<PAGE>
As filed with the Securities and Exchange Commission on November 6, 1996
Registration No. 333-13495
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO THE FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
IFB HOLDINGS, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 6712 43-1760023
(State or Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Industrial Classification Code Identification No.)
Organization) Number)
522 Washington Street
Chillicothe, MO 64601
(816) 646-3733
(Address and Telephone Number of Principal Executive Offices)
522 Washington Street
Chillicothe, MO 64601
(Address of Principal Place of Business or Intended Principal Place of Business)
Earle S. Teegarden, Jr.
522 Washington Street
Chillicothe, MO 64601
(816) 646-3733
(Name, Address and Telephone Number of Agent for Service)
Copies to:
Robert I. Lipsher, Esq.
Robert B. Pomerenk, Esq.
Luse Lehman Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W.
Suite 400
Washington, D.C. 20015
Approximate date of proposed sale to the public: As soon as practicable after
this registration statement becomes effective.
If this Form is filed to register additional shares for an offering pursuant to
Rule 462(b) under the Securities Act please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
======================================================================================================================
<S> <C> <C> <C> <C> <C>
Proposed Proposed
Amount to be maximum maximum
Title of each class of registered offering price aggregate Amount of
securities to be registered per share offering price registration fee
(1) (2)
- ----------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value per share 297,562 $20.00 $5,951,240 $1,804
======================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) A filing fee of $1,807 was paid with the initial filing of the Registration
Statement.
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 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 Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
PROSPECTUS
IFB HOLDINGS, INC.
(Proposed Holding Company for Investors Federal Bank and Savings Association, to
become Investors Federal Bank, National Association)
Up to 258,750 Shares of Common Stock
(Anticipated Maximum)
IFB Holdings, Inc. (the "Holding Company"), a Delaware corporation, is
offering up to 258,750 shares of its common stock, par value $.01 per share (the
"Common Stock"), in connection with the conversion of Investors Federal Bank and
Savings Association ("Investors Federal" or the "Bank"), from a federally
chartered mutual savings association to a federally chartered stock savings
bank, and the issuance of all of Investors Federal's outstanding capital stock
to the Holding Company pursuant to the Bank's Plan of Conversion (the "Plan" or
"Plan of Conversion"). The simultaneous conversion of the Bank to stock form,
the issuance of Investors Federal's outstanding common stock to the Holding
Company and the Holding Company's sale of its Common Stock are referred to
herein as the "Stock Conversion." As soon as possible following completion of
the Stock Conversion pursuant to the Plan, the Bank intends to convert from a
federal stock savings bank (the "Converted Bank") to a national bank (the "Bank
Conversion") to be known as Investors Federal Bank, National Association (the
"National Bank"). The purpose of the Bank Conversion is to provide the Bank with
additional operating flexibility and to enhance its ability to provide a full
range of banking products and services to its community. It is presently the
intent
(continued on following page)
FOR INFORMATION ON HOW TO SUBSCRIBE FOR SHARES OF COMMON STOCK, CALL THE STOCK
INFORMATION CENTER AT
(816) ________
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR, SEE "RISK FACTORS" BEGINNING ON PAGE ___
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION, OR ANY OTHER FEDERAL
AGENCY OR ANY STATE SECURITIES COMMISSION, NOR HAS SUCH COMMISSION, OFFICE OR
OTHER AGENCY OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION ("FDIC"), THE BANK INSURANCE FUND ("BIF"), THE SAVINGS ASSOCIATION
INSURANCE FUND ("SAIF") OR ANY OTHER GOVERNMENT AGENCY.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Estimated Underwriting Fees and
Purchase Price(1) Other Expenses(2) Estimated Net Proceeds(2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum Per Share........ $20.00 $1.93 $18.07
- -----------------------------------------------------------------------------------------------------------------------
Midpoint Per Share....... $20.00 $1.69 $18.31
- -----------------------------------------------------------------------------------------------------------------------
Maximum Per Share........ $20.00 $1.47 $18.53
- -----------------------------------------------------------------------------------------------------------------------
Maximum Per Share, as
adjusted(3)............. $20.00 $1.28 $18.72
- ----------------------------------------------------------------------------------------------------------------------
Total Minimum............ $3,825,000 $368,512 $3,456,488
- ----------------------------------------------------------------------------------------------------------------------
Total Midpoint........... $4,500,000 $380,000 $4,120,000
- ----------------------------------------------------------------------------------------------------------------------
Total Maximum............ $5,175,000 $380,000 $4,795,000
- ----------------------------------------------------------------------------------------------------------------------
Total Maximum, as
adjusted(3)............. $5,951,240 $380,000 $5,571,240
- ----------------------------------------------------------------------------------------------------------------------
(footnotes on second following page)
</TABLE>
TRIDENT SECURITIES, INC.
The date of this Prospectus is November __, 1996.
<PAGE>
(continued from preceding page)
of the Bank's Board of Directors to proceed with both the Conversion and the
Bank Conversion. However, there can be no assurance that the Bank will obtain
regulatory approval to consummate the Bank Conversion, that any such approval
might not contain burdensome conditions, that there will be no significant delay
in obtaining such approvals, or that other developments will not occur that
cause the Board of Directors to conclude that the Bank Conversion is not in the
best interests of the Holding Company and its stockholders. Under these
circumstances, the Board of Directors may elect not to proceed with the Bank
Conversion. See "Risk Factors--Potential Delay in Completion or Denial of Bank
Conversion." The Conversion and the Bank Conversion are herein collectively
referred to as the "Conversion". References herein to the Bank refer to
Investors Federal both in its mutual and stock form as the context may indicate.
Non-transferable rights to subscribe for the Common Stock have been
granted, in order of priority, to (i) the Bank's deposit account holders with
deposits of at least $50 as of June 30, 1995 ("Eligible Account Holders"), (ii)
tax-qualified employee stock benefit plans of the Bank ("Tax Qualified Employee
Plans"), (iii) the Bank's deposit account holders with deposits of at least $50
as of September 30, 1996 ("Supplemental Eligible Account Holders") (iv) certain
other depositors as of _______, 1996 ("Other Members"), and (v) officers,
directors and employees of the Bank in a subscription offering (the
"Subscription Offering"). Pursuant to Office of Thrift Supervision ("OTS")
regulations, these subscription rights are non-transferable. Persons violating
this prohibition against transfer may lose their right to purchase stock in the
Stock Conversion and be subject to other possible sanctions. Concurrently with,
during, or following the Subscription Offering, and subject to the prior rights
of holders of Subscription Rights, any shares of Common Stock not subscribed for
in the Subscription Offering are being offered in a community offering to
certain members of the general public to whom a prospectus is delivered (the
"Community Offering"). It is anticipated that shares of Common Stock not
subscribed for in the Subscription and Community Offerings may be offered at the
discretion of the Holding Company to certain members of the general public as
part of a community offering on a best efforts basis by a selling group of
broker-dealers managed by Trident Securities, Inc. (the "Syndicated Community
Offering"). The Subscription, Community and Syndicated Community Offerings are
referred to collectively as the "Offerings."
The Bank's Employee Stock Ownership Plan ("ESOP") intends to subscribe
for up to 8% of the total number of shares of Common Stock issued in the Stock
Conversion; however, the Bank reserves the right to have all or part of the
order of the ESOP filled by purchases in the open market, subject to OTS
approval, if required. Shares sold above the maximum of the Estimated Valuation
Range (as hereinafter defined) may be sold to the ESOP to fill its subscription
(prior to filling any other orders). With the exception of the ESOP, no
individual Eligible Account Holder, Supplemental Eligible Account Holder or
Other Member may purchase in the Subscription Offering shares of Common Stock
having an aggregate purchase price which exceeds $100,000 of the shares sold
in the Stock Conversion; no individual person or other entity, together with
associates of and persons acting in concert with such person, may purchase in
the Community Offering and the Syndicated Community Offering shares of Common
Stock having an aggregate purchase price which exceeds $100,000 of the shares
sold in the Stock Conversion; and no person, together with associates and
persons acting in concert with such person, may purchase in the aggregate shares
of Common Stock having an aggregate purchase price which exceeds the lesser of
$200,000 or five percent of the shares sold in the Stock Conversion. However,
the Bank and the Holding Company in their sole discretion may increase or
decrease the purchase limitations without notice to members or subscribers,
provided that the aggregate purchase limit may not be reduced below 1.0% of the
shares offered. The minimum purchase is 25 shares. See "The Stock Conversion--
Offering of Holding Company Common Stock--Limitations on Purchase of Shares."
The Holding Company may, in its absolute discretion, accept or reject,
in whole or in part, any or all orders in the Community Offering or Syndicated
Community Offering at the time of receipt of an order or as soon as practicable
following the completion of such offerings. All orders submitted are irrevocable
until completion or termination of the Stock Conversion. Subscriptions paid by
cash, check, bank draft or money order will be placed in a segregated account at
Investors Federal and will earn interest at the rate of ____%, the rate
currently paid by Investors Federal on passbook savings accounts, from the date
of receipt until completion or termination of the Stock Conversion. Payments may
be authorized by withdrawal from deposit accounts at Investors Federal without
penalty and will continue to earn interest at the contractual rate until the
Stock Conversion is completed or
<PAGE>
terminated; these funds will be otherwise unavailable to the depositor until
such time. See "The Conversion-- Subscription Offering" and "--Community
Offering."
The Holding Company must receive an original stock order form (the
"Stock Order Form") (facsimile copies and photocopies will not be accepted) and
a fully executed separate Certification Form together with full payment (or
appropriate instructions authorizing a withdrawal from a deposit account at the
Bank) of $20.00 per share for all shares for which subscription is made, at the
executive office of the Bank, 522 Washington Street, Chillicothe, Missouri, by
Noon, Central Time, on December ___, 1996. Payment for shares of Common Stock
by wire transfer will not be accepted.
The Subscription Offering will terminate at Noon, Central Time, on
December ___, 1996 (the "Expiration Date"), unless extended at the discretion of
the Holding Company and the Bank without notice to subscribers, with the
approval of the OTS, if necessary. The Community Offering may commence
simultaneously with, during, or following the completion of the Subscription
Offering and may terminate on the Expiration Date or any date thereafter at the
discretion of the Bank and the Holding Company but not later than 45 days after
the Expiration Date unless extended with the approval of the OTS. The Syndicated
Community Offering may commence subsequent to the Subscription and Community
Offerings and may terminate on any date at the discretion of the Bank and the
Holding Company but not later than 45 days after the Expiration Date unless
extended with the approval of the OTS.
If the Offerings are extended beyond 45 days after the Expiration Date
(i.e., February __, 1997), all subscribers will be notified of such extension,
of their rights to modify or confirm their subscriptions or to rescind their
subscriptions and have their funds returned promptly with interest, and of the
time period within which the subscriber must notify the Bank of his intention to
modify, confirm or rescind his subscription. In the event the value of an
updated independent appraisal of the pro forma market value of the Holding
Company and the Bank, as converted, is less than $3,825,000 or more than
$5,951,240 and the Holding Company determines to sell an amount outside of this
range to its subscribers, all subscribers must be resolicited with an updated
prospectus. The failure of a subscriber to notify the Bank of his intention
during a resolicitation will be deemed a rescission of the subscription and the
funds will be returned promptly with interest. Under applicable OTS regulations,
the Stock Conversion must be completed or terminated no later than 24 months
from the approval of the Stock Conversion by the Bank's members.
The Holding Company and the Bank have engaged Trident Securities, Inc.
("Trident Securities") to consult with and advise the Bank and the Holding
Company in connection with the Stock Conversion and with the sale of shares of
the Common Stock in the Offerings. In addition, in the event the Common Stock is
not fully subscribed for in the Subscription and Community Offerings, Trident
Securities will manage the Syndicated Community Offering. Neither Trident
Securities nor any other broker-dealers will have any obligation to purchase or
accept any shares of Common Stock in the Conversion. See "The Conversion" and "-
- -Marketing Arrangements."
There is currently no market for the Common Stock, and it is unlikely
that an active and liquid trading market for the Common Stock will develop. The
Holding Company has requested Trident Securities to undertake to match buy and
sell orders for the Common Stock and to list the Common Stock over-the-counter
through the National Daily Quotation System "Pink Sheets," and Trident
Securities has agreed to do so. There can be no assurance that purchasers will
be able to sell their shares at or above the Purchase Price after the Stock
Conversion. See "Market for the Common Stock."
_____________________
(footnotes for preceding table)
(1) Determined in accordance with an independent appraisal prepared by Ferguson
& Co., LLP ("Ferguson") as of September 20, 1996. The estimated pro forma
market value of the Holding Company and the Bank, as converted, ranges from
$3,825,000 to $5,175,000 ("Estimated Valuation Range") or between 191,250
and 258,750 shares of Common Stock at the purchase price of $20.00 per
share, which is the amount established by the Board of Directors to be paid
for each share of Common Stock sold in the Offerings ("Purchase Price").
See "The Conversion--Stock Pricing and Number of Shares to be Issued." The
valuation by Ferguson is not intended and must not be construed as a
recommendation of any kind as to the advisability of voting to approve the
Stock Conversion or of purchasing shares of Common
<PAGE>
Stock. Moreover, because the valuation is necessarily based upon estimates
of and projections as to a number of matters (including certain assumptions
as to expense factors affecting the net proceeds from the sale of Common
Stock in the Stock Conversion and as to the net earnings on such net
proceeds), all of which are subject to change from time to time, no
assurance can be given that persons who purchase such shares in the Stock
Conversion will be able to sell such shares thereafter at or above the
Purchase Price.
(2) Consists of the estimated expenses of $380,000 (assuming the sale of
225,000 shares at the midpoint of the Estimated Valuation Range), which
includes, among other things, printing, postage, legal, accounting,
appraisal and filing fees. These expenses also include financial advisory
and marketing fees to be paid to Trident Securities of $62,715 (assuming
the sale of 225,000 shares at the midpoint of the Estimated Valuation
Range). Such fees may be deemed to be underwriting fees, and Trident
Securities may be deemed to be an underwriter. Actual expenses and, thus,
net proceeds, may be more or less than estimated amounts. The Holding
Company and the Bank have agreed to indemnify Trident Securities against
certain liabilities, including liabilities that may arise under the
Securities Act of 1933 (the "Securities Act"). See "Pro Forma Data" and
"The Stock Conversion--Marketing Arrangements."
(3) Gives effect to an increase in the number of shares sold which could occur
without a resolicitation of subscribers or any right of cancellation due to
an increase in the Estimated Valuation Range of up to 15% above the maximum
of the Estimated Valuation Range to reflect changes in market and financial
conditions following commencement of the Offerings or to fill in part or in
whole the order of the ESOP. See "The Stock Conversion--Stock Pricing and
Number of Shares to be Issued."
<PAGE>
[INSERT MAP HERE]
The Stock Conversion is contingent upon the approval of the Plan by the members
of the Bank, the sale of at least the minimum number of shares of Common Stock
to be issued pursuant to the Plan of Conversion and the receipt of all
applicable regulatory approvals.
<PAGE>
PROSPECTUS SUMMARY
The following summary does not purport to be complete. It is qualified in
its entirety by the detailed information and Consolidated Financial Statements
and Notes thereto appearing elsewhere in this Prospectus. The purchase of Common
Stock is subject to certain risks. See "Risk Factors."
Investors Federal Bank and Savings Association
Investors Federal is a federally chartered mutual savings association
headquartered in Chillicothe, Missouri. Investors Federal was originally
chartered as a federal savings association in 1934 under the name Chillicothe
Federal Savings and Loan Association. In 1974, the Bank changed its name to
Investors Federal Savings and Loan Association, and in 1988 the Bank changed its
name to Investors Federal Bank and Savings Association. Its deposits are insured
up to the maximum allowable amount by the SAIF of the FDIC. Through its main
office in Chillicothe and its branch offices in Hamilton and Gallatin, Missouri,
Investors Federal primarily serves communities located in Livingston, Caldwell
and Daviess Counties in the State of Missouri. At June 30, 1996, Investors
Federal had total assets of $52.6 million, deposits of $35.5 million and total
equity of $3.3 million.
Investors Federal has been, and intends to continue to be, a community-
oriented financial institution offering selected financial services to meet the
needs of the communities it serves. The Bank attracts deposits from the general
public and historically has used such deposits, together with other funds, to
originate and purchase one-to four-family residential mortgage loans, and to
originate non-residential real estate loans (primarily farm loans), and consumer
loans consisting primarily of loans secured by automobiles. In addition, in
recent years, the Bank has expanded its loan portfolio by purchasing Small
Business Administration ("SBA")-guaranteed loans and Federal Housing
Administration ("FHA")-insured Title I home improvement loans. At June 30, 1996,
the Bank's total loan portfolio was $28.7 million, of which 79.5% were one- to
four-family residential mortgage loans, 6.8% were non-residential real estate
loans, 9.0% were consumer loans (including FHA home improvement loans), and 3.4%
were SBA-guaranteed loans.
During the year ended June 30, 1996, the Bank originated $2.1 million of
fixed-rate and $3.1 million of adjustable rate one-to four-family residential
mortgage loans, all of which were retained in the Bank's portfolio. See
"Business - Lending Activities." To supplement local loan production, the Bank
has purchased adjustable-rate loans in the secondary mortgage market on a non-
recourse basis, with servicing retained by the seller or originator of the
loans. In recent years, the Bank has limited its purchased loans to one- to
four-family residential mortgage loans secured by collateral located in the
State of Missouri, although the Bank's purchased loan portfolio includes
seasoned one- to four-family residential mortgage loans secured by collateral
located outside Missouri. Purchased one- to four-family residential mortgage
loans totaled $7.2 million, or 25.0%, of the Bank's total loan portfolio at June
30, 1996.
Because of the limited lending opportunities in its local market area
and to the extent adjustable-rate one-to four-family residential mortgage loans
are unavailable for purchase at attractive yields, the Bank will invest in
mortgage-backed securities and other investment securities. At June 30, 1996,
the Bank's portfolio of mortgage-backed securities and investment securities was
substantial. At June 30, 1996, the Bank's mortgage-backed securities portfolio
totaled $17.0 million (or 32.3% of total assets), and consisted of $7.9 million
in mortgage-backed securities issued or guaranteed by the FHLMC, FNMA and GNMA,
$3.0 million in collateralized mortgage obligations, including real estate
mortgage investment conduits, and $6.0 million in participations in pools of
SBA loans. Also at June 30, 1996, the Bank's investment portfolio totaled
$5.6 million (or 10.6% of total assets) and consisted of federal agency
obligations, municipal bonds, FHLB stock, interest earnings deposits with other
financial institutions and mutual funds. In recent years, management has also
utilized the mortgage-backed securities and investment portfolio to attempt to
increase net interest income by purchasing such securities with the proceeds of
FHLB advances and earning the spread between the yields earned on the mortgage-
backed securities and the rates
4
<PAGE>
paid on the FHLB advances. At June 30, 1996, the Bank's FHLB advances totaled
$13.5 million, as compared to FHLB advances of $6.4 million at June 30, 1995.
Investors Federal's executive office is located at 522 Washington Street,
Chillicothe, Missouri 64601. Its telephone number at that address is (816) 646-
3733.
IFB Holdings, Inc.
IFB Holdings, Inc. was organized in October 1996 for the purpose of
serving as the holding company for the Converted Bank upon its conversion from
mutual to stock form, and of the National Bank following the Bank Conversion.
Prior to the Conversion, the Holding Company has not engaged and will not engage
in any material operations. Upon consummation of the Stock Conversion, the
Holding Company will have no significant assets other than the outstanding
capital stock of the Converted Bank (or, following the Bank Conversion, the
National Bank), up to 50% of the net proceeds from the Stock Conversion (less
the amount to fund the Employee Stock Ownership Plan ("ESOP")) and a note
evidencing its loan to the Bank's ESOP. Upon consummation of the Stock
Conversion, the Holding Company's principal business will be directing the
business of the National Bank and investing the net Stock Conversion proceeds
retained by it. In connection with the Bank Conversion, the Holding Company will
register with the Board of Governors of the Federal Reserve System (the "FRB")
as a bank holding company under the Bank Holding Company Act of 1956, as amended
(the "BHCA").
Investors Federal Bank, National Association
Upon consummation of the Bank Conversion, the National Bank will succeed to
all of the assets and liabilities of the Converted Bank (which, pursuant to the
Stock Conversion will have succeeded to all of the assets and liabilities of the
Bank), and initially will continue to conduct business in substantially the same
manner as the Bank prior to the Conversion. Over time, however, management
anticipates broadening its range of banking products and services consistent
with the national bank charter. Diversification of the National Bank's loan
portfolio may also alter the risk profile of the National Bank. See "Risk
Factors--Effect of the Conversion to a National Bank Charter on Operations."
The deposits of the National Bank will continue to be insured by the
SAIF of the FDIC and, as such, the National Bank will continue to be subject to
regulation and supervision by the FDIC. The National Bank will not be subject to
OTS regulation and supervision; rather, the primary regulator of the National
Bank will be the OCC. The National Bank will remain a member of the FHLB of Des
Moines. As a national bank, the National Bank will also be required to become a
member of the Federal Reserve System and to purchase stock in the Federal
Reserve Bank of Kansas City.
The Conversion
The Offerings are being made in connection with the Stock Conversion
of Investors Federal from a federally chartered mutual savings association to a
federally chartered stock savings bank and the formation of IFB Holdings, Inc.
as the holding company of the Bank. The Holding Company will retain up to 50%
of the net proceeds of the issuance of the Common Stock and will use the
remaining net proceeds to purchase all of the stock of Investors Federal
issued in the Stock Conversion. Net Conversion proceeds will increase the
capital of the Bank and, consistent with regulatory restrictions, will support
the Bank's lending and investment activities. The conversion to stock form and
the use of a holding company structure are also expected to enhance the ability
of the Bank to expand through possible mergers and acquisitions and facilitate
future access to the capital markets. The Holding Company will have additional
authorized shares of common stock and serial preferred stock available for
issuance to raise additional equity capital for future acquisitions or for other
business purposes, although the Holding Company has no specific plans for
expansion and no present plans for the issuance of such securities. See "Use of
Proceeds" and "Description of Capital Stock - Holding Company Capital Stock."
5
<PAGE>
Upon consummation of the Stock Conversion, it is anticipated that the
Converted Bank will convert to a national bank. The Bank Conversion will be
consummated as soon as possible thereafter; provided, however, that under the
Plan, the Bank's Board of Directors has the ability to elect, at any time, not
to proceed with the Bank Conversion. Furthermore, there can be no assurance that
the Bank will obtain regulatory approval to consummate the Bank Conversion. It
is presently the intent of the Bank's Board of Directors to proceed with both
the Stock Conversion and the Bank Conversion. See "Risk Factors--Potential Delay
in Completion or Denial of Bank Conversion" and "The Conversion--General."
The Stock Conversion is subject to certain conditions, including the
prior approval of the Plan of Conversion by the Bank's members at a special
meeting to be held at 4:00 p.m., Central Time on December __, 1996 (the "Special
Meeting"). Approval of the Plan requires the affirmative vote of members of the
Bank holding not less than a majority of the total number of votes eligible to
be cast at the Special Meeting. After the Stock Conversion, depositors and
borrowers of the Bank will have no voting rights in the Holding Company, unless
they become Holding Company stockholders. Eligible Account Holders and
Supplemental Eligible Account Holders, however, will have certain liquidation
rights in the Bank. See "The Stock Conversion - Effects of Conversion to Stock
Form on Depositors and Borrowers of the Bank - Liquidation Rights."
Subscription, Community and Syndicated Community Offerings. The Holding
Company is offering up to 258,750 shares of Common Stock, at a price of $20.00
per share, in the Subscription, Community and Syndicated Community Offerings.
The shares of Common Stock to be issued in the Stock Conversion are being
offered in the following order of priority: (1) Eligible Account Holders
(deposit account holders of the Bank with an account balance of $50 or more as
of June 30, 1995); (2) Tax-Qualified Employee Plans; (3) Supplemental Eligible
Account Holders (deposit account holders of the Bank with an account balance of
$50 or more as of September 30, 1996); (4) Other Members (deposit account
holders of the Bank as of _______, 1996, other than Eligible Account Holders or
Supplemental Eligible Account Holders; and (5) employees, officers and directors
of the Bank. In addition, the Tax-Qualified Employee Plans shall have first
priority Subscription Rights to the extent that the total number of shares of
Common Stock sold in the Stock Conversion exceeds the maximum of the Estimated
Valuation Range. Concurrently with, during, or following the Subscription
Offering, and subject to the prior rights of holders of Subscription Rights, any
shares of Common Stock not subscribed for in the Subscription Offering are being
offered in the Community Offering to certain members of the general public to
whom a prospectus is delivered. In the Community Offering, a preference will be
given to natural persons and trusts of natural persons residing in Caldwell,
Daviess and Livingston Counties. See "The Conversion." The Holding Company and
the Bank reserve the absolute right to accept or reject any orders in the
Community Offering, in whole or in part, either at the time of receipt of an
order or at any time prior to the consummation of the Stock Conversion.
It is anticipated that shares of Common Stock not otherwise subscribed
for in the Subscription Offering and Community Offering, if any, may be offered
at the discretion of the Holding Company to certain members of the general
public as part of a Syndicated Community Offering on a best efforts basis by a
selling group of selected broker-dealers to be managed by Trident Securities.
See "The Conversion--Offering of Holding Company Common Stock."
The Plan of Conversion places limitations on the number of shares that
may be purchased in the Stock Conversion by various categories of persons.
Except for the Tax-Qualified Employee Plans which intend to subscribe for 8% of
the total number of shares of Common Stock offered in the Stock Conversion, no
Eligible Account Holder, Supplemental Eligible Account Holder or Other Member
may purchase in their capacity as such in the Subscription Offering shares of
Common Stock having an aggregate purchase price which exceeds $100,000 of the
shares sold in the Stock Conversion; no individual person or other entity,
together with associates of and persons acting in concert with such person, may
purchase in the Community Offering and the Syndicated Community Offering shares
of Common Stock having an aggregate purchase price which exceeds $100,000 of
the shares sold in the Stock Conversion; and no person, together with associates
of or persons acting in concert with such person, may purchase in the aggregate
shares of Common Stock having an aggregate purchase price which exceeds the
lesser of $200,000 or five percent of the shares sold in the Stock Conversion.
The purchase limitations described herein are subject to increase or decrease
within the sole discretion of the Bank and the Holding
6
<PAGE>
Company. Further, to the extent that shares are available, each subscriber must
subscribe for a minimum of 25 shares. See "The Conversion - Offering of Holding
Company Common Stock." The Bank and the Holding Company have engaged Trident
Securities to consult, advise and assist in the distribution of shares of Common
Stock in the Offerings on a best efforts basis. Trident Securities is under no
obligation to purchase any of the Common Stock offered in the Stock Conversion.
All Subscription Rights for Common Stock are non-transferable and will
expire at noon, Central Time on December __, 1996, unless the Subscription
Offering is extended by Investors Federal and the Holding Company. The
accompanying stock order form and executed certification, together with full
payment for all shares of Common Stock for which subscription is made, or
appropriate instructions authorizing withdrawal of such amount from one or more
deposit accounts at the Bank, must be received by the Holding Company prior to
that time or any extension thereof. Under applicable federal regulations, all
shares of Common Stock must be sold in the Stock Conversion within 45 days after
the completion of the Subscription Offering, unless extended with OTS approval.
If the Conversion is not approved by the members at the Special Meeting, no
shares will be issued, the Stock Conversion will not take place, all
subscription funds received will be returned promptly with interest at the
Bank's current passbook rate, and all withdrawal authorizations will be
terminated. If the aggregate Purchase Price of the Common Stock sold in the
Stock Conversion is below $3,825,000 or above $5,951,240 (15% above the maximum
of the Estimated Valuation Range), or if the Offerings are extended beyond
February __, 1997, subscribers will be permitted to modify or cancel their
subscriptions and to have their subscription funds returned promptly with
interest. In the event of such an extension, each subscriber will be notified in
writing of the time period within which the subscriber must notify the Bank of
his intention to maintain, modify or rescind his subscription. In the event the
subscriber does not respond in any manner to the Bank's notice, the funds
submitted will be refunded to the subscriber with interest at ____% per annum,
the Bank's current passbook rate, and/or the subscriber's withdrawal
authorizations will be terminated.
Stock Pricing. The Purchase Price of the Common Stock in the Offerings is a
uniform price for all subscribers, including members of the Bank's board of
directors (the "Board of Directors") and management. The aggregate Purchase
Price is based upon an independent appraisal of the aggregate pro forma market
value of the Holding Company and the Bank, as converted. The aggregate pro forma
market value was estimated by Ferguson, an experienced conversion appraisal firm
independent of the Holding Company and the Bank, to range from $3,825,000 to
$5,175,000 at September 20, 1996. Depending upon the final updated valuation,
the number of shares to be issued is subject to a maximum of 297,562 shares (15%
above the maximum of the Estimated Valuation Range) and a minimum of 191,250
shares. The appraisal should not be considered a recommendation as to the
advisability of purchasing shares of the Common Stock. In preparing the
appraisal, Ferguson assumed the accuracy and completeness of the financial and
statistical information provided by the Bank and did not independently value the
Bank's assets and liabilities. The Boards of Directors of the Holding Company
and the Bank have reviewed the appraisal of Ferguson and in determining the
reasonableness and adequacy of such appraisal consistent with OTS regulations
and policies, have reviewed the methodology and reasonableness of the
assumptions utilized by Ferguson in the preparation of such appraisal. See "The
Stock Conversion--Stock Pricing and Number of Shares to be Issued" for a
description of the manner in which such valuation was made and the limitations
on its use. Subject to regulatory approval, the Estimated Valuation Range may be
increased or decreased to reflect market and financial conditions prior to the
completion of the Stock Conversion and may be increased to permit an increase in
the number of shares of Common Stock sold in the Stock Conversion to cover any
oversubscriptions in the Offerings. The actual number of shares to be issued in
the Stock Conversion will not be determined until completion of the Offerings.
No resolicitation of subscribers will be made and subscribers will not be
permitted to modify or cancel their subscriptions unless the gross proceeds from
the sale of the Common Stock are below the minimum of the Estimated Valuation
Range or more than 15% above the maximum of the Estimated Valuation Range. See
"The Conversion--Stock Pricing and Number of Shares to be Issued."
The Estimated Valuation Range is necessarily based upon estimates of a
number of matters (including certain assumptions as to expense factors affecting
the net proceeds from the sale of Common Stock in the Stock Conversion and as to
the net earnings on such net proceeds), all of which are subject to change from
time to time.
7
<PAGE>
As a result, no assurance can be given that persons who purchase such shares in
the Stock Conversion will be able to sell such shares thereafter at or above the
Purchase Price.
Non-transferability of Subscription Rights. Prior to the completion of the
Stock Conversion, federal regulations prohibit any person from transferring or
entering into any agreement or understanding to transfer the legal or beneficial
ownership of the Subscription Rights issued under the Plan or the shares of
Common Stock to be issued upon their exercise. Persons violating such
prohibition may lose their right to purchase stock in the Stock Conversion and
may be subject to sanctions by the OTS. Each person exercising Subscription
Rights will be required to certify that a purchase of Common Stock is solely for
the purchaser's own account and that there is no agreement or understanding
regarding the sale or transfer of such shares. See "The Conversion--Restrictions
on Transferability."
Use of Proceeds
The net proceeds from the sale of Common Stock in the Stock Conversion
are estimated to be approximately $3.5 million, $4.1 million, $4.8 million and
$5.6 million, respectively, based on the minimum, midpoint, maximum and 15%
above the maximum, of the Estimated Valuation Range. See "Pro Forma Data." The
Holding Company will purchase all of the common stock of the Bank to be issued
in the Stock Conversion in exchange for 50% of the net proceeds from the
issuance of the Common Stock and will retain up to the remaining 50% of such net
proceeds as its initial capitalization (less funds loaned to the ESOP sufficient
to purchase up to 8% of shares sold in the Stock Conversion). In addition, the
Holding Company intends to invest additional proceeds into the Bank to the
extent necessary to increase the Converted Bank's tangible capital to at least
10% of its adjusted total assets. Subject to regulatory approval, the Holding
Company intends to lend a portion of the net proceeds to the ESOP to facilitate
its purchase of up to 8% of the Common Stock sold in the Stock Conversion. It
is anticipated that the funds will be borrowed by the ESOP at an interest rate
equal to the prime rate as published in the Wall Street Journal on the closing
date of the Stock Conversion, which rate is currently 8.25%. It is
anticipated that the ESOP loan will have a term of 10 years. Based upon the
issuance of shares at the minimum and maximum of the Estimated Valuation Range,
the loan to the ESOP to purchase 8% of the Common Stock would be $306,000 and
$414,000, respectively. The Bank intends to make contributions to the ESOP in
an amount to be determined by the Board of Directors, but not less than the
amount needed to pay any currently maturing obligations under the loan made to
the ESOP, subject to the Bank's continuing compliance with OTS capital
requirements. These contributions would be allocated among all eligible
participants in proportion to their compensation. It is expected the ESOP will
purchase up to 8% of the total number of shares sold in the Stock Conversion.
See "Management--Benefit Plans--Employee Stock Ownership Plan." The remaining
net proceeds retained by the Holding Company are anticipated to be initially
invested in short- and intermediate-term securities and will be available as
general working capital. Subject to compliance with federal regulations, such
funds may also be used to repurchase the Common Stock. However, since the
Holding Company has not yet issued stock, there is currently insufficient
information upon which an intention to repurchase stock could be based. For
information regarding the possible purchase of stock to implement a restricted
stock plan following the Stock Conversion, see "Use of Proceeds." The net
proceeds to the Bank will become part of the Bank's general funds and will be
used to support its lending and investment activities, subject to applicable
regulatory restrictions. All or a portion of the proceeds may be used to repay a
portion of the Bank's FHLB advances. On an interim basis, such proceeds will be
invested primarily in short- and intermediate-term securities and will be
available as general working capital.
Purchases by Directors and Executive Officers
The directors and executive officers of Investors Federal have indicated
their intention to purchase in the Stock Conversion an aggregate of $701,000 of
Common Stock (or 35,050 shares, or approximately 18.3%, 15.6%, 13.5%, or 11.8%,
respectively, of the shares to be issued in the Stock Conversion at the minimum,
the midpoint, the maximum and 15% above the maximum of the Estimated Valuation
Range). There is no formal agreement among the executive officers and directors
and their affiliates regarding their purchases of Common Stock. In addition, 8%
of the shares issued in the Stock Conversion are expected to be purchased by the
Bank's ESOP. See
8
<PAGE>
"Management - Benefit Plans - Employee Stock Ownership Plan" and "The Stock
Conversion - Participation by Management."
Benefits of Conversion to Directors and Executive Officers
Employment Agreements. The Board of Directors of the Bank intends to
enter into an employment agreement with each of Earle S. Teegarden, Jr.,
President and Chief Executive Officer of the Bank, and Larry R. Johnson, Senior
Vice President and Secretary of the Bank. See "Management--Employment
Agreements." It is anticipated that each of the agreements will be at the
executive officer's current salary and will become effective upon completion of
the Stock Conversion. Under certain circumstances, including involuntary
termination of employment following a change in control, as defined in the
employment agreements, each of the executive officers will also be entitled to a
severance payment equal to up to 299% of his base compensation, as defined.
Assuming a change in control occurred as of June 30, 1996, Messrs. Teegarden and
Johnson would have received approximately $231,000 and $158,000, respectively,
pursuant to the employment agreements' change in control provision. See
"Management--Employment Agreements" for a more detailed description of these
agreements. In addition, the Bank may enter into employment and/or severance
agreements with other offices of the Bank after the Conversion.
Employee Stock Ownership Plan. The Board of Directors of the Bank has
adopted an ESOP, a tax-qualified employee benefit plan for officers and
employees of the Holding Company and the Bank. The ESOP intends to buy up to 8%
of the Common Stock issued in the Stock Conversion (approximately $306,000 to
$414,000 of the Common Stock based on the issuance of the minimum (191,250)
shares) and the maximum (258,750 shares of the Estimated Valuation Range and the
$20.00 per share Purchase Price). The ESOP will purchase the shares with funds
borrowed from the Holding Company, and it is anticipated that the ESOP will
repay the loans through periodic tax-deductible contributions from the Bank over
a ten-year period. These contributions will increase the compensation expense
of the Bank. The Bank's contributions to the ESOP will be allocated among
participants on the basis of their compensation. See "Management - Benefit
Plans - Employee Stock Ownership Plan" for a description of this plan.
Other Stock Benefit Plans. The Board of Directors of the Holding
Company intends to adopt a Stock Option and Incentive Plan ("Stock Option Plan")
and a Recognition and Retention Plan ("RRP") to become effective upon approval
by stockholders no earlier than six months following the Stock Conversion. It
is anticipated that certain of the directors and executive officers of the
Holding Company and the Bank will receive awards under these plans. It is
currently anticipated that the Stock Option Plan and the RRP will be funded by
shares subsequently reacquired and held as treasury shares or through the
issuance of authorized but unissued stock of the Holding Company, representing
10% and 4%, respectively, of the shares sold in the Stock Conversion. To the
extent the Stock Option Plan and RRP are funded from authorized but unissued
shares, the funding of such plans will dilute existing shareholders by an
aggregate of approximately 12.95%. See "Management - Benefit Plans" for a
description of these plans. The Stock Option Plan and the RRP may be submitted
for stockholder approval at an annual or special meeting of stockholders
following the Stock Conversion, provided such meeting is at least six months
following the Stock Conversion, or alternatively such approval may not be sought
until after one year following the Stock Conversion. If such plans are adopted
during the first year following the Stock Conversion, they might be subject to
certain allocation and other requirements of the OTS which might not apply after
one year.
Stock Option Plan. Following consummation of the Stock Conversion,
the Holding Company intends to adopt a stock option plan for the benefit of the
directors, officers and employees of the Holding Company and the Bank (the
"Stock Option Plan"), pursuant to which the Holding Company intends to reserve a
number of shares of Common Stock equal to an aggregate of 10% of the Common
Stock issued in the Stock Conversion (25,875 shares at the maximum of the
Estimated Valuation Range) for issuance pursuant to stock options and stock
appreciation rights. Under regulations of the OTS that may be applicable to the
Bank following the Conversion, if the Stock Option Plan is submitted to and
approved by the stockholders of the Holding Company within one year after
completion of the Stock Conversion, no more than 30% of the shares available
under the Stock Option Plan could be granted to non-employee directors, no more
than 5% of the shares available could be granted to individual non-
9
<PAGE>
employee directors, and no more than 25% of the shares available could be
granted to an individual officer. Under such circumstances, it is expected that
each non-employee director will receive an option for the same number of shares,
in which event options for a total of approximately 1,293 shares would be
granted to each director if the amount of Common Stock sold in the Stock
Conversion is equal to the maximum of the Estimated Valuation Range. In
addition, it is currently expected that stock options will be granted to Mr.
Teegarden and to other officers of the Bank, although no determination has been
made at this time as to the amount of such stock options. The Holding Company
currently anticipates that it will not implement the Stock Option Plan until
after one year following the Stock Conversion, although it reserves the right to
do so as early as six months following the Stock Conversion. See "Management--
Benefit Plan--Stock Option and Incentive Plan."
Recognition and Retention Plan. Following consummation of the Stock
Conversion, the Holding Company intends to adopt a recognition and retention
plan for the benefit of the directors, officers and employees of the Holding
Company and the Bank (the "RRP"). It is expected that the RRP will be submitted
to stockholders for approval at the same time as the Stock Option Plan. Upon the
receipt of such approval, the RRP is expected to purchase a number of shares of
Common Stock either from the Holding Company or in the open market equal to an
aggregate of 4% of the Common Stock issued in the Stock Conversion (10,350
shares at the maximum of the Estimated Valuation Range). Assuming the Common
Stock awarded pursuant to the RRP had a value of $20.00 per share, the aggregate
value of RRP awards would be $207,000 at the maximum of the Estimated Valuation
Range. Under regulations of the OTS that may be applicable to the Bank
following the Conversion, if the RRP is submitted to and approved by the
stockholders of the Holding Company within one year after completion of the
Stock Conversion, no more than 30% of the shares available under the RRP could
be granted to non-employee directors, no more than 5% of the shares available
could be granted to an individual non-employee director, and no more than 25% of
the shares available could be granted to an individual officer. Under such
circumstances each non-employee director would receive an award for the same
number of shares, in which event awards of 517 shares would be granted to each
such individual if the amount of common stock sold in the Stock Conversion is
equal to the maximum of the Estimated Value Range. It is currently expected that
awards will be granted to Mr. Teegarden, although no determination has been made
at this time as to the amount of such awards. Awards of Common Stock under the
RRP will be at no cost to the recipient.
Dividends
Subject to regulatory and other considerations, the Holding Company intends
to establish a dividend policy at an initial rate of $.60 per share per annum
(or 3.0% based upon the initial offering price of $20 per share), payable semi-
annually in December and June of each year, with the first payment expected in
June 1997. In addition, the Holding Company may determine from time to time to
pay a special nonrecurring cash dividend as circumstances warrant. The payment
of dividends will be subject to determination and declaration by the Board of
Directors in its discretion, which will take into account the Holding Company's
consolidated financial condition and results of operations, tax considerations,
industry standards, economic conditions, regulatory restrictions on dividend
payments by the Bank to the Holding Company, general business practices and
other factors. See "Dividends," "Regulation - Regulatory Capital Requirements"
and "Regulation - Limitations on Dividends and Other Capital Distributions."
Market for Common Stock
The Holding Company has never issued capital stock to the public and
due to the relatively small size of the Offerings, it is unlikely that an active
and liquid trading market will develop or be maintained. The Holding Company
has requested that Trident Securities undertake to match offers to buy and sell
the Conversion Stock, and that Trident Securities list the Common Stock over the
counter through the National Daily Quotation System "Pink Sheets" published by
the National Quotation Bureau, Inc. and Trident Securities has agreed to do so.
However, purchasers of Common Stock should have a long term investment intent
and recognize that the absence of an active and liquid trading market may make
it difficult to sell the Common Stock, and may have an adverse effect on the
price. See "Illiquid Market for the Common Stock" and "Market for Common
Stock."
10
<PAGE>
Prospectus Delivery and Procedure for Purchasing Shares
To ensure that each purchaser receives a Prospectus at least 48 hours
prior to the Expiration Date in accordance with Rule 15c2-8 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), no Prospectus will be
mailed any later than five days prior to the Expiration Date or hand-delivered
any later than two days prior to such date. Execution of the order form will
confirm receipt of the Prospectus in accordance with Rule 15c2-8. Order forms
will only be distributed with a Prospectus. The Bank is not obligated to accept
for processing orders not submitted on original order forms. Order forms
unaccompanied by an executed certification form will not be accepted. Payment by
check, money order, bank draft, cash or debit authorization to an existing
account at the Bank must accompany the order and certification forms. No wire
transfers will be accepted. The Bank is prohibited from lending funds to any
person or entity for the purpose of purchasing shares of Common Stock in the
Stock Conversion. See "The Conversion--Procedure for Purchasing Shares in
Subscription and Community Offering."
In order to ensure that Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members are properly identified as to their
stock purchase priorities, depositors as of the Eligibility Record Date, the
Supplemental Eligibility Record Date or the Voting Record Date must list all
deposit accounts on the stock order form, giving all names on each account and
the account numbers. Failure to list all account numbers may result in the
inability of the Holding Company or the Bank to fill all or part of a
subscription order. In addition, registration of shares in a name or title
different from the names or titles listed on the account may adversely affect
such subscriber's purchase priority. See "The Conversion--Procedure for
Purchasing Shares in Subscription and Community Offering."
Risk Factors
See "Risk Factors" for information regarding the geographical concentration
of loans and risks of economic downturn in the Bank's primary market area,
adequacy of the Bank's allowance for loan losses, limited lending opportunities
in the Bank's market area, collection, credit and economic risks associated with
purchased loan portfolio, increased credit risks associated with national bank
loan products, the potential delay in completion or denial of the Bank
Conversion, the Bank's reduced return on equity ratios after the Stock
Conversion, interest rate risk exposure, potential discouragement of takeover
attempts resulting from takeover defensive provisions, potential operational
restrictions associated with regulatory oversight, disparity between BIF and
SAIF insurance premiums, legislation limiting deduction of bad debt,
competition, potential increased costs of Conversion resulting from a delayed
offering, the Bank's ESOP compensation expense, absence of active market for the
common stock, absence of refund of offering subscriptions on amendment to Plan
of Conversion and the possible adverse income tax consequences of the
distribution of subscription rights.
11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA
Set forth below are selected consolidated financial and other data of
the Bank at and for the periods indicated. The selected consolidated financial
and other data does not purport to be complete and is qualified in its entirety
by reference to the detailed information and Consolidated Financial Statements
and Notes thereto presented elsewhere in this Prospectus.
<TABLE>
<CAPTION>
At June 30,
-------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(In Thousands)
Selected Financial Condition Data:
<S> <C> <C> <C> <C> <C>
Total assets................................................... $ 52,587 $ 45,013 $ 41,095 $ 41,263 $ 42,584
Loans receivable, net.......................................... 28,429 26,340 22,719 22,284 22,326
Mortgage-backed securities:
Held to maturity............................................... - 8,306 10,674 12,490 15,237
Available for sale............................................. 16,971 4,397 470 - -
Investment securities:
Held to maturity............................................... 215 815 809 596 1,627
Available for sale............................................. 3,264 1,737 2,009 1,354 -
Deposits........................................................ 35,495 35,210 37,072 38,429 39,986
FHLB advances................................................... 13,474 6,419 1,073 - -
Total equity, substantially restricted.......................... 3,268 3,042 2,743 2,599 2,350
<CAPTION>
Years Ended June 30,
-------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
Selected Operations Data: (In Thousands)
<S> <C> <C> <C> <C> <C>
Total interest income........................................... $ 3,616 $ 2,843 $ 2,509 $ 2,790 $ 3,416
Total interest expense.......................................... 2,264 1,716 1,432 1,659 2,275
------- ------- ------- ------- -------
Net interest income.......................................... 1,352 1,127 1,077 1,131 1,141
Provision for loan losses....................................... 210 1 15 3 -
------- ------- ------- ------- -------
Net interest income after provision
for loan losses............................................... 1,142 1,126 1,062 1,128 1,141
------- ------- ------- ------- -------
Fees and service charges........................................ 231 225 218 188 167
Gain on sales of mortgage-backed
securities and investment securities.......................... 46 19 7 10 63
Other non-interest income....................................... 80 22 59 60 62
------- ------- ------- ------- -------
Total non-interest income....................................... 357 266 284 258 292
Total non-interest expense...................................... 1,030 1,011 1,101 1,079 1,013
------- ------- ------- ------- -------
Income before income taxes...................................... 469 381 245 307 420
Income tax expense.............................................. 167 135 105 58 133
Cumulative effect on prior years of a change
in accounting principle........................................ - 27 25 - -
------- ------- ------- ------- -------
Net income...................................................... $ 302 $ 273 $ 165 $ 249 $ 287
======= ======= ======= ======= =======
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
At or For the Years Ended June 30,
-------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C>
Selected Financial Ratios and Other Data:
Performance ratios:
Return on assets (1)............................. .61 .64 .40 .59 .67
Return on total equity (2)....................... 8.86 8.88 6.13 9.16 11.58
Interest rate spread information:
Average during period.......................... 2.38 2.36 2.39 2.45 2.35
End of period.................................. 2.29 2.64 2.55 2.84 2.80
Net interest margin (3).......................... 2.79 2.72 2.67 2.76 2.74
Ratio of noninterest expense to average
total assets................................... 2.07 2.38 2.66 2.56 2.37
Ratio of average interest-earning assets to
average interest-bearing liabilities........... 108.63 108.64 108.00 107.48 107.08
Asset quality ratios:
Non-performing assets to total assets at
end of period (4).............................. .24 .06 .33 .25 .44
Allowance for loan losses to
non-performing loans........................... 221.09 65.03 64.69 74.77 39.26
Allowance for loan losses to loans
receivable, net................................ 1.00 .31 .39 .34 .33
Capital ratios:
Total equity to total assets at end of period.... 6.21 6.76 6.67 6.30 5.52
Average total equity to average assets........... 6.85 7.24 6.53 6.44 5.80
Other data:
Number of full-service offices................... 3 3 3 3 3
Deposit accounts................................. 7,083 7,302 7,519 7,624 7,863
Real estate loans outstanding.................... 1,237 1,251 1,205 1,174 1,201
</TABLE>
________________
(1) Ratio of net income to average total assets.
(2) Ratio of net income to average total equity.
(3) Net interest income as a percentage of average interest-earning assets.
(4) Non-performing assets include non-accrual loans, foreclosed real estate and
other repossessed assets.\\
13
<PAGE>
RECENT FINANCIAL DATA
Set forth below are selected consolidated financial and other data of
the Bank at and for the periods indicated. Information at September 30, 1996 and
for the three months ended September 30, 1996 and 1995 is unaudited. In the
opinion of management of the Bank, all adjustments, consisting only of normal
recurring adjustments necessary for a fair statement of results for or as of the
periods indicated, have been included. The results of operations and other data
for the three month period ended September 30, 1996 are not necessarily
indicative of the results of operations for the full fiscal year. The selected
consolidated financial and other data does not purport to be complete and is
qualified in its entirety by reference to the detailed information and
Consolidated Financial Statements and Notes thereto presented elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
At At
September 30, June 30,
1996 1996
------ ------
(In Thousands)
Selected Financial Condition Data:
<S> <C> <C>
Total assets.............................. $ 54,351 $ 52,587
Loans receivable, net..................... 28,916 28,429
Mortgage-backed securities:
Available for sale...................... 17,548 16,971
Investment securities:
Held to maturity......................... 215 215
Available for sale....................... 3,391 3,264
Deposits.................................. 35,207 35,495
FHLB advances............................. 15,461 13,474
-------- --------
Total equity, substantially restricted.... 3,213 3,268
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------------------
1996 1995
------ ------
Selected Operations Data: (In Thousands)
<S> <C> <C>
Total interest income................... $ 967 $ 823
Total interest expense.................. 619 518
------ ------
Net interest income.................. 348 305
Provision for loan losses............... -- --
------ ------
Net interest income after provision
for loan losses....................... 348 305
------ ------
Fees and service charges................ 59 62
Gain on sales of mortgage-backed
securities............................ -- 35
Other non-interest income............... 6 1
------ ------
Total non-interest income............... 65 98
------ ------
Total non-interest expense (1).......... 459 230
------ ------
Income (loss) before income taxes....... (46) 173
Income tax (expense) benefit............ 20 (52)
Net income (loss)....................... $ (26) $ 121
</TABLE>
- -----------------------
(1) Non-interest expense for the three months ended September 30, 1996 includes
$226,000 for the SAIF special assessment.
14
<PAGE>
<TABLE>
<CAPTION>
At or For the
Three Months Ended
September 30,
--------------------------------------
1996 1995
------------ -----------
<S> <C> <C>
Selected Financial Ratios and Other Data:
Performance ratios:
Return on assets (1).................... 1.08/(5)/ 1.05/(5)/
Return on total equity (2).............. 17.37/(5)/ 15.60/(5)/
Interest rate spread information:
Average during period.................. 2.33 2.30
End of period.......................... 2.15 2.57
Net interest margin (3)................. 2.69 2.73
Ratio of noninterest expense to average
total assets........................... 2.18/(5)/ 2.01/(5)/
Ratio of average interest-earning assets
to average interest-bearing liabilities 107.54 109.26
Asset quality ratios:
Non-performing assets to total assets at
end of period (4)..................... .19 .11
Allowance for loan losses to
non-performing loans.................. 268.95 159.65
Allowance for loan losses to loans
receivable, net....................... .99 .29
Capital ratios:
Total equity to total assets at end
of period............................. 5.91 6.70
Average total equity to average assets. 6.23 6.75
Other data:
Number of full-service offices......... 3 3
Deposit accounts....................... 6,772 7,288
Real estate loans outstanding.......... 1,239 1,273
</TABLE>
________________
(1) Ratio of net income to average total assets.
(2) Ratio of net income to average total equity.
(3) Net interest income as a percentage of average interest-earning assets.
(4) Non-performing assets include non-accrual loans, foreclosed real estate and
other repossessed assets.
(5) Three month ratios are annualized. For September 30, 1996, the net income
effect and the noninterest expense effect, as applicable, of the SAIF
special assessment of $226,000 was not annualized.
Financial Condition
The Bank's total assets increased by $1.8 million, or 3.4%, to $54.4
million at September 30, 1996 from $52.6 million at June 30, 1996. The overall
increase in total assets was composed of an increase of $505,000 in interest
earning deposits at other financial institutions, $342,000 in investment
securities, $577,000 in mortgage-backed securities and $487,000 in loans. The
increases were funded by higher FHLB advances, which increased by $2.0 million
to $15.5 million at September 30, 1996 from $13.5 million at June 30, 1996.
Other than the increases mentioned above, the composition of assets did not
change significantly for the three months ended September 30, 1996. Unrealized
losses on available-for-sale securities was $155,000 at September 30, 1996.
At September 30, 1996, the Bank exceeded all regulatory capital
requirements, with tangible capital of $3.3 million (6.06% of adjusted total
assets); core capital of $3.3 million (6.06% of adjusted total assets); and
risk-based capital of $3.6 million (16.70% of risk-weighted assets).
15
<PAGE>
In October 1996, in order to maintain capital at desired levels in
light of the SAIF special assessment of $226,000, the Bank reduced its total
assets by $2.0 million, or 3.7%, primarily through the sale of mortgage-backed
securities with a carrying value of $1.4 million. The proceeds of such sales
together with other funds were used by the Bank to reduce its level of FHLB
advances by $2.7 million.
Results of Operations
General. The Bank had a net loss of $26,000 for the three months ended
September 30, 1996, compared to net income of $121,000 for the same period in
1995. This decline was primarily due to the one-time SAIF assessment of
$226,000, which was partially offset by a related reduction in income tax
expense, and an increase in net interest income.
Interest Income. Interest income increased $144,000, or 17.5%, for the
three months ended September 30, 1996 compared to the same period in 1995,
primarily due to increased levels of mortgage-backed securities and investment
securities funded by FHLB advances.
Interest Expense. Interest expense increased by $101,000, or 19.5%,
for the three months ended September 30, 1996 compared to the same period in
1995, primarily due to the increase in FHLB advances, which were $15.5 million
and $8.6 million at September 30, 1996 and 1995, respectively.
Net Interest Income. Net interest income increased by $43,000 to
$348,000 for the three months ended September 30, 1996, from $305,000 for the
three months ended September 30, 1995. The increase was due to a slightly higher
interest rate spread, which improved to 2.33% for the three months ended
September 30, 1996 from 2.30% for the three months ended September 30, 1995, and
an increase in the average balances of total loans and securities.
Provision for Loan Losses. The Bank made no provision for loan losses
for the three month periods ended September 30, 1996 and 1995. The Bank's ratio
of the allowance for loan losses to total non-performing loans was 268.95% at
September 30, 1996.
Noninterest Income. Noninterest income, consisting primarily of
service charges and fees on deposit accounts and gains on the sale of
securities, decreased by $33,000 to $65,000 for the three month period ended
September 30, 1996, compared to $98,000 for the three months ended September 30,
1995. The decrease was a result of the Bank having a gain of $35,000 on sales of
mortgage-backed securities in the three months ended September 30, 1995 and no
gain or loss in the three months ended September 30, 1996.
Noninterest Expense. Noninterest expense, consisting primarily of
employee compensation and benefits, premises and equipment expenses, federal
deposit insurance premiums, data processing, advertising and promotion, and
other miscellaneous items, increased by $229,000 to $459,000 for the three month
period ended September 30, 1996 compared to $230,000 for the three month period
ended September 30, 1995. The increase was primarily attributable to the one-
time SAIF assessment of $226,000. Following this one-time assessment, and
depending upon the Bank's capital level and supervisory rating, the Bank's
deposit insurance premiums are expected to decrease significantly for future
periods.
Income Taxes. Income taxes decreased from $52,000 for the three month
period ended September 30, 1995 to a $20,000 benefit for the three month period
ended September 30, 1996, as a result of the decline in income before income
taxes.
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RISK FACTORS
The following factors, in addition to those discussed elsewhere in
this Prospectus, should be considered by investors before deciding whether to
purchase the Common Stock offered in the Stock Conversion.
Geographical Concentration of Loans and Risks of Economic Downturn in Primary
Market Area
At June 30, 1996, substantially all of the Bank's real estate mortgage
loans were secured by properties located in the Bank's primary market area of
Livingston, Caldwell and Daviess Counties and, to a lesser extent, in the
Missouri Counties of Boone, Greene and Cole. In the event that real estate
prices in the Bank's market area substantially weaken or economic conditions in
Missouri deteriorate, reducing the value of properties securing the Bank's
loans, some borrowers may default and the value of the real estate collateral
may be insufficient to fully secure the loan. In either event, the Bank may
experience increased levels of delinquencies and related losses having an
adverse impact on net income.
Adequacy of Allowance for Loan Losses
At June 30, 1996, the Bank's allowance for loan losses was $283,000,
or 1.00% of loans receivable, net as compared to $81,000, or 0.31% of loans
receivable, net, at June 30, 1995. The increase was due to a number of factors,
including an increase in the size of the Bank's loan portfolio, an increase in
non-performing and other problem loans, and the changing composition of the
Bank's loan portfolio, which includes higher levels of non-mortgage loans such
as consumer loans, which are generally considered to present increased credit
risk to the Bank, and higher amounts of loans with adjustable interest rates,
which present an increased risk of default in a rising interest rate
environment. Management believes the higher ratio of the allowance for loan
losses to net loans receivable also is more consistent with that of comparable
publicly traded financial institutions in the midwest at June 30, 1996. Because
future events affecting borrowers and loan collateral cannot be predicted with
any degree of certainty, there can be no assurance that the Bank's allowance for
loan losses will be adequate to absorb all future loan losses. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business--Lending Activities," and "--Asset Quality."
Limited Lending Opportunities in Market Area
The economy of the Bank's primary market area has experienced little
growth in recent years. Accordingly, the Bank has had limited residential
mortgage lending opportunities in its local market area. As a result, the Bank
has not been able to originate loans in the volume desired and consequently it
has supplemented its investment in loans through the purchase of loans in the
secondary mortgage market and through the purchase of mortgage-backed and other
investment securities (and, to a lesser extent, SBA-guaranteed loans and FHA
home improvement loans). Consistent with its asset/liability management
policies, the Bank has emphasized the purchase of adjustable-rate residential
mortgage loans in the secondary mortgage market. Because of the current
relatively low level of market interest rates, borrowers generally prefer fixed-
rate, rather than adjustable-rate, mortgage loans, which has limited the
availability of such loans for purchase by the Bank. Accordingly, the Bank has
increased its investment in mortgage-backed securities to supplement its loan
portfolio. At June 30, 1996, the Bank's investment in mortgage-backed securities
totaled $17.0 million, or 32.2% of total assets. Mortgage-backed securities
typically earn lower yields than one- to four-family residential mortgage loans.
The Bank's need to purchase mortgage-backed securities due to the lack of
lending opportunities has caused the Bank's interest rate spread to be below
that of savings institutions with more significant loan originations relative to
their asset size. At June 30, 1996, the Bank's yield on its loan portfolio was
8.28% compared to a yield of 6.97% on its mortgage-backed securities portfolio.
Because of the limited lending opportunities in its local market area, the Bank
anticipates that the net proceeds of the Stock Conversion initially will be
invested in short term and intermediate term securities and mortgage-backed
securities. Consequently, in the short term the Bank will have difficulty in
improving its interest rate spread and thus the return on equity to
stockholders. See "Business -- Market Area and Competition," "--Lending
Activities" and "-- Investment Activities."
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Collection, Credit and Economic Risks Associated with Purchased Loan
Portfolio
The Bank historically has employed an operating strategy that
emphasized the origination of one- to four-family residential mortgage loans in
its market area, primarily with adjustable rates. In order to supplement local
mortgage loan demand, the Bank also has purchased adjustable-rate loans in the
secondary mortgage market. These loans have consisted primarily of one- to four-
family residential mortgage loans secured by property located in the State of
Missouri, although the Bank's purchased loan portfolio includes seasoned one- to
four-family residential mortgage loans secured by collateral located outside
Missouri. At June 30, 1996, $7.2 million, or 25.0%, of the Bank's total loan
portfolio consisted of purchased one- to four-family residential mortgage loans.
The Bank's purchased loans are generally acquired without recourse with
servicing retained by the seller or originator of the loans. The Bank is
dependent on the seller or originator of the loan for ongoing collection efforts
and collateral review. In addition, the Bank purchases loans with a variety of
terms, including maturities, interest rate caps and indices for adjustment of
interest rates that may differ from those offered at the time by the Bank in
connection with loans the Bank itself originates. Finally, with respect to
purchased loans that are secured by collateral located outside Missouri, the
market areas in which the collateral properties are located are subject to
economic and real estate market conditions that may differ significantly from
those experienced in the Bank's market area. If economic conditions continue to
limit the Bank's opportunities to originate loans in its market area, the Bank
may seek to increase its investment in purchased mortgage loans, including loans
secured by collateral located outside its market area, subject to the
availability of such loans for purchase. General economic conditions, including
prevailing interest rates, may affect the availability of such loans for
purchase. Because of the current relatively low level of market interest rates,
borrowers generally prefer fixed-rate, rather than adjustable-rate, mortgage
loans, which has limited the availability of such loans for purchase by the
Bank.
Increased Credit Risks Associated with National Bank Loan Products
Over time, management anticipates broadening its range of banking
products and services consistent with the national bank charter, and it will
continue to diversify its loan portfolio. Diversification of the National Bank's
loan portfolio may also alter the risk profile of the National Bank, since
certain loans that may be made by national banks, such as commercial and
consumer loans, are generally believed to carry more credit risk than
residential one-to four-family mortgage loans. See "Business of the Bank--
Lending Activities." It is also anticipated that the National Bank will continue
to be a member of the FHLB of Des Moines after the Conversion, although it is
not required to remain a member.
Potential Delay in Completion or Denial of Bank Conversion
The Office of the Comptroller of the Currency (the "OCC") must
approve the Bank's application to convert to a national bank and the FRB must
approve the Holding Company's application to become a bank holding company. If
the FRB or the OCC deny such applications, significantly delay the approval of
such applications, or impose burdensome conditions on the approval of such
applications, the Board of Directors may elect not to proceed with the Bank
Conversion; to convert to a state-chartered commercial bank; to become a
National Bank through a transaction other than the Bank Conversion; or to
consummate the Stock Conversion before the Bank Conversion. Unless and until
the Bank becomes a National Bank or a state-chartered commercial bank, the
Holding Company will operate as a savings and loan holding company and the
Converted Bank as a federal stock savings bank. If the Board of Directors
elects not to proceed with the Bank Conversion or to proceed with the Bank
Conversion notwithstanding the imposition of conditions imposed by the OCC or
the FRB, subscribers for Common Stock in the Offerings will not be resolicited
unless required by regulatory authority. See "The Conversion--General."
Reduced Return on Equity After Stock Conversion
Return on equity (net income for a given period divided by average
equity during that period) is a ratio used by many investors to compare the
performance of a particular financial institution to its peers. The Bank's
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return on equity for the year ended June 30, 1996 was, and the Holding Company's
post-Stock Conversion return on equity will be, less than the average return on
equity for publicly traded thrift institutions and their holding companies. See
"Selected Consolidated Financial Information and Other Data" for numerical
information regarding the Bank's historical return on equity and
"Capitalization" for a discussion of the Holding Company's estimated pro forma
consolidated capitalization as a result of the Conversion. In addition, the
expenses associated with the ESOP and the RRP (see "Pro Forma Data"), along with
other post-Stock Conversion expenses, are expected to contribute initially to
reduced earnings levels. Finally, because of the limited lending opportunities
in its market area, the Bank anticipates the proceeds of the Stock Conversion
will be used to purchase mortgage-backed and other investment securities, which
typically have a lower yield than that available on one- to four-family
residential mortgage loans. The Bank intends to deploy the net proceeds of the
Offerings to increase earnings per share and book value per share, with the
goal of achieving a return on equity comparable to the average for publicly
traded thrift institutions and their holding companies. In the short term, the
Bank will have difficulty in improving its interest rate spread and thus the
return on equity to stockholders. Consequently, for the foreseeable future,
investors should not expect a return on equity that will meet or exceed the
average return on equity for publicly traded thrift institutions, and no
assurances can be given that this goal can be attained.
Interest Rate Risk Exposure
The Bank's profitability is dependent to a large extent upon its net
interest income, which is the difference between its interest income on
interest-earning assets, such as loans and investments, and its interest expense
on interest-bearing liabilities, such as deposits and borrowings. Changes in
the level of interest rates also affect the amount of loans originated by the
Bank and, thus, the amount of loan and commitment fees, as well as the market
value of the Bank's interest-earning assets. Moreover, increases in interest
rates also can result in disintermediation, which is the flow of funds away from
savings institutions into direct investments, such as corporate securities and
other investment vehicles, which, because of the absence of federal insurance
premiums, may yield higher rates of return than those paid by savings
institutions.
In addition, changes in interest rates also can affect the market
value of the Bank's interest-earning assets, which are comprised of fixed- and
adjustable-rate instruments with various terms to maturity. Generally, the
value of fixed-rate, longer-term instruments fluctuates inversely with changes
in interest rates. See "Business - Lending Activities - One- to Four-Family
Mortgage Loans." Increases in interest rates also can affect the type (fixed-
rate or adjustable-rate) and amount of loans originated by the Bank and the
average life of loans and securities, which can adversely impact the yields
earned on the Bank's loan and securities portfolio. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Asset/Liability Management."
The OTS utilizes a net portfolio value methodology to measure the
interest rate risk exposure of savings associations. Effective March 31, 1995,
for purposes of calculating risk-based capital, institutions with more than
normal interest rate risk, as defined by OTS regulations, are required to make a
deduction from capital equal to 50% of their interest rate risk exposure
multiplied by the present value of their assets. Based upon this methodology,
at June 30, 1996, the Bank's interest rate risk exposure to a 200 basis point
increase in interest rates was considered "normal" under this regulation.
However, because the Bank has total assets of less than $300 million and risk-
based capital in excess of 12%, the Bank is exempt from this rule unless
otherwise notified by the OTS. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Asset/Liability Management."
Potential Discouragement of Takeover Attempts Resulting from Takeover Defensive
Provisions
Holding Company and Bank Governing Instruments. Certain provisions of
the Holding Company's Certificate of Incorporation and Bylaws assist the Holding
Company in maintaining its status as an independent publicly owned corporation.
These provisions provide for, among other things, limiting voting rights of
beneficial owners of more than 10% of the Common Stock, staggered terms for
directors, noncumulative voting for directors, limits on the calling of special
meetings, a fair price/supermajority vote requirement for certain business
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combinations and certain notice requirements. The 10% vote limitation would not
affect the ability of an individual who is not the beneficial owner of more than
10% of the Common Stock to solicit revocable proxies in a public solicitation
for proxies for a particular meeting of stockholders and to vote such proxies.
In addition, provisions in the Bank's federal stock Charter that have an anti-
takeover effect could also be applicable to changes in control of the Holding
Company as the sole shareholder of the Bank. The Converted Bank's Charter
includes a provision applicable for five years which prohibits acquisitions and
offers to acquire, directly or indirectly, the beneficial ownership of more than
10% of the Bank's securities. Any person violating this restriction may not
vote the Converted Bank's securities in excess of 10%. However, the Articles of
Association of the National Bank do not contain a similar provision. Any or all
of these provisions may discourage potential proxy contests and other takeover
attempts, particularly those which have not been negotiated with the Board of
Directors. In addition, the Holding Company's Certificate of Incorporation also
authorizes preferred stock with terms to be established by the Board of
Directors which may rank prior to the Common Stock as to dividend rights,
liquidation preferences, or both, may have full or limited voting rights and may
have a dilutive effect on the ownership interests of holders of the Common
Stock. The Board of Directors of the Holding Company has the ability to waive
certain restrictions on acquisition, provided that the acquisition is approved
in advance by a majority of the disinterested Board of Directors. See
"Restrictions on Acquisitions of Stock and Related Takeover Defensive
Provisions."
Regulatory and Statutory Provisions. Federal regulations prohibit,
for a period of three years following the completion of the Conversion, any
person from offering to acquire or acquiring the beneficial ownership of more
than 10% of the stock of a converted savings institution or its holding company
without prior federal regulatory approval. Federal law also requires federal
regulatory approval prior to the acquisition of "control" (as defined in federal
regulations) of an insured institution, including a holding company thereof.
See "Restrictions on Acquisitions of Stock and Related Takeover Defensive
Provisions."
Employment Agreements and Other Benefit Plans; Voting Control of
Directors and Officers and Possible Dilutive Effects. The employment
agreements, the proposed Stock Option Plan and the proposed RRP also contain
provisions that could have the effect of discouraging takeover attempts of the
Holding Company.
The Bank intends to enter into an employment agreement with each of
Earle S. Teegarden, Jr., President and Chief Executive Officer of the Bank, and
Larry R. Johnson, Senior Vice President and Secretary of the Bank. The
employment agreements provide for a payment equal to 299% of the employee's base
compensation, in the event that his employment is involuntarily terminated as a
result of a change in control of the Holding Company or the Bank. These
provisions may have the effect of increasing the cost of, and thereby
discouraging, a future attempt to takeover the Holding Company or the Bank.
Assuming involuntary termination of the employment of such employees occurred
following a change in control as of June 30, 1996, Messrs. Teegarden and Johnson
would have received approximately $231,000 and $158,000, respectively, pursuant
to the employment agreements' change in control provisions. See "Management--
Employment Agreement." In addition, the Bank may enter into employment and/or
severance agreements with other officers of the Bank after the Conversion.
Additionally, if the Holding Company issues additional shares pursuant
to the proposed Stock Option Plan and RRP (as opposed to funding such plans with
shares subsequently reacquired and held as treasury shares) the percentage of
ownership of the Holding Company of those persons purchasing Common Stock in the
Stock Conversion will be diluted. Assuming exercise of all options available
under the Stock Option Plan, the interest of stockholders will be diluted by
approximately 9.1%. The award of all shares available under the RRP will dilute
the interests of stockholders by approximately 3.85%. See "Pro Forma Data,"
"Management - Benefit Plans - Stock Option and Incentive Plan," and
"- Recognition and Retention Plan" and "Restrictions on Acquisitions of Stock
and Related Takeover Defensive Provisions." For financial accounting purposes,
certain incentive grants under the proposed RRP will result in the recording of
compensation expense over the period of vesting. See "Pro Forma Data."
The directors and executive officers of the Bank are anticipated to
purchase an aggregate of approximately $701,000 or approximately 13.5% of the
shares offered in the Stock Conversion at the maximum of the Estimate
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Valuation Range, or 11.8% at 15% above the maximum of the Estimated Valuation
Range, or 18.3% of the shares offered in the Stock Conversion at the minimum of
the Estimated Valuation Range. Directors and executive officers will also
receive awards under the proposed Stock Option Plan and the proposed RRP.
Assuming the purchase of $701,000 of Common Stock in the Stock Conversion by
directors and executive officers in the aggregate (6 persons), the full vesting
of the restricted stock to be awarded under the proposed RRP and the exercise of
all options to be awarded under the proposed Stock Option Plan in connection
with the Stock Conversion, approval of the Stock Option Plan and the RRP by the
stockholders, and the acquisition by the Holding Company of shares to fund such
plans in open-market purchases, the shares owned by the directors and executive
officers in the aggregate would amount from approximately 25.8% (at 15% above
the maximum of the Estimated Valuation Range) to 32.3% (at the minimum of the
Estimated Valuation Range) of the outstanding shares. In addition, the ESOP is
expected to purchase 8% of the shares sold in the Stock Conversion. This stock
ownership, if voted as a block, could defeat takeover attempts favored by other
stockholders. See "Management - Benefit Plans - Employee Stock Ownership Plan."
Potential Operational Restrictions Associated with Regulatory Oversight
The Bank is subject to extensive regulation, supervision and
examination by the OTS as its chartering authority and primary federal
regulator, and by the FDIC, which insures its deposits up to applicable limits.
The Bank is a member of the Federal Home Loan Bank (the "FHLB") of Des Moines
and is subject to certain limited regulation by the Board of Governors of the
Federal Reserve System ("Federal Reserve Board"). See "Regulation." Such
regulation and supervision governs the activities in which an institution can
engage and is intended primarily for the protection of the insurance fund and
depositors. Following the Bank Conversion, the National Bank will be subject to
extensive regulation and supervision by the OCC and the FDIC, and the Holding
Company will be subject to extensive regulation and supervision of the FRB.
Regulatory authorities have been granted extensive discretion in connection with
their supervisory and enforcement activities which are intended to strengthen
the financial condition of the banking industry, including the imposition of
restrictions on the operation of an institution, the classification of assets by
the institution and the adequacy of an institution's allowance for losses on
loans. See "Regulation - Federal Regulation of Savings Associations" and
"- Regulatory Capital Requirements." Any change in such regulation and
oversight, whether by the OTS, the FDIC, the OCC, the FRB or Congress, could
have a material impact on the Holding Company, the Bank and their respective
operations.
Recapitalization of SAIF, Disparity between BIF and SAIF Premiums
Deposits of the Bank are currently insured by the SAIF of the FDIC.
The FDIC also maintains another insurance fund, the Bank Insurance Fund, which
primarily insures commercial bank deposits. Applicable law requires that both
the SAIF and BIF funds be recapitalized to a ratio of 1.25% of reserves to
deposits, and the FDIC announced that the BIF reached the required reserve ratio
during May 1995. The SAIF, however, was not expected to achieve that reserve
ratio before 2002. Due to the disparity in reserve ratios, on November 14, 1995,
the FDIC reduced annual assessments for BIF-insured institutions to the legal
minimum of $2,000 while SAIF-insured institutions continued to pay assessments
based on a schedule of from $0.23 to $0.31 per $100 of deposits.
In September 1996, Congress enacted legislation to recapitalize the
SAIF by a one-time assessment on all SAIF-insured deposits held as of March 31,
1995. The assessment will be 65.7 basis points per $100 in deposits, payable on
November 30, 1996. For the Bank, the assessment is expected to be $226,000 (or
$145,000 when adjusted for taxes), based on the Bank's deposits on March 31,
1995 of $34.9 million. In addition, beginning January 1, 1997, pursuant to the
legislation, interest payments on bonds ("FICO Bonds") issued in the late 1980s
by the Financing Corporation ("FICO") to recapitalize the now defunct Federal
Savings and Loan Insurance Corporation will be paid jointly by BIF-insured
institutions and SAIF-insured institutions. The FICO assessment will be 1.29
basis points per $100 in BIF deposits and 6.44 basis points per $100 in SAIF
deposits. Beginning January 1, 2000, the FICO interest payments will be paid
pro-rata by banks and thrifts based on deposits (approximately 2.4 basis points
per $100 in deposits). The BIF and SAIF will be merged on January 1, 1999,
provided the bank
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and savings association charters are merged by that date. In that event, pro-
rata FICO sharing will begin on January 1, 1999.
While the legislation has reduced the disparity between premiums paid
on BIF deposits and SAIF deposits, and has relieved the thrift industry of a
portion of the contingent liability represented by the FICO bonds, the premium
disparity between SAIF-insured institutions, such as the Bank, and BIF-insured
institutions will continue until at least January 1, 1999. Under the
legislation, the Bank anticipates that its ongoing annual SAIF premiums will be
approximately $23,000.
Legislation Limiting Deduction of Bad Debt
Under Section 593 of the Code, until the first tax year beginning on
or after January 1, 1996, thrift institutions such as the Bank, which met
certain definitional tests primarily relating to their assets and the nature of
their businesses, were permitted to establish a tax reserve for bad debts and to
make annual additions thereto, which additions, within specified limitations,
could be deducted in arriving at their taxable income. The Bank's deduction with
respect to "qualifying loans," which are generally loans secured by certain
interests in real property, were computed using an amount based on the Bank's
actual loss experience (the "Experience Method"), or a percentage equal to 8.0%
of the Bank's taxable income (the "PTI Method"), computed without regard to this
deduction and with additional modifications and reduced by the amount of any
permitted addition to the non-qualifying reserve.
Under recently enacted legislation, the PTI Method was repealed. If a
Bank is not a "large" bank, i.e., the quarterly average of the Bank's total
assets or of the consolidated group of which it is a member exceeds $500 million
for the year, the Bank will continue to be permitted to use the Experience
Method. In addition, the Bank is required to recapture (i.e., take into income)
over a multi-year period its "applicable excess reserves", i.e., the balance of
its reserve for losses on qualifying loans and nonqualifying loans, as of the
close of its last tax year beginning before January 1, 1996, over the greater
of (a) the balance of such reserves as of December 31, 1987 or (b) in the case
of a bank which is not a "large" bank, an amount that would have been the
balance of such reserves as of the close of its last tax year beginning before
January 1, 1996, had the Bank always computed the additions to its reserves
using the experience method. The Bank would not be required to recapture its
supplemental reserves or its pre-1988 reserves, even if the Bank later became a
"large" bank. Under the legislation, such recapture requirements would be
suspended for each of two successive taxable years beginning January 1, 1997 if
the principle amount of residential loans made by the Bank during each such year
is not less than the average of the principal amounts of such loans made by the
Bank during its six taxable years preceding January 1, 1996. As of June 30,
1996, the Bank's bad debt reserve subject to recapture over a six-year period
totaled approximately $129,000.
If the Bank ceases to qualify as a "bank" (as defined in Code Section
581) or converts to a credit union, the pre-1988 reserves and supplemental
reserves are restored to income ratably over a six-year period, beginning in the
tax year the association no longer qualifies as a bank. The balance of the pre-
1988 reserves are also subject to recapture in the case of certain excess
distributions to (including distributions on liquidation and dissolution), or
redemptions of stockholders. See "Regulation" and "Regulation--Federal and
State Taxation--Federal Taxation."
Competition
The Bank experiences strong competition in its local market area in
both originating loans and attracting deposits. This competition arises, with
respect to originating loans, from mortgage bankers and to a lesser extent from
commercial banks, savings institutions and credit unions, and with respect to
attracting deposits, from securities firms and mutual funds and from other
financial institutions in its market area. In Livingston, Caldwell and Daviess
Counties, where the Bank's three offices are located, there are ten commercial
banks, in addition to the Bank. See "Business--Lending Activities" and
"--Market Area and Competition."
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Potential Increased Costs of Conversion Resulting from Delayed Offering
The Subscription Offering will expire at noon, Central Time on
December ___, 1996 unless extended by the Bank and the Holding Company. If the
Offerings are extended beyond February __, 1997, all subscribers will have the
right to modify or rescind their subscriptions and to have their subscription
funds returned with interest. There can be no assurance that the Offerings will
not be extended as set forth above.
A material delay in the completion of the sale of all unsubscribed
shares in the Community or Syndicated Community Offering may result in a
significant increase in the costs in completing the Stock Conversion.
Significant changes in the Bank's operations and financial condition, the
aggregate market value of the shares to be issued in the Stock Conversion and
general market conditions may occur during such material delay. In the event
the Stock Conversion is not consummated within 24 months after the date of the
Special Meeting, OTS regulations would require the Bank to charge accrued Stock
Conversion costs to then-current period operations. See "The Stock Conversion -
Risk of Delayed Offering."
ESOP Compensation Expense
In November, 1993, the American Institute of Certified Public
Accountants ("AICPA") Accounting Standards Executive Committee issued Statement
of Position 93-6 Employers' Accounting for Employee Stock Ownership Plans ("SOP
93-6"). SOP 93-6 requires an employer to record compensation expense in an
amount equal to the fair value of shares committed to be released to employees
from an employee stock ownership plan. Assuming shares of Common Stock
appreciate in value over time, the adoption of SOP 93-6 will increase
compensation expense relating to the ESOP to be established in connection with
the Stock Conversion as compared with prior guidance which required the
recognition of compensation expense based on the cost of shares acquired by the
ESOP. It is impossible to determine at this time the extent of such impact on
future net income. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Impact of New Accounting Standards."
Absence of Active Market for the Common Stock
The Holding Company and the Bank have never issued capital stock.
Consequently, there is no existing market for the Common Stock. The Holding
Company has requested that Trident Securities undertake to match offers to buy
and offers to sell the Common Stock and that Trident Securities list the Common
Stock over-the-counter through the National Daily Quotation System "Pink Sheets"
published by the National Quotation Bureau, Inc. and Trident Securities has
agreed to do so. The development of a liquid public trading market depends upon
the existence of willing buyers and sellers, the presence of which is not within
the control of the Holding Company, the Bank or any market maker. It is
unlikely that an active and liquid trading market for the Common Stock will
develop due to the relatively small size of the Offerings and the small number
of stockholders expected following the Stock Conversion. Accordingly,
purchasers should consider the illiquid, long-term nature of an investment in
the Common Stock. Furthermore, there can be no assurance that purchasers will
be able to sell their shares at or above the Purchase Price. See "Market for
Common Stock."
Absence of Refund of Offering Subscriptions on Amendment to Plan of
Conversion
The Plan of Conversion provides that, if deemed necessary or desirable
by the Boards of Directors of the Bank and the Holding Company, the Plan of
Conversion may be substantively amended (including an amendment to eliminate the
formation of the holding company as part of the Conversion) by a two-thirds vote
of the respective Boards of Directors of the Bank and the Holding Company, as a
result of comments from regulatory authorities or otherwise, at any time with
the concurrence of the OTS. Moreover, if the Plan of Conversion is amended,
subscriptions which have been received prior to such amendment will not be
refunded unless otherwise required by the OTS. If the Plan of Conversion is
amended in a manner that is deemed to be material to the subscribers by the
Holding Company, the Bank and the OTS, such subscriptions will be resolicited.
No such amendments are currently
23
<PAGE>
contemplated, although the Bank reserves the right to increase or decrease
purchase limitations. See "The Conversion -Approval, Interpretation, Amendment
and Termination."
Possible Adverse Income Tax Consequences of the Distribution of Subscription
Rights
If the Subscription Rights granted to Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members are deemed to have an
ascertainable value, receipt of such rights may be taxable only to those
Eligible Account Holders, Supplemental Eligible Account Holders or Other Members
who exercise the Subscription Rights (either as capital gain or ordinary income)
in an amount equal to such value. Additionally, the Bank could recognize a gain
for tax purposes on such distribution. Whether Subscription Rights are
considered to have ascertainable value is an inherently factual determination.
The Bank has received an opinion of Ferguson that such rights have no value,
which opinion is not binding on the IRS. See "The Conversion--Effects of
Conversion to Stock Form on Depositors and Borrowers of the Bank--Tax Effects."
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
Investors Federal is a federally chartered mutual savings association
headquartered in Chillicothe, Missouri. Investors Federal was originally
chartered as a federal savings association in 1934 under the name Chillicothe
Federal Savings and Loan Association. In 1974, the Bank changed its name to
Investors Federal Savings and Loan Association, and in 1988 the Bank changed its
name to Investors Federal Bank and Savings Association. Its deposits are
insured up to the maximum allowable amount by the SAIF of the FDIC. Through its
main office in Chillicothe and its branch offices in Hamilton and Gallatin,
Missouri, Investors Federal primarily serves communities located in Livingston,
Caldwell and Daviess Counties in the State of Missouri. At June 30, 1996,
Investors Federal had total assets of $52.6 million, deposits of $35.5 million
and total equity of $3.3 million.
Investors Federal has been, and intends to continue to be, a
community-oriented financial institution offering selected financial services to
meet the needs of the communities it serves. The Bank attracts deposits from
the general public and historically has used such deposits, together with other
funds, to originate and purchase one-to four-family residential mortgage loans,
and to originate non-residential real estate loans (primarily farm loans), and
consumer loans consisting primarily of loans secured by automobiles. In
addition, in recent years, the Bank has expanded its loan portfolio by
purchasing SBA-guaranteed loans and FHA-insured Title I home improvement loans.
At June 30, 1996, the Bank's total loan portfolio was $28.7 million, of which
79.5% were one- to four-family residential mortgage loans, 6.8% were non-
residential real estate loans, 9.0% were consumer loans (including FHA home
improvement loans), and 3.4% were SBA-guaranteed loans.
During the year ended June 30, 1996, the Bank originated $2.1 million
of fixed-rate and $3.1 million of adjustable rate one-to four-family residential
mortgage loans, all of which were retained in the Bank's portfolio. See
"Business - Lending Activities." To supplement local loan production, the Bank
has purchased adjustable-rate loans in the secondary mortgage market on a non-
recourse basis, with servicing retained by the seller or originator of the
loans. In recent years, the Bank has limited its purchased loans to one- to
four-family residential mortgage loans secured by collateral located in the
State of Missouri, although the Bank's purchased loan portfolio includes
seasoned one- to four-family residential mortgage loans secured by collateral
located outside Missouri. Purchased one- to four-family residential mortgage
loans totaled $7.2 million, or 25.0%, of the Bank's total loan portfolio at June
30, 1996.
Because of the limited lending opportunities in its local market area
and to the extent adjustable-rate one-to four-family residential mortgage loans
are unavailable for purchase at attractive yields, the Bank will invest in
mortgage-backed securities and other investment securities. At June 30, 1996,
the Bank's portfolio of mortgage-backed securities and investment securities was
substantial. At June 30, 1996, the Bank's mortgage-backed securities portfolio
totaled $17.0 million (or 32.3% of total assets), and consisted of $7.9 million
in mortgage-backed securities issued or guaranteed by the FHLMC, FNMA and GNMA,
$3.0 million in collateralized mortgage obligations, including real estate
mortgage investment conduits, and $6.0 million in participations in pools of
Small Business
24
<PAGE>
Administration loans. Also at June 30, 1996, the Bank's investment portfolio
totaled $5.6 million (or 10.6% of total assets) and consisted of federal agency
obligations, municipal bonds, FHLB stock, interest earnings deposits with other
financial institutions and mutual funds. In recent years, management has also
utilized the mortgage-backed securities and investment portfolio to attempt to
increase net interest income by purchasing such securities with the proceeds of
FHLB advances and earning the spread between the yields earned on the mortgage-
backed securities and the rates paid on the FHLB advances. At June 30, 1996, the
Bank's FHLB advances totaled $13.5 million, as compared to FHLB advances of $6.4
million at June 30, 1995.
Investors Federal's executive office is located at 522 Washington
Street, Chillicothe, Missouri 64601. Its telephone number at that address is
(816) 646-3733.
IFB HOLDINGS, INC.
IFB Holdings, Inc. was organized in October 1996 for the purpose of
serving as a holding company for the Converted Bank upon its conversion from
mutual to stock form, and of the National Bank following the Bank Conversion.
Prior to the Conversion, the Holding Company has not engaged and will not engage
in any material operations. Upon consummation of the Stock Conversion, the
Holding Company will have no significant assets other than the outstanding
capital stock of the Converted Bank (or, following the Bank Conversion, the
National Bank), up to 50% of the net proceeds from the Stock Conversion (less
the amount to fund the Employee Stock Ownership Plan ("ESOP")) and a note
evidencing its loan to the Bank's ESOP. Upon consummation of the Stock
Conversion, the Holding Company's principal business will be overseeing and
directing the business of the National Bank and investing the net Stock
Conversion proceeds retained by it. In connection with the Bank Conversion, the
Holding Company will register with the Board of Governors of the Federal Reserve
System (the "FRB") as a bank holding company under the Bank Holding Company Act
of 1956, as amended (the "BHCA").
The Holding Company has received approval from the OTS to acquire
control of the Converted Bank, subject to satisfaction of certain conditions.
The Holding Company has applied to the FRB for approval to retain control of the
National Bank following the Bank Conversion. Such approval has not been obtained
as of the date of this Prospectus, and there can be no assurance that such
approval will be obtained. See "Risk Factors--Potential Delay in Completion or
Denial of Bank Conversion."
The holding company structure will permit the Holding Company to
expand the financial services currently offered through the Bank, although there
are no definitive plans or arrangements for such expansion at present. The
holding company structure will also provide the Bank with enhanced operational
flexibility and provide the ability to diversify its business opportunities
through acquiring or merging with other financial institutions, thereby
enhancing its financial resources in order to compete more effectively with
other financial service organizations. At the present time, however, the Holding
Company does not have any plans, arrangements, agreements or understandings with
respect to any such acquisitions or mergers. After the Stock Conversion, the
Holding Company will be classified as a unitary savings and loan holding company
and will be subject to regulation by the OTS. After the Bank Conversion, the
Holding Company will be classified as a bank holding company and will be subject
to regulation by the FRB.
The initial activities of the Holding Company are anticipated to be
funded by such retained proceeds and the income thereon and dividends, if any,
from Investors Federal or the National Bank after the Bank Conversion. See
"Dividends," "Use of Proceeds," "Regulation - Holding Company Regulation" and
"Regulation - Federal and State Taxation." Thereafter, activities of the
Holding Company may also be funded through sales of additional securities,
through borrowings and through income generated by other activities of the
Holding Company. At this time, there are no plans regarding any other
activities.
The executive office of the Holding Company is located at 522
Washington Street, Chillicothe, Missouri 64601. Its telephone number at that
address is (816) 646-3733.
25
<PAGE>
INVESTORS FEDERAL BANK, NATIONAL ASSOCIATION
Upon consummation of the Bank Conversion, the National Bank will
succeed to all of the assets and liabilities of the Converted Bank (which,
pursuant to the Stock Conversion will have succeeded to all of the assets and
liabilities of the Bank), and initially will continue to conduct business in
substantially the same manner as the Bank prior to the Conversion. Over time,
however, management anticipates broadening its range of banking products and
services consistent with the national bank charter. Diversification of the
National Bank's loan portfolio may also alter the risk profile of the National
Bank. See "Risk Factors--Effect of the Conversion to a National Bank Charter on
Operations."
The deposits of the National Bank will continue to be insured by the
SAIF of the FDIC and, as such, the National Bank will continue to be subject to
regulation and supervision by the FDIC. The National Bank will not be subject to
OTS regulation and supervision; rather, the primary regulator of the National
Bank will be the OCC. The National Bank will remain a member of the FHLB of Des
Moines. As a national bank, the National Bank will also be required to become a
member of the Federal Reserve System and to purchase stock in the Federal
Reserve Bank of Kansas City.
28
<PAGE>
CAPITALIZATION
The table below sets forth the capitalization, including deposits and
borrowings, of Investors Federal as of June 30, 1996 and the pro forma
capitalization of the Holding Company at the minimum, the midpoint, maximum and
15% above the maximum of the Estimated Valuation Range, after giving effect to
the Stock Conversion and based on other assumptions set forth in the table and
under the caption "Pro Forma Data."
<TABLE>
<CAPTION>
Pro Forma Capitalization of Holding Company
---------------------------------------------------------
191,250 225,000 258,750 297,562
Capitalization of Shares Shares Shares Shares
Bank at at $20.00 at $20.00 at $20.00 at $20.00
June 30, 1996 Per Share Per Share Per Share Per Share
------------- --------- --------- --------- ---------
(Amounts In Thousands)
<S> <C> <C> <C> <C> <C>
Deposits/(1)/.................... $ 35,495 $ 35,495 $ 35,495 $ 35,495 $ 35,495
FHLB advances.................... 13,474 13,474 13,474 13,474 13,474
-------- -------- -------- -------- --------
Total deposits and borrowings.. $ 48,969 $ 48,969 $ 48,969 $ 48,969 $ 48,969
======== ======== ======== ======== ========
Stockholders' equity:
Preferred Stock, $.01 per value
per share:
authorized - 100,000 shares;
assumed outstanding - none..... $ -- $ -- $ -- $ -- $ --
Common Stock, $.01 par value
per share:
authorized - 900,000 shares;
shares to be outstanding - as
shown/(5)/..................... -- 2 2 3 3
Paid-in capital.................. -- 3,454 4,118 4,792 5,568
Less: Common stock acquired by
ESOP/(3)/................ -- (306) (360) (414) (476)
Common stock to be
acquired by RRP/(4)/..... -- (153) (180) (207) (238)
Retained earnings, substantially
restricted/(2)/................ 3,339 3,339 3,339 3,339 3,339
Unrealized (losses) on
available-for-sale securities,
net of tax..................... (71) (71) (71) (71) (71)
-------- -------- -------- -------- --------
Total stockholders' equity..... $ 3,268 $ 6,265 $ 6,848 $ 7,442 $ 8,125
======== ======== ======== ======== ========
</TABLE>
_____________________________
/(1)/ No effect has been given to withdrawals from savings accounts for the
purpose of purchasing Common Stock in the Stock Conversion. Any such
withdrawals will reduce pro forma deposits by the amount of such
withdrawals.
/(2)/ See Notes 10 and 11 of the Notes to Consolidated Financial Statements
for information regarding restrictions on retained earnings,
"Dividends" and "Regulation - Limitations on Dividends and Other
Capital Distributions" regarding restrictions on future dividend
payments and "The Conversion - Effects of Conversion to Stock Form on
Depositors and Borrowers of the Bank" regarding the liquidation
account to be established upon Stock Conversion. Does not take into
account Holding Company dividends, if any, which may be paid
subsequent to the Stock Conversion. See "Dividends."
/(3)/ Assumes that 8% of the shares issued in the Stock Conversion will be
acquired by the ESOP and that the ESOP will be funded by the Holding
Company. The Bank intends to make contributions to the ESOP
sufficient to service and ultimately retire its debt. Since the
Holding Company will finance the ESOP debt, the ESOP debt will be
eliminated through consolidation and no liability will be reflected
on the Holding Company's consolidated financial statements.
Accordingly, the amount of stock acquired by the ESOP is shown in
this table as a reduction of total stockholders' equity. See
"Management - Benefit Plans - Employee Stock Ownership Plan."
/(4)/ While management does not currently intend to do so, following OTS
and stockholder approval, shares utilized to fund the RRP could be
obtained from newly issued shares. In the event RRP shares are
obtained from authorized but unissued shares, the existing ownership
of current stockholders would be diluted by approximately 3.85%.
However, there would be no impact on stockholders' equity.
/(5)/ Does not reflect the shares of Common Stock that may be reserved for
issuance pursuant to the proposed Stock Option Plan and the proposed
RRP. See "Management--Benefit Plans."
27
<PAGE>
PRO FORMA DATA
The following table sets forth the historical consolidated net income,
total equity and per share data of the Bank at and for the year ended June 30,
1996, and after giving effect to the Stock Conversion, the pro forma
consolidated net income, stockholders' equity and per share data of the Holding
Company at and for the same period. The pro forma data is computed on the
assumptions that (i) the specified number of shares of Common Stock were sold at
the beginning of the specified period and yielded net proceeds to the Holding
Company as indicated and (ii) such net proceeds were invested by the Bank and
the Holding Company at the beginning of the period to yield a return of 5.80%
for the fiscal year ended June 30, 1996. The assumed return is based on the
yield on one-year U.S. Government securities at June 30, 1996, which is deemed
by management to more accurately reflect pro forma reinvestment rates than the
arithmetic average of the Bank's weighted average yield on all interest-earning
assets and the weighted average rate paid on deposits. After adjusting for
applicable federal and state taxes totaling 38.5%, the after-tax yield was equal
to 3.57% for the fiscal year ended June 30, 1996. The table also assumes that
the proposed RRP awards equal to 4% of the shares sold in the Stock Conversion
were purchased by the RRP at $20.00 per share in the open market and fixed Stock
Conversion expenses were $317,285. No effect has been given to the stock
reserved for issuance under the Stock Option Plan. Actual Stock Conversion
expenses may be more or less than those estimated because fees paid may vary
depending upon whether selected broker-dealers are used, market conditions and
other factors. The pro forma net earnings amounts derived from the assumptions
set forth herein should not be considered indicative of the actual results of
operations of the Holding Company that would have been attained for any period
if the Stock Conversion had been actually consummated at the beginning of such
period, and the assumptions regarding investment yields should not be considered
indicative of the actual yields expected to be achieved during any future
period.
The total number of shares to be issued in the Stock Conversion may be
increased or decreased to reflect changes in market and financial conditions
prior to the close of the Offerings. However, if the aggregate Purchase Price
of the Common Stock actually sold in the Conversion is below $3,825,000 or more
than $5,951,240 (15% above the maximum of the Estimated Valuation Range)
subscribers will be offered the opportunity to modify or cancel their
subscriptions. See "The Stock Conversion - Stock Pricing and Number of Shares
to be Issued."
28
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended June 30, 1996
-----------------------------------------------------------------------
297,562
191,250 225,000 258,750 Shares
Shares Shares Shares at $20.00
at $20.00 at $20.00 at $20.00 per Share
per Share per Share per Share (Maximum
(Minimum) (Midpoint) (Maximum) as Adjusted)/(1)/
------------ ----------- ------------ -----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross proceeds............. $ 3,825 $ 4,500 $ 5,175 $ 5,951
Less estimated expenses.... (369) (380) (380) (380)
-------- -------- -------- --------
Estimated net Stock
Conversion proceeds...... 3,456 4,120 4,795 5,571
Less Common Stock
acquired by ESOP......... (306) (360) (414) (476)
Less Common Stock to be
acquired by RRP.......... (153) (180) (207) (238)
-------- -------- -------- --------
Estimated proceeds
available for
investment............. $ 2,997 $ 3,580 $ 4,174 $ 4,857
======== ======== ======== ========
Consolidated net income:
Historical................ $ 302 $ 302 $ 302 $ 302
Pro forma adjustments:
Net income from
proceeds/(2)/............ 107 128 149 173
Less pro forma ESOP
adjustment/(3)/.......... (19) (22) (25) (29)
Less pro forma RRP
adjustment/(4)/.......... (19) (22) (25) (29)
-------- -------- -------- --------
Pro forma net income.... $ 371 $ 385 $ 400 $ 417
======== ======== ======== ========
Consolidated net income
per share: /(5)(6)/
Historical................ $ 1.70 $ 1.45 $ 1.26 $ 1.09
Pro forma adjustments:
Net income from proceeds
/(2)/.................... 0.60 0.61 0.62 0.63
Less pro forma ESOP
adjustment/(3)/.......... (0.11) (0.11) (0.11) (0.11)
Less pro forma RRP
adjustment/(4)/.......... (0.11) (0.11) (0.11) (0.11)
-------- -------- -------- --------
Pro forma net income
per share............. $ 2.09 $ 1.85 $ 1.67 $ 1.51
======== ======== ======== ========
Consolidated stockholders'
equity (book value):/(7)/
Historical................ 3,268 3,268 3,268 3,268
Estimated net Stock
Conversion proceeds...... 3,456 4,120 4,795 5,571
Less common stock acquired
or to be acquired by:
ESOP..................... (306) (360) (414) (476)
RRP /(4)/................ (153) (180) (207) (238)
-------- -------- -------- --------
Pro forma............... $ 6,265 $ 6,848 $ 7,442 $ 8,125
======== ======== ======== ========
Consolidated stockholders'
equity per share: /(6)(8)/
Historical................ $ 17.09 $ 14.52 $ 12.63 $ 10.98
Estimated net Stock
Conversion proceeds...... 18.07 18.31 18.53 18.72
Less Common Stock
acquired by:
ESOP..................... (1.60) (1.60) (1.60) (1.60)
RRP /(4)/................ (0.80) (0.80) (0.80) (0.80)
-------- -------- -------- --------
Pro forma stockholders'
equity/(9)/........... $ 32.76 $ 30.44 $ 28.76 $ 27.31
======== ======== ======== ========
Pro forma price to book
value..................... 61.05% 65.71% 69.54% 73.25%
======== ======== ======== ========
Pro forma price to
earnings (P/E ratio)...... 9.56x 10.83x 12.01x 13.25x
======== ======== ======== ========
Number of shares used in
calculating equity per
share..................... 191,250 225,000 258,750 297,562
======== ======== ======== ========
Number of shares used in
calculating earnings per
share..................... 177,480 208,800 240,120 276,138
======== ======== ======== ========
(footnotes begin on following page)
</TABLE>
29
<PAGE>
_____________________
/(1)/ Gives effect to the sale of an additional 38,812 shares in the Stock
Conversion, which may be issued as a result of an increase in the pro
forma market value of the Holding Company and the Bank, as converted,
without the resolicitation of subscribers or any right of cancellation.
The issuance of such additional shares will be conditioned on a
determination of the independent appraiser that such issuance is
compatible with its determination of the estimated pro forma market
value of the Holding Company and the Bank, as converted. See "The Stock
Conversion--Stock Pricing and Number of Shares to be Issued."
/(2)/ No effect has been given to withdrawals from accounts for the purpose of
purchasing Common Stock in the Stock Conversion.
/(3)/ It is assumed that 8% of the shares of Common Stock offered in the Stock
Conversion will be purchased by the ESOP. The funds used to acquire such
shares will be borrowed by the ESOP (at an interest rate equal to the
prime rate as published in The Wall Street Journal on the closing date
of the Stock Conversion, which rate is currently 8.25%), from the net
proceeds from the Stock Conversion retained by the Holding Company. The
amount of this borrowing has been reflected as a reduction from gross
proceeds to determine estimated net proceeds. The Bank intends to make
contributions to the ESOP in amounts at least equal to the principal and
interest requirement of the debt. As the debt is paid down,
stockholders' equity will be increased. The Bank's payment of the ESOP
debt is based upon equal installments of principal over a 10-year
period, assuming a combined federal and state tax rate of 38.5%.
Interest income earned by the Holding Company on the ESOP debt offsets
the interest paid by the Bank on the ESOP loan. No reinvestment is
assumed on proceeds contributed to fund the ESOP. The ESOP expense
reflects adoption of Statement of Position ("SOP") 93-6, which will
require recognition of expense based upon shares committed to be
released and the exclusion of unallocated shares from earnings per share
computations. The valuation of shares committed to be released would be
based upon the average market value of the shares during the year,
which, for purposes of this calculation, was assumed to be equal to the
$20.00 per share Purchase Price. See "Management of the Bank--Benefit
Plans--Employee Stock Ownership Plan."
/(4)/ In calculating the pro forma effect of the RRP, it is assumed that the
required stockholder approval has been received, that the shares were
acquired by the RRP at the beginning of the period presented in open
market purchases at the Purchase Price and that 20% of the amount
contributed was an amortized expense during such period. The issuance of
authorized but unissued shares of the Common Stock instead of open
market purchases would dilute the voting interests of existing
stockholders by approximately 3.85% and pro forma net income per share
for the year ended June 30, 1996 would be $2.03, $1.80, $1.63, and
$1.48, the pro forma price to earnings ratio for the year ended June 30,
1996 would be 9.85x, 11.11x, 12.27x, and 13.51x, and pro forma
stockholders' equity per share at June 30, 1996 would be $32.27, $30.03,
$28.38, and $26.99, at the minimum, midpoint, maximum, and 15% above the
maximum of the Estimated Valuation Range, respectively. Shares issued
under the RRP vest 20% per year and, for purposes of this table,
compensation expense is recognized on a straight-line basis over each
vesting period. In the event the fair market value per share is greater
than $20.00 per share on the date of stockholder approval of the RRP,
total RRP expense would increase. No effect has been given to the shares
reserved for issuance under the proposed Stock Option Plan. If
stockholders approve the Stock Option Plan following the Stock
Conversion, the Holding Company will have reserved for issuance under
the Stock Option Plan authorized but unissued shares of Common Stock
representing an amount of shares equal to 10% of the shares sold in the
Stock Conversion. If all of the options were to be exercised utilizing
these authorized but unissued shares rather than treasury shares (which
could be acquired), the voting interests of existing stockholders would
be diluted by approximately 9.1%. See "Management of the Bank--Benefit
Plans--1996 Stock Option and Incentive Plan" and "--Recognition and
Retention Plan."
/(5)/ Per share amounts are based upon outstanding shares of 177,480, 208,800,
240,120, and 276,138 at the minimum, midpoint, maximum, and 15% above
the maximum of the Estimated Valuation Range. Such shares include all
shares sold in the Stock Conversion minus shares purchased by the ESOP
that are not assumed committed to be released.
/(6)/ Historical per share amounts have been computed as if the shares of
Common Stock expected to be issued in the Stock Conversion had been
outstanding at the beginning of the period or on the date shown, but
without any adjustment of historical net income or historical retained
earnings to reflect the investment of the estimated net proceeds of the
sale of shares in the Stock Conversion, the additional ESOP expense or
the proposed RRP expense, as described above. Amounts shown do not
reflect the payment by the Bank of the special one-time assessment to
recapitalize the SAIF. See "Risk Factors--Recapitalization of SAIF,
Disparity between BIF and SAIF Premiums." Based on assessable deposits
on March 31, 1995 of $34.9 million, the Bank's assessment is expected to
be $226,000 (or $145,000 when adjusted for taxes), or $1.29, $1.10,
$0.95 and $0.83 per share, respectively, at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range.
30
<PAGE>
/(7)/ "Book value" represents the difference between the stated amounts of the
Bank's assets and liabilities. The amounts shown do not reflect the
liquidation account that will be established for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in the Stock
Conversion, or the federal income tax consequences of the restoration to
income of the Bank's special bad debt reserves for income tax purposes,
which would be required in the unlikely event of liquidation. See "The
Stock Conversion--Effects of Conversion to Stock Form on Depositors and
Borrowers of the Bank" and "--Income Tax Consequences." The amounts
shown for book value do not represent fair market values or amounts
distributable to stockholders in the unlikely event of liquidation.
/(8)/ Per share amounts are based upon shares outstanding of 191,250, 225,000,
258,750 and 297,562 at the minimum, midpoint, maximum and 15% above the
maximum of the Estimated Valuation Range, respectively.
/(9)/ Neither represents, nor is intended to represent, possible future price
appreciation or depreciation of the Common Stock.
31
<PAGE>
PRO FORMA REGULATORY CAPITAL
The Bank is currently subject to OTS regulatory capital requirements.
After the Bank Conversion, however, the Bank will be required to satisfy OCC
regulatory capital requirements, which are similar but not identical to the OTS
capital requirements. The following table sets forth the Bank's historical
capital position relative to the various minimum OTS regulatory capital
requirements. The next table sets forth the National Bank's historical capital
position relative to the OCC capital requirements to which the National Bank
will be subject. The Federal Reserve's capital requirements for bank holding
companies do not apply to bank holding companies with consolidated assets of
less than $150 million (such as the Holding Company); accordingly, pro forma
data of the Holding Company relative to such capital requirements are not
presented. Pro forma data assumes that the Common Stock has been sold as of June
30, 1996, at the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range. For additional information regarding the financial
condition of the Bank and the assumptions underlying the pro forma capital
calculations set forth below, see "Use of Proceeds," "Capitalization" and "Pro
Forma Data" and the Consolidated Financial Statements and related notes
appearing elsewhere herein.
<TABLE>
<CAPTION>
Pro Forma Based Upon Sale of
------------------------------------------------------------
Minimum of Midpoint of
Estimated Valuation Estimated Valuation
Range of Range of
Historical at 191,250 Shares 225,000 Shares
June 30, 1996 at $20.00 Per Share at $20.00 Per Share
--------------------- ----------------------------- -----------------------------
Amount Percent/(1)/ Amount/(2)/ Percent/(1)(2)/ Amount/(2)/ Percent/(1)(2)/
------ ------------- ----------- ---------------- ----------- ----------------
The Bank (Dollars in Thousands)
- --------
<S> <C> <C> <C> <C> <C> <C>
Capital under generally
accepted accounting
principles..................... $3,268 6.21% $4,537 8.38% $4,788 8.79%
====== ===== ====== ===== ====== =====
Tangible capital/(2)/........... $3,339 6.34% $4,608 8.49% $4,859 8.90%
Tangible capital
requirement/(5)/............... 790 1.50% 814 1.50% 819 1.50%
------ ----- ------ ----- ------ -----
Excess........................ $2,549 4.84% $3,794 6.99% $4,040 7.40%
====== ===== ====== ===== ====== =====
Core capital/(2)/............... $3,339 6.34% $4,608 8.49% $4,859 8.90%
Core capital requirement/(3)(5)/ 1,581 3.00 1,628 3.00 1,637 3.00
------ ----- ------ ----- ------ -----
Excess........................ $1,758 3.34% $2,980 5.49% 3,222 5.90%
====== ===== ====== ===== ====== =====
Risk-based capital/(2)(4)/...... $3,592 17.30% $4,861 23.06% $5,112 24.18%
Risk-based capital
requirement/(5)(6)/............ 1,661 8.00 1,686 8.00 1,691 8.00
------ ----- ------ ----- ------ -----
Excess........................ $1,931 9.30% $3,175 15.06% $3,421 16.18%
====== ===== ====== ===== ====== =====
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Based Upon Sale of
------------------------------------------------------------
Maximum of Maximum, as Adjusted,
Estimated Valuation of Valuation
Range of Range of
258,750 Shares 297,562 Shares
at $20.00 Per Share at $20.00 Per Share
---------------------------- ----------------------------
Amount/(2)/ Percent/(1)(2)/ Amount/(2)/ Percent/(1)(2)/
The Bank
- --------
<S> <C> <C> <C> <C>
Capital under generally
accepted accounting
principles..................... $5,045 9.21% $5,340 9.69%
====== ===== ====== =====
Tangible capital/(2)/........... $5,116 9.32% $5,411 9.79%
Tangible capital
requirement/(5)/............... 823 1.50% 829 1.50%
------ ----- ------ -----
Excess........................ $4,293 7.82% $4,582 8.29%
====== ===== ====== =====
Core capital/(2)/............... $5,116 9.32% $5,411 9.79%
Core capital requirement/(3)(5)/ 1,647 3.00 1,657 3.00
------ ----- ------ -----
Excess........................ $3,469 6.32% $3,754 6.79%
====== ===== ====== =====
Risk-based capital/(2)(4)/...... $5,369 25.32% $5,664 26.62%
Risk-based capital
requirement/(5)(6)/............ 1,696 8.00 1,702 8.00
------ ----- ------ -----
Excess........................ $3,673 17.32% $3,962 18.62%
====== ===== ====== =====
</TABLE>
- ---------------------------
/(1)/ Tangible and core capital levels are shown as a percentage of total
adjusted assets; risk-based capital levels are shown as a percentage of
risk-weighted assets.
