<PAGE>
As filed with the Securities and Exchange Commission on May 2, 1997
Registration No. 333-23395
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FIRSTBANK CORP.
-------------------------------------
(Exact name of registrant as specified in charter)
Delaware 6035 84-1389562
- ------------------------------- ------------------ -------------------
(State or other jurisdiction of (Primary SICC No.) (I.R.S. Employer
incorporation or organization) Identification No.)
920 Main Street
Lewiston, Idaho 83501
(208) 746-9610
-----------------------------------
(Address and telephone number of principal executive offices)
John F. Breyer, Jr., Esquire
Aaron M. Kaslow, Esquire
BREYER & AGUGGIA
Suite 470 East
1300 I Street, N.W.
Washington, D.C. 20005
------------------------------
(Name and address of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, 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 of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<TABLE>
<CAPTION>
===================================================================================================================
Calculation of Registration Fee
===================================================================================================================
Title of Each Class of Securities Proposed Proposed Proposed Maximum Amount of
Being Registered Maximum Offering Aggregate Offering Registration Fee
Amount Being Price(1) Price(1)
Registered(1)
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<S> <C> <C> <C> <C>
Common Stock, $0.01 Par Value 1,983,750 $10.00 $19,837,500 $6,012(2)
Participation interests 90,590 -- -- (3)
===================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee. As
described in the Prospectus, the actual number of shares to be issued and sold
are subject to adjustment based upon the estimated pro forma market value of the
registrant and market and financial conditions.
(2) Previously paid.
(3) The securities of FirstBank Corp. to be purchased by the First Federal Bank
of Idaho, F.S.B. 401(k) Plan are included in the amount shown for Common Stock.
Accordingly, pursuant to Rule 457(h) of the Securities Act of 1933, as amended,
no separate fee is required for the participation interests. Pursuant to such
rule, the amount being registered has been calculated on the basis of the number
of shares of Common Stock that may be purchased with the current assets of such
Plan.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
PROSPECTUS SUPPLEMENT
FIRSTBANK CORP.
FIRSTBANK NORTHWEST
401(K) PLAN
This Prospectus Supplement relates to the offer and sale to participants
(the "Participants") in the FirstBank Northwest 401(k) Plan (the "Plan" or the
"401(k) Plan") of participation interests and shares of FirstBank Corp. common
stock, par value $.01 per share (the "Common Stock"), as set forth herein.
In connection with the proposed conversion of FirstBank Northwest (the
"Bank" or "Employer") from a federally chartered mutual savings bank to a
federally chartered stock savings bank (and, thereafter, to a Washington-
chartered savings bank), a holding company, FirstBank Corp. (the "Holding
Company"), has been formed. The simultaneous conversion of the Bank to stock
form, the issuance of the Bank's common stock to the Holding Company and the
offer and sale of the Holding Company's Common Stock to the public are herein
referred to as the "Conversion." Applicable provisions of the 401(k) Plan
permit the investment of the Plan assets in Common Stock of the Holding Company
at the direction of a Plan Participant. This Prospectus Supplement relates to
the election of a Participant to direct the purchase of Common Stock in
connection with the Conversion.
The Prospectus dated ___________, 1997 of the Holding Company (the
"Prospectus") which is attached to this Prospectus Supplement includes detailed
information with respect to the Conversion, the Common Stock and the financial
condition, results of operation and business of the Bank and the Holding
Company. This Prospectus Supplement, which provides detailed information with
respect to the Plan, should be read only in conjunction with the Prospectus.
Terms not otherwise defined in this Prospectus Supplement are defined in the
Plan or the Prospectus.
A PARTICIPANT'S ELIGIBILITY TO PURCHASE COMMON STOCK IN THE CONVERSION
THROUGH THE PLAN IS SUBJECT TO THE PARTICIPANT'S GENERAL ELIGIBILITY TO PURCHASE
SHARES OF COMMON STOCK IN THE CONVERSION AND THE MAXIMUM AND MINIMUM LIMITATIONS
SET FORTH IN THE PLAN OF CONVERSION. SEE "THE CONVERSION" AND "-- LIMITATIONS
ON PURCHASES OF SHARES" IN THE PROSPECTUS.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PARTICIPANT, SEE "RISK FACTORS" IN THE PROSPECTUS.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION ("SEC"), THE OFFICE OF THRIFT
SUPERVISION ("OTS"), THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC") OR ANY OTHER FEDERAL AGENCY OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SEC, THE OTS, THE FDIC OR ANY 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 date of this Prospectus Supplement is ___________, 1997.
S-2
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in the Prospectus or this Prospectus
Supplement in connection with the offering made hereby, and, if given or made,
such information and representations must not be relied upon as having been
authorized by the Holding Company, the Bank or the Plan. This Prospectus
Supplement does not constitute an offer to sell or solicitation of an offer to
buy any securities in any jurisdiction to any person to whom it is unlawful to
make such offer or solicitation in such jurisdiction. Neither the delivery of
this Prospectus Supplement and the Prospectus nor any sale made hereunder shall
under any circumstances create any implication that there has been no change in
the affairs of the Bank or the Plan since the date hereof, or that the
information herein contained or incorporated by reference is correct as of any
time subsequent to the date hereof. This Prospectus Supplement should be read
only in conjunction with the Prospectus that is attached herein and should be
retained for future reference.
S-3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
The Offering
Securities Offered...................................................... S-5
Election to Purchase Common Stock in the Conversion..................... S-5
Value of Participation Interests........................................ S-5
Method of Directing Transfer............................................ S-6
Time for Directing Transfer............................................. S-6
Irrevocability of Transfer Direction.................................... S-6
Direction to Purchase Common Stock After the Conversion................. S-6
Purchase Price of Common Stock.......................................... S-6
Nature of a Participant's Interest in the Holding Company Common Stock.. S-7
Voting and Tender Rights of Common Stock................................ S-7
Description of the Plan
Introduction............................................................ S-7
Eligibility and Participation........................................... S-8
Contributions Under the Plan............................................ S-8
Limitations on Contributions............................................ S-9
Investment of Contributions............................................. S-11
The Employer Stock Fund................................................. S-12
Benefits Under the Plan................................................. S-13
Withdrawals and Distributions from the Plan............................. S-13
Administration of the Plan.............................................. S-14
Reports to Plan Participants............................................ S-15
Plan Administrator...................................................... S-15
Amendment and Termination............................................... S-15
Merger, Consolidation or Transfer....................................... S-15
Federal Income Tax Consequences......................................... S-15
Restrictions on Resale.................................................. S-18
Legal Opinions............................................................... S-19
Investment Form.............................................................. S-20
</TABLE>
S-4
<PAGE>
THE OFFERING
SECURITIES OFFERED
The securities offered hereby are participation interests in the Plan and
up to _________ shares, at the actual purchase price of $10.00 per share, of
Common Stock which may be acquired by the Plan for the accounts of employees
participating in the Plan. The Holding Company is the issuer of the Common
Stock. Only employees and former employees of the Bank and their beneficiaries
may participate in the Plan. Information with regard to the Plan is contained
in this Prospectus Supplement and information with regard to the Conversion and
the financial condition, results of operation and business of the Bank and the
Holding Company is contained in the attached Prospectus. The address of the
principal executive office of the Bank is 920 Main Street, Lewiston, Idaho
83501. The Bank's telephone number is (208) 746-9610.
ELECTION TO PURCHASE COMMON STOCK IN THE CONVERSION
In connection with the Bank's Conversion, each Participant in the 401(k)
plan may direct the trustees of the Plan ("Trustees") to transfer up to 100% of
a Participant's beneficial interest in the assets of the Plan at ___________,
1997 to a newly created Employer Stock Fund and to use such funds to purchase
Common Stock issued in connection with the Conversion. Amounts transferred will
include salary deferral, Employer matching, profit sharing contributions and
account balances transferred from the First Federal Bank of Idaho, FSB
____________, which was terminated on _______, 1997. The Employer Stock Fund
will consist of investments in the Common Stock made on or after the effective
date of the Conversion. Funds not transferred to the Employer Stock Fund will
be invested at the Participant's discretion in the other investment options
available under the Plan. See "INVESTMENT OF CONTRIBUTIONS" below. A
PARTICIPANT'S ABILITY TO TRANSFER FUNDS TO THE EMPLOYER STOCK FUND IN THE
CONVERSION IS SUBJECT TO THE PARTICIPANT'S GENERAL ELIGIBILITY TO PURCHASE
SHARES OF COMMON STOCK IN THE CONVERSION. FOR GENERAL INFORMATION AS TO THE
ABILITY OF THE PARTICIPANTS TO PURCHASE SHARES IN THE CONVERSION, SEE "THE
CONVERSION -- THE SUBSCRIPTION, DIRECT COMMUNITY AND SYNDICATED COMMUNITY
OFFERINGS" IN THE ATTACHED PROSPECTUS.
VALUE OF PARTICIPATION INTERESTS
The assets of the Plan are valued on an ongoing basis and each Participant
is informed of the value of his or her beneficial interest in the Plan on an
annual basis. This value represents the market value of past contributions to
the Plan by the Bank and by the Participants and earnings thereon, less previous
withdrawals, and transfers from the Savings Fund.
S-5
<PAGE>
METHOD OF DIRECTING TRANSFER
The last page of this Prospectus Supplement is an investment form to direct
a transfer to the Employer Stock Fund (the "Investment Form"). If a Participant
wishes to transfer funds to the Employer Stock Fund to purchase Common Stock
issued in connection with the Conversion, the Participant should indicate that
decision in Part 2 of the Investment Form. If a Participant does not wish to
make such an election, he or she does not need to take any action.
TIME FOR DIRECTING TRANSFER
THE DEADLINE FOR SUBMITTING A DIRECTION TO TRANSFER AMOUNTS TO THE EMPLOYER
STOCK FUND IN ORDER TO PURCHASE COMMON STOCK ISSUED IN CONNECTION WITH THE
CONVERSION IS ____________, 1997. The Investment Form should be returned to
____________ at the Bank no later than the close of business on such date.
IRREVOCABILITY OF TRANSFER DIRECTION
A Participant's direction to transfer amounts credited to such
Participant's account in the Plan to the Employer Stock Fund in order to
purchase shares of Common Stock in connection with the Conversion shall be
irrevocable. Participants, however, will be able to direct the sale of Common
Stock, as explained below.
DIRECTION TO PURCHASE COMMON STOCK AFTER THE CONVERSION
After the Conversion, a Participant will be able to direct that a certain
percentage of such Participant's interests in the trust assets ("Trust") be
transferred to the Employer Stock Fund and invested in Common Stock, or to the
other investment funds available under the Plan. Alternatively, a Participant
may direct that a certain percentage of such Participant's interest in the
Employer Stock Fund be transferred from the Employer Stock Fund to other
investment funds available under the Plan. Participants will be permitted to
direct that future contributions made to the Plan by or on their behalf be
invested in Common Stock. Following the initial election, the allocation of
Participant's interest in the Employer Stock Fund may be changed by the
Participant on a _________ basis. Special restrictions may apply to transfers
directed by those Participants who are executive officers, directors and
principal stockholders of the Holding Company who are subject to the provisions
of Section 16(b) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act").
PURCHASE PRICE OF COMMON STOCK
The funds transferred to the Employer Stock Fund for the purchase of Common
Stock in connection with the Conversion will be used by the Trustees to purchase
shares of Common Stock. The price paid for such shares of Common Stock will be
the same price as is paid by all other persons who purchase shares of Common
Stock in the Conversion.
S-6
<PAGE>
NATURE OF A PARTICIPANT'S INTEREST IN THE HOLDING COMPANY STOCK
The Holding Company Stock purchased for an account of a Participant will be
held in the name of the Trustee of the Plan in the Employer Stock Fund. Any
earnings, losses or expenses with respect to the Holding Company Stock,
including dividends and appreciation or depreciation in value, will be credited
or debited to the account and will not be credited to or borne by any other
accounts.
VOTING AND TENDER RIGHTS OF COMMON STOCK
The Trustees generally will exercise voting and tender rights attributable
to all Common Stock held by the Trust as directed by Participants with an
interest in the Employer Stock Fund. With respect to each matter as to which
holders of Common Stock have the right to vote, each Participant will be
allocated a number of voting instruction rights reflecting such Participant's
proportionate interest in the Employer Stock Fund. The percentage of shares of
Common Stock held in the Employer Stock Fund that are voted in the affirmative
or negative on each matter shall be the same percentage of the total number of
voting instruction rights that are exercised in either the affirmative or
negative, respectively.
DESCRIPTION OF THE PLAN
INTRODUCTION
The Bank adopted the Plan effective January 1, 1994. The Plan is a cash or
deferred arrangement established in accordance with the requirement under
Section 401(a) and Section 401(k) of the Internal Revenue Code of 1986, as
amended (the "Code").
The Bank intends that the Plan, in operation, will comply with the
requirements under Section 401(a) and Section 401(k) of the Code. The Bank will
adopt any amendments to the Plan that may be necessary to ensure the qualified
status of the Plan under the Code and applicable Treasury Regulations. The Bank
has received a determination from the Internal Revenue Service ("IRS") that the
Plan is qualified under Section 401(a) of the Code and that it satisfies the
requirements for a qualified cash or deferred arrangement under Section 401(k)
of the Code.
EMPLOYEE RETIREMENT INCOME SECURITY ACT. The Plan is an "individual
account plan" other than a "money purchase pension plan" within the meaning of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). As
such, the Plan is subject to all of the provisions of Title I (Protection of
Employee Benefit Rights) and Title II (Amendments to the Internal Revenue Code
Relating to Retirement Plans) of ERISA, except the funding requirements
contained in Part 3 of Title I of ERISA, which by their terms do not apply to an
individual account plan (other than a money purchase pension plan). The Plan is
not subject to Title IV (Plan Termination Insurance) of ERISA. Neither the
funding requirements contained in Title IV
S-7
<PAGE>
of ERISA nor the plan termination insurance provisions contained in Title IV
will be extended to Participants or beneficiaries under the Plan.
APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL RESTRICTIONS
ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS OR HER
BENEFIT UNDER THE PLAN PRIOR TO THE PARTICIPANT'S TERMINATION OF EMPLOYMENT WITH
THE BANK. A SUBSTANTIAL FEDERAL TAX PENALTY MAY ALSO BE IMPOSED ON WITHDRAWALS
MADE PRIOR TO THE PARTICIPANT'S ATTAINMENT OF AGE 59 1/2, UNLESS A PARTICIPANT
RETIRES AS PERMITTED UNDER THIS PLAN REGARDLESS OF WHETHER SUCH A WITHDRAWAL
OCCURS DURING HIS OR HER EMPLOYMENT WITH THE BANK OR AFTER TERMINATION OF
EMPLOYMENT.
REFERENCE TO FULL TEXT OF PLAN. THE FOLLOWING STATEMENTS ARE SUMMARIES OF
CERTAIN PROVISIONS OF THE PLAN. THEY ARE NOT COMPLETE AND ARE QUALIFIED IN
THEIR ENTIRETY BY THE FULL TEXT OF THE PLAN, WHICH IS FILED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT FILED WITH THE SEC. COPIES OF THE PLAN ARE AVAILABLE TO
ALL EMPLOYEES BY FILING A REQUEST WITH THE PLAN ADMINISTRATOR. EACH EMPLOYEE IS
URGED TO READ CAREFULLY THE FULL TEXT OF THE PLAN.
ELIGIBILITY AND PARTICIPATION
Any employee of the Bank is eligible to participate and will become a
Participant in the Plan following completion of a minimum of 1,000 hours of
service with the Bank within a consecutive 12 month period of employment and the
attainment of age 21. The Plan fiscal year is the calendar year ("Plan Year").
Directors who are not employees of the Bank are not eligible to participate in
the Plan.
During 1996, approximately __ employees participated in the Plan.
CONTRIBUTIONS UNDER THE PLAN
PARTICIPANT CONTRIBUTIONS. Each Participant in the Plan is permitted to
elect to reduce such Participant's Compensation (as defined below) pursuant to a
salary reduction agreement and have that amount contributed to the Plan on such
Participant's behalf. Such amounts are credited to the Participant's deferral
contributions account. For purposes of the Plan, "Compensation" means a
Participant's total amount of earnings reportable W-2 wages for federal income
tax withholding purposes plus a Participant's elective deferrals pursuant to a
salary reduction agreement under the Plan or any elective deferrals to a Section
125 plan. Due to recent statutory changes, the annual Compensation of each
Participant taken into account under the Plan is limited to $160,000 as adjusted
periodically (adjusted as permitted by the Code). A Participant may elect to
modify the amount contributed to the Plan under the participant's salary
reduction agreement during the Plan Year. Deferral contributions are
transferred by the Bank to the Trustee of the Plan on a periodic basis.
S-8
<PAGE>
EMPLOYER CONTRIBUTIONS. The Bank currently makes a discretionary matching
contribution to the Plan in an amount equal to a percentage of each
Participant's annual salary reduction contributions.
DISCRETIONARY CONTRIBUTIONS. The Bank may also make discretionary
nonmatching contributions to the Plan for each Plan Year. Participants who are
in service on the last day of the Plan Year and have completed 1,000 hours of
service during the Plan Year are eligible to share in the allocation of the
discretionary contributions (if any) for the Plan Year. The Bank's
discretionary contributions are allocated among Participants eligible to share
in the allocation according to the relationship of each such Participant's
Compensation for the Plan Year to the total Compensation of all such
Participants for such Plan Year. In addition, the Bank may make discretionary
contributions on behalf of certain non-highly compensated employees to the
extent necessary to satisfy the Code's nondiscrimination requirements (see
below).
LIMITATIONS ON CONTRIBUTIONS
LIMITATIONS ON ANNUAL ADDITIONS AND BENEFITS. Pursuant to the requirements
of the Code, the Plan provides that the amount of contributions allocated to
each Participant's Account during any Plan Year may not exceed the lesser of 25%
of the Participant's "Section 415 Compensation" for the Plan Year or $30,000 (as
adjusted periodically as permitted by the Code). A Participant's "Section 415
Compensation" is a Participant's Compensation, excluding any amount contributed
to the Plan under a salary reduction agreement or any employer contribution to
the Plan or to any other plan or deferred compensation or any distributions from
a plan of deferred compensation. In addition, annual additions are limited to
the extent necessary to prevent the limitations for the combined plans of the
Bank from being exceeded. To the extent that these limitations would be
exceeded by reason of excess annual additions to the Plan with respect to a
Participant, the excess must be reallocated to the remaining Participants who
are eligible for an allocation of Employer contributions for the Plan Year.
LIMITATION ON 401(K) PLAN CONTRIBUTIONS. The annual amount of deferred
compensation of a Participant (when aggregated with any elective deferrals of
the Participant under any other employer plan, a simplified employee pension
plan or a tax-deferred annuity) may not exceed $9,500 (as adjusted periodically
as permitted by the Code). Contributions in excess of this limitation ("excess
deferrals") will be included in the Participant's gross federal income tax
purposes in the year they are made. In addition, any such excess deferral will
again be subject to federal income tax when distributed by the Plan to the
Participant, unless the excess deferral (together with any income allocable
thereto) is distributed to the Participant not later than the first April 15th
following the close of the taxable year in which the excess deferral is made.
Any income on the excess deferral that is distributed not later than such date
shall be treated, for federal income tax purposes, as earned and received by the
Participant in the taxable year in which the excess deferral is made.
LIMITATION ON PLAN CONTRIBUTIONS FOR HIGHLY COMPENSATED EMPLOYEES.
Sections 401(k) and 401(m) of the Code limit the amount of deferred compensation
contributed to the Plan
S-9
<PAGE>
in any Plan Year on behalf of Highly Compensated Employees (defined below) in
relation to the amount of deferred compensation contributed by or on behalf of
all other employees eligible to participate in the Plan. Specifically, the
actual deferral percentage for a Plan Year (i.e., the average of the ratios,
----
calculated separately for each eligible employee in each group, by dividing the
amount of salary reduction contributions credited to the salary reduction
contribution account of such eligible employee by such employee's compensation
for the Plan Year) of the Highly Compensated Employees may not exceed the
greater of (a) 125% of the actual deferred percentage of all other eligible
employees, or (b) the lesser of (i) 200% of the actual deferred percentage of
all other eligible employees, or (ii) the actual deferral percentage of all
other eligible employees plus two percentage points. In addition, the actual
contribution percentage for a Plan Year (i.e., the average of the ratios
----
calculated separately for each eligible employee in each group, by dividing the
amount of employer contributions credited to the Matching contributions account
of such eligible employee by each eligible employee's compensation for the Plan
Year) of the Highly Compensated Employees may not exceed the greater of (a) 125%
of the actual contribution percentage of all other eligible employees, or (b)
the lesser of (i) 200% of the actual contributions percentage of all other
eligible employees, or (ii) the actual contribution percentage of all other
eligible employees plus two percentage points.
In general, a Highly Compensated Employee includes any employee who, during
the Plan Year or the preceding Plan Year, (1) was at any time a 5% owner (i.e.,
----
owns directly or indirectly more than 5% of the stock of the Employer, or stock
possessing more than 5% of the total combines voting power of all stock of the
Employer) or, (2) during the preceding Plan Year, received Section 415
Compensation in excess of $80,000 (as adjusted periodically as permitted by the
Code) and, if elected by the Bank, was in the top paid group of employees for
such Plan Year.
In order to prevent disqualification of the Plan, any amounts contributed
by Highly Compensated Employees that exceed the average deferral limitation in
any Plan Year ("excess contributions"), together with any income allocable
thereto, must be distributed to such Highly Compensated Employees before the
close of the following Plan Year. However, the Bank will be subject to a 10%
excise tax on any excess contributions unless such excess contributions,
together with any income allocable thereto, either are recharacterized or are
distributed before the close of the first 2 1/2 months following the Plan Year
to which such excess contributions relate. In addition, in order to avoid
disqualification of the Plan, any contributions by Highly Compensated Employees
that exceed the average contribution limitation in any Plan Year ("excess
aggregate contributions") together with any income allocable thereto, must be
distributed to such Highly Compensated Employees before the close of the
following Plan Year. However, the 10% excise tax will be imposed on the Bank
with respect to any excess aggregate contributions, unless such amounts, plus
any income allocable thereto, are distributed within 2 1/2 months following the
close of the Plan Year in which they arose.
TOP-HEAVY PLAN REQUIREMENTS. If, for any Plan Year, the Plan is a Top-
Heavy Plan (as defined below), then (i) the Bank may be required to make certain
minimum contributions to the Plan on behalf of non-key employees (as defined
below), and (ii) certain additional restrictions
S-10
<PAGE>
would apply with respect to the combination of annual additions to the Plan and
projected annual benefits under any defined plan maintained by the Bank.
In general, the Plan will be regarded as a "Top-Heavy Plan" for any Plan
Year, if as of the last day of the preceding Plan Year, the aggregate balance of
the accounts of all Participants who are key Employees exceeds 60% of the
aggregate balance of the Accounts of the Participants. "Key Employees"
generally include any employee, who at any time during the Plan Year or any
other the four preceding Plan Years, if (1) an officer of the Bank having annual
compensation in excess of $60,000 who is in administrative or policy-making
capacity, (2) one of the ten employees having annual compensation in excess of
$30,000 and owing, directly or indirectly, the largest interest in the employer,
(3) a 5% owner of the employer (i.e., owns directly or indirectly more than 5%
----
of the stock of the employer, or stock possessing more than 5% of the total
combined voting power of all stock of the employer), or (4) a 1% of owner of the
employer having compensation in excess of $150,000.
INVESTMENT OF CONTRIBUTIONS
All amounts credited to Participant's Accounts under the Plan are held in
the Trust which is administered by the Trustee. The Trustee is appointed by the
Bank's Board of Directors. The Plan provides that a Participant may direct the
Trustee to invest all or a portion of his Accounts in various managed investment
portfolios, as described below, A Participant may periodically elect to change
his investment directions with respect to both past contributions and for more
additions to the Participant's accounts invested in these investment
alternatives.
Under the Plan, prior to the effective date of the Conversion, the
Accounts of Participant held in the Trust will be invested by the Trustee at the
direction of the Participant in the following managed portfolios:
[TO BE PROVIDED]
Investment Fund A -
Investment Fund B -
Investment Fund C -
Investment Fund D -
Investment Fund E -
Effective upon the Conversion, a Participant may invest all or a portion of
his or her Accounts in the portfolios described above and in Fund __, described
below:
S-11
<PAGE>
Investment Fund __ - Employer Stock Fund which invests in common stock of the
Holding Company.
A Participant may elect (in increments of __%), to have both past and
future contributions and additions to the Participant's Account invested either
in the Employer Stock Fund or in any of the other managed portfolios listed
above. Any amounts credited to a Participant's Accounts for which investment
directions are not given will be invested in _____________. Because investment
allocations only are required to be made in increments of __%, Participants can
invest their Accounts in each of the __ available investment funds.
The net gain (or loss) in the Accounts from investments (including interest
payments, dividends, realized and unrealized gains and losses on securities, and
expenses paid from the Trust) are determined monthly on a quarterly basis. For
purposes of such allocation, all assets of the Trust are valued at their fair
market value.
THE EMPLOYER STOCK FUND
The Employer Stock Fund will consist of investments in Common Stock made on
and after the effective date of the Conversion. In connection with the
Conversion, pursuant to the attached Investment Form, Participants will be able
to change their investments at a time other than the normal election intervals.
Any cash dividends paid on Common Stock held in the Employer Stock Fund will be
credited to a cash dividend subaccount for each Participant investing in the
Employer Stock Fund. The Trustee will, to the extent practicable, use all
amounts held by it in the Employer Stock Fund (except the amounts credited to
cash dividend subaccounts) to purchase shares of Common Stock. It is expected
that all purchases will be made at prevailing market prices. Under certain
circumstances, the Trustee may be required to limit the daily volume of shares
purchased. Pending investment in Common Stock, assets held in the Employer
Stock Fund will be placed in bank deposits and other short-term investments.
When Common Stock is purchased or sold, the cost or net proceeds are
charged or credited to the Accounts of Participants affected by the purchase or
sale. A Participant's Account will be adjusted to reflect changes in the value
of shares of Common Stock resulting from stock dividends, stock splits and
similar changes.
To the extent dividends are not paid on Common Stock held in the Employer
Stock Fund, the return on any investment in the Employer Stock Fund will consist
only of the market value appreciation of the Common Stock subsequent to its
purchase. Following the conversion, the Board of the Holding Company may
consider a policy of paying dividends on the Common Stock, however, no decision
has been made by the Board of the Holding Company regarding the amount or timing
of dividends, if any.
As of the date of this Prospectus Supplement, none of the shares of Common
Stock have been issued or are outstanding and there is no established market for
the Common Stock. Accordingly, there is no record of the historical performance
of the Employer Stock Fund.
S-12
<PAGE>
INVESTMENTS IN THE EMPLOYER STOCK FUND MAY INVOLVE CERTAIN RISK FACTORS
ASSOCIATED WITH INVESTMENTS IN COMMON STOCK OF THE HOLDING COMPANY. FOR A
DISCUSSION OF THESE RISK FACTORS, SEE "RISK FACTORS" ON PAGES 1 THROUGH 7 IN THE
PROSPECTUS.
BENEFITS UNDER THE PLAN
VESTING. A Participant, has at all times a fully vested, nonforfeitable
interest in all of his or her deferred contributions and the earnings thereon
under the Plan. A Participant is 100% vested in his or her matching
contributions account and employer discretionary contributions after the
completion of five years of service under the Plan's vesting schedule (40%
vested upon completion of four years of service).
WITHDRAWALS AND DISTRIBUTIONS FROM THE PLAN
APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL RESTRICTIONS
ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS OR HER
BENEFIT UNDER THE PLAN PRIOR TO THE PARTICIPANT'S ATTAINMENT OF AGE 59 1/2
UNLESS A PARTICIPANT RETIRES AS PERMITTED UNDER THE PLAN REGARDLESS OF WHETHER
SUCH A WITHDRAWAL OCCURS DURING HIS OR HER EMPLOYMENT WITH THE BANK.
DISTRIBUTION UPON RETIREMENT, DISABILITY OR TERMINATION OF EMPLOYMENT.
Payment of benefits to a Participant who retires, incurs a disability, or
otherwise terminates employment generally shall be made in a lump sum cash
payment. At the request of the Participant, the distribution may include an in-
kind distribution of Common Stock of the Holding Company credited to the
Participant's Account. A Participant whose total vested account balance equals
or exceeds $3,500 at the time of termination, may elect, in lieu of a lump sum
payments, to be paid in annual installments over a period not exceeding the life
expectancy of the Participant or the joint life expectancies of the Participant
and his or her designated beneficiary. Benefits payments ordinarily shall be
made not later than 60 days following the end of the Plan Year in which occurs
later of the Participant's: (i) termination of employment; (ii) attainment of
age 65; or (iii) tenth anniversary of commencement of participation in the Plan;
but in no event later than April 1 following the calendar year in which the
Participant attains age 70 1/2 (if the Participant is retired). However, if the
vested portion of the Participant's Account balances exceeds $3,500, no
distribution shall be made from the Plan prior to the Participant's attaining
age 65 unless the Participant consents to an earlier distribution. Special
restrictions may apply to the distribution of Common Stock of the Holding
Company to those Participants who are executive officers, directors and
principal shareholders of the Holding Company who are subject to the provisions
of Section 16(b) of the Exchange Act.
DISTRIBUTION UPON DEATH. A Participant who dies prior to the benefit
commencement date for retirement, disability or termination of employment, and
who has a surviving spouse, shall have his or her benefits paid to the surviving
spouse in a lump sum, or if the payment of
S-13
<PAGE>
his or her benefits had commenced before his or her death, in accordance with
the distribution method in effect at his or her death. With respect to an
unmarried Participant, and in the case of a married Participant with spousal
consent to the designation of another beneficiary, payment of benefits to the
beneficiary, payments of benefits to the beneficiary of a deceased Participant
shall be made in the form of a lump sum payment in cash or in Common Stock, or
if the payment of his or her benefit had commenced before his or her death, in
accordance with the distribution method if effect at death.
NONALIENATION OF BENEFITS. Except with respect to federal income tax
withholding and as provided with respect to a qualified domestic relations order
(as defined in the Code), benefits payable under the Plan shall not be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose of any rights to
benefits payable under the Plan shall be void.
ADMINISTRATION OF THE PLAN
TRUSTEES. The Trustees with respect to the Plan are currently Larry K.
Moxley, Mary K. Barker, G.J. Cole, Rocky Dover and Dona M. Miller (collectively,
the "Trustee").
Pursuant to the terms of the Plan, the Trustee receives and holds
contributions to the Plan in trust and has exclusive authority and discretion to
manage and control the assets of the Plan pursuant to the terms of the Plan and
to manage, invest and reinvest the Trust and income therefrom. The Trustee has
the authority to invest and reinvest the Trust and may sell or otherwise dispose
of Trust investments at any time and may hold trust funds uninvested. The
Trustee has authority to invest the assets of the Trust in "any type of
property, investment or security" as defined under ERISA.
The Trustee has full power to vote any corporate securities in the Trust in
person or by proxy; provided, however, that the Participants will direct the
Trustee as to voting and tendering of all Common Stock held in the Employer
Stock Fund.
The Trustee is entitled to reasonable compensation for its services and is
also entitled to reimbursement for expenses properly and actually incurred in
the administration of the Trust. The expenses of the Trustee and the
compensation of the persons so employed is paid out of the Trust except to the
extent such expenses and compensation are paid by the Bank.
The Trustee must render at least annual reports to the Bank and to the
Participants in such form and containing information that the Trustee deems
necessary.
S-14
<PAGE>
REPORTS TO PLAN PARTICIPANTS
The administrator will furnish to each Participant a statement at least
semiannually showing (i) the balance in the Participant's Account as of the end
of that period, (ii) the amount of contributions allocated to such Participant's
Account for that period, and (iii) the adjustments to such Participant's Account
to reflect earnings or losses (if any).
PLAN ADMINISTRATOR
Mr. Larry K. Moxley, the Bank's Chief Financial Officer, has been
designated by the Board of Directors of the Bank to act on the Bank's behalf as
the Plan Administrator. The Administrator is responsible for the administration
of the Plan, interpretation of the provisions of the Plan, prescribing
procedures for filing applications for benefits, preparation and distribution of
information explaining the Plan, maintenance of plan records, books of account
and all other data necessary for the proper administration of the Plan, and
preparation and filing of all returns and reports relating to the Plan which are
required to be filed with the U.S. Department of Labor and the IRS, and for all
disclosures required to be made to Participants, beneficiaries and others under
Sections 104 and 105 of ERISA.
AMENDMENT AND TERMINATION
The Bank may terminate the Plan at any time. If the Plan is terminated in
whole or in part, then regardless of other provisions in the Plan, each employee
who ceases to be a Participant shall have a fully vested interest in his or her
Account. The Bank reserves the right to make, from time to time, any amendment
or amendments to the Plan which do not cause any part of the Trust to be used
for, or diverted to, any purpose other than the exclusive benefit of the
Participants or their beneficiaries.
MERGER, CONSOLIDATION OR TRANSFER
In the event of the merger or consolidation of the Plan with another plan,
or the transfer of the Trust to another plan, the Plan requires that each
Participant (if either the Plan or the other plan then terminated) receive a
benefit immediately after the merger, consolidation or transfer which is equal
to or greater than the benefit he or she would have been entitled to receive
immediately before the merger, consolidation or transfer (if the Plan had then
terminated).
FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS ONLY A BRIEF SUMMARY OF CERTAIN FEDERAL INCOME TAX ASPECTS
OF THE PLAN WHICH ARE OF GENERAL APPLICATION UNDER THE CODE AND IS NOT INTENDED
TO BE A COMPLETE OR DEFINITIVE DESCRIPTION OF THE FEDERAL INCOME TAX
CONSEQUENCES OF PARTICIPATING IN OR RECEIVING DISTRIBUTIONS FROM THE PLAN. THE
SUMMARY IS NECESSARILY GENERAL IN NATURE AND DOES NOT PURPORT TO BE COMPLETE.
MOREOVER, STATUTORY PROVISIONS ARE SUBJECT TO CHANGE, AS ARE THEIR
INTERPRETATIONS, AND THEIR APPLICATION MAY VARY IN INDIVIDUAL CIRCUMSTANCES.
S-15
<PAGE>
FINALLY, THE CONSEQUENCES UNDER APPLICABLE STATE AND LOCAL INCOME TAX LAWS MAY
NOT BE THE SAME AS UNDER THE FEDERAL INCOME TAX LAWS.
PARTICIPANTS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO ANY
DISTRIBUTION FROM THE PLAN AND TRANSACTIONS INVOLVING THE PLAN.
