerings and may be
increased to permit an increase in the number of shares of Conversion Stock sold
in the Conversion and Reorganization pursuant to an over-allotment option which
the Company intends to grant Webb in the Public Offering, and under such
circumstances the Primary Parties may increase or decrease the number of shares
of Conversion Stock. Subscribers will be resolicited and will be permitted to
modify or cancel their subscriptions if (i) the gross proceeds from the sale of
the Conversion Stock are less than the minimum or more than 15% above the
maximum of the current Offering Price Range or (ii) the Offerings are extended
beyond __________ __, 1996.
Based on the 207,726 Public Association Shares outstanding at June 30,
1996, and assuming a minimum of 373,065 and a maximum of 504,735 shares of
Conversion Stock are issued in the Offerings, the Exchange Ratio is expected to
range from approximately 1.3139 Exchange Shares to 1.7777 Exchange Shares for
each Public Association Share outstanding immediately prior to the consummation
of the Conversion and Reorganization. The Exchange Ratio will be affected if any
stock options to purchase shares of Association Common Stock are exercised after
June 30, 1996 and prior to consummation of the Conversion and Reorganization. If
any of such stock options are outstanding immediately prior to consummation of
the Conversion and Reorganization, they will be converted into options to
purchase shares of Common Stock, with the number of shares subject to the option
and the exercise price per share to be adjusted based upon the Exchange Ratio so
that the aggregate exercise price remains unchanged, and with the duration of
the option remaining unchanged. At June 30, 1996, there were options to purchase
12,274 shares of Association Common Stock outstanding, all of which had an
exercise price of $10.00 per share, and the Association has no plans to grant
additional stock options prior to the consummation of the Conversion and
Reorganization.
-12-
<PAGE>
Differences in Stockholder Rights
The Company is an Indiana corporation subject to the provisions of the
Indiana Business Corporation Law, and the Association is a federally chartered
savings association subject to federal laws and regulations. Upon consummation
of the Conversion and Reorganization, the Public Stockholders of the Association
will become stockholders of the Company and their rights will be governed by the
Company's Articles of Incorporation and Bylaws and Indiana law. The rights of
stockholders of the Association are materially different in certain respects
from the rights of stockholders of the Company. See "Comparison of Stockholders'
Rights" and "Description of Capital Stock of the Company."
Benefits of Conversion and Reorganization to Directors and Officers
Following consummation of the Conversion and Reorganization, the Company
may consider adopting certain stock benefit plans for the benefit of directors,
officers and employees of the Company and the Association. The proposed benefit
plans are as follows: (i) a 1997 Stock Option Plan, pursuant to which a number
of authorized but unissued shares of Common Stock equal to 10% of the Conversion
Stock to be sold in the Offerings (50,743 shares at the maximum of the Offering
Price Range) may be reserved for issuance pursuant to stock options and stock
appreciation rights to directors, officers and employees; and (ii) a 1997
Management Recognition Plan and Trust Agreement (the "1997 Recognition Plan"),
which may, following the receipt of stockholder approval, purchase a number of
shares of Common Stock, with funds contributed by the Company, either from the
Company or in the open market equal to 4.0% of the Conversion Stock to be sold
in the Offerings (20,189 shares at the maximum of the Offering Price Range) for
distribution to directors, officers and employees. The Company currently
anticipates that it would not implement the 1997 Stock Option Plan and the 1997
Recognition Plan until after one year following the consummation of the
Conversion and Reorganization. See "Management of the Company - Benefits."
In addition, the Association currently maintains an ESOP for the benefit of
employees of the Association. Although the ESOP does not intend to purchase
additional shares of Common Stock in the Offerings, the ESOP may purchase
additional shares of Common Stock not earlier than one year following completion
of the Conversion and Reorganization. See "Management of the Association - Stock
Benefit Plans - Employee Stock Ownership Plan."
The foregoing plans are in addition to a 1993 Stock Incentive Plan, a 1993
Directors' Stock Option Plan and a Management Recognition Plan which were
adopted by the Association in connection with the MHC Reorganization and
subsequently approved by the stockholders of the Association. These plans will
continue in existence after the Conversion and Reorganization as plans of the
Company. In addition, pursuant to the terms of the 1993 Stock Incentive Plan and
1993 Directors' Stock Option Plan, all outstanding stock options may be
exercised in whole or in part immediately prior to consummation of the
Conversion
-13-
<PAGE>
and Reorganization. See "Management of the Association - Stock Benefit Plans"
and "The Conversion and Reorganization - Effects of the Conversion and
Reorganization - Effect on Existing Compensation Plans."
In addition to the foregoing plans, in connection with the Conversion and
Reorganization, the Company and the Association may seek to enter into
employment agreements with Donald C. Siemers, the current President and Chief
Executive Officer of the Company and the Association, Jay Gary Fraley, the
current Vice president of the Company and the Association, and Edward L.
Fischer, the current Chief Financial Officer of the Company and the Association.
If such employment agreements were in effect as of June 30, 1996 and Messrs.
Siemers, Fraley and Fischer were terminated as of such date in connection with a
"change in control" of the Company, as defined, Messrs. Siemers, Fraley and
Fischer could be entitled to receive approximately $218,981, $89,871 and $91,875
in severance pay, respectively. See "Management of the Company - Employment
Agreements."
Use of Proceeds
Net proceeds from the sale of the Conversion Stock are estimated to be
between $3.4 million and $4.7 million, depending on the number of shares sold
and the expenses of the Conversion and Reorganization. See "Pro Forma Data." The
Company plans to contribute to the Association 50% of the net proceeds from the
Offerings and retain the remainder of the net proceeds. The net proceeds will be
initially used to invest primarily in short-term interest-bearing deposits and
marketable securities. Funds retained by the Company may be used to support the
future expansion of operations or diversification into other banking-related
businesses and for other business or investment purposes, including the
acquisition of other financial institutions and/or branch offices, although
there are no current plans, arrangements, understandings or agreements regarding
such expansion, diversification or acquisitions. A portion of the net proceeds
retained by the Company also may be utilized in order to refinance the existing
third party loan to the ESOP. In addition, subject to applicable limitations,
such funds also may be used in the future to repurchase shares of Common Stock.
Funds contributed to the Association from the Company will be used for general
business purposes. The proceeds will be used to support the Association's
lending and investment activities and thereby enhance the Association's
capabilities to serve the borrowing and other financial needs of the communities
it serves. The Association plans to initially use the proceeds to invest
primarily in short-term interest-bearing deposits and marketable securities. See
"Use of Proceeds."
Dividend Policy
Following consummation of the Conversion and Reorganization, the Board of
Directors of the Company intends to declare cash dividends on the Common Stock
at an initial quarterly rate equal to $.07 per share, commencing with the first
full quarter following consummation of the Conversion and Reorganization.
Declarations of dividends by the Company's Board of Directors will depend upon a
number of factors, including the amount
-14-
<PAGE>
of the net proceeds from the Offerings retained by the Company, investment
opportunities available to the Company or the Association, capital requirements,
regulatory limitations, the Company's and the Association's financial condition
and results of operations, tax considerations and general economic conditions.
Consequently, there can be no assurance that dividends will in fact be paid on
the Common Stock or that, if paid, such dividends will not be reduced or
eliminated in future periods. The Association intends to continue to pay regular
quarterly dividends through either the date of consummation of the Conversion
and Reorganization (on a pro rata basis) or the end of the fiscal quarter during
which the consummation of the Conversion and Reorganization occurs. See
"Dividend Policy."
Dissenters' Rights of Appraisal
Holders of Association Common Stock are entitled to appraisal rights under
Section 552.14 of the OTS' regulations as a result of the merger of the Mutual
Holding Company (following its conversion to a federal interim stock savings
institution) with and into the Association and the merger of the Association
with and into Interim, with the Association to be the surviving entity in both
mergers. Any such stockholder who wishes to exercise such appraisal rights
should review carefully the discussion of such rights in the Association's proxy
statement, including Appendix A thereto, because failure to timely and properly
comply with the procedures specified will result in the loss of appraisal rights
under Section 552.14. Pursuant to the Plan of Conversion, consummation of the
Conversion and the Reorganization is conditioned upon holders of less than 10%
of the outstanding Association Common Stock exercising appraisal rights, which
condition may, in the sole discretion of the Primary Parties, be waived. See
"The Conversion and Reorganization - Dissenters' Rights of Appraisal."
Risk Factors
See "Risk Factors" for a discussion of certain factors that should be
considered by prospective investors, including risks relating to the effects of
changes in interest rates; the effects of certain provisions in the Company's
Articles of Incorporation and Bylaws and certain provisions in Indiana law which
may be deemed to have an anti-takeover effect; the absence of a market for the
Common Stock; the risk of dilution; the impact of certain proposed legislation;
the effect of competition within the Association's market area; and the possible
adverse tax consequences of the distribution of subscription rights.
-15-
<PAGE>
SELECTED FINANCIAL AND OTHER DATA OF THE ASSOCIATION
(Unaudited)
(Dollars in Thousands)
The following selected financial and other data of the Association does not
purport to be complete and is qualified in its entirety by reference to the more
detailed financial information contained elsewhere herein.
<TABLE>
<CAPTION>
June 30,
--------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Selected Financial
Condition and Other Data:
Total assets $63,521 $61,661 $60,239 $56,756 $51,481
Cash and cash equivalents(1) 603 182 111 708 263
Certificates of deposit in other financial
institutions 1,626 2,306 2,843 2,837 4,047
Investment securities 3,317 5,608 5,778 2,010 4,362
Investment securities available for sale 6,415 400 -- -- --
Mortgage-backed securities, net -- 3,008 2,788 1,578 4,757
Mortgage-backed securities held for sale 1,496 -- 754 -- --
Loans receivable, net 46,604 46,751 44,884 46,620 35,732
Loans held for sale 182 489 445 140 262
Deposits 41,379 37,460 38,716 37,127 36,249
FHLB advances 14,517 16,821 14,362 14,821 10,792
Stockholders' equity(2) 6,815 6,687 6,504 4,452 3,835
Year Ended June 30,
--------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
Selected Operating Data:
Total interest income $4,708 $4,583 $4,577 $5,073 $4,280
Total interest expense 2,969 2,873 2,606 2,881 2,853
------ ------ ------ ------ ------
Net interest income 1,739 1,710 1,971 2,192 1,427
Provision for losses on loans 12 8 12 130 97
------ ------ ------ ------ ------
Net interest income after provision
for losses on loans 1,727 1,702 1,959 2,062 1,330
Other income 200 126 227 93 320
General, administrative and other
expense 1,285 1,289 1,295 1,195 899
------ ------ ------ ------ ------
Earnings before income taxes 642 539 891 960 751
Federal income taxes 189 154 288 321 270
------ ------ ------ ------ ------
Net earnings $ 453 $ 385 $ 603 $ 639 $ 481
====== ====== ====== ====== ======
Earnings per share $ 1.02 $ .86 $ N/A $ N/A $ N/A
====== ====== ====== ====== ======
Dividends declared per share $ 1.60 $ .98 $ .32 $ N/A $ N/A
====== ====== ====== ====== ======
At or For the Year Ended June 30,
--------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
Selected Operating Ratios (3):
Performance Ratios:
Return on average assets .73% .63% 1.03% 1.18% 1.04%
Return on average equity 6.59 5.82 11.01 15.42 13.23
Average equity to average assets 11.14 10.82 9.36 7.66 7.86
Equity to assets at end of period 10.73 10.84 10.80 7.84 7.45
Interest rate spread(4) 2.40 2.40 3.00 2.96 2.47
Net interest margin(4) 2.92 2.88 3.35 3.40 2.87
Average interest-earning assets to average
interest-bearing liabilities 110.37 109.95 107.95 109.98 107.03
Net interest income after provision for
losses on loans to total general,
administrative and other expense 134.40 132.04 151.27 172.55 147.94
General, administrative and other
expense to average total assets 2.08 2.10 2.21 2.21 1.94
Dividend payout ratio 81.16 60.28 N/A N/A N/A
Asset Quality Ratios:
Non-performing loans to total loans
at end of period(5) .05 .14 .33 .12 .07
Non-performing assets to total assets at
end of period(5) .04 .14 .24 .39 .32
Allowance for loan losses to total loans
at end of period .46 .44 .45 .35 .26
</TABLE>
(Footnotes on following page)
-16-
<PAGE>
- ----------------------
(1) Includes cash and due from banks as well as interest-bearing deposits in
other financial institutions.
(2) Comprised of only retained earnings for the years ended June 30, 1992
through June 30, 1993, inclusive.
(3) With the exception of end of period ratios, all ratios are based on average
daily balances during the periods.
(4) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average rate on
interest-bearing liabilities. Net interest margin represents net interest
income as a percentage of average interest-earning assets.
(5) Non-performing loans consist of non-accrual loans and accruing loans that
are contractually past due 90 days or more, and non-performing assets
consist of non-performing loans and real estate acquired through
foreclosure or by deed in lieu thereof.
-17-
<PAGE>
RISK FACTORS
The following risk factors, in addition to those discussed elsewhere in
this Prospectus, should be carefully considered by investors in deciding whether
to purchase the Common Stock offered hereby.
Potential Effects of Changes in Interest Rates on the Association's Financial
Condition and Results of Operations
Effect on Net Interest Income. The operations of the Association are
substantially dependent on its net interest income, which is the difference
between the interest income earned on its interest-earning assets and the
interest expense paid on its interest-bearing liabilities. Like most savings
institutions, the Association's earnings are affected by changes in market
interest rates and other economic factors beyond its control. If an
institution's interest-earning assets have longer effective maturities than its
interest-bearing liabilities, the yield on the institution's interest-earning
assets generally will adjust more slowly than the cost of its interest-bearing
liabilities and, as a result, the institution's net interest income generally
would be adversely affected by material and prolonged increases in interest
rates and positively affected by comparable declines in interest rates. The
Association has sought to reduce the vulnerability of its operations to changes
in interest rates by managing the nature and composition of its rate sensitive
assets and rate sensitive liabilities. However, at June 30, 1996, the
Association's total interest-bearing liabilities which were estimated to mature
or reprice within one year exceeded the Association's total interest-earning
assets with the same characteristics. This negative gap position will continue
to expose the Association to material and prolonged increases in interest rates
and will adversely affect net interest income in an increasing interest rate
environment. Moreover, prolonged increases in interest rates could adversely
affect the demand for residential mortgage loans within the Association's
primary market area. During periods of rising interest rates, the Association
has historically relied and will continue to rely on its strong capital base.
Effect on Investment and Mortgage-Backed Securities. In addition to
affecting interest income and expense, changes in interest rates also can affect
the value of the Association's interest-earning assets, which are comprised of
fixed and adjustable-rate instruments. Generally, the value of fixed-rate
instruments fluctuates inversely with changes in interest rates. At June 30,
1996, $6.4 million of the Association's investment securities and $1.5 million
of its mortgage-backed securities were classified as available for sale and the
Association had $31,000 of unrealized losses (net of related tax benefits) with
respect to such investment and mortgage-backed securities which was deducted
from the Association's stockholders' equity as of such date. In addition, at
June 30, 1996, $3.3 million of the Association's investment securities were
deemed to be held to maturity and, consequently, are generally not available to
be sold in response to changes in interest rates.
-18-
<PAGE>
Prepayment Risk. Changes in interest rates also can affect the average life
of loans and mortgage-backed securities. Decreases in interest rates in recent
periods have resulted in increased prepayments of loans and mortgage-backed
securities, as borrowers refinanced to reduce borrowing costs. Under these
circumstances, the Association is subject to reinvestment risk to the extent
that it is not able to reinvest such prepayments at rates which are comparable
to the rates on the maturing loans or securities. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
Recapitalization of SAIF and Related Legislative Proposals
The deposits of the Association are currently insured by the Savings
Association Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation
("FDIC"). Both the SAIF and the Bank Insurance Fund ("BIF"), the federal deposit
insurance fund that covers commercial bank deposits, are required by law to
attain and thereafter maintain a reserve ratio of 1.25% of insured deposits. The
BIF has achieved a fully funded status in contrast to the SAIF and, therefore,
as discussed below, the FDIC recently substantially reduced the average deposit
insurance premium paid by commercial banks to a level substantially below the
average premium paid by savings institutions.
On November 14, 1995, the FDIC approved a final rule regarding deposit
insurance premiums. The final rule reduced deposit insurance premiums for BIF
member institutions to zero basis points (subject to a $2,000 minimum) for
institutions in the lowest risk category, while holding deposit insurance
premiums for SAIF members at their current levels (23 basis points for
institutions in the lowest risk category). The reduction was effective with
respect to the semiannual premium assessment beginning January 1, 1996.
Accordingly, in the absence of further legislative action, SAIF members such as
the Association will be competitively disadvantaged as compared to commercial
banks by the resulting premium differential.
The U.S. House of Representatives and Senate have actively considered
legislation which would eliminate the premium differential between SAIF-insured
institutions and BIF-insured institutions by recapitalizing the SAIF's reserves
to the required ratio. The proposed legislation provides that all SAIF member
institutions pay a special one-time assessment to recapitalize the SAIF, which
in the aggregate will be sufficient to bring the reserve ratio in the SAIF to
1.25% of insured deposits. Based on the current level of reserves maintained by
the SAIF, it is currently anticipated that the amount of the special assessment
required to recapitalize the SAIF will be approximately 65 to 85 basis points of
the SAIF-assessable deposits. It is anticipated that after the recapitalization
of the SAIF, that premiums of SAIF-insured institutions would be reduced
comparable to those currently being assessed BIF-insured commercial banks. The
legislation also provides for the merger of the BIF and SAIF, with such merger
being conditioned upon the prior elimination of the thrift charter. If adopted,
such legislation could require the Association to convert to a bank charter.
-19-
<PAGE>
While the outcome of the proposed legislation cannot be predicted with
certainty, it is likely that some kind of legislative or regulatory action will
be undertaken that will impact the Association's insured deposits. A one-time
special assessment of 65 to 85 basis points would result in the Association
paying approximately $165,000 to $230,000, net of related tax benefits (assuming
a 34% effective tax rate). In addition, the enactment of such legislation may
have the effect of immediately reducing the capital of SAIF-member institutions
by the amount of the special assessment. Nevertheless, management does not
believe that this one-time charge to the Association, if incurred, will have a
material adverse effect on the Association's overall financial condition and
thereafter the Association would continue to be a well-capitalized institution.
In light of the different proposals currently under consideration and the
uncertainty of the legislative process generally, management cannot predict
whether legislation reducing SAIF premiums and/or imposing a special one-time
assessment will be adopted, or, if adopted, the amount of the assessment, if
any, that would be imposed on the Association.
In addition, recently enacted legislation will affect the Association's
method of establishing a tax reserve for bad debts and its ability to make
annual additions thereto. Pursuant to such legislation, the percentage of
taxable income method would be repealed and the Association would be permitted
to use only the experience method of computing additions to its bad debt
reserve. In addition, the Association would be unable to make additions to its
tax bad debt reserve, would be permitted to deduct bad debts only as they occur
and would additionally be required to recapture (i.e. take into income) over a
six-year period the excess of the balance of its bad debt reserves as of
December 31, 1995 over the balance of such reserves as of December 31, 1987.
However, pursuant to the legislation, such recapture requirements would be
suspended for each of two successive taxable years beginning January 1, 1996, in
which the Association originates a minimum amount of certain residential loans
based upon the average of the principal amounts of such loans made by the
Association during its six taxable years preceding 1996. It anticipated that any
recapture of the Association's bad debt reserves accumulated after 1987 would
not have a material adverse effect on the Association's financial condition and
results of operations. For additional information, see "Taxation - Federal
Taxation."
Consumer and Nonresidential Real Estate Lending
The Association has recently begun to emphasize the origination of consumer
loans, particularly mobile home loans and real estate secured consumer loans,
and nonresidential real estate loans. At June 30, 1996, the Association's total
portfolio of consumer and other loans and nonresidential real estate loans
amounted to $7.0 million or 14.1% and $3.2 million or 6.4% of the Association's
total loans, respectively. Although consumer and other loans and nonresidential
real estate loans provide for higher interest rates and shorter terms than
single-family residential real estate loans, these loans generally have a higher
degree of credit risk. Nevertheless, at June 30, 1996, the Association had only
$14,000 of non-performing consumer and other loans and no non-performing
nonresidential real estate
-20-
<PAGE>
loans. See "Business - Lending Activities - Multi-Family Residential and
Nonresidential Real Estate Loans" and "- Consumer and Other Loans."
Certain Anti-Takeover Provisions
Provisions in the Company's Governing Instruments and Indiana Law. Certain
provisions of the Company's Articles of Incorporation and Bylaws, as well as
certain provisions in Indiana law, will assist the Company in maintaining its
status as an independent publicly owned corporation. Provisions in the Company's
Articles of Incorporation and Bylaws provide for, among other things,
supermajority voting on certain matters (which may be waived by the Board of
Directors under certain circumstances), a staggered board of directors,
noncumulative voting for directors, limits on the calling of special meetings by
stockholders and, for a period of five years following the Conversion and
Reorganization, limits on acquiring beneficial ownership of more than 10.0% of
the outstanding Common Stock (which may be waived by the Board of Directors
under certain circumstances). Provisions under Indiana law applicable to the
Company, among other things, provide that persons who acquire more than 20% of
the outstanding voting stock may not vote such shares unless the disinterested
stockholders approve such shares having voting rights. The above provisions may
discourage potential proxy contests and other potential takeover attempts,
particularly those which have not been negotiated with the Board of Directors,
and thus generally may serve to perpetuate current management. See "Restrictions
on Acquisition of the Company."
Voting Power of Directors and Executive Officers. Directors and executive
officers of the Company expect to hold approximately 163,010 shares or 18.7% of
the shares of Common Stock outstanding (excluding stock options) upon
consummation of the Conversion and Reorganization based upon the midpoint of the
Offering Price Range. See "Beneficial Ownership of Capital Stock."
In addition, and subject to stockholder approval (which is expected to be
received not less than one year following the consummation of the Conversion and
Reorganization), the Company may acquire Common Stock on behalf of the 1997
Recognition Plan, a non-tax qualified restricted stock plan, in an amount equal
to 4.0% of the Conversion Stock issued in the Offerings (20,189 shares based on
the maximum of the Offering Price Range). Under the terms of the 1997
Recognition Plan, the trustees of such plan, who will also be directors of the
Company, will have discretionary authority to vote all shares held by such plan.
Subject to stockholder approval (which is expected to be received not less than
one year following the consummation of the Conversion and Reorganization), the
Company also may reserve for future issuance pursuant to the 1997 Stock Option
Plan a number of authorized shares of Common Stock equal to an aggregate of
10.0% of the Conversion Stock issued in the Offerings (50,473 shares, based on
the maximum of the Offering Price Range). These options are in addition to the
options for 12,274 shares of Association Common Stock which were previously
granted and remain unexercised under the option plans adopted by
-21-
<PAGE>
the Association in connection with the MHC Reorganization. See "Management of
the Company - Benefits" and "Management of the Association - Stock Benefit
Plans."
Management's potential voting power could, together with additional
stockholder support, preclude or make more difficult takeover attempts which do
not have the support of the Company's Board of Directors and may tend to
perpetuate existing management.
Employment Arrangements. The Company and the Association may enter into
employment agreements with Donald C. Siemers, the current President and Chief
Executive Officer of the Company and the Association, Jay Gary Fraley, the
current Vice President of the Company and the Association, and Edward L.
Fischer, the current Chief Financial Officer of the Company and the Association.
The agreements may provide for severance payments equal to three times (two
times in the case of Messrs. Fraley and Fischer) such employee's average annual
compensation for the last five years if his respective employment is terminated
in connection with a change in control of the Company, as defined. These
provisions may have the effect of increasing the cost of acquiring the Company.
See "Restrictions on Acquisition of the Company" and "Management of the Company
- - Employment Agreements."
Absence of Market For Common Stock
The Company has never issued capital stock (other than 100 shares issued to
the Association, which will be cancelled upon consummation of the Conversion and
Reorganization), and to date an active and liquid trading market has not
developed for the 207,726 Public Association Shares outstanding prior to the
Offerings. The Company has applied to have its Common Stock quoted on the Nasdaq
SmallCap Market under the symbol "VIBA" upon completion of the Conversion and
Reorganization and will seek to encourage and assist at least two market makers
to make a market in its Common Stock. Although under no obligation to do so,
KB&W has informed the Company that it intends, upon the completion of the
Conversion and Reorganization, to make a market in the Common Stock by
maintaining bid and ask quotations and trading in the Common Stock so long as
the volume of trading activity and certain other market making considerations
justify it doing so. While the Company has attempted to obtain commitments from
other broker-dealers to act as market makers, and anticipates that prior to the
completion of the Conversion and Reorganization, it will be able to obtain the
commitment from at least one other broker-dealer to act as a market maker for
the Common Stock, there can be no assurance there will be two or more market
makers for the Common Stock. Accordingly, there can be no assurance that an
active and liquid trading market for the Common Stock will develop or that, if
developed, it will continue.
Making a market in securities involves maintaining bid and ask quotations
and being able, as principal, to effect transactions in reasonable quantities at
those quoted prices, subject to various securities laws and other regulatory
requirements. The development of a public trading market depends upon the
existence of willing buyers and sellers, the
-22-
<PAGE>
presence of which is not within the control of the Company, the Association, or
any market maker. Accordingly, as discussed above, there can be no assurance
that an active and liquid trading market for the Common Stock will develop, or
once developed, will continue. The absence of an active and liquid trading
market for the Common Stock could affect the price and liquidity of the Common
Stock.
Possible Dilutive Effect of Issuance of Additional Shares
Various possible and planned issuances of Common Stock could dilute the
interests of prospective stockholders of the Company or existing stockholders of
the Association following consummation of the Conversion and Reorganization, as
noted below.
The number of shares to be sold in the Conversion and Reorganization may be
increased as a result of an increase in the Offering Price Range of up to 15% to
reflect changes in market and financial conditions following the commencement of
the Offerings or pursuant to an over-allotment option which the Company intends
to grant to Webb in the Public Offering. In the event that the Offering Price
Range is so increased, it is expected that the Company will issue up to 580,445
shares of Conversion Stock at the Purchase Price for an aggregate price of up to
$5,804,450. An increase in the number of shares will decrease net earnings per
share and stockholders' equity per share on a pro forma basis and will increase
the Company's consolidated stockholders' equity and net earnings. See
"Capitalization" and "Pro Forma Data."
If the 1997 Recognition Plan is approved by stockholders at an annual or
special meeting of the Company's stockholders held at least one year following
the consummation of the Conversion and Reorganization, the 1997 Recognition Plan
may acquire an amount of Common Stock equal to 4.0% of the shares of Conversion
Stock issued in the Offerings (20,189 shares, based on the maximum of the
Offering Price Range). Such shares of Common Stock may be acquired in the open
market with funds provided by the Company, if permissible, or from authorized
but unissued shares of Common Stock. In the event that additional shares of
Common Stock are issued to the 1997 Recognition Plan, stockholders would
experience dilution of their ownership interests and per share stockholders'
equity and per share net earnings would decrease as a result of an increase in
the number of outstanding shares of Common Stock. See "Pro Forma Data" and
"Management of the Company - Benefits - 1997 Management Recognition Plan and
Trust."
If the Company's 1997 Stock Option Plan is approved by stockholders at an
annual or special meeting of stockholders held at least one year following the
consummation of the Conversion and Reorganization, the Company may reserve for
future issuance pursuant to such plan a number of authorized shares of Common
Stock equal to an aggregate of 10% of the Conversion Stock issued in the
Offerings (50,473 shares, based on the maximum of the Offering Price Range). See
"Pro Forma Data" and "Management of the Company - Benefits - 1997 Stock Option
Plan."
-23-
<PAGE>
In addition, the Association currently maintains an ESOP for the benefit of
employees of the Association. Although the ESOP does not intend to purchase
additional shares of Common Stock in the Offerings, the ESOP may purchase
additional shares of Common Stock not earlier than one year following completion
of the Conversion and Reorganization. Such additional shares of Common Stock may
be acquired in the open market with funds provided by the Company or from
authorized but unissued shares of Common Stock. In the event that additional
shares of Common Stock are issued to the ESOP, stockholders would experience
dilution of their ownership interests and per share stockholders' equity and per
share net earnings would decrease as a result of an increase in the number of
outstanding shares of Common Stock. See "Management of the Association - Stock
Benefit Plans - Employee Stock Ownership Plan."
The Association also has adopted and maintains the 1993 Stock Incentive
Plan and the 1993 Directors' Stock Option Plan, which reserve for issuance
13,000 shares and 7,000 shares of Association Common Stock. As of June 30, 1996,
7,726 shares had been issued as a result of the exercise of options granted
under such option plans. Upon consummation of the Conversion and Reorganization,
these plans will become plans of the Company and Common Stock will be issued in
lieu of Association Common Stock pursuant to the terms of such plans. See
"Management of the Association - Stock Benefit Plans."
Possible Dilution to Public Stockholders as a Result of Purchase Limitations
The OTS has required that the purchase limitations contained in the Plan of
Conversion include Exchange Shares to be issued to Public Stockholders for their
Public Association Shares. As a result, certain holders of Public Association
Shares may be limited in their ability to purchase Conversion Stock in the
Offerings. For example, a Public Stockholder which acquires Exchange Shares in
an amount equal to 5.0% of the Conversion Stock will not be able to purchase any
shares of Conversion Stock in the Offerings, although such a stockholder will be
able to purchase shares of Common Stock in the market during the Offerings and
thereafter. Similarly, a Public Stockholder which qualifies as an Eligible
Account Holder and acquires Exchange Shares in an amount equal to 2.5% of the
Conversion Stock will not be able to participate as a first priority purchaser
in the Subscription Offering. As a result, the purchase limitations may prevent
such stockholders from maintaining their current ownership percentage of the
Association after the Conversion and Reorganization through purchases of
Conversion Stock in the Offerings. See "The Conversion and Reorganization -
Limitations on Conversion Stock Purchases."
Competition
The Association faces significant competition both in making loans and in
attracting deposits. The State of Indiana in general and Dearborn County in
particular have a high density of financial institutions, many of which are
branches of significantly larger institutions which have greater financial
resources than the Association. All of these institutions are competitors of the
Association to varying degrees. The Association's
-24-
<PAGE>
competition for loans comes principally from commercial banks, savings banks,
savings and loan associations, credit unions, mortgage banking companies and
insurance companies. Its most direct competition for deposits has historically
come from commercial banks, savings banks, savings and loan associations and
credit unions. The Association faces additional competition for deposits from
short-term money market funds, other corporate and government securities funds
and from other financial institutions such as brokerage firms and insurance
companies. In addition, the Association may face additional competition from
commercial banks headquartered outside of the State of Ohio as a result of the
enactment of the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, which becomes fully effective on June 1, 1997 and which will allow banks
and bank holding companies headquartered outside of Indiana to enter the
Association's market through acquisition, merger or de novo branching.
Possible Adverse Income Tax Consequences of the Distribution of Subscription
Rights
The Primary Parties have received an opinion of RP Financial that
subscription rights granted to Eligible Account Holders, Supplemental Eligible
Account Holders, Other Members, directors, officers and employees and Public
Stockholders have no value. However, this opinion is not binding on the Internal
Revenue Service ("IRS"). If the subscription rights granted to Eligible Account
Holders, Supplemental Eligible Account Holders, Other Members, directors,
officers and employees and Public Stockholders are deemed to have an
ascertainable value, receipt of such rights likely would be taxable only to
those Eligible Account Holders, Supplemental Eligible Account Holders, Other
Members, directors, officers and employees and Public Stockholders who exercise
the subscription rights (either as capital gain or ordinary income) in an amount
equal to such value. Whether subscription rights are considered to have
ascertainable value is an inherently factual determination. See "The Conversion
and Reorganization - Effects of the Conversion and Reorganization" and "- Tax
Aspects."
VISION BANCORP, INC.
The Company was organized in August 1996 at the direction of the Board of
Directors of the Association for the purpose of holding all of the capital stock
of the Association and in order to facilitate the Conversion and Reorganization.
The Company has applied for the approval of the OTS to become a thrift holding
company and as such will be subject to regulation by the OTS. After completion
of the Conversion and Reorganization, the Company will conduct business
initially as a unitary thrift holding company. See "Regulation - The Company."
Upon consummation of the Conversion and Reorganization, the Company will have no
significant assets other than all of the outstanding shares of Association
Common Stock and the portion of the net proceeds from the Offerings retained by
the Company, and the Company will have no significant liabilities. See "Use of
Proceeds." Initially, the management of the Company and the Association will be
substantially similar and the Company will neither own nor lease any property,
but will
-25-
<PAGE>
instead use the premises, equipment and furniture of the Association. At the
present time, the Company does not intend to employ any persons other than
officers who are also officers of the Association, and the Company will utilize
the support staff of the Association from time to time. Additional employees may
be hired as appropriate to the extent the Company expands or changes its
business in the future.
Management believes that the holding company structure will provide the
Company with additional flexibility to diversify, should it decide to do so, its
business activities through existing or newly-formed subsidiaries, or through
acquisitions of or mergers with other financial institutions and financial
services related companies. Although there are no current arrangements,
understandings or agreements regarding any such opportunities or transactions,
the Company will be in a position after the Conversion and Reorganization,
subject to regulatory limitations and the Company's financial position, to take
advantage of any such acquisition and expansion opportunities that may arise.
The initial activities of the Company are anticipated to be funded by the
proceeds to be retained by the Company and earnings thereon, as well as
dividends from the Association. See "Dividend Policy."
The Company's principal executive office is located at the home office of
the Association at 118 Walnut Street, Lawrenceburg, Indiana 47025-1838, and its
telephone number is (812) 537-0940.
DEARBORN SAVINGS ASSOCIATION, F.A.
General
The Association is a federally chartered savings association which conducts
business through one full-service office and one loan origination office, both
of which are located in Lawrenceburg, Indiana. In October 1993, the Mutual
Association reorganized into the mutual holding company form of organization
whereby the Mutual Association (i) formed a newly formed stock savings
association; (ii) transferred substantially all of its assets and liabilities to
the newly formed stock savings association in exchange for all of the common
stock of such institution; and (iii) reorganized from a federally chartered,
mutual savings association to a federally chartered, mutual holding company
known as "Dearborn Mutual Holding Company." As part of the MHC Reorganization,
the newly formed stock savings association issued 200,000 shares of Association
Common Stock to certain members of the general public and 250,000 shares of
Association Common Stock to the Mutual Holding Company. At June 30, 1996, the
Association had $63.5 million of total assets, $56.7 million of total
liabilities, including $41.4 million of deposits, and $6.8 million of
stockholders' equity.
The Association is primarily engaged in attracting deposits from the
general public through its office and using those and other available sources of
funds to originate loans secured by single-family residences located primarily
in Dearborn County, Indiana. Such
-26-
<PAGE>
loans amounted to $35.3 million or 71.4% of the Association's total loan
portfolio (including loans classified as held for sale) at June 30, 1996. To a
much lesser extent, the Association originates loans secured by existing
multi-family residential and nonresidential real estate, which amounted to
$543,000 or 1.1% and $3.2 million or 6.4%, respectively, of the total loan
portfolio (including loans classified as held for sale) at June 30, 1996, as
well as construction loans and consumer and other loans, which respectively
amounted to $3.5 million or 7.0% and $7.0 million or 14.1% of the total loan
portfolio (including loans classified as held for sale) at such date. The
Association also invests in interest-bearing deposits in other financial
institutions (including certificates of deposit), U.S. Government and federal
agency obligations, municipal obligations and mortgage-backed securities which
are insured or guaranteed by federal agencies.
The Association is a community-oriented savings association which
emphasizes customer service and convenience. As part of this strategy, the
Association has sought to develop a variety of products and services which meet
the needs of its retail customers. The Association generally has sought to
achieve long-term financial strength and stability by (i) increasing the amount
and stability of its net interest income, (ii) maintaining a high level of asset
quality, (iii) maintaining a high level of regulatory capital, and (iv)
maintaining low general, administrative and other expenses. In pursuit of these
goals, the Association has adopted a number of complementary business strategies
which emphasize retail lending and deposit products and services traditionally
offered by savings institutions. Highlights of the Association's business
strategy include the following:
Emphasis on Traditional Lending and Investment Activities. Management
believes that the Association is more likely to achieve its goals of long-term
financial strength and profitability by emphasizing retail products and
services, as opposed to wholesale or commercial activities. The Association's
primary lending emphasis is the origination of loans secured by first liens on
single-family (one-to-four units) residences. In addition, the Association
recently increased its emphasis on the origination of consumer loans, such as
mobile home loans, second mortgage, home improvement loans and home equity lines
of credit, and nonresidential real estate loans. Such loans generally provide
for higher interest rates and shorter terms than single-family residential real
estate loans. At June 30, 1996, the Association's net loans (including loans
classified as held for sale) amounted to $46.8 million or 73.7% of the
Association's total assets.
Maintain Asset Quality. Management believes that high asset quality is key
to long-term financial success and, as a result, the investments which are
emphasized by the Association and its related policies and practices are
intended to maintain a high level of asset quality and reduce credit risk. At
June 30, 1996, the Association's non-performing assets, which consist of
non-accrual loans, accruing loans that are contractually past due 90 days or
more and real estate owned, amounted to $27,000 or .04% of the Association's
total assets. At June 30, 1996, the Association's allowance for loan losses
amounted to $226,000 or .46% of the Association's total loans outstanding
(including loans classified as held for sale).
-27-
<PAGE>
Emphasis on Retail Deposits. The Association's liability strategy
emphasizes retail deposits obtained through its office. This strategy is
facilitated by the Association's emphasis on lower-costing NOW, money market and
passbook deposits, which in the aggregate amounted to $8.0 million, or 19.3%, of
the Association's total deposits at June 30, 1996. At June 30, 1996, the
weighted average rate paid on the Association's NOW, money market and passbook
savings accounts amounted to 2.89%, as compared to a weighted average rate paid
of 5.79% on the Association's certificates of deposit at such date.
Maintain Strong Levels of Regulatory Capital. The Association seeks to
maintain high levels of regulatory capital to give it maximum flexibility in the
changing regulatory environment and to respond to changes in market and economic
conditions. At June 30, 1996, the Association's tangible, core and risk-based
capital ratios amounted to 10.8%, 10.8% and 23.1%, respectively, which exceeded
the minimum requirements of 1.5%, 3.0% and 8.0% by $5.9 million, $4.9 million
and $4.6 million, respectively.
Maintain Low Expenses. The Association's general, administrative and other
expenses have amounted to 2.08%, 2.10% and 2.21% of total assets for the years
ended June 30, 1996, 1995 and 1994, respectively.
Regulation
The Association is subject to examination and comprehensive regulation by
the OTS, which is the Association's chartering authority and primary regulator,
and by the FDIC, which as administrator of the SAIF insures the Association's
deposits up to applicable limits. The Association also is subject to certain
reserve requirements established by the Board of Governors of the Federal
Reserve System ("Federal Reserve Board") and is a member of the Federal Home
Loan Bank ("FHLB") of Indianapolis, which is one of the 12 regional banks
comprising the FHLB System. See "Regulation - The Association."
Office
The Association's principal executive office is located at 118 Walnut
Street, Lawrenceburg, Indiana 47025-1838, and its telephone number is (812)
537-0940.
DEARBORN MUTUAL HOLDING COMPANY
The Mutual Holding Company is a federally chartered mutual holding company
which was chartered on October 22, 1993 in connection with the MHC
Reorganization. The Mutual Holding Company's primary asset is 250,000 shares of
Association Common Stock, which represent 54.6% of the shares of Association
Common Stock outstanding as of the date of this Prospectus. The Mutual Holding
Company's only other assets consist of deposit accounts in the amount of $80,000
as of June 30, 1996 (which will become assets of the Association upon
consummation of the Conversion and Reorganization). Prior to the
-28-
<PAGE>
Conversion and Reorganization, each depositor in the Association has both a
deposit account in the institution and a pro rata ownership interest in the net
worth of the Mutual Holding Company based upon the value in his account, which
interest may only be realized in the event of a liquidation of the Mutual
Holding Company. As part of the Conversion and Reorganization, the Mutual
Holding Company will convert from mutual form to a federal interim stock savings
institution and simultaneously merge with and into the Association, with the
Association being the surviving entity.
USE OF PROCEEDS
Net proceeds from the sale of the Conversion Stock are estimated to be
between $3.4 million and $4.7 million ($5.5 million assuming an increase in the
Offering Price Range by 15%). See "Pro Forma Data" as to the assumptions used to
arrive at such amounts.
The Company plans to contribute to the Association 50% of the net proceeds
from the Offerings and retain the remainder of the net proceeds. The net
proceeds will be initially used to invest primarily in short-term
interest-bearing deposits and marketable securities. The net proceeds retained
by the Company also may be used to support the future expansion of operations or
diversification into other banking-related businesses and for other business or
investment purposes, including the acquisition of other financial institutions
and/or branch offices, although there are no current plans, arrangements,
understandings or agreements regarding such expansion, diversification or
acquisitions. A portion of the net proceeds retained by the Company also may be
utilized in order to refinance the existing third party loan to the ESOP. In
addition, subject to applicable regulatory limitations, the net proceeds also
may be used to repurchase shares of Common Stock, although the Company currently
has no intention of effecting any such transactions following consummation of
the Conversion and Reorganization. See "The Conversion and Reorganization -
Certain Restrictions on Purchase or Transfer of Shares after the Conversion and
Reorganization." The portion of the net proceeds contributed to the Association
will be used for general corporate purposes, including investment in loans and
mortgage-backed securities, and will be initially used to invest primarily in
short-term interest-bearing deposits and marketable securities.
DIVIDEND POLICY
Upon completion of the Conversion and Reorganization, the Board of
Directors of the Company will have the authority to declare dividends on the
Common Stock, subject to statutory and regulatory requirements. Following
consummation of the Conversion and Reorganization, the Board of Directors of the
Company intends to pay cash dividends on the Common Stock at an initial
quarterly rate equal to $.07 per share, commencing with the first full quarter
following consummation of the Conversion and Reorganization. Declarations of
dividends by the Board of Directors will depend upon a number of factors,
including the amount of net proceeds from the Offerings retained by the Company,
-29-
<PAGE>
investment opportunities available to the Company or the Association, capital
requirements, regulatory limitations, the Company's and the Association's
financial condition and results of operations, tax considerations, and general
economic conditions. Consequently, there can be no assurance that dividends will
in fact be paid on the Common Stock or that, if paid, such dividends will not be
reduced or eliminated in future periods. The Association intends to continue to
pay regular quarterly dividends through either the date of consummation of the
Conversion and Reorganization (on a pro rata basis) or the end of the fiscal
quarter during which the consummation of the Conversion and Reorganization
occurs.
Dividends from the Company will depend, in part, upon receipt of dividends
from the Association, because the Company initially will have no source of
income other than dividends from the Association and earnings from the
investment of proceeds from the sale of Conversion Stock retained by the
Company. A regulation of the OTS imposes limitations on "capital distributions"
by savings institutions, including cash dividends, payments by a savings
institution to repurchase or otherwise acquire its stock, payments to
stockholders of another savings institution in a cash-out merger and other
distributions charged against capital. The regulation establishes a three-tiered
system, with the greatest flexibility being afforded to well-capitalized or Tier
1 savings institutions and the least flexibility being afforded to
under-capitalized or Tier 3 savings institutions. As of June 30, 1996, the
Association was a Tier 1 savings institution and is expected to continue to so
qualify immediately following the consummation of the Conversion and
Reorganization.
Any payment of dividends by the Association to the Company which would be
deemed to be a distribution from the Association's pre-1988 bad debt reserves
for federal income tax purposes would require a payment of taxes at the
then-current tax rate by the Association on the amount of earnings deemed to be
removed from the reserves for such distribution (at June 30, 1996, the
Association's stockholders' equity and bad debt reserves for federal income tax
purposes amounted to $6.8 million and $1.2 million, respectively, and as a
result for tax purposes (but not regulatory purposes) the Association could
declare approximately $5.6 million of dividends without having to pay taxes on
its bad debt reserves for federal income tax purposes). The Association has no
current intention of making any distribution that would create such a federal
tax liability either before or after the Conversion and Reorganization. See
"Taxation."
Unlike the Association, the Company is not subject to the aforementioned
regulatory restrictions on the payment of dividends to its stockholders,
although the source of such dividends will be, in part, dependent upon dividends
from the Association in addition to the net proceeds retained by the Company and
earnings thereon. The Company is subject, however, to the requirements of
Indiana law. See "Comparison of Stockholders' Rights - Payment of Dividends."
-30-
<PAGE>
MARKET FOR COMMON STOCK
The Company has never issued capital stock (other than 100 shares issued to
the Association, which will be cancelled upon consummation of the Conversion and
Reorganization), and to date an active and liquid trading market has not
developed for the 207,726 Public Association Shares outstanding prior to the
Offerings. Consequently, there is no established market for the Common Stock at
this time. The Company has applied to have its Common Stock quoted on the Nasdaq
SmallCap Market under the symbol "VIBA." The development of a liquid public
market depends on the existence of willing buyers and sellers, the presence of
which is not within the control of the Company, the Association or any market
maker. Accordingly, there can be no assurance that an active and liquid trading
market for the Common Stock will develop or that, if developed, it will
continue. Therefore, investors in the Common Stock could have difficulty
disposing of their shares and should not view the Common Stock as a short-term
investment. The absence of an active and liquid trading market for the Common
Stock could affect the price and liquidity of the Common Stock.
Quotation on the Nasdaq SmallCap Market is dependent upon, among other
things, the Company having at least two market makers for the Common Stock and a
minimum number of stockholders of record. Based upon the minimum of 373,065
shares of Conversion Stock being offered, the minimum of 272,935 Exchange Shares
to be issued, and the anticipated pro forma ownership of officers and directors,
the Company expects to satisfy the required minimum number of stockholders of
record. Although under no obligation to do so, KB&W has informed the Company
that it intends, upon the completion of the Conversion and Reorganization, to
make a market in the Common Stock by maintaining bid and ask quotations and
trading in the Common Stock so long as the volume of trading activity and
certain other market making considerations justify it doing so. While the
Company has attempted to obtain commitments from other broker-dealers to act as
market makers, and anticipates that prior to the completion of the Conversion
and Reorganization, it will be able to obtain the commitment from at least one
other broker-dealer to act as a market maker for the Common Stock, there can be
no assurance there will be two or more market makers for the Common Stock.
Making a market involves maintaining bid and ask quotations and being able, as
principal, to effect transactions in reasonable quantities at those quoted
prices, subject to various securities laws and other regulatory requirements.
Accordingly, there can be no assurance that an active and liquid trading market
for the Common Stock will develop or that, if developed, it will continue.
-31-
<PAGE>
CAPITALIZATION
The following table presents the historical consolidated capitalization of
the Association at June 30, 1996, and the pro forma consolidated capitalization
of the Company after giving effect to the Conversion and Reorganization, based
upon the sale of the number of shares shown below, the issuance of Exchange
Shares and the other assumptions set forth under "Pro Forma Data."
<TABLE>
<CAPTION>
The Company - Pro Forma
Based Upon Sale at $10.00 Per Share
----------------------------------------------------------------------
The
Association- 373,065 Shares 438,900 Shares 504,735 Shares 580,445 Shares(1)
Historical (Minimum of (Midpoint of (Maximum of (15% above
Capitalization Range) Range) Range) Maximum of Range)
--------------- --------------- --------------- -------------- -------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Deposits(2) $ 41,379 $ 41,379 $ 41,379 $ 41,379 $ 41,379
Borrowings(3) 14,630 14,630 14,630 14,630 14,630
-------- ------- ------- ------- -------
Total deposits and borrowings $ 56,009 $ 56,009 $ 56,009 $ 56,009 $ 56,009
======== ======= ======= ======= =======
Stockholders' equity:
Preferred Stock, $.10 par
value, 2,000,000 shares
authorized; none to
be issued $ -- $ -- $ -- $ -- $ --
Common Stock, $.10 par
value, 8,000,000 shares
authorized; shares issued or
to be issued as reflected(4) 46 65 76 87 101
Additional paid-in capital(5) 1,795 5,237 5,884 6,531 7,275
Retained earnings(5)(6) 5,157 5,157 5,157 5,157 5,157
Less:
Net unrealized loss on
securities available for sale(5) (31) (31) (31) (31) (31)
Unearned Common Stock
held by the Management
Recognition Plan (38) (38) (38) (38) (38)
Common Stock acquired by
the ESOP (114) (114) (114) (114) (114)
-------- ------- ------- ------- -------
Total stockholders' equity $ 6,815 $10,276 $10,934 $11,592 $12,349
======== ======= ======= ======= =======
</TABLE>
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Offering Price Range of up to 15% to
reflect changes in market and financial conditions following the
commencement of the Offerings or pursuant to an over-allotment option which
the Company intends to grant Webb in the Public Offering, if any.
(2) Does not reflect withdrawals from deposit accounts for the purchase of
Conversion Stock in the Offerings. Such withdrawals would reduce pro forma
deposits by the amount of such withdrawals.
-32-
<PAGE>
(3) Consists of FHLB advances and a third party loan to the Association's
Employee Stock Ownership Plan ("ESOP").
(4) Assumes (i) that the 207,726 Public Association Shares outstanding at June
30, 1996 are converted into 272,935, 321,100, 369,265 and 424,655 Exchange
Shares at the minimum, midpoint, maximum and 15% above the maximum of the
Offering Price Range, respectively, and (ii) that no fractional shares of
Exchange Shares will be issued by the Company. No effect has been given to
the issuance of additional shares of Common Stock pursuant to existing and
proposed stock benefit plans. See "Pro Forma Data," "Management of the
Company - Benefits" and "Management of the Association - Stock Benefit
Plans."
(5) The pro forma additional paid-in capital and retained earnings reflect a
restriction of the original retained earnings of the Association prior to
the MHC Reorganization. The pro forma additional paid-in capital reflects
the $80,000 to be acquired by the Association upon the merger of the Mutual
Holding Company (following its conversion to a federal interim stock
savings institution) with and into the Association.
(6) The retained earnings of the Association will be substantially restricted
after the Conversion and Reorganization by virtue of the liquidation
account to be established in connection with the Conversion and
Reorganization. See "The Conversion and Reorganization - Liquidation
Rights." In addition, certain distributions from the Association's retained
earnings may be treated as being from its pre-1988 accumulated bad debt
reserve for tax purposes, which would cause the Association to have
additional taxable income. See "Taxation - Federal Taxation."
-33-
<PAGE>
REGULATORY CAPITAL
The following table presents the historical regulatory capital of the
Association at June 30, 1996, and the pro forma regulatory capital of the
Association after giving effect to the Conversion and Reorganization, based upon
the sale of the number of shares shown below, the issuance of Exchange Shares
and the other assumptions set forth under "Pro Forma Data."
<TABLE>
<CAPTION>
Pro Forma Regulatory Capital Based Upon(1)
--------------------------------------------------------------------
Actual Regulatory 373,065 Shares 438,900 Shares
Capital at (Minimum (Midpoint
June 30, 1996(1) of Range) of Range)
-------------------------- ------------------------- ---------------------------
Percent Percent Percent
Amount of Assets(2) Amount of Assets(2) Amount of Assets(2)
------------ ----------- ------------ ----------- ------------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Tangible capital:
Actual $6,846 10.8% $8,616 13.2% $8,946 13.6%
Requirement 953 1.5 980 1.5 985 1.5
------ ---- ------ ---- ------ ----
Excess $5,893 9.3% $7,636 11.7% $7,961 12.1%
====== === ====== ==== ====== ====
Core capital:
Actual $6,846 10.8% $8,616 13.2% $8,946 13.6%
Requirement(3) 1,906 3.0 1,960 3.0 1,970 3.0
------ ---- ------ ---- ------ ----
Excess $4,940 7.8% $6,656 10.2% $6,976 10.6%
====== === ====== ==== ====== ====
Risk-based capital(4)(5)
Actual $7,072 23.1% $8,842 28.5% $9,172 29.5%
Requirement(3) 2,450 8.0 2,478 8.0 2,484 8.0
------ ---- ------ ---- ------ ----
Excess $4,622 15.1% $6,364 20.5% $6,688 21.5%
====== === ====== ==== ====== ====
580,445 Shares
504,735 Shares (15% Above
(Maximum Maximum
of Range) of Range)(1)
- -------------------------------- -----------------------------
Percent Percent
Amount of Assets(2) Amount of Assets(2)
- -------------- ------------- ----------- ------------
<C> <C> <C> <C>
$9,275 14.1% $9,653 14.6%
990 1.5 995 1.5
------ ---- ------ ----
$8,285 12.6% $8,658 13.1%
====== ==== ====== ====
$9,275 14.1% $9,653 14.6%
1,979 3.0 1,991 3.0
------ ---- ------ ----
$7,296 11.1% $7,662 11.6%
====== ==== ====== ====
$9,501 30.5% $9,879 31.7%
2,489 8.0 2,495 8.0
------ ---- ------ ----
$7,012 22.5% $7,384 23.7%
====== ==== ====== ====
</TABLE>
(1) The OTS recently revised its policy to exclude net unrealized gains or
losses on securities classified as available for sale from regulatory
capital when computing core and risk-based capital. The net unrealized loss
on securities classified as available for sale amounted to $31,000 as of
June 30, 1996.
-34-
<PAGE>
(2) Tangible and core capital are computed as a percentage of adjusted total
assets of $63.5 million prior to the consummation of the Offerings and
$65.3 million, $65.7 million, $66.0 million and $66.4 million following the
issuance of 373,065, 438,900, 504,735 and 580,445 shares in the Conversion
and Reorganization, respectively. Risk-based capital is computed as a
percentage of total risk-weighted assets of $30.6 million prior to the
consummation of the Offerings and $31.0 million, $31.0 million, $31.1
million and $31.2 million following the issuance of 373,065, 438,900,
504,735 and 580,445 shares in the Conversion and Reorganization,
respectively.
(3) Does not reflect proposed amendments to regulatory capital requirements or,
in the case of the core capital requirement, the 4.0% requirement to be met
in order for an institution to be "adequately capitalized" under applicable
laws and regulations. See "Regulation - The Association - Prompt Corrective
Action."
(4) The pro forma risked-based capital ratios (i) reflect the receipt by the
Association of the assets held by the Mutual Holding Company and of 50% of
the estimated net proceeds from the Offerings, and (ii) assume the
investment of the net proceeds received by the Association in assets which
have a risk-weight of 20% under applicable regulations, as if such net
proceeds had been received and so applied at June 30, 1996.
(5) Includes the $226,000 of general allowance for loan losses that was
included in risk-based capital as of June 30, 1996.
PRO FORMA DATA
The actual net proceeds from the sale of the Conversion Stock cannot be
determined until the Conversion and Reorganization is completed. However, net
proceeds are currently estimated to be between $3.4 million and $4.7 million (or
$5.5 million in the event the Offering Price Range is increased by 15%) based
upon the following assumptions: (i) all shares of Conversion Stock will be sold
in the Subscription and Community Offerings; and (ii) total expenses, including
the marketing fees to be paid to Webb, will be approximately $350,000. Actual
expenses may vary from those estimated.
Pro forma net earnings and stockholders' equity have been calculated for
the year ended June 30, 1996 as if the Conversion Stock to be issued in the
Offerings had been sold (and the Exchange Shares issued) at the beginning of the
year and the net proceeds had been invested at 5.68%, which represents the yield
on one-year U.S. Government securities at June 30, 1996 (which, in light of
changes in interest rates in recent periods, is deemed to more accurately
reflect a pro forma reinvestment rate than the arithmetic average method). The
effect of withdrawals from deposit accounts for the purchase of Conversion Stock
has
-35-
<PAGE>
not been reflected. An effective federal tax rate of 35.0% has been assumed for
the year, resulting in an after-tax yield of 3.69% for the year ended June 30,
1996. Historical and pro forma per share amounts have been calculated by
dividing historical and pro forma amounts by the indicated number of shares of
Common Stock. No effect has been given in the pro forma stockholders' equity
calculations for the assumed earnings on the net proceeds. As discussed under
"Use of Proceeds," the Company intends to retain 50% of the net proceeds from
the Offerings.
No effect has been given in the tables to the issuance of additional shares
of Common Stock pursuant to existing and proposed stock benefit plans. See
"Management of the Company - Benefits" and "Management of the Association -
Stock Benefit Plans." No effect has been given to (i) the Company's results of
operations after the Conversion and Reorganization, or (ii) the market price of
the Common Stock after the Conversion and Reorganization.
The following pro forma information may not be representative of the
financial effects of the foregoing transactions at the dates on which such
transactions actually occur and should not be taken as indicative of future
results of operations. Pro forma stockholders' equity represents the difference
between the stated amount of assets and liabilities of the Company computed in
accordance with generally accepted accounting principles ("GAAP"). The pro forma
stockholders' equity is not intended to represent the fair market value of the
Common Stock and may be different than amounts that would be available for
distribution to stockholders in the event of liquidation.
-36-
<PAGE>
The following table summarizes historical data of the Association and
pro forma data of the Company at or for the dates and periods indicated based on
assumptions set forth above and in the tables and should not be used as a basis
for projections of the market value of the Common Stock following the Conversion
and Reorganization.
<TABLE>
<CAPTION>
At or For the Year Ended June 30, 1996
--------------------------------------------------------------------------
373,065 438,900 504,735 580,445
Shares Sold Shares Sold Shares Sold Shares Sold
at $10.00 at $10.00 at $10.00 at $10.00 Per
Per Share Per Share Per Share Share (15%
(Minimum of (Midpoint (Maximum of above Maximum
Range) of Range) Range) of Range)(5)
--------------- --------------- --------------- ---------------
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds $ 3,731 $ 4,389 $ 5,047 $ 5,804
Less offering expenses and commissions 350 350 350 350
------ ------ ------ ------
Estimated net proceeds 3,381 4,039 4,697 5,454
Add assets consolidated from the
Mutual Holding Company 80 80 80 80
------ ------ ------ ------
Total estimated net proceeds, as adjusted $ 3,461 $ 4,119 $ 4,777 $ 5,534
====== ====== ====== ======
Net earnings:
Historical $ 453 $ 453 $ 453 $ 453
Pro forma earnings on net proceeds 128 152 176 204
------ ------ ------ ------
Pro forma net earnings(1) $ 581 $ 605 $ 629 $ 657
====== ====== ====== ======
Net earnings per share(2):
Historical $ .70 $ .60 $ .52 $ .45
Pro forma earnings on net proceeds .20 .20 .20 .20
------ ------ ------ ------
Pro forma net earnings per share(1) $ .90 $ .80 $ .72 $ .65
====== ====== ====== ======
Offering price to pro forma
annualized net earnings per share(2) 11.11x 12.50x 13.89x 15.38x
====== ====== ====== ======
Stockholders' equity:
Historical(3) $ 6,895 $ 6,895 $ 6,895 $ 6,895
Estimated net proceeds 3,381 4,039 4,697 5,454
------ ------ ------ ------
Pro forma stockholders' equity(1)(4) $10,276 $10,934 $11,592 $12,349
====== ====== ====== ======
Stockholders' equity per share(2):
Historical(3) $ 10.67 $ 9.07 $ 7.89 $ 6.86
Estimated net proceeds 5.24 5.32 5.37 5.43
------ ------ ------ ------
Pro forma stockholders' equity
per share(1)(4) $ 15.91 $ 14.39 $ 13.26 $ 12.29
====== ====== ====== ======
Offering price as a percentage of pro
forma stockholders' equity per share(2) 62.85% 69.49% 75.41% 81.37%
====== ====== ====== ======
</TABLE>
________________________________
(1) No effect has been given to the issuance of additional shares of Common
Stock pursuant to the 1997 Stock Option Plan or the purchase of additional
shares of Common Stock pursuant to the 1997 Recognition Plan, which plans
may be adopted by the Company following the Conversion and Reorganization
and presented for approval by stockholders at an annual or special meeting
of stockholders of the Company held at least one year following the
consummation of the Conversion and Reorganization. In addition, no effect
has been given to the purchase of additional shares of Common Stock by the
ESOP, which purchases, if made, would not be conducted earlier than one
year following consummation of the Conversion and Reorganization. The
issuance of Common Stock pursuant to the exercise of options under the 1997
Stock Option Plan will result in the dilution of existing stockholders'
-37-
<PAGE>
interests. See "Management of the Company - Benefits - 1997 Stock Option
Plan." Moreover, funds used by the 1997 Recognition Plan to purchase the
shares initially may be contributed to the 1997 Recognition Plan by the
Company and the shares may be acquired either in the open market or from
the Company. The issuance of authorized but unissued shares of Common Stock
pursuant to the 1997 Recognition Plan would result in the dilution of
existing stockholders' interests. See "Management of the Company - Benefits
- 1997 Management Recognition Plan and Trust." Finally, any additional
shares of Common Stock purchased by the ESOP could be acquired in the open
market with funds provided by the Company or from authorized but unissued
shares of Common Stock. In the event that additional shares of Common Stock
are issued to the ESOP, stockholders would experience dilution of their
ownership interests. See "Management of the Association - Stock Benefit
Plans - Employee Stock Ownership Plan."
(2) The per share calculations are determined by adding the number of shares
assumed to be issued in the Conversion and Reorganization.
(3) Includes the $80,000 to be acquired by the Association upon the merger
of the Mutual Holding Company (following its conversion to a federal
interim stock savings institution) with and into the Association.
(4) The retained earnings of the Association will be substantially restricted
after the Conversion by virtue of the liquidation account to be established
in connection with the Conversion and Reorganization. See "Dividend Policy"
and "The Conversion and Reorganization - Liquidation Rights." In addition,
certain distributions from the Association's retained earnings may be
treated as being from its pre-1988 accumulated bad debt reserve for tax
purposes, which would cause the Association to have additional taxable
income. See "Taxation - Federal Taxation."
(5) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Offering Price Range of up to 15% to
reflect changes in market and financial conditions following the
commencement of the Offerings or pursuant to an over-allotment option which
the Company intends to grant Webb in the Public Offering, if any.
-38-
<PAGE>
DEARBORN SAVINGS ASSOCIATION, F.A.
STATEMENTS OF EARNINGS
(In Thousands, Except Per Share Data)
The following Statements of Earnings of the Association for each of the
years in the three-year period ended June 30, 1996 have been audited by Grant
Thornton L.L.P., independent certified public accountants, whose report thereon
appears elsewhere herein. The Statements of Earnings should be read in
conjunction with the Financial Statements and related Notes included elsewhere
herein.
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------------
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Interest income:
Loans $ 3,869 $ 3,654 $ 3,780
Mortgage-backed securities 182 245 222
Investment securities 381 404 264
Interest-bearing deposits and other 276 280 311
------ ------ ------
Total interest income 4,708 4,583 4,577
Interest expense:
Deposits 2,077 1,980 1,824
Borrowings 892 893 782
------ ------ ------
Total interest expense 2,969 2,873 2,606
------ ------ ------
Net interest income 1,739 1,710 1,971
Provision for losses on loans 12 8 12
------ ------ ------
Net interest income after provision for
losses on loans 1,727 1,702 1,959
Other income:
Gain (loss) on sale of loans 45 (13) 124
Gain (loss) on sale of investment and
mortgage-backed securities transactions 14 (1) 2
Other operating 141 140 101
------ ------ ------
Total other income 200 126 227
General, administrative and other expense:
Employee compensation and benefits 646 646 628
Occupancy and equipment 115 100 91
Federal deposit insurance premiums 87 90 87
Other operating 437 453 489
------ ------ ------
Total general, administrative and
other expense 1,285 1,289 1,295
------ ------ ------
Earnings before income taxes 642 539 891
Federal income taxes:
Current 152 116 257
Deferred 37 38 31
------ ------ ------
Total federal income taxes $ 189 $ 154 $ 288
------ ------ ------
Net earnings $ 453 $ 385 $ 603
====== ====== ======
Earnings per share $ 1.02 $ 0.86 $ N/A
====== ====== =====
</TABLE>
The accompanying notes are an integral part of these statements.
-39-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Association's results of operations depend primarily on its net
interest income, which is the difference between interest income on
interest-earning assets, which principally consist of loans, mortgage-backed
securities and investment securities, and interest expense on interest-bearing
liabilities, which principally consist of deposits and borrowings. The
Association's results of operations also are affected by the provision for
losses on loans, resulting from management's assessment of the adequacy of the
allowance for loan losses; the level of its other income, including deposit fees
and related income and gains and losses from the sale of loans, investments,
mortgage-backed securities and real estate owned; the level of its general,
administrative and other expense, including employee compensation and benefits,
occupancy and equipment expense, federal deposit insurance premiums and
miscellaneous other operating expenses; and income tax expense.
Asset and Liability Management
The ability to maximize net interest income is largely dependent upon
the achievement of a positive interest rate spread that can be sustained during
fluctuations in prevailing interest rates. Interest rate sensitivity is a
measure of the difference between amounts of interest-earning assets and
interest-bearing liabilities which either reprice or mature within a given
period of time. The difference, or the interest rate repricing "gap," provides
an indication of the extent to which an institution's interest rate spread will
be affected by changes in interest rates. A gap is considered positive when the
amount of interest-rate sensitive assets exceeds the amount of interest-rate
sensitive liabilities, and is considered negative when the amount of
interest-rate sensitive liabilities exceeds the amount of interest-rate
sensitive assets. Generally, during a period of rising interest rates, a
negative gap within shorter maturities would adversely affect net interest
income, while a positive gap within shorter maturities would result in an
increase in net interest income, and during a period of falling interest rates,
a negative gap within shorter maturities would result in an increase in net
interest income while a positive gap within shorter maturities would have the
opposite effect.
The lending activities of savings associations have historically
emphasized long-term, fixed-rate loans secured by single-family residences, and
the primary source of funds of such institutions has been deposits. The deposit
accounts of savings associations generally bear interest rates that reflect
market rates and largely mature or are subject to repricing within a short
period of time. This factor, in combination with substantial investments in
long-term, fixed-rate loans, has historically caused the income earned by
savings associations on their loan portfolios to adjust more slowly to changes
in interest rates than their cost of funds.
-40-
<PAGE>
In order to minimize the potential for adverse effects of material and
prolonged increases in interest rates on the Association's results of
operations, the Association's management, through its Asset and Liability
Committee, has implemented and continues to monitor asset and liability
management policies to better match the maturities and repricing terms of the
Association's interest-earning assets and interest-bearing liabilities. Such
policies have consisted primarily of: (i) emphasizing the origination of
adjustable-rate single-family residential loans ("ARMs"); (ii) emphasizing the
origination of single-family residential loans on terms which permit the sale to
the Federal Home Loan Mortgage Corporation ("FHLMC") and other institutional
investors, and the sale of selected fixed-rate residential mortgage loans in the
secondary market as economic and market conditions permit; and (iii) managing
interest expense.
In the past few years, the Association has successfully emphasized the
origination of single-family residential ARMs. However, due to the generally
lower interest rates which have prevailed in recent years, the Association's
originations of ARMs has decreased due to the preference of the Association's
customers for fixed-rate residential mortgage loans. Nevertheless, as a
consequence of the Association's efforts, $10.5 million or 28.9% of the
single-family residential mortgages originated by the Association during fiscal
1996, 1995 and 1994 consisted of ARMs. As a result, as of June 30, 1996, $11.6
million or 32.8% of the Association's portfolio of single-family residential
mortgage loans consisted of ARMs.
Since 1985, the Association has sold selected fixed-rate single-family
residential mortgage loans to the FHLMC and other institutional investors in the
secondary market as economic and market conditions permit. During fiscal 1996,
1995 and 1994, such sales amounted to $8.2 million, $2.5 million and $6.4
million, respectively. Such sales were conducted as a means of minimizing
interest rate risk associated with such loans and in order to generate
additional funds for lending and other purposes.
Finally, in order to manage its interest expense more effectively, the
Association has elected to offer rates on its deposit accounts that are
competitive with certain of its competitors' rates. Pursuant to this policy, the
Association has generally neither engaged in sporadic increases or decreases in
interest rates paid nor offered the highest rates available in its deposit
market except upon specific occasions when market conditions have created
opportunities to attract longer-term deposits or when the Association has deemed
such actions necessary in order to reduce excessive deposit outflows. In
addition, the Association utilizes FHLB advances to, among other things, fund
the volume of mortgage loan originations. This policy has assisted the
Association in controlling its cost of funds.
Management presently monitors and evaluates the potential impact of
interest rate changes upon the market value of the Association's portfolio
equity and the level of net interest income on a quarterly basis. As discussed
under "Regulation - The Association - Regulatory Capital Requirements," the OTS
adopted a final rule in August 1993 incorporating an interest rate risk
component into the risk-based capital rules. Under the rule, an institution with
a greater than "normal" level of interest rate risk will be subject to
-41-
<PAGE>
a deduction of its interest rate component from total capital for purposes of
calculating the risk-based capital requirement. An institution with a greater
than "normal" interest rate risk is defined as an institution that would suffer
a loss of net portfolio value ("NPV") exceeding 2.0% of the estimated market
value of its assets in the event of a 200 basis point increase or decrease in
interest rates. NPV is the difference between incoming and outgoing discounted
cash flows from assets, liabilities and off-balance sheet contracts. A resulting
change in NPV of more than 2% of the estimated market value of an institution's
assets will require the institution to deduct from its capital 50% of that
excess change. The rule provides that the OTS will calculate the interest rate
risk component quarterly for each institution. The rule is effective for
institutions with total assets in excess of $300 million and, in any event, the
OTS has recently indicated that no institution will be required to deduct
capital for interest rate risk until further notice. See "Regulation - The
Association - Regulatory Capital Requirements."
The following table presents the Association's NPV as of March 31, 1996
(the latest date such information is available), as calculated by the OTS, based
on information provided to the OTS by the Association.
<TABLE>
<CAPTION>
Net Portfolio Value
- ----------------------------------------------------------------------------------------------------------------
Estimated
Change in NPV as a
Interest Rates Estimated Percentage Amount
(basis points) NPV of Assets of Change Percent
-------------- ---------- ---------- --------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
+400 $3,050 5.40% $(4,662) (60)%
+300 4,231 7.27 (3,481) (45)
+200 5,446 9.09 (2,266) (29)
+100 6,641 10.77 (1,071) (14)
-- 7,712 12.18 -- --
-100 8,492 13.13 780 10
-200 8,829 13.45 1,117 14
-300 9,005 13.54 1,293 17
-400 9,320 13.80 1,608 21
</TABLE>
Although the actions taken by management of the Association have reduced
the potential effects of changes in interest rates on the Association's results
of operations, significant increases in interest rates may adversely affect the
Association's net interest income and/or NPV because of the excess of
interest-bearing liabilities over interest-earning assets within shorter periods
and because the Association's adjustable-rate, interest-earning assets generally
are not as responsive to changes in interest rates as its interest-bearing
liabilities due to terms which generally permit only annual adjustments to the
interest rate
-42-
<PAGE>
and which generally limit the amount which interest rates thereon can adjust at
such time and over the life of the related asset. In addition, the proportion of
adjustable-rate loans in the Association's loan portfolio could decrease in
future periods if market rates of interest remain at or decrease below current
levels.
Changes in Financial Condition
General. At June 30, 1996, the Association's assets totalled $63.5
million, as compared to $61.7 million at June 30, 1995, reflecting an increase
of $1.9 million or 3.0%. The increase in assets in fiscal 1996 was funded
primarily by an increase in deposits of $3.9 million or 10.5%, and current year
undistributed earnings of $114,000, which were partially offset by a decrease in
FHLB advances of $2.3 million or 13.7%.
Cash and Interest-Bearing Deposits. Cash and interest-bearing deposits
(including certificates of deposit) in other financial institutions declined by
$259,000 or 10.4% during the fiscal year ended June 30, 1996, as excess
liquidity was redeployed into higher yielding investment securities.
Investment Securities. Investment securities (including investment
securities classified as available for sale) increased by $3.7 million or 61.9%,
from $6.0 million at June 30, 1995 to $9.7 million at June 30, 1996. Such
increase was due primarily to the purchase of $10.4 million of predominantly
short and medium-term U.S. Government agency obligations, which was partially
offset by the maturity of $6.7 million of investment securities. At June 30,
1996, $6.4 million of the Association's investment securities were classified as
available for sale.
Mortgage-Backed Securities. Mortgage-backed securities (including
mortgage-backed securities classified as available for sale) decreased by $1.5
million or 50.3%, from $3.0 million at June 30, 1995 to $1.5 million at June 30,
1996. Such decrease resulted primarily from the principal repayments on
mortgage-backed securities of $453,000 and the sale of $1.1 million of
mortgage-backed securities classified as available for sale. At June 30, 1996,
all $1.5 million of the Association's mortgage-backed securities were classified
as available for sale.
Loans Receivable. Loans receivable (including loans classified as held
for sale) decreased by $454,000 or 1.0% during fiscal 1995, from $47.2 million
at June 30, 1995 to $46.8 million at June 30, 1996. The decrease resulted
primarily from $16.8 million of loan originations being offset by $17.3 million
of loans sold and loan principal reductions. At June 30, 1996, $182,000 of the
Association's loans receivable were classified as held for sale.
Allowance for Loan Losses. At June 30, 1996, the Association's
allowance for loan losses totalled $226,000, which represented a $12,000
increase over the level maintained at June 30, 1995. At June 30, 1996, the
Association's allowance for loan losses was comprised solely of a general loan
loss allowance, which is includable as a component of regulatory
-43-
<PAGE>
risk-based capital. The allowance represented approximately .46% of the gross
loan portfolio (including loans classified as held for sale). At that date, the
ratio of total non-performing loans to total loans amounted to .05%, as compared
to .14% at June 30, 1995. Although management of the Association believes that
its allowance for loan losses at June 30, 1996 was adequate based on the facts
and circumstances available to it, there can be no assurance that additions to
such allowance will not be necessary in future periods, which could adversely
affect the Association's results of operations.
Deposits. Deposits totalled $41.4 million at June 30, 1996, as compared
to $37.5 million at June 30, 1995, reflecting an increase of $3.9 million or
10.4%. Deposit accounts subject to daily repricing (passbook, money market
deposit and NOW accounts) increased by $317,000 or 4.1% from June 30, 1995 to
June 30, 1996. During the same period, certificates of deposit increased by $3.6
million or 12.1%. The Association has generally not engaged in sporadic
increases or decreases in interest rates paid or offered the highest rates
available in its deposit market except upon specific occasions when market
conditions have created opportunities to attract longer-term deposits.
FHLB Advances. Advances from the FHLB of Indianapolis amounted to $14.5
million at June 30, 1996, as compared to $16.8 million at June 30, 1995. The
FHLB advances were predominantly drawn upon in prior years and consisted
primarily of longer-term advances which were utilized to fund the loan growth in
fiscal years 1992 and 1993. The weighted average rate on FHLB advances was 5.96%
at June 30, 1996, as compared to 6.30% at June 30, 1995.
Stockholders' Equity. For the year ended June 30, 1996, the
Association's stockholders' equity increased by $128,000 or 1.9%, from $6.7
million at June 30, 1995 to $6.8 million at June 30, 1996. This increase was
primarily due to $453,000 of net earnings during the year, which was partially
offset by $339,000 in dividends which were declared during the year together
with a $33,000 increase in unrealized losses on investment and mortgage-backed
securities classified as available for sale. In addition, adjustments to
stockholders' equity relating to unearned Association Common Stock held by the
Management Recognition Plan and unallocated shares of Association Common Stock
held by the ESOP declined from (197,000) to (152,000) from June 30, 1995 to June
30, 1996.
-44-
<PAGE>
Results of Operations
Average Balances, Net Interest Income and Yields Earned and Rates Paid.
The following table presents for the periods indicated the total dollar amount
of interest from average interest-earning assets and the resultant yields, as
well as the interest expense on average interest-bearing liabilities, expressed
both in dollars and rates, and the net interest margin. The table does not
reflect any effect of income taxes.
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------------------------------------------------------
1996 1995
---------------------------------------------- ------------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate(1) Balance Interest Rate
------------ ------------ ----------- ------------ ------------ ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable(2) $47,529 $3,869 8.14% $46,294 $3,654 7.89%
Mortgage-backed securities(3) 2,412 182 7.55 3,579 245 6.85
Investment securities(3) 5,880 381 6.48 5,834 404 6.92
Other interest-earning assets 3,766 276 7.33 3,664 280 7.64
------ ----- ------ -----
Total interest-earning assets 59,587 4,708 7.90% 59,371 4,583 7.72%
------ ----- ==== ------ ----- ====
Non-interest-earning assets 2,077 1,953
------ ------
Total assets $61,664 $61,324
====== ======
Interest-bearing liabilities
Deposits $39,434 2,077 5.27% $39,511 1,980 5.01%
FHLB advances and other
borrowings(4) 14,554 892 6.13 14,488 893 6.16
------ ----- ------ -----
Total interest-bearing
liabilities 53,988 2,969 5.50% 53,999 2,873 5.32%
------ ----- ==== ------ ----- ====
Non-interest-bearing liabilities 805 687
------ ------
Total liabilities 54,793 54,686
------ ------
Stockholders' equity 6,871 6,638
------ ------
Total liabilities and
stockholders' equity $61,664 $61,324
====== ======
Net interest income; interest
rate spread $1,739 2.40% $1,710 2.40%
===== ====== ===== ====
Net interest margin(5) 2.92% 2.88%
====== ====
Average interest-earning assets
to average interest-bearing
liabilities 110.37% 109.95%
====== ======
<CAPTION>
1994
--------------------------------------------
Average Yield/
Balance Interest Rate
-------------- ----------- ----------
Interest-earning assets:
Loans receivable(2) $45,720 $3,780 8.27%
Mortgage-backed securities(3) 3,052 222 7.27
Investment securities(3) 5,866 264 4.50
Other interest-earning assets 4,198 311 7.41
------ ------
Total interest-earning assets 58,836 4,577 7.78%
------ ----- ====
Non-interest-earning assets 2,283
-------
Total assets $61,119
======
Interest-bearing liabilities
Deposits $40,814 1,824 4.47%
FHLB advances and other
borrowings(4) 13,691 782 5.71
------ ------
Total interest-bearing
liabilities 54,505 2,606 4.78%
------ ------ ====
Non-interest-bearing liabilities 625
------
Total liabilities 55,130
------
Stockholders' equity 5,989
-------
Total liabilities and
stockholders' equity $61,119
======
Net interest income; interest
rate spread $1,971 3.00%
====== ====
Net interest margin(5) 3.35%
====
Average interest-earning assets
to average interest-bearing
liabilities 107.95%
======
(Footnotes on following page)
</TABLE>
-45-
<PAGE>
- ----------------------
(1) At June 30, 1996 the yields earned and rates paid were as follows:
loans receivable, 8.16%; mortgage-backed securities, 8.09%; investment
securities, 6.71%; other interest-earning assets, 7.37%; total
interest-earning assets, 7.89%; deposits, 5.23%; FHLB advances and
other borrowings, 5.96%; total interest-bearing liabilities, 5.42%; and
interest rate spread, 2.47%.
(2) Includes loans classified as held for sale.
(3) Includes mortgage-backed securities classified as available for sale
and held for sale and investment securities classified as available for
sale.
(4) Includes a loan from a third party financial institution to the
Association's ESOP.
(5) Net interest margin is net interest income divided by average
interest-earning assets.
-46-
<PAGE>
Rate/Volume Analysis. The following table describes the extent to which
changes in interest rates and changes in volume of interest-related assets and
liabilities have affected the Association's interest income and interest expense
during the periods 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 change in rate and volume. The combined effect of changes in both rate and
volume has been allocated proportionately to the change due to rate and the
change due to volume.
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------------------------------------------------
1996 vs. 1995 1995 vs. 1994
--------------------------------------- -------------------------------------------
Increase Increase
(Decrease) (Decrease)
Due To Due To
---------------------- Total ---------------------- Total
Increase Increase
Rate Volume (Decrease) Rate Volume (Decrease)
------ -------- ---------- ------ ------- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable $118 $ 97 $215 $(173) $ 47 $(126)
Mortgage-backed securities 17 (80) (63) (15) 38 23
Investment securities (165) 142 (23) 141 (1) 140
Other interest-earning assets (12) 8 4 9 (40) (31)
---- --- --- ---- --- ----
Total interest-earning assets $ (42) $167 $125 $ (38) $ 44 $ 6
==== === === ==== === ===
Interest-bearing liabilities:
Deposits 101 (4) 97 214 (58) 156
FHLB advances and other borrowings (5) 4 (1) 65 46 111
---- ---- ---- ---- --- ----
Total interest-bearing
liabilities $ 96 $ -- $ 96 $ 279 $ (12) $ 267
==== ===== ===== ==== ==== ====
Increase (decrease) in net interest
income $ 29 $(261)
===== ====
</TABLE>
-47-
<PAGE>
Comparison of Results of Operations for the Years Ended June 30, 1996
and June 30, 1995
General. Net earnings for the fiscal year ended June 30, 1996 totalled
$453,000, representing an increase of $68,000 or 17.7% from the $385,000 of net
earnings reported for the year ended June 30, 1995. The increase in net earnings
during fiscal 1996 is primarily attributable to a $29,000 increase in net
interest income, a $74,000 increase in other income and a $4,000 decrease in
general, administrative and other expense, which were partially offset by a
$4,000 increase in the Association's provision for losses on loans and a $35,000
increase in the provision for federal income taxes.
Net Interest Income. Net interest income is determined by an
institution's interest rate spread (i.e., the difference between the yields
earned on its interest-earning assets and the rates paid on its interest-bearing
liabilities), the relative amounts of interest-earning assets and
interest-bearing liabilities and by the degree of mismatch in the maturity and
repricing characteristics of its interest-earning assets and interest-bearing
liabilities.
Interest income on loans and mortgage-backed securities totalled $4.1
million in fiscal 1996, an increase of $152,000 or 3.9% from the $3.9 million
recorded in fiscal 1995. The increase in interest income on loans, partially
offset by a decrease in interest income on mortgage-backed securities, is
primarily attributable to a combined increase in the average balance of loans
and mortgage-backed securities of $68,000. In addition, the weighted average
yield earned on the Association's aggregate loan and mortgage-backed securities
portfolio increased from 7.82% during fiscal 1995 to 8.11% for fiscal 1996.
Interest income on investment securities and other interest-earning
assets (consisting primarily of U.S. Government agency obligations, municipal
obligations, interest-bearing deposits and FHLB of Indianapolis stock) decreased
during fiscal 1996 by $27,000 or 3.9%. This was primarily due to a decrease in
the weighted average yield from 7.20% at June 30, 1995 to 6.80% at June 30,
1996, which was partially offset by an increase in the average balance of such
investments during fiscal 1996 of $148,000 or 1.6%, as compared to fiscal 1995.
Interest expense on deposits increased by $97,000 or 4.9% from $2.0
million for the fiscal year ended June 30, 1995 to $2.1 million for the fiscal
ended June 30, 1996. Such increase in interest expense was due to an increase in
the weighted average cost of deposits from 5.01% in fiscal 1995 to 5.27% in
fiscal 1996, which was partially offset by a $77,000 decrease in the average
balance of deposits outstanding year-to-year. The increase in the cost of
deposits generally reflects the increase in interest rates in the economy.
Interest expense on FHLB advances and other borrowings decreased
slightly by $1,000 or 0.1% during fiscal 1996. Such decrease was due to a
decrease in the weighted average rate paid thereon from 6.16% for fiscal 1995 to
6.13% for fiscal 1996, which was partially offset by a $66,000 increase in the
average balance of such borrowings during fiscal 1996 as compared to fiscal
1995.
-48-
<PAGE>
As a result of the foregoing changes in interest income and interest
expense, net interest income increased by $29,000 or 1.7% to $1.7 million for
the fiscal year ended June 30, 1996.
The Association's interest rate spread amounted to 2.40% for both the
fiscal years ended June 30, 1995 and 1996. The Association's net interest margin
increased from 2.88% during fiscal 1995 to 2.92% during fiscal 1996.
Provision for Losses on Loans. The Association established a provision
for losses on loans of $12,000 and $8,000 during fiscal 1996 and 1995,
respectively.
Other Income. Total other income totalled $200,000 in fiscal 1996, an
increase of $74,000 or 58.7% from fiscal 1995. The increase in fiscal 1996 was
primarily attributable to a $58,000 increase in gain on the sales of loans, a
$15,000 increase in gain on sales of investments and mortgage-backed securities
and a $1,000 increase in other operating income (which consist primarily of loan
servicing fee income, late charges and fees and other miscellaneous fee income).
General, Administrative and Other Expense. Total general,
administrative and other expense totalled $1.3 million for the fiscal year ended
June 30, 1996, a decrease of $4,000 or .3% from the fiscal year ended June 30,
1995. The decrease was primarily due to a $16,000 or 3.5% decrease in other
operating expense (which consists primarily of data processing costs,
advertising expenses, franchise taxes, professional fees and supervisory
assessments), which reflects a pro-rata decrease in all other operating expense
categories except those described below. In addition, Federal deposit insurance
premiums decreased by $3,000 or 3.3%, reflecting fluctuations in the balance of
the Association's deposit accounts. These decreases were partially offset by an
increase of $15,000 or 15.5% in occupancy and equipment expense. Such increase
resulted primarily from an increase in building maintenance and maintenance
contract expense.
Federal Income Taxes. The provision for federal income taxes totalled
$189,000 in fiscal 1996, an increase of $35,000 or 22.7% from the 1995
provision. The increase in the fiscal 1996 provision was due primarily to a
$103,000 or 19.1% increase in pre-tax earnings.
Comparison of Results of Operations for the Years Ended June 30, 1995
and June 30, 1994
General. Net earnings for the fiscal year ended June 30, 1995 totalled
$385,000, representing a decline of $218,000 or 36.2% from the $603,000 of net
earnings reported for the year ended June 30, 1994. The reduction in net
earnings during fiscal 1995 is primarily attributable to a $261,000 decrease in
net interest income and a $101,000 decrease in other income, which were
partially offset by a $4,000 decrease in the Association's provision for losses
on loans, a $6,000 decrease in general, administrative and other expense and a
$134,000 decrease in the provision for federal income taxes.
-49-
<PAGE>
Net Interest Income. Interest income on loans and mortgage-backed
securities totalled $3.9 million in fiscal 1995, a decline of $103,000 or 2.6%
from the $4.0 million recorded in fiscal 1994. The reduction of interest income
on loans and mortgage-backed securities is primarily attributable to a $122,000
reduction in amortization of deferred loan origination fees, which was the
result of the decline in loan refinancing activity during the fiscal year ended
June 30, 1995, as compared to fiscal year ended June 30, 1994, which was
partially offset by growth in the average loan and mortgage-backed securities
portfolios of $1.1 million or 2.3%.
Interest income on investment securities and other interest-earning
assets (consisting primarily of U.S. Government agency obligations, municipal
obligations, interest-bearing deposits and FHLB of Indianapolis stock) increased
during fiscal 1995 by $109,000 or 19.0%. This increase was primarily due to an
increase in the weighted average yield earned on such investments from 5.71% at
June 30, 1994 to 7.20% at June 30, 1995, which was partially offset by a
decrease of $566,000 in the aggregate average balance of such investments during
fiscal 1995, as compared to fiscal 1994.
Interest expense on deposits increased by $156,000 or 8.6% from $1.8
million for the fiscal year ended June 30, 1994 to $2.0 million for the fiscal
ended June 30, 1995. Such increase in interest expense was due to an increase in
the weighted average rate paid on deposits from 4.47% in fiscal 1994 to 5.01% in
fiscal 1995, which was partially offset by a decrease of $1.3 million in the
average balance of deposits outstanding year-to-year. The increase in the rate
paid on deposits generally reflected the increase in market rates of interest
during the year.
Interest expense on FHLB advances and other borrowings increased by
$111,000 or 14.2% due to a $797,000 increase in the average balance of
borrowings outstanding, together with an increase in the weighted average rate
paid thereon from 5.71% for fiscal 1994 to 6.16% for fiscal 1995.
As a result of the foregoing changes in interest income and interest
expense, net interest income decreased by $261,000 or 13.2% from $2.0 million
for the fiscal year ended June 30, 1994 to $1.7 million for the fiscal year
ended June 30, 1995.
The Association's interest rate spread decreased from 3.00% for the
fiscal year ended June 30, 1994 to 2.40% for the fiscal year ended June 30,
1995. The Association's net interest margin declined from 3.35% during fiscal
1994 to 2.88% during fiscal 1995.
Provision for Losses on Loans. The Association established a provision
for losses on loans of $8,000 and $12,000 during fiscal 1995 and 1994,
respectively. The $4,000 or 33.3% decrease in the provision during fiscal 1995
reflected the decline in net charge-offs during the year.
-50-
<PAGE>
Other Income. Total other income totalled $126,000 in fiscal 1995, a
decrease of $101,000 or 44.5% from fiscal 1994. The decrease in other income
during fiscal 1995 was primarily attributable to a reduction in gain on the sale
of loans, which declined by $137,000 primarily due to a decline in loan
originations and loan sales during fiscal 1995. The decrease in gain on the sale
of loans was partially offset by an increase in other operating income of
$39,000 or 38.6%, which resulted from increased servicing fees on loans sold of
$21,000 or 73.7%, with the remainder of the increase resulting from a pro-rata
increase in miscellaneous other income accounts.
General, Administrative and Other Expense. Total general,
administrative and other expense totalled $1.3 million for the fiscal year ended
June 30, 1995, a decrease of $6,000 or .5% from the fiscal year ended June 30,
1994. This decrease was primarily due to a $36,000 or 7.4% decrease in other
operating expense, which reflects a pro-rata decrease in all other operating
expense categories except those described below. The decrease in other operating
expense was partially offset by increases of $18,000 or 2.9% in employee
compensation and benefits, $9,000 or 9.9% in occupancy and equipment expense and
$3,000 or 3.4% in federal deposit insurance premiums. The increase in employee
compensation and benefits was due to normal merit increases as well as expenses
relating to employee benefit plans adopted in connection with the Association's
conversion to stock form. The increase in occupancy and equipment expense
resulted primarily from an increase in depreciation and maintenance contract
expense. Federal deposit insurance premiums vary in accordance with fluctuations
in the balance of the Association's deposit accounts.
Federal Income Taxes. The provision for federal income taxes totalled
$154,000 in fiscal 1995, a decrease of $134,000 or 46.5% from the fiscal 1994
provision. The decrease in the fiscal 1995 provision was due primarily to a
$352,000 or 39.5% decrease in pre-tax earnings.
Regulatory Capital Requirements
Federally insured savings associations are required to maintain minimum
levels of regulatory capital. Pursuant to the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 ("FIRREA"), the OTS has established
capital standards applicable to all savings associations. These standards
generally must be as stringent as the comparable capital requirements imposed on
national banks. The OTS also is authorized to impose capital requirements in
excess of these standards on individual associations on a case-by-case basis.
Savings associations must satisfy three different OTS capital
requirements. Under these standards, savings associations must maintain
"tangible" capital equal to at least 1.5% of adjusted total assets, "core"
capital equal to at least 3% of adjusted total assets and "total" capital (a
combination of core and "supplementary" capital) equal to at least 8% of
"risk-weighted" assets.
-51-
<PAGE>
The following table sets forth the Association's compliance with each
of the above-described regulatory capital requirements at June 30, 1996.
<TABLE>
<CAPTION>
Tangible Core Risk-Based
Capital Capital(1) Capital(2)
------- ---------- --------
(Dollars in Thousands)
<S> <C> <C> <C>
Regulatory capital $6,846 $6,846 $7,072
Minimum required regulatory capital 953 1,906 2,450
----- ----- -----
Excess regulatory capital $5,893 $4,940 $4,622
===== ===== =====
Regulatory capital as a percentage of
assets(3) 10.8% 10.8% 23.1%
Minimum regulatory capital required
as a percentage of assets 1.5 3.0 8.0
---- ---- ----
Excess regulatory capital as a
percentage in excess of requirement 9.3% 7.8% 15.1%
==== === ====
</TABLE>
- ---------------
(1) Does not reflect the 4.0% requirement to be met in order for an
institution to be deemed "adequately capitalized" under applicable
laws and regulations. See "Regulation - The Association - Prompt
Corrective Action."
(2) Does not reflect the interest rate component to the risk-based capital
requirement, the effective date of which has been postponed. See
"Regulation - The Association - Regulatory Capital Requirements."
(3) Tangible and core capital are computed as a percentage of adjusted
total assets of $63.5 million. Risk-based capital is computed as a
percentage of total risk-weighted assets of $30.6 million.
Liquidity and Commitments
The Association is required under applicable federal regulations to
maintain specified levels of "liquid" investments in qualifying types of United
States Government and government agency obligations and other similar
investments having maturities of five years or less. Such investments are
intended to provide a source of relatively liquid funds upon which the
Association may rely if necessary to fund deposit withdrawals and for other
short-term funding needs. The required level of such liquid investments is
currently 5% of certain liabilities as defined by the OTS and is changed from
time to time to reflect economic conditions.
-52-
<PAGE>
The liquidity of the Association, as measured by the ratio of cash,
cash equivalents (not committed, pledged or required to liquidate specific
liabilities), investment and qualifying mortgage-backed securities to the sum of
total deposits plus borrowings payable within one year, was 13.4% at June 30,
1996, as compared to 11.6% and 14.9% at June 30, 1995 and 1994, respectively. At
June 30, 1996, the Association's "liquid" assets totalled approximately $6.0
million, which was $3.6 million in excess of the current OTS minimum
requirement.
The Association's liquidity, represented by cash and cash equivalents,
is a product of its operating, investing and financing activities. The
Association's primary sources of funds are deposits, borrowings, amortization,
prepayments and maturities of outstanding loans and mortgage-backed securities,
maturities of investment and mortgage-backed securities and other short-term
investments, sales of loans and investment and mortgage-backed securities and
funds provided from operations. While scheduled loan and mortgage-backed
securities amortization and maturing investment securities and short-term
investments are relatively predictable sources of funds, deposit flows and loan
prepayments are greatly influenced by general interest rates, economic
conditions and competition. The Association manages the pricing of its deposits
to maintain a steady deposit balance. In addition, the Association invests
excess funds in overnight deposits and other short-term interest-earning assets
which provides liquidity to meet lending requirements. The Association generates
cash through the retail deposit market and, to the extent deemed necessary,
utilizes borrowings for liquidity purposes (primarily consisting of advances
from the FHLB of Indianapolis). At June 30, 1996, the Association had $14.5
million of outstanding advances from the FHLB of Indianapolis. Furthermore, the
Association has access to the Federal Reserve Bank discount window.
Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments
such as overnight deposits. On a longer-term basis, the Association maintains a
strategy of investing in various loans, mortgage-backed securities and
investment securities as described in greater detail under "Business - Lending
Activities" and "- Investment Activities." The Association uses its sources of
funds primarily to meet its ongoing commitments, to pay maturing savings
certificates and savings withdrawals, fund loan commitments and maintain a
portfolio of investment and mortgage-backed securities. At June 30, 1996, the
total approved loan commitments outstanding amounted to $689,000. At the same
date, commitments under unused lines of credit amount to $523,000 and the
unadvanced portion of construction loans approximated $2.2 million. Certificates
of deposit scheduled to mature in one year or less at June 30, 1996 totalled
$20.9 million. The Association believes that it has adequate resources to fund
all of its commitments and that it can adjust the rate of certificates of
deposit in order to retain deposits in changing interest rate environments.
The Company, as a separately incorporated holding company, will have no
significant operations other than serving as sole stockholder of the
Association. On an unconsolidated basis, the Company initially will have no paid
employees. The Company's assets will consist
-53-
<PAGE>
of its investment in the Association and the net proceeds retained from the
Offerings (see "Use of Proceeds"), and its sources of income will consist
primarily of earnings from the investment of such funds as well as any dividends
from the Association. The only expenses expected to be incurred initially by the
Company will relate to its reporting obligations under the Exchange Act, and
related expenses as a publicly traded company. Management believes that the
Company currently has adequate liquidity available to respond to its liquidity
demands.
Impact of Inflation and Changing Prices
The financial statements and related financial data presented herein
have been prepared in accordance with generally accepted accounting principles,
which require the measurement of financial position and operating results in
terms of historical dollars, without considering changes in relative purchasing
power over time due to inflation.
Unlike most industrial companies, virtually all of the Association's
assets and liabilities are monetary in nature. As a result, interest rates
generally have a more significant impact on a financial institution's
performance than does the effect of inflation.
Recent Accounting Pronouncements
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."
Pursuant to SFAS No. 125, after a transfer of financial assets, an entity would
be required to recognize all financial assets and servicing it controls and
liabilities it has incurred and, conversely, would not be required to recognize
financial assets when control has been surrendered and liabilities when
extinguished. SFAS No. 125 provides standards for distinguishing transfers of
financial assets that are sales from transfers that are secured borrowings. SFAS
No. 125 will be effective with respect to the transfer and servicing of
financial assets and the extinguishment of liabilities occurring after December
31, 1996, with earlier application prohibited. Management of the Association
does not believe adoption of SFAS No. 125 will have a material effect on the
Association's financial condition or results of operations.
BUSINESS
Market Area
The Association conducts its operations out of one full service office
located in Lawrenceburg, Indiana, which represents the county seat and largest
town in Dearborn County, Indiana. In addition to the main office, the
Association maintains a loan production office in Lawrenceburg, Indiana.
Dearborn County is located in southeastern Indiana near
-54-
<PAGE>
the borders of Indiana, Kentucky and Ohio. The primary market area for the
Association is considered to consist of Dearborn County, and to a much lesser
extent, the counties of Switzerland and Franklin in Indiana, Hamilton, Ripley
and Clemont in Ohio, and Boone and Kenton in Kentucky.
Dearborn County is included in the Cincinnati metropolitan statistical
area. Dearborn County's economy has traditionally been supported by
manufacturing, together with employment in services, wholesale/retail trade and
miscellaneous other employment sectors. While manufacturing employment continues
to account for the highest proportion of industry earnings in Dearborn County,
manufacturing employment has been recently declining and employment growth has
been occurring mostly in services and wholesale/retail trade. The favorable
demographic growth being realized in Dearborn County has also supported
employment growth in the construction industry. Based on 1994 data (the most
recent data available), the largest employment sector in Dearborn County is
wholesale/retail trade (23% of total employment) followed by services (21% of
total employment) and manufacturing (14% of total employment). The balance of
employment in Dearborn County is concentrated in government and construction.
Lawrenceburg's location on the Ohio River and its proximity to
Cincinnati makes it the center of economic activity in Dearborn County, and many
of the largest employers in Dearborn County are based in Lawrenceburg. The
current largest employer in Dearborn County is Joseph Seagram's and Sons. Based
in Lawrenceburg, Joseph Seagram's and Sons is the largest distillery of its kind
in the world with approximately 750 employees. Other major employers in Dearborn
County include Aurora Casket Company, Dearborn County Hospital and American
Electric Power. Economic activity in the Association's primary market area is
expected to be further enhanced by the building of a riverboat gambling casino
in Lawrenceburg, which will create additional jobs and result in economic growth
throughout the entire business community. The casino is scheduled to open in
late 1996. Overall, the economy within Dearborn County is fairly diverse, which
provides for a relatively stable economic environment.
Lending Activities
General. At June 30, 1996, the Association's net loans receivable
(including loans classified as held for sale) totalled $46.8 million, which
represented 73.7% of the Association's $63.5 million of total assets at that
date. The principal lending activity of the Association is the origination of
single-family residential loans and, to a lesser extent, multi-family
residential and nonresidential real estate loans, construction loans and
consumer and other loans. Substantially all of the Association's loan portfolio
consists of conventional loans, which are loans that are neither insured by the
Federal Housing Administration nor partially guaranteed by the Department of
Veterans Affairs.
-55-
<PAGE>
As a federally-chartered savings association, the Association has
general authority to originate and purchase loans secured by real estate located
throughout the United States. Notwithstanding this nationwide lending authority,
substantially all of the mortgage loans in the Association's portfolio are
secured by properties located in Indiana, Ohio and Kentucky, with a majority of
the mortgage loans in the Association's portfolio secured by property located in
the Association's market area in Dearborn County in Southeastern Indiana.
Nevertheless, the Association has recently increased its origination of loans in
neighboring counties within Ohio and Kentucky.
Federal regulations permit the Association to invest without limitation
in residential mortgage loans and up to four times its capital in loans secured
by nonresidential or commercial real estate. The Association is also permitted
to invest in secured and unsecured consumer loans in an amount not exceeding 35%
of the Association's total assets; however, such 35% limit may be exceeded for
certain types of consumer loans, such as home equity and property improvement.
In addition, the Association is permitted to invest up to 10% of its total
assets in secured (by other than real estate) and unsecured loans for
commercial, corporate, business or agricultural purposes.
Although the Association historically originated loans with lesser
dollar balances than was permitted by federal regulations, current loans-to-one
borrower limitations may restrict its ability to do business with certain
customers. A savings association generally may not make loans to one borrower
and related entities in an amount which exceeds 15% of its unimpaired capital
and surplus, although loans in an amount equal to an additional 10% of
unimpaired capital and surplus may be made to a borrower if the loans are fully
secured by readily marketable securities. See "Regulation - The Association
- - General." At June 30, 1996, the Association's limit on loans-to-one borrower
was $1.0 million and its five largest loans or groups of loans-to-one borrower,
including related entities, ranged from $443,000 to $523,000. The $523,000 loan
consists of a nonresidential loan secured by a nursing home located in
Lawrenceburg, Indiana. In addition, during August 1996, the Association
originated a commercial real estate loan secured by an office building located
in Cincinnati, Ohio with a principal balance of $5.1 million, with the
Association retaining $758,000 of the loan and selling participation interests
to several other financial institutions for the remaining principal balance. If
such loan had been outstanding at June 30, 1996, it would have represented the
Association's largest loan as of such date. All of the Association's five
largest loans or groups of loans consisted of nonresidential loans and all of
such loans were performing in accordance with their terms at June 30, 1996.
-56-
<PAGE>
Loan Portfolio Composition. The following table sets forth the
composition of Association's loan portfolio by type of loan at the dates
indicated.
<TABLE>
<CAPTION>
June 30,
--------------------------------------------------------------------------
1996 1995 1994
--------------------- ---------------------- ----------------------
Amount % Amount % Amount %
-------- ------- --------- ------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
Single-family residential(1) .............. $35,346 71.4% $36,793 74.6% $35,170 74.1%
Multi-family residential .................. 543 1.1 581 1.2 621 1.3
Nonresidential real estate ................ 3,183 6.4 2,703 5.5 3,627 7.7
Construction(2) ........................... 3,477 7.0 3,156 6.4 3,197 6.7
------- ------ ------- ------ ------- ------
Total real estate loans ................ 42,549 85.9 43,233 87.7 42,615 89.8
Consumer and other loans:
Loans secured by savings accounts ......... 86 .2 133 .3 196 .4
Second mortgage, home equity and
improvement loans ....................... 2,095 4.2 1,773 3.6 851 1.8
Mobile home loans ......................... 4,125 8.3 3,463 7.0 3,033 6.4
Other(3) .................................. 665 1.4 706 1.4 744 1.6
------- ----- ------- ------ ------- ------
Total consumer and other loans ......... 6,971 14.1 6,075 12.3 4,824 10.2
------- ----- ------- ------ ------- ------
Total loans .......................... 49,520 100.0% 49,308 100.0% 47,439 100.0%
------- ===== ------- ====== ------- ======
Less:
Loans in process .......................... 2,212 1,491 1,432
Deferred loan origination fees ............ 196 211 229
Unearned discount ......................... 100 152 237
Allowance for loan losses ................. 226 214 212
------- ------- ------
Net loans ............................ $46,786 $47,240 $45,329
======== ======= =======
</TABLE>
- ------------------------------------
(1) At June 30, 1996, 1995 and 1994, includes $182,000, $489,000 and $445,000
of loans classified as held for sale, respectively.
(2) Includes construction loans which convert to permanent loans at the end
of the construction period. Also includes one land acquisition and
development loan which amounted to $373,000 at June 30, 1996.
(3) Consists solely of Small Business Administration loans guaranteed by the
U.S. Government.
-57-
<PAGE>
Contractual Principal Repayments and Interest Rates. The following
table sets forth certain information at June 30, 1996 regarding the dollar
amount of loans maturing in the Association's portfolio, based on the
contractual terms to maturity, after giving effect to net items. Demand loans,
loans having no stated schedule of repayments and no stated maturity and
overdrafts are reported as due in one year or less.
<TABLE>
<CAPTION>
Due 3-5 Due 5-10 Due 10-15 Due more than
years after years after years after 15 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>
Single-family residential $ 575 $ 621 $ 671 $1,510 $4,979 $ 7,341 $19,649 $35,346
Multi-family residential 17 19 21 48 169 269 -- 543
Nonresidential real estate 105 115 125 288 992 1,558 -- 3,183
Construction (1) 73 80 86 194 646 963 1,435 3,477
Consumer and other 326 358 394 911 3,205 1,777 -- 6,971
----- ----- ----- ----- ----- ------- -------- ------
Total $1,096 $1,193 $1,297 $2,951 $9,991 $11,908 $21,084 $49,520
===== ===== ===== ===== ===== ====== ====== ======
</TABLE>
- ------------------------------------
(1) Includes construction loans which convert to permanent loans at the end of
the construction period and $373,000 of land acquisition and development
loans.
-58-
<PAGE>
Scheduled contractual amortization of loans does not reflect the
expected term of the Association's loan portfolio. The average life of loans is
substantially less than their contractual terms because of prepayments and
due-on-sale clauses, which give the Association the right to declare a
conventional loan immediately due and payable in the event, among other things,
that the borrower sells the real property subject to the mortgage and the loan
is not repaid. The average life of mortgage loans tends to increase when current
mortgage loan rates are higher than rates on existing mortgage loans and,
conversely, decrease when rates on existing mortgage loans are lower than
current mortgage loan rates (due to refinancings of adjustable-rate and
fixed-rate loans at lower rates). Under the latter circumstance, the weighted
average yield on loans decreases as higher-yielding loans are repaid or
refinanced at lower rates.
The following table sets forth the dollar amount of all loans, before
net items, due after one year from June 30, 1996 which have fixed interest rates
or which have floating or adjustable interest rates.
Fixed Floating or
Rates Adjustable Rates Total
------- ---------------- -------
(In Thousands)
Single-family residential $23,347 $11,424 $34,771
Multi-family residential -- 526 526
Nonresidential real estate 227 2,851 3,078
Construction 3,404 -- 3,404
Consumer and other 5,079 1,566 6,645
------ ------ ------
Total $32,057 $16,367 $48,424
====== ====== ======
Origination, Purchase and Sale of Loans. The lending activities of the
Association are subject to the written, non-discriminatory, underwriting
standards and loan origination procedures established by the Association's Board
of Directors and management. Loan originations are obtained from a variety of
sources, including referrals from real estate brokers, developers, builders,
existing customers, newspaper, radio, periodical advertising and walk-in
customers. Loan applications are taken by lending personnel, and the loan
department supervises the obtainment of credit reports, appraisals and other
documentation involved with a loan. Property valuations are generally performed
by independent outside appraisers approved by the Association's Board of
Directors. Title and hazard insurance are required on all security properties.
Applications for owner-occupied residential mortgage loans also are
obtained through two field loan originators who solicit and refer residential
mortgage loan applications to the Association. These representatives are
compensated in part on a commission basis and provide convenient origination
services during banking and nonbanking hours. In addition, the Association also
occasionally utilizes the services of one or more loan brokers. The
-59-
<PAGE>
Association's loan approval process is intended to assess the borrower's ability
to repay the loan, the viability of the loan and the adequacy of the value of
the property that will secure the loan. Single-family residential loans which do
not exceed the limit established by the Federal Home Loan Mortgage Corporation
("FHLMC") (which is currently $203,150) and home improvement and home equity
loans which do not exceed $15,000 may be approved by the Association's President
or Vice President. Single-family residential loans and home improvement and home
equity loans in excess of such amounts, as well as all other mortgage or
consumer loans, require approval by the Association's Loan Committee, which
consists of Messrs. Meador, Denney, Siemers and Fraley. In addition, all loans
committed or approved by the Association are reported to the Board of Directors
of the Association and ratified by the Board.
Historically, the Association has originated substantially all of the
loans in its portfolio and has held them until maturity. Nevertheless, the
Association's residential loans are generally made on terms, conditions and
documentation which permit the sale to the FHLMC and other institutional
investors in the secondary market. Since 1982, the Association has occasionally
sold participations in mortgage loans to other financial institutions. The
majority of such loan sales in recent years have consisted of sales of
participation interests in large nonresidential loans on a non-recourse basis in
order to reduce the Association's potential credit risk and loss exposure.
In addition, since 1985, the Association has sold selected conforming
fixed-rate single-family residential loans to the FHLMC and other institutional
investors in the secondary market as market and economic conditions permit as a
means of minimizing interest rate risk as well as generating additional funds
for lending and other purposes. At June 30, 1996, loans classified as held for
sale amounted to $182,000. Sales of loans to date generally have been under
terms which do not provide any recourse to the Association by the purchaser in
the event of default on the loan by the borrower.
The Association generally continues to collect payments on conventional
loans which it sells to others as they become due, to inspect the security
property, to make certain insurance and tax advances on behalf of borrowers and
to otherwise service such loans. The Association records a premium or discount,
as adjusted for a normal servicing fee, when it realizes a gain or loss from the
sale of loans, respectively. The Association amortizes such premiums and
discounts over the estimated lives of the loans using the level yield method,
and recognizes the servicing fee when the related loan payments are received. At
June 30, 1996, the Association was servicing $14.1 million of loans for others.
Historically, the Association has not been an active purchaser of
loans. At June 30, 1996, loans purchased and serviced by others totalled
$522,000. The Association does not currently intend to become an active
purchaser of loans in the future.
-60-
<PAGE>
The following table shows total loans originated, purchased, sold and
repaid during the periods indicated.
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------
1996 1995 1994
------- --------- ----------
(In Thousands)
<S> <C> <C> <C>
Loan originations:
Single-family residential(1) $10,403 $ 4,220 $ 15,993
Multi-family residential -- -- --
Nonresidential real estate 587 64 1,286
Construction 3,315 3,438 3,816
Consumer and other 2,497 2,460 857
------ ------- -------
Total loans originated 16,802 10,182 21,952
Loan purchases -- -- --
------ ------- -------
Total loans originated and purchased 16,802 10,182 21,952
Sales and loan principal
reductions:
Loans sold 8,115 2,470 6,442
Loan principal reductions 9,185 5,776 15,279
Conversion of residential loans to
mortgage-backed securities -- -- 2,058
------- ------- -------
Total loans sold and converted and
principal reductions 17,300 8,246 23,779
Increase (decrease) due to
other items, net 44 (25) 396
------ ------- -------
Net increase (decrease) in
loan portfolio(1) $ (454) $ 1,911 $ (1,431)
======= ======= =======
</TABLE>
- ------------------------------------
(1) Includes loans originated for sale in the secondary market.
Residential Real Estate Loans. Historically savings institutions have
concentrated their lending activities on the origination of loans secured
primarily by first mortgage liens on existing single-family residences. At June
30, 1996, $35.3 million or 71.4% of the Association's total loan portfolio
(including loans classified as held for sale) consisted of such loans.
In recent years, the Association has been emphasizing for its portfolio
single-family residential mortgage loans which provide for periodic adjustments
to the interest rate. The loans emphasized by the Association have 15 to 30-year
terms and an interest rate which adjusts every year in accordance with a
designated index (the weekly average yield on U.S. Treasury securities adjusted
to a constant comparable maturity of one year, as made available by the Federal
Reserve Board). There is a cap on the amount of any increase or decrease in the
interest rate per year, and various caps, depending on when the loan was
originated, on the amount which the interest rate can increase or decrease over
the life of the loan. The Association's adjustable-rate loans can, upon payment
of a fee, be converted into fixed-rate loans during certain specified periods.
The Association's adjustable-rate loans
-61-
<PAGE>
currently being originated are not assumable and do not contain prepayment
penalties. The Association has not engaged in the practice of using a cap on the
payments that could allow the loan balance to increase rather than decrease,
resulting in negative amortization. Approximately 34.6% of the permanent
single-family residential loans in the Association's loan portfolio at June 30,
1996 (including loans classified as held for sale) had adjustable interest
rates.
The demand for adjustable-rate loans in the Association's primary
market area has been a function of several factors, including the level of
interest rates, the expectations of changes in the level of interest rates and
the difference between the interest rates and loan fees offered for fixed-rate
loans and adjustable-rate loans. The relative amount of fixed-rate and
adjustable-rate residential loans that can be originated at any time is largely
determined by the demand for each in a competitive environment.
Adjustable-rate loans decrease the risks associated with changes in
interest rates but involve other risks, primarily because as interest rates
rise, the payment by the borrower rises to the extent permitted by the terms of
the loan, thereby increasing the potential for default. At the same time, the
marketability of the underlying property may be adversely affected by higher
interest rates. The Association believes that these risks, which have not had a
material adverse effect on the Association to date, generally are less than the
risks associated with holding fixed-rate loans in an increasing interest rate
environment.
The Association continues to originate long-term, fixed-rate loans in
order to provide a full range of products to its customers, but generally only
under terms, conditions and documentation which permit the sale thereof in the
secondary market. At June 30, 1996, approximately $23.1 million or 65.4% of the
permanent single-family residential loans in the Association's loan portfolio
(including loans classified as held for sale) consisted of loans which provide
for fixed rates of interest. Although these loans provide for repayments of
principal over a fixed period of up to 30 years, it is the Association's
experience that such loans remain outstanding for a substantially shorter period
of time. Since 1985, the Association has sold selected conforming, fixed-rate
single-family residential loans to the FHLMC and other institutional investors
in the secondary market as economic and market conditions permit.
The Association is permitted to lend up to 100% of the appraised value
of the real property securing a residential loan (referred to as the
loan-to-value ratio); however, if the amount of a residential loan originated or
refinanced exceeds 90% of the appraised value, the Association is required by
federal regulations to obtain mortgage insurance on the portion of the principal
amount that exceeds 80% of the appraised value of the security property.
Pursuant to underwriting guidelines adopted by the Board of Directors, the
Association will lend up to 95% of the appraised value of the property securing
a single-family residential loan, and generally requires borrowers to obtain
private mortgage insurance on the portion of the principal amount of the loan
that exceeds 80% of the appraised value of the security property.
-62-
<PAGE>
The Association generally requires title insurance insuring the
priority of its mortgage lien, as well as fire and extended coverage casualty
insurance in order to protect the properties securing its residential and other
mortgage loans. Borrowers may be required to advance funds, with each monthly
payment of principal and interest, to a loan escrow account from which the
Association makes disbursements for items such as real estate taxes, hazard
insurance premiums and mortgage insurance premiums as they become due. The
properties securing all of the Association's mortgage loans are appraised by
independent appraisers approved by the Board of Directors.
Multi-Family Residential and Nonresidential Real Estate Loans. At June
30, 1996, $543,000 or 1.1% and $3.2 million or 6.4% of the Association's total
loan portfolio (including loans classified as held for sale) consisted of loans
secured by existing multi-family residential and nonresidential real estate,
respectively. The Association's multi-family residential and nonresidential real
estate loan portfolio includes, for the most part, 32 loans secured by apartment
buildings, small office buildings, retail establishments and other special
purpose properties located within the Association's primary lending area. The
Association's largest multi-family residential or non-residential real estate
loan at June 30, 1996 consists of a $523,000 non-residential real estate loan
secured by a nursing home located in Lawrenceburg, Indiana. However, during
August 1996, the Association originated a commercial real estate loan secured by
an office building located in Cincinnati, Ohio with a principal balance of $5.1
million, with the Association retaining $758,000 of the loan and selling
participation interests to several other financial institutions for the
remaining principal balance. If such loan had been outstanding at June 30, 1996
it would have represented the Association's largest multi-family residential or
nonresidential loan as of such date.
Multi-family residential and nonresidential real estate loans have
terms which range up to 25 years. Although some of the multi-family residential
and nonresidential real estate loans which were originated in prior periods have
fixed interest rates, interest rates on originations in recent years generally
adjust at a one-year interval in accordance with a designated index. The maximum
adjustment in any one period is 1% with a 5% cap over the life of the loan. At
June 30, 1996, $3.7 million or 98.9% of the multi-family residential and
nonresidential real estate loan portfolio consisted of adjustable-rate loans.
Multi-family residential and nonresidential real estate loans are
generally made in amounts up to 75% of the appraised value of the security
property. All appraisals are generally performed by an independent appraiser
designated by the Association and are reviewed by management. In originating
multi-family residential and nonresidential real estate loans, the Association
considers the quality of the property, the credit of the borrower, cash flow of
the project, location of the real estate and the quality of management involved
with the property.
Multi-family residential and nonresidential real estate lending is
generally considered to involve a higher degree of risk than single-family
residential lending. Such lending
-63-
<PAGE>
typically involves large loan balances concentrated in a single borrower or
groups of related borrowers. In addition, the payment experience on loans
secured by income-producing properties is typically dependent on the successful
operation of the related real estate project and thus may be subject to a
greater extent to adverse conditions in the real estate market or in the economy
generally. The Association generally attempts to mitigate the risks associated
with multi-family residential and nonresidential real estate lending by, among
other things, lending primarily in its market area and using low loan-to-value
ratios in the underwriting process.
Construction Loans. The Association also makes construction loans to
individuals for the construction of their residences. At June 30, 1996,
construction loans amounted to $3.5 million or 7.0% of the Association's total
loan portfolio (including loans classified as held for sale). Included in such
amount was one land acquisition and development loan with a principal balance as
of June 30, 1996 of $373,000.
Construction lending is generally limited to the Association's primary
lending area. Construction loans are structured to be converted to permanent
loans at the end of the construction phase, which typically does not exceed six
months. Construction loans have rates and terms which generally match the
non-construction loans then offered by the Association, except that during the
construction phase the borrower only pays interest on the loan. Advances are
made on a percentage of completion basis. Construction loans are underwritten
pursuant to the same general guidelines used for originating permanent loans. In
addition, the Association has in the past (and may continue in the future on a
case-by-case basis) to originate a limited amount of land acquisition and
development loans.
Construction financing is generally considered to involve a higher
degree of risk of loss than long-term financing on improved, owner-occupied real
estate because of the uncertainties of construction, including the possibility
of costs exceeding the initial estimates and the need to obtain a tenant or
purchaser if the property will not be owner-occupied. The Association generally
attempts to mitigate the risks associated with construction lending by, among
other things, lending primarily in its market area and using low loan-to-value
ratios in the underwriting process.
Consumer and Other Loans. Subject to restrictions contained in
applicable federal laws and regulations, the Association is authorized to make
loans for a wide variety of personal or consumer purposes. At June 30, 1996,
$7.0 million or 14.1% of the Association's total loan portfolio (including loans
classified as held for sale) consisted of consumer loans.
The Association has been emphasizing the origination of consumer loans
in recent years in order to provide a full range of financial services to its
customers and because such loans generally have shorter terms and higher
interest rates than mortgage loans. The consumer loans offered by the
Association include second mortgage and home improvement loans, home equity
lines of credit, deposit account secured loans and loans that are secured by
mobile homes.
-64-
<PAGE>
Second mortgage and home improvement loans are originated by the
Association for up to 90% of the appraised value, less the amount of any
existing prior liens on the property. The Association also offers home equity
lines of credit in amounts up to 75% of the appraised value, less the amount of
any existing prior liens. Second mortgage and home equity line of credit loans
have a maximum term of 20 years, and the interest rate is dependent upon current
market conditions. The Association secures the loan with a mortgage on the
property (generally a second mortgage) and will originate the loan even if
another institution holds the first mortgage. Home improvement loans cannot
exceed $15,000, while second mortgage and home equity line of credit loans can
be made up to $100,000 upon receipt of approval by the Association's Loan
Committee. At June 30, 1996, second mortgage and home improvement loans and
lines of credit totalled $2.1 million or 4.2% of the Association's total loan
portfolio (including loans classified as held for sale).
The Association currently offers loans secured by deposit accounts,
which amounted to $86,000 or .2% of the Association's total loan portfolio
(including loans classified as held for sale) at June 30, 1996. Such loans are
originated for up to 95% of the account balance, with a hold placed on the
account restricting the withdrawal of the account balance.
The Association also originates mobile home loans through a corporation
located in Ohio which specializes in the financing, origination and servicing of
mobile home loans. This company markets the dealer base, receives and processes
all credit applications, submits applications to the Association for approval
and funding and assists in the collection of delinquent accounts and resale of
repossessed collateral. Mobile homes securing such loans are located primarily
in Ohio, Kentucky and Indiana. Mobile home loans are typically made at a higher
yield and for a shorter maturity than single-family residential loans. Most of
the Association's mobile home loans have been originated with fixed rates of
interest and are generally made in amounts of up to a maximum of 90% of the
buyer's cost. Mobile home loans are limited to a term of 15 years or less. At
June 30, 1996, mobile home loans totalled $4.1 million or 8.3% of the
Association's total loan portfolio (including loans classified as held for
sale).
Consumer loans generally have shorter terms and higher interest rates
than mortgage loans but generally involve more credit risk than mortgage loans
because of the type and nature of the collateral and, in certain cases, the
absence of collateral. In addition, consumer lending collections are dependent
on the borrower's continuing financial stability, and thus are more likely to be
adversely effected by job loss, divorce, illness and personal bankruptcy. In
most cases, any repossessed collateral for a defaulted consumer loan will not
provide an adequate source of repayment of the outstanding loan balance because
of improper repair and maintenance of the underlying security. The remaining
deficiency often does not warrant further substantial collection efforts against
the borrower. The Association believes that the generally higher yields earned
on consumer loans compensate for the increased credit risk associated with such
loans and that consumer loans are important to its efforts to increase rate
sensitivity, shorten the average maturity of its loan portfolio and provide a
full range of services to its customers.
The Association previously purchased certain Small Business
Administration loans which are guaranteed by the U.S. Government. At June 30,
1996, $665,000 or 1.4% of the
-65-
<PAGE>
Association's total loan portfolio (including loans classified as held for sale)
consisted of such Small Business Administration loans. The Association may
consider purchasing additional Small Business Administration loans in the
future.
Loan Origination and Other Fees. In addition to interest earned on
loans, the Association receives loan origination fees or "points" for
originating loans. Loan points are a percentage of the principal amount of a
mortgage loan and are charged to the borrower in connection with the origination
of the loan.
In accordance with SFAS No. 91, which deals with the accounting for
non-refundable fees and costs associated with originating or acquiring loans,
the Association's loan origination fees and certain related direct loan
origination costs are offset, and the resulting net amount is deferred and
amortized as interest income over the contractual life of the related loans as
an adjustment to the yield of such loans. At June 30, 1996, the Association had
$196,000 of loan fees which had been deferred and are being recognized as income
over the contractual maturities of the related loans.
Asset Quality
General. When a borrower fails to make a required payment on a loan,
the Association attempts to cure the deficiency by contacting the borrower and
seeking payment. Contacts are generally made following the fifteenth day after a
payment is due. In most cases, deficiencies are cured promptly. If a delinquency
extends beyond 15 days, the loan and payment history is reviewed and efforts are
made to collect the loan. While the Association generally prefers to work with
borrowers to resolve such problems, when the account becomes 90 days delinquent,
the Association does institute foreclosure or other proceedings, as necessary,
to minimize any potential loss.
Loans are placed on non-accrual status when, in the judgment of
management, the probability of collection of interest is deemed to be
insufficient to warrant further accrual. When a loan is placed on non-accrual
status, previously accrued but unpaid interest is deducted from interest income.
As a matter of policy, the Association does not accrue interest on loans past
due 90 days or more except when the estimated value of the collateral and
collection efforts are deemed sufficient to ensure full recovery.
Real estate acquired by the Association as a result of foreclosure or
by deed-in-lieu of foreclosure are classified as real estate owned until sold.
Pursuant to a statement of position ("SOP 92-3") issued by the American
Institute of Certified Public Accountants in April 1992, which provides guidance
on determining the balance sheet treatment of foreclosed assets in annual
financial statements for periods ending on or after December 15, 1992, there is
a rebuttable presumption that foreclosed assets are held for sale and such
assets are recommended to be carried at the lower of fair value minus estimated
costs to sell the property, or cost (generally the balance of the loan on the
property at the date of acquisition). After the date of acquisition, all costs
incurred in maintaining the property are expensed and costs incurred for the
improvement or development of such property are capitalized up to the extent of
fair value. The Association's accounting for its real estate owned complies with
the guidance set forth in SOP 92-3.
-66-
<PAGE>
Delinquent Loans. The following table sets forth information concerning
delinquent loans at June 30, 1996, in dollar amount and as a percentage of the
Association's total loan portfolio (including loans classified as held for
sale). The amounts presented represent the total outstanding principal balances
of the related loans, rather than the actual payment amounts which are past due.
<TABLE>
<CAPTION>
Single-family Multi-family Nonresidential
Residential Residential Real Estate Construction
---------------------- ---------------------- ---------------------- --------------------
Amount Percentage Amount Percentage Amount Percentage Amount Percentage
------- ---------- -------- ----------- -------- ----------- -------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans delinquent for:
30-59 days $410 1.2% $ -- --% $ -- --% $110 3.2%
60-89 days 15 -- -- -- -- -- -- --
90 days and over 13 -- -- -- -- -- -- --
--- --- ----- ---- ---- ---- --- ---
Total delinquent loans $438 1.2% $ -- --% $ -- --% $110 3.2%
=== === ===== ==== ==== ==== === ===
<CAPTION>
Consumer and Other Total
------------------------- --------------------------
Amount Percentage Amount Percentage
--------- ----------- ---------- -----------
Loans delinquent for:
30-59 days $46 .7% $566 1.1%
60-89 days 29 .4 44 .1
90 days and over 14 .2 27 .1
--- --- --- ---
Total delinquent loans $ 89 1.3% $637 1.3%
=== === ==== ===
</TABLE>
-67-
<PAGE>
Non-Performing Assets. The following table sets forth the amounts and
categories of the Association's non-performing assets at the dates indicated.
The Association did not have any troubled debt restructurings at any of the
dates presented.
June 30,
----------------------------
1996 1995 1994
----- ------- ------
(Dollars in Thousands)
Non-accruing loans:
Single-family residential ................ $ 13 $-- $ 30
Multi-family residential ................. -- -- --
Nonresidential real estate ............... -- -- 32
Construction ............................. -- -- --
Consumer and other ....................... 14 66 6
---- ---- ----
Total non-accruing loans ............. 27 66 68
Accruing loans greater than 90 days
delinquent:
Single-family residential ................ -- -- 79
Multi-family residential ................. -- -- --
Nonresidential real estate ............... -- -- --
Construction ............................. -- -- --
Consumer and other ....................... -- -- --
---- ---- ----
Total accruing loans greater than
90 days delinquent ................... -- -- 79
---- ---- ----
Total non-performing loans ............. 27 66 147
Real estate owned .......................... -- 23 --
---- ---- ----
Total non-performing assets ............ $ 27 $ 89 $147
==== ==== ====
Total non-performing loans as a
percentage of total loans ............ .06% .14% .33%
==== ==== ====
Total non-performing assets as a
percentage of total assets ........... .04% .14% .24%
==== ==== ====
-68-
<PAGE>
Classified Assets. Federal regulations require that each insured
savings association classify its assets on a regular basis. In addition, in
connection with examinations of insured institutions, federal examiners have
authority to identify problem assets and, if appropriate, classify them. There
are three classifications for problem assets: "substandard," "doubtful" and
"loss." Substandard assets have one or more defined weaknesses and are
characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. Doubtful assets have
the weaknesses of substandard assets with the additional characteristic that the
weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss. An asset classified loss is considered uncollectible and of
such little value that continuance as an asset of the institution is not
warranted. Another category designated "special mention" also must be
established and maintained for assets which do not currently expose an insured
institution to a sufficient degree of risk to warrant classification as
substandard, doubtful or loss. Assets classified as substandard or doubtful
require the institution to establish general allowances for loan losses. If an
asset or portion thereof is classified loss, the insured institution must either
establish specific allowances for loan losses in the amount of 100% of the
portion of the asset classified loss, or charge-off such amount. General loss
allowances established to cover possible losses related to assets classified
substandard or doubtful may be included in determining an institution's
regulatory capital, while specific valuation allowances for loan losses do not
qualify as regulatory capital. Federal examiners may disagree with an insured
institution's classifications and amounts reserved. For information concerning a
recent OTS proposal which would revise the amount of general loss allowances
required with respect to classified and other assets, see "- Allowance for Loan
Losses."
Exclusive of assets classified loss which have been fully reserved or
charged-off, the Association's classified assets at June 30, 1996 consisted of
$27,000 of assets classified as special mention, no assets classified as
substandard and no assets classified as doubtful. At June 30, 1996, the
Association's classified assets totalled $27,000 or .04% of total assets.
Allowance for Loan Losses. It is management's policy to maintain an
allowance for estimated losses on loans based upon an assessment of prior loss
experience, the volume and type of lending conducted by the Association,
industry standards, past due loans, general economic conditions and other
factors related to the collectibility of the loan portfolio.
Effective December 21, 1993, the OTS, in conjunction with the Office of
the Comptroller of the Currency, the FDIC and the Federal Reserve Board, issued
an Interagency Policy Statement on the Allowance for Loan and Lease Losses
("Policy Statement"). The Policy Statement, which effectively supersedes the
proposed guidance issued in September 1992, includes guidance (i) on the
responsibilities of management for the assessment and establishment of an
adequate allowance and (ii) for the agencies' examiners to use in evaluating the
adequacy of such allowance and the policies utilized to determine such
allowance. The Policy Statement also sets forth quantitative measures for the
allowance with respect to assets classified substandard and doubtful and with
respect to
-69-
<PAGE>
the remaining portion of an institution's loan portfolio. Specifically, the
Policy Statement sets forth the following quantitative measures which examiners
may use to determine the reasonableness of an allowance: (i) 50% of the
portfolio that is classified doubtful; (ii) 15% of the portfolio that is
classified substandard and (iii) for the portions of the portfolio that have not
been classified (including loans designated special mention), estimated credit
losses over the upcoming twelve months based on facts and circumstances
available on the evaluation date. While the Policy Statement sets forth this
quantitative measure, such guidance is not intended as a "floor" or "ceiling."
The following table sets forth an analysis of the Association's
allowance for loan losses during the periods indicated.
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------
1996 1995 1994
------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C>
Total loans outstanding(1) $49,520 $49,308 $45,329
====== ====== ======
Average loans outstanding(1) $47,529 $46,294 $45,720
====== ====== ======
Balance at beginning of period 214 212 174
Charge-offs -- (6) 34
Recoveries -- -- 60
------- ------ ------
Net recoveries (charge-offs) -- (6) 26
Provision for losses on loans 12 8 12
------ ------ ------
Balance at end of period $ 226 $ 214 $ 212
====== ====== ======
Allowance for loan losses as a percent
of total loans outstanding .46% .43% .47%
=== === ===
Ratio of net charge-offs to average
loans outstanding --% .01% .07%
==== === ===
</TABLE>
- ---------------------
(1) Total and average loans outstanding include loans classified as held
for sale during the respective periods.
-70-
<PAGE>
The following table sets forth information concerning the allocation of
the Association's allowance for loan losses by loan categories at the dates
indicated.
<TABLE>
<CAPTION>
June 30,
-------------------------------------------------------------------------------------------
1996 1995 1994
---------------------------- ---------------------------- ------------------------
Percent of Percent of Percent of
Total Loans Total Loans Total Loans
Amount by Category Amount by Category Amount by Category
------- ------------ -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Single family residential loans $ 68 71.4% $ 64 74.6% $ 53 74.1%
Multi-family residential loans 22 1.1 21 1.2 11 1.3
Nonresidential real estate loans 68 6.4 64 5.5 119 7.7
Construction loans 11 7.0 11 6.4 9 6.7
Consumer and other loans 57 14.1 54 12.3 20 10.2
--- ----- --- ----- --- -----
Total $226 100.0% $214 100.0% $212 100.0%
=== ===== === ===== === =====
</TABLE>
Management of the Association believes that the reserves it has
established are adequate to cover any potential losses in the Association's loan
portfolio. However, future adjustments to these reserves may be necessary, and
the Association's results of operations could be adversely affected if
circumstances differ substantially from the assumptions used by management in
making its determinations in this regard.
Investment Activities
Mortgage-Backed Securities. Mortgage-backed securities represent a
participation interest in a pool of single-family or multi-family mortgages, the
principal and interest payments on which are passed from the mortgage
originators, through intermediaries (generally quasi-governmental agencies) that
pool and repackage the participation interests in the form of securities, to
investors such as the Association. Such quasi-governmental agencies, which
guarantee the payment of principal and interest to investors, primarily include
the FHLMC, the FNMA and the GNMA.
The FHLMC is a corporation chartered by the U.S. Government and owned
by the 12 Federal Home Loan Banks and federally-insured savings institutions.
The FHLMC issues participation certificates backed principally by conventional
mortgage loans. The FHLMC guarantees the timely payment of interest and the
ultimate return of principal. FHLMC securities are indirect obligations of the
U.S. Government. The FNMA is a private corporation chartered by the U.S.
Congress with a mandate to establish a secondary market for conventional
mortgage loans. The FNMA guarantees the timely payment of principal and
interest, and FNMA securities are indirect obligations of the U.S. Government.
The GNMA is a government agency within the Department of Housing and Urban
Development which is intended to help finance government assisted housing
programs. The GNMA guarantees the timely payment of principal and interest, and
GNMA securities are backed by the full faith and credit of the U.S. Government.
Because the FHLMC, the FNMA and the GNMA were established to provide support for
low- and middle-income housing, there are limits to the maximum size of loans
that qualify for these programs. For example, the FNMA and the FHLMC currently
limit their loans secured by single-family, owner-occupied
-71-
<PAGE>
residences to $203,150. To accommodate larger-sized loans, and loans that, for
other reasons, do not conform to the agency programs, a number of private
institutions have established their own home-loan origination and securitization
programs.
Mortgage-backed securities typically are issued with stated principal
amounts, and the securities are backed by pools of mortgages that have loans
with interest rates that are within a range and have varying maturities. The
underlying pool of mortgages, i.e., fixed-rate or adjustable-rate, as well as
prepayment risk, are passed on to the certificate holder. The life of a
mortgage-backed pass-through security is equal to the life of the underlying
mortgages.
The Association invests in mortgage-backed securities which are insured
or guaranteed by the GNMA, the FHLMC or the FNMA, as well as mortgage-backed
securities which are issued by non-governmental entities. At June 30, 1996, the
carrying value of the Association's mortgage-backed securities amounted to $1.5
million (all of which was classified as available for sale) which represented
2.4% of the Association's $63.5 million of total assets at that date. All of the
Association's $1.5 million of mortgage-backed securities at June 30, 1996 was
insured or guaranteed by federal agencies, and all $1.5 million of such
securities had fixed rates of interest.
Mortgage-backed securities generally increase the quality of the
Association's assets by virtue of the insurance or guarantees that back them,
are more liquid than individual mortgage loans and may be used to collateralize
borrowings or other obligations of the Association.
-72-
<PAGE>
The following table sets forth the activity in the Association's
mortgage-backed securities portfolio during the periods indicated.
At or For the
Year Ended June 30,
-------------------------------------
1996 1995 1994
-------- ------- -------
(Dollars in Thousands)
Mortgage-backed securities
at beginning of period $ 3,008 $ 3,542 $ 1,578
Purchases -- 1,115 2,051
Conversions from mortgage loans -- -- 2,058
Sales (1,048) (755) (1,058)
Repayments (460) (893) (1,114)
Discount (premium)
amortization, net (4) (1) 27
------- ------- -------
Mortgage-backed securities
at end of period(1) $ 1,496 $ 3,008 $ 3,542
======= ======= =======
Weighted average yield at
end of period 8.09% 7.69% 7.41%
- ----------------------
(1) At June 30, 1996, 1995 and 1994, the market value of the Association's
mortgage-backed securities amounted to $1.5 million, $3.0 million and
$2.8 million, respectively.
Of the Association's $1.5 million of mortgage-backed securities at June
30, 1996, $394,000 with a weighted average yield of 7.98% was scheduled to
mature from one to five years; $232,000 with a weighted average yield of 8.47%
was scheduled to mature from five to ten years; and $866,000 with a weighted
average yield of 8.00% was scheduled to mature in over 10 years. Due to
prepayments of the underlying loans, the actual maturities of mortgage-backed
securities are substantially less than the scheduled maturities.
Investment Securities. Federally-chartered savings institutions have
authority to invest in various types of liquid assets, including United States
Treasury obligations, securities of various Federal agencies and of state and
municipal governments, certificates of deposit at federally-insured banks and
savings and loan associations, certain bankers' acceptances and Federal funds.
Subject to various restrictions, federally-chartered savings institutions may
also invest a portion of their assets in commercial paper, corporate debt
securities and mutual funds, the assets of which conform to the investments that
federally-chartered savings institutions are otherwise authorized to make
directly.
-73-
<PAGE>
The Association's investment securities portfolio is managed by the
President, the Vice President and/or the Treasurer of the Association in
accordance with a comprehensive investment policy which addresses strategies,
types and levels of allowable investments and which is reviewed and approved by
the Board of Directors on an annual basis. The management of the investment
securities portfolio is set in accordance with strategies developed by the
Association's Asset and Liability Committee. These strategies currently
emphasize lending activities in order to increase the weighted average yield on
the Association's interest-earning assets.
The following table sets forth certain information relating to the
Association's investment securities portfolio (including investment securities
classified as available for sale) at the dates indicated.
<TABLE>
<CAPTION>
June 30,
--------------------------------------------------------------------------------------
1996 1995 1994
------------------------ ------------------------ -----------------------
Carrying Market Carrying Market Carrying Market
Value Value Value Value Value Value
-------- -------- --------- -------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Government agency
obligations(1) $8,866 $8,737 $4,047 $4,055 $3,588 $3,555
Municipal obligations 917 917 1,961 1,944 2,190 2,160
------ ------ ------ ------ ------ ------
Total(1) $9,783 $9,654 $6,008 $5,999 $5,778 $5,715
====== ====== ====== ====== ====== ======
</TABLE>
- ----------------------
(1) At June 30, 1996, 1995 and 1994, included $6.5 million, $400,000 and
$6.5 million of U.S. Government agency securities classified as
available for sale.
The following table sets forth certain information regarding the
maturities of the Association's investment securities (including investment
securities classified as available for sale) at June 30, 1996.
<TABLE>
<CAPTION>
Contractually Maturing
------------------------------------------------------------------------------------------
Weighted Weighted Weighted Weighted
Under 1 Average 1-5 Average 6-10 Average Over 10 Average
Year Yield Years Yield Years Yield Years Yield
------ ------ -------- ------- -------- ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
agency obligations $ -- --% $4,070 6.5% $4,196 7.2% $600 8.2%
Municipal obligations 715 4.3 23 5.6 65 5.6 114 5.6
------ --- ------ --- ------ --- ---- ---
Total $ 715 4.3% $4,093 6.5% $4,261 7.2% $714 7.8%
====== === ====== === ====== === ==== ===
</TABLE>
-74-
<PAGE>
Sources of Funds
General. Deposits are the primary source of the Association's funds for
lending and other investment purposes. In addition to deposits, the Association
derives funds from loan principal repayments, prepayments and advances from the
FHLB of Indianapolis. Loan repayments are a relatively stable source of funds,
while deposits inflows and outflows are significantly influenced by general
interest rates and money market conditions. Borrowings may be used on a
short-term basis to compensate for reductions in the availability of funds from
other sources. They may also be used on a longer term basis for general business
purposes.
Deposits. The Association's deposit products include a broad selection
of deposit instruments, including NOW accounts, money market accounts, passbook
accounts and term certificate accounts. Deposit account terms vary, with the
principal differences being the minimum balance required, the time periods the
funds must remain on deposit and the interest rate.
The Association's deposits are obtained primarily from residents of
Dearborn County, Indiana, and management of the Association estimates that less
than 15% of the Association's deposits are obtained from customers residing
outside of Indiana. The Association does not pay fees to brokers to solicit
funds for deposit with the Association or, except as described below, actively
solicit negotiable-rate certificates of deposit with balances of $100,000 or
more. The Association does actively solicit deposits from various state, county
and local government units. The amount of such deposits generally ranges between
$500,000 and $1.0 million.
The Association attracts deposits by offering a wide variety of
accounts and services, competitive interest rates and convenient customer hours.
Deposit account terms offered by the Association vary according to the minimum
balance required, the time periods the funds must remain on deposit and the
interest rate, among other factors. In determining the characteristics of its
deposit accounts, consideration is given to the profitability of the
Association, matching terms of the deposits with loan products, the
attractiveness to customers and the rates offered by the Association's
competitors.
-75-
<PAGE>
The following table sets forth the dollar amount of deposits in the
various types of deposit programs offered by the Association at the dates
indicated.
<TABLE>
<CAPTION>
June 30,
---------------------------------------------------------------------------------------------
1996 1995 1994
------------------------- --------------------------- ----------------------------
Amount Percentage Amount Percentage Amount Percentage
-------- ---------- ---------- ------------ --------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
2.00 - 4.00% -- --% $ 95 .3% $ 9,002 23.3%
4.01 - 6.00% $24,288 58.7 14,950 39.9 15,037 38.8
6.01 - 8.00% 8,612 20.8 13,638 36.4 3,821 9.9
8.01 - 10.00% 477 1.2 1,012 2.7 1,250 3.2
10.01 - 12.00% -- -- 80 .2 282 .7
-------- ------ ------ ----- ----- -----
Total certificate
accounts(1) 33,377 80.7 29,775 79.5 29,392 75.9
------- ----- ------ ----- ------ -----
Transaction accounts:
Passbook accounts(2) 3,577 8.6 3,435 9.2 3,814 9.9
Money market accounts(3) 3,259 7.9 3,194 8.5 4,444 11.5
NOW accounts(4) 1,166 2.8 1,056 2.8 1,066 2.7
------- ----- ------ ----- ------ -----
Total transaction accounts 8,002 19.3 7,685 20.5 9,324 24.1
------- ----- ------ ----- ------ -----
Total deposits $41,379 100.0% $37,460 100.0% $38,716 100.0%
====== ===== ====== ===== ====== =====
</TABLE>
- ------------------------
(1) The weighted average rates paid on certificates of deposit at June 30,
1996, 1995 and 1994 were 5.79%, 5.89% and 5.00%, respectively.
(2) The weighted average rates paid on passbook accounts at June 30, 1996,
1995 and 1994 were 3.00%, 3.00% and 3.00%, respectively.
(3) The weighted average rates paid on money market accounts fluctuate with
the general movement of interest rates. At June 30, 1996, 1995 and
1994, the weighted average rates paid on money market accounts were
3.01%, 2.95% and 3.05%, respectively.
(4) The weighted average rates paid on NOW accounts fluctuate with the
general movement of interest rates. At June 30, 1996, 1995 and 1994,
the weighted average rates paid on NOW accounts were 2.23%, 2.30% and
2.35%, respectively.
-76-
<PAGE>
The following table sets forth the savings activities of the
Association during the periods indicated.
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------
1996 1995 1994
---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C>
Deposits(1) $48,931 $123,141 $82,597
Withdrawals(1) 46,378 125,579 82,036
------- --------- -------
Net increase (decrease) before
interest credited 2,553 (2,438) 561
Interest credited 1,366 1,244 1,028
------- ------- -------
Net increase (decrease) in deposits $ 3,919 $ (1,194) $ 1,589
======= ======== =======
</TABLE>
- ---------------------------
(1) The significant level of deposits and withdrawals during fiscal 1995
and 1994 reflected the Association's increased use of public deposits
(which represent a much more volatile source of funds) during such
years.
The following table shows the interest rate and maturity information
for the Association's certificates of deposit at June 30, 1996.
<TABLE>
<CAPTION>
Maturity Date
----------------------------------------------------------------------------------------------
One Year Over Over Over
or Less 1-2 Years 2-3 Years 3 Years Total
---------- --------- ---------- --------- ---------
(In Thousands)
<S> <C> <C> <C> <C> <C>
2.00 - 4.00% $ -- $ -- $ -- $ -- $ --
4.01 - 6.00% 19,885 3,312 1,091 -- 24,288
6.01 - 8.00% 1,054 2,159 1,951 3,448 8,612
8.01 - 10.00% 18 49 83 327 477
------ ----- ----- ----- ------
Total $20,957 $5,520 $3,125 $3,775 $33,377
====== ===== ===== ===== ======
</TABLE>
-77-
<PAGE>
The following table sets forth the maturities of the Association's
certificates of deposit having principal amounts of $100,000 or more at June 30,
1996.
Certificates of deposit maturing
in quarter ending:
--------------------------------
(In Thousands)
September 30, 1996 $ 6,249
December 31, 1996 5,574
March 31, 1997 4,622
June 30, 1997 4,512
After June 30, 1997 12,420
------
Total certificates of deposit with
balances of $100,000 or more $ 3,344
======
Borrowings. The Association may obtain advances from the FHLB of
Indianapolis upon the security of the common stock it owns in that bank and
certain of its residential mortgage loans, provided certain standards related to
creditworthiness have been met. Such advances are made pursuant to several
credit programs, each of which has its own interest rate and range of
maturities. Such advances are generally available to meet seasonal and other
withdrawals of deposit accounts and to permit increased lending. See
"Regulation - The Association - Federal Home Loan Bank System." In recent
years, FHLB advances have represented a significant source of funds for the
Association with respect to its lending and investment activities. At June 30,
1996, the Association had $14.5 million of advances from the FHLB of
Indianapolis.
-78-
<PAGE>
The following table sets forth the maximum month-end balance and
average balance of the Association's FHLB advances during the periods indicated.
Year Ended June 30,
-------------------------------------
1996 1995 1994
------- ------- ------
(Dollars in Thousands)
Maximum balance $17,073 $16,821 $15,698
Average balance 14,554 14,488 13,691
Weighted average interest rate
of FHLB advances 6.13% 6.16% 5.71%
The following table sets forth certain information as to the
Association's FHLB advances at the dates indicated.
June 30,
----------------------------------------
1996 1995 1994
--------- -------- --------
(Dollars in Thousands)
FHLB advances $14,517 $16,821 $14,362
Weighted average interest rate
of FHLB advances 5.96% 6.30% 6.07%
Employees
The Association had 16 full-time employees and no part-time employees
at June 30, 1996. None of these employees is represented by a collective
bargaining agent, and the Association believes that it enjoys good relations
with its personnel.
-79-
<PAGE>
Competition
The Association faces strong competition both in attracting deposits
and making real estate loans. Its most direct competition for deposits has
historically come from other savings associations, credit unions and commercial
banks located in Dearborn County, Indiana, including many large financial
institutions which have greater financial and marketing resources available to
them. In addition, during times of high interest rates, the Association has
faced additional significant competition for investors' funds from short-term
money market securities, mutual funds and other corporate and government
securities. The ability of the Association to attract and retain savings
deposits depends on its ability to generally provide a rate of return, liquidity
and risk comparable to that offered by competing investment opportunities.
The Association experiences strong competition for real estate loans
principally from other savings associations, commercial banks and mortgage
banking companies. The Association competes for loans principally through the
interest rates and loan fees it charges and the efficiency and quality of
services it provides borrowers. Competition may increase as a result of the
continuing reduction of restrictions on the interstate operations of financial
institutions.
Legal Proceedings
The Association is involved in routine legal proceedings occurring in
the ordinary course of business which, in the aggregate, are believed by
management to be immaterial to the financial condition and results of operations
of the Association.
Offices
At June 30, 1996, the Association conducted its business from its
headquarters and main office at 118 Walnut Street, Lawrenceburg, Indiana
47025-1838. The Association owns its office, which had a net book value at June
30, 1996 of $110,000. In August 1992, the Association purchased an additional
office located at 141 Ridge Avenue, Lawrenceburg, Indiana 47025, which serves as
the Association's loan origination center. This office had a net book value at
June 30, 1996 of $261,000. The estimated net book value of the electronic data
processing equipment owned by the Association was $38,000 at June 30, 1996.
-80-
<PAGE>
REGULATION
Set forth below is a brief description of those laws and regulations
which, together with the descriptions of laws and regulations contained
elsewhere herein, are deemed material to an investor's understanding of the
extent to which the Company and the Association are regulated. The description
of the laws and regulations hereunder and elsewhere herein does not purport to
be complete and is qualified in its entirety by reference to applicable laws and
regulations.
The Company
General. The Company, as a savings and loan holding company within the
meaning of the Home Owners' Loan Act ("HOLA"), will be required to register with
the OTS and will be subject to OTS regulations, examinations, supervision and
reporting requirements. As a subsidiary of a savings and loan holding company,
the Association will be subject to certain restrictions in its dealings with the
Company and affiliates thereof.
Activities Restrictions. There are generally no restrictions on the
activities of a savings and loan holding company which holds only one subsidiary
savings institution. However, if the Director of 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 institution, the
Director may impose such restrictions as deemed necessary to address such risk,
including limiting (i) payments of dividends by the savings institution; (ii)
transactions between the savings institution and its affiliates; and (iii) any
activities of the savings institution that might create a serious risk that the
liabilities of the holding company and its affiliates may be imposed on the
savings institution. Notwithstanding the above rules as to permissible business
activities of unitary savings and loan holding companies, if the savings
institution subsidiary of such a holding company fails to meet a qualified
thrift lender ("QTL") test, then such unitary holding company also shall become
subject to the activities restrictions applicable to multiple savings and loan
holding companies and, unless the savings institution requalifies as a QTL
within one year thereafter, shall register as, and become subject to the
restrictions applicable to, a bank holding company. See "- The Association -
Qualified Thrift Lender Test."
If the Company were to acquire control of another savings institution,
other than through merger or other business combination with the Association,
the Company 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 institution meets the QTL
test, as set forth below, the activities of the Company and any of its
subsidiaries (other than the Association or other subsidiary savings
institutions) would thereafter be subject to further restrictions. Among other
things, no multiple savings and loan holding company or subsidiary thereof which
is not a savings institution shall commence or continue for a limited period of
time after becoming a multiple savings and loan holding company or subsidiary
thereof any business activity, upon
-81-
<PAGE>
prior notice to, and no objection by the OTS, 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
authorized by regulation as of March 5, 1987 to be engaged in by multiple
savings and loan holding companies; or (vii) unless the Director of the OTS by
regulation prohibits or limits such activities for savings and loan holding
companies, those activities authorized by the Federal Reserve Board as
permissible for bank holding companies. Those activities described in (vii)
above also must be approved by the Director of the OTS prior to being engaged in
by a multiple savings and loan holding company.
Limitations on Transactions with Affiliates. Transactions between
savings institutions and any affiliate are governed by Sections 23A and 23B of
the Federal Reserve Act. An affiliate of a savings institution is any company or
entity which controls, is controlled by or is under common control with the
savings institution. In a holding company context, the parent holding company of
a savings institution (such as the Company) and any companies which are
controlled by such parent holding company are affiliates of the savings
institution. Generally, Sections 23A and 23B (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, and contain an aggregate limit on all such transactions with
all affiliates to an amount equal to 20% of such capital stock and surplus and
(ii) require that all such transactions be on terms substantially the same, or
at least as favorable, to the institution or subsidiary as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans,
purchase of assets, issuance of a guarantee and similar other types of
transactions. In addition to the restrictions imposed by Sections 23A and 23B,
no savings institution may (i) loan or otherwise extend credit to an affiliate,
except for any affiliate which engages only in activities which are permissible
for bank holding companies, or (ii) purchase or invest in any stocks, bonds,
debentures, notes or similar obligations of any affiliate, except for affiliates
which are subsidiaries of the savings institution.
In addition, Sections 22(h) and (g) of the Federal Reserve Act places
restrictions on loans to executive officers, directors and principal
stockholders. Under Section 22(h), loans to a director, an executive officer and
to a greater than 10% stockholder of a savings institution, and certain
affiliated interests of either, may not exceed, together with all other
outstanding loans to such person and affiliated interests, the institution's
loans to one borrower limit (generally equal to 15% of the institution's
unimpaired capital and surplus). Section 22(h) also requires that loans to
directors, executive officers and principal stockholders be made on terms
substantially the same as offered in comparable transactions to other persons
and also requires prior board approval for certain loans. In addition, the
aggregate amount of extensions of credit by a savings institution to all
insiders cannot exceed the institution's unimpaired capital and surplus.
Furthermore, Section 22(g) places
-82-
<PAGE>
additional restrictions on loans to executive officers. At June 30, 1996, the
Association was in compliance with the above restrictions.
Restrictions on Acquisitions. Except under limited circumstances,
savings and loan holding companies are prohibited from acquiring, without prior
approval of the Director of the OTS, (i) control of any other savings
institution or savings and loan holding company or substantially all the assets
thereof or (ii) more than 5% of the voting shares of a savings institution or
holding company thereof which is not a subsidiary. 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 otherwise more
than 25% of such company's stock, may acquire control of any savings
institution, other than a subsidiary savings institution, or of any other
savings and loan holding company.
The Director of the OTS may only approve acquisitions resulting in the
formation of a multiple savings and loan holding company which controls savings
institutions in more than one state if (i) the multiple savings and loan holding
company involved controls a savings institution which operated a home or branch
office located in the state of the institution to be acquired as of March 5,
1987; (ii) the acquiror is authorized to acquire control of the savings
institution pursuant to the emergency acquisition provisions of the Federal
Deposit Insurance Act ("FDIA"); or (iii) the statutes of the state in which the
institution to be acquired is located specifically permit institutions to be
acquired by the 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).
FIRREA amended provisions of the Bank Holding Company Act of 1956 to
specifically authorize the Federal Reserve Board to approve an application by a
bank holding company to acquire control of a savings institution. FIRREA also
authorized a bank holding company that controls a savings institution to merge
or consolidate the assets and liabilities of the savings institution with, or
transfer assets and liabilities to, any subsidiary bank which is a member of the
BIF with the approval of the appropriate federal banking agency and the Federal
Reserve Board. As a result of these provisions, there have been a number of
acquisitions of savings institutions by bank holding companies in recent years.
Federal Securities Laws. The Company has filed with the Securities and
Exchange Commission ("SEC") a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), for the registration of the Common
Stock to be issued pursuant to the Conversion. Upon completion of the
Conversion, the Company's Common Stock will be registered with the SEC under
Section 12(g) of the Exchange Act. The Company will then be subject to the
information, proxy solicitation, insider trading restrictions and other
requirements under the Exchange Act.
-83-
<PAGE>
The registration under the Securities Act of shares of the Common Stock
to be issued in the Conversion and Reorganization does not cover the resale of
such shares. Shares of the Common Stock purchased by persons who are not
affiliates of the Company may be sold without registration. Shares purchased by
an affiliate of the Company will be subject to the resale restrictions of Rule
144 under the Securities Act. If the Company meets the current public
information requirements of Rule 144 under the Securities Act, each affiliate of
the Company who complies with the other conditions of Rule 144 (including those
that require the affiliate's sale to be aggregated with those of certain other
persons) would be able to sell in the public market, without registration, a
number of shares not to exceed, in any three-month period, the greater of (i) 1%
of the outstanding shares of the Company or (ii) the average weekly volume of
trading in such shares during the preceding four calendar weeks.
The Association
General. The OTS has extensive authority over the operations of
federally chartered savings institutions. As part of this authority, savings
institutions are required to file periodic reports with the OTS and are subject
to periodic examinations by the OTS and the FDIC. The investment and lending
authority of savings institutions are prescribed by federal laws and
regulations, and such institutions are prohibited from engaging in any
activities not permitted by such laws and regulations. Those laws and
regulations generally are applicable to all federally chartered savings
institutions and may also apply to state-chartered savings institutions. Such
regulation and supervision is primarily intended for the protection of
depositors.
The OTS' enforcement authority over all savings institutions was
substantially enhanced by FIRREA. This enforcement authority includes, among
other things, the ability to assess civil money penalties, to issue cease and
desist or removal orders and to initiate injunctive actions. In general, these
enforcement actions may be initiated for violations of laws and regulations and
unsafe or unsound practices. Other actions or inactions may provide the basis
for enforcement action, including misleading or untimely reports filed with the
OTS. FIRREA significantly increased the amount of and grounds for civil money
penalties.
On December 19, 1991, the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") was enacted into law. The FDICIA provided
for, among other things, the recapitalization of the BIF; the authorization of
the FDIC to make emergency special assessments under certain circumstances
against BIF members and members of the SAIF; the establishment of risk-based
deposit insurance premiums; and improved examinations and reporting
requirements. The FDICIA also provided for enhanced federal supervision of
depository institutions based on, among other things, an institution's capital
level. See "- Prompt Corrective Action."
-84-
<PAGE>
Insurance of Accounts. The deposits of the Association are insured to
the maximum extent permitted by the SAIF, which is administered by the FDIC, and
are backed by the full faith and credit of the U.S. Government. As insurer, the
FDIC is authorized to conduct examinations of, and to require reporting by,
FDIC-insured institutions. It also may prohibit any FDIC-insured institution
from engaging in any activity the FDIC determines by regulation or order to pose
a serious threat to the FDIC. The FDIC also has the authority to initiate
enforcement actions against savings institutions, after giving the OTS an
opportunity to take such action.
The annual assessment for SAIF members for deposit insurance for the
period from January 1, 1991 through December 31, 1992 was equal to .23% of
insured deposits, which was payable on a semi-annual basis. Recent legislation
eliminated limitations on increases in federal deposit insurance premiums and
authorized the FDIC to increase the assessment rates to the extent necessary to
protect the SAIF (as well as the BIF). Under current FDIC regulations,
institutions are assigned to one of three capital groups which are based solely
on the level of an institution's capital--"well capitalized," "adequately
capitalized," and "undercapitalized"--which are defined in the same manner as
the regulations establishing the prompt corrective action system under Section
38 of the FDIA, as discussed below. These three groups are then divided into
three subgroups which reflect varying levels of supervisory concern, from those
which are considered to be healthy to those which are considered to be of
substantial supervisory concern. The matrix so created results in nine
assessment risk classifications, with rates ranging from .23% for well
capitalized, healthy institutions to .31% for undercapitalized institutions with
substantial supervisory concerns. As of June 30, 1996, the insurance premiums
for the Association amounted to .23% of insured deposits.
On November 14, 1995, the FDIC adopted a new assessment rate schedule
of zero to 27 basis points (subject to a $2,000 minimum) for BIF members
beginning on or about January 1, 1996 while retaining the existing assessment
rate schedule for SAIF member institutions. In announcing this new schedule, the
FDIC noted that the premium differential may have adverse consequences for SAIF
members, including reduced earnings and an impaired ability to raise funds in
the capital markets. In addition, SAIF members, such as the Association, could
be placed at a competitive disadvantage to BIF members with respect to pricing
of loans and deposits and the ability to achieve lower operating costs. For
information concerning proposed legislation which is intended to address this
competitive disadvantage and, among other things, recapitalize the SAIF, see
"Risk Factors - Recapitalization of SAIF and Related Legislative Proposals."
The FDIC may terminate the deposit insurance of any insured depository
institution, including the Association, if it determines after a hearing that
the institution has engaged or is engaging in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, order or any condition imposed by an agreement with
the FDIC. It also may suspend deposit insurance temporarily during the hearing
process for the permanent termination of insurance, if the institution has no
tangible capital. If insurance of accounts is terminated, the accounts at the
institution
-85-
<PAGE>
at the time of the termination, less subsequent withdrawals, shall continue to
be insured for a period of six months to two years, as determined by the FDIC.
There are no pending proceedings to terminate the deposit insurance of the
Association.
Regulatory Capital Requirements. Federally insured savings institutions
are required to maintain minimum levels of regulatory capital. Pursuant to
FIRREA, the OTS has established capital standards applicable to all savings
institutions. These standards generally must be as stringent as the comparable
capital requirements imposed on national banks. The OTS also is authorized to
impose capital requirements in excess of these standards on individual
institutions on a case-by-case basis.
Current OTS capital standards require savings institutions to satisfy
three different capital requirements. Under these standards, savings
institutions must maintain "tangible" capital equal to at least 1.5% of adjusted
total assets, "core" capital equal to at least 3.0% of adjusted total assets and
"total" capital (a combination of core and "supplementary" capital) equal to at
least 8.0% of "risk-weighted" assets. For purposes of the regulation, core
capital generally consists of common stockholders' equity (including retained
earnings), noncumulative perpetual preferred stock and related surplus, minority
interests in the equity accounts of fully consolidated subsidiaries, certain
nonwithdrawable accounts and pledged deposits and "qualifying supervisory
goodwill." Tangible capital is given the same definition as core capital but
does not include qualifying supervisory goodwill and is reduced by the amount of
all the savings institution's intangible assets, with only a limited exception
for purchased mortgage servicing rights. The Association had no goodwill or
other intangible assets at June 30, 1996. Both core and tangible capital are
further reduced by an amount equal to a savings institution's debt and equity
investments in subsidiaries engaged in activities not permissible to national
banks (other than subsidiaries engaged in activities undertaken as agent for
customers or in mortgage banking activities and subsidiary depository
institutions or their holding companies). These adjustments do not affect the
Association's regulatory capital. Supplementary capital generally consists of
hybrid capital instruments; perpetual preferred stock which is not eligible to
be included as core capital; subordinated debt and intermediate-term preferred
stock; and general allowances for loan losses up to a maximum of 1.25% of
risk-weighted assets.
In determining compliance with the risk-based capital requirement, a
savings institution is allowed to include both core capital and supplementary
capital in its total capital, provided that the amount of supplementary capital
included does not exceed the savings institution's core capital. In determining
the required amount of risk-based capital, total assets, including certain
off-balance sheet items, are multiplied by a risk weight based on the risks
inherent in the type of assets. The risk weights assigned by the OTS for
principal categories of assets are (i) 0% for cash and securities issued by the
U.S. Government or unconditionally backed by the full faith and credit of the
U.S. Government; (ii) 20% for securities (other than equity securities) issued
by U.S. Government-sponsored agencies and mortgage-backed securities issued by,
or fully guaranteed as to principal and interest by, the FNMA or the FHLMC,
except for those classes with residual characteristics
-86-
<PAGE>
or stripped mortgage-related securities; (iii) 50% for prudently underwritten
permanent one-to four-family first lien mortgage loans not more than 90 days
delinquent and having a loan-to-value ratio of not more than 80% at origination
unless insured to such ratio by an insurer approved by the FNMA or the FHLMC,
qualifying residential bridge loans made directly for the construction of one-
to four-family residences and qualifying multi-family residential loans; and
(iv) 100% for all other loans and investments, including consumer loans,
commercial loans, and single-family residential real estate loans more than 90
days delinquent, and for repossessed assets.
At June 30, 1996, the Association exceeded all of its regulatory
capital requirements, with tangible, core and risk-based capital ratios of
10.80% and 10.80% and 23.09%, respectively. For additional information, see
"Regulatory Capital" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Regulatory Capital Requirements."
A savings institution which is not in capital compliance or which is
otherwise deemed to require more than normal supervision is subject to
restrictions on its ability to grow pursuant to Regulatory Bulletin 3a-1. In
addition, a provision of HOLA generally provides that the Director of OTS must
restrict the asset growth of savings institutions not in regulatory capital
compliance, subject to a limited exception for growth not exceeding interest
credited.
A savings institution which is not in capital compliance is also
automatically subject to the following: (i) new directors and senior executive
officers and employment contracts for senior executive officers must be approved
by the OTS in advance; (ii) the savings institution may not accept or renew any
brokered deposits; (iii) the savings institution is subject to higher OTS
assessments as a capital-deficient institution; and (iv) the savings institution
may not make any capital distributions without prior written approval.
Any savings institution that fails any of the capital requirements is
subject to possible enforcement actions by the OTS or the FDIC. Such actions
could include a capital directive, a cease and desist order, civil money
penalties, the establishment of restrictions on the institution's operations,
termination of federal deposit insurance and the appointment of a conservator or
receiver. The OTS' capital regulation provides that such actions, through
enforcement proceedings or otherwise, could require one or more of a variety of
corrective actions.
In August 1993, the OTS adopted a final rule incorporating an
interest-rate risk component into the risk-based capital regulation. Under the
rule, an institution with a greater than "normal" level of interest rate risk is
subject to a deduction of its interest rate risk component from total capital
for purposes of calculating its risk-based capital. As a result, such an
institution is required to maintain additional capital in order to comply with
the risk-based capital requirement. An institution with a greater than "normal"
interest rate risk is defined as an institution that would suffer a loss of net
portfolio value exceeding 2.0%
-87-
<PAGE>
of the estimated economic value of its assets in the event of a 200 basis point
increase or decrease (with certain minor exceptions) in interest rates. The
interest rate risk component is calculated, on a quarterly basis, as one-half of
the difference between an institution's measured interest rate risk and 2.0%,
multiplied by the economic value of its assets. The rule also authorizes the
Director of the OTS, or his designee, to waive or defer an institution's
interest rate risk component on a case-by-case basis. The final rule was
originally to be effective as of January 1, 1994, subject however to a three
quarter "lag" time between the reporting date of the data used to calculate an
institution's interest rate risk and the effective date of each quarter's
interest rate risk component. However, in October 1994, the Director of the OTS
indicated that it would waive the capital deduction for institutions with
greater than "normal" interest rate risk until the OTS publishes an appeals
process. The OTS has recently indicated that no savings institution will be
required to deduct capital for interest rate risk until further notice. In any
event, management of the Association does not believe that the OTS' adoption of
an interest rate risk component to the risk-based capital requirement will
adversely affect the Association's regulatory capital position.
Prompt Corrective Action. Under Section 38 of the FDIA, as added by the
FDICIA, each federal banking agency was required to implement a system of prompt
corrective action for institutions which it regulates. The federal banking
agencies, including the OTS, adopted substantially similar regulations to
implement Section 38 of the FDIA, effective as of December 19, 1992. Under the
regulations, an institution is deemed to be (i) "well capitalized" if it has
total risk-based capital of 10.0% or more, has a Tier 1 risk-based capital ratio
of 6.0% or more, has a Tier 1 leverage capital ratio of 5.0% or more and is not
subject to any order or final capital directive to meet and maintain a specific
capital level for any capital measure, (ii) "adequately capitalized" if it has a
total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital
ratio of 4.0% or more and a Tier 1 leverage capital ratio of 4.0% or more (3.0%
under certain circumstances) and does not meet the definition of "well
capitalized," (iii) "undercapitalized" if it has a total risk-based capital
ratio that is less than 8.0%, a Tier 1 risk-based capital ratio that is less
than 4.0% or a Tier 1 leverage capital ratio that is less than 4.0% (3.0% under
certain circumstances), (iv) "significantly undercapitalized" if it has a total
risk-based capital ratio that is less than 6.0%, a Tier 1 risk-based capital
ratio that is less than 3.0% or a Tier 1 leverage capital ratio that is less
than 3.0%, and (v) "critically undercapitalized" if it has a ratio of tangible
equity to total assets that is equal to or less than 2.0%. Section 38 of the
FDIA and the regulations promulgated thereunder also specify circumstances under
which a federal banking agency may reclassify a well capitalized institution as
adequately capitalized and may require an adequately capitalized institution or
an undercapitalized institution to comply with supervisory actions as if it were
in the next lower category (except that the FDIC may not reclassify a
significantly undercapitalized institution as critically undercapitalized).
An institution generally must file a written capital restoration plan
which meets specified requirements with an appropriate federal banking agency
within 45 days of the date that the institution receives notice or is deemed to
have notice that it is
-88-
<PAGE>
undercapitalized, significantly undercapitalized or critically undercapitalized.
A federal banking agency must provide the institution with written notice of
approval or disapproval within 60 days after receiving a capital restoration
plan, subject to extensions by the agency.
An institution which is required to submit a capital restoration plan
must concurrently submit a performance guaranty by each company that controls
the institution. Such guaranty shall be limited to the lesser of (i) an amount
equal to 5.0% of the institution's total assets at the time the institution was
notified or deemed to have notice that it was undercapitalized or (ii) the
amount necessary to restore the relevant capital measures of the institution to
the levels required for the institution to be classified as adequately
capitalized. Such a guarantee shall expire after the federal banking agency
notifies the institution that it has remained adequately capitalized for each of
four consecutive calendar quarters. An institution which fails to submit a
written capital restoration plan within the requisite period, including any
required performance guarantee(s), or fails in any material respect to implement
a capital restoration plan, shall be subject to the restrictions in Section 38
of the FDIA which are applicable to significantly undercapitalized institutions.
Immediately upon becoming undercapitalized, an institution shall become
subject to the provisions of Section 38 of the FDIA (i) restricting payment of
capital distributions and management fees, (ii) requiring that the appropriate
federal banking agency monitor the condition of the institution and its efforts
to restore its capital, (iii) requiring submission of a capital restoration
plan, (iv) restricting the growth of the institution's assets and (v) requiring
prior approval of certain expansion proposals. The appropriate federal banking
agency for an undercapitalized institution also may take any number of
discretionary supervisory actions if the agency determines that any of these
actions is necessary to resolve the problems of the institution at the least
possible long-term cost to the deposit insurance fund, subject in certain cases
to specified procedures. These discretionary supervisory actions include
requiring the institution to raise additional capital; restricting transactions
with affiliates; restricting interest rates paid by the institution on deposits;
requiring replacement of senior executive officers and directors; restricting
the activities of the institution and its affiliates; requiring divestiture of
the institution or the sale of the institution to a willing purchaser; and any
other supervisory action that the agency deems appropriate. These and additional
mandatory and permissive supervisory actions may be taken with respect to
significantly undercapitalized and critically undercapitalized institutions.
At June 30, 1996, the Association was deemed a "well capitalized"
institution for purposes of the above regulations and as such was not subject to
the above mentioned restrictions.
Safety and Soundness. FDICIA requires each federal banking regulatory
agency to prescribe, by regulation or guideline, standards for all insured
depository institutions and depository institution holding companies relating to
(i) internal controls, information systems and audit systems; (ii) loan
documentation; (iii) credit underwriting; (iv) interest rate risk
-89-
<PAGE>
exposure; (v) asset growth; (vi) compensation, fees and benefits; and (vii) such
other operational and managerial standards as the agency determines to be
appropriate. The compensation standards would prohibit employment contracts or
other compensatory arrangements that provide excess compensation, fees or
benefits or could lead to material financial loss. In addition, each federal
banking regulatory agency must prescribe, by regulation or guideline, standards
relating to asset quality, earnings and stock valuation as the agency determines
to be appropriate. On July 10, 1995, the federal banking agencies, including the
OTS, adopted final rules and proposed guidelines concerning standards for safety
and soundness required to be prescribed by regulation pursuant to Section 39 of
the FDIA. In general, the standards relate to (1) operational and managerial
matters; (2) asset quality and earnings; and (3) compensation. The operational
and managerial standards cover (a) internal controls and information systems,
(b) internal audit systems, (c) loan documentation, (d) credit underwriting,
(e) interest rate exposure, (f) asset growth, and (g) compensation, fees and
benefits. Under the proposed asset quality and earnings standards, the
Association would be required to establish and maintain systems to (i) identify
problem assets and prevent deterioration in those assets, and (ii) evaluate and
monitor earnings and ensure that earnings are sufficient to maintain adequate
capital reserves. Finally, the proposed compensation standard states that
compensation will be considered excessive if it is unreasonable or
disproportionate to the services actually performed by the individual being
compensated. If a savings institution fails to meet any of the standards
promulgated by regulation, then such institution will be required to submit a
plan within 30 days to the OTS specifying the steps it will take to correct the
deficiency. In the event that a savings institution fails to submit or fails in
any material respect to implement a compliance plan within the time allowed by
the federal banking agency, Section 39 of the FDIA provides that the OTS must
order the institution to correct the deficiency and may (1) restrict asset
growth; (2) require the savings institution to increase its ratio of tangible
equity to assets; (3) restrict the rates of interest that the savings
institution may pay; or (4) take any other action that would better carry out
the purpose of prompt corrective action. The Association believes that it has
been and will continue to be in compliance with each of the standards as they
have been adopted by the OTS.