/(2)/ Assumes retention by the Holding Company of 50% of the net Stock
Conversion proceeds (less the amount of the loan made to the ESOP from the
Holding Company's portion of the net Stock Conversion proceeds). The
remaining 50% of the net Stock Conversion proceeds will be provided to the
Bank. For regulatory capital purposes, the Bank's capital will be reduced
by the anticipated purchases by the ESOP of 8% of the shares of Common
Stock sold in the Stock Conversion and the proposed issuance of 4% of the
shares of Common Stock sold in the Stock Conversion for the RRP. The
Holding Company intends to invest additional proceeds into the Bank to the
extent necessary to increase the Converted Bank's tangible capital to at
least 10% of its adjusted total assets. As of June 30, 1996, additional
proceeds to be invested into the Bank for this purpose would be $910,000,
$665,000, $415,000 and $125,000, assuming sale of Common Stock in the
Offerings at the minimum, midpoint, maximum and 15% above the maximum of
the Estimated Valuation Range, respectively; the investment of such
additional proceeds into the Bank would result in retained proceeds by the
Holding Company of $818,000, $1,395,000, $1,983,000 and $2,661,000 at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range, respectively. The actual amount of additional proceeds to
be invested into the Bank to maintain the 10% tangible capital level will
depend on a number of factors, including the amount of deposit
withdrawals
32
<PAGE>
to fund subscriptions for Common Stock in the Offerings, the actual level
of assets of the Bank at the closing of the Offerings (which will depend
in part on the repayment and prepayment of loans and the maturity of
mortgage-backed and investment securities), the Bank's asset/liability
management in the period up to the closing of the Offerings, and the
overall expenses of the Conversion.
/(3)/ In April 1991, the OTS proposed a core capital requirement for savings
associations comparable to the requirement for national banks that became
effective December 31, 1990. The proposal calls for an OTS core capital
requirement of at least 3% of total adjusted assets for thrifts that
receive the highest supervisory rating for safety and soundness, with a 4%
to 5% core capital requirement for all other thrifts. If adopted as
proposed, management would expect the Bank to be subject to a 4% to 5%
core capital requirement. See "Regulation - Regulatory Capital
Requirements."
/(4)/ Includes $253,000 of general valuation allowances, which qualify as
supplementary capital. See "Regulation - Regulatory Capital Requirements."
/(5)/ Assumes investment of net proceeds in U.S. Government agency securities
which have a 20% risk weight.
/(6)/ The OTS utilizes a net market value methodology to measure the interest
rate risk exposure of savings associations. Effective March 31, 1996,
institutions with more than normal interest rate risk, as defined by OTS
regulations, are required to make a deduction from capital equal to 50% of
its interest rate risk exposure multiplied by the present value of its
assets. Based upon this methodology, at June 30, 1996, the latest date for
which such information is available, the Bank's interest rate risk
exposure to a 200 basis point increase in interest rates was considered
"normal" under this regulation. However, since the Bank has assets of less
than $300 million and a total risk-based capital ratio in excess of 12%,
it is exempt from this requirement unless the OTS determines otherwise.
See "Regulation - Regulatory Capital Requirements."
<PAGE>
<TABLE>
<CAPTION>
Pro Forma at June 30, 1996
----------------------------------------------------------------
Minimum of Midpoint of
Estimated Valuation Estimated Valuation
Range Range
191,250 Shares 225,000 Shares
June 30, 1996 at $20.00 Per Share at $20.00 Per Share
------------------------ ------------------------ ------------------------
Amount Percent/(1)/ Amount Percent/(1)/ Amount Percent/(1)/
---------- ---------- ---------- ---------- ---------- ----------
The National Bank (Dollars in Thousands)
- -----------------
<S> <C> <C> <C> <C> <C> <C>
GAAP capital............... $ 3,268 6.21% $ 4,537 8.38% $ 4,788 8.79%
========== ========== ========== ========== ========== ==========
Tier 1 capital............. $ 3,339 6.34% $ 4,608 8.49% $ 4,859 8.90%
Tier 1 capital requirement. 2,108 4.00% 2,171 4.00% 2,183 4.00%
---------- ---------- ---------- ---------- ---------- ----------
Excess.................. $ 1,231 2.34% $ 2,437 4.49% $ 2,676 4.90%
========== ========== ========== ========== ========== ==========
Tier 1 capital to
risk-weighted
assets.................. $ 3,339 16.08% $ 4,608 21.86% $ 4,859 22.98%
Requirement................ 831 4.00% 843 4.00% 846 4.00%
---------- ---------- ---------- ---------- ---------- ----------
Excess.................. $ 2,508 12.08% $ 3,765 17.86% $ 4,013 18.98%
========== ========== ========== ========== ========== ==========
Risk-based capital......... $ 3,592 17.30% $ 4,861 23.06% $ 5,112 24.18%
Risk-based capital
requirement............... 1,661 8.00% 1,686 8.00% 1,691 8.00%
---------- ---------- ---------- ---------- ---------- ----------
Excess.................. $ 1,931 9.30% $ 3,175 15.06% $ 3,421 16.18%
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Pro Forma at June 30, 1996
--------------------------------------------------------
Maximum of 15% above
Estimated Valuation Maximum of Estimated
Range Valuation Range
258,750 Shares 297,562 Shares
at $20.00 Per Share at $20.00 Per Share
------------------------ ------------------------
Amount Percent/(1)/ Amount Percent/(1)/
---------- ---------- ---------- ----------
The National Bank (Dollars in Thousands)
- -----------------
<S> <C> <C> <C> <C>
GAAP capital............... $ 5,045 9.21% $ 5,340 9.69%
======= ===== ======= ======
Tier 1 capital............. $ 5,116 9.32% $ 5,411 9.79%
Tier 1 capital requirement. 2,196 4.00% 2,210 4.00%
------- ----- ------- ------
Excess.................. $ 2,920 5.32% $ 3,201 5.79%
======= ===== ======= ======
Tier 1 capital to
risk-weighted
assets.................. $ 5,116 24.13% $ 5,411 25.43%
Requirement................ 848 4.00% 851 4.00%
------- ----- ------- ------
Excess.................. $ 4,268 20.13% $ 4,560 21.43%
======= ===== ======= ======
Risk-based capital......... $ 5,369 25.32% $ 5,664 26.62%
Risk-based capital
requirement............... 1,696 8.00% 1,702 8.00%
------- ----- ------- ------
Excess.................. $ 3,673 17.32% $ 3,962 18.62%
======= ===== ======= ======
</TABLE>
- ---------------------------
/(1)/ Based upon adjusted total assets for purposes of the tangible capital and
core capital requirements, and risk-weighted assets for purposes of the
risk-based capital requirement.
34
<PAGE>
[PAGE LEFT INTENTIONALLY BLANK]
35
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of Common Stock in the Stock
Conversion, based on the minimum, midpoint, maximum and 15% above the maximum of
the Estimated Valuation Range, are estimated at $3.5 million, $4.1 million, $4.8
million and $5.6 million, respectively. See "Pro Forma Data." The Holding
Company will retain up to 50% of the net Stock Conversion proceeds as its
initial capitalization and will use the balance of the net Stock Conversion
proceeds to purchase all of the common stock of the Bank to be issued upon Stock
Conversion. The Holding Company intends to lend a portion of the net proceeds
retained by it to the ESOP to facilitate its purchase of 8% of the Common Stock
in the Stock Conversion. It is anticipated that the funds will be borrowed by
the ESOP at an interest rate equal to the prime rate as published in the Wall
Street Journal on the closing date of the Stock Conversion, which rate is
currently 8.25%. It is anticipated that the ESOP loan will have a term of 10
years. Based upon the issuance of shares at the minimum and maximum of the
Estimated Valuation Range, the loan to the ESOP to purchase 8% of the Common
Stock would be $306,000 and $414,000, respectively. See "Management -- Benefit
Plans -- Employee Stock Ownership Plan."
In addition, the Holding Company intends to invest additional proceeds
into the Bank to the extent necessary to increase the Converted Bank's tangible
capital to at least 10% of its adjusted total assets. As of June 30, 1996, the
additional proceeds to be invested into the Bank for this purpose would be
$910,000, $665,000, $415,000 and $125,000, assuming sale of Common Stock in the
Offerings at the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range, respectively; the investment of such additional
proceeds into the Bank would result in retained proceeds by the Holding Company
of $818,000, $1,395,000, $1,983,000 and $2,661,000 at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range,
respectively. The actual amounts of additional proceeds to be invested into the
Bank to maintain the 10% tangible capital level and retained by the Holding
Company will depend on a number of factors, including the amount of deposit
withdrawals to fund subscriptions for Common Stock in the Offerings, the actual
level of assets of the Bank at the closing of the Stock Conversion (which will
depend in part on the repayment and prepayment of loans and the maturity of
mortgage-backed and investment securities), the Bank's asset/liability
management in the period up to the closing of the Stock Conversion, and the
overall expenses of the Stock Conversion. See "Pro Forma Regulatory Capital."
The remainder of the proceeds will be invested on an interim basis in
short- and intermediate-term securities. These funds would be available for
general corporate purposes which may include expansion of operations through
acquisitions of other financial service organizations and diversification into
other related or unrelated businesses, or for investment purposes. Currently,
there are no specific plans being considered for the expansion of the business
of the Holding Company. In addition, the funds may be used to infuse additional
capital to the Bank when and if appropriate.
The net proceeds retained by the Holding Company may also be used to
repurchase the Holding Company's Common Stock as permitted by federal
regulation. Upon completion of the Stock Conversion, the Board of Directors
will have the authority to adopt stock repurchase plans, subject to statutory
and regulatory requirements. Since the Holding Company has not yet issued stock,
there is currently insufficient information upon which an intention to
repurchase stock could be based.
Based upon facts and circumstances which may arise following the Stock
Conversion, the Board of Directors may determine to repurchase stock in the
future. Such facts and circumstances may include but are not limited to: (i)
market and economic factors such as the price at which the stock is trading in
the market, the volume of trading, the attractiveness of other investment
alternatives in terms of the rate of return and risk involved in the investment,
the ability to increase the book value or earnings per share of the remaining
outstanding shares, and the effect on the Holding Company's return on equity;
(ii) the avoidance of dilution to stockholders by not having to issue additional
shares to cover the exercise of stock options or to fund employee stock benefit
plans; and (iii) any other circumstances in which repurchases would be in the
best interests of the Holding Company and its shareholders.
36
<PAGE>
Any stock repurchases will be subject to the determination of the
Board of Directors that both the Holding Company and the Bank will be
capitalized in excess of all applicable regulatory requirements after any such
repurchases and that capital will be adequate taking into account, among other
things, the level of non-performing assets and other loans of concern, the
Holding Company's and the Bank's current and projected results of operations and
asset/liability structure, the economic environment and tax and other regulatory
considerations. Repurchases during the first year following the Stock Conversion
may be subject to limitations imposed by federal regulations. A stock repurchase
program may have the effect of: (i) reducing the overall market value of the
Holding Company, (ii) increasing the cost of capital and (iii) promoting a
temporary demand for Common Stock.
Should the Holding Company implement a restricted stock plan (i.e.,
the RRP) following the Stock Conversion, a portion of the net proceeds may be
used to fund the purchase by the plan of Common Stock in an amount up to 4% of
the shares sold in the Stock Conversion. The actual cost of such purchase will
depend on the number of shares sold in the Stock Conversion and the market price
at the time of purchase. Based upon the minimum and the maximum of the
Estimated Valuation Range and on a $20.00 per share Purchase Price, the cost
would be approximately $153,000 and $207,000, respectively.
The net proceeds from the sale of the Common Stock in the Stock
Conversion will substantially increase the capital of Investors Federal.
Investors Federal will use the net proceeds for general corporate business
purposes, such as lending and investment activities in the ordinary course of
business. A portion of the proceeds may be used to repay FHLB advances. On an
interim basis, the proceeds will be invested by the Bank in short- and
intermediate-term securities.
The actual net proceeds may be more or less than the estimated net
proceeds calculated as shown under "Pro Forma Data," above. Additionally, the
actual expenses may be more or less than those estimated. See "The Conversion -
Stock Pricing and Number of Shares to be Issued."
DIVIDENDS
Subject to regulatory and other considerations, the Holding Company
intends to establish a dividend policy at an initial rate of $.60 per share per
annum (or 3.0% based upon the initial public offering price of $20 per share)
payable semi-annually in December and June of each year, with the first dividend
payment expected in June 1997. At the minimum, midpoint, maximum and 15% above
the maximum of the Estimated Valuation Range, the aggregate annual dividend
payment would be $114,750, $135,000, $155,250, and $178,537, respectively. In
addition, the Holding Company may determine from time to time to pay a special
nonrecurring cash dividend. The payment of dividends will be subject to
determination and declaration by the Board of Directors in its discretion, which
will take into account the Holding Company's consolidated financial condition
and results of operations, tax considerations, industry standards, economic
conditions, regulatory restrictions, general business practices and other
factors. Therefore, no assurances can be made as to the future ability of the
Holding Company to pay dividends. Delaware law generally limits dividends of the
Holding Company to an amount equal to the excess of its net assets (the amount
by which total assets exceeds total liabilities) over its paid-in capital or, if
there is no excess, to its net profits for the current and immediately preceding
fiscal year.
It is presently anticipated that the Holding Company will not conduct
significant operations independent of those of the Bank for some time following
the Stock Conversion. As such, the Holding Company does not expect to have any
significant source of income other than earnings on the net Stock Conversion
proceeds retained by the Holding Company and dividends from Investors Federal,
if any. Consequently, the ability of the Holding Company to pay cash dividends
to its stockholders will be dependent upon such retained proceeds and earnings
thereon, and upon the ability of the Bank to pay dividends to the Holding
Company. Management believes that, upon completion of the Stock Conversion, the
Bank will qualify as a Tier 1 institution, and thereby be entitled to make
capital distributions without OTS approval in an amount not exceeding 100% of
its net income year-to-date plus 50% of the Bank's capital surplus, as measured
at the beginning of the calendar year. In addition, upon completion of the Bank
Conversion, the National Bank will be subject to OCC restrictions on its ability
to pay dividends. See "Regulation - Regulatory Capital Requirements" and
"- Limitations on Dividends and Other Capital Distributions."
37
<PAGE>
Assuming only the minimum number of shares are sold in the Stock Conversion, the
purchase of the Bank's stock by the Holding Company in exchange for
substantially all the net proceeds from the Stock Conversion (less 50% to be
retained by the Holding Company) and the investment of such proceeds in 20%
risk-weighted assets, on a pro forma basis as of June 30, 1996, the Bank would
have had risk-based capital of $3.2 million above its fully phased-in, risk-
based capital requirement. Net proceeds retained by the Holding Company would be
immediately available for the payment of dividends. See "Regulation - Regulatory
Capital Requirements" and "Limitations on Dividends and Other Capital
Distributions." Earnings appropriated to the Bank's "excess" bad debt reserves
and deducted for federal income tax purposes cannot be used by the Bank to pay
cash dividends to the Holding Company without adverse tax consequences. See
"Regulation - Federal and State Taxation. "
38
<PAGE>
MARKET FOR COMMON STOCK
The Holding Company and the Bank have never issued capital stock.
Consequently, there is no established market for the Common Stock at this time.
The Holding Company has requested that Trident Securities undertake to match
offers to buy and offers to sell the Common Stock, and that Trident Securities
list the Common Stock over-the-counter through the National Daily Quotation
System "Pink Sheets" published by the National Quotation Bureau, Inc. and
Trident Securities has agreed to do so. The development of a liquid public
trading market depends upon the existence of willing buyers and sellers, the
presence of which is not within the control of the Holding Company, the Bank or
any market maker. It is unlikely that an active and liquid trading market for
the Common Stock will develop due to the relatively small size of the Offerings
and the small number of stockholders expected following the Stock Conversion.
Moreover, subject to shareholder approval, the Holding Company intends to adopt
the Stock Option Plan and the RRP following the Stock Conversion. If the Holding
Company purchases shares in the open market for the purpose of funding such
plans, such purchases could also initially reduce the overall number of shares
outstanding and initially could further reduce the liquidity of the Common
Stock. Under such circumstances, investors in the Common Stock could have
difficulty disposing of their shares on short notice and should not view the
Common Stock as a short-term investment. Accordingly, purchasers should
consider the illiquid, long-term nature of an investment in the Common Stock.
Furthermore, there can be no assurance that purchasers will be able to sell
their shares at or above the Purchase Price.
PARTICIPATION BY MANAGEMENT
The following table sets forth information regarding intended Common
Stock purchases by each of the directors of the Bank and the Holding Company, by
Mr. Teegarden, and by all directors and executive officers as a group. This
table excludes shares to be purchased by the ESOP or proposed Restricted Stock
Awards under the proposed RRP or proposed option grants pursuant to the proposed
Stock Option Plan. See "Management - Benefit Plans." The directors and
officers of the Bank have indicated their intention to purchase in the Stock
Conversion an aggregate of $701,000 of Common Stock, equal to 18.3%, 15.6%,
13.5%, and 11.8% of the number of shares to be issued in the Subscription and
Community Offering, at the minimum, midpoint, maximum and 15% above the maximum
of the Estimated Valuation Range, respectively. For information regarding
options and restricted stock intended to be awarded to management pursuant to
the proposed Stock Option Plan and the proposed RRP, see "Management - Benefit
Plans."
<TABLE>
<CAPTION>
Aggregate Number Percent
Purchase of at
Name Title Price Shares Midpoint
- --------------------------- -------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Earle S. Teegarden, Jr. President, Chief Executive Officer and $ 100,000 5,000 2.2%
Director
Robert T. Fairweather Chairman of the Board 1,000 50 *
Larry R. Johnson Senior Vice President, Secretary and 100,000 5,000 2.2
Director
Edward P. Milbank Vice Chairman of the Board 200,000 10,000 4.4
J. Michael Palmer Director 200,000 10,000 4.4
Armand J. Peterson Director 100,000 5,000 2.2
---------- ---------- ----------
All directors and executive officers as a group (6 persons) $ 701,000 35,050 15.6%
- --------------------
</TABLE>
*less than 1%.
39
<PAGE>
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
CONSOLIDATED STATEMENTS OF INCOME
The following Consolidated Statements of Income of the Bank for the fiscal
years ended June 30, 1996 and 1995 have been audited by Lockridge, Constant &
Conrad, LLC, independent certified public accountants, whose report thereon
appears elsewhere herein. These Statements should be read in conjunction with
the Consolidated Financial Statements of the Bank and Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Years ended
June 30,
-------------------
1996 1995
-------- --------
(In thousands)
<S> <C> <C>
Interest income:
Loans receivable (note 4) ............................... $2,340 $1,969
Investment securities:
Taxable interest ...................................... 120 105
Non-taxable interest .................................. 13 13
Dividends ............................................. 18 --
FHLB dividends .......................................... 39 27
Mortgage-backed and related securities .................. 1,039 679
Other interest-earning assets ........................... 47 50
-------- --------
Total interest income ................................. 3,616 2,843
-------- --------
Interest expense:
Deposits (note 7) ....................................... 1,634 1,481
FHLB advances ........................................... 630 235
-------- --------
Total interest expense ................................ 2,264 1,716
-------- --------
Net interest income ................................... 1,352 1,127
Provision for loan losses (note 4) ........................ 210 1
-------- --------
Net interest income after provision
for loan losses ...................................... 1,142 1,126
-------- --------
Noninterest income:
Banking service charges and fees ........................ 231 225
Gain on sales of interest-earning assets, net (note 12).. 46 19
Other (note 13) ......................................... 80 22
-------- --------
Total noninterest income .............................. 357 266
-------- --------
Noninterest expense:
Compensation and benefits (note 9) ...................... 616 579
Occupancy and equipment (note 6) ........................ 65 56
SAIF deposit insurance premium .......................... 80 83
Data processing ......................................... 48 95
Professional fees ....................................... 47 45
Printing, postage and supplies .......................... 65 49
Other (note 13) ......................................... 109 104
-------- --------
Total noninterest expense ............................. 1,030 1,011
-------- --------
Income before income taxes ................................ 469 381
Income tax expense (note 10) .............................. 167 135
-------- --------
Income before cumulative effect of a
change in accounting principle ......................... 302 246
Cumulative effect on prior years of a change in
accounting principle (note 1) ............................ -- 27
-------- --------
Net income .............................................. $ 302 $ 273
======== ========
</TABLE>
40
<PAGE>
See accompanying Notes to Consolidated Financial Statements.
41
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
This discussion is intended to assist in understanding the financial
condition and results of operations of the Bank. The information contained in
this section should be read in conjunction with the Consolidated Financial
Statements and accompanying Notes thereto and the other sections contained in
this Prospectus.
The Holding Company has only recently been formed and, accordingly,
has no results of operations. The following discussion relates only to the
financial condition and results of operations of the Bank.
The earnings of the Bank depend primarily on its level of net interest
income, which is the difference between interest earned on interest-earning
assets, consisting primarily of mortgage and consumer loans and other
investments, and the interest paid on interest-bearing liabilities, consisting
of deposits and FHLB advances. Net interest income is a function of the Bank's
"interest rate spread," which is the difference between the average yield earned
on interest-earning assets and the average rate paid on interest-bearing
liabilities, as well as a function of the average balance of interest-earning
assets as compared to interest-bearing liabilities. The interest rate spread is
affected by regulatory, economic and competitive factors that influence interest
rates, loan demand and deposit flows. Because of limited growth in the Bank's
primary market area in recent years, the Bank has supplemented its originations
of local residential mortgage loans with the purchase of mortgage-backed and
other investment securities and, to a lesser extent, SBA-guaranteed loans and
FHA home improvement loans. Such assets typically earn lower yields than
residential mortgage loans, which has caused the Bank's interest rate spread to
be below that of savings institutions with a more significant residential
mortgage loan portfolio relative to their asset size. See "Risk Factors--Limited
Lending Opportunities in Market Area." In addition, the Bank has supplemented
its originations of residential mortgage loans with purchased loans in the
secondary mortgage market. Although the Bank reviews each purchased loan using
the Bank's underwriting criteria for originations, purchased loans present
credit risks that are absent from residential mortgage loans originated by the
Bank in its market area. See "Risk Factors--Collection, Credit and Economic
Risks Associated with Purchased Loan Portfolio."
The Bank, like other financial institutions, is subject to interest-
rate risk to the degree that its interest-earning assets mature or reprice at
different times, or on different bases, than its interest-bearing liabilities.
The Bank's operating results are also affected by the amount of its non-interest
income, including gain on the sales of loans, service charges, loan originating
and commitment fees, and other income. Non-interest expense consists
principally of employee compensation and benefits, occupancy expense, data
processing, federal insurance premiums, advertising, real estate owned
operations, and other operating expenses. The Bank's operating results are
significantly affected by general economic and competitive conditions, in
particular, the changes in market interest rates, government policies and
actions by regulatory authorities.
Financial Condition
Total assets increased $7.6 million, or 16.8%, to $52.6 million at
June 30, 1996 from $45.0 million at June 30, 1995. This was primarily the result
of increases of $4.3 million, or 33.6%, in mortgage-backed securities, $2.1
million, or 7.9%, in loans receivable and $927,000, or 36.3%, in investment
securities. At June 30, 1996, the Bank's mortgage-backed securities portfolio
included $3.0 million in collateralized mortgage obligations and real estate
mortgage investment conduits ("REMICs"), $2.3 million of which was guaranteed by
FNMA or FHLMC, and $684,000 of which was guaranteed by private mortgage
insurance companies. The substantial increases in mortgage-backed securities and
investment securities were funded by an increase in FHLB advances of $7.1
million and reflected management's asset/liability strategy of seeking to earn
the spread between the yield earned on adjustable-rate interest-bearing assets
and the rates paid on the FHLB advances, as well as the limited lending
42
<PAGE>
opportunities in its market area. See "Risk Factors--Limited Lending
Opportunities in Market Area.". Additionally, deposits increased by $285,000,
and total equity by $226,000 at June 30, 1996 from June 30, 1995.
Loans receivable, net increased by $2.1 million, or 7.9%, to $28.4
million at June 30, 1996 from $26.3 million at June 30, 1995, due primarily to
purchases and originations of one- to four-family residential mortgage loans and
the origination of $3.4 million in consumer loans.
Deposits increased $285,000, or 0.8%, to $35.5 million at June 30,
1996, from $35.2 at June 30, 1995. Interest credited during the twelve months
ended June 30, 1996 totaled $1.1 million, while withdrawals exceeded deposits by
$800,000.
FHLB advances increased $7.1 million, or 109.9%, to $13.5 million at
June 30, 1996, from $6.4 million at June 30, 1995. Proceeds were used to fund
mortgage-backed securities, loans receivable and investment securities.
Management utilized FHLB advances because such advances, unlike deposit
accounts, do not require the Bank to incur the operating expenses associated
with attracting and servicing customer accounts. In addition, such advances can
be accessed immediately and in specified amounts; deposits must be attracted
with higher deposit rates that must be paid also to existing depositors, thereby
increasing the average cost of funds for the Bank's overall base of deposits.
Total equity increased $226,000, or 7.4%, to $3.3 million at June 30,
1996 from $3.0 million at June 30, 1995, due to $302,000 of net earnings during
the twelve months ended June 30, 1996 and $76,000 in net unrealized loss on
investment securities available for sale, net of taxes.
Analysis of Net Interest Income
Net interest income represents the difference between interest earned
on interest-earning assets and interest paid on interest-bearing liabilities.
Net interest income depends on the volumes of interest-earning assets and
interest-bearing liabilities and the interest rates earned or paid on them.
43
<PAGE>
The following table presents for the periods indicated the total
dollar amount of interest income from average interest-earning assets and the
resultant yields as well as the total dollar amount of interest expense on
average interest-bearing liabilities and the resultant rates. No tax equivalent
adjustments were made. All average balances are monthly average balances. The
Bank's management does not believe that the use of monthly balances instead of
daily balances has caused a material difference in the information presented.
Non-accruing loans have been included in the table as loans carrying a zero
yield.
<TABLE>
<CAPTION>
Years Ended June 30,
-----------------------------------------------------------------------------
1996 1995
At June 30, 1996 -------------------------------------- -------------------------------------
------------------------ Average Average
Outstanding Outstanding Interest Outstanding Interest
Balance Yield/Rate Balance Earned/Paid Yield/Rate Balance Earned/Paid Yield/Rate
----------- ----------- ----------- ------------ ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Interest-earning assets:
Loans receivable (1).... $28,429 8.28% $27,269 $2,340 8.58% $24,889 $1,969 7.91%
Mortgage-backed
securities............. 16,971 6.97 16,156 1,039 6.43 11,709 679 5.80
Investment securities... 3,479 6.06 2,983 151 5.06 2,601 118 4.54
Investments in other
financial
institutions........... 1,609 3.42 1,555 47 3.02 1,870 50 2.67
FHLB stock.............. 724 7.00 564 39 6.91 350 27 7.71
------- ------- ------ ------- ------
Total interest-earning
assets (1)............. 51,212 7.52 48,527 3,616 7.45 41,419 2,843 6.86
------ ------
Noninterest-earnings assets 1,375 -- 1,254 -- -- 1,120 -- --
------- ------- -------
Total assets.............. $52,587 $49,781 $42,539
======= ======= =======
Interest-bearing
liabilities:
Savings deposits........ $ 2,602 3.00 2,742 83 3.04 2,949 85 2.89
Demand and NOW
deposits/(2)/.......... 9,669 3.76 9,613 370 3.85 10,718 355 3.31
Certificate accounts.... 21,763 5.56 21,177 1,181 5.57 20,749 1,041 5.02
FHLB advances........... 13,474 6.19 11,138 630 5.66 3,709 235 6.34
------- ------- ------ ------- ------
Total interest-bearing
liabilities............ 47,508 5.23 44,670 2,264 5.07 38,125 1,716 4.50
------ ------
Noninterest-bearing
liabilities............... 1,811 -- 1,700 -- -- 1,334 -- --
------- ------- -------
Total liabilities....... 49,319 46,370 39,459
Retained earnings.......... 3,268 3,411 3,080
------- ------- -------
Total liabilities and
retained earnings........ $52,587 $49,781 $42,539
======= ======= =======
Net interest income........ $1,352 $1,127
====== ======
Net interest rate spread
(2)....................... 2.29% 2.38% 2.36%
==== ==== ====
Net earning assets......... $ 3,704 $ 3,857 $ 3,294
======= ======= =======
Net interest margin........ 2.79% 2.72%
====== ======
Average interest-earning
assets to average
interest-
bearing liabilities....... 1.09x 1.09x
====== ======
</TABLE>
__________________
(1) Calculated net of deferred loan fees, loan discounts, loans in process and
loss reserves.
(2) Excludes non-interest bearing deposit accounts.
44
<PAGE>
Rate/Volume Analysis
The following schedule presents the dollar amount of changes in interest
income and interest expense for major components of interest-earning assets and
interest-bearing liabilities. It distinguishes between the changes due to
changes in outstanding balances and those due to changes in interest rates. For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (i.e.,
changes in volume multiplied by prior interest rate) and (ii) changes in rate
(i.e., changes in rate multiplied by prior volume). For purposes of this table,
changes attributable to both rate and volume, which cannot be segregated, have
been allocated proportionately to the changes due to volume and the changes due
to rate.
<TABLE>
<CAPTION>
Years Ended June 30,
------------------------------------------
1996 vs. 1995
------------------------------------------
Increase/(Decrease)
Due to
------------------- Total
Increase
Volume Rate (Decrease)
------------------- --------- ----------
(In Thousands)
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable................. $196 $175 $371
Mortgage-backed securities....... 280 80 360
Investment securities............ 18 15 33
Interest earning deposits........ (9) 6 (3)
FHLB stock....................... 15 (3) 12
---- ---- ----
Total interest-earning assets. $500 $273 773
==== ==== ----
Interest-bearing liabilities:
Savings deposits................. $ (6) $ 4 (2)
Demand and NOW deposits.......... (39) 54 15
Certificate accounts............. 22 118 140
FHLB advances.................... 423 (28) 395
---- ---- ----
Total interest-bearing
liabilities................... $400 $148 548
==== ==== ----
Net interest income................ $225
====
</TABLE>
45
<PAGE>
Comparison of Operating Results for the Years Ended June 30, 1996 and 1995
Performance Summary. Net earnings for the year ended June 30, 1996
increased by $29,000, or 10.6% to $302,000 from $273,000 for the year ended
June 30, 1995. The increase was primarily due to the combined effects of a
$225,000 increase in net interest income and a $91,000 increase in non-interest
income, which more than offset a $209,000 increase in the provision for loan
losses and a $32,000 increase in income taxes. For the year ended June 30, 1996
and 1995, the returns on average assets were 0.61% and 0.64% respectively, while
the returns on average equity were 8.86% and 8.88% respectively.
Net Interest Income. For the year ended June 30, 1996, net interest
income increased by $225,000, or 20.0%, to $1.4 million from $1.1 million for
the year ended June 30, 1995. The increase reflected an increase of $773,000 in
interest income to $3.6 million from $2.8 million which more than offset an
increase of $548,000 in interest expense to $2.3 million from $1.7 million. The
increase in interest income reflected increased balances of loans receivable,
mortgage-backed securities and investment securities together with higher yields
earned on interest-earning assets. Interest expense increased primarily due to
an increased balance of Federal Home Loan Bank advances together with higher
rates paid on deposits.
For the year ended June 30, 1996, the average yield on interest-
earning assets was 7.45% compared to 6.86% for the year ended June 30, 1995. The
average cost of interest-bearing liabilities was 5.07% for the year ended
June 30, 1996, an increase from 4.50% for the same period ended June 30, 1995.
The increase in the average yield on interest-earning assets and in the average
cost of interest-bearing liabilities was due to higher overall levels of market
interest rates for the year ended June 30, 1996 as compared to the earlier year
period. The average balance of interest-earning assets increased by $7.1 million
to $48.5 million for the year ended June 30, 1996 from $41.4 million for the
year ended June 30, 1995. The increase primarily reflected an increase of
$4.4 million, or 38.0%, in the average balance of mortgage-backed securities for
the year ended June 30, 1996 as compared to the year ended June 30, 1995. During
this same period, average interest-bearing liabilities increased by $6.5 million
to $44.7 million for the year ended June 30, 1996 from $38.1 million for the
same period ended June 30, 1995.
The Bank's average interest rate spread was 2.38% for the year ended
June 30, 1996, compared to 2.36% for the earlier year period. The average net
interest margin was 2.79% for the year ended June 30, 1996, compared to 2.72%
for the year ended June 30, 1995.
Provision for Loan Losses. During the year ended June 30, 1996, the
Bank charged $210,000 against income as a provision for loan losses compared to
a provision of $1,000 for the year ended June 30, 1995. This charge resulted in
an allowance for loan losses of $283,000, or 1.00% of loans receivable, net at
June 30, 1996, compared to $81,000, or 0.31% of loans receivable, net at
June 30, 1995. The allowance for loan losses as a percentage of non-performing
loans increased to 221.09% at June 30, 1996, from 65.03% at June 30, 1995. The
ratio increased due to the provision for loan losses for the year ended June 30,
1996, exceeding net charge-offs. The increase in the provision for loan losses
for the year ended June 30, 1996 reflected a number of factors, including an
increase in the size of the Bank's loan portfolio, an increase in non-performing
and other problem loans, and the changing composition of the Bank's loan
portfolio, which includes higher levels of non-mortgage loans such as consumer
loans, which are generally considered to present increased credit risk to the
Bank, and higher levels of loans with adjustable interest rates which present an
increased risk of default in a rising interest rate environment. Management
believes the higher ratio of the allowance for loan losses to net loans
receivable also is more consistent with that of comparable publicly traded
financial institutions in the Midwest at June 30, 1996.
Management will continue to monitor its allowance for loan losses and
make future additions to the allowance through the provision for loan losses as
economic conditions dictate. Although the Bank maintains its allowance for loan
losses at a level which it considers to be adequate to provide for potential
losses, there can be no assurance that future losses will not exceed estimated
amounts or that additional provisions for loan losses will not be required in
future periods.
46
<PAGE>
Non-Interest Income. For the year ended June 30, 1996, non-interest
income increased $91,000 to $357,000 from $266,000 for the same period ended
June 30, 1995. Included in non-interest income was $66,000 of patronage
dividends from and gain on the sale of the Bank's former cooperative data
processing service bureau. Patronage dividends are an allocation of earnings to
the user/owners of the cooperative data processing service bureau, all of which
were paid to the Bank and the other user/owners at the time of the sale of the
bureau. Customer service charges, primarily relating to fees on transaction
accounts, were $231,000 for the year ended June 30, 1996 and $225,000 for the
year ended June 30, 1995. Other non-interest income included late charges on
loans of $7,000 and $8,000 for the years ended June 30, 1996 and 1995,
respectively.
Non-interest Expense. Non-interest expense increased by $19,000 to
$1.03 million for the year ended June 30, 1996, from $1.01 million for the year
ended June 30, 1995. Compensation expense increased $37,000 to $616,000 for the
year ended June 30, 1996 from $579,000 for the year ended June 30, 1995. Data
processing expense decreased $47,000 to $48,000 for the year ended June 30, 1996
from $95,000 for the year ended June 30, 1995. This was the result of the Bank
implementing an in-house system in October 1995.
Income Taxes. Income taxes increased by $32,000 to $167,000 for the
twelve months ended June 30, 1996 from $135,000 for the year ended June 30,
1995. The effective tax rates were 35.6% and 35.4% for the years ended June 30,
1996 and 1995, respectively.
Asset/Liability Management
Savings institutions such as the Bank are subject to interest rate
risk to the extent their interest-bearing liabilities (consisting primarily of
deposit accounts, FHLB advances and other borrowings) mature or reprice more
rapidly, or on a different basis, than their interest-earning assets (consisting
predominantly of intermediate and long-term real estate loans and investments
held for investment and liquidity purposes). Having interest-bearing
liabilities that mature or reprice more frequently on average than assets may be
beneficial in times of declining interest rates, although such an
asset/liability structure may result in declining net interest earnings during
periods of rising interest rates. Conversely, having interest-earning assets
that mature or reprice more frequently on average than liabilities may be
beneficial in times of rising interest rates, although this asset/liability
structure may result in declining net interest earnings during periods of
falling interest rates.
47
<PAGE>
The following table sets forth the amounts of interest-earning assets
and interest-bearing liabilities outstanding at June 30, 1996, which are
expected to reprice or mature in each of the future time periods shown. The
table does not include any estimates of pre-payments on interest-earning assets.
Pre-payments significantly shorten the average life of the assets and may cause
the Bank's actual repayment experience to differ from that shown below. Except
for transaction accounts, which are classified as repricing in the "within
1 year" category, the amounts of assets and liabilities shown which reprice or
mature during a particular period were determined in accordance with the earlier
of term to repricing or the contractual terms of the asset or liability. For
information regarding the contractual maturities of the Bank's loans,
investments and deposits, see "Business--Lending Activities," "--Investment
Activities" and "--Sources of Funds."
<TABLE>
<CAPTION>
Amounts Maturing or Repricing at June 30, 1996
----------------------------------------------------------------------------------------------
1 Year Over 3 Over 5 Over 10
1 Year through through through through Over
or Less 3 Years 5 Years 10 Years 20 Years 20 Years Total
------- ------- ------- -------- -------- -------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable.......... $18,509 $ 3,436 $ 2,013 $ 2,153 $ 2,570 $ -- $28,681
Mortgage-backed securities 16,369 -- -- 6 -- 596 16,971
Investment securities..... 2,295 699 -- -- 485 -- 3,479
Investments in other
financial institutions... 1,609 -- -- -- -- -- 1,609
-------- ------ ------- ------- ------ ------ -------
Total interest-earning
assets.................. $38,782 $ 4,135 $ 2,013 $ 2,159 $ 3,055 $ 596 $50,740
======== ====== ======= ======= ====== ====== =======
Interest-bearing
liabilities:
assets.................. $38,782 $ 4,135 $ 2,013 $ 2,159 $ 3,055 $ 596 $50,740
Savings deposits.......... 9,910 $ -- $ -- $ -- $ -- $ -- 9,910
Demand and NOW deposits... 2,362 -- -- -- -- -- 2,362
Certificate accounts...... 13,489 5,646 2,475 152 -- -- 21,762
FHLB advances............. 10,555 918 1,334 -- 667 -- 13,474
-------- ------ ------- ------- ------ ------ -------
Total interest-bearing
liabilities............. $36,316 $ 6,564 $ 3,809 $ 152 $ 667 $ -- $47,508
======== ====== ======= ======= ====== ====== =======
Interest sensitivity gap... $ 2,466 $(2,429) $(1,796) $ 2,007 $ 2,388 $ 596 $ 3,232
======== ====== ======= ======= ====== ====== =======
Cumulative interest
sensitivity gap........... $ 2,466 $ 37 $(1,759) $ 248 $ 2,636 $3,232 3,232
======== ====== ======= ======= ====== ====== =======
Ratio of interest-earning
assets to
interest-bearing
liabilities............... 106.79% 63.00% 52.58% 1420.39% 458.02% --% 106.80%
======== ====== ======= ======= ====== ====== =======
Ratio of cumulative gap to
total assets.............. 4.69% .07% (3.34)% .47% 5.01% 6.15% 6.15%
======== ====== ======= ======= ====== ====== =======
</TABLE>
48
<PAGE>
Net Portfolio Value. In order to measure its interest rate risk, the
Bank computes the amounts by which the net present value of the Bank's cash
flows from assets, liabilities and off-balance sheet items, if any (the
institution's Net Portfolio Value, or NPV), would change in the event of a range
of assumed changes in market interest rates. These computations estimate the
effect on the Bank's NPV of instantaneous and permanent 1% to 4% increases and
decreases in market interest rates. The Board of Directors has established
maximum increases and decreases in NPV. The table below indicates the Board
limits and the estimates of projected changes in NPV in the event of 1%, 2%, 3%
and 4% instantaneous and permanent increases and decreases in market interest
rates, respectively.
The Net Portfolio Value method of calculating interest rate risk
originated in a rule adopted by the OTS for the purpose of incorporating an
interest rate risk ("IRR") component into its risk-based capital rules. The IRR
component is a dollar amount that will be deducted from total capital for the
purpose of calculating an institution's risk-based capital requirement and is
measured in terms of the sensitivity of its NPV to changes in interest rates.
NPV is the difference between incoming and outgoing discounted cash flows from
assets, liabilities and off-balance sheet contracts. An institution's IRR is
measured as the change to its NPV as a result of a hypothetical 200 basis point
change in market interest rates. A resulting change in NPV of more than 2% of
the estimated market value of its assets will require the institution to deduct
from its capital 50% of that excess change. The rule provides that the OTS will
calculate the IRR component quarterly for each institution. The Bank, based on
asset size and risk-based capital, has been informed by the OTS that it is
exempt from this rule. Nevertheless, the following table presents the Bank's NPV
at June 30, 1996, as calculated by the OTS, based on information provided to the
OTS by the Bank.
Computations of prospective effects of hypothetical interest rate
changes are based on numerous assumptions, including relative levels of market
interest rates, loan prepayments and deposit run offs, and should not be relied
upon as indicative of actual results. Further, the computations do not
contemplate any actions the Bank may undertake in response to changes in
interest rates.
<TABLE>
<CAPTION>
Change in Amount of Percent
Interest Rates Estimated Change Change
(basis points) NPV in NPV in NPV
--------------------------- --------- --------- -------
(Dollars In Thousands)
<S> <C> <C> <C>
+400 $2,837 $(1,992) (41)%
+300 3,582 (1,247) (26)
+200 4,167 (662) (14)
+100 4,595 (234) (5)
0 4,829 0 0
-100 4,852 23 0
-200 4,730 (99) (2)
-300 4,666 (163) (3)
-400 4,730 (98) (2)
</TABLE>
Although the OTS has informed the Bank that it is not subject to the IRR
component discussed above, the Bank is still subject to interest rate risk and,
as illustrated above, rising interest rates will reduce the Bank's NPV because
over time the Bank's interest bearing liabilities will reprice more rapidly than
its interest earning assets. The OTS has the authority to require otherwise
exempt institutions to comply with the rule concerning interest rate risk. See
"Regulation--Regulatory Capital Requirements."
49
<PAGE>
Certain shortcomings are inherent in the method of analysis presented in
both the computation of NPV and in the analysis presented in the prior table
setting forth the maturing and repricing of interest-earning assets and
interest-bearing liabilities. Although certain assets and liabilities may have
similar maturities or periods within which they will reprice, they may react
differently to changes in market interest rates. The interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind changes in
market rates. Additionally, adjustable-rate mortgages have features which
restrict changes in interest rates on a short-term basis and over the life of
the asset. The proportion of adjustable-rate loans could be reduced in future
periods if market interest rates would decrease and remain at lower levels for a
sustained period, due to increased refinance activity. Further, in the event of
a change in interest rates, prepayment and early withdrawal levels would likely
deviate significantly from those assumed in the table. Finally, the ability of
many borrowers to service their adjustable-rate debt may decrease in the event
of a sustained interest rate increase.
The Bank's Board of Directors has formulated an Asset/Liability Policy
designed to promote long-term profitability while managing interest rate risk.
The Asset/Liability Policy is designed to reduce the impact of changes in
interest rates on the Bank's net interest income by achieving a more favorable
match between the maturity or repricing dates of its interest-earning assets and
interest-bearing liabilities. The Bank has sought to reduce exposure of its
earnings to changes in market interest rates by increasing the interest rate
sensitivity of the Bank's assets through the origination of loans with interest
rates subject to periodic adjustment to market conditions. Accordingly, the Bank
has emphasized the origination of adjustable-rate mortgage ("ARM") loans and
consumer loans (which generally have shorter terms) for retention in its
portfolio. The Bank has also increased its FHLB borrowings in an effort to
lengthen the maturity of its liabilities. Finally, the Bank has sought to
maintain a strong base of less interest sensitive and lower costing "core
deposits" in the form of passbook accounts, NOW accounts, money market accounts
and noninterest-bearing demand accounts, and by promoting longer-term
certificates of deposit in an effort to extend the maturity of its liabilities.
Liquidity and Capital Resources
The Bank's primary sources of funds are deposits, FHLB advances, repayments
on loans, the maturity of investment securities and income from operations.
Although maturity and scheduled amortization of loans are relatively predictable
sources of funds, deposit flows and prepayments on loans are influenced
significantly by general interest rates, economic conditions and competition.
The primary investing activity of the Bank is the origination and purchase
of loans for investment. For the year ended June 30, 1996, the Bank originated
loans for portfolio in the amount of $9.2 million. The Bank also purchased $2.3
million of one- to four-family residential mortgage loans for the year ended
June 30, 1996. The Bank did not sell any loans into the secondary market during
this period. For the year ended June 30, 1996, these activities were funded by
principal repayments of $9.2 million and FHLB advances of $7.1 million.
The Bank is required to maintain minimum levels of liquid assets under the
OTS regulations. Savings institutions are required to maintain an average daily
balance of liquid assets (including cash, certain time deposits, and specified
U.S. Government, state or federal agency obligations) of not less than 5.0% of
its average daily balance of net withdrawal accounts plus short-term borrowings.
It is the Bank's policy to maintain its liquidity portfolio in excess of
regulatory requirements. The Bank's eligible liquidity ratio was 10.5% at June
30, 1996.
The Bank's most liquid assets are cash and cash equivalents, which include
short-term investments. The levels of these assets are dependent on the Bank's
operating, financing, lending and investing activities during any given period.
At June 30, 1996 and 1995, cash and cash equivalents were $2.1 million and $2.3
million, respectively. The decrease in cash and cash equivalents in 1996
compared to 1995 resulted primarily from the use of cash to fund loans. The
principal component of cash provided during the years ended June 30, 1996 and
1995 was the proceeds from loan repayments, deposit activity, and investment
maturities. The Bank will have a higher level of liquidity following
consummation of the Stock Conversion until appropriate investments are
identified for the proceeds raised. See "Use of Proceeds."
50
<PAGE>
Liquidity management for the Bank is both an ongoing and long-term function
of the Bank's asset/liability management strategy. Excess funds generally are
invested in overnight deposits at the FHLB of Des Moines. Should the Bank
require funds beyond its ability to generate them internally, additional sources
of funds are available through FHLB of Des Moines advances. The Bank would
pledge its FHLB of Des Moines stock or certain other assets as collateral for
such advances. For the twelve months ended June 30, 1996, the Bank had an
average balance of $11.1 million in FHLB advances.
At June 30, 1996, the Bank had outstanding loan commitments of $232,000,
unused lines of credit of $316,000 and undisbursed loans in process of $5,000.
The Bank anticipates it will have sufficient funds available to meet its current
loan commitments, including loan applications received and in process prior to
the issuance of firm commitments. Certificates of deposit which are scheduled to
mature in one year or less at June 30, 1996 were $13.3 million. Management
believes that a significant portion of such deposits will remain with the Bank.
Following consummation of the Stock Conversion, the Holding Company
initially will have no business other than holding the capital stock of the Bank
and the investment of the net proceeds from the Stock Conversion retained by it.
Management believes the net proceeds will provide sufficient funds for the
Holding Company's operations.
Under federal law, the Bank is required to meet certain tangible, core and
risk based capital requirements. For information regarding the Bank's regulatory
capital compliance, see "Pro Forma Regulatory Capital" and "Regulation -
Regulatory Capital Requirements."
Recent Accounting Developments
Statement of Financial Accounting Standards No. 119, Disclosures About
Derivative Financial Instruments and Fair Value of Financial Instruments,
requires disclosures of information such as credit and market risks, cash
requirements and accounting policies about derivative financial instruments.
SFAS No. 119 is effective for financial statements issued for fiscal years
ending after December 15, 1994, except for entities with less than $150 million
in total assets. For those entities, SFAS No. 119 is effective for financial
statements issued for fiscal years ending after December 15, 1995. SFAS No. 119
is effective for the Bank for the fiscal year ending June 30, 1996. The adoption
of SFAS No. 119 did not have a material adverse impact on the Bank's financial
position or results of operations.
The Financial Accounting Standards Board ("FASB") has issued SFAS No. 107,
Disclosure about Fair Value of Financial Instruments, which generally requires
disclosure of the fair value of financial instruments, both assets and
liabilities recognized and not recognized in the balance sheets. The FASB has
also issued SFAS No. 114, Accounting by Creditors for Impairment of a Loan, and
SFAS No. 118, Accounting by Creditors for Impairment of a Loan -Income
Recognition and Disclosures. SFAS No. 107, SFAS No. 114 and SFAS No. 118 are
effective for fiscal years beginning after December 15, 1994. SFAS No. 114, as
amended by SFAS No. 118, requires that impaired loans be measured at the present
value of expected future cash flows discounted at the loan's effective interest
rate or, as a practical expedient, at the loan's observable market price or the
fair value of the collateral if the loan is collateral dependent. Homogeneous
loans, such as single-family loans and most categories of consumer loans, are
excluded from this requirement. Adoption of these statements was effective for
the fiscal year beginning July 1, 1995. The adoption of SFAS Nos. 114 and 118
did not have a material adverse impact on the Bank's financial position or
results of operations.
In November 1993, the AICPA issued SOP 93-6, "Employers' Accounting for
Employee Stock Ownership Plans," which is effective for fiscal years beginning
after December 15, 1993 and which applies to shares of capital stock of
sponsoring employers acquired by ESOPs after December 31, 1992 that have not
been committed to be released as of the beginning of the year in which the ESOP
is adopted. The SOP requires that shares to be released in an accounting period
should be reflected in the consolidated financial statements as compensation
expense equal to the fair value of the shares at the time of release. Thus, as
shares increase or decrease in value, earnings will be affected relative to the
shares to be released in that period. Additionally, the SOP requires that
outstanding shares for purposes of computing both primary and fully diluted
earnings per share include only those shares scheduled to be released in that or
prior periods. Thus, as additional shares are released by the ESOP in future
periods, earnings per share may
51
<PAGE>
be diluted. Shares of Common Stock of the Holding Company to be acquired by the
ESOP are scheduled to be released over a ten-year period commencing with the
consummation of the Conversion. However, the effect on net income and book value
per share for 1996 cannot be predicted due to the uncertainty of the fair value
of the shares subsequent to their issuance.
SFAS No. 123, Accounting for Stock-Based Compensation, is effective for
fiscal years beginning after December 15, 1995. This statement establishes
financial accounting and reporting standards for stock-based employee
compensation plans, including stock option plans. These plans include all
arrangements by which employees receive shares of stock or other equity
investments of the employer or where an employer issues its equity instruments
to acquire goods and services from nonemployees. This statement will require pro
forma disclosures in fiscal 1997 of net income and earnings per share as if a
new accounting method based on the estimated fair value of employee stock
options had been adopted. The Bank has not yet determined whether the optional
accounting treatment proposed by SFAS No. 123 will be adopted.
SFAS No. 122, Accounting for Mortgage Servicing Rights, will be effective
for the Bank for the year beginning July 1, 1996 and generally requires entities
that sell or securitize loans and retain the mortgage servicing rights to
allocate the total cost of the mortgage loans to the mortgage servicing right
and the loan based on their relative fair value. Costs allocated to mortgage
servicing rights should be recognized as a separate asset and amortized over the
period of estimated net servicing income and evaluated for impairment based on
fair value. The adoption of this statement is not expected to have a material
effect on the Consolidated Financial Statements.
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" supersedes SFAS No. 122 and will be
effective for all transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996. This
statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that focuses on
control. It distinguished transfers of financial assets that are sales from
transfers that are secured borrowings.
Under the financial-components approach, after a transfer of financial
assets, an entity recognizes all financial assets it no longer controls and
liabilities that have been extinguished. The financial-components approach
focuses on the assets and liabilities that exist after the transfer. Many of
these assets and liabilities are components of financial assets that existed
prior to the transfer. If a transfer does not meet the criteria for a sale, the
transfer is accounted for as a secured borrowing with a pledge of collateral.
The adoption of this statement is not expected to have a material effect on the
consolidated financial statements.
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and Long-
Lived Assets to be Disposed of, is effective for the fiscal year beginning July
1, 1996. The statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. An impairment loss is recognized if the sum of the
expected future cash flows is less than the carrying amount of the asset.
Management does not expect the implementation of SFAS No. 121 to have a material
impact on the Bank's consolidated financial position or results of operations.
In April 1995, the FASB issued SOP 94-6, Disclosure of Certain Significant
Risks and Uncertainties. This SOP applies to financial statements prepared in
conformity with generally accepted accounting principles by all nongovernmental
entities. The disclosure requirements in SOP 94-6 focus primarily on risks and
uncertainties that could significantly affect the amounts reported in the
financial statements in the near-term functioning of the reporting entity. The
risks and uncertainties discussed in SOP 94-6 stem from the nature of the
entity's operations, from the necessary use of estimates in the preparation of
the entity's financial statements, and from significant concentrations in
certain aspects of the entity's operations. SOP 94-6 is effective for financial
statements issued for fiscal years ending after June 30, 1995 and is not
expected to have any impact on the Bank's operations.
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<PAGE>
Impact of Inflation and Changing Prices
The Consolidated Financial Statements and Notes thereto presented herein
have been prepared in accordance with generally accepted accounting principles,
which generally requires the measurement of financial position and operating
results in terms of historical dollars without considering the change in the
relative purchasing power of money over time due to inflation. The impact of
inflation is reflected in the increased cost of the Bank's operations. Nearly
all the assets and liabilities of the Bank are financial, unlike most industrial
companies. As a result, the Bank's performance is directly impacted by changes
in interest rates, which are indirectly influenced by inflationary expectations.
The Bank's ability to match the interest sensitivity of its financial assets to
the interest sensitivity of its financial liabilities in its asset/liability
management may tend to minimize the effect of change in interest rates on the
Bank's performance. Changes in interest rates do not necessarily move to the
same extent as changes in the price of goods and services. In the current
increasing interest rate environment, liquidity and the maturity structure of
the Bank's assets and liabilities are critical to the maintenance of acceptable
performance levels.
BUSINESS
General
Investors Federal has been, and intends to continue to be, a community-
oriented financial institution offering selected financial services to meet the
needs of the communities it serves. The Bank attracts deposits from the general
public and historically has used such deposits, together with other funds, to
originate and purchase one- to four-family residential mortgage loans, and to
originate non-residential real estate loans (primarily farm loans), and consumer
loans consisting primarily of loans secured by automobiles. In addition, in
recent years, the Bank has expanded its loan portfolio by purchasing SBA-
guaranteed loans and FHA-insured Title I home improvement loans. At June 30,
1996, the Bank's total loan portfolio was $28.7 million, of which 79.5% were
one- to four-family residential mortgage loans, 6.8% were non-residential real
estate loans, 9.0% were consumer loans (including FHA home improvement loans),
and 3.4% were SBA-guaranteed loans.
During the year ended June 30, 1996, the Bank originated $2.1 million of
fixed-rate and $3.1 million of adjustable rate one-to four-family residential
mortgage loans, all of which were retained in the Bank's portfolio. See
"Business - Lending Activities." To supplement local loan production, the Bank
has purchased adjustable-rate loans in the secondary mortgage market on a non-
recourse basis, with servicing retained by the seller or originator of the
loans. In recent years, the Bank has limited its purchased loans to one- to
four-family residential mortgage loans secured generally by collateral located
in the State of Missouri, although the Bank's purchased loan portfolio includes
seasoned one- to four-family residential mortgage loans secured by collateral
located outside Missouri. Purchased one- to four-family residential mortgage
loans totaled $7.2 million, or 25.0%, of the Bank's total loan portfolio at June
30, 1996.
Because of the limited lending opportunities in its local market area and to
the extent adjustable-rate one- to four-family residential mortgage loans are
unavailable for purchase at attractive yields, the Bank will invest in mortgage-
backed securities and other investment securities. At June 30, 1996, the Bank's
portfolio of mortgage-backed securities and investment securities was
substantial. At June 30, 1996, the Bank's mortgage-backed securities portfolio
totaled $17.0 million (or 32.3% of total assets), and consisted of $7.9 million
in mortgage-backed securities issued or guaranteed by the FHLMC, FNMA and GNMA,
$3.0 million in collateralized mortgage obligations, including real estate
mortgage investment conduits, and $6.0 million in participations in pools of
Small Business Administration loans. Also at June 30, 1996, the Bank's
investment portfolio totaled $5.6 million (or 10.6% of total assets) and
consisted of federal agency obligations, municipal bonds, FHLB stock, interest
earnings deposits with other financial institutions and mutual funds. In recent
years, management has also utilized the mortgage-backed securities and
investment portfolio to attempt to increase net interest income by purchasing
such securities with the proceeds of FHLB advances and earning the spread
between the yields earned on the mortgage-backed securities and the rates paid
on the FHLB advances. At June 30, 1996, the Bank's FHLB advances
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<PAGE>
totaled $13.5 million, as compared to FHLB advances of $6.4 million at June 30,
1995.
The Bank currently offers a variety of deposit accounts, which include
passbook savings, NOW, noninterest bearing demand, money market and certificate
accounts. The Bank solicits deposits in its primary market area. The Bank does
not accept any brokered deposits.
Current Business Strategy
The Bank's business strategy is to operate as a well-capitalized, profitable
and independent community savings institution dedicated primarily to home-
mortgage lending and to providing quality service to its customers.
The Bank intends to implement this strategy by (i) closely monitoring the
needs of its customers and providing quality service; (ii) maintaining asset
quality; (iii) utilizing investments in mortgage-backed securities and other
investment securities to invest excess funds and to increase net interest
income; (iv) maintaining capital in excess of regulatory requirements; (v)
attempting to increase the Bank's earnings; and (vi) managing interest rate risk
by attempting to match asset and liability maturities and rates.
The Bank anticipates operating in substantially the same manner following
the consummation of the Bank Conversion. However, it is anticipated that,
subject to market conditions, competition and related factors, among other
things, the Bank anticipates broadening its range of banking products and
services. For example, management anticipates considering the introduction of
various new business products, including, but not limited to, debit cards and
commercial deposits. Accordingly, management anticipates that the Bank will
incur start-up and ongoing expenses as these new programs and services are
introduced. Since no determination has been made by management in connection
with these services and products, no costs associated with them can be projected
at this time. See "Risk Factors--Return on Equity after Conversion."
The highlights of the Bank's business strategy are as follows:
o Providing Quality Service. As a relatively small, community-based
financial institution, the Bank is able to offer personalized banking
services and can utilize management staff to respond to customer
inquiries. Because it operates in a small community, the Bank also
believes it is able to closely monitor the needs of its customers in
that community.
o Asset Quality. The Bank's non-performing assets have ranged between
0.06% and 0.24% of total assets during the last two fiscal years and
represented 0.24% of total assets at June 30, 1996. The Bank's
allowance for loan losses at June 30, 1996 totaled $283,000, or 1.00%
of total loans receivable, net.
o Mortgage-Backed Securities and Investment Securities Portfolio. The
Bank has utilized a substantial mortgage-backed securities and
investment securities portfolio to invest deposits and borrowed funds
in excess of the mortgage and consumer lending volumes available in its
primary market area and to increase the Bank's levels of net interest
income by attempting to match the repricing or maturity periods of its
mortgage-backed securities portfolio with FHLB advances. At June 30,
1996, the Bank's mortgage-backed securities portfolio totaled $17.0
million and included mortgage-backed securities issued or guaranteed by
FNMA, FHLMC and GNMA (46.7% of the portfolio), collateralized mortgage
obligations, including REMICS, all of which were sponsored by United
States Government Agencies and government sponsored entities (17.7% of
the portfolio) and participations in Small Business Administration
pools (35.6% of the portfolio).
o Maintaining Regulatory Capital. At June 30, 1996, the Bank exceeded all
of its regulatory capital requirements with tangible and core capital
of 6.34% of adjusted total assets and risk-based capital of 17.30% of
total risk-based assets. See "Pro Forma Regulatory Capital" for the
Bank's compliance with its regulatory capital requirements. As a result
of the Stock Conversion and based on the assumptions stated herein, at
the midpoint of the Estimated Valuation Range at June 30, 1996,
54
<PAGE>
o the Bank would have had pro forma equity of approximately $4.9 million,
or 8.9% of total assets. The Holding Company intends to invest
additional proceeds into the Bank to the extent necessary to increase
the Converted Bank's tangible capital to at least 10% of its adjusted
total assets. See "Use of Proceeds."
o Managing Interest Rate Risk. Management of the Bank has attempted to
reduce interest rate risk by: (i) emphasizing the origination and
purchase of adjustable rate mortgages; (ii) originating non-mortgage
consumer loans, which have shorter terms; (iii) maintaining a strong
base of less interest rate sensitive "core deposits"; and (iv)
utilizing FHLB borrowings to lengthen the maturity of its liabilities.
For the fiscal year ended June 30, 1996, of the $5.2 million in one- to
four-family mortgage loans originated by the Bank, $3.1 million, or
58.9%, had adjustable interest rates. In addition, of the $22.8 million
in one- to four- family mortgage loans held by the Bank in portfolio,
$18.6 million, or 81.7%, had adjustable interest rates. See "--Lending
Activities--One-to-Four Family Mortgage Loans." Finally, of the fixed
rate mortgage loans originated by the Bank, none are originated with
terms in excess of 20 years. The Bank's base of core deposit accounts
consisting of passbook accounts, demand deposits and money market
deposit accounts amounted to $13.7 million at June 30, 1996, or 38.7%
of the Bank's total deposits.
o Profitability. Although no assurance can be made regarding future
profitability, the Bank has been profitable during recent years. The
Bank had net income of $302,000 in fiscal 1996 and $273,000 in fiscal
1995. The Bank's average interest rate spread was 2.38% and 2.36%,
respectively, for fiscal 1996 and 1995. The Bank is attempting to
increase its net earnings by increasing its interest rate spread by
reducing its investment portfolio and increasing higher-yielding
adjustable rate mortgage loans, to the extent available for origination
or purchase, and by increasing the origination of higher-yielding
consumer loans. In addition, the Bank anticipates utilizing the
proceeds of the Stock Conversion to increase its assets in a controlled
manner. See "--Lending Activities."
Market Area and Competition
Investors Federal conducts its operations through its main office in
Chillicothe and branch offices in Hamilton and Gallatin, Missouri. The Bank's
offices are located in the northwest part of Missouri, approximately 95 miles
northeast of Kansas City and approximately 60 miles south of the Iowa-Missouri
state line.
The annual population growth rate for Livingston County (site of the Bank's
main office) from 1990 to 1996 was a negative 2.25%, while Caldwell and Daviess
Counties (sites of the Bank's branch offices) grew by 2.35% and 1.63%,
respectively. These growth rates and the estimated growth rates through the
year 2001 for the three counties were substantially below the State of Missouri
and the United States as a whole. While the population of this area is not
expected to increase substantially, household income for Livingston, Caldwell
and Daviess Counties is expected to increase faster than the rates projected for
the State of Missouri and the United States as a whole. However, notwithstanding
the projected increases in income levels, the local economy is not expected to
produce a large number of one- to four-family residential mortgage lending
opportunities.
The Bank's market area is changing from primarily an agrarian economy into a
subregional manufacturing and distribution center. The major employers in the
Bank's market area are Donaldson Company, Lambert Manufacturing, Midwest Gloves
Corporation, SEMCO, the Department of Corrections, the local school districts,
Wire Rope Corp. of America, Stride-Rite Shoe Company, Landmark Metal Fabricating
and Hamilton Hillcrest.
The Bank faces significant competition in attracting deposits and
originating loans. Such competition consists of ten commercial banks that
maintain 15 offices in the area.
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<PAGE>
Lending Activities
General. The Bank has emphasized and, subject to market conditions, will
continue to emphasize the origination and purchase of one- to four-family
residential mortgage loans. In recent years, subject to market conditions, the
Bank has emphasized the origination and purchase of ARM loans and shorter-term
fixed-rate residential mortgage loans. At June 30, 1996, the Bank's portfolio of
one- to four-family residential mortgage loans totaled $22.8 million, or 79.5%
of total loans. The Bank also originates loans secured by farm residences and
combinations of farm residences and farm real estate. At June 30, 1996, the non-
residential real estate portfolio (consisting principally of farm loans) totaled
$2.0 million, or 6.8% of total loans, all of which were secured by properties
located in the Bank's market area. The Bank's non-mortgage loans consist
primarily of automobile loans, all of which are direct originations (i.e., not
through a dealer), SBA-guaranteed loans and FHA-insured Title I home improvement
loans.
Under OTS regulations, a thrift institution's loans-to-one borrower limit is
generally limited to the greater of 15% of unimpaired capital and surplus or
$500,000. See "Regulation - Federal Regulation of Savings Associations." At
June 30, 1996, the maximum amount which the Bank could have lent under this
limit to any one borrower and the borrower's related entities was approximately
$500,000. At June 30, 1996, the Bank had no loans or groups of loans to related
borrowers with outstanding balances in excess of this amount. The Bank's
largest lending relationship at June 30, 1996 was three loans to an individual
borrower aggregating $478,000 and secured by one- to four-family residential
rental properties. At June 30, 1996, these loans were performing in accordance
with their terms.
Loan Portfolio Composition. Set forth below is data relating to the
composition of the Bank's loan portfolio by type of loan as of the dates
indicated.
<TABLE>
<CAPTION>
At June 30,
--------------------------------------
1996 1995
------------------ ------------------
Amount Percent Amount Percent
-------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Real estate loans:
- -----------------
One- to four-family................. $22,798 79.49% $21,020 79.63%
Non-residential real estate......... 1,955 6.81 1,874 7.10
Commercial.......................... 369 1.29 409 1.55
------- ------ ------- ------
Total real estate loans......... 25,122 87.59 23,303 88.28
------- ------ ------- ------
Consumer and other loans:
- -------------------------
Automobile......................... 1,365 4.76 1,298 4.92
SBA guaranteed..................... 982 3.42 993 3.76
Home improvement - FHA............. 437 1.52 - -
Savings account.................... 341 1.19 364 1.38
Other.............................. 434 1.52 440 1.66
------- ------ ------- ------
Total consumer and other loans.. 3,559 12.41 3,095 11.72
------- -------
Total loans..................... 28,681 100.00% 26,398 100.00%
====== ======
Less:
- -----
Loans in process.................... (5) (8)
Deferred fees and origination costs. 36 31
Allowance for losses................ (283) (81)
------- -------
Total loans receivable, net......... $28,429 $26,340
======= =======
</TABLE>
56
<PAGE>
The following table shows the composition of the Bank's loan portfolio
by fixed- and adjustable-rates at the dates indicated.
<TABLE>
<CAPTION>
At June 30,
------------------------------------------
1996 1995
------------------ ----------------------
Amount Percent Amount Percent
-------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Fixed-Rate Loans:
- -----------------
Real estate:
One- to four-family................. $ 4,180 14.58% $ 3,784 14.34%
Commercial.......................... 369 1.28 409 1.55
Non-residential..................... 317 1.11 424 1.60
-------- -------- -------- --------
Total real estate loans.......... 4,866 16.97 4,617 17.49
Consumer and other................... 2,530 8.82 2,081 7.88
-------- -------- -------- --------
Total fixed-rate loans........... 7,396 25.79 6,698 25.37
-------- -------- -------- --------
Adjustable-Rate Loans:
- ---------------------
Real estate:
One- to four-family................. 18,618 64.91 17,236 65.30
Non-residential..................... 1,638 5.71 1,450 5.49
-------- -------- -------- --------
Total real estate loans.......... 20,256 70.62 18,686 70.79
Consumer and other................... 1,029 3.59 1,014 3.84
-------- -------- -------- --------
Total adjustable-rate loans...... 21,285 74.21 19,700 74.63
-------- -------- -------- --------
Total loans...................... $ 28,681 100.00% $ 26,398 100.00%
Less:
- ----
Loans in process..................... $ (5) $ (8)
Deferred fees and origination costs.. 36 31
Allowance for loan losses............ (283) (81)
-------- --------
Total loans receivable, net....... $ 28,429 $ 26,340
======== ========
</TABLE>
One- to Four-Family Mortgage Loans. The Bank's primary lending activity is
the origination for its portfolio of one- to four-family, owner-occupied,
residential mortgage loans secured by property located in the Bank's market
area. Loans are generated through the Bank's marketing efforts, its existing
customers and referrals, real estate brokers, builders and local businesses.
The Bank generally has limited its real estate loan originations to the
financing of properties located within its market area, although it has from
time to time in the past purchased loans secured by properties located outside
of its market area. The average principle balance of the loans in the Bank's
one- to four-family residential mortgage loan portfolio was approximately
$20,950 at June 30, 1996. At June 30, 1996, the Bank had $22.8 million, or
79.5% of its total loan portfolio, invested in mortgage loans secured by
one- to four-family residences.
The Bank originates fixed-rate residential one- to four-family loans with
terms of up to 20 years. As of June 30, 1996, $4.2 million, or 14.6% of the
Bank's loan portfolio, consisted of fixed-rate residential one- to four-family
loans. The Bank's fixed-rate mortgage loans amortize monthly with principal and
interest due each month. Residential real estate loans often remain outstanding
for significantly shorter periods than their contractual terms because borrowers
may refinance or prepay loans at their option.
The Bank also offers ARM loans for terms ranging up to 30 years. The Bank
currently offers ARM loans that adjust every year, with interest rate adjustment
limitations up to two percentage points per year and up to six percentage points
over the life of the loan; however, a majority of the ARM loans in the Bank's
portfolio have adjustment limitations of one percentage point per year and five
percentage points over the life of the loan. Additionally, the Bank offers ARM
loans that adjust annually after an initial lock-in term of three or five years
has expired. In a rising interest rate environment, such rate limitations may
prevent ARM loans from repricing to market interest rates, which would have an
adverse effect on net interest income. The Bank has used different interest
indices for ARM loans in the past, and currently uses the one year U.S. Treasury
Index adjusted to a constant maturity, with
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<PAGE>
margins of 300-325 basis points for agency-conforming ARM loans. ARM loans
secured by residential one- to four-family real estate totaled $18.6 million, or
64.9% of the Bank's total loan portfolio at June 30, 1996. The origination of
fixed-rate mortgage loans versus ARM loans is monitored on an ongoing basis and
is affected significantly by the level of market interest rates, customer
preference, the Bank's interest rate gap position and loan products offered by
the Bank's competitors. Particularly in a relatively low interest rate
environment, borrowers may prefer fixed-rate loans to ARM loans. During fiscal
year 1996, the Bank originated $2.1 million in fixed-rate residential mortgage
loans and $3.1 million of ARM loans. During fiscal year 1995, the Bank
originated $596,000 of fixed-rate residential mortgage loans and $3.0 million of
ARM loans.
The primary purpose of offering ARM loans is to make the Bank's loan
portfolio more interest rate sensitive. However, as the interest income earned
on ARM loans varies with prevailing interest rates, such loans do not offer the
Bank predictable cash flows as would long-term, fixed-rate loans. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Asset/Liability Management." ARM loans carry increased credit risk
associated with potentially higher monthly payments by borrowers as general
market interest rates increase. It is possible, therefore, during periods of
rising interest rates, that the risk of delinquencies and defaults on ARM loans
may increase due to the upward adjustment of interest costs to the borrower,
resulting in increased loan losses.
In order to supplement local mortgage loan demand, the Bank also has
purchased one- to four-family residential mortgage loans. All such purchased
loans are subject to the same underwriting standards and approval procedures as
for loans originated by the Bank. Before a loan is purchased, the Bank obtains a
copy of the original loan application, the original title insurance policy and
personal financial statements of any guarantors of the loan. Officers of the
Bank also usually make a personal inspection of the property securing the loan.
Such purchases are made without recourse. Generally, the originating financial
institution or mortgage banker continues to service the loans, remitting
principal and interest to the Bank. In recent years, the Bank has limited its
purchases of residential mortgage loans to adjustable rate loans. However, the
availability of such loans for purchase is influenced by overall market interest
rates and the demand for such loans from borrowers.
The Bank's residential first mortgage loans customarily include due-on-sale
clauses, which are provisions giving the Bank the right to declare a loan
immediately due and payable in the event, among other things, that the borrower
sells or otherwise disposes of the underlying real property serving as security
for the loan. Due-on-sale clauses are a means of imposing assumption fees and
increasing the interest rate on the Bank's mortgage portfolio during periods of
rising interest rates.
Regulations limit the amount that a savings association may lend relative to
the appraised value of the real estate securing the loan, as determined by an
appraisal at the time of loan origination. Such regulations permit a maximum
loan-to-value ("LTV") ratio of 95% for residential property (and 100% for loans
guaranteed by the Veterans Administration) and 90% for all other real estate
loans. The Bank's lending policies, however, generally limit the maximum LTV
ratio to 80% of the lesser of the appraised value or the purchase price of the
property securing the loan in the case of loans secured by one- to four-family
owner-occupied properties. On conventional one- to four-family loans, the Bank
will lend up to a 95% LTV ratio; however, loans with LTV ratios in excess of 80%
may require private mortgage insurance and loans with LTV ratios in excess of
90%, with rare exceptions, require private mortgage insurance or additional
readily marketable collateral.
When underwriting residential real estate loans, the Bank reviews each loan
applicant's employment, income and credit history. The Bank's policy is to
obtain credit reports and financial statements on all borrowers and guarantors.
Properties securing real estate loans are appraised by the Bank's employees.
Appraisals are subsequently reviewed by the Bank's Chief Lending Officer and the
Loan Committee, as applicable. Management believes that stability of income,
past credit history and adequacy of the proposed security are integral parts in
the underwriting process. Generally, the applicant's total monthly mortgage
payment, including all escrow amounts, is limited to 25% of the applicant's
total monthly income. In addition, total monthly obligations of the applicant,
including mortgage payments, should not generally exceed 33% of total monthly
income. Written appraisals are always required on real
58
<PAGE>
estate property offered to secure an applicant's loan. The Bank requires fire
and casualty insurance on all properties securing real estate loans, as well as
title insurance or a certified abstract and written attorney's title opinion.
Non-Residential Real Estate Lending. The Bank originates loans secured by
farm residences and combinations of farm residences and farm real estate. At
June 30, 1996, the non-residential real estate portfolio totaled $2.0 million,
or 6.8% of total loans, all of which were secured by properties located in the
Bank's market area. The principle balance of such loans in the Bank's portfolio
ranged from approximately $1,000 to $250,000 at June 30, 1996. Non-residential
real estate mortgage loans are generally made for terms of 15 to 20 years.
Loans secured by farm real estate generally involve greater risks than
one- to four- family residential mortgage loans. Payments on loans secured by
such properties may, in some instances, be dependent on farm income from the
properties. To address this risk, applicants may be required to provide income
projections for the coming year as well as a five-year history on past
production from the farm securing the loan. The Bank also evaluates the cash
flow from the farm securing the loan, and the Bank's analysis of such cash flow
data is an important part of the underwriting decision. Nonetheless, such loans
are more difficult to evaluate. If the estimate of value proves to be
inaccurate, the Bank may be confronted with a property the value of which is
insufficient to assure full repayment in the event of default and foreclosure.
The Bank seeks to minimize these risks in a variety of ways, including limiting
the size of such loans, limiting the maximum loan to value ratio to 75% and
strictly scrutinizing the financial condition of the borrower and the quality of
the collateral securing the loan. All of the properties securing the Bank's non-
residential real estate mortgage portfolio are inspected and appraised by the
Bank's lending personnel before the loan is made.
Commercial Real Estate Lending. The Bank occasionally originates loans
secured by commercial real estate. At June 30, 1996, $369,000, or 1.3%, of the
Bank's loan portfolio consisted of one commercial real estate loan, which
represented a purchased participation in a commercial real estate loan secured
by a nursing home located in St. Peters, Missouri, a suburb of St. Louis. At
June 30, 1996, this loan was performing according to its terms.
Commercial real estate loans originated or purchased by the Bank may be
either fixed- or adjustable-rate loans with terms to maturity and amortization
schedules of up to 30 years. Commercial real estate loans are written in amounts
of up to 80% of the lesser of the appraised value of the property or the sales
price.
Appraisals on properties which secure commercial real estate loans are
performed by the Bank's employees or an independent appraiser designated by the
Bank before the loan is made. All appraisals on commercial real estate loans
are reviewed by the Bank's management. In underwriting such loans, the Bank
primarily considers the cash flows generated by the real estate to support the
debt service, the financial resources and income level of the borrower and the
Bank's experience with the borrower. In addition, the Bank's underwriting
procedures require verification of the borrower's credit history, an analysis of
the borrower's income, financial statements and banking relationships, a review
of the borrower's property management experience and references, and a review of
the property, including cash flow projections and historical operating results.
The Bank seeks to ensure that the property securing the loans will generate
sufficient cash flow to adequately cover operating expenses and debt service
payments.
Commercial real estate lending affords the Bank an opportunity to receive
interest at rates higher than those generally available from one- to four-family
residential lending. Nevertheless, loans secured by such properties are
generally larger, more difficult to evaluate and monitor and, therefore
generally, involve a greater degree of risk than one- to four-family residential
mortgage loans. Because payments on loans secured by commercial real estate are
often dependent on the successful operation or management of the properties,
repayment of such loans may be subject to adverse conditions in the real estate
market or the economy. If the cash flow from the project is reduced, the
borrower's ability to repay the loan might be impaired. The Bank has attempted
to minimize these risks by lending primarily to the ultimate user of the
property or on existing income-producing properties.
Consumer and Other Lending. Investors Federal originates a limited variety
of consumer loans, primarily direct automobile loans and loans secured by
savings accounts. The Bank currently originates substantially all of its
59
<PAGE>
consumer loans in its primary market area. The Bank also occasionally purchases
consumer and other loans originated by other financial institutions. Such
purchased loans include adjustable rate loans guaranteed by the Small Business
Administration and FHA-insured Title I home improvement loans.
The primary component of the Bank's consumer loan portfolio consists of
automobile loans secured by both new and used cars and light trucks. The Bank
originates automobile loans on a direct basis, where the Bank extends credit
directly to the borrower. The Bank's automobile loans generally have terms that
do not exceed five years and carry a fixed-rate of interest. Generally, loans
on new vehicles are made in amounts up to 80% of cost and loans on used vehicles
are made in amounts up to 90% of the vehicle's "Black Book" value, as published
by the Hearst Business Media Corporation. Collision and comprehensive insurance
coverage is required on all automobile loans.
The Bank also purchases FHA home improvement loans, which are fixed-rate
loans with terms ranging from one to fifteen years. Principal and interest
payments on such loans is 100% guaranteed to investors, such as the Bank, by the
Department of Housing and Urban Development, a Department of the United States
Government. At June 30, 1996, the Bank's purchased FHA home improvement loan
portfolio consisted of two FHA loan packages, one of which had a principal
balance of $174,000 and a fixed interest rate of 10.5% and the other of which
had a principal balance of $255,000 and a fixed interest rate of 9.38%.
The Bank also purchases adjustable rate loans guaranteed by the Small
Business Administration, an independent agency of the Federal Government. Such
loans are generally originated by financial institutions to small- and medium-
sized businesses, with interest rates that adjust monthly or quarterly based on
the prime rate. SBA-guaranteed loans generally have terms ranging from seven to
25 years depending on the use of the proceeds. The principal and interest on
such loans is 90% insured by the Small Business Administration and the Bank has
limited its purchases to the guaranteed portion of such loans. Such loans are
generally sold at a premium to par value primarily due to the SBA's guarantee.
As of June 30, 1996, the Bank's purchased SBA-guaranteed loan portfolio
consisted of three loans in the aggregate amount of $982,000, representing 3.4%
of the Bank's total loan portfolio.
Finally, the Bank has originated a small number of loans for the purchase of
farm equipment. Such loans are generally secured by chattel and equipment and
generally are originated as fixed-rate loans with terms of less than five years.
Consumer loan terms vary according to the type and value of collateral,
length of contract and creditworthiness of the borrower. The underwriting
standards employed by the Bank for originated consumer loans include an
application, a determination of the applicant's payment history on other debts
and an assessment of ability to meet existing obligations and payments on the
proposed loan. Although creditworthiness of the applicant is a primary
consideration, the underwriting process also includes a comparison of the value
of the security, if any, in relation to the proposed loan amount.
Consumer loans entail greater credit risk than do residential mortgage
loans, particularly in the case of consumer loans which are unsecured or are
secured by rapidly depreciable assets, such as automobiles. Further, any
repossessed collateral for a defaulted consumer loan may not provide an adequate
source of repayment of the outstanding loan balance as a result of the greater
likelihood of damage, loss or depreciation. In addition, consumer loan
collections are dependent on the borrower's continuing financial stability, and
thus are more likely to be affected by adverse personal circumstances.
Furthermore, the application of various federal and state laws, including
bankruptcy and insolvency laws, may limit the amount which can be recovered on
such loans. At June 30, 1996, $10,000 in consumer loans were non-performing.
See "Asset Quality--Delinquent Loans and Non-performing Assets." There can be
no assurances, however, that delinquencies will not increase in the future.
60
<PAGE>
Loan Maturity Schedule
The following schedule illustrates the contractual maturity and weighted
average rates of the Bank's total loan portfolio at June 30, 1996. Mortgages
which have adjustable or renegotiable interest rates are shown as maturing in
the period during which the contract is due. The schedule does not reflect the
effects of scheduled payments, possible prepayments or enforcement of due-on-
sale clauses. The total amount of loans due after June 30, 1997 that have
predetermined interest rates is $5.5 million, and that have floating or
adjustable rates is $21.3 million.
<TABLE>
<CAPTION>
Nonresidential Real
One- to Four-Family Estate & Commercial Consumer and Other Total
--------------------- ------------------- ------------------ ------------------
Weighted Weighted Weighted Weighted
Average Average Average Average
Amount Rate Amount Rate Amount Rate Amount Rate
--------------------- ------------------- ------------------ -------- --------
(Dollars in Thousands)
Due During Years Ending June 30,
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 (1).......................... $ 115 8.25% $ 73 7.69% $1,600 7.87% $ 1,788 7.88%
1998.............................. 133 8.24 2 8.36 283 10.30 418 9.64
1999.............................. 366 8.35 82 9.15 435 10.25 883 9.36
2000 and 2001..................... 786 8.54 81 8.52 588 9.47 1,455 8.91
2002 to 2006...................... 3,349 8.01 894 10.28 242 7.34 4,485 8.43
2007 to 2021...................... 13,969 7.45 1,192 8.48 411 8.64 15,572 7.56
2022 and following................ 4,080 7.55 - - - - 4,080 7.55
------- ------ ------ -------
$22,798 7.61% $2,324 9.19% $3,559 8.67% $28,681 7.87%
======= ====== ====== =======
</TABLE>
- ----------------------------------
(1) Includes demand loans, loans having no stated maturity and overdraft loans.
61
<PAGE>
Origination, Purchases and Sales of Loans
Loan originations are developed from continuing business with depositors and
borrowers, soliciting realtors, builders, walk-in customers and third-party
sources. The Board of Directors of the Bank has authorized certain officers to
originate loans within specified underwriting limits. Specifically, Bank
officers may originate loans secured by single-family, owner occupied residences
up to $100,000 (based on a 60% LTV ratio), up to $87,500 (based on a 70% LTV
ratio), up to $82,500 (based on a 75% LTV ratio), up to $80,000 (based on an 80%
LTV ratio), and up to $72,000 (based on a 90% LTV ratio). All loans over
$100,000 require action by the Bank's Loan Committee and all loans originated
over a 90% LTV ratio require action by the Bank's Loan Committee. In addition,
the full Board of Directors meets monthly to review all real estate loans made
by officers of the Bank.
While the Bank originates both adjustable-rate and fixed-rate loans, its
ability to originate loans to a certain extent is dependent upon the relative
customer demand for loans in its market, which is affected by the interest rate
environment, among other factors. For fiscal year 1996, the Bank originated
$5.6 million in fixed-rate loans and $3.6 million in adjustable-rate loans.
In order to supplement local loan demand, the Bank also has purchased loans in
the secondary mortgage market. These loans have consisted of one- to four-family
residential mortgage loans secured by property located in the State of Missouri,
although the Bank's purchased loan portfolio includes seasoned one- to four-
family residential mortgage loans secured by collateral located outside
Missouri. At June 30, 1996, $7.2 million, or 25.0%, of the Bank's total loan
portfolio consisted of purchased one- to four-family residential mortgage loans.
During the year ended June 30, 1996, the Bank purchased $2.3 million in one- to
four-family residential mortgage loans, all of which were collateralized by
properties located in the State of Missouri.
The Bank generally does not sell in the secondary mortgage market residential
mortgage loans that it originates. In the year ended June 30, 1996, the Bank did
not sell any originated mortgage loans; in the year ended June 30, 1995, the
Bank sold $80,000 in one- to four-family residential mortgage loans. The fixed
rate residential one- to four-family mortgage loans originated by the Bank are
generally underwritten in conformity with the criteria established by the FHLMC.
62
<PAGE>
Set forth below is a table showing the Bank's loan originations, purchases,
sales and repayments for the periods indicated.
<TABLE>
<CAPTION>
Years Ended June 30,
----------------------
1996 1995
----------- ---------
(In Thousands)
<S> <C> <C>
Originations by Type:
- ---------------------
Adjustable rate:
Real estate - one- to four-family...... $3,068 $3,031
- non-residential........ 516 191
Non-real estate - consumer............. - 24
------ ------
Total adjustable-rate........... 3,584 3,246
------ ------
Fixed rate:
Real estate - one- to four-family...... 2,144 596
- non-residential........ - 365
======
Non-real estate - consumer............. 3,440 3,454
------ ------
Total fixed-rate................ 5,584 4,415
------ ------
Total loans originated.......... 9,168 7,661
------ ------
Purchases:
- ---------
Real estate - one- to four-family...... 2,292 3,651
- commercial............. - -
Non-real estate - consumer............. - -
------ ------
Total loans purchased........... 2,292 3,651
Sales and Repayments:
- --------------------
Real estate - one- to four-family...... - 80
- commercial............. - -
Non-real estate - consumer............. - -
------ ------
Total loans sold................ - 80
Principal repayments................... 9,166 7,703
------ ------
Total reductions................
Increase (decrease) in other items, net.. (11) (11)
------ ------
Net increase (decrease)......... $2,283 $3,518
====== ======
</TABLE>
63
<PAGE>
Asset Quality
The Bank's collection procedures provide that when a real estate loan
is past due 15 days, a delinquent notice is sent requesting payment. If a
payment is more than 30 days past due then personal contact is made by the
collection officer. If the deed of trust calls for a right-to-cure notice, then
the required notice is mailed by certified mail and regular mail when the loan
becomes 30 days past due. Personal contact is continued on all delinquent real
estate loans until the loan is completely current.
With respect to consumer loans, a delinquent notice is sent requesting
payment five days after the due date. If payment is not made by the 30th day
after it is due, the Bank sends a right to cure letter by certified mail and by
regular mail. If consumer loans are not resolved by 90 days, the account is put
on non-accrual status and repossession and/or legal action is normally
initiated. Real estate loans of 60 days or more past due and consumer loans of
30 or more past due are reported monthly to the Board of Directors. For both
consumer loans and real estate loans, the Bank officer has authority to begin
foreclosure and/or repossession procedures at any time he feels it necessary or
advisable. At June 30, 1996, the percentage of total loans delinquent 90 days or
more to total loans was 0.45% and the percentage of total loans delinquent 60 to
89 days to total loans was 0.65%.
Delinquent Loans and Non-performing Assets. Loans are reviewed on a
regular basis and are placed on non-accrual status when, in the opinion of
management, the collection of additional interest is doubtful. Mortgage and
consumer loans are placed on non-accrual status when principal is 90 days or
more past due. Interest accrued and unpaid at the time a loan is placed on non-
accrual status is charged against interest income. The loan will remain on non-
accrual status until the loan is brought current.
Real estate acquired through foreclosure or by deed-in-lieu of
foreclosure is classified as real estate owned until such time as it is sold.
When real estate owned is acquired, it is recorded at the lower of the unpaid
principal balance of the related loan, or its fair value, less estimated selling
expenses. Any further write-down of real estate owned is charged against
earnings. At June 30, 1996, the Bank had no property classified as real estate
owned.
The following table sets forth information with respect to the Bank's
delinquent loans at June 30, 1996.
<TABLE>
<CAPTION>
Loans Delinquent For
------------------------------------------------------------
60-89 Days 90 Days and Over Total Delinquent Loans
----------------------- -------------------------------- --------------------------------
Percent Percent Percent
of Loan of Loan of Loan
Number Amount Category Number Amount Category Number Amount Category
------ ------ -------- ------ ------ ---------------- ------ ------ --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate:
One- to four-family...... 3 $ 184 .82% 1 $ 25 .11% 4 $ 209 .93%
Nonresidential real
estate.................. - - - 1 93 4.76 1 93 4.76
Consumer................. 1 3 .07 1 10 .26 2 13 .34
------ ------ ------ ------ ------ ------
Total................. 4 $ 187 .65% 3 $ 128 .45% 7 $ 315 1.10%
====== ====== ====== ====== ====== ======
</TABLE>
64
<PAGE>
The following table sets forth information regarding non-performing loans at
the dates indicated. As of the dates indicated, the Bank had no material
restructured loans within the meaning of SFAS No. 15 and no real estate owned.
In addition, as of the dates indicated, the Bank had no accruing loans that were
delinquent more than 90 days. All loans over 90 days past due are classified as
non-accrual.
<TABLE>
<CAPTION>
At June 30,
--------------------
1996 1995
------ ------------
(In Thousands)
<S> <C> <C>
Non-accruing loans:
One- to four-family..................................... $ 25 $ 29
Nonresidential real estate.............................. 93 -
Consumer................................................ 10 -
----- -----
Total................................................ $ 128 $ 29
----- -----
Total non-accruing loans as a percentage of total assets.. .24% .06%
===== =====
</TABLE>
For the year ended June 30, 1996, gross interest income which would
have been recorded had the non-accruing loans been current in accordance with
their original terms amounted to $14,000. The amount that was included in
interest income on such loans was $10,000 for the year ended June 30, 1996.
Classified Assets. Federal regulations provide for the classification
of loans and other assets, such as debt and equity securities, considered by the
OTS to be of lesser quality, as "substandard," "doubtful" or "loss." An asset
is considered "substandard" if it is inadequately protected by the current net
worth and paying capacity of the obligor or the collateral pledged, if any.
"Substandard" assets include those characterized by the "distinct possibility"
that the insured institution will sustain "some loss" if the deficiencies are
not corrected. Assets classified as "doubtful" have all of the weaknesses
inherent in those classified "substandard" with the added characteristic that
the weaknesses present make "collection or liquidation in full" on the basis of
currently existing facts, conditions and values, "highly questionable and
improbable." Assets classified as "loss" are those considered "uncollectible"
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted.
When an insured institution classifies problem assets as either
substandard or doubtful, it may establish general allowances for losses in an
amount deemed prudent by management. General allowances represent loss
allowances which have been established to recognize the inherent risk associated
with lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets. When an insured institution classifies
problem assets as "loss," it is required either to establish a specific
allowance for losses equal to 100% of that portion of the asset so classified or
to charge-off such amount. An institution's determination as to the
classification of its assets and the amount of its valuation allowances is
subject to review by the regulatory authorities, who may order the establishment
of additional general or specific loss allowances.
In connection with the filing of its periodic reports with the OTS and
in accordance with its classification of assets policy, the Bank reviews loans
in its portfolio quarterly to determine whether such assets require
classification in accordance with applicable regulations.
65
<PAGE>
On the basis of management's review of its assets, at June 30, 1996,
the Bank had classified a total of $382,000 of its loans and other assets as
follows:
<TABLE>
<CAPTION>
At June 30, 1996
----------------
(In Thousands)
<S> <C> <C>
1996 1995
----- -----
Special Mention..................... $ - $ -
Substandard......................... 378 194
Doubtful............................ - 3
Loss................................ 4 4
----- -----
Total.......................... 382 201
===== =====
General loss allowance.............. 279 77
===== =====
Specific loss allowance............. 4 4
===== =====
Charge-offs......................... 8 9
===== =====
</TABLE>
Other Loans of Concern. In addition to the non-performing loans set
forth in the tables above, as of June 30, 1996, there were no loans classified
by the Bank with respect to which known information about the possible credit
problems of the borrowers or the cash flows of the security properties have
caused management to have some doubts as to the ability of the borrowers to
comply with present loan repayment terms and which may result in the future
inclusion of such items in the non-performing asset categories.
Allowance for Loan Losses. The allowance for loan losses is
established through a provision for loan losses based on management's evaluation
of the risk inherent in its loan portfolio and changes in the nature and volume
of its loan activity, including those loans which are being specifically
monitored by management. Such evaluation, which includes a review of loans for
which full collectibility may not be reasonably assured, considers among other
matters, the loan classifications discussed above, the estimated fair value of
the underlying collateral, economic conditions, historical loan loss experience,
the amount of loans outstanding and other factors that warrant recognition in
providing for an adequate loan loss allowance.
Real estate properties acquired through foreclosure are recorded at
the lower of cost or fair value minus estimated cost to sell. If fair value at
the date of foreclosure is lower than the balance of the related loan, the
difference will be charged-off to the allowance for loan losses at the time of
transfer. Valuations are periodically updated by management and if the value
declines, a specific provision for losses on such property is established by a
charge to operations. At June 30, 1996, the Bank had no properties that were
acquired through foreclosure.
Although management believes that it uses the best information
available to determine the allowance, unforeseen market conditions could result
in adjustments and net earnings could be significantly affected if circumstances
differ substantially from the assumptions used in making the final
determination. Future additions to the Bank's allowance for loan losses will be
the result of periodic loan, property and collateral reviews and thus cannot be
predicted in advance. In addition, federal regulatory agencies, as an integral
part of the examination process, periodically review the Bank's allowance for
loan losses. Such agencies may require the Bank to increase the allowance based
upon their judgment of the information available to them at the time of their
examination. At June 30, 1996, the Bank had a total allowance for loan losses
of $283,000, representing 221.1% of total non-performing loans and 1.00% of
the Bank's loans receivable, net. See Note 4 of the Notes to Consolidated
Financial Statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
66
<PAGE>
The following table sets forth the allocation for loan losses by
category at the dates indicated:
<TABLE>
<CAPTION>
At June 30,
--------------------------------------------------------------
1996 1995
------------------------------ ------------------------------
Percent Percent
of Loans of Loans
Loan in Each Loan in Each
Amount of Amounts Category Amount of Amounts Category
Loan Loss by to Total Loan Loss by to Total
Allowance Category Loans Allowance Category Loans
--------- -------- --------- --------- -------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
One- to four-family......................... $ 225 $22,798 79.49% $ 64 $21,020 79.63%
Commercial real estate...................... - 369 1.29 - 409 1.55
Non-residential real estate................. 19 1,955 6.81 6 1,874 7.10
Consumer and other.......................... 39 3,559 12.41 11 3,095 11.72
------ ------- ------ ------ ------- ------
Total.................................. $ 283 $28,681 100.00% $ 81 $26,398 100.00%
====== ======= ====== ====== ======= ======
</TABLE>
The following table sets forth information with respect to the Bank's
allowance for loan losses for the periods indicated.
<TABLE>
<CAPTION>
Years Ended June 30,
------------------------
1996 1995
------------ ----------
(Dollars In Thousands)
<S> <C> <C>
Balance at beginning of period................. $ 81 $ 89
Charge-offs:
Consumer and other........................... (11) (11)
Recoveries:
Consumer and other........................... 3 2
Net charge-offs................................ (8) (9)
Additions charged to operations................ 210 1
----- ------
Balance at end of period....................... $ 283 $ 81
===== ======
Ratio of net charge-offs during the period to
average loans outstanding during the period.. .03% .04%
===== ======
Ratio of net charge-offs during the period to
average non-performing assets................ 9.51% 11.38%
===== ======
</TABLE>
67
<PAGE>
Investment Activities
General. Investors Federal must maintain minimum levels of
investments that qualify as liquid assets under OTS regulations. Liquidity may
increase or decrease depending upon the availability of funds and comparative
yields on investments in relation to the return on loans. Historically, the
Bank has generally maintained liquid assets at levels above the minimum
requirements imposed by the OTS regulations and at levels believed adequate to
meet the requirements of normal operations, including repayments of maturing
debt and potential deposit outflows. Cash flow projections are regularly
reviewed and updated to assure that adequate liquidity is maintained. At June
30, 1996, the Bank's liquidity ratio (liquid assets as a percentage of net
withdrawable savings deposits and current borrowings) was 10.5%. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" and "Regulation - Liquidity."
Federally chartered savings institutions have the authority to invest
in various types of liquid assets, including U.S. Treasury obligations,
securities of various federal agencies, certain certificates of deposit of
insured banks and savings institutions, certain bankers' acceptances, repurchase
agreements and federal funds. Subject to various restrictions, federally
chartered savings institutions may also invest their assets in commercial paper,
investment grade corporate debt securities and mutual funds whose assets conform
to the investments that a federally chartered savings institution is otherwise
authorized to make directly.
Generally, the investment policy of the Bank, as established by the
Board of Directors, is to invest funds among various categories of investments
and maturities based upon the Bank's liquidity needs, asset/liability management
policies, investment quality, marketability and performance objectives.
Mortgage-backed Securities. The Bank purchases mortgage-backed
securities primarily to supplement its lending activities, to generate positive
interest rate spreads on large principal balances with minimal administrative
expense, to lower the credit risk of the Bank as a result of the guarantees
provided by FHLMC, FNMA and GNMA and to generally assist in managing the
interest rate risk of the Bank. The Bank has invested primarily in federal
agency securities, principally FHLMC, FNMA and GNMA obligations. In addition,
the Bank invests in collateralized mortgage obligations ("CMOs") and
participations in Small Business Administration pools. Included in the Bank's
mortgage-backed securities portfolio are real estate mortgage investment
conduits ("REMICs") which mature in 2008 through 2023 and have adjusting
interest rates based on a variety of interest rate indices. At June 30, 1996,
the Bank's investment in mortgage-backed securities totaled $17.0 million, or
32.3% of its total assets. At June 30, 1996 all of the Bank's mortgage-backed
securities were classified as available-for-sale. See Note 3 of the Notes to
Consolidated Financial Statements. The portfolio had coupon rates ranging from
4.00% to 9.16% and had a weighted average rate of 6.97% during the year ended
June 30, 1996.
On November 15, 1995, the FASB issued a FASB Special Report, "A Guide
to Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities." The Special Report allows for a "one-time
reclassification" of securities as of a single date between November 15, 1995
and December 31, 1995. In December 1995, the Bank reclassified approximately
$8.1 million of mortgage-backed securities from the held to maturity
classification to the available for sale classification. The estimated fair
value of the Bank's mortgage-backed securities available for sale at June 30,
1996, was $17.0 million, which was equal to the amortized cost of such
securities.
The FHLMC, FNMA and GNMA certificates are modified pass-through
mortgage-backed securities that represent undivided interests in underlying
pools of fixed-rate, or certain types of adjustable-rate, single-family
residential mortgages issued by these government-sponsored entities. As a
result, the interest rate risk characteristics of the underlying pool of
mortgages, i.e., fixed rate or adjustable rate, as well as prepayment risk, are
passed on to the certificate holder. FHLMC provides the certificate holder a
guarantee of timely payments of interest and ultimate collection of principal,
whether or not they have been collected. GNMA's guarantee to the holder of
timely payments of principal and interest is backed by the full faith and credit
of the U.S. Government. FNMA is a private corporation chartered by Congress
which guarantees the timely payment of principal and interest on FNMA
securities, which are indirect obligations of the United States Government. At
June 30, 1996, $2.3 million of the Bank's CMOs and REMICs were guaranteed by
FNMA or FHLMC, and the remaining $684,000 of CMOs and REMICs were guaranteed by
private mortgage insurance companies.
68
<PAGE>
Collateralized mortgage obligations include real estate mortgage
investment conduits, and are securities created by segregating or partitioning
cash flows from mortgage pass-through securities or from pools of mortgage
loans. CMOs provide a broad range of mortgage investment vehicles by tailoring
cash flows from mortgages to meet the varied risk and return preferences of
investors. CMOs are typically issued by a special purpose entity that may be
organized in a variety of legal forms, such as a trust, a corporation or a
partnership. REMICs may be sponsored by private issuers, such as mortgage
bankers or money center banks, or by U.S. Government agencies and government-
sponsored entities. At June 30, 1996, the Bank's portfolio of REMICs included an
investment in the Huntington Residential Mortgage Trust, which consists of a
pool of fixed-rate mortgage loans. At June 30, 1996, the aggregate book value
and aggregate market value of the Bank's investment in this security was
$432,928. CMOs are collateralized by mortgage loans or mortgage-backed
securities that are transferred to the CMO trust or pool by a sponsor. The issue
is structured so that collections from underlying collateral provide a cash flow
to make principal and interest payment on the obligations, or "tranches," of the
issuer. The Bank's investment in CMOs is in the fixed rate classes with
scheduled repayments and weighted average lives ranging up to five years at the
time of purchase, and in the floating rate classes which reset monthly based on
the applicable index.
Mortgage-backed securities generally yield less than the loans that
underlie such securities because of the cost of payment guarantees and credit
enhancements. In addition, mortgage-backed securities are usually more liquid
than individual mortgage loans and may be used to collateralize certain
liabilities and obligations of the Bank. These types of securities also permit
the Bank to optimize its regulatory capital because they have low risk
weighting.
Thrift Bulletin Number 52 ("TB-52"), the OTS Policy Statement on
securities portfolio policies and unsuitable investment practices, requires that
institutions classify mortgage derivative products acquired, including REMICs
and certain tranches of CMOs, as "high-risk mortgage securities" if such
products exhibit greater price volatility than a benchmark fixed-rate 30-year
mortgage-backed pass-through security. Institutions may only hold high-risk
mortgage securities to reduce interest-rate risk in accordance with safe and
sound practices and must also follow certain prudent safeguards in the purchase
and retention of such securities. At June 30, 1996, the Bank did not have any
securities that would be identified under TB-52 as "high-risk mortgage
securities." The Bank also evaluates its mortgage-backed securities portfolio
annually for compliance with applicable regulatory requirements, including
testing for identification of high risk investments pursuant to Federal
Financial Institutions Examination Council standards.
Of the Bank's $17.0 million mortgage-backed securities portfolio at
June 30, 1996, substantially all had contractual maturities over six years. The
actual maturity of a mortgage-backed security may be less than its stated
maturity due to prepayments of the underlying mortgages. Prepayments that are
faster than anticipated may shorten the life of the security and may result in a
loss of any premiums paid and thereby reduce the net yield on such securities.
Although prepayments of underlying mortgages depend on many factors, including
the type of mortgages, the coupon rate, the age of mortgages, the geographical
location of the underlying real estate collateralizing the mortgages and general
levels of market interest rates, the difference between the interest rates on
the underlying mortgages and the prevailing mortgage interest rates generally is
the most significant determinant of the rate of prepayments. During periods of
declining mortgage interest rates, if the coupon rate of the underlying
mortgages exceeds the prevailing market interest rates offered for mortgage
loans, refinancing generally increases and accelerates the prepayment of the
underlying mortgages and the related security. Under such circumstances, the
Bank may be subject to reinvestment risk because, to the extent that the Bank's
mortgage-backed securities amortize or prepay faster than anticipated, the Bank
may not be able to reinvest the proceeds of such repayments and prepayments at a
comparable rate. In contrast to mortgage-backed securities in which cash flow is
received (and hence, prepayment risk is shared) pro rata by all securities
holders, the cash flow from the mortgages or mortgage-backed securities
underlying REMICs are segmented and paid in accordance with a predetermined
priority to investors holding various tranches of such securities or
obligations. A particular tranche of REMICs may therefore carry prepayment risk
that differs from that of both the underlying collateral and other tranches.
The Bank also invests in SBA-guaranteed loan participation
certificates, which represent participations in a pool of Small Business
Administration loans. Such certificates are purchased by the Bank from brokers
which purchase the individual loans directly from the originators and pool such
loans for sale to investors. The Small Business Administration is authorized by
the Small Business Act to guarantee a certain percentage of the loan
69
<PAGE>
amount made by financial institutions to qualifying small businesses. Only the
guaranteed portion of the loan is sold into the secondary market as a loan or
pooled security. Accordingly, the certificates purchased by the Bank are 100%
guaranteed by the full faith and credit of the United States Government.
Loans in a pool must be fully disbursed and current when the pool is
formed and the minimum aggregate principal balance of the guaranteed portion
outstanding at the time of certificate issuance is $1 million. At least four
guaranteed portions are in each pool and no individual loan may constitute more
than 25% of the pool. The pools are closed end with no substitutions of
guaranteed portions that prepay or default.
The guaranteed portion of a given pool must be all fixed or all
variable rate. The certificates purchased by the Bank generally are adjustable
rate and adjust at a specified discount to the prime rate. While the SBA
guarantee eliminates credit risk, the Bank is subject to the risk that
certificates will prepay. Certificates are available with interim and/or
lifetime interest rate caps. In exchange for accepting the cap, the prices of
the certificates to the Bank are lower. Prepayments on capped pools are
generally expected to be less than uncapped pools because lenders generally
offer interest rate caps only to their most credit-worthy customers.
Set forth below is a table showing the Bank's purchases, sales and
repayments of mortgage-backed securities and mortgage related securities for the
periods indicated.
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------
1996 1995
--------- ---------
(In Thousands)
<S> <C> <C>
Purchases:
- ----------
Adjustable-rate mortgage-backed securities (1).. $1,311 $1,931
Mortgage related securities:
CMO/REMIC--adjustable-rate................... 2,395 850
CMO/REMIC--fixed-rate........................ - -
SBA pools--adjustable-rate................... 5,013 2,370
SBA pools--fixed-rate........................ 645 -
------ ------
Total purchases.......................... 9,364 5,151
Sales:
- ------
Adjustable-rate mortgage-backed securities (1).. 1,177 478
Mortgage related securities:
CMO/REMIC--adjustable rate................... 302 274
CMO/REMIC--fixed rate........................ - -
SBA pools--adjustable-rate................... 754 1,016
SBA pools--fixed-rate........................ - -
------ ------
Total sales.............................. 2,233 1,768
Principal Repayments:
- ---------------------
Adjustable-rate mortgage-backed securities (1).. 2,360 1,723
Mortgage related securities:
CMO/REMIC--adjustable-rate................... 159 128
CMO/REMIC--fixed-rate........................ 63 81
SBA pools--adjustable-rate................... 258 12
SBA pools--fixed-rate........................ 52 -
------ ------
Total principal repayments............... 2,892 1,944
Increase (decrease) in other items, net........... 29 120
------ ------
Net increase (decrease)......................... $4,268 $1,559
====== ======
- -------------------------
</TABLE>
(1) Consists of pass-through securities.
70
<PAGE>
The following table sets forth the composition of the Bank's mortgage-
backed securities portfolio at the date indicated.
<TABLE>
<CAPTION>
At June 30,
------------------------------------------------------
1996 1995
-------------------------- --------------------------
Book % of Book % of
Value Total Value Total
------- ------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Mortgage-backed securities
held-to-maturity: (1)
GNMA................................. $ - % $ - %
FNMA................................. - - 6,043 47.57
FHLMC................................ - - 1,699 13.37
CMOs/REMICS.......................... - - 1,074 8.45
SBA pools............................ - - - -
------- ------- ------- -------
$ - $ - $ 8,816 $ 69.39%
Mortgage-backed securities
available for sale:
GNMA................................. $ 1,163 6.85% $ 1,289 10.15%
FNMA................................. 4,542 26.76 482 3.79
FHLMC................................ 2,240 13.20 628 4.94
CMOs/REMICS.......................... 2,982 17.57 69 .54
SBA pools............................ 5,846 34.45 1,433 11.28
------- ------- ------- -------
$ 16,773 98.83% $ 3,901 30.70%
Unamortized premium
(discounts), net..................... 198 1.17 (14) (.09)
------- ------- ------- -------
Total mortgage-backed securities.. $ 16,971 100.00% $12,703 100.00%
======== ======= ======= =======
</TABLE>
__________________
(1) By June 30, 1996, pursuant to SFAS 115, the Bank had classified all of its
mortgage-backed securities as available for sale.
Other Investments. At June 30, 1996, the Bank's investment securities
other than mortgage-backed securities consisted of federal agency obligations,
municipal bonds, FHLB stock and other FHLB interest-earning assets, and
interest-earning deposits with other financial institutions. In addition, in
recent years, the Bank has also invested in certain mutual funds whose assets
conform to the investments that a federally-chartered saving institution is
otherwise authorized to make directly. The Bank's investments in mutual funds
includes an investment in the Federated U.S. Government Securities Fund. As of
June 30, 1996, the aggregate book value and aggregate market value of the Bank's
investment in this mutual fund was $339,203.
OTS regulations restrict investments in corporate debt and equity
securities by the Bank. These restrictions include prohibitions against
investments in the debt securities of any one issuer in excess of 15% of the
Bank's unimpaired capital and unimpaired surplus as defined by federal
regulations, plus an additional 10% if the investments are fully secured by
readily marketable collateral. At June 30, 1996, the Bank was in compliance
with this regulation. See "Regulation - Federal Regulation of Savings
Associations" for a discussion of additional restrictions on the Bank's
investment activities.
71
<PAGE>
The following table sets forth the composition of the Bank's
investment securities, net of premiums and discounts, at the dates indicated.
<TABLE>
<CAPTION>
At June 30,
------------------------------------------------------
1996 1995
-------------------------- --------------------------
Book % of Book % of
Value Total Value Total
------- ------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Investment securities held to maturity:
Federal agency obligations....................... $ - -% $ 600 20.67%
Municipal bonds.................................. 215 5.11 215 7.41
------- ------- ------- -------
Investment securities available for sale:
Federal agency obligations....................... 962 22.89 493 16.99
------- ------- ------- -------
Subtotal....................................... 1,177 28.00 1,308 45.07
Equity securities:
FHLB stock....................................... 724 17.23 350 12.06
Mutual funds..................................... 1,308 31.12 1,244 42.87
FNMA preferred stock............................. 994 23.65 - -
------- ------- ------- -------
Total debt and equity securities.............. 4,203 100.00% $ 2,902 100.00%
======= ======= ======= =======
Average remaining life of
debt securities.................................. 6.68 years 3.31 years
Other interest-earning assets:
Interest-earning deposits........................ $ 1,609 100.00% $ 1,808 94.76%
Certificates of deposit.......................... - - 100 5.24
------- ------- ------- -------
Total......................................... $ 1,609 100.00% $ 1,908 100.00%
======= ======= ======= =======
</TABLE>
Investment Portfolio Maturities. The following table sets forth the
scheduled maturities, carrying values, market values and average yields for the
Bank's investment securities excluding FHLB stock at June 30, 1996.