The Plan has received a determination from the IRS that it is qualified
under Section 401(a) and 401(k) of the Code, and that the related Trust is
exempt from tax under Section 501(a) of the Code. A plan that is "qualified"
under these sections of the Code is afforded special tax treatment which include
the following: (1) the sponsoring employer is allowed an immediate tax deduction
for the amount contributed to the Plan of each year; (2) Participants pay no
current income tax on amounts contributed by the employer on their behalf; and
(3) earnings of the Plan are tax-exempt thereby permitting the tax-free
accumulation of income and gains on investments. The Plan will be administered
to comply in operation with the requirements of the Code as of the applicable
effective date of any change in the law. The Bank expects to timely adopt any
amendments to the Plan that may be necessary to maintain the qualified status of
the Plan under the Code. Following such an amendment, the Plan will be submitted
to the IRS for a determination that the Plan, as amended, continues to qualify
under Sections 401(a) and 501(a) of the Code and that it continues to satisfy
the requirements for a qualified cash or deferred arrangement under Section
401(k) of the Code.
Assuming that the Plan is administered in accordance with the requirements
of the Code, participation in the Plan under existing federal income tax laws
will have the following effects:
(a) Amounts contributed to a Participant's 401(k) account and the
investment earnings are actually distributed or withdrawn from the Plan.
Special tax treatment may apply to the taxable portion of any distribution that
includes Common Stock or qualified as a "Lump Sum Distribution" (as described
below).
(b) Income earned on assets held by the Trust will not be taxable to the
Trust.
LUMP SUM DISTRIBUTION. A distribution from the Plan to a Participant or
the beneficiary of a Participant will qualify as a "Lump Sum Distribution" if it
is made: (i) within a single taxable year of the Participant or beneficiary;
(ii) on account of the Participant's death or separation from service, or after
the Participant attains age 59 1/2; and (iii) consists of the balance to the
credits of the Participant under the Plan and all other profit sharing plans, if
any, maintained by the Bank. The portion of any Lump Sum Distribution that is
required to be included in the Participant's or beneficiary's taxable income for
federal income tax purposes (the "total taxable amount") consists of the entire
amount of such Lump Sum Distribution less the amount of after-tax contributions,
if any, made by the Participant to any other profit sharing plans maintained by
the Bank which is included in such distribution.
S-16
<PAGE>
AVERAGING RULES. The portion of the total taxable amount of a Lump Sum
Distribution (the "ordinary income portion") will be taxable generally as
ordinary income for federal income tax purposes. However, for distributions
occurring prior to January 1, 2000, a Participant who has completed at least
five years of participation in the Plan before the taxable year in which the
distribution is made, or a beneficiary who receives a Lump Sum Distribution on
account of the Participant's death (regardless of the period of the
Participant's participation in the Plan or any other profit sharing plan
maintained by the Employer), may elect to have the ordinary income portion of
such Lump Sum Distribution taxed according to a special averaging rule ("five-
year averaging"). The election of the special averaging rules may apply only to
one Lump Sum Distribution received by the Participant or beneficiary, provided
such amount is received on or after the Participant turns 59 1/2 and the
recipient elects to have any other Lump Sum Distribution from a qualified plan
received in the same taxable year taxed under the special averaging rule. The
special five-year averaging rule has been repealed for distributions occurring
after December 31, 1999. Under a special grandfather rule, individuals who
turned 50 by 1986 may elect to have their Lump Sum Distribution taxed under
either the five-year averaging rule (if available) or the prior law ten-year
averaging rule. Such individuals also may elect to have that portion of the Lump
Sum Distribution attributable to the Participant's pre-1974 participation in the
Plan taxed at a flat 20% rate as gain from the sale of a capital asset.
COMMON STOCK INCLUDED IN LUMP SUM DISTRIBUTION. If a Lump Sum Distribution
includes Common Stock, the distribution generally will be taxed in the manner
described above, except that the total taxable amount will be reduced by the
amount of any net unrealized appreciation with respect to such Common Stock,
i.e., the excess of the value of such Common Stock at the time of the
- ----
distribution over its cost to the Plan. The tax basis of such Common Stock to
the Participant or beneficiary for purposes of computing gain or loss on its
subsequent sale will be the value of the Common Stock at the time of
distribution less the amount of net unrealized appreciation. Any gain on a
subsequent sale or other taxable disposition of such Common Stock, to the extent
of the amount of net unrealized appreciation at the time of distribution, will
be considered long-term capital gain regardless of the holding period of such
Common Stock. Any gain on a subsequent sale or other taxable disposition of the
Common Stock in excess of the amount of net unrealized appreciation at the time
of distribution will be considered either short-term capital gain or long-term
capital gain depending upon the length of the holding period of the Common
Stock. The recipient of a distribution may elect to include the amount of any
net unrealized appreciation in the total taxable amount of such distribution to
the extent allowed by the regulations by the IRS.
DISTRIBUTIONS: ROLLOVERS AND DIRECT TRANSFERS TO ANOTHER QUALIFIED PLAN OR
TO AN IRA. Pursuant to a change in the law, effective January 1, 1993, virtually
all distributions from the Plan may be rolled over to another qualified Plan or
to an individual retirement account ("IRA") without regard to whether the
distribution is a Lump Sum Distribution or Partial Distribution. Effective
January 1, 1993, Participants have the right to elect to have the Trustee
transfer all or any portion of an "eligible rollover distribution" directly to
another plan qualified under Section 401(a) of the Code or to an IRA. If the
Participant does not elect to have an "eligible rollover distribution"
transferred directly to another qualified plan of to an IRA, the
S-17
<PAGE>
distribution will be subject to a mandatory federal withholding tax equal to 20%
of the taxable distribution. An "eligible rollover distribution" means any
amount distributed from the Plan except: (1) a distribution that is (a) one of a
series of substantially equal periodic payments made (not less frequently than
annually) over the Participant's life of the joint life of the Participant and
the Participant's designated beneficiary, or (b) for a specified period of ten
years or more; (2) any amount that is required to be distributed under the
minimum distribution rules; and (3) any other distributions excepted under
applicable federal law. The tax law change described above did not modify the
special tax treatment of Lump Sum Distributions, that are not rolled over or
transferred, i.e., forward averaging, capital gains tax treatment and the
----
nonrecognition of net unrealized appreciation, discussed earlier.
ADDITIONAL TAX ON EARLY DISTRIBUTIONS. A Participant who receives a
distribution from the Plan prior to attaining age 59 1/2 will be subject to an
additional income tax equal to 10% of the taxable amount of the distribution.
The 10% additional income tax will not apply, however, to the extent the
distribution is rolled or onto an IRA or another qualified plan or the
distribution is (i) made to a beneficiary (or to the estate of a Participant) on
or after the death of the Participant, (ii) attributable to the Participant's
being disabled within the meaning of Section 72(m)(7) of the Code, (iii) part of
a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Participant or the joint
lives (or joint life expectancies) of the Participant and his or her
beneficiary, (iv) made to the Participant after separation from service on
account of early retirement under the Plan after attainment of age 55, (v) made
to pay medical expenses to the extent deductible for federal income tax
purposes, (vi) pursuant to a qualified domestic relations order, or (vii) made
to effect the distribution of excess contributions or excess deferrals.
THE FOREGOING IS ONLY A BRIEF SUMMARY OF CERTAIN FEDERAL INCOME TAX ASPECTS
OF THE PLAN WHICH ARE OF GENERAL APPLICATION UNDER THE CODE AND IS NOT INTENDED
TO BE A COMPLETE OR DEFINITIVE DESCRIPTION OF THE FEDERAL INCOME TAX
CONSEQUENCES OF PARTICIPATING IN OR RECEIVING DISTRIBUTIONS FROM THE PLAN.
ACCORDINGLY, EACH PARTICIPANT IS URGED TO CONSULT A TAX ADVISOR CONCERNING THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN AND RECEIVING
DISTRIBUTIONS FROM THE PLAN.
RESTRICTIONS ON RESALE
Any person receiving shares of the Common Stock under the Plan who is an
"affiliate" of the Bank or the Holding Company as the term "affiliate" is used
in Rules 144 and 405 under the Securities Act of 1933, as amended ("Securities
Act") (e.g., directors, officers and substantial shareholders of the Bank) may
reoffer or resell such shares only pursuant to a registration statement filed
under the Securities Act (the Holding Company and the Bank having no obligation
to file such registration statement) or, assuming the availability thereof,
pursuant to Rule 144 or some other exemption from the registration requirements
of the Securities Act. Any person who may be an "affiliate" of the Bank of the
Holding Company may wish to consult with
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<PAGE>
counsel before transferring any Common Stock owned by him. In addition,
Participants are advised to consult with counsel as to the applicability of the
reporting and short-swing profit liability rules of Section 16 of the Exchange
Act which may affect the purchase and sale of the Common Stock where acquired
under the Plan, or other sales of the Common Stock.
LEGAL OPINIONS
The validity of the issuance of the Common Stock will be passed upon by
Breyer & Aguggia, Washington, D.C., which firm is acting as special counsel for
the Holding Company in connection with the Bank's Conversion from a federally
chartered mutual savings bank to a federally chartered stock savings bank and
the concurrent formation of the Holding Company.
S-19
<PAGE>
Investment Form
(Employer Stock Fund)
FIRSTBANK NORTHWEST
401(K) PLAN
Name of Participant:________________________________
Social Security Number:_____________________________
1. Instructions. In connection with the proposed conversion of FirstBank
Northwest (the "Bank") to a stock savings bank and the simultaneous formation of
a holding company (the "Conversion"), participants in the FirstBank Northwest
401(k) Plan (the "Plan") may elect to direct the investment of up to 100% of
their ___________, 1997 account balances into the Employer Stock Fund (the
"Employer Stock Fund"). Amounts transferred at the direction of Participants
into the Employer Stock Fund will be used to purchase shares of the co common
stock of FirstBank Corp. (the "Common Stock"), the proposed holding company for
the Bank. A PARTICIPANT'S ELIGIBILITY TO PURCHASE SHARES OF COMMON STOCK IS
SUBJECT TO THE PARTICIPANT'S GENERAL ELIGIBILITY TO PURCHASE SHARES OF COMMON
STOCK IN THE CONVERSION AND THE MAXIMUM AND MINIMUM LIMITATIONS SET FORTH IN THE
PLAN CONVERSION. SEE THE PROSPECTUS FOR ADDITIONAL INFORMATION.
You may use this form to direct a transfer of funds credited to your
account to the Employer Stock Fund, to purchase Common Stock in the Conversion.
To direct such a transfer to the Employer Stock Fund, you should complete this
form and return it to ______ _____ at the Bank, no later than the close of
business on ____________, 1997. The Bank will keep a copy of this form and
return a copy to you. (If you need assistance in completing this form, please
contact ____________.
2. Transfer Direction. I hereby direct the Plan Administrator to
transfer $__________ (in increments of $10) from my Plan account to the Employer
Stock Fund.
3. Effectiveness of Direction. I understand that this Investment Form
shall be subject to all of the terms and conditions of the Plan and the terms
and conditions of the Conversion. I acknowledge that I have received a copy of
the Prospectus and the Prospectus Supplement.
______________________________ ______________________________
Signature Date
* * * * *
4. Acknowledgement of Receipt. This Investment Form was received by the
Plan Administrator and will become effective on the date noted below.
______________________________ ______________________________
Plan Administrator Date
S-20
<PAGE>
PROSPECTUS FIRSTBANK CORP.
(PROPOSED HOLDING COMPANY FOR FIRSTBANK NORTHWEST)
1,725,000 SHARES OF COMMON STOCK
FirstBank Corp. (the "Holding Company"), a Delaware corporation, is
offering between 1,275,000 and 1,725,000 shares of its common stock, $0.01 par
value per share (the "Common Stock"), in connection with the conversion of
FirstBank Northwest (formerly known as First Federal Bank of Idaho, a Federal
Savings Bank) (the "Bank") from a federally chartered mutual savings bank to a
federally chartered capital stock savings bank and the simultaneous issuance of
the Bank's capital stock to the Holding Company. The conversion of the Bank to a
capital stock savings bank and the acquisition of the Bank by the Holding
Company are collectively referred to herein as the "Stock Conversion." Following
consummation of the Stock Conversion, the Bank intends to relocate its main
office to Clarkston, Washington and convert from a federally chartered stock
savings bank to a Washington-chartered savings bank (the "Charter Conversion").
The closing of the Stock Conversion is not contingent upon the closing of the
Charter Conversion. See "FIRSTBANK NORTHWEST" and "THE CONVERSION -- Purposes of
Conversion." In connection with the Charter Conversion, the Holding Company
anticipates becoming a bank holding company under the Bank Holding Company Act
of 1956, as amended ("BHCA"). The Stock Conversion and the Charter Conversion
are referred to herein collectively as the "Conversion" and are being undertaken
pursuant to a plan of conversion adopted by the Board of Directors of the Bank
("Plan" or "Plan of Conversion"). In certain circumstances, the Holding Company
may increase the amount of Common Stock offered hereby to 1,983,750 shares. See
Footnote 3 to the table below. (cover continued on following page)
FOR INFORMATION ON HOW TO SUBSCRIBE FOR SHARES OF COMMON STOCK, CALL THE
CONVERSION CENTER AT (___) __________.
FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR, SEE "RISK FACTORS" BEGINNING ON PAGE 1.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR ACCOUNTS AND WILL NOT BE
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE BANK
INSURANCE FUND ("BIF"), THE SAVINGS ASSOCIATION INSURANCE FUND ("SAIF") OR ANY
OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"), THE OTS, THE FDIC OR ANY OTHER FEDERAL AGENCY OR
ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC, THE OTS, THE FDIC OR ANY 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.
SANDLER O'NEILL & PARTNERS, L.P.
The date of this Prospectus is _______________ ___, 1997.
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Estimated Underwriting
Purchase Commissions and Estimated Net
Price(1) Other Fees and Expenses(2) Proceeds
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum Per Share.................. $ 10.00 $ 0.49 $ 9.51
- ----------------------------------------------------------------------------------------------------------
Midpoint Per Share................. $ 10.00 $ 0.44 $ 9.56
- ----------------------------------------------------------------------------------------------------------
Maximum Per Share.................. $ 10.00 $ 0.40 $ 9.60
- ----------------------------------------------------------------------------------------------------------
Maximum Per Share, as adjusted(3).. $ 10.00 $ 0.35 $ 9.65
- ----------------------------------------------------------------------------------------------------------
Minimum Total(4)................... $12,750,000 $625,000 $12,125,000
- ----------------------------------------------------------------------------------------------------------
Midpoint Total(5).................. $15,000,000 $656,000 $14,344,000
- ----------------------------------------------------------------------------------------------------------
Maximum Total(6)................... $17,250,000 $687,000 $16,563,000
- ----------------------------------------------------------------------------------------------------------
Maximum Total, as adjusted(3)(7)... $19,837,500 $697,000 $19,140,500
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Determined in accordance with an independent appraisal prepared by RP
Financial, LC. ("RP Financial") as of February 28, 1997 which states that
the estimated aggregate pro forma market value of the Holding Company and
the Bank, as converted, ranged from $12,750,000 to $17,250,000, with a
midpoint of $15,000,000 ("Estimated Valuation Range"). RP Financial's
appraisal is based upon estimates and projections that are subject to
change, and the valuation must not be construed as a recommendation as to
the advisability of purchasing such shares or that a purchaser will
thereafter be able to sell such shares at or above the Purchase Price. See
"THE CONVERSION -- Stock Pricing and Number of Shares to be Issued."
(2) Consists of estimated costs to the Holding Company and the Bank arising
from the Conversion, including fees to be paid to Sandler O'Neill &
Partners, L.P. ("Sandler O'Neill") in connection with the Offerings. Such
fees may be deemed to be underwriting fees and Sandler O'Neill may be
deemed to be an underwriter. The Holding Company and the Bank have agreed
to indemnify Sandler O'Neill against certain liabilities, including
liabilities that may arise under the Securities Act of 1933, as amended
("Securities Act"). See "USE OF PROCEEDS" and "THE CONVERSION -- Marketing
and Underwriting Arrangements."
(3) Gives effect to the sale of up to an additional 15% of the shares offered,
without the resolicitation of subscribers or any right of cancellation, due
to an increase in the pro forma market value of the Holding Company and the
Bank, as converted. The ESOP shall have a first priority right to subscribe
for such additional shares up to an aggregate of 8% of the Common Stock
issued in the Conversion. See "THE CONVERSION -- Stock Pricing and Number
of Shares to be Issued."
(4) Assumes the issuance of 1,275,000 shares at $10.00 per share.
(5) Assumes the issuance of 1,500,000 shares at $10.00 per share.
(6) Assumes the issuance of 1,725,000 shares at $10.00 per share.
(7) Assumes the issuance of 1,983,750 shares at $10.00 per share.
Pursuant to the Plan of Conversion, nontransferable rights to subscribe for
the Common Stock ("Subscription Rights") have been granted, in order of
priority, to (i) depositors with $50.00 or more on deposit at the Bank as of
December 31, 1995 ("Eligible Account Holders"), (ii) the Bank's employee stock
ownership plan ("ESOP"), a tax-qualified employee benefit plan, (iii) depositors
with $50.00 or more on deposit at the Bank as of March 31, 1997 ("Supplemental
Eligible Account Holders"), and (iv) depositors of the Bank as of April 30, 1997
("Voting Record Date") and borrowers of the Bank with loans outstanding as of
April 25, 1990 which continue to be outstanding as of the Voting Record Date
("Other Members"), subject to the priorities and purchase limitations set forth
in the Plan of Conversion ("Subscription Offering"). SUBSCRIPTION RIGHTS ARE
NONTRANSFERABLE. PERSONS SELLING OR OTHERWISE TRANSFERRING THEIR RIGHTS TO
SUBSCRIBE FOR COMMON STOCK IN THE SUBSCRIPTION OFFERING OR SUBSCRIBING FOR
COMMON STOCK ON BEHALF OF ANOTHER PERSON WILL BE SUBJECT TO FORFEITURE OF SUCH
RIGHTS AND POSSIBLE FURTHER SANCTIONS AND PENALTIES IMPOSED BY THE OFFICE OF
THRIFT SUPERVISION ("OTS") OR ANOTHER AGENCY OF THE U.S. GOVERNMENT. See "THE
CONVERSION -- The Subscription, Direct Community and Syndicated Community
Offerings" and "-- Limitations on Purchases of Shares."
Concurrently, but subject to the prior rights of holders of Subscription
Rights, the Holding Company is offering the Common Stock to certain members of
the general public through a direct community offering ("Direct Community
Offering") with preference being given to natural persons and trusts of natural
persons who are permanent residents of NezPerce, Latah, Kootenai, or Idaho
Counties of Idaho ("Local Community"), subject to the right of the Holding
Company to accept or reject orders in the Direct Community Offering in whole or
in part. The
<PAGE>
Subscription Offering and the Direct Community Offering are referred to herein
as the "Subscription and Direct Community Offering." It is anticipated that
shares of Common Stock not subscribed for or purchased in the Subscription and
Direct Community Offering will be offered to eligible members of the general
public in a syndicated offering ("Syndicated Community Offering") (the
Subscription Offering, Direct Community Offering and Syndicated Community
Offering are referred to collectively as the "Offerings").
With the exception of the ESOP, which is expected to purchase 8% of the
shares of Common Stock issued in the Conversion, NO PERSON OR ENTITY MAY
PURCHASE MORE THAN $125,000 OF COMMON STOCK (OR 12,500 SHARES BASED ON THE
PURCHASE PRICE); AND NO PERSON OR ENTITY, TOGETHER WITH ASSOCIATES OF AND
PERSONS ACTING IN CONCERT WITH SUCH PERSON OR ENTITY, MAY PURCHASE IN THE
AGGREGATE MORE THAN $250,000 OF COMMON STOCK (OR 25,000 SHARES BASED ON THE
PURCHASE PRICE). Under certain circumstances, the maximum purchase limitation
may be increased or decreased at the sole discretion of the Bank and the Holding
Company subject to any required regulatory approval. See "THE CONVERSION -- The
Subscription, Direct Community and Syndicated Community Offerings," "--
Limitations on Purchases of Shares" and "-- Procedure for Purchasing Shares in
the Subscription and Direct Community Offering" for other purchase and sale
limitations. The minimum order is 25 shares.
THE SUBSCRIPTION OFFERING WILL EXPIRE AT 12:00 NOON, PACIFIC TIME, ON
___________, 1997 ("EXPIRATION DATE"), UNLESS EXTENDED BY THE BANK AND THE
HOLDING COMPANY FOR UP TO __ DAYS TO ___________, 1997. SUCH EXTENSION MAY BE
GRANTED WITHOUT ADDITIONAL NOTICE TO SUBSCRIBERS. THE DIRECT COMMUNITY OFFERING
WILL ALSO TERMINATE AT 12:00 NOON, PACIFIC TIME, ON THE EXPIRATION DATE UNLESS
EXTENDED BY THE HOLDING COMPANY AND THE BANK, WITH APPROVAL OF THE OTS, IF
NECESSARY. The Holding Company must receive a properly completed and signed
stock order form ("Order Form") and certification along with full payment (or
appropriate instructions authorizing a withdrawal of the full payment from a
deposit account at the Bank) of $10.00 per share for all shares subscribed for
or ordered. Funds so received will be placed in a segregated account created for
this purpose at the Bank, and interest will be paid at the Bank's passbook rate
from the date payment is received until the Conversion is consummated or
terminated; these funds will be otherwise unavailable to the depositor until
such time. Payments authorized by withdrawals from deposit accounts will
continue to earn interest at the contractual rate until the Conversion is
consummated or terminated, although such funds will be unavailable for
withdrawal until the Conversion is consummated or terminated. ONCE TENDERED,
SUBSCRIPTION ORDERS CANNOT BE REVOKED OR MODIFIED WITHOUT THE CONSENT OF THE
BANK AND THE HOLDING COMPANY. The Holding Company is not obligated to accept
orders submitted on photocopied or telecopied Order Forms. If the Conversion is
not consummated within 45 days after the last day of the Subscription Offering
(which date will be no later than ________ __, 1997) and the OTS consents to an
extension of time to complete the Conversion, subscribers will be given the
right to increase, decrease or rescind their orders. Such extensions may not go
beyond _________ __, 1999.
The Bank and the Holding Company have engaged Sandler O'Neill to consult
with and advise them in the sale of the Common Stock in the Offerings. In
addition, in the event the Common Stock is not fully subscribed for in the
Subscription and Direct Community Offering, Sandler O'Neill will manage the
Syndicated Community Offering. Neither Sandler O'Neill nor any other registered
broker-dealer is obligated to take or purchase any shares of Common Stock in the
Offerings. The Holding Company and the Bank reserve the right, in their absolute
discretion, to accept or reject, in whole or in part, any or all orders in the
Direct Community or Syndicated Community Offerings either at the time of receipt
of an order or as soon as practicable following the termination of the
Offerings. See "THE CONVERSION -- Marketing and Underwriting Arrangements."
Prior to the Offerings, the Holding Company has not issued any capital
stock and accordingly there has been no market for the shares offered hereby.
There can be no assurance that an active and liquid trading market for the
Common Stock will develop or, if developed, will be maintained. The Holding
Company has received conditional approval to have its Common Stock listed on the
Nasdaq National Market under the symbol "FBNW." Sandler O'Neill has advised the
Holding Company that it intends to act as a market maker for the Common Stock
following consummation of the Conversion. See "RISK FACTORS -- Absence of
Active Market for the Common Stock" and "MARKET FOR COMMON STOCK."
<PAGE>
[Map of Idaho, Washington and Oregon, which shows the locations of the Bank's
offices in the State of Idaho]
THE CONVERSION IS CONTINGENT UPON APPROVAL OF THE BANK'S PLAN OF CONVERSION BY
ITS ELIGIBLE VOTING MEMBERS, THE SALE OF AT LEAST 1,275,000 SHARES OF COMMON
STOCK PURSUANT TO THE PLAN OF CONVERSION, AND RECEIPT OF ALL REGULATORY
APPROVALS.
<PAGE>
- --------------------------------------------------------------------------------
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR ACCOUNTS AND WILL NOT BE
INSURED OR GUARANTEED BY THE FDIC, THE BIF, THE SAIF OR ANY OTHER GOVERNMENT
AGENCY.
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
The information set forth below should be read in conjunction with and is
qualified in its entirety by the more detailed information and Consolidated
Financial Statements (including the Notes thereto) presented elsewhere in this
Prospectus. The purchase of Common Stock is subject to certain risks. See "RISK
FACTORS."
FIRSTBANK CORP.
The Holding Company is a Delaware corporation organized in March 1997 at
the direction of the Bank for the purpose of serving as the holding company of
the Bank upon consummation of the Stock Conversion. The Holding Company has not
engaged in any significant business to date. The Holding Company has received
the approval of the OTS to become a savings and loan holding company and to
acquire 100% of the capital stock of the Bank. The Holding Company intends to
apply for approval of the Board of Governors of the Federal Reserve System
("Federal Reserve") to become a bank holding company under the BHCA through the
continued ownership of the Bank following the Charter Conversion. The Holding
Company expects to receive such approval. Immediately following the Stock
Conversion, the only significant assets of the Holding Company will be the
capital stock of the Bank, that portion of the net proceeds of the Offerings
permitted by the OTS to be retained by the Holding Company and a note receivable
from the ESOP evidencing a loan from the Holding Company to fund the Bank's
ESOP. The Holding Company has received approval from the OTS to retain 50% of
the net proceeds of the Offerings. Funds retained by the Holding Company will be
used for general business activities, including a loan by the Holding Company
directly to the ESOP to enable the ESOP to purchase 8% of the Common Stock
issued in the Conversion. See "USE OF PROCEEDS." Management believes that the
holding company structure and retention of proceeds may facilitate the expansion
and diversification of its operations, should it decide to do so. The holding
company structure will also enable the Holding Company to repurchase its stock
without adverse tax consequences, subject to applicable regulatory restrictions
and waiting periods. There are no present plans, arrangements, agreements, or
understandings, written or oral, regarding any such activities or repurchases.
The main office of the Holding Company is located at 920 Main Street, Lewiston,
Idaho 83501, and its telephone number is (208) 746-9610.
FIRSTBANK NORTHWEST
The Bank, founded in 1920, is a federally chartered mutual savings bank
located in Lewiston, Idaho. The Bank, which was formed as an Idaho mutual
savings and loan association, converted to a federal mutual savings and loan
association in 1935 and adopted the federal mutual savings bank charter in 1990.
In April 1997, in anticipation of the Charter Conversion, the Bank changed its
name from "First Federal Bank of Idaho, a federal savings bank" to "FirstBank
Northwest." In connection with the Stock Conversion, the Bank will convert to a
federally chartered capital stock savings bank and will become a subsidiary of
the Holding Company. The Bank is currently regulated by the OTS, its primary
regulator, and the FDIC, the insurer of its deposits. The Bank's deposits are
insured by the FDIC's Savings Association Insurance Fund ("SAIF") and have been
federally insured since 1933. The Bank has been a member of the Federal Home
Loan Bank ("FHLB") System since 1933. At December 31, 1996, the Bank had total
assets of $133.2 million, total deposits of $105.3 million and total equity of
$10.8 million on a consolidated basis. In connection with the Charter
Conversion, the Bank will relocate its main office to Clarkston, Washington and
convert to a Washington-chartered savings bank.
The Bank is a community-oriented financial institution that engages
primarily in the business of attracting deposits from the general public and
using those funds to originate residential mortgage loans within the Bank's
market area. At December 31, 1996, one- to four-family residential mortgage
loans totalled $72.7 million, or 61.3%
(i)
<PAGE>
of total loans receivable. The Bank also is active in originating construction
and agricultural real estate loans. At December 31, 1996, construction loans
totalled $14.9 million, or 12.6% of total loans receivable, and agricultural
real estate loans totalled $11.9 million, or 10.0% of total loans receivable. To
a lesser extent, the Bank also originates commercial real estate and consumer
and other non-real estate loans, although it intends to increase its
originations of these types of loans, subject to market conditions and other
factors. See "BUSINESS OF THE BANK -- Lending Activities." The Bank has adopted
a mortgage banking strategy pursuant to which it generally sells a majority of
the fixed-rate residential mortgage loans that it originates while retaining the
servicing rights on most of the conventional loans it sells. At December 31,
1996, the Bank serviced $131.5 million of loans for others. The administrative
office of the Bank is located at 920 Main Street, Lewiston, Idaho, 83501, and
its telephone number is (208) 746-9610. The Bank operates five full-service
offices in Lewiston, Lewiston Orchards, Moscow, Grangeville and Coeur d'Alene,
Idaho and two loan production offices in Lewiston and Coeur d'Alene, Idaho.
As part of its asset/liability management, subsequent to December 31, 1996,
the Bank intends to retain for its portfolio $5.0 million of 30-year, fixed-rate
conventional mortgage loans and to purchase $5.0 million of short-term mortgage-
backed securities. These investments will be funded with additional FHLB
advances, which may be retired with the proceeds of the Offerings. See "USE OF
PROCEEDS."
Following the Stock Conversion, the Bank will relocate its main office to
Clarkston, Washington, which is adjacent to Lewiston, Idaho across the Snake
River, and convert to a Washington-chartered savings bank. The main office
relocation will be accomplished by opening a full-service office in Clarkston,
Washington and designating that office as the Bank's main office. The Bank's
administrative offices will remain in their present location. The Bank is in the
process of evaluating locations for its Clarkston, Washington office and expects
that the Charter Conversion will not be completed until several months after the
consummation of the Stock Conversion, or longer in the event that the Bank has
difficulty locating suitable office space in Clarkston. The Board of Directors
believes that conversion to a Washington-chartered savings bank is in the best
interests of the Bank, its members and the communities it serves. As a
Washington-chartered savings bank with offices in Washington and Idaho, the Bank
will have the flexibility to expand in Washington and Idaho, should it decide to
do so, through branch acquisitions, opening new branches, or acquiring other
institutions. While the current federal thrift charter permits nationwide
branching, the possible elimination of the federal thrift charter in favor of a
common charter for federal thrifts and banks may limit the Bank's branching
authority in the future. See "RISK FACTORS -- Potential Operational Restrictions
Associated with Regulatory Oversight." Furthermore, the Washington savings bank
charter will provide the Bank with the authority to pursue its community banking
strategy.
The Bank, as a Washington-chartered savings bank, will succeed to all of
the assets and liabilities of the Bank as a federally chartered savings bank. In
anticipation of the Charter Conversion, the Bank has adopted a community banking
strategy pursuant to which it intends to expand the products and services it
offers in order to improve market share and increase the average yield of its
interest-earning assets. Specifically, the Bank intends to expand its
agricultural real estate and commercial real estate lending activities. The Bank
also intends to expand its non-mortgage lending activities by increasing its
emphasis on originating agricultural operating loans and commercial business
loans. Management anticipates that the Bank will incur initial start-up and
ongoing expenses in connection with the opening of its Clarkston, Washington
office and as various programs and services, such as its commercial real estate
and business lending operations, are introduced or expanded. These expenses
could reduce earnings for a period of time while income from new programs and
services increases to a degree sufficient to cover the additional expenses.
Following the Charter Conversion, the deposits of the Bank will continue to
be insured by the SAIF of the FDIC. In addition, following the Charter
Conversion, the Bank will not be regulated and supervised by the OTS, but rather
by the Washington Department of Financial Institutions, Division of Banks
("Department") and the FDIC. The Bank intends to remain a member of the FHLB-
Seattle.
(ii)
<PAGE>
THE CONVERSION
The Bank is in the process of converting from a federally chartered mutual
savings bank to a federally chartered capital stock savings bank and, in
connection with the Conversion, has formed the Holding Company. Following
consummation of the Stock Conversion, the Bank intends to relocate its main
office to Clarkston, Washington and convert to a Washington-chartered savings
bank. The closing of the Stock Conversion is not contingent upon the closing of
the Charter Conversion. As a result of the Charter Conversion, the Holding
Company intends to become a bank holding company under the BHCA. As part of the
Stock Conversion, the Bank will issue all of its capital stock to the Holding
Company in exchange for 50% of the net proceeds of the Offerings.
Simultaneously, the Holding Company will sell its Common Stock in the Offerings.
AFTER CONSUMMATION OF THE STOCK CONVERSION, DEPOSITORS AND BORROWERS OF THE BANK
WILL HAVE NO VOTING RIGHTS IN THE HOLDING COMPANY UNLESS THEY BECOME
STOCKHOLDERS.
Consummation of the Stock Conversion is subject to the approval of the Plan
of Conversion by the Bank's members and approval by the OTS of the Plan of
Conversion and the Holding Company's acquisition of the Bank. Consummation of
the Charter Conversion is subject to the approval by the OTS and the Department
and approval by the Federal Reserve of the Holding Company's continued ownership
of the Bank.
The Plan of Conversion requires that the aggregate purchase price of the
Common Stock to be issued in the Conversion be based upon an independent
appraisal of the estimated pro forma market value of the Holding Company and the
Bank as converted. RP Financial has advised the Bank that in its opinion, at
February 28, 1997, the aggregate estimated pro forma market value of the Holding
Company and the Bank as converted ranged from $12,750,000 to $17,250,000. The
appraisal of the pro forma market value of the Holding Company and the Bank as
converted is based on a number of factors and should not be considered a
recommendation to buy shares of the Common Stock or any assurance that after the
Stock Conversion shares of Common Stock will be able to be resold at or above
the Purchase Price. The appraisal will be updated or confirmed prior to
consummation of the Conversion.
The Board of Directors and management believe that the Conversion is in the
best interests of the Bank's members and its communities. The Conversion is
intended: (i) to improve the competitive position of the Bank in its market area
and support possible future expansion and diversification of operations
(currently, there are no specific plans, arrangements or understandings, written
or oral, regarding any such activities); (ii) to afford members of the Bank and
others the opportunity to become stockholders of the Holding Company and thereby
participate more directly in, and contribute to, any future growth of the
Holding Company and the Bank; and (iii) to provide future access to capital
markets. See "THE CONVERSION."
THE SUBSCRIPTION, DIRECT COMMUNITY AND SYNDICATED COMMUNITY OFFERINGS
The Holding Company is offering up to 1,725,000 shares of Common Stock at
$10.00 per share to holders of Subscription Rights in the following order of
priority: (i) Eligible Account Holders; (ii) the Bank's ESOP; (iii) Supplemental
Eligible Account Holders; and (iv) Other Members. In the event the number of
shares offered in the Stock Conversion is increased above the maximum of the
Estimated Valuation Range, the Bank's ESOP shall have a priority right to
purchase any such shares exceeding the maximum of the Estimated Valuation Range
up to an aggregate of 8% of the Common Stock issued in the Offerings.