Liquidity Requirements. All savings institutions are required to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings institutions. At the present time, the required minimum
liquid asset ratio is 5%. At June 30, 1996, the Association's liquidity ratio
was 12.59%.
Capital Distributions. OTS regulations govern capital distributions by
savings institutions, which include cash dividends, stock redemptions or
repurchases, cash-out mergers, interest payments on certain convertible debt and
other transactions charged to the capital account of a savings institution to
make capital distributions. Generally, the regulation creates a safe harbor for
specified levels of capital distributions from institutions
-90-
<PAGE>
meeting at least their minimum capital requirements, so long as such
institutions notify the OTS and receive no objection to the distribution from
the OTS. Savings institutions and distributions that do not qualify for the safe
harbor are required to obtain prior OTS approval before making any capital
distributions.
Generally, a savings institution that before and after the proposed
distribution meets or exceeds its fully phased-in capital requirements (Tier 1
institutions) may make capital distributions during any calendar year equal to
the higher of (i) 100% of net income for the calendar year-to-date plus 50% of
its "surplus capital ratio" at the beginning of the calendar year or (ii) 75% of
net income over the most recent four-quarter period. The "surplus capital ratio"
is defined to mean the percentage by which the institution's ratio of total
capital to assets exceeds the ratio of its fully phased-in capital requirement
to assets. "Fully phased-in capital requirement" is defined to mean an
institution's capital requirement under the statutory and regulatory standards
to be applicable on December 31, 1994, as modified to reflect any applicable
individual minimum capital requirement imposed upon the institution. Failure to
meet fully phased-in or minimum capital requirements will result in further
restrictions on capital distributions, including possible prohibition without
explicit OTS approval. See "- Regulatory Capital Requirements."
Tier 2 institutions, which are institutions that before and after the
proposed distribution meet or exceed their minimum capital requirements, may
make capital distributions up to 75% of their net income over the most recent
four quarter period.
In order to make distributions under these safe harbors, Tier 1 and
Tier 2 institutions must submit 30 days written notice to the OTS prior to
making the distribution. The OTS may object to the distribution during that
30-day period based on safety and soundness concerns. In addition, a Tier 1
institution deemed to be in need of more than normal supervision by the OTS may
be downgraded to a Tier 2 or Tier 3 institution as a result of such a
determination.
Tier 3 institutions, which are institutions that do not meet current
minimum capital requirements, or that have capital in excess of either their
fully phased-in capital requirement or minimum capital requirement but which
have been notified by the OTS that it will be treated as a Tier 3 institution
because they are in need of more than normal supervision, cannot make any
capital distribution without obtaining OTS approval prior to making such
distributions.
At June 30, 1996, the Association was a Tier 1 institution for purposes
of this regulation.
On December 5, 1994, the OTS published a notice of proposed rulemaking
to amend its capital distribution regulation. Under the proposal, savings
institutions would be permitted to only make capital distributions that would
not result in their capital being reduced below the level required to remain
"adequately capitalized." A savings institution
-91-
<PAGE>
is adequately capitalized if it has a total risk-based capital ratio of 8.0% or
more, a Tier 1 risk-based capital ratio of 4.0% or more and a Tier 1 leverage
capital ratio of 4.0% or more and does not meet the definition of "well
capitalized." Because the Association will be a subsidiary of the Company, the
proposal would require the Association to provide notice to the OTS of its
intent to make a capital distribution. The Association does not believe that the
proposal will adversely affect its ability to make capital distributions if it
is adopted substantially as proposed.
Loans to One Borrower. FIRREA imposed limitations on the aggregate
amount of loans that a savings institution could make to any one borrower,
including related entities. Under FIRREA, the permissible amount of loans-to-one
borrower now follows the national bank standard for all loans made by savings
institutions, as compared to the pre-FIRREA rule that applied that standard only
to commercial loans made by federally chartered savings institutions. The
regulations promulgated pursuant to FIRREA generally do not permit loans-to-one
borrower to exceed the greater of $500,000 or 15% of unimpaired capital and
surplus. Loans in an amount equal to an additional 10% of unimpaired capital and
surplus also may be made to a borrower if the loans are fully secured by readily
marketable securities. For information about the largest borrowers from the
Association, see "Business Lending Activities - General."
Branching by Federal Savings Institutions. Effective May 11, 1992, the
OTS amended its Policy Statement on Branching by Federal Savings Institutions to
permit interstate branching to the full extent permitted by statute (which is
essentially unlimited). Prior policy permitted interstate branching for federal
savings institutions only to the extent allowed for state-chartered institutions
in the states where the institution's home office is located and where the
branch is sought. Prior policy also permitted healthy out-of-state federal
institutions to branch into another state, regardless of the law in that state,
provided the branch office was the result of a purchase of an institution that
was in danger of default.
Generally, federal law prohibits federal savings institutions from
establishing, retaining or operating a branch outside the state in which the
federal institution has its home office unless the institution meets the IRS's
domestic building and loan test (generally, 60% of a thrift's assets must be
housing-related) ("IRS Test"). The IRS Test requirement does not apply if: (i)
the branch(es) result(s) from an emergency acquisition of a troubled savings
institution (however, if the troubled savings institution is acquired by a bank
holding company, does not have its home office in the state of the bank holding
company bank subsidiary and does not qualify under the IRS Test, its branching
is limited to the branching laws for state-chartered banks in the state where
the savings institution is located); (ii) the law of the state where the branch
would be located would permit the branch to be established if the federal
savings institution were chartered by the state in which its home office is
located; or (iii) the branch was operated lawfully as a branch under state law
prior to the savings institution's conversion to a federal charter.
-92-
<PAGE>
Furthermore, the OTS will evaluate a branching applicant's record of
compliance with the Community Reinvestment Act of 1977 ("CRA"). An
unsatisfactory CRA record may be the basis for denial of a branching
application.
Qualified Thrift Lender Test. All savings institutions are required to
meet a QTL test set forth in Section 10(m) of the HOLA and regulations of the
OTS thereunder to avoid certain restrictions on their operations. A savings
institution that does not meet the QTL test set forth in the HOLA and
implementing regulations must either convert to a bank charter or comply with
the following restrictions on its operations: (i) the institution may not engage
in any new activity or make any new investment, directly or indirectly, unless
such activity or investment is permissible for a national bank; (ii) the
branching powers of the institution shall be restricted to those of a national
bank; (iii) the institution shall not be eligible to obtain any advances from
its FHLB; and (iv) payment of dividends by the institution shall be subject to
the rules regarding payment of dividends by a national bank. Upon the expiration
of three years from the date the savings institution ceases to be a QTL, it must
cease any activity and not retain any investment not permissible for a national
bank and immediately repay any outstanding FHLB advances (subject to safety and
soundness considerations).
Currently, the QTL test requires that 65% of an institution's
"portfolio assets" (as defined) consist of certain housing and consumer-related
assets on a monthly average basis in nine out of every 12 months. Assets that
qualify without limit for inclusion as part of the 65% requirement are loans
made to purchase, refinance, construct, improve or repair domestic residential
housing and manufactured housing; home equity loans; mortgage-backed securities
(where the mortgages are secured by domestic residential housing or manufactured
housing); stock issued by the FHLB of Indianapolis; and direct or indirect
obligations of the FDIC. In addition, the following assets, among others, may be
included in meeting the test subject to an overall limit of 20% of the savings
institution's portfolio assets: 50% of residential mortgage loans originated and
sold within 90 days of origination; 100% of consumer and educational loans
(limited to 10% of total portfolio assets); and stock issued by the FHLMC or the
FNMA. Portfolio assets consist of total assets minus the sum of (i) goodwill and
other intangible assets, (ii) property used by the savings institution to
conduct its business, and (iii) liquid assets up to 20% of the institution's
total assets. At June 30, 1996, the qualified thrift investments of the
Association were approximately 79.2% of its portfolio assets.
Federal Home Loan Bank System. The Association is a member of the FHLB
of Indianapolis, which is one of 12 regional FHLBs that administers the home
financing credit function of savings institutions. Each FHLB serves as a reserve
or central bank for its members within its assigned region. It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB System. It makes loans to members (i.e., advances) in accordance with
policies and procedures established by the Board of Directors of the FHLB.
-93-
<PAGE>
As a member, the Association is required to purchase and maintain stock
in the FHLB of Indianapolis in an amount equal to at least 1% of its aggregate
unpaid residential mortgage loans, home purchase contracts or similar
obligations at the beginning of each year. At June 30, 1996, the Association had
$1.0 million in FHLB stock, which was in compliance with this requirement.
As a result of FIRREA, the FHLBs are required to provide funds for the
resolution of troubled savings institutions and to contribute to affordable
housing programs through direct loans or interest subsidies on advances targeted
for community investment and low-and moderate-income housing projects. These
contributions have adversely affected the level of FHLB dividends paid and could
continue to do so in the future. These contributions also could have an adverse
effect on the value of FHLB stock in the future. For the year ended June 30,
1996, dividends paid by the FHLB of Indianapolis to the Association amounted to
$81,000, compared to $66,000 during the year ended June 30, 1995.
Federal Reserve System. The Federal Reserve Board requires all
depository institutions to maintain reserves against their transaction accounts
(primarily NOW and Super NOW checking accounts). As of June 30, 1996, no
reserves were required to be maintained on the first $4.3 million of transaction
accounts, reserves of 3% were required to be maintained against the next $52.0
million of net transaction accounts (with such dollar amounts subject to
adjustment by the Federal Reserve Board), and a reserve of 10% (which is subject
to adjustment by the Federal Reserve Board to a level between 8% and 14%)
against all remaining net transaction accounts. Because required reserves must
be maintained in the form of vault cash or a noninterest-bearing account at a
Federal Reserve Bank, the effect of this reserve requirement is to reduce an
institution's earning assets.
TAXATION
Federal Taxation
General. The Company and the Association are subject to the generally
applicable corporate tax provisions of the Internal Revenue Code of 1986 as
amended (the "Code"), and the Association is subject to certain additional
provisions of the Code which apply to thrifts and other types of financial
institutions. The following discussion of federal taxation is intended only to
summarize certain pertinent federal income tax matters and is not a
comprehensive discussion of the tax rules applicable to the Association.
Fiscal Year. The Association files a federal income tax return on the
basis of a fiscal year ending on June 30.
Bad Debt Reserves. Savings institutions, such as the Association, which
meet certain definitional tests primarily relating to their assets and the
nature of their businesses, are permitted to establish a reserve for bad debts
and to make annual additions to the reserve.
-94-
<PAGE>
These additions may, within specified formula limits, be deducted in arriving at
the institution's taxable income. For purposes of computing the deductible
addition to its bad debt reserve, the institution's loans are separated into
"qualifying real property loans" (i.e., generally those loans secured by certain
interests in real property) and all other loans ("non-qualifying loans"). The
deduction with respect to non-qualifying loans must be computed under the
experience method as described below. The following formulas previously could be
used to compute the bad debt deduction with respect to qualifying real property
loans: (i) actual loss experience, or (ii) a percentage of taxable income.
Reasonable additions to the reserve for losses on non-qualifying loans must be
based upon actual loss experience and would reduce the current year's addition
to the reserve for losses on qualifying real property loans, unless that
addition is also determined under the experience method. The sum of the
additions to each reserve for each year is the institution's annual bad debt
deduction.
Under the experience method, the deductible annual addition to the
institution's bad debt reserves is the amount necessary to increase the balance
of the reserve at the close of the taxable year to the greater of (a) the amount
which bears the same ratio to loans outstanding at the close of the taxable year
as the total net bad debts sustained during the current and five preceding
taxable years bear to the sum of the loans outstanding at the close of the six
years, or (b) the lower of (i) the balance of the reserve account at the close
of the last taxable year prior to the most recent adoption of the experience
method (the "base year"), except that for taxable years beginning after 1987,
the base year shall be the last taxable year beginning before 1988, or (ii) if
the amount of loans outstanding at the close of the taxable year is less than
the amount of loans outstanding at the close of the base year, the amount which
bears the same ratio to loans outstanding at the close of the taxable year as
the balance of the reserve at the close of the base year bears to the amount of
loans outstanding at the close of the base year.
Under the percentage of taxable income method, the bad debt deduction
equals 8% of taxable income determined without regard to that deduction and with
certain adjustments. The prior availability of the percentage of taxable income
method permitted a qualifying savings institution to be taxed at a lower
effective federal income tax rate than that applicable to corporations in
general. This resulted generally in an effective federal income tax rate payable
by a qualifying savings institution fully able to use the maximum deduction
permitted under the percentage of taxable income method, in the absence of other
factors affecting taxable income, of 31.3% exclusive of any minimum tax or
environmental tax (as compared to 34% for corporations generally). For tax years
beginning on or after January 1, 1993, the maximum corporate tax rate was
increased to 35%, which increased the maximum effective federal income tax rate
payable by a qualifying savings institution fully able to use the maximum
deduction to 32.2%. Any savings institution at least 60% of whose assets are
qualifying assets, as described in the Code, was generally eligible for the full
deduction of 8% of taxable income. As of June 30, 1996, at least 60% of the
assets of the Association were "qualifying assets" as defined in the Code, and
the Association anticipates that at least 60% of its assets will continue to be
qualifying assets in the immediate future.
-95-
<PAGE>
Under the percentage of taxable income method, the bad debt deduction
for an addition to the reserve for qualifying real property loans cannot exceed
the amount necessary to increase the balance in this reserve to an amount equal
to 6% of such loans outstanding at the end of the taxable year. The bad debt
deduction is also limited to the amount which, when added to the addition to the
reserve for losses on non-qualifying loans, equals the amount by which 12% of
deposits at the close of the year exceeds the sum of surplus, undivided profits
and reserves at the beginning of the year. In addition, the deduction for
qualifying real property loans is reduced by an amount equal to all or part of
the deduction for non-qualifying loans.
Pursuant to certain legislation which was recently enacted and which
will be effective for tax years beginning after 1995, a small thrift institution
(one with an adjusted basis of assets of less than $500 million), such as the
Association, would no longer be permitted to make additions to its tax bad debt
reserve under the percentage of taxable income method. Such institutions would
be permitted to use the experience method in lieu of deducting bad debts only as
they occur. Such legislation will require the Association to realize increased
tax liability over a period of at least six years, beginning in 1996.
Specifically, the legislation will require a small thrift institution to
recapture (i.e., take into income) over a multi-year period the balance of its
bad debt reserves in excess of the lesser of (i) the balance of such reserves as
of the end of its last taxable year ending before 1988 or (ii) an amount that
would have been the balance of such reserves had the institution always computed
its additions to its reserves using the experience method. The recapture
requirement would be suspended for each of two successive taxable years
beginning January 1, 1996 in which the Association originates an amount of
certain kinds of residential loans which in the aggregate are equal to or
greater than the average of the principal amounts of such loans made by the
Association during its six taxable years preceding 1996. It is anticipated that
any recapture of the Association's bad debt reserves accumulated after 1987
would not have a material adverse effect on the Association's financial
condition and results of operations.
At June 30, 1996, the federal income tax reserves of the Association
included $1.2 million for which no federal income tax has been provided. Because
of these federal income tax reserves and the liquidation account to be
established for the benefit of certain depositors of the Association in
connection with the Conversion and Reorganization, the retained earnings of the
Association are substantially restricted.
Distributions. If the Association distributes cash or property to its
stockholders, and the distribution is treated as being from its pre-1988
accumulated bad debt reserves, the distribution will cause the Association to
have additional taxable income. A distribution is deemed to have been made from
pre-1988 accumulated bad debt reserves to the extent that (a) the reserves
exceed the amount that would have been accumulated on the basis of actual loss
experience, and (b) the distribution is a "non-qualified distribution." A
distribution with respect to stock is a non-dividend distribution to the extent
that, for federal income tax purposes, (i) it is in redemption of shares, (ii)
it is pursuant to a liquidation of the institution, or (iii) in the case of a
current distribution, together with all other such
-96-
<PAGE>
distributions during the taxable year, it exceeds the institution's current and
post-1951 accumulated earnings and profits. The amount of additional taxable
income created by a non-dividend distribution is an amount that when reduced by
the tax attributable to it is equal to the amount of the distribution.
Minimum Tax. The Code imposes an alternative minimum tax at a rate of
20%. The alternative minimum tax generally applies to a base of regular taxable
income plus certain tax preferences ("alternative minimum taxable income" or
"AMTI") and is payable to the extent such AMTI is in excess of an exemption
amount. The Code provides that an item of tax preference is the excess of the
bad debt deduction allowable for a taxable year pursuant to the percentage of
taxable income method over the amount allowable under the experience method.
Other items of tax preference that constitute AMTI include (a) tax-exempt
interest on newly issued (generally, issued on or after August 8, 1986) private
activity bonds other than certain qualified bonds and (b) 75% of the excess (if
any) of (i) adjusted current earnings as defined in the Code, over (ii) AMTI
(determined without regard to this preference and prior to reduction by net
operating losses).
Net Operating Loss Carryovers. A financial institution may carry back
net operating losses ("NOLs") to the preceding three taxable years and forward
to the succeeding 15 taxable years. This provision applies to losses incurred in
taxable years beginning after 1986. At June 30, 1996, the Association had no NOL
carryforwards for federal income tax purposes.
Capital Gains and Corporate Dividends-Received Deduction. Corporate net
capital gains are taxed at a maximum rate of 34%. The corporate
dividends-received deduction is 80% in the case of dividends received from
corporations with which a corporate recipient does not file a consolidated tax
return, and corporations which own less than 20% of the stock of a corporation
distributing a dividend may deduct only 70% of dividends received or accrued on
their behalf. However, a corporation may deduct 100% of dividends from a member
of the same affiliated group of corporations.
Other Matters. Federal legislation is introduced from time to time that
would limit the ability of individuals to deduct interest paid on mortgage
loans. Individuals are currently not permitted to deduct interest on consumer
loans. Significant increases in tax rates or further restrictions on the
deductibility of mortgage interest could adversely affect the Association.
The Association's federal income tax returns have not been audited by
the IRS in recent years and its federal income tax returns for the tax years
ended June 30, 1995, 1994 and 1993 are open under the statute of limitations and
are subject to review by the IRS.
-97-
<PAGE>
State Taxation
Effective January 1, 1990, the State of Indiana imposed a franchise tax
assessed on net income (adjusted gross income as defined in the statute) of
financial institutions. The new tax replaced the gross receipts tax, excise tax
and supplemental net income tax imposed prior to 1990. This new financial
institution's tax is imposed at the rate of 8.5% of the association's adjusted
gross income. In computing adjusted gross income, no deductions are allowed for
municipal interest, United States Government interest, the excess of the federal
tax bad debt deduction over actual net charge-offs, or pre-1990 net operating
losses. The Association is not currently under audit with respect to its Indiana
franchise tax returns.
MANAGEMENT OF THE COMPANY
Directors and Executive Officers
The Board of Directors is divided into three classes, each of which
contains approximately one-third of the Board. The Bylaws of the Company
currently authorize six directors. The directors shall be elected by the
stockholders of the Company for staggered three-year terms, or until their
successors are elected and qualified. One class of directors, consisting of
Messrs. Denney and Richter, has a term of office expiring at the annual meeting
of stockholders of the Company in 1997, a second class, consisting of Messrs.
Sonntag and Lorey, has a term of office expiring at the annual meeting of
stockholders of the Company in 1998, and a third class, consisting of Messrs.
Siemers and Meador, has a term of office expiring at the annual meeting of
stockholders of the Company in 1999, and in each case until their successors are
elected and qualified. No director is related to any other director or executive
officer of the Association by blood, marriage or adoption. All directors of the
Company currently serve as directors of the Association.
The following individuals are executive officers of the Company and
hold the offices set forth opposite their names.
Name Position(s) Held With the Company
------------------ -------------------------------------
Donald C. Siemers President and Chief Executive Officer
Jay Gary Fraley Vice President
Edward L. Fischer Chief Financial Officer
Margaret M. Abner Secretary
-98-
<PAGE>
The executive officers of the Company are elected annually and hold
office until their respective successors have been elected and qualified or
until death, retirement, resignation or removal by the Board of Directors.
Information concerning the principal occupations and employment of the
directors and executive officers of the Company during the past five years is
set forth under "Management of the Association - Directors" and "- Executive
Officers Who Are Not Directors." Directors and executive officers of the Company
initially will not be compensated by the Company but will serve and be
compensated by the Association. See "Management of the Association -
Compensation of Directors" and "- Executive Compensation."
Benefits
General. The Company intends to adopt certain stock benefit plans
following consummation of the Conversion and Reorganization. Moreover, existing
stock benefit plans of the Association, consisting of the 1993 Stock Incentive
Plan, 1993 Directors' Stock Option Plan and the Management Recognition Plan,
will be adopted by the Company in connection with the Conversion and
Reorganization, with the effect that shares of Common Stock will be issuable
pursuant thereto and not shares of Association Common Stock.
1997 Stock Option Plan. The Board of Directors of the Company may adopt
the 1997 Stock Option Plan (the "1997 Plan") and to submit the 1997 Plan to
stockholders at an annual or special meeting of stockholders to be held at least
one year following the consummation of the Conversion and Reorganization.
The 1997 Plan will be designed to attract and retain qualified
personnel in key positions, provide directors, officers and key employees with a
proprietary interest in the Company as an incentive to contribute to the success
of the Company and reward key employees for outstanding performance and the
attainment of targeted goals. The 1997 Plan will provide for the grant of
incentive stock options intended to comply with the requirements of Section 422
of the Code ("incentive stock options"), non-incentive or compensatory stock
options and stock appreciation rights (collectively "Awards"). Awards will be
granted to directors and key employees of the Company and any subsidiaries,
except that non-employee directors will not be eligible to receive incentive
stock options. If stockholder approval is obtained, it is expected that options
to acquire shares of Common Stock will be awarded to key employees of the
Company and the Association and directors of the Company with an exercise price
equal to the fair market value of the Common Stock on the date of the grant.
The Company may reserve for future issuance pursuant to the 1997 Plan
a number authorized shares of Common Stock equal to 10% of the Conversion Stock
issued in the Offerings (or 50,473 shares at the maximum of the Offering Price
Range). In the event of a stock split, reverse stock split or stock dividend,
the number of shares of Common
-99-
<PAGE>
Stock under the 1997 Plan, the number of shares to which any Award relates and
the exercise price per share under any option or stock appreciation right shall
be adjusted to reflect such increase or decrease in the total number of shares
of Common Stock outstanding.
1997 Management Recognition Plan and Trust. The Board of Directors of
the Company may adopt the 1997 Recognition Plan for directors and selected
officers and employees of the Company and the Association and to submit such
plan to stockholders at an annual or special meeting of stockholders to be held
at least one year following the consummation of the Conversion and
Reorganization. The objective of the 1997 Recognition Plan will be to enable the
Company to provide directors, officers and employees with a proprietary interest
in the Company as an incentive to contribute to its success.
Assuming the receipt of stockholder and OTS approval, the Company may
acquire Common Stock on behalf of the 1997 Recognition Plan in an amount equal
to 4.0% of the Conversion Stock issued in the Offerings, or 20,189 shares at the
maximum of the Offering Price Range. These shares may be acquired through open
market purchases or from authorized but unissued shares, with approval from the
OTS. In the event that authorized but unissued shares are acquired by the 1997
Recognition Plan, such issuance would dilute the interests of other
stockholders. See "Risk Factors - Possible Dilutive Effect of Issuance of
Additional Shares."
The 1997 Recognition Plan will be administered and interpreted by the
Board of Directors or a committee thereof. The trustees will have the
responsibility to invest all funds contributed by the Company to the trust
created for the 1997 Recognition Plan (the "Trust"). Shares of Common Stock
granted pursuant to the 1997 Recognition Plan generally will be in the form of
restricted stock payable over a period specified by the administrators. For
accounting purposes, compensation expense in the amount of the fair market value
of the Common Stock at the date of the grant to the recipient will be recognized
pro rata over the number of years during which the shares are payable. The
shares, while restricted, may not be sold, pledged or otherwise disposed of and
are required to be held in the Trust. If a recipient terminates employment for
reasons other than death or disability, the recipient will forfeit all rights to
the allocated shares under restriction. If the recipient's termination is caused
by death or disability, all restrictions will expire and all allocated shares
will become unrestricted.
Employment Agreements
In connection with the Conversion and Reorganization, the Company and
the Association (collectively the "Employers") may enter into employment
agreements with Messrs. Siemers, Fraley and Fischer. In such event, the
Employers will agree to employ Mr. Siemers for a term of up to three years and
Messrs. Fraley and Fischer for a term of up to two years, in each case in their
respective current positions and at their respective current salaries, which
salaries
-100-
<PAGE>
may be increased at the discretion of the Board of Directors from time to time.
In addition, subject to satisfactory performance reviews by the Board of
Directors, the employment agreements may be extended on each anniversary date
for an additional year so that the remaining term shall be up to three years in
the case of Mr. Siemers and up to two years in the case of Messrs. Fraley and
Fischer.
The employment agreements will be terminable with or without cause by
the Employers. Messrs. Siemers, Fraley and Fischer shall have no right to
compensation or other benefits pursuant to the employment agreements for any
period after voluntary termination or termination by the Employers for cause,
disability, retirement or death, provided, however, that in the event that
either Mr. Siemers, Mr. Fraley or Mr. Fischer is terminated by the Employers for
other than cause, disability, retirement or the employee's death and no Change
of Control of the Company, as defined, has occurred, Messrs. Siemers, Fraley and
Fischer will be entitled to receive a cash severance amount equal to his
respective base salary over the remaining term of the respective employment
agreement. In addition, in the event that either Mr. Siemers, Mr. Fraley or Mr.
Fischer terminates his employment because of failure of the Employers to comply
with any material provision of the respective employment agreement or such
employment agreement is terminated by the Employers other than for cause,
disability, retirement or death or by Mr. Siemers, Mr. Fraley or Mr. Fischer as
a result of certain adverse actions which are taken with respect to Mr.
Siemers', Mr. Fraley's or Mr. Fischer's respective employment following a Change
in Control of the Company, as defined, Messrs. Siemers, Fraley and Fischer will
be entitled to a cash severance amount equal to three times his respective base
salary in the case of Mr. Siemers and two times his respective base salary in
the case of Messrs. Fraley and Fischer. In addition, Messrs. Siemers, Fraley and
Fischer will be entitled to a continuation of benefits similar to those they are
receiving at the time of such termination for the remaining term of the
agreement or until such employee obtains full-time employment with another
employer.
A Change in Control is generally defined in the employment agreement to
include any change in control required to be reported under the federal
securities laws, as well as (i) the acquisition by any person of 25% or more of
the Company's outstanding voting securities and (ii) a change in a majority of
the directors of the Company during any two-year period without the approval of
at least two-thirds of the persons who were directors of the Company at the
beginning of such period.
The employment agreements may provide that in the event that any of the
payments to be made thereunder or otherwise upon termination of employment are
deemed to constitute "excess parachute payments" within the meaning of Section
280G of the Code, then such payments and benefits received thereunder shall be
reduced, in the manner determined by the employee, by the amount, if any, which
is the minimum necessary to result in no portion of the payments and benefits
being non-deductible by the Employers for federal income tax purposes. Excess
parachute payments generally are payments in excess of three times the base
amount, which is defined to mean the recipient's average annual compensation
from
-101-
<PAGE>
the employer includable in the recipient's gross income during the most recent
five taxable years ending before the date on which a change in control of the
employer occurred. Recipients of excess parachute payments are subject to a 20%
excise tax on the amount by which such payments exceed the base amount, in
addition to regular income taxes, and payments in excess of the base amount are
not deductible by the employer as compensation expense for federal income tax
purposes.
MANAGEMENT OF THE ASSOCIATION
Directors
The Association's Bylaws presently provide that the Board of Directors
consists of six members and require the Board of Directors to be divided into
three classes as nearly equal in number as possible. The members of each class
are elected for a term of three years or until their successors are elected and
qualified, with one class of directors elected annually. The following table
sets forth certain information regarding the Board of Directors of the
Association.
<TABLE>
<CAPTION>
Positions Held
With the Director Term
Name Age(1) Association Since Expires
- ------------------------ ------ ----------------------- --------- -------
<S> <C> <C> <C> <C>
Ronald J. Denney 47 Director 1976 1997
David P. Lorey 39 Director 1992 1998
Richard B. Meador, III 61 Director 1983 1996
Dennis G. Richter 48 Director 1986 1997
Donald C. Siemers 50 Director, President 1980 1996
and Chief Executive
Officer
Robert P. Sonntag 61 Chairman 1971 1998
</TABLE>
- ----------------------------
(1) As of June 30, 1996
Set forth below is information with respect to the principal
occupations of the current directors of the Association during the last five
years.
Ronald J. Denney was initially elected to the Board of Directors in
1976. Mr. Denney has served as the funeral director at Fitch Denney Funeral
Home, Inc., Lawrenceburg, Indiana, since 1973.
-102-
<PAGE>
David P. Lorey was initially elected to the Board of Directors in 1992.
Mr. Lorey has been the owner of Loreys, a department store located in
Lawrenceburg, Indiana, since 1988.
Richard B. Meador, III was initially elected to the Board of Directors
in 1983 and is currently retired. Prior to 1992, Mr. Meador owned Meador's
Fitness Center in Lawrenceburg, Indiana.
Dennis G. Richter was initially elected to the Board of Directors in
1986 and has been self-employed as an optometrist in Lawrenceburg, Indiana,
since 1974.
Donald C. Siemers has served as President and Chief Executive Officer
of the Association since October 1978 and as a director of the Association since
1980.
Robert P. Sonntag was initially elected to the Board of Directors in
1971. Mr. Sonntag has served as Chairman of the Board of Directors of the
Association since 1991 and President of Sonntag Accountancy Corporation, Aurora,
Indiana, since 1967.
Executive Officers Who Are Not Directors
The following table sets forth certain information with respect to the
executive officers of the Association who are not directors. There are no
arrangements or understandings between the Association and any such person
pursuant to which such person was elected an executive officer of the
Association, and no such officer is related to any director or officer of the
Association by blood, marriage or adoption.
Name Age(1) Position(s)
- ------------------------ ------ ------------------------------
Jay Gary Fraley 45 Vice President
Edward L. Fischer 44 Chief Financial Officer and
Treasurer
Margaret M. Abner 58 Head Teller and Secretary
- -------------------------------
(1) As of June 30, 1996.
Set forth below is information with respect to the principal
occupations of the above executive officers during the last five years.
-103-
<PAGE>
Jay Gary Fraley has served as Vice President of the Association since
1984.
Margaret M. Abner has served as Head Teller of the Association since
1975 and Secretary of the Association since 1985.
Edward L. Fischer has served as Chief Financial Officer and Treasurer
of the Association since October 1993. Mr. Fischer served as Vice President and
Controller of Charter Oak Federal Savings Bank, Cincinnati, Ohio, from 1983 to
January 1993.
The Board of Directors and Its Committees
Regular meetings of the Board of Directors of the Association are held
between one and two times a month and special meetings of the Board of Directors
of the Association are held from time-to-time as needed. There were 21 meetings
of the Board of Directors of the Association held during fiscal 1996. No
director attended fewer than 75% of the total number of meetings of the Board of
Directors of the Association held during fiscal 1996 and the total number of
meetings held by all committees of the Board on which the director served during
such year.
The Board of Directors of the Association has established various
committees, including Executive, Audit, Compensation and Nominating committees.
The Executive Committee is authorized to act with the same authority as
the Board of Directors between meetings of the Board. Currently, Messrs.
Siemers, Sonntag, Meador and Lorey serve as members of this Committee. The
Executive Committee did not meet during fiscal 1996.
The Audit Committee reviews the records and affairs of the Association
to determine its financial condition, reviews with management and the
independent auditors the systems of internal control, and monitors the
Association's adherence in accounting and financial reporting to generally
accepted accounting principles. Currently, Messrs. Sonntag, Richter and Lorey
serve as members of this Committee. The Audit Committee met two times during
fiscal 1996.
The Compensation Committee reviews existing compensation, investigates
new and different forms of compensation and makes recommendations with respect
thereto to the Board of Directors. Currently the entire Board of Directors serve
as members of this Committee. The Compensation Committee met five times during
fiscal 1996.
The Nominating Committee is appointed each year prior to the Annual
Meeting of Stockholders of the Association and most recently consisted of
Messrs. Denney, Lorey and Sonntag. The Nominating Committee nominates
individuals for election as directors of the Association and met one time during
fiscal 1996.
-104-
<PAGE>
The Association has other committees (including an Asset and Liability
and Loan Committees) comprised of officers and directors of the Association
which meet for specific purposes. The Board of Directors of the Association has
authority under its Bylaws to establish such other committees from time-to-time
as may be deemed necessary.
Executive Compensation
Summary Compensation Table. The following table sets forth a summary of
certain information concerning the compensation awarded to or paid by the
Association for services rendered in all capacities during the last three fiscal
years to the President and Chief Executive Officer of the Association. No
executive officer had total compensation during the last fiscal year which
exceeded $100,000.
<TABLE>
<CAPTION>
==========================================================================
Annual Compensation
------------------------------------
Other
Annual
Name and Compensation
Principal Position Year Salary Bonus (1)
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Donald C. Siemers 1996 $74,780 $ -- --
President and Chief 1995 74,780 -- --
Executive Officer 1994 72,842 -- --
==========================================================================
===============================================================================
Long Term Compensation
-----------------------------------
Awards Payouts
------------------------ -------
Restricted All Other
Options Stock LTIP Compensation
(2) Awards(3) Payouts (4)
- -------------------------------------------------------------------------------
Donald C. Siemers -- $ -- -- $16,727
President and Chief -- -- -- 11,584
Executive Officer 5,200 24,000 -- 6,212
===============================================================================
</TABLE>
- -----------------
(1) Does not include amounts attributable to miscellaneous benefits
received by the named executive officer, including the payment of club
membership dues. The costs to the Association of providing such
benefits to the named executive officer during the year ended June 30,
1996 did not exceed the lesser of $50,000 or 10% of the total of annual
salary and bonus reported for such individual.
(2) Consists of awards granted pursuant to the Association's 1993 Stock
Incentive Plan during the year ended June 30, 1994.
(3) Represents the grant of 2,400 shares of restricted Common Stock during
the year ended June 30, 1994 pursuant to the Association's MRP, which
shares had a fair market value of approximately $34,800 at June 30,
1996. Such shares vest over a five-year period at the rate of 20% per
year, commencing on October 22, 1993, and the named executive officer
is entitled to all voting and other stockholder rights (including the
right to receive dividends) with respect to such shares.
-105-
<PAGE>
(4) During the years ended June 30, 1996, 1995 and 1994, consists of
amounts allocated, accrued or paid by the Association pursuant to the
Association's ESOP of $12,481, $7,540 and $1,787, respectively, and
pursuant to the Association's Simplified Employee Pension Plan of
$4,246, $4,044 and $4,425, respectively.
Stock Options. The following table sets forth certain information
concerning exercises of stock options granted pursuant to the Association's 1993
Stock Incentive Plan by the named executive officer during the year ended June
30, 1996 and options held by such officer at June 30, 1996.
<TABLE>
<CAPTION>
==============================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
- ----------------------------------------------------------------------------------------------
Shares Number of
Acquired on Options at Value of Options
Name Exercise Value Realized Year End at Year End
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Donald C. Siemers $ -- $ -- 5,200(1) $23,400(2)
==============================================================================================
</TABLE>
- -------------------
(1) All of such options were exercisable as of June 30, 1996.
(2) Based on a per share market price of $14.50 as of June 30, 1996.
Compensation of Directors
Since January 1, 1993, each non-employee director of the Association
receives $10,100 per year (a portion of which is being deferred as described
below) for service on such Board of Directors. In addition, Mr. Sonntag receives
an additional $2,000 as Chairman of the Board of the Association. Furthermore,
Messrs. Meador and Denney receive $5,000 per year as members of the
Association's Loan Committee and Messrs. Lorey, Richter and Sonntag receive
$3,000 per year as members of the Association's Asset and Liability and
Strategic Planning Committee and $600 per year as members of the Association's
Audit Committee.
The Association entered into Director Deferred Compensation Agreements
with Messrs. Denney, Meador, Richter and Sonntag in January 1992 and with Mr.
Lorey in August 1992 ("Director Agreements"). Pursuant to the Director
Agreements, the directors of the Association are to defer receipt of monthly
Board fees of $142 ($250 for Messrs.
-106-
<PAGE>
Lorey and Denney) for a period of up to 156 months. The Director Agreements
provide that at each director's normal retirement following his 70th birthday,
the Association shall commence paying a deferred compensation benefit of $2,269,
$4,221, $659, $1,465 and $595, respectively, for Messrs. Denney, Lorey, Meador,
Richter and Sonntag. In the event a director defers fees for a period of less
than the full deferral period, he shall be entitled to receive, upon reaching
his normal retirement age, a deferred compensation benefit determined by
multiplying the amounts listed above by a fraction, the numerator of which is
equal to the total Board fees deferred by a director and the denominator of
which is equal to the total amount of Board fees which would have been deferred
during the entire deferral period. Such benefits shall be payable for 15 years,
or at the election of each director or his beneficiary, in a lump sum. In the
event of death or disability prior to termination of employment, a death benefit
of the full amount payable if fees were deferred for the entire deferral period
shall be payable to the director's beneficiaries for 15 years.
The Association has funded its obligations under the Director
Agreements by purchasing single premium life insurance policies. The directors
and their beneficiaries have no rights to the insurance policies acquired by the
Association and have only the rights of unsecured general creditors of the
Association. During the year ended June 30, 1994, the Association paid premiums
of $70,000 and $18,000, respectively, to fund the benefits payable to Messrs.
Lorey and Denney. During the years ended June 30, 1995 and 1996, the Association
did not pay any additional premiums. The cash surrender value of these policies
is an asset of the Association which was valued at approximately $1.2 million as
of June 30, 1996. Each year the Association will record an expense which is
calculated ratably over the remaining anticipated years of service of the
directors. This expense was approximately $16,000 during the year ended June 30,
1996.
The Association also maintains a 1993 Directors' Stock Option Plan
pursuant to which non-employee directors of the Association were granted options
to purchase an aggregate of 7,000 shares of Common Stock at an exercise price of
$10.00 per share.
Simplified Employee Pension Plan
The Association established a Simplified Employee Pension Plan ("SEP
Plan") on December 29, 1995. Employees are eligible to participate in the SEP
Plan after attaining the age of 21 and having worked for the Association for
three out of the immediately preceding five years. Pursuant to the SEP Plan,
each year the Association may make a discretionary contribution to the SEP Plan
which will be allocated to each participant in the same proportion as such
participant's compensation bears to all participants' compensation in such year.
The Association's contributions to the SEP Plan are held in participants'
individual retirement accounts ("IRAs") and are fully vested and belong to the
participants from the time such amounts are contributed. In addition,
participants may make additional contributions to their SEP Plan accounts
subject to the limitations generally applicable to IRAs. During the year ended
June 30, 1996, the Association contributed approximately $15,000 to the SEP
Plan, exclusive of contributions made directly by participants.
-107-
<PAGE>
Participants may rollover funds from their SEP Plan accounts into other
IRAs, subject to certain restrictions, or may withdraw the Association's
contributions to their SEP Plan accounts. Withdrawn amounts are includable in
income and may be subject to a penalty tax if a participant has not attained the
age of 59 1/2.
Executive Supplemental Retirement Income Agreements
The Association entered into Executive Supplemental Retirement Income
Agreements with Messrs. Siemers and Fraley and Ms. Abner in March 1992 and with
Mr. Fischer in May 1996 ("Supplemental Agreements"). The Supplemental Agreements
are intended to provide supplemental retirement benefits beyond those provided
by the Association's SEP Plan. The Supplemental Agreements provide that at each
executive's normal retirement following his or her 65th birthday, the
Association shall commence paying supplemental retirement income benefits which
shall be, in Mr. Siemers' case, 52 percent, and in Mr. Fraley's, Ms. Abner's and
Mr. Fischer's cases, 35 percent, of their highest W-2 compensation during any 12
month period during their employment with the Association. Such benefits shall
be payable for 20 years, and the benefit payable to Mr. Siemers shall not exceed
$69,000 per year. In the event of the executives' early retirement, after
attaining the age of 60 in the case of Messrs. Siemers, Fraley and Fischer, and
62 in the case of Ms. Abner, the supplemental retirement income benefit shall be
reduced by one percent for each year, or fraction thereof, that an executive's
retirement date precedes his or her normal retirement date. In the event of
death or disability prior to termination of employment, a death benefit of 60
percent of annual salary at date of death shall be payable to these executives'
beneficiaries for 20 years. Such death benefits shall not exceed $69,000,
$40,000, $49,000 or $12,500 for the beneficiaries of Messrs. Siemers, Fraley,
Fischer and Ms. Abner, respectively. The benefits provided under the
Supplemental Agreements vest at the rate of 20 percent per year starting with
the third complete calendar year of employment beginning from the date of
execution of the Supplemental Agreements. If, prior to an executive's normal
retirement date, he or she voluntarily terminates or is terminated without cause
by the Association, the Association shall pay to the executive his or her vested
accrued benefits. If, however, an executive's termination follows a merger,
conversion or other material change in the Association's structure or business
activities, the executive shall be entitled to his or her full supplemental
retirement income benefits. Should an executive be terminated for cause, his
benefits under the Supplemental Agreements shall be forfeited.
The Association has funded its obligations under the Supplemental
Agreements by purchasing single premium life insurance policies. The Executives
and their beneficiaries have no rights to the insurance policies acquired by the
Association and have only the rights of unsecured general creditors of the
Association. Each year the Association records on expense which is calculated
ratably over the remaining anticipated years of service of the Executive. This
expense was approximately $20,000 during the year ended June 30, 1996.
-108-
<PAGE>
Stock Benefit Plans
Stock Plans of the Association. The Association has adopted and
maintains the 1993 Stock Incentive Plan, the 1993 Directors' Stock Option Plan
and the Management Recognition Plan. The 1993 Stock Incentive Plan provides for
the grant of stock options to officers and employees of the Association. The
maximum number of shares of Association Common Stock which may be issued under
the 1993 Stock Incentive Plan is 13,000 shares, 866 of which had been issued
upon the exercise of stock options as of June 30, 1996. The 1993 Directors'
Stock Option Plan provides for the grant of stock options to non-employee
directors of the Association. The maximum number of shares of Association Common
Stock which may be issued under the 1993 Directors' Stock Option Plan is 7,000
shares, 6,860 of which had been issued upon the exercise of stock options as of
June 30, 1996. See "Compensation of Directors." The Management Recognition Plan
provides for the award of restricted Common Stock to directors, officers and
employees of the Association. The maximum number of shares of Association Common
Stock which may be issued under the plan is 6,000 shares, all of which are
outstanding and 2,160 shares of which had vested as of June 30, 1996. The
restricted stock awarded pursuant to the Management Recognition Plan vests over
five years, one-fifth per year from the date of grant. Pursuant to the terms of
the Association's stock option plans, all outstanding options thereunder may be
exercised in whole or in part immediately prior to consummation of the
Conversion and Reorganization.
The Company has approved adoption of the Association's existing 1993
Stock Incentive Plan, 1993 Directors' Stock Option Plan and Management
Recognition Plan (collectively the "Plans") as plans of the Company upon
consummation of the Conversion and Reorganization and will issue Common Stock in
lieu of Association Common Stock pursuant to the terms of such Plans. As of the
effective date of the Conversion and Reorganization, rights outstanding under
the Plans shall be assumed by the Company and thereafter shall be rights only
for shares of Company Common Stock, with each such right being for a number of
shares of Common Stock equal to the number of shares of Association Common Stock
that were available thereunder immediately prior to such effective date times
the Exchange Ratio, and the price of each such right shall be adjusted to
reflect the Exchange Ratio and so that the aggregate purchase price of the right
is unaffected, but with no change in any other term or condition of such right.
The Company shall make appropriate amendments to the Plans to reflect the
adoption of the Plans by the Company without adverse effect upon the rights
outstanding thereunder.
Employee Stock Ownership Plan. The Association established an ESOP in
connection with the MHC Reorganization for employees age 21 or older who have at
least one year of credited service with the Association (including its
predecessors) ("ESOP Participants"). The ESOP purchased 16,000 Public
Association Shares in the MHC Reorganization. The ESOP is funded by the
Association's contributions made in cash and by dividends on the shares held by
the ESOP. Upon consummation of the Conversion and Reorganization, the Public
Association Shares held by the ESOP will convert into Common
-109-
<PAGE>
Stock based upon the Exchange Ratio. See "The Conversion and Reorganization -
Effects of the Conversion and Reorganization - Effect on Existing Compensation
Plans."
Messrs. Siemers, Sonntag and Denney serve as trustees of the ESOP
trust. Under the ESOP, the trustees must vote all allocated shares held in the
ESOP in accordance with the instructions of the ESOP Participants, and allocated
shares for which employees do not give instructions will be voted in the same
ratio on any matter as to those shares for which instructions are given.
Unallocated shares held in the ESOP are voted by the ESOP trustees in the same
proportion as participants and beneficiaries actually vote their allocated
shares. To date, 5,510 shares have been allocated to participants, including
1,378 shares to Mr. Siemers.
The Company may, in any plan year, make additional discretionary
contributions for the benefit of ESOP Participants in either cash or shares of
Common Stock, which may be acquired through the purchase of outstanding shares
in the market or from individual stockholders, upon the original issuance of
additional shares by the Company or upon the sale of treasury shares by the
Company. Such purchases, if made, would be funded through additional borrowings
by the ESOP or additional contributions from the Company. The timing, amount and
manner of future contributions to the ESOP will be affected by various factors,
including prevailing regulatory policies, the requirements of applicable laws
and regulations and market conditions. Nevertheless, the Company does not
anticipate that the ESOP will purchase additional shares of Common Stock for at
least one year following completion of the Conversion and Reorganization.
The ESOP is subject to the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and the regulations of the
IRS and the Department of Labor thereunder.
Indebtedness of Management
In accordance with applicable federal laws and regulations, the
Association used to offer mortgage loans to its directors, officers and
full-time employees for the financing of their primary residences and certain
other loans. Prior to the enactment of recent legislation discussed below, the
Association offered loans to officers, directors and employees at a more
favorable interest rate and at reduced fees for as long as such persons were
employed at the Association. Otherwise, these loans generally were made on
substantially the same terms as those prevailing at the time for comparable
transactions with non-affiliated persons. It is the belief of management that
these loans neither involve more than the normal risk of collectibility nor
present other unfavorable features.
As a result of the enactment of FIRREA and FIDICIA, any credit extended
by a savings institution, such as the Association, to its executive officers,
directors and, to the extent otherwise permitted, principal stockholder(s), or
any related interest of the foregoing, must (i) be on substantially the same
terms, including interest rates and collateral, as those
-110-
<PAGE>
prevailing at the time for comparable transactions by the savings institution
with non-affiliated parties; (ii) be pursuant to underwriting standards that are
no less stringent than those applicable to comparable transactions with
non-affiliated parties; (iii) not involve more than the normal risk of repayment
or present other unfavorable features; and (iv) not exceed, in the aggregate,
the institution's unimpaired capital and surplus, as defined.
The Association's policy provides that all loans made by the
Association to its directors and officers are made in the ordinary course of
business, are made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons and do not involve more than the normal risk of collectability or
present other unfavorable features. As of June 30, 1996, two of the
Association's directors and executive officers each had aggregate loan balances
in excess of $60,000, which amounted to $371,000 in the aggregate, or 5.4% of
the Association's stockholders' equity as of such date. All such loans were made
by the Association in the ordinary course of business and were not made with
favorable terms nor did they involve more than the normal risk of
collectability.
-111-
<PAGE>
BENEFICIAL OWNERSHIP OF CAPITAL STOCK
Beneficial Ownership of Association Common Stock
The following table includes, as of ______________ __, 1996, certain
information as to the Association Common Stock beneficially owned by (i) the
only persons or entities, including any "group" as that term is used in Section
13(d)(3) of the Exchange Act, who or which was known to the Association to be
the beneficial owner of more than 5% of the issued and outstanding Association
Common Stock, (ii) the directors of the Association and (iii) all directors and
executive officers of the Association as a group. For information concerning
proposed subscriptions by directors and executive officers and the anticipated
ownership of Common Stock by such persons upon consummation of the Conversion
and Reorganization, see "- Proposed Subscriptions by Directors and Executive
Officers."
Association Common Stock
Beneficially Owned as of
___________ __, 1996 (1)
---------------------------
Name of Beneficial Owner No. %
- ---------------------------------- ---------- -----
Dearborn Mutual Holding Company 250,000(2) 54.6%
118 Walnut Street
Lawrenceburg, Indiana 47025-1838
Directors:
Ronald J. Denney 9,500(3) 2.1
David P. Lorey 9,599(4) 2.1
Richard B. Meador, III 9,400(5) 2.1
Dennis G. Richter 9,400(6) 2.1
Donald C. Siemers 18,883(7) 4.1
Robert P. Sonntag 9,400 2.1
All directors and executive officers
of the Association as a group
(nine persons) 83,967(8) 17.9
- -----------------
(1) For purposes of this table, pursuant to rules promulgated under the
Exchange Act, an individual is considered to beneficially own shares of
Association Common Stock if he or she directly or indirectly has or
shares (i) voting power, which includes the power to vote or to direct
the voting of the shares or (ii) investment power, which includes the
power to dispose or direct the disposition of the shares. Unless
otherwise indicated, a director has sole voting power and sole
investment power with respect to the indicated shares.
-112-
<PAGE>
(2) The shares of Association Common Stock held by the Mutual Holding
Company are to be cancelled in connection with the Conversion and
Reorganization.
(3) Includes 100 shares owned by Mr. Denney's wife, which shares may be
deemed to be beneficially owned by Mr. Denney.
(4) Includes 1,200 shares owned by Mr. Lorey's children and 1,999 shares
held in an IRA for the benefit of Mr. Lorey.
(5) Includes options to purchase 140 shares pursuant to the Association's
1993 Directors' Stock Option Plan.
(6) All of such shares are owned by Mr. Richter's daughter, which shares
may be deemed to be beneficially owned by Mr. Richter.
(7) Includes 1,000 shares owned jointly with Mr. Siemers' wife, 1,540
shares held in an IRA for the benefit of Mr. Siemers' wife and 2,224
shares owned by Mr. Siemers' children, which shares may be deemed to be
beneficially owned by Mr. Siemers, 5,141 shares held in an IRA for the
benefit of Mr. Siemers, 1,920 shares which were awarded to Mr. Siemers
pursuant to the Association's MRP (and which vest at the rate of 20%
per year), options to purchase 5,200 shares pursuant to the
Association's 1993 Stock Incentive Plan and 1,378 shares held by the
Association's ESOP for the account of Mr. Siemers.
(8) Includes in the case of all directors and officers of the Association
as a group, options to purchase 12,274 shares pursuant to the
Association's 1993 Stock Incentive Plan. Also includes, in the case of
all directors and officers of the Association as a group, 6,000 shares
of Association Common Stock which were awarded to certain officers of
the Association pursuant to the Association's Management Recognition
Plan and 3,118 shares of Common Stock which are held by the trust
established pursuant to the Association's ESOP, which have been
allocated to the accounts of participating officers.
Proposed Subscriptions by Directors and Executive Officers
The following table sets forth, for each of the Company's directors and
executive officers and for all of the directors and executive officers as a
group, (1) the number of Exchange Shares to be held upon consummation of the
Conversion and Reorganization, based upon their beneficial ownership of
Association Common Stock as of ___________ __, 1996, (2) the proposed purchases
of Conversion Stock, assuming sufficient shares are available to satisfy their
subscriptions, and (3) the total amount of Common Stock to be held upon
consummation of the Conversion and Reorganization, in each case assuming that
504,735 shares of Conversion Stock are sold, which is the maximum of the
Offering Price Range.
-113-
<PAGE>
<TABLE>
<CAPTION>
Proposed Purchases of Total Common Stock
Conversion Stock to be Held
Number of -------------------------- --------------------------
Exchange Shares Number Number Percentage
Name to be Held(1)(2) Amount of Shares of Shares of Total
- ---------------------------- ---------------- -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Ronald J. Denney 14,685 $ 20,000 2,000 16,685 1.9%
David P. Lorey 14,838 103,980 10,398 25,236 2.9
Richard B. Meador, III 14,530 -- -- 14,530 1.7
Dennis G. Richter 14,530 107,060 10,706 25,236 2.9
Donald C. Siemers 21,764 34,720 3,472 25,236 2.9
Robert P. Sonntag 14,530 -- -- 14,530 1.7
All directors and executive
officers of the Association
as a group (nine persons) 103,409 326,010 32,601 163,010 18.7
</TABLE>
- ------------------
(1) Excludes shares which may be received upon the exercise of outstanding
stock options. Based upon the Exchange Ratio of 1.7777 Exchange Shares
for each Public Association Share at the maximum of the Offering Price
Range, Messrs. Meador and Siemers would have options to purchase 248
shares and 9,244 shares of Common Stock, respectively.
(2) Excludes stock options and awards which may be granted under the Company's
1997 Stock Option Plan and 1997 Recognition Plan if such plans are
approved by stockholders following the Conversion and Reorganization.
See "Management of the Company - Benefits."
-114-
<PAGE>
THE CONVERSION AND REORGANIZATION
The Boards of Directors of the Mutual Holding Company, the Association and
the Company have approved the Plan of Conversion, as has the OTS, subject to
approval by the Members of the Mutual Holding Company and the Stockholders of
the Association entitled to vote on the matter and the satisfaction of certain
other conditions. Such OTS approval, however, does not constitute a
recommendation or endorsement of the Plan by such agency.
General
The Boards of Directors of the Mutual Holding Company and the Association
unanimously adopted the Plan as of August 8, 1996, which was amended on August
22, 1996. The Plan has been approved by the OTS, subject to, among other things,
approval of the Plan by the Members of the Mutual Holding Company and the
Stockholders of the Association. The Members' Meeting and the Stockholders'
Meeting have been called for this purpose on _________ __, 1996.
The following is a brief summary of pertinent aspects of the Plan and the
Conversion and Reorganization. The summary is qualified in its entirety by
reference to the provisions of the Plan, which is available for inspection at
each branch office of the Association and at the offices of the OTS. The Plan
also is filed as an exhibit to the Registration Statement of which this
Prospectus is a part, copies of which may be obtained from the SEC. See
"Additional Information."
Purposes of the Conversion and Reorganization
The Mutual Holding Company, as a federally chartered mutual holding
company, does not have stockholders and has no authority to issue capital stock.
As a result of the Conversion and Reorganization, the Company will be structured
in the form used by holding companies of commercial banks, most business
entities and a growing number of savings institutions. The holding company form
of organization will provide the Company with the ability to diversify the
Company's and the Association's business activities through acquisition of or
mergers with both stock savings institutions and commercial banks, as well as
other companies. Although there are no current arrangements, understandings or
agreements regarding any such opportunities, the Company will be in a position
after the Conversion and Reorganization, subject to regulatory limitations and
the Company's financial position, to take advantage of any such opportunities
that may arise.
In their decision to pursue the Conversion and Reorganization, the Mutual
Holding Company and the Association considered various regulatory uncertainties
associated with the mutual holding company structure including the ability to
waive dividends in the future as well as the general uncertainty regarding a
possible elimination of the federal savings
-115-
<PAGE>
association charter. See "Risk Factors - Recapitalization of SAIF and Related
Legislative Proposals" and "- Pending Legislation Regarding Bad Debt Reserves."
The Conversion and Reorganization also will be important to the future
growth and performance of the holding company organization by providing a larger
capital base to support the operations of the Association and Company and by
enhancing their future access to capital markets, ability to diversify into
other financial services related activities, and ability to provide services to
the public. Although the Association currently has the ability to raise
additional capital through the sale of additional shares of Association Common
Stock, that ability is limited by the mutual holding company structure which,
among other things, requires that the Mutual Holding Company hold a majority of
the outstanding shares of Association Common Stock.
The Conversion and Reorganization also will result in an increase in the
number of outstanding shares of Common Stock following the Conversion and
Reorganization, as compared to the number of outstanding shares of Public
Association Shares prior to the Conversion and Reorganization, which will
increase the likelihood of the development of an active and liquid trading
market for the Common Stock. See "Market for Common Stock." In addition, the
Conversion and Reorganization will enhance the Association's ability to engage
in stock repurchases.
An additional benefit to the Conversion and Reorganization will be an
increase in the accumulated earnings and profits of the Association for federal
income tax purposes. When the Mutual Association transferred substantially all
of its assets and liabilities to the Association in connection with the MHC
Reorganization, its accumulated earnings and profits tax attribute was not able
to be transferred to the Association because no tax-free reorganization was
involved. Accordingly, this tax attribute was retained by the Mutual Association
when it converted its charter to that of the Mutual Holding Company, even though
the underlying retained earnings were transferred to the Association. The
Conversion and Reorganization has been structured to re-unite the accumulated
earnings and profits tax attribute retained by the Mutual Holding Company in the
MHC Reorganization with the retained earnings of the Association by merging the
Mutual Holding Company with and into the Association in a tax-free
reorganization. This transaction will increase the Association's ability to pay
dividends to the Company in the future. See "Dividend Policy."
If the Mutual Association had undertaken a standard conversion involving
the formation of a stock holding company in 1993, applicable OTS regulations
would have required a greater amount of common stock to be sold than the amount
of net proceeds raised in the MHC Reorganization. In addition, if a standard
conversion had been conducted in 1993, management of the Mutual Association
believed that it would have been difficult to profitably invest the larger
amount of capital that would have been raised, when compared to the amount of
net proceeds raised in the MHC Reorganization. A standard
-116-
<PAGE>
conversion in 1993 also would have immediately eliminated all aspects of the
mutual form of organization.
In light of the foregoing, the Boards of Directors of the Association and
the Mutual Holding Company believe that the Conversion and Reorganization is in
the best interests of such companies and their respective Stockholders and
Members.
Description of the Conversion and Reorganization
On August 8, 1996, the Boards of Directors of the Association and the
Mutual Holding Company adopted the Plan, which was amended on August 22, 1996,
and in August 1996 the Association incorporated the Company under Indiana law as
a first-tier wholly owned subsidiary of the Association. Pursuant to the Plan,
(i) the Mutual Holding Company will convert from mutual form to a federal
interim stock savings institution and simultaneously merge with and into the
Association, pursuant to which the Mutual Holding Company will cease to exist
and the shares of Association Common Stock held by the Mutual Holding Company
will be cancelled, and (ii) Interim will then merge with and into the
Association. As a result of the merger of Interim with and into the Association,
the Association will become a wholly-owned subsidiary of the Company and the
Public Association Shares will be converted into the Exchange Shares pursuant to
the Exchange Ratio, which will result in the holders of such shares owning in
the aggregate approximately the same percentage of the Common Stock to be
outstanding upon the completion of the Conversion and Reorganization (i.e., the
Conversion Stock and the Exchange Shares) as the percentage of Association
Common Stock owned by them in the aggregate immediately prior to consummation of
the Conversion and Reorganization, adjusted downward pursuant to OTS policy
which requires that the Exchange Ratio reflect the $403,000 of special dividends
declared by the Association and waived by the Mutual Holding Company, but before
giving effect to (a) the payment of cash in lieu of issuing fractional Exchange
Shares, (b) any shares of Conversion Stock purchased by the Association's
stockholders in the Offerings, and (c) any exercise of dissenters' rights.
-117-
<PAGE>
The following diagram outlines the current organizational structure of the
parties' ownership interests:
|--------------------| |--------------------|
| | | |
| Dearborn Mutual | | Holders of Public |
| Holding Company | | Association Shares |
| | | |
| | | |
|--------------------| |--------------------|
| |
| |
| |
| 54.62% | 45.38%
| |
| |
|-----------------------------------------------------|
| |
| Dearborn Savings |
| Association, F.A. |
| |
|-----------------------------------------------------|
|
|
|
| 100%
|
|
|
|-----------------------------------------------------|
| |
| Vision Bancorp, Inc. |
| |
|-----------------------------------------------------|
|
|
| 100%
|
|
|-----------------------------------------------------|
| |
| Interim (to be formed) |
| |
|-----------------------------------------------------|
-118-
<PAGE>
The following diagram reflects the Conversion and Reorganization, including
(i) the merger of the Mutual Holding Company (following its conversion into an
interim federal stock savings institution) with and into the Association, (ii)
the merger of Interim with and into the Association, pursuant to which the
Public Association Shares will be converted into Exchange Shares, and (iii) the
offering of Conversion Stock. The diagram assumes that there are no dissenters'
rights exercised and no fractional shares and does not give effect to purchases
of Conversion Stock by holders of Public Association Shares or the exercise of
outstanding stock options.
|-------------------------------------| |------------------------|
| | | |
| Purchasers of Conversion Stock | | Holders of Public |
| | | Association Shares |
|-------------------------------------| |------------------------|
| |
| |
57.75% | | 42.25%
|-----------------------------------------------------|
| |
| |
| Vision Bancorp, Inc. |
| |
| |
|----------------------------|------------------------|
|
|
| 100%
|----------------------------|------------------------|
| |
| |
| Dearborn Bank |
| |
| |
|-----------------------------------------------------|
Pursuant to OTS regulations, consummation of the Conversion and
Reorganization (including the offering of Conversion Stock in the Offerings, as
described below) is conditioned upon the approval of the Plan by (1) the OTS,
(2) at least a majority of the total number of votes eligible to be cast by
Members of the Mutual Holding Company at the Members' Meeting, and (3) holders
of at least two-thirds of the shares of the outstanding Association Common Stock
at the Stockholders' Meeting. In addition, the Primary Parties have conditioned
the consummation of the Conversion and Reorganization on the approval of the
Plan by at least a majority of the votes cast, in person or by proxy, by the
Public Stockholders at the Stockholders' Meeting.
Effects of the Conversion and Reorganization
General. Prior to the Conversion and Reorganization, each depositor in the
Association has both a deposit account in the institution and a pro rata
ownership interest in the net worth of the Mutual Holding Company based upon the
balance in his account,
-119-
<PAGE>
which interest may only be realized in the event of a liquidation of the Mutual
Holding Company. However, this ownership interest is tied to the depositor's
account and has no tangible market value separate from such deposit account. A
depositor who reduces or closes his account receives a portion or all of the
balance in the account but nothing for his ownership interest in the net worth
of the Mutual Holding Company, which is lost to the extent that the balance in
the account is reduced.
Consequently, the depositors of the Association normally have no way to
realize the value of their ownership interest in the Mutual Holding Company,
which has realizable value only in the unlikely event that the Mutual Holding
Company is liquidated. In such event, the depositors of record at that time, as
owners, would share pro rata in any residual surplus and reserves of the Mutual
Holding Company after other claims are paid.
Upon consummation of the Conversion and Reorganization, permanent
nonwithdrawable capital stock will be created to represent the ownership of the
net worth of the Company. The Common Stock of the Company is separate and apart
from deposit accounts and cannot be and is not insured by the FDIC or any other
governmental agency. Certificates are issued to evidence ownership of the
permanent stock. The stock certificates are transferable, and therefore the
stock may be sold or traded if a purchaser is available with no effect on any
account the seller may hold in the Association.
Continuity. While the Conversion and Reorganization is being accomplished,
the normal business of the Association of accepting deposits and making loans
will continue without interruption. The Association will continue to be subject
to regulation by the OTS and the FDIC. After the Conversion and Reorganization,
the Association will continue to provide services for depositors and borrowers
under current policies by its present management and staff.
The directors and officers of the Association at the time of the Conversion
and Reorganization will continue to serve as directors and officers of the
Association after the Conversion and Reorganization. The directors and officers
of the Company consist of individuals currently serving as directors and
officers of the Mutual Holding Company and the Association, and they generally
will retain their positions in the Company after the Conversion and
Reorganization.
Effect on Public Association Shares. Under the Plan, upon consummation of
the Conversion and Reorganization, the Public Association Shares shall be
converted into Common Stock based upon the Exchange Ratio without any further
action on the part of the holder thereof. Upon surrender of the Public
Association Shares, Common Stock will be issued in exchange for such shares. See
"- Delivery and Exchange of Certificates."
Upon consummation of the Conversion and Reorganization, the Public
Stockholders of the Association, a federally chartered savings association, will
become stockholders of the Company, an Indiana corporation. For a description of
certain changes in the rights of
-120-
<PAGE>
stockholders as a result of the Conversion and Reorganization, see "Comparison
of Stockholders' Rights" below.
Effect on Deposit Accounts. Under the Plan, each depositor in the
Association at the time of the Conversion and Reorganization will automatically
continue as a depositor after the Conversion and Reorganization, and each such
deposit account will remain the same with respect to deposit balance, interest
rate and other terms, except to the extent that funds in the account are
withdrawn to purchase Conversion Stock to be issued in the Offerings. Each such
account will be insured by the FDIC to the same extent as before the Conversion
and Reorganization. Depositors will continue to hold their existing
certificates, passbooks and other evidences of their accounts.
Effect on Loans. No loan outstanding from the Association will be affected
by the Conversion and Reorganization, and the amount, interest rate, maturity
and security for each loan will remain as they were contractually fixed prior to
the Conversion and Reorganization.
Effect on Voting Rights of Members. At present, all depositors of the
Association are members of, and have voting rights in, the Mutual Holding
Company as to all matters requiring membership action. Upon completion of the
Conversion and Reorganization, depositors will cease to be members and will no
longer be entitled to vote at meetings of the Mutual Holding Company (which will
cease to exist). Upon completion of the Conversion and Reorganization, all
voting rights in the Association will be vested in the Company as the sole
stockholder of the Association. Exclusive voting rights with respect to the
Company will be vested in the holders of Common Stock. Depositors of the
Association will not have voting rights in the Company after the Conversion and
Reorganization, except to the extent that they become stockholders of the
Company.
Tax Effects. Consummation of the Conversion and Reorganization is
conditioned on prior receipt by the Primary Parties of rulings or opinions with
regard to federal and Indiana income taxation which indicate that the adoption
and implementation of the Plan of Conversion set forth herein will not be
taxable for federal or Indiana income tax purposes to the Primary Parties or the
Association's Eligible Account Holders, Supplemental Eligible Account Holders or
Other Members, except as discussed below. See "- Tax Aspects" below.
Effect on Liquidation Rights. Were the Mutual Holding Company to liquidate,
all claims of the Mutual Holding Company's creditors would be paid first.
Thereafter, if there were any assets remaining, Members of the Mutual Holding
Company would receive such remaining assets, pro rata, based upon the deposit
balances in their deposit accounts at the Association immediately prior to
liquidation. In the unlikely event that the Association were to liquidate after
the Conversion and Reorganization, all claims of creditors (including those of
depositors, to the extent of their deposit balances) also would be paid first,
followed by distribution of the "liquidation account" to certain depositors (see
"- Liquidation Rights" below), with any assets remaining thereafter distributed
to the Company as the holder of the
-121-
<PAGE>
Association's capital stock. Pursuant to the rules and regulations of the OTS, a
merger, consolidation, sale of bulk assets or similar combination or transaction
with another insured institution would not be considered a liquidation for this
purpose and, in such a transaction, the liquidation account would be required to
be assumed by the surviving institution.
Effect on Existing Compensation Plans. Under the Plan, the Association's
1993 Stock Incentive Plan, 1993 Directors' Stock Option Plan and the Management
Recognition Plan will become stock benefit plans of the Company and shares of
Common Stock will be issued (or reserved for issuance) pursuant to such benefit
plans and not shares of Association Common Stock. See "Management of the
Association - Stock Benefit Plans."
The Offerings
Subscription Offering. In accordance with the Plan of Conversion, rights to
subscribe for the purchase of Conversion Stock have been granted under the Plan
of Conversion to the following persons in the following order of descending
priority: (1) Eligible Account Holders, (2) Supplemental Eligible Account
Holders, (3) Other Members, (4) directors, officers and employees of the Mutual
Holding Company and the Association and (5) Public Stockholders. Although the
Plan of Conversion permits the Association to provide priority subscription
rights to the Association's ESOP, the Association has determined not to allow
its ESOP to purchase additional shares of Common Stock in the Offerings.
However, the ESOP may purchase additional shares of Common Stock not earlier
than one year following completion of the Conversion and Reorganization. All
subscriptions received will be subject to the availability of Conversion Stock
after satisfaction of all subscriptions of all persons having prior rights in
the Subscription Offering and to the maximum and minimum purchase limitations
set forth in the Plan of Conversion and as described below under "- Limitations
on Conversion Stock Purchases."
Priority 1: Eligible Account Holders. Each Eligible Account Holder will
receive, without payment therefor, first priority, nontransferable subscription
rights to subscribe for in the Subscription Offering up to the greater of (i)
the number of shares of Conversion Stock that when combined with Exchange Shares
received aggregate 2.5% of the Conversion Stock, (ii) one-tenth of one percent
(.10%) of the total offering of shares of Conversion Stock in the Subscription
Offering and (iii) 15 times the product (rounded down to the next whole number)
obtained by multiplying the total number of shares of Conversion Stock offered
in the Subscription Offering 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 as of the close of business on December 31, 1994 (the "Eligibility
Record Date"), subject to the overall purchase limitations. See "- Limitations
on Conversion Stock Purchases."
If there are not sufficient shares available to satisfy all subscriptions,
shares first will be allocated so as to permit each subscribing Eligible Account
Holder to purchase a number of shares sufficient to make his total allocation
equal to the lesser of the number of shares
-122-
<PAGE>
subscribed for or 100 shares. Thereafter, unallocated shares will be allocated
to subscribing Eligible Account Holders whose subscriptions remain unfilled in
the proportion that the amounts of their respective eligible deposits bear to
the total amount of eligible deposits of all subscribing Eligible Account
Holders whose subscriptions remain unfilled, provided that no fractional shares
shall be issued. The subscription rights of Eligible Account Holders who are
also directors or officers of the Mutual Holding Company or the Association and
their associates will be subordinated to the subscription rights of other
Eligible Account Holders to the extent attributable to increased deposits in the
year preceding December 31, 1994.
Priority 2: Supplemental Eligible Account Holders. Each Supplemental
Eligible Account Holder will receive, without payment therefor, second priority,
nontransferable subscription rights to subscribe for in the Subscription
Offering up to the greater of (i) the number of shares of Conversion Stock that
when combined with Exchange Shares received aggregate 2.5% of the Conversion
Stock, (ii) one-tenth of one percent (.10%) of the total offering of shares of
Conversion Stock in the Subscription Offering and (iii) 15 times the product
(rounded down to the next whole number) obtained by multiplying the total number
of shares of Conversion Stock offered in the Subscription Offering 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 as of the close of business on September 30, 1996 (the "Supplemental
Eligibility Record Date"), subject to the overall purchase limitations. See "-
Limitations on Conversion Stock Purchases."
If there are not sufficient shares available to satisfy all subscriptions,
shares first will be allocated so as to permit each subscribing Supplemental
Eligible Account Holder to purchase a number of shares sufficient to make his
total allocation equal to the lesser of the number of shares subscribed for or
100 shares. Thereafter, unallocated shares will be allocated to subscribing
Supplemental Eligible Account Holders whose subscriptions remain unfilled in the
proportion that the amounts of their respective eligible deposits bear to the
total amount of eligible deposits of all such subscribing Supplemental Eligible
Account Holders whose subscriptions remain unfilled, provided that no fractional
shares shall be issued.
Priority 3: Other Members. To the extent that there are sufficient shares
remaining after satisfaction of subscriptions by Eligible Account Holders and
Supplemental Eligible Account Holders, each Other Member will receive, without
payment therefor, third priority, nontransferable subscription rights to
subscribe for Conversion Stock in the Subscription Offering up to the greater of
(i) the number of shares of Conversion Stock that when combined with Exchange
Shares received aggregate 2.5% of the Conversion Stock and (ii) one-tenth of one
percent (.10%) of the total offering of shares of Conversion Stock in the
Subscription Offering, subject to the overall purchase limitations. See "-
Limitations on Conversion Stock Purchases."
-123-
<PAGE>
In the event the Other Members subscribe for a number of shares which, when
added to the shares subscribed for by Eligible Account Holders and Supplemental
Eligible Account Holders is in excess of the total number of shares of
Conversion Stock offered in the Subscription Offering, shares first will be
allocated so as to permit each subscribing Other Member to purchase a number of
shares sufficient to make his total allocation equal to the lesser of the number
of shares subscribed for or 100 shares. Thereafter, any remaining shares will be
allocated among subscribing Other Members on a pro rata basis in the same
proportion as each Other Member's subscription bears to the total subscriptions
of all subscribing Other Members, provided that no fractional shares shall be
issued.
Priority 4: Directors, Officers and Employees. To the extent that there are
sufficient shares remaining after satisfaction of all subscriptions by Eligible
Account Holders, Supplemental Eligible Account Holders and Other Members, then
directors, officers and employees of the Mutual Holding Company and the
Association will receive, without payment therefor, fourth priority,
nontransferable subscription rights to subscribe for, in this category, up to an
aggregate of 24.7% of the shares of Conversion Stock offered in the Subscription
Offering. The ability of directors, officers and employees to purchase
Conversion Stock under this category is in addition to rights which are
otherwise available to them under the Plan, which generally allows such persons
to purchase in the aggregate up to 34.7% of the total number of shares of
Conversion Stock sold in the Offerings. See "- Limitations on Conversion Stock
Purchases."
In the event of an oversubscription in this category, subscription rights
will be allocated among the individual directors, officers and employees on a
point system basis, whereby such individuals will receive subscription rights in
the proportion that the number of points assigned to each of them bears to the
total points assigned to all directors, officers and employees, provided that no
fractional shares shall be issued. One point will be assigned for each year of
service with the Mutual Holding Company and the Association, one point for each
salary increment of $5,000 per annum and five points for each office presently
held in the Mutual Holding Company and the Association, including directorships.
For information as to the number of shares proposed to be purchased by certain
of the directors and officers, see "Beneficial Ownership of Capital Stock -
Proposed Subscriptions by Directors and Executive Officers."
Priority 5: Public Stockholders. To the extent that there are sufficient
shares remaining after satisfaction of subscriptions by Eligible Account
Holders, Supplemental Eligible Account Holders, Other Members and directors,
officers and employees, each Public Stockholder as of the Voting Record Date
will receive, without payment therefor, fifth priority, nontransferable
subscription rights to subscribe for Conversion Stock in the Subscription
Offering up to the greater of (i) the number of shares of Conversion Stock that
when combined with Exchange Shares received aggregate 2.5% of the Conversion
Stock and (ii) one-tenth of one percent (.10%) of the total offering of shares
of Conversion Stock in the Subscription Offering, subject to the overall
purchase limitations. See "- Limitations on Conversion Stock Purchases."
-124-
<PAGE>
In the event the Public Stockholders as of the Voting Record Date subscribe
for a number of shares which, when added to the shares subscribed for by
Eligible Account Holders, Supplemental Eligible Account Holders, Other Members
and directors, officers and employees, is in excess of the total number of
shares of Conversion Stock offered in the Subscription Offering, available
shares will be allocated among subscribing Public Stockholders as of the Voting
Record Date on a pro rata basis in the same proportion as each Public
Stockholder's subscription bears to the total subscriptions of all subscribing
Public Stockholders, provided that no fractional shares shall be issued.
Expiration Date for the Subscription Offering. The Subscription Offering
will expire at 5:00 p.m., Eastern Time, on _________ __, 1996, unless extended
for up to 45 days or such additional periods by the Primary Parties with the
approval of the OTS. Such extensions may not be extended beyond _________ __,
1998. Subscription rights which have not been exercised prior to the Expiration
Date will become void.
The Primary Parties will not execute orders until at least the minimum
number of shares of Conversion Stock (373,065 shares) have been subscribed for
or otherwise sold. If all shares have not been subscribed for or sold within 45
days after the Expiration Date, unless such period is extended with the consent
of the OTS, all funds delivered to the Association pursuant to the Subscription
Offering will be returned promptly to the subscribers with interest and all
withdrawal authorizations will be cancelled. If an extension beyond the 45-day
period following the Expiration Date is granted, the Primary Parties will notify
subscribers of the extension of time and subscribers will be resolicited and
permitted to modify or cancel their subscriptions.
Community Offering. To the extent that shares remain available for purchase
after satisfaction of all subscriptions of Eligible Account Holders,
Supplemental Eligible Account Holders, Other Members, directors, officers and
employees of the Mutual Holding Company and the Association and Public
Stockholders, the Primary Parties have determined to offer shares pursuant to
the Plan to certain members of the general public, with preference given to
natural persons residing in Dearborn County, Indiana (such natural persons
referred to as "Preferred Subscribers"). Such persons, together with associates
of and persons acting in concert with such persons, may purchase up to the
greater of (i) the number of shares of Conversion Stock that when combined with
Exchange Shares received aggregate 2.5% of the Conversion Stock, and (ii)
one-tenth of one percent (.10%) of the total offering of shares of Conversion
Stock in the Subscription Offering, subject to the maximum purchase limitations.
See "- Limitations on Conversion Stock Purchases." This amount may be increased
at the sole discretion of the Primary Parties. The opportunity to subscribe for
shares of Conversion Stock in the Community Offering category is subject to the
right of the Primary Parties, in their sole discretion, to accept or reject any
such orders in whole or in part either at the time of receipt of an order or as
soon as practicable following the Expiration Date.
-125-
<PAGE>
If there are not sufficient shares available to fill the orders of
Preferred Subscribers after completion of the Subscription and Community
Offerings, such stock will be allocated first to each Preferred Subscriber whose
order is accepted by the Primary Parties, in an amount equal to the lesser of
100 shares or the number of shares subscribed for by each such Preferred
Subscriber, if possible. Thereafter, unallocated shares will be allocated among
the Preferred Subscribers whose orders remain unsatisfied in the same proportion
that the unfilled subscription of each bears to the total unfilled subscriptions
of all Preferred Subscribers whose subscription remains unsatisfied. If there
are any shares remaining, shares will be allocated to other members of the
general public who subscribe in the Community Offering applying the same
allocation described above for Preferred Subscribers.
Syndicated Community Offering and Public Offering. The Plan provides that,
if feasible, all shares of Conversion Stock not purchased in the Subscription
and Community Offerings may be offered for sale to the general public in a
Syndicated Community Offering through a syndicate of registered broker-dealers
to be formed or through an underwritten Public Offering in which Webb will serve
as the underwriter. The Primary Parties have the right to reject orders in whole
or part in their sole discretion in the Syndicated Community Offering. In the
event of a Public Offering, Webb will purchase the unsubscribed shares of
Conversion Stock from the Company at a price which is negotiated by the Company
and the Association and Webb ("Public Offering Price") on the basis of the final
independent valuation of the pro forma market value of the Common Stock. See "-
Stock Pricing, Exchange Ratio and Number of Shares to be Issued."
The price at which shares of Conversion Stock are sold to Webb will be less
an underwriting discount, which also will be negotiated between the Company, the
Association and Webb and will be subject to review by the OTS. The proposed
underwriting agreement in connection with such underwriting will not be entered
into between the Company and Webb until immediately prior to the Public
Offering. Pursuant to the underwriting agreement and subject to certain
conditions, Webb will be obligated to purchase all shares of Conversion Stock
which have not been subscribed for in the Subscription and Community Offerings.
In addition, it is anticipated that the Company will grant Webb an option to
purchase up to an additional 75,710 shares of Conversion Stock, which represents
15% of the shares of Conversion Stock to be sold in the Conversion and
Reorganization, solely for the purpose of covering over-allotments, if any, for
a period of 30 days following the commencement of the Public Offering.
No person will be permitted to subscribe in the Syndicated Community
Offering or Public Offering for more than the number of shares of Conversion
Stock that when combined with Exchange Shares received aggregate 2.5% of the
Conversion Stock, subject to the maximum purchase limitations.
In addition to the foregoing, if a syndicate of broker-dealers ("selected
dealers") is formed to assist in a Syndicated Community Offering, a purchaser
may pay for his shares with funds held by or deposited with a selected dealer.
If an order form is executed and
-126-
<PAGE>
forwarded to the selected dealer or if the selected dealer is authorized to
execute the order form on behalf of a purchaser, the selected dealer is required
to forward the order form and funds to the Association for deposit in a
segregated account on or before noon of the business day following receipt of
the order form or execution of the order form by the selected dealer.
Alternatively, selected dealers may solicit indications of interest from their
customers to place orders for shares. Such selected dealers shall subsequently
contact their customers who indicated an interest and seek their confirmation as
to their intent to purchase. The selected dealer will acknowledge receipt of the
order to its customer in writing on the following business day and will debit
such customer's account on the fifth business day after the customer has
confirmed his intent to purchase (the "debit date") and on or before noon of the
next business day following the debit date will send funds to the Association
for deposit in a segregated account. If such alternative procedure is employed,
purchasers' funds are not required to be in their accounts with selected dealers
until the debit date.
Any Syndicated Community Offering or Public Offering will terminate no more
than 45 days following the Expiration Date, unless extended by the Primary
Parties with the approval of the OTS. See "- Stock Pricing, Exchange Ratio and
Number of Shares to be Issued" below for a discussion of rights of subscribers,
if any, in the event an extension is granted.
Stock Pricing, Exchange Ratio and Number of Shares to be Issued
The Plan of Conversion requires that the purchase price of the Conversion
Stock must be based on the appraised pro forma market value of the Conversion
Stock, as determined on the basis of an independent valuation. The Primary
Parties have retained RP Financial to make such valuation. For its services in
making such appraisal and any expenses incurred in connection therewith, RP
Financial will receive a maximum fee of $16,500 plus out of pocket expenses,
together with a fee of no greater than $5,000 plus out of pocket expenses for
the preparation of a business plan and other services performed in connection
with the Company's holding company application to the OTS. The Primary Parties
have agreed to indemnify RP Financial and its employees and affiliates against
certain losses (including any losses in connection with claims under the federal
securities laws) arising out of its services as appraiser, except where RP
Financial's liability results from its negligence or bad faith.
The Appraisal has been prepared by RP Financial in reliance upon the
information contained in this Prospectus, including the Financial Statements. RP
Financial also considered the following factors, among others: the present and
projected operating results and financial condition of the Primary Parties and
the economic and demographic conditions in the Association's existing market
area; certain historical, financial and other information relating to the
Association; a comparative evaluation of the operating and financial statistics
of the Association with those of other similarly situated publicly-traded
companies located in Indiana and other regions of the United States; the
aggregate size of the offering of the
-127-
<PAGE>
Conversion Stock; the impact of the Conversion and Reorganization on the
Association's capital and earnings potential; the proposed dividend policy of
the Company and the Association; and the trading market for the Association
Common Stock and securities of comparable companies and general conditions in
the market for such securities.
On the basis of the foregoing, RP Financial has advised the Primary Parties
in its opinion that the estimated pro forma market value of the Association and
the Mutual Holding Company on a combined basis was $7.6 million as of September
6, 1996. Because the holders of the Public Association Shares will continue to
hold the same aggregate percentage ownership interest in the Company as they
currently hold in the Association, adjusted downward pursuant to OTS policy
which requires the Exchange Ratio to reflect special dividends waived by the
Mutual Holding Company (before giving effect to the payment of cash in lieu of
issuing fractional Exchange Shares, any exercise of dissenters' rights and any
shares of Conversion Stock purchased by the Association's stockholder in the
Offerings), the Appraisal was multiplied by 57.75% (which represents the Mutual
Holding Company's percentage interest in the Association, adjusted upward in
order to reflect the $403,000 of special dividends declared by the Association
and waived by the Mutual Holding Company). The resulting amount represents the
midpoint of the valuation ($4,389,000), and the minimum and maximum of the
valuation were set at 15% below and above the midpoint, respectively, resulting
in a range of $3,730,650 to $5,047,350. The Boards of Directors of the Primary
Parties determined that the Conversion Stock would be sold at $10.00 per share,
resulting in a range of 373,065 to 504,735 shares of Conversion Stock being
offered. As a result of the Company's engagement of Webb to act as the
underwriter in a Public Offering with respect to any shares remaining unsold
after completion of the Subscription and Community Offerings, the Company
currently anticipates that the Conversion Stock will be sold in accordance with
the upper end of the Offering Price Range. However, no assurance can be made
that the Company will be able to sell all of such shares either in the
Subscription and Community Offerings or in the Public Offering, if any. Upon
consummation of the Conversion and Reorganization, the Conversion Stock and the
Exchange Shares will represent approximately 57.75% and 42.25%, respectively, of
the Company's total outstanding shares. The Boards of Directors of the Primary
Parties reviewed RP Financial's appraisal report, including the methodology and
the assumptions used by RP Financial, and determined that the Offering Price
Range was reasonable and adequate. The Boards of Directors of the Primary
Parties also established the formula for determining the Exchange Ratio. Based
upon such formula and the Offering Price Range, the Exchange Ratio ranged from a
minimum of 1.3139 to a maximum of 1.7777 Exchange Shares for each Public
Association Share, with a midpoint of 1.5458. Based upon these Exchange Ratios,
the Company expects to issue between 272,935 and 369,265 shares of Exchange
Shares to the holders of Public Association Shares outstanding immediately prior
to the consummation of the Conversion and Reorganization. The Offering Price
Range and the Exchange Ratio may be amended with the approval of the OTS, if
required, or if necessitated by subsequent developments in the financial
condition of any of the Primary Parties or market conditions generally. In the
event the Appraisal is updated to below
-128-
<PAGE>
$6,460,000 or above $8,740,000 (the maximum of the Offering Price Range, as
adjusted by 15%), such Appraisal will be filed with the SEC by post-effective
amendment.
Based upon current market and financial conditions and recent practices and
policies of the OTS, in the event the Company receives orders for Conversion
Stock in excess of $5,047,350 (the maximum of the Offering Price Range) and up
to $5,804,453 (the maximum of the Offering Price Range, as adjusted by 15%), the
Company may be required by the OTS to accept all such orders. No assurances,
however, can be made that the Company will receive orders for Conversion Stock
in excess of the maximum of the Offering Price Range or that, if such orders are
received, that all such orders will be accepted because the Company's final
valuation and number of shares to be issued are subject to the receipt of an
updated appraisal from RP Financial which reflects such an increase in the
valuation and the approval of such increase by the OTS. There is no obligation
or understanding on the part of management to take and/or pay for any shares of
Conversion Stock in order to complete the Offerings.
The following table sets forth, based upon the minimum, midpoint, maximum
and 15% above the maximum of the Offering Price Range, the following: (i) the
total number of shares of Conversion Stock and Exchange Shares to be issued in
the Conversion and Reorganization, (ii) the percentage of the total Common Stock
represented by the Conversion Stock and the Exchange Shares, and (iii) the
Exchange Ratio. The table assumes that no holder of Public Association Shares
exercises dissenters' rights and that there is no cash paid in lieu of issuing
fractional Exchange Shares.
<TABLE>
<CAPTION>
Conversion Stock to Be
Issued Exchange Shares to be Issued Total Shares of
-------------------------- --------------------------------- Common Stock to Exchange
Amount Percent Amount Percent be Outstanding Ratio
------------ ------------ -------------- ------------- ------------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Minimum 373,065 57.75% 272,935 42.25% 646,000 1.3139
Midpoint 438,900 57.75 321,100 42.25 760,000 1.5458
Maximum 504,735 57.75 369,265 42.25 874,000 1.7777
15% above maximum 580,445 57.75 424,655 42.25 1,005,100 2.0443
</TABLE>
RP Financial's valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing such shares. RP
Financial did not independently verify the Financial Statements and other
information provided by the Association and the Mutual Holding Company, nor did
RP Financial value independently the assets or liabilities of the Association.
The valuation considers the Association and the Mutual Holding Company as going
concerns and should not be considered as an indication of the liquidation value
of the Association and the Mutual Holding Company. 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 Conversion Stock or receiving Exchange Shares
in the Conversion and Reorganization will thereafter be able to sell such shares
at prices at or above the Purchase Price or in the range of the foregoing
valuation of the pro forma market value thereof.
-129-
<PAGE>
No sale of shares of Conversion Stock or issuance of Exchange Shares may be
consummated unless prior to such consummation RP Financial confirms that nothing
of a material nature has occurred which, taking into account all relevant
factors, would cause it to conclude that the Purchase Price is materially
incompatible with the estimate of the pro forma market value of a share of
Common Stock upon consummation of the Conversion and Reorganization. If such is
not the case, a new Offering Price Range may be set, a new Exchange Ratio may be
determined based upon the new Offering Price Range, a new Subscription and
Community Offering and/or Syndicated Community Offering or Public Offering may
be held or such other action may be taken as the Primary Parties shall determine
and the OTS may permit or require.
Depending upon market or financial conditions following the commencement of
the Subscription Offering or as a result of the exercise of the over-allotment
option granted by the Company to Webb in the Public Offering, the total number
of shares of Conversion Stock to be issued in the Offerings may be increased or
decreased without a resolicitation of subscribers, provided that the product of
the total number of shares times the Purchase Price is not below the minimum or
more than 15% above the maximum of the Offering Price Range. In the event market
or financial conditions change so as to cause the aggregate Purchase Price of
the shares to be below the minimum of the Offering Price Range or more than 15%
above the maximum of such range, purchasers will be resolicited (i.e., permitted
to continue their orders, in which case they will need to affirmatively
reconfirm their subscriptions prior to the expiration of the resolicitation
offering or their subscription funds will be promptly refunded with interest at
the Association's passbook rate of interest, or be permitted to modify or
rescind their subscriptions). Any increase or decrease in the number of shares
of Conversion Stock will result in a corresponding change in the number of
Exchange Shares, so that upon consummation of the Conversion and Reorganization
the Conversion Stock and the Exchange Shares will represent approximately 57.75%
and 42.25%, respectively, of the Company's total outstanding shares of Common
Stock (exclusive of the effects of the exercise of outstanding stock options).
An increase in the number of shares of Conversion Stock, either as a result
of an increase in the appraisal of the estimated pro forma market value or due
to the exercise of Webb's over-allotment option in the Public Offering, would
decrease both a subscriber's ownership interest and the Company's pro forma net
earnings and stockholders' equity on a per share basis while increasing pro
forma net earnings and stockholders' equity on an aggregate basis. A decrease in
the number of shares of Conversion Stock would increase both a subscriber's
ownership interest and the Company's pro forma net earnings and stockholders'
equity on a per share basis while decreasing pro forma net earnings and
stockholders' equity on an aggregate basis. See "Risk Factors - Possible
Dilutive Effect of Issuance of Additional Shares" and "Pro Forma Data."
The appraisal report of RP Financial has been filed as an exhibit to this
Registration Statement and Application for Conversion of which this Prospectus
is a part and is available for inspection in the manner set forth under
"Additional Information."
-130-
<PAGE>
Persons in Nonqualified States or Foreign Countries
The Primary Parties will make reasonable efforts to comply with the
securities laws of all states in the United States in which persons entitled to
subscribe for stock pursuant to the Plan reside. However, the Primary Parties
are not required to offer stock in the Subscription Offering to any person who
resides in a foreign country or resides in a state of the United States with
respect to which all of the following apply: (a) the number of persons otherwise
eligible to subscribe for shares under the Plan who reside in such jurisdiction
is small; (b) the granting of subscription rights or the offer or sale of shares
of Conversion Stock to such persons would require any of the Primary Parties or
their officers, directors or employees, under the laws of such jurisdiction, to
register as a broker, dealer, salesman or selling agent or to register or
otherwise qualify its securities for sale in such jurisdiction or to qualify as
a foreign corporation or file a consent to service of process in such
jurisdiction; and (c) such registration, qualification or filing in the judgment
of the Primary Parties would be impracticable or unduly burdensome for reasons
of costs or otherwise. Where the number of persons eligible to subscribe for
shares in one state is small, the Primary Parties will base their decision as to
whether or not to offer the Conversion Stock in such state on a number of
factors, including but not limited to the size of accounts held by account
holders in the state, the cost of registering or qualifying the shares or the
need to register the Company, its officers, directors or employees as brokers,
dealers or salesmen.
Limitations on Conversion Stock Purchases
The Plan includes the following limitations on the number of shares of
Conversion Stock which may be purchased:
(1) No less than 25 shares of Conversion Stock may be purchased, to the
extent such shares are available;
(2) Each Eligible Account Holder may subscribe for and purchase in the
Subscription Offering up to the greater of (i) the number of shares of
Conversion Stock that when combined with Exchange Shares received aggregate
2.5% of the Conversion Stock, (ii) one-tenth of 1% (.10%) of the total
offering of shares of Conversion Stock in the Subscription Offering and
(iii) 15 times the product (rounded down to the next whole number) obtained
by multiplying the total number of shares of Conversion Stock to be issued
by a fraction, of which the numerator is the amount of the qualifying
deposit of the Eligible Account Holder and the denominator is the total
amount of qualifying deposits of all Eligible Account Holders, in each case
as of the close of business on the Eligibility Record Date, subject to the
overall limitation in clause (5) below;
(3) Each Supplemental Eligible Account Holder may subscribe for and
purchase in the Subscription Offering up to the greater of (i) the number
of shares
-131-
<PAGE>
of Conversion Stock that when combined with Exchange Shares received
aggregate 2.5% of the Conversion Stock, (ii) one-tenth of 1% (.10%) of the
total offering of shares of Conversion Stock in the Subscription Offering
and (iii) 15 times the product (rounded down to the next whole number)
obtained by multiplying the total number of shares of Conversion Stock to
be issued by a fraction, of which the numerator is the amount of the
qualifying deposit of the Supplemental Eligible Account Holder and the
denominator is the total amount of qualifying deposits of all Supplemental
Eligible Account Holders, in each case as of the close of business on the
Supplemental Eligibility Record Date, subject to the overall limitation in
clause (5) below;
(4) Each Other Member, Public Stockholder or any other person
purchasing shares of Conversion Stock in the Community Offering, the
Syndicated Community Offering or the Public Offering may subscribe for and
purchase in the respective Offering up to the greater of (i) the number of
shares of Conversion Stock that when combined with Exchange Shares received
aggregate 2.5% of the Conversion Stock and (ii) one-tenth of 1% (.10%) of
the total offering of shares of Conversion Stock in the Subscription
Offering, subject to the overall limitation in clause (5) below;
(5) Eligible Account Holders, Supplemental Eligible Account Holders,
Other Members, directors, officers and employees of the Mutual Holding
Company and the Association, and Public Stockholders may purchase stock in
the Community and Syndicated Community Offerings and the Public Offering
subject to the purchase limitations described above, provided that the
maximum number of shares of Conversion Stock subscribed for or purchased in
all categories by any person, together with associates of and groups of
persons acting in concert with such persons, shall not exceed the number of
shares of Conversion Stock that when combined with Exchange Shares received
aggregate 5.0% of the Conversion Stock; and
(6) No more than 24.7% of the total number of shares sold in the
Subscription Offering may be purchased by directors and officers of the
Mutual Holding Company and the Association in the fourth priority category
in the Subscription Offering. No more than 34.7% of the total number of
shares sold in the Offerings may be purchased by directors and officers of
the Mutual Holding Company and the Association and their associates in the
aggregate.
For purposes of the purchase limitations set forth in the Plan of
Conversion, Exchange Shares will be valued at the same price that shares of
Conversion Stock are issued in the Offerings.
Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the Members of
the Mutual Holding Company or the Stockholders of the Association, both the
individual amount permitted to
-132-
<PAGE>
be subscribed for and the overall purchase limitation may be decreased or
increased up to a maximum of 5% of the total shares of Common Stock to be issued
in the Conversion and Reorganization at the sole discretion of the Primary
Parties. If such amount is increased, subscribers for the maximum amount will
be, and certain other large subscribers in the sole discretion of the Primary
Parties may be, given the opportunity to increase their subscriptions up to the
then applicable limit.
An individual Eligible Account Holder, Supplemental Eligible Account
Holder, Other Member or Public Stockholder may not purchase individually in the
Subscription Offering the overall maximum purchase limit of 5.0% of the
Conversion Stock but may make such purchase, together with associates of and
persons acting in concert with such person, by also purchasing in other
available categories, subject to availability of shares and the maximum overall
purchase limit for purchases in the Offerings, including Exchange Shares
received by Public Stockholders for Public Association Shares. However, Public
Stockholders will not have to sell any Public Association Shares or be limited
in receiving Exchange Shares even if their current ownership of Public
Association Shares when converted into Exchange Shares exceeds an applicable
purchase limitation, including the maximum purchase limitation of 5.0% of the
Conversion Stock.
In the event of an increase in the total number of shares of Conversion
Stock offered in the Conversion due to an increase in the Offering Price Range
of up to 15% (the "Adjusted Maximum"), the additional shares will be allocated
in the following order of priority in accordance with the Plan: (i) in the event
that there is an oversubscription by Eligible Account Holders, to fill
unfulfilled subscriptions of Eligible Account Holders, inclusive of the Adjusted
Maximum; (ii) in the event that there is an oversubscription by Supplemental
Eligible Account Holders, to fill unfulfilled subscriptions of Supplemental
Eligible Account Holders, inclusive of the Adjusted Maximum; (iii) in the event
that there is an oversubscription by Other Members, to fill unfulfilled
subscriptions of Other Members, inclusive of the Adjusted Maximum; (iv) in the
event there is an oversubscription by directors, officers and employees of the
Mutual Holding Company and the Association, to fill unfulfilled subscriptions of
directors, officers and employees, inclusive of the Adjusted Maximum; (v) in the
event that there is an oversubscription by Public Stockholders, to fill
unfulfilled subscriptions of Public Stockholders, inclusive of the Adjusted
Maximum; and (vi) to fill unfulfilled subscriptions in the Community Offering to
the extent possible, inclusive of the Adjusted Maximum.
The term "associate" of a person is defined to mean (i) any corporation or
other organization (other than the Primary Parties or a majority-owned
subsidiary of the Association) of which such person is a director, officer or
partner or is directly or indirectly the beneficial owner of 10% or more of any
class of equity securities; (ii) any trust or other estate in which such person
has a substantial beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity, provided, however, that such term
shall not include any tax-qualified employee stock benefit plan of the Primary
Parties in which such person has a substantial beneficial interest or serves as
a trustee or in a similar
-133-
<PAGE>
fiduciary capacity; and (iii) any relative or spouse of such person, or any
relative of such spouse, who either has the same home as such person or who is a
director or officer of the Primary Parties or any of their subsidiaries.
Marketing Arrangements
The Primary Parties have engaged Webb as a financial advisor and marketing
agent in connection with the offering of the Conversion Stock, and Webb has
agreed to use its best efforts to solicit subscriptions and purchase orders for
shares of Conversion Stock in the Subscription and Community Offerings. In
addition, in the event that shares of Conversion Stock remain unsold after
completion of the Subscription and Community Offerings, it is anticipated that
the Primary Parties will enter into an underwriting agreement with Webb pursuant
to which and subject to certain conditions, Webb will be obligated to purchase
all shares of Conversion Stock which have not been subscribed for in the
Subscription and Community Offerings. In addition, it is anticipated that the
Primary Parties will grant Webb an option to purchase up to an additional 75,710
shares of Conversion Stock, which represents 15% of the shares of Conversion
Stock to be sold in the Offerings, solely for the purpose of covering
over-allotments, if any, for a period of 30 days following the commencement of
the Public Offering.
Webb will provide various other services including, but not limited to, (1)
training and educating the Association's employees who will be performing
certain ministerial functions in the Offerings regarding the mechanics and
regulatory requirements of the stock sales process; (2) providing its employees
to staff the Stock Information Center to assist the Association's customers and
internal stock purchasers and to keep records of orders for shares of Conversion
Stock; (3) targeting the Company's sales efforts, including preparation of
marketing materials; and (4) assisting in the solicitation of proxies of Members
and Stockholders for use at the Members' Meeting and the Stockholders' Meeting,
respectively. Based upon negotiations between the Primary Parties and Webb, Webb
will receive a fee equal to $50,000. In the event that a selected dealers
agreement is entered into in connection with a Syndicated Community Offering,
the Association will pay a fee of up to 4.0% of the aggregate Purchase Price of
the Conversion Stock to selected broker-dealers, for shares sold by such NASD
member firm pursuant to a selected dealers agreement. In the event of a Public
Offering, the Primary Parties and Webb will negotiate the applicable
underwriting discount. No fees will be paid to Webb with respect to
subscriptions by any director, officer, employee or associate thereof. Fees paid
to Webb and to any other broker-dealers may be deemed to be underwriting fees,
and Webb and such broker-dealers may be deemed to be underwriters. Webb also
will be reimbursed for its reasonable out-of-pocket expenses not to exceed
$5,000, and reasonable legal fees not to exceed $20,000. The Primary Parties
have agreed to indemnify Webb for reasonable costs and expenses in connection
with certain claims or liabilities, including certain liabilities under the
Securities Act.
Directors and executive officers of the Primary Parties may participate in
the solicitation of offers to purchase Conversion Stock. Other employees of the
Association may
-134-
<PAGE>
participate in the Offerings in ministerial capacities or providing clerical
work in effecting a sales transaction. Such other employees have been instructed
not to solicit offers to purchase Conversion Stock or provide advice regarding
the purchase of Conversion Stock. Questions of prospective purchasers will be
directed to executive officers or registered representatives. The Company will
rely on Rule 3a4-1 under the Exchange Act, and sales of Conversion Stock will be
conducted within the requirements of Rule 3a4-1, so as to permit officers,
directors and employees to participate in the sale of Conversion Stock. No
officer, director or employee of the Primary Parties will be compensated in
connection with his solicitations or other participation in the Offerings or the
Exchange by the payment of commissions or other remuneration based either
directly or indirectly on transactions in the Conversion Stock and Exchange
Shares, respectively.
Procedure for Purchasing Shares in the Offerings
To ensure that each purchaser receives a Prospectus at least 48 hours
before the Expiration Date in accordance with Rule 15c2-8 of the Exchange Act,
no Prospectus will be mailed any later than five days prior to such date or hand
delivered any later than two days prior to such date. Execution of the order
form will confirm receipt or delivery of the Prospectus in accordance with Rule
15c2-8. Order forms will only be distributed with a Prospectus.
To purchase shares in the Subscription and Community Offerings, an executed
order form with the required payment for each share subscribed for, or with
appropriate authorization for withdrawal from a deposit account at the
Association (which may be given by completing the appropriate blanks in the
order form), must be received by the Association at any of its offices by 5:00
p.m., Eastern Time, on the Expiration Date. In addition, the Primary Parties
will require a prospective purchaser to execute a certification in the form
required by applicable OTS regulations in connection with any sale of Conversion
Stock. Order forms which are not received by such time or are executed
defectively or are received without full payment (or appropriate withdrawal
instructions) are not required to be accepted. In addition, the Association will
not accept orders submitted on photocopied or facsimiled order forms nor order
forms unaccompanied by an executed certification form. The Primary Parties have
the right to waive or permit the correction of incomplete or improperly executed
forms, but do not represent that they will do so. Once received, an executed
order form may not be modified, amended or rescinded without the consent of the
Primary Parties, unless the Offerings have not been completed within 45 days
after the end of the Subscription and Community Offerings, unless such period
has been extended.
In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priority, depositors as of the close of business on the Eligibility
Record Date (December 31, 1994) or the Supplemental Eligibility Record Date
(September 30, 1996) and depositors as of the close of business on the Voting
Record Date (__________ __, 1996) must list on the order
-135-
<PAGE>
form all accounts in which they have an ownership interest, giving all names in
each account and the account numbers.
Payment for subscriptions may be made (i) in cash if delivered in person at
any office of the Association, (ii) by check or money order or (iii) by
authorization of withdrawal from deposit accounts maintained with the
Association. Interest will be paid on payments made by cash, check or money
order at the Association's passbook rate of interest from the date payment is
received until completion or termination of the Conversion and Reorganization.
If payment is made by authorization of withdrawal from deposit accounts, the
funds authorized to be withdrawn from a deposit account will continue to accrue
interest at the contractual rates until completion or termination of the
Conversion and Reorganization, but a hold will be placed on such funds, thereby
making them unavailable to the depositor until completion or termination of the
Conversion and Reorganization.
If a subscriber authorizes the Association to withdraw the aggregate amount
of the purchase price from a deposit account, the Association will do so as of
the effective date of the Conversion and Reorganization. The Association will
waive any applicable penalties for early withdrawal from certificate accounts.
If the remaining balance in a certificate account is reduced below the
applicable minimum balance requirement at the time that the funds actually are
transferred under the authorization, the certificate will be cancelled at the
time of the withdrawal, without penalty, and the remaining balance will earn
interest at the passbook rate.
Owners of self-directed Individual Retirement Accounts ("IRAs") may use the
assets of such IRAs to purchase shares of Conversion Stock in the Offerings,
provided that such IRAs are not maintained at the Association. Persons with
self-directed IRAs maintained at the Association must have their accounts
transferred to an unaffiliated institution or broker to purchase shares of
Conversion Stock in the Subscription and Community Offerings. In addition, ERISA
provisions and IRS regulations require that officers, directors and 10%
stockholders who use self-directed IRA funds to purchase shares of Conversion
Stock in the Subscription and Community Offerings make such purchases for the
exclusive benefit of the IRAs. Any interested parties wishing to use IRA funds
for stock purchases are advised to contact the Stock Information Center for
additional information and allow sufficient time for the account to be
transferred as required.
Restrictions on Transfer of Subscription Rights and Shares
Pursuant to the rules and regulations of the OTS, no person with
subscription rights may transfer or enter into any agreement or understanding to
transfer the legal or beneficial ownership of the subscription rights issued
under the Plan or the shares of Conversion Stock to be issued upon their
exercise. Such rights may be exercised only by the person to whom they are
granted and only for his account. Each person exercising such subscription
rights will be required to certify that he is purchasing shares solely for his
own account and that he has no agreement or understanding regarding the sale or
transfer of such shares. Federal
-136-
<PAGE>
regulations also prohibit any person from offering or making an announcement of
an offer or intent to make an offer to purchase such subscription rights or
shares of Conversion Stock prior to the completion of the Conversion and
Reorganization.
The Primary Parties will pursue any and all legal and equitable remedies in
the event they become aware of the transfer of subscription rights and will not
honor orders known by them to involve the transfer of such rights.
Liquidation Rights
In the unlikely event of a complete liquidation of the Mutual Holding
Company in its present mutual form, each depositor of the Association would
receive his pro rata share of any assets of the Mutual Holding Company remaining
after payment of claims of all creditors. Each depositor's pro rata share of
such remaining assets would be in the same proportion as the value of his
deposit account was to the total value of all deposit accounts in the
Association at the time of liquidation. After the Conversion and Reorganization,
each depositor, in the event of a complete liquidation of the Association, would
have a claim as a creditor of the same general priority as the claims of all
other general creditors of the Association. However, except as described below,
his claim would be solely in the amount of the balance in his deposit account
plus accrued interest. He would not have an interest in the value or assets of
the Association or the Company above that amount.
The Plan provides for the establishment, upon the completion of the
Conversion and Reorganization, of a special "liquidation account" for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders in
an amount equal to the amount of any dividends waived by the Mutual Holding
Company plus the greater of (1) the Association's retained earnings of
$4,556,000 at June 30, 1993, the date of the latest statement of financial
condition contained in the final offering circular utilized in the MHC
Reorganization, or (2) 54.6% of the Association's total stockholders' equity as
reflected in its latest statement of financial condition contained in the final
Prospectus utilized in the Offerings. As of the date of this Prospectus, the
initial balance of the liquidation account would be $5.4 million. Each Eligible
Account Holder and Supplemental Eligible Account Holder, if he were to continue
to maintain his deposit account at the Association, would be entitled, upon a
complete liquidation of the Association after the Conversion and Reorganization,
to an interest in the liquidation account prior to any payment to the Company as
the sole stockholder of the Association. Each Eligible Account Holder and
Supplemental Eligible Account Holder would have an initial interest in such
liquidation account for each deposit account, including passbook accounts,
transaction accounts such as checking accounts, money market deposit accounts
and certificates of deposit, held in the Association at the close of business on
December 31, 1994 or September 30, 1996, as the case may be. Each Eligible
Account Holder and Supplemental Eligible Account Holder will have a pro rata
interest in the total liquidation account for each of his deposit accounts based
on the proportion that the balance of each such deposit account on the December
31, 1994 Eligibility Record Date (or the September 30, 1996 Supplemental
Eligibility Record
-137-
<PAGE>
Date, as the case may be) bore to the balance of all deposit accounts in the
Association on such date.
If, however, on any June 30 annual closing date of the Association,
commencing June 30, 1997, the amount in any deposit account is less than the
amount in such deposit account on December 31, 1994 or September 30, 1996, as
the case may be, or any other annual closing date, then the interest in the
liquidation account relating to such deposit account would be reduced by the
proportion of any such reduction, and such interest will cease to exist if such
deposit account is closed. In addition, no interest in the liquidation account
would ever be increased despite any subsequent increase in the related deposit
account. Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders are satisfied would be
distributed to the Company as the sole stockholder of the Association.
Tax Aspects
Consummation of the Conversion and Reorganization is expressly conditioned
upon prior receipt of either a ruling or an opinion of counsel with respect to
federal tax laws, and either a ruling or an opinion with respect to Indiana tax
laws, to the effect that consummation of the transactions contemplated hereby
will not result in a taxable reorganization under the provisions of the
applicable codes or otherwise result in any adverse tax consequences to the
Mutual Holding Company, the Association, the Company or to account holders
receiving subscription rights, except to the extent, if any, that subscription
rights are deemed to have fair market value on the date such rights are issued.
This condition may not be waived by the Primary Parties.
Elias, Matz, Tiernan & Herrick L.L.P., Washington, D.C., has issued an
opinion to the Company and the Association to the effect that, for federal
income tax purposes: (1) the conversion of the Mutual Holding Company from
mutual form to a federal interim stock savings institution and its simultaneous
merger with and into the Association, with the Association being the surviving
institution, will qualify as a reorganization within the meaning of Section
368(a)(1)(A) of the Code, (2) no gain or loss will be recognized by the
Association upon the receipt of the assets of the Mutual Holding Company in such
merger, (3) the merger of Interim with and into the Association, with the
Association being the surviving institution, will qualify as a reorganization
within the meaning of Section 368(a)(1)(A) of the Code, (4) no gain or loss will
be recognized by Interim upon the transfer of its assets to the Association, (5)
no gain or loss will be recognized by the Association upon the receipt of the
assets of Interim, (6) no gain or loss will be recognized by the Company upon
the receipt of Association Common Stock solely in exchange for Common Stock, (7)
no gain or loss will be recognized by the Public Stockholders upon the receipt
of Common Stock solely in exchange for their Public Association Shares, (8) the
basis of the Common Stock to be received by the Public Stockholders will be the
same as the basis of the Public Association Shares surrendered in exchange
therefor, before giving effect to any payment of cash in lieu of fractional
shares, (9) the holding period of the Common Stock
-138-
<PAGE>
to be received by the Public Stockholders will include the holding period of the
Public Association Shares, provided that the Public Association Shares were held
as a capital asset on the date of the exchange, (10) no gain or loss will be
recognized by the Company upon the sale of shares of Conversion Stock in the
Offerings, (11) the Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members will recognize gain, if any, upon the issuance to them
of withdrawable savings accounts in the Association following the Conversion and
Reorganization, interests in the liquidation account and nontransferable
subscription rights to purchase Conversion Stock, but only to the extent of the
value, if any, of the subscription rights, and (12) the tax basis to the holders
of Conversion Stock purchased in the Offerings will be the amount paid therefor,
and the holding period for the shares of Conversion Stock will begin on the date
of consummation of the Offerings if purchased through the exercise of
subscription rights and on the day after the date of purchase if purchased in
the Community Offering, the Syndicated Community Offering or the Public
Offering.
Schwartz, Manes & Ruby, Cincinnati, Ohio, has issued an opinion to the
Company and the Association to the effect that the income tax consequences of
the Conversion and Reorganization are substantially the same under Indiana law
as they are under the Code.
In the opinion of RP Financial, which opinion is not binding on the IRS,
the subscription rights do not have any value, based on the fact that such
rights are acquired by the recipients without cost, are nontransferable and of
short duration, and afford the recipients the right only to purchase the
Conversion Stock at a price equal to its estimated fair market value, which will
be the same price as the Purchase Price for the unsubscribed shares of
Conversion Stock. If the subscription rights granted to eligible subscribers are
deemed to have an ascertainable value, receipt of such rights likely would be
taxable only to those eligible subscribers who exercise the subscription rights
(either as a capital gain or ordinary income) in an amount equal to such value,
and the Primary Parties could recognize gain on such distribution. Eligible
subscribers are encouraged to consult with their own tax advisor as to the tax
consequences in the event that such subscription rights are deemed to have an
ascertainable value.
Unlike private rulings, an opinion is not binding on the IRS and the IRS
could disagree with conclusions reached therein. In the event of such
disagreement, there can be no assurance that the IRS would not prevail in a
judicial or administrative proceeding.
Delivery and Exchange of Certificates
Conversion Stock. Certificates representing Conversion Stock issued in
connection with the Offerings will be mailed by the Company's transfer agent for
the Common Stock to the persons entitled thereto at the addresses of such
persons appearing on the stock order form for Conversion Stock as soon as
practicable following consummation of the Conversion and Reorganization. Any
certificates returned as undeliverable will be held by the Company until claimed
by persons legally entitled thereto or otherwise disposed of in accordance with
-139-
<PAGE>
applicable law. Until certificates for Conversion Stock are available and
delivered to subscribers, subscribers may not be able to sell such shares.
Exchange Shares. After consummation of the Conversion and Reorganization,
each holder of a certificate or certificates theretofore evidencing issued and
outstanding shares of Association Common Stock (other than the Mutual Holding
Company), upon surrender of the same to an agent, duly appointed by the Company,
which is anticipated to be the transfer agent for the Common Stock (the
"Exchange Agent"), shall be entitled to receive in exchange therefor a
certificate or certificates representing the number of full shares of Common
Stock for which the shares of Association Common Stock theretofore represented
by the certificate or certificates so surrendered shall have been converted
based on the Exchange Ratio. The Exchange Agent shall promptly mail to each such
holder of record of an outstanding certificate which immediately prior to the
consummation of the Conversion and Reorganization evidenced shares of
Association Common Stock, and which is to be exchanged for Common Stock based on
the Exchange Ratio as provided in the Plan, a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to such certificate shall pass, only upon delivery of such certificate to the
Exchange Agent) advising such holder of the terms of the exchange effected by
the Conversion and Reorganization and of the procedure for surrendering to the
Exchange Agent such certificate in exchange for a certificate or certificates
evidencing Common Stock. The Association's stockholders should not forward
Association Common Stock certificates to the Association or the Exchange Agent
until they have received the transmittal letter.
No holder of a certificate theretofore representing shares of Association
Common Stock shall be entitled to receive any dividends in respect of the Common
Stock into which such shares shall have been converted by virtue of the
Conversion and Reorganization until the certificate representing such shares of
Association Common Stock is surrendered in exchange for certificates
representing shares of Common Stock. In the event that dividends are declared
and paid by the Company in respect of Common Stock after the consummation of the
Conversion and Reorganization but prior to surrender of certificates
representing shares of Association Common Stock, dividends payable in respect of
shares of Common Stock not then issued shall accrue (without interest). Any such
dividends shall be paid (without interest) upon surrender of the certificates
representing such shares of Association Common Stock. The Company shall be
entitled, after the consummation of the Conversion and Reorganization, to treat
certificates representing shares of Association Common Stock as evidencing
ownership of the number of full shares of Common Stock into which the shares of
Association Common Stock represented by such certificates shall have been
converted, notwithstanding the failure on the part of the holder thereof to
surrender such certificates.
The Company shall not be obligated to deliver a certificate or certificates
representing shares of Common Stock to which a holder of Association Common
Stock would otherwise be entitled as a result of the Conversion and
Reorganization until such holder surrenders the certificate or certificates
representing the shares of Association
-140-
<PAGE>
Common Stock for exchange as provided above, or, in default thereof, an
appropriate affidavit of loss and indemnity agreement and/or a bond as may be
required in each case by the Company. If any certificate evidencing shares of
Common Stock is to be issued in a name other than that in which the certificate
evidencing Association Common Stock surrendered in exchange therefor is
registered, it shall be a condition of the issuance thereof that the certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange pay to the Exchange Agent
any transfer or other tax required by reason of the issuance of a certificate
for shares of Common Stock in any name other than that of the registered holder
of the certificate surrendered or otherwise establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
Required Approvals
Various approvals of the OTS are required in order to consummate the
Conversion and Reorganization. The OTS has approved the Plan of Conversion,
subject to approval by the Mutual Holding Company's Members and the
Association's Stockholders. In addition, consummation of the Conversion and
Reorganization is subject to OTS approval of the Company's application to
acquire all of the to-be-outstanding Association Common Stock and the
applications with respect to the merger of the Mutual Holding Company (following
its conversion to a federal interim stock savings institution) into the
Association and the merger of Interim into the Association, with the Association
being the surviving entity in both mergers. Applications for these approvals
have been filed and are currently pending. There can be no assurances that the
requisite OTS approvals will be received in a timely manner, in which event the
consummation of the Conversion and Reorganization may be delayed beyond the
expiration of the Offerings.
Pursuant to OTS regulations, the Plan of Conversion also must be approved
by (1) at least a majority of the total number of votes eligible to be cast by
Members of the Mutual Holding Company at the Members' Meeting, and (2) holders
of at least two-thirds of the outstanding Association Common Stock at the
Stockholders' Meeting. In addition, the Primary Parties have conditioned the
consummation of the Conversion and Reorganization on the approval of the Plan by
at least a majority of the votes cast, in person or by proxy, by the Public
Stockholders at the Stockholders' Meeting.
Dissenters' Rights of Appraisal
Holders of Association Common Stock are entitled to appraisal rights under
Section 552.14 of the OTS regulations as a result of the merger of the Mutual
Holding Company (following its conversion to a federal interim stock savings
institution) with and into the Association and the merger of the Association
with and into Interim, with the Association to be the surviving entity in both
mergers. A holder of shares of Association Common Stock wishing to exercise his
appraisal rights must deliver to the Secretary of the Association, before the
vote on the Plan of Conversion at the Stockholders' Meeting, a writing which
-141-
<PAGE>
identifies such stockholder and which states his intention to demand appraisal
of and payment for his shares of Association Common Stock. Such demand must be
in addition to and separate from any proxy or vote against the Plan of
Conversion. Any such stockholder who wishes to exercise such appraisal rights
should review carefully the discussion of such rights in the Association's proxy
statement, including Appendix A thereto, because failure to timely and properly
comply with the procedures specified will result in the loss of appraisal rights
under Section 552.14. All written demands for appraisal should be sent or
delivered to the attention of the Secretary of the Association, 118 Walnut
Street, Lawrenceburg, Indiana 47025-1838 so as to be received prior to the vote
at the Stockholders' Meeting with respect to the Plan of Conversion. Pursuant to
the Plan of Conversion, consummation of the Conversion and the Reorganization is
conditioned upon holders of less than 10% of the outstanding Association Common
Stock exercising appraisal rights, which condition may, in the sole discretion
of the Primary Parties, be waived.
In determining whether or not to exercise appraisal rights, current
Stockholders should review the comparison of their rights as Stockholders with
their rights as stockholders of the Company following consummation of the
Conversion. Such comparison is contained in the Association's proxy statement to
its stockholders under "The Conversion and Reorganization - Comparison of
Stockholder Rights." Because the Company is governed by the Indiana Business
Corporation Law and the Association is governed by federal law, including OTS
regulations, there are material differences between the rights of stockholders
of the Association and stockholders of the Company.
Certain Restrictions on Purchase or Transfer of Shares after the Conversion and
Reorganization
All shares of Conversion Stock purchased in connection with the Conversion
and Reorganization by a director or an executive officer of the Primary Parties
will be subject to a restriction that the shares not be sold for a period of one
year following the Conversion and Reorganization, except in the event of the
death of such director or executive officer or pursuant to a merger or similar
transaction approved by the OTS. Each certificate for restricted shares will
bear a legend giving notice of this restriction on transfer, and appropriate
stop-transfer instructions will be issued to the Company's transfer agent. Any
shares of Common Stock issued within this one-year period as a stock dividend,
stock split or otherwise with respect to such restricted stock will be subject
to the same restrictions. The directors and executive officers of the Company
will also be subject to the insider trading rules promulgated pursuant to the
Exchange Act.
Purchases of Common Stock of the Company by directors, executive officers
and their associates during the three-year period following completion of the
Conversion and Reorganization may be made only through a broker or dealer
registered with the SEC, except with the prior written approval of the OTS. This
restriction does not apply, however, to negotiated transactions involving more
than 1.0% of the Company's outstanding Common Stock or to the purchase of stock
pursuant to any tax-qualified employee stock benefit plan,
-142-
<PAGE>
such as the ESOP, or by any non-tax-qualified employee stock benefit plan, such
as the 1997 Recognition Plan.
Pursuant to OTS regulations, the Company will generally be prohibited from
repurchasing any shares of Common Stock within one year following consummation
of the Conversion and Reorganization. During the second and third years
following consummation of the Conversion and Reorganization, the Company may not
repurchase any shares of its Common Stock other than pursuant to (i) an offer to
all stockholders on a pro rata basis which is approved by the OTS; (ii) the
repurchase of qualifying shares of a director, if any; (iii) purchases in the
open market by a tax-qualified or non-tax-qualified employee stock benefit plan
in an amount reasonable and appropriate to fund the plan; or (iv) purchases that
are part of an open-market program not involving more than 5% of its outstanding
capital stock during a 12-month period, if the repurchases do not cause the
Association to become undercapitalized and the Association provides to the
Regional Director of the OTS no later than 10 days prior to the commencement of
a repurchase program written notice containing a full description of the program
to be undertaken and such program is not disapproved by the Regional Director.
However, the Regional Director has authority to permit repurchases during the
first year following consummation of the Conversion and Reorganization and to
permit repurchases in excess of 5% during the second and third years upon the
establishment of exceptional circumstances (i.e., where such repurchases would
be in the best interests of the institution and its stockholders).
COMPARISON OF STOCKHOLDERS' RIGHTS
General. As a result of the Conversion and Reorganization, holders of the
Association Common Stock will become stockholders of the Company, an Indiana
corporation. There are certain differences in stockholder rights arising from
distinctions between the Association's Charter and Bylaws and the Company's
Articles of Incorporation and Bylaws and from distinctions between laws with
respect to federally chartered savings institutions and Indiana law.
The discussion herein is not intended to be a complete statement of the
differences affecting the rights of stockholders, but rather summarizes the more
significant differences and certain important similarities. The discussion
herein is qualified in its entirety by reference to the Articles of
Incorporation and Bylaws of the Company and the Indiana Business Corporation
Law.
Authorized Capital Stock. The Company's authorized capital stock consists
of 8,000,000 shares of Common Stock and 2,000,000 shares of Preferred Stock. The
Association's authorized capital stock consists of 8,000,000 shares of
Association Common Stock and 2,000,000 shares of preferred stock, par value $.10
per share (the "Association Preferred Stock"). The shares of Common Stock and
Preferred Stock were authorized in
-143-
<PAGE>
an amount greater than that to be issued in the Conversion and Reorganization to
provide the Company's Board of Directors with as much flexibility as possible to
effect, among other transactions, financings, acquisitions, stock dividends,
stock splits and employee stock options. However, these additional authorized
shares may also be used by the Board of Directors consistent with its fiduciary
duty to deter future attempts to gain control of the Company. The Board of
Directors also has sole authority to determine the terms of any one or more
series of Preferred Stock, including voting rights, conversion rates, and
liquidation preferences. As a result of the ability to fix voting rights for a
series of Preferred Stock, the Board has the power, to the extent consistent
with its fiduciary duty, to issue a series of Preferred Stock to persons
friendly to management in order to attempt to block a post-tender offer merger
or other transaction by which a third party seeks control, and thereby assist
management to retain its position. The Company's Board currently has no plan for
the issuance of additional shares, other than the issuance of additional shares
pursuant to stock benefit plans.
Issuance of Capital Stock. Pursuant to applicable laws and regulations, the
Mutual Holding Company is required to own not less than a majority of the
outstanding Association Common Stock. There will be no such restriction
applicable to the Company following consummation of the Conversion and
Reorganization.
The Articles of Incorporation of the Company do not contain restrictions on
the issuance of shares of capital stock to directors, officers or controlling
persons of the Company, whereas the Charter of the Association restricts such
issuance to general public offerings, or if qualifying shares, to directors,
unless the share issuance or the plan under which they would be issued has been
approved by a majority of the total votes eligible to be cast at a legal
meeting. Thus, stock-related compensation plans such as stock option plans could
be adopted by the Company without stockholder approval and shares of Company
capital stock could be issued directly to directors or officers without
stockholder approval. The Bylaws of the NASD, however, generally require
corporations with securities which are quoted on the Nasdaq National Market
System to obtain stockholder approval of most stock compensation plans for
directors, officers and key employees of the corporation. Moreover, although
generally not required, stockholder approval of stock-related compensation plans
may be sought in certain instances in order to qualify such plans for favorable
federal income tax and securities law treatment under current laws and
regulations. The Company plans to submit the stock compensation plans discussed
herein to its stockholders for approval.
Voting Rights. Neither the Association's Charter or Bylaws nor the
Company's Articles of Incorporation or Bylaws currently provide for cumulative
voting in elections of directors.
The Association's Charter permits the provision of separate class voting
rights for holders of a class of the Association Preferred Stock only under
specified circumstances, including (i) mergers, consolidations and sales, leases
or conveyances of property of the
-144-
<PAGE>
Association if the class of the Association Preferred Stock is to be exchanged
for securities of another corporation, (ii) amendments of the Charter that would
adversely change the specific terms of any class or series of the Association
Preferred Stock and (iii) the provision of class voting rights to holders of the
Association Preferred Stock permitting such holders to elect a specified number
of directors of the Board of Directors of the Association (which must be less
than a majority of directors) in the event of default in the payment of
dividends on the Association Preferred Stock. The Articles of Incorporation of
the Company do not contain any specification of or limitation on the
circumstances under which separate class voting rights may be provided to a
particular class or series of Preferred Stock.
For additional information relating to voting rights, see "- Limitations on
Acquisitions of Voting Stock and Voting Rights" below.
Payment of Dividends. The ability of the Association to pay dividends on
its capital stock is restricted by OTS regulations and by tax considerations
related to savings institutions such as the Association. See "Regulation - The
Association - Capital Distributions" and "Taxation - Federal Taxation." Although
the Company is not subject to these restrictions as an Indiana corporation, such
restrictions will indirectly affect the Company because dividends from the
Association will be a primary source of funds of the Company for the payment of
dividends to stockholders of the Company.
The Indiana Business Corporation Law generally provides that, subject to
any restrictions in the corporation's articles of incorporation, a corporation
may make distributions to its stockholders, provided (i) the corporation would
be able to pay its debts as they become due in the usual course of business and
(ii) the corporation's total assets would not be less than the sum of its total
liabilities plus the amount that would be needed, if the corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
which are superior to those receiving the distribution.
Board of Directors. The Association's Charter and Bylaws and the Articles
of Incorporation and Bylaws of the Company respectively require the Board of
Directors of the Association and the Company to be divided into three classes as
nearly equal in number as possible and that the members of each class shall be
elected for a term of three years and until their successors are elected and
qualified, with one class being elected annually.
Under the Association's Bylaws, any vacancies in the Board of Directors of
the Association may be filled by the affirmative vote of a majority of the
remaining directors although less than a quorum of the Board of Directors.
Persons elected by the directors of the Association to fill vacancies may only
serve until the next annual meeting of stockholders. However, under the
Company's Articles of Incorporation, any vacancy occurring in the Board of
Directors of the Company, including any vacancy created by reason of an increase
in the number of directors, may be filled by the remaining directors, and any
director so chosen shall hold office for the remainder of the term to which the
director has been elected and until his or her successor is elected and
qualified.
-145-
<PAGE>
Under the Association's Bylaws, any director may be removed for cause by
the holders of a majority of the outstanding voting shares. The Company's
Articles of Incorporation simply provide that any director may be removed for
cause by the holders of two-thirds of the outstanding voting shares of the
Company.
Limitations on Liability. The Company's Articles of Incorporation provide
that no director shall be personally liable to the Company or its stockholders
for monetary damages or injunctive relief for any act or omission by such
director as a director unless the director has breached or failed to perform the
duties of the director's office in compliance with Section 23-1-35-1 of the
Indiana Business Corporation Law, or any successor provision thereto. Section
23-1-35-1 of the Indiana Business Corporation Law currently provides that
directors will not be liable for any action taken as a director, or any failure
to take any action, unless (i) the director has breached or failed to perform
the duties of the director's office in compliance with said section (i.e., in
good faith, with the care an ordinarily prudent person in a like position would
exercise under similar circumstances and in a manner the director reasonably
believes to be in the best interests of the corporation) and (ii) the breach or
failure to perform constitutes willful misconduct or recklessness.
Currently, the scope of the provision in the Company's Articles of
Incorporation limiting the personal liability of directors is uncertain because
of the absence of judicial precedent interpreting similar provisions. In
addition, the SEC takes the position that similar provisions limiting the
liability of directors under state laws would not protect those corporations'
directors from liability for violations of the federal securities laws. Federal
banking regulators also may take the same position with respect to violations of
federal banking laws and regulations.
The provision limiting the personal liability of the Company's directors
does not eliminate or alter the duty of the Company's directors; it merely
limits personal liability for monetary damages to the extent permitted by the
Indiana Business Corporation Law. Moreover, it applies only to claims against a
director arising out of his role as a director; it currently does not apply to
claims arising out of his role as an officer (if he is also an officer) or
arising out of any other capacity in which he serves because the Indiana
Business Corporation Law does not authorize such a limitation of liability.
The provision in the Company's Articles of Incorporation which limits the
personal liability of directors is designed to ensure that the ability of the
Company's directors to exercise their best business judgment in managing the
Company's affairs is not unreasonably impeded by exposure to the potentially
high personal costs or other uncertainties of litigation. The nature of the
tasks and responsibilities undertaken by directors of publicly-held corporations
often require such persons to make difficult judgments of great importance which
can expose such persons to personal liability, but from which they will acquire
no personal benefit. In recent years, litigation against publicly-held
corporations and their directors and officers challenging good faith business
judgments and involving no allegations of personal wrongdoing has become common.
Such litigation regularly involves
-146-
<PAGE>
damage claims in huge amounts which bear no relationship to the amount of
compensation received by the directors or officers, particularly in the case of
directors who are not employees of the corporation. The expense of such
litigation, whether it is well-founded or not, can be enormous. The provision of
the Articles of Incorporation relating to director liability is intended to
reduce, in appropriate cases, the risk incident to serving as a director and to
enable the Company to elect and retain the persons most qualified to serve as
directors.
Currently, federal law does not permit federally chartered savings
institutions such as the Association to limit the personal liability of
directors in the manner provided by the Indiana Business Corporation Law and the
laws of many other states.
Indemnification of Directors, Officers, Employees and Agents. The
Association's Charter and Bylaws do not contain any provision relating to
indemnification of directors and officers of the Association. Under present OTS
regulations, however, the Association shall indemnify its directors, officers
and employees for any costs incurred in connection with any litigation involving
any such person's activities as a director, officer or employee if such person
obtains a final judgment on the merits in his or her favor. In addition,
indemnification is permitted in the case of a settlement, a final judgment
against such person or final judgement other than on the merits, if a majority
of disinterested directors determine that such person was acting in good faith
within the scope of his or her employment as he or she could reasonably have
perceived it under the circumstances and for a purpose he or she could
reasonably have believed under the circumstances was in the best interest of the
Association or its stockholders. The Association also is permitted to pay
ongoing expenses incurred by a director, officer or employee if a majority of
disinterested directors concludes that such person may ultimately be entitled to
indemnification. Before making any indemnification payment, the Association is
required to notify the OTS of its intention and such payment cannot be made if
the OTS objects thereto.
The Company's Articles of Incorporation provide that the Company shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed formal or informal action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person is or was a director, officer, employee or agent of
the Company or any predecessor of the Company, or is or was serving at the
request of the Company or any predecessor of the Company as a director, officer,
partner, member, manager, employee or agent of another corporation, partnership,
limited liability company, joint venture, trust, employee benefit plan or other
enterprise, against liability and expenses (including court costs and attorneys'
fees), judgments, fines, excise taxes and amounts paid in satisfaction,
settlement or compromise actually and reasonably incurred by such person in
connection with such action, suit or proceeding to the fullest extent authorized
by law. Such indemnity shall be made only if (i) such person's conduct was in
good faith; (ii) such person reasonably believed (a) in the case of conduct in
the person's official capacity with the Company, that the person's conduct was
in its best interests and (b) in all other cases, the person's conduct was at
least not opposed to the
-147-
<PAGE>
Company's best interests; and (iii) in the case of any criminal proceeding, the
person either (a) had reasonable cause to believe the person's conduct was
lawful, or (b) had no reasonable cause to believe that such person's conduct was
unlawful.
The Company's Articles of Incorporation also provide that reasonable
expenses incurred by a director, officer, employee or agent of the Company in
defending an action, suit or proceeding described above shall be paid by the
Company in advance of the final disposition of such action, suit or proceeding
as authorized by the Board of Directors upon receipt of a written affirmation by
or on behalf of such person of his good faith belief that he has met the
standard of conduct necessary for indemnification under relevant law and a
written undertaking, executed personally or on the person's behalf, to repay
such amount if it shall ultimately be determined that the person is not entitled
to be indemnified by the Company.
Special Meetings of Stockholders. The Association's Bylaws provide that
special meetings of the stockholders of the Association may be called by the
Chairman, President, a majority of the Board of Directors or the holders of not
less than one-tenth of the outstanding capital stock of the Association entitled
to vote at the meeting. The Company's Articles of Incorporation contain a
provision pursuant to which special meetings of stockholders of the Company only
may be called by a majority of directors then in office or the Chairman of the
Board or Chief Executive Officer.
Stockholder Nominations and Proposals. The Association's Bylaws generally
provide that stockholders may submit nominations for election as director at an
annual meeting of stockholders and any new business to be taken up at such a
meeting by filing such in writing with the Association at least thirty days
before the date of any such meeting.
The Company's Articles of Incorporation provide that, subject to the rights
of the holders of any class or series of stock having a preference over the
Common Stock as to dividends or upon liquidation, all nominations for election
to the Board of Directors, other than those made by the Board or a committee
thereof, shall be made by a stockholder who has complied with the notice
provisions in the Articles of Incorporation. Written notice of a stockholder
nomination must be communicated to the attention of the secretary and either
delivered to, or mailed and received at, the principal executive offices of the
Company not later than (i) with respect to an annual meeting of the stockholders
of the Company, 60 days prior to the anniversary date of the mailing of proxy
materials by the Company in connection with the immediately preceding annual
meeting of stockholders of the Company, or in the case of the first annual
meeting following the Conversion and Reorganization, the close of business on
the tenth day following the day on which notice of the date of the scheduled
annual meeting was mailed, and (ii) with respect to a special meeting of
stockholders for the election of directors, the close of business on the tenth
day following the date on which notice of such meeting is first given to the
stockholders. Each such notice shall set forth: (a) as to each person whom the
stockholder proposes to nominate as a director, and as to the stockholder giving
the notice, (i) the name, age, business address and
-148-
<PAGE>
residence address of such person; (ii) the principal occupation or employment of
such person; (iii) the class and number of shares of the Company's stock
beneficially owned by such person on the date of the stockholder notice; and
(iv) such other information regarding such person as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the SEC; and
(b) to the extent known by the stockholder giving the notice, (i) the name and
address of any other stockholders supporting such nominees; and (ii) the class
and number of shares of the Company's stock beneficially owned by any other
stockholders supporting such nominees, on the date of such stockholder notice.
The presiding officer of the meeting may refuse to acknowledge the nomination of
any person not made in compliance with the foregoing procedure.
The Company's Articles of Incorporation also provide that only such
business as shall have been properly brought before an annual meeting of
stockholders shall be conducted at the annual meeting. To be properly brought
before an annual meeting, business must be brought before the meeting by or at
the direction of the Board of Directors or otherwise properly brought before the
meeting by a stockholder. For business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the Company. To be timely, a stockholder's notice
must be delivered to or mailed and received at the principal executive offices
of the Company not less than 60 days prior to the anniversary date of the
mailing of proxy materials by the Company in connection with the immediately
preceding annual meeting of stockholders of the Company; provided, however, that
with respect to the first scheduled annual meeting following completion of the
Conversion and Reorganization, such written notice must be delivered or received
by the Company no later than the close of business on the tenth day following
the day on which notice of the meeting was first mailed to stockholders. A
stockholder's notice shall set forth as to each matter the stockholder proposes
to bring before the annual meeting (a) a brief description of the business
desired to be brought before the annual meeting and the reasons for conducting
such business at the annual meeting, (b) the name and address, as they appear on
the Company's books, of the stockholder proposing such business, and, to the
extent known, any other stockholders known by such stockholder to be supporting
such proposal, (c) the class and number of shares of the Company which are
beneficially owned by the stockholder and, to the extent known, by any other
stockholders known by such stockholder to be supporting such proposal on the
date of such stockholder notice, and (d) any financial interest of the
stockholder in such business. The presiding officer of an annual meeting shall
determine and declare to the meeting whether the business was properly brought
before the meeting in accordance with the provisions of the Articles of
Incorporation and any such business not properly brought before the meeting
shall not be transacted.
The procedures regarding stockholder proposals and nominations are intended
to provide the Board of Directors of the Company with the information deemed
necessary to evaluate a stockholder proposal or nomination and other relevant
information, such as existing stockholder support, as well as the time necessary
to consider and evaluate such information in advance of the applicable meeting.
The proposed procedures, however, will
-149-
<PAGE>
give incumbent directors advance notice of a business proposal or nomination.
This may make it easier for the incumbent directors to defeat a stockholder
proposal or nomination, even when certain stockholders view such proposal or
nomination as in the best interests of the Company or its stockholders.
Inspectors of Election. The Association's Bylaws provide that the Board of
Directors may appoint any persons, other than nominees for office, as inspectors
of election at a meeting of stockholders and that if inspectors of election are
not so appointed, the Chairman of the Board or the President may, and on the
request of not less than 10% of the votes represented at the meeting shall, make
such appointment at the meeting. In accordance with Indiana law, the Company's
Bylaws provide that the Board of Directors of the Company may appoint one or
more persons as inspectors of election, and that the chairman of any meeting of
stockholders shall make such an appointment in the event that the inspector(s)
appointed by the Board of Directors shall be unable to act or the Board shall
fail to appoint any inspector. The Bylaws of the Association and the Company
also specify the duties of inspectors of election.
Stockholder Action Without a Meeting. The Bylaws of the Association provide
that any action to be taken or which may be taken at any annual or special
meeting of stockholders may be taken if a consent in writing, setting forth the
actions so taken, is given by the holders of all outstanding shares entitled to
vote. The Articles of Incorporation of the Company similarly provide that any
action permitted to be taken by the stockholders at a meeting, may be taken
without a meeting if a consent in writing setting forth the action so taken
shall be signed by all of the stockholders entitled to vote and filed with the
Secretary of the Company.
Stockholder's Right to Examine Books and Records. A federal regulation
which is applicable to the Association provides that stockholders may inspect
and copy specified books and records of a federally chartered savings
institution after proper written notice for a proper purpose. The Indiana
Business Corporation Law similarly provides that a stockholder may inspect books
and records upon written demand stating the purpose of the inspection, if such
purpose is reasonably related to such person's interest as a stockholder.
Limitations on Acquisitions of Voting Stock and Voting Rights. The
Company's Articles of Incorporation provide that for a period of five years from
the date of the completion of the Conversion and Reorganization, no person shall
directly or indirectly offer to acquire or acquire the beneficial ownership of
(i) more than 10% of the issued and outstanding shares of any class of an equity
security of the Company, or (ii) any securities convertible into, or exercisable
for, any equity securities of the Company if, assuming conversion or exercise by
such person of all securities of which such person is the beneficial owner which
are convertible into, or exercisable for, such equity securities (but of no
securities convertible into, or exercisable for, such equity securities of which
such person is not the beneficial owner), such person would be the beneficial
owner of more than 10% of
-150-
<PAGE>
any class of an equity security of the Company. The term "person" is broadly
defined in the Articles of Incorporation to prevent circumvention of this
restriction.
The foregoing restrictions do not apply to (i) any offer with a view toward
public resale made exclusively to the Company by underwriters or a selling group
acting on its behalf, (ii) any employee benefit plan established by the Company
or the Association, and (iii) any other offer or acquisition approved in advance
by the affirmative vote of two-thirds of the Company's Board of Directors. In
the event that shares are acquired in violation of this restriction, all shares
beneficially owned by any person in excess of 10% shall not be counted as shares
entitled to vote and shall not be voted by any person or counted as voting
shares in connection with any matters submitted to stockholders for a vote.
Neither the Charter nor the Bylaws of the Association contains a provision
which restricts voting rights of certain stockholders of the Association in the
manner set forth above.
Mergers, Consolidations and Sales of Assets. A federal regulation requires
the approval of the Board of Directors of the Association and the holders of
two-thirds of the outstanding stock of the Association entitled to vote thereon
for mergers, consolidations and sales of all or substantially all of the
Association's assets. Such regulation permits the Association to merge with
another corporation without obtaining the approval of its stockholders if: (i)
it does not involve an interim savings institution; (ii) the Association's
Charter is not changed; (iii) each share of the Association's stock outstanding
immediately prior to the effective date of the transaction is to be an identical
outstanding share or a treasury share of the Association after such effective
date; and (iv) either: (A) no shares of voting stock of the Association and no
securities convertible into such stock are to be issued or delivered under the
plan of combination or (B) the authorized unissued shares or the treasury shares
of voting stock of the Association to be issued or delivered under the plan of
combination, plus those initially issuable upon conversion of any securities to
be issued or delivered under such plan, do not exceed 15% of the total shares of
voting stock of the Association outstanding immediately prior to the effective
date of the transaction.
The Indiana Business Corporation Law requires the approval of the Board of
Directors and, unless the Articles of Incorporation provide for a higher vote,
the holders of a majority of the outstanding stock of the Company entitled to
vote thereon for mergers or consolidations, and for sales, leases or exchanges
of all or substantially all of the Company's assets. The Indiana Business
Corporation Law permits the Company to merge with another corporation without
obtaining the approval of the Company's stockholders if: (i) the Company's
Articles of Incorporation will not differ (subject to certain limited
exceptions) from its Articles of Incorporation before the merger; (ii) each
stockholder of the Company whose shares were outstanding immediately before the
effective date of the merger will hold the same proportionate number of shares
after the merger; and (iii) the number of voting shares outstanding immediately
after the merger, plus the number of voting shares issuable
-151-
<PAGE>
as a result of the merger, will not exceed 20% of the shares of Common Stock
outstanding immediately prior to the merger.
As holder of all of the outstanding Association Common Stock after
consummation of the Conversion and Reorganization, the Company generally will be
able to authorize a merger, consolidation or other business combination
involving the Association without the approval of the stockholders of the
Company.
Business Combinations. Articles 10A. and 10B. of the Company's Articles of
Incorporation govern any proposed "Business Combination" (defined generally to
include certain sales, purchases, exchanges, leases, transfers, dispositions or
acquisitions of assets or businesses, mergers or consolidations, or certain
reclassifications of securities of the Company) between the Company or any
subsidiaries, on the one hand, and a Related Person, on the other hand. A
"Related Person" is defined generally to include any person, partnership,
corporation, group or other entity (other than the Company and its subsidiaries)
which is the Beneficial Owners (as defined) of 10.0% or more of the shares of
the Company entitled to vote generally in an election of directors (the "Voting
Shares").
Under Article 10B., if certain specified conditions (discussed briefly in
the following four paragraphs) are not met, neither the Company nor any of its
subsidiaries may become a party to any Business Combination, without the prior
affirmative vote at a meeting of the Company's stockholders by the holders of at
least 80.0% of the Voting Shares, voting separately as a class, and by an
Independent Majority of Stockholders, which is defined to mean the holders of a
majority of the outstanding Voting Shares that are not Beneficially Owned (as
defined), directly or indirectly, by a Related Person. If such approval were
obtained, the special conditions would not have to be met. Such conditions also
would not have to be met if the Board of Directors approved the Business
Combination at times and by votes specified in the Articles of Incorporation.
The conditions necessary to avoid the vote of 80.0% of the Company's
outstanding Voting Shares and of an Independent Majority of Stockholders include
conditions providing that, upon consummation of the Business Combination, all of
the Company's stockholders would receive at least a certain minimum price per
share for their shares. The ratio of the price to be received by the
stockholders (other than the Related Person) in the Business Combination to the
market price of the Company's shares immediately before the announcement of the
Business Combination would have to be at least as great as the ratio of (i) the
highest per share price paid by the Related Person in acquiring any of the
Company's Common Stock prior to the Business Combination to (ii) the market
price per share of the Company's Common Stock immediately before the initial
acquisition of any shares by the Related Person. A similar condition would apply
in the case of the price to be paid for any outstanding shares of the Company's
Preferred Stock. These requirements generally are designed to ensure that the
stockholders receive the benefit of any premium paid by the Related Person in
acquiring any of its holdings. The price to be received by
-152-
<PAGE>
stockholders in the Business Combination also would have to be not less than the
highest per share price paid by the Related Person in acquiring any of its
holdings.
Another condition necessary to avoid the increased vote requirements is
that the consideration to be received in the Business Combination by holders of
stock (whether common stock or preferred stock) must be in the same form and of
the same kind as the consideration paid by the Related Person in acquiring stock
already owned by it (except to the extent that each individual stockholder might
agree to accept consideration of a different form or kind in exchange for all or
part of the shares which he owns). Thus, for example, if the Related Person had
acquired his initial share interest for cash, the remaining stockholders would
have to be offered cash in the Business Combination and would not have to accept
stock or debt of another corporation or institution.
In order to avoid the supermajority voting requirements of Article 10B.,
the Related Person also would have to comply with certain other conditions after
he acquired his 10.0% interest in the Company. These conditions include the
following: (i) the Related Person must ensure that the Company's Board of
Directors included representation by "Continuing Directors" (generally, those
directors at the time of effectiveness of the Articles of Incorporation, whether
or not a Related Person or Associate or Affiliate (as defined) of a Related
Person, and those directors who are not affiliated with the Related Person and
who are elected as directors prior to the time the Related Person became such or
with the recommendation of a majority of other Continuing Directors) in
proportion to the holdings of the other stockholders; (ii) the Related Person
must have refrained from acquiring additional capital stock of the Company with
certain limited exceptions, and must have refrained from acquiring additional
Voting Shares, or securities convertible into or exchangeable for Voting Shares,
after he became a Related Person; (iii) the Related Person must not have
received certain specified benefits from the Company, such as loans or
guarantees, and, except with the approval of a majority of the directors and a
majority of the Continuing Directors, must not have made any change in the
Company's business or equity capital structure or entered into any contract,
arrangement or understanding with the Company; and (iv) except as approved by a
majority of the directors and a majority of the Continuing Directors, there must
have been no failure to pay full quarterly dividends on any outstanding Company
Preferred Stock, no reduction in annual dividends paid on the Company's Common
Stock, and there must have been increases in annual dividends as necessary to
reflect any reclassification, recapitalization, reorganization or similar
transaction which has the effect of reducing the number of outstanding shares of
stock. Finally, a proxy statement must have been sent to stockholders in
connection with the Business Combination. Such proxy statement must contain the
recommendations, if any, of the Continuing Directors, and of any investment
banking firm selected by a majority of the Continuing Directors, as to the
fairness of the Business Combination from the point of view of the stockholders.
-153-
<PAGE>
If all of the foregoing conditions are met, the increased voting
requirements described above are dispensed with and the Business Combination
would require only such approval, if any, as would otherwise be required by
Indiana law.
Articles 10A. and 10B. are intended to provide minimum safeguards for
stockholders who do not accept a takeover attempt and continue to hold their
shares after the attempt succeeds and the control of the Company is acquired by
a Related Person. The requirement of an 80.0% stockholder vote probably means
that a Business Combination which fails to meet the minimum price and other
conditions might not be accomplished against the opposition of the incumbent
Board of Directors.
The provisions would not restrict another company which merely desired to
exercise control over the Company and did not intend to effect a subsequent
Business Combination. Moreover, these provisions may not apply to an attempted
combination with a person not a Related Person. On the other hand, if another
company obtaining control over the Company were not willing to meet the price
and other conditions of Article 10B., the holders of just over one-fifth of the
outstanding Voting Shares could block a Business Combination supported by the
remaining stockholders. The result is that Business Combinations favored by a
majority of stockholders might not be approved. Article 10B. might also
discourage a tender offer for the Company's stock because of the resulting need
either to observe the minimum price requirements or to obtain an 80.0%
stockholder vote as a precondition to any subsequent Business Combination. This
might have the effect of preventing temporary fluctuations in the market price
of the stock of the Company which could result from actual or rumored takeover
attempts.
Neither the Association's Charter and Bylaws nor federal laws and
regulations contain a provision which restricts business combinations between
the Association and any Related Persons in the manner set forth above.
Control Share Acquisitions. The Indiana Business Corporation Law contains a
provision which, unless explicitly provided for otherwise in a corporation's
articles of incorporation or bylaws, restricts the voting rights of shares
acquired by a person in excess of 20% of the outstanding shares, unless voting
rights are granted by resolution approved by a majority of the disinterested
stockholders of the corporation.
Neither the Association's Charter and Bylaws nor federal laws and
regulations contain a provision which restricts voting rights of certain
stockholders of the Association in the manner set forth above.
Dissenters' Rights of Appraisal. A federal regulation which is applicable
to the Association generally provides that a stockholder of a federally
chartered savings institution which engages in a merger, consolidation or sale
of all or substantially all of its assets shall have the right to demand from
such institution payment of the fair or appraised value of his or her stock in
the institution, subject to specified procedural requirements. This regulation
-154-
<PAGE>
also provides, however, that the stockholders of a federally chartered savings
institution with stock which is listed on a national securities exchange or
quoted on the Nasdaq System are not entitled to dissenters' rights in connection
with a merger involving such savings institution if the stockholder is required
to accept only "qualified consideration" for his or her stock, which is defined
to include cash, shares of stock of any institution or corporation which at the
effective date of the merger will be listed on a national securities exchange or
quoted on the Nasdaq System or any combination of such shares of stock and cash.
After the Conversion and Reorganization, the rights of appraisal of
dissenting stockholders of the Company will be governed by the Indiana Business
Corporation Law. Pursuant thereto, a stockholder of an Indiana corporation
generally has the right to dissent from any merger or consolidation involving
the corporation or sale of all or substantially all of the corporation's assets,
subject to specified procedural requirements. However, no such appraisal rights
are available for the shares of any class or series of a corporation's capital
stock if as of the record date fixed to determine the stockholders entitled to
receive notice of and to vote at the meeting of stockholders to act upon the
agreement of merger or consolidation, such shares were either listed on a United
States securities exchange registered under the Exchange Act or traded on the
Nasdaq National Market System or a similar market.
Amendment of Governing Instruments. No amendment of the Association's
Charter may be made unless it is first proposed by the Board of Directors of the
Association, then preliminarily approved by the OTS, and thereafter approved by
the holders of a majority of the total votes eligible to be cast at a legal
meeting. Article XII of the Company's Articles of Incorporation generally
provides that the Articles of Incorporation may be amended as set forth by
Indiana law (i.e., generally upon the recommendation of the board of directors
and the affirmative vote of a majority of all of the stockholder votes entitled
to be cast on the matter), except that any amendment to Articles VI (preemptive
rights), VII (directors), VIII (indemnification), IX (meetings of stockholders
and stockholder proposals), X (restrictions on acquisitions), XI (voting rights)
and XII (amendments) must be approved by the affirmative vote of the holders of
at least two-thirds of the then outstanding shares of the class or classes
entitled to vote thereon at that meeting, voting together as a single class.
The Bylaws of the Association may be amended by a majority vote of the full
Board of Directors of the Association or by a majority vote of the votes cast by
the stockholders of the Association at any legal meeting. The Bylaws of the
Company may only be amended by a majority vote of the Board of Directors of the
Company.
-155-
<PAGE>
RESTRICTIONS ON ACQUISITION OF THE COMPANY
Restrictions in the Company's Articles of Incorporation and Bylaws and Indiana
Law
Certain provisions of the Company's Articles of Incorporation and Bylaws
which deal with matters of corporate governance and rights of stockholders might
be deemed to have a potential anti-takeover effect. These provisions, which are
described under "Comparison of Stockholders' Rights" above, provide, among other
things, (i) that the Board of Directors of the Company shall be divided into
three classes as nearly equal in number as possible and that the members of each
class shall be elected for a term of three years, with one class being elected
annually; (ii) that special meetings of stockholders may only be called by the
Board of Directors of the Company; (iii) that stockholders generally must
provide the Company notice of stockholder nominations for director and proposals
and related information at least 60 days prior to the anniversary date of the
mailing of proxy materials by the Company in connection with the immediately
preceding annual meeting of stockholders of the Company; (iv) that no person may
acquire more than 10% of the issued and outstanding shares of any class of an
equity security of the Company during the five-year period from the date of
consummation of the Conversion and Reorganization; (v) the authority to issue
shares of authorized but unissued Common Stock and Preferred Stock and to
establish the terms of any one or more series of Preferred Stock, including
voting rights; and (vi) restrictions on the Company's ability to engage in
certain business combinations with "related persons." In addition to the
foregoing, and also as described under "Comparison of Stockholders' Rights"
above, the Indiana Business Corporation Law generally restricts the voting
rights of shares acquired by a person in excess of 20% of the outstanding
shares.
The foregoing provisions of the Articles of Incorporation and Bylaws of the
Company and Indiana law could have the effect of discouraging an acquisition of
the Company or stock purchases in furtherance of an acquisition, and could
accordingly, under certain circumstances, discourage transactions which might
otherwise have a favorable effect on the price of the Common Stock.
The Board of Directors believes that the provisions described above are
prudent and will reduce vulnerability to takeover attempts and certain other
transactions that are not negotiated with and approved by the Board of Directors
of the Company. The Board of Directors believes that these provisions are in the
best interests of the Company and its future stockholders. In the Board of
Directors' judgment, the Board of Directors is in the best position to determine
the true value of the Company and to negotiate more effectively for what may be
in the best interests of its stockholders. Accordingly, the Board of Directors
believes that it is in the best interests of the Company and its future
stockholders to encourage potential acquirors to negotiate directly with the
Board of Directors and that these provisions will encourage such negotiations
and discourage hostile takeover attempts. It is also the Board of Directors'
view that these provisions should not discourage persons
-156-
<PAGE>
from proposing a merger or other transaction at prices reflective of the true
value of the Company and where the transaction is in the best interests of all
stockholders.
Regulatory Restrictions
The Change in Bank Control Act provides that no person, acting directly or
indirectly or through or in concert with one or more other persons, may acquire
control of a savings institution unless the OTS has been given 60 days' prior
written notice. The HOLA provides that no company may acquire "control" of a
savings institution without the prior approval of the OTS. Any company that
acquires such control becomes a thrift holding company subject to registration,
examination and regulation by the OTS. Pursuant to federal regulations, control
of a savings institution is conclusively deemed to have been acquired by, among
other things, the acquisition of more than 25% of any class of voting stock of
the institution or the ability to control the election of a majority of the
directors of an institution. Moreover, control is presumed to have been
acquired, subject to rebuttal, upon the acquisition of more than 10% of any
class of voting stock, or of more than 25% of any class of stock, of a savings
institution where certain enumerated "control factors" are also present in the
acquisition. The OTS may prohibit an acquisition if (i) it would result in a
monopoly or substantially lessen competition, (ii) the financial condition of
the acquiring person might jeopardize the financial stability of the
institution, or (iii) the competence, experience or integrity of the acquiring
person indicates that it would not be in the interest of the depositors or of
the public to permit the acquisition of control by such person. The foregoing
restrictions do not apply to the acquisition of a savings institution's capital
stock by one or more tax-qualified employee stock benefit plans, 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 the savings institution.
For three years following the Conversion and Reorganization, OTS
regulations prohibit any person from acquiring, either directly or indirectly,
or making an offer to acquire more than 10% of the stock of any converted
savings institution, without the prior written approval of the OTS, except for
(i) any offer with a view toward public resale made exclusively to the
institution or to underwriters or a selling group acting on its behalf, (ii)
offers that if consummated would not result in the acquisition by such person
during the preceding 12-month period of more than 1% of such stock, (iii) offers
in the aggregate for up to 24.9% by the ESOP or other tax-qualified plans of the
Company or the Association, and (iv) an offer to acquire or acquisition of
beneficial ownership of more than 10% of the common stock of the savings
institution by a corporation whose ownership is or will be substantially the
same as the ownership of the savings institution, provided that the offer or
acquisition is made more than one year following the date of completion of the
Conversion and Reorganization. Such prohibition also is applicable to the
acquisition of the Common Stock. In the event that any person, directly or
indirectly, violates this regulation, the securities beneficially owned by such
person in excess of 10% shall not be counted as shares entitled to vote and
shall not be voted by any person or counted as voting shares in connection with
any matters submitted to a vote of stockholders. The definition of
-157-
<PAGE>
beneficial ownership for this regulation extends to persons holding revocable or
irrevocable proxies for an institution's stock under circumstances that give
rise to a conclusive or rebuttable determination of control under OTS
regulations.
In addition to the foregoing, the Plan prohibits any person, prior to the
completion of the Conversion and Reorganization, from offering, or making an
announcement of an intent to make an offer, to purchase subscription rights or
Common Stock. See "The Conversion and Reorganization - Restrictions on Transfer
of Subscription Rights and Shares."
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
General
The Company is authorized to issue 8,000,000 shares of Common Stock and
2,000,000 shares of Preferred Stock. The Company currently expects to issue up
to a maximum of 874,000 shares of Common Stock, including 504,735 shares of
Conversion Stock and 369,265 shares of Exchange Shares, and no shares of
Preferred Stock in the Conversion and Reorganization. Each share of Common Stock
will have the same relative rights as, and will be identical in all respects
with, each other share of Common Stock. Upon payment of the Purchase Price for
the Conversion Stock and the issuance of the Exchange Shares in accordance with
the Plan of Conversion, all such stock will be duly authorized, fully paid and
nonassessable.
The Common Stock will represent nonwithdrawable capital, will not be an
account of an insurable type and will not be insured by the FDIC or any other
governmental authority.
Common Stock
Dividends. The Company can pay dividends if, as and when declared by its
Board of Directors, subject to compliance with limitations which are imposed by
law. See "Dividend Policy." The holders of Common Stock will be entitled to
receive and share equally in such dividends as may be declared by the Board of
Directors of the Company out of funds legally available therefor. If the Company
issues Preferred Stock, the holders thereof may have a priority over the holders
of the Common Stock with respect to dividends.
Voting Rights. Upon completion of the Conversion and Reorganization, the
holders of Common Stock of the Company will possess exclusive voting rights in
the Company. They will elect the Company's Board of Directors and act on such
other matters as are required to be presented to them under Indiana law or the
Company's Articles of Incorporation or as are otherwise presented to them by the
Board of Directors. Except as discussed in "Comparison of Stockholders' Rights -
Limitations on Acquisitions of Voting Stock and Voting Rights," each holder of
Common Stock will be entitled to one vote per
-158-
<PAGE>
share and will not have any right to cumulate votes in the election of
directors. If the Company issues Preferred Stock, holders of the Preferred Stock
may have the right to vote with the holders of Common Stock as a single class or
have voting rights as a separate class.
Liquidation. In the event of any liquidation, dissolution or winding up of
the Company, the holders of the then-outstanding Common Stock would be entitled
to receive, after payment or provision for payment of all its debts and
liabilities, all of the assets of the Company available for distribution. If
Preferred Stock is issued, the holders thereof may have a priority over the
holders of the Common Stock in the event of liquidation or dissolution.
Preemptive Rights. Holders of the Common Stock will not be entitled to
preemptive rights with respect to any shares which may be issued in the future.
The Common Stock is not subject to redemption.
Preferred Stock
None of the shares of the Company's authorized Preferred Stock will be
issued in the Conversion and Reorganization. Such stock may be issued with such
preferences and designations as the Board of Directors may from time to time
determine. The Board of Directors can, without stockholder approval, issue
Preferred Stock with voting, dividend, liquidation and conversion rights which
could dilute the voting strength of the holders of the Common Stock and may
assist management in impeding an unfriendly takeover or attempted change in
control.
EXPERTS
The Financial Statements of the Association as of June 30, 1996 and 1995,
and for each of the years in the three-year period ended June 30, 1996, have
been included herein in reliance upon the report of Grant Thornton LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
RP Financial has consented to the publication herein of the summary of its
report to the Company and the Association setting forth its opinion as to the
estimated pro forma market value of the Common Stock to be outstanding upon
completion of the Conversion and Reorganization and its opinion with respect to
subscription rights.
-159-
<PAGE>
LEGAL MATTERS
The legality of the Common Stock and the federal income tax consequences of
the Conversion and Reorganization will be passed upon for the Company and the
Association by Elias, Matz, Tiernan & Herrick L.L.P., Washington, D.C., special
counsel to the Company and the Association. The Indiana income tax consequences
of the Conversion and Reorganization will be passed upon for the Company and the
Association by Schwartz, Manes & Ruby, Cincinnati, Ohio. Certain legal matters
will be passed upon for Webb by Vorys, Sater, Seymour and Pease, Cincinnati,
Ohio.
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement under the
Securities Act with respect to the Conversion Stock and the Exchange Shares
offered hereby. As permitted by the rules and regulations of the SEC, this
Prospectus does not contain all the information set forth in the Registration
Statement. Such information can be examined without charge at the public
reference facilities of the SEC located at 450 Fifth Street, N.W., Washington,
D.C. 20549, and copies of such material can be obtained from the SEC at
prescribed rates. The SEC maintains a World Wide Web site on the Internet that
contains reports, proxy and information statements and other information
regarding registrants such as the Company that file electronically with the SEC.
The address of such site is: http://www.sec.gov. The statements contained in
this Prospectus as to the contents of any contract or other document filed as an
exhibit to the Registration Statement describe all material provisions of such
contracts or other documents. Nevertheless, such statements are, of necessity,
brief descriptions thereof and are not necessarily complete; each such statement
is qualified by reference to such contract or document.
The Mutual Holding Company has filed an Application for Conversion with the
OTS with respect to the Conversion and Reorganization. This Prospectus omits
certain information contained in that application. The application may be
examined at the principal office of the OTS, 1700 G Street, N.W., Washington,
D.C. 20552, and at the Central Regional Office of the OTS located at 200 West
Madison Street, Suite 1300, Chicago, Illinois 60606.
In connection with the Conversion and Reorganization, the Company will
register its Common Stock with the SEC under Section 12(g) of the Exchange Act,
and, upon such registration, the Company and the holders of its stock will
become subject to the proxy solicitation rules, reporting requirements and
restrictions on stock purchases and sales by directors, officers and greater
than 10% stockholders, the annual and periodic reporting requirements and
certain other requirements of the Exchange Act. Under the Plan, the Company has
undertaken that it will not terminate such registration for a period of at least
three years following the Conversion and Reorganization.
-160-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Certified Public Accountants.................. F-1
Statements of Financial Condition at June 30, 1996
and 1995.......................................................... F-2
Statements of Earnings for the years ended
June 30, 1996, 1995 and 1994..................................... 39
Statements of Stockholders' Equity for the years ended
June 30, 1996, 1995 and 1994...................................... F-4
Statements of Cash Flows for the years
ended June 30, 1996, 1995 and 1994................................ F-5
Notes to Financial Statements....................................... F-7
All financial statement schedules are omitted because the required
information either is not applicable or is shown in the financial statements or
in the notes thereto.
Dearborn Mutual Holding Company has limited assets other than its
shares of Association Common Stock (which will be cancelled in connection with
the Conversion and Reorganization) and has engaged in only minimal activities to
date; accordingly, the financial statements of the Mutual Holding Company have
been omitted because of their immateriality.
Vision Bancorp, Inc. was incorporated on August 21, 1996 with an
initial capitalization of $1,000 and has engaged in only minimal activities to
date; accordingly, the financial statements of the Company have been omitted
because of their immateriality.
161
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Dearborn Savings Association, F.A.
We have audited the accompanying statements of financial condition of Dearborn
Savings Association, F.A. as of June 30, 1996 and 1995, and the related
statements of earnings, stockholders' equity and cash flows for each of the
three years ended June 30, 1996, 1995 and 1994. These financial statements are
the responsibility of the Association's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dearborn Savings Association,
F.A. as of June 30, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years ended June 30, 1996, 1995 and 1994, in
conformity with generally accepted accounting principles.
As more fully discussed in Notes A-2 and B, the Association changed its method
of accounting for certain investments and mortgage-backed securities as of July
1, 1994.
Cincinnati, Ohio
August 14, 1996 (except for Note I, as to which the date is August 20, 1996)
F-1
<PAGE>
Dearborn Savings Association, F.A.
STATEMENTS OF FINANCIAL CONDITION
June 30,
(In thousands, except share data)
<TABLE>
<CAPTION>
ASSETS 1996 1995
<S> <C> <C>
Cash and due from banks $ 103 $ 182
Interest-bearing deposits in other financial institutions 500 --
------- -------
Cash and cash equivalents 603 182
Certificates of deposit in other financial institutions 1,626 2,306
Investment securities - at cost, approximate market value of
$3,239 at June 30, 1996 and $5,597 at June 30, 1995 3,317 5,608
Investment securities designated as available for sale - at market 6,415 402
Mortgage-backed securities - at amortized cost, approximate
market value of $3,038 at June 30, 1995 -- 3,008
Mortgage-backed securities designated as available for sale - at market 1,496 --
Loans receivable - net 46,604 46,751
Loans held for sale - at lower of cost or market 182 489
Real estate acquired through foreclosure -- 23
Office premises and equipment - at depreciated cost 444 448
Stock in Federal Home Loan Bank - at cost 1,026 1,026
Accrued interest receivable on loans 255 244
Accrued interest receivable on mortgage-backed securities 15 25
Accrued interest receivable on investments 207 153
Cash surrender value of life insurance 1,223 896
Prepaid expenses and other assets 86 92
Prepaid federal income taxes 22 10
------- -------
Total assets $63,521 $61,663
======= =======
</TABLE>
F-2
<PAGE>
Dearborn Savings Association, F.A.
STATEMENTS OF FINANCIAL CONDITION
June 30,
(In thousands, except share data)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
<S> <C> <C>
Deposits $41,379 $37,460
Advances from Federal Home Loan Bank 14,517 16,821
Loan to Employee Stock Ownership Plan 113 137
Accounts payable on mortgage loans serviced for others 51 49
Accrued interest payable 96 85
Advances by borrowers for taxes and insurance 231 136
Other liabilities 262 253
Deferred federal income taxes 57 35
------- -------
Total liabilities 56,706 54,976
Commitments -- --
Stockholders' equity
Preferred stock - 2,000,000 shares authorized: no shares issued -- --
Common stock - 8,000,000 shares of $.10 par value authorized; 457,726 and
457,586 shares issued and outstanding at June 30, 1996 and 1995 46 46
Additional paid-in capital 1,795 1,793
Retained earnings, restricted 5,157 5,043
Less shares acquired by employee benefit plans (152) (197)
Unrealized gains (losses) on securities designated as available for sale,
net of related tax effects (31) 2
------- -------
Total stockholders' equity 6,815 6,687
------- -------
Total liabilities and stockholders' equity $63,521 $61,663
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
Dearborn Savings Association, F.A.
STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended June 30, 1996, 1995 and 1994
(In thousands, except share data)
<TABLE>
<CAPTION>
Unrealized
gains
Shares (losses) on
acquired by securities
Additional employee designated
Common paid-in benefit as available Retained
stock capital plans for sale earnings Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1993 $-- $ -- $-- $-- $ 4,452 $ 4,452
Reorganization to common stock form and issuance of
shares in connection therewith - net 45 1,717 (220) -- (100) 1,442
Proceeds from exercise of stock options 1 71 -- -- -- 72
Net earnings for the year ended June 30, 1994 -- -- -- -- 603 603
Dividends of $.32 per common share -- -- -- -- (65) (65)
--- ------ ----- ----- ------- -------
Balance at June 30, 1994 46 1,788 (220) -- 4,890 6,504
Designation of securities as available for sale upon
adoption of SFAS No. 115 -- -- -- (9) -- (9)
Principal repayments on loan to ESOP -- -- 23 -- 23
Proceeds from exercise of stock options -- 5 -- -- 5
Net earnings for the year ended June 30, 1995 -- -- -- 385 385
Dividends of $1.12 per common share -- -- -- -- (232) (232)
Unrealized gain on securities designated as available
for sale, net of related tax effects -- -- -- 11 -- 11
--- ------ ----- ----- ------- -------
Balance at June 30, 1995 46 1,793 (197) 2 5,043 6,687
Principal repayments on loan to ESOP -- -- 23 -- -- 23
Distribution of shares under employee benefit plans -- -- 22 -- -- 22
Proceeds from exercise of stock options - net -- 2 -- -- -- 2
Net earnings for the year ended June 30, 1996 -- -- -- -- 453 453
Dividends of $1.63 per common share -- -- -- -- (339) (339)
Unrealized loss on securities designated as available
for sale, net of related tax effects -- -- -- (33) -- (33)
--- ------ ----- ----- ------- -------
Balance at June 30, 1996 $46 $1,795 $(152) $ (31) $ 5,157 $ 6,815
=== ====== ===== ===== ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
Dearborn Savings Association, F.A.