<TABLE>
<CAPTION>
June 30, 1996
--------------------------------------------------------------------------------
Less than 1 to 5 5 to 10 Over
1 Year Years Years 10 Years Total Investment Securities
-------- -------- -------- -------- ---------------------------
Book Book Book Book Book Market
Value Value Value Value Value Value
-------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Municipal securities...................... $ -- $ 215 $ -- $ -- $ 215 $ 215
Federal agency obligations................ -- 484 -- 478 962 962
Mortgage-backed securities................ -- 334 7 16,630 16,971 16,971
-------- -------- -------- -------- -------- --------
Total investment securities............... $ -- $ 1,033 $ 7 $ 17,108 $ 18,148 $ 18,148
======== ======== ======== ======== ======== ========
Weighted average yield.................... --% 6.66% 7.83% 6.92% 6.90% 6.90%
</TABLE>
Sources of Funds
General. The Bank's primary sources of funds are deposits, receipt of
principal and interest on loans and securities, FHLB advances, and other funds
provided from operations.
FHLB advances are used to support lending activities and to assist in
the Bank's asset/liability management strategy. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Asset\Liability
Management." Typically, the Bank does not use other forms of borrowings. At
June 30, 1996, the Bank had $13.5 million in FHLB advances.
Deposits. Investors Federal offers a variety of deposit accounts
having a wide range of interest rates and terms. The Bank's deposits consist of
passbook, demand, NOW, money market deposit and certificate accounts. The
certificate accounts currently range in terms from 91 days to eight years.
72
<PAGE>
The Bank relies primarily on advertising, competitive pricing policies
and customer service to attract and retain these deposits. Currently, Investors
Federal solicits deposits from its market area only, and does not use brokers to
obtain deposits. The flow of deposits is influenced significantly by general
economic conditions, changes in money market and prevailing interest rates and
competition.
The Bank has become more susceptible to short-term fluctuations in
deposit flows as customers have become more interest-rate conscious. The Bank
endeavors to manage the pricing of its deposits in keeping with its
profitability objectives giving consideration to its asset/liability management.
Notwithstanding the foregoing, a significant percentage of the Bank's deposits
are for terms of less than one year. At June 30, 1996, $13.3 million, or 61.1%
of the Bank's certificates of deposit were in certificates of deposit with terms
of 12 months or less. The Bank believes that upon maturity most of these
deposits will remain at the Bank. The ability of the Bank to attract and
maintain savings accounts and certificates of deposit, and the rates paid on
these deposits, has been and will continue to be significantly affected by
market conditions.
Savings Portfolio
The following table sets forth the dollar amount of savings deposits
with various types of deposit programs offered by the Bank at the periods
indicated.
<TABLE>
<CAPTION>
At June 30,
---------------------------------------------------
1996 1995
--------------------- ------------------------
Amount Percent Amount Percent
-------- -------- -------- --------
(Dollars in Thousands)
Transaction Accounts and Savings Deposits:
- -----------------------------------------
<S> <C> <C> <C> <C>
Savings deposits......................... 2,607 7.32 3,004 8.52
Demand and NOW deposits.................. 3,824 10.74 3,839 10.89
Money market accounts.................... 7,301 20.51 7,478 21.22
------- ------ ------- ------
Total non-certificates................... 13,732 38.57 14,321 40.63
------- ------ ------- ------
Certificates:
- ------------
0.00 - 3.99%........................... 39 .11 549 1.56
4.00 - 5.99%........................... 16,839 47.30 14,761 41.89
6.00 - 7.99%........................... 4,554 12.79 5,171 14.67
8.00 - 9.99%........................... 331 .93 408 1.16
------- ------ ------- ------
Total certificates....................... 21,763 61.13 20,889 59.28
------- ------ ------- ------
Accrued interest......................... 103 .30 28 .09
------- ------ ------- ------
Total deposits........................... $35,598 100.00% $35,238 100.00%
======= ====== ======= ======
</TABLE>
73
<PAGE>
Deposit Activity
The following table sets forth the deposit activities of the Bank for
the periods indicated:
<TABLE>
<CAPTION>
Years Ended June 30,
---------------------------
1996 1995
---------- ----------
(In Thousands)
<S> <C> <C>
Opening balance.............. $35,210 $37,072
Deposits..................... 72,437 72,410
Withdrawals.................. 73,237 75,406
Interest credited............ 1,085 1,134
------- -------
Ending balance............... $35,495 $35,210
======= =======
Net increase (decrease)...... $ 285 $(1,862)
======= =======
Percent increase (decrease).. .81% (5.02)%
======= =======
</TABLE>
Time Deposit Maturity Schedule
The following table shows weighted average rate and maturity information for
the Bank's certificates of deposit as of June 30, 1996.
<TABLE>
<CAPTION>
Certificate accounts maturing in Weighted
- -------------------------------- Total Average Percent of
quarter ending: Balance Rate Total
- -------------- -------------- --------- -----------
(In Thousands)
<S> <C> <C> <C>
September 30, 1996................ $ 5,402 5.32% 24.82%
December 31, 1996................. 4,275 5.28 19.64
March 31, 1997.................... 1,759 5.44 8.08
June 30, 1997..................... 1,866 5.50 8.57
September 30, 1997................ 1,377 5.57 6.33
December 31, 1997................. 1,061 5.71 4.88
March 31, 1998.................... 580 5.53 2.67
June 30, 1998..................... 832 5.66 3.82
September 30, 1998................ 594 5.75 2.73
December 31, 1998................. 546 5.97 2.51
March 31, 1999.................... 456 6.00 2.10
June 30, 1999..................... 387 6.12 1.78
Thereafter........................ 2,628 6.22 12.07
------- 5.56 ------
Total......................... $21,763 100.00%
======= ======
</TABLE>
74
<PAGE>
The following table indicates the amount of the Bank's certificates of
deposit and other deposits by time remaining until maturity as of June 30, 1996.
<TABLE>
<CAPTION>
Maturity
------------------------------------------------
3 Months Over 3 to 6 Over 6 to 12 Over
or Less Months Months 12 Months Total
-------- ----------- ------------ --------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Certificates of deposit less
than $100,000.................... $ 4,880 $ 4,106 $ 3,287 $ 8,217 $ 20,490
Certificates of deposit of
$100,000 or more................. 500 100 338 244 1,182
Public funds/(1)/................. 22 69 - - 91
-------- --------- -------- --------- --------
Total certificates of deposit.... $ 5,402 $ 4,275 $ 3,625 $ 8,461 $ 21,762
======== ========= ======== ========= ========
</TABLE>
__________________
/(1)/ Deposits from governmental and other public entities.
Borrowings. Investors Federal's borrowings historically have consisted
of advances from the FHLB of Des Moines. Such advances may be made pursuant to
different credit programs, each of which has its own interest rate and range of
maturities. Federal law limits an institution's borrowings from the FHLB to 20
times the amount paid for capital stock in the FHLB, subject to regulatory
collateral requirements. At June 30, 1996, the Bank had $13.5 million in
advances from the FHLB with maturities from August 1996 to April 2001 , which
included a daily line of credit from the FHLB of $3.5 million. The line of
credit's interest rate is based upon the FHLB's average Fed Funds rate plus 20
basis points, and adjusts daily. As of June 30, 1996, the interest rate on the
line of credit was 5.57% and the Bank had drawn down $1.8 million of the line of
credit. The Bank has the ability to purchase additional capital stock from the
FHLB. For additional information regarding the term to maturity on FHLB
advances, see Note 8 of the Notes to Consolidated Financial Statements and
"Business - Lending Activities."
75
<PAGE>
For the years ended June 30, 1996 and 1995, the Bank had maximum
balances of FHLB advances of $14.5 million and $6.9 million, respectively. The
average balances of such advances for such periods were $11.1 million and $3.7
million for the years ended June 30, 1996 and 1995, respectively. For such
periods, the Bank did not have any other borrowings or any securities sold under
agreements to repurchase. At June 30, 1996 and 1995, the Bank's balance of FHLB
advances was $13.5 million and $6.4 million, respectively, and the weighted
average interest rate of such advances was 6.19% and 6.40%, respectively.
Employees
At June 30, 1996, the Bank had 16 full-time and nine part-time
employees. The Bank's employees are not represented by any collective
bargaining group. Management considers its employee relations to be good.
Properties
The Bank conducts its business through its main office, located in
Chillicothe, Missouri and two branch offices, one located in Hamilton and one
located in Gallatin, Missouri. The following table sets forth information
relating to the Bank's offices as of June 30, 1996. The total net book value of
the Bank's premises and equipment (including land, buildings and leasehold
improvements and furniture, fixtures and equipment) at June 30, 1996 was
$373,000.
<TABLE>
<CAPTION>
Total
Approximate
Date Square Net Book Value at
Location Acquired Footage June 30, 1996
-------- ---------- ----------- -----------------
<S> <C> <C> <C>
Main Office:/(1)/ 1966 3,910 $193,000
522 Washington Street
Chillicothe, Missouri 64601
Branch Offices: Leased 660 -
400 North Main (month-to-
Gallatin, Missouri month)
305 North Davis 1975 1,458 $19,000
Hamilton, Missouri
</TABLE>
__________________
/(1)/ Includes a building located at 520 Washington Street purchased by the Bank
in 1977 as well as a drive through facility purchased in 1985 located at
812 Jackson Street.
In addition to the foregoing facilities, the Bank also owns a lot in
Gallatin, Missouri for a possible new branch facility. At the present time,
there are no plans to build such a facility. The net book value for this lot is
$6,500.
The Bank believes that its current facilities are adequate to meet the
present and foreseeable needs of the Bank and the Holding Company.
Legal Proceedings
Investors Federal is involved, from time to time, as plaintiff or
defendant in various legal actions arising in the normal course of their
businesses. While the ultimate outcome of these proceedings cannot be predicted
with certainty, it is the opinion of management, after consultation with counsel
representing Investors Federal in the
76
<PAGE>
proceedings, that the resolution of these proceedings should not have a material
effect on the Holding Company's financial position or results of operations on a
consolidated basis.
Service Corporation Activities
As a federally chartered savings association, Investors Federal is
permitted by OTS regulations to invest up to 2% of its assets, or approximately
$1.1 million at June 30, 1996, in the stock of, or loans to, service corporation
subsidiaries. Investors Federal may invest an additional 1% of its assets in
service corporations where such additional funds are used for inner-city or
community development purposes and up to 50% of its total capital in conforming
loans to service corporations in which it owns more than 10% of the capital
stock. In addition to investments in service corporations, federal associations
are permitted to invest an unlimited amount in operating subsidiaries engaged
solely in activities in which a federal association may engage. At June 30,
1996, Investors Federal had one subsidiary, Investors Federal Service
Corporation, a Missouri corporation, which was established in June 1992 for the
primary purpose of offering credit life, health and accident insurance to its
customers. The Bank is now offering such products directly and the subsidiary is
largely inactive.
As a national bank, the Bank will be able to invest unlimited amounts
in subsidiaries that are engaged in activities in which the parent bank may
engage. In addition, a national bank may invest limited amounts in subsidiaries
that provide banking services, such as data processing, to other financial
institutions.
REGULATION
General
Investors Federal is a federally chartered savings association, the
deposits of which are federally insured and backed by the full faith and credit
of the U.S. Government. Accordingly, the Bank is subject to broad federal
regulation and oversight extending to all its operations. The Bank is a member
of the FHLB of Des Moines and is subject to certain limited regulation by the
Federal Reserve Board. As the savings and loan holding company of the Bank, the
Holding Company also is subject to federal regulation and oversight. The
purpose of the regulation of the Holding Company and other holding companies is
to protect subsidiary savings and loan associations. The Bank is a member of
the SAIF. The deposits of the Bank are insured by the SAIF of the FDIC. As a
result, the FDIC has certain regulatory and examination authority over the Bank.
The foregoing regulatory oversight will continue to apply to the Bank
following consummation of the Stock Conversion but prior to completion of the
Bank Conversion.
Upon consummation of the Bank Conversion, the Bank will be a national
bank and its deposit accounts will continue to be insured by the SAIF. As a
national bank, the Bank also will be required to become a member of the Federal
Reserve System. The Bank will be subject to supervision, examination and
regulation by the OCC (rather than the OTS) and to OCC regulations governing
such matters as capital standards, mergers, establishment of branch offices,
subsidiary investments and activities and general investment authority, and it
will remain subject to the FDIC's authority to conduct special examinations. The
Bank will be required to file reports with the OCC concerning its activities and
financial condition and will be required to obtain regulatory approvals prior to
entering into certain transactions, including mergers with, or acquisitions of,
other depository institutions.
Certain of these regulatory requirements and restrictions are
discussed below or elsewhere in this document.
Federal Regulation of Savings Associations
The OTS has extensive authority over the operations of savings
associations. As part of this authority, the Bank is required to file periodic
reports with the OTS and is subject to periodic examinations by the OTS and the
FDIC. The last regular OTS and FDIC examinations of the Bank were as of 1995
and 1991, respectively. Such examinations did not result in any material
changes to the operations, personnel or finances of the Bank. When
77
<PAGE>
these examinations are conducted by the OTS and the FDIC, the examiners may
require the Bank to provide for higher general or specific loan loss reserves.
All savings associations are subject to a semi-annual assessment,
based upon the savings and loan association's total assets. The Bank's OTS
assessment for the fiscal year ended June 30, 1996, was approximately $15,000.
The OTS also has extensive enforcement authority over all savings
institutions and their holding companies, including the Bank and the Holding
Company. 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. Except
under certain circumstances, public disclosure of final enforcement actions by
the OTS is required.
In addition, the investment, lending and branching authority of the
Bank is prescribed by federal laws, and regulations, and it is prohibited from
engaging in any activities not permitted by such laws and regulations. For
example, no savings institution may invest in non-investment grade corporate
debt securities. In addition, the permissible level of investment by federal
associations in loans secured by non-residential real property may not exceed
400% of total capital, except with approval of the OTS. Federal savings
associations are also generally authorized to branch nationwide. The Bank is in
compliance with the noted restrictions. Following the Bank Conversion, the
National Bank will be able to branch throughout the State of Missouri; however,
its interstate branching authority will be restricted. See "Regulation of
Holding Company following Bank Conversion--Interstate Banking and Branching."
OTS regulations limit a thrift institution's loans to one borrower to
the greater of $500,000 or 15% of unimpaired capital and surplus (except for
loans fully secured by certain readily marketable collateral, in which case this
limit is increased to 25% of unimpaired capital and surplus). At June 30, 1996,
the Bank's lending limit under this restriction was approximately $500,000.
Assuming the sale of the minimum number of shares in the Stock Conversion at
June 30, 1996, that limit would be increased to approximately $1.0 million. The
Bank is in compliance with the loans-to-one borrower limitation. These
percentage limitations will continue to apply to the National Bank following
completion of the Bank Conversion.
The OTS, as well as the other federal banking agencies, has adopted
guidelines establishing safety and soundness standards on such matters as loan
underwriting and documentation, internal controls and audit systems, interest
rate risk exposure and compensation and other employee benefits. Any
institution which fails to comply with these standards must submit a capital
compliance plan. A failure to submit a plan or to comply with an approved plan
will subject the institution to further enforcement action. The OTS and the
other federal banking agencies have also proposed additional guidelines on asset
quality and earnings standards. No assurance can be given as to whether or in
what form the proposed regulations will be adopted. The guidelines are not
expected to materially effect the Bank. Following the completion of the Bank
Conversion, the National Bank will be subject to substantially similar
guidelines adopted by the OCC.
Insurance of Accounts and Regulation by the FDIC
Investors Federal is a member of the SAIF, which is administered by
the FDIC. Deposits are insured up to applicable limits by the FDIC and such
insurance is backed by the full faith and credit of the U.S. Government. As
insurer, the FDIC imposes deposit insurance premiums and 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 risk to the FDIC.
The FDIC also has the authority to initiate enforcement actions against savings
and loan associations, after giving the OTS an opportunity to take such action,
and may terminate the deposit insurance if it determines that the institution
has engaged or is engaging in unsafe or unsound practices, or is in an unsafe or
unsound condition.
78
<PAGE>
The FDIC's deposit insurance premiums are assessed through a risk-
based system under which all insured depository institutions are placed into one
of nine categories and assessed insurance premiums, ranging from .23% to .31% of
deposits, based upon their level of capital and supervisory evaluation. Under
the system, institutions classified as well capitalized (i.e., a core capital
ratio of at least 5%, a ratio of core capital to risk-weighted assets of at
least 6% and a risk-based capital ratio of at least 10%) and considered healthy
would pay the lowest premium while institutions that are less than adequately
capitalized (i.e., a core capital or core capital to risk-based capital ratios
of less than 4% or a risk-based capital ratio of less than 8%) and considered of
substantial supervisory concern would pay the highest premium. Risk
classification of all insured institutions will be made by the FDIC for each
semi-annual assessment period.
The FDIC is authorized to increase assessment rates, on a semiannual
basis, if it determines that the reserve ratio of the SAIF will be less than the
designated reserve ratio of 1.25% of SAIF insured deposits. In setting these
increased assessments, the FDIC must seek to restore the reserve ratio to that
designated reserve level, or such higher reserve ratio as established by the
FDIC. The FDIC may also impose special assessments on SAIF members to repay
amounts borrowed from the United States Treasury or for any other reason deemed
necessary by the FDIC.
In September 1996, Congress enacted legislation to recapitalize the
SAIF by a one-time assessment on all SAIF-insured deposits held as of March 31,
1995. The assessment will be 65.7 basis points per $100 in deposits, payable on
November 30, 1996. For the Bank, the assessment is expected to be $226,000 (or
$145,000 when adjusted for taxes), based on the Bank's deposits on March 31,
1995 of $34.9 million. In addition, beginning January 1, 1997, pursuant to the
legislation, interest payments on bonds ("FICO Bonds") issued in the late 1980's
by the Financing Corporation to recapitalize the now defunct Federal Savings and
Loan Insurance Corporation will be paid jointly by BIF-insured institutions and
SAIF-insured institutions. The FICO assessment will be 1.29 basis points per
$100 in BIF deposits and 6.44 basis points per $100 in SAIF deposits. Beginning
January 1, 2000, the FICO interest payments will be paid pro-rata by banks and
thrifts based on deposits (approximately 2.4 basis points per $100 in deposits).
The BIF and SAIF will be merged on January 1, 1999, provided the bank and saving
association charters are merged by that date. In that event, pro-rata FICO
sharing will begin on January 1, 1999.
While the legislation has reduced the disparity between premiums paid
on BIF deposits and SAIF deposits, and has relieved the thrift industry of a
portion of the contingent liability represented by the FICO bonds, the premium
disparity between SAIF-insured institutions, such as the Bank, and BIF-insured
institutions will continue until at least January 1, 1999. Under the
legislation, the Bank anticipates that its ongoing annual SAIF premiums will be
approximately $23,000.
The National Bank will be insured by the SAIF following completion of
the Bank Conversion. To the extent it becomes available, the Bank may consider
paying an exit fee to the SAIF and an entrance fee to the BIF in order to
convert its insured deposits to the BIF. No prediction can be made at this time
as to whether this option, currently prohibited, may become available.
Regulatory Capital Requirements
Federal Savings Associations. Federally insured savings associations,
such as the Bank, are required to maintain a minimum level of regulatory
capital. The OTS has established capital standards, including a tangible
capital requirement, a leverage ratio (or core capital) requirement and a risk-
based capital requirement applicable to such savings and loan associations.
Generally, these capital requirements must be generally as stringent as the
comparable capital requirements for national banks. The OTS is also authorized
to impose capital requirements in excess of these standards on individual
associations on a case-by-case basis.
The capital regulations require tangible capital of at least 1.5% of
adjusted total assets (as defined by regulation). Tangible capital generally
includes common stockholders' equity and retained income, and certain
noncumulative perpetual preferred stock and related income. In addition, all
intangible assets, other than a limited amount of purchased mortgage servicing
rights, must be deducted from tangible capital for calculating compliance with
the requirement. Further, the valuation allowance applicable to the write-down
of investments and mortgage-backed securities in accordance with SFAS No. 115 is
excluded from the regulatory capital calculation. At June 30, 1996, the Bank
had no intangible assets and a realized loss, net of tax under SFAS No. 115 of
$71,000.
79
<PAGE>
The OTS regulations establish special capitalization requirements for
savings associations that own subsidiaries. In determining compliance with the
capital requirements, all subsidiaries engaged solely in activities permissible
for national banks or engaged in certain other activities solely as agent for
its customers are "includable" subsidiaries that are consolidated for capital
purposes in proportion to the Bank's level of ownership. For excludable
subsidiaries the debt and equity investments in such subsidiaries are deducted
from assets and capital. The Bank has one service corporation subsidiary, which
is an "includable" subsidiary.
At June 30, 1996, the Bank had tangible capital of $3.3 million, or
6.34% of adjusted total assets, which is approximately $2.5 million above the
minimum requirement of 1.5% of adjusted total assets in effect on that date. On
a pro forma basis, after giving effect to the sale of the minimum, midpoint and
maximum number of shares of Common Stock offered in the Stock Conversion and
investment of the net proceeds in assets not excluded for tangible capital
purposes, the Bank would have had tangible capital equal to 8.49%, 8.90% and
9.32%, respectively, of adjusted total assets at June 30, 1996, which is $3.8
million, $4.0 million and $4.3 million, respectively, above the requirement.
The capital standards also require core capital equal to at least 3%
of adjusted total assets (as defined by regulation). Core capital generally
consists of tangible capital plus certain intangible assets, including
supervisory goodwill (which is phased-out over a five-year period) and a limited
amount of purchased credit card relationships and purchased mortgage servicing
rights. As a result of the prompt corrective action provisions of the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") discussed
below, however, a savings association must maintain a core capital ratio of at
least 4% to be considered adequately capitalized unless its supervisory
condition is such to allow it to maintain a 3% ratio. At June 30, 1996, the Bank
had no intangibles that were subject to these tests.
At June 30, 1996, the Bank had core capital equal to $3.3 million, or
6.34% of adjusted total assets, which is $1.8 million above the minimum leverage
ratio requirement of 3% as in effect on that date. On a pro forma basis, after
giving effect to the sale of the minimum, midpoint and maximum number of shares
of Common Stock offered in the Stock Conversion and investment of the net
proceeds in assets not excluded from core capital, the Bank would have had core
capital equal to 8.49%, 8.90% and 9.32%, respectively, of adjusted total assets
at June 30, 1996, which is $3.0 million, $3.2 million and $3.5 million,
respectively, above the requirement.
The OTS risk-based requirement requires savings associations to have
total capital of at least 8% of risk-weighted assets. Total capital consists of
core capital, as defined above, and supplementary capital. Supplementary
capital consists of certain permanent and maturing capital instruments that do
not qualify as core capital and general valuation loan and lease loss allowances
up to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be
used to satisfy the risk-based requirement only to the extent of core capital.
At June 30, 1996, the Bank had $283,000 of general loan valuation allowances,
which was more than 1.25% of risk-weighted assets.
Certain exclusions from capital and assets are required to be made for
the purpose of calculating total capital. Such exclusions consist of equity
investments (as defined by regulation) and that portion of land loans and
nonresidential construction loans in excess of an 80% loan-to-value ratio (these
items are excluded on a sliding scale through March 31, 1995, after which they
must be excluded in their entirety) and reciprocal holdings of qualifying
capital instruments. Investors Federal had no such exclusions from capital and
assets at June 30, 1996.
In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet items, will be multiplied by a risk weight,
ranging from 0% to 100%, based on the risk inherent in the type of asset. For
example, the OTS has assigned a risk weight of 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 the loan amount in excess of such ratio is insured by an insurer approved
by the Federal National Mortgage Association ("FNMA") or FHLMC.
On June 30, 1996, the Bank had total capital of $3.3 million
(including approximately $3.3 million in core capital, $324,000 in qualifying
supplementary capital and not reduced by any exclusions from capital) and risk-
weighted assets of $20.8 million (with no converted off-balance sheet assets);
or total capital of 17.3% of risk-weighted assets. This amount was $1.9 million
above the 8% requirement in effect on that date. On a pro forma
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basis, after giving effect to the sale of the minimum, midpoint and maximum
number of shares of Common Stock offered in the Stock Conversion, the infusion
to the Bank of 50% of the net Stock Conversion proceeds and the investment of
those proceeds in 20% risk-weighted government securities, the Bank would have
had total capital of 23.06%, 24.18% and 25.32%, respectively, of risk-weighted
assets, which is above the current 8% requirement by $3.2 million, $3.4 million
and $3.7 million, respectively.
The OTS has adopted a final rule that requires every savings
association with more than normal interest rate risk exposure to deduct from its
total capital, for purposes of determining compliance with such requirement, an
amount equal to 50% of its interest-rate risk exposure multiplied by the present
value of its assets. This exposure is a measure of the potential decline in the
net portfolio value of a savings association, greater than 2% of the present
value of its assets, based upon a hypothetical 200 basis point increase or
decrease in interest rates (whichever results in a greater decline). Net
portfolio value is the present value of expected cash flows from assets,
liabilities and off-balance sheet contracts. The rule provides for a two quarter
lag between calculating interest rate risk and recognizing any deduction from
capital. The rule will not become effective until the OTS adopts the process by
which savings associations may appeal an interest rate risk deduction
determination. Any savings association with less than $300 million in assets and
a total risk-based capital ratio in excess of 12% is exempt from this
requirement unless the OTS determines otherwise. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Asset/Liability
Management" for information regarding the effect of this rule on the Bank.
Pursuant to FDICIA, the federal banking agencies, including the OTS,
have also proposed regulations authorizing the agencies to require a depository
institution to maintain additional total capital to account for concentration of
credit risk and the risk of non-traditional activities. No assurance can be
given as to the final form of any such regulation.
The OTS and the FDIC are authorized and, under certain circumstances
required, to take certain actions against savings associations that fail to meet
their capital requirements. Effective December 19, 1992, the federal banking
agencies, including the OTS, were given additional enforcement authority over
undercapitalized depository institutions. The OTS is generally required to take
action to restrict the activities of an "undercapitalized association"
(generally defined to be one with less than either a 4% core capital ratio, a 4%
Tier 1 risked-based capital ratio or an 8% risk-based capital ratio). Any such
association must submit a capital restoration plan and until such plan is
approved by the OTS may not increase its assets, acquire another institution,
establish a branch or engage in any new activities, and generally may not make
capital distributions. The OTS is authorized to impose the additional
restrictions that are applicable to significantly undercapitalized associations.
As a condition to the approval of the capital restoration plan, any
company controlling an undercapitalized association must agree that it will
enter into a limited capital maintenance guarantee with respect to the
institution's achievement of its capital requirements.
Any savings association that fails to comply with its capital plan or
is "significantly undercapitalized" (i.e., Tier 1 risk-based or core capital
ratios of less than 3% or a risk-based capital ratio of less than 6%) must be
made subject to one or more of additional specified actions and operating
restrictions, which may cover all aspects of its operations and include a forced
merger or acquisition of the Bank. An association that becomes "critically
undercapitalized" (i.e., a tangible capital ratio of 2% or less) is subject to
further mandatory restrictions on its activities in addition to those applicable
to significantly undercapitalized associations. In addition, the OTS must
appoint a receiver (or conservator with the concurrence of the FDIC) for a
savings association, with certain limited exceptions, within 90 days after it
becomes critically undercapitalized.
Any undercapitalized association is also subject to the general
enforcement activity of the OTS and the FDIC, including the appointment of a
receiver or conservator.
The OTS is also generally authorized to reclassify an association into
a lower capital category and impose restrictions applicable to such category if
the institution is engaged in unsafe or unsound practices or is in an unsafe or
unsound condition.
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The imposition by the OTS or the FDIC of any of these measures on
Investors Federal may have a substantial adverse effect on the Bank's operations
and profitability and the value of the Common Stock purchased in the Stock
Conversion. Holding Company shareholders do not have preemptive rights and,
therefore, if the Holding Company is directed by the OTS or the FDIC to issue
additional shares of Common Stock, such issuance may result in the dilution in
the percentage of ownership of the Holding Company of those persons purchasing
shares in the Conversion.
National Banks. Upon consummation of the Bank Conversion, the National
Bank will no longer be subject to OTS capital regulations, but will be subject
to the capital regulations of the OCC. The OCC's regulations establish two
capital standards for national banks: a leverage requirement and a risk-based
capital requirement. In addition, the OCC may, on a case-by-case basis,
establish individual minimum capital requirements for a national bank that vary
from the requirements which would otherwise apply under OCC regulations. A
national bank that fails to satisfy the capital requirements established under
the OCC's regulations will be subject to such administrative action or sanctions
as the OCC deems appropriate.
The leverage ratio adopted by the OCC requires a minimum ratio of
"Tier 1 capital" to adjusted total assets of 3% for national banks rated
composite 1 under the CAMEL rating system for banks. National banks not rated
composite 1 under the CAMEL rating system for banks are required to maintain a
minimum ratio of Tier 1 capital to adjusted total assets of 4% to 5%, depending
upon the level and nature of risks of their operations. For purposes of the
OCC's leverage requirement, Tier 1 capital generally consists of the same
components as core capital under the OTS's capital regulations, except that no
intangibles except certain PMSRs and PCCRs may be included in capital.
The risk-based capital requirements established by the OCC's
regulations require national banks to maintain "total capital" equal to at least
8% of total risk-weighted assets. For purposes of the risk-based capital
requirement, "total capital" means Tier 1 capital (as described above) plus
"Tier 2 capital" (as described below), provided that the amount of Tier 2
capital may not exceed the amount of Tier 1 capital, less certain assets. The
components of Tier 2 capital under the OCC's regulations generally correspond to
the components of supplementary capital under OTS regulations. Total risk-
weighted assets generally are determined under the OCC's regulations in the same
manner as under the OTS's regulations.
The OCC has revised its risk-based capital requirements to permit the
OCC to require higher levels of capital for an institution in light of its
interest rate risk. In addition, the OCC has proposed that a bank's interest
rate risk exposure would be quantified using either the measurement system set
forth in the proposal or the institution's internal model for measuring such
exposure, if such model is determined to be adequate by the institution's
examiner. Small institutions that are highly capitalized and have minimal
interest rate risk, such as the Bank, would be exempt from the rule unless
otherwise determined by the OCC. Management of the Bank has not determined what
effect, if any, the OCC's proposed interest rate risk component would have on
the National Bank's capital if adopted as proposed.
Bank Holding Companies. The Federal Reserve Board has established
capital requirements for bank holding companies with consolidated assets of $150
million or more that generally parallel the capital requirements for national
banks under the OCC's regulations. Since the Holding Company's consolidated
assets are expected to be less than $150 million, the Federal Reserve Board's
holding company capital requirements are not expected to apply to the Holding
Company.
Limitations on Dividends and Other Capital Distributions
Federal Savings Associations. OTS regulations impose various
restrictions or requirements on associations with respect to their ability to
pay dividends or make other distributions of capital. OTS regulations prohibit
an association from declaring or paying any dividends or from repurchasing any
of its stock if, as a result, the regulatory capital of the association would be
reduced below the amount required to be maintained for the liquidation account
established in connection with its mutual-to-stock conversion. See "The
Conversion - Effects of Conversion to Stock Form on Depositors and Borrowers of
the Bank" and "- Restrictions on Repurchase of Stock."
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The OTS utilizes a three-tiered approach to permit associations, based
on their capital level and supervisory condition, to make capital distributions
which include dividends, stock redemptions or repurchases, cash-out mergers and
other transactions charged to the capital account. See "- Regulatory Capital
Requirements."
Generally, Tier 1 associations, which are associations that before and
after the proposed distribution meet their fully phased-in capital requirements,
may make capital distributions during any calendar year equal to the greater of
100% of net income for the year-to-date plus 50% of the amount by which the
lesser of the association's tangible, core or risk-based capital exceeds its
fully phased-in capital requirement for such capital component, as measured at
the beginning of the calendar year, or the amount authorized for a Tier 2
association. However, a Tier 1 association deemed to be in need of more than
normal supervision by the OTS may be downgraded to a Tier 2 or Tier 3
association as a result of such a determination. The Bank meets the
requirements for a Tier 1 association and has not been notified of a need for
more than normal supervision. Tier 2 associations, which are associations that
before and after the proposed distribution meet their current minimum capital
requirements, may make capital distributions of up to 75% of net income over the
most recent four quarter period.
Tier 3 associations (which are associations that do not meet current
minimum capital requirements) that propose to make any capital distribution and
Tier 2 associations that propose to make a capital distribution in excess of the
noted safe harbor level must obtain OTS approval prior to making such
distribution. Tier 2 associations proposing to make a capital distribution
within the safe harbor provisions and Tier 1 associations proposing to make any
capital distribution need only submit written notice to the OTS 30 days prior to
such distribution. As a subsidiary of the Holding Company, the Bank will also
be required to give the OTS 30 days' notice prior to declaring any dividend on
its stock. The OTS may object to the distribution during that 30-day period
based on safety and soundness concerns. See "- Regulatory Capital
Requirements."
The OTS has proposed regulations that would revise the current capital
distribution restrictions. The proposal eliminates the current tiered structure
and the safe-harbor percentage limitations. Under the proposal a savings
association may make a capital distribution without notice to the OTS (unless it
is a subsidiary of a holding company) provided that it has a CAMEL 1 or 2
rating, is not in troubled condition and would remain adequately capitalized (as
defined by regulation) following the proposed distribution. Savings associations
that would remain adequately capitalized following the proposed distribution but
do not meet the other noted requirements must notify the OTS 30 days prior to
declaring a capital distribution. The OTS stated it will generally regard as
permissible that amount of capital distributions that do not exceed 50% of the
institution's excess regulatory capital plus net income to date during the
calendar year. A savings association may not make a capital distribution
without prior approval of the OTS and the FDIC if it is undercapitalized before,
or as a result of, such a distribution. A savings association will be
considered in troubled condition if it has a CAMEL rating of 4 or 5, is subject
to an enforcement action relating to its safety and soundness or financial
viability or has been informed in writing by the OTS that it is in troubled
condition. As under the current rule, the OTS may object to a capital
distribution if it would constitute an unsafe or unsound practice. No assurance
may be given as to whether or in what form the regulations may be adopted.
National Banks. Following the Bank Conversion, the National Bank's
ability to pay dividends will not be subject to the limitations in the OTS
regulations but will instead be governed by the National Bank Act and OCC
regulations. Under such statute and regulations, all dividends by a national
bank must be paid out of current or retained net profits, after deducting
reserves for losses and bad debts. The National Bank Act further restricts the
payment of dividends out of net profits by prohibiting a national bank from
declaring a dividend on its shares of common stock until the surplus fund equals
the amount of capital stock or, if the surplus fund does not equal the amount of
capital stock, until one-tenth of the Bank's net profits for the preceding half
year in the case of quarterly or semi-annual dividends, or the preceding two
half-year periods in the case of annual dividends, are transferred to the
surplus fund. In addition, the prior approval of the OCC is required for the
payment of a dividend if the total of all dividends declared by a national bank
in any calendar year would exceed the total of its net profits for the year
combined with its net profits for the two preceding years, less any required
transfers to surplus or a fund for the retirement of any preferred stock.
The OCC has the authority to prohibit the payment of dividends by a
national bank when it determines such payment to be an unsafe and unsound
banking practice. In addition, the National Bank would be prohibited by
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federal statute and the OCC's prompt corrective action regulations from making
any capital distribution if, after giving effect to the distribution, the
National Bank would be classified as "undercapitalized" under the OCC's
regulations. See "--Prompt Corrective Action." Finally, the National Bank, like
the Converted Bank, would not be able to pay dividends on its capital stock if
its capital would thereby be reduced below the remaining balance of the
liquidation account established in connection with the Stock Conversion.
Liquidity
All savings associations, including the Bank, 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. For a discussion of what the Bank
includes in liquid assets, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources." This liquid asset ratio requirement may vary from time to time
(between 4% and 10%) depending upon economic conditions and savings flows of all
savings associations. At the present time, the minimum liquid asset ratio is
5%.
In addition, short-term liquid assets (e.g., cash, certain time
deposits, certain bankers acceptances and short-term U.S. Treasury obligations)
currently must constitute at least 1% of the Bank's average daily balance of net
withdrawable deposit accounts and current borrowings. Penalties may be imposed
upon associations for violations of either liquid assets ratio requirement. At
June 30, 1996, the Bank was in compliance with both requirements, with a liquid
assets ratio of 10.5% and a short-term liquid assets ratio of 4.3%.
National banks are not subject to any prescribed liquidity requirements.
Accounting
An OTS policy statement applicable to all savings associations clarifies
and re-emphasizes that the investment activities of a savings association must
be in compliance with approved and documented investment policies and
strategies, and must be accounted for in accordance with generally accepted
accounting principles. Under the policy statement, management must support its
classification of and accounting for loans and securities (i.e., whether held
for investment, sale or trading) with appropriate documentation.
The OTS has adopted an amendment to its accounting regulations, which
may be made more stringent than generally accepted accounting principles by the
OTS, to require that transactions be reported in a manner that best reflects
their underlying economic substance and inherent risk and that financial reports
must incorporate any other accounting regulations or orders prescribed by the
OTS. The Bank is in compliance with these amended rules.
The National Bank will be subject to similar requirements following
completion of the Bank Conversion.
Qualified Thrift Lender Test
All savings associations, including the Bank, are required to meet a
qualified thrift lender ("QTL") test to avoid certain restrictions on their
operations. This test requires a savings association to have at least 65% of
its portfolio assets (as defined by regulation) in qualified thrift investments
on a monthly average for nine out of every 12 months on a rolling basis. Such
assets primarily consist of residential housing related loans and investments.
At June 30, 1996, the Bank met the test and has always met the test since its
effectiveness.
Any savings association that fails to meet the QTL test must convert to
a national bank charter, unless it requalifies as a QTL and thereafter remains a
QTL. If an association does not requalify and converts to a national bank
charter, it must remain SAIF-insured until the FDIC permits it to transfer to
the BIF. If such an association has not yet requalified or converted to a
national bank, its new investments and activities are limited to those
permissible for both a savings association and a national bank, and it is
limited to national bank branching rights in its home state. In addition, the
savings association is immediately ineligible to receive any new FHLB borrowings
and is subject to national bank limits for payment of dividends. If such
association has not requalified or converted to a national bank within three
years after the failure, it must divest of all investments and cease all
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activities not permissible for a national bank. In addition, it must repay
promptly any outstanding FHLB borrowings, which may result in prepayment
penalties. If any association that fails the QTL test is controlled by a
holding company, then within one year after the failure, the holding company
must register as a bank holding company and become subject to all restrictions
on bank holding companies. See "- Holding Company Regulation."
The QTL requirements and the penalties imposed for the failure to comply
will not be applicable to the National Bank.
Community Reinvestment Act
Under the Community Reinvestment Act ("CRA"), every FDIC insured
institution, including the Bank and the National Bank, has a continuing and
affirmative obligation consistent with safe and sound banking practices to help
meet the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires the OTS, in connection with the examination of the Bank, to assess the
institution's record of meeting the credit needs of its community and to take
such record into account in its evaluation of certain applications, such as a
merger or the establishment of a branch, by the Bank. An unsatisfactory rating
may be used as the basis for the denial of an application by the OTS.
The federal banking agencies, including the OTS, have recently revised
the CRA regulations and the methodology for determining an institution's
compliance with the CRA. Due to the heightened attention being given to the CRA
in the past few years, the Bank may be required to devote additional funds for
investment and lending in its local community. The Bank was examined for CRA
compliance in 1996 and received a rating of "satisfactory record of meeting
community credit needs." Following completion of the Bank Conversion, the
National Bank's compliance with the CRA will be enforced by the OCC.
Transactions with Affiliates
Generally, transactions between a savings association or its
subsidiaries and its affiliates are required to be on terms as favorable to the
association as transactions with non-affiliates. In addition, certain of these
transactions, such as loans to an affiliate, are restricted to a percentage of
the association's capital. Affiliates of the Bank include the Holding Company
and any company which is under common control with the Bank. In addition, a
savings association may not lend to any affiliate engaged in activities not
permissible for a bank holding company or acquire the securities of most
affiliates.
Certain transactions with directors, officers or controlling persons are
also subject to conflict of interest regulations enforced by the OTS. These
conflict of interest regulations and other statutes also impose restrictions on
loans to such persons and their related interests. Among other things, such
loans must be made on terms substantially the same as for loans to unaffiliated
individuals. Following completion of the Bank Conversion, the National Bank will
be subject to substantially identical rules on transactions with affiliates and
loans to directors, officers or controlling persons.
Holding Company Regulation
The Holding Company will be a unitary savings and loan holding company
subject to regulatory oversight by the OTS. As such, the Holding Company is
required to register and file reports with the OTS and is subject to regulation
and examination by the OTS. In addition, the OTS has enforcement authority over
the Holding Company and its non-savings association subsidiaries which also
permits the OTS to restrict or prohibit activities that are determined to be a
serious risk to the subsidiary savings association.
As a unitary savings and loan holding company, the Holding Company
generally is not subject to activity restrictions. If the Holding Company
acquires control of another savings association as a separate subsidiary, it
would become a multiple savings holding company, and the activities of the
Holding Company and any of its subsidiaries (other than the Bank or any other
SAIF-insured savings and loan association) would become subject to
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such restrictions unless such other associations each qualify as a QTL and were
acquired in a supervisory acquisition.
If the Bank fails the QTL test, the Holding Company must obtain the
approval of the OTS prior to continuing after such failure, directly or through
its other subsidiaries, any business activity other than those approved for
multiple savings and loan holding companies or their subsidiaries. In addition,
within one year of such failure the Holding Company must register as, and will
become subject to, the restrictions applicable to bank holding companies. The
activities authorized for a bank holding company are more limited than are the
activities authorized for a unitary or multiple savings and loan holding
company. See "- Qualified Thrift Lender Test."
The Holding Company must obtain approval from the OTS before acquiring
control of any other SAIF-insured association. Such acquisitions are generally
prohibited if they result in a multiple savings and loan holding company
controlling savings and loan associations in more than one state. However, such
interstate acquisitions are permitted based on specific state authorization or
in a supervisory acquisition of a failing savings and loan association.
Regulation of the Holding Company Following the Bank Conversion
General. Upon consummation of the Bank Conversion, the Holding Company,
as the sole shareholder of the National Bank, will become a bank holding company
and will register as such with the FRB and deregister with the OTS as a savings
and loan holding company. Bank holding companies are subject to comprehensive
regulation by the FRB under the BHCA, and the regulations of the FRB. As a bank
holding company, the Holding Company will be required to file reports with the
FRB and such additional information as the FRB may require, and will be subject
to regular examinations by the FRB. The FRB also has extensive enforcement
authority over bank holding companies, including, among other things, the
ability to assess civil money penalties, to issue cease and desist or removal
orders and to require that a holding company divest subsidiaries (including its
bank subsidiaries). In general, enforcement actions may be initiated for
violations of law and regulations and unsafe or unsound practices.
Under FRB policy, a bank holding company must serve as a source of
strength for its subsidiary banks. Under this policy the FRB may require, and
has required in the past, a holding company to contribute additional capital to
an undercapitalized subsidiary bank.
Under the BHCA, a bank holding company must obtain FRB approval before:
(i) acquiring, directly or indirectly, ownership or control of any voting shares
of another bank or bank holding company if, after such acquisition, it would own
or control more than 5% of such shares (unless it already owns or controls the
majority of such shares); (ii) acquiring all or substantially all of the assets
of another bank or bank holding company; or (iii) merging or consolidating with
another bank holding company.
The BHCA also prohibits a bank holding company, with certain exceptions,
from acquiring direct or indirect ownership or control of more than 5% of the
voting shares of any company which is not a bank or bank holding company, or
from engaging directly or indirectly in activities other than those of banking,
managing or controlling banks, or providing services for its subsidiaries. The
principal exceptions to these prohibitions involve certain non-bank activities
which, by statute or by FRB regulation or order, have been identified as
activities closely related to the business of banking or managing or controlling
banks. The list of activities permitted by the FRB includes, among other things,
operating a savings institution, mortgage company, finance company, credit card
company or factoring company; performing certain data processing operations;
providing certain investment and financial advice; underwriting and acting as an
insurance agent for certain types of credit-related insurance; leasing property
on a full-payout, non-operating basis; selling money orders, travelers' checks
and United States Savings Bonds; real estate and personal property appraising;
providing tax planning and preparation services; and, subject to certain
limitations, providing securities brokerage services for customers. The Holding
Company has no present plans to engage in any of these activities.
Interstate Banking and Branching. On September 29, 1994, the Riegle-Neal
Interstate Banking and Branching Act of 1994 (the "Act") was enacted to ease
restrictions on interstate banking. The Act allows the FRB to approve an
application of an adequately capitalized and adequately managed bank holding
company to acquire
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control of, or acquire all or substantially all of the assets of, a bank located
in a state other than such holding company's home state, without regard to
whether the transaction is prohibited by the laws of any state. The FRB may not
approve the acquisition of the bank that has not been in existence for the
minimum time period (not exceeding five years) specified by the statutory law of
the host state. The Act also prohibits the FRB from approving an application if
the applicant (and its depository institution affiliates) controls or would
control more than 10% of the insured deposits in the United States or 30% or
more of the deposits in the target bank's home state or in any state in which
the target bank maintains a branch. The Act does not affect the authority of
states to limit the percentage of total insured deposits in the state which may
be held or controlled by a bank or bank holding company to the extent such
limitation does not discriminate against out-of-state banks or bank holding
companies. Individual states may also waive the 30% state-wide concentration
limit contained in the Act.
Additionally, beginning on June 1, 1997, the federal banking agencies
will be authorized to approve interstate merger transactions without regard to
whether such transaction is prohibited by the law of any state, unless the home
state of one of the banks opts out of the Act by adopting a law after the date
of enactment of the Act and prior to June 1, 1997 which applies equally to all
out-of-state banks and expressly prohibits merger transactions involving out-of-
state banks. Interstate acquisitions of branches will be permitted only if the
law of the state in which the branch is located permits such acquisitions.
Interstate mergers and branch acquisitions will also be subject to the
nationwide and statewide insured deposit concentration amounts described above.
The Act authorizes the OCC and FDIC to approve interstate branching de
novo by national and state banks, respectively, only in states which
specifically allow for such branching. The Act also requires the appropriate
federal banking agencies to prescribe regulations by June 1, 1997 which prohibit
any out-of-state bank from using the interstate branching authority primarily
for the purpose of deposit production. These regulations must include guidelines
to ensure that interstate branches operated by an out-of-state bank in a host
state are reasonably helping to meet the credit needs of the communities which
they serve.
Dividends. The FRB has issued a policy statement on the payment of cash
dividends by bank holding companies, which expresses the FRB's view that a bank
holding company should pay cash dividends only to the extent that the holding
company's net income for the past year is sufficient to cover both the cash
dividends and a rate of earning retention that is consistent with the holding
company's capital needs, asset quality and overall financial condition. The FRB
also indicated that it would be inappropriate for a company experiencing serious
financial problems to borrow funds to pay dividends. Furthermore, under the
prompt corrective action regulations adopted by the FRB, the FRB may prohibit a
bank holding company from paying any dividends if the holding company's bank
subsidiary is classified as "undercapitalized". See "--Regulatory Capital
Requirements--Prompt Corrective Action."
Bank holding companies are required to give the FRB prior written notice
of any purchase or redemption of its outstanding equity securities if the gross
consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, is equal to 10% or more of their consolidated net worth. The FRB may
disapprove such a purchase or redemption if it determines that the proposal
would constitute an unsafe or unsound practice or would violate any law,
regulation, FRB order, or any condition imposed by, or written agreement with,
the FRB. This notification requirement does not apply to any company that meets
the well-capitalized standard for commercial banks, has a safety and soundness
examination rating of at least a "2" and is not subject to any unresolved
supervisory issues.
Capital Requirements. The FRB has established capital requirements for
bank holding companies that generally parallel the capital requirements for
national banks. For bank holding companies with consolidated assets of less than
$150 million, such as the Holding Company, compliance is measured on a bank-only
basis. See "--Regulatory Capital Requirements--National Banks." The Holding
Company's capital following the Conversion will exceed such requirements and be
at the same levels as that of the National Bank.
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Federal Securities Law
The stock of the Holding Company will be registered with the Securities
and Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Holding Company will be subject to the
information, proxy solicitation, insider trading restrictions and other
requirements of the SEC under the Exchange Act.
Holding Company stock held by persons who are affiliates (generally
officers, directors and principal stockholders) of the Holding Company may not
be resold without registration or unless sold in accordance with certain resale
restrictions. If the Holding Company meets specified current public information
requirements, each affiliate of the Holding Company is able to sell in the
public market, without registration, a limited number of shares in any three-
month period.
Federal Reserve System
The Federal Reserve Board requires all depository institutions to
maintain noninterest-bearing reserves at specified levels against their
transaction accounts (primarily checking, NOW and Super NOW checking accounts).
At June 30, 1996, the Bank was in compliance with these reserve requirements.
The balances maintained to meet the reserve requirements imposed by the Federal
Reserve Board may be used to satisfy liquidity requirements that may be imposed
by the OTS. See "- Liquidity."
Savings associations are authorized to borrow from the Federal Reserve
Bank "discount window," but Federal Reserve Board regulations require
associations to exhaust other reasonable alternative sources of funds, including
FHLB borrowings, before borrowing from the Federal Reserve Bank.
As a national bank, the National Bank will be required to become a
member of the Federal Reserve System and subscribe for stock in the FRB of
Kansas City in an amount equal to 3% of the National Bank's paid in capital and
surplus (an additional 3% will be subject to call by the FRB of Kansas City).
The National Bank will continue to be subject to the reserve requirements to
which the Bank is presently subject under FRB regulations.
Federal Home Loan Bank System
The Bank is a member of the FHLB of Des Moines, which is one of 12
regional FHLBs, that administers the home financing credit function of savings
associations. 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. These policies and procedures are
subject to the regulation and oversight of the Federal Housing Finance Board.
All advances from the FHLB are required to be fully secured by sufficient
collateral as determined by the FHLB. In addition, all long-term advances are
required to provide funds for residential home financing.
As a member, the Bank is required to purchase and maintain stock in the
FHLB of Des Moines. At June 30, 1996, the Bank had $724,000 (at cost) of FHLB
stock, which was in compliance with this requirement. In past years, the Bank
has received substantial dividends on its FHLB stock. Over the past five fiscal
years such dividends have averaged 7.99% and were 6.91% for fiscal 1996. For
the fiscal year ended June 30, 1996, dividends paid by the FHLB of Des Moines to
the Bank totaled approximately $39,000, which constitutes a $12,000 increase
over the amount of dividends received in fiscal year 1995. No assurance can be
given that such dividends will continue in the future at such levels. The Bank
currently intends to remain a member of the FHLB of Des Moines following
completion of the Bank Conversion.
Under federal law, the FHLBs are required to provide funds for the
resolution of troubled savings associations and to contribute to low- and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing
projects. These contributions have affected adversely the level of FHLB
dividends paid and could continue to do so in the future.
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These contributions could also have an adverse effect on the value of FHLB stock
in the future. A reduction in value of the Bank's FHLB stock may result in a
corresponding reduction in the Bank's capital.
Federal and State Taxation
Federal Taxation. Savings associations such as the Bank that meet
certain definitional tests relating to the composition of assets and other
conditions prescribed by the Internal Revenue Code (the "Code") are permitted to
establish reserves for bad debts and to make annual additions thereto which may,
within specified formula limits, be taken as a deduction in computing taxable
income for federal income tax purposes. The amount of the bad debt reserve
deduction for "non-qualifying loans" is computed under the experience method.
For tax years beginning before December 31, 1995, the amount of the bad debt
reserve deduction for "qualifying real property loans" (generally loans secured
by improved real estate) may be computed under either the experience method or
the percentage of taxable income method (based on an annual election). If a
saving association elected the latter method, it could claim, each year, a
deduction based on a percentage of taxable income, without regard to actual bad
debt experience.
Under the experience method, the bad debt reserve deduction is an amount
determined under a formula based generally upon the bad debts actually sustained
by the savings and loan association over a period of years.
Under recently enacted legislation, the percentage of taxable income
method has been repealed for years beginning after December 31, 1995, and
"large" associations, i.e., the quarterly average of the association's total
assets or of the consolidated group of which it is a member, exceeds $500
million for the year, may no longer be entitled to use the experience method of
computing additions to their bad debt reserve. A "large" association must use
the direct write-off method for deducting bad debts, under which charge-offs are
deducted and recoveries are taken into taxable income as incurred. If the Bank
is not a "large" association, the Bank will continue to be permitted to use the
experience method. The Bank will be required to recapture (i.e., take into
income) over a six-year period its applicable excess reserves, i.e, the balance
of its reserves for losses on qualifying loans and nonqualifying loans, as of
the close of the last tax year beginning before January 1, 1996, over the
greater of (a) the balance of such reserves as of December 31, 1987 (pre-1988
reserves) or (b) in the case of a bank which is not a "large" association, an
amount that would have been the balance of such reserves as of the close of the
last tax year beginning before January 1, 1996, had the bank always computed the
additions to its reserves using the experience method. Postponement of the
recapture is possible for a two-year period if an association meets a minimum
level of mortgage lending for 1996 and 1997. As of June 30, 1996, the Bank's
bad debt reserve subject to recapture over a six-year period totaled
approximately $127,000.
If an association ceases to qualify as a "bank" (as defined in Code
Section 581) or converts to a credit union, the pre-1988 reserves and the
supplemental reserve are restored to income ratably over a six-year period,
beginning in the tax year the association no longer qualifies as a bank. The
balance of the pre-1988 reserves are also subject to recapture in the case of
certain excess distributions to (including distributions on liquidation and
dissolution), or redemptions of, shareholders.
In addition to the regular federal income tax, corporations, including
savings and loan associations such as the Bank, generally are subject to a
minimum tax. An alternative minimum tax is imposed at a minimum tax rate of 20%
on alternative minimum taxable income, which is the sum of a corporation's
regular taxable income (with certain adjustments) and tax preference items, less
any available exemption. The alternative minimum tax is imposed to the extent
it exceeds the corporation's regular income tax and net operating losses can
offset no more than 90% of alternative minimum taxable income. For taxable
years beginning after 1986 and before 1996, corporations, including savings and
loan associations such as the Bank, are also subject to an environmental tax
equal to 0.12% of the excess of alternative minimum taxable income for the
taxable year (determined without regard to net operating losses and the
deduction for the environmental tax) over $2 million.
The Bank and its subsidiary file consolidated federal income tax returns
on a calendar year basis using the accrual method of accounting. The Holding
Company intends to file consolidated federal income tax returns with the Bank.
Savings and loan associations, such as the Bank, that file federal income tax
returns as part of a consolidated group are required by applicable Treasury
regulations to reduce their taxable income for purposes of
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computing the percentage bad debt deduction for losses attributable to
activities of the non-savings and loan association members of the consolidated
group that are functionally related to the activities of the savings association
member.
The Bank has not been audited by the IRS recently with respect to
federal income tax returns. In the opinion of management, any examination of
still open returns would not result in a deficiency which could have a material
adverse effect on the financial condition of the Bank.
State Taxation. Missouri-based thrift institutions, such as the Bank,
are subject to a special financial institutions tax, based on net income without
regard to net operating loss carryforwards, at the rate of 7% of net income.
This tax is in lieu of certain other state taxes on thrift institutions, on
their property, capital or income, except taxes on tangible personal property
owned by the Bank and held for lease or rental to others and on real estate,
contributions paid pursuant to the Unemployment Compensation Law of Missouri,
social security taxes, sales taxes and use taxes. In addition, the Bank is
entitled to credit against this tax all taxes paid to the State of Missouri or
any political subdivision, except taxes on tangible personal property owned by
the Bank and held for lease or rental to others and on real estate,
contributions paid pursuant to the Unemployment Compensation Law of Missouri,
social security taxes, sales and use taxes, and taxes imposed by the Missouri
Financial Institutions Tax Law. Missouri thrift institutions are not subject to
the regular corporate income tax.
Delaware Taxation. As a Delaware holding company, the Holding Company
is exempted from Delaware corporate income tax but is required to file an annual
report with and pay an annual fee to the State of Delaware. The Holding Company
is also subject to an annual franchise tax imposed by the State of Delaware.
MANAGEMENT
Directors and Executive Officers of the Holding Company
The Board of Directors of the Holding Company currently consists of six
members, each of whom is also a director of the Bank. See "--Directors of the
Bank." Each Director of the Holding Company has served as such since the
Holding Company's incorporation in October 1996. Directors of the Holding
Company will serve three-year staggered terms so that approximately one-third of
the directors will be elected at each annual meeting of stockholders. The terms
of the current directors of the Holding Company are the same as their terms as
directors of the Bank. The Holding Company does not intend initially to pay
directors fees for their service on the Board of Directors of the Holding
Company. See "-Directors of the Bank."
The executive officers of the Holding Company, each of whom held his
present position since October 1996, are elected annually and hold office until
his respective successor has been elected and qualified or until death,
resignation or removal by the Board of Directors. The executive officers of
the Holding Company are set forth below.
Name Age Title
-------------------- --- -------------------------------------------
Earle S. Teegarden, Jr. 60 President, Chief Executive Officer and
Chief Financial Officer
Larry R. Johnson 48 Senior Vice President and Secretary
It is not anticipated that the executive officers of the Holding Company
will receive any remuneration in their capacity as Holding Company executive
officers. For information regarding compensation of directors and executive
officers of the Bank, see "- Meetings of the Board of Directors and Committees
of the Bank," "-Compensation of the Board of Directors of the Bank" and
"-Executive Compensation."
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Committees of the Holding Company
The Holding Company formed standing Audit, Nominating and Compensation
Committees in connection with its organization in October 1996. The Holding
Company was not incorporated in fiscal 1995 and therefore the committees did not
meet during that fiscal year.
The Audit Committee will review audit reports and related matters to
ensure effective compliance with regulations and internal policies and
procedures. This committee also will act on the recommendation by management of
an accounting firm to perform the Holding Company's annual audit and acts as a
liaison between the auditors and the Board. The current members of this
committee are Directors _____, _____ and _____.
The Nominating Committee will meet annually in order to nominate
candidates for membership on the Board of Directors. This committee is
comprised of the Board members who are not up for election.
The Compensation Committee will establish the Holding Company's
compensation policies and review compensation matters. The current members of
this Committee are Directors _____, _____ and _____.
Indemnification
The Certificate of Incorporation of the Holding Company provides that a
director or officer of the Holding Company shall be indemnified by the Holding
Company to the fullest extent authorized by the Delaware General Corporation Law
("DGCL") against all expenses, liability and loss reasonably incurred or
suffered by such person in connection with his activities as a director or
officer or as a director or officer of another company, if the director or
officer held such position at the request of the Holding Company. Delaware law
requires that such director, officer, employee or agent, in order to be
indemnified, must have acted in good faith and in a manner reasonably believed
to be not opposed to the best interests of the Holding Company and, with respect
to any criminal action or proceeding, either had reasonable cause to believe
such conduct was lawful or did not have reasonable cause to believe his conduct
was unlawful.
The Certificate of Incorporation and Delaware law also provide that the
indemnification provisions of such Certificate and the statute are not exclusive
of any other right which a person seeking indemnification may have or later
acquire under any statute, provision of the Certificate of Incorporation, Bylaws
of the Holding Company, agreement, vote of stockholders or disinterested
directors or otherwise.
These provisions may have the effect of deterring shareholder derivative
actions, since the Holding Company may ultimately be responsible for expenses
for both parties to the action. A similar effect would not be expected for
third-party claims.
In addition, the Certificate of Incorporation and Delaware law also
provide that the Holding Company may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Holding
Company or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the Holding
Company has the power to indemnify such person against such expense, liability
or loss under the DGCL. The Holding Company intends to obtain such insurance.
Directors of the Bank
Prior to the Stock Conversion, the direction and control of the Bank, as a
mutual savings institution, has been vested in its Board of Directors. Upon
conversion of the Bank to stock form, each of the directors of the Bank will
continue to serve as a director of the converted Bank. The Board of Directors
of the Bank currently consists of six directors. The directors are divided into
three classes. Approximately one-third of the directors will be elected at each
annual meeting of stockholders. Because the Holding Company will own all of the
issued and outstanding shares of capital stock of the converted Bank after the
Stock Conversion, (or the National Bank after the Bank Conversion), directors of
the Holding Company will elect the directors of the Bank.
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The following table sets forth certain information regarding the directors
of the Bank and the Holding Company:
<TABLE>
<CAPTION>
Position(s) Held with Director Term
Name the Bank Age/(1)/ Since Expires
- ---- ------------------------------ -------- ----- -------
<S> <C> <C> <C> <C>
Robert T. Fairweather Chairman of the Board 72 1966 1999
Earle S. Teegarden, Jr. President, Chief Executive
Officer and Director 60 1964 1997
Larry R. Johnson Senior Vice President,
Secretary and Director 48 1989 1998
Edward P. Milbank Vice Chairman of the Board 57 1974 1999
J. Michael Palmer Director 46 1996 1998
Armand J. Peterson Director 59 1978 1997
</TABLE>
_________________
/(1)/ At June 30, 1996.
The business experience of each director is set forth below. All
directors have held their present position for at least the past five years,
except as otherwise indicated.
Robert T. Fairweather. Mr. Fairweather is retired. Until his
retirement, Mr. Fairweather was an owner/operator of a retail hardware store
in Chillicothe. Prior to that, he served as the Chief Executive Officer of a
credit union.
Earle S. Teegarden, Jr. Mr. Teegarden has been employed by the Bank
since February 1964. As President and Chief Executive Officer, Mr. Teegarden
oversees the day-to-day operations of the Bank. He is also responsible for
investments and overseeing the Bank's asset/liability management program.
Larry R. Johnson. Mr. Johnson has been employed by the Bank since
December 1974. He is responsible for all lending operations for the Bank and
also serves as personnel officer for the Bank.
Edward P. Milbank. Mr. Milbank is Vice Chairman of the Board of the
Bank. Mr. Milbank is the President and CEO of Milbank Mills, Inc., a feed
manufacturing company.
J. Michael Palmer. Mr. Palmer is currently a private investor. Until
December 1995, he was Chairman of the Board and Treasurer of Midwest Quality
Gloves, Inc., in Chillicothe. Mr. Palmer was appointed to the Board of
Directors in January 1996.
Armand J. Peterson. Mr. Peterson is President and Treasurer of
Chillicothe Iron and Steel, Inc., a steel fabricating company.
There are no executive officers of the Bank that are not also
directors of the Bank.
Meetings of the Board of Directors and Committees of the Bank
The Board of Directors met 15 times during the year ended June 30,
1996. During fiscal 1996, no director of the Bank attended fewer than 75% of
the aggregate of the total number of Board meetings and the total number of
meetings held by the committees of the Board of Directors on which he served.
The Board of Directors of the Bank utilizes various committees. The
Bank has two standing committees, the Loan Committee and the Compliance
Committee. The Bank's Compensation Committee and Audit Committee are composed of
the full Board of Directors. The Compensation Committee met once during the year
ended June 30, 1996.
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The Loan Committee meets monthly (or more often as necessary) to
review loans originated or purchased by the Bank and also to approve loans not
authorized to be made by officers of the Bank. The Loan Committee consists of
Messrs. Teegarden, Johnson and two outside directors of the Bank. The Loan
Committee met 17 times during the year ended June 30, 1996.
The Bank's Compliance Committee meets quarterly for the purpose of
ensuring that the Bank is in compliance with all laws, rules, regulations and
Board policy. The Committee is composed of Messrs. Fairweather (as Chairman) and
Palmer. The Compliance Committee met four times during the year ended June 30,
1996.
The Bank's Compensation Committee, composed of the entire Board of
Directors, meets annually to review the compensation bonuses and profit sharing
for employees of the Bank. This committee met once during the year ended June
30, 1996.
The Audit Committee reviews (i) the independent auditors' reports and
results of their examination, (ii) the internal audit function, which is under
the control of and reports directly to the Audit Committee, and (iii) the
examination reports of the OTS and the FDIC and other regulatory reports. The
Audit Committee met once during the year ended June 30, 1996.
Compensation of the Board of Directors of the Bank
During fiscal 1996, all directors received a fee of $425 per month
from July to December 1995, and a fee of $450 per month from January to June
1996. In addition, during fiscal 1996, outside directors of the Bank serving on
the Loan Committee received a $15 fee for each meeting attended. In addition,
each outside member serving on the Compliance Committee received a fee of $60
for each meeting attended, and the Chairman of the Committee received a fee of
$85 for each meeting attended. The aggregate Board and Committee fees paid by
the Bank during fiscal 1996 was approximately $44,000.
In order to encourage directors to remain associated with the Bank's
Board of Directors, in January 1995 the Bank adopted a director emeritus program
in which the Board of Directors, in its discretion, may elect any retiring
director as a Director Emeritus, provided the retiring director has served as a
director until reaching mandatory retirement age (or until being forced to
retire due to medical considerations) and such director has served as a director
of the Bank for at least 10 years. Directors Emeritus of the Bank shall be
compensated for their services at a rate of 50% of full director fees for the
first 10 years following election and at a rate of 25% of full director fees for
the second 10 years following election. Thereafter, no fees shall be payable
except that, upon request from the then current Board of Directors, a Director
Emeritus may be invited to attend a Board meeting and as such shall qualify to
receive full Board fees for that meeting.
Following completion of the Stock Conversion, and subject to the
approval of the Holding Company's stockholders, each director of the Bank who is
not a full-time employee (4 persons) is expected to be granted an option to
purchase shares of Common Stock under the Stock Option Plan and an award of
restricted stock under the RRP. See "Benefit Plans - Stock Option and Incentive
Plan" and "Benefit Plans--Recognition and Retention Plan."
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Executive Compensation
The following table sets forth information concerning the compensation
paid or granted to the Bank's President and Chief Executive Officer. No other
executive officer of the Bank had aggregate compensation (salary plus bonus) in
excess of $100,000 in fiscal 1996.
<TABLE>
<CAPTION>
===============================================================================================================
Summary Compensation Table
- ---------------------------------------------------------------------------------------------------------------
Long-Term
Compensation
Annual Compensation/(1)/ Awards
- ---------------------------------------------------------------------------------------------------------------
Other Restricted
Annual Stock Options/ All Other
Name and Principal Fiscal Compensation Award SARs Compensation
Position Year/(1)/ Salary($) Bonus($) ($) ($) (#) ($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earle S. Teegarden, Jr., 1996 $69,450 $16,423 $ --- ---/(2)/ ---/(2)/ $12,293
President and Chief
Executive Officer
===============================================================================================================
- --------------------------
</TABLE>
/(1)/ In accordance with the rules on executive officer and director
compensation disclosure adopted by the SEC, Summary Compensation
information is excluded for the fiscal years ended June 30, 1994 and
1995, as the Bank was not a public company during such periods.
/(2)/ Following the Stock Conversion, it is expected that Mr. Teegarden
will be granted an option to purchase shares of common stock under
the Stock Option Plan, and an award of restricted stock under the
RRP. See "--Benefits Plans--Stock Option and Incentive Plan" and "--
Benefit Plans--Recognition and Retention Plan."
/(3)/ Includes Board fees of $6,600, a profit-sharing contribution of
$4,381 and earned insurance commissions of $1,312.
Employment Agreements
The Bank has determined to enter into an employment agreement effective
upon consummation of the Stock Conversion, with Earle S. Teegarden, Jr.,
President and Chief Executive Officer, providing for a term of three years. The
contract provides for payment to the employee for the remaining term of the
contract unless the employee is terminated "for cause."
The employment agreement for Mr. Teegarden provides for an annual base
salary as determined by the Board of Directors, but not less than the employee's
current salary. Mr. Teegarden's base salary (exclusive of director fees and
bonuses) will be $70,500, assuming the employment contract is entered into in
fiscal 1997. So long as the contract remains in force, salary increases will be
reviewed not less often than annually thereafter, and are subject to the sole
discretion of the Board of Directors. The employment contract provides for
annual extensions of one additional year, but only upon express authorization by
the Board of Directors at the end of each year. The contract provides for
termination upon the employee's death, for cause or in certain events specified
by OTS regulations. The employment contract is terminable by the employee upon
90 days' notice to the Bank.
In the event there is a change in control of the Holding Company or the
Bank, as defined in the agreement, and if employment terminates involuntarily,
as defined in the agreement, in connection with such change in control or within
12 months thereafter, the employment contract provides for a payment equal to
299% of Mr. Teegarden's base amount of compensation as defined in the Code.
Assuming a change in control were to take place as of
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June 30, 1996, the aggregate amounts payable to Mr. Teegarden pursuant to this
change in control provision would be approximately $231,000.
The contract provides, among other things, for participation in an
equitable manner in employee benefits applicable to executive personnel. The
employment contract may have an "anti-takeover" effect that could affect a
proposed future acquisition of control of the Bank after its Conversion. See
"Restrictions on Acquisitions of Stock and Related Takeover Defensive
Provisions."
The Bank also intends to enter into an employment agreement with Larry R.
Johnson, Senior Vice President and Secretary. This agreement will also provide
for a term of three years and a change of control payment equal to 299% of the
Mr. Johnson's prior years' compensation plus certain additional benefits such as
health insurance. This agreement is otherwise expected to be similar to the
employment agreement with Mr. Teegarden.
Finally, the Bank may enter into employment and/or severance agreements
with other officers of the Bank after the Conversion.
Benefit Plans
General. The Bank currently provides health care benefits, including
medical and prescription plan benefits, subject to certain deductibles and
copayments by employees, and group life insurance to its full time employees.
Profit Sharing Plan. The Bank maintains the Investors Federal Bank and
Savings Association Employee Profit Sharing Plan (the "Plan") which is a
qualified, tax-exempt retirement plan under Section 401(a) of the Code. All
employees who have reached the age of 18 and have completed one year of service
with the Bank (i.e., 12 months in which the employee works at least 1,000 hours)
are eligible to participate. The Bank may, but is not required to, make
discretionary contributions to the Plan each year in amounts to be determined
annually. Contributions, when made, are allocated to eligible plan participants
based on the ratio of their compensation to the total compensation for all
eligible participants for the plan year. The Plan operates on the basis of a
calendar plan year. Participants are vested in their profit sharing account
balances at the rate of 20% per year of credited service under the Plan
beginning in their third year of credited service, with participants becoming
fully vested in their account balance after seven years of credited service. If
the Plan is top-heavy, participants become fully vested after six years of
credited service under the Plan. Participants also become fully vested in their
account balance upon attainment of normal retirement age under the Plan (i.e.,
age 65), upon death or disability, or upon termination of the Plan. At September
30, 1996, the market value of the Plan trust fund equaled approximately
$407,330. During the year ended December 31, 1995, the Bank contributed $4,380
to the account of Mr. Teegarden, and contributed an aggregate of $18,200 to the
accounts of all other eligible participants.
In connection with the Offerings and adoption of the Employee Stock
Ownership Plan, the Bank intends to terminate the Plan and distribute its
assets. Upon distribution, former participants in the Plan will be eligible to
purchase Common Stock in the Offerings or in the open market with the proceeds
of their account balances, subject to the purchase priorities set forth in the
Plan of Conversion.
Stock Option and Incentive Plan. Following consummation of the Stock
Conversion, the Board of Directors of the Holding Company intends to adopt a
Stock Option Plan, which will be designed to attract and retain qualified
personnel in key positions, provide directors, officers and key employees with a
proprietary interest in the Holding Company as an incentive to contribute to the
success of the Holding Company and reward key employees for outstanding
performance and the attainment of targeted goals. The Stock Option 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 stock options, stock appreciation rights, and limited stock
appreciation rights (collectively "Awards"). Awards may be granted to key
employees of the Holding Company and any subsidiaries. The Stock Option Plan
will be administered and interpreted by the Holding Company's Compensation
Committee (the "Committee") the members of which will be either the full Board
or at least two "non-employee directors" as defined in Rule 16b-3 of the
Exchange Act. Directors who are not employees ("Outside Directors") will only be
entitled to receive non-incentive stock options pursuant to a formula governing
the amount and timing of such
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options. Unless sooner terminated, the Stock Option Plan shall continue in
effect for a period of 10 years from the date the Stock Option Plan is adopted
by the Board of Directors.
Under the Stock Option Plan, the Committee will determine which
officers and key employees will be granted Awards, whether options will be
incentive or non-incentive options, the number of shares subject to each Award,
the exercise price of each option, whether options may be exercised by
delivering other shares of Common Stock and when such options become
exercisable. The per share exercise price of an incentive or non-incentive stock
option must at least equal the fair market value of a share of Common Stock on
the date the option is granted.
Stock options will become exercisable in the manner specified by the
Committee, provided that all options will become fully exercisable in the event
of a change in control of the Company if the plan is implemented following the
one-year anniversary of the Stock Conversion. If the plan is implemented within
the first year following the Stock Conversion, OTS regulations that may be
applicable to the Bank following the Conversion, would require the stock options
to vest at a rate not in excess of 20% per year and prohibit accelerated vesting
except in the case of disability or death. Each stock option or portion thereof
will be exercisable at any time on or after it vests and will be exercisable
until 10 years after its date of grant or for periods of up to one year
following the death, disability or other termination of the optionee's
employment. However, failure to exercise incentive stock options within three
months after the date on which the optionee's employment terminates may result
in adverse tax consequences to the optionee. Incentive stock options are non-
transferable except by will or the laws of descent and distribution. Non-
incentive stock options may be transferable in the sole discretion of the
Committee.
The proposed Stock Option Plan provides for the grant of Stock
Appreciation Rights ("SARs") at any time, whether or not the participant then
holds stock options, granting the right to receive the excess of the market
value of the shares represented by the SARs on the date exercised over the
exercise price. SARs generally will be subject to the same terms and conditions
and exercisable to the same extent as stock options. There is no present
intention to grant any SARs.
At the time an Award is granted pursuant to the Plan, the recipient
will not be required to make any payment in consideration for such grant. With
respect to incentive or non-incentive stock options, the optionee will be
required to pay the applicable exercise price at the time of exercise in order
to receive the underlying shares of Common Stock. If a stock appreciation right
is exercised, the holder of the right is entitled to receive an amount equal to
the excess of the fair market value of the underlying shares of Common Stock
over the applicable exercise price, without having to pay the exercise price.
A number of shares of Common Stock equal to an aggregate of 10% of the
Common Stock sold in the Conversion will be reserved for issuance pursuant to
the Stock Option Plan (25,875 shares, based on the sale of 258,750 shares).
Such shares may be authorized but previously unissued shares, treasury shares,
or shares purchased by the Holding Company on the open market or from private
sources. In the event of a stock split, reverse stock split or stock dividend,
the number of shares of Common Stock under the Stock Option 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.
Under current provisions of the Code, the federal income tax treatment
of incentive stock options and non-incentive stock options is different. As
regards incentive stock options, an optionee who meets certain holding period
requirements will not recognize income at the time the option is granted or at
the time the option is exercised, and a federal income tax deduction generally
will not be available to the Holding Company at any time as a result of such
grant or exercise. With respect to non-incentive stock options, the difference
between the fair market value on the date of exercise and the option exercise
price generally will be treated as compensation income upon exercise, and the
Holding Company will be entitled to a deduction in the amount of income so
recognized by the optionee. Upon the exercise of a stock appreciation right, the
holder will realize income for federal income tax purposes equal to the amount
received by him, whether in cash, shares of stock or both, and the Holding
Company will be entitled to a deduction for federal income tax purposes in the
same amount.
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Under regulations of the OTS that may apply to the Bank following the
Conversion, if the Stock Option Plan is submitted to and approved by
stockholders of the Holding Company within one year after completion of the
Conversion, no more than 30% of the shares available under the Stock Option Plan
could be granted to non-employee directors, no more than 5% of the shares
available could be granted to an individual non-employee director, and no more
than 25% of the shares available could be granted to an individual officer. It
is currently expected that each non-employee director will receive an option for
the same number of shares, in which event options for a total of approximately
1,293 shares would be granted to each outside director if the amount of Common
Stock sold in the Stock Conversion is equal to the maximum of the Estimated
Valuation Range. In addition, it is currently expected that stock options will
be granted to Mr. Teegarden and other officers of the Bank, although no
determination has been made at this time as to the amount of such stock option
awards. The Holding Company does not expect to grant any stock appreciation
rights or performance share awards in the first year following completion of the
Stock Conversion.
The Holding Company currently intends to submit the Stock Option Plan
to stockholders for approval following the one-year anniversary of the Stock
Conversion. However, the Holding Company reserves the right to submit such plan
to stockholders prior to such time, provided that such meeting is at least six
months following the Stock Conversion. In such event, the proposed Stock Option
Plan might need to include a mandatory five-year vesting schedule and a
prohibition on accelerated vesting in the event of a change in control, which
provisions are required by current OTS regulations for plans implemented within
one year following the Stock Conversion.
Recognition and Retention Plan. Following consummation of the Stock
Conversion, the Board of Directors of the Company intends to adopt a Recognition
and Retention Plan ("RRP") for directors, officers and key employees. The
objective of the RRP will be to enable the Holding Company to provide directors,
officers and key employees with a proprietary interest in the Holding Company as
an incentive to contribute to its success.
The RRP will be administered and interpreted by the Holding Company's
Compensation Committee (the "Committee), the members of which will be the full
Board or at least two "non-employee directors" as defined in Rule 16b-3 of the
Exchange Act. The Committee will have the responsibility to invest all funds
contributed to the RRP. The Holding Company will contribute sufficient funds so
that the RRP can purchase, following the receipt of stockholder approval, a
number of shares equal to an aggregate of 4% of the Common Stock sold in the
Stock Conversion (10,350 shares, based on the sale of 258,750 shares). Assuming
the Common Stock awarded pursuant to the RRP had a value of $20.00 per share,
and the Holding Company issued 258,750 shares, the aggregate value of RRP awards
would be $207,000. Shares of Common Stock granted pursuant to the RRP generally
will be in the form of restricted stock and, if the RRP is implemented within
the first year following the Stock Conversion, will vest at the rate of 20% per
year over the five years following the date of grant, to the extent required by
applicable law. 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 period during which the shares
are payable. A recipient will be entitled to all voting and other stockholder
rights, except that the shares, while restricted, may not be sold, pledged or
otherwise disposed of. 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. All restrictions also will expire and all allocated shares will
become unrestricted in the event of a change in control of the Holding Company,
as defined in the RRP. However, if the plan is implemented within the first
year following the Stock Conversion, current OTS regulations might prohibit
accelerated vesting except in the event of disability or death. The Board of
Directors of the Holding Company can terminate the RRP at any time, and if it
does so, any shares not allocated will revert to the Holding Company. Recipients
of grants under the RRP will not be required to make any payment at the time of
grant or when the underlying shares of Common Stock become vested.
Under regulations of the OTS that may apply to the Bank following the
Conversion, if the RRP is submitted to and approved by the stockholders of the
Holding Company within one year after completion of the Stock Conversion, no
more than 30% of the shares available under the RRP could be granted to non-
employee directors, no more than 5% of the shares available could be granted to
an individual outside director, and no more than 25% of the shares available
could be granted to an individual officer. In such event, it is expected that
each non-employee director will receive an award for the same number of shares,
in which event awards for a total of
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approximately 517 shares would be granted to each outside director if the amount
of Common Stock sold in the Stock Conversion is equal to the maximum of the
Estimated Valuation Range. It is currently expected that awards will be granted
to Mr. Teegarden and other officers of the Bank, although no determination has
been made at this time as to the amount of such awards.
The Holding Company currently intends to submit the RRP to
stockholders for approval following the one-year anniversary of the Stock
Conversion. However, the Holding Company reserves the right to submit such plan
to stockholders prior to such time, provided that such meeting is held at least
six months following the Stock Conversion. In such event, the RRP might need to
include a prohibition on accelerated vesting in the event of a change in
control, which provision is required by current OTS regulations applicable to
plans implemented within one year following the Stock Conversion.
It is currently anticipated that the RRP will be funded by shares
subsequently reacquired and held as treasury shares or through the issuance of
authorized but unissued shares. To the extent the RRP is funded from authorized
but unissued shares, the funding of the RRP will have the effect of diluting
existing stockholders. See "Summary -Benefits of Conversion to Directors and
Executive Officers" and "Capitalization."
Employee Stock Ownership Plan. The Boards of Directors of Investors
Federal and the Holding Company have approved the adoption of an ESOP for the
benefit of employees of Investors Federal. The ESOP is designed to meet the
requirements of an employee stock ownership plan as described at Section
4975(e)(7) of the Code and Section 407(d)(6) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and, as such, the ESOP is empowered
to borrow in order to finance purchases of the Holding Company's Common Stock.
It is anticipated that the ESOP will be capitalized with a loan from
the Holding Company. The proceeds from this loan are expected to be used by the
ESOP to purchase up to 8.0% of the Common Stock issued in the Stock Conversion.
After the Stock Conversion, as a qualified employee pension plan under Section
401(a) of the Code, the ESOP will be in the form of a stock bonus plan and will
provide for contributions, predominantly in the form of either the Holding
Company's Common Stock or cash, which will be used within a reasonable period
after the date of contributions primarily to purchase Holding Company Common
Stock. The Bank will receive a tax deduction equal to the amount it contributes
to the ESOP, subject to the limitations set forth in the Code. The maximum tax-
deductible contribution by the Bank in any year is an amount equal to the
maximum amount that may be deducted by the Bank under Section 404 of the Code,
subject to reduction based on contributions to other Tax-Qualified Employee
Plans. Additionally, the Bank will not make contributions if such contributions
would cause the Bank to violate its regulatory capital requirements. The assets
of the ESOP will be invested primarily in Holding Company Common Stock.
From time to time, the ESOP may purchase additional shares of Common
Stock for the benefit of plan participants through purchases of outstanding
shares in the market, upon the original issuance of additional shares by the
Holding Company or upon the sale of shares held in treasury by the Holding
Company. Such purchases, which are not currently contemplated, would be subject
to then-applicable laws, regulations and market conditions.
Generally accepted accounting principles require that any borrowing by
the ESOP be reflected as a liability in the Holding Company's consolidated
financial statements, whether or not such borrowing is guaranteed by, or
constitutes a legally binding contribution commitment of the Holding Company or
the Bank. In addition, shares purchased with borrowed funds will, to the extent
of the borrowings, be excluded from stockholders' equity, representing unearned
compensation to employees for future services not yet performed. Consequently,
if the ESOP purchases already-issued shares in the open market, the Holding
Company's consolidated liabilities will increase to the extent of the ESOP's
borrowings, and total and per share stockholders' equity will be reduced to
reflect such borrowings. If the ESOP purchases newly issued shares from the
Holding Company, total stockholders' equity would neither increase nor decrease,
but per share stockholders' equity and per share net income would decrease
because of the increase in the number of outstanding shares. In either case, as
the borrowings used to fund ESOP purchases are repaid, total stockholders'
equity will correspondingly increase.
All employees of the Bank will be eligible to participate in the ESOP
after they attain age 18 and complete one year of service during which they
work at least 1,000 hours. Employees will be credited for years
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of service to the Bank prior to the adoption of the ESOP for participation and
vesting purposes. The Bank's contribution to the ESOP will be allocated among
participants on the basis of compensation. Each participant's account will be
credited with cash and shares of Holding Company Common Stock based upon
compensation earned during the year with respect to which the contribution is
made. After completing five years of service, a participant will be 100% vested
in his ESOP account. ESOP participants will be entitled to receive distributions
from their ESOP accounts only upon termination of service. Distribution will be
made in cash and in whole shares of Holding Company Common Stock. Fractional
shares will be paid in cash. Participants will not incur a tax liability until a
distribution is made.
Participating employees will be entitled to instruct the trustee of
the ESOP as to how to vote the shares held in their account. The trustee, who
has dispositive power over the shares in the Plan, will not be affiliated with
the Holding Company or Investors Federal. The ESOP may be amended by the Board
of Directors of the Holding Company, except that no amendment may be made which
would reduce the interest of any participant in the ESOP trust fund or divert
any of the assets of the ESOP trust fund to purposes other than the benefit of
participants or their beneficiaries.
Director Emeritus Program. In order to encourage directors to remain
associated with the Bank's Board of Directors, in January 1995 the Bank adopted
a director emeritus program in which the Board of Directors, in its discretion,
may elect any retiring director as a Director Emeritus, provided the retiring
director has served as a director until reaching mandatory retirement age (or
until being forced to retire due to medical considerations) and such director
has served as a director of the Bank for at least 10 years. Directors Emeritus
of the Bank shall be compensated for their services at a rate of 50% of full
director fees for the first 10 years following election and at a rate of 25% of
full director fees for the second 10 years following election. Thereafter, no
fees shall be payable except that, upon request from the then current Board of
Directors, a Director Emeritus may be invited to attend a Board meeting and as
such shall qualify to receive full Board fees for that meeting.
Indebtedness of Management
The Bank has followed a policy of granting consumer loans and loans
secured by one- to four-family real estate to officers, directors and employees.
Loans to directors and executive officers are made in the ordinary course of
business and on the same terms and conditions as those of comparable
transactions with the general public prevailing at the time, in accordance with
the Bank's underwriting guidelines, and do not involve more than the normal risk
of collectibility or present other unfavorable features.
All loans by the Bank to its directors and executive officers are
subject to OTS regulations restricting loan and other transactions with
affiliated persons of the Bank. Federal law currently requires that all loans
to directors and executive officers be made on terms and conditions comparable
to those for similar transactions with non-affiliates. Loans to all directors,
executive officers, employees and their associates totaled $446,000 at June 30,
1996, which was 13.6% of the Bank's equity capital at that date and 9.3% of the
Holding Company's pro forma stockholders' equity at that date, assuming
completion of the Stock Conversion at the midpoint of the Estimated Valuation
Range. There were no loans outstanding to any director, executive officer or
their affiliates at preferential rates or terms which in the aggregate exceeded
$60,000 during the three years ended June 30, 1996. All loans to directors and
officers were performing in accordance with their terms at June 30, 1996.
THE CONVERSION
The Board of Directors of the Bank and the OTS have approved the Plan
of Conversion, subject to approval by the members of the Bank and the
satisfaction of certain other conditions. OTS approval does not constitute a
recommendation or endorsement by the OTS of the Plan of Conversion. Certain
terms used in the following summary are defined in the Plan of Conversion, a
copy of which may be obtained by contacting the Bank.
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General
On September 23, 1996, the Board of Directors unanimously adopted the
Plan, subject to approval by the OTS and the members of the Bank. The Plan was
subsequently amended on November __, 1996. Pursuant to the Plan, the Bank
proposes to convert from a federal mutual savings association to a federal stock
savings bank and subsequently to a national bank. The OTS has approved the
Plan, subject to its approval by the affirmative vote of the members of the Bank
holding not less than a majority of the total number of votes eligible to be
cast at a Special Meeting called for that purpose to be held on December __,
1996.
The Stock Conversion will be accomplished through amendment of the
Bank's federal mutual charter to authorize the issuance of capital stock, at
which time the Bank will become a wholly owned subsidiary of the Holding
Company. Following the consummation of the Stock Conversion, the Board of
Directors of the Bank intends to effectuate the Bank Conversion by converting
the Converted Bank to the National Bank. Upon completion of the Bank Conversion,
the National Bank will be a wholly-owned subsidiary of the Holding Company.
The Holding Company has received approval from the OTS to become the
holding company of the Converted Bank subject to the satisfaction of certain
conditions and to acquire all of the common stock of the Converted Bank to be
issued in the Stock Conversion in exchange for at least 50% of the net proceeds
form the sale of Common Stock in the Stock Conversion. The Stock Conversion will
be effected only upon completion of the sale of the shares of Common Stock to be
issued by the Holding Company pursuant to the Plan of Conversion. The Bank has
applied to the OTS and the OCC for approval of the conversion of the Converted
Bank to a national bank, and the Holding Company has applied to the FRB for
approval of the Holding Company's continued ownership of 100% of the stock of
the National Bank following the Bank Conversion. Such approvals have not been
received to date, and there can be no assurance that such approvals will be
received. If such approvals are not received, the Bank Conversion will not
occur. See "Risk Factors--Potential Delay in Completion or Denial of Bank
Conversion."
The Plan of Conversion provides that the Board of Directors of the
Bank may, at any time, elect not to proceed with the Bank Conversion. It is the
present intent of the Bank's Board of Directors to proceed with both the Stock
Conversion and the Bank Conversion.
Subscription Rights are being given to Eligible Account Holders as of
June 30, 1995, the Tax-Qualified Employee Plans of the Bank and the Holding
Company, Supplemental Eligible Account Holders, Other Members, and officers,
directors and employees of the Bank. Concurrently with, during, or following
the Subscription Offering, and subject to the prior rights of holders of
Subscription Rights, members of the general public to whom a prospectus is
delivered are being afforded the opportunity to subscribe for Holding Company
Common Stock in the Community Offering. See "- Offering of Holding Company
Common Stock." Depending upon market conditions, any shares not initially
subscribed for in the Subscription Offering may be offered for sale by the
Holding Company to the general public in a Syndicated Community Offering. See
"-Offering of Holding Company Common Stock-Syndicated Community Offering."
Subscriptions for shares will be subject to the maximum and minimum purchase
limitations set forth in the Plan of Conversion.
Business Purposes
The Bank has several business purposes for the Stock Conversion. The
sale of Holding Company Common Stock will have the immediate result of providing
the Bank with additional equity capital. This increased capital will support
expansion of its financial services, subject to applicable regulatory
restrictions. The sale of the Common Stock is the most effective means of
increasing the Bank's permanent capital and does not involve the high interest
cost and repayment obligation of subordinated debt. In addition, investment of
the net Stock Conversion proceeds is expected to provide additional operating
income to further increase the Bank's capital on a continuing basis.
The Bank's Board of Directors has undertaken the Bank Conversion to
allow the Bank to broaden its range or banking practices and services consistent
with a national bank charter. Management believes such expansion can be more
effectively developed if the Bank operated under regulatory requirements
applicable to a national bank rather than a federally chartered savings
association. Moreover, management believes the additional operating
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flexibility associated with the national bank charter will enable the Bank to
compete more effectively with other financial institutions. See "Regulation."
The Board of Directors of the Bank believes that a holding company
structure could facilitate the acquisition of other financial institutions as
well as other companies. If a multiple holding company structure is utilized in
a future acquisition, the acquired savings institution or bank would be able to
operate on a more autonomous basis as a wholly owned subsidiary of the Holding
Company rather than as a division of the Bank. For example, the acquired
savings institution could retain its own directors, officers and corporate name
as well and have representation on the Board of Directors of the Holding
Company. As of the date hereof, there are no plans or understandings by the
Bank or the Holding Company regarding the acquisition of any other institutions.
The preferred stock and additional common stock of the Holding Company
being authorized in the Stock Conversion will be available for future
acquisitions (although the Holding Company has no current negotiations,
understandings or plans with respect to any acquisition) and for issuance and
sale to raise additional equity capital, subject to market conditions and
generally without stockholder approval.
The Stock Conversion will structure the Bank and, after the Bank
Conversion, the National Bank, in the stock form used in the United States by
all commercial banks, most major business corporations and an increasing number
of savings institutions. The Stock Conversion will permit the Bank's members to
become stockholders of the Holding Company, thereby allowing them to own stock
in the parent corporation of the Bank in which they maintain deposit accounts or
with which they have a borrowing relationship. Such ownership may encourage
customers who become stockholders to promote the Bank to others, thereby further
contributing to the Bank's growth. The more flexible operating structure
provided by the Holding Company and the stock form of ownership is expected to
assist the Bank in competing aggressively with other financial institutions in
its principal market area.
The Bank is also expected to benefit from its management and employees
owning stock, because stock ownership is viewed as an effective performance
incentive and a means of attracting, retaining and compensating personnel.
Effects of Stock Conversion to Stock Form on Depositors and Borrowers of the
Bank
Voting Rights. Upon Conversion, neither deposit account holders nor
borrowers will have voting rights in the Bank, the National Bank or the Holding
Company and will therefore not be able to elect directors of either entity or to
control their affairs. These rights are currently accorded to deposit account
holders with regard to the Bank. Subsequent to the Stock Conversion, voting
rights will be vested exclusively in the Holding Company as the sole stockholder
of the Bank and, after the Bank Conversion, the National Bank. Voting rights as
to the Holding Company will be held exclusively by its stockholders. Each
purchaser of Holding Company Common Stock shall be entitled to vote on any
matters to be considered by the Holding Company stockholders. A stockholder
will be entitled to one vote for each share of Common Stock owned, subject to
certain limitations applicable to holders of 10% or more of the shares of the
Common Stock. See "Restrictions on Acquisitions of Stock and Related Takeover
Defensive Provisions." The Holding Company intends to supply each stockholder
with annual reports and proxy statements.
Deposit Accounts and Loans. The terms of the Bank's deposit accounts,
the balances of the individual accounts and the existing FDIC insurance coverage
will not be affected by the Conversion. Furthermore, the Conversion will not
affect the loan accounts, the balances of these accounts, or the obligations of
the borrowers under their individual contractual arrangements with the Bank.
Tax Effects. The Bank has received an opinion from Luse Lehman Gorman
Pomerenk & Schick, P.C. with regard to federal income taxation, and an opinion
of Lockridge, Constant & Conrad, LLC with regard to Missouri taxation, to the
effect that the adoption and implementation of the Plan of Conversion set forth
herein will not be taxable for federal or Missouri tax purposes to the Bank or
the Holding Company. See "- Income Tax Consequences."
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Liquidation Rights. The Bank has no plan to liquidate either before
or after the Conversion. However, if there should ever be a complete
liquidation, either before or after Conversion, deposit account holders would
receive the protection of insurance by the FDIC up to applicable limits.
Subject thereto, liquidation rights before and after the Stock Conversion would
be as follows:
Liquidation Rights in Present Mutual Bank. In addition to the
protection of FDIC insurance up to applicable limits, in the event of a complete
liquidation each holder of a deposit account in the Bank in its present mutual
form would receive his pro rata share of any assets of the Bank remaining after
payment of claims of all creditors (including the claims of all depositors in
the amount of the withdrawal value of their accounts). Such holder's pro rata
share of such remaining assets, if any, would be in the same proportion of such
assets as the balance in his deposit account was to the aggregate balance in all
deposit accounts in the Bank at the time of liquidation.
Liquidation Rights in Proposed Converted Bank. After the Stock
Conversion each deposit account holder, in the event of a complete liquidation,
would have a claim of the same general priority as the claims of all other
general creditors of the Bank in addition to the protection of FDIC insurance up
to applicable limits. Therefore, except as described below, the deposit account
holder's claim would be solely in the amount of the balance in his deposit
account plus accrued interest and the holder would have no interest in the value
of the Bank above that amount.
The Plan of Conversion provides that there shall be established, upon
the completion of the Conversion, a special "liquidation account" for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders
(i.e., depositors with an account balance of $50 or more at June 30, 1995 and
September 30, 1996, respectively) in an amount equal to the net worth of the
Bank as of the date of its latest consolidated statement of financial condition
contained in the final Prospectus relating to the sales of shares of Holding
Company Common Stock in the Stock Conversion. Each Eligible Account Holder and
Supplemental Eligible Account Holder would have an initial interest in such
liquidation account for each qualifying deposit account held in the Bank on the
qualifying date. An Eligible Account Holder's or Supplemental Eligible Account
Holder's interest as to each deposit account would be in the same proportion of
the total liquidation account as the balance in his account on June 30, 1995 and
September 30, 1996, respectively, was to the aggregate balance in all qualifying
deposit accounts of Eligible Account Holders and Supplemental Eligible Account
Holders on such date. For accounts in existence on both dates, separate
subaccounts shall be determined on the basis of the qualifying deposits in such
accounts on the record dates. However, if an Eligible Account Holder or
Supplemental Eligible Account Holder should reduce the amount in the qualifying
deposit account on any annual closing date of the Bank to a level less than the
lowest amount in such account on June 30, 1995 or September 30, 1996,
respectively, and on any subsequent closing date, then the account holder's
interest in this special liquidation account would be reduced by an amount
proportionate to any such reduction, and the account holder's interest would
cease to exist if such qualifying deposit account were closed.
In addition, the interest in the special liquidation account would
never be increased despite any increase in the balance of the account holders'
related accounts after the Stock Conversion, and would only decrease.
Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders were satisfied would
be distributed to the Holding Company as the sole stockholder of the Bank.
No merger, consolidation, purchase of bulk assets with assumption of
deposit accounts and other liabilities, or similar transaction, whether the
Bank, as converted, or another SAIF-insured institution if the surviving
institution, is deemed to be a complete liquidation for purposes of distribution
of the liquidation account and, in any such transaction, the liquidation account
would be assumed to the full extent authorized by regulations of the OTS as then
in effect. The OTS has stated that the consummation of a transaction of the type
described in the preceding sentence in which the surviving entity is not an
SAIF-insured institution would be reviewed on a case-by-case basis to determine
whether the transaction should constitute a "complete liquidation" requiring
distribution of any then remaining balance in the liquidation account. While the
Bank believes that such a transaction should not constitute
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a complete liquidation, there can be no assurance that the OTS will not adopt a
contrary position and, in such event, that the Bank's position will be
determined to be correct.
The Bank Conversion shall not be deemed to be a complete liquidation of the
Converted Bank for purposes of the distribution of the liquidation account. Upon
consummation of the Bank Conversion, the liquidation account, and all rights and
obligations of the Converted Bank in connection therewith, shall be assumed by
the National Bank.
Common Stock. For information as to the characteristics of the Common Stock
to be issued under the Plan of Conversion, see "Dividends" and "Description of
Capital Stock." Common Stock issued under the Plan of Conversion cannot, and
will not, be insured by the FDIC or any other government agency.
The Bank will continue, immediately after completion of the Stock Conversion,
to provide its services to depositors and borrowers pursuant to its existing
policies and will maintain the existing management and employees of the Bank.
Other than for payment of expenses incident to the Stock Conversion, no assets
of the Bank will be distributed in the Stock Conversion. The Bank will continue
to be a member of the FHLB System, and its deposit accounts will continue to be
insured by the FDIC. The affairs of the Bank will continue to be directed by
the existing Board of Directors and management.
Offering of Holding Company Common Stock
Under the Plan of Conversion, up to 258,750 shares of Holding Company Common
Stock will be offered for sale, subject to certain restrictions described below
through a Subscription and Community Offering.
Subscription Offering. The Subscription Offering will expire at noon, Central
Time, on December __, 1996 (the "Subscription Expiration Date") unless extended
by the Bank and the Holding Company. Regulations of the OTS require that all
shares to be offered in the Stock Conversion be sold within a period ending not
more than 45 days after the Subscription Expiration Date (or such longer period
as may be approved by the OTS) or, despite approval of the Plan of Conversion by
members, the Stock Conversion will not be effected and the Bank will remain in
mutual form. This period expires on February __, 1997, unless extended with the
approval of the OTS. If the Stock Conversion is not completed by February __,
1997, all subscribers will have the right to modify or rescind their
subscriptions and to have their subscription funds returned promptly with
interest. In the event of such an extension, all subscribers will be notified
in writing of the time period within which subscribers must notify the Bank of
their intention to maintain, modify or rescind their subscriptions. If the
subscriber rescinds or does not respond in any manner to the Bank's notice, the
funds submitted will be refunded to the subscriber with interest at ____%, the
Bank's current passbook rate per annum, and/or the subscriber's withdrawal
authorizations will be terminated. In the event that the Stock Conversion is
not effected, all funds submitted and not previously refunded pursuant to the
Subscription and Community Offering will be promptly refunded to subscribers
with interest at ____%, the Bank's current passbook rate per annum, and all
withdrawal authorizations will be terminated.
Subscription Rights. In accordance with OTS regulations, non-transferable
Subscription Rights have been granted under the Plan of Conversion to the
following persons in the following order of priority: (1) Eligible Account
Holders (deposit account holders of the Bank maintaining an account balance of
$50 or more as of June 30, 1995), (2) Tax-Qualified Employee Plans, (3)
Supplemental Eligible Account Holders (deposit account holders of the Bank
maintaining an account balance of $50 or more as of September 30, 1996); (4)
Other Members of the Bank (deposit account holders of the Bank as of _______,
1996 other than Eligible Account Holders and Supplemental Eligible Account
Holders), and (5) officers, directors and employees of the Bank. All
subscriptions received will be subject to the availability of Common Stock after
satisfaction of all subscriptions of all persons having prior rights in the
Subscription Offering, and to the maximum and minimum purchase limitations set
forth in the Plan of Conversion. Subscription Rights are non-transferable.
Persons found to be selling or otherwise transferring their right to purchase
stock in the Subscription Offering or purchasing Common Stock on behalf of
another person will be subject to forfeiture of such rights and possible further
sanctions and penalties imposed by the OTS, an agency of the U.S. Government.
The preference categories are more fully described below.
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Category No. 1 is reserved for the Bank's Eligible Account Holders.
Subscription Rights to purchase shares under this category will be allocated
among Eligible Account Holders to permit each such depositor to purchase shares
in an amount equal to the greater of (i) $100,000 of the Common Stock sold in
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the Stock Conversion; (ii) one-tenth of one percent (.10%) of the total shares
of Common Stock offered in the Conversion; or (iii) or 15 times the product
(rounded down to the next whole number) obtained by multiplying the total number
of shares of Common Stock to be issued by a fraction of which the numerator is
the amount of the qualifying deposit of the Eligible Account Holder and the
denominator is the total amount of the qualifying deposit of the Eligible
Account Holders in the converting Bank in each case on June 30, 1995 (the
"Eligibility Record Date"); if sufficient shares are not available, shares shall
be allocated first to permit each subscribing Eligible Account Holder to
purchase to the extent possible 100 shares, and thereafter among each
subscribing Eligible Account Holder pro rata in the same proportion that his
qualifying deposit bears to the total qualifying deposits of all subscribing
Eligible Account Holders whose subscriptions remain unsatisfied.
Category No. 2 provides for the issuance of Subscription Rights to Tax-
Qualified Employee Plans to purchase up to 10% of the total shares issued in the
Subscription Offering, provided that singly or in the aggregate such plans
(other than that portion of such plans which is self-directed) shall not
purchase more than 10% of the shares of the Holding Company Conversion Stock.
Subscription Rights received pursuant to this Category shall be subordinated to
all rights received by Eligible Account Holders to purchase shares pursuant to
Category No. 1; provided, however, that notwithstanding any other provision in
the Plan of Conversion to the contrary, the Tax-Qualified Employee Plans shall
have a first priority Subscription Right to the extent that the total number of
shares of Holding Company Conversion Stock sold in the Subscription and
Community Offering exceeds the maximum of the Estimated Valuation Range.
However, such plans shall not, in the aggregate, purchase more than 10% of the
Holding Company Common Stock issued. It is currently intended that the ESOP
will purchase 8% of the shares of Common Stock issued in the Stock Conversion.
Category No. 3 provides that each Supplemental Eligible Account Holder shall
receive non-transferable Subscription Rights to subscribe for shares of Holding
Company Conversion Stock in an amount equal to the greater of (i) $100,000 of
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the Common Stock sold in the Stock Conversion; (ii) one-tenth of one percent
(.10%) of the total offering of shares; or (iii) 15 times the product (rounded
down to the next whole number) obtained by multiplying the total number of
shares of common stock to be issued by a fraction of which the numerator is the
amount of the qualifying deposit of the Supplemental Eligible Account Holder and
the denominator is the total amount of qualifying deposits of all Supplemental
Eligible Account Holders in the converting association in each case on September
30, 1996 (the "Supplemental Eligibility Record Date"). Subscription Rights
received pursuant to this category shall be subordinated to all Subscription
Rights received by Eligible Account Holders and Tax-Qualified Employee Plans.
Any non-transferable Subscription Rights to purchase shares received by an
Eligible Account Holder in accordance with Category No. 1 shall reduce to the
extent thereof the Subscription Rights to be distributed to such person pursuant
to this Category. In the event of an oversubscription for shares under the
provisions of this subparagraph, the shares available shall be allocated first
to permit each subscribing Supplemental Eligible Account Holder, to the extent
possible, to purchase a number of shares sufficient to make his total allocation
(including the number of shares, if any, allocated in accordance with Category
No. 1) equal to 100 shares, and thereafter among each subscribing Supplemental
Eligible Account Holder pro rata in the same proportion that his qualifying
deposit bears to the total qualifying deposits of all subscribing Supplemental
Eligible Account Holders whose subscriptions remain unsatisfied.
Category No. 4 provides, to the extent that shares are then available after
satisfying the subscriptions of Eligible Account Holders, Tax-Qualified Employee
Plans and Supplemental Eligible Account Holders, for the issuance of
Subscription Rights to each such Other Member to purchase shares in an amount
equal to the greater of (i) $100,000 of the Common Stock sold in the Stock
========
Conversion; (ii) or one-tenth of one percent (.10%) of the total offering of
shares offered in the Conversion based on the Estimated Valuation Range subject
to the overall purchase limitation and to the extent Common Stock is available.
In the event of an oversubscription for shares, the shares available shall be
allocated among the subscribing Other Members pro rata in the same proportion
that his number of votes on the Voting Record Date bears to the total number of
votes on the Voting Record Date of all subscribing Other Members on such date.
Such number of votes shall be determined based on the Bank's mutual charter and
bylaws in effect on the date of approval by members of this Plan of
Conversion.
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Category No. 5 provides for the issuance of Subscription Rights to officers,
directors and employees of the Bank, to purchase up to a maximum of $100,000
of the Common Stock sold in the Stock Conversion to the extent that shares are
available after satisfying the subscriptions of eligible subscribers in
preference Categories 1, 2, 3 and 4. In the event of an oversubscription, the
available shares will be allocated pro rata among all subscribers in this
Category.
The Bank and the Holding Company will make reasonable efforts to comply with
the securities laws of all states in the United States in which persons entitled
to subscribe for shares pursuant to the Plan of Conversion reside. However, no
shares will be offered or sold under the Plan of Conversion to any such person
who (1) resides in a foreign country or (2) resides in a state of the United
States in which a small number of persons otherwise eligible to subscribe for
shares under the Plan of Conversion reside or as to which the Bank and the
Holding Company determine that compliance with the securities laws of such state
would be impracticable for reasons of cost or otherwise, including, but not
limited to, a requirement that the Bank or the Holding Company or any of their
officers, directors or employees register, under the securities laws of such
state, as a broker, dealer, salesman or agent. No payments will be made in lieu
of the granting of Subscription Rights to any such person.
Community Offering. To the extent that shares are available for purchase, the
Holding Company and the Bank have determined to offer shares pursuant to the
Plan of Conversion to certain members of the general public to whom the Holding
Company delivers a copy of this Prospectus and a stock order form in the
Community Offering, with preference given to natural persons (or trusts
established by such persons) residing in Livingston, Caldwell and Daviess
Counties, Missouri (the "Local Community"). Such persons, together with
associates of and persons acting in concert with such persons, may purchase up
to $100,000 of the Common Stock sold in the Stock Conversion. The Community
Offering, if any, may terminate at any time without notice, but may not
terminate later than February __, 1997, unless extended with the approval of the
OTS. The opportunity to subscribe for shares of Common Stock in the Community
Offering category is subject to the right of the Company and the Bank, 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 thereafter.
If there are not sufficient shares available to fill orders in the Community
Offering, such stock will be allocated first to each natural person (or trust
established by such person) residing in the Local Community whose order is
accepted by the Holding Company, in an amount equal to the lesser of 1,000
shares or the number of shares subscribed for by each such subscriber in the
Local Community, if possible. Thereafter, unallocated shares will be allocated
among the subscribers in the Local Community whose orders remain unsatisfied in
the same proportion that the unfilled subscription of each bears to the total
unfilled subscriptions of all subscribers in the Local Community 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 subscribers
in the Local Community.
Syndicated Community Offering. As part of the Community Offering, all shares
of Common Stock not purchased in the Subscription and Community Offerings, if
any, may be offered for sale to the general public in a Syndicated Community
Offering through a syndicate of registered broker-dealers to be formed and
managed by Trident Securities. The Holding Company and the Bank expect to
market any shares which remain unsubscribed after the Subscription and Community
Offerings through a Syndicated Community Offering. The Holding Company and the
Bank have the right to reject orders in whole or part in their sole discretion
in the Syndicated Community Offering. Neither Trident Securities nor any
registered broker-dealer shall have any obligation to take or purchase any
shares of Common Stock in the Syndicated Community Offering; however, Trident
Securities has agreed to use its best efforts in the sale of shares in the
Syndicated Community Offering.
The price at which Common Stock is sold in the Syndicated Community Offering
will be the same price as in the Subscription and Community Offerings. Subject
to overall purchase limitations, no person will be permitted to subscribe in the
Syndicated Community Offering for more than the lesser of $200,000 or 5% of the
shares of Common Stock sold in the Stock Conversion.
Trident Securities may enter into agreements with broker-dealers ("Selected
Dealers") to assist in the sale of the shares in the Syndicated Community
Offering. No orders may be placed or filled by or for a Selected Dealer
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during the Subscription Offering. After the close of the Subscription Offering,
Trident Securities will instruct Selected Dealers as to the number of shares to
be allocated to each Selected Dealer. Only after the close of the Subscription
Offering and upon allocation of shares to Selected Dealers may Selected Dealers
take orders from their customers. During the Subscription and Community
Offerings, Selected Dealers may only solicit indications of interest from their
customers to place orders with the Holding Company as of a certain date ("Order
Date") for the purchase of shares of Common Stock. When and if Trident
Securities and the Holding Company believe that enough indications of interest
and orders have not been received in the Subscription and Community Offerings to
consummate the Stock Conversion, Trident Securities will request, as of the
Order Date, Selected Dealers to submit orders to purchase shares for which they
have previously received indications of interest from their customers. Selected
Dealers will send confirmations of the orders to such customers on the next
business day after the Order Date. Selected Dealers will debit the accounts of
their customers on the "Settlement Date" which date will be three business days
from the Order Date. Customers who authorize Selected Dealers to debit their
brokerage accounts are required to have the funds for payment in their account
on but not before the Settlement Date. On the Settlement Date, Selected Dealers
will remit funds to the account established by the Bank for each Selected
Dealer. Each customer's funds so forwarded to the Bank, along with all other
accounts held in the same title, will be insured by the FDIC up to $100,000 in
accordance with applicable FDIC regulations. After payment has been received by
the Bank from Selected Dealers, funds will earn interest at the Bank's passbook
rate until the consummation or termination of the Stock Conversion. Funds will
be promptly returned, with interest, in the event the Stock Conversion is not
consummated as described above.