Concurrently, but subject to the prior rights of holders of Subscription Rights,
the Holding Company is offering the Common Stock in the Direct Community
Offering to certain members of the general public with preference being given to
natural persons and trusts of natural persons who are permanent residents of the
Local Community. ONCE TENDERED, SUBSCRIPTION ORDERS CANNOT BE REVOKED OR
MODIFIED WITHOUT THE CONSENT OF THE BANK AND THE HOLDING COMPANY. The Bank has
engaged Sandler O'Neill to consult with and advise the Holding Company and the
Bank in the Offerings, and Sandler O'Neill has agreed to use its best efforts to
assist the Holding Company with the solicitation of subscriptions and purchase
orders for shares of Common Stock in the Offerings. Sandler O'Neill is not
obligated to take or purchase any shares of Common Stock in the Offerings. If
all shares of Common Stock to be issued in the Stock Conversion are not sold
through the Subscription and Direct Community Offering, then the Holding Company
expects to offer the
(iii)
<PAGE>
remaining shares in a Syndicated Community Offering managed by Sandler O'Neill,
which would occur as soon as practicable following the close of the Subscription
and Direct Community Offering. All shares of Common Stock will be sold at the
same price per share in the Syndicated Community Offering as in the Subscription
and Direct Community Offering. See "USE OF PROCEEDS," "PRO FORMA DATA" and "THE
CONVERSION -- Stock Pricing and Number of Shares to be Issued." The Subscription
Offering will expire at 12:00 noon, Pacific Time, on the Expiration
Date, unless extended by the Bank and the Holding Company for up to __ days. The
Direct Community Offering will also terminate on the Expiration Date unless
extended by the Holding Company and the Bank to no later than 45 days after the
expiration of the Subscription Offering, unless further extended with the
consent of the OTS. The Syndicated Community Offering, if one is held, will
terminate no later than 45 days after the expiration of the Subscription
Offering, unless extended with the consent of the OTS.
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
Conversion. See "THE CONVERSION -- Procedure for Purchasing Shares in
Subscription and Direct 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 December 31, 1995 (the "Eligibility Record
Date"), March 31, 1997 (the "Supplemental Eligibility Record Date") or April 30,
1997 ("Voting Record Date") and borrowers with loans outstanding on April 25,
1990 which continue to be outstanding as of the Voting Record Date must list all
deposit and/or loan accounts on the 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 Direct Community Offering."
RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS
No person may transfer or enter into any agreement or understanding to
transfer the legal or beneficial ownership of the Subscription Rights issued
under the Plan or the shares of Common Stock to be issued upon their exercise.
Each person exercising Subscription Rights will be required to certify that 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 HOLDING COMPANY AND THE BANK 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.
PURCHASE LIMITATIONS
With the exception of the ESOP, which is expected to subscribe for 8% of
the shares of Common Stock issued in the Conversion, no person or entity may
purchase more than $125,000 of Common Stock (or 12,500 shares based on the
Purchase Price); and no person or entity, together with associates of and
persons acting in concert with such person or entity, may purchase in the
aggregate more than $250,000 of Common Stock (or 25,000 shares based on the
Purchase Price). THIS MAXIMUM PURCHASE LIMITATION MAY BE INCREASED OR DECREASED
AS CONSISTENT WITH OTS REGULATIONS IN THE SOLE DISCRETION OF THE HOLDING COMPANY
AND THE BANK SUBJECT TO ANY REQUIRED
(iv)
<PAGE>
REGULATORY APPROVAL. The minimum purchase is 25 shares. In addition, stock
orders received either through the Direct Community Offering or the Syndicated
Community Offering, if held, may be accepted or rejected, in whole or in part,
at the discretion of the Holding Company and the Bank. See "THE CONVERSION --
Limitations on Purchases of Shares." If an order is rejected in part, the
purchaser does not have the right to cancel the remainder of the order. In the
event of an oversubscription, shares will be allocated in accordance with the
Plan of Conversion. See "THE CONVERSION -- The Subscription, Direct Community
and Syndicated Community Offerings."
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION
The Purchase Price in the Offerings is a uniform price for all subscribers,
including members of the Holding Company's and the Bank's Boards of Directors,
their management and tax-qualified employee plans, and was set by the Board of
Directors. The number of shares to be offered at the 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 RP Financial to range from $12,750,000 to $17,250,000 as of
February 28, 1997. See "THE CONVERSION -- Stock Pricing and Number of Shares to
be Issued." The appraisal of the pro forma value of the Holding Company and the
Bank as converted will be updated or confirmed at the completion of the
Offerings. The maximum of the Estimated Valuation Range may be increased by up
to 15% to $19,837,500 and the number of shares of Common Stock to be issued in
the Conversion may be increased to 1,983,750 shares due to material changes in
the financial condition or performance of the Bank or changes in market
conditions or general financial and economic conditions. No resolicitation of
subscribers will be made and subscribers will not be permitted to modify or
cancel their subscriptions unless the gross proceeds from the sale of the Common
Stock are less than the minimum or more than 15% above the maximum of the
current Estimated Valuation Range. THE APPRAISAL IS NOT INTENDED TO BE AND
SHOULD NOT BE CONSTRUED AS A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY
OF PURCHASING COMMON STOCK IN THE OFFERINGS NOR CAN ASSURANCE BE GIVEN THAT
PURCHASERS OF THE COMMON STOCK IN THE OFFERINGS WILL BE ABLE TO SELL SUCH SHARES
AFTER CONSUMMATION OF THE CONVERSION AT A PRICE THAT IS EQUAL TO OR ABOVE THE
PURCHASE PRICE. Furthermore, the pro forma stockholders' equity is not intended
to represent the fair market value of the Common Stock and may be greater than
amounts that would be available for distribution to stockholders in the event of
liquidation.
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock are estimated to range
from $12.1 million to $16.6 million, or up to $19.1 million if the Estimated
Valuation Range is increased by 15%, depending upon the number of shares sold
and the expenses of the Conversion. The Holding Company has received the
approval of the OTS to purchase all of the capital stock of the Bank to be
issued in the Conversion in exchange for 50% of the net proceeds of the
Offerings. This will result in the Holding Company retaining approximately $6.1
million to $8.3 million of the net proceeds, or up to $9.6 million if the
Estimated Valuation Range is increased by 15%, and the Bank receiving an equal
amount.
Receipt of 50% of the net proceeds of the sale of the Common Stock will
increase the Bank's capital and will support the expansion of the Bank's
existing business activities. The Bank will use the funds contributed to it for
general corporate purposes, including increased local lending, the establishment
of its Clarkston, Washington office, the expansion of its community banking
activities and possible future acquisitions of branches or banks. The Bank may
also use a portion of the funds contributed to it to retire outstanding FHLB
advances. Pending deployment of funds, the Bank plans initially to invest the
net proceeds in short-term U.S. Government and agency securities. Shares of
Common Stock may be purchased with funds on deposit at the Bank, which will
reduce deposits by the amounts of such purchases. As a result, the net amount
of funds available to the Bank for investment following receipt of the
Conversion proceeds will be reduced by the amount of deposit withdrawals used to
fund stock purchases.
A portion of the net proceeds retained by the Holding Company will be used
for a loan by the Holding Company to the ESOP to enable it to purchase 8% of the
shares of Common Stock issued in the Conversion. Such
(v)
<PAGE>
loan would fund the entire purchase price of the ESOP shares ($1,380,000 at the
maximum of the Estimated Valuation Range) and would be repaid principally from
the Bank's contributions to the ESOP and from dividends payable on the Common
Stock held by the ESOP. The remaining proceeds retained by the Holding Company
initially will be invested in short-term U.S. Government and agency securities.
Such proceeds will be available for additional contributions to the Bank in the
form of debt or equity, to support future growth and diversification activities,
as a source of dividends to the stockholders of the Holding Company and for
future repurchases of Common Stock (including possible repurchases to fund the
MRP or to provide shares to be issued upon exercise of stock options) to the
extent permitted under Delaware law and OTS regulations (following the Charter
Conversion, dividend payments will be regulated by Delaware law and the
regulations and policies of the Federal Reserve). Currently, as discussed below
under "USE OF PROCEEDS," there are no specific plans, arrangements, agreements
or understandings, written or oral, regarding any of such activities.
MARKET FOR COMMON STOCK
The Holding Company has never issued capital stock to the public and,
consequently, there is no existing market for the Common Stock. The Holding
Company has received conditional approval to have the Common Stock listed on the
Nasdaq National Market under the symbol "FBNW." Although under no obligation to
do so, Sandler O'Neill has indicated its intention to act as a market maker for
the Holding Company's Common Stock following consummation of the Conversion. No
assurance can be given that an active and liquid trading market for the Common
Stock will develop. Further, no assurance can be given that purchasers will be
able to sell their shares at or above the Purchase Price after the Conversion.
See "RISK FACTORS -- Absence of Active Market for the Common Stock" and "MARKET
FOR COMMON STOCK."
DIVIDENDS
The Board of Directors of the Holding Company has not formulated a dividend
policy, but intends to consider a policy of paying cash dividends in the future.
Declarations and payments of dividends by the Board of Directors will depend
upon a number of factors, including the amount of the net proceeds retained by
the Holding Company, capital requirements, regulatory limitations, the Bank's
and the Holding Company's financial condition and results of operations, tax
considerations and general economic conditions. No assurances can be given that
any dividends will be declared or, if declared, what the amount of dividends
will be or whether such dividends, once declared, will continue. The Holding
Company may pay stock dividends in lieu of or in addition to cash dividends, or
may combine periodic special dividends with regular dividends. See "DIVIDEND
POLICY."
OFFICERS' AND DIRECTORS' COMMON STOCK PURCHASES AND BENEFICIAL OWNERSHIP
Officers and directors of the Bank (12 persons) are expected to subscribe
for an aggregate of approximately 155,000 shares of Common Stock, or 12.2% and
9.0% of the shares based on the minimum and the maximum of the Estimated
Valuation Range, respectively. See "THE CONVERSION -- Shares to be Purchased by
Management Pursuant to Subscription Rights." In addition, purchases by the
ESOP, allocations of stock under the Management Recognition Plan ("MRP"), and
the exercise of stock options issued under the Stock Option Plan ("Stock Option
Plan"), will increase the number of shares beneficially owned by officers,
directors and employees. See "RISK FACTORS -- Antitakeover Effects of Governing
Documents, Delaware and Federal Law, Control by Insiders and Employment
Agreements -- Voting Control by Insiders." The MRP and Stock Option Plan are
subject to approval by the stockholders of the Holding Company at a meeting to
be held no earlier than six months following consummation of the Conversion.
RISK FACTORS
See "RISK FACTORS" beginning on page 1 for a discussion of certain risks
related to the Offerings that should be considered by all prospective investors.
(vi)
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following tables set forth certain information concerning the
consolidated financial position and results of operations of the Bank and its
subsidiary at the dates and for the periods indicated. This information is
qualified in its entirety by reference to the detailed information contained in
the Consolidated Financial Statements and Notes thereto presented elsewhere in
this Prospectus. Information as of December 31, 1996 and for the nine months
ended December 31, 1995 and 1996 is unaudited but, in the opinion of management,
reflects all adjustments consisting only of normal recurring adjustments
necessary for a fair presentation of the results at such date and for such
periods.
<TABLE>
<CAPTION>
At
At March 31, December 31,
----------------------------------------------------
1992 1993 1994 1995 1996 1996
---- ---- ---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL CONDITION DATA:
Total assets................................. $95,951 $96,816 $102,223 $104,121 $129,832 $133,194
Loans receivable, net........................ 60,711 77,574 76,217 82,777 93,817 111,085
Cash and cash equivalents.................... 9,042 3,988 12,754 4,172 13,581 5,765
Investment securities available for sale..... 1,353 1,414 1,335 1,289 1,328 --
Investment securities held to maturity....... 3,236 2,692 4,110 6,732 10,545 5,189
Mortgage-backed securities held to maturity.. 6,776 5,013 3,446 2,840 2,488 2,343
Deposits..................................... 86,941 83,182 91,858 88,787 115,324 105,349
Borrowings................................... 544 4,044 -- 4,000 2,304 15,060
Total equity................................. 6,634 7,807 8,797 9,504 10,356 10,818
</TABLE>
<TABLE>
<CAPTION>
Nine
Months Ended
Year Ended March 31, December 31,
------------------------------------------------- ------------
1992 1993 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Interest income.............................. $ 7,726 $ 7,335 $ 7,418 $ 7,658 $ 9,552 $ 7,025 $7,640
Interest expense............................. 5,104 3,928 3,625 3,596 5,158 3,672 4,014
------- ------- -------- -------- -------- -------- ------
Net interest income.......................... 2,622 3,407 3,793 4,062 4,394 3,353 3,626
Provision for loan losses.................... 82 267 79 27 150 78 194
------- ------- -------- -------- -------- -------- ------
Net interest income
after provision for loan losses............ 2,540 3,140 3,714 4,035 4,244 3,275 3,432
Non-interest income.......................... 1,037 2,116 2,740 1,737 1,980 1,507 1,680
Non-interest expense......................... 2,624 3,367 4,310 4,567 5,261 3,555 4,539
------- ------- -------- -------- -------- -------- ------
Income before income taxes and cumulative
effect of accounting change................ 953 1,889 2,144 1,205 963 1,227 573
Income taxes................................. 361 797 963 452 375 428 150
------- ------- -------- -------- -------- -------- ------
Income before cumulative effect
of accounting change....................... 592 1,092 1,181 753 588 799 423
Cumulative effect of accounting change(1).... -- -- (116) -- -- -- --
------- ------- -------- -------- -------- -------- ------
Net income................................... $ 592 $ 1,092 $ 1,065 $ 753 $ 588 $ 799 $ 423
======= ======= ======== ======== ======== ======== ======
</TABLE>
_____________
(1) Reflects adoption of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
(vii)
<PAGE>
<TABLE>
<CAPTION>
At
At March 31, December 31,
---------------------------------------------
1992 1993 1994 1995 1996 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Number of:
Real estate loans outstanding........... 1,423 1,581 1,440 1,425 1,456 1,470
Deposit accounts........................ 15,379 15,205 15,730 16,303 18,206 18,099
Full-service offices.................... 4 4 5 5 5 5
</TABLE>
<TABLE>
<CAPTION>
At or for
At or For the the Nine Months
Year Ended March 31, Ended December 31,
--------------------------------------------- ------------------
1992 1993 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
KEY FINANCIAL RATIOS:
Performance Ratios (1):
Return on average assets (2).............. 0.64% 1.15% 1.05% 0.74% 0.50% 0.71% 0.33%
Return on average equity (3).............. 9.40 15.28 12.48 8.19 5.81 8.03 3.94
Average total equity to average
assets (4)............................... 6.85 7.51 8.43 9.03 8.55 8.85 8.32
Total equity to total assets
at end of period......................... 6.91 8.06 8.61 9.13 7.98 7.78 8.12
Interest rate spread (5).................. 2.72 3.64 3.61 3.87 3.61 3.88 3.68
Net interest margin (6)................... 2.97 3.80 3.88 4.15 3.89 4.17 3.93
Average interest-earning assets to
average interest- bearing liabilities.... 104.30 103.54 107.27 107.44 106.09 106.46 105.67
Non-interest expense as a percent of
average total assets..................... 2.85 3.54 4.26 4.49 4.44 4.22 4.68
Efficiency ratio (7)...................... 71.71 60.96 65.97 78.75 82.54 73.15 85.54
Equity Ratios:
Core capital.............................. 6.91 8.06 8.61 9.13 7.98 7.78 8.12
Tangible capital.......................... 6.91 8.06 8.61 9.13 7.98 7.78 8.12
Risk-based capital........................ 11.64 14.02 15.42 15.66 14.14 14.04 13.27
Asset Quality Ratios:
Nonaccrual and 90 days or more past due
loans as a percent of loans
receivable, net.......................... 3.02 0.99 0.28 0.64 0.74 0.68 0.91
Nonperforming assets as a percent of
total assets............................. 4.41 0.95 0.21 0.51 0.59 0.55 0.90
Allowance for loan losses as a
percent of total loans
receivable............................... 0.48 0.56 0.66 0.62 0.70 0.63 0.74
Allowance for loan losses as a
percent of nonperforming loans........... 16.34 59.61 252.38 104.32 101.30 85.62 87.48
Net charge-offs to average
outstanding loans........................ 0.02 0.15 0.01 0.00 0.00 0.00 0.01
</TABLE>
__________________
(1) Ratios for the nine-month periods are annualized.
(2) Net earnings divided by average total assets.
(3) Net earnings divided by average equity.
(4) Average total equity divided by average total assets.
(5) Difference between weighted average yield on interest-earning assets and
weighted average rate on interest-bearing liabilities.
(6) Net interest income as a percentage of average interest-earning assets.
(7) Represents the ratio of non-interest expenses divided by the sum of net
interest income and non-interest income.
(viii)
<PAGE>
RECENT DEVELOPMENTS
The following tables sets forth selected financial condition data for the
Bank at March 31, 1996, December 31, 1996 and March 31, 1997, selected operating
data for the Bank for the three months and the years ended March 31, 1996 and
1997 and selected financial ratios for the Bank at and for the three months and
the years ended March 31, 1996 and 1997. The selected financial and operating
data and financial ratios at and for the three months and ended March 31, 1996
and 1997 are derived from the unaudited consolidated financial statements of
the Bank, which, in the opinion of management, reflect all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation. This information should be read inconjunction with the
Consolidated Financial Statements and Notes thereto presented elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
At At At
March 31, December 31, March 31,
1996 1996 1997
---------- ----------- ---------
(In Thousands)
<S> <C> <C> <C>
FINANCIAL CONDITION DATA:
Total assets................................... $129,832 $133,194 $137,652
Loans receivable, net.......................... 93,817 111,085 113,053
Cash and cash equivalents...................... 13,581 5,765 5,303
Investment securities available for sale....... 1,328 -- --
Investment securities held to maturity......... 10,545 5,189 5,199
Mortgage-backed securities available for sale.. -- -- 2,599
Mortgage-backed securities held to maturity.... 2,488 2,343 2,281
Deposits....................................... 115,324 105,349 107,596
Borrowings..................................... 2,304 15,060 13,922
Total equity................................... 10,356 10,818 11,011
</TABLE>
<TABLE>
<CAPTION>
Three Months Year
Ended March 31, Ended March 31,
--------------- -----------------
1996 1997 1996 1997
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Interest income................................ $ 2,527 $2,552 $ 9,552 $ 10,192
Interest expense............................... 1,486 1,324 5,158 5,338
-------- ------ -------- --------
Net interest income............................ 1,041 1,228 4,394 4,854
Provision for loan losses...................... 72 116 150 310
-------- ------ -------- --------
Net interest income after
provision for loan losses.................... 969 1,112 4,244 4,544
Non-interest income............................ 473 565 1,980 2,245
Non-interest expense........................... 1,706 1,338 5,261 5,877
-------- ------ -------- --------
Income (loss) before income taxes.............. (264) 339 963 912
Income taxes................................... (53) 113 375 263
-------- ------ -------- --------
Net income (loss).............................. $ (211) $ 226 $ 588 $ 649
======== ====== ======== ========
</TABLE>
(footnotes on following page)
(ix)
<PAGE>
<TABLE>
<CAPTION>
At or For the At or For the
Three Months Year
Ended March 31, Ended March 31,
-------------------- ----------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
KEY FINANCIAL RATIOS:
Performance Ratios (1):
Return on average assets (2)......................... (0.16)% 0.17% 0.50% 0.50%
Return on average equity (3)......................... (2.02) 2.04 5.81 5.99
Average total equity to average assets (4)........... 7.92 8.40 8.55 8.34
Total equity to total assets at end of period........ 7.98 8.00 7.98 8.00
Interest rate spread (5)............................. 3.04 3.67 3.61 3.68
Net interest margin (6).............................. 3.30 3.91 3.89 3.92
Average interest-earning assets
to average interest-bearing liabilities............. 105.48 105.53 106.09 105.62
Non-interest expense as a
percent of average total assets..................... 5.17 4.05 4.44 4.52
Efficiency ratio (7)................................. 112.68 74.62 82.54 82.79
Equity Ratios:
Core capital......................................... 7.98 8.02 7.98 8.02
Tangible capital..................................... 7.98 8.02 7.98 8.02
Risk-based capital................................... 14.14 13.59 14.14 13.59
Asset Quality Ratios:
Nonaccrual and 90 days or more
past due loans as a percent
of loans receivable, net............................ 0.74 1.00 0.74 1.00
Nonperforming assets as a
percent of total assets............................. 0.59 0.99 0.59 0.99
Allowance for loan losses as a
percent of total loans receivable................... 0.70 0.82 0.70 0.82
Allowance for loan losses as a
percent of nonperforming loans...................... 101.30 86.58 101.30 86.58
Net charge-offs to average
outstanding loans................................... 0.00 0.02 0.00 0.03
</TABLE>
__________________
(1) Ratios for the three-month periods are annualized.
(2) Net income (loss) divided by average total assets.
(3) Net income (loss) divided by average equity.
(4) Average equity divided by average total assets.
(5) Difference between weighted average yield on interest-earning assets and
weighted average rate on interest-bearing liabilities.
(6) Net interest income as a percentage of average interest-earning assets.
(7) Represents the ratio of non-interest expenses divided by the sum of net
interest income and non-interest income.
(x)
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1996 AND MARCH 31, 1997
Total assets increased $4.5 million, or 3.4%, from $133.2 million at
December 31, 1996 to $137.7 million at March 31, 1997. The growth in assets is
primarily attributable to an increase in loans receivable and mortgage-backed
securities available for sale. Net loans receivable increased from $111.1
million at December 31, 1996 to $113.1 million at March 31, 1997. Between
December 31, 1996 and March 31, 1997, the Bank decreased its cash and cash
equivalents from $5.8 million to $5.3 million. Investment securities remained
essentially unchanged from December 31, 1996 to March 31, 1997. Mortgage-backed
securities held to maturity decreased slightly as a result of principal
repayments. In the three months ended March 31, 1997, the Bank purchased $2.6
million mortgage-backed securities available for sale as part of its
asset/liability management.
Nonperforming assets increased from $1.2 million, or 0.9% of total assets,
at December 31, 1996 to $1.4 million, or 1.0% of total assets, at March 31,
1997. Nonaccrual loans increased from $1.0 million to $1.1 million. At March
31, 1997, nonaccrual loans consisted of $526,000 of residential real estate
loans, $595,000 of construction loans and $4,000 of consumer loans. Real estate
owned increased from $196,000 at March 31, 1996 to $234,000 at March 31,
1997.
Total liabilities increased from $122.4 million at December 31, 1996 to
$126.6 million at March 31, 1997. Deposits increased $2.3 million from $105.3
million at December 31, 1996 to $107.6 million at March 31, 1997. FHLB advances
decreased from $15.1 million at December 31, 1996 to $13.9 million at March 31,
1997.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
1997
GENERAL. Net income increased from a loss of $211,000 for the three months
ended March 31, 1996 to net income of $226,000 for the three months ended March
31, 1997.
NET INTEREST INCOME. Net interest income increased by $187,000, or 18.0%,
from $1.0 million for the three months ended March 31, 1996 to $1.2 million for
the three months ended March 31, 1997. This increase resulted from the growth of
the Bank and the maturity of promotional certificates of deposit in fiscal
1996.
Total interest income increased $25,000 between the periods. Interest
income on loans receivable increased $287,000 from $2.1 million for the three
months ended March 31, 1996 to $2.4 million for the three months ended March 31,
1997. This was primarily offset by a decrease in interest income on investment
securities and other interest-earning assets. Interest income on loans
increased primarily as a result of a larger average balance of loans in 1997
while interest income on investment securities and other interest-earning assets
decreased primarily as a result of a smaller average balance in 1997.
Total interest expense decreased $162,000 between the periods. Interest
expense on deposits decreased $303,000 from $1.4 million for the three months
ended March 31, 1996 to $1.1 million for the three months ended March 31, 1997.
The decrease was primarily the result of a decrease of $294,000 in interest paid
on certificates of deposit. In late 1995, the Bank offered a 75-day certificate
of deposit at an above-market interest rate to promote the Bank's 75th
anniversary. The effect of the promotional certificate of deposit is reflected
in the higher interest expense for the three months ended March 31, 1996.
Interest paid on FHLB advances increased between the periods from $43,000 to
$184,000 because of an increase in average borrowings.
PROVISION FOR LOAN LOSSES. Provisions for loan losses totalled $116,000
during the three months ended March 31, 1997 compared to $72,000 during the same
period in 1996. The Bank made larger provisions in 1997 after considering the
growth of its loan portfolio, including the growth of its commercial real estate
and consumer loans, which generally are riskier than residential mortgages.
NON-INTEREST INCOME. Total non-interest income increased $92,000, from
$473,000 for the three months ended March 31, 1996 to $565,000 for the three
months ended March 31, 1997. Income on gain on sales of loans
(xi)
<PAGE>
decreased $16,000, or 6.3%, between the periods. The decrease was primarily the
result of a decrease in loans originated for sale servicing-released. This was
offset by a $70,000, or 32.4%, increase in service fees and charges and a
$38,000 increase in commissions. Service fees and charges increased
as a result of an increase in mortgage loans serviced, while commissions
increased as a result of higher annuity sales by the Bank's subsidiary.
NON-INTEREST EXPENSE. Total non-interest expense decreased $368,000 from
$1.7 million for the three months ended March 31, 1996 to $1.3 million for the
three months ended March 31, 1997. Compensation and related benefits decreased
$133,000, or 14.5% between the periods primarily as a result of the termination
in 1996 of a defined benefit pension plan. Deposit insurance premiums decreased
from $80,000 to $3,000 between the periods as a result of the change in the
deposit premium schedule for savings associations following the recapitalization
of the SAIF. Included in the total for the 1996 period is a charge of $200,000
relating to the impairment in value of a mutual fund held by the Bank. There
was no similar charge in the 1997 period.
INCOME TAXES. Income taxes were $113,000 for the three months ended March
31, 1997 compared to a tax benefit of $53,000 for the three months ended March
31, 1996. The increase in income taxes was due to pre-tax income in 1997
compared to a pre-tax loss in 1996.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED MARCH 31, 1996 AND 1997
GENERAL. Net income increased $61,000, or 10.4%, from $588,000 for the
year ended March 31, 1996 to $649,000 for the year ended March 31, 1997. The
Bank experienced greater net interest income and non-interest income in fiscal
1997 compared to fiscal 1996. However, these gains were partially offset by
greater non-interest expense and increased provisions for loan losses. Non-
interest expense for the year ended March 31, 1997 included a one-time, special
assessment of $584,000 for the purpose of recapitalizing the SAIF. Excluding the
special assessment and related tax effects, net income would have been
$1,004,000 for fiscal 1997.
NET INTEREST INCOME. Net interest income increased $460,000, or 10.5%,
from $4.4 million for the year ended March 31, 1996 to $4.9 million for the year
ended March 31, 1997. The Bank's spread between the yield on interest-earning
assets and the rate paid on interest-bearing liabilities increased from 3.61%
for fiscal 1996 to 3.68% for fiscal 1997.
Total interest income increased $640,000 from $9.6 million for the year
ended March 31, 1996 to $10.2 million for the year ended March 31, 1997.
Interest income on loans receivable increased $841,000, or 10.0%, from $8.4
million for fiscal 1996 to $9.2 million for fiscal 1997. The increase was the
result of a larger average balance of loans in fiscal 1997, offset slightly by a
decrease in the average yield on the loan portfolio. Interest income on
mortgage-backed and related securities decreased $10,000 from fiscal 1996 to
fiscal 1997 primarily as a result of a smaller average balance in fiscal 1997.
Interest income on investment securities increased $77,000 from fiscal 1996 to
fiscal 1997 as a result of a larger average balance in 1996, which was partially
offset by a decrease in the average yield. Interest income on other interest-
earning assets decreased $268,000 from fiscal 1996 to fiscal 1997 as a result of
a smaller average balance in fiscal 1997.
Interest expense increased by $180,000, from $5.2 million for the year
ended March 31, 1996 to $5.3 million for the year ended March 31, 1997.
Interest expense on deposits increased $46,000, or 1.0%, from fiscal 1996 to
fiscal 1997. The average balance of deposits increased from fiscal 1996 to
fiscal 1997. However, this was partially offset by a decrease in the average
rate paid on deposits. Interest expense on FHLB advances increased $134,000
from $365,000 in fiscal 1996 to $499,000 in fiscal 1997 as a result of a larger
average balance of borrowings in fiscal 1997.
PROVISION FOR LOAN LOSSES. The provision for loans losses was $310,000 for
the year ended March 31, 1997 compared to $150,000 for the year ended March 31,
1996. Management increased the provision for loan losses in fiscal 1997 after
considering the growth of the loan portfolio, including the growth of commercial
real estate and consumer loans, which generally are riskier than residential
mortgage loans. The Bank's allowance for loan losses was $974,000, or 0.82% of
total loans receivable, at March 31, 1997, compared to $701,000, or 0.70% of
total loans
(xii)
<PAGE>
receivable, at March 31, 1996. Net loan charge-offs were $37,000 during fiscal
1997 compared to $4,000 during fiscal 1996.
NON-INTEREST INCOME. Total non-interest income increased $265,000, or
13.4%, from fiscal 1995 to fiscal 1997. Income on gain on sales of loans
increased $61,000, or 5.4%, from fiscal 1996 to fiscal 1997. The increase was
the result of the adoption of SFAS No. 122 combined with a smaller volume of
loans sold servicing-released in fiscal 1997. Service fees and charges
increased $147,000 and commissions increased $57,000. Service fees and charges
increased as a result of an increase in mortgage loans serviced, while
commissions increased as a result of higher annuity sales by the Bank's
subsidiary.
NON-INTEREST EXPENSE. Total non-interest expense increased $616,000, or
11.7%, from $5.3 million for the year ended March 31, 1996 to $5.9 million for
the year ended March 31, 1996. The increase in non-interest expense is
primarily the result of the payment of the one-time, industry wide special
assessment to recapitalize the SAIF. The Bank's assessment was $584,000.
Compensation and related benefits increased $63,000, or 2.1%, from fiscal 1996
to 1997. Occupancy expenses increased $26,000, or 3.9%, advertising expenses
increased $38,000, or 31.1%, and data processing expenses increased $70,000, or
79.5%, between the periods while supplies and postage expenses decreased
$10,000, or 3.7%, and other expenses decreased $36,000, or 4.4%. Included in
the total for fiscal 1996 is a charge of $200,000 relating to the impairment in
value of a mutual fund held by the Bank. There was no similar charge in fiscal
1997.
INCOME TAXES. Income taxes were $263,000 for the year ended March 31, 1997
compared with $375,000 for the year ended March 31, 1996. The decrease in income
tax expense in fiscal 1997 was primarily the result of an underaccrual of prior
year income taxes receivable.
(xiii)
<PAGE>
RISK FACTORS
Before investing in shares of the Common Stock offered hereby, prospective
investors should carefully consider the matters presented below, in addition to
matters discussed elsewhere in this Prospectus.
DIVERSIFIED LENDING RISKS
RISKS OF CONSTRUCTION LENDING. At December 31, 1996, construction loans
totalled $14.9 million, or 12.6% of the Bank's total loan portfolio. During the
year ended March 31, 1996 and the nine months ended December 31, 1996,
construction loans constituted 24.5% and 23.8%, respectively, of total loan
originations. Construction loans are generally considered to involve a higher
degree of risk than single-family permanent mortgage lending because of (i) the
concentration of principal among relatively few borrowers, (ii) the increased
difficulty at the time the loan is made of accurately estimating total building
costs and the eventual selling price of the residence to be built, (iii) the
increased difficulty and costs of monitoring the loan, (iv) the higher degree of
sensitivity to increases in market rates of interest, and (v) the increased
difficulty of working out problem loans. Speculative construction loans, which
constituted 44.6% of the total construction loan portfolio at December 31, 1996,
have the added risk associated with identifying an end-purchaser for the
finished home. Additionally, working out of problem construction loans is
complicated by the fact that in-process homes are difficult to sell and
typically must be completed in order to be sold. This may require the Bank to
advance additional funds and contract with another builder to complete the
residence. In addition, because much of the Bank's construction lending is in
the Coeur d'Alene area, changes in the local economy and real estate market
could adversely affect the Bank's construction loan portfolio. Accordingly, the
Bank closely monitors the Coeur d'Alene real estate market and will limit the
amount of speculative loans if it perceives there are unfavorable market
conditions. The Bank has sought to address the foregoing risks of its
construction lending by developing and adhering to underwriting policies,
disbursement procedures, and monitoring practices. See "BUSINESS OF THE BANK --
Lending Activities -- Construction Lending."
RISKS OF AGRICULTURAL LENDING. At December 31, 1996, agricultural real
estate loans totalled $11.9 million, or 10.0% of the Bank's total loan
portfolio. Agricultural real estate lending involves a greater degree of risk
than residential real estate loans. Payments on agricultural real estate loans
are dependent on the successful operation or management of the farm property
securing the loan. The success of the farm may be affected by many factors
outside the control of the farm borrower, including adverse weather conditions
that limit crop yields (such as hail, drought and floods), declines in market
prices for agricultural products and the impact of government regulations
(including changes in price supports, subsidies and environmental regulations.)
In addition, many farms are dependent on a limited number of key individuals
whose injury or death may significantly affect the successful operation of the
farm. The primary crop in the Bank's market area is wheat. Accordingly, adverse
circumstances affecting the area's wheat crop could have an adverse effect on
the Bank's agricultural real estate loan portfolio. The Bank also originates
agricultural operating loans. At December 31, 1996, such loans totalled $1.0
million. As with agricultural real estate loans, the repayment of operating
loans is dependent on the successful operation or management of the farm
property. Agricultural operating loans entail greater risk than do residential
mortgage loans, particularly in the case of loans that are unsecured or secured
by rapidly depreciating assets such as farm equipment. In such cases, any
repossessed collateral for a defaulted 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 connection with the adoption of
its community banking strategy, the Bank intends to expand its agricultural
lending activities. See "BUSINESS OF THE BANK -- Lending Activities --
Agricultural Lending" and "-- Lending Activities -- Consumer and Other Lending."
RELIANCE ON MORTGAGE BANKING OPERATIONS
Mortgage banking activities significantly influence the Bank's results of
operations. The Bank's mortgage banking operations involve the origination and
sale of mortgage loans for the purpose of generating income from the sale of
mortgage loans and from servicing fees (from loans sold on a servicing-retained
basis). Income from the sale of mortgage loans is derived primarily from the
sale of government insured loans, which are sold on a servicing-
1
<PAGE>
released basis, whereas servicing fees are derived primarily from conventional
mortgage loans sold on a servicing-retained basis. The profitability of mortgage
banking operations depends primarily on managing the volume of loan originations
and sales and the expenses associated with loan originations so that gains on
the sale of loans together with fee income exceeds the costs of this activity.
Changes in the level of interest rates and the condition of the local and
national economies affect the amount of loans originated by the Bank and
demanded by investors to whom the loans are sold. Generally, the Bank's loan
origination and sale activity and, therefore, its results of operations, may be
adversely affected by an increasing interest rate environment to the extent such
environment results in decreased loan demand by borrowers and/or investors.
Accordingly, the volume of loan originations and the profitability of this
activity can vary significantly from period to period. Furthermore, the Bank's
mortgage banking activities have been dependent on the growth of the Coeur
d'Alene area in recent years and the high volume of construction and real estate
activity there. Changes in the Coeur d'Alene economy or a decrease in real
estate activity there could adversely affect the Bank's volume of loan
originations and sales. In addition, the Bank's results of operations are
affected by the amount of non-interest expenses associated with mortgage-banking
activities, such as compensation and benefits, occupancy and equipment expenses,
and other operating costs. During periods of reduced loan demand, the Bank's
results of operations may be adversely affected to the extent that it is unable
to reduce expenses commensurate with the decline in loan originations.