STATEMENTS OF CASH FLOWS
Year ended June 30,
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings for the year $ 453 $ 385 $ 603
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Amortization of deferred loan origination fees (35) (19) (140)
Depreciation and amortization 61 60 54
Amortization of discounts and premiums on loans,
investments and mortgage-backed securities - net 11 (26) (23)
(Gain) loss on investment and mortgage-backed securities transactions (14) 1 (2)
Origination of loans for sale in the secondary market (7,810) (2,527) (6,623)
Proceeds from sale of loans in the secondary market 8,162 2,470 6,442
(Gain) loss on sale of loans (45) 13 (124)
Provision for losses on loans 12 8 12
Increase (decrease) in cash due to changes in:
Accrued interest receivable on loans (11) (25) 18
Accrued interest receivable on mortgage-backed securities 10 (3) (9)
Accrued interest receivable on investments (54) (71) (15)
Prepaid expenses and other assets 6 (30) 87
Accounts payable on mortgage loans
serviced for others 2 (49) 8
Accrued interest payable 11 11 4
Other liabilities 28 3 119
Federal income taxes
Current (12) 32 51
Deferred 38 38 31
------- --------- --------
Net cash provided by operating activities 813 271 493
Cash flows provided by (used in) investing activities:
Purchase of investment securities designated as held to maturity (4,970) (13,449) (12,867)
Purchase of investment securities designated as available for sale (5,470) (400) --
Proceeds from sale of investment securities designated as available
for sale 806 -- --
Proceeds from maturity of investment securities 5,860 13,666 9,115
Principal repayments on mortgage-backed securities 463 893 1,114
Proceeds from sale of mortgage-backed securities designated
as held for or available for sale 1,057 734 1,058
Purchase of mortgage-backed securities designated as held to maturity -- (1,115) (2,051)
Principal repayments on loans 9,185 5,776 15,279
Loan disbursements (8,992) (7,655) (15,329)
Purchase of office premises and equipment (57) (68) (37)
Purchase of Federal Home Loan Bank stock -- (113) --
(Increase) decrease in certificates
of deposit in other financial institutions 680 537 (6)
Increase in cash surrender value of life insurance (47) (43) (27)
Purchase of single premium life insurance (280) -- (88)
------ ------- --------
Net cash used in investing activities (1,765) (1,237) (3,839)
----- ------- ------
Net cash used in operating and investing
activities (balance carried forward) (952) (966) (3,346)
------ -------- ------
</TABLE>
F-5
<PAGE>
Dearborn Savings Association, F.A.
STATEMENTS OF CASH FLOWS (CONTINUED)
Year ended June 30,
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Net cash used in operating and investing activities
(balance brought forward) $ (952) $ (966) $(3,346)
Cash flows provided by (used in) financing activities:
Net increase (decrease) in deposit accounts 3,919 (1,194) 1,589
Repayment of Federal Home Loan Bank advances (12,604) (11,250) (459)
Proceeds from Federal Home Loan Bank advances 10,300 13,709 --
Advances by borrowers for taxes and insurance 95 (1) 10
Proceeds from issuance of common stock, net -- -- 1,602
Proceeds from exercise of stock options 2 5 72
Dividends on common stock (339) (232) (65)
-------- -------- --------
Net cash provided by financing activities 1,373 1,037 2,749
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 421 71 (597)
Cash and cash equivalents at the beginning of the year 182 111 708
-------- -------- -------
Cash and cash equivalents at the end of the year $ 603 $ 182 $ 111
========= ========= =======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Federal income taxes $ 163 $ 82 $ 207
========= ========= =======
Interest on deposits and borrowings $ 2,958 $ 2,878 $ 2,602
========= ========= =======
Supplemental disclosure of noncash investing activities:
Unrealized gains (losses) on securities designated as available
for sale, net of related tax effects $ (33) $ 2 $ --
========= ========= =======
Transfers from loans to real estate acquired through
foreclosure $ -- $ 23 $ 46
========= ========= ========
Loans disbursed to finance the sale of real estate
acquired through foreclosure $ 33 $ -- $ 327
========= ========= ========
Conversion of residential mortgage loans into mortgage-
backed securities $ -- $ -- $ 2,058
========= ========= ========
Transfers of investment and mortgage-backed securities
to a held for or available for sale classification $ 2,894 $ -- $ 2,058
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Dearborn Savings Association, F.A. (Dearborn) conducts a general banking
business in southeastern Indiana which primarily consists of attracting
deposits from the general public and applying those funds to the origination
of loans for residential, consumer, and nonresidential purposes. Dearborn's
profitability is significantly dependent on net interest income which is the
difference between interest income generated from interest-earning assets
(i.e. loans and investments) and the interest expense paid on
interest-bearing liabilities (i.e. deposits and borrowed funds). Net
interest income is affected by the relative amount of interest-earning
assets and interest-bearing liabilities and the interest received or paid on
these balances. The level of interest rates paid or received by Dearborn can
be significantly influenced by a number of environmental factors, such as
governmental monetary policy, that are outside of management's control.
The financial information presented herein has been prepared in accordance
with generally accepted accounting principles (GAAP) and general accounting
practices within the financial services industry. In preparing financial
statements in accordance with GAAP, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and revenues and expenses during the
reporting period. Actual results could differ from such estimates.
The following is a summary of significant accounting policies which, with
the exception of the policy described in Note A-2, have been consistently
applied in the preparation of the accompanying financial statements.
1. Basis of Presentation
During fiscal 1994, Dearborn Savings Association, F.A. (the Association), a
mutual savings association, completed its reorganization (the
Reorganization) into a federally-chartered mutual holding company, Dearborn
Mutual Holding Company (the Company). As part of the Reorganization, the
Association organized Dearborn, a federally-chartered stock savings
association, and transferred substantially all of its assets and liabilities
to Dearborn in exchange for all of the 250,000 shares of common stock
outstanding upon consummation of the Reorganization. Concurrent with the
Reorganization, Dearborn undertook an offering of 200,000 newly issued
shares of common stock at a price of $10.00 per share, resulting in $2.0
million of additional equity capital before offering expenses. The costs of
issuing the common stock were deferred and deducted from the sale proceeds.
F-7
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2. Investment Securities and Mortgage-Backed Securities
Prior to July 1, 1994, investment securities and mortgage-backed securities
were carried at cost, adjusted for amortization of premiums and accretion of
discounts. The investments and mortgage-backed securities were carried at
cost, as it was management's intent and Dearborn had the ability to hold the
securities until maturity. Investment securities and mortgage-backed
securities held for indefinite periods of time, or which management utilized
as part of its asset/liability management strategy, or that would be sold in
response to changes in interest rates, prepayment risk, or the perceived
need to increase regulatory capital were classified as held for sale at the
point of purchase and carried at the lower of cost or market.
In May 1993, the Financial Accounting Standards Board (the FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 115 "Accounting for
Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that investments be categorized as held-to-maturity, trading, or available
for sale. Securities classified as held-to-maturity are carried at cost only
if Dearborn has the positive intent and ability to hold these securities to
maturity. Trading securities and securities designated as available for sale
are carried at fair value with resulting unrealized gains or losses recorded
to operations or stockholders' equity, respectively. Dearborn adopted SFAS
No. 115 for the fiscal year beginning July 1, 1994. The effect of initial
adoption was to decrease stockholders' equity by approximately $9,000 on
July 1, 1994, representing the unrealized market value decline of
mortgage-backed securities designated as available for sale, net of
applicable deferred federal income taxes.
In November 1995, the FASB issued a Special Report on Implementation of SFAS
No. 115, which provided for the reclassification of securities between the
held-to-maturity, available for sale and trading portfolios during a
forty-five day period, without calling into question management's prior
intent with respect to such securities. Management elected to restructure
Dearborn's securities portfolio pursuant to the Special Report, and
transferred approximately $2.9 million of investment and mortgage-backed
securities from the held-to-maturity portfolio to an available for sale
portfolio. At June 30, 1996, Dearborn's stockholders' equity reflected a net
unrealized loss of $31,000 in securities designated as available for sale.
Realized gains and losses on sales of securities are recognized using the
specific identification method.
3. Loans Receivable
Loans held in portfolio are stated at the principal amount outstanding,
adjusted for deferred loan origination fees, the allowance for loan losses
and premiums and discounts on loans purchased and sold. Premiums and
discounts on loans purchased and sold are amortized and accreted to
operations using the interest method over the average life of the underlying
loans.
F-8
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3. Loans Receivable (continued)
Interest is accrued as earned unless the collectibility of the loan is in
doubt. Uncollectible interest on loans that are contractually past due is
charged off, or an allowance is established based on management's periodic
evaluation. The allowance is established by a charge to interest income
equal to all interest previously accrued, and income is subsequently
recognized only to the extent that cash payments are received until, in
management's judgment, the borrower's ability to make periodic interest and
principal payments has returned to normal, in which case the loan is
returned to accrual status.
Dearborn retains the servicing on loans sold and agrees to remit to the
investor loan principal and interest at agreed-upon rates. These rates can
differ from the loan's contractual interest rate resulting in a "yield
differential." In addition to previously deferred loan origination fees and
cash gains, gains on sale of loans can represent the present value of the
future yield differential less a normal servicing fee, capitalized over the
estimated life of the loans sold. Normal servicing fees are determined by
reference to the stipulated servicing fee set forth in the loan sale
agreement. Such fees approximate Dearborn's normal servicing costs. The
resulting capitalized excess servicing fee is amortized to operations over
the estimated life of the loans using the interest method. If prepayments
are higher than expected, an immediate charge to operations is made. If
prepayments are lower than original estimates, then the related adjustments
are made prospectively.
In May 1995, the FASB issued SFAS No. 122 "Accounting for Mortgage Servicing
Rights," which requires that Dearborn recognize as separate assets, rights
to service mortgage loans for others, regardless of how those servicing
rights are acquired. An institution that acquires mortgage servicing rights
through either the purchase or origination of mortgage loans and sells those
loans with servicing rights retained would allocate some of the cost of the
loans to the mortgage servicing rights.
SFAS No. 122 requires that securitization of mortgage loans be accounted for
as sales of mortgage loans and acquisitions of mortgage-backed securities.
Additionally, SFAS No. 122 requires that capitalized mortgage servicing
rights and capitalized excess servicing receivables be assessed for
impairment. Impairment is measured based on fair value.
SFAS No. 122 is effective for years beginning after December 15, 1995, (July
1, 1996, as to Dearborn) to transactions in which an entity acquires
mortgage servicing rights and to impairment evaluations of all capitalized
mortgage servicing rights and capitalized excess servicing receivables
whenever acquired. Retroactive application was prohibited, and earlier
adoption is encouraged. Management adopted SFAS No. 122, which was
subsequently amended by SFAS No. 125, as of July 1, 1996, without
significant effect on Dearborn's financial position or results of
operations.
Loans held for sale are carried at the lower of cost or market determined in
the aggregate. In computing cost, deferred loan origination fees are
deducted from the principal balances of the related loans. Loans held for
sale at June 30, 1996 and 1995 were carried at cost.
F-9
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
4. Loan Origination Fees
Dearborn accounts for loan origination fees in accordance with SFAS No. 91
"Accounting for Nonrefundable Fees and Costs Associated with Originating or
Acquiring Loans and Initial Direct Costs of Leases". Pursuant to the
provisions of SFAS No. 91, origination fees received from loans, net of
certain direct origination costs, are deferred and amortized to interest
income using the level-yield method, giving effect to actual loan
prepayments. Additionally, SFAS No. 91 generally limits the definition of
loan origination costs to the direct costs attributable to originating a
loan, i.e., principally actual personnel costs. Fees received for loan
commitments that are expected to be drawn upon, based on Dearborn's
experience with similar commitments, are deferred and amortized over the
life of the loan using the level-yield method. Fees for other loan
commitments are deferred and amortized over the loan commitment period on a
straight-line basis.
5. Allowance for Losses
It is Dearborn's policy to provide valuation allowances for estimated losses
on loans based on past loss experience, trends in the level of delinquent
and problem loans, adverse situations that may affect the borrower's ability
to repay, the estimated value of any underlying collateral and current and
anticipated economic conditions in Dearborn's primary lending area. When the
collection of a loan becomes doubtful, or otherwise troubled, Dearborn
records a charge-off equal to the difference between the fair value of the
property securing the loan and the loan's carrying value. In providing
valuation allowances, costs of holding real estate, including the cost of
capital are considered. Major loans and major lending areas are reviewed
periodically to determine potential problems at an early date. The allowance
for loan losses is increased by charges to earnings and decreased by
charge-offs (net of recoveries).
In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan." This Statement, which was amended by SFAS No. 118 as
to certain income recognition provisions and financial statement disclosure
requirements, requires that impaired loans be measured based upon the
present value of expected future cash flows discounted at the loan's
effective interest rate or, as an alternative, at the loan's observable
market price or fair value of the collateral. Dearborn adopted SFAS No. 114
effective July 1, 1995 without material effect on financial condition or
results of operations.
A loan is defined under SFAS No. 114 as impaired when, based on current
information and events, it is probable that a creditor will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. In applying the provisions of SFAS No. 114, Dearborn considers
its investment in one-to-four family residential loans and consumer
installment loans to be homogeneous and therefore excluded from separate
identification for evaluation of impairment. With respect to Dearborn's
investment in impaired multi-family nonresidential loans, such loans are
collateral dependent and, as a result, are carried as a practical expedient
at the lower of cost or fair value.
F-10
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
5. Allowance for Losses (continued)
It is Dearborn's policy to charge off unsecured credits that are more than
ninety days delinquent. Similarly, collateral dependent loans which are more
than ninety days delinquent are considered to constitute more than a minimum
delay in repayment and are evaluated for impairment under SFAS No. 114 at
that time.
At June 30, 1996, Dearborn had no loans that would be defined as impaired
under SFAS No. 114.
6. Real Estate Acquired through Foreclosure
Real estate acquired through foreclosure is carried at the lower of the
loan's unpaid principal balance (cost) or fair value less estimated selling
expenses at the date of acquisition. Real estate loss provisions are
recorded if the property's fair value subsequently declines below the value
determined at the recording date. In determining the lower of cost or fair
value at acquisition, costs relating to development and improvement of
property are capitalized. Costs related to holding real estate acquired
through foreclosure, net of rental income, are charged against earnings as
incurred.
7. Office Premises and Equipment
Office premises and equipment are carried at cost and include expenditures
which extend the useful lives of existing assets. Maintenance, repairs and
minor renewals are expensed as incurred. For financial reporting,
depreciation and amortization are provided on the straight-line and
declining-balance methods over the useful lives of the assets, estimated to
be twenty-five to forty years for buildings, five to ten years for furniture
and equipment, and five years for automobiles. An accelerated method is used
for tax reporting purposes.
8. Income Taxes
Dearborn accounts for federal income taxes pursuant to SFAS No. 109,
"Accounting for Income Taxes". SFAS No. 109 established financial accounting
and reporting standards for the effects of income taxes that result from
Dearborn's activities within the current and previous years. In accordance
with SFAS No. 109, a deferred tax liability or deferred tax asset is
computed by applying the current statutory tax rates to net taxable or
deductible temporary differences between the tax basis of an asset or
liability and its reported amount in the financial statements that will
result in net taxable or deductible amounts in future periods. Deferred tax
assets are recorded only to the extent that the amount of net deductible
temporary
F-11
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
8. Income Taxes (continued)
differences or carryforward attributes may be utilized against current
period earnings, carried back against prior years' earnings, offset against
taxable temporary differences reversing in future periods, or utilized to
the extent of management's estimate of future taxable income. A valuation
allowance is provided for deferred tax assets to the extent that the value
of net deductible temporary differences and carryforward attributes exceeds
management's estimates of taxes payable on future taxable income. Deferred
tax liabilities are provided on the total amount of net temporary
differences taxable in the future.
Dearborn's principal temporary differences between pretax financial income
and taxable income result primarily from the preparation of the federal
income tax return on the cash basis of accounting, while the financial
statements are prepared on the accrual basis of accounting and from
different methods of accounting for deferred loan origination fees, certain
components of retirement expense, general loan loss allowances, percentage
of earnings bad debt deductions and gains on sale of loans utilizing the net
yield method. Additional temporary differences result from depreciation
expense computed using accelerated methods for federal income tax purposes.
9. Retirement Plans and Stock Option Plans
In addition to providing employees with access to a Simplified Employee
Pension Plan, Dearborn has a supplemental retirement plan which provides
retirement benefits to certain key officers and directors. Dearborn's
obligations under the plan have been funded via the purchase of a key man
life insurance policy, of which Dearborn is the beneficiary. Expense under
the plan totaled approximately $37,000, $26,000 and $14,000 during the
fiscal years ended June 30, 1996, 1995 and 1994, respectively.
In conjunction with the Reorganization, Dearborn implemented an Employee
Stock Ownership Plan (ESOP). The ESOP provides retirement benefits for
substantially all employees who have completed one year of service and have
attained the age of 21. The provision for expense under the ESOP totaled
$23,000 for each of the years ended June 30, 1996 and 1995, and $15,000 for
the year ended June 30, 1994.
Additionally, Dearborn has implemented a Management Recognition Plan (MRP).
The MRP purchased 6,000 shares of common stock issued in the offering.
Common stock granted under the MRP vests ratably over a five year period.
Dearborn recognized expense related to the MRP of $12,000 and $20,000 for
the fiscal years ended June 30, 1996 and 1995, respectively.
F-12
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
9. Retirement Plans and Stock Option Plans (continued)
Also, the Board of Directors adopted a Stock Option Plan that provided for
the issuance and grant of 20,000 shares of common stock at the original
subscription price of $10.00 per share. During the fiscal years ended June
30, 1996, 1995 and 1994, 140, 420 and 7,166 options, respectively, were
exercised leaving a total of 12,274 option shares unexercised at June 30,
1996.
10. Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents includes
cash and due from banks and interest-bearing deposits in other financial
institutions with original terms to maturity of less than ninety days.
11. Earnings Per Share
Earnings per share for the years ended June 30, 1996 and 1995, is based upon
the weighted-average shares outstanding during the period plus those stock
options that are dilutive, less shares in the ESOP that are unallocated and
not committed to be released. Weighted-average shares deemed outstanding
totaled 444,799 and 445,121 during the respective periods. Fully-diluted
earnings per share is not presented, as there is no material dilutive effect
associated with Dearborn's stock option plan.
The provisions of Accounting Principles Board Opinion No. 15, "Earnings Per
Share", are not applicable to the fiscal year ended June 30, 1994, as
Dearborn was not a stock association for the entire year.
12. Fair Value of Financial Instruments
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires disclosure of the fair value of financial instruments, both assets
and liabilities whether or not recognized in the statement of financial
condition, for which it is practicable to estimate that value. For financial
instruments where quoted market prices are not available, fair values are
based on estimates using present value and other valuation methods.
The methods used are greatly affected by the assumptions applied, including
the discount rate and estimates of future cash flows. Therefore, the fair
values presented may not represent amounts that could be realized in an
exchange for certain financial instruments.
F-13
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
12. Fair Value of Financial Instruments (continued)
The following methods and assumptions were used by Dearborn in estimating
its fair value disclosures for financial instruments at June 30, 1996:
Cash and cash equivalents: The carrying amounts presented in
the statement of financial condition for cash and cash
equivalents are deemed to approximate fair value.
Certificates of deposit in other financial institutions: The
carrying amounts presented in the statement of financial
condition for certificates of deposit in other financial
institutions are deemed to approximate fair value.
Investment and mortgage-backed securities: For investment and
mortgage-backed securities, fair value is deemed to equal the
quoted market price.
Loans receivable: The loan portfolio has been segregated into
categories with similar characteristics, such as one-to-four
family residential, multi-family residential and
nonresidential real estate. These loan categories were further
delineated into fixed-rate and adjustable-rate loans. The fair
values for the resultant loan categories were computed via
discounted cash flow analysis, using current interest rates
offered for loans with similar terms to borrowers of similar
credit quality. For loans on deposit accounts and consumer and
other loans, fair values were deemed to equal the historic
carrying values. The historical carrying amount of accrued
interest on loans is deemed to approximate fair value.
Federal Home Loan Bank stock: The carrying amount presented in
the statement of financial condition is deemed to approximate
fair value.
Deposits: The fair value of NOW accounts, passbook and club
accounts, and money market deposits is deemed to approximate
the amount payable on demand. Fair values for fixed-rate
certificates of deposit have been estimated using a discounted
cash flow calculation using the interest rates currently
offered for deposits of similar remaining maturities.
Loan to Employee Stock Ownership Plan: The loan for the
employee stock option plan is an adjustable rate loan;
therefore, carrying value is deemed to approximate fair value.
Advances from Federal Home Loan Bank: The fair value of these
advances is estimated using the rates currently offered for
similar advances of similar remaining maturities or, when
available, quoted market prices.
F-14
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
12. Fair Value of Financial Instruments (continued)
Commitments to extend credit: For fixed-rate and
adjustable-rate loan commitments, the fair value estimate
considers the difference between current levels of interest
rates and committed rates. At June 30, 1996, the difference
between the fair value of loan commitments and the notional
value of such commitments was not material.
Based on the foregoing methods and assumptions, the carrying value and fair
value of Dearborn's financial instruments at June 30, 1996 are as follows:
<TABLE>
<CAPTION>
Carrying Fair
value value
(In thousands)
<S> <C> <C>
Financial assets
Cash and short-term investments $ 603 $ 603
Certificates of deposit in other financial institutions 1,626 1,626
Investment securities 9,732 9,654
Mortgage-backed securities 1,496 1,496
Loans receivable 46,786 46,686
Stock in Federal Home Loan Bank 1,026 1,026
------- -------
$61,269 $61,091
======= =======
Financial liabilities
Deposits $41,379 $41,564
Loan to Employee Stock Ownership Plan 113 113
Advances from the Federal Home Loan Bank 14,517 13,629
Advances by borrowers for taxes and insurance 231 231
------- -------
$56,240 $55,537
======= =======
</TABLE>
13. Reclassifications
Certain prior year amounts have been reclassified to conform to the 1996
financial statement presentation.
F-15
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES
Amortized cost and approximate market values of investment securities at
June 30 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
Amortized Market Amortized Market
cost value cost value
(In thousands)
<S> <C> <C> <C> <C>
Held to maturity
U. S. Government agency obligations $2,400 $2,322 $3,647 $3,653
Municipal obligations 917 917 1,961 1,944
------ ------ ----- -----
Total investment securities held to
maturity 3,317 3,239 5,608 5,597
Available for sale
U.S. Government agency obligations 6,466 6,415 400 402
------ ------ ------ ------
Total investment securities $9,783 $9,653 $6,008 $5,999
====== ====== ====== ======
</TABLE>
At June 30, 1996, the cost carrying value of Dearborn's investment
securities held to maturity exceeded market value by $78,000, comprised of
gross unrealized gains of $1,000 and gross unrealized losses of $79,000. At
June 30, 1995, the carrying value of Dearborn's investment securities held
to maturity exceeded market value by $11,000, comprised of gross unrealized
gains of $30,000 and gross unrealized losses of $41,000.
During fiscal 1994, Dearborn purchased investment securities, primarily
asset management funds, for the purpose of redemption in the short term,
recognizing losses of $41,000 on such activities. Dearborn discontinued this
activity in fiscal 1994.
The carrying value and market value of investment securities at June 30,
1996 by term to maturity are shown below.
Amortized Market
cost value
(In thousands)
Held to maturity
Due within two years $ 717 $ 717
Due in three to five years 2,400 2,322
Due in five years or more 200 200
------ ------
$3,317 $3,239
====== ======
Available for sale
Due within two years $200 $ 200
Due in two to three years 520 523
Due in three years or more 5,746 5,692
------ ------
$6,466 $6,415
====== ======
F-16
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES (continued)
The amortized cost, gross unrealized gains, gross unrealized losses and
market values of mortgage-backed securities at June 30, 1996 and 1995,
including those designated as available for sale, are summarized as follows:
<TABLE>
<CAPTION>
June 30, 1996
Gross Gross
Amortized unrealized unrealized Market
cost gains losses value
(In thousands)
<S> <C> <C> <C> <C>
Available for sale:
Federal Home Loan
Mortgage Corporation
participation certificates $1,486 $ 19 $ 15 $1,490
Government National
Mortgage Association
participation certificates 6 -- -- 6
------ ---- ---- ------
Total mortgage-backed
securities $1,492 $ 19 $ 15 $1,496
====== ==== ==== ======
</TABLE>
<TABLE>
<CAPTION>
June 30, 1995
Gross Gross
Amortized unrealized unrealized Market
cost gains losses value
(In thousands)
<S> <C> <C> <C> <C>
Held to maturity:
Federal Home Loan
Mortgage Corporation
participation certificates $3,000 $ 45 $ 15 $3,030
Government National
Mortgage Association
participation certificates 8 -- -- 8
------ ----- ----- ------
Total mortgage-backed
securities $3,008 $ 45 $ 15 $3,038
====== ===== ===== ======
</TABLE>
F-17
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES (continued)
The amortized cost of mortgage-backed securities at June 30, 1996, by
contractual term to maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may generally prepay
obligations without prepayment penalties.
Amortized cost
(In thousands)
Due within five years $ 394
Due after five through ten years 232
Due after ten years through twenty years 866
------
$1,492
======
Proceeds from sale of mortgage-backed securities designated as available for
sale during fiscal 1996 totaled $1.1 million, resulting in a gain of $5,000
on such sale. Proceeds from sale of mortgage-backed securities during fiscal
1995 was approximately $734,000, resulting in losses of $20,000 on such
sales. Sales of mortgage-backed securities during fiscal 1994 consisted
solely of collateralized mortgage obligations which were classified as
derivatives under Office of Thrift Supervision regulations. In addition to
the sale of mortgage-backed securities, Dearborn recognized a $13,000 charge
to operations during fiscal 1994 for lower of cost or market adjustments on
mortgage-backed securities identified as held for sale.
NOTE C - LOANS RECEIVABLE
The composition of the loan portfolio at June 30 is as follows:
1996 1995
(In thousands)
Residential real estate
One-to-four family $35,164 $36,304
Multi-family 543 581
Nonresidential real estate 3,183 2,703
Construction 3,477 3,156
Loans secured by deposit accounts 86 133
Home equity and improvement 2,095 1,773
Mobile home loans 4,125 3,463
Other 665 706
------- -------
49,338 48,819
Less:
Undisbursed portion of loans in process 2,212 1,491
Deferred loan origination fees 196 211
Unearned discount 100 152
Allowance for loan losses 226 214
------- -------
$46,604 $46,751
======= =======
F-18
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE C - LOANS RECEIVABLE (continued)
As depicted above, Dearborn's lending efforts have historically focused on
residential and multi-family residential real estate loans, which comprise
approximately $36.6 million, or 78%, of the total loan portfolio at June 30,
1996, and $38.1 million, or 82%, of the total loan portfolio at June 30,
1995. Generally, such loans have been underwritten on the basis of no more
than an 80% loan-to-value ratio, which has historically provided Dearborn
with adequate collateral coverage in the event of default. Nevertheless,
Dearborn, as with any lending institution, is subject to the risk that real
estate values could deteriorate in its primary lending area of southeastern
Indiana, thereby impairing collateral values. However, management is of the
belief that residential real estate values in Dearborn's primary lending
area are presently stable.
As discussed previously, Dearborn has sold whole loans and participating
interests in loans in the secondary market, retaining servicing on the loans
sold. Loans sold and serviced for others totaled approximately $14.1 and
$11.4 million at June 30, 1996 and 1995, respectively. Dearborn's
capitalized excess servicing fee receivable on loans sold at June 30, 1996
and 1995, totaled $38,000 and $50,000, respectively. Amortization of
capitalized excess servicing fees totaled $12,000, $14,000 and $51,000, for
fiscal 1996, 1995, and 1994, respectively.
In the normal course of business, Dearborn has made loans to its directors,
officers and their related business interests. Related party loans granted
prior to fiscal 1990 were made on substantially the same terms, except for
loan origination fees, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unrelated persons
and do not involve more than the normal risk of collectibility. However, for
so long as the officer or director continues full employment or service, the
actual payment rate of interest is slightly lower than the prevalent market
interest rate to unrelated parties on the loan's inception date. All related
party loans subsequent to fiscal 1990 have been made on substantially the
same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with unrelated persons. The aggregate
dollar amount of loans outstanding to directors, officers and their related
business interests totaled $411,000 and $936,000 at June 30, 1996 and 1995,
respectively.
The activity in the allowance for loan losses for the years ended June 30 is
summarized as follows:
1996 1995 1994
(In thousands)
Beginning balance $214 $212 $174
Provision charged to operations 12 8 12
Recoveries (charge-offs) of loans - net -- (6) 26
---- ---- ----
Ending balance $226 $214 $212
==== ==== ====
F-19
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE C - LOANS RECEIVABLE (continued)
At June 30, 1996, Dearborn's allowance for loan losses was solely general in
nature, and is includible as a component of regulatory risk-based capital.
Nonaccrual loans for which interest has been reduced totaled approximately
$27,000 and $66,000 at June 30, 1996 and 1995, respectively. For each of the
years ended June 30, 1996 and 1995, interest income of approximately $2,000
would have been recognized had nonaccrual loans been performing in
accordance with the contractual terms. No interest income on nonaccrual
loans was included in earnings during the fiscal years ended June 30, 1996,
1995 and 1994. Dearborn had no nonaccrual loans at June 30, 1994.
NOTE D - OFFICE PREMISES AND EQUIPMENT
Office premises and equipment at June 30 are summarized as follows:
1996 1995
(In thousands)
Land $183 $175
Building and improvements 468 453
Furniture and equipment 299 265
Automobile 20 20
---- ----
970 913
Less accumulated depreciation and amortization 526 465
---- ----
$444 $448
==== ====
F-20
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE E - DEPOSITS
Deposits consist of the following major classifications at June 30:
<TABLE>
<CAPTION>
Weighted-average rate
June 30, 1996 1995
Deposit type 1996 1995 Amount % Amount %
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Passbook accounts 3.00% 3.00% $ 3,577 8.6 $ 3,435 9.2
Money market accounts 3.04% 2.95% 3,259 7.9 3,194 8.5
NOW accounts 2.23% 2.30% 1,166 2.8 1,056 2.8
------- ------- -------- -------
Total transaction accounts 8,002 19.3 7,685 20.5
Certificates of deposit
2.00 - 4.00% -- -- 95 .3
4.01 - 6.00% 24,288 58.7 14,950 39.9
6.01 - 8.00% 8,612 20.8 13,638 36.4
8.01 - 10.00% 477 1.2 1,012 2.7
10.01 - 12.00% -- -- 80 .2
------- ------- ------- -------
Total certificates of deposit 33,377 80.7 29,775 79.5
------- ------- ------- -------
Total deposits $41,379 100.0 $37,460 100.0
======= ===== ======= =====
</TABLE>
Interest expense on deposits for the years ended June 30 is summarized as
follows:
1996 1995 1994
(In thousands)
Passbook accounts $ 105 $ 105 $ 116
NOW and money market accounts 117 134 165
Certificates 1,855 1,741 1,543
------ ------ ------
$2,077 $1,980 $1,824
====== ====== ======
F-21
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE E - DEPOSITS (continued)
Maturities of outstanding certificates of deposit at June 30 are summarized
as follows:
1996 1995
(In thousands)
Less than one year $20,957 $16,168
One year to three years 8,645 8,318
More than three years 3,775 5,289
------- -------
$33,377 $29,775
======= =======
NOTE F - ADVANCES FROM THE FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank, collateralized at June 30, 1996 by
pledges of certain residential mortgage loans totaling $24.7 million, $10.4
million of Dearborn's investment and mortgage-backed securities, and
Dearborn's investment in Federal Home Loan Bank stock are summarized as
follows:
Interest Maturing in June 30,
rate fiscal year ending 1996 1995
(In thousands)
3.94% - 7.40% 1996 $ -- $ 9,307
4.53% - 7.40% 1997 9,517 3,514
5.34% - 6.75% 1998 1,500 500
7.55% - 7.80% 1999 2,000 2,000
7.35% 2002 500 500
5.80% 2004 1,000 1,000
------- -------
$14,517 $16,821
Weighted-average interest rate 5.96% 6.30%
==== ====
F-22
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE G - FEDERAL INCOME TAXES
The provision for federal income taxes on earnings differs from that
computed at the statutory corporate rate for the years ended June 30 as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(In thousands)
<S> <C> <C> <C>
Federal income taxes computed
at the statutory rate $218 $183 $303
Decrease in taxes resulting from:
Tax-exempt interest (12) (25) (9)
Other (17) (4) (6)
---- ---- ----
Federal income tax provision per financial statements $189 $154 $288
==== ==== ====
</TABLE>
The composition of Dearborn's net deferred tax liability at June 30 is as
follows:
1996 1995
(In thousands)
Taxes (payable) refundable on temporary
differences at statutory rate:
Deferred tax assets:
Deferred loan origination fees $ 55 $ 72
Deferred compensation 46 33
General loan loss allowance 77 73
Unrealized loss on securities
designated as available for sale 16 --
Other 5 1
----- -----
Deferred tax assets 199 179
Deferred tax liabilities:
Accrual versus cash basis of accounting (144) (118)
Book/tax depreciation differences (18) (16)
Percentage of earnings bad debt deduction (94) (80)
----- -----
Deferred tax liabilities (256) (214)
----- -----
Net deferred tax liability $ (57) $ (35)
===== =====
F-23
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE G - FEDERAL INCOME TAXES (continued)
Dearborn is allowed a special bad debt deduction based on a percentage of
earnings generally limited to 8% of otherwise taxable income and subject to
certain limitations based on aggregate loans and savings account balances at
the end of the year. This percentage of earnings bad debt deduction had
accumulated to approximately $1.2 million as of June 30, 1996. If the
amounts that qualify as deductions for federal income tax purposes are later
used for purposes other than for bad debt losses, including distributions in
liquidation, such distributions will be subject to federal income taxes at
the then current corporate income tax rate. The approximate amount of
unrecognized deferred tax liability relating to the cumulative bad debt
deduction is approximately $320,000 at June 30, 1996. See Note I for
additional information regarding Dearborn's future percentage of earnings
deductions.
NOTE H - LOAN COMMITMENTS
Dearborn 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
including commitments to extend credit. Such commitments involve, to varying
degrees, elements of credit and interest-rate risk in excess of the amount
recognized in the statement of financial condition. The contract or notional
amounts of the commitments reflect the extent of Dearborn's involvement in
such financial instruments.
Dearborn's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit is
represented by the contractual notional amount of those instruments.
Dearborn uses the same credit policies in making commitments and conditional
obligations as those utilized for on-balance-sheet instruments.
At June 30, 1996, Dearborn had outstanding commitments of approximately
$689,000 to originate residential and nonresidential loans, of which
$393,000 consisted of fixed-rate loan commitments with interest rates
ranging from 8.38% to 8.75%, with the remaining $296,000 of commitments
consisting of variable rate loans. Additionally, Dearborn was obligated
under unused lines of credit totaling $523,000. In the opinion of
management, outstanding loan commitments equaled or exceeded prevalent
market interest rates as of June 30, 1996, such loans were underwritten in
accordance with normal underwriting policies, and all commitments will be
funded via cash flow from operations and existing excess liquidity. Fees
received in connection with these commitments have not been recognized in
earnings.
F-24
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE I - REGULATORY CAPITAL
Dearborn is subject to minimum regulatory capital standards promulgated by
the Office of Thrift Supervision (OTS). Such minimum capital standards
generally require the maintenance of regulatory capital sufficient to meet
each of three tests, hereinafter described as the tangible capital
requirement, the core capital requirement and the risk-based capital
requirement. The tangible capital requirement provides for minimum tangible
capital (defined as stockholders' equity less all intangible assets) equal
to 1.5% of adjusted total assets. The core capital requirement provides for
minimum core capital (tangible capital plus certain forms of supervisory
goodwill and other qualifying intangible assets) equal to 3.0% of adjusted
total assets. An OTS proposal, if adopted in present form, would increase
the core capital requirement to a range of 4.0% to 5.0% of adjusted total
assets for substantially all savings associations. Management anticipates no
material change to Dearborn's excess regulatory capital position if such
proposal is adopted in present form. The risk-based capital requirement
currently provides for the maintenance of core capital plus general loss
allowances equal to 8.0% of risk-weighted assets. In computing risk-weighted
assets, Dearborn multiplies the value of each asset on its statement of
financial condition by a defined risk-weighting factor, e.g., one-to-four
family residential loans carry a risk-weighted factor of 50%.
As of June 30, 1996, Dearborn's regulatory capital exceeded all minimum
capital requirements as shown in the following table:
<TABLE>
<CAPTION>
Regulatory capital
Tangible Core Risk-based
capital % capital % capital %
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Capital under generally
accepted accounting
principles $6,815 $6,815 $6,815
Unrealized loss on securities
designated as available for sale 31 31 31
General valuation allowance -- -- 226
------ ------ ------
Regulatory capital computed 6,846 10.8 6,846 10.8 7,072 23.1
Minimum capital requirement 953 1.5 1,906 3.0 2,450 8.0
------ ----- ------ ----- ------ -----
Regulatory capital - excess $5,893 9.3 $4,940 7.8 $4,622 15.1
====== ===== ====== ===== ====== ====
</TABLE>
F-25
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE I - REGULATORY CAPITAL (continued)
The deposit accounts of Dearborn and of other savings associations are
insured by the FDIC in the Savings Association Insurance Fund ("SAIF"). 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 deposit accounts of commercial banks
are insured by the FDIC in the Bank Insurance Fund ("BIF"), except to the
extent such banks have acquired SAIF deposits. The reserves of the BIF met
the level required by law in May 1995. As a result of the respective reserve
levels of the funds, deposit insurance assessments paid by healthy savings
associations exceed those paid by healthy commercial banks by approximately
$.19 per $100 in deposits in 1995. In 1996, no BIF assessments are required
for healthy commercial banks except for a $2,000 minimum fee. A continuation
of this premium disparity could have a negative competitive impact on
Dearborn and other institutions with SAIF deposits.
Congress is considering legislation to recapitalize the SAIF and eliminate
the significant premium disparity. Currently, that recapitalization plan
provides for a special assessment ranging from approximately $.69 to $.85
per $100 of SAIF deposits held at March 31, 1995, in order to increase SAIF
reserves to the level required by law. In addition, the cost of prior thrift
failures would be shared by both the SAIF and the BIF. This would likely
increase BIF assessments by $.02 to $.025 per $100 in deposits. SAIF
assessments would initially be set at the same level as BIF assessments and
could never be reduced below the level for BIF assessments. These projected
assessment levels may change if commercial banks holding SAIF deposits are
provided some relief from the special assessment or are allowed to transfer
SAIF deposits to the BIF.
A component of the recapitalization plan provides for the merger of the SAIF
and BIF on January 1, 1998. However, the SAIF recapitalization legislation
currently provides for an elimination of the thrift charter or of the
separate federal regulation of thrifts prior to the merger of the deposit
insurance funds. As a result, Dearborn would be regulated as a bank under
federal laws which would subject it to the more restrictive activity limits
imposed on national banks. Under recently enacted legislation, that is
separate and apart from the recapitalization plan, Dearborn is required to
recapture, as taxable income, approximately $275,000 of its bad debt
reserve, which represents the post-1987 additions to the reserve, and will
be unable to utilize the percentage of earnings method to compute its
reserve in the future. Deferred taxes have been provided on this amount and
Dearborn will be permitted to amortize the recapture of its bad debt reserve
over six years.
Dearborn had $38.7 million in deposits at March 31, 1995. If the special
assessment under the recapitalization plan is $.85 per $100 in deposits,
Dearborn will pay an additional assessment of $330,000. This assessment will
be tax deductible, but it will reduce earnings and capital for the quarter
in which it is recorded.
No assurances can be given that the SAIF recapitalization plan will be
enacted into law or in what form it may be enacted. In addition, Dearborn
can give no assurances that the disparity between BIF and SAIF assessments
will be eliminated and cannot predict the impact of being regulated as a
bank until the legislation requiring such change is enacted.
F-26
<PAGE>
Dearborn Savings Association, F.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE J - CORPORATE REORGANIZATIONS AND CHANGE OF CORPORATE FORM
In fiscal 1993, the Board of Directors of Dearborn Savings Association, F.A.
(the Association) adopted a Plan of Reorganization (The Plan or the
Reorganization) pursuant to which the Association would reorganize from a
mutual savings association into a federally-chartered mutual holding
company, Dearborn Mutual Holding Company (the Company). As part of the
Reorganization, the Company organized Dearborn Savings Association, F.A.
(Dearborn), a federally-chartered stock savings association, and transferred
substantially all of its assets and liabilities to Dearborn in exchange for
all of the common stock outstanding upon consummation of the Reorganization.
Coincident with the Reorganization, Dearborn undertook offering of 200,000
shares at an original issue price of $10.00 per share. The gross proceeds
from the sale of common shares, totaling $2.0 million, were reduced by stock
issuance costs of approximately $297,000, resulting in net capital proceeds
of $1.7 million.
On August 8, 1996, the Board of Directors of Dearborn and the Company
adopted a Plan of Conversion and Agreement and Plan of Reorganization (the
Plan or Plan of Conversion) wherein Dearborn will become a subsidiary of the
Company upon consummation of the transactions described herein after
(collectively, the Offerings or the Conversion and Reorganization). As a
result of the Conversion and Reorganization, each share of Dearborn's common
stock, par value $.10 per share (Dearborn common stock) held by the Company,
which currently holds 250,000 shares, or 54.6%, of Dearborn's outstanding
common stock, will be canceled and each share of Dearborn's common stock
held by the public stockholders (the public shares) which amounted to
207,726 shares, or 45.4%, of Dearborn's outstanding common stock at June 30,
1996, will be converted into shares of common stock pursuant to an exchange
ratio that will result in the holders of such public shares owning in the
aggregate approximately 42.2% of the Company before giving effect to (a) the
payment of cash in lieu of fractional exchange shares, (b) any shares of
common stock purchased by such stockholders in the Offerings or (c) any
exercise of dissenters' rights. The dilution of public stockholder ownership
interest from 45.4% actual ownership interest in Dearborn to a 42.2%
ownership interest in the Company reflects the downward adjustment pursuant
to OTS policy which requires the exchange ratio to reflect the amount of the
special dividends declared by Dearborn and waived by the Company.
In addition to the exchange of shares, nontransferable subscription rights
to subscribe for up to 504,735 shares (which may be increased to 580,445
shares under certain circumstances described below) of common stock at an
initial offering price of $10.00 have been granted to certain of Dearborn's
depositors as of specified record dates, directors, officers and employees
of Dearborn and the Company and the public stockholders. The costs of
issuing the common stock will be deferred and deducted from the sale
proceeds of the offering. At June 30, 1996, Dearborn had not incurred any
offering costs. Coincident with the Conversion and Reorganization, the
Company will change its name to Vision Bancorp, Inc.
The rights of Dearborn's depositors in liquidation in the conversion to
stock form will be maintained in an amount equal to Dearborn's retained
earnings reflected in the statement of financial condition used in the
conversion offering circular. The liquidation account will be maintained for
the benefit of eligible savings account holders who maintained deposit
accounts in Dearborn after the conversion.
F-27
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than as contained in this
Prospectus in connection with the offering made hereby, and, if given or made,
such other information or representation must not be relied upon as having been
authorized by the Company, the Mutual Holding Company, the Association or
Charles Webb & Company. This Prospectus does not constitute an offer to sell or
a solicitation of an offer to buy any of the securities offered hereby to any
person in any jurisdiction in which such offer or solicitation is not authorized
or in which the person making such offer or solicitation is not qualified to do
so, or to any person to whom it is unlawful to make such offer or solicitation
in such jurisdiction. Neither the delivery of this Prospectus nor any sale
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Company or the Association since any of the
dates as of which information is furnished herein or since the date hereof.
---------------------
TABLE OF CONTENTS
---------------------
Page
----
Summary......................................... 7
Selected Financial and Other
Data of the Association........................ 16
Risk Factors.................................... 18
Vision Bancorp, Inc............................. 25
Dearborn Savings Association, F.A............... 26
Dearborn Mutual Holding Company................. 28
Use of Proceeds................................. 29
Dividend Policy................................. 29
Market for Common Stock......................... 31
Capitalization.................................. 32
Regulatory Capital.............................. 34
Pro Forma Data.................................. 35
Statements of Earnings.......................... 39
Management's Discussion and Analysis
of Financial Condition and Results
of Operations................................. 40
Business ....................................... 54
Regulation...................................... 81
Taxation........................................ 94
Management of the Company....................... 98
Management of the Association................... 102
Beneficial Ownership of Capital Stock........... 112
The Conversion and Reorganization............... 115
Comparison of Stockholders' Rights.............. 143
Restrictions on Acquisition of the Company...... 156
Description of Capital Stock of the Company...... 158
Experts.......................................... 159
Legal Matters.................................... 160
Additional Information........................... 160
Index to Financial Statements.................... 161
Until _________ __, 1996 or 25 days after commencement of the Syndicated
Community Offering or Public Offering, if any, whichever is later, all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
874,000 Shares
VISION BANCORP, INC.
(Proposed Holding Company
for Dearborn Bank)
COMMON STOCK
---------------------
PROSPECTUS
---------------------
CHARLES WEBB & COMPANY,
a Division of Keefe, Bruyette
& Woods, Inc.
__________ __, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
SEC filing fees.......................................... $ 3,131
OTS filing fees.......................................... 8,400
NASD filing fees......................................... 16,835
Printing, postage and mailing............................ 65,000
Legal fees............................................... 75,000
Blue Sky fees and expenses .............................. 5,000
Accounting fees.......................................... 25,000
Marketing agent fees and expenses........................ 70,000
Appraiser's fees and expenses............................ 21,500
Conversion agent......................................... 8,000
Miscellaneous............................................ 52,134
--------
Total.................................................... $350,000
========
Item 14. Indemnification of Directors and Officers
Chapter 37 of the Indiana Business Corporation Law sets forth
circumstances under which directors, officers, employees and agents may be
insured or indemnified against liability which they may incur in their capacity
as such. The Articles of Incorporation of the Company provide for
indemnification of directors, officers, employees and agents of the Company to
the full extent permitted by Indiana law. Such indemnity shall extend to
expenses, including attorney's fees, judgments, fines and amounts paid in the
settlement, prosecution or defense of the foregoing actions.
Item 15. Recent Sales of Unregistered Securities
The only securities to be sold by the Registrant prior to effectiveness
of this registration statement will be of 100 shares of common stock to be
issued to its sole incorporator, Dearborn Savings Association, F.A., for $10.00
per share, which shares will be cancelled upon consummation of the Conversion
and Reorganization. Because the shares will be sold to only one entity and were
sold only to facilitate the organization of the Registrant, the sale will be
exempt from registration under the Securities Act of 1933 pursuant to Section
4(2) thereof.
II-1
<PAGE>
Item 16. Exhibits and Financial Statements Schedules
The exhibits and financial statement schedules filed as a part of this
Registration Statement are as follows:
(a) List of Exhibits (filed herewith unless otherwise noted)
1.1 Engagement Letter dated August 28, 1996 with Charles Webb & Company
1.2* Form of Agency Agreement with Charles Webb & Company
2.1 Plan of Conversion and Agreement and Plan of Reorganization
3.1 Articles of Incorporation of Vision Bancorp, Inc.
3.2 Bylaws of Vision Bancorp, Inc.
4.1 Form of Stock Certificate of Vision Bancorp, Inc.
5.1* Opinion of Elias, Matz, Tiernan & Herrick L.L.P. regarding legality of
securities
8.1* Opinion of Elias, Matz, Tiernan & Herrick L.L.P. regarding federal
income tax consequences
8.2* Opinion of Schwartz, Manes & Ruby regarding Indiana income tax
consequences
8.3 Opinion of RP Financial, Inc. regarding subscription rights
10.1 1993 Stock Incentive Plan
10.2 1993 Directors' Stock Option Plan
10.3 Management Recognition Plan
10.4 Form of Employment Agreements between Vision Bancorp, Inc.,
Dearborn Bank and Donald C. Siemers, Jay Gary Fraley and
Edward L. Fischer
23.1 Consent of Grant Thornton LLP
23.2 Consent of RP Financial, Inc.
23.3 Consent of Elias, Matz, Tiernan & Herrick L.L.P. (included in
Exhibit 5)
23.4 Consent of Schwartz, Manes & Ruby (included in Exhibit 8.2)
24.1 Power of Attorney (included in Signature Page of this Registration
Statement)
99.1 Proxy Statement and form of proxy for solicitation of stockholders of
Dearborn Savings Association, F.A.
99.2 Proxy Statement and form of proxy for solicitation of members of
Dearborn Mutual Holding Company
99.3 Appraisal Report of RP Financial, Inc.
99.4 Stock Order Form
99.5 Transmittal Letters
99.6 Question and Answer Brochure
- ------------------
* To be filed by amendment, if applicable.
II-2
<PAGE>
(b) Financial Statement Schedules
All schedules have been omitted as not applicable or not required under
the rules of Regulation S-X.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the Offerings.
The undersigned Registrant hereby undertakes to furnish stock
certificates to or in accordance with the instructions of the respective
purchasers of the Common Stock, so as to make delivery to each purchaser
promptly following the closing under the Plan of Conversion.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused the Form S-1 Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the State of
Indiana on August 30, 1996.
VISION BANCORP, INC.
By: /s/ Donald C. Siemers
--------------------------------------
Donald C. Siemers
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
hereby makes, constitutes and appoints Donald C. Siemers his true and lawful
attorney, with full power to sign for each person and in such person's name and
capacity indicated below, and with full power of substitution, any and all
amendments to this Registration Statement, hereby ratifying and confirming such
person's signature as it may be signed by said attorney to any and all
amendments.
Name Title Date
- ------------------ ----------------------- -----------------
/s/ Donald C. Siemers President and Chief August 30, 1996
- -------------------------- Executive Officer
Donald C. Siemers (principal executive
officer)
/s/ Edward L. Fischer Chief Financial Officer August 30, 1996
- -------------------------- (principal financial and
Edward L. Fischer accounting officer)
/s/ Ronald J. Denney Director August 30, 1996
- --------------------------
Ronald J. Denney
/s/ David P. Lorey Director August 30, 1996
- --------------------------
David P. Lorey
II-4
<PAGE>
Name Title Date
- ------------------ ----------------------- -----------------
/s/ Richard B. Meador, III Director August 30, 1996
- --------------------------
Richard B. Meador, III
/s/ Dennis G. Richter Director August 30, 1996
- --------------------------
Dennis G. Richter
/s/ Robert P. Sonntag Chairman of the Board August 30, 1996
- --------------------------
Robert P. Sonntag
II-5
<PAGE>
EXHIBIT INDEX
Page
----
1.1 Engagement Letter dated July 17, 1996 with
Charles Webb & Company
1.2* Form of Agency Agreement with Charles Webb & Company
2.1 Plan of Conversion and Agreement and Plan of Reorganization
3.1 Articles of Incorporation of Vision Bancorp, Inc.
3.2 Bylaws of Vision Bancorp, Inc.
4.1 Form of Stock Certificate of Vision Bancorp, Inc.
5.1* Opinion of Elias, Matz, Tiernan & Herrick L.L.P.
regarding legality of securities
8.1* Opinion of Elias, Matz, Tiernan & Herrick L.L.P.
regarding federal income tax consequences
8.2* Opinion of Schwartz, Manes & Ruby regarding
Indiana income tax consequences
8.3 Opinion of RP Financial, Inc. regarding
subscription rights
10.1 1993 Stock Incentive Plan
10.2 1993 Directors' Stock Option Plan
10.3 Management Recognition Plan
10.4 Form of Employment Agreements between Vision
Bancorp, Inc., Dearborn Bank and Donald C. Simers,
Jay Gary Fraley and Edward L. Fischer
23.1 Consent of Grant Thornton LLP
23.2 Consent of RP Financial, Inc.
23.3 Consent of Elias, Matz, Tiernan & Herrick L.L.P.
(included in Exhibit 5)
23.4 Consent of Schwartz, Manes & Ruby (included in
Exhibit 8.2)
24.1 Power of Attorney (included in Signature Page
of this Registration Statement)
27 Financial Data Schedule
99.1 Proxy Statement and form of proxy for solicitation
of stockholders of Dearborn Savings Association, F.A.
99.2 Proxy Statement and form of proxy for solicitation
of members of Dearborn Mutual Holding Company
99.3 Appraisal Report of RP Financial, Inc.
99.4 Stock Order Form
99.5 Transmittal Letters
99.6 Question and Answer Brochure
- ---------------------
* To be filed by amendment, if applicable.
[CHARLES WEBB & COMPANY LETTERHEAD]
June 14, 1996
Mr. Donald C. Siemers
President and Chief Executive Officer
Dearborn Savings Association
118 Walnut Street
Lawrenceburg, IN 47025-1838
Dear Mr. Siemers:
This proposal is in connection with Dearborn Savings Associations' (the "Bank")
intention to reorganize and convert from a mutual holding company to a full
capital stock form of organization (the "Conversion"). In order to effect the
Conversion, it is contemplated that all of the Bank's common stock to be
outstanding pursuant to the Conversion will be issued to a holding company (the
"Company") to be formed by the Bank, and that the Company will offer and sell
shares of its common stock first to eligible persons (pursuant to the Bank's
Plan of Conversion) in a Subscription Offering and then in a Community Offering.
We hereby confirm the interest of Charles Webb & Company ("Webb") in acting as
the Bank's and the Company's exclusive financial advisor and marketing agent in
connection with the Conversion. This letter sets forth selected terms of our
engagement.
1. Advisory/Conversion Services. As the Bank's and Company's financial advisor
and marketing agent, Webb will provide the Bank and the Company with a
comprehensive program of conversion services designed to promote an orderly,
efficient, cost-effective and long-term stock distribution. Webb will provide
financial and logistical advice to the Bank and the Company concerning the
offering and related issues. Webb will provide conversion enhancement services
intended to maximize stock sales in the Subscription Offering and the Public
Offering pursuant to the goals of the Board of Directors of the Bank. (Refer to
Exhibit A.)
2. Preparation of Offering Documents. The Bank, the Company and their counsel
will draft the Registration Statement, Application for Conversion, and other
offering materials to be used in connection with the Conversion. Webb will
attend meetings to review these documents and advise you on their form and
content. Webb and its counsel will draft appropriate agency agreements and
related documents.
<PAGE>
Mr. Donald C. Siemers
June 14, 1996
Page 2 of 5
3. Due Diligence Review. Prior to filing the Registration Statement, Application
for Conversion or any offering or other documents naming Webb as the Bank's and
the Company's financial advisor and underwriter, Webb and their representatives
will undertake substantial investigations to learn about the Bank's business and
operations ("due diligence review") in order to confirm information provided to
us and to evaluate information to be contained in the Bank's and/or the
Company's offering documents. The Bank agrees that it will make available to
Webb all relevant information, whether or not publicly available, which Webb
reasonably requests, and will permit Webb to discuss personnel and the
operations and prospects of the Bank with management. Webb will treat all
material non-public information as confidential. The Bank acknowledges that Webb
will rely upon the accuracy and completeness of all information received from
the Bank, its officers, directors, employees, agents and representatives,
accountants and counsel including this letter of intent to serve as the Bank's
and the Company's financial advisor and marketing agent.
4. Regulatory Filings. Upon satisfactory completion of Webb's due diligence
review, the Bank and/or the Company will cause appropriate offering documents to
be filed with the Office of Thrift Supervision ("OTS"), Federal Deposit
Insurance Corporation ("FDIC"), the Securities and Exchange Commission ("SEC"),
the National Association of Securities Dealers ("NASD") and such state
securities commissioners as may be determined by the Bank.
5. Agency Agreement. The specific terms of the conversion offering enhancement
and broker-assisted sales services contemplated in this letter shall be set
forth in an Agency Agreement between Webb and the Bank and the Company to be
executed prior to commencement of the offering, and dated the date the
Prospectus is declared effective by the SEC, the NASD and such state securities
commissioners and other regulatory agencies as required or deemed to be
appropriate by Webb. Sales of shares in the Subscription/Community Offering
will be contingent upon, among other things, the absence of material adverse
developments and the completion of the Conversion.
6. Representations, Warranties and Covenants. The Agency Agreement will provide
for customary representations, warranties and covenants by the Bank and Webb,
and for the Bank to indemnify Webb and their controlling persons (and, if
applicable, the members of the selling group and their controlling persons), and
for Webb to indemnify the Bank and the Company against certain liabilities,
including, without limitation, liabilities under the Securities Act of 1933.
<PAGE>
Mr. Donald C. Siemers
June 14, 1996
Page 3 of 5
7. Fees. For the services hereunder, the Bank and/or Company shall pay the
following fees to Webb at closing unless stated otherwise:
(a) A financial advisory fee of $50,000, payable as follows:
$5,000 upon signing of this engagement letter; $10,000 upon
filing of regulatory applications; $10,000 upon mailing of the
offering circular; and the balance upon closing.
(b) Selected broker-dealers who assisted in the subscription or
purchase, excluding those shares purchased by the Bank's
officers, directors or employees (or members of their immediate
families) or by 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, will be paid
a fee equal to 4.0% of the aggregate Actual Purchase Price of the
shares of common stock sold by them in the Subscription and/or
Community Offerings. Fees with respect to subscriptions or
purchases effected with the assistance of Registered
Representatives employed by a Broker/Dealer other than Webb shall
be transmitted by Webb to such Broker/Dealer. The decision to
utilize selected Broker/Dealer will be made by the Bank.
(c) Client will reimburse Webb for reasonable out of pocket
expenses, including costs of travel, meals and lodging,
photocopying, telephone, facsimile, couriers, NASD and other
filing fees. Such reimbursement will be based upon
documentation and will not exceed $5,000 without prior
approval of Client. Client will also reimburse Webb for
reasonable fees of Counsel. The selection of such counsel will
be done by Webb, with the approval of Client. A preagreed cap
on such legal fees will be agreed by Webb and Client.
(d) Webb shall have earned and be paid fees as described above and
additionally shall be entitled to reimbursement of reasonable
expenses should the Conversion be terminated for any reason
not attributable to the action or inaction of Webb.
(e) Provide financial advisory assistance for a period of one year
following completion of the Conversion, including formation of
a dividend policy and share repurchase program, assistance
with shareholder reporting and shareholder relations matters,
general advice on mergers and acquisitions not related to
specific transactions and other related financial matters at
no additional fee. Following this initial one year term if
both parties wish to continue the relationship, a fee will be
negotiated and an agreement entered into at that time.
<PAGE>
Mr. Donald C. Siemers
June 14, 1996
Page 4 of 5
8. Expenses. The Bank will bear those expenses of the proposed offering
customarily borne by issuers, including, without limitation, FDIC, SEC, "Blue
Sky," and NASD filing and registration fees; the fees of the Bank's accountants,
attorneys, appraiser, transfer agent and registrar, printing, mailing and
marketing expenses associated with the Conversion; the fees set forth in Section
7; and fees for "Blue Sky" legal work, which will be performed by Webb's
counsel.
9. Conditions. Webb's willingness and obligation to proceed hereunder shall be
subject to, among other things, satisfaction of the following conditions in
Webb's opinion, which opinion shall have been formed in good faith by Webb after
reasonable determination and consideration of all relevant factors: (a) full and
satisfactory disclosure of all relevant material, financial and other
information in the disclosure documents and a determination by Webb, in its sole
discretion, that the sale of stock on the terms proposed is reasonable given
such disclosures; (b) no material adverse change in the condition or operations
of the Bank subsequent to Webb's due diligence; and (c) no market conditions at
the time of offering which in Webb's opinion make the sale of the shares by the
Company inadvisable.
10. Benefit. This Agreement shall inure to the benefit of the parties hereto and
their respective successors and assigns and to the parties indemnified hereunder
and their successors and assigns, and the obligations and liabilities assumed
hereunder by the parties hereto shall be binding upon their respective
successors assigns.
This letter reflects Webb's present intention of proceeding to work with the
Bank and the Company on its proposed conversion. It does not constitute an
agreement to underwrite securities or to serve as sales or marketing agent to
the Bank or the Company, or to perform any other service, nor is it an agreement
to enter into any such agreement or a representation that market conditions will
support an offering of the Company's common stock. It also does not constitute a
commitment on the part of the Bank, the Company or Webb except as to the payment
of certain fees as set forth in Section 7 and the assumption of expenses as set
forth in Section 8, all of which shall constitute the binding obligations of the
parties hereto and which shall survive the termination of this Agreement or the
completion of the services furnished hereunder and shall remain operative and in
full force and effect. You further acknowledge that any report or analysis
rendered by Webb pursuant to this engagement is rendered for use solely by the
management of the Bank and its Agents in connection with the Conversion.
<PAGE>
Mr. Donald C. Siemers
June 14, 1996
Page 5 of 5
Accordingly, you agree that you will not provide any such information to any
other person without our prior written consent.
Webb acknowledges that in offering the Company's stock no person will be
authorized to give any information or to make any representation not contained
in the offering prospectus and related offering materials filed as part of a
registration statement to be declared effective in connection with the offering.
Accordingly, Webb agrees that in connection with the offering it will not give
any unauthorized information or make any unauthorized representation. We will be
pleased to elaborate on any of the matters discussed in this letter at your
convenience.
If the foregoing correctly sets forth our mutual understanding, please so
indicate by signing and returning the original copy of this letter to the
undersigned with a check in the amount of $5,000 payable to Charles Webb &
Company.
Very truly yours,
CHARLES WEBB & COMPANY
By: /s/ Patricia A. McJoynt
-------------------------------
Patricia A. McJoynt
Executive Vice President
ACKNOWLEDGED AND ACCEPTED:
DEARBORN SAVINGS ASSOCIATION
By: /s/ Donald C. Siemers July 17, 1996
----------------------------- --------------------------
Donald C. Siemers Date
President & Chief
Executive Officer
<PAGE>
EXHIBIT A
CONVERSION SERVICES PROPOSAL
TO DEARBORN SAVINGS ASSOCIATION
Charles Webb & Company ("Webb") provide thrift institutions converting from
mutual to stock form of ownership with a comprehensive program of conversion
services designed to promote an orderly, efficient, cost-effective and long-term
stock distribution. The following list is representative of the conversion
services, if appropriate, we propose to perform on behalf of the Bank.
General Services
Assist management and legal counsel with the design of the transaction
structure.
Analyze and make recommendations on bids from printing, transfer agent, and
appraisal firms.
Assist officers and directors in obtaining bank loans to purchase stock, if
requested.
Assist in drafting and distribution of press releases as required or
appropriate.
Conversion Offering Enhancement Services
Establish and manage Conversion Center at the Bank. Conversion Center personnel
will track prospective investors; record stock orders; mail order confirmations;
provide the Bank's senior management with daily reports; answer customer
inquiries; and handle special situations as they arise.
Assign Webb personnel to be at the Bank through completion of the Subscription
and Community Offerings to manage the Conversion Center, meet with prospective
shareholders at individual and community information meetings, solicit local
investor interest through a tele-marketing campaign, answer inquiries, and
otherwise assist in the sale of stock in the Subscription and Community
Offerings. This effort will be lead by a Principal of Webb.
Create target investor list based upon review of the Bank's depositor base.
Provide intensive financial and marketing input for drafting of the prospectus.
<PAGE>
Conversion Offering Enhancement Services - Continued
Prepare other marketing materials, including prospecting letters and brochures,
and media advertisements.
Arrange logistics of community information meeting(s) as required.
Prepare audio-visual presentation by senior management for community information
meeting(s).
Prepare management for question-and-answer period at community information
meeting(s).
Attend and address community information meeting(s) and be available to answer
questions.
Broker-Assisted Sales Services.
Arrange for broker information meeting(s) as required.
Prepare audio-visual presentation for broker information meeting(s).
Prepare script for presentation by senior management at broker information
meeting(s).
Prepare management for question-and-answer period at broker information
meeting(s).
Attend and address broker information meeting(s) and be available to answer
questions.
Produce confidential broker memorandum to assist participating brokers in
selling the Bank's common stock.
Aftermarket Support Services.
Webb will use its best efforts to secure market making and on-going research
commitment from at least two NASD firms.
EXHIBIT 2.1
PLAN OF CONVERSION
of
DEARBORN MUTUAL HOLDING COMPANY
and
AGREEMENT AND PLAN OF REORGANIZATION
between
VISION BANCORP, INC.
and
DEARBORN SAVINGS ASSOCIATION, F.A.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section
Number Page
- ------- ----
<S> <C> <C>
1. Introduction................................................................... 1
2. Definitions.................................................................... 3
3. General Procedure for Conversion and Reorganization............................ 9
4. Total Number of Shares and Purchase Price of
Conversion Stock.............................................................. 12
5. Subscription Rights of Eligible Account Holders................................ 13
6. Subscription Rights of the Tax-Qualified Employee Stock
Benefit Plans................................................................. 14
7. Subscription Rights of Supplemental Eligible Account Holders................... 14
8. Subscription Rights of Other Members........................................... 15
9. Subscription Rights of Directors, Officers and Employees....................... 16
10. Subscription Rights of Public Stockholders..................................... 16
11. Community Offering, Syndicated Community Offering,
Public Offering and Other Offerings.......................................... 17
12. Limitations on Subscriptions and Purchases of Conversion Stock................. 19
13. Timing of Subscription Offering; Manner of Exercising
Subscription Rights and Order Forms........................................... 21
14. Payment for Conversion Stock................................................... 22
15. Account Holders in Nonqualified States or Foreign Countries.................... 24
16. Voting Rights of Stockholders.................................................. 24
17. Liquidation Account............................................................ 24
18. Transfer of Deposit Accounts................................................... 26
19. Requirements Following Conversion and Reorganization for
Registration, Market Making and Stock Exchange Listing........................ 26
20. Directors and Officers of the Association...................................... 26
21. Requirements for Stock Purchases by Directors
and Officers Following the Conversion and Reorganization...................... 27
22. Restrictions on Transfer of Stock.............................................. 27
23. Restrictions on Acquisition of Stock of the Holding Company................... 28
24. Tax Rulings or Opinions........................................................ 28
25. Stock Compensation Plans....................................................... 29
26. Dividend and Repurchase Restrictions on Stock.................................. 29
27. Payment of Fees to Brokers..................................................... 30
28. Dissenting Stockholders....................................................... 30
29. Effective Date................................................................. 30
30. Amendment or Termination of the Plan........................................... 30
31. Interpretation of the Plan..................................................... 31
Annex A - Plan of Merger between the Mutual Holding Company and the Association
Annex B - Plan of Merger between the Association and Interim
</TABLE>
<PAGE>
1. INTRODUCTION.
For purposes of this section, all capitalized terms have the meanings
ascribed to them in Section 2.
On October 22, 1993, Dearborn Savings Association, F.A., a
federally-chartered mutual savings association (the "Mutual Association"),
reorganized into the mutual holding company form of organization. To accomplish
this transaction, the Mutual Association organized a federally-chartered, stock
savings association which assumed the name "Dearborn Savings Association, F.A."
(the "Association") as a wholly-owned subsidiary. The Mutual Association then
transferred substantially all of its assets and liabilities to the Association
in exchange for 250,000 shares of Association Common Stock, and reorganized
itself into a federally-chartered mutual holding company known as Dearborn
Mutual Holding Company. The Association simultaneously sold 200,000 shares of
Association Common Stock to certain members of the general public. As of the
date hereof, 457,726 shares of Association Common Stock were issued and
outstanding and the Mutual Holding Company and the Public Stockholders own an
aggregate of 54.6% and 45.4% of the outstanding Association Common Stock,
respectively.
The Boards of Directors of the Mutual Holding Company and the
Association believe that a conversion of the Mutual Holding Company to stock
form and reorganization of the Association pursuant to this Plan of Conversion
is in the best interests of the Mutual Holding Company and the Association, as
well as the best interests of their respective Members and Stockholders. The
Boards of Directors determined that this Plan of Conversion equitably provides
for the interests of Members through the granting of subscription rights and the
establishment of a liquidation account. The Conversion and Reorganization will
result in the Association being wholly owned by a stock holding company, which
is a more common structure and form of ownership than a mutual holding company.
In addition, the Conversion and Reorganization will result in the raising of
additional capital for the Association and the Holding Company and should result
in a more active and liquid market for the Holding Company Common Stock than
currently exists for the Association Common Stock, although there can be no
assurances that this will be the case. Finally, the Conversion and
Reorganization has been structured to re-unite the accumulated earnings and
profits tax attribute retained by the Mutual Holding Company with the retained
earnings of the Association through a tax-free reorganization. This will
increase the Association's ability to pay dividends in the future.
If the Association had undertaken a standard conversion involving the
formation of a stock holding company in 1993, applicable OTS regulations would
have required a greater amount of Association Common Stock to be sold than
resulted in the amount of net proceeds raised in connection with the formation
of the Mutual Holding Company. In addition, if a standard conversion had been
conducted in 1993, management of the Association believed that it would have
been difficult to profitably invest the larger amount
<PAGE>
of capital that would have been raised, when compared to the amount of net
proceeds raised in connection with the formation of the Mutual Holding Company.
A standard conversion in 1993 also would have immediately eliminated all aspects
of the mutual form of organization.
Subsequent to the formation of the Mutual Holding Company, there have
been certain changes in the policies of the OTS relating to mutual holding
companies. In addition, market conditions for the stocks of savings institutions
and their holding companies have improved. In light of the foregoing, the Boards
of Directors of the Mutual Holding Company and the Association believe that it
is in the best interests of such companies and their respective Members and
Stockholders to raise additional capital at this time, and that the most
feasible way to do so is through the Conversion and Reorganization.
In connection with the Conversion and Reorganization, the Association
will form a new first-tier, wholly-owned subsidiary known as Vision Bancorp,
Inc., which will become the Holding Company upon consummation of the Conversion
and Reorganization. The Holding Company will in turn form Interim as a
wholly-owned subsidiary. As described in more detail in Section 3, the Mutual
Holding Company will convert from the mutual form to a federal interim stock
savings institution and simultaneously merge with and into the Association
pursuant to the Plan of Merger included as Annex A hereto, pursuant to which the
Mutual Holding Company will cease to exist and a liquidation account will be
established by the Association for the benefit of depositor Members as of
specified dates, and Interim will then merge with and into the Association
pursuant to the Plan of Merger included as Annex B hereto, pursuant to which the
Association will become a wholly-owned subsidiary of the Holding Company and, in
connection therewith, each share of Association Common Stock outstanding
immediately prior to the effective time thereof shall be automatically
converted, without further action by the holder thereof, into and become the
right to receive shares of Holding Company Common Stock based on the Exchange
Ratio, plus cash in lieu of any fractional share interest.
In connection with the Conversion and Reorganization, the Holding
Company will offer shares of Conversion Stock in the Offerings as provided
herein. Shares of Conversion Stock will be offered in a Subscription Offering in
descending order of priority to Eligible Account Holders, Tax-Qualified Employee
Stock Benefit Plans, Supplemental Eligible Account Holders, Other Members,
Directors, Officers and Employees and Public Stockholders. Any shares of
Conversion Stock remaining unsold after the Subscription Offering will be
offered for sale to the public through a Community Offering and/or Syndicated
Community Offering or Public Offering, as determined by the Boards of Directors
of the Holding Company and the Association in their sole discretion.
The Conversion and Reorganization is intended to provide a larger
capital base to support the Association's lending and investment activities and
thereby enhance the Association's capabilities to serve the borrowing and other
financial needs of the
2
<PAGE>
communities it serves. The use of the Holding Company will provide greater
organizational flexibility and possible diversification.
This Plan was adopted by the Boards of Directors of the Mutual Holding
Company and the Association on August 8, 1996 and amended on August 22, 1996.
This Plan is subject to the approval of the OTS and must be adopted by
(1) at least a majority of the total number of votes eligible to be cast by
Voting Members of the Mutual Holding Company at the Special Meeting and (2)
holders of at least two-thirds of the outstanding Association Common Stock at
the Stockholders' Meeting. In addition, the Primary Parties have conditioned the
consummation of the Conversion and Reorganization on the approval of the Plan by
at least a majority of the votes cast, in person or by proxy, by the Public
Stockholders at the Stockholders' Meeting.
After the Conversion and Reorganization, the Association will continue
to be regulated by the OTS, as its chartering authority, and by the FDIC, which
insures the Association's deposits. In addition, the Association will continue
to be a member of the Federal Home Loan Bank System and all insured savings
deposits will continue to be insured by the FDIC up to the maximum provided by
law.
2. DEFINITIONS.
As used in this Plan, the terms set forth below have the following
meaning:
2.1 Actual Purchase Price means the price per share at which the
Conversion Stock is ultimately sold by the Holding Company in the Offerings in
accordance with the terms hereof.
2.2 Affiliate means a Person who, directly or indirectly, through one
or more intermediaries, controls or is controlled by or is under common control
with the Person specified.
2.3 Associate, when used to indicate a relationship with any Person,
means (i) a corporation or organization (other than the Mutual Holding Company,
the Association, a majority-owned subsidiary of the Association or the Holding
Company) of which such Person is a director, officer or partner or is, directly
or indirectly, the beneficial owner of 10% or more of any class of equity
securities, (ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity, provided, however, that such term shall not
include any Tax-Qualified Employee Stock Benefit Plan of the Holding Company or
the Association in which such Person has a substantial beneficial interest or
serves as a trustee or in a similar fiduciary capacity, and (iii) any relative
or spouse of such Person, or any relative of such spouse, who has the same home
as such Person or who is a director or officer of the Holding Company or the
Association or any of the subsidiaries of the foregoing.
3
<PAGE>
2.4 Association means Dearborn Savings Association, F.A. in its
mutual or stock form, as the sense of the reference indicates.
2.5 Association Common Stock means the common stock of the Association,
par value $.10 per share, which stock is not and will not be insured by the FDIC
or any other governmental authority.
2.6 Association Merger means the merger of Interim with and into the
Association pursuant to the Plan of Merger included as Annex B hereto.
2.7 Code means the Internal Revenue Code of 1986, as amended.
2.8 Community Offering means the offering for sale by the Holding
Company of any shares of Conversion Stock not subscribed for in the Subscription
Offering to such Persons within or without the State of Indiana as may be
selected by the Holding Company and the Association within their sole
discretion.
2.9 Control (including the terms "controlling," "controlled by," and
"under common control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
2.10 Conversion and Reorganization means (i) the conversion of the
Mutual Holding Company from mutual form to a federal interim stock savings
institution and the subsequent Mutual Holding Company Merger, pursuant to which
the Mutual Holding Company will cease to exist, (ii) the Association Merger,
pursuant to which the Association will become a wholly-owned subsidiary of the
Holding Company and, in connection therewith, each share of Association Common
Stock outstanding immediately prior to the effective time thereof shall
automatically be converted, without further action by the holder thereof, into
and become the right to receive shares of Holding Company Common Stock based on
the Exchange Ratio, plus cash in lieu of any fractional share interest, and
(iii) the issuance of Conversion Stock by the Holding Company in the Offerings
as provided herein, which will increase the number of shares of Holding Company
Common Stock outstanding and the capitalization of the Holding Company and the
Association.
2.11 Conversion Stock means the Holding Company Common Stock to be
issued and sold in the Offerings pursuant to the Plan of Conversion.
2.12 Deposit Account means savings and demand accounts, including
passbook accounts, money market deposit accounts and negotiable order of
withdrawal accounts, and certificates of deposit and other authorized accounts
of the Association held by a Member.
4
<PAGE>
2.13 Director, Officer and Employee means the terms as applied
respectively to any person who is a director, officer or employee of the Mutual
Holding Company, the Association or any subsidiary thereof.
2.14 Eligible Account Holder means any Person holding a Qualifying
Deposit on the Eligibility Record Date for purposes of determining Subscription
Rights and establishing subaccount balances in the liquidation account to be
established pursuant to Section 17 hereof.
2.15 Eligibility Record Date means the date for determining Qualifying
Deposits of Eligible Account Holders and is the close of business on March 31,
1995.
2.16 Estimated Price Range means the range of the estimated aggregate
pro forma market value of the total number of shares of Conversion Stock to be
issued in the Offerings, as determined by the Independent Appraiser in
accordance with Section 4 hereof.
2.17 Exchange Ratio means the rate at which shares of Holding Company
Common Stock will be exchanged for shares of Association Common Stock held by
the Public Stockholders in connection with the Association Merger. The exact
rate shall be determined by the Mutual Holding Company and the Association in
order to ensure that upon consummation of the Conversion and Reorganization the
Public Stockholders will own in the aggregate approximately the same percentage
of the Holding Company Common Stock to be outstanding upon completion of the
Conversion and Reorganization as the percentage of Association Common Stock
owned by them in the aggregate immediately prior to consummation of the
Conversion and Reorganization (less any dilution required by the OTS in order to
reflect the prior declaration of special dividends by the Association and the
associated waiver of such special dividends by the Mutual Holding Company),
before giving effect to (a) cash paid in lieu of any fractional interests of
Holding Company Common Stock and (b) any shares of Conversion Stock purchased by
the Public Stockholders in the Offerings or tax-qualified employee stock benefit
plans thereafter.
2.18 Exchange Shares means the shares of Holding Company Common Stock
to be issued to the Public Stockholders in connection with the Association
Merger.
2.19 FDIC means the Federal Deposit Insurance Corporation or any
successor thereto.
2.20 Holding Company means Vision Bancorp, Inc., a corporation to be
organized under the laws of the State of Indiana. Such corporation will be
initially formed as a first-tier, wholly-owned subsidiary of the Association.
Upon completion of the Conversion and Reorganization, the Holding Company shall
hold all of the outstanding capital stock of the Association.
5
<PAGE>
2.21 Holding Company Common Stock means the common stock of the Holding
Company, par value $.10 per share, which stock cannot and will not be insured by
the FDIC or any other governmental authority.
2.22 Independent Appraiser means the independent investment banking or
financial consulting firm retained by the Holding Company and the Association to
prepare an appraisal of the estimated pro forma market value of the Conversion
Stock.
2.23 Initial Purchase Price means the price per share to be paid
initially by Participants for shares of Conversion Stock subscribed for in the
Subscription Offering and by Persons for shares of Conversion Stock ordered in
the Community Offering and/or Syndicated Community Offering or Public Offering.
2.24 Interim means Dearborn Interim Savings Association, which will be
formed as a first-tier, wholly-owned subsidiary of the Holding Company to
facilitate the Association Merger.
2.25 Member means any Person qualifying as a member of the Mutual
Holding Company in accordance with its mutual charter and bylaws and the laws of
the United States.
2.26 Mutual Association means Dearborn Savings Association, F.A. in its
mutual form prior to the formation of the Mutual Holding Company.
2.27 Mutual Holding Company means Dearborn Mutual Holding Company
2.28 Mutual Holding Company Merger means the merger of the Mutual
Holding Company (following its conversion into a federal interim stock savings
institution) with and into the Association pursuant to the Plan of Merger
included as Annex A hereto.
2.29 Offerings means the Subscription Offering, the Community Offering,
the Syndicated Community Offering and the Public Offering.
2.30 Officer means the chairman of the board of directors, president,
vice-president, secretary, treasurer or principal financial officer, comptroller
or principal accounting officer and any other person performing similar
functions with respect to any organization whether incorporated or
unincorporated.
2.31 Order Form means the form or forms provided by the Holding
Company, containing all such terms and provisions as set forth in Section 13
hereof, to a Participant or other Person by which Conversion Stock may be
ordered in the Offerings.
2.32 Other Member means a Voting Member who is not an Eligible Account
Holder or a Supplemental Eligible Account Holder.
6
<PAGE>
2.33 OTS means the Office of Thrift Supervision or any successor
thereto.
2.34 Participant means any Eligible Account Holder, Tax-Qualified
Employee Stock Benefit Plan, Supplemental Eligible Account Holder,
Other Member, Director, Officer and Employee and Public Stockholder as of the
Voting Record Date.
2.35 Person means an individual, a corporation, a partnership, an
association, a joint stock company, a trust, an unincorporated organization or a
government or any political subdivision thereof.
2.36 Plan and Plan of Conversion mean this Plan of Conversion and
Agreement and Plan of Reorganization as adopted by the Boards of Directors of
the Mutual Holding Company and the Association and any amendment hereto approved
as provided herein. The Board of Directors of the Holding Company shall adopt
this Plan as soon as practicable following its organization, and the Board of
Directors of Interim shall adopt the Plan of Merger included as Annex B hereto
as soon as practicable following its organization.
2.37 Primary Parties mean the Mutual Holding Company, the Association
and the Holding Company.
2.38 Prospectus means the one or more documents to be used in offering
the Conversion Stock in the Offerings.
2.39 Public Offering means the offering for sale by the Underwriters to
the general public following completion of the Subscription Offering, the
Community Offering and, if applicable, the Syndicated Community Offering, of all
shares of the Conversion Stock not purchased in the Subscription Offering, the
Community Offering and, if applicable, the Syndicated Community Offering.
2.40 Public Offering Price means the price per share at which any
remaining shares of Conversion Stock are initially offered for sale to the
general public in the Public Offering.
2.41 Public Stockholders mean those Persons who own shares of
Association Common Stock, excluding the Mutual Holding Company, as of the Voting
Record Date.
2.42 Qualifying Deposit means the aggregate balance of all Deposit
Accounts in the Association of (i) an Eligible Account Holder at the close of
business on the Eligibility Record Date, provided such aggregate balance is not
less than $50, and (ii) a Supplemental Eligible Account Holder at the close of
business on the Supplemental Eligibility Record Date, provided such aggregate
balance is not less than $50.
2.43 SEC means the Securities and Exchange Commission.
7
<PAGE>
2.44 Special Meeting means the Special Meeting of Members of the Mutual
Holding Company called for the purpose of submitting this Plan to the Members
for their approval, including any adjournments of such meeting.
2.45 Stockholders mean those Persons who own shares of Association
Common Stock.
2.46 Stockholders' Meeting means the annual or special meeting of
Stockholders of the Association called for the purpose of submitting this Plan
to the Stockholders for their approval, including any adjournments of such
meeting.
2.47 Subscription Offering means the offering of the Conversion Stock
to Participants.
2.48 Subscription Rights means nontransferable rights to subscribe for
Conversion Stock granted to Participants pursuant to the terms of this Plan.
2.49 Supplemental Eligible Account Holder means any Person, except
Directors and Officers of the Association and their Associates, holding a
Qualifying Deposit at the close of business on the Supplemental Eligibility
Record Date.
2.50 Supplemental Eligibility Record Date, if applicable, means the
date for determining Qualifying Deposits of Supplemental Eligible Account
Holders and shall be required if the Eligibility Record Date is more than 15
months prior to the date of the latest amendment to the Application for
Conversion filed by the Mutual Holding Company prior to approval of such
application by the OTS. If applicable, the Supplemental Eligibility Record Date
shall be the last day of the calendar quarter preceding OTS approval of the
Application for Conversion submitted by the Mutual Holding Company pursuant to
this Plan of Conversion.
2.51 Syndicated Community Offering means the offering for sale by a
syndicate of broker-dealers to the general public of shares of Conversion Stock
not purchased in the Subscription Offering and the Community Offering.
2.52 Tax-Qualified Employee Stock Benefit Plan means any defined
benefit plan or defined contribution plan, such as an employee stock ownership
plan, stock bonus plan, profit-sharing plan or other plan, which is established
for the benefit of the employees of the Holding Company and the Association and
which, with its related trust, meets the requirements to be "qualified" under
Section 401 of the Code as from time to time in effect. A "Non-Tax-Qualified
Employee Stock Benefit Plan" is any defined benefit plan or defined contribution
stock benefit plan which is not so qualified.
8
<PAGE>
2.53 Underwriters means the investment banking firm or firms agreeing
to purchase from the Holding Company shares of Conversion Stock remaining after
the conclusion of the Subscription Offering, the Community Offering and, if
applicable, the Syndicated Community Offering, with a view towards the offer and
sale of such shares of stock in a Public Offering.
2.54 Voting Member means a Person who at the close of business on the
Voting Record Date is entitled to vote as a Member of the Mutual Holding Company
in accordance with its mutual charter and bylaws.
2.55 Voting Record Date means the date or dates for determining the
eligibility of Members to vote at the Special Meeting and Stockholders to vote
at the Stockholders' Meeting, as applicable.
3. GENERAL PROCEDURE FOR CONVERSION AND REORGANIZATION.
(a) After the Association's organization of the Holding Company and the
receipt of all requisite regulatory approvals, the Holding Company will form
Interim as a first-tier, wholly-owned subsidiary of the Holding Company, and the
Board of Directors of Interim shall adopt the Plan of Merger included as Annex B
hereto by at least a two-thirds vote. In addition, the Holding Company shall
approve such Plan of Merger in its capacity as the sole stockholder of Interim.
(b) An application for the Conversion and Reorganization, including the
Plan and all other requisite material (the "Application for Conversion"), shall
be submitted to the OTS for approval. The Mutual Holding Company and the
Association also will cause notice of the adoption of the Plan by the Boards of
Directors of the Mutual Holding Company and the Association to be given by
publication in a newspaper having general circulation in each community in which
an office of the Association is located; and will cause copies of the Plan to be
made available at each office of the Mutual Holding Company and the Association
for inspection by Members and Stockholders. After receipt of notice from the OTS
to do so, the Mutual Holding Company and the Association will post the notice of
the filing of the Application for Conversion in each of their offices and will
again cause to be published, in accordance with the requirements of applicable
regulations of the OTS, a notice of the filing with the OTS of an application to
convert the Mutual Holding Company from mutual to stock form.
(c) Promptly following receipt of requisite approval of the OTS, this
Plan will be submitted to the Members for their consideration and approval at
the Special Meeting. The Mutual Holding Company may, at its option, mail to all
Members as of the Voting Record Date, at their last known address appearing on
the records of the Mutual Holding Company and the Association, a proxy statement
in either long or summary form describing the Plan which will be submitted to a
vote of the Members at the Special Meeting. The Holding Company also shall mail
to all such Members (as well as other Participants) either a
9
<PAGE>
Prospectus and Order Form for the purchase of Conversion Stock or a letter
informing them of their right to receive a Prospectus and Order Form and a
postage prepaid card to request such materials, subject to the provisions of
Section 15 hereof. In addition, all such Members will receive, or be given the
opportunity to request by returning a postage-prepaid card which will be
distributed with the proxy statement, letter or other written communication, a
copy of the articles of incorporation and bylaws of the Holding Company. The
Plan must be approved by the affirmative vote of at least a majority of the
total number of votes eligible to be cast by Voting Members at the Special
Meeting.
(d) Subscription Rights to purchase shares of Conversion Stock will be
issued without payment therefor to Eligible Account Holders, Tax-Qualified
Employee Plans, Supplemental Eligible Account Holders, if any, Other Members,
Directors, Officers and Employees of the Association and Public Stockholders as
of the Voting Record Date, as set forth in Sections 5, 6, 7, 8, 9 and 10 hereof.
(e) The Association shall file preliminary proxy materials with the OTS
in order to seek the approval of the Plan by its Stockholders. Promptly
following clearance of such proxy materials and the receipt of any other
requisite approval of the OTS, the Association will mail definitive proxy
materials to all Stockholders as of the Voting Record Date, at their last known
address appearing on the records of the Association, for their consideration and
approval of this Plan at the Stockholders' Meeting. The Plan must be approved by
the holders of at least two-thirds of the outstanding Association Common Stock
as of the Voting Record Date. In addition, the Primary Parties have conditioned
the consummation of the Conversion and Reorganization on the approval of the
Plan by at least a majority of the votes cast, in person or by proxy, by the
Public Stockholders at the Stockholders' Meeting.
(f) The Holding Company shall submit or cause to be submitted an
Application H-(e)1 or H-(e)1-S to the OTS for approval of the acquisition of the
Association. Such application also shall include an application to form Interim.
In addition, an application to merge the Mutual Holding Company (following its
conversion into a federal interim stock savings institution) and the Association
and an application to merge Interim and the Association shall be filed with the
OTS, either as exhibits to the Application H-(e)1 or H-(e)1-S or separately. All
notices required to be published in connection with such applications shall be
published at the times required.
(g) The Holding Company shall file a Registration Statement with the
SEC to register the Holding Company Common Stock to be issued in the Conversion
and Reorganization under the Securities Act of 1933, as amended, and shall
register such Holding Company Common Stock under any applicable state securities
laws. Upon registration and after the receipt of all required regulatory
approvals, the Conversion Stock shall be first offered for sale in a
Subscription Offering to Eligible Account Holders, Tax-Qualified Employee Stock
Benefit Plans, Supplemental Eligible Account Holders, if any, Other Members,
Directors, Officers and Employees and Public Stockholders as of the Voting
Record Date. It is anticipated that any shares of Conversion Stock remaining
unsold
10
<PAGE>
after the Subscription Offering will be sold through a Community Offering and/or
a Syndicated Community Offering or Public Offering. The purchase price per share
for the Conversion Stock shall be a uniform price determined in accordance with
Section 4 hereof. The Holding Company shall contribute to the Association an
amount of the net proceeds received by the Holding Company from the sale of
Conversion Stock as shall be determined by the Boards of Directors of the
Holding Company and the Association and as shall be approved by the OTS.
(h) The effective date of the Conversion and Reorganization shall be
the date set forth in Section 29 hereof. Upon the effective date, the following
transactions shall occur:
(i) The Mutual Holding Company shall convert from a mutual
holding company to a federal interim stock savings institution and
simultaneously merge with and into the Association in the Mutual
Holding Company Merger, with the Association being the surviving
institution. As a result of the Mutual Holding Company Merger, (x) the
shares of Association Common Stock held by the Mutual Holding Company
(following its conversion to a federal interim stock savings
institution) shall be extinguished and (y) Members of the Mutual
Holding Company will be granted interests in the liquidation account to
be established by the Association pursuant to Section 17 hereof.
(ii) Interim shall merge with and into the Association
pursuant to the Association Merger, with the Association being the
surviving institution. As a result of the Association Merger, (x) the
shares of Holding Company Common Stock held by the Association shall be
extinguished; (y) the shares of Association Common Stock held by the
Public Stockholders shall be converted into the right to receive shares
of Holding Company Common Stock based upon the Exchange Ratio, plus
cash in lieu of any fractional share interest based upon the Actual
Purchase Price; and (z) the shares of common stock of Interim held by
the Holding Company shall be converted into shares of Association
Common Stock on a one-for-one basis, with the result that the
Association shall become a wholly-owned subsidiary of the Holding
Company. In addition, as a result of the Association Merger, options to
purchase shares of Association Common Stock which are outstanding
immediately prior to consummation of the Conversion and Reorganization
shall be converted into options to purchase shares of Holding Company
Common Stock, with the number of shares subject to the option and the
exercise price per share to be adjusted based upon the Exchange Ratio
so that the aggregate exercise price remains unchanged, and with the
duration of the option remaining unchanged.
(iii) The Holding Company shall sell the Conversion Stock in
the Offerings, as provided herein.
11
<PAGE>
(i) The Primary Parties may retain and pay for the services of
financial and other advisors and investment bankers to assist in connection with
any or all aspects of the Conversion and Reorganization, including in connection
with the Offerings, the payment of fees to brokers and investment bankers for
assisting Persons in completing and/or submitting Order Forms. All fees,
expenses, retainers and similar items shall be reasonable.
4. TOTAL NUMBER OF SHARES AND PURCHASE PRICE OF CONVERSION
STOCK.
(a) The aggregate price at which shares of Conversion Stock shall be
sold in the Offerings shall be based on a pro forma valuation of the aggregate
market value of the Conversion Stock prepared by the Independent Appraiser. The
valuation shall be based on financial information relating to the Primary
Parties, market, financial and economic conditions, a comparison of the Primary
Parties with selected publicly-held financial institutions and holding companies
and with comparable financial institutions and holding companies and such other
factors as the Independent Appraiser may deem to be important. The valuation
shall be stated in terms of an Estimated Price Range, the maximum of which shall
generally be no more than 15% above the average of the minimum and maximum of
such price range and the minimum of which shall generally be no more than 15%
below such average. The valuation shall be updated during the Conversion and
Reorganization as market and financial conditions warrant and as may be required
by the OTS.
(b) Based upon the independent valuation, the Boards of Directors of
the Primary Parties shall fix the Initial Purchase Price and the number (or
range) of shares of Conversion Stock to be offered in the Subscription Offering,
Community Offering and/or Syndicated Community Offering. The Actual Purchase
Price and the total number of shares of Conversion Stock to be issued in the
Offerings shall be determined by the Boards of Directors of the Primary Parties
upon conclusion of the Offerings in consultation with the Independent Appraiser
and any financial advisor or investment banker retained by the Primary Parties
in connection therewith. In the event of a Public Offering, the Actual Purchase
Price for each share of Conversion Stock shall be the same as the Public
Offering Price at which remaining shares of Conversion Stock are initially
offered for sale by the Underwriters to the general public. The Public Offering
Price shall be a price negotiated between the Boards of Directors of the Primary
Parties and the Underwriters not in excess of the Initial Purchase Price. The
price to be paid to the Holding Company by the Underwriters for all shares
purchased by the Underwriters shall be the Public Offering Price less a
negotiated underwriting discount.
(c) Subject to the approval of the OTS, the Estimated Price Range may
be increased or decreased to reflect market, financial and economic conditions
prior to completion of the Conversion and Reorganization, and under such
circumstances the Primary Parties may increase or decrease the total number of
shares of Conversion Stock to be issued in the Conversion and Reorganization to
reflect any such change. Notwithstanding anything to the contrary contained in
this Plan, no resolicitation of
12
<PAGE>
subscribers shall be required and subscribers shall not be permitted to modify
or cancel their subscriptions unless the gross proceeds from the sale of the
Conversion Stock issued in the Conversion and Reorganization are less than the
minimum or (excluding purchases, if any, by the Holding Company's and the
Association's Tax-Qualified Employee Stock Benefit Plans under Section 4(d)
hereof) more than 15% above the maximum of the Estimated Price Range set forth
in the Prospectus. In the event of an increase in the total number of shares
offered in the Conversion and Reorganization due to an increase in the Estimated
Price Range, the priority of share allocation shall be as set forth in this
Plan, provided, however, that such priorities will have no effect whatsoever on
the ability of the Tax-Qualified Employee Stock Benefit Plans to purchase
additional shares pursuant to Section 4(d). The total number of shares of
Conversion Stock offered by the Holding Company also may be subject to increase
in connection with an over-allotment option which may be granted to the
Underwriters of the Public Offering, provided that the over-allotment option may
not cover more than 15% of the total number of shares of Conversion Stock sold
in the Subscription Offering, Community Offering, Syndicated Community Offering
and Public Offering.
(d) In the event that Tax-Qualified Employee Stock Benefit Plans are
unable to purchase the number of shares subscribed for by such Tax-Qualified
Employee Stock Benefit Plans due to an oversubscription for shares of Conversion
Stock pursuant to Section 5 hereof, Tax-Qualified Employee Stock Benefit Plans
may purchase from the Holding Company, and the Holding Company may sell to the
Tax-Qualified Employee Stock Benefit Plans, such additional shares ("Additional
Shares") of Holding Company Common Stock necessary to fill the subscriptions of
the Tax-Qualified Employee Stock Benefit Plans, provided that such Additional
Shares may not exceed 10% of the total number of shares of Conversion Stock sold
in the Conversion and Reorganization. The sale of Additional Shares, if
necessary, will occur contemporaneously with the sale of the Conversion Stock.
The sale of Additional Shares to Tax-Qualified Employee Stock Benefit Plans by
the Holding Company is conditioned upon receipt by the Holding Company of a
letter from the Independent Appraiser to the effect that such sale would not
have a material effect on the Conversion and Reorganization or the Actual
Purchase Price and the approval of the OTS. The ability of the Tax-Qualified
Employee Stock Benefit Plans to purchase up to an additional 10% of the total
number of shares of Conversion Stock sold in the Conversion and Reorganization
shall not be affected or limited in any manner by the priorities or purchase
limitations otherwise set forth in this Plan of Conversion.
5. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS.
(a) Each Eligible Account Holder shall receive, without payment,
Subscription Rights to purchase up to the greater of (i) the number of shares of
Conversion Stock that when combined with Exchange Shares received aggregate 2.5%
of the Conversion Stock (or such maximum purchase limitation as may be
established for the Community Offering and/or Syndicated Community Offering or
Public Offering), (ii) one-tenth of 1% of the total offering of shares of
Conversion Stock in the Subscription Offering, and (iii) 15 times the
13
<PAGE>
product (rounded down to the next whole number) obtained by multiplying the
total number of shares of Conversion Stock offered in the Subscription Offering
by a fraction, of which the numerator is the amount of the Qualifying Deposits
of the Eligible Account Holder and the denominator is the total amount of all
Qualifying Deposits of all Eligible Account Holders, subject to Section 15
hereof.
(b) In the event of an oversubscription for shares of Conversion Stock
pursuant to Section 5(a), available shares shall be allocated among subscribing
Eligible Account Holders so as to permit each such Eligible Account Holder, to
the extent possible, to purchase a number of shares which will make his or her
total allocation equal to the lesser of the number of shares subscribed for or
100 shares. Any available shares remaining after each such subscribing Eligible
Account Holder has been allocated the lesser of the number of shares subscribed
for or 100 shares shall be allocated among the subscribing Eligible Account
Holders in the proportion which the Qualifying Deposit of each such subscribing
Eligible Account Holder bears to the total Qualifying Deposits of all such
subscribing Eligible Account Holders whose orders are unfilled, provided that no
fractional shares shall be issued. Subscription Rights of Eligible Account
Holders who are also Directors or Officers and their Associates shall be
subordinated to those of other Eligible Account Holders to the extent that they
are attributable to increased deposits during the one-year period preceding the
Eligibility Record Date.
6. SUBSCRIPTION RIGHTS OF THE TAX-QUALIFIED EMPLOYEE STOCK
BENEFIT PLANS.
Notwithstanding the purchase limitations discussed below, Tax-Qualified
Employee Stock Benefit Plans of the Holding Company and the Association may
receive (in the Primary Parties' discretion), without payment, Subscription
Rights to purchase in the aggregate up to 10% of the Conversion Stock, including
any shares of Conversion Stock to be issued in the Conversion and Reorganization
as a result of an increase in the Estimated Price Range after commencement of
the Subscription Offering and prior to completion of the Conversion and
Reorganization. Consistent with applicable laws and regulations and policies and
practices of the OTS, Tax-Qualified Employee Stock Benefit Plans may use funds
contributed by the Holding Company or the Association and/or borrowed from an
independent financial institution to exercise such Subscription Rights, and the
Holding Company and the Association may make scheduled discretionary
contributions thereto, provided that such contributions do not cause the Holding
Company or the Association to fail to meet any applicable regulatory capital
requirement.
7. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS.
(a) In the event that the Eligibility Record Date is more than 15
months prior to the date of the latest amendment to the Application for
Conversion filed prior to OTS approval, then, and only in that event, a
Supplemental Eligibility Record Date shall be set and each Supplemental Eligible
Account Holder shall receive, without payment, Subscription
14
<PAGE>
Rights to purchase up to the greater of (i) the number of shares of Conversion
Stock that when combined with Exchange Shares received aggregate 2.5% of the
Conversion Stock (or such maximum purchase limitation as may be established for
the Community Offering and/or Syndicated Community Offering or Public Offering),
(ii) one-tenth of 1% of the total offering of shares of Conversion Stock in the
Subscription Offering, and (iii) 15 times the product (rounded down to the next
whole number) obtained by multiplying the total number of shares of Conversion
Stock offered in the Subscription Offering by a fraction, of which the numerator
is the amount of the Qualifying Deposits of the Supplemental Eligible Account
Holder and the denominator is the total amount of all Qualifying Deposits of all
Supplemental Eligible Account Holders, subject to Section 15 hereof and the
availability of shares of Conversion Stock for purchase after taking into
account the shares of Conversion Stock purchased by Eligible Account Holders and
Tax-Qualified Employee Stock Benefit Plans through the exercise of Subscription
Rights under Sections 5 and 6 hereof.
(b) In the event of an oversubscription for shares of Conversion Stock
pursuant to Section 7(a), available shares shall be allocated among subscribing
Supplemental Eligible Account Holders so as to permit each such Supplemental
Eligible Account Holder, to the extent possible, to purchase a number of shares
sufficient to make his or her total allocation (including the number of shares,
if any, allocated in accordance with Section 5(a)) equal to the lesser of the
number of shares subscribed for or 100 shares. Any remaining available shares
shall be allocated among subscribing Supplemental Eligible Account Holders in
the proportion that the amount of their respective Qualifying Deposits bears to
the total amount of the Qualifying Deposits of all such subscribing Supplemental
Eligible Account Holders whose orders are unfilled, provided that no fractional
shares shall be issued.
8. SUBSCRIPTION RIGHTS OF OTHER MEMBERS.
(a) Each Other Member shall receive, without payment, Subscription
Rights to purchase up to the greater of (i) the number of shares of Conversion
Stock that when combined with Exchange Shares received aggregate 2.5% of the
Conversion Stock (or such maximum purchase limitation as may be established for
the Community Offering and/or Syndicated Community Offering or Public Offering)
and (ii) one-tenth of 1% of the total offering of shares of Conversion Stock in
the Subscription Offering, in each case subject to Section 15 hereof and the
availability of shares of Conversion Stock for purchase after taking into
account the shares of Conversion Stock purchased by Eligible Account Holders,
Tax-Qualified Employee Stock Benefit Plans, and Supplemental Eligible Account
Holders, if any, through the exercise of Subscription Rights under Sections 5, 6
and 7 hereof.
(b) If, pursuant to this Section 8, Other Members subscribe for a
number of shares of Conversion Stock in excess of the total number of shares of
Conversion Stock remaining, available shares shall be allocated among
subscribing Other Members so as to permit each such Other Member, to the extent
possible, to purchase a number of shares which will make his or her total
allocation equal to the lesser of the number of shares subscribed for or 100
shares. Any remaining shares shall be allocated among subscribing Other Members
on a
15
<PAGE>
pro rata basis in the same proportion as each such Other Member's subscription
bears to the total subscriptions of all such subscribing Other Members, provided
that no fractional shares shall be issued.
9. SUBSCRIPTION RIGHTS OF DIRECTORS, OFFICERS AND EMPLOYEES.
(a) To the extent that there are sufficient shares remaining after
satisfaction of all subscriptions under the above categories, Directors,
Officers and Employees of the Association shall receive, without payment,
Subscription Rights to purchase in this category up to an aggregate of 24.7% of
the shares of Conversion Stock offered in the Subscription Offering.
(b) In the event of an oversubscription for shares of Conversion Stock
pursuant to Section 9(a), Subscription Rights for the purchase of such shares
shall be allocated among the individual Directors, Officers and Employees on a
point system basis, whereby a point will be assigned for each year of employment
and for each salary increment of $5,000 per annum and five points for each
office held in the Mutual Holding Company and the Association, including a
directorship. If any such Director, Officer or Employee does not subscribe for
his or her full allocation of shares, any shares not subscribed for may be
purchased by other Directors, Officers and Employees in proportion to their
respective subscriptions, provided that no fractional shares shall be issued.
10. SUBSCRIPTION RIGHTS OF PUBLIC STOCKHOLDERS.
(a) Each Public Stockholder as of the Voting Record Date shall receive,
without payment, Subscription Rights to purchase up to the greater of (i) the
number of shares of Conversion Stock that when combined with Exchange Shares
received aggregate 2.5% of the Conversion Stock (or such maximum purchase
limitation as may be established for the Community Offering and/or Syndicated
Community Offering or Public Offering) and (ii) one tenth of 1% of the total
offering of shares of Conversion Stock in the Subscription Offering, in each
case subject to Section 15 hereof and the availability of shares of Conversion
Stock for purchase after taking into account the shares of Conversion Stock
purchased by Eligible Account Holders, Tax-Qualified Employee Stock Benefit
Plans, Supplemental Eligible Account Holders, if any, and Directors, Officers
and Employees.
(b) If, pursuant to this Section 10, Public Stockholders as of the
Voting Record Date subscribe for a number of shares of Conversion Stock in
excess of the total number of shares of Conversion Stock remaining, available
shares shall be allocated among subscribing Public Stockholders as of the Voting
Record Date on a pro rata basis in the same proportion as each such Public
Stockholder's subscription bears to the total subscriptions of all such
subscribing Public Stockholders, provided that no fractional shares shall be
issued.
16
<PAGE>
11. COMMUNITY OFFERING, SYNDICATED COMMUNITY OFFERING, PUBLIC
OFFERING AND OTHER OFFERINGS.
(a) If less than the total number of shares of Conversion Stock are
sold in the Subscription Offering, it is anticipated that all remaining shares
of Conversion Stock shall, if practicable, be sold in a Community Offering
and/or a Syndicated Community Offering or a Public Offering. Subject to the
requirements set forth herein, the manner in which the Conversion Stock is sold
in the Community Offering and/or the Syndicated Community Offering or the Public
Offering shall have as the objective the achievement of the widest possible
distribution of such stock.
(b) In the event of a Community Offering, all shares of Conversion
Stock which are not subscribed for in the Subscription Offering shall be offered
for sale by means of a direct community marketing program, which may provide for
the use of brokers, dealers or investment banking firms experienced in the sale
of financial institution securities. Any available shares in excess of those not
subscribed for in the Subscription Offering will be available for purchase by
members of the general public to whom a Prospectus is delivered by the Holding
Company or on its behalf, with preference given to natural persons residing in
Dearborn County ("Preferred Subscribers").
(c) A Prospectus and Order Form shall be furnished to such Persons as
the Primary Parties may select in connection with the Community Offering, and
each order for Conversion Stock in the Community Offering shall be subject to
the absolute right of the Primary Parties to accept or reject any such order in
whole or in part either at the time of receipt of an order or as soon as
practicable following completion of the Community Offering. Available shares
will be allocated first to each Preferred Subscriber whose order is accepted in
an amount equal to the lesser of 100 shares or the number of shares subscribed
for by each such Preferred Subscriber, if possible. Thereafter, unallocated
shares shall be allocated among the Preferred Subscribers whose accepted orders
remain unsatisfied in the same proportion that the unfilled order of each bears
to the total unfilled orders of all Preferred Subscribers whose accepted orders
remain unsatisfied, provided that no fractional shares shall be issued. If there
are any shares remaining after all accepted orders by Preferred Subscribers have
been satisfied, any remaining shares shall be allocated to other members of the
general public who purchase in the Community Offering, applying the same
allocation described above for Preferred Subscribers.
(d) The amount of Conversion Stock that any Person may purchase in the
Community Offering shall not exceed the greater of (i) the number of shares of
Conversion Stock that when combined with Exchange Shares received aggregate 2.5%
of the Conversion Stock and (ii) one-tenth of 1% of the total offering of shares
of Conversion Stock in the Subscription Offering, provided, however, that this
amount may be increased to up to 5% of the total offering of shares in the
Conversion and Reorganization, subject to any required regulatory approval but
without the further approval of Members of the Mutual Holding Company or the
Stockholders of the Association; and provided further that, subject to the
17
<PAGE>
preferences set forth in Section 11(b) and (c) of this Plan and to the extent
applicable, orders for Conversion Stock in the Community Offering shall first be
filled to a maximum of 2% of the total number of shares of Conversion Stock sold
in the Offerings and thereafter any remaining shares shall be allocated on an
equal number of shares basis per order until all orders have been filled. The
Primary Parties may commence the Community Offering concurrently with, at any
time during, or as soon as practicable after the end of, the Subscription
Offering, and the Community Offering must be completed within 45 days after the
completion of the Subscription Offering, unless extended by the Primary Parties
with any required regulatory approval.
(e) Subject to such terms, conditions and procedures as may be
determined by the Primary Parties, all shares of Conversion Stock not subscribed
for in the Subscription Offering or ordered in the Community Offering may be
sold by a syndicate of broker-dealers to the general public in a Syndicated
Community Offering. Each order for Conversion Stock in the Syndicated Community
Offering shall be subject to the absolute right of the Primary Parties to accept
or reject any such order in whole or in part either at the time of receipt of an
order or as soon as practicable after completion of the Syndicated Community
Offering. The amount of Conversion Stock that any Person may purchase in the
Syndicated Community Offering shall not exceed the number of shares of
Conversion Stock that when combined with Exchange Shares received aggregate 2.5%
the Conversion Stock, provided, however, that this amount may be increased to up
to 5% of the total offering of shares in the Conversion and Reorganization,
subject to any required regulatory approval but without the further approval of
Members of the Mutual Holding Company or the Stockholders of the Association;
and provided further that, to the extent applicable, orders for Conversion Stock
in the Syndicated Community Offering shall first be filled to a maximum of 2% of
the total number of shares of Conversion Stock sold in the Offerings and
thereafter any remaining shares shall be allocated on an equal number of shares
basis per order until all orders have been filled. The Primary Parties may
commence the Syndicated Community Offering concurrently with, at any time
during, or as soon as practicable after the end of, the Subscription Offering
and/or Community Offering, and the Syndicated Community Offering must be
completed within 45 days after the completion of the Subscription Offering,
unless extended by the Primary Parties with any required regulatory approval.
(f) Subject to such terms, conditions and procedures as may be
determined by the Primary Parties, all shares of Conversion Stock not subscribed
for in the Subscription Offering or ordered in the Community Offering and/or, if
applicable, Syndicated Community Offering, may be purchased by the Underwriters
in the Public Offering. The amount of Conversion Stock that any Person may
purchase in the Public Offering shall not exceed the number of shares of
Conversion Stock that when combined with Exchange Shares received aggregate 2.5%
the Conversion Stock, provided, however, that this amount may be increased to up
to 5% of the total offering of shares in the Conversion and Reorganization,
subject to any required regulatory approval but without the further approval of
Members of the Mutual Holding Company or the Stockholders of the Association;
and provided further that, to the extent applicable, orders for Conversion Stock
in the Public Offering
18
<PAGE>
shall first be filled to a maximum of 2% of the total number of shares of
Conversion Stock sold in the Offerings and thereafter any remaining shares shall
be allocated on an equal number of shares basis per order until all orders have
been filled. The Public Offering must be completed within 45 days after the
completion of the Subscription Offering, unless extended by the Primary Parties
with any required regulatory approval.
(g) If for any reason a Syndicated Community Offering and/or Public
Offering of shares of Conversion Stock not sold in the Subscription Offering and
the Community Offering cannot be effected, or in the event that any
insignificant residue of shares of Conversion Stock is not sold in the
Subscription Offering, Community Offering, Syndicated Community Offering or
Public Offering, the Primary Parties shall use their best efforts to obtain
other purchasers for such shares in such manner and upon such conditions as may
be satisfactory to the OTS.
12. LIMITATIONS ON SUBSCRIPTIONS AND PURCHASES OF CONVERSION
STOCK.
(a) The maximum number of shares of Conversion Stock which may be
purchased in the Conversion by Tax-Qualified Employee Stock Benefit Plans shall
not exceed 10% of the total number of shares of Conversion Stock sold in the
Offerings, including any shares which may be issued in the event of an increase
in the maximum of the Estimated Price Range to reflect changes in market,
financial and economic conditions after commencement of the Subscription
Offering and prior to completion of the Offerings.
(b) Except in the case of Tax-Qualified Employee Stock Benefit Plans in
the aggregate, as set forth in Section 12(a) hereof, and certain Eligible
Account Holders, Supplemental Eligible Account Holders and Other Members, as set
forth in Sections 5(a), 7(a) and 8(a) hereof, and in addition to the other
restrictions and limitations set forth herein, the maximum amount of Holding
Company Common Stock which any Person together with any Associate or group of
Persons acting in concert may, directly or indirectly, subscribe for or purchase
in the Conversion and Reorganization shall not exceed 5.0% of the Conversion
Stock.
(c) The number of shares of Conversion Stock which Directors and
Officers and their Associates may purchase in the aggregate in the Offerings
shall not exceed 34.7% of the total number of shares of Conversion Stock sold in
the Offerings, including any shares which may be issued in the event of an
increase in the maximum of the Estimated Price Range to reflect changes in
market, financial and economic conditions after commencement of the Subscription
Offering and prior to completion of the Offerings.
(d) No Person may purchase fewer than 25 shares of Conversion Stock in
the Offerings, to the extent such shares are available; provided, however, that
if the Actual Purchase Price is greater than $20.00 per share, such minimum
number of shares shall be
19
<PAGE>
adjusted so that the aggregate Actual Purchase Price for such minimum shares
will not exceed $500.00.
(e) For purposes of the foregoing limitations and the determination of
Subscription Rights, (i) Directors, Officers and Employees shall not be deemed
to be Associates or a group acting in concert solely as a result of their
capacities as such, (ii) shares purchased by Tax-Qualified Employee Stock
Benefit Plans shall not be attributable to the individual trustees or
beneficiaries of any such plan for purposes of determining compliance with the
limitations set forth in Section 12(b) hereof, (iii) shares purchased by
Tax-Qualified Employee Stock Benefit Plans shall not be attributable to the
individual trustees or beneficiaries of any such plan for purposes of
determining compliance with the limitation set forth in Section 12(c) hereof,
and (iv) Exchange Shares shall be valued at the Actual Purchase Price.
(f) Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the Members of
the Mutual Holding Company or the Stockholders of the Association, the Primary
Parties may increase or decrease any of the individual or aggregate purchase
limitations set forth herein to a percentage which does not exceed 5% of the
total offering of shares of Holding Company Common Stock in the Conversion and
Reorganization whether prior to, during or after the Subscription Offering,
Community Offering and/or Syndicated Community Offering. In the event that an
individual purchase limitation is increased after commencement of the
Subscription Offering or any other offering, the Primary Parties shall permit
any Person who subscribed for the maximum number of shares of Conversion Stock
to purchase an additional number of shares, so that such Person shall be
permitted to subscribe for the then maximum number of shares permitted to be
subscribed for by such Person, subject to the rights and preferences of any
Person who has priority Subscription Rights. In the event that an individual
purchase limitation is decreased after commencement of the Subscription Offering
or any other offering, the orders of any Person who subscribed for more than the
new purchase limitation 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.
(g) The Primary Parties shall have the right to take all such action as
they may, in their sole discretion, deem necessary, appropriate or advisable in
order to monitor and enforce the terms, conditions, limitations and restrictions
contained in this Section 12 and elsewhere in this Plan and the terms,
conditions and representations contained in the Order Form, including, but not
limited to, the absolute right (subject only to any necessary regulatory
approvals or concurrences) to reject, limit or revoke acceptance of any
subscription or order and to delay, terminate or refuse to consummate any sale
of Conversion Stock which they believe might violate, or is designed to, or is
any part of a plan to, evade or circumvent such terms, conditions, limitations,
restrictions and representations. Any such action shall be final, conclusive and
binding on all persons, and the Primary
20
<PAGE>
Parties and their respective Boards shall be free from any liability to any
Person on account of any such action.
(h) Notwithstanding anything to the contrary contained in this Plan,
the Public Stockholders will not have to sell any Association Common Stock or to
be limited in receiving Exchange Shares even if their ownership of Association
Common Stock when converted into Exchange Shares pursuant to the Association
Merger would exceed an applicable purchase limitation.
13. TIMING OF SUBSCRIPTION OFFERING; MANNER OF EXERCISING
SUBSCRIPTION RIGHTS AND ORDER FORMS.
(a) The Subscription Offering may be commenced concurrently with or at
any time after the mailing to Voting Members of the Mutual Holding Company and
Stockholders of the Association of the proxy statement(s) to be used in
connection with the Special Meeting and the Stockholders' Meeting. The
Subscription Offering may be closed before the Special Meeting and the
Stockholders' Meeting, provided that the offer and sale of the Conversion Stock
shall be conditioned upon the approval of the Plan by the Voting Members of the
Mutual Holding Company and the Stockholders of the Association at the Special
Meeting and the Stockholders' Meeting, respectively.
(b) The exact timing of the commencement of the Subscription Offering
shall be determined by the Primary Parties in consultation with the Independent
Appraiser and any financial or advisory or investment banking firm retained by
them in connection with the Conversion. The Primary Parties may consider a
number of factors, including, but not limited to, their current and projected
future earnings, local and national economic conditions, and the prevailing
market for stocks in general and stocks of financial institutions in particular.
The Primary Parties shall have the right to withdraw, terminate, suspend, delay,
revoke or modify any such Subscription Offering, at any time and from time to
time, as they in their sole discretion may determine, without liability to any
Person, subject to compliance with applicable securities laws and any necessary
regulatory approval or concurrence.
(c) The Primary Parties shall, promptly after the SEC has declared the
Registration Statement which includes the Prospectus effective and all required
regulatory approvals have been obtained, distribute or make available the
Prospectus, together with Order Forms for the purchase of Conversion Stock, to
all Participants for the purpose of enabling them to exercise their respective
Subscription Rights, subject to Section 15 hereof. The Primary Parties may elect
to mail a Prospectus and Order Form only to those Participants who request such
materials by returning a postage-paid card to the Primary Parties by a date
specified in the letter informing them of their Subscription Rights. Under such
circumstances, the Subscription Offering shall not be closed until the
expiration of 30 days after the mailing by the Primary Parties of the
postage-paid card to Participants.
21
<PAGE>
(d) A single Order Form for all Deposit Accounts maintained with the
Association by an Eligible Account Holder and any Supplemental Eligible Account
Holder may be furnished, irrespective of the number of Deposit Accounts
maintained with the Association on the Eligibility Record Date and Supplemental
Eligibility Record Date, respectively.
(e) The recipient of an Order Form shall have no less than 20 days and
no more than 45 days from the date of mailing of the Order Form (with the exact
termination date to be set forth on the Order Form) to properly complete and
execute the Order Form and deliver it to the Primary Parties. The Primary
Parties may extend such period by such amount of time as they determine is
appropriate. Failure of any Participant to deliver a properly executed Order
Form to the Primary Parties, along with payment (or authorization for payment by
withdrawal) for the shares of Conversion Stock subscribed for, within the time
limits prescribed, shall be deemed a waiver and release by such person of any
rights to subscribe for shares of Conversion Stock. Each Participant shall be
required to confirm to the Primary Parties by executing an Order Form that such
Person has fully complied with all of the terms, conditions, limitations and
restrictions in the Plan.
(f) The Primary Parties shall have the absolute right, in their sole
discretion and without liability to any Participant or other Person, to reject
any Order Form, including, but not limited to, any Order Form that is (i)
improperly completed or executed; (ii) not timely received; (iii) not
accompanied by the proper payment (or authorization of withdrawal for payment)
or, in the case of institutional investors in the Community Offering, not
accompanied by an irrevocable order together with a legally binding commitment
to pay the full amount of the purchase price prior to 48 hours before the
completion of the Offerings; or (iv) submitted by a Person whose representations
the Primary Parties believe to be false or who they otherwise believe, either
alone, or acting in concert with others, is violating, evading or circumventing,
or intends to violate, evade or circumvent, the terms and conditions of the
Plan. The Primary Parties may, but will not be required to, waive any
irregularity on any Order Form or may require the submission of corrected Order
Forms or the remittance of full payment for shares of Conversion Stock by such
date as they may specify. The interpretation of the Primary Parties of the terms
and conditions of the Order Forms shall be final and conclusive.
14. PAYMENT FOR CONVERSION STOCK.
(a) Payment for shares of Conversion Stock subscribed for by
Participants in the Subscription Offering and payment for shares of Conversion
Stock ordered by Persons in the Community Offering shall be equal to the Initial
Purchase Price multiplied by the number of shares which are being subscribed for
or ordered, respectively. Such payment may be made in cash, if delivered in
person, or by check or money order at the time the Order Form is delivered to
the Primary Parties. The Primary Parties may also elect to receive payment for
shares of Conversion Stock by wire transfer. In addition, the Primary Parties
may elect to provide Participants and/or other Persons who have a Deposit
Account with the Association the opportunity to pay for shares of Conversion
Stock by authorizing
22
<PAGE>
the Association to withdraw from such Deposit Account an amount equal to the
aggregate Initial Purchase Price of such shares. If the Actual Purchase Price is
less than the Initial Purchase Price, the Primary Parties shall refund the
difference to all Participants and other Persons, unless the Primary Parties
choose to provide Participants and other Persons the opportunity on the Order
Form to elect to have such difference applied to the purchase of additional
whole shares of Conversion Stock. If the Actual Purchase Price is more than the
Initial Purchase Price, the Primary Parties shall reduce the number of shares of
Conversion Stock ordered by Participants and other Persons and refund any
remaining amount which is attributable to a fractional share interest, unless
the Primary Parties choose to provide Participants and other Persons the
opportunity to increase the Actual Purchase Price submitted to them.
(b) Consistent with applicable laws and regulations and policies and
practices of the OTS, payment for shares of Conversion Stock subscribed for by
Tax-Qualified Employee Stock Benefit Plans may be made with funds contributed by
the Holding Company and/or the Association and/or funds obtained pursuant to a
loan from an unrelated financial institution pursuant to a loan commitment which
is in force from the time that any such plan submits an Order Form until the
closing of the transactions contemplated hereby.
(c) If a Participant or other Person authorizes the Association to
withdraw the amount of the Initial Purchase Price from his or her Deposit
Account, the Association shall have the right to make such withdrawal or to
freeze funds equal to the aggregate Initial Purchase Price upon receipt of the
Order Form. Notwithstanding any regulatory provisions regarding penalties for
early withdrawals from certificate accounts, the Association may allow payment
by means of withdrawal from certificate accounts without the assessment of such
penalties. In the case of an early withdrawal of only a portion of such account,
the certificate evidencing such account shall be cancelled if any applicable
minimum balance requirement ceases to be met. In such case, the remaining
balance will earn interest at the regular passbook rate. However, where any
applicable minimum balance is maintained in such certificate account, the rate
of return on the balance of the certificate account shall remain the same as
prior to such early withdrawal. This waiver of the early withdrawal penalty
applies only to withdrawals made in connection with the purchase of Conversion
Stock and is entirely within the discretion of the Primary Parties.
(d) The Association shall pay interest, at not less than the passbook
rate, for all amounts paid in cash, by check or money order to purchase shares
of Conversion Stock in the Subscription Offering and the Community Offering from
the date payment is received until the date the Conversion and Reorganization is
completed or terminated.
(e) The Association shall not knowingly loan funds or otherwise extend
credit to any Participant or other Person to purchase Conversion Stock.
(f) Each share of Conversion Stock shall be non-assessable upon
payment in full of the Actual Purchase Price.
23
<PAGE>
15. ACCOUNT HOLDERS IN NONQUALIFIED STATES OR FOREIGN COUNTRIES.
The Primary Parties shall make reasonable efforts to comply with the
securities laws of all jurisdictions in the United States in which Participants
reside. However, no Participant will be offered or receive any Conversion Stock
under the Plan if such Participant resides in a foreign country or resides in a
jurisdiction of the United States with respect to which all of the following
apply: (a) there are few Participants otherwise eligible to subscribe for shares
under this Plan who reside in such jurisdiction; (b) the granting of
Subscription Rights or the offer or sale of shares of Conversion Stock to such
Participants would require any of the Primary Parties or their respective
Directors and Officers, under the laws of such jurisdiction, to register as a
broker-dealer, salesman or selling agent or to register or otherwise qualify the
Conversion Stock for sale in such jurisdiction, or any of the Primary Parties
would be required to qualify as a foreign corporation or file a consent to
service of process in such jurisdiction; and (c) such registration,
qualification or filing in the judgment of the Primary Parties would be
impracticable or unduly burdensome for reasons of cost or otherwise.
16. VOTING RIGHTS OF STOCKHOLDERS.
Following consummation of the Conversion and Reorganization, voting
rights with respect to the Association shall be held and exercised exclusively
by the Holding Company as holder of all of the Association's outstanding voting
capital stock, and voting rights with respect to the Holding Company shall be
held and exercised exclusively by the holders of the Holding Company's voting
capital stock.
17. LIQUIDATION ACCOUNT.
(a) At the time of the Mutual Holding Company Merger, the Association
shall establish a liquidation account in an amount equal to the amount of the
dividends with respect to the Association Common Stock waived by the Mutual
Holding Company plus the greater of (i) $4,556,000, which is equal to 100% of
the retained earnings of the Association as of June 30, 1993, the date of the
latest statement of financial condition contained in the final offering circular
utilized in the Association's initial public offering, or (ii) 54.6% of the
Association's total stockholders' equity as reflected in its latest statement of
financial condition contained in the final Prospectus utilized in the Conversion
and Reorganization. The function of the liquidation account will be to preserve
the rights of certain holders of Deposit Accounts in the Association who
maintain such accounts in the Association following the Conversion and
Reorganization to a priority to distributions in the unlikely event of a
liquidation of the Association subsequent to the Conversion and Reorganization.
(b) The liquidation account shall be maintained for the benefit of
Eligible Account Holders and Supplemental Eligible Account Holders, if any, who
maintain their Deposit Accounts in the Association after the Conversion and
Reorganization. Each such account holder will, with respect to each Deposit
Account held, have a related inchoate
24
<PAGE>
interest in a portion of the liquidation account balance, which interest will be
referred to in this Section 17 as the "subaccount balance." All Deposit Accounts
having the same social security number will be aggregated for purposes of
determining the initial subaccount balance with respect to such Deposit
Accounts, except as provided in Section 17(d) hereof.
(c) In the event of a complete liquidation of the Association
subsequent to the Conversion and Reorganization (and only in such event), each
Eligible Account Holder and Supplemental Eligible Account Holder, if any, shall
be entitled to receive a liquidation distribution from the liquidation account
in the amount of the then current subaccount balances for Deposit Accounts then
held (adjusted as described below) before any liquidation distribution may be
made with respect to the capital stock of the Association. No merger,
consolidation, sale of bulk assets or similar combination transaction with
another FDIC-insured institution in which the Association is not the surviving
entity shall be considered a complete liquidation for this purpose. In any
merger or consolidation transaction, the liquidation account shall be assumed by
the surviving entity.
(d) The initial subaccount balance for a Deposit Account held by an
Eligible Account Holder and Supplemental Eligible Account Holder, if any, shall
be determined by multiplying the opening balance in the liquidation account by a
fraction, of which the numerator is the amount of the Qualifying Deposits of
such account holder and the denominator is the total amount of Qualifying
Deposits of all Eligible Account Holders and Supplemental Eligible Account
Holders, if any. For Deposit Accounts in existence at both the Eligibility
Record Date and the Supplemental Eligibility Record Date, if any, separate
initial subaccount balances shall be determined on the basis of the Qualifying
Deposits in such Deposit Accounts on each such record date. Initial subaccount
balances shall not be increased, and shall be subject to downward adjustment as
provided below.
(e) If the aggregate deposit balance in the Deposit Account(s) of any
Eligible Account Holder or Supplemental Eligible Account Holder, if any, at the
close of business on any June 30 annual closing date, commencing June 30, 1997,
is less than the lesser of (a) the aggregate deposit balance in such Deposit
Account(s) at the close of business on any other annual closing date subsequent
to such record dates or (b) the aggregate deposit balance in such Deposit
Account(s) as of the Eligibility Record Date or the Supplemental Eligibility
Record Date, the subaccount balance for such Deposit Account(s) shall be
adjusted by reducing such subaccount balance in an amount proportionate to the
reduction in such deposit balance. In the event of such a downward adjustment,
the subaccount balance shall not be subsequently increased, notwithstanding any
subsequent increase in the deposit balance of the related Deposit Account(s).
The subaccount balance of an Eligible Account Holder or Supplemental Eligible
Account Holder, if any, will be reduced to zero if the Account Holder ceases to
maintain a Deposit Account at the Association that has the same social security
number as appeared on his Deposit Account(s) at the Eligibility Record Date or,
if applicable, the Supplemental Eligibility Record Date.
25
<PAGE>
(f) Subsequent to the Conversion and Reorganization, the Association
may not pay cash dividends generally on deposit accounts and/or capital stock of
the Association, or repurchase any of the capital stock of the Association, if
such dividend or repurchase would reduce the Association's regulatory capital
below the aggregate amount of the then current subaccount balances for Deposit
Accounts then held; otherwise, the existence of the liquidation account shall
not operate to restrict the use or application of any of the net worth accounts
of the Association.
(g) For purposes of this Section 17, a Deposit Account includes a
predecessor or successor account which is held by an Account Holder with the
same social security number.
18. TRANSFER OF DEPOSIT ACCOUNTS.
Each Deposit Account in the Association at the time of the consummation
of the Conversion and Reorganization shall become, without further action by the
holder, a Deposit Account in the Association equivalent in withdrawable amount
to the withdrawal value (as adjusted to give effect to any withdrawal made for
the purchase of Conversion Stock), and subject to the same terms and conditions
(except as to voting and liquidation rights) as such Deposit Account in the
Association immediately preceding consummation of the Conversion and
Reorganization. Holders of Deposit Accounts in the Association shall not, as
such holders, have any voting rights.
19. REQUIREMENTS FOLLOWING CONVERSION AND REORGANIZATION FOR
REGISTRATION, MARKET MAKING AND STOCK EXCHANGE LISTING.
In connection with the Conversion and Reorganization, the Holding
Company shall register the Holding Company Common Stock pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended, and shall undertake
not to deregister such stock for a period of three years thereafter. The Holding
Company also shall use its best efforts to (i) encourage and assist a market
maker to establish and maintain a market for the Holding Company Common Stock
and (ii) list the Holding Company Common Stock on a national or regional
securities exchange or to have quotations for such stock disseminated on the
National Association of Securities Dealers Automated Quotation System.
20. DIRECTORS AND OFFICERS OF THE ASSOCIATION.
Each person serving as a Director or Officer of the Association at the
time of the Conversion and Reorganization shall continue to serve as a Director
or Officer of the Association for the balance of the term for which the person
was elected prior to the Conversion and Reorganization, and until a successor is
elected and qualified. The number, names, business addresses and terms of the
Directors of the Association are set forth in the Plans of Merger included as
Annexes A and B hereto.
26
<PAGE>
21. REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS
FOLLOWING THE CONVERSION AND REORGANIZATION.
For a period of three years following the Conversion and
Reorganization, the Directors and Officers of the Holding Company and the
Association and their Associates may not purchase, without the prior written
approval of the OTS, Holding Company Common Stock except from a broker-dealer
registered with the SEC. This prohibition shall not apply, however, to (i) a
negotiated transaction arrived at by direct negotiation between buyer and seller
and involving more than 1% of the outstanding Holding Company Common Stock and
(ii) purchases of stock made by and held by any Tax-Qualified Employee Stock
Benefit Plan (and purchases of stock made by and held by any Non-Tax-Qualified
Employee Stock Benefit Plan following the receipt of stockholder approval of
such plan) which may be attributable to individual officers or directors.
The foregoing restriction on purchases of Holding Company Common Stock
shall be in addition to any restrictions that may be imposed by federal and
state securities laws.
22. RESTRICTIONS ON TRANSFER OF STOCK.
All shares of the Conversion Stock which are purchased by Persons other
than Directors and Officers shall be transferable without restriction, except in
connection with a transaction proscribed by Section 23 of this Plan. Shares of
Conversion Stock purchased by Directors and Officers of the Holding Company and
the Association on original issue from the Holding Company (by subscription or
otherwise) shall be subject to the restriction that such shares shall not be
sold or otherwise disposed of for value for a period of one year following the
date of purchase, except for any disposition of such shares following the death
of the original purchaser or pursuant to any merger or similar transaction
approved by the OTS. The shares of Conversion Stock issued by the Holding
Company to Directors and Officers shall bear the following legend giving
appropriate notice of such one-year restriction:
"The shares of stock evidenced by this Certificate are
restricted as to transfer for a period of one year from the date of
this Certificate pursuant to Part 563b of the Rules and Regulations of
the Office of Thrift Supervision. These shares may not be transferred
during such one-year period without a legal opinion of counsel for the
Company that said transfer is permissible under the provisions of
applicable law and regulation. This restrictive legend shall be deemed
null and void after one year from the date of this Certificate."
In addition, the Holding Company shall give appropriate instructions to
the transfer agent for the Holding Company Common Stock with respect to the
applicable restrictions relating to the transfer of restricted stock. Any shares
issued at a later date as a stock
27
<PAGE>
dividend, stock split or otherwise with respect to any such restricted stock
shall be subject to the same holding period restrictions as may then be
applicable to such restricted stock.
The foregoing restriction on transfer shall be in addition to any
restrictions on transfer that may be imposed by federal and state securities
laws.
23. RESTRICTIONS ON ACQUISITION OF STOCK OF THE HOLDING COMPANY.
The articles of incorporation of the Holding Company shall prohibit any
Person together with Associates or group of Persons acting in concert from
offering to acquire or acquiring, directly or indirectly, beneficial ownership
of more than 10% of any class of equity securities of the Holding Company, or of
securities convertible into more than 10% of any such class, for five years
following completion of the Conversion and Reorganization. The articles of
incorporation of the Holding Company also shall provide that all equity
securities beneficially owned by any Person in excess of 10% of any class of
equity securities during such five-year period shall be considered "excess
shares," and that excess shares shall not be counted as shares entitled to vote
and shall not be voted by any Person or counted as voting shares in connection
with any matters submitted to the stockholders for a vote. The foregoing
restrictions shall not apply to (i) any offer with a view toward public resale
made exclusively to the Holding Company by underwriters or a selling group
acting on its behalf, (ii) the purchase of shares by a Tax-Qualified Employee
Stock Benefit Plan established for the benefit of the employees of the Holding
Company and its subsidiaries which is exempt from approval requirements under 12
C.F.R. ss.574.3(c)(1)(vi) or any successor thereto, and (iii) any offer or
acquisition approved in advance by the affirmative vote of two-thirds of the
entire Board of Directors of the Holding Company. Directors, Officers or
Employees of the Holding Company or the Association or any subsidiary thereof
shall not be deemed to be Associates or a group acting in concert with respect
to their individual acquisitions of any class of equity securities of the
Holding Company solely as a result of their capacities as such.
24. TAX RULINGS OR OPINIONS.
Consummation of the Conversion and Reorganization is conditioned upon
prior receipt by the Primary Parties of either a ruling or an opinion of counsel
with respect to federal tax laws, and either a ruling or an opinion of counsel
with respect to Indiana tax laws, to the effect that consummation of the
transactions contemplated hereby will not result in a taxable reorganization
under the provisions of the applicable codes or otherwise result in any adverse
tax consequences to the Primary Parties or to account holders receiving
Subscription Rights before or after the Conversion and Reorganization, except in
each case to the extent, if any, that Subscription Rights are deemed to have
fair market value on the date such rights are issued.
28
<PAGE>
25. STOCK COMPENSATION PLANS.
(a) The Holding Company and the Association are authorized to adopt
Tax-Qualified Employee Stock Benefit Plans in connection with the Conversion
and Reorganization, including without limitation an employee stock ownership
plan.
(b) The Holding Company and the Association also are authorized to
adopt stock option plans, restricted stock grant plans and other
Non-Tax-Qualified Employee Stock Benefit Plans, provided that no stock options
shall be granted, and no shares of Conversion Stock shall be purchased, pursuant
to any of such plans prior to the earlier of (i) the one-year anniversary of the
consummation of the Conversion and Reorganization or (ii) the receipt of
stockholder approval of such plans at either an annual or special meeting of
stockholders of the Holding Company held no earlier than six months following
the Conversion and Reorganization.
(c) Existing as well as any newly-created Tax-Qualified Employee Stock
Benefit Plans may purchase shares of Conversion Stock in the Offerings, to the
extent permitted by the terms of such benefit plans and this Plan.
26. DIVIDEND AND REPURCHASE RESTRICTIONS ON STOCK.
(a) The Holding Company may not repurchase any shares of its capital
stock during the first year following consummation of the Conversion and
Reorganization. During the second and third years following consummation of the
Conversion and Reorganization, the Holding Company may not repurchase any of its
capital stock from any person, other than pursuant to (i) an offer to repurchase
made by the Holding Company on a pro rata basis to all of its stockholders and
which is approved by the OTS, (ii) the repurchase of qualifying shares of a
director, if any, (iii) purchases in the open market by a Tax-Qualified or
Non-Tax-Qualified Employee Stock Benefit Plan in an amount reasonable and
appropriate to fund the plan, or (iv) a repurchase program approved by the OTS.
(b) The Association may not declare or pay a cash dividend on, or
repurchase any of, its capital stock if the effect thereof would cause the
regulatory capital of the Association to be reduced below the amount required
for the liquidation account. Any dividend declared or paid on, or repurchase of,
the Association's capital stock also shall be in compliance with Section 563.134
of the Regulations Applicable to All Savings Associations, or any successor
thereto.
(c) Notwithstanding anything to the contrary set forth herein, the
Holding Company may repurchase its capital stock to the extent and subject to
the requirements set forth in Section 563b.3(g)(3) of the Regulations Applicable
to All Savings Associations, or any successor thereto, or as otherwise may be
approved by the OTS.
29
<PAGE>
27. PAYMENT OF FEES TO BROKERS.
The Primary Parties may elect to offer to pay fees on a per share basis
to securities brokers who assist purchasers of Conversion Stock in the
Offerings.
28. DISSENTING STOCKHOLDERS.
If any Stockholders of the Association dissent from the Conversion and
Reorganization and exercise and perfect the right to obtain valuation of and
payment for their shares of Association Common Stock ("Dissenting Shares")
pursuant to 12 C.F.R. ss. 552.14, then (a) the Dissenting Shares, if any, will
be deemed to have been retired and cancelled immediately prior to consummation
of the Conversion and Reorganization, with the effect that such shares will not
be exchanged for Holding Company Common Stock pursuant to Section 3(h)(ii)
hereof, and (b) all payments to be made to the holders of such Dissenting Shares
will be made directly by the Association. Consummation of the Conversion and
Reorganization is conditioned upon the number of Dissenting Shares being less
than 10.0% of the shares of Association Common Stock issued and outstanding
immediately prior to consummation of the Conversion and Reorganization.
29. EFFECTIVE DATE.
The effective date of the Conversion and Reorganization shall be the
date upon which the last of the following actions occurs: (i) the filing of
Articles of Combination with the OTS with respect to the Mutual Holding Company
Merger, (ii) the filing of Articles of Combination with the OTS with respect to
the Association Merger and (iii) the closing of the issuance of the shares of
Conversion Stock in the Offerings. The filing of Articles of Combination
relating to the Mutual Holding Company Merger and the Association Merger and the
closing of the issuance of shares of Conversion Stock in the Offerings shall not
occur until all requisite regulatory, Member and Stockholder approvals have been
obtained, all applicable waiting periods have expired and sufficient
subscriptions and orders for the Conversion Stock have been received. It is
intended that the closing of the Mutual Holding Company Merger, the Association
Merger and the sale of shares of Conversion Stock in the Offerings shall occur
consecutively and substantially simultaneously.
30. AMENDMENT OR TERMINATION OF THE PLAN.
If deemed necessary or desirable by the Boards of Directors of the
Primary Parties, this Plan may be substantively amended, as a result of comments
from regulatory authorities or otherwise, at any time prior to the solicitation
of proxies from Members and Stockholders to vote on the Plan and at any time
thereafter with the concurrence of the OTS. Any amendment to this Plan made
after approval by the Members and Stockholders with the concurrence of the OTS
shall not necessitate further approval by the Members or Stockholders unless
otherwise required by the OTS. This Plan shall terminate if the sale of all
shares of Conversion Stock is not completed within 24 months from the date of
the
30
<PAGE>
Special Meeting. Prior to the earlier of the Special Meeting and the
Stockholders' Meeting, this Plan may be terminated by the Boards of Directors of
the Primary Parties without approval of the OTS; after the Special Meeting or
the Stockholders' Meeting, the Boards of Directors may terminate this Plan only
with the approval of the OTS.
31. INTERPRETATION OF THE PLAN.
All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of each of the Boards of Directors of the
Primary Parties shall be final, subject to the authority of the OTS.
31
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to the
Plan to be executed by their duly authorized officers as of this 22nd day of
August 1996.
DEARBORN MUTUAL HOLDING COMPANY
Attest: /s/ Margaret M. Abner By: /s/ Donald C. Siemers
--------------------------------- -----------------------------
Margaret M. Abner Donald C. Siemers
Secretary President and Chief
Executive Officer
DEARBORN SAVINGS ASSOCIATION, F.A.
Attest: /s/ Margaret M. Abner By: /s/ Donald C. Siemers
-------------------------------- -----------------------------
Margaret M. Abner Donald C. Siemers
Secretary President and Chief
Executive Officer
VISION BANCORP, INC.
Attest: /s/ Margaret M. Abner By: /s/ Donald C. Siemers
-------------------------------- -------------------------------
Margaret M. Abner Donald C. Siemers
Secretary President and Chief Executive
Officer
32
<PAGE>
ANNEX A
PLAN OF MERGER
Plan of Merger, dated as of August 8, 1996, between Dearborn Mutual
Holding Company (the "Mutual Holding Company"), a federally-chartered mutual
holding company, and Dearborn Savings Association, F.A. (the "Association" or
the "Surviving Corporation"), a federally-chartered savings association.
WITNESSETH:
WHEREAS, the Mutual Holding Company and the Association have adopted a
Plan of Conversion of the Mutual Holding Company and Agreement and Plan of
Reorganization between Vision Bancorp, Inc. (the "Holding Company") and the
Association (the "Plan of Conversion"), pursuant to which (i) the Mutual Holding
Company will convert to a federally-chartered interim stock savings institution
and simultaneously merge with and into the Association, (ii) the Association and
a newly-formed interim savings institution will merge, pursuant to which the
Association will become a wholly-owned subsidiary of the Holding Company (the
"Association Merger"), and (iii) the Holding Company will offer shares of its
common stock in the manner set forth in the Plan of Conversion; and
WHEREAS, the Mutual Holding Company, which owns 54.6% of the
outstanding common stock of the Association, par value $.10 per share
("Association Common Stock"), will convert to a federally-chartered interim
stock savings institution pursuant to the Plan of Conversion and merge with and
into the Association pursuant to this Plan of Merger (the "Mutual Holding
Company Merger"), pursuant to which, among other things, all interests of
members in the Mutual Holding Company and all shares of Association Common Stock
held by the Mutual Holding Company will be cancelled; and
WHEREAS, the Mutual Holding Company and the Association (the
"Constituent Corporations") desire to provide for the terms and conditions of
the Mutual Holding Company Merger;
NOW, THEREFORE, the Mutual Holding Company and the Association hereby
agree as follows:
1. Effective Date. The Mutual Holding Company Merger shall become
effective on the date specified in the endorsement of the Articles of
Combination relating to the Mutual Holding Company Merger by the Secretary of
the Office of Thrift Supervision ("OTS") pursuant to 12 C.F.R. ss. 552.13(k), or
any successor thereto (the "Effective Date").
<PAGE>
2. The Mutual Holding Company Merger and Effect Thereof. Subject to the
terms and conditions set forth herein and the prior approval of the OTS of the
Conversion and Reorganization, as defined in the Plan of Conversion, and the
expiration of all applicable waiting periods, the Mutual Holding Company shall
convert from the mutual form to a federal interim stock savings institution and
simultaneously merge with and into the Association, which shall be the Surviving
Corporation. Upon consummation of the Mutual Holding Company Merger, the
Surviving Corporation shall be considered the same business and corporate entity
as each of the Constituent Corporations and thereupon and thereafter all the
property, rights, powers and franchises of each of the Constituent Corporations
shall vest in the Surviving Corporation and the Surviving Corporation shall be
subject to and be deemed to have assumed all of the debts, liabilities,
obligations and duties of each of the Constituent Corporations and shall have
succeeded to all of each of their relationships, fiduciary or otherwise, as
fully and to the same extent as if such property, rights, privileges, powers,
franchises, debts, obligations, duties and relationships had been originally
acquired, incurred or entered into by the Surviving Corporation. In addition,
any reference to either of the Constituent Corporations in any contract, will or
document, whether executed or taking effect before or after the Effective Date,
shall be considered a reference to the Surviving Corporation if not inconsistent
with the other provisions of the contract, will or document; and any pending
action or other judicial proceeding to which either of the Constituent
Corporations is a party shall not be deemed to have abated or to have been
discontinued by reason of the Mutual Holding Company Merger, but may be
prosecuted to final judgment, order or decree in the same manner as if the
Mutual Holding Company Merger had not occurred or the Surviving Corporation may
be substituted as a party to such action or proceeding, and any judgment, order
or decree may be rendered for or against it that might have been rendered for or
against either of the Constituent Corporations if the Mutual Holding Company
Merger had not occurred.
3. Cancellation of Association Common Stock held by the Mutual Holding
Company and Member Interests; Liquidation Account
(a) On the Effective Date, (i) each share of Association Common Stock
issued and outstanding immediately prior to the Effective Date and held by the
Mutual Holding Company shall, by virtue of the Mutual Holding Company Merger and
without any action on the part of the holder thereof, be cancelled, (ii) the
interests in the Mutual Holding Company of any person, firm or entity who or
which qualified as a member of the Mutual Holding Company in accordance with its
mutual charter and bylaws and the laws of the United States prior to the Mutual
Holding Company's conversion from mutual to stock form (the "Members") shall, by
virtue of the Mutual Holding Company Merger and without any action on the part
of the holder thereof, be cancelled, and (iii) the Association shall establish a
liquidation account on behalf of each depositor member of the Mutual Holding
Company, as defined in the Plan of Conversion, in accordance with Section 17 of
the Plan of Conversion.
A-2
<PAGE>
(b) At or after the Effective Date and prior to the Association Merger,
each certificate or certificates theretofore evidencing issued and outstanding
shares of Association Common Stock, other than any such certificate or
certificates held by the Mutual Holding Company, which shall be cancelled, shall
continue to represent issued and outstanding shares of Association Common Stock.
4. Dissenting Shares. No Member of the Mutual Holding Company shall
have any dissenter or appraisal rights in connection with the Mutual Holding
Company Merger. However, stockholders of the Association shall have dissenter or
appraisal rights in accordance with Section 28 of the Plan of Conversion and 12
C.F.R. ss. 552.14.
5. Name of Surviving Corporation. The name of the Surviving Corporation
shall be "Dearborn Savings Association, F.A."
6. Directors of the Surviving Corporation. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Corporation and applicable law, the number of directors of the Surviving
Corporation shall be six. The names of those persons who, upon and after the
Effective Date, shall be directors of the Surviving Corporation are set forth
below. Each such director shall serve for the term which expires at the annual
meeting of stockholders of the Surviving Corporation in the year set forth after
his respective name, and until a successor is elected and qualified.
Name Term Expires
---- ------------
Robert P. Sonntag 1998
David P. Lorey 1998
Ronald J. Denney 1997
Dennis G. Richter 1997
Donald C. Siemers 1996
Richard B. Meador, III 1996
The address of each such director is c/o Dearborn Savings Association,
F.A., 118 Walnut Street, Lawrenceburg, Indiana 47025-1838.
7. Officers of the Surviving Corporation. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Corporation and applicable law, the officers of the Association immediately
prior to the Effective Date shall be the officers of the Surviving Corporation.
8. Offices. Upon the Effective Date, all offices of the Association
shall be offices of the Surviving Corporation. As of the Effective Date, the
home and only deposit-taking office of the Surviving Corporation shall remain at
118 Walnut Street, Lawrenceburg, Indiana 47025-1838, except for the addition of
deposit-taking offices authorized or the deletion of deposit-taking offices
closed subsequent to the date hereof and the Effective Date.
A-3
<PAGE>
9. Charter and Bylaws. On and after the Effective Date, the Charter of
the Association as in effect immediately prior to the Effective Date shall be
the Charter of the Surviving Corporation until amended in accordance with the
terms thereof and applicable law, except that the Charter shall be amended to
provide for the establishment of a liquidation account in accordance with
applicable law and regulation.
On and after the Effective Date, the Bylaws of the Association as in
effect immediately prior to the Effective Date shall be the Bylaws of the
Surviving Corporation until amended in accordance with the terms thereof and
applicable law.
10. Stockholder and Member Approvals. The affirmative votes of the
holders of Association Common Stock set forth in Section 3(e) of the Plan of
Conversion and the Members set forth in Section 3(c) of the Plan of Conversion
shall be required to approve the Plan of Conversion, of which this Plan of
Merger is a part, on behalf of the Association and the Mutual Holding Company,
respectively.
11. Abandonment of Agreement. This Plan of Merger may be abandoned by
either the Mutual Holding Company or the Association at any time before the
Effective Date in the manner set forth in Section 30 of the Plan of Conversion.
12. Amendments. This Plan of Merger may be amended in the manner set
forth in Section 30 of the Plan of Conversion by a subsequent writing signed by
the parties hereto upon the approval of the Board of Directors of each of the
parties hereto.
13. Successors. This Agreement shall be binding on the successors of
the Mutual Holding Company and the Association.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the United States of America.
A-4
<PAGE>
IN WITNESS WHEREOF, the Mutual Holding Company and the Association have
caused this Plan of Merger to be executed by their duly authorized officers as
of the day and year first above written.
DEARBORN MUTUAL HOLDING COMPANY
Attest: /s/ Margaret M. Abner By: /s/ Donald C. Siemers
-------------------------- ----------------------------------
Margaret M. Abner Donald C. Siemers
Secretary President and Chief Executive
Officer
DEARBORN SAVINGS ASSOCIATION, F.A.
Attest: /s/ Margaret M. Abner By: /s/ Donald C. Siemers
-------------------------- -----------------------------------
Margaret M. Abner Donald C. Siemers
Secretary President and Chief Executive
Officer
A-5
<PAGE>
ANNEX B
PLAN OF MERGER
Plan of Merger, dated as of August 8, 1996 among Dearborn Savings
Association, F.A. (the "Association" or the "Surviving Association"), a
federally-chartered savings association, Vision Bancorp, Inc. (the "Holding
Company"), an Indiana corporation, and Dearborn Interim Savings Association
("Interim"), a federally-chartered interim savings association.
WITNESSETH:
WHEREAS, the Association has organized the Holding Company as a
first-tier, wholly-owned subsidiary for the purpose of becoming the stock
holding company of the Association upon completion of the Conversion and
Reorganization, as defined in the Plan of Conversion of Dearborn Mutual Holding
Company (the "Mutual Holding Company") and Agreement and Plan of Reorganization
between the Holding Company and the Association (the "Plan of Conversion"); and
WHEREAS, the Mutual Holding Company, a federally-chartered mutual
holding company which owns 54.6% of the common stock of the Association, par
value $.10 per share ("Association Common Stock"), will convert to a
federally-chartered interim stock savings institution and simultaneously merge
with and into the Association pursuant to the Plan of Conversion and the Plan of
Merger included as Annex A thereto (the "Mutual Holding Company Merger"),
pursuant to which all shares of Association Common Stock held by the Mutual
Holding Company will be cancelled; and
WHEREAS, the formation of a stock holding company by the Association
will be facilitated by causing the Holding Company to become the sole
stockholder of a newly-formed interim federally-chartered stock savings
institution and then merging the interim savings institution with and into the
Association (the "Association Merger"), pursuant to which the Association will
become a wholly-owned subsidiary of the Holding Company and, in connection
therewith, all outstanding shares of Association Common Stock will be converted
automatically into and become shares of common stock of the Holding Company, par
value $.10 per share ("Holding Company Common Stock"); and
WHEREAS, Interim is being organized by the officers of the Association
as an interim federally-chartered stock savings institution with the Holding
Company as its sole stockholder in order to effect the Association Merger; and
<PAGE>
WHEREAS, the Association and Interim (the "Constituent Associations")
desire to provide for the terms and conditions of the Association Merger;
NOW, THEREFORE, the Association and Interim hereby agree as follows:
1. Effective Date. The Association Merger shall become effective on the
date specified in the endorsement of the Articles of Combination relating to the
Association Merger by the Secretary of the Office of Thrift Supervision ("OTS")
pursuant to 12 C.F.R. ss. 552.13(k), or any successor thereto (the "Effective
Date").
2. The Association Merger and Effect Thereof. Subject to the terms and
conditions set forth herein and the prior approval of the OTS of the Conversion
and Reorganization, as defined in the Plan of Conversion, and the expiration of
all applicable waiting periods, Interim shall merge with and into the
Association, which shall be the Surviving Association. Upon consummation of the
Association Merger, the Surviving Association shall be considered the same
business and corporate entity as each of the Constituent Associations and
thereupon and thereafter all the property, rights, powers and franchises of each
of the Constituent Associations shall vest in the Surviving Association and the
Surviving Association shall be subject to and be deemed to have assumed all of
the debts, liabilities, obligations and duties of each of the Constituent
Associations and shall have succeeded to all of each of their relationships,
fiduciary or otherwise, as fully and to the same extent as if such property,
rights, privileges, powers, franchises, debts, obligations, duties and
relationships had been originally acquired, incurred or entered into by the
Surviving Association. In addition, any reference to either of the Constituent
Associations in any contract, will or document, whether executed or taking
effect before or after the Effective Date, shall be considered a reference to
the Surviving Association if not inconsistent with the other provisions of the
contract, will or document; and any pending action or other judicial proceeding
to which either of the Constituent Associations is a party shall not be deemed
to have abated or to have been discontinued by reason of the Association Merger,
but may be prosecuted to final judgment, order or decree in the same manner as
if the Association Merger had not occurred or the Surviving Association may be
substituted as a party to such action or proceeding, and any judgment, order or
decree may be rendered for or against it that might have been rendered for or
against either of the Constituent Associations if the Association Merger had not
occurred.
3. Conversion of Stock.
(a) On the Effective Date, (i) each share of Association Common Stock
issued and outstanding immediately prior to the Effective Date shall, by virtue
of the Association Merger and without any action on the part of the holder
thereof, be converted into the right to receive Holding Company Common Stock
based on the Exchange Ratio, as defined in the Plan of Conversion, plus the
right to receive cash in lieu of any fractional share interest, as determined in
accordance with Section 3(c) hereof, (ii) each share of common stock, par value
$.10 per share, of Interim ("Interim Common Stock") issued and outstanding
B-2
<PAGE>
immediately prior to the Effective Date shall, by virtue of the Association
Merger and without any action on the part of the holder thereof, be converted
into one share of Association Common Stock, and (iii) each share of Holding
Company Common Stock issued and outstanding immediately prior to the Effective
Date shall, by virtue of the Association Merger and without any action on the
part of the holder thereof, be cancelled. By voting in favor of this Plan of
Merger, the Holding Company, as the sole stockholder of Interim, shall have
agreed (i) to issue shares of Holding Company Common Stock in accordance with
the terms hereof and (ii) to cancel all previously issued and outstanding shares
of Holding Company Common Stock upon the effectiveness of the Association
Merger.
(b) On and after the Effective Date, there shall be no registrations of
transfers on the stock transfer books of Interim or the Association of shares of
Interim Common Stock or Association Common Stock which were outstanding
immediately prior to the Effective Date.
(c) Notwithstanding any other provision hereof, no fractional shares of
Holding Company Common Stock shall be issued to holders of Association Common
Stock. In lieu thereof, each holder of shares of Association Common Stock
entitled to a fraction of a share of Holding Company Common Stock shall, at the
time of surrender of the certificate or certificates representing such holder's
shares, receive an amount of cash equal to the product arrived at by multiplying
such fraction of a share of Holding Company Common Stock by the Actual Purchase
Price, as defined in the Plan of Conversion. No such holder shall be entitled to
dividends, voting rights or any other rights in respect of any fractional share.
4. Exchange of Shares.
(a) At or after the Effective Date, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of Association
Common Stock, upon surrender of the same to an agent, duly appointed by the
Holding Company ("Exchange Agent"), shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of full shares of
Holding Company Common Stock for which the shares of Association Common Stock
theretofore represented by the certificate or certificates so surrendered shall
have been converted as provided in Section 3(a) hereof. The Exchange Agent shall
mail to each holder of record of an outstanding certificate which immediately
prior to the Effective Date evidenced shares of Association Common Stock, and
which is to be exchanged for Holding Company Common Stock as provided in Section
3(a) hereof, a form of letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to such certificate shall pass,
only upon delivery of such certificate to the Exchange Agent) advising such
holder of the terms of the exchange effected by the Association Merger and of
the procedure for surrendering to the Exchange Agent such certificate in
exchange for a certificate or certificates evidencing Holding Company Common
Stock.
B-3
<PAGE>
(b) No holder of a certificate theretofore representing shares of
Association Common Stock shall be entitled to receive any dividends in respect
of the Holding Company Common Stock into which such shares shall have been
converted by virtue of the Association Merger until the certificate representing
such shares of Association Common Stock is surrendered in exchange for
certificates representing shares of Holding Company Common Stock. In the event
that dividends are declared and paid by the Holding Company in respect of
Holding Company Common Stock after the Effective Date but prior to surrender of
certificates representing shares of Association Common Stock, dividends payable
in respect of shares of Holding Company Common Stock not then issued shall
accrue (without interest). Any such dividends shall be paid (without interest)
upon surrender of the certificates representing such shares of Association
Common Stock. The Holding Company shall be entitled, after the Effective Date,
to treat certificates representing shares of Association Common Stock as
evidencing ownership of the number of full shares of Holding Company Common
Stock into which the shares of Association Common Stock represented by such
certificates shall have been converted, notwithstanding the failure on the part
of the holder thereof to surrender such certificates.
(c) The Holding Company shall not be obligated to deliver a certificate
or certificates representing shares of Holding Company Common Stock to which a
holder of Association Common Stock would otherwise be entitled as a result of
the Association Merger until such holder surrenders the certificate or
certificates representing the shares of Association Common Stock for exchange as
provided in this Section 4, or, in default thereof, an appropriate Affidavit of
Loss and Indemnity Agreement and/or a bond as may be required in each case by
the Holding Company. If any certificate evidencing shares of Holding Company
Common Stock is to be issued in a name other than that in which the certificate
evidencing Association Common Stock surrendered in exchange therefor is
registered, it shall be a condition of the issuance thereof that the certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange pay to the Exchange Agent
any transfer or other tax required by reason of the issuance of a certificate
for shares of Holding Company Common Stock in any name other than that of the
registered holder of the certificate surrendered or otherwise establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) If, between the date hereof and the Effective Date, the shares of
Association Common Stock shall be changed into a different number or class of
shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock dividend thereon
shall be declared with a record date within said period, the Exchange Ratio
specified in Section 3(a) hereof shall be adjusted accordingly.
5. Dissenting Shares. Holders of shares of Association Common Stock
shall have dissenter or appraisal rights in connection with the Association
Merger in accordance with Section 28 of the Plan of Conversion and 12 C.F.R.
ss. 552.14(b).
B-4
<PAGE>
6. Name of Surviving Association. The name of the Surviving Association
shall be "Dearborn Bank"
7. Directors of the Surviving Association. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Association and applicable law, the number of directors of the Surviving
Association shall be six. The names of those persons who, upon and after the
Effective Date, shall be directors of the Surviving Association are set forth
below. Each such director shall serve for the term which expires at the annual
meeting of stockholders of the Surviving Association in the year set forth after
his respective name, and until a successor is elected and qualified.
Name Term Expires
---- -------------
Robert P. Sonntag 1998
David P. Lorey 1998
Ronald J. Denney 1997
Dennis G. Richter 1997
Donald C. Siemers 1996
Richard B. Meador, III 1996
The address of each such director is c/o Dearborn Bank, 118 Walnut
Street, Lawrenceburg, Indiana 47025-1838.
8. Officers of the Surviving Association. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Association and applicable law, the officers of the Association immediately
prior to the Effective Date shall be the officers of the Surviving Association.
9. Offices. Upon the Effective Date, all offices of the Association
shall be offices of the Surviving Association. As of the Effective Date, the
home and only deposit-taking office of the Surviving Association shall remain at
118 Walnut Street, Lawrenceburg, Indiana 47025-1838, except for the addition of
deposit-taking offices authorized or the deletion of deposit-taking offices
closed subsequent to the date hereof and the Effective Date.
10. Charter and Bylaws. On and after the Effective Date, the Charter
and Bylaws of the Association as in effect immediately prior to the Effective
Date shall be the Charter and Bylaws of the Surviving Association until amended
in accordance with the terms thereof and applicable law.
11. Savings Accounts. Upon the Effective Date, any savings accounts of
Interim, without reissue, shall be and become savings accounts of the Surviving
Association without change in their respective terms, including, without
limitation, maturity, minimum required balances or withdrawal value.
B-5
<PAGE>
12. Stock Compensation Plans. By voting in favor of this Plan of
Merger, the Holding Company shall have approved adoption of the Association's
existing 1993 Stock Incentive Plan, 1993 Directors' Stock Option Plan and
Management Recognition Plan (collectively, the "Plans") as plans of the Holding
Company and shall have agreed to issue Holding Company Common Stock in lieu of
Association Common Stock pursuant to the terms of such Plans. As of the
Effective Date, rights outstanding under the Plans shall be assumed by the
Holding Company and thereafter shall be rights only for shares of Holding
Company Common Stock, with each such right being for a number of shares of
Holding Company Common Stock equal to the number of shares of Association Common
Stock that were available thereunder immediately prior to the Effective Date
times the Exchange Ratio, as defined in the Plan of Conversion, and the price of
each such right shall be adjusted to reflect the Exchange Ratio and so that the
aggregate purchase price of the right is unaffected, but with no change in any
other term or condition of such right. The Holding Company shall make
appropriate amendments to the Plans to reflect the adoption of the Plans by the
Holding Company without adverse effect upon the rights outstanding thereunder.
13. Stockholder Approval. The affirmative votes of the holders of
Association Common Stock set forth in Section 3 of the Plan of Conversion shall
be required to approve the Plan of Conversion, of which this Plan of Merger is a
part, on behalf of the Association. The approval of the Holding Company, as the
sole holder of the Interim Common Stock, shall be required to approve the Plan
of Conversion, of which this Plan of Merger is a part, on behalf of Interim.
14. Registration; Other Approvals. In addition to the approvals set
forth in Sections 1 and 14 hereof and the Plan of Conversion, the parties'
obligations to consummate the Association Merger shall be subject to the Holding
Company Common Stock to be issued hereunder in exchange for Association Common
Stock being registered under the Securities Act of 1993, as amended, and
registered or qualified under applicable state securities laws, as well as the
receipt of all other approvals, consents or waivers as the parties may deem
necessary or advisable.
15. Abandonment of Agreement. This Plan of Merger may be abandoned by
either the Association or Interim at any time before the Effective Date in the
manner set forth in Section 30 of the Plan of Conversion.
16. Amendments. This Plan of Merger may be amended in the manner set
forth in Section 30 of the Plan of Conversion by a subsequent writing signed by
the parties hereto upon the approval of the Board of Directors of each of the
parties hereto.
17. Successors. This Agreement shall be binding on the successors of
the Association and Interim.
B-6
<PAGE>
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the United States of America.
IN WITNESS WHEREOF, the Association and Interim have caused this Plan
of Merger to be executed by their duly authorized officers as of the day and
year first above written.
DEARBORN SAVINGS ASSOCIATION, F.A.
Attest: /s/ Margaret M. Abner By: /s/ Donald C. Siemers
--------------------------- -------------------------------
Margaret M. Abner Donald C. Siemers
Secretary President and Chief
Executive Officer
DEARBORN INTERIM SAVINGS ASSOCIATION
Attest: /s/ Margaret M. Abner By: /s/ Donald C. Siemers
---------------------------- -------------------------------
Margaret M. Abner Donald C. Siemers
Secretary President and Chief
Executive Officer
B-7
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
VISION BANCORP, INC.
ARTICLE I
NAME
Name. The name of the corporation is Vision Bancorp, Inc. (hereinafter
referred to as the "Corporation").
ARTICLE II
DURATION
Duration. The period of duration of the existence of the Corporation
is perpetual.
ARTICLE III
PURPOSE; EFFECTIVE DATE
Purpose and Effective Date. The purpose of the Corporation is to engage
in any lawful activity or business for which a corporation may be incorporated
under the Indiana Business Corporation Law, I.C. Section 23-1-17-1, et seq., as
amended ("Act"). These Articles of Incorporation shall become effective upon the
date that they are endorsed as filed with the Secretary of the State of Indiana.
ARTICLE IV
REGISTERED OFFICE; REGISTERED AGENT; SOLE INCORPORATOR
Registered Office and Registered Agent; Sole Incorporator. The address
of the registered office of the Corporation in the State of Indiana is 118
Walnut Street, in the City of Lawrenceburg, County of Dearborn, Indiana 47025.
The name of the registered agent at such address is: Donald C. Siemers, who is a
resident of the State of Indiana and whose business office is the same as the
Corporation's registered office. The address of the Corporation's registered
office shall also serve as the principal office and mailing address of the
Corporation.
The name and address of the sole incorporator of the Corporation is
Dearborn Savings Association, F.A., 118 Walnut Street, Lawrenceburg, Indiana
47025.
<PAGE>
ARTICLE V
CAPITAL STOCK
Capital Stock. The total number of shares of capital stock which the
Corporation has authority to issue is 10,000,000 of which 8,000,000 shall be
common stock, $0.10 par value per share (hereinafter the "Common Stock"), and of
which 2,000,000 shall be preferred stock, no par value per share (hereinafter
the "Preferred Stock"). The Board of Directors shall have the authority to
establish series of unissued shares of any class of capital stock by fixing and
determining the designations, preferences, limitations and relative rights,
including voting rights, of the shares of any series so established to the same
extent that such designations, preferences, limitations and relative rights
could be stated if fully set forth in these Articles of Incorporation. Except to
the extent required by governing law, rule or regulation, the shares of capital
stock may be issued from time to time to such persons, for such consideration,
and upon such terms and conditions as the Board of Directors may from time to
time determine, without further approval of stockholders. The Corporation shall
have the authority to purchase its capital stock out of funds lawfully available
therefor, which funds shall include, without limitation, the Corporation's
unreserved and unrestricted capital. Shares of Corporation capital stock
acquired by the Corporation shall constitute authorized but unissued shares.
Stockholders shall not be liable for the debts of the Corporation.
A description of the different classes and series (if any) of the
Corporation's capital stock and a statement of the designations, and the
relative rights, preferences and limitations of the shares of each class of and
series (if any) of capital stock are as follows:
A. Common Stock. Except as provided in this Article V (or in any
resolution or resolutions adopted by the Board of Directors pursuant hereto),
the exclusive voting power shall be vested in the Common Stock, the holders
thereof being entitled to one vote for each share of such Common Stock standing
in the holder's name on the books of the Corporation. Subject to any rights and
preferences of any class of stock having preference over the Common Stock,
holders of Common Stock shall be entitled to such dividends as may be declared
by the Board of Directors out of funds lawfully available therefor. Upon any
liquidation, dissolution or winding up of the affairs of the Corporation,
whether voluntary or involuntary, holders of Common Stock shall be entitled to
receive pro rata the remaining assets of the Corporation after the payment or
provision for payment of the Corporation's debts and liabilities and after the
holders of any class of stock having preference over the Common Stock have been
paid in full any sums to which they may be entitled.
B. Preferred Stock. The Board of Directors is hereby expressly
authorized to provide, by resolution or resolutions, out of the unissued shares
of Preferred Stock, for series of Preferred Stock. Before any shares of any such
series are issued, the Board of Directors
2
<PAGE>
shall fix, and hereby is expressly empowered to fix, by resolution or
resolutions, the following provisions of the shares thereof:
(a) The designation of such series, the number of shares to
constitute such series and the stated value thereof;
(b) Whether the shares of such series shall have voting
rights, in addition to any voting rights provided by law, and, if so,
the terms of such voting rights, which may be general or limited;
(c) The dividends, if any, payable on such series, whether any
such dividends shall be cumulative, and, if so, from what dates, the
conditions and dates upon which such dividends shall be payable, the
preference or relation which such dividends shall bear to the dividends
payable on any shares of stock of any other class or any other series
of this class;
(d) Whether the shares of such series shall be subject to
redemption by the Corporation, and, if so, the times, prices and other
conditions of such redemption;
(e) The amount or amounts payable upon shares of such series,
and the rights of the holders of such series in, the voluntary or
involuntary liquidation, dissolution or winding up, or upon any
distribution of the assets, of the Corporation;
(f) Whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to and
manner in which any such retirement or sinking fund shall be applied to
the purchase or redemption of the shares of such series for retirement
or other corporate purposes and the terms and provisions relative to
the operation thereof;
(g) Whether the shares of such series shall be convertible
into, or exchangeable for, shares of stock of any other class or any
other series of this class or any other securities, and, if so, the
price or prices or the rate or rates of conversion or exchange and the
method, if any, of adjusting the same, and any other terms and
conditions of conversion or exchange;
(h) The price or other consideration for which the shares of
such series shall be issued;
(i) Whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued shares of
preferred stock and whether such shares may be reissued as shares of
the same or any other series of preferred stock;
3
<PAGE>
(j) The limitations and restrictions, if any, to be effective
while any shares of such series are outstanding upon the payment of
dividends or the making of other distributions on, and upon the
purchase, redemption or other acquisition by the Corporation of, the
Common Stock or shares of stock of any other class or any other series
of this class;
(k) The conditions or restrictions, if any, upon the creation
of indebtedness of the Corporation or upon the issue of any additional
stock, including additional shares of such series or of any other
series of this class or of any other class; and
(l) Any other powers, preferences and relative, participating,
optional and other special rights, and any qualifications, limitations
and restrictions thereof.
The powers, preferences and relative, participating, optional and other
special rights, of each series of Preferred Stock, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of any and
all other series, except that shares of any one series issued at different times
may differ as to the dates from which dividends thereon shall accrue and/or be
cumulative.
Prior to the issuance of any shares of a series of capital stock
established by resolution adopted by the Board of Directors, the Corporation
shall file with the Secretary of State of Indiana Articles of Amendment as
required by the Act. Upon the filing of such Articles of Amendment by the
Secretary of State, the resolution establishing and designating the series and
fixing and determining the preferences, limitations, and relative rights thereof
shall become an amendment of these Articles of Incorporation, effective without
stockholder action.
ARTICLE VI
NO PREEMPTIVE RIGHTS
Preemptive Rights. No holder of the capital stock of the Corporation
shall be entitled as such, as a matter of right or otherwise, to subscribe for
or purchase any part of any new or additional issue of equity or debt of any
class or series whatsoever, of the Corporation, or of securities convertible
into equity or debt of any class whatsoever, whether now or hereafter
authorized, or whether issued for cash or other consideration or by way of a
dividend.
4
<PAGE>
ARTICLE VII
BOARD OF DIRECTORS
Directors. The initial Board of Directors of the Corporation shall be:
Ronald J. Denney
David P. Lorey
Richard B. Meador, III
Dennis G. Richter
Donald C. Siemers
Robert P. Sonntag
The business address of each member of the Board of Directors of the
Corporation shall be 118 Walnut Street, Lawrenceburg, Indiana 47025.
The business and affairs of the Corporation shall be managed by or
under the direction of a Board of Directors. Except as otherwise fixed pursuant
to the provisions of Article V hereof relating to the rights of the holders of
any class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation to elect additional directors, the number of
directors shall be determined by resolution of the Board of Directors as
provided in the Corporation's Bylaws, as may be amended from time to time. In
addition, the number of directors shall not be less than five nor greater than
15. Directors shall be elected by a plurality of the votes cast by the holders
of shares entitled to vote in the election of directors at a meeting of
stockholders at which a quorum is present. There shall be no cumulative voting
for the election of directors of the Corporation.
A. Classification and Term. The Board of Directors, other than those
who may be elected by the holders of any class or series of stock having
preference over the Common Stock as to dividends or upon liquidation, shall be
divided into three classes as nearly equal in number as possible, with one class
to be elected annually, as set forth in the Bylaws of the Corporation.