The Syndicated Community Offering will terminate no more than 45 days
following the Subscription Expiration Date, unless extended by the Holding
Company and the Bank with the approval of the OTS.
Limitations on Purchase of Shares. The Plan also provides for certain
additional limitations to be placed upon the purchase of shares in the Stock
Conversion. Specifically, no person (other than a Tax-Qualified Employee Plan)
by himself or herself or with an associate, and no group of persons acting in
concert, may subscribe for or purchase more than the lesser of $200,000 or 5% of
the Common Stock sold in the Stock Conversion. Officers and directors and their
associates may not purchase, in the aggregate, more than 34% of the shares to be
sold in the Stock Conversion. For purposes of the Plan of Conversion, the
members of the Board of Directors are not deemed to be acting in concert solely
by reason of their Board membership. For purposes of this limitation, an
associate of a person does not include a Tax-Qualified Employee Plan or Non-Tax-
Qualified Employee Plan. Also, for purposes of this limitation, an associate of
an officer or director does not include a Tax-Qualified Employee Plan or a
recognition and retention plan, such as the RRP. Moreover, any shares
attributable to the officers and directors and their associates, but held by a
Tax-Qualified Employee Plan (other than that portion of a plan which is self-
directed) shall not be included in calculating the number of shares which may be
purchased under the limitations in this paragraph. Shares purchased by
employees who are not officers or directors of the Bank, or their associates,
are not subject to this limitation. The term "associate" is used above to
indicate any of the following relationships with a person: (i) any corporation
or organization (other than the Holding Company or the Bank or a majority-owned
subsidiary of the Holding Company or the Bank) of which a person is an officer
or partner or is, directly or indirectly, the beneficial owner of 10% or more of
any class of equity security; (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; 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 Bank or any
subsidiary of the Holding Company or the Bank.
The Boards of Directors of the Holding Company and the Bank may, in their sole
discretion, decrease the maximum purchase limitation referred to above or
increase the maximum purchase limitation up to 9.99% of the shares being offered
in the Stock Conversion, provided that orders for shares exceeding 5.0% of the
shares being offered in the Stock Conversion shall not exceed, in the aggregate,
10% of the shares being offered in the Stock Conversion. Requests to purchase
additional shares of Holding Company Common Stock under this provision will be
allocated by the Boards of Directors on a pro rata basis giving priority in
accordance with the priority rights set forth above. Depending upon market and
financial conditions, and subject to certain regulatory limitations, the Boards
of Directors of the Holding Company and the Bank, with the approval of the OTS
and without further approval of the members, may increase or decrease any of the
above purchase limitations at any time.
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To the extent that shares are available, each subscriber must subscribe for a
minimum of 25 shares. In computing the number of shares to be allocated, all
numbers will be rounded down to the next whole number.
Common Stock purchased in the Stock Conversion will be freely transferable
except for shares purchased by executive officers and directors of the Bank or
the Holding Company and except as described below. See "- Restrictions on
Transferability." In addition, under National Association of Securities
Dealers, Inc. ("NASD") guidelines, members of the NASD and their associates are
subject to certain restrictions on transfer of securities purchased in
accordance with Subscription Rights and to certain reporting requirements upon
purchase of such securities.
Marketing Arrangements
The Holding Company and the Bank have engaged Trident Securities as a
financial advisor and marketing agent in connection with the offering of the
Common Stock, and Trident Securities has agreed to use its best efforts to
solicit subscriptions and purchase orders for shares of Common Stock in the
Offerings. Trident Securities is a member of the NASD and an SEC-registered
broker-dealer. Trident Securities is headquartered in Raleigh, North Carolina.
Trident Securities will provide various services including, but not limited to,
(1) training and educating the Bank's directors, officers and employees
regarding the mechanics and regulatory requirements of the stock sales process;
(2) providing its employees to staff the Stock Information Center to assist the
Bank's customers and internal stock purchasers and to keep records of orders for
shares of Common Stock; and (3) targeting the Holding Company's sales efforts,
including preparation of marketing materials. Based upon negotiations between
the Holding Company and the Bank concerning fee structure, Trident Securities
will receive a commission equal to 1.85% of the aggregate dollar amount of the
common stock sold in the Subscription and Community Offerings to persons in the
Local Community, and a commission equal to 1.35% of the aggregate dollar amount
of the common stock sold in the Subscription and Community Offerings to persons
outside the Local Community. Commissions will not be paid on any shares
purchased by officers, directors, or employees of the Bank, or "associates" (as
defined in the Plan) of such persons, and no commissions will be paid on any
shares purchased by the Bank's employee benefit plans (including the ESOP). In
the event that a selected dealers agreement is entered into in connection with a
Syndicated Community Offering, the Bank will pay a fee to be determined to such
selected dealers, for shares sold by an NASD member firm pursuant to a selected
dealers agreement. Fees to Trident Securities and to any other broker-dealer
may be deemed to be underwriting fees, and Trident Securities and such broker-
dealers may be deemed to be underwriters. Trident Securities will also be
reimbursed for its reasonable out of pocket expenses, including legal fees and
expenses, in an amount not to exceed $31,500. Trident Securities has been paid
$10,000 as an advance against these expenses. The Holding Company and the Bank
have agreed to indemnify Trident Securities for reasonable costs and expenses in
connection with certain claims or liabilities, including certain liabilities
under the Securities Act.
In addition, directors and executive officers of the Holding Company and the
Bank, may to a limited extent and subject to applicable state law, participate
in the solicitation of offers to purchase Common Stock. Other employees of the
Bank may participate in the Subscription and Community Offering in
administrative capacities, providing clerical work in effecting a sales
transaction or answering questions of a potential purchaser provided that the
content of the employee's responses is limited to information contained in this
Prospectus or other offering document. Other questions of prospective
purchasers will be directed to registered representatives of Trident Securities.
Such other employees have been instructed not to solicit offers to purchase
Common Stock or provide advice regarding the purchase of Common Stock. Sales of
Common Stock by directors, executive officers and registered representatives
will be made from the Stock Information Center. The Holding Company will rely
on Rule 3a4-1 under the Exchange Act, and sales of Common Stock will be
conducted within the requirements of Rule 3a4-1, so as to permit officers,
directors and employees to participate in the sale of Common Stock except in
some states where only registered broker-dealers may sell. No officer, director
or employee of the Holding Company or the Bank will be compensated in connection
with his participation by the payment of commissions or other remuneration based
either directly or indirectly on the transactions in the Common Stock.
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Stock Pricing and Number of Shares to be Issued
Federal regulations require that the aggregate Purchase Price of the
securities of a thrift institution sold in connection with its conversion must
be based on an appraised aggregate market value of the institution as converted
(i.e., taking into account the expected receipt of proceeds from the sale of the
securities in the conversion), as determined by an independent valuation.
Ferguson, which is experienced in the valuation and appraisal of business
entities, including thrift institutions involved in the conversion process, was
retained by the Bank to prepare an appraisal of the estimated pro forma market
value of the Holding Company and the Bank, as converted.
Ferguson will receive a fee of $19,000 for its appraisal and assistance in
preparation of the Bank's business plan plus reasonable out-of-pocket expenses.
The Holding Company has agreed to indemnify Ferguson, under certain
circumstances against liabilities and expenses (including legal fees) arising
out of, related to, or based upon the Stock Conversion.
Ferguson has prepared an appraisal of the estimated pro forma market value of
the Holding Company and the Bank, as converted, taking into account market
conditions for initial public offerings of thrift stocks and the formation of
Holding Company as the holding company for the Bank. Ferguson's appraisal
concluded that at September 20, 1996, an appropriate range for the estimated pro
forma market value of the Holding Company and the Bank, as converted, ranged
from a minimum of $3,825,000 to a maximum of $5,175,000, with a midpoint of
$4,500,000. Assuming that the shares are sold at $20.00 per share in the Stock
Conversion, the estimated number of shares to be issued in the Stock Conversion
is expected to be between 191,250 and 258,750. The appraisal involved a
comparative evaluation of the operating and financial statistics of the Bank
with those of other thrift institutions. The appraisal also took into account
such other factors as the market for thrift institution stocks generally,
prevailing economic conditions, both nationally and in Missouri, which affect
the operations of thrift institutions, the competitive environment within which
the Bank operates, the effect of the Bank becoming a subsidiary of the Holding
Company, and the effect of the Bank becoming a national bank. No detailed
individual analysis of the separate components of the Holding Company's and the
Bank's assets and liabilities was performed in connection with the evaluation.
The Plan of Conversion requires that all of the shares subscribed for in the
Subscription and Community Offering be sold at the same price per share. The
Board of Directors of the Holding Company and the Bank have reviewed the
appraisal of Ferguson and in determining the reasonableness and adequacy of such
appraisal consistent with OTS regulations and policies, have reviewed the
methodology and reasonableness of the assumptions utilized by Ferguson in the
preparation of such appraisal.
No sale of the shares will take place unless, prior thereto, Ferguson confirms
to the Bank, the Holding Company and the OTS that, to the best of Ferguson's
knowledge and judgment, nothing of a material nature has occurred which would
cause Ferguson to conclude that the actual aggregate Purchase Price was
incompatible with its estimate of the total pro forma market value of the Common
Stock at the time of the sale. If, however, the facts do not justify such a
statement, a new Estimated Valuation Range and price per share may be set.
Under such circumstances, the Holding Company will be required to resolicit, and
subscribers would have the right to modify or rescind their subscriptions and to
have their subscription funds returned promptly with interest and holds on funds
authorized for withdrawal from deposit accounts would be released or reduced;
provided that if the pro forma market value of the Bank upon the Stock
Conversion has not decreased below $3,825,000 or increased to an amount which
does not exceed $5,951,240 (15% above the maximum of the Estimated Valuation
Range), the Holding Company and the Bank do not intend to resolicit
subscriptions unless it is determined after consultation with the OTS that a
resolicitation is required.
Depending upon market and financial conditions, the number of shares issued
may be more or less than the range in number of shares shown above. A decrease
in the number of shares to be issued in the Stock Conversion would increase a
purchaser's ownership interest and both pro forma net income and net worth on a
per share basis while decreasing these amounts on an aggregate basis. In the
event of a resolicitation, subscribers will be afforded the opportunity to
increase, decrease or maintain their previously submitted order. In the event a
new valuation range is established by Ferguson, such new range will be subject
to approval by the OTS and the Holding Company will be required to resolicit.
The Holding Company will also be required to resolicit if the aggregate Purchase
Price of Common Stock sold in the Stock Conversion is less than the minimum of
the Estimated Valuation Range or above 15% above the maximum of the Estimated
Valuation Range.
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If purchasers cannot be found for an insignificant residue of unsubscribed
shares from the general public, other purchase arrangements will be made by the
Boards of Directors of the Bank and the Holding Company, if possible. Such
other purchase arrangements will be subject to the approval of the OTS and may
provide for purchases by directors, officers, their associates and other persons
in excess of the limitations discussed herein. If such other purchase
arrangements cannot be made, the Subscription and Community Offering will
terminate.
In preparing its valuation of the pro forma market value of the Holding
Company and the Bank, as converted, Ferguson relied upon and assumed the
accuracy and completeness of all financial and statistical information provided
by the Bank and the Holding Company. Ferguson also considered information based
upon other publicly available sources which it believes are reliable. However,
Ferguson does not guarantee the accuracy and completeness of such information
and did not independently verify the financial statements and other data
provided by the Bank and the Holding Company or independently value the assets
or liabilities of the Bank and the Holding Company. The valuation by Ferguson
is not intended and must not be construed as a recommendation of any kind as to
the advisability of voting to approve the Stock Conversion or of purchasing
shares of Common Stock. Moreover, because the valuation is necessarily based
upon estimates of and projections as to a number of matters (including certain
assumptions as to expense factors affecting the net proceeds from the sale of
Common Stock in the Stock Conversion and as to the net earnings on such net
proceeds), all of which are subject to change from time to time, no assurance
can be given that persons who purchase such shares in the Stock Conversion will
be able to sell such shares thereafter at or above the Purchase Price.
Method of Payment for Subscriptions
Subscribers must, before the Subscription Expiration Date, or such date to
which the Subscription Expiration Date may be extended, return an original stock
order form and certification to the Bank, properly completed, together with
cash, checks or money orders in an amount equal to the Purchase Price ($20.00
per share) multiplied by the number of shares for which subscription is made.
Subscriptions which are returned by mail must be received by the Bank by the
Expiration Date. Payment for stock purchases can also be accomplished through
authorization on the order form of withdrawals from accounts with the Bank.
Until completion or termination of the Stock Conversion, subscribers who elect
to make payment through authorization of withdrawal from accounts with the Bank
will not be permitted to reduce the deposit balance in any such accounts below
the amount required to purchase the shares for which they subscribed. In such
cases interest will continue to be credited on deposits authorized for
withdrawal until the completion of the Stock Conversion. Interest at the Bank's
current passbook rate per annum will be paid on amounts submitted in cash,
check, bank draft or money order. Authorized withdrawals from certificate
accounts for the purchase of Common Stock will be permitted without the
imposition of early withdrawal penalties or loss of interest. However,
withdrawals from certificate accounts that reduce the balance of said accounts
below the required minimum for specific interest rate qualification will cause
the cancellation of the certificate accounts, and the remaining balance will
earn interest at the Bank's current passbook rate per annum.
The beneficiaries of Individual Retirement Accounts ("IRAs") are deemed to
have the same subscription rights as other depositors. However, the IRA
accounts maintained at the Bank do not permit investment in Common Stock. A
depositor interested in using his IRA funds to purchase Common Stock must do so
through a self-directed IRA account. Since the Bank does not offer such
accounts, it will allow such a depositor to make a trustee to trustee transfer
or other form of transfer of the IRA on deposit at the Bank. There will be no
early withdrawal or IRS penalties for such transfers. The new trustee would
hold the Common Stock in a self-directed account in the same manner as the Bank
now holds the depositor's IRA funds. An annual administrative fee might be
payable to the new trustee. The Bank assumes no responsibility as to the
selection of, or services performed by, a new trustee.
Depositors interested in transferring IRA funds on deposit at the Bank to
purchase Common Stock should contact the Stock Information Center at (816)
________ as soon as possible so that the necessary forms may be completed prior
to the Expiration Date of the Subscription Offering. This process cannot be done
through the mail and sufficient time should be allowed for the completion of the
transfer.
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Stock subscriptions received by the Bank may not be modified, withdrawn or
canceled by the subscriber without the consent of the Bank and, if accepted by
the Bank, are final. Subscriptions which are not received by the Subscription
Expiration Date or are not in compliance with the Plan of Conversion or the
stock order form instructions may be deemed void by the Bank. The Bank and the
Holding Company have the right to extend the Subscription Expiration Date,
unless objected to by the OTS, or to waive or permit correction of incomplete or
improperly executed stock order forms, but does not represent that they will do
so.
If Tax-Qualified Employee Plans subscribe for shares during the Subscription
Offering, such plans will not be required to pay for the shares subscribed for
at the time they subscribe, but may pay for such shares of Common Stock
subscribed for by such plans at the actual Purchase Price upon consummation of
the Stock Conversion, provided that, in the case of the ESOP, there is a loan
commitment to lend to the ESOP the aggregate Purchase Price of the shares for
which it subscribes.
To ensure that each purchaser receives a Prospectus at least 48 hours prior to
the Subscription Expiration Date in accordance with Rule 15c2-8 under 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 in accordance with
Rule 15c2-8. Order forms will only be distributed with a Prospectus. The Bank
will accept for processing only orders submitted on original order forms.
Payment by check, money order, bank draft or debit authorization to an existing
account at the Bank must accompany the order form.
Risk of Delayed Offering
In the event that all shares of the Common Stock are not sold in the
Subscription Offering and Community Offering, the Bank and the Holding Company
may extend the Community Offering for a period of up to 45 days from the date of
the termination of the Subscription Offering. Further extensions are subject to
OTS approval and may be granted for successive periods, but not beyond 24 months
from the date of the Special Meeting.
A material delay in the completion of the sale of all unsubscribed shares in
the Community Offering may result in a significant increase in the costs in
completing the Stock Conversion. Significant changes in the Bank's operations
and financial condition, the aggregate market value of the shares to be issued
in the Stock Conversion and general market conditions may occur during such
material delay. In the event the Stock Conversion is not consummated within 24
months after the date of the Special Meeting, the Bank would charge accrued
Conversion costs to then current period operations. See "Risk Factors--Potential
Increased Costs of Conversion Resulting from Delayed Offering."
Approval, Interpretation, Amendment and Termination
All interpretations of the Plan of Conversion, as well as the completeness and
validity of order forms, will be made by the Bank and the Holding Company and
will be final, subject to the authority of the OTS and the requirements of
applicable law. The Plan of Conversion provides that, if deemed necessary or
desirable by the Boards of Directors of the Bank and the Holding Company, the
Plan of Conversion may be substantively amended (including an amendment to
eliminate the formation of the Holding Company as part of the Stock Conversion)
by the Boards of Directors of the Bank and the Holding Company, as a result of
comments from regulatory authorities or otherwise, at any time but only with the
concurrence of the OTS. Moreover, if the Plan of Conversion is amended,
subscriptions which have been received prior to such amendment will not be
refunded if such amendment is not material to the transaction or otherwise
required by the OTS.
In the event that a decision is made to eliminate the Holding Company as part
of the Stock Conversion, the Holding Company will withdraw its registration
statement from the SEC and the Bank will take all steps necessary to complete
the Stock Conversion without the Holding Company, including filing any necessary
documents with the OTS. In such event, and provided there is no regulatory
action, directive or other consideration upon which basis the Bank determines
not to complete the Stock Conversion, if permitted by the OTS the Bank will
issue and sell the common stock of the Bank and subscribers will be notified of
the elimination of the Holding Company and resolicited (i.e., permitted to
affirm their orders, in which case they will need affirmatively to reconfirm
their subscriptions prior to the expiration of the resolicitation offering or
their funds will be promptly refunded with
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interest at the Bank's current passbook rate per annum; or be permitted to
modify or rescind their subscriptions) and notified of the time period within
which they must affirmatively notify the Bank of their intention to affirm,
modify or rescind their subscription. In the event that a holding company form
of organization is not used, all other pertinent terms of the Plan of Conversion
as described in "-Offering of Holding Company Common Stock" will apply to the
conversion of the Bank from the mutual to stock form of organization and the
sale of the Bank's common stock, as well as the subsequent charter conversion of
the Converted Bank to the National Bank.
The Plan of Conversion will terminate if the sale of all shares is not
completed within 24 months after the date of the Special Meeting. The Plan of
Conversion may be terminated by the Board of Directors of the Bank with the
concurrence of the OTS at any time. A specific resolution approved by a two-
thirds vote of the Board of Directors would be required to terminate the Plan of
Conversion prior to the end of such 24-month period. See "Risk Factors -
Possible Consequences of Amendment to Plan of Conversion."
Restrictions on Repurchase of Stock
For a period of three years following Conversion, the Holding Company may not
repurchase any shares of its capital stock, except in the case of an offer to
repurchase on a pro rata basis made to all holders of capital stock of the
Holding Company. Any such offer shall be subject to the prior approval of the
OTS. Furthermore, the Holding Company may not repurchase any of its stock (i)
if the result thereof would be to reduce the regulatory capital of the Bank
below the amount required for the liquidation account to be established pursuant
to OTS regulations and (ii) except in compliance with the requirements of the
OTS' capital distribution rule.
The above limitations are subject to the OTS conversion rules which generally
provide that the Holding Company may repurchase its capital stock provided (i)
no repurchases occur within one year following the Stock Conversion (except with
OTS approval), (ii) repurchases during the second and third year after
conversion are part of an open market stock repurchase program that does not
allow for a repurchase of more than 5% of the Holding Company's outstanding
capital stock during a 12-month period, (iii) the repurchases do not cause the
Bank to become undercapitalized, and (iv) the Holding Company provides notice or
an application to the OTS at least ten days prior to the commencement of a
repurchase program and the OTS does not object. In addition, the above
limitations do not preclude repurchases of capital stock by the Holding Company
as otherwise permitted by the OTS or in the event applicable federal regulatory
limitations are subsequently liberalized.
Restrictions on Transferability
The Subscription Rights described in this Prospectus are non-transferable and
shall be awarded to eligible persons without payment. Prior to the completion
of the Stock Conversion, federal regulations prohibit any person from
transferring or entering into any agreement or understanding to transfer the
legal or beneficial ownership of the Subscription Rights issued under the Plan
of Conversion or the shares of Common Stock to be issued upon their exercise.
Persons violating such prohibition may lose their right to purchase stock in the
Stock Conversion and may be subject to sanctions by the OTS. Each person
exercising Subscription Rights will be required to certify that a purchase of
Common Stock is solely for the purchaser's own account and that there is no
agreement or understanding regarding the sale or transfer of such shares. The
Bank and the Holding Company 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.
Shares purchased by directors, executive officers or their associates in the
Stock Conversion shall be subject to the restrictions that said shares shall not
be sold during the period of one year following the date of purchase, except in
the event of the death of the stockholder or resulting from an exchange of
securities in a merger or acquisition approved by applicable regulatory
authorities, in which event such restriction shall be released. Accordingly,
stock certificates issued by the Holding Company to directors, executive
officers and associates shall bear a legend giving appropriate notice of such
restriction and, in addition, the Bank and the Holding Company will give
appropriate instructions to the transfer agent for the Holding Company's Common
Stock with respect to the applicable restriction upon transfer of any restricted
shares. Any shares issued at a later date as a stock dividend, stock split or
otherwise, to holders of restricted stock, shall be subject to the same
restrictions that may apply to
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such restricted stock. Holding Company stock (like the stock of most companies)
is subject to the requirements of the Securities Act. Accordingly, Holding
Company stock may be offered and sold only in compliance with such registration
requirements or pursuant to an applicable exemption from registration.
OTS regulations provide that for a period of three years following the
Conversion, without prior approval of the OTS, neither directors and officers of
the Holding Company, the Bank nor their associates may purchase shares of the
Holding Company, except from a broker registered with the SEC. This restriction
does not, however, apply to negotiated transactions involving more than one
percent of the Holding Company's outstanding Common Stock or the purchase of
stock made by or held by any one or more employee stock benefit plans which may
be attributable to individual directors or officers.
Holding Company stock received in the Stock Conversion by persons who are not
"affiliates" of the Holding Company may be resold without registration. Shares
received by affiliates of the Holding Company (primarily the directors, officers
and principal stockholders of the Holding Company) will be subject to the resale
restrictions of Rule 144 under the Securities Act, which are discussed below.
Rule 144 generally requires that there be publicly available certain information
concerning the Holding Company, and that sales thereunder be made in routine
brokerage transactions or through a market maker. If the conditions of Rule 144
are satisfied, each affiliate (or group of persons acting in concert with one or
more affiliates) is entitled to sell in the public market, without registration,
in any three-month period, a number of shares which does not exceed the greater
of (i) 1% of the number of outstanding shares of Holding Company stock, or (ii)
if the stock is admitted to trading on a national securities exchange or
reported through the automated quotation system of a registered securities
association the average weekly reported volume of trading during the four weeks
preceding the sale.
Income Tax Consequences
Consummation of the Stock Conversion is expressly conditioned upon prior
receipt by the Bank of either a ruling from the Internal Revenue Service or an
opinion of Luse Lehman Gorman Pomerenk & Schick, P.C. with respect to federal
taxation, and a ruling of the Missouri taxation authorities or an opinion of
Lockridge, Constant & Conrad, LLC with respect to Missouri taxation, to the
effect that consummation of the Stock Conversion will not be taxable to the
Converted Bank or the Holding Company.
An opinion has been received from Luse Lehman Gorman Pomerenk & Schick, P.C.
with respect to the proposed Stock Conversion of the Bank, to the effect that
(i) the Stock Conversion will qualify as a reorganization under Section
368(a)(1)(F) of the Code, and no gain or loss will be recognized to the Bank in
either its mutual form or its stock form by reason of the proposed Stock
Conversion, (ii) no gain or loss will be recognized to the Bank upon the receipt
of money from the Holding Company for stock of the Bank; and no gain or loss
will be recognized to the Holding Company upon the receipt of money for Common
Stock of the Holding Company; (iii) the assets of the Bank in either its mutual
or its stock form will have the same basis before and after the Stock
Conversion; (iv) the holding period of the assets of the Bank will include the
period during which the assets were held by the Bank in its mutual form prior to
conversion; (v) no gain or loss will be recognized by the depositors of the Bank
upon the issuance to them of withdrawable deposit accounts in the Bank after the
Stock Conversion in the same dollar amount as their deposit accounts in the Bank
plus an interest in the Liquidation Account of the Bank, as described above, in
exchange for their deposit account in the Bank; (vi) the basis of the account
holder's deposit accounts in the Bank after the Stock Conversion will be the
same as the basis of his deposit accounts in the Bank prior to the Stock
Conversion; (vii) the basis of each account holder's interest in the Liquidation
Account will be zero; (viii) the basis of the Holding Company Common Stock to
its shareholders will be the Purchase Price thereof plus, in the case of stock
acquired by account holders, the basis, if any, in the Subscription Rights and a
shareholder's holding period for Holding Company Common Stock acquired through
the exercise of Subscription Rights shall begin on the date on which the
Subscription Rights are exercised; (ix) for purposes of Section 381 of the Code,
the Bank will be treated as if there had been no reorganization, accordingly,
the taxable year of the Bank will not end on the effective date of the Stock
Conversion and the tax attributes of the Bank will be taken into account by the
Bank in stock form as if there had been no reorganization; (x) the part of the
taxable year of the Bank before the reorganization and the part of the taxable
year of the Bank after the reorganization will constitute a single taxable year
of the Bank; (xi) the Bank, immediately after Stock Conversion, will succeed to
the bad debt reserve accounts of the Bank, in mutual form, and the bad debt
reserves will have the same character in the hands
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of the Bank after Stock Conversion as if no distribution or transfer had
occurred; and (xii) the creation of the liquidation account will have no effect
on the Bank's taxable income, deductions or addition to reserve for bad debts
either in its mutual or stock form.
The opinion from Luse Lehman Gorman Pomerenk & Schick, P.C. is based, among
other things, on certain assumptions, including the assumptions that the
exercise price of the Subscription Rights to purchase Holding Company Common
Stock will be approximately equal to the fair market value of that stock at the
time of the completion of the proposed Stock Conversion. The Holding Company and
the Bank have received a letter issued by Ferguson stating that pursuant to
Ferguson's valuation, Ferguson is of the belief that Subscription Rights issued
in connection with the Stock Conversion will have no value. The letter of
Ferguson and the federal and state tax opinions, respectively, referred to
herein are filed as exhibits to the Registration Statement. See "Additional
Information."
The Bank has also received an opinion of Luse Lehman Gorman Pomerenk & Schick,
P.C. to the effect that, based in part on the Ferguson Letter: (i) no taxable
income will be realized by depositors as a result of the receipt or exercise of
non-transferable Subscription Rights to purchase shares of Holding Company
Common Stock at fair market value; and (ii) no taxable income will be realized
by the Bank or Holding Company on the issuance of Subscription Rights to
eligible subscribers to purchase shares of Holding Company Common Stock at fair
market value.
If it is subsequently established that the Subscription Rights received by
such persons have an ascertainable fair market value, then, in such event, the
Subscription Rights will be taxable to the recipient in the amount of their fair
market value. In this regard, the Subscription Rights may be taxed partially or
entirely at ordinary income tax rates.
With respect to Missouri taxation, the Bank has received an opinion from
Lockridge, Constant & Conrad, LLC to the effect that, assuming the Stock
Conversion does not result in any federal taxable income, gain or loss to the
Bank in its mutual or stock form, the Holding Company, the account holders,
borrowers, officers, directors and employees and Tax-Qualified Employee Plans of
the Bank, the Stock Conversion should not result in any Missouri income tax
liability to such entities or persons.
Unlike a private letter ruling, the opinions of Luse Lehman Gorman Pomerenk &
Schick, P.C. and Lockridge, Constant & Conrad, LLC, as well as the Ferguson
Letter, have no binding effect or official status, and no assurance can be given
that the conclusions reached in any of those opinions would be sustained by a
court if contested by the IRS or the Missouri tax authorities.
RESTRICTIONS ON ACQUISITIONS OF STOCK AND
RELATED TAKEOVER DEFENSIVE PROVISIONS
Although the Boards of Directors of the Bank and the Holding Company are not
aware of any effort that might be made to obtain control of the Holding Company
after Conversion, the Boards of Directors, as discussed below, believe that it
is appropriate to include certain provisions as part of the Holding Company's
certificate of incorporation to protect the interests of the Holding Company and
its stockholders from takeovers which the Board of Directors of the Holding
Company might conclude are not in the best interests of the Bank, the National
Bank, the Holding Company or the Holding Company's stockholders.
The following discussion is a general summary of the material provisions of
the Holding Company's certificate of incorporation and bylaws and certain other
regulatory provisions which may be deemed to have an "anti-takeover" effect.
The following description of certain of these provisions is necessarily general
and, with respect to provisions contained in the Holding Company's certificate
of incorporation and bylaws, the Bank's proposed stock charter and bylaws, and
the National Bank's proposed articles and bylaws, reference should be made in
each case to the document in question, each of which is part of the Bank's
application to the OTS and the OCC
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and the Holding Company's Registration Statement filed with the SEC and holding
company application filed with the FRB. See "Additional Information."
Provisions of the Holding Company's Certificate of Incorporation and Bylaws
Directors. Certain provisions of the Holding Company's certificate of
incorporation and bylaws will impede changes in majority control of the Board of
Directors. The Holding Company's certificate of incorporation provides that the
Board of Directors of the Holding Company will be divided into three classes,
with directors in each class elected for three-year staggered terms except for
the initial directors. Thus, it would take two annual elections to replace a
majority of the Holding Company's Board. The Holding Company's certificate of
incorporation provides that the size of the Board of Directors may be increased
or decreased only by a majority vote of the Board. The certificate of
incorporation also provides that any vacancy occurring in the Board of
Directors, including a vacancy created by an increase in the number of
directors, shall be filled for the remainder of the unexpired term by a majority
vote of the directors then in office. Finally, the certificate and bylaws
impose certain notice and information requirements in connection with the
nomination by stockholders of candidates for election to the Board of Directors
or the proposal by stockholders of business to be acted upon at an annual
meeting of stockholders.
The certificate of incorporation provides that a director may only be removed
for cause by the affirmative vote of 80% of the shares eligible to vote.
Removal for "cause" is limited to the grounds for termination in the federal
regulations that applies to employment contracts of federally insured savings
institutions.
Restrictions on Call of Special Meetings. The certificate of incorporation of
the Holding Company provides that a special meeting of stockholders may be
called by the Chairman of the Board of the Holding Company or pursuant to a
resolution adopted by a majority of the Board of Directors. Stockholders are
not authorized to call a special meeting.
Absence of Cumulative Voting. The Holding Company's certificate of
incorporation provides that there shall be no cumulative voting rights in the
election of directors.
Authorization of Preferred Stock. The certificate of incorporation of the
Holding Company authorizes 100,000 shares of serial preferred stock, without par
value. The Holding Company is authorized to issue preferred stock from time to
time in one or more series subject to applicable provisions of law; and the
Board of Directors is authorized to fix the designations, and relative
preferences, limitations, voting rights, if any, including without limitation,
conversion rights of such shares (which could be multiple or as a separate
class). In the event of a proposed merger, tender offer or other attempt to
gain control of the Holding Company that the Board of Directors does not
approve, it might be possible for the Board of Directors to authorize the
issuance of a series of preferred stock with rights and preferences that would
impede the completion of such a transaction. An effect of the possible issuance
of preferred stock, therefore, may be to deter a future takeover attempt. The
Board of Directors has no present plans or understandings for the issuance of
any preferred stock but it may issue any preferred stock on terms which the
Board deems to be in the best interests of the Holding Company and its
stockholders.
Limitation on Voting Rights. The certificate of incorporation of the Holding
Company provides that (i) no person shall directly or indirectly offer to
acquire or acquire the beneficial ownership of more than 10% of any class of
equity security of the Holding Company (provided that such limitation shall not
apply to the acquisition of equity securities by any one or more tax-qualified
employee stock benefit plans maintained by the Holding Company, if the plan or
plans beneficially own no more than 25% of any class of such equity security of
the Holding Company); and that (ii) shares beneficially owned in violation of
the stock ownership restriction described above shall not be entitled to vote
and shall not be voted by any person or counted as voting stock in connection
with any matter submitted to a vote of stockholders. For these purposes, a
person (including management) who has obtained the right to vote shares of the
Common Stock pursuant to revocable proxies shall not be deemed to be the
"beneficial owner" of those shares if that person is not otherwise deemed to be
a beneficial owner of those shares.
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The certificate of incorporation of the Holding Company further provides that
the Board of Directors of the Holding Company, when determining to take or
refrain from taking corporate action on any matter, including making or
declining to make any recommendation to the Holding Company's stockholders, may,
in connection with the exercise of its judgment in determining what is in the
best interest of the Holding Company, the Bank, the National Bank and the
stockholders of the Holding Company, give due consideration to all relevant
factors, including, without limitation, the social and economic effects of
acceptance of such offer on the Holding Company's customers and the Bank's (and
the National Bank's) present and future account holders, borrowers and
employees; the effect on the communities in which the Holding Company and the
Bank (and the National Bank) operate or are located; and the effect on the
ability of the Holding Company to fulfill the objectives of a financial
institution holding company and of the Bank (and the National Bank) or future
subsidiaries to fulfill the objectives of a financial institution under
applicable statutes and regulations. The certificate of incorporation of the
Holding Company also authorizes the Board of Directors to take certain actions
to encourage a person to negotiate for a change of control of the Holding
Company or to oppose such a transaction deemed undesirable by the Board of
Directors including the adoption of so-called shareholder rights plans. By
having these standards and provisions in the certificate of incorporation of the
Holding Company, the Board of Directors may be in a stronger position to oppose
such a transaction if the Board concludes that the transaction would not be in
the best interest of the Holding Company, even if the price offered is
significantly greater than the then market price of any equity security of the
Holding Company.
Procedures for Certain Business Combinations. The certificate of
incorporation of the Holding Company requires that certain business combinations
between the Holding Company (or any majority-owned subsidiary thereof) and a 10%
or greater stockholder either (i) be approved by at least 80% of the total
number of outstanding voting shares of the Holding Company or (ii) be approved
by a majority of certain directors unaffiliated with such 10% or greater
stockholder or (iii) involve consideration per share generally equal to the
higher of (A) the highest amount paid by such 10% stockholder or its affiliates
in acquiring any shares of the Common Stock or (B) the "Fair Market Value"
(generally, the highest closing bid paid on the Common Stock during the 30 days
preceding the date of the announcement of the proposed business combination or
on the date the 10% or greater stockholder became such, whichever is higher).
Amendment to Certificate of Incorporation and Bylaws. Amendments to the
Holding Company's certificate of incorporation must be approved by the Holding
Company's Board of Directors and also by a majority of the outstanding shares of
the Holding Company's voting stock; provided, however, that approval by at least
80% of the outstanding voting stock is generally required for certain
provisions (i.e., provisions relating to number, classification, election and
removal of directors, amendment of bylaws, call of special stockholder meetings,
criteria for evaluating certain offers, offers to acquire and acquisitions of
control, director liability, certain business combinations, power of
indemnification, and amendments to provisions relating to the foregoing in the
certificate of incorporation).
The bylaws may be amended by the affirmative vote of the total number of
directors of the Holding Company or the affirmative vote of at least 80% of the
total votes eligible to be voted at a duly constituted meeting of stockholders.
Purpose and Takeover Defensive Effects of the Holding Company's Certificate of
Incorporation and Bylaws. The Board of Directors of the Bank believes that the
provisions described above are prudent and will reduce the Holding Company's
vulnerability to takeover attempts and certain other transactions which have not
been negotiated with and approved by its Board of Directors. These provisions
will also assist the Bank in the orderly deployment of the Stock Conversion
proceeds into productive assets during the initial period after the Stock
Conversion. The Board of Directors believes these provisions are in the best
interest of the Bank and of the Holding Company and its stockholders. In the
judgment of the Board of Directors, the Holding Company's Board will be in the
best position to determine the true value of the Holding 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 Holding Company and its stockholders to encourage
potential acquirors to negotiate directly with the Board of Directors of the
Holding Company and that these provisions will encourage such negotiations and
discourage hostile takeover attempts. It is also the view of the Board of
Directors that these provisions should not
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discourage persons from proposing a merger or other transaction at prices
reflective of the true value of the Holding Company and which is in the best
interests of all stockholders.
Attempts to take over financial institutions and their holding companies have
become increasingly common. Takeover attempts which have not been negotiated
with and approved by the Board of Directors present to stockholders the risk of
a takeover on terms which may be less favorable than might otherwise be
available. A transaction which is negotiated and approved by the Board of
Directors, on the other hand, can be carefully planned and undertaken at an
opportune time in order to obtain maximum value for the Holding Company and its
stockholders, with due consideration given to matters such as the management and
business of the acquiring corporation and maximum strategic development of the
Holding Company's assets.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause it great expense. Although a tender offer
or other takeover attempt may be made at a price substantially above then-
current market prices, such offers are sometimes made for less than all of the
outstanding shares of a target company. As a result, stockholders may be
presented with the alternative of partially liquidating their investment at a
time that may be disadvantageous or retaining their investment in an enterprise
which is under different management and whose objectives may not be similar to
those of the remaining stockholders. The concentration of control, which could
result from a tender offer or other takeover attempt, could also deprive the
Holding Company's remaining stockholders of the benefits of certain protective
provisions of the Exchange Act, if the number of beneficial owners becomes less
than the 300 required for Exchange Act registration.
Potential Anti-Takeover Effects. Despite the belief of the Bank and the
Holding Company as to the benefits to stockholders of these provisions of the
Holding Company's certificate of incorporation and bylaws, these provisions may
also have the effect of discouraging a future takeover attempt which would not
be approved by the Holding Company's Board, but pursuant to which stockholders
may receive a substantial premium for their shares over then-current market
prices. As a result, stockholders who might desire to participate in such a
transaction may not have any opportunity to do so. Such provisions will also
render the removal of the Holding Company's Board of Directors and of management
more difficult. The Boards of Directors of the Bank and the Holding Company,
however, have concluded that the potential benefits outweigh the possible
disadvantages.
Pursuant to applicable law, at any annual or special meeting of its
stockholders after the Stock Conversion, the Holding Company may adopt
additional provisions to its certificate of incorporation regarding the
acquisition of its equity securities that would be permitted to a Delaware
corporation. The Holding Company and the Bank do not presently intend to
propose the adoption of further restrictions on the acquisition of the Holding
Company's equity securities.
Other Restrictions on Acquisitions of Stock
Delaware Anti-Takeover Statute. The State of Delaware has enacted legislation
which provides that subject to certain exceptions a publicly held Delaware
corporation may not engage in any business combination with an "interested
stockholder" for three years after such stockholder became an interested
stockholder, unless, among other things, the interested stockholder acquired at
least 85% of the corporation's voting stock in the transaction that resulted in
the stockholder becoming an interested stockholder. This legislation generally
defines "interested stockholder" as any person or entity that owns 15% or more
of the corporation's voting stock. The term "business combination" is defined
broadly to cover a wide range of corporate transactions, including mergers,
sales of assets, issuances of stock, transactions with subsidiaries and the
receipt of disproportionate financial benefits. Under certain circumstances,
either the board of directors or both the board and two-thirds of the
stockholders other than the acquiror may approve a given business combination
and thereby exempt the corporation from the operation of the statute.
However, these statutory provisions do not apply to Delaware corporations with
fewer than 2,000 stockholders or which do not have voting stock listed on a
national exchange or listed for quotation with a registered national securities
association. The Holding Company has applied to have the Common Stock listed on
the Nasdaq SmallCap Market.
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OTS Regulation. OTS regulations prohibit any person prior to the completion of
a conversion from transferring, or entering into any agreement or understanding
to transfer, the legal or beneficial ownership of the Subscription Rights issued
under a plan of conversion or the stock to be issued upon their exercise. These
regulations also prohibit any person prior to the completion of a conversion
from offering, or making an announcement of an offer or intent to make an offer,
to purchase such Subscription Rights or stock. For three years following
conversion, this regulation prohibits any person, without the prior approval of
the OTS, from acquiring or making an offer (if opposed by the institution) to
acquire more than 10% of the stock of any converted savings institution if such
person is, or after consummation of such acquisition would be, the beneficial
owner of more than 10% of such 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 matter submitted to a vote of stockholders.
Federal law provides that no company "directly or indirectly or acting in
concert with one or more persons, or through one or more subsidiaries, or
through one or more transactions," may acquire "control" of a savings
association at any time without the prior approval of the OTS. "Acting in
concert" is defined very broadly. In addition, federal regulations require
that, prior to obtaining control of a savings association, a person, other than
a company, must give 60 days' prior notice to the OTS and have received no OTS
objection to such acquisition of control. Any company that acquires such
control becomes a "savings and loan holding company" subject to registration,
examination and regulation as a savings and loan holding company. Under federal
law (as well as the regulations referred to below) the term "savings
association" includes state and federally chartered SAIF-insured institutions
and federally chartered savings banks whose accounts are insured by the FDIC's
BIF and holding companies thereof. Following completion of the Bank Conversion,
the control restrictions of the OTS will no longer be applicable.
Control, as defined under federal law, means ownership, control of or holding
irrevocable proxies representing more than 25% of any class of voting stock,
control in any manner of the election of a majority of the savings association's
directors, or a determination by the OTS that the acquiror has the power to
direct, or directly or indirectly to exercise a controlling influence over, the
management or policies of the institution. Acquisition of more than 10% of any
class of a savings association's voting stock, if the acquiror also is subject
to any one of eight "control factors," constitutes a rebuttable determination of
control under the regulations. Such control factors include the acquiror being
one of the two largest stockholders. The determination of control may be
rebutted by submission to the OTS, prior to the acquisition of stock or the
occurrence of any other circumstances giving rise to such determination, of a
statement setting forth facts and circumstances which would support a finding
that no control relationship will exist and containing certain undertakings.
The regulations provide that persons or companies which acquire beneficial
ownership exceeding 10% or more of any class of a savings association's stock
must file with the OTS a certification that the holder is not in control of such
institution, is not subject to a rebuttable determination of control and will
take no action which would result in a determination or rebuttable determination
of control without prior notice to or approval of the OTS, as applicable.
FRB Regulations. The CIBC and the BHCA, together with the FRB regulations
under those acts, require that the consent of the FRB be obtained prior to any
person or company acquiring "control" of a bank holding company. Control is
conclusively presumed to exist if an individual or company acquires more than
25% of any class of voting stock of the bank holding company. Control is
rebuttably presumed to exist if the person acquires more than 10% of any class
of voting stock of a bank holding company if either (i) the Holding Company has
registered securities under Section 12 of the Exchange Act or (ii) no other
person will own a greater percentage of that class of voting securities
immediately after the transaction. The regulations provide a procedure to rebut
the rebuttable control presumption. Since the Holding Company's Common Stock
will be registered under Section 12 of the Exchange Act, any acquisition of 10%
or more of the Holding Company's Common Stock will give rise to a rebuttable
presumption that the acquiror of such stock controls the Holding Company,
requiring the acquiror, prior to acquiring such stock, to rebut the presumption
of control to the satisfaction of the FRB or obtain FRB approval for the
acquisition of control. Restrictions applicable to the operations of bank
holding companies may deter companies from seeking to obtain control of the
Holding Company. See "Regulation."
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DESCRIPTION OF CAPITAL STOCK
Holding Company Capital Stock
The 1,000,000 shares of capital stock authorized by the Holding Company
certificate of incorporation are divided into two classes, consisting of 900,000
shares of Common Stock ($.01 par value) and 100,000 shares of serial preferred
stock ($.01 par value). The Holding Company currently expects to issue between
191,250 and 258,750 shares of Common Stock in the Stock Conversion. The
aggregate stated value of the issued shares will constitute the capital account
of the Holding Company on a consolidated basis. The balance of the Purchase
Price of Common Stock, less expenses of Stock Conversion, will be reflected as
paid-in capital on a consolidated basis. See "Capitalization." Upon payment of
the Purchase Price for the Common Stock, in accordance with the Plan of
Conversion, all such stock will be duly authorized, fully paid, validly issued
and nonassessable.
Each share of the Common Stock will have the same relative rights and will be
identical in all respects with each other share of the Common Stock. The Common
Stock of the Holding Company will represent non-withdrawable capital, will not
be of an insurable type and will not be insured by the FDIC.
Under Delaware law, the holders of the Common Stock will possess exclusive
voting power in the Holding Company. Each stockholder will be entitled to one
vote for each share held on all matters voted upon by stockholders, subject to
the limitation discussed under "Restrictions on Acquisitions of Stock and
Related Takeover Defensive Provisions - Provisions of the Holding Company's
Certificate of Incorporation and Bylaws - Limitation on Voting Rights." If the
Holding Company issues preferred stock subsequent to the Stock Conversion,
holders of the preferred stock may also possess voting powers.
Liquidation or Dissolution. In the unlikely event of the liquidation or
dissolution of the Holding Company, the holders of the Common Stock will be
entitled to receive -- after payment or provision for payment of all debts and
liabilities of the Holding Company (including all deposits in the Bank and
accrued interest thereon) and after distribution of the liquidation account
established upon Stock Conversion for the benefit of Eligible Account Holders
and Supplemental Eligible Account Holders who continue their deposit accounts at
the Bank -- all assets of the Holding Company available for distribution, in
cash or in kind. See "The Conversion - Effects of Conversion to Stock Form on
Depositors and Borrowers of the Bank." If preferred stock is issued subsequent
to the Stock Conversion, the holders thereof may have a priority over the
holders of Common Stock in the event of liquidation or dissolution.
No Preemptive Rights. Holders of the Common Stock will not be entitled to
preemptive rights with respect to any shares which may be issued. The Common
Stock will not be subject to call for redemption, and, upon receipt by the
Holding Company of the full purchase price therefor, each share of the Common
Stock will be fully paid and nonassessable.
Preferred Stock. After Stock Conversion, the Board of Directors of the
Holding Company will be authorized to issue preferred stock in series and to fix
and state the voting powers, designations, preferences and relative,
participating, optional or other special rights of the shares of each such
series and the qualifications, limitations and restrictions thereof. Preferred
stock may rank prior to the Common Stock as to dividend rights, liquidation
preferences, or both, and may have full or limited voting rights. The holders
of preferred stock will be entitled to vote as a separate class or series under
certain circumstances, regardless of any other voting rights which such holders
may have.
Except as discussed herein, the Holding Company has no present plans for the
issuance of the additional authorized shares of Common Stock or for the issuance
of any shares of preferred stock. In the future, the authorized but unissued
and unreserved shares of Common Stock will be available for general corporate
purposes including but not limited to possible issuance as stock dividends or
stock splits, in future mergers or acquisitions, under a cash dividend
reinvestment and stock purchase plan, in a future underwritten or other public
offering or under an employee stock ownership plan, stock option or restricted
stock plan. The authorized but unissued shares of preferred stock will
similarly be available for issuance in future mergers or acquisitions, in a
future underwritten
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public offering or private placement or for other general corporate purposes.
Except as described above or as otherwise required to approve the transaction in
which the additional authorized shares of Common Stock or authorized shares of
preferred stock would be issued, no stockholder approval will be required for
the issuance of these shares. Accordingly, the Board of Directors of the Holding
Company, without stockholder approval, can issue preferred stock with voting and
conversion rights which could adversely affect the voting power of the holders
of Common Stock.
Restrictions on Acquisitions. See "Restrictions on Acquisitions of Stock and
Related Takeover Defensive Provisions" for a description of certain provisions
of the Holding Company's certificate of incorporation and bylaws which may
affect the ability of the Holding Company's stockholders to participate in
certain transactions relating to acquisitions of control of the Holding Company.
Dividends. Upon consummation of the formation of the Holding Company, the
Holding Company's only asset will be the Bank's Common Stock. Although it is
anticipated that the Holding Company will retain approximately 50% of the net
proceeds in the Stock Conversion, dividends from the Bank will be an important
source of income for the Holding Company. Should the Bank elect to retain its
income, the ability of the Holding Company to pay dividends to its own
shareholders may be adversely affected. Furthermore, if at any time in the
future the Holding Company owns less than 80% of the outstanding stock of the
Bank, certain tax benefits under the Code as to inter-company distributions will
not be fully available to the Holding Company and it will be required to pay
federal income tax on a portion of the dividends received from the Bank, thereby
reducing the amount of income available for distribution to the shareholders of
the Holding Company. For further information concerning the ability of the
Bank, and following the Bank Conversion, the National Bank, to pay dividends to
the Holding Company, see "Dividends."
LEGAL AND TAX MATTERS
The legality of the Common Stock and the federal income tax consequences of
the Conversion will be passed upon for the Bank and the Holding Company by the
firm of Luse Lehman Gorman Pomerenk & Schick, P.C., Washington, D.C. The
Missouri state income tax consequences of the Conversion will be passed upon for
the Bank and the Holding Company by Lockridge, Constant & Conrad, LLC,
Chillicothe, Missouri. Luse Lehman Gorman Pomerenk & Schick, P.C. and
Lockridge, Constant & Conrad, LLC have consented to the references herein to
their opinions. Certain legal matters regarding the Conversion will be passed
upon for Trident Securities by Breyer & Aguggia, Washington, D.C.
EXPERTS
The Consolidated Financial Statements of the Bank as of June 30, 1996 and
1995, and for the fiscal years ended June 30, 1996 and 1995 have been included
in this Prospectus in reliance on the report of Lockridge, Constant & Conrad,
LLC, certified public accountants, appearing elsewhere herein, and upon the
authority of that firm as experts in accounting and auditing.
Ferguson has consented to the publication herein of the summary of its report
to the Bank and the Holding Company setting forth its opinion as to the
estimated pro forma market value of the Common Stock upon Conversion and its
valuation with respect to Subscription Rights.
119
<PAGE>
ADDITIONAL INFORMATION
The Holding Company has filed with the SEC a registration statement under the
Securities Act, with respect to the Common Stock offered hereby. As permitted
by the rules and regulations of the SEC, this Prospectus does not contain all
the information set forth in the registration statement. Such information can
be examined without charge at the public reference facilities of the SEC located
at 450 Fifth Street, NW, Washington, D.C. 20549, and copies of such material
can be obtained from the SEC at prescribed rates. The SEC maintains a web site
that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC. The address of this web
site is http://www.sec.gov. The statements contained herein as to the contents
of any contract or other document filed as an exhibit to the registration
statement are, of necessity, brief descriptions thereof and are not necessarily
complete but do contain all material information regarding such documents; each
such statement is qualified by reference to such contract or document.
The Bank has filed an Application for Conversion with the OTS with respect to
the Stock Conversion. Pursuant to the rules and regulations of the OTS, this
Prospectus omits certain information contained in that Application. The
Application may be examined at the principal offices of the OTS, 1700 G Street,
N.W., Washington, D.C. 20552 and at the Midwest Regional Office of the OTS
located at 122 W. John Carpenter Freeway, Suite 600, Irving, Texas 75039.
In connection with the Stock Conversion, the Holding Company will register the
Common Stock with the SEC under Section 12(g) of the Exchange Act; and, upon
such registration, the Holding Company and the holders of its Common Stock will
become subject to the proxy solicitation rules, reporting requirements and
restrictions on stock purchases and sales by directors, officers and greater
than 10% stockholders, the annual and periodic reporting and certain other
requirements of the Exchange Act. Under the Plan of Conversion, the Holding
Company has undertaken that it will not terminate such registration for a period
of at least three years following the Stock Conversion.
A copy of the certificate of incorporation and bylaws of the Holding Company
are available without charge from the Bank.
120
<PAGE>
Investors Federal Bank and Savings Association
Chillicothe, Missouri
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report......................................... F-2
Consolidated Statements of Financial Condition at June 30, 1996
and 1995........................................................... F-3
Consolidated Statements of Income for the years ended June 30, 1996
and 1995........................................................... 35
Consolidated Statements of Equity for the years ended June 30, 1996
and 1995........................................................... F-4
Consolidated Statements of Cash Flows for the years ended June 30,
1996 and 1995...................................................... F-5
Notes to Consolidated Financial Statements........................... F-8
</TABLE>
######
All financial statements of IFB Holdings, Inc. have been omitted because IFB
Holdings, Inc. has not yet issued any stock, has no assets and liabilities and
has not conducted any business other than of an organizational nature.
All schedules are omitted as the required information is not applicable or
because the required information is included in the consolidated financial
statements or related notes.
<PAGE>
[LETTERHEAD OF LOCKRIDGE, CONSTANT & CONRAD, LLC APPEARS HERE]
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Investors Federal Bank and
Savings Association
Chillicothe, Missouri
We have audited the accompanying consolidated statements of financial condition
of Investors Federal Bank and Savings Association and Subsidiary as of June 30,
1996 and 1995, and the related consolidated statements of income, equity and
cash flows for the years then ended. 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 consolidated financial statements referred to in the first
paragraph present fairly, in all material respects, the financial position of
Investors Federal Bank and Savings Association and Subsidiary as of June 30,
1996 and 1995, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
As described in Note 1 to the consolidated financial statements, the Bank
changed its method of accounting for investment securities to conform with
Statement of Financial Accounting Standards No. 115 effective July 1, 1994.
Chillicothe, Missouri
September 25, 1996, except for
Note 18 as to which the date is
September 30, 1996
MEMBERS SEC PRACTICE SECTION AND AMERICAN INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS
F-2
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
At June 30,
-----------------------
1996 1995
---------- ----------
ASSETS (In Thousands)
------ --------------
<S> <C> <C>
Cash on hand and non-interest earning deposits $ 471 $ 492
Interest-earning deposits 1,609 1,808
Certificates of deposit - 100
Investment securities (Note 2):
Securities available-for-sale at fair value 3,264 1,737
Securities held-to-maturity at amortized cost
(estimated market value of $215,000 and
$796,000, respectively) 215 815
Mortgage-backed securities (Note 3):
Securities available-for-sale at fair value 16,971 4,397
Securities held-to-maturity at amortized cost
(estimated market value of $8,341,000 for 1995) - 8,306
Loans receivable, net (Note 4) 28,429 26,340
Accrued interest receivable (Note 5) 457 322
Investment required by law - stock in
Federal Home Loan Bank, at cost 724 350
Premises and equipment (Note 6) 373 257
Other assets 74 89
------- -------
Total Assets $52,587 $45,013
======= =======
<CAPTION>
LIABILITIES AND EQUITY
----------------------
<S> <C> <C>
Deposits (Note 7) $35,495 $35,210
Federal Home Loan Bank advances (Note 8) 13,474 6,419
Advances from borrowers for taxes and insurance 35 50
Income taxes (Note 10):
Current 17 5
Deferred 101 163
Accrued expenses and other liabilities 197 124
------- -------
Total liabilities 49,319 41,971
------- -------
Commitments and contingencies (Note 14) - -
Retained earnings, substantially
restricted (Note 10) 3,339 3,037
Unrealized gain (loss) on securities
available-for-sale, net of tax (71) 5
------- -------
Total equity 3,268 3,042
------- -------
Total Liabilities and Equity $52,587 $45,013
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Consolidated Statement of Equity
<TABLE>
<CAPTION>
Net
Unrealized
Gains and
Unrealized (Losses)
Retained Loss on for Available-
Earnings Equity for-Sale
Substantially Securities Securities,
Restricted Held-for-Sale Net of Tax Total
-------------- ------------- --------------- ---------
(In Thousands)
<S> <C> <C> <C> <C>
Balance, June 30, 1994 $2,764 $(21) $ - $2,743
Net income for the
year ended June 30,
1995 273 - - 273
Transfer of allowance
account - 21 (21) -
Cumulative effect of
change in accounting
principle - unrealized
net loss for available
-for-sale securities
at July 1, 1994 (Note 1) - - (58) (58)
Change in net unrealized
gains (losses) for
available-for-sale
securities, net of taxes - - 84 84
----------- ----------- ----------- ---------
Balance, June 30, 1995 3,037 - 5 3,042
Net income for the
year ended June 30,
1996 302 - - 302
Change in net unrealized
gain (losses) for
available-for-sale
securities, net of taxes - - (76) (76)
----------- ----------- ----------- ---------
Balance, June 30, 1996 $3,339 $ - $ (71) $3,268
=========== =========== =========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended
June 30,
----------------------
1996 1995
-------- --------
(In Thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 302 $ 273
Adjustments to reconcile net
income to net cash provided
by operating activities:
Net loss (gain) on sales of:
Investment securities - (1)
Mortgage-backed securities (46) (18)
Depreciation 23 19
Provision for loan loss 210 1
Amortization of premiums,
discounts, and loan fees 9 62
FHLB stock dividend (9) -
Changes in assets and liabilities:
Interest receivable (135) (65)
Prepaid expenses and
other assets 25 (51)
Income taxes (29) 26
Accrued expenses and other
liabilities 76 64
----- -----
NET CASH PROVIDED BY
OPERATING ACTIVITIES 426 310
----- -----
</TABLE>
(Continued)
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Consolidated Statements of Cash Flows
(Continued)
-----------
<TABLE>
<CAPTION>
Years ended
June 30,
-----------------------
1996 1995
-------- --------
(In Thousands)
<S> <C> <C>
Cash flows from investing activities:
Net decrease (increase) in loans (288) 232
Purchased loans (2,007) (3,723)
Sale of loans - 80
Purchase of investment securities-
available-for-sale (1,579) (74)
Purchase of investment securities-
held-to-maturity - (100)
Purchase of mortgage-backed
securities - available-for-sale (9,540) (4,644)
Purchase of mortgage-backed
securities - held-to-maturity - (771)
Mortgage-backed securities
principal repayments -
available-for-sale 3,009 366
Mortgage-backed securities
principal repayments -
held-to-maturity - 1,612
Proceeds from maturities/calls
of investment securities
available-for-sale 600 250
Proceeds from sales of
investment securities -
available-for-sale - 126
Proceeds from sales of mortgage-
backed securities - available
-for-sale 2,257 1,713
Purchase of FHLB stock (365) -
Proceeds from maturities of
certificates of deposit 100 297
Proceeds from sales of real
estate owned - 44
Purchase of office properties
and equipment (140) (7)
------ ------
NET CASH USED IN
INVESTING ACTIVITIES (7,953) (4,599)
------ ------
(Continued)
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Consolidated Statements of Cash Flows
(Continued)
<TABLE>
<CAPTION>
Years ended
June 30,
----------------------
1996 1995
-------- --------
(In Thousands)
--------------
<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in
demand deposits, NOW accounts,
passbook savings accounts,
and certificates of deposit 268 (1,856)
Net increase in escrow mortgage
funds (15) 1
Proceeds from Federal Home
Loan Bank advances 9,000 5,400
Principal repayments on Federal
Home Loan Bank advances (746) (3,054)
Net borrowings from Federal
Home Loan Bank line of credit (1,200) 3,000
------- -------
NET CASH PROVIDED
BY FINANCING
ACTIVITIES 7,307 3,491
------- -------
INCREASE (DECREASE)
IN CASH (220) (798)
CASH AT BEGINNING OF YEAR 2,300 3,098
------- -------
CASH AT END OF YEAR $ 2,080 $ 2,300
======= =======
Supplemental disclosure of cash
flow information:
Cash paid for:
Interest - deposits $ 383 $ 342
======= =======
Interest - advances $ 619 $ 207
======= =======
Income taxes $ 176 $ 81
======= =======
Noncash investing and financing
activities:
Loans transferred to real
estate owned $ - $ 43
======= =======
Loans to facilitate sales
of real estate owned $ - $ -
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
--------
The Association provides financial services to individuals and
corporate customers, and is subject to competition from other financial
institutions. The Association is also subject to the regulations of
certain Federal agencies and undergoes periodic examination by those
regulatory authorities.
The Association is principally engaged in one to four family home
lending in agricultural-based rural communities in and around
Chillicothe, Missouri. The Association also makes consumer loans
depending on demand and management's assessment as to the quality of
the loan.
Basis of Financial Statement Presentation
-----------------------------------------
The accompanying consolidated financial statements include the accounts
of Investors Federal Bank and Savings Association (the Association) and
Investors Federal Service Corporation, its wholly owned subsidiary. All
significant intercompany transactions and balances are eliminated in
consolidation.
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the
consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the statement of financial condition
and revenues and expenses for the year. Actual results could differ
significantly from those estimates.
Material estimates that are particularly susceptible to significant
change relate to the determination of the allowance for losses on loans
and the valuation of real estate acquired in connection with
foreclosure or in satisfaction of loans. In connection with the
determination of the allowances for losses on loans and foreclosed real
estate, management obtains independent appraisals for significant
properties.
While management uses available information to recognize losses on
loans and foreclosed real estate, future additions to the allowances
may be necessary based on changes in local economic conditions. In
addition, regulatory agencies, as an integral part of their examination
process, periodically review the Association's allowances for losses on
loans and foreclosed real estate. Such agencies may require the
Association to recognize additions to the allowances
F-8
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
based on their judgements about information available to them at the
time of their examination. Because of these factors, in management's
judgement, the allowances for loan losses reflected in the consolidated
financial statements is adequate to absorb estimated losses that may
exist in the current portfolio.
Statement of Financial Accounting Standards (SFAS) No. 107,
Disclosures About Fair Value of Financial Instruments, requires that
------------------------------------------------------
the estimated fair value of the Association's financial instruments be
disclosed. Fair market value estimates of financial instruments are
made at a specific point in time, based on relevant market information
and information about the financial instruments. These estimates do not
reflect any premium or discount that could result from offering for
sale at one time the entire holdings or a significant portion of a
particular financial instrument. Because no market exists for a
significant portion of the Association's financial instruments, some
fair value estimates are subjective in nature and involve uncertainties
and matters of significant judgment. Changes in assumptions could
significantly affect these estimates. Fair value estimates are
presented for existing on-balance-sheet and off-balance-sheet financial
instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not
considered financial instruments. In addition, the tax ramifications
related to the realization of the unrealized gains and losses can have
a significant affect on fair value estimates and have not been
considered in any of the estimates (see Note 19).
Cash Equivalents
----------------
Cash equivalents of $2,080,000 and $2,300,000 at June 30, 1996 and
1995, respectively, consist of cash on hand, funds due from banks and
money market mutual funds. For purposes of the statements of cash
flows, the Association considers all highly liquid debt instruments
with original maturities when purchased of three months or less to be
cash equivalents.
F-9
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investment Securities
---------------------
Investment securities that are held for short-term resale are
classified as trading securities and are carried at fair value. Debt
securities that management has the ability and intent to hold to
maturity are classified as held-to-maturity and are carried at cost,
adjusted for amortization of premium and accretion of discounts using
the interest method. Other marketable securities are classified as
available-for-sale and are carried at fair value. Realized and
unrealized gains and losses on trading securities are included in net
income. Unrealized gains and losses, net of tax, on securities
available-for-sale are recognized as direct increases or decreases in
retained earnings. Cost of securities sold is determined using the
specific identification method. Yields on tax exempt obligations are
not computed on a tax-equivalent basis.
Mortgage-Backed Securities
--------------------------
Mortgage-backed securities represent participating interest in pools of
long-term first mortgage loans originated and serviced by issuers of
the securities. Mortgage-backed securities are classified as available-
for-sale or held-to-maturity. Available-for-sale securities are carried
at fair value with the unrealized gain or loss, net of income tax,
reflected as a separate component of retained earnings and held-to-
maturity securities are carried at amortized cost. Premiums and
discounts are amortized using the interest method over the remaining
period to contractual maturity, adjusted for anticipated prepayments.
Cost of mortgage-backed securities sold is recognized using the
specific identification method.
The Association evaluates mortgage-backed securities on a monthly basis
to monitor prepayments and the resulting effect on yields and
valuations. Management considers the concentration of credit risk to be
minimal on mortgage-backed securities because all such securities are
guaranteed as to timely payment of principal and interest by FNMA,
FHLMC, GNMA and SBA or the underlying loans are insured by private
mortgage insurance. Cost of securities sold are recognized based on the
specific-identification method. All sales are made without recourse.
At June 30, 1996 and 1995, the Association had no outstanding
commitments to sell loans or securities.
F-10
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Mortgage-Backed Securities (Continued)
--------------------------
Equity securities that are nonmarketable are carried at cost.
Nonmarketable equity securities held by the Association consist of
their patronage equity in the Financial Information Trust (a computer
service bureau) and stock in the Federal Home Loan Bank. In June, 1996,
the Association sold its interest in the Financial Information Trust.
The Association, as a member of the Federal Home Loan Bank System, is
required to maintain an investment in capital stock of the Federal Home
Loan Bank in an amount based on its outstanding loans and advances. No
ready market exists for the Bank stock and it has no quoted market
value. For reporting purposes these investments are assumed to have a
market value equal to cost. (See Note 13.)
Accounting for Certain Investments in Debt and Equity Securities
----------------------------------------------------------------
In May 1993 the FASB issued SFAS No. 115, Accounting for Certain
----------------------
Investments in Debt and Equity Securities. SFAS No. 115 addresses the
-----------------------------------------
accounting and reporting for investments in equity securities that have
readily determinable fair values and for all investments in debt
securities. Those investments are to be classified in three categories
and accounted for as follows:
* Debt securities that the enterprise has the positive intent and
ability to hold to maturity are classified as held-to-maturity
----------------
securities and reported at amortized cost.
----------
* Debt and equity securities that are bought and held principally for
the purpose of selling them in the near term are classified as
trading securities and reported at fair value, with unrealized gains
------------------
and losses included in earnings.
* Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-
--------------
sale securities and reported at fair value, with unrealized gains
---------------
and losses excluded from earnings and reported in a separate
component of retained earnings.
F-11
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounting for Certain Investments in Debt and Equity Securities -
----------------------------------------------------------------
(Continued)
SFAS No. 115 is restrictive as to suitable reasons for selling any
security classified as held to maturity. Investments and mortgage-
backed securities classified as available-for-sale provide greater
flexibility for asset/liability management, liquidity needs, reacting
to changes in market rates and related prepayment risk, and changes in
availability of and the yield on alternative investments. As a result
of this, the Association has determined that substantially all of their
investments and mortgage-backed securities are classified as available-
for-sale.
SFAS No. 115 was adopted effective July 1, 1994. The effect of adopting
SFAS No. 115 effective July 1, 1994, was to decrease investment and
mortgage-backed securities, deferred taxes payable and retained
earnings by $88,000, $30,000, and $58,000 respectively. Additionally,
$27,000 was included in earnings for the year ended June 30, 1995,
representing the cumulative effect, net of deferred tax of $14,000, of
reversing losses that had been previously reflected in earnings under
the prior method of accounting for investments.
Loans Receivable
----------------
Loans receivable are stated at unpaid principal balances, less the
allowance for loan losses, and net deferred loan-origination costs.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the
Association's past loan loss experience, known and inherent risks in
the portfolio, adverse situations that may affect the borrower's
ability to repay, the estimated value of any underlying collateral,
and current economic conditions.
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 judgement, the borrower's ability to
make periodic interest and principal payments is back to normal, in
which case the loan is returned to accrual status.
F-12
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans Receivable (Continued)
----------------
Effective July 1, 1995, the Association adopted SFAS No. 114,
Accounting by Creditors for Impairment of a Loan, and SFAS No. 118,
------------------------------------------------
Accounting by Creditors for Impairment of a Loan - Income Recognition
---------------------------------------------------------------------
and Disclosures, which amends SFAS No. 114. SFAS No. 114, as amended by
---------------
SFAS No. 118, defines the recognition criteria for loan impairment and
the measurement methods for certain impaired loans and loans for which
terms have been modified in troubled-debt restructurings (a
restructured loan). Specifically, a loan is considered impaired when it
is probable a creditor will be unable to collect all amounts due -both
principal and interest - according to the contractual terms of the loan
agreement. When measuring impairment, the expected future cash flows of
an impaired loan are required to be discounted at the loan's effective
interest rate. Alternatively, impairment can be measured by reference
to an observable market price, if one exists, or the fair value of the
collateral for a collateral-dependent loan. Regardless of the
historical measurement method used, SFAS No. 114 requires a creditor to
measure impairment based on the fair value of the collateral when the
creditor determines foreclosure is probable. Additionally, impairment
of a restructured loan is measured by discounting the total expected
future cash flows at the loan's effective rate of interest as stated in
the original loan agreement.
The Association applies the recognition criteria of SFAS No. 114 to
multi-family residential loans, commercial real estate loans and
agriculture loans. Smaller balance, homogeneous loans, including
one-to-four family residential loans and consumer loans, are
collectively evaluated for impairment. SFAS No. 118 amends SFAS No. 114
to allow a creditor to use existing methods for recognizing interest
income on impaired loans. The Association has elected to continue to
use its existing nonaccrual methods for recognizing interest on
impaired loans. The adoption of SFAS No. 114 and SFAS No. 118 resulted
in no prospective adjustment to the allowance for loan losses and did
not affect the Association's policies regarding charge-offs or
recoveries.
Loan-Origination Fees, Commitment Fees, and Related Costs
---------------------------------------------------------
Loan fees and certain direct loan origination costs are deferred, and
the net fee or cost is recognized as an adjustment to interest income
using the interest method over the contractual life of the loans,
adjusted for estimated prepayments based on the Association's
historical prepayment experience.
F-13
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Foreclosed Real Estate
----------------------
Real estate properties acquired through, or in lieu of, loan
foreclosure are initially recorded at fair value less estimated selling
costs at the date of foreclosure. Costs relating to development and
improvement of property are capitalized, whereas costs relating to the
holding of property are expensed.
Valuations are periodically performed by management, and an allowance
for losses is established by a charge to operations if the carrying
value of a property exceeds its estimated net realizable value.
All foreclosed real estate owned is held-for-sale. There was no
foreclosed real estate owned at June 30, 1996.
Income Taxes
------------
The Association files a consolidated federal income tax return with its
subsidiary. The provision for federal and state taxes on income is
based on earnings reported in the financial statements.
Deferred income taxes arise from temporary differences between the
financial statement carrying amounts and the tax basis of existing
assets and liabilities.
An asset and liability approach is used for financial accounting and
reporting of income taxes which, among other things, requires the
Association to take into account changes in the tax rates when valuing
the deferred income tax accounts recorded on the balance sheet. A
deferred tax liability or asset is recognized for the estimated future
tax effects attributable to temporary differences and loss
carryforwards. Temporary differences include differences between
financial statement income and tax return income which are expected to
reverse in future periods as well as differences between the tax bases
of assets and liabilities and their amounts for financial reporting
which are also expected to be settled in future periods. To the extent
a deferred tax asset is established which is not realizable, a
valuation allowance shall be established against such asset.
F-14
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Premises and Equipment
----------------------
Land is carried at cost. Buildings, furniture, fixtures, and equipment
are carried at cost, less accumulated depreciation and amortization.
Buildings and furniture, fixtures, and equipment are depreciated using
the straight-line method over the estimated useful lives of the assets.
Estimated useful lives range from ten to forty years for buildings and
related improvements and from three to eighteen years for furniture,
fixtures and equipment.
NOTE 2: INVESTMENT SECURITIES
Securities available-for sale consist of the following:
<TABLE>
<CAPTION>
June 30, 1996
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Bonds, notes and
debentures
at fair value:
Federal agencies $1,000,000 $ - $ (38,000) $ 962,000
Equity securities at
fair value:
Mutual funds 1,337,000 2,000 (31,000) 1,308,000
FNMA preferred stock 1,002,000 - (8,000) 994,000
---------- ---------- ---------- ----------
$3,339,000 $ 2,000 $ (77,000) $3,264,000
========== ========== ========== ==========
<CAPTION>
June 30, 1996
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Bonds, notes and
debentures
at fair value:
Federal agencies $ 500,000 $ - $ (7,000) $ 493,000
Equity securities at
fair value:
Mutual funds 1,260,000 6,000 (22,000) 1,244,000
---------- ---------- ---------- ----------
$1,760,000 $ 6,000 $ (29,000) $1,737,000
========== ========== ========== ==========
</TABLE>
F-15
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 2: INVESTMENT SECURITIES (Continued)
Securities held-to-maturity consist of the following:
<TABLE>
<CAPTION>
June 30, 1996
--------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Bonds, notes and
debentures
at fair value:
Municipal securities $ 215,000 $ - $ - $ 215,000
========= ========== ========== =========
<CAPTION>
June 30, 1995
--------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Bonds, notes and
debentures
at fair value:
Federal agencies $ 600,000 $ 1,000 $ (20,000) $ 581,000
Municipal securities 215,000 - - 215,000
--------- ---------- ---------- ---------
$ 815,000 $ 1,000 $ (20,000) $ 796,000
========= ========== ========== =========
</TABLE>
The following is a summary of debt securities at June 30, 1996, by
contractual maturity for available-for-sale and held-to-maturity
securities.
<TABLE>
<CAPTION>
Securities Available- Securities To Be Held
for-Sale To Maturity
----------------------- ------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Due in one year or
less $ - $ - $ - $ -
Due after one year
through five years 500,000 484,000 215,000 215,000
Due after five years
through ten years - - - -
Due after ten years 500,000 478,000 - -
---------- ---------- ---------- ----------
$1,000,000 $ 962,000 $ 215,000 $ 215,000
========== ========== ========== ==========
</TABLE>
F-16
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 2: INVESTMENT SECURITIES (Continued)
During the year ended June 30, 1996, the Association did not sell any
securities from their available-for-sale portfolio. During the year
ended June 30, 1995, the Association sold securities with total
proceeds of $126,000 resulting in gross realized gains of $1,000 and
no realized losses.
No investment securities were pledged at June 30, 1996.
NOTE 3: MORTGAGE-BACKED SECURITIES
Mortgage-backed securities available-for-sale consist of the
following:
<TABLE>
<CAPTION>
June 30, 1996
-------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Mortgage-backed
securities
at fair value:
GNMA certificates $ 1,158,000 $ 4,000 $ (11,000) $ 1,152,000
FHLMC certificates 2,235,000 20,000 (6,000) 2,248,000
FNMA certificates 4,474,000 56,000 (1,000) 4,528,000
CMO/REMIC 3,034,000 5,000 (36,000) 3,003,000
SBA pools 6,105,000 512,000 (578,000) 6,040,000
----------- -------- --------- -----------
$17,006,000 $597,000 $(632,000) $16,971,000
=========== ======== ========= ===========
</TABLE>
Of the $3,003,000 of fair value of CMO/REMIC's above, $2,319,000 was
guaranteed by FNMA or FHLMC. The balance of $684,000 was guaranteed by
private mortgage insurance companies.
<TABLE>
<CAPTION>
June 30, 1995
-------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Mortgage-backed
securities
at fair value:
GNMA certificates $ 1,284,000 $ 10,000 $ - $ 1,294,000
FHLMC certificates 620,000 4,000 - 624,000
FNMA certificates 433,000 19,000 - 452,000
CMO/REMIC 569,000 2,000 (2,000) 569,000
SBA pools 1,462,000 - (4,000) 1,458,000
----------- ---------- ----------- -----------
$ 4,368,000 $ 35,000 $ (6,000) $ 4,397,000
=========== ========== =========== ===========
</TABLE>
F-17
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 3: MORTGAGE-BACKED SECURITIES (Continued)
Mortgage-backed securities held-to-maturity consist of the following:
<TABLE>
<CAPTION>
June 30, 1995
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Mortgage-backed
securities
at amortized cost:
FHLMC certificates $1,700,000 $20,000 $(27,000) $1,693,000
FNMA certificates 6,029,000 74,000 (11,000) 6,093,000
CMO/REMIC 577,000 2,000 (23,000) 555,000
---------- ------- -------- ----------
$8,306,000 $96,000 $(61,000) $8,341,000
========== ======= ======== ==========
</TABLE>
The amortized cost and fair value of mortgage-backed securities by
contractual maturity, are shown below as of June 30, 1996. Expected
maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
Mortgage-Backed
Securities
Available-for-Sale
----------------------------
Amortized Fair
Cost Value
----------- -----------
<S> <C> <C>
Due in one year or less $ - $ -
Due after one year through five years 339,000 334,000
Due after five years through ten years 6,000 7,000
Due after ten years 16,661,000 16,630,000
----------- -----------
$17,006,000 $16,971,000
=========== ===========
</TABLE>
During the year ended June 30, 1996, the Association sold mortgage-
backed securities available-for-sale with total proceeds of $2,257,000
resulting in gross realized gains of $46,000 and no realized losses.
The related income taxes were approximately $17,000. During the year
ended June 30, 1995, the Association sold mortgage-backed securities
available-for-sale with total proceeds of $1,713,000 resulting in
gross realized gains of $18,000 and no realized losses. The related
income taxes were approximately $6,000.
F-18
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 3: MORTGAGE-BACKED SECURITIES (Continued)
Mortgage-backed securities available-for-sale with a fair value of
$4,131,000 were pledged in connection with Federal Home Loan Bank
borrowings at June 30, 1996.
NOTE 4: LOANS RECEIVABLE
Loans receivable at June 30, are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------- ------------
<S> <C> <C>
Mortgage loans:
One-to-four-family $22,798,000 $21,020,000
Commercial 369,000 409,000
Non-residential real estate 1,955,000 1,874,000
----------- -----------
Total mortgage loans 25,122,000 23,303,000
----------- -----------
Other loans:
Automobile 1,365,000 1,298,000
SBA guaranteed 982,000 993,000
Home improvement - FHA 437,000 -
Loans on savings accounts 341,000 364,000
Other 434,000 440,000
----------- -----------
Total other loans 3,559,000 3,095,000
----------- -----------
Add:
Deferred loan costs 36,000 31,000
Less:
Loans in process 5,000 8,000
Allowance for loan losses 283,000 81,000
----------- -----------
Loans receivable, net $28,429,000 $26,340,000
=========== ===========
</TABLE>
At June 30, 1996, the Association's loan portfolio consisted of
$7,396,000 of fixed rate loans and $21,285,000 of variable rate loans.
The fixed rate loans had a weighted average term to maturity of 7.92
years and a weighted average interest rate of 7.87%.
F-19
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 4: LOANS RECEIVABLE (Continued)
The Association is required to maintain qualifying collateral for the
Federal Home Loan Bank of Des Moines (the "Bank") representing 150
percent of current Bank credit. (See Note 8.) At June 30, 1996, the
Association met this requirement. Qualifying collateral is defined as
fully disbursed, whole first mortgage loans on improved residential
property or securities representing a whole interest in such
mortgages. The mortgages must not be past due more than 60 days. They
must not be otherwise pledged or encumbered as security for other
indebtedness, and the documents must be in the physical possession or
control of the Association. The documents that govern the
determination of the qualifying mortgage collateral are the (a)
Federal Home Loan Bank of Des Moines' Credit Policy Statement, dated
April 1, 1994, and (b) the Agreement for Advances, Pledge, and
Security Agreement between the Association and the Federal Home Loan
Bank of Des Moines, dated April 3, 1989.
Activity in the allowance for loan losses is summarized as follows for
the years ended June 30:
<TABLE>
<CAPTION>
1996 1995
-------- -----------
<S> <C> <C>
Balance at beginning of
year $ 81,000 $ 89,000
Provision charged to
income 210,000 1,000
Charge-offs (11,000) (11,000)
Recoveries 3,000 2,000
-------- --------
Balance at end of year $283,000 $ 81,000
======== ========
</TABLE>
Nonaccrual and renegotiated loans for which interest has been reduced
totaled approximately $128,000 and $124,000 at June 30, 1996 and 1995,
respectively. Interest income foregone on these loans was
insignificant.
The Association is not committed to lend additional funds to debtors
whose loans have been modified.
NOTE 5: ACCRUED INTEREST RECEIVABLE
Accrued interest receivable at June 30 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Investment securities $ 26,000 $ 25,000
Mortgage-backed securities 170,000 70,000
Loans receivable 261,000 227,000
-------- --------
$457,000 $322,000
======== ========
</TABLE>
F-20
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 6: PREMISES AND EQUIPMENT
Premises and equipment at June 30 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Cost:
Land $101,000 $101,000
Building 338,000 338,000
Furniture, fixtures, and equipment 459,000 319,000
-------- --------
898,000 758,000
Less accumulated depreciation and
amortization 525,000 501,000
-------- --------
$373,000 $257,000
======== ========
</TABLE>
Depreciation expense for the years ended June 30, 1996 and 1995 was
$23,000 and $19,000, respectively.
NOTE 7: DEPOSITS
Deposits at June 30 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------ -----------------------------
Weighted Weighted
Average Average
Rate Amount % Rate Amount %
-------- ----------- ----- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing -% $ 1,462,000 4.1 -% $ 1,418,000 4.0
Demand and NOW 2.78% 2,362,000 6.7 1.90% 2,421,000 6.9
Money market 4.08% 7,301,000 20.6 4.15% 7,478,000 21.3
Passbook savings 2.99% 2,607,000 7.3 3.00% 3,004,000 8.5
-------- ----------- ----- ------- ----------- -----
3.51% 13,732,000 38.7 3.31% 14,321,000 40.7
-------- ----------- ----- ------- ----------- -----
Certificates of
deposit:
3.00% to 3.99% 3.83% 39,000 0.1 3.79% 549,000 1.5
4.00% to 4.99% 4.62% 2,602,000 7.3 4.45% 4,737,000 13.4
5.00% to 5.99% 5.39% 14,237,000 40.1 5.59% 10,024,000 28.5
6.00% to 6.99% 6.29% 4,038,000 11.4 6.34% 4,341,000 12.3
7.00% to 7.99% 7.36% 516,000 1.5 7.40% 830,000 2.4
8.00% to 8.99% 8.34% 331,000 0.9 8.34% 408,000 1.2
-------- ----------- ----- ------- ----------- -----
5.56% 21,763,000 61.3 5.56% 20,889,000 59.3
-------- ----------- ----- ------- ----------- -----
4.60% $35,495,000 100.0 4.65% $35,210,000 100.0
======== =========== ===== ======= =========== =====
</TABLE>
The aggregate amount of short-term jumbo certificates of deposit with a
minimum denomination of $100,000 was approximately $1,182,000 and
$500,000 at June 30, 1996 and 1995, respectively. Balances of deposit
accounts in excess of $100,000 are not federally insured.
F-21
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 7: DEPOSITS (Continued)
At June 30, 1995, scheduled maturities of certificates of deposit are
as follows:
<TABLE>
<CAPTION>
Year Ending June 30,
----------------------------------------------------------
1997 1998 1999 2000 2001 Thereafter
------- ------- ------- ------- ------- -------------
(In Thousands)
--------------
<S> <C> <C> <C> <C> <C> <C>
3.00% to 3.99% $ 39 $ - $ - $ - $ - $ -
4.00% to 4.99% 2,171 271 141 16 1 1
5.00% to 5.99% 9,844 2,594 1,172 258 237 133
6.00% to 6.99% 852 986 249 1,389 544 18
7.00% to 7.99% 99 - 387 30 - -
8.00% to 8.99% 297 - 34 - - -
------- ------- ------- ------- ------- -------
$13,302 $ 3,851 $ 1,983 $ 1,693 $ 782 $ 152
======= ======= ======= ======= ======= =======
</TABLE>
Interest expense on deposits for the years ended June 30 is summarized
as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Passbook, money market and NOW $ 453,000 $ 440,000
Interest expense on certificates 75,000 54,000
of deposit greater than $100,000
Certificates of deposit 1,106,000 987,000
---------- ----------
$1,634,000 $1,481,000
========== ==========
</TABLE>
F-22
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 8: FEDERAL HOME LOAN BANK ADVANCES
Advances consist of the following:
<TABLE>
<CAPTION>
June 30,
Maturity Interest --------------------------
Date Rate 1996 1995
-------- -------- ----------- ----------
<S> <C> <C> <C> <C>
07-10-95 6.13% $ - $ 700,000
08-28-95 6.11% - 500,000
08-01-95 5.90% - 500,000
09-18-95 6.08% - 500,000
03-15-96 6.52% - 3,000,000
08-29-96 6.16% 500,000 -
08-15-96 5.45% 1,000,000 -
10-24-96 5.47% 1,000,000 -
07-01-96 5.48% 500,000 -
07-08-96 5.52% 700,000 -
04-18-97 5.35% 1,000,000 -
04-18-97 5.36% 1,000,000 -
07-24-96 5.46% 500,000 -
04-24-97 5.39% 1,000,000 -
08-05-96 5.52% 500,000 -
08-16-96 5.55% 500,000 -
09-16-96 5.62% 500,000 -
02-02-97 5.57% 1,800,000 -
----------- ----------
Total short-term advances 10,500,000 5,200,000
----------- ----------
09-26-08 5.78% 87,000 92,000
10-10-08 5.76% 88,000 93,000
10-24-08 5.90% 88,000 93,000
10-28-08 5.93% 88,000 93,000
11-03-08 6.12% 89,000 93,000
11-07-08 6.20% 89,000 93,000
11-21-08 6.35% 89,000 93,000
11-28-08 6.21% 89,000 93,000
12-05-08 6.24% 89,000 94,000
12-23-08 6.22% 89,000 93,000
01-07-09 6.19% 89,000 94,000
09-23-09 8.07% - 195,000
09-12-97 5.95% 200,000 -
09-14-98 6.03% 200,000 -
09-14-00 6.22% 200,000 -
10-20-98 6.13% 400,000 -
02-27-01 6.00% 500,000 -
04-10-01 6.82% 500,000 -
----------- ----------
Total long-term advances 2,974,000 1,219,000
----------- ----------
Total advances $13,474,000 $6,419,000
=========== ==========
</TABLE>
F-23
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 8: FEDERAL HOME LOAN BANK ADVANCES (Continued)
See Notes 3 and 4 of the financial statements for collateral securing
this indebtedness.
Advances at June 30, 1996, have maturity dates as follows:
<TABLE>
<S> <C>
06-30-97 $10,554,000
06-30-98 258,000
06-30-99 661,000
06-30-2000 65,000
06-30-2001 1,269,000
Thereafter 667,000
-----------
$13,474,000
===========
</TABLE>
The short-term advances include $6,800,000 which have variable rates
and the rate adjusts daily or monthly. All other advances are at fixed
rates.
The maximum amount of Federal Home Loan Bank advances outstanding at
any month end during the years ended June 30, 1996 and 1995 was
$14,483,000 and $6,934,000 respectively.
The short-term advance maturing February 2, 1997 in the amount of
$1,800,000 was the balance due on a line of credit. The total line of
credit available was $3,500,000. Interest due on the line of credit is
variable and adjusts daily.
F-24
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 9: PENSION PLAN
The Association has a defined contribution pension plan which covers
all eligible employees who have completed one full year of continuous
service. The benefits contemplated by the plan are funded through
employer contributions on the basis of salaries. The cost of funding is
charged to current operations as accrued and there is no unfunded
liability for past service. The amounts funded and charged to expense
amounted to approximately $23,000 and $27,000 in 1996, and 1995,
respectively.
NOTE 10: INCOME TAXES
The Association and Subsidiary file consolidated federal income tax
returns on a calendar year basis. If certain conditions are met in
determining taxable income the Association is allowed a special bad-
debt deduction based on specified experience formulas.
Income tax expense for the years ended June 30 is summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Current $208,000 $ 89,000
Deferred (Benefit) (41,000) 46,000
-------- --------
$167,000 $135,000
======== ========
Effective tax rate 35.6% 35.4%
======== ========
</TABLE>
As discussed in Note 1, the Association uses the liability method of
accounting for income taxes. Under this method, deferred income taxes
are recognized for the tax consequences of "temporary differences" by
applying statutory tax rates applicable to future years to differences
between the financial statement carrying amounts and tax bases of
existing assets and liabilities.
A deferred tax asset is to be recognized for the bad debt reserve
established for financial reporting purposes and requires a deferred
tax liability to be recorded for increases in the tax bad debt reserve
since January 1, 1988, the effective date of certain changes made by
the Tax Reform Act of 1986 to the calculation of savings institutions'
bad debt deduction. Accordingly, retained earnings at June 30, 1996,
include approximately $127,000 for which no deferred federal income tax
liability has been recognized.
F-25
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 10: INCOME TAXES (Continued)
Total income tax expense differed from the amounts computed by applying
the U.S. Federal income tax rates of 34 percent to income before income
taxes as a result of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Expected income tax expense
at federal tax rate $160,000 $129,000
State tax net of Federal tax benefit 8,000 16,000
Tax rate benefit - (2,000)
Municipal income nontaxable (3,000) (4,000)
Other 2,000 (4,000)
-------- --------
Total income tax expense $167,000 $135,000
======== ========
</TABLE>
Deferred tax liabilities (assets) are comprised of the following at
June 30:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Income and expenses recognized in the
financial statements on the accrual
basis, but on the cash basis for
tax purposes $127,000 $ 84,000
Income tax basis of FHLB stock versus
carrying value 49,000 40,000
Tax bad debt reserve 44,000 40,000
Deferred loan costs 14,000 11,000
Net fixed assets 15,000 5,000
Unrealized gain on available-for-sale
securities - 2,000
-------- --------
Gross deferred tax liabilities 249,000 182,000
-------- --------
Unrealized loss on available-for-sale
securities (38,000) -
Provision for loan loss (110,000) -
Missouri state tax offset - (19,000)
-------- --------
Gross deferred tax assets (148,000) (19,000)
-------- --------
Net deferred tax liability $101,000 $163,000
======== ========
</TABLE>
F-26
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 10: INCOME TAXES (Continued)
For years ended June 30, 1996 and 1995, deferred tax expense resulted
from temporary differences between the financial statement carrying
amounts and the tax basis of existing assets and liabilities. The
sources and tax effects of these temporary and timing differences are
as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Income and expense recognized in the
financial statements on the accrual
basis, but on the cash basis for
tax purposes $ 30,000 $ 10,000
FHLB stock basis 3,000 -
Tax bad debt reserve 4,000 5,000
Deferred loan fees 2,000 10,000
Net fixed assets 9,000 5,000
Provision for loan loss (89,000) -
Missouri state tax offset - 16,000
-------- --------
$(41,000) $ 46,000
======== ========
</TABLE>
The Association currently files a Savings and Loan Association Tax
Return with the State of Missouri. During the years 1975-1979, the
Association paid an intangibles tax which was subsequently declared
unconstitutional. In May, 1987, the Missouri Department of Revenue
determined that interest would be accrued on the refund claims at the
rate of 6% commencing August 13, 1978. All such claims and related
accrued interest were to be remitted to the Association by cash
payments and credits to offset future Missouri savings and loan tax
liabilities. A deferred tax asset was established for this right to
offset future Missouri tax liability.
This deferred tax asset was reduced by $19,000 as a result of its state
tax liability for the year ended June 30, 1996.
F-27
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 10: INCOME TAXES (Continued)
The Association did not establish a valuation allowance for its
deferred tax assets as management believes they are realizable.
NOTE 11: FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991 (FDICIA)
AND FINANCIAL INSTITUTIONS REFORM, RECOVERY AND ENFORCEMENT ACT OF 1989
(FIRREA)
FDICIA was signed into law on December 19, 1991. Regulations
implementing the prompt corrective action provisions of FDICIA became
effective on December 19, 1992. In addition to the prompt corrective
action requirements, FDICIA includes significant changes to the legal
and regulatory environment for insured depository institutions,
including reductions in insurance coverage for certain kinds of
deposits, increased supervision by the federal regulatory agencies,
increased reporting requirements for insured institutions, and new
regulations concerning internal controls, accounting, and operations.
The prompt corrective action regulations define specific capital
categories based on an institution's capital ratios. The capital
categories, in declining order are "well capitalized", "adequately
capitalized", "under-capitalized", "significantly undercapitalized",
and "critically under-capitalized". Institutions categorized as
"undercapitalized" or worse are subject to certain restrictions,
including the requirement to file a capital plan with their primary
federal regulator, prohibitions on the payment of dividends and
management fees, restrictions on executive compensation, and increased
supervisory monitoring, among other things. Other restrictions may be
imposed on the institution either by its primary federal regulator, the
Office of Thrift Supervision (OTS), or by the Federal Deposit Insurance
Corporation (FDIC), including requirements to raise additional capital,
sell assets, or sell the entire institution. Once an institution
becomes "critically undercapitalized", it must generally be placed in
receivership or conservatorship within 90 days.
F-28
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 11: FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991 (FDICIA)
AND FINANCIAL INSTITUTIONS REFORM, RECOVERY AND ENFORCEMENT ACT OF 1989
(FIRREA) (Continued)
FIRREA was signed into law on August 9, 1989; regulations for savings
institutions' minimum-capital requirements went into effect on December
7, 1989. In addition to the capital requirements, FIRREA includes
provisions for changes in the federal regulatory structure for
institutions, including a new deposit insurance system, increased
deposit insurance premiums, and restricted investment activities with
respect to non-investment-grade corporate debt and certain other
investments. FIRREA also increases the required ratio of housing-
related assets needed to qualify as a savings institution. The
regulations require institutions to have minimum regulatory tangible
capital equal to 1.5 percent of total assets, 3 percent core capital
ratio, and risk-based capital ratio of 8%.
The following is a reconciliation of GAAP capital to regulatory
capital:
<TABLE>
<CAPTION>
Regulatory
----------------------------------------------------------
Tangible Core Risk-Based
Capital Capital Capital
----------------- ----------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
GAAP capital, as
adjusted $3,268,000 6.21% $3,268,000 6.21% $3,268,000 15.74%
Additional capital
items:
Unrealized loss on
securities
available-for-sale 71,000 .13% 71,000 .13% 71,000 .34%
Loan loss allowance -
limited - - - - 253,000 1.22%
---------- ---- ---------- ---- ---------- -----
Regulatory capital-
computed 3,339,000 6.34% 3,339,000 6.34% 3,592,000 17.30%
Minimum-capital
requirement 790,000 1.50% 1,581,000 3.00% 1,661,000 8.00%
---------- ---- ---------- ---- ---------- -----
Regulatory capital-
excess $2,549,000 4.84% $1,758,000 3.34% $1,931,000 9.30%
========== ==== ========== ==== ========== =====
</TABLE>
F-29
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 12: GAIN ON SALES OF INTEREST EARNING ASSETS, NET
Gains are summarized as follows for the years ended June 30:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Realized gains on sales of:
Mortgage-backed securities
- gains $ 46,000 $ 18,000
Investment securities -
gains - 1,000
-------- --------
$ 46,000 $ 19,000
======== ========
</TABLE>
NOTE 13: OTHER NON-INTEREST INCOME AND EXPENSE
Other non-interest income and expense amounts are summarized as follows
for the years ended June 30:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Other noninterest income:
Loan late charges $ 7,000 $ 8,000
Other 73,000 14,000
-------- --------
$ 80,000 $ 22,000
======== ========
Other noninterest expense:
Advertising and promotion $ 19,000 $ 28,000
Telephone 16,000 8,000
Other 74,000 68,000
-------- --------
$109,000 $104,000
======== ========
</TABLE>
In 1996, other income includes approximately $66,000 of patronage
dividends and gain on the sale of the Association's former cooperative
data processing service bureau. Patronage dividends are an allocation
of earnings to the user owners of a cooperative association, which may
be credited to the user owner's account or paid in cash. As a result of
the sale of the service bureau, all of the dividends have been paid to
the Association.
NOTE 14: COMMITMENTS AND CONTINGENCIES
Loan Commitments
----------------
At June 30, 1996, the Association had outstanding firm commitments to
originate loans as follows:
Fixed Rate Variable Rate Total
---------- ------------- -----
$94,000 $138,000 $232,000
======= ======== ========
F-30
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 14: COMMITMENTS AND CONTINGENCIES (Continued)
These loans are at rates of 7.25% to 9.00% for terms of one to twenty
years.
The Association is involved, from time to time, as plaintiff or
defendant in various legal actions arising in the normal course of
their businesses. While the ultimate outcome of these proceedings
cannot be predicted with certainty, it is the opinion of management,
after consultation with counsel representing the Association in the
proceedings, that the resolution of these proceedings should not have a
material effect on the Association's financial position or results of
operations on a consolidated basis.
NOTE 15: FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Association is a party to financial instruments with off-balance-
sheet risk in the normal course of business to meet the financing needs
of its customers. These financial instruments include commitments to
extend credit. Those instruments involve, to varying degrees, elements
of credit risk in excess of the amount recognized in the statement of
financial position. The contract or notional amounts of those
instruments reflect the extent of the Association's involvement in
particular classes of financial instruments.
The Association's exposure to credit loss in the event of
nonperformance by the other party to the commitments to extend credit
is represented by the contractual notional amount of those instruments.
The Association uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.
Unless noted otherwise, the Association does not require collateral or
other security to support financial instruments with credit risk.
Contract or
Notional Amount
---------------
Financial instruments the contract amounts
of which represent credit risk:
Commitments to extend credit $232,000
Open lines of credit $316,000
F-31
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 15: FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (Continued)
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. These commitments and outstanding lines of credit generally
have fixed expiration dates or other termination clauses and may
require payment of a fee. Since some commitments can expire without
being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Association evaluates each
customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if it is deemed necessary by the Association upon
extension of credit, is based on management's credit evaluation of the
counterparty. Collateral held varies but may include accounts
receivable, inventory, property, plant, and equipment, and income-
producing commercial properties.
The Association invests funds in other financial institutions in the
form of certificates of deposit, none of which exceed the insured limit
of $100,000. In addition, the Association maintains cash accounts at
the Federal Home Loan Bank and four banks. Balances reflected on the
banks' statements exceed the $100,000 insurance limit by varying
amounts on a daily basis. The Association controls this risk by
monitoring the financial condition of the banks. The Federal Home Loan
Bank is an instrumentality of the U.S. Government.
NOTE 16: RELATED PARTY TRANSACTIONS
Certain directors and executive officers of the Association or its
subsidiary were loan customers. A summary of aggregate related party
loan activity, for loans aggregating $60,000 or more to any one related
party, is as follows:
<TABLE>
<CAPTION>
June 30, June 30,
1996 1995
-------- --------
<S> <C> <C>
Beginning balance $78,000 $ -
New loans - 79,000
Repayments 1,000 1,000
------- -------
Ending balance $77,000 $78,000
======= =======
</TABLE>
In the opinion of management, related party loans are made on
substantially the same terms, 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.
F-32
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 17: INVESTORS FEDERAL SERVICE CORPORATION
The statement of financial condition and income for Investors Federal
Service Corporation is as follows:
Statement of Financial Condition
--------------------------------
<TABLE>
<CAPTION>
At June 30, At June 30,
1996 1995
----------- -----------
<S> <C> <C>
Assets:
Cash $16,000 $17,000
======= =======
Liabilities:
Accounts payable $ 1,000 $ 2,000
------- -------
Stockholders' Equity:
Common stock 1,000 1,000
Retained earnings 14,000 14,000
------- -------
15,000 15,000
------- -------
Total liabilities and
stockholders' equity $16,000 $17,000
======= =======
</TABLE>
Statement of Income
-------------------
<TABLE>
<CAPTION>
Years Ended
---------------------
June 30, June 30,
1996 1995
------- -------
<S> <C> <C>
Commission income $ - $ 5,000
Other expense - (1,000)
------- -------
Net income (loss) $ - $ 4,000
======= =======
</TABLE>
The subsidiary corporation's primary source of income was from
insurance sales and it was generally inactive at June 30, 1996.
NOTE 18: SPECIAL INSURANCE ASSESSMENT RELATING TO THE RECAPITALIZATION OF THE
SAVINGS ASSOCIATION INSURANCE FUND (SAIF)
F-33
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
In September 1996, Congress enacted legislation to recapitalize the
SAIF by a one-time assessment on all SAIF-insured deposits held as of
March 31, 1995. The assessment will be 65.7 basis points per $100 in
deposits, payable on November 30, 1996. For the Association, the
assessment is expected to be $226,000 (or $145,000 when adjusted for
taxes), based on the Association's deposits on March 31, 1995 of $34.9
million. In addition, beginning January 1, 1997, pursuant to the
legislation, interest payments on bonds ("FICO Bonds") issued in the
late 1980s by the Financing Corporation ("FICO") to recapitalize the
now defunct Federal Savings and Loan Insurance Corporation will be paid
jointly by BIF-insured institutions and SAIF-insured institutions. The
FICO assessment will be 1.29 basis points per $100 in BIF deposits and
6.44 basis points per $100 in SAIF deposits. Beginning January 1, 2000,
the FICO interest payments will be paid pro-rata by banks and thrifts
based on deposits (approximately 2.4 basis points per $100 in
deposits).
NOTE 19: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of
the company's financial instruments at June 30, 1996. FASB Statement
No. 107, Disclosures About Fair Value of Financial Instruments, defines
-----------------------------------------------------
the fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale.
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
-------- -------
(In Thousands)
<S> <C> <C>
Nontrading instruments:
Cash and cash equivalents $ 2,080 $ 2,080
Investment securities and
mortgage-backed securities $20,450 $20,450
Loans, net $28,429 $28,474
Accrued interest receivable $ 457 $ 457
FHLB stock $ 724 $ 724
Deposit liabilities $35,495 $35,487
</TABLE>
F-34
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
<TABLE>
<S> <C> <C>
Debt-FHLB advances $13,474 $13,375
Other liabilities $ 350 $ 350
Unrecognized financial instruments:
Commitments to extend credit $ - $ -
Open lines of credit $ - $ -
</TABLE>
The carrying amounts in the table are included in the statement of
financial position under the indicated captions, except for advances
from borrowers for taxes and insurance, income taxes payable and
accrued expenses and other liabilities which have been combined into
other liabilities. For unrecognized financial instruments, the carrying
amounts represent accruals or deferred income arising from those
unrecognized financial instruments for which at June 30, 1996, there
were none.
NOTE 19: FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Estimation of Fair Values
-------------------------
The following notes summarize the major methods and assumptions used in
estimating the fair values of financial instruments.
Short-term financial instruments are valued at their carrying amounts
included in the statement of financial position, which are reasonable
estimates of fair value due to the relatively short period to maturity
of the instruments. This approach applies to cash and cash equivalents,
accrued receivables, and certain other liabilities.
Loans are valued on the basis of estimated future receipts of principal
and interest, discounted at various rates. Future cash flows of loans
are estimated based on their maturities and weighted average rates and
are discounted at current rates offered for similar loan terms to new
borrowers.
Investment securities are valued at quoted market prices if available.
For unquoted securities, the reported fair value is estimated by the
Company on the basis of financial and other information.
Fair value of demand deposits and deposits with no defined maturity is
taken to be the amount payable on demand at the reporting date. The
fair value of fixed-maturity deposits is estimated using rates
currently offered for deposits of similar remaining maturities. The
intangible value of long-term relationships with depositors is not
taken into account in estimating the fair values disclosed.
F-35
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
Rates currently available to the Company for Federal Home Loan Bank
advances with similar terms and remaining maturities are used to
estimate the fair value of existing borrowings as the present value of
expected cash flows. Advances which have maturities within one year or
rates which adjust monthly are valued at the carrying amount.
NOTE 20: RECENT ACCOUNTING DEVELOPMENTS
Statement of Financial Accounting Standards No. 119, Disclosures About
Derivative Financial Instruments and Fair Value of Financial
Instruments, requires disclosures of information such as credit and
market risks, cash requirements and accounting policies about
derivative financial instruments. SFAS No. 119 is effective for
financial statements issued for fiscal years ending after December 15,
1994, except for entities with less than $150 million in total assets.
For those entities, SFAS No. 119 is effective for financial statements
issued for fiscal years ending after December 15, 1995. SFAS No. 119 is
effective for the Association for the fiscal year ending June 30, 1996.
The adoption of SFAS No. 119 did not have a material adverse impact on
the Association's financial position or results of operation.
The Financial Accounting Standards Board ("FASB" has issued SFAS No.
107, Disclosure about Fair Value of Financial Instruments, which
generally requires disclosure of the fair value of financial
instruments, both assets and liabilities recognized and not recognized
in the balance sheets. The FASB has also issued SFAS No. 114,
Accounting by Creditors for Impairment of a Loan, and SFAS No. 118,
Accounting by Creditors for Impairment of a Loan - Income Recognition
and Disclosures. SFAS No. 107, SFAS No. 114 and SFAS No. 118 are
effective for fiscal years beginning after December 15, 1994. SFAS No.
114, as amended by SFAS No. 118, requires that impaired loans be
measured at the present value of expected future cash flows discounted
at the loan's effective interest rate or, as a practical expedient, at
the loans' observable market price or the fair value of the collateral
if the loan is collateral dependent. Homogeneous loans, such as single-
family loans and most categories of consumer loans, are excluded from
this requirement. Adoption of these statements was effective for the
fiscal year beginning July 1, 1995. The adoption of SFAS No. 114 and
118 did not have a material adverse impact on the Association's
financial position or results of operations.
In November 1993, the AICPA issued SOP 93-6, "Employers' Accounting for
Employee Stock Ownership Plans," which is effective for fiscal years
beginning after December 15, 1993 and which applied to shares of
capital stock of sponsoring employers acquired by ESOPs after
F-36
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
December 31, 1992 that have not been committed to be released as of the
beginning of the year in which the ESOP is adopted. The SOP requires
that shares to be released in an accounting period should be reflected
in the consolidated financial statements as compensation expense equal
to the fair value of the shares at the time of release. Thus, as shares
increase or decrease in value,
NOTE 20: RECENT ACCOUNTING DEVELOPMENTS (Continued)
earnings will be affected relative to the shares to be released in that
period. Additionally, the SOP requires that outstanding shares for
purposes of computing both primary and fully diluted earnings per share
include only those shares scheduled to be released in that or prior
periods. Thus, as additional shares are released by the ESOP in future
periods, earnings per share may be diluted. Shares of Common Stock of
the Holding Company to be acquired by the ESOP are scheduled to be
released over a ten-year period commencing with the consummation of the
Conversion. However, the effect on net income and book value per share
for 1996 cannot be predicted due to the uncertainty of the fair value
of the shares subsequent to their issuance.
SFAS No. 123, Accounting for Stock-Based Compensation, is effective for
fiscal years beginning after December 15, 1995. This statement
established financial accounting and reporting standards for stock-
based employee compensation plans, including stock option plans. These
plans include all arrangements by which employees receive shares of
stock or other equity investments of the employer or where an employer
issues its equity instruments to acquire goods and services from
nonemployees. This statement will require pro forma disclosures in
fiscal 1997 of net income and earnings per share as if a new accounting
method based on the estimated fair value of employee stock options had
been adopted. The Association has not yet determined whether the
optional accounting treatment proposed by SFAS No. 123 will be adopted.
SFAS No. 122, Accounting for Mortgage Servicing Rights, will be
effective for the Association for the year beginning July 1, 1996 and
generally requires entities that sell or securitize loans and retain
the mortgage servicing rights to allocate the total cost of the
mortgage loans to the mortgage servicing right and the loan based on
their relative fair value. Costs allocated to mortgage servicing rights
should be recognized as a separate asset and amortized over the period
of estimated net servicing income and evaluated for impairment based on
fair value. The adoption of this statement is not expected to have a
material effect on the Consolidated Financial Statements.
F-37
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
SFAS No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" supersedes SFAS No. 122 and
will be effective for all transfers and servicing of financial assets
and extinguishments of liabilities occurring after December 31, 1996.
This statement provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of
liabilities based on consistent application of
NOTE 20: RECENT ACCOUNTING DEVELOPMENTS (Continued)
a financial-components approach that focuses on control. It
distinguished transfers of financial assets that are sales from
transfers that are secured borrowings.
Under the financial-components approach, after a transfer of financial
assets, an entity recognizes all financial assets it no longer controls
and liabilities that have been extinguished. The financial-components
approach focuses on the assets and liabilities that exist after the
transfer. Many of these assets and liabilities are components of
financial assets that existed prior to the transfer. If a transfer does
not meet the criteria for a sale, the transfer is accounted for as a
secured borrowing with a pledge of collateral. The adoption of this
statement is not expected to have a material effect on the Consolidated
Financial Statements.
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed of, is effective for the fiscal year
beginning July 1, 1996. The statement requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity
to be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss is recognized if the sum of the
expected future cash flows is less than the carrying amount of the
asset. Management does not expect the implementation of SFAS No. 121 to
have a material impact on the Association's consolidated financial
position or results of operations.
In April 1995, the FASB issued SOP 94-6, Disclosure of Certain
Significant Risks and Uncertainties. This SOP applies to financial
statements prepared in conformity with generally accepted accounting
principles by all nongovernmental entities. The disclosure requirements
in SOP 94-6 focus primarily on risks and uncertainties that could
significantly affect the amounts reported in the financial statements
in the near-term functioning of the reporting entity. The risks and
uncertainties discussed in SOP 94-6 stem from the nature of the
entity's operations, from the
F-38
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
necessary use of estimates in the preparation of the entity's financial
statements, and from significant concentrations in certain aspects of
the entity's operations. SOP 94-6 is effective for financial statements
issued for fiscal years ending after June 30, 1995 and is not expected
to have any impact on the Association's operations.
NOTE 21: PLAN OF CONVERSION
On September 23, 1996, the Association's Board of Directors approved a
plan ("Plan") to convert from a federally chartered mutual savings bank
to a federally chartered stock savings bank and then to a national
bank, subject to approval by the Association's members. The Plan, which
includes formation of a holding company to own all of the outstanding
stock of the Association, is subject to approval by the OTS and
includes the filing of a registration statement with the Securities and
Exchange Commission. As of June 30, 1996, the Association had incurred
no costs related to this conversion. If the conversion is ultimately
successful, actual conversion costs will be accounted for as a
reduction in gross proceeds. If the conversion is unsuccessful, the
conversion costs will be expensed.
The Plan calls for the common stock of the holding company to be
offered to various parties in a subscription offering at a price based
on an independent appraisal of the Association. It is anticipated that
any shares not purchased in the subscription offering will be offered
in a community offering.
The Association may not declare or pay a cash dividend if the effect
thereof would cause its net worth to be reduced below either the amount
required for the liquidation account discussed below or the regulatory
capital requirements imposed by the OTS.