The Bank's loan servicing portfolio consists of retained loan servicing
rights that relate to loans originated by the Bank and sold to investors. In a
decreasing interest rate environment the Bank may experience a higher volume of
prepayments as borrowers refinance their loans, which would reduce the size and
adversely impact the income received from the loan servicing portfolio. See
"BUSINESS OF THE BANK -- Lending Activities -- Loan Servicing."
RISKS OF DEPENDENCE ON LOCAL ECONOMY
The Bank has been and intends to continue to operate as a community-
oriented financial institution, with a focus on servicing customers in its
market area. Although the Bank has experienced strong loan demand in recent
years, because the Bank operates in a market area with a small population, the
Bank's ability to achieve loan and deposit growth may be limited. Future growth
opportunities for the Bank depend largely on market area growth and the Bank's
ability to compete effectively within its market area. As a result of limited
growth opportunities in Lewiston, the Bank expanded into Coeur d'Alene in 1992.
At December 31, 1996, most of the Bank's loan portfolio consisted of loans made
to borrowers and collateralized by properties located in its market area. As a
result of this concentration, a downturn in the economy of the Bank's market
area could increase the risk of loss associated with the Bank's loan portfolio.
RISKS OF COMMUNITY BANKING STRATEGY
The Bank's lending strategy involves a shift from a primary focus on
residential and construction lending to a community banking approach. As part of
the expansion of its community banking activities, the Bank intends to increase
its efforts to originate commercial real estate loans, agricultural real estate
and operating loans and commercial business loans. The Bank's community banking
strategy may take a period of time to implement fully and may require the
incurrence of additional expenses to originate the desired volume of non-
residential loans. There can be no assurances that the Bank will meet its
objectives in increasing the size of its non-mortgage loan portfolio. Factors
that may effect the ability of the Bank to increase its originations of such
loans include the demand for such loans, interest rates and the state of the
local and national economy.
Commercial lending affords the Bank an opportunity to originate loans that
contain interest rates that are higher than those generally available from
residential mortgage loans. However, loans secured by commercial real estate
usually are greater in amount, more difficult to evaluate and monitor and,
therefore, involve a greater degree of risk than one- to four-family residential
mortgage loans. Because payments on loans secured by commercial properties are
often dependent on the successful operation and management of the properties,
repayment of such loans may be affected by adverse conditions in the real estate
market or the economy. While commercial business
2
<PAGE>
loans are often collateralized by equipment, inventory, accounts receivable or
other business assets, the liquidation of collateral in the event of a borrower
default may be an insufficient source of repayment because accounts receivable
may be uncollectible and inventories and equipment may be obsolete or of limited
use, among other things.
LOW RETURN ON EQUITY AFTER 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. From fiscal year 1993
through fiscal year 1996, the Bank's return on equity declined from 15.28% to
5.81%. During the same period, the Bank's efficiency ratio (which is non-
interest expense as a percentage of the sum of net interest income and non-
interest income) increased from 60.96% to 82.54%. The decline in return on
equity and the increase in the efficiency ratio have resulted from non-interest
expenses increasing at a faster rate than income. The Bank's non-interest
expenses have been higher than the average expenses of institutions of
comparable size because of the greater resources required for the Bank's
mortgage banking operations, diversified lending activities and branch network.
The Holding Company's post-Conversion return on equity will continue to be less
than the average return on equity for publicly traded thrift institutions and
their holding companies because of the increase in consolidated equity of the
Holding Company that will result from the net proceeds of the Offerings. See
"SELECTED CONSOLIDATED FINANCIAL INFORMATION" for numerical information
regarding the Savings Bank's historical return on equity and "CAPITALIZATION"
and "PRO FORMA DATA" for a discussion of the Holding Company's estimated pro
forma consolidated capitalization as a result of the Conversion. The Holding
Company intends to deploy the net proceeds of the Offerings as discussed under
"USE OF PROCEEDS" to increase earnings per share with the goal of achieving a
return on equity comparable to the average for publicly traded thrift
institutions and their holding companies without assuming undue risk. This goal
will likely take a number of years to achieve and no assurances can be given
that this goal can be attained. 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 or their
holding companies.
COMPETITION WITHIN MARKET AREA
The Bank faces competition both in originating loans and attracting
deposits. Its most direct competition for savings deposits has historically come
from commercial banks, credit unions and other thrifts operating in its market
area. The Bank's competitors include large regional and superregional banks.
These institutions are significantly larger than the Bank and therefore have
greater financial and marketing resources than the Bank. In recent years, the
Bank has experienced an increased level of competition for deposits from
securities firms, insurance companies and other investment vehicles, such as
money market and mutual funds. This competition could adversely affect the
Bank's future growth prospects. The Bank's competition for loans comes from
commercial banks and other thrifts operating in its market as well as from
mortgage bankers and brokers, consumer finance companies, and, with respect to
agricultural loans, government sponsored lending programs. Because the
profitability of mortgage banking operations generally depends on maintaining a
sufficient volume of loan originations, such competition may limit the Bank's
profitability in the future. See "BUSINESS OF THE BANK -- Market Area" and "--
Competition."
ANTI-TAKEOVER EFFECTS OF GOVERNING DOCUMENTS, DELAWARE AND FEDERAL LAW, CONTROL
BY INSIDERS AND EMPLOYMENT AGREEMENTS
PROVISIONS IN THE HOLDING COMPANY'S GOVERNING INSTRUMENTS AND DELAWARE AND
FEDERAL LAW. Certain provisions included in the Holding Company's Certificate
of Incorporation and in the Delaware General Corporation Law ("DGCL") might
discourage potential proxy contests and other potential takeover attempts,
particularly those that have not been negotiated with the Board of Directors.
As a result, these provisions might preclude takeover attempts that certain
stockholders may deem to be in their best interest and might tend to perpetuate
existing management. These provisions include, among other things, a provision
limiting voting rights of beneficial owners of more than 10% of the Common
Stock, supermajority voting requirements for certain business combinations,
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staggered terms for directors, non-cumulative voting for directors, the removal
of directors without cause only upon the vote of holders of 80% of the
outstanding voting shares, limitations on the calling of special meetings, and
specific notice requirements for stockholder nominations and proposals. Certain
provisions of the Certificate of Incorporation of the Holding Company cannot be
amended by stockholders unless an 80% stockholder vote is obtained. The
existence of these anti-takeover provisions could result in the Holding Company
being less attractive to a potential acquiror and in stockholders receiving less
for their shares than otherwise might be available in the event of a takeover
attempt. Furthermore, federal regulations prohibit for three years after
consummation of the Conversion the ownership of more than 10% of the Bank or the
Holding Company without prior OTS approval. Federal law also requires regulatory
approval prior to the acquisition of "control" (as defined in federal
regulations) of an insured institution. For a more detailed discussion of these
provisions, see "RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY."
VOTING CONTROL BY INSIDERS. Directors and officers of the Bank and the
Holding Company expect to purchase 155,000 shares of Common Stock, or 12.2% and
9.0% of the shares issued in the Offerings at the minimum and the maximum of the
Estimated Valuation Range, respectively. Directors and officers are also
expected to control indirectly the voting of approximately 8% of the shares of
Common Stock issued in the Conversion through the ESOP. Under the terms of the
ESOP, the unallocated shares will be voted by the ESOP trustees in the same
proportion as the votes cast by participants with respect to the allocated
shares.
At a meeting of stockholders to be held no earlier than six months
following the consummation of the Conversion, the Holding Company expects to
seek approval of the Holding Company's MRP, which is a non-tax-qualified
restricted stock plan for the benefit of key employees and directors of the
Holding Company and the Bank. Assuming the receipt of stockholder approval, the
Holding Company expects to acquire common stock of the Holding Company on behalf
of the MRP in an amount equal to 4% of the Common Stock issued in the
Conversion, or 51,000 and 69,000 shares at the minimum and the maximum of the
Estimated Valuation Range, respectively. These shares will be acquired either
through open market purchases or from authorized but unissued shares of Common
Stock. Under the terms of the MRP, the MRP committee or the MRP trustees will
have the power to vote unallocated and unvested shares. The Holding Company also
intends to seek approval of the Stock Option Plan at a meeting of stockholders
to be held no earlier than six months following the consummation of the
Conversion. The Holding Company intends to reserve for future issuance pursuant
to the Stock Option Plan a number of authorized shares of Common Stock equal to
10% of the Common Stock issued in the Conversion (127,500 and 172,500 shares at
the minimum and the maximum of the Estimated Valuation Range, respectively).
Assuming (i) the receipt of stockholder approval for the MRP and the Stock
Option Plan, (ii) the open market purchase of shares on behalf of the MRP, (iii)
the purchase by the ESOP of 8% of the Common Stock sold in the Offerings, and
(iv) the exercise of stock options equal to 10% of the number of shares of
Common Stock issued in the Conversion, directors, officers and employees of the
Holding Company and the Bank would have voting control, on a fully diluted
basis, of 31.1% and 28.1% of the Common Stock, based on the issuance of Common
Stock at the minimum and maximum of the Estimated Valuation Range, respectively.
Management's potential voting control alone, as well as together with additional
stockholder support, might preclude or make more difficult takeover attempts
that certain stockholders deem to be in their best interest and might tend to
perpetuate existing management.
SEVERANCE PAYMENTS UPON CHANGE IN CONTROL. The proposed employment
agreements with the Chief Executive Officer and Chief Financial Officer provide
for cash severance payments in the event of a change in control of the Holding
Company or the Bank. Such agreements also provide for the continuation of
certain employee benefits following the change in control. Assuming a change in
control occurred as of December 31, 1996, the aggregate amounts payable under
these agreements would have been approximately $450,000. These provisions may
have the effect of increasing the cost of acquiring the Holding Company, thereby
discouraging future attempts to take over the Holding Company or the Bank.
See "MANAGEMENT OF THE BANK -- Benefits," "RESTRICTIONS ON ACQUISITION OF
THE HOLDING COMPANY" and "DESCRIPTION OF CAPITAL STOCK OF THE HOLDING COMPANY."
4
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INTEREST RATE RISK EXPOSURE
The financial condition and operations of the Bank, and of savings
institutions in general, are influenced significantly by general economic
conditions, by the related monetary and fiscal policies of the federal
government and by the regulations of the OTS and the FDIC. The Bank's
profitability, like that of most financial institutions, is dependent to a large
extent on 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. The interest earned by the Bank on such loans and paid by the Bank
on such accounts are significantly impacted by market interest rates.
Accordingly, the Bank's results of operations are significantly influenced by
movements in market interest rates and the Bank's ability to manage its assets
and liabilities in response to such movements.
To manage the impact of changes in interest rates, the Bank has sought to
improve the match between asset and liability maturities or repricing periods
and rates by emphasizing the origination of adjustable-rate mortgage ("ARM")
loans and shorter term consumer loans, offering certificates of deposit with
terms of up to five years and selling most of the fixed-rate loans that it
originates. At December 31, 1996, out of total gross loans of $118.6 million,
the Bank had $71.8 million of ARM loans in its loan portfolio. However, the
Bank originates ARM loans at initial "teaser" rates below the rate that would
prevail were the market rate index used for repricing applied initially.
Furthermore, the Bank's ARM loans contain periodic and lifetime interest rate
adjustment limits which, in a rising interest rate environment, may prevent such
loans from repricing to market interest rates. While management anticipates
that the Bank's ARM loans will better offset the adverse effects of an increase
in interest rates as compared to fixed-rate mortgages, the increased mortgage
payments required of ARM borrowers in a rising interest rate environment could
potentially cause an increase in delinquencies and defaults. The Bank has not
historically had an increase in such delinquencies and defaults on ARM loans,
but no assurance can be given that such delinquencies or defaults would not
occur in the future. The marketability of the underlying property also may be
adversely affected in a high interest rate environment. Moreover, the Bank's
ability to originate ARM loans may be affected by changes in the level of
interest rates and by market acceptance of the terms of such loans. For further
information regarding the Bank's asset and liability management, see
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Asset and Liability Management."
Changes in the level of interest rates affect the market value of the
Bank's investment securities and other interest-earning assets. Changes in
interest rates also can affect the average life of loans. Decreases in interest
rates may result in increased prepayments of loans, as borrowers refinance to
reduce borrowing costs. Under these circumstances, the Bank is subject to
reinvestment risk to the extent that it is not able to reinvest such prepayments
at rates that are comparable to the rates on the maturing loans or securities.
Moreover, volatility in interest rates also can result in disintermediation, or
the flow of funds away from savings institutions into direct investments, such
as U.S. Government and corporate securities and other investment vehicles which,
because of the absence of federal insurance premiums and reserve requirements,
generally pay higher rates of return than savings institutions.
ABSENCE OF ACTIVE MARKET FOR THE COMMON STOCK
The Holding Company has never issued capital stock and, consequently, there
is no existing market for the Common Stock. Although the Holding Company has
received conditional approval to list the Common Stock on the Nasdaq National
Market under the symbol "FBNW," there can be no assurance that the Holding
Company will meet Nasdaq National Market listing requirements, which include a
minimum market capitalization, at least two market makers and a minimum number
of holders of record. Although under no obligation to do so, Sandler O'Neill
has indicated its intention to act as a market maker. While Sandler O'Neill will
assist the Holding Company in encouraging another market maker to establish and
maintain a market in the Common Stock, there can be assurance that another
market maker will make a market in the Common Stock. Making a market in
securities involves maintaining bid and ask quotations and being able, as
principal, to effect transactions in reasonable quantities at those quoted
prices, subject to various securities laws and other regulatory requirements.
The development of a public
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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. Accordingly, there can be no assurance that an active and
liquid trading market for the Common Stock will develop, or once developed, will
continue. 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."
POSSIBLE DILUTIVE EFFECT OF BENEFIT PROGRAMS
At a meeting to be held no earlier than six months following consummation
of the Conversion, the Holding Company intends to seek stockholder approval of
the MRP. If approved, the MRP intends to acquire an amount of Common Stock of
the Holding Company equal to 4% of the shares issued in the Conversion. Such
shares of Common Stock of the Holding Company may be acquired by the Holding
Company in the open market or from authorized but unissued shares of Common
Stock of the Holding Company. In the event that the MRP acquires authorized but
unissued shares of Common Stock from the Holding Company, the voting interests
of existing stockholders will be diluted and net income per share and
stockholders' equity per share will be decreased. See "PRO FORMA DATA" and
"MANAGEMENT OF THE BANK -- Benefits -- Management Recognition Plan."
At a meeting to be held no earlier than six months following consummation
of the Conversion, the Holding Company intends to seek stockholder approval of
the Stock Option Plan. If approved, the Stock Option Plan will provide for
options for up to a number of shares of Common Stock of the Holding Company
equal to 10% of the shares issued in the Conversion. Such shares may be
authorized but unissued shares of Common Stock of the Holding Company and, upon
exercise of the options, will result in the dilution of the voting interests of
existing stockholders and may decrease net income per share and stockholders'
equity per share. See "MANAGEMENT OF THE BANK -- Benefits -- Stock Option
Plan."
If the ESOP is not able to purchase 8% of the shares of Common Stock issued
in the Offerings, the ESOP may purchase newly issued shares from the Holding
Company. In such event, the voting interests of existing stockholders will be
diluted and net income per share and stockholders' equity per share will be
decreased. See "MANAGEMENT OF THE BANK -- Benefits -- Employee Stock Ownership
Plan."
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 of the Bank are deemed
to have an ascertainable value, receipt of such rights may be a taxable event
(either as capital gain or ordinary income) to those Eligible Account Holders,
Supplemental Eligible Account Holders or Other Members who receive and/or
exercise the Subscription Rights in an amount equal to such value. Additionally,
the Bank could be required to 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 been advised by RP
Financial that such rights have no value; however, RP Financial's conclusion is
not binding on the Internal Revenue Service ("IRS"). The letter from RP
Financial is filed as an exhibit to the Registration Statement. See "ADDITIONAL
INFORMATION" and See "THE CONVERSION -- Effects of Conversion to Stock Form on
Depositors and Borrowers of the Bank -- Tax Effects."
POSSIBLE INCREASE IN ESTIMATED PRICE RANGE AND NUMBER OF SHARES ISSUED
The number of shares to be sold in the Conversion may be increased as a
result of an increase in the Estimated Price Range of up to 15% to reflect
changes in market and financial conditions following the commencement of the
Subscription and Direct Community Offering. In the event that the Estimated
Price Range is so increased, it is expected that the Holding Company will issue
up to 1,983,750 shares of Common Stock at the Purchase Price for an aggregate
price of up to $19,837,500. An increase in the number of shares will decrease
pro forma net earnings per share and stockholders' equity per share and will
increase the Holding Company's pro forma
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consolidated stockholders' equity and net earnings. Such an increase will also
increase the Purchase Price as a percentage of pro forma stockholders' equity
per share and net earnings per share.
POTENTIAL OPERATIONAL RESTRICTIONS ASSOCIATED WITH REGULATORY OVERSIGHT
The Bank is, and the Holding Company upon consummation of the Conversion
will be, subject to extensive government regulation and oversight. Such
regulation and supervision govern the activities in which an institution can
engage and is designed primarily to protect the federal deposit insurance fund
and depositors. Regulatory authorities have extensive discretion in connection
with their supervisory and enforcement activities, including the imposition of
restrictions on the operation of an institution, the classification of assets by
the institution and the determination of the adequacy of an institution's
allowance for loan losses. See "REGULATION." Such regulation often has a
material impact on the Bank's financial condition and results of operations. The
Deposit Insurance Funds Act of 1996 ("DIF Act") required the Bank to pay a one-
time assessment of $584,000 to the FDIC to recapitalize the SAIF. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Comparison of Operating Results for the Nine Months Ended December
31, 1996 and 1995."
The U.S. Congress is expected to consider legislation that may eliminate
the thrift industry as a separate industry. The DIF Act provides that the SAIF
will be merged with the BIF on January 1, 1999, but only if there are no thrift
institutions in existence. The DIF Act requires the Treasury Department to
study the development of a common charter for banks and thrifts and to submit a
report of its findings to Congress by March 31, 1997. The Bank cannot predict
what the attributes of such common charter would be or whether any legislation
will result from this study. If developed, the common charter may not offer all
the advantages that a federal savings association now enjoys (e.g., unrestricted
----
nationwide branching). Furthermore, holding companies for institutions with the
common charter may not have the same advantages as a unitary savings and loan
holding company now possesses (e.g., the absence of non-banking activities
----
restrictions). Because of the uncertainties with regard to the future of the
thrift industry, the Bank has determined to undertake the Charter Conversion.
See "THE CONVERSION -- Purposes of Conversion." If Congress fails to create a
common charter, or does not act otherwise to end the thrift industry's separate
existence, the merger of the SAIF and BIF contemplated by the DIF Act would not
likely occur. Although the SAIF currently meets its statutory reserve ratios,
there can be no assurance that it will continue to do so. The financial burden
of any future recapitalization would likely fall on a smaller assessment base,
potentially increasing the burden on individual institutions, including the
Bank.
FIRSTBANK CORP.
The Holding Company is a Delaware corporation organized in March 1997 at
the direction of the Bank for the purpose of serving as the holding company of
the Bank upon consummation of the Stock Conversion. The Holding Company has not
engaged in any significant business to date. The Holding Company has received
the approval of the OTS to become a savings and loan holding company and to
acquire 100% of the capital stock of the Converted Bank. Immediately following
the Stock Conversion, the only significant assets of the Holding Company will be
the capital stock of the Bank, that portion of the net proceeds of the Offerings
permitted by the OTS to be retained by the Holding Company and a note receivable
from the ESOP evidencing a loan from the Holding Company to fund the Bank's
ESOP. See "BUSINESS OF THE HOLDING COMPANY."
The Holding Company has appliedintends to apply for approval of the Federal
Reserve to become a bank holding company under the BHCA, through the continued
ownership of the Bank following the Charter Conversion. The Holding Company
expects to receive such approval. However, Iif there is a significant delay in
obtaining the approval of the Federal Reserve for the Holding Company to become
a bank holding company or if the Federal Reserve seeks to impose conditions on
its approval that the Holding Company and the Bank believe would adversely
affect the Holding Company and the Bank, the Holding Company may elect to be
regulated by the OTS as a savings and loan holding company and the Bank may
complete following completion of the Charter Conversion.
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The holding company structure will permit the Holding Company to expand the
financial services currently offered through the Bank. Management believes that
the holding company structure and retention of a portion of the proceeds of the
Offerings will facilitate the expansion and diversification of its operations.
The holding company structure also will enable the Holding Company to repurchase
its stock without adverse tax consequences. There are no present plans,
arrangements, agreements, or understandings, written or oral, regarding any such
activities or repurchases. See "REGULATION -- Bank Holding Company Regulation."
FIRSTBANK NORTHWEST
The Bank, founded in 1920, is a federally chartered mutual savings bank
located in Lewiston, Idaho. The Bank, which was formed as an Idaho mutual
savings and loan association, converted to a federal mutual savings and loan
association in 1935 and adopted the federal mutual savings bank charter in 1990.
In April 1997, in anticipation of the Charter Conversion, the Bank changed its
name from "First Federal Bank of Idaho, a Federal Savings Bank" to "FirstBank
Northwest." In connection with the Stock Conversion, the Bank will convert to a
federally chartered capital stock savings bank and will become a subsidiary of
the Holding Company. The Bank is currently regulated by the OTS, its primary
regulator, and the FDIC, the insurer of its deposits. The Bank's deposits are
insured by the SAIF and have been federally insured since 1933. The Bank has
been a member of the FHLB System since 1933. At December 31, 1996, the Bank had
total assets of $133.2 million, total deposits of $105.3 million and total
equity of $10.8 million on a consolidated basis. In connection with the Charter
Conversion, the Bank will relocate its main office to Clarkston, Washington and
convert to a Washington-chartered savings bank.
The Bank is a community-oriented financial institution that engages
primarily in the business of attracting deposits from the general public and
using those funds to originate residential mortgage loans within the Bank's
market area. At December 31, 1996, one- to four-family residential mortgage
loans totalled $72.7 million, or 61.3% of total loans receivable. The Bank also
is active in originating construction and agricultural real estate loans. At
December 31, 1996, construction loans totalled $14.9 million, or 12.6% of total
loans receivable, and agricultural real estate loans totalled $11.9 million, or
10.0% of total loans receivable. To a lesser extent, the Bank also originates
commercial real estate and consumer and other non-real estate loans, although it
intends to increase its originations of these types of loans, subject to market
conditions and other factors. See "BUSINESS OF THE BANK -- Lending Activities."
The Bank has adopted a mortgage banking strategy pursuant to which it generally
sells a majority of the fixed-rate residential mortgage loans that it originates
while retaining the servicing rights on most of the conventional loans it sells.
At December 31, 1996, the Bank serviced $131.5 million of loans for others.
As part of its asset/liability management, subsequent to December 31, 1996,
the Bank intends to retain for its portfolio $5.0 million of 30-year, fixed-rate
conventional mortgage loans and to purchase $5.0 million of short-term mortgage-
backed securities. These investments will be funded with additional FHLB
advances, which may be retired with the proceeds of the Offerings. See "USE OF
PROCEEDS."
Following the Stock Conversion, the Bank will relocate its main office to
Clarkston, Washington, which is adjacent to Lewiston, Idaho across the Snake
River, and convert to a Washington-chartered savings bank. The main office
relocation will be accomplished by opening a full-service office in Clarkston,
Washington and designating that office as the Bank's main office. The Bank's
administrative offices will remain in their present location. The Bank is in the
process of evaluating locations for its Clarkston, Washington office and expects
that the Charter Conversion will not be completed until several months after the
consummation of the Stock Conversion, or longer in the event that the Bank has
difficulty locating suitable office space in Clarkston. The Board of Directors
believes that conversion to a Washington-chartered savings bank is in the best
interests of the Bank, its members and the communities it serves. As a
Washington-chartered savings bank with offices in Washington and Idaho, the Bank
will have the flexibility to expand in Washington and Idaho, should it decide to
do so, through branch acquisitions, opening new branches, or acquiring other
institutions. While the current federal thrift charter permits nationwide
branching, the possible elimination of the federal thrift charter in favor of a
common charter for federal thrifts and banks may limit the Bank's branching
authority in the future. See "RISK FACTORS -- Potential
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Operational Restrictions Associated with Regulatory Oversight." Furthermore,
the Washington savings bank charter will provide the Bank with the authority to
pursue its community banking strategy.
The Bank, as a Washington-chartered savings bank, will succeed to all of
the assets and liabilities of the Bank as a federally chartered savings bank.
In anticipation of the Charter Conversion, the Bank has adopted a community
banking strategy pursuant to which it intends to expand the products and
services it offers in order to improve market share and increase the average
yield of its interest-earning assets. Specifically, the Bank intends to expand
its agricultural real estate and commercial real estate lending activities. The
Bank also intends to expand its non-mortgage lending activities by increasing
its emphasis on originating agricultural operating loans and commercial business
loans.
Management anticipates that the Bank will incur initial start-up and
ongoing expenses in connection with the opening of its Clarkston, Washington
office and as various programs and services, such as its commercial real estate
and business lending operations, are introduced or expanded. These expenses
could reduce earnings for a period of time while income from new programs and
services increases to a degree sufficient to cover the additional expenses.
Following the Charter Conversion, the deposits of the Bank will continue to
be insured by the SAIF of the FDIC. In addition, following the Charter
Conversion, the Bank will not be regulated and supervised by the OTS, but rather
by the Department and the FDIC. The Bank intends to remain a member of the
FHLB-Seattle.
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock offered hereby are
estimated to range from $12.1 million to $16.6 million, or up to $19.1 million
if the Estimated Valuation Range is increased by 15%. See "PRO FORMA DATA" for
the assumptions used to arrive at such amounts. The Holding Company has
received the approval of the OTS to purchase all of the capital stock of the
Bank to be issued in the Conversion in exchange for 50% of the net proceeds of
the Offerings. This will result in the Holding Company retaining approximately
$6.1 million to $8.3 million of net proceeds, or up to $9.6 million if the
Estimated Valuation Range is increased by 15%, and the Bank receiving an equal
amount.
Receipt of 50% of the net proceeds of the sale of the Common Stock will
increase the Bank's capital and will support the expansion of the Bank's
existing business activities. The Bank will use the funds contributed to it for
general corporate purposes, including increased local lending, the establishment
of its Clarkston, Washington office, the expansion of its community banking
activities and possible future acquisitions of branches or banks. The Bank may
also use a portion of the funds contributed to it to retire outstanding FHLB
advances, depending on market conditions, the cost of other sources of funds and
other factors. Pending deployment of funds, the Bank plans initially to invest
the net proceeds in short-term U.S. Government and agency securities. Shares of
Common Stock may be purchased with funds on deposit at the Bank, which will
reduce deposits by the amount of such purchases. As a result, the net amount of
funds available to the Bank for investment following receipt of the Conversion
proceeds will be reduced by the amount of deposit withdrawals used to fund stock
purchases.
In connection with the Conversion and the establishment of the ESOP, the
Holding Company intends to loan the ESOP the amount necessary to purchase 8% of
the shares of Common Stock sold in the Conversion. The Holding Company's loan to
fund the ESOP may range from $1,020,000 to $1,380,000 based on the sale to the
ESOP of 102,000 shares (at the minimum of the Estimated Valuation Range) and
138,000 shares (at the maximum of the Estimated Valuation Range), respectively,
at $10.00 per share. If 15% above the maximum of the Estimated Valuation Range,
or 1,983,750 shares, are sold in the Conversion, the Holding Company's loan to
the ESOP would be approximately $1,587,000. It is anticipated that the ESOP loan
will have a seven-year term with interest payable at the prime rate as published
in The Wall Street Journal on the closing date of the Conversion. The loan will
be
9
<PAGE>
repaid principally from the Bank's contributions to the ESOP and from any
dividends paid on shares of Common Stock held by the ESOP.
The remaining proceeds retained by the Holding Company initially will be
invested in short-term U.S. Government and agency securities. Such proceeds
will be available for additional contributions to the Bank in the form of debt
or equity, to support future diversification or acquisition activities, as a
source of dividends to the stockholders of the Holding Company and for future
repurchases of Common Stock to the extent permitted under Delaware law and
federal regulations. Currently, there are no specific plans, arrangements,
agreements or understandings, written or oral, regarding any diversification
activities.
Following consummation of the Conversion, the Board of Directors will have
the authority to adopt plans for repurchases of Common Stock or other returns of
capital to stockholders, subject to statutory and regulatory requirements.
Since the Holding Company has not yet issued stock, there currently is
insufficient information upon which an intention to repurchase stock could be
based. The facts and circumstances upon which the Board of Directors may
determine to repurchase stock in the future 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 and/or earnings per share of the
remaining outstanding shares, and the ability to improve 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
stockholders. Any stock repurchases or return of capital will be subject to a
determination by 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 or return of capital and that capital will be
adequate, taking into account, among other things, the level of nonperforming
and classified assets, 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. See "THE CONVERSION --
Restrictions on Repurchase of Stock."
DIVIDEND POLICY
GENERAL
The Board of Directors of the Holding Company has not formulated a dividend
policy, but intends to consider a policy of paying cash dividends in the future.
The payment of dividends on the Common Stock will be subject to the requirements
of applicable law and the determination by the Board of Directors of the Holding
Company that the net income, capital and financial condition of the Holding
Company, industry trends and general economic conditions justify the payment of
dividends. The rate of such dividends and the initial or continued payment
thereon will depend upon various factors at the intended time of declaration and
payment, including the Bank's profitability and liquidity, alternative
investment opportunities, and regulatory restrictions on dividend payments and
on capital levels applicable to the Bank. Accordingly, there can be no present
assurance that any dividends will be paid. Periodically, the Board of
Directors, if market, economic and regulatory conditions permit, may combine or
substitute periodic special dividends with or for regular dividends. In
addition, since the Holding Company initially will have no significant source of
income other than dividends from the Bank and earnings from investment of the
net proceeds of the Conversion retained by the Holding Company, the payment of
dividends by the Holding Company will depend in part upon the amount of the net
proceeds from the Conversion retained by the Holding Company and the Holding
Company's earnings thereon and the receipt of dividends from the Bank, which are
subject to various tax and regulatory restrictions on the payment of dividends.
Dividend payments by the Holding Company are subject to regulatory restriction
under Federal Reserve policy as well as to limitation under applicable
provisions of Delaware corporate law. Under Delaware law, dividends may be paid
either out of surplus or, if there is no surplus, out of net profits for the
fiscal year in which the dividend is declared and/or the preceding fiscal year.
For additional information, see "REGULATION -- Bank Holding Company Regulation -
- - Dividends."
10
<PAGE>
CURRENT REGULATORY RESTRICTIONS
Dividends from the Holding Company may depend, in part, upon receipt of
dividends from the Bank because the Holding Company initially will have no
source of income other than dividends from the Bank and earnings from the
investment of the net proceeds from the Offerings retained by the Holding
Company. OTS regulations require federal savings associations to give the OTS
30 days' advance notice of any proposed declaration of dividends, and the OTS
has the authority under its supervisory powers to prohibit the payment of
dividends. The OTS imposes certain limitations on the payment of dividends
which utilizes a three-tiered approach that permits various levels of
distributions based primarily upon a savings association's capital level. In
addition, the Bank may not declare or pay a cash dividend on its capital stock
if the effect thereof would be to reduce the regulatory capital of the Bank
below the amount required for the liquidation account to be established pursuant
to the Bank's Plan of Conversion. The Bank currently meets the criteria to be
designated a Tier 1 association, as hereinafter defined, and consequently could
at its option (after prior notice to and no objection made by the OTS)
distribute up to 100% of its net income during the calendar year plus 50% of its
surplus capital ratio at the beginning of the calendar year less any
distributions previously paid during the year. See "REGULATION -- Federal
Regulation of Savings Associations -- Limitations on Capital Distributions,"
"THE CONVERSION -- Effects of Conversion to Stock Form on Depositors and
Borrowers of the Bank -- Liquidation Account" and Note 15 of Notes to the
Consolidated Financial Statements included elsewhere herein. After the Charter
Conversion, dividends from the Bank to the Holding Company will be subject to
the requirements of Washington law. Under Washington law, the Bank may not
declare or pay a cash dividend on its capital stock if it would cause its net
worth to be reduced below the amount required for the liquidation account or net
worth requirements, if any, imposed by the Department. See "REGULATION --
Regulation of Washington Savings Banks -- Dividends."
Additionally, in connection with the Conversion, the Holding Company and
the Bank have committed to the OTS that during the one-year period following
consummation of the Stock Conversion, the Holding Company will not take any
action, including any preliminary action, to declare an extraordinary dividend
to stockholders that would be treated by recipients as a tax-free return of
capital for federal income tax purposes.
MARKET FOR COMMON STOCK
The Holding Company has never issued capital stock and, consequently, there
is no existing market for the Common Stock. Although the holding Company has
received conditional approval to list the Common Stock on the Nasdaq National
Market under the symbol "FBNW," there can be no assurance that the Holding
Company will meet Nasdaq National Market listing requirements, which include a
minimum market capitalization, at least two market makers and a minimum number
of record holders. Although under no obligation to do so, Sandler O'Neill has
indicated its intention to make a market for the Holding Company's Common Stock
following consummation of the Conversion and will assist the Holding Company in
seeking to encourage at least one additional market maker to establish and
maintain a market in the Common Stock. Making a market involves maintaining bid
and ask quotations and being able, as principal, to effect transactions in
reasonable quantities at those quoted prices, subject to various securities laws
and other regulatory requirements. While the Holding Company has attempted to
obtain commitments from broker-dealers to act as market makers, and anticipates
that prior to the completion of the Conversion it will be able to obtain the
commitment from at least one additional broker-dealer to act as market maker for
the Common Stock, there can be no assurance that there will be two or more
market makers for the Common Stock. Additionally, the development of a liquid
market depends on 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. There can be no assurance that an active and liquid trading market for
the Common Stock will develope or that, if developed, it will continue. The
number of active buyers and sellers of the Common Stock at any particular time
may be limited. Under such circumstances, investors in the Common Stock could
have difficulty disposing of their shares on short notice and should not view
the Common stock as a short-term investment. Furthermore, there can be no
assurance that purchasers will be able to sell their shares at or above the
Purchase Price or that quotations will be available on the Nasdaq National
Market as contemplated.
11
<PAGE>
CAPITALIZATION
The following table presents the historical capitalization of the Bank at
December 31, 1996, and the pro forma consolidated capitalization of the Holding
Company after giving effect to the assumptions set forth under "PRO FORMA DATA,"
based on the sale of the number of shares of Common Stock set forth below in the
Conversion at the minimum, midpoint and maximum of the Estimated Valuation
Range, and based on the sale of 1,983,750 shares (representing the shares that
would be issued in the Conversion after giving effect to an additional 15%
increase in the maximum valuation in the Estimated Valuation Range, subject to
receipt of an updated appraisal confirming such valuation and OTS approval).
A CHANGE IN THE NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION MAY MATERIALLY
AFFECT PRO FORMA CONSOLIDATED CAPITALIZATION.