B. Vacancies. Except as otherwise fixed pursuant to the provisions of
Article V hereof relating to the rights of the holders of any class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation to elect directors, any vacancy occurring in the Board of Directors,
by reason of an increase in the number of directors or otherwise, shall be
filled by a majority vote of the Whole Board of Directors and a majority of the
Continuing Directors then in office, as defined by Article X, though less than a
quorum of the Board of Directors, and any director so chosen shall be elected
for a term of office continuing until the end of the term for which such
director's predecessor was
5
<PAGE>
elected, or, if such director is elected by reason of an increase in the number
of directors, until the next annual meeting of stockholders at which the term of
the class to which the director has been elected expires, and until such
director's successor shall have been duly elected and qualified. Whenever the
holders of any class or series of shares or group of classes or series of shares
are entitled to elect one or more directors by the provisions of these Articles
of Incorporation, any vacancies in such directorships and any newly created
directorships of such class or series to be filled by reason of increase in the
number of such directors shall be filled by the affirmative vote of the holders
of such class or group of classes or such series of shares or group of series of
shares, and any director so chosen shall be elected for a term of office
continuing until the end of the term for which such director's predecessor was
elected, or, if such director is elected by reason of an increase in the number
of directors, until the next annual meeting of stockholders at which the term of
the class to which the director has been elected expires, and until such
director's successor shall have been elected and qualified. When the number of
directors is changed, the Board of Directors shall determine the class or
classes to which the increased or decreased number of directors shall be
apportioned; provided that no decrease in the number of directors shall shorten
the term of any incumbent director.
C. Removal. Subject to the rights of any class or series of stock
having preference over the Common Stock as to dividends or upon liquidation to
elect directors, any director (including persons elected by directors to fill
vacancies in the Board of Directors) may be removed from office only with cause
by an affirmative vote of not less than two-thirds of the votes eligible to be
cast by stockholders at a duly constituted meeting of stockholders called
expressly for such purpose. Whenever the holders of any class or series of
capital stock of the Corporation are entitled to elect one or more directors by
the provisions of these Articles of Incorporation or any amendment thereto, only
the holders of shares of that class or series of Capital Stock shall be entitled
to vote for or against the removal of any director elected by the holders of the
shares of that class or series. Cause for removal shall exist only if the
director whose removal is proposed has been either declared of unsound mind by
an order of a court of competent jurisdiction, convicted of a felony or of an
offense punishable by imprisonment for a term of more than one year by a court
of competent jurisdiction, or deemed liable by a court of competent jurisdiction
for gross negligence or misconduct in the performance of such director's duties
to the Corporation. At least thirty (30) days prior to such meeting of
stockholders, written notice shall be sent to the director whose removal will be
considered at the meeting.
D. Nominations of Directors. Nominations of candidates for election as
directors at any annual meeting of stockholders may be made (a) by, or at the
direction of, a majority of the Board of Directors or (b) by any stockholder
entitled to vote at such annual meeting. Only persons nominated in accordance
with the procedures set forth in this Article VII.D. shall be eligible for
election as directors at an annual meeting. Ballots bearing the names of all the
persons who have been nominated for election as directors at an annual meeting
in accordance with the procedures set forth in this Article VII.D. shall be
provided for use at the annual meeting.
6
<PAGE>
Subject to the rights of the holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation,
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation as set forth in this Article VII.D. To be timely, a
stockholder's notice shall be delivered to, or mailed and received at, the
principal executive offices of the Corporation not less than (i) with respect to
the first annual meeting of stockholders of the Corporation following the
completion of the reorganization of Dearborn Savings Association, F.A. (the
"Association") into the stock holding company structure, notice by the
stockholder must be received or so delivered no later than the close of business
on the tenth day following the day on which notice of the date of the scheduled
annual meeting was mailed; (ii) with respect to an election to be held at any
succeeding annual meeting of stockholders, 60 days prior to the anniversary date
of the mailing of proxy materials by the Corporation in connection with the
immediately preceding annual meeting of stockholders of the Corporation; and
(iii) with respect to a special meeting of stockholders for the election of
directors, the close of business on the tenth day following the date on which
notice of such meeting is first given to stockholders. Such stockholder's notice
shall set forth (a) as to each person whom the stockholder proposes to nominate
for election or re-election as a director (i) the name, age, business address
and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of Corporation
stock which are Beneficially Owned (as defined in Article X.A.(c)) by such
person on the date of such stockholder notice, and (iv) any other information
relating to such person that is required to be disclosed in solicitations of
proxies with respect to nominees for election as directors, pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including, but not limited to, information required to be
disclosed by Items 4, 5, 6 and 7 of Schedule 14A with the Securities and
Exchange Commission (or any successors of such items); and (b) as to the
stockholder giving the notice (i) the name and address, as they appear on the
Corporation's books, of such stockholder and any other stockholders known by
such stockholder to be supporting such nominees and (ii) the class and number of
shares of Corporation stock which are Beneficially Owned by such stockholder on
the date of such stockholder notice and, to the extent known, by any other
stockholders known by such stockholder to be supporting such nominees on the
date of such stockholder notice. At the request of the Board of Directors, any
person nominated by, or at the direction of, the Board for election as a
director at an annual or special meeting of stockholders shall furnish to the
Secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee.
The Board of Directors may reject any nomination by a stockholder not
timely made in accordance with the requirements of this Article VII.D. If the
Board of Directors, or a designated committee thereof, determines that the
information provided in a stockholder's notice does not satisfy the
informational requirements of this Article VII.D. in any material respect, the
Secretary of the Corporation shall promptly notify such stockholder of the
deficiency in the notice. The stockholder shall have an opportunity to cure the
deficiency by providing additional information to the Secretary within such
period of time, not to
7
<PAGE>
exceed five days from the date such deficiency notice is given to the
stockholder, as the Board of Directors or such committee thereof shall
reasonably determine. If the deficiency is not cured within such period, or if
the Board of Directors or such committee thereof reasonably determines that the
additional information provided by the stockholder, together with information
previously provided, does not satisfy the requirements of this Article VII.D. in
any material respect, then the Board of Directors may reject such stockholder's
nomination. The Secretary of the Corporation shall notify a stockholder in
writing whether his nomination has been made in accordance with the time and
informational requirements of this Article VII.D. Notwithstanding the procedures
set forth in this paragraph, if neither the Board of Directors nor such
committee thereof makes a determination as to the validity of any nominations by
a stockholder, the presiding officer of the annual meeting shall determine and
declare at the annual meeting whether the nomination was made in accordance with
the terms of this Article VII.D. If the presiding officer determines that a
nomination was made in accordance with the terms of this Article VII.D., he
shall so declare at the annual meeting and ballots shall be provided for use at
the meeting with respect to such nominee. If the presiding officer determines
that a nomination was not made in accordance with the terms of this Article
VII.D., he shall so declare at the annual meeting and the defective nomination
shall be disregarded.
Notwithstanding the foregoing, and except as otherwise required by law,
whenever the holders of any one or more series of Preferred Stock shall have the
right, voting separately as a class, to elect one or more directors of the
Corporation, the provisions of this Article VII.D. shall not apply with respect
to the director or directors elected by such holders of Preferred Stock.
E. Discharge of Duties. In discharging the duties of their respective
positions, the Board of Directors, committees of the Board and individual
directors shall, in considering the best interests of the Corporation, consider
the effects of any action upon the employees of the Corporation and its
subsidiaries, the depositors and borrowers of any banking subsidiary, the
communities in which offices or other establishments of the Corporation or any
subsidiary are located and all other pertinent factors.
ARTICLE VIII
INDEMNIFICATION, ETC. OF OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS
A. Limitation of Liability. No director shall be personally liable to
the Corporation or its stockholders for monetary damages or injunctive relief
for any act or omission by such director as a director unless the director has
breached or failed to perform the duties of the director's office in compliance
with Section 23-1-35-1 of the Act, or any successor provision thereto, and the
breach or failure to perform constitutes willful misconduct or recklessness. No
amendment to or repeal of this Subsection (A) to Article VIII shall apply to or
have any effect on the liability or alleged liability of any director of
8
<PAGE>
the Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
B. Indemnification. The Corporation shall indemnify any person who was
or is a party or is threatened to be a made a party to any threatened, pending
or completed formal or informal action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, by reason of the fact
that such person is or was a director, officer, employee or agent of the
Corporation or any predecessor of the Corporation, or is or was serving at the
request of the Corporation or any predecessor of the Corporation as a director,
officer, partner, member, manager, employee or agent of another corporation,
partnership, limited liability company, joint venture, trust, employee benefit
plan or other enterprise, against liability and expenses (including court costs
and attorney's fees), judgments, fines, excise taxes and amounts paid in
satisfaction, settlement or compromise actually and reasonably incurred by such
person in connection with such action, suit or proceeding to the full extent
authorized by law. Such indemnity shall be made only if (i) such person's
conduct was in good faith; (ii) such person reasonably believed (a) in the case
of conduct in the person's official capacity with the Corporation, that the
person's conduct was in its best interests and (b) in all other cases, the
person's conduct was at least not opposed to the Corporation's best interests;
and (iii) in the case of any criminal proceeding, the person either (a) had
reasonable cause to believe the person's conduct was lawful, or (b) had no
reasonable cause to believe that such person's conduct was unlawful. The
termination of a proceeding by a judgment, order, settlement, conviction or upon
a plea of nolo contendere or its equivalent is not, of itself, determinative
that the person did not meet the standard of conduct described herein. Such a
determination shall be made as prescribed by Section 23-1-37-12 of the Act or
any successor provision thereto.
C. Advancement of Expenses. Reasonable expenses incurred by a director,
officer, employee or agent of the Corporation in defending an action, suit or
proceeding described in Article VIII.B. shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding as
authorized by the Board of Directors only upon receipt of written affirmation by
or on behalf of such person of his good faith belief that he has met the
standard of conduct necessary for indemnification under relevant law and a
written undertaking, executed personally or on the person's behalf, to repay
such amount if it shall ultimately be determined that the person has not met
that standard or if it is ultimately determined that indemnification of the
person against expenses incurred by him in connection with that proceeding is
prohibited by relevant law, and a determination is made by the Board of
Directors that the facts then known would not preclude indemnification under
relevant law.
D. Other Rights and Remedies. The indemnification provided by this
Article VIII shall not be deemed to exclude any other rights to which those
seeking indemnification or advancement of expenses may be entitled under the
Corporation's Articles of Incorporation, any insurance or other agreement, vote
of stockholders or disinterested directors or otherwise, both as to actions in
their official capacity and as to actions in another capacity
9
<PAGE>
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person, and nothing herein shall be
construed to limit any person's right to mandatory indemnification as set forth
in the Act.
E. Insurance. Upon resolution passed by the Board, 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 was serving at the
request of the Corporation as a director, officer, partner, member, manager,
employee or agent of another corporation, partnership, limited liability
company, joint venture, trust, employee benefit plan or another enterprise,
against any liability asserted against him or incurred by him in any such
capacity, or arising out of his status, whether or not the Corporation would
have the power to indemnify him against such liability under the provisions of
this Article or the Act.
F. Modification. The duties of the Corporation to indemnify and to
advance expenses to a director, officer, employee or agent provided in this
Article VIII shall be in the nature of a contract between the Corporation and
each such director, officer, employee or agent, and no amendment or repeal of
any provision of this Article VIII shall alter, to the detriment of such
director, officer, employee or agent, the right of such person to the advance of
expenses or indemnification related to a claim based on an act or failure to act
which took place prior to such amendment or repeal.
ARTICLE IX
MEETINGS OF STOCKHOLDERS AND STOCKHOLDER PROPOSALS
A. Special Meetings of Stockholders. Except as otherwise required by
law and subject to the rights of the holders of any class or series of Preferred
Stock, special meetings of the stockholders of the Corporation may be called
only by (i) the Board of Directors pursuant to a resolution approved by the
affirmative vote of a majority of the Whole Board of Directors and a majority of
the Continuing Directors then in office or (ii) the Chairman of the Board or
Chief Executive Officer.
B. Action Without a Meeting. Any action permitted to be taken by the
stockholders at a meeting may be taken without a meeting if consent in writing
setting forth the action so taken shall be signed by all of the stockholders who
would be entitled to vote at a meeting for such purpose and filed with the
Secretary of the Corporation as part of the corporate records.
C. Stockholder Proposals. At an annual meeting of stockholders, only
such business shall be conducted, and only such proposals shall be acted upon,
as shall have been brought before the annual meeting by, or at the direction of,
(a) the Board of Directors or (b) any stockholder of the Corporation who
complies with all the requirements set forth in this Article IX.C.
10
<PAGE>
Proposals, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation as set forth in this Article IX.C. For stockholder proposals
to be included in the Corporation's proxy materials, the stockholder must comply
with all the timing and informational requirements of Rule 14a-8 under the
Exchange Act (or any successor regulation). With respect to stockholder
proposals to be considered at the annual meeting of stockholders but not
included in the Corporation's proxy materials, the stockholder's notice shall be
delivered to, or mailed and received at, the principal executive offices of the
Corporation not less than (i) with respect to the first annual meeting of
stockholders of the Corporation following the completion of the reorganization
of the Association into the stock holding company structure, the close of
business on the tenth day following the day on which notice of the date of the
scheduled annual meeting was mailed, and (ii) with respect to any succeeding
annual meeting of stockholders, 60 days prior to the anniversary date of the
mailing of proxy materials by the Corporation in connection with the immediately
preceding annual meeting of stockholders of the Corporation. Such stockholder's
notice shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (a) a brief description of the proposal desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business and, to the
extent known, any other stockholders known by such stockholder to be supporting
such proposal, (c) the class and number of shares of the Corporation stock which
are Beneficially Owned by the stockholder on the date of such stockholder notice
and, to the extent known, by any other stockholders known by such stockholder to
be supporting such proposal on the date of such stockholder notice, and (d) any
financial interest of the stockholder in such proposal (other than interests
which all stockholders would have).
The Board of Directors may reject any stockholder proposal not timely
made in accordance with the terms of this Article IX.C. If the Board of
Directors, or a designated committee thereof, determines that the information
provided in a stockholder's notice does not satisfy the informational
requirements of this Article IX.C. in any material respect, the Secretary of the
Corporation shall promptly notify such stockholder of the deficiency in the
notice. The stockholder shall have an opportunity to cure the deficiency by
providing additional information to the Secretary within such period of time,
not to exceed five days from the date such deficiency notice is given to the
stockholder, as the Board of Directors or such committee thereof shall
reasonably determine. If the deficiency is not cured within such period, or if
the Board of Directors or such committee thereof determines that the additional
information provided by the stockholder, together with information previously
provided, does not satisfy the requirements of this Article IX.C. in any
material respect, then the Board of Directors may reject such stockholder's
proposal. The Secretary of the Corporation shall notify a stockholder in writing
whether his proposal has been made in accordance with the time and informational
requirements of this Article IX.C. Notwithstanding the procedures set forth in
this paragraph, if neither the Board of Directors nor such committee thereof
makes a determination as to the validity of any stockholder proposal, the
presiding officer of the annual meeting shall determine and declare at the
11
<PAGE>
annual meeting whether the stockholder proposal was made in accordance with the
terms of this Article IX.C. If the presiding officer determines that a
stockholder proposal was made in accordance with the terms of this Article
IX.C., he shall so declare at the annual meeting and ballots shall be provided
for use at the meeting with respect to any such proposal. If the presiding
officer determines that a stockholder proposal was not made in accordance with
the terms of this Article IX.C., he shall so declare at the annual meeting and
any such proposal shall not be acted upon at the annual meeting.
This provision shall not prevent the consideration and approval or
disapproval at the annual meeting of reports of officers, directors and
committees of the Board of Directors, but in connection with such reports, no
new business shall be acted upon at such annual meeting unless stated, filed and
received as herein provided.
ARTICLE X
CERTAIN BUSINESS COMBINATIONS AND ACQUISITIONS OF STOCK
A. Definitions and Related Matters.
(a) Affiliate. An "Affiliate" of, or a Person "affiliated
with," a specified Person means a Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or
is under common control with, the Person specified.
(b) Associate. The term "Associate" when used to indicate a
relationship with any Person means:
(i) Any corporation or organization (other than the
Corporation or a Subsidiary of the Corporation) of which such
Person is an officer or partner or is, directly or indirectly,
the beneficial owner of 10 percent or more of any class of
equity securities;
(ii) Any trust or other estate in which such Person
has a 10 percent or greater beneficial interest or as to which
such Person serves as trustee or in a similar fiduciary
capacity;
(iii) Any relative or spouse of such Person, or any
relative of such spouse who has the same home as such Person;
or
(iv) Any investment company registered under the
Investment Company Act of 1940 for which such Person or any
Affiliate or Associate of such Person serves as investment
advisor.
12
<PAGE>
(c) Beneficial Owner. A Person shall be considered the
"Beneficial Owner" of any shares of stock (whether or not owned of
record):
(i) With respect to which such Person or any
Affiliate or Associate of such Person directly or indirectly
has or shares (1) voting power, including the power to vote or
to direct the voting of such shares of stock and/or (2)
investment power, including the power to dispose of or to
direct the disposition of such shares of stock;
(ii) Which such Person or any Affiliate or Associate
of such Person has (1) the right to acquire (whether such
right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding
or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, and/or (2) the right to
vote pursuant to any agreement, arrangement or understanding
(whether such right is exercisable immediately or only after
the passage of time); or
(iii) Which are Beneficially Owned within the meaning
of (i) or (ii) of this Article X.A.(c) by any other Person
with which such first-mentioned Person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding, written or oral, with respect to acquiring,
holding, voting or disposing of any shares of stock of the
Corporation or any Subsidiary of the Corporation or acquiring,
holding or disposing of all or substantially all, or any
Substantial Part, of the assets or businesses of the
Corporation or a Subsidiary of the Corporation.
For the purpose only of determining whether a Person is the Beneficial
Owner of a percentage specified in this Article X of the outstanding Voting
Shares, such shares shall be deemed to include any Voting Shares which may be
issuable pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants, options or otherwise
and which are deemed to be Beneficially Owned by such Person pursuant to the
foregoing provisions of this Article X.A.(c).
(d) Business Combination. A "Business Combination" means:
(i) The sale, exchange, lease, transfer or other
disposition to or with a Related Person or any Affiliate or
Associate of such Related Person by the Corporation or any of
its Subsidiaries (in a single transaction or a series of
related transactions) of all or substantially all, or any
Substantial Part, of its or their assets or businesses
(including, without limitation, any securities issued by a
Subsidiary);
(ii) The purchase, exchange, lease or other
acquisition by the Corporation or any of its Subsidiaries
(in a single transaction or a series of
13
<PAGE>
related transactions) of all or substantially all, or any
Substantial Part, of the assets or business of a Related
Person or any Affiliate or Associate of such Related Person;
(iii) Any merger or consolidation of the Corporation
or any Subsidiary thereof into or with a Related Person or any
Affiliate or Associate of such Related Person or into or with
another Person which, after such merger or consolidation,
would be an Affiliate or an Associate of a Related Person, in
each case irrespective of which Person is the surviving entity
in such merger or consolidation;
(iv) Any reclassification of securities,
recapitalization or other transaction (other than a redemption
in accordance with the terms of the security redeemed) which
has the effect, directly or indirectly, of increasing the
proportionate amount of Voting Shares of the Corporation or
any Subsidiary thereof which are Beneficially Owned by a
Related Person, or any partial or complete liquidation,
spinoff or split up of the Corporation or any Subsidiary
thereof; provided, however, that this Article X.A.(d)(iv)
shall not relate to any transaction of the types specified
herein that have been approved by the affirmative vote of at
least two-thirds of the Whole Board of Directors and a
majority of the Continuing Directors; or
(v) The acquisition upon the issuance thereof of
Beneficial Ownership by a Related Person of Voting Shares or
securities convertible into Voting Shares or any voting
securities or securities convertible into voting securities of
any Subsidiary of the Corporation, or the acquisition upon the
issuance thereof of Beneficial Ownership by a Related Person
of any rights, warrants or options to acquire any of the
foregoing or any combination of the foregoing Voting Shares or
voting securities of a Subsidiary.
As used in this definition, a "series of related transactions" shall be
deemed to include not only a series of transactions with the same Related Person
but also a series of separate transactions with a Related Person or any
Affiliate or Associate of such Related Person.
Anything in this definition to the contrary notwithstanding, this
definition shall not be deemed to include any transaction of the type set forth
in Article X.A.(d)(i) through X.A.(d)(iii) between or among any two or more
Subsidiaries of the Corporation or the Corporation and one or more Subsidiaries
of the Corporation if such transaction has been approved by the affirmative vote
of at least two-thirds of the Whole Board of Directors and a majority of the
Continuing Directors on or prior to the Date of Determination.
(e) Continuing Director. A "Continuing Director" shall mean:
14
<PAGE>
(i) Each of the present directors of the Corporation
as set forth in Article VII, whether or not such person is a
Related Person or an Affiliate or Associate of a Related
Person, except that such designation shall in no way be deemed
to affect or change or diminish the fiduciary duties of such
person to the Corporation;
(ii) An individual who is unaffiliated with a Related
Person and who was a member of the Board of Directors prior to
the time that a Related Person acquired 10% or more of the
Voting Shares; or,
(iii) An individual who is unaffiliated with a
Related Person and who is designated before his or her initial
election as a Continuing Director by a majority of the then
Continuing Directors.
(f) Date of Determination. The term "Date of Determination"
means:
(i) The date on which a binding agreement (except for
the fulfillment of conditions precedent, including, without
limitation, votes of stockholders to approve such transaction)
is entered into by the Corporation, as authorized by its Board
of Directors, and another Person providing for any Business
Combination; or,
(ii) If such an agreement as referred to in Article
X.A.(f)(i) above is amended so as to make it less favorable to
the Corporation and its stockholders, the date on which such
amendment is approved by the Board of Directors of the
Corporation; or,
(iii) In cases where neither Article X.A.(f)(i) nor
(ii) shall be applicable, the record date for the
determination of stockholders of the Corporation entitled to
notice of and to vote upon the transaction in question.
A majority of the Continuing Directors shall have the power and duty to
determine the Date of Determination as to any transaction under this Article X.
Any such determination shall be conclusive and binding for all purposes of this
Article X.
(g) Fair Market Value. The term "Fair Market Value" shall
mean:
(i) In the case of stock, the highest closing sale
price during the 30-day period immediately preceding the date
in question of a share of such stock on the Composite Tape for
New York Stock Exchange - Listed Stocks, or, if such stock is
not quoted on the Composite Tape, on the New York Stock
Exchange or the American Stock Exchange, or, if such stock is
not listed on such exchanges, on the principal United States
securities exchange registered under the Exchange Act on which
such shares are listed, or, if such
15
<PAGE>
shares are not listed on any such exchange, the highest
closing price with respect to a share of such stock during the
30-day period preceding the date in question on the National
Market System of the National Association of Securities
Dealers Automated Quotations ("NASDAQ") System, or, if not
listed on the National Market System, the highest mean of the
closing bid and asked quotations on the NASDAQ System during
such 30-day period or any system then in use, or, if no such
quotations are available, the fair market value on the date in
question of a share as determined by a majority of the
Continuing Directors in good faith; and
(ii) In the case of property other than cash or
stock, the fair market value of such property on the date in
question as determined by a majority of the Continuing
Directors in good faith.
(h) Independent Majority of Stockholders. The term
"Independent Majority of Stockholders" shall mean the holders of a
majority of the outstanding Voting Shares that are not Beneficially
Owned or controlled, directly or indirectly, by a Related Person.
(i) Offer. The term "Offer" shall mean every offer to buy or
otherwise acquire, solicitation of an offer to sell, tender offer for,
or request or invitation for tenders of, a security or interest in a
security for value; provided that the term "Offer" shall not include:
(a) inquiries directed solely to the management of the Corporation and
not intended to be communicated to stockholders which are designed to
elicit an indication of management's receptivity to the basic structure
of a potential acquisition with respect to the amount of cash and/or
securities, manner of acquisition and formula for determining price, or
(b) non-binding expressions of understanding or letters of intent with
the management of the Corporation regarding the basic structure of a
potential acquisition with respect to the amount of cash and/or
securities, manner of acquisition and formula for determining price.
(j) Person. The term "Person" shall mean any person,
partnership, corporation, or group or other entity (other than the
Corporation, any Subsidiary of the Corporation or a trustee holding
stock for the benefit of employees of the Corporation or its
Subsidiaries, or any one of them, pursuant to one or more employee
benefit plans or arrangements). When two or more Persons act as a
partnership, limited partnership, syndicate, association or other group
for the purpose of acquiring, holding or disposing of shares of stock,
such partnership, syndicate, association or group shall be deemed a
"Person."
(k) Related Person. The term "Related Person" shall mean any
Person who or which is (a) the Beneficial Owner, as of the Date of
Determination, or immediately prior to the consummation of a Business
Combination, of 10% or more of the Voting Shares; or (b) an Affiliate
of the Corporation and at any time within
16
<PAGE>
the two-year period immediately prior to the announcement of a Business
Combination was the Beneficial Owner, directly or indirectly, of 10% or
more of the then outstanding Voting Shares; or (c) an assignee of or
has otherwise succeeded to any Voting Shares which were at any time
within the two-year period immediately prior to the announcement of a
Business Combination Beneficially Owned by any Related Person, if such
assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933.
(l) Substantial Part. The term "Substantial Part" as used with
reference to the assets of the Corporation, of any Subsidiary or of any
Related Person means assets having a value of more than 10% of the
total consolidated assets of the Corporation and its Subsidiaries as of
the end of the Corporation's most recent fiscal year ending prior to
the time the determination is being made.
(m) Subsidiary. The term "Subsidiary" shall mean any
corporation or other entity of which the Person in question owns not
less than 50 percent of any class of equity securities, directly or
indirectly.
(n) Voting Shares. The term "Voting Shares" shall mean shares
of the Corporation entitled to vote generally in the election of
directors.
(o) Whole Board of Directors. The term "Whole Board of
Directors" shall mean the total number of directors which the
Corporation would have if there were no vacancies.
(p) Certain Determinations with Respect to Article X.
(i) A majority of the Continuing Directors shall have
the power to determine for the purposes of this Article X, on
the basis of information known to them: (1) the number of
Voting Shares of which any Person is the Beneficial Owner, (2)
whether a Person is an Affiliate or Associate of another, (3)
whether a Person has an agreement, arrangement or
understanding with another as to the matters referred to in
the definition of "Beneficial Owner" as hereinabove defined,
(4) whether the assets subject to any Business Combination
constitute a "Substantial Part" as hereinabove defined, (5)
whether two or more transactions constitute a "series of
related transactions" as hereinabove defined, (6) any matters
referred to in Article X.A.(p)(ii) below, and (7) such other
matters with respect to which a determination is required
under this Article X.
(ii) A Related Person shall be deemed to have
acquired a share of the Corporation at the time when such
Related Person became a Beneficial Owner thereof. With respect
to shares owned by Affiliates, Associates or
17
<PAGE>
other Persons whose ownership is attributable to a Related
Person under the foregoing definition of Beneficial Owner, if
the price paid by such Related Person for such shares is not
determinable, the price so paid shall be deemed to be the
higher of (1) the price paid upon acquisition thereof by the
Affiliate, Associate or other Person or (2) the market price
of the shares in question (as determined by a majority of the
Continuing Directors) at the time when the Related Person
became the Beneficial Owner thereof.
(q) Fiduciary Obligations. Nothing contained in this
Article X shall be construed to relieve any Related Person from any
fiduciary obligation imposed by law.
B. Approval of Business Combination.
(a) Except as provided in Article X.B.(b), neither the
Corporation nor any of its Subsidiaries shall become party to any
Business Combination without the prior affirmative vote at a meeting of
the Corporation's stockholders of:
(i) The holders of not less than 80 percent of the
outstanding Voting Shares, voting separately as a class, and
(ii) An Independent Majority of Stockholders.
Such favorable votes shall be in addition to any stockholder vote which
would be required without reference to this Article X.B.(a) and shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified by law or otherwise.
(b) The provisions of Article X.B.(a) shall not apply to a
particular Business Combination, and such Business Combination shall
require only such stockholder vote (if any) as would be required
without reference to this Article X.B., if all of the conditions set
forth in subparagraphs (i) through (vii) below are satisfied:
(i) The ratio of (1) the aggregate amount of the cash
and the Fair Market Value of the other consideration to be
received per share of Common Stock (as defined in Article V)
of the Corporation in such Business Combination by holders of
Common Stock other than the Related Person involved in such
Business Combination, to (2) the market price per share of the
Common Stock immediately prior to the announcement of the
proposed Business Combination, is at least as great as the
ratio of (x) the highest per share price (including brokerage
commissions, transfer taxes and soliciting dealers' fees)
which such Related Person has theretofore paid in acquiring
any Common Stock prior to such Business Combination, to
(y) the market price
18
<PAGE>
per share of Common Stock immediately prior to the initial
acquisition by such Related Person of any shares of Common
Stock; and
(ii) The aggregate amount of the cash and the Fair
Market Value of other consideration to be received per share
of Common Stock in such Business Combination by holders of
Common Stock, other than the Related Person involved in such
Business Combination, is not less than the highest per share
price (including brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by such Related Person in
acquiring any of its holdings of Common Stock; and
(iii) If applicable, the ratio of (1) the aggregate
amount of the cash and the Fair Market Value of other
consideration to be received per share of Preferred Stock (as
defined in Article V) of the Corporation in such Business
Combination by holders of Preferred Stock other than the
Related Person involved in such Business Combination, to (2)
the market price per share of the Preferred Stock immediately
prior to the announcement of the proposed Business
Combination, is at least as great as the ratio of (x) the
highest per share price (including brokerage commissions,
transfer taxes and soliciting dealers' fees) which such
Related Person has theretofore paid in acquiring any Preferred
Stock prior to such Business Combination to (y) the market
price per share of Preferred Stock immediately prior to the
initial acquisition by such Related Person of any shares of
Preferred Stock; and
(iv) If applicable, the aggregate amount of the cash
and the Fair Market Value of other consideration to be
received per share of Preferred Stock in such Business
Combination by holders of Preferred Stock, other than the
Related Person involved in such Business Combination, is not
less than the highest per share price (including brokerage
commissions, transfer taxes and soliciting dealers' fees) paid
by such Related Person in acquiring any of its holdings of
Preferred Stock; and
(v) The consideration (if any) to be received in such
Business Combination by holders of stock other than the
Related Person (whether Common Stock or Preferred Stock)
involved shall, except to the extent that a stockholder agrees
otherwise as to all or part of the shares which he owns, be in
the same form and of the same kind as the consideration paid
by the Related Person in acquiring Common Stock already owned
by it; and
(vi) After such Related Person became a Related
Person and prior to the consummation of such Business
Combination:
(1) such Related Person shall vote his
shares in such a manner as to cause, to the extent
necessary and within his power as a
19
<PAGE>
stockholder, the Board of Directors of the
Corporation to include at all times representation by
Continuing Directors proportionate to the ratio that
the number of Voting Shares of the Corporation from
time to time owned by stockholders who are not
Related Persons bears to all Voting Shares of the
Corporation outstanding at the time in question (with
a Continuing Director to occupy any resulting
fractional position among the directors);
(2) such Related Person shall not have
acquired from the Corporation, directly or
indirectly, any shares of the Corporation (except (x)
upon conversion of convertible securities acquired by
it prior to becoming a Related Person or (y) as a
result of a pro rata stock dividend, stock split or
division of shares or (z) in a transaction which
satisfied all applicable requirements of this Article
X);
(3) such Related Person shall not have
acquired any additional Voting Shares of the
Corporation or securities convertible into or
exchangeable for Voting Shares except as a part of
the transaction which resulted in such Related Person
becoming a Related Person;
(4) such Related Person shall not have
(x) received the benefit, directly or indirectly
(except proportionately as a stockholder), of any
loans, advances, guarantees, pledges or other
financial assistance or tax credits provided by the
Corporation or any Subsidiary, or (y) made any major
change in the Corporation's business or equity
capital structure or entered into any contract,
arrangement or understanding with the Corporation
except any such change, contract, arrangement or
understanding as may have been approved by the
favorable vote of not less than a majority of the
Whole Board of Directors and a majority of the
Continuing Directors of the Corporation; and
(5) except as approved by a majority of
the Whole Board of Directors and a majority of the
Continuing Directors, there shall have been: (x) no
failure to declare and pay at the regular date
therefor any dividends (whether or not cumulative) on
any outstanding Preferred Stock; (y) no reduction in
the annual rate of dividends paid on the Common Stock
(except as necessary to reflect any subdivision of
the Common Stock); and (z) an increase in such annual
rate of dividends as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar
transaction which has the effect of reducing the
number of outstanding shares of the stock; and
20
<PAGE>
(vii) A proxy statement complying with the
requirements under the Exchange Act shall have been mailed to
all holders of Voting Shares for the purpose of soliciting
stockholder approval of such Business Combination. Such proxy
statement is not required to be filed with or approved by the
Securities and Exchange Commission unless otherwise required
by law. Such proxy statement shall contain at the front
thereof, in a prominent place, any recommendations as to the
advisability (or inadvisability) of the Business Combination
which the Continuing Directors, or any of them, may have
furnished in writing and, if deemed advisable by a majority of
the Continuing Directors, an opinion of a reputable investment
banking firm as to the fairness (or lack of fairness) of the
terms of such Business Combination from the point of view of
the holders of Voting Shares other than any Related Person
(such investment banking firm to be selected by a majority of
the Continuing Directors, to be furnished with all information
it reasonably requests, and to be paid a reasonable fee for
its services upon receipt by the Corporation of such opinion).
(c) For purposes of Article X.B.(b)(i) through X.B.(b)(iv)
hereof, in the event of a Business Combination upon consummation of
which the Corporation would be the surviving corporation or company or
would continue to exist (unless it is provided, contemplated or
intended that as part of such Business Combination or within one year
after consummation thereof a plan of liquidation or dissolution of the
Corporation will be effected), the term "other consideration to be
received" shall include (without limitation) Common Stock retained by
the stockholders of the Corporation other than Related Persons who are
parties to such Business Combination.
(d) The provisions of this Article X.B. shall not apply to (i)
any Business Combination approved by two-thirds of the Whole Board of
Directors of the Corporation at a time prior to the acquisition of 10
percent or more of the outstanding Voting Shares of the Corporation by
the Related Person, or (ii) any Business Combination approved by
two-thirds of the Whole Board of Directors and a majority of the
Continuing Directors after such acquisition.
C. Evaluation of Business Combinations, Etc. In connection with the
exercise of its judgment in determining what is in the best interest of the
Corporation and its stockholders when evaluating a Business Combination or a
proposal by another Person or Persons to make a Business Combination or a tender
or exchange offer, the Board of Directors of the Corporation shall, in addition
to considering the adequacy of the amount to be paid in connection with any such
transaction, consider all of the following factors and any other factors which
it deems relevant: (i) the social and economic effects of the transaction on the
Corporation and its Subsidiaries and their respective employees, depositors,
loan and other customers, creditors and other elements of the communities in
which the Corporation and its Subsidiaries operate or are located; (ii) the
business and
21
<PAGE>
financial condition and earnings prospects of the acquiring Person or Persons,
including, but not limited to, debt service and other existing or likely
financial obligations of the acquiring Person or Persons, and the possible
effect of such conditions upon the Corporation and its Subsidiaries and the
elements of the communities in which the Corporation and its Subsidiaries
operate or are located; and (iii) the competence, experience and integrity of
the acquiring Person or Persons and its or their management.
D. Amendments, Etc. of this Article X. Notwithstanding any other
provisions of these Articles of Incorporation or the Bylaws of the Corporation
(and notwithstanding the fact that some lesser percentage may be specified by
law, these Articles of Incorporation or the Bylaws of the Corporation), this
Article X shall not be amended, altered, changed, or repealed without the
affirmative vote of (i) the holders of two-thirds or more of the outstanding
Voting Shares, voting separately as a class, and (ii) an Independent Majority of
Stockholders; provided, however, that this Article X.D. shall not apply to, and
such vote shall not be required for, any such amendment, change or repeal
recommended to stockholders by the favorable vote of not less than two-thirds of
the Whole Board of Directors, including a majority of the Continuing Directors,
and any such amendment, change or repeal so recommended shall require only the
vote, if any, required under the applicable provisions of the Act, these
Articles of Incorporation and the Bylaws of the Corporation.
E. State Law Election. The Corporation hereby elects not to be
governed by Chapter 43 of the Act or any successor provision thereto.
ARTICLE XI
RESTRICTIONS ON OFFERS AND ACQUISITIONS OF THE CORPORATION'S
EQUITY SECURITIES
A. Restrictions. The definitions and other provisions set forth in
Article X are also applicable to this Article XI. For a period of five (5) years
from the completion of the reorganization of the Association into the stock
holding company structure, no Person shall directly or indirectly Offer to
acquire or acquire the Beneficial Ownership of (i) more than 10% of the issued
and outstanding shares of any class of an equity security of the Corporation, or
(ii) any securities convertible into, or exercisable for, any equity securities
of the Corporation if, assuming conversion or exercise by such Person of all
securities of which such Person is the Beneficial Owner which are convertible
into, or exercisable for, such equity securities (but of no securities
convertible into, or exercisable for, such equity securities of which such
Person is not the Beneficial Owner), such Person would be the Beneficial Owner
of more than 10% of any class of an equity security of the Corporation.
B. Exclusions. The foregoing restrictions shall not apply to
(i) any Offer with a view toward public resale made exclusively to the
Corporation by underwriters or a selling group acting on its behalf, (ii) any
tax qualified employee benefit plan or arrangement
22
<PAGE>
established by the Corporation or the Association and any trustee of such a plan
or arrangement, and (iii) any other Offer or acquisition approved in advance by
the affirmative vote of two-thirds of the Corporation's Board of Directors.
C. Remedies. In the event that shares are acquired in violation of
this Article XI, all shares Beneficially Owned by any Person in excess of 10%
shall be considered "Excess Shares" and shall not be counted as shares entitled
to vote and shall not be voted by any Person or counted as Voting Shares in
connection with any matters submitted to stockholders for a vote, and the Board
of Directors may cause such Excess Shares to be transferred to an independent
trustee for sale on the open market or otherwise, with the expenses of such
trustee to be paid out of the proceeds of the sale.
D. Expiration. Article XI of these Articles of Incorporation shall
expire and, along with all references thereto, no longer be a part hereof on the
fifth anniversary of the completion of the reorganization of the Association
into the stock holding company structure.
E. Board Power. The Board of Directors of the Corporation shall have
the power to construe and apply the provisions of this Article XI and to make
all determinations necessary or desirable to implement such provisions,
including but not limited to matters with respect to (i) the number of shares of
any class of equity securities of the Corporation Beneficially Owned by any
Person; (ii) whether a Person is an Affiliate of another; (iii) whether a Person
has an agreement, arrangement or understanding with another as to the Beneficial
Ownership of any shares of any class of equity securities of the Corporation;
(iv) the application of any other definition or operative provision of this
Article XI to the given facts; or (v) any other matter relating to the
applicability of this Article XI.
ARTICLE XII
AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
A. Articles of Incorporation. The Corporation reserves the right to
amend, alter, change or repeal any provision contained in these Articles of
Incorporation, in the manner now or hereafter prescribed by law, and all rights
conferred upon stockholders herein are granted subject to this reservation. No
amendment, addition, alteration, change or repeal of these Articles of
Incorporation shall be made unless it is first approved by the Board of
Directors of the Corporation pursuant to a resolution adopted by the affirmative
vote of a majority of the directors then in office, and thereafter is approved
by the holders of a majority of the shares of the Corporation entitled to vote
generally in an election of directors, voting together as a single class, unless
any class or series of shares is entitled to vote thereon as a class, in which
event the proposed amendment shall be adopted upon receiving the affirmative
vote of the holders of a majority of the shares within each class or series of
outstanding shares entitled to vote thereon as a class and of at least a
majority of the total outstanding shares entitled to vote thereon, provided
that, notwithstanding anything
23
<PAGE>
contained in these Articles of Incorporation to the contrary, (i) the
affirmative vote of the holders of at least two-thirds of the shares of the
Corporation entitled to vote generally in an election of directors, voting
together as a single class, unless any class or series of shares is entitled to
vote thereon as a class, in which event the proposed amendment shall be adopted
upon receiving the affirmative vote of the holders of two-thirds of the shares
within each class or series of outstanding shares entitled to vote thereon as a
class and of at least two-thirds of the total outstanding shares entitled to
vote thereon, shall be required to amend, adopt, alter, change or repeal any
provision inconsistent with Articles VI, VII, VIII, IX, XI and this Article XII,
and (ii) Article X shall be amended in the manner specified in Article X.D.
B. Bylaws. The Board of Directors may adopt, alter, amend or repeal
the Bylaws of the Corporation. Such action by the Board of Directors shall
require the affirmative vote of a majority of the directors then in office at
any regular or special meeting of the Board of Directors. Stockholders shall not
have any power to make, alter, amend or repeal the Corporation's Bylaws, except
as set forth in the Bylaws.
24
<PAGE>
I, THE UNDERSIGNED, being the duly authorized President and Chief
Executive Officer of Dearborn Savings Association, F.A., the sole incorporator,
for the purpose of forming a corporation pursuant to the Act do make these
Articles of Incorporation, hereby affirming under the penalties of perjury that
this is my act and deed on behalf of Dearborn Savings Association, F.A. and that
the facts herein stated are true, and accordingly have hereunto set my hand this
___ day of August 1996.
DEARBORN SAVINGS ASSOCIATION, F.A.
By:_____________________________________
Name: Donald C. Siemers
Title: President and Chief Executive
Officer
25
EXHIBIT 3.2
BYLAWS
OF
VISION BANCORP, INC.
ARTICLE I
OFFICES
1.1 Registered Office and Registered Agent. The registered office of
Vision Bancorp, Inc. (the "Corporation") shall be located in the State of
Indiana at such place as may be fixed from time to time by the Board of
Directors upon filing of such notices as may be required by law, and the
registered agent shall have a business office identical with such registered
office.
1.2 Other Offices. The Corporation may have other offices within or
outside the State of Indiana at such place or places as the Board of Directors
may from time to time determine, as permitted by applicable law and regulation.
ARTICLE II
STOCKHOLDERS' MEETINGS
2.1 Meeting Place. All meetings of the stockholders shall be held at
the principal place of business of the Corporation, or at such other place
within or without the State of Indiana as shall be determined from time to time
by the Board of Directors, and the place at which any such meeting shall be held
shall be stated in the notice of the meeting.
2.2 Annual Meeting Time. The annual meeting of the stockholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year on the fourth Thursday
of October at the hour of 4:00 p.m., if not a legal holiday, and if a legal
holiday, then on the day following, at the same hour, or at such other date and
time as may be determined by the Board of Directors and stated in the notice of
such meeting.
2.3 Organization. Each meeting of the stockholders shall be presided
over by the Chairman of the Board, or if the Chairman of the Board is not
present, by the Vice-Chairman of the Board or the President, or if the Chairman
of the Board, the Vice-Chairman of the Board or the President are not present,
by an Executive or Senior Vice President or such other officer as designated by
the Board of Directors. The Secretary, or in his absence a temporary Secretary,
shall act as secretary of each meeting of the stockholders. In the absence of
the Secretary and any temporary Secretary, the chairman of the meeting may
appoint any person present to act as secretary of the meeting. The
<PAGE>
chairman of any meeting of the stockholders, unless prescribed by law or
regulation, shall determine the order of the business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussions as shall be deemed appropriate by him in his sole discretion.
2.4 Special Meetings. Special meetings of the stockholders for any
purpose may be called at any time in the manner provided in the Corporation's
Articles of Incorporation, which are incorporated herein with the same effect as
if they were set forth herein.
2.5 Notice.
(a) Notice of the date, time and place of the annual meeting
of stockholders shall be given by delivering personally or by mailing a written
or printed notice of the same, at least ten days and not more than sixty days
prior to the meeting, to each stockholder of record entitled to vote at such
meeting. When any stockholders' meeting, either annual or special, is adjourned
and if a new record date is fixed for an adjourned meeting of stockholders,
notice of the adjourned meeting shall be given as in the case of an original
meeting. It shall not be necessary to give any notice of the time and place of
any meeting adjourned, unless a new record date is fixed therefor, other than an
announcement of the new date, time and place at the meeting at which such
adjournment is taken.
(b) At least ten days and not more than sixty days prior to
the meeting, a written or printed notice of each special meeting of
stockholders, stating the place, day and hour of such meeting, and the purpose
or purposes for which the meeting is called, shall be either delivered
personally or mailed to each stockholder of record entitled to vote at such
meeting.
2.6 Voting List. At least five days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting, or any adjournment thereof, shall be made, arranged by voting group, in
alphabetical order, with the address of and number of shares held by each, which
list shall be kept on file at the principal office of the Corporation for a
period of five business days prior to such meeting. The list shall be kept open
at the time and place of such meeting for the inspection of any stockholder.
2.7 Quorum. Except as otherwise required by law:
(a) A quorum at any annual or special meeting of stockholders
shall consist of stockholders representing, either in person or by proxy, a
majority of the outstanding capital stock of the Corporation entitled to vote on
that matter at such meeting.
(b) With respect to any other matter other than the election
of directors, action on a matter shall be approved if the votes cast in favor of
the action exceed the votes cast opposing the action at any properly called
meeting or adjourned meeting of stockholders at which a quorum, as defined
above, is present.
2
<PAGE>
2.8 Voting of Shares.
(a) Except as otherwise provided in these Bylaws or to the
extent that voting rights of the shares of any class or classes are limited or
denied by the Articles of Incorporation, each stockholder, on each matter
submitted to a vote at a meeting of stockholders, shall have one vote for each
share of stock registered in his name on the books of the Corporation.
(b) Directors are to be elected by a plurality of votes cast
by the shares entitled to vote in the election at a meeting at which a quorum is
present. Stockholders shall not be permitted to cumulate their votes for the
election of directors. If, at any meeting of the stockholders, due to a vacancy
or vacancies or otherwise, directors of more than one class of the Board of
Directors are to be elected, each class of directors to be elected at the
meeting shall be elected in a separate election by a plurality vote.
2.9 Closing of Transfer Books and Fixing Record Date. For the purpose
of determining stockholders entitled to notice of or to vote at any meeting of
stockholders, or any adjournment thereof, or entitled to receive payment of any
distribution by the Corporation or a share dividend, or in order to make a
determination of stockholders for any other proper purpose, the Board of
Directors may provide that the stock transfer books shall be closed for a stated
period not to exceed seventy days preceding such meeting. In lieu of closing the
stock transfer books, the Board of Directors may fix in advance a record date
for any such determination of stockholders, such date to be not more than
seventy days prior to the date on which the particular action requiring such
determination of stockholders is to be taken. A determination of stockholders
entitled to notice of or to vote at a meeting of stockholders is effective for
any adjournment of the meeting unless the Board of Directors fixes a new record
date, which it must do if the meeting is adjourned to a date more than one
hundred and twenty (120) days after the date fixed for the original meeting.
2.10 Proxies. A stockholder may vote either in person or by proxy
executed in writing by the stockholder, or his duly authorized attorney-in-fact.
No proxy shall be valid after eleven months from the date of its execution,
unless otherwise provided in the proxy.
2.11 Waiver of Notice. Whenever any notice is required to be given to
any stockholder, a waiver of notice signed by the person or persons entitled to
such notice and delivered to the Corporation, whether before or after the time
stated therein for the meeting, shall be equivalent to the giving of such
notice. A stockholder's attendance at a meeting (i) waives objection to lack of
notice or defective notice of the meeting, unless the stockholder at the
beginning of the meeting objects to the holding of the meeting or transacting
business at the meeting; and (ii) waives objection to consideration of a
particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the stockholder objects to considering
the matter when it is presented.
3
<PAGE>
2.12 Voting of Shares in the Name of Two or More Persons. When
ownership stands in the name of two or more persons, in the absence of written
directions to the Corporation to the contrary, at any meeting of the
stockholders of the Corporation any one or more of such stockholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose names shares of stock stand, the vote or votes to
which those persons are entitled shall be cast as directed by a majority of
those holding such stock and present in person or by proxy at such meeting, but
no votes shall be cast for such stock if a majority cannot agree.
2.13 Voting of Shares by Certain Holders. Shares standing in the name
of another corporation may be voted by an officer or agent of such corporation.
Shares held by an administrator, executor, guardian, conservator, trustee,
receiver, pledgee, beneficial owner or attorney-in-fact may be voted by him,
either in person or by proxy, without a transfer of such shares into his name,
but the Corporation may request of such person prior to the acceptance of the
vote evidence acceptable to the Corporation of such person's status or authority
to sign with respect to the vote, consent, waiver or proxy appointment. The
Corporation is entitled to reject a vote, consent, waiver or proxy appointment
if the Secretary or other officer or agent authorized to tabulate votes, acting
in good faith, has reasonable basis for doubt about the validity of the
signature on it or about the signatory's authority to sign for the stockholder.
2.14 Stockholder Proposals. Stockholder proposals shall be made in
accordance with the provisions of the Corporation's Articles of Incorporation,
which provisions are incorporated herein with the same effect as if they were
set forth herein.
2.15 Inspectors. For each meeting of stockholders, the Board of
Directors may appoint one or more inspectors of election. If for any meeting the
inspector(s) appointed by the Board of Directors shall be unable to act or the
Board of Directors shall fail to appoint any inspector, one or more inspectors
may be appointed at the meeting by the chairman thereof. Such inspectors shall
tabulate the voting in each election of directors and, as directed by the Board
of Directors or chairman of the meeting, the voting on the matters voted on at
such meeting, and after the voting shall make a certificate of the vote taken.
Inspectors need not be stockholders.
ARTICLE III
CAPITAL STOCK
3.1 Certificates. Certificates of stock shall be issued in numerical
order, and each stockholder shall be entitled to a certificate signed by the
President or a Vice President, and the Secretary or the Treasurer, and may be
sealed with the seal of the Corporation or a facsimile thereof. The signatures
of such officers may be facsimiles if the certificate is manually signed on
behalf of a transfer agent, or registered by a registrar, other than the
4
<PAGE>
Corporation itself or an employee of the Corporation. If an officer who has
signed or whose facsimile signature has been placed upon such certificate ceases
to be an officer before the certificate is issued, it may be issued by the
Corporation with the same effect as if the person were an officer on the date of
issue. Each certificate of stock shall state:
(a) the name of the Corporation and that the Corporation is
organized under the laws of the State of Indiana;
(b) the name of the person to whom issued;
(c) the number and class of shares and the designation of
the series, if any, which such certificate represents; and
(d) conspicuously on its front or back that the Corporation
will furnish to any stockholder without charge the designations, relative
rights, preferences and limitations applicable to each class and the variations
and limitations in rights, preferences and limitations determined for each
series and the authority of the Board of Directors to determine variations for
future series.
3.2 Transfers.
(a) Transfers of stock shall be made only upon the stock
transfer books of the Corporation, kept at the registered office of the
Corporation or at its principal place of business, or at the office of its
transfer agent or registrar, and before a new certificate is issued the old
certificate shall be surrendered for cancellation. The Board of Directors may,
by resolution, open a share register in any state of the United States, and may
employ an agent or agents to keep such register, and to record transfers of
shares therein.
(b) Shares of stock shall be transferred by delivery of the
certificates therefor, accompanied either by an assignment in writing on the
back of the certificate or an assignment separate from the certificate, or by a
written power of attorney to sell, assign and transfer the same, signed by the
holder of said certificate. No shares of stock shall be transferred on the books
of the Corporation until the outstanding certificates therefor have been
surrendered to the Corporation.
3.3 Registered Owner. Registered stockholders shall be treated by the
Corporation as the holders in fact of the stock standing in their respective
names and the Corporation shall not be bound to recognize any equitable or other
claim to or interest in any share on the part of any other person, whether or
not it shall have express or other notice thereof, except as expressly provided
below or by the laws of the State of Indiana. The Board of Directors may adopt
by resolution a procedure whereby a stockholder of the Corporation may certify
in writing to the Corporation that all or a portion of the shares registered in
the name of such stockholder are held for the account of a specified person or
persons.
5
<PAGE>
3.4 Mutilated, Lost or Destroyed Certificates. In case of any
mutilation, loss or destruction of any certificate of stock, another may be
issued in its place upon receipt of proof of such mutilation, loss or
destruction. The Board of Directors may impose conditions on such issuance and
may require the giving of a satisfactory bond or indemnity to the Corporation in
such sum as they might determine or establish such other procedures as they deem
necessary.
3.5 Shares of Another Corporation. Shares owned by the Corporation in
another corporation, domestic or foreign, may be voted by such officer, agent or
proxy as the Board of Directors may determine or, in the absence of such
determination, by the President of the Corporation.
ARTICLE IV
BOARD OF DIRECTORS
4.1 Number and Powers. The management of all the affairs, property and
interests of the Corporation shall be vested in a Board of Directors. The Board
of Directors shall consist of six persons as of the effective date of these
Bylaws. Directors need not be residents of the State of Indiana or stockholders
of the Corporation. The Board of Directors, other than those who may be elected
by the holders of any class or series of stock having preference over the Common
Stock as to dividends or upon liquidation, shall be divided into three classes
as nearly equal in number as possible, with one class to be elected annually. At
the first annual meeting of stockholders following the effective date of the
Articles of Incorporation, directors of the first class shall be elected to hold
office for a term expiring at the next succeeding annual meeting, directors of
the second class shall be elected to hold office for a term expiring at the
second succeeding annual meeting, and directors of the third class shall be
elected to hold office for a term expiring at the third succeeding annual
meeting; and, as to directors of each class, when their respective successors
are elected and qualified. At each subsequent annual meeting of stockholders,
directors elected to succeed those whose terms are expiring shall be elected for
a term of office to expire at the third succeeding annual meeting of
stockholders and when their respective successors are elected and qualified. In
addition to the powers and authorities expressly conferred upon it by these
Bylaws and the Articles of Incorporation, the Board of Directors may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Articles of Incorporation or by these Bylaws directed
or required to be exercised or done by the stockholders.
4.2 Change of Number. The number of directors may at any time be
increased or decreased by a vote of a majority of the Whole Board of Directors
and a majority of the Continuing Directors, as such terms are defined in the
Articles of Incorporation, provided that no decrease shall have the effect of
shortening the term of any incumbent director except as provided in Sections 4.3
and 4.4 hereunder.
6
<PAGE>
4.3 Vacancies. All vacancies in the Board of Directors shall be filled
in the manner provided in the Corporation's Articles of Incorporation, which
provisions are incorporated herein with the same effect as if they were set
forth herein.
4.4 Removal of Directors. Directors may be removed in the manner
provided in the Corporation's Articles of Incorporation, which provisions are
incorporated herein with the same effect as if they were set forth herein.
4.5 Regular Meetings. Regular meetings of the Board of Directors or any
committee may be held without notice at the principal place of business of the
Corporation or at such other place or places, either within or without the State
of Indiana, as the Board of Directors or such committee, as the case may be, may
from time to time designate. The annual meeting of the Board of Directors shall
be held without notice immediately after the adjournment of the annual meeting
of stockholders.
4.6 Special Meetings.
(a) Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board, the President or by a majority of the
authorized number of directors, to be held at the principal place of business of
the Corporation or at such other place or places as the Board of Directors or
the person or persons calling such meeting may from time to time designate.
Notice of all special meetings of the Board of Directors shall be given to each
director by at least two days' service of the same by facsimile or personally,
and by at least three days' service when delivered by mail at the address at
which the director is most likely to be reached. Such notice shall be deemed to
be delivered when deposited in the mail so addressed with postage prepared, or
when delivered to the telegraph company if sent by telegram. Such notice need
not specify the business to be transacted at, nor the purpose of, the meeting.
(b) Special meetings of any committee may be called at any
time by such person or persons and with such notice as shall be specified for
such committee by the Board of Directors, or in the absence of such
specification, in the manner and with the notice required for special meetings
of the Board of Directors.
4.7 Quorum. A majority of the Whole Board of Directors, as such term is
defined in the Corporation's Articles of Incorporation, shall be necessary at
all meetings to constitute a quorum for the transaction of business.
4.8 Waiver of Notice. Attendance of a director at a meeting of
directors shall constitute a waiver of notice of such meeting, unless the
director at the beginning of the meeting (or promptly upon his arrival) objects
to the holding of the meeting or transacting business at the meeting and does
not thereafter vote for or assent to action taken at the meeting. A waiver of
notice signed by the director or directors and filed with the minutes
7
<PAGE>
of the meeting or in the corporate records of the Corporation, whether before or
after the time stated for the meeting, shall be equivalent to the giving of
notice.
4.9 Registering Dissent. A director who is present at a meeting of the
Board of Directors at which action on a corporate matter is taken shall be
deemed to have assented to such action unless the director objects at the
beginning of the meeting (or promptly upon the director's arrival) to holding it
on or transacting business at the meeting, the director's dissent or abstention
from the action taken is entered in the minutes of the meeting, or the director
delivers written notice of his dissent or abstention to the presiding officer of
the meeting before its adjournment or to the Secretary of the Corporation
immediately after adjournment of the meeting. Such right to dissent shall not
apply to a director who voted in favor of such action.
4.10 Executive, Audit and Other Committees. Standing or special
committees may be appointed from its own number by the Board of Directors from
time to time and the Board of Directors may from time to time invest such
committees with such powers as it may see fit, subject to such conditions as may
be prescribed by the Board. An Executive Committee may be appointed by
resolution passed by a majority of the Whole Board of Directors, as such term is
defined in the Corporation's Articles of Incorporation. It shall have and
exercise all of the authority of the Board of Directors, except in reference to
amending the Articles of Incorporation or Bylaws (except as expressly permitted
by the Indiana Business Corporation Law, I.C. Section 23-1-17-1, et seq., as
amended (the "Act")), authorizing distributions (except that it may authorize or
approve a reacquisition of shares of capital stock of the Corporation or other
distribution if done according to a formula or method or within a range
prescribed by the Board of Directors), approving or proposing to stockholders
action required by law to be approved by stockholders, approving a plan of
merger not requiring stockholder approval, authorizing or approving the issuance
or sale or a contract for the sale of shares (except that it may authorize or
approve the issuance or sale or a contract for sale of shares of capital stock
of the Corporation, or determine the designation and relative rights,
preferences and limitations of a class or series of shares of capital stock of
the Corporation as prescribed by a resolution of the Board of Directors),
adopting, amending or repealing bylaws, or filling vacancies on the Board of
Directors or on any committee thereof. An Audit Committee may be appointed by a
resolution approved by a majority of the Whole Board of Directors, as such term
is defined in the Corporation's Articles of Incorporation, and at least a
majority of the members of the Audit Committee shall be directors who are not
also officers of the Corporation. The Audit Committee shall recommend
independent auditors to the Board of Directors annually and shall review the
Corporation's budget, the scope and results of the audit performed by the
Corporation's independent auditors and the Corporation's system of internal
control with management and such independent auditors, and such other duties as
may be assigned to such Committee. All committees so appointed shall keep
regular minutes of the transactions of their meetings and shall cause them to be
recorded in books kept for that purpose in the office of the Corporation. The
designation of any such committee, and the
8
<PAGE>
delegation of authority thereto, shall not relieve the Board of Directors, or
any member thereof, of any responsibility imposed by law.
4.11 Remuneration. Directors, as such, may receive a stated salary for
their service, and by resolution of the Board of Directors, a fixed sum and
expenses of attendance, if any, may be allowed for attendance at each regular or
special meeting of such Board. Members of standing or special committees may be
allowed like compensation for attending committee meetings.
4.12 Action by Directors Without a Meeting. Any action required or
which may be taken at a meeting of the directors, or of a committee thereof, may
be taken without a meeting if a consent in writing, setting forth the action so
taken or to be taken, shall be signed by all of the directors, or all of the
members of the committee, as the case may be, and included in the minutes or
filed with the corporate records reflecting the action taken. Such consent
shall have the same effect as a unanimous vote.
4.13 Action of Directors by Communications Equipment. Any action
required or which may be taken at a meeting of directors, or of a committee
thereof, may be taken by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time. A director participating in the
meeting by this means is deemed to be present in person at the meeting.
4.14 Nominations. Nominations of candidates for election as directors
at any annual meeting of stockholders shall be made in the manner set forth in
the provisions of the Corporation's Articles of Incorporation, which provisions
are incorporated herein with the same effect as if they were set forth herein.
ARTICLE V
OFFICERS
5.1 Designations. The officers of the Corporation shall be a President,
a Secretary and a Treasurer, such Vice Presidents, Assistant Secretaries and
Assistant Treasurers as the Board may designate, each of whom shall be elected
by a majority vote of the Board of Directors for one year at their first meeting
after the annual meeting of stockholders, and who shall hold office until their
successors are elected and qualify. The Board of Directors may also designate
the Chairman of the Board as an officer. The Board of Directors also may elect
or authorize the appointment of such other officers as the business of the
Corporation may require. Any two or more offices may be held by the same person.
5.2 Powers and Duties. The officers of the Corporation shall have such
authority and perform such duties as the Board of Directors may from time to
time authorize or determine. In the absence of action of the Board of Directors,
the officers shall have such powers and duties as may be provided in these
Bylaws and as generally pertain to their
9
<PAGE>
respective offices. The Secretary of the Corporation shall be responsible for
preparing minutes of the directors' and stockholders' meetings and for
authenticating records of the Corporation.
5.3 Delegation. In the case of absence or inability to act of any
officer of the Corporation and of any person herein authorized to act in his
place, the Board of Directors may from time to time delegate the powers or
duties of such officer to any other officer or any directors or other person
whom it may select.
5.4 Vacancies. Vacancies in any office arising from any cause may be
filled by a vote of a majority of the Whole Board of Directors, as such term is
defined in the Articles of Incorporation, at any regular or special meeting of
the Board.
5.5 Other Officers. Directors may appoint such other officers and
agents as it shall deem necessary or expedient, who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
5.6 Term; Removal. The officers of the Corporation shall hold office
until their successors are chosen and qualify. Any officer or agent elected or
appointed by the Board of Directors may be removed at any time, with or without
cause, by the affirmative vote of a majority of the Whole Board of Directors, as
such term is defined in the Corporation's Articles of Incorporation, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed.
ARTICLE VI
DIVIDENDS AND FINANCE
6.1 Dividends. Subject to the conditions and limitations imposed by the
Act, dividends may be declared by the Board of Directors and paid by the
Corporation.
6.2 Reserves. There may be set aside out of the net earnings of the
Corporation such sum or sums as the directors from time to time in their
absolute discretion deem expedient as a reserve fund to meet contingencies or
for any other proper purpose.
6.3 Depositories. The monies of the Corporation shall be deposited in
the name of the Corporation in such financial institution or financial
institutions or trust company or trust companies as the Board of Directors shall
designate, and shall be drawn out only by check or other order for payment of
money signed by such persons and in such manner as may be determined by
resolution of the Board of Directors.
10
<PAGE>
ARTICLE VII
NOTICES
Except as may otherwise be required by law, any notice to any
stockholder or director may be delivered personally or by mail. If mailed, the
notice shall be deemed to have been delivered when deposited in the United
States mail, addressed to the addressee at his last known address in the records
of the Corporation, with postage thereon prepaid.
ARTICLE VIII
SEAL
The corporate seal of the Corporation shall be in such form and bear
such inscription as may be adopted by resolution of the Board of Directors, or
by usage of the officers on behalf of the Corporation.
ARTICLE IX
BOOKS AND RECORDS
The Corporation shall keep correct and complete books and records of
account and shall keep minutes and proceedings of its stockholders and Board of
Directors; and it shall keep at its registered office or principal place of
business, or at the office of its transfer agent or registrar, a record of its
stockholders, giving the names and addresses of all stockholders and the number
and class of the shares held by each. Any books, records and minutes may be in
written form or any other form capable of being converted into written form
within a reasonable time.
ARTICLE X
FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the Corporation shall end on the 30th day of June
each year. The Corporation shall be subject to an annual audit as of the end of
its fiscal year by independent public accountants appointed by and responsible
to the Board of Directors. The appointment of such accountants shall be subject
to annual ratification by the stockholders.
11
<PAGE>
ARTICLE XI
PERSONAL LIABILITY OF DIRECTORS; INDEMNIFICATION
(a) A director of the Corporation shall not be personally
liable for monetary damages for action taken, or any failure to take action, as
a director, to the extent set forth in the Corporation's Articles of
Incorporation, which provisions are incorporated herein with the same affect as
if they were set forth herein.
(b) The Corporation shall indemnify any person who is a
director, agent, officer, employee or agent of the Corporation to the extent set
forth in the Corporation's Articles of Incorporation, which provisions are
incorporated herein with the same affect as if they were set forth herein.
ARTICLE XII
AMENDMENTS
Amendments. These Bylaws may be altered, amended or repealed only in
the manner set forth in the Corporation's Articles of Incorporation, which
provisions are incorporated herein with the same effect as if they were set
forth herein. Action by the Board of Directors to adopt or amend a bylaw that
changes the quorum or voting requirement for stockholders must be approved by an
affirmative majority of votes entitled to be cast on the matter. Action by the
Board of Directors to adopt or amend a bylaw that changes the quorum or voting
requirement for the Board of Directors shall meet the same quorum requirement
and be adopted by the same vote required to take action under the quorum and
voting requirement then in effect or proposed to be adopted, whichever is
greater.
As adopted this ____ day of August 1996.
12
EXHIBIT 4.1
(FORM OF STOCK CERTIFICATE - FRONT SIDE)
NUMBER SHARES
CUSIP
See reverse for
certain definitions
Vision Bancorp, Inc.
Lawrenceburg, Indiana
$.10 par value common stock -- fully paid and non-assessable
This certifies that ___________________________________ is the
registered holder of _________________ shares of the Common Stock, par value
$.10 per share, of Vision Bancorp, Inc., Lawrenceburg, Indiana (the
"Corporation"), incorporated under the laws of the State of Indiana.
The shares evidenced by this Certificate are transferable only on the
books of the Corporation by the holder hereof, in person or by duly authorized
attorney or legal representative, upon surrender of this Certificate properly
endorsed. This Certificate and the shares represented hereby are subject to all
the provisions of the Articles of Incorporation and Bylaws of the Corporation
and any and all amendments thereto.
This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed by the facsimile signatures of its duly authorized officers and has
caused its facsimile seal to be affixed hereto.
Dated:
___________________________________ (SEAL) _________________________________
Margaret M. Abner Donald C. Siemers
Secretary President and Chief Executive
Officer
<PAGE>
(FORM OF STOCK CERTIFICATE - BACK SIDE)
The Corporation is authorized to issue more than one class of
stock, including a class of preferred stock which may be issued in one or more
series. The Corporation will furnish to any stockholder, upon written request
and without charge, a full statement of the designations, preferences,
limitations and relative rights of the shares of each class authorized to be
issued and, with respect to the issuance of any preferred stock to be issued in
series, the relative rights, limitations and preferences between the shares of
each series so far as the rights and preferences have been fixed and determined
and the authority of the Board of Directors to fix and determine the relative
rights and preferences of any subsequent series or class.
The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT - ______________ Custodian ______________ under
(Cust) (Minor)
Uniform Gifts to Minors Act ________________________
(State)
Additional abbreviations may also be used though not in the above list.
<PAGE>
For value received, _________________________________ hereby
sell, assign and transfer
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAXPAYER IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------
| |
- ---------------------------------
unto ______________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP
CODE OF ASSIGNEE
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
__________________________ shares of the Common Stock represented by this
Certificate, and do hereby irrevocably constitute and appoint
__________________________ as Attorney, to transfer the said shares on the books
of the within named Corporation, with full power of substitution.
Dated _____________ __, ____
______________________________________
Signature
______________________________________
Signature
Notice: The signature(s) to this assignment must correspond with the name(s)
written upon the face of this Certificate in every particular without alteration
or any change whatsoever.
EXHIBIT 8.3
[RP FINANCIAL, LC. LETTERHEAD]
September 13, 1996
Board of Directors
Dearborn Mutual Holding Company
Dearborn Savings Association, F.A.
118 Walnut Street
Lawrenceburg, Indiana 47025
Re: Plan of Conversion: Subscription Rights
Gentlemen:
All capitalized terms not otherwise defined in this letter have the
meanings given such terms in the Plan of Conversion and Agreement and Plan of
Reorganization (the "Plan") adopted by the Boards of Directors of Dearborn
Savings Association, F.A. (the "Association") and Dearborn Mutual Holding
Company (the "Mutual Holding Company"). Pursuant to the Plan, Vision Bancorp,
Inc. (the "Company") will offer and sell the Conversion Stock.
We understand that "Subscription Rights" to purchase shares of the
Conversion Stock are to be issued to (i) Eligible Account Holders; (ii)
Supplemental Eligible Account Holders; (iii) Other Members; (iv) directors,
officers and employees of the Mutual Holding Company and the Association; and,
(v) Public Stockholders, collectively referred to as the "Recipients". Based
solely upon our observation that the Subscription Rights will be available to
such Recipients without cost, will be legally non-transferable and of short
duration, and will afford the Recipients the right only to purchase shares of
Conversion Stock at the same price as will be paid by members of the general
public in the Community Offering, but without undertaking any independent
investigation of state or federal law or the position of the Internal Revenue
Service with respect to this issue, we are of the belief that:
(1) the Subscription Rights will have no ascertainable market value; and,
(2) the price at which the Subscription Rights are exercisable will not
be more or less than the pro forma market value of the shares upon
issuance.
Changes in the local and national economy, the legislative and
regulatory environment, the stock market, interest rates, and other external
forces (such as natural disasters or significant world events) may occur from
time to time, often with great unpredictability and may materially impact the
value of thrift stocks as a whole or the Company's value alone. Accordingly, no
assurance can be given that persons who subscribe to shares of Conversion Stock
in the conversion will thereafter be able to buy or sell such shares at the same
price paid in the Subscription Offering.
Sincerely,
Gregory E. Dunn
Senior Vice President
DEARBORN SAVINGS ASSOCIATION, F.A.
1993 STOCK INCENTIVE PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
Dearborn Savings Association, F.A. (the "Savings Association") hereby
establishes this 1993 Stock Incentive Plan (the "Plan") upon the terms and
conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of this Plan is to improve the growth and profitability of
the Savings Association and its Subsidiary Companies by attracting and retaining
qualified personnel, providing such Employees with a proprietary interest in the
Savings Association as an incentive to contribute to the success of the Savings
Association and its Subsidiary Companies, and rewarding those Employees for
outstanding performance and the attainment of targeted goals. All Incentive
Stock Options issued under this Plan are intended to comply with the
requirements of Section 422 of the Code, and the regulations thereunder, and all
provisions hereunder shall be read, interpreted and applied with that purpose in
mind.
ARTICLE III
DEFINITIONS
3.01 "Award" means an Option or Stock Appreciation Right granted
pursuant to the terms of this Plan.
3.02 "Board" means the Board of Directors of the Savings Association.
3.03 "Code" means the Internal Revenue Code of 1986, as amended.
3.04 "Committee" means a committee of two or more directors appointed
by the Board pursuant to Article IV hereof, none of whom shall be an officer or
employee of the Savings Association, and each of whom shall be a "disinterested
person" within the meaning of Rule 16b-3 under the Exchange Act, or any
successor thereto.
3.05 "Common Stock" means shares of the common stock, $.10 par value
per share, of the Savings Association.
3.06 "Disability" means any physical or mental impairment which
qualifies an Employee for disability benefits under the applicable long-term
disability plan maintained by the Savings Association or a Subsidiary Company,
or, if no such plan applies, which
<PAGE>
2
would qualify such Employee for disability benefits under any long-term
disability plan maintained by the Savings Association, if such Employee were
covered by that plan.
3.07 "Effective Date" means the hour and day upon which Common Stock is
initially sold by the Savings Association in the Offering.
3.08 "Employee" means any person who is employed by the Savings
Association or a Subsidiary Company, including Officers, but not including
directors who are not also officers of or otherwise employed by the Savings
Association or a Subsidiary Company.
3.09 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
3.10 "Fair Market Value" shall be equal to the fair market value per
share of the Savings Association's Common Stock on the date an Award is granted.
For purposes hereof, the Fair Market Value of a share of Common Stock shall be
the closing sale price of a share of Common Stock on the date in question (or,
if such day is not a trading day in the U.S. markets, on the nearest preceding
trading day), as reported with respect to the principal market (or the composite
of the markets, if more than one) or national quotation system in which such
shares are then traded, or if no such closing prices are reported, the mean
between the high bid and low asked prices that day on the principal market or
national quotation system then in use, or if no such quotations are available,
the price furnished by a professional securities dealer making a market in such
shares selected by the Committee.
3.11 "Incentive Stock Option" means any Option granted under this Plan
which the Board intends (at the time it is granted) to be an incentive stock
option within the meaning of Section 422 of the Code or any successor thereto.
3.12 "Non-Qualified Option" means any Option granted under this Plan
which is not an Incentive Stock Option.
3.13 "Offering" means the offering of Common Stock to the public
pursuant to the Stock Issuance Plan adopted by the Savings Association in
connection with the reorganization of Dearborn Savings Association, F.A. into
the mutual holding company form of organization.
3.14 "Officer" means an Employee whose position in the Savings
Association or Subsidiary Company is that of a corporate officer, as determined
by the Board.
3.15 "Option" means a right granted under this Plan to purchase Common
Stock.
3.16 "Optionee" means an Employee or former Employee to whom an Option
is granted under the Plan.
3.17 "Retirement" means a termination of employment which constitutes a
<PAGE>
3
"retirement" under any applicable qualified pension benefit plan maintained by
the Savings Association or a Subsidiary Company, or, if no such plan is
applicable, which would constitute "retirement" under any qualified pension
benefit plan maintained by the Savings Association or a Subsidiary Company, if
such individual were a participant in such plan.
3.18 "Stock Appreciation Right" means a right to surrender an Option in
consideration for a payment by the Savings Association in cash and/or Common
Stock, as provided in the discretion of the Committee in accordance with Section
8.10.
3.19 "Subsidiary Companies" means those subsidiaries of the Savings
Association which meet the definition of "subsidiary corporations" set forth in
Section 425(f) of the Code, at the time of granting of the Option in question.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Duties of the Committee. The Plan shall be administered and
interpreted by the Committee, as appointed from time to time by the Board
pursuant to Section 4.02. The Committee shall have the authority in its absolute
discretion to adopt, amend and rescind such rules, regulations and procedures
as, in its opinion, may be advisable in the administration of the Plan,
including, without limitation, rules, regulations and procedures which (i) deal
with satisfaction of an Employee's tax withholding obligation pursuant to
Section 12.02 hereof, (ii) include arrangements to facilitate the Employee's
ability to borrow funds for payment of the exercise or purchase price of an
Award, if applicable, from securities brokers and dealers, and (iii) include
arrangements which provide for the payment of some or all of such exercise or
purchase price by delivery of previously-owned shares of Common Stock or other
property and/or by withholding some of the shares of Common Stock which are
being acquired. The interpretation and construction by the Committee of any
provisions of the Plan, any rule, regulation or procedure adopted by it pursuant
thereto or of any Award shall be final and binding.
4.02 Appointment and Operation of the Committee. The members of the
Committee shall be appointed by, and will serve at the pleasure of, the Board.
The Board from time to time may remove members from, or add members to, the
Committee, provided the Committee shall continue to consist of two or more
members of the Board, none of whom shall be an officer or employee of the
Savings Association, and each of whom shall be a "disinterested person" within
the meaning of Rule 16b-3 under the Exchange Act. The Committee shall act by
vote or written consent of a majority of its members. Subject to the express
provisions and limitations of the Plan, the Committee may adopt such rules,
regulations and procedures as it deems appropriate for the conduct of its
affairs. It may appoint one of its members to be chairman and any person,
whether or not a member, to be its secretary or agent. The Committee shall
report its actions and decisions to the Board at appropriate times but in no
event less than one time per calendar year.
<PAGE>
4
4.03 Revocation for Misconduct. The Committee may by resolution
immediately revoke, rescind and terminate any Option, or portion thereof, to the
extent not yet vested, or any Stock Appreciation Right, to the extent not yet
exercised, previously granted or awarded under this Plan to an Employee who is
discharged from the employ of the Savings Association or a Subsidiary Company
for cause, which, for purposes hereof, shall mean termination because of the
Employee's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, or willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order.
4.04 Limitation on Liability. No member of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan, any rule, regulation or procedure adopted by it pursuant thereto or any
Awards granted under it. If a member of the Committee 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, by
reason of anything done or not done by him in such capacity under or with
respect to the Plan, the Savings Association shall, subject to the requirements
of applicable laws and regulations, indemnify such member against all
liabilities and expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in the best interests of the Savings Association
and its Subsidiary Companies and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
4.05 Compliance with Law and Regulations. All Awards granted hereunder
shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may be required.
The Savings Association shall not be required to issue or deliver any
certificates for shares of Common Stock prior to the completion of any
registration or qualification of or obtaining of consents or approvals with
respect to such shares under any Federal or state law or any rule or regulation
of any government body, which the Savings Association shall, in its sole
discretion, determine to be necessary or advisable. Moreover, no Option or Stock
Appreciation Right may be exercised if such exercise would be contrary to
applicable laws and regulations.
4.06 Restrictions on Transfer. The Savings Association may place a
legend upon any certificate representing shares acquired pursuant to an Award
granted hereunder noting that the transfer of such shares may be restricted by
applicable laws and regulations.
<PAGE>
5
ARTICLE V
ELIGIBILITY
Awards may be granted to such Employees of the Savings Association and
its Subsidiary Companies as may be designated from time to time by the
Committee. Awards may not be granted to individuals who are not Employees of
either the Savings Association or its Subsidiary Companies.
ARTICLE VI
COMMON STOCK COVERED BY THE PLAN
6.01 Option Shares. The aggregate number of shares of Common Stock
which may be issued pursuant to this Plan, subject to adjustment as provided in
Article IX, shall be an amount equal to 6.5% of the shares of Common Stock
issued in the Offering. None of such shares shall be the subject of more than
one Award at any time, but if an Option as to any shares is surrendered before
exercise (including surrender in connection with exercise of a Stock
Appreciation Right), or expires or terminates for any reason without having been
exercised in full, or for any other reason ceases to be exercisable, the number
of shares covered thereby shall again become available for grant under the Plan
as if no Awards had been previously granted with respect to such shares.
6.02 Source of Shares. The shares of Common Stock issued under the Plan
may be authorized but unissued shares, treasury shares or shares purchased by
the Savings Association on the open market or from private sources for use under
the Plan.
ARTICLE VII
DETERMINATION OF
AWARDS, NUMBER OF SHARES, ETC.
The Committee shall, in its discretion, determine from time to time
which Employees will be granted Awards under the Plan, the number of shares of
Common Stock subject to each Award, whether each Option will be an Incentive
Stock Option or a Non-Qualified Stock Option and the exercise price of an
Option. In making all such determinations there shall be taken into account the
duties, responsibilities and performance of each respective Employee, his
present and potential contributions to the growth and success of the Savings
Association, his salary and such other factors as the Committee shall deem
relevant to accomplishing the purposes of the Plan.
ARTICLE VIII
OPTIONS AND STOCK APPRECIATION RIGHTS
Each Option granted hereunder shall be on the following terms and
conditions:
8.01 Stock Option Agreement. The proper Officers of the Savings
Association and each Optionee shall execute a Stock Option Agreement which shall
set forth the
<PAGE>
6
total number of shares of Common Stock to which it pertains, the exercise price,
whether it is a Non-Qualified Option or an Incentive Stock Option, and such
other terms, conditions, restrictions and privileges as the Committee in each
instance shall deem appropriate, provided they are not inconsistent with the
terms, conditions and provisions of this Plan. Each Optionee shall receive a
copy of his executed Stock Option Agreement.
8.02 Option Exercise Price.
(a) Incentive Stock Options. The per share price at which the subject
Common Stock may be purchased upon exercise of an Incentive Stock Option shall
be no less than one hundred percent (100%) of the Fair Market Value of a share
of Common Stock at the time such Incentive Stock Option is granted, except as
provided in Section 8.09(b).
(b) Non-Qualified Options. The per share price at which the subject
Common Stock may be purchased upon exercise of a Non-Qualified Option shall be
established by the Committee at the time of grant, but in no event shall be less
than the greater of (i) the par value or (ii) the Fair Market Value of a share
of Common Stock at the time such Non-Qualified Option is granted.
8.03 Vesting and Exercise of Options.
(a) General Rules. Incentive Stock Options and Non-Qualified Options
shall become vested and exercisable at the rate, to the extent and subject to
such limitations as may be specified by the Committee, provided, however, that
no Option may be exercisable for the first six months following the date the
Option is granted. Notwithstanding the foregoing, no vesting shall occur on or
after an Optionee's employment with the Savings Association and all Subsidiary
Companies is terminated for any reason other than his death, Disability or
Retirement. In determining the number of shares of Common Stock with respect to
which Options are vested and/or exercisable, fractional shares will be rounded
up to the nearest whole number if the fraction is 0.5 or higher, and down if it
is less.
(b) Accelerated Vesting Upon Death, Disability or Retirement. Unless
the Committee shall specifically state otherwise at the time an Option is
granted, all Options granted under this Plan shall become vested and exercisable
in full on the date an Optionee terminates his employment with the Savings
Association or a Subsidiary Company because of his death, Disability or
Retirement.
(c) Accelerated Vesting for Changes in Control. Notwithstanding the
general rule described in Section 8.03(a), all outstanding Options shall become
immediately vested and exercisable in the event there is a change in control of
the Savings Association. A "change in control of the Savings Association" for
this purpose shall mean a change in control as defined under 12 C.F.R. Part 574
or any successor thereto.
<PAGE>
7
8.04 Duration of Options.
(a) General Rule. Except as provided in Sections 8.04(b) and 8.09, each
Option or portion thereof shall be exercisable at any time on or after it vests
and becomes exercisable until the earlier of (i) ten (10) years after its date
of grant or (ii) three (3) months after the date on which the Optionee ceases to
be employed by the Savings Association and all Subsidiary Companies, unless, in
the case of a Non-Qualified Option, the Committee in its discretion decides at
the time of grant or thereafter to extend such period of exercise upon
termination of employment from three (3) months to a period not exceeding five
(5) years.
(b) Exception for Termination Due to Death, Disability or Retirement.
If an Optionee dies while in the employ of the Savings Association or a
Subsidiary Company or terminates employment with the Savings Association or a
Subsidiary Company as a result of Disability or Retirement without having fully
exercised his Options, the Optionee or the executors, administrators, legatees
or distributees of his estate shall have the right, during the twelve-month
period following the earlier of his death, Disability or Retirement, to exercise
such Options to the extent vested on the date of such death, Disability or
Retirement. In no event, however, shall any Option be exercisable more than ten
(10) years from the date it was granted.
8.05 Nonassignability. Options shall not be transferable by an Optionee
except by will or the laws of descent or distribution, and during an Optionee's
lifetime shall be exercisable only by such Optionee or the Optionee's guardian
or legal representative.
8.06 Manner of Exercise. Options may be exercised in part or in whole
and at one time or from time to time. The procedures for exercise shall be set
forth in the written Stock Option Agreement provided for in Section 8.01 above.
8.07 Payment for Shares. Payment in full of the purchase price for
shares of Common Stock purchased pursuant to the exercise of any Option shall be
made to the Savings Association upon exercise of the Option. All shares sold
under the Plan shall be fully paid and nonassessable. Payment for shares may be
made by the Optionee in cash or, at the discretion of the Committee, by
delivering shares of Common Stock (including shares acquired pursuant to the
exercise of an Option) or other property equal in Fair Market Value to the
purchase price of the shares to be acquired pursuant to the Option, by
withholding some of the shares of Common Stock which are being purchased upon
exercise of an Option, or any combination of the foregoing.
8.08 Voting and Dividend Rights. No Optionee shall have any voting or
dividend rights or other rights of a stockholder in respect of any shares of
Common Stock covered by an Option prior to the time that his name is recorded on
the Savings Association's stockholder ledger as the holder of record of such
shares acquired pursuant to an exercise of an Option.
<PAGE>
8
8.09 Additional Terms Applicable to Incentive Stock Options. All
Options issued under the Plan as Incentive Stock Options will be subject, in
addition to the terms detailed in Sections 8.01 to 8.08 above, to those
contained in this Section 8.09.
(a) Notwithstanding any contrary provisions contained elsewhere in this
Plan and as long as required by Section 422 of the Code, the aggregate Fair
Market Value, determined as of the time an Incentive Stock Option is granted, of
the Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by the Optionee during any calendar year, under this Plan and
stock options that satisfy the requirements of Section 422 of the Code under any
other stock option plan or plans maintained by the Savings Association (or any
parent or Subsidiary Company), shall not exceed $100,000.
(b) Limitation on Ten Percent Stockholders. The price at which shares
of Common Stock may be purchased upon exercise of an Incentive Stock Option
granted to an individual who, at the time such Incentive Stock Option is
granted, owns, directly or indirectly, more than ten percent (10%) of the total
combined voting power of all classes of stock issued to stockholders of the
Savings Association or any Subsidiary Company, shall be no less than one hundred
and ten percent (110%) of the Fair Market Value of a share of the Common Stock
of the Savings Association at the time of grant, and such Incentive Stock Option
shall by its terms not be exercisable after the earlier of the date determined
under Section 8.03 or the expiration of five (5) years from the date such
Incentive Stock Option is granted.
(c) Notice of Disposition; Withholding; Escrow. An Optionee shall
immediately notify the Savings Association in writing of any sale, transfer,
assignment or other disposition (or action constituting a disqualifying
disposition within the meaning of Section 421 of the Code) of any shares of
Common Stock acquired through exercise of an Incentive Stock Option, within two
(2) years after the grant of such Incentive Stock Option or within one (1) year
after the acquisition of such shares, setting forth the date and manner of
disposition, the number of shares disposed of and the price at which such shares
were disposed of. The Savings Association shall be entitled to withhold from any
compensation or other payments then or thereafter due to the Optionee such
amounts as may be necessary to satisfy any withholding requirements of Federal
or state law or regulation and, further, to collect from the Optionee any
additional amounts which may be required for such purpose. The Committee may, in
its discretion, require shares of Common Stock acquired by an Optionee upon
exercise of an Incentive Stock Option to be held in an escrow arrangement for
the purpose of enabling compliance with the provisions of this Section 8.09(c).
8.10 Stock Appreciation Rights.
(a) General Terms and Conditions. The Committee may, but shall not be
obligated to, authorize the Savings Association, on such terms and conditions as
it deems appropriate in each case, to grant rights to Optionees to surrender an
exercisable Option,
<PAGE>
9
or any portion thereof, in consideration for the payment by the Savings
Association of an amount equal to the excess of the Fair Market Value of the
shares of Common Stock subject to the Option, or portion thereof, surrendered
over the exercise price of the Option with respect to such shares (any such
authorized surrender and payment being hereinafter referred to as a "Stock
Appreciation Right"). Such payment, at the discretion of the Committee, may be
made in shares of Common Stock valued at the then Fair Market Value thereof, or
in cash, or partly in cash and partly in shares of Common Stock.
The terms and conditions set with respect to a Stock Appreciation Right
may include (without limitation), subject to other provisions of this Section
8.10 and the Plan; the period during which, date by which or event upon which
the Stock Appreciation Right may be exercised; the method for valuing shares of
Common Stock for purposes of this Section 8.10; a ceiling on the amount of
consideration which the Savings Association may pay in connection with exercise
and cancellation of the Stock Appreciation Right; and arrangements for income
tax withholding. The Committee shall have complete discretion to determine
whether, when and to whom Stock Appreciation Rights may be granted.
Notwithstanding the foregoing, the Savings Association may not permit the
exercise of a Stock Appreciation Right issued pursuant to this Plan until the
Savings Association has been subject to the reporting requirements of Section 13
of the Exchange Act for a period of at least one year prior to the exercise of
any such Stock Appreciation Right and until a Stock Appreciation Right issued
pursuant to this Plan has been outstanding for at least six months from the date
of grant.
(b) Time Limitations. If a holder of a Stock Appreciation Right
terminates service with the Savings Association as an Officer or Employee, the
Stock Appreciation Right may be exercised only within the period, if any, within
which the Option to which it relates may be exercised. Notwithstanding the
foregoing, any election by an Optionee to exercise the Stock Appreciation Rights
provided in this Plan shall be made during the period beginning on the third
business day following the release for publication of quarterly or annual
financial information required to be prepared and disseminated by the Savings
Association pursuant to the requirements of the Exchange Act and ending on the
twelfth business day following such date. The required release of information
shall be deemed to have been satisfied when the specified financial data appears
on or in a wire service, financial news service or newspaper of general
circulation or is otherwise first made publicly available.
(c) Effects of Exercise of Stock Appreciation Rights or Options. Upon
the exercise of a Stock Appreciation Right, the number of shares of Common Stock
available under the Option to which it relates shall decrease by a number equal
to the number of shares for which the Stock Appreciation Right was exercised.
Upon the exercise of an Option, any related Stock Appreciation Right shall
terminate as to any number of shares of Common Stock subject to the Stock
Appreciation Right that exceeds the total number of shares for which the Option
remains unexercised.
<PAGE>
10
(d) Time of Grant. A Stock Appreciation Right granted in connection
with an Incentive Stock Option must be granted concurrently with the Option to
which it relates while a Stock Appreciation Right granted in connection with a
Non-Qualified Option may be granted concurrently with the Option which it
relates or at any time thereafter prior to the exercise or expiration of such
Option.
(e) Non-Transferable. The holder of a Stock Appreciation Right may not
transfer or assign the Stock Appreciation Right otherwise than by will or in
accordance with the laws of descent and distribution, and during a holder's
lifetime a Stock Appreciation Right may be exercisable only by the holder.
ARTICLE IX
ADJUSTMENTS FOR CAPITAL CHANGES
The aggregate number of shares of Common Stock available for issuance
under this Plan, the number of shares to which any Award relates and the
exercise price per share of Common Stock under any Option shall be
proportionately adjusted for any increase or decrease in the total number of
outstanding shares of Common Stock issued subsequent to the effective date of
this Plan resulting from a split, subdivision or consolidation of shares or any
other capital adjustment, the payment of a stock dividend, or other increase or
decrease in such shares effected without receipt or payment of consideration by
the Savings Association. If, upon a merger, consolidation, reorganization,
liquidation, recapitalization or the like of the Savings Association, the shares
of the Savings Association's Common Stock shall be exchanged for other
securities of the Savings Association or of another corporation, each recipient
of an Award shall be entitled, subject to the conditions herein stated, to
purchase or acquire such number of shares of Common Stock or amount of other
securities of the Savings Association or such other corporation as were
exchangeable for the number of shares of Common Stock of the Savings Association
which such optionees would have been entitled to purchase or acquire except for
such action, and appropriate adjustments shall be made to the per share exercise
price of outstanding Options.
ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, by resolution, at any time terminate or amend the Plan
with respect to any shares of Common Stock as to which Awards have not been
granted, subject to any required stockholder approval or any stockholder
approval which the Board may deem to be advisable for any reason, such as for
the purpose of obtaining or retaining any statutory or regulatory benefits under
tax, securities or other laws or satisfying any applicable stock exchange
listing requirements. The Board may not, without the consent of the holder of an
Award, alter or impair any Award previously granted or awarded under this Plan
as specifically authorized herein.
<PAGE>
11
ARTICLE XI
EMPLOYMENT RIGHTS
Neither the Plan nor the grant of any Awards hereunder nor any action
taken by the Committee or the Board in connection with the Plan shall create any
right on the part of any Employee of the Savings Association or a Subsidiary
Company to continue in the employ of the Savings Association or a Subsidiary
Company.
ARTICLE XII
WITHHOLDING
12.01 Tax Withholding. The Savings Association may withhold from any
cash payment made under this Plan sufficient amounts to cover any applicable
withholding and employment taxes, and if the amount of such cash payment is
insufficient, the Savings Association may require the Optionee to pay to the
Savings Association the amount required to be withheld as a condition to
delivering the shares acquired pursuant to an Award. The Savings Association
also may withhold or collect amounts with respect to a disqualifying disposition
of shares of Common Stock acquired pursuant to exercise of an Incentive Stock
Option, as provided in Section 8.09(c).
12.02 Methods of Tax Withholding. The Committee is authorized to adopt
rules, regulations or procedures which provide for the satisfaction of an
Employee's tax withholding obligation by the retention of shares of Common Stock
to which the Employee would otherwise be entitled pursuant to an Award and/or by
the Employee's delivery of previously-owned shares of Common Stock or other
property.
ARTICLE XIII
EFFECTIVE DATE OF THE PLAN; TERM
13.01 Effective Date of the Plan. This Plan shall become effective on
the Effective Date, and Awards may be granted hereunder as of or after the
Effective Date and prior to the termination of the Plan, provided that no
Incentive Stock Option issued pursuant to this Plan shall qualify as such unless
this Plan is approved by the requisite vote of the holders of the outstanding
voting shares of the Savings Association at a meeting of stockholders of the
Savings Association held within twelve (12) months following the Effective Date.
13.02 Term of Plan. Unless sooner terminated, this Plan shall remain in
effect for a period of ten (10) years ending on the tenth anniversary of the
Effective Date. Termination of the Plan shall not affect any Awards previously
granted and such Awards shall remain valid and in effect until they have been
fully exercised or earned, are surrendered or by their terms expire or are
forfeited.
<PAGE>
12
ARTICLE XIV
MISCELLANEOUS
14.01 Governing Law. To the extent not governed by Federal law, this
Plan shall be construed under the laws of the State of Indiana.
14.02 Pronouns. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun, and the singular shall include the plural.
EXHIBIT 10.2
DEARBORN SAVINGS ASSOCIATION, F.A.
1993 DIRECTORS' STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
Dearborn Savings Association, F.A. (the "Savings Association") hereby
establishes this 1993 Directors' Stock Option Plan (the "Plan") upon the terms
and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of this Plan is to improve the growth and profitability of
the Savings Association by providing non-employee directors with a proprietary
interest in the Savings Association through non-discretionary grants of
non-qualified stock options (an "Option" or "Options").
ARTICLE III
ADMINISTRATION OF THE PLAN
3.01 Administration. This Plan shall be administered by the entire
Board of Directors of the Savings Association (the "Board"). The Board shall
have the power, subject to and within the limits of the express provisions of
this Plan, to exercise such powers and to perform such acts as are deemed
necessary or expedient to promote the best interests of the Savings Association
with respect to this Plan.
3.02 Compliance with Law and Regulations. All Options granted hereunder
shall be subject to all applicable Federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may be required.
The Savings Association shall not be required to issue or deliver any
certificates for shares of Common Stock prior to the completion of any
registration or qualification of or obtaining of consents or approvals with
respect to such shares under any Federal or state law or any rule or regulation
of any government body, which the Savings Association shall, in its sole
discretion, determine to be necessary or advisable. Moreover, no Option may be
exercised if such exercise or issuance would be contrary to applicable laws and
regulations.
3.03 Restrictions on Transfer. The Savings Association may place a
legend upon any certificate representing shares acquired pursuant to an Option
granted hereunder noting that the transfer of such shares may be restricted by
applicable laws and regulations.
<PAGE>
2
ARTICLE IV
ELIGIBILITY
Each of the non-employee directors ("non-employee director") of the
Savings Association at the time of the Savings Association's initial offering of
capital stock to the public pursuant to the Stock Issuance Plan adopted by the
Savings Association following the reorganization of the Savings Association into
the mutual holding company form of organization (the "Offering") shall receive
options hereunder. No honorary directors, advisory directors or directors
emeritus shall be entitled to receive Options hereunder.
ARTICLE V
COMMON STOCK COVERED BY THE PLAN
5.01 Option Shares. The aggregate number of shares of common stock of
the Savings Association, par value $.10 per share ("Common Stock"), which may be
issued pursuant to this Plan, subject to adjustment as provided in Article VIII,
shall be an amount equal to 3.5% of the shares of Common Stock issued in the
Offering.
5.02 Source of Shares. The shares of Common Stock issued under this
Plan may be authorized but unissued shares, treasury shares or shares purchased
by the Savings Association on the open market or from private sources for use
under the Plan.
ARTICLE VI
OPTION GRANTS
6.01 Initial Grants. An Option to purchase shares of Common Stock shall
be granted to each non-employee director of the Savings Association as of the
hour and day on which Common Stock is initially sold in the Offering.
Specifically, each non-employee director shall receive Options to purchase the
number of shares of Common Stock (rounded down to the nearest whole number)
determined by multiplying the total number of shares of Common Stock which may
be issued pursuant to this Plan by 90% divided by the number of non-employee
directors of the Savings Association at such time.
6.02 Subsequent Grants. An Option to purchase shares of Common Stock
shall be granted to each non-employee director of the Savings Association one
year from the date on which Common Stock is initially sold in the Offering.
Specifically, each non-employee director shall receive Options to purchase the
number of shares of Common Stock (rounded down to the nearest whole number)
determined by multiplying the total number of shares of Common Stock which may
be issued pursuant to this Plan by 10% divided by the number of non-employee
directors of the Savings Association at such time.
<PAGE>
3
ARTICLE VII
OPTION TERMS
Each Option granted hereunder shall be on the following terms and
conditions:
7.01 Option Agreement. The Savings Association and each optionee shall
execute an Option Agreement which shall set forth the total number of shares of
Common Stock to which it pertains, the exercise price and such other terms,
conditions and provisions as are appropriate, provided that they are not
inconsistent with the terms, conditions and provisions of this Plan. Each
optionee shall receive a copy of his executed Option Agreement.
7.02 Option Exercise Price.
(a) Initial Grants. The per share exercise price at which shares of
Common Stock may be purchased upon exercise of an Option granted pursuant to
Section 6.01 hereof shall be the uniform per share price at which Common Stock
is sold by the Savings Association to participants in the Offering.
(b) Subsequent Grants. The per share exercise price at which the shares
of Common Stock may be purchased upon exercise of an Option granted pursuant to
Section 6.02 hereof shall be equal to the greater of (i) the par value of a
share of Common Stock and (ii) the Fair Market Value of a share of Common
Stock as of the date of grant. For purposes of this Plan, the Fair Market Value
shall be the closing sale price of a share of Common Stock on the date in
question (or, if such day is not a trading day in the U.S. markets, on the
nearest preceding trading day), as reported with respect to the principal market
(or the composite of the markets, if more than one) in which such shares are
then traded, or if no such closing prices are reported, the mean between the
high bid and low asked prices that day on the principal market or national
quotation system then in use, or if no such quotations are available, the price
furnished by a professional securities dealer making a market in such shares
selected by the Board.
7.03 Vesting and Exercise of Options. Subject to the approval of
stockholders of the Savings Association pursuant to the terms of Article XII
hereof, Options shall be vested and exercisable six months following the date of
grant.
7.04 Duration of Options.
(a) Each Option or portion thereof shall be exercisable at any time on
or after the date of grant until the earlier of (i) ten (10) years after the
date of grant or (ii) the first annual anniversary of the date on which the
optionee ceases to be a non-employee director.
<PAGE>
4
(b) Exception for Termination Due to Death. If an optionee dies while
serving as a non-employee director without having fully exercised his Options,
the Optionee's executors, administrators, legatees or distributees of his estate
shall have the right, during the twelve-month period following such death, to
exercise such Options, provided that no Option shall be exercisable within six
(6) months after the date of grant or more than ten (10) years from the date it
was granted.
(c) Options granted to a non-employee director who is removed by
stockholders of the Savings Association for cause shall terminate as of the
effective date of such removal. Removal for cause shall include removal because
of the non-employee director's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, or willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order.
7.05 Nonassignability. Options shall not be transferable by an optionee
except by will or the laws of descent or distribution, and during an optionee's
lifetime shall be exercisable only by such optionee or the optionee's guardian
or legal representative.
7.06 Manner of Exercise. Options may be exercised in part or in whole
and at one time or from time to time. The procedures for exercise shall be set
forth in the written Option Agreement provided for in Section 7.01.
7.07 Payment for Shares. Payment in full of the purchase price for
shares of Common Stock purchased pursuant to the exercise of an Option shall be
made to the Savings Association upon exercise of the Option. Payment for shares
may be made by the optionee in cash or by delivering shares of Common Stock
(including shares acquired pursuant to the exercise of an Option) equal in fair
market value to the purchase price of the shares to be acquired pursuant to the
Option, or any combination of the foregoing.
7.08 Voting and Dividend Rights. No optionee shall have any voting or
dividend rights or other rights of a stockholder in respect of any shares of
Common Stock covered by an Option prior to the time that his name is recorded on
the Savings Association's stockholder ledger as the holder of record of such
shares acquired pursuant to an exercise of an Option.
ARTICLE VIII
ADJUSTMENTS FOR CAPITAL CHANGES
The aggregate number of shares of Common Stock available for issuance
under this Plan, the number of shares to which any Option relates and the
exercise price per share of Common Stock under any Option shall be
proportionately adjusted for any increase or decrease in the total number of
outstanding shares of Common Stock issued subsequent to the effective date of
this Plan resulting from a split, subdivision or
<PAGE>
5
consolidation of shares or any other capital adjustment, the payment of a stock
dividend, or other increase or decrease in such shares effected without receipt
or payment of consideration by the Savings Association. If, upon a merger,
consolidation, reorganization, liquidation, recapitalization or the like of the
Savings Association, the shares of the Savings Association's Common Stock shall
be exchanged for other securities of the Savings Association or of another
corporation, each recipient of an Option shall be entitled, subject to the
conditions herein stated, to purchase or acquire such number of shares of Common
Stock or amount of other securities of the Savings Association or such other
corporation as were exchangeable for the number of shares of Common Stock of the
Savings Association which such optionees would have been entitled to purchase or
acquire except for such action, and appropriate adjustments shall be made to the
per share exercise price of outstanding Options.
ARTICLE IX
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, by resolution, at any time terminate or amend this Plan
with respect to any shares of Common Stock as to which Options have not been
granted, subject to any required stockholder approval or any stockholder
approval which the Board may deem to be advisable for any reason, such as for
the purpose of obtaining or retaining any statutory or regulatory benefits under
tax, securities or other laws or satisfying any applicable stock exchange
listing requirements. The Board may not, without the consent of the holder of an
Option, alter or impair any Option previously granted under this Plan as
specifically authorized herein. Notwithstanding anything contained in this Plan
to the contrary, the provisions of Articles IV, VI and VII of this Plan shall
not be amended more than once every six months, other than to comport with
changes in the Internal Revenue Code of 1986, as amended, the Employee
Retirement Income Security Act of 1974, as amended, or the rules and regulations
promulgated under such statutes.
ARTICLE X
RIGHTS TO CONTINUE AS A DIRECTOR
Neither the Plan nor the grant of any Options hereunder nor any action
taken by the Board in connection with the Plan shall create any right on the
part of any non-employee director of the Savings Association to continue as
such.
ARTICLE XI
WITHHOLDING
The Savings Association may withhold from any cash payment made under
this Plan sufficient amounts to cover any applicable withholding and employment
taxes, and if the amount of such cash payment is insufficient, the Savings
Association may require
<PAGE>
6
the optionee to pay to the Savings Association the amount required to be
withheld as a condition to delivering the shares acquired pursuant to an Option.
ARTICLE XII
EFFECTIVE DATE OF THE PLAN; TERM
12.01 Effective Date of the Plan. This Plan shall become effective at
the time that Common Stock is initially sold by the Savings Association in the
Offering (the "Effective Date"), and Options may be granted hereunder as of or
after the Effective Date and prior to the termination of this Plan.
12.02 Term of Plan. Unless sooner terminated, this Plan shall remain in
effect for a period of ten (10) years ending on the tenth anniversary of the
Effective Date. Termination of the Plan shall not affect any Options previously
granted and such Options shall remain valid and in effect until they have been
fully exercised or earned, are surrendered or by their terms expire or are
forfeited.
ARTICLE XIII
MISCELLANEOUS
13.01 Governing Law. To the extent not governed by Federal law, this
Plan shall be construed under the laws of the State of Indiana.
13.02 Pronouns. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun, and the singular shall include the plural.
EXHIBIT 10.3
DEARBORN SAVINGS ASSOCIATION, F.A.
MANAGEMENT RECOGNITION
PLAN AND TRUST AGREEMENT
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 Dearborn Savings Association, F.A. (the "Savings Association")
hereby establishes a Management Recognition Plan (the "Plan") and Trust (the
"Trust") upon the terms and conditions hereinafter stated in this Management
Recognition Plan and Trust Agreement (the "Agreement").
1.02 The Trustee(s) hereby accept this Trust and agree to hold the
Trust assets existing on the date of this Agreement and all additions and
accretions thereto upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to retain personnel of experience and
ability in key positions by providing such key employees of the Savings
Association and any Subsidiaries with a proprietary interest in the Savings
Association as compensation for their contributions to the Savings Association
and any Subsidiaries and as an incentive to make such contributions in the
future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Agreement with an
initial capital letter, unless the context clearly indicates otherwise, shall
have the meanings set forth below. Wherever appropriate, the masculine pronouns
shall include the feminine pronouns and the singular shall include the plural.
3.01 "Beneficiary" means the person or persons designated by a
Recipient to receive any benefits payable under the Plan in the event of such
Recipient's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time to
time by similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any,
or if none, his estate.
3.02 "Board" means the Board of Directors of the Savings Association.
3.03 "Code" means the Internal Revenue Code of 1986, as amended.
<PAGE>
2
3.04 "Committee" means the committee appointed by the Board pursuant to
Article IV hereof.
3.05 "Common Stock" means shares of the common stock, $.10 par value
per share, of the Savings Association.
3.06 "Disability" means any physical or mental impairment which
qualifies an Employee for disability benefits under the applicable long-term
disability plan maintained by the Savings Association or any Subsidiary or, if
no such plan applies, which would qualify such Employee for disability benefits
under the Federal Social Security System.
3.07 "Effective Date" means the hour and day upon which Common Stock is
initially sold by the Savings Association in the Offering.
3.08 "Employee" means any person who is employed by the Savings
Association or any Subsidiary, including officers or other employees who may be
directors of the Savings Association.
3.09 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
3.10 "Offering" means the offering of Common Stock to the public
pursuant to the Stock Issuance Plan adopted by the Savings Association following
the reorganization of Dearborn Savings Association, F.A. into the mutual holding
company form of organization.
3.11 "Plan Shares" or "Shares" means shares of Common Stock held in the
Trust which may be distributed to a Recipient pursuant to the Plan.
3.12 "Plan Share Award" or "Award" means a right granted under this
Plan to receive a distribution of Plan Shares upon completion of the service
requirements described in Article VII.
3.13 "Recipient" means an Employee who receives a Plan Share Award
under the Plan.
3.14 "Retirement" means a termination of employment upon or after
attainment of age sixty-five (65) or such earlier age as may be specified in
applicable plans or policies of the Savings Association or in a Recipient's Plan
Share Award.
3.15 "Subsidiary" means any subsidiaries of the Savings Association
which, with the consent of the Board, agree to participate in this Plan.
<PAGE>
3
3.16 "Trustee" or "Trustees" means those person or persons (which may
be members of the Committee), or firm or other entity, nominated by the
Committee and approved by the Board pursuant to Sections 4.01 and 4.02 to hold
legal title to the Plan assets for the purposes set forth herein.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Role of the Committee. The Plan shall be administered and
interpreted by the Committee, which shall consist of two or more members of the
Board, none of whom shall be an officer or employee of the Savings Association
and each of whom shall be a "disinterested person" within the meaning of Rule
16b-3 under the Exchange Act. The Committee shall have all of the powers
allocated to it in this and other Sections of the Plan. The interpretation and
construction by the Committee of any provisions of the Plan or of any Plan Share
Award granted hereunder shall be final and binding. The Committee shall act by
vote or written consent of a majority of its members. Subject to the express
provisions and limitations of the Plan, the Committee may adopt such rules,
regulations and procedures as it deems appropriate for the conduct of its
affairs. The Committee shall report its actions and decisions with respect to
the Plan to the Board at appropriate times, but in no event less than one time
per calendar year. The Committee shall recommend to the Board one or more
persons (which may be from among its members), or a firm or other entity, to act
as Trustee(s) in accordance with the provisions of this Plan and Trust and the
terms of Article VIII hereof.
4.02 Role of the Board. The members of the Committee and the Trustee or
Trustees shall be appointed or approved by, and will serve at the pleasure of,
the Board. The Board may in its discretion from time to time remove members
from, or add members to, the Committee, and may remove, replace or add Trustees,
provided that any directors who are selected as members of the Committee shall
not be officers or employees of the Savings Association and shall be
"disinterested persons" within the meaning of Rule 16b-3 promulgated under the
Exchange Act.
4.03 Limitation on Liability. No member of the Board or the Committee
shall be liable for any determination made in good faith with respect to the
Plan or any Plan Shares or Plan Share Awards granted under it. If a member of
the Board or the Committee 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, by reason of anything done or not
done by him in such capacity under or with respect to the Plan, the Savings
Association shall, subject to the requirements of applicable laws and
regulations, indemnify such member against all liabilities and expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner
<PAGE>
4
he reasonably believed to be in the best interests of the Savings Association
and any Subsidiaries and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful.
4.04 Compliance with Laws and Regulations. All awards granted hereunder
shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency or stockholders as
may be required.
ARTICLE V
CONTRIBUTIONS
5.01 Amount and Timing of Contributions. The Board shall determine the
amount (or the method of computing the amount) and timing of any contributions
by the Savings Association and any Subsidiaries to the Trust established under
this Plan. Such amounts may be paid in cash or in shares of Common Stock and
shall be paid to the Trust at the designated time of contribution. No
contributions by Employees shall be permitted.
5.02 Investment of Trust Assets; Number of Plan Shares. Subject to
Section 8.02 hereof, the Trustees shall invest all of the Trust's assets
primarily in Common Stock. The aggregate number of Plan Shares initially
available for distribution pursuant to this Plan, subject to adjustment as
provided in Section 9.01 hereof, shall be equal to 3.0% of the shares of Common
Stock which are issued by the Savings Association in the Offering (rounded down
to the nearest whole number), which shares shall be purchased by the Trust in
such Offering with funds contributed by the Savings Association. Subsequent to
consummation of the Offering, the Trust may purchase (from the Savings
Association and/or stockholders thereof) additional shares of Common Stock for
distribution pursuant to this Plan.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Eligibility. Plan Share Awards may be made to such Employees as
may be selected by the Committee. In selecting those Employees to whom Plan
Share Awards may be granted and the number of Shares covered by such Awards, the
Committee shall consider the position and responsibilities of the eligible
Employees, the value of their services to the Savings Association and any
Subsidiaries, and any other factors the Committee may deem relevant. The
Committee may but shall not be required to request the written recommendation of
the Chief Executive Officer of the Savings Association other than with respect
to Plan Share Awards to be granted to him.
6.02 Form of Allocation. As promptly as practicable after a
determination is made pursuant to Section 6.01 that a Plan Share Award is to be
issued, the Committee shall notify
<PAGE>
5
the Recipient in writing of the grant of the Award, the number of Plan Shares
covered by the Award, and the terms upon which the Plan Shares subject to the
Award shall be distributed to the Employee. Such terms shall be reflected in a
written agreement with the Employee. The date on which the Committee so notifies
the Recipient shall be considered the date of grant of the Plan Share Award. The
Committee shall maintain records as to all grants of Plan Share Awards under the
Plan.
6.03 Allocations Not Required to any Specific Employee. Notwithstanding
anything to the contrary in Section 6.01 hereof, no Employee shall have any
right or entitlement to receive a Plan Share Award hereunder, such Awards being
at the total discretion of the Committee.
ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Unless the Committee shall specifically
state to the contrary at the time a Plan Share Award is granted, and subject to
the terms hereof, Plan Shares subject to an Award shall be earned by a Recipient
at the rate of twenty percent (20%) of the aggregate number of Shares covered by
the Award as of each annual anniversary of the date of grant of the Award. If
the employment of a Recipient is terminated prior to the fifth (5th) annual
anniversary of the date of grant of a Plan Share Award for any reason (except as
specifically provided in subsections (b), (c) and (d) below), the Recipient
shall forfeit the right to any Shares subject to the Award which have not
theretofore been earned. No fractional shares shall be distributed pursuant to
this Plan.
(b) Exception for Terminations Due to Death, Disability and
Retirement. Notwithstanding the general rule contained in Section 7.01(a), all
Plan Shares subject to a Plan Share Award held by a Recipient whose employment
with the Savings Association or any Subsidiary terminates due to death,
Disability or Retirement, shall be deemed earned as of the Recipient's last day
of employment with the Savings Association or any Subsidiary and shall be
distributed as soon as practicable thereafter; provided, however, that no Awards
shall be distributed prior to six months from the date of grant of the Plan
Share Award.
(c) Exception for Terminations after a Change in Control.
Notwithstanding the general rule contained in Section 7.01(a), all Plan Shares
subject to a Plan Share Award held by a Recipient shall be deemed to be earned
in the event of a "change in control of the Savings Association". A "change in
control of the Savings Association" for this purpose shall mean a change in
control as defined under 12 C.F.R. Part 574 or any successor thereto.
<PAGE>
6
(d) Revocation for Misconduct. Notwithstanding anything
hereinafter to the contrary, the Board may by resolution immediately revoke,
rescind and terminate any Plan Share Award, or portion thereof, previously
awarded under this Plan, to the extent Plan Shares have not been distributed
hereunder to the Recipient, whether or not yet earned, in the case of an
Employee who is discharged from the employ of the Savings Association or any
Subsidiary for cause (as hereinafter defined). Termination of employment for
cause shall include termination because of the Employee's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, or willful violation of
any law, rule, or regulation (other than traffic violations or similar offenses)
or final cease-and-desist order.
7.02 Distribution of Dividends. Any cash dividends or stock dividends
declared in respect of each Plan Share held by the Trust will be paid by the
Trust, as soon as practicable after the Trust's receipt thereof, to the
Recipient on whose behalf such Plan Share is then held by the Trust.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Plan Shares shall
be distributed to a Recipient or his Beneficiary, as the case may be, as soon as
practicable after they have been earned, provided, however, that no Plan Shares
shall be distributed to a Recipient or Beneficiary pursuant to a Plan Share
Award within six months from the date on which that Plan Share Award was granted
to such person.
(b) Form of Distributions. All Plan Shares, together with any
Shares representing stock dividends, shall be distributed in the form of Common
Stock. One share of Common Stock shall be given for each Plan Share earned and
distributable. Payments representing cash dividends shall be made in cash.
(c) Withholding. The Trustees may withhold from any cash
payment or Common Stock distribution made under this Plan sufficient amounts to
cover any applicable withholding and employment taxes, and if the amount of a
cash payment is insufficient, the Trustees may require the Recipient or
Beneficiary to pay to the Trustees the amount required to be withheld as a
condition of delivering the Plan Shares. The Trustees shall pay over to the
Savings Association or any Subsidiary which employs or employed such Recipient
any such amount withheld from or paid by the Recipient or Beneficiary.
(d) Restrictions on Selling of Plan Shares. Plan Share Awards
may not be sold, assigned, pledged or otherwise disposed of prior to the time
that they are earned and distributed pursuant to the terms of this Plan.
Following distribution, the Committee may require the Recipient or his
Beneficiary, as the case may be, to agree not to sell or
<PAGE>
7
otherwise dispose of his distributed Plan Shares except in accordance with all
then applicable Federal and state securities laws, and the Committee may cause a
legend to be placed on the stock certificate(s) representing the distributed
Plan Shares in order to restrict the transfer of the distributed Plan Shares for
such period of time or under such circumstances as the Committee, upon the
advice of counsel, may deem appropriate.
7.04 Voting of Plan Shares. After a Plan Share Award has been made, the
Recipient shall be entitled to direct the Trustees as to the voting of the Plan
Shares which are covered by the Plan Share Award and which have not yet been
earned and distributed to him pursuant to Section 7.03, subject to rules and
procedures adopted by the Committee for this purpose. All shares of Common Stock
held by the Trust as to which Recipients have not directed the voting shall be
voted by the Trustees as the Committee in its discretion shall direct.
ARTICLE VIII
TRUST
8.01 Trust. The Trustees shall receive, hold, administer, invest and
make distributions and disbursements from the Trust in accordance with the
provisions of the Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Committee pursuant to
the Plan.
8.02 Management of Trust. It is the intent of this Plan and Trust that
the Trustees shall have complete authority and discretion with respect to the
arrangement, control and investment of the Trust, and that the Trustees shall
invest all assets of the Trust in Common Stock to the fullest extent
practicable, except (i) to the extent that the Trustees determine that the
holding of monies in cash or cash equivalents is necessary to meet the
obligations of the Trust and (ii) contributions to the Trust by the Savings
Association prior to the Offering may be temporarily invested in such
interest-bearing account or accounts as the Trustees shall determine to be
appropriate. In performing their duties, the Trustees shall have the power to do
all things and execute such instruments as may be deemed necessary or proper,
including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust
assets in Common Stock without regard to any law now or hereafter in force
limiting investments for trustees or other fiduciaries. The investment
authorized herein may constitute the only investment of the Trust, and in making
such investment, the Trustees are authorized to purchase Common Stock from the
Savings Association or from any other source, and such Common Stock so purchased
may be outstanding, newly issued, or treasury shares.
(b) To invest any Trust assets not otherwise invested in
accordance with (a) above, in such deposit accounts, and certificates of
deposit, obligations of the United
<PAGE>
8
States Government or its agencies or such other investments as shall be
considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at
any time held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be
registered in the name of a nominee, without the addition of words indicating
that such security is an asset of the Trust (but accurate records shall be
maintained showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may in
the opinion of the Trustees be reasonable for the proper operation of the Plan
and Trust.
(f) To employ brokers, agents, custodians, consultants and
accountants.
(g) To hire counsel to render advice with respect to their
rights, duties and obligations hereunder, and such other legal services or
representation as they may deem desirable.
(h) To hold funds and securities representing the amounts to
be distributed to a Recipient or his Beneficiary as a consequence of a dispute
as to the disposition thereof, whether in a segregated account or held in common
with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustees
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of court for the exercise of any power
herein contained, or give bond.
8.03 Records and Accounts. The Trustees shall maintain accurate and
detailed records and accounts of all transactions of the Trust, which shall be
available at all reasonable times for inspection by any legally entitled person
or entity to the extent required by applicable law, or any other person
determined by the Committee.
8.04 Expenses. All costs and expenses incurred in the operation and
administration of this Plan shall be borne by the Savings Association.
8.05 Indemnification. Subject to the requirements of applicable laws
and regulations, the Savings Association shall indemnify, defend and hold the
Trustees harmless against all claims, expenses and liabilities arising out of or
related to the exercise of the Trustees' powers and the discharge of their
duties hereunder, unless the same shall be due to their gross negligence or
willful misconduct.
<PAGE>
9
ARTICLE IX
MISCELLANEOUS
9.01 Adjustments for Capital Changes. The aggregate number of Plan
Shares available for distribution pursuant to the Plan Share Awards and the
number of Shares to which any Plan Share Award relates shall be proportionately
adjusted for any increase or decrease in the total number of outstanding shares
of Common Stock issued subsequent to the effective date of the Plan resulting
from any split, subdivision or consolidation of shares or other capital
adjustment, or other increase or decrease in such shares effected without
receipt or payment of consideration by the Savings Association.
9.02 Amendment and Termination of Plan. The Board may, by resolution,
at any time amend or terminate the Plan, subject to any required stockholder
approval or any stockholder approval which the Board may deem to be advisable
for any reason, such as for the purpose of obtaining or retaining any statutory
or regulatory benefits under tax, securities or other laws or satisfying any
applicable stock exchange listing requirements. The Board may not, without the
consent of the holder of a Plan Share Award, alter or impair any Plan Share
Award previously granted under this Plan as specifically authorized herein. Upon
termination of the Plan, all Plan Share Awards shall be distributed to the
Recipients regardless of whether or not such Plan Share Awards had otherwise
been earned under the service requirements set forth in Article VII; provided,
however, that no Awards shall be distributed prior to six months from the date
of grant of the Plan Share Award.
9.03 Nontransferable. Plan Share Awards and rights to Plan Shares shall
not be transferable by a Recipient, and during the lifetime of the Recipient,
Plan Shares may only be earned by and paid to a Recipient who was notified in
writing of an Award by the Committee pursuant to Section 6.02. No Recipient or
Beneficiary shall have any right in or claim to any assets of the Plan or Trust,
nor shall the Savings Association or any Subsidiary be subject to any claim for
benefits hereunder.
9.04 Employment Rights. Neither the Plan nor any grant of a Plan Share
Award or Plan Shares hereunder nor any action taken by the Trustees, the
Committee or the Board in connection with the Plan shall create any right on the
part of any Employee to continue in the employ of the Savings Association or any
Subsidiary.
9.05 Voting and Dividend Rights. No Recipient shall have any voting or
dividend rights or other rights of a stockholder in respect of any Plan Shares
covered by a Plan Share Award, except as expressly provided in Sections 7.02 and
7.04 above, prior to the time said Plan Shares are actually earned and
distributed to him.
9.06 Governing Law. To the extent not governed by Federal law, the Plan
and Trust shall be governed by the laws of the State of Indiana.
<PAGE>
10
9.07 Effective Date. This Plan shall be effective as of the Effective
Date, and Awards may be granted hereunder as of or after the Effective Date and
as long as the Plan remains in effect.
9.08 Term of Plan. This Plan shall remain in effect until the earlier
of (1) ten (10) years from the Effective Date, (2) termination by the Board, or
(3) the distribution to Recipients and Beneficiaries of all assets of the Trust.
9.09 Tax Status of Trust. It is intended that the trust established
hereby be treated as a Grantor Trust of the Savings Association under the
provisions of Section 671 et seq. of the Code, as the same may be amended from
time to time.
<PAGE>
11
IN WITNESS WHEREOF, the Savings Association has caused this Agreement
to be executed by its duly authorized officers and the corporate seal to be
affixed and duly attested, and the initial Trustees of the Trust established
pursuant hereto have duly and validly executed this Agreement, all on this __
day of ________ 1993.
Attest: By:
-------------------------------- -------------------------------
Margaret M. Abner Donald C. Siemers
Secretary President and Chief Executive
Officer
Trustees:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated this ____ day of _________ 1996, between
Vision Bancorp, Inc., an Indiana corporation (the "Corporation"), Dearborn Bank,
a federally chartered savings bank and a wholly owned subsidiary of the
Corporation (the "Bank"), and Donald C. Siemers (the "Executive").
WITNESSETH
WHEREAS, the Executive is presently an officer of the Corporation and
the Bank (together the "Employers"); and
WHEREAS, the Employers desire to be ensured of the Executive's
continued active participation in the business of the Employers; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Employers and in consideration of the Executive's agreeing to remain in the
employ of the Employers, the parties desire to specify the severance benefits
which shall be due the Executive in the event that his employment with the
Employers is terminated under specified circumstances;
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree as follows:
1. Definitions. The following words and terms shall have the meanings
set forth below for the purposes of this Agreement:
(a) Average Annual Compensation. The Executive's "Average Annual
Compensation" for purposes of this Agreement shall be deemed to mean the average
level of compensation paid to the Executive by the Employers or any subsidiary
thereof during the most recent five taxable years preceding the Date of
Termination (or such shorter period as the Executive was employed), including
Base Salary and bonuses under any employee benefit plans of the Employers.
(b) Base Salary. "Base Salary" shall have the meaning set forth in
Section 3(a) hereof.
(c) Cause. Termination of the Executive's employment for "Cause" shall
mean termination because of personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order or material breach of any provision of this Agreement.
For
<PAGE>
2
purposes of this paragraph, no act or failure to act on the Executive's part
shall be considered "willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief that the Executive's
action or omission was in the best interest of the Employers.
(d) Change in Control of the Corporation. "Change in Control of the
Corporation" shall mean a change in control of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), or any successor thereto, whether or not the Corporation is registered
under Exchange Act; provided that, without limitation, such a change in control
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 25% or more of the
combined voting power of the Corporation's then outstanding securities; or (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Corporation cease for any
reason to constitute at least a majority thereof unless the election, or the
nomination for election by stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
(e) Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(f) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated for Cause or for Disability, the date
specified in the Notice of Termination, and (ii) if the Executive's employment
is terminated for any other reason, the date on which a Notice of Termination is
given or as specified in such Notice.
(g) Disability. Termination by the Employers of the Executive's
employment based on "Disability" shall mean termination because of any physical
or mental impairment which qualifies the Executive for disability benefits under
the applicable long-term disability plan maintained by the Employers or any
subsidiary or, if no such plan applies, which would qualify the Executive for
disability benefits under the Federal Social Security System.
(h) Good Reason. Termination by the Executive of the Executive's
employment for "Good Reason" shall mean termination by the Executive following
a Change in Control of the Corporation based on:
(i) Without the Executive's express written consent, a material
adverse change made by the Employers in the Executive's
functions, duties or responsibilities as President and Chief
Executive Officer of the Employers;
<PAGE>
3
(ii) Without the Executive's express written consent, a material
reduction by the Employers in the Executive's Base Salary as the
same may be increased from time to time or, except to the extent
permitted by Section 3(b) hereof, a material reduction in the
package of fringe benefits provided to the Executive, taken as a
whole;
(iii) Without the Executive's express written consent, the Employers
require the Executive to work in an office which is more than 30
miles from the location of the Employers' current principal
executive office, except for required travel on business of the
Employers to an extent substantially consistent with the
Executive's present business travel obligations;
(iv) Any purported termination of the Executive's employment for
Cause, Disability or Retirement which is not effected pursuant
to a Notice of Termination satisfying the requirements of
paragraph (j) below; or
(v) The failure by the Employers to obtain the assumption of and
agreement to perform this Agreement by any successor as
contemplated in Section 9 hereof.
(i) IRS. IRS shall mean the Internal Revenue Service.
(j) Notice of Termination. Any purported termination of the Executive's
employment by the Employers for any reason, including without limitation for
Cause, Disability or Retirement, or by the Executive for any reason, including
without limitation for Good Reason, shall be communicated by written "Notice of
Termination" to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a dated notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated, (iii)
specifies a Date of Termination, which shall be not less than thirty (30) nor
more than ninety (90) days after such Notice of Termination is given, except in
the case of the Employers' termination of Executive's employment for Cause; and
(iv) is given in the manner specified in Section 10 hereof.
(k) Retirement. "Retirement" shall mean voluntary termination by the
Executive in accordance with the Employers' retirement policies, including
early retirement, generally applicable to the Employers' salaried employees.
<PAGE>
4
2. Term of Employment.
(a) The Employers hereby employ the Executive as President and Chief
Executive Officer and Executive hereby accepts said employment and agrees to
render such services to the Employers on the terms and conditions set forth in
this Agreement. Unless extended as provided in this Section 2, this Agreement
shall terminate three (3) years after the date first above written. Prior to the
first annual anniversary of the date first above written and each annual
anniversary thereafter, the Boards of Directors of the Employers shall consider,
review (with appropriate corporate documentation thereof, and after taking into
account all relevant factors, including the Executive's performance) and, if
appropriate, explicitly approve a one-year extension of the remaining term of
this Agreement. The term of this Agreement shall continue to extend each year if
the Boards of Directors so approve such extension unless the Executive gives
written notice to the Employers of the Executive's election not to extend the
term, with such notice to be given not less than thirty (30) days prior to any
such anniversary date. If the Boards of Directors elect not to extend the term,
they shall give written notice of such decision to the Executive not less than
thirty (30) days prior to any such anniversary date. If any party gives timely
notice that the term will not be extended as of any annual anniversary date,
then this Agreement shall terminate at the conclusion of its remaining term.
References herein to the term of this Agreement shall refer both to the initial
term and successive terms.
(b) During the term of this Agreement, the Executive shall perform such
executive services for the Employers as is consistent with his title of
President and Chief Executive Officer. The Executive shall be responsible for
the overall day to day operations of the Employers and shall be responsible for
planning, organizing, staffing, directing and controlling the respective
operations in conjunction with other officers.
3. Compensation and Benefits.
(a) The Employers shall compensate and pay Executive for his services
during the term of this Agreement at a minimum base salary of $_______ per year
("Base Salary"), which may be increased from time to time in such amounts as may
be determined by the Boards of Directors of the Employers. In addition to his
Base Salary, the Executive shall be entitled to receive during the term of this
Agreement such bonus payments as may be determined by the Boards of Directors of
the Employers.
(b) During the term of the Agreement, Executive shall be entitled to
participate in and receive the benefits of any pension or other retirement
benefit plan, profit sharing, stock option, employee stock ownership, or other
plans, benefits and privileges given to employees and executives of the
Employers, to the extent commensurate with his then duties and responsibilities,
as fixed by the Boards of Directors of the Employers. The Employers shall not
make any changes in such plans, benefits or privileges which would adversely
affect Executive's rights or benefits thereunder, unless such change occurs
pursuant to a program
<PAGE>
5
applicable to all executive officers of the Employers and does not result in a
proportionately greater adverse change in the rights of or benefits to Executive
as compared with any other executive officer of the Employers. Nothing paid to
Executive under any plan or arrangement presently in effect or made available in
the future shall be deemed to be in lieu of the salary payable to Executive
pursuant to Section 3(a) hereof.
(c) During the term of this Agreement, Executive shall be entitled to
paid annual vacation in accordance with the policies as established from time to
time by the Boards of Directors of the Employers. Executive shall not be
entitled to receive any additional compensation from the Employers for failure
to take a vacation, nor shall Executive be able to accumulate unused vacation
time from one year to the next, except to the extent authorized by the Boards of
Directors of the Employers.
4. Expenses. The Employers shall reimburse Executive or otherwise
provide for or pay for all reasonable expenses incurred by Executive in
furtherance of, or in connection with the business of the Employers, including,
but not by way of limitation, automobile and traveling expenses, and all
reasonable entertainment expenses (whether incurred at the Executive's
residence, while traveling or otherwise), subject to such reasonable
documentation and other limitations as may be established by the Boards of
Directors of the Employers. If such expenses are paid in the first instance by
Executive, the Employers shall reimburse the Executive therefor.
5. Termination.
(a) The Employers shall have the right, at any time upon prior Notice
of Termination, to terminate the Executive's employment hereunder for any
reason, including without limitation termination for Cause, Disability or
Retirement, and Executive shall have the right, upon prior Notice of
Termination, to terminate his employment hereunder for any reason.
(b) In the event that (i) Executive's employment is terminated by the
Employers for Cause, Disability or Retirement or in the event of the Executive's
death, or (ii) Executive terminates his employment hereunder other than for Good
Reason, Executive shall have no right pursuant to this Agreement to compensation
or other benefits for any period after the applicable Date of Termination.
(c)(i) In the event that Executive's employment is terminated by the
Employers for other than Cause, Disability, Retirement or the Executive's death
or such employment is terminated by the Executive due to a material breach of
this Agreement by the Employers, which breach has not been cured within fifteen
(15) days after a written notice of non-compliance has been given by the
Executive to the Employers, and as of Executive's Date of Termination no Change
in Control of the Corporation has occurred, no written agreement which
contemplates a Change in Control of the Corporation and which still is in effect
has been entered into by either or both of the Employers and no discussions
<PAGE>
6
and/or negotiations are being conducted which relate to the same, then the
Employers shall, subject to the provisions of Section 6 hereof, if applicable:
(A) Pay to the Executive, in equal monthly installments beginning with
the first business day of the month following the Date of Termination, a cash
severance amount equal to the Base Salary which the Executive would have earned
over the remaining term of this Agreement as of his Date of Termination, and
(B) Maintain and provide for a period ending at the earlier of (i) the
expiration of the remaining term of employment pursuant hereto prior to the
Notice of Termination or (ii) the date of the Executive's full-time employment
by another employer (provided that the Executive is entitled under the terms of
such employment to benefits substantially similar to those described in this
subparagraph (B)), at no cost to the Executive, the Executive's continued
participation in all group insurance, life insurance, health and accident,
disability and other employee benefit plans, programs and arrangements in which
the Executive was entitled to participate immediately prior to the Date of
Termination (other than stock option and restricted stock plans of the
Employers), provided that in the event that the Executive's participation in any
plan, program or arrangement as provided in this subparagraph (B) is barred or
during such period any such plan, program or arrangement is discontinued or the
benefits thereunder are materially reduced, the Employers shall arrange to
provide the Executive with benefits substantially similar to those which the
Executive was entitled to receive under such plans, programs and arrangements
immediately prior to the Date of Termination.
(ii) In the event that Executive's employment is terminated by the
Employers for other than Cause, Disability, Retirement or the Executive's death,
or such employment is terminated by the Executive due to a material breach of
this Agreement by the Employers which has not been cured within fifteen (15)
days after a written notice of non-compliance has been given by the Executive to
the Employers or for Good Reason, and on or prior to the Executive's Date of
Termination there has been a Change in Control of the Corporation, or a written
agreement which contemplates a Change in Control of the Corporation is in
effect, then the Employers shall subject to the provisions of Section 6 hereof,
if applicable:
(A) Pay to the Executive, in thirty-six (36) equal monthly installments
beginning with the first business day of the month following the Date of
Termination, a cash severance amount equal to three (3) times the Executive's
average annual compensation over the most recent five taxable years, and
(B) Maintain and provide for a period ending at the earlier of (i) the
expiration of the remaining term of employment pursuant hereto prior to the
Notice of Termination or (ii) the date of the Executive's full-time employment
by another employer (provided that the Executive is entitled under the terms of
such employment to benefits substantially similar to those described in this
subparagraph (B)), at no cost to the Executive, the
<PAGE>
7
Executive's continued participation in all group insurance, life insurance,
health and accident, disability and other employee benefit plans, programs and
arrangements in which the Executive was entitled to participate immediately
prior to the Date of Termination (other than stock option and restricted stock
plans of the Employers), provided that in the event that the Executive's
participation in any plan, program or arrangement as provided in this
subparagraph (B) is barred or during such period any such plan, program or
arrangement is discontinued or the benefits thereunder are materially reduced,
the Employers shall arrange to provide the Executive with benefits substantially
similar to those which the Executive was entitled to receive under such plans,
programs and arrangements immediately prior to the Date of Termination.
6. Limitation of Benefits under Certain Circumstances. If the payments
and benefits pursuant to Section 5 hereof, either alone or together with other
payments and benefits which Executive has the right to receive from the
Employers, would constitute a "parachute payment" under Section 280G of the
Code, the payments and benefits pursuant to Section 5 hereof shall be reduced,
in the manner determined by the Executive, by the amount, if any, which is the
minimum necessary to result in no portion of the payments and benefits under
Section 5 being non-deductible to either of the Employers pursuant to Section
280G of the Code and subject to the excise tax imposed under Section 4999 of the
Code. The determination of any reduction in the payments and benefits to be made
pursuant to Section 5 shall be based upon the opinion of independent tax counsel
selected by the Employers' independent public accountants and paid by the
Employers. Such counsel shall be reasonably acceptable to the Employers and the
Executive; shall promptly prepare the foregoing opinion, but in no event later
than thirty (30) days from the Date of Termination; and may use such actuaries
as such counsel deems necessary or advisable for the purpose. In the event that
the Employers and/or the Executive do not agree with the opinion of such
counsel, (i) the Employers shall pay to the Executive the maximum amount of
payments and benefits pursuant to Section 5, as selected by the Executive, which
such opinion indicates that there is a high probability do not result in any of
such payments and benefits being non-deductible to the Employers and subject to
the imposition of the excise tax imposed under Section 4999 of the Code and (ii)
the Employers may request, and Executive shall have the right to demand that the
Employers request, a ruling from the IRS as to whether the disputed payments and
benefits pursuant to Section 5 hereof have such consequences. Any such request
for a ruling from the IRS shall be promptly prepared and filed by the Employers,
but in no event later than thirty (30) days from the date of the opinion of
counsel referred to above, and shall be subject to Executive's approval prior to
filing, which shall not be unreasonably withheld. The Employers and Executive
agree to be bound by any ruling received from the IRS and to make appropriate
payments to each other to reflect any such rulings, together with interest at
the applicable federal rate provided for in Section 7872(f)(2) of the Code.
Nothing contained herein shall result in a reduction of any payments or benefits
to which the Executive may be entitled upon termination of employment under any
circumstances other than as specified in this Section 6, or a reduction in the
payments and benefits specified in Section 5 below zero.
<PAGE>
8
7. Mitigation; Exclusivity of Benefits.
(a) The Executive shall not be required to mitigate the amount of any
benefits hereunder by seeking other employment or otherwise, nor shall the
amount of any such benefits be reduced by any compensation earned by the
Executive as a result of employment by another employer after the Date of
Termination or otherwise.
(b) The specific arrangements referred to herein are not intended to
exclude any other benefits which may be available to the Executive upon a
termination of employment with the Employers pursuant to employee benefit plans
of the Employers or otherwise.
8. Withholding. All payments required to be made by the
Employers hereunder to the Executive shall be subject to the withholding of
such amounts, if any, relating to tax and other payroll deductions as the
Employers may reasonably determine should be withheld pursuant to any
applicable law or regulation.
9. Assignability. The Employers may assign this Agreement and its
rights and obligations hereunder in whole, but not in part, to any corporation,
bank or other entity with or into which the Employers may hereafter merge or
consolidate or to which the Employers may transfer all or substantially all of
its assets, if in any such case said corporation, bank or other entity shall by
operation of law or expressly in writing assume all obligations of the Employers
hereunder as fully as if it had been originally made a party hereto, but may not
otherwise assign this Agreement or its rights and obligations hereunder. The
Executive may not assign or transfer this Agreement or any rights or obligations
hereunder.
10. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:
To the Employers: Board of Directors
Vision Bancorp, Inc.
118 Walnut Street
Lawrenceburg, Indiana 47025-1838
To the Executive: Donald C. Siemers
5280 Kirby Road
Lawrenceburg, Indiana 47025
<PAGE>
9
11. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer or officers as may be
specifically designated by the Boards of Directors of the Employers to sign on
its behalf. No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
12. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise by the substantive laws of the State of Indiana.
13. Nature of Obligations. Nothing contained herein shall create or
require the Employers to create a trust of any kind to fund any benefits which
may be payable hereunder, and to the extent that the Executive acquires a right
to receive benefits from the Employers hereunder, such right shall be no greater
than the right of any unsecured general creditor of the Employers.
14. Interpretation and Headings. This agreement shall be interpreted in
order to achieve the purposes for which it was entered into. The section
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
15. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
17. Regulatory Actions. The following provisions shall be applicable to
the parties to the extent that they are required to be included in employment
agreements between a savings association and its employees pursuant to Section
563.39(b) of the Regulations Applicable to all Savings Associations, 12 C.F.R.
ss.563.39(b), or any successor thereto, and shall be controlling in the event of
a conflict with any other provision of this Agreement, including without
limitation Section 5 hereof.
(a) If Executive is suspended from office and/or temporarily prohibited
from participating in the conduct of the Employers' affairs pursuant to notice
served under Section 8(e)(3) or Section 8(g)(1) of the Federal Deposit Insurance
Act ("FDIA")(12 U.S.C. ss.ss.1818(e)(3) and 1818(g)(1)), the Employers'
obligations under this Agreement shall be suspended as of the date of service,
unless stayed by appropriate proceedings. If the charges
<PAGE>
10
in the notice are dismissed, the Employers may, in their discretion: (i) pay
Executive all or part of the compensation withheld while its obligations under
this Agreement were suspended, and (ii) reinstate (in whole or in part) any of
its obligations which were suspended.
(b) If Executive is removed from office and/or permanently prohibited
from participating in the conduct of the Employers' affairs by an order issued
under Section 8(e)(4) or Section 8(g)(1) of the FDIA (12 U.S.C. ss.ss.1818(e)(4)
and (g)(1)), all obligations of the Employers under this Agreement shall
terminate as of the effective date of the order, but vested rights of the
Executive and the Employers as of the date of termination shall not be affected.
(c) If the Bank is in default, as defined in Section 3(x)(1) of the
FDIA (12 U.S.C. ss.1813(x)(1)), all obligations under this Agreement shall
terminate as of the date of default, but vested rights of the Executive and the
Employers as of the date of termination shall not be affected.
(d) All obligations under this Agreement shall be terminated pursuant
to 12 C.F.R. ss.563.39(b)(5) (except to the extent that it is determined that
continuation of the Agreement for the continued operation of the Employers is
necessary): (i) by the Director of the Office of Thrift Supervision ("OTS"), or
his/her designee, at the time the Federal Deposit Insurance Corporation ("FDIC")
or Resolution Trust Corporation enters into an agreement to provide assistance
to or on behalf of the Bank under the authority contained in Section 13(c) of
the FDIA (12 U.S.C. ss.1823(c)); or (ii) by the Director of the OTS, or his/her
designee, at the time the Director or his/her designee approves a supervisory
merger to resolve problems related to operation of the Bank or when the Bank is
determined by the Director of the OTS to be in an unsafe or unsound condition,
but vested rights of the Executive and the Employers as of the date of
termination shall not be affected.
<PAGE>
11
18. Regulatory Prohibition. Notwithstanding any other provision of this
Agreement to the contrary, any payments made to the Executive pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with Section 18(k) of the FDIA (12 U.S.C. ss.1828(k)) and any regulations
promulgated thereunder.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
Attest: VISION BANCORP, INC.
By:
- ---------------------------------- ---------------------------------
Attest: DEARBORN BANK
By:
- ---------------------------------- ---------------------------------
EXECUTIVE
By:
---------------------------------
Donald C. Siemers
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated this ____ day of ________ 1996, between
Vision Bancorp, Inc., an Indiana corporation (the "Corporation"), Dearborn Bank,
a federally chartered savings bank and a wholly owned subsidiary of the
Corporation (the "Bank"), and Jay Gary Fraley (the "Executive").
WITNESSETH
WHEREAS, the Executive is presently an officer of the Corporation and
the Bank (together the "Employers"); and
WHEREAS, the Employers desire to be ensured of the Executive's
continued active participation in the business of the Employers; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Employers and in consideration of the Executive's agreeing to remain in the
employ of the Employers, the parties desire to specify the severance benefits
which shall be due the Executive in the event that his employment with the
Employers is terminated under specified circumstances;
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree as follows:
1. Definitions. The following words and terms shall have the meanings
set forth below for the purposes of this Agreement:
(a) Average Annual Compensation. The Executive's "Average Annual
Compensation" for purposes of this Agreement shall be deemed to mean the average
level of compensation paid to the Executive by the Employers or any subsidiary
thereof during the most recent five taxable years preceding the Date of
Termination (or such shorter period as the Executive was employed), including
Base Salary and bonuses under any employee benefit plans of the Employers.
(b) Base Salary. "Base Salary" shall have the meaning set forth in
Section 3(a) hereof.
(c) Cause. Termination of the Executive's employment for "Cause" shall
mean termination because of personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order or material breach of any provision of this Agreement.
For purposes of this paragraph, no act or failure to act on the Executive's part
shall be considered "willful" unless done, or omitted to be done, by the
Executive not in good faith
<PAGE>
2
and without reasonable belief that the Executive's action or omission was
in the best interest of the Employers.
(d) Change in Control of the Corporation. "Change in Control of the
Corporation" shall mean a change in control of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), or any successor thereto, whether or not the Corporation is registered
under Exchange Act; provided that, without limitation, such a change in control
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 25% or more of the
combined voting power of the Corporation's then outstanding securities; or (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Corporation cease for any
reason to constitute at least a majority thereof unless the election, or the
nomination for election by stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
(e) Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(f) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated for Cause or for Disability, the date
specified in the Notice of Termination, and (ii) if the Executive's employment
is terminated for any other reason, the date on which a Notice of Termination is
given or as specified in such Notice.
(g) Disability. Termination by the Employers of the Executive's
employment based on "Disability" shall mean termination because of any physical
or mental impairment which qualifies the Executive for disability benefits under
the applicable long-term disability plan maintained by the Employers or any
subsidiary or, if no such plan applies, which would qualify the Executive for
disability benefits under the Federal Social Security System.
(h) Good Reason. Termination by the Executive of the Executive's
employment for "Good Reason" shall mean termination by the Executive following a
Change in Control of the Corporation based on:
(i) Without the Executive's express written consent, a
material adverse change made by the Employers in the
Executive's functions, duties or responsibilities as
Vice President of the Employers;
(ii) Without the Executive's express written consent, a
material reduction by the Employers in the
Executive's Base Salary as the same may be increased
from time to time or, except to the extent permitted
by
<PAGE>
3
Section 3(b) hereof, a material reduction in the
package of fringe benefits provided to the Executive,
taken as a whole;
(iii) Without the Executive's express written consent, the
Employers require the Executive to work in an office
which is more than 30 miles from the location of the
Employers' current principal executive office, except
for required travel on business of the Employers to
an extent substantially consistent with the
Executive's present business travel obligations;
(iv) Any purported termination of the Executive's
employment for Cause, Disability or Retirement which
is not effected pursuant to a Notice of Termination
satisfying the requirements of paragraph (j) below;
or
(v) The failure by the Employers to obtain the assumption
of and agreement to perform this Agreement by any
successor as contemplated in Section 9 hereof.
(i) IRS. IRS shall mean the Internal Revenue Service.
(j) Notice of Termination. Any purported termination of the Executive's
employment by the Employers for any reason, including without limitation for
Cause, Disability or Retirement, or by the Executive for any reason, including
without limitation for Good Reason, shall be communicated by written "Notice of
Termination" to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a dated notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated, (iii)
specifies a Date of Termination, which shall be not less than thirty (30) nor
more than ninety (90) days after such Notice of Termination is given, except in
the case of the Employers' termination of Executive's employment for Cause; and
(iv) is given in the manner specified in Section 10 hereof.
(k) Retirement. "Retirement" shall mean voluntary termination by the
Executive in accordance with the Employers' retirement policies, including early
retirement, generally applicable to the Employers' salaried employees.
<PAGE>
4
2. Term of Employment.
(a) The Employers hereby employ the Executive as Vice President and
Executive hereby accepts said employment and agrees to render such services to
the Employers on the terms and conditions set forth in this Agreement. Unless
extended as provided in this Section 2, this Agreement shall terminate two (2)
years after the date first above written. Prior to the first annual anniversary
of the date first above written and each annual anniversary thereafter, the
Boards of Directors of the Employers shall consider, review (with appropriate
corporate documentation thereof, and after taking into account all relevant
factors, including the Executive's performance) and, if appropriate, explicitly
approve a one-year extension of the remaining term of this Agreement. The term
of this Agreement shall continue to extend each year if the Boards of Directors
so approve such extension unless the Executive gives written notice to the
Employers of the Executive's election not to extend the term, with such notice
to be given not less than thirty (30) days prior to any such anniversary date.
If the Boards of Directors elect not to extend the term, they shall give written
notice of such decision to the Executive not less than thirty (30) days prior to
any such anniversary date. If any party gives timely notice that the term will
not be extended as of any annual anniversary date, then this Agreement shall
terminate at the conclusion of its remaining term. References herein to the term
of this Agreement shall refer both to the initial term and successive terms.
(b) During the term of this Agreement, the Executive shall perform such
executive services for the Employers as is consistent with his title of Vice
President. The Executive shall be an officer of the Employers and shall serve at
the pleasure of the respective Boards of Directors. The Executive shall oversee
the overall lending function and will be responsible for developing and
implementing lending programs in accordance with the policies and strategic
planning of the Employers.
3. Compensation and Benefits.
(a) The Employers shall compensate and pay Executive for his services
during the term of this Agreement at a minimum base salary of $_______ per year
("Base Salary"), which may be increased from time to time in such amounts as may
be determined by the Boards of Directors of the Employers. In addition to his
Base Salary, the Executive shall be entitled to receive during the term of this
Agreement such bonus payments as may be determined by the Boards of Directors of
the Employers.
(b) During the term of the Agreement, Executive shall be entitled to
participate in and receive the benefits of any pension or other retirement
benefit plan, profit sharing, stock option, employee stock ownership, or other
plans, benefits and privileges given to employees and executives of the
Employers, to the extent commensurate with his then duties and responsibilities,
as fixed by the Boards of Directors of the Employers. The Employers shall not
make any changes in such plans, benefits or privileges which would adversely
affect Executive's rights or benefits thereunder, unless such change occurs
pursuant to a program
<PAGE>
5
applicable to all executive officers of the Employers and does not result in a
proportionately greater adverse change in the rights of or benefits to Executive
as compared with any other executive officer of the Employers. Nothing paid to
Executive under any plan or arrangement presently in effect or made available in
the future shall be deemed to be in lieu of the salary payable to Executive
pursuant to Section 3(a) hereof.
(c) During the term of this Agreement, Executive shall be entitled to
paid annual vacation in accordance with the policies as established from time to
time by the Boards of Directors of the Employers. Executive shall not be
entitled to receive any additional compensation from the Employers for failure
to take a vacation, nor shall Executive be able to accumulate unused vacation
time from one year to the next, except to the extent authorized by the Boards of
Directors of the Employers.
4. Expenses. The Employers shall reimburse Executive or otherwise
provide for or pay for all reasonable expenses incurred by Executive in
furtherance of, or in connection with the business of the Employers, including,
but not by way of limitation, automobile and traveling expenses, and all
reasonable entertainment expenses (whether incurred at the Executive's
residence, while traveling or otherwise), subject to such reasonable
documentation and other limitations as may be established by the Boards of
Directors of the Employers. If such expenses are paid in the first instance by
Executive, the Employers shall reimburse the Executive therefor.
5. Termination.
(a) The Employers shall have the right, at any time upon prior Notice
of Termination, to terminate the Executive's employment hereunder for any
reason, including without limitation termination for Cause, Disability or
Retirement, and Executive shall have the right, upon prior Notice of
Termination, to terminate his employment hereunder for any reason.
(b) In the event that (i) Executive's employment is terminated by the
Employers for Cause, Disability or Retirement or in the event of the Executive's
death, or (ii) Executive terminates his employment hereunder other than for Good
Reason, Executive shall have no right pursuant to this Agreement to compensation
or other benefits for any period after the applicable Date of Termination.
(c)(i) In the event that Executive's employment is terminated by the
Employers for other than Cause, Disability, Retirement or the Executive's death
or such employment is terminated by the Executive due to a material breach of
this Agreement by the Employers, which breach has not been cured within fifteen
(15) days after a written notice of non-compliance has been given by the
Executive to the Employers, and as of Executive's Date of Termination no Change
in Control of the Corporation has occurred, no written agreement which
contemplates a Change in Control of the Corporation and which still is in effect
has been entered into by either or both of the Employers and no discussions
<PAGE>
6
and/or negotiations are being conducted which relate to the same, then the
Employers shall, subject to the provisions of Section 6 hereof, if applicable:
(A) Pay to the Executive, in equal monthly installments beginning with
the first business day of the month following the Date of Termination, a cash
severance amount equal to the Base Salary which the Executive would have earned
over the remaining term of this Agreement as of his Date of Termination, and
(B) Maintain and provide for a period ending at the earlier of (i) the
expiration of the remaining term of employment pursuant hereto prior to the
Notice of Termination or (ii) the date of the Executive's full-time employment
by another employer (provided that the Executive is entitled under the terms of
such employment to benefits substantially similar to those described in this
subparagraph (B)), at no cost to the Executive, the Executive's continued
participation in all group insurance, life insurance, health and accident,
disability and other employee benefit plans, programs and arrangements in which
the Executive was entitled to participate immediately prior to the Date of
Termination (other than stock option and restricted stock plans of the
Employers), provided that in the event that the Executive's participation in any
plan, program or arrangement as provided in this subparagraph (B) is barred or
during such period any such plan, program or arrangement is discontinued or the
benefits thereunder are materially reduced, the Employers shall arrange to
provide the Executive with benefits substantially similar to those which the
Executive was entitled to receive under such plans, programs and arrangements
immediately prior to the Date of Termination.
(ii) In the event that Executive's employment is terminated by the
Employers for other than Cause, Disability, Retirement or the Executive's death,
or such employment is terminated by the Executive due to a material breach of
this Agreement by the Employers which has not been cured within fifteen (15)
days after a written notice of non-compliance has been given by the Executive to
the Employers or for Good Reason, and on or prior to the Executive's Date of
Termination there has been a Change in Control of the Corporation, or a written
agreement which contemplates a Change in Control of the Corporation is in
effect, then the Employers shall subject to the provisions of Section 6 hereof,
if applicable:
(A) Pay to the Executive, in twenty-four (24) equal monthly
installments beginning with the first business day of the month following the
Date of Termination, a cash severance amount equal to two (2) times the
Executive's average annual compensation over the most recent five taxable years,
and
(B) Maintain and provide for a period ending at the earlier of (i) the
expiration of the remaining term of employment pursuant hereto prior to the
Notice of Termination or (ii) the date of the Executive's full-time employment
by another employer (provided that the Executive is entitled under the terms of
such employment to benefits substantially similar to those described in this
subparagraph (B)), at no cost to the Executive, the
<PAGE>
7
Executive's continued participation in all group insurance, life insurance,
health and accident, disability and other employee benefit plans, programs and
arrangements in which the Executive was entitled to participate immediately
prior to the Date of Termination (other than stock option and restricted stock
plans of the Employers), provided that in the event that the Executive's
participation in any plan, program or arrangement as provided in this
subparagraph (B) is barred or during such period any such plan, program or
arrangement is discontinued or the benefits thereunder are materially reduced,
the Employers shall arrange to provide the Executive with benefits substantially
similar to those which the Executive was entitled to receive under such plans,
programs and arrangements immediately prior to the Date of Termination.
6. Limitation of Benefits under Certain Circumstances. If the payments
and benefits pursuant to Section 5 hereof, either alone or together with other
payments and benefits which Executive has the right to receive from the
Employers, would constitute a "parachute payment" under Section 280G of the
Code, the payments and benefits pursuant to Section 5 hereof shall be reduced,
in the manner determined by the Executive, by the amount, if any, which is the
minimum necessary to result in no portion of the payments and benefits under
Section 5 being non-deductible to either of the Employers pursuant to Section
280G of the Code and subject to the excise tax imposed under Section 4999 of the
Code. The determination of any reduction in the payments and benefits to be made
pursuant to Section 5 shall be based upon the opinion of independent tax counsel
selected by the Employers' independent public accountants and paid by the
Employers. Such counsel shall be reasonably acceptable to the Employers and the
Executive; shall promptly prepare the foregoing opinion, but in no event later
than thirty (30) days from the Date of Termination; and may use such actuaries
as such counsel deems necessary or advisable for the purpose. In the event that
the Employers and/or the Executive do not agree with the opinion of such
counsel, (i) the Employers shall pay to the Executive the maximum amount of
payments and benefits pursuant to Section 5, as selected by the Executive, which
such opinion indicates that there is a high probability do not result in any of
such payments and benefits being non-deductible to the Employers and subject to
the imposition of the excise tax imposed under Section 4999 of the Code and (ii)
the Employers may request, and Executive shall have the right to demand that the
Employers request, a ruling from the IRS as to whether the disputed payments and
benefits pursuant to Section 5 hereof have such consequences. Any such request
for a ruling from the IRS shall be promptly prepared and filed by the Employers,
but in no event later than thirty (30) days from the date of the opinion of
counsel referred to above, and shall be subject to Executive's approval prior to
filing, which shall not be unreasonably withheld. The Employers and Executive
agree to be bound by any ruling received from the IRS and to make appropriate
payments to each other to reflect any such rulings, together with interest at
the applicable federal rate provided for in Section 7872(f)(2) of the Code.
Nothing contained herein shall result in a reduction of any payments or benefits
to which the Executive may be entitled upon termination of employment under any
circumstances other than as specified in this Section 6, or a reduction in the
payments and benefits specified in Section 5 below zero.
<PAGE>
8
7. Mitigation; Exclusivity of Benefits.
(a) The Executive shall not be required to mitigate the amount of any
benefits hereunder by seeking other employment or otherwise, nor shall the
amount of any such benefits be reduced by any compensation earned by the
Executive as a result of employment by another employer after the Date of
Termination or otherwise.
(b) The specific arrangements referred to herein are not intended to
exclude any other benefits which may be available to the Executive upon a
termination of employment with the Employers pursuant to employee benefit plans
of the Employers or otherwise.
8. Withholding. All payments required to be made by the Employers
hereunder to the Executive shall be subject to the withholding of such amounts,
if any, relating to tax and other payroll deductions as the Employers may
reasonably determine should be withheld pursuant to any applicable law or
regulation.
9. Assignability. The Employers may assign this Agreement and its
rights and obligations hereunder in whole, but not in part, to any corporation,
bank or other entity with or into which the Employers may hereafter merge or
consolidate or to which the Employers may transfer all or substantially all of
its assets, if in any such case said corporation, bank or other entity shall by
operation of law or expressly in writing assume all obligations of the Employers
hereunder as fully as if it had been originally made a party hereto, but may not
otherwise assign this Agreement or its rights and obligations hereunder. The
Executive may not assign or transfer this Agreement or any rights or obligations
hereunder.
10. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:
To the Employers: Board of Directors
Vision Bancorp, Inc.
118 Walnut Street
Lawrenceburg, Indiana 47025-1838
To the Executive: Jay Gary Fraley
35 Village Drive
Lawrenceburg, Indiana 47025
<PAGE>
9
11. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer or officers as may be
specifically designated by the Boards of Directors of the Employers to sign on
its behalf. No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
12. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise by the substantive laws of the State of Indiana.
13. Nature of Obligations. Nothing contained herein shall create or
require the Employers to create a trust of any kind to fund any benefits which
may be payable hereunder, and to the extent that the Executive acquires a right
to receive benefits from the Employers hereunder, such right shall be no greater
than the right of any unsecured general creditor of the Employers.
14. Interpretation and Headings. This agreement shall be interpreted in
order to achieve the purposes for which it was entered into. The section
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
15. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
17. Regulatory Actions. The following provisions shall be applicable to
the parties to the extent that they are required to be included in employment
agreements between a savings association and its employees pursuant to Section
563.39(b) of the Regulations Applicable to all Savings Associations, 12 C.F.R.
ss.563.39(b), or any successor thereto, and shall be controlling in the event of
a conflict with any other provision of this Agreement, including without
limitation Section 5 hereof.
(a) If Executive is suspended from office and/or temporarily prohibited
from participating in the conduct of the Employers' affairs pursuant to notice
served under Section 8(e)(3) or Section 8(g)(1) of the Federal Deposit Insurance
Act ("FDIA")(12 U.S.C. ss.ss.1818(e)(3) and 1818(g)(1)), the Employers'
obligations under this Agreement shall be suspended as of the date of service,
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Employers may, in their discretion: (i)
<PAGE>
10
pay Executive all or part of the compensation withheld while its obligations
under this Agreement were suspended, and (ii) reinstate (in whole or in part)
any of its obligations which were suspended.
(b) If Executive is removed from office and/or permanently prohibited
from participating in the conduct of the Employers' affairs by an order issued
under Section 8(e)(4) or Section 8(g)(1) of the FDIA (12 U.S.C. ss.ss.1818(e)(4)
and (g)(1)), all obligations of the Employers under this Agreement shall
terminate as of the effective date of the order, but vested rights of the
Executive and the Employers as of the date of termination shall not be affected.
(c) If the Bank is in default, as defined in Section 3(x)(1) of the
FDIA (12 U.S.C. ss.1813(x)(1)), all obligations under this Agreement shall
terminate as of the date of default, but vested rights of the Executive and the
Employers as of the date of termination shall not be affected.
(d) All obligations under this Agreement shall be terminated pursuant
to 12 C.F.R. ss.563.39(b)(5) (except to the extent that it is determined that
continuation of the Agreement for the continued operation of the Employers is
necessary): (i) by the Director of the Office of Thrift Supervision ("OTS"), or
his/her designee, at the time the Federal Deposit Insurance Corporation ("FDIC")
or Resolution Trust Corporation enters into an agreement to provide assistance
to or on behalf of the Bank under the authority contained in Section 13(c) of
the FDIA (12 U.S.C. ss.1823(c)); or (ii) by the Director of the OTS, or his/her
designee, at the time the Director or his/her designee approves a supervisory
merger to resolve problems related to operation of the Bank or when the Bank is
determined by the Director of the OTS to be in an unsafe or unsound condition,
but vested rights of the Executive and the Employers as of the date of
termination shall not be affected.
<PAGE>
11
18. Regulatory Prohibition. Notwithstanding any other provision of this
Agreement to the contrary, any payments made to the Executive pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with Section 18(k) of the FDIA (12 U.S.C. ss.1828(k)) and any regulations
promulgated thereunder.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
Attest: VISION BANCORP, INC.
By:
- ----------------------------------- -------------------------------
Attest: DEARBORN BANK
By:
- ----------------------------------- -------------------------------
EXECUTIVE
By:
------------------------------
Jay Gary Fraley
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated this ____ day of _________ 1996, between
Vision Bancorp, Inc., an Indiana corporation (the "Corporation"), Dearborn Bank,
a federally chartered savings bank and a wholly owned subsidiary of the
Corporation (the "Bank"), and Edward L. Fischer (the "Executive").
WITNESSETH
WHEREAS, the Executive is presently an officer of the Corporation and
the Bank (together the "Employers"); and
WHEREAS, the Employers desire to be ensured of the Executive's
continued active participation in the business of the Employers; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Employers and in consideration of the Executive's agreeing to remain in the
employ of the Employers, the parties desire to specify the severance benefits
which shall be due the Executive in the event that his employment with the
Employers is terminated under specified circumstances;
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree as follows:
1. Definitions. The following words and terms shall have the meanings
set forth below for the purposes of this Agreement:
(a) Average Annual Compensation. The Executive's "Average Annual
Compensation" for purposes of this Agreement shall be deemed to mean the average
level of compensation paid to the Executive by the Employers or any subsidiary
thereof during the most recent five taxable years preceding the Date of
Termination (or such shorter period as the Executive was employed), including
Base Salary and bonuses under any employee benefit plans of the Employers.
(b) Base Salary. "Base Salary" shall have the meaning set forth in
Section 3(a) hereof.
(c) Cause. Termination of the Executive's employment for "Cause" shall
mean termination because of personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order or material breach of any provision of this Agreement.
For purposes of this paragraph, no act or failure to act on the Executive's part
shall be considered "willful" unless done, or omitted to be done, by the
Executive not in good faith
<PAGE>
2
and without reasonable belief that the Executive's action or omission was in the
best interest of the Employers.
(d) Change in Control of the Corporation. "Change in Control of the
Corporation" shall mean a change in control of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), or any successor thereto, whether or not the Corporation is registered
under Exchange Act; provided that, without limitation, such a change in control
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 25% or more of the
combined voting power of the Corporation's then outstanding securities; or (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Corporation cease for any
reason to constitute at least a majority thereof unless the election, or the
nomination for election by stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
(e) Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(f) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated for Cause or for Disability, the date
specified in the Notice of Termination, and (ii) if the Executive's employment
is terminated for any other reason, the date on which a Notice of Termination is
given or as specified in such Notice.
(g) Disability. Termination by the Employers of the Executive's
employment based on "Disability" shall mean termination because of any physical
or mental impairment which qualifies the Executive for disability benefits under
the applicable long-term disability plan maintained by the Employers or any
subsidiary or, if no such plan applies, which would qualify the Executive for
disability benefits under the Federal Social Security System.
(h) Good Reason. Termination by the Executive of the Executive's
employment for "Good Reason" shall mean termination by the Executive following a
Change in Control of the Corporation based on:
(i) Without the Executive's express written consent, a
material adverse change made by the Employers in the
Executive's functions, duties or responsibilities as
Chief Financial Officer of the Employers;
<PAGE>
3
(ii) Without the Executive's express written consent, a
material reduction by the Employers in the
Executive's Base Salary as the same may be increased
from time to time or, except to the extent permitted
by Section 3(b) hereof, a material reduction in the
package of fringe benefits provided to the Executive,
taken as a whole;
(iii) Without the Executive's express written consent, the
Employers require the Executive to work in an office
which is more than 30 miles from the location of the
Employers' current principal executive office, except
for required travel on business of the Employers to
an extent substantially consistent with the
Executive's present business travel obligations;
(iv) Any purported termination of the Executive's
employment for Cause, Disability or Retirement which
is not effected pursuant to a Notice of Termination
satisfying the requirements of paragraph (j) below;
or
(v) The failure by the Employers to obtain the assumption
of and agreement to perform this Agreement by any
successor as contemplated in Section 9 hereof.
(i) IRS. IRS shall mean the Internal Revenue Service.
(j) Notice of Termination. Any purported termination of the Executive's
employment by the Employers for any reason, including without limitation for
Cause, Disability or Retirement, or by the Executive for any reason, including
without limitation for Good Reason, shall be communicated by written "Notice of
Termination" to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a dated notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated, (iii)
specifies a Date of Termination, which shall be not less than thirty (30) nor
more than ninety (90) days after such Notice of Termination is given, except in
the case of the Employers' termination of Executive's employment for Cause; and
(iv) is given in the manner specified in Section 10 hereof.
(k) Retirement. "Retirement" shall mean voluntary termination by the
Executive in accordance with the Employers' retirement policies, including early
retirement, generally applicable to the Employers' salaried employees.
<PAGE>
4
2. Term of Employment.
(a) The Employers hereby employ the Executive as Chief Financial
Officer and Executive hereby accepts said employment and agrees to render such
services to the Employers on the terms and conditions set forth in this
Agreement. Unless extended as provided in this Section 2, this Agreement shall
terminate two (2) years after the date first above written. Prior to the first
annual anniversary of the date first above written and each annual anniversary
thereafter, the Boards of Directors of the Employers shall consider, review
(with appropriate corporate documentation thereof, and after taking into account
all relevant factors, including the Executive's performance) and, if
appropriate, explicitly approve a one-year extension of the remaining term of
this Agreement. The term of this Agreement shall continue to extend each year if
the Boards of Directors so approve such extension unless the Executive gives
written notice to the Employers of the Executive's election not to extend the
term, with such notice to be given not less than thirty (30) days prior to any
such anniversary date. If the Boards of Directors elect not to extend the term,
they shall give written notice of such decision to the Executive not less than
thirty (30) days prior to any such anniversary date. If any party gives timely
notice that the term will not be extended as of any annual anniversary date,
then this Agreement shall terminate at the conclusion of its remaining term.
References herein to the term of this Agreement shall refer both to the initial
term and successive terms.
(b) During the term of this Agreement, the Executive shall perform such
executive services for the Employers as is consistent with his title of Chief
Financial Officer. The Executive shall be an officer of the Employers and shall
serve at the pleasure of the respective Boards of Directors and may also hold
the title of Treasurer. The Executive shall oversee the overall finance function
and will be responsible for developing and implementing financial plans and
policies.
3. Compensation and Benefits.
(a) The Employers shall compensate and pay Executive for his services
during the term of this Agreement at a minimum base salary of $_______ per year
("Base Salary"), which may be increased from time to time in such amounts as may
be determined by the Boards of Directors of the Employers. In addition to his
Base Salary, the Executive shall be entitled to receive during the term of this
Agreement such bonus payments as may be determined by the Boards of Directors of
the Employers.
(b) During the term of the Agreement, Executive shall be entitled to
participate in and receive the benefits of any pension or other retirement
benefit plan, profit sharing, stock option, employee stock ownership, or other
plans, benefits and privileges given to employees and executives of the
Employers, to the extent commensurate with his then duties and responsibilities,
as fixed by the Boards of Directors of the Employers. The Employers shall not
make any changes in such plans, benefits or privileges which would adversely
affect Executive's rights or benefits thereunder, unless such change occurs
pursuant to a program
<PAGE>
5
applicable to all executive officers of the Employers and does not result in a
proportionately greater adverse change in the rights of or benefits to Executive
as compared with any other executive officer of the Employers. Nothing paid to
Executive under any plan or arrangement presently in effect or made available in
the future shall be deemed to be in lieu of the salary payable to Executive
pursuant to Section 3(a) hereof.
(c) During the term of this Agreement, Executive shall be entitled to
paid annual vacation in accordance with the policies as established from time to
time by the Boards of Directors of the Employers. Executive shall not be
entitled to receive any additional compensation from the Employers for failure
to take a vacation, nor shall Executive be able to accumulate unused vacation
time from one year to the next, except to the extent authorized by the Boards of
Directors of the Employers.
4. Expenses. The Employers shall reimburse Executive or otherwise
provide for or pay for all reasonable expenses incurred by Executive in
furtherance of, or in connection with the business of the Employers, including,
but not by way of limitation, automobile and traveling expenses, and all
reasonable entertainment expenses (whether incurred at the Executive's
residence, while traveling or otherwise), subject to such reasonable
documentation and other limitations as may be established by the Boards of
Directors of the Employers. If such expenses are paid in the first instance by
Executive, the Employers shall reimburse the Executive therefor.
5. Termination.
(a) The Employers shall have the right, at any time upon prior Notice
of Termination, to terminate the Executive's employment hereunder for any
reason, including without limitation termination for Cause, Disability or
Retirement, and Executive shall have the right, upon prior Notice of
Termination, to terminate his employment hereunder for any reason.
(b) In the event that (i) Executive's employment is terminated by the
Employers for Cause, Disability or Retirement or in the event of the Executive's
death, or (ii) Executive terminates his employment hereunder other than for Good
Reason, Executive shall have no right pursuant to this Agreement to compensation
or other benefits for any period after the applicable Date of Termination.
(c)(i) In the event that Executive's employment is terminated by the
Employers for other than Cause, Disability, Retirement or the Executive's death
or such employment is terminated by the Executive due to a material breach of
this Agreement by the Employers, which breach has not been cured within fifteen
(15) days after a written notice of non-compliance has been given by the
Executive to the Employers, and as of Executive's Date of Termination no Change
in Control of the Corporation has occurred, no written agreement which
contemplates a Change in Control of the Corporation and which still is in effect
has been entered into by either or both of the Employers and no discussions
<PAGE>
6
and/or negotiations are being conducted which relate to the same, then the
Employers shall, subject to the provisions of Section 6 hereof, if applicable:
(A) Pay to the Executive, in equal monthly installments beginning with
the first business day of the month following the Date of Termination, a cash
severance amount equal to the Base Salary which the Executive would have earned
over the remaining term of this Agreement as of his Date of Termination, and
(B) Maintain and provide for a period ending at the earlier of (i) the
expiration of the remaining term of employment pursuant hereto prior to the
Notice of Termination or (ii) the date of the Executive's full-time employment
by another employer (provided that the Executive is entitled under the terms of
such employment to benefits substantially similar to those described in this
subparagraph (B)), at no cost to the Executive, the Executive's continued
participation in all group insurance, life insurance, health and accident,
disability and other employee benefit plans, programs and arrangements in which
the Executive was entitled to participate immediately prior to the Date of
Termination (other than stock option and restricted stock plans of the
Employers), provided that in the event that the Executive's participation in any
plan, program or arrangement as provided in this subparagraph (B) is barred or
during such period any such plan, program or arrangement is discontinued or the
benefits thereunder are materially reduced, the Employers shall arrange to
provide the Executive with benefits substantially similar to those which the
Executive was entitled to receive under such plans, programs and arrangements
immediately prior to the Date of Termination.