At the time of the conversion, the Association will establish a
liquidation account in an amount equal to its retained earnings as
reflected in the latest statement of financial condition used in the
final conversion prospectus. The liquidation account will be maintained
for the benefit of eligible account holders and supplemental account
holders who continue to maintain their deposit accounts in the
Association after conversion. In the event of a complete liquidation of
the Association, and only in such an event, eligible depositors who
continue to maintain accounts shall be entitled to receive a
distribution from the liquidation account before any liquidation may be
made with respect to common stock.
The Board of Directors of the Bank has adopted an employee stock
F-39
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
ownership plan (ESOP), a tax-qualified employee benefit plan for
officers and employees of the Holding Company and the Bank. The ESOP
intends to buy up to 8% of the Common Stock issued in the Stock
Conversion. The ESOP will purchase the shares with funds borrowed from
the Holding Company, and it is anticipated that the ESOP will repay the
loans through periodic tax-deductible contributions from the Bank over
a ten-year period. These contributions will increase the compensation
expense of the Bank.
F-40
<PAGE>
No 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 informa tion or
representation must not be relied upon as having been authorized by the Holding
Company or Investors Federal. 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 Holding Company or Investors
Federal since any of the dates as of which information is furnished herein or
since the date hereof.
_____________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary................................................... 4
Selected Consolidated Financial Information and Other Data........... 11
Recent Financial Data................................................ 13
Risk Factors......................................................... 18
Investors Federal Bank and Savings Association....................... 26
IFB Holdings, Inc.................................................... 26
Investors Federal Bank, National Association.........................
Capitalization....................................................... 27
Pro Forma Data....................................................... 28
Pro Forma Regulatory Capital......................................... 33
Use of Proceeds...................................................... 34
Dividends............................................................ 35
Market for Common Stock.............................................. 36
Investors Federal Bank and Savings Association Consolidated
Statements of Income............................................... 37
Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 38
Business............................................................. 51
Regulation........................................................... 75
Management........................................................... 85
The Conversion....................................................... 94
Restrictions on Acquisitions of Stock and Related Takeover
Defensive Provisions............................................... 107
Description of Capital Stock......................................... 111
Legal and Tax Matters................................................ 113
Experts.............................................................. 113
Additional Information............................................... 113
Index to Consolidated Financial Statements........................... F-1
</TABLE>
Until the later of December __, 1996, or 25 days after commencement of
the syndicated community offering, if any, 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.
258,750 Shares
IFB HOLDINGS, INC.
(Holding Company for Investors Federal
Bank and Savings Association to become
Investors Federal Bank, National Association)
Common Stock
_____________
PROSPECTUS
_____________
TRIDENT SECURITIES, INC.
November __, 1996
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers of Investors Federal Bank
and Savings Association
Generally, federal regulations define areas for indemnity coverage for federal
savings associations, as follows:
(a) Any person against whom any action is brought by reason of the
fact that such person is or was a director or officer of the savings association
shall be indemnified by the savings association for:
(i) Reasonable costs and expenses, including reasonable
attorneys' fees, actually paid or incurred by such person in
connection with proceedings related to the defense or settlement of
such action;
(ii) Any amount for which such person becomes liable by
reason of any judgment in such action;
(iii) Reasonable costs and expenses, including reasonable
attorneys' fees, actually paid or incurred in any action to enforce
his rights under this section, if the person attains a final judgment
in favor of such person in such enforcement action.
(b) Indemnification provided for in subparagraph (a) shall be made to
such officer or director only if the requirements of this subsection are met:
(i) The savings association shall make the indemnification
provided by subparagraph (a) in connection with any such action which
results in a final judgment on the merits in favor of such officer or
director.
(ii) The savings association shall make the indemnification
provided by subparagraph (a) in case of settlement of such action,
final judgment against such director or officer or final judgment in
favor of such director or officer other than on the merits except in
relation to matters as to which he shall be adjudged to be liable for
negligence or misconduct in the performance of duty, only if a
majority of the directors of the savings association determines that
such a director or officer was acting in good faith within what he was
reasonably entitled to believe under the circumstances was the scope
of his employment or authority and for a purpose which he was
reasonably entitled to believe under the circumstances was in the best
interest of the savings association or its members.
(c) As used in this paragraph:
(i) "Action" means any action, suit or other judicial or
administrative proceeding, or threatened proceeding, whether civil,
criminal, or otherwise, including any appeal or other proceeding for
review;
(ii) "Court" includes, without limitation, any court to which
or in which any appeal or any proceeding for review is brought;
(iii) "Final Judgment" means a judgment, decree, or order which
is appealable and as to which the period for appeal has expired and no
appeal has been taken;
(iv) "Settlement" includes the entry of a judgment by consent
or by confession or upon a plea of guilty or of nolo contendere.
<PAGE>
Indemnification of Directors and Officers of IFB Holdings, Inc.
Article ELEVENTH of IFB Holdings, Inc.'s (the "Corporation")
Certificate of Incorporation sets forth circumstances under which directors,
officers, employees and agents of the Corporation may be insured or indemnified
against liability which they may incur in their capacities as such.
ELEVENTH:
A. Each person who was or is made a party or is threatened to be made
a party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a director or an officer of the
Corporation or is or was serving at the request of the Corporation as a director
or officer of another corporation, including, without limitation, any Subsidiary
(as defined in Article EIGHTH of the Certificate of Incorporation of the
Corporation), partnership, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan (hereinafter an "indemnitee"),
whether the basis of such proceeding is alleged action in an official capacity
as a director or officer or in any other capacity while serving as a director or
officer, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General Corporation Law, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such indemnitee in
connection therewith; provided, however, that, except as provided in Section C
hereof with respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation.
B. The right to indemnification conferred in Section A of this
Article ELEVENTH shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however, that,
if the Delaware General Corporation Law requires, an advancement of expenses
incurred by an indemnitee in his or her capacity as a director or officer (and
not in any other capacity in which service was or is rendered by such
indemnitee, including, without limitation, service to an employee benefit plan)
shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication"), that such indemnitee is not entitled to be indemnified for such
expenses under this Section or otherwise. The rights to indemnification and to
the advancement of expenses conferred in Sections A and B of this Article
ELEVENTH shall be contract rights and such rights shall continue as to an
indemnitee who has ceased to be a director or officer and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article ELEVENTH is not
paid in full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in
any such suit, or in a suit brought by the Corporation to recover an advancement
of expenses pursuant to the terms of an undertaking, the indemnitee shall also
be entitled to be paid the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors,
<PAGE>
independent legal counsel, or its stockholders) that the indemnitee has not met
such applicable standard of conduct, shall create a presumption that the
indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Article ELEVENTH or otherwise shall be on
the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article ELEVENTH shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, the
Corporation's Certificate of Incorporation, Bylaws, agreement, vote of
stockholders or Disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
F. The Corporation may, to the extent authorized from time to time by
a majority vote of the Disinterested Directors, grant rights to indemnification
and to the advancement of expenses to any employee or agent of the Corporation
to the fullest extent of the provisions of this Article with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
Item 25. Other Expenses of Issuance and Distribution
<TABLE>
<CAPTION>
Amount
------
<S> <C> <C>
* Legal Fees and Expenses..................... $ 85,000
* Printing, Postage and Mailing............... 60,000
* Appraisal Fees and Expenses................. 23,000
* Accounting Fees and Expenses................ 45,000
* Blue Sky Filing Fees and Expenses
(including counsel fees).................... 15,000
Conversion Agent and Proxy Solicitation Fees 6,000
** Marketing Agent Fees and Expenses........... 71,715
* Marketing Agent Counsel Fees................ 22,500
* Filing Fees (NASD, OTS and SEC)............. 16,700
* Other Expenses.............................. 35,085
--------
* Total....................................... $380,000
========
</TABLE>
- --------------
* Estimated
** IFB Holdings, Inc. has retained Trident Securities, Inc. ("Trident
Securities") to assist in the sale of common stock on a best efforts basis
in the Offerings. Trident Securities will receive fees of $62,715,
exclusive of estimated expenses of $9,000, assuming the sale of Common
Stock at the midpoint of the Estimated Valuation Range.
<PAGE>
Item 26. Recent Sales of Unregistered Securities
Not Applicable.
Item 27. Exhibits:
The exhibits filed as part of this registration statement are as
follows:
(a) List of Exhibits
1.1 Engagement Letter between Investors Federal Bank and Savings Association
and Trident Securities, Inc.*
1.2 Form of Agency Agreement among IFB Holdings, Inc., Investors Federal Bank
and Savings Association and Trident Securities, Inc.
2 Plan of Conversion*
3.1 Certificate of Incorporation of IFB Holdings, Inc.*
3.2 Bylaws of IFB Holdings, Inc.*
3.3 Charter of Investors Federal Bank and Savings Association*
3.4 Bylaws of Investors Federal Bank and Savings Association*
3.5 Articles of Association of Investors Federal Bank, National Association*
3.6 Bylaws of Investors Federal Bank, National Association*
4 Form of Common Stock Certificate of IFB Holdings, Inc.*
5 Opinion of Luse Lehman Gorman Pomerenk & Schick regarding legality of
securities being registered*
8.1 Federal Tax Opinion of Luse Lehman Gorman Pomerenk & Schick*
8.2 State Tax Opinion of Lockridge, Constant & Conrad, LLC
8.3 Opinion of Ferguson & Co., LLP with respect to Subscription Rights*
10.1 Form of Employment Agreement for Earle S. Teegarden, Jr. and Larry R.
Johnson*
10.2 Employee Stock Ownership Plan*
10.3 Profit Sharing Plan*
10.4 Director Emeritus Plan*
21 Subsidiary
23.1 Consent of Luse Lehman Gorman Pomerenk & Schick (contained in Opinions
included on Exhibits 5 and 8.1)*
23.2 Consent of Lockridge, Constant & Conrad, LLC
23.3 Consent of Ferguson & Co., LLP*
<PAGE>
24 Power of Attorney (set forth on signature page)*
27.1 EDGAR Financial Data Schedule*
99.1 Appraisal Agreement between Investors Federal Bank and Savings Association
and Ferguson & Co., LLP*
99.2 Appraisal Report of Ferguson & Co., LLP
99.3 Proxy Statement*
99.4 Marketing Materials*
99.5 Order and Acknowledgment Form and Certification Form
- ---------------------------
* Previously filed.
<PAGE>
Item 28. Undertakings
The undersigned Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
duration from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities offered,
and the offering of the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
The small business issuer will provide to the underwriter at the closing
specified in the Underwriting Agreement certificates in such documentation and
registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer 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 small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer 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 small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
questions whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Chillicothe, Missouri on November 5,
1996.
IFB HOLDINGS, INC.
By: /s/ Earle S. Teegarden, Jr.
---------------------------
Earle S. Teegarden, Jr.
President
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
as of the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Earle S. Teegarden, Jr. President and Director November 5, 1996
- ---------------------------- (Principal Executive Officer
Earle S. Teegarden, Jr. and Principal Financial Officer)
* Vice President and Controller November 5, 1996
- ---------------------------- (Principal Accounting Officer)
Sherri H. Williams
* Chairman of the Board November 5, 1996
- ----------------------------
Robert T. Fairweather
* Senior Vice President, November 5, 1996
- ---------------------------- Secretary and Director
Larry R. Johnson
* Vice-Chairman of the Board November 5, 1996
Edward P. Milbank
- ----------------------------
* Director November 5, 1996
- ----------------------------
J. Michael Palmer
* Director November 5, 1996
- ----------------------------
Armand J. Peterson
</TABLE>
*By: /s/ Earle S. Teegarden, Jr.
Earle S. Teegarden, Jr.
President
(Power of Attorney, signed October 4, 1996)
<PAGE>
Exhibit 1.2
IFB Holdings, Inc.
Up to 258,750 Shares
of
Common Stock
(Subject to Adjustment)
(Par Value $.01 Per Share)
$20.00 Per Share
SALES AGENCY AGREEMENT
----------------------
________, 1996
Trident Securities, Inc.
4601 Six Forks Road, Suite 400
Raleigh, North Carolina 27609
Dear Sirs:
IFB Holdings, Inc., a Delaware-chartered corporation ("Company"), and
Investors Federal Bank and Savings Association (to become Investors Federal
Bank, National Association), a federally chartered and insured mutual savings
bank ("Association," and all references hereafter to the Association shall
include the Association as a federal savings bank and as a national bank as
indicated by the context), hereby confirm as of the date above their respective
agreements with Trident Securities, Inc. ("Trident"), a broker-dealer registered
with the Securities and Exchange Commission ("Commission") and a member of the
National Association of Securities Dealers, Inc. ("NASD"), as follows:
1. Introduction. The Association intends to convert from a federally
------------
chartered mutual savings bank to a federally chartered stock savings bank and
then to a national bank as a wholly-owned subsidiary of the Company (together
with the Offerings, as defined below, the issuance of shares of common stock of
the Association to the Company, and the incorporation of the Company,
collectively the "Conversion") pursuant to a plan of conversion adopted on
September 23, 1996 ("Plan"). In accordance with the Plan, the Company is
offering shares of its common stock, par value $.01 per share ("Shares" or the
"Common Stock"), pursuant to nontransferable subscription rights in a
subscription offering ("Subscription Offering"), in order of priority, to (i)
the Association's Eligible Account Holders (as defined in the Plan), (ii) the
Association's Employee Stock Ownership Plan ("ESOP"), (iii) the Association's
Supplemental Eligible Account Holders (as defined in the Plan), (iv) the
Association's Other Members (as defined in the Plan), and (v) directors,
officers and employees of the Association. Shares of the Common Stock not sold
in the Subscription Offering are being offered to the general public in a
community offering, with
<PAGE>
Trident Securities, Inc.
Page 2
preference being given to natural persons residing in Livingston, Caldwell and
Daviess Counties, Missouri ("Association's Local Community") ("Community
Offering"), and, if necessary, through a syndicate of NASD-registered broker-
dealers managed by Trident in a syndicated community offering ("Syndicated
Community Offering"). The Community Offering and the Syndicated Community
Offering may commence any time during the Subscription Offering or after the
expiration of the Subscription Offering. The Subscription Offering, the
Community Offering and the Syndicated Community Offering are collectively
referred to as the "Offerings." Purchases of Shares in the Offerings are
subject to certain limitations and restrictions as described in the Plan.
The Company and the Association have been advised by Trident that it
intends to utilize its best efforts to assist the Company and the Association
with the sale of the Shares in the Subscription Offering and, if deemed
necessary, in the Community Offering and the Syndicated Community Offering.
2. Representations and Warranties.
------------------------------
(a) The Company and the Association jointly and severally represent and
warrant to Trident that:
(i) The Company has filed with the Commission a registration
statement, including exhibits and an amendment or amendments thereto, on
Form SB-2 (No. 333-____), including a Prospectus relating to the Offerings,
for the registration of the Shares under the Securities Act of 1933, as
amended ("Securities Act"); and such registration statement has been
declared effective under the Securities Act and no stop order has been
issued with respect thereto and no proceedings therefor have been initiated
or, to the Company's best knowledge, threatened by the Commission. Except
as the context may otherwise require, such registration statement, as
amended or supplemented, on file with the Commission at the time the
registration statement became effective, including the Prospectus,
financial statements, schedules, exhibits and all other documents filed as
part thereof, as amended and supplemented, is herein called the
"Registration Statement," and the prospectus, as amended or supplemented,
on file with the Commission at the time the Registration Statement became
effective is herein called the "Prospectus," except that if any prospectus
filed by the Company with the Commission pursuant to Rule 424(b) of the
general rules and regulations of the Commission under the Securities Act
(together with the published policies and actions of the Commission
thereunder, the "Securities Act Regulations") differs from the form of
prospectus on file at the time the Registration Statement became effective,
the term "Prospectus" shall refer to the Rule 424(b) prospectus from and
after the time it is filed with or mailed for filing to the Commission and
shall include any amendments or supplements thereto from and after their
dates of effectiveness or use, respectively.
<PAGE>
Trident Securities, Inc.
Page 3
(ii) The Association has filed a Notification of Intention to
Convert to or Combine with a Bank, including exhibits (as amended or
supplemented, the "OTS Bank Notification") under the HOLA and the OTS
Regulations, which has been approved by the OTS. No action by or before the
OTS revoking such approval is pending or, to the Association's best
knowledge, threatened.
(iii) The Association has filed a Letter of Intent to Convert to a
National Bank, including exhibits (as amended or supplemented, the "OCC
Conversion Application") under the National Bank Act, as amended ("NBA")
and the rules and regulations of the Office of the Comptroller of the
Currency ("OCC") promulgated thereunder ("OCC Regulations"), which has been
approved by the OCC. No action by or before the OCC revoking such approval
is pending or, to the Association's best knowledge, threatened. The
Company has filed an application, including exhibits (as amended or
supplemented, the "Bank Holding Company Application") with the Board of
Governors of the Federal Reserve System ("Federal Reserve") under the
Federal Reserve Act, as amended ("FRA"), and Regulation Y promulgated
thereunder by the Federal Reserve, which has been approved by the Federal
Reserve. No action by or before the Federal Reserve revoking such approval
is pending or, to the Association's best knowledge, threatened.
(iv) The Association has filed an Application for Approval of
Conversion on Form AC, including exhibits (as amended or supplemented, the
"Form AC" or the "Conversion Application") with the Office of Thrift
Supervision ("OTS") under the Home Owners' Loan Act, as amended ("HOLA"),
and the rules and regulations, including published policies and actions, of
the OTS thereunder (collectively, the "OTS Regulations"), which has been
approved by the OTS; and the Prospectus and the proxy statement for the
solicitation of proxies from members for the special meeting to approve the
Plan ("Proxy Statement") included as part of the Form AC have been approved
for use by the OTS. No order has been issued by the OTS preventing or
suspending the use of the Prospectus or the Proxy Statement and no action
by or before the OTS revoking such approvals is pending or, to the
Association's best knowledge, threatened. The Company has filed with the
OTS the Company's application on Form H-e(1)-S ("Holding Company
Application") promulgated under the savings and loan holding company
provisions of the HOLA and the regulations promulgated thereunder and has
received approval of its acquisition of the Association from the OTS.
(v) As of the date hereof (i) the Registration Statement and the
Prospectus complied with the Securities Act and the Securities Act
Regulations, (ii) the Registration Statement does not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made,
<PAGE>
Trident Securities, Inc.
Page 4
not misleading, and (iii) the Prospectus does not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Representations or warranties in this subsection shall not apply to
statements or omissions made in reliance upon and in conformity with
written information furnished to the Company or the Association by or on
behalf of Trident relating to Trident expressly for use in the Registration
Statement or Prospectus.
(vi) The Company has been duly incorporated as a Delaware
corporation and the Association has been duly organized as a mutual savings
bank under the laws of the United States, and each of them is validly
existing and in good standing under the laws of their jurisdiction of
organization with full power and authority to own its property and conduct
its business as described in the Registration Statement and Prospectus; the
Association is a member in good standing of the Federal Home Loan Bank of
Kansas City; the deposit accounts of the Association are insured by the
Savings Association Insurance Fund ("SAIF") administered by the Federal
Deposit Insurance Corporation ("FDIC") up to the applicable legal limits
and, upon consummation of the Conversion, will remain so insured; and each
of the Company and the Association is not required to be qualified to do
business as a foreign corporation in any jurisdiction where non-
qualification would have a material adverse effect on the financial
condition, operations, business, properties or assets of the Company and
the Association.
(vii) The Association has good, marketable and insurable title to
all assets material to its business and to those assets described in the
Prospectus as owned by it, free and clear of all liens, charges,
encumbrances or restrictions, except for liens for taxes not yet due,
except as described in the Prospectus and except as do not in the aggregate
have a material adverse effect upon the financial condition, operations,
business, properties or assets of the Association; and all of the leases
and subleases material to the financial condition, operations, business,
assets or properties of the Association, under which it holds properties,
including those described in the Prospectus, are in full force and effect
as described therein.
(viii) The Association does not own equity securities of or an equity
interest in any business enterprise except as described in the Prospectus.
Investors Federal Service Corporation ("Subsidiary") is duly organized and
in good standing under the laws of the State of Missouri, with full power
and authority to own its property and conduct its business and is not
required to be qualified to do business as a foreign corporation in any
jurisdiction where the failure to be so qualified would have a material
adverse effect on the business, financial condition, operations, properties
or assets of the Subsidiary. The Subsidiary holds all licenses,
certificates and permits
<PAGE>
Trident Securities, Inc.
Page 5
from governmental authorities necessary for the conduct of its business,
except where failure to obtain such licenses, permits or authorizations
would not have a material adverse effect on the financial condition,
operations, property, assets or business of the Subsidiary. All of the
outstanding stock of the Subsidiary has been duly authorized and is fully
paid and nonassessable, and such stock is owned directly by the Association
free and clear of any liens or encumbrances. The activities of the
Subsidiary are permitted to subsidiaries of a federally-chartered savings
bank by the OTS Regulations and the policies and practices of the OTS and,
upon consummation of the Conversion, will be permitted to subsidiaries of a
national bank by the OCC Regulations and the policies and practices of the
OCC and to subsidiaries of a bank holding company by Regulation Y and the
policies and practices of the Federal Reserve.
(ix) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary actions on the part of each of the
Company and the Association, and this Agreement is a valid and binding
obligation of each of the Company and the Association, enforceable in
accordance with its terms (except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, reorganization,
conservatorship, receivership or similar laws relating to or affecting the
enforcement of creditors' rights generally or the rights of creditors of
insured financial institutions and their holding companies, the accounts of
whose subsidiaries are insured by the FDIC, by general equity principles,
regardless of whether such enforceability is considered in a proceeding in
equity or at law, or laws relating to the safety and soundness of insured
depository institutions and their affiliates, and except to the extent that
the provisions of Sections 8 and 9 hereof may be unenforceable as against
public policy or by applicable law, including without limitation, Section
23A of the FRA, 12 U.S.C. Section 371c ("Section 23A").
(x) Except as referred to in the Prospectus, there is no
litigation or governmental proceeding pending or, to the best knowledge of
the Company or the Association, threatened against or involving the
Company, the Association or the Subsidiary, or any of their respective
assets which individually or in the aggregate would reasonably be expected
to have a material adverse effect on the financial condition, results of
operations, business, assets or properties of the Company, the Association
or the Subsidiary. Any litigation or governmental proceeding is not
considered "threatened" unless the potential litigation or governmental
authority had manifested to the management of the Company, the Association
or the Subsidiary a present intention to initiate such litigation or
proceeding.
(xi) The Company and the Association have received the opinions of
Luse Lehman Gorman Pomerenk & Schick, P.C. with respect to the federal
income tax
<PAGE>
Trident Securities, Inc.
Page 6
consequences of the Conversion, and of Lockridge, Constant & Conrad, LLC
with respect to Missouri income tax consequences of the Conversion, to the
effect that the Conversion will constitute a tax-free reorganization under
the Internal Revenue Code of 1986, as amended, and will not be a taxable
transaction for the Association or the Company under the laws of Missouri;
and the facts and representations made by the Company and the Association
and relied upon in rendering such opinions are accurate and complete, and
neither the Company nor the Association have taken any action inconsistent
therewith.
(xii) Neither the Company nor the Association nor the Subsidiary is
in violation of any rule or regulation of the OTS or the FDIC that could
reasonably be expected to result in any enforcement action against the
Company, the Association or the Subsidiary, or their officers or directors,
that might have a material adverse effect on the financial condition,
operations, businesses, assets or properties of the Company, the
Association, and the Subsidiary, taken as a whole.
(xiii) Ferguson & Co., LLP ("Ferguson"), the firm that prepared the
independent appraisal dated as of September 20, 1996, is independent with
respect to the Company and the Association within the meaning of the OTS
Regulations. The Company and the Association believe Ferguson to be
experienced and expert in rendering appraisals of thrift institutions, and
nothing has come to the attention of the Company and the Association which
has caused them to believe that the appraisal by Ferguson was not prepared
in accordance with the requirements of the OTS Regulations.
(xiv) Lockridge, Constant & Conrad, LLC, the firm that certified the
consolidated financial statements of the Association filed as part of the
Registration Statement and the Conversion Application, is independent with
respect to the Company and the Association as required by the Securities
Act, the Securities Act Regulations, the Code of Professional Ethics of the
American Institute of Certified Public Accountants, and Title 12 of the
Code of Federal Regulations Parts 563c and 571, and nothing has come to the
attention of the Company and the Association which has caused them to
believe that such firm is not independent within the meaning of such
provisions.
(xv) The consolidated financial statements and related notes which
are included in the Registration Statement and the Prospectus fairly
present the consolidated financial condition, earnings, equity and cash
flows of the Association at the respective dates thereof and for the
respective periods covered thereby and comply as to form with the
applicable accounting requirements of the Securities Act Regulations and
the OTS Regulations. Such financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP")
<PAGE>
Trident Securities, Inc.
Page 7
consistently applied throughout the periods involved, except as set forth
therein, and such financial statements are consistent with financial
statements and other reports filed by the Association with the OTS, except
as GAAP may otherwise require. The financial tables in the Prospectus
accurately present the information purported to be shown thereby at the
respective dates thereof and for the respective periods covered thereby.
(xvi) There has been no material change in the financial condition,
operations, business, assets or properties of the Company, the Association
and the Subsidiary, taken as a whole, since the latest date as of which
such condition is set forth in the Prospectus, except as set forth therein;
and the capitalization, assets, properties and business of each of the
Company and the Association conform in all material aspects to the
descriptions thereof contained in the Prospectus. None of the Company, the
Association or the Subsidiary has any material liabilities of any kind,
contingent or otherwise, except as set forth in the Prospectus.
(xvii) There has been no breach or default (or the occurrence of any
event which, with notice or lapse of time or both, would constitute a
default) under, or creation or imposition of any lien, charge or other
encumbrance upon any of the properties or assets of the Company, the
Association or the Subsidiary pursuant to any of the terms, provisions or
conditions of, any agreement, contract, indenture, bond, debenture, note,
instrument or obligation to which the Company, the Association or the
Subsidiary is a party or by which any of them or any of their respective
assets or properties may be bound or is subject, or violation of any
governmental license or permit or any enforceable published law,
administrative regulation or order or court order, writ, injunction or
decree, which breach, default, encumbrance or violation would have a
material adverse effect on the financial condition, operations, business,
assets or properties of the Company, the Association and the Subsidiary,
taken as a whole; all agreements which are material to the financial
condition, results of operations or business of the Company, the
Association and the Subsidiary, taken as a whole, are in full force and
effect, and no party to any such agreement has instituted or, to the best
knowledge of the Company, the Association and the Subsidiary, threatened
any action or proceeding wherein the Company, the Association or the
Subsidiary would be alleged to be in default thereunder.
(xviii) Neither the Company nor the Association nor the Subsidiary is
in violation of its respective charter, certificate of incorporation or
bylaws. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby by the Company and the Association
do not conflict with or result in a breach of the charter, certificate of
incorporation or bylaws of the Company or the Association (in either mutual
or stock form) or constitute a material
<PAGE>
Trident Securities, Inc.
Page 8
breach of or default (or an event which, with notice or lapse of time or
both, would constitute a default) under, give rise to any right of
termination, cancellation or acceleration contained in, or result in the
creation or imposition of any lien, charge or other encumbrance upon any of
the properties or assets of the Company or the Association pursuant to any
of the terms, provisions or conditions of, any material agreement,
contract, indenture, bond, debenture, note, instrument or obligation to
which the Company or the Association is a party (other than the
establishment of a liquidation account pursuant to the Plan) or violate any
governmental license or permit or any law, administrative regulation or
order or court order, writ, injunction or decree (subject to the
satisfaction of certain conditions imposed by the OTS in connection with
its approval of the Conversion Application), which breach, default,
encumbrance or violation would have a material adverse effect on the
financial condition, operations or business of the Company and the
Association, taken as a whole.
(xix) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, except as otherwise may
be indicated or contemplated therein, none of the Company or the
Association has issued any securities which will remain issued at the
Closing Date or incurred any liability or obligation, direct or contingent,
or borrowed money, except borrowings or liabilities in the ordinary course
of business, or entered into any other transaction not in the ordinary
course of business and not consistent with prior practices, which is
material in light of the business of the Company and the Association, taken
as a whole.
(xx) The issuance and the sale of the Shares of the Company have
been duly authorized by all necessary action of the Company and approved by
the OTS and, when issued in accordance with the terms of the Plan and paid
for, shall be validly issued, fully paid and nonassessable and shall
conform to the description thereof contained in the Prospectus; the
issuance of the Shares is not subject to preemptive rights, except as set
forth in the Prospectus; and good title to the Shares will be transferred
by the Company upon issuance thereof against payment therefor, free and
clear of all claims, encumbrances, security interests and liens against the
Company whatsoever. The issuance and sale of the capital stock of the
Association to the Company has been duly authorized by all necessary action
of the Association and the Company and all appropriate regulatory
authorities (subject to the satisfaction of various conditions imposed by
the OTS in connection with its approvals of the Conversion Application and
the Holding Company Application), and such capital stock, when issued in
accordance with the terms of the Plan, will be fully paid and nonassessable
and will conform in all material respects to the description thereof
contained in the Prospectus.
<PAGE>
Trident Securities, Inc.
Page 9
(xxi) No approval of any regulatory or supervisory or other public
authority is required in connection with the execution and delivery of this
Agreement or the issuance of the Shares, except such approvals as have been
obtained and except for the declaration of effectiveness of any required
post-effective amendment by the Commission and approval thereof by the OTS,
the issuance of the Association's Federal Stock Charter by the OTS, the
issuance of the Association's Articles of Association by the OCC, and as
may be required under the "blue sky" or securities laws of various
jurisdictions.
(xxii) All contracts and other documents required to be filed as
exhibits to the Registration Statement, the Conversion Application, the
Holding Company Application, the OTS Bank Notification, the OCC Conversion
Application or the Bank Holding Company Application have been filed with
the Commission, the OTS, the OCC or the Federal Reserve, as the case may
be.
(xxiii) The Company, the Association and the Subsidiary have timely
filed all required federal, state and local franchise tax returns, and no
deficiency has been asserted with respect to such returns by any taxing
authorities, and the Company, the Association and the Subsidiary have paid
all taxes that have become due and, to the best of their knowledge, have
made adequate reserves for accrued tax liabilities, except where any
failure to make such filings, payments and reserves, or the assertion of
such a deficiency, would not have a material adverse effect on the
financial condition or results of operations of the Company, the
Association and the Subsidiary, taken as a whole.
(xxiv) All of the loans represented as assets of the Association and
the Subsidiary as of the most recent date for which financial condition
data is included in the Prospectus meet or are exempt from all requirements
of federal, state or local law pertaining to lending, including without
limitation truth in lending (including the requirements of Regulation Z and
12 C.F.R. Part 226 and Section 563.99), real estate settlement procedures,
consumer credit protection, equal credit opportunity and all disclosure
laws applicable to such loans, except for violations which, if asserted,
would not have a material adverse effect on the Company, the Association
and the Subsidiary, taken as a whole.
(xxv) The records of Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members (as those terms are defined in the Plan)
delivered to Trident by the Association or its agent for use during the
Conversion have been reviewed by the Association and are believed to be
accurate, reliable and complete and Trident shall have no liability to any
person relating to the reliability, accuracy or completeness of such
records or for any denial or allocation of a subscription to purchase
shares to any person based upon such records.
<PAGE>
Trident Securities, Inc.
Page 10
(xxvi) None of the Company, the Association or the Subsidiary or, to
the best knowledge of the Company, the Association and the Subsidiary, the
employees of the Company, the Association or the Subsidiary, has made any
payment of funds of the Company, the Association or the Subsidiary
prohibited by law, and no funds of the Company, the Association or the
Subsidiary have been set aside to be used for any payment prohibited by
law.
(xxvii) To the best knowledge of the Company, the Association and the
Subsidiary, the Company, the Association and the Subsidiary are in
compliance with all laws, rules and regulations relating to environmental
protection and neither the Company, the Association nor the Subsidiary is
subject to liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or any similar law,
except for violations which, if asserted, would not have a material adverse
effect on the Company, the Association and the Subsidiary, taken as a
whole. There are no actions, suits, regulatory investigations or other
proceedings pending or, to the best knowledge of the Company, the
Association or the Subsidiary, threatened against the Company, the
Association or the Subsidiary relating to environmental protection. To the
best knowledge of the Company, the Association and the Subsidiary, no
disposal, release or discharge of hazardous or toxic substances, pollutants
or contaminants, including petroleum and gas products, as any of such terms
may be defined under federal, state or local law, has been caused by the
Company, the Association or the Subsidiary or, to the best knowledge of the
Company, the Association and the Subsidiary, and except as already
disclosed in the Prospectus, has occurred on, in or at any of the
facilities or properties owned or leased by the Company, the Association or
the Subsidiary or in which the Association or the Subsidiary has a security
interest, except such disposal, release or discharge which would not have a
material adverse effect on the financial condition, operations, business,
assets or properties of the Company, the Association or the subsidiary,
taken as a whole.
(xxviii) All documents delivered by the Association or the Company or
their representatives in connection with the issuance and sale of the
Common Stock, except for those documents that were prepared by parties
other than the Association, the Company or their representatives, were, on
the dates on which they were delivered, true, complete and correct.
(b) Trident represents and warrants to the Company and the Association
that:
(i) Trident is registered as a broker-dealer and is in good standing
with the Commission and the NASD.
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Trident Securities, Inc.
Page 11
(ii) Trident is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with full corporate
power and authority to provide the services to be furnished to the Company
and the Association hereunder.
(iii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary action on the part of Trident, and this
Agreement is a legal, valid and binding obligation of Trident, enforceable
in accordance with its terms (except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar
laws relating to or affecting the enforcement of creditors' rights
generally or the rights of creditors of registered broker-dealers accounts
of whose may be protected by the Securities Investor Protection Corporation
or by general equity principles, regardless of whether such enforceability
is considered in a proceeding in equity or at law, and except to the extent
that the provisions of Sections 8 and 9 hereof may be unenforceable as
against public policy or pursuant to Section 23A).
(iv) Trident and, to Trident's best knowledge, its employees, agents
and representatives who shall perform any of the services required
hereunder to be performed by Trident, shall be duly authorized and shall
have all licenses, approvals and permits necessary to perform such
services, and Trident is a registered selling agent in the jurisdictions in
which the Company is relying on such registration for the sale of the
Shares, and will remain so registered until the Conversion is consummated
or terminated.
(v) The execution and delivery of this Agreement by Trident, the
fulfillment of the terms set forth herein and the consummation of the
transactions contemplated hereby shall not violate or conflict with the
charter or bylaws of Trident or violate, conflict with or constitute a
breach of, or default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, any material agreement, indenture
or other instrument by which Trident is bound or under any governmental
license or permit or any law, administrative regulation, authorization,
approval or order or court decree, injunction or order.
(vi) All funds received by Trident to purchase Common Stock will be
handled in accordance with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended ("Exchange Act").
(vii) No action or proceeding against Trident before the Commission,
the NASD, any state securities commission, or any state or federal court is
pending or, to Trident's best knowledge, threatened concerning Trident's
activities as a broker-dealer.
<PAGE>
Trident Securities, Inc.
Page 12
3. Employment of Trident; Sale and Delivery of the Shares. On the basis
------------------------------------------------------
of the representations and warranties herein contained, but subject to the terms
and conditions herein set forth, the Company and the Association hereby employ
Trident as their agent to utilize its best efforts to assist the Company with
the Company's sale of the Shares in the Offerings, and Trident hereby accepts
such employment. The employment of Trident hereunder shall terminate (a) forty-
five (45) days after the Subscription and Community Offering closes, unless the
Company and the Association, with the approval of the OTS, are permitted to
extend such period of time, or (b) upon consummation of the Conversion,
whichever date shall first occur.
In the event the Company is unable to sell a minimum of 191,250 Shares (or
such lesser amount as the OTS may permit) within the period herein provided,
this Agreement shall terminate, and the Company and the Association shall refund
promptly to any persons who have subscribed for any of the Shares, the full
amount which it may have received from them, together with interest as provided
in the Prospectus, and no party to this Agreement shall have any obligation to
the other party hereunder, except as set forth in Sections 6, 8, 9 and 10
hereof. Appropriate arrangements for placing the funds received from
subscriptions for Shares in special interest-bearing accounts with the
Association until all Shares are sold and paid for will be made prior to the
commencement of the Subscription and Community Offering, with provision for
prompt refund to the purchasers as set forth above, or for delivery to the
Company if all Shares are sold.
If all conditions precedent to the consummation of the Conversion are
satisfied, including the sale of all Shares required by the Plan to be sold, the
Company agrees to issue or have issued such Shares and to release for delivery
certificates to subscribers thereof for such Shares on or as soon as possible
following the Closing Date against payment to the Company by any means
authorized pursuant to the Prospectus, at the principal office of the Company,
522 Washington Street, Chillicothe, Missouri 64601, or at such other place as
shall be agreed upon between the parties hereto. The date upon which the
Company shall release or deliver the Shares sold in the Offerings, in accordance
with the terms hereof, is herein called the "Closing Date."
Trident agrees either (a) upon receipt of an executed order form of a
subscriber to forward the offering price of the Common Stock ordered on or
before twelve noon on the next business day following receipt or execution of an
order form by Trident to the Association for deposit in a segregated account or
(b) to solicit indications of interest in which event (i) Trident will
subsequently contact any potential subscriber indicating interest to confirm the
interest and give instructions to execute and return an order form or to receive
authorization to execute the order form on the subscriber's behalf, (ii) Trident
will mail acknowledgements of receipt of orders to each subscriber confirming
interest on the business day following such confirmation, (iii) Trident will
debit accounts of such subscribers on the third business day ("debit date")
following receipt of the confirmation referred to in
<PAGE>
Trident Securities, Inc.
Page 13
(i), and (iv) Trident will forward completed order forms together with such
funds to the Association on or before twelve noon on the next business day
following the debit date for deposit in a segregated account. Trident
acknowledges that if the procedure in (b) is adopted, subscribers' funds are not
required to be in their accounts until the debit date.
Trident shall receive the following compensation and expense reimbursement
for its services hereunder:
(a) (i) a commission equal to 1.85% of the aggregate dollar amount of
Common Stock sold to Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members who reside in the Association's Local
Community and a commission equal to 1.35% of the aggregate dollar amount of
Common Stock sold to Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members who reside outside of the Association's
Local Community (excluding any Common Stock purchased by officers,
directors, employees of the Company or the Association or their associates
or any employee benefit plans of the Company or the Association); (ii) a
commission equal to 1.85% of the aggregate dollar amount of Common Stock
sold in the Community Offering to residents of the Association's Local
Community and a commission equal to 1.35% of the aggregate dollar amount of
Common Stock sold in the Community Offering to non-residents of the
Association's Local Community (excluding any Common Stock purchased by
officers, directors, employees of the Company or the Association or their
associates or any employee benefit plans of the Company or the
Association); and (iii) a commission to be agreed upon by Trident and the
Company for Shares sold by other member firms of the NASD through a
selected dealers arrangement in the Syndicated Community Offering, which
aggregate commission shall be determined at the discretion of the Company
and the Association with the advice of Trident. All such fees shall be
calculated based on the final midpoint appraised value and such fees shall
not exceed the amount of such calculation. All such fees shall be paid to
Trident in next-day funds on the Closing Date.
(b) Reimbursement for reasonable out-of-pocket allocable expenses,
including but not limited to travel, food, lodging and legal fees, incurred
by it whether or not the Offerings are successfully completed; provided,
however, that reimbursable legal fees and expenses will not exceed $22,500
and $1,500, respectively, and that reimbursable expenses of Trident will
not exceed $7,500, and, provided further, that neither the Company nor the
Association shall reimburse Trident for any of the foregoing expenses
accrued after Trident shall have notified the Company or the Association of
its election to terminate this Agreement pursuant to Section 11 hereof or
after such time as the Company or the Association shall have given notice
in accordance with Section 12 hereof that Trident is in breach of this
Agreement. Full reimbursement of Trident shall be made in next-day funds
on the
<PAGE>
Trident Securities, Inc.
Page 14
Closing Date or, if the Conversion is not completed and is terminated for
any reason, within ten (10) business days of receipt by the Company of a
written request detailing allocable expenses from Trident for reimbursement
of such expenses. Trident acknowledges receipt of a $10,000 advance
payment from the Association, which shall be credited against the total
reimbursement due Trident hereunder. In the event this Agreement is
terminated pursuant to Section 11 hereof, Trident shall be reimbursed only
for its actual allocable expenses.
(c) Reimbursement for any expenses of the Company and the Association
set forth in Section 6 hereof to the extent paid by Trident on behalf of
the Company and the Association. Full reimbursement shall be made in next-
day funds on the Closing Date or, if the Conversion is not completed and is
terminated for any reason, within ten (10) business days of receipt by the
Company and the Association of a written request for such reimbursement
detailing such reimbursements.
Notwithstanding the limitations on reimbursement of Trident for its
allocable expenses provided in subsection (b) above and notwithstanding any
reimbursement of Trident pursuant to subsection (c) above, in the event that a
resolicitation or other event causes the Offerings to be extended beyond their
original expiration date, Trident shall be reimbursed for its reasonable
allocable expenses incurred during such extended period, provided that the
allowance for allocable expenses provided for in subsection (b) above has been
exhausted and subject to the following: such reimbursement shall be in an
amount equal to the product obtained by dividing $31,500 (the reimbursable
expenses and legal fees limitation set forth in Section (b) above by the total
number of days of the unextended Subscription Offering (calculated from the date
of the Prospectus to the intended close of the Subscription Offering as stated
in the Prospectus) and multiplying such product by the number of days of the
extension (that number of days from the date of the supplemental prospectus used
in the extended Subscription Offering to the closing of the extension of the
Subscription Offering described in such supplemental prospectus).
4. Offering. Subject to the provisions of Section 7 hereof, Trident is
--------
assisting the Company on a best efforts basis in offering a minimum of 191,250
and a maximum of 258,750 Shares, subject to adjustment up to 297,562 Shares
(except as the OTS may permit to be decreased or increased) in the Offerings.
The Shares are to be offered to the public at the price set forth on the cover
page of the Prospectus and the first page of this Agreement.
5. Further Agreements. The Company and the Association jointly and
------------------
severally covenant and agree that:
(a) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus and through and including the Closing
Date, except
<PAGE>
Trident Securities, Inc.
Page 15
as otherwise may be indicated or contemplated therein, neither the Company nor
the Association will issue any securities which will remain issued at the
Closing Date or incur any liability or obligation, direct or contingent, or
borrow money, except borrowings or liabilities in the ordinary course of
business, or enter into any other transaction not in the ordinary course of
business and consistent with prior practices, which is material in light of the
financial condition, operations, business, properties or assets of the Company
and the Association, taken as a whole.
(b) If any Shares remain unsubscribed following completion of the
Subscription Offering and the Community Offering, the Company (i) will, if
deemed necessary, promptly file with the Commission a post-effective amendment
to such Registration Statement relating to the results of the Subscription and
the Community Offerings, any additional information with respect to the proposed
plan of distribution and any revised pricing information or (ii) if no such
post-effective amendment is required, will file with, or mail for filing to, the
Commission a prospectus or prospectus supplement containing information relating
to the results of the Subscription and Community Offerings and pricing
information pursuant to Rule 424(c) of the Securities Act Regulations, in either
case in a form reasonably acceptable to the Company and Trident.
(c) Upon consummation of the Conversion, the authorized, issued and
outstanding equity capital of the Company shall be within the range as set forth
in the Prospectus under the caption "Capitalization," and no Common Stock of the
Company shall be outstanding immediately prior to the Closing Date (other than
shares of Common Stock issued in connection with the initial capitalization of
the Company, which shares will be canceled upon consummation of the Conversion);
and the certificates representing the Shares will conform in all material
respects with the requirements of applicable laws and OTS Regulations.
(d) At all times subsequent to the date of the Prospectus through and
including the Closing Date (i) the Registration Statement and the Prospectus
will comply with the Securities Act and the Securities Act Regulations, (ii) the
Registration Statement will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (iii) the Prospectus will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Agreements in this
subsection shall not apply to statements or omissions made in reliance upon and
in conformity with written information furnished to the Company or the
Association relating to Trident by or on behalf of Trident expressly for use in
the Registration Statement or Prospectus.
<PAGE>
Trident Securities, Inc.
Page 16
(e) Upon amendment of the Association's charter and bylaws as provided in
the OTS Regulations, the Association's conversion to a national bank as provided
in the OCC Regulations and completion of the sale by the Company of the Shares
as contemplated by the Prospectus, (i) the Association will be converted to a
federally chartered capital stock savings bank and then to a national bank
pursuant to the Plan, in each case with full power and authority to own its
property and conduct its business as described in the Prospectus, (ii) all of
the authorized and outstanding capital stock of the Association will be owned of
record and beneficially by the Company, and (iii) the Company will have no
direct subsidiaries other than the Association.
(f) The Company shall deliver to Trident, from time to time, such number of
copies of the Prospectus as Trident reasonably may request. The Company
authorizes Trident to use the Prospectus in any lawful manner in connection with
the offer and sale of the Shares.
(g) The Company will notify Trident immediately, and confirm the notice in
writing, (i) when any post-effective amendment to the Registration Statement
becomes effective or any supplement to the Prospectus has been filed, (ii) of
the issuance by the Commission of any stop order relating to the Registration
Statement or of the initiation or the threat of any proceedings for that
purpose, (iii) of the receipt of any notice with respect to the suspension of
the qualification of the Shares for offering or sale in any jurisdiction, and
(iv) of the receipt of any comments from the staff of the Commission relating to
the Registration Statement. If the Commission enters a stop order relating to
the Registration Statement at any time, the Company will make every reasonable
effort to obtain the lifting of such order at the earliest possible moment.
(h) During the time when a prospectus is required to be delivered under the
Securities Act, the Company will comply with all requirements imposed upon it by
the Securities Act and by the Securities Act Regulations to permit the
continuance of offers and sales of or dealings in the Shares in accordance with
the provisions hereof and the Prospectus. If during the period when the
Prospectus is required to be delivered in connection with the offer and sale of
the Shares any event relating to or affecting the Company and the Association,
taken as a whole, shall occur as a result of which it is necessary, in the
reasonable opinion of counsel for Trident, to amend or supplement the Prospectus
in order to make the Prospectus not false or misleading in light of the
circumstances existing at the time it is delivered to a purchaser of the Shares,
the Company forthwith shall prepare and furnish to Trident a reasonable number
of copies of an amendment or amendments or of a supplement or supplements to the
Prospectus (in form and substance reasonably satisfactory to counsel for
Trident) which shall amend or supplement the Prospectus so that, as amended or
supplemented, the Prospectus shall not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances existing at the time the
<PAGE>
Trident Securities, Inc.
Page 17
Prospectus is delivered to a purchaser of the Shares, not misleading. The
Company will not file or use any amendment or supplement to the Registration
Statement or the Prospectus unless Trident has been first furnished a copy or if
Trident shall reasonably object after having been furnished such copy. For the
purposes of this subsection the Company and the Association shall furnish such
information with respect to themselves as Trident from time to time may
reasonably request.
(i) The Company and the Association will take all reasonably necessary
action as may be required to qualify or register the Shares for offer and sale
by the Company under the securities or blue sky laws of such jurisdictions as
Trident and the Company or its counsel may agree upon; provided, however, that
the Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any such jurisdiction. In each jurisdiction where
such qualification or registration shall be effected, the Company, unless
Trident agrees that such action is not necessary or advisable in connection with
the distribution of the Shares, shall file and make such statements or reports
as are, or reasonably may be, required by the laws of such jurisdiction.
(j) Appropriate entries will be made in the financial records of the
Association to establish a liquidation account for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders (as those terms are
defined in the Plan) in accordance with the OTS Regulations.
(k) The Company will file a registration statement for the Common Stock
under Section 12(g) of the Exchange Act prior to completion of the Offerings
pursuant to the Plan and shall request that such registration statement be
effective upon completion of the Conversion. The Company shall maintain the
effectiveness of such registration for a minimum period of three years or for
such shorter period as may be required by applicable law.
(l) The Company will make generally available to its security holders as
soon as practicable, but not later than 90 days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 of the Securities Act Regulations) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date (as defined in said Rule 158) of the Registration
Statement.
(m) For a period of three (3) years from the date of this Agreement, the
Company will furnish to Trident, as soon as publicly available after the end of
each fiscal year, a copy of its annual report to shareholders for such year; and
the Company will furnish to Trident (i) as soon as publicly available, a copy of
each report or definitive proxy statement of the Company filed with the
Commission under the Exchange Act or mailed to shareholders, and
<PAGE>
Trident Securities, Inc.
Page 18
(ii) from time to time, such other public information concerning the Company as
Trident may reasonably request.
(n) The Company shall use the net proceeds from the sale of the Shares in
the manner set forth in the Prospectus.
(o) The Company shall not deliver the Shares until each and every condition
set forth in Section 7 hereof has been satisfied, unless such condition is
waived in writing by Trident.
(p) The Company shall advise Trident, if necessary, as to the allocation of
deposits, in the case of Eligible Account Holders and Supplemental Eligible
Account Holders, and votes, in the case of Other Members, and of the Shares in
the event of an oversubscription, and shall provide Trident final instructions
as to the allocation of the Shares ("Allocation Instructions") in such event and
the Allocation Instructions shall be accurate, reliable and complete. Trident
shall be entitled to rely on the Allocation Instructions and shall have no
liability in respect of its reliance thereon, including without limitation, no
liability for or related to any denial or grant of a subscription in whole or in
part.
(q) The Company and the Association will take such actions and furnish such
information as are reasonably requested by Trident in order for Trident to
comply with the NASD's "Interpretation Relating to Free-Riding and Withholding."
(r) At the Closing Date, the Company and the Association will have
completed the conditions precedent to, and shall have conducted the Conversion
in all material respects in accordance with, the Plan, OTS Regulations, OCC
Regulations, Regulation Y and all other applicable laws, regulations, published
decisions and orders, including all terms, conditions, requirements and
provisions precedent to the Conversion imposed by the OTS, the OCC and the
Federal Reserve.
(s) The Company will use its best efforts to obtain approval for and
maintain quotation of its shares of common stock on The Nasdaq Stock Market
effective on or prior to the Closing Date.
(t) Upon consummation of the Conversion, neither the Company nor the
Association nor the Subsidiary will be in violation of any rule or regulation of
the OCC, the FDIC or the Federal Reserve that could reasonably be expected to
result in any enforcement action against the Company, the Association or the
Subsidiary, or their officers or directors, that might have a material adverse
effect on the financial condition, operations, businesses, assets or properties
of the Company, the Association, and the Subsidiary, taken as a whole.
<PAGE>
Trident Securities, Inc.
Page 19
6. Payment of Expenses. Subject to Section 3(c) hereof, whether or not
-------------------
the Conversion is consummated, the Company and the Association shall pay the
following expenses: (a) all regulatory filing fees, including but not limited to
those payable to the Commission, OTS, "blue sky" authorities and the NASD
(including fees payable to the NASD for Trident's filing pursuant to the NASD
Corporate Finance Rule), (b) all stock issue and transfer taxes which may be
payable with respect to the sale of the Shares, (c) attorneys' fees of the
Company and the Association, (d) attorneys' fees relating to any required "blue
sky" laws research and filings, (e) telephone charges, (f) air freight, (g)
rental equipment, (h) supplies, (i) transfer agent and registrar fees and
expenses, (j) auditing and accounting fees and expenses, (k) costs of printing
and mailing all documents necessary in connection with the Conversion, and (l)
slide production expenses in connection with any community investor meetings to
be held by Trident.
7. Conditions of Trident's Obligations. Except as may be waived in
-----------------------------------
writing by Trident, the obligations of Trident as provided herein shall be
subject to the accuracy of the representations and warranties contained in
Section 2 hereof as of the date hereof and as of the Closing Date, to the
performance by the Company and the Association of their obligations hereunder,
and to the following conditions:
(a) At the Closing Date, Trident shall receive the favorable opinion
of Luse Lehman Gorman Pomerenk & Schick, P.C., special counsel for the
Company and the Association, dated the Closing Date, addressed to Trident,
in form and substance reasonably satisfactory to counsel for Trident and
stating that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, and the Association is validly existing in good standing
as a mutual savings bank under the laws of the United States, each
with full power and authority to own its properties and conduct its
business as described in the Prospectus;
(ii) the Association is a member of the Federal Home Loan Bank of
Kansas City; the deposit accounts of the Association are insured by
the SAIF up to the applicable legal limits and will remain so insured
upon consummation of the Conversion; and no action or proceeding to
suspend or revoke such membership or insurance coverage is pending or,
to such counsel's Actual Knowledge, threatened;
(iii) the activities of the Company, the Association and the
Subsidiary as described in the Prospectus are permitted under the HOLA
and OTS Regulations and, upon consummation of the Conversion, will be
permitted under the NBA and OCC Regulations and the FRA and Regulation
Y;
<PAGE>
Trident Securities, Inc.
Page 20
(iv) the Subsidiary is validly existing as a corporation in good
standing under the laws of the State of Missouri with full power and
authority to own its properties and conduct its business as described
in the Prospectus; to such counsel's Actual Knowledge, the Subsidiary
has obtained all licenses, permits and other governmental
authorizations required for the conduct of its business as described
in the Prospectus, except where the failure to obtain such licenses,
permits or governmental authorization would not have a material
adverse effect on the financial condition, operations, business,
properties or assets of the Subsidiary; to such counsel's Actual
Knowledge, all of the leases and subleases material to the business of
the Subsidiary under which the Subsidiary holds properties are in full
force and effect; to such counsel's Actual Knowledge, the Subsidiary
is not in violation of its articles of incorporation or bylaws; and to
such counsel's Actual Knowledge, all of the outstanding stock of the
Subsidiary has been duly authorized and is validly issued, fully paid
and nonassessable, and such stock is owned directly by the
Association, free and clear of all material liens, encumbrances or
other claims or restrictions;
(v) the Company, the Association and the Subsidiary are each
duly qualified to do business and are in good standing as a foreign
corporation in each jurisdiction where the ownership or leasing of its
properties or the conduct of its business requires such qualification,
unless the failure to be so qualified would not have a material
adverse effect on the Company, the Association and the Subsidiary,
taken as a whole.
(vi) to such counsel's Actual Knowledge, the Association has
obtained all licenses, permits and other governmental authorizations
required for the conduct of its business as described in the
Prospectus, except where the failure to obtain such licenses, permits
or governmental authorizations would not have a material adverse
effect on the financial condition, operations, business, properties or
assets of the Company and the Association, taken as a whole; to such
counsel's Actual Knowledge, all of the leases and subleases material
to the business of the Association under which the Association holds
properties are in full force and effect; to such counsel's Actual
Knowledge, the Association is not in violation of its charter or
bylaws;
(vii) the Plan has been duly adopted and approved by the Boards
of Directors of the Association and the Company and the members of the
Association; the Plan complies with, and to such counsel's Actual
Knowledge, the Conversion has been effected in all material respects
in accordance with, the HOLA and the OTS Regulations, the NBA and OCC
Regulations, and the FRA and Regulation Y; to such counsel's Actual
Knowledge, all of the
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Trident Securities, Inc.
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terms, conditions, requirements and provisions with respect to the
Plan and the Conversion imposed by the OTS, the OCC and the Federal
Reserve, except with respect to the Conversion Application (which is
covered by opinion (xix) below) and the filing or submission of
certain required post-Conversion reports or other materials by the
Company or the Association, have been complied with by the Company and
the Association; and, to such counsel's Actual Knowledge, no person
has sought to obtain regulatory or judicial review of the final action
of the OTS in approving the Plan;
(viii) the Company has authorized Common Stock as set forth in
the Registration Statement and the Prospectus, and the description
thereof in the Registration Statement and the Prospectus is accurate
and complete in all material respects;
(ix) the issuance and sale of the Shares have been duly and
validly authorized by all necessary corporate action on the part of
the Company; the Shares, upon receipt of consideration and issuance in
accordance with the terms of the Plan and this Agreement, will be
validly issued, fully paid, nonassessable and, except as disclosed in
the Prospectus, free of preemptive rights, and good title thereto
shall be transferred by the Company free and clear of all claims,
encumbrances, security interests and liens created by the Company;
(x) the certificates for the Shares are in due and proper
form and comply in all material respects with applicable Delaware law
and OTS Regulations;
(xi) the issuance and sale of the capital stock of the
Association to the Company have been duly authorized by all necessary
corporate action of the Association and the Company and have received
the approvals of the OTS and the Federal Reserve, and such capital
stock, upon receipt of payment and issuance in accordance with the
terms of the Plan, will be validly issued, fully paid and
nonassessable;
(xii) subject to the satisfaction of the conditions to the OTS
approval of the Conversion Application and the Holding Company
Application the OCC approval of the OCC Conversion Application and the
Federal Reserve approval of the Bank Holding Company Application, no
further approval, authorization, consent or other order of any
regulatory agency is required in connection with the execution and
delivery of this Agreement, the issuance and sale of the Shares and
the consummation of the Conversion, except with respect to the
issuance to the Association's Federal Stock Charter by the OTS
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and the issuance of the Association's Articles of Association by the
OCC, and except as may be required under the "blue sky" securities
laws of various jurisdictions and the regulations of the NASD (as to
which no opinion need be rendered);
(xiii) the execution and delivery of this Agreement and the
consummation of the Conversion have been duly and validly authorized
by all necessary corporate action on the part of each of the Company
and the Association; and this Agreement is a legal, valid and binding
obligation of each of the Company and the Association, enforceable in
accordance with its terms (except as the enforceability thereof may be
limited by (i) bankruptcy, insolvency, moratorium, reorganization,
receivership, conservatorship or other similar laws relating to or
affecting the enforcement of creditors' rights generally or the rights
of creditors of depository institutions whose accounts are insured by
the FDIC or savings and loan holding companies the accounts of whose
subsidiaries are insured by the FDIC; (ii) general equity principles,
regardless of whether such enforceability is considered in a
proceeding in equity or at law, or (iii) laws relating to the safety
and soundness of insured depository institutions and their affiliates,
and except to the extent that the provisions of Sections 8 and 9
hereof may be unenforceable as against public policy or applicable
law, including but not limited to, Section 23A of the Federal Reserve
Act, as amended);
(xiv) except as set forth in the Prospectus, there are no legal
or governmental proceedings pending or, to such counsel's Actual
Knowledge, threatened against or involving the assets of the Company,
the Association or the Subsidiary which would have a material adverse
effect on the Company, the Association and the Subsidiary, taken as a
whole (provided that for this purpose such counsel need not regard any
litigation or governmental procedure to be "threatened" unless the
potential litigant or government authority has manifested to the
management of the Company or the Association, or to such counsel, a
present intention to initiate such litigation or proceeding);
(xv) the statements in the Prospectus under the captions
"Regulation," "Taxation," "Dividends," "Certain Restrictions on
Acquisition of the Company" and "Description of Capital Stock,"
insofar as they are, or refer to, statements of federal law or legal
conclusions (excluding financial or statistical data or stock
valuation information included therein, as to which an opinion need
not be expressed), have been prepared or reviewed by such counsel and
are accurate and complete in all material respects;
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(xvi) the Form AC, the Holding Company Application and the OTS
Bank Notification have been approved by the OTS, and the Prospectus
and the Proxy Statement have been authorized for use by the OTS; the
Registration Statement has been declared effective by the Commission;
the OCC Conversion Application has been approved by the OCC; the Bank
Holding Company Application has been approved by the Federal Reserve;
and no proceedings are pending by or before the OTS, the Commission,
the OCC or the Federal Reserve seeking to revoke or rescind the orders
declaring the Registration Statement effective or approving the OCC
Conversion Application, the Holding Company Application, the OTS Bank
Notification, or the Conversion Application, to such counsel's Actual
Knowledge, are contemplated or threatened (provided that for this
purpose such counsel need not regard any litigation or governmental
procedure to be "threatened" unless the potential litigant or
government authority has manifested to the management of the Company
or the Association, or to such counsel, a present intention to
initiate such litigation or proceeding);
(xvii) the execution and delivery of this Agreement and the
consummation of the Conversion by the Company and the Association do
not conflict with or result in a breach of the charter, certificate of
incorporation or bylaws of the Company or the Association (in either
mutual or stock form), or, to such counsel's Actual Knowledge,
constitute a breach of or default (or an event which, with notice or
lapse of time or both, would constitute a default) under, give rise to
any right of termination, cancellation or acceleration contained in,
or result in the creation or imposition of any lien, charge or other
encumbrance upon any of the properties or assets of the Company or the
Association pursuant to any of the terms, provisions or conditions of,
any material agreement, contract, indenture, bond, debenture, note,
instrument or obligation to which the Company or the Association is a
party (other than the establishment of the liquidation account
pursuant to the Plan) or violate any governmental license or permit or
any enforceable published law, administrative regulation or order or
court order, writ, injunction or decree (subject to the satisfaction
of certain conditions imposed by the OTS in connection with its
approval of the Conversion Application, the OTS Bank Notification, and
the Holding Company Application, the OCC in connection with its
approval of the OCC Conversion Application, or the Federal Reserve in
connection with its approval of the Bank Holding Company Application),
which breach, default, encumbrance or violation would have a material
adverse effect on the financial condition, operations, business,
assets or properties of the Company and the Association taken as a
whole;
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Page 24
(xviii) to such counsel's Actual Knowledge, there has been no
breach of any provision of the Company's, the Association's or the
Subsidiary's charter, certificate of incorporation or bylaws or breach
or default (or the occurrence of any event which, with notice or lapse
of time or both, would constitute a default) by the Company, the
Association or the Subsidiary under any agreement, contract,
indenture, bond, debenture, note, instrument or obligation to which
the Company, the Association or the Subsidiary is a party or by which
any of them or any of their respective assets or properties may be
bound, which breach or default would have a material adverse effect on
the financial condition, operations, business, assets or properties of
the Company, the Association and the Subsidiary taken as a whole;
(xix) at the time the Conversion Application was approved by
the OTS and the Registration Statement was declared effective by the
Commission, the Conversion Application and the Registration Statement
(including the Prospectus and the Proxy Statement contained therein),
complied as to form in all material respects with the requirements of
the Securities Act, the HOLA, the Securities Act Regulations and the
OTS Regulations, as the case may be (except as to information provided
in writing by Trident with respect to Trident included therein and
financial statements, notes to financial statements, financial tables
and other financial and statistical data and stock valuation
information included therein, as to which no opinion need be
rendered); and all documents and exhibits required to be filed with
the Conversion Application and the Registration Statement have been so
filed and the descriptions in the Conversion Application and the
Registration Statement of such documents and exhibits are accurate and
complete in all material respects;
(xx) at the time the OTS Bank Notification and the Holding
Company Application, the OCC Conversion Application, and the Bank
Holding Company Application were approved by the OTS, the OCC and the
Federal Reserve, respectively, the OTS Bank Notification, the OCC
Conversion Application and the Bank Holding Company Application
complied as to form in all material respects with the requirements of
the HOLA and the OTS Regulations, the NBA and the OCC Regulations, and
the FRA and Regulation Y, respectively; and all documents and exhibits
required to be filed with the OTS Bank Notification and the Holding
Company Application, the OCC Conversion Application and the Bank
Holding Company Application have been so filed and the descriptions in
the OTS Bank Notification, the OCC Conversion Application and the Bank
Holding Company Application of such documents and exhibits are
accurate and complete in all material respects; and
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Trident Securities, Inc.
Page 25
(xxi) upon the effectiveness of the Association's stock charter
and bylaws in accordance with applicable regulations, the conversion
of the association to a national bank and completion of the sale by
the Company of the Shares as contemplated by the Prospectus and the
Plan, (i) the Association will be converted to a permanent capital
stock savings bank under the laws of the United States and then to a
national bank under the laws of the United States, in each case with
full power and authority to own its property and conduct its business
as described in the Prospectus, and (ii) all of the outstanding
capital stock of the Association will be owned of record and, to such
counsel's Actual Knowledge, beneficially by the Company, free and
clear of all liens, charges, encumbrances and restrictions.
In rendering such opinions, such counsel may rely as to certain
matters of fact on certificates of executive officers and directors of the
Company and the Association and certificates of public officials delivered
pursuant hereto. Such counsel may assume that any agreement is the valid and
binding obligation of any parties to such agreement other than the Company, the
Association and the Subsidiary. The opinion of Luse Lehman Gorman Pomerenk &
Schick, P.C. shall be limited to matters governed by federal law and, with
respect to clauses (i), (viii) and (x), the Delaware General Corporation Law,
and with respect to clauses (iv) and (xv), the State of Missouri Business
Corporation Act. Such opinion shall be governed by, and interpreted in
accordance with, the Legal Opinion Accord ("Accord") of the ABA Section of
Business Law (1991), and, as a consequence, references in such opinion to such
counsel's "Actual Knowledge" shall be as such term is defined in the Accord (or
knowledge based on certificates). For purposes of such opinion, no proceeding
shall be deemed to be pending, no order or stop order shall be deemed to be
issued, and no action shall be deemed to be instituted unless, in each case, a
director or executive officer of the Company or the Association, or its counsel,
shall have received a copy of such proceeding, order, stop order or action. Such
opinion may be limited to statutes, regulations and judicial interpretations and
to facts as they exist as of the date of such opinions. In rendering such
opinion, such counsel need assume no obligation to revise or supplement it
should such statutes, regulations and judicial interpretations be changed by
legislative or regulatory action, judicial decision or otherwise. Such counsel
need express no view, opinion or belief with respect to whether any proposed or
pending legislation, if enacted, or any proposed or pending regulations or
policy statements issued by any regulatory agency, whether or not promulgated
pursuant to any such legislation, would affect the validity of the execution and
delivery by the Company and the Association of this Agreement or the issuance of
the Shares.
(b) At the Closing Date, Trident shall receive the letter of Luse
Lehman Gorman Pomerenk & Schick, P.C. special counsel for the Company and the
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Trident Securities, Inc.
Page 26
Association, dated the Closing Date, addressed to Trident, in form and
substance reasonably satisfactory to counsel for Trident and to the effect
that: (i) based on such counsel's participation in conferences with
representatives of the Company, the Association, its counsel, the
independent appraiser, the independent certified public accountants,
Trident and its counsel, review of documents and applicable law (including
the requirements of Form SB-2) and the experience such counsel has gained
in its practice under the Securities Act (relying as to factual matters on
certificates of officers and other written factual representations by the
Company and the Association), nothing has come to such counsel's attention
that would lead it to believe that the Registration Statement, as amended
or supplemented (except as to information in respect of Trident contained
therein and except as to the financial statements, notes to financial
statements, financial tables and other financial and statistical data and
stock valuation information contained therein, as to which such counsel
need express no view), at the time it became effective contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements made therein, in
light of the circumstances under which they were made, not misleading, and
that the Prospectus, as amended or supplemented (except as to information
in respect of Trident contained therein and except as to financial
statements, notes to financial statements, financial tables and other
financial and statistical data and stock valuation information contained
therein as to which such counsel need express no view), at the time the
Prospectus was filed with the Commission under Rule 424(b) of the
Securities Act regulations and at the Closing Date, contained any untrue
statement of a material fact or omitted to state a material fact necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading (in issuing such letter, such counsel may
indicate that it has not confirmed the accuracy or completeness of or
otherwise verified the factual information contained in the Registration
Statement or the Prospectus and that it does not assume any responsibility
for the accuracy or completeness thereof.)
(c) Counsel for Trident shall have been furnished such documents as
they reasonably may require for the purpose of enabling them to review or
pass upon the sale of the Shares as herein contemplated and related
proceedings, and for the purpose of evidencing the accuracy, completeness
or satisfaction of any of the representations, warranties or conditions
herein contained, including but not limited to, resolutions of the Board of
Directors of the Company and the Association regarding the authorization of
this Agreement and the transactions contemplated hereby.
(d) Prior to and at the Closing Date, in the reasonable opinion of
Trident, (i) there shall have been no material adverse change in the
financial condition, business, operations, assets or properties of the
Company and the Association, taken
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Trident Securities, Inc.
Page 27
as a whole, since the latest date as of which such condition is set forth
in the Prospectus, except as referred to or contemplated therein; (ii)
there shall have been no transaction entered into by the Company or the
Association after the latest date as of which the financial condition of
the Company or the Association is set forth in the Prospectus other than
transactions referred to or contemplated therein, transactions in the
ordinary course of business, and transactions which are not material to the
Company and the Association, taken as a whole; (iii) none of the Company or
the Association shall have received from the OTS, the OCC, the Federal
Reserve or the Commission any directive (oral or written) to make any
change in the method of conducting their respective businesses which is
material to the business of the Company and the Association, taken as a
whole, with which they have not complied; (iv) no action, suit or
proceeding, at law or in equity or before or by any federal or state
commission, board or other administrative agency, shall be pending or
threatened against the Company or the Association or affecting any of their
respective assets, wherein an unfavorable decision, ruling or finding would
have a material adverse effect on the business, operations, financial
condition or income of the Company and the Association, taken as a whole;
and (v) the Shares shall have been qualified or registered for offering and
sale by the Company under the securities or "blue sky" laws of such
jurisdictions as Trident and the Company shall have agreed upon.
(e) At the Closing Date, Trident shall receive a certificate of the
principal executive officer and the principal financial officer of each of
the Company and the Association, dated the Closing Date, to the effect
that: (i) they have examined the Prospectus and, at the time the Prospectus
became authorized for final use, the Prospectus did not contain an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading with respect to the Company or the
Association; (ii) since the date the Prospectus became authorized for final
use, no event has occurred which should have been set forth in an amendment
or supplement to the Prospectus which has not been so set forth, including
specifically, but without limitation, any material adverse change in the
business, financial condition, operations, assets or properties of the
Company or the Association and, the conditions set forth in clauses (ii)
through (iv) inclusive of subsection (d) of this Section 7 have been
satisfied; (iii) no order has been issued by the Commission, the OTS, the
OCC or the Federal Reserve to suspend the Offerings or the effectiveness of
the Prospectus, and, to the best knowledge of such officers, no action for
such purposes has been instituted or threatened by the Commission or the
OTS, the OCC or the Federal Reserve; (iv) to the best knowledge of such
officers, no person has sought to obtain review of the final actions of the
OTS approving the Plan; and (v) all of the representations and warranties
contained in
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Trident Securities, Inc.
Page 28
Section 2 of this Agreement are true and correct, with the same force and
effect as though expressly made on the Closing Date.
(f) At the Closing Date, Trident shall receive, among other documents,
(i) copies of the letters from the OTS approving the Conversion
Application, the OTS Bank Notification and the Holding Company Application
and authorizing the use of the Prospectus and the Proxy Statement, (ii) a
copy of the order of the Commission declaring the Registration Statement
effective; (iii) a copy of the letter from the OCC approving the OCC
Conversion Application, (iv) a copy of the letter from the Federal Reserve
approving the Bank Holding Company Application; (v) copy of the certificate
from the OTS evidencing the corporate existence of the Association; (vi)
copy of the certificate from the FDIC evidencing the insured status of the
Association, (vii) a copy of the letter from the appropriate Delaware
authority evidencing the incorporation (and, if generally available from
such authority, good standing) of the Company; (viii) a copy of the
Company's certificate of incorporation certified by the appropriate
Delaware governmental authority; and, (ix) if available, a copy of the
letter from the OTS approving the Association's Federal Stock Charter.
(g) As soon as available after the Closing Date, Trident shall receive
a certified copy of the Association's Federal Stock Charter as executed by
the OTS and a certified copy of the Association's Articles of Association
as executed by the OCC.
(h) Concurrently with the execution of this Agreement, Trident
acknowledges receipt of a letter from Lockridge, Constant & Conrad, LLC
independent certified public accountants, addressed to Trident and the
Company, in substance and form reasonably satisfactory to counsel for
Trident, with respect to the consolidated financial statements of the
Association and certain financial information contained in the Prospectus.
(i) At the Closing Date, Trident shall receive a letter in form and
substance reasonably satisfactory to counsel for Trident from Lockridge,
Constant & Conrad, LLC independent certified public accountants, dated the
Closing Date and addressed to Trident and the Company, confirming the
statements made by them in the letter delivered by them pursuant to the
preceding subsection as of a specified date not more than five (5) days
prior to the Closing Date.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are, in the reasonable
opinion of Trident and its counsel, satisfactory to Trident and its counsel.
Any certificates signed by an officer or director of the Company or the
Association prepared for Trident's reliance and delivered to Trident or to
counsel for Trident shall be deemed a representation and warranty by the Company
and the Association to Trident as to the statements made therein. If any
condition to
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Trident Securities, Inc.
Page 29
Trident's obligations hereunder to be fulfilled prior to or at the Closing Date
is not so fulfilled, Trident may terminate this Agreement or, if Trident so
elects, may waive in writing any such conditions which have not been fulfilled,
or may extend the time of their fulfillment.
8. Indemnification.
---------------
(a) The Company and the Association jointly and severally agree to
indemnify and hold harmless Trident, its officers, directors and employees and
each person, if any, who controls Trident within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act, against any and all
loss, liability, claim, damage and expense whatsoever and shall further promptly
reimburse such persons for any legal or other expenses reasonably incurred by
each or any of them in investigating, preparing to defend or defending against
any action, proceeding or claim (whether commenced or threatened) arising out of
or based upon any untrue or alleged untrue statement of a material fact or the
omission or alleged omission of a material fact required to be stated or
necessary to make the statements, in light of the circumstances under which they
were made, not misleading in (i) the Registration Statement or the Prospectus or
(ii) any application (including the Registration Statement and the Form AC) or
other document or communication (in this Section 8 collectively called
"Application") prepared or executed by or on behalf of the Company, the
Association or based upon written information furnished by or on behalf of the
Company or the Association, filed in any jurisdiction to register or qualify the
Shares under the securities laws thereof or filed with the OTS or Commission
with respect to the offering of the Shares, unless such statement or omission
was made in reliance upon and in conformity with information furnished in
writing to the Company or the Association with respect to Trident by or on
behalf of Trident expressly for use in the Prospectus or any amendment or
supplement thereof or in any Application, as the case may be.
(b) The Company shall indemnify and hold Trident harmless for any
liability whatsoever arising out of (i) the Allocation Instructions or (ii) any
records of Eligible Account Holders, Supplemental Eligible Account Holders and
Other Members (as those terms are defined in the Plan) delivered to Trident by
the Association or its agents for use during the Conversion.
(c) Trident agrees to indemnify and hold harmless the Company and the
Association, their officers, directors and employees and each person, if any,
who controls the Company and the Association within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act, to the same extent as
the foregoing indemnity from the Company and the Association to Trident, but
only with respect to statements or omissions, if any, made in the Prospectus or
any amendment or supplement thereof, in any Application or to a purchaser of the
Shares in reliance upon, and in conformity with,
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Trident Securities, Inc.
Page 30
information furnished in writing to the Company or the Association with respect
to Trident by or on behalf of Trident expressly for use in the Prospectus or any
amendment or supplement thereof or in any Application.
(d) Promptly after receipt by an indemnified party under this Section 8 of
notice of any action, proceeding or claim (whether commenced or threatened) such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party of such
action, proceeding or claim; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 8. In case any such action
is brought against any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with the other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than the
reasonable cost of investigation except as otherwise provided herein. In the
event the indemnifying party elects to assume the defense of any such action and
retain counsel acceptable to the indemnified party, the indemnified party may
retain additional counsel, but shall bear the fees and expenses of such counsel
unless (i) the indemnifying party shall have specifically authorized the
indemnified party to retain such counsel or (ii) the parties to such suit
include such indemnifying party and the indemnified party, and such indemnified
party shall have been advised by counsel that one or more material legal
defenses may be available to the indemnified party which may not be available to
the indemnifying party, in which case the indemnifying party shall not be
entitled to assume the defense of such suit notwithstanding the indemnifying
party's obligation to bear the fees and expenses of such counsel. In no event
shall the indemnifying parties be liable for the fees and expenses of more than
one separate firm of attorneys (and any special counsel that said firm may
retain) for all indemnified parties in connection with any one action,
proceeding, claim or suit or separate but similar or related actions,
proceedings or claims in the same jurisdiction arising out of the same general
allegations or circumstances. An indemnifying party against whom indemnity may
be sought shall not be liable to indemnify an indemnified party under this
Section 8 if any settlement of any such action is effected without such
indemnifying party's consent. To the extent applicable, this Section 8 is
subject to and limited by public policy and the provisions of applicable law,
including but not limited to, Section 23A.
9. Contribution. In order to provide for just and equitable contribution
------------
in circumstances in which the indemnity agreement provided for in Section 8
above is for any reason held to be unavailable to Trident, the Company and/or
the Association other than in accordance with its terms, the Company and the
Association or Trident shall contribute
<PAGE>
Trident Securities, Inc.
Page 31
to the aggregate losses, liabilities, claims, damages, and expenses of the
nature contemplated by said indemnity agreement incurred by the Company and the
Association or Trident (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Association on the one hand
and Trident on the other from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above, but also the relative fault of the Company or
the Association on the one hand and Trident on the other hand in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Association on the one hand and Trident on the other shall be deemed to be in
the same proportion as the total net proceeds from the Conversion received by
the Company and the Association bear to the total fees received by Trident under
this Agreement. The relative fault of the Company or the Association on the one
hand and Trident on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Association or by Trident and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Association and Trident agree that it would not be just
and equitable if contribution pursuant to this Section 9 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
the indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 9, Trident
shall not be required to contribute any amount in excess of the amount by which
fees owed Trident pursuant to this Agreement exceeds the amount of any damages
which Trident has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. To the extent applicable, this
Section 9 is subject to and limited by public policy and the provisions of
applicable law, including but not limited to, Section 23A.
10. Survival of Agreements, Representations and Indemnities. The
--------------------------------------------------------
respective indemnities of the Company and the Association and Trident and the
representation and warranties of the Company and the Association and of Trident
set forth in or made pursuant to this Agreement shall remain in full force and
effect, regardless of any
<PAGE>
Trident Securities, Inc.
Page 32
termination or cancellation of this Agreement or any investigation made by or on
behalf of Trident or the Company or the Association or any controlling person or
indemnified party referred to in Section 8 hereof, and shall survive any
termination or consummation of this Agreement and/or the issuance of the Shares,
and any legal representative of Trident, the Company, the Association and any
such controlling persons shall be entitled to the benefit of the respective
agreements, indemnities, warranties and representations.
11. Termination. Trident may terminate this Agreement by giving the
-----------
notice indicated below in this Section at any time after this Agreement becomes
effective as follows:
(a) If any domestic or international event or act or occurrence has
materially disrupted the United States securities markets such as to make it, in
Trident's reasonable opinion, impracticable to proceed with the offering of the
Shares; or if trading on the New York Stock Exchange shall have suspended; or if
the United States shall have become involved in a war or major hostilities; or
if a general banking moratorium has been declared by a state or federal
authority which has material effect on the Association or the Conversion; or if
a moratorium in foreign exchange trading by major international banks or persons
has been declared; or if there shall have been a material change in the
capitalization, condition or business of the Company, or if the Association
shall have sustained a material or substantial loss by fire, flood, accident,
hurricane, earthquake, theft, sabotage or other calamity or malicious act,
whether or not said loss shall have been insured; or if there shall have been a
material change in the condition or prospects of the Company or the Association.
(b) Any party hereto may terminate this Agreement by giving notice
pursuant to Section 12 hereof of a material breach of this Agreement by the
other party at any time after this Agreement becomes effective.
(c) If this Agreement is terminated as provided in this Section 11, the
party terminating this Agreement shall notify the non-terminating party promptly
by telephone or telegram, confirmed by letter.
(d) If this Agreement is terminated by Trident for any of the reasons set
forth in subsection (a) above, and to fulfill its obligations, if any, pursuant
to Sections 3, 6, 8(a) and 9 of this Agreement and upon demand, the Company and
the Association shall pay Trident the full amount so owing thereunder.
(e) The Association may terminate the Conversion in accordance with the
terms of the Plan. Such termination shall be without liability to any party,
except that the Company and the Association shall be required to fulfill their
obligations pursuant to Sections 3(b), 3(c), 6, 8(a), 9 and 10 of this
Agreement.
<PAGE>
Trident Securities, Inc.
Page 33
12. Notices. All communications hereunder, except as herein otherwise
-------
specifically provided, shall be in writing and if sent to Trident shall be
mailed, delivered or telegraphed and confirmed to Trident Securities, Inc., 4601
Six Forks Road, Suite 400, Raleigh, North Carolina 27609, Attention: Mr. R. Lee
Burrows, Jr. (with a copy to Breyer & Aguggia, 1300 I Street, N.W., Suite 470
East, Washington, D.C. 20005, Attention: Paul M. Aguggia, Esquire) and if sent
to the Company or the Association, shall be mailed, delivered or telegraphed and
confirmed to IFB Holdings, Inc. or Investors Federal Bank and Savings
Association, 522 Washington, Chillicothe, Missouri 64601, Attention, Earle S.
Teegarden, Jr., President (with a copy to Luse Lehman Gorman Pomerenk & Schick,
P.C., 5335 Wisconsin Avenue, NW, Washington, DC 20015, Attention: Robert I.
Lipsher, Esquire).
13. Parties. This Agreement shall inure solely to the benefit of, and
-------
shall be binding upon, Trident, the Company, the Association and the controlling
and other persons referred to in Section 8 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
14. Construction. Unless preempted by federal law, this Agreement shall
------------
be governed by and construed in accordance with the substantive laws of North
Carolina.
15. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
<PAGE>
Trident Securities, Inc.
Page 34
Please acknowledge your agreement to the foregoing by signing below and
returning to the Company one copy of this letter.
IFB HOLDINGS, INC.
By:
-------------------------------
Earl S. Teegarden, Jr.
President
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
By:
-------------------------------
Earl S. Teegarden, Jr.
President
Agreed to and accepted as of
the date first written above:
TRIDENT SECURITIES, INC.
By:
--------------------------------------------
Name:
Title:
<PAGE>
Exhibit 8.2
LOCKRIDGE, CONSTANT & CONRAD, LLC
CERTIFIED PUBLIC ACCOUNTANTS
P.O. Box 500
448 Washington 813 Main
Chillicothe, MO 64601 Trenton, MO 64683
(816) 646-6911 (816) 359-2263
PRIVATE AND CONFIDENTIAL
Board of Directors
Investors Federal Bank and
Savings Association
522 Washington Street
Chillicothe, Missouri 64601
Gentlemen:
Missouri Savings and Loan Association Privilege Tax Consequences of the
Conversion of Investors Federal Bank and Savings Association, A Savings Bank
from a Federal Mutual Savings Institution to a Federal Stock Savings Institution
and then to a National Bank.
You have requested an opinion on the Missouri Savings and Loan Association
Privilege Tax consequences of the proposed conversion ("Conversion") of
Investors Federal Bank and Savings Association ("Bank") from a federal mutual
savings institution to a federal stock savings institution ("Converted Bank")
and then to a national bank ("National Bank"), pursuant to the Plan of
Conversion as adopted by the Bank on September 23, 1996.
IFB Holdings, Inc. ("Holding Company") was organized in October, 1996, by the
Bank for the purpose of acquiring all of the outstanding capital stock of
Converted Bank, which will be issued in the Conversion. The only significant
assets of the Holding Company will be the capital stock of the Converted Bank,
the note evidencing its loan to fund the Converted Bank's ESOP and approximately
50% of the net proceeds from the Conversion. An offering is being made for the
issuance of common stock of the Holding Company, which will retain up to 50% of
the net proceeds of the issuance of the common stock and will use the remaining
50% of the net proceeds to purchase all of the stock of Converted Bank issued in
the Conversion.
MEMBERS SEC PRACTICE SECTION AND AMERICAN INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS
<PAGE>
Board of Directors
Investors Federal Bank and Savings Association
Page 2
The firm of Luse Lehman Gorman Pomerenk & Schink ("Firm") has acted as special
counsel to the Bank for purposes of this Conversion and they have furnished the
Bank with their opinion regarding the Federal income tax consequences of the
Conversion ("Federal Tax Opinion"). For purposes of this opinion, we are
relying on the representation provided to the Firm by the Bank, as set forth
below.
REPRESENTATIONS
1. The Conversion is implemented in accordance with the terms of the Plan of
Conversion (the "Plan") and all conditions precedent contained in the Plan
shall be performed or waived prior to the consummation of the Conversion.
2. The fair market value of the withdrawable deposit accounts plus interest
in the liquidation account ("Liquidation Account") of Converted Bank to be
received under the Plan, in each instance, shall be equal to the fair
market value of the membership interests (i.e., withdrawable deposit
accounts, voting and liquidation rights) in the Bank surrendered in
exchange therefor.
3. Holding Company and Converted Bank and National Bank each have no plan or
intention to redeem or otherwise re-acquire any of the stock issued in the
proposed transaction.
4. To the best of the knowledge of the management of the Bank, there is no
plan or intention by any member of the Bank, who holds more than 1% of the
qualifying deposits in the Bank, and there is no plan or intention on the
part of the remaining members to dispose of their withdrawable deposit
accounts in Converted Bank that would reduce their aggregate interest in
the Liquidation Account as of the Effective Date of the Conversion, to
less than 50% of the value of their interest in the Bank as of the same
date.
5. Immediately following the consummation of the proposed transaction,
Converted Bank will possess the same assets and liabilities as the Bank
held immediately prior to the proposed transaction, plus proceeds from the
sale of stock of Converted Bank to Holding Company.
6. Assets used to pay expenses of the Conversion (without reference to the
expenses of the Direct Community Offering) and all distributions (except
for regular normal interest payments and other payments in the normal
course of business made by the Bank immediately preceding the transaction)
will in the aggregate constitute less than one percent (1%) of the net
assets of the Bank.
<PAGE>
Board of Directors
Investors Federal Bank and Savings Association
Page 3
7. Following the proposed transaction, Converted Bank and National Bank will
continue the historic business of the Bank or use a significant portion of
the Bank's historic business assets in the business.
8. Converted Bank and National Bank have no plan or intention to sell or
otherwise dispose of any of the assets of the Bank acquired in the
proposed transaction, except for dispositions in the ordinary course of
business.
9. There is no plan or intention for Converted Bank and National Bank to be
liquidated or merged with another corporation following the Conversion.
10. Both Converted Bank and Holding Company have no plan or intention, either
currently at the time of the Conversion, to issue additional shares of
stock following the proposed transaction, other than shares that may be
issued to employees and/or directors pursuant to certain stock option and
stock incentive plans or that may be issued to employee benefit plans.
11. Converted Bank and National Bank have no plan or intention to reacquire
any of its stock issued in the proposed transaction.
12. The Bank is not under the jurisdiction of a court in any Title II or
similar case within the meaning of Section 368(a)(3)(A). The proposed
transaction does not involve a receivership, foreclosure, or similar
proceeding before a federal or state agency involving a financial
institution to which Section 585 or 593 of the Code applies.
13. Compensation to be paid to depositor-employees of the Bank, Converted
Bank, National Bank or Holding Company will be commensurate with amounts
paid to third parties bargaining at arm's length for similar services.
14. No shares of Holding Company Conversion Stock will be issued to or
purchased by depositor-employees of the Bank, Converted Bank, or Holding
Company at a discount or as compensation in the proposed transaction.
15. No cash or other property will be given to Eligible Account Holders or
others in lieu of (a) non-transferable subscription rights or (b) an
interest in the Liquidation Account of Stock Bank.
16. Bank has utilized a reserve for bad debts in accordance with Section 593
of the Internal Revenue Code of 1986, as amended (the "Code"). Section 593
was repealed for taxable years beginning after December 31, 1995.
<PAGE>
Board of Directors
Investors Federal Bank and Savings Association
Page 4
17. At the time of the proposed transaction, the fair market value of the
assets of the Bank on a going concern basis will equal or exceed the amount
of its liabilities assumed plus the amount of liabilities to which the
transferred assets are subject. Bank will have a positive regulatory net
worth at the time of the Conversion.
18. Bank, Converted Bank and Holding Company are corporations within the
meaning of Section 7701(a)(3) of the Code. Bank and Converted Bank are
domestic building and loan associations within the meaning of Section
7701(a)(19)(C) of the Code.
19. Neither Bank nor Converted Bank is an investment company as defined in
Sections 368(a)(2)(F)(iii) and (iv) of the Code.
20. The exercise price of the subscription rights received by the Bank's
Eligible Account Holders and Supplemental Eligible Account Holders to
purchase Holding Company Stock will be equal to the fair market value of
the Holding Company Conversion Stock at the time of the completion of the
proposed transaction as determined by an independent appraisal.
21. The Bank has received or will receive an opinion from an independent
appraiser to the effect that the subscription rights to be received by
Eligible Account Holders and Supplemental Eligible Account Holders and
other eligible subscribers do not have any ascertainable fair market value.
22. The Bank's savings depositors will pay expenses of the conversion solely
attributable to them, if any. Holding Company and the Bank will pay their
own expenses for the transaction and will not pay any expenses solely
attributable to the savings depositors or to the Holding Company
stockholders. The stockholders of the Holding Company will pay the expenses
incurred by themselves in connection with the proposed transaction.
23. The Eligible Account Holders', Supplemental Eligible Account Holders', and
Other Members' proprietary interests in the Bank arise solely by virtue of
the fact that they are account holders in the Bank.
24. No creditors of the Bank or the depositors in their roles as creditors,
have taken any steps to enforce their claims against the Bank by
instituting Bankruptcy or other legal proceedings, in either a court or
appropriate regulatory agency, that would eliminate the proprietary
interests of the members prior to the Conversion of the Bank including
depositors as equity holders of the Bank.
<PAGE>
Board of Directors
Investors Federal Bank and Savings Association
Page 5
25. The liabilities of the Bank assumed by Converted Bank plus the liabilities,
if any, to which the transferred assets are subject were incurred by the
Bank in the ordinary course of its business and are associated with the
assets transferred.
26. Holding Company has no plan or intention to sell or otherwise dispose of
the stock of Converted Bank received by it in the proposed transaction.
27. No amount of deposit accounts or deposits as of the Eligibility Record Date
will be excluded from participation in the Liquidation Account.
The Federal Tax Opinion contains the following opinions regarding the Federal
income tax consequences of the transactions described herein.
1. The Stock Conversion will constitute a reorganization within the meaning of
Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (the
"Code"), and no gain or loss will be recognized to either the Bank or the
Converted Bank as a result of the Stock Conversion (see Rev. Rul. 80-105,
---
1980-1 C.B. 78). The Bank and the Converted Bank will each be a party to
the reorganization within the meaning of Section 368(b) of the Code. (Rev.
Rul. 72-206, 1972-1 C.B. 104)
2. The assets of the Bank will have the same basis in the hands of the
Converted Bank as in the hands of the Bank immediately prior to the Stock
Conversion (Section 362(b) of the Code).
3. The holding period of the assets of the Bank to be received by the
Converted Bank will include the period during which the assets were held by
the Bank prior to the Stock Conversion (Section 1223(2) of the Code).
4. No gain or loss will be recognized by the Converted Bank upon its receipt
of money from the Company in exchange for shares of common stock of the
Converted Bank (Section 1032(a) of the Code). The Company will be
transferring solely cash to the Converted Bank in exchange for all the
outstanding capital stock of the Converted Bank and therefore will not
recognize any gain or loss upon such transfer. (Section 351(a) of the Code;
see Rev. Rul. 69-357, 1969-1 C.B. 101).
---
5. No gain or loss will be recognized by the Company upon its receipt of money
in exchange for shares of the Common Stock (Section 1032(a) of the Code).
<PAGE>
Board of Directors
Investors Federal Bank and Savings Association
Page 6
6. No gain or loss will be recognized by the Eligible Account Holders,
Supplemental Eligible Account Holders or Other Members of the Bank upon
the issuance to them of deposit accounts in the Converted Bank in the same
dollar amount and on the same terms and conditions in exchange for their
deposit accounts in the Bank held immediately prior to the Stock
Conversion. (Section 1001(a) of the Code; Treas. Reg. Section 1.1001-
1(a)).
7. The tax basis of the savings accounts of the Eligible Account Holders,
Supplemental Eligible Account Holders, and Other Members in the Converted
Bank received as part of the Stock Conversion will equal the tax basis of
such account holders' corresponding deposit accounts in the Bank
surrendered in exchange therefore (Section 1012 of the Code).
8. Each depositor of the Bank will recognize gain upon the receipt of his or
her respective interest in the Liquidation Account established by the
Converted Bank pursuant to the Plan and the receipt of his or her
subscription rights deemed to have been received for federal income tax
purposes, but only to the extent of the excess of the combined fair market
value of a depositor's interest in such Liquidation Account and
subscription rights over the depositor's basis in the former interests in
the Bank other than deposit accounts. Persons who subscribe in the Stock
Conversion but who are not depositors of the Bank will recognize gain upon
the receipt of subscription rights deemed to have been received for
federal income tax purposes, but only to the extent of the excess of the
fair market value of such subscription rights over such person's former
interests in the Bank, if any. Any such gain realized in the Stock
Conversion would be subject to immediate recognition.
9. The Basis of each account holder's interest in the Liquidation Account
received in the Stock Conversion and to be established by the Converted
Bank pursuant to the Stock Conversion will be equal to the value, if any,
of that interest.
10. No gain or loss will be recognized upon the exercise of a subscription
right in the Stock Conversion. (Rev. Rul. 56-572, 1956-2C.B. 182).
11. The basis of the shares of Common Stock acquired in the Stock Conversion
will be equal to the purchase price of such shares, increased, in the case
of such shares acquired pursuant to the exercise of subscription rights,
by the fair market value, if any, of the subscription rights exercised
(Section 1012 of the Code).
<PAGE>
Board of Directors
Investors Federal Bank and Savings Association
Page 7
12. The holding period of the Common Stock acquired in the Stock Conversion
pursuant to the exercise of subscription rights will commence on the date
on which the subscription rights are exercised (Section 1223(6) of the
Code). The holding period of the Common Stock acquired in the Community
Offering will commence on the date following the date on which such stock
is purchased (Rev. Rul 70-598, 1970-2 C.B. 168; Rev. Rul. 66-97, 1966-1
C.B. 190).
13. The Bank Conversion will constitute a reorganization within the meaning of
Section 368(a)(1)(F) of the Code (see Rev. Rul. 80-105, 1980-1C.B. 78).
---
14. The assets of the Converted Bank will have the same basis in the hands of
the National Bank as in the hands of the Converted Bank immediately prior
to the Bank Conversion (Section 362(b) of the Code).
15. The holding period of the assets of the Converted Bank to be received by
the National Bank will include the period during which the assets were held
by the Converted Bank prior to the Bank Conversion (Section 1223(2) of the
Code).
STATEMENT OF MISSOURI LAW
Chapter 148 of the Missouri Revised Statutes, in part, imposes a privilege tax
on savings and loan associations doing business in Missouri. This franchise tax
is measured by net income and is imposed at a rate of 7 percent of the
association's "net income".
Section 148.630 of the Missouri Revised Statutes provides as follows:
1. "Net income" means gross income as defined in subsection 2 of this section
minus the deductions allowed in subsection 3 of this section;
2. "Gross income" shall include all gains, profits, earnings and other income
of the taxpayer from whatever sources derived during the income period;
3. In computing net income there shall be allowed as deductions "all ordinary
and necessary expenses paid or incurred by the taxpayer during the income
period in carrying on its trade or business."
<PAGE>
Board of Directors
Investors Federal Bank and Savings Association
Page 8
As quoted above, the language of the Missouri Statute defining "gross income" is
nearly identical to Section 61 of the Code, which defines gross income as "all
income from whatever source derived." Further, in accordance with long-standing
state administrative policy and with the tax return form used to compute the
Missouri privilege tax, federal taxable income is the starting point in
computing Missouri net income for privilege tax purposes.
OPINION
Because Federal taxable income is the starting point in computing Missouri net
income for privilege tax purposes and because based on the Federal Tax Opinion
there is no Federal taxable income to Bank or Converted Bank as a result of the
Conversion then it is the opinion of Lockridge, Constant & Conrad, LLC, that
there will be no Missouri privilege tax to Bank or Converted Bank as a result of
the Conversion.
Our opinions contained herein are expressly limited to the Missouri Savings and
Loan Association privilege tax discussed above and are specifically predicated
upon the Federal Tax Opinion being correct, and because the federal tax rules
are the starting point for Missouri purposes we are assuming that the Federal
Tax Opinion is correct. No opinion, either express or implied, is given on any
matter not expressly discussed above.
Our opinions expressed herein are based solely upon current provisions of the
Missouri Revised Statutes, as amended, including applicable regulations
thereunder and current judicial and administrative authority. Any future
amendments of the Missouri Revised Statutes, or applicable regulations, or new
judicial decisions or administrative interpretations, any of which could be
retroactive in effect, could cause us to modify our opinion. No opinion is
expressed herein with regard to any federal tax matter or state tax consequences
of the Conversion under any section of the Missouri Revised Statutes except if
and to the extent specifically addressed.
In particular, it is expressly understood and agreed to by Bank, Converted Bank,
and Holding Company that Lockridge, Constant & Conrad, LLC, is relying solely on
the Federal Tax Opinion in all respects relating to the Federal tax consequences
of the matters described herein. Lockridge, Constant & Conrad, LLC, has not
independently verified the accuracy of any matters contained in the Federal Tax
Opinion and should any matter addressed therein not be correct, it could cause
the Missouri Savings and Loan Association Privilege Tax opinion contained herein
to also be incorrect.
<PAGE>
Board of Directors
Investors Federal Bank and Savings Association
Page 9
Since this letter is rendered in advance of the closing of this transaction, we
have assumed that the transaction will be consummated in accordance with the
Plan of Conversion as well as all the information and representations referred
to herein. Any change in the transaction would cause us to modify our opinion.
Very truly yours,
/s/ LOCKRIDGE, CONSTANT & CONRAD, LLC
LOCKRIDGE, CONSTANT & CONRAD, LLC
HL:cla
<PAGE>
SUBSIDIARY
----------
Investors Federal Service Corporation Incorporated in Missouri
Investors Federal Bank and Savings Association Federally Chartered
<PAGE>
EXHIBIT 23.2
[LETTERHEAD OF LOCKRIDGE, CONSTANT & CONRAD, LLC APPEARS HERE]
ACCOUNTANTS' CONSENT
--------------------
The Board of Directors
Investors Federal Bank and Savings Association
We consent to the use in this Registration Statement of IFB Holdings, Inc. Form
SB-2 and the Application for Conversion on Form AC-SB of our report dated
September 25, 1996, on the Consolidated Financial Statements of Investors
Federal Bank and Savings Association and subsidiary as of June 30, 1996 and
1995, and for the fiscal years ended June 30, 1996 and 1995, and to the
references to our firm under the headings "Legal and Tax Matters" and "Experts"
in the related prospectus.
/s/ Lockridge, Constant & Conrad, LLC
November 4, 1996
Chillicothe, Missouri
<PAGE>
Exhibit 99.2
CONVERSION VALUATION REPORT
------------------------------------
Valued as of September 20, 1996
INVESTORS FEDERAL BANK
AND SAVINGS ASSOCIATION
CHILLICOTHE, MISSOURI
Prepared By:
Ferguson & Co., LLP
Suite 550
122 W. John Carpenter Frwy.
Irving, TX 75039
972/869-1177
<PAGE>
[LETTERHEAD OF FERGUSON & CO., LLP APPEARS HERE]
STATEMENT OF APPRAISER'S INDEPENDENCE
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
----------------------------------------------
CHILLICOTHE, MISSOURI
---------------------
We are the appraiser for Investors Federal Bank and Savings Association in
connection with its mutual to stock conversion. We are submitting our
independent estimate of the pro forma market value of the Bank's stock to be
issued in the conversion. In connection with our appraisal of the Bank's to-be-
issued stock, we have received a fee which was not related to the estimated
final value. The estimated pro forma market value is solely the opinion of our
company and it was not unduly influenced by the Bank, its conversion counsel,
its selling agent, or any other party connected with the conversion. We also
received a fixed fee for assisting the Bank in connection with the preparation
of its business plan to be submitted with the conversion application.
Investors Federal has agreed to indemnify Ferguson & Co., LLP under certain
circumstances against liabilities arising out of our services. Specifically, we
are indemnified against liabilities arising from our appraisal except to the
extent such liabilities are determined to have arisen because of our negligence
or willful conduct.
Ferguson & Co., LLP
/s/ Charles M. Hebert
Charles M. Hebert
Principal
October 8, 1996
<PAGE>
[LETTERHEAD OF FERGUSON & CO., LLP APPEARS HERE] October 8,1996
Board of Directors
Investors Federal Bank and Savings Association
522 Washington Street
Chillicothe, Missouri 64601
Gentlemen:
We have completed and hereby provide, as of September 20, 1996, an
independent appraisal of the estimated pro forma market value of Investors
Federal Bank and Savings Association ("Investors Federal" or the "Bank"),
Chillicothe, Missouri, in connection with the conversion of Investors Federal
from the mutual form to the stock form of organization ("Conversion"). This
appraisal report is furnished pursuant to the regulatory filing of the Bank's
Application for Conversion ("Form AC") with the Office of Thrift Supervision
("OTS").
Ferguson & Co., LLP ("F&C") is a consulting firm that specializes in
providing financial, economic, and regulatory services to financial
institutions. The background and experience of F&C is presented in Exhibit I. We
believe that, except for the fees we will receive for preparing the appraisal
and assisting with Investors Federal's business plan, we are independent. F&C
personnel are prohibited from owning stock in conversion clients for a period of
at least one year after conversion.
In preparing our appraisal, we have reviewed Investors Federal's
Application for Approval of Conversion, including the Proxy Statement as filed
with the OTS. We conducted an analysis of Investors Federal that included
discussions with Lockridge, Constant and Conrad, LLP, CPAs, the Bank's
independent auditors, and with Luse, Lehman, Gorman, Pomerenk & Schick, the
Bank's conversion counsel. In addition, where appropriate, we considered
information based on other available published sources that we believe is
reliable; however, we cannot guarantee the accuracy or completeness of such
information.
We also reviewed the economy in Investors Federal's primary market area and
compared the Bank's financial condition and operating results with that of
selected publicly traded thrift institutions. We reviewed conditions in the
securities markets in general and in the market for thrifts stocks in
particular.
Our appraisal is based on Investors Federal's representation that the
information contained in the Form AC and additional evidence furnished to us by
the Bank and its independent auditors are truthful, accurate, and complete. We
did not independently verify the financial statements and other information
provided by Investors Federal and its auditors, nor did we independently value
the Bank's assets or liabilities. The valuation considers Investors Federal only
as a going concern and should not be considered an indication of its liquidation
value.
<PAGE>
Board of Directors
October 8, 1996
Page 2
It is our opinion that, as of September 20, 1996, the estimated pro forma
market value of Investors Federal was $4,500,000, or 225,000 shares at $20.00
per share. The resultant valuation range was $3,825,000 at the minimum (191,250
shares at $20.00 per share) to $5,175,000 at the maximum (258750 shares at
$20.00 per share), based on a range of 15 percent below and above the midpoint
valuation. The supermaximum was $5,951,250 (297,563 shares at $20.00 per share).
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of common
stock in the conversion. Moreover, because such valuation is necessarily based
upon estimates and projections of a number of matters, all of which are subject
to change from time to time, no assurance can be given that persons who purchase
shares of common stock in the conversion will thereafter be able to sell such
shares at prices related to the foregoing estimate of the Bank's pro forma
market value. F&C is not a seller of securities within the meaning of any
federal or state securities laws and any report prepared by F&C shall not be
used as an offer or solicitation with respect to the purchase or sale of any
securities.
Our opinion is based on circumstances as of the date hereof, including
current conditions in the United States securities markets. Events occurring
after the date hereof, including, but not limited to, changes affecting the
United States securities markets and subsequent results of operations of
Investors Federal, could materially affect the assumptions used in preparing
this appraisal.
The valuation reported herein will be updated as provided in the OTS
conversion regulations and guidelines. All updates will consider, among other
things, any developments or changes in Investors Federal's financial performance
and condition, management policies, and current conditions in the equity markets
for thrift shares. Should any such new developments or changes be material, in
our opinion, to the valuation of the shares, appropriate adjustments will be
made to the estimated pro forma market value. The reasons for any such
adjustments will be explained in detail at the time.
Respectfully,
FERGUSON & CO., LLP
/s/ Charles M Hebert
Charles M. Hebert
Principal
<PAGE>
FERGUSON & CO., LLP
- -------------------
TABLE OF CONTENTS
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
CHILLICOTHE, MISSOURI
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION I. - FINANCIAL CHARACTERISTICS 1
INTRODUCTION 1
PAST & PROJECTED ECONOMIC CONDITIONS 3
FINANCIAL CONDITION OF INSTITUTION 3
BALANCE SHEET TRENDS 3
ASSET/LIABILITY MANAGEMENT 4
INCOME AND EXPENSE TRENDS 11
REGULATORY CAPITAL REQUIREMENTS 11
LENDING 11
NONPERFORMING ASSETS 17
CLASSIFIED ASSETS 17
LOAN LOSS ALLOWANCE 18
MORTGAGE-BACKED SECURITIES AND INVESTMENTS 20
SAVINGS DEPOSITS 22
BORROWINGS 24
SUBSIDIARIES 24
LEGAL PROCEEDINGS 24
EARNINGS CAPACITY OF THE INSTITUTION 26
ASSET-SIZE-EFFICIENCY OF ASSET UTILIZATION 26
INTANGIBLE VALUES 26
EFFECT OF GOVERNMENT REGULATIONS 26
OFFICE FACILITIES 26
</TABLE>
i
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FERGUSON & CO., LLP
- -------------------
TABLE OF CONTENTS - CONTINUED
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
CHILLICOTHE, MISSOURI
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION II - MARKET AREA 1
DEMOGRAPHICS 1
SECTION III - COMPARISON WITH PUBLICLY TRADED THRIFTS 1
COMPARATIVE DISCUSSION 1
SELECTION CRITERIA 1
PROFITABILITY 2
BALANCE SHEET CHARACTERISTICS 2
RISK FACTORS 2
SUMMARY OF FINANCIAL COMPARISON 3
FUTURE PLANS 4
SECTION IV - CORRELATION OF MARKET VALUE 1
MARKETABILITY & LIQUIDITY OF STOCK TO BE ISSUED 1
FINANCIAL ASPECTS 1
MARKET AREA 2
MANAGEMENT 3
DIVIDENDS 3
LIQUIDITY 3
THRIFT EQUITY MARKET CONDITIONS 3
</TABLE>
ii
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FERGUSON & CO., LLP
- -------------------
TABLE OF CONTENTS - CONTINUED
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
CHILLICOTHE, MISSOURI
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION IV - CORRELATION OF MARKET VALUE - CONTINUED
MISSOURI ACQUISITIONS 4
EFFECT OF INTEREST RATES ON THRIFT STOCK 4
ADJUSTMENTS CONCLUSION 6
VALUATION APPROACH 6
VALUATION CONCLUSION 7
</TABLE>
iii
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FERGUSON & CO., LLP
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LIST OF TABLES
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
CHILLICOTHE, MISSOURI
<TABLE>
<CAPTION>
TABLE
NUMBER TABLE TITLE PAGE
- ------ ----------- ----
<S> <C>
SECTION I - FINANCIAL CHARACTERISTICS
1 Selected Financial Data 5
2 Selected Operating Data 6
3 Selected Operating Ratios 7
4 Interest Rate Sensitivity 8
5 GAP Analysis 9
6 Net Portfolio Value 10
7 Regulatory Capital Compliance 11
8 Portfolio Composition 12
9 Loan Activity 13
10 Average Balance Sheet 15
11 Rate/Volume Analysis 16
12 Non-Performing Assets 17
13 Analysis of Allowance for Loan Losses 18
14 Allocation of the Allowance for Loan Losses 19
15 Mortgage-Backed Securities, Interest Bearing Deposits,
and Investment Securities Maturities and Yields 20
16 Morgage-Backed Securities 21
17 Deposit Portfolio 22
18 Time Deposit Maturities 23
19 Jumbo Certificates of Deposit 23
20 Savings Deposit Activity 24
21 Borrowings from FHLB 25
22 Office Facilities 27
SECTION II - MARKET AREA
1 Key Economic Indicators 3
2 Market Area Deposits 4
</TABLE>
iv
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FERGUSON & CO., LLP
- -------------------
LIST OF TABLES - CONTINUED
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
CHILLICOTHE, MISSOURI
<TABLE>
<CAPTION>
TABLE
NUMBER TABLE TITLE PAGE
- ------ ----------- ----
<S> <C> <C>
SECTION III - COMPARISON WITH PUBLICLY
TRADED THRIFTS
1 Comparables General 5
2 Key Financial Indicators 6
3 Pro Forma Comparisons 7
4 Comparative Selection 9
SECTION IV - CORRELATION OF MARKET VALUE
1 Appraisal Earnings 2
2 Missouri Acquisitions 8
3 Recent Conversions 9
4 Comparative Selection 12
5 Pricing Comparisons 16
</TABLE>
<TABLE>
<CAPTION>
SECTION
NUMBER FIGURE TITLE PAGE
------------ ----
<S> <C> <C>
IV Figure IV.1 - SNL Index 17
IV Figure IV.2 - Interest Rates 18
</TABLE>
v
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FERGUSON & CO., LLP
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EXHIBITS
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
CHILLICOTHE, MISSOURI
EXHIBIT TITLE
Exhibit I - Ferguson & Co., LLP. Qualifications
Exhibit II - Information on Publicly Traded Thrifts and Comparatives
Exhibit III - Investors Federal Bank and Savings Association Financial
Highlights
Exhibit IV - Comparative Group TAFS and BankSource Reports
Exhibit V - Pro Forma Calculations
Pro Forma Assumptions
Pro Forma Effect of Conversion Proceeds at the Minimum of the Range
Pro Forma Effect of Conversion Proceeds at the Midpoint of the Range
Pro Forma Effect of Conversion Proceeds at the Maximum of the Range
Pro Forma Effect of Conversion Proceeds at the SuperMax of the Range
Pro Forma Analysis Sheet
vi
<PAGE>
SECTION I
FINANCIAL CHARACTERISTICS
<PAGE>
FERGUSON & CO., LLP Section I.