<TABLE>
<CAPTION>
Holding Company
Pro Forma Consolidated Capitalization
Based Upon the Sale of
--------------------------------------------------------------
1,275,000 1,500,000 1,725,000 1,983,750
Capitalization Shares at Shares at Shares at Shares at
as of $10.00 $10.00 $10.00 $10.00
December 31, 1996 Per Share(1) Per Share(1) Per Share(1) Per Share(2)
----------------- ------------- ------------- ------------- -------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Deposits(3)............................... $105,349 $105,349 $105,349 $105,349 $105,349
Advances from FHLB........................ 15,060 15,060 15,060 15,060 15,060
-------- -------- -------- -------- --------
Total deposits and advances from FHLB..... $120,409 $120,409 $120,409 $120,409 $120,409
======== ======== ======== ======== ========
Stockholders' equity:
Preferred stock:
500,000 shares, $.01
par value per share,
authorized; none issued
or outstanding......................... $ -- $ -- $ -- $ -- $ --
Common Stock:
5,000,000 shares, $.01 par
value per share, authorized;
specified number of shares
assumed to be issued and
outstanding(4)......................... -- 13 15 17 20
Additional paid-in capital................ -- 12,112 14,329 16,546 19,121
Retained earnings(5)....................... 10,818 10,818 10,818 10,818 10,818
Less:
Common Stock acquired
by ESOP(6)............................ -- (1,020) (1,200) (1,380) (1,587)
Common Stock to be acquired
by MRP(7)............................. -- (510) (600) (690) (794)
-------- --------- --------- --------- ---------
Total stockholders' equity................ $ 10,818 $ 21,413 $ 23,362 $ 25,311 $ 27,578
======== ========= ========= ========= =========
</TABLE>
(footnotes on following page)
12
<PAGE>
_______________
(1) Does not reflect the possible increase in the Estimated Valuation Range to
reflect material changes in the financial condition or performance of the
Bank or changes in market conditions or general financial and economic
conditions, or the issuance of additional shares under the Stock Option
Plan.
(2) This column represents the pro forma capitalization of the Holding Company
in the event the aggregate number of shares of Common Stock issued in the
Conversion is 15% above the maximum of the Estimated Valuation Range. See
"PRO FORMA DATA" and Footnote 1 thereto.
(3) Withdrawals from deposit accounts for the purchase of Common Stock are not
reflected. Such withdrawals will reduce pro forma deposits by the amounts
thereof.
(4) The Bank's authorized capital will consist solely of 1,000 shares of common
stock, par value $1.00 per share, 1,000 shares of which will be issued to
the Holding Company, and 9,000 shares of preferred stock, no par value per
share, none of which will be issued in connection with the Conversion.
(5) Retained earnings are substantially restricted by applicable regulatory
capital requirements. Additionally, the Bank will be prohibited from paying
any dividend that would reduce its regulatory capital below the amount in
the liquidation account, which will be established for the benefit of the
Bank's Eligible Account Holders and Supplemental Eligible Account Holders
at the time of the Conversion and adjusted downward thereafter as such
account holders reduce their balances or cease to be depositors. See "THE
CONVERSION -- Effects of Conversion to Stock Form on Depositors and
Borrowers of the Bank -- Liquidation Account."
(6) Assumes that 8% of the Common Stock sold in the Conversion will be acquired
by the ESOP in the Conversion with funds borrowed from the Holding Company.
In accordance with generally accepted accounting principles ("GAAP"), the
amount of Common Stock to be purchased by the ESOP represents unearned
compensation and is, accordingly, reflected as a reduction of capital. As
shares are committed to be released to ESOP participants' accounts, a
corresponding charge to compensation expense and reduction in the charge
against capital will occur. Since the funds are borrowed from the Holding
Company, the borrowing will be eliminated in consolidation and no liability
will be reflected in the consolidated financial statements of the Holding
Company. See "MANAGEMENT OF THE BANK -- Benefits -- Employee Stock
Ownership Plan."
(7) Assumes the purchase in the open market at the Purchase Price, pursuant to
the proposed MRP, of a number of shares equal to 4% of the shares of Common
Stock issued in the Conversion at the minimum, midpoint, maximum and 15%
above the maximum of the Estimated Valuation Range. The issuance of an
additional 4% of the shares of Common Stock for the MRP from authorized but
unissued shares of Holding Company Common Stock would dilute the voting and
ownership interest of stockholders by 3.85%. The shares are reflected as a
reduction of stockholders' equity. See "RISK FACTORS -- Possible Dilutive
Effect of Benefit Programs," "PRO FORMA DATA" and "MANAGEMENT OF THE BANK
-- Benefits -- Management Recognition Plan." The MRP is subject to
stockholder approval, which is expected to be sought at a meeting to be
held no earlier than six months following consummation of the Conversion.
13
<PAGE>
HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE
The Bank is currently subject to OTS regulatory capital requirements.
After the Charter Conversion, the Bank will be required to satisfy FDIC
regulatory capital requirements. The following table presents the Bank's
historical and pro forma capital position relative to the OTS equal requirements
at December 31, 1996. The amount of capital infused into the Bank for purposes
of the following table is 50% of the net proceeds of the Offerings. For purposes
of the table below, the amount excepted to be borrowed by the ESOP and the cost
of the shares expected to be acquired by the MRP are deducted from pro forma
regulatory capital. For a discussion of the assumptions underlying the pro forma
capital calculations presented below, see "USE OF PROCEEDS," "CAPITALIZATION"
and "PRO FORMA DATA." The definitions of the terms used in the table are those
provided in the capital regulations issued by the OTS. For a discussion of the
capital standards applicable to the Bank, see "REGULATION - Federal Regulation
of Savings Associations -- Capital Requirements."
<TABLE>
<CAPTION>
PRO FORMA AT DECEMBER 31, 1996
------------------------------------------------
Minimum of Estimated Midpoint of Estimated
Valuation Range Valuation Range
---------------------- ------------------------
1,275,000 Shares 1,500,000 Shares
December 31, 1996 at $10.00 Per Share at $10.00 Per Share
--------------------- ---------------------- ------------------------
Percent of Percent of Percent of
Total Total Total
Amount Assets(1) Amount Assets (1) Amount Assets (1)
-------- ---------- -------- ----------- -------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
GAAP capital.......................... $10,818 8.12% $ 15,351 11.06% $ 16,190 11.58%
======= ==== ======== ===== ======== =====
Tangible capital...................... $10,818 8.12% $ 15,351 11.06% $ 16,190 11.58%
Tangible capital requirement.......... 1,998 1.50 2,081 1.50 2,096 1.50
------- ---- -------- ----- -------- -----
Excess................................ $ 8,820 6.62% $ 13,270 9.56% $ 14,094 10.08%
======= ==== ======== ===== ======== =====
Core capital.......................... $10,818 8.12% $ 15,351 11.06% $ 16,190 11.58%
Core capital requirement(2)........... 3,996 3.00 4,162 3.00 4,193 3.00
------- ---- -------- ----- -------- -----
Excess................................ $ 6,822 5.12% $ 11,189 8.06% $ 11,997 8.58%
======= ==== ======== ===== ======== =====
Risk-based capital(3)................. $11,698 13.27% $ 16,231 17.85% $ 17,070 18.67%
Risk-based
capital requirement.................. 7,052 8.00 7,274 8.00 7,315 8.00
------- ---- -------- ----- -------- -----
Excess................................ $ 4,646 5.27% $ 8,957 9.85% $ 9,755 10.67%
======= ==== ======== ===== ======== =====
<CAPTION>
------------------------------------------------
15% above
Maximum of Estimated Maximum of Estimated
Valuation Range Valuation Range
---------------------- ------------------------
1,725,000 Shares 1,983,750 Shares
at $10.00 Per Share at $10.00 Per Share
---------------------- ------------------------
Percent of Percent of
Total Total
Amount Assets (1) Amount Assets (1)
-------- ----------- -------- -----------
<S>................................... <C> <C> <C> <C>
GAAP capital.......................... $ 17,030 12.10% $ 18,008 12.68%
======== ===== ======== =====
Tangible capital...................... $ 17,030 12.10% $ 18,008 12.68%
Tangible capital requirement.......... 2,112 1.50 2,130 1.50
-------- ----- -------- -----
Excess................................ $ 14,918 10.60% $ 15,878 11.18%
======== ===== ======== =====
Core capital.......................... $ 17,030 12.10% $ 18,008 12.68%
Core capital requirement(2)........... 4,224 3.00 4,259 3.00
-------- ----- -------- -----
Excess................................ $ 12,806 9.10% $ 13,749 9.68%
======== ===== ======== =====
Risk-based capital(3)................. $ 17,910 19.48% $ 18,888 20.41%
Risk-based
capital requirement.................. 7,356 8.00 7,403 8.00
-------- ----- -------- -----
Excess................................ $ 10,554 11.48% $ 11,485 12.41%
======== ===== ======== =====
</TABLE>
______________
(1) Tangible capital levels are shown as a percentage of tangible assets. Core
capital levels are shown as percentage of total adjusted assets. Risk based
capital levels are shown as a percentage of risk-weighted assets.
(2) The current OTS core capital requirement for savings associations is 3% of
total adjusted assets. The OTS has proposed core capital requirements which
would require a core capital ratio of 3% of total adjusted assets for
thrifts that receive the highest supervisory rating for safety and
soundness and a core capital ratio of 4% to 5% for all other thrifts.
(3) Assumes net proceeds are invested in assets that carry a 50%
risk-weighting.
14
<PAGE>
The following table presents the Bank's historical and pro forma capital
position relative to FDIC capital requirements at December 31, 1996. The amount
of capital infused into the Bank for purposes of the following table is 50% of
the net proceeds of the Offerings. For purposes of the table below, the amount
expected to be borrowed by the ESOP and the cost of the shares expected to be
acquired by the MRP are deducted from pro forma regulatory capital. For a
discussion of the assumptions underlying the pro forma capital calculations
presented below, see "USE OF PROCEEDS," "CAPITALIZATION" and "PRO FORMA DATA."
The definitions of the terms used in the table are those provided in the capital
regulations issued by the FDIC. For a discussion of the capital standards
applicable to the Bank following the Charter Conversion, see "REGULATION --
Regulation of Washington Savings Banks -- Capital Requirements."
<TABLE>
<CAPTION>
PRO FORMA AT DECEMBER 31, 1996
------------------------------------------------------------------------------------
15% above
Minimum of Estimated Midpoint of Estimated Maximum of Estimated Maximum of Estimated
Valuation Range Valuation Range Valuation Range Valuation Range
-------------------- --------------------- ------------------- ---------------------
1,275,000 Shares 1,500,000 Shares 1,725,000 Shares 1,983,750 Shares
December 31, 1996 at $10.00 Per Share at $10.00 Per Share at $10.00 Per Share at $10.00 Per Share
------------------ -------------------- --------------------- ------------------- ---------------------
Percent of Percent of Percent of Percent of Percent of
Total Total Total Total Total
Amount Assets(1) Amount Assets(1) Amount Assets(1) Amount Assets(1) Amounts Assets
------ ---------- ------ ---------- ------ ---------- ------ --------- ------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital................ $10,818 8.12% $15,351 11.06% $16,190 11.58% $17,030 12,10% $18,008 12.68%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Tier I (leverage) capital... $10,818 8.12% $15,351 11.06% $16,190 11.58% $17,030 12,10% $18,008 12.68%
Tier I (leverage)
capital requirement(2).... 5,328 4.00 5,550 4.00 5,591 4.00 5,631 4.00 5,679 4.00
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess...................... $ 5,490 4.12% $ 9,801 7.06% $10,599 7.58% $11,399 8.10% $12,329 8.68%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Tier I risk-based capital(3) $10,818 12.27% $15,351 16.88% $16,190 17.71% $17,030 18.52% $18,008 19.46%
Tier I risked-based
capital requirement....... 3,526 4.00 3,637 4.00 3,657 4.00 3,678 4.00 3,702 4.00
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess...................... 7,292 8.27% $11,714 12.88% $12,533 13.71% $13,352 14.52% $14,306 15.46%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Total risk-based capital(3) $11,698 13.27% $16,231 17.85% $17,070 18.67% $17,910 19.48% $18,888 20.41%
Total risked-based
capital requirement....... 7,052 8.00 7,274 8.00 7,315 8.00 7,356 8.00 7,403 8.00
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess...................... $ 4,646 5.27% $ 8,957 9.85% $ 9,755 10.67% $10,554 11.48% $11,485 12.41%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
__________________
(1) Tier I capital levels are shown as a percentage of tangible assets. Tier I
risk-based capital levels and Total risk-based capital levels are shown as
a percentage of risk-weighted assets.
(2) The FDIC requires state-chartered savings banks to have a minimum leverage
ratio of Tier I capital to total assets of as least 3%, provided, however,
that all institutions, other than those receiving the highest rating during
the examination process and not anticipating any significant growth, are
required to maintain a ratio of 1% to 2% above the stated minimum, with an
absolute minimum leverage ratio of at least 4%. For purposes of this table,
it has been assumed that the leverage capital requirement is 4% of total
average assets.
(3) Assumes net proceeds are invested in assets that carry a 50% risk-
weighting.
15
<PAGE>
PRO FORMA DATA
Under the Plan of Conversion, the Common Stock must be sold at an aggregate
price equal to the estimated pro forma market value of the Holding Company and
the Bank as converted, based upon an independent valuation. The Estimated
Valuation Range as of February 28, 1997 is from a minimum of $12,750,000 to a
maximum of $17,250,000 with a midpoint of $15,000,000 or, at a price per share
of $10.00, a minimum number of shares of 1,275,000, a maximum number of shares
of 1,725,000 and a midpoint number of shares of 1,500,000. The actual net
proceeds from the sale of the Common Stock cannot be determined until the
Conversion is completed. However, net proceeds set forth on the following table
are based upon the following assumptions: (i) Sandler O'Neill will receive a fee
equal to 1.5% of the aggregate Purchase Price of shares sold in the Subscription
and Direct Community Offering, excluding shares purchased by directors,
officers, employees and any immediate family member thereof, and the ESOP,
subject to a maximum fee equal to 1.5% of the aggregate gross proceeds at the
midpoint of the Estimated Valuation Range; (ii) all of the Common Stock will be
sold in the Subscription and Direct Community Offerings; and (iii) Conversion
expenses, excluding the fees paid to Sandler O'Neill, will total approximately
$472,000. Actual expenses may vary from those estimated.
The pro forma consolidated net income of the Bank for the year ended March
31, 1996 and the nine months ended December 31, 1996 has been calculated as if
the Conversion had been consummated at the beginning of each such period and the
estimated net proceeds received by the Holding Company and the Bank had been
invested at 5.68% at the beginning of each period, which represents the one year
U.S. Treasury Bill yield as of December 31, 1996. While OTS regulations provide
for the use of a yield representing the arithmetic average of the weighted
average yield earned by the Bank on its interest-earning assets and the rates
paid on its deposits, the Holding Company believes that the U.S. Treasury Bill
represents a more realistic yield on the Bank's investments. As discussed under
"USE OF PROCEEDS," the Holding Company expects to retain 50% of the net proceeds
of the Offerings from which it will fund the ESOP loan. A pro forma after-tax
return of 3.52% is used for both the Holding Company and the Bank for the year
ended March 31, 1996 and the nine months ended December 31, 1996, after giving
effect to an incremental combined federal and state tax rate of 38%. Historical
and pro forma per share amounts have been calculated by dividing historical and
pro forma amounts by the number of shares of Common Stock indicated in the
footnotes to the table. Per share amounts have been computed as if the Common
Stock had been outstanding at the beginning of the period or at the dates
indicated, but without any adjustment of per share historical or pro forma
stockholders' equity to reflect the earnings on the estimated net proceeds.
The following tables summarize the historical net income and retained
earnings of the Bank and the pro forma consolidated net income and stockholders'
equity of the Holding Company for the periods and at the dates indicated, based
on the minimum, midpoint and maximum of the Estimated Valuation Range and based
on a 15% increase in the maximum of the Estimated Valuation Range. No effect has
been given to: (i) the shares to be reserved for issuance under the Holding
Company's Stock Option Plan, which is expected to be voted upon by stockholders
at a meeting to be held no earlier than six months following consummation of the
Conversion; (ii) withdrawals from deposit accounts for the purpose of purchasing
Common Stock in the Conversion; (iii) the issuance of shares from authorized but
unissued shares to the MRP, which is expected to be voted upon by stockholders
at a meeting to be held no earlier than six months following consummation of the
Conversion; or (iv) the establishment of a liquidation account for the benefit
of Eligible Account Holders and Supplemental Eligible Account Holders. See
"MANAGEMENT OF THE BANK -- Benefits -- Stock Option Plan" and "THE CONVERSION --
Stock Pricing and Number of Shares Issued." Shares of Common Stock may be
purchased with funds on deposit at the Bank, which will reduce deposits by the
amounts of such purchases. Accordingly, the net amount of funds available for
investment will be reduced by the amount of deposit withdrawals used to fund
stock purchases.
THE FOLLOWING PRO FORMA INFORMATION MAY NOT BE REPRESENTATIVE OF THE
FINANCIAL EFFECTS OF THE CONVERSION AT THE DATE ON WHICH THE CONVERSION ACTUALLY
OCCURS AND SHOULD NOT BE TAKEN AS INDICATIVE OF FUTURE RESULTS OF OPERATIONS.
STOCKHOLDERS' EQUITY REPRESENTS THE DIFFERENCE BETWEEN THE STATED AMOUNTS OF
CONSOLIDATED ASSETS AND LIABILITIES OF THE HOLDING COMPANY COMPUTED IN
ACCORDANCE WITH GAAP. STOCKHOLDERS' EQUITY HAS NOT BEEN INCREASED OR DECREASED
TO REFLECT THE DIFFERENCE BETWEEN THE CARRYING VALUE OF LOANS AND
16
<PAGE>
OTHER ASSETS AND MARKET VALUE. STOCKHOLDERS' EQUITY IS NOT INTENDED TO REPRESENT
FAIR MARKET VALUE NOR DOES IT REPRESENT AMOUNTS THAT WOULD BE AVAILABLE FOR
DISTRIBUTION TO STOCKHOLDERS IN THE EVENT OF LIQUIDATION.
<TABLE>
<CAPTION>
At or For the Year Ended March 31, 1996
-----------------------------------------------------------
Minimum of Midpoint of Maximum of 15% Above
Estimated Estimated Estimated Maximum of
Valuation Valuation Valuation Estimated
Range Range Range Valuation Range
---------- ---------- ---------- ----------------
1,275,000 1,500,000 1,725,000 1,983,750(1)
Shares Shares Shares Shares
at $10.00 at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share Per Share
---------- ---------- ---------- ----------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds............................... $12,750 $15,000 $17,250 $19,838
Less: estimated expenses..................... 625 656 687 697
---------- ---------- ---------- ----------
Estimated net proceeds....................... 12,125 14,344 16,563 19,141
Less: Common Stock acquired by ESOP.......... (1,020) (1,200) (1,380) (1,587)
Less: Common Stock to be acquired by MRP..... (510) (600) (690) (794)
---------- ---------- ---------- ----------
Net investable proceeds................... $10,595 $12,544 $14,493 $16,760
========== ========== ========== ==========
Consolidated net income:
Historical................................... $588 $588 $588 $588
Pro forma income on net proceeds(2).......... 373 442 510 590
Pro forma ESOP adjustments(3)................ (90) (106) (122) (141)
Pro forma MRP adjustments(4)................. (63) (74) (86) (98)
---------- ---------- ---------- ----------
Pro forma net income........................ $808 $850 $890 $939
========== ========== ========== ==========
Consolidated net income per share(5)(6):
Historical................................... $0.50 $0.42 $0.36 $0.32
Pro forma income on net proceeds............. 0.31 0.32 0.32 0.32
Pro forma ESOP adjustments(3)................ (0.08) (0.08) (0.08) (0.08)
Pro forma MRP adjustments(4)................. (0.05) (0.05) (0.05) (0.05)
---------- ---------- ---------- ----------
Pro forma net income per share.............. $0.68 $0.61 $0.55 $0.51
========== ========== ========== ==========
Consolidated stockholders' equity (book value):
Historical................................... $10,356 $10,356 $10,356 $10,356
Estimated net proceeds....................... 12,125 14,344 16,563 19,141
Less: Common Stock acquired by ESOP.......... (1,020) (1,200) (1,380) (1,587)
Less: Common Stock to be acquired by MRP(4).. (510) (600) (690) (794)
---------- ---------- ---------- ----------
Pro forma stockholders' equity(7)........... $20,951 $22,900 $24,849 $27,116
========== ========== ========== ==========
Consolidate stockholders' equity per share(6)(8):
Historical(6)................................ $8.12 $6.90 $6.00 $5.22
Estimated net proceeds....................... 9.51 9.57 9.61 9.65
Less: Common Stock acquired by ESOP.......... (0.80) (0.80) (0.80) (0.80)
Less: Common Stock to be acquired by MRP(4).. (0.40) (0.40) (0.40) (0.40)
---------- ---------- ---------- ----------
Pro forma stockholders' equity per share(9). $16.43 $15.27 $14.41 $13.67
========== ========== ========== ==========
Purchase Price as a multiple of pro forma
net income per share......................... 14.71x 16.39x 18.18x 19.61x
Purchase Price as a percentage of pro forma
stockholders' equity per share............... 60.86% 65.48% 69.40% 73.15%
</TABLE>
(footnotes on page 19)
17
<PAGE>
<TABLE>
<CAPTION>
At or For the Nine Months Ended December 31, 1996
----------------------------------------------------------------
Minimum of Midpoint of Maximum of 15% Above
Estimated Estimated Estimated Maximum of
Valuation Valuation Valuation Estimated
Range Range Range Valuation Range
---------- ---------- ---------- ---------------
1,275,000 1,500,000 1,725,000 1,983,750(1)
Shares Shares Shares Shares
at $10.00 at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share Per Share
---------- --------- --------- ---------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross Proceeds.................................... $12,750 $15,000 $17,250 $19,838
Less: estimated expenses.......................... 625 656 687 697
------- ------- ------- -------
Estimated net proceeds............................ 12,125 14,344 16,563 19,141
Less: Common Stock acquired by ESOP............... (1,020) (1,200) (1,380) (1,587)
Less: Common Stock to be acquired by MRP.......... (510) (600) (690) (794)
------- ------- ------- -------
Net investable proceeds...................... $10,595 $12,544 $14,493 $16,760
======= ======= ======= =======
Consolidated net income:
Historical....................................... $423 $423 $423 $423
Pro forma income on net proceeds(2).............. 280 331 383 443
Pro forma ESOP adjustments(3).................... (68) (80) (92) (105)
Pro forma MRP adjustments(4)..................... (47) (56) (64) (74)
---- ---- ---- ----
Pro forma net income............................ $588 $618 $650 $687
==== ==== ==== ====
Consolidated net income per share (5)(6):
Historical...................................... $0.36 $0.30 $0.26 $0.23
Pro forma income on net proceeds................ 0.23 0.24 0.24 0.24
Pro forma ESOP adjustments(3)................... (0.06) (0.06) (0.06) (0.06)
Pro forma MRP adjustments(4).................... (0.04) (0.04) (0.04) (0.04)
----- ----- ----- -----
Pro forma net income per share................. $0.49 $0.44 $0.40 $0.37
===== ===== ===== =====
Consolidated stockholders' equity (book value):
Historical....................................... $10,818 $10,818 $10,818 $10,818
Estimated net proceeds........................... 12,125 14,344 16,563 19,141
Less: Common Stock acquired by ESOP.............. (1,020) (1,200) (1,380) (1,587)
Less: Common Stock to be acquired by MRP(4)...... (510) (600) (690) (794)
------- ------- ------- -------
Pro forma stockholders' equity(7).............. $21,413 $23,362 $25,311 $27,578
======= ======= ======= =======
Consolidated stockholders' equity per share(6)(8):
Historical(6).................................... $8.48 $7.21 $6.27 $5.45
Estimated net proceeds........................... 9.51 9.56 9.60 9.65
Less: Common Stock acquired by ESOP.............. (0.80) (0.80) (0.80) (0.80)
Less: Common Stock to be acquired by MRP(4)...... (0.40) (0.40) (0.40) (0.40)
------- ------ ------ ------
Pro forma stockholders' equity per share(9).... $16.79 $15.57 $14,65 $13.90
======= ====== ====== ======
Purchase Price as a multiple of pro forma
net income per share(10)......................... 16.39x 18.18x 20.00x 21.74x
Purchase Price as a percentage of pro forma
stockholders' equity per share................... 59.56% 64.23% 68.26% 71.94%
</TABLE>
(footnotes on following page)
18
<PAGE>
- ---------------
(1) Gives effect to the sale of an additional 258,750 shares in the Conversion,
which may be issued to cover 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 CONVERSION -- Stock Pricing and Number of Shares to be
Issued."
(2) No effect has been given to withdrawals from savings accounts for the
purpose of purchasing Common Stock in the Conversion.
(3) It is assumed that 8% of the shares of Common Stock offered in the
Conversion will be purchased by the ESOP. The funds used to acquire such
shares 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
Conversion, which rate is currently 8.50%) from the net proceeds from the
Offerings retained by the Holding Company. The amount of this borrowing has
been reflected as a reduction from gross proceeds to determine estimated
net investable proceeds. The Bank intends to make contributions to the ESOP
in amounts at least equal to the principal and interest requirement of the
debt. The Bank's payment of the ESOP debt is based upon equal installments
of principal over a seven-year period, assuming a combined federal and
state tax rate of 38%. Shares purchased by the ESOP with the proceeds of
the loan will be held in a suspense account and released on a pro rate
basis as the loan is repaid. 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,
"Employers" Accounting for Employee Stock Ownership Plans," 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 $10.00 per
share Purchase Price. See "MANAGEMENT OF THE BANK --Benefits -- Employee
Stock Ownership Plan."
(4) Gives effect to the MRP expected to be adopted by the Holding Company
following the Conversion. If the MRP is approved by stockholders, the MRP
intends to acquire an amount of Common Stock equal to 4% of the shares of
Common Stock issued in the Conversion either through open market purchases
or from authorized but unissued shares of Common Stock. In calculating the
pro forma effect of the MRP, it is assumed that the required stockholder
approval has been received, that the shares were acquired by the MRP 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 and
ownership interests of existing stockholders by approximately 3.85% and pro
forma net income per share would be $0.65, $0.58, $0.53 and $0.47 at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range, respectively, for the year ended March 31, 1996, and
$0.47, $0.42, $0.39 and $0.34 at the minimum, midpoint, maximum and 15%
above the maximum of the Estimated Valuation Range, respectively, for the
nine months ended December 31, 1996, and pro forma stockholders' equity per
share would be $15.80, $14.67, $13.85 and $12.66 at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range,
respectively, at March 31, 1996 and $16.14, $14.97, $14,11 and $12.87 at
the minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range, respectively, for the nine months ended December 31, 1996.
Shares issued under the MRP vest over a five-year period at 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 $10.00 per share on the date of stockholder
approval of MRP, total MRP 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 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 Conversion. If all of the
options were to be exercised utilizing these authorized but unissued shares
rather than
19
<PAGE>
treasury shares which could be acquired, the voting and ownership interests
of existing stockholders would be diluted by approximately 9.1%. See
"MANAGEMENT OF THE BANK -- Benefits -- Stock Option Plan" and "--
Management Recognition Plan" and "RISK FACTORS -- Possible Dilutive Effect
of Benefit Programs."
(5) Per share amounts are based upon shares outstanding of 1,187,571,
1,397,143, 1,606,714 and 1,847,721 at the minimum, midpoint, maximum and
15% above the maximum of the Estimated Valuation Range, respectively, for
the year ended March 31, 1996 and 1,192,429, 1,402,857, 1,613,286 and
1,855,279 at the minimum, midpoint, maximum and 15% above the maximum of
the Estimated Valuation Range, respectively, for the nine months ended
December 31, 1996, which includes the shares of Common Stock sold in the
Conversion less the number of shares assumed to be held by the ESOP not
committed to be released within the first year following the Conversion.
(6) Historical per share amounts have been computed as if the shares of Common
Stock expected to be issued in the 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
Conversion, the additional ESOP expense or the proposed MRP expense, as
described above.
(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 which will be established for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in the
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
CONVERSION" -- Effects of Conversion to Stock Form on Depositors and
Borrowers of the Bank" and "TAXATION." 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 1,257,000, 1,500,000
and 1,983,750 at the minimum, midpoint, maximum and 15% above the maximum
of the Estimated Valuation Range, respectively.
(9) Does not represent possible future price appreciation or depreciation of
Common Stock.
(10) Annualized.
20
<PAGE>
FIRST FEDERAL BANK OF IDAHO, A FEDERAL SAVINGS BANK
CONSOLIDATED STATEMENTS OF INCOME
The following Consolidated Statements of Income of First Federal Bank of
Idaho, a Federal Savings Bank (now known as "FirstBank Northwest") and
Subsidiary for the fiscal years ended March 31, 1995 and 1996 have been audited
by BDO Seidman, LLP, Spokane, Washington, independent auditors, whose report
thereon appears elsewhere in this Prospectus. These statements should be read in
conjunction with the Consolidated Financial Statements and related Notes
included elsewhere herein. The Consolidated Statements of Income for the nine
months ended December 31, 1995 and 1996 are unaudited but, in the opinion of
management, reflect all adjustments consisting only of normal recurring
adjustments necessary for a fair presentation of the results of such periods.
The results for the nine month period ended December 31, 1996 are not
necessarily indicative of the results of the Bank that may be expected for the
entire fiscal year.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended March 31, December 31,
-------------------- -----------------
1995 1996 1995 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Interest Income:
Loans receivable............................... $6,825,840 $8,407,900 $6,324,493 $6,878,474
Mortgage backed and related securities......... 135,654 156,879 117,219 101,322
Investment securities.......................... 501,505 456,907 340,724 506,202
Other interest earnings assets................. 195,209 530,207 242,260 154,418
--------- --------- --------- ---------
Total interest income......................... 7,658,208 9,551,893 7,024,696 7,640,416
Interest Expense:
Deposits (Note 6).............................. 3,494,263 4,792,837 3,349,758 3,698,993
Advances from FHLB............................. 101,552 365,093 321,994 315,383
--------- --------- --------- ---------
Total interest expense........................ 3,595,815 5,157,930 3,671,752 4,014,376
Net interest income........................... 4,062,393 4,393,963 3,352,944 3,626,040
Provision for loan losses (Note 3).............. 27,453 150,000 78,312 193,619
--------- --------- --------- ---------
Net interest income after
provision for loan losses..................... 4,034,940 4,243,963 3,274,632 3,432,421
--------- --------- --------- ---------
Non-interest Income:
Gain on sale of loans.......................... 889,831 1,138,352 882,973 959,716
Service fees and charges....................... 782,490 812,751 596,804 673,953
Commissions.................................... 63,951 28,838 27,147 46,607
--------- --------- --------- ---------
Total non-interest income..................... 1,727,272 1,979,941 1,506,924 1,680,276
Non-interest Expense:
Compensation and related benefits
(Notes 10 and 11).............................. 2,708,441 3,048,163 2,131,225 2,327,006
Occupancy...................................... 661,654 671,258 490,060 504,181
Deposit insurance premiums..................... 206,400 234,728 154,800 696,925
Advertising.................................... 103,326 122,162 73,442 123,352
Data processing................................ 83,603 88,432 66,768 93,940
Supplies and postage........................... 207,040 270,525 192,578 196,630
Other.......................................... 596,359 825,851 445,527 597,278
--------- --------- --------- ---------
Total non-interest expense.................... 4,566,823 5,261,119 3,554,400 4,539,312
Income before income tax expense.............. 1,205,389 962,785 1,227,156 573,385
Income tax expense (Note 7)..................... 452,226 375,000 427,826 150,675
--------- --------- --------- ---------
Net income................................... 753,163 $ 587,785 799,330 422,710
========= ========= ========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Management's discussion and analysis of financial condition and results of
operations 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 profitability of the Bank's operations depends primarily on its net
interest income, its non-interest income (principally from mortgage banking
activities) and its non-interest expense. Net interest income is the difference
between the income the Bank receives on its loan and investment portfolio and
its cost of funds, which consists of interest paid on deposits and borrowings.
Net interest income is a function of the Bank's interest rate spread, which is
the difference between the yield earned on interest-earning assets and the rate
paid on interest-bearing liabilities, as well as a function of the average
balance of interest-earning assets as compared to the average balance of
interest-bearing liabilities. Non-interest income is comprised of income from
mortgage banking activities, gain on the occasional sale of assets and
miscellaneous fees and income. Mortgage banking generates income from the sale
of mortgage loans and from servicing fees on loans serviced for others. The
contribution of mortgage banking activities to the Bank's results of operations
is highly dependent on the demand for loans by borrowers and investors, and
therefore the amount of gain on sale of loans may vary significantly from period
to period as a result of changes in market interest rates and the local and
national economy. The Bank's profitability is also affected by the level of
non-interest expense. Non-interest expenses include compensation and benefits,
occupancy and equipment expenses, deposit insurance premiums, data servicing
expenses, advertising expenses, supplies and postage, and other operating costs.
The Bank's results of operations may be adversely affected during periods of
reduced loan demand to the extent that non-interest expenses associated with
mortgage banking activities are not reduced commensurate with the decrease in
loan originations.
OPERATING STRATEGY
The Bank's primary goal has been to improve the Bank's profitability while
maintaining a sound capital position. To accomplish this goal, the Bank has
employed an operating strategy that includes: (1) originating for its portfolio
residential mortgage loans, primarily with adjustable rates or with fixed rates
with terms of 15 years or less, secured by properties located in its primary
market area; (2) enhancing net income and controlling interest rate risk by
originating fixed-rate residential mortgage loans for sale in the secondary
market, as market conditions permit, as a means of generating current income
through the recognition of cash gains on loan sales and loan servicing fees; (3)
increasing its average yield on interest-earning assets by originating for
portfolio higher yielding construction, commercial real estate and agricultural
real estate loans; and (4) controlling asset growth to a level sustainable by
the Bank's capital position. In anticipation of the Charter Conversion, the
Bank has adopted a community banking strategy pursuant to which it will expand
the products and services it offers within its primary market area in order to
improve market share and increase the average yield of its interest-earning
assets. Specifically, the Bank intends to expand its agricultural real estate
and commercial real estate lending activities. The Bank also intends to expand
its non-mortgage lending activities by increasing its emphasis on originating
agricultural operating loans and commercial business loans. These loans afford
the Bank the opportunity to achieve higher interest rates with shorter terms to
maturity than residential mortgage loans. See "RISK FACTORS -- Diversified
Lending Risks -- Risks of Agricultural Lending" and "-- Risks of Community
Banking Strategy" for a discussion of the risks associated with this type of
lending. As part of this strategy, the Bank recently hired an experienced
commercial loan officer. There can be no assurances that the Bank will be
successful in its efforts to increase its originations of these types of loans.
Management anticipates that the Bank will incur initial start-up and ongoing
expenses in connection with the opening of its Clarkston, Washington office and
as various programs and services, such as its commercial real estate and
business lending operations, are introduced or expanded. These expenses could
reduce earnings for a period of time while income from new programs and services
increases to a level sufficient to cover the additional expenses.