(ii) In the event that Executive's employment is terminated by the
Employers for other than Cause, Disability, Retirement or the Executive's death,
or such employment is terminated by the Executive due to a material breach of
this Agreement by the Employers which has not been cured within fifteen (15)
days after a written notice of non-compliance has been given by the Executive to
the Employers or for Good Reason, and on or prior to the Executive's Date of
Termination there has been a Change in Control of the Corporation, or a written
agreement which contemplates a Change in Control of the Corporation is in
effect, then the Employers shall subject to the provisions of Section 6 hereof,
if applicable:
(A) Pay to the Executive, in twenty-four (24) equal monthly
installments beginning with the first business day of the month following the
Date of Termination, a cash severance amount equal to two (2) times the
Executive's average annual compensation over the most recent five taxable years,
and
(B) Maintain and provide for a period ending at the earlier of (i) the
expiration of the remaining term of employment pursuant hereto prior to the
Notice of Termination or (ii) the date of the Executive's full-time employment
by another employer (provided that the Executive is entitled under the terms of
such employment to benefits substantially similar to those described in this
subparagraph (B)), at no cost to the Executive, the
<PAGE>
7
Executive's continued participation in all group insurance, life insurance,
health and accident, disability and other employee benefit plans, programs and
arrangements in which the Executive was entitled to participate immediately
prior to the Date of Termination (other than stock option and restricted stock
plans of the Employers), provided that in the event that the Executive's
participation in any plan, program or arrangement as provided in this
subparagraph (B) is barred or during such period any such plan, program or
arrangement is discontinued or the benefits thereunder are materially reduced,
the Employers shall arrange to provide the Executive with benefits substantially
similar to those which the Executive was entitled to receive under such plans,
programs and arrangements immediately prior to the Date of Termination.
6. Limitation of Benefits under Certain Circumstances. If the payments
and benefits pursuant to Section 5 hereof, either alone or together with other
payments and benefits which Executive has the right to receive from the
Employers, would constitute a "parachute payment" under Section 280G of the
Code, the payments and benefits pursuant to Section 5 hereof shall be reduced,
in the manner determined by the Executive, by the amount, if any, which is the
minimum necessary to result in no portion of the payments and benefits under
Section 5 being non-deductible to either of the Employers pursuant to Section
280G of the Code and subject to the excise tax imposed under Section 4999 of the
Code. The determination of any reduction in the payments and benefits to be made
pursuant to Section 5 shall be based upon the opinion of independent tax counsel
selected by the Employers' independent public accountants and paid by the
Employers. Such counsel shall be reasonably acceptable to the Employers and the
Executive; shall promptly prepare the foregoing opinion, but in no event later
than thirty (30) days from the Date of Termination; and may use such actuaries
as such counsel deems necessary or advisable for the purpose. In the event that
the Employers and/or the Executive do not agree with the opinion of such
counsel, (i) the Employers shall pay to the Executive the maximum amount of
payments and benefits pursuant to Section 5, as selected by the Executive, which
such opinion indicates that there is a high probability do not result in any of
such payments and benefits being non-deductible to the Employers and subject to
the imposition of the excise tax imposed under Section 4999 of the Code and (ii)
the Employers may request, and Executive shall have the right to demand that the
Employers request, a ruling from the IRS as to whether the disputed payments and
benefits pursuant to Section 5 hereof have such consequences. Any such request
for a ruling from the IRS shall be promptly prepared and filed by the Employers,
but in no event later than thirty (30) days from the date of the opinion of
counsel referred to above, and shall be subject to Executive's approval prior to
filing, which shall not be unreasonably withheld. The Employers and Executive
agree to be bound by any ruling received from the IRS and to make appropriate
payments to each other to reflect any such rulings, together with interest at
the applicable federal rate provided for in Section 7872(f)(2) of the Code.
Nothing contained herein shall result in a reduction of any payments or benefits
to which the Executive may be entitled upon termination of employment under any
circumstances other than as specified in this Section 6, or a reduction in the
payments and benefits specified in Section 5 below zero.
<PAGE>
8
7. Mitigation; Exclusivity of Benefits.
(a) The Executive shall not be required to mitigate the amount of any
benefits hereunder by seeking other employment or otherwise, nor shall the
amount of any such benefits be reduced by any compensation earned by the
Executive as a result of employment by another employer after the Date of
Termination or otherwise.
(b) The specific arrangements referred to herein are not intended to
exclude any other benefits which may be available to the Executive upon a
termination of employment with the Employers pursuant to employee benefit plans
of the Employers or otherwise.
8. Withholding. All payments required to be made by the Employers
hereunder to the Executive shall be subject to the withholding of such amounts,
if any, relating to tax and other payroll deductions as the Employers may
reasonably determine should be withheld pursuant to any applicable law or
regulation.
9. Assignability. The Employers may assign this Agreement and its
rights and obligations hereunder in whole, but not in part, to any corporation,
bank or other entity with or into which the Employers may hereafter merge or
consolidate or to which the Employers may transfer all or substantially all of
its assets, if in any such case said corporation, bank or other entity shall by
operation of law or expressly in writing assume all obligations of the Employers
hereunder as fully as if it had been originally made a party hereto, but may not
otherwise assign this Agreement or its rights and obligations hereunder. The
Executive may not assign or transfer this Agreement or any rights or obligations
hereunder.
10. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:
To the Employers: Board of Directors
Vision Bancorp, Inc.
118 Walnut Street
Lawrenceburg, Indiana 47025-1838
To the Executive: Edward L. Fischer
5689 Thomaridge Court
Cincinnati, Ohio 45248
<PAGE>
9
11. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer or officers as may be
specifically designated by the Boards of Directors of the Employers to sign on
its behalf. No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
12. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise by the substantive laws of the State of Indiana.
13. Nature of Obligations. Nothing contained herein shall create or
require the Employers to create a trust of any kind to fund any benefits which
may be payable hereunder, and to the extent that the Executive acquires a right
to receive benefits from the Employers hereunder, such right shall be no greater
than the right of any unsecured general creditor of the Employers.
14. Interpretation and Headings. This agreement shall be interpreted in
order to achieve the purposes for which it was entered into. The section
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
15. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
17. Regulatory Actions. The following provisions shall be applicable to
the parties to the extent that they are required to be included in employment
agreements between a savings association and its employees pursuant to Section
563.39(b) of the Regulations Applicable to all Savings Associations, 12 C.F.R.
ss.563.39(b), or any successor thereto, and shall be controlling in the event of
a conflict with any other provision of this Agreement, including without
limitation Section 5 hereof.
(a) If Executive is suspended from office and/or temporarily prohibited
from participating in the conduct of the Employers' affairs pursuant to notice
served under Section 8(e)(3) or Section 8(g)(1) of the Federal Deposit Insurance
Act ("FDIA")(12 U.S.C. ss.ss.1818(e)(3) and 1818(g)(1)), the Employers'
obligations under this Agreement shall be suspended as of the date of service,
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Employers may, in their discretion: (i) pay Executive all or part
of the compensation withheld while its obligations under this Agreement were
suspended, and (ii) reinstate (in whole or in part) any of its obligations which
were suspended.
<PAGE>
10
(b) If Executive is removed from office and/or permanently prohibited
from participating in the conduct of the Employers' affairs by an order issued
under Section 8(e)(4) or Section 8(g)(1) of the FDIA (12 U.S.C. ss.ss.1818(e)(4)
and (g)(1)), all obligations of the Employers under this Agreement shall
terminate as of the effective date of the order, but vested rights of the
Executive and the Employers as of the date of termination shall not be affected.
(c) If the Bank is in default, as defined in Section 3(x)(1) of the
FDIA (12 U.S.C. ss.1813(x)(1)), all obligations under this Agreement shall
terminate as of the date of default, but vested rights of the Executive and the
Employers as of the date of termination shall not be affected.
(d) All obligations under this Agreement shall be terminated pursuant
to 12 C.F.R. ss.563.39(b)(5) (except to the extent that it is determined that
continuation of the Agreement for the continued operation of the Employers is
necessary): (i) by the Director of the Office of Thrift Supervision ("OTS"), or
his/her designee, at the time the Federal Deposit Insurance Corporation ("FDIC")
or Resolution Trust Corporation enters into an agreement to provide assistance
to or on behalf of the Bank under the authority contained in Section 13(c) of
the FDIA (12 U.S.C. ss.1823(c)); or (ii) by the Director of the OTS, or his/her
designee, at the time the Director or is/her designee approves a supervisory
merger to resolve problems related to operation of the Bank or when the Bank is
determined by the Director of the OTS to be in an unsafe or unsound condition,
but vested rights of the Executive and the Employers as of the date of
termination shall not be affected.
<PAGE>
11
18. Regulatory Prohibition. Notwithstanding any other provision of this
Agreement to the contrary, any payments made to the Executive pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with Section 18(k) of the FDIA (12 U.S.C. ss.1828(k)) and any regulations
promulgated thereunder.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
Attest: VISION BANCORP, INC.
By:
- ---------------------------------- ---------------------------------
Attest: DEARBORN BANK
By:
- ---------------------------------- --------------------------------
EXECUTIVE
By:
--------------------------------
Edward L. Fischer
EXHIBIT 23.1 TO BE FORTH COMING
EXHIBIT 23.2
[RP FINANCIAL, LC. LETTERHEAD]
September 13, 1996
Board of Directors
Dearborn Mutual Holding Company
Dearborn Savings Association, F.A.
118 Walnut Street
Lawrenceburg, Indiana 47025
Gentlemen:
We hereby consent to the use of our firm's name in the Application for
Conversion of Dearborn Mutual Holding Company, the mutual holding company for
Dearborn Savings Association, F.A., Lawrenceburg, Indiana and any amendments
thereto, in the Form S-1 Registration Statement and any amendments thereto and
in the Form H(e)1-s for Vision Bancorp, Inc. We also hereby consent to the
inclusion of, summary of and references to our Appraisal Report and our
statement concerning subscription rights in such filings including the
Prospectus of Vision Bancorp, Inc.
Sincerely,
RP FINANCIAL, LC.
Gregory E. Dunn
Senior Vice President
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) ANNUAL
REPORT - DEARBORN SAVINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
(B) 10K
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S.$
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 103
<INT-BEARING-DEPOSITS> 2,126
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 7,911
<INVESTMENTS-CARRYING> 3,317
<INVESTMENTS-MARKET> 3,239
<LOANS> 46,786
<ALLOWANCE> 236
<TOTAL-ASSETS> 63,521
<DEPOSITS> 41,379
<SHORT-TERM> 9,517
<LIABILITIES-OTHER> 810
<LONG-TERM> 5,000
0
0
<COMMON> 46
<OTHER-SE> 6,769
<TOTAL-LIABILITIES-AND-EQUITY> 63,521
<INTEREST-LOAN> 3,869
<INTEREST-INVEST> 839
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 4,728
<INTEREST-DEPOSIT> 2,077
<INTEREST-EXPENSE> 2,969
<INTEREST-INCOME-NET> 1,739
<LOAN-LOSSES> 12
<SECURITIES-GAINS> 59
<EXPENSE-OTHER> 1,285
<INCOME-PRETAX> 642
<INCOME-PRE-EXTRAORDINARY> 642
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 453
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 0.96
<YIELD-ACTUAL> 7.89
<LOANS-NON> 26
<LOANS-PAST> 0
<LOANS-TROUBLED> 76
<LOANS-PROBLEM> 12
<ALLOWANCE-OPEN> 214
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 226
<ALLOWANCE-DOMESTIC> 12
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
EXHIBIT 99.1
[Dearborn Savings Association, F.A. Letterhead]
October __, 1996
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Dearborn Savings Association, F.A. The meeting will be held at the Association's
loan origination center located at 141 Ridge Avenue, Lawrenceburg, Indiana, on
__________, November __, 1996 at _:00 _.m., Eastern Time. The matters to be
considered by stockholders at the Special Meeting are described in the
accompanying materials.
It is very important that you be represented at the Special Meeting
regardless of the number of shares you own or whether you are able to attend the
meeting in person. We urge you to mark, sign, and date your proxy card today and
return it in the envelope provided, even if you plan to attend the Special
Meeting. This will not prevent you from voting in person, but will ensure that
your vote is counted if you are unable to attend.
Your continued support of and interest in Dearborn Savings Association,
F.A. are sincerely appreciated.
Sincerely,
Donald C. Siemers
President and Chief Executive Officer
<PAGE>
DEARBORN SAVINGS ASSOCIATION, F.A.
118 Walnut Street
Lawrenceburg, Indiana 47025-1838
(812) 537-0940
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER __, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of
Dearborn Savings Association, F.A. ("Association") will be held at the
Association's loan origination center located at 141 Ridge Avenue, Lawrenceburg,
Indiana, on ________, November __, 1996 at _:00 _.m., Eastern Time, for the
following purposes, as more completely set forth in the accompanying Proxy
Statement:
1. To approve and adopt the Plan of Conversion and Agreement and Plan of
Reorganization (the "Plan" or "Plan of Conversion"), pursuant to which (i)
Dearborn Mutual Holding Company (the "Mutual Holding Company"), which currently
owns approximately 54.6% of the outstanding shares of common stock of the
Association, will convert from mutual form to a federal interim stock savings
institution and simultaneously merge with and into the Association, with the
Association being the surviving entity; (ii) an interim institution ("Interim")
to be formed as a wholly-owned subsidiary of Vision Bancorp, Inc., an Indiana
corporation recently formed as a wholly-owned subsidiary of the Association (the
"Company"), will merge with and into the Association, with the Association being
the surviving entity and becoming a wholly-owned subsidiary of the Company
operating under the name "Dearborn Bank;" (iii) the outstanding shares of
Association common stock (other than those held by the Mutual Holding Company,
which will be cancelled) will be converted into shares of common stock of the
Company pursuant to a ratio that will result in the holders of such shares
owning in the aggregate approximately 42.25% of the Company, before giving
effect to such shareholders purchasing additional shares in a concurrent stock
offering by the Company (the "Offerings"), receiving cash in lieu of fractional
shares or exercising dissenters rights ("Exchange Shares"); and (iv) in
connection therewith the Association's charter will be amended to change the
name of the Association and to establish a liquidation account in accordance
with applicable regulations. In addition, the Company is offering shares of its
common stock by means of a Prospectus, and the sale of such stock and the
reorganization are referred to herein as the "Conversion and Reorganization."
2. To transact such other business as may properly come before the
meeting. Except with respect to procedural matters incident to the conduct of
the meeting, management of the Association is not aware of any matters other
than those set forth above which may properly come before the meeting.
Stockholders of the Association have the right, pursuant to 12 C.F.R.
Section 522.14, to dissent from the Conversion and Reorganization and to
exercise appraisal rights for their shares of the Association common stock upon
strict compliance with the terms and
<PAGE>
conditions of 12 C.F.R. Section 552.14, a copy of which is attached hereto as
Appendix A. Failure to comply strictly with the requirements of 12 C.F.R.
Section 552.14 will result in the loss of appraisal rights.
The Board of Directors of the Association has fixed October __, 1996 as
the voting record date for the determination of stockholders entitled to notice
of and to vote at the Special Meeting. Only those stockholders of record as of
the close of business on the date will be entitled to vote at the Special
Meeting or at any such adjournment.
BY ORDER OF THE BOARD OF DIRECTORS
Margaret M. Abner, Secretary
October __, 1996
Lawrenceburg, Indiana
- -------------------------------------------------------------------------------
YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THIS MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY YOUR PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN
WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF. PROXIES MUST BE
RECEIVED PRIOR TO THE COMMENCEMENT OF THE MEETING.
YOUR VOTE IS VERY IMPORTANT. VOTING ON THE PLAN DOES NOT REQUIRE YOU TO
PURCHASE STOCK IN THE OFFERINGS.
- -------------------------------------------------------------------------------
<PAGE>
DEARBORN SAVINGS ASSOCIATION, F.A.
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
This Proxy Statement is being furnished to the holders of the common
stock, par value $0.10 per share ("Association Common Stock"), of Dearborn
Savings Association, F.A. (the "Association"), in connection with the
solicitation of proxies by the Board of Directors for use at its Special Meeting
of Stockholders ("Special Meeting") to be held at the Association's loan
origination center located at 141 Ridge Avenue, Lawrenceburg, Indiana, on
________, November __, 1996, at _:00 _.m., Eastern Time, and at any adjournment
thereof, for the purposes set forth in the Notice of Special Meeting of
Stockholders. The Proxy Statement is first being mailed to stockholders on or
about October __, 1996.
Each proxy solicited hereby, if properly signed and returned to the
Association and not revoked prior to its use, will be voted in accordance with
the instructions indicated on the proxies. If no contrary instructions are
given, each signed proxy received will be voted in favor of the Plan of
Conversion and, in the discretion of the proxy holder, as to any other matter
which may properly come before the Special Meeting. Only proxies that are
returned can be counted and voted at the Special Meeting.
An Association stockholder who has given a proxy may revoke it at any
time prior to its exercise at the Special Meeting by (i) giving written notice
of revocation to the Secretary of the Association, (ii) properly submitting to
the Association a duly-executed proxy bearing a later date, or (iii) attending
the Special Meeting and voting in person. All written notices of revocation and
other communications with respect to revocation of proxies should be addressed
as follows: Dearborn Savings Association, F.A., 118 Walnut Street, Lawrenceburg,
Indiana 47025-1838, Attention: Secretary. Proxies solicited hereby may be
exercised only at the Special Meeting and any adjournment thereof and will not
be used for any other meeting.
VOTING SECURITIES AND REQUIRED VOTE
Pursuant to Office of Thrift Supervision ("OTS") regulations,
consummation of the Conversion and Reorganization is conditioned upon the
approval of the Plan by the OTS, as well as (1) the approval of the holders of
at least a majority of the total number of votes eligible to be cast by the
members of the Dearborn Mutual Holding Company (the
<PAGE>
2
"Members") as of the close of business on the voting record date at a special
meeting of Members called for the purpose of considering the Plan (the "Members'
Meeting"), and (2) the approval of the holders of at least two-thirds of the
shares of the outstanding Association Common Stock held by the stockholders as
of the voting record date at the Special Meeting. In addition, the Association,
the Mutual Holding Company and the Company (the "Primary Parties") have
conditioned the consummation of the Conversion and Reorganization on the
approval of the Plan by the holders of at least a majority of the votes cast, in
person or by proxy, by the holders of Association Common Stock excluding the
Mutual Holding Company (the "Public Stockholders") at the Special Meeting. The
Mutual Holding Company intends to vote its shares of Association Common Stock,
which amount to approximately 54.6% of the outstanding shares, in favor of the
Plan at the Special Meeting. In addition, as of October __, 1996, directors and
executive officers of the Association as a group (nine persons) beneficially
owned _________ shares (not including stock options) or ______% of the
outstanding Association Common Stock, which shares can also be expected to be
voted in favor of the Plan at the Special Meeting.
Only holders of record of Association Common Stock at the close of
business on October __, 1996 (the "Voting Record Date") will be entitled to
notice of and to vote at the Special Meeting. On the Voting Record Date, there
were _______ shares of Association Common Stock issued and outstanding and the
Association had no other class of equity securities outstanding. Each share of
Association Common Stock is entitled to cast one vote at the Special Meeting on
all matters properly presented at the Special Meeting.
The presence in person or by proxy of at least a majority of the issued
and outstanding shares of Association Common Stock entitled to vote is necessary
to constitute a quorum at the Special Meeting. Shares as to which the "ABSTAIN"
box has been marked on the proxy and any shares held by brokers in street name
for customers which are present at the Special Meeting and are not voted in the
absence of instructions from the customers ("broker non-votes") will be counted
as present for determining if a quorum is present. Because adoption of the Plan
of Conversion must be approved by the holders of at least two-thirds of the
outstanding Association Common Stock, abstentions and broker non-votes will have
the same effect as a vote against such proposal. The Plan also conditions
consummation of the Conversion and Reorganization on the approval of the Plan by
at least a majority of the votes cast, in person or by proxy, at the Special
Meeting by the Public Stockholders. Abstentions and broker non-votes will have
no effect on the required vote of the Public Stockholders.
INCORPORATION OF INFORMATION BY REFERENCE
The accompanying Prospectus of the Company is incorporated herein by
reference. The Prospectus sets forth a description of the Plan of Conversion and
the related offering of common stock by the Company under the caption "The
Conversion and Reorganization." Such caption also describes the effects of the
Conversion and Reorganization on the
<PAGE>
3
stockholders of the Association and the members of the Mutual Holding Company,
including the tax consequences of the Conversion and Reorganization and the
establishment of a liquidation account for the benefit of certain depositors of
the Association. Upon consummation of the Conversion and Reorganization, the
charter of the Association will be amended to change the name of the Association
to "Dearborn Bank" and to delete current Section 8, which establishes a priority
for deposit account holders as creditors in certain situations. A new Section 8
will be added to the charter to provide for a liquidation account. These
amendments are being adopted to comply with applicable regulations of the OTS.
See Appendix B attached hereto.
Information regarding the Association, the Company and the Mutual
Holding Company are set forth in the Prospectus under the captions "Dearborn
Savings Association, F.A.," "Vision Bancorp, Inc." and "Dearborn Mutual Holding
Company," respectively, as well as under the caption "Summary." The Prospectus
also describes the business and financial condition of the Association under the
captions "Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the historical financial statements of
the Association are included in the Prospectus. Information regarding the use of
proceeds of the Offerings conducted in connection with the Conversion and
Reorganization, the historical capitalization of the Association and the pro
forma capitalization of the Company, and other pro forma data are set forth in
the Prospectus under the captions "Use of Proceeds," "Capitalization" and "Pro
Forma Data," respectively.
The Prospectus sets forth certain information as to the Association
Common Stock beneficially owned by (i) the only persons or entities who or which
were known to the Association to be the beneficial owner of more than 5% of the
issued and outstanding Association Common Stock, (ii) the directors of the
Association, and (iii) all directors and executive officers of the Association
as a group. See "Beneficial Ownership of Capital Stock" in the Prospectus.
The Prospectus also sets forth a comparison of the rights of
stockholders of the Association with the rights of stockholders of the Company.
See "Comparison of Stockholders' Rights" in the Prospectus.
DISSENTERS' RIGHTS OF APPRAISAL
Record holders of Association Common Stock are entitled to appraisal
rights under Section 552.14 of the OTS regulations as a result of the merger of
the Mutual Holding Company (following its conversion to a federal interim stock
savings institution) with and into the Association and the merger of the
Association with and into Interim, with the Association to be the surviving
entity in both mergers (the "Mergers"). Any person having a beneficial interest
in shares of Association Common Stock held of record in the name of another
person, such as a broker or nominee, and who wishes to exercise dissenters'
rights
<PAGE>
4
must act promptly to cause the record holder to follow the steps summarized
below properly and in a timely manner to perfect whatever appraisal rights the
beneficial owner may have.
The following discussion is not a complete statement of the law
pertaining to appraisal rights under Section 552.14 and is qualified in its
entirety by the full text of Section 552.14, which is reprinted as Appendix A to
this Proxy Statement.
Under Section 552.14, where a merger is to be submitted for approval at
a meeting of stockholders, as in the case of the Special Meeting, not less than
20 days prior to the meeting, the institution must notify each of the holders of
its stock for which appraisal rights are available that such appraisal rights
are available and include in each such notice a copy of Section 552.14. This
Proxy Statement shall constitute such notice to the record holders of the
Association Common Stock. Any such stockholder who wishes to exercise such
appraisal rights should review carefully the following discussion and Appendix A
to this Proxy Statement because failure to timely and properly comply with the
procedures specified will result in the loss of appraisal rights under Section
552.14.
A holder of shares of Association Common Stock wishing to exercise his
appraisal rights must deliver to the Secretary of the Association, before the
vote on the Plan of Conversion at the Special Meeting, a writing which
identifies such stockholder and which states his intention to demand appraisal
of and payment for his shares of Association Common Stock. Such demand must be
in addition to and separate from any proxy or vote against the Plan of
Conversion. A vote against the Plan of Conversion does not, by itself,
constitute a demand for appraisal rights. Also, voting for the approval and
adoption of the Plan of Conversion will result in the loss of appraisal rights
with respect to such shares. In addition, a holder of shares of Association
Common Stock wishing to exercise his appraisal rights must hold of record such
shares on the date the written demand for appraisal is made and must hold such
shares continuously through the effective date of the Conversion and
Reorganization (the "Effective Date").
Only a holder of record of shares of Association Common Stock is
entitled to assert appraisal rights for the shares of Association Common Stock
registered in that holder's name. A demand for appraisal should be executed by
or on behalf of the holder of record fully and correctly, as his name appears on
his stock certificates. If the shares of Association Common Stock are owned of
record in a fiduciary capacity, such as by a trustee, guardian or custodian,
execution of the demand should be made in that capacity, and if the shares of
Association Common Stock are owned of record by more than one person, as in a
joint tenancy or tenancy in common, the demand should be executed by or on
behalf of all joint owners. An authorized agent, including one or more joint
owners, may execute a demand for appraisal on behalf of a holder of record;
however, the agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, the agent is agent for such
owner or owners. A record holder such as a broker who holds shares of
Association Common Stock as nominee for several beneficial owners may exercise
appraisal rights with respect to the shares of Association Common Stock held for
one or more
<PAGE>
5
beneficial owners while not exercising such rights with respect to the shares of
Association Common Stock held for other beneficial owners; in such case, the
written demand should set forth the number of shares of Association Common Stock
as to which appraisal is sought and where no number of shares of Association
Common Stock is expressly mentioned the demand will be presumed to cover all
shares of Association Common Stock held in the name of the record owner.
Stockholders who hold their shares of Association Common Stock in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights must
take all necessary steps in order that a demand for appraisal is made by the
record holder of such shares and are urged to consult with their brokers to
determine the appropriate procedures for the making of a demand for appraisal by
the record holder and for surrendering the certificates for such shares to the
Association for notation of appraisal rights as set forth below.
All written demands for appraisal should be sent or delivered to
Dearborn Savings Association, F.A., 118 Walnut Street, Lawrenceburg, Indiana
47025-1838, Attention: Secretary, so as to be received prior to the vote of
stockholders with respect to the Plan of Conversion.
Within ten days after the Effective Date of the Conversion and
Reorganization, the Association, as the resulting institution in the Mergers,
must: (i) send a written notice as to the Effective Date of the Conversion and
Reorganization to each person who has satisfied the appropriate provisions of
Section 552.14 and who has not voted in favor of the Plan of Conversion, (ii)
make a written offer to each stockholder to pay for dissenting shares at a
specified price deemed by the Association to be the fair value thereof, and
(iii) inform each stockholder that within 60 days of such date the stockholder
must take certain actions, set forth in such notice (and summarized below). A
written offer to dissenting stockholders, if any, will be based on the
circumstances existing on the Effective Date, and the Association has not
determined the price per share it would offer any dissenting stockholders. If,
within 60 days of the Effective Date, an agreement is reached as to the fair
value between the Association and a dissenting stockholder, payment therefore
shall be made within 90 days of the Effective Date.
If the Association and any holder of the Association Common Stock who
has complied with the foregoing procedures and who is entitled to appraisal
rights under Section 552.14 have not agreed as to the fair value within 60 days
of the Effective Date, the stockholder may file a petition with the OTS, with a
copy to the Association by registered or certified mail demanding a
determination of the fair value of the stock of all dissenting stockholders. A
stockholder who fails to file such petition within 60 days of the Effective Date
shall be deemed to have accepted the Exchange Shares to which he is entitled. In
addition, within 60 days of the Effective Date, each stockholder demanding
appraisal and payment under Section 552.14 must submit to the Association the
certificates for notation thereon that appraisal and payment has been demanded
and that appraisal proceedings are pending. The failure to submit certificates
for notation will result in the loss of appraisal rights. The Association is not
under any obligation to file a petition with respect to the appraisal of the
<PAGE>
6
fair value of the shares of Association Common Stock. Accordingly, it is the
obligation of the stockholders to initiate all necessary action to perfect their
appraisal rights within the time prescribed in Section 552.14.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Director of the OTS will determine the holders of shares of
Association Common Stock entitled to appraisal rights and will order an
appraisal of the "fair value" of the shares of Association Common Stock,
exclusive of any element of value arising from the accomplishment or expectation
of the Conversion and Reorganization. Such appraisal may be conducted by
appropriate staff of the OTS or such independent appraiser as the Director shall
determine. If the appraisal is conducted by an independent appraiser, then the
OTS staff will review and provide an opinion as to the suitability of the
methodology and the adequacy of the analysis and supportive data. If the
Director concurs in the valuation, then payment of the appraised value of the
shares will be directed from the resulting institution (the Association) upon
surrender of the certificates representing the dissenting shares of Association
Common Stock, along with interest from the Effective Date at a rate deemed
equitable by the Director. Holders of shares of Association Common Stock
considering seeking appraisal should be aware that the fair value of their
shares of Association Common stock as determined under Section 552.14 could be
more than, the same as, or less than the value of the consideration they would
receive pursuant to the Plan of Conversion if they did not seek appraisal of
their shares of Association Common Stock.
The costs of any appraisal proceeding may be apportioned and assessed by
the Director as he or she deems equitable against all or some of the parties. In
making the determination, the Director shall consider whether any of the parties
has acted arbitrarily, vexatiously, or not in good faith.
Any holder of shares of Association Common Stock who has duly demanded
an appraisal in compliance with Section 552.14 will not, after the Effective
Date, be entitled to vote the shares of Association Common Stock subject to such
demand for any purpose or be entitled to the payment of dividends or other
distributions on those shares (except dividends or other distributions payable
to, or a vote to be taken by, holders of record of shares of Association Common
Stock as of a date prior to the Effective Date).
If any holder of Association Common Stock who demands appraisal of his
shares under Section 552.14 fails to perfect, or effectively withdraws or loses
his right to appraisal as provided in Section 552.14, the shares of such
stockholder will be converted into Exchange Shares in accordance with the Plan
of Conversion. A holder may withdraw his demand for appraisal by delivering to
the Association a written withdrawal of his demand for appraisal and acceptance
of the Exchange Shares (any such written withdrawal should be directed to
Dearborn Savings Association, F.A., 118 Walnut Street, Lawrenceburg, Indiana
47025-1838, Attention: Secretary).
<PAGE>
7
Failure to follow the steps required by Section 552.14 for perfecting
appraisal rights may result in the loss of such rights.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in the proxy
solicitation materials to be used in connection with the next annual meeting of
stockholders of the Association which is expected to be held in October 1997 if
the Conversion and Reorganization is not consummated, must be received at the
main office of the Association no later than _______________ __, 1997.
OTHER MATTERS
Each proxy solicited hereby also confers discretionary authority on the
Board of Directors of the Association to vote the proxy upon such other matters
as may properly come before the Special Meeting. Management is not aware of any
business that may properly come before the Special Meeting other than those
matters described above in this Proxy Statement. However, if any other matters
should properly come before the Special Meeting, it is intended that the proxies
solicited hereby will be voted with respect to those other matters in accordance
with the judgment of the persons voting the proxies.
The cost of solicitation of proxies will be borne by the Association.
The Association will reimburse brokerage firms and other custodians, nominees
and fiduciaries for reasonable expenses incurred by them in sending proxy
materials to the beneficial owners of the Association Common Stock. In addition
to solicitations by mail, directors, officers and employees of the Association
may solicit proxies personally or by telephone without additional compensation.
You may obtain a copy of the Plan of Conversion, together with the
Articles of Incorporation and Bylaws the Company, from any office of the
Association or in writing from the Association. Any such requests should be
directed to Dearborn Savings Association, F.A., 118 Walnut Street, Lawrenceburg,
Indiana 47025-1838, Attention: Secretary. So that you have sufficient time to
receive and review the requested materials, it is recommended that any such
requests be sent so that they are received by the Association by ________, 1996.
YOUR VOTE IS IMPORTANT! THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR THE PLAN OF CONVERSION. WE URGE YOU TO MARK, SIGN AND DATE THE ENCLOSED
PROXY CARD AND RETURN IT TODAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
<PAGE>
APPENDIX A
SECTION 552.14 OF THE OTS REGULATIONS RELATING TO
DISSENTERS' RIGHTS OF APPRAISAL
ss.552.14 Dissenter and appraisal rights.
(a) Right to demand payment of fair or appraised value. Except as
provided in paragraph (b) of this section, any stockholder of a Federal stock
association combining in accordance with ss.552.13 of this part shall have the
right to demand payment of the fair or appraised value of his stock: Provided,
That such stockholder has not voted in favor of the combination and complies
with the provisions of paragraph (c) of this section.
(b) Exceptions. No stockholder required to accept only qualified
consideration for his or her stock shall have the right under this section to
demand payment of the stock's fair or appraised value, if such stock was listed
on a national securities exchange or quoted on the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ") on the date of the
meeting at which the combination was acted upon or stockholder action is not
required for a combination made pursuant to ss.552.13(h)(2) of this part.
"Qualified consideration" means cash, shares of stock of any association or
corporation which at the effective date of the combination will be listed on a
national securities exchange or quoted on NASDAQ or any combination of such
shares of stock and cash.
(c) Procedure.
(1) NOTICE. Each constituent Federal stock association shall notify all
stockholders entitled to rights under this section, not less than twenty days
prior to the meeting at which the combination agreement is to be submitted for
stockholder approval, of the right to demand payment of appraised value of
shares, and shall include in such notice a copy of this section. Such written
notice shall be mailed to stockholders of record and may be part of the
management's proxy solicitation for such meeting.
(2) DEMAND FOR APPRAISAL AND PAYMENT. Each stockholder electing to make
a demand under this section shall deliver to the Federal stock association,
before voting on the combination, a writing identifying himself or herself and
stating his or her intention thereby to demand appraisal of and payment for his
or her shares. Such demand must be in addition to and separate from any proxy or
vote against the combination by the stockholder.
(3) NOTIFICATION OF EFFECTIVE DATE AND WRITTEN OFFER. Within ten days
after the effective date of the combination, the resulting association shall;
A-1
<PAGE>
(i) Give written notice by mail to stockholders of constituent
Federal Stock associations who have complied with the provisions
of paragraph (c)(2) of this section and have not voted in favor
of the combination, of the effective date of the combination;
(ii) Make a written offer to each stockholder to pay for
dissenting shares at a specified price deemed by the resulting
association to be the fair value thereof; and
(iii) Inform them that, within sixty days of such date, the
respective requirements of paragraphs (c)(5) and (6) of this
section (set out in the notice) must be satisfied.
The notice and offer shall be accompanied by a balance sheet and
statement of income of the association the shares of which the dissenting
stockholder holds, for a fiscal year ending not more than sixteen months before
the date of notice and offer, together with the latest available interim
financial statements.
(4) ACCEPTANCE OF OFFER. If within sixty days of the effective date of
the combination the fair value is agreed upon between the resulting association
and any stockholder who has complied with the provisions of paragraph (c)(2) of
this section, payment therefor shall be made within ninety days of the effective
date of the combination.
(5) PETITION TO BE FILED IF OFFER NOT ACCEPTED. If within sixty days of
the effective date of the combination the resulting association and any
stockholder who has complied with the provisions of paragraph (c)(2) of this
section do not agree as to the fair value, then any such stockholder may file a
petition with the Office, with a copy by registered or certified mail to the
resulting association, demanding a determination of the fair market value of the
stock of all such stockholders. A stockholder entitled to file a petition under
this section who fails to file such petition within sixty days of the effective
date of the combination shall be deemed to have accepted the terms offered under
the combination.
(6) STOCK CERTIFICATES TO BE NOTED. Within sixty days of the effective
date of the combination, each stockholder demanding appraisal and payment under
this section shall submit to the transfer agent his certificates of stock for
notation thereon that an appraisal and payment have been demanded with respect
to such stock and that appraisal proceedings are pending. Any stockholder who
fails to submit his stock certificates for such notation shall no longer be
entitled to appraisal rights under this section and shall be deemed to have
accepted the terms offered under the combination.
(7) WITHDRAWAL OF DEMAND. Notwithstanding the foregoing, at any time
within sixty days after the effective date of the combination, any stockholder
shall have the
A-2
<PAGE>
right to withdraw his or her demand for appraisal and to accept the terms
offered upon the combination.
(8) VALUATION AND PAYMENT. The Director shall, as he or she may elect,
either appoint one or more independent persons or direct appropriate Staff of
the Office to appraise the shares to determine their fair market value, as of
the effective date of the combination, exclusive of any element of value arising
from the accomplishment or expectation of the combination. Appropriate staff of
the Office shall review and provide an opinion on appraisals prepared by
independent persons as to the suitability of the appraisal methodology and the
adequacy of the analysis and supportive data. The Director after consideration
of the appraisal report and the advise of the appropriate staff shall, if he or
she concurs in the valuation of the shares direct payment by the resulting
association of the appraised fair market value of the shares, upon surrender of
the certificates representing such stock. Payment shall be made, together with
interest from the effective date of the combination, at a rate deemed equitable
by the Director.
(9) COSTS AND EXPENSES. The costs and expenses of any proceeding under
this section may be apportioned and assessed by the Director as he or she may
deem equitable against all or some of the parties. In making this determination
the Director shall consider whether any party has acted arbitrarily,
vexatiously, or not in good faith in respect to the rights provided by this
section.
(10) VOTING AND DISTRIBUTION. Any stockholder who has demanded appraisal
rights as provided in paragraph (c)(2) of this section shall thereafter neither
be entitled to vote such stock for any purpose nor be entitled to the payment of
dividends or other distributions on the stock (except dividends or other
distribution payable to, or a vote to be taken by stockholders of record at a
date which is on or prior to, the effective date of the combination): Provided,
That if any stockholder becomes unentitled to appraisal and payment of appraised
value with respect to such stock and accepts or is deemed to have accepted the
terms offered upon the combination, such stockholder shall thereupon be entitled
to vote and receive the distribution described above.
(11) STATUS. Shares of the resulting association into which shares of
the stockholder demanding appraisal rights would have been converted or
exchanged, had they assented to the combination, shall have the status of
authorized and unissued shares of the resulting association.
A-3
<PAGE>
APPENDIX B
PROPOSED AMENDMENTS TO THE CHARTER OF
DEARBORN SAVINGS ASSOCIATION, F.A.
Upon consummation of the Conversion and Reorganization, Section 1 of the
Association's Charter will be revised to read as follows:
Section 1. Corporate Title. The full corporate title of the Bank is
Dearborn Bank (the "Bank").
In addition, all other references in the Association's Charter to the
"Association" will be changed to the "Bank."
Upon consummation of the Conversion and Reorganization, the following Section 8
of the Association's Charter will be deleted in its entirety:
Section 8. Deposit Accounts. In any situation in which the priority of
the accounts of the Association is in controversy, all such accounts shall, to
the extent of their withdrawable value, be debts of the Association having at
least as high a priority as the claims of general creditors of the Association
not having priority (other than any priority arising or resulting from
consensual subordination) over other general creditors of the Association.
Upon consummation of the Conversion and Reorganization, the following section
will be added as new Section 8 of the Association's Charter:
Section 8. Liquidation Account. Pursuant to the requirements of 12
C.F.R. Subchapter D, the Bank shall establish and maintain a liquidation account
for the benefit of its savings account holders who had an account balance of at
least $50.00 as of the close of business on either December 31, 1994 or
September 30, 1996 ("eligible depositors"). In the event of a complete
liquidation of the Bank, it shall comply with such regulations with respect to
the amount and the priorities on liquidation of each of the Bank's eligible
depositor's inchoate interest in the liquidation account, to the extent it is
still in existence, provided that an eligible depositor's inchoate interest in
the liquidation account shall not entitle such eligible depositor to any voting
rights at meetings of the Bank's stockholders.
B-1
<PAGE>
DEARBORN SAVINGS ASSOCIATION, F.A. REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DEARBORN
SAVINGS ASSOCIATION, F.A. (THE "ASSOCIATION") FOR USE ONLY AT A SPECIAL MEETING
OF STOCKHOLDERS TO BE HELD ON NOVEMBER __, 1996 AND ANY ADJOURNMENT THEREOF.
The undersigned, being a stockholder of the Association as of November __,
1996, hereby authorizes the Board of Directors of the Association, or any of
their successors, as proxies, with full powers of substitution, to represent the
undersigned at the Special Meeting of Stockholders to be held at the
Association's loan origination center located at 141 Ridge Avenue, Lawrenceburg,
Indiana, on November __, 1996, at __:00 __.m., Eastern Time, and at any
adjournment of said meeting, and thereat to with respect to all votes that the
undersigned would be entitled to cast, if then personally present, as follows:
(1) To approve and adopt the Plan of Conversion and Agreement and Plan of
Reorganization (the "Plan of Conversion"), pursuant to which (i) Dearborn Mutual
Holding Company (the "Mutual Holding Company"), which currently owns
approximately 54.6% of the outstanding shares of common stock of the
Association, will convert from mutual form to a federal interim stock savings
institution and simultaneously merge with and into the Association, with the
Association being the surviving entity; (ii) an interim institution ("Interim")
to be formed as a wholly-owned subsidiary of Vision Bancorp, Inc., an Indiana
corporation recently formed as a wholly-owned subsidiary of the Association (the
"Company"), will merge with and into the Association, with the Association being
the surviving entity and became a wholly-owned subsidiary of the Company
operating under the name "Dearborn Bank;" (iii) the outstanding shares of
Association common stock (other than those held by the Mutual Holding Company,
which will be cancelled) will be converted into shares of common stock of the
Company pursuant to an exchange ratio as described in the Proxy Statement; (iv)
the Company will sell additional shares of its common stock pursuant to the Plan
of Conversion; and (v) in connection therewith the Association's charter will be
amended as set forth in Appendix B to the Proxy Statement.
/ / FOR / / AGAINST / / ABSTAIN
In their discretion, the proxies are authorized to vote with respect to
approval of the minutes of the last meeting of stockholders, matters incident
to the conduct of the meeting, and upon such other matters as may
properly come before the meeting.
This proxy may be revoked at any time before it is exercised. Shares of
common stock of the Association will be voted as specified. If no specification
is made herein, shares will be voted FOR Proposal 1.
(Continued and to be signed on other side)
<PAGE>
The undersigned hereby acknowledges receipt of a Notice of Special Meeting
of the Stockholders of Dearborn Savings Association, F.A. called for November
__, 1996 and a Proxy Statement for the Special Meeting prior to the signing of
this Proxy.
Date: , 1996
-----------------------
-----------------------------
Signature
-----------------------------
Signature
Note: Please sign exactly as your name(s)
appear(s) on this Proxy. Only one
signature is required in the case of a joint
account. When signing in a representative
capacity, please give title.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE ENCLOSED
ENVELOPE.
EXHIBIT 99.2
DEARBORN MUTUAL HOLDING COMPANY
118 Walnut Street
Lawrenceburg, Indiana 47025-1838
(812) 537-0940
NOTICE OF SPECIAL MEETING OF MEMBERS
To Be Held on November __, 1996
NOTICE IS HEREBY GIVEN that a special meeting ("Special Meeting") of
the members of Dearborn Mutual Holding Company (the "Mutual Holding Company")
will be held at the loan origination center of Dearborn Savings Association,
F.A. (the "Association") located at 141 Ridge Avenue, Lawrenceburg, Indiana on
November __, 1996 at _:__ _.m., Eastern Time, to consider and vote upon:
1. The approval of the Plan of Conversion of the Mutual Holding
Company and Agreement and Plan of Reorganization between the
Mutual Holding Company and the Association, pursuant to which the
Association organized Vision Bancorp, Inc. (the "Company") and,
upon consummation of the following transactions, will become a
wholly owned subsidiary of the Company: (1) the Mutual Holding
Company, which currently owns approximately 54.6% of the
outstanding shares of common stock of the Association, will
convert from mutual form to a federal interim stock savings
institution and simultaneously merge with and into the
Association, with the Association being the surviving entity; (2)
the Association will then merge with and into an interim
institution to be formed as a wholly owned subsidiary of the
Company, with the Association being the surviving entity
operating under the name "Dearborn Bank;" (3) the outstanding
shares of Association common stock (other than those held by the
Mutual Holding Company, which will be cancelled) will be
converted into shares of the Company's common stock ("Exchange
Shares") pursuant to a ratio that will result in the holders of
such shares owning in the aggregate approximately 42.25% of the
company before giving effect to such stockholders purchasing
additional shares in a concurrent stock offering by the Company,
receiving cash in lieu of fractional shares or exercising
dissenters' rights; and (4) the offer and sale of shares of the
Company's common stock; and
2. Such other business as may properly come before the Special
Meeting or any adjournment thereof. Except with respect to
procedural matters incident to the conduct of the meeting,
management is not aware of any other such business.
The Board of Directors has fixed October __ 1996 as the voting record
date for the determination of members entitled to notice of and to vote at the
Special Meeting and at any adjournment thereof. Only those members of the Mutual
Holding Company of record as of the close of business on that date will be
entitled to vote at the Special Meeting or at any such adjournment.
By Order of the Board of Directors
Margaret M. Abner
Secretary
Lawrenceburg, Indiana
October __, 1996
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU SIGN, DATE AND MARK THE ENCLOSED
PROXY CARD FOR ADOPTION OF THE PLAN AND RETURN IT PROMPTLY IN THE ENCLOSED
SELF-ADDRESSED STAMPED ENVELOPE. PROXY CARDS MUST BE RECEIVED PRIOR TO THE
COMMENCEMENT OF THE SPECIAL MEETING. RETURNING PROXY CARDS WILL NOT PREVENT YOU
FROM VOTING IN PERSON IF YOU ATTEND THE SPECIAL MEETING.
YOUR VOTE IS IMPORTANT. NOT VOTING WILL HAVE THE SAME EFFECT AS A VOTE
AGAINST THE PLAN. VOTING ON THE PLAN DOES NOT REQUIRE YOU TO PURCHASE
STOCK IN THE OFFERINGS.
<PAGE>
DEARBORN MUTUAL HOLDING COMPANY
----------------
PROXY STATEMENT
----------------
SPECIAL MEETING OF MEMBERS
To Be Held On November __, 1996
INTRODUCTION
This Proxy Statement is being furnished to you in connection with the
solicitation by the Board of Directors of Dearborn Mutual Holding Company (the
"Mutual Holding Company") of proxies to be voted at the Special Meeting of
Members of the Mutual Holding Company (the "Special Meeting") to be held on
November __, 1996 at the loan origination center of Dearborn Savings
Association, F.A. (the "Association") located at 141 Ridge Avenue, Lawrenceburg,
Indiana at _:__ _.m., Eastern Time, and at any adjournments thereof. This
Special Meeting is being held for the purpose of considering and voting upon a
Plan of Conversion of the Mutual Holding Company and Agreement and Plan of
Reorganization between the Mutual Holding Company and the Association (the
"Plan" or the "Plan of Conversion"), pursuant to which the Association organized
Vision Bancorp, Inc. (the "Company") and, upon consummation of the following
transactions, will become a wholly owned subsidiary of the Company: (1) the
Mutual Holding Company, which currently owns approximately 54.6% of the
outstanding common stock of the Association, will convert from mutual form to a
federal interim stock savings institution and simultaneously merge with and into
the Association, with the Association being the surviving entity; (2) the
Association will then merge with and into an interim institution ("Interim") to
be formed as a wholly owned subsidiary of the Company, with the Association
being the surviving entity operating under the name "Dearborn Bank;" (3) the
outstanding shares of Association common stock (other than those held by the
Mutual Holding Company, which will be cancelled) (the "Public Association
Shares") will be converted into shares of common stock of the Company (the
"Exchange Shares") pursuant to a ratio (the "Exchange Ratio") that will result
in the holders of such shares owning in the aggregate approximately 42.25% of
the Company, before giving effect to such stockholders purchasing additional
shares in a concurrent stock offering by the Company (the "Offerings"),
receiving cash in lieu of fractional shares or exercising dissenters' rights;
and (4) the offer and sale of shares of the Company's common stock (the
"Conversion Stock") pursuant to the Plan. The offer and sale of the Conversion
Stock and the reorganization are referred to herein as the "Conversion and
Reorganization."
Voting in favor of the Plan of Conversion will not obligate any person
to purchase Conversion Stock. Exchange Shares and shares of Conversion Stock are
being offered only by the Prospectus, which is available upon request, if not
included herein. See "How to Obtain Additional Information."
<PAGE>
2
VOTING RIGHTS AND VOTE REQUIRED FOR APPROVAL
Depositors of the Association are members of the Mutual Holding Company
under its current Charter (the "Members"). All of the Members as of the close of
business on ______ __, 1996 (the "Voting Record Date") who continue to be
Members on the date of the Special Meeting or any adjournment thereof will be
entitled to vote on the Plan of Conversion. If there are not sufficient votes
for approval of the Plan at the time of the Special Meeting, the Special Meeting
may be adjourned to permit further solicitation of proxies.
At the Special Meeting, each depositor Member will be entitled to cast
one vote for every $100, or fraction thereof, of the total withdrawal value of
all of his accounts in the Association as of the Voting Record Date up to a
maximum of 1,000 votes. As of the Voting Record Date, the Association had
approximately ______ deposit accounts, the holders of which are entitled to cast
a total of approximately _________ votes at the Special Meeting.
Pursuant to Office of Thrift Supervision ("OTS") regulations,
consummation of the Conversion and Reorganization is conditioned upon the
approval of the Plan by the OTS, as well as (1) the approval of the holders of
at least a majority of the total number of votes eligible to be cast by the
Members as of the close of business on the Voting Record Date at the Special
Meeting, and (2) the approval of the holders of at least two-thirds of the
shares of the outstanding Association Common Stock held by the Mutual Holding
Company and the holders of the Public Association Shares (the "Public
Stockholders") (collectively, the "Stockholders") as of the Voting Record Date
at a Special Meeting of Stockholders called for the purpose of considering the
Plan (the "Stockholders' Meeting"). In addition, the Mutual Holding Company, the
Association and the Company (the "Primary Parties") have conditioned the
consummation of the Conversion and Reorganization on the approval of the Plan by
the holders of at least a majority of the votes cast, in person or by proxy, by
the Public Stockholders at the Stockholders' Meeting. The Mutual Holding Company
intends to vote its shares of Association Common Stock, which amount to 54.6% of
the outstanding shares, in favor of the Plan at the Stockholder's Meeting.
This Proxy Statement and related materials are first being mailed to
Members on or about October __, 1996
<PAGE>
3
PROXIES
The Board of Directors of the Mutual Holding Company is soliciting the
proxy which accompanies this Proxy Statement for use at the Special Meeting.
Each proxy solicited hereby, if properly executed, duly returned before the
Special Meeting and not revoked prior to or at the Special Meeting, will be
voted at the Special Meeting in accordance with the Member's instructions
indicated thereon. If no contrary instructions are given on the proxy, the
proxy, if signed, will be voted in favor of the Plan of Conversion. If you do
not return a proxy or vote at the meeting, it will have the same effect as a
vote against the Plan of the Conversion. If any other matters properly come
before the Special Meeting, the persons named as proxies will vote upon such
matters according to their discretion. Except with respect to procedural matters
incident to the conduct of the meeting, no additional matters are expected to
come before the Special Meeting.
Any Member giving a proxy may revoke it at any time before it is voted
by delivering to the Secretary of the Mutual Holding Company either a written
revocation of the proxy or a duly executed proxy bearing a later date, or by
voting in person at the Special Meeting. Proxies are being solicited only for
use at the Special Meeting and any and all adjournments thereof and will not be
used for any other meeting.
Proxies may be solicited by officers, directors and employees of the
Mutual Holding Company personally, by telephone or further correspondence
without additional compensation.
Deposits held in a trust or other fiduciary capacity may be voted by the
trustee or other fiduciary to whom voting rights are delegated under the trust
instrument or other governing document or applicable law. In the case of
individual retirement accounts and Keogh trusts established at the Association,
the beneficiary may direct the trustee's vote on the Plan of Conversion by
returning a completed proxy card to the Mutual Holding Company. For retirement
accounts and Keogh trusts, if no proxy card is returned, the trustee will vote
in favor of approval of the Plan of Conversion on behalf of such beneficiary.
The Board of Directors urges you to mark, sign, date and return the
enclosed proxy card in the enclosed postage-paid envelope as soon as possible,
even if you do not intend to purchase Conversion Stock. This will ensure that
your vote will be counted.
DEARBORN MUTUAL HOLDING COMPANY
The Mutual Holding Company is a federally chartered mutual holding
company which was chartered on October 22, 1993 in connection with the mutual
holding company reorganization of the Association (the "MHC Reorganization").
The Mutual Holding
<PAGE>
4
Company's primary asset is 250,000 shares of Association Common Stock, which
represent 54.6% of the shares of Association Common Stock outstanding. The
Mutual Holding Company's only other assets consist of deposit accounts in the
amount of $80,000 as of June 30, 1996 (which will become assets of the
Association upon consummation of the Conversion and Reorganization). Prior to
the Conversion and Reorganization, each depositor in the Association has both a
deposit account in the institution and a pro rata ownership interest in the net
worth of the Mutual Holding Company based upon the value in his account, which
interest may only be realized in the event of a liquidation of the Mutual
Holding Company. As part of the Conversion and Reorganization, the Mutual
Holding Company will convert from mutual form to a federal interim stock savings
institution and simultaneously merge with and into the Association, with the
Association being the surviving entity.
VISION BANCORP, INC.
The Company was organized in August 1996 at the direction of the Board
of Directors of the Association for the purpose of holding all of the capital
stock of the Association and in order to facilitate the Conversion and
Reorganization. The Company has applied for the approval of the OTS to become a
thrift holding company and as such will be subject to regulation by the OTS.
After completion of the Conversion and Reorganization, the Company will conduct
business initially as a unitary thrift holding company. Upon consummation of the
Conversion and Reorganization, the Company will have no significant assets other
than all of the outstanding shares of Association Common Stock and the portion
of the net proceeds from the Offerings retained by the Company, and the Company
will have no significant liabilities. See "Use of Proceeds." Initially, the
management of the Company and the Association will be substantially similar and
the Company will neither own nor lease any property, but will instead use the
premises, equipment and furniture of the Association. At the present time, the
Company does not intend to employ any persons other than officers who are also
officers of the Association, and the Company will utilize the support staff of
the Association from time to time. Additional employees may be hired as
appropriate to the extent the Company expands or changes its business in the
future.
Management believes that the holding company structure will provide the
Company with additional flexibility to diversify, should it decide to do so, its
business activities through existing or newly-formed subsidiaries, or through
acquisitions of or mergers with other financial institutions and financial
services related companies. Although there are no current arrangements,
understandings or agreements regarding any such opportunities or transactions,
the Company will be in a position after the Conversion and Reorganization,
subject to regulatory limitations and the Company's financial position, to take
advantage of any such acquisition and expansion opportunities that may arise.
The initial activities of the Company are anticipated to be funded by the
proceeds to be retained by the Company and earnings thereon, as well as
dividends from the Association. See "Dividend Policy."
<PAGE>
5
The Company's principal executive office is located at the home office
of the Association at 118 Walnut Street, Lawrenceburg, Indiana 47025-1838, and
its telephone number is (812) 537-0940.
DEARBORN SAVINGS ASSOCIATION, F.A.
The Association is a federally chartered savings association which
conducts business through one full-service office and one loan origination
office, both of which are located in Lawrenceburg, Indiana. At June 30, 1996,
the Association had $63.5 million of total assets, $56.7 million of total
liabilities, including $41.4 million of deposits, and $6.8 million of
stockholders' equity.
The Association is subject to examination and comprehensive regulation
by the OTS, which is the Association's chartering authority and primary
regulator, and by the Federal Deposit Insurance Corporation ("FDIC"), which as
administrator of the Savings Association Insurance Fund ("SAIF") insures the
Association's deposits up to applicable limits. The Association also is subject
to certain reserve requirements established by the Board of Governors of the
Federal Reserve System ("Federal Reserve Board") and is a member of the Federal
Home Loan Bank ("FHLB") of Indianapolis, which is one of the 12 regional banks
comprising the FHLB System.
The Association's principal executive office is located at 118 Walnut
Street, Lawrenceburg, Indiana 47025-1838, and its telephone number is (812)
537-0940.
THE CONVERSION AND REORGANIZATION
The Boards of Directors of the Mutual Holding Company, the Association
and the Company have approved the Plan of Conversion, as has the OTS, subject to
approval by the Members of the Mutual Holding Company and the Stockholders of
the Association entitled to vote on the matter and the satisfaction of certain
other conditions. Such OTS approval, however, does not constitute a
recommendation or endorsement of the Plan by such agency.
General
The Boards of Directors of the Mutual Holding Company and the
Association unanimously adopted the Plan as of August 8, 1996, which was amended
on August 22, 1996. The Plan has been approved by the OTS, subject to, among
other things, approval of the Plan by the Members of the Mutual Holding Company
and the Stockholders of the Association. The Members' Meeting and the
Stockholders' Meeting have been called for this purpose on November __, 1996.
<PAGE>
6
The following is a brief summary of pertinent aspects of the Plan and
the Conversion and Reorganization. The summary is qualified in its entirety by
reference to the provisions of the Plan, which is available for inspection at
each branch office of the Association and at the offices of the OTS. The Plan
also is filed as an exhibit to the Registration Statement of which the
Prospectus is a part, copies of which may be obtained from the Securities and
Exchange Commission ("SEC"). See "Available Information."
Purposes of the Conversion and Reorganization
The Mutual Holding Company, as a federally chartered mutual holding
company, does not have stockholders and has no authority to issue capital stock.
As a result of the Conversion and Reorganization, the Company will be structured
in the form used by holding companies of commercial banks, most business
entities and a growing number of savings institutions. The holding company form
of organization will provide the Company with the ability to diversify the
Company's and the Association's business activities through acquisition of or
mergers with both stock savings institutions and commercial banks, as well as
other companies. Although there are no current arrangements, understandings or
agreements regarding any such opportunities, the Company will be in a position
after the Conversion and Reorganization, subject to regulatory limitations and
the Company's financial position, to take advantage of any such opportunities
that may arise.
In their decision to pursue the Conversion and Reorganization, the
Mutual Holding Company and the Association considered various regulatory
uncertainties associated with the mutual holding company structure including the
ability to waive dividends in the future as well as the general uncertainty
regarding a possible elimination of the federal savings association charter.
The Conversion and Reorganization also will be important to the future
growth and performance of the holding company organization by providing a larger
capital base to support the operations of the Association and Company and by
enhancing their future access to capital markets, ability to diversify into
other financial services related activities, and ability to provide services to
the public. Although the Association currently has the ability to raise
additional capital through the sale of additional shares of Association Common
Stock, that ability is limited by the mutual holding company structure which,
among other things, requires that the Mutual Holding Company hold a majority of
the outstanding shares of Association Common Stock.
The Conversion and Reorganization also will result in an increase in the
number of outstanding shares of Common Stock following the Conversion and
Reorganization, as compared to the number of outstanding shares of Public
Association Shares prior to the Conversion and Reorganization, which will
increase the likelihood of the development of an active and liquid trading
market for the Common Stock. See "Market for Common
<PAGE>
7
Stock." In addition, the Conversion and Reorganization will enhance the
Association's ability to engage in stock repurchases.
An additional benefit to the Conversion and Reorganization will be an
increase in the accumulated earnings and profits of the Association for federal
income tax purposes. When the Mutual Association transferred substantially all
of its assets and liabilities to the Association in connection with the MHC
Reorganization, its accumulated earnings and profits tax attribute was not able
to be transferred to the Association because no tax-free reorganization was
involved. Accordingly, this tax attribute was retained by the Mutual Association
when it converted its charter to that of the Mutual Holding Company, even though
the underlying retained earnings were transferred to the Association. The
Conversion and Reorganization has been structured to re-unite the accumulated
earnings and profits tax attribute retained by the Mutual Holding Company in the
MHC Reorganization with the retained earnings of the Association by merging the
Mutual Holding Company with and into the Association in a tax-free
reorganization. This transaction will increase the Association's ability to pay
dividends to the Company in the future. See "Dividend Policy."
If the Mutual Association had undertaken a standard conversion involving
the formation of a stock holding company in 1993, applicable OTS regulations
would have required a greater amount of common stock to be sold than the amount
of net proceeds raised in the MHC Reorganization. In addition, if a standard
conversion had been conducted in 1993, management of the Mutual Association
believed that it would have been difficult to profitably invest the larger
amount of capital that would have been raised, when compared to the amount of
net proceeds raised in the MHC Reorganization. A standard conversion in 1993
also would have immediately eliminated all aspects of the mutual form of
organization.
In light of the foregoing, the Boards of Directors of the Association
and the Mutual Holding Company believe that the Conversion and Reorganization is
in the best interests of such companies and their respective Stockholders and
Members.
Description of the Conversion and Reorganization
On August 8, 1996, the Boards of Directors of the Association and the
Mutual Holding Company adopted the Plan, which was amended on August 22, 1996,
and in August 1996 the Association incorporated the Company under Indiana law as
a first-tier wholly owned subsidiary of the Association. Pursuant to the Plan,
(i) the Mutual Holding Company will convert from mutual form to a federal
interim stock savings institution and simultaneously merge with and into the
Association, pursuant to which the Mutual Holding Company will cease to exist
and the shares of Association Common Stock held by the Mutual Holding Company
will be cancelled, and (ii) Interim will then merge with and into the
Association. As a result of the merger of Interim with and into the Association,
the Association will
<PAGE>
8
become a wholly-owned subsidiary of the Company and the Public Association
Shares will be converted into the Exchange Shares pursuant to the Exchange
Ratio, which will result in the holders of such shares owning in the aggregate
approximately the same percentage of the Common Stock to be outstanding upon the
completion of the Conversion and Reorganization (i.e., the Conversion Stock and
the Exchange Shares) as the percentage of Association Common Stock owned by them
in the aggregate immediately prior to consummation of the Conversion and
Reorganization, adjusted downward pursuant to OTS policy which requires that the
Exchange Ratio reflect the $403,000 of special dividends declared by the
Association and waived by the Mutual Holding Company, but before giving effect
to (a) the payment of cash in lieu of issuing fractional Exchange Shares, (b)
any shares of Conversion Stock purchased by the Association's stockholders in
the Offerings, and (c) any exercise of dissenters' rights.
Effects of the Conversion and Reorganization
General. Prior to the Conversion and Reorganization, each depositor in
the Association has both a deposit account in the institution and a pro rata
ownership interest in the net worth of the Mutual Holding Company based upon the
balance in his account, which interest may only be realized in the event of a
liquidation of the Mutual Holding Company. However, this ownership interest is
tied to the depositor's account and has no tangible market value separate from
such deposit account. A depositor who reduces or closes his account receives a
portion or all of the balance in the account but nothing for his ownership
interest in the net worth of the Mutual Holding Company, which is lost to the
extent that the balance in the account is reduced.
Consequently, the depositors of the Association normally have no way to
realize the value of their ownership interest in the Mutual Holding Company,
which has realizable value only in the unlikely event that the Mutual Holding
Company is liquidated. In such event, the depositors of record at that time, as
owners, would share pro rata in any residual surplus and reserves of the Mutual
Holding Company after other claims are paid.
Upon consummation of the Conversion and Reorganization, permanent
nonwithdrawable capital stock will be created to represent the ownership of the
net worth of the Company. The Common Stock of the Company is separate and apart
from deposit accounts and cannot be and is not insured by the FDIC or any other
governmental agency. Certificates are issued to evidence ownership of the
permanent stock. The stock certificates are transferable, and therefore the
stock may be sold or traded if a purchaser is available with no effect on any
account the seller may hold in the Association.
Continuity. While the Conversion and Reorganization is being
accomplished, the normal business of the Association of accepting deposits and
making loans will continue without interruption. The Association will continue
to be subject to regulation by the OTS and the FDIC. After the Conversion and
Reorganization, the Association will continue to
<PAGE>
9
provide services for depositors and borrowers under current policies by its
present management and staff.
The directors and officers of the Association at the time of the
Conversion and Reorganization will continue to serve as directors and officers
of the Association after the Conversion and Reorganization. The directors and
officers of the Company consist of individuals currently serving as directors
and officers of the Mutual Holding Company and the Association, and they
generally will retain their positions in the Company after the Conversion and
Reorganization.
Effect on Public Association Shares. Under the Plan, upon consummation
of the Conversion and Reorganization, the Public Association Shares shall be
converted into Common Stock based upon the Exchange Ratio without any further
action on the part of the holder thereof. Upon surrender of the Public
Association Shares, Common Stock will be issued in exchange for such shares.
Upon consummation of the Conversion and Reorganization, the Public
Stockholders of the Association, a federally chartered savings association, will
become stockholders of the Company, an Indiana corporation.
Effect on Deposit Accounts. Under the Plan, each depositor in the
Association at the time of the Conversion and Reorganization will automatically
continue as a depositor after the Conversion and Reorganization, and each such
deposit account will remain the same with respect to deposit balance, interest
rate and other terms, except to the extent that funds in the account are
withdrawn to purchase Conversion Stock to be issued in the Offerings. Each such
account will be insured by the FDIC to the same extent as before the Conversion
and Reorganization. Depositors will continue to hold their existing
certificates, passbooks and other evidences of their accounts.
Effect on Loans. No loan outstanding from the Association will be
affected by the Conversion and Reorganization, and the amount, interest rate,
maturity and security for each loan will remain as they were contractually fixed
prior to the Conversion and Reorganization.
Effect on Voting Rights of Members. At present, all depositors of the
Association are members of, and have voting rights in, the Mutual Holding
Company as to all matters requiring membership action. Upon completion of the
Conversion and Reorganization, depositors will cease to be members and will no
longer be entitled to vote at meetings of the Mutual Holding Company (which will
cease to exist). Upon completion of the Conversion and Reorganization, all
voting rights in the Association will be vested in the Company as the sole
stockholder of the Association. Exclusive voting rights with respect to the
Company will be vested in the holders of Common Stock. Depositors of the
<PAGE>
10
Association will not have voting rights in the Company after the Conversion and
Reorganization, except to the extent that they become stockholders of the
Company.
Tax Effects. Consummation of the Conversion and Reorganization is
conditioned on prior receipt by the Primary Parties of rulings or opinions with
regard to federal and Indiana income taxation which indicate that the adoption
and implementation of the Plan of Conversion set forth herein will not be
taxable for federal or Indiana income tax purposes to the Primary Parties or the
Association's Eligible Account Holders, Supplemental Eligible Account Holders or
Other Members.
Effect on Liquidation Rights. Were the Mutual Holding Company to
liquidate, all claims of the Mutual Holding Company's creditors would be paid
first. Thereafter, if there were any assets remaining, Members of the Mutual
Holding Company would receive such remaining assets, pro rata, based upon the
deposit balances in their deposit accounts at the Association immediately prior
to liquidation. In the unlikely event that the Association were to liquidate
after the Conversion and Reorganization, all claims of creditors (including
those of depositors, to the extent of their deposit balances) also would be paid
first, followed by distribution of the "liquidation account" to certain
depositors (see "Liquidation Rights" below), with any assets remaining
thereafter distributed to the Company as the holder of the Association's capital
stock. Pursuant to the rules and regulations of the OTS, a merger,
consolidation, sale of bulk assets or similar combination or transaction with
another insured institution would not be considered a liquidation for this
purpose and, in such a transaction, the liquidation account would be required to
be assumed by the surviving institution.
Liquidation Rights
In the unlikely event of a complete liquidation of the Mutual Holding
Company in its present mutual form, each depositor of the Association would
receive his pro rata share of any assets of the Mutual Holding Company remaining
after payment of claims of all creditors. Each depositor's pro rata share of
such remaining assets would be in the same proportion as the value of his
deposit account was to the total value of all deposit accounts in the
Association at the time of liquidation. After the Conversion and Reorganization,
each depositor, in the event of a complete liquidation of the Association, would
have a claim as a creditor of the same general priority as the claims of all
other general creditors of the Association. However, except as described below,
his claim would be solely in the amount of the balance in his deposit account
plus accrued interest. He would not have an interest in the value or assets of
the Association or the Company above that amount.
The Plan provides for the establishment, upon the completion of the
Conversion and Reorganization, of a special "liquidation account" for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders in
an amount equal to the amount of any dividends waived by the Mutual Holding
Company plus the greater of (1) the Association's retained earnings of
$4,556,000 at June 30, 1993, the date of the latest
<PAGE>
11
statement of financial condition contained in the final offering circular
utilized in the MHC Reorganization, or (2) 54.6% of the Association's total
stockholders' equity as reflected in its latest statement of financial condition
contained in the final Prospectus utilized in the Offerings. As of the date of
the Prospectus, the initial balance of the liquidation account would be $5.4
million. Each Eligible Account Holder and Supplemental Eligible Account Holder,
if he were to continue to maintain his deposit account at the Association, would
be entitled, upon a complete liquidation of the Association after the Conversion
and Reorganization, to an interest in the liquidation account prior to any
payment to the Company as the sole stockholder of the Association. Each Eligible
Account Holder and Supplemental Eligible Account Holder would have an initial
interest in such liquidation account for each deposit account, including
passbook accounts, transaction accounts such as checking accounts, money market
deposit accounts and certificates of deposit, held in the Association at the
close of business on December 31, 1994 or September 30, 1996, as the case may
be. Each Eligible Account Holder and Supplemental Eligible Account Holder will
have a pro rata interest in the total liquidation account for each of his
deposit accounts based on the proportion that the balance of each such deposit
account on the December 31, 1994 Eligibility Record Date (or the September 30,
1996 Supplemental Eligibility Record Date, as the case may be) bore to the
balance of all deposit accounts in the Association on such date.
If, however, on any June 30 annual closing date of the Association,
commencing June 30, 1997, the amount in any deposit account is less than the
amount in such deposit account on December 31, 1994 or September 30, 1996, as
the case may be, or any other annual closing date, then the interest in the
liquidation account relating to such deposit account would be reduced by the
proportion of any such reduction, and such interest will cease to exist if such
deposit account is closed. In addition, no interest in the liquidation account
would ever be increased despite any subsequent increase in the related deposit
account. Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders are satisfied would be
distributed to the Company as the sole stockholder of the Association.
Required Approvals
Various approvals of the OTS are required in order to consummate the
Conversion and Reorganization. The OTS has approved the Plan of Conversion,
subject to approval by the Mutual Holding Company's Members and the
Association's Stockholders. In addition, consummation of the Conversion and
Reorganization is subject to OTS approval of the Company's application to
acquire all of the to-be-outstanding Association Common Stock and the
applications with respect to the merger of the Mutual Holding Company (following
its conversion to a federal interim stock savings institution) into the
Association and the merger of Interim into the Association, with the Association
being the surviving entity in both mergers. Applications for these approvals
have been filed and are currently pending. There can be no assurances that the
requisite OTS approvals will be received in
<PAGE>
12
a timely manner, in which event the consummation of the Conversion and
Reorganization may be delayed beyond the expiration of the Offerings.
Pursuant to OTS regulations, the Plan of Conversion also must be
approved by (1) at least a majority of the total number of votes eligible to be
cast by Members of the Mutual Holding Company at the Members' Meeting, and (2)
holders of at least two-thirds of the outstanding Association Common Stock at
the Stockholders' Meeting. In addition, the Primary Parties have conditioned the
consummation of the Conversion and Reorganization on the approval of the Plan by
at least a majority of the votes cast, in person or by proxy, by the Public
Stockholders at the Stockholders' Meeting.
MANAGEMENT OF THE COMPANY
Directors and Executive Officers
The Board of Directors is divided into three classes, each of which
contains approximately one-third of the Board. The Bylaws of the Company
currently authorize six directors. The directors shall be elected by the
stockholders of the Company for staggered three-year terms, or until their
successors are elected and qualified. One class of directors, consisting of
Messrs. Denney and Richter, has a term of office expiring at the annual meeting
of stockholders of the Company in 1997, a second class, consisting of Messrs.
Sonntag and Lorey, has a term of office expiring at the annual meeting of
stockholders of the Company in 1998, and a third class, consisting of Messrs.
Siemers and Meador, has a term of office expiring at the annual meeting of
stockholders of the Company in 1999, and in each case until their successors are
elected and qualified. No director is related to any other director or executive
officer of the Association by blood, marriage or adoption. All directors of the
Company currently serve as directors of the Association.
The following individuals are executive officers of the Company and hold
the offices set forth opposite their names.
Name Position(s) Held With the Company
- --------------------------- ------------------------------------------
Donald C. Siemers President and Chief Executive Officer
Jay Gary Fraley Vice President
Edward L. Fischer Chief Financial Officer
Margaret M. Abner Secretary
<PAGE>
13
The executive officers of the Company are elected annually and hold
office until their respective successors have been elected and qualified or
until death, retirement, resignation or removal by the Board of Directors.
Information concerning the principal occupations and employment of the
directors and executive officers of the Company during the past five years is
set forth under "Management of the Association - Directors" and "Executive
Officers Who Are Not Directors." Directors and executive officers of the Company
initially will not be compensated by the Company but will serve and be
compensated by the Association.
Benefits
General. The Company intends to adopt certain stock benefit plans
following consummation of the Conversion and Reorganization. Moreover, existing
stock benefit plans of the Association, consisting of the 1993 Stock Incentive
Plan, 1993 Directors' Stock Option Plan and the Management Recognition Plan,
will be adopted by the Company in connection with the Conversion and
Reorganization, with the effect that shares of Common Stock will be issuable
pursuant thereto and not shares of Association Common Stock.
1997 Stock Option Plan. The Board of Directors of the Company may adopt
the 1997 Stock Option Plan (the "1997 Plan") and to submit the 1997 Plan to
stockholders at an annual or special meeting of stockholders to be held at least
one year following the consummation of the Conversion and Reorganization.
The 1997 Plan will be designed to attract and retain qualified personnel
in key positions, provide directors, officers and key employees with a
proprietary interest in the Company as an incentive to contribute to the success
of the Company and reward key employees for outstanding performance and the
attainment of targeted goals. The 1997 Plan will provide for the grant of
incentive stock options intended to comply with the requirements of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code") ("incentive stock
options"), non-incentive or compensatory stock options and stock appreciation
rights (collectively "Awards"). Awards will be granted to directors and key
employees of the Company and any subsidiaries, except that non-employee
directors will not be eligible to receive incentive stock options. If
stockholder approval is obtained, it is expected that options to acquire shares
of Common Stock will be awarded to key employees of the Company and the
Association and directors of the Company with an exercise price equal to the
fair market value of the Common Stock on the date of the grant.
The Company may reserve for future issuance pursuant to the 1997 Plan
a number of authorized shares of Common Stock equal to 10% of the Conversion
Stock issued in the Offerings (or 50,473 shares at the maximum of the Offering
Price Range). In the event of a stock split, reverse stock split or stock
dividend, the number of shares of Common Stock under the 1997 Plan, the number
of shares to which any Award relates and the
<PAGE>
14
exercise price per share under any option or stock appreciation right shall be
adjusted to reflect such increase or decrease in the total number of shares of
Common Stock outstanding.
1997 Management Recognition Plan and Trust. The Board of Directors of
the Company may adopt the 1997 Recognition Plan for directors and selected
officers and employees of the Company and the Association (the "1997 Recognition
Plan") and to submit such plan to stockholders at an annual or special meeting
of stockholders to be held at least one year following the consummation of the
Conversion and Reorganization. The objective of the 1997 Recognition Plan will
be to enable the Company to provide directors, officers and employees with a
proprietary interest in the Company as an incentive to contribute to its
success.
Assuming the receipt of stockholder and OTS approval, the Company may
acquire Common Stock on behalf of the 1997 Recognition Plan in an amount equal
to 4.0% of the Conversion Stock issued in the Offerings, or 20,189 shares at the
maximum of the Offering Price Range. These shares may be acquired through open
market purchases or from authorized but unissued shares, with approval from the
OTS. In the event that authorized but unissued shares are acquired by the 1997
Recognition Plan, such issuance would dilute the interests of other
stockholders.
The 1997 Recognition Plan will be administered and interpreted by the
Board of Directors or a committee thereof. The trustees will have the
responsibility to invest all funds contributed by the Company to the trust
created for the 1997 Recognition Plan (the "Trust"). Shares of Common Stock
granted pursuant to the 1997 Recognition Plan generally will be in the form of
restricted stock payable over a period specified by the administrators. For
accounting purposes, compensation expense in the amount of the fair market value
of the Common Stock at the date of the grant to the recipient will be recognized
pro rata over the number of years during which the shares are payable. The
shares, while restricted, may not be sold, pledged or otherwise disposed of and
are required to be held in the Trust. If a recipient terminates employment for
reasons other than death or disability, the recipient will forfeit all rights to
the allocated shares under restriction. If the recipient's termination is caused
by death or disability, all restrictions will expire and all allocated shares
will become unrestricted.
Employment Agreements
In connection with the Conversion and Reorganization, the Company and
the Association (collectively the "Employers") may enter into employment
agreements with Messrs. Siemers, Fraley and Fischer. In such event, the
Employers will agree to employ Mr. Siemers for a term of up to three years and
Messrs. Fraley and Fischer for a term of up to two years, in each case in their
respective current positions and at their respective current salaries, which
salaries may be increased at the discretion of the Board of Directors from time
to time. In addition,
<PAGE>
15
subject to satisfactory performance reviews by the Board of Directors, the
employment agreements may be extended on each anniversary date for an
additional year so that the remaining term shall be three years in the case of
Mr. Siemers and two years in the case of Messrs. Fraley and Fischer.
The employment agreements will be terminable with or without cause by
the Employers. Messrs. Siemers, Fraley and Fischer shall have no right to
compensation or other benefits pursuant to the employment agreements for any
period after voluntary termination or termination by the Employers for cause,
disability, retirement or death, provided, however, that in the event that
either Mr. Siemers, Mr. Fraley or Mr. Fischer is terminated by the Employers for
other than cause, disability, retirement or the employee's death and no Change
of Control of the Company, as defined, has occurred, Messrs. Siemers, Fraley and
Fischer will be entitled to receive a cash severance amount equal to his
respective base salary over the remaining term of the respective employment
agreement. In addition, in the event that either Mr. Siemers, Mr. Fraley or Mr.
Fischer terminates his employment because of failure of the Employers to comply
with any material provision of the respective employment agreement or such
employment agreement is terminated by the Employers other than for cause,
disability, retirement or death or by Mr. Siemers, Mr. Fraley or Mr. Fischer as
a result of certain adverse actions which are taken with respect to Mr.
Siemers', Mr. Fraley's or Mr. Fischer's respective employment following a Change
in Control of the Company, as defined, Messrs. Siemers, Fraley and Fischer will
be entitled to a cash severance amount equal to three times his respective base
salary in the case of Mr. Siemers and two times his respective base salary in
the case of Messrs. Fraley and Fischer. In addition, Messrs. Siemers, Fraley and
Fischer will be entitled to a continuation of benefits similar to those they are
receiving at the time of such termination for the remaining term of the
agreement or until such employee obtains full-time employment with another
employer.
A Change in Control is generally defined in the employment agreement to
include any change in control required to be reported under the federal
securities laws, as well as (i) the acquisition by any person of 25% or more of
the Company's outstanding voting securities and (ii) a change in a majority of
the directors of the Company during any two-year period without the approval of
at least two-thirds of the persons who were directors of the Company at the
beginning of such period.
The employment agreements may provide that in the event that any of the
payments to be made thereunder or otherwise upon termination of employment are
deemed to constitute "excess parachute payments" within the meaning of Section
280G of the Code, then such payments and benefits received thereunder shall be
reduced, in the manner determined by the employee, by the amount, if any, which
is the minimum necessary to result in no portion of the payments and benefits
being non-deductible by the Employers for federal income tax purposes. Excess
parachute payments generally are payments in excess of three times the base
amount, which is defined to mean the recipient's average annual compensation
from
<PAGE>
16
the employer includable in the recipient's gross income during the most recent
five taxable years ending before the date on which a change in control of the
employer occurred. Recipients of excess parachute payments are subject to a 20%
excise tax on the amount by which such payments exceed the base amount, in
addition to regular income taxes, and payments in excess of the base amount are
not deductible by the employer as compensation expense for federal income tax
purposes.
MANAGEMENT OF THE ASSOCIATION
Directors
The Association's Bylaws presently provide that the Board of Directors
consists of six members and require the Board of Directors to be divided into
three classes as nearly equal in number as possible. The members of each class
are elected for a term of three years or until their successors are elected and
qualified, with one class of directors elected annually. The following table
sets forth certain information regarding the Board of Directors of the
Association.
<TABLE>
<CAPTION>
Positions Held
With the Director Term
Name Age(1) Association Since Expires
- ---------------------------------- ---------- -------------------------- ------------- ------------
<S> <C> <C> <C> <C>
Ronald J. Denney 48 Director 1976 1997
David P. Lorey 40 Director 1992 1998
Richard B. Meador, III 61 Director 1983 1996
Dennis G. Richter 49 Director 1986 1997
Donald C. Siemers 52 Director, President 1980 1996
and Chief Executive
Officer
Robert P. Sonntag 62 Chairman 1971 1998
</TABLE>
- -------------------
(1) As of June 30, 1996
Set forth below is information with respect to the principal occupations
of the current directors of the Association during the last five years.
<PAGE>
17
Ronald J. Denney was initially elected to the Board of Directors in
1976. Mr. Denney has served as the funeral director at Fitch Denney Funeral
Home, Inc., Lawrenceburg, Indiana, since 1973.
David P. Lorey was initially elected to the Board of Directors in 1992.
Mr. Lorey has been the owner of Loreys, a department store located in
Lawrenceburg, Indiana, since 1988.
Richard B. Meador, III was initially elected to the Board of Directors
in 1983 and is currently retired. Prior to 1992, Mr. Meador owned Meador's
Fitness Center in Lawrenceburg, Indiana.
Dennis G. Richter was initially elected to the Board of Directors in
1986 and has been self-employed as an optometrist in Lawrenceburg, Indiana,
since 1974.
Donald C. Siemers has served as President and Chief Executive Officer of
the Association since October 1978 and as a director of the Association since
1980.
Robert P. Sonntag was initially elected to the Board of Directors in
1971. Mr. Sonntag has served as Chairman of the Board of Directors of the
Association since 1991 and President of Sonntag Accountancy Corporation, Aurora,
Indiana, since 1967.
Executive Officers Who Are Not Directors
The following table sets forth certain information with respect to the
executive officers of the Association who are not directors. There are no
arrangements or understandings between the Association and any such person
pursuant to which such person was elected an executive officer of the
Association, and no such officer is related to any director or officer of the
Association by blood, marriage or adoption.
Name Age(1) Position(s)
- --------------------- ----------- ----------------------------------
Jay Gary Fraley 45 Vice President
Edward L. Fischer 44 Chief Financial Officer and
Treasurer
Margaret M. Abner 58 Head Teller and Secretary
- ------------
(1) As of June 30, 1996.
<PAGE>
18
Set forth below is information with respect to the principal occupations
of the above executive officers during the last five years.
Jay Gary Fraley has served as Vice President of the Association since
1984.
Margaret M. Abner has served as Head Teller of the Association since
1975 and Secretary of the Association since 1985.
Edward L. Fischer has served as Chief Financial Officer and Treasurer of
the Association since October 1993. Mr. Fischer served as Vice President and
Controller of Charter Oak Federal Savings Bank, Cincinnati, Ohio, from 1983 to
January 1993.
Simplified Employee Pension Plan
The Association established a Simplified Employee Pension Plan ("SEP
Plan") on June 3, 1992. Employees are eligible to participate in the SEP Plan
after attaining the age of 21 and having worked for the Association for three
out of the immediately preceding five years. Pursuant to the SEP Plan, each year
the Association may make a discretionary contribution to the SEP Plan which will
be allocated to each participant in the same proportion as such participant's
compensation bears to all participants' compensation in such year. The
Association's contributions to the SEP Plan are held in participants' individual
retirement accounts ("IRAs") and are fully vested and belong to the participants
from the time such amounts are contributed. In addition, participants may make
additional contributions to their SEP Plan accounts subject to the limitations
generally applicable to IRAs. During the year ended June 30, 1996, the
Association contributed approximately $15,000 to the SEP Plan, exclusive of
contributions made directly by participants.
Participants may rollover funds from their SEP Plan accounts into other
IRAs, subject to certain restrictions, or may withdraw the Association's
contributions to their SEP Plan accounts. Withdrawn amounts are includable in
income and may be subject to a penalty tax if a participant has not attained the
age of 59 1/2.
Executive Supplemental Retirement Income Agreements
The Association entered into Executive Supplemental Retirement Income
Agreements with Messrs. Siemers and Fraley and Ms. Abner in March 1992 and with
Mr. Fischer in May 1996 ("Supplemental Agreements"). The Supplemental Agreements
are intended to provide supplemental retirement benefits beyond those provided
by the Association's SEP Plan. The Supplemental Agreements provide that at each
executive's normal retirement following his or her 65th birthday, the
Association shall commence paying supplemental retirement income benefits which
shall be, in Mr. Siemers' case, 52 percent, and in Mr. Fraley's, Ms. Abner's and
Mr. Fischer's cases, 35 percent, of their highest W-2 compensation during any 12
month period during their employment with the Association. Such benefits shall
be payable for 20 years, and the benefit payable to Mr. Siemers shall not exceed
$69,000 per
<PAGE>
19
year. In the event of the executives' early retirement, after attaining the age
of 60 in the case of Messrs. Siemers, Fraley and Fischer, and 62 in the case of
Ms. Abner, the supplemental retirement income benefit shall be reduced by one
percent for each year, or fraction thereof, that an executive's retirement date
precedes his or her normal retirement date. In the event of death or disability
prior to termination of employment, a death benefit of 60 percent of annual
salary at date of death shall be payable to these executives' beneficiaries for
20 years. Such death benefits shall not exceed $69,000, $40,000, $49,000 or
$12,500 for the beneficiaries of Messrs. Siemers, Fraley, Fischer and Ms. Abner,
respectively. The benefits provided under the Supplemental Agreements vest at
the rate of 20 percent per year starting with the third complete calendar year
of employment beginning from the date of execution of the Supplemental
Agreements. If, prior to an executive's normal retirement date, he or she
voluntarily terminates or is terminated without cause by the Association, the
Association shall pay to the executive his or her vested accrued benefits. If,
however, an executive's termination follows a merger, conversion or other
material change in the Association's structure or business activities, the
executive shall be entitled to his or her full supplemental retirement income
benefits. Should an executive be terminated for cause, his benefits under the
Supplemental Agreements shall be forfeited.
The Association has funded its obligations under the Supplemental
Agreements by purchasing single premium life insurance policies. The Executives
and their beneficiaries have no rights to the insurance policies acquired by the
Association and have only the rights of unsecured general creditors of the
Association. Each year the Association records on expense which is calculated
ratably over the remaining anticipated years of service of the Executive. This
expense was approximately $20,000 during the year ended June 30, 1996.
Stock Benefit Plans
Stock Plans of the Association. The Association has adopted and
maintains the 1993 Stock Incentive Plan, the 1993 Directors' Stock Option Plan
and the Management Recognition Plan. The 1993 Stock Incentive Plan provides for
the grant of stock options to officers and employees of the Association. The
maximum number of shares of Association Common Stock which may be issued under
the 1993 Stock Incentive Plan is 13,000 shares, 866 of which had been issued
upon the exercise of stock options as of June 30, 1996. The 1993 Directors'
Stock Option Plan provides for the grant of stock options to non-employee
directors of the Association. The maximum number of shares of Association Common
Stock which may be issued under the 1993 Directors' Stock Option Plan is 7,000
shares, 6,860 of which had been issued upon the exercise of stock options as of
June 30, 1996. The Management Recognition Plan provides for the award of
restricted Common Stock to directors, officers and employees of the Association.
The maximum number of shares of Association Common Stock which may be issued
under the plan is 6,000 shares, all of which are outstanding and 2,160 shares of
which had vested as of June 30, 1996. The restricted stock awarded pursuant to
the Management Recognition Plan vests over five years, one-fifth per year from
the date of grant. Pursuant to the terms of the Association's stock option
<PAGE>
20
plans, all outstanding options thereunder may be exercised in whole or in part
immediately prior to consummation of the Conversion and Reorganization.
The Company has approved adoption of the Association's existing 1993
Stock Incentive Plan, 1993 Directors' Stock Option Plan and Management
Recognition Plan (collectively the "Plans") as plans of the Company upon
consummation of the Conversion and Reorganization and will issue Common Stock in
lieu of Association Common Stock pursuant to the terms of such Plans. As of the
effective date of the Conversion and Reorganization, rights outstanding under
the Plans shall be assumed by the Company and thereafter shall be rights only
for shares of Company Common Stock, with each such right being for a number of
shares of Common Stock equal to the number of shares of Association Common Stock
that were available thereunder immediately prior to such effective date times
the Exchange Ratio, and the price of each such right shall be adjusted to
reflect the Exchange Ratio and so that the aggregate purchase price of the right
is unaffected, but with no change in any other term or condition of such right.
The Company shall make appropriate amendments to the Plans to reflect the
adoption of the Plans by the Company without adverse effect upon the rights
outstanding thereunder.
Employee Stock Ownership Plan. The Association established an ESOP in
connection with the MHC Reorganization for employees age 21 or older who have at
least one year of credited service with the Association (including its
predecessors) ("ESOP Participants"). The ESOP purchased 16,000 Public
Association Shares in the MHC Reorganization. The ESOP is funded by the
Association's contributions made in cash and by dividends on the shares held by
the ESOP. Upon consummation of the Conversion and Reorganization, the Public
Association Shares held by the ESOP will convert into Common Stock based upon
the Exchange Ratio.
Messrs. Siemers, Sonntag and Denney serve as trustees of the ESOP trust.
Under the ESOP, the trustees must vote all allocated shares held in the ESOP in
accordance with the instructions of the ESOP Participants, and allocated shares
for which employees do not give instructions will be voted in the same ratio on
any matter as to those shares for which instructions are given. Unallocated
shares held in the ESOP are voted by the ESOP trustees in the same proportion as
participants and beneficiaries actually vote their allocated shares. To date,
5,510 shares have been allocated to participants, including 1,378 shares to Mr.
Siemers.
The Company may, in any plan year, make additional discretionary
contributions for the benefit of ESOP Participants in either cash or shares of
Common Stock, which may be acquired through the purchase of outstanding shares
in the market or from individual stockholders, upon the original issuance of
additional shares by the Company or upon the sale of treasury shares by the
Company. Such purchases, if made, would be funded through additional borrowings
by the ESOP or additional contributions from the Company. The timing, amount and
manner of future contributions to the ESOP will be affected by various
<PAGE>
21
factors, including prevailing regulatory policies, the requirements of
applicable laws and regulations and market conditions. Nevertheless, the Company
does not anticipate that the ESOP will purchase additional shares of Common
Stock for at least one year following completion of the Conversion and
Reorganization.
The ESOP is subject to the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and the regulations of the
IRS and the Department of Labor thereunder.
<PAGE>
22
SELECTED FINANCIAL AND OTHER DATA OF THE ASSOCIATION
(Unaudited)
(Dollars in Thousands)
The following selected financial and other data of the Association does
not purport to be complete and is qualified in its entirety by reference to the
more detailed financial information contained elsewhere herein.
<TABLE>
<CAPTION>
June 30,
--------------------------------------------------------------------------------
1996 1995 1994 1993 1992
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Selected Financial
Condition and Other Data:
Total assets $63,521 $61,661 $60,239 $56,756 $51,481
Cash and cash equivalents(1) 603 182 111 708 263
Certificates of deposit in other financial
institutions 1,626 2,306 2,843 2,837 4,047
Investment securities 3,317 5,608 5,778 2,010 4,362
Investment securities available for sale 6,415 400 -- -- --
Mortgage-backed securities, net -- 3,008 2,788 1,578 4,757
Mortgage-backed securities held for sale 1,496 -- 754 -- --
Loans receivable, net 46,604 46,751 44,884 46,620 35,732
Loans held for sale 182 489 445 140 262
Deposits 41,379 37,460 38,716 37,127 36,249
FHLB advances 14,517 16,821 14,362 14,821 10,792
Stockholders' equity(2) 6,815 6,687 6,504 4,452 3,835
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------------------------------------
1996 1995 1994 1993 1992
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Selected Operating Data:
Total interest income $4,708 $4,583 $4,577 $5,073 $4,280
Total interest expense 2,969 2,873 2,606 2,881 2,853
----- ----- ----- ----- -----
Net interest income 1,739 1,710 1,971 2,192 1,427
Provision for losses on loans 12 8 12 130 97
----- ----- ----- ----- -----
Net interest income after provision
for losses on loans 1,727 1,702 1,959 2,062 1,330
Other income 200 126 227 93 320
General, administrative and other
expense 1,285 1,289 1,295 1,195 899
----- ----- ----- ----- -----
Earnings before income taxes 642 539 891 960 751
Federal income taxes 189 154 288 321 270
----- ----- ----- ----- -----
Net earnings $ 453 $ 385 $ 603 $ 639 $ 481
===== ===== ===== ===== =====
Earnings per share $ 1.02 $ .86 $N/A $N/A $N/A
===== ===== ===== === ===
Dividends declared per share $ 1.60 $ .98 $ .32 $N/A $N/A
===== ===== ===== === ===
</TABLE>
<TABLE>
<CAPTION>
At or For the Year Ended June 30,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Selected Operating Ratios (3):
Performance Ratios:
Return on average assets .73% .63% 1.03% 1.18% 1.04%
Return on average equity 6.59 5.82 11.01 15.42 13.23
Average equity to average assets 11.14 10.82 9.36 7.66 7.86
Equity to assets at end of period 10.73 10.84 10.80 7.84 7.45
Interest rate spread(4) 2.40 2.40 3.00 2.96 2.47
Net interest margin(4) 2.92 2.88 3.35 3.40 2.87
Average interest-earning assets to average
interest-bearing liabilities 110.37 109.95 107.95 109.98 107.03
Net interest income after provision for
losses on loans to total general,
administrative and other expense 134.40 132.04 151.27 172.55 147.94
General, administrative and other
expense to average total assets 2.08 2.10 2.21 2.21 1.94
Dividend payout ratio 81.16 60.28 N/A N/A N/A
Asset Quality Ratios:
Non-performing loans to total loans
at end of period(5) .05 .14 .32 .12 .07
Non-performing assets to total assets at
end of period(5) .04 .14 .24 .39 .32
Allowance for loan losses to total loans
at end of period .46 .44 .33 .35 .26
</TABLE>
(Footnotes on following page)
<PAGE>
23
- ----------------------
(1) Includes cash and due from banks as well as interest-bearing deposits in
other financial institutions.
(2) Comprised of only retained earnings for the years ended June 30, 1992
through June 30, 1993, inclusive.
(3) With the exception of end of period ratios, all ratios are based on
average daily balances during the periods.
(4) Interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average rate
on interest-bearing liabilities. Net interest margin represents net
interest income as a percentage of average interest-earning assets.
(5) Non-performing loans consist of non-accrual loans and accruing loans
that are contractually past due 90 days or more, and non-performing
assets consist of non-performing loans and real estate acquired through
foreclosure or by deed in lieu thereof.
<PAGE>
24
USE OF PROCEEDS
Net proceeds from the sale of the Conversion Stock are estimated to be
between $3.4 million and $4.7 million ($5.5 million assuming an increase in the
Offering Price Range by 15%). See "Pro Forma Data" as to the assumptions used to
arrive at such amounts.
The Company plans to contribute to the Association 50% of the net
proceeds from the Offerings and retain the remainder of the net proceeds. The
net proceeds will be initially used to invest primarily in short-term
interest-bearing deposits and marketable securities. The net proceeds retained
by the Company also may be used to support the future expansion of operations or
diversification into other banking-related businesses and for other business or
investment purposes, including the acquisition of other financial institutions
and/or branch offices, although there are no current plans, arrangements,
understandings or agreements regarding such expansion, diversification or
acquisitions. A portion of the net proceeds retained by the Company also may be
utilized in order to refinance the existing third party loan to the ESOP. In
addition, subject to applicable regulatory limitations, the net proceeds also
may be used to repurchase shares of Common Stock, although the Company currently
has no intention of effecting any such transactions following consummation of
the Conversion and Reorganization. The portion of the net proceeds contributed
to the Association will be used for general corporate purposes, including
investment in loans and mortgage-backed securities, and will be initially used
to invest primarily in short-term interest-bearing deposits and marketable
securities.
DIVIDEND POLICY
Upon completion of the Conversion and Reorganization, the Board of
Directors of the Company will have the authority to declare dividends on the
Common Stock, subject to statutory and regulatory requirements. Following
consummation of the Conversion and Reorganization, the Board of Directors of the
Company intends to pay cash dividends on the Common Stock at an initial
quarterly rate equal to $.07 per share, commencing with the first full quarter
following consummation of the Conversion and Reorganization. Declarations of
dividends by the Board of Directors will depend upon a number of factors,
including the amount of net proceeds from the Offerings retained by the Company,
investment opportunities available to the Company or the Association, capital
requirements, regulatory limitations, the Company's and the Association's
financial condition and results of operations, tax considerations, and general
economic conditions. Consequently, there can be no assurance that dividends will
in fact be paid on the Common Stock or that, if paid,
<PAGE>
25
such dividends will not be reduced or eliminated in future periods. The
Association intends to continue to pay regular quarterly dividends through
either the date of consummation of the Conversion and Reorganization (on a pro
rata basis) or the end of the fiscal quarter during which the consummation of
the Conversion and Reorganization occurs.
Dividends from the Company will depend, in part, upon receipt of
dividends from the Association, because the Company initially will have no
source of income other than dividends from the Association and earnings from the
investment of proceeds from the sale of Conversion Stock retained by the
Company. A regulation of the OTS imposes limitations on "capital distributions"
by savings institutions, including cash dividends, payments by a savings
institution to repurchase or otherwise acquire its stock, payments to
stockholders of another savings institution in a cash-out merger and other
distributions charged against capital. The regulation establishes a three-tiered
system, with the greatest flexibility being afforded to well-capitalized or Tier
1 savings institutions and the least flexibility being afforded to
under-capitalized or Tier 3 savings institutions. As of June 30, 1996, the
Association was a Tier 1 savings institution and is expected to continue to so
qualify immediately following the consummation of the Conversion and
Reorganization.
Any payment of dividends by the Association to the Company which would
be deemed to be a distribution from the Association's pre-1988 bad debt reserves
for federal income tax purposes would require a payment of taxes at the
then-current tax rate by the Association on the amount of earnings deemed to be
removed from the reserves for such distribution (at June 30, 1996, the
Association's stockholders' equity and bad debt reserves for federal income tax
purposes amounted to $6.8 million and $1.2 million, respectively, and as a
result for tax purposes (but not regulatory purposes) the Association could
declare approximately $5.6 million of dividends without having to pay taxes on
its bad debt reserves for federal income tax purposes). The Association has no
current intention of making any distribution that would create such a federal
tax liability either before or after the Conversion and Reorganization.
Unlike the Association, the Company is not subject to the aforementioned
regulatory restrictions on the payment of dividends to its stockholders,
although the source of such dividends will be, in part, dependent upon dividends
from the Association in addition to the net proceeds retained by the Company and
earnings thereon. The Company is subject, however, to the requirements of
Indiana law.
<PAGE>
26
MARKET FOR COMMON STOCK
The Company has never issued capital stock (other than 100 shares issued
to the Association, which will be cancelled upon consummation of the Conversion
and Reorganization), and to date an active and liquid trading market has not
developed for the 207,726 Public Association Shares outstanding prior to the
Offerings. Consequently, there is no established market for the Common Stock at
this time. The Company has applied to have its Common Stock quoted on the Nasdaq
SmallCap Market under the symbol "VIBA." The development of a liquid public
market depends on the existence of willing buyers and sellers, the presence of
which is not within the control of the Company, the Association or any market
maker. Accordingly, there can be no assurance that an active and liquid trading
market for the Common Stock will develop or that, if developed, it will
continue. Therefore, investors in the Common Stock could have difficulty
disposing of their shares and should not view the Common Stock as a short-term
investment. The absence of an active and liquid trading market for the Common
Stock could affect the price and liquidity of the Common Stock.
Quotation on the Nasdaq SmallCap Market is dependent upon, among other
things, the Company having at least two market makers for the Common Stock and a
minimum number of stockholders of record. Based upon the minimum of 373,065
shares of Conversion Stock being offered, the minimum of 272,935 Exchange Shares
to be issued, and the anticipated pro forma ownership of officers and directors,
the Company expects to satisfy the required minimum number of stockholders of
record. Although under no obligation to do so, KB&W has informed the Company
that it intends, upon the completion of the Conversion and Reorganization, to
make a market in the Common Stock by maintaining bid and ask quotations and
trading in the Common Stock so long as the volume of trading activity and
certain other market making considerations justify it doing so. While the
Company has attempted to obtain commitments from other broker-dealers to act as
market makers, and anticipates that prior to the completion of the Conversion
and Reorganization, it will be able to obtain the commitment from at least one
other broker-dealer to act as a market maker for the Common Stock, there can be
no assurance there will be two or more market makers for the Common Stock.
Making a market involves maintaining bid and ask quotations and being able, as
principal, to effect transactions in reasonable quantities at those quoted
prices, subject to various securities laws and other regulatory requirements.
Accordingly, there can be no assurance that an active and liquid trading market
for the Common Stock will develop or that, if developed, it will continue.
<PAGE>
27
CAPITALIZATION
The following table presents the historical consolidated capitalization
of the Association at June 30, 1996, and the pro forma consolidated
capitalization of the Company after giving effect to the Conversion and
Reorganization, based upon the sale of the number of shares shown below, the
issuance of Exchange Shares and the other assumptions set forth under "Pro Forma
Data."
<TABLE>
<CAPTION>
The Company - Pro Forma
Based Upon Sale at $10.00 Per Share
------------------------------------------------------------------------------
The
Association- 373,065 Shares 438,900 Shares 504,735 Shares 580,445 Shares(1)
Historical (Minimum of (Midpoint of (Maximum of (15% above
Capitalization Range) Range) Range) Maximum of Range)
--------------- --------------- --------------- -------------- ------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Deposits(2) $ 41,379 $ 41,379 $ 41,379 $ 41,379 $ 41,379
Borrowings(3) 14,630 14,630 14,630 14,630 14,630
-------- -------- -------- -------- --------
Total deposits and borrowings $ 56,009 $ 56,009 $ 56,009 $ 56,009 $ 56,009
======== ======== ======== ======== ========
Stockholders' equity:
Preferred Stock, $.10 par
value, 2,000,000 shares
authorized; none to
be issued $ -- $ -- $ -- $ -- $ --
Common Stock, $.10 par
value, 8,000,000 shares
authorized; shares issued or
to be issued as reflected(4) 46 65 76 87 101
Additional paid-in capital(5) 1,795 5,237 5,884 6,531 7,275
Retained earnings(5)(6) 5,157 5,157 5,157 5,157 5,157
Less:
Net unrealized loss on
securities available for sale(5) (31) (31) (31) (31) (31)
Unearned Common Stock
held by the Management
Recognition Plan (38) (38) (38) (38) (38)
Common Stock acquired by
the ESOP (114) (114) (114) (114) (114)
-------- ------- ------ ------- -------
Total stockholders' equity $ 6,815 $10,276 $10,934 $11,592 $12,349
======== ======= ======= ======= =======
</TABLE>
- -------------------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Offering Price Range of up to 15%
to reflect changes in market and financial conditions following the
commencement of the Offerings or pursuant to an over-allotment option
which the Company intends to grant Charles Webb & Company ("Webb"), the
underwriter in the Public Offering, if any.
<PAGE>
28
(2) Does not reflect withdrawals from deposit accounts for the purchase of
Conversion Stock in the Offerings. Such withdrawals would reduce pro
forma deposits by the amount of such withdrawals.
(3) Consists of FHLB advances and a third party loan to the Association's
Employee Stock Ownership Plan.
(4) Assumes (i) that the 207,726 Public Association Shares outstanding at June
30, 1996 are converted into 272,935, 321,100, 369,265 and 424,655 Exchange
Shares at the minimum, midpoint, maximum and 15% above the maximum of the
Offering Price Range, respectively, and (ii) that no fractional shares of
Exchange Shares will be issued by the Company. No effect has been given to
the issuance of additional shares of Common Stock pursuant to existing and
proposed stock benefit plans. See "Pro Forma Data," "Management of the
Company - Benefits" and "Management of the Association - Stock Benefit
Plans."
(5) The pro forma additional paid-in capital and retained earnings reflect a
restriction of the original retained earnings of the Association prior
to the MHC Reorganization. The pro forma additional paid-in capital
reflects the $80,000 to be acquired by the Association upon the merger
of the Mutual Holding Company (following its conversion to a federal
interim stock savings institution) with and into the Association.
(6) The retained earnings of the Association will be substantially restricted
after the Conversion and Reorganization by virtue of the liquidation
account to be established in connection with the Conversion and
Reorganization. See "The Conversion and Reorganization - Liquidation
Rights." In addition, certain distributions from the Association's retained
earnings may be treated as being from its pre-1988 accumulated bad debt
reserve for tax purposes, which would cause the Association to have
additional taxable income.
<PAGE>
29
REGULATORY CAPITAL
The following table presents the historical regulatory capital of the
Association at June 30, 1996, and the pro forma regulatory capital of the
Association after giving effect to the Conversion and Reorganization, based upon
the sale of the number of shares shown below, the issuance of Exchange Shares
and the other assumptions set forth under "Pro Forma Data."
<TABLE>
<CAPTION>
-------------------------
Actual Regulatory 373,065 Shares
Capital at (Minimum
June 30, 1996(1) of Range)
-------------------------- -------------------------
Percent Percent
Amount of Assets(2) Amount of Assets(2)
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Tangible capital:
Actual $6,846 10.8% $8,616 13.2%
Requirement 953 1.5 980 1.5
------ ----- ------ -----
Excess $5,893 9.3% $7,636 11.7%
====== ===== ====== =====
Core capital:
Actual $6,846 10.8% $8,616 13.2%
Requirement(3) 1,906 3.0 1,960 3.0
------ ----- ------ -----
Excess $4,940 7.8% $6,656 10.2%
====== ===== ====== =====
Risk-based capital(4)(5)
Actual $7,072 23.1% $8,842 28.5%
Requirement(3) 2,450 8.0 2,478 8.0
------ ----- ------ -----
Excess $4,622 15.1% $6,364 20.5%
====== ===== ====== =====
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Regulatory Capital Based Upon(1)
-------------------------------------------------------------------------------------------------
580,445 Shares
438,900 Shares 504,735 Shares (15% Above
(Midpoint (Maximum Maximum
of Range) of Range) of Range)(1)
--------------------------- --------------------------- ----------------------------
Percent Percent Percent
Amount of Assets(2) Amount of Assets(2) Amount of Assets(2)
------------- ----------- ------------- ----------- ----------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Tangible capital:
Actual $8,946 13.6% $9,275 14.1% $9,653 14.6%
Requirement 985 1.5 990 1.5 995 1.5
------ ---- ------ ---- ------ ----
Excess $7,961 12.1% $8,285 12.6% $8,658 13.1%
====== ==== ====== ==== ====== ====
Core capital:
Actual $8,946 13.6% $9,275 14.1% $9,653 14.6%
Requirement(3) 1,970 3.0 1,979 3.0 1,991 3.0
------ ---- ------ ---- ------ ----
Excess $6,976 10.6% $7,296 11.1% $7,662 11.6%
====== ==== ====== ==== ====== ====
Risk-based capital(4)(5)
Actual $9,172 29.5% $9,501 30.5% $9,879 31.7%
Requirement(3) 2,484 8.0 2,489 8.0 2,495 8.0
------ ---- ------ ---- ------ ----
Excess $6,688 21.5% $7,012 22.5% $7,384 23.7%
====== ==== ====== ==== ====== ====
</TABLE>
- ----------------------
(1) The OTS recently revised its policy to exclude net unrealized gains or
losses on securities classified as available for sale from regulatory
capital when computing core and risk-based capital. The net unrealized
loss on securities classified as available for sale amounted to $31,000
as of June 30, 1996.
<PAGE>
30
(2) Tangible and core capital are computed as a percentage of adjusted total
assets of $63.5 million prior to the consummation of the Offerings and
$65.3 million, $65.7 million, $66.0 million and $66.4 million following
the issuance of 373,065, 438,900, 504,735 and 580,445 shares in the
Conversion and Reorganization, respectively. Risk-based capital is
computed as a percentage of total risk-weighted assets of $30.6 million
prior to the consummation of the Offerings and $31.0 million, $31.0
million, $31.1 million and $31.2 million following the issuance of
373,065, 438,900, 504,735 and 580,445 shares in the Conversion and
Reorganization, respectively.
(3) Does not reflect proposed amendments to regulatory capital requirements
or, in the case of the core capital requirement, the 4.0% requirement to
be met in order for an institution to be "adequately capitalized" under
applicable laws and regulations.
(4) The pro forma risked-based capital ratios (i) reflect the receipt by the
Association of the assets held by the Mutual Holding Company and of 50%
of the estimated net proceeds from the Offerings, and (ii) assume the
investment of the net proceeds received by the Association in assets
which have a risk-weight of 20% under applicable regulations, as if such
net proceeds had been received and so applied at June 30, 1996.
(5) Includes the $226,000 of general allowance for loan losses that was
included in risk-based capital as of June 30, 1996.
PRO FORMA DATA
The actual net proceeds from the sale of the Conversion Stock cannot be
determined until the Conversion and Reorganization is completed. However, net
proceeds are currently estimated to be between $3.4 million and $4.7 million (or
$5.5 million in the event the Offering Price Range is increased by 15%) based
upon the following assumptions: (i) all shares of Conversion Stock will be sold
in the Subscription and Community Offerings; and (ii) expenses, including the
marketing fees to be paid to Webb, will be approximately $350,000. Actual
expenses may vary from those estimated.
Pro forma net earnings and stockholders' equity have been calculated for
the year ended June 30, 1996 as if the Conversion Stock to be issued in the
Offerings had been sold (and the Exchange Shares issued) at the beginning of the
year and the net proceeds had been invested at 5.68%, which represents the yield
on one-year U.S. Government securities at June 30, 1996 (which, in light of
changes in interest rates in recent periods, is deemed to more accurately
reflect a pro forma reinvestment rate than the arithmetic average method). The
effect of withdrawals from deposit accounts for the purchase of Conversion Stock
has not been reflected. An effective federal tax rate of 35.0% has been assumed
for the year,
<PAGE>
31
resulting in an after-tax yield of 3.69% for the year ended June 30, 1996.
Historical and pro forma per share amounts have been calculated by dividing
historical and pro forma amounts by the indicated number of shares of Common
Stock. No effect has been given in the pro forma stockholders' equity
calculations for the assumed earnings on the net proceeds. As discussed under
"Use of Proceeds," the Company intends to retain 50% of the net proceeds from
the Offerings.
No effect has been given in the tables to the issuance of additional
shares of Common Stock pursuant to existing and proposed stock benefit plans.
See "Management of the Company - Benefits" and "Management of the Association -
Stock Benefit Plans." No effect has been given to (i) the Company's results of
operations after the Conversion and Reorganization, or (ii) the market price of
the Common Stock after the Conversion and Reorganization.
The following pro forma information may not be representative of the
financial effects of the foregoing transactions at the dates on which such
transactions actually occur and should not be taken as indicative of future
results of operations. Pro forma stockholders' equity represents the difference
between the stated amount of assets and liabilities of the Company computed in
accordance with generally accepted accounting principles ("GAAP"). The pro forma
stockholders' equity is not intended to represent the fair market value of the
Common Stock and may be different than amounts that would be available for
distribution to stockholders in the event of liquidation.
<PAGE>
32
The following table summarizes historical data of the Association and
pro forma data of the Company at or for the dates and periods indicated based on
assumptions set forth above and in the tables and should not be used as a basis
for projections of the market value of the Common Stock following the Conversion
and Reorganization.
<TABLE>
<CAPTION>
At or For the Year Ended June 30, 1996
------------------------------------------------------------------
373,065 438,900 504,735 580,445
Shares Sold Shares Sold Shares Sold Shares Sold
at $10.00 at $10.00 at $10.00 at $10.00 Per
Per Share Per Share Per Share Share (15%
(Minimum of (Midpoint (Maximum of above Maximum
Range) of Range) Range) of Range)(5)
--------------- --------------- --------------- ---------------
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds $ 3,731 $ 4,389 $ 5,047 $ 5,804
Less offering expenses and commissions 350 350 350 350
------- ------- ------- -------
Estimated net proceeds 3,381 4,039 4,697 5,454
Add assets consolidated from the
Mutual Holding Company 80 80 80 80
------- ------- ------- -------
Total estimated net proceeds, as adjusted $ 3,461 $ 4,119 $ 4,777 $ 5,534
======= ======= ======= =======
Net earnings:
Historical $ 453 $ 453 $ 453 $ 453
Pro forma earnings on net proceeds 128 152 176 204
------- ------- ------- -------
Pro forma net earnings(1) $ 581 $ 605 $ 629 $ 657
======= ======= ======= =======
Net earnings per share(2):
Historical $ .70 $ .60 $ .52 $ .45
Pro forma earnings on net proceeds .20 .20 .20 .20
------- ------- ------- -------
Pro forma net earnings per share(1) $ .90 $ .80 $ .72 $ .65
======= ======= ======= =======
Offering price to pro forma
annualized net earnings per share(2) 11.11x 12.50x 13.89x 15.38x
Stockholders' equity:
Historical(3) $ 6,895 $ 6,895 $ 6,895 $ 6,895
Estimated net proceeds 3,381 4,039 4,697 5,454
------- ------- ------- -------
Pro forma stockholders' equity(1)(4) $10,276 $10,934 $11,592 $12,349
======= ======= ======= =======
Stockholders' equity per share(2):
Historical(3) $ 10.67 $ 9.07 $ 7.89 $ 6.86
Estimated net proceeds 5.24 5.32 5.37 5.43
------- ------- ------- -------
Pro forma stockholders' equity
per share(1)(4) $ 15.91 $ 14.39 $ 13.26 $ 12.29
======= ======= ======= =======
Offering price as a percentage of pro
forma stockholders' equity per share(2) 62.85% 69.49% 75.41% 81.37%
======= ======= ======= =======
</TABLE>
(1) No effect has been given to the issuance of additional shares of Common
Stock pursuant to the 1997 Stock Option Plan or the purchase of additional
shares of Common Stock pursuant to the 1997 Recognition Plan, which plans
may be adopted by the Company following the Conversion and Reorganization
and presented for approval by stockholders at an annual or special meeting
of stockholders of the Company held at least one year following the
consummation of the Conversion and Reorganization. In addition, no effect
has been given to the purchase of additional shares of Common Stock by the
ESOP, which purchases, if made, would not be conducted earlier than one
year following consummation of the Conversion and Reorganization. The
issuance of Common Stock pursuant to the exercise of options
<PAGE>
33
under the 1997 Stock Option Plan will result in the dilution of existing
stockholders' interests. See "Management of the Company - Benefits -
1997 Stock Option Plan." Moreover, funds used by the 1997 Recognition
Plan to purchase the shares initially may be contributed to the 1997
Recognition Plan by the Company and the shares may be acquired either in
the open market or from the Company. The issuance of authorized but
unissued shares of Common Stock pursuant to the 1997 Recognition Plan
would result in the dilution of existing stockholders' interests. See
"Management of the Company - Benefits - 1997 Management Recognition Plan
and Trust." Finally, any additional shares of Common Stock purchased by
the ESOP could be acquired in the open market with funds provided by the
Company or from authorized but unissued shares of Common Stock. In the
event that additional shares of Common Stock are issued to the ESOP,
stockholders would experience dilution of their ownership interests. See
"Management of the Association - Stock Benefit Plans."
(2) The per share calculations are determined by adding the number of shares
assumed to be issued in the Conversion and Reorganization.
(3) Includes the $80,000 to be acquired by the Association upon the merger
of the Mutual Holding Company (following its conversion to a federal
interim stock savings institution) with and into the Association.
(4) The retained earnings of the Association will be substantially restricted
after the Conversion by virtue of the liquidation account to be established
in connection with the Conversion and Reorganization. See "Dividend Policy"
and "The Conversion and Reorganization - Liquidation Rights." In addition,
certain distributions from the Association's retained earnings may be
treated as being from its pre-1988 accumulated bad debt reserve for tax
purposes, which would cause the Association to have additional taxable
income.
(5) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Offering Price Range of up to 15%
to reflect changes in market and financial conditions following the
commencement of the Offerings or pursuant to an over-allotment option
which the Company intends to grant Webb in the Public Offering, if any.
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
General
The Company is authorized to issue 8,000,000 shares of Common Stock and
2,000,000 shares of Preferred Stock. The Company currently expects to issue up
to a maximum of 874,000 shares of Common Stock, including 504,735 shares of
Conversion Stock and 369,265 shares of Exchange Shares, and no shares of
Preferred Stock in the Conversion and
<PAGE>
34
Reorganization. Each share of Common Stock will have the same relative rights
as, and will be identical in all respects with, each other share of Common
Stock. Upon payment of the Purchase Price for the Conversion Stock and the
issuance of the Exchange Shares in accordance with the Plan of Conversion, all
such stock will be duly authorized, fully paid and nonassessable.
The Common Stock will represent nonwithdrawable capital, will not be an
account of an insurable type and will not be insured by the FDIC or any other
governmental authority.
Common Stock
Dividends. The Company can pay dividends if, as and when declared by its
Board of Directors, subject to compliance with limitations which are imposed by
law. See "Dividend Policy." The holders of Common Stock will be entitled to
receive and share equally in such dividends as may be declared by the Board of
Directors of the Company out of funds legally available therefor. If the Company
issues Preferred Stock, the holders thereof may have a priority over the holders
of the Common Stock with respect to dividends.
Voting Rights. Upon completion of the Conversion and Reorganization, the
holders of Common Stock of the Company will possess exclusive voting rights in
the Company. They will elect the Company's Board of Directors and act on such
other matters as are required to be presented to them under Indiana law or the
Company's Articles of Incorporation or as are otherwise presented to them by the
Board of Directors. Except in limited cases, each holder of Common Stock will be
entitled to one vote per share and will not have any right to cumulate votes in
the election of directors. If the Company issues Preferred Stock, holders of the
Preferred Stock may have the right to vote with the holders of Common Stock as a
single class or have voting rights as a separate class.
Liquidation. In the event of any liquidation, dissolution or winding up
of the Company, the holders of the then-outstanding Common Stock would be
entitled to receive, after payment or provision for payment of all its debts and
liabilities, all of the assets of the Company available for distribution. If
Preferred Stock is issued, the holders thereof may have a priority over the
holders of the Common Stock in the event of liquidation or dissolution.
Preemptive Rights. Holders of the Common Stock will not be entitled to
preemptive rights with respect to any shares which may be issued in the future.
The Common Stock is not subject to redemption.
Preferred Stock
None of the shares of the Company's authorized Preferred Stock will be
issued in the Conversion and Reorganization. Such stock may be issued with such
preferences and
<PAGE>
35
designations as the Board of Directors may from time to time determine. The
Board of Directors can, without stockholder approval, issue Preferred Stock with
voting, dividend, liquidation and conversion rights which could dilute the
voting strength of the holders of the Common Stock and may assist management in
impeding an unfriendly takeover or attempted change in control.
REVIEW OF OTS ACTION
Any person aggrieved by a final action of the OTS which approves, with
or without conditions, or disapproves a plan of conversion may obtain review of
such action by filing in the court of appeals of the United States for the
circuit in which the principal office or residence of such person is located, or
in the United States Court of Appeals for the District of Columbia, a written
petition praying that the final action of the OTS be modified, terminated or set
aside. Such petition must be filed within 30 days after the publication of
notice of such final action in the Federal Register, or 30 days after the
mailing by the applicant of the notice to members as provided for in 12 C.F.R.
ss.563b.6(c), whichever is later. The further procedure for review is as
follows: A copy of the petition is forthwith transmitted to the OTS by the clerk
of the court and thereupon the OTS files in the court the record in proceeding,
as provided in Section 2112 of Title 28 of the United States Code. Upon the
filing of the petition, the court has jurisdiction, which upon the filing of the
record is exclusive, to affirm, modify, terminate, or set aside in whole or in
part, the final action of the OTS. Review of such proceedings is as provided in
Chapter 7 of Title 5 of the United States Code. The judgment and decree of the
court is final, except that they are subject to review by the Supreme Court upon
certiorari as provided in Section 1254 of Title 28 of the United States Code.
REGISTRATION REQUIREMENTS
The Company will register the Common Stock under the Securities Exchange
Act of 1934, as amended ("Exchange Act"), in connection with the Conversion and
Reorganization and has agreed not to deregister such shares for a period of
three years following the Conversion and Reorganization. Upon such registration,
the proxy rules, tender offer rules, insider reporting requirements and trading
restrictions, annual and periodic reporting and other requirements of the
Exchange Act will be applicable. In addition, upon registration, the Company
will furnish its stockholders with annual reports containing audited financial
statements as promptly as practicable after the end of each fiscal year.
<PAGE>
36
EXPERTS
The Financial Statements of the Association as of June 30, 1996 and
1995, and for each of the years in the three-year period ended June 30, 1996,
have been included herein in reliance upon the report of Grant Thornton LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
The legality of the Common Stock and the federal income tax consequences
of the Conversion and Reorganization will be passed upon for the Company and the
Association by Elias, Matz, Tiernan & Herrick L.L.P., Washington, D.C., special
counsel to the Company and the Association. The Indiana income tax consequences
of the Conversion and Reorganization will be passed upon for the Company and the
Association by Schwartz, Manes & Ruby, Cincinnati, Ohio. Certain legal matters
will be passed upon for Webb by Vorys, Sater, Seymour and Pease, Cincinnati,
Ohio.
HOW TO OBTAIN ADDITIONAL INFORMATION
You may obtain a copy of the Plan of Conversion, including the Articles
of Incorporation and Bylaws the Company, from any office of the Association or
in writing from the Mutual Holding Company. Any such requests should be directed
to Dearborn Mutual Holding Company, 118 Walnut Street, Lawrenceburg, Indiana
47025-1838, Attention: Secretary. So that you have sufficient time to receive
and review the requested materials, it is recommended that any such requests be
sent so that they are received by the Mutual Holding Company by _______ __,
1996.
AVAILABLE INFORMATION
The Mutual Holding Company has filed with the OTS an Application for
Conversion pursuant to which it will reorganize in accordance with the terms of
the Plan. This Proxy Statement and the Prospectus omit certain information
contained in such Application. The Application may be inspected at the offices
of the OTS, 1700 G Street, N.W., Washington, D.C. 20552, and at the Central
Regional Office of the OTS located at 200 West Madison Street, Suite 1300,
Chicago, Illinois 60606.
The Company has filed with the Securities and Exchange Commission
("SEC") a Registration Statement on Form S-1 (File No. 333-_____) ("Registration
Statement") under
<PAGE>
37
the Securities Act of 1933, as amended, with respect to the Conversion Stock and
Exchange Shares being offered in the Offerings. This Proxy Statement and the
Prospectus do not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the SEC. Such information may be inspected at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and copies may be obtained at prescribed rates from the
Public Reference Section of the SEC at the same address.
--------------
PLEASE REMEMBER TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO THAT YOUR IMPORTANT VOTE WILL BE
COUNTED AT THE SPECIAL MEETING.
--------------
THIS PROXY STATEMENT IS NEITHER AN OFFER TO SELL NOR THE SOLICITATION
OF ANY OFFER TO BUY STOCK. THE OFFER IS MADE ONLY BY THE PROSPECTUS.
<PAGE>
DEARBORN MUTUAL HOLDING COMPANY REVOCABLY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DEARBORN
MUTUAL HOLDING COMPANY (THE "MUTUAL HOLDING COMPANY") FOR USE ONLY AT A SPECIAL
MEETING OF MEMBERS TO BE HELD ON NOVEMBER__, 1996 AND ANY ADJOURNMENT THEREOF.
The undersigned, being a member of the Mutual Holding Company as of
October __, 1996, hereby authorizes the Board of Directors of the Mutual Holding
Company, or any of their successors, as proxies, with full powers of
substitution, to represent the undersgined at the Special Meeting of Members
of the Mutual Holding Company to be held at the loan origination center of
Dearborn Savings Association, F.A. (the "Association"), which is located at
141 Ridge Avenue, Lawrenceburg, Indiana, on November __, 1996, at __:00 _.m.,
Eastern Time, and at any adjournment of said meeting, and thereat to act with
respect to all votes that the undersigned would be entitled to cast, if then
personally present, as follows:
(1) To approve and adopt the Plan of Conversion and Agreement and Plan of
Reorganization (the "Plan of Conversion"), pursuant to which (i) the Mutual
Holding Company, which currently owns approximately 54.6% of the outstanding
shares of common stock of the Association will convert from mutual form to a
federal interim stock savings institution and simultaneously merge with and into
the Association, with the Association being the surviving entity; (ii) an
interim institution ("Interim") to be formed as a wholly-owned subsidiary of
Vision Bancorp, Inc., and Indiana corporation recently formed as a wholly-owned
subsidiary of the Association (the "Company"), will merge with and into the
Association, with the Association being the surviving entity and becoming a
wholly-owned subsidiary of the Company operating under the name "Dearborn Bank;"
(iii) the outstanding shares of Association common stock (other than those held
by the Mutual Holding Company, which will be cancelled) will be converted into
shares of common stock of the Company pursuant to a ratio that will result in
the holders of such shares owning in the aggregate approximately 42.25% of the
Company, before giving effect to such shareholders purchasing additional shares
in a concurrent stock offering by the Company, receiving cash in lieu of
fractional shares or exercising dissenters rights; and (iv) the offer and sale
of shares of the Company's common stock.
/ / FOR / / AGAINST / / ABSTAIN
In their discretion, the proxies are authorized to vote with respect to
approval of the minutes of the last meeting of members, matters incident to the
conduct of the meeting, and upon such other matters as may properly come before
the meeting.
(Continued and to be signed on other side)
<PAGE>
This proxy, if executed, will be voted FOR adoption of the Plan of
Conversion if no choice is made herein. This proxy may be revoked at any time
before it is exercised.
The undersigned hereby acknowledges receipt of a Notice of Special Meeting
of the Members of Dearborn Mutual Holding Company called for November__, 1996
and a Proxy Statement for the Special Meeting prior to the signing of this
Proxy.
Date:___________________________________1996
_____________________________________
Signature
_____________________________________
Signature
Note: Please sign exactly as your name(s)
appear(s) on this Proxy. Only one
signature is required in the case of a joint
account. When signing in a representative
capacity, please give title.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE ENCLOSED
ENVELOPE.
EXHIBIT 99.3
----------------------------------------------
CONVERSION APPRAISAL REPORT
VISION BANCORP, INC.
PROPOSED HOLDING COMPANY FOR
DEARBORN BANK
(currently Dearborn Savings Association, F.A.)
Lawrenceburg, Indiana
Dated As Of:
September 6, 1996
----------------------------------------------
Prepared By:
RP Financial, LC.
1700 North Moore Street
Suite 2210
Arlington, Virginia 22209
<PAGE>
[Letterhead of RP Financial, LC.]
September 6, 1996
Board of Directors
Dearborn Mutual Holding Company
Dearborn Savings Association, F.A.
118 Walnut Street
Lawrenceburg, Indiana 47025
Gentlemen:
At your request, we have completed and hereby provide an independent
appraisal of the estimated pro forma market value of the common stock which is
to be issued by Vision Bancorp, Inc., Lawrenceburg, Indiana ("Vision Bancorp" or
the "Holding Company"), in connection with the mutual-to-stock conversion of
Dearborn Mutual Holding Company (the "Mutual Holding Company" or the "MHC"). The
Mutual Holding Company currently has a majority ownership interest in, and its
principal asset consists of, the common stock of Dearborn Savings Association,
F.A., Lawrenceburg, Indiana to be known as Dearborn Bank following the
mutual-to-stock conversion. It is our understanding that the Holding Company
will offer its stock in Subscription and Community Offerings to the
Association's Eligible Account Holders, to Supplemental Eligible Account Holders
of the Association, to Other Members of the Association, to directors, officers
and employees of the Mutual Holding Company and the Association, to Public
Stockholders, and to certain members of the general public (the "Subscription
and Community Offerings").
This Appraisal is furnished pursuant to the conversion regulations
promulgated by the Office of Thrift Supervision ("OTS"). This Appraisal has been
prepared in accordance with the written valuation guidelines promulgated by the
OTS, most recently updated as of October 21, 1994. Specifically, this Appraisal
has been prepared in accordance with the "Guidelines for Appraisal Reports for
the Valuation of Savings and Loan Associations Converting from Mutual to Stock
Form of Organization" of the OTS, as successor to the Federal Home Loan Bank
Board ("FHLBB"), dated as of October 21, 1994; and applicable regulatory
interpretations thereof.
Description of Reorganization
On August 8, 1996, the Board of Directors of the Association and the Mutual
Holding Company adopted the Plan of Conversion and Agreement and Plan of
Reorganization (the "Plan"), which was amended on August 22, 1996. Pursuant to
the Plan, (1) the MHC will convert to an interim federal stock savings
institution and simultaneously merge with and into the Association pursuant to
which the MHC will cease to exist and the 250,000 shares or 54.6 percent of the
Association common stock held by the MHC will be cancelled, and (2) an interim
savings association ("Interim") to be formed as a wholly owned subsidiary of the
Holding Company solely for such purpose will then merge with and into the
Association. As a result of the merger of Interim with and into the Association,
the Association will become a wholly owned subsidiary of the Holding Company and
the outstanding shares of the Association's common stock, other than the shares
held by the MHC, ("Public Shares") will be converted into shares of common stock
of Vision Bancorp (the "Exchange Shares") pursuant to a ratio (the "Exchange
Ratio) that will result in the holders of Public Shares owning in the aggregate
approximately the same percentage of the common stock to be outstanding upon
completion of the
<PAGE>
RP Financial, LC.
Board of Directors
September 6, 1996
Page 2
Conversion and Reorganization as the percentage of the Association's common
stock owned by them in the aggregate immediately prior to consummation of the
Conversion and Reorganization, adjusted downward pursuant to OTS policy in order
to reflect the $403,000 of special dividends declared by the Association and
waived by the MHC. As of June 30, 1996, Public Shares of the Association
amounted to 207,726 shares, or 45.4 percent of the Association's outstanding
common stock.
RP Financial, LC.
RP Financial, LC. ("RP Financial") is a financial consulting firm that
specializes in financial valuations and analyses of business enterprises and
securities. The background and experience of RP Financial are detailed in
Exhibit V-1. We believe that, except for the fee we will receive for our
appraisal of the shares to be issued by the Holding Company and assisting the
Association in the preparation of its business plan, we are independent of the
Association, the Mutual Holding Company, the Holding Company and other parties
engaged by the Association to assist in the stock issuance process.
Valuation Methodology
In preparing our appraisal, we have reviewed the Mutual Holding Company's
Application for Approval of Conversion, including the Proxy Statement, as filed
with the OTS and the Holding Company's Form S-1 registration statement as filed
with the Securities and Exchange Commission ("SEC"). We have conducted an
analysis of the Association and the Mutual Holding Company (hereinafter,
collectively referred to as the "Association"), that has included due diligence
related discussions with the Association's management. All conclusions and
assumptions set forth in the appraisal were reached independently from such
discussions. In addition, where appropriate, we have considered information
based on other available published sources that we believe are reliable. While
we believe the information and data gathered from all these sources are reliable
we cannot guarantee the accuracy and completeness of such information.
We have investigated the competitive environment within which the
Association operates, and have assessed the Association's relative strengths and
weaknesses. We have kept abreast of the changing regulatory and legislative
environment and analyzed the potential impact on the Association and the
industry as a whole. We have analyzed the potential effects of the stock
offering on the Association's operating characteristics and financial
performance as they relate to the pro forma market value of the Association. We
have reviewed the economy in the Association's primary market area and have
compared the Association's financial performance and condition with selected
publicly-traded thrift institutions in the Midwest region of the U.S. We have
reviewed conditions in the securities markets in general and for thrift stocks
in particular, including the market for existing thrift issues and the market
for initial public offerings by thrifts.
Our appraisal is based on the Association's representation that the
information contained in the regulatory applications and additional information
furnished to us by the Association and its independent auditors are truthful,
accurate and complete. We did not independently verify the financial statements
and other information provided by the Association and its independent auditors,
nor did we independently value the individual assets or liabilities of the
Association. The valuation considers the Association only as a going concern and
should not be considered as an indication of the liquidation value of the
Association.
Our appraised value is predicated on a continuation of the current
operating environment for the Association and for all thrifts. Changes in the
local and national economy, the legislative and regulatory
<PAGE>
RP Financial, LC.
Board of Directors
September 6, 1996
Page 3
environment, the stock market, interest rates, and other external forces (such
as natural disasters) may occur from time to time, often with great
unpredictability and may materially impact the value of thrift stocks as a whole
or the Association's value alone. To the extent that such factors can be
foreseen, they have been factored into our analysis.
Pro forma market value is defined as the price at which the Holding
Company's shares would change hands between a willing buyer and a willing
seller, neither being under any compulsion to buy or sell and both having
reasonable knowledge of relevant facts.
Valuation Conclusion
It is our opinion that, as of September 6, 1996, the aggregate pro forma
market value of the Association and the Mutual Holding Company was $7,600,000 at
the midpoint. Based on this valuation and the approximate 57.25 percent
ownership interest being sold to the public, the midpoint of the Holding
Company's stock offering was $4,389,000, equal to 438,900 shares offered at a
per share value of $10.00. Pursuant to OTS conversion guidelines, the 15 percent
offering range includes a minimum of $3,730,650 and a maximum of $5,047,350.
Based on the $10.00 per share offering price, this range equates to an offering
of 373,065 shares at the minimum to 504,735 shares at the maximum. In the event
that the appraised value is subject to an increase, up to 580,445 shares may be
sold at an issue price of $10.00 per share, for an aggregate offering size of
$5,804,450, without a resolicitation.
Establishment of Exchange Ratio
OTS regulations provide that in a conversion of a mutual holding company,
the minority stockholders are entitled to exchange their shares of the
Association's common stock for common stock of the Holding Company. The proposed
Exchange Ratio has been designed to preserve the current aggregate percentage
ownership in the Association represented by the Public Shares, after taking into
account the special dividends which were waived by the Mutual Holding Company.
Pursuant to the formula, the Exchange Ratio will be determined at the end of the
Holding Company's stock offering based on the total number of shares sold in the
Subscription and Community Offerings. Based upon this formula, and the valuation
conclusion and offering range concluded above, the Exchange Ratio would be
1.3139 shares, 1.5458 shares, 1.7777 shares and 2.0443 shares of Vision Bancorp
stock issued for each Public Share, at the minimum, midpoint, maximum and super
range of the offering, respectively.
Limiting Factors and Considerations
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of the
common stock. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject to
change from time to time, no assurance can be given that persons who purchase
shares of common stock in the initial offering will thereafter be able to sell
such shares at prices related to the foregoing valuation of the pro forma market
value. The appraisal does not take into account any trading activity with
respect to the purchase and sale of common stock in the secondary market, and
reflects only a valuation range as of this date for the pro forma market value
of the Association immediately upon issuance of the stock.
<PAGE>
RP Financial, LC.
Board of Directors
September 6, 1996
Page 4
RP Financial's valuation was determined based on the financial condition,
operations and shares outstanding as of June 30, 1996, the date of the financial
data included in the Holding Company's Prospectus. The proposed Exchange Ratio
and the exchange of Public Shares for newly issued Holding Company shares was
determined independently. RP Financial expresses no opinion on the proposed
Exchange Ratio and the exchange of Public Shares for newly issued Holding
Company shares.
RP Financial is not a seller of securities within the meaning of any
federal and state securities laws and any report prepared by RP Financial shall
not be used as an offer or solicitation with respect to the purchase or sale of
any securities. RP Financial maintains a policy which prohibits the company, its
principals or employees from purchasing stock of its client institutions.
The valuation will be updated should market conditions or changes in
Dearborn Savings' operating results warrant. The valuation will also be updated
at the completion of the Holding Company's stock offering. These updates will
consider, among other things, any developments or changes in the Association's
financial performance and condition, management policies, and current conditions
in the equity markets for thrift shares, both existing issues and new issues.
Also, these updates will consider changes in other external factors which impact
value including, but not limited to: various changes in the legislative and
regulatory environment (including changes in the appraisal guidelines), the
stock market and the market for thrift stocks, and interest rates. Should any
such new developments or changes be material, in our opinion, to the valuation
of the shares, appropriate adjustments to the estimated pro forma market value
will be made. The reasons for any such adjustments will be explained in the
update at the date of the release of the update.
Respectfully submitted,
RP FINANCIAL, LC.
/s/ William E. Pommerening
William E. Pommerening
Chief Executive Officer
/s/ Gregory E. Dunn
Gregory E. Dunn
Senior Vice President
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
DEARBORN SAVINGS ASSOCIATION, F.A.
Lawrenceburg, Indiana
PAGE
DESCRIPTION NUMBER
----------- ------
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
Plan of Conversion and Holding Company Reorganization 1.1
Strategic Discussion 1.2
Balance Sheet Trends 1.4
Income and Expense Trends 1.7
Interest Rate Risk Management 1.11
Lending Activities and Strategy 1.12
Asset Quality 1.15
Funding Composition and Strategy 1.16
Legal Proceedings 1.17
CHAPTER TWO MARKET AREA
Introduction 2.1
Market Area Demographics 2.1
National Economic Factors 2.3
Local Economy 2.5
Competition 2.6
CHAPTER THREE PEER GROUP ANALYSIS
Selection of Peer Group 3.1
Financial Condition 3.5
Income and Expense Components 3.7
Loan Composition 3.10
Interest Rate Risk 3.12
Credit Risk 3.14
Summary 3.14
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
DEARBORN SAVINGS ASSOCIATION, F.A.
Lawrenceburg, Indiana
(continued)
PAGE
DESCRIPTION NUMBER
----------- ------
CHAPTER FOUR VALUATION ANALYSIS
Introduction 4.1
Appraisal Guidelines 4.1
RP Financial Approach to the Valuation 4.2
Valuation Analysis 4.3
1. Financial Condition 4.3
2. Profitability, Growth and Viability of Earnings 4.4
3. Asset Growth 4.6
4. Primary Market Area 4.6
5. Dividends 4.7
6. Liquidity of the Shares 4.8
7. Marketing of the Issue 4.9
A. The Public Market 4.9
B. The New Issue Market 4.14
C. The Acquisition Market 4.17
D. The Market for Dearborn Savings Stock 4.17
8. Management 4.18
9. Effect of Government Regulation and Regulatory Reform 4.18
Summary of Adjustments 4.18
Valuation Approaches 4.19
1. Price-to-Earnings ("P/E") 4.21
2. Price-to-Book ("P/B") 4.21
3. Price-to-Assets ("P/A") 4.22
Valuation Conclusion 4.22
Establishment of Exchange Ratio 4.25
<PAGE>
RP Financial, LC.
LIST OF TABLES
DEARBORN SAVINGS ASSOCIATION, F.A.
Lawrenceburg, Indiana
TABLE
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
1.1 Summary Balance Sheet Data 1.5
1.2 Historical Income Statements 1.8
2.1 Summary Demographic Data 2.2
2.2 Unemployment Rates 2.6
2.3 Deposit Summary 2.7
3.1 Peer Group of Publicly-Traded Thrifts 3.3
3.2 Balance Sheet Composition and Growth Rates 3.6
3.3 Income as a Percent of Average Assets and Yields,
Costs, Spreads 3.8
3.4 Loan Portfolio Composition Comparative Analysis 3.11
3.5 Interest Rate Risk Comparative Analysis 3.13
3.6 Peer Group Credit Risk Comparative Analysis 3.15
4.1 Market Area Unemployment Rates 4.7
4.2 Conversion Pricing Characteristics 4.15
4.3 Market Pricing Comparatives 4.16
4.4 Public Market Pricing 4.23
4.5 Calculation of Exchange Ratios 4.25
<PAGE>
RP Financial, LC.
Page 1.1
I. OVERVIEW AND FINANCIAL ANALYSIS
Dearborn Savings Association, F.A. ("Dearborn Savings" or the
"Association") is a federally chartered stock savings association headquartered
in Lawrenceburg, Indiana. In addition to its main office, the Association
maintains a loan production office in Greendale, Indiana, which is adjacent to
Lawrenceburg. Lawrenceburg is located approximately 25 miles west of Cincinnati
and is part of the Cincinnati MSA. The substantial portion of the Association's
depositors reside in close proximity to its main office. Currently, the
Association is a member of the FHLB system, with deposits insured up to the
regulatory maximums by the Savings Association Insurance Fund ("SAIF") of the
Federal Deposit Insurance Corporation ("FDIC"). At June 30, 1996, Dearborn
Savings had $63.5 million in total assets, $41.4 million in deposits and equity
of $6.8 million or 10.7 percent of total assets.
In September 1993, the Association completed a reorganization from a
federal mutual savings association to a federal stock savings association
through the formation of a federal mutual holding company. Pursuant to the
reorganization, Dearborn Savings transferred substantially all of its assets and
liabilities to a newly-formed stock association in exchange for 250,000 shares
of stock issued to Dearborn Mutual Holding Company (the "Mutual Holding Company"
or the "MHC"). Simultaneously, the Association sold 200,000 shares of stock to
the public in Subscription and Community Offerings. As of June 30, 1996 there
were 457,726 total shares of the Association common stock issued and
outstanding, of which 250,000 shares, or 54.62 percent, were owned by the Mutual
Holding Company and 207,726 shares, or 45.38 percent, were owned by the public.
Plan of Conversion and Holding Company Reorganization
On August 8, 1996, the Board of Directors of the Association and the Mutual
Holding Company adopted the Plan of Conversion and Agreement and Plan of
Reorganization (the "Plan"), which was amended on August 22, 1996. Pursuant to
the Plan, (1) the MHC will convert to an interim federal stock savings
institution and simultaneously merge with and into the Association pursuant to
which the MHC will cease to exist and the 250,000 shares or 54.6 percent of the
Association common stock held by the MHC will be cancelled, and (2) an interim
savings association ("Interim") to be formed as a wholly owned subsidiary of
Vision Bancorp, Inc. ("Vision Bancorp" or the "Holding Company") solely for such
purpose will then merge with and into the Association. As a result of the merger
of Interim with and into the Association, the Association will become a wholly
owned subsidiary of the Holding Company and the outstanding shares of the
Association's common stock, other than the shares held by the MHC, ("Public
Shares") will be converted into shares of common stock of Vision Bancorp (the
"Exchange Shares") pursuant to a ratio (the "Exchange Ratio) that will result in
the holders of Public Shares owning in the aggregate approximately the same
percentage of
<PAGE>
RP Financial, LC.
Page 1.2
the common stock to be outstanding upon completion of the Conversion and
Reorganization as the percentage of the Association's common stock owned by them
in the aggregate immediately prior to consummation of the Conversion and
Reorganization, adjusted downward pursuant to OTS policy in order to reflect the
$403,000 of special dividends declared by the Association and waived by the MHC.
As of June 30, 1996, Public Shares of the Association amounted to 207,726
shares, or 45.4 percent of the Association's outstanding common stock.
At this time, no other activities are contemplated for Vision Bancorp other
than the ownership of the Association, which will be known as Dearborn Bank
following the completion of the mutual-to-stock conversion, although in the
future Vision Bancorp may acquire or organize other operating subsidiaries.
Vision Bancorp plans to retain up to 50 percent of the net proceeds from the
sale of common stock and infuse the remaining proceeds into the Association.
Strategic Discussion
Dearborn Savings is a community-oriented thrift, with a primary strategic
objective of meeting the borrowing and savings needs of its local customer base.
The market area served by the Association has been experiencing fairly strong
population and household growth, which have been fostered by a diversified and
expanding economy. The attractive characteristics of the market area, as well as
the market area's proximity to Cincinnati, have cultivated significant
competition for the Association from all aspects of the financial services
industry. In this operating environment the Association has pursued a strategy
of steady growth, in which traditional thrift activities of 1-4 family permanent
mortgage lending funded by retail deposits have been emphasized.
Throughout its history, Dearborn Savings has pursued a traditional thrift
operating strategy and, thus, 1-4 family permanent mortgage loans and retail
deposits have consistently been the principal components of the Association's
assets and liabilities, respectively. Loan diversification by the Association
primarily consists of consumer loans, followed by construction and commercial
real estate loans. Going forward the Association plans to pursue a strategy of
greater lending diversification, primarily in the areas of consumer and
commercial real estate lending. Such growth is expected to be gradual and
limited to familiar markets, or, in the case of the Association's mobile home
lending activities, will be limited to the current lending relationship
maintained by the Association. Dearborn Savings' emphasis on originating 1-4
family permanent mortgage loans in local and familiar markets, as well as the
favorable real estate market conditions of the primary market area, have been
effective in limiting credit risk exposure as indicated by the Association's
favorable credit quality measures. Comparatively, the Association maintains a
greater degree of interest rate risk exposure, as Dearborn Savings maintains a
fairly notable repricing mismatch between interest-sensitive assets and
liabilities. The repricing
<PAGE>
RP Financial, LC.
Page 1.3
mismatch stems from the concentration of funding liabilities consisting of
short-term deposits and borrowings, while the concentration of interest-earning
assets consist of intermediate- and long-term loans and investments.
As a traditional thrift, Dearborn Savings' earnings base is largely
dependent upon net interest income and operating expense levels. Maintenance of
a liability sensitive balance sheet reflects the Association's philosophy that
earnings can be more fully maximized by incurring some interest rate risk, while
Dearborn Savings' strong capital position and resultant favorable
interest-earning assets to interest-bearing liabilities ("IEA/IBL") ratio will
sustain earnings at lower but profitable levels during periods of rising and
higher interest rates. Dearborn Savings' ability to take on a certain degree of
interest rate risk in the net margin is further enhanced by the limited risk
that earnings will be negatively impacted to any significant extent by credit
quality related losses. Interest rate risk associated with the net interest
margin is also somewhat negated by Dearborn Savings' control of operating
expenses, which is supported by the Association's limited diversification and
maintenance of only one full service branch. Overall, Dearborn Savings'
operating strategy has provided for a certain degree of fluctuation in the net
interest margin, with the net interest margin declining in recent years due
largely to higher funding costs.
Retail deposits have consistently served as the primary funding source for
the Association, although borrowings comprise a notable portion of Dearborn
Savings' funding composition as well. Dearborn Savings has utilized FHLB
advances to support control of funding costs, and to support management of
interest rate risk through utilizing intermediate-term FHLB advances on a
limited basis. The Association's deposits are concentrated in CDs, which along
with its use of borrowings, results in relatively high cost of funds maintained
by the Association. In recent years, a shift in deposit composition towards a
higher concentration of CDs and a resulting lower level of transaction and
savings accounts has further placed upward pressure on Dearborn Savings' funding
costs.
Dearborn Savings' operating strategy has resulted in steady asset growth,
an increasing capital position and healthy core earnings. Growth in capital has
been supported by the capital raised in the Association's minority stock
offering, which has been redeployed into interest-earning assets. Notably,
Dearborn Savings' operating strategy has been effective in preserving asset
quality, while providing for a certain degree of interest rate risk.
The Association's Board of Directors has elected to convert to the full
stock form of ownership to improve the competitive position of Dearborn Savings.
A full stock conversion will also provide existing public shareholders with
greater liquidity in their shares by more than doubling the number of shares
outstanding to the public, which is expected to facilitate a NASDAQ listing for
the stock (Dearborn Savings' stock is currently traded on the "pink sheets").
The additional capital realized from conversion proceeds will increase liquidity
to
<PAGE>
RP Financial, LC.
Page 1.4
support funding of future loan growth and other interest-earning assets, and
reduce interest rate risk by enhancing the Association's IEA/IBL ratio, which,
will in turn reduce the repricing mismatch between the Association's interest
sensitive assets and interest sensitive liabilities. The additional funds
realized from the stock offering will also serve as an alternative funding
source to deposits in meeting the Association's future funding needs, which may
facilitate a reduction in the Association's funding costs. Additionally,
Dearborn Savings' higher equity-to-assets ratio will also better position the
Association to take advantage of expansion opportunities as they arise. Such
expansion would most likely occur through acquiring branches or other financial
institutions in areas that would provide for further penetration in the markets
currently served by the Association or nearby surrounding markets. At this time,
the Association has no other specific plans for expansion other than internal
growth. The Association's projected internal use of proceeds are highlighted
below.
The proceeds from the conversion are expected to be deployed as follows:
o Holding Company. Up to 50 percent of the net conversion proceeds will
be retained by Vision Bancorp. Such funds will be invested initially
into short-term investments. Over time, the Holding Company funds may
be utilized for various corporate purposes, including payment of
dividends and possible repurchases of common stock consistent with OTS
limitations.
o Dearborn Savings. The remaining net proceeds of the conversion will be
infused into the Association in exchange for all of the Association's
newly issued stock. Proceeds infused into the Association will
initially be held in short-term investments. Over time, the proceeds
are expected to be redeployed into the Association's loan growth and
normal investment activities.
Balance Sheet Trends
Table 1.1 shows key balance sheet items at the close of the last five
fiscal years. Dearborn Savings' historical key operating ratios are presented in
Exhibit I-3. From June 30, 1992 through June 30, 1996, Dearborn Savings
exhibited annual asset growth of 5.4 percent. Most of the asset growth was
realized in loans and to a lesser extent cash and investments, resulting in an
increase in the concentration of loans comprising total assets. Asset growth has
been funded by a mixture of deposits, FHLB advances and capital.
The Association's traditional emphasis on 1-4 family lending is readily
apparent, with 1-4 family permanent mortgage loans accounting for more than 70
percent of the loan portfolio during the past three fiscal years. As of June 30,
1996, 1-4 family permanent mortgage loans comprised 71.4 percent of gross loans
outstanding. Consumer loans ($6.3 million or 12.7 percent of loans outstanding
at June 30, 1996) have accounted for the second largest concentration of the
Association's loan portfolio in recent years. Over the past three fiscal years,
consumer loan growth has served to slightly increase the proportion of consumer
loans
<PAGE>
RP Financial, LC.
Page 1.5
Table 1.1
Dearborn Savings Association, F.A.
Historical Balance Sheets(1)
(Amount and Percent of Assets)
<TABLE>
<CAPTION>
6/30/92-
At June 30, 6/30/96
-------------------------------------------------------------------------------------------- Annualized
1992 1993 1994 1995 1996 Growth Rate
---------------- ----------------- ---------------- ---------------- ---------------- -----------
Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct Pct
------ --- ------ --- ------ --- ------ --- ------ --- ---
($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Amount of:
Assets $51,481 100.00% $56,756 100.00% $60,239 100.00% $61,661 100.00% $63,521 100.00% 5.39%
Loans receivable (net) 35,994 69.92% 46,760 82.39% 45,329 75.25% 47,240 76.61% 46,786 73.65% 6.76%
Cash and Investments 8,672 16.85% 5,555 9.79% 8,732 14.50% 8,496 13.78% 11,961 18.83% 8.37%
Mortgage-backed
securities 4,757 9.24% 1,578 2.78% 3,542 5.88% 3,008 4.88% 1,496 2.36% -25.11%
Deposits 36,249 70.41% 37,127 65.42% 38,716 64.27% 37,460 60.75% 41,379 65.14% 3.36%
FHLB advances 10,792 20.96% 14,821 26.11% 14,362 23.84% 16,821 27.28% 14,517 22.85% 7.69%
Equity 3,835 7.45% 4,452 7.84% 6,504 10.80% 6,685 10.84% 6,815 10.73% 15.46%
</TABLE>
- ----------
(1) Ratios are as a percent of ending assets.
Sources: Dearborn Savings' prospectus and audited financial statements
<PAGE>
RP Financial, LC.
Page 1.6
comprising total loans outstanding. In comparison to the 12.7 percent ratio
exhibited at fiscal year end 1996, consumer loans comprised 8.6 percent of loans
outstanding at fiscal year end 1994. The balance of the Association's lending
diversification consists primarily of commercial real estate/multi-family loans
and construction loans, which accounted for 7.5 percent and 7.0 percent of gross
loans outstanding, respectively, at June 30, 1996. Over the past three fiscal
years, modest declines and increases have been exhibited in Association's
respective balances of commercial real estate/multi-family loans and
construction loans, although during fiscal year 1996 the Association recorded
positive growth in commercial real estate/multi-family loans and the Association
will be seeking to maintain that trend going forward. Commercial business loans
account for the remainder of the Association's loan portfolio ($665,000 or 1.4
percent of gross loans receivable at June 30, 1996) and have gradually declined
in balance. The downward trend in the commercial business loan portfolio is
expected to continue, as the Association is not active in the origination of
commercial business loans.
Dearborn Savings' cash and investments balance has fluctuated during the
past five fiscal years, ranging from a high of $12.0 million, or 18.8 percent of
assets, at fiscal year end 1996, to a low of $5.6 million, or 9.8 percent of
assets, at fiscal year end 1993. The relatively high balance of cash and
investments maintained at fiscal year end 1996 reflects the redeployment of cash
flow realized from shrinkage in the loan and mortgage-backed securities
portfolios into cash and investments, coupled with strong deposit growth which
was largely deployed in cash and investments. The investment portfolio is
substantially comprised of U.S. Government and federal agency securities ($8.8
million), with the balance of the portfolio consisting of municipal bonds
($917,000). Exhibit I-4 provides historical detail of the Association's
investment portfolio. The investment portfolio is fairly evenly distributed
between investments with maturities of less than five years and investments with
maturities of greater than five years, while the substantial proportion of the
investment portfolio has maturities of less than 10 years. As of June 30, 1996,
the investment portfolio consisted of $3.3 million of securities classified as
held to maturity and $6.5 million of securities as classified as available for
sale. Dearborn Savings maintained an unrealized loss of $51,000 on the available
for sale portfolio at June 30, 1996. In addition to investment securities, the
Association held cash and cash equivalents of $603,000, CDs of $1.6 million and
FHLB stock of $1.0 million, as of June 30, 1996. The FHLB stock balance is not
included in the cash and investments balance shown in Table 1.1.
Mortgage-backed securities comprise the balance of the Association's
interest-earning assets composition, serving as an investment alternative to 1-4
family permanent mortgage loans. The balance of mortgage-backed securities has
generally trended lower over the past five fiscal years, declining from $4.8
million at fiscal year end 1992 to $1.5 million at fiscal year end 1996. The
mortgage-backed securities portfolio consists of participation certificates,
which have been issued by FHLMC and GNMA. As of June 30,
<PAGE>
RP Financial, LC.
Page 1.7
1996, all of the Association's mortgage-backed securities were classified as
available for sale and a $4,000 unrealized gain was maintained on the portfolio.
Over the past five fiscal years, Dearborn Savings' funding needs have been
substantially met through retail deposits, borrowings, internal cash flows and
retained earnings. The Association's balance of deposits exhibited little change
from fiscal year end 1992 through fiscal year end 1995, which was followed by
relatively strong deposit growth recorded in fiscal 1996. Limited deposit growth
recorded during fiscal years 1992 through 1995 was largely attributable to the
Association's strategic decision to fund asset growth primarily with borrowings,
as funding growth with deposits would have required above market pricing of
deposits, in light of the relatively low market rates that were being paid for
deposits during that period, which tended to limit deposit growth at financial
institutions in general. Comparatively, as market rates being paid on deposits
became more attractive during fiscal 1996, the Association realized deposit
growth of 10.5 percent. Most of the deposit growth recorded in 1996 was realized
in CDs, as CD rates became more attractive following the general increase in
market interest rates. As CD rates have become attractive, Dearborn Savings'
deposit composition has exhibited a shift towards CDs. As of June 30, 1996,
transaction and savings accounts comprised 19.3 percent of Dearborn Savings'
total deposits, versus a comparative measure of 24.1 percent at June 30, 1994.
Dearborn Savings' use of FHLB advances peaked at $16.8 million at fiscal year
end 1995, with deposit growth during fiscal 1996 serving to fund the paydown of
borrowings to $14.5 million at fiscal year end 1996. FHLB advances held by the
Association consist of short- and intermediate-term borrowings, with the
concentration of the FHLB advances maturing or repricing within one year.
Positive earnings over the past four fiscal years, along with the sale of
minority stock in fiscal 1994, translated in an annual capital growth rate of
15.5 percent for the Association from fiscal year end 1992 through fiscal year
end 1996. Over the same time period, the Association's equity-to-assets ratio
increased from 7.5 percent to 10.7 percent. All of the Association's capital is
tangible capital, and Dearborn Savings maintained capital surpluses relative to
all of its capital requirements at June 30, 1996. The addition of conversion
proceeds will enhance the Association's regulatory capital surpluses and
strengthen Dearborn Savings' competitive posture within its market area, as well
as support expansion into other nearby markets if favorable growth opportunities
are presented.
Income and Expense Trends
Dearborn Savings has reported positive earnings over the past five fiscal
years, ranging from a low of 0.63 percent of average assets in fiscal 1995 to a
high of 1.18 percent of average assets in fiscal 1993 (see Table 1.2). For
fiscal 1996, the Association reported net income of $453,000, equal to 0.73
percent of average assets.
<PAGE>
RP Financial, LC.
Page 1.8
Table 1.2
Dearborn Savings Association, F.A.
Historical Income Statement(1)
(Amount and Percent of Assets)
<TABLE>
<CAPTION>
For the Fiscal Year Ended June 30,
---------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
---------------- ----------------- ---------------- ---------------- -----------------
Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income $ 4,280 9.25% $ 5,073 9.37% $ 4,577 7.82% $ 4,583 7.50% $ 4,708 7.59%
Interest expense (2,853) -6.17% (2,881) -5.32% (2,606) -4.45% (2,873) -4.70% (2,969) -4.76%
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Net Interest Income $ 1,427 3.09% $ 2,192 4.05% $ 1,971 3.37% $ 1,710 2.80% $ 1,739 2.80%
Provision for Loan
Losses (97) -0.21% (130) -0.24% (12) -0.02% (8) -0.01% (12) -0.02%
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Net Interest Income
after Provisions $ 1,330 2.88% $ 2,062 3.81% $ 1,959 3.35% $ 1,702 2.79% $ 1,727 2.78%
Other Income 50 0.11% 78 0.14% 101 0.17% 140 0.23% 141 0.23%
Operating expenses (899) -1.94% (1,195) -2.21% (1,295) -2.21% (1,289) -2.11% (1,285) -2.07%
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Net Operating Income $ 481 1.04% $ 945 1.75% $ 765 1.31% $ 553 0.90% $ 583 0.94%
Non-Operating Income
Gain (Loss) on Sales
of Int-Earn Assets,
Net 270 0.58% 15 0.03% 126 0.22% (14) -0.02% 59 0.10%
Real estate operations,
net 0 0.00% 0 0.00% 0 0.00% 0 0.00% 0 0.00%
Net Income Before Tax $ 751 1.62% $ 960 1.77% $ 891 1.52% $ 539 0.88% $ 642 1.03%
Income Taxes (270) -0.58% (321) -0.59% (288) -0.49% (154) -0.25% (189) -0.30%
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Net Income Before
Extraordinary Items $ 481 1.04% $ 639 1.18% $ 603 1.03% $ 385 0.63% $ 453 0.73%
Extraordinary Items(2) 0 0.00% 0 0.00% 0 0.00% 0 0.00% 0 0.00%
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Net Income (Loss) $ 481 1.04% $ 639 1.18% $ 603 1.03% $ 385 0.63% $ 453 0.73%
Estimated Core Earnings:
Net Income $ 481 1.04% $ 639 1.18% $ 603 1.03% $ 385 0.63% $ 453 0.73%
Adjustments for non-
operating income (270) -0.58% (15) -0.03% (126) -0.22% 14 0.02% (59) -0.10%
Tax Effect (34.0%) 95 0.20% 5 0.01% 44 0.08% (5) -0.01% 21 0.03%
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Estimated Core Net Income $ 306 0.65% $ 629 1.16% $ 521 0.89% $ 394 0.64% $ 415 0.67%
</TABLE>
- ----------
(1) Ratios are as a percent of average assets.
Sources: Dearborn Savings' prospectus and audited financial statements.
<PAGE>
RP Financial, LC.
Page 1.9
Consistent with the Association's traditional thrift operating mode, net
interest income and operating expenses have been the dominant factors in
Dearborn Savings' earnings. Non-interest operating income has been a limited
contributor to the Association's earnings, while gains and losses realized from
the sale of investments and loans have had a varied impact on Dearborn Savings'
earnings. Loan loss provisions established by the Association have been
relatively minor, in light of Dearborn Savings' favorable credit quality
measures.
Dearborn Savings' level of net interest income before provisions for loan
losses peaked at 4.05 percent of average assets in fiscal 1993 and has trended
lower to equal 2.80 percent of average assets during the past two fiscal years.
The peak net interest income to average assets ratio posted in fiscal 1993 was
supported by a number of factors, including the declining interest rate
environment, an improving capital position, including stock proceeds realized
from the minority stock offering, and a shift in the Association's deposit
composition towards lower costing savings and transaction accounts.
The impact of interest rates on Dearborn Savings' net interest margin is
further revealed through examination of the Association's historical net
interest rate spreads and yields and costs as set forth in Exhibits I-3 and I-5.
As indicated by the upward trend in Dearborn Savings' yield-cost spread from
fiscal 1992 through fiscal 1994, the declining interest rate environment served
as an earnings benefit to the Association's net interest margin. In particular,
maintenance of a negative short-term gap position provided for a more rapid
decline in the Association's cost of funds relative to the yield earned on
interest-earning assets. The widening of the yield-cost spread was further
supported by a shift in the Association's deposit composition towards lower
costing savings and transaction accounts, as the result of the relatively low
market rates being offered on CDs. Overall, the Association's yield-cost spread
increased from 2.47 percent in fiscal 1992 to 3.00 percent in fiscal 1994
Notwithstanding the slight increase recorded in the Association's yield -cost
spread during fiscal 1994 (3.00 percent versus 2.96 percent during fiscal 1993),
Dearborn Savings' net interest income to average assets ratio declined during
fiscal 1994. A decline in Dearborn Savings' IEA/IBL ratio was a factor in the
lower net interest income to average assets ratio posted by the Association
during fiscal 1994.
Comparatively, higher interest rates resulted in a narrowing of the
Association's yield-cost spread during the past two fiscal years, reflecting the
more immediate impact of interest rate movements on Dearborn Savings' cost of
funds and the shift in deposit composition towards CDs. From fiscal 1994 through
fiscal 1996 both the Association's yield on interest-earning assets and cost of
funds increased, with a much sharper increase being reflected in Dearborn
Savings' cost of funds. From fiscal 1994 to fiscal 1996, the Association's yield
on interest-earning assets increased from 7.78 percent to 7.90 percent, while,
over the same time period, Dearborn Savings' cost of funds increased from 4.78
percent to 5.50 percent. Overall, the Association's yield-cost spread narrowed
from 3.00 percent during fiscal 1994 to 2.40 percent during fiscal 1996.
Partially mitigating the decline in the Association's yield-cost spread has been
an upward trend in the Association's
<PAGE>
RP Financial, LC.
Page 1.10
IEA/IBL ratio over the past two fiscal years, which will be further enhanced by
the stock offering, due to the reinvestment of interest-free capital into
interest-earning assets and the higher IEA/IBL ratio that will result from the
Association's increased capital position.
Non-interest operating income has been a limited contributed to Dearborn
Savings' earnings over the past five fiscal years, ranging from a low of 0.11
percent of average assets in fiscal 1992 to a high of 0.23 percent of average
assets for fiscal years 1995 and 1996. Sources of non-interest operating income
consist primarily of various customer service charges and fees and miscellaneous
sources of non-interest operating income. The low level of non-interest
operating income is consistent with Dearborn Savings' traditional thrift
operating strategy, which relies on net interest income, limited operating
diversification, and low operating expenses to sustain profitability. The
Association's relatively low proportion of transaction deposit accounts has also
restrained fee income.
Operating expenses at Dearborn Savings have generally been contained at
relatively low levels and have trended lower as a percent of average assets
during the past two fiscal years. Dearborn Savings' operating expense to average
assets ratio equaled 2.07 percent during fiscal 1996, versus a comparative ratio
of 2.21 percent during fiscal 1994. The decline in the operating expense ratio
was realized through asset growth and a modest reduction in operating expenses.
Containment of the Association's operating expenses is supported by operating
efficiencies realized from pursuing a traditional thrift operating strategy,
which limits diversification into areas that generate additional operating
expenses. Control of operating expenses is further facilitated by the
Association's limited fixed asset costs, as the result of maintaining only one
full service branch office and a loan production office.
The recent trends in the Association's net interest income to average
assets ratio and operating expense to average assets ratio indicate that core
earnings have trended lower, as indicated by the decline in Dearborn Savings'
expense coverage ratio (net interest income to average assets ratio divided by
operating expense to average assets ratio). Dearborn Savings' expense coverage
ratio equaled 1.83 times during fiscal 1993, versus a comparative ratio of 1.35
times during fiscal 1996. Conversion proceeds should serve to enhance the
Association's expense coverage ratio, both with respect to strengthening the net
interest income to average assets ratio, as discussed previously, and through
increasing Dearborn Savings' capacity to leverage operating expenses through
pursuing more aggressive asset growth.
Gains and losses realized from the sale of investments and loans have
ranged from a high of positive 0.58 percent of average assets during fiscal 1992
to a low of negative 0.02 percent of average assets during fiscal 1995. The high
level of gains recorded during fiscal 1992 primarily resulted from the sale of
the Association's FHLMC stock. A healthy level of gains was also posted during
fiscal 1994, amounting to 0.22 percent of
<PAGE>
RP Financial, LC.
Page 1.11
average assets, with loan sales to the secondary market accounting for most of
the gains. Comparatively, the slight loss recorded on investments and loans
during fiscal 1995 was also largely attributable to loan sales. Gains recorded
during fiscal 1996 amounted to $59,000, or 0.10 percent of average assets,
consisting mostly of loan sale gains and to a lesser extent gains on the sale of
investments. The minor amount of gains and losses recorded by the Association
during the past two fiscal years are considered to be indicative of the impact
gains and losses will typically have on the Association's earnings, with such
gains and losses resulting from the sale of fixed rate loan originations to the
secondary market and the ongoing management of the investment portfolio.
Loan loss provisions established by the Association have generally not had
a significant impact on earnings, ranging from a low of 0.01 percent of average
assets during fiscal 1995 to a high of 0.24 percent of average assets during
fiscal 1993. Loss provisions of $12,000, or 0.02 percent of average assets, were
established during fiscal 1996. The relatively high loss provisions established
during fiscal 1993 was largely attributable to the strong growth loan growth
recorded during the year, as the loan balance increased from $36.0 million at
fiscal year end 1992 to $46.8 million at fiscal year end 1993. An increase in
non-performing assets also warranted the establishment of higher loss provisions
during fiscal 1993. In general, a low risk lending strategy and favorable credit
quality measures have served to contain the amount of loss provisions
established by the Association. As of June 30, 1996, the Association maintained
valuation allowances of $226,000, equal to 0.48 percent of net loans receivable
and 869.2 percent of non-performing assets. Exhibit I-6 sets forth the
Association's loan loss allowance activity since fiscal 1994.
Interest Rate Risk Management
Dearborn Savings' balance sheet is currently liability-sensitive, as
indicated by its one year cumulative gap to assets ratio of negative 22.8
percent (calculated internally). According to the most recent Net Portfolio
Value ("NPV") report provided by the OTS, the Association's NPV as of March 31,
1996 would exhibit a 29 percent decline in the event of a 200 basis point
instantaneous and sustained rise in interest rates (see Exhibit I-7). The
concentration of the Association's interest-bearing liabilities consist of
short-term deposits and borrowings, while Dearborn Savings' interest-earning
assets are diversified among various repricing periods. The Association's most
notable interest rate risk exposure is associated with its holdings of fixed
rate loans, which generally have maturities of more than 10 years. As of June
30, 1996, of the total loans due after one year from June 30, 1996, fixed rate
loans comprised 66.2 percent of those loans (see Exhibit I-8). Dearborn Savings
pursues management of interest rate risk from both the asset and liability sides
of the balance, with the intent of maintaining a certain degree of interest rate
risk that will provide for enhanced profitability during periods of low and
declining interest rates. Strategies implemented by the Association to support
control of interest rate risk on the asset side include selling longer term
fixed rate loan originations to the secondary market,
<PAGE>
RP Financial, LC.
Page 1.12
emphasizing the origination of adjustable rate loans, diversifying into more
interest sensitive types of lending, and investing in short- and
intermediate-term securities. On the liability side, management of interest rate
risk is pursued through promoting certain longer term CDs from time-to-time and
utilizing intermediate-term FHLB advances.
The short-term repricing mismatch between the Association's interest
sensitive assets and liabilities indicates that net interest income will be
somewhat inconsistent in various interest rate environments, with declining and
low interest rate environments being highly beneficial to Dearborn Savings' net
interest margin. Comparatively, the Association's net interest margin is
adversely impacted by rising and higher interest rates, as highlighted by the
narrowing of Dearborn Savings' yield-cost since fiscal 1994. As noted
previously, the Association's yield-cost spread narrowed from 3.00 percent
during fiscal 1994 to 2.40 percent during fiscal 1996. However, given the
Association's current IEA/IBL ratio of 109.5 percent, which will become stronger
following the infusion of conversion proceeds, Dearborn Savings has the capacity
to take on a certain degree of interest rate risk and sustain positive, although
lower, core earnings during periods of moderately rising interest rates.
Lending Activities and Strategy
The Association's lending activities have traditionally concentrated on the
origination and retention of 1-4 family permanent mortgage loans (see Exhibits
I-9 and I-10, which reflect loan composition and lending activity,
respectively). As of June 30, 1996, $35.3 million, or 71.4 percent, of Dearborn
Savings' total loan portfolio was comprised of loans secured by 1-4 family
permanent mortgage loans. Included in the balance of 1-4 family loans was
approximately $346,000 of land loans for single-family lots. The Association's
second largest category of loans was consumer loans, which totaled $6.3 million,
or 12.7 percent, of total loans outstanding at June 30, 1996. Consumer lending,
as well commercial real estate lending, are planned growth areas for the
Association, although such growth is expected to be gradual. Commercial real
estate/multi-family loans and construction loans accounted for most of the
Association's other lending diversification, comprising 7.5 percent and 7.0
percent of total loans outstanding, respectively, at June 30, 1996. The
Association also holds a minor amount of commercial business loans, although
commercial business lending is no longer an active lending area for Dearborn
Savings. Exhibit I-11 provides the contractual maturity of the Association's
loan portfolio, by loan type, as of June 30, 1996.
The Association originates both fixed rate and adjustable rate 1-4 family
loans. Currently, all adjustable rate loans and fixed rate loans with terms of
20 years or less are retained for portfolio. Fixed rate loans with terms of more
than 20 years are generally sold to FHLMC on a servicing retained basis. The
Association also maintains a relationship with a financial institution in which
loans are originated under the
<PAGE>
RP Financial, LC.