- ------------------- ----------
INTRODUCTION
Investors Federal Bank and Savings Association, ("Investors Federal" or
"Bank") is a federally chartered, federally insured mutual savings and loan bank
located in Chillicothe (Livingston County), Missouri. It was chartered in 1934
as Chillicothe Federal Savings and Loan Association. Its name was changed to
Investors Federal Savings and Loan Association in 1974 and changed again in 1988
to Investors Federal Bank and Savings Association. It obtained federal
insurance of accounts in 1934 and joined the Federal Home Loan Bank system the
same year. At the time of the 1988 name change, it changed to a Federal Saving
Bank Charter. On September 23, 1996, it adopted a plan to convert to a stock
savings and loan association, via a standard mutual to stock conversion.
At June 30, 1996, Investors Federal had total assets of $52.6 million,
loans of $28.4 million, mortgage-backed securities of $17.0 million, investment
securities of $3.5 million, deposits of $35.5 million, borrowings of $13.5
million and net worth of $3.3 million, or 6.21% of assets.
The Bank has three offices located in three counties, Livingston, Caldwell
and Daviess. The three counties are contiguous and are located in the north-
northwest portion of Missouri. Missouri is in the midwestern portion of the
United States. Chillicothe, the location of the home office, is located in the
north central portion of Missouri. It is approximately 95 miles northwest of
Kansas City, Missouri, and 60 miles south of the Iowa/Missouri state line.
Investors Federal is a traditional thrift with a slight orientation toward
passive investments. It invests primarily in: (1) 1-4 family loans and, to a
lesser extent, in multifamily, commercial, and construction real estate loans,
commercial non-real estate loans, and consumer loans; (2) mortgage backed
securities; (3) United States government and agency securities; and (4)
temporary cash investments. It is funded principally by savings deposits,
borrowings, and existing net worth. It has utilized borrowings extensively as
an alternate funding source.
The Bank offers a variety of loan products to accommodate its customer base
and single family loans dominate the Bank's loan portfolio. In recent years,
Investors Federal has concentrated its lending on one year ARM's and 15 year
fixed rate single family loans. At June 30, 1996, loans on 1-4 family dwellings
made up 43.35% of total assets and 79.49% of the loan portfolio. Mortgage
backed securities made up 32.27% of total assets. Investment securities made up
6.62% of Investors Federal's assets at June 30, 1996.
Investors Federal had $128 thousand in non-performing assets at June 30,
1996 (.24% of total assets), as compared to $29 thousand at June 30, 1995 (.06%
of total assets).
Savings deposits decreased during the period from June 30, 1992, to June
30, 1996 ($4.49 million), a compound annual rate of decline of 2.81%. Savings
increased $285 thousand between June 30, 1995, and June 30, 1996. Except for
this slight increase, the trend has been downward since June 30, 1992. This
trend is the result of deliberate actions on the part of Management to seek
alternative funding sources in order to improve spreads and reduce interest rate
risk Investors Federal has relied extensively on borrowings during recent
years.
The Bank's capital to assets ratio has shown steady growth. Equity
capital, as a percentage of assets, has increased from 5.52% at June 30, 1992,
to 6.21% at June 30, 1996. This capital growth was a result of consistent
earnings combined with steady growth. Capital in dollars has increased from
$2.35 million to $3.3 million, which is a 39.06% increase.
1
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FERGUSON & CO., LLP Section I.
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Investors Federal's profitability, as measured by return on average assets
("ROAA"), was below its peer group average of thrifts filing TFR's with the OTS,
consisting of OTS supervised thrifts with assets from $50 million to $100
million, with the exception of 1996. For the years ending December 31, 1993,
1994, and 1995, and the quarter ended March 31, 1996, Investors Federal ranked
in the 12th, 28th, 41st, and 50th percentile, respectively, in ROAA, based on
information derived from the TAFS thrift database published by Sheshunoff
Information Services Inc. (See Exhibit III, page 2). In return on equity for
the same periods, Investors Federal ranked in the 13th, 55th, 72nd, and 84th
percentile, respectively.
2
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FERGUSON & CO., LLP Section I.
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I. FINANCIAL CHARACTERISTICS
PAST & PROJECTED ECONOMIC CONDITIONS
Fluctuations in thrift earnings in recent years have occurred within the
time frames as a result of changing temporary trends in interest rates and other
economic factors. However, the year-to-year results have been upward while the
general trends in the thrift industry have been improving as interest rates
declined. Interest rates began a general upward movement during late 1993,
followed by a decline in interest margins and profitability. Rates began a
general decline in mid 1995. Since early 1996, rates have moved in a narrow
band. From mid-March until early June there was a slight upward trend, with the
spread between the short end and the long end increasing. Early July saw the
jobless rate dip, and responding to inflation fears, the rates rose slightly.
In late July Greenspan's comments sparked a rise in the Dow-Jones, but rates
remained steady. Mid-August's report on the rising CPI caused a slight increase
in rates, but they remained within the narrow band. The recent pass by the
Federal Reserve to raise rates should provide stability in rates and the
equities market until after the general elections. There is a long history of
rate stability in the period just before a presidential election. If rates
change significantly in the period between now and the elections, it is likely
that the stimulus will be of a global event rather than a domestic event or
Federal Reserve's action.
The thrift industry generally is better equipped to cope with changing
interest rates than it was in the past, and investors have recognized the
demonstrated ability of the thrift industry to maintain interest margins in
spite of rising interest rates. However, the industry is still a long lender
and for the most part a short borrower. Periods of gradually rising interest
rates can be readily managed, but periods of rapidly rising rates and interest
rate spikes can negate to a certain degree, the positive impact of adjustable
rate loans and investments. A grim reminder that all financial services
industry members' profitability can be affected by events that management cannot
control.
FINANCIAL CONDITION OF INSTITUTION
BALANCE SHEET TRENDS
As Table I.1 shows, Investors Federal experienced a modest increase in
assets during the four year period ending June 30, 1996. Assets increased $10.0
million, or 23.49% during the period. However, the growth was not steadily
upward. Assets decreased in 1993 and 1995, then began the rise. Loans
increased $6.1 million, or 27.34%. Notably, loans did not have the interim
decreases that were demonstrated by the total assets, instead, loan growth was
consistently upward for the four year periods; mortgage backed securities
("MBS's") increased $1.73 million, or 11.38%. MBS's also fluctuated up and
down, $15.23 million in 1992, $12.50 million in 1993, $11.14 million in 1994,
$12.70 million in 1995, and $16.97 at June 30, 1996. The most important change
in the MBS's portfolio is the change to "Available for Sale" designation for the
whole portfolio. Investment securities have also increased during the period
shown. They rose from $1.63 million in 1992, to $3.48 million in 1996, an
increase of 113.8%. All but $215 thousand of the securities are "Available for
Sale." Savings deposits have decreased by $4.47 million, or 11.18%. All of the
asset growth has been funded by borrowings, which have gone from zero in 1992
and 1993, to $13.47 million in 1996. Equity increased $918 thousand, or 39.06%.
3
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FERGUSON & CO., LLP Section I.
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ASSET/LIABILITY MANAGEMENT
Managing interest rate risk is a major component of the strategy used in
operating a thrift. Most of a thrift's interest earning assets are long-term,
while most of the interest bearing liabilities have short to intermediate terms
to contractual maturity. To compensate, asset/liability management techniques
include: (1) making long term loans with interest rates that adjust to market
periodically, (2) investing in assets with shorter terms to maturity, (3)
lengthening the terms to maturities of savings deposits, and (4) seeking to
employ any combination of the aforementioned techniques artificially through the
use of synthetic hedge instruments. Table I.4 contains information on
contractual loan maturities at June 30, 1996. However, this table must be read
in conjunction with Table I.5, because the adjustable rate loans are recorded in
Table I.4 in accordance with their contractual maturities. Table I.5 shows the
gap analysis of Investors Federal's interest earning assets and interest bearing
liabilities at June 30, 1996. It shows that, within one year of June 30, 1996,
Investors Federal has a positive gap to interest bearing liabilities of 6.8% and
a positive gap to total assets of 4.7%. Investors Federal has an insignificant
positive cumulative gap at the end of three years and a minor negative gap at
the end of five years. Table I.6 provides rate shock information at varying
levels of interest rate change.
The Bank has managed its interest rate risk well, and should be able to
maintain, within practical limits, its net interest margin and the market value
of its portfolio equity. The preparation of the gap analysis (Table I.5) was
approached in a conservative manner. The following assumptions were used: 1)
monthly amortizing fixed rate loans were assumed to repay at an annual rate of
5% in addition to normal amortization; 2) adjustable rate loans and investments
were included in the time period in which they are scheduled to reprice; 3)
checking accounts and statement savings were assumed to reprice in the earliest
period available; and 4) certificates of deposit and borrowings were included in
the period of contractual maturity. Table I.6 confirms the conclusion derived
from Table I.5.
Investors Federal's basic approach to interest rate risk management has
been to emphasize adjustable mortgage loans and intermediate term mortgage-
backed securities, shorten fixed rate mortgage terms, increase consumer and
commercial non-real estate loans, and increase investments in short and
intermediate term investment securities. In addition, Investors Federal has
used FHLB advances extensively since 1995. These advances have been used to
purchase safe mortgage related securities with matching repricing or maturity
periods. At June 30, 1996, Investors Federal had $13.5 million in advances for
the FHLB, on the other hand, it had only $1.2 million in jumbo certificates.
The results of this funding strategy, combined with other actions, have been to
produce an asset/liability position that is only slightly sensitive to rate
changes.
4
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FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.1 - SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
June 30,
--------------------------------------------------
1996 1995 1994 1993 1992
--------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Selected Financial Condition Data:
Total assets $ 52,587 $ 45,013 $ 41,095 $ 41,263 $ 42,584
Loans receivable, net 28,429 26,340 22,719 22,284 22,326
Mortgage-backed securities:
Held for investment 8,306 10,674 12,490 15,237
Available for sale 16,971 4,397 470 - -
Investment securities:
Held for investment 215 815 809 596 1,627
Available for sale 3,264 1,737 2,009 1,354 -
Deposits 35,495 35,210 37,072 38,429 39,986
Total borrowings 13,474 6,419 1,073 - -
Retained earnings - substantially
restricted 3,268 3,038 2,764 2,599 2,350
</TABLE>
Source: Offering Circular
5
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FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.2 - SELECTED OPERATING DATA
<TABLE>
<CAPTION>
Years Ended June 30,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- --------- --------- --------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Selected Operations Data:
Total interest income $3,616 $2,843 $2,509 $2,790 $3,416
Total interest expense 2,264 1,716 1,432 1,659 2,275
--------- --------- --------- --------- ---------
Net interest income 1,352 1,127 1,077 1,131 1,141
Provision for loan losses 210 1 15 3 -
--------- --------- --------- --------- ---------
Net interest income after provision
for loan losses 1,142 1,126 1,062 1,128 1,141
Fees and service charges 231 225 218 188 167
Gain (loss) on sales of loans, mortgage-
backed securities and investment securities 46 19 7 10 63
Other non-interest income 80 22 59 60 62
--------- --------- --------- --------- ---------
Total non-interest income 357 266 284 258 292
Total non-interest expense 1,050 1,011 1,101 1,079 1,013
--------- --------- --------- --------- ---------
Income (loss) before taxes and
extraordinary item 469 381 245 307 420
Income tax provision 167 135 105 58 133
Cumulative effect on prior years of a change
in accounting principle - 27 25 - -
--------- --------- --------- --------- ---------
Net income (loss) $ 302 $ 273 $ 165 $ 249 $ 287
========= ========= ========= ========= =========
</TABLE>
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FERGUSON & CO., LLP SECTION I.
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TABLE I.3 - SELECTED OPERATING RATIOS
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Selected Operations Data:
- --------------------------
Performance Ratios:
Return on assets (ratio of net income to
average total assets) 0.61% 0.64% 0.40% 0.59% 0.67%
Return on retained earnings (ratio of
net income to average equity) 8.86% 8.88% 6.13% 9.16% 11.58%
Interest rate spread information:
Average during period 2.38% 2.36% 2.39% 2.45% 2.35%
End of period 2.29% 2.64% 2.55% 2.84% 2.80%
Net interest margin (1) 2.79% 2.72% 2.67% 2.76% 2.74%
Ratio of operating expense to average total assets 2.07% 2.38% 2.66% 2.56% 2.37%
Ratio of average interest-earning assets
to average interest-bearing liabilities 108.63% 108.64% 108.00% 107.48% 107.08%
Asset Quality Ratios:
Non-performing assets to total assets
at end of period 0.24% 0.28% 0.33% 0.25% 0.44%
Allowance for loan losses to non-performing loans 221.09% 65.03% 64.69% 74.77% 39.26%
Allowance for loan losses to loans receivable, net 1.00% 0.31% 0.39% 0.34% 0.33%
Capital Ratios:
Retained earnings to total assets at end of period 6.21% 6.76% 6.67% 6.30% 5.52%
Average retained earnings to average assets 6.85% 7.24% 6.53% 6.44% 5.80%
Other Data:
Number of full-service offices 3 3 3 3 3
</TABLE>
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FERGUSON & CO., LLP SECTION I.
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TABLE I.4 - INTEREST RATE SENSITIVITY
<TABLE>
<CAPTION>
Non Residential
Real Estate and
One-to-Four Family Commercial Consumer Total
------------------ ----------------- -------------------- -----------------
Weighted Weighted Weighted Weighted
Average Average Average Average
Amount Rate Amount Rate Amount Rate Amount Rate
-------- -------- ------ --------- ------ -------- ------ --------
Due During Years Ending June 30,
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 (1) $ 115 8.25% $ 73 7.69% $ 1,600 7.87% $ 1,788 7.88%
1998 133 8.24% 2 8.36% 283 10.30% 418 9.64%
1999 366 8.35% 82 9.15% 435 10.25% 883 9.36%
2000 and 2001 786 8.54% 81 8.52% 588 9.47% 1,455 8.91%
2002 to 2006 3,349 8.01% 899 10.28% 242 7.34% 4,490 8.43%
2007 50 2021 13,969 7.45% 1,192 8.48% 411 8.64% 15,572 7.56%
2022 and following 4,080 7.55% - - - - 4,080 7.55%
------- ------- ------ --------- ------- ------- ------- --------
$22,798 7.61% $2,329 9.19% $ 3,559 8.67% $28,686 0.0787
======= ====== ======= =======
</TABLE>
____________________________________
(1) Includes demand loans, loans having no stated maturity and overdraft loans.)
8
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FERGUSON & CO., LLP SECTION 1.
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TABLE I.5 - GAP ANALYSIS
The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at June 30, 1996, which are expected to
mature or reprice in each of the time periods shown.
<TABLE>
<CAPTION>
1 to 3 3 to 5 5 to 10 Over 10
1 Year Years Years Years Years Total
--------- -------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Rate Sensitive Assets 38,782 4,135 2,013 2,159 4,375 51,464
Rate Sensitive Liabilities 36,316 6,564 3,809 152 667 47,508
Interest Sensitivity GAP 2,466 (2,429) (1,796) 2,007 3,708 3,956
Cumulative Sensitivity GAP 2,466 37 (1,759) 248 3,956 3,956
Ratio of Interest Sensitive
Assets to Interest Sensitive
Liabilities for the Period 106.8% 63.0% 52.8% 1420.4% 655.9% 108.3%
Cumulative Ratio of Interest
Sensitive Assets to Interest
Sensitive Liabilities 106.8% 100.1% 96.2% 100.5% 108.3% 108.3%
Ratio of Cumulative GAP to
Total Assets 4.7% 0.1% -3.3% 0.5% 7.5% 7.5%
Ratio of Cumulative GAP to
Interest Sensitive Liabilities 6.8% 0.1% -3.8% 0.5% 8.3% 8.3%
</TABLE>
SOURCE: INVESTORS FEDERAL
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FERGUSON & CO., LLP SECTION I
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TABLE I.6 - NET PORTFOLIO VALUE
<TABLE>
<CAPTION>
Change in
Interest Rates March 31, 1996
---------------------------------------------------------------------
in Basis Point Net Portfolio Value NPV as % of PV of Assets
---------------------------------------------------------------------
(Rate Shock) Amount $000 Change % Change NPV Ratio Change
------------------ ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
400 2,837 -1,992 -41% 5.65% -332 bp
300 3,582 -1,247 -26% 6.98% -204 bp
200 4,167 -662 -14% 7.97% -101 bp
100 4,595 -234 -5% 8.65% -31 bp
Static 4,829 - - 8.98%
(100) 4,852 23 0% 8.94% -4 bp
(200) 4,730 -99 -2% 8.66% -32 bp
(300) 4,656 -163 -3% 8.48% -50 bp
(400) 4,730 -90 -2% 8.51% -47 bp
</TABLE>
SOURCE: FEDERAL HOME LOAN BANK OF DALLAS, TEXAS
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INCOME AND EXPENSE TRENDS
Investors Federal was profitable for the four fiscal years ending June 30,
1996. Fluctuations in income over the periods have resulted principally from:
(1) changes in non-interest expense; and (2) net interest income (see Table
I.2).
Noninterest income levels have remained constant with the exception of
1996, when a significant gain on the sale of assets were recorded. Non-interest
expense items have also been stable with the exception of 1994, when there was
an increase of approximately 10%. However, analytically speaking, profitability
is stable and sustainable.
REGULATORY CAPITAL REQUIREMENTS
As Table I.7 demonstrates, Investors Federal meets all regulatory capital
requirements and meets the regulatory definition of a "Well Capitalized"
institution. Moreover, the additional capital raised in the stock conversion
will add to the existing capital cushion.
TABLE I.7 - REGULATORY CAPITAL COMPLIANCE
<TABLE>
<CAPTION>
Amount ($000's) Percent
<S> <C> <C>
GAAP Capital $3,268 6.21%
Tangible Capital:
Capital level 3,339 6.34%
Requirement 793 1.5%
------ -----
Excess 2,549 4.84%
Core Capital:
Capital level 3,339 6.34%
Requirement 1,581 3.00%
------ -----
Excess 1,758 3.34%
Risk Based Capital:
Capital level 3,592 17.30%
Requirement 1,661 8.0%
------ -----
Excess 1931 9.30%
</TABLE>
SOURCE: INVESTORS FEDERAL TFR, F&C CALCULATIONS.
LENDING
Table I.8 provides an analysis of the Bank's loan portfolio by type of loan
and security. This analysis shows that, from June 30, 1994, through June 30,
1996, Investors Federal's loan composition has been dominated by 1-4 family
dwelling loans, but the loan mix is currently emphasizing other loans.
Table I.9 provides information with respect to loan originations and
repayments. It indicates the year ended June 30, 1996, will be considered a good
growth year overall and in most individual categories. Closer analysis reveals
the continued emphasis on adjustable one to four
11
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FERGUSON & CO., LLP SECTION I.
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residential loans and adjustable loans in general. The origination of adjustable
loans increased from $3.24 million in 1995 to $3.58 million in 1996. However,
fixed rate transactions increased at a much more significant rate. Total fixed
rate transactions originated in 1995 totaled $4.42 million and increased to
$5.58 million in 1996. Although mindful of interest rate risk, the increased
level of fixed rate loans was done to add to the net interest rate margin.
Table I.10 provides rates, yields, and average balances for the two years
ended June 30, 1996. Interest rates earned on average interest-earning assets
increased from 6.86% in 1995 to 7.45% in 1996. Interest rates paid on average
interest-bearing liabilities increased from 4.50% in 1995 to 5.07% in 1996.
Investors Federal's spread decreased from 2.38% in 1995 to 2.29% in 1996. The
net interest rate spread increased slightly. Rates have negatively impacted the
portfolio. At June 30, 1996, the net interest spread was 2.29% on outstanding
balances.
TABLE I.8 - PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
June 30,
------------------------------------------------
1996 1995
----------------------- -----------------------
Amount Percent Amount Percent
---------- ----------- ---------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Real estate loans:
One-to-four-family $22,798 79.49% $21,020 79.63%
Multi-family - -
Commercial 369 1.30% 409 1.55%
Non residential real estate 1,955 6.81% 1,874 7.10%
---------- ----------- ---------- -----------
Total real estate loans 25,122 87.60% 23,303 88.28%
Other loans:
Consumer loans:
Deposit account 341 1.19% 364 1.38%
Automobile 1,365 4.76% 1,298 4.92%
Home equity
SBA guaranteed 982 3.42% 993 3.76%
Home improvement - FHA 437 1.52% -
Other 434 1.52% 440 1.66%
---------- ----------- ---------- -----------
Total consumer loans 3,559 12.41% 3,095 11.72%
Total loans 28,681 100.00% 26,398 100.00%
Less:
Loans in process (5) (8)
Deferred fees and origination costs 36 31
Allowance for loan losses (283) (81)
---------- ----------
Total reductions (252) (58)
---------- ----------
Total loans receivable, net $28,429 $26,340
========== ==========
</TABLE>
SOURCE: OFFERING CIRCULAR
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TABLE I.9 - LOAN ACTIVITY
The following table sets forth certain information with respect to the Bank's
loan activity for the periods indicated.
<TABLE>
<CAPTION>
Years Ended June 30,
----------------------------
1996 1995
------------- -----------
(In Thousands)
<S> <C> <C>
Originations by Type:
- ---------------------
Adjustable rate:
Real estate - one-to-four-family $ 3,068 $ 3,031
- multi-family - -
- commercial 486 191
- construction - -
Non-real estate - consumer - 24
- commercial business 30 -
------------- -----------
Total adjustable-rate 3,584 3,246
Fixed rate:
Real estate - one-to-four-family 2,144 596
- multi-family - -
- commercial - 365
- construction - -
Non-real estate - consumer 3,036 2,535
- commercial business 404 919
------------- -----------
Total fixed-rate 5,584 4,415
------------- -----------
Total loans originated 9,168 7,661
------------- -----------
Purchases:
- ----------
Real estate - one-to-four-family 2,292 3,651
- multi-family
- commercial
- construction
Non-real estate - consumer
- commercial business
------------- -----------
Total loans purchased 2,292 3,651
Sales and Repayments:
- ---------------------
Real estate - one-to-four-family 80
- multi-family
- commercial
- construction
Non-real estate - consumer
- commercial business ------------- -----------
Total loans sold 80
Principal repayments 9,166 7,703
------------- -----------
Total reductions
Increase (decrease) - other items, net (11) (11)
------------- ------------
Net increase (decrease) $2,283 $3,519
============= ============
</TABLE>(decrease)
Source: Offering circular
13
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
Table I.9 clearly demonstrates that Investors Federal is still
primarily a residential lender. Although, the information also shows that
consumer and business type loans are becoming more common and are a growing
portion of the loan portfolio.
14
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.10 - AVERAGE BALANCE SHEET
<TABLE>
<CAPTION>
Years Ended June 30,
---------------------------------------------------------
At June 30, 1996 1996 1995
------------------------ ----------------------------------------- --------------
Average Interest Average
Outstanding Yield/ Outstanding Earned/ Yield/ Outstanding
Balance Rate Balance Paid Rate Balance
------------------------ ------------ ------------- ------------ --------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Interest-earning deposits $ 1,609 3.42% $ 1,555 $ 47 3.02% $ 1,870
Loans receivable (1) 28,429 8.28% 27,269 2,340 8.58% 24,889
Mortgage-backed securities 16,971 6.97% 16,156 1,039 6.43% 11,709
Investment securities 3,479 6.06% 2,983 151 5.06% 2,601
FHLB stock 724 7.00% 564 39 6.91% 350
------------ ------------ ------------- --------------
Total interest-earning assets $ 51,212 7.52% $ 48,527 $ 3,616 7.45% $ 41,419
============ ============ ============= ==============
Interest-Bearing Liabilities:
Savings deposits $ 2,602 3.00% $ 2,742 $ 83 3.04% $ 2,949
Demand and NOW deposits (2) 9,669 3.76% 9,613 370 3.85% 10,718
Certificate accounts 21,763 5.56% 21,177 1,181 5.57% 20,749
Borrowings 13,474 6.19% 11,138 630 5.66% 3,709
------------ ------------ ------------- --------------
Total interest-bearing liabilities $ 47,508 5.23% $ 44,670 $ 2,264 5.07% $ 38,125
============ ============ ============= ==============
Net interest income $ 1,352
=============
Net interest rate spread 2.29% 2.38%
========== ============
Net earning assets $ 3,704 $ 3,857 $ 3,294
============ ============ ==============
Net yield on average
interest-earning assets 2.79%
=============
Average interest-earning assets
to interest-bearing liabilities 1.09%
=============
<CAPTION>
--------------------------
--------------------------
Interest
Earned/ Yield/
Paid Rate
------------ ------------
<S> <C> <C>
Interest-Earning Assets:
Interest-earning deposits $ 50 2.67%
Loans receivable (1) 1,969 7.91%
Mortgage-backed securities 679 5.80%
Investment securities 118 4.54%
FHLB stock 27 7.71%
------------
Total interest-earning assets $ 2,843 6.86%
============
Interest-Bearing Liabilities:
Savings deposits $ 85 2.89%
Demand and NOW deposits (2) 355 3.31%
Certificate accounts 1,041 5.02%
Borrowings 235 6.34%
------------
Total interest-bearing liabilities $ 1,716 4.50%
============
Net interest income $ 1,127
============
Net interest rate spread 2.36%
============
Net earning assets
Net yield on average
interest-earning assets 2.72%
============
Average interest-earning assets
to interest-bearing liabilities 1.09%
============
</TABLE>
(1) Calculated net of deferred loan fees, loan discounts, loans in process and
loss reserves.
(2) Excludes non-interest-bearing deposit accounts.
Source: Offering Circular
15
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.11 - RATE/VOLUME ANALYSIS
<TABLE>
<CAPTION>
Year Ended June 30,
1996 vs. 1995
Increase (Decrease) Attributable to
-----------------------------------
Volume Rate Net
----------- --------- --------
(In Thousands)
<S> <C> <C> <C>
Interest income on:
Interest Earning Deposits -9 6 -3
FHLB Stock $ 15 $ (3) $ 12
Investment Securities 18 15 33
Mortgage-backed securities 280 80 360
Loans receivable 196 175 371
----------- --------- --------
Total interest income on
interest-earning assets 500 273 773
----------- --------- --------
Interest expense on:
Borrowings 423 (28) 395
Passbook savings (6) 4 (2)
NOW and money market (39) 54 15
Certificates of deposit 22 118 140
----------- --------- --------
Total interest expense on
interest-bearing liabilities 400 148 548
----------- --------- --------
Increase (decrease) in net
interest income $100 $125 $225
=========== ========= ========
</TABLE>
SOURCE: OFFERING CIRCULAR
Table I.11 provides a rate volume analysis, measuring differences in
interest earning assets and interest costing liabilities and the interest rates
thereon during the years ended June 30, 1995 and 1996. The table shows that of
the $225 thousand increase in income, $100 thousand can be attributed to volumes
and $125 thousand can be attributed to rate.
16
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
NON-PERFORMING ASSETS
As shown in Table I.12, Investors Federal's total nonperforming loans as of
June 30, 1996, were only $128 thousand and represented 0.24% of the portfolio.
Most of the nonperforming loans as of that date were secured by non-residential
real estate. The nominal level of non-performing assets is unlikely to place
the capital of the institution in jeopardy.
CLASSIFIED ASSETS
Investors Federal had $382 thousand in classified assets at June 30, 1996.
The classified assets consisted of $382 thousand in substandard, and $4 thousand
in loss. The Bank had a loan loss allowance of $279 thousand, or 73.04% of
classified assets at June 30, 1996. The majority of classified assets were
collateralized.
TABLE I.12 - NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
June 30,
-----------------------
1996 1995
---------- ----------
(In Thousands)
<S> <C> <C>
Non-accruing loans:
One-to-four-family $ 25 $ 29
Multi-family - -
Commercial real estate - -
Non-residential real estate 93 -
Consumer 10 -
Commercial business - -
---------- ----------
Total 128 29
---------- ----------
Accruing loans delinquent more than 90 days: 0 0
Total non-performing assets $ 128 $ 29
========== ==========
Total as a percentage of total assets 0.24% 0.06%
========== ==========
</TABLE>
SOURCE: OFFERING CIRCULAR
17
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.13 - ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
The following table sets forth an analysis of the Bank's allowance for possible
loan losses for the periods indicated:
<TABLE>
<CAPTION>
Years Ended June 30,
-----------------------------
1996 1995
---------- ----------
(Dollars in Thousands)
<S> <C> <C>
Balance, beginning of period $ 81 $ 89
Charge-offs: 11 11
Recoveries 3 2
Net charge-offs (8) (9)
Additions charged to operations 210 1
---------- ----------
Balance, end of period $ 283 $ 81
========== ==========
Ratio of net charge-offs during the period
to average loans outstanding during the period 0.03% 0.04%
========== ==========
Ratio of net charge-offs during the period
to average non-performing assets 6.25% 31.03%
========== ==========
</TABLE>
SOURCE: OFFERING CIRCULAR
LOAN LOSS ALLOWANCE
Table I.13 provides an analysis of the allocation of Investors Federal's
loan loss allowance. Significant increases to the loan loss reserves were made
at the June 30, 1996, year end. These increases in loan loss reserves were not
dictated by historical or anticipated losses, but instead were adjustments made
in anticipation of conversion and being a public company.
Table I.14 shows the allocation of the loan loss allowance among the
various loan categories as of June 30, 1996, and June 30, 1995.
18
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.14 - ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The following table allocates the allowance for loan losses by loan category at
the dates indicated. The allocation of the allowance to each category is not
necessarily indicative of future losses and does not restrict the use of the
allowance to absorb losses in any category.
<TABLE>
<CAPTION>
June 30,
------------------------------------------------------------------
1996 1995
-------------------------------- --------------------------------
Percent Percent
of Loans of Loans
Loan in Each Loan in Each
Amount of Amounts Category Amount of Amounts Category
Loan Loss by to Total Loan Loss by to Total
Allowance Category Loans Allowance Category Loans
----------- -------- -------- ---------- -------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
One-to-four-family $ 225 $22,798 79.49% $ 64 $21,220 79.63%
Multi-family 0 0 0 0 0 0
Commercial real estate 369 1.29% 409 1.55%
Non-residential R/E 19 1,955 6.81% 6 1,874 7.10%
Consumer 39 3,559 12.41% 11 3,095 11.72%
Commercial business 0 0 0 0
Unallocated 0 0 0 0
----------- -------- -------- -------- -------- ---------
Total $ 283 $28,681 100.00% $ 81 $26,398 100.00%
=========== ======== ======== ======== ======== =========
</TABLE>
Source: Offering circular
19
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
MORTGAGE-BACKED SECURITIES AND INVESTMENTS
Table I.15 provides a breakdown of mortgage-backed securities, interest
bearing deposits, and investment securities with maturity and yield information
as of June 30, 1996. Table I.16 provides breakdowns for mortgage-backed
securities at June 30, 1995 and June 30, 1996. A large portion of the securities
portfolio is funded by matching borrowings from the FHLB. Management has use
this technique to improve earnings and manage the interest rate risk component
of asset and liability management. The GAP position and the Rate Shock position
of the bank (discussed above) confirm the utilization and success of this
particular technique.
TABLE I.15 -MORTGAGE-BACKED SECURITIES, INTEREST BEARING DEPOSITS,
AND INVESTMENT SECURITIES MATURITIES AND YIELDS
The following table sets forth the scheduled maturities, carrying values and
average yields for the Bank's investment securities at September 30, 1995.
<TABLE>
<CAPTION>
June 30, 1996
---------------------------------------------------------------------------------------------------
Less than 1 to 5 5 to 10 Over
1 Year Years Years 10 Years Total Investment
Securities
------------- --------------- ---------------- -------------- ---------------------
Book Book Book Book Book
Value Value Value Value Value
------------- --------------- ---------------- -------------- ---------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Municipal securities $ - $ 215 $ - $ - $ 215
Federal agency obligations - 485 - 477 962
Mortgage-backed securities - 334 7 16,630 16,971
------------- --------------- ---------------- -------------- -------------------
Total investment securities $ - $ 1,034 $ 7 $ 17,107 $ 18,148
============= =============== ================ ============== ===================
Weighted average yield 6.66% 7.83% 6.92% 6.90%
</TABLE>
SOURCE: OFFERING CIRCULAR
20
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.16 - MORTGAGE-BACKED SECURITIES
The following table sets forth the carrying value of the Bank's investment
security portfolio at the dates indicated:
<TABLE>
<CAPTION>
June 30,
---------------------------------------
1996 1995
------------------ --------------------
Book % of Book % of
Value Total Value Total
--------- ------- -------- ---------
<S> <C> <C> <C> <C>
(Dollars in Thousands)
MBS's held to maturity:
GNMA $0 $0
FNMA 0 6,043 47.57%
FHLMC 0 1,699 13.37%
CMOs/REMICS 0 1,074 8.45%
Other (1) 0 -
--------- ------- -------- ---------
8,816 69.39%
MBS's available for sale:
GNMA $1,163 6.85% $1,298 10.15%
FNMA 4,542 26.76% 482 3.79%
FHLMC 2,240 13.20% 628 4.94%
CMOs/REMICS 2,982 17.57% 69 0.54%
Other (1) 5,846 34.45% 1,433 11.28%
--------- ------- -------- ---------
16,733 98.83% 3,901 30.70%
--------- ------- -------- ---------
Unamortized prem. (discounts), net 198 1.17% -14 -0.09%
--------- ------- -------- ---------
Total mtg.-backed securities $16,971 100.00% $12,703 100.00%
========== ======= ======== =========
(1) Comprised of SBA pools.
</TABLE>
SOURCE: OFFERING CIRCULAR
MORTGAGE BACKED SECURITIES CONT'D
Mortgage backed securities have been used by Management to supplement a
limited demand for both "fixed rate" and "adjustable rate" loan products.
Competitive factors within the primary trade area of the Bank have made
expansion of the one to four residential portfolio difficult. Management has
committed a significant portion of Bank's assets to MBS's. They have taken a
conservative stance, and as of June 30, 1996, have classified all of the MBS's
as "Available for Sale."
21
<PAGE>
FERGUSON & CO, LLP Section I.
- ------------------ ----------
TABLE I.17 - DEPOSIT PORTFOLIO
Deposits in the Bank at June 30, 1996, and June 30, 1995 were represented
by the various types of deposit programs described below.
<TABLE>
<CAPTION>
June 30,
------------------------------------------------
1996 1995
---------------------- ---------------------
Amount Percent Amount Percent
---------- --------- ---------- ---------
(Dollars in Thousands)
Transactions and Savings
- ------------------------
Deposits:
- ---------
<S> <C> <C> <C> <C>
Demand 0% $ 1,456 4.09% $ 1,396 3.96%
Passbook Accounts 3.00% 2,607 7.32% 3,004 8.53%
NOW Accounts 2.40-2.90% 2,368 6.65% 2,443 6.94%
MMD Accounts 3.25-4.00% 7,301 20.51% 7,478 21.24%
---------- -------- ---------- --------
Total Non-Certificates 13,732 38.57% 14,321 40.67%
---------- -------- ---------- --------
Certificates:
- -------------
0.00 - 3.99% 39 0.11% 549 1.56%
4.00 - 5.99% 16,839 47.30% 14,761 41.92%
6.00 - 7.99% 4,554 12.79% 5,171 14.69%
8.00 - 9.99% 331 0.93% 408 1.16%
---------- -------- ---------- --------
Total Certificates (1) 21,763 61.13% 20,889 59.33%
---------- -------- ---------- --------
Accrued Interest 103 0.30% 28
---------- -------- ----------
Total Deposits $35,598 100.00% $35,238 100.00%
========== ======== ========== ========
</TABLE>
(1) The average rate on all certificates combined was 5.56% at June 30, 1996.
SOURCE: OFFERING CIRCULAR
SAVINGS DEPOSITS
At June 30, 1996, Investors Federal's deposit portfolio was composed as
follows: demand accounts -- $1.5 million, or 4.09%; passbook accounts--$2.6
million or 7.32%; transaction accounts--$9.7 million or 27.16%; and
certificate accounts--$35.6 million or 61.13% (see Table I.17).
Table I.18 shows the totals of time deposits and the maturities by year
with rate ranges at June 30, 1996. At June 30, 1996, $13.35 million or 61.35% of
Investors Federal's certificates matured within one year.
Investors Federal is not dependent on jumbo certificates of deposit. At
June 30, 1996, the Bank had $1.2 million in certificates that were issued for
$100 thousand or more, or 5.43% of its total deposits (see Table I.19).
Table I.20 presents information on deposit flows for the years ending June
30, 1995 and 1996. The most notable thing about the Banks deposit flows is the
lack of deposit growth when viewed in relation to asset growth. This dichotomy
is the result of Management's decision to fund asset growth with advances from
the FHLB rather than increase interest rates and interest expense.
22
<PAGE>
FERGUSON & CO., LLP SECTION I
- ------------------- ---------
TABLE I.18 - TIME DEPOSIT MATURITIES
The following table sets forth the amount and maturities of time deposits at
June 30, 1996.
<TABLE>
<CAPTION>
As of June 30, 1996
------------------------------------------------------
Over Over
3 Months 3 to 6 6 to 12 Over
or Less Months Months 12 Months Total
---------- -------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
CD's less than $100,000 $4,887 $4,175 $3,351 $8,168 $20,581
CD's of $100,000 or more 500 100 338 244 $1,182
Public funds (1) 0 0 0 0 $0
---------- -------- --------- ---------- --------
Total CD's $5,387 $4,275 $3,689 $8,412 $21,763
========== ======== ========= ========== ========
</TABLE>
____________________________
(1) Deposits from governmental and other public entities.
Source: Offering circular
TABLE I.19 - JUMBO CD'S
The following table indicates the amount of the Bank's certificates of deposit
of $100,000 or more by time remaining until maturity as of June 30, 1996.
<TABLE>
<CAPTION>
Certificates
of Deposits
Maturity Period ----------------
--------------- (In thousands)
<S> <C>
Three months or less 500
Over three through six months 100
Over six through 12 months 338
Over 12 months 244
----------------
Total 1,182
================
</TABLE>
Source: Offering circular
23
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.20 - SAVINGS DEPOSIT ACTIVITY
The following table sets forth the savings activities of the Bank for the
periods indicated.
<TABLE>
<CAPTION>
Years Ended June 30,
------------------------
1996 1995
---------- ----------
(In Thousands)
<S> <C> <C>
Opening balance $35,210 $37,072
Deposits 72,437 72,410
Withdrawals 73,237 75,405
Interest credited 1,085 1,134
---------- ----------
Ending balance $35,495 $35,210
========== ==========
Net increase (decrease) $285 $(1,862)
========== ==========
Percent increase (decrease) 0.81% -5.02%
========== ==========
</TABLE>
Source: Offering circular
BORROWINGS
At June 30, 1996, Investors Federal had FHLB advances of $13.47 million at
a weighted average cost of funds of 6.19% (see Table I.21). At June 30, 1995,
FHLB advances were $6.42 million and the weighted average cost was 6.40%. The
current position in advances is the result of Management's decision to fund
asset growth with advances rather than increase deposit interest expense.
SUBSIDIARIES
Investors Federal has no subsidiaries.
LEGAL PROCEEDINGS
From time to time, Investors Federal becomes involved in legal proceedings
principally related to the enforcement of its security interest in real estate
loans. In the opinion of Management of the Bank, no legal proceedings are in
process or pending that would have a material effect on Investors Federal's
financial position, results of operations, or liquidity.
24
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.21 - BORROWINGS FROM FHLB
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------------
1996 1995
---------- ----------
(In Thousands)
<S> <C> <C>
Maximum Balance:
- ----------------
FHLB advances $ 14,483 $ 6,934
Securities sold under agreements to repurchase
Other borrowings
Average Balance:
- ----------------
FHLB advances $ 11,138 $ 3,709
Securities sold under agreements to repurchase
Other borrowings
</TABLE>
<TABLE>
<CAPTION>
June 30,
--------------------------
1996 1995
---------- ----------
(In Thousands)
<S> <C> <C>
FHLB advances $ 13,474 $ 6,419
Securities sold under agreements to repurchase
Other borrowings
---------- ----------
Total borrowings $ 13,474 $ 6,419
Weighted average interest rate of FHLB advances 6.19% 6.40%
</TABLE>
25
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
EARNINGS CAPACITY OF THE INSTITUTION
As in any interest sensitive industry, the future earnings capacity of
Investors Federal will be affected by the interest rate environment.
Historically, the thrift industry has performed at less profitable levels in
periods of rising interest rates. This performance is due principally to the
general composition of the assets and the limited repricing opportunities
afforded even the adjustable rate loans. The converse earnings situation
(falling rates) does not afford the same degree of profitability potential for
thrifts due to the tendency of borrowers to refinance both high rate fixed rate
loans and adjustable loans as rates decline.
Investors Federal is no exception to the aforementioned paradox. With its
current asset and liability structure, however, the effect of rising interest
rates will have less negative impact on earnings, due to capable management of
interest rate risk.
The addition of capital through the conversion will allow Investors Federal
to grow. As growth is attained, the leverage of that new capital should, from a
ratio of expenses to total assets standpoint, reduce the operating expense
ratio. However, growth and additional leverage will likely be moderate and well
controlled to maintain the current low risk levels inherent in the Bank's asset
base.
ASSET-SIZE-EFFICIENCY OF ASSET UTILIZATION
At its current size and in its current asset configuration, Investors
Federal is an efficient operation. With total assets of approximately $52.6
million, Investors Federal has 21 full time equivalent employees.
INTANGIBLE VALUES
Investors Federal's greatest intangible value lies in its loyal deposit
base. Investors Federal has a 62 year history of sound operations, controlled
growth, and generally consistent earnings. The Bank currently has 7.8% of the
deposit market in its area, and it has the ability to increase market share.
Investors Federal has no significant intangible values that could be
attributed to unrecognized asset gains on investments and real estate.
EFFECT OF GOVERNMENT REGULATIONS
Although still considered a traditional thrift, Investors Federal has
emphasized more passive investments (MBS's) during the recent years. With its
current efforts to increase loans as a percentage of deposits, the Bank's loan
mix is expected to continue to change. Government regulations will have the
greatest impact in the area of cost of compliance and reporting. The conversion
will create an additional layer of regulations and reporting and thereby
increase the cost to the Bank. Moreover, no future plans currently exist to
make acquisitions or purchase branches or complicate operations with matters
that would add to reporting and regulatory compliance.
OFFICE FACILITIES
Investors Federal's main office is an adequately maintained facility that
was purchased and occupied by the Bank in 1966. Table I.22 provides information
on all of Investors Federal's offices. The Bank's facilities are currently
adequate for the convenience and needs of the Bank's customer base.
26
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.22 - OFFICE FACILITIES
<TABLE>
<CAPTION>
Net Book Year Owned or Square
Physical address Value (1) Opened Leased Footage
- ---------------- --------- ------ ------ -------
($000's)
--------
<S> <C> <C> <C> <C>
522 Washington $ 86 1966 Owned 3,900
Chillicothe-Main Office
518 Washington 24 Not in use Owned 1,200
Space for Expansion
305 N Davis 6 1975 Owned 1,450
Hamilton-Branch Office
400 N Main - 1979 Leased (2) 660
Gallatin-Branch Office
</TABLE>
(1) Cost less accumulated depreciation and amortization of land and building.
(2) Lease is on month to month basis.
SOURCE: INVESTORS FEDERAL SAVINGS AND LOAN BANK
27
<PAGE>
SECTION II
MARKET AREA
<PAGE>
FERGUSON & CO., LLP Section II.
- ------------------- -----------
II. MARKET AREA
DEMOGRAPHICS
Investors Federal conducts its operations through three offices. The main
office is located in Chillicothe, Livingston County, Missouri. One branch is
located in Hamilton, Caldwell County, Missouri, and the second branch is located
in Gallatin, Daviess County, Missouri. The branches have $29.876 million,
$3.636 million, and $1.967 million in deposits, respectively, as of June 30,
1996. Livingston, Caldwell and Daviess Counties are located in the Northwest
part of the state, approximately 95 miles north-northwest from Kansas City,
Missouri, and approximately 60 miles due south of the Iowa/Missouri State line.
Investors Federal has determined that its principal trade area is the three
counties discussed above. Table II.1 presents historical and projected trends
for the United States, Missouri, the counties of Livingston, Caldwell and
Daviess, and the cities of Chillicothe, Hamilton and Gallatin. The information
addresses population, income, employment, and housing trends.
As indicated in Table II.1, the population growth rate for Livingston
County from 1990 to 1996 was a negative 2.25%, while Caldwell and Daviess
Counties grew 2.35% and 1.63%, respectively. These growth rates were well below
the 6.67% reported for the United States and the 4.92% for the State of
Missouri. The estimated growth rates from 1996 through 2001 for the three
counties demonstrate the same patterns that are reflected in the period from
1990 to 1996. Estimated population change for Livingston County is a negative
1.81%, while Caldwell and Daviess Counties are expecting growth of 1.84% and
1.28%, respectively. Household income estimates for the next five years are
encouraging and are in excess of the growth anticipated by the State of Missouri
and are counter to the decrease anticipated in the United States overall.
Household income for Livingston County is expected to increase from $26,511
to $27,855, or 5.07%. In other words, Livingston County is expecting to have
fewer people in 2001, but they will have significantly higher incomes. Caldwell
and Daviess Counties are estimating dramatic increases in household income.
Caldwell County is expecting an increase of 10.91% to $28,260 per household, and
Daviess County is expecting a household income increase of 13.35% to $25,706.
These increases in household incomes are mainly due to the changes in employment
patterns in the area. This area is changing from primarily an agrarian economy,
developing into a sub-regional manufacturing and distribution center.
The principal cities in the counties are showing exactly the same economic
patterns the counties are showing. Chillicothe, located in Livingston County,
is estimated to lose population but gain in household incomes. Hamilton, in
Caldwell County, and Gallatin, in Daviess County, are expecting growth in both
population and household incomes.
The Household Income Distribution Estimates for 2001 reflect the
traditional rural bias. In the three counties and their principal cities, the
number of households reporting incomes of $15,000 or less are greater than the
percentage reported by the United States and the State of Missouri. The same is
true for incomes that are more than $15,000, but less than $25,000. In the mid-
range incomes, $25,000 to $50,000, the area is very close to the percentages
reflected for the Unites States and Missouri. However, in the upper ranges of
income, $50,000 to $100,000, $100,000 to $150,000, and those over $150,000, the
area will have lower levels.
1
<PAGE>
FERGUSON & CO., LLP Section II.
- ------------------- -----------
In two of the three counties that Investors Federal considers their
principal trade area, the populations are expanding. In all of the counties,
the income levels are projected to increase. However, the combined population
levels are not considered excessive, and the high percentage increases do not
produce a large number of one to four residential lending opportunities
considering the level of competition within the financial services community,
but the economic prosperity that is predicted should increase the number of
consumer, commercial, and home improvement lending opportunities.
The principal sources of employment in Investors Federal's designated trade
area are: trade--29.48%; manufacturing--50.4%; and services--20.12%. The major
employers in Investors Federal's market area are: in Livingston County,
Donaldson Company (245 employees), Lambert Manufacturing (111 employees),
Midwest Gloves Corp. (176 employees), SEMCO (92 employees), Department of
Corrections (155 employees), Chillicothe R-11 School District (255 employees),
and Wire Rope Corp. of America (100 employees). In Caldwell County: Stride-
Rite Shoe Co. (300 employees); Hamilton Hillcrest (90 employees), and Hamilton
R-2 School District (86 employees). In Daviess County: Landmark Metal
Fabricating (200 employees), Continental Grain Co. (80 employees), and Lambert
Manufacturing (35 employees)./1/
Analysis of the data presented above presents a picture of ample and
expanding economic opportunity, suggesting that Investors Federal has sufficient
growth opportunities within its current market area.
Based on information publicly available on deposits as of June 30, 1995,
(see Table II.20), the designated trade area had $450.4 thousand in deposits,
and Investors had 7.82% of the deposit market. Investors Federal's competition
consists of 10 commercial banks that maintain 15 offices in the area. Table II.2
shows that Investors Federal had deposit shrinkage in the period from 1993 to
1995. That shrinkage is due to a concentrated effort on the part of Management
to achieve a targeted spread between interest earning assets and bearing
liabilities, and a plan to minimize interest rate risk. As a result, the Bank
has used borrowings as an alternative to fund asset growth with deposit growth.
Growth opportunities for Investors Federal can be assessed by reviewing
economic factors in its market area. The salient factors include growth trends,
economic trends, and competition form other financial institutions. We have
reviewed these factors to assess the potential for the market area. In assessing
the growth potential of Investors Federal, we must also assess the willingness
and flexibility of Management to respond to the competitive factors that exist
in the market area. Our analysis of the economic potential and the potential of
Management affects the valuation of the Bank. Management has demonstrated its
interest in being a full service bank through its diversification of loan and
deposit products. The Bank offers consumer loads and non-real estate commercial
loans in addition to real loans, as well as a full range of deposit products.
The next challenge is a practical expansion of its lending market.
___________________________
/1/DEPARTMENT OF ECONOMIC DEVELOPMENT. Research Planning, Jefferson City,
Missouri
2
<PAGE>
FERGUSON & CO., LLP SECTION II.
- ------------------- -----------
TABLE II.1 - DEMOGRAPHIC TRENDS
KEY ECONOMIC INDICATORS
<TABLE>
<CAPTION>
==================================================================================================================================
UNITED LIVINGSTON CALDWELL DAVIESS
KEY ECONOMIC INDICATOR STATES MISSOURI COUNTY COUNTY COUNTY CHILLICOTHE HAMILTON GALLATIN
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Population, 2001 Est. 278,802,003 5,594,862 14,006 8,735 8,095 10,808 2,809 3,339
1996 - 2001 Percent Change, Est. 5.09 4.21 (1.81) 1.84 1.28 (1.75) 1.74 1.09
Total Population, 1996 Est. 265,294,885 5,368,608 14,264 8,577 7,993 11,000 2,761 3,303
1990 - 96 Percent Change, Est. 6.67 4.92 (2.25) 2.35 1.63 (2.04) 2.11 1.19
Total Population, 1990 248,709,873 5,117,073 14,592 8,380 7,865 11,229 2,704 3,264
- ----------------------------------------------------------------------------------------------------------------------------------
Household Income, 2001 Est. 33,189 31,950 27,855 28,260 25,706 27,144 28,646 24,399
1996 - 2001 Percent Change, Est. (3.88) 2.38 5.07 10.91 13.35 5.08 11.16 13.75
Household Income, 1996 Est. 34,530 31,206 26,511 25,479 22,678 25,832 25,771 21,450
- ----------------------------------------------------------------------------------------------------------------------------------
Per Capita Income, 1990 16,738 15,547 13,828 12,405 11,337 14,015 12,774 11,426
- ----------------------------------------------------------------------------------------------------------------------------------
Household Income Distribution-2001 Est. (%)
$15,000 and less 20 22 26 29 30 28 28 31
$15,000 - $25,000 16 17 20 20 24 20 20 25
$25,000 - $50,000 34 35 35 34 35 33 34 33
$50,000 - $100,000 24 22 16 15 10 16 16 9
$100,000 - $150,000 4 3 2 2 1 2 1 1
$150,000 and over 2 1 1 1 1 1 1 0
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Unemployment rate, 1990 6.24 6.11 4.79 9.95 6.73 4.70 9.47 6.11
- ----------------------------------------------------------------------------------------------------------------------------------
Median Age of Population, 1996 Est. 34.3 35.0 38.0 37.9 38.2 38.1 37.5 37.7
Median Age of Population, 1990 32.9 33.5 37.0 37.6 38.0 37.0 37.1 37.6
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Average Housing Value, 1990 79,098 72,086 51,706 38,964 31,793 43,505 34,050 33,073
- ----------------------------------------------------------------------------------------------------------------------------------
Total Households, 2001 Est. 103,293,062 2,154,220 5,457 3,384 3,151 4,244 1,113 1,360
1996 - 2001 Percent Change, Est. 5.14 4.32 (1.73) 2.05 1.48 (1.69) 1.92 1.34
Total Households, 1996 98,239,161 2,064,948 5,553 3,316 3,105 4,317 1,092 1,342
1990 - 96 Percent Change, Est. 6.84 5.29 (1.63) 2.92 2.14 (1.39) 2.63 1.67
Total Households, 1990 91,947,410 1,961,206 5,645 3,222 3,040 4,378 1,064 1,320
- ----------------------------------------------------------------------------------------------------------------------------------
Total Housing Units, 1990 101,641,260 2,199,129 14,365 5,794 3,613 3,878 763 876
% Vacant 10.07 10.82 4.37 8.97 15.86 8.95 8.91 10.73
% Occupied 89.93 89.18 95.63 91.03 84.14 91.05 91.09 89.27
% By Owner 57.78 61.33 67.78 68.69 63.33 59.75 63.83 60.50
% By Renter 32.15 27.85 27.85 22.33 20.81 31.30 27.26 28.77
================================================================================================================================
</TABLE>
Source: Scan/US, Inc.
3
<PAGE>
FERGUSON & CO., LLP SECTION 11.
- ------------------- -----------
TABLE II.2 - MARKET AREA DEPOSITS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994 1993
(in Thousands)
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
Investors Federal $35,227 $37,083 $38,428
----------------------------------------
Number of Branches 3 3 3
Other Savings Associations $ $ $
----------------------------------------
Number of Branches
Total Savings Association Deposits $35,227 $37,083 $38,428
----------------------------------------
Number of Branches 3 3 3
Total Bank Deposits $415,378 $444,545 $437,040
Number of Branches 15 15 16
Investors Federal - Market Share
To Total Area Deposits 7.82% 8.34% 8.79%
- --------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
SECTION III
COMPARISON WITH PUBLICLY
TRADED THRIFTS
<PAGE>
FERGUSON & CO., LLP Section III.
- ------------------- ------------
III. COMPARISON WITH PUBLICLY TRADED THRIFTS
COMPARATIVE DISCUSSION
This section presents an analysis of Investors Federal Bank and Saving
Association relative to a group of 12 publicly traded thrift institutions
("Comparative Group"). Such analysis is necessary to determine the adjustments
that must be made to the pro forma market value of Investors Federal's stock.
Table III.1 presents a listing of the comparative group with general information
about the group. Table III.2 presents key financial indicators relative to
profitability, balance sheet composition and strength, and risk factors. Table
III.3 presents a pro forma comparison of Investors Federal to the comparative
group. Exhibits III and IV contain selected financial information on Investors
Federal and the comparative group. This information is derived from quarterly
TFR's filed with the OTS and call reports filed with the FDIC. The selection
criteria and comparison with the Comparative Group are discussed below.
SELECTION CRITERIA
Ideally, the comparative group would consist of thrifts in the same
geographic region with identical local economies, asset size, capital level,
earnings performance, asset quality, etc. However, there are few comparably
sized institutions with stock that is liquid enough to provide timely,
meaningful market values. Therefore, we have selected a group of comparatives
that are either listed on the New York Stock Exchange ("NYSE"), the American
Stock Exchange ("AMEX"), or NASDAQ. We excluded companies that are apparent
takeover targets and companies with unusual characteristics that tend to distort
both mean and median calculations. For example, we have excluded all companies
with losses during the trailing 12 months. We have also excluded mutual holding
companies (see Exhibit II.1).
Because of the limited number of similar size thrifts with sufficient
trading volume, we looked for members of the comparative group among thrifts
with assets up to $110 million. The Midwest Region, which includes Missouri, had
12 thrifts that met the aforementioned requirements. We found 16 thrifts that
met the requirements in the Midwest Region of the United States, and one in the
Southwest Region (we consider 10 to be the minimum number), and we retained 12
and eliminated five for the following reasons: (a) three had capital levels that
were significantly in excess of the subject that analysis would be difficult;
(b) one had an unusually high loans to deposit ratio; and (c) one had no
borrowings.
The principal source of data was SNL Securities, Charlottesville, Virginia.
There are approximately 430 publicly traded thrifts listed on NYSE, AMEX, or
NASDAQ. In developing statistics for the entire country, we eliminated certain
institutions that skewed the results, in order to make the data more meaningful:
<> We eliminated companies with losses,
<> We eliminated indicated acquisition targets,
<> We eliminated companies with price/earnings ratios in excess of 25,
<> We eliminated companies that had not reported as a stock institution
for one complete year, and
<> We eliminated mutual holding companies.
The resulting group of approximately 270 publicly traded thrifts is included in
Exhibit II.1.
1
<PAGE>
FERGUSON & CO., LLP Section III.
- ------------------- ------------
The selected group of comparatives has sufficient trading volume to provide
meaningful price data. Eleven of the comparative group members are located in
the Midwest, and the other is located in the Southwest. Three of the group are
located in Iowa, three in Ohio, and one each in Missouri, Indiana, Minnesota,
Illinois, Kansas, and Louisiana. With total assets of approximately $52.6
million, Investors Federal is well below the group selected, which has average
assets of $82.8 million and median assets of $85.8 million.
PROFITABILITY
Using the comparison of profitability components as a percentage of average
assets, Investors Federal was below the comparative group in return on assets,
.62% to .89%; net interest income, 2.77% to 3.32%; and core income, .52% to
.85%. Investors Federal was below the comparative group in other operating
income, .07% to .37%; and operating expense, 2.15% to 2.29%. After conversion,
deployment of the proceeds will provide additional income, and Investors Federal
will compare more favorably with the comparative group in terms of return on
average assets, with a return of .81% at the midpoint of the appraisal range.
Pro forma return on average equity is 6.33% at the midpoint, versus a mean of
6.24% and median of 5.99% for the comparative group.
BALANCE SHEET CHARACTERISTICS
The general asset composition of Investors Federal is similar to that of
the comparative group. Investors Federal has a higher level of passive
investments with 58.15% of its assets invested in cash, investments, and
mortgage-backed securities, versus 51.87% for the comparative group. In the
investment portfolio, Investors Federal has 25.88% in cash and investment
securities and 32.27% in mortgage backed securities. The comparative group has
a reverse mixture with 37.35% in cash and investments, and 14.52% in mortgage
backed securities. Investors Federal has a lower percentage of its assets in
loans, at 54.06% versus 60.16% for the comparative group. Investors Federal's
percentage of earning assets to interest costing liabilities is much lower than
that of the group. Investors Federal has 109.0%, and the comparative group
averages 116.99%. After conversion, Investors Federal's ratio will be in line
with that of the group of comparatives.
The liability side differs mainly in that Investors Federal has a higher
percentage of borrowings and lower percentage of equity and deposits. Investors
Federal's capital level is 6.21% versus 15.41% for the comparative group. The
comparison between Investors Federal's capital level and that of the comparative
group will improve after conversion, but at the midpoint, equity to assets will
be 12.19% compared to their average of 15.41% and median of 13.89%.
RISK FACTORS
Both Investors Federal and the comparative group have low levels of
nonperforming assets, with First Federal's being much lower than the comparative
group, 0.24% to 0.56% of assets. Investors Federal's loan loss allowance is
1.00% of net loans, which compares favorably with the comparative group's 0.81%.
Investors Federal's one year gap to assets is a positive 4.70% versus a positive
0.02% for the comparative group. However, the group average is based on
information available for only five members of the comparative group. On
balance, we believe that Investors Federal's interest rate risk management is
better than the comparative group.
2
<PAGE>
FERGUSON & CO., LLP Section III.
- ------------------- ------------
SUMMARY OF FINANCIAL COMPARISON
Based on the above discussion of operational, balance sheet, and risk
characteristics of Investors Federal compared with the group, we believe that
Investors Federal's performance is equal to that of the comparative group, and
we believe that the interest rate risk management component is better than the
group. While Investors Federal's profitability and capital levels are below the
comparative group, the conversion proceeds will increase its income and capital
levels to near comparable levels. The close management of interest rate risk is
likely to have a continuing slight negative influence on the performance of
Investors Federal's earnings. However, in some analytical circles, the
diminution of earnings is adequately offset by the reduced interest rate risk
component.
3
<PAGE>
FERGUSON & CO., LLP Section III.
- ------------------- ------------
FUTURE PLANS
Investors Federal's future plans are to remain a well capitalized,
profitable institution with good asset quality and a commitment to serving the
needs of its trade area, and emphasizing lending. The business plan emphasizes
growth in consumer lending and commercial non-real estate lending. Management
recognizes that it will take time to invest the proceeds of its capital infusion
in a manner consistent with its historic performance and current policy. During
that period of time, Management is willing to accept a lower return on assets as
well as a lower return on equity capital.
Investors Federal has always adhered to a controlled growth policy, and in
recent years, it has controlled its rates paid, its overall spreads, and has
funded all recent growth with FHLB advances. The advances were used to control
spreads and help control interest rate risk. The additional capital raised by
the sale of Common Stock will initially be used to purchase short term
investment securities. Adjustable rate and short term loans will continue to be
emphasized. The Bank will continue to minimize long term, fixed rate loans.
The Bank's business plan projects that it will experience growth in loans,
savings deposits, and liquidity.
Investors Federal has no current plans to open or acquire branches.
However, the additional capital and the formation of a holding company would
make acquisition of branches a viable option. Management intends to expand
lending and believes that projected lending goals can be met without additional
offices.
Increasing market penetration by increasing the number of services and
products available, coupled with expanded marketing efforts, are the most likely
methods to be employed to achieve growth.
4
<PAGE>
FERGUSON & CO., LLP SECTION III
- ------------------ -----------
TABLE III.1 - COMPARABLES GENERAL
<TABLE>
<CAPTION>
Total Current Current
Number Assets Stock Market
Of ($000) Price Value
Ticker Short Name City State Offices Mst RctQ IPO DATE ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BDJI First Federal Bancorporation Bemidji MN 5 104,969 04/04/95 15.125 11.77
CIBI Community Investors Bancorp Bucyrus OH 3 85,785 02/07/95 16.250 11.40
CSBF CSB Financial Group, Inc. Centralia IL 1 41,524 10/09/95 9.625 9.96
CZF CitiSave Financial Corp Baton Rouge LA 5 76,128 07/14/95 14.125 13.63
FFSL First Independence Corp. Independence KS 1 105,771 10/08/93 19.000 11.08
GFSB GFS Bancorp, Inc. Grinnell IA 1 83,305 01/06/94 20.500 10.45
HBBI Home Building Bancorp Washington IN 2 43,135 02/08/95 17.500 5.80
HFSA Hardin Bancorp, Inc. Hardin MO 3 86,949 09/29/95 12.000 11.55
HHFC Harvest Home Financial Corp. Cheviot OH 3 76,399 10/1O/94 10.000 9.35
MIFC Mid-Iowa Financial Corp. Newton IA 6 115,260 10/14/92 6.000 10.10
PTRS Potters Financial Corp. East Liverpool OH 4 114,714 12/31/93 15.500 7.85
SFFC StateFed Financial Corporation Des Moines IA 2 76,705 01/05/94 16.000 13.42
Maximum 6 115,260 20.500 13.63
Minimum 1 41,524 6.000 5.8
Average 3 84,220 14.344 10.53
Median 3 84,545 15.313 10.77
</TABLE>
SOURCE: SNL SECURITIES, INC. 5
<PAGE>
FERGUSON & CO.,LLP SECTION III
- ------------------ -----------
TABLE III.2-KEY FINANCIAL INDICATORS
<TABLE>
<CAPTION>
Investors Federal Comparative
Chillicothe, Mo. Group
<S> <C> <C>
Profitability
(% of average assets)
Net income 0.62 0.89
Net interest income 2.77 3.32
Loss provisions 0.43 0.37
Other operating income 0.07 0.37
Operating expense 2.15 2.29
Core income (excluding gains
and losses on asset sales) 0.52 0.85
Balance Sheet Factors
(% of assets)
Cash and investments 25.88 37.35
Mortgage-backed securities 32.27 14.52
Loans 54.06 60.16
Savings deposits 67.50 73.47
Borrowings 25.62 10.09
Equity 6.21 15.41
Tangible equity 6.21 15.41
Risk Factors
(%)
Earning assets/costing liabilities 109.00 116.99
Non-performing assets/assets 0.24 0.56
Loss allowance/non performing assets 221.09 142.51
Loss allowance/loans 1.00 0.81
One year gap/assets 4.70 0.02 (*)
</TABLE>
(*) Five of the twelve comparables reported gap assets.
SOURCE: SNL SECURITIES, F&C CALCULATIONS AND OFFERING CIRCULAR.
SOURCE: SNL SECURITIES, OFFERING CIRCULAR AND F&C CALCULATIONS
6
<PAGE>
FERGUSON & CO., LLP SECTION III
- ------------------- -----------
TABLE III.3-COMPARABLES
INVESTORS FEDERAL SAVINGS BANK
<TABLE>
<CAPTION>
AS OF SEPTEMBER 21, 1996
Ticker Name Price Mk Valu PE P/Book P/TBook P/Assets Div Yld Assets
($) ($Mil) (X) (%) (%) (%) (%) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTORS FEDERAL
-----------------
Before Conversion N/A N/A N/A N/A N/A N/A N/A 52,587
SuperMax 20.000 5.951 13.00 73.25 73.25 10.36 3.00 57,444
Maximum 20.000 5.175 11.74 69.54 69.54 9.12 3.00 56,761
Midpoint 20.000 4.500 10.55 65.71 65.71 8.01 3.00 56,167
Minimum 20.000 3.825 9.28 61.05 61.05 6.88 3.00 55,584
COMPARATIVE GROUP
-----------------
Averages 14.344 10.530 15.87 87.18 87.20 13.52 1.92 84,220
Medians 15.313 10.765 14.61 85.94 85.94 12.91 2.03 84,545
MISSOURI PUBLIC THRIFTS
-----------------------
Averages 19.969 102.501 15.72 112.92 116.28 14.50 2.10 1,095,534
Medians 19.188 31.550 15.98 102.11 102.11 14.76 1.89 198,814
MIDWEST REGION THRIFTS
----------------------
Averages 20.060 125.714 15.29 113.20 116.73 12.89 2.16 1,095,155
Medians 17.500 34.750 14.53 100.36 100.43 12.04 2.04 312,959
ALL PUBLIC THRIFTS
------------------
Averages 18.145 134.475 17.16 114.00 117.70 13.59 1.87 1,362,666
Medians 16.375 39.930 14.67 106.54 109.57 11.70 2.00 338,985
COMPARATIVE GROUP
-----------------
BDJI FirstFedBcrp-MN 15.125 11.770 17.19 84.59 84.59 11.22 - 104,969
CIBI CommInvBncrp-OH 16.250 11.400 13.66 95.98 95.98 13.28 2.46 85,785
CSBF CSBFinancialGrp-IL 9.625 9.960 21.88 77.62 77.62 23.99 - 41,524
CZF CitiSaveFinCorp-LA 14.125 13.630 11.67 99.05 99.12 17.90 2.12 76,128
FFSL FirstIndepCorp-KS 19.000 11.080 12.03 84.94 84.94 10.48 2.11 105,771
GFSB GFSBancorp,Inc.-IA 20.500 10.450 12.28 105.02 105.02 12.54 1.95 83,305
HBBI HomeBldngBncrp-IN 17.500 5.800 32.41 86.93 86.93 13.46 1.71 43,135
HFSA HardinBancorp-MO 12.000 11.550 15.00 81.36 81.36 13.97 3.33 86,949
HHFC HarvestHome-OH 10.000 9.350 15.87 73.21 73.21 12.24 4.00 76,399
MIFC Mid-IowaFinCorp-IA 6.000 10.100 10.17 93.46 93.60 8.76 1.33 115,260
PTRS PottersFin-OH 15.125 7.850 14.35 74.06 74.06 6.84 1.55 114,714
SFFC StateFedFinCorp-IA 16.500 13.420 14.86 89.92 89.92 17.50 2.42 76,705
</TABLE>
NOTE: STOCK PRICES ARE CLOSING PRICES OR LAST TRADE. PRO
FORMA CALCULATIONS FOR INVESTORFEDERAL ARE BASED ON SALES AT
$20 PER SHARE WITH A MIDPOINT OF $4,500,000.
SOURCES: INVESTOR FEDERALS' AUDITED AND UNAUDITED FINANCIAL
STATEMENTS, SNL SECURITIES, AND F&C CALCULATIONS.
7
<PAGE>
FERGUSON & CO., LLP SECTION III
- ------------------- ------------
TABLE III.3 - COMPARABLES
<TABLE>
<CAPTION>
As of September 21, 1996
Ticker Name Eq/A TEq/A EPS ROAA ROAE
(%) (%) ($) (%) (%)
<S> <C> <C> <C> <C> <C>
INVESTORS FEDERAL
-----------------
Before Conversion 6.21 6.21 N/A 0.70 8.86
SuperMax 14.14 14.14 1.66 0.85 5.71
Maximum 13.11 13.11 1.84 0.83 6.02
Midpoint 12.19 12.19 2.04 0.81 6.33
Minimum 11.27 11.27 2.32 0.80 6.70
COMPARATIVE GROUP
-----------------
Averages 15.41 15.41 1.03 0.89 6.24
Medians 13.89 13.89 1.08 0.91 5.99
MISSOURI PUBLIC THRIFTS
-----------------------
Averages 13.93 13.77 1.44 1.00 8.48
Medians 12.77 12.77 1.10 0.88 6.33
Midwest Region Thrifts
----------------------
Averages 12.11 11.95 1.42 0.98 8.90
Medians 10.67 10.59 1.22 0.96 7.47
ALL PUBLIC THRIFTS
------------------
Averages 12.52 12.20 1.25 0.89 8.72
Medians 9.82 9.46 1.14 0.90 8.37
COMPARATIVE GROUP
-----------------
BDJI FirstFedBcrp-MN 13.26 13.26 0.88 0.70 4.74
CIBI CommInvBncrp-OH 13.84 13.84 1.19 1.01 6.98
CSBF CSBFinancialGrp-IL 30.91 30.91 0.44 0.89 NA
CZF CitiSaveFinCorp-LA 16.73 16.72 0.84 1.21 6.68
FFSL FirstIndepCorp-KS 12.34 12.34 1.58 1.10 8.51
GFSB GFSBancorp,Inc.-IA 11.94 11.94 1.67 1.16 9.19
HBBI HomeBldngBncrp-IN 13.94 13.94 0.54 0.41 2.86
HFSA HardinBancorp-MO 17.17 17.17 0.80 0.76 4.25
HHFC HarvestHome-OH 16.71 16.71 0.63 0.75 4.14
MIFC Mid-IowaFinCorp-IA 9.38 9.36 0.59 0.93 10.00
PTRS PottersFin-OH 9.24 9.24 1.08 0.51 5.27
SFFC StateFedFinCorp-IA 19.46 19.46 1.11 1.19 5.99
</TABLE>
8
<PAGE>
FERGUSON & CO., LLP SECTION IV.
- ------------------- -----------
TABLE III.4 - COMPARATIVE SELECTION
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BDJI First Federal Bancorporation Bemidji MN MW SAIF NASDAQ 04/04/95 14.00
CIBI Community Investors Bancorp Bucyrus OH MW SAIF NASDAQ 02/07/95 16.00
CSBF CSB Financial Group, Inc. Centralia IL MW SAIF NASDAQ 10/09/95 9.13
CZF CitiSave Financial Corp Baton Rouge LA SW SAIF AMSE 07/14/95 14.00
FFSL First Independence Corp. Independence KS MW SAIF NASDAQ 10/08/95 18.50
GFSB GFS Bancorp, Inc. Grinnell IA MW SAIF NASDAQ 01/06/94 21.00
HBBI Home Building Bancorp Washington IN MW SAIF NASDAQ 02/08/95 18.25
HFSA Hardin Bancorp, Inc. Hardin MO MW SAIF NASDAQ 09/29/95 11.25
HHFC Harvest Home Financial Corp. Cheviot OH MW SAIF NASDAQ 10/10/94 13.75
MIFC Mid-Iowa Financial Corp. Newton IA MW SAIF NASDAQ 10/14/92 6.00
PTRS Potters Financial Corp. East Liverpool OH MW SAIF NASDAQ 12/31/93 15.50
SFFC StateFed Financial Corporation Des Moines IA MW SAIF NASDAQ 01/05/94 16.00
Maximum 18.50
Minimum 9.13
Average 14.33
Median 14.00
Rejects and Reasons
-------------------
PCBC Perry County Financial Corp. Perryville MO MW SAIF NASDAQ 02/13/95 17.50
Loan to Deposit Ratio to low to compare and capital to high.
NSLB NS&L Bancorp, Inc. Neosho MO MW SAIF NASDAQ 06/08/95 12.00
Capital Accounts to high this one has no borrwoings.
ASBP ASB Financial Corp. Portsmouth OH MW SAIF NASDAQ 05/11/95 14.25
Capital to high, NPA's to high and loan to deposit ratio is also to high.
ATSB AmTrust Capital Corp. Peru IN MW SAIF NASDAQ 03/28/95 9.00
Current Quarter PE ratio is unrealistic ant LTM is not reported
HFFB Harrodsburg First Fin Bancorp Harrodsburg KY MW SAIF NASDAQ 10/04/95 16.50
Capital Ratios are to high and the equity to assets distorts the comparisons.
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 9
<PAGE>
FERGUSON & CO., LLP SECTION IV.
- ------------------- -----------
TABLE III.4 - COMPARATIVE SELECTION
<TABLE>
<CAPTION>
Current Price/ Price/ Current Current Current Total Equity/
Market LTM Core Price/ Price/Tang Price/ Dividend Assets Assets
Value Core EPS EPS Book Value Book value Assets Yield ($000) (%)
Ticker ($M) (x) (x) (%) (%) (%) (%) Mst RctQ Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BDJI 10.90 15.91 12.96 78.30 78.30 10.38 0.000 104,969 13.26
CIBI 11.22 13.45 13.79 94.51 94.51 13.08 2.500 85,785 13.84
CSBF 9.44 NA 20.74 73.59 73.59 22.74 0.000 41,524 30.91
CZF 13.51 NA 16.67 98.18 98.25 17.74 2.143 76,128 16.73
FFSL 10.79 11.71 11.01 82.70 82.70 10.20 2.162 105,771 12.34
GFSB 10.70 12.57 10.10 107.58 107.58 12.85 1.905 83,305 11.94
HBBI 6.05 33.18 19.84 90.66 90.66 14.03 1.644 43,135 13.94
HFSA 10.83 NA 14.06 76.27 76.27 13.10 3.556 86,949 17.17
HHFC 12.85 21.83 21.48 100.66 100.66 16.83 2.909 76,399 16.71
MIFC 10.10 10.17 7.50 93.46 93.60 8.76 1.333 115,260 9.38
PTRS 7.85 14.35 19.38 74.06 74.06 6.84 1.548 114,714 9.24
SFFC 13.02 14.41 13.33 87.19 87.19 16.97 2.500 76,705 19.46
Maximum 13.51 15.91 20.74 98.18 98.25 22.74 2.50 105,771.00 30.91
Minimum 9.44 11.71 11.01 73.59 73.59 10.20 - 41,524.00 12.34
Average 11.17 13.69 15.03 85.46 85.47 14.83 1.36 82,835.40 17.42
Median 10.90 13.45 13.79 82.70 82.70 13.08 2.14 85,785.00 13.84
PCBC 14.99 18.62 17.50 99.32 99.32 18.64 1.714 80,394 18.77
NSLB 9.11 20.34 17.65 71.81 71.81 16.74 4.167 57,288 23.31
ASBP 24.42 20.65 18.75 89.45 89.45 21.62 2.807 112,988 22.70
ATSB 5.10 100.00 22.50 67.57 68.29 6.98 0.000 73,072 10.34
HFFB 35.62 NA 21.71 106.66 106.66 32.51 2.424 109,578 28.13
</TABLE>
10
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS
<PAGE>
FERGUSON & CO., LLP SECTION IV.
- ------------------- -----------
TABLE III.4 - COMPARATIVE SELECTION
<TABLE>
<CAPTION>
Tangible Return on Return on ROACE ROACE
Equity/ Core Core Avg Assets Avg Assets Before Before
Tang Assets EPS EPS Before Extra Before Fixture Extra Extra Merger Current
(%) ($) ($) (%) (%) (%) (%) Target Pricing
Ticker Mst RctQ LTM Mst RctQ LTM Mst RctQ LTM Mst RctQ (Y/N) Date
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BDJI 13.26 0.88 0.27 0.70 0.79 4.74 5.80 N 08/30/96
CIBI 13.84 1.19 0.29 1.01 0.93 6.98 6.50 N 08/30/96
CSBF 30.91 NA 0.11 0.89 1.02 NA 3.29 N 08/30/96
CZF 16.72 NA 0.21 1.21 1.05 6.68 5.70 N 08/30/96
FFSL 12.34 1.58 0.42 1.10 0.93 8.51 7.50 N 08/30/96
GFSB 11.94 1.67 0.52 1.16 1.33 9.19 11.14 N 08/30/96
HBBI 13.94 0.55 0.23 0.41 0.77 2.86 5.46 N 08/30/96
HFSA 17.17 NA 0.20 0.76 0.92 4.25 5.06 N 08/30/96
HHFC 16.71 0.63 0.16 0.75 0.74 4.14 4.33 N 08/30/96
MIFC 9.36 0.59 0.20 0.93 1.28 10.00 13.87 N 08/30/96
PTRS 9.24 1.08 0.20 0.51 0.36 5.27 3.77 N 08/30/96
SFFC 19.46 1.11 0.30 1.19 1.28 5.99 6.46 N 08/30/96
Maximum 30.91 1.58 0.42 1.21 1.05 8.51 7.50
Minimum 12.34 0.88 0.11 0.70 0.79 4.74 3.29
Average 17.41 1.21 0.26 0.98 0.94 6.73 5.76
Median 13.84 1.19 0.27 1.01 0.93 6.83 5.80
PCBC 18.77 0.94 0.25 0.88 0.55 4.36 2.83 N 08/30/96
NSLB 23.31 0.59 0.17 0.97 0.97 4.08 4.14 N 08/30/96
ASBP 22.70 0.69 0.19 1.01 1.09 4.30 4.76 N 08/30/96
ATSB 10.24 0.09 0.10 0.31 0.46 2.75 4.46 N 08/30/96
HFFB 28.13 NA 0.19 1.17 1.38 4.52 4.87 N 08/30/96
</TABLE>
11
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS
<PAGE>
FERGUSON & CO., LLP SECTION IV.
- ------------------- -----------
TABLE III.4 - COMPARATIVE SELECTION
<TABLE>
<CAPTION>
Loans
NTAs/ Loans/ Loans/ Deposits/ Borrowings/ Serviced
Assets Deposits Assets Assets Assets For Others
(%) (%) (%) (%) (%) ($000)
Ticker Mst RctQ Mst RctQ Mst RctQ Mst RctQ Mst RctQ Mst RctQ
<S> <C> <C> <C> <C> <C> <C>
BDJI 0.21 62.11 47.26 76.08 9.39 204
CIBI 0.73 89.35 74.52 83.40 2.28 746
CSBF NA 80.78 55.38 68.55 0.00 NA
CZF 0.23 70.95 57.55 81.12 0.00 1,362
FFSL 0.29 95.09 61.89 65.09 21.46 2,603
GFSB 1.15 136.32 86.93 63.77 23.19 8,193
HBBI 0.27 86.41 65.53 75.84 9.95 0
HFSA 0.15 71.59 54.42 76.01 5.75 3,759
HHFC 0.19 72.21 55.04 76.21 6.54 NA
MIFC 0.05 77.67 53.04 68.28 20.82 2,960
PTRS 2.33 53.08 46.55 87.69 2.08 643
SFFC NA 137.65 82.07 59.62 19.56 NA
Maximum 0.73 95.09 74.52 83.4 21.46 2,603.00
Minimum 0.21 62.11 47.26 65.09 - 204.00
Average 0.37 79.66 59.32 74.85 6.63 1,228.75
Median 0.26 80.78 57.55 76.08 2.28 1,054.00
PCBC NA 17.77 13.82 77.77 3.11 NA
NSLB 0.00 69.21 51.94 75.05 0.00 NA
ASBP 1.61 82.36 60.79 73.81 2.14 0
ATSB 1.31 99.02 68.85 69.53 19.16 26,664
HFFB 0.00 97.35 69.16 71.04 0.00 0
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 12
<PAGE>
SECTION IV
CORRELATION OF MARKET VALUE
<PAGE>
FERGUSON & CO., LLP SECTION IV
- ------------------- ----------
IV. CORRELATION OF MARKET VALUE
MARKETABILITY & LIQUIDITY OF STOCK TO BE ISSUED
This section addresses the aforementioned factors and the estimated pro
forma market. Certain factors must be considered to determine whether
adjustments are required in correlating Investors Federal's market value to the
comparative group. Those factors include financial aspects, market area,
management, dividends, liquidity, thrift equity market conditions, and
subscription interest value of the to-be-issued common shares and compares the
resulting market value of the Bank to the members of its comparative group and
the selected group of publicly held thrifts.
FINANCIAL ASPECTS
Section III includes a discussion regarding a comparison of Investors
Federal's earnings, balance sheet characteristics, and risk factors with its
comparative group. Table III.2 presents a comparison of certain key indicators,
and Table III.3 presents certain key indicators on a pro forma basis after
conversion.
As shown in Table III.2, from an earnings viewpoint, Investors Federal is
below its comparative group in return on assets and core income as a percentage
of average assets, principally as a result of its net interest income level,
which is lower because of the Bank's lower capital ratio, a lower ratio of
interest earning assets ("IEA's") to interest bearing liabilities ("IBL's"), and
a lower net interest margin. Investors Federal's net interest income as a
percent of assets is 2.77% versus 3.32% for the comparatives. After Investors
Federal completes its stock conversion, its return on average assets and core
income as a percentage of average assets will increase, but it will not achieve
parity with the comparable group principally due to lower capital levels and the
ratio of IEA's to IBL's. Table III.3 projects that Investors Federal will
approach the group in return on assets with 0.81% at the midpoint, versus a mean
of .89% and median of 0.91% for the comparative group.
Investors Federal's pro forma equity to assets ratio at the midpoint is
12.19%, versus a mean of 15.41% and median of 13.89% for the comparative group.
Investors Federal's pro forma return on equity is slightly above the comparative
group--6.33% at the midpoint versus a mean of 6.24% and median of 5.99% for the
comparative group, even though Investors Federal's capital levels will be lower.
Investors Federal's recorded earnings have been adjusted for appraisal
purposes. The Bank recorded gains of $46 thousand from the sale of assets,
patronage dividends and gain on the sale of the Bank's former cooperative data
processing bureau in the amount of $58 thousand recorded in non-interest income,
and an adjustment to the $210 thousand provision for loans losses taken at year
end June 30, 1996.
1
<PAGE>
FERGUSON & CO., LLP SECTION IV
- ------------------- ----------
<TABLE>
<CAPTION>
TABLE IV.1 - APPRAISAL EARNINGS ADJUSTMENT
AS REPORTED ADJUSTMENTS
<S> <C> <C> <C>
Total Interest Income 3,616 3,616
Total Interest Expense (2,264) (2,264)
Net Interest Income 1,352 1,352
Provision for Losses (210) Adj (40) (*)
Net Interest Income
after Loss 1,142 1,312
Provisions
Gain of Sale of Assets 46 Adj -
Other Noninterest
Income 311 Adj 253
Sub Total 1,499 1,565
Noninterest Expense (1,030) (1,030)
469 535
Income Tax Expense (167) (192)
-------------- -----------
Net Income 302 343
============== ===========
</TABLE>
(*) Equals the average provision for loan losses on thrifts
(excluding California) that were larger than $25 million, smaller
than $100 million and have at least 40% of their total assets in
loans.
Source: Investors Federal's audited and unaudited financial statements
and F&C calculations
Investors Federal's asset composition is similar to that of its comparative
group--lending oriented, with a high percentage of total assets in investments
and mortgage-backed securities. From the risk factor viewpoint, Investors
Federal is similar to the comparative group. Investors Federal has a lower level
of non performing assets. Investors Federal's loan loss allowance is 1.00% of
net loans, comparing favorably with the comparative group, which is 0.81%. Its
ratio of interest earning assets to interest bearing liabilities (109.0%) is
well below the comparative group (116.99%). Investors Federal's ratio will be in
line with the comparative group after conversion. From an interest rate risk
factor, Investors Federal is positioned to withstand reasonable interest rate
changes -- better than the comparative group.
We believe that NO ADJUSTMENT is necessary relative to financial aspects of
-------------
Investors Federal.
MARKET AREA
Section II describes Investors Federal's market area.
2
<PAGE>
FERGUSON & CO., LLP SECTION IV
- ------------------- ----------
We believe that NO ADJUSTMENT is required for Investors Federal's market
-------------
area.
MANAGEMENT
The CEO has been with Investors Federal 32 years, serving as President, CEO
and Director since 1964. The CFO has been with Investors Federal for 5 years,
serving in that capacity for the entire period. The CLO joined Investors Federal
in 1975. All officers report directly to President Teegarden. The staff
possesses the necessary skills, levels of expertise and experience to maintain
the integrity of the assets and to implement the goals of the organization.
Investors Federal's results compare well with the comparative group. Therefore,
Investors Federal's management has done the same quality job as its selected
comparatives. The Bank has no formal management succession plan in effect;
however, that is not unusual for this size institution.
We believe that NO ADJUSTMENT is required for Investors Federal's
-------------
management.
DIVIDENDS
Table III.3 provides dividend information relative to the comparative group
and the thrift industry as a whole. The comparative group is paying a mean yield
on price of 1.92% and a median of 2.03%, while all public thrifts are paying a
mean of 1.87% and median of 2.00%. Missouri public thrifts are paying a mean of
2.10% and a median of 1.89%. Investors Federal intends to pay a dividend at an
initial annual rate of 3.0%.
We believe that NO ADJUSTMENT is required relative to Investors Federal's
-------------
intention to pay dividends.
LIQUIDITY
The Holding Company has never issued capital stock to the public, and as a
result, there is no existing market for the Common Stock. Although the Holding
Company has applied to list its Common Stock on Nasdaq as a Pink Sheet, there
can be no assurance that a liquid trading market will develop.
A public market having the desirable characteristics of depth, liquidity,
and orderliness depends upon the presence, in the market place, of both willing
buyers and sellers of the Common Stock. These characteristics are not within the
control of the Bank or the market.
The peer group includes companies with sufficient trading volume to develop
meaningful pricing characteristics for the stock. The market value of the
comparative group ranges from $5.8 million to $13.6 million, with a mean value
of $10.53 million. The midpoint of Investors Federal's valuation range is $4.5
million at $20 a share, or 225,000 shares. The limited size of the issue and the
modest number of shares that are being issued should have a negative impact on
the liquidity of the issue.
We believe a DOWNWARD ADJUSTMENT is required relative to the liquidity of
-------------------
Investors Federal's stock .
THRIFT EQUITY MARKET CONDITIONS
The SNL Thrift Index has performed well since the end of 1990. The Index
has grown as follows: year ended December 31, 1991--increased 49.0% from 96.6 to
143.9; year ended December 31, 1992--increased 39.7% to 201.1; year ended
December 31, 1993--increased 25.6% to 252.5; year ended December 31, 1994--
decreased 3.1% to 244.7; year ended December 31, 1995--increased
3
<PAGE>
FERGUSON & CO., LLP SECTION IV
- ------------------- ----------
54.1% to 376.5. The SNL Index is market value weighted with a base value of 100
as of March 31, 1984.
As shown in Figure IV.1, which is a graph of the SNL Thrift Index covering
the period January 31, 1994 through September 30, 1996, the market, as depicted
by the Index, has experienced fluctuations recently. It dipped in the latter
part of 1994, but recovered during the first quarter of 1995. During 1995, the
Index continued a more robust increase and moved from 244.7 at year end 1994 to
362.3 by September 30, 1995, an increase of 48.1%. However, the Index has
recently shown an upward tendency, moving up and down within a narrow band of
performance. In May of 1996, the upward trend became recognizable, and the Index
had generally trended upward since the start, with an exception in July 1996,
when it dropped 4.02%. However, overall, the market has increased 13.81% between
the end of May and the end of September.
The increase in the SNL Index, in general, has been parallel with the
increases in other equity markets with some interim fluctuations caused by
changes or anticipated changes in interest rates. Another factor, however, is
also notable. In other markets, increased prices are responding to improved
profits, with price to earnings ratios increasing as earnings potentials are
anticipated. However, the thrift IPO market has been affected by speculation
that conveys the notion that the majority of the converting institutions will
become viable consolidation candidates and sell at some expanded multiple of
book value. Moreover, the number of conversions has decreased in recent months
and the basics of supply and demand are affecting the pricing of some of the
recent issues, as professional investor and regional speculators chase fewer
viable issues of thrift equities.
MISSOURI ACQUISITIONS
Table IV.2 provides information relative to acquisitions of financial
institutions in Missouri between January 1, 1996 and September 30, 1996. There
were two thrift acquisitions and six bank acquisitions announced during that
time frame. Currently, there are 17 publicly held thrifts in the State of
Missouri. There are 155 publicly held thrifts in the Midwest region of the
country. Bank acquisitions in Missouri since January 1, 1994, have averaged
193.39% of tangible book value and 19.25 times earnings. The median price has
been 183.63% of tangible book value and 19.38 times earnings. Thrifts generally
sell at lower price/book multiples than do banks. Thrifts in Missouri during
that period have averaged 120.32% of tangible book value and 36.57 times
earnings.
EFFECT OF INTEREST RATES ON THRIFT STOCK
The current interest rate environment and the anticipated rate environment
will affect the pricing of thrift stocks, and all other interest sensitive
stocks. As the economy continues to lose momentum, the fear of inflation can and
has to a degree been replaced by economic uncertainty. The Federal Reserve, in
its resolve to curb inflation, has increased rates in the past, but has more
recently relented to vagaries of the economy and decreased rates in an attempt
to stimulate what is currently perceived as a fragile and irresolute economy
(political rhetoric aside). Recent gains in thrift stocks could reverse if there
were an abatement of the merger and consolidation activity, or if rates rose
sharply.
What is likely to happen in the short to intermediate term is that rates
will float around current levels and trend upward. The yield curve will continue
to normalize. A slowly increasing yield curve will do little for the financial
services industry in general and thrifts specifically. But
4
<PAGE>
FERGUSON & CO., LLP SECTION IV
- ------------------- ----------
the normalization of the yield curve will mitigate to some degree its impact on
earnings, by allowing money managers to play the spread. Thrift net interest
margins will narrow if the cost of funds start to rise more quickly. With
portfolios replete with adjustable rate loans and MB's, a quickly rising rate
enviornment can cause the cost of funds to rise faster than the adjustable
assets can accommodate and thusly, spreads narrow.
As clearly illustrated, the SNL Thrift Index has performed well over the
last five years. It moved in tandem with all interest sensitive stocks and
reflected the weakness in the market as investors began to consider the
importance of increases in rates and their impact on the net interest margins of
thrifts. The clear implication is that eventually rising interest rates will
have a negative impact on earnings.
Figure IV.2 graphically displays the rate environment since March 15, 1996.
In March and most of April 1996, the yield curve was flat, with only a 1.45
basis point ("BP") difference between the federal funds rate and the 30 year
treasury at March 15, 1996. Since that time, the yield curve has developed more
slope with a 200 BP spread between the federal funds rate and the 30 year
treasury rate at September 20, 1996. Mortgage rates follow closely the long term
government obligations, giving asset managers more opportunity to maintain their
spreads.
Increased cost of funds will serve to narrow the net interest margins of
thrifts. A thrift's ability to maintain net interest margins through business
cycles is important to investors, unless thrifts can offset the decline in net
interest income by other sources of revenue or reductions in noninterest
expense. The former is difficult and the latter is unlikely.
Investors Federal, with its excellent interest rate risk management,
combined with its equity position after conversion will be less vulnerable to
rising rates than most.
Table IV.3 which has information on recent conversions since February 29,
1996, shows that recent price appreciation has not been as robust as it was in
past periods. Table IV.3 provides information on 40 conversions completed since
February 29, 1996. The average change in price since conversion is a gain of
23.0% and the median change is a gain of 21.25%. All thrifts within that group
have increased in value with a range of a low of 5.0% to a high of 51.25%. The
average increase in value at one day, one week, and one month after conversion
has been 10.29%, 9.92%, and 9.25%, respectively. The median increase in value at
one day, one week, and one month after conversion has been 9.7%, 8.1%, and
5.63%, respectively.
Because of the lack of complete earnings information on recent conversions,
a meaningful comparison of the price earnings ratios is difficult to make.
However, there is sufficient information to review the price-to-book ratio. The
average price-to-book ratio, as of September 20, 1996, is 86.4% and the median
is 85.96%. That compares to the offering price to pro forma book, where the
average was 68.9% and the median was 69.5%.
We believe a DOWNWARD ADJUSTMENT is required for the new issue discount.
-------------------
5
<PAGE>
FERGUSON & CO., LLP SECTION IV
- ------------------- ----------
ADJUSTMENTS CONCLUSION
<TABLE>
<CAPTION>
ADJUSTMENTS SUMMARY
- ---------------------------------------------------------------------------
NO CHANGE UPWARD DOWN
<S> <C> <C> <C>
Financial Aspects X
Market Area X
Management X
Dividends X
Liquidity X
Thrift Equity Market Conditions X
- ---------------------------------------------------------------------------
</TABLE>
VALUATION APPROACH
Typically, investors rely on the price/earnings ratio as the most
appropriate indicator of value. We consider price/earnings to be one of the
important pricing methods in valuing a thrift stock. Price/book is a well
recognized yardstick for measuring the value of financial institution stocks in
general. Another method of viewing thrift values is price/assets, which is more
meaningful in situations where the subject is thinly capitalized. Given the
healthy condition of the thrift industry today, more emphasis is placed on
price/earnings and price/book. Generally, price/earnings and price/book should
be considered in tandem.
Table III.3 presents Investors Federal's pro forma ratios and compares them
to the ratios of its comparative group and the publicly held thrift industry as
a whole. Investors Federal's earnings for the 12 months ended June 30, 1996,
were approximately $302,000, with net adjustments of $66,000 ($41,000 after tax)
required to determine appraisal earnings of $343,000. Management has indicated
an intention, through its diversification of deposit and loan products, to
exhibit the flexibility in operations needed to serve both the public and the
institution. The Bank is well positioned to manage interest rate variations. The
Bank projects moderate growth.
The comparative group traded at an average of 15.87 times earnings at
September 20, 1996, and at 87.18% of book value. The comparative group traded at
a median of 14.61 times earnings and a median of 85.94% of book value. At the
midpoint of the valuation range, Investors Federal is priced at 10.55 times
earnings and 65.71% of book value. At the maximum end of the range, Investors
Federal is priced at 11.74 times earnings and 69.54% of book value. At the
supermaximum, Investors Federal is priced at 13.00 times earnings and 73.25% of
book value.
The midpoint valuation of $4,500,000 represents a discount of 24.63% from
the average and a discount of 23.54% from the median of the comparative group on
a price/book basis. The price/earnings ratio for Investors Federal at the
midpoint represents a discount of 33.52% from the comparative group's mean and
27.79% from the median price/earnings ratio.
The maximum valuation of $5,175,000 represents a discount of 20.23% from
the average and 19.08% from the median of the comparative group on a price/book
basis. The price/earnings ratio for Investors Federal at the maximum represents
a discount of 26.02% from the average and 19.64% from the median of the
comparative group.
6
<PAGE>
As shown in Table IV.3, conversions closing since February 29, 1996, have
closed at an average price to book ratio of 68.90% and median of 69.5%.
Investors Federal's pro forma price to book ratio is 65.71% at the midpoint,
69.54% at the maximum, and 73.25% at the supermaximum of the range. At the
midpoint, Investors Federal is 4.63% below the average and 5.45% below the
median. At the maximum of the range, Investors Federal is 0.92% above the
average and 0.06% above the median. At the supermaximum of the range, Investors
Federal's pro forma price to book ratio is 6.31% above the average and 5.40%
above the median.
VALUATION CONCLUSION
- --------------------
We believe that as of September 20, 1996, the estimated pro forma market
value of Investors Federal was $4,500,000. The resulting valuation range was
$3,825,000 at the minimum to $5,175,000 at the maximum, based on a range of 15%
below and 15% above the midpoint valuation. The supermaximum is $5,951,000,
based on 1.15 times the maximum. Pro forma comparisons with the comparative
group are presented in Table III.3 based on calculations shown in Exhibit VII.
7
<PAGE>
FERGUSON & CO; LLP Section IV
- ------------------ ----------
Table IV.2
Whole-Bank and Whole Thrift Acquistions in Missouri, Announced Since Jan.1,1996
<TABLE>
<CAPTION>
Buyer Seller
Bank/ Bank/ Total Assets Total Assets
Buyer ST Thrift Seller ST Thrift ($000) (000)
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Mark Twain Bancshrs MO Bank First City Bncshrs MO Bank 2,900,844 89,143
Mercantile Bancorp MO Bank First Fnc'l Corp MO Bank 17,902,326 81,228
Mark Twain Bancshrs MO Bank Northland Bancshares MO Bank 3,047,980 71,725
Roosevelt Financial MO Thrift Community Charter Cp MO Bank 9,013,061 64,296
Roosevelt Financial MO Thrift Mutual Bancompany MO Thrift 9,013,061 54,913
Roosevelt Financial MO Thrift Sentinel Financial MO Thrift 9,013,061 151,578
Union Planters Corp TN Bank Financial Bancshares MO Bank 11,368,682 325,403
Maximum 325,403
Minimum 54,913
Average 119,755
Median 81,228
<CAPTION>
Announced
------------------------------------------------------
Completed/ Deal Deal Deal Pr/ Deal Pr/
Announce Terminated Value Pg/Bk Tg Bk LTM
Buyer Date Status Date ($M) (%) (%) EPS (x)
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Mark Twain Bancshrs 07/18/96 Pending NA NA NA NA NA
Mercantile Bancorp 07/10/96 Pending NA 15.00 150.36 150.36 14.94
Mark Twain Bancshrs 05/08/96 Pending NA 12.70 210.00 210.61 NA
Roosevelt Financial 04/16/96 Pending NA 14.20 250.82 255.94 23.43
Roosevelt Financial 04/09/96 Pending NA 7.70 123.46 123.46 53.49
Roosevelt Financial 03/22/96 Pending NA 13.50 117.17 117.17 19.65
Union Planters Corp 06/27/96 Pending NA 36.20 149.79 156.65 19.38
Maximum 36.20 250.82 255.94 53.49
Minimum 7.70 117.17 117.17 14.94
Average 16.55 166.93 169.03 26.18
Median 13.85 150.08 153.51 19.65
</TABLE>
Notes: 1.) Total Assests are as of the latest financial date at the time of
announcement.
2.) The list includes private sector deals in which the entire target
institutions were acquired.
3.) The purchase of Boatman's by Nations Bank was eliminated. The
size of the seller and purchaser distorts the relevance of the
numbers in this comparison.
8
Source: SNL Securities L.P.
<PAGE>
FERGUSON & CO., LLP SECTION IV
- ------------------- ----------
TABLE IV.3 - RECENT CONVERSIONS (SINCE FEBRUARY 29, 1996)
<TABLE>
<CAPTION>
Price/
Conversion Gross Offering Pro-Forma
Assets Proceeds Price Book Value
Ticker Short Name State IPO Date ($000) ($000) ($) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
AMFC AMB Financial Corp. IN 04/01/96 68,851 11,241.00 10.00 70.80
ANA Acadiana Bancshares, Inc. LA 07/16/96 225,248 32,775.00 12.00 69.90
CATB Catskill Financial Corp. NY 04/18/96 230,102 56,869.00 10.00 71.90
CBK Citizens First Financial Corp. IL 05/01/96 227,872 28,175.00 10.00 73.10
CFTP Community Federal Bancorp. MS 03/26/96 162,042 46,288.00 10.00 71.40
CMSB Commonwealth Bancorp, Inc. PA 06/17/96 NA NA NA NA
CNSB CNS Bancorp, Inc. MO 06/12/96 85,390 16,531.00 10.00 69.30
CRZY Crazy Woman Creek Bancorp WY 03/29/96 37,510 10,580.00 10.00 69.70
DIME Dime Community Bancorp, Inc. NY 06/26/96 665,187 145,475.00 10.00 69.10
EGLB Eagle BancGroup, Inc. IL 07/01/96 150,974 13,027.00 10.00 57.10
FBER 1st Bergen Bancorp NJ 04/01/96 223,167 31,740.00 10.00 74.80
FCB Falmouth Co-Operative Bank MA 03/28/96 73,735 14,548.00 10.00 68.70
FFBH First Federal Bancshares of AR AR 05/03/96 454,479 51,538.00 10.00 63.40
FFDH FFD Financial Corp. OH 04/03/96 58,955 14,548.00 10.00 69.90
FFFD North Central Bancshares, Inc. IA 03/21/96 NA NA NA NA
FFOH Fidelity Financial of Ohio OH 03/04/96 NA NA NA NA
FLKY First Lancaster Bancshares KY 07/01/96 35,361 9,588.00 10.00 72.50
GAF GA Financial, Inc. PA 03/26/96 476,259 89,000.00 10.00 70.50
GSFC Green Street Financial Corp. NC 04/04/96 151,028 42,981.00 10.00 71.00
HWEN Home Financial Bancorp IN 07/02/96 33,462 5,059.00 10.00 66.20
JXVL Jacksville Bancorp, Inc. TX 04/01/96 NA NA 10.00 NA
LONF London Financial Corporation OH 04/01/96 34,152 5,290.00 10.00 68.50
LXMO Lexington B&L Fianacial Corp. MO 06/06/96 49,981 12,650.00 10.00 69.10
MBSP Mitchell Bancorp, Inc. NC 07/12/96 28,222 9,799.00 10.00 68.10
MECH Mechanics Savings Bank CT 06/26/96 662,482 52,900.00 10.00 72.00
OCFC Ocean Financial Corp. NJ 07/03/96 1,036,445 167,762.00 20.00 69.20
PFED Park Bancorp, Inc. IL 08/12/96 158,939 27,014.00 10.00 64.90
PFFB PFF Bancorp, Inc. CA 03/29/96 1,899,412 198,375.00 10.00 69.00
PFFC Peoples Financial Corp. OH 09/13/96 78,078 14,910.00 10.00 62.70
PHFC Pittsburg Home Financial Corp PA 04/01/96 157,570 21,821.00 10.00 72.80
PRBC Prestige Bancorp, Inc. PA 06/27/96 91,841 9,630.00 10.00 61.90
PROV Provident Financial Holdings CA 06/28/96 570,691 51,252.00 10.00 60.90
PWBK Pennwood Savings Bank PA 07/15/96 41,592 6,101.00 10.00 65.80
RELI Rellance Bancshares, Inc. WI 04/19/96 32,260 20,499.00 8.00 72.50
SSB Scotland Bancorp, Inc NC 04/01/96 57,718 18,400.00 10.00 74.80
SSM Stone Street Bancorp, Inc. NC 04/01/96 84,996 27,376.00 15.00 74.90
WHGB WHG Bancshares Corp. MD 04/01/96 85,027 16,201.00 10.00 71.10
WWFC Westwood Financial Corporation NJ 06/07/96 NA NA NA NA
WYNE Wayne Bancorp, Inc. NJ 06/27/96 207,997 22,314.00 10.00 60.90
YFCB Yonkers Financial Corporation NY 04/18/96 208,283 35,708.00 10.00 74.90
Maximum 1,899,412 198,375.00 20.00 74.90
Minimum 28,222 5,059.00 8.00 57.10
Average 258,131 39,021.26 10.43 68.90
Median 151,001 22,067.50 10.00 69.50
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 9
<PAGE>
FERGUSON & CO., LLP SECTION IV
- ------------------- ----------
TABLE IV.3 - RECENT CONVERSIONS (SINCE FEBRUARY 29, 1996)
<TABLE>
<CAPTION>
Price/ Price/ Current Current Current Price One Price One Price One
Pro-Forma Adjusted Stock Price/ Price/Tang Day After Week After Month After
Earnings Assets Price Book Value Book Value Conversion Conversion Conversion
Ticker (x) (%) ($) (%) (%) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AMFC 18.20 14.00 11.125 77.15 77.15 10.500 10.500 10.500
ANA NA 12.70 13.625 NA NA 12.000 11,750 12.375
CATB 19.00 19.80 12.250 79.44 79.44 10.375 10.625 10.375
CBK 15.30 11.00 11.500 79.70 79.70 10.500 10.000 10.125
CFTP 14.00 22.20 13.625 94.82 94.82 12.625 12.875 12.625
CMSB NA NA 11.750 92.74 121.76 10.500 10.750 10.000
CNSB 26.10 16.20 12.750 87.09 87.09 11.000 11.625 11.500
CRZY 16.40 22.00 11.375 77.86 NA NA 10.750 10.500
DIME 15.70 17.90 13.625 93.00 107.20 11.687 12.000 11.875
EGLB 58.70 7.90 12.250 NA NA 11.250 11.250 11.125
FBER 21.70 12.50 11.188 82.63 82.63 10.000 9.500 9.625
FCB 19.00 16.50 12.500 83.61 83.61 10.750 11.250 10.750
FFBH 9.80 10.20 14.750 91.11 91.11 13.000 13.250 13.690
FFDF 17.40 19.80 11.125 NA NA 10.500 10.500 10.310
FFFD NA NA 12.375 89.03 89.03 10.875 10.690 10.440
FFOH NA NA 10.000 79.94 79.94 10.500 10.000 10.125
FLKY 19.00 21.30 14.000 NA NA 13.500 13.375 13.750
GAF 13.80 15.70 13.125 90.96 90.96 11.375 11.500 11.000
GSFC 14.80 22.20 15.125 103.60 103.60 12.875 11.250 12.310
HWEN 12.40 13.10 12.250 NA NA 10.250 9.875 10.500
JXVL NA NA 12.500 93.49 93.49 11.108 9.625 9.875
LONF 22.40 13.40 11.125 74.07 74.07 10.812 10.625 10.125
LXMO 14.40 20.20 10.500 70.90 70.90 9.500 9.750 10.125
MBSP 94.50 25.80 12.750 NA NA NA 10.625 11.000
MECH NA 7.40 13.625 105.62 105.62 11.500 11.500 11.250
OCFC 13.80 13.90 22.875 NA NA 21.250 20.125 21.000
PFED 17.80 14.50 10.875 NA NA 10.250 10.438 10.500
PFFB 26.60 9.50 12.688 86.67 87.68 11.375 11.625 11.625
PFFC 26.70 16.00 11.500 NA NA 10.875 11.500 NA
PHFC 17.50 12.20 11.875 85.25 85.25 11.000 11.000 10.625
PRBC 24.60 9.50 11.750 74.09 74.09 10.375 10.250 9.750
PROV 18.20 8.20 12.125 NA NA 10.970 10.810 10.125
PWBK 13.30 12.80 11.000 NA NA 9.500 9.125 9.625
RELI 22.50 38.90 8.625 75.33 NA 8.375 8.250 7.940
SSB 16.20 24.20 13.250 98.66 98.66 12.250 12.500 11.750
SSM 19.70 24.20 17.875 85.12 85.12 17.500 18.000 17.750
WHGB 15.50 16.00 12.125 NA NA 11.125 11.060 11.250
WWFC NA NA 13.250 NA NA 10.750 10.375 10.625
WYNE 16.70 9.70 13.875 84.40 84.40 11.125 11.375 11.250
YFCB 16.10 14.60 12.000 87.40 87.40 9.750 10.125 9.940
Maximum 94.50 38.90 22.875 105.62 121.76 21.25 20.13 21.00
Minimum 9.80 7.40 8.625 70.90 70.90 8.38 8.25 7.94
Average 21.56 16.24 12.702 86.40 88.61 11.43 11.35 11.29
Median 17.45 15.15 12.250 85.96 87.09 10.97 10.81 10.63
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 10
<PAGE>
FERGUSON & CO., LLP SECTION IV
- ------------------- ----------
TABLE IV.3- RECENT CONVERSIONS (SINCE FEBRUARY 29, 1996)
<TABLE>
<CAPTION>
% Change % Change % Change % Change
Day After Week After Month After Since
Conversion Conversion Conversion Conversion
Ticker (%) (%) (%) (%)
<S> <C> <C> <C> <C>
AMFC 5.00 5.00 5.00 11.25
ANA - (2.08) 3.13 13.54
CATB 3.75 6.25 3.75 22.50
CBK 5.00 - 1.25 15.00
CFTP 26.00 28.75 26.25 36.00
CMSB N/M N/M N/M N/M
CNSB 10.00 16.25 15.00 27.50
CRSY N/M 7.50 5.00 13.75
DIME 16.87 20.00 18.75 36.25
EGLB 12.50 12.50 11.25 22.50
FBER - (5.00) (3.75) 11.88
FCB 7.50 12.50 7.50 25.00
FFBH 30.00 32.50 36.90 47.50
FFDH 5.00 5.00 3.10 11.25
FFFD N/M N/M N/M N/M
FFOH N/M N/M N/M N/M
FLKY 35.00 33.75 37.50 40.00
GAF 13.75 15.00 10.00 31.25
GSFC 28.75 22.50 23.10 51.25
HWEN 2.50 (1.25) 5.00 22.50
JXVL 11.08 (3.75) (1.25) 25.00
LONF 8.12 6.25 1.25 11.25
LXMO (5.00) (2.50) 1.25 5.00
MBSP N/M 6.25 10.00 27.50
MECH 15.00 15.00 12.50 36.25
OCFC 6.25 0.63 5.00 14.38
PFED 2.50 4.38 5.00 8.75
PFFB 13.75 16.25 16.25 26.88
PFFC 8.75 15.00 N/M 15.00
PHFC 10.00 10.00 6.25 18.75
PRBC 3.75 2.50 (2.50) 17.50
PROV 9.70 8.10 1.25 21.25
PWBK (5.00) (8.75) (3.75) 10.00
RELI 4.69 3.13 (0.75) 7.81
SSB 22.50 25.00 17.50 32.50
SSM 16.67 20.00 18.33 19.17
WHGB 11.25 10.60 12.50 21.25
WWFC N/M N/M N/M N/M
WYNE 11.25 13.75 12.50 38.75
YFCB (2.50) 1.25 (0.60) 20.00
Maximum 35.00 33.75 37.50 51.25
Minimum (5.00) (8.75) (3.75) 5.00
Average 10.29 9.92 9.25 23.00
Median 9.70 8.10 5.63 21.25
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 11
<PAGE>
FFERGUSON & CO.,LLP TABLE IV 4-COMPARATIVE SELECTION SECTION IV
- ------------------- ----------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Comparables
-----------
MIFC Mid-Iowa Financial Corp. Newton IA MW SAIF NASDAQ 10/14/92 6.00
PTRS Potters Financial Corp. East Liverpool OH MW SAIF NASDAQ 12/31/93 15.50
FFSL First Independence Corp. Independence KS MW SAIF NASDAQ 10/08/93 18.50
BDJI First Federal Bancorporation Bemidji MN MW SAIF NASDAQ 04/04/95 14.00
CSBF CSB Financial Group, Inc. Centralia IL MW SAIF NASDAQ 10/09/95 9.13
HFSA Hardin Bancorp, Inc. Hardin MO MW SAIF NASDAQ 09/29/95 11.25
SFFC StateFed Financial Corporation Des Moines IA MW SAIF NASDAQ 01/05/94 16.00
HHFC Harvest Home Financial Corp. Cheviot OH MW SAIF NASDAQ 10/10/94 13.75
CZF CitiSave Financial Corp Baton Rouge LA SW SAIF AMSE 07/14/95 14.00
GPSB GFS Bancorp, Inc. Grinnell IA MW SAIF NASDAQ 01/06/94 21.00
CIBI Community Investors Bancorp Bucyrus OH MW SAIF NASDAQ 02/07/95 16.00
HBBI Home Building Bancorp Washington IN MW SAIF NASDAQ 02/08/95 18.25
Maximum 18.50
Minimum 6.00
Average 12.63
Median 14.00
Rejects and Reasons
-------------------
PCBC Perry County Financial Corp. Perryville MO MW SAIF NASDAQ 02/13/95 17.50
Loan to Deposit Ratio to low to compare and capital is to high.