22
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1996 AND MARCH 31, 1996
Total assets increased $3.4 million, or 2.6%, from $129.8 million at March
31, 1996 to $133.2 million at December 31, 1996. The growth in assets is
primarily attributable to an increase in loans receivable, which was partially
offset by a decrease in cash and securities. Net loans receivable increased
from $93.8 million at March 31, 1996 to $111.1 million at December 31, 1996.
During the nine months ended December 31, 1996, the Bank retained for its
portfolio some fixed-rate mortgage loans with terms of 15 years or less.
Adjustable-rate mortgage loans that adjust after a fixed period of three or five
years, which the Bank retains for its portfolio, were in higher demand by
borrowers during this period. Between March 31, 1996 and December 31, 1996, the
Bank decreased its cash and cash equivalents and investment and mortgage-backed
securities. Cash and cash equivalents decreased from $13.6 million to $5.8
million and investment securities decreased from $11.9 million to $5.2 million
as the Bank used available cash and the proceeds from the sale and maturity of
investment securities to fund loan originations and deposit withdrawals.
Mortgage-backed securities decreased from $2.5 million to $2.3 million as a
result of principal repayments. Included among the assets of the Bank is the
cash surrender value of life insurance policies, which totalled $1.3 million at
March 31, 1996 and December 31, 1996. Such policies were purchased in 1995 in
connection with the implementation of salary continutation agreements with
senior executive officers of the Bank.
Total liabilities increased from $119.5 million at March 31, 1996 to $122.4
million at December 31, 1996. Deposits decreased $10.0 million from $115.3
million at March 31, 1996 to $105.3 million at December 31, 1996. In late 1995,
the Bank offered a 75-day certificate of deposit with a 7.5% interest rate to
promote the Bank's 75th anniversary. This promotion attracted approximately $20
million in new deposits. Upon the expiration of the promotional certificates of
deposit in early 1996, most of the funds were rolled over into six month or two
year certificates of deposit. The decrease in deposits from March 31, 1996 to
December 31, 1996 reflects the withdrawal of funds following the maturity of
these six month certificates as well as withdrawals following the maturity of
some higher yielding five-year certificates of deposit. FHLB advances increased
from $2.3 million at March 31, 1996 to $15.1 million at December 31, 1996.
Because of the decrease in deposits, the Bank increased its use of borrowings
to fund asset growth.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED DECEMBER 31, 1995 AND
1996
NET INCOME. Net income decreased $376,000, or 47.1%, from $799,000 for the
nine months ended December 31, 1995 to $423,000 for the nine months ended
December 31, 1996. The Bank experienced greater net interest income during 1996,
but this was more than offset by increases in non-interest expense and the
provision for loan losses. Non-interest expense for the nine months ended
December 31, 1996 included a one-time, special assessment of $584,000 for the
purpose of recapitalizing the SAIF. Excluding the special assessment and related
tax effects, net income would have been $778,000 for the nine months ended
December 31, 1996.
NET INTEREST INCOME. Net interest income increased by $273,000, or 8.1%,
from $3.4 million for the nine months ended December 31, 1995 to $3.6 million
for the nine months ended December 31, 1996. This increase resulted from the
growth of the Bank, as the average balance of interest-earning assets increased
$15.8 million, or 14.8%, between the periods. This growth was partially offset
by a 20 basis point decrease in the spread between the yield on interest-earning
assets and the rate paid on interest-bearing liabilities from 3.88% for the nine
months ended December 31, 1995 to 3.68% for the same period in 1996.
Total interest income increased $616,000, or 8.8%, from $7.0 million for
the nine months ended December 31, 1995 to $7.6 million for the nine months
ended December 31, 1996. Interest income on loans receivable increased $554,000
from $6.3 million to $6.9 million as a result of an increase in the average
balance of loans from $90.9 million for the nine months ended December 31, 1995
to $103.4 million for the nine months ended December 31, 1996. The Bank
increased its loan portfolio by offering ARM loans that adjust after a fixed
period of three or five years and by retaining some fixed-rate mortgage loans in
its portfolio. The increase in the average balance of loans was partially
offset by a decrease in the average yield on the loan portfolio from 9.28% to
8.87%. Interest income on mortgage-backed and related securities decreased
$16,000 between the periods primarily as a result of a smaller average balance
in 1996. Interest income on investment securities increased $166,000 between
the periods
23
<PAGE>
as a result of a larger average balance in 1996, which was partially offset by a
decrease in the average yield. Interest income on other interest-earning assets
decreased $88,000 between the periods primarily as a result of the decrease in
the average yield on such assets from 4.50% to 3.05%.
Total interest expense increased $343,000, or 9.3%, from $3.7 million for
the nine months ended December 31, 1995 to $4.0 million for the nine months
ended December 31, 1996. Interest expense on deposits increased $350,000
between the periods from $3.3 million for the nine months ended December 31,
1995 to $3.7 million for the nine months ended December 31, 1996. Interest paid
on transaction accounts decreased $49,000 between the periods as a result of a
decrease in the rate paid from 2.49% to 2.27%. The decrease in the average rate
paid on transaction accounts was partially offset by a $559,000 increase in the
average balance of such accounts. Interest paid on certificates of deposit
increased $399,000 between the periods. This increase was the result of an
increase in the average balance of certificate accounts from $58.5 million to
$74.1 million, which was partially offset by a decrease in the average rate paid
from 6.12% to 5.55%. In late 1995, the Bank offered a 75-day certificate of
deposit to promote the Bank's 75th anniversary, which resulted in the receipt of
$20 million of new deposits. Much of this amount remained on deposit with the
Bank at lower rates after the maturity of the promotional certificate of
deposit. Interest paid on FHLB advances decreased $7,000 between the periods as
a $349,000 decrease in the average balance of advances was partially offset by a
21 basis point increase in the average rate paid.
PROVISION FOR LOAN LOSSES. Provisions for loan losses are charged to
operations to bring the total allowance for loan losses to a level considered by
management to be adequate to provide for estimated losses based on management's
evaluation of the portfolio, past experience, prevailing market conditions and
other relevant factors. Management also reviews individual loans for which full
collectibility may not be reasonably assured and considers, among other factors,
the present value of expected future cash flows, including the estimated fair
value of the underlying collateral. Provisions for loan losses totalled
$194,000 during the nine months ended December 31, 1996 compared to provisions
of $78,000 during the nine months ended December 31, 1995. The Bank made larger
provisions in 1996 after considering the growth of its loan portfolio, including
the growth of its commercial real estate and consumer loans, which generally are
riskier than residential mortgage loans.
The Bank's allowance for loan losses was $880,000, or 0.74% of total loans
receivable, at December 31, 1996, compared to $631,000, or 0.63% of total loans
receivable, at December 31, 1995. Net loan charge-offs during the nine months
ended December 31, 1996 were $15,000 compared to $2,000 during the same period
in 1995. Based on the level of the allowance for loan losses in relation to
loans receivable and delinquent loans, management believes the allowance for
loan losses was adequate at December 31, 1996. Although management uses the
best information available, future adjustments to the allowance may be necessary
due to economic, operating, regulatory and other conditions that may be beyond
the Bank's control. While the Bank maintains its allowance for loan losses at a
level which it considers to be adequate to provide for losses, there can be no
assurance that further additions will not be made to the allowance for loan
losses and that actual losses will not exceed the estimated amounts. Management
anticipates making additional provisions for loan losses in future periods as
the Bank increases the amount of its agricultural real estate, commercial real
estate and non-real estate loans.
NON-INTEREST INCOME. Total non-interest income increased $173,000,
from $1.5 million for the nine months ended December 31, 1995 to $1.7 million
for the nine months ended December 31, 1996. Income on gain on sales of loans,
which is derived primarily from the sale of government insured loans on a
servicing-released basis, increased $77,000 between the periods as a result of
the adoption of Statement of Financial Accounting Standard ("SFAS") No. 122
combined with a smaller volume of loans sold on a servicing-released basis in
1996. Total loans sold servicing-released decreased from $38.0 million during
the nine months ended December 31, 1995 to $26.0 million during the nine months
ended December 31, 1996. Service fees and charges increased $77,000 and
commissions increased $20,000. Service fees and charges increased as a result of
the growth of the amount of loans serviced for others and increased fees on
transaction accounts, while commissions increased as a result of higher annuity
sales by the Bank's subsidiary.
Pursuant to SFAS No. 122, since April 1, 1996, the Bank has been required
to recognize as separate assets servicing rights that were generated by the Bank
through the sale of loans on a servicing retained basis. As a result,
24
<PAGE>
when a loan is sold servicing-retained, the Bank recognizes additional gain
during the period in which loan is sold for the capitalized cost of those
mortgage servicing rights. Furthermore, SFAS No. 122 requires the Bank to
periodically evaluate all capitalized mortgage servicing rights for impairment
based upon the current fair value of these rights. Accordingly, future changes
in the fair value of the Bank's capitalized mortgage servicing rights may
require the Bank to reduce the carrying value of these rights by taking a charge
against earnings. As a result of the adoption of SFAS No. 122, from time to
time the Bank may reassess its practice of selling loans on a servicing-retained
basis.
NON-INTEREST EXPENSE. Total non-interest expense increased $1.0 million,
or 7.7%, from $3.5 million for the nine months ended December 31, 1995 to $4.5
million for the nine months ended December 31, 1996. Deposit insurance premiums
increased from $155,000 for the nine months ended December 31, 1995 to $697,000
for the nine months ended December 31, 1996. Included in deposit insurance
premiums for the 1996 period is a one-time, special assessment of $584,000.
Pursuant to legislation enacted in September 1996, the FDIC imposed a special
assessment on each depository institution with SAIF-assessable deposits which
resulted in the SAIF achieving its designated reserve ratio. In connection
therewith, the FDIC reduced deposit insurance premiums. As a result, the Bank's
deposit insurance assessment rate has decreased from 0.23% of deposits to
0.0648% beginning January 1, 1997. Compensation and related benefits increased
$196,000, or 9.2%, between the periods as a result of an increase in the number
of employees and a contribution of $130,000 in connection with the termination
of a defined benefit pension plan that was suspended in 1995. Occupancy expense
increased $14,000, or 2.9%, between the periods as a result of opening of the
Coeur d'Alene branch in November 1995. Other non-interest expenses increased
$233,000, or 30.0%, primarily due to a loss of $90,000 on the sale of mutual
funds, an increase of $50,000 in advertising expenses and an increase of $27,000
in data processing costs. The Bank's non-interest expenses are higher than the
average expenses of institutions of comparable size because of the greater
resources required for the Bank's mortgage banking operations, diversified
lending activities and branch network. The Bank expects to incur additional
expenses in connection with the opening and operation of its Clarkston,
Washington office. In addition, the Bank expects to experience increased costs
following consummation of the Conversion because of expenses associated with the
ESOP and the other stock benefit plans as well as the additional costs of
operating as a public company.
INCOME TAXES. Income taxes were $428,000 for the nine months ended
December 31, 1995 (resulting in an effective tax rate of 34.9%) compared with
$150,000 for the nine months ended December 31, 1996 (resulting in an effective
tax rate of 26.3%). The decrease of $278,000 in tax expense is principally
attributable to a decrease in pre-tax income between the periods.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED MARCH 31, 1995 AND 1996
NET INCOME. Net income decreased $165,000, or 22.0%, from $753,000 for the
year ended March 31, 1995 to $588,000 for the year ended March 31, 1996. The
Bank experienced greater net interest income and non-interest income in fiscal
1996 compared to fiscal 1995. However, these gains were more than offset by
increases in non-interest expense and the provision for loan losses.
NET INTEREST INCOME. Net interest income increased by $332,000, or 8.2%,
from $4.1 million for the year ended March 31, 1995 to $4.4 million for the year
ended March 31, 1996. This increase resulted from the growth of the Bank's
assets as the average balance of interest-earning assets increased $15.1
million, or 15.4%, from fiscal 1995 to fiscal 1996. The Bank's spread between
the yield on interest-earning assets and the rate paid on interest-bearing
liabilities decreased 26 basis points from 3.87% for the year ended March 31,
1995 to 3.61% for the year ended March 31, 1996.
Total interest income increased $1.9 million, or 24.7%, from $7.7 million
for the year ended March 31, 1995 to $9.6 million for the year ended March 31,
1996. The increase in interest income between the periods was primarily the
result of an increase in interest income on loans, which increased by $1.6
million, or 23.2%, from $6.8 million during fiscal 1995 to $8.4 million during
fiscal 1996. The average balance of loans grew from $79.9 million in fiscal
1995 to $91.8 in fiscal 1996. Most of the increase was in the Bank's
residential loan portfolio. The growth
25
<PAGE>
of the loan portfolio was funded with FHLB advances and a decrease in cash and
cash equivalents. In addition, the average yield on the loan portfolio
increased from 8.54% to 9.15% as a result of upward adjustments on ARM loans and
the retention of 15-year fixed-rate loans and ARM loans with initial fixed
periods of three and five years. Interest income on mortgage-backed and related
securities increased $21,000 due to upward adjustments on adjustable-rate
securities. Interest income on investment securities decreased by $45,000 as a
result of a smaller average balance in fiscal 1996, which was partially offset
by a higher average yield. Interest income on other interest-earning assets
increased $335,000 as a result of an increase in the average balance of such
assets and an increase in the average yield from 2.79% to 4.41%. The average
balance of other interest-earning assets increased from $7.0 million for fiscal
1995 to $12.0 million for fiscal 1996 as a result of the funds received from the
75th anniversary certificate of deposit promotion being invested in cash and
cash equivalents.
Interest expense increased by $1.6 million, or 43.4%, from $3.6 million for
the year ended March 31, 1995 to $5.2 million for the year ended March 31, 1996.
The increase in interest expense was due to an increase in both interest paid on
deposits and interest paid on FHLB advances. Interest expense on deposits
increased $1.3 million, or 37.2%, from $3.5 million for fiscal 1995 to $4.8
million for fiscal 1996 primarily as a result of the increase in the average
balance of deposits. The average balance of transaction accounts decreased by
$4.5 million and the average cost of such accounts decreased from 2.62% to
2.50%, resulting in a decrease in interest expense of $160,000. However, the
decrease in interest expense on transaction accounts was more than offset by an
increase in interest expense on certificates of deposit. The average balance of
certificates of deposit increased by $15.7 million and the average cost of such
accounts increased from 4.88% to 5.93%, resulting in an increase in interest
expense on certificates of deposit of $1.5 million. The increase in the average
balance of certificates of deposit and in the average rate paid on such accounts
was due, in part, to the promotion in late 1995 of a 75-day, 7.5% certificate of
deposit in honor of the Bank's 75th anniversary. The promotion attracted $25
million, of which $20 million were new deposits. As a result of strong loan
demand, the Bank utilized FHLB advances to a greater extent during fiscal 1996,
which increased interest expense on FHLB advances by $263,000, from $102,000 in
fiscal 1995 to $365,000 in fiscal 1996.
PROVISION FOR LOAN LOSSES. The provision for loan losses was $150,000 for
the year ended March 31, 1996 compared to $27,000 for the year ended March 31,
1995. Management increased the provision for loan losses in fiscal 1996 as a
result of the growth of the loan portfolio and the increased emphasis on
commercial and agricultural real estate loans, which generally are riskier than
residential real estate loans. The Bank's allowance for loan losses was
$701,000, or 0.70% of total loans receivable, at March 31, 1996, compared to
$555,000, or 0.62% of total loans receivable, at March 31, 1995. Net loan
charge-offs were $4,000 during fiscal 1996 compared to $3,000 during fiscal
1995.
NON-INTEREST INCOME. Total non-interest income increased $243,000, or
14.0%, from fiscal 1995 to fiscal 1996. The Bank experienced increased income
from gain on sales of loans and from service fees and charges while income from
commissions decreased. Loans sold servicing-released increased from $24.6
million for the year ended March 31, 1995 to $48.6 million for the year ended
March 31, 1996. As a result, gain on sales of loans increased $248,000 from
$891,000 during fiscal 1995 to $1.1 million in fiscal 1996. Service fees and
charges increased $30,000 between the periods, primarily as a result of a larger
balance of loans serviced for others. Commission income decreased $35,000
between the periods because of decreased annuity sales by the Bank's
subsidiary.
NON-INTEREST EXPENSE. Total non-interest expense increased $694,000 from
$4.6 million for the year ended March 31, 1995 to $5.3 million for the year
ended March 31, 1996. During fiscal 1996, compensation and related benefits
increased by $340,000, or 12.6%, over fiscal 1995 primarily as a result of an
increase in the number of employees and an increase in commissions paid, which
are tied directly to increased loan originations. Included in compensation
expense for fiscal 1995 is a charge of $96,000 relating to the suspension of a
defined benefit pension plan. Occupancy costs remained steady, increasing by
$10,000, or 1.5%, between the periods. Deposit insurance increased by $28,000
between the periods as a result of greater deposit balances in fiscal 1996.
Other non-interest expenses increased by $317,000, or 32.0%, as a result of
increased expenses associated
26
<PAGE>
with operational audits and consulting services and a charge of $200,000 for the
impairment of mutual funds owned by the Bank.
INCOME TAXES. Income taxes were $452,000 for the year ended March 31, 1995
(resulting in an effective tax rate of 37.5%) compared with $375,000 for the
year ended March 31, 1996 (resulting in an effective tax rate of 38.9%). The
decrease of $77,000 in tax expense is principally attributable to a decrease in
pre-tax income between the periods.
AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS/COST
The following table sets forth certain information for the periods
indicated regarding average balances of assets and liabilities as well as the
total dollar amounts of interest income from average interest-earning assets and
interest expense on average interest-bearing liabilities and average yields and
costs. Such yields and costs for the periods indicated are derived by dividing
income or expense by the average monthly balance of assets or liabilities,
respectively, for the periods presented. Average balances are derived from
month-end balances. Management does not believe that the use of month-end
balances instead of daily balances has caused any material difference in the
information presented.
27
<PAGE>
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------------------------
1995 1996
------------------------------- -----------------------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
---------- --------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets(1):
Loans receivable.................. $ 79,912 $6,826 8.54% $ 91,849 $8,408 9.15%
Mortgage-backed securities........ 2,981 136 4.56 2,622 157 5.99
Investment securities............. 8,075 501 6.20 6,553 457 6.97
Other earning assets.............. 6,986 195 2.79 12,026 530 4.41
-------- ------ -------- ------
Total interest-earning
assets......................... 97,954 7,658 7.82 113,050 9,552 8.45
------ ------
Non-interest-earning
assets............................ 3,873 5,460
-------- --------
Total assets.................... $101,827 $118,510
======== ========
Interest-earning liabilities:
Passbook, NOW and money
market accounts................. $ 39,546 1,036 2.62 $ 35,072 876 2.50
Certificates of deposit........... 50,319 2,458 4.88 66,066 3,917 5.93
-------- ------ -------- ------
Total deposits.................. 89,865 3,494 3.89 101,138 4,793 4.74
Advances from FHLB................ 1,305 102 7.82 5,419 365 6.74
-------- ------ -------- ------
Total interest-bearing
liabilities.................... 91,170 3,596 3.95 106,557 5,158 4.84
------ ------
Non-interest-bearing
liabilities....................... 1,458 1,826
-------- --------
Total liabilities............... 92,628 108,383
-------- --------
Total equity....................... 9,199 10,127
-------- --------
Total liabilities and
total equity................... $101,827 $118,510
======== ========
Net interest income................ $4,062 $4,394
====== ======
Interest rate spread............... 3.87% 3.61%
==== ====
Net interest margin................ 4.15% 3.89%
====== ======
Ratio of average interest-earning
assets to average interest-
bearing liabilities............... 107.44% 106.09%
======== ========
<CAPTION>
Nine Months Ended December 31,
------------------------------------------------------------------
1995(2) 1996(2)
-------------------------------- --------------------------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
---------- -------- -------- ---------- --------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets(1):
Loans receivable.................. $ 90,916 $6,325 9.28% $103,407 $6,878 8.87%
Mortgage-backed securities........ 2,658 117 5.87 2,381 101 5.66
Investment securities............. 6,450 341 7.05 10,466 506 6.45
Other earning assets.............. 7,168 242 4.50 6,783 155 3.05
-------- ------ -------- ------
Total interest-earning
assets......................... 107,192 7,025 8.74 123,037 7,640 8.28
------ ------
Non-interest-earning
assets............................ 5,247 6,173
-------- --------
Total assets.................... $112,439 $129,210
======== ========
Interest-earning liabilities:
Passbook, NOW and money
market accounts................. $ 35,551 665 2.49 $ 36,110 615 2.27
Certificates of deposit........... 58,538 2,685 6.12 74,074 3,084 5.55
-------- ------ -------- ------
Total deposits.................. 94,089 3,350 4.75 110,184 3,699 4.48
Advances from FHLB................ 6,599 322 6.51 6,250 315 6.72
-------- ------ -------- ------
Total interest-bearing
liabilities.................... 100,688 3,672 4.86 116,434 4,014 4.60
------ ------
Non-interest-bearing
liabilities....................... 1,796 2,027
-------- --------
Total liabilities............... 102,484 118,461
-------- --------
Total equity....................... 9,955 10,749
-------- --------
Total liabilities and
total equity................... $112,439 $129,210
======== ========
Net interest income................ $3,353 $3,626
====== ======
Interest rate spread............... 3.88% 3.68%
==== ====
Net interest margin................ 4.17% 3.93%
==== =====
Ratio of average interest-earning
assets to average interest-
bearing liabilities............... 106.46% 105.67%
======= =======
</TABLE>
________________
(1) Does not include interest on loans 90 days or more past due.
(2) Yields and ratios for the nine-month periods are annualized.
28
<PAGE>
YIELDS EARNED AND RATES PAID
The following table sets forth (on a consolidated basis) for the periods
and at the date indicated the weighted average yields earned on the Bank's
assets and the weighted average interest rates paid on the Bank's liabilities,
together with the net yield on interest-earning assets. Amounts for the nine
month periods are annualized.
<TABLE>
<CAPTION>
Year Nine Months Ended
Ended March 31, December 31, At December 31,
----------------- -------------------
1995 1996 1995 1996 1996
-------- ------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Weighted average yield earned on:
Loans receivable....................... 8.54% 9.15% 9.28% 8.87% 8.43%
Mortgage-backed securities............. 4.56 5.99 5.87 5.66 6.03
Investment securities.................. 6.20 6.97 7.05 6.45 6.14
All interest-earning assets............ 7.82 8.45 8.74 8.28 8.29
Weighted average rate paid on:
Passbook, NOW and money market
accounts.............................. 2.62 2.50 2.49 2.27 2.26
Certificates of deposit................ 4.88 5.93 6.12 5.55 5.60
FHLB advances.......................... 7.82 6.74 6.51 6.72 5.88
All interest-bearing liabilities....... 3.95 4.84 4.86 4.60 4.52
Interest rate spread (spread between
weighted average yield earned on all
interest-earning assets and weighted
average rate paid on all interest-
bearing liabilities)................... 3.87 3.61 3.88 3.68 3.77
Net interest margin (net interest income
as a percentage of average
interest-earning assets)............... 4.15 3.89 4.17 3.93 3.92
</TABLE>
29
<PAGE>
RATE/VOLUME ANALYSIS
The following table sets forth the effects of changing rates and volumes on
the interest income and interest expense of the Bank. Information is provided
with respect to: (i) effects attributable to changes in rate (changes in rate
multiplied by prior volume); (ii) effects attributable to changes in volume
(changes in volume multiplied by prior rate); and (iii) effects attributable to
changes in rate/volume (changes in rate multiplied by changes in volume).
<TABLE>
<CAPTION>
Year Ended March 31, Nine Months Ended December 31,
1996 Compared to Year Ended 1996 Compared to Nine Months Ended
March 31, 1995 December 31, 1995
------------------------------------------ --------------------------------------
Increase (Decrease) Increase (Decrease)
Due to Due to
------------------------------------------ --------------------------------------
Rate/ Rate/
Rate Volume Volume Net Rate Volume Volume Net
---- ------ ------ --- ---- ------ ------ ---
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable(1)................ $489 $1,020 $ 73 $1,582 $(277) $ 869 $(38) $554
Mortgage-backed securities......... 42 (16) (5) 21 (4) (12) -- (16)
Investment securities.............. 62 (94) (12) (44) (28) 212 (18) 166
Other earning assets............... 113 141 81 335 (78) (14) 4 (88)
---- ------ ---- ------ ----- ------ ---- ----
Total net change in income
on interest-earning assets......... 706 1,051 137 1,894 (387) 1,055 (52) 616
---- ------ ---- ------ ----- ------ ---- ----
Interest-bearing liabilities:
Passbook, NOW and money
market accounts.................. (48) (117) 5 (160) (59) 11 (1) (49)
Certificates of deposit............ 525 769 164 1,458 (248) 713 (66) 399
FHLB advances...................... (14) 322 (44) 264 11 (18) -- (7)
---- ------ ---- ------ ----- ------ ---- ----
Total net change in expense
on interest-bearing
liabilities....................... 463 974 125 1,562 (296) 706 (67) 343
---- ------ ---- ------ ----- ------ ---- ----
Net increase (decrease) in net
interest income................... $243 $ 77 $ 12 $ 332 $ (91) $ 349 $ 15 $273
==== ====== ==== ====== ===== ====== ==== ====
</TABLE>
_______________
(1) Does not include interest on loans 90 days or more past due.
ASSET AND LIABILITY MANAGEMENT
The Bank's principal financial objective is to achieve long-term
profitability while reducing its exposure to fluctuating interest rates. The
Bank has sought to reduce exposure of its earnings to changes in market interest
rates by attempting to manage the mismatch between asset and liability
maturities and interest rates. The principal element in achieving this
objective is to increase the interest-rate sensitivity of the Bank's interest-
earning assets by retaining for its portfolio shorter term loans and loans with
interest rates subject to periodic adjustment to market conditions and by
selling substantially all of its longer term, fixed-rate residential mortgage
loans. The Bank has historically relied on retail deposits as its primary
source of funds. Management believes retail deposits, compared to brokered
deposits, reduce the effects of interest rate fluctuations because they
generally represent a more stable source of funds. As part of its interest rate
risk management strategy, the Bank promotes non-interest-bearing
30
<PAGE>
transaction accounts and certificates of deposit with longer maturities (up to
five years) to reduce the interest sensitivity of its interest-bearing
liabilities.
In order to encourage institutions to reduce their interest rate risk, the
OTS adopted a rule incorporating an interest rate risk component into the risk-
based capital rules. Using data from the Bank's quarterly reports to the OTS,
the Bank receives a report which measures interest rate risk by modeling the
change in Net Portfolio Value ("NPV") over a variety of interest rate scenarios.
This procedure for measuring interest rate risk was developed by the OTS to
replace the "gap" analysis (the difference between interest-earning assets and
interest-bearing liabilities that mature or reprice within a specific time
period). NPV is the present value of expected cash flows from assets,
liabilities and off-balance sheet contracts. The calculation is intended to
illustrate the change in NPV that will occur in the event of an immediate change
in interest rates of at least 200 basis points with no effect given to any steps
that management might take to counter the effect of that interest rate movement.
Under proposed OTS regulations, an institution with a greater than "normal"
level of interest rate risk will be subject to a deduction from total capital
for purposes of calculating its risk-based capital. An institution with a
"normal" level of interest rate risk is defined as one whose "measured interest
rate risk" is less than 2.0%. Institutions with assets of less than $300
million and a risk-based capital ratio of more than 12.0% are exempt. The Bank
meets these qualifications and therefore is exempt. Assuming this proposed rule
was in effect at December 31, 1996 and the Bank was not exempt from the rule,
the Bank's level of interest rate risk would not have caused it to be treated as
an institution with greater than "normal" interest rate risk.
The following table is provided by the OTS and illustrates the change in
NPV at December 31, 1996, based on OTS assumptions, that would occur in the
event of an immediate change in interest rates, with no effect given to any
steps that management might take to counter the effect of that interest rate
movement.
<TABLE>
<CAPTION>
Net Portfolio as % of
Net Portfolio Value Portfolio Value of Assets
-------------------------------- --------------------------------
Basis Point ("bp")
Change in Rates $ Amount $ Change(1) % Change NPV Ratio(2) Change(bp)(3)
--------------- -------- ----------- --------- ------------ -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
400 11,802 (4,815) (29) 8.99 (298)
300 13,362 (3,254) (20) 10.01 (196)
200 14,769 (1,847) (11) 10.90 (107)
100 15,903 (714) (4) 11.58 (39)
0 16,617 -- -- 11.97 --
(100) 16,784 168 1 12.01 4
(200) 16,440 (177) (1) 11.73 (24)
(300) 16,222 (395) (2) 11.52 (45)
(400) 16,485 (132) (1) 11.62 (35)
</TABLE>
________________
(1) Represents the increase (decrease) of the estimated NPV at the indicated
change in interest rates compared to the NPV assuming no change in interest
rates.
(2) Calculated as the estimated NPV divided by the portfolio value of total
assets ("PV").
(3) Calculated as the increase (decrease) of the NPV ratio assuming the
indicated change in interest rates over the estimated NPV ratio assuming no
change in interest rates.
31
<PAGE>
The following table is provided by the OTS and is based on the calculations
in the above table. It sets forth the interest rate risk capital component that
will be deducted from risk-based capital in determining the level of risk-based
capital. At December 31, 1996, the change in NPV as a percentage of portfolio
value of total assets is negative 1.33%, which is less than negative 2.0%,
indicating that the Bank has a "normal" level of interest rate risk.
<TABLE>
<CAPTION>
At At At
December 31, September 30, December 31,
1995 1996 1996
------------- -------------- -------------
<S> <C> <C> <C>
RISK MEASURES: 200 BP RATE SHOCK:
Pre-Shock NPV Ratio: NPV as % of PV of Assets.. 10.92% 12.25% 11.97%
Exposure Measure: Post-Shock NPV Ratio......... 10.61% 11.14% 10.90%
Sensitivity Measure: Change in NPV Ratio....... (31)bp (111)bp (107)bp
CALCULATION OF CAPITAL COMPONENT:
Change in NPV as % of PV of Assets.............. (0.36)% (1.36)% (1.33)%
Interest Rate Risk Capital Component (1)........ -- -- --
</TABLE>
_______________
(1) No amounts are shown on the interest rate risk capital component line
because the Bank is exempt from the interest rate risk capital component.
As with any method of measuring interest rate risk, certain shortcomings
are inherent in the method of analysis presented in the foregoing tables. For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market rates.
Additionally, certain assets, such as ARM loans, have features which restrict
changes in interest rates on a short-term basis and over the life of the asset.
Further, in the event of a change in interest rates, expected rates of
prepayments on loans and early withdrawals from certificates could likely
deviate significantly from those assumed in calculating the table.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary sources of funds are customer deposits, proceeds from
principal and interest payments on loans, proceeds from sales of loans maturing
securities and FHLB advances. While maturities and scheduled amortization of
loans are a predictable source of funds, deposit flows and mortgage prepayments
are greatly influenced by general interest rates, economic conditions and
competition.
The Bank must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to support loan growth and deposit withdrawals,
to satisfy financial commitments and to take advantage of investment
opportunities. The Bank generally maintains sufficient cash and short-term
investments to meet short-term liquidity needs. At December 31, 1996, cash and
cash equivalents totalled $5.8 million, or 4.3% of total assets, and investment
securities that matured in one year or less totalled $500,000, or 0.4% of total
assets. The Bank did not hold any securities classified as available for sale
at December 31, 1996. In addition, the Bank maintains a credit facility with
the FHLB-Seattle, which provides for immediately available advances. Advances
under this credit facility totalled $15.1 million at December 31, 1996.
The OTS requires a savings institution to maintain an average daily balance
of liquid assets (cash and eligible investments) equal to at least 5.0% of the
average daily balance of its net withdrawable deposits and short-
32
<PAGE>
term borrowings. In addition, short-term liquid assets currently must
constitute 1.0% of the sum of net withdrawable deposit accounts plus short-term
borrowings. The Bank's actual long- and short-term liquidity ratios at December
31, 1996 were 5.32% and 1.03%, respectively.
The primary investing activity of the Bank is the origination of mortgage
loans. During the years ended March 31, 1995 and 1996, and the nine months
ended December 31, 1996, the Bank originated loans in the amounts of $89.8
million, $120.9 million, and $97.4 million, respectively. At December 31, 1996,
the Bank had loan commitments totalling $16.4 million and undisbursed lines of
credit totalling $21.3 million and undisbursed loans in process totalling $6.2
million. The Bank anticipates that it will have sufficient funds available to
meet its current loan origination commitments. Certificates of deposit that are
scheduled to mature in less than one year from December 31, 1996 totalled $49.2
million. Historically, the Bank has been able to retain a significant amount of
its deposits as they mature. In addition, management of the Bank believes that
it can adjust the offering rates of savings certificates to retain deposits in
changing interest rate environments.
The Bank is required to maintain specific amounts of capital pursuant to
OTS requirements. As of December 31, 1996, the Bank was in compliance with all
regulatory capital requirements which were effective as of such date with
tangible, core and risk-based capital ratios of 8.12%, 8.12% and 13.27%,
respectively. For a detailed discussion of regulatory capital requirements, see
"REGULATION -- Federal Regulation of Savings Associations -- Capital
Requirements." See also "HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE."
IMPACT OF NEW ACCOUNTING STANDARDS
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS. In March 1995, the
Financial Accounting Standards Board ("FASB") issued SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." SFAS No. 121 applies prospectively in fiscal years beginning after
December 31, 1995, and establishes new guidelines regarding when impairment
losses on long-lived assets, which include plant and equipment, certain
identifiable intangible assets and goodwill, should be recognized and how
impairment losses should be measured. SFAS No. 121 became effective for the Bank
for the fiscal year beginning April 1, 1996. The adoption of SFAS No. 121 has
not had a material impact on the Bank's results of operations or financial
position.
ACCOUNTING FOR MORTGAGE SERVICING RIGHTS. In May 1995, the FASB issued
SFAS No. 122, "Accounting for Mortgage Servicing Rights." SFAS No. 122
eliminates distinctions between servicing rights that were purchased and those
that were retained upon the sale of loans. The statement requires mortgage
servicers to recognize as separate assets rights to service loans, no matter how
the rights were acquired. Institutions that sell loans and retain the servicing
rights will be required to allocate the total cost of the loans to servicing
rights and loans based on their relative fair values if that value can be
estimated. Furthermore, SFAS No. 122 requires that all capitalized mortgage
servicing rights be periodically evaluated for impairment based upon the current
fair value of these rights. SFAS No. 122 became effective for the Bank for the
fiscal year beginning April 1, 1996. The effect of adopting SFAS No. 122 was to
increase income before income taxes for the nine months ended December 31, 1996,
approximately $204,000.
ACCOUNTING FOR STOCK-BASED COMPENSATION. In October 1995, the FASB issued
SFAS No. 123, "Accounting for Stock-Based Compensation," establishing financial
accounting and reporting standards for stock-based employee compensation plans.