Page 1.13
terms offered by that financial institution, with all such originations being
sold to the financial institution on a servicing released basis. In general, all
of the Association's 1-4 family loan originations are underwritten to conform to
FHLMC requirements.
To enhance the attractiveness of 1-4 family ARM loans, the Association
offers two ARM loan products. In addition to the standard one year ARM loan,
Dearborn Savings offers convertible loans which convert to one year ARMs after a
period of fixed rate interest for up to 5 years. ARM loans are indexed to the
one year U.S. Treasury Bill rate, with a current repricing margin of 2.75
percent. One year ARM loans are subject to annual and lifetime repricing caps of
1.0 percent and 5.0 percent, respectively, while 5 year convertible ARM loans
are subject to a rate cap of 3.0 percent at the first adjustment and then 1.0
percent annually thereafter with a lifetime cap of 5.0 percent. In light of the
highly competitive market for 1-4 family loan originations, Dearborn Savings
offers ARM loans at a discounted initial rate and the borrower is qualified at
the initial rate. Fixed rate loans offered by the Association have amortization
terms ranging from 10 to 30 years, with most originations consisting of loans
with 15 or 30 year terms. The Association's fixed rate loan products also
include 5 and 7 year balloon loans. Most 1-4 family loans are originated with
loan-to-value ("LTV") ratios of 80.0 percent or less, while loans with LTV
ratios above 80.0 percent generally require private mortgage insurance ("PMI").
Construction lending conducted by the Association is generally limited to
the origination of loans to finance the construction of 1-4 family residences.
The Association's construction lending activities are generally for the
construction of pre-sold homes, which convert to permanent loans upon completion
of the construction. Construction loans require payment of interest only during
the construction period, which is typically six months. For construction loans,
the Association will lend up to an LTV ratio of 80.0 percent.
Construction/permanent loan rates are offered under the same terms as the
Association's 1-4 family permanent mortgage loans, except the interest rate on
the construction/permanent loan is slightly higher.
Land loans represent a very minor area of lending diversification for the
Association, serving as a complement to the Association's construction lending
activities. Substantially all of the Association's land loans are secured by
single-family lots. Terms of land loans offered by the Association generally
require an LTV ratio of 75.0 percent or less for developed lots and 65.0 percent
or less for undeveloped lots. Land loans are originated as one year ARM loans,
with amortization terms of up to 15 years.
Commercial real estate and multi-family loans originated by the Association
are collateralized by properties in its normal lending territory and consist
substantially of loans with balances of less than $1.0 million. In cases where
the loan balance exceeds $1.0 million, the Association's participating interest
in the loan is less than $1.0 million. Loan participations held by the
Association are also secured by properties
<PAGE>
RP Financial, LC.
Page 1.14
located in nearby and familiar markets such as Cincinnati. Commercial real
estate and multi-family loans are generally extended up to an LTV ratio of 75.0
or 80.0 percent, and are originated as ARM loans with up to 25 year
amortizations. The Association generally seeks to obtain a debt coverage ratio
of 1.2 times or higher on commercial real estate and multi-family loan
originations. Consistent with the higher credit risk associated with commercial
real estate and multi-family loans, loan rates offered on those loans are at a
premium to the Association's 1-4 family loan rates. Properties securing the
commercial real estate and multi-family loan portfolio include small apartment
buildings, small office buildings, a nursing home and other special purpose
properties. The largest commercial real estate or multi-family loan held by the
Association at June 30, 1996 had a balance of $523,000 and was secured by a
nursing home in Lawrenceburg, Indiana. However, during August 1996, the
Association originated a commercial real estate loan secured by an office
building located in Cincinnati, Ohio with a principal balance of $5.1 million,
with the Association retaining $758,000 of the loan and selling participation
interests to several other financial institutions for the remaining principal
balance. Commercial real estate lending is a desired growth area for the
Association, although such growth is expected to be gradually and will not be
pursued beyond Dearborn Savings' normal lending territory.
Diversification into non-mortgage lending consists primarily of consumer
loans, with mobile home loans representing the most notable segment of the
consumer loan portfolio. The balance of the consumer loan portfolio is
concentrated in home improvement loans. The Association also holds a minor
amount of commercial business loans, which consist of purchased loans guaranteed
by the Small Business Administration ("SBA").
Mobile home loans held by the Association totaled $4.1 million at June 30,
1996. Mobile home loans are originated through a corespondent program, whereby
Dearborn Savings funds loans brokered by Mobile Consultants, Inc. ("MCI"). MCI
is an Ohio based company specializing in the generation and underwriting of
mobile home loans. Under the program, MCI takes loan applications, underwrites
the loans, services the loans, and assumes collection and resale responsibility
in the event of default. Dearborn Savings provides the funding upon approval of
the loan, and remits a service fee of 1.5 percent to MCI which effectively
reduces the interest rate on the loan by 1.5 percent. The relatively high risk
associated with mobile home lending is mitigated to a degree by the higher
yields earned on mobile home loans and a loan guarantee by MCI. An LTV ratio of
90.0 percent or less is required for mobile home financing, with such loans
having fixed rate terms of 15 years or less. Most of the mobile homes securing
the loans are located in Indiana, Kentucky, or Ohio. To date, the Association's
loss exposure with regard to the mobile home loans has been low, and the
Association intends to maintain its relationship with MCI going forward.
The balance of the consumer loan portfolio is comprised primarily of home
improvement and second mortgage loans, which totaled $2.1 million at June 30,
1996. Home improvement loans are originated as either
<PAGE>
RP Financial, LC.
Page 1.15
fixed rate or adjustable rate loans, with terms of up to 15 years. The
Association will originate home improvement loans up to an LTV ratio of 100
percent of the combined balance of the home improvement loan and the first
mortgage loan, with PMI being required for loans with LTV ratios of greater than
80.0 percent or in cases where Dearborn Savings does not hold the first mortgage
loan. Other consumer loans held by the Association consist of low balances of
loans secured by deposits and home equity lines of credit. Consumer lending is
also a desired growth area for the Association, with such growth expected to be
primarily realized in the types of consumer loans currently offered by the
Association.
The Association is currently not active in originating commercial business
loans, with such loans totaling $665,000 at June 30, 1996. The commercial
business loans held by the Association consist of the government guaranteed
portion of SBA loans, which were purchased by the Association in the mid-1980s.
The commercial business loan portfolio is expected to gradually pay down to a
zero balance.
Exhibit I-10, which shows the Association's loan originations over the past
three fiscal years, highlights Dearborn Savings' emphasis on originating 1-4
family permanent mortgage loans. Dearborn Savings' 1-4 family loan volume
dropped sharply in fiscal 1995, reflecting a significant decline in 1-4 family
loans being refinanced. Notwithstanding the sharp decline in the 1-4 family loan
volume, positive loan growth was recorded during fiscal 1995. Loan growth during
fiscal 1995 was supported by originations of consumer and construction loans, as
well as reductions in loans repaid and loans sold. Comparatively, despite
increased originations of 1-4 family loans during fiscal 1996, the loan balance
declined as the result of higher loan repayments and an increase in the amount
of loans sold. Beyond 1-4 family permanent mortgage loans, consumer and
construction lending have accounted for most of the Association's remaining loan
volume during the past three fiscal years. Commercial real estate lending
accounted for the balance of the Association's lending activities over past
three year fiscal years, with the highest originations ($1.3 million) occurring
during fiscal 1994. Going forward, the Association's lending strategy is to
place a greater emphasis on the origination of commercial real estate and
consumer loans, although the origination of 1-4 family permanent mortgage loans
is expected to remain as the Association's most prominent lending activity.
Asset Quality
The Association's historical 1-4 family lending emphasis has generally
supported favorable credit quality measures. Over the past five fiscal years,
Dearborn Savings' non-performing assets-to-assets ratio has ranged from a high
of 0.39 percent at fiscal year end 1993 to a low of 0.04 percent at fiscal year
end 1996. As shown in Exhibit I-12, the only non-performing assets held by the
Association at fiscal year end 1996 consisted of $26,000 of non-accruing loans
<PAGE>
RP Financial, LC.
Page 1.16
The Association reviews and classifies assets on a quarterly basis and
establishes loan loss provisions based on the overall quality, size and
composition of the loan portfolio, as well other factors such as historical loss
experience, industry trends and local real estate market and economic
conditions. At June 30, 1996, the Association had $26,000 of assets classified
as Special Mention and no assets classified as Substandard or Doubtful. The
Association maintained valuation allowances of $226,000 at June 30, 1996, equal
to 0.48 percent of net loans receivable and 869.2 percent of non-performing
assets.
Funding Composition and Strategy
Deposits have consistently been the Association's primary source of funds
(see Exhibits I-13 and I-14), and at June 30, 1996 deposits accounted for 73.9
percent of Dearborn Savings' interest-bearing liabilities. The Association's
deposit composition has consistently been concentrated in CDs, with Dearborn
Savings' CD composition generally reflecting a higher concentration of
shorter-term CDs (maturities of one year or less). As of June 30, 1996, the CD
portfolio totaled $33.4 million, or 80.7 percent of total deposits, with 62.8
percent of those CDs having maturities of one year or less. Jumbo CDs (CD
accounts with balances of $100,000 or more) amounted to $3.3 million or 10.0
percent of total CDs at June 30, 1996. Dearborn Savings generally does not pay
premium rates for higher balance CDs. The Association does not maintain any
brokered CDs and typically offers CD rates that are priced in the middle to
upper end of the range of rates offered by local competitors.
Lower costing savings and transaction accounts comprise the remainder of
Dearborn Savings' deposits, amounting to $8.0 million or 19.3 percent of total
deposits at June 30, 1996. While the Association's deposit composition exhibited
an increase towards lower costing accounts during the declining and low interest
rate environment that prevailed in fiscal years 1992 through 1994, the recent
trend in the Association's deposit composition has reflected a shift back
towards CDs. The shift in deposit composition towards CDs reflects the generally
higher market rates being offered for CDs, in line with the higher interest rate
environment overall. In comparison to the 19.3 percent ratio maintained at June
30, 1996, savings and transaction accounts comprised 24.1 percent of the
Association's deposits at June 30, 1994. Accordingly, due to the upward
repricing of CDs, and the shift in deposit composition away from lower costing
deposit accounts, the Association's deposit costs have trended higher since
fiscal 1994. Dearborn Savings' weighted average cost of deposits equaled 5.27
percent during fiscal 1996, versus a comparative measure of 4.47 percent during
fiscal 1994.
Borrowings held by the Association at fiscal year end 1996 consisted
entirely of FHLB advances, except for a $113,000 loan outstanding to the
Employee Stock Ownership Plan. Most of the Association's
<PAGE>
RP Financial, LC.
Page 1.17
FHLB advances were added during fiscal years 1992 and 1993 to provide funding
for loan growth, although the FHLB advance balance peaked at a maximum balance
of $17.1 million during fiscal 1996. Exhibit I-14 shows the Association's use of
FHLB advances during the past three fiscal years. FHLB advances held by the
Association consist mostly of short-term advances and to a lesser extent
intermediate-term advances which maturities up through 2004. Dearborn Savings'
deposit growth and internal funding are expected to be adequate enough to fund
most of the Association's lending and investment activities in the near term. If
additional borrowings are needed, FHLB advances will remain as the primary
source of borrowings for the Association.
Legal Proceedings
The Association is involved in routine legal proceedings occurring in the
ordinary course of business which, in the aggregate, are believed by management
to be immaterial to the financial condition and results of operations of the
Association.
<PAGE>
RP Financial, LC.
Page 2.1
II. MARKET AREA
Introduction
Dearborn Savings conducts operations out of one full service office in
Lawrenceburg, the county seat and largest town in Dearborn County, Indiana. In
addition to the main office, the Association maintains a loan production office
in Greendale, Indiana, which is adjacent to Lawrenceburg. Dearborn County is
located in southeastern Indiana at the convergence of Indiana, Kentucky and
Ohio, and Lawrenceburg is located in southeastern Dearborn County. The primary
market area for Dearborn Savings is considered to consist of Dearborn County,
supplemented by business generated by customers living in surrounding counties,
primarily the counties of Switzerland and Franklin in Indiana, Hamilton, Ripley
and Clermont in Ohio, and Boone and Kenton in Kentucky. Exhibit II-1 provides
information on the Association's office facilities.
Dearborn County is included in the Cincinnati MSA, although Lawrenceburg,
which is located 25 miles west of Cincinnati, has maintained a small town
atmosphere. The attractive characteristics of Dearborn County has supported
steady economic and demographic growth in the Association's primary market area.
A community-oriented institution, Dearborn Savings is the oldest thrift
headquartered in Lawrenceburg and has conducted business in Dearborn County for
over 100 years since it was established in 1890. In this regard, the Association
has developed strong ties to the local community and benefits from a loyal
customer base. However, in light of the attractiveness of the market area served
by Dearborn Savings, competition from other thrifts, commercial banks, credit
unions and other sources in the County is intense. A total of nine thrifts,
banks and credit unions are headquartered in Dearborn County.
Future growth opportunities for Dearborn Savings depend in part on national
economic factors, the future growth in the market area, which has been measured
by indicators such as demographic growth trends, the health and stability of the
regional and local economy, and the nature and intensity of the competitive
environment for financial institutions. These factors have been briefly examined
to help determine the growth potential that exists for the Association, and the
relative economic health of the Association's market area.
Market Area Demographics
Demographic and economic growth trends, measured by changes in population,
number of households, age distribution and median household income, provide key
insight into the health of the Association's market area (see Table 2.1).
Dearborn County recorded an increase in population from 1990 to 1995, which
outpaced the Indiana and U.S. population growth rates over the same time period.
Growth in households mirrored the population growth rates, reflecting the
relatively strong growth occurring in the
<PAGE>
RP Financial, LC.
Page 2.2
Table 2.1
Dearborn Savings Association, F.A.
Summary Demographic Data
State, County and Zip Code Within County
<TABLE>
<CAPTION>
Year
-------------------------- Growth Rate Growth Rate
Population (000) 1990 1995 2000 1990-95 1995-2000
---- ---- ---- ------- ---------
(%) (%)
<S> <C> <C> <C> <C> <C>
UNITED STATES 248,710 263,006 277,084 1.1% 1.0%
INDIANA 5,544 5,800 6,046 0.9% 0.8%
DEARBORN COUNTY 39 44 50 2.7% 2.3%
Households (000)
UNITED STATES 91,947 97,070 102,202 1.1% 1.0%
INDIANA 2,065 2,163 2,256 0.9% 0.8%
DEARBORN COUNTY 14 16 17 2.7% 2.3%
Median Household Income ($)
UNITED STATES $29,199 $33,610 $32,972 2.9% -0.4%
INDIANA $26,507 $36,137 $36,848 6.4% 0.4%
DEARBORN COUNTY $27,204 $38,689 $41,378 7.3% 1.4%
Per Capita Income -1995 ($)
UNITED STATES $13,179 $16,405 ---- 4.5% ----
INDIANA $11,490 $16,671 ---- 7.7% ----
DEARBORN COUNTY $10,855 $15,895 ---- 7.9% ----
<CAPTION>
1995 Age Distribution(%) 0-14 Years 15-24 Years 25-44 Years 45-64 Years 65+ Years Median Age
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES 22.1 13.8 31.8 19.5 12.8 34.0
INDIANA 22.0 14.4 30.8 19.9 12.9 32.8
DEARBORN COUNTY 23.7 13.7 30.1 20.2 12.3 33.1
<CAPTION>
Less Than $15,000 to $25,000 to $50,000 to $100,000 to
1995 HH Income Dist.(%) $15,000 24,999 $49,999 $99,999 $149,999 $150,000+
------- ------ ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES 20.5 15.8 33.8 23.7 4.2 2.0
INDIANA 16.5 15.3 36.9 26.0 3.9 1.4
DEARBORN COUNTY 13.8 14.9 38.0 28.3 4.0 1.1
<CAPTION>
Housing Permit Data 1991 1992 1993 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
UNITED STATES 1,105,748 1,094,933 1,390,017 1,371,637
INDIANA 28,580 29,581 28,604 31,135
DEARBORN COUNTY 1,093 1,257 1,293 846
</TABLE>
Source: CACI, Inc.; U.S. Dept. of Commerce.
<PAGE>
RP Financial, LC.
Page 2.3
Association's primary market area. Dearborn County's household growth translated
into an increase in housing permits during 1992 and 1993, which was followed by
a notable decline in 1994. Over the next five years, population and household
growth trends in the Association's primary market area are forecasted to be
slightly less than recent historical trends, but will remain above the growth
rates projected for Indiana and the U.S.
Median household income for Dearborn County exceeded the Indiana and U.S.
comparative measures in 1995, while 1995 per capita income for Dearborn County
was slightly below the Indiana and U.S. comparative measures. The growth rates
of median household and per capita income in Dearborn County from 1990 to 1995
were higher than the Indiana and U.S. comparative growth rates, indicating that
the population growth occurring in the market area has provided for economic
growth as well. Consistent with the U.S. and Indiana, growth in household income
is projected to be lower in Dearborn County for the balance of the decade. The
slow down in household income reflects that most of the job growth is being
realized in service related jobs, which tend to be relatively low paying jobs.
Overall, Dearborn County appears to maintain relatively attractive growth
potential characteristics for a community banking concern like Dearborn Savings,
with the most notable limitation being the high degree of competition that has
been cultivated by the attractiveness of the market area.
National Economic Factors
Since mid-1995, national economic growth has been mixed. GDP growth during
the second quarter of 1995 slowed to 1.3 percent annually, which was the slowest
growth in almost four years. In a move to revive the sagging economy, the
Federal Reserve cut short-term interest rates by 0.25 percent in early-July
1995. Amid mixed economic data, such as a drop in July durable goods orders and
an increase in July new housing starts, the Fed held rates steady during its
meeting in late-August. During the balance of the third quarter, the general
economy showed signs of expansion with inflation under control. For example,
construction picked up in most regions of the U.S., while retail prices were
relatively stable in the late summer. Third quarter GDP growth was stronger than
expected, increasing at an annual rate of 4.2 percent. Economic data through
most of the fourth quarter suggested that the economy was on track for a soft
landing, as indicated by modest retail sales growth and a stable inflation
picture. Weak retail sales during the holiday shopping season and a slight
increase in the November unemployment rate provided indications of a slowing
national economy at the end of the fourth quarter.
Economic data released in January 1996 continued to indicate a generally
sluggish economy, as highlighted by the Federal Reserve's mid-January "Beige
Book" report which indicated slowing economic growth in its latest nationwide
survey of economic conditions. Record-breaking winter weather conditions
<PAGE>
RP Financial, LC.
Page 2.4
further slowed the economy in January of 1996. However, unemployment declined
sharply in February, although the January figures were skewed by the weather and
by striking GM workers. A stronger than expected March 1996 employment report
served to rekindle inflation fears, although other economic indicators suggested
that the pace of economic growth was moderate and inflation was under control.
Inflation concerns were further heightened in late-April, as the result of
higher oil and commodity prices; however, wages, which account for most of the
inflation measures, did not signal that inflation was heating up. Unemployment
data for both May and June suggested a strong pace of economic growth, with the
stronger than expected job growth pushing interest rates higher. However, other
economic measures, such as consumer and producer prices, reflected a more modest
pace of economic growth. Mid-July Congressional testimony by the Federal Reserve
Chairman hinted of expectations that the economy would taper off slightly in the
second half of 1996, which was consistent with other recent forecasts by
economists. However, economic data at the end of July, such as new home sales
and the consumer confidence rate, indicated that the pace of economic growth
remained fairly strong. Second quarter GDP increased at a healthy 4.2 percent
annual rate, although inflation during the second quarter was a modest 2.1
percent. Other inflation data released in early- and mid-August provided mixed
inflation signals. Inflation concerns were eased by a slight increase in the
July unemployment rate and a decline in the Purchasing Management's index, while
a stronger than expected increase in July consumer prices and strong retail
sales in August bolstered inflation concerns.
Interest rates generally trended lower in the second half of 1995,
particularly in the fourth quarter due to the slowing of the economy. The
sluggish economy and a 0.25 percent cut in short-term interest rates by the
Federal Reserve pushed the yield on 30-year U.S. Government bond to slightly
below 6.0 percent at year end 1995. Following another 0.25 percent rate cut by
the Federal Reserve in January 1996, interest rates moved higher during the
balance of the first quarter of 1996. The upward trend in interest rates
reflected generally improving economic conditions and indications that the Fed
would not cut interest rates further due to the mixed inflation signals.
Interest rates continued to edge higher during the second quarter and the
30-year U.S. Government bond yield climbed above 7.0 percent following the
stronger than expected job growth reported in early-June. The June employment
report had a more severe effect on bond prices, as the large drop in
unemployment provided for one of the largest one day declines in bond prices
with the yield on the 30-year benchmark bond increasing from 6.93 percent to
7.18 percent. During the balance of July, bond prices recovered on expectations
that a rate hike by the Federal Reserve was not imminent. Mixed inflation data
provided for a relatively flat interest rate environment during the first half
of August, while a stronger than expected increase for durable-goods orders in
July raised concerns that the economy was not moderating as forecasted and
pushed interest rates slightly higher in late-August. Bond yields fell slightly
in early-September, following the release of the August employment report which
came close to meeting expectations. As of
<PAGE>
RP Financial, LC.
Page 2.5
September 6, 1996 one- and thirty-year U.S. Government bonds were yielding 5.89
percent and 7.11 percent, respectively. Exhibit II-2 provides historical
interest rate trends from 1991 through September 6, 1996.
Local Economy
The Dearborn County economy has traditionally been supported by
manufacturing, supplemented by employment in services, wholesale/retail trade
and miscellaneous other employment sectors. While manufacturing employment
continues to account for the highest proportion of industry earnings in Dearborn
County, over the years manufacturing employment has been declining and
employment growth has been occurring mostly in services and wholesale/retail
trade. The favorable demographic growth being realized in Dearborn County has
also supported employment growth in the construction industry. Based on 1994
data (the most recent data available), the largest employment sector in Dearborn
County is the wholesale/retail trade (23 percent of total employment) followed
by services (21 percent of total employment) and manufacturing (14 percent of
total employment). The balance of employment in Dearborn County is concentrated
in government and construction.
Lawrenceburg's location on the Ohio River and proximity to Cincinnati makes
it the hub of economic activity in Dearborn County, and many of the largest
employers in Dearborn County are based in Lawrenceburg. The current largest
employer in Dearborn County is Joseph Seagram's and Sons. Based in Lawrenceburg,
Joseph Seagram's and Sons is the largest distillery of its kind in the world
with approximately 750 employees. Other major employers in Dearborn County
include Aurora Casket Company (480 employees), Dearborn County Hospital (420
employees) and American Electric Power (325 employees). Economic activity in the
Association's primary market area is expected to be further enhanced by the
building of a riverboat gambling casino in Lawrenceburg, which will create
additional jobs and spur economic growth throughout the entire business
community. The casino is scheduled to open in late-1996. Overall, the Dearborn
County economy is fairly diverse, which provides for a relatively stable
economic environment. The economic expansion occurring in Dearborn County is
further evidenced by the decline in unemployment, although, as of June 1996,
unemployment in Dearborn County was higher than the comparative U.S. and Indiana
measures (see Table 2.2).
<PAGE>
RP Financial, LC.
Page 2.6
Table 2.2
Dearborn Savings Association, F.A.
Selected Unemployment Rates(1)
June 1995 June 1996
Region Unemployment Unemployment
------------ ------------
United States 5.8% 5.5%
Indiana 4.6% 4.2%
Dearborn County 7.0% 5.6%
(1) Data is not seasonally adjusted.
Source: Bureau of Labor Statistics.
Competition
Competition among financial institutions in the market area is substantial.
As larger institutions compete for market share to achieve economies of scale,
the market environment for the Association's products and services is expected
to become increasingly competitive in the future. Smaller institutions such as
Dearborn Savings will be forced to either compete with larger institutions on
pricing, or to identify and operate in a "niche" that will allow for operating
margins to be maintained at profitable levels.
The Association's retail deposit base is closely tied to the economic
fortunes of Dearborn County. Table 2.3 displays deposit market trends over the
past several years for Dearborn County, with additional data presented for the
State of Indiana. The data indicates that deposit growth in the Association's
primary market area was relatively strong, with most of the growth being
realized by commercial banks. In comparison to Indiana, Dearborn County's
deposit growth measures were more favorable, as slightly positive deposit growth
by Indiana commercial banks and credit unions was partially negated by deposit
shrinkage posted by Indiana thrifts. During the period covered in Table 2.3,
deposit growth was relatively limited for financial institutions on a nationwide
basis, in light of the relatively low market rates being offered for CDs and the
more attractive returns that were being realized through investing in the stock
market.
Dearborn Savings' deposit growth was less than the comparative Dearborn
County measures, which resulted in a slight decline in the Association's total
market share of deposits. The nominal deposit growth recorded by the Association
was due to competitive factors and a strategic decision to control the
Association's deposit costs through greater utilization of borrowings as a
funding source. Subsequent to June 30, 1995, the Association has realized
relatively strong deposit growth. Dearborn Savings' deposit growth was 10.5
percent during fiscal 1996.
<PAGE>
RP Financial, LC.
Page 2.7
Table 2.3
Dearborn Savings Association, F.A.
Deposit Summary
<TABLE>
<CAPTION>
As of June 30,
----------------------------------------------------
1993 1995
-------------------------- ------------------------- Deposit
Market Number of Market No. of Growth Rate
Deposits Share Branches Deposits Share Branches 1993-1995
-------- ----- --------- -------- ----- -------- ---------
(Dollars In Thousands) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
A. Deposit Summary
State of Indiana $67,510,408 100.0% 2,490 $70,395,953 100.0% 2,483 2.1%
Commercial Banks 48,136,630 71.3% 1,814 50,954,149 72.4% 1,820 2.9%
Credit Unions 7,189,994 10.7% 299 7,707,565 10.9% 299 3.5%
Savings Institutions 12,183,784 18.0% 377 11,734,239 16.7% 364 -1.9%
Dearborn County $452,050 100.0% 22 $496,636 100.0% 23 4.8%
Commercial Banks 203,648 45.0% 15 240,861 48.5% 16 8.8%
Credit Unions 12,557 2.8% 3 13,903 2.8% 3 5.2%
Savings Institutions 235,845 52.2% 4 241,872 48.7% 4 1.3%
Dearborn Savings Assoc.(1) 37,178 15.8% 1 37,460 15.5% 1 0.4%
Dearborn Savings Assoc.(2) 8.2% 7.5%
</TABLE>
(1) Percent of county S&L/bank deposits.
(2) Percent of total county deposits.
Sources: FDIC; OTS; Thompson Credit Union Directory.
<PAGE>
RP Financial, LC.
Page 2.8
Future deposit growth by the Association should be enhanced by the
conversion, as the additional capital will improve Dearborn Savings' competitive
position and leverage capacity. At the same time, the notable competitive market
forces within the Association's primary market area will somewhat limit its
capacity to realize notable gains in deposit market share without paying above
market rates for deposits. To augment the deposit growth that is possible
internally, the Association may seek deposit growth opportunities through
acquiring branches or other financial institutions, but, at this time, the
Association has no definite plans to acquire additional branches or other
financial institutions.
<PAGE>
RP Financial, LC.
Page 3.1
III. PEER GROUP ANALYSIS
This chapter presents an analysis of Dearborn Savings' operations versus a
group of comparable savings institutions (the "Peer Group") selected from the
universe of all publicly-traded savings institutions. The basis of the pro forma
market valuation of Dearborn Savings is provided by these institutions. Factors
affecting the Association's pro forma value such as financial condition, credit
risk, interest rate risk, loan composition and recent operating results can be
readily assessed in relation to the Peer Group. Current market pricing of the
Peer Group, subject to appropriate adjustments to account for differences
between Dearborn Savings and the Peer Group, will then be used as a basis for
the pro forma valuation of Dearborn Savings' to-be-issued common stock.
Selection of Peer Group
We consider the appropriate Peer Group to be comprised of only those
publicly-traded savings institutions whose common stock is either listed on a
national exchange or is NASDAQ listed, since the market for companies trading in
this fashion is regular and reported. We believe non-listed institutions are
inappropriate since the trading activity for thinly-traded stocks is typically
highly irregular in terms of frequency and price and may not be a reliable
indicator of market value. We have also excluded from the Peer Group those
companies under acquisition, mutual holding companies and recent conversions,
since their pricing ratios are subject to distortion and/or do not have a
seasoned trading history.
From the universe of publicly-traded thrifts, we selected ten institutions
with characteristics similar to those of Dearborn Savings. In the selection
process, we applied two primary "screens" to the universe of all public
companies:
o Screen #1. Indiana institutions with assets less than $300 million,
equity-to-assets ratios of at least 10.0 percent, return on average
assets ratios between 0.50 percent and 1.25 percent and non-performing
assets-to-assets ratios of less than 1.50 percent. Seven companies met
the criteria for Screen #1 and four were included in the Peer Group:
Community Bank Shares, FFW Corporation, MFB Corp. and Northeast
Indiana Bancorp. Two companies were excluded due to the recency of
their conversions: AMB Financial Corp. (conversion completed April
1996) and Home Financial Bancorp (conversion completed July 1996).
Indiana Community Bank, SB was the other company excluded from the
Peer Group, based on an earnings composition that was not similar to
the Association's. In particular, Indiana Community Bank's retail
banking strategy resulted in a significantly higher net interest
margin and a significantly higher level of operating expenses,
relative to the Association's comparative ratios which were consistent
with ratios resulting from implementation of a traditional thrift
operating strategy. Exhibit III-2 details the financial
characteristics of all publicly-traded Indiana institutions.
<PAGE>
RP Financial, LC.
Page 3.2
o Screen #2. Kentucky and Ohio institutions with assets of $50 million
to $250 million, equity-to-assets ratios of 10.0 percent to 20.0
percent, return on average assets ratios between 0.50 percent and 1.25
percent, and non-performing assets to assets ratios of less than 1.0
percent. Six institutions met the selection criteria for Screen #2 and
all were based in Ohio. All six were included as part of Dearborn
Savings' Peer Group: Community Investors Bancorp, Enterprise Federal
Bancorp, Harvest Home Financial Corp., Milton Federal Financial Corp.,
OHSL Financial Corp. and Wood Bancorp.
Table 3.1 on the following page shows the general characteristics of each
of the Peer Group companies and Exhibit III-3 provides summary demographic data
for the primary market areas served by each of the Peer Group companies. While
there are some differences between the Peer Group companies and Dearborn
Savings, we believe that the Peer Group provides a good representation of
publicly-traded thrifts with operations comparable to those of the Association
and, thus, will provide a good basis for valuation. The following sections
present a comparison of Dearborn Savings' financial condition, income and
expense trends, loan composition, interest rate risk and credit risk versus the
Peer Group. The conclusions drawn from the comparative analysis are then
factored into the valuation analysis discussed in the final chapter.
A summary description of the key characteristics of each of the Peer Group
companies, which we determined warranted their inclusion as a comparable
institution to Dearborn Savings, is detailed below.
o Community Bank Shares of IN. Selected due to Indiana market area,
traditional thrift operating strategy, comparable net interest margin, low
level of operating expenses, similar concentration of mortgage-backed
securities and 1-4 family permanent mortgage loans comprising loan and MBS
portfolio, and favorable credit quality measures.
o Community Investors Bancorp, Inc. of OH. Selected due to traditional thrift
operating strategy, comparable asset size, similar interest-earning asset
composition, strong capital position, low level of operating expenses,
similar concentration of mortgage-backed securities and 1-4 family
permanent mortgage loans comprising loan and MBS portfolio, and favorable
credit quality measures.
o Enterprise Federal Bancorp of OH. Selected due to traditional thrift
operating strategy, same regional market area, strong capital position,
comparable funding composition, low level of operating expenses, and
favorable credit quality measures.
o FFW Corporation of Wabash IN. Selected due to Indiana market area,
traditional thrift operating strategy, similar funding composition,
comparable net interest margin, low level of operating expenses, and
favorable credit quality measures.
o Harvest Home Financial Corp. of OH. Selected due to traditional thrift
operating strategy, comparable asset size, strong capital position, low
level of operating expenses, and favorable credit quality measures.
<PAGE>
RP Financial, LC.
Page 3.3
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.1
Peer Group of Publicly-Traded Thrifts
September 11, 1996(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ -------
($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CBIN Community Bank Shares of IN OTC Southeast IN Thrift 233 7 12-31 04/95 12.87 26
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 214 5 09-30 10/94 12.87 27
OHSL OHSL Financial Corp. of OH OTC Cincinnati, OH Thrift 209 4 12-31 02/93 20.25 25
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 201 M 4 09-30 03/94 15.50 31
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 178 2 09-30 10/94 13.75 31
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 154 3 12-31 06/95 12.25 25
FFWC FFW Corporation of Wabash IN OTC Central IN Thrift 150 3 06-30 03/93 19.50 14
FFWD Wood Bancorp of OH OTC Northern OH Thrift 146 6 06-30 08/93 14.50 22
CIBI Community Inv. Bancorp of OH OTC NorthCentral OH Thrift 86 M 3 06-30 02/95 15.75 11
HHFC Harvest Home Fin. Corp. of OH OTC Southwest OH Thrift 73 M 3 09-30 10/94 9.87 9
</TABLE>
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift,
M.B.=Mortgage Banker, R.E.=Real Estate Developer,
Div.=Diversified, and Ret.=Retail Banking.
(3) FDIC savings bank institution.
Source: Corporate offering circulars, data derived from information
published in SNL Securities Quarterly Thrift Report, and financial
reports of publicly-traded thrifts.
Date of Last Update: 09/11/96
<PAGE>
RP Financial, LC.
Page 3.4
o MFB Corp. of Mishawaka IN. Selected due to Indiana market area, traditional
thrift operating strategy, strong capital position, comparable return on
assets, comparable net interest margin, low level of operating expenses,
and favorable credit quality measures.
o Milton Fed. Fin. Corp. of OH. Selected due to traditional thrift operating
strategy, high level of capital, low level of operating expenses, and
favorable credit quality measures.
o Northeast Indiana Bancorp of IN. Selected due to Indiana market area,
traditional thrift operating strategy, strong capital position, similar
concentration of mortgage-backed securities and 1-4 family permanent
mortgage loans comprising loan and MBS portfolio, and favorable credit
quality measures.
o OHSL Financial Corp. of OH. Selected due to traditional thrift operating
strategy, same regional market area, low level of operating expenses,
similar concentration of mortgage-backed securities and 1-4 family
permanent mortgage loans comprising loan and MBS portfolio, and favorable
credit quality measures.
o Wood Bancorp of OH. Selected due to traditional thrift operating strategy,
similar interest-earning asset composition, strong capital position, and
favorable credit quality measures.
In aggregate, the Peer Group companies are more highly capitalized than the
industry average (15.07 percent of assets versus 13.15 percent for the all SAIF
average), generate higher earnings (0.97 percent ROAA versus 0.87 percent for
the all SAIF average), and generate a lower ROE (6.37 percent versus 7.91
percent for the all SAIF average). Overall, the Peer Group's average P/B ratio
and P/E multiple were below and above the respective comparable SAIF averages.
As of September 6, 1996
-----------------------
Peer All SAIF
Group Insured
----- -------
Equity-to-Assets 15.07% 13.15%
Return on Assets ("ROA") 0.97 0.87
Return on Equity ("ROE") 6.37 7.91
Price-to-Book ratio ("P/B") 90.00% 105.73%
Price-to-Earnings multiple ("P/E") 14.88x 14.36x
Price-to-Assets ratio ("P/A") 13.39% 13.17%
Source: Table 4.4 - Chapter IV Valuation Analysis.
Ideally, the Peer Group companies would be comparable to Dearborn Savings
in terms of all of the selection criteria, but the universe of publicly-traded
thrifts does not provide for an appropriate number of such companies. However,
in general, the companies selected for the Peer Group were fairly comparable to
Dearborn Savings, as will be highlighted in the following comparative analysis.
<PAGE>
RP Financial, LC.
Page 3.5
Financial Condition
Table 3.2 shows comparative balance sheet measures for Dearborn Savings and
the Peer Group, reflecting the expected similarities and some differences given
the selection procedures outlined above. The Association's ratios reflect
balances as of June 30, 1996, while the Peer Group's ratios are based on data as
of June 30, 1996 or March 31, 1996. Dearborn Savings' net worth base of 10.7
percent was below the Peer Group's average net worth ratio of 15.1 percent;
however, with the addition of stock proceeds, the Association's pro forma
capital position (consolidated with the holding company) can be expected to be
comparable to the Peer Group's ratio. All of Dearborn Savings' and the Peer
Group's capital consisted of tangible capital. The increase in Dearborn Savings'
pro forma capital position will be favorable from a risk perspective and in
terms of future earnings potential that may be realized through leverage and
lower funding costs. However, at the same time, the Association's high pro forma
capitalization will result in a relatively low return on equity. Both the
Association's and the Peer Group's capital ratios reflected capital surpluses
with respect to the regulatory capital requirements, with the Association's and
the Peer Group's ratios currently indicating comparable capital surpluses.
Accordingly, on a pro forma basis, the Association should gain the advantage in
terms of capital surpluses.
The interest-earning asset compositions for the Association and the Peer
Group were somewhat similar, with loans and mortgage-backed securities
constituting the bulk of interest-earning assets for both Dearborn Savings and
the Peer Group. Dearborn Savings' combined level of loans and mortgage-backed
securities was approximately the same as the Peer Group's ratio (76.1 percent
versus 74.0 percent for the Peer Group), with the Association maintaining a
higher concentration of loans and a lower concentration of mortgage-backed
securities relative to the comparative Peer Group ratios. Comparatively, the
Peer Group's cash and investments to assets ratio was slightly higher than the
comparable ratio for Dearborn Savings (23.9 percent versus 20.4 percent for the
Association). Overall, Dearborn Savings' interest-earning assets amounted to
96.5 percent of assets, which was below the comparable Peer Group ratio of 97.9
percent.
Dearborn Savings' funding liabilities reflect a funding strategy similar to
that of the Peer Group's funding composition. The Association's deposits equaled
65.1 percent of assets, which was lower than the Peer Group average of 72.6
percent. More than offsetting Dearborn Savings' lower ratio of deposits was its
higher level of borrowings, as the Association and the Peer Group posted
borrowings-to-assets ratios of 23.0 percent and 11.7 percent, respectively.
Accordingly, the Peer Group was considered to have greater borrowing capacity
than the Association. Total interest-bearing liabilities maintained by the
Association and the Peer Group, as a percent of assets, equaled 88.1 percent and
84.3 percent, respectively, with the Peer Group's lower ratio being supported by
maintenance of a higher capital position.
<PAGE>
RP Financial, LC.
Page 3.6
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.2
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of June 30, 1996
<TABLE>
<CAPTION>
Balance Sheet as a Percent of Assets
----------------------------------------------------------------------------------------
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Investments Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
----------- ------ ------ -------- -------- ------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dearborn Savings
June 30, 1996 20.4 73.7 2.4 65.1 23.0 0.0 10.7 0.0 10.7 0.0
SAIF-Insured Thrifts 18.7 65.5 12.5 72.5 13.1 0.1 12.9 0.2 12.7 0.1
State of IN 19.2 71.2 6.1 72.2 13.2 0.2 13.4 0.1 13.3 0.0
Comparable Group Average 23.9 67.8 6.2 72.6 11.7 0.0 15.1 0.0 15.1 0.0
Mid-West Companies 23.9 67.8 6.2 72.6 11.7 0.0 15.1 0.0 15.1 0.0
Comparable Group
Mid-West Companies
CBIN Community Bank Shares of IN 40.5 54.3 2.9 81.1 7.2 0.0 11.1 0.0 11.1 0.0
CIBI Community Inv. Bancorp of OH(1) 21.8 74.0 2.7 83.4 2.3 0.0 13.8 0.0 13.8 0.0
EFBI Enterprise Fed. Bancorp of OH 19.0 65.3 13.6 65.5 18.7 0.0 14.8 0.0 14.7 0.0
FFWC FFW Corporation of Wabash IN 18.3 67.1 12.3 61.5 27.8 0.0 10.3 0.0 10.3 0.0
HHFC Harvest Home Fin. Corp. of OH(1) 35.8 54.7 7.2 81.6 0.0 0.0 17.7 0.0 17.7 0.0
MFBC MFB Corp. of Mishawaka IN(1) 30.5 65.3 2.7 74.7 4.7 0.0 19.3 0.0 19.3 0.0
MFFC Milton Fed. Fin. Corp. of OH 23.8 63.1 10.6 71.5 9.0 0.0 18.9 0.0 18.9 0.0
NEIB Northeast Indiana Bncrp of IN 10.9 86.9 0.0 48.2 32.4 0.0 18.9 0.0 18.9 0.0
OHSL OHSL Financial Corp. of OH 20.0 71.4 6.9 79.0 8.1 0.0 12.2 0.0 12.2 0.0
FFWD Wood Bancorp of OH 18.5 76.2 3.4 79.2 6.4 0.0 13.8 0.0 13.8 0.0
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Annual Growth Rates Regulatory Capital
------------------------------------------------------------ -------------------------
Cash and Loans Borrows. Net Tng Net
Assets Investments & MBS Deposits &Subdebt Worth Worth Tangible Core Reg.Cap.
------ ----------- ------ -------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dearborn Savings
June 30, 1996 3.01 36.36 -3.91 10.46 -13.73 1.91 1.91 10.78 10.78 23.09
SAIF-Insured Thrifts 11.33 7.81 11.09 5.72 6.05 3.90 3.58 10.82 10.90 23.21
State of IN 8.45 5.23 6.91 5.23 11.12 3.71 3.74 11.17 11.26 21.99
Comparable Group Average 9.44 17.39 8.24 9.60 16.21 -2.72 -2.72 11.14 11.28 22.59
Mid-West Companies 9.44 17.39 8.24 9.60 16.21 -2.72 -2.72 11.14 11.28 22.59
Comparable Group
Mid-West Companies
CBIN Community Bank Shares of IN 14.11 24.36 7.64 16.06 8.08 4.51 4.51 9.94 11.07 22.92
CIBI Community Inv. Bancorp of OH(1) 1.98 -11.53 6.27 1.94 27.36 -0.91 -0.91 11.86 11.86 24.41
EFBI Enterprise Fed. Bancorp of OH 11.77 -22.16 23.67 16.58 33.33 -20.58 -20.55 13.10 13.10 26.90
FFWC FFW Corporation of Wabash IN 2.15 -14.12 6.52 7.63 -7.73 -0.22 -0.22 8.00 8.00 15.20
HHFC Harvest Home Fin. Corp. of OH(1) 4.58 4.62 4.15 5.58 NM 0.06 0.06 NM NM NM
MFBC MFB Corp. of Mishawaka IN(1) 8.04 16.76 4.51 3.63 NM 0.28 0.28 NM NM NM
MFFC Milton Fed. Fin. Corp. of OH 15.23 50.35 7.20 10.79 NM -12.50 -12.50 14.69 14.69 32.08
NEIB Northeast Indiana Bncrp of IN 18.63 8.46 19.93 12.00 53.83 -3.92 -3.92 13.21 13.21 22.57
OHSL OHSL Financial Corp. of OH 9.62 48.55 2.76 11.36 1.30 3.50 3.50 9.93 9.93 20.47
FFWD Wood Bancorp of OH 8.27 68.59 -0.28 10.48 -2.72 2.59 2.59 8.39 8.39 16.14
</TABLE>
(1) Financial information is for the quarter ending March 31, 1996.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The
information provided in this table has been obtained from sources we
believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.7
A key measure of balance sheet strength for a thrift institution is its
IEA/IBL ratio. Presently, the Association's IEA/IBL ratio is lower than the Peer
Group's ratio, based on respective ratios of 109.5 percent and 116.1 percent.
The additional capital realized from stock proceeds should serve to partially
address the lower IEA/IBL ratio currently maintained by the Association, as the
interest free capital realized in Dearborn Savings' stock offering will be
deployed into interest-earning assets.
The growth rate section of Table 3.2 shows annual growth rates for key
balance sheet items. Dearborn Savings' growth rates are based on annual growth
for the twelve months ended June 30, 1996, while the Peer Group's growth rates
are based on annual growth for the twelve months ended June 30, 1996 or March
31, 1996. Asset growth rates of 3.0 percent and 9.4 percent were posted by the
Association and the Peer Group, respectively. Dearborn Savings' limited asset
growth reflects growth in cash and investments being somewhat offset by
shrinkage in loans and mortgage-backed securities. Comparatively, growth in
loans and mortgage-backed securities accounted for most of the Peer Group's
asset growth, although a higher growth rate was realized in the Peer Group's
lower balance of cash and investments. Overall, the Peer Group's asset growth
measures would tend to support greater earnings growth relative to the
Association's measures. However, following the conversion, Dearborn Savings'
leverage capacity will be comparable to the Peer Group's.
Deposits and retained earnings funded the Association's asset growth, as
well as a reduction in borrowings. The Peer Group's asset growth was funded by
deposit growth, which was slightly less than the Association's deposit growth
rate, and borrowings. In fact, the Peer Group's borrowings growth rate shown in
Table 3.2 is somewhat understated, as it does not include the borrowings growth
rates of the Peer Group companies which recorded a more than 100 percent
increase in borrowings during the twelve month period. Of the three Peer Group
companies with "NMs" indicated as borrowing growth rates in Table 3.2, two of
the Peer Group companies posted borrowing growth rates in excess of 100 percent,
and one of the Peer Group companies recorded no change in its balance of
borrowings. Despite recording a lower return on average assets ratio, Dearborn
Savings posted a slightly stronger capital growth rate than the Peer Group
(positive 1.9 percent versus negative 2.7 percent for the Peer Group). Dearborn
Savings' capital growth resulted from the retention of earnings being somewhat
offset by dividend payments and a negative SFAS 115 adjustment. A higher capital
position, as well as dividend payments, stock repurchases and possible negative
SFAS 115 adjustments, were likely factors that accounted for the Peer Group's
slightly negative capital growth rate.
Income and Expense Components
Dearborn Savings and the Peer Group reported net income to average assets
ratios of 0.73 percent and 0.97 percent, respectively (see Table 3.3), based on
earnings for the twelve months ended June 30, 1996 or for
<PAGE>
RP Financial, LC.
Page 3.8
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.3
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended June 30, 1996
<TABLE>
<CAPTION>
Net Interest Income Other Income G&A/Other Exp.
---------------------------- ------------------- ----------------
Loss NII Total
Net Provis. After Loan R.E. Other Other G&A Goodwill
Income Income Expense NII on IEA Provis. Fees Oper. Income Income Expense Amort.
------ ------ ------- ------ ------- ------- ---- ----- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dearborn Savings
June 30, 1996 0.73 7.59 4.78 2.80 0.02 2.78 0.00 0.00 0.23 0.23 2.07 0.00
SAIF-Insured Thrifts 0.87 7.35 4.16 3.19 0.12 3.07 0.12 -0.01 0.31 0.42 2.22 0.02
State of IN 0.95 7.54 4.23 3.31 0.18 3.13 0.08 0.02 0.44 0.54 2.37 0.00
Comparable Group Average 0.97 7.44 4.13 3.31 0.06 3.25 0.04 -0.01 0.18 0.21 2.03 0.00
Mid-West Companies 0.97 7.44 4.13 3.31 0.06 3.25 0.04 -0.01 0.18 0.21 2.03 0.00
Comparable Group
Mid-West Companies
CBIN Community Bank Shares of IN 0.88 6.97 4.11 2.85 0.02 2.83 0.25 0.00 0.37 0.63 2.03 0.00
CIBI Community Inv. Bancorp of OH(1) 1.01 7.82 4.31 3.51 0.18 3.33 0.00 -0.06 0.17 0.11 1.99 0.00
EFBI Enterprise Fed. Bancorp of OH 0.92 7.39 4.46 2.94 0.03 2.91 0.00 0.00 0.05 0.05 1.97 0.01
FFWC FFW Corporation of Wabash IN 1.08 7.63 4.65 2.98 0.06 2.92 0.03 0.00 0.30 0.33 1.73 0.00
HHFC Harvest Home Fin. Corp. of OH(1) 0.79 7.04 3.91 3.13 0.01 3.12 0.00 0.00 0.07 0.07 1.99 0.00
MFBC MFB Corp. of Mishawaka IN(1) 0.69 6.83 3.88 2.94 0.02 2.93 0.00 0.00 0.18 0.18 1.98 0.00
MFFC Milton Fed. Fin. Corp. of OH 1.04 7.38 3.88 3.50 0.04 3.46 0.01 0.00 0.13 0.14 2.14 0.00
NEIB Northeast Indiana Bncrp of IN 1.19 7.73 3.89 3.84 0.20 3.64 0.06 0.00 0.16 0.22 1.94 0.00
OHSL OHSL Financial Corp. of OH 0.95 7.76 4.43 3.33 0.00 3.33 0.00 0.00 0.15 0.15 2.06 0.00
FFWD Wood Bancorp of OH 1.19 7.90 3.77 4.13 0.09 4.04 0.00 0.00 0.25 0.25 2.48 0.00
</TABLE>
<TABLE>
<CAPTION>
Non-Op. Items Yields, Costs, and Spreads
-------------- -------------------------
MEMO: MEMO:
Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
------- ------- --------- -------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Dearborn Savings
June 30, 1996 0.10 0.00 7.90 5.50 2.40 3,529 29.44
SAIF-Insured Thrifts 0.08 0.00 7.53 4.80 2.73 4,047 36.36
State of IN 0.20 0.00 7.83 4.96 2.87 3,363 36.93
Comparable Group Average 0.08 0.00 7.59 4.98 2.61 4,078 35.94
Mid-West Companies 0.08 0.00 7.59 4.98 2.61 4,078 35.94
Comparable Group
Mid-West Companies
CBIN Community Bank Shares of IN 0.03 0.00 7.13 4.70 2.44 2,846 40.30
CIBI Community Inv. Bancorp of OH(1) 0.08 0.00 7.93 5.07 2.85 3,730 34.13
EFBI Enterprise Fed. Bancorp of OH 0.43 0.00 7.53 5.44 2.08 6,684 34.95
FFWC FFW Corporation of Wabash IN 0.06 0.00 7.80 5.25 2.55 3,960 31.76
HHFC Harvest Home Fin. Corp. of OH(1) 0.00 0.00 7.18 4.83 2.36 4,294 33.89
MFBC MFB Corp. of Mishawaka IN(1) 0.01 0.00 6.94 4.96 1.98 4,100 39.90
MFFC Milton Fed. Fin. Corp. of OH 0.13 0.00 7.57 4.99 2.58 3,962 34.26
NEIB Northeast Indiana Bncrp of IN 0.00 0.00 7.90 5.01 2.90 4,281 38.22
OHSL OHSL Financial Corp. of OH 0.02 0.00 7.91 5.11 2.79 3,604 34.70
FFWD Wood Bancorp of OH 0.07 0.00 8.03 4.43 3.59 3,324 37.32
</TABLE>
(1) Financial information is for the quarter ending March 31, 1996.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The
information provided in this table has been obtained from sources we
believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.9
the twelve months ended March 31, 1996 for some of the Peer Group companies.
Both the Association's and the Peer Group's earnings were fairly representative
of their core earnings, as gains and other non-recurring items were not material
factors in their respective earnings. The Peer Group's higher earnings were
realized primarily through maintenance of a stronger net interest margin, as the
other components of Dearborn Savings' and the Peer Group's earnings were highly
similar.
The Peer Group's stronger net interest margin resulted from a lower
interest expense ratio, which was partially offset by the Association's higher
interest income ratio. As highlighted in the yield-cost section of Table 3.3,
Dearborn Savings' higher interest income ratio was realized through earning a
higher yield on interest-earning assets, which was partially negated by the Peer
Group's higher level of interest-earning assets (97.9 percent versus 96.5
percent for Dearborn Savings). The Association's higher yield on
interest-earning assets was consistent with an asset composition which would
tend to be higher yielding, based on Dearborn Savings' higher concentration of
loans (73.7 percent of assets versus 67.8 percent for the Peer Group). Likewise,
the Peer Group's lower cost of funds was supported by its composition of
interest-bearing liabilities, which reflected a lower level of borrowings (11.7
percent of assets versus 23.0 percent for the Association), and the lower level
of interest-bearing liabilities maintained by the Peer Group (84.3 percent of
assets versus 88.1 percent for Dearborn Savings). Overall, Dearborn Savings and
the Peer Group reported net interest income to average assets ratios of 2.80
percent and 3.31 percent, respectively.
In another key area of core earnings strength, the Association and the Peer
Group maintained comparable levels of operating expenses. For the period covered
in Table 3.3, the Association and the Peer Group recorded operating expense to
average assets ratios of 2.07 percent and 2.03 percent, respectively. Dearborn
Savings' operating expense ratio was comparable to the Peer Group's, despite
maintaining a relatively high number of employees for its asset size. Assets per
full time equivalent employee equaled $3.5 million for the Association, versus a
comparative measure of $4.1 million for the Peer Group. Offsetting Dearborn
Savings' lower assets per employee measure is the expense savings the
Association realizes from operating in a relatively low cost market area.
Comparatively, some of the Peer Group companies operate in higher costing more
urban markets, such as Cincinnati. Maintenance of only one full service branch
facility was also a factor in supporting containment of the Association's
operating expenses. Both Dearborn Savings' and the Peer Group's operating
expense ratios were lower than the average operating expense ratio for all
publicly-traded SAIF-insured thrifts, which was consistent with the less
diversified traditional operating strategies maintained by the Association and
the Peer Group.
When viewed together, net interest income and operating expenses provide
considerable insight into a thrift's earnings strength, since those sources of
income and expenses are typically the most prominent components of earnings and
are generally more predictable than losses and gains realized from the sale of
<PAGE>
RP Financial, LC.
Page 3.10
assets or other non-recurring activities. In this regard, as measured by their
expense coverage ratios (net interest margin divided by the operating expense
ratio), Dearborn Savings' earnings strength was less favorable than the Peer
Group's. Expense coverage ratios posted by Dearborn Savings and the Peer Group
equaled 1.35x and 1.63x, respectively. An expense coverage ratio of greater than
1.0x indicates that an institution is able to sustain pre-tax profitability
without having to rely on non-interest sources of income.
Sources of non-interest operating income made similar contributions to the
Association's and the Peer Group's earnings, based on comparative non-interest
operating income to average assets ratios of 0.23 percent and 0.21 percent,
respectively. Both the Association's and the Peer Group's non-interest operating
income ratios are indicative of traditional thrift operating strategies, which
provides for relatively limited diversification into lines of business that
generate non-interest operating income. Real estate operations were not a
material factor in either the Association's or the Peer Group's earnings, which
was supported by maintenance of favorable credit quality measures and, in
particular, minimal holdings of real estate owned.
Dearborn Savings' and the Peer Group's favorable credit quality measures
also served to limit the impact of loss provisions on their respective earnings,
with loss provisions established by the Association and the Peer Group amounting
to 0.02 percent and 0.06 percent of average assets, respectively. Gains realized
from the sale of loans and investments also similarly impacted the Association's
and the Peer Group's earnings, amounting to 0.10 percent and 0.08 percent of
average assets, respectively. Gains and losses resulting from the sale of loans
and investments are generally viewed as being non-recurring in nature, given
that they are highly dependent upon interest rate movements and typically do not
represent a core earnings activity for a thrift. Accordingly, the Association's
and the Peer Group's gains will be discounted in evaluating the relative
strengths and weaknesses of their respective earnings. Extraordinary items were
not a factor in either the Association's or the Peer Group's earnings.
Effective tax rates of 29.4 percent and 35.9 percent were posted by the
Association and the Peer Group for the periods covered in Table 3.3. The
Association's lower effective tax rate was supported by an investment portfolio
which included investments in tax-exempt municipal bonds. Overall, the
Association's and the Peer Group's reported earnings were fairly reflective of
their core earnings.
Loan Composition
Table 3.4 presents data related to the loan composition of Dearborn Savings
and the Peer Group. An emphasis on low risk residential lending was apparent in
both the Association's and the Peer Group's loan compositions, with 1-4 family
permanent mortgage loans and mortgage-backed securities accounting for 71.5
percent and 80.9 percent of Dearborn Savings' and the Peer Group's loan and MBS
portfolios,
<PAGE>
RP Financial, LC.
Page 3.11
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.4
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of June 30, 1996
<TABLE>
<CAPTION>
Portfolio Composition as a Percent of MBS and Loans
--------------------------------------------------------
1-4 Constr. 5+Unit Commerc. RWA/ Serviced Servicing
Institution MBS Family & Land Comm RE Business Consumer Assets For Others Assets
----- ------ ------ ------ ------ -------- ------ ---------- ------
(%) (%) (%) (%) (%) (%) (%) ($000) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dearborn Savings 2.93 68.54 7.56 7.30 1.30 12.36 48.22 14,066 0
SAIF-Insured Thrifts 16.19 61.22 4.73 11.62 1.60 6.21 50.96 414,498 2,821
State of IN 7.42 67.86 4.72 8.34 3.17 9.52 55.20 85,752 263
Comparable Group Average 8.34 72.58 3.44 8.52 2.54 5.94 48.82 11,716 3
Comparable Group
CBIN Community Bank Shares of IN 5.75 71.46 2.79 9.35 9.67 2.18 49.46 50,939 0
CIBI Community Inv. Bancorp of OH(1) 3.56 76.92 2.42 5.74 1.32 11.08 49.52 746 0
EFBI Enterprise Fed. Bancorp of OH 18.11 59.17 4.93 16.42 0.65 2.84 46.91 0 0
FFWC FFW Corporation of Wabash IN 16.24 55.35 1.93 5.05 4.08 18.02 53.91 20,154 6
HHFC Harvest Home Fin. Corp. of OH(1) 8.56 79.91 0.00 11.40 0.00 0.00 39.92 408 0
MFBC MFB Corp. of Mishawaka IN(1) 3.97 93.07 1.81 0.42 1.21 0.02 41.22 0 0
MFFC Milton Fed. Fin. Corp. of OH 14.32 76.66 2.99 5.65 0.01 1.77 44.66 0 0
NEIB Northeast Indiana Bncrp of IN 0.00 71.18 5.57 10.52 5.10 8.90 60.84 2,096 0
OHSL OHSL Financial Corp. of OH 8.14 64.16 8.52 17.24 0.53 5.48 48.62 22,530 20
FFWD Wood Bancorp of OH 4.75 77.97 3.47 3.42 2.85 9.13 53.17 20,291 0
</TABLE>
(1) Financial information is for the quarter ending March 31, 1996.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The
information provided in this table has been obtained from sources we
believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.12
respectively. The Peer Group's higher ratio was attributable to maintaining
higher concentrations of both 1-4 family permanent mortgage loans and
mortgage-backed securities, relative to the comparative ratios posted by the
Association. Loans serviced for others represented a more significant
off-balance sheet item for the Association, both in terms of dollar balance
($14.1 million versus $11.7 million for the Peer Group) and as a percent of
assets (22.1 percent versus 7.1 percent for the Peer Group). Only two of the
Peer Group companies (FFW Corporation and OHSL Financial) maintained a modest
amount of servicing intangibles, while the Association did not maintain any
servicing intangibles as of June 30, 1996.
As indicated by the higher percentage of 1-4 family loans and
mortgage-backed securities maintained by the Peer Group, lending diversification
was more limited for the Peer Group compared to Dearborn Savings. The
Association's lending diversification consisted primarily of consumer loans
(12.4 percent of loans and MBS), followed by comparable concentrations of
construction/land loans and multi-family/commercial real estate loans (7.6
percent and 7.3 percent of loans and MBS, respectively). Comparatively, the Peer
Group's primary area of lending diversification consisted of
multi-family/commercial real estate loans (8.5 percent of loans and MBS),
followed by consumer and construction/land loans (5.9 percent and 3.4 percent of
loans and MBS, respectively). Commercial business loans represented a minor area
of lending diversification for both Dearborn Savings and the Peer Group,
amounting to 1.3 percent and 2.5 percent of their respective loan and MBS
portfolios. Notwithstanding the Association's greater diversification into
higher risk types of lending, the Peer Group maintained a slightly higher risk
weighted assets-to-assets ratio than the Association (48.8 percent versus 48.2
percent for the Association). Overall, both the Association's and the Peer
Group's risk weighted assets ratios were indicative of relatively low risk
operating strategies, as both ratios were similar to the SAIF-insured average of
51.0 percent.
Interest Rate Risk
Table 3.5 reflects various key ratios highlighting the relative interest
rate risk exposure of the Association versus the Peer Group companies. The data
indicates cumulative one year gap to assets ratios of negative 22.8 percent for
Dearborn Savings and positive 2.1 percent for the Peer Group companies which
reported gap data. Dearborn Savings' one year gap ratio indicates that net
interest income is exposed to a relatively high degree of volatility due to
interest rate movements, while the Peer Group's more closely matched one year
gap ratio should provide for greater stability in the net interest margin in
various interest rate environments. Following the infusion of stock proceeds and
the resulting decline in the proportion of interest sensitive liabilities
meeting the Association's funding needs, Dearborn Savings' one year gap ratio
should narrow. However, the repricing mismatch between the Association's
short-term interest sensitive assets and liabilities can be expected to remain
greater than the Peer Group's.
<PAGE>
RP Financial, LC.
Page 3.13
Table 3.5
Dearborn Savings and the Peer Group
Interest Rate Risk Comparative Analysis
<TABLE>
<CAPTION>
Interest-Earning Non Interest-
Assets/ Earning
One Year Equity/ Interest-Bearing Assets(3)/
Gap/Assets(1) Assets Liabilities(2) Assets
------------- ------ -------------- ------
(%) (%) (%) (%)
<S> <C> <C> <C> <C>
Dearborn Savings(4) -22.8% 10.7% 109.5% 3.6%
Peer Group Average 2.1% 15.1% 116.5% 2.2%
Peer Group(5)
Community Bank Shares of IN NA 11.1% 110.7% 2.3%
Community Inv. Corp. of OH NA 13.8% 114.9% 2.1%
Enterprise Fed. Bancorp of OH 7.3%(J95)14.8% 116.3% 2.1%
FFW Corporation of Wabash IN 9.1%(D95)10.3% 109.4% 2.2%
Harvest Home Fin. Corp. of OH -.7%(S95)17.7% 119.7% 2.5%
MFB Corp. of Mishawaka IN 1.0%(S95) 19.3% 124.1% 1.5%
Milton Fed. Fin. Corp. of OH NA 18.9% 121.1% 2.7%
Northeast Indiana Bncrp of IN NA 18.9% 121.3% 2.6%
OHSL Financial Corp. of OH -5.9%(D95) 12.2% 112.9% 2.9%
Wood Bancorp of OH NA 13.8% 114.6% 1.6%
</TABLE>
(1) Latest date as of: M=March, J=June, S=September, D=December.
(2) Interest-earning assets includes cash; interest-bearing liabilities
includes non interest-bearing deposits but excludes escrows.
(3) Comprised of REO, non-accruing loans, and other non interest-earning assets.
(4) Dearborn Bank's data is as of June 30, 1996.
(5) As of March 31, 1996 or most recent data available.
Sources: Dearborn Bank's prospectus and SNL Securities.
<PAGE>
RP Financial, LC.
Page 3.14
In terms of balance sheet composition, Dearborn Savings' interest rate risk
characteristics were also considered to be less favorable than the Peer Group's.
In particular, Dearborn Savings' lower capital position and resulting lower
IEA/IBL ratio indicate a greater dependence on the yield-cost spread to sustain
the net interest margin. Likewise, Dearborn Savings' higher level of
non-interest earning assets results in a lower capacity to generate interest
income in comparison to the Peer Group. However, on a pro forma basis, the
infusion of stock proceeds should serve to substantially address the lower
equity-to-assets and IEA/IBL ratios currently maintained by Dearborn Savings.
Credit Risk
Overall, Dearborn Savings' credit risk exposure did not appear to be
materially different than the Peer Group's, with both the Association's and the
Peer Group's credit quality measures being representative of limited credit risk
exposure. As shown in Table 3.6, Dearborn Savings' ratio of non-performing
assets (REO, non-accruing loans and accruing loans more than 90 days past due)
to assets equaled 0.04 percent, versus a comparative ratio of 0.23 percent for
the Peer Group. The Peer Group's slightly higher ratio was largely attributable
to maintaining a higher level of non-performing loans, as the Peer Group's REO
balance was nominal. Dearborn Savings did not maintain any REO as of June 30,
1996. Loss reserve ratios as a percent of non-performing assets further
indicated limited credit risk exposure for the Association and the Peer Group,
with the Association and the Peer Group maintaining loss reserves as a percent
of non-performing assets of 869.2 percent and 261.8 percent, respectively. Loss
reserves maintained as percent of loans were comparable for the Association and
the Peer Group, amounting to 0.48 percent and 0.44 percent, respectively. Net
loan charge-offs were not a material factor for either the Association or the
Peer Group, during the period covered in Table 3.6.
Summary
Based on the above analysis and the criteria employed by RP Financial in
the selection of the companies for the Peer Group, RP Financial concluded that
the Peer Group forms a reasonable basis for determining the pro forma market
value of Dearborn Savings. Such general characteristics as asset size, capital
position, interest-earning asset composition, funding composition, core earnings
measures and loan composition all tend to support the reasonability of the Peer
Group from a financial standpoint.
<PAGE>
RP Financial, LC.
Page 3.15
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.6
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of June 30, 1996 or Most Recent Date Available
<TABLE>
<CAPTION>
NPAs & Rsrves/
REO/ 90+Del/ NPLs/ Rsrves/ Rsrves/ NPAs & Net Loan NLCs/
Institution Assets Assets Loans Loans NPLs 90+Del Chargoffs Loans
------ ------ ------ ------ ------ -------- --------- ----------
(%) (%) (%) (%) (%) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dearborn Savings 0.00 0.04 0.06 0.48 869.23 869.23 0 0.00
SAIF-Insured Thrifts 0.20 0.90 0.99 0.86 171.05 122.71 310 0.15
State of IN 0.10 0.70 0.85 0.71 186.54 133.78 154 0.29
Comparable Group Average 0.02 0.23 0.22 0.44 428.60 261.79 9 0.04
Comparable Group
CBIN Community Bank Shares of IN 0.00 0.12 0.09 0.48 532.17 218.57 0 0.00
CIBI Community Inv. Bancorp of OH(1) 0.11 0.73 0.83 0.68 81.39 69.06 43 0.27
EFBI Enterprise Fed. Bancorp of OH 0.00 0.03 0.04 0.27 660.34 660.34 0 0.00
FFWC FFW Corporation of Wabash IN 0.02 0.06 0.06 0.55 852.31 602.17 21 0.08
HHFC Harvest Home Fin. Corp. of OH(1) 0.00 0.19 0.35 0.26 75.51 75.51 0 0.00
MFBC MFB Corp. of Mishawaka IN(1) 0.00 NA NA 0.24 NA NA 0 0.00
MFFC Milton Fed. Fin. Corp. of OH 0.02 0.40 0.27 0.36 131.70 56.05 0 0.00
NEIB Northeast Indiana Bncrp of IN 0.00 0.25 0.28 0.73 258.27 258.27 13 0.04
OHSL OHSL Financial Corp. of OH 0.00 0.12 0.04 0.35 837.10 206.77 0 0.00
FFWD Wood Bancorp of OH 0.02 0.17 0.03 0.46 NA 209.39 11 0.04
</TABLE>
(1) Financial information is for the quarter ending March 31, 1996.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The
information provided in this table has been obtained from sources we
believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 4.1
IV. VALUATION ANALYSIS
Introduction
This chapter presents the valuation analysis, prepared pursuant to the
approved valuation methodology promulgated by the OTS, and valuation factors
used to determine the estimated pro forma market value of the common stock of
the Holding Company. The common stock will be issued in conjunction with the
conversion of the Mutual Holding Company. The Mutual Holding Company is
converting to an Indiana stock corporation pursuant to the Plan. The valuation
has been prepared utilizing the same general pro forma valuation methodology
that has been used in the valuation of standard conversions since 1983. The pro
forma valuation methodology has been modified to reflect the unique
characteristics of the conversion of the Mutual Holding Company, specifically
the fact that the Mutual Holding Company will be selling only a partial
ownership interest in the forthcoming offering, instead of a 100 percent
ownership interest as would be the case in a standard conversion.
Appraisal Guidelines
The OTS appraisal guidelines, originally released in October 1983, specify
the methodology for estimating the pro forma market value of an institution. The
methodology included: (1) selection of a peer group of comparable
publicly-traded institutions, subsequent guidance from the OTS incorporated only
seasoned public companies in the peer group; (2) a financial and operational
comparison of the subject company to the peer group; and (3) a valuation
analysis in which the pro forma market value of the subject company was
determined based on the market pricing of the peer group as of the date of
valuation.
On October 21, 1994, the OTS released written revisions to the appraisal
guidelines, which had already been implemented in practice by the OTS. As
outlined in the guideline revisions, the basic appraisal methodology to be
followed is unchanged from the October 1983 guidelines. The revised guidelines,
however, limit the amount of a new issue discount which may be incorporated into
the valuation and thereby curtail the potential price appreciation in the
after-market. Appraisal firms must be able to demonstrate their general
adherence to the appraisal guidelines by demonstrating that after-market
appreciation of previous conversions, on average, is not excessive in order to
maintain their qualifications to continue practicing before the OTS.
<PAGE>
RP Financial, LC.
Page 4.2
RP Financial Approach to the Valuation
RP Financial's valuation analysis complies with the October 1983 OTS
appraisal guidelines as revised on October 21, 1994. Accordingly, the valuation
incorporates a detailed analysis based on the Peer Group discussed in Chapter
III, incorporating "fundamental analysis" techniques. Additionally, the
valuation incorporates a "technical analysis" of recently completed stock
conversions, given the significant weight in the valuation process of limiting
the after-market increase in the stock. The pricing characteristics of recent
conversions serve as the best proxy for near-term aftermarket trading activity
in newly issued thrift shares, and the pricing characteristics of such recent
conversions has been applied to Dearborn Savings' valuation in order to evaluate
the potential aftermarket trading characteristics upon completion of the
offering. It should be noted that such analysis cannot possibly fully account
for all the market forces which impact trading activity and pricing
characteristics of a stock on a given day.
The pro forma market value determined herein is a preliminary value for the
Holding Company's to-be-issued stock. Throughout the conversion process, RP
Financial will: (1) review changes in the Association's operations and financial
condition; (2) monitor the Association's operations and financial condition
relative to the Peer Group to identify any fundamental changes; (3) monitor the
external factors affecting value including, but not limited to, local and
national economic conditions, interest rates, and the stock market environment,
including the market for thrift stocks; and (4) monitor pending conversion
offerings (including those in the offering phase) both regionally and
nationally. If material changes should occur during the conversion process, RP
Financial will prepare updated valuation reports reflecting such changes and
their related impact on value, if any, over the course of the conversion
process. RP Financial will also prepare a final valuation update at the closing
of the conversion offering to determine if the preliminary range of value
continues to be appropriate.
The appraised value determined herein is based on the current market and
operating environment for the Association and for all thrifts. Subsequent
changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates, and other external forces (such
as natural disasters or major world events), which may occur from time to time
(often with great unpredictability) may materially impact the market value of
all thrift stocks, including Dearborn Savings, or Dearborn Savings' value alone.
To the extent a change in factors impacting the Association's value can be
reasonably anticipated and/or quantified, RP Financial has incorporated the
estimated impact into our analysis.
<PAGE>
RP Financial, LC.
Page 4.3
Valuation Analysis
A fundamental analysis discussing similarities and differences relative to
the Peer Group was presented in Chapter III. The following sections focus on
differences between the Association and the Peer Group and how those differences
affect the pro forma valuation. Emphasis is placed on the specific strengths and
weaknesses of the Association relative to the Peer Group in such key areas as
financial condition, profitability, growth and viability of earnings, asset
growth, primary market area, dividends, liquidity of the issue, marketing of the
issue, management, and the effect of government regulations and/or regulatory
reform. We have also considered the market for thrift stocks, and in particular
new issues, to assess the impact on value of Dearborn Savings coming to market
at this time.
1. Financial Condition
The financial strength of an institution is an important determinant in pro
forma market value, because investors typically look to such factors as
liquidity, capital, asset composition and quality, and funding sources in
assessing investment attractiveness. The similarities and differences in the
Association's financial strength are noted as follows:
o Overall A/L Composition. 1-4 family permanent mortgage loans and MBS
funded by retail deposits were the primary components of both Dearborn
Savings' and the Peer Group's balance sheets. The Association's
interest-earning asset composition exhibited greater yield potential,
based on its higher concentration of loans and greater diversification
into higher credit risk types of loans. However, the credit risk
associated with both the Association's and the Peer Group's balance
sheets was considered to be quite limited, as indicated by relatively
low risk weighted assets-to-assets ratios and favorable credit quality
measures. Dearborn Savings' funding composition reflected a lower
level of deposits and higher concentration of borrowings than the
respective Peer Group measures, which translated into higher funding
costs for the Association. Overall, RP Financial concluded that the
Association's and the Peer Group's A/L compositions were similar and
no adjustment was warranted for valuation purposes.
o Credit Risk. Both the Association's and the Peer Group's credit
quality measures were indicative of limited credit risk exposure.
Dearborn Savings and the Peer Group both maintained low levels of
non-performing assets (0.04 percent of assets versus 0.23 percent for
the Peer Group) and high levels of reserves as a percent of
non-performing assets (869.2 percent and 261.8 percent for the Peer
Group). Loss reserves maintained as percent of loans were comparable
for the Association and the Peer Group, equaling 0.48 percent and 0.44
percent, respectively. Overall, the Association's and the Peer Group's
credit quality measures were considered to be highly favorable and
indicative of limited credit risk exposure. Therefore, RP Financial
concluded that no adjustment was warranted for valuation purposes.
o Liquidity. The Peer Group operated with a slightly higher level of
cash and investments than the Association (23.9 percent of assets
versus 20.4 percent for Dearborn Savings), but the Association's
proportion of cash and investments is likely to increase on a pro
forma basis. Borrowings were utilized to a greater degree by the
Association (23.0 percent of assets versus
<PAGE>
RP Financial, LC.
Page 4.4
11.7 percent for the Peer Group), thereby indicating that the
Association's future borrowing capacity is more limited than the Peer
Group's. Overall, the Peer Group's balance sheet liquidity is
considered to be slightly more favorable than the Association's, in
light of the Peer Group's greater borrowing capacity. Therefore, RP
Financial concluded that Dearborn Savings' balance sheet liquidity
warranted a slight downward adjustment for valuation purposes.
o Funding. Retail deposits served as the primary interest-bearing source
of funds for the Association and the Peer Group, with the Peer Group
maintaining a slightly higher level of deposits than Dearborn Savings.
More than offsetting the Association's lower level of deposits was its
greater utilization of borrowings, which was less favorable for the
Association in terms of funding costs and future borrowing capacity.
Accordingly, RP Financial concluded that Dearborn Savings' funding
composition warranted a slight downward adjustment for valuation
purposes.
o Capital. The Association operates with a lower pre-conversion capital
ratio than the Peer Group, 10.7 percent and 15.1 percent of assets,
respectively. This disadvantage will be addressed as a result of the
stock offering, as the Association's and the Holding Company's
consolidated pro forma capital position should be comparable to the
Peer Group's equity-to-assets ratio. Additionally, the increase in
capital will also serve to depress the Association's return on equity
("ROE") to a level that is comparable or slightly below the Peer
Group's ROE. Overall, RP Financial concluded that no valuation
adjustment was warranted for the Association's capital position.
On balance, we believe the Association's less favorable balance sheet
liquidity and less attractive funding composition warranted a slight downward
adjustment relative to the Peer Group for financial condition.
2. Profitability, Growth and Viability of Earnings
Earnings are an important factor in determining pro forma market value, as
the level and risk characteristics of an institution's earnings stream and the
prospects and ability to generate future earnings are typically heavily factored
into an investment decision. The historical income statements of Dearborn
Savings and the Peer Group were generally reflective of traditional thrift
operating strategies, with net interest income and operating expense ratios
being the major determinants of their respective earnings. The specific factors
considered in the valuation include:
o Reported Earnings. The Association recorded lower earnings on a ROAA
basis (0.73 percent versus 0.97 percent for the Peer Group). The
difference between the Association's and the Peer Group's returns was
largely attributable to the Peer Group's more favorable core earnings
and, in particular, the higher net interest margin maintained by the
Peer Group. Accordingly, for valuation purposes, the disparity between
the Association's and the Peer Group's reported earnings was
considered to be indicative of the Peer Group's more favorable
recurring earnings strength and, thus, Dearborn Savings' lower
reported earnings warranted a slight downward adjustment for valuation
purposes.
<PAGE>
RP Financial, LC.
Page 4.5
o Core Earnings. Both the Association's and the Peer Group's earnings
were derived largely from recurring sources, including net interest
income, operating expenses, and non-interest operating income. In
these measures, the Association operated with a lower net interest
margin, a comparable expense ratio and a similar level of non-interest
operating income. The Peer Group's stronger net interest margin and
comparable level of operating expenses translated into a higher
expense coverage ratio (1.63x versus 1.35x for the Peer Group).
Consistent with the Association's and the Peer Group's favorable
credit quality measures, loss provisions had a minimal impact on their
respective earnings. Overall, these measures, as well as the expected
earnings benefits the Association should realize from the redeployment
of conversion proceeds into interest-earning assets, indicate that the
Association's core earnings are not quite as strong as the Peer
Group's. Accordingly, we concluded that a slight downward valuation
adjustment was warranted for the Association's core earnings.
o Interest Rate Risk. One year cumulative gap ratios for Dearborn
Savings and the Peer Group equaled negative 22.8 percent and positive
2.1 percent, respectively, indicating that there is a higher degree of
interest rate risk associated with the Association's net interest
margin. Other measures of interest rate risk, such as equity-to-assets
ratios, IEA/IBL ratios, and the level of non-interest earning assets
to total assets were more favorable for the Peer Group, although, on a
pro forma basis, the infusion of stock proceeds will address the less
favorable equity-to-assets and IEA/IBL ratios currently maintained by
the Association. Similarly, the Association's negative gap position
should be less significant following the redeployment of stock
proceeds into short-term investments, although the Association's one
year gap ratio will remain negative and continue to indicate greater
interest rate risk exposure relative to the Peer Group's one year gap
ratio. Accordingly, RP Financial concluded that a slight downward
adjustment was warranted for the greater interest rate risk associated
with the Association's earnings.
o Credit Risk. Loan loss provisions were not a significant factor in
either Dearborn Savings' or the Peer Group's earnings. In terms of
future exposure to credit quality related losses, both the
Association's and the Peer Group's operating strategies and credit
quality measures indicated relatively limited credit risk exposure.
Lending diversification into higher risk types of loans was more
notable for the Association and the Association maintained a higher
concentration of loans as a percent of assets, which would tend to
indicate greater credit risk exposure for Dearborn Savings. However,
Dearborn Savings' risk weighted assets-to-assets ratio was slightly
lower than Peer Group's ratio, and the Association's credit quality
measures were as good or better than the Peer Group's. Overall, RP
Financial concluded that the credit risk exposure associated with the
Association's earnings was similar to the Peer Group's and no
adjustment was warranted for valuation purposes.
o Earnings Growth Potential. Several factors were considered in
assessing earnings growth potential. First, the Association maintains
a similar concentration of liquid cash and investments, which provides
a ready source of funds for funding potential loan growth. Second,
opportunities for lending in the Association's market area are
considered to be slightly more favorable than in the primary market
areas served by the Peer Group companies, as indicated by the stronger
population being realized in the Association's primary market area
(see Exhibit III-3). Lastly, the Association's leverage capacity will
be comparable to the Peer Group's, based on a pro forma capital
position that will be similar to the Peer Group's equity-to-assets
ratio. On balance, the Association's earnings growth potential was
considered to be slightly more favorable than the Peer Group's, and a
slight upward adjustment was warranted for valuation purposes.
<PAGE>
RP Financial, LC.
Page 4.6
Overall, in comparison to the Association, the Peer Group's more favorable
reported and core earnings and lower interest rate risk were viewed as more than
negating Dearborn Savings' slightly more favorable earnings growth potential.
Therefore, RP Financial concluded that a slight downward valuation adjustment
was warranted for profitability, growth and viability of the Association's
earnings relative to the Peer Group's.
3. Asset Growth
Dearborn Savings' asset growth was lower than the Peer Group's, during the
period covered in our comparative analysis (3.0 percent versus 9.4 percent for
the Peer Group). This characteristic would normally be considered as a negative,
but was somewhat offset by the potential asset growth the Association will be
able to realize following the infusion of stock proceeds. On a pro forma basis,
the Association's equity-to-assets ratio will be similar to the Peer Group's,
with both Dearborn Savings' and the Peer Group's capital positions providing for
notable leverage potential. Accordingly, future asset growth potential appears
to be comparable for Dearborn Savings versus the Peer Group and no valuation
adjustment was warranted for this factor.
4. Primary Market Area
The general condition of a financial institution's market area has an
impact on value, as future success is in part dependent upon opportunities for
profitable activities in the local market area. A diversified and stable economy
has supported relatively favorable demographic measures for the Association's
primary market area in recent years, as indicated by strong population and
household growth rates. Overall, a stable local economy, strong demographic
growth and moderate unemployment are viewed as being favorable market area
characteristics with respect to limiting credit risk exposure and supporting
growth opportunities. At the same time, given the desirable features of the
market area, Dearborn Savings faces notable competition from numerous other
financial institutions, including many which are significantly larger than the
Association.
In general, the Peer Group companies also operate in MSAs where there is
significant competition from larger and more diversified financial institutions,
although, on average, the Peer Group companies maintained a slightly higher
deposit market share in their respective markets than maintained by Dearborn
Savings in Dearborn County. Population growth in the markets served by the Peer
Group companies was not as favorable as exhibited by Dearborn County, while
average per capita income in the primary market areas served by the Peer Group
companies was slightly higher than Dearborn County's per capita income. Summary
demographic and deposit market share data for the Association and the Peer Group
companies is provided in Exhibit III-3. As shown in Table 4.1, June 1996
unemployment rates in the markets served by the Peer Group companies were
generally slightly lower than Dearborn County's June 1996 unemployment rate, and
were
<PAGE>
RP Financial, LC.
Page 4.7
considered to be indicative of relatively stable economic environments. Overall,
the Peer Group companies operate in healthy and stable economic environments,
which would tend to provide for comparability with respect to the degree of
credit risk exposure associated with their primary market areas as compared to
Dearborn County. In terms of growth potential, Dearborn County's higher
population growth would tend to be more supportive of growth opportunities.
Therefore, we concluded a slight upward adjustment was appropriate for the
Association's market area.
Table 4.1
Market Area Unemployment Rates
Dearborn Savings and the Peer Group Companies (1)
June 1996
County Unemployment
------ ------------
Dearborn Savings - IN Dearborn 5.6%
The Peer Group
Community Bank Shares - IN Floyd 3.6%
Community Inv. Corp. - OH Crawford 6.8
Enterprise Fed. Bancorp. - OH Hamilton 4.5
FFW Corporation of Wabash - IN Wabash 4.1
Harvest Home Fin. Corp. - OH Hamilton 4.5
MFB Corp. of Mishawaka - IN St. Joseph 4.1
Milton Fed. Fin. Corp. - OH Miami 4.4
Northeast Indiana Bancorp - IN Huntington 3.7
OHSL Financial Corp. - OH Hamilton 4.5
Wood Bancorp - OH Wood 3.9
(1) Unemployment rates are not seasonally adjusted.
Source: U.S. Bureau of Labor Statistics.
5. Dividends
The Holding Company has indicated its intentions to pay an annual cash
dividend. At this time the Association has indicated that the annual dividend
payment will approximate $0.28 per share at the midpoint, which would provide
for a yield of 2.80 percent based on the initial offering price of $10.00 per
share, and a pro forma payout ratio of approximately 34 percent. However, future
declarations of dividends by the Board of Directors will depend upon a number of
factors, including investment opportunities available to the Holding Company or
the subsidiary banks, capital requirements, regulatory limitations, the Holding
Company's and the Association's financial condition and results of operations,
tax considerations and general economic conditions.
<PAGE>
RP Financial, LC.
Page 4.8
Historically, thrifts typically have not established dividend policies at
the time of their conversion to stock ownership. Newly converted institutions,
in general, have preferred to gain market seasoning, establish an earnings track
record and fully invest the conversion proceeds before establishing a dividend
policy. However, during the late-1980s and early-1990s, with negative publicity
surrounding the thrift industry, there was a tendency for more thrifts to
initiate moderate dividend policies concurrent with their conversion as a means
of increasing the attractiveness of the stock offering. Today, fewer
institutions are compelled to initially establish dividend policies at the time
of their conversion offering as (1) industry profitability has improved, (2) the
number of problem thrift institutions has declined, and (3) the stock market
cycle for thrift stocks is generally more favorable than in the early-1990s. At
the same time, with ROE ratios under pressure, due to high equity levels,
well-capitalized institutions are subject to increased competitive pressures to
offer dividends.
As publicly-traded thrifts' capital levels and profitability have improved
and as weakened institutions have been resolved, the proportion of institutions
with cash dividend policies has increased. Nine out of the ten institutions in
the Peer Group presently pay regular cash dividends, with implied dividend
yields ranging from 1.55 percent to 4.05 percent. The average dividend yield on
the stocks of the Peer Group institutions was 2.55 percent as of September 6,
1996, representing an average earnings payout ratio of 37.45 percent. As of
September 6, 1996, approximately 78 percent of all publicly-traded SAIF-insured
thrifts had adopted cash dividend policies (see Exhibit IV-1), exhibiting an
average yield of 2.46 percent and an average payout ratio of 36.01 percent. The
dividend paying thrifts generally maintain higher than average profitability
ratios, facilitating their ability to pay cash dividends.
The Holding Company's indicated dividend yield and payout ratio are
comparable to the Peer Group averages. Accordingly, given the comparability of
the Association's and the Peer Group's dividend payments and dividend paying
capacities, no adjustment was necessary for this valuation consideration.
6. Liquidity of the Shares
The Peer Group is by definition composed of companies that are traded in
the public markets, all of which trade on the NASDAQ system. Dearborn Savings'
stock is expected to be listed on the NASDAQ as well. Typically, the number of
shares outstanding and market capitalization provides an indication of how much
liquidity there will be in a particular stock. The market capitalization of the
Peer Group companies ranged from $9.2 million to $31.1 million as of September
6, 1996, with an average market value of $22.0 million. The shares outstanding
of the Peer Group members ranged from 701,000 to 2.3 million, with average
shares outstanding of approximately 1.5 million. The Association's conversion
offering will result in a market value that will be less than all of the Peer
Group companies and shares outstanding that will be at the lower end of the Peer
Group range. Accordingly, there is expected to be less liquidity in the
Association's
<PAGE>
RP Financial, LC.
Page 4.9
stock compared to the stocks of the Peer Group companies, thus we have applied a
slight downward adjustment for this valuation factor.
7. Marketing of the Issue
We believe that four separate markets exists for thrift stocks coming to
market such as Dearborn Savings: (1) the after-market for public companies, in
which trading activity is regular and investment decisions are made based upon
financial condition, earnings, capital, ROE and dividends; (2) the new issue
market in which converting thrifts are evaluated on the basis of the same
factors but on a pro forma basis without the benefit of a stock trading history
and reporting quarterly operating results as a publicly-held company; (3) the
acquisition market for thrift franchises in Indiana; and (4) the market for the
public stock of Dearborn Savings. All of these markets were considered in the
valuation of the Association's to-be-issued stock.
A. The Public Market
The value of publicly-traded thrift stocks is easily measurable, and
is tracked by most investment houses and related organizations. In general,
thrift stock values react to market stimuli such as interest rates, inflation,
perceived industry health, projected rates of economic growth, regulatory issues
and stock market conditions in general. Exhibit IV-2 displays historical stock
market trends for various indices and includes historical stock price index
values for thrifts and commercial banks. Exhibit IV-3 displays historical stock
price indices for thrifts only.
In terms of assessing general stock market conditions, the stock
market has trended higher over the past year. The first rate cut in nearly three
years propelled the stock market to new highs in mid-July 1995, as the DJIA
closed above the 4700 mark in the second week of July. A more upbeat assessment
of the economy by the Fed and mixed economic data, both of which lessened the
likelihood of further rate cuts by the Fed, caused the stock market to retract
modestly in late-July and early-August. Profit taking and moderating
expectations of earnings growth in the technology sector further contributed to
the pull-back in the stock market, while news of Disney's acquisition of Cap
Cities/ABC had little impact on the overall stock market. The strengthening
dollar also served to push the DJIA lower in late-August, as the blue-chip
multinational stocks experienced selling pressure in light of lower earnings
expectations from their foreign operations.
The sell-off in the stock market was brief, as the DJIA rebounded
during the first half of September 1995. Technology stocks initially led the
stock market upturn, as investors found technology issues more attractively
priced following the downturn in July and August. Favorable inflation data
bolstered the DJIA in mid-September, as well as provided for a rally in bond
prices. While the DJIA was further boosted by
<PAGE>
RP Financial, LC.
Page 4.10
AT&T's breakup announcement, weakness in the dollar and unfavorable inflation
data pushed bond and stock prices lower in late-September.
Quarterly earnings controlled the market in beginning of the fourth
quarter, with day-to-day fluctuations reflecting positive and negative earnings
surprises particularly in the technology sector. Economic data indicating that
the economy was on track for a soft landing provided for a rally in the bond
market and stability in the stock market in mid-October 1995, which was followed
by a broad sell-off in the stock market in late-October. The sell-off was
primarily attributable to increasing signs of consumer credit weakness and the
possibility that such weakness could lead to a recession. However, the downturn
was brief, as the DJIA rallied to new highs in early- and mid-November. The
rally was initially led by transportation issues, and continued strength in the
bond market. Investors poured into defensive issues during the first U.S. budget
impasse, with the DJIA posting several consecutive highs in mid-November. The
DJIA surged past the 5000 mark in late-November, reflecting strength in blue
chip issues and a mild rebound in the technology sector amid increasing
expectations that the Federal Reserve would cut short-term interest rates.
Defensive issues sustained the rally through early-December, while weakness in
the technology sector provided for a slight pull-back in the stock market in
mid-December. At the close of 1995, market activity was mixed. Favorable
inflation data led to a 0.25 percent cut in short-term interest rates by the
Federal Reserve in late-December, which served to initially lift stock prices.
However, the second national budget impasse and weak holiday retail sales
quickly erased the positive impact of the interest rate cut, as the DJIA dropped
sharply one day after the Federal Reserve action. Bond prices rallied on news of
the sagging economy, as the 30-year bond yield fell below 6.0 percent in
late-December.
The stock market began 1996 on a down note, reflecting concern over
the budget stalemate in Washington. A sell-off in technology stocks further
sustained the decline in the stock market, as investors dumped technology stocks
on profit concerns. However, favorable inflation data and strong fourth quarter
earnings by some blue chip issues served to abbreviate the decline in the stock
market, with the DJIA posting several new highs in the second half of January.
Stock prices were further boosted by increasing expectations of another rate cut
by the Federal Reserve, which occurred at the end of January. The stock market
moved sharply higher in early-February, as the cut in short-term interest rates
and strong fourth quarter earnings posted by some large technology companies
served to renew investor interest in technology stocks. Low inflation and modest
economic growth translated into renewed interest for cyclical stocks as well,
with the DJIA posting five consecutive all-time highs during the week ended
February 9. Congressional testimony by the Federal Reserve Chairman provided for
significant swings in the stock market in mid-February, reflecting changing
investor sentiment regarding the possibility of future rate cuts. The volatility
continued through the end of February, reflecting turbulence in the bond market
and general uncertainty over future interest rate
<PAGE>
RP Financial, LC.
Page 4.11
trends. An unexpectedly large drop in the February unemployment rate provided
for a sharp one day sell-off in the stock market on March 8, as bond prices
plunged on news of the strong job growth and the possibility that an
accelerating economy may lead to higher inflation. However, the stock market
recovered the following week, as inflation fears were somewhat alleviated by
additional economic data which indicated a more modest pace of economic growth
than suggested by the unemployment data, including a 0.2 percent drop in
February wholesale prices. After trading in a narrow range through the end of
March, merger activity and a jump in IBM's stock price propelled the DJIA to a
new record in early-April. The upturn was brief, as bond and stock prices
slumped following the stronger than expected March employment report which
served to rekindle inflation fears.
Earnings reports dominated the stock market in mid-April 1996, with
day-to-day fluctuations in the market reflecting changing investor sentiment
regarding the strength of first quarter earnings and future earnings
expectations. Favorable fourth quarter earnings among technology issues pushed
the NASDAQ Composite Index to new highs in late-April and early-May, while blue
chip stocks lagged the overall market. Stronger than expected first quarter GDP
growth reported in early-May stirred major sell-offs in stocks and bonds,
resulting in the 30-year bond edging above 7.0 percent and a one day drop in the
DJIA of almost 77 points. Inflation concerns receded somewhat following a
mid-May report by the Federal Reserve, which indicated that inflation remained
in check and near term rate increases were not likely. The positive reading on
inflation by the Federal Reserve, along with the Federal Reserve's decision to
leave interest rates unchanged at its late-May meeting, served to strengthen
bond and stock prices, with the DJIA posting new highs in late-May and the
30-year bond dropping below 7.0 percent. However, signs of an accelerating
economy and revised upward estimates of second quarter GDP growth provided for a
pullback in the stock market at the end of May. Stronger than expected job
growth in May further depressed bond prices in early-June, which served to stall
the stock market as well. A relatively narrow trading range was exhibited by the
stock market through late-June.
Expectations that the Federal Reserve would not tighten interest rates
at its July 1996 meeting provided for a rally in the bond market in late-June,
as the 30-year bond yield dropped below 7.0 percent. The positive interest rate
outlook also served to boost the stock market in early-July, but the rally was
cut short by a larger than expected drop in June unemployment. Bond and stock
prices tumbled following the June unemployment report, as highlighted by a 115
point decline in the Dow Jones Industrial Average ("DJIA") and an increase in
the 30-year bond yield to 7.18 percent. The release of second quarter earnings
reports provided for a volatile stock market in mid-July, especially among the
technology stocks. Overall, the stock market declined due to earnings
disappointments, with a more severe decline occurring in the technology driven
NASDAQ Composite Index. At the same time bond prices recovered, as the 30-year
bond yield dropped
<PAGE>
RP Financial, LC.
Page 4.12
below 7.0 percent following statements by the Federal Reserve Chairman which
indicated he expected the economy to slow down in the second half of 1996.
Stocks and bonds rallied in late-July and early-August, as economic data
indicated a healthy but moderating economy. Higher interest rates pushed stocks
lower in late-August, reflecting increasing expectations that the Federal
Reserve would tighten interest rates in September. The decline in the stock
market was reversed in early-September, as investors reacted positively to the
inflation data contained in the August employment report. On September 6, 1996,
the DJIA closed at 5659.86, translating into an increase of 10.6 percent from
year end 1995.
The market for thrift stocks has generally been favorable during the
past year. Lower interest rates, healthy economies in most regions of the U.S.
and acquisition speculation all contributed to the upward trend exhibited in
thrift prices during mid-1995. The run-up in thrift prices moderated somewhat
during July and the first half of August 1995, reflecting profit taking, as
thrift prices approached historically high pricing multiples, and indications of
lower profitability due to shrinking net interest margins. However, the trend in
thrift issues remained generally positive, as acquisitions of thrift issues
continued at a healthy pace during the first half of the third quarter.
The upward trend in thrift prices accelerated in late-August and the
first half of September 1995, as acquisition activity among financial
institutions became more pronounced. Most notably, acquisitions or mergers
involving some of the nation's largest banks were announced during the third
quarter, including the merger between Chase Manhattan and Chemical Bank which
resulted in the largest banking entity in the U.S. A court ruling favoring
thrifts seeking damages against the U.S. government for breach-of-contract
involving the accounting treatment of supervisory goodwill further heightened
interest in thrift stocks, as the SNL index closed 2.4 percent higher the day of
the ruling. Following the significant run-up recorded through mid-September,
slightly higher interest rates and profit taking nudged thrift prices lower in
late-September.
Lower interest rates and generally favorable third quarter earnings
propelled thrift prices higher during the first half of October 1995, while
credit quality concerns sparked a widespread sell-off in financial stocks during
late-October. In particular, the concerns were related to rising consumer
delinquencies, as indicated by a steady rise in the consumer delinquency index
maintained by the American Bankers Association. For the first time since 1991,
the index increased for three consecutive quarters. However, sustained by
acquisition activity and relatively low interest rates, thrift stocks edged
higher during the first half of November. A tax law change in the new
congressional budget, which would provide for the elimination of back taxes on
bad-debt reserves taken before 1988, served to push thrift stocks higher in
late-November, as investors speculated that the removal of the potential back
taxes would accelerate the pace of mergers and acquisitions in the thrift
industry. Uncertainty regarding the Federal Reserve's intentions on cutting
short-term interest rates provided for a relatively narrow trading range for
thrift stocks during the first half of December.
<PAGE>
RP Financial, LC.
Page 4.13
The rate cut by the Fed and reports of sluggish retail sales led to a rally in
the bond market in late-December, which, in turn, bolstered prices for thrift
and bank issues.
Thrift stocks followed the stock market in general lower in
early-1996, reflecting concern that the absence of a budget agreement would lead
to higher interest rates. The downturn in thrift stocks was brief, as thrift
prices trended higher in the second half of January. Economic data which
indicated that inflation was low supported the recovery in thrift prices, with
the favorable inflation data serving to calm the credit markets amid increasing
expectations that interest rates would remain low. Thrift prices were further
boosted by the Federal Reserve's move to cut short-term interest rates at the
end of January and generally favorable fourth quarter earnings. Mixed
indications on the future direction of interest rates translated into a
relatively narrow trading range for thrift stocks throughout February.
Interest sensitive issues were among the stocks most severely affected
by the sell-off precipitated by the decline in the February 1996 unemployment
rate, as prospects for further near-term rate cuts by the Federal Reserve were
substantially eliminated by the explosive job growth. However, thrift prices
rebounded in late-March and early-April as interest rates stabilized. A bullish
outlook on the financial institution sector in general served to further bolster
prices in early-April, as a number of analysts forecasted healthy first quarter
earnings for thrift and bank stocks and that the financial institution sector
would outperform the market in general during the balance of 1996. However,
thrift prices declined following the release of the March employment report, as
interest sensitive stocks were pulled lower by the unfavorable interest rate
outlook. The downturn was abbreviated by the generally strong first quarter
earnings posted by bank and thrift issues, which provided for a mild upward
trend in thrift stocks in mid-April. Paralleling the stock market in general,
thrift prices dropped sharply in early-May following the rise in interest rates
caused by the strong first quarter GDP growth. Thrift prices rebounded in
mid-May, as interest rates declined slightly on the strength of tame inflation
news. At the end of May and through mid-June, uncertainty over future interest
rate trends provided for a flat thrift stock market.
The Supreme Court's ruling in favor of thrifts seeking damages for
goodwill served to boost thrift prices in the beginning of July, but the upturn
was abbreviated by a sharp increase in interest rates in early-July. The sharp
rise in interest rates, which was prompted by the stronger than expected June
unemployment report, pushed interest-sensitive issues in general lower.
Generally favorable second quarter earnings and lower interest rates supported a
modest recovery in thrift prices in mid-July, although concerns about future
interest rate trends moderated the impact of the healthy second quarter
earnings. Lower interest rates and the announced acquisitions of two large
California thrifts, American Savings with $20 billion in assets and CalFed
Bancorp with $14 billion in assets, pushed the SNL Index higher in late-July and
through mid-August. Thrift stocks settled into a narrow trading range in
late-August and early-September, as higher interest
<PAGE>
RP Financial, LC.
Page 4.14
rates dampened interest in the thrift sector. The SNL Index for all
publicly-traded thrifts closed at 410.8 on September 6, 1996, an increase of
15.2 percent from one year ago.
B. The New Issue Market
In addition to thrift stock market conditions in general, the new
issue market for converting thrifts is also an important consideration in
determining the Association's pro forma market value. The market for converting
thrifts was favorable throughout most of 1995, as the improving market for
thrift stocks in general translated into stronger demand for converting thrifts
as well. Demand for converting issues remained strong in the first quarter of
1996, with most offerings being oversubscribed and posting healthy increases in
near term aftermarket trading. In general, the market for the most recent
converting issues (offering completed within the past three months) has begun to
show signs of weakness, as indicated by fewer oversubscriptions and generally
weak aftermarket trading activity exhibited in the stocks of recently converted
institutions. In comparison to recent prior quarters, the price appreciation
exhibited in the most recent offerings has been limited, despite lower closing
P/B ratios on average, and in a few cases converting thrift issues have traded
below their IPO prices. As shown in Table 4.2, the median one week change in
price for offerings completed during the latest three months equaled positive
4.4 percent.
In examining the current pricing characteristics of institutions
completing their conversions during the last three months (see Table 4.3), we
note there exists a considerable difference in pricing ratios compared to the
universe of all publicly-traded thrifts. Specifically, the current average P/B
ratio of the conversions completed in the most recent three month period of
82.34 percent reflects a discount of 22.1 percent from the average P/B ratio of
all publicly-traded SAIF-insured thrifts (equal to 105.73 percent), and the
average core P/E ratio of 18.68 times reflects a premium of 23.3 percent from
the all SAIF-insured public average core P/E ratio of 15.15 times. The pricing
ratios of the better capitalized but lower earning recently converted thrifts
suggest that the investment community has determined to discount their stocks on
a book basis until the earnings improve through redeployment and leveraging of
the proceeds over the longer term.
In determining our valuation adjustment for marketing of the issue, we
considered trends in both the overall thrift market and the new issue market.
The overall market for thrift stocks is considered to be healthy, as indicated
by the generally positive trend reflected in the SNL Index. However, in recent
weeks, the market for thrift stocks has been relatively flat. Additionally, the
most recent upward trend exhibited in the SNL Index, late-July through
mid-August, was not considered to be reflective of a broad-based rally in thrift
issues. Rather certain segments of the thrift market accounted for most of the
appreciation, most notably California thrifts following the recent acquisition
announcements of two large California thrifts and thrifts
<PAGE>
RP Financial, LC.
Page 4.15
----------------------------------------------------------
Table 4.2
Recent Conversions (Last Three Months)
Conversion Pricing Characteristics: Sorted Chronologically
----------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Information Pre-Conversion Data
----------------------------- Offering Insider Purchases
Financial Info. Asset Quality Information
- ------------------------------------------------------------------------------------------------------------------------------------
Benefit Plans
-------------
Conversion Equity/ NPAs/ Res. Gross % of Exp./ Recog. Mgmt.
Institution State Date Ticker Assets Assets Assets Cov. Proc. Mid. Proc. ESOP Plans & Dirs.
- ----------- ----- ---- ------ ------ ------ ------ ---- ----- ---- ----- ---- ----- -------
($Mil) (%) (%)(2) (%) ($Mil) (%) (%) (%) (%) (%)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Park Bancorp IL 08/12/96 PFED $151 11.64% 0.09% 625% $27.0 98% 2.9% 8.0% 4.0% 3.5%
Lenox Bancorp(1) OH * 07/17/96 P. Sheet 44 8.55% 0.21% 65% 4.3 85% 10.6% 8.0% 4.0% 4.1%
Acadiana Bancshares(1) LA * 07/16/96 ANA 230 7.69% 1.00% 103% 32.8 115% 3.0% 8.0% 4.0% 2.4%
Pennwood SB(1) PA * 07/15/96 PWBK 42 9.63% 2.64% 44% 6.1 94% 6.6% 8.0% 4.0% 11.1%
Mitchell Bancorp(1) NC 07/12/96 MBSP 28 21.62% 3.40% 15% 9.8 92% 7.1% 8.0% 4.0% 2.9%
Algiers Bancorp LA 07/09/96 P. Sheet 44 9.46% 0.27% 447% 6.5 132% 5.4% 8.0% 4.0% 6.7%
Ocean Financial Corp. NJ * 07/03/96 OCFC 1,130 8.15% 1.01% 52% 167.8 132% 2.6% 8.0% 4.0% 1.2%
Home Financial Bancorp(1) IN 07/02/96 HWEN 34 9.85% 0.24% 148% 5.1 89% 6.1% 8.0% 4.0% 7.1%
First Lancaster Bancshares KY * 07/01/96 FLKY 35 13.95% 1.57% 22% 9.6 132% 4.6% 8.0% 4.0% 9.4%
Heartland Bancshares IL 07/01/96 P. Sheet 61 7.75% 0.93% 53% 8.8 125% 5.8% 8.0% 4.0% 14.8%
Kenwood Bancorp(7) OH * 07/01/96 P. Sheet 48 6.88% 0.00% NM 1.6 102% 22.2% 8.0% 4.0% 6.4%
Eagle BancGroup IL * 07/01/96 EGLB 152 7.40% 0.93% 64% 13.0 90% 5.3% 8.0% 4.0% 6.3%
Provident Financial Holdings CA * 06/28/96 PROV 558 7.10% 1.80% 50% 51.3 101% 2.2% 8.0% 4.0% 2.9%
Prestige Bancorp PA 06/27/96 PRBC 94 7.56% 0.33% 95% 9.6 96% 5.0% 8.0% 4.0% 6.9%
Wayne Bancorp NJ 06/27/96 WYNE 196 8.91% 1.79% 46% 22.3 89% 4.4% 8.0% 4.0% 4.4%
Mechanics SB(1) CT 06/26/96 MECH 670 3.68% 2.75% 56% 52.9 132% 3.6% 2.3% 0.0% 1.5%
Dime Community Bancorp NY * 06/26/96 DIME 1,094 7.46% 0.75% 77% 145.5 132% 2.5% 8.0% 4.0% 2.7%
Commonwealth Bancorp(7) PA * 06/17/96 CMSB 2,054 6.71% 0.51% 109% 98.7 110% 1.9% 8.0% 4.0% 0.1%
CNS Bancorp MO * 06/12/96 CNSB 87 10.66% 0.19% 189% 16.5 132% 3.3% 8.0% 4.0% 8.0%
Westwood Financial Corp.(7) NJ 06/07/96 WWFC 85 7.05% 0.00% NM 3.9 99% 9.9% 0.0% 0.0% 2.5%
Lexington B&L Fin. Corp. MO * 06/06/96 LXMO 51 14.66% 1.88% 21% 12.7 115% 4.2% 8.0% 4.0% 4.3%
Averages: $328 9.35% 1.06% 120% $33.6 109% 5.7% 7.3% 3.6% 5.2%
Medians: 87 8.15% 0.93% 64% 12.7 102% 4.6% 8.0% 4.0% 4.3%
Averages, Excluding 2nd Steps $261 9.76% 1.21% 136% $33.4 110% 4.7% 7.7% 3.8% 5.6%
Medians, Excluding 2nd Steps 90 8.73% 0.97% 60% 12.8 108% 4.5% 8.0% 4.0% 4.4%
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Information Pro Forma Data
- ------------------------------------------------------------------------------------------------------------------------------------
Pricing Ratios(4) Fin. Characteristics
- ------------------------------------------------------------------------------------------------------------------------------------
Conversion
Institution State Date Ticker P/TB P/E P/A ROA TE/A ROE
- ----------- ----- ---- ------ ---- --- --- --- ---- ---
(%) (x) (%) (%) (%) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Park Bancorp IL 08/12/96 PFED 66.6% 20.5 15.5% 0.8% 23.3% 3.2%
Lenox Bancorp(1) OH * 07/17/96 P. Sheet 60.0% 29.7 8.9% 0.3% 14.9% 2.0%
Acadiana Bancshares(1) LA * 07/16/96 ANA 72.0% 20.0 12.7% 0.6% 17.7% 3.6%
Pennwood SB(1) PA * 07/15/96 PWBK 67.4% 19.3 12.8% 0.7% 18.9% 3.5%
Mitchell Bancorp(1) NC 07/12/96 MBSP 69.7% 33.2 27.0% 0.8% 38.7% 2.1%
Algiers Bancorp LA 07/09/96 P. Sheet 68.4% 19.6 13.3% 0.7% 19.4% 3.5%
Ocean Financial Corp. NJ * 07/03/96 OCFC 75.9% 15.4 14.2% 0.9% 18.8% 4.9%
Home Financial Bancorp(1) IN 07/02/96 HWEN 67.5% 13.4 13.3% 1.0% 19.6% 5.0%
First Lancaster Bancshares KY * 07/01/96 FLKY 74.2% 18.5 22.2% 1.2% 29.8% 4.0%
Heartland Bancshares IL 07/01/96 P. Sheet 73.3% NM 12.8% NM 17.5% NM
Kenwood Bancorp(7) OH * 07/01/96 P. Sheet 67.6% NM 6.0% 0.1% 8.8% 1.7%
Eagle BancGroup IL * 07/01/96 EGLB 59.2% NM 8.0% 0.1% 13.5% 0.6%
Provident Financial Holdings CA * 06/28/96 PROV 61.4% NM 8.5% 0.2% 13.9% 1.1%
Prestige Bancorp PA 06/27/96 PRBC 63.9% 24.7 9.4% 0.4% 14.7% 2.6%
Wayne Bancorp NJ 06/27/96 WYNE 61.8% 18.6 10.4% 0.6% 16.8% 3.3%
Mechanics SB(1) CT 06/26/96 MECH 77.3% NM 7.3% NM 9.5% NM
Dime Community Bancorp NY * 06/26/96 DIME 80.3% 15.9 11.9% 0.7% 16.9% 4.0%
Commonwealth Bancorp(7) PA * 06/17/96 CMSB 109.3% 12.1 8.4% 0.7% 6.7% 10.4%
CNS Bancorp MO * 06/12/96 CNSB 71.1% 22.3 16.4% 0.7% 23.1% 3.2%
Westwood Financial Corp.(7) NJ 06/07/96 WWFC 80.0% 10.1 7.3% 0.7% 9.2% 7.9%
Lexington B&L Fin. Corp. MO * 06/06/96 LXMO 70.1% 16.2 20.6% 1.3% 29.4% 4.3%
Averages: 71.3% 19.3 12.7% 0.7% 18.1% 3.7%
Medians: 69.7% 19.0 12.7% 0.7% 17.5% 3.5%
Averages, Excluding 2nd Steps 68.9% 20.5 13.6% 0.7% 19.8% 3.2%
Medians, Excluding 2nd Steps 69.1% 19.5 12.8% 0.7% 18.2% 3.4%
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Information Post-IPO Pricing Trends
Closing Price:
- ------------------------------------------------------------------------------------------------------------------------------------
First After After
Conversion IPO Trading % First % First %
Institution State Date Ticker Price Day Chg. Week(5) Chg. Month(6) Chg.
- ----------- ----- ---- ------ ----- --- ---- ------- ---- -------- ----
($) ($) (%) ($) (%) ($) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Park Bancorp IL 08/12/96 PFED $10.00 10.25 2.5% $10.44 4.4% $10.50 5.0%
Lenox Bancorp(1) OH * 07/17/96 P. Sheet 10.00 NT NA NT NA NT NA
Acadiana Bancshares(1) LA * 07/16/96 ANA 12.00 12.00 0.0% 11.75 -2.1% 11.88 -1.0%
Pennwood SB(1) PA * 07/15/96 PWBK 10.00 9.50 -5.0% 9.12 -8.8% 9.38 -6.3%
Mitchell Bancorp(1) NC 07/12/96 MBSP 10.00 10.50 5.0% 10.38 3.8% 11.00 10.0%
Algiers Bancorp LA 07/09/96 P. Sheet 10.00 NT NA NT NA NT NA
Ocean Financial Corp. NJ * 07/03/96 OCFC 20.00 21.25 6.3% 20.13 0.6% 21.00 5.0%
Home Financial Bancorp(1) IN 07/02/96 HWEN 10.00 10.25 2.5% 9.88 -1.2% 10.50 5.0%
First Lancaster Bancshares KY * 07/01/96 FLKY 10.00 13.25 32.5% 13.38 33.8% 13.75 37.5%
Heartland Bancshares IL 07/01/96 P. Sheet 10.00 NT NA NT NA NT NA
Kenwood Bancorp(7) OH * 07/01/96 P. Sheet 10.00 NT NA NT NA NT NA
Eagle BancGroup IL * 07/01/96 EGLB 10.00 11.25 12.5% 11.25 12.5% 11.13 11.2%
Provident Financial Holdings CA * 06/28/96 PROV 10.00 10.97 9.7% 10.81 8.1% 10.12 1.2%
Prestige Bancorp PA 06/27/96 PRBC 10.00 10.38 3.8% 10.25 2.5% 9.75 -2.5%
Wayne Bancorp NJ 06/27/96 WYNE 10.00 11.13 11.2% 11.38 13.8% 11.25 12.5%
Mechanics SB(1) CT 06/26/96 MECH 10.00 11.50 15.0% 11.50 15.0% 11.25 12.5%
Dime Community Bancorp NY * 06/26/96 DIME 10.00 12.00 20.0% 12.00 20.0% 11.87 18.7%
Commonwealth Bancorp(7) PA * 06/17/96 CMSB 10.00 10.50 5.0% 10.75 7.5% 10.00 0.0%
CNS Bancorp MO * 06/12/96 CNSB 10.00 11.00 10.0% 12.00 20.0% 11.50 15.0%
Westwood Financial Corp.(7) NJ 06/07/96 WWFC 10.00 10.75 7.5% 10.38 3.8% 10.62 6.2%
Lexington B&L Fin. Corp. MO * 06/06/96 LXMO 10.00 9.50 -5.0% 9.75 -2.5% 10.12 1.2%
Averages: $10.57 $11.53 7.8% $11.48 7.7% $11.51 7.7%
Medians: 10.00 10.97 6.3% 10.81 4.4% 11.00 5.0%
Averages, Excluding 2nd Steps $10.67 $11.65 8.1% $11.60 8.0% $11.50 6.7%
Medians, Excluding 2nd Steps 10.00 11.00 6.3% 11.25 4.4% 10.50 5.0%
</TABLE>
September 6, 1996
Note: * - Appraisal performed by RP Financial; "NT" - Not Traded;
"NA" - Not Applicable, Not Available.
(1) Non-OTS regulated thrifts.
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Latest price if offering less than one week old.
(6) Latest price if offering more than one week but less than one month old.
(7) Second-step conversions.
<PAGE>
RP Financial, LC.
Page 4.16
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.3
Market Pricing Comparatives
Prices As of September 6, 1996
<TABLE>
<CAPTION>
Per Share Data
Market ---------------
Capitalization Book Pricing Ratios(3) Dividends(4)
--------------- --------------------------------------- -----------------------
Price/ Market 12-Mth Value/ Amount/ Payout
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield Ratio(5)
Financial Institution ------- ------- ------- ------- ------- ------- ------- ------- -------- ------- ------ -------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 17.47 121.39 1.25 16.54 14.36 105.73 13.17 109.33 15.15 0.36 2.04 28.00
Converted Last 3 Mths (no MHC) 12.77 56.46 0.35 15.61 18.69 82.34 15.55 85.62 18.68 0.02 0.14 2.88
Comparable Group
Converted Last 3 Mths (no MHC)
ANA Acadiana Bancshares of LA 13.31 43.63 -0.27 16.67 NM 79.84 14.11 79.84 22.18 0.00 0.00 NM
CNSB CNS Bancorp of MO 12.75 21.08 0.39 14.64 NM 87.09 21.44 87.09 NM 0.00 0.00 0.00
CMSB Cmnwealth Bancorp of PA 10.87 195.15 0.62 12.67 17.53 85.79 9.52 112.64 20.13 0.25 2.30 40.32
DIME Dime Community Bancorp of NY 13.50 196.38 0.63 14.17 21.43 95.27 16.12 108.43 23.28 0.00 0.00 0.00
EGLB Eagle BancGroup of IL 11.87 15.47 0.10 16.89 NM 70.28 9.51 70.28 NM 0.00 0.00 0.00
FLKY First Lancaster Bncshrs of KY 14.50 13.91 0.54 13.47 NM 107.65 32.12 107.65 NM 0.00 0.00 0.00
HWEN Home Financial Bancorp of IN 12.75 6.45 0.75 14.81 17.00 86.09 16.91 86.09 17.00 0.00 0.00 0.00
MECH Mechanics SB of Hartford CT 13.50 71.42 -1.63 12.90 NM 104.65 9.81 104.65 NM 0.00 0.00 NM
MBSP Mitchell Bancorp of NC 12.12 11.88 0.30 14.34 NM 84.52 32.73 84.52 NM 0.00 0.00 0.00
OCFC Ocean Fin. Corp. of NJ 22.50 188.73 1.27 26.36 17.72 85.36 16.01 85.36 17.31 0.00 0.00 0.00
PFED Park Bancorp of Chicago IL 10.31 27.85 0.50 15.01 20.62 68.69 16.02 68.69 19.45 0.00 0.00 0.00
PWBK Pennwood SB of PA 10.00 6.10 0.52 14.83 19.23 67.43 12.76 67.43 13.16 0.00 0.00 0.00
PRBC Prestige Bancorp of PA 10.75 10.35 0.24 15.86 NM 67.78 10.09 67.78 NM 0.00 0.00 0.00
PROV Provident Fin. Holdings of CA 11.25 57.76 0.18 16.29 NM 69.06 9.60 69.06 22.50 0.00 0.00 0.00
WYNE Wayne Bancorp of NJ 13.50 30.12 0.54 16.17 25.00 83.49 14.05 83.49 20.77 0.00 0.00 0.00
WWFC Westwood Fin. Corp. of NJ 10.87 7.03 0.99 14.61 10.98 74.40 7.97 86.89 10.98 0.00 0.00 0.00
</TABLE>
<TABLE>
<CAPTION>
Financial Characteristics(6)
-------------------------------------------------------
Total Equity/ NPAs/ Reported Core
Assets Assets Assets ROA ROE ROA ROE
Financial Institution ------ ------- ------- ------- ------- ------- -------
($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 1,299 13.15 0.90 0.87 7.91 0.82 7.25
Converted Last 3 Mths (no MHC) 443 18.67 1.13 0.49 2.13 0.58 2.64
Comparable Group
Converted Last 3 Mths (no MHC)
ANA Acadiana Bancshares of LA 309 17.67 0.71 -0.29 -1.62 0.64 3.60
CNSB CNS Bancorp of MO 98 24.61 NA 0.73 5.32 0.63 4.64
CMSB Cmnwealth Bancorp of PA 2,049 11.10 0.40 0.70 7.29 0.61 6.35
DIME Dime Community Bancorp of NY 1,218 16.92 NA 0.75 4.45 0.69 4.09
EGLB Eagle BancGroup of IL 163 13.53 0.74 0.08 0.59 0.08 0.59
FLKY First Lancaster Bncshrs of KY 43 29.83 1.23 1.20 4.01 1.20 4.01
HWEN Home Financial Bancorp of IN 38 19.64 1.03 0.99 5.06 0.99 5.06
MECH Mechanics SB of Hartford CT 728 9.38 2.38 -1.23 -18.56 -1.21 -18.22
MBSP Mitchell Bancorp of NC 36 38.73 1.41 0.81 2.09 0.78 2.02
OCFC Ocean Fin. Corp. of NJ 1,179 18.75 0.94 0.90 4.82 0.92 4.93
PFED Park Bancorp of Chicago IL 174 23.32 0.17 0.78 3.33 0.82 3.53
PWBK Pennwood SB of PA 48 18.92 2.65 0.66 3.51 0.97 5.12
PRBC Prestige Bancorp of PA 103 14.89 0.35 0.25 2.63 0.25 2.63
PROV Provident Fin. Holdings of CA 602 13.90 2.22 0.15 1.10 0.43 3.07
WYNE Wayne Bancorp of NJ 214 16.83 1.50 0.56 3.34 0.68 4.02
WWFC Westwood Fin. Corp. of NJ 88 10.71 0.02 0.73 6.78 0.73 6.78
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets;
P/TB = Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been
obtained from sources we believe are reliable, but we cannot guarantee
the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, Inc.
<PAGE>
RP Financial, LC.
Page 4.17
effected by the Supreme Court's ruling in favor of institutions seeking damages
for goodwill. Investor interest in the new issue market has shown signs of
cooling, as indicated by fewer offerings being oversubscribed and fairly limited
price appreciation exhibited in post-conversion trading activity by most of the
recent conversions.
C. The Acquisition Market
Also considered in the valuation was the potential impact on Dearborn
Savings' stock price of recently completed and pending acquisitions of other
thrifts operating in Dearborn Savings' market area. As shown in Exhibit IV-4,
there were five Indiana thrifts acquired in 1994, 1995 and year-to-date 1996 and
one acquisition is currently pending. The recent acquisition activity involving
Indiana thrifts may imply a certain degree of acquisition speculation for the
Association's stock. To the extent that acquisition speculation may impact the
Association's offering, we have largely taken this into account in selecting
Indiana and Ohio based companies, which operate in markets that have experienced
a comparable level of acquisition activity as the Association's market and,
thus, are subject to the same type of acquisition speculation that may influence
Dearborn Savings' trading price.
D. The Market for Dearborn Savings Stock
Dearborn Savings' minority shares of stock are not traded on NASDAQ or
any other exchange but are listed on the "pink sheets", and trade very
infrequently. As indicated by the Association's management, the most recent
trades in the Association's stock (January 1996) have approximated $14.50 per
share. In addition to the liquidity differences between the minority shares
currently traded and the new conversion stock (the new conversion stock will
more liquid owing to the greater number of public shares outstanding and
expected NASDAQ listing), there are other differences between the Association's
minority stock and the conversion stock that will be issued by the Holding
Company. Such differences include a lower return on equity for the Holding
Company's conversion stock, and dividend payments will be made on all shares
outstanding; thereby requiring a higher payout ratio to sustain the current
level of dividends paid to non-MHC shareholders. For these reasons, RP Financial
discounted somewhat the meaningfulness of the trading level of the Association's
minority stock in its valuation analysis.
*******************************
Taking these factors and trends into account, primarily recent trends in
the new issue market, market conditions overall, and recent trends in the
acquisition market, as well as considering recent trades in the Association's
minority stock, RP Financial concluded that no adjustment was appropriate in the
valuation analysis for purposes of marketing of the issue.
<PAGE>
RP Financial, LC.
Page 4.18
8. Management
Dearborn Savings' management team has experience and expertise in all of
the key areas of the Association's operations. Exhibit IV-5 provides summary
resumes of Dearborn Savings' Board of Directors and executive management. While
the Association does not have the resources to develop a great deal of
management depth, given its small asset size and the significant impact
acquiring significant depth would have on operating expenses, management and the
Board have been effective in implementing an operating strategy that can be well
managed by the Association's present management structure as indicated by
Dearborn Savings' solid core earnings and healthy capital position.
Similarly, the returns, capital positions, and other operating measures of
the Peer Group companies are indicative of well-managed financial institutions,
which have Boards and management teams that have been effective in implementing
conservative and competitive operating strategies. Therefore, on balance, we
concluded no valuation adjustment relative to the Peer Group was appropriate for
this factor.
9. Effect of Government Regulation and Regulatory Reform
There have been two recent developments in the thrift industry which may
have an effect on the pricing of thrifts: (1) the recent discussions by
legislators regarding the recapitalizing of the SAIF through a special
assessment coupled with possible lower future annual deposit premiums; and, (2)
the possibility that back taxes on bad debt reserves taken before 1988 may be
eliminated. Since the Association and all of the Peer Group members are
SAIF-insured, we believe the effect of these discussions on the Association's
pro forma pricing has been implicitly accounted for in the pricing ratios of the
Peer Group. In summary, as a fully converted SAIF-insured savings institution,
Dearborn Savings will operate in substantially the same regulatory environment
as the Peer Group members -- all of whom are adequately capitalized institutions
and are operating with no apparent restrictions. Exhibit IV-6 reflects the
Association's pro forma regulatory capital ratios. RP Financial concluded that
Dearborn Savings' flexibility of operations are neither materially restricted
nor enhanced by its current regulatory status versus the Peer Group and no
adjustment was made for this factor.
Summary of Adjustments
Overall, we believe the Association's pro forma market value should be
discounted relative to the Peer Group:
<PAGE>
RP Financial, LC.
Page 4.19
Key Valuation Parameters: Valuation Adjustment
- ------------------------- --------------------
Financial Condition Slight Downward
Profitability, Growth and Viability of Earnings Slight Downward
Asset Growth No Adjustment
Primary Market Area Slight Upward
Dividends No Adjustment
Liquidity of the Shares Slight Downward
Marketing of the Issue No Adjustment
Management No Adjustment
Effect of Government Regulations and Regulatory Reform No Adjustment
Valuation Approaches
In applying the accepted valuation methodology promulgated by the OTS,
i.e., the pro forma market value approach, we considered the three key pricing
ratios in valuing Dearborn Savings' to-be-issued stock -- the price/earnings
("P/E"), price/book ("P/B"), and price/assets ("P/A") approaches -- all
performed on a pro forma basis including the effects of the conversion proceeds
from selling the Mutual Holding Company's interest to the public. In computing
the pro forma impact of the conversion and the related pricing ratios, we have
incorporated the assumptions disclosed in Dearborn Savings' prospectus for
offering expenses, the effective tax rate and stock benefit plan assumptions
(summarized in Exhibits IV-7 and IV-8). A reinvestment rate of 6.59 percent was
utilized, equal to the arithmetic average of the Association's average yield on
interest-earnings assets and cost of deposits for the twelve months ended June
30, 1996 (the reinvestment rate calculation specified by OTS conversion
guidelines). The 6.59 percent reinvestment rate is considered to be reasonable,
based on the Association's business plan as converted and incorporating the
impact of deposit withdrawals to fund a portion of the stock issued in
conversion.
In addition to the three valuation methodologies specified by the OTS, RP
Financial also considered recent trades in the Association's stock. However,
such trades were not given significant weight, in light of the differences
between the characteristics of minority stock and conversion, particularly with
respect to the absence of a liquid trading market for the minority stock.
RP Financial's valuation placed emphasis on the following:
o P/E Approach. The P/E approach is generally the best indicator of
long-term value for a stock. Given the similarities between the
Association's and the Peer Group's earnings and overall financial
condition, the P/E approach was carefully considered in this
valuation. In applying the P/E approach, we took into account reported
and estimated core earnings.
o P/B Approach. P/B ratios have generally served as a useful benchmark
in the valuation of thrift stock, with the greater determinant of long
term value being earnings. RP Financial considered the P/B approach to
be a reliable indicator of value given current market
<PAGE>
RP Financial, LC.
Page 4.20
conditions, particularly the market for new conversions which often
exhibit P/E multiples that are above industry averages and since the
P/E multiples do not reflect the actual impact of reinvestment,
leveraging and capital management strategies.
o P/A Approach. P/A ratios are generally not indicative of market value,
as investors do not place significant weight on total assets as a
determinant of market value. Investors place significantly greater
weight on book value and earnings -- which have received greater
weight in our valuation analysis.
o Trading of Dearborn Savings' Stock. Converting institutions generally
do not have stock outstanding. Dearborn Savings, however, has public
shares outstanding due to the mutual holding company form of
ownership. However, since there is not an active and liquid market for
Dearborn Savings' minority shares of common stock (the shares are
traded on the "pink sheets", and are not listed on NASDAQ or any other
exchange), and the conversion stock will have different
characteristics than the minority shares, this valuation method was
deemed to be less relevant than the other valuation methodologies and
therefore received limited weighting in our valuation.
Based on the application of the OTS valuation approaches, taking into
consideration the valuation adjustments discussed above, and placing the
greatest weight on the P/E and P/B approaches, RP Financial concluded that the
pro forma market value of the Association's conversion stock is $7,600,000 at
the midpoint at this time. The midpoint value and resulting valuation range is
based on the sale of a 57.75 percent ownership interest to the public, which
takes into account the special dividends that were waived by the MHC. Currently,
the MHC ownership interest is equal to 54.62 percent. The calculation of the
resulting ownership interest being sold is shown below. While the ownership
interest being sold varies nominally throughout the valuation range, for
marketing purposes the percent being sold to the public will be set forth at
57.75 percent for the entire valuation range. At the conclusion of the offering,
the percent sold to the public and resulting exchange ratio will be based on the
concluding value.
(Association Book Value - Waived Dividends) X Minority Ownership %
Step 1: -------------------------------------------------------------------
Association Book Value(1)
($6,815,000 - $402,500) X 45.3822%
42.7019% = ----------------------------------
$6,815,000
(Pro Forma Market Value - MHC Assets(2)) X Step 1 Result
Step 2: --------------------------------------------------------
Pro Forma Market Value
($7,600,000 - $80,000) X 42.7019%
42.2524% = ---------------------------------
$7,600,000
<PAGE>
RP Financial, LC.
Page 4.21
1. Price-to-Earnings ("P/E"). The application of the P/E valuation method
requires calculating the Association's pro forma market value by applying a
valuation P/E multiple times the pro forma earnings base. Ideally, the pro forma
earnings base is composed principally of the Association's recurring earnings
base, that is, earnings adjusted to exclude any one-time non-operating items,
plus the estimated after-tax earnings benefit of the reinvestment of net
conversion proceeds. Dearborn Savings' reported earnings equaled $453,000 for
the twelve months ended June 30, 1996. In deriving Dearborn Savings' core
earnings, two adjustments were made to reported earnings. The first adjustment
was to eliminate non-recurring gains on the sale of loans and securities. Such
gains amounted to $59,000 for the twelve month period, which on a tax effected
basis, assuming an effective tax rate of 35.0 percent, reduced core earnings by
$38,000. The second adjustment was to take into account the reinvestment of the
$80,000 of assets currently held at the MHC, which will be consolidated with the
Association as the result of the conversion. Reinvestment of the MHC assets at
the 6.59 percent reinvestment rate added approximately $3,000 to Dearborn
Savings' after tax earnings. As shown below, Dearborn Savings' core earnings
were determined to equal $418,000 for the twelve months ended June 30, 1996.
(Note: see Exhibit IV-9 for the adjustments applied to the Peer Group's earnings
in the calculation of core earnings).
Amount
------
($000)
Net income $453
Reinvestment of MHC assets(1) 3
Adjustment for non-recurring gains(1) (38)
----
Core earnings estimate $418
(1) Tax effected at 35.0 percent.
Based on Dearborn Savings' trailing twelve month reported and estimated
core earnings, and incorporating the impact of the pro forma assumptions
discussed previously, the Association's pro forma P/E multiples at the
$7,600,000 midpoint value were 12.09 and 12.86 times, resulting in discounts of
18.8 percent and 19.2 percent, respectively, from the Peer Group averages of
14.88 and 15.92 times reported and core earnings, respectively. The discounted
earnings multiples were consistent with valuation adjustments outlined earlier.
Such discounts are substantially reduced or eliminated in the upper portion of
the range.
2. Price-to-Book ("P/B"). The application of the P/B valuation method
requires calculating the Association's pro forma market value by applying a
valuation P/B ratio to Dearborn Savings' pro forma book value. The
pre-conversion book value for Dearborn Savings of $6,895,000 was equal to the
Association's reported capital at June 30, 1996 plus the $80,000 of mutual
holding company assets at June 30, 1996 which will
<PAGE>
RP Financial, LC.
Page 4.22
be consolidated with the Association as a result of the conversion. Based on the
$7,600,000 midpoint valuation, Dearborn Savings' pro forma P/B ratio was 69.51
percent. In comparison to the average P/B ratio for the Peer Group of 90.00
percent, Dearborn Savings' valuation reflected a discount of 22.8 percent. RP
Financial considered the discount under the P/B approach to be reasonable in
light of the valuation adjustments referenced earlier.
Given the emphasis on limiting near term aftermarket trading in the revised
appraisal guidelines, RP Financial also considered the pro forma P/B ratios of
recent conversions in its valuation analysis. It is these companies that provide
the best proxy for aftermarket trading for a new issue such as Dearborn Savings'
conversion stock, and it is the pro forma P/B ratio that investors emphasize in
evaluating the trading of new issues. At the midpoint value of $7,600,000,
Dearborn Savings' pro forma P/B ratio of 69.51 percent represented a discount of
15.6 percent from the 82.34 percent average P/B ratio of the recently converted
thrifts (see Table 4.3). The pricing in the upper portion of the Association's
valuation range approximates or exceeds the average P/B ratio of the recent
conversions.
3. Price-to-Assets ("P/A"). The P/A valuation methodology determines market
value by applying a valuation P/A ratio to the Association's pro forma asset
base, conservatively assuming no deposit withdrawals are made to fund stock
purchases. In all likelihood there will be deposit withdrawals, which results in
understating the pro forma P/A ratio which is computed herein. At the midpoint
of the valuation range, Dearborn Savings' value equaled 11.24 percent of pro
forma assets. Comparatively, the Peer Group companies exhibited an average P/A
ratio of 13.39 percent, which implies a 16.1 percent discount being applied to
the Association's pro forma P/A ratio.
Valuation Conclusion
It is our opinion that, as of September 6, 1996, the aggregate pro forma
market value of the Association, inclusive of the sale of the Mutual Holding
Company's ownership interest to public shareholders was $7,600,000 at the
midpoint. Based on this valuation and the approximate 57.75 percent ownership
interest being sold in the public offering, the midpoint value of the Holding
Company's stock offering was $4,389,000, equal to 438,900 shares at a per share
value of $10.00. Pursuant to OTS conversion guidelines, the 15 percent offering
range includes a minimum value of $3,730,650 and a maximum value of $5,047,350.
Based on the $10.00 per share offering price, this range equates to an offering
of 373,065 shares at the minimum to 504,735 shares at the maximum. The Holding
Company's offering also includes a provision for a super range, which if
exercised, would result in an offering size of $5,804,450, equal to 580,445
shares at the $10.00 per share offering price. The comparative pro forma
valuation ratios relative to the Peer Group are shown in Table 4.4, and the
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.4
Public Market Pricing
Dearborn Savings and the Comparables
As of September 6, 1996
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization --------------- Pricing Ratios(3)
---------------- Book --------------------------------------------
Price/ Market 12-Mth Value/
Share(1) Value FPS(2) Share P/E P/B P/A P/TB P/CORE
------- ------ ------ ------ ----- ----- ----- ----- ------
($) ($MT) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dearborn Savings
- ----------------
Superrange 10.00 10.05 0.59 12.29 14.58 81.39 14.55 81.39 15.43
Range Maximum 10.00 8.74 0.75 13.26 13.30 75.39 12.80 75.39 14.12
Range Midpoint 10.00 7.50 0.83 14.39 12.09 69.51 11.24 69.51 12.85
Range Minimum 10.00 6.46 0.93 15.91 10.75 62.87 9.64 62.87 11.48
SAIF-Insured Thrifts(7)
- -----------------------
Average 17.47 121.39 1.25 16.54 14.36 105.73 13.17 109.33 15.15
Medians -- -- -- -- 14.19 102.88 11.97 104.95 15.39
All Non-HIMC State of IN(7)
- ---------------------------
Average 16.70 35.11 1.46 17.07 14.72 103.23 13.13 101.02 15.26
Medians -- -- -- -- 15.31 96.69 12.92 96.69 15.31
Comparable Group Averages
- -------------------------
Averages 14.71 21.97 1.08 16.38 14.38 90.00 13.39 90.02 15.92
Medians -- -- -- -- 13.92 90.96 12.76 90.95 14.58
State of IN
- -----------
FBCV 1st Bancorp of Vincennes IN 31.50 21.01 8.64 32.58 3.65 96.69 7.97 96.69 HM
ANFC ANB Financial Corp. of IN 10.44 11.73 0.41 14.42 HM 72.40 14.78 72.40 HM
ATSB AmTrust Capital Corp. of IN 9.00 5.10 0.37 13.32 24.32 67.57 6.96 68.29 HM
ASBI Americana Bancorp of IN 13.25 43.76 1.03 13.51 12.86 90.08 10.89 98.22 13.12
CBCO CB Bancorp of Michigan City 19.00 22.33 2.27 16.44 8.37 115.57 11.41 115.37 8.48
IN
CBIM Community Bank Shares of IN 12.37 25.51 0.95 13.00 13.55 99.00 10.94 99.00 13.84
FFWC FFW Corporation of Wabash IN 19.50 13.86 2.21 21.74 8.74 89.70 9.21 89.70 9.11
FFED Fidelity Fed. Bancorp of IN 11.00 27.45 1.30 5.73 6.45 191.97 10.47 191.97 10.00
FISB First Indiana Corp. of IN 22.94 190.26 2.12 16.40 10.82 139.88 12.92 141.78 13.03
HBFW Home Bancorp of Fort Wayne 16.37 47.26 0.91 16.96 17.99 96.52 14.96 96.52 17.99
IN
HBBN Home Building Bancorp of IN 18.25 6.06 0.52 18.12 HM 100.72 14.05 100.72 HM
HFBN Home Fed Bancorp of Seymour 26.25 58.43 3.30 23.14 7.95 113.44 9.27 117.77 9.02
IN
HFNB Home Financial Bancorp of IN 12.75 6.45 0.75 14.81 17.00 86.09 16.91 26.09 17.00
INCB Indiana Comm. Bank, SB of IN 13.25 12.22 0.67 15.35 19.78 86.32 12.93 86.32 19.78
IFCL Indiana Federal Corp. of IN 20.00 94.60 1.38 14.86 14.49 134.59 12.74 144.61 13.79
LSBF LSB Fin. Corp. of Lafayette 17.25 16.06 0.88 17.82 19.50 96.80 9.34 96.80 21.55
IN
LOGN Logansport Fin. Corp. of IN 14.00 18.51 0.85 14.99 16.47 93.40 23.98 93.40 16.67
MFBC MFB Corp. of Mishawaka IN 15.50 30.60 0.66 19.66 23.48 78.84 15.23 78.84 23.85
MARH Marion Capital Holdings of 20.25 39.16 1.28 21.46 15.82 94.36 22.03 94.36 15.82
IN
NEIB Northeast Indiana Bncrp of 12.25 25.26 0.80 14.12 15.31 86.76 16.39 86.76 15.31
IN
PFOC Peoples Bancorp of Auburn IN 19.87 46.62 1.72 18.46 11.55 107.64 16.77 107.64 11.62
PERH Permanent Bancorp of IN 16.50 35.33 0.68 18.79 24.25 87.81 8.59 88.90 24.63
SOBI Sobleski Bancorp of S. Bend 12.00 10.04 0.39 16.87 HM 71.13 13.15 71.13 HM
IN
WCHI Workingmens Cap. Bldgs of 21.16 38.28 1.00 14.63 21.16 144.63 10.39 144.63 20.95
IN(7)
<CAPTION>
Dividends(4) Financial Characteristics (6)
--------------------------- -----------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ MPAs/ ------------ ------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
----- ----- -------- ------ ------ ------ --- --- --- ---
($) (%) (%) ($MT) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dearborn Savings
- ----------------
Superrange 0.28 2.80 40.5% 69 17.86 0.04 1.00 5.58 0.94 5.28
Range Maximum 0.28 2.80 37.2% 68 16.97 0.04 0.95 5.67 0.91 5.34
Range Midpoint 0.28 2.80 33.8% 68 16.15 0.04 0.93 5.75 0.87 5.40
Range Minimum 0.28 2.80 30.1% 67 15.34 0.04 0.90 5.85 0.84 5.18
SAIF-Insured Thrifts(7)
- -----------------------
Average 0.36 2.04 28.00 1,299 13.15 0.90 0.87 7.91 0.82 7.25
Medians -- -- -- -- -- -- -- -- -- --
All Non-HIMC State of IN(7)
- ---------------------------
Average 0.37 2.25 33.31 285 13.84 0.70 0.97 8.51 0.84 6.72
Medians -- -- -- -- -- -- -- -- -- --
Comparable Group Averages
- -------------------------
Averages 0.38 2.55 37.45 165 15.07 0.23 0.97 6.27 0.92 6.03
Medians -- -- -- -- -- -- -- -- -- --
State of IN
- -----------
FBCV 1st Bancorp of Vincennes IN 0.40 1.27 4.63 263 8.25 0.35 2.05 29.46 -0.04 -0.65
ANFC ANB Financial Corp. of IN 0.24 2.30 58.54 79 20.41 0.51 0.63 4.53 0.63 4.53
ATSB AmTrust Capital Corp. of IN 0.00 0.00 0.00 73 10.34 0.31 0.31 2.75 0.07 0.59
ASBI Americana Bancorp of IN 0.56 4.23 54.37 402 11.10 0.41 0.92 7.42 0.90 7.28
CBCO CB Bancorp of Michigan City 0.00 0.00 0.00 196 9.87 1.51 1.39 14.66 1.38 14.47
IN
CBIM Community Bank Shares of IN 0.34 2.64 35.79 233 11.05 0.12 0.87 7.46 0.85 7.31
FFWC FFW Corporation of Wabash IN 0.60 3.08 26.91 150 10.27 0.06 1.08 9.99 1.04 9.59
FFED Fidelity Fed. Bancorp of IN 0.80 7.27 61.54 262 5.45 0.17 1.19 23.68 1.10 20.04
FISB First Indiana Corp. of IN 0.56 2.44 26.42 1,473 9.23 1.59 1.18 13.62 0.98 11.31
HBFW Home Bancorp of Fort Wayne 0.20 1.22 21.98 316 15.50 0.04 0.84 5.00 0.84 5.00
IN
HBBN Home Building Bancorp of IN 0.30 1.64 51.69 43 13.95 0.27 0.41 2.86 0.41 2.86
HFBN Home Fed Bancorp of Seymour 0.50 1.90 15.15 630 8.18 0.48 1.22 15.14 1.08 13.35
IN
HFNB Home Financial Bancorp of IN 0.00 0.00 0.00 38 19.64 1.03 0.99 5.06 0.99 5.06
INCB Indiana Comm. Bank, SB of IN 0.35 2.64 52.24 94 14.98 NA 0.68 4.41 0.68 4.41
IFCL Indiana Federal Corp. of IN 0.72 1.50 52.17 742 9.47 1.42 0.90 9.37 0.95 9.81
LSBF LSB Fin. Corp. of Lafayette 0.32 1.86 36.36 172 9.65 1.60 0.52 4.66 0.47 4.24
IN
LOGN Logansport Fin. Corp. of IN 0.40 7.86 47.06 77 25.67 0.39 1.51 5.57 1.49 5.51
MFBC MFB Corp. of Mishawaka IN 0.24 1.55 36.36 201 19.32 NA 0.69 3.40 0.68 3.35
MARH Marion Capital Holdings of 0.80 3.95 62.50 178 23.35 1.07 1.40 5.85 1.40 5.85
IN
NEIB Northeast Indiana Bncrp of 0.30 2.45 17.50 154 18.89 0.25 1.19 5.50 1.19 5.50
IN
PFOC Peoples Bancorp of Auburn IN 0.60 1.02 34.88 278 15.58 0.34 1.45 9.56 1.44 9.50
PERH Permanent Bancorp of IN 0.30 1.82 44.12 411 9.78 1.66 0.38 3.50 0.38 3.45
SOBI Sobleski Bancorp of S. Bend 0.00 0.00 0.00 76 18.49 0.08 0.42 2.27 0.42 2.27
IN
WCHI Workingmens Cap. Bldgs of 0.36 1.70 36.00 208 12.71 0.32 0.86 7.03 0.87 7.10
IN(7)
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.4
Public Market Pricing
Dearborn Savings and the Comparables
As of September 6, 1996
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization --------------- Pricing Ratios(3)
---------------- Book --------------------------------------------
Price/ Market 12-Mth Value/
Share(1) Value FPS(2) Share P/E P/B P/A P/TB P/CORE
------- ------ ------ ------ ----- ----- ----- ----- ------
($) ($MT) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Comparable Group
- ----------------
CBIN Community Bank Shares of IN 12.87 25.53 0.95 13.00 13.55 99.00 10.94 99.00 13.84
CIBI Community Inv. Bancorp of OH 15.75 11.04 1.22 16.93 12.91 93.03 12.87 93.03 13.58
EFBI Enterprise Fed. Bancorp of 12.87 26.69 0.90 15.23 14.30 84.50 12.48 84.62 20.76
OH
FFWC FFW Corporation of Wabash IN 19.50 13.86 2.23 21.74 8.74 89.70 9.21 89.70 9.11
HHFC Harvest Home Fin. Corp. of 9.87 9.23 0.60 13.83 16.45 71.37 12.64 71.37 16.45
OH
MFBC MFB Corp. of Mishawaka IN 15.50 30.60 0.66 19.66 23.48 78.84 15.23 78.84 23.85
MFFC Milton Fed. Fin. Corp. of OH 13.75 31.33 0.76 14.91 18.09 92.22 17.46 92.22 19.64
NEIB Northwest Indiana Bncrp. 12.25 25.26 0.80 14.12 15.31 86.76 16.39 86.76 15.31
of IN
OHSL OHSL Financial Corp. of OH 20.25 24.64 1.57 20.95 12.90 96.66 11.79 96.66 13.05
FFWB Wood Bancorp of OH 14.50 21.72 1.11 13.43 13.06 107.97 14.85 107.97 13.55
<CAPTION>
Dividends(4) Financial Characteristics (6)
--------------------------- -----------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ MPAs/ -------------- --------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
----- ----- -------- ------ ------ ------ --- --- --- ---
($) (%) (%) ($MT) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Comparable Group
- ----------------
CBIN Community Bank Shares of IN 0.34 2.64 35.79 233 11.05 0.12 0.87 7.46 0.85 7.31
CIBI Community Inv. Bancorp of OH 0.40 2.54 32.79 86 13.83 0.73 1.01 7.03 0.96 6.68
EFBI Enterprise Fed. Bancorp of 0.00 0.00 0.00 214 14.77 0.03 0.92 5.37 0.63 3.70
OH
FFWC FFW Corporation of Wabash IN 0.60 3.08 26.91 150 10.27 0.06 1.08 9.99 1.04 9.59
HHFC Harvest Home Fin. Corp. of 0.40 4.05 55.67 72 17.71 0.19 0.30 4.34 0.80 4.34
OH
MFBC MFB Corp. of Mishawaka IN 0.24 1.55 36.36 201 19.32 NA 0.69 3.40 0.68 3.35
MFFC Milton Fed. Fin. Corp. of OH 0.52 3.76 68.42 178 18.93 0.40 1.04 4.79 0.95 4.41
NEIB Northwest Indiana Bncrp. 0.30 2.45 37.50 154 18.89 0.25 1.19 5.50 1.19 5.50
of IN
OHSL OHSL Financial Corp. of OH 0.76 3.75 48.41 209 12.20 0.12 0.95 7.57 0.94 7.48
FFWB Wood Bancorp of OH 0.24 1.66 21.62 146 13.76 0.17 1.18 8.30 1.14 8.00
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) EPS (common earnings per share) is based on actual trailing twelve month
data and is shown on a pro forma basis.
(3) P/E = Price to Earnings; P/B = Price to Book; P/A = Price to Assets; P/TB =
Price to Tangible Book; and P/CORE = Price to Core Earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated twelve month dividend as a percent of trailing twelve month
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and total assets balances.
(7) Excludes from averages and medians those companies the subject of actual or
rumored acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been
obtained from sources we believe are reliable, but we cannot guarantee
the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, Inc.
<PAGE>
RP Financial, LC.
Page 4.25
key valuation assumptions are detailed in Exhibit IV-7. The pro forma
calculations for the range are detailed in Exhibit IV-8.
Establishment of Exchange Ratio
OTS regulations provide that in a conversion of a mutual holding company,
the minority stockholders are entitled to exchange their shares of the
Association's common stock for common stock of the Holding Company. Such
exchange ratio takes into account the special dividends which were waived by the
MHC. Pursuant to this formula, the pro forma minority interest at this time is
equal to 42.25 percent, however this percent may vary slightly prior to and at
the time of the close of the offering, so as to take into account quarterly
changes in book value, any further payments of special dividends and the closing
pro forma market value of the Association's offering. Based upon this formula,
and the valuation conclusion and offering range concluded above, the Exchange
Ratio would be 1.3139 shares, 1.5458 shares, 1.7777 shares and 2.0443 shares of
Vision Bancorp stock issued for each Public Share, at the minimum, midpoint,
maximum and super maximum of the offering range, respectively.
The Exchange Ratio formula and share exchange procedures were determined
independently. RP Financial expresses no opinion on the proposed exchange of
Holding Company shares for the Public Shares or on the proposed Exchange Ratio.
Table 4.5
Dearborn Savings
Calculation of Exchange Ratios
Shares Price/ Exchange Implied
Offered Share Shares(1) Exch. Ratio(2)
------- ----- --------- --------------
Minimum 373,065 $10.00 272,935 1.3139
Midpoint 438,900 10.00 321,100 1.5458
Maximum 504,735 10.00 369,265 1.7777
Super Maximum 580,445 10.00 424,655 2.0443
(1) Calculated to equal a Public Shares percentage ownership in the Company of
42.25 percent, which takes into account the $402,500 of special dividends
which were waived by the MHC. Current minority ownership is equal to
45.3822 percent (207,726 shares divided by 457,726 total shares
outstanding).
(2) Calculated as pro forma exchange shares divided by 207,726 existing Public
Shares outstanding.
<PAGE>
EXHIBITS
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS
Exhibit
Number Description
- ------ -----------
I-1 Map of Office Locations
I-2 Audited Financial Statements
I-3 Key Operating Ratios
I-4 Investment Portfolio Composition
I-5 Yields and Costs
I-6 Loan Loss Allowance Activity
I-7 Net Portfolio Value Analysis
I-8 Fixed Rate and Adjustable Rate Loans
I-9 Loan Portfolio Composition
I-10 Loan Originations, Purchases, and Sales
I-11 Contractual Maturity By Loan Type
I-12 Non-Performing Assets
I-13 Deposit Composition
I-14 Time Deposit Rate/Maturity
I-15 Borrowings
II-1 Description of Office Facilities
II-2 Historical Interest Rates
III-1 General Characteristics of Publicly-Traded
Institutions
III-2 Financial Analysis of Indiana Institutions
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS (continued)
III-3 Peer Group Market Area Comparative Analysis
IV-1 Stock Prices: September 6, 1996
IV-2 Historical Stock Price Indices
IV-3 Historical Thrift Stock Indices
IV-4 Market Area Acquisition Activity
IV-5 Director and Senior Management Summary Resumes
IV-6 Pro Forma Regulatory Capital Ratios
IV-7 Pro Forma Analysis Sheet
IV-8 Pro Forma Effect of Conversion Proceeds
IV-9 Peer Group Core Earnings Analysis
V-1 Firm Qualifications Statement
<PAGE>
EXHIBIT I-1
Dearborn Savings Association, F.A.
Map of Office Locations
<PAGE>
DEMOGRAPHIC MAP OF INDIANA
<PAGE>
EXHIBIT I-2
Dearborn Savings Association, F.A.
Audited Financial Statements
- [Incorporated by Reference] -
<PAGE>
- [Insert Stamp Sheets 80-93 Here (Exhibit I-3 through I-15 and II-1)] -
<PAGE>
EXHIBIT II-2
Historical Interest Rates
<PAGE>
Historical Interest Rates (1)
Prime 90 Day One Year 30 Year
Year/Qtr. Ended Rate T-Bill T-Bill T-Bond
--------------- ---- ------ ------ ------
1991: Quarter 1 8.75% 5.92% 6.24% 8.26%
Quarter 2 8.50% 5.72% 6.35% 8.43%
Quarter 3 8.00% 5.22% 5.38% 7.80%
Quarter 4 6.50% 3.95% 4.10% 7.47%
1992: Quarter 1 6.50% 4.15% 4.53% 7.97%
Quarter 2 6.50% 3.65% 4.06% 7.79%
Quarter 3 6.00% 2.75% 3.06% 7.38%
Quarter 4 6.00% 3.15% 3.59% 7.40%
1993: Quarter 1 6.00% 2.95% 3.18% 6.93%
Quarter 2 6.00% 3.09% 3.45% 6.67%
Quarter 3 6.00% 2.97% 3.36% 6.03%
Quarter 4 6.00% 3.06% 3.59% 6.34%
1994: Quarter 1 6.25% 3.56% 4.44% 7.09%
Quarter 2 7.25% 4.22% 5.49% 7.61%
Quarter 3 7.75% 4.79% 5.94% 7.82%
Quarter 4 8.50% 5.71% 7.21% 7.88%
1995: Quarter 1 9.00% 5.86% 6.47% 7.43%
Quarter 2 9.00% 5.57% 5.63% 6.63%
Quarter 3 8.75% 5.42% 5.68% 6.51%
Quarter 4 8.50% 5.09% 5.14% 5.96%
1996: Quarter 1 0.083 0.051 0.053 0.0667
1996: Quarter 2 0.083 0.052 0.056 0.0687
As of September 6, 1996 0.083 0.053 0.058 0.0711
(1) End of period data.
Source: SNL Securities.