NSLB NS&L Bancorp, Inc. Neosho MO MW SAIF NASDAQ 08/08/95 12.00
Capital Accounts to high this one has no borrwoings.
ASBP ASB Financial Corp. Portsmouth OH MW SAIF NASDAQ 05/11/95 14.25
Capital to high, NPA's to high and loan to deposit ratio is also to high.
ATSB AmTrust Capital Corp. Peru IN MW SAIF NASDAQ 03/28/95 9.00
Current Quarter PE ratio is unrealistic ant LTM is not reported
HFFB Harrodsburg First Fin Bancorp Harrodsburg KY MW SAIF NASDAQ 10/04/95 16.50
Capital Ratios are to high.
HFFB Harrodsburg First Fin Bancorp Harrodsburg KY MW SAIF NASDAQ 10/04/95 16.50
Equity to Assets distorts the comparison.
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 12
<PAGE>
<TABLE>
<CAPTION>
FFERGUSON & CO.,LLP TABLE IV 4-COMPARATIVE SELECTION SECTION IV
- ------------------- ----------
Current Price/ Price/ Current Current Current Total Equity
Market LTM Core Price/ Price/Tang Price/ Dividend Assets Assets
Value Core EPS EPS Book Value Book Value Assets Yield ($000) (%)
Ticker (&M) (x) (x) (%) (%) (%) (%) Mst RctQ Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MIFC 10.10 10.17 7.50 93.46 93.60 8.76 1.333 115,260 9.38
PTRS 7.85 14.35 19.38 74.06 74.06 6.84 1.548 114,714 9.24
FFSL 10.79 11.71 11.01 82.70 82.70 10.20 2.162 105,771 12.34
BDJI 10.90 15.91 12.96 78.30 78.30 10.38 0.000 104,969 13.26
CSBF 9.44 NA 20.74 73.59 73.59 22.74 0.000 41,524 30.91
HFSA 10.83 NA 14.06 76.27 76.27 13.10 3.556 86,949 17.17
SFFC 13.02 14.41 13.33 87.19 87.19 16.97 2.500 76,705 19.46
HHFC 12.85 21.83 21.48 100.66 100.66 16.83 2.909 76,399 16.71
CZF 13.51 NA 16.67 98.18 98.25 17.74 2.143 76,128 16.73
GPSB 10.70 12.57 10.10 107.58 107.58 12.85 1.905 83,305 11.94
CIBI 11.22 13.45 13.79 94.51 94.51 13.08 2.500 85,785 13.84
HBBI 6.05 33.18 19.84 90.66 90.66 14.03 1.644 43,135 13.94
Maximum 10.90 15.91 20.74 93.46 93.60 22.74 2.16 115,260.00 30.91
Minimum 7.85 10.71 7.50 73.59 73.59 6.84 - 41,524.00 9.24
Average 9.82 13.04 14.32 80.42 80.45 11.78 1.01 96,447.60 15.03
Median 10.10 13.03 12.96 78.30 78.30 10.20 1.33 105,771.00 12.34
PCBC 14.99 18.62 17.50 99.32 99.32 18.64 1.714 80,394 18.77
NSLB 9.11 20.34 17.65 71.81 71.81 16.74 4.167 57,288 23.31
ASBP 24.42 20.65 18.75 89.45 89.45 21.62 2.807 112,988 22.70
ATSB 5.10 100.00 22.50 67.57 68.29 6.98 0.000 73,072 10.34
HFFB 35.62 NA 21.71 106.66 106.66 32.51 2.424 109,578 28.13
HFFB 35.62 NA 21.71 106.66 106.66 32.51 2.424 109,578 28.13
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 13
<PAGE>
FFERGUSON & CO.,LLP TABLE IV.4-COMPARATIVE SELECTION SECTION IV
- ------------------- ----------
<TABLE>
<CAPTION>
Tangible Return on Return on ROACE ROACE
Equity Core Core Avg Assets Avg Assets Before Before
Tang Assets EPS EPS Before Extra Before Extra Extra Extra Merger Current
(%) ($) ($) (%) (%) (%) (%) Target? Pricing
Ticker Mst RctQ LTM Mst RctQ LTM Mst RctQ LTM Mst RctQ (Y/N) Date
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MIFC 9.36 0.59 0.20 0.93 1.28 10.00 13.87 N 08/30/96
PTRS 9.24 1.08 0.20 0.51 0.36 5.27 3.77 N 08/30/96
FFSL 12.34 1.58 0.42 1.10 0.93 8.51 7.50 N 08/30/96
BDJI 13.26 0.88 0.27 0.70 0.79 4.74 5.80 N 08/30/96
CSBF 30.91 NA 0.11 0.89 1.02 NA 3.29 N 08/30/96
HFSA 17.17 NA 0.20 0.76 0.92 4.25 5.06 N 08/30/96
SFFC 19.46 1.11 0.30 1.19 1.28 5.99 6.46 N 08/30/96
HHFC 16.71 0.63 0.16 0.75 0.74 4.14 4.33 N 08/30/96
CZF 16.72 NA 0.21 1.21 1.05 6.68 5.70 N 08/30/96
GPSB 11.94 1.67 0.52 1.16 1.33 9.19 11.14 N 08/30/96
CIBI 13.84 1.19 0.29 1.01 0.93 6.98 6.50 N 08/30/96
HBBI 13.94 0.55 0.23 0.41 0.77 2.86 5.46 N 08/30/96
Maximum 30.91 1.58 0.42 1.10 1.28 10.00 13.87
Minimum 9.24 0.59 0.11 0.51 0.36 4.74 3.29
Average 15.02 1.03 0.24 0.83 0.88 7.13 6.85
Median 12.34 0.98 0.20 0.89 0.93 6.89 5.80
PCBC 18.77 0.94 0.25 0.88 0.55 4.36 2.83 N 08/30/96
NSLB 23.31 0.59 0.17 0.97 0.97 4.08 4.14 N 08/30/96
ASBP 22.70 0.69 0.19 1.01 1.09 4.30 4.76 N 08/30/96
ATSB 10.24 0.09 0.10 0.31 0.46 2.75 4.46 N 08/30/96
HFFB 28.13 NA 0.19 1.17 1.38 4.52 4.87 N 08/30/96
HFFB 28.13 NA 0.19 1.17 1.38 4.52 4.87 N 08/30/96
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 14
<PAGE>
FFERGUSON & CO.,LLP TABLE IV. 4-COMPARATIVE SELECTION SECTION IV
- ------------------- ----------
<TABLE>
<CAPTION>
Loans
NPAs/ Loans/ Loans/ Deposits/ Borrowings/ Serviced
Assets Deposits Assets Assets Assets For Others
(%) (%) (%) (%) (%) ($000)
Ticker Mst RctQ Mst RctQ Mst RctQ Mst RctQ Mst RctQ Mst RctQ
<S> <C> <C> <C> <C> <C> <C>
MIFC 0.05 77.67 53.04 68.28 20.82 2,960
PTRS 2.33 53.08 46.55 87.69 2.08 643
FFSL 0.29 95.09 61.89 65.09 21.46 2,603
BDJI 0.21 62.11 47.26 76.08 9.39 204
CSBF NA 80.78 55.38 68.55 0.00 NA
HFSA 0.15 71.59 54.42 76.01 5.75 3,759
SFFC NA 137.65 82.07 59.62 19.56 NA
HHFC 0.19 72.21 55.04 76.21 6.54 NA
CZF 0.23 70.95 57.55 81.12 0.00 1,362
GPSB 1.15 136.32 86.93 63.77 23.19 8,193
CIBI 0.73 89.35 74.52 83.40 2.28 746
HBBI 0.27 86.41 65.53 75.84 9.95 0
Maximum 2.23 95.09 61.89 87.69 21.46 2,960.00
Minimum 0.05 53.08 46.55 65.09 - 204.00
Average 0.72 73.75 52.82 73.14 10.75 1,602.50
Median 0.25 77.67 53.04 68.55 9.39 1,623,00
PCBC NA 17.77 13.82 77.77 3.11 NA
NSLB 0.00 69.21 51.94 75.05 0.00 NA
ASBP 1.61 82.36 60.79 73.81 2.14 0
ATSB 1.31 99.02 68.85 69.53 19.16 26,664
HFFB 0.00 97.35 69.16 71.04 0.00 0
HFFB 0.00 97.35 69.16 71.04 0.00 0
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 15
<PAGE>
FERGUSON & CO, LLP SECTION IV
- ------------------ ----------
TABLE IV.5
COMPARISON OF PRICING RATIOS
<TABLE>
<CAPTION>
Group Percent Premium
Investors Compared to (Discount) Versus
-------------------- --------------------
Federal Average Median Average Median
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
COMPARISON OF PE RATIO AT
MIDPOINT TO:
- ---------------------------
Comparative group 10.55 15.87 14.61 (33.52) (27.79)
Missouri Thrifts 10.55 15.72 15.98 (32.89) (33.98)
Midwest Region thrifts 10.55 15.29 14.53 (31.00) (27.39)
All public thrifts 10.55 17.16 14.67 (38.52) (28.08)
COMPARISON OF PE RATIO AT
MAXIMUM TO:
- ---------------------------
Comparative group 11.74 15.87 14.61 (26.02) (19.64)
Missouri Thrifts 11.74 15.72 15.98 (25.32) (26.53)
Midwest Region thrifts 11.74 15.29 14.53 (23.22) (19.20)
All public thrifts 11.74 17.16 14.67 (31.59) (19.97)
COMPARISON OF PE RATIO AT
SUPERMAXIMUM TO:
- ---------------------------
Comparative group 13.00 15.87 14.61 (18.08) (11.02)
Missouri Thrifts 13.00 15.72 15.98 (17.30) (18.65)
Midwest Region thrifts 13.00 15.29 14.53 (14.98) (10.53)
All public thrifts 13.00 17.16 14.67 (24.24) (11.38)
COMPARISON OF PB RATIO AT
MIDPOINT TO:
- ---------------------------
Comparative group 65.71 87.18 85.94 (24.63) (23.54)
Missouri Thrifts 65.71 112.92 102.11 (41.81) (35.65)
Midwest Region thrifts 65.71 113.20 100.36 (41.95) (34.53)
All public thrifts 65.71 114.00 106.54 (42.36) (38.32)
COMPARISON OF PB RATIO AT
MAXIMUM TO:
- ---------------------------
Comparative group 69.54 87.18 85.94 (20.23) (19.08)
Missouri Thrifts 69.54 112.92 102.11 (38.42) (31.90)
Midwest Region thrifts 69.54 113.20 100.36 (38.57) (30.71)
All public thrifts 69.54 114.00 106.54 (39.00) (34.73)
COMPARISON OF PB RATIO AT
SUPERMAXIMUM TO:
- ---------------------------
Comparative group 73.25 87.18 85.94 (15.98) (14.77)
Missouri Thrifts 73.25 112.92 102.11 (35.13) (28.26)
Midwest Region thrifts 73.25 113.20 100.36 (35.29) (27.01)
All public thrifts 73.25 114.00 106.54 (35.74) (31.25)
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 16
<PAGE>
FERGUSON & CO, LLP SECTION IV
- ------------------ ----------
SNL Index
---------
Date Index
- --------------------
1/31/94 258,47 [GRAPH APPEARS HERE]
2/28/94 249,53
3/31/94 241.57
4/29/94 248.31
5/31/94 263.34
6/30/94 269.58
7/29/94 276.69
8/31/94 287.18
9/30/94 279.69
10/31/94 236.12
11/30/94 245.84
12/30/94 244.73
1/31/95 256.10
2/28/95 277.00
3/31/95 278.40
4/28/95 295.44
5/31/95 307.60
6/23/95 313.95
7/31/95 328.20
8/31/95 355.50
9/29/95 362.29
10/31/95 354.05 Percent Change Since
11/30/95 370.17 ---------------------------------------------------------
12/29/95 376.51 SNL Prev.
1/31/95 370.69 Date Index Date 12/31/94 4/30/96
2/29/96 373.64 12/34/94 244.70
3/29/96 382.13 3/31/95 278.40 13.77% 13.77%
4/30/96 377.24 6/30/95 313.50 12.61% 28.12%
5/31/96 382.99 9/30/95 362.30 15.57% 48.06%
6/28/96 387.18 10/31/95 354.10 -2.26% 44.71%
7/30/96 388.38 11/30/95 370.20 4.55% 51.29%
8/30/96 408.34 12/31/95 376.50 1.70% 53.86%
9/13/96 416.01 1/12/96 372.40 -1.09% 52.19%
9/30/96 429.28 1/31/96 370.70 -0.46% 51.49%
2/29/96 373.60 0.78% 52.68%
3/29/96 382.10 2.28% 56.15%
4/30/96 377.20 -1.28% 54.15%
5/31/96 382.99 1.53% 56.51% 1.53%
6/28/96 387.18 1.09% 58.23% 2.65%
7/30/96 371.62 -4.02% 51.87% -1.48%
8/30/96 408.34 9.88% 66.87% 8.26%
9/13/96 416.01 1.88% 70.01% 10.29%
9/30/96 429.28 3.19% 75.43% 13.81%
---------------------------------------------------------
FIGURE IV.I SNL INDEX
Source: SNL Securities INC. 17
<PAGE>
FERGUSON & CO., LLP SECTION IV
- ------------------- ----------
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
1 Year 5 Year 10 Year 30 Year
Fed Fds(*) T-bill Treas. Treas. Treas.
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3/15/96 5.24 5.39 6.02 6.35 6.69
3/22/96 5.36 5.43 6.08 6.36 6.72
3/29/96 5.22 5.41 6.08 6.32 6.70
4/5/96 5.30 5.41 6.06 6.26 6.68
4/12/96 5.08 5.61 6.42 6.60 6.96
4/19/96 5.24 5.50 6.32 6.52 6.88
4/26/96 5.24 5.50 6.31 6.53 6.88
5/3/96 5.30 5.60 6.37 6.64 6.96
5/17/96 5.26 5.57 6.42 6.68 6.93
5/31/96 5.19 5.70 6.55 6.77 7.02
6/14/96 5.24 5.84 6.77 6.99 7.23
6/28/96 5.21 5.79 6.63 6.86 7.08
7/15/96 5.26 5.93 6.77 7.00 7.20
7/26/96 5.25 5.53 6.62 6.85 7.05
8/16/96 5.10 5.59 6.30 6.55 6.79
8/23/96 5.18 5.63 6.50 6.63 6.87
8/30/96 5.21 5.80 6.60 6.84 7.07
9/6/96 5.39 5.94 6.73 6.95 7.17
9/13/96 5.16 5.90 6.69 6.93 7.16
9/27/96 5.34 5.75 6.53 6.77 6.96
</TABLE>
(*) Seven-day average for week ending two days earlier than date shown.
-----------------------------------------------------------------------
[Graph of Interest Rates appears here]
Figure IV.2 - Rate Environment
Source: Federal Reserve Bank
of St. Louis, Missouri 18
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT I
<PAGE>
FERGUSON & CO., LLP QUALIFICATIONS
Ferguson & Co. (F&C) is a financial, economic, and regulatory consulting
firm providing services to financial institutions. It is located in Irving,
Texas. Its services to financial institutions include:
. Mergers and acquisition services
. Business plans
. Fairness opinions and conversion appraisals
. Litigation support
. Operational and efficiency consulting
. Human resources evaluation and management
F&C developed several financial institution databases of information
derived from periodic financial reports filed with regulatory authorities by
financial institutions. For example, F&C developed TAFS and BankSource. TAFS
includes thrifts filing TFR's with the OTS and BankSource includes banks and
savings banks filing call reports with the FDIC. Both databases of information
include information from the periodic reports plus numerous calculations derived
from F&C's analysis. In addition, both databases are interactive, permitting the
user to conduct merger analysis, do peer group comparisons, and a number of
other items. F&C recently sold its electronic publishing segment to Sheshunoff
Information Services Inc., Austin, Texas.
Brief biographical information is presented below on F&C's principals:
WILLIAM C. FERGUSON
- -------------------
Mr. Ferguson has approximately 30 years of experience providing various services
to financial institutions. He was a partner in a CPA firm prior to founding F&C
in 1984. Mr. Ferguson is a frequent speaker for financial institution seminars
and he has testified before Congressional Committees several times on his
analysis of the state of the thrift industry. Mr. Ferguson has a B.A. degree
from Austin Peay University and an M.S. degree from the University of Tennessee.
He is a CPA.
1
<PAGE>
CHARLES M. HEBERT
- -----------------
Mr. Hebert has over 30 years of experience providing services to and managing
financial institutions. He spent 7 years as a national bank examiner, 14 years
in bank management, 5 years in thrift management, and has spent the last 7 years
on the F&C consulting staff. Mr. Hebert holds a B.S. degree from Louisiana State
University.
ROBIN L. FUSSELL
- ----------------
Mr. Fussell has over 25 years of experience providing professional services to
and managing financial institutions. He worked on the audit staff of a "Big Six"
accounting firm for 12 years, served as CFO of a thrift for 3 years, and has
worked in financial institution consulting for the last 12 years. He is a co-
founder of F&C. He holds a B.S. degree from East Carolina University. He is a
CPA.
2
<PAGE>
EXHIBIT II
<PAGE>
FERGUSON & CO., LLP EXHIBIT IL.1 - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AADV Advantage Bancorp, Inc. Kenosha WI MW SAIF NASDAQ 03/23/92 32.500
ABCW Anchor BanCorp Wisconsin Madison WI MW SAIF NASDAQ 07/16/92 35.000
AFFFZ America First Financial Fund San Francisco CA WE SAIF NASDAQ NA 30.250
ALBK ALBANK Financial Corporation Albany NY MA SAIF NASDAQ 04/01/92 28.625
AMFB American Federal Bank, FSB Greenville SC SE SAIF NASDAQ 01/19/89 17.750
ANDB Andover Bancorp, Inc. Andover MA NE BIF NASDAQ 05/08/86 24.875
ASBI Ameriana Bancorp New Castle IN MW SAIF NASDAQ 03/02/87 13.500
ASBP ASB Financial Corp. Portsmouth OH MW SAIF NASDAQ 05/11/95 14.375
ASFC Astoria Financial Corporation Lake Success NY MA SAIF NASDAQ 11/18/93 27.625
AVND Avondale Financial Corp. Chicago IL MW SAIF NASDAQ 04/07/95 14.500
BANC BankAtlantic Bancorp, Inc. Fort Lauderdale FL SE SAIF NASDAQ 11/29/83 13.250
BDJI First Federal Bancorporation Bemidji MN MW SAIF NASDAQ 04/04/95 15.125
BFSB Bedford Bancshares, Inc. Bedford VA SE SAIF NASDAQ 08/22/94 17.000
BFSI BFS Bankorp, Inc. New York NY MA SAIF NASDAQ 05/12/88 54.500
BKC American Bank of Connecticut Waterbury CT NE BIF AMSE 12/01/81 26.125
BKCO Bankers Corp. Perth Amboy NJ MA BIF NASDAQ 03/16/90 18.063
BKCT Bancorp Connecticut, Inc. Southington CT NE BIF NASDAQ 07/03/86 22.875
BSBC Branford Savings Bank Branford CT NE BIF NASDAQ 11/04/86 3.375
BVFS Bay View Capital Corp. San Mateo CA WE SAIF NASDAQ 05/09/86 36.750
CAFI Camco Financial Corporation Cambridge OH MW SAIF NASDAQ NA 18.750
CAPS Capital Savings Bancorp, Inc. Jefferson City MO MW SAIF NASDAQ 12/29/93 20.500
CARV Carver Federal Savings Bank New York NY MA SAIF NASDAQ 10/25/94 7.750
CASH First Midwest Financial, Inc. Storm Lake IA MW SAIF NASDAQ 09/20/93 23.375
CBCI Calumet Bancorp, Inc. Dolton IL MW SAIF NASDAQ 02/20/92 28.125
CBCO CB Bancorp, Inc. Michigan City IN MW SAIF NASDAQ 12/28/92 20.250
CBIN Community Bank Shares New Albany IN MW SAIF NASDAQ 04/10/95 12.500
CBNH Community Bankshares, Inc. Concord NH NE BIF NASDAQ 05/08/86 19.375
CBSA Coastal Bancorp, Inc. Houston TX SW SAIF NASDAQ NA 19.625
CEBK Central Co-Operative Bank Somerville MA NE BIF NASDAQ 10/24/86 15.750
CENF CENFED Financial Corp. Pasadena CA WE SAIF NASDAQ 10/25/91 24.250
CFB Commercial Federal Corporation Omaha NE MW SAIF NYSE 12/31/84 41.500
CFCP Coastal Financial Corp. Myrtle Beach SC SE SAIF NASDAQ 09/26/90 20.750
CFFC Community Financial Corp. Staunton VA SE SAIF NASDAQ 03/30/88 21.500
CFHC California Financial Holding Stockton CA WE SAIF NASDAQ 04/01/83 22.750
CFSB CFSB Bancorp, Inc. Lansing MI MW SAIF NASDAQ 06/22/90 19.000
CFX CFX Corporation Keene NH NE BIF AMSE 02/12/87 15.125
CIBI Community Investors Bancorp Bucyrus OH MW SAIF NASDAQ 02/07/95 16.250
CMRN Cameron Financial Corp Cameron MO MW SAIF NASDAQ 04/03/95 14.750
CNIT CENIT Bancorp, Inc. Norfolk VA SE SAIF NASDAQ 08/06/92 38.750
CNSK Covenant Bank for Savings Haddonfield NJ MA BIF NASDAQ NA 13.500
COFD Collective Bancorp, Inc. Egg Harbor City NJ MA SAIF NASDAQ 02/07/84 27.375
COFI Charter One Financial Cleveland OH MW SAIF NASDAQ 01/22/88 37.125
CSA Coast Savings Financial Los Angeles CA WE SAIF NYSE 12/23/85 31.500
CTBK Center Banks Incorporated Skaneateles NY MA BIF NASDAQ 06/02/86 13.875
CTZN CitFed Bancorp, Inc. Dayton OH MW SAIF NASDAQ 01/23/92 38.000
CVAL Chester Valley Bancorp Inc. Downingtown PA MA SAIF NASDAQ 03/27/87 19.500
DIBK Dime Financial Corp. Wallingford CT NE BIF NASDAQ 07/09/86 16.500
DME Dime Bancorp, Inc. New York NY MA BIF NYSE 08/19/86 12.875
DNFC D & N Financial Corp. Hancock MI MW SAIF NASDAQ 02/13/85 13.938
DSBC DS Bancor, Inc. Derby CT NE BIF NASDAQ 12/11/85 37.125
DSL Downey Financial Corp. Newport Beach CA WE SAIF NYSE 01/01/71 24.375
EBCP Eastern Bancorp Dover NH NE SAIF NASDAQ 11/17/83 20.000
EBSI Eagle Bancshares Tucker GA SE SAIF NASDAQ 04/01/86 16.000
EFBI Enterprise Federal Bancorp Lockland OH MW SAIF NASDAQ 10/17/94 13.750
EGFC Eagle Financial Corp. Bristol CT NE SAIF NASDAQ 02/03/87 25.250
EQSB Equitable Federal Savings Bank Wheaton MD MA SAIF NASDAQ 09/10/93 25.250
ETFS East Texas Financial Services Tyler TX SW SAIF NASDAQ 01/10/95 14.500
</TABLE>
1
SOURCE: SNL SECURITIES INC, AND F&C CALCULATIONS
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.1 - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AADV Advantage Bancorp, Inc. Kenosha WI MW SAIF NASDAQ 03/23/92 32.500
FBBC First Bell Bancorp, Inc. Pittsburgh PA MA SAIF NASDAQ 06/29/95 14.875
FBCI Fidelity Bancorp, Inc. Chicago IL MW SAIF NASDAQ 12/15/93 16.250
FBHC Fort Bend Holding Corp. Rosenberg TX SW SAIF NASDAQ 06/30/93 17.750
FBSI First Bancshares, Inc. Mountain Grove MO MW SAIF NASDAQ 12/22/93 16.500
FCBF FCB Financial Corp. Neenah WI MW SAIF NASDAQ 09/24/93 17.125
FCIT First Citizens Financial Corp. Gaithersburg MD MA SAIF NASDAQ 12/17/86 17.188
FED FirstFed Financial Corp. Santa Monica CA WE SAIF NYSE 12/16/83 19.625
FESX First Essex Bancorp, Inc. Andover MA NE BIF NASDAQ 08/04/87 11.750
FFBI First Financial Bancorp, Inc. Belvidere IL MW SAIF NASDAQ 10/04/93 15.750
FFBS FFBS BanCorp, Inc. Columbus MS SE SAIF NASDAQ 07/01/93 21.500
FFBZ First Federal Bancorp, Inc. Zanesville OH MW SAIF NASDAQ 07/13/92 26.500
FFCH First Financial Holdings Inc. Charleston SC SE SAIF NASDAQ 11/10/83 19.250
FFED Fidelity Federal Bancorp Evansville IN MW SAIF NASDAQ 08/31/87 11.250
FFES First Federal of East Hartford East Hartford CT NE SAIF NASDAQ 06/23/87 19.750
FFFC FFVA Financial Corp. Lynchburg VA SE SAIF NASDAQ 10/12/94 18.000
FFFG F.F.O. Financial Group, Inc. St. Cloud FL SE SAIF NASDAQ 10/13/88 2.688
FFHC First Financial Corp. Stevens Point WI MW SAIF NASDAQ 12/24/80 23.375
FFHH FSF Financial Corp. Hutchinson MN MW SAIF NASDAQ 10/07/94 13.000
FFHS First Franklin Corporation Cincinnati OH MW SAIF NASDAQ 01/26/88 14.500
FFKY First Federal Financial Corp. Elizabethtown KY MW SAIF NASDAQ 07/15/87 19.750
FFLC FFLC Bancorp, Inc. Leesburg FL SE SAIF NASDAQ 01/04/94 18.625
FFPB First Palm Beach Bancorp, Inc. West Palm Beach FL SE SAIF NASDAQ 09/29/93 23.000
FFSL First Independence Corp. Independence KS MW SAIF NASDAQ 10/08/93 19.000
FFSW FirstFederal Financial Svcs Wooster OH MW SAIF NASDAQ 03/31/87 30.875
FFWC FFW Corp. Wabash IN MW SAIF NASDAQ 04/05/93 19.750
FFWD Wood Bancorp, Inc. Bowling Green OH MW SAIF NASDAQ 08/31/93 15.250
FFWM First Financial-W. Maryland Cumberland MD MA SAIF NASDAQ 02/11/92 28.250
FFYF FFY Financial Corp. Youngstown OH MW SAIF NASDAQ 06/28/93 24.000
FGHC First Georgia Holding, Inc. Brunswick GA SE SAIF NASDAQ 02/11/87 76.750
FIBC Financial Bancorp, Inc. Long Island City NY MA SAIF NASDAQ 08/17/94 15.000
FISB First Indiana Corporation Indianapolis IN MW SAIF NASDAQ 08/02/83 24.875
FKFS First Keystone Financial Media PA MA SAIF NASDAQ 01/26/95 17.750
FLAG FLAG Financial Corp. LaGrange GA SE SAIF NASDAQ 12/11/86 10.875
FLFC First Liberty Financial Corp. Macon GA SE SAIF NASDAQ 12/06/83 25.000
FMCO FMS Financial Corporation Burlington NJ MA SAIF NASDAQ 12/14/88 15.500
FMSB First Mutual Savings Bank Bellevue WA WE BIF NASDAQ 12/17/85 15.000
FNGB First Northern Capital Corp. Green Bay WI MW SAIF NASDAQ 12/29/83 16.500
FOBC Fed One Bancorp Wheeling WV SE SAIF NASDAQ 01/19/95 15.500
FRC First Republic Bancorp San Francisco CA WE BIF NYSE NA 14.875
FSBC First Savings Bank, FSB Clovis NM SW SAIF NASDAQ 08/08/86 5.500
FSBI Fidelity Bancorp, Inc. Pittsburgh PA MA SAIF NASDAQ 06/24/88 19.500
FSFC First Southeast Financial Corp Anderson SC SE SAIF NASDAQ 10/08/93 9.500
FSPG First Home Bancorp, Inc. Pennsville NJ MA SAIF NASDAQ 04/20/87 18.000
FTFC First Federal Capital Corp. La Crosse WI MW SAIF NASDAQ 11/02/89 20.500
FTSB Fort Thomas Financial Corp. Fort Thomas KY MW SAIF NASDAQ 06/28/95 13.625
GBCI Glacier Bancorp, Inc. Kalispell MT WE SAIF NASDAQ 03/30/84 25.000
GDW Golden West Financial Oakland CA WE SAIF NYSE 05/29/59 56.375
GFCO Glenway Financial Corp. Cincinnati OH MW SAIF NASDAQ 11/30/90 19.250
GFSB GFS Bancorp, Inc. Grinnell IA MW SAIF NASDAQ 01/06/94 20.500
GLBK Glendale Co-Operative Bank Everett MA NE BIF NASDAQ 01/10/94 20.750
GPT GreenPoint Financial Corp. Flushing NY MA BIF NYSE 01/28/94 37.875
GROV Grove Bank Chestnut Hill MA NE BIF NASDAQ 08/07/86 33.000
GRTR Greater New York Savings Bank New York NY MA BIF NASDAQ 06/17/87 13.000
GSBC Great Southern Bancorp, Inc. Springfield MO MW SAIF NASDAQ 12/14/89 29.875
GSLC Guaranty Financial Corp. Charlottesville VA SE SAIF NASDAQ NA 8.500
GTFN Great Financial Corporation Louisville KY MW SAIF NASDAQ 03/31/94 29.125
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 2
<PAGE>
FERGUSON & CO.,LLP EXHIBIT 11.1- SELECTED PUBLICLY TRADED THRIFTS
- ------------------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AADV Advantage Bancorp, Inc. Kenosha WI MW SAIF NASDAQ 03/23/92 32.500
GWBC Gateway Bancorp, Inc. Catlettsburg KY MW SAIF NASDAQ 01/18/95 13.250
HALL Hallmark Capital Corp. West Allis WI MW SAIF NASDAQ 01/03/94 17.203
HBFW Home Bancorp Fort Wayne IN MW SAIF NASDAQ 03/30/95 16.500
HFFC HF Financial Corp. Sioux Falls SD MW SAIF NASDAQ 04/08/92 15.750
HFGI Harrington Financial Group Richmond IN MW SAIF NASDAQ NA 10.125
HHFC Harvest Home Financial Corp. Cheviot OH MW SAIF NASDAQ 10/10/94 10.000
HMNF HMN Financial, Inc. Spring Valley MN MW SAIF NASDAQ 06/30/94 16.000
HOMF Home Federal Bancorp Seymour IN MW SAIF NASDAQ 01/23/88 28.750
HVFD Haverfield Corporation Cleveland OH MW SAIF NASDAQ 03/19/85 18.250
HZFS Horizon Financial Svcs Corp. Oskaloosa IA MW SAIF NASDAQ 06/30/94 15.000
IFSL Indiana Federal Corporation Valparaiso IN MW SAIF NASDAQ 02/04/87 21.000
JSBA Jefferson Savings Bancorp Ballwin MO MW SAIF NASDAQ 04/08/93 23.000
KNK Kankakee Bancorp, Inc. Kankakee IL MW SAIF AMSE 01/06/93 20.375
LARK Landmark Bancshares, Inc. Dodge City KS MW SAIF NASDAQ 03/28/94 16.125
LOGN Logansport Financial Corp. Logansport IN MW SAIF NASDAQ 06/14/95 14.750
LSBI LSB Financial Corp. Lafayette IN MW BIF NASDAQ 02/03/95 16.500
MAFB MAF Bancorp, Inc. Clarendon Hills IL MW SAIF NASDAQ 01/12/90 26.000
MARN Marion Capital Holdings Marion IN MW SAIF NASDAQ 03/18/93 20.625
MBLF MBLA Financial Corp. Macon MO MW SAIF NASDAQ 06/24/93 21.250
MCBS Mid Continent Bancshares Inc. El Dorado KS MW SAIF NASDAQ 06/27/94 18.750
MFBC MFB Corp. Mishawaka IN MW SAIF NASDAQ 03/25/94 17.000
MFFC Milton Federal Financial Corp. West Milton OH MW SAIF NASDAQ 10/07/94 14.000
MIFC Mid-Iowa Financial Corp. Newton IA MW SAIF NASDAQ 10/14/9 26.000
MIVI Mississippi View Holding Co. Little Falls MN MW SAIF NASDAQ 03/24/95 12.750
MLBC ML Banocrp,inc. Villanova PA MA SAIF NASDAQ 08/11/94 13.875
MORG Morgan Financial Corp. Fort Morgan CO SW SAIF NASDAQ 01/11/93 11.500
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 3
<PAGE>
FERGUSON & CO., LLP Exhibit II.1 - Selected Publicly Traded Thrifts
- -------------------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AADV Advantage Bancorp, Inc. Kenosha WI MW SAIF NASDAQ 03/23/92 32.500
MSBB MSB Bancorp, Inc. Goshen NY MA BIF NASDAQ 09/03/92 17.000
MSBF MSB Financial, Inc. Marshall MI MW SAIF NASDAQ 02/06/95 19.000
MWBI Midwest Bancshares, Inc. Burlington IA MW SAIF NASDAQ 11/12/92 26.000
MWBX MetroWest Bank Framingham MA NE BIF NASDAQ 10/10/86 3.875
MWFD Midwest Federal Financial Baraboo WI MW SAIF NASDAQ 07/08/92 17.500
NASB North American Savings Bank Grandview MO MW SAIF NASDAQ 09/27/85 31.000
NEBC Northeast Bancorp Portland ME NE BIF NASDAQ 08/19/87 12.750
NEIB Northeast Indiana Bancorp Huntington IN MW SAIF NASDAQ 06/28/95 12.625
NFSL Newnan Savings Bank, FSB Newnan GA SE SAIF NASDAQ 03/01/86 20.750
NHTB New Hampshire Thrift Bncshrs New London NH NE SAIF NASDAQ 05/22/86 11.000
NMSB NewMil Bancorp, Inc. New Milford CT NE BIF NASDAQ 02/01/86 7.250
NSLB NS&L Bancorp, Inc. Neosho MO MW SAIF NASDAQ 06/08/95 12.500
NSSB Norwich Financial Corp Norwich CT NE BIF NASDAQ 11/14/86 16.500
NSSY Norwalk Savings Society Norwalk CT NE BIF NASDAQ 06/16/94 22.625
NTMG Nutmeg Federal S&LA Danbury CT NE SAIF NASDAQ NA 7.250
NWEQ Northwest Equity Corp. Amery WI MW SAIF NASDAQ 10/11/94 10.875
NYB New York Bancorp Inc. Douglaston NY MA SAIF NYSE 01/28/88 30.250
OFCP Ottawa Financial Corp. Holland MI MW SAIF NASDAQ 08/19/94 16.375
OHSL OHSL Financial Corp. Cincinnati OH MW SAIF NASDAQ 02/10/93 20.500
PALM Palfed, Inc. Aiken SC SE SAIF NASDAQ 12/15/85 13.500
PBCI Pamrapo Bancorp, Inc. Bayonne NJ MA SAIF NASDAQ 11/14/89 19.750
PBCT People's Bank, MHC Bridgeport CT NE BIF NASDAQ 07/06/88 24.125
PBKB People's Bancshares, Inc. South Easton MA NE BIF NASDAQ 10/23/86 10.500
PBNB People's Savings Financial Cp. New Britain CT NE BIF NASDAQ 08/20/86 28.250
PCBC Perry County Financial Corp. Perryville MO MW SAIF NASDAQ 02/13/95 17.875
PCCI Pacific Crest Capital Agoura Hills CA WE BIF NASDAQ NA 8.250
PERM Permanent Bancorp, Inc. Evansville IN MW SAIF NASDAQ 04/04/94 16.250
PFDC Peoples Bancorp Auburn IN MW SAIF NASDAQ 07/07/87 19.250
PFNC Progress Financial Corporation Blue Bell PA MA SAIF NASDAQ 07/18/83 6.250
PFSB PennFed Financial Services, Inc. West Orange NJ MA SAIF NASDAQ 07/15/94 18.000
PHBK Peoples Heritage Finl Group Portland ME NE BIF NASDAQ 12/04/86 23.250
PKPS Poughkeepsie Savings Bank, FSB Poughkeepsie NY MA SAIF NASDAQ 11/19/85 5.000
PLE Pinnacle Bank Jasper AL SE SAIF AMSE 12/17/86 18.000
POSB Portsmouth Bank Shares Portsmouth NH NE BIF NASDAQ 12/09/88 12.750
PSAB Prime Bancorp, Inc. Philadelphia PA MA SAIF NASDAQ 11/21/88 19.000
PSBK Progressive Bank, Inc. Fishkill NY MA BIF NASDAQ 08/01/84 31.500
PTRS Potters Financial Corp. East Liverpool OH MW SAIF NASDAQ 12/31/93 15.500
PULS Pulse Bancorp South River NJ MA SAIF NASDAQ 09/18/86 17.250
PVFC PVF Capital Corp. Bedford Heights OH MW SAIF NASDAQ 12/30/92 15.750
PVSA Parkvale Financial Corporation Monroeville PA MA SAIF NASDAQ 07/16/87 28.250
PWBC PennFirst Bancorp, Inc. Ellwood City PA MA SAIF NASDAQ 06/13/90 13.500
QCBC Quaker City Bancorp, Inc. Whittier CA WE SAIF NASDAQ 12/30/93 14.500
QCSB Queens County Bancorp, Inc. Flushing NY MA BIF NASDAQ 11/23/93 37.250
RARB Raritan Bancorp Inc. Raritan NY MA BIF NASDAQ 03/01/87 21.625
RCSB RCSB Financial Inc. Rochester NY MA BIF NASDAQ 04/29/86 26.875
RELY Reliance Bancorp, Inc. Garden City NY MA SAIF NASDAQ 03/31/94 18.125
RFED Roosevelt Financial Group Chesterfield MO MW SAIF NASDAQ 01/23/87 17.500
ROSE TR Financial Corp. Garden City NY MA BIF NASDAQ 06/29/93 28.625
SBCN Suburban Bancorporation, Inc. Cincinnati OH MW SAIF NASDAQ 09/30/93 16.500
SCCB S. Carolina Community Bancshrs Winnsboro SC SE SAIF NASDAQ 07/07/94 15.000
SECP Security Capital Corporation Milwaukee WI MW SAIF NASDAQ 01/03/94 63.500
SFB Standard Federal Bancorp Troy MI MW SAIF NYSE 01/21/87 43.750
SFBM Security Bancorp Billings MT WE SAIF NASDAQ 11/20/86 21.750
SFED SFS Bancorp, Inc. Schenectady NY MA SAIF NASDAQ 06/30/95 13.000
SFFC StateFed Financial Corporation Des Moines IA MW SAIF NASDAQ 01/05/94 16.500
SFSB SuburbFed Financial Corp. Flossmoor IL MW SAIF NASDAQ 03/04/92 17.250
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 4
<PAGE>
FERGUSON &CO., LLP EXHIBIT II.1 - SELECTED PUBLICLY TRADED THRIFTS
- ------------------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AADV Advantage Bancorp, Inc. Kenosha WI MW SAIF NASDAQ 03/23/92 32.500
SFSL Security First Corp. Mayfield Heights OH MW SAIF NASDAQ 01/22/88 14.250
SHEN First Shenango Bancorp, Inc. New Castle PA MA SAIF NASDAQ 04/06/93 20.500
SISB SIS Bancorp, Inc. Springfield MA NE BIF NASDAQ 02/08/95 22.250
SJSB SJS Bancorp St. Joseph MI MW SAIF NASDAQ 02/16/95 21.250
SMBC Southern Missouri Bancorp, Inc Poplar Bluff MO MW SAIF NASDAQ 04/13/94 14.250
SMFC Sho-Me Financial Corp. Mt. Vernon MO MW SAIF NASDAQ 07/01/94 20.625
SOPN First Savings Bancorp, Inc. Southern Pines NC SE SAIF NASDAQ 01/06/94 17.500
SOSA Somerset Savings Bank Somerville MA NE BIF NASDAQ 07/09/86 2.000
SPBC St. Paul Bancorp, Inc. Chicago IL MW SAIF NASDAQ 05/18/87 25.375
SSBK Strongsville Savings Bank Strongsville OH MW SAIF NASDAQ NA 22.250
STFR St. Francis Capital Corp. Milwaukee WI MW SAIF NASDAQ 06/21/93 25.750
STND Standard Financial, Inc. Chicago IL MW SAIF NASDAQ 08/01/94 16.250
STSA Sterling Financial Corp. Spokane WA WE SAIF NASDAQ NA 13.500
SVRN Sovereign Bancorp, Inc. Wyomissing PA MA SAIF NASDAQ 08/12/86 10.875
SWBI Southwest Bancshares Hometown IL MW SAIF NASDAQ 06/24/92 26.875
SWCB Sandwich Co-operative Bank Sandwich MA NE BIF NASDAQ 07/25/86 23.000
TBK Tolland Bank Tolland CT NE BIF AMSE 12/19/86 11.750
TCB TCF Financial Corp. Minneapolis MN MW SAIF NYSE 06/17/86 37.625
THRD TF Financial Corporation Newtown PA MA SAIF NASDAQ 07/13/94 14.625
TRIC Tri-County Bancorp, Inc. Torrington WY WE SAIF NASDAQ 09/30/93 18.375
TSH Teche Holding Co. Franklin LA SW SAIF AMSE 04/19/95 13.250
TWIN Twin City Bancorp Bristol TN SE SAIF NASDAQ 01/04/95 16.750
UBMT United Financial Corp. Great Falls MT WE SAIF NASDAQ 09/23/86 18.250
UFRM United Federal Savings Bank Rocky Mount NC SE SAIF NASDAQ 07/01/80 7.250
VFFC Virginia First Financial Corp. Petersburg VA SE SAIF NASDAQ 01/01/78 13.563
WAMU Washington Mutual Inc. Seattle WA WE BIF NASDAQ 03/11/83 35.250
WBST Webster Financial Corporation Waterbury CT NE SAIF NASDAQ 12/12/86 34.250
WCBI Westco Bancorp Westchester IL MW SAIF NASDAQ 06/26/92 21.750
WEFC Wells Financial Corp. Wells MN MW SAIF NASDAQ 04/11/95 12.500
WFCO Winton Financial Corp. Cincinnati OH MW SAIF NASDAQ 08/04/88 12.313
WFSL Washington Federal, Inc. Seattle WA WE SAIF NASDAQ 11/17/82 22.000
WRNB Warren Bancorp, Inc. Peabody MA NE BIF NASDAQ 07/09/86 13.250
WSB Washington Savings Bank, FSB Waldorf MD MA SAIF AMSE NA 5.000
WSFS WSFS Financial Corporation Wilmington DE MA BIF NASDAQ 11/26/86 8.375
WSTR WesterFed Financial Corp. Missoula MT WE SAIF NASDAQ 01/10/94 15.250
WVFC WVS Financial Corporation Pittsburgh PA MA SAIF NASDAQ 11/29/93 22.000
YFED York Financial Corp. York PA MA SAIF NASDAQ 02/01/84 18.125
Maximum 63.500
Minimum 2.000
Average 19.486
Median 18.000
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 5
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.1 - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Current Price/ Current Current Current Total Equity/
Market LTM Price/ Price/ Tang Price/ Dividend Assets Assets
Value Core EPS Book Value Book Value Assets Yield ($000) (%)
Ticker ($M) (x) (%) (%) (%) (%) Mst RctQ Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 110.26 15.19 125.14 143.81 11.07 0.99 996,245 9.45
ABCW 169.38 12.46 143.68 147.49 9.30 1.43 1,822,248 6.47
AFFFZ 181.82 9.70 116.98 119.52 8.00 5.29 2,274,053 7.09
ALBK 380.37 13.76 120.12 135.99 11.44 1.68 3,325,592 9.52
AMFB 194.04 10.82 180.75 196.13 14.04 2.25 1,382,171 7.76
ANDB 105.86 10.19 119.19 119.19 9.00 2.41 1,173,956 7.56
ASBI 44.59 14.06 99.93 100.07 11.09 4.15 402,051 11.10
ASBP 24.64 20.83 90.24 90.24 21.81 2.78 112,988 22.70
ASFC 594.20 13.28 105.80 130.06 8.39 1.59 7,078,383 7.93
AVND 52.24 21.64 88.79 88.79 8.81 - 592,771 9.93
BANC 196.70 13.95 139.62 151.08 10.01 1.10 1,975,287 7.17
BDJI 11.77 17.19 84.59 84.59 11.22 - 104,969 13.26
BFSB 19.74 12.88 100.24 100.24 16.21 2.59 121,783 15.22
BFSI 89.13 9.46 183.32 183.32 14.35 - 621,324 7.83
BKC 59.74 16.64 132.61 139.56 11.24 5.21 531,638 8.48
BKCO 223.59 10.44 121.23 123.72 10.14 3.54 2,208,543 8.37
BKCT 60.91 14.66 141.90 141.90 14.98 3.32 405,761 10.56
BSBC 17.48 14.67 141.81 141.81 12.43 - 178,121 8.75
BVFS 253.03 23.71 122.75 139.10 7.47 1.63 3,388,847 6.08
CAFI 38.92 11.79 132.70 132.70 11.04 2.34 352,576 8.32
CAPS 19.23 11.33 100.79 100.79 10.52 1.76 202,554 10.43
CARV 17.94 24.22 51.56 54.08 4.95 - 362,369 9.62
CASH 41.57 13.51 106.54 114.08 12.15 1.88 342,095 11.41
CBCI 66.83 12.02 84.64 84.64 13.61 - 500,814 16.08
CBCO 23.80 9.74 123.18 123.18 12.16 6.42 195,658 9.87
CBIN 24.80 13.44 96.15 96.15 10.63 2.72 233,347 11.05
CBNH 46.94 13.55 124.28 124.28 8.59 3.10 546,725 6.94
CBSA 97.39 9.53 103.89 125.56 3.48 2.04 2,796,568 3.40
CEBK 30.95 19.69 98.81 112.82 9.70 - 319,162 9.82
CENF 122.23 14.88 114.01 114.28 5.69 1.49 2,148,344 4.99
CFB 574.53 11.25 151.52 168.08 9.48 0.96 6,607,670 6.25
CFCP 71.31 19.04 258.08 258.08 15.75 2.12 452,809 6.10
CFFC 27.35 13.27 122.65 122.65 17.22 2.42 158,835 14.04
CFHC 106.67 16.61 122.71 123.44 8.04 1.93 1,327,178 6.55
CFSB 92.85 13.97 143.40 143.40 11.79 2.53 791,610 8.22
CFX 114.44 15.13 123.27 137.38 11.16 5.29 1,025,771 9.05
CIBI 11.40 13.66 95.98 95.98 13.28 2.46 85,785 13.84
CMRN 42.04 15.05 90.71 90.71 23.91 1.90 175,841 26.35
CNIT 62.52 18.72 131.00 135.87 9.53 2.07 655,771 7.28
CNSK 26.46 16.88 156.07 156.07 7.46 - 354,822 6.93
COFD 557.74 10.37 153.10 164.02 10.84 3.65 5,145,471 7.08
COFI 1,754.54 12.46 187.78 203.20 12.58 2.36 13,951,846 6.70
CSA 585.38 15.99 136.19 138.34 7.01 - 8,350,710 5.15
CTBK 13.10 10.59 84.55 84.55 5.95 1.73 220,373 7.03
CTZN 216.27 13.87 123.38 141.53 8.13 0.84 2,661,006 6.59
CVAL 32.14 13.93 125.73 125.73 11.78 2.15 272,932 9.37
DIBK 84.18 7.17 148.92 156.10 12.22 1.94 688,993 8.20
DME 1,368.72 13.70 138.00 139.34 7.00 - 19,544,289 5.08
DNFC 105.44 8.71 135.32 137.19 7.73 - 1,364,024 5.79
DSBC 112.55 14.56 133.59 137.86 8.95 0.65 1,257,432 6.70
DSL 413.71 14.34 105.57 107.38 8.78 1.97 4,712,294 8.32
EBCP 73.03 17.54 112.55 119.19 8.69 2.80 840,534 7.72
EBSI 72.84 11.03 127.29 127.29 11.72 3.75 621,474 9.21
EFBI 28.52 21.15 90.28 90.46 13.34 - 213,876 14.77
EGFC 114.05 14.11 111.43 152.57 8.13 3.64 1,402,417 7.30
EQSB 15.15 8.07 106.81 106.81 5.66 - 267,776 5.30
ETFS 15.62 19.08 75.36 75.36 14.25 1.38 115,339 18.91
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 6
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.1 - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Current Price/ Current Current Current Total Equity/
Market LTM Price/ Price/ Tang Price/ Dividend Assets Assets
Value Core EPS Book Value Book Value Assets Yield ($000) (%)
Ticker ($M) (x) (%) (%) (%) (%) Mst RctQ Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 110.26 15.19 125.14 143.81 11.07 0.99 996,245 9.45
FBBC 115.40 13.65 104.46 104.46 21.29 2.69 570,649 20.37
FBCI 47.62 16.58 95.64 95.98 10.42 1.48 456,896 10.90
FBHC 14.54 11.31 80.76 80.76 5.71 1.58 254,739 7.07
FBSI 20.93 17.55 88.24 88.38 14.57 1.21 143,671 16.52
FCBF 42.12 15.71 90.27 90.27 15.88 4.20 265,172 17.59
FCIT 50.27 15.48 126.10 126.10 7.76 - 645,824 6.15
FED 206.24 22.30 109.27 111.13 5.02 - 4,104,854 4.60
FESX 71.04 10.68 113.97 113.97 8.43 4.09 842,903 7.40
FFBI 7.34 15.14 93.20 93.20 7.77 0.00 94,486 8.33
FFBS 33.80 19.72 129.52 129.52 26.99 2.33 125,228 19.68
FFBZ 20.79 11.62 157.36 157.55 11.70 1.66 177,778 7.89
FFCH 122.76 10.81 126.15 126.15 8.06 3.33 1,523,224 6.39
FFED 28.07 11.25 196.34 196.34 10.71 7.11 262,216 5.45
FFES 51.55 10.51 89.98 90.22 5.41 3.04 947,807 6.01
FFFC 93.26 15.13 106.64 108.89 17.84 2.22 522,811 15.58
FFFG 22.66 12.80 118.41 118.41 7.38 - 307,055 6.22
FFHC 699.13 10.30 171.37 179.67 12.53 2.57 5,579,294 7.31
FFHH 45.21 22.81 83.44 83.44 13.64 3.85 331,395 14.37
FFHS 16.90 13.81 83.29 84.16 7.80 2.21 216,508 9.37
FFKY 83.12 16.74 166.39 178.09 23.57 2.43 352,671 14.16
FFLC 48.77 15.92 86.47 86.47 14.69 2.15 332,087 16.98
FFPB 119.17 12.78 104.88 107.58 8.29 1.74 1,438,024 7.90
FFSL 11.08 12.03 84.94 84.94 10.48 2.11 105,771 12.34
FFSW 110.65 19.06 204.61 252.25 10.59 1.56 1,044,608 7.93
FFWC 14.04 9.63 90.85 90.85 9.33 3.04 150,467 10.27
FFWD 22.84 14.81 113.47 113.47 15.62 1.57 146,249 13.76
FFWM 61.49 17.66 147.44 147.44 19.10 1.70 321,994 12.95
FFYF 121.95 17.02 119.64 119.64 21.19 2.50 575,602 17.71
FGHC 13.66 12.50 114.02 128.08 9.48 - 144,022 8.30
FIBC 26.86 17.86 102.74 103.31 10.26 2.00 262,497 9.99
FISB 206.33 14.63 151.68 153.74 14.01 2.25 1,473,094 9.24
FKFS 22.94 13.05 100.11 100.11 7.90 0.00 290,549 7.89
FLAG 22.14 13.77 101.45 101.45 9.68 3.13 228,710 9.55
FLFC 100.12 13.59 146.28 172.77 10.09 2.08 991,226 7.66
FMCO 38.25 9.51 111.43 114.22 7.38 1.29 517,943 6.63
FMSB 29.74 10.79 143.95 143.95 9.52 1.33 386,366 6.62
FNGB 72.51 18.13 102.48 102.48 12.50 3.64 580,128 12.20
FOBC 39.65 12.50 92.65 97.67 11.56 3.74 343,028 12.01
FRC 109.38 15.18 95.60 95.72 5.30 - 2,064,209 5.55
FSBC 4.03 12.79 68.92 68.92 3.40 - 112,436 4.94
FSBI 26.71 14.44 123.97 124.60 8.42 1.64 317,315 6.79
FSFC 41.69 14.62 123.86 123.86 12.77 1.68 326,573 10.31
FSPG 36.54 8.57 118.50 121.46 7.62 2.67 479,314 6.43
FTFC 126.92 14.14 134.07 142.16 9.20 3.12 1,389,163 6.86
FTSB 21.44 16.62 99.09 99.09 24.13 1.84 88,874 24.35
GBCI 84.03 13.74 218.34 218.53 20.57 2.56 408,467 9.42
GDW 3,265.45 11.92 138.24 146.81 9.13 0.67 35,775,375 6.60
GFCO 22.05 14.47 83.26 85.29 8.05 3.36 273,890 9.67
GFSB 10.45 12.28 105.02 105.02 12.54 1.95 83,305 11.94
GLBK 5.13 21.84 88.41 88.41 13.99 - 36,677 15.82
GPT 1,890.87 16.19 112.56 201.46 13.36 2.11 14,150,594 10.36
GROV 50.89 11.22 135.47 135.64 8.62 2.18 590,405 6.36
GRTR 174.04 16.88 119.49 119.49 6.85 - 2,540,811 7.90
GSBC 131.63 13.10 194.12 197.32 19.70 2.34 668,105 10.15
GSLC 7.81 16.67 122.66 122.66 7.59 1.18 102,967 6.19
GTFN 413.10 22.40 150.28 156.17 14.71 1.65 2,808,092 9.79
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 7
<PAGE>
FERGUSON & CO., LLP EXHIBIT 11.1 - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Current Price/ Current Current Current Total Equity/
Market LTM Price/ Price/ Tang Price/ Dividend Assets Assets
Value Core EPS Book Value Book Value Assets Yield ($000) (%)
Ticker ($M) (x) (%) (%) (%) (%) Mst RctQ Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 110.26 15.19 125.14 143.81 11.07 0.99 996,245 9.45
GWBC 15.00 20.08 84.72 84.72 21.06 3.02 71,260 24.86
HALL 24.31 13.65 91.90 91.90 6.45 0.00 377,157 7.16
HBFW 46.07 18.75 97.29 97.29 15.08 1.21 315,901 15.50
HFFC 48.06 12.91 92.81 93.09 8.66 2.29 555,189 9.33
HFGI 32.97 16.60 142.61 142.61 7.88 0.00 418,196 5.53
HHFC 9.35 15.87 73.21 73.21 12.24 4.00 76,399 16.71
HMNF 74.77 14.81 90.24 90.24 14.19 0.00 554,979 15.72
HOMF 64.01 10.53 124.24 128.98 10.16 1.74 630,015 8.18
HVFD 34.80 14.04 122.48 122.73 10.41 2.96 334,226 8.50
HZFS 6.72 22.06 80.09 80.09 9.15 2.13 73,464 11.42
IFSL 99.46 14.58 141.51 151.95 13.38 3.43 742,269 9.47
JSBA 96.18 13.77 105.41 128.21 8.55 1.391 125,393 7.31
KNK 29.21 16.04 82.29 88.55 8.13 1.96 359,171 9.88
LARK 30.86 19.20 93.37 93.37 15.40 2.48 200,469 16.49
LOGN 19.51 18.44 98.40 98.40 25.27 2.71 77,195 25.68
LSBI 15.14 22.00 85.76 85.76 8.94 1.94 172,006 9.64
MAFB 268.86 9.35 111.02 130.13 8.62 1.393 117,149 7.77
MARN 39.88 16.91 96.06 96.06 22.43 3.88 177,767 23.35
MBLF 29.15 22.14 102.76 102.76 14.94 1.88 195,074 14.54
MCBS 38.10 10.65 99.00 99.10 12.14 2.13 313,759 11.70
MFBC 33.56 24.64 89.05 89.05 15.94 1.41 210,559 17.90
MFFC 31.63 20.90 93.90 93.90 17.78 3.71 178,289 18.93
MIFC 10.10 10.17 93.46 93.60 8.76 1.33 115,260 9.38
MIVI 11.60 14.01 90.94 90.94 16.73 1.26 69,322 18.40
MLBC 164.69 18.75 114.20 118.89 9.24 2.74 1,876,018 7.53
MORG 9.59 13.86 92.59 92.59 12.94 2.09 74,130 13.97
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 8
<PAGE>
FERGUSON & CO., LLP EXHHIBIT II.1 - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Current Price/ Current Current Current Total Equity/
Market LTM Price/ Price/Tang Price/ Dividend Assets Assets
Value Core EPS Book Value Book Value Assets Yield (5000) (%)
Ticker ($M) (x) (%) (%) (%) (%) Mst RctQ Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 110.26 15.19 125.14 143.81 11.07 0.99 996.245 9.45
MSBB 48.18 14.78 85.17 220.21 5.73 3.53 840,552 8.21
MSBF 12.46 12.67 98.91 98.91 20.72 2.63 60,130 20.94
MWBI 9.08 10.44 98.26 98.26 6.55 2.00 138,628 6.67
MWBX 53.79 8.61 145.13 145.13 10.97 2.58 490,130 7.55
MWFD 28.46 16.83 169.25 176.95 15.25 1.71 187,601 9.01
NASB 70.31 8.99 139.58 145.06 9.50 2.02 740,298 6.81
NEBC 15.45 17.23 93.00 110.77 7.03 2.51 218,187 8.48
NEIB 24.72 15.78 89.35 89.35 16.89 2.38 154,128 18.90
NFSL 30.28 9.70 145.92 146.64 18.67 2.12 162,199 12.79
NHTB 18.61 12.22 95.57 95.57 7.20 4.55 258,526 7.53
NMSB 29.51 14.80 92.47 92.47 9.54 2.76 309,363 10.31
NSLB 9.49 21.19 74.81 74.81 17.43 4.00 57,288 23.31
NSSB 88.97 16.84 121.41 134.69 12.17 2.91 731,193 10.02
NSSY 53.96 21.75 121.64 121.64 8.85 0.88 609,522 7.28
NTMG 5.15 21.97 98.64 98.64 5.65 - 91,158 6.22
NWEQ 10.28 12.50 80.86 80.86 11.20 3.68 91,804 12.77
NYB 347.63 11.33 219.52 219.52 11.91 2.65 2,918,120 5.43
OFCP 84.81 19.26 110.34 137.61 11.34 2.20 782,145 10.27
OHSL 24.96 13.76 97.90 97.90 11.94 3.71 209,037 12.20
PALM 70.55 18.75 131.45 137.90 11.06 0.59 638,002 8.41
PBCI 64.80 13.53 114.63 115.63 17.73 4.56 365,553 15.47
PBCT 961.45 15.67 167.30 167.53 12.91 3.32 7,441,500 7.80
PBKB 35.36 14.79 127.27 134.10 6.74 2.67 524,443 5.30
PBNB 53.69 14.41 121.40 130.79 12.29 3.26 437,034 10.12
PCBC 15.31 19.02 101.45 101.45 19.04 1.68 80,394 18.77
PCCI 24.17 8.97 104.30 104.30 8.41 - 290,443 8.06
PERM 34.70 25.00 86.34 87.46 8.46 1.85 411,213 9.78
FFDC 45.15 11.26 104.28 104.28 16.24 3.12 277,958 15.58
PFNC 23.31 8.68 119.50 120.42 6.70 1.28 347,858 5.61
PFSB 86.83 11.69 87.80 110.23 7.99 - 1,086,524 8.34
PHBK 585.32 11.02 159.79 178.71 13.39 2.93 4,371,709 8.38
PKPS 62.75 3.45 88.50 88.50 7.47 2.00 840,491 8.44
PLE 16.02 10.98 105.63 109.49 8.59 4.00 186,475 8.13
POBS 73.15 14.83 109.54 109.54 27.41 4.71 266,877 25.02
PSAB 70.78 12.58 121.95 130.05 10.98 3.58 644,560 9.01
PSBK 83.38 9.49 116.06 133.59 9.25 2.54 901,690 7.97
PTRS 7.85 14.35 74.06 74.06 6.84 1.55 114,714 9.24
PULS 52.60 12.50 133.72 133.72 10.42 4.06 505,034 7.79
PVFC 36.59 12.50 171.57 171.57 11.50 - 318,000 6.70
PVSA 91.41 10.58 131.03 131.58 9.94 2.30 919,242 7,59
PWBC 53.11 14.06 109.76 121.40 7.63 2.67 696 467 6.96
QCBC 55.30 16.29 81.41 81.78 7.63 - 735,085 9.37
QCSB 299.73 13.02 138.79 138.79 23.02 2.69 1,302,281 16.58
RARB 33.30 11.82 121.15 124.14 8.93 2.78 344,710 7.37
RCSB 333.49 12.80 131.29 135.94 8.24 1.79 4,048,684 8.63
RELY 165.46 14.62 107.69 158.85 9.28 3.09 1,782,550 8.62
RFED 737.55 10.12 159.38 168.11 7.91 3.54 9,327,772 5.54
ROSE 255.20 12.34 123.33 123.33 8.30 2.52 3,073,458 6.21
SBCN 24.43 21.43 94.39 94.39 12.39 3.64 197,137 13.01
SCCB 11.03 22.39 89.66 89.66 24.98 4.00 44,161 27.87
SECP 591.46 17.84 112.13 112.13 17.21 0.95 3,427,317 16.26
SFB 1,367.11 12.64 142.32 181.76 8.99 1.83 15,239,983 6.32
SFBM 31.80 17.26 103.57 120.77 8.54 3.03 372,239 8.25
SFED 17.42 15.29 75.41 75.41 10.22 1.85 164,366 13.56
SFFC 13.42 14.86 89.92 89.92 17.50 2.42 76,705 19.46
SFSB 21.68 14.74 83.25 83.74 5.73 1.86 378,388 6.88
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 9
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.1 - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Current Price/ Current Current Current Total Equity/
Market LTM Price/ Price/ Tang Price/ Dividend Assets Assets
Value Core EPS Book Value Book Value Assets Yield ($000) (%)
Ticker ($M) (x) (%) (%) (%) (%) Mst RctQ MstRctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 110.26 15.19 125.14 143.81 11.07 0.99 996,245 9.45
SFSL 70.25 10.33 125.99 128.49 11.93 3.09 588,592 9.47
SHEN 46.56 14.14 99.85 99.85 12.66 2.34 369,279 12.68
SISB 127.33 7.92 139.32 139.32 10.52 - 1,209,843 7.19
SJSB 20.88 23.61 118.72 118.72 13.85 2.07 150,752 11.67
SMBC 24.24 19.52 92.47 92.47 15.17 3.51 161,992 16.40
SMFC 33.95 16.91 105.28 105.28 12.76 0.00 280,027 10.99
SOPN 65.52 17.86 98.09 98.09 25.50 3.89 256,986 26.00
SOSA 33.30 15.38 116.96 116.96 6.51 - 511,390 5.56
SPBC 456.45 13.50 121.53 121.94 10.52 1.89 4,337,546 8.66
SSBK 56.31 13.01 132.36 135.09 10.64 2.16 529,187 8.04
STFR 143.86 14.07 110.09 115.32 10.82 1.55 1,329,903 9.82
STND 265.62 17.47 99.75 99.94 11.68 1.97 2,274,536 11.71
STSA 73.26 15.88 122.62 151.35 4.96 - 1,477,699 5.80
SVRN 539.11 10.56 140.32 206.75 5.87 0.77 9,183,447 5.02
SWBI 47.98 13.78 120.52 120.52 13.52 4.02 356,692 11.22
SWCB 43.26 12.85 116.81 124.39 9.62 4.35 449,889 8.23
TBK 13.60 10.59 99.66 104.26 6.07 - 223,978 6.09
TCB 1,315.46 13.83 251.17 262.56 18.79 1.99 7,000,871 7.48
THRD 62.85 14.92 81.39 81.39 12.48 2.19 528,910 14.20
TRIC 11.19 18.19 90.16 90.16 14.58 2.72 76,718 16.17
TSH 50.60 14.25 90.01 90.01 13.84 3.77 370,722 15.37
TWIN 15.02 14.57 106.42 106.42 14.54 3.82 103,300 13.66
UBMT 22.33 14.37 91.11 91.11 21.43 4.82 104,195 23.52
UFRM 22.22 12.95 107.73 107.73 8.70 2.76 255,485 8.08
VFFC 77.86 13.56 127.59 131.68 10.43 0.74 746,867 8.17
WAMU 2,541.06 12.46 178.66 199.83 11.38 2.61 22,323,472 7.38
WBST 277.47 13.33 140.25 183.84 7.23 2.10 3,837,220 5.59
WCBI 57.02 15.54 118.21 118.21 18.27 2.21 312,158 15.45
WEFC 25.98 15.24 93.56 93.56 13.54 - 191,787 14.47
WFCO 24.46 11.84 116.05 119.08 8.65 3.41 282,833 7.45
WFSL 929.42 11.58 155.59 163.33 18.44 4.18 5,040,588 11.85
WRNB 48.35 8.95 154.79 154.79 13.97 3.32 349,421 9.03
WSB 21.10 11.90 100.60 100.60 8.28 2.00 254,968 8.22
WSFS 115.84 6.75 156.25 158.02 8.82 - 1,312,864 5.65
WSTR 67.03 15.10 85.29 85.29 11.89 2.36 563,931 13.94
WVFC 38.21 11.58 112.24 112.24 14.72 1.82 259,622 13.11
YFED 110.34 12.50 117.92 117.92 9.94 3.31 1,109,804 8.43
Maximum 3,469.16 25.00 258.08 262.56 27.41 7.11 43,719,958 27.87
Minimum 4.03 3.45 51.56 54.08 3.40 - 36,677 3.40
Average 161.34 14.33 117.01 122.39 11.68 2.15 1,590,093 10.50
Median 48.02 13.94 112.40 118.57 10.62 2.13 409,840 9.01
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 10
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.1 - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Tangible Return on ROACE
Equity/ Core Avg Assets Before NPAs/ Price/ Core
Tang Assets EPS Before Extra Extra Merger Current Assets Core EPS
(%) ($) (%) (%) Target? Pricing (%) EPS ($)
Ticker Mst RctQ LTM LTM LTM (Y/N) Date Mst RctQ (x) Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 8.32 2.14 0.90 9.41 N 09/20/96 0.55 14.51 0.56
ABCW 6.31 2.81 0.90 12.75 N 09/20/96 0.67 10.06 0.87
AFFFZ 6.95 3.12 0.89 13.53 N 09/20/96 0.77 9.70 0.78
ALBK 8.51 2.08 0.97 9.50 N 09/20/96 0.80 13.25 0.54
AMFB 7.20 1.64 1.42 17.60 N 09/20/96 0.54 11.38 0.39
ANDB 7.56 2.44 0.97 12.72 N 09/20/96 1.43 9.72 0.64
ASBI 11.08 0.96 0.92 7.38 N 09/20/96 0.29 12.98 0.26
ASBP 22.70 0.69 1.01 4.30 N 09/20/96 1.61 18.91 0.19
ASFC 6.55 2.08 0.74 8.56 N 09/20/96 0.69 13.03 0.53
AVND 9.93 0.67 0.62 5.82 N 09/20/96 0.75 21.32 0.17
BANC 6.66 0.95 1.12 14.72 N 09/20/96 0.82 11.42 0.29
BDJI 13.26 0.88 0.70 4.74 N 09/20/96 0.21 14.00 0.27
BFSB 15.22 1.32 1.29 7.96 N 09/20/96 - 11.18 0.38
BFSI 7.83 5.76 1.84 24.09 N 09/20/96 1.21 9.46 1.44
BKC 8.09 1.57 1.24 13.70 N 09/20/96 2.66 9.75 0.67
BKCO 8.21 1.73 1.13 11.82 N 09/20/96 1.22 9.41 0.48
BKCT 10.56 1.56 1.18 10.70 N 09/20/96 1.59 14.30 0.40
BSBC 8.75 0.23 0.86 10.00 N 09/20/96 2.05 14.06 0.06
BVFS 5.41 1.55 0.14 2.04 N 09/20/96 0.95 13.32 0.69
CAFI 8.32 1.59 1.22 15.13 N 09/20/96 0.39 12.02 0.39
CAPS 10.43 1.81 0.95 8.96 N 09/20/96 0.18 11.14 0.46
CARV 9.22 0.32 0.21 2.15 N 09/20/96 0.47 21.53 0.09
CASH 10.74 1.73 1.06 8.14 N 09/20/96 0.20 11.69 0.50
CBCI 16.08 2.34 1.31 7.85 N 09/20/96 1.44 9.90 0.71
CBCO 9.87 2.08 1.38 14.66 N 09/20/96 1.50 9.38 0.54
CBIN 11.05 0.93 0.88 7.36 N 09/20/96 0.05 12.50 0.25
CBNH 6.94 1.43 0.81 11.11 N 09/20/96 0.41 11.81 0.41
CBSA 2.83 2.06 0.40 11.70 N 09/20/96 0.58 9.26 0.53
CEBK 8.70 0.80 0.46 4.69 N 09/20/96 1.79 12.70 0.31
CENF 4.98 1.63 0.57 11.69 N 09/20/96 1.39 11.23 0.54
CFB 5.67 3.69 0.84 14.74 N 09/20/96 1.01 10.07 1.03
CFCP 6.10 1.09 1.04 17.09 N 09/20/96 0.07 17.29 0.30
CFFC 14.04 1.62 1.31 9.68 N 09/20/96 0.08 12.50 0.43
CFHC 6.51 1.37 0.57 8.53 N 09/20/96 1.26 10.53 0.54
CFSB 8.22 1.36 0.96 11.70 N 09/20/96 0.08 13.19 0.36
CFX 8.19 1.00 1.00 10.23 N 09/20/96 0.93 12.20 0.31
CIBI 13.84 1.19 1.01 6.98 N 09/20/96 0.73 14.01 0.29
CMRN 26.35 0.98 1.60 5.77 N 09/20/96 0.37 14.75 0.25
CNIT 7.03 2.07 0.48 6.76 N 09/20/96 0.45 14.90 0.65
CNSK 6.93 0.80 0.76 11.83 N 09/20/96 1.39 15.34 0.22
COFD 6.64 2.64 1.07 15.71 N 09/20/96 0.52 9.51 0.72
COFI 6.22 2.98 0.42 6.39 N 09/20/96 0.33 10.43 0.89
CSA 5.07 1.97 0.49 9.90 N 09/20/96 1.59 15.75 0.50
CTBK 7.03 1.31 0.57 8.15 N 09/20/96 1.01 12.85 0.27
CTZN 5.79 2.74 0.71 10.20 N 09/20/96 0.93 11.18 0.85
CVAL 9.37 1.40 0.91 9.88 N 09/20/96 0.86 13.93 0.35
DIBK 7.86 2.30 1.64 21.02 N 09/20/96 0.92 6.16 0.67
DME 5.03 0.94 0.38 7.94 N 09/20/96 2.59 11.50 0.28
DNFC 5.71 1.60 1.08 19.53 N 09/20/96 0.54 9.17 0.38
DSBC 6.51 2.55 0.72 10.98 N 09/20/96 1.82 12.54 0.74
DSL 8.19 1.70 0.69 8.44 N 09/20/96 1.33 13.54 0.45
EBCP 7.32 1.14 0.74 9.85 N 09/20/96 1.51 18.52 0.27
EBSI 9.21 1.45 0.93 11.91 N 09/20/96 1.45 13.79 0.29
EFBI 14.75 0.65 0.92 5.39 N 09/20/96 0.03 18.09 0.19
EGFC 5.44 1.79 1.27 17.56 N 09/20/96 1.17 10.88 0.58
EQSB 5.30 3.13 0.78 14.98 N 09/20/96 0.77 7.43 0.85
ETFS 18.91 0.76 0.81 4.17 N 09/20/96 0.23 19.08 0.19
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 11
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.1 - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Tangible Return on ROACE
Equity/ Core Avg Assets Before NPAs/ Price/ Core
Tang Assets EPS Before Extra Extra Merger Current Assets Core EPS
(%) ($) (%) (%) Target? Pricing (%) EPS ($)
Ticker Mst RctQ LTM LTM LTM (Y/N) Date Mst RctQ (x) Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 8.32 2.14 0.90 9.41 N 09/20/96 0.55 14.51 0.56
FBBC 20.37 1.09 1.62 7.34 N 09/20/96 0.08 12.00 0.31
FBCI 10.87 0.98 0.74 5.68 N 09/20/96 0.61 14.51 0.28
FBHC 7.07 1.57 0.70 9.62 N 09/20/96 1.21 11.99 0.37
FBSI 16.49 0.94 0.85 4.90 N 09/20/96 0.09 13.31 0.31
FCBF 17.59 1.09 1.09 5.71 N 09/20/96 0.12 13.81 0.31
FCIT 6.15 1.11 0.71 11.59 N 09/20/96 2.96 13.02 0.33
FED 4.53 0.88 0.23 4.98 N 09/20/96 2.52 15.33 0.32
FESX 7.40 1.10 0.99 13.34 N 09/20/96 0.61 9.79 0.30
FFBI 8.33 1.04 0.68 6.79 N 09/20/96 0.24 13.58 0.29
FFBS 19.68 1.09 1.37 6.88 N 09/20/96 1.09 21.50 0.25
FFBZ 7.88 2.28 1.14 15.12 N 09/20/96 0.50 9.89 0.67
FFCH 6.39 1.78 0.78 11.81 N 09/20/96 1.24 10.24 0.47
FFED 5.45 1.00 1.18 23.76 N 09/20/96 0.15 23.44 0.12
FFES 6.00 1.88 0.57 8.65 N 09/20/96 0.60 9.14 0.54
FFFC 15.31 1.19 1.24 7.51 N 09/20/96 0.51 14.06 0.32
FFFG 6.22 0.21 0.50 7.76 N 09/20/96 2.83 8.40 0.08
FFHC 7.00 2.27 1.32 18.73 N 09/20/96 0.43 10.44 0.56
FFHH 14.37 0.57 0.64 3.79 N 09/20/96 0.07 15.48 0.21
FFHS 9.28 1.05 0.62 6.56 N 09/20/96 0.43 13.43 0.27
FFKY 13.36 1.18 1.60 11.28 N 09/20/96 0.09 16.46 0.30
FFLC 16.98 1.17 0.94 5.51 N 09/20/96 0.13 15.02 0.31
FFPB 7.72 1.80 0.74 8.92 N 09/20/96 0.53 11.98 0.48
FFSL 12.34 1.58 1.10 8.51 N 09/20/96 0.29 11.31 0.42
FFSW 6.93 1.62 1.12 16.88 N 09/20/96 0.12 14.29 0.54
FFWC 10.27 2.05 1.09 9.89 N 09/20/96 0.06 8.51 0.58
FFWD 13.76 1.03 1.19 8.40 N 09/20/96 0.04 14.66 0.26
FFWM 12.95 1.60 1.11 8.98 N 09/20/96 1.37 15.35 0.46
FFYF 17.71 1.41 1.20 6.58 N 09/20/96 0.81 15.38 0.39
FGHC 7.46 0.54 0.89 10.65 N 09/20/96 1.34 10.55 0.16
FIBC 9.94 0.84 0.66 5.75 N 09/20/96 2.59 13.39 0.28
FISB 9.12 1.70 1.19 13.57 N 09/20/96 1.59 15.55 0.40
FKFS 7.89 1.36 0.56 6.48 N 09/20/96 2.53 10.09 0.44
FLAG 9.55 0.79 0.87 9.35 N 09/20/96 3.56 16.99 0.16
FLFC 6.67 1.84 1.03 14.22 N 09/20/96 1.22 13.02 0.48
FMCO 6.48 1.63 0.83 12.68 N 09/20/96 NA 8.81 0.44
FMSB 6.62 1.39 1.03 15.44 N 09/20/96 0.02 11.36 0.33
FNGB 12.20 0.91 0.78 6.12 N 09/20/96 0.17 16.50 0.25
FOBC 11.46 1.24 1.00 7.93 N 09/20/96 0.16 12.11 0.32
FRC 5.54 0.98 0.46 7.94 N 09/20/96 2.44 11.62 0.32
FSBC 4.94 0.43 0.34 7.13 N 09/20/96 1.49 137.50 0.01
FSBI 6.76 1.35 0.65 8.66 N 09/20/96 0.43 11.34 0.43
FSFC 10.31 0.65 0.26 1.37 N 09/20/96 0.19 21.59 0.11
FSPG 6.28 2.10 0.97 14.89 N 09/20/96 0.91 8.33 0.54
FTFC 6.49 1.45 0.97 13.98 N 09/20/96 0.11 13.49 0.38
FTSB 24.35 0.82 1.33 5.39 N 09/20/96 1.27 17.03 0.20
GBCI 9.41 1.82 1.59 16.40 N 09/20/96 0.04 13.30 0.47
GDW 6.24 4.73 0.81 12.46 N 09/20/96 1.40 11.01 1.28
GFCO 9.46 1.33 0.56 5.82 N 09/20/96 0.51 13.01 0.37
GFSB 11.94 1.67 1.16 9.19 N 09/20/96 1.15 9.86 0.52
GLBK 15.82 0.95 0.77 4.83 N 09/20/96 - 19.95 0.26
GPT 6.07 2.34 0.89 7.42 N 09/20/96 2.86 14.35 0.66
GROV 6.36 2.94 0.87 13.91 N 09/20/96 0.67 10.58 0.78
GRTR 7.90 0.77 0.73 7.89 N 09/20/96 8.73 19.12 0.17
GSBC 10.00 2.28 1.75 17.28 N 09/20/96 2.36 13.34 0.56
GSLC 6.19 0.51 0.68 10.91 N 09/20/96 3.14 19.32 0.11
GTFN 9.45 1.30 1.00 8.68 N 09/20/96 0.44 22.06 0.33
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 12
<PAGE>
FERGUSON & CO., LLP EXHIBIT 11.1 - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Tangible Return on ROACE
Equity/ Core Avg Assets Before NPAs/ Prices/ Core
Tang Assets EPS Before Extra Extra Merger Current Assets Core EPS
(%) ($) (%) (%) Target? Pricing (%) EPS ($)
Ticker Mst RctQ LTM LTM LTM (Y/N) Date Mst RctQ (X) Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 8.32 2.14 0.90 9.41 N 09/20/96 0.55 14.51 0.56
GWBC 24.86 0.66 1.05 4.05 N 09/20/96 0.08 22.08 0.15
GWF 5.83 1.96 0.72 11.97 N 09/20/96 1.76 12.14 0.52
HALL 7.16 1.26 0.60 7.17 N 09/20/96 0.02 11.32 0.38
HARL 6.65 1.79 0.81 11.83 N 09/20/96 - 9.19 0.51
HAVN 6.03 2.32 0.74 11.42 N 09/20/96 1.02 10.69 0.64
HBFW 15.50 0.88 0.84 4.99 N 09/20/96 - 15.87 0.26
HBNK 7.91 0.72 0.30 4.69 N 09/20/96 3.41 18.75 0.19
HBS 14.89 1.10 1.02 6.83 N 09/20/96 2.44 16.59 0.29
HFFC 9.30 1.22 0.85 9.35 N 09/20/96 0.41 13.13 0.30
HFGI 5.53 0.61 0.37 9.49 N 09/20/96 0.32 14.89 0.17
HHFC 16.71 0.63 0.75 4.14 N 09/20/96 0.19 15.63 0.16
HIFS 9.76 1.46 1.10 10.64 N 09/20/96 0.51 10.03 0.38
HMNF 15.72 1.08 1.11 6.48 N 09/20/96 0.09 13.33 0.30
HOMF 7.90 2.73 1.23 15.14 N 09/20/96 0.46 11.41 0.63
HPBC 10.65 1.65 1.79 15.72 N 09/20/96 0.04 9.76 0.41
HRZB 16.20 1.12 1.54 9.56 N 09/20/96 - 11.21 0.29
HSBK 6.64 1.32 0.61 9.15 N 09/20/96 0.22 9.01 0.43
HVFD 8.48 1.30 0.71 8.57 N 09/20/96 NA 11.41 0.40
HZFS 11.42 0.68 0.53 4.38 N 09/20/96 NA 17.05 0.22
IBSF 19.91 0.75 1.05 4.99 N 09/20/96 0.07 20.49 0.18
IFSB 5.95 0.39 0.43 6.58 N 09/20/96 NA 14.42 0.13
IFSL 8.87 1.44 0.91 9.37 N 09/20/96 1.26 15.91 0.33
IPSW 5.76 1.08 1.30 21.10 N 09/20/96 2.00 10.25 0.25
IROQ 6.48 1.63 0.96 14.40 N 09/20/96 1.13 8.61 0.45
ISBF 16.71 1.05 1.17 6.04 N 09/20/96 NA 14.35 0.27
IWBK 6.64 2.09 1.11 15.69 N 09/20/96 0.59 11.88 0.60
JSBA 6.09 1.67 0.63 9.07 N 09/20/96 0.93 15.13 0.38
JSBF 21.80 2.28 1.63 7.45 N 09/20/96 1.21 13.89 0.63
KNK 9.25 1.27 0.56 5.37 N 09/20/96 0.16 12.13 0.42
KSAV 14.78 1.41 1.11 6.88 N 09/20/96 0.52 10.79 0.42
KSBK 6.35 2.93 0.89 13.42 N 09/20/96 1.26 6.25 0.84
LARK 16.49 0.84 0.93 5.45 N 09/20/96 0.03 16.13 0.25
LARL 10.71 1.68 1.39 13.29 N 09/20/96 0.62 8.81 0.44
LIFB 11.60 1.02 0.87 6.25 N 09/20/96 0.41 13.84 0.28
LISB 9.99 1.70 0.93 8.78 N 09/20/96 1.16 17.19 0.41
LOGN 25.68 0.80 1.50 5.55 N 09/20/96 0.39 18.44 0.20
LSBI 9.64 0.75 0.52 4.62 N 09/20/96 1.60 NM (0.18)
LSBX 7.59 0.88 1.24 15.92 N 09/20/96 1.04 7.23 0.24
LVSB 7.82 1.28 1.15 10.25 N 09/20/96 1.89 12.43 0.46
MAFB 6.70 2.78 0.88 14.60 N 09/20/96 0.37 9.42 0.69
MARN 23.35 1.22 1.41 5.86 N 09/20/96 1.07 15.63 0.33
MASB 9.79 3.13 1.06 10.40 N 09/20/96 0.29 10.19 0.81
MBLF 14.54 0.96 0.70 4.83 N 09/20/96 0.33 20.43 0.26
MCBN 9.04 1.28 0.60 6.65 N 09/20/96 0.64 10.80 0.44
MCBS 11.69 1.76 1.27 9.59 N 09/20/96 0.10 10.19 0.46
MDBK 8.17 2.06 1.04 11.68 N 09/20/96 0.51 10.65 0.54
MERI 7.59 2.71 1.01 13.70 N 09/20/96 0.19 11.23 0.69
MFBC 17.90 0.69 0.73 3.69 N 09/20/96 NA 20.24 0.21
MFFC 18.93 0.67 1.04 4.80 N 09/20/96 0.19 21.88 0.16
MFLR 9.49 1.04 0.91 9.01 N 09/20/96 1.05 11.52 0.32
MFSL 8.27 1.96 0.79 9.60 N 09/20/96 0.20 15.86 0.54
MGNL 9.14 1.49 1.71 17.51 N 09/20/96 2.52 12.19 0.40
MIFC 9.36 0.59 0.93 10.00 N 09/20/96 0.05 7.50 0.20
MIVI 18.40 0.91 1.31 6.73 N 09/20/96 0.46 13.28 0.24
MLBC 7.25 0.74 0.72 8.30 N 09/20/96 0.50 24.78 0.14
MORG 13.97 0.83 1.02 6.82 N 09/20/96 0.35 11.50 0.25
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 13
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.1 - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Tangible Return on ROACE
Equity/ Core Avg Assets Before NPAs/ Price/ Core
Tang Assets EPS Before Extra Extra Merger Current Assets Core EPS
(%) ($) (%) (%) Target? Pricing (%) EPS ($)
Ticker Mst RctQ LTM LTM LTM (Y/N) Date Mst RctQ (x) Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 8.32 2.14 0.90 9.41 N 09/20/96 0.55 14.51 0.56
MSBB 4.26 1.15 0.44 NA N 09/20/96 0.63 19.32 0.22
MSBF 20.94 1.50 1.83 7.66 N 09/20/96 0.24 12.84 0.37
MWBI 6.67 2.49 1.01 14.64 N 09/20/96 0.28 9.15 0.71
MWBX 7.55 0.45 1.30 17.23 N 09/20/96 1.72 8.07 0.12
MWFD 8.65 1.04 1.28 13.41 N 09/20/96 0.19 15.09 0.29
NASB 6.57 3.45 1.26 17.33 N 09/20/96 3.12 8.52 0.91
NEBC 7.36 0.74 0.68 8.10 N 09/20/96 NA 19.92 0.16
NEIB 18.90 0.80 1.19 5.46 N 09/20/96 0.25 13.15 0.24
NFSL 12.74 2.14 2.25 19.85 N 09/20/96 1.26 16.21 0.32
NHTB 7.53 0.90 0.65 8.48 N 09/20/96 1.41 15.28 0.18
NMSB 10.31 0.49 0.75 6.71 N 09/20/96 2.04 12.95 0.14
NSLB 23.31 0.59 0.97 4.08 N 09/20/96 - 18.38 0.17
NSSB 9.13 0.98 0.83 7.62 N 09/20/96 1.71 16.50 0.25
NSSY 7.28 1.04 0.81 9.66 N 09/20/96 2.12 13.47 0.42
NTMG 6.22 0.33 0.67 10.92 N 09/20/96 NA 18.13 0.10
NWEQ 12.77 0.87 1.00 6.91 N 09/20/96 0.91 11.33 0.24
NYB 5.43 2.67 1.27 21.77 N 09/20/96 1.22 9.82 0.77
OFCP 8.41 0.85 0.91 5.72 N 09/20/96 0.13 14.62 0.28
OHSL 12.20 1.49 0.95 7.55 N 09/20/96 0.03 13.49 0.38
PALM 8.05 0.72 0.69 8.53 N 09/20/96 3.77 16.07 0.21
PBCI 15.36 1.46 1.34 8.52 N 09/20/96 2.29 15.43 0.32
PBCT 7.79 1.54 1.13 14.32 N 09/20/96 1.37 16.30 0.37
PBKB 5.04 0.71 0.79 13.08 N 09/20/96 1.12 18.75 0.14
PBNB 9.46 1.96 0.97 8.89 N 09/20/96 0.47 13.08 0.54
PCBC 18.77 0.94 0.88 4.36 N 09/20/96 NA 17.88 0.25
PCCI 8.06 0.92 1.31 19.82 N 09/20/96 2.76 12.13 0.17
PERM 9.67 0.65 0.38 3.47 N 09/20/96 1.66 17.66 0.23
PFDC 15.58 1.71 1.45 9.51 N 09/20/96 0.31 10.94 0.44
PFNC 5.57 0.72 0.91 18.78 N 09/20/96 1.48 14.20 0.11
PFSB 6.75 1.54 0.82 8.36 N 09/20/96 0.88 9.57 0.47
PHBK 7.56 2.11 1.15 13.42 N 09/20/96 1.07 11.18 0.52
PKPS 8.44 1.45 1.70 21.07 N 09/20/96 1.89 NM -
PLE 7.87 1.64 0.85 10.96 N 09/20/96 0.18 10.23 0.44
POBS 25.02 0.86 2.30 9.38 N 09/20/96 0.18 14.49 0.22
PSAB 8.49 1.51 1.02 10.90 N 09/20/96 1.07 11.31 0.42
PSBK 7.00 3.32 1.10 12.30 N 09/20/96 1.03 6.79 1.16
PTRS 9.24 1.08 0.51 5.27 N 09/20/96 2.33 19.38 0.20
PULS 7.79 1.38 1.19 10.28 N 09/20/96 1.12 11.98 0.36
PVFC 6.70 1.26 1.13 17.86 N 09/20/96 1.21 11.58 0.34
PVSA 7.56 2.67 1.06 15.13 N 09/20/96 0.14 10.24 0.69
PWBC 6.33 0.96 0.62 7.68 N 09/20/96 0.58 12.50 0.27
QCBC 9.33 0.89 0.53 5.25 N 09/20/96 2.06 13.94 0.26
QCSB 16.58 2.86 1.82 10.45 N 09/20/96 0.47 11.22 0.83
RARB 7.20 1.83 0.87 11.45 N 09/20/96 0.81 10.40 0.52
RCSB 8.42 2.10 1.01 11.62 N 09/20/96 0.68 13.44 0.50
RELY 6.01 1.24 0.83 7.61 N 09/20/96 0.82 11.92 0.38
RFED 5.30 1.73 0.64 13.33 N 09/20/96 0.74 10.67 0.41
ROSE 6.21 2.32 0.92 13.93 N 09/20/96 0.65 10.68 0.67
SBCN 13.01 0.77 0.39 2.95 N 09/20/96 0.20 34.38 0.12
SCCB 27.87 0.67 1.11 3.80 N 09/20/96 NA 26.79 0.14
SECP 16.26 3.56 0.99 5.85 N 09/20/96 0.11 14.84 1.07
SFB 5.02 3.46 0.95 14.09 N 09/20/96 0.32 11.64 0.94
SFBM 7.16 1.26 0.71 8.22 N 09/20/96 0.17 16.99 0.32
SFED 13.56 0.85 0.69 4.88 N 09/20/96 0.67 13.54 0.24
SFFC 19.46 1.11 1.19 5.99 N 09/20/96 NA 13.75 0.30
SFSB 6.85 1.17 0.50 6.91 N 09/20/96 0.25 13.48 0.32
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 14
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.1 - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Tangible Return on ROACE
Equity/ Core Avg Assets Before NPAs/ Price/ Core
Tang Assets EPS Before Extra Extra Merger Current Assets Core EPS
(%) ($) (%) (%) Target? Pricing (%) EPS ($)
Ticker Mst RctQ LTM LTM LTM (Y/N) Date Mst RctQ (x) Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 8.32 2.14 0.90 9.41 N 09/20/96 0.55 14.51 0.56
SFSL 9.30 1.38 1.21 13.36 N 09/20/96 0.31 10.18 0.35
SHEN 12.68 1.45 1.03 7.45 N 09/20/96 0.46 12.81 0.40
SISB 7.19 2.81 1.38 19.41 N 09/20/96 0.84 10.30 0.54
SJSB 11.67 0.90 0.63 5.00 N 09/20/96 0.29 29.51 0.18
SMBC 16.40 0.73 0.87 4.98 N 09/20/96 0.95 14.25 0.25
SMFC 10.99 1.22 0.85 6.89 N 09/20/96 0.06 13.94 0.37
SOPN 26.00 0.98 1.53 5.86 N 09/20/96 0.05 16.83 0.26
SOSA 5.56 0.13 0.42 7.83 N 09/20/96 9.10 12.50 0.04
SPBC 8.63 1.88 0.91 9.81 N 09/20/96 0.40 11.75 0.54
SSBK 7.89 1.71 0.99 11.83 N 09/20/96 0.06 11.59 0.48
STFR 9.42 1.83 1.18 10.78 N 09/20/96 0.27 14.97 0.43
STND 11.69 0.93 0.81 6.06 N 09/20/96 0.13 16.93 0.24
STSA 5.06 0.85 0.45 7.76 N 09/20/96 0.57 14.67 0.23
SVRN 3.79 1.03 0.79 17.03 N 09/20/96 0.49 10.07 0.27
SWBI 11.22 1.95 1.15 8.95 N 09/20/96 0.13 13.17 0.51
SWCB 7.77 1.79 0.87 10.76 N 09/20/96 1.07 12.50 0.46
TBK 5.84 1.11 0.61 9.94 N 09/20/96 5.06 9.79 0.30
TCB 7.18 2.72 1.43 20.12 N 09/20/96 0.82 12.89 0.73
THRD 14.20 0.98 0.91 5.94 N 09/20/96 0.37 14.06 0.26
TRIC 16.17 1.01 0.95 5.13 N 09/20/96 0.22 15.84 0.29
TSH 15.37 0.93 1.10 6.08 N 09/20/96 0.15 12.27 0.27
TWIN 13.66 1.15 1.09 7.94 N 09/20/96 0.36 12.69 0.33
UBMT 23.52 1.27 1.52 6.66 N 09/20/96 0.65 17.55 0.26
UFRM 8.08 0.56 0.79 10.03 N 09/20/96 0.88 18.13 0.10
VFFC 7.93 1.00 1.74 22.49 N 09/20/96 2.18 21.19 0.16
WAMU 6.76 2.83 1.04 15.64 N 09/20/96 0.55 11.44 0.77
WBST 4.43 2.57 0.60 11.00 N 09/20/96 1.45 11.42 0.75
WCBI 15.45 1.40 1.30 8.37 N 09/20/96 0.30 14.31 0.38
WEFC 14.47 0.82 0.84 5.71 N 09/20/96 0.37 14.20 0.22
WFCO 7.28 1.04 0.94 12.39 N 09/20/96 0.40 10.26 0.30
WFSL 11.36 1.90 1.78 14.47 N 09/20/96 0.64 10.19 0.54
WRNB 9.03 1.48 1.70 19.56 N 09/20/96 1.72 9.74 0.34
WSB 8.22 0.42 0.94 12.56 N 09/20/96 NA 11.36 0.11
WSFS 5.59 1.24 2.20 37.91 N 09/20/96 2.72 8.72 0.24
WSTR 13.94 1.01 0.79 5.90 N 09/20/96 0.07 12.71 0.30
WVFC 13.11 1.90 1.51 10.19 N 09/20/96 0.38 12.79 0.43
YFED 8.43 1.45 0.99 11.57 N 09/20/96 1.02 13.73 0.33
Maximum 27.87 5.76 2.30 37.91 9.10 137.50 1.44
Minimum 2.83 0.13 0.14 1.37 - 6.16 (0.18)
Average 10.25 1.46 0.97 10.10 0.94 13.97 0.39
Median 8.44 1.29 0.94 9.19 0.62 13.00 0.33
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 15
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.1 - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Return on ROACE
Avg Assets Before
Before Extra Extra
(%) (%)
Ticker Mst RctQ Mst RctQ
<S> <C> <C>
AADV 0.89 9.18
ABCW 1.02 15.09
AFFFZ 0.92 13.32
ALBK 0.94 9.78
AMFB 1.30 16.51
ANDB 1.01 13.19
ASBI 0.86 7.55
ASBP 1.09 4.76
ASFC 0.68 8.28
AVND 0.64 6.29
BANC 1.28 15.89
BDJI 0.79 5.80
BFSB 1.42 9.12
BFSI 1.69 21.29
BKC 1.27 14.60
BKCO 1.18 13.23
BKCT 1.20 11.13
BSBC 0.96 10.97
BVFS 0.54 8.23
CAFI 1.07 12.81
CAPS 0.92 8.68
CARV 0.29 3.05
CASH 1.09 9.16
CBCI 1.53 9.23
CBCO 1.42 14.93
CBIN 0.89 7.68
CBNH 0.95 13.21
CBSA 0.43 12.82
CEBK 0.76 7.70
CENF 0.58 11.54
CFB 0.96 15.52
CFCP 1.10 18.12
CFFC 1.38 9.96
CFHC 0.89 13.41
CFSB 0.95 11.45
CFX 1.04 11.31
CIBI 0.93 6.50
CMRN 1.56 5.88
CNIT 0.75 10.39
CNSK 0.75 12.74
COFD 1.14 16.22
COFI 1.22 17.80
CSA 0.37 7.30
CTBK 0.48 6.83
CTZN 0.78 11.58
CVAL 0.88 9.49
DIBK 1.79 22.47
DME 0.59 11.72
DNFC 1.01 17.23
DSBC 0.78 11.56
DSL 0.68 8.10
EBCP 0.71 9.13
EBSI 0.85 9.02
EFBI 0.77 5.09
EGFC 0.83 11.37
EQSB 0.81 15.35
ETFS 0.74 3.82
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 16
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.1 - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Return on ROACE
Avg Assets Before
Before Extra Extra
(%) (%)
Ticker Mst RctQ Mst RctQ
<S> <C> <C>
AADV 0.89 9.18
FBBC 1.64 7.93
FBCI 0.76 6.42
FBHC 0.65 9.12
FBSI 1.02 6.21
FCBF 1.16 6.45
FCIT 0.67 11.68
FED 0.33 7.08
FESX 1.03 13.63
FFBI 0.60 7.00
FFBS 1.25 6.38
FFBZ 1.32 16.84
FFCH 0.81 12.53
FFED 0.89 17.01
FFES 0.63 10.37
FFFC 1.32 8.13
FFFG 0.71 11.31
FFHC 1.29 17.41
FFHH 0.82 5.49
FFHS 0.61 6.46
FFKY 1.46 10.32
FFLC 0.96 5.65
FFPB 0.75 9.51
FFSL 0.93 7.50
FFSW 1.33 20.80
FFWC 1.13 10.80
FFWD 1.23 8.67
FFWM 1.23 9.67
FFYF 1.32 7.47
FGHC 0.94 11.17
FIBC 0.81 7.57
FISB 1.33 14.47
FKFS 0.78 9.53
FLAG 0.75 8.15
FLFC 1.05 14.39
FMCO 0.88 13.17
FMSB 1.01 15.22
FNGB 0.82 6.62
FOBC 0.96 7.99
FRC 0.60 10.61
FSBC 0.08 1.74
FSBI 0.79 11.35
FSFC (1.54) (8.45)
FSPG 0.93 14.40
FTFC 0.95 13.83
FTSB 1.28 5.28
GBCI 1.57 16.50
GDW 0.87 13.03
GFCO 0.53 5.53
GFSB 1.33 11.14
GLBK 0.72 4.46
GPT 1.05 10.01
GROV 0.92 14.51
GRTR 0.66 6.66
GSBC 1.65 16.21
GSLC 0.79 12.35
GTFN 1.01 9.55
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 17
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.1 - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Return on ROACE
Avg Assets Before
Before Extra Extra
(%) (%)
Ticker Mst RctQ Mst RctQ
<S> <C> <C>
AADV 0.89 9.18
GWBC 0.94 3.76
GWF 0.73 11.61
HALL 0.62 8.31
HARL 0.91 13.35
HAVN 0.80 12.80
HBFW 0.90 5.64
HBNK 0.45 5.62
HBS 1.01 6.81
HFFC 0.77 8.44
HFGI 0.08 1.72
HHFC 0.74 4.33
HIFS 1.07 10.68
HMNF 1.12 6.88
HOMF 1.16 13.97
HPBC 1.75 15.97
HRZB 1.53 9.46
HSBK 0.77 11.71
HVFD 0.77 8.86
HZFS 0.76 6.64
IBSF 0.98 4.89
IFSB 0.29 4.34
IFSL 0.75 7.78
IPSW 1.01 16.74
IROQ 0.99 15.16
ISBF 1.11 6.05
IWBK 1.14 16.51
JSBA 0.58 7.92
JSBF 1.75 8.08
KNK 0.67 6.83
KSAV 1.27 8.51
KSBK 0.91 13.28
LARK 0.96 5.70
LARL 1.39 13.02
LIFB 0.88 7.05
LISB 0.89 8.71
LOGN 1.47 5.62
LSBI (0.37) (3.67)
LSBX 1.25 16.51
LVSB 1.35 12.79
MAFB 0.87 13.26
MARN 1.41 5.95
MASB 1.10 11.02
MBLF 0.73 5.11
MCBN 0.79 8.63
MCBS 1.21 9.77
MDBK 1.03 11.59
MERI 0.98 12.97
MFBC 0.82 4.43
MFFC 0.88 4.54
MFLR 0.97 10.08
MFSL 0.67 8.02
MGNL 1.68 17.35
MIFC 1.28 13.87
MIVI 1.13 6.04
MLBC 0.71 9.01
MORG 1.20 8.34
</TABLE>
SOURCE: SNL SECURITIES., AND F&C CALCULATIONS 18
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.1 - SELECTED PUBLICLY TRADED THRIFTS
<TABLE>
<CAPTION>
Return on ROACE
Avg Assets Before
Before Extra Extra
(%) (%)
Ticker Mst RctQ Mst RctQ
<S> <C> <C>
AADV 0.89 9.18
MSBB 0.43 NA
MSBF 1.56 7.21
MWBI 0.87 12.92
MWBX 1.34 17.32
MWFD 1.28 13.81
NASB 1.33 18.85
NEBC 0.56 6.42
NEIB 1.25 6.41
NFSL 1.48 12.40
NHTB 0.76 9.94
NMSB 0.81 7.44
NSLB 0.97 4.14
NSSB 0.85 8.24
NSSY 0.99 12.69
NTMG 0.66 10.39
NWEQ 0.99 7.56
NYB 1.37 24.15
OFCP 0.77 7.13
OHSL 0.93 7.54
PALM 0.72 8.51
PBCI 1.14 7.34
PBCT 1.02 12.99
PBKB 0.73 13.59
PBNB 1.17 10.99
PCBC 0.55 2.83
PCCI 1.04 13.03
PERM 0.50 4.93
PFDC 1.46 9.53
PFNC 0.53 9.44
PFSB 0.86 9.75
PHBK 0.92 11.11
PKPS 0.01 0.09
PLE 0.93 11.52
POBS 2.17 9.07
PSAB 1.05 11.39
PSBK 1.32 16.60
PTRS 0.36 3.77
PULS 1.16 10.56
PVFC 1.18 17.84
PVSA 1.01 13.80
PWBC 0.63 8.44
QCBC 0.58 5.99
QCSB 1.99 11.87
RARB 0.94 12.75
RCSB 0.94 11.57
RELY 0.81 9.47
RFED 0.84 16.88
ROSE 0.96 15.23
SBCN (0.41) (3.08)
SCCB 0.88 3.12
SECP 1.20 7.22
SFB 0.97 14.36
SFBM 0.69 7.91
SFED 0.71 5.15
SFFC 1.28 6.46
SFSB 0.47 6.79
</TABLE>
SOURCE SNL SECURITIES INC., AND F&C CALCULATIONS 19
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.1 - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Return on ROACE
Avg Assets Before
Before Extra Extra
(%) (%)
Ticker Mst RctQ Mst RctQ
<S> <C> <C>
AADV 0.89 9.18
SFSL 1.38 14.08
SHEN 1.00 7.63
SISB 1.05 14.72
SJSB 0.46 3.84
SMBC 1.13 6.84
SMFC 0.88 7.66
SOPN 1.59 6.08
SOSA 0.50 8.97
SPBC 0.96 10.76
SSBK 0.96 11.77
STFR 0.78 7.79
STND 0.69 5.72
STSA 0.46 8.03
SVRN 0.78 17.40
SWBI 1.12 9.40
SWCB 0.87 10.47
TBK 0.62 9.85
TCB 1.54 20.22
THRD 0.84 5.89
TRIC 1.00 6.82
TSH 1.11 6.81
TWIN 1.15 8.45
UBMT 1.52 6.53
UFRM 0.64 7.87
VFFC 3.32 41.55
WAMU 1.10 16.58
WBST 0.78 14.39
WCBI 1.37 8.76
WEFC 0.75 5.09
WFCO 0.87 11.34
WFSL 1.87 15.70
WRNB 1.64 18.32
WSB 0.80 9.78
WSFS 1.03 17.61
WSTR 0.86 6.25
WVFC 1.24 8.93
YFED 0.91 10.62
Maximum 3.32 41.55
Minimum (1.54) (8.45)
Average 0.96 10.15
Median 0.94 9.51
</TABLE>
SOURCE: SNL SECURITIES INC, AND F&C CALCULATIONS 20
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.2 - SELECTED MIDWEST REGION THRIFTS
- -------------------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AADV Advantage Bancorp, Inc. Kenosha WI MW SAIF NASDAQ 03/23/92 32.500
ABCW Anchor BanCorp Wisconsin Madison WI MW SAIF NASDAQ 07/16/92 35.000
ASBI Ameriana Bancorp New Castle IN MW SAIF NASDAQ 03/02/87 13.500
ASBP ASB Financial Corp. Portsmouth OH MW SAIF NASDAQ 05/11/95 14.375
AVND Avondale Financial Corp. Chicago IL MW SAIF NASDAQ 04/07/95 14.500
BDJI First Federal Bancorporation Bemidji MN MW SAIF NASDAQ 04/04/95 15.125
CAFI Camco Financial Corporation Cambridge OH MW SAIF NASDAQ NA 18.750
CAPS Capital Savings Bancorp, Inc. Jefferson City MO MW SAIF NASDAQ 12/29/93 20.500
CASH First Midwest Financial, Inc. Storm Lake IA MW SAIF NASDAQ 09/20/93 23.375
CBCI Calumet Bancorp, Inc. Dolton IL MW SAIF NASDAQ 02/20/92 28.125
CBCO CB Bancorp, Inc. Michigan City IN MW SAIF NASDAQ 12/28/92 20.250
CBIN Community Bank Shares New Albany IN MW SAIF NASDAQ 04/10/95 12.500
CFB Commercial Federal Corporation Omaha NE MW SAIF NYSE 12/31/84 41.500
CFSB CFSB Bancorp, Inc. Lansing MI MW SAIF NASDAQ 06/22/90 19.000
CIBI Community Investors Bancorp Bucyrus OH MW SAIF NASDAQ 02/07/95 16.250
CMRN Cameron Financial Corp Cameron MO MW SAIF NASDAQ 04/03/95 14.750
COFI Charter One Financial Cleveland OH MW SAIF NASDAQ 01/22/88 37.125
CTZN CitFed Bancorp, Inc. Dayton OH MW SAIF NASDAQ 01/23/92 38.000
DNFC D & N Financial Corp. Hancock MI MW SAIF NASDAQ 02/13/85 13.938
EFBI Enterprise Federal Bancorp Lockland OH MW SAIF NASDAQ 10/17/94 13.750
FBCI Fidelity Bancorp, Inc. Chicago IL MW SAIF NASDAQ 12/15/93 16.250
FBSI First Bancshares, Inc. Mountain Grove MO MW SAIF NASDAQ 12/22/93 16.500
FCBF FCB Financial Corp. Neenah WI MW SAIF NASDAQ 09/24/93 17.125
FFBI First Financial Bancorp, Inc. Belvidere IL MW SAIF NASDAQ 10/04/93 15.750
FFBZ First Federal Bancorp, Inc. Zanesville OH MW SAIF NASDAQ 07/13/92 26.500
FFED Fidelity Federal Bancorp Evansville IN MW SAIF NASDAQ 08/31/87 11.250
FFHC First Financial Corp. Stevens Point WI MW SAIF NASDAQ 12/24/80 23.375
FFHH FSF Financial Corp. Hutchinson MN MW SAIF NASDAQ 10/07/94 13.000
FFHS First Franklin Corporation Cincinnati OH MW SAIF NASDAQ 01/26/88 14.500
FFKY First Federal Financial Corp. Elizabethtown KY MW SAIF NASDAQ 07/15/87 19.750
FFSL First Independence Corp. Independence KS MW SAIF NASDAQ 10/08/93 19.000
FFSW FirstFederal Financial Svcs Wooster OH MW SAIF NASDAQ 03/31/87 30.875
FFWC FFW Corp. Wabash IN MW SAIF NASDAQ 04/05/93 19.750
FFWD Wood Bancorp, Inc. Bowling Green OH MW SAIF NASDAQ 08/31/93 15.250
FFYF FFY Financial Corp. Youngstown OH MW SAIF NASDAQ 06/28/93 24.000
FISB First Indiana Corporation Indianapolis IN MW SAIF NASDAQ 08/02/83 24.875
FNGB First Northern Capital Corp. Green Bay WI MW SAIF NASDAQ 12/29/83 16.500
FTFC First Federal Capital Corp. La Crosse WI MW SAIF NASDAQ 11/02/89 20.500
FTSB Fort Thomas Financial Corp. Fort Thomas KY MW SAIF NASDAQ 06/28/95 13.625
GFCO Glenway Financial Corp. Cincinnati OH MW SAIF NASDAQ 11/30/90 19.250
GFSB GFS Bancorp, Inc. Grinnell IA MW SAIF NASDAQ 01/06/94 20.500
GSBC Great Southern Bancorp, Inc. Springfield MO MW SAIF NASDAQ 12/14/89 29.875
GTFN Great Financial Corporation Louisville KY MW SAIF NASDAQ 03/31/94 29.125
GWBC Gateway Bancorp, Inc. Catlettsburg KY MW SAIF NASDAQ 01/18/95 13.250
HALL Hallmark Capital Corp. West Allis WI MW SAIF NASDAQ 01/03/94 17.203
HBFW Home Bancorp Fort Wayne IN MW SAIF NASDAQ 03/30/95 16.500
HFFC HF Financial Corp. Sioux Falls SD MW SAIF NASDAQ 04/08/92 15.750
HFGI Harrington Financial Group Richmond IN MW SAIF NASDAQ NA 10.125
HHFC Harvest Home Financial Corp. Cheviot OH MW SAIF NASDAQ 10/10/94 10.000
HMNF HMN Financial, Inc. Spring Valley MN MW SAIF NASDAQ 06/30/94 16.000
HOMF Home Federal Bancorp Seymour IN MW SAIF NASDAQ 01/23/88 28.750
HVFD Haverfield Corporation Cleveland OH MW SAIF NASDAQ 03/19/85 18.250
HZFS Horizon Financial Svcs Corp. Oskaloosa IA MW SAIF NASDAQ 06/30/94 15.000
IFSL Indiana Federal Corporation Valparaiso IN MW SAIF NASDAQ 02/04/87 21.000
JSBA Jefferson Savings Bancorp Ballwin MO MW SAIF NASDAQ 04/08/93 23.000
KNK Kankakee Bancorp, Inc. Kankakee IL MW SAIF AMSE 01/06/93 20.375
LARK Landmark Bancshares, Inc. Dodge City KS MW SAIF NASDAQ 03/28/94 16.125
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 21
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.2 - SELECTED MIDWEST REGION THRIFTS
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LOGN Logansport Financial Corp. Logansport IN MW SAIF NASDAQ 06/14/95 14.750
LSBI LSB Financial Corp. Lafayette IN MW BIF NASDAQ 02/03/95 16.500
MAFB MAF Bancorp, Inc. Clarendon Hills IL MW SAIF NASDAQ 01/12/90 26.000
MARN Marion Capital Holdings Marion IN MW SAIF NASDAQ 03/18/93 20.625
MBLF MBLA Financial Corp. Macon MO MW SAIF NASDAQ 06/24/93 21.250
MCBS Mid Continent Bancshares Inc. El Dorado KS MW SAIF NASDAQ 06/27/94 18.750
MFBC MFB Corp. Mishawaka IN MW SAIF NASDAQ 03/25/94 17.000
MFFC Milton Federal Financial Corp. West Milton OH MW SAIF NASDAQ 10/07/94 14.000
MIFC Mid-Iowa Financial Corp. Newton IA MW SAIF NASDAQ 10/14/92 6.000
MIVI Mississippi View Holding Co. Little Falls MN MW SAIF NASDAQ 03/24/95 12.750
MSBF MSB Financial, Inc. Marshall MI MW SAIF NASDAQ 02/06/95 19.000
MWBI Midwest Bancshares, Inc. Burlington IA MW SAIF NASDAQ 11/12/92 26.000
MWFD Midwest Federal Financial Baraboo WI MW SAIF NASDAQ 07/08/92 17.500
NASB North American Savings Bank Grandview MO MW SAIF NASDAQ 09/27/85 31.000
NEIB Northeast Indiana Bancorp Huntington IN MW SAIF NASDAQ 06/28/95 12.625
NSLB NS&L Bancorp, Inc. Neosho MO MW SAIF NASDAQ 06/08/95 12.500
NWEQ Northwest Equity Corp. Amery WI MW SAIF NASDAQ 10/11/94 10.875
OFCP Ottawa Financial Corp. Holland MI MW SAIF NASDAQ 08/19/94 16.375
OHSL OHSL Financial Corp. Cincinnati OH MW SAIF NASDAQ 02/10/93 20.500
PCBC Perry County Financial Corp. Perryville MO MW SAIF NASDAQ 02/13/95 17.875
PERM Permanent Bancorp, Inc. Evansville IN MW SAIF NASDAQ 04/04/94 16.250
PFDC Peoples Bancorp Auburn IN MW SAIF NASDAQ 07/07/87 19.250
PTRS Potters Financial Corp. East Liverpool OH MW SAIF NASDAQ 12/31/93 15.500
PVFC PVF Capital Corp. Bedford Heights OH MW SAIF NASDAQ 12/30/92 15.750
RFED Roosevelt Financial Group Chesterfield MO MW SAIF NASDAQ 01/23/87 17.500
SBCN Suburban Bancorporation, Inc. Cincinnati OH MW SAIF NASDAQ 09/30/93 16.500
SECP Security Capital Corporation Milwaukee WI MW SAIF NASDAQ 01/03/94 63.500
SFB Standard Federal Bancorp Troy MI MW SAIF NYSE 01/21/87 43.750
SFFC StateFed Financial Corporation Des Moines IA MW SAIF NASDAQ 01/05/94 16.500
SFSB SuburbFed Financial Corp. Flossmoor IL MW SAIF NASDAQ 03/04/92 17.250
SFSL Security First Corp. Mayfield Heights OH MW SAIF NASDAQ 01/22/88 14.250
SJSB SJS Bancorp St. Joseph MI MW SAIF NASDAQ 02/16/95 21.250