This statement encourages all entities to adopt a new method of accounting to
measure compensation cost of all employee stock compensation plans based on the
estimated fair value of the award at the date it is granted. The accounting
requirements of this statement are effective for transactions entered into in
fiscal years that begin after December 15, 1995; however, companies are required
to disclose information for awards granted in their first fiscal year beginning
after December 15, 1994. Management of the Bank has not completed an analysis
of the potential effects of this statement on its financial condition or results
of operations.
33
<PAGE>
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENT OF LIABILITIES. In June 1996, the FASB issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities," which provides accounting and reporting standards for transfers
and servicing of financial assets and extinguishment of liabilities. This
statement supersedes SFAS No. 122 and applies prospectively in fiscal years
beginning after December 31, 1996, and establishes new standards that focus on
control whereas, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. The Bank does not expect adoption
of SFAS No. 125 to have a material impact on the Bank's results of operations or
financial position.
EFFECT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and related financial data presented
herein have been prepared in accordance with GAAP, which require 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 primary impact of inflation is reflected in the
increased cost of the Bank's operations. Unlike most industrial companies,
virtually all the assets and liabilities of a financial institution are monetary
in nature. As a result, interest rates generally have a more significant impact
on a financial institution's performance than do general levels of inflation.
Interest rates do not necessarily move in the same direction or to the same
extent as the prices of goods and services.
BUSINESS OF THE HOLDING COMPANY
GENERAL
The Holding Company was organized as a Delaware business corporation at the
direction of the Bank in March 1997 for the purpose of becoming a holding
company for the Bank upon completion of the Stock Conversion. Upon completion
of the Conversion, the Bank will be a wholly-owned subsidiary of the Holding
Company.
BUSINESS
Prior to the Conversion, the Holding Company will not engage in any
significant operations. Upon completion of the Conversion, the Holding
Company's sole business activity will be the ownership of the stock of the Bank
and investment of the net proceeds of the Offerings retained by it. In the
future, the Holding Company may acquire or organize other operating
subsidiaries, although there are no current plans, arrangements, agreements or
understandings, written or oral, to do so.
Initially, the Holding Company will neither own nor lease any property but
will instead use the premises, equipment and furniture of the Bank with the
payment of appropriate rental fees, as required by applicable law.
Since the Holding Company will only hold the capital stock of the Bank, the
competitive conditions applicable to the Holding Company will be the same as
those currently confronting the Bank. See "BUSINESS OF THE BANK --
Competition."
BUSINESS OF THE BANK
GENERAL
The Bank is a community oriented financial institution that engages
primarily in the business of attracting deposits from the general public in the
areas surrounding its branch offices and using those funds, together with funds
34
<PAGE>
generated from operations and borrowings, to originate residential mortgage
loans within the Bank's market area. The Bank also is active in originating
construction and agricultural real estate loans. To a lesser extent, the Bank
originates commercial real estate, and consumer and other non-real estate loans.
The Bank has adopted a mortgage banking strategy pursuant to which it generally
sells a majority of the fixed-rate residential mortgage loans that it originates
while retaining the servicing rights on the conventional loans it sells.
MARKET AREA
The Bank is headquartered in Lewiston, Idaho and operates five full-service
offices in Lewiston, Lewiston Orchards, Moscow, Grangeville and Coeur d'Alene,
Idaho. The Bank also operates two loan production offices, one in Lewiston and
one in Coeur d'Alene. Most of the Bank's depositors reside in the communities
surrounding the Bank's offices. Most of the Bank's loans are made to borrowers
residing in the counties in which the Bank's offices are located and in the
surrounding counties.
In general, the market areas served by the Bank are dependent on
agriculture, mining, tourism and the forest products industry, and the local
economies reflect the health or weakness of those industries. Agriculture in
the Bank's market area is dry land farming. The primary crop is wheat. Other
major crops are barley, peas, lentils, beans and grass seed. Livestock is also
raised in the Bank's market area. Lewiston is the largest city in northern
Idaho and serves as the regional center for state government. The economy of
Lewiston, in NezPerce County, is connected to that of Clarkston, Washington,
which is separated from Lewiston by the Snake River. The Lewis-Clark Valley has
a population of approximately 50,000. Forest products and agriculture are the
dominant industries in the Lewiston-Clarkston area. Medical services, light
manufacturing and tourism have helped keep the economy stable in recent years.
Moscow, Idaho, in Latah County, has a population of 20,000. The county
population is approximately 30,000. Agriculture and higher education are the
primary industries in Moscow. The University of Idaho is located in Moscow and
is the city's largest employer. In addition, Washington State University is
located eight miles west of Moscow in Pullman, Washington. Both universities
have been expanding in recent years, which resulted in increased demand for
housing. The growth of the universities has slowed recently, which has caused
some slow down in the real estate market. Grangeville, Idaho, in Idaho County,
has an economy based mostly on agriculture, the forest products industry and the
U.S. Forest Service. Declines in the forest products industry has resulted in a
decline in population in Idaho County over the last decade. Tourism has become
increasingly important to the Grangeville economy in recent years. Coeur
D'Alene, Idaho, in Kootenai County, has a population of approximately 25,000 in
a county with almost 70,000 residents. Tourism, forest products, mining and
agriculture are the major industries of this region. Coeur d'Alene has
experienced significant growth in the past ten years, primarily because of the
expanding tourism industry and migration from more populous parts of the western
and northwestern United States. As a result, real estate activity has been high
with a large amount of new home construction.
The Bank faces competition from many financial institutions for deposits
and loan originations. See "--Competition" and "RISK FACTORS -- Competition
Within Market Area."
LENDING ACTIVITIES
GENERAL. The principal lending activity of the Bank is the origination of
conventional mortgage loans for the purpose of purchasing or refinancing owner-
occupied, one- to four-family residential property. The Bank also is active in
originating construction and agricultural real estate loans. To a lesser
extent, the Bank also originates commercial real estate and consumer and other
non-real estate loans, although it intends to increase its originations of these
types of loans. The Bank's net loans receivable totalled $111.1 million at
December 31, 1996, representing 83.5% of consolidated total assets.
35
<PAGE>
LOAN PORTFOLIO ANALYSIS. The following table sets forth the composition of
the Bank's loan portfolio by type of loan at the dates indicated. The Bank had
no concentration of loans exceeding 10% of total gross loans other than as
disclosed below.
<TABLE>
<CAPTION>
At March 31, At December 31,
-------------------------------------
1995 1996 1996
----------------- ------------------ ------------------
Amount Percent Amount Percent Amount Percent
------- -------- -------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
Residential................ $53,307 60.02% $ 62,818 62.41% $ 72,656 61.26%
Construction............... 12,259 13.80 13,832 13.74 14,945 12.60
Agricultural............... 11,887 13.39 11,945 11.87 11,876 10.01
Commercial................. 5,068 5.71 4,036 4.01 6,007 5.07
------- ------ -------- ------ -------- ------
Total real estate loans.. 82,521 92.92 92,631 92.03 105,184 88.94
Consumer and other loans:
Home equity................ 3,826 4.31 5,229 5.20 9,721 8.20
Agricultural operating..... 561 0.63 589 0.58 1,024 0.86
Other consumer............. 1,902 2.14 2,206 2.19 2,368 2.00
------- ------ -------- ------ -------- ------
Total consumer and
other loans............. 6,289 7.08 8,024 7.98 13,113 11.06
------- ------ -------- ------ -------- ------
Total loans receivable... 88,810 100.00% 100,655 100.00% 118,597 100.00%
------- ====== -------- ====== -------- ======
Less:
Loans in process........... 5,052 5,726 6,224
Unearned loan fees and
discounts................ 426 411 408
Allowance for loan losses.. 555 701 880
------- -------- --------
Loans receivable, net.... $82,777 $ 93,817 $111,085
======= ======== ========
</TABLE>
RESIDENTIAL REAL ESTATE LENDING. The principal lending activity of the Bank
is the origination of mortgage loans to enable borrowers to purchase existing
residential real estate. At December 31, 1996, $72.7 million, or 61.3%, of the
Bank's total gross loan portfolio consisted of loans secured by residential real
estate. The Bank presently originates both ARM loans and fixed-rate mortgage
loans with maturities of up to 30 years. Substantially all of the Bank's
residential mortgage loans are secured by property located in the Bank's primary
market area. Very few of the properties securing the Bank's residential
mortgage loans are second homes or vacation properties. The Bank's conventional
mortgage loans are generally underwritten and documented in accordance with the
guidelines established by the Federal Home Loan Mortgage Corporation ("Freddie
Mac").
The Bank generally retains all of the conventional fixed-rate mortgages with
maturities of 15 years or less and sells all of the fixed-rate mortgage loans
with maturities in excess of 15 years that it originates, although in the nine
months ended December 31, 1996 the Bank retained some 30-year, fixed-rate loans
for its portfolio. The Bank generally retains all of the ARM loans that it
originates. Most of the loans sold by the Bank are sold to Freddie Mac. The
remainder of loans sold are purchased by the Federal National Mortgage
Association ("Fannie Mae") or private investors. The Bank sells loans to
Freddie Mac and Fannie Mae on a servicing-retained basis, while loans sold to
private investors are sold servicing-released. Generally, all loans are sold
without recourse, although in the past the Bank has sold loans with recourse.
As of December 31, 1996, the Bank remains contingently liable for approximately
$1.8 million of loans sold with recourse. The Bank's decision to hold or sell
loans is based on its asset/liability management policies and goals and the
market conditions for mortgages. See "-- Lending Activities -- Loan
Originations, Sales and Purchases."
36
<PAGE>
The Bank offers ARM loans at rates and terms competitive with market
conditions. The Bank currently offers ARM products that adjust annually after
an initial fixed period of one, three or five years based on the One Year U.S.
Treasury Note Constant Maturity Rate. ARM loans held in the Bank's portfolio do
not permit negative amortization of principal and carry no prepayment
restrictions. The periodic interest rate cap (the maximum amount by which the
interest rate may be increased or decreased in a given period) on the Bank's ARM
loans is generally 2% per adjustment period and the lifetime interest rate cap
is generally 6% over the initial interest rate of the loan. The terms and
conditions of the ARM loans offered by the Bank, including the index for
interest rates, may vary from time to time. Borrower demand for ARM loans
versus fixed-rate mortgage loans is a function of the level of interest rates,
the expectations of changes in the level of interest rates and the difference
between the initial interest rates and fees charged for each type of loan. The
relative amount of fixed-rate mortgage loans and ARM loans that can be
originated at any time is largely determined by the demand for each in a
competitive environment.
The Bank also originates residential mortgage loans that are insured by the
Federal Housing Administration, the Veterans Administration, the Farm Home
Administration or the Idaho Housing Authority. A significant portion of the
Bank's residential mortgage loan originations in recent years has consisted of
government insured loans. Most of these loans have been originated in the Coeur
d'Alene area, where there has been a significant increase in entry-level
housing. The Bank generally sells the government insured loans that it
originates to private investors on a servicing-released basis.
A significant portion of the Bank's ARM loans are not readily saleable in
the secondary market because they are not originated in accordance with the
purchase requirements of Freddie Mac or Fannie Mae. The Bank requires that non-
conforming loans demonstrate appropriate compensating factors that offset their
lack of conformity. Although such loans satisfy the Bank's underwriting
requirements, they are "non-conforming" because they do not satisfy property
limits, credit requirements, repayment capacities or various other requirements
imposed by Freddie Mac and Fannie Mae. Accordingly, the Bank's non-conforming
loans can be sold only to private investors on a negotiated bases. At December
31, 1996, the Bank's residential loan portfolio included $24.0 million of non-
conforming ARM loans. Generally, the Bank's non-conforming ARM loans bear a
higher rate of interest than similar conforming ARM loans. The Bank has
historically found that its origination of non-conforming loans has not resulted
in high amounts of nonperforming loans.
The retention of ARM loans in the Bank's loan portfolio helps reduce the
Bank's exposure to changes in interest rates. There are, however,
unquantifiable credit risks resulting from the potential of increased costs due
to increased rates to be paid by the customer. It is possible that during
periods of rising interest rates the risk of default on ARM loans may increase
as a result of repricing and the increased payments required by the borrower.
Furthermore, because the ARM loans originated by the Bank generally provide, as
a marketing incentive, for "teaser rates" (i.e., initial rates of interest below
the rates that would apply were the adjusted index plus the applicable margin
initially used for pricing), these loans are subject to increased risks of
default or delinquency. See "RISK FACTORS -- Interest Rate Risk Exposure." The
Bank attempts to reduce the potential for delinquencies and defaults on ARM
loans by qualifying the borrower based on the borrower's ability to repay the
ARM loan assuming a rate 200 basis points above the initial interest rate or the
fully indexed rate, whichever is higher. Another consideration is that although
ARM loans allow the Bank to increase the sensitivity of its asset base to
changes in interest rates, the extent of this interest sensitivity is limited by
the periodic and lifetime interest rate adjustment limits. Because of these
considerations, the Bank has no assurance that yields on ARM loans will be
sufficient to offset increases in the Bank's cost of funds.
While one- to four-family residential real estate loans are normally
originated with 15 to 30 year terms, such loans typically remain outstanding for
substantially shorter periods. This is because borrowers often prepay their
loans in full upon sale of the property pledged as security or upon refinancing
the original loan. In addition, substantially all mortgage loans in the Bank's
loan portfolio contain due-on-sale clauses providing that the Bank may declare
the unpaid amount due and payable upon the sale of the property securing the
loan. Typically, the Bank enforces these due-on-sale clauses to the extent
permitted by law and as business judgment dictates. Thus, average
37
<PAGE>
loan maturity is a function of, among other factors, the level of purchase and
sale activity in the real estate market, prevailing interest rates and the
interest rates payable on outstanding loans.
The Bank generally obtains title insurance insuring the status of its lien
on all loans where real estate is the primary source of security. The Bank also
requires that fire and casualty insurance (and, if appropriate, flood insurance)
be maintained in an amount at least equal to the outstanding loan balance.
The Bank's lending policies generally limit the maximum loan-to-value ratio
on mortgage loans secured by owner-occupied properties to 90% of the lesser of
the appraised value or the purchase price, with the condition that private
mortgage insurance is generally required on loans with loan-to-value ratios
greater than 80%. Higher loan-to value ratios are available on certain
government insured programs.
CONSTRUCTION LENDING. The Bank invests a significant proportion of its
loan portfolio in residential construction loans. This activity has been
prompted by favorable economic conditions in northern Idaho, especially in the
area around Coeur d'Alene, lower long-term interest rates and an increased
demand for housing units as a result of the population growth in northern Idaho.
At December 31, 1996, construction loans totalled $14.9 million, or 12.6% of
total loans. At such date, the average amount of the Bank's construction loans
was approximately $112,000, which reflects that much of the construction in the
Coeur d'Alene area is of entry-level housing. The largest construction loan in
the Bank's portfolio at December 31, 1996 was $332,000. During the year ended
March 31, 1996 and the nine months ended December 31, 1996, construction loans
constituted 24.5% and 23.8%, respectively, of total loan originations.
The Bank originates construction loans to professional home builders and to
individuals building their primary residence. In addition, the Bank
occasionally makes loans to builders for the acquisition of building lots.
Construction loans made by the Bank to professional home builders include both
those with a sales contract or permanent loan in place for the finished homes
and those for which purchasers for the finished homes may be identified either
during or following the construction period (speculative loans). At December
31, 1996, speculative loans totalled $5.3 million, or 35.5% of the total
construction loan portfolio. Construction loans to individuals generally
convert to permanent mortgage loans upon completion of the construction period.
At December 31, 1996, custom construction loans to individuals totalled $1.5
million, or 10.0% of the total construction loan portfolio.
Construction lending affords the Bank the opportunity to achieve higher
interest rates and fees with shorter terms to maturity than does its single-
family permanent mortgage lending. Construction lending, however, is generally
considered to involve a higher degree of risk than single-family permanent
mortgage lending because of the inherent difficulty in estimating both a
property's value at completion of the project and the estimated cost of the
project. The nature of these loans is such that they are generally more
difficult to evaluate and monitor. If the estimate of construction cost proves
to be inaccurate, the Bank may be required to advance funds beyond the amount
originally committed to permit completion of the project. If the estimate of
value upon completion proves to be inaccurate, the Bank may be confronted with a
project whose value is insufficient to assure full repayment. Projects may also
be jeopardized by disagreements between borrowers and builders and by the
failure of builders to pay subcontractors. Loans to builders to construct homes
for which no purchaser has been identified carry more risk because the payoff
for the loan is dependent on the builder's ability to sell the property prior to
the time that the construction loan is due. The Bank has sought to address
these risks by adhering to strict underwriting policies, disbursement
procedures, and monitoring practices. In addition, because much of the Bank's
construction lending is in the Coeur d'Alene area, changes in the local economy
and real estate market could adversely affect the Bank's construction loan
portfolio. Accordingly, the Bank closely monitors sales and listings in the
Coeur d'Alene real estate market and will limit the amount of speculative loans
if it perceives there are unfavorable market conditions.
Loans to builders for the construction of one- to four-family residences
are generally made for a term of 12 months. The Bank's loan policy includes a
maximum loan-to-value ratio of 75%. The Bank maintains a list of major builders
and establishes an aggregate credit limit for each major builder based on the
builder's financial strength, experience and reputation and monitors their
borrowings on a monthly basis. Each major builder is required
38
<PAGE>
to provide the Bank with annual financial statements and other credit
information. At December 31, 1996, the Bank had approved five major builders,
the largest borrowing capacity of which was approximately $1.3 million. At
December 31, 1996, the Bank's major builders had total loans of $2.4 million
outstanding. For all other builders, the Bank reviews the financial strength
and credit of the builder on a loan by loan basis.
The construction loan documents require that construction loan proceeds be
disbursed in increments as construction progresses. Disbursements are based on
periodic on-site inspections by both Bank personnel and independent fee
inspectors. At inception, the Bank also requires the builder (other than
approved major builders) to deposit funds to the loans-in-process account
covering the difference between the actual cost of construction and the loan
amount. Alternatively, the Bank may require that the borrower pay for the first
portion of construction costs before the loan proceeds are used. Major builders
are permitted to utilize the loan proceeds from the initiation of construction
and to carry the short-fall between construction costs and the loan amount,
based on their financial strength, until the property is sold.
AGRICULTURAL LENDING. Agricultural real estate lending has been an
important part of the Bank's lending strategy since the mid-1980s. The Chief
Executive Officer has 24 years of experience and the Vice President,
Agricultural and Consumer Lending has 18 years of experience in agricultural
real estate lending. See "MANAGEMENT OF THE BANK." At December 31, 1996,
agricultural real estate loans totalled $11.9 million, or 10.0% of the Bank's
total loan portfolio.
The Bank presently originates both adjustable-rate and fixed-rate loans
secured by farmland located in the Bank's market area, primarily around
Lewiston. The Bank offers adjustable-rate loans that adjust annually after an
initial fixed period of one, three or five years. Such loans generally provide
for up to a 25-year term. The Bank also offers fixed-rate loans with a ten-year
term and a ten-year amortization schedule. The Bank also makes agricultural
operating loans. See "-- Consumer and Other Lending."
Agricultural real estate loans generally are underwritten to Federal
Agricultural Mortgage Corporation ("Farmer Mac") standards so as to qualify for
sale in the secondary market, although the Bank currently retains most of these
loans for its portfolio. In originating an agricultural real estate loan, the
Bank considers the debt service coverage of the borrower's cash flow, the amount
of working capital available to the borrower, the financial history of the
farmer and the appraised value of the underlying property as well as the Bank's
experience with and knowledge of the borrower. An environmental assessment is
also performed. The maximum loan-to-value for agricultural real estate loans is
75%. At December 31, 1996, the largest agricultural real estate loan was
$620,000 and the average amount of the Bank's agricultural real estate loans was
approximately $100,000.
The Bank is approved to originate agricultural real estate loans qualifying
for purchase by the Farmer Mac II program, which requires Farm House
Administration guarantees up to a maximum of 90% of the principal and interest.
Once the guaranteed loan has been funded, the Bank generally sells the
guaranteed portion of the loan to Farmer Mac II, while retaining the servicing
rights on the entire loan.
Agricultural real estate lending affords the Bank the opportunity to earn
yields higher than those obtainable on residential real estate lending.
However, agricultural real estate lending involves a greater degree of risk than
residential real estate loans. Payments on agricultural real estate loans are
dependent on the successful operation or management of the farm property
securing the loan. The success of the farm may be affected by many factors
outside the control of the farm borrower, including adverse weather conditions
that limit crop yields (such as hail, drought and floods), declines in market
prices for agricultural products and the impact of government regulations
(including changes in price supports, subsidies and environmental regulations).
In addition, many farms are dependent on a limited number of key individuals
whose injury or death may significantly affect the successful operation of the
farm. Farming in the Bank's market area is generally dry-land farming, with
wheat being the primary crop. Accordingly, adverse circumstances affecting the
area's wheat crop could have an adverse effect on the Bank's agricultural loan
portfolio.
39
<PAGE>
The risk of crop damage by weather conditions can be reduced by the farmer
with multi-peril crop insurance which can guarantee set yields to provide
certainty of repayment. Unless the circumstances of the borrower merit
otherwise, the Bank generally does not require its borrowers to procure multi-
peril crop or hail insurance. Farmers may mitigate the effect of price declines
through the use of futures contracts, options or forward contracts. The Bank
does not monitor or require the use by borrowers of these instruments.
COMMERCIAL REAL ESTATE LENDING. Commercial real estate lending has been a
minor part of the Bank's lending strategy in recent years. At December 31,
1996, the Bank's commercial real estate loan portfolio totalled $6.0 million, or
5.1% of total loans. The Bank has been more active in originating commercial
real estate loans in recent periods. During the year ended March 31, 1996 and
the nine months ended December 31, 1996, originations of commercial real estate
loans totalled $1.5 million and $3.4 million, respectively. In connection with
the expansion of the Bank's community banking activities, the Bank intends to
further increase its emphasis on commercial real estate lending. However, there
can be no assurances that the Bank will meet its objectives in increasing the
size of its commercial real estate portfolio.
The Bank's commercial real estate loans include loans secured by a storage
facility, a manufactured home park, small office buildings, retail shops, a
multi-family residential property and other small commercial properties.
Commercial real estate loans in the Bank's portfolio include loans originated by
the Bank and participation interests in loans originated by other institutions.
At December 31, 1996, the average size of the Bank's commercial real estate
loans was $122,000 and the largest was a $1.8 million loan secured by a storage
facility near Seattle, Washington. Such loan was restructured in 1992 and is
performing according to its terms. Appraisals on properties that secure
commercial real estate loans are performed by an independent appraiser engaged
by the Bank before the loan is made. An environmental assessment is also
performed. Underwriting of commercial real estate loans includes a thorough
analysis of the cash flows generated by the real estate or the borrower's
business to support the debt service and the financial resources, experience,
and income level of the borrowers. Annual operating statements on each
commercial real estate loan are required and reviewed by management.
In addition to loans secured by commercial properties, the Bank's
commercial real estate portfolio includes loans for the development of
residential subdivisions . Such loans totalled $489,000 at December 31, 1996.
During the year ended March 31, 1996 and the nine months ended December 31,
1996, originations of loans for the development of residential subdivisions
totalled $411,000 and $1.2 million, respectively.
Commercial real estate lending affords the Bank an opportunity to receive
interest at rates higher than those generally available from residential
mortgage loans. However, loans secured by such properties usually are greater
in amount, more difficult to evaluate and monitor and, therefore, involve a
greater degree of risk than one- to four-family residential mortgage loans.
Because payments on loans secured by commercial properties are often dependent
on the successful operation and management of the properties, repayment of such
loans may be affected by adverse conditions in the real estate market or the
economy. The Bank seeks to minimize these risks by limiting the maximum loan-
to-value ratio to 75% and strictly scrutinizing the financial condition of the
borrower, the quality of the collateral and the management of the property
securing the loan. The Bank also obtains loan guarantees from financially
capable parties based on a review of personal financial statements.
CONSUMER AND OTHER LENDING. The Bank originates a variety of consumer and
other non-mortgage loans. Such loans generally have shorter terms to maturity
and higher interest rates than mortgage loans. At December 31, 1996, the Bank's
consumer and other non-mortgage loans totalled approximately $8.4 million, or
7.1% of the Bank's total loans. The Bank's consumer loans consist primarily of
secured and unsecured consumer loans, automobile loans, boat loans, recreation
vehicle loans, home improvement and equity loans and deposit account loans. The
Bank also originates a small amount of agricultural operating loans and
equipment loans. The growth of the consumer loan portfolio in recent years has
consisted primarily of an increase in home equity loans, which the Bank has more
aggressively marketed.
40
<PAGE>
At December 31, 1996, home equity loans totalled $9.7 million. The Bank
offers both home equity second mortgage loans and lines of credit.
Substantially all of the Bank's home equity loans are primarily secured by
second mortgages on residential real estate located in the Bank's primary market
area. Home equity second mortgage loans are generally offered with terms of
five or ten years and only with fixed interest rates. Home equity lines of
credit generally have adjustable interest rates based on the prime rate.
At December 31, 1996, agricultural operating loans totalled $1.0 million.
Agricultural operating loans or lines of credit generally are made for a term of
one to three years and may be secured or unsecured. Such loans may be secured
by a first or second mortgage, or liens on property, vehicles, accounts
receivable, crop held or growing crop. Personal guarantees are frequently
required for loans made to corporations and other business entities.
As part of the expansion of its community banking activities, the Bank
intends to increase its efforts to originate agricultural operating loans and
commercial business loans. The Bank has established a commercial loan
department and recently hired a loan officer with 18 years of commercial lending
experience as part of this effort. The Bank is also implementing a VISA credit
card program, which initially will be marketed to existing customers. However
there can be no assurances that the Bank will meet its objectives in increasing
the size of its non-mortgage loan portfolio. Factors that may effect the
ability of the Bank to increase its originations in this area include the demand
for such loans, interest rates and the state of the local and national economy.
Consumer and non-mortgage loans entail greater risk than do residential
mortgage loans, particularly in the case of loans that are unsecured or secured
by rapidly depreciating assets such as automobiles and farm equipment. In such
cases, 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. The remaining
deficiency often does not warrant further substantial collection efforts against
the borrower beyond obtaining a deficiency judgment. In addition, consumer loan
collections are dependent on the borrower's continuing financial stability, and
thus are more likely to be adversely affected by job loss, divorce, illness or
personal bankruptcy. Similarly, payments on agricultural operating loans depend
on the successful operation of the farm, which may be adversely affected by
weather conditions that limit crop yields, fluctuations in market prices for
agricultural products, and changes in government regulations and subsidies.
Furthermore, the application of various federal and state laws, including
federal and state bankruptcy and insolvency laws, may limit the amount that can
be recovered on such loans. At December 31, 1996, the Bank had $28,000 of
consumer and non-mortgage loans accounted for on a nonaccrual basis.
41
<PAGE>
MATURITY OF LOAN PORTFOLIO. The following table sets forth certain
information at December 31, 1996 regarding the dollar amount of principal
repayments for loans becoming due during the periods indicated. All loans are
included in the period in which the final contractual payment is due. Demand
loans, loans having no stated schedule of repayments and no stated maturity, and
overdrafts are reported as due within one year. The table does not include any
estimate of prepayments which significantly shorten the average life of all
loans and may cause the Bank's actual repayment experience to differ from that
shown below.
<TABLE>
<CAPTION>
After After After After 10
One Year 3 Years 5 Years Years
Within Through Through Through Through Beyond
One Year 3 Years 5 Years 10 Years 15 Years 15 Years Total
-------- ------- ------- -------- -------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
Residential............. $ 276 $1,506 $3,897 $ 3,573 $12,059 $51,345 $ 72,656
Construction............ 14,945 -- -- -- -- -- 14,945
Commercial.............. 412 394 2,005 529 519 2,148 6,007
Agricultural............ -- 110 102 1,078 2,618 7,968 11,876
Consumer and other loans.. 2,849 1,295 1,883 6,628 239 219 13,113
------- ------ ------ ------- ------- ------- --------
Total gross loans..... $18,482 $3,305 $7,887 $11,808 $15,435 $61,680 $118,597
======= ====== ====== ======= ======= ======= ========
</TABLE>
The following table sets forth the dollar amount of all loans due after
December 31, 1997, that have fixed interest rates and have floating or
adjustable interest rates.
<TABLE>
<CAPTION>
Fixed Floating or
Rates Adjustable Rates
------- ----------------
(In Thousands)
<S> <C> <C>
Real estate loans:
Residential............. $33,712 $42,664
Construction............ -- --
Commercial.............. 2,575 1,776
Agricultural............ 699 11,373
Consumer and other loans.. 3,151 4,165
------- -------
Total gross loans.... $40,137 $59,978
======= =======
</TABLE>
42
<PAGE>
Scheduled contractual principal repayments of loans do not reflect the
actual life of such assets. The average life of a loan is substantially less
than its contractual terms because of prepayments. In addition, due-on-sale
clauses on loans generally give the Bank the right to declare loans immediately
due and payable in the event, among other things, that the borrower sells the
real property subject to the mortgage and the loan is not repaid. The average
life of mortgage loans tends to increase, however, when current mortgage loan
market rates are substantially higher than rates on existing mortgage loans and,
conversely, decrease when rates on existing mortgage loans are substantially
higher than current mortgage loan market rates.
LOAN SOLICITATION AND PROCESSING. Loan applicants come primarily through
existing customers, referrals by realtors and homebuilders, and walk-ins. The
Bank also uses radio and newspaper advertising to create awareness of its loan
products. In addition to originating loans through its branch offices, the Bank
operates two mortgage loan centers, one in Coeur d'Alene and one in Lewiston, to
supplement residential real estate loan originations. The Bank does not utilize
any loan correspondents, mortgage brokers or other forms of wholesale loan
origination. Upon receipt of a loan application from a prospective borrower, a
credit report and other data are obtained to verify specific information
relating to the loan applicant's employment, income and credit standing. An
appraisal of the real estate offered as collateral generally is undertaken by a
certified, independent fee appraiser.
Residential real estate loans up to $214,600 that qualify for sale in the
secondary market may be approved by the Bank's underwriters. All other
portfolio real estate loans up to $500,000 must be approved by two members of
the management loan committee. Delegated loan approval authority to residential
lending centers is authorized within prescribed limits for approved major
builder loans. All other construction loans resulting in total extension of
credit to one borrower up to $500,000 must be approved by two members of the
management loan committee. Any loan that would result in the total extension of
credit to one borrower to be in excess of $500,000 or to a major builder in
excess of its maximum credit limit must be approved by the Board of Directors
Loan Committee. Consumer loans up to $25,000 and home equity loans up to
$100,000 may be approved by designated underwriters. All other consumer and
home equity loans must be approved by two members of the management loan
committee.
LOAN ORIGINATIONS, SALES AND PURCHASES. While the Bank originates both
adjustable-rate and fixed-rate loans, its ability to generate each type of loan
is dependent upon relative customer demand for loans in its market. For the
year ended March 31, 1996, and the nine months ended December 31, 1996, the Bank
originated $120.9 million and $97.4 million of loans, respectively. Residential
real estate loan originations totalled $83.6 million for the year ended March
31, 1996 and $64.9 million for the nine months ended December 31, 1996. Of the
$97.4 million of loans originated during the nine months ended December 31,
1996, 16.2% were adjustable-rate loans and 83.8% were fixed-rate loans.
In the early 1990s the Bank adopted a mortgage banking strategy pursuant to
which it seeks to generate income from the sale of loans (which may be sold
either servicing-retained or servicing-released) and from servicing fees from
loans sold on a servicing-retained basis. Generally, the level of loan sale
activity and, therefore, its contribution to the Bank's profitability depends on
maintaining a sufficient volume of loan originations. Changes in the level of
interest rates and the local economy affect the amount of loans originated by
the Bank and, thus, the amount of loan sales as well as origination and loan
fees earned. Gains on sales of loans totalled $1.0 million, $1.4 million and
$891,000 during the years ended March 31, 1995 and 1996 and the nine months
ended December 31, 1996, respectively. See "RISK FACTORS -- Reliance on
Mortgage Banking Operations" and "-- Competition Within Market Area." The Bank
sells loans on a loan by loan basis. Generally a loan is committed to be sold
and a price for the loan is fixed at the time the interest rate on the loan is
fixed, which may be at the time the Bank issues a loan commitment or at the time
the loan closes. This eliminates the risk to the Bank that a rise in market
interest rates will reduce the value of a mortgage before it can be sold. Where
a loan is committed to be sold before it is closed, the Bank is subject to the
risk that the loan fails to close or that the closing of the loan is delayed
beyond the specified delivery date. In such event, the Bank may be required to
compensate the purchaser for failure to deliver the loan. Generally, all loans
are sold without recourse, although in the past the Bank has sold loans with
recourse. As of December 31, 1996, the Bank remains contingently liable for
approximately $1.8 million of loans sold with recourse.
43
<PAGE>
In the past, the Bank has purchased loans and loan participations in its
primary market during periods of reduced loan demand. However, in recent years,
because of strong loan demand, the Bank has purchased few loans. Through a
consortium of local financial institutions, the Bank occasionally purchases
participation interests in loans secured by local low-income housing projects.
The Bank intends to supplement its origination of agricultural and commercial
real estate loans and agricultural operating and commercial business loans by
purchasing participations in such loans originated by other community banks in
northern Idaho and eastern Washington. All such purchases will be made in
conformance with the Bank's underwriting standards. The Bank anticipates that
it will purchase only a small portion of such loans and that the originating
institution will retain a majority of the loan.
The following table shows total loans originated, purchased, sold and repaid
during the periods indicated.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended March 31, December 31,
---------------------- ---------------------
1995 1996 1995 1996
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Total loans receivable at
beginning of period.............. $ 80,780 $ 88,810 $ 88,810 $100,655
-------- -------- -------- --------
Loans originated:
Real estate loans:
Residential..................... 61,030 83,551 63,030 64,912
Construction.................... 22,385 29,569 23,341 23,153
Agricultural.................... 2,402 1,023 692 798
Commercial...................... -- 1,481 1,202 3,419
Consumer and other loans......... 3,957 5,270 4,366 5,147
-------- -------- -------- --------
Total loans originated........ 89,774 120,894 92,631 97,429
-------- -------- -------- --------
Loans purchased:
Real estate loans:
Residential..................... 88 25 25 43
Construction.................... -- -- -- --
Agricultural.................... -- -- -- --
Commercial...................... -- -- -- --
Consumer and other loans......... -- -- -- --
-------- -------- -------- --------
Total loans purchased......... 88 25 25 43
-------- -------- -------- --------
Loans sold:
Servicing retained............... (26,996) (21,219) (14,339) (20,377)
Servicing released............... (24,570) (48,550) (38,037) (26,030)
-------- -------- -------- --------
Total loans sold.............. (51,566) (69,769) (52,376) (46,407)
Loan principal repayments......... (26,199) (32,112) (25,138) (25,818)
Other(1).......................... (4,067) (7,193) (3,973) (7,305)
-------- -------- -------- --------
Change in total loans receivable.. 8,030 11,845 11,169 17,942
-------- -------- -------- --------
Total receivable loans
at end of period................. $ 88,810 $100,655 $ 99,979 $118,597
======== ======== ======== ========
</TABLE>
______________
(1) Consists of refinanced loans.