<PAGE>
EXHIBIT III-1
General Characteristics of Publicly-Traded Institutions
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 11, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
California Companies
--------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA NYSE Nationwide M.B. 49,507 345 12-31 10/72 25.37 2,719
GWF Great Western Fin. Corp. of CA NYSE CA,FL Div. 43,720 416 12-31 / 25.00 3,435
GDW Golden West Fin. Corp. of CA NYSE Nationwide M.B. 35,776 232 12-31 05/59 55.00 3,186
GLN Glendale Fed. Bk, FSB of CA NYSE CA Div. 14,456 150 06-30 10/83 17.50 818
CAL CalFed Inc. of Los Angeles CA NYSE CA,NV Div. 14,045 124 12-31 03/83 23.00 1,136
CSA Coast Savings Financial of CA NYSE California R.E. 8,351 89 12-31 12/85 31.37 583
DSL Downey Financial Corp. of CA NYSE Southern CA Thrift 4,712 52 12-31 01/71 24.75 420
FED FirstFed Fin. Corp. of CA NYSE Los Angeles CA R.E. 4,105 25 12-31 12/83 18.37 193
BVFS Bay View Capital Corp. of CA OTC San Francisco CA M.B. 3,389 27 12-31 05/86 37.62 259
BPLS Bank Plus Corp. of CA OTC Los Angeles CA R.E. 3,297 33 12-31 / 10.00 182
WES Westcorp Inc. of Orange CA NYSE California Div. 3,027 25 12-31 05/86 20.87 542
AFFFZ America First Fin. Fund of CA OTC San Francisco CA Div. 2,274 36 12-31 / 30.25 182
CENF CENFED Financial Corp. of CA OTC Los Angeles CA Thrift 2,148 18 12-31 10/91 24.25 122
PFFB PFF Bancorp of Pomona CA OTC Southern CA Thrift 2,146 22 03-31 03/96 11.62 231
FRC First Republic Bancorp of CA (3) NYSE CA,NV M.B. 2,064 11 12-31 / 13.62 100
CFHC California Fin. Hld. Co. of CA OTC Central CA Thrift 1,327 22 12-31 04/83 22.81 107
REDF RedFed Bancorp of Redlands CA OTC Southern CA Thrift 840 14 12-31 04/94 10.12 41
HTHR Hawthorne Fin. Corp. of CA OTC Southern CA Thrift 761 9 12-31 / 7.50 19
HEMT HF Bancorp of Hemet CA OTC Southern CA Thrift 754 M 12 06-30 06/95 9.38 59
QCBC Quaker City Bancorp of CA OTC Los Angeles CA R.E. 725 8 06-30 12/93 14.31 55
ITLA Imperial Thrift & Loan of CA (3) OTC Los Angeles CA R.E. 670 11 12-31 / 13.50 106
PROV Provident Fin. Holdings of CA OTC M.B. 602 P 0 06-30 06/96 11.25 58
HBNK Highland Federal Bank of CA OTC Los Angeles CA R.E. 441 11 12-31 / 14.25 33
SGVB SGV Bancorp of W. Covina CA OTC Los Angeles CA Thrift 333 M 6 06-30 06/95 8.81 24
MBBC Monterey Bay Bancorp of CA OTC West Central CA Thrift 317 6 12-31 02/95 13.25 44
PCCI Pacific Crest Capital of CA (3) OTC Southern CA R.E. 290 4 12-31 / 8.69 26
NHSL NHS Financial, Inc. of CA OTC Central CA R.E. 284 3 12-31 / 11.12 28
PSSB Palm Springs SB of CA OTC Southern CA Thrift 187 4 12-31 / 14.03 16
BYFC Broadway Fin. Corp. of CA OTC Los Angeles CA Thrift 112 3 12-31 01/96 9.75 9
FSSB First FS&LA of San Bern. CA OTC San Bernard. CA Thrift 102 4 06-30 12/92 9.87 3
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 11, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BANC BankAtlantic Bancorp of FL OTC Southeastern FL M.B. 1,975 43 12-31 11/83 12.37 185
FFPB First Palm Beach Bancorp of FL OTC Southeast FL Thrift 1,438 31 09-30 09/93 22.87 118
HOFL Home Financial Corp. of FL OTC Southern FL R.E. 1,216 8 09-30 10/94 13.87 343
HARB Harbor FSB, MHC of FL (45.7) OTC Eastern FL Thrift 1,014 22 09-30 01/94 28.75 142
FFFL Fidelity FSB, MHC of FL(47.2) OTC Southeast FL Thrift 817 20 12-31 01/94 14.87 100
BKUNA BankUnited SA of FL OTC Miami FL Thrift 802 7 09-30 12/85 7.62 43
CMSV Commty. Svgs, MHC of FL(47.6) OTC Southeast FL Thrift 626 17 09-30 10/94 16.12 79
SCSL Suncoast S&LA of Hollywood FL OTC Southeastern FL M.B. 403 5 06-30 11/85 7.00 14
FFLC FFLC Bancorp of Leesburg FL OTC Central FL Thrift 332 8 12-31 01/94 18.25 48
FFFG F.F.O. Financial Group of FL OTC Central FL R.E. 307 11 12-31 10/88 2.75 23
FFPC Florida First Bancorp of FL OTC Northwestern FL Thrift 303 9 12-31 11/86 11.12 38
FFML First Family Bank, FSB of FL OTC Central FL Thrift 159 M 5 06-30 10/92 21.50 12
Mid-Atlantic Companies
----------------------
DME Dime Savings Bank, FSB of NY (3) NYSE NY,NJ,FL M.B. 19,545 87 12-31 08/86 13.12 1,395
GPT GreenPoint Fin. Corp. of NY (3) NYSE New York City NY Thrift 14,150 82 06-30 01/94 36.25 1,810
SVRN Sovereign Bancorp of PA OTC PA,NJ,DE M.B. 9,183 120 12-31 08/86 10.81 536
ASFC Astoria Financial Corp. of NY OTC New York City NY Thrift 7,078 46 12-31 11/93 26.75 575
LISB Long Island Bancorp of NY OTC Long Island NY M.B. 5,221 36 09-30 04/94 28.25 701
COFD Collective Bancorp Inc. of NJ OTC Southern NJ Thrift 5,145 79 06-30 02/84 26.87 547
RCSB RCSB Financial, Inc. of NY (3) OTC NY M.B. 4,049 34 11-30 04/86 27.12 337
ALBK ALBANK Fin. Corp. of Albany NY OTC NY,MA Thrift 3,326 63 06-30 04/92 29.56 393
ROSE TR Financial Corp. of NY OTC New York, NY Thrift 3,073 15 12-31 06/93 29.00 259
NYB New York Bancorp, Inc. of NY AMEX Southeastern NY Thrift 2,918 29 09-30 01/88 30.25 348
GRTR Greater New York SB of NY (3) OTC New York NY Div. 2,541 14 12-31 06/87 12.62 169
BKCO Bankers Corp. of NJ (3) OTC Central NJ Thrift 2,209 15 12-31 03/90 18.50 229
CMSB Cmnwealth Bancorp of PA OTC Philadelphia PA M.B. 2,049 39 06-30 06/96 10.87 195
NWSB Northwest SB, MHC of PA(29.9) OTC Pennsylvania Thrift 1,878 53 06-30 11/94 11.00 257
MLBC ML Bancorp of Villanova PA OTC Philadelphia PA M.B. 1,876 18 03-31 08/94 25.62 160
RELY Reliance Bancorp of NY OTC NYC NY Thrift 1,783 28 06-30 03/94 18.00 164
NSBK Northside SB of Bronx NY (3) OTC New York NY Thrift 1,655 17 09-30 04/86 46.50 225
HAVN Haven Bancorp of Woodhaven NY OTC New York City NY Thrift 1,550 9 12-31 09/93 27.06 117
HARS Harris SB, MHC of PA (23.1) OTC Southeast PA Thrift 1,542 31 12-31 01/94 14.87 167
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 11, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JSBF JSB Financial, Inc. of NY OTC New York City R.E. 1,526 13 12-31 06/90 34.87 351
WSFS WSFS Financial Corp. of DE (3) OTC DE Div. 1,313 14 12-31 11/86 8.13 112
QCSB Queens County SB of NY (3) OTC New York City NY R.E. 1,302 9 12-31 11/93 37.25 300
DIME Dime Community Bancorp of NY OTC Thrift 1,218 P 0 06-30 06/96 13.50 196
OCFC Ocean Fin. Corp. of NJ OTC Thrift 1,179 P 0 12-31 07/96 22.50 189
MFSL Maryland Fed. Bancorp of MD OTC MD Thrift 1,128 25 02-28 06/87 29.50 93
YFED York Financial Corp. of PA OTC PA,MD Thrift 1,110 22 06-30 02/84 16.00 97
PFSB PennFed Fin. Services of NJ OTC Northern NJ Thrift 1,087 17 06-30 07/94 17.50 84
FSLA First SB, SLA MHC of NJ (37.6) OTC Eastern NJ Thrift 962 17 12-31 06/92 16.12 105
PVSA Parkvale Financial Corp of PA OTC Southwestern PA Thrift 919 28 06-30 07/87 28.25 91
PSBK Progressive Bank, Inc. of NY (3) OTC Eastern NY Thrift 902 17 12-31 08/84 30.00 79
PKPS Poughkeepsie SB of NY OTC Poughkeepsie NY R.E. 841 9 12-31 11/85 4.94 62
FFIC Flushing Fin. Corp. of NY (3) OTC New York, NY Thrift 767 7 12-31 11/95 17.87 159
IBSF IBS Financial Corp. of NJ OTC Southwest NJ Thrift 749 8 09-30 10/94 14.37 158
PWBC PennFirst Bancorp of PA OTC Western PA Thrift 696 9 12-31 06/90 13.75 54
SFIN Statewide Fin. Corp. of NJ OTC Northern NJ Thrift 678 16 03-31 10/95 12.50 63
FSFI First State Fin. Serv. of NJ OTC Northeastern NJ Thrift 666 13 09-30 12/87 13.00 51
FSNJ First SB of NJ, MHC (45.0) OTC Northern NJ Thrift 651 4 05-31 01/95 15.00 46
FCIT First Cit. Fin. Corp of MD OTC DC Metro Area Thrift 646 14 12-31 12/86 16.62 48
PSAB Prime Bancorp, Inc. of PA OTC Southeastern PA Thrift 645 18 12-31 11/88 19.25 72
BFSI BFS Bankorp, Inc. of NY OTC New York NY R.E. 621 5 09-30 05/88 52.00 85
FBBC First Bell Bancorp of PA OTC Pittsburgh PA Thrift 571 7 12-31 06/95 13.87 113
GAF GA Financial Corp. of PA AMEX Pittsburgh PA Thrift 562 10 12-31 03/96 12.37 110
THRD TF Financial Corp. of PA OTC Philadelphia PA Thrift 529 11 06-30 07/94 14.62 66
FMCO FMS Financial Corp. of NJ OTC Southern NJ Thrift 518 16 12-31 12/88 15.50 38
TSBS Trenton SB, FSB MHC of NJ(35.0 OTC Central NJ Thrift 517 10 12-31 08/95 14.00 125
PULS Pulse Bancorp of S. River NJ OTC Central NJ Thrift 505 4 09-30 09/86 16.87 51
IROQ Iroquois Bancorp of Auburn NY (3) OTC Central NY Thrift 471 9 12-31 01/86 15.50 37
CJFC Central Jersey Fin. Corp of NJ OTC Central NJ Thrift 469 6 03-31 09/84 33.12 88
FSPG First Home SB, SLA of NJ OTC NJ,DE Thrift 466 M 10 12-31 04/87 18.00 37
AHCI Ambanc Holding Co. of NY (3) OTC East-Central NY Thrift 459 9 12-31 12/95 9.87 54
LVSB Lakeview SB of Paterson NJ OTC Northern NJ Thrift 455 M 8 07-31 12/93 22.75 52
MSBB MSB Bancorp of Middletown NY (3) OTC Southeastern NY Thrift 454 D 17 09-30 08/92 15.75 45
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 11, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ANBK American Nat'l Bancorp of MD OTC Baltimore MD R.E. 449 M 9 07-31 11/95 11.50 46
PBIX Patriot Bank Corp. of PA OTC Southeast PA Thrift 418 7 12-31 12/95 15.00 57
SHEN First Shenango Bancorp of PA OTC Western PA Thrift 369 4 12-31 04/93 20.75 47
PBCI Pamrapo Bancorp, Inc. of NJ OTC Northern NJ Thrift 366 8 12-31 10/89 19.62 64
CARV Carver FSB of New York, NY OTC New York, NY Thrift 362 8 03-31 10/94 7.94 18
CNSK Covenant Bank for Svgs. of NJ (3) OTC Southern NJ Thrift 355 12 12-31 / 12.75 25
PFNC Progress Financial Corp. of PA OTC Southeastern PA M.B. 348 9 12-31 07/83 6.37 24
RARB Raritan Bancorp. of Raritan NJ (3) OTC Central NJ Thrift 345 5 12-31 03/87 21.25 30
FOBC Fed One Bancorp of Wheeling WV OTC Northern WV,OH Thrift 343 9 12-31 01/95 15.50 40
FFWM First Fin. Corp of Western MD OTC Western MD Thrift 322 9 06-30 01/92 24.00 52
FSBI Fidelity Bancorp, Inc. of PA OTC Southwestern PA Thrift 317 8 09-30 06/88 17.87 24
HARL Harleysville SA of PA OTC Southeastern PA Thrift 298 4 09-30 08/87 17.75 23
FKFS First Keystone Fin. Corp of PA OTC Philadelphia PA Thrift 291 5 09-30 01/95 17.75 23
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 283 3 09-30 04/96 11.37 65
LFBI Little Falls Bancorp of NJ OTC New Jersey Thrift 282 7 12-31 01/96 10.37 32
CVAL Chester Valley Bancorp of PA OTC Southeastern PA Thrift 273 6 06-30 03/87 18.00 30
EQSB Equitable FSB of Wheaton MD OTC Central MD Thrift 268 4 09-30 09/93 24.75 15
LFED Leeds FSB, MHC of MD (35.3) OTC Baltimore MD Thrift 267 M 1 06-30 03/94 13.12 45
IFSB Independence FSB of DC OTC Washington DC Ret. 264 D 2 12-31 06/85 7.12 9
FIBC Financial Bancorp of NY OTC New York, NY Thrift 263 5 09-30 08/94 15.00 27
WVFC WVS Financial Corp. of PA (3) OTC Pittsburgh PA Thrift 260 5 06-30 11/93 21.75 38
WSB Washington SB, FSB of MD AMEX Southeastern MD Thrift 255 M 3 07-31 / 5.12 22
FBER First Bergen Bancorp of NJ OTC Northern NJ Thrift 252 2 09-30 04/96 10.00 32
YFCB Yonkers Fin. Corp. of NY OTC Yonkers NY Thrift 243 4 09-30 04/96 11.62 41
GDVS Greater DV SB,MHC of PA(19.9) (3) OTC Southeast PA Thrift 232 7 12-31 03/95 10.00 33
ESBK Elmira SB of Elmira NY (3) OTC NY,PA Ret. 223 6 12-31 03/85 16.50 12
CTBK Center Banks, Inc. of NY (3) OTC Central NY Thrift 220 7 12-31 05/86 14.00 13
HFMD Home Federal Corporation of MD OTC Western MD Thrift 220 7 12-31 02/84 10.44 26
WYNE Wayne Bancorp of NJ OTC Thrift 214 P 0 12-31 06/96 13.50 30
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 201 6 03-31 08/94 14.25 25
SBFL SB Fing. Lakes MHC of NY(33.0) OTC Western NY Thrift 197 4 04-30 11/94 14.75 26
LARL Laurel Capital Group of PA OTC Southwestern PA Thrift 197 6 06-30 02/87 15.50 23
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 191 3 06-30 12/95 12.75 52
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 11, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PHFC Pittsburgh Home Fin. of PA OTC Pittsburgh PA Thrift 184 6 09-30 04/96 10.50 23
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 164 3 12-31 06/95 13.00 17
TPNZ Tappan Zee Fin. Corp. of NY OTC Southeast NY Thrift 115 M 1 03-31 10/95 12.12 19
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 112 M 5 09-30 04/96 11.50 19
PRBC Prestige Bancorp of PA OTC Thrift 103 0 12-31 06/96 10.75 10
WWFC Westwood Fin. Corp. of NJ OTC Northern NJ Thrift 88 P 2 03-31 06/96 10.87 7
THBC Troy Hill Bancorp of PA OTC Pittsburgh PA Thrift 80 M 2 06-30 06/94 13.62 15
ALBC Albion Banc Corp. of Albion NY OTC Western NY Thrift 58 2 09-30 07/93 17.00 4
BRFC Bridgeville SB, FSB of PA OTC Western PA Thrift 56 1 12-31 10/94 15.00 17
PWBK Pennwood SB of PA (3) OTC Pittsburgh PA Thrift 48 P 3 12-31 07/96 10.00 6
Mid-West Companies
------------------
SFB Standard Fed. Bancorp of MI NYSE MI,IN,OH M.B. 15,240 166 12-31 01/87 42.87 1,343
COFI Charter One Financial of OH OTC OH,MI Div. 13,952 155 12-31 01/88 38.62 1,738
RFED Roosevelt Fin. Grp. Inc. of MO OTC MO,IL,KS Div. 9,328 79 12-31 01/87 18.12 764
TCB TCF Financial Corp. of MN NYSE MN,IL,MI,WI,OH Div. 7,001 184 12-31 06/86 38.00 1,328
CFB Commercial Federal Corp. of NE NYSE NE,CO,KS,OK M.B. 6,608 98 06-30 12/84 39.50 596
FFHC First Financial Corp. of WI OTC WI,IL Div. 5,579 129 12-31 12/80 23.00 688
SPBC St. Paul Bancorp, Inc. of IL OTC Chicago IL Div. 4,338 52 12-31 05/87 26.25 472
SECP Security Capital Corp. of WI OTC Wisconsin Div. 3,437 42 06-30 01/94 61.75 575
MAFB MAF Bancorp of IL OTC Chicago IL Thrift 3,117 13 06-30 01/90 26.50 274
GTFN Great Financial Corp. of KY OTC Kentucky M.B. 2,808 41 12-31 03/94 28.00 397
CTZN CitFed Bancorp of Dayton OH OTC Dayton OH M.B. 2,661 33 03-31 01/92 37.50 213
STND Standard Fin. of Chicago IL OTC Chicago IL Thrift 2,275 13 12-31 08/94 16.25 266
ABCW Anchor Bancorp Wisconsin of WI OTC Wisconsin M.B. 1,822 33 03-31 07/92 35.62 172
FISB First Indiana Corp. of IN OTC Central IN M.B. 1,473 28 12-31 08/83 22.94 190
FTFC First Fed. Capital Corp. of WI OTC Southern WI M.B. 1,389 44 12-31 11/89 21.00 131
DNFC D&N Financial Corp. of MI OTC MI,WI Ret. 1,364 35 12-31 02/85 13.00 98
STFR St. Francis Cap. Corp. of WI OTC Milwaukee WI Thrift 1,330 13 09-30 06/93 25.75 144
JSBA Jefferson Svgs Bancorp of MO OTC St. Louis MO,TX Thrift 1,125 21 12-31 04/93 23.50 98
FFSW First Fed Fin. Serv. of OH OTC Northeastern OH Thrift 1,045 18 12-31 04/87 30.25 108
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 11, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AADV Advantage Bancorp of WI OTC WI,IL Thrift 996 15 09-30 03/92 33.00 112
CFSB CFSB Bancorp of Lansing MI OTC Central MI Thrift 792 18 12-31 06/90 18.25 90
OFCP Ottawa Financial Corp. of MI OTC Western MI Thrift 782 26 12-31 08/94 16.25 88
IFSL Indiana Federal Corp. of IN OTC Northwestern IN Thrift 742 15 12-31 02/87 20.00 95
NASB North American SB of MO OTC KS,MO M.B. 740 8 09-30 09/85 31.50 71
FFEC First Fed. Bancshares of WI OTC Northwest WI Thrift 707 20 12-31 10/94 15.25 105
MSBK Mutual SB, FSB of Bay City MI OTC Michigan M.B. 680 22 12-31 07/92 5.75 25
GSBC Great Southern Bancorp of MO OTC Southwest MO Div. 668 25 06-30 12/89 28.50 126
HNFC Hinsdale Financial Corp. of IL OTC Chicago IL M.B. 662 10 09-30 07/92 23.50 63
LBCI Liberty Bancorp of Chicago IL OTC Chicago IL Thrift 651 4 12-31 12/91 24.00 59
FFDP FirstFed Bancshares of IL OTC Chicago IL Thrift 635 3 12-31 07/92 16.50 56
HOMF Home Fed Bancorp of Seymour IN OTC Southern IN Thrift 630 15 06-30 01/88 26.25 58
AVND Avondale Fin. Corp. of IL OTC Chicago IL Ret. 593 6 03-31 04/95 14.12 51
SFSL Security First Corp. of OH OTC Northeastern OH R.E. 589 13 03-31 01/88 13.25 65
FNGB First Northern Cap. Corp of WI OTC Northeast WI Thrift 580 20 12-31 12/83 15.75 69
FFYF FFY Financial Corp. of OH OTC Youngstown OH Thrift 576 10 06-30 06/93 24.06 122
HFFC HF Financial Corp. of SD OTC South Dakota Thrift 555 19 06-30 04/92 15.31 47
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 555 7 12-31 06/94 15.94 78
SSBK Strongsville SB of OH OTC Cleveland OH Thrift 529 13 12-31 / 21.00 53
FDEF First Defiance Fin.Corp. of OH OTC Northwest OH Thrift 521 9 06-30 10/95 10.75 112
FFBH First Fed. Bancshares of AR OTC Northern AR Thrift 505 8 12-31 05/96 15.00 77
CBCI Calumet Bancorp of Chicago IL OTC Chicago IL Thrift 501 5 06-30 02/92 28.00 68
FBCI Fidelity Bancorp of Chicago IL OTC Chicago IL Thrift 457 5 09-30 12/93 16.75 49
FFSX First FS&LA. MHC of IA (45.0) OTC Western IA Thrift 444 12 06-30 06/92 25.75 44
PERM Permanent Bancorp of IN OTC Southwest IN Thrift 411 11 03-31 04/94 16.50 35
ASBI Ameriana Bancorp of IN OTC Eastern IN,OH Thrift 402 8 12-31 02/87 13.25 44
PMFI Perpetual Midwest Fin. of IA OTC EastCentral IA Thrift 383 4 12-31 03/94 17.25 34
SFSB SuburbFed Fin. Corp. of IL OTC IL,IN Thrift 378 12 12-31 02/92 17.25 22
PFSL Pocahnts Fed, MHC of AR (46.4) OTC Northeast AR Thrift 377 5 09-30 04/94 14.50 24
HALL Hallmark Capital Corp. of WI OTC Milwaukee WI Thrift 377 3 06-30 01/94 15.00 21
CBSB Charter Financial Inc. of IL OTC Southern IL Thrift 367 6 09-30 12/95 11.62 57
KNK Kankakee Bancorp of IL AMEX Illinois Thrift 359 10 03-31 12/92 20.25 29
SWBI Southwest Bancshares of IL OTC Chicago IL Thrift 357 5 12-31 06/92 26.87 48
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 11, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFKY First Fed. Fin. Corp. of KY OTC Central KY Thrift 353 7 06-30 07/87 21.00 88
CAFI Camco Fin. Corp. of OH OTC Eastern OH M.B. 353 7 12-31 / 17.50 36
CASH First Midwest Fin. Corp. of IA OTC IA,SD R.E. 342 9 09-30 09/93 23.25 41
HMCI Homecorp, Inc. of Rockford IL OTC Northern IL Thrift 339 9 12-31 06/90 18.25 21
HVFD Haverfield Corp. of OH OTC Cleveland OH Thrift 334 10 12-31 03/85 17.12 33
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 333 6 12-31 07/94 20.62 48
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift 331 11 09-30 10/94 12.00 42
PVFC PVF Capital Corp. of OH OTC Cleveland OH R.E. 318 M 9 06-30 12/92 13.50 31
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 316 8 09-30 03/95 16.37 47
MCBS Mid Continent Bancshares of KS OTC Central KS M.B. 314 7 09-30 06/94 19.12 39
INBI Industrial Bancorp of OH OTC Northern OH Thrift 314 10 12-31 08/95 10.50 58
WCBI WestCo Bancorp of IL OTC Chicago IL Thrift 312 1 12-31 06/92 21.50 56
FMBD First Mutual Bancorp of IL OTC Central IL Thrift 302 7 12-31 07/95 13.06 54
WBCI WFS Bancorp of Wichita KS OTC Wichita KS Thrift 292 D 4 09-30 06/94 23.12 36
WFCO Winton Financial Corp. of OH OTC Cincinnati OH R.E. 283 4 09-30 08/88 11.25 22
SMFC Sho-Me Fin. Corp. of MO OTC Southwest MO Thrift 280 7 12-31 06/94 20.00 35
PFDC Peoples Bancorp of Auburn IN OTC Northeastern IN Thrift 278 6 09-30 07/87 19.87 47
GFCO Glenway Financial Corp. of OH OTC Cincinnati OH Thrift 274 M 6 06-30 11/90 20.25 23
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 263 1 06-30 04/87 31.50 21
FFED Fidelity Fed. Bancorp of IN OTC Southwestern IN Thrift 262 4 06-30 08/87 11.00 27
FNSC Financial Security Corp. of IL OTC Chicago IL Thrift 258 2 12-31 12/92 25.75 40
FCBF FCB Fin. Corp. of Neenah WI OTC Eastern WI Thrift 256 M 6 03-31 09/93 17.75 44
FFOH Fidelity Financial of OH OTC Cincinnati OH Thrift 251 4 12-31 03/96 9.75 40
WAYN Wayne S&L Co., MHC of OH(46.7) OTC Central OH Thrift 250 6 03-31 06/93 19.37 29
OSBF OSB Fin. Corp. of Oshkosh WI OTC Eastern WI Thrift 250 7 12-31 06/92 23.75 26
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 248 6 12-31 05/96 10.87 31
CRCL Circle Financial Corp.of OH OTC Cincinnati OH Thrift 242 8 06-30 08/91 36.00 26
DFIN Damen Fin. Corp. of Chicago IL OTC Chicago IL Thrift 237 3 11-30 10/95 11.37 45
CBIN Community Bank Shares of IN OTC Southeast IN Thrift 233 7 12-31 04/95 12.87 26
FFHS First Franklin Corp. of OH OTC Cincinnati OH Thrift 217 7 12-31 01/88 15.25 18
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 214 5 09-30 10/94 12.87 27
OHSL OHSL Financial Corp. of OH OTC Cincinnati, OH Thrift 209 4 12-31 02/93 20.25 25
WCHI Workingmens Cap. Hldgs of IN OTC South Central IN Thrift 208 2 12-31 06/90 21.16 38
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 11, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 203 M 7 06-30 12/93 19.25 20
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 201 M 4 09-30 03/94 15.50 31
LARK Landmark Bancshares of KS OTC Central KS Thrift 200 5 09-30 03/94 15.63 30
SBCN Suburban Bancorp. of OH OTC Cincinnati OH Thrift 197 M 8 06-30 09/93 16.12 24
CBCO CB Bancorp of Michigan City IN OTC Northwest IN Thrift 196 3 03-31 12/92 19.00 22
MBLF MBLA Financial Corp. of MO OTC Northeast MO Thrift 195 M 2 06-30 06/93 21.75 30
FFFD North Central Bancshares of IA OTC Central IA Thrift 194 4 12-31 03/96 11.87 48
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 192 7 12-31 04/95 12.25 25
MWFD Midwest Fed. Fin. Corp of WI OTC Central WI Thrift 188 9 12-31 07/92 17.50 29
GFED Guaranty FS&LA,MHC of MO(31.1) OTC Southwest MO Thrift 186 M 4 06-30 04/95 9.75 30
PULB Pulaski SB, MHC of MO (29.0) OTC St. Louis MO Thrift 179 M 5 09-30 05/94 12.87 27
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 178 2 09-30 10/94 13.75 31
FFBZ First Federal Bancorp of OH OTC Eastern OH Thrift 178 6 09-30 06/92 26.50 21
MARN Marion Capital Holdings of IN OTC Central IN Thrift 178 2 06-30 03/93 20.25 39
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift 176 3 09-30 04/95 14.50 41
PFED Park Bancorp of Chicago IL OTC Chicago IL Thrift 174 P 3 12-31 08/96 10.31 28
LSBI LSB Fin. Corp. of Lafayette IN OTC Central IN Thrift 172 3 12-31 02/95 17.25 16
EGLB Eagle BancGroup of IL OTC Thrift 163 P 0 12-31 07/96 11.87 15
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 162 M 8 06-30 04/94 14.25 25
THIR Third Financial Corp. of OH OTC Piqua OH Thrift 156 4 09-30 03/93 32.25 37
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 154 3 12-31 06/95 12.25 25
SJSB SJS Bancorp of St. Joseph MI OTC Southwest MI Thrift 151 M 4 06-30 02/95 19.87 20
FFWC FFW Corporation of Wabash IN OTC Central IN Thrift 150 3 06-30 03/93 19.50 14
FFWD Wood Bancorp of OH OTC Northern OH Thrift 146 6 06-30 08/93 14.50 22
QCFB QCF Bancorp of Virginia MN OTC Northeast MN Thrift 146 M 2 06-30 04/95 15.00 27
FBSI First Bancshares of MO OTC Southcentral MO Thrift 144 5 06-30 12/93 16.75 21
JXSB Jcksnville SB,MHC of IL(43.3%) OTC Central IL Thrift 143 4 12-31 04/95 12.25 16
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 139 M 2 06-30 03/95 11.00 25
MWBI Midwest Bancshares, Inc. of IA OTC Southeast IA Thrift 139 4 12-31 11/92 24.50 9
FKKY Frankfort First Bancorp of KY OTC Frankfort KY Thrift 139 M 3 06-30 07/95 10.75 37
MFCX Marshalltown Fin. Corp. of IA OTC Central IA Thrift 125 3 09-30 03/94 16.25 23
GTPS Great American Bancorp of IL OTC East Central IL Thrift 121 M 3 09-30 06/95 13.50 25
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 119 2 06-30 12/93 15.75 18
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 11, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MIFC Mid Iowa Financial Corp. of IA OTC Central IA Thrift 115 6 09-30 10/92 6.50 11
PTRS The Potters S&L Co. of OH OTC Northeast OH Thrift 115 4 12-31 12/93 16.25 8
ASBP ASB Financial Corp. of OH OTC Southern OH Thrift 113 1 06-30 04/95 14.50 25
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 110 2 09-30 10/95 16.25 35
FFSL First Independence Corp. of KS OTC Southeast KS Thrift 106 1 09-30 10/93 19.00 11
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 105 5 09-30 04/95 14.75 11
CNSB CNS Bancorp of MO OTC Central MO Thrift 98 5 12-31 06/96 12.75 21
WCFB Webster CityFSB,MHC of IA(45.2 OTC Central IA Thrift 97 1 12-31 08/94 13.25 28
FFBI First Financial Bancorp of IL OTC Northern IL M.B. 94 2 12-31 10/93 15.50 7
INCB Indiana Comm. Bank, SB of IN OTC Central IN Ret. 94 M 3 06-30 12/94 13.25 12
NWEQ Northwest Equity Corp. of WI OTC Northwest WI Thrift 92 3 03-31 10/94 10.25 10
FTSB Fort Thomas Fin. Corp. of KY OTC Northern KY Thrift 89 2 09-30 06/95 14.00 22
KYF Kentucky First Bancorp of KY AMEX Central KY Thrift 88 2 06-30 08/95 13.62 19
FSBS First Ashland Fin. Corp. of KY OTC Northeast KY Thrift 87 3 09-30 04/95 18.25 27
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 87 3 03-31 09/95 11.25 11
CIBI Community Inv. Bancorp of OH OTC NorthCentral OH Thrift 86 M 3 06-30 02/95 15.75 11
THR Three Rivers Fin. Corp. of MI AMEX Southwest MI Thrift 85 M 4 06-30 08/95 13.00 11
GFSB GFS Bancorp of Grinnell IA OTC Central IA Thrift 83 1 06-30 01/94 21.00 11
AMFC AMB Financial Corp. of IN OTC Northwest IN Thrift 79 4 12-31 04/96 10.44 12
PCBC Perry Co. Fin. Corp. of MO OTC EastCentral MO Thrift 77 D 1 09-30 02/95 17.50 15
LOGN Logansport Fin. Corp. of IN OTC Northern IN Thrift 77 1 12-31 06/95 14.00 19
SFFC StateFed Financial Corp. of IA OTC Des Moines IA Thrift 77 2 06-30 01/94 16.00 13
SOBI Sobieski Bancorp of S. Bend IN OTC Northern IN Thrift 76 M 3 06-30 03/95 12.00 10
HZFS Horizon Fin'l. Services of IA OTC Central IA Thrift 73 3 06-30 06/94 14.50 6
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 73 P 1 06-30 04/96 10.19 15
ATSB AmTrust Capital Corp. of IN OTC Northcentral IN Thrift 73 M 3 06-30 03/95 9.00 5
HHFC Harvest Home Fin. Corp. of OH OTC Southwest OH Thrift 73 M 3 09-30 10/94 9.87 9
GWBC Gateway Bancorp of KY OTC Eastern KY Thrift 71 2 06-30 01/95 13.25 15
MIVI Miss. View Hold. Co. of MN OTC Central MN Thrift 69 1 09-30 03/95 11.75 11
CLAS Classic Bancshares of KY OTC Eastern KY Thrift 69 1 03-31 12/95 11.87 16
LXMO Lexington B&L Fin. Corp. of MO OTC West Central MO Thrift 61 1 09-30 06/96 10.06 13
MSBF MSB Financial Corp. of MI OTC Southcentral MI Thrift 60 2 06-30 02/95 18.00 12
CKFB CKF Bancorp of Danville KY OTC Central KY Thrift 59 1 12-31 01/95 19.75 19
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 11, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NSLB NS&L Bancorp of Neosho MO OTC Southwest MO Thrift 57 2 09-30 06/95 12.00 10
MFSB Mutual Bancompany of MO OTC Central MO Thrift 53 M 1 06-30 02/95 21.00 7
RELI Reliance Bancshares Inc of WI (3) OTC Milwaukee WI Thrift 50 P 1 June 04/96 8.37 21
SHFC Seven Hills Fin. Corp. of OH OTC Cincinnati OH Thrift 46 M 3 06-30 12/93 17.75 10
FLKY First Lancaster Bncshrs of KY OTC Thrift 43 P 0 06-30 07/96 14.50 14
HBBI Home Building Bancorp of IN OTC Southwest IN Thrift 43 2 09-30 02/95 18.25 6
CSBF CSB Financial Group Inc of IL OTC Centralia IL Thrift 41 M 1 09-30 10/95 9.12 9
HWEN Home Financial Bancorp of IN OTC Central IN Thrift 38 P 0 06-30 07/96 12.75 6
LONF London Financial Corp. of OH OTC Central OH Thrift 37 1 09-30 04/96 10.75 6
JOAC Joachim Bancorp of MO OTC Eastern MO Thrift 36 1 03-31 12/95 12.75 10
New England Companies
---------------------
PBCT Peoples Bank, MHC of CT(32.3) (3) OTC Southwestern CT Div. 7,441 84 12-31 07/88 21.25 846
PHBK Peoples Heritage Fin Grp of ME (3) OTC ME,NH Div. 4,372 82 12-31 12/86 22.06 555
CFCX Center Fin. Corp of CT (3) OTC Western CT M.B. 4,018 44 12-31 08/86 24.87 373
WBST Webster Financial Corp. of CT OTC Central CT Thrift 3,837 64 12-31 12/86 32.00 259
EGFC Eagle Financial Corp. of CT OTC Western CT Thrift 1,402 19 09-30 02/87 25.25 114
DSBC DS Bancor Inc. of Derby CT (3) OTC Southwestern CT Thrift 1,257 22 12-31 12/85 37.75 114
SISB SIS Bank of Sprinfield MA (3) OTC Central MA Div. 1,210 21 12-31 02/95 21.12 121
ANDB Andover Bancorp, Inc. of MA (3) OTC Northeastern MA M.B. 1,174 11 12-31 05/86 25.62 109
WLDN Walden Bancorp of MA (3) OTC Eastern MA M.B. 1,052 17 04-30 12/85 27.50 146
CFX Cheshire Fin. Corp. of NH (3) AMEX S.W. NH,MA M.B. 1,026 23 12-31 02/87 14.62 111
MDBK Medford Savings Bank of MA (3) OTC Eastern MA Thrift 993 16 12-31 03/86 24.00 109
AFCB Affiliated Comm BC, Inc of MA OTC MA Thrift 984 10 12-31 / 21.62 110
FFES First FS&LA of E. Hartford CT OTC Central CT Thrift 948 12 12-31 06/87 19.50 51
FMLY Family Bancorp of Haverhill MA (3) OTC MA,NH Div. 925 21 12-31 11/86 27.25 115
MASB MassBank Corp. of Reading MA (3) OTC Eastern MA Thrift 881 14 12-31 05/86 32.87 89
FESX First Essex Bancorp of MA (3) OTC MA,NH Div. 843 10 12-31 08/87 11.12 67
EBCP Eastern Bancorp of NH OTC VT, NH M.B. 841 25 09-30 11/83 19.25 70
BFD BostonFed Bancorp of MA AMEX Boston MA M.B. 778 8 12-31 10/95 13.00 86
NSSB Norwich Financial Corp. of CT (3) OTC Southeastern CT Thrift 731 18 12-31 11/86 15.87 86
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 11, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
New England Companies (continued)
---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MECH Mechanics SB of Hartford CT (3) OTC Hartford CT Thrift 728 0 12-31 06/96 13.50 71
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 689 10 12-31 07/86 16.00 82
NSSY Norwalk Savings Society of CT (3) OTC Southwest CT Thrift 610 8 12-31 06/94 21.25 51
GROV GroveBank for Savings of MA (3) OTC Eastern MA Thrift 590 7 12-31 08/86 31.50 49
CBNH Community Bankshares Inc of NH (3) OTC Southcentral NH M.B. 547 9 06-30 05/86 19.25 47
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 532 15 12-31 12/81 26.87 61
FMCT Farmers & Mechanics Bank of CT (3) OTC Central CT Thrift 530 12 12-31 11/93 31.00 52
PBKB People's SB of Brockton MA (3) OTC Southeastern MA Thrift 524 14 12-31 10/86 10.12 34
SOSA Somerset Savings Bank of MA (3) OTC Eastern MA R.E. 511 5 12-31 07/86 1.91 32
MWBX Metro West of MA (3) OTC Eastern MA Thrift 490 9 12-31 10/86 3.81 53
ABBK Abington Savings Bank of MA (3) OTC Southeastern MA M.B. 484 7 12-31 06/86 16.75 32
SWCB Sandwich Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 450 11 04-30 07/86 21.75 41
PBNB Peoples Sav. Fin. Corp. of CT (3) OTC Central CT Thrift 437 8 12-31 08/86 29.25 56
PETE Primary Bank of NH (3) OTC Southern NH Ret. 408 8 12-31 10/93 13.25 26
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 406 3 12-31 07/86 22.62 60
HSBK Hibernia SB of Quincy MA (3) OTC Eastern MA R.E. 373 7 12-31 09/86 15.00 25
MIDC Midconn Bank of Kensington CT (3) OTC Central CT Thrift 367 10 09-30 09/86 19.50 37
WRNB Warren Bancorp of Peabody MA (3) OTC Eastern MA R.E. 349 6 12-31 07/86 12.50 46
LSBX Lawrence Savings Bank of MA (3) OTC Northeastern MA Thrift 333 6 12-31 05/86 6.44 27
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 311 M 11 04-30 10/86 16.50 32
NMSB Newmil Bancorp. of CT (3) OTC Eastern CT Thrift 309 12 06-30 02/86 7.12 29
POBS Portsmouth Bank Shrs Inc of NH (3) OTC Southeastern NH Thrift 267 3 12-31 02/88 12.81 73
NHTB NH Thrift Bancshares of NH OTC Central NH Thrift 259 10 12-31 05/86 9.87 17
TBK Tolland Bank of CT (3) AMEX Northern CT Thrift 224 7 12-31 12/86 10.75 12
NEBC Northeast Bancorp of ME (3) OTC Eastern ME Thrift 218 M 8 06-30 08/87 12.75 15
HIFS Hingham Inst. for Sav. of MA (3) OTC Eastern MA Thrift 187 4 12-31 12/88 14.75 19
HPBC Home Port Bancorp, Inc. of MA (3) OTC Southeastern MA Thrift 180 2 12-31 08/88 14.50 27
BSBC Branford SB of CT (3) OTC New Haven CT R.E. 178 5 12-31 11/86 3.00 20
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 151 4 12-31 05/93 10.12 12
KSBK KSB Bancorp of Kingfield ME (3) OTC Western ME M.B. 133 8 12-31 06/93 21.00 9
MFLR Mayflower Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 113 M 4 04-30 12/87 15.00 13
NTMG Nutmeg FS&LA of CT OTC CT M.B. 91 3 12-31 / 7.25 5
FCB Falmouth Co-Op Bank of MA (3) AMEX Southeast MA Thrift 88 1 09-30 03/96 11.25 16
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 11, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
New England Companies (continued)
---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MCBN Mid-Coast Bancorp of ME OTC Eastern ME Thrift 55 2 03-31 11/89 19.00 4
GLBK Glendale Co-op. Bank of MA (3) OTC Boston MA Thrift 37 M 1 04-30 01/94 18.00 4
North-West Companies
--------------------
WAMU Washington Mutual Inc. of WA (3) OTC WA,OR,ID,UT,MT Div. 22,323 290 12-31 03/83 36.25 2,613
WFSL Washington FS&LA of Seattle WA OTC Western US Thrift 5,041 89 09-30 11/82 22.25 940
STSA Sterling Financial Corp. of WA OTC WA,OR M.B. 1,478 41 06-30 / 14.25 77
IWBK Interwest SB of Oak Harbor WA OTC Western WA Div. 1,414 31 12-31 / 27.75 179
MSEA Metropolitan Bancorp of WA OTC Western WA R.E. 761 10 03-31 01/90 17.31 64
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 630 7 09-30 10/95 14.37 176
FWWB First Savings Bancorp of WA (3) OTC Central WA Thrift 595 D 16 03-31 11/95 17.00 178
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 494 12 03-31 08/86 13.00 86
FMSB First Mutual SB of Bellevue WA (3) OTC Western WA M.B. 386 6 12-31 12/85 14.75 36
CASB Cascade SB of Everett WA OTC Seattle WA Thrift 334 6 06-30 08/92 17.00 35
RVSB Rvrview SB,FSB MHC of WA(40.3) OTC Southwest WA M.B. 214 9 03-31 10/93 14.50 32
South-East Companies
--------------------
LFCT Leader Fin. Corp of Memphis TN OTC Tennessee M.B. 3,211 23 12-31 09/93 52.25 520
FFCH First Fin. Holdings Inc. of SC OTC CHARLESTON SC Div. 1,523 32 09-30 11/83 18.75 120
AMFB American Federal Bank of SC OTC Northwest SC Thrift 1,382 41 12/31 01/89 16.87 184
MGNL Magna Bancorp of MS OTC MS,AL M.B. 1,309 62 06-30 03/91 21.00 288
LIFB Life Bancorp of Norfolk VA OTC Southeast VA Thrift 1,241 20 12-31 10/94 15.94 161
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 991 29 9-30 12/83 22.75 91
VFFC Virginia First Savings of VA OTC Petersburg VA M.B. 747 23 06-30 01/78 12.62 72
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 716 M 8 06-30 12/95 17.62 303
ISBF ISB Financial Corp. of LA OTC SouthCentral LA Thrift 687 16 12-31 04/95 14.87 106
CNIT Cenit Bancorp of Norfolk VA OTC Southeastern VA Thrift 656 15 12-31 08/92 40.25 65
PALM Palfed, Inc. of Aiken SC OTC Southwest SC Thrift 638 19 12-31 12/85 14.00 73
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 621 10 03-31 04/86 16.00 73
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 11, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
South-East Companies (continued)
--------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VABF Va. Beach Fed. Fin. Corp of VA OTC Southeast VA M.B. 609 12 12-31 11/80 8.00 40
FFFC FFVA Financial Corp. of VA OTC Southern VA Thrift 523 11 12-31 10/94 17.25 89
CFCP Coastal Fin. Corp. of SC OTC SC Thrift 453 9 09-30 09/90 19.50 67
TSH Teche Holding Company of LA AMEX Southern LA Thrift 371 8 09-30 04/95 13.00 50
FSFC First So.east Fin. Corp. of SC OTC Northwest SC Thrift 327 11 06-30 10/93 9.50 42
FFRV Fid. Fin. Bkshrs. Corp. of VA OTC Southern VA Thrift 326 7 12-31 05/86 22.75 52
COOP Cooperative Bk.for Svgs. of NC OTC Eastern NC Thrift 317 17 03-31 08/91 19.00 28
ANA Acadiana Bancshares of LA (3) AMEX Southern LA Thrift 309 P 4 12-31 07/96 13.31 44
ESX Essex Bancorp of VA AMEX VA,NC M.B. 305 12 12-31 / 1.88 2
JEBC Jefferson Bancorp of Gretna LA OTC Southeast LA Thrift 266 7 12-31 08/94 22.50 49
SOPN First SB, SSB, Moore Co. of NC OTC Central NC Thrift 257 5 06-30 01/94 17.00 64
UFRM United FS&LA of Rocky Mount NC OTC Eastern NC M.B. 255 9 12-31 07/80 7.25 22
FLAG Flag Financial Corp of GA OTC Western GA M.B. 229 4 12-31 12/86 10.50 21
MERI Meritrust FSB of Thibodaux LA OTC Southeast LA Thrift 228 8 12-31 / 30.75 24
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 202 1 09-30 03/96 13.37 62
PLE Pinnacle Bank of AL AMEX Central AL Thrift 186 5 06-30 12/86 17.62 16
GSFC Green Street Fin. Corp. of NC OTC Southern NC Thrift 179 3 09-30 04/96 14.00 60
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 164 5 09-30 07/95 14.12 28
NFSL Newnan SB, FSB of Newnan GA OTC Western GA M.B. 162 8 03-31 03/86 22.50 33
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 159 3 03-31 03/88 21.50 27
FGHC First Georgia Hold. Corp of GA OTC Southeastern GA Thrift 144 7 09-30 02/87 7.00 14
PDB Piedmont Bancorp of NC AMEX Central NC Thrift 129 2 06-30 12/95 15.00 40
FFBS FFBS Bancorp of Columbus MS OTC Columbus MS Thrift 125 3 06-30 06/93 21.50 34
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 122 3 09-30 08/94 16.50 19
VAFD Valley FSB of Sheffield AL OTC Northern AL Thrift 119 4 09-30 10/87 39.00 14
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 110 M 4 06-30 10/95 13.25 19
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 108 2 12-31 04/96 17.37 32
TWIN Twin City Bancorp of TN OTC Northeast TN Thrift 103 3 12-31 01/95 17.25 15
GSLC Guaranty Svgs & Loan FA of VA OTC Charltsvl VA M.B. 103 M 3 06-30 / 8.50 8
KSAV KS Bancorp of Kenly NC OTC Central NC Thrift 94 3 12-31 12/93 20.00 13
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 91 2 09-30 02/95 12.75 11
CCFH CCF Holding Company of GA OTC Atlanta GA Thrift 79 3 09-30 07/95 12.37 14
CZF Citisave Fin. Corp. of LA AMEX Baton Rouge LA Thrift 76 5 12-31 07/95 14.00 14
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 11, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
South-East Companies (continued)
--------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SSB Scotland Bancorp of NC AMEX S. Central NC Thrift 70 2 09-30 04/96 12.37 23
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 44 M 1 06-30 07/94 15.50 11
MBSP Mitchell Bancorp of NC (3) OTC Western NC Thrift 36 P 1 12-31 07/96 12.12 12
South-West Companies
--------------------
CBSA Coastal Bancorp of Houston TX OTC Houston TX M.B. 2,797 40 12-31 / 19.62 97
FBHC Fort Bend Holding Corp. of TX OTC Eastcentral TX M.B. 255 5 03-31 06/93 16.87 14
JXVL Jacksonville Bancorp of TX OTC East Central TX Thrift 218 6 09-30 04/96 11.50 31
LBFI L&B Financial of S. Springs TX OTC Northeast TX Thrift 144 6 06-30 09/94 16.50 26
LOAN Horizon Bancorp, Inc of TX (3) OTC Austin TX R.E. 131 M 8 04-30 / 14.50 20
ETFS East Texas Fin. Serv. of TX OTC Northeast TX Thrift 115 2 09-30 01/95 14.50 16
FSBC First SB, FSB of Clovis NM OTC Eastern NM Thrift 112 3 12-31 08/86 5.50 4
GUPB GFSB Bancorp of Gallup NM OTC Northwest NM Thrift 70 M 1 06-30 06/95 14.12 13
Western Companies (Excl CA)
---------------------------
FFBA First Colorado Bancorp of Co OTC Denver CO Thrift 1,501 26 12-31 01/96 14.00 282
WSTR WesterFed Fin. Corp. of MT OTC MT Thrift 564 20 06-30 01/94 15.12 66
GBCI Glacier Bancorp of MT OTC Western MT Div. 408 13 06-30 03/84 24.00 81
SFBM Security Bancorp of MT OTC Southcentral MT Thrift 372 16 06-30 11/86 21.75 32
UBMT United SB, FA of MT OTC Central MT Thrift 104 4 12-31 09/86 18.75 23
TRIC Tri-County Bancorp of WY OTC Southeastern WY Thrift 77 2 12-31 09/93 18.37 11
MORG Morgan Financial Corp. of CO OTC Northeast CO Thrift 74 1 06-30 01/93 13.00 11
CRZY Crazy Woman Creek Bncorp of WY OTC Northeast WY Thrift 50 1 09-30 03/96 10.87 12
</TABLE>
Other Areas
-----------
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage
Banker, R.E.=Real Estate Developer, Div.=Diversified, and
Ret.=Retail Banking.
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 11, 1996(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C>
(3) FDIC savings bank.
</TABLE>
Source: Corporate offering circulars, SNL Securities Quarterly Thrift Report,
and financial reports of publicly Traded Thrifts.
Date of Last Update: 09/11/96
<PAGE>
EXHIBIT III-2
Financial Analysis of Indiana Institutions
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-2
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of June 30, 1996
Balance Sheet as a Percent of Assets
----------------------------------------------------------------------------------------
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Investments Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
----------- ------ ------ -------- -------- ------- -------- -------- ------- ----------
Dearborn Savings
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1996 20.4 73.7 2.4 65.1 23.0 0.0 10.7 0.0 10.7 0.0
SAIF-Insured Thrifts 18.7 65.5 12.5 72.5 13.1 0.1 12.9 0.2 12.7 0.1
State of IN 19.2 71.2 6.1 72.2 13.2 0.2 13.4 0.1 13.3 0.0
Comparable Group
- ----------------
State of IN
- -----------
FBCV 1st Bancorp of Vincennes IN 30.9 64.3 1.0 52.1 38.3 0.0 8.2 0.0 8.2 0.0
AMFC AMB Financial Corp. of IN 17.3 74.5 5.4 75.5 2.5 0.0 20.4 0.0 20.4 0.0
ATSB AmTrust Capital Corp. of IN(1) 19.6 68.3 6.4 69.5 19.2 0.0 10.3 0.1 10.2 0.0
ASBI Ameriana Bancorp of IN 17.4 69.1 10.5 79.2 6.7 0.0 11.1 0.0 11.1 0.0
CBCO CB Bancorp of Michigan City IN 44.9 46.2 4.6 65.5 22.5 0.0 9.9 0.0 9.9 0.0
CBIN Community Bank Shares of IN 40.5 54.3 2.9 81.1 7.2 0.0 11.1 0.0 11.1 0.0
FFWC FFW Corporation of Wabash IN 18.3 67.1 12.3 61.5 27.8 0.0 10.3 0.0 10.3 0.0
FFED Fidelity Fed. Bancorp of IN 7.2 82.4 4.8 69.3 20.2 3.8 5.5 0.0 5.5 0.0
FISB First Indiana Corp. of IN 11.6 82.1 2.9 75.4 13.9 0.0 9.2 0.1 9.1 0.0
HBFW Home Bancorp of Fort Wayne IN 22.4 75.9 0.0 83.7 0.0 0.0 15.5 0.0 15.5 0.0
HBBI Home Building Bancorp of IN 20.9 65.4 10.9 75.8 9.9 0.0 13.9 0.0 13.9 0.0
HOMF Home Fed Bancorp of Seymour IN 8.4 83.3 4.4 77.7 13.4 0.0 8.2 0.3 7.9 0.0
HWEN Home Financial Bancorp of IN(3) 19.9 68.8 7.9 72.9 18.3 0.0 8.6 0.0 8.6 0.0
INCB Indiana Comm. Bank, SB of IN(1) 15.1 78.2 3.5 84.2 0.0 0.0 15.0 0.0 15.0 0.0
IFSL Indiana Federal Corp. of IN 13.9 74.7 4.5 76.0 13.8 0.0 9.5 0.7 8.8 0.0
LSBI LSB Fin. Corp. of Lafayette IN 6.9 87.5 2.3 66.5 23.7 0.0 9.6 0.0 9.6 0.0
LOGN Logansport Fin. Corp. of IN 17.4 68.3 11.2 71.0 2.6 0.0 25.7 0.0 25.7 0.0
MFBC MFB Corp. of Mishawaka IN(1) 30.5 65.3 2.7 74.7 4.7 0.0 19.3 0.0 19.3 0.0
MARN Marion Capital Holdings of IN 12.7 80.5 0.0 71.0 3.5 0.0 23.4 0.0 23.4 0.0
NEIB Northeast Indiana Bncrp of IN 10.9 86.9 0.0 48.2 32.4 0.0 18.9 0.0 18.9 0.0
PFDC Peoples Bancorp of Auburn IN 18.8 79.6 0.2 84.0 0.0 0.0 15.6 0.0 15.6 0.0
PERM Permanent Bancorp of IN 24.8 50.8 20.9 66.6 22.7 0.0 9.8 0.1 9.7 0.0
SOBI Sobieski Bancorp of S. Bend IN(1) 11.7 64.0 20.7 80.3 0.0 0.0 18.5 0.0 18.5 0.0
WCHI Workingmens Cap. Hldgs of IN(2) 7.2 88.1 2.5 71.9 14.7 0.0 12.7 0.0 12.7 0.0
<CAPTION>
Balance Sheet Annual Growth Rates Regulatory Capital
------------------------------------------------------------ -------------------------
Cash and Loans Borrows. Net Tng Net
Assets Investments & MBS Deposits &Subdebt Worth Worth Tangible Core Reg.Cap.
------ ----------- ------ -------- -------- -------- ------- -------- -------- --------
Dearborn Savings
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1996 3.01 36.36 -3.91 10.46 -13.73 1.91 1.91 10.78 10.78 23.09
SAIF-Insured Thrifts 11.33 7.81 11.09 5.72 6.05 3.90 3.58 10.82 10.90 23.21
State of IN 8.45 5.23 6.91 5.23 11.12 3.71 3.74 11.17 11.26 21.99
Comparable Group
- ----------------
State of IN
- -----------
FBCV 1st Bancorp of Vincennes IN -15.76 -12.25 -17.04 -34.63 27.08 33.04 33.04 8.73 8.73 18.17
AMFC AMB Financial Corp. of IN 18.39 26.20 17.72 2.78 0.00 NM NM 14.10 14.10 28.20
ATSB AmTrust Capital Corp. of IN(1) 13.58 84.36 1.51 14.99 16.67 0.24 -0.84 9.76 9.76 16.94
ASBI Ameriana Bancorp of IN 15.11 NM 1.23 7.82 NM -3.48 -3.42 10.11 10.11 19.44
CBCO CB Bancorp of Michigan City IN 13.12 29.82 1.57 7.56 31.76 12.68 12.68 8.83 8.83 17.27
CBIN Community Bank Shares of IN 14.11 24.36 7.64 16.06 8.08 4.51 4.51 9.94 11.07 22.92
FFWC FFW Corporation of Wabash IN 2.15 -14.12 6.52 7.63 -7.73 -0.22 -0.22 8.00 8.00 15.20
FFED Fidelity Fed. Bancorp of IN -2.68 -20.96 -2.74 0.52 -14.88 15.24 15.24 7.08 7.08 13.24
FISB First Indiana Corp. of IN 1.81 -7.20 3.05 3.89 -12.94 11.54 11.78 8.81 8.81 12.44
HBFW Home Bancorp of Fort Wayne IN 2.73 -25.50 15.74 4.95 NM -8.21 -8.21 12.75 12.75 29.17
HBBI Home Building Bancorp of IN 6.18 16.86 3.34 1.37 95.49 1.62 1.62 10.20 10.20 21.40
HOMF Home Fed Bancorp of Seymour IN 7.02 -4.41 8.78 4.81 15.41 13.78 14.65 8.28 8.28 12.35
HWEN Home Financial Bancorp of IN(3) 35.65 NM 11.78 30.78 75.86 6.98 NM 8.76 8.76 20.75
INCB Indiana Comm. Bank, SB of IN(1) 7.39 26.11 4.64 8.66 NM 2.55 2.55 NM NM NM
IFSL Indiana Federal Corp. of IN 2.10 6.47 1.18 5.34 -12.24 3.64 6.97 6.60 7.21 12.97
LSBI LSB Fin. Corp. of Lafayette IN 20.02 -46.10 32.77 8.49 NM -6.56 -6.56 8.92 8.92 14.08
LOGN Logansport Fin. Corp. of IN 8.27 -29.83 22.64 7.55 NM -0.86 -0.86 26.10 26.10 50.30
MFBC MFB Corp. of Mishawaka IN(1) 8.04 16.76 4.51 3.63 NM 0.28 0.28 NM NM NM
MARN Marion Capital Holdings of IN 2.93 2.29 3.06 4.68 -10.37 -0.84 -0.84 19.66 19.66 30.67
NEIB Northeast Indiana Bncrp of IN 18.63 8.46 19.93 12.00 53.83 -3.92 -3.92 13.21 13.21 22.57
PFDC Peoples Bancorp of Auburn IN 1.65 3.91 1.20 1.40 -99.20 5.57 5.57 13.50 13.50 28.30
PERM Permanent Bancorp of IN 16.39 58.11 6.46 2.52 NM -3.86 -3.42 8.18 8.18 20.86
SOBI Sobieski Bancorp of S. Bend IN(1) -2.45 -33.43 3.45 -2.45 NM -2.06 -2.06 13.10 13.10 34.50
WCHI Workingmens Cap. Hldgs of IN(2) -0.72 0.36 -0.93 -3.18 6.97 6.03 6.03 12.10 12.10 21.55
</TABLE>
(1) Financial information is for the quarter ending March 31, 1996.
(2) Excluded from averages due to announced or pending acquisition.
(3) Growth rates have been annualized from available financial information.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-2
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended June 30, 1996
Net Interest Income Other Income
---------------------------- -------------------
Loss NII Total
Net Provis. After Loan R.E. Other Other
Income Income Expense NII on IEA Provis. Fees Oper. Income Income
------ ------ ------- ------ ------- ------- ---- ----- ------ ------
Dearborn Savings
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1996 0.73 7.59 4.78 2.80 0.02 2.78 0.00 0.00 0.23 0.23
SAIF-Insured Thrifts 0.87 7.35 4.16 3.19 0.12 3.07 0.12 -0.01 0.31 0.42
State of IN 0.95 7.54 4.23 3.31 0.18 3.13 0.08 0.02 0.44 0.54
Comparable Group
- ----------------
State of IN
- -----------
FBCV 1st Bancorp of Vincennes IN 2.05 7.41 5.15 2.26 0.03 2.23 0.11 0.00 0.40 0.50
AMFC AMB Financial Corp. of IN 0.63 7.53 3.91 3.62 0.05 3.57 0.07 0.00 0.45 0.52
ATSB AmTrust Capital Corp. of IN(1) 0.31 7.03 4.35 2.68 0.02 2.66 0.02 0.00 0.45 0.47
ASBI Ameriana Bancorp of IN 0.92 7.32 4.25 3.07 0.01 3.05 0.09 0.00 0.48 0.56
CBCO CB Bancorp of Michigan City IN 1.39 8.05 3.99 4.06 0.56 3.50 0.00 0.00 0.67 0.67
CBIN Community Bank Shares of IN 0.88 6.97 4.11 2.85 0.02 2.83 0.25 0.00 0.37 0.63
FFWC FFW Corporation of Wabash IN 1.08 7.63 4.65 2.98 0.06 2.92 0.03 0.00 0.30 0.33
FFED Fidelity Fed. Bancorp of IN 1.19 7.89 5.69 2.20 0.17 2.03 0.42 0.26 2.04 2.72
FISB First Indiana Corp. of IN 1.18 8.56 4.45 4.11 0.67 3.44 0.32 0.14 0.44 0.91
HBFW Home Bancorp of Fort Wayne IN 0.84 7.26 4.39 2.86 0.01 2.85 0.00 0.00 0.08 0.08
HBBI Home Building Bancorp of IN 0.41 7.74 4.11 3.64 0.84 2.79 0.00 0.00 0.32 0.32
HOMF Home Fed Bancorp of Seymour IN 1.22 7.83 4.53 3.31 0.11 3.20 0.04 0.09 0.82 0.95
HWEN Home Financial Bancorp of IN(3) 0.68 7.65 4.18 3.47 0.33 3.15 0.03 0.00 0.40 0.43
INCB Indiana Comm. Bank, SB of IN(1) 0.67 7.70 3.50 4.20 0.31 3.89 0.00 0.00 0.87 0.87
IFSL Indiana Federal Corp. of IN 0.90 7.52 4.10 3.42 0.03 3.39 0.22 -0.06 0.46 0.62
LSBI LSB Fin. Corp. of Lafayette IN 0.52 7.73 4.33 3.40 0.51 2.89 0.05 0.00 0.25 0.30
LOGN Logansport Fin. Corp. of IN 1.51 7.16 3.41 3.75 0.03 3.72 0.00 0.02 0.13 0.15
MFBC MFB Corp. of Mishawaka IN(1) 0.69 6.83 3.88 2.94 0.02 2.93 0.00 0.00 0.18 0.18
MARN Marion Capital Holdings of IN 1.41 7.82 3.88 3.94 0.02 3.92 0.01 -0.10 0.14 0.05
NEIB Northeast Indiana Bncrp of IN 1.19 7.73 3.89 3.84 0.20 3.64 0.06 0.00 0.16 0.22
PFDC Peoples Bancorp of Auburn IN 1.45 7.81 4.06 3.75 0.07 3.68 0.00 0.05 0.24 0.28
PERM Permanent Bancorp of IN 0.38 7.10 4.51 2.60 0.06 2.53 0.18 0.00 0.19 0.37
SOBI Sobieski Bancorp of S. Bend IN(1) 0.42 7.05 3.90 3.15 -0.02 3.17 0.00 0.00 0.20 0.20
WCHI Workingmens Cap. Hldgs of IN(2) 0.86 7.69 4.98 2.71 0.04 2.67 0.00 0.00 0.10 0.10
<CAPTION>
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
---------------- -------------- -------------------------
MEMO: MEMO:
G&A Goodwill Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Expense Amort. Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
------- ------- ------- ------- --------- -------- ------ ---------- --------
Dearborn Savings
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1996 2.07 0.00 0.10 0.00 7.90 5.50 2.40 3,529 29.44
SAIF-Insured Thrifts 2.22 0.02 0.08 0.00 7.53 4.80 2.73 4,047 36.36
State of IN 2.37 0.00 0.20 0.00 7.83 4.96 2.87 3,363 36.93
Comparable Group
- ----------------
State of IN
- -----------
FBCV 1st Bancorp of Vincennes IN 2.65 0.00 3.17 0.00 7.71 5.67 2.05 1,668 36.93
AMFC AMB Financial Corp. of IN 3.10 0.00 0.00 0.00 7.96 4.62 3.35 3,054 36.71
ATSB AmTrust Capital Corp. of IN(1) 2.95 0.00 0.37 0.00 7.38 4.94 2.44 2,706 45.00
ASBI Ameriana Bancorp of IN 2.17 0.01 0.02 0.00 7.54 4.98 2.56 2,872 37.21
CBCO CB Bancorp of Michigan City IN 2.03 0.00 0.02 0.00 8.39 4.51 3.89 3,433 35.75
CBIN Community Bank Shares of IN 2.03 0.00 0.03 0.00 7.13 4.70 2.44 2,846 40.30
FFWC FFW Corporation of Wabash IN 1.73 0.00 0.06 0.00 7.80 5.25 2.55 3,960 31.76
FFED Fidelity Fed. Bancorp of IN 3.15 0.00 0.27 0.00 8.29 6.06 2.23 1,972 36.84
FISB First Indiana Corp. of IN 2.83 -0.06 0.30 0.00 8.86 4.95 3.91 2,872 36.89
HBFW Home Bancorp of Fort Wayne IN 1.51 0.00 0.00 0.00 7.38 5.34 2.04 4,050 40.55
HBBI Home Building Bancorp of IN 2.53 0.00 0.00 0.00 7.95 4.82 3.14 3,081 38.15
HOMF Home Fed Bancorp of Seymour IN 2.38 0.02 0.22 0.00 8.17 4.96 3.21 2,561 41.46
HWEN Home Financial Bancorp of IN(3) 2.52 0.00 0.00 0.00 8.26 4.80 3.46 2,816 35.64
INCB Indiana Comm. Bank, SB of IN(1) 3.72 0.00 0.00 0.00 7.97 4.18 3.79 2,147 35.47
IFSL Indiana Federal Corp. of IN 2.73 0.08 -0.06 0.00 8.07 4.58 3.50 2,586 20.85
LSBI LSB Fin. Corp. of Lafayette IN 2.44 0.00 0.07 0.00 7.99 4.91 3.08 3,018 37.64
LOGN Logansport Fin. Corp. of IN 1.59 0.00 0.01 0.00 7.38 4.73 2.65 7,018 39.03
MFBC MFB Corp. of Mishawaka IN(1) 1.98 0.00 0.01 0.00 6.94 4.96 1.98 4,100 39.90
MARN Marion Capital Holdings of IN 2.04 0.00 0.00 0.00 8.38 5.26 3.12 6,349 26.89
NEIB Northeast Indiana Bncrp of IN 1.94 0.00 0.00 0.00 7.90 5.01 2.90 4,281 38.22
PFDC Peoples Bancorp of Auburn IN 1.55 0.00 0.01 0.00 7.91 4.81 3.10 3,657 39.84
PERM Permanent Bancorp of IN 2.23 0.05 0.00 0.00 7.35 5.11 2.24 3,238 38.86
SOBI Sobieski Bancorp of S. Bend IN(1) 2.69 0.00 0.00 0.00 7.30 4.84 2.45 3,054 39.47
WCHI Workingmens Cap. Hldgs of IN(2) 1.34 0.00 -0.01 0.00 7.85 5.72 2.14 5,479 39.39
</TABLE>
(1) Financial information is for the quarter ending March 31, 1996.
(2) Excluded from averages due to announced or pending acquisition.
(3) Income and expense information has been annualized from available financial
information.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-2
Market Pricing Comparatives
Prices As of September 6, 1996
Per Share Data
Market _______________
Capitalization Book Pricing Ratios(3)
--------------- ---------------------------------------
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
------- ------- ------- ------- ------- ------- ------- ------- --------
Financial Institution
- ---------------------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 17.47 121.39 1.25 16.54 14.36 105.73 13.17 109.33 15.15
State of IN 16.70 35.11 1.48 17.07 14.72 100.23 13.13 101.02 15.26
Comparable Group
- ----------------
State of IN
- -----------
FBCV 1st Bancorp of Vincennes IN 31.50 21.01 8.64 32.58 3.65 96.69 7.97 96.69 NM
AMFC AMB Financial Corp. of IN 10.44 11.73 0.41 14.42 NM 72.40 14.78 72.40 NM
ATSB AmTrust Capital Corp. of IN 9.00 5.10 0.37 13.32 24.32 67.57 6.98 68.29 NM
ASBI Ameriana Bancorp of IN 13.25 43.76 1.03 13.51 12.86 98.08 10.89 98.22 13.12
CBCO CB Bancorp of Michigan City IN 19.00 22.33 2.27 16.44 8.37 115.57 11.41 115.57 8.48
CBIN Community Bank Shares of IN 12.87 25.53 0.95 13.00 13.55 99.00 10.94 99.00 13.84
FFWC FFW Corporation of Wabash IN 19.50 13.86 2.23 21.74 8.74 89.70 9.21 89.70 9.11
FFED Fidelity Fed. Bancorp of IN 11.00 27.45 1.30 5.73 8.46 191.97 10.47 191.97 10.00
FISB First Indiana Corp. of IN 22.94 190.26 2.12 16.40 10.82 139.88 12.92 141.78 13.03
HBFW Home Bancorp of Fort Wayne IN 16.37 47.26 0.91 16.96 17.99 96.52 14.96 96.52 17.99
HBBI Home Building Bancorp of IN 18.25 6.06 0.52 18.12 NM 100.72 14.05 100.72 NM
HOMF Home Fed Bancorp of Seymour IN 26.25 58.43 3.30 23.14 7.95 113.44 9.27 117.77 9.02
HWEN Home Financial Bancorp of IN 12.75 6.45 0.75 14.81 17.00 86.09 16.91 86.09 17.00
INCB Indiana Comm. Bank, SB of IN 13.25 12.22 0.67 15.35 19.78 86.32 12.93 86.32 19.78
IFSL Indiana Federal Corp. of IN 20.00 94.60 1.38 14.86 14.49 134.59 12.74 144.61 13.79
LSBI LSB Fin. Corp. of Lafayette IN 17.25 16.06 0.88 17.82 19.60 96.80 9.34 96.80 21.56
LOGN Logansport Fin. Corp. of IN 14.00 18.51 0.85 14.99 16.47 93.40 23.98 93.40 16.67
MFBC MFB Corp. of Mishawaka IN 15.50 30.60 0.66 19.66 23.48 78.84 15.23 78.84 23.85
MARN Marion Capital Holdings of IN 20.25 39.16 1.28 21.46 15.82 94.36 22.03 94.36 15.82
NEIB Northeast Indiana Bncrp of IN 12.25 25.26 0.80 14.12 15.31 86.76 16.39 86.76 15.31
PFDC Peoples Bancorp of Auburn IN 19.87 46.62 1.72 18.46 11.55 107.64 16.77 107.64 11.62
PERM Permanent Bancorp of IN 16.50 35.33 0.68 18.79 24.26 87.81 8.59 88.90 24.63
SOBI Sobieski Bancorp of S. Bend IN 12.00 10.04 0.39 16.87 NM 71.13 13.15 71.13 NM
WCHI Workingmens Cap. Hldgs of IN(7) 21.16 38.28 1.00 14.63 21.16 144.63 18.39 144.63 20.95
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Amount/ Payout Total Equity/ NPAs/ Reported Core
---------------- ---------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------- ------ ------- ------ ------- ------- ------- ------- ------- -------
Financial Institution
- ---------------------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.36 2.04 28.00 1,299 13.15 0.90 0.87 7.91 0.82 7.25
State of IN 0.37 2.25 33.31 285 13.84 0.70 0.97 8.51 0.84 6.72
Comparable Group
- ----------------
State of IN
- -----------
FBCV 1st Bancorp of Vincennes IN 0.40 1.27 4.63 263 8.25 0.35 2.05 29.46 -0.04 -0.65
AMFC AMB Financial Corp. of IN 0.24 2.30 58.54 79 20.41 0.51 0.63 4.53 0.63 4.53
ATSB AmTrust Capital Corp. of IN 0.00 0.00 0.00 73 10.34 1.31 0.31 2.75 0.07 0.59
ASBI Ameriana Bancorp of IN 0.56 4.23 54.37 402 11.10 0.41 0.92 7.42 0.90 7.28
CBCO CB Bancorp of Michigan City IN 0.00 0.00 0.00 196 9.87 1.51 1.39 14.66 1.38 14.47
CBIN Community Bank Shares of IN 0.34 2.64 35.79 233 11.05 0.12 0.87 7.46 0.85 7.31
FFWC FFW Corporation of Wabash IN 0.60 3.08 26.91 150 10.27 0.06 1.08 9.99 1.04 9.59
FFED Fidelity Fed. Bancorp of IN 0.80 7.27 61.54 262 5.45 0.17 1.19 23.68 1.01 20.04
FISB First Indiana Corp. of IN 0.56 2.44 26.42 1,473 9.23 1.59 1.18 13.62 0.98 11.31
HBFW Home Bancorp of Fort Wayne IN 0.20 1.22 21.98 316 15.50 0.04 0.84 5.00 0.84 5.00
HBBI Home Building Bancorp of IN 0.30 1.64 57.69 43 13.95 0.27 0.41 2.86 0.41 2.86
HOMF Home Fed Bancorp of Seymour IN 0.50 1.90 15.15 630 8.18 0.48 1.22 15.14 1.08 13.35
HWEN Home Financial Bancorp of IN 0.00 0.00 0.00 38 19.64 1.03 0.99 5.06 0.99 5.06
INCB Indiana Comm. Bank, SB of IN 0.35 2.64 52.24 94 14.98 NA 0.68 4.41 0.68 4.41
IFSL Indiana Federal Corp. of IN 0.72 3.60 52.17 742 9.47 1.42 0.90 9.37 0.95 9.84
LSBI LSB Fin. Corp. of Lafayette IN 0.32 1.86 36.36 172 9.65 1.60 0.52 4.66 0.47 4.24
LOGN Logansport Fin. Corp. of IN 0.40 2.86 47.06 77 25.67 0.39 1.51 5.57 1.49 5.51
MFBC MFB Corp. of Mishawaka IN 0.24 1.55 36.36 201 19.32 NA 0.69 3.40 0.68 3.35
MARN Marion Capital Holdings of IN 0.80 3.95 62.50 178 23.35 1.07 1.40 5.85 1.40 5.85
NEIB Northeast Indiana Bncrp of IN 0.30 2.45 37.50 154 18.89 0.25 1.19 5.50 1.19 5.50
PFDC Peoples Bancorp of Auburn IN 0.60 3.02 34.88 278 15.58 0.34 1.45 9.56 1.44 9.50
PERM Permanent Bancorp of IN 0.30 1.82 44.12 411 9.78 1.66 0.38 3.50 0.38 3.45
SOBI Sobieski Bancorp of S. Bend IN 0.00 0.00 0.00 76 18.49 0.08 0.42 2.27 0.42 2.27
WCHI Workingmens Cap. Hldgs of IN(7) 0.36 1.70 36.00 208 12.71 0.32 0.86 7.03 0.87 7.10
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets;
P/TB = Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, Inc.
<PAGE>
EXHIBIT III-3
Peer Group Market Area Comparative Analysis
<PAGE>
<TABLE>
<CAPTION>
Exhibit III-3
Peer Group Primary Market Area Demographic/Competition Trends
Population Proj.
---------- Pop. 1990-95 1995-2000
Institution County 1990 1995 2000 % Change % Change Median Age
- ----------- ------ ---- ---- ---- ----------------- ----------
(000) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
Community Bank Shares of IN Floyd 64 70 76 8.9% 7.8% 35.1
Community Inv. Corp. of OH Crawford 48 47 47 -1.0% -0.4% 35.8
Enterprise Fed. Bancorp of OH Hamilton 866 866 866 -0.0% -0.0% 33.7
FFW Corporation of Wabash IN Wabash 35 35 35 -0.7% -0.3% 35.3
Harvest Home Fin. Corp. of OH Hamilton 866 866 866 -0.0% -0.0% 33.7
MFB Corp of Mishawaka IN St. Joseph 247 258 268 4.2% 3.9% 33.6
Milton Fed. Fin. Corp. of OH Miami 93 97 101 4.4% 4.0% 35.6
Northeast Indiana Bncrp. of IN Huntington 35 37 38 3.4% 3.1% 34.0
OHSL Financial Corp. of OH Hamilton 866 866 866 -0.0% -0.0% 33.7
Wood Bancorp of OH Wood 113 117 121 3.4% 3.2% 31.2
---- --- --- --- ---- ---- ----
Averages: 323 326 328 2.3% 2.1% 34.2
Medians: 103 107 110 1.7% 1.6% 33.9
Dearborn Savings of IN Dearborn 39 44 50 14.1% 11.8% 34.2
<CAPTION>
Per Capita Income
----------------- Deposit
County % State Market
Institution ------ Amount Average Share(1)
- ----------- ------ ------- --------
Community Bank Shares of IN Floyd 16,291 97.7% 18.3%
Community Inv. Corp. of OH Crawford 13,264 84.4% 11.9%
Enterprise Fed. Bancorp of OH Hamilton 18,004 114.6% 0.4%
FFW Corporation of Wabash IN Wabash 14,774 88.6% 20.8%
Harvest Home Fin. Corp. of OH Hamilton 18,004 114.6% 0.4%
MFB Corp of Mishawaka IN St. Joseph 16,003 96.0% 5.3%
Milton Fed. Fin. Corp. of OH Miami 16,756 106.7% 6.8%
Northeast Indiana Bncrp. of IN Huntington 15,994 95.9% 18.5%
OHSL Financial Corp. of OH Hamilton 18,004 114.6% 1.0%
Wood Bancorp of OH Wood 16,534 105.3% 8.7%
---- ------ ------ ----
Averages: 16,363 101.8% 9.2%
Medians: 16,413 101.5% 7.8%
Dearborn Savings of IN Dearborn 15,895 95.3% 7.8%
</TABLE>
(1) Total institution deposits in headquart ers county as percent of total
county deposits.
Sources: CACI, Inc; FDIC; OTS.
<PAGE>
EXHIBIT IV-1
Stock Prices:
As of September 6, 1996
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1
Weekly Thrift Market Line - Part One
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week(1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
SAIF-Insured Thrifts(331) 17.58 5,858 127.3 18.84 14.88 17.45 0.56 140.70 4.45
NYSE Traded Companies(12) 30.78 45,696 1,378.5 32.18 24.74 30.58 0.55 219.57 6.76
AMEX Traded Companies(17) 14.62 3,254 53.7 15.66 12.37 14.54 0.61 224.95 5.30
NASDAQ Listed OTC Companies(302) 17.22 4,395 80.8 18.48 14.63 17.09 0.56 129.84 4.31
California Companies(27) 19.30 21,394 555.1 20.59 15.59 19.35 -0.66 63.44 6.51
Florida Companies(9) 12.77 7,372 83.5 13.96 11.13 12.74 0.02 37.10 8.13
Mid-Atlantic Companies(67) 17.52 5,979 110.7 18.64 14.72 17.37 0.42 127.02 6.00
Mid-West Companies(153) 17.87 3,788 86.2 19.19 15.44 17.75 0.61 163.43 2.30
New England Companies(9) 18.53 3,686 79.6 19.47 14.80 18.40 0.74 171.22 6.94
North-West Companies(6) 19.12 13,680 281.4 19.72 14.51 19.00 1.01 79.89 13.54
South-East Companies(45) 16.55 3,753 61.7 18.06 13.82 16.33 0.79 177.29 6.57
South-West Companies(7) 13.69 1,871 29.2 15.12 12.20 13.49 1.16 -18.52 -4.26
Western Companies (Excl CA)(8) 16.98 4,135 64.7 17.37 14.20 16.57 2.87 245.09 10.68
Thrift Strategy(254) 16.48 3,521 62.8 17.73 14.18 16.39 0.49 108.43 3.63
Mortgage Banker Strategy(41) 21.02 11,909 322.4 22.29 17.41 20.70 1.36 211.48 7.31
Real Estate Strategy(17) 18.80 7,625 134.6 19.80 14.25 18.25 0.89 115.65 8.23
Diversified Strategy(15) 27.67 28,540 716.0 28.84 21.83 27.49 0.42 228.38 8.53
Retail Banking Strategy(4) 11.87 3,342 42.6 13.88 10.75 12.19 -3.44 152.29 -6.03
Companies Issuing Dividends(258) 18.50 6,260 143.7 19.82 15.68 18.37 0.64 156.88 4.57
Companies Without Dividends(73) 14.17 4,361 66.1 15.18 11.92 14.04 0.26 68.20 3.89
Equity/Assets greater than 6%(29) 16.64 20,070 421.9 18.10 13.21 16.57 0.25 75.47 6.98
Equity/Assets 6-12%(157) 20.02 5,943 148.5 21.31 16.65 19.86 0.50 162.20 5.83
Equity/Assets less than 12%(145) 15.24 3,119 50.2 16.41 13.36 15.12 0.69 104.85 2.07
Converted Last 3 Mths (no MHC)(12) 12.95 4,749 64.2 13.26 11.38 12.87 0.76 0.00 -3.03
Actively Traded Companies(53) 24.19 17,043 453.9 25.66 20.01 24.03 0.27 169.68 7.06
Market Value Below $20 Million(83) 13.63 964 12.2 15.00 12.20 13.62 0.05 75.70 -1.81
Holding Company Structure(284) 17.99 5,842 132.4 19.24 15.30 17.85 0.59 132.56 4.15
Assets Over $1 Billion(66) 24.91 18,343 465.3 26.17 20.23 24.73 0.75 163.87 9.89
Assets $500 Million-$1 Billion(58) 17.67 5,129 80.5 18.71 14.82 17.44 0.49 177.35 5.45
Assets $250-$500 Million(76) 16.31 2,555 37.7 17.71 14.01 16.23 0.27 111.19 4.18
Assets less than $250 Million(131) 14.37 1,414 19.5 15.63 12.56 14.28 0.66 82.70 0.72
Goodwill Companies(139) 20.21 10,022 236.8 21.45 16.61 20.05 0.61 163.42 7.76
Non-Goodwill Companies(192) 15.69 2,850 48.1 16.95 13.63 15.57 0.53 95.25 1.73
Acquirors of FSLIC Cases(14) 26.16 33,100 985.5 27.62 21.80 26.00 0.16 219.48 -0.94
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
SAIF-Insured Thrifts(331) 1.27 1.16 16.75 16.28 164.06
NYSE Traded Companies(12) 2.61 2.16 22.34 20.68 369.62
AMEX Traded Companies(17) 0.88 0.85 14.92 14.76 106.71
NASDAQ Listed OTC Companies(302) 1.24 1.13 16.63 16.19 159.10
California Companies(27) 0.96 0.71 18.21 17.64 274.33
Florida Companies(9) 1.07 1.01 12.64 12.29 142.73
Mid-Atlantic Companies(67) 1.40 1.34 16.65 16.00 170.92
Mid-West Companies(153) 1.31 1.17 17.43 17.08 150.29
New England Companies(9) 1.62 1.34 17.76 16.31 245.72
North-West Companies(6) 1.39 1.26 12.75 12.10 165.17
South-East Companies(45) 1.12 1.07 14.54 14.26 119.94
South-West Companies(7) 1.18 1.10 16.47 15.92 215.64
Western Companies (Excl CA)(8) 1.13 1.04 16.24 15.85 115.83
Thrift Strategy(254) 1.11 1.05 16.60 16.22 144.27
Mortgage Banker Strategy(41) 1.96 1.48 17.31 16.22 246.95
Real Estate Strategy(17) 1.25 1.25 16.09 15.90 199.97
Diversified Strategy(15) 2.17 2.13 19.38 18.87 236.31
Retail Banking Strategy(4) 1.13 0.88 13.87 13.37 163.38
Companies Issuing Dividends(258) 1.40 1.27 17.13 16.62 164.30
Companies Without Dividends(73) 0.82 0.73 15.31 15.03 163.16
Equity/Assets greater than 6%(29) 1.17 0.87 13.92 12.96 280.94
Equity/Assets 6-12%(157) 1.70 1.51 17.43 16.66 211.72
Equity/Assets less than 12%(145) 0.85 0.84 16.57 16.51 92.82
Converted Last 3 Mths (no MHC)(12) 0.56 0.59 15.91 15.34 97.00
Actively Traded Companies(53) 2.10 1.93 19.01 18.07 254.71
Market Value Below $20 Million(83) 0.86 0.78 15.91 15.82 127.25
Holding Company Structure(284) 1.28 1.16 17.23 16.76 163.28
Assets Over $1 Billion(66) 1.96 1.77 19.84 18.39 270.60
Assets $500 Million-$1 Billion(58) 1.39 1.29 16.08 15.68 168.64
Assets $250-$500 Million(76) 1.27 1.05 16.10 15.75 161.35
Assets less than $250 Million(131) 0.86 0.82 15.78 15.74 107.00
Goodwill Companies(139) 1.56 1.40 17.39 16.27 218.15
Non-Goodwill Companies(192) 1.07 0.98 16.29 16.29 124.98
Acquirors of FSLIC Cases(14) 2.36 2.07 19.59 18.14 305.85
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
BIF-Insured Thrifts(75) 17.02 6,752 120.9 17.97 13.43 16.92 0.60 111.81 12.22
NYSE Traded Companies(3) 21.00 54,528 1,101.6 21.79 15.12 20.75 1.09 116.54 17.41
AMEX Traded Companies(5) 15.36 3,149 48.9 16.15 12.94 15.10 1.99 38.15 1.77
NASDAQ Listed OTC Companies(67) 16.96 4,554 75.6 17.93 13.38 16.87 0.46 117.37 12.52
California Companies(3) 11.94 6,044 77.1 13.21 9.75 11.91 0.10 202.67 11.29
Mid-Atlantic Companies(20) 18.40 13,239 258.6 19.66 15.10 18.31 0.81 77.98 6.71
Mid-West Companies(1) 8.37 2,562 21.4 8.50 7.50 8.13 2.95 0.00 0.00
New England Companies(44) 17.36 3,861 63.1 18.19 13.32 17.25 0.47 126.21 14.92
North-West Companies(4) 14.92 6,507 100.0 15.67 11.51 14.62 2.22 43.56 12.84
South-East Companies(2) 12.72 2,129 27.8 13.06 10.94 12.94 -1.75 0.00 0.00
Thrift Strategy(47) 17.33 4,503 93.9 18.15 13.57 17.28 0.22 113.87 15.03
Mortgage Banker Strategy(11) 18.64 17,897 267.8 19.89 14.67 18.29 2.31 145.46 9.59
Real Estate Strategy(8) 14.99 5,122 86.9 16.08 11.92 15.07 -1.75 136.43 10.59
Diversified Strategy(7) 15.01 12,833 205.0 15.94 11.95 14.80 2.22 44.28 3.86
Retail Banking Strategy(2) 14.88 1,330 18.8 17.13 13.63 14.25 5.21 14.82 -3.50
Companies Issuing Dividends(49) 19.82 5,406 125.0 20.88 15.49 19.75 0.14 120.97 13.79
Companies Without Dividends(26) 12.24 9,051 113.9 13.00 9.90 12.07 1.40 77.21 8.43
Equity/Assets greater than 6%(10) 11.50 21,055 263.9 12.68 8.76 11.26 2.08 70.23 3.96
Equity/Assets 6-12%(50) 18.44 5,174 111.9 19.50 14.43 18.33 0.49 120.54 13.76
Equity/Assets less than 12%(15) 15.33 4,559 77.7 15.79 12.61 15.31 0.22 -3.20 11.12
Converted Last 3 Mths (no MHC)(4) 12.23 2,540 33.3 12.47 10.47 12.31 -0.63 0.00 0.00
Actively Traded Companies(29) 18.71 9,365 152.4 19.39 14.62 18.65 0.13 137.56 13.64
Market Value Below $20 Million(13) 13.02 1,355 12.6 13.87 10.54 13.11 -1.30 80.55 9.12
Holding Company Structure(46) 17.51 5,273 92.8 18.50 14.01 17.48 0.06 116.23 13.20
Assets Over $1 Billion(17) 22.14 20,723 420.1 23.10 16.60 21.94 1.42 93.18 14.63
Assets $500 Million-$1 Billion(18) 20.05 4,729 84.5 20.62 16.21 19.86 0.73 158.04 10.62
Assets $250-$500 Million(24) 14.81 3,478 41.6 16.12 11.75 14.68 1.23 110.03 12.76
Assets less than $250 Million(16) 12.81 1,468 14.1 13.59 10.36 12.90 -1.15 80.64 10.41
Goodwill Companies(36) 19.80 9,774 194.1 21.00 15.28 19.63 1.01 111.16 13.23
Non-Goodwill Companies(39) 14.78 4,318 61.9 15.53 11.94 14.73 0.28 112.79 11.21
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
BIF-Insured Thrifts(75) 1.35 1.30 15.12 14.48 171.12
NYSE Traded Companies(3) 1.40 1.46 18.09 13.74 249.34
AMEX Traded Companies(5) 1.01 0.95 15.08 14.52 143.36
NASDAQ Listed OTC Companies(67) 1.38 1.32 14.97 14.52 169.44
California Companies(3) 1.03 0.95 11.40 11.40 154.82
Mid-Atlantic Companies(20) 1.47 1.46 16.56 15.48 186.32
Mid-West Companies(1) 0.29 0.29 11.06 11.06 19.67
New England Companies(44) 1.44 1.34 15.00 14.42 180.49
North-West Companies(4) 1.05 1.02 12.40 12.40 96.38
South-East Companies(2) 0.01 0.45 15.51 15.51 65.69
Thrift Strategy(47) 1.30 1.26 15.77 14.97 163.38
Mortgage Banker Strategy(11) 1.79 1.74 16.07 15.60 238.53
Real Estate Strategy(8) 1.29 1.25 11.89 11.89 115.34
Diversified Strategy(7) 1.66 1.48 11.31 10.99 161.83
Retail Banking Strategy(2) 0.21 0.16 16.26 15.80 262.48
Companies Issuing Dividends(49) 1.74 1.66 16.74 15.82 199.97
Companies Without Dividends(26) 0.70 0.70 12.36 12.20 121.84
Equity/Assets greater than 6%(10) 1.15 0.99 9.39 9.31 173.46
Equity/Assets 6-12%(50) 1.56 1.49 15.78 14.85 198.20
Equity/Assets less than 12%(15) 0.81 0.87 15.91 15.91 84.84
Converted Last 3 Mths (no MHC)(4) -0.27 0.01 14.69 14.69 86.83
Actively Traded Companies(29) 1.65 1.62 15.97 15.21 199.24
Market Value Below $20 Million(13) 1.02 0.98 14.42 14.00 153.89
Holding Company Structure(46) 1.51 1.48 15.42 14.92 164.33
Assets Over $1 Billion(17) 1.94 1.86 17.35 15.98 223.89
Assets $500 Million-$1 Billion(18) 1.58 1.43 16.91 16.34 194.14
Assets $250-$500 Million(24) 1.08 1.10 13.40 12.95 144.64
Assets less than $250 Million(16) 1.02 0.98 13.93 13.56 141.22
Goodwill Companies(36) 1.66 1.57 16.90 15.46 222.30
Non-Goodwill Companies(39) 1.10 1.09 13.69 13.69 129.89
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(18) 15.60 5,026 24.2 18.10 13.59 15.45 0.90 109.35 -7.27
BIF-Insured Thrifts(2) 15.63 21,543 128.8 18.06 13.94 15.63 1.48 170.01 -2.41
NASDAQ Listed OTC Companies(20) 15.60 6,677 34.7 18.10 13.62 15.47 0.96 129.57 -6.78
Florida Companies(3) 19.91 5,511 50.0 21.50 16.00 18.58 8.21 0.00 -3.04
Mid-Atlantic Companies(8) 13.61 7,698 25.4 16.59 12.27 13.70 -0.28 61.20 -9.55
Mid-West Companies(7) 15.39 1,917 11.1 17.80 13.62 15.36 0.10 157.50 -8.81
New England Companies(1) 21.25 39,813 251.1 23.12 18.62 21.75 -2.30 170.01 11.84
North-West Companies(1) 14.50 2,196 11.4 17.00 12.39 14.75 -1.69 0.00 -0.28
Thrift Strategy(18) 15.35 5,085 23.9 17.88 13.41 15.16 1.28 109.35 -8.18
Mortgage Banker Strategy(1) 14.50 2,196 11.4 17.00 12.39 14.75 -1.69 0.00 -0.28
Diversified Strategy(1) 21.25 39,813 251.1 23.12 18.62 21.75 -2.30 170.01 11.84
Companies Issuing Dividends(19) 15.91 6,864 36.1 18.39 13.92 15.76 1.14 129.57 -6.20
Companies Without Dividends(1) 9.75 3,125 7.6 12.50 8.00 10.00 -2.50 0.00 -17.86
Equity/Assets greater than 6%(1) 14.50 1,624 10.8 17.25 12.75 14.50 0.00 0.00 -8.63
Equity/Assets 6-12%(13) 17.28 8,382 45.2 19.81 14.87 17.12 0.95 129.57 -6.46
Equity/Assets less than 12%(6) 12.17 3,825 15.7 14.54 11.06 12.04 1.12 0.00 -7.16
Actively Traded Companies(1) 16.12 6,512 32.2 17.50 13.25 16.25 -0.80 61.20 -2.30
Market Value Below $20 Million(1) 12.25 1,272 6.8 14.25 11.25 12.25 0.00 0.00 -11.68
Holding Company Structure(1) 16.12 6,512 32.2 17.50 13.25 16.25 -0.80 61.20 -2.30
Assets Over $1 Billion(4) 18.97 19,835 97.6 21.59 16.47 18.78 0.33 170.01 -4.63
Assets $500 Million-$1 Billion(5) 15.22 6,017 36.3 17.45 13.12 14.70 4.17 61.20 -4.26
Assets $250-$500 Million(4) 18.19 2,069 14.9 21.16 16.34 18.19 -0.23 157.50 -7.97
Assets less than $250 Million(7) 12.48 2,263 8.8 14.82 10.81 12.57 -0.31 0.00 -9.13
Goodwill Companies(10) 17.34 10,666 55.1 19.57 14.86 16.99 2.16 129.57 -3.73
Non-Goodwill Companies(10) 13.87 2,689 14.2 16.63 12.38 13.95 -0.25 0.00 -9.83
MHC Institutions(20) 15.60 6,677 34.7 18.10 13.62 15.47 0.96 129.57 -6.78
</TABLE>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(18) 0.89 0.90 13.12 12.74 130.01
BIF-Insured Thrifts(2) 1.07 0.90 11.52 11.51 128.91
NASDAQ Listed OTC Companies(20) 0.91 0.90 12.96 12.62 129.90
Florida Companies(3) 1.35 1.34 14.87 14.61 151.79
Mid-Atlantic Companies(8) 0.57 0.68 11.92 11.35 111.87
Mid-West Companies(7) 0.92 0.84 13.44 13.41 137.62
New England Companies(1) 1.91 1.53 14.42 14.40 186.91
North-West Companies(1) 1.23 1.13 10.73 9.56 97.39
Thrift Strategy(18) 0.84 0.85 13.00 12.69 128.54
Mortgage Banker Strategy(1) 1.23 1.13 10.73 9.56 97.39
Diversified Strategy(1) 1.91 1.53 14.42 14.40 186.91
Companies Issuing Dividends(19) 0.93 0.93 13.18 12.83 133.61
Companies Without Dividends(1) 0.58 0.31 8.69 8.69 59.37
Equity/Assets greater than 6%(1) 1.24 1.27 13.78 13.78 232.29
Equity/Assets 6-12%(13) 1.01 1.03 14.08 13.58 151.38
Equity/Assets less than 12%(6) 0.65 0.55 10.40 10.36 66.29
Actively Traded Companies(1) 1.24 1.27 14.07 12.26 147.78
Market Value Below $20 Million(1) 0.53 0.43 13.31 13.31 112.46
Holding Company Structure(1) 1.24 1.27 14.07 12.26 147.78
Assets Over $1 Billion(4) 1.35 1.30 13.29 12.48 152.56
Assets $500 Million-$1 Billion(5) 0.91 0.94 13.74 13.30 133.63
Assets $250-$500 Million(4) 1.21 1.17 15.88 15.83 184.20
Assets less than $250 Million(7) 0.49 0.49 10.55 10.38 83.26
Goodwill Companies(10) 1.20 1.12 13.61 12.93 140.74
Non-Goodwill Companies(10) 0.62 0.68 12.31 12.31 119.06
MHC Institutions(20) 0.91 0.90 12.96 12.62 129.90
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 25.37 107,188 2,719.4 27.75 21.88 25.25 0.48 35.31 -4.26
CAL CalFed Inc. of Los Angeles CA(8) 23.00 49,396 1,136.1 23.00 14.50 22.87 0.57 13.92 46.03
CSA Coast Savings Financial of CA 31.37 18,584 583.0 35.12 25.25 30.87 1.62 171.37 -9.39
CFB Commercial Federal Corp. of NE 39.50 15,090 596.1 39.50 32.37 39.00 1.28 970.46 4.64
DME Dime Savings Bank, FSB of NY* 13.12 106,308 1,394.8 13.75 10.37 13.12 0.00 30.42 12.91
DSL Downey Financial Corp. of CA 24.75 16,973 420.1 24.87 18.93 24.62 0.53 44.40 13.79
FRC First Republic Bancorp of CA* 13.62 7,353 100.1 15.37 11.00 13.37 1.87 202.67 3.81
FED FirstFed Fin. Corp. of CA 18.37 10,509 193.1 18.50 12.37 18.37 0.00 13.75 30.10
GLN Glendale Fed. Bk, FSB of CA 17.50 46,730 817.8 19.62 15.12 17.75 -1.41 7.69 -0.68
GDW Golden West Fin. Corp. of CA 55.00 57,924 3,185.8 58.00 46.75 55.50 -0.90 110.00 -0.45
GWF Great Western Fin. Corp. of CA 25.00 137,392 3,434.8 27.12 21.12 24.75 1.01 43.93 -1.46
GPT GreenPoint Fin. Corp. of NY* 36.25 49,924 1,809.7 36.25 24.00 35.75 1.40 N.A. 35.51
SFB Standard Fed. Bancorp of MI 42.87 31,324 1,342.9 43.12 35.50 41.87 2.39 360.47 8.89
TCB TCF Financial Corp. of MN 38.00 34,960 1,328.5 38.50 28.19 37.37 1.69 473.15 14.73
WES Westcorp Inc. of Orange CA 20.87 25,977 542.1 21.91 14.64 21.00 -0.62 184.72 18.44
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 13.31 3,278 43.6 13.50 11.69 13.25 0.45 N.A. N.A.
BKC American Bank of Waterbury CT* 26.87 2,287 61.5 27.62 22.00 26.75 0.45 43.31 -1.39
BFD BostonFed Bancorp of MA 13.00 6,590 85.7 13.12 10.00 12.62 3.01 N.A. 10.64
CFX Cheshire Fin. Corp. of NH* 14.62 7,566 110.6 17.50 12.50 13.87 5.41 22.86 -6.46
CZF Citisave Fin. Corp. of LA 14.00 965 13.5 16.50 13.00 14.00 0.00 N.A. -5.08
CBK Citizens First Fin.Corp. of IL 10.87 2,817 30.6 11.00 9.50 10.87 0.00 N.A. N.A.
ESX Essex Bancorp of VA(8) 1.88 1,052 2.0 5.50 1.62 2.00 -6.00 -88.78 0.00
FCB Falmouth Co-Op Bank of MA* 11.25 1,455 16.4 11.37 10.25 11.25 0.00 N.A. N.A.
GAF GA Financial Corp. of PA 12.37 8,900 110.1 12.37 10.25 11.87 4.21 N.A. N.A.
KNK Kankakee Bancorp of IL 20.25 1,434 29.0 21.00 18.37 19.50 3.85 102.50 7.31
KYF Kentucky First Bancorp of KY 13.62 1,389 18.9 15.25 11.37 13.75 -0.95 N.A. 10.11
NYB New York Bancorp, Inc. of NY 30.25 11,492 347.6 32.12 19.50 30.50 -0.82 326.66 34.44
PDB Piedmont Bancorp of NC 15.00 2,645 39.7 15.12 12.00 15.12 -0.79 N.A. 20.00
PLE Pinnacle Bank of AL 17.62 890 15.7 19.25 15.50 17.62 0.00 161.04 -2.11
SSB Scotland Bancorp of NC 12.37 1,840 22.8 12.62 11.62 12.12 2.06 N.A. N.A.
SZB SouthFirst Bancshares of AL 12.75 863 11.0 16.00 11.37 12.75 0.00 N.A. -17.74
SRN Southern Banc Company of AL 13.25 1,455 19.3 13.37 11.37 13.25 0.00 N.A. 2.95
SSM Stone Street Bancorp of NC 17.37 1,825 31.7 18.50 16.25 17.50 -0.74 N.A. N.A.
TSH Teche Holding Company of LA 13.00 3,871 50.3 14.50 12.00 13.00 0.00 N.A. -5.45
FTF Texarkana Fst. Fin. Corp of AR 14.12 1,952 27.6 16.87 13.00 16.50 -14.42 N.A. 0.00
THR Three Rivers Fin. Corp. of MI 13.00 860 11.2 13.62 11.37 13.00 0.00 N.A. 6.12
TBK Tolland Bank of CT* 10.75 1,157 12.4 10.75 8.25 10.37 3.66 48.28 13.16
WSB Washington SB, FSB of MD 5.12 4,220 21.6 6.25 4.38 5.12 0.00 309.60 2.40
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 31.50 667 21.0 32.86 26.00 27.50 14.55 N.A. 7.99
ALBK ALBANK Fin. Corp. of Albany NY 29.56 13,288 392.8 30.62 22.92 29.12 1.51 27.14 18.24
AMFC AMB Financial Corp. of IN 10.44 1,124 11.7 11.00 9.75 10.37 0.68 N.A. N.A.
ASBP ASB Financial Corp. of OH 14.50 1,714 24.9 16.50 13.25 14.25 1.75 N.A. -8.63
ABBK Abington Savings Bank of MA(8)* 16.75 1,887 31.6 18.50 14.50 17.50 -4.29 153.02 -2.90
AADV Advantage Bancorp of WI 33.00 3,393 112.0 34.50 26.00 32.75 0.76 258.70 9.27
AFCB Affiliated Comm BC, Inc of MA 21.62 5,081 109.9 21.62 16.06 21.25 1.74 N.A. 24.47
ALBC Albion Banc Corp. of Albion NY 17.00 252 4.3 18.75 15.87 17.50 -2.86 30.77 3.03
ATSB AmTrust Capital Corp. of IN 9.00 567 5.1 11.25 8.50 9.00 0.00 N.A. -12.20
</TABLE>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 3.89 0.56 19.78 18.47 461.87
CAL CalFed Inc. of Los Angeles CA(8) 2.11 1.84 13.83 13.83 284.34
CSA Coast Savings Financial of CA 2.21 2.02 23.13 22.77 449.35
CFB Commercial Federal Corp. of NE 3.71 3.68 27.39 24.69 437.88
DME Dime Savings Bank, FSB of NY* 0.73 0.98 9.33 9.24 183.85
DSL Downey Financial Corp. of CA 1.89 1.67 23.09 22.70 277.63
FRC First Republic Bancorp of CA* 1.18 1.16 15.58 15.56 280.73
FED FirstFed Fin. Corp. of CA 0.91 1.02 17.96 17.67 390.60
GLN Glendale Fed. Bk, FSB of CA 0.55 1.05 17.37 16.11 309.36
GDW Golden West Fin. Corp. of CA 4.87 4.79 40.78 38.40 617.63
GWF Great Western Fin. Corp. of CA 2.13 1.98 18.49 16.27 318.21
GPT GreenPoint Fin. Corp. of NY* 2.29 2.23 29.37 16.41 283.44
SFB Standard Fed. Bancorp of MI 4.09 3.55 30.74 24.07 486.53
TCB TCF Financial Corp. of MN 2.94 2.80 14.98 14.33 200.25
WES Westcorp Inc. of Orange CA 1.51 0.59 12.04 12.01 116.54
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* -0.27 0.60 16.67 16.67 94.34
BKC American Bank of Waterbury CT* 2.65 1.60 19.70 18.72 232.46
BFD BostonFed Bancorp of MA 0.48 0.44 13.50 13.50 118.06
CFX Cheshire Fin. Corp. of NH* 1.23 1.05 12.27 11.01 135.58
CZF Citisave Fin. Corp. of LA 0.98 0.90 13.20 13.19 78.89
CBK Citizens First Fin.Corp. of IL 0.46 0.38 14.44 14.44 88.00
ESX Essex Bancorp of VA(8) -5.04 -4.67 0.54 -1.53 290.14
FCB Falmouth Co-Op Bank of MA* 0.33 0.33 14.94 14.94 60.82
GAF GA Financial Corp. of PA 0.44 0.54 14.43 14.43 63.19
KNK Kankakee Bancorp of IL 1.35 1.35 24.75 23.00 250.47
KYF Kentucky First Bancorp of KY 0.61 0.61 13.84 13.84 63.57
NYB New York Bancorp, Inc. of NY 3.01 2.84 13.78 13.78 253.93
PDB Piedmont Bancorp of NC 0.64 0.65 14.01 14.01 48.66
PLE Pinnacle Bank of AL 1.84 1.63 17.04 16.44 209.52
SSB Scotland Bancorp of NC 0.45 0.45 13.43 13.43 38.31
SZB SouthFirst Bancshares of AL 0.57 0.76 15.12 15.12 104.92
SRN Southern Banc Company of AL 0.40 0.40 15.32 15.16 75.44
SSM Stone Street Bancorp of NC 0.62 0.62 21.00 21.00 59.17
TSH Teche Holding Company of LA 0.95 0.93 14.72 14.72 95.77
FTF Texarkana Fst. Fin. Corp of AR 1.51 1.51 16.93 16.93 84.05
THR Three Rivers Fin. Corp. of MI 0.66 0.61 15.17 15.10 99.00
TBK Tolland Bank of CT* 1.13 1.16 11.80 11.28 193.59
WSB Washington SB, FSB of MD 0.59 0.44 4.97 4.97 60.42
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 8.64 -0.19 32.58 32.58 395.03
ALBK ALBANK Fin. Corp. of Albany NY 2.30 2.30 23.83 21.05 250.27
AMFC AMB Financial Corp. of IN 0.41 0.41 14.42 14.42 70.65
ASBP ASB Financial Corp. of OH 0.65 0.65 14.96 14.96 65.92
ABBK Abington Savings Bank of MA(8)* 0.95 0.68 16.66 14.71 256.25
AADV Advantage Bancorp of WI 2.59 2.32 27.74 24.14 293.62
AFCB Affiliated Comm BC, Inc of MA 1.29 1.54 19.07 18.93 193.64
ALBC Albion Banc Corp. of Albion NY 0.56 0.55 23.70 23.70 229.30
ATSB AmTrust Capital Corp. of IN 0.37 0.08 13.32 13.18 128.87
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
AHCI Ambanc Holding Co. of NY* 9.87 5,422 53.5 10.31 9.38 9.87 0.00 N.A. -2.37
ASBI Ameriana Bancorp of IN 13.25 3,303 43.8 14.44 12.75 13.25 0.00 43.55 -7.02
AFFFZ America First Fin. Fund of CA 30.25 6,011 181.8 30.75 25.87 30.25 0.00 61.33 1.68
AMFB American Federal Bank of SC 16.87 10,932 184.4 17.12 14.25 17.12 -1.46 255.16 10.62
ANBK American Nat'l Bancorp of MD 11.50 3,980 45.8 11.62 9.38 11.50 0.00 N.A. 17.95
ABCW Anchor Bancorp Wisconsin of WI 35.62 4,839 172.4 36.25 30.25 35.25 1.05 21.28 -0.70
ANDB Andover Bancorp, Inc. of MA* 25.62 4,250 108.9 27.00 20.00 25.37 0.99 138.33 21.31
ASFC Astoria Financial Corp. of NY 26.75 21,509 575.4 28.13 20.75 26.81 -0.22 1.90 17.27
AVND Avondale Fin. Corp. of IL 14.12 3,603 50.9 15.25 12.50 14.12 0.00 N.A. -2.62
BFSI BFS Bankorp, Inc. of NY 52.00 1,635 85.0 52.00 31.00 45.00 15.56 473.95 47.52
BKCT Bancorp Connecticut of CT* 22.62 2,657 60.1 23.75 13.96 22.75 -0.57 158.51 52.94
BPLS Bank Plus Corp. of CA 10.00 18,242 182.4 10.50 5.50 9.87 1.32 N.A. 11.11
BWFC Bank West Fin. Corp. of MI 11.00 2,296 25.3 12.25 8.94 11.50 -4.35 N.A. 8.70
BANC BankAtlantic Bancorp of FL 12.37 14,926 184.6 12.80 10.08 12.25 0.98 137.88 3.08
BKUNA BankUnited SA of FL 7.62 5,703 43.5 8.75 6.12 7.75 -1.68 40.33 24.51
BKCO Bankers Corp. of NJ* 18.50 12,398 229.4 19.50 16.25 19.25 -3.90 196.00 13.85
BVFS Bay View Capital Corp. of CA 37.62 6,885 259.0 38.25 25.25 37.00 1.68 90.48 32.00
BFSB Bedford Bancshares of VA 16.50 1,161 19.2 18.75 16.00 16.59 -0.54 57.14 -5.01
BSBC Branford SB of CT* 3.00 6,559 19.7 3.50 2.50 3.37 -10.98 41.51 4.53
BRFC Bridgeville SB, FSB of PA(8) 15.00 1,124 16.9 15.37 12.25 15.25 -1.64 5.26 3.45
BYFC Broadway Fin. Corp. of CA 9.75 893 8.7 11.00 9.75 9.75 0.00 N.A. N.A.
CBCO CB Bancorp of Michigan City IN 19.00 1,175 22.3 19.25 15.00 17.87 6.32 72.73 5.56
CCFH CCF Holding Company of GA 12.37 1,131 14.0 12.75 11.12 12.50 -1.04 N.A. -2.98
CENF CENFED Financial Corp. of CA 24.25 5,040 122.2 24.25 19.77 24.12 0.54 54.66 11.14
CFSB CFSB Bancorp of Lansing MI 18.25 4,913 89.7 21.82 17.73 20.00 -8.75 102.78 -6.65
CKFB CKF Bancorp of Danville KY 19.75 963 19.0 20.75 18.00 19.75 0.00 N.A. 2.60
CNSB CNS Bancorp of MO 12.75 1,653 21.1 12.75 11.00 12.37 3.07 N.A. N.A.
CSBF CSB Financial Group Inc of IL 9.12 1,035 9.4 9.62 8.81 9.12 0.00 N.A. -4.00
CFHC California Fin. Hld. Co. of CA 22.81 4,689 107.0 23.12 18.75 22.87 -0.26 117.24 11.27
CBCI Calumet Bancorp of Chicago IL 28.00 2,423 67.8 28.50 27.25 27.81 0.68 38.27 0.90
CAFI Camco Fin. Corp. of OH 17.50 2,076 36.3 19.29 15.71 18.37 -4.74 N.A. 2.10
CMRN Cameron Fin. Corp. of MO 14.50 2,850 41.3 15.25 13.50 14.25 1.75 N.A. 0.90
CAPS Capital Savings Bancorp of MO 19.25 1,039 20.0 19.75 17.25 19.25 0.00 45.28 4.05
CARV Carver FSB of New York, NY 7.94 2,314 18.4 10.75 7.50 7.87 0.89 27.04 -11.78
CASB Cascade SB of Everett WA 17.00 2,046 34.8 17.50 12.40 17.50 -2.86 32.81 27.82
CATB Catskill Fin. Corp. of NY* 11.37 5,687 64.7 11.37 9.87 11.00 3.36 N.A. N.A.
CNIT Cenit Bancorp of Norfolk VA 40.25 1,613 64.9 40.25 31.75 35.75 12.59 153.46 9.52
CTBK Center Banks, Inc. of NY* 14.00 944 13.2 15.25 13.12 14.00 0.00 27.27 -0.43
CFCX Center Fin. Corp of CT(8)* 24.87 15,014 373.4 24.87 16.50 24.87 0.00 268.44 42.11
CEBK Central Co-Op. Bank of MA* 16.50 1,965 32.4 17.75 10.87 16.50 0.00 214.29 10.00
CJFC Central Jersey Fin. Corp of NJ(8) 33.12 2,668 88.4 33.12 21.00 32.87 0.76 255.36 32.48
CBSB Charter Financial Inc. of IL 11.62 4,874 56.6 12.25 9.84 11.00 5.64 N.A. 7.49
COFI Charter One Financial of OH(8) 38.62 45,010 1,738.3 38.87 28.31 38.06 1.47 120.69 26.13
CVAL Chester Valley Bancorp of PA 18.00 1,648 29.7 19.50 17.26 19.50 -7.69 58.87 -1.80
CRCL Circle Financial Corp.of OH(8) 36.00 715 25.7 37.00 25.00 36.00 0.00 227.27 33.33
CTZN CitFed Bancorp of Dayton OH 37.50 5,691 213.4 39.50 32.62 37.50 0.00 316.67 8.70
CLAS Classic Bancshares of KY 11.87 1,322 15.7 12.12 10.37 11.62 2.15 N.A. 1.02
CMSB Cmnwealth Bancorp of PA 10.87 17,953 195.1 12.39 9.75 10.75 1.12 N.A. -3.03
CBSA Coastal Bancorp of Houston TX 19.62 4,962 97.4 19.75 15.87 18.50 6.05 N.A. 12.11
CFCP Coastal Fin. Corp. of SC 19.50 3,436 67.0 21.00 12.00 19.25 1.30 95.00 54.27
COFD Collective Bancorp Inc. of NJ 26.87 20,374 547.4 28.25 22.50 26.25 2.36 252.62 5.91
CMSV Commty. Svgs, MHC of FL(47.6) 16.12 4,881 38.4 18.25 14.25 16.25 -0.80 N.A. -5.18
CBIN Community Bank Shares of IN 12.87 1,984 25.5 14.75 12.00 12.50 2.96 N.A. -9.68
CBNH Community Bankshares Inc of NH* 19.25 2,423 46.6 19.75 16.50 19.25 0.00 413.33 2.01
CFTP Community Fed. Bancorp of MS 13.37 4,629 61.9 13.75 12.25 13.50 -0.96 N.A. N.A.
</TABLE>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
AHCI Ambanc Holding Co. of NY* 0.23 0.21 13.80 13.80 84.65
ASBI Ameriana Bancorp of IN 1.03 1.01 13.51 13.49 121.72
AFFFZ America First Fin. Fund of CA 3.51 3.49 26.82 26.25 378.32
AMFB American Federal Bank of SC 1.58 1.73 9.81 9.05 126.43
ANBK American Nat'l Bancorp of MD 0.37 0.36 12.31 12.31 112.82
ABCW Anchor Bancorp Wisconsin of WI 3.19 3.10 24.36 23.73 376.58
ANDB Andover Bancorp, Inc. of MA* 2.53 2.47 20.87 20.87 276.22
ASFC Astoria Financial Corp. of NY 2.29 2.25 26.11 21.25 329.09
AVND Avondale Fin. Corp. of IL 1.02 0.73 16.33 16.33 164.52
BFSI BFS Bankorp, Inc. of NY 6.37 6.16 29.74 29.74 380.01
BKCT Bancorp Connecticut of CT* 1.70 1.68 16.12 16.12 152.71
BPLS Bank Plus Corp. of CA -3.31 -3.32 9.59 9.57 180.72
BWFC Bank West Fin. Corp. of MI 0.41 0.24 11.99 11.99 60.63
BANC BankAtlantic Bancorp of FL 1.19 0.92 9.49 8.77 132.34
BKUNA BankUnited SA of FL 0.94 0.98 7.95 7.51 140.55
BKCO Bankers Corp. of NJ* 1.75 1.84 14.90 14.61 178.14
BVFS Bay View Capital Corp. of CA 0.27 1.61 29.95 26.42 492.21
BFSB Bedford Bancshares of VA 1.29 1.29 15.96 15.96 104.89
BSBC Branford SB of CT* 0.23 0.23 2.38 2.38 27.16
BRFC Bridgeville SB, FSB of PA(8) 0.61 0.61 14.24 14.24 49.92
BYFC Broadway Fin. Corp. of CA 0.35 0.39 14.61 14.61 125.27
CBCO CB Bancorp of Michigan City IN 2.27 2.24 16.44 16.44 166.52
CCFH CCF Holding Company of GA 0.68 0.65 14.86 14.86 70.14
CENF CENFED Financial Corp. of CA 2.30 1.64 21.27 21.23 426.26
CFSB CFSB Bancorp of Lansing MI 1.49 1.47 13.24 13.24 161.13
CKFB CKF Bancorp of Danville KY 0.70 0.70 16.24 16.24 60.99
CNSB CNS Bancorp of MO 0.39 0.34 14.64 14.64 59.48
CSBF CSB Financial Group Inc of IL 0.32 0.32 12.30 12.30 39.82
CFHC California Fin. Hld. Co. of CA 1.56 1.40 18.54 18.43 283.04
CBCI Calumet Bancorp of Chicago IL 2.71 2.71 33.23 33.23 206.69
CAFI Camco Fin. Corp. of OH 2.02 1.57 14.13 14.13 169.83
CMRN Cameron Fin. Corp. of MO 0.97 0.95 16.26 16.26 61.70
CAPS Capital Savings Bancorp of MO 1.75 1.75 20.34 20.34 194.95
CARV Carver FSB of New York, NY 0.32 0.29 15.07 14.37 156.60
CASB Cascade SB of Everett WA 1.11 0.67 10.17 10.17 163.46
CATB Catskill Fin. Corp. of NY* 0.80 0.80 14.19 14.19 49.81
CNIT Cenit Bancorp of Norfolk VA 1.93 2.15 29.58 28.52 406.55
CTBK Center Banks, Inc. of NY* 1.28 1.33 16.42 16.42 233.45
CFCX Center Fin. Corp of CT(8)* 1.73 1.09 15.58 14.63 267.64
CEBK Central Co-Op. Bank of MA* 0.62 0.66 15.82 13.80 158.24
CJFC Central Jersey Fin. Corp of NJ(8) 1.94 1.89 20.99 19.60 175.90
CBSB Charter Financial Inc. of IL 0.74 0.73 13.09 12.17 75.29
COFI Charter One Financial of OH(8) 0.88 2.94 20.76 19.19 309.97
CVAL Chester Valley Bancorp of PA 1.48 1.41 15.51 15.51 165.61
CRCL Circle Financial Corp.of OH(8) 1.59 1.36 34.60 30.20 338.12
CTZN CitFed Bancorp of Dayton OH 3.07 2.74 30.80 26.85 467.58
CLAS Classic Bancshares of KY 0.36 0.31 14.75 14.75 52.01
CMSB Cmnwealth Bancorp of PA 0.62 0.54 12.67 9.65 114.13
CBSA Coastal Bancorp of Houston TX 2.15 2.07 19.16 15.86 563.60
CFCP Coastal Fin. Corp. of SC 1.29 1.13 8.04 8.04 131.78
COFD Collective Bancorp Inc. of NJ 2.67 2.64 17.88 16.69 252.55
CMSV Commty. Svgs, MHC of FL(47.6) 1.08 1.10 15.38 15.38 128.26
CBIN Community Bank Shares of IN 0.95 0.93 13.00 13.00 117.61
CBNH Community Bankshares Inc of NH* 1.56 1.28 15.66 15.66 225.64
CFTP Community Fed. Bancorp of MS 0.51 0.50 14.37 14.37 43.56
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week(1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
CFFC Community Fin. Corp. of VA 21.50 1,272 27.3 22.00 15.00 21.50 0.00 207.14 19.44
CIBI Community Inv. Bancorp of OH 15.75 701 11.0 17.50 14.25 16.00 -1.56 N.A. 3.28
COOP Cooperative Bk.for Svgs. of NC 19.00 1,492 28.3 22.50 16.50 17.50 8.57 90.00 -7.32
CNSK Covenant Bank for Svgs. of NJ* 12.75 1,960 25.0 13.22 9.30 12.50 2.00 N.A. -3.56
CRZY Crazy Woman Creek Bncorp of WY 10.87 1,058 11.5 11.00 10.00 11.00 -1.18 N.A. N.A.
DNFC D&N Financial Corp. of MI 13.00 7,565 98.3 14.25 11.25 13.12 -0.91 48.57 7.26
DSBC DS Bancor Inc. of Derby CT* 37.75 3,032 114.5 38.00 23.33 37.25 1.34 129.48 48.04
DFIN Damen Fin. Corp. of Chicago IL 11.37 3,967 45.1 11.94 11.00 11.25 1.07 N.A. 0.00
DIME Dime Community Bancorp of NY 13.50 14,547 196.4 13.75 11.69 13.37 0.97 N.A. N.A.
DIBK Dime Financial Corp. of CT* 16.00 5,102 81.6 16.00 11.00 15.50 3.23 52.38 18.52
EGLB Eagle BancGroup of IL 11.87 1,303 15.5 11.87 10.50 11.50 3.22 N.A. N.A.
EBSI Eagle Bancshares of Tucker GA 16.00 4,552 72.8 19.00 14.37 16.00 0.00 120.69 -15.79
EGFC Eagle Financial Corp. of CT 25.25 4,517 114.1 27.75 22.25 24.50 3.06 188.57 -3.81
ETFS East Texas Fin. Serv. of TX 14.50 1,134 16.4 16.75 14.25 14.50 0.00 N.A. -10.77
EBCP Eastern Bancorp of NH 19.25 3,652 70.3 19.25 14.42 17.75 8.45 53.39 7.96
ESBK Elmira SB of Elmira NY* 16.50 706 11.6 18.75 15.50 16.50 0.00 14.82 -12.00
EFBI Enterprise Fed. Bancorp of OH 12.87 2,074 26.7 18.00 12.75 13.37 -3.74 N.A. -12.75
EQSB Equitable FSB of Wheaton MD 24.75 600 14.9 26.25 21.00 24.75 0.00 N.A. -1.00
FFFG F.F.O. Financial Group of FL 2.75 8,430 23.2 3.13 2.25 2.75 0.00 -66.91 7.42
FCBF FCB Fin. Corp. of Neenah WI 17.75 2,460 43.7 18.50 16.25 17.00 4.41 N.A. -4.05
FFBS FFBS Bancorp of Columbus MS 21.50 1,572 33.8 24.25 16.50 21.50 0.00 N.A. 26.47
FFDF FFD Financial Corp. of OH 10.19 1,455 14.8 10.75 10.00 10.19 0.00 N.A. N.A.
FFLC FFLC Bancorp of Leesburg FL 18.25 2,619 47.8 20.25 17.25 18.31 -0.33 N.A. -2.67
FFFC FFVA Financial Corp. of VA 17.25 5,181 89.4 18.25 13.37 17.25 0.00 N.A. 25.45
FFWC FFW Corporation of Wabash IN 19.50 711 13.9 20.00 16.50 19.62 -0.61 N.A. -1.27
FFYF FFY Financial Corp. of OH 24.06 5,081 122.2 24.25 20.25 24.00 0.25 N.A. 14.57
FMCO FMS Financial Corp. of NJ 15.50 2,468 38.3 17.50 14.75 15.50 0.00 72.22 -8.82
FFHH FSF Financial Corp. of MN 12.00 3,478 41.7 13.50 11.37 11.50 4.35 N.A. -7.69
FMLY Family Bancorp of Haverhill MA(8)* 27.25 4,215 114.9 27.37 16.33 27.00 0.93 423.03 52.49
FMCT Farmers & Mechanics Bank of CT(8)* 31.00 1,662 51.5 31.00 17.75 30.75 0.81 N.A. 40.91
FOBC Fed One Bancorp of Wheeling WV 15.50 2,558 39.6 16.25 13.25 14.87 4.24 55.00 2.51
FFRV Fid. Fin. Bkshrs. Corp. of VA(8) 22.75 2,292 52.1 23.12 12.00 22.50 1.11 160.00 64.02
FBCI Fidelity Bancorp of Chicago IL 16.75 2,931 49.1 17.06 13.75 17.00 -1.47 N.A. 8.98
FSBI Fidelity Bancorp, Inc. of PA 17.87 1,370 24.5 18.00 14.32 18.00 -0.72 131.18 19.13
FFFL Fidelity FSB, MHC of FL(47.2) 14.87 6,720 47.1 17.00 12.00 12.50 18.96 N.A. -8.49
FFED Fidelity Fed. Bancorp of IN 11.00 2,495 27.4 14.77 10.25 10.75 2.33 56.03 -25.52
FFOH Fidelity Financial of OH 9.75 4,074 39.7 10.89 7.00 9.62 1.35 N.A. -10.47
FIBC Financial Bancorp of NY 15.00 1,796 26.9 16.25 12.37 16.00 -6.25 N.A. 9.09
FNSC Financial Security Corp. of IL(8) 25.75 1,551 39.9 26.50 19.00 26.00 -0.96 157.50 15.73
FSBS First Ashland Fin. Corp. of KY(8) 18.25 1,463 26.7 18.75 13.37 18.25 0.00 N.A. 25.86
FBSI First Bancshares of MO 16.75 1,269 21.3 17.00 15.25 16.50 1.52 31.37 4.69
FBBC First Bell Bancorp of PA 13.87 8,166 113.3 14.25 12.62 13.75 0.87 N.A. 3.74
FBER First Bergen Bancorp of NJ 10.00 3,174 31.7 10.50 9.00 10.25 -2.44 N.A. N.A.
FCIT First Cit. Fin. Corp of MD 16.62 2,915 48.4 19.09 14.09 16.75 -0.78 91.25 -3.76
FFBA First Colorado Bancorp of Co 14.00 20,134 281.9 14.50 10.23 13.87 0.94 324.24 27.39
FDEF First Defiance Fin.Corp. of OH 10.75 10,432 112.1 11.00 8.80 10.62 1.22 N.A. 6.23
FESX First Essex Bancorp of MA* 11.12 6,046 67.2 12.00 10.00 11.12 0.00 85.33 -2.20
FFES First FS&LA of E. Hartford CT 19.50 2,597 50.6 21.50 16.50 20.00 -2.50 200.00 -2.50
FSSB First FS&LA of San Bern. CA 9.87 328 3.2 14.50 9.75 9.75 1.23 -1.30 -21.04
FFSX First FS&LA. MHC of IA (45.0) 25.75 1,707 19.5 28.62 21.50 25.25 1.98 157.50 -3.74
FFML First Family Bank, FSB of FL(8) 21.50 545 11.7 23.00 16.00 21.50 0.00 230.77 2.38
FFSW First Fed Fin. Serv. of OH 30.25 3,584 108.4 31.00 21.02 30.50 -0.82 77.94 40.11
BDJI First Fed. Bancorp. of MN 14.75 778 11.5 14.75 12.25 14.00 5.36 N.A. 7.27
FFBH First Fed. Bancshares of AR 15.00 5,154 77.3 15.00 12.75 15.00 0.00 N.A. N.A.
FFEC First Fed. Bancshares of WI 15.25 6,855 104.5 16.19 13.62 15.00 1.67 N.A. 0.00
</TABLE>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
CFFC Community Fin. Corp. of VA 1.62 1.62 17.53 17.53 124.87
CIBI Community Inv. Bancorp of OH 1.22 1.16 16.93 16.93 122.38
COOP Cooperative Bk.for Svgs. of NC 0.61 0.60 19.77 17.45 212.23
CNSK Covenant Bank for Svgs. of NJ* 1.02 1.02 8.72 8.72 181.03
CRZY Crazy Woman Creek Bncorp of WY 0.36 0.33 14.61 14.61 47.57
DNFC D&N Financial Corp. of MI 1.74 1.59 10.44 10.30 180.31
DSBC DS Bancor Inc. of Derby CT* 2.95 2.71 27.79 26.92 414.72
DFIN Damen Fin. Corp. of Chicago IL 0.51 0.50 13.85 13.85 59.82
DIME Dime Community Bancorp of NY 0.63 0.58 14.17 12.45 83.75
DIBK Dime Financial Corp. of CT* 2.10 2.28 11.08 10.57 135.04
EGLB Eagle BancGroup of IL 0.10 0.10 16.89 16.89 124.84
EBSI Eagle Bancshares of Tucker GA 1.15 1.14 12.57 12.57 136.53
EGFC Eagle Financial Corp. of CT 3.73 1.82 22.66 16.55 310.48
ETFS East Texas Fin. Serv. of TX 0.83 0.76 19.24 19.24 101.71
EBCP Eastern Bancorp of NH 1.64 1.25 17.77 16.77 230.16
ESBK Elmira SB of Elmira NY* 0.48 0.40 19.69 18.81 316.10
EFBI Enterprise Fed. Bancorp of OH 0.90 0.62 15.23 15.21 103.12
EQSB Equitable FSB of Wheaton MD 3.30 3.28 23.64 23.64 446.29
FFFG F.F.O. Financial Group of FL 0.17 0.20 2.27 2.27 36.42
FCBF FCB Fin. Corp. of Neenah WI 1.04 1.02 19.18 19.18 103.93
FFBS FFBS Bancorp of Columbus MS 1.06 1.06 15.67 15.67 79.66
FFDF FFD Financial Corp. of OH 0.52 0.52 14.08 14.08 50.24
FFLC FFLC Bancorp of Leesburg FL 1.17 1.17 21.54 21.54 126.80
FFFC FFVA Financial Corp. of VA 1.27 1.24 15.72 15.40 100.91
FFWC FFW Corporation of Wabash IN 2.23 2.14 21.74 21.74 211.63
FFYF FFY Financial Corp. of OH 1.36 1.40 20.06 20.06 113.29
FMCO FMS Financial Corp. of NJ 1.69 1.69 13.91 13.57 209.86
FFHH FSF Financial Corp. of MN 0.58 0.58 13.69 13.69 95.28
FMLY Family Bancorp of Haverhill MA(8)* 1.88 1.82 16.60 15.25 219.51
FMCT Farmers & Mechanics Bank of CT(8)* 0.62 0.59 17.58 17.58 318.71
FOBC Fed One Bancorp of Wheeling WV 1.29 1.29 16.10 15.28 134.10
FFRV Fid. Fin. Bkshrs. Corp. of VA(8) 1.37 1.33 12.22 12.21 142.15
FBCI Fidelity Bancorp of Chicago IL 1.03 1.03 16.99 16.93 155.88
FSBI Fidelity Bancorp, Inc. of PA 1.40 1.38 15.73 15.65 231.62
FFFL Fidelity FSB, MHC of FL(47.2) 0.78 0.73 11.99 11.86 121.56
FFED Fidelity Fed. Bancorp of IN 1.30 1.10 5.73 5.73 105.10
FFOH Fidelity Financial of OH 0.50 0.50 12.54 12.54 61.66
FIBC Financial Bancorp of NY 0.87 0.86 14.60 14.52 146.16
FNSC Financial Security Corp. of IL(8) 1.35 1.37 25.69 25.69 166.64
FSBS First Ashland Fin. Corp. of KY(8) 0.51 0.51 16.35 16.35 59.76
FBSI First Bancshares of MO 0.91 0.90 18.70 18.67 113.22
FBBC First Bell Bancorp of PA 1.04 1.04 14.24 14.24 69.88
FBER First Bergen Bancorp of NJ 0.27 0.36 13.54 13.54 79.43
FCIT First Cit. Fin. Corp of MD 1.52 1.24 13.63 13.63 221.55
FFBA First Colorado Bancorp of Co 0.79 0.79 12.17 12.03 74.57
FDEF First Defiance Fin.Corp. of OH 0.60 0.59 12.14 12.14 49.91
FESX First Essex Bancorp of MA* 1.34 1.12 10.31 10.31 139.41
FFES First FS&LA of E. Hartford CT 1.95 1.93 21.95 21.89 364.96
FSSB First FS&LA of San Bern. CA -3.47 -4.03 14.44 13.72 312.30
FFSX First FS&LA. MHC of IA (45.0) 1.79 1.66 21.59 21.38 259.89
FFML First Family Bank, FSB of FL(8) 2.57 1.36 16.38 16.38 291.83
FFSW First Fed Fin. Serv. of OH 2.47 2.03 16.59 13.46 291.46
BDJI First Fed. Bancorp. of MN 0.90 0.89 17.89 17.89 134.92
FFBH First Fed. Bancshares of AR 0.82 0.78 16.19 16.19 97.97
FFEC First Fed. Bancshares of WI 0.80 0.83 14.22 13.66 103.09
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week(1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FTFC First Fed. Capital Corp. of WI 21.00 6,231 130.9 22.87 17.25 19.75 6.33 86.67 16.67
FFKY First Fed. Fin. Corp. of KY 21.00 4,208 88.4 22.00 14.62 21.00 0.00 33.33 36.63
FFBZ First Federal Bancorp of OH 26.50 785 20.8 26.50 17.50 24.50 8.16 165.00 30.86
FFWM First Fin. Corp of Western MD 24.00 2,177 52.2 24.59 17.75 24.50 -2.04 140.00 21.52
FFCH First Fin. Holdings Inc. of SC 18.75 6,377 119.6 22.25 17.50 19.25 -2.60 53.06 -2.60
FFBI First Financial Bancorp of IL 15.50 466 7.2 16.25 15.00 15.87 -2.33 N.A. -3.13
FFHC First Financial Corp. of WI 23.00 29,905 687.8 24.00 19.25 23.75 -3.16 46.03 0.00
FFHS First Franklin Corp. of OH 15.25 1,165 17.8 17.50 13.50 15.25 0.00 16.23 -3.91
FGHC First Georgia Hold. Corp of GA 7.00 2,024 14.2 7.83 5.33 7.25 -3.45 82.77 -8.74
FSPG First Home SB, SLA of NJ 18.00 2,030 36.5 19.00 16.25 18.25 -1.37 200.00 -5.26
FFSL First Independence Corp. of KS 19.00 583 11.1 19.25 17.62 18.50 2.70 N.A. 1.33
FISB First Indiana Corp. of IN 22.94 8,294 190.3 25.19 19.79 23.12 -0.78 69.93 6.90
FKFS First Keystone Fin. Corp of PA 17.75 1,292 22.9 20.87 15.50 17.25 2.90 N.A. -14.95
FLKY First Lancaster Bncshrs of KY 14.50 959 13.9 14.50 13.12 14.50 0.00 N.A. N.A.
FLFC First Liberty Fin. Corp. of GA 22.75 4,002 91.0 22.75 19.12 22.00 3.41 198.56 7.06
CASH First Midwest Fin. Corp. of IA 23.25 1,779 41.4 24.25 19.75 23.50 -1.06 N.A. -1.06
FMBD First Mutual Bancorp of IL 13.06 4,127 53.9 14.75 11.62 12.87 1.48 N.A. -4.11
FMSB First Mutual SB of Bellevue WA* 14.75 2,453 36.2 16.00 10.42 13.50 9.26 90.32 8.94
FNGB First Northern Cap. Corp of WI 15.75 4,395 69.2 16.50 14.75 15.50 1.61 8.17 -4.55
FFPB First Palm Beach Bancorp of FL 22.87 5,181 118.5 24.87 19.94 22.62 1.11 N.A. 8.29
FSNJ First SB of NJ, MHC (45.0) 15.00 3,062 20.4 19.50 13.75 14.75 1.69 N.A. -13.04
FSBC First SB, FSB of Clovis NM 5.50 696 3.8 7.00 5.25 5.50 0.00 -18.52 -18.52
FSLA First SB, SLA MHC of NJ (37.6) 16.12 6,512 32.2 17.50 13.25 16.25 -0.80 61.20 -2.30
SOPN First SB, SSB, Moore Co. of NC 17.00 3,744 63.6 20.25 16.75 17.00 0.00 N.A. -4.55
FWWB First Savings Bancorp of WA* 17.00 10,474 178.1 17.25 12.37 17.12 -0.70 N.A. 29.57
SHEN First Shenango Bancorp of PA 20.75 2,281 47.3 22.25 19.50 20.75 0.00 N.A. 1.22
FSFC First So.east Fin. Corp. of SC(8) 9.50 4,388 41.7 20.25 9.12 9.69 -1.96 N.A. -50.00
FSFI First State Fin. Serv. of NJ(8) 13.00 3,929 51.1 14.12 10.00 13.25 -1.89 220.20 -4.55
FFDP FirstFed Bancshares of IL 16.50 3,399 56.1 17.62 13.00 16.50 0.00 147.75 16.44
FLAG Flag Financial Corp of GA 10.50 2,036 21.4 15.00 10.50 11.00 -4.55 7.14 -23.64
FFPC Florida First Bancorp of FL(8) 11.12 3,385 37.6 11.25 7.00 11.00 1.09 491.49 50.88
FFIC Flushing Fin. Corp. of NY* 17.87 8,909 159.2 18.37 14.12 18.25 -2.08 N.A. 16.27
FBHC Fort Bend Holding Corp. of TX 16.87 819 13.8 20.25 16.87 17.00 -0.76 N.A. -6.28
FTSB Fort Thomas Fin. Corp. of KY 14.00 1,574 22.0 17.75 11.25 13.50 3.70 N.A. 15.51
FKKY Frankfort First Bancorp of KY 10.75 3,450 37.1 15.87 10.75 10.87 -1.10 N.A. -18.87
GFSB GFS Bancorp of Grinnell IA 21.00 510 10.7 21.00 17.50 21.00 0.00 N.A. 5.00
GUPB GFSB Bancorp of Gallup NM 14.12 949 13.4 15.00 12.87 14.12 0.00 N.A. -0.91
GWBC Gateway Bancorp of KY 13.25 1,132 15.0 16.25 13.00 13.25 0.00 N.A. -7.02
GBCI Glacier Bancorp of MT 24.00 3,361 80.7 24.00 16.59 23.25 3.23 396.89 30.36
GLBK Glendale Co-op. Bank of MA* 18.00 247 4.4 19.00 13.75 17.50 2.86 N.A. -4.00
GFCO Glenway Financial Corp. of OH 20.25 1,145 23.2 23.33 17.86 20.25 0.00 N.A. -13.20
GTPS Great American Bancorp of IL 13.50 1,850 25.0 15.12 13.00 13.37 0.97 N.A. -7.28
GTFN Great Financial Corp. of KY 28.00 14,184 397.2 29.00 20.50 28.37 -1.30 N.A. 19.15
GSBC Great Southern Bancorp of MO 28.50 4,406 125.6 29.50 20.75 28.25 0.88 876.03 15.15
GDVS Greater DV SB,MHC of PA(19.9)* 10.00 3,272 6.5 13.00 9.25 9.50 5.26 N.A. -16.67
GRTR Greater New York SB of NY* 12.62 13,388 169.0 13.31 10.12 11.37 10.99 35.55 5.17
GSFC Green Street Fin. Corp. of NC 14.00 4,298 60.2 14.62 12.12 14.50 -3.45 N.A. N.A.
GROV GroveBank for Savings of MA* 31.50 1,542 48.6 31.50 23.25 29.87 5.46 255.13 27.27
GFED Guaranty FS&LA,MHC of MO(31.1) 9.75 3,125 7.6 12.50 8.00 10.00 -2.50 N.A. -17.86
GSLC Guaranty Svgs & Loan FA of VA 8.50 919 7.8 8.50 6.37 8.25 3.03 N.A. 9.68
HEMT HF Bancorp of Hemet CA 9.38 6,282 58.9 10.25 9.12 9.62 -2.49 N.A. -4.96
HFFC HF Financial Corp. of SD(8) 15.31 3,052 46.7 16.75 13.44 15.25 0.39 206.20 0.39
HFNC HFNC Financial Corp. of NC 17.62 17,192 302.9 18.12 13.12 17.37 1.44 N.A. 34.30
HMNF HMN Financial, Inc. of MN 15.94 4,921 78.4 16.50 14.50 15.81 0.82 N.A. -0.38
HALL Hallmark Capital Corp. of WI 15.00 1,413 21.2 16.25 14.50 15.75 -4.76 N.A. -3.23
</TABLE>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FTFC First Fed. Capital Corp. of WI 2.04 1.51 15.29 14.42 222.94
FFKY First Fed. Fin. Corp. of KY 1.30 1.19 11.87 11.09 83.81
FFBZ First Federal Bancorp of OH 2.50 2.46 17.86 17.84 226.47
FFWM First Fin. Corp of Western MD 1.65 1.60 19.16 19.16 147.91
FFCH First Fin. Holdings Inc. of SC 1.74 1.76 15.26 15.26 238.86
FFBI First Financial Bancorp of IL 1.17 1.02 16.89 16.89 202.76
FFHC First Financial Corp. of WI 2.38 2.30 13.64 13.01 186.57
FFHS First Franklin Corp. of OH 1.13 1.11 17.41 17.24 185.84
FGHC First Georgia Hold. Corp of GA 0.60 0.60 5.91 5.26 71.16
FSPG First Home SB, SLA of NJ 2.19 2.13 14.97 14.57 229.74
FFSL First Independence Corp. of KS 1.93 1.93 22.38 22.38 181.43
FISB First Indiana Corp. of IN 2.12 1.76 16.40 16.18 177.61
FKFS First Keystone Fin. Corp of PA 1.17 1.27 17.74 17.74 224.88
FLKY First Lancaster Bncshrs of KY 0.54 0.54 13.47 13.47 45.15
FLFC First Liberty Fin. Corp. of GA 2.31 1.92 17.09 14.47 247.68
CASH First Midwest Fin. Corp. of IA 1.76 1.74 21.94 20.49 192.30
FMBD First Mutual Bancorp of IL 0.66 0.63 16.83 16.83 73.10
FMSB First Mutual SB of Bellevue WA* 1.51 1.45 10.42 10.42 157.51
FNGB First Northern Cap. Corp of WI 1.00 0.96 16.10 16.10 132.00
FFPB First Palm Beach Bancorp of FL 1.88 1.78 21.93 21.37 277.56
FSNJ First SB of NJ, MHC (45.0) 0.38 0.85 16.01 16.01 212.49
FSBC First SB, FSB of Clovis NM 0.57 0.44 7.98 7.98 161.55
FSLA First SB, SLA MHC of NJ (37.6) 1.24 1.27 14.07 12.26 147.78
SOPN First SB, SSB, Moore Co. of NC 1.05 1.05 17.84 17.84 68.64
FWWB First Savings Bancorp of WA* 0.51 0.49 14.65 14.65 56.80
SHEN First Shenango Bancorp of PA 1.53 1.46 20.53 20.53 161.89
FSFC First So.east Fin. Corp. of SC(8) 0.25 0.67 7.67 7.67 74.42
FSFI First State Fin. Serv. of NJ(8) 0.02 -0.19 10.17 9.61 169.49
FFDP FirstFed Bancshares of IL 1.03 0.55 16.13 15.40 186.85
FLAG Flag Financial Corp of GA 0.98 0.83 10.73 10.73 112.33
FFPC Florida First Bancorp of FL(8) 0.80 0.74 6.31 6.31 89.42
FFIC Flushing Fin. Corp. of NY* 0.73 0.70 15.48 15.48 86.05
FBHC Fort Bend Holding Corp. of TX 2.06 1.82 21.99 21.99 311.04
FTSB Fort Thomas Fin. Corp. of KY 0.74 0.74 13.75 13.75 56.46
FKKY Frankfort First Bancorp of KY 0.53 0.42 13.87 13.87 40.18
GFSB GFS Bancorp of Grinnell IA 1.75 1.82 19.50 19.50 163.34
GUPB GFSB Bancorp of Gallup NM 0.76 0.76 17.09 17.09 74.21
GWBC Gateway Bancorp of KY 0.68 0.68 15.65 15.65 62.95
GBCI Glacier Bancorp of MT 1.82 1.82 11.45 11.43 121.53
GLBK Glendale Co-op. Bank of MA* 1.14 0.95 23.49 23.49 148.49
GFCO Glenway Financial Corp. of OH 1.31 1.30 23.13 22.58 239.21
GTPS Great American Bancorp of IL 0.42 0.41 17.95 17.95 65.16
GTFN Great Financial Corp. of KY 1.70 1.33 19.38 18.65 197.98
GSBC Great Southern Bancorp of MO 2.56 2.38 15.39 15.14 151.64
GDVS Greater DV SB,MHC of PA(19.9)* 0.22 0.26 8.62 8.62 70.90
GRTR Greater New York SB of NY* 0.85 0.83 11.13 11.13 189.78
GSFC Green Street Fin. Corp. of NC 0.49 0.49 14.60 14.60 41.64
GROV GroveBank for Savings of MA* 3.20 2.99 24.37 24.34 382.88
GFED Guaranty FS&LA,MHC of MO(31.1) 0.58 0.31 8.69 8.69 59.37
GSLC Guaranty Svgs & Loan FA of VA 0.70 0.43 6.93 6.93 112.04
HEMT HF Bancorp of Hemet CA 0.21 0.21 13.73 13.72 120.08
HFFC HF Financial Corp. of SD(8) 1.55 1.26 16.97 16.92 181.91
HFNC HFNC Financial Corp. of NC 0.32 0.38 14.21 14.21 41.66
HMNF HMN Financial, Inc. of MN 1.21 1.05 17.73 17.73 112.78
HALL Hallmark Capital Corp. of WI 1.33 1.26 19.12 19.12 266.92
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week(1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HARB Harbor FSB, MHC of FL (45.7) 28.75 4,933 64.4 29.25 21.75 27.00 6.48 N.A. 4.55
HRBF Harbor Federal Bancorp of MD 14.25 1,754 25.0 15.50 12.37 13.50 5.56 42.50 -1.72
HFSA Hardin Bancorp of Hardin MO 11.25 1,012 11.4 13.00 11.00 11.25 0.00 N.A. -11.76
HARL Harleysville SA of PA 17.75 1,289 22.9 19.75 15.00 17.75 0.00 0.00 18.33
HARS Harris SB, MHC of PA (23.1) 14.87 11,216 37.2 20.50 14.75 15.50 -4.06 N.A. -25.65
HFFB Harrodsburg 1st Fin Bcrp of KY 16.25 2,159 35.1 16.75 12.37 16.50 -1.52 N.A. 8.33
HHFC Harvest Home Fin. Corp. of OH 9.87 935 9.2 13.75 9.87 10.75 -8.19 N.A. -19.43
HAVN Haven Bancorp of Woodhaven NY 27.06 4,320 116.9 28.87 20.87 27.25 -0.70 N.A. 14.56
HVFD Haverfield Corp. of OH 17.12 1,907 32.6 19.25 12.50 17.00 0.71 10.45 26.81
HTHR Hawthorne Fin. Corp. of CA 7.50 2,599 19.5 9.25 3.13 8.37 -10.39 -72.73 50.00
HSBK Hibernia SB of Quincy MA* 15.00 1,662 24.9 18.00 14.00 15.06 -0.40 96.85 -7.69
HBNK Highland Federal Bank of CA 14.25 2,296 32.7 17.00 11.00 14.37 -0.84 N.A. -8.06
HIFS Hingham Inst. for Sav. of MA* 14.75 1,297 19.1 15.25 12.25 15.25 -3.28 223.46 0.00
HNFC Hinsdale Financial Corp. of IL 23.50 2,690 63.2 26.75 21.00 23.56 -0.25 135.00 9.30
HBFW Home Bancorp of Fort Wayne IN 16.37 2,887 47.3 16.37 13.75 15.87 3.15 N.A. 7.34
HBBI Home Building Bancorp of IN 18.25 332 6.1 21.25 14.50 18.25 0.00 N.A. 10.61
HOMF Home Fed Bancorp of Seymour IN 26.25 2,226 58.4 27.25 23.75 27.25 -3.67 75.00 -0.94
HFMD Home Federal Corporation of MD(8) 10.44 2,519 26.3 11.37 7.25 10.75 -2.88 7.08 34.71
HWEN Home Financial Bancorp of IN 12.75 506 6.5 13.75 9.87 13.00 -1.92 N.A. N.A.
HOFL Home Financial Corp. of FL(8) 13.87 24,717 342.8 16.25 12.62 14.12 -1.77 177.40 -10.52
HPBC Home Port Bancorp, Inc. of MA* 14.50 1,842 26.7 15.00 11.00 15.00 -3.33 81.25 23.40
HMCI Homecorp, Inc. of Rockford IL 18.25 1,129 20.6 18.87 15.50 17.87 2.13 82.50 9.81
LOAN Horizon Bancorp, Inc of TX(8)* 14.50 1,387 20.1 15.75 7.87 13.25 9.43 N.A. 61.11
HZFS Horizon Fin'l. Services of IA 14.50 448 6.5 16.37 12.75 14.50 0.00 N.A. -4.92
HRZB Horizon Financial Corp. of WA* 13.00 6,595 85.7 13.75 11.75 13.25 -1.89 -3.20 0.00
IBSF IBS Financial Corp. of NJ 14.37 11,002 158.1 15.46 12.50 14.87 -3.36 N.A. 5.35
ISBF ISB Financial Corp. of LA 14.87 7,122 105.9 17.00 13.62 14.87 0.00 N.A. -0.87
ITLA Imperial Thrift & Loan of CA* 13.50 7,820 105.6 15.25 11.37 13.62 -0.88 N.A. 10.20
IFSB Independence FSB of DC 7.12 1,279 9.1 9.25 6.75 8.00 -11.00 256.00 -15.64
INCB Indiana Comm. Bank, SB of IN 13.25 922 12.2 16.75 12.50 13.50 -1.85 N.A. -13.11
IFSL Indiana Federal Corp. of IN 20.00 4,730 94.6 21.50 16.25 20.12 -0.60 165.25 -5.88
INBI Industrial Bancorp of OH 10.50 5,554 58.3 16.00 9.87 10.50 0.00 N.A. -23.64
IWBK Interwest SB of Oak Harbor WA 27.75 6,450 179.0 28.00 15.19 27.75 0.00 177.50 36.23
IPSW Ipswich SB of Ipswich MA* 10.12 1,178 11.9 12.62 6.15 10.19 -0.69 N.A. 22.67
IROQ Iroquois Bancorp of Auburn NY* 15.50 2,357 36.5 16.25 12.75 15.37 0.85 121.43 19.23
JSBF JSB Financial, Inc. of NY 34.87 10,052 350.5 34.87 30.62 33.12 5.28 203.22 10.28
JXVL Jacksonville Bancorp of TX 11.50 2,664 30.6 11.99 8.11 11.31 1.68 N.A. -1.20
JXSB Jcksnville SB,MHC of IL(43.3%) 12.25 1,272 6.8 14.25 11.25 12.25 0.00 N.A. -11.68
JEBC Jefferson Bancorp of Gretna LA(8) 22.50 2,196 49.4 22.50 19.00 22.50 0.00 N.A. 16.88
JSBA Jefferson Svgs Bancorp of MO 23.50 4,182 98.3 30.75 21.50 23.50 0.00 N.A. -15.32
JOAC Joachim Bancorp of MO 12.75 760 9.7 13.50 11.50 12.50 2.00 N.A. -5.56
KSAV KS Bancorp of Kenly NC 20.00 663 13.3 22.00 17.12 20.00 0.00 N.A. 14.29
KSBK KSB Bancorp of Kingfield ME* 21.00 411 8.6 22.00 15.00 21.00 0.00 N.A. 20.00
KFBI Klamath First Bancorp of OR 14.37 12,233 175.8 14.62 12.50 14.12 1.77 N.A. 4.51
LBFI L&B Financial of S. Springs TX(8) 16.50 1,584 26.1 17.00 13.75 16.75 -1.49 N.A. 15.79
LSBI LSB Fin. Corp. of Lafayette IN 17.25 931 16.1 17.37 14.50 16.50 4.55 N.A. 0.00
LVSB Lakeview SB of Paterson NJ 22.75 2,266 51.6 22.87 15.91 22.62 0.57 N.A. 33.43
LARK Landmark Bancshares of KS 15.63 1,914 29.9 16.00 13.25 15.63 0.00 N.A. 13.67
LARL Laurel Capital Group of PA 15.50 1,513 23.5 16.50 14.50 15.50 0.00 21.09 0.00
LSBX Lawrence Savings Bank of MA* 6.44 4,245 27.3 6.62 4.62 6.00 7.33 87.21 39.39
LFCT Leader Fin. Corp of Memphis TN(8) 52.25 9,948 519.8 52.25 33.25 49.75 5.03 N.A. 39.82
LFED Leeds FSB, MHC of MD (35.3) 13.12 3,448 16.4 16.75 13.00 13.25 -0.98 N.A. -7.93
LXMO Lexington B&L Fin. Corp. of MO 10.06 1,265 12.7 10.19 9.50 10.00 0.60 N.A. N.A.
LBCI Liberty Bancorp of Chicago IL(8) 24.00 2,477 59.4 26.87 22.25 23.75 1.05 140.00 -4.95
LIFB Life Bancorp of Norfolk VA 15.94 10,097 160.9 16.25 14.00 15.81 0.82 N.A. 6.27
</TABLE>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HARB Harbor FSB, MHC of FL (45.7) 2.20 2.20 17.24 16.60 205.56
HRBF Harbor Federal Bancorp of MD 0.55 0.55 15.84 15.84 114.61
HFSA Hardin Bancorp of Hardin MO 0.61 0.61 14.75 14.75 85.92
HARL Harleysville SA of PA 1.74 1.82 15.38 15.38 231.32
HARS Harris SB, MHC of PA (23.1) 0.53 0.72 13.32 11.19 137.46
HFFB Harrodsburg 1st Fin Bcrp of KY 0.57 0.57 14.28 14.28 50.75
HHFC Harvest Home Fin. Corp. of OH 0.60 0.60 13.83 13.83 78.08
HAVN Haven Bancorp of Woodhaven NY 2.48 2.46 21.78 21.65 358.86
HVFD Haverfield Corp. of OH 1.28 1.21 14.90 14.87 175.26
HTHR Hawthorne Fin. Corp. of CA 1.76 0.00 13.29 13.23 292.87
HSBK Hibernia SB of Quincy MA* 1.26 1.27 14.91 14.91 224.42
HBNK Highland Federal Bank of CA 0.58 0.57 15.20 15.20 192.18
HIFS Hingham Inst. for Sav. of MA* 1.47 1.47 14.05 14.05 143.97
HNFC Hinsdale Financial Corp. of IL 1.61 1.56 20.62 20.01 246.28
HBFW Home Bancorp of Fort Wayne IN 0.91 0.91 16.96 16.96 109.42
HBBI Home Building Bancorp of IN 0.52 0.52 18.12 18.12 129.92
HOMF Home Fed Bancorp of Seymour IN 3.30 2.91 23.14 22.29 283.03
HFMD Home Federal Corporation of MD(8) 0.62 0.60 7.63 7.54 87.23
HWEN Home Financial Bancorp of IN 0.75 0.75 14.81 14.81 75.39
HOFL Home Financial Corp. of FL(8) 0.60 0.76 12.20 12.20 49.19
HPBC Home Port Bancorp, Inc. of MA* 1.64 1.65 10.43 10.43 97.96
HMCI Homecorp, Inc. of Rockford IL 1.20 0.76 18.72 18.72 300.25
LOAN Horizon Bancorp, Inc of TX(8)* 1.22 0.97 8.07 7.81 94.40
HZFS Horizon Fin'l. Services of IA 0.84 0.68 18.73 18.73 163.98
HRZB Horizon Financial Corp. of WA* 1.12 1.12 12.12 12.12 74.83
IBSF IBS Financial Corp. of NJ 0.70 0.71 13.55 13.55 68.06
ISBF ISB Financial Corp. of LA 1.02 1.01 16.50 16.03 96.40
ITLA Imperial Thrift & Loan of CA* 0.85 0.85 10.72 10.72 85.62
IFSB Independence FSB of DC 1.10 0.52 13.36 11.48 206.21
INCB Indiana Comm. Bank, SB of IN 0.67 0.67 15.35 15.35 102.47
IFSL Indiana Federal Corp. of IN 1.38 1.45 14.86 13.83 156.93
INBI Industrial Bancorp of OH 0.90 0.90 10.95 10.95 56.46
IWBK Interwest SB of Oak Harbor WA 2.25 2.14 14.94 14.52 219.21
IPSW Ipswich SB of Ipswich MA* 1.43 1.25 7.38 7.38 128.15
IROQ Iroquois Bancorp of Auburn NY* 1.60 1.60 11.99 10.73 199.71
JSBF JSB Financial, Inc. of NY 2.49 2.49 33.10 33.10 151.82
JXVL Jacksonville Bancorp of TX 0.72 0.72 13.37 13.37 81.73
JXSB Jcksnville SB,MHC of IL(43.3%) 0.53 0.43 13.31 13.31 112.46
JEBC Jefferson Bancorp of Gretna LA(8) 1.14 1.14 16.42 16.42 120.94
JSBA Jefferson Svgs Bancorp of MO 1.74 1.58 19.67 16.17 269.10
JOAC Joachim Bancorp of MO 0.33 0.32 14.20 14.20 48.02
KSAV KS Bancorp of Kenly NC 1.49 1.51 20.87 20.85 141.08
KSBK KSB Bancorp of Kingfield ME* 2.76 2.76 22.00 20.37 322.46
KFBI Klamath First Bancorp of OR 0.69 0.69 13.23 13.23 51.50
LBFI L&B Financial of S. Springs TX(8) 0.92 0.87 15.65 15.65 90.99
LSBI LSB Fin. Corp. of Lafayette IN 0.88 0.80 17.82 17.82 184.75
LVSB Lakeview SB of Paterson NJ 2.20 1.32 19.99 15.35 200.86
LARK Landmark Bancshares of KS 0.96 0.86 17.27 17.27 104.74
LARL Laurel Capital Group of PA 1.76 1.72 13.94 13.94 130.17
LSBX Lawrence Savings Bank of MA* 0.88 0.88 5.95 5.95 78.43
LFCT Leader Fin. Corp of Memphis TN(8) 4.49 4.38 26.78 26.78 322.78
LFED Leeds FSB, MHC of MD (35.3) 0.78 0.78 12.65 12.65 77.34
LXMO Lexington B&L Fin. Corp. of MO 0.43 0.43 14.81 14.81 48.45
LBCI Liberty Bancorp of Chicago IL(8) 1.47 1.47 25.84 25.78 262.90
LIFB Life Bancorp of Norfolk VA 0.97 1.01 14.73 14.18 122.86
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week(1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
LFBI Little Falls Bancorp of NJ 10.37 3,042 31.5 11.50 9.50 10.75 -3.53 N.A. N.A.
LOGN Logansport Fin. Corp. of IN 14.00 1,322 18.5 14.00 12.00 13.50 3.70 N.A. 7.69
LONF London Financial Corp. of OH 10.75 529 5.7 11.25 9.75 10.25 4.88 N.A. N.A.
LISB Long Island Bancorp of NY 28.25 24,805 700.7 32.87 22.75 28.00 0.89 N.A. 7.13
MAFB MAF Bancorp of IL 26.50 10,341 274.0 26.81 22.25 26.12 1.45 211.76 6.00
MBLF MBLA Financial Corp. of MO(8) 21.75 1,372 29.8 26.00 16.00 21.25 2.35 N.A. 12.29
MFBC MFB Corp. of Mishawaka IN 15.50 1,974 30.6 16.25 13.75 15.50 0.00 N.A. 5.08
MLBC ML Bancorp of Villanova PA 25.62 6,247 160.0 25.75 21.25 25.75 -0.50 N.A. 15.15
MSBB MSB Bancorp of Middletown NY* 15.75 2,834 44.6 27.25 15.00 16.00 -1.56 57.50 -14.86
MSBF MSB Financial Corp. of MI 18.00 656 11.8 19.50 15.00 17.25 4.35 N.A. -5.26
MGNL Magna Bancorp of MS 21.00 13,703 287.8 22.50 14.25 20.75 1.20 320.00 46.14
MARN Marion Capital Holdings of IN 20.25 1,934 39.2 21.00 19.00 20.25 0.00 N.A. 1.25
MFCX Marshalltown Fin. Corp. of IA(8) 16.25 1,411 22.9 16.75 14.25 15.75 3.17 N.A. 3.17
MFSL Maryland Fed. Bancorp of MD 29.50 3,160 93.2 33.25 28.25 30.12 -2.06 180.95 -1.67
MASB MassBank Corp. of Reading MA* 32.87 2,720 89.4 34.50 30.00 32.62 0.77 166.59 3.53
MFLR Mayflower Co-Op. Bank of MA* 15.00 873 13.1 15.75 10.00 15.25 -1.64 200.00 36.36
MECH Mechanics SB of Hartford CT* 13.50 5,290 71.4 13.75 11.00 13.37 0.97 N.A. N.A.
MDBK Medford Savings Bank of MA* 24.00 4,531 108.7 24.50 19.75 23.00 4.35 242.86 11.63
MERI Meritrust FSB of Thibodaux LA 30.75 774 23.8 34.00 25.75 30.75 0.00 N.A. -0.81
MWBX Metro West of MA* 3.81 13,882 52.9 4.87 3.50 3.81 0.00 -7.52 -7.52
MSEA Metropolitan Bancorp of WA(8) 17.31 3,710 64.2 17.31 11.50 17.12 1.11 138.10 33.15
MCBS Mid Continent Bancshares of KS 19.12 2,032 38.9 19.25 17.00 19.12 0.00 N.A. 3.35
MIFC Mid Iowa Financial Corp. of IA 6.50 1,683 10.9 7.87 5.50 6.00 8.33 30.00 -16.13
MCBN Mid-Coast Bancorp of ME 19.00 230 4.4 20.25 14.76 20.00 -5.00 232.75 10.98
MIDC Midconn Bank of Kensington CT* 19.50 1,910 37.2 20.00 13.00 19.50 0.00 85.71 39.29
MWBI Midwest Bancshares, Inc. of IA 24.50 349 8.6 27.12 24.50 24.50 0.00 145.00 -4.85
MWFD Midwest Fed. Fin. Corp of WI 17.50 1,635 28.6 18.25 9.12 16.00 9.38 250.00 62.79
MFFC Milton Fed. Fin. Corp. of OH 13.75 2,264 31.1 17.12 11.50 13.75 0.00 N.A. -15.38
MIVI Miss. View Hold. Co. of MN 11.75 910 10.7 12.25 10.50 12.12 -3.05 N.A. 3.34
MBSP Mitchell Bancorp of NC* 12.12 980 11.9 12.62 10.19 12.62 -3.96 N.A. N.A.
MBBC Monterey Bay Bancorp of CA 13.25 3,307 43.8 13.50 11.00 13.50 -1.85 N.A. 14.03
MORG Morgan Financial Corp. of CO 13.00 834 10.8 13.00 9.75 11.25 15.56 N.A. 4.00
MFSB Mutual Bancompany of MO(8) 21.00 333 7.0 21.75 16.00 21.00 0.00 N.A. 16.67
MSBK Mutual SB, FSB of Bay City MI 5.75 4,274 24.6 7.37 5.12 5.63 2.13 -34.29 -4.17
NHTB NH Thrift Bancshares of NH 9.87 1,692 16.7 11.00 9.25 10.00 -1.30 113.64 -2.47
NHSL NHS Financial, Inc. of CA(8) 11.12 2,523 28.1 11.25 8.00 11.12 0.00 42.02 11.20
NSLB NS&L Bancorp of Neosho MO 12.00 799 9.6 13.75 12.00 12.00 0.00 N.A. -9.43
NMSB Newmil Bancorp. of CT* 7.12 4,070 29.0 7.50 6.00 7.50 -5.07 11.77 1.71
NFSL Newnan SB, FSB of Newnan GA 22.50 1,459 32.8 23.00 13.50 21.00 7.14 80.00 30.43
NASB North American SB of MO 31.50 2,268 71.4 32.37 28.50 30.87 2.04 641.18 -1.56
NBSI North Bancshares of Chicago IL 15.75 1,114 17.5 16.25 13.25 16.12 -2.30 N.A. 16.67
FFFD North Central Bancshares of IA 11.87 4,011 47.6 12.68 9.80 11.62 2.15 N.A. 12.51
NEBC Northeast Bancorp of ME* 12.75 1,203 15.3 13.50 11.00 13.12 -2.82 8.51 10.87
NEIB Northeast Indiana Bncrp of IN 12.25 2,062 25.3 13.50 11.37 12.50 -2.00 N.A. 2.08
NSBK Northside SB of Bronx NY(8)* 46.50 4,834 224.8 48.00 29.00 46.50 0.00 191.54 52.46
NWEQ Northwest Equity Corp. of WI 10.25 945 9.7 11.37 9.87 10.25 0.00 N.A. -5.70
NWSB Northwest SB, MHC of PA(29.9) 11.00 23,376 38.0 13.50 10.75 10.87 1.20 N.A. -9.24
NSSY Norwalk Savings Society of CT* 21.25 2,385 50.7 22.25 17.62 21.62 -1.71 N.A. 11.84
NSSB Norwich Financial Corp. of CT* 15.87 5,392 85.6 16.00 12.25 15.50 2.39 126.71 23.31
NTMG Nutmeg FS&LA of CT 7.25 710 5.1 8.00 5.17 7.25 0.00 N.A. 8.70
OHSL OHSL Financial Corp. of OH 20.25 1,217 24.6 22.00 17.25 20.00 1.25 N.A. -5.81
OSBF OSB Fin. Corp. of Oshkosh WI 23.75 1,111 26.4 24.87 22.75 23.25 2.15 106.52 0.00
OCFC Ocean Fin. Corp. of NJ 22.50 8,388 188.7 22.87 19.62 22.75 -1.10 N.A. N.A.
OFCP Ottawa Financial Corp. of MI 16.25 5,415 88.0 16.75 15.25 16.12 0.81 N.A. 3.97
PFFB PFF Bancorp of Pomona CA 11.62 19,837 230.5 11.75 10.37 11.50 1.04 N.A. N.A.
</TABLE>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
LFBI Little Falls Bancorp of NJ 0.30 0.45 14.40 13.29 92.78
LOGN Logansport Fin. Corp. of IN 0.85 0.84 14.99 14.99 58.39
LONF London Financial Corp. of OH 0.52 0.52 15.02 15.02 70.30
LISB Long Island Bancorp of NY 1.86 1.69 21.03 21.03 210.48
MAFB MAF Bancorp of IL 1.66 1.69 23.42 19.98 301.44
MBLF MBLA Financial Corp. of MO(8) 1.00 1.00 20.67 20.67 142.18
MFBC MFB Corp. of Mishawaka IN 0.66 0.65 19.66 19.66 101.77
MLBC ML Bancorp of Villanova PA 1.94 1.50 22.61 21.71 300.31
MSBB MSB Bancorp of Middletown NY* 0.83 0.89 15.52 15.26 160.24
MSBF MSB Financial Corp. of MI 1.53 1.50 19.20 19.20 91.66
MGNL Magna Bancorp of MS 1.54 1.53 9.18 8.69 95.50
MARN Marion Capital Holdings of IN 1.28 1.28 21.46 21.46 91.92
MFCX Marshalltown Fin. Corp. of IA(8) 0.33 0.32 13.86 13.86 88.81
MFSL Maryland Fed. Bancorp of MD 2.27 2.10 29.95 29.48 357.10
MASB MassBank Corp. of Reading MA* 3.33 3.22 31.69 31.69 323.73
MFLR Mayflower Co-Op. Bank of MA* 1.04 0.98 12.42 12.15 129.65
MECH Mechanics SB of Hartford CT* -1.63 -1.60 12.90 12.90 137.57
MDBK Medford Savings Bank of MA* 2.21 2.17 19.50 17.78 219.26
MERI Meritrust FSB of Thibodaux LA 2.90 2.90 22.40 22.40 295.11
MWBX Metro West of MA* 0.43 0.43 2.67 2.67 35.31
MSEA Metropolitan Bancorp of WA(8) 1.55 1.66 13.79 12.51 205.13
MCBS Mid Continent Bancshares of KS 1.72 1.52 18.06 18.05 154.41
MIFC Mid Iowa Financial Corp. of IA 0.62 0.61 6.42 6.41 68.48
MCBN Mid-Coast Bancorp of ME 1.42 1.30 21.63 21.63 239.34
MIDC Midconn Bank of Kensington CT* 0.70 0.67 18.28 15.34 192.26
MWBI Midwest Bancshares, Inc. of IA 3.95 3.90 26.49 26.49 397.21
MWFD Midwest Fed. Fin. Corp of WI 1.36 1.09 10.34 9.88 114.74
MFFC Milton Fed. Fin. Corp. of OH 0.76 0.70 14.91 14.91 78.75
MIVI Miss. View Hold. Co. of MN 0.99 0.93 14.01 14.01 76.18
MBSP Mitchell Bancorp of NC* 0.30 0.29 14.34 14.34 37.03
MBBC Monterey Bay Bancorp of CA 0.31 0.30 14.15 14.00 95.96
MORG Morgan Financial Corp. of CO 0.86 0.83 12.42 12.42 88.88
MFSB Mutual Bancompany of MO(8) 0.34 0.39 18.73 18.73 160.09
MSBK Mutual SB, FSB of Bay City MI 0.02 -0.15 9.04 9.04 159.11
NHTB NH Thrift Bancshares of NH 0.96 0.90 11.51 11.51 152.79
NHSL NHS Financial, Inc. of CA(8) 0.52 0.52 9.92 9.90 112.64
NSLB NS&L Bancorp of Neosho MO 0.70 0.63 16.71 16.71 71.70
NMSB Newmil Bancorp. of CT* 0.55 0.54 7.84 7.84 76.01
NFSL Newnan SB, FSB of Newnan GA 2.08 1.82 14.22 14.15 111.17
NASB North American SB of MO 3.68 3.48 22.21 21.37 326.41
NBSI North Bancshares of Chicago IL 0.59 0.54 16.62 16.62 107.21
FFFD North Central Bancshares of IA 0.74 0.74 13.90 13.90 48.44
NEBC Northeast Bancorp of ME* 1.19 0.83 13.72 11.53 181.37
NEIB Northeast Indiana Bncrp of IN 0.80 0.80 14.12 14.12 74.75
NSBK Northside SB of Bronx NY(8)* 3.89 3.39 25.55 25.32 342.29
NWEQ Northwest Equity Corp. of WI 0.88 0.83 12.40 12.40 97.15
NWSB Northwest SB, MHC of PA(29.9) 0.75 0.76 8.16 7.74 80.32
NSSY Norwalk Savings Society of CT* 1.76 1.39 18.60 18.60 255.56
NSSB Norwich Financial Corp. of CT* 1.05 1.03 13.59 12.25 135.61
NTMG Nutmeg FS&LA of CT 0.76 0.42 7.35 7.35 128.39
OHSL OHSL Financial Corp. of OH 1.57 1.55 20.95 20.95 171.76
OSBF OSB Fin. Corp. of Oshkosh WI 0.48 0.84 28.26 28.26 225.03
OCFC Ocean Fin. Corp. of NJ 1.27 1.30 26.36 26.36 140.55
OFCP Ottawa Financial Corp. of MI 0.84 0.83 14.84 11.90 144.44
PFFB PFF Bancorp of Pomona CA 0.17 0.18 14.64 14.48 108.20
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week(1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
PVFC PVF Capital Corp. of OH 13.50 2,323 31.4 14.00 9.42 14.00 -3.57 206.82 10.93
PCCI Pacific Crest Capital of CA* 8.69 2,960 25.7 9.00 6.88 8.75 -0.69 N.A. 19.86
PALM Palfed, Inc. of Aiken SC 14.00 5,226 73.2 14.00 11.00 13.25 5.66 -8.91 17.94
PSSB Palm Springs SB of CA(8) 14.03 1,131 15.9 14.12 8.00 14.03 0.00 210.40 60.34
PBCI Pamrapo Bancorp, Inc. of NJ 19.62 3,281 64.4 24.50 18.25 19.62 0.00 248.49 -8.74
PFED Park Bancorp of Chicago IL 10.31 2,701 27.8 10.62 10.19 10.50 -1.81 N.A. N.A.
PVSA Parkvale Financial Corp of PA 28.25 3,236 91.4 28.50 24.50 26.69 5.84 241.18 2.73
PBIX Patriot Bank Corp. of PA 15.00 3,769 56.5 15.00 12.31 13.69 9.57 N.A. 16.55
PEEK Peekskill Fin. Corp. of NY 12.75 4,100 52.3 13.00 11.12 13.00 -1.92 N.A. 5.20
PFSB PennFed Fin. Services of NJ 17.50 4,824 84.4 18.12 13.75 17.87 -2.07 N.A. 18.64
PWBC PennFirst Bancorp of PA 13.75 3,939 54.2 14.75 11.87 13.75 0.00 72.31 1.85
PWBK Pennwood SB of PA* 10.00 610 6.1 10.00 9.00 10.00 0.00 N.A. N.A.
PBKB People's SB of Brockton MA* 10.12 3,367 34.1 10.50 7.62 10.25 -1.27 70.37 -3.62
PFDC Peoples Bancorp of Auburn IN 19.87 2,346 46.6 22.25 18.75 19.25 3.22 13.54 -3.64
PBCT Peoples Bank, MHC of CT(32.3)* 21.25 39,813 251.1 23.12 18.62 21.75 -2.30 170.01 11.84
PHBK Peoples Heritage Fin Grp of ME* 22.06 25,175 555.4 22.75 18.25 22.00 0.27 44.09 -3.03
PBNB Peoples Sav. Fin. Corp. of CT* 29.25 1,901 55.6 30.19 19.00 30.19 -3.11 196.35 51.95
PERM Permanent Bancorp of IN 16.50 2,141 35.3 17.25 14.00 16.25 1.54 N.A. 1.54
PMFI Perpetual Midwest Fin. of IA 17.25 1,988 34.3 17.75 16.00 17.37 -0.69 N.A. 4.55
PCBC Perry Co. Fin. Corp. of MO 17.50 856 15.0 21.50 15.50 17.50 0.00 N.A. -10.26
PHFC Pittsburgh Home Fin. of PA 10.50 2,182 22.9 11.12 9.50 10.25 2.44 N.A. N.A.
PFSL Pocahnts Fed, MHC of AR (46.4) 14.50 1,624 10.8 17.25 12.75 14.50 0.00 N.A. -8.63
POBS Portsmouth Bank Shrs Inc of NH(8)* 12.81 5,737 73.5 15.20 11.77 12.87 -0.47 23.05 -15.00
PKPS Poughkeepsie SB of NY 4.94 12,549 62.0 5.63 4.62 4.75 4.00 -36.26 -5.90
PRBC Prestige Bancorp of PA 10.75 963 10.4 10.75 9.75 10.62 1.22 N.A. N.A.
PETE Primary Bank of NH* 13.25 1,954 25.9 15.50 11.75 12.00 10.42 N.A. 4.99
PSAB Prime Bancorp, Inc. of PA 19.25 3,725 71.7 20.68 17.27 19.37 -0.62 177.38 -4.94
PFNC Progress Financial Corp. of PA 6.37 3,730 23.8 7.25 5.12 6.50 -2.00 -42.14 13.14
PSBK Progressive Bank, Inc. of NY* 30.00 2,647 79.4 30.00 24.25 30.00 0.00 124.38 1.69
PROV Provident Fin. Holdings of CA 11.25 5,134 57.8 11.37 10.12 11.37 -1.06 N.A. N.A.
PULB Pulaski SB, MHC of MO (29.0) 12.87 2,094 7.7 16.50 12.00 13.25 -2.87 N.A. -14.20
PULS Pulse Bancorp of S. River NJ 16.87 3,049 51.4 18.00 14.50 16.87 0.00 36.38 -0.76
QCFB QCF Bancorp of Virginia MN 15.00 1,783 26.7 15.25 13.25 15.00 0.00 N.A. 1.69
QCBC Quaker City Bancorp of CA 14.31 3,814 54.6 15.00 12.62 14.62 -2.12 90.80 3.17
QCSB Queens County SB of NY* 37.25 8,046 299.7 37.50 27.00 37.50 -0.67 N.A. 25.55
RCSB RCSB Financial, Inc. of NY* 27.12 12,409 336.5 27.75 21.56 26.87 0.93 120.31 14.19
RARB Raritan Bancorp. of Raritan NJ* 21.25 1,423 30.2 22.50 20.25 21.50 -1.16 117.95 -1.16
REDF RedFed Bancorp of Redlands CA 10.12 4,083 41.3 10.62 8.37 10.25 -1.27 N.A. 0.00
RELY Reliance Bancorp of NY 18.00 9,129 164.3 18.00 13.12 17.12 5.14 N.A. 23.12
RELI Reliance Bancshares Inc of WI* 8.37 2,562 21.4 8.50 7.50 8.13 2.95 N.A. N.A.
RFED Roosevelt Fin. Grp. Inc. of MO 18.12 42,146 763.7 19.75 15.63 17.62 2.84 364.62 -6.45
RVSB Rvrview SB,FSB MHC of WA(40.3) 14.50 2,196 11.4 17.00 12.39 14.75 -1.69 N.A. -0.28
SCCB S. Carolina Comm. Bnshrs of SC 15.50 735 11.4 20.00 15.00 15.50 0.00 N.A. -14.46
SBFL SB Fing. Lakes MHC of NY(33.0) 14.75 1,785 8.7 17.00 11.00 15.75 -6.35 N.A. -9.23
SFED SFS Bancorp of Schenectady NY 13.00 1,292 16.8 13.50 11.50 13.00 0.00 N.A. 0.00
SGVB SGV Bancorp of W. Covina CA 8.81 2,728 24.0 10.12 7.75 9.00 -2.11 N.A. -9.64
SISB SIS Bank of Sprinfield MA* 21.12 5,723 120.9 21.62 14.62 21.50 -1.77 N.A. 29.02
SJSB SJS Bancorp of St. Joseph MI 19.87 983 19.5 20.75 17.25 20.25 -1.88 N.A. 0.61
SWCB Sandwich Co-Op. Bank of MA* 21.75 1,881 40.9 21.75 16.50 21.50 1.16 152.32 19.18
SFBM Security Bancorp of MT 21.75 1,462 31.8 21.75 19.87 21.45 1.40 180.65 3.57
SECP Security Capital Corp. of WI 61.75 9,314 575.1 62.50 51.75 60.50 2.07 N.A. 2.49
SFSL Security First Corp. of OH 13.25 4,930 65.3 15.75 11.50 14.50 -8.62 -15.87 -7.02
SHFC Seven Hills Fin. Corp. of OH(8) 17.75 536 9.5 18.12 14.37 17.75 0.00 18.33 22.41
SMFC Sho-Me Fin. Corp. of MO 20.00 1,733 34.7 20.00 14.50 20.00 0.00 N.A. 33.33
SOBI Sobieski Bancorp of S. Bend IN 12.00 837 10.0 13.25 11.75 12.50 -4.00 N.A. -7.69
</TABLE>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
PVFC PVF Capital Corp. of OH 1.51 1.33 9.18 9.18 136.93
PCCI Pacific Crest Capital of CA* 1.05 0.83 7.91 7.91 98.12
PALM Palfed, Inc. of Aiken SC 0.84 0.70 10.27 9.78 122.08
PSSB Palm Springs SB of CA(8) 1.10 0.91 10.60 10.60 165.63
PBCI Pamrapo Bancorp, Inc. of NJ 1.51 1.51 17.23 17.09 111.42
PFED Park Bancorp of Chicago IL 0.50 0.53 15.01 15.01 64.36
PVSA Parkvale Financial Corp of PA 2.97 2.77 21.56 21.47 284.07
PBIX Patriot Bank Corp. of PA 0.48 0.50 14.33 14.33 110.84
PEEK Peekskill Fin. Corp. of NY 0.53 0.54 14.58 14.58 46.66
PFSB PennFed Fin. Services of NJ 1.63 1.61 18.77 14.95 225.23
PWBC PennFirst Bancorp of PA 1.04 1.04 12.30 11.12 176.81
PWBK Pennwood SB of PA* 0.52 0.76 14.83 14.83 78.37
PBKB People's SB of Brockton MA* 0.88 0.54 8.25 7.83 155.76
PFDC Peoples Bancorp of Auburn IN 1.72 1.71 18.46 18.46 118.48
PBCT Peoples Bank, MHC of CT(32.3)* 1.91 1.53 14.42 14.40 186.91
PHBK Peoples Heritage Fin Grp of ME* 1.53 1.64 14.55 13.01 173.65
PBNB Peoples Sav. Fin. Corp. of CT* 2.07 2.15 23.27 21.59 229.90
PERM Permanent Bancorp of IN 0.68 0.67 18.79 18.56 192.07
PMFI Perpetual Midwest Fin. of IA 0.75 0.67 17.90 17.90 192.79
PCBC Perry Co. Fin. Corp. of MO 0.88 0.88 18.84 18.84 90.32
PHFC Pittsburgh Home Fin. of PA 0.46 0.46 13.93 13.93 84.33
PFSL Pocahnts Fed, MHC of AR (46.4) 1.24 1.27 13.78 13.78 232.29
POBS Portsmouth Bank Shrs Inc of NH(8)* 1.05 0.88 11.64 11.64 46.52
PKPS Poughkeepsie SB of NY 1.10 1.54 5.65 5.65 66.98
PRBC Prestige Bancorp of PA 0.24 0.24 15.86 15.86 106.55
PETE Primary Bank of NH* -0.06 -0.09 12.82 12.78 208.85
PSAB Prime Bancorp, Inc. of PA 1.65 1.54 15.58 14.61 173.04
PFNC Progress Financial Corp. of PA 0.85 0.66 5.23 5.19 93.26
PSBK Progressive Bank, Inc. of NY* 3.21 3.34 27.14 23.58 340.65
PROV Provident Fin. Holdings of CA 0.18 0.50 16.29 16.29 117.23
PULB Pulaski SB, MHC of MO (29.0) 0.73 0.69 10.82 10.82 85.68
PULS Pulse Bancorp of S. River NJ 1.78 1.78 12.90 12.90 165.64
QCFB QCF Bancorp of Virginia MN 1.28 1.28 17.81 17.81 81.66
QCBC Quaker City Bancorp of CA 0.94 0.91 17.81 17.73 190.11
QCSB Queens County SB of NY* 2.74 2.74 26.84 26.84 161.85
RCSB RCSB Financial, Inc. of NY* 2.85 2.78 22.42 21.66 326.27
RARB Raritan Bancorp. of Raritan NJ* 2.08 2.08 17.84 17.42 242.24
REDF RedFed Bancorp of Redlands CA -0.48 -0.71 12.11 12.11 205.77
RELY Reliance Bancorp of NY 1.28 1.24 16.83 11.41 195.26
RELI Reliance Bancshares Inc of WI* 0.29 0.29 11.06 11.06 19.67
RFED Roosevelt Fin. Grp. Inc. of MO 1.32 1.80 10.71 10.15 221.32
RVSB Rvrview SB,FSB MHC of WA(40.3) 1.23 1.13 10.73 9.56 97.39
SCCB S. Carolina Comm. Bnshrs of SC 0.81 0.81 17.08 17.08 59.98
SBFL SB Fing. Lakes MHC of NY(33.0) -0.37 0.06 11.31 11.31 110.61
SFED SFS Bancorp of Schenectady NY 0.88 0.90 17.25 17.25 127.22
SGVB SGV Bancorp of W. Covina CA 0.12 0.12 11.94 11.94 122.09
SISB SIS Bank of Sprinfield MA* 2.59 2.62 15.20 15.20 211.40
SJSB SJS Bancorp of St. Joseph MI 0.88 0.86 17.89 17.89 153.36
SWCB Sandwich Co-Op. Bank of MA* 1.97 1.83 19.68 18.49 239.18
SFBM Security Bancorp of MT 1.74 1.30 21.00 18.01 254.61
SECP Security Capital Corp. of WI 3.48 3.60 60.02 60.02 369.05
SFSL Security First Corp. of OH 1.18 1.23 11.30 11.08 119.39
SHFC Seven Hills Fin. Corp. of OH(8) 0.31 0.29 18.01 18.01 84.91
SMFC Sho-Me Fin. Corp. of MO 1.24 1.24 17.77 17.77 161.59
SOBI Sobieski Bancorp of S. Bend IN 0.39 0.39 16.87 16.87 91.23
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week(1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
SOSA Somerset Savings Bank of MA(8)* 1.91 16,652 31.8 1.91 1.12 1.53 24.84 -62.70 39.42
SMBC Southern Missouri Bncrp of MO 14.25 1,724 24.6 17.50 13.50 13.50 5.56 N.A. -5.00
SWBI Southwest Bancshares of IL 26.87 1,794 48.2 28.25 26.00 27.50 -2.29 168.70 1.40
SVRN Sovereign Bancorp of PA 10.81 49,573 535.9 11.25 9.29 10.69 1.12 141.83 12.14
STFR St. Francis Cap. Corp. of WI 25.75 5,587 143.9 28.00 22.00 26.00 -0.96 N.A. 10.75
SPBC St. Paul Bancorp, Inc. of IL 26.25 17,988 472.2 27.00 22.25 25.87 1.47 55.60 2.94
STND Standard Fin. of Chicago IL 16.25 16,346 265.6 16.50 13.50 16.25 0.00 N.A. 11.15
SFFC StateFed Financial Corp. of IA 16.00 813 13.0 19.75 15.00 16.00 0.00 N.A. -11.70
SFIN Statewide Fin. Corp. of NJ 12.50 5,058 63.2 13.75 11.25 12.62 -0.95 N.A. -4.29
STSA Sterling Financial Corp. of WA 14.25 5,426 77.3 15.00 12.75 13.50 5.56 56.77 3.64
SSBK Strongsville SB of OH 21.00 2,531 53.2 22.25 18.00 21.95 -4.33 N.A. 7.69
SFSB SuburbFed Fin. Corp. of IL 17.25 1,257 21.7 18.17 16.00 16.75 2.99 158.62 4.55
SBCN Suburban Bancorp. of OH 16.12 1,481 23.9 18.50 14.25 16.50 -2.30 N.A. -12.86
SCSL Suncoast S&LA of Hollywood FL(8) 7.00 1,997 14.0 7.25 5.75 7.25 -3.45 2.79 12.00
THRD TF Financial Corp. of PA 14.62 4,514 66.0 16.00 13.75 14.50 0.83 N.A. -4.88
ROSE TR Financial Corp. of NY 29.00 8,915 258.5 29.50 22.37 28.37 2.22 N.A. 13.73
TPNZ Tappan Zee Fin. Corp. of NY 12.12 1,553 18.8 13.50 11.25 12.87 -5.83 N.A. -3.96
PTRS The Potters S&L Co. of OH 16.25 506 8.2 18.50 15.50 15.50 4.84 N.A. -4.75
THIR Third Financial Corp. of OH(8) 32.25 1,136 36.6 33.00 21.50 32.25 0.00 N.A. 22.86
TSBS Trenton SB, FSB MHC of NJ(35.0 14.00 8,912 43.6 15.00 12.37 13.75 1.82 N.A. 7.69
TRIC Tri-County Bancorp of WY 18.37 609 11.2 18.87 16.25 18.37 0.00 N.A. 11.33
THBC Troy Hill Bancorp of PA 13.62 1,068 14.5 14.00 12.25 13.75 -0.95 N.A. 4.77
TWIN Twin City Bancorp of TN 17.25 897 15.5 18.25 14.00 16.25 6.15 N.A. 1.47
UFRM United FS&LA of Rocky Mount NC 7.25 3,065 22.2 8.50 7.12 7.25 0.00 123.08 -3.33
UBMT United SB, FA of MT 18.75 1,223 22.9 18.75 17.00 18.27 2.63 78.57 7.14
VABF Va. Beach Fed. Fin. Corp of VA 8.00 4,965 39.7 9.87 6.81 8.00 0.00 70.58 3.23
VAFD Valley FSB of Sheffield AL(8) 39.00 367 14.3 39.00 24.87 34.00 14.71 271.43 11.43
VFFC Virginia First Savings of VA 12.62 5,741 72.5 14.25 9.87 13.00 -2.92 ***.** 10.99
WBCI WFS Bancorp of Wichita KS(8) 23.12 1,564 36.2 23.12 19.75 23.12 0.00 N.A. 4.52
WHGB WHG Bancshares of MD 11.50 1,620 18.6 11.75 10.87 11.75 -2.13 N.A. N.A.
WSFS WSFS Financial Corp. of DE* 8.13 13,832 112.5 10.00 6.75 8.00 1.63 12.14 -9.67
WVFC WVS Financial Corp. of PA* 21.75 1,737 37.8 22.25 18.25 21.00 3.57 N.A. 13.76
WLDN Walden Bancorp of MA(8)* 27.50 5,320 146.3 28.25 16.62 28.25 -2.65 286.24 44.74
WRNB Warren Bancorp of Peabody MA* 12.50 3,683 46.0 13.25 9.75 12.12 3.14 270.92 11.11
WFSL Washington FS&LA of Seattle WA 22.25 42,246 940.0 23.46 19.69 22.12 0.59 52.50 -4.51
WAMU Washington Mutual Inc. of WA(8)* 36.25 72,087 2,613.2 36.87 25.00 36.25 0.00 95.31 25.56
WYNE Wayne Bancorp of NJ 13.50 2,231 30.1 13.50 10.75 13.25 1.89 N.A. N.A.