SMBC Southern Missouri Bancorp, Inc Poplar Bluff MO MW SAIF NASDAQ 04/13/94 14.250
SMFC Sho-Me Financial Corp. Mt. Vernon MO MW SAIF NASDAQ 07/01/94 20.625
SPBC St. Paul Bancorp, Inc. Chicago IL MW SAIF NASDAQ 05/18/87 25.375
SSBK Strongsville Savings Bank Strongsville OH MW SAIF NASDAQ NA 22.250
STFR St. Francis Capital Corp. Milwaukee WI MW SAIF NASDAQ 06/21/93 25.750
STND Standard Financial, Inc. Chicago IL MW SAIF NASDAQ 08/01/94 16.250
SWBI Southwest Bancshares Hometown IL MW SAIF NASDAQ 06/24/92 26.875
TCB TCF Financial Corp. Minneapolis MN MW SAIF NYSE 06/17/86 37.625
WCBI Westco Bancorp Westchester IL MW SAIF NASDAQ 06/26/92 21.750
WEFC Wells Financial Corp. Wells MN MW SAIF NASDAQ 04/11/95 12.500
WFCO Winton Financial Corp. Cincinnati OH MW SAIF NASDAQ 08/04/88 12.313
Maximum 63.500
Minimum 6.000
Average 20.109
Median 17.500
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 22
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.2 - SELECTED MIDWEST REGION THRIFTS
- -------------------
<TABLE>
<CAPTION>
Current Price/ Current Current Current Total Equity/
Market LTM Price/ Price/ Tang Price/ Dividend Assets Assets
Value Core EPS Book Value Book Value Assets Yield ($000) (%)
Ticker ($M) (x) (%) (%) (%) (%) Mst RctQ Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 110.26 15.19 125.14 143.81 11.07 0.99 996,245 9.45
ABCW 169.38 12.46 143.68 147.49 9.30 1.43 1,822,248 6.47
ASBI 44.59 14.06 99.93 100.07 11.09 4.15 402,051 11.10
ASBP 24.64 20.83 90.24 90.24 21.81 2.78 112,988 22.70
AVND 52.24 21.64 88.79 88.79 8.81 - 592,771 9.93
BDJI 11.77 17.19 84.59 84.59 11.22 - 104,969 13.26
CAFI 38.92 11.79 132.70 132.70 11.04 2.34 352,576 8.32
CAPS 19.23 11.33 100.79 100.79 10.52 1.76 202,554 10.43
CASH 41.57 13.51 106.54 114.08 12.15 1.88 342,095 11.41
CBCI 66.83 12.02 84.64 84.64 13.61 - 500,814 16.08
CBCO 23.80 9.74 123.18 123.18 12.16 6.42 195,658 9.87
CBIN 24.80 13.44 96.15 96.15 10.63 2.72 233,347 11.05
CFB 574.53 11.25 151.52 168.08 9.48 0.96 6,607,670 6.25
CFSB 92.85 13.97 143.40 143.40 11.79 2.53 791,610 8.22
CIBI 11.40 13.66 95.98 95.98 13.28 2.46 85,785 13.84
CMRN 42.04 15.05 90.71 90.71 23.91 1.90 175,841 26.35
COFI 1,754.54 12.46 187.78 203.20 12.58 2.36 13,951,84 66.70
CTZN 216.27 13.87 123.38 141.53 8.13 0.84 2,661,006 6.59
DNFC 105.44 8.71 135.32 137.19 7.73 - 1,364,024 5.79
EFBI 28.52 21.15 90.28 90.46 13.34 - 213,876 14.77
FBCI 47.62 16.58 95.64 95.98 10.42 1.48 456,896 10.90
FBSI 20.93 17.55 88.24 88.38 14.57 1.21 143,671 16.52
FCBF 42.12 15.71 90.27 90.27 15.88 4.20 265,172 17.59
FFBI 7.34 15.14 93.20 93.20 7.77 - 94,486 8.33
FFBZ 20.79 11.62 157.36 157.55 11.70 1.66 177,778 7.89
FFED 28.07 11.25 196.34 196.34 10.71 7.11 262,216 5.45
FFHC 699.13 10.30 171.37 179.67 12.53 2.57 5,579,294 7.31
FFHH 45.21 22.81 83.44 83.44 13.64 3.85 331,395 14.37
FFHS 16.90 13.81 83.29 84.16 7.80 2.21 216,508 9.37
FFKY 83.12 16.74 166.39 178.09 23.57 2.43 352,671 14.16
FFSL 11.08 12.03 84.94 84.94 10.48 2.11 105,771 12.34
FFSW 110.65 19.06 204.61 252.25 10.59 1.56 1,044,608 7.93
FFWC 14.04 9.63 90.85 90.85 9.33 3.04 150,467 10.27
FFWD 22.84 14.81 113.47 113.47 15.62 1.57 146,249 13.76
FFYF 121.95 17.02 119.64 119.64 21.19 2.50 575,602 17.71
FISB 206.33 14.63 151.68 153.74 14.01 2.25 1,473,094 9.24
FNGB 72.51 18.13 102.48 102.48 12.50 3.64 580,128 12.20
FTFC 126.92 14.14 134.07 142.16 9.20 3.12 1,389,163 6.86
FTSB 21.44 16.62 99.09 99.09 24.13 1.84 88,874 24.35
GFCO 22.05 14.47 83.26 85.29 8.05 3.36 273,890 9.67
GFSB 10.45 12.28 105.02 105.02 12.54 1.95 83,305 11.94
GSBC 131.63 13.10 194.12 197.32 19.70 2.34 668,105 10.15
GTFN 413.10 22.40 150.28 156.17 14.71 1.65 2,808,092 9.79
GWBC 15.00 20.08 84.72 84.72 21.06 3.02 71,260 24.86
HALL 24.31 13.65 91.90 91.90 6.45 - 377,157 7.16
HBFW 46.07 18.75 97.29 97.29 15.08 1.21 315,901 15.50
HFFC 48.06 12.91 92.81 93.09 8.66 2.29 555,189 9.33
HFGI 32.97 16.60 142.61 142.61 7.88 - 418,196 5.53
HHFC 9.35 15.87 73.21 73.21 12.24 4.00 76,399 16.71
HMNF 74.77 14.81 90.24 90.24 14.19 - 554,979 15.72
HOMF 64.01 10.53 124.24 128.98 10.16 1.74 630,015 8.18
HVFD 34.80 14.04 122.48 122.73 10.41 2.96 334,226 8.50
HZFS 6.72 22.06 80.09 80.09 9.15 2.13 73,464 11.42
IFSL 99.46 14.58 141.51 151.95 13.38 3.43 742,269 9.47
JSBA 96.18 13.77 105.41 128.21 8.55 1.39 1,125,393 7.31
KNK 29.21 16.04 82.29 88.55 8.13 1.96 359,171 9.88
LARK 30.86 19.20 93.37 93.37 15.40 2.48 200,469 16.49
</TABLE>
SOURCE: SNL SECURITIES., AND CALCULATIONS 23
<PAGE>
FERGUSON & CO., LLP EXHIBIT 11.2 - SELECTED MIDWEST REGION THRIFTS
- -------------------
<TABLE>
<CAPTION>
Current Price/ Current Current Current Total Equity/
Market LTM Price/ Price/ Tang Price/ Dividend Assets Assets
Value Core EPS Book Value Book Value Assets Yield ($000) (%)
Ticker ($M) (x) (%) (%) (%) (%) Mst RctQ Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LOGN 19.51 18.44 98.40 98.40 25.27 2.71 77,195 25.68
LSBI 15.14 22.00 85.76 85.76 8.94 1.94 172,006 9.64
MAFB 268.86 9.35 111.02 130.13 8.62 1.39 3,117,149 7.77
MARN 39.88 16.91 96.06 96.06 22.43 3.88 177,767 23.35
MBLF 29.15 22.14 102.76 102.76 14.94 1.88 195,074 14.54
MCBS 38.10 10.65 99.00 99.10 12.14 2.13 313,759 11.70
MFBC 33.56 24.64 89.05 89.05 15.94 1.41 210,559 17.90
MFFC 31.63 20.90 93.90 93.90 17.78 3.71 178,289 18.93
MIFC 10.10 10.17 93.46 93.60 8.76 1.33 115,260 9.38
MIVI 11.60 14.01 90.94 90.94 16.73 1.26 69,322 18.40
MSBF 12.46 12.67 98.91 98.91 20.72 2.63 60,130 20.94
MWBI 9.08 10.44 98.26 98.26 6.55 2.00 138,628 6.67
MWFD 28.46 16.83 169.25 176.95 15.25 1.71 187,601 9.01
NASB 70.31 8.99 139.58 145.06 9.50 2.02 740,298 6.81
NEIB 24.72 15.78 89.35 89.35 16.89 2.38 154,128 18.90
NSLB 9.49 21.19 74.81 74.81 17.43 4.00 57,288 23.31
NWEQ 10.28 12.50 80.86 80.86 11.20 3.68 91,804 12.77
OFCP 84.81 19.26 110.34 137.61 11.34 2.20 782,145 10.27
OHSL 24.96 13.76 97.90 97.90 11.94 3.71 209,037 12.20
PCBC 15.31 19.02 101.45 101.45 19.04 1.68 80,394 18.77
PERM 34.70 25.00 86.34 87.46 8.46 1.85 411,213 9.78
PFDC 45.15 11.26 104.28 104.28 16.24 3.12 277,958 15.58
PTRS 7.85 14.35 74.06 74.06 6.84 1.55 114,714 9.24
PVFC 36.59 12.50 171.57 171.57 11.50 - 318,100 6.70
RFED 737.55 10.12 159.38 168.11 7.91 3.54 9,327,772 5.54
SBCN 24.43 21.43 94.39 94.39 12.39 3.64 197,137 13.01
SECP 591.46 17.84 112.13 112.13 17.21 0.95 3,437,317 16.26
SFB 1,367.11 12.64 142.32 181.76 8.99 1.83 15,239,983 6.32
SFFC 13.42 14.86 89.92 89.92 17.50 2.42 76,705 19.46
SFSB 21.68 14.74 83.25 83.74 5.73 1.86 378,388 6.88
SFSL 70.25 10.33 125.99 128.49 11.93 3.09 588,592 9.47
SJSB 20.88 23.61 118.72 118.72 13.85 2.07 150,752 11.67
SMBC 24.24 19.52 92.47 92.47 15.17 3.51 161,992 16.40
SMFC 33.95 16.91 105.28 105.28 12.76 - 280,027 10.99
SPBC 456.45 13.50 121.53 121.94 10.52 1.89 4,337,546 8.66
SSBK 56.31 13.01 132.36 135.09 10.64 2.16 529,187 8.04
STFR 143.86 14.07 110.09 115.32 10.82 1.55 1,329,903 9.82
STND 265.62 17.47 99.75 99.94 11.68 1.97 2,274,536 11.71
SWBI 47.98 13.78 120.52 120.52 13.52 4.02 356,692 11.22
TCB 1,315.46 13.83 251.17 262.56 18.79 1.99 7,000,871 7.48
WCBI 57.02 15.54 118.21 118.21 18.27 2.21 312,158 15.45
WEFC 25.98 15.24 93.56 93.56 13.54 - 191,787 14.47
WFCO 24.46 11.84 116.05 119.08 8.65 3.41 282,833 7.45
Maximum 1,754.54 25.00 251.17 262.56 25.27 7.11 15,239,983 25.68
Minimum 7.85 8.99 74.06 74.06 5.73 - 57,288 5.54
Average 144.41 15.65 110.33 113.48 13.36 2.24 1,272,186 12.11
Median 31.63 14.74 99.75 99.94 12.39 2.02 210,559 10.67
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 24
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.2 - SELECTED MIDWEST REGION THRIFTS
- -------------------
<TABLE>
<CAPTION>
Tangible Return on ROACE
Equity/ Core Avg Assets Before NPAs/ Price/ Core
Tang Assets EPS Before Extra Extra Merger Current Assets Core EPS
(%) ($) (%) (%) Target? Pricing (%) EPS ($)
Ticker Mst RctQ LTM LTM LTM (Y/N) Date Mst RctQ (x) Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 8.32 2.14 0.90 9.41 N 09/20/96 0.55 14.51 0.56
ABCW 6.31 2.81 0.90 12.75 N 09/20/96 0.67 10.06 0.87
ASBI 11.08 0.96 0.92 7.38 N 09/20/96 0.29 12.98 0.26
ASBP 22.70 0.69 1.01 4.30 N 09/20/96 1.61 18.91 0.19
AVND 9.93 0.67 0.62 5.82 N 09/20/96 0.75 21.32 0.17
BDJI 13.26 0.88 0.70 4.74 N 09/20/96 0.21 14.00 0.27
CAFI 8.32 1.59 1.22 15.13 N 09/20/96 0.39 12.02 0.39
CAPS 10.43 1.81 0.95 8.96 N 09/20/96 0.18 11.14 0.46
CASH 10.74 1.73 1.06 8.14 N 09/20/96 0.20 11.69 0.50
CBCI 16.08 2.34 1.31 7.85 N 09/20/96 1.44 9.90 0.71
CBCO 9.87 2.08 1.38 14.66 N 09/20/96 1.50 9.38 0.54
CBIN 11.05 0.93 0.88 7.36 N 09/20/96 0.05 12.50 0.25
CFB 5.67 3.69 0.84 14.74 N 09/20/96 1.01 10.07 1.03
CFSB 8.22 1.36 0.96 11.70 N 09/20/96 0.08 13.19 0.36
CIBI 13.84 1.19 1.01 6.98 N 09/20/96 0.73 14.01 0.29
CMRN 26.35 0.98 1.60 5.77 N 09/20/96 0.37 14.75 0.25
COFI 6.22 2.98 0.42 6.39 N 09/20/96 0.33 10.43 0.89
CTZN 5.79 2.74 0.71 10.20 N 09/20/96 0.93 11.18 0.85
DNFC 5.71 1.60 1.08 19.53 N 09/20/96 0.54 9.17 0.38
EFBI 14.75 0.65 0.92 5.39 N 09/20/96 0.03 18.09 0.19
FBCI 10.87 0.98 0.74 5.68 N 09/20/96 0.61 14.51 0.28
FBSI 16.49 0.94 0.85 4.90 N 09/20/96 0.09 13.31 0.31
FCBF 17.59 1.09 1.09 5.71 N 09/20/96 0.12 13.81 0.31
FFBI 8.33 1.04 0.68 6.79 N 09/20/96 0.24 13.58 0.29
FFBZ 7.88 2.28 1.14 15.12 N 09/20/96 0.50 9.89 0.67
FFED 5.45 1.00 1.18 23.76 N 09/20/96 0.15 23.44 0.12
FFHC 7.00 2.27 1.32 18.73 N 09/20/96 0.43 10.44 0.56
FFHH 14.37 0.57 0.64 3.79 N 09/20/96 0.07 15.48 0.21
FFHS 9.28 1.05 0.62 6.56 N 09/20/96 0.43 13.43 0.27
FFKY 13.36 1.18 1.60 11.28 N 09/20/96 0.09 16.46 0.30
FFSL 12.34 1.58 1.10 8.51 N 09/20/96 0.29 11.31 0.42
FFSW 6.93 1.62 1.12 16.88 N 09/20/96 0.12 14.29 0.54
FFWC 10.27 2.05 1.09 9.89 N 09/20/96 0.06 8.51 0.58
FFWD 13.76 1.03 1.19 8.40 N 09/20/96 0.04 14.66 0.26
FFYF 17.71 1.41 1.20 6.58 N 09/20/96 0.81 15.38 0.39
FISB 9.12 1.70 1.19 13.57 N 09/20/96 1.59 15.55 0.40
FNGB 12.20 0.91 0.78 6.12 N 09/20/96 0.17 16.50 0.25
FTFC 6.49 1.45 0.97 13.98 N 09/20/96 0.11 13.49 0.38
FTSB 24.35 0.82 1.33 5.39 N 09/20/96 1.27 17.03 0.20
GFCO 9.46 1.33 0.56 5.82 N 09/20/96 0.51 13.01 0.37
GFSB 11.94 1.67 1.16 9.19 N 09/20/96 1.15 9.86 0.52
GSBC 10.00 2.28 1.75 17.28 N 09/20/96 2.36 13.34 0.56
GTFN 9.45 1.30 1.00 8.68 N 09/20/96 0.44 22.06 0.33
GWBC 24.86 0.66 1.05 4.05 N 09/20/96 0.08 22.08 0.15
HALL 7.16 1.26 0.60 7.17 N 09/20/96 0.02 11.32 0.38
HBFW 15.50 0.88 0.84 4.99 N 09/20/96 - 15.87 0.26
HFFC 9.30 1.22 0.85 9.35 N 09/20/96 0.41 13.13 0.30
HFGI 5.53 0.61 0.37 9.49 N 09/20/96 0.32 14.89 0.17
HHFC 16.71 0.63 0.75 4.14 N 09/20/96 0.19 15.63 0.16
HMNF 15.72 1.08 1.11 6.48 N 09/20/96 0.09 13.33 0.30
HOMF 7.90 2.73 1.23 15.14 N 09/20/96 0.46 11.41 0.63
HVFD 8.48 1.30 0.71 8.57 N 09/20/96 NA 11.41 0.40
HZFS 11.42 0.68 0.53 4.38 N 09/20/96 NA 17.05 0.22
IFSL 8.87 1.44 0.91 9.37 N 09/20/96 1.26 15.91 0.33
JSBA 6.09 1.67 0.63 9.07 N 09/20/96 0.93 15.13 0.38
KNK 9.25 1.27 0.56 5.37 N 09/20/96 0.16 12.13 0.42
LARK 16.49 0.84 0.93 5.45 N 09/20/96 0.03 16.13 0.25
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 25
<PAGE>
FERGUSON & CO., LLP EXHIBIT 11.2 - SELECTED MIDWEST REGION THRIFTS
- -------------------
<TABLE>
<CAPTION>
Tangible Return on ROACE
Equity/ Core Avg Assets Before NPAs/ Price/ Core
Tang Assets EPS Before Extra Extra Merger Current Assets Core EPS
(%) ($) (%) (%) Target? Pricing (%) EPS ($)
Ticker Mst RctQ LTM LTM LTM (Y/N) Date Mst RctQ (x) Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOGN 25.68 0.80 1.50 5.55 N 09/20/96 0.39 18.44 0.20
LSBI 9.64 0.75 0.52 4.62 N 09/20/96 1.60 NM (0.18)
MAFB 6.70 2.78 0.88 14.60 N 09/20/96 0.37 9.42 0.69
MARN 23.35 1.22 1.41 5.86 N 09/20/96 1.07 15.63 0.33
MBLF 14.54 0.96 0.70 4.83 N 09/20/96 0.33 20.43 0.26
MCBS 11.69 1.76 1.27 9.59 N 09/20/96 0.10 10.19 0.46
MFBC 17.90 0.69 0.73 3.69 N 09/20/96 NA 20.24 0.21
MFFC 18.93 0.67 1.04 4.80 N 09/20/96 0.19 21.88 0.16
MIFC 9.36 0.59 0.93 10.00 N 09/20/96 0.05 7.50 0.20
MIVI 18.40 0.91 1.31 6.73 N 09/20/96 0.46 13.28 0.24
MSBF 20.94 1.50 1.83 7.66 N 09/20/96 0.24 12.84 0.37
MWBI 6.67 2.49 1.01 14.64 N 09/20/96 0.28 9.15 0.71
MWFD 8.65 1.04 1.28 13.41 N 09/20/96 0.19 15.09 0.29
NASB 6.57 3.45 1.26 17.33 N 09/20/96 3.12 8.52 0.91
NEIB 18.90 0.80 1.19 5.46 N 09/20/96 0.25 13.15 0.24
NSLB 23.31 0.59 0.97 4.08 N 09/20/96 - 18.38 0.17
NWEQ 12.77 0.87 1.00 6.91 N 09/20/96 0.91 11.33 0.24
OFCP 8.41 0.85 0.91 5.72 N 09/20/96 0.13 14.62 0.28
OHSL 12.20 1.49 0.95 7.55 N 09/20/96 0.03 13.49 0.38
PCBC 18.77 0.94 0.88 4.36 N 09/20/96 NA 17.88 0.25
PERM 9.67 0.65 0.38 3.47 N 09/20/96 1.66 17.66 0.23
PFDC 15.58 1.71 1.45 9.51 N 09/20/96 0.31 10.94 0.44
PTRS 9.24 1.08 0.51 5.27 N 09/20/96 2.33 19.38 0.20
PVFC 6.70 1.26 1.13 17.86 N 09/20/96 1.21 11.58 0.34
RFED 5.30 1.73 0.64 13.33 N 09/20/96 0.74 10.67 0.41
SBCN 13.01 0.77 0.39 2.95 N 09/20/96 0.20 34.38 0.12
SECP 16.26 3.56 0.99 5.85 N 09/20/96 0.11 14.84 1.07
SFB 5.02 3.46 0.95 14.09 N 09/20/96 0.32 11.64 0.94
SFFC 19.46 1.11 1.19 5.99 N 09/20/96 NA 13.75 0.30
SFSB 6.85 1.17 0.50 6.91 N 09/20/96 0.25 13.48 0.32
SFSL 9.30 1.38 1.21 13.36 N 09/20/96 0.31 10.18 0.35
SJSB 11.67 0.90 0.63 5.00 N 09/20/96 0.29 29.51 0.18
SMBC 16.40 0.73 0.87 4.98 N 09/20/96 0.95 14.25 0.25
SMFC 10.99 1.22 0.85 6.89 N 09/20/96 0.06 13.94 0.37
SPBC 8.63 1.88 0.91 9.81 N 09/20/96 0.40 11.75 0.54
SSBK 7.89 1.71 0.99 11.83 N 09/20/96 0.06 11.59 0.48
STFR 9.42 1.83 1.18 10.78 N 09/20/96 0.27 14.97 0.43
STND 11.69 0.93 0.81 6.06 N 09/20/96 0.13 16.93 0.24
SWBI 11.22 1.95 1.15 8.95 N 09/20/96 0.13 13.17 0.51
TCB 7.18 2.72 1.43 20.12 N 09/20/96 0.82 12.89 0.73
WCBI 15.45 1.40 1.30 8.37 N 09/20/96 0.30 14.31 0.38
WEFC 14.47 0.82 0.84 5.71 N 09/20/96 0.37 14.20 0.22
WFCO 7.28 1.04 0.94 12.39 N 09/20/96 0.40 10.26 0.30
Maximum 25.68 3.56 1.83 20.12 3.12 34.38 1.07
Minimum 5.02 0.59 0.38 2.95 - 7.50 (0.18)
Average 12.61 1.40 1.00 8.53 0.53 14.71 0.37
Median 11.67 1.11 0.97 6.91 0.31 13.62 0.30
</TABLE>
SOURCE SNL SECURITIES INC., AND F&C CALCULATIONS 26
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.2 - SELECTED MIDWEST REGION THRIFTS
<TABLE>
<CAPTION>
Return on ROACE
Avg Assets Before
Before Extra Extra
(%) (%)
Ticker Mst RctQ Mst RctQ
<S> <C> <C>
AADV 0.89 9.18
ABCW 1.02 15.09
ASBI 0.86 7.55
ASBP 1.09 4.76
AVND 0.64 6.29
BDJI 0.79 5.80
CAFI 1.07 12.81
CAPS 0.92 8.68
CASH 1.09 9.16
CBCI 1.53 9.23
CBCO 1.42 14.93
CBIN 0.89 7.68
CFB 0.96 15.52
CFSB 0.95 11.45
CIBI 0.93 6.50
CMRN 1.56 5.88
COFI 1.22 17.80
CTZN 0.78 11.58
DNFC 1.01 17.23
EFBI 0.77 5.09
FBCI 0.76 6.42
FBSI 1.02 6.21
FCBF 1.16 6.45
FFBI 0.60 7.00
FFBZ 1.32 16.84
FFED 0.89 17.01
FFHC 1.29 17.41
FFHH 0.82 5.49
FFHS 0.61 6.46
FFKY 1.46 10.32
FFSL 0.93 7.50
FFSW 1.33 20.80
FFWC 1.13 10.80
FFWD 1.23 8.67
FFYF 1.32 7.47
FISB 1.33 14.47
FNGB 0.82 6.62
FTFC 0.95 13.83
FTSB 1.28 5.28
GFCO 0.53 5.53
GFSB 1.33 11.14
GSBC 1.65 16.21
GTFN 1.01 9.55
GWBC 0.94 3.76
HALL 0.62 8.31
HBFW 0.90 5.64
HFFC 0.77 8.44
HFGI 0.08 1.72
HHFC 0.74 4.33
HMNF 1.12 6.88
HOMF 1.16 13.97
HVFD 0.77 8.86
HZFS 0.76 6.64
IFSL 0.75 7.78
JSBA 0.58 7.92
KNK 0.67 6.83
LARK 0.96 5.70
</TABLE>
SOURCE: SNL SECURITIES., AND F&C CALCULATIONS 27
<PAGE>
FERGUSON & CO., LLP EXHIBIT 11.2 - SELECTED MIDWEST REGION THRIFTS
- -------------------
<TABLE>
<CAPTION>
Return on ROACE
Avg Assets Before
Before Extra Extra
(%) (%)
Ticker Mst RctQ Mst RctQ
<S> <C> <C>
LOGN 1.47 5.62
LSBI (0.37) (3.67)
MAFB 0.87 13.26
MARN 1.41 5.95
MBLF 0.73 5.11
MCBS 1.21 9.77
MFBC 0.82 4.43
MFFC 0.88 4.54
MIFC 1.28 13.87
MIVI 1.13 6.04
MSBF 1.56 7.21
MWBI 0.87 12.92
MWFD 1.28 13.81
NASB 1.33 18.85
NEIB 1.25 6.41
NSLB 0.97 4.14
NWEQ 0.99 7.56
OFCP 0.77 7.13
OHSL 0.93 7.54
PCBC 0.55 2.83
PERM 0.50 4.93
PFDC 1.46 9.53
PTRS 0.36 3.77
PVFC 1.18 17.84
RFED 0.84 16.88
SBCN (0.41) (3.08)
SECP 1.20 7.22
SFB 0.97 14.36
SFFC 1.28 6.46
SFSB 0.47 6.79
SFSL 1.38 14.08
SJSB 0.46 3.84
SMBC 1.13 6.84
SMFC 0.88 7.66
SPBC 0.96 10.76
SSBK 0.96 11.77
STFR 0.78 7.79
STND 0.69 5.72
SWBI 1.12 9.40
TCB 1.54 20.22
WCBI 1.37 8.76
WEFC 0.75 5.09
WFCO 0.87 11.34
Maximum 1.56 20.22
Minimum (0.41) (3.67)
Average 0.95 8.40
Median 0.96 7.22
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 28
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.3 - SELECTED PUBICLY TRADED MISSOURI THIFTS
- -------------------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CAPS Capital Savings Bancorp, Inc. Jefferson City MO MW SAIF NASDAQ 12/29/93 20.500
CMRN Cameron Financial Corp Cameron MO MW SAIF NASDAQ 04/03/95 14.750
FBSI First Bancshares, Inc. Mountain Grove MO MW SAIF NASDAQ 12/22/93 16.500
GSBC Great Southern Bancorp, Inc. Springfield MO MW SAIF NASDAQ 12/14/89 29.875
JSBA Jefferson Savings Bancorp Ballwin MO MW SAIF NASDAQ 04/08/93 23.000
MBLF MBLA Financial Corp. Macon MO MW SAIF NASDAQ 06/24/93 21.250
NASB North American Savings Bank Grandview MO MW SAIF NASDAQ 09/27/85 31.000
NSLB NS&L Bancorp, Inc. Neosho MO MW SAIF NASDAQ 06/08/95 12.500
PCBC Perry County Financial Corp. Perryville MO MW SAIF NASDAQ 02/13/95 17.875
RFED Roosevelt Financial Group Chesterfield MO MW SAIF NASDAQ 01/23/87 17.500
SMBC Southern Missouri Bancorp, Inc Poplar Bluff MO MW SAIF NASDAQ 04/13/94 14.250
SMFC Sho-Me Financial Corp. Mt. Vernon MO MW SAIF NASDAQ 07/01/94 20.625
Maximum 31.000
Minimum 12.500
Average 19.969
Median 19.188
</TABLE>
SOURCE: SNL, SECURITIES INC., AND F&C CALCULATIONS 29
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.3 - SELECTED PUBLICLY TRADED MISSOURI THIFTS
- -------------------
<TABLE>
<CAPTION>
Current Price/ Current Current Current Total Equity/
Market LTM Price/ Price/ Tang Price/ Dividend Assets Assets
Value Core EPS Book Value Book Value Assets Yield ($000) (%)
Ticker ($M) (x) (%) (%) (%) (%) Mst RctQ Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CAPS 19.23 11.33 100.79 100.79 10.52 1.76 202,554 10.43
CMRN 42.04 15.05 90.71 90.71 23.91 1.90 175,841 26.35
FBSI 20.93 17.55 88.24 88.38 14.57 1.21 143,671 16.52
GSBC 131.63 13.10 194.12 197.32 19.70 2.34 668,105 10.15
JSBA 96.18 13.77 105.41 128.21 8.55 1.39 1,125,393 7.31
MBLF 29.15 22.14 102.76 102.76 14.94 1.88 195,074 14.54
NASB 70.31 8.99 139.58 145.06 9.50 2.02 740,298 6.81
NSLB 9.49 21.19 74.81 74.81 17.43 4.00 57,288 23.31
PCBC 15.31 19.02 101.45 101.45 19.04 1.68 80,394 18.77
RFED 737.55 10.12 159.38 168.11 7.91 3.54 9,327,772 5.54
SMBC 24.24 19.52 92.47 92.47 15.17 3.51 161,992 16.40
SMFC 33.95 16.91 105.28 105.28 12.76 0.00 280,027 10.99
Maximum 737.55 22.14 194.12 197.32 23.91 4.00 9,327,772 26.35
Minimum 9.49 8.99 74.81 74.81 7.91 - 57,288 5.54
Average 102.50 15.72 112.92 116.28 14.50 2.10 1,096,534 13.93
Median 31.55 15.98 102.11 102.11 14.76 1.89 198,814 12.77
</TABLE>
SOURCE: SNL SECURITIES., AND CALCULATIONS 30
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.3 - SELECTED PUBLICLY TRADED MISSOURI THIFTS
- -------------------
<TABLE>
<CAPTION>
Tangible Return on ROACE
Equity/ Core Avg Assets Before NPAs/ Price/ Core
Tang Assets EPS Before Extra Extra Merger Current Assets Core EPS
(%) ($) (%) (%) Target? Pricing (%) EPS ($)
Ticker Mst RctQ LTM LTM LTM (Y/N) Date Mst RctQ (x) Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CAPS 10.43 1.81 0.95 8.96 N 09/20/96 0.18 11.14 0.46
CMRN 26.35 0.98 1.60 5.77 N 09/20/96 0.37 14.75 0.25
FBSI 16.49 0.94 0.85 4.90 N 09/20/96 0.09 13.31 0.31
GSBC 10.00 2.28 1.75 17.28 N 09/20/96 2.36 13.34 0.56
JSBA 6.09 1.67 0.63 9.07 N 09/20/96 0.93 15.13 0.38
MBLF 14.54 0.96 0.70 4.83 N 09/20/96 0.33 20.43 0.26
NASB 6.57 3.45 1.26 17.33 N 09/20/96 3.12 8.52 0.91
NSLB 23.31 0.59 0.97 4.08 N 09/20/96 - 18.38 0.17
PCBC 18.77 0.94 0.88 4.36 N 09/20/96 NA 17.88 0.25
RFED 5.30 1.73 0.64 13.33 N 09/20/96 0.74 10.67 0.41
SMBC 16.40 0.73 0.87 4.98 N 09/20/96 0.95 14.25 0.25
SMFC 10.99 1.22 0.85 6.89 N 09/20/96 0.06 13.94 0.37
Maximum 26.35 3.45 1.75 17.33 3.12 20.43 0.91
Minimum 5.30 0.59 0.63 4.08 - 8.52 0.17
Average 13.77 1.44 1.00 8.48 0.83 14.31 0.38
Median 12.77 1.10 0.88 6.33 0.37 14.10 0.34
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 31
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.3 - SELECTED PUBLICLY TRADED MISSOURI THIFTS
- -------------------
<TABLE>
<CAPTION>
Return on ROACE
Avg Assets Before
Before Extra Extra
(%) (%)
Ticker Mst RctQ Mst RctQ
<S> <C> <C>
CAPS 0.92 8.68
CMRN 1.56 5.88
FBSI 1.02 6.21
GSBC 1.65 16.21
JSBA 0.58 7.92
MBLF 0.73 5.11
NASB 1.33 18.85
NSLB 0.97 4.14
PCBC 0.55 2.83
RFED 0.84 16.88
SMBC 1.13 6.84
SMFC 0.88 7.66
Maximum 1.65 18.85
Minimum 0.55 2.83
Average 1.01 8.93
Median 0.95 7.25
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 32
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.4 - COMPARATIVES GENERAL CHARACTERISTICS
- -------------------
<TABLE>
<CAPTION>
Total Current Current
Number Assets Stock Market
of ($000) Price Value
Ticker Short Name City State Offices Mst RctQ IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BDJI First Federal Bancorporation Bemidji MN 5 104,969 04/04/95 15.125 11.77
CIBI Community Investors Bancorp Bucyrus OH 3 85,785 02/07/95 16.250 11.40
CSBF CSB Financial Group, Inc. Centralia IL 1 41,524 10/09/95 9.625 9.96
CZF CitiSave Financial Corp Baton Rouge LA 5 76,128 07/14/95 14.125 13.63
FFSL First Independence Corp. Independence KS 1 105,771 10/08/93 19.000 11.08
GFSB GFS Bancorp, Inc. Grinnell IA 1 83,305 01/06/94 20.500 10.45
HBBI Home Building Bancorp Washington IN 2 43,135 02/08/95 17.500 5.80
HFSA Hardin Bancorp, Inc. Hardin MO 3 86,949 09/29/95 12.000 11.55
HHFC Harvest Home Financial Corp. Cheviot OH 3 76,399 10/10/94 10.000 9.35
MIFC Mid-Iowa Financial Corp. Newton IA 6 115,260 10/14/92 6.000 10.10
PTRS Potters Financial Corp. East Liverpool OH 4 114,714 12/31/93 15.500 7.85
SFFC StateFed Financial Corporation Des Moines IA 2 76,705 01/05/94 16.500 13.42
Maximum 6 115,260 20.500 13.63
Minimum 1 41,524 6.000 5.80
Average 3 84,220 14.344 10.53
Median 3 84,545 15.313 10.77
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 33
<PAGE>
FERGUSON & CO., LLP
- -------------------
EXHIBIT II.5 - COMPARATIVES OPERATIONS
<TABLE>
<CAPTION>
Net Income Loan Total
Average Before Return on Return on Loss Noninterest
Assets Net Income Extra Items Avg Assets Avg Equity Provision Income
($000) ($000) ($000) (%) (%) ($000) ($000)
Short Name LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BDJI First Federal Bancorporation 100,022 698 698 0.70 4.74 - 465
CIBI Community Investors Bancorp 85,029 855 855 1.01 6.98 149 148
CSBF CSB Financial Group, Inc. 41,311 369 369 0.89 3.67 75 67
CZF CitiSave Financial Corp 78,482 946 946 1.21 6.68 6 1,108
FFSL First Independence Corp. 102,679 1,126 1,126 1.10 8.51 - 231
GFSB GFS Bancorp, Inc. 77,127 895 895 1.16 9.19 249 99
HBBI Home Building Bancorp 42,193 173 173 0.41 2.86 356 137
HFSA Hardin Bancorp, Inc. 82,372 622 622 0.76 4.25 22 317
HHFC Harvest Home Financial Corp. 71,440 535 535 0.75 4.14 3 43
MIFC Mid-Iowa Financial Corp. 112,195 1,048 1,048 0.93 10.00 33 920
PTRS Potters Financial Corp. 113,793 578 578 0.51 5.27 339 266
SFFC StateFed Financial Corporation 73,988 883 883 1.19 5.99 24 57
Maximum 113,793 1,126 1,126 1.21 10.00 356 1,108
Minimum 41,311 173 173 0.41 2.86 - 43
Average 81,719 727 727 0.89 6.02 105 322
Median 80,427 777 777 0.91 5.63 29 190
</TABLE>
Source: SNL Securities Inc., and F&C calculations 34
<PAGE>
FERGUSON & CO., LLP EXHIBIT 11.5 - COMPARATIVE OPERATIONS
- -------------------
<TABLE>
<CAPTION>
Total Net Loan Common Dividend Interest Interest Net Interest Gain on
Noninterest Chargeoffs/ LTM EPS Dividends Payout Income/ Expense/ Income/ Sale/
Expense Avg Loans After Extra Per Share Ratio Avg Assets Avg Assets Avg Assets Avg Assets
($000) (%) ($) ($) (%) (%) (%) (%) (%)
LTM LTM LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BDJI 2,718 0.10 0.88 - - 7.28 3.86 3.42 -
CIBI 1,749 0.22 1.26 0.120 9.52 7.82 4.31 3.51 0.08
CSBF 916 0.29 NA NA NA 6.76 3.12 3.64 -
CZF 2,788 0.24 NA NA NA 7.13 3.30 3.83 0.14
FFSL 1,764 - 1.84 0.350 19.02 7.52 4.45 3.07 -
GFSB 1,336 - 1.72 0.325 18.90 8.10 4.82 3.27 (0.06)
HBBI 1,066 1.43 0.58 0.300 51.72 7.74 4.10 3.64 -
HFSA 1,698 - NA NA NA 7.11 4.24 2.87 0.01
HHFC 1,417 - 0.63 0.400 63.49 7.07 4.02 3.05 -
MIFC 2,448 0.02 0.60 0.080 13.33 7.15 4.38 2.77 0.03
PTRS 3,003 0.72 1.09 0.230 21.10 7.14 3.87 3.27 0.01
SFFC 1,266 NA 1.11 0.400 36.04 7.82 4.32 3.50 -
Maximum 3,003 1.43 1.84 0.400 63.49 8.10 4.82 3.83 0.14
Minimum 916 - 0.58 - - 6.76 3.12 2.77 (0.06)
Average 1,847 0.27 1.08 0.245 25.90 7.39 4.07 3.32 0.02
Median 1,724 0.10 1.09 0.300 19.02 7.22 4.17 3.35 -
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS
35
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.5 - COMPARATIVES OPERATIVES
- ------------------
<TABLE>
<CAPTION>
Real Noninterest G&A Noninterest Net Oper Amortization Core
Estate Income/ Expense/ Expense/ Expenses/ of Tax Efficiency Income/
Expense Avg Assets Avg Assets Avg Assets Avg Assets Intangibles Provision Ratio Avg Assets
($000) (%) (%) (%) (%) ($000) ($000) (%) (%)
LTM LTM LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BDJI (5.00) 0.46 2.72 2.72 2.26 - 479.00 70.00 0.69
CIBI 54.00 0.17 1.99 2.06 1.82 - 443.00 54.14 0.96
CSBF - 0.16 2.22 2.22 2.06 - 209.00 58.38 0.89
CZF (7.00) 1.41 3.54 3.55 2.13 16.00 483.00 67.60 1.11
FFSL (105.00) 0.22 1.82 1.72 1.60 - 743.00 55.28 0.94
GFSB - 0.13 1.73 1.73 1.60 - 183.00 50.91 1.13
HBBI - 0.32 2.53 2.53 2.20 - 95.00 63.79 0.38
HFSA (3.00) 0.38 2.07 2.06 1.68 - 347.00 63.38 0.75
HHFC - 0.06 1.98 1.98 1.92 - 270.00 63.69 0.75
MIFC 4.00 0.82 2.18 2.18 1.36 1.00 534.00 60.64 0.92
PTRS 36.00 0.23 2.61 2.64 2.37 - 78.00 74.40 0.50
SFFC (209.00) 0.08 1.99 1.71 1.92 - 475.00 55.70 1.19
Maximum 54.00 1.41 3.54 3.55 2.37 16.00 743.00 74.40 1.19
Minimum (209.00) 0.06 1.73 1.71 1.36 - 78.00 50.91 0.38
Average (19.58) 0.37 2.28 2.26 1.91 1.42 361.58 61.49 0.85
Median - 0.23 2.13 2.12 1.92 - 395.00 62.01 0.91
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 36
<PAGE>
FERGUSON & CO., LLP
- -------------------
EXHIBIT II.5 - COMPARATIVES OPERATIONS
<TABLE>
<CAPTION>
Yield on Cost of Interest
Int Earning Int Bearing Effective Yield
Assets Liabilities Tax Rate Spread
(%) (%) (%) (%)
LTM LTM LTM LTM
<S> <C> <C> <C> <C>
BDJI 7.67 4.59 40.70 3.08
CIBI 8.02 5.08 34.13 2.94
CSBF 6.89 4.49 36.16 2.40
CZF 7.44 4.30 33.80 3.14
FFSL 7.68 5.20 39.75 2.48
GFSB 8.55 5.59 16.98 2.96
HBBI 7.96 4.65 35.45 3.31
HFSA 7.38 5.21 35.81 2.17
HHFC 7.23 4.95 33.54 2.28
MIFC 7.30 4.90 33.75 2.40
PTRS 7.36 4.33 11.89 3.03
SFFC 8.24 5.49 34.98 2.75
Maximum 8.55 5.59 40.70 3.31
Minimum 6.89 4.30 11.89 2.17
Average 7.64 4.90 32.25 2.75
Median 7.56 4.93 34.56 2.85
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 37
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.6 COMPARATIVES PRICING
- -------------------
<TABLE>
<CAPTION>
Current Current Current Current
Stock Market Price/ Price/ Price/ Price/
Abbreviated Price Value TM /core EP Book Value Book Value Assets
Ticker Name City State ($) ($M) (x) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BDJI FirstFedBcrp-MN Bemidji MN 15.125 11.77 17.19 84.59 84.59 11.22
CIBI CommInvBncrp-OH Bucyrus OH 16.250 11.40 13.66 95.98 95.98 13.28
CSBF CSBFinancialGrp-IL Centralia IL 9.625 9.96 21.00 77.62 77.62 23.99
CZF CitiSaveFinCorp-LA Baton Rouge LA 14.125 13.63 11.67 99.05 99.12 17.90
FFSL FirstIndepCorp-KS Independence KS 19.000 11.08 12.03 84.94 84.94 10.48
GFSB GFSBancorp,Inc.-IA Grinnell IA 20.500 10.45 12.28 105.02 105.02 12.54
HBBI HomeBldngBncrp-IN Washington IN 17.500 5.80 32.41 86.93 86.93 13.46
HFSA HardinBancorp-MO Hardin MO 12.000 11.55 15.00 81.36 81.36 13.97
HHFC HarvestHome-OH Cheviot OH 10.000 9.35 15.87 73.21 73.21 12.24
MIFC Mid-IowaFinCorp-IA Newton IA 6.000 10.10 10.17 93.46 93.60 8.76
PTRS PottersFin-OH East Liverpool OH 15.500 7.85 14.35 74.06 74.06 6.84
SFFC StateFedFinCorp-IA Des Moines IA 16.500 13.42 14.86 89.92 89.92 17.50
Maximum 20.500 13.63 32.41 105.02 105.02 23.99
Minimum 6.000 5.80 10.17 73.21 73.21 6.84
Average 14.344 10.53 15.87 87.18 87.20 13.52
Median 15.313 10.77 14.61 85.94 85.94 12.91
</TABLE>
SOURCE: SNL SECURITIES., AND F&C CALCULATIONS 38
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.6 - COMPARATIVES PRICING
- -------------------
<TABLE>
<CAPTION>
Tangible Return on ROACE
Current Total Equity/ Equity/ Core Avg Assets Before NPAs/ Price/
Dividend Assets Assets Tang Assets EPS Before Extra Extra Merger Current Assets Core
Yield ($000) (%) (%) ($) (%) (%) Target? Pricing (%) EPS
(%) Mst RctQ Mst RctQ Mst RctQ LTM LTM LTM (Y/N) Date Mst RctQ (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- 104,969 13.26 13.26 0.88 0.70 4.74 N 09/20/96 0.21 14.00
2.46 85,785 13.84 13.84 1.19 1.01 6.98 N 09/20/96 0.73 14.01
- 41,524 30.91 30.91 NA 0.89 NA N 09/20/96 NA 21.88
2.12 76,128 16.73 16.72 NA 1.21 6.68 N 09/20/96 0.23 16.82
2.11 105,771 12.34 12.34 1.58 1.10 8.51 N 09/20/96 0.29 11.31
1.95 83,305 11.94 11.94 1.67 1.16 9.19 N 09/20/96 1.15 9.86
1.71 43,135 13.94 13.94 0.54 0.41 2.86 N 09/20/96 0.27 19.02
3.33 86,949 17.17 17.17 NA 0.76 4.25 N 09/20/96 0.15 15.00
4.00 76,399 16.71 16.71 0.63 0.75 4.14 N 09/20/96 0.19 15.63
1.33 115,260 9.38 9.36 0.59 0.93 10.00 N 09/20/96 0.05 7.50
1.55 114,714 9.24 9.24 1.08 0.51 5.27 N 09/20/96 2.33 19.38
2.42 76,705 19.46 19.46 1.11 1.19 5.99 N 09/20/96 NA 13.75
4.00 115,260 30.91 30.91 1.67 1.21 10.00 2.33 21.88
- 41,524 9.24 9.24 0.54 0.41 2.86 0.05 7.50
1.92 84,220 15.41 15.41 1.03 0.89 6.24 0.56 14.85
2.03 84,545 13.89 13.89 1.08 0.91 5.99 0.25 14.51
</TABLE>
SOURCE: SNL SECURITIES., AND F&C CALULATIONS 39
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.6 - COMPARATIVES PRICING
- -------------------
<TABLE>
<CAPTION>
Return on ROACE
Core Avg Assets Before
EPS Before Extra Extra
($) (%) (%)
Mst RctQ Mst RctQ Mst RctQ
<S> <C> <C>
0.27 0.79 5.80
0.29 0.93 6.50
0.11 1.02 3.29
0.21 1.05 5.70
0.42 0.93 7.50
0.52 1.33 11.14
0.23 0.77 5.46
0.20 0.92 5.06
0.16 0.74 4.33
0.20 1.28 13.87
0.20 0.36 3.77
0.30 1.28 6.46
0.52 1.33 13.87
0.11 0.36 3.29
0.26 0.95 6.57
0.22 0.93 5.75
</TABLE>
SOURCE: SNL SERCURITIES INC., AND F&C CALCULATIONS 40
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.7 - COMPARATIVES BALANCE SHEET
- --------------------
<TABLE>
<CAPTION>
Total Mortgage- Investment Loan
Total Cash and Backed Net Foreclosed Servicing Total
Assets Investments Securities Loans Real Estate Rights Intangibles
($000) ($000) ($000) ($000) ($000) ($000) ($000)
Short Name Mst RctQ Mst RctQ Mst RctQ Mst RctQ Mst RctQ Mst RctQ Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BDJI First Federal Bancorporation 104,969 52,149 9,985 49,068 189 - -
CIBI Community Investors Bancorp 85,785 21,021 2,352 63,498 95 - -
CSBF CSB Financial Group, Inc. 41,524 17,909 NA 22,887 - - -
CZF CitiSave Financial Corp 76,128 29,808 2,344 43,331 64 - 8
FFSL First Independence Corp. 105,771 39,282 20,855 64,774 12 - -
GFSB GFS Bancorp, Inc. 83,305 10,120 3,435 71,773 227 -
HBBI Home Building Bancorp 43,135 13,722 4,717 28,217 - - -
HFSA Hardin Bancorp, Inc. 86,949 38,329 22,786 47,175 - - -
HHFC Harvest Home Financial Corp. 76,399 32,783 NA 41,936 - - -
MIFC Mid-Iowa Financial Corp. 115,260 52,412 29,664 60,506 37 - 16
PTRS Potters Financial Corp. 114,714 59,868 27,237 51,289 12 - -
SFFC StateFed Financial Corporation 76,705 10,101 - 62,708 1,535 - -
Maximum 115,260 59,868 29,664 71,773 1,535 - 16
Minimum 41,524 10,101 - 22,887 - - -
Average 84,220 31,459 12,338 50,597 181 - 2
Median 84,545 31,296 7,351 50,179 25 - -
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 41
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.7 - COMPARATIVES BALANCE SHEET
- -------------------
<TABLE>
<CAPTION>
Regulatory Regulatory
Other Total Total Other Total Common Total Tangible Core
Assets Deposits Borrowings Liabilities Liabilities Equity Equity Capital Capital
($000) ($000) ($000) ($000) ($000) ($000) ($000) ($000) ($000)
Mst RctQ Mst RctQ Mst RctQ Mst RctQ Mst RctQ Mst RctQ Mst RctQ Mst RctQ Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BDJI 3,497 79,860 9,854 1,337 91,051 13,918 13,918 10,298 10,298
CIBI 1,171 71,548 1,955 413 73,916 11,869 11,869 9,970 9,970
CSBF 728 28,465 - 222 28,687 12,837 12,837 NA NA
CZF 2,504 61,752 - 1,638 63,390 12,738 12,738 10,288 10,288
FFSL 1,703 68,845 22,700 1,176 92,721 13,050 13,050 10,572 10,572
GFSB 1,185 53,122 19,318 920 73,360 9,945 9,945 8,376 8,376
HBBI 1,196 32,715 4,291 114 37,120 6,015 6,015 4,389 4,389
HFSA 1,445 66,091 5,000 926 72,017 14,932 14,932 10,871 10,871
HHFC 1,680 58,226 5,000 404 63,630 12,769 12,769 NA NA
MIFC 1,933 78,705 24,000 1,748 104,453 10,807 10,807 9,031 9,031
PTRS 3,535 100,594 2,386 1,140 104,120 10,594 10,594 10,679 10,679
SFFC 2,361 45,732 15,000 1,045 61,777 14,928 14,928 NA NA
Maximum 3,535 100,594 24,000 1,748 104,453 14,932 14,932 10,871 10,871
Minimum 728 28,465 - 114 28,687 6,015 6,015 4,389 4,389
Average 1,912 62,138 9,125 924 72,187 12,034 12,034 9,386 9,386
Median 1,692 63,922 5,000 986 72,689 12,754 12,754 10,288 10,288
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 42
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.7 - COMPARATIVES BALANCE SHEET
- -------------------
<TABLE>
<CAPTION>
Regulatory Loan Loss Publicly Tangible
Total Tangible Core Risk-Based NPAs/ Reserves/ Reserves/ Reported Publicly Rep
Capital Capital/ Capital/ Capital/ Assets Assets NPLs Book Value Book Value
($000) Tangible Adj Tangible Risk-Weight (%) (%) (%) ($) ($)
Mst RctQ Assets (%) Assets (%) Assets (%) Mst RctQ Mst RctQ Mst RctQ Mst RctQ Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BDJI 10,754 12.34 12.34 25.13 0.21 0.45 NM 17.88 17.88
CIBI 10,370 11.86 11.86 24.41 0.73 0.50 81.39 16.93 16.93
CSBF NA NA NA NA NA 0.26 NA 12.40 12.40
CZF 10,344 12.93 12.93 29.45 0.23 0.09 62.83 14.26 14.25
FFSL 11,137 10.32 10.32 24.83 0.29 0.65 236.30 22.37 22.37
GFSB 8,962 10.07 10.07 18.49 1.15 0.77 87.21 19.52 19.52
HBBI 4,440 10.44 10.44 21.95 0.27 0.12 43.59 20.13 20.13
HFSA 11,010 13.78 13.78 33.06 0.15 0.16 103.73 14.75 14.75
HHFC NA NA NA NA 0.19 0.15 75.51 13.66 13.66
MIFC 9,309 7.37 7.37 21.11 0.05 0.24 513.21 6.42 6.41
PTRS 11,311 9.83 9.83 24.61 2.33 1.83 78.80 20.93 20.93
SFFC NA 13.92 13.92 24.35 NA 0.31 NA 18.35 18.35
Maximum 11,311 13.92 13.92 33.06 2.33 1.83 513.21 22.37 22.37
Minimum 4,440 7.37 7.37 18.49 0.05 0.09 43.59 6.42 6.41
Average 9,737 11.29 11.29 24.74 0.56 0.46 142.51 16.47 16.47
Median 10,370 11.15 11.15 24.51 0.25 0.29 81.39 17.41 17.41
</TABLE>
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 43
<PAGE>
FERGUSON & CO.,LLP EXHIBIT II.7 - COMPARATIVES BALANCE SHEET
- ------------------
Earn Assets/ Full-Time Loans
Int Bearing Equivalent Serviced
Liabilities Employees For Others
(%) (Actual) ($000)
Mst RctQ Mst RctQ Mst RctQ
BDJI 111.83 39 204
CIBI 114.58 23 746
CSBF 143.36 NA NA
CZF 125.15 43 1,362
FFSL 112.54 21 2,603
GFSB 109.23 16 8,193
HBBI 109.20 14 0.00
HFSA 121.12 18 3,759
HHFC 118.92 NA NA
MIFC 109.81 36 2,960
PTRS 108.22 46 643
SFFC 119.91 NA NA
Maximum 143.36 46 8,193
Minimum 108.22 14 -
Average 116.99 28 2,274
Median 113.56 23 1,362
SOURCE: SNL SECURITIES INC., AND F&C CALCULATIONS 44
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.8 - COMPARATIVES RISK CHARACTERISTICS
- -------------------
<TABLE>
<CAPTION>
PAs + Loans Net Loan
NPAs/ 90+Pst Due/ NPAs/ Reserves/ Reserves/ Chargeoffs/ Loans/
Assets Assets Equity Loans NPAs Avg Loans Assets
(%) (%) (%) (%) (%) (%) (%)
Short Name Mst RctQ Mst RctQ Mst RctQ Mst RctQ Mst RctQ Mst RctQ Mst RctQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BDJI First Federal Bancorporation 0.21 0.40 1.58 0.95 214.09 0.10 47.26
CIBI Community Investors Bancorp 0.73 0.73 5.28 0.68 69.06 0.27 74.52
CSBF CSB Financial Group, Inc. NA 0.70 NA 0.47 NA 0.39 55.38
CZF CitiSave Financial Corp 0.23 0.23 0.73 0.16 40.11 0.24 57.55
FFSL First Independence Corp. 0.29 0.37 0.70 1.05 226.97 - 61.89
GFSB GFS Bancorp, Inc. 1.15 1.15 0.23 0.89 66.63 - 86.93
HBBI Home Building Bancorp 0.27 0.27 0.37 0.18 43.59 5.32 65.53
HFSA Hardin Bancorp, Inc. 0.15 0.15 1.15 0.29 103.73 - 54.42
HHFC Harvest Home Financial Corp. 0.19 0.19 0.15 0.26 75.51 - 55.04
MIFC Mid-Iowa Financial Corp. 0.05 0.05 0.15 0.44 513.21 0.02 53.04
PTRS Potters Financial Corp. 2.33 2.33 20.19 3.93 78.44 (0.03) 46.55
SFFC StateFed Financial Corporation NA NA 0.05 0.38 NA NA 82.07
Maximum 2.33 2.33 2.33 3.93 513.21 5.32 86.93
Minimum 0.05 0.49 0.16 40.11 (0.03) 46.55 46.55
Average 0.56 0.50 0.81 143.13 0.57 61.68 61.68
Median 0.25 1.37 1.77 0.46 76.98 0.02 56.47
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATIONS 45
<PAGE>
FERGUSON & CO., LLP Exhibit II.8 - Comparatives Risk Characteristics
- -------------------
<TABLE>
<CAPTION>
One Year Intangible Earn Assets/
Cum Gap/ Assets/ Net Int Bearing
Assets Equity Loans Liabilities
(%) (%) ($000) (%)
Mst RctQ Mst RctQ Mst RctQ Mst RctQ
<S> <C> <C> <C> <C>
BDJI 4.00 - 49,068 111.83
CIBI NA - 63,498 114.58
CSBF NA - 22,887 143.36
CZF NA 0.06 43,331 125.15
FFSL (13.94) - 64,774 112.54
GFSB 13.67 - 71,773 109.23
HBBI NA - 28,217 109.20
HFSA (0.63) - 47,175 121.12
HHFC NA - 41,936 118.92
MIFC (3.02) 0.15 60,506 109.81
PTRS NA - 51,289 108.22
SFFC NA - 62,708 119.91
Maximum 13.67 0.15 71,773 143.36
Minimum (13.94) - 22,887 108.22
Average 0.02 0.02 50,597 116.99
Median (0.63) - 50,179 113.56
</TABLE>
SOURCE: SNL SECURITIES AND F&C CALCULATION 46
<PAGE>
EXHIBIT III
<PAGE>
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
CHILLICOTHE, MO.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1993 1994 1995 YTD 3/96
Num of Quarters Open for Period 4 4 4 1
($'s in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 41,345 41,404 50,640 51,729
% Change in Assets (1.52) 0.14 22.31 2.15
Total Loans 22,870 24,751 28,518 27,928
Mortgage Loans Serv for Others - - 79 78
Mortgage Loans Serv by Others 3,843 6,088 7,976 7,926
Total Savings Deposits 37,399 35,881 34,868 35,436
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 2,748 2,824 3,329 3,358
GAAP Capital 2,748 2,824 3,329 3,358
Tangible Capital 2,748 2,937 3,243 3,326
Core Capital 2,748 2,937 3,243 3,326
Risk-Based Capital 2,806 2,993 3,285 3,381
Equity Capital/Total Assets 6.65 6.82 6.57 6.49
Core Cap/Risk Based Assets 16.23 16.53 16.20 16.42
Core Cap/Adj Tangible Assets 6.65 7.10 6.42 6.44
Tangible Cap/Tangible Assets 6.65 7.10 6.42 6.44
Risk-Based Cap/Risk-Wt Assets 16.57 16.85 16.41 16.69
PROFITABILITY:
Net Income(Loss) 193 241 309 95
Ret on Avg Assets Bef Ext Item 0.40 0.58 0.67 0.74
Return on Avg GAAP Capital 6.33 8.65 10.14 11.36
Net Interest Income/Avg Assets 2.50 2.53 2.55 2.85
Noninterest Income/Avg Assets 0.75 0.83 0.74 0.68
Noninterest Expense/Avg Assets 2.67 2.51 2.24 2.21
Yield/Cost Spread 2.43 2.45 2.44 2.76
LIQUIDITY:
Int Earn Assets/Int Bear Liab 107.17 108.36 107.85 107.08
Brokered Deposits/Tot Deposits - - - -
Amt Eligible as Reg Liquidity 5,521 3,082 3,907 4,289
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.37 0.26 0.06 0.65
Nonaccrual Loans/Gross Loans 0.37 0.23 0.06 0.65
Nonaccrual Loans/Loan Loss Res 113.33 70.89 18.82 222.22
Reposs Assets/Total Assets - 0.02 - 0.00
Net Chrg-Offs/Avg Adj Lns - - (0.00) 0.06
Non 1-4 Con/Conv Lns/Tot Assts 5.42 5.92 5.25 4.56
</TABLE>
1
<PAGE>
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
SELECTED PEER GROUP RATIOS & RANKINGS
<TABLE>
<CAPTION>
Peer Group Category 2 2 3 3
<S> <C> <C> <C> <C>
CAPITAL:
Equity Capital/Total Assets 6.65 6.82 6.57 6.49
Peer Group Percentile 23 20 17 15
GAAP Capital/GAAP Assets 6.65 6.82 6.57 6.49
Peer Group Percentile 23 20 17 15
Core Cap/Adj Tangible Assets 6.65 7.10 6.42 6.44
Peer Group Percentile 26 24 17 17
Tangible Cap/Tangible Assets 6.65 7.10 6.42 6.44
Peer Group Percentile 26 24 17 17
Risk-Based Cap/Risk-Wt Assets 16.57 16.85 16.41 16.69
Peer Group Percentile 40 36 39 38
ASSET QUALITY:
Risk Assets/Total Assets 5.42 5.94 5.25 4.56
Peer Group Percentile 57 51 60 67
Risk Weighted Assts/Tot Assts 40.98 42.91 39.54 39.16
Peer Group Percentile 74 69 85 87
Nonaccrual Loans/Gross Loans 0.37 0.23 0.06 0.65
Peer Group Percentile 44 47 63 38
Repos Assets/Tot Assets - 0.02 - 0.00
Peer Group Percentile 100 47 100 100
90+ Day Del Loans/Gross Loans - - - -
Peer Group Percentile 100 100 100 100
90Day P Due+NonAccr-(1-4)/LLR 2.67 1.27 1.18 191.36
Peer Group Percentile 58 59 72 8
LIQUIDITY:
Avg Reg Liquidity Ratio 14.53 10.00 9.18 9.53
Peer Group Percentile 36 28 25 27
PROFITABILITY:
Ret on Avg Assets Bef Ext Item 0.40 0.58 0.67 0.74
Peer Group Percentile 12 28 41 50
Return on Equity Capital 6.11 8.53 9.28 11.32
Peer Group Percentile 13 55 72 84
Return on Average GAAP Capital 6.33 8.65 10.14 11.36
Peer Group Percentile 13 50 74 83
Int Earn Assets/Int Bear Liab 107.17 108.36 107.85 107.08
Peer Group Percentile 51 50 40 32
Yield on Earning Assts 6.30 6.25 7.20 7.74
Peer Group Percentile 10 10 19 50
Cost of Funds 3.87 3.80 4.75 4.98
Peer Group Percentile 65 54 52 38
Yield/Cost Spread 2.43 2.45 2.44 2.76
Peer Group Percentile 11 11 22 42
</TABLE>
2
<PAGE>
EXHIBIT IV
<PAGE>
FIRST FEDERAL BANKING AND SAVINGS, FBS
BEMIDJI, MN.
BDJI
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
1993 1994 1995 YTD 3/96
Num of Quarters Open for Period 4 4 4 1
($'s in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 85,952 89,395 98,506 98,724
% Change in Assets (1.70) 4.01 10.19 0.22
Total Loans 48,594 47,744 47,414 48,073
Mortgage Loans Serv for Others 385 278 224 214
Mortgage Loans Serv by Others 4,612 5,903 7,834 8,898
Total Savings Deposits 78,271 81,689 84,064 82,606
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 6,811 6,419 12,090 12,000
GAAP Capital 6,811 6,419 12,090 12,000
Tangible Capital 6,811 7,302 12,072 12,200
Core Capital 6,811 7,302 12,072 12,200
Risk-Based Capital 7,325 7,811 12,540 12,667
Equity Capital/Total Assets 7.92 7.18 12.27 12.16
Core Cap/Risk Based Assets 14.56 15.21 23.63 24.20
Core Cap/Adj Tangible Assets 7.93 8.09 12.26 12.34
Tangible Cap/Tangible Assets 7.93 8.09 12.26 12.34
Risk-Based Cap/Risk-Wt Assets 15.66 16.27 24.55 25.13
PROFITABILITY:
Net Income(Loss) 742 565 632 121
Ret on Avg Assets Bef Ext Item 0.72 0.64 0.66 0.49
Return on Avg GAAP Capital 9.66 8.54 6.42 4.02
Net Interest Income/Avg Assets 3.14 3.20 3.31 3.16
Noninterest Income/Avg Assets 0.41 0.43 0.42 0.42
Noninterest Expense/Avg Assets 2.39 2.46 2.64 2.77
Yield/Cost Spread 3.17 3.28 3.23 2.94
LIQUIDITY:
Int Earn Assets/Int Bear Liab 107.03 104.64 113.43 112.31
Brokered Deposits/Tot Deposits - - - -
Amt Eligible as Reg Liquidity 17,343 19,286 24,403 24,082
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+RE 0.73 0.27 0.77 0.47
Nonaccrual Loans/Gross Loans 0.13 0.04 - 0.02
Nonaccrual Loans/Loan Loss Res 11.44 3.58 - 2.08
Reposs Assets/Total Assets 0.07 0.06 0.17 0.17
Net Chrg-Offs/Avg Adj Lns 0.10 0.06 0.06 0.03
Non 1-4 Con/Conv Lns/Tot Assts 8.35 10.22 10.35 11.84
</TABLE>
1
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
BUCYRUS, OH.
CIBI
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1993 1994 1995 YTD 3/96
Num of Quarters Open for Period 4 4 4 1
($'s in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 75,811 79,922 82,948 84,070
% Change in Assets 2.17 5.42 3.79 1.35
Total Loans 55,331 58,297 62,038 63,601
Mortgage Loans Serv for Others 1,288 437 821 746
Mortgage Loans Serv by Others 429 437 836 1,078
Total Savings Deposits 69,033 70,751 71,230 71,691
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 4,923 5,570 9,784 9,985
GAAP Capital 4,923 5,570 9,784 9,985
Tangible Capital 4,923 5,570 9,772 9,970
Core Capital 4,923 5,570 9,772 9,970
Risk-Based Capital 5,269 5,918 10,143 10,370
Equity Capital/Total Assets 6.49 6.97 11.80 11.88
Core Cap/Risk Based Assets 13.54 14.32 24.10 23.47
Core Cap/Adj Tangible Assets 6.49 6.97 11.78 11.86
Tangible Cap/Tangible Assets 6.49 6.97 11.78 11.86
Risk-Based Cap/Risk-Wt Assets 14.49 15.21 25.01 24.41
PROFITABILITY:
Net Income(Loss) 672 682 787 204
Ret on Avg Assets Bef Ext Item 0.90 0.88 0.96 0.98
Return on Avg GAAP Capital 14.65 13.00 8.80 8.25
Net Interest Income/Avg Assets 3.30 3.22 3.22 3.65
Noninterest Income/Avg Assets 0.13 0.19 0.26 0.11
Noninterest Expense/Avg Assets 1.78 1.81 1.81 1.97
Yield/Cost Spread 3.21 3.07 2.84 3.31
LIQUIDITY:
Int Earn Assets/Int Bear Liab 104.93 107.62 111.61 110.82
Brokered Deposits/Tot Deposit - - - -
Amt Eligible as Reg Liquidity 12,093 14,311 15,396 14,560
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 2.76 1.06 1.09 0.97
Nonaccrual Loans/Gross Loans 2.13 0.74 0.87 0.81
Nonaccrual Loans/Loan Loss Res 307.95 110.91 131.58 122.17
Reposs Assets/Total Assets 0.23 0.10 0.16 0.11
Net Chrg-Offs/Avg Adj Lns 0.43 0.17 0.30 0.16
Non 1-4 Con/Conv Lns/Tot Assts 3.38 4.39 4.92 4.81
</TABLE>
SOURCE:SHESHUNOFF INFORMATION SERVICES, INC. 2
<PAGE>
CENTRALIA SAVINGS BANK
CENTRALIA, IL
CSBF
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1993 1994 1995 YTD 6/96
Number of Open Quarters 4 4 4 1
($'s in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 53,507 56,974 61,276 64,394
% Change in Assets 6.36 6.48 7.55 5.09
Securities-Book Value 22,101 25,029 22,295 25,300
Securities-Fair Value 22,427 23,731 22,164 25,098
Total Loans & Leases 26,645 28,571 31,285 34,042
Total Deposits 48,738 51,794 55,349 58,752
Loan/Deposit Ratio 54.67 55.16 56.52 57.94
Provision for Loan Losses 30 4 10 3
CAPITAL:
Equity Capital 4,675 5,051 5,561 5,290
Total Qualifying Capital(Est) 5,030 5,489 5,997 6,167
Equity Capital/Average Assets 9.01 9.14 9.54 8.37
Tot Qual Cap/Rk Bsd Asts(Est) 17.73 17.27 18.01 14.73
Tier 1 Cap/Rsk Bsed Asts(Est) 16.48 16.04 16.79 13.78
T1 Cap/Avg Assets(Lev Est) 8.77 8.93 9.31 8.95
Dividends Declared/Net Income 8.32 32.15 28.78 53.48
PROFITABILITY:
Net Income(Loss) 601 622 695 374
Return on Average Assets 1.16 1.13 1.19 1.18
Return on Average Equity Cap 13.67 12.79 13.17 13.89
Net Interest Margin 3.90 4.02 4.05 3.49
Net Int Income/Avg Assets 3.68 3.81 3.84 3.29
Noninterest Income/Avg Assets 0.81 0.75 0.68 0.79
Noninterest Exp/Avg Assets 3.22 3.10 2.99 2.66
ASSET QUALITY:
NPL+Frcl RE/Lns+Frcl RE 2.89 2.09 0.53 0.37
NPA's/Equity + LLR 15.31 11.04 2.80 2.23
LLR/Nonperf & Restrcd Lns 66.04 108.89 519.23 598.51
Foreclosed RE/Total Assets 0.35 0.42 0.15 0.09
90+ Day Del Loans/Total Loans 0.08 0.56 0.09 0.01
Loan Loss Reserves/Total Lns 1.45 1.37 1.29 1.18
Net Charge-Offs/Average Loans 0.09 (0.00) (0.01) 0.04
Dom Risk R/E Lns/Tot Dom Lns1 9.17 19.53 20.15 10.76
LIQUIDITY:
Brokered Dep/Total Dom Deps - - - -
$100M+ Time Dep/Total Dom Dep 14.54 14.50 19.11 20.67
Int Earn Assets/Int Bear Liab 120.47 119.67 120.45 116.36
Pledged Sec/Total Sec 4.77 17.91 22.76 26.30
Fair Value Sec/Amort Cost Sec 101.48 94.55 99.20 96.45
</TABLE>
3
<PAGE>
CITIZENS SAVINGS ASSOCIATION
BATON ROUGE, LA
CZF
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1993 1994 1995 YTD 3/96
Num of Quarters Open for Period 4 4 4 1
($'s in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 72,591 69,889 76,693 78,114
% Change in Assets (0.99 (3.72) 9.74 1.85
Total Loans 36,188) 34,564 41,878 43,745
Mortgage Loans Serv for Others 2,532 2,201 1,743 1,395
Mortgage Loans Serv by Others188 129 120 117
Total Savings Deposits 66,714 63,366 65,119 66,196
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 5,471 6,091 9,805 10,047
GAAP Capital 5,471 6,091 9,805 10,047
Tangible Capital 4,504 5,155 9,788 10,034
Core Capital 4,504 5,155 9,788 10,034
Risk-Based Capital 4,600 5,231 9,842 10,107
Equity Capital/Total Assets 7.54 8.72 12.78 12.86
Core Cap/Risk Based Assets 16.84 19.46 29.70 29.24
Core Cap/Adj Tangible Assets 6.26 7.46 12.85 12.93
Tangible Cap/Tangible Assets 6.26 7.46 12.85 12.93
Risk-Based Cap/Risk-Wt Assets 17.20 19.75 29.87 29.45
PROFITABILITY:
Net Income(Loss) 979 620 775 213
Ret on Avg Assets Bef Ext Item 1.34 0.87 1.03 1.10
Return on Avg GAAP Capital 19.65 10.72 10.92 8.58
Net Interest Income/Avg Assets 3.56 3.32 3.47 3.61
Noninterest Income/Avg Assets 0.51 0.51 0.69 0.72
Noninterest Expense/Avg Assets 2.63 2.76 2.78 2.87
Yield/Cost Spread 3.63 3.39 3.39 3.49
LIQUIDITY:
Int Earn Assets/Int Bear Liab 108.28 107.96 118.12 117.17
Brokered Deposits/Tot Deposits - - - -
Amt Eligible as Reg Liquidity 30,166 29,645 29,559 29,034
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.44 0.62 0.51 0.55
Nonaccrual Loans/Gross Loans - - - -
Nonaccrual Loans/Loan Loss Res - - - -
Reposs Assets/Total Assets 0.11 - 0.05 -
Net Chrg-Offs/Avg Adj Lns 0.03 (0.00) 0.06 (0.03)
Non 1-4 Con/Conv Lns/Tot Assts 6.85 6.13 6.03 5.91
</TABLE>
4
Source:Sheshunoff Information Services, Inc.
<PAGE>
FIRST FEDERAL SAVINGS & LOAN ASSOCIATION
INDEPENDENCE, KS
FFSL
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1993 1994 1995 YTD 3/96
<S> <C> <C> <C> <C>
Num of Quarters Open for Period 4 4 4 1
($'s in Thousands)
BALANCE SHEET:
Total Assets 85,997 91,415 100,497 99,893
% Change in Assets (1.68) 6.30 9.93 (0.60)
Total Loans 58,390 57,559 61,344 62,107
Mortgage Loans Serv for Others - - - -
Mortgage Loans Serv by Others 6,198 5,541 5,155 5,089
Total Savings Deposits 71,466 64,612 71,712 73,290
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 9,501 9,782 10,076 10,320
GAAP Capital 9,501 9,782 10,076 10,320
Tangible Capital 9,501 9,769 10,026 10,312
Core Capital 9,501 9,769 10,026 10,312
Risk-Based Capital 10,000 10,270 10,569 10,861
Equity Capital/Total Assets 11.05 10.70 10.03 10.33
Core Cap/Risk Based Assets 23.88 24.49 23.18 23.57
Core Cap/Adj Tangible Assets 11.05 10.69 9.98 10.32
Tangible Cap/Tangible Assets 11.05 10.69 9.98 10.32
Risk-Based Cap/Risk-Wt Assets 25.14 25.75 24.43 24.83
PROFITABILITY:
Net Income(Loss) 1,285 1,195 1,178 268
Ret on Avg Assets Bef Ext Item 1.20 1.35 1.22 1.07
Return on Avg GAAP Capital 14.08 12.39 11.36 10.51
Net Interest Income/Avg Assets 3.69 3.76 3.25 3.01
Noninterest Income/Avg Assets 0.19 0.09 0.44 0.15
Noninterest Expense/Avg Assets 1.68 1.75 1.75 1.79
Yield/Cost Spread 3.62 3.52 2.86 2.63
LIQUIDITY:
Int Earn Assets/Int Bear Liab 111.33 111.14 109.85 110.39
Brokered Deposits/Tot Deposits - - - -
Amt Eligible as Reg Liquidity 8,051 4,268 4,837 6,707
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 4.90 2.66 1.39 1.56
Nonaccrual Loans/Gross Loans 0.85 1.26 0.84 1.06
Nonaccrual Loans/Loan Loss Res 77.30 107.17 76.09 96.81
Reposs Assets/Total Assets 0.61 0.19 0.06 0.00
Net Chrg-Offs/Avg Adj Lns 0.07 (0.05) 0.01 0.00
Non 1-4 Con/Conv Lns/Tot Assts 10.66 9.59 8.62 8.74
</TABLE>
SOURCE:SHESHUNOFF INFORMATION SERVICES, INC. 5
<PAGE>
GRINNELL FEDERAL SAVINGS BANK
GRINNELL, IA
GFSB
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1993 1994 1995 YTD 3/96
<S> <C> <C> <C> <C>
Num of Quarters Open for Period 4 4 4 1
($'s in Thousands)
BALANCE SHEET:
Total Assets 59,489 61,028 79,392 79,431
% Change in Assets 18.60 2.59 30.09 0.05
Total Loans 36,501 49,805 65,255 67,720
Mortgage Loans Serv for Others 79 501 1,537 3,976
Mortgage Loans Serv by Others 9,061 12,883 17,771 17,325
Total Savings Deposits 51,196 43,412 47,780 51,092
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 4,194 6,779 7,725 7,992
GAAP Capital 4,194 6,779 7,725 7,992
Tangible Capital 4,167 6,779 7,776 7,992
Core Capital 4,167 6,779 7,776 7,992
Risk-Based Capital 14,534 7,179 8,180 8,404
Equity Capital/Total Assets 7.05 11.11 9.73 10.06
Core Cap/Risk Based Assets 14.22 20.40 17.53 17.58
Core Cap/Adj Tangible Assets 7.01 11.11 9.79 10.07
Tangible Cap/Tangible Assets 7.01 11.11 9.79 10.07
Risk-Based Cap/Risk-Wt Assets 15.47 21.60 18.45 18.49
PROFITABILITY:
Net Income(Loss) 411 534 670 223
Ret on Avg Assets Bef Ext Item 0.84 0.89 0.97 1.12
Return on Avg GAAP Capital 11.51 9.73 9.28 11.35
Net Interest Income/Avg Assets 2.76 3.05 2.88 3.07
Noninterest Income/Avg Assets 0.26 0.31 0.27 0.35
Noninterest Expense/Avg Assets 1.63 1.96 1.70 1.59
Yield/Cost Spread 2.57 2.80 2.43 2.69
LIQUIDITY:
Int Earn Assets/Int Bear Liab 106.24 112.88 111.30 110.89
Brokered Deposits/Tot Deposits - - - -
Amt Eligible as Reg Liquidity 12,906 2,502 6,938 4,938
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 1.44 0.17 0.13 0.60
Nonaccrual Loans/Gross Loans 0.00 0.06 0.13 0.41
Nonaccrual Loans/Loan Loss Res 0.00 7.25 21.29 70.39
Reposs Assets/Total Assets 0.38 0.05 0.00 0.08
Net Chrg-Offs/Avg Adj Lns 0.42 0.00 0.01 0.00
Non 1-4 Con/Conv Lns/Tot Assts 16.42 24.31 24.69 25.47
</TABLE>
SOURCE:SHESHUNOFF INFORMATION SERVICES, INC. 6
<PAGE>
HOME BUILDING SAVINGS BANK, FSB
WASHINGTON, IN
HBBI
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1993 1994 1995 YTD 3/96
<S> <C> <C> <C> <C>
Num of Quarters Open for Period 4 4 4 1
($'s in Thousands)
BALANCE SHEET:
Total Assets 42,816 42,107 42,796 42,143
% Change in Assets 4.22 (1.66) 1.64 (1.53)
Total Loans 30,583 29,944 29,177 28,372
Mortgage Loans Serv for Others - - - -
Mortgage Loans Serv by Others 2,626 1,897 10,098 1,429
Total Savings Deposits 37,235 36,629 33,283 33,238
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 2,795 3,090 4,639 4,413
GAAP Capital 2,795 3,090 4,639 4,413
Tangible Capital 2,795 3,090 4,611 4,393
Core Capital 2,795 3,090 4,611 4,393
Risk-Based Capital 2,840 3,167 4,688 4,827
Equity Capital/Total Assets 6.53 7.34 10.84 10.47
Core Cap/Risk Based Assets 12.92 13.65 20.99 19.98
Core Cap/Adj Tangible Assets 6.53 7.35 10.79 10.44
Tangible Cap/Tangible Assets 6.53 7.35 10.79 10.44
Risk-Based Cap/Risk-Wt Assets 13.13 13.99 21.35 21.95
PROFITABILITY:
Net Income(Loss) 436 327 421 (138)
Ret on Avg Assets Bef Ext Item 1.04 0.77 1.01 (1.30)
Return on Avg GAAP Capital 16.92 11.11 9.69 (12.20)
Net Interest Income/Avg Assets 3.25 3.21 3.47 3.33
Noninterest Income/Avg Assets 0.30 0.27 0.37 0.16
Noninterest Expense/Avg Assets 1.94 2.10 2.27 2.29
Yield/Cost Spread 3.36 3.32 3.39 3.31
LIQUIDITY:
Int Earn Assets/Int Bear Liab 101.49 102.82 105.60 106.03
Brokered Deposits/Tot Deposits - - - -
Amt Eligible as Reg Liquidity 7,556 4,559 4,210 4,677
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.27 0.68 0.32 0.34
Nonaccrual Loans/Gross Loans 0.09 0.67 0.20 0.34
Nonaccrual Loans/Loan Loss Res 64.44 263.64 77.92 22.35
Reposs Assets/Total Assets - - 0.08 -
Net Chrg-Offs/Avg Adj Lns 0.01 0.03 - -
Non 1-4 Con/Conv Lns/Tot Assts 0.80 0.53 0.81 0.80
</TABLE>
SOURCE:SHESHUNOFF INFORMATION SERVICES, INC. 7
<PAGE>
HARDIN FEDERAL SAVINGS BANK
HARDIN, MO
HFSA
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1993 1994 1995 YTD 3/96
<S> <C> <C> <C> <C>
Num of Quarters Open for Period 4 4 4 1
($'s in Thousands)
BALANCE SHEET:
Total Assets 73,573 74,813 78,663 78,848
% Change in Assets (0.89) 1.69 5.15 0.24
Total Loans 28,953 33,011 42,287 45,375
Mortgage Loans Serv for Others 1,691 12,103 10,425 9,910
Mortgage Loans Serv by Others 1,691 2,281 6,347 5,913
Total Savings Deposits 66,933 67,651 66,219 66,605
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 5,846 6,182 10,801 10,766
GAAP Capital 5,846 6,182 10,801 10,766
Tangible Capital 5,812 6,401 10,930 10,889
Core Capital 5,846 6,410 10,930 10,889
Risk-Based Capital 5,946 6,516 11,009 11,020
Equity Capital/Total Assets 7.95 8.26 13.73 13.65
Core Cap/Risk Based Assets 24.18 25.36 35.35 32.66
Core Cap/Adj Tangible Assets 7.95 8.54 13.87 13.78
Tangible Cap/Tangible Assets 7.90 8.53 13.87 13.78
Risk-Based Cap/Risk-Wt Assets 24.59 25.78 35.60 33.06
PROFITABILITY:
Net Income(Loss) 593 565 381 131
Ret on Avg Assets Bef Ext Item 0.80 0.76 0.50 0.67
Return on Avg GAAP Capital 10.68 9.39 4.72 4.86
Net Interest Income/Avg Assets 2.58 2.47 2.34 2.87
Noninterest Income/Avg Assets 0.45 0.31 0.39 0.36
Noninterest Expense/Avg Assets 1.60 1.75 1.96 2.10
Yield/Cost Spread 2.44 2.31 1.97 2.34
LIQUIDITY:
Int Earn Assets/Int Bear Liab 105.31 106.01 113.62 113.41
Brokered Deposits/Tot Deposits - - - -
Amt Eligible as Reg Liquidity 9,886 10,896 7,545 6,037
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.70 0.58 0.36 0.33
Nonaccrual Loans/Gross Loans 0.48 0.40 0.22 0.20
Nonaccrual Loans/Loan Loss Res 127.27 110.94 81.20 70.99
Reposs Assets/Total Assets 0.06 0.04 0.04 0.04
Net Chrg-Offs/Avg Adj Lns - (0.00) 0.01 -
Non 1-4 Con/Conv Lns/Tot Assts 0.48 0.48 0.42 1.38
</TABLE>
SOURCE:SHESHUNOFF INFORMATION SERVICES, INC. 8
<PAGE>
HARVEST HOME SAVINGS BANK
CHEVIOT, OH
HHFC
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1993 1994 1995 YTD 6/96
Number of Open Quarters 4 4 4 2
($'s in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 3,387,345 3,733,398 4,572,764 4,550,184
% Change in Assets 12.86 10.22 22.48 (0.49)
Securities-Book Value 1,362,326 1,299,627 1,404,843 1,310,178
Securities-Fair Value 1,387,869 1,249,110 1,409,107 1,311,262
Total Loans & Leases 1,802,050 2,187,807 2,793,175 2,942,215
Total Deposits 3,079,924 3,334,934 4,114,600 4,064,345
Loan/Deposit Ratio 58.5 65.6 67.9 72.4
Provision for Loan Losses 6,000 3,545 2,669 1,750
CAPITAL:
Equity Capital 233,598 264,348 366,380 351,915
Total Qualifying Capital(Est) 255,304 307,247 395,251 393,246
Equity Capital/Average Assets 7.31 7.42 8.55 7.78
Tot Qual Cap/Rk Bsd Asts(Est) 13.98 14.10 14.50 13.77
Tier 1 Cap/Rsk Bsed Asts(Est) 12.72 12.85 13.25 12.52
T1 Cap/Avg Assets(Lev Est) 6.86 7.49 8.11 7.91
Dividends Declared/Net Income 38.01 50.29 57.44 112.31
PROFITABILITY:
Net Income(Loss) 55,246 59,253 62,677 35,615
Return on Average Assets 1.73 1.66 1.46 1.57
Return on Average Equity Cap 27.21 23.80 19.32 19.67
Net Interest Margin 4.41 4.41 4.27 4.19
Net Int Income/Avg Assets 4.21 4.17 4.03 3.95
Noninterest Income/Avg Assets 0.55 0.45 0.44 0.43
Noninterest Exp/Avg Assets 2.12 2.15 2.06 1.95
ASSET QUALITY:
NPL+Frcl RE/Lns+Frcl RE 1.99 1.42 1.02 0.93
NPA's/Equity + LLR 13.39 10.33 7.06 7.01
LLR/Nonperf & Restrcd Lns 107.20 150.46 183.34 186.18
Foreclosed RE/Total Assets 0.09 0.18 0.15 0.12
90+ Day Del Loans/Total Loans 0.47 0.25 0.29 0.31
Loan Loss Reserves/Total Lns 1.95 1.67 1.42 1.41
Net Charge-Offs/Average Loans 0.25 0.18 0.20 0.00
Dom Risk R/E Lns/Tot Dom Lns 23.47 25.69 23.95 24.55
LIQUIDITY:
Brokered Dep/Total Dom Deps - - - -
$100M+ Time Dep/Total Dom Dep 4.40 7.40 12.82 11.71
Int Earn Assets/Int Bear Liab 119.28 117.51 118.50 118.18
Pledged Sec/Total Sec 5.01 9.72 8.81 7.12
Fair Value Sec/Amort Cost Sec 101.88 94.08 100.67 99.18
</TABLE>
SOURCE:SHESHUNOFF INFORMATION SERVICES, INC. 9
<PAGE>
MID-IOWA SAVINGS BANK, FSB
NEWTON, IA
MIFC
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1993 1994 1995 YTD 6/96
<S> <C> <C> <C> <C>
Num of Quarters Open for Period 4 4 4 1
($'s in Thousands)
BALANCE SHEET:
Total Assets 91,312 103,372 107,780 117,752
% Change in Assets 2.61 13.21 4.26 9.25
Total Loans 51,204 56,054 60,372 59,839
Mortgage Loans Serv for Others 3,338 3,432 3,506 3,259
Mortgage Loans Serv by Others 5,881 5,510 5,906 6,075
Total Savings Deposits 79,592 80,526 78,842 88,777
Broker Originated Deposits - 497 - -
CAPITAL:
Equity Capital 7,423 7,908 8,469 8,706
GAAP Capital 7,423 7,908 8,469 8,706
Tangible Capital 7,414 7,900 8,445 8,682
Core Capital 7,416 7,901 8,445 8,682
Risk-Based Capital 7,685 8,153 8,703 8,943
Equity Capital/Total Assets 8.13 7.65 7.86 7.39
Core Cap/Risk Based Assets 19.00 19.47 21.17 20.49
Core Cap/Adj Tangible Assets 8.13 7.65 7.84 7.37
Tangible Cap/Tangible Assets 8.12 7.65 7.84 7.37
Risk-Based Cap/Risk-Wt Assets 19.68 20.09 21.82 21.11
PROFITABILITY:
Net Income(Loss) 1,091 971 836 235
Ret on Avg Assets Bef Ext Item 1.17 1.00 0.79 0.83
Return on Avg GAAP Capital 14.68 12.67 10.08 10.95
Net Interest Income/Avg Assets 3.11 2.86 2.51 2.59
Noninterest Income/Avg Assets 0.72 0.59 0.48 0.38
Noninterest Expense/Avg Assets 2.06 1.93 1.79 1.70
Yield/Cost Spread 2.92 2.66 2.23 2.36
LIQUIDITY:
Int Earn Assets/Int Bear Liab 108.33 108.01 107.90 106.80
Brokered Deposits/Tot Deposits - 0.62 - -
Amt Eligible as Reg Liquidity 7,704 7,521 12,464 18,801
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.64 0.15 0.41 0.40
Nonaccrual Loans/Gross Loans 0.03 0.15 0.03 0.08
Nonaccrual Loans/Loan Loss Res 5.84 30.86 7.34 17.18
Reposs Assets/Total Assets 0.17 - - 0.01
Net Chrg-Offs/Avg Adj Lns 0.17 0.10 0.07 0.05
Non 1-4 Con/Conv Lns/Tot Assts 4.99 4.56 6.09 5.57
</TABLE>
SOURCE:SHESHUNOFF INFORMATION SERVICES, INC. 10
<PAGE>
POTTERS SAVINGS & LOAN COMPANY
EAST LIVERPOOL, OH
PTRS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1993 1994 1995 YTD 3/96
Num of Quarters Open for Period 4 4 4 1
($'s in Thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 114,088 111,013 114,280 113,986
% Change in Assets (3.71) (2.70) 2.94 (0.26)
Total Loans 47,768 51,061 51,162 51,309
Mortgage Loans Serv for Others - 984 743 706
Mortgage Loans Serv by Others 11,617 9,997 9,059 7,364
Total Savings Deposits 103,571 100,636 99,454 101,086
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 9,952 9,793 11,189 11,081
GAAP Capital 9,952 9,793 11,189 11,081
Tangible Capital 9,895 9,793 11,211 11,222
Core Capital 9,952 9,793 11,211 11,222
Risk-Based Capital 10,544 10,385 11,824 11,842
Equity Capital/Total Assets 8.72 8.82 9.79 9.72
Core Cap/Risk Based Assets 20.93 21.30 23.66 23.32
Core Cap/Adj Tangible Assets 8.73 8.82 9.81 9.83
Tangible Cap/Tangible Assets 8.68 8.82 9.81 9.83
Risk-Based Cap/Risk-Wt Assets 22.18 22.59 24.96 24.61
PROFITABILITY:
Net Income(Loss) (3,316) 664 828 10
Ret on Avg Assets Bef Ext Item (3.05) 0.59 0.74 0.04
Return on Avg GAAP Capital (38.23) 6.73 7.87 0.36
Net Interest Income/Avg Assets 2.65 3.20 3.30 3.16
Noninterest Income/Avg Assets 0.50 0.34 0.33 0.26
Noninterest Expense/Avg Assets 5.67 2.75 2.68 2.59
Yield/Cost Spread 2.75 3.18 3.21 3.03
LIQUIDITY:
Int Earn Assets/Int Bear Liab 106.82 106.16 107.58 107.16
Brokered Deposits/Tot Deposits - - - -
Amt Eligible as Reg Liquidity 25,400 12,725 15,586 17,385
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 8.21 5.27 4.72 5.30
Nonaccrual Loans/Gross Loans 2.08 0.22 0.33 0.92
Nonaccrual Loans/Loan Loss Res 47.35 5.26 7.33 19.01
Reposs Assets/Total Assets 0.66 0.36 0.07 0.09
Net Chrg-Offs/Avg Adj Lns 1.57 0.75 0.00 0.20
Non 1-4 Con/Conv Lns/Tot Assts 11.51 10.22 9.99 9.33
</TABLE>
SOURCE:SHESHUNOFF INFORMATION SERVICES, INC. 11
<PAGE>
STATE FS&LA OF DES MOINES
DES MOINES, IA
SFFC
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1993 1994 1995 YTD 3/96
<S> <C> <C> <C> <C>
Num of Quarters Open for Period 4 4 4 1
($'s in Thousands)
BALANCE SHEET:
Total Assets 64,900 64,977 71,246 71,465
% Change in Assets 12.09 0.12 9.65 0.31
Total Loans 47,643 54,307 60,444 61,297
Mortgage Loans Serv for Others - - 4,125 4,100
Mortgage Loans Serv by Others 1,998 1,680 1,032 1,023
Total Savings Deposits 53,460 46,043 46,201 46,435
Broker Originated Deposits - - 396 86
CAPITAL:
Equity Capital 6,699 10,101 10,067 10,289
GAAP Capital 6,699 10,101 10,067 10,289
Tangible Capital 6,439 9,641 9,537 9,773
Core Capital 6,439 9,641 9,537 9,773
Risk-Based Capital 6,621 9,845 9,765 10,007
Equity Capital/Total Assets 10 16 14 14
Core Cap/Risk Based Assets 19.52 27.98 24.47 23.78
Core Cap/Adj Tangible Assets 10.02 15.14 13.63 13.92
Tangible Cap/Tangible Assets 10.02 15.14 13.63 13.92
Risk-Based Cap/Risk-Wt Assets 20.08 28.57 25.05 24.35
PROFITABILITY:
Net Income(Loss) 762 803 729 215
Ret on Avg Assets Bef Ext Item 1.34 1.24 1.07 1.21
Return on Avg GAAP Capital 12.96 9.56 6.99 8.45
Net Interest Income/Avg Assets 3.65 3.83 3.46 3.45
Noninterest Income/Avg Assets 0.25 0.26 0.32 0.35
Noninterest Expense/Avg Assets 1.77 2.05 2.02 1.92
Yield/Cost Spread 3.44 3.51 2.90 2.98
LIQUIDITY:
Int Earn Assets/Int Bear Liab 110.20 121.29 116.63 115.23
Brokered Deposits/Tot Deposits - - 0.86 0.19
Amt Eligible as Reg Liquidity 8,692 3,719 2,988 2,798
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.55 0.22 0.64 1.30
Nonaccrual Loans/Gross Loans 0.08 0.21 - 0.18
Nonaccrual Loans/Loan Loss Res 21.43 57.84 - 49.15
Reposs Assets/Total Assets 0.23 - - -
Net Chrg-Offs/Avg Adj Lns - 0.07 - -
Non 1-4 Con/Conv Lns/Tot Assts 24.18 28.11 27.78 28.50
</TABLE>
SOURCE:SHESHUNOFF INFORMATION SERVICES, INC. 12
<PAGE>
EXHIBIT V
<PAGE>
FERGUSON & CO., LLP EXHIBIT V - PRO FORMA ASSUMPTIONS
- -------------------
1. Net proceeds from the conversion were invested at the beginning of the
period at 5.80%, which was the approximate rate on the one-year treasury
bill on June 30, 1996. This rate was selected because it is considered more
representative of the rate the Bank is likely to earn.
2. Investors Federal's ESOP will acquire 8% of the conversion stock with
loan proceeds obtained from the Holding Company; therefore, there will be
no interest expense. We assumed that the ESOP expense in 10% annually of
the initial ESOP expense.
3. Investors Federal's RP will acquire 4% of the stock through open market
purchases at $20 per share and the expense is recognized ratably over five
years as the shares vest.
4. All pro forma income and expense items are adjusted for income taxes at
a combined state and federal rate of 38.5%.
5. In calculating the pro forma adjustments to net worth, the ESOP and RP
are deducted in accordance with generally accepted accounting principles.
6. Earnings per share calculations have ignored AICPA OP 93-6. Calculating
earnings per share under SOP 93-6 and assuming 10% of the ESOP shares are
committed to be released and allocated to the individual accounts at the
beginning of the period would yield earning per share of $2.32, $2.04,
$1.84 and $1.66, and a price to earnings ratio of 8.61, 9.79, 10.89, and
12.07, at the minimum, midpoint, maximum and supermaximum, respectively.
1
<PAGE>
EXHIBIT V
PRO FORMA EFFECT OF CONVERSION PROCEEDS
AT THE MINIMUM OF THE CONVERSION VALUATION RANGE
SEPTEMBER 20, 1996
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
- --------------------------------------------------------
1. Conversion Proceeds
Pro Forma Market Value (Minimum) $ 3,825,000
Less: Estimated Expenses (368,512)
-----------------
Net Conversion Proceeds $ 3,456,488
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 3,456,488
Less: ESOP Contributions (306,000)
MRP Contributions (153,000)
-----------------
Net Conversion Proceeds after ESOP & MRP $ 2,997,488
Estimated Incremental Rate of Return(1) 3.57%
-----------------
Estimated Additional Income $ 106,920
Less: ESOP Expense (18,819)
MRP Expense (18,819)
-----------------
$ 69,282
=================
3. Pro Forma Calculations
<TABLE>
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
---------------------------------------------------
<S> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
6/30/1996 $ 343,000 $ 69,282 $ 412,282
b. Pro Forma Net Worth
6/30/1996 $ 3,268,000 $ 2,997,488 $ 6,265,488
c. Pro Forma Net Assets
6/30/1996 $ 52,587,000 $ 2,997,488 $ 55,584,488
</TABLE>
(1) Investment rate of 5.80%, subject to an effective tax rate of 38.50%.
2
<PAGE>
EXHIBIT V
PRO FORMA EFFECT OF CONVERSION PROCEEDS
AT THE MIDPOINT OF THE CONVERSION VALUATION RANGE
SEPTEMBER 20, 1996
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
- ----------------------------------------------------------
1. Conversion Proceeds
Pro Forma Market Valuation (Midpoint) $ 4,500,000
(380,000)
Less: Estimated Expenses ---------------
Net Conversion Proceeds $ 4,120,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 4,120,000
Less: ESOP Contributions (360,000)
MRP Contributions (180,000)
---------------
Net Conversion Proceeds after ESOP & MRP $ 3,580,000
Estimated Incremental Rate of Return(I) 3.57%
---------------
Estimated Additional Income $ 127,699
Less: ESOP Expense (22,140)
MRP Expense (22,140)
---------------
$ 83,419
===============
3. Pro Forma Calculations
Period Before Conversion After
Conversion Results Conversion
-------------------------------------------
a. Pro Forma Earnings
Twelve Months Ended
6/30/1996 $ 343,000 $ 83,419 $ 426,419
b. Pro Forma Net Worth
6/30/1996 $ 3,268,000 $ 3,580,000 $ 6,848,000
c. Pro Forma Net Assets
6/30/1996 $ 52,587,000 $ 3,580,000 $ 56,167,000
(I) INVESTMENT RATE OF 5.80%, SUBJECT TO AN EFFECTIVE TAX RATE OF 38.50%
3
<PAGE>
EXHIBIT V
PRO FORMA EFFECT OF CONVERSION PROCEEDS
AT THE MINIMUM OF THE CONVERSION VALUATION RANGE
SEPTEMBER 20, 1996
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
- ----------------------------------------------
1. Conversion Proceeds
Pro Forma Market Valuation (Maximum) $ 5,175,000
Less: Estimated Expenses (380,000)
-----------------
Net Conversion Proceeds $ 4,795,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ $4,795,000
Less: ESOP Contributions (414,000)
MRP Contributions (207,000)
-----------------
Net Conversion Proceeds after ESOP & MRP$ $ 4,174,000
Estimated Incremental Rate of Return(1) 3.57%
-----------------
Estimated Additional Income $ 148,887
Less: ESOP Expense (25,461)
MRP Expense (25,461)
-----------------
$ 97,965
=================
3. Pro Forma Calculations
<TABLE>
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
---------------------------------------------------
<S> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
6/30/1996 $ 343,000 $ 97,965 $ 440,965
b. Pro Forma Net Worth
6/30/1996 $ 3,268,000 $ 4,174,000 $ 7,442,000
c. Pro Forma Net Assets
6/30/1996 $ 52,587,000 $ 4,174,000 $ 56,761,000
</TABLE>
(1) Investment rate of 5.80%, subject to an effective tax rate of 38.50%.
4
<PAGE>
EXHIBIT V
PRO FORMA EFFECT OF CONVERSION PROCEEDS
AT THE SUPERMAX OF THE CONVERSION VALUATION RANGE
SEPTEMBER 20, 1996
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
- ----------------------------------------------------------
1. Conversion Proceeds
Pro Forma Market Valuation (Final) $ 5,951,250
Less: Estimated Expenses $ (380,000)
----------------
Net Conversion Proceeds $ 5,571,250
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 5,571,250
Less: ESOP Contributions $ (476,100)
MRP Contributions $ (238,050)
----------------
Net Conversion Proceeds after ESOP & MRP $ 4,857,100
Estimated Incremental Rate of Return(1) 3.57%
----------------
Estimated Additional Income $ 173,253
Less: ESOP Expense $ (29,280)
MRP Expense $ (29,280)
----------------
$ 114,692
================
3. Pro Forma Calculations
Before Conversion After
Conversion Results Conversion
-------------------------------------------
Period
a. Pro Forma Earnings
Twelve Months Ended
6/30/1996 $ 343,000 $ 114,692 $ 457,692
b. Pro Forma Net Worth
6/30/1996 $ 3,268,000 $ 4,857,100 $ 8,125,100
c. Pro Forma Net Assets
6/30/1996 $ 52,587,000 $ 4,857,100 $ 57,444,100
(1) INVESTMENT RATE OF 5.80%, SUBJECT TO AN EFFECTIVE TAX RATE OF 38.50%
5
<PAGE>
EXHIBIT V
PRO FORMA ANALYSIS SHEET
<TABLE>
<CAPTION>
Name of Association: INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
Date of Letter to Assn.: OCTOBER 8, 1996 20
Date of Market Prices: SEPTEMBER 20, 1996 Midwest Publicly All Publicly
Comparatives Held Thrifts Held Thrifts
------------ ------------ ------------
SYMBOLS VALUE Mean Median Mean Median Mean Median
------------------- ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Price-Earnings Ratio P/E
- --------------------
Last Twelve Months N/A
At Minimum of Range 9.28
At Midpoint of Range 10.55 15.87 14.61 15.29 14.53 17.16 14.67
At Maximum of Range 11.74
At SuperMax of Range 13.00
Price-Book Ratio P/B
- ----------------
Last Twelve Months N/A
At Minimum of Range 61.05%
At Midpoint of Range 65.71% 87.18 85.94 113.20 100.36 117.70 109.57
At Maximum of Range 69.54%
At SuperMax of Range 73.25%
Price-Asset Ratio P/A
- -----------------
Last Twelve Months N/A
At Minimum of Range 6.88%
At Midpoint of Range 8.01% 13.52 12.91 12.89 12.04 13.59 11.70
At Maximum of Range 9.12%
At SuperMax of Range 10.36%
Twelve Mo. Earnings Base Y $ 343,000
Period Ended 6/30/1996
Book Value B $ 3,268,000
As of 6/30/1996
Total Assets A $ 52,587,000
As of 6/30/1996
Return on Money (1) R 3.57%
Conversion Expense X $ 380,000
Underwriting Commission C 0.00%
Percentage Underwritten S 0.00%
Estimate Dividend
Dollar Amount DA $ .
Yield DY
ESOP Contributions P $ 360,000
MRP Contributions I $ 180,000
ESOP Annual Expense E $ 22,140
MRP Annual Contributions M $ 22,140
Cost of ESOP Borrowings F 0.00%
</TABLE>
(1) Investment rate of 5.80%, subject to an effective tax rate of 38.50%.
6
<PAGE>
EXHIBIT V
PRO FORMA ANALYSIS SHEET
Calculation of Estimated Value (V) at Midpoint Value
1. V= P/A(A-X-P-I) $ 4,500,000
----------------------
1-P/A(1-(CxS))
2. V= P/B(B-X-P-I) $ 4,500,000
----------------------
1-P/B(1-(CxX))
3. V= P/E(Y-R(X+P+I)-(E+M+ST)) $ 4,500,000
----------------------------
1-P/E(R(1-(CxX))
Value
Estimated Value Per Share Total Shares Date
- ------------------- ------------- ---------------- --------
$4,500,000 $20.00 225,000 September 20, 1996
Range of Value
$4.5 million x 1.15 = $5.175 million or 258,750 shares at $20.00 per share
$4.5 million x .085 = $3.825 million or 191,250 shares at $20.00 per share
7
<PAGE>
Exhibit 99.5
CERTIFICATION FORM
(This Signed Form Must Accompany A Signed Stock Order Form)
I acknowledge that the shares of common stock, $.01 par value per share
("common stock"), of IFB Holdings, Inc. (the "corporation"), the proposed
holding company for Investors Federal Bank and Savings Association ("investors
federal" or the "Bank"), are not guaranteed by the corporation, Investors
Federal or the Federal Government.
If anyone asserts that this security is federally insured or guaranteed, or
is as safe as an insured deposit, I should call the Office of Thrift Supervision
Regional Director, Frederick R. Casteel, at (214) 281-2000.
I further certify that, before purchasing the shares of Common Stock of the
Corporation, I received a copy of the Prospectus dated November __, 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 17 of the Prospectus:
1. Geographical Concentration of Loans and Risks of Economic Downturn in
Primary Market Area.
2. Adequacy of Allowance for Loan Losses.
3. Limited Lending Opportunities in Market Area.
4. Collection, Credit and Economic Risks Associated with Purchased Loan
Portfolio.
5. Increased Credit Risks Associated with National Bank Loan Products.
6. Potential Delay in Completion or Denial of Bank Conversion.
7. Reduced Return on Equity After Stock Conversion.
8. Interest Rate Risk Exposure.
9. Potential Discouragement of Takeover Attempts Resulting From Takeover
Defensive Provisions.
10. Potential Operational Restrictions Associated with Regulatory
Oversight.
11. Recapitalization of SAIF, Disparity Between BIF and SAIF Premiums.
12. Legislation Limiting Deduction of Bad Debt.
13. Competition.
14. Potential Increased Costs of Conversion Resulting From Delayed
Offering.
15. ESOP Compensation Expense.
16. Absence of Active Market for the Common Stock.
17. Absence of Refund of Offering Subscriptions on Amendment to Plan of
Conversion.
18. Potential Adverse Income Tax Consequences of the Distribution of
Subscription Rights.
For a more detailed description of the risks involved in the offering, see
"Risk Factors" at pages 17 through 24 of the Prospectus.
Signature:
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Signature:
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(Note: If stock is to be held jointly, both parties must sign)
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Date:
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