WAYN Wayne S&L Co., MHC of OH(46.7) 19.37 1,496 12.8 22.00 18.09 19.75 -1.92 N.A. -11.59
WCFB Webster CityFSB,MHC of IA(45.2 13.25 2,100 12.6 13.50 11.75 12.50 6.00 N.A. 6.00
WBST Webster Financial Corp. of CT 32.00 8,101 259.2 32.75 24.75 32.25 -0.78 238.98 8.47
WEFC Wells Fin. Corp. of Wells MN 12.25 2,078 25.5 12.50 10.00 12.50 -2.00 N.A. 11.36
WCBI WestCo Bancorp of IL 21.50 2,622 56.4 22.00 16.83 21.50 0.00 115.00 20.58
WSTR WesterFed Fin. Corp. of MT 15.12 4,395 66.5 17.12 13.87 15.06 0.40 N.A. -9.03
WOFC Western Ohio Fin. Corp. of OH 20.62 2,309 47.6 24.37 19.50 21.25 -2.96 N.A. -11.31
WWFC Westwood Fin. Corp. of NJ 10.87 647 7.0 11.00 10.25 10.50 3.52 N.A. N.A.
WFCO Winton Financial Corp. of OH(8) 11.25 1,986 22.3 15.00 10.87 11.25 0.00 N.A. 3.50
FFWD Wood Bancorp of OH 14.50 1,498 21.7 14.50 10.50 14.00 3.57 N.A. 20.83
WCHI Workingmens Cap. Hldgs of IN(8) 21.16 1,809 38.3 21.25 15.50 20.87 1.39 323.20 20.91
YFCB Yonkers Fin. Corp. of NY 11.62 3,571 41.5 11.62 9.31 11.00 5.64 N.A. N.A.
YFED York Financial Corp. of PA 16.00 6,088 97.4 18.86 16.00 16.00 0.00 69.31 -5.16
</TABLE>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
SOSA Somerset Savings Bank of MA(8)* 0.13 0.13 1.71 1.71 30.71
SMBC Southern Missouri Bncrp of MO 0.78 0.73 15.41 15.41 93.96
SWBI Southwest Bancshares of IL 2.30 2.28 22.30 22.30 198.82
SVRN Sovereign Bancorp of PA 1.14 1.10 7.36 4.99 185.25
STFR St. Francis Cap. Corp. of WI 2.60 1.91 23.39 22.32 238.04
SPBC St. Paul Bancorp, Inc. of IL 2.07 2.02 20.88 20.80 241.14
STND Standard Fin. of Chicago IL 1.02 0.93 16.29 16.26 139.15
SFFC StateFed Financial Corp. of IA 1.09 1.09 18.36 18.36 94.35
SFIN Statewide Fin. Corp. of NJ 0.66 0.78 13.28 13.24 134.13
STSA Sterling Financial Corp. of WA 0.90 0.89 11.26 9.13 272.34
SSBK Strongsville SB of OH 1.92 1.70 16.81 16.48 209.08
SFSB SuburbFed Fin. Corp. of IL 1.41 1.25 20.72 20.60 301.02
SBCN Suburban Bancorp. of OH 0.53 0.77 17.31 17.31 133.11
SCSL Suncoast S&LA of Hollywood FL(8) 0.65 -0.63 6.66 6.64 201.59
THRD TF Financial Corp. of PA 0.99 0.95 16.64 16.64 117.17
ROSE TR Financial Corp. of NY 2.99 2.40 21.42 21.42 344.75
TPNZ Tappan Zee Fin. Corp. of NY 0.54 0.50 14.40 14.40 73.92
PTRS The Potters S&L Co. of OH 1.14 1.13 20.94 20.94 226.71
THIR Third Financial Corp. of OH(8) 1.87 1.67 25.22 25.22 137.25
TSBS Trenton SB, FSB MHC of NJ(35.0 1.05 0.75 11.23 10.98 58.05
TRIC Tri-County Bancorp of WY 1.06 1.03 20.37 20.37 125.97
THBC Troy Hill Bancorp of PA 1.02 0.93 16.73 16.73 75.36
TWIN Twin City Bancorp of TN 1.24 1.09 15.73 15.73 115.16
UFRM United FS&LA of Rocky Mount NC 0.66 0.56 6.73 6.73 83.36
UBMT United SB, FA of MT 1.33 1.26 20.04 20.04 85.20
VABF Va. Beach Fed. Fin. Corp of VA 0.40 0.12 8.30 8.30 122.62
VAFD Valley FSB of Sheffield AL(8) 1.19 1.16 26.14 26.14 322.96
VFFC Virginia First Savings of VA 2.11 1.79 10.62 10.29 130.09
WBCI WFS Bancorp of Wichita KS(8) 0.86 0.94 21.31 21.30 186.80
WHGB WHG Bancshares of MD 0.36 0.36 14.20 14.20 68.95
WSFS WSFS Financial Corp. of DE* 1.97 1.18 5.36 5.30 94.91
WVFC WVS Financial Corp. of PA* 2.06 2.04 19.60 19.60 149.47
WLDN Walden Bancorp of MA(8)* 1.79 2.01 18.28 15.74 197.70
WRNB Warren Bancorp of Peabody MA* 1.63 1.58 8.57 8.57 94.87
WFSL Washington FS&LA of Seattle WA 2.01 1.92 14.14 13.47 119.32
WAMU Washington Mutual Inc. of WA(8)* 2.84 2.83 19.27 17.23 309.67
WYNE Wayne Bancorp of NJ 0.54 0.65 16.17 16.17 96.07
WAYN Wayne S&L Co., MHC of OH(46.7) 1.02 0.96 15.50 15.50 167.29
WCFB Webster CityFSB,MHC of IA(45.2 0.54 0.53 10.38 10.38 46.38
WBST Webster Financial Corp. of CT 2.34 2.46 24.42 18.63 473.67
WEFC Wells Fin. Corp. of Wells MN 0.79 0.79 13.36 13.36 92.29
WCBI WestCo Bancorp of IL 1.52 1.53 18.40 18.40 119.05
WSTR WesterFed Fin. Corp. of MT 1.04 0.99 17.89 17.89 128.31
WOFC Western Ohio Fin. Corp. of OH 1.00 0.82 24.09 22.66 144.01
WWFC Westwood Fin. Corp. of NJ 0.99 0.99 14.61 12.51 136.46
WFCO Winton Financial Corp. of OH(8) 1.11 0.94 10.62 10.34 142.41
FFWD Wood Bancorp of OH 1.11 1.07 13.43 13.43 97.63
WCHI Workingmens Cap. Hldgs of IN(8) 1.00 1.01 14.63 14.63 115.09
YFCB Yonkers Fin. Corp. of NY 0.50 0.49 13.73 13.73 68.00
YFED York Financial Corp. of PA 1.70 1.54 15.36 15.36 182.29
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1
Weekly Thrift Market Line - Part Two
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ----------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
SAIF-Insured Thrifts(331) 13.24 13.03 0.88 7.96 7.07 0.82 7.27 0.92 124.19 0.86
NYSE Traded Companies(12) 6.43 6.03 0.76 12.04 8.13 0.61 9.69 1.50 64.36 1.30
AMEX Traded Companies(17) 17.85 17.77 0.90 7.05 5.81 0.88 6.68 0.51 156.80 0.67
NASDAQ Listed OTC Companies(302) 13.25 13.04 0.88 7.85 7.10 0.83 7.21 0.92 125.13 0.85
California Companies(27) 7.84 7.69 0.28 3.97 6.06 0.20 2.24 2.40 49.61 1.34
Florida Companies(9) 8.79 8.58 0.79 10.85 8.55 0.76 10.53 1.05 96.85 1.08
Mid-Atlantic Companies(67) 11.69 11.33 0.86 8.87 7.72 0.84 8.55 1.08 97.82 1.02
Mid-West Companies(153) 14.64 14.49 0.94 7.74 6.84 0.88 7.07 0.58 158.01 0.71
New England Companies(9) 7.75 7.34 0.69 9.35 8.66 0.57 7.60 1.10 59.63 1.01
North-West Companies(6) 10.94 10.64 1.07 11.00 6.96 0.99 9.80 0.85 61.45 0.66
South-East Companies(45) 15.71 15.53 1.06 8.81 6.78 1.02 8.27 1.09 120.44 0.85
South-West Companies(7) 12.29 12.19 0.74 7.49 8.48 0.70 6.90 0.75 86.02 0.84
Western Companies (Excl CA)(8) 16.54 16.37 1.07 7.65 6.36 1.02 7.23 0.31 151.58 0.63
Thrift Strategy(254) 14.76 14.57 0.88 7.08 6.57 0.85 6.64 0.80 134.40 0.79
Mortgage Banker Strategy(41) 7.70 7.33 0.86 11.61 9.02 0.68 9.02 1.29 90.70 0.94
Real Estate Strategy(17) 8.86 8.77 0.70 7.20 8.45 0.74 7.71 1.84 89.07 1.49
Diversified Strategy(15) 8.17 7.97 1.03 13.18 7.95 0.98 12.81 1.00 90.11 1.22
Retail Banking Strategy(4) 9.29 9.05 0.73 9.70 10.28 0.59 7.68 0.74 100.18 0.89
Companies Issuing Dividends(258) 13.54 13.31 0.96 8.59 7.29 0.90 7.91 0.80 126.43 0.83
Companies Without Dividends(73) 12.16 11.99 0.58 5.64 6.20 0.53 4.91 1.37 115.64 0.98
Equity/Assets greater than 6%(29) 5.10 4.80 0.44 9.14 9.27 0.33 6.96 1.85 72.61 1.12
Equity/Assets 6-12%(157) 8.61 8.29 0.85 10.14 8.32 0.77 9.12 1.03 120.05 0.97
Equity/Assets less than 12%(145) 19.57 19.50 0.98 5.48 5.39 0.97 5.41 0.63 138.88 0.70
Converted Last 3 Mths (no MHC)(12) 17.84 17.32 0.65 4.06 4.28 0.67 4.14 0.86 154.06 0.79
Actively Traded Companies(53) 8.65 8.35 0.96 11.83 8.84 0.91 10.86 1.32 98.02 0.98
Market Value Below $20 Million(83) 15.82 15.75 0.80 5.72 6.63 0.75 5.07 0.92 119.87 0.72
Holding Company Structure(284) 13.80 13.59 0.88 7.65 6.79 0.83 7.00 0.89 123.62 0.83
Assets Over $1 Billion(66) 8.23 7.68 0.82 10.50 8.11 0.75 9.49 1.08 84.04 1.01
Assets $500 Million-$1 Billion(58) 11.40 11.19 0.89 9.03 7.64 0.86 8.40 1.22 120.33 0.99
Assets $250-$500 Million(76) 11.19 10.98 0.84 8.38 7.49 0.76 7.29 0.89 138.72 0.87
Assets less than $250 Million(131) 17.89 17.86 0.92 5.90 6.02 0.88 5.57 0.71 140.47 0.71
Goodwill Companies(139) 9.16 8.66 0.82 9.40 7.99 0.74 8.43 1.06 108.07 0.94
Non-Goodwill Companies(192) 16.20 16.20 0.92 6.92 6.41 0.88 6.44 0.82 136.13 0.80
Acquirors of FSLIC Cases(14) 7.13 6.72 0.91 12.82 10.04 0.88 12.09 1.25 55.02 0.86
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
--------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(331) 14.25 104.91 13.13 108.49 15.04 0.35 1.94 28.38
NYSE Traded Companies(12) 12.49 130.12 9.38 140.55 13.95 0.46 1.53 16.83
AMEX Traded Companies(17) 16.61 99.77 16.74 100.48 16.73 0.38 2.53 38.81
NASDAQ Listed OTC Companies(302) 14.22 104.29 13.07 107.78 15.01 0.34 1.92 28.39
California Companies(27) 12.98 101.27 7.66 104.46 16.57 0.27 1.05 15.41
Florida Companies(9) 12.49 107.27 8.99 111.08 12.68 0.19 1.03 13.61
Mid-Atlantic Companies(67) 13.42 104.04 11.48 109.46 14.20 0.33 1.82 26.30
Mid-West Companies(153) 14.96 101.74 14.10 104.23 15.53 0.34 1.95 28.58
New England Companies(9) 11.52 102.39 7.87 112.33 13.66 0.50 2.59 31.84
North-West Companies(6) 15.08 149.09 14.97 157.63 15.35 0.34 1.56 21.31
South-East Companies(45) 14.36 116.97 17.00 119.78 14.76 0.41 2.47 37.38
South-West Companies(7) 13.16 82.01 9.94 85.56 14.15 0.30 2.04 29.73
Western Companies (Excl CA)(8) 14.93 109.44 16.61 111.81 15.90 0.48 2.68 43.13
Thrift Strategy(254) 14.99 99.89 14.08 102.64 15.54 0.34 2.03 31.22
Mortgage Banker Strategy(41) 11.22 120.36 9.22 129.50 13.97 0.34 1.61 18.50
Real Estate Strategy(17) 13.67 112.98 9.77 114.08 12.30 0.17 0.82 9.96
Diversified Strategy(15) 12.36 149.33 12.74 153.99 12.54 0.66 2.49 29.20
Retail Banking Strategy(4) 11.89 87.65 8.04 90.26 15.25 0.14 1.43 18.06
Companies Issuing Dividends(258) 14.12 108.35 13.80 112.30 14.99 0.44 2.46 36.01
Companies Without Dividends(73) 14.90 92.16 10.62 94.34 15.31 0.00 0.00 0.00
Equity/Assets greater than 6%(29) 10.49 119.07 6.10 129.66 12.34 0.25 1.21 13.89
Equity/Assets 6-12%(157) 12.73 115.04 9.85 120.35 13.57 0.38 1.90 23.92
Equity/Assets less than 12%(145) 16.97 91.84 17.84 92.33 17.34 0.33 2.11 35.98
Converted Last 3 Mths (no MHC)(12) 18.61 81.75 14.95 86.12 18.93 0.02 0.19 3.36
Actively Traded Companies(53) 11.68 126.06 10.90 133.96 12.71 0.52 2.20 25.99
Market Value Below $20 Million(83) 15.06 85.84 13.55 86.50 15.96 0.27 1.86 29.21
Holding Company Structure(284) 14.61 104.12 13.56 107.72 15.39 0.36 1.98 29.69
Assets Over $1 Billion(66) 12.59 127.65 10.34 139.30 13.87 0.48 1.90 22.97
Assets $500 Million-$1 Billion(58) 13.33 107.77 12.08 110.87 14.17 0.30 1.68 25.30
Assets $250-$500 Million(76) 13.89 105.45 11.38 107.56 14.48 0.34 2.08 27.52
Assets less than $250 Million(131) 16.04 91.44 16.07 91.84 16.59 0.30 2.00 33.39
Goodwill Companies(139) 13.05 115.94 10.44 124.51 14.02 0.40 1.88 24.20
Non-Goodwill Companies(192) 15.26 97.01 15.07 97.01 15.89 0.31 1.98 31.46
Acquirors of FSLIC Cases(14) 10.65 121.31 9.33 130.46 12.21 0.47 2.14 22.14
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(75) 11.05 10.76 0.90 10.02 7.90 0.87 9.46 1.57 99.35 1.42
NYSE Traded Companies(3) 7.00 5.45 0.57 7.77 6.85 0.61 8.57 2.51 31.89 1.30
AMEX Traded Companies(5) 13.17 12.85 0.63 7.14 5.94 0.69 6.84 2.42 66.49 1.35
NASDAQ Listed OTC Companies(67) 11.07 10.86 0.94 10.39 8.13 0.90 9.73 1.45 105.76 1.44
California Companies(3) 8.71 8.71 0.91 12.55 9.01 0.82 11.21 2.49 47.07 1.54
Mid-Atlantic Companies(20) 10.67 10.28 0.92 10.01 8.13 0.89 9.41 1.87 67.04 1.37
Mid-West Companies(1) 56.23 56.23 1.47 2.62 3.46 1.47 2.62 0.00 0.00 0.55
New England Companies(44) 8.86 8.56 0.88 10.47 8.28 0.83 9.78 1.43 100.50 1.53
North-West Companies(4) 16.20 16.20 1.19 11.11 7.28 1.16 10.79 0.16 490.91 0.91
South-East Companies(2) 28.20 28.20 0.26 0.24 0.22 0.71 2.81 1.06 74.01 0.89
Thrift Strategy(47) 12.62 12.26 0.87 8.79 7.26 0.87 8.51 1.47 91.52 1.38
Mortgage Banker Strategy(11) 6.81 6.59 0.81 11.27 9.31 0.77 11.00 1.20 166.56 1.10
Real Estate Strategy(8) 10.27 10.27 1.21 13.17 9.14 1.16 12.43 1.70 87.76 1.71
Diversified Strategy(7) 6.90 6.71 1.22 18.70 12.44 1.03 15.26 2.86 96.44 2.17
Retail Banking Strategy(2) 6.18 6.03 0.06 0.97 1.23 0.04 0.65 1.28 58.62 1.07
Companies Issuing Dividends(49) 9.06 8.68 1.00 11.40 8.94 0.95 10.81 1.13 120.32 1.33
Companies Without Dividends(26) 14.44 14.33 0.73 7.67 6.13 0.72 7.15 2.37 61.39 1.58
Equity/Assets greater than 6%(10) 5.43 5.37 0.88 15.72 10.86 0.70 12.66 3.07 44.60 1.68
Equity/Assets 6-12%(50) 8.21 7.80 0.87 10.52 8.43 0.84 10.06 1.37 107.02 1.45
Equity/Assets less than 12%(15) 22.78 22.78 0.98 5.60 4.75 1.05 5.97 1.37 105.43 1.20
Converted Last 3 Mths (no MHC)(4) 21.17 21.17 -0.01 -3.65 -1.61 0.29 -1.87 1.79 59.86 1.38
Actively Traded Companies(29) 8.37 8.01 0.94 11.14 8.92 0.92 10.91 1.24 89.89 1.47
Market Value Below $20 Million(13) 12.74 12.55 0.76 8.25 7.74 0.74 7.87 1.91 65.86 1.29
Holding Company Structure(46) 12.41 12.18 1.04 11.03 8.69 1.02 10.46 1.20 108.45 1.47
Assets Over $1 Billion(17) 7.94 7.39 1.03 13.13 9.55 0.96 11.98 2.17 65.49 1.49
Assets $500 Million-$1 Billion(18) 10.15 9.89 0.86 9.72 7.22 0.77 8.62 1.22 109.56 1.60
Assets $250-$500 Million(24) 10.45 10.23 0.86 9.52 7.54 0.89 9.49 1.38 105.82 1.38
Assets less than $250 Million(16) 15.50 15.34 0.87 8.38 7.70 0.86 8.05 1.74 114.44 1.25
Goodwill Companies(36) 7.74 7.11 0.83 10.89 8.53 0.77 9.93 1.57 70.72 1.38
Non-Goodwill Companies(39) 13.71 13.71 0.95 9.32 7.39 0.95 9.07 1.58 123.50 1.46
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(75) 11.72 113.77 11.74 118.61 12.44 0.33 1.71 20.03
NYSE Traded Companies(3) 15.11 117.16 8.26 150.14 13.79 0.27 0.74 11.64
AMEX Traded Companies(5) 10.51 100.36 12.10 105.35 15.54 0.27 1.01 12.83
NASDAQ Listed OTC Companies(67) 11.58 114.77 11.89 118.11 12.09 0.34 1.83 21.05
California Companies(3) 11.90 107.74 9.83 107.78 12.70 0.00 0.00 0.00
Mid-Atlantic Companies(20) 13.33 112.33 11.20 120.10 12.05 0.34 1.52 17.17
Mid-West Companies(1) 0.00 75.68 42.55 75.68 0.00 0.00 0.00 0.00
New England Companies(44) 10.91 117.10 10.12 121.60 12.40 0.39 2.08 23.66
North-West Companies(4) 10.69 121.62 18.89 121.62 10.89 0.27 1.87 29.39
South-East Companies(2) 0.00 82.18 23.42 82.18 22.18 0.00 0.00 0.00
Thrift Strategy(47) 12.06 110.15 12.77 116.13 12.94 0.36 1.88 22.83
Mortgage Banker Strategy(11) 11.35 118.86 8.10 122.23 11.50 0.26 1.19 12.44
Real Estate Strategy(8) 11.73 124.52 13.09 124.52 12.12 0.29 1.35 14.29
Diversified Strategy(7) 9.97 132.70 9.18 136.63 10.71 0.23 1.48 16.05
Retail Banking Strategy(2) 0.00 93.58 5.78 95.70 0.00 0.32 1.94 0.00
Companies Issuing Dividends(49) 11.16 119.45 10.82 126.23 11.92 0.53 2.72 30.81
Companies Without Dividends(26) 13.05 104.06 13.29 105.58 13.60 0.00 0.00 0.00
Equity/Assets greater than 6%(10) 11.37 128.45 6.95 129.84 12.37 0.07 0.68 6.54
Equity/Assets 6-12%(50) 10.97 117.51 9.67 124.43 11.93 0.43 2.23 25.63
Equity/Assets less than 12%(15) 15.67 94.68 20.62 94.68 15.03 0.14 0.63 10.06
Converted Last 3 Mths (no MHC)(4) 19.23 84.11 17.35 84.11 17.67 0.00 0.00 0.00
Actively Traded Companies(29) 11.20 118.41 9.87 123.93 12.08 0.45 2.26 24.27
Market Value Below $20 Million(13) 11.84 95.49 11.32 98.27 12.13 0.19 1.28 11.46
Holding Company Structure(46) 11.37 113.65 13.14 117.44 11.73 0.37 1.88 22.52
Assets Over $1 Billion(17) 11.95 128.37 10.27 139.39 12.05 0.34 1.24 15.47
Assets $500 Million-$1 Billion(18) 12.11 119.60 12.06 123.74 12.91 0.47 2.21 26.86
Assets $250-$500 Million(24) 11.35 112.56 11.09 115.86 12.76 0.31 1.82 23.07
Assets less than $250 Million(16) 11.56 97.07 13.64 99.48 11.83 0.22 1.48 13.31
Goodwill Companies(36) 11.58 118.02 9.14 128.86 12.83 0.45 2.13 25.38
Non-Goodwill Companies(39) 11.85 110.35 13.82 110.35 12.09 0.23 1.38 15.94
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(18) 11.62 11.31 0.80 6.99 5.58 0.77 6.92 0.56 95.45 0.80
BIF-Insured Thrifts(2) 9.94 9.93 0.70 8.41 5.59 0.62 7.21 2.45 47.44 1.49
NASDAQ Listed OTC Companies(20) 11.45 11.18 0.79 7.13 5.58 0.76 6.95 0.76 89.80 0.87
Florida Companies(3) 10.08 9.94 0.91 9.09 6.53 0.90 9.00 0.48 113.53 0.81
Mid-Atlantic Companies(8) 11.87 11.41 0.66 5.11 4.22 0.71 5.83 1.11 56.82 0.93
Mid-West Companies(7) 12.14 12.13 0.77 6.88 5.83 0.67 6.11 0.43 112.66 0.75
New England Companies(1) 7.71 7.70 1.10 14.32 8.99 0.88 11.47 1.37 73.39 1.66
North-West Companies(1) 11.02 9.82 1.31 12.07 8.48 1.21 11.09 0.22 151.63 0.51
Thrift Strategy(18) 11.68 11.44 0.74 6.46 5.23 0.73 6.47 0.76 86.77 0.84
Mortgage Banker Strategy(1) 11.02 9.82 1.31 12.07 8.48 1.21 11.09 0.22 151.63 0.51
Diversified Strategy(1) 7.71 7.70 1.10 14.32 8.99 0.88 11.47 1.37 73.39 1.66
Companies Issuing Dividends(19) 11.28 10.99 0.78 7.13 5.56 0.77 7.11 0.80 89.80 0.83
Companies Without Dividends(1) 14.64 14.64 1.02 7.29 5.95 0.55 3.89 0.07 0.00 1.59
Equity/Assets greater than 6%(1) 5.93 5.93 0.56 9.39 8.55 0.57 9.62 0.37 108.37 1.15
Equity/Assets 6-12%(13) 9.65 9.27 0.70 7.28 5.52 0.73 7.47 0.69 98.21 0.89
Equity/Assets less than 12%(6) 16.25 16.18 1.03 6.43 5.22 0.86 5.37 1.01 47.16 0.77
Actively Traded Companies(1) 9.52 8.30 0.85 9.20 7.69 0.87 9.42 0.93 55.55 1.01
Market Value Below $20 Million(1) 11.84 11.84 0.48 4.04 4.33 0.39 3.28 0.45 107.41 0.61
Holding Company Structure(1) 9.52 8.30 0.85 9.20 7.69 0.87 9.42 0.93 55.55 1.01
Assets Over $1 Billion(4) 8.99 8.39 0.94 10.33 6.76 0.93 10.01 0.89 102.04 1.21
Assets $500 Million-$1 Billion(5) 11.65 11.30 0.88 7.09 5.93 0.82 7.06 0.63 68.18 0.76
Assets $250-$500 Million(4) 9.97 9.95 0.73 7.75 6.68 0.71 7.55 0.24 141.07 0.59
Assets less than $250 Million(7) 13.55 13.38 0.68 4.99 4.03 0.64 4.78 1.13 70.87 0.90
Goodwill Companies(10) 10.58 10.04 0.96 9.20 6.72 0.87 8.52 0.61 112.04 0.84
Non-Goodwill Companies(10) 12.31 12.31 0.63 5.07 4.44 0.64 5.38 0.93 58.03 0.89
MHC Institutions(20) 11.45 11.18 0.79 7.13 5.58 0.76 6.95 0.76 89.80 0.87
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(18) 16.26 119.14 13.84 123.24 16.84 0.59 3.74 40.30
BIF-Insured Thrifts(2) 11.13 131.69 12.74 131.79 13.89 0.58 3.68 41.88
NASDAQ Listed OTC Companies(20) 15.93 120.39 13.73 124.10 16.66 0.59 3.74 40.46
Florida Companies(3) 15.69 131.86 12.93 134.46 16.03 0.93 4.84 64.31
Mid-Atlantic Companies(8) 14.46 116.19 13.88 122.23 16.83 0.44 3.29 36.09
Mid-West Companies(7) 18.17 114.33 14.09 114.49 18.15 0.63 4.09 35.99
New England Companies(1) 11.13 147.36 11.37 147.57 13.89 0.80 3.76 41.88
North-West Companies(1) 11.79 135.14 14.89 151.67 12.83 0.22 1.52 17.89
Thrift Strategy(18) 16.57 118.08 13.80 121.26 17.13 0.60 3.86 43.11
Mortgage Banker Strategy(1) 11.79 135.14 14.89 151.67 12.83 0.22 1.52 17.89
Diversified Strategy(1) 11.13 147.36 11.37 147.57 13.89 0.80 3.76 41.88
Companies Issuing Dividends(19) 15.88 120.83 13.59 124.72 16.66 0.62 3.93 44.96
Companies Without Dividends(1) 16.81 112.20 16.42 112.20 0.00 0.00 0.00 0.00
Equity/Assets greater than 6%(1) 11.69 105.22 6.24 105.22 11.42 0.84 5.79 67.74
Equity/Assets 6-12%(13) 15.41 123.04 11.79 128.51 16.00 0.62 3.52 43.36
Equity/Assets less than 12%(6) 17.83 117.20 19.20 117.67 19.78 0.49 3.87 16.67
Actively Traded Companies(1) 13.00 114.57 10.91 131.48 12.69 0.40 2.48 32.26
Market Value Below $20 Million(1) 23.11 92.04 10.89 92.04 0.00 0.40 3.27 0.00
Holding Company Structure(1) 13.00 114.57 10.91 131.48 12.69 0.40 2.48 32.26
Assets Over $1 Billion(4) 12.95 140.14 12.47 148.94 15.52 0.73 3.69 46.37
Assets $500 Million-$1 Billion(5) 15.08 112.35 13.38 116.57 16.81 0.57 3.73 46.56
Assets $250-$500 Million(4) 15.47 113.29 11.17 113.59 15.98 0.77 4.50 53.98
Assets less than $250 Million(7) 18.78 118.91 16.18 121.28 18.83 0.43 3.34 8.94
Goodwill Companies(10) 14.84 127.03 13.28 134.43 15.80 0.58 3.27 37.54
Non-Goodwill Companies(10) 17.34 113.76 14.19 113.76 17.77 0.60 4.21 47.27
MHC Institutions(20) 15.93 120.39 13.73 124.10 16.66 0.59 3.74 40.46
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 4.28 4.00 0.82 17.93 15.33 0.12 2.58 2.29 33.80 1.24
CAL CalFed Inc. of Los Angeles CA(8) 4.86 4.86 0.73 16.76 9.17 0.64 14.61 1.33 92.55 1.76
CSA Coast Savings Financial of CA 5.15 5.07 0.49 9.94 7.04 0.45 9.08 1.59 49.10 1.15
CFB Commercial Federal Corp. of NE 6.26 5.64 0.88 15.49 9.39 0.87 15.37 1.01 73.94 1.01
DME Dime Savings Bank, FSB of NY* 5.07 5.03 0.39 7.95 5.56 0.53 10.68 2.59 24.67 1.21
DSL Downey Financial Corp. of CA 8.32 8.18 0.68 8.41 7.64 0.60 7.43 1.33 44.15 0.66
FRC First Republic Bancorp of CA* 5.55 5.54 0.45 7.94 8.66 0.44 7.80 2.08 45.05 1.06
FED FirstFed Fin. Corp. of CA 4.60 4.52 0.23 4.99 4.95 0.26 5.59 2.52 75.63 2.54
GLN Glendale Fed. Bk, FSB of CA 5.61 5.21 0.17 3.38 3.14 0.33 6.46 1.96 65.80 1.71
GDW Golden West Fin. Corp. of CA 6.60 6.22 0.81 12.47 8.85 0.79 12.27 1.40 32.79 0.56
GWF Great Western Fin. Corp. of CA 5.81 5.11 0.66 11.92 8.52 0.61 11.08 1.76 42.88 1.09
GPT GreenPoint Fin. Corp. of NY* 10.36 5.79 0.88 7.44 6.32 0.85 7.24 2.86 25.95 1.63
SFB Standard Fed. Bancorp of MI 6.32 4.95 0.94 14.05 9.54 0.81 12.20 0.54 58.81 0.45
TCB TCF Financial Corp. of MN 7.48 7.16 1.43 20.12 7.74 1.36 19.16 0.82 119.89 1.29
WES Westcorp Inc. of Orange CA 10.33 10.31 1.28 13.70 7.24 0.50 5.35 1.25 111.12 2.57
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 17.67 17.67 -0.29 -1.62 -2.03 0.64 3.60 0.71 124.43 1.38
BKC American Bank of Waterbury CT* 8.47 8.05 1.23 13.85 9.86 0.74 8.36 2.66 35.97 1.45
BFD BostonFed Bancorp of MA 11.43 11.43 0.48 4.76 3.69 0.44 4.37 1.15 54.40 0.77
CFX Cheshire Fin. Corp. of NH* 9.05 8.12 1.00 10.31 8.41 0.86 8.80 0.93 84.76 1.02
CZF Citisave Fin. Corp. of LA 16.73 16.72 1.21 7.73 7.00 1.11 7.10 0.23 40.11 0.16
CBK Citizens First Fin.Corp. of IL 16.41 16.41 0.56 6.36 4.23 0.46 5.26 0.56 35.59 0.24
ESX Essex Bancorp of VA(8) 0.19 -0.53 -1.65 -44.64 NM -1.53 -41.36 2.34 77.62 2.15
FCB Falmouth Co-Op Bank of MA* 24.56 24.56 0.59 3.18 2.93 0.59 3.18 NA NA 1.24
GAF GA Financial Corp. of PA 22.84 22.84 0.75 4.94 3.56 0.92 6.07 0.17 93.06 0.39
KNK Kankakee Bancorp of IL 9.88 9.18 0.57 5.36 6.67 0.57 5.36 0.44 151.05 1.01
KYF Kentucky First Bancorp of KY 21.77 21.77 1.11 4.96 4.48 1.11 4.96 0.14 301.64 0.85
NYB New York Bancorp, Inc. of NY 5.43 5.43 1.26 21.84 9.95 1.19 20.61 1.38 48.98 1.06
PDB Piedmont Bancorp of NC 28.79 28.79 1.44 6.09 4.27 1.47 6.18 0.82 57.36 0.66
PLE Pinnacle Bank of AL 8.13 7.85 0.86 11.01 10.44 0.76 9.75 0.18 377.94 1.05
SSB Scotland Bancorp of NC 35.06 35.06 1.29 4.83 3.64 1.29 4.83 NA NA 0.50
SZB SouthFirst Bancshares of AL 14.41 14.41 0.57 3.47 4.47 0.75 4.63 0.52 53.93 0.41
SRN Southern Banc Company of AL 20.31 20.10 0.55 3.94 3.02 0.55 3.94 NA NA 0.25
SSM Stone Street Bancorp of NC 35.49 35.49 1.14 4.42 3.57 1.14 4.42 0.22 200.42 0.60
TSH Teche Holding Company of LA 15.37 15.37 1.09 6.11 7.31 1.07 5.98 0.15 553.45 1.04
FTF Texarkana Fst. Fin. Corp of AR 20.14 20.14 1.82 10.01 10.69 1.82 10.01 0.33 213.97 0.87
THR Three Rivers Fin. Corp. of MI 15.32 15.25 0.67 4.35 5.08 0.62 4.02 0.72 70.52 0.77
TBK Tolland Bank of CT* 6.10 5.83 0.60 10.00 10.51 0.62 10.27 5.37 20.78 1.65
WSB Washington SB, FSB of MD 8.23 8.23 0.94 12.58 11.52 0.70 9.38 NA NA 0.99
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 8.25 8.25 2.05 29.46 27.43 -0.04 -0.65 0.35 96.97 0.53
ALBK ALBANK Fin. Corp. of Albany NY 9.52 8.41 0.98 9.55 7.78 0.98 9.55 1.10 66.68 1.07
AMFC AMB Financial Corp. of IN 20.41 20.41 0.63 4.53 3.93 0.63 4.53 0.51 87.99 0.60
ASBP ASB Financial Corp. of OH 22.69 22.69 1.01 4.27 4.48 1.01 4.27 1.61 48.54 1.29
ABBK Abington Savings Bank of MA(8)* 6.50 5.74 0.39 5.84 5.67 0.28 4.18 0.32 112.30 0.60
AADV Advantage Bancorp of WI 9.45 8.22 0.90 9.33 7.85 0.81 8.36 0.55 101.88 1.02
AFCB Affiliated Comm BC, Inc of MA 9.85 9.78 0.73 6.71 5.97 0.88 8.01 0.69 106.60 1.21
ALBC Albion Banc Corp. of Albion NY 10.34 10.34 0.24 2.34 3.29 0.24 2.30 0.76 55.48 0.52
ATSB AmTrust Capital Corp. of IN 10.34 10.23 0.31 2.75 4.11 0.07 0.59 1.31 38.02 0.73
AHCI Ambanc Holding Co. of NY* 16.30 16.30 0.32 2.22 2.33 0.29 2.03 3.65 25.93 1.65
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 6.52 128.26 5.49 137.36 NM 0.88 3.47 22.62
CAL CalFed Inc. of Los Angeles CA(8) 10.90 166.31 8.09 166.31 12.50 0.00 0.00 0.00
CSA Coast Savings Financial of CA 14.19 135.62 6.98 137.77 15.53 0.00 0.00 0.00
CFB Commercial Federal Corp. of NE 10.65 144.21 9.02 159.98 10.73 0.40 1.01 10.78
DME Dime Savings Bank, FSB of NY* 17.97 140.62 7.14 141.99 13.39 0.00 0.00 0.00
DSL Downey Financial Corp. of CA 13.10 107.19 8.91 109.03 14.82 0.48 1.94 25.40
FRC First Republic Bancorp of CA* 11.54 87.42 4.85 87.53 11.74 0.00 0.00 0.00
FED FirstFed Fin. Corp. of CA 20.19 102.28 4.70 103.96 18.01 0.00 0.00 0.00
GLN Glendale Fed. Bk, FSB of CA NM 100.75 5.66 108.63 16.67 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 11.29 134.87 8.91 143.23 11.48 0.38 0.69 7.80
GWF Great Western Fin. Corp. of CA 11.74 135.21 7.86 153.66 12.63 1.00 4.00 46.95
GPT GreenPoint Fin. Corp. of NY* 15.83 123.43 12.79 220.90 16.26 0.80 2.21 34.93
SFB Standard Fed. Bancorp of MI 10.48 139.46 8.81 178.11 12.08 0.80 1.87 19.56
TCB TCF Financial Corp. of MN 12.93 NM 18.98 NM 13.57 0.75 1.97 25.51
WES Westcorp Inc. of Orange CA 13.82 173.34 17.91 173.77 NM 0.40 1.92 26.49
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* NM 79.84 14.11 79.84 22.18 0.00 0.00 NM
BKC American Bank of Waterbury CT* 10.14 136.40 11.56 143.54 16.79 1.36 5.06 51.32
BFD BostonFed Bancorp of MA NM 96.30 11.01 96.30 NM 0.20 1.54 41.67
CFX Cheshire Fin. Corp. of NH* 11.89 119.15 10.78 132.79 13.92 0.00 0.00 0.00
CZF Citisave Fin. Corp. of LA 14.29 106.06 17.75 106.14 15.56 0.30 2.14 30.61
CBK Citizens First Fin.Corp. of IL 23.63 75.28 12.35 75.28 NM 0.00 0.00 0.00
ESX Essex Bancorp of VA(8) NM NM 0.65 NM NM 0.00 0.00 NM
FCB Falmouth Co-Op Bank of MA* NM 75.30 18.50 75.30 NM 0.00 0.00 0.00
GAF GA Financial Corp. of PA NM 85.72 19.58 85.72 22.91 0.20 1.62 45.45
KNK Kankakee Bancorp of IL 15.00 81.82 8.08 88.04 15.00 0.40 1.98 29.63
KYF Kentucky First Bancorp of KY 22.33 98.41 21.43 98.41 22.33 0.50 3.67 NM
NYB New York Bancorp, Inc. of NY 10.05 219.52 11.91 219.52 10.65 0.80 2.64 26.58
PDB Piedmont Bancorp of NC 23.44 107.07 30.83 107.07 23.08 0.48 3.20 NM
PLE Pinnacle Bank of AL 9.58 103.40 8.41 107.18 10.81 0.72 4.09 39.13
SSB Scotland Bancorp of NC NM 92.11 32.29 92.11 NM 0.30 2.43 66.67
SZB SouthFirst Bancshares of AL 22.37 84.33 12.15 84.33 16.78 0.50 3.92 NM
SRN Southern Banc Company of AL NM 86.49 17.56 87.40 NM 0.35 2.64 NM
SSM Stone Street Bancorp of NC NM 82.71 29.36 82.71 NM 0.44 2.53 70.97
TSH Teche Holding Company of LA 13.68 88.32 13.57 88.32 13.98 0.50 3.85 52.63
FTF Texarkana Fst. Fin. Corp of AR 9.35 83.40 16.80 83.40 9.35 0.45 3.19 29.80
THR Three Rivers Fin. Corp. of MI 19.70 85.70 13.13 86.09 21.31 0.30 2.31 45.45
TBK Tolland Bank of CT* 9.51 91.10 5.55 95.30 9.27 0.00 0.00 0.00
WSB Washington SB, FSB of MD 8.68 103.02 8.47 103.02 11.64 0.10 1.95 16.95
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 3.65 96.69 7.97 96.69 NM 0.40 1.27 4.63
ALBK ALBANK Fin. Corp. of Albany NY 12.85 124.05 11.81 140.43 12.85 0.48 1.62 20.87
AMFC AMB Financial Corp. of IN NM 72.40 14.78 72.40 NM 0.24 2.30 58.54
ASBP ASB Financial Corp. of OH 22.31 96.93 22.00 96.93 22.31 0.40 2.76 61.54
ABBK Abington Savings Bank of MA(8)* 17.63 100.54 6.54 113.87 24.63 0.40 2.39 42.11
AADV Advantage Bancorp of WI 12.74 118.96 11.24 136.70 14.22 0.32 0.97 12.36
AFCB Affiliated Comm BC, Inc of MA 16.76 113.37 11.17 114.21 14.04 0.48 2.22 37.21
ALBC Albion Banc Corp. of Albion NY NM 71.73 7.41 71.73 NM 0.31 1.82 55.36
ATSB AmTrust Capital Corp. of IN 24.32 67.57 6.98 68.29 NM 0.00 0.00 0.00
AHCI Ambanc Holding Co. of NY* NM 71.52 11.66 71.52 NM 0.00 0.00 0.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
ASBI Ameriana Bancorp of IN 11.10 11.08 0.92 7.42 7.77 0.90 7.28 0.41 67.03 0.40
AFFFZ America First Fin. Fund of CA 7.09 6.94 0.90 13.54 11.60 0.89 13.46 0.77 41.01 0.50
AMFB American Federal Bank of SC 7.76 7.16 1.29 16.14 9.37 1.42 17.67 0.54 140.66 1.27
ANBK American Nat'l Bancorp of MD 10.91 10.91 0.34 3.61 3.22 0.33 3.51 1.40 69.88 1.61
ABCW Anchor Bancorp Wisconsin of WI 6.47 6.30 0.89 12.77 8.96 0.87 12.40 0.67 187.67 1.60
ANDB Andover Bancorp, Inc. of MA* 7.56 7.56 0.96 12.71 9.88 0.94 12.41 1.43 70.34 1.43
ASFC Astoria Financial Corp. of NY 7.93 6.46 0.74 8.60 8.56 0.73 8.45 0.78 24.18 0.55
AVND Avondale Fin. Corp. of IL 9.93 9.93 0.63 5.82 7.22 0.45 4.16 0.75 96.74 1.63
BFSI BFS Bankorp, Inc. of NY 7.83 7.83 1.83 24.02 12.25 1.77 23.23 1.21 81.73 1.08
BKCT Bancorp Connecticut of CT* 10.56 10.56 1.16 10.61 7.52 1.15 10.48 1.59 76.23 2.01
BPLS Bank Plus Corp. of CA 5.31 5.30 -1.81 -34.41 NM -1.81 -34.51 3.67 60.98 2.56
BWFC Bank West Fin. Corp. of MI 19.78 19.78 0.69 3.38 3.73 0.41 1.98 0.08 112.71 0.13
BANC BankAtlantic Bancorp of FL 7.17 6.63 1.00 14.34 9.62 0.77 11.08 0.85 114.30 1.70
BKUNA BankUnited SA of FL 5.66 5.34 0.80 17.80 12.34 0.83 18.56 0.79 33.85 0.34
BKCO Bankers Corp. of NJ* 8.36 8.20 1.12 11.77 9.46 1.18 12.37 1.33 25.00 0.45
BVFS Bay View Capital Corp. of CA 6.08 5.37 0.06 0.87 0.72 0.36 5.19 1.00 108.62 1.44
BFSB Bedford Bancshares of VA 15.22 15.22 1.29 7.96 7.82 1.29 7.96 0.87 60.30 0.61
BSBC Branford SB of CT* 8.76 8.76 0.86 10.18 7.67 0.86 10.18 2.05 98.22 2.84
BRFC Bridgeville SB, FSB of PA(8) 28.53 28.53 1.26 4.34 4.07 1.26 4.34 0.20 130.09 0.74
BYFC Broadway Fin. Corp. of CA 11.66 11.66 0.28 3.67 3.59 0.32 4.09 2.42 33.23 0.97
CBCO CB Bancorp of Michigan City IN 9.87 9.87 1.39 14.66 11.95 1.38 14.47 1.51 53.34 1.71
CCFH CCF Holding Company of GA 21.19 21.19 0.96 5.14 5.50 0.92 4.92 0.92 60.06 0.90
CENF CENFED Financial Corp. of CA 4.99 4.98 0.55 11.25 9.48 0.39 8.02 1.39 50.22 0.96
CFSB CFSB Bancorp of Lansing MI 8.22 8.22 0.96 11.73 8.16 0.94 11.57 0.09 661.63 0.66
CKFB CKF Bancorp of Danville KY 26.63 26.63 1.18 4.24 3.54 1.18 4.24 1.50 12.70 0.21
CNSB CNS Bancorp of MO 24.61 24.61 0.73 5.32 3.06 0.63 4.64 NA NA 0.58
CSBF CSB Financial Group Inc of IL 30.89 30.89 0.82 4.53 3.51 0.82 4.53 0.70 37.37 0.47
CFHC California Fin. Hld. Co. of CA 6.55 6.51 0.57 8.58 6.84 0.51 7.70 1.26 44.64 0.78
CBCI Calumet Bancorp of Chicago IL 16.08 16.08 1.30 7.84 9.68 1.30 7.84 1.44 73.91 1.43
CAFI Camco Fin. Corp. of OH 8.32 8.32 1.21 15.13 11.54 0.94 11.76 0.55 55.23 0.36
CMRN Cameron Fin. Corp. of MO 26.35 26.35 1.60 5.81 6.69 1.56 5.69 0.96 74.48 0.85
CAPS Capital Savings Bancorp of MO 10.43 10.43 0.95 8.92 9.09 0.95 8.92 0.20 152.91 0.38
CARV Carver FSB of New York, NY 9.62 9.18 0.20 2.12 4.03 0.18 1.92 0.72 36.31 1.11
CASB Cascade SB of Everett WA 6.22 6.22 0.71 11.35 6.53 0.43 6.85 1.58 55.90 1.25
CATB Catskill Fin. Corp. of NY* 28.49 28.49 1.61 5.64 7.04 1.61 5.64 0.54 119.39 1.53
CNIT Cenit Bancorp of Norfolk VA 7.28 7.02 0.49 6.94 4.80 0.55 7.74 0.48 118.59 1.16
CTBK Center Banks, Inc. of NY* 7.03 7.03 0.57 8.11 9.14 0.59 8.43 1.10 73.78 0.97
CFCX Center Fin. Corp of CT(8)* 5.82 5.47 0.74 12.17 6.96 0.46 7.67 2.58 42.75 1.42
CEBK Central Co-Op. Bank of MA* 10.00 8.72 0.38 3.98 3.76 0.41 4.24 1.79 51.21 1.27
CJFC Central Jersey Fin. Corp of NJ(8) 11.93 11.14 1.11 9.81 5.86 1.08 9.56 1.68 38.04 1.37
CBSB Charter Financial Inc. of IL 17.39 16.16 1.17 6.86 6.37 1.15 6.77 0.52 130.13 0.94
COFI Charter One Financial of OH(8) 6.70 6.19 0.37 5.62 2.28 1.24 18.79 0.38 122.74 0.90
CVAL Chester Valley Bancorp of PA 9.37 9.37 0.91 9.86 8.22 0.86 9.39 0.86 114.02 1.18
CRCL Circle Financial Corp.of OH(8) 10.23 8.93 0.52 4.69 4.42 0.44 4.01 0.15 140.61 0.30
CTZN CitFed Bancorp of Dayton OH 6.59 5.74 0.70 10.21 8.19 0.63 9.12 0.93 67.48 1.08
CLAS Classic Bancshares of KY 28.36 28.36 0.73 3.24 3.03 0.63 2.79 0.64 65.76 0.61
CMSB Cmnwealth Bancorp of PA 11.10 8.46 0.70 7.29 5.70 0.61 6.35 0.40 122.42 0.95
CBSA Coastal Bancorp of Houston TX 3.40 2.81 0.40 11.63 10.96 0.38 11.20 0.59 38.39 0.56
CFCP Coastal Fin. Corp. of SC 6.10 6.10 1.04 17.09 6.62 0.91 14.97 0.15 598.96 1.06
COFD Collective Bancorp Inc. of NJ 7.08 6.61 1.07 15.69 9.94 1.06 15.51 0.52 48.04 0.50
CMSV Commty. Svgs, MHC of FL(47.6) 11.99 11.99 0.89 7.14 6.70 0.90 7.27 0.53 68.77 0.63
CBIN Community Bank Shares of IN 11.05 11.05 0.87 7.46 7.38 0.85 7.31 0.12 218.57 0.48
CBNH Community Bankshares Inc of NH* 6.94 6.94 0.82 11.41 8.10 0.67 9.36 0.45 145.32 1.00
CFTP Community Fed. Bancorp of MS 32.99 32.99 1.32 5.80 3.81 1.30 5.68 0.46 61.97 0.50
CFFC Community Fin. Corp. of VA 14.04 14.04 1.31 9.71 7.53 1.31 9.71 0.49 125.93 0.69
CIBI Community Inv. Bancorp of OH 13.83 13.83 1.01 7.03 7.75 0.96 6.68 0.73 69.06 0.68
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
ASBI Ameriana Bancorp of IN 12.86 98.08 10.89 98.22 13.12 0.56 4.23 54.37
AFFFZ America First Fin. Fund of CA 8.62 112.79 8.00 115.24 8.67 1.60 5.29 45.58
AMFB American Federal Bank of SC 10.68 171.97 13.34 186.41 9.75 0.40 2.37 25.32
ANBK American Nat'l Bancorp of MD NM 93.42 10.19 93.42 NM 0.00 0.00 0.00
ABCW Anchor Bancorp Wisconsin of WI 11.17 146.22 9.46 150.11 11.49 0.50 1.40 15.67
ANDB Andover Bancorp, Inc. of MA* 10.13 122.76 9.28 122.76 10.37 0.60 2.34 23.72
ASFC Astoria Financial Corp. of NY 11.68 102.45 8.13 125.88 11.89 0.44 1.64 19.21
AVND Avondale Fin. Corp. of IL 13.84 86.47 8.58 86.47 19.34 0.00 0.00 0.00
BFSI BFS Bankorp, Inc. of NY 8.16 174.85 13.68 174.85 8.44 0.00 0.00 0.00
BKCT Bancorp Connecticut of CT* 13.31 140.32 14.81 140.32 13.46 0.76 3.36 44.71
BPLS Bank Plus Corp. of CA NM 104.28 5.53 104.49 NM 0.00 0.00 NM
BWFC Bank West Fin. Corp. of MI NM 91.74 18.14 91.74 NM 0.28 2.55 68.29
BANC BankAtlantic Bancorp of FL 10.39 130.35 9.35 141.05 13.45 0.15 1.21 12.61
BKUNA BankUnited SA of FL 8.11 95.85 5.42 101.46 7.78 0.00 0.00 0.00
BKCO Bankers Corp. of NJ* 10.57 124.16 10.39 126.63 10.05 0.64 3.46 36.57
BVFS Bay View Capital Corp. of CA NM 125.61 7.64 142.39 23.37 0.60 1.59 NM
BFSB Bedford Bancshares of VA 12.79 103.38 15.73 103.38 12.79 0.40 2.42 31.01
BSBC Branford SB of CT* 13.04 126.05 11.05 126.05 13.04 0.00 0.00 0.00
BRFC Bridgeville SB, FSB of PA(8) 24.59 105.34 30.05 105.34 24.59 0.32 2.13 52.46
BYFC Broadway Fin. Corp. of CA NM 66.74 7.78 66.74 25.00 0.20 2.05 57.14
CBCO CB Bancorp of Michigan City IN 8.37 115.57 11.41 115.57 8.48 0.00 0.00 0.00
CCFH CCF Holding Company of GA 18.19 83.24 17.64 83.24 19.03 0.40 3.23 58.82
CENF CENFED Financial Corp. of CA 10.54 114.01 5.69 114.23 14.79 0.36 1.48 15.65
CFSB CFSB Bancorp of Lansing MI 12.25 137.84 11.33 137.84 12.41 0.44 2.41 29.53
CKFB CKF Bancorp of Danville KY NM 121.61 32.38 121.61 NM 0.44 2.23 62.86
CNSB CNS Bancorp of MO NM 87.09 21.44 87.09 NM 0.00 0.00 0.00
CSBF CSB Financial Group Inc of IL NM 74.15 22.90 74.15 NM 0.00 0.00 0.00
CFHC California Fin. Hld. Co. of CA 14.62 123.03 8.06 123.77 16.29 0.44 1.93 28.21
CBCI Calumet Bancorp of Chicago IL 10.33 84.26 13.55 84.26 10.33 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 8.66 123.85 10.30 123.85 11.15 0.44 2.51 21.78
CMRN Cameron Fin. Corp. of MO 14.95 89.18 23.50 89.18 15.26 0.28 1.93 28.87
CAPS Capital Savings Bancorp of MO 11.00 94.64 9.87 94.64 11.00 0.36 1.87 20.57
CARV Carver FSB of New York, NY 24.81 52.69 5.07 55.25 NM 0.00 0.00 0.00
CASB Cascade SB of Everett WA 15.32 167.16 10.40 167.16 NM 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 14.21 80.13 22.83 80.13 14.21 0.00 0.00 0.00
CNIT Cenit Bancorp of Norfolk VA 20.85 136.07 9.90 141.13 18.72 0.80 1.99 41.45
CTBK Center Banks, Inc. of NY* 10.94 85.26 6.00 85.26 10.53 0.24 1.71 18.75
CFCX Center Fin. Corp of CT(8)* 14.38 159.63 9.29 169.99 22.82 0.28 1.13 16.18
CEBK Central Co-Op. Bank of MA* NM 104.30 10.43 119.57 25.00 0.00 0.00 0.00
CJFC Central Jersey Fin. Corp of NJ(8) 17.07 157.79 18.83 168.98 17.52 1.12 3.38 57.73
CBSB Charter Financial Inc. of IL 15.70 88.77 15.43 95.48 15.92 0.24 2.07 32.43
COFI Charter One Financial of OH(8) NM 186.03 12.46 201.25 13.14 0.92 2.38 NM
CVAL Chester Valley Bancorp of PA 12.16 116.05 10.87 116.05 12.77 0.42 2.33 28.38
CRCL Circle Financial Corp.of OH(8) 22.64 104.05 10.65 119.21 NM 0.68 1.89 42.77
CTZN CitFed Bancorp of Dayton OH 12.21 121.75 8.02 139.66 13.69 0.32 0.85 10.42
CLAS Classic Bancshares of KY NM 80.47 22.82 80.47 NM 0.00 0.00 0.00
CMSB Cmnwealth Bancorp of PA 17.53 85.79 9.52 112.64 20.13 0.25 2.30 40.32
CBSA Coastal Bancorp of Houston TX 9.13 102.40 3.48 123.71 9.48 0.40 2.04 18.60
CFCP Coastal Fin. Corp. of SC 15.12 242.54 14.80 242.54 17.26 0.44 2.26 34.11
COFD Collective Bancorp Inc. of NJ 10.06 150.28 10.64 160.99 10.18 1.00 3.72 37.45
CMSV Commty. Svgs, MHC of FL(47.6) 14.93 104.81 12.57 104.81 14.65 0.80 4.96 74.07
CBIN Community Bank Shares of IN 13.55 99.00 10.94 99.00 13.84 0.34 2.64 35.79
CBNH Community Bankshares Inc of NH* 12.34 122.92 8.53 122.92 15.04 0.60 3.12 38.46
CFTP Community Fed. Bancorp of MS NM 93.04 30.69 93.04 NM 0.30 2.24 58.82
CFFC Community Fin. Corp. of VA 13.27 122.65 17.22 122.65 13.27 0.52 2.42 32.10
CIBI Community Inv. Bancorp of OH 12.91 93.03 12.87 93.03 13.58 0.40 2.54 32.79
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
COOP Cooperative Bk.for Svgs. of NC 9.32 8.22 0.29 3.13 3.21 0.29 3.08 0.23 97.91 0.29
CNSK Covenant Bank for Svgs. of NJ* 4.82 4.82 0.63 11.89 8.00 0.63 11.89 2.02 37.45 1.35
CRZY Crazy Woman Creek Bncorp of WY 30.71 30.71 0.91 3.91 3.31 0.83 3.59 0.28 203.57 1.10
DNFC D&N Financial Corp. of MI 5.79 5.71 1.08 19.64 13.38 0.99 17.95 0.72 103.61 0.92
DSBC DS Bancor Inc. of Derby CT* 6.70 6.49 0.72 11.17 7.81 0.66 10.26 1.84 34.69 0.89
DFIN Damen Fin. Corp. of Chicago IL 23.15 23.15 0.91 4.83 4.49 0.89 4.73 0.20 69.57 0.36
DIME Dime Community Bancorp of NY 16.92 14.87 0.75 4.45 4.67 0.69 4.09 NA NA 1.34
DIBK Dime Financial Corp. of CT* 8.20 7.83 1.63 20.87 13.13 1.77 22.66 0.93 216.21 3.28
EGLB Eagle BancGroup of IL 13.53 13.53 0.08 0.59 0.84 0.08 0.59 0.74 73.68 0.92
EBSI Eagle Bancshares of Tucker GA 9.21 9.21 0.93 11.79 7.19 0.93 11.69 1.45 41.45 0.86
EGFC Eagle Financial Corp. of CT 7.30 5.33 1.28 17.47 14.77 0.62 8.52 1.17 54.16 1.11
ETFS East Texas Fin. Serv. of TX 18.92 18.92 0.81 4.18 5.72 0.74 3.82 0.23 106.64 0.62
EBCP Eastern Bancorp of NH 7.72 7.29 0.71 9.62 8.52 0.54 7.33 1.51 23.99 0.64
ESBK Elmira SB of Elmira NY* 6.23 5.95 0.15 2.40 2.91 0.13 2.00 0.85 77.49 0.90
EFBI Enterprise Fed. Bancorp of OH 14.77 14.75 0.92 5.37 6.99 0.63 3.70 0.03 660.34 0.27
EQSB Equitable FSB of Wheaton MD 5.30 5.30 0.78 14.99 13.33 0.78 14.90 1.00 21.61 0.31
FFFG F.F.O. Financial Group of FL 6.23 6.23 0.50 7.76 6.18 0.59 9.13 2.83 58.95 2.57
FCBF FCB Fin. Corp. of Neenah WI 18.45 18.45 1.03 5.30 5.86 1.01 5.20 0.12 351.57 0.51
FFBS FFBS Bancorp of Columbus MS 19.67 19.67 1.37 6.85 4.93 1.37 6.85 1.62 32.79 0.79
FFDF FFD Financial Corp. of OH 28.03 28.03 1.04 3.69 5.10 1.04 3.69 0.15 124.79 0.32
FFLC FFLC Bancorp of Leesburg FL 16.99 16.99 0.94 5.50 6.41 0.94 5.50 0.13 239.95 0.50
FFFC FFVA Financial Corp. of VA 15.58 15.26 1.30 7.58 7.36 1.27 7.40 0.51 124.96 1.08
FFWC FFW Corporation of Wabash IN 10.27 10.27 1.08 9.99 11.44 1.04 9.59 0.06 602.17 0.55
FFYF FFY Financial Corp. of OH 17.71 17.71 1.20 6.57 5.65 1.24 6.76 0.81 73.59 0.78
FMCO FMS Financial Corp. of NJ 6.63 6.47 0.83 12.72 10.90 0.83 12.72 NA NA 0.97
FFHH FSF Financial Corp. of MN 14.37 14.37 0.65 3.79 4.83 0.65 3.79 0.07 332.75 0.38
FMLY Family Bancorp of Haverhill MA(8)* 7.56 6.95 0.90 11.79 6.90 0.87 11.42 0.90 81.25 1.46
FMCT Farmers & Mechanics Bank of CT(8)* 5.52 5.52 0.20 3.49 2.00 0.19 3.32 NA NA 1.43
FOBC Fed One Bancorp of Wheeling WV 12.01 11.39 0.99 7.89 8.32 0.99 7.89 0.30 139.14 1.10
FFRV Fid. Fin. Bkshrs. Corp. of VA(8) 8.60 8.59 0.99 11.74 6.02 0.96 11.40 1.11 85.89 1.15
FBCI Fidelity Bancorp of Chicago IL 10.90 10.86 0.73 5.74 6.15 0.73 5.74 0.61 17.59 0.15
FSBI Fidelity Bancorp, Inc. of PA 6.79 6.76 0.65 8.71 7.83 0.64 8.58 0.57 81.41 1.01
FFFL Fidelity FSB, MHC of FL(47.2) 9.86 9.76 0.67 6.58 5.25 0.63 6.16 0.34 81.03 0.36
FFED Fidelity Fed. Bancorp of IN 5.45 5.45 1.19 23.68 11.82 1.01 20.04 0.17 238.51 0.49
FFOH Fidelity Financial of OH 20.34 20.34 0.86 5.32 5.13 0.86 5.32 0.55 60.52 0.43
FIBC Financial Bancorp of NY 9.99 9.93 0.65 5.73 5.80 0.64 5.67 2.78 18.09 0.95
FNSC Financial Security Corp. of IL(8) 15.42 15.42 0.76 5.42 5.24 0.77 5.50 2.81 28.97 1.15
FSBS First Ashland Fin. Corp. of KY(8) 27.36 27.36 0.85 3.12 2.79 0.85 3.12 0.79 13.40 0.15
FBSI First Bancshares of MO 16.52 16.49 0.84 4.82 5.43 0.83 4.77 0.57 63.49 0.44
FBBC First Bell Bancorp of PA 20.38 20.38 1.61 7.33 7.50 1.61 7.33 0.08 133.97 0.13
FBER First Bergen Bancorp of NJ 17.05 17.05 0.36 3.28 2.70 0.48 4.37 3.36 43.40 3.23
FCIT First Cit. Fin. Corp of MD 6.15 6.15 0.72 11.61 9.15 0.59 9.47 2.96 37.58 1.57
FFBA First Colorado Bancorp of Co 16.32 16.13 1.10 8.31 5.64 1.10 8.31 0.24 87.74 0.32
FDEF First Defiance Fin.Corp. of OH 24.32 24.32 1.22 5.23 5.58 1.20 5.14 0.18 202.08 0.49
FESX First Essex Bancorp of MA* 7.40 7.40 0.98 13.41 12.05 0.82 11.21 0.61 136.64 1.32
FFES First FS&LA of E. Hartford CT 6.01 6.00 0.57 8.71 10.00 0.56 8.62 0.79 41.84 1.89
FSSB First FS&LA of San Bern. CA 4.62 4.39 -1.10 -20.21 NM -1.28 -23.47 3.31 32.04 1.57
FFSX First FS&LA. MHC of IA (45.0) 8.31 8.23 0.70 8.48 6.95 0.64 7.86 0.17 229.27 0.54
FFML First Family Bank, FSB of FL(8) 5.61 5.61 0.89 17.02 11.95 0.47 9.01 NA NA 0.62
FFSW First Fed Fin. Serv. of OH 5.69 4.62 0.92 16.77 8.17 0.76 13.78 0.12 231.57 0.39
BDJI First Fed. Bancorp. of MN 13.26 13.26 0.70 4.77 6.10 0.69 4.72 0.40 111.08 0.95
FFBH First Fed. Bancshares of AR 16.53 16.53 0.91 9.49 5.47 0.87 9.03 0.17 141.50 0.33
FFEC First Fed. Bancshares of WI 13.79 13.25 0.88 5.69 5.25 0.91 5.90 0.04 311.27 0.17
FTFC First Fed. Capital Corp. of WI 6.86 6.47 0.95 13.99 9.71 0.71 10.36 0.11 523.40 0.83
FFKY First Fed. Fin. Corp. of KY 14.16 13.23 1.60 11.25 6.19 1.46 10.29 0.49 92.65 0.53
FFBZ First Federal Bancorp of OH 7.89 7.88 1.13 14.90 9.43 1.12 14.66 0.56 155.47 0.98
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- -------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
COOP Cooperative Bk.for Svgs. of NC NM 96.11 8.95 108.88 NM 0.00 0.00 0.00
CNSK Covenant Bank for Svgs. of NJ* 12.50 146.22 7.04 146.22 12.50 0.00 0.00 0.00
CRZY Crazy Woman Creek Bncorp of WY NM 74.40 22.85 74.40 NM 0.20 1.84 55.56
DNFC D&N Financial Corp. of MI 7.47 124.52 7.21 126.21 8.18 0.00 0.00 0.00
DSBC DS Bancor Inc. of Derby CT* 12.80 135.84 9.10 140.23 13.93 0.24 0.64 8.14
DFIN Damen Fin. Corp. of Chicago IL 22.29 82.09 19.01 82.09 22.74 0.24 2.11 47.06
DIME Dime Community Bancorp of NY 21.43 95.27 16.12 108.43 23.28 0.00 0.00 0.00
DIBK Dime Financial Corp. of CT* 7.62 144.40 11.85 151.37 7.02 0.32 2.00 15.24
EGLB Eagle BancGroup of IL NM 70.28 9.51 70.28 NM 0.00 0.00 0.00
EBSI Eagle Bancshares of Tucker GA 13.91 127.29 11.72 127.29 14.04 0.60 3.75 52.17
EGFC Eagle Financial Corp. of CT 6.77 111.43 8.13 152.57 13.87 0.92 3.64 24.66
ETFS East Texas Fin. Serv. of TX 17.47 75.36 14.26 75.36 19.08 0.20 1.38 24.10
EBCP Eastern Bancorp of NH 11.74 108.33 8.36 114.79 15.40 0.56 2.91 34.15
ESBK Elmira SB of Elmira NY* NM 83.80 5.22 87.72 NM 0.64 3.88 NM
EFBI Enterprise Fed. Bancorp of OH 14.30 84.50 12.48 84.62 20.76 0.00 0.00 0.00
EQSB Equitable FSB of Wheaton MD 7.50 104.70 5.55 104.70 7.55 0.00 0.00 0.00
FFFG F.F.O. Financial Group of FL 16.18 121.15 7.55 121.15 13.75 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI 17.07 92.54 17.08 92.54 17.40 0.72 4.06 69.23
FFBS FFBS Bancorp of Columbus MS 20.28 137.20 26.99 137.20 20.28 0.50 2.33 47.17
FFDF FFD Financial Corp. of OH 19.60 72.37 20.28 72.37 19.60 0.20 1.96 38.46
FFLC FFLC Bancorp of Leesburg FL 15.60 84.73 14.39 84.73 15.60 0.40 2.19 34.19
FFFC FFVA Financial Corp. of VA 13.58 109.73 17.09 112.01 13.91 0.40 2.32 31.50
FFWC FFW Corporation of Wabash IN 8.74 89.70 9.21 89.70 9.11 0.60 3.08 26.91
FFYF FFY Financial Corp. of OH 17.69 119.94 21.24 119.94 17.19 0.60 2.49 44.12
FMCO FMS Financial Corp. of NJ 9.17 111.43 7.39 114.22 9.17 0.20 1.29 11.83
FFHH FSF Financial Corp. of MN 20.69 87.66 12.59 87.66 20.69 0.50 4.17 NM
FMLY Family Bancorp of Haverhill MA(8)* 14.49 164.16 12.41 178.69 14.97 0.48 1.76 25.53
FMCT Farmers & Mechanics Bank of CT(8)* NM 176.34 9.73 176.34 NM 0.00 0.00 0.00
FOBC Fed One Bancorp of Wheeling WV 12.02 96.27 11.56 101.44 12.02 0.54 3.48 41.86
FFRV Fid. Fin. Bkshrs. Corp. of VA(8) 16.61 186.17 16.00 186.32 17.11 0.20 0.88 14.60
FBCI Fidelity Bancorp of Chicago IL 16.26 98.59 10.75 98.94 16.26 0.24 1.43 23.30
FSBI Fidelity Bancorp, Inc. of PA 12.76 113.60 7.72 114.19 12.95 0.32 1.79 22.86
FFFL Fidelity FSB, MHC of FL(47.2) 19.06 124.02 12.23 125.38 20.37 0.80 5.38 NM
FFED Fidelity Fed. Bancorp of IN 8.46 191.97 10.47 191.97 10.00 0.80 7.27 61.54
FFOH Fidelity Financial of OH 19.50 77.75 15.81 77.75 19.50 0.20 2.05 40.00
FIBC Financial Bancorp of NY 17.24 102.74 10.26 103.31 17.44 0.30 2.00 34.48
FNSC Financial Security Corp. of IL(8) 19.07 100.23 15.45 100.23 18.80 0.00 0.00 0.00
FSBS First Ashland Fin. Corp. of KY(8) NM 111.62 30.54 111.62 NM 0.00 0.00 0.00
FBSI First Bancshares of MO 18.41 89.57 14.79 89.72 18.61 0.20 1.19 21.98
FBBC First Bell Bancorp of PA 13.34 97.40 19.85 97.40 13.34 0.20 1.44 19.23
FBER First Bergen Bancorp of NJ NM 73.86 12.59 73.86 NM 0.12 1.20 44.44
FCIT First Cit. Fin. Corp of MD 10.93 121.94 7.50 121.94 13.40 0.00 0.00 0.00
FFBA First Colorado Bancorp of Co 17.72 115.04 18.77 116.38 17.72 0.32 2.29 40.51
FDEF First Defiance Fin.Corp. of OH 17.92 88.55 21.54 88.55 18.22 0.28 2.60 46.67
FESX First Essex Bancorp of MA* 8.30 107.86 7.98 107.86 9.93 0.48 4.32 35.82
FFES First FS&LA of E. Hartford CT 10.00 88.84 5.34 89.08 10.10 0.60 3.08 30.77
FSSB First FS&LA of San Bern. CA NM 68.35 3.16 71.94 NM 0.00 0.00 NM
FFSX First FS&LA. MHC of IA (45.0) 14.39 119.27 9.91 120.44 15.51 0.72 2.80 40.22
FFML First Family Bank, FSB of FL(8) 8.37 131.26 7.37 131.26 15.81 0.16 0.74 6.23
FFSW First Fed Fin. Serv. of OH 12.25 182.34 10.38 224.74 14.90 0.48 1.59 19.43
BDJI First Fed. Bancorp. of MN 16.39 82.45 10.93 82.45 16.57 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 18.29 92.65 15.31 92.65 19.23 0.00 0.00 0.00
FFEC First Fed. Bancshares of WI 19.06 107.24 14.79 111.64 18.37 0.28 1.84 35.00
FTFC First Fed. Capital Corp. of WI 10.29 137.34 9.42 145.63 13.91 0.64 3.05 31.37
FFKY First Fed. Fin. Corp. of KY 16.15 176.92 25.06 189.36 17.65 0.48 2.29 36.92
FFBZ First Federal Bancorp of OH 10.60 148.38 11.70 148.54 10.77 0.44 1.66 17.60
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FFWM First Fin. Corp of Western MD 12.95 12.95 1.09 8.97 6.88 1.06 8.70 1.99 121.42 3.11
FFCH First Fin. Holdings Inc. of SC 6.39 6.39 0.78 11.84 9.28 0.79 11.98 1.32 54.66 0.88
FFBI First Financial Bancorp of IL 8.33 8.33 0.67 6.85 7.55 0.58 5.97 0.27 150.00 0.53
FFHC First Financial Corp. of WI 7.31 6.97 1.30 18.61 10.35 1.26 17.98 0.43 100.08 0.67
FFHS First Franklin Corp. of OH 9.37 9.28 0.62 6.55 7.41 0.61 6.43 0.50 84.85 0.63
FGHC First Georgia Hold. Corp of GA 8.31 7.39 0.87 10.71 8.57 0.87 10.71 1.34 51.51 0.82
FSPG First Home SB, SLA of NJ 6.52 6.34 1.01 15.73 12.17 0.98 15.30 0.94 81.69 1.41
FFSL First Independence Corp. of KS 12.34 12.34 1.10 8.52 10.16 1.10 8.52 0.37 177.38 1.05
FISB First Indiana Corp. of IN 9.23 9.11 1.18 13.62 9.24 0.98 11.31 1.59 69.62 1.33
FKFS First Keystone Fin. Corp of PA 7.89 7.89 0.54 6.39 6.59 0.59 6.94 2.53 20.51 0.89
FLKY First Lancaster Bncshrs of KY 29.83 29.83 1.20 4.01 3.72 1.20 4.01 1.23 16.83 0.23
FLFC First Liberty Fin. Corp. of GA 6.90 5.84 0.99 14.70 10.15 0.83 12.22 1.22 66.75 1.09
CASH First Midwest Fin. Corp. of IA 11.41 10.66 1.05 8.17 7.57 1.03 8.07 0.20 268.74 0.81
FMBD First Mutual Bancorp of IL 23.02 23.02 0.97 3.84 5.05 0.92 3.67 0.34 121.39 0.51
FMSB First Mutual SB of Bellevue WA* 6.62 6.62 1.03 15.46 10.24 0.99 14.84 0.11 710.29 0.91
FNGB First Northern Cap. Corp of WI 12.20 12.20 0.78 6.11 6.35 0.75 5.87 0.17 268.46 0.52
FFPB First Palm Beach Bancorp of FL 7.90 7.70 0.73 8.85 8.22 0.69 8.38 0.64 37.19 0.31
FSNJ First SB of NJ, MHC (45.0) 7.53 7.53 0.19 2.28 2.53 0.43 5.10 0.96 48.20 1.28
FSBC First SB, FSB of Clovis NM 4.94 4.94 0.34 7.22 10.36 0.26 5.57 1.49 23.28 1.01
FSLA First SB, SLA MHC of NJ (37.6) 9.52 8.30 0.85 9.20 7.69 0.87 9.42 0.93 55.55 1.01
SOPN First SB, SSB, Moore Co. of NC 25.99 25.99 1.54 5.91 6.18 1.54 5.91 0.05 454.48 0.34
FWWB First Savings Bancorp of WA* 25.79 25.79 0.98 8.32 3.00 0.94 7.99 0.21 271.52 0.99
SHEN First Shenango Bancorp of PA 12.68 12.68 1.02 7.47 7.37 0.98 7.13 0.46 156.41 1.08
FSFC First So.east Fin. Corp. of SC(8) 10.31 10.31 0.31 1.75 2.63 0.84 4.70 0.19 197.44 0.51
FSFI First State Fin. Serv. of NJ(8) 6.00 5.67 0.01 0.19 0.15 -0.12 -1.79 4.24 32.21 1.67
FFDP FirstFed Bancshares of IL 8.63 8.24 0.58 6.18 6.24 0.31 3.30 0.12 162.86 0.37
FLAG Flag Financial Corp of GA 9.55 9.55 0.87 9.26 9.33 0.74 7.84 3.56 23.68 1.22
FFPC Florida First Bancorp of FL(8) 7.06 7.06 0.90 13.29 7.19 0.83 12.29 0.76 161.53 2.09
FFIC Flushing Fin. Corp. of NY* 17.99 17.99 0.95 6.34 4.09 0.91 6.08 0.86 82.66 1.66
FBHC Fort Bend Holding Corp. of TX 7.07 7.07 0.70 9.62 12.21 0.62 8.50 1.21 44.46 1.34
FTSB Fort Thomas Fin. Corp. of KY 24.35 24.35 1.33 5.37 5.29 1.33 5.37 1.27 28.12 0.42
FKKY Frankfort First Bancorp of KY 34.52 34.52 1.36 4.94 4.93 1.08 3.91 0.10 66.67 0.09
GFSB GFS Bancorp of Grinnell IA 11.94 11.94 1.14 9.22 8.33 1.18 9.59 1.15 66.63 0.89
GUPB GFSB Bancorp of Gallup NM 23.03 23.03 1.24 5.07 5.38 1.24 5.07 0.18 247.58 0.87
GWBC Gateway Bancorp of KY 24.86 24.86 1.05 4.02 5.13 1.05 4.02 0.31 36.99 0.47
GBCI Glacier Bancorp of MT 9.42 9.41 1.58 16.46 7.58 1.58 16.46 0.26 196.56 0.69
GLBK Glendale Co-op. Bank of MA* 15.82 15.82 0.78 4.94 6.33 0.65 4.11 NA NA 0.71
GFCO Glenway Financial Corp. of OH 9.67 9.44 0.56 5.82 6.47 0.55 5.77 0.66 33.99 0.29
GTPS Great American Bancorp of IL 27.55 27.55 0.68 2.55 3.11 0.66 2.49 0.19 115.42 0.30
GTFN Great Financial Corp. of KY 9.79 9.42 0.99 8.67 6.07 0.77 6.78 3.46 13.42 0.65
GSBC Great Southern Bancorp of MO 10.15 9.98 1.73 17.20 8.98 1.61 15.99 2.36 91.04 2.56
GDVS Greater DV SB,MHC of PA(19.9)* 12.16 12.16 0.30 2.49 2.20 0.36 2.95 3.52 21.48 1.31
GRTR Greater New York SB of NY* 5.86 5.86 0.44 7.91 6.74 0.43 7.73 8.83 9.73 2.09
GSFC Green Street Fin. Corp. of NC 35.06 35.06 1.25 6.90 3.50 1.25 6.90 0.20 66.01 0.19
GROV GroveBank for Savings of MA* 6.36 6.36 0.86 13.95 10.16 0.81 13.03 0.70 81.88 0.79
GFED Guaranty FS&LA,MHC of MO(31.1) 14.64 14.64 1.02 7.29 5.95 0.55 3.89 0.07 NA 1.59
GSLC Guaranty Svgs & Loan FA of VA 6.19 6.19 0.68 11.24 8.24 0.42 6.90 3.14 23.56 0.94
HEMT HF Bancorp of Hemet CA 11.43 11.43 0.19 1.70 2.24 0.19 1.70 NA NA NA
HFFC HF Financial Corp. of SD(8) 9.33 9.30 0.85 9.40 10.12 0.69 7.64 0.41 180.23 0.97
HFNC HFNC Financial Corp. of NC 34.11 34.11 0.80 3.76 1.82 0.95 4.46 1.62 64.19 1.59
HMNF HMN Financial, Inc. of MN 15.72 15.72 1.10 6.50 7.59 0.96 5.64 0.09 447.23 0.70
HALL Hallmark Capital Corp. of WI 7.16 7.16 0.59 7.18 8.87 0.56 6.80 0.03 NA 0.55
HARB Harbor FSB, MHC of FL (45.7) 8.39 8.08 1.17 13.56 7.65 1.17 13.56 0.57 190.80 1.44
HRBF Harbor Federal Bancorp of MD 13.82 13.82 0.56 3.23 3.86 0.56 3.23 0.42 51.96 0.35
HFSA Hardin Bancorp of Hardin MO 17.17 17.17 0.75 4.46 5.42 0.75 4.46 0.15 103.73 0.29
HARL Harleysville SA of PA 6.65 6.65 0.81 11.84 9.80 0.85 12.39 0.06 932.07 0.77
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
-------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FFWM First Fin. Corp of Western MD 14.55 125.26 16.23 125.26 15.00 0.48 2.00 29.09
FFCH First Fin. Holdings Inc. of SC 10.78 122.87 7.85 122.87 10.65 0.64 3.41 36.78
FFBI First Financial Bancorp of IL 13.25 91.77 7.64 91.77 15.20 0.00 0.00 0.00
FFHC First Financial Corp. of WI 9.66 168.62 12.33 176.79 10.00 0.60 2.61 25.21
FFHS First Franklin Corp. of OH 13.50 87.59 8.21 88.46 13.74 0.32 2.10 28.32
FGHC First Georgia Hold. Corp of GA 11.67 118.44 9.84 133.08 11.67 0.00 0.00 0.00
FSPG First Home SB, SLA of NJ 8.22 120.24 7.83 123.54 8.45 0.48 2.67 21.92
FFSL First Independence Corp. of KS 9.84 84.90 10.47 84.90 9.84 0.40 2.11 20.73
FISB First Indiana Corp. of IN 10.82 139.88 12.92 141.78 13.03 0.56 2.44 26.42
FKFS First Keystone Fin. Corp of PA 15.17 100.06 7.89 100.06 13.98 0.00 0.00 0.00
FLKY First Lancaster Bncshrs of KY NM 107.65 32.12 107.65 NM 0.00 0.00 0.00
FLFC First Liberty Fin. Corp. of GA 9.85 133.12 9.19 157.22 11.85 0.52 2.29 22.51
CASH First Midwest Fin. Corp. of IA 13.21 105.97 12.09 113.47 13.36 0.44 1.89 25.00
FMBD First Mutual Bancorp of IL 19.79 77.60 17.87 77.60 20.73 0.28 2.14 42.42
FMSB First Mutual SB of Bellevue WA* 9.77 141.55 9.36 141.55 10.17 0.20 1.36 13.25
FNGB First Northern Cap. Corp of WI 15.75 97.83 11.93 97.83 16.41 0.60 3.81 60.00
FFPB First Palm Beach Bancorp of FL 12.16 104.29 8.24 107.02 12.85 0.40 1.75 21.28
FSNJ First SB of NJ, MHC (45.0) NM 93.69 7.06 93.69 17.65 0.50 3.33 NM
FSBC First SB, FSB of Clovis NM 9.65 68.92 3.40 68.92 12.50 0.00 0.00 0.00
FSLA First SB, SLA MHC of NJ (37.6) 13.00 114.57 10.91 131.48 12.69 0.40 2.48 32.26
SOPN First SB, SSB, Moore Co. of NC 16.19 95.29 24.77 95.29 16.19 0.60 3.53 57.14
FWWB First Savings Bancorp of WA* NM 116.04 29.93 116.04 NM 0.20 1.18 39.22
SHEN First Shenango Bancorp of PA 13.56 101.07 12.82 101.07 14.21 0.48 2.31 31.37
FSFC First So.east Fin. Corp. of SC(8) NM 123.86 12.77 123.86 14.18 0.16 1.68 64.00
FSFI First State Fin. Serv. of NJ(8) NM 127.83 7.67 135.28 NM 0.22 1.69 NM
FFDP FirstFed Bancshares of IL 16.02 102.29 8.83 107.14 NM 0.40 2.42 38.83
FLAG Flag Financial Corp of GA 10.71 97.86 9.35 97.86 12.65 0.34 3.24 34.69
FFPC Florida First Bancorp of FL(8) 13.90 176.23 12.44 176.23 15.03 0.24 2.16 30.00
FFIC Flushing Fin. Corp. of NY* 24.48 115.44 20.77 115.44 NM 0.00 0.00 0.00
FBHC Fort Bend Holding Corp. of TX 8.19 76.72 5.42 76.72 9.27 0.28 1.66 13.59
FTSB Fort Thomas Fin. Corp. of KY 18.92 101.82 24.80 101.82 18.92 0.25 1.79 33.78
FKKY Frankfort First Bancorp of KY 20.28 77.51 26.75 77.51 NM 0.36 3.35 67.92
GFSB GFS Bancorp of Grinnell IA 12.00 107.69 12.86 107.69 11.54 0.40 1.90 22.86
GUPB GFSB Bancorp of Gallup NM 18.58 82.62 19.03 82.62 18.58 0.40 2.83 52.63
GWBC Gateway Bancorp of KY 19.49 84.66 21.05 84.66 19.49 0.40 3.02 58.82
GBCI Glacier Bancorp of MT 13.19 209.61 19.75 209.97 13.19 0.64 2.67 35.16
GLBK Glendale Co-op. Bank of MA* 15.79 76.63 12.12 76.63 18.95 0.00 0.00 0.00
GFCO Glenway Financial Corp. of OH 15.46 87.55 8.47 89.68 15.58 0.65 3.21 49.62
GTPS Great American Bancorp of IL NM 75.21 20.72 75.21 NM 0.40 2.96 NM
GTFN Great Financial Corp. of KY 16.47 144.48 14.14 150.13 21.05 0.48 1.71 28.24
GSBC Great Southern Bancorp of MO 11.13 185.19 18.79 188.24 11.97 0.70 2.46 27.34
GDVS Greater DV SB,MHC of PA(19.9)* NM 116.01 14.10 116.01 NM 0.36 3.60 NM
GRTR Greater New York SB of NY* 14.85 113.39 6.65 113.39 15.20 0.00 0.00 0.00
GSFC Green Street Fin. Corp. of NC NM 95.89 33.62 95.89 NM 0.40 2.86 NM
GROV GroveBank for Savings of MA* 9.84 129.26 8.23 129.42 10.54 0.72 2.29 22.50
GFED Guaranty FS&LA,MHC of MO(31.1) 16.81 112.20 16.42 112.20 NM 0.00 0.00 0.00
GSLC Guaranty Svgs & Loan FA of VA 12.14 122.66 7.59 122.66 19.77 0.10 1.18 14.29
HEMT HF Bancorp of Hemet CA NM 68.32 7.81 68.37 NM 0.00 0.00 0.00
HFFC HF Financial Corp. of SD(8) 9.88 90.22 8.42 90.48 12.15 0.36 2.35 23.23
HFNC HFNC Financial Corp. of NC NM 124.00 42.29 124.00 NM 0.20 1.14 62.50
HMNF HMN Financial, Inc. of MN 13.17 89.90 14.13 89.90 15.18 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 11.28 78.45 5.62 78.45 11.90 0.00 0.00 0.00
HARB Harbor FSB, MHC of FL (45.7) 13.07 166.76 13.99 173.19 13.07 1.20 4.17 54.55
HRBF Harbor Federal Bancorp of MD NM 89.96 12.43 89.96 NM 0.40 2.81 72.73
HFSA Hardin Bancorp of Hardin MO 18.44 76.27 13.09 76.27 18.44 0.40 3.56 65.57
HARL Harleysville SA of PA 10.20 115.41 7.67 115.41 9.75 0.40 2.25 22.99
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HARS Harris SB, MHC of PA (23.1) 9.69 8.14 0.46 3.98 3.56 0.63 5.41 0.82 57.89 0.78
HFFB Harrodsburg 1st Fin Bcrp of KY 28.14 28.14 1.17 4.61 3.51 1.17 4.61 0.58 46.70 0.39
HHFC Harvest Home Fin. Corp. of OH 17.71 17.71 0.80 4.34 6.08 0.80 4.34 0.19 75.51 0.26
HAVN Haven Bancorp of Woodhaven NY 6.07 6.03 0.73 11.37 9.16 0.72 11.27 1.02 62.65 1.46
HVFD Haverfield Corp. of OH 8.50 8.48 0.70 8.74 7.48 0.66 8.27 NA NA 0.96
HTHR Hawthorne Fin. Corp. of CA 4.54 4.52 0.62 15.77 23.47 0.00 0.00 10.26 20.17 2.39
HSBK Hibernia SB of Quincy MA* 6.64 6.64 0.61 9.14 8.40 0.62 9.21 0.39 146.93 0.94
HBNK Highland Federal Bank of CA 7.91 7.91 0.29 4.27 4.07 0.29 4.20 3.41 45.47 1.95
HIFS Hingham Inst. for Sav. of MA* 9.76 9.76 1.09 10.74 9.97 1.09 10.74 0.51 134.69 0.94
HNFC Hinsdale Financial Corp. of IL 8.37 8.12 0.63 8.16 6.85 0.61 7.90 0.13 270.15 0.40
HBFW Home Bancorp of Fort Wayne IN 15.50 15.50 0.84 5.00 5.56 0.84 5.00 0.04 NA 0.57
HBBI Home Building Bancorp of IN 13.95 13.95 0.41 2.86 2.85 0.41 2.86 0.27 43.59 0.18
HOMF Home Fed Bancorp of Seymour IN 8.18 7.88 1.22 15.14 12.57 1.08 13.35 0.48 101.73 0.58
HFMD Home Federal Corporation of MD(8) 8.75 8.64 0.73 8.52 5.94 0.70 8.24 4.89 34.61 2.53
HWEN Home Financial Bancorp of IN 19.64 19.64 0.99 5.06 5.88 0.99 5.06 1.03 36.76 0.55
HOFL Home Financial Corp. of FL(8) 24.80 24.80 1.22 4.79 4.33 1.55 6.07 0.38 77.58 1.65
HPBC Home Port Bancorp, Inc. of MA* 10.65 10.65 1.78 15.85 11.31 1.79 15.94 0.23 551.71 1.55
HMCI Homecorp, Inc. of Rockford IL 6.23 6.23 0.40 6.63 6.58 0.25 4.20 3.12 12.92 0.51
LOAN Horizon Bancorp, Inc of TX(8)* 8.55 8.27 1.42 16.09 8.41 1.13 12.80 0.20 256.49 0.71
HZFS Horizon Fin'l. Services of IA 11.42 11.42 0.52 4.38 5.79 0.42 3.54 NA NA NA
HRZB Horizon Financial Corp. of WA* 16.20 16.20 1.54 9.54 8.62 1.54 9.54 NA NA 0.82
IBSF IBS Financial Corp. of NJ 19.91 19.91 1.04 4.97 4.87 1.06 5.04 0.07 194.63 0.57
ISBF ISB Financial Corp. of LA 17.12 16.63 1.18 6.14 6.86 1.17 6.08 NA NA 0.86
ITLA Imperial Thrift & Loan of CA* 12.52 12.52 1.08 11.13 6.30 1.08 11.13 2.62 55.05 1.74
IFSB Independence FSB of DC 6.48 5.57 0.55 8.92 15.45 0.26 4.22 NA NA 0.38
INCB Indiana Comm. Bank, SB of IN 14.98 14.98 0.68 4.41 5.06 0.68 4.41 NA NA 0.61
IFSL Indiana Federal Corp. of IN 9.47 8.81 0.90 9.37 6.90 0.95 9.84 1.42 63.53 1.20
INBI Industrial Bancorp of OH 19.39 19.39 1.58 7.96 8.57 1.58 7.96 0.47 99.46 0.54
IWBK Interwest SB of Oak Harbor WA 6.82 6.62 1.11 15.80 8.11 1.06 15.03 0.62 55.39 0.60
IPSW Ipswich SB of Ipswich MA* 5.76 5.76 1.30 21.19 14.13 1.14 18.52 2.00 45.77 1.25
IROQ Iroquois Bancorp of Auburn NY* 6.00 5.37 0.85 14.16 10.32 0.85 14.16 1.17 58.64 0.93
JSBF JSB Financial, Inc. of NY 21.80 21.80 1.63 7.43 7.14 1.63 7.43 1.30 25.17 0.60
JXVL Jacksonville Bancorp of TX 16.36 16.36 0.94 7.25 6.26 0.94 7.25 0.82 55.80 0.64
JXSB Jcksnville SB,MHC of IL(43.3%) 11.84 11.84 0.48 4.04 4.33 0.39 3.28 0.45 107.41 0.61
JEBC Jefferson Bancorp of Gretna LA(8) 13.58 13.58 0.94 7.19 5.07 0.94 7.19 0.44 56.94 1.05
JSBA Jefferson Svgs Bancorp of MO 7.31 6.01 0.63 9.06 7.40 0.57 8.22 0.93 51.66 0.67
JOAC Joachim Bancorp of MO 29.57 29.57 0.73 3.09 2.59 0.71 3.00 0.29 69.16 0.32
KSAV KS Bancorp of Kenly NC 14.79 14.78 1.10 6.95 7.45 1.12 7.04 0.52 56.47 0.36
KSBK KSB Bancorp of Kingfield ME* 6.82 6.32 0.89 13.40 13.14 0.89 13.40 NA NA 0.83
KFBI Klamath First Bancorp of OR 25.69 25.69 1.43 5.90 4.80 1.43 5.90 NA NA 0.20
LBFI L&B Financial of S. Springs TX(8) 17.20 17.20 1.03 5.76 5.58 0.98 5.44 0.42 123.93 1.13
LSBI LSB Fin. Corp. of Lafayette IN 9.65 9.65 0.52 4.66 5.10 0.47 4.24 1.60 62.47 1.13
LVSB Lakeview SB of Paterson NJ 9.95 7.64 1.15 10.31 9.67 0.69 6.19 1.89 34.35 1.75
LARK Landmark Bancshares of KS 16.49 16.49 0.91 5.38 6.14 0.82 4.82 0.06 604.24 0.60
LARL Laurel Capital Group of PA 10.71 10.71 1.38 13.27 11.35 1.35 12.97 0.62 155.78 1.29
LSBX Lawrence Savings Bank of MA* 7.59 7.59 1.21 15.86 13.66 1.21 15.86 1.04 106.11 2.45
LFCT Leader Fin. Corp of Memphis TN(8) 8.30 8.30 1.49 18.36 8.59 1.46 17.91 15.32 4.55 1.12
LFED Leeds FSB, MHC of MD (35.3) 16.36 16.36 1.03 6.35 5.95 1.03 6.35 0.01 NA 0.24
LXMO Lexington B&L Fin. Corp. of MO 30.57 30.57 1.04 5.72 4.27 1.04 5.72 0.98 33.39 0.49
LBCI Liberty Bancorp of Chicago IL(8) 9.83 9.81 0.55 5.61 6.13 0.55 5.61 0.06 922.51 0.74
LIFB Life Bancorp of Norfolk VA 11.99 11.54 0.87 6.32 6.09 0.90 6.58 0.41 189.06 1.65
LFBI Little Falls Bancorp of NJ 15.52 14.32 0.35 3.40 2.89 0.53 5.10 1.57 21.07 0.85
LOGN Logansport Fin. Corp. of IN 25.67 25.67 1.51 5.57 6.07 1.49 5.51 0.39 76.16 0.43
LONF London Financial Corp. of OH 21.37 21.37 0.78 5.39 4.84 0.78 5.39 0.21 242.86 0.68
LISB Long Island Bancorp of NY 9.99 9.99 0.93 8.81 6.58 0.85 8.00 1.16 56.47 1.17
MAFB MAF Bancorp of IL 7.77 6.63 0.80 12.68 6.26 0.82 12.91 0.44 124.48 0.75
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
--------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HARS Harris SB, MHC of PA (23.1) NM 111.64 10.82 132.89 20.65 0.58 3.90 NM
HFFB Harrodsburg 1st Fin Bcrp of KY NM 113.80 32.02 113.80 NM 0.40 2.46 70.18
HHFC Harvest Home Fin. Corp. of OH 16.45 71.37 12.64 71.37 16.45 0.40 4.05 66.67
HAVN Haven Bancorp of Woodhaven NY 10.91 124.24 7.54 124.99 11.00 0.60 2.22 24.19
HVFD Haverfield Corp. of OH 13.38 114.90 9.77 115.13 14.15 0.54 3.15 42.19
HTHR Hawthorne Fin. Corp. of CA 4.26 56.43 2.56 56.69 NM 0.00 0.00 0.00
HSBK Hibernia SB of Quincy MA* 11.90 100.60 6.68 100.60 11.81 0.28 1.87 22.22
HBNK Highland Federal Bank of CA 24.57 93.75 7.41 93.75 NM 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA* 10.03 104.98 10.25 104.98 10.03 0.36 2.44 24.49
HNFC Hinsdale Financial Corp. of IL 14.60 113.97 9.54 117.44 15.06 0.00 0.00 0.00
HBFW Home Bancorp of Fort Wayne IN 17.99 96.52 14.96 96.52 17.99 0.20 1.22 21.98
HBBI Home Building Bancorp of IN NM 100.72 14.05 100.72 NM 0.30 1.64 57.69
HOMF Home Fed Bancorp of Seymour IN 7.95 113.44 9.27 117.77 9.02 0.50 1.90 15.15
HFMD Home Federal Corporation of MD(8) 16.84 136.83 11.97 138.46 17.40 0.00 0.00 0.00
HWEN Home Financial Bancorp of IN 17.00 86.09 16.91 86.09 17.00 0.00 0.00 0.00
HOFL Home Financial Corp. of FL(8) 23.12 113.69 28.20 113.69 18.25 0.80 5.77 NM
HPBC Home Port Bancorp, Inc. of MA* 8.84 139.02 14.80 139.02 8.79 0.80 5.52 48.78
HMCI Homecorp, Inc. of Rockford IL 15.21 97.49 6.08 97.49 24.01 0.00 0.00 0.00
LOAN Horizon Bancorp, Inc of TX(8)* 11.89 179.68 15.36 185.66 14.95 0.16 1.10 13.11
HZFS Horizon Fin'l. Services of IA 17.26 77.42 8.84 77.42 21.32 0.32 2.21 38.10
HRZB Horizon Financial Corp. of WA* 11.61 107.26 17.37 107.26 11.61 0.40 3.08 35.71
IBSF IBS Financial Corp. of NJ 20.53 106.05 21.11 106.05 20.24 0.24 1.67 34.29
ISBF ISB Financial Corp. of LA 14.58 90.12 15.43 92.76 14.72 0.32 2.15 31.37
ITLA Imperial Thrift & Loan of CA* 15.88 125.93 15.77 125.93 15.88 0.00 0.00 0.00
IFSB Independence FSB of DC 6.47 53.29 3.45 62.02 13.69 0.22 3.09 20.00
INCB Indiana Comm. Bank, SB of IN 19.78 86.32 12.93 86.32 19.78 0.35 2.64 52.24
IFSL Indiana Federal Corp. of IN 14.49 134.59 12.74 144.61 13.79 0.72 3.60 52.17
INBI Industrial Bancorp of OH 11.67 95.89 18.60 95.89 11.67 0.30 2.86 33.33
IWBK Interwest SB of Oak Harbor WA 12.33 185.74 12.66 191.12 12.97 0.52 1.87 23.11
IPSW Ipswich SB of Ipswich MA* 7.08 137.13 7.90 137.13 8.10 0.20 1.98 13.99
IROQ Iroquois Bancorp of Auburn NY* 9.69 129.27 7.76 144.45 9.69 0.32 2.06 20.00
JSBF JSB Financial, Inc. of NY 14.00 105.35 22.97 105.35 14.00 1.20 3.44 48.19
JXVL Jacksonville Bancorp of TX 15.97 86.01 14.07 86.01 15.97 0.50 4.35 69.44
JXSB Jcksnville SB,MHC of IL(43.3%) 23.11 92.04 10.89 92.04 NM 0.40 3.27 NM
JEBC Jefferson Bancorp of Gretna LA(8) 19.74 137.03 18.60 137.03 19.74 0.30 1.33 26.32
JSBA Jefferson Svgs Bancorp of MO 13.51 119.47 8.73 145.33 14.87 0.32 1.36 18.39
JOAC Joachim Bancorp of MO NM 89.79 26.55 89.79 NM 0.50 3.92 NM
KSAV KS Bancorp of Kenly NC 13.42 95.83 14.18 95.92 13.25 0.60 3.00 40.27
KSBK KSB Bancorp of Kingfield ME* 7.61 95.45 6.51 103.09 7.61 0.20 0.95 7.25
KFBI Klamath First Bancorp of OR 20.83 108.62 27.90 108.62 20.83 0.26 1.81 37.68
LBFI L&B Financial of S. Springs TX(8) 17.93 105.43 18.13 105.43 18.97 0.40 2.42 43.48
LSBI LSB Fin. Corp. of Lafayette IN 19.60 96.80 9.34 96.80 21.56 0.32 1.86 36.36
LVSB Lakeview SB of Paterson NJ 10.34 113.81 11.33 148.21 17.23 0.25 1.10 11.36
LARK Landmark Bancshares of KS 16.28 90.50 14.92 90.50 18.17 0.40 2.56 41.67
LARL Laurel Capital Group of PA 8.81 111.19 11.91 111.19 9.01 0.44 2.84 25.00
LSBX Lawrence Savings Bank of MA* 7.32 108.24 8.21 108.24 7.32 0.00 0.00 0.00
LFCT Leader Fin. Corp of Memphis TN(8) 11.64 195.11 16.19 195.11 11.93 0.72 1.38 16.04
LFED Leeds FSB, MHC of MD (35.3) 16.82 103.72 16.96 103.72 16.82 0.64 4.88 NM
LXMO Lexington B&L Fin. Corp. of MO 23.40 67.93 20.76 67.93 23.40 0.00 0.00 0.00
LBCI Liberty Bancorp of Chicago IL(8) 16.33 92.88 9.13 93.10 16.33 0.60 2.50 40.82
LIFB Life Bancorp of Norfolk VA 16.43 108.21 12.97 112.41 15.78 0.44 2.76 45.36
LFBI Little Falls Bancorp of NJ NM 72.01 11.18 78.03 23.04 0.10 0.96 33.33
LOGN Logansport Fin. Corp. of IN 16.47 93.40 23.98 93.40 16.67 0.40 2.86 47.06
LONF London Financial Corp. of OH 20.67 71.57 15.29 71.57 20.67 0.00 0.00 0.00
LISB Long Island Bancorp of NY 15.19 134.33 13.42 134.33 16.72 0.40 1.42 21.51
MAFB MAF Bancorp of IL 15.96 113.15 8.79 132.63 15.68 0.36 1.36 21.69
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
MBLF MBLA Financial Corp. of MO(8) 14.54 14.54 0.70 4.81 4.60 0.70 4.81 0.33 83.20 0.51
MFBC MFB Corp. of Mishawaka IN 19.32 19.32 0.69 3.40 4.26 0.68 3.35 NA NA 0.24
MLBC ML Bancorp of Villanova PA 7.53 7.23 0.70 8.40 7.57 0.54 6.50 0.50 149.45 1.70
MSBB MSB Bancorp of Middletown NY* 9.69 9.52 0.53 5.65 5.27 0.57 6.05 0.63 29.59 0.51
MSBF MSB Financial Corp. of MI 20.95 20.95 1.82 7.69 8.50 1.78 7.54 0.86 67.44 0.65
MGNL Magna Bancorp of MS 9.61 9.10 1.71 17.30 7.33 1.69 17.19 4.01 18.03 1.08
MARN Marion Capital Holdings of IN 23.35 23.35 1.40 5.85 6.32 1.40 5.85 1.07 105.74 1.38
MFCX Marshalltown Fin. Corp. of IA(8) 15.61 15.61 0.37 2.42 2.03 0.36 2.34 NA NA 0.19
MFSL Maryland Fed. Bancorp of MD 8.39 8.26 0.63 7.60 7.69 0.58 7.04 0.48 83.49 0.46
MASB MassBank Corp. of Reading MA* 9.79 9.79 1.06 10.48 10.13 1.02 10.14 0.29 93.51 0.94
MFLR Mayflower Co-Op. Bank of MA* 9.58 9.37 0.88 8.50 6.93 0.83 8.01 1.23 76.96 1.50
MECH Mechanics SB of Hartford CT* 9.38 9.38 -1.23 -18.56 -12.07 -1.21 -18.22 2.38 49.97 1.72
MDBK Medford Savings Bank of MA* 8.89 8.11 1.04 11.70 9.21 1.02 11.49 0.51 146.23 1.35
MERI Meritrust FSB of Thibodaux LA 7.59 7.59 1.00 13.65 9.43 1.00 13.65 0.22 143.29 0.64
MWBX Metro West of MA* 7.56 7.56 1.27 17.34 11.29 1.27 17.34 2.13 45.53 1.35
MSEA Metropolitan Bancorp of WA(8) 6.72 6.10 0.78 11.46 8.95 0.84 12.28 NA NA 1.81
MCBS Mid Continent Bancshares of KS 11.70 11.69 1.25 9.60 9.00 1.10 8.49 0.10 124.51 0.24
MIFC Mid Iowa Financial Corp. of IA 9.38 9.36 0.93 9.97 9.54 0.92 9.81 0.05 513.21 0.44
MCBN Mid-Coast Bancorp of ME 9.04 9.04 0.60 6.71 7.47 0.55 6.14 0.64 72.57 0.57
MIDC Midconn Bank of Kensington CT* 9.51 7.98 0.37 3.89 3.59 0.35 3.72 2.14 21.11 0.62
MWBI Midwest Bancshares, Inc. of IA 6.67 6.67 1.01 14.74 16.12 1.00 14.56 0.28 171.76 0.83
MWFD Midwest Fed. Fin. Corp of WI 9.01 8.61 1.28 13.49 7.77 1.03 10.81 0.19 386.54 1.03
MFFC Milton Fed. Fin. Corp. of OH 18.93 18.93 1.04 4.79 5.53 0.95 4.41 0.40 56.05 0.36
MIVI Miss. View Hold. Co. of MN 18.39 18.39 1.30 6.73 8.43 1.22 6.33 0.51 249.15 2.04
MBSP Mitchell Bancorp of NC* 38.73 38.73 0.81 2.09 2.48 0.78 2.02 1.41 23.59 0.41
MBBC Monterey Bay Bancorp of CA 14.75 14.59 0.32 2.13 2.34 0.31 2.06 0.61 69.77 0.59
MORG Morgan Financial Corp. of CO 13.97 13.97 1.02 6.89 6.62 0.99 6.65 0.35 46.69 0.23
MFSB Mutual Bancompany of MO(8) 11.70 11.70 0.20 1.83 1.62 0.23 2.10 0.01 NA 0.45
MSBK Mutual SB, FSB of Bay City MI 5.68 5.68 0.01 0.22 0.35 -0.09 -1.61 0.12 222.19 0.76
NHTB NH Thrift Bancshares of NH 7.53 7.53 0.64 8.42 9.73 0.60 7.89 1.41 41.36 0.70
NHSL NHS Financial, Inc. of CA(8) 8.81 8.79 0.45 5.36 4.68 0.45 5.36 2.27 55.78 1.45
NSLB NS&L Bancorp of Neosho MO 23.31 23.31 0.97 4.08 5.83 0.87 3.68 0.02 390.91 0.14
NMSB Newmil Bancorp. of CT* 10.31 10.31 0.74 6.80 7.72 0.72 6.67 2.09 75.09 3.13
NFSL Newnan SB, FSB of Newnan GA 12.79 12.73 1.87 14.63 9.24 1.64 12.80 1.26 66.63 1.04
NASB North American SB of MO 6.80 6.55 1.25 17.53 11.68 1.18 16.58 3.12 24.45 0.89
NBSI North Bancshares of Chicago IL 15.50 15.50 0.58 3.22 3.75 0.53 2.95 NA NA 0.31
FFFD North Central Bancshares of IA 28.70 28.70 1.63 7.51 6.23 1.63 7.51 0.21 448.67 1.17
NEBC Northeast Bancorp of ME* 7.56 6.36 0.68 8.99 9.33 0.47 6.27 NA NA 1.48
NEIB Northeast Indiana Bncrp of IN 18.89 18.89 1.19 5.50 6.53 1.19 5.50 0.25 258.27 0.73
NSBK Northside SB of Bronx NY(8)* 7.46 7.40 1.17 15.81 8.37 1.02 13.78 0.32 104.28 1.00
NWEQ Northwest Equity Corp. of WI 12.76 12.76 1.00 6.93 8.59 0.94 6.54 0.92 51.54 0.59
NWSB Northwest SB, MHC of PA(29.9) 10.16 9.64 1.04 9.48 6.82 1.05 9.61 0.81 86.09 0.95
NSSY Norwalk Savings Society of CT* 7.28 7.28 0.79 9.74 8.28 0.63 7.69 2.17 31.53 1.01
NSSB Norwich Financial Corp. of CT* 10.02 9.03 0.83 7.61 6.62 0.81 7.46 1.71 121.41 3.31
NTMG Nutmeg FS&LA of CT 5.72 5.72 0.62 10.70 10.48 0.34 5.92 NA NA 0.49
OHSL OHSL Financial Corp. of OH 12.20 12.20 0.95 7.57 7.75 0.94 7.48 0.12 206.77 0.35
OSBF OSB Fin. Corp. of Oshkosh WI 12.56 12.56 0.21 1.64 2.02 0.37 2.88 0.22 180.71 0.59
OCFC Ocean Fin. Corp. of NJ 18.75 18.75 0.90 4.82 5.64 0.92 4.93 0.94 54.53 0.95
OFCP Ottawa Financial Corp. of MI 10.27 8.24 0.88 5.71 5.17 0.87 5.64 0.20 179.17 0.44
PFFB PFF Bancorp of Pomona CA 13.53 13.38 0.17 1.86 1.46 0.18 1.97 2.53 43.57 1.38
PVFC PVF Capital Corp. of OH 6.70 6.70 1.13 17.87 11.19 1.00 15.74 1.23 66.73 0.91
PCCI Pacific Crest Capital of CA* 8.06 8.06 1.19 18.58 12.08 0.94 14.69 2.76 41.11 1.82
PALM Palfed, Inc. of Aiken SC 8.41 8.01 0.69 8.55 6.00 0.57 7.12 3.77 32.89 1.58
PSSB Palm Springs SB of CA(8) 6.40 6.40 0.64 10.87 7.84 0.53 8.99 2.95 23.58 0.81
PBCI Pamrapo Bancorp, Inc. of NJ 15.46 15.34 1.34 8.53 7.70 1.34 8.53 3.38 22.40 1.27
PFED Park Bancorp of Chicago IL 23.32 23.32 0.78 3.33 4.85 0.82 3.53 0.17 190.11 0.79
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
--------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
MBLF MBLA Financial Corp. of MO(8) 21.75 105.22 15.30 105.22 21.75 0.40 1.84 40.00
MFBC MFB Corp. of Mishawaka IN 23.48 78.84 15.23 78.84 23.85 0.24 1.55 36.36
MLBC ML Bancorp of Villanova PA 13.21 113.31 8.53 118.01 17.08 0.76 2.97 39.18
MSBB MSB Bancorp of Middletown NY* 18.98 101.48 9.83 103.21 17.70 0.60 3.81 72.29
MSBF MSB Financial Corp. of MI 11.76 93.75 19.64 93.75 12.00 0.50 2.78 32.68
MGNL Magna Bancorp of MS 13.64 228.76 21.99 241.66 13.73 0.60 2.86 38.96
MARN Marion Capital Holdings of IN 15.82 94.36 22.03 94.36 15.82 0.80 3.95 62.50
MFCX Marshalltown Fin. Corp. of IA(8) NM 117.24 18.30 117.24 NM 0.00 0.00 0.00
MFSL Maryland Fed. Bancorp of MD 13.00 98.50 8.26 100.07 14.05 0.66 2.24 29.07
MASB MassBank Corp. of Reading MA* 9.87 103.72 10.15 103.72 10.21 0.96 2.92 28.83
MFLR Mayflower Co-Op. Bank of MA* 14.42 120.77 11.57 123.46 15.31 0.48 3.20 46.15
MECH Mechanics SB of Hartford CT* NM 104.65 9.81 104.65 NM 0.00 0.00 NM
MDBK Medford Savings Bank of MA* 10.86 123.08 10.95 134.98 11.06 0.68 2.83 30.77
MERI Meritrust FSB of Thibodaux LA 10.60 137.28 10.42 137.28 10.60 0.60 1.95 20.69
MWBX Metro West of MA* 8.86 142.70 10.79 142.70 8.86 0.10 2.62 23.26
MSEA Metropolitan Bancorp of WA(8) 11.17 125.53 8.44 138.37 10.43 0.00 0.00 0.00
MCBS Mid Continent Bancshares of KS 11.12 105.87 12.38 105.93 12.58 0.40 2.09 23.26
MIFC Mid Iowa Financial Corp. of IA 10.48 101.25 9.49 101.40 10.66 0.08 1.23 12.90
MCBN Mid-Coast Bancorp of ME 13.38 87.84 7.94 87.84 14.62 0.50 2.63 35.21
MIDC Midconn Bank of Kensington CT* NM 106.67 10.14 127.12 NM 0.60 3.08 NM
MWBI Midwest Bancshares, Inc. of IA 6.20 92.49 6.17 92.49 6.28 0.52 2.12 13.16
MWFD Midwest Fed. Fin. Corp of WI 12.87 169.25 15.25 177.13 16.06 0.30 1.71 22.06
MFFC Milton Fed. Fin. Corp. of OH 18.09 92.22 17.46 92.22 19.64 0.52 3.78 68.42
MIVI Miss. View Hold. Co. of MN 11.87 83.87 15.42 83.87 12.63 0.16 1.36 16.16
MBSP Mitchell Bancorp of NC* NM 84.52 32.73 84.52 NM 0.00 0.00 0.00
MBBC Monterey Bay Bancorp of CA NM 93.64 13.81 94.64 NM 0.10 0.75 32.26
MORG Morgan Financial Corp. of CO 15.12 104.67 14.63 104.67 15.66 0.24 1.85 27.91
MFSB Mutual Bancompany of MO(8) NM 112.12 13.12 112.12 NM 0.00 0.00 0.00
MSBK Mutual SB, FSB of Bay City MI NM 63.61 3.61 63.61 NM 0.00 0.00 0.00
NHTB NH Thrift Bancshares of NH 10.28 85.75 6.46 85.75 10.97 0.50 5.07 52.08
NHSL NHS Financial, Inc. of CA(8) 21.38 112.10 9.87 112.32 21.38 0.16 1.44 30.77
NSLB NS&L Bancorp of Neosho MO 17.14 71.81 16.74 71.81 19.05 0.50 4.17 71.43
NMSB Newmil Bancorp. of CT* 12.95 90.82 9.37 90.82 13.19 0.20 2.81 36.36
NFSL Newnan SB, FSB of Newnan GA 10.82 158.23 20.24 159.01 12.36 0.44 1.96 21.15
NASB North American SB of MO 8.56 141.83 9.65 147.40 9.05 0.63 2.00 17.12
NBSI North Bancshares of Chicago IL NM 94.77 14.69 94.77 NM 0.40 2.54 67.80
FFFD North Central Bancshares of IA 16.04 85.40 24.50 85.40 16.04 0.25 2.11 33.78
NEBC Northeast Bancorp of ME* 10.71 92.93 7.03 110.58 15.36 0.32 2.51 26.89
NEIB Northeast Indiana Bncrp of IN 15.31 86.76 16.39 86.76 15.31 0.30 2.45 37.50
NSBK Northside SB of Bronx NY(8)* 11.95 182.00 13.58 183.65 13.72 1.00 2.15 25.71
NWEQ Northwest Equity Corp. of WI 11.65 82.66 10.55 82.66 12.35 0.40 3.90 45.45
NWSB Northwest SB, MHC of PA(29.9) 14.67 134.80 13.70 142.12 14.47 0.32 2.91 42.67
NSSY Norwalk Savings Society of CT* 12.07 114.25 8.32 114.25 15.29 0.20 0.94 11.36
NSSB Norwich Financial Corp. of CT* 15.11 116.78 11.70 129.55 15.41 0.48 3.02 45.71
NTMG Nutmeg FS&LA of CT 9.54 98.64 5.65 98.64 17.26 0.00 0.00 0.00
OHSL OHSL Financial Corp. of OH 12.90 96.66 11.79 96.66 13.06 0.76 3.75 48.41
OSBF OSB Fin. Corp. of Oshkosh WI NM 84.04 10.55 84.04 NM 0.64 2.69 NM
OCFC Ocean Fin. Corp. of NJ 17.72 85.36 16.01 85.36 17.31 0.00 0.00 0.00
OFCP Ottawa Financial Corp. of MI 19.35 109.50 11.25 136.55 19.58 0.36 2.22 42.86
PFFB PFF Bancorp of Pomona CA NM 79.37 10.74 80.25 NM 0.00 0.00 0.00
PVFC PVF Capital Corp. of OH 8.94 147.06 9.86 147.06 10.15 0.00 0.00 0.00
PCCI Pacific Crest Capital of CA* 8.28 109.86 8.86 109.86 10.47 0.00 0.00 0.00
PALM Palfed, Inc. of Aiken SC 16.67 136.32 11.47 143.15 20.00 0.08 0.57 9.52
PSSB Palm Springs SB of CA(8) 12.75 132.36 8.47 132.36 15.42 0.00 0.00 0.00
PBCI Pamrapo Bancorp, Inc. of NJ 12.99 113.87 17.61 114.80 12.99 0.90 4.59 59.60
PFED Park Bancorp of Chicago IL 20.62 68.69 16.02 68.69 19.45 0.00 0.00 0.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
PVSA Parkvale Financial Corp of PA 7.59 7.56 1.06 14.72 10.51 0.99 13.73 0.14 NA 2.19
PBIX Patriot Bank Corp. of PA 12.93 12.93 0.61 4.49 3.20 0.64 4.68 0.13 331.63 0.78
PEEK Peekskill Fin. Corp. of NY 31.25 31.25 1.23 4.93 4.16 1.25 5.02 0.65 41.45 1.30
PFSB PennFed Fin. Services of NJ 8.33 6.64 0.81 8.43 9.31 0.80 8.33 0.88 27.37 0.40
PWBC PennFirst Bancorp of PA 6.96 6.29 0.61 7.80 7.56 0.61 7.80 0.58 67.90 1.33
PWBK Pennwood SB of PA* 18.92 18.92 0.66 3.51 5.20 0.97 5.12 2.65 41.44 2.00
PBKB People's SB of Brockton MA* 5.30 5.03 0.75 13.25 8.70 0.46 8.13 1.12 83.82 1.88
PFDC Peoples Bancorp of Auburn IN 15.58 15.58 1.45 9.56 8.66 1.44 9.50 0.34 94.20 0.40
PBCT Peoples Bank, MHC of CT(32.3)* 7.71 7.70 1.10 14.32 8.99 0.88 11.47 1.37 73.39 1.66
PHBK Peoples Heritage Fin Grp of ME* 8.38 7.49 1.16 13.59 6.94 1.24 14.56 1.14 127.88 2.00
PBNB Peoples Sav. Fin. Corp. of CT* 10.12 9.39 0.95 8.93 7.08 0.99 9.28 0.47 73.31 0.61
PERM Permanent Bancorp of IN 9.78 9.66 0.38 3.50 4.12 0.38 3.45 1.66 33.07 1.07
PMFI Perpetual Midwest Fin. of IA 9.28 9.28 0.41 4.15 4.35 0.36 3.71 0.39 177.88 0.89
PCBC Perry Co. Fin. Corp. of MO 20.86 20.86 1.00 5.36 5.03 1.00 5.36 NA NA 0.09
PHFC Pittsburgh Home Fin. of PA 16.52 16.52 0.57 6.34 4.38 0.57 6.34 1.31 47.36 0.90
PFSL Pocahnts Fed, MHC of AR (46.4) 5.93 5.93 0.56 9.39 8.55 0.57 9.62 0.37 108.37 1.15
POBS Portsmouth Bank Shrs Inc of NH(8)* 25.02 25.02 2.26 8.89 8.20 1.89 7.45 0.21 122.68 0.80
PKPS Poughkeepsie SB of NY 8.44 8.44 1.70 20.99 22.27 2.38 29.39 2.14 46.18 1.36
PRBC Prestige Bancorp of PA 14.89 14.89 0.25 2.63 2.23 0.25 2.63 0.35 84.96 0.44
PETE Primary Bank of NH* 6.14 6.12 -0.03 -0.46 -0.45 -0.05 -0.69 1.70 39.75 1.23
PSAB Prime Bancorp, Inc. of PA 9.00 8.44 1.02 10.92 8.57 0.95 10.19 1.07 54.25 0.97
PFNC Progress Financial Corp. of PA 5.61 5.57 0.90 18.76 13.34 0.70 14.57 1.48 40.98 0.97
PSBK Progressive Bank, Inc. of NY* 7.97 6.92 1.10 12.27 10.70 1.15 12.76 1.05 91.71 1.56
PROV Provident Fin. Holdings of CA 13.90 13.90 0.15 1.10 1.60 0.43 3.07 2.22 40.31 0.99
PULB Pulaski SB, MHC of MO (29.0) 12.63 12.63 0.84 6.93 5.67 0.79 6.55 NA NA 0.31
PULS Pulse Bancorp of S. River NJ 7.79 7.79 1.18 10.83 10.55 1.18 10.83 1.33 37.28 1.86
QCFB QCF Bancorp of Virginia MN 21.81 21.81 1.52 7.75 8.53 1.52 7.75 0.14 659.90 2.66
QCBC Quaker City Bancorp of CA 9.37 9.33 0.53 5.30 6.57 0.51 5.14 2.06 52.43 1.27
QCSB Queens County SB of NY* 16.58 16.58 1.79 10.34 7.36 1.79 10.34 0.65 109.85 0.86
RCSB RCSB Financial, Inc. of NY* 6.87 6.64 0.90 10.99 10.51 0.88 10.72 0.78 85.48 1.30
RARB Raritan Bancorp. of Raritan NJ* 7.36 7.19 0.86 11.50 9.79 0.86 11.50 0.81 88.80 1.19
REDF RedFed Bancorp of Redlands CA 5.89 5.89 -0.22 -3.90 -4.74 -0.33 -5.77 4.43 30.19 1.66
RELY Reliance Bancorp of NY 8.62 5.84 0.86 7.56 7.11 0.83 7.32 0.84 30.12 0.55
RELI Reliance Bancshares Inc of WI* 56.23 56.23 1.47 2.62 3.46 1.47 2.62 NA NA 0.55
RFED Roosevelt Fin. Grp. Inc. of MO 4.84 4.59 0.61 13.16 7.28 0.83 17.95 0.85 27.42 0.54
RVSB Rvrview SB,FSB MHC of WA(40.3) 11.02 9.82 1.31 12.07 8.48 1.21 11.09 0.22 151.63 0.51
SCCB S. Carolina Comm. Bnshrs of SC 28.48 28.48 1.36 4.53 5.23 1.36 4.53 1.44 46.00 0.87
SBFL SB Fing. Lakes MHC of NY(33.0) 10.23 10.23 -0.37 -3.19 -2.51 0.06 0.52 1.42 41.17 1.34
SFED SFS Bancorp of Schenectady NY 13.56 13.56 0.68 4.85 6.77 0.70 4.96 0.71 53.64 0.56
SGVB SGV Bancorp of W. Covina CA 9.78 9.78 0.11 1.12 1.36 0.11 1.12 1.84 13.07 0.31
SISB SIS Bank of Sprinfield MA* 7.19 7.19 1.36 18.69 12.26 1.37 18.90 0.87 142.22 2.51
SJSB SJS Bancorp of St. Joseph MI 11.67 11.67 0.63 5.03 4.43 0.61 4.91 0.29 144.27 0.67
SWCB Sandwich Co-Op. Bank of MA* 8.23 7.73 0.86 10.37 9.06 0.80 9.64 1.07 75.46 1.24
SFBM Security Bancorp of MT 8.25 7.07 0.70 8.10 8.00 0.52 6.05 0.23 135.90 0.63
SECP Security Capital Corp. of WI 16.26 16.26 0.99 5.78 5.64 1.02 5.98 0.11 NA 1.55
SFSL Security First Corp. of OH 9.46 9.28 1.20 13.59 8.91 1.26 14.17 0.31 256.95 0.91
SHFC Seven Hills Fin. Corp. of OH(8) 21.21 21.21 0.36 1.69 1.75 0.34 1.58 0.22 51.02 0.14
SMFC Sho-Me Fin. Corp. of MO 11.00 11.00 0.85 6.86 6.20 0.85 6.86 0.06 NA 0.71
SOBI Sobieski Bancorp of S. Bend IN 18.49 18.49 0.42 2.27 3.25 0.42 2.27 0.08 327.87 0.41
SOSA Somerset Savings Bank of MA(8)* 5.57 5.57 0.42 7.98 6.81 0.42 7.98 9.10 14.87 1.74
SMBC Southern Missouri Bncrp of MO 16.40 16.40 0.88 5.01 5.47 0.82 4.69 0.97 39.01 0.66
SWBI Southwest Bancshares of IL 11.22 11.22 1.15 9.09 8.56 1.14 9.01 0.13 160.59 0.30
SVRN Sovereign Bancorp of PA 3.97 2.69 0.69 16.89 10.55 0.67 16.30 0.50 76.04 0.60
STFR St. Francis Cap. Corp. of WI 9.83 9.38 1.17 10.82 10.10 0.86 7.95 0.27 118.34 0.74
SPBC St. Paul Bancorp, Inc. of IL 8.66 8.63 0.90 9.88 7.89 0.88 9.64 0.49 175.47 1.21
STND Standard Fin. of Chicago IL 11.71 11.69 0.80 6.06 6.28 0.73 5.52 0.13 213.38 0.48
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
--------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
PVSA Parkvale Financial Corp of PA 9.51 131.03 9.94 131.58 10.20 0.52 1.84 17.51
PBIX Patriot Bank Corp. of PA NM 104.68 13.53 104.68 NM 0.32 2.13 66.67
PEEK Peekskill Fin. Corp. of NY 24.06 87.45 27.33 87.45 23.61 0.36 2.82 67.92
PFSB PennFed Fin. Services of NJ 10.74 93.23 7.77 117.06 10.87 0.00 0.00 0.00
PWBC PennFirst Bancorp of PA 13.22 111.79 7.78 123.65 13.22 0.36 2.62 34.62
PWBK Pennwood SB of PA* 19.23 67.43 12.76 67.43 13.16 0.00 0.00 0.00
PBKB People's SB of Brockton MA* 11.50 122.67 6.50 129.25 18.74 0.28 2.77 31.82
PFDC Peoples Bancorp of Auburn IN 11.55 107.64 16.77 107.64 11.62 0.60 3.02 34.88
PBCT Peoples Bank, MHC of CT(32.3)* 11.13 147.36 11.37 147.57 13.89 0.80 3.76 41.88
PHBK Peoples Heritage Fin Grp of ME* 14.42 151.62 12.70 169.56 13.45 0.68 3.08 44.44
PBNB Peoples Sav. Fin. Corp. of CT* 14.13 125.70 12.72 135.48 13.60 0.92 3.15 44.44
PERM Permanent Bancorp of IN 24.26 87.81 8.59 88.90 24.63 0.30 1.82 44.12
PMFI Perpetual Midwest Fin. of IA 23.00 96.37 8.95 96.37 NM 0.30 1.74 40.00
PCBC Perry Co. Fin. Corp. of MO 19.89 92.89 19.38 92.89 19.89 0.30 1.71 34.09
PHFC Pittsburgh Home Fin. of PA 22.83 75.38 12.45 75.38 22.83 0.20 1.90 43.48
PFSL Pocahnts Fed, MHC of AR (46.4) 11.69 105.22 6.24 105.22 11.42 0.84 5.79 67.74
POBS Portsmouth Bank Shrs Inc of NH(8)* 12.20 110.05 27.54 110.05 14.56 0.60 4.68 57.14
PKPS Poughkeepsie SB of NY 4.49 87.43 7.38 87.43 3.21 0.10 2.02 9.09
PRBC Prestige Bancorp of PA NM 67.78 10.09 67.78 NM 0.00 0.00 0.00
PETE Primary Bank of NH* NM 103.35 6.34 103.68 NM 0.00 0.00 NM
PSAB Prime Bancorp, Inc. of PA 11.67 123.56 11.12 131.76 12.50 0.68 3.53 41.21
PFNC Progress Financial Corp. of PA 7.49 121.80 6.83 122.74 9.65 0.08 1.26 9.41
PSBK Progressive Bank, Inc. of NY* 9.35 110.54 8.81 127.23 8.98 0.80 2.67 24.92
PROV Provident Fin. Holdings of CA NM 69.06 9.60 69.06 22.50 0.00 0.00 0.00
PULB Pulaski SB, MHC of MO (29.0) 17.63 118.95 15.02 118.95 18.65 0.80 6.22 NM
PULS Pulse Bancorp of S. River NJ 9.48 130.78 10.18 130.78 9.48 0.70 4.15 39.33
QCFB QCF Bancorp of Virginia MN 11.72 84.22 18.37 84.22 11.72 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA 15.22 80.35 7.53 80.71 15.73 0.00 0.00 0.00
QCSB Queens County SB of NY* 13.59 138.79 23.02 138.79 13.59 1.00 2.68 36.50
RCSB RCSB Financial, Inc. of NY* 9.52 120.96 8.31 125.21 9.76 0.48 1.77 16.84
RARB Raritan Bancorp. of Raritan NJ* 10.22 119.11 8.77 121.99 10.22 0.60 2.82 28.85
REDF RedFed Bancorp of Redlands CA NM 83.57 4.92 83.57 NM 0.00 0.00 NM
RELY Reliance Bancorp of NY 14.06 106.95 9.22 157.76 14.52 0.46 2.56 35.94
RELI Reliance Bancshares Inc of WI* NM 75.68 42.55 75.68 NM 0.00 0.00 0.00
RFED Roosevelt Fin. Grp. Inc. of MO 13.73 169.19 8.19 178.52 10.07 0.62 3.42 46.97
RVSB Rvrview SB,FSB MHC of WA(40.3) 11.79 135.14 14.89 151.67 12.83 0.22 1.52 17.89
SCCB S. Carolina Comm. Bnshrs of SC 19.14 90.75 25.84 90.75 19.14 0.60 3.87 74.07
SBFL SB Fing. Lakes MHC of NY(33.0) NM 130.42 13.34 130.42 NM 0.40 2.71 NM
SFED SFS Bancorp of Schenectady NY 14.77 75.36 10.22 75.36 14.44 0.24 1.85 27.27
SGVB SGV Bancorp of W. Covina CA NM 73.79 7.22 73.79 NM 0.00 0.00 0.00
SISB SIS Bank of Sprinfield MA* 8.15 138.95 9.99 138.95 8.06 0.00 0.00 0.00
SJSB SJS Bancorp of St. Joseph MI 22.58 111.07 12.96 111.07 23.10 0.44 2.21 50.00
SWCB Sandwich Co-Op. Bank of MA* 11.04 110.52 9.09 117.63 11.89 1.00 4.60 50.76
SFBM Security Bancorp of MT 12.50 103.57 8.54 120.77 16.73 0.66 3.03 37.93
SECP Security Capital Corp. of WI 17.74 102.88 16.73 102.88 17.15 0.60 0.97 17.24
SFSL Security First Corp. of OH 11.23 117.26 11.10 119.58 10.77 0.44 3.32 37.29
SHFC Seven Hills Fin. Corp. of OH(8) NM 98.56 20.90 98.56 NM 0.36 2.03 NM
SMFC Sho-Me Fin. Corp. of MO 16.13 112.55 12.38 112.55 16.13 0.00 0.00 0.00
SOBI Sobieski Bancorp of S. Bend IN NM 71.13 13.15 71.13 NM 0.00 0.00 0.00
SOSA Somerset Savings Bank of MA(8)* 14.69 111.70 6.22 111.70 14.69 0.00 0.00 0.00
SMBC Southern Missouri Bncrp of MO 18.27 92.47 15.17 92.47 19.52 0.50 3.51 64.10
SWBI Southwest Bancshares of IL 11.68 120.49 13.51 120.49 11.79 1.08 4.02 46.96
SVRN Sovereign Bancorp of PA 9.48 146.88 5.84 216.63 9.83 0.08 0.74 7.02
STFR St. Francis Cap. Corp. of WI 9.90 110.09 10.82 115.37 13.48 0.40 1.55 15.38
SPBC St. Paul Bancorp, Inc. of IL 12.68 125.72 10.89 126.20 13.00 0.48 1.83 23.19
STND Standard Fin. of Chicago IL 15.93 99.75 11.68 99.94 17.47 0.32 1.97 31.37
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of September 6, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
SFFC StateFed Financial Corp. of IA 19.46 19.46 1.21 6.02 6.81 1.21 6.02 NA NA 0.38
SFIN Statewide Fin. Corp. of NJ 9.90 9.87 0.58 5.52 5.28 0.68 6.53 1.25 40.30 1.25
STSA Sterling Financial Corp. of WA 4.13 3.35 0.32 7.56 6.32 0.32 7.48 0.57 93.20 0.87
SSBK Strongsville SB of OH 8.04 7.88 0.98 11.89 9.14 0.87 10.53 0.40 54.75 0.29
SFSB SuburbFed Fin. Corp. of IL 6.88 6.84 0.49 6.89 8.17 0.44 6.11 0.32 69.31 0.44
SBCN Suburban Bancorp. of OH 13.00 13.00 0.40 2.98 3.29 0.57 4.33 0.20 794.18 2.06
SCSL Suncoast S&LA of Hollywood FL(8) 3.30 3.29 0.31 9.94 9.29 -0.30 -9.63 NA NA 0.20
THRD TF Financial Corp. of PA 14.20 14.20 0.92 5.91 6.77 0.89 5.67 0.37 80.35 0.51
ROSE TR Financial Corp. of NY 6.21 6.21 0.91 13.91 10.31 0.73 11.16 0.70 65.52 0.89
TPNZ Tappan Zee Fin. Corp. of NY 19.48 19.48 0.80 6.05 4.46 0.74 5.60 1.51 36.65 1.21
PTRS The Potters S&L Co. of OH 9.24 9.24 0.51 5.31 7.02 0.50 5.27 2.33 78.44 3.93
THIR Third Financial Corp. of OH(8) 18.38 18.38 1.37 7.65 5.80 1.23 6.83 1.21 64.85 0.94
TSBS Trenton SB, FSB MHC of NJ(35.0 19.35 18.91 1.78 10.26 7.50 1.27 7.33 0.39 87.34 0.53
TRIC Tri-County Bancorp of WY 16.17 16.17 0.94 4.96 5.77 0.91 4.82 0.22 252.73 1.31
THBC Troy Hill Bancorp of PA 22.20 22.20 1.40 6.20 7.49 1.27 5.65 2.95 30.03 1.09
TWIN Twin City Bancorp of TN 13.66 13.66 1.09 7.91 7.19 0.96 6.95 0.42 42.01 0.25
UFRM United FS&LA of Rocky Mount NC 8.07 8.07 0.79 10.05 9.10 0.67 8.52 1.17 99.00 1.74
UBMT United SB, FA of MT 23.52 23.52 1.53 6.66 7.09 1.45 6.31 0.80 8.99 0.24
VABF Va. Beach Fed. Fin. Corp of VA 6.77 6.77 0.30 4.87 5.00 0.09 1.46 1.53 44.71 0.96
VAFD Valley FSB of Sheffield AL(8) 8.09 8.09 0.36 4.43 3.05 0.35 4.32 1.31 23.58 0.41
VFFC Virginia First Savings of VA 8.16 7.91 1.69 22.52 16.72 1.44 19.10 2.18 46.18 1.12
WBCI WFS Bancorp of Wichita KS(8) 11.41 11.40 0.47 4.14 3.72 0.51 4.52 0.53 88.62 0.72
WHGB WHG Bancshares of MD 20.59 20.59 0.64 5.18 3.13 0.64 5.18 0.35 42.31 0.23
WSFS WSFS Financial Corp. of DE* 5.65 5.58 2.16 39.88 24.23 1.29 23.89 2.83 65.72 2.94
WVFC WVS Financial Corp. of PA* 13.11 13.11 1.49 10.24 9.47 1.48 10.14 0.38 200.41 1.30
WLDN Walden Bancorp of MA(8)* 9.25 7.96 1.03 11.34 6.51 1.16 12.73 0.93 120.02 1.84
WRNB Warren Bancorp of Peabody MA* 9.03 9.03 1.70 19.66 13.04 1.65 19.06 1.72 75.40 2.04
WFSL Washington FS&LA of Seattle WA 11.85 11.29 1.79 14.39 9.03 1.71 13.74 0.64 41.32 0.37
WAMU Washington Mutual Inc. of WA(8)* 6.22 5.56 0.96 15.62 7.83 0.95 15.57 0.55 117.46 1.03
WYNE Wayne Bancorp of NJ 16.83 16.83 0.56 3.34 4.00 0.68 4.02 1.50 52.56 1.29
WAYN Wayne S&L Co., MHC of OH(46.7) 9.27 9.27 0.62 6.77 5.27 0.58 6.37 0.42 85.58 0.43
WCFB Webster CityFSB,MHC of IA(45.2 22.38 22.38 1.17 5.27 4.08 1.15 5.18 1.08 32.66 0.64
WBST Webster Financial Corp. of CT 5.16 3.93 0.56 11.07 7.31 0.59 11.64 1.45 82.08 1.75
WEFC Wells Fin. Corp. of Wells MN 14.48 14.48 0.85 5.77 6.45 0.85 5.77 0.37 82.60 0.34
WCBI WestCo Bancorp of IL 15.46 15.46 1.30 8.37 7.07 1.31 8.43 0.30 94.84 0.41
WSTR WesterFed Fin. Corp. of MT 13.94 13.94 0.80 5.94 6.88 0.76 5.65 0.13 280.42 0.54
WOFC Western Ohio Fin. Corp. of OH 16.73 15.74 0.89 3.91 4.85 0.73 3.21 0.65 60.52 0.57
WWFC Westwood Fin. Corp. of NJ 10.71 9.17 0.73 6.78 9.11 0.73 6.78 0.02 868.42 0.50
WFCO Winton Financial Corp. of OH(8) 7.46 7.26 0.93 12.27 9.87 0.78 10.39 0.44 70.82 0.37
FFWD Wood Bancorp of OH 13.76 13.76 1.18 8.30 7.66 1.14 8.00 0.17 209.39 0.46
WCHI Workingmens Cap. Hldgs of IN(8) 12.71 12.71 0.86 7.03 4.73 0.87 7.10 0.32 57.06 0.20
YFCB Yonkers Fin. Corp. of NY 20.19 20.19 0.74 3.64 4.30 0.72 3.57 1.27 27.87 1.00
YFED York Financial Corp. of PA 8.43 8.43 0.98 11.55 10.63 0.89 10.46 1.96 30.36 0.70
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
--------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
SFFC StateFed Financial Corp. of IA 14.68 87.15 16.96 87.15 14.68 0.40 2.50 36.70
SFIN Statewide Fin. Corp. of NJ 18.94 94.13 9.32 94.41 16.03 0.40 3.20 60.61
STSA Sterling Financial Corp. of WA 15.83 126.55 5.23 156.08 16.01 0.00 0.00 0.00
SSBK Strongsville SB of OH 10.94 124.93 10.04 127.43 12.35 0.48 2.29 25.00
SFSB SuburbFed Fin. Corp. of IL 12.23 83.25 5.73 83.74 13.80 0.32 1.86 22.70
SBCN Suburban Bancorp. of OH NM 93.13 12.11 93.13 20.94 0.60 3.72 NM
SCSL Suncoast S&LA of Hollywood FL(8) 10.77 105.11 3.47 105.42 NM 0.00 0.00 0.00
THRD TF Financial Corp. of PA 14.77 87.86 12.48 87.86 15.39 0.32 2.19 32.32
ROSE TR Financial Corp. of NY 9.70 135.39 8.41 135.39 12.08 0.72 2.48 24.08
TPNZ Tappan Zee Fin. Corp. of NY 22.44 84.17 16.40 84.17 24.24 0.20 1.65 37.04
PTRS The Potters S&L Co. of OH 14.25 77.60 7.17 77.60 14.38 0.24 1.48 21.05
THIR Third Financial Corp. of OH(8) 17.25 127.87 23.50 127.87 19.31 0.76 2.36 40.64
TSBS Trenton SB, FSB MHC of NJ(35.0 13.33 124.67 24.12 127.50 18.67 0.35 2.50 33.33
TRIC Tri-County Bancorp of WY 17.33 90.18 14.58 90.18 17.83 0.50 2.72 47.17
THBC Troy Hill Bancorp of PA 13.35 81.41 18.07 81.41 14.65 0.40 2.94 39.22
TWIN Twin City Bancorp of TN 13.91 109.66 14.98 109.66 15.83 0.64 3.71 51.61
UFRM United FS&LA of Rocky Mount NC 10.98 107.73 8.70 107.73 12.95 0.20 2.76 30.30
UBMT United SB, FA of MT 14.10 93.56 22.01 93.56 14.88 0.88 4.69 66.17
VABF Va. Beach Fed. Fin. Corp of VA 20.00 96.39 6.52 96.39 NM 0.16 2.00 40.00
VAFD Valley FSB of Sheffield AL(8) NM 149.20 12.08 149.20 NM 0.60 1.54 50.42
VFFC Virginia First Savings of VA 5.98 118.83 9.70 122.64 7.05 0.10 0.79 4.74
WBCI WFS Bancorp of Wichita KS(8) NM 108.49 12.38 108.54 24.60 0.40 1.73 46.51
WHGB WHG Bancshares of MD NM 80.99 16.68 80.99 NM 0.00 0.00 0.00
WSFS WSFS Financial Corp. of DE* 4.13 151.68 8.57 153.40 6.89 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA* 10.56 110.97 14.55 110.97 10.66 0.40 1.84 19.42
WLDN Walden Bancorp of MA(8)* 15.36 150.44 13.91 174.71 13.68 0.64 2.33 35.75
WRNB Warren Bancorp of Peabody MA* 7.67 145.86 13.18 145.86 7.91 0.44 3.52 26.99
WFSL Washington FS&LA of Seattle WA 11.07 157.36 18.65 165.18 11.59 0.92 4.13 45.77
WAMU Washington Mutual Inc. of WA(8)* 12.76 188.12 11.71 210.39 12.81 0.92 2.54 32.39
WYNE Wayne Bancorp of NJ 25.00 83.49 14.05 83.49 20.77 0.00 0.00 0.00
WAYN Wayne S&L Co., MHC of OH(46.7) 18.99 124.97 11.58 124.97 20.18 0.88 4.54 NM
WCFB Webster CityFSB,MHC of IA(45.2 24.54 127.65 28.57 127.65 25.00 0.80 6.04 NM
WBST Webster Financial Corp. of CT 13.68 131.04 6.76 171.77 13.01 0.72 2.25 30.77
WEFC Wells Fin. Corp. of Wells MN 15.51 91.69 13.27 91.69 15.51 0.00 0.00 0.00
WCBI WestCo Bancorp of IL 14.14 116.85 18.06 116.85 14.05 0.48 2.23 31.58
WSTR WesterFed Fin. Corp. of MT 14.54 84.52 11.78 84.52 15.27 0.36 2.38 34.62
WOFC Western Ohio Fin. Corp. of OH 20.62 85.60 14.32 91.00 NM 1.00 4.85 NM
WWFC Westwood Fin. Corp. of NJ 10.98 74.40 7.97 86.89 10.98 0.00 0.00 0.00
WFCO Winton Financial Corp. of OH(8) 10.14 105.93 7.90 108.80 11.97 0.42 3.73 37.84
FFWD Wood Bancorp of OH 13.06 107.97 14.85 107.97 13.55 0.24 1.66 21.62
WCHI Workingmens Cap. Hldgs of IN(8) 21.16 144.63 18.39 144.63 20.95 0.36 1.70 36.00
YFCB Yonkers Fin. Corp. of NY 23.24 84.63 17.09 84.63 23.71 0.20 1.72 40.00
YFED York Financial Corp. of PA 9.41 104.17 8.78 104.17 10.39 0.60 3.75 35.29
</TABLE>
<PAGE>
EXHIBIT IV-2
Historical Stock Price Indices
<PAGE>
Historical Stock Price Indices(1)
SNL SNL
NASDAQ Thrift Bank
Year/Qtr. Ended DJIA S&P 500 Composite Index Index
- --------------- ---- ------- --------- ----- -----
1991: Quarter 1 2881.1 375.2 482.3 125.5 66.0
Quarter 2 2957.7 371.2 475.9 130.5 82.0
Quarter 3 3018.2 387.9 526.9 141.8 90.7
Quarter 4 3168.0 417.1 586.3 144.7 103.1
1992: Quarter 1 3235.5 403.7 603.8 157.0 113.3
Quarter 2 3318.5 408.1 563.6 173.3 119.7
Quarter 3 3271.7 417.8 583.3 167.0 117.1
Quarter 4 3301.1 435.7 677.0 201.1 136.7
1993: Quarter 1 3435.1 451.7 690.1 228.2 151.4
Quarter 2 3516.1 450.5 704.0 219.8 147.0
Quarter 3 3555.1 458.9 762.8 258.4 154.3
Quarter 4 3754.1 466.5 776.8 252.5 146.2
1994: Quarter 1 3625.1 445.8 743.5 241.6 143.1
Quarter 2 3625.0 444.3 706.0 269.6 152.6
Quarter 3 3843.2 462.6 764.3 279.7 149.2
Quarter 4 3834.4 459.3 752.0 244.7 137.6
1995: Quarter 1 4157.7 500.7 817.2 278.4 152.1
Quarter 2 4556.1 544.8 933.5 313.5 171.7
Quarter 3 4789.1 584.4 1,043.5 362.3 195.3
Quarter 4 5117.1 615.9 1,052.1 376.5 207.6
1996: Quarter 1 5587.1 645.5 1,101.4 382.1 225.1
Quarter 2 5654.6 670.6 1,185.0 387.2 224.7
September 6, 1996 5659.9 655.7 1,139.4 410.8 237.5
(1) End of period data.
Sources: SNL Securities; Wall Street Journal.
<PAGE>
- [Insert Stamp Sheets 142-150 Here] -
<PAGE>
EXHIBIT V-1
RP Financial, LC.
Firm Qualifications Statement
<PAGE>
FIRM QUALIFICATION STATEMENT
RP Financial provides financial and management consulting and valuation services
to the financial services industry nationwide, particularly federally-insured
financial institutions. RP Financial establishes long- term client relationships
through its wide array of services, emphasis on quality and timeliness, hands-on
involvement by our principals and senior consulting staff, and careful
structuring of strategic plans and transactions. RP Financial's staff draws from
backgrounds in consulting, regulatory agencies and investment banking, thereby
providing our clients with considerable resources.
STRATEGIC AND CAPITAL PLANNING
RP Financial's strategic and capital planning services are designed to provide
effective workable plans with quantifiable results. Through a program referred
to as SAFE, Strategic Alternatives Financial Evaluations, RP Financial analyzes
strategic options which will enhance shareholder value or otherwise achieve
desired results. Our planning services involve conducting situation analyses and
establishing mission statements, strategic goals and objectives, with overall
emphasis on enhancement of franchise value, capital management and planning,
earnings improvement and operational issues. Our planning services include the
development of strategies in the following areas: capital formation and
management, interest rate risk management, development of investment and
liquidity portfolio targets, development of loan and servicing portfolio
targets and development of funding composition targets. Our proprietary
financial simulation model provides the basis for evaluating the financial
impact of alternative strategies as well as assessing the feasibility and
compatability of such strategies with regulations and accounting guidelines.
MERGER AND ACQUISITION SERVICES
RP Financial's merger and acquisition (M&A) services include targeting
candidates and potential acquirors, assessing acquisition merit, conducting
detailed due diligence, negotiating and structuring transactions, preparing
merger business plans and financial simulations, rendering fairness opinions and
assisting in implementing post-acquisition strategies. Through our financial
simulations, in-house data bases of public and non-public banks and savings
institutions, valuation expertise and regulatory and accounting knowledge,
RP Financial's M&A consulting focuses on structuring transactions to enhance
shareholder returns.
VALUATION SERVICES
RP Financial's extensive valuation practice includes valuations for a variety of
purposes including mergers and acquisitions, mutual-to-stock conversions, ESOPs,
subsidiary and related industry companies, mark-to-market transactions, loan
and servicing portfolios, non-traded securities, deposit portfolios and core
deposits. Our principals and staff are highly experienced in performing
valuation appraisals which conform with regulatory guidelines and appraisal
industry standards. RP Financial is the nation's leading valuation firm for
mutual-to-stock conversions of thrift institutions.
OTHER CONSULTING SERVICES AND DATA BASES
RP Financial offers a variety of other services including branching strategies,
feasibility studies and special research studies, which are complemented by our
quantitative and computer skills. RP Financial's consulting services are aided
by its in-house data base resources for commercial banks and savings
institutions and proprietary valuation and financial simulation models.
RP Financial's Key Personnel (Years of Relevant Experience)
Ronald S. Riggins, Managing Director (16)
William E. Pommerening, Managing Director (11)
Gregory E. Dunn, Senior Vice President (15)
James P. Hennessey, Senior Vice President (10)
James J. Oren, Vice President (9)
Timothy M. Biddle, Vice President (7)
Alan P. Carruthers, Senior Consultant-Community Banking (14)
EXHIBIT 99.4
STOCK ORDER FORM & DEARBORN
CERTIFICATION FORM SAVINGS
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., Lawrenceburg,
Indiana 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 may be subscribed for is 25 and the maximum
purchase is x,xxx shares in the Subscription Offering and Community Offering,
respectively. No person, together with associates of and persons acting in
concert with such person, may purchase more than xx,xxx shares of the Common
Stock in the Subscription Offering. The price per share is based upon a
valuation that is subject to review prior to filling individual stock orders.
- --------------------------------------------------------------------------------
Method of Payment
(3) / / I authorize Dearborn Savings Association to make withdrawals from my
Dearborn Savings Association account(s) shown below, and understand
that the amounts will not otherwise be available for withdrawal:
(4) / / Enclosed is a check, bank draft or money order payable to Dearborn
Savings Association for $__________ (or cash if presented in
person).
Account Number(s) Amount(s)
|-------------------------------------------|----------------|
| | |
|-------------------------------------------|----------------|
| | |
|-------------------------------------------|----------------|
| | |
|-------------------------------------------|----------------|
| Total Withdrawal | |
|-------------------------------------------|----------------|
- --------------------------------------------------------------------------------
Purchaser Information
(5) / / Check here if you are a director, officer or employee of Dearborn
Savings Association or a member of such person's immediate family.
/ / Check here if you are a depositor or a borrower and enter below
information for all accounts you had at the Eligibility Record Date
(March 31, 1995), Supplemental Eligibility Record Date (September 30,
1996) or the Voting Record Date (XXXXX, 1996). If additional space is
needed, please utilize the back of this form. Please confirm account(s)
by initializing here______________.
Account Title (Names on Accounts) Account Number
|-------------------------------------|----------------|
| | |
|-------------------------------------| |
| | |
|-------------------------------------|----------------|
| | |
|-------------------------------------| |
| | |
|-------------------------------------|----------------|
- --------------------------------------------------------------------------------
(6) Stock Registration
/ /Individual / /Uniform Transfer to Minors / /Partnership / /Joint Tenants
/ /Uniform Gift to Minors / /Individual Retirement Account / /Tenants in Common
/ /Corporation / /Fiduciary/Trust (Under Agreement Dated_______)
- --------------------------------------------------------------------------------
Name Social Security or Tax I.D.
- --------------------------------------------------------------------------------
Name Daytime Telephone
- --------------------------------------------------------------------------------
Street Address Evening Telephone
- --------------------------------------------------------------------------------
City State Zip Code 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 Offering Circular
dated XXXX xx, 1996 and that I have reviewed all provisions therein and
understand I may not change or revoke my order once it is received by Dearborn
Savings Association. 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. Dearborn Savings Association 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 this
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.
- --------------------------------------------------------------------------------
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 Offering Circular. 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 Stock Information Center at (xxx) xxx-xxxx.
- --------------------------------------------------------------------------------
Signature Title (if applicable) Date
- --------------------------------------------------------------------------------
Signature Title (if applicable) Date
- --------------------------------------------------------------------------------
THE SHARES OF COMMON STOCK 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.
- --------------------------------------------------------------------------------
Date Rec'd ______________ Order # ____________ Batch # _________
OFFICE USE Check # ________________ Category ___________
Amount $ ________________ Initials ___________
STOCK INFORMATION CENTER
118 Walnut Street
Lawrenceburg, Indiana 47025-1838
(812) XXX-XXXX
<PAGE>
DEARBORN
SAVINGS ASSN.
Stock Ownership Guide
- --------------------------------------------------------------------------------
Individual- The Stock is 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 stock is 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
stock is to be held by tenants in common, upon the death of one co-tenant,
ownership of the stock will be held by the surviving co-tenant(s) and by the
heirs of the deceased co-tenant. All parties must agree to the transfer or sale
of shares held by tenants in common. You may not list beneficiaries for this
ownership.
Individual Retirement Account- Individual Retirement Account ("IRA") holders
may make stock purchases from their deposits through a prearranged
"trustee-to-trustee" transfer. Stock may only be held in a self-directed IRA.
Dearborn Savings Association does not offer a self-directed IRA. Please contact
the Stock Information Center 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 state, stock 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, stock 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 id the actual owner of the stock with the adult
custodian being responsible for the investment until the child reaches legal
age.
Instructions: See your legal advisor if you are unsure about the correct
registration of your stock.
On the first line, print the first name, middle initial and last name of the
custodian, with the abbreviation "CUST" after the name. 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 stock. 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 stock 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 stock 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 stock 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 is defined to mean (i) any corporation or
other organization (other than the Primary Parties or a majority owned
subsidiary of the Bank) of which such person is a director, officer or partner
or is directly or indirectly the beneficial owner of 10% or more of any class of
equity securities; (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves a trustee or
in a similar fiduciary capacity, provided, however, that such term shall not
include any tax-qualified employee stock benefit plan to the Primary Parties in
which such person has a substantial beneficial interest or serves as a trustee
or in a similar fiduciary capacity; and (iii) any relative or spouse of such
person, or any relative of such person, who either has the same home as such
person or who is a director or officer of the Primary Parties or any of their
subsidiaries.
<PAGE>
CERTIFICATION FORM
(This Form Must Accompany A Signed Stock Order Form)
I ACKNOWLEDGE THAT THE SHARES OF COMMON STOCK, $0.01 PAR VALUE PER SHARE
("COMMON STOCK"), OF DEARBORN SAVINGS ASSOCIATION ("DEARBORN SAVINGS") ARE NOT
FEDERALLY INSURED AND ARE NOT GUARANTEED BY, DEARBORN SAVINGS OR THE FEDERAL
GOVERNMENT.
If anyone asserts that the shares of Common Stock 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 shares of Common Stock of
Dearborn Savings, I received a copy of the Offering Circular dated, XXXXX xx,
1996 which discloses the nature of the shares of Common Stock being offered
thereby and describes the following risks involved in an investment in the
Common Stock under the heading "Risk Factors" beginning on page X of the
Offering Circular:
1. Supervisory Agreement
2. Adequacy of Loan Loss Allowance
3. Recent Operating Income Levels
4. Sensitivity to Changes in Interest Rates
5. Absence of Active Market for the Common Stock
6. Possible Dilutive Effect of Stock Options and Restricted Stock and Effects
on Earnings
7. Post Conversion Overhead Expense
8. Voting Control by the Board, Management and Employee Plans
9. Takeover Defensive Provisions
10. Regulatory Oversight
11. Competitive Disadvantage Caused by the Current Disparity Between BIF and
SAIF Deposit Insurance Premiums
12. Risk of Delayed Offering
__________________ __________________
| signature | | signature |
| | | |
| | | |
|__________________| |__________________|
(Note: If stock is to be held jointly, both parties must sign)
Date:
--------------------
<PAGE>
DEARBORN
SAVINGS ASSN.
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 amount in the Conversion by any person is xxx
shares in the Subscription and Community Offering. No person, together with
associates of and persons acting in concert with such person, may purchase more
than xxxx shares of the Common Stock in the Subscription Offering.
Dearborn Savings Association 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 Dearborn Savings
Association. 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 Dearborn
Savings Association. Your funds will earn interest at Dearborn Savings
Association's passbook rate, currently xxx% per annum.
Item 4- To pay by withdrawal from a savings account or certificate at Dearborn
Savings Association, 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 tom purchase our stock. A
hold will be placed on the account(s) for the amount(s) you show. Payments
will remain in certificate account(s) until the stock 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
at the passbook rate.
Item 5- Please check this box if you were a depositor on the Eligibility Record
Date (March 31, 1995), and/or a depositor on the Supplemental Eligibility Record
Date (September 30, 1996) or a depositor on the Voting Record Date (XXXX, 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 Dearborn Savings
Association common stock. Print the name(s) in which you want the stock
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 describe din the Offering
Circular, 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 Accounts) Account Number
|----------------------------------------------|----------------|
| | |
|----------------------------------------------| |
| | |
|----------------------------------------------|----------------|
| | |
|----------------------------------------------| |
| | |
|----------------------------------------------|----------------|
| | |
|----------------------------------------------| |
| | |
|----------------------------------------------|----------------|
EXHIBIT 99.5
[CHARLES WEBB & COMPANY LETTERHEAD]
To Members and Friends of
Dearborn Savings Association, F.A.
Charles Webb & Company, a member of the National Association of Securities
Dealers, Inc. ("NASD"), is assisting Dearborn Savings Association, F.A.
(the "Association") and Vision Bancorp, Inc., (the "Company") with their
reorganization into the stock holding company structure with its concurrent
offering of shares of Common Stock.
At the request of the Company, we are enclosing materials explaining this
process and your opportunity to invest in shares of the Company's Common
Stock being offered to customers, existing stockholders and the community
through XXXXXXX XX, 1996. Please read the enclosed offering materials carefully.
The Company has asked us to forward these documents to you in view of certain
requirements of the securities laws in your state.
If you have any questions, please visit our Stock Information Center at
118 Walnut Street, Lawrenceburg, Indiana or feel free to call the Stock
Information Center at (812) XXX-XXXX.
Very truly yours,
Charles Webb & Company
<PAGE>
(RECEIPT OF ORDER LETTER - DEARBORN LETTERHEAD)
Date
Name
Address Tax I.D. Number XXX-XX-XXX
City, State, Zip
Receipt of Order
This letter is to acknowledge receipt of your order to purchase stock offered by
Dearborn Savings Association. Please check the following information carefully
to ensure that we have entered your order correctly. Each order is assigned a
prioritized category described below. Acceptance of your order will be subject
to the allocation provisions of the Plan of Conversion, as well as other
conditions and limitations described in the Prospectus.
Our records indicate the following:
Number of Shares Ordered: ______
Purchase Price Per Share: $10.00
Total Order Amount: $_____
Date Order Received: __/__/__
Category Assigned:
Category Description
--------------------
1. Eligible Account Holders as of March 31, 1995
2. Employee Stock Ownership Plan (ESOP)
3. Supplemental Eligible Account Holders as of
September 30, 1996
4. Other Members as of Voting Record Date
5. Directors, Officers and Employees of the Mutual Holding
Company and Bank
6. Shareholders
7. Local Community Members who reside in Dearborn county in
Indiana.
8. General Public
If this does not agree with your records or if you have any questions, please
call our Stock Information Center at (812) xxx-xxxx. Thank you for your order.
Sincerely,
Donald C. Siemers
President and Chief Executive Officer
<PAGE>
XXXXXX XX, 1996
Dear Friend:
We are pleased to inform you that the Boards of Directors of Dearborn
Savings Association, F.A. (the "Association") and Dearborn Mutual Holding
Company (the "Mutual Association") have adopted a Plan of Conversion and
Reorganization (the "Plan of Conversion"). The Association has organized Vision
Bancorp, Inc., (the "Company") which will own all of the Association's stock.
Pursuant to the Plan of Conversion, the existing shareholders of the Association
(other than the MHC) will be issued shares of the Mutual Association's Common
Stock in exchange for their shares of Association Common Stock (the "Share
Exchange"). The Share Exchange will result in those shareholders owning in the
aggregate the same percent of the Mutual Association as they owned in the
Association. In addition to the shares of Company stock to be issued in the
Share Exchange, the Company is also offering up to XXXXXX shares of Common Stock
to the Mutual Association's members, the Association's stockholders and members
of the public. Consummation of the Plan of Conversion is subject to (i) the
approval of the members of the Mutual Association, (ii) the approval of the
stockholders of the Association, and (iii) various regulatory approvals.
Because we believe you may be interested in learning more about the
merits of Vision Bancorp, Inc.'s common stock as an investment, we are sending
you the following materials which describe the stock offering.
PROSPECTUS: This document provides detailed information about
operations at the Association and the proposed stock offering.
QUESTIONS AND ANSWERS: Key questions and answers about the stock
offering are found in this pamphlet.
STOCK ORDER FORM: This form is used to purchase stock by returning it
with your payment in the enclosed business reply envelope. The deadline
for ordering stock is XXX p.m., XXXXX XX, 1996.
CERTIFICATION FORM: This form must be completed and returned with the
stock order form in the enclosed business reply envelope if you wish to
purchase stock.
As a friend of Dearborn Savings Association, you will have the
opportunity to buy stock directly from Dearborn Mutual Holding Company without
commission or fee. The Board of Directors and senior management of the
Association support the stock offering.
If you have additional questions regarding the Conversion and stock offering,
please call us at (812) xxx-xxxx, Monday through Friday from x:00 a.m. to x:00
p.m. or stop by the Stock Information Center at 118 Walnut Street, Lawrenceburg,
Indiana.
Sincerely,
Donald C. Siemers
President and Chief Executive Officer
THE SHARES OF COMMON STOCK BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK
INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL
AGENCY. THIS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY STOCK.
THE OFFER IS MADE ONLY BY THE PROSPECTUS.
<PAGE>
[OVERSUBSCRIPTION LETTER-CHECK, VISION BANCORP, INC. LETTERHEAD]
XXXX XX, 1996
Dear Subscriber:
I want to thank you for your interest in Vision Bancorp, Inc. common shares. We
are extremely proud of the overwhelming support we received from our customers
and the community as we successfully completed the sale of 000,000 shares of
common stock.
However, due to the oversubscription of our common shares during the
Subscription Offering, we regret we were unable to fill a portion of your order.
Enclosed is a refund check for the amount of your order we were unable to fill
plus interest. The stock certificates for the balance of your order are being
sent to you directly from our transfer agent, [Name of Transfer Agent].
If you continue to be interested in acquiring common shares of Vision Bancorp,
Inc., the following brokerage firms have indicated their intent to make a market
in our stock. You may contact any of them for assistance.
[List of Market Makers]
Again, thank you for your interest. If you have any questions, please do not
hesitate to contact me.
Sincerely,
Donald C. Siemers
President and Chief Executive Officer
<PAGE>
XXXXXXX XX, 1996
Dear Stockholder:
It is my pleasure to welcome you as a stockholder of Vision Bancorp,
Inc. the newly formed holding company for Dearborn Savings Association. We are
extremely proud of the overwhelming support we received from our customers and
the community as we successfully completed the sale of 0,000,000 common shares.
In connection with the formation of Vision Bancorp, Inc., the
outstanding shares of common stock of Dearborn Savings Association will be
canceled and converted into common shares of Vision Bancorp, Inc. pursuant to a
ratio of 0.0000 shares for every one (0) share of Dearborn Savings Association.
This will result in exchange shares of 000,000. Vision Bancorp, Inc. will now
have 0,000,000 common shares outstanding.
Your new stock certificate is enclosed and should be kept in a safe
place. Please take a moment to be sure the name(s), number of shares, and
mailing address are correct.
We have selected Registrar and Transfer Company to serve as our
Transfer Agent and Registrar. If there is an error on your stock certificate, if
your address changes, or if at any time you want to change the registration of
your certificate, you should contact Registrar and Transfer at the address
listed below:
Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ 07016
(800) 368-5948
If you need to send the original certificate to the Transfer Agent to
be reissued for any reason, please send the certificate registered mail. Lost or
destroyed certificates can be replaced, but an indemnity bond will be required
to replace the certificate.
Please be advised that Vision Bancorp, Inc., will be traded under the
symbol VIBA on the Nasdaq SmallCap Market. Should you be interested in
purchasing additional shares or selling your shares of Vision Bancorp, Inc., the
attached page lists brokerage firms that have indicated their intent to make a
market in our stock. You may contact any of them for assistance.
<PAGE>
xxxxxx xx, 1996
Page 2
If you purchased your shares with a check or cash, you will receive a
check for payment of the interest earned on those funds in a separate mailing.
If you purchased your shares using your Dearborn Savings Association account,
the funds will be withdrawn on xxxxxx xx, 1996.
On behalf of Vision Bancorp, Inc., Dearborn Savings Association, their
Boards of Directors and employees, we look forward to the opportunities now
ahead of us and pledge our best efforts to make your investment a profitable
one.
Sincerely,
Donald C. Siemers
President and Chief Executive Officer
<PAGE>
North Central Bancshares, Inc., market makers as of xxxxxx xx, 1996:
The Chicago Corporation Mayer & Schweitzer, Inc.
Russ Feltes Kevin McKeon
208 South LaSalle Street 111 Pavonia Avenue East
Chicago, IL 60604 Jersey City, NJ 07310
(800) 621-0686 (212) 804-3354
Friedman, Billings, Ramsey & Gruntal & Co., Inc.
Company, Inc. Richard Schlesinger
Martin Friedman 1000 Northern Blvd.
Potomac Tower Great Neck, NY 11021
1001 19th Street North (800) 223-6813
Arlington, VA 22209
(703) 312-9525
Herzog, Heine, Geduld, Inc. Oppenheimer & Co.
Bill Barrett Kurt Thompson
26 Broadway 311 South Wacker Street
New York, NY 10004 Chicago, IL 60606
(212) 908-4100 (312) 360-5500
<PAGE>
[CLOSING LETTER, DEARBORN SAVINGS ASSOCIATION, F.A. LETTERHEAD]
xxxxxx xx, 1996
Dear Subscriber:
I want to thank you for your interest in Vision Bancorp, Inc. common shares. We
are extremely proud of the overwhelming support we received from our customers
and the community as we successfully completed the sale of ___________ shares of
common stock.
However, due to the oversubscription of our common shares during the
Subscription Offering, we regret we were unable to fill either a portion of your
order or the entire order. Enclosed is a refund check for the amount of your
order we were unable to fill plus interest. If you are receiving a partial
refund, the stock certificates for the balance of your order are being sent to
you directly from our transfer agent, Registrar and Transfer Company
If you are still interested in acquiring common shares of Vision Bancorp, Inc.,
the following brokerage firms have indicated their intent to make a market in
our stock. You may contact any of them for assistance.
[List of Market Makers]
Again, thank you for your interest. If you have any questions, please do not
hesitate to contact me.
Sincerely,
Donald C. Siemers
President and Chief Executive Officer
EXHIBIT 99.6
QUESTIONS
and
ANSWERS
VISION
BANCORP, INC.
<PAGE>
Facts About the Conversion
The Boards of Directors of Dearborn Savings Association ("Dearborn", or
the "Association"), Dearborn Mutual Holding Company (the "MHC") and Vision
Bancorp, Inc. (the "Company") have adopted a Plan of Conversion and Agreement
and Plan of Reorganization (the "Plan of Conversion"), pursuant to which the MHC
and Dearborn will reorganize from the mutual holding company structure to the
stock holding company structure (the "Conversion").
This brochure answers some of the most frequently asked questions about
the Conversion into the stock holding company structure and about your
opportunity to invest in Vision Bancorp, Inc., the proposed stock holding
company for Dearborn.
Investment in the stock involves certain risks. For a discussion of
these risks and other factors, investors are urged to read the accompanying
Prospectus, including the section entitled "Risk Factors."
Why are the MHC and Dearborn converting to the stock holding company structure?
The stock holding company structure is a more common form of ownership
than the mutual holding company structure and offers the ability to diversify
the Company's and the Bank's business activities. The Conversion will increase
the capital base of the Bank and the number of outstanding shares, which will
increase the likelihood of the development of an active and liquid market for
its common stock.
Will the Conversion affect any of my deposit accounts or loans?
No. The Conversion will have no effect on the balance or terms of any
deposit or loan, and your deposits will continue to be federally insured by the
Federal Deposit Insurance Corporation ("FDIC") to the maximum legal limit.
Who is eligible to purchase stock in the subscription and community offerings?
Depositors and borrowers of Dearborn as of certain dates, Dearborn's
Employee Stock Ownership Plan, Dearborn's public stockholders and members of the
general public.
<PAGE>
How many shares of stock are being offered in the Subscription and Community
Offerings and at what price?
Vision Bancorp, Inc. is offering up to XXXXXX shares of Common Stock at
a price of $10.00 per share through the Prospectus. Under certain circumstances
the Company may sell up to XXXXX shares.
I am an existing stockholder. How will my stock be treated?
The Plan of Conversion ensures that existing shareholders of the Bank
will own the same aggregate percentage of the Company's common stock as they
previously owned of the Bank. Shares of common stock of the Bank will be
converted into shares of the common stock of the Company pursuant to an Exchange
Ratio. Depending upon the number of shares sold in the Offering, the Exchange
Ratio will range from approximately XXXXX to XXXXX exchange shares of Company
Common Stock for each share of Bank Common Stock.
How much stock may I buy?
The minimum order is 25 shares ($250). The maximum purchase for any
person, including associates or persons acting in concert with such person, is
$xxxxx (xxxxxx shares), including any exchange shares to which such person may
be entitled as a shareholder of the Bank.
Do members have to buy stock?
No. However, the Conversion will allow Dearborn's depositors and
borrowers an opportunity to buy stock and become stockholders of the Company.
How do I order stock?
You must complete the enclosed Stock Order Form and Certification Form
and return them so that they are received by Dearborn with payment by 5:00 p.m.,
Eastern Time, on XXXXX 1996.
How may I pay for my shares of stock?
First, you may pay for stock by check, cash or money order. Cash
payments must be tendered in person at any branch of Dearborn where a bank check
will be issued. Interest will be paid by Dearborn on these funds at the passbook
rate, from the day the funds are received until the completion or termination of
the Conversion.
Second, you may authorize us to withdraw funds from your Dearborn
savings account or certificate of deposit for the amount of funds you
specify for stock payment. You will not have access to these funds from the day
we receive your order until the completion or termination of the Conversion,
although you will continue to earn interest on the balance. Dearborn will waive
any early withdrawal penalties from certificate accounts.
Third, you may use funds from an account with checking privileges by
simply writing a check.
<PAGE>
Must I pay a commission?
No. You will not be charged a commission or fee on the purchase of
shares in the Conversion.
Can I purchase shares using funds in my Commonwealth IRA account?
Yes, however, federal regulations do not permit the direct purchase of
conversion stock from your existing Commonwealth IRA account. Purchasing shares
of stock through the offering using IRA funds requires the use of a
self-directed IRA account. To accommodate our depositors, we have made
arrangements with an outside trustee to allow such purchases through a
trustee-to-trustee transfer. Please note that self-directed IRA accounts held at
brokerage houses or other outside custodians may incur initial and/or annual
fees. Please call our Stock Information Center as soon as possible for
additional information if you are interested in purchasing shares with IRA
funds.
Will the stock be insured?
No. Like any other common stock, the Company's stock will not be
insured by the Federal Deposit Insurance Corporation or any other government
agency.
Will dividends be paid on the stock?
The Board of Directors of the Company intends to declare cash dividends
on the common stock at an initial quarterly rate equal to $XXX per share divided
by the exchange ratio, commencing with the first full quarter following
consummation of the Conversion and Reorganization. Based upon the valuation
price range and related exchange ratios, the resulting initial quarterly
dividend rate would range from $0.xxx to $0.xxx per share. There can be no
assurance that dividends will in fact be paid on the common stock or that, if
paid, such dividends will not be reduced or eliminated in the future.
How will the stock be traded?
Vision Bancorp, Inc. has applied to have the common stock quoted on the
Nasdaq National Stock Market under the symbol "VIBA." While the Bank's common
stock currently trades on Nasdaq, and it is expected that the Company's common
stock will be more liquid, there can be no assurances given that an active and
liquid market will develop or that the common stock will trade at or above the
purchase price in the offering.
<PAGE>
Should I vote my proxy?
The Conversion will produce a fundamental change in the Mutual Holding
Company's corporate structure. The Boards of Directors of the MHC and of
Dearborn unanimously recommend that members of the MHC and stockholders of
Dearborn vote FOR the Plan of Conversion. Because we need a majority affirmative
vote, it is very important that you vote. Members of the MHC who do not vote
will have the same effect as a vote against the Plan of Conversion.
May I vote in person at the special meetings?
Yes, but we would still like you to sign and mail your proxy today. If
you then attend either the members or stockholders meeting, you may still chose
to vote in person at the meeting by revoking your previously executed proxy.
FOR ADDITIONAL INFORMATION, YOU MAY CALL OUR STOCK INFORMATION CENTER AT
(812) XXX-XXXX,
XXX a.m. and XXX p.m., Eastern Time,
Monday through Friday.
The shares of common stock offered in the Conversion are not savings accounts or
deposits and are not insured by the Federal Deposit Insurance Corporation or any
other government agency. This is not an offer to sell or a solicitation of an
offer to buy stock. The offer is made only by the Prospectus. Complete details
of the Conversion, including reasons for the Conversion, can be found in the
Prospectus and Proxy Materials. We ask that you read them carefully.