44
<PAGE>
LOAN COMMITMENTS. The Bank issues commitments to originate loans
conditioned upon the occurrence of certain events. Such commitments are made on
specified terms and conditions and are honored for up to 90 days from the date
of loan approval. The Bank had outstanding loan commitments of approximately
$16.4 million at December 31, 1996.
LOAN ORIGINATION AND OTHER FEES. The Bank, in some instances, receives
loan origination fees. Loan fees are a fixed dollar amount or a percentage of
the principal amount of the mortgage loan that is charged to the borrower for
funding the loan. The amount of fees charged by the Bank generally is 1% of the
loan amount. Current accounting standards require fees received (net of certain
loan origination costs) for originating loans to be deferred and amortized into
interest income over the contractual life of the loan. Net deferred fees or
costs associated with loans that are prepaid are recognized as income at the
time of prepayment. The Bank had $408,000 of net deferred loan fees at December
31, 1996.
LOAN SERVICING. The Bank sells residential real estate loans to Freddie Mac
and Fannie Mae on a servicing-retained basis and receives fees in return for
performing the traditional services of collecting individual payments and
managing the loans. In the past, the Bank has sold agricultural real estate
loans to private investors on a servicing-retained basis. At December 31, 1996,
the Bank was servicing $131.5 million of loans for others. Loan servicing
includes processing payments, accounting for loan funds and collecting and
paying real estate taxes, hazard insurance and other loan-related items, such as
private mortgage insurance. When the Bank receives the gross mortgage payment
from individual borrowers, it remits to the investor in the mortgage a
predetermined net amount based on the yield on that mortgage. The difference
between the coupon on the underlying mortgage and the predetermined net amount
paid to the investor is the gross loan servicing fee. For a discussion of the
adoption SFAS No. 122, See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- Comparison of Operating Results for the
Nine Months Ended December 31, 1995 and 1996 -- Non-interest Income." In
addition, the Bank retains certain amounts in escrow for the benefit of the
investor for which the Bank incurs no interest expense but is able to invest. At
December 31, 1996, the Bank held $734,000 in escrow for its portfolio of loans
serviced for others.
DELINQUENCIES AND CLASSIFIED ASSETS
DELINQUENT LOANS. When a mortgage loan borrower fails to make a required
payment when due, the Bank institutes collection procedures. During the first
three months of the term of a loan, the borrower is contacted by telephone
approximately ten days after the payment is due in order to permit the borrower
to make the payment before the imposition of a late fee. The first notice is
mailed to the borrower when the payment is 16 days past due. Attempts to
contact the borrower by telephone generally begin when a payment becomes 25 days
past due. If the loan has not been brought current by the 60th day of
delinquency, the Bank attempts to interview the borrower in person and to
physically inspect the property securing the loan.
In most cases, delinquencies are cured promptly; however, if by the 91st
day of delinquency, or sooner if the borrower is chronically delinquent and all
reasonable means of obtaining payment on time have been exhausted, foreclosure,
according to the terms of the security instrument and applicable law, is
initiated. Interest income on loans is reduced by the full amount of accrued and
uncollected interest.
45
<PAGE>
The following table sets forth information with respect to the Bank's
nonperforming assets and restructured loans within the meaning of SFAS No. 15 at
the dates indicated. It is the policy of the Bank to cease accruing interest on
loans more than 90 days past due.
<TABLE>
<CAPTION>
At March 31, At December 31,
-------------------
1995 1996 1996
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Loans accounted for on a
nonaccrual basis:
Real estate loans:
Residential............................... $ 407 $ 399 $ 189
Construction.............................. -- 194 789
Agricultural.............................. -- -- --
Commercial................................ -- -- --
Consumer and other loans................... -- -- 28
------ ------ ------
Total................................... 407 593 1,006
------ ------ ------
Accruing loans which are contractually
past due 90 days or more:
Real estate loans:
Residential............................... 4 97 --
Construction.............................. 119 -- --
Agricultural.............................. -- -- --
Commercial................................ -- -- --
Consumer and other loans................... 2 2 --
------ ------ ------
Total................................... 125 99 --
------ ------ ------
Total of nonaccrual and 90 days past
due loans.................................. 532 692 1,006
Real estate owned............................ -- 76 196
------ ------ ------
Total nonperforming assets................ $ 532 $ 768 $1,202
====== ====== ======
Restructured loans........................... $3,333 $1,760 $1,746
Nonaccrual and 90 days or more past
due loans as a percentage of net loans..... 0.64% 0.74% 0.91%
Nonaccrual and 90 days or more past
due loans as a percentage of total assets.. 0.51 0.53 0.76
Total nonperforming assets to
total assets............................... 0.51 0.59 0.90
</TABLE>
Interest income that would have been recorded for the year ended March 31,
1996 and the nine months ended December 31, 1996 had nonaccruing loans been
current in accordance with their original terms amounted to approximately
$24,000 and $59,000, respectively. The amount of interest included in interest
income on such loans for the year ended March 31, 1996 and the nine months
ended December 31, 1996 amounted to approximately $64,000 and $33,000,
respectively.
46
<PAGE>
REAL ESTATE OWNED. Real estate acquired by the Bank as a result of
foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned
("REO") until it is sold. When property is acquired it is recorded at the lower
of its cost, which is the unpaid principal balance of the related loan plus
foreclosure costs, or fair market value. Subsequent to foreclosure, REO is
carried at the lower of the foreclosed amount or fair value, less estimated
selling costs. At December 31, 1996, the Bank had $196,000 of REO, which
consisted of two building lots and one single family residence.
ASSET CLASSIFICATION. The OTS has adopted various regulations regarding
problem assets of savings institutions. The regulations require that each
insured institution review and classify its assets on a regular basis. In
addition, in connection with examinations of insured institutions, OTS examiners
have authority to identify problem assets and, if appropriate, require them to
be classified. There are three classifications for problem assets:
substandard, doubtful and loss. Substandard assets have one or more defined
weaknesses and are characterized by the distinct possibility that the insured
institution will sustain some loss if the deficiencies are not corrected.
Doubtful assets have the weaknesses of substandard assets with the additional
characteristic that the weaknesses make collection or liquidation in full on the
basis of currently existing facts, conditions and values questionable, and there
is a high possibility of loss. An asset classified as loss is considered
uncollectible and of such little value that continuance as an asset of the
institution is not warranted. If an asset or portion thereof is classified as
loss, the insured institution establishes specific allowances for loan losses
for the full amount of the portion of the asset classified as loss. All or a
portion of general loan loss allowances established to cover possible losses
related to assets classified substandard or doubtful may be included in
determining an institution's regulatory capital, while specific valuation
allowances for loan losses generally do not qualify as regulatory capital.
Assets that do not currently expose the insured institution to sufficient risk
to warrant classification in one of the aforementioned categories but possess
weaknesses are classified as special mention and monitored by the Bank.
At December 31, 1996, classified assets totalled $2.4 million. Assets
classified as loss totalled $16,000 and consisted of one construction loan in
the amount of $10,000 and overdrawn NOW accounts totalling $6,000. Assets
classified as substandard totalled $1.7 million and consisted of REO totalling
$196,000, one consumer loan in the amount of $5,000, five construction loans
totalling $736,000, 11 residential real estate loans totalling and $699,000 and
overdrawn NOW accounts totalling $35,000. Assets designated as special mention
totalled $753,000 and consisted of five residential real estate loans totalling
$191,000, two agricultural real estate loans totalling $548,000 and one consumer
loan in the amount of $14,000. The aggregate amounts of the Bank's classified
assets at the dates indicated were as follows:
<TABLE>
<CAPTION>
At March 31, At December 31,
-----------------
1995 1996 1996
------ ------ ------
<S> <C> <C> <C>
(In Thousands)
Loss...................... $ 4 $ 2 $ 16
Doubtful.................. -- -- --
Substandard............... 846 1,219 1,671
Special mention........... 246 342 753
------ ------ ------
Total classified assets.. $1,096 $1,563 $2,440
====== ====== ======
</TABLE>
ALLOWANCE FOR LOAN LOSSES. The Bank has established a systematic
methodology for the determination of provisions for loan losses. The
methodology is set forth in a formal policy and takes into consideration the
need for an overall general valuation allowance as well as specific allowances
that are tied to individual loans.
In originating loans, the Bank recognizes that losses will be experienced
and that the risk of loss will vary with, among other things, the type of loan
being made, the creditworthiness of the borrower over the term of the loan,
general economic conditions and, in the case of a secured loan, the quality of
the security for the loan. The Bank increases its allowance for loan losses by
charging provisions for loan losses against income.
47
<PAGE>
The general allowance is maintained to cover losses inherent in the
portfolio of performing loans. Management's periodic evaluation of the adequacy
of the allowance is based on management's evaluation of probable losses in the
loan portfolio. Specific valuation allowances are established to absorb losses
on loans for which full collectibility may not be reasonably assured, based
upon, among other factors, the estimated fair market value of the underlying
collateral and estimated holding and selling costs. Generally, a provision for
losses is charged against income on a quarterly basis to maintain the
allowances.
At December 31, 1996, the Bank had an allowance for loan losses of
$880,000. The allowance for loan losses is maintained at an amount management
considers adequate to absorb losses inherent in the portfolio. Although
management believes that it uses the best information available to make such
determinations, future adjustments to the allowance for loan losses may be
necessary and results of operations could be significantly and adversely
affected if circumstances differ substantially from the assumptions used in
making the determinations.
While the Bank believes it has established its existing allowance for loan
losses in accordance with GAAP, there can be no assurance that regulators, in
reviewing the Bank's loan portfolio, will not request the Bank to increase
significantly its allowance for loan losses. In addition, because future events
affecting borrowers and collateral cannot be predicted with certainty, there can
be no assurance that the existing allowance for loan losses is adequate or that
substantial increases will not be necessary should the quality of any loans
deteriorate as a result of the factors discussed above. Any material increase
in the allowance for loan losses may adversely affect the Bank's financial
condition and results of operations.
48
<PAGE>
The following table sets forth an analysis of the Bank's allowance for loan
losses at and for the periods indicated. Where specific loan loss reserves have
been established, any differences between the loss allowances and the amount of
loss realized has been charged or credited to current income.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended March 31, December 31,
-------------------- -----------------
1995 1996 1995 1996
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Allowance at beginning of period.. $ 530 $ 555 $ 555 $ 701
Provision for loan losses(1)...... 28 150 78 194
Recoveries........................ -- -- -- --
Charge-offs:
Real estate loans:
Residential.................... -- -- -- 14
Construction................... -- -- -- --
Agricultural................... -- -- -- --
Commercial..................... -- -- -- --
Consumer and other loans........ 3 4 2 1
----- ----- ----- -----
Total charge-offs............ 3 4 2 15
----- ----- ----- -----
Net charge-offs.............. 3 4 2 15
----- ----- ----- -----
Balance at end of period..... $ 555 $ 701 $ 631 $ 880
===== ===== ===== =====
Ratio of allowance to total
loans outstanding
at the end of the period......... 0.62% 0.70% 0.63% 0.74%
Ratio of net charge-offs to
average loans outstanding
during the period................ -- -- -- 0.01%
</TABLE>
____________
(1) See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- Comparison of Operating Results for the Nine Months Ended
December 31, 1995 and 1996 -- Provisions for Loan Losses" and "-- Comparison
of Operating Results for the Years Ended March 31, 1995 and 1996 --
Provisions for Loan Losses" for a discussion of the factors responsible for
changes in the Bank's provision for loan losses between the periods.
49
<PAGE>
The following table sets forth the breakdown of the allowance for loan
losses by loan category for the periods indicated. Management believes that the
allowance can be allocated by category only on an approximate basis. 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 other category.
<TABLE>
<CAPTION>
At March 31, At December 31,
---------------------------------------
1995 1996 1996
---------------- ------------------- ----------------
% of % of % of
Loans in Loans in Loans in
Category Category Category
to Total to Total to Total
Amount Loans Amount Loans Amount Loans
------ -------- ------ -------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
Residential............. $117 62.34% $375 65.23% $ 304 65.22%
Construction............ 136 13.80 135 13.74 206 12.60
Agricultural............ 119 13.38 119 11.87 191 10.01
Commercial.............. 108 5.71 -- 4.01 100 5.07
Consumer and other loans.. 75 4.76 72 5.15 79 7.10
---- ------ ---- ------ ----- ------
Total allowance for
loan losses.......... $555 100.00% $701 100.00% $ 880 100.00%
==== ====== ==== ====== ===== ======
</TABLE>
INVESTMENT ACTIVITIES
The Bank is permitted under federal law to invest in various types of
liquid assets, including U.S. Treasury obligations, securities of various
federal agencies and of state and municipal governments, deposits at the FHLB-
Seattle, certificates of deposit of federally insured institutions, certain
bankers' acceptances and federal funds. Subject to various restrictions, the
Bank may also invest a portion of its assets in commercial paper and corporate
debt securities. Savings institutions like the Bank are also required to
maintain an investment in FHLB stock. The Bank is required under federal
regulations to maintain a minimum amount of liquid assets. See "REGULATION" and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Liquidity and Capital Resources."
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," requires that investments be categorized as "held to maturity,"
"trading securities" or "available for sale," based on management's intent as to
the ultimate disposition of each security. SFAS No. 115 allows debt securities
to be classified as "held to maturity" and reported in financial statements at
amortized cost only if the reporting entity has the positive intent and ability
to hold those securities to maturity. Securities that might be sold in response
to changes in market interest rates, changes in the security's prepayment risk,
increases in loan demand, or other similar factors cannot be classified as "held
to maturity." Debt and equity securities held for current resale are classified
as "trading securities." Such securities are reported at fair value, and
unrealized gains and losses on such securities would be included in earnings.
Debt and equity securities not classified as either "held to maturity" or
"trading securities" are classified as "available for sale." Such securities
are reported at fair value, and unrealized gains and losses on such securities
are excluded from earnings and reported as a net amount in a separate component
of equity. Currently, all of the Bank's investments are classified as held to
maturity.
The Chief Executive Officer and the Chief Financial Officer determine
appropriate investments in accordance with the Board of Directors' approved
investment policies and procedures. The Bank's investment
50
<PAGE>
policies generally limit investments to FHLB obligations, certificates of
deposit, U.S. Government and agency securities, municipal bonds rated AAA,
mortgage-backed securities and certain types of mutual funds. The Bank's
investment policy does not permit engaging directly in hedging activities or
purchasing high risk mortgage derivative products. Investments are made based
on certain considerations, which include the interest rate, yield, settlement
date and maturity of the investment, the Bank's liquidity position, and
anticipated cash needs and sources (which in turn include outstanding
commitments, upcoming maturities, estimated deposits and anticipated loan
amortization and repayments). The effect that the proposed investment would
have on the Bank's credit and interest rate risk, and risk-based capital is also
given consideration during the evaluation.
Investment securities are purchased primarily for managing liquidity.
Generally, the Bank purchases mortgage-backed securities only during times of
reduced loan demand. Because the Bank has experienced strong loan demand in
recent years, it has not purchased any mortgage-backed securities recently.
However, the Bank has entered into a commitment to purchase $1.6 million of a
collaterized mortgage obligation ("CMO") to be issued and guaranteed by the
Idaho Housing Authority. This purchase, which is expected to occur in June
1997, will be funded through an advance from the FHLB-Seattle pursuant to its
Community Investment Program. The CMO will represent an interest in a loan
secured by a low-income, multi-family housing project located in Lewiston.
The following table sets forth the composition of the Bank's investment and
mortgage-backed securities portfolios at the dates indicated.
<TABLE>
<CAPTION>
At March 31, At December 31,
----------------------------------------------------
1995 1996 1996
------------------------ ---------------------- ---------------------
Carrying Percent of Carrying Percent of Carrying Percent of
Value Portfolio Value Portfolio Value Portfolio
----- --------- ----- --------- ----- ---------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Mutual funds................. $ 1,289 11.87% $ 1,328 9.25% $ -- --%
HELD TO MATURITY:
U.S. Government and federal
agency obligations......... 6,732 61.98 10,545 73.43 5,189 68.89
Mortgage-backed securities... 2,840 26.15 2,488 17.32 2,343 31.11
------- ------ ------- ------ ------ ------
Total held to maturity.. 9,572 88.13 13,033 90.75 7,532 100.00
Total.................... $10,861 100.00% $14,361 100.00% $7,532 100.00%
======= ====== ======= ====== ====== ======
</TABLE>
The table below sets forth certain information regarding the carrying value,
weighted average yields and maturities of the Bank's investment and mortgage-
backed securities at December 31, 1996.
<TABLE>
<CAPTION>
Over Over
Less Than One to Five to Over Ten
One Year Five Years Ten Years Years
------------------ ----------------- ---------------- ----------------
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- --------- ------ ------ ----- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and federal
agency obligations......... $500 5.64% $4,689 6.21% --$ --% $ -- --%
Mortgage-backed securities... 7 7.12 14 7.06 -- -- 2,322 6.02
---- ------ ------
Total.................... $507 5.66 $4,703 6.21 -- -- $2,322 6.02
==== ====== ======
</TABLE>
51
<PAGE>
DEPOSIT ACTIVITIES AND OTHER SOURCES OF FUNDS
GENERAL. Deposits and loan repayments are the major sources of the Bank's
funds for lending and other investment purposes. Scheduled loan repayments are
a relatively stable source of funds, while deposit inflows and outflows and loan
prepayments are influenced significantly by general interest rates and money
market conditions. Borrowings through the FHLB-Seattle are used to compensate
for reductions in the availability of funds from other sources. Presently, the
Bank has no other borrowing arrangements.
DEPOSIT ACCOUNTS. Savings deposits are the primary source of funds for the
Bank's lending and investment activities and for its general business purposes.
Substantially all of the Bank's depositors are residents of the States of Idaho
and Washington. Deposits are attracted from within the Bank's market area
through the offering of a broad selection of deposit instruments, including NOW
accounts, money market deposit accounts, regular savings accounts, certificates
of deposit and retirement savings plans. The Bank also offers "TT&L" (treasury,
taxes and loans) accounts for local businesses. Deposit account terms vary,
according to the minimum balance required, the time periods the funds must
remain on deposit and the interest rate, among other factors. In determining
the terms of its deposit accounts, the Bank considers current market interest
rates, profitability to the Bank, matching deposit and loan products and its
customer preferences and concerns. The Bank reviews its deposit mix and pricing
weekly. Currently, the Bank does not accept brokered deposits, nor has it
aggressively sought jumbo certificates of deposit, although the Bank has in the
past accepted brokered certificates of deposit. At December 31, 1996, the Bank
had one brokered deposit in the amount of $1.1 million. At December 31, 1996,
certificates of deposit that are scheduled to mature in less than one year
totalled $49.2 million. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- Liquidity and Capital Resources."
The Bank currently offers certificates of deposit for terms not exceeding 60
months. As a result, the Bank believes that it is better able to match the
repricing of its liabilities to the repricing of its loan portfolio. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Asset and Liability Management."
In the unlikely event the Bank is liquidated after the Conversion,
depositors will be entitled to full payment of their deposit accounts prior to
any payment being made to the Holding Company, as the sole stockholder of the
Bank.
52
<PAGE>
The following table sets forth information concerning the Bank's deposits at
December 31, 1996.
<TABLE>
<CAPTION>
Weighted Percentage
Average Minimum of Total
Interest Rate Term Checking and Savings Deposits Amount Balance Deposits
- ------------- ---- ----------------------------- ------ -------- ---------
(In Thousands)
<S> <C> <C> <C> <C> <C>
1.23% -- NOW $ -- $ 15,211 14.44%
3.00 -- Money Market Deposit -- 13,456 12.77
3.03 -- Passbook -- 7,428 7.05
Certificates of Deposit
-----------------------
4.25 7 days to 179 days Fixed term, fixed rate 2,500 5,306 5.04
5.46 11 months special/non-renewable Fixed term, fixed rate 500 2,979 2.83
5.27 6 months to less than 1 year Fixed term, fixed rate 1,000 14,577 13.84
5.58 14 months special/non-renewable Fixed term, fixed rate 500 4,856 4.61
5.29 1 year to less than 2 years Fixed term, fixed rate 500 8,237 7.82
5.75 27 months special/non-renewable Fixed term, fixed rate 500 1,646 1.56
6.20 2 years to less than 3 years Fixed term, fixed rate 500 15,151 14.38
5.96 New 2 years to 5 years - add on Fixed term, fixed rate 100 4,530 4.30
5.65 3 years to less than 4 years Fixed term, fixed rate 500 2,578 2.45
5.85 4 years to less than 5 years Fixed term, fixed rate 500 1,229 1.16
6.09 5 years to less than 10 years Fixed term, fixed rate 500 7,239 6.87
5.45 IRA Variable Fixed term, adjustable rate -- 926 0.88
-------- ------
Total $105,349 100.00%
======== ======
</TABLE>
The following table indicates the amount of the Bank's jumbo certificates
of deposit by time remaining until maturity as of December 31, 1996. Jumbo
certificates of deposit are certificates in amounts of $100,000 or more.
<TABLE>
<CAPTION>
Maturity Period Amount
--------------- --------------
(In Thousands)
<S> <C>
Three months or less............... $4,029
Over three through six months...... 2,032
Over six through 12 months......... 1,767
Over 12 months..................... 1,558
------
Total jumbo certificates
of deposit................... $9,386
======
</TABLE>
53
<PAGE>
DEPOSIT FLOW. The following table sets forth the balances (inclusive of
interest credited) and changes in dollar amounts of deposits in the various
types of accounts offered by the Bank between the dates indicated.
<TABLE>
<CAPTION>
At March 31, At December 31,
------------------------------------------------- -----------------------------
1995 1996 1996
----------------- ----------------------------- -----------------------------
Percent Percent Percent
of of Increase of Increase
Amount Total Amount Total (Decrease) Amount Total (Decrease)
------ -------- ------- -------- ---------- ------- -------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NOW accounts......................... $13,146 14.81% $ 14,617 12.67% $ 1,471 $ 15,211 14.44% 594
Passbook accounts.................... 15,610 17.58 13,861 12.02 (1,749) 13,456 12.77 (405)
Money market deposit accounts........ 8,932 10.06 7,167 6.21 (1,765) 7,428 7.05 261
Fixed-rate certificates which
mature:
Within 1 year...................... 13,506 15.21 52,692 45.69 39,186 49,235 46.74 (3,457)
After 1 year, but within 2 years... 16,621 18.72 16,329 14.16 (292) 12,240 11.62 (4,089)
After 2 years, but within 5 years.. 18,834 21.21 10,639 9.23 (8,195) 7,779 7.38 (2,860)
Certificates maturing thereafter... 2,138 2.41 19 .02 (2,119) -- -- (19)
------- ------ -------- ------ ------- -------- ------ -------
Total........................... $88,787 100.00% $115,324 100.00% $26,537 $105,349 100.00% $(9,975)
======= ====== ======== ====== ======= ======== ====== =======
</TABLE>
54
<PAGE>
TIME DEPOSITS BY RATES. The following table sets forth the time deposits in
the Bank categorized by rates at the dates indicated.
<TABLE>
<CAPTION>
At March 31, At December 31,
----------------
1995 1996 1996
---- ---- ---------------
(Dollars in Thousands)
<S> <C> <C> <C>
3.20 - 4.19%.................. $ 5,798 $ 1,786 $ 1,079
4.20 - 5.19%.................. 16,001 13,854 24,586
5.20 - 6.19%.................. 18,689 50,332 32,929
6.20 - 7.19%.................. 6,674 10,300 9,752
7.20 - 8.19%.................. 3,349 2,814 453
8.20 - 11.19%................. 588 593 455
------- ------- -------
Total......................... $51,099 $79,679 $69,254
======= ======= =======
</TABLE>
The following table sets forth the amount and maturities of time deposits at
December 31, 1996.
<TABLE>
<CAPTION>
Amount Due
------------------------------------------------------------------
Percent
After After After of Total
Less Than 1 to 2 2 to 3 3 to 4 After Certificate
One Year Years Years Years 4 Years Total Accounts
--------- ------- ------ ------ ------- ------- ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
3.20 - 4.19%.............. $ 1,079 $ -- $ -- $ -- $ -- $ 1,079 1.55%
4.20 - 5.19%.............. 24,176 409 1 -- -- 24,586 35.50
5.20 - 6.19%.............. 14,897 11,029 4,796 793 1,414 32,929 47.55
6.20 - 7.19%.............. 9,075 677 -- -- -- 9,752 14.08
7.20 - 8.19%.............. -- 110 230 3 110 453 0.66
8.20 - 11.19%............. 8 15 432 -- -- 455 0.66
------- ------- ------ ------ ------- ------- ------
Total..................... $49,235 $12,240 $5,459 $796 $1,524 $69,254 100.00%
======= ======= ====== ====== ======= ======= ======
</TABLE>
55
<PAGE>
DEPOSIT ACTIVITY. The following table sets forth the deposit activities of
the Bank for the periods indicated.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended March 31, December 31,
--------------------- -------------------
1995 1996 1995 1996
---------- --------- -------- ---------
(In Thousands)
<S> <C> <C> <C> <C>
Beginning balance........... $91,858 $ 88,787 $ 88,787 $115,324
------- -------- -------- --------
Net increase (decrease)
before interest credited.. (6,557) 21,769 27,175 (13,699)
Interest credited........... 3,486 4,768 3,343 3,724
------- -------- -------- --------
Net increase (decrease)
in savings deposits....... (3,071) 26,537 30,518 (9,975)
------- -------- -------- --------
Ending balance.............. $88,787 $115,324 $119,305 $105,349
======= ======== ======== ========
</TABLE>
BORROWINGS. The Bank utilizes advances from the FHLB-Seattle to
supplement its supply of lendable funds and to meet deposit withdrawal
requirements. The FHLB-Seattle functions as a central reserve bank providing
credit for savings associations and certain other member financial institutions.
As a member of the FHLB-Seattle, the Bank is required to own capital stock in
the FHLB-Seattle and is authorized to apply for advances on the security of such
stock and certain of its mortgage loans and other assets (principally securities
that are obligations of, or guaranteed by, the U.S. Government) provided certain
creditworthiness standards have been met. Advances are made pursuant to several
different credit programs. Each credit program has its own interest rate and
range of maturities. Depending on the program, limitations on the amount of
advances are based on the financial condition of the member institution and the
adequacy of collateral pledged to secure the credit. The Bank is currently
authorized to borrow from the FHLB up to an amount equal to 20% of total assets.
The Bank intends to increase the amount of its FHLB advances in order to fund
certain investments as part of its asset/liability management. See "FIRSTBANK
NORTHWEST"
The following tables sets forth certain information regarding borrowings by
the Bank at the dates and for the periods indicated:
<TABLE>
<CAPTION>
At or For the Nine
At or For the Months Ended
Year Ended March 31, December 31,
-------------------- ------------------
1995 1996 1995 1996
---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Maximum amount of FHLB advances outstanding
at any month end during the period......... 4,900 $9,688 9,688 $15,060
Approximate average FHLB advances
outstanding during the period.............. 1,150 4,862 5,696 8,272
Balance of FHLB advances outstanding
at end of period........................... 4,000 2,304 2,467 15,060
Weighted average rate paid on
FHLB advances at end of period............. 6.74% 6.03% 6.04% 6.06%
Approximate weighted average rate paid on
FHLB advances during the period............ 6.68% 6.19% 6.25% 5.94%
</TABLE>
56
<PAGE>
COMPETITION
The Bank operates in a competitive market for the attraction of savings
deposits (its primary source of lendable funds) and in the origination of loans.
Its most direct competition for savings deposits has historically come from
commercial banks, credit unions and other thrifts operating in its market area.
The Bank's competitors include large regional and superregional banks. These
institutions are significantly larger than the Bank and therefore have greater
financial and marketing resources than the Bank. Particularly in times of high
interest rates, the Bank has faced additional significant competition for
investors' funds from short-term money market securities and other corporate and
government securities. The Bank's competition for loans comes from commercial
banks and other thrifts operating in its market as well as from mortgage bankers
and brokers, consumer finance companies, and, with respect to agricultural
loans, government sponsored lending programs. Such competition for deposits and
the origination of loans may limit the Bank's growth and profitability in the
future.
SUBSIDIARY ACTIVITIES
The Bank has one subsidiary, Tri-Star Financial Corporation, which was
created in 1985 and whose activities consist primarily of selling life insurance
and tax deferred annuities on an agency basis. At December 31, 1996, the Bank's
equity investment in its subsidiary was $20,000.
Federal savings associations generally may invest up to 3% of their assets
in service corporations, provided that any amount in excess of 2% is used
primarily for community, inner-city and community development projects. The
Bank's investment in its subsidiary did not exceed these limits at December 31,
1996.
PERSONNEL
As of December 31, 1996, the Bank had 75 full-time and eight part-time
employees. The employees are not represented by a collective bargaining unit
and the Bank believes its relationship with its employees to be good.
LEGAL PROCEEDINGS
Periodically, there have been various claims and lawsuits involving the
Bank, such as claims to enforce liens, condemnation proceedings on properties in
which the Bank holds security interests, claims involving the making and
servicing of real property loans and other issues incident to the Bank's
business. In the opinion of management, the Bank is not a party to any pending
legal proceedings that it believes would have a material adverse effect on the
financial condition or operations of the Bank.
PROPERTIES
The Bank operates five full-service facilities in Lewiston, Lewiston
Orchards, Moscow, Grangeville and Coeur d'Alene, Idaho, all of which it owns.
The Bank also operates one loan production office in Lewiston and one in Coeur
d'Alene, Idaho, which is located in the same facility as its full-service
office. A portion of the Coeur d'Alene facility is leased to an unaffiliated
brokerage firm for a period of ten years expiring in 2006. At December 31,
1996, the net book value of the properties (including land and buildings) and
the Bank's fixtures, furniture and equipment was $4.8 million.
57
<PAGE>
<TABLE>
<CAPTION>
Net Book Value Deposits
Location Year Acquired at December 31, 1996 at December 31, 1996
- -------- ------------- -------------------- --------------------
(in thousands)
<S> <C> <C> <C>
Administrative Office
- ---------------------
920 Main Street 1978 $ 213,000 N/A
Lewiston, Idaho 83501
Full-Service Office
- -------------------
921 F Street 1960 123,000 $40,119
Lewiston, Idaho 83501
444 Thain Road 1974 63,000 16,161
Lewiston, Idaho 83501
201 S. Jackson Street 1989 437,000 28,329
Moscow, Idaho 83843
108 S. Mill Street 1977 47,000 10,607
Grangeville, Idaho 83530
1233 Northwood Center Court 1995 1,738,000 10,132
Coeur d'Alene, Idaho 83814
Residential Loan Centers
- ------------------------
1233 Northwood Center Court 1995 -- N/A
Coeur d' Alene, Idaho 83814
108 10th Street 1978 -- N/A
Lewiston, Idaho
Other
- -----
unimproved lot 1993 336,000 N/A
Coeur d' Alene, Idaho
</TABLE>
58
<PAGE>
MANAGEMENT OF THE HOLDING COMPANY
The Board of Directors of the Holding Company consists of seven persons
divided into three classes, each of which contains approximately one third of
the Board. The Directors shall be elected by the stockholders of the Holding
Company for staggered three-year terms, or until their successors are elected
and qualified. One class of Directors, consisting of Messrs. William J. Larson
and Mr. Larry K. Moxley, has a term of office expiring at the first annual
meeting of stockholders, a second class, consisting of Messrs. James N. Marker
and Robert S. Coleman, Sr., has a term of office expiring at the second annual
meeting of stockholders, and a third class, consisting of Messrs. Clyde E.
Conklin, W. Dean Jurgens and Steve R. Cox, has a term of office expiring at the
third annual meeting of stockholders. The executive officers of the Holding
Company are elected annually and hold office until their respective successors
have been elected and qualified or until death, resignation or removal by the
Board of Directors.
The following individuals hold the offices set forth opposite their names
below.
Name Position held with Holding Company
---- ----------------------------------
Clyde E. Conklin President and Chief Executive Officer
Larry K. Moxley Executive Vice President, Chief Financial Officer
and Corporate Secretary
Cynthia M. Moore Controller and Assistant Corporate Secretary
Since the formation of the Holding Company, none of the executive officers,
directors or other personnel has received remuneration from the Holding Company.
Information concerning the principal occupations, employment and compensation of
the directors and executive officers of the Holding Company during the past five
years is set forth under "MANAGEMENT OF THE BANK -- Biographical Information."
MANAGEMENT OF THE BANK
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors of the Bank is presently composed of seven members
who are elected for terms of three years, approximately one third of whom are
elected annually in accordance with the Bylaws of the Bank. The Board of
Directors of the Bank following the Stock Conversion will be composed of nine
members and will include all of the current Directors of the Bank plus Messrs.
Conklin and Moxley. The executive officers of the Bank are elected annually by
the Board of Directors and serve at the Board's discretion. The following table
sets forth information with respect to the Directors and executive officers of
the Bank.
DIRECTORS
<TABLE>
<CAPTION>
Current
Director Term
Name Age (1) Position with Bank Since Expires
- ---- ------- ------------------ -------- -------
<S> <C> <C> <C> <C>
Steve R. Cox 50 Chairman 1986 2000
James N. Marker 60 First Vice Chairman 1974 1999
Robert S. Coleman, Sr. 69 Second Vice Chairman 1978 1999
Dr. L. Glen Carlson 73 Director 1977 1998
William J. Larson 66 Director 1973 1998
F. Ron McMurray 56 Director 1986 1999
W. Dean Jurgens 64 Director 1969 2000
</TABLE>
59
<PAGE>
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Name Age (1) Position with Bank
- ---- ------- ------------------
<S> <C> <C>
Clyde E. Conklin 45 Chief Executive Officer
Larry K. Moxley 46 Chief Financial Officer and Secretary/Treasurer
Terence A. Otte 40 Vice President, Agricultural and
Consumer Lending
Donn L. Durgan 42 Vice President, Residential Lending
Douglas R. Ax 41 Vice President, Commercial Lending
</TABLE>
_____________________
(1) As of December 31, 1996.
BIOGRAPHICAL INFORMATION
Set forth below is certain information regarding the Directors and
executive officers of the Bank. Unless otherwise stated, each Director and
executive officer has held his or her current occupation for the last five
years.
Steve R. Cox is the president and shareholder of Randall, Blake & Cox,
P.A., a law firm in Lewiston, Idaho, and is a non-practicing certified public
accountant.
James N. Marker is general manager and part owner of Idaho Truck Sales Co.,
Inc., a heavy duty truck dealership.
Robert S. Coleman, Sr., a retired businessman, is the former President and
co-owner of Coleman Oil, Co., a petroleum distributor.
Dr. L. Glen Carlson, a native of the area, is a retired dentist. He
developed the Bryden Canyon Center, a complex of medical and dental offices.
Dr. Carlson is trustee of family owned farmland at Nez Perce, Idaho.
William J. Larson is a partner in the Quality Inn and Convention Center in
Clarkston, Washington and other various real estate development projects. Prior
to 1993, he was a partner in Houser & Son, Inc., a livestock and farming
operation.
F. Ron McMurray has been the manager of Inland 465, a warehouse
distribution center, since 1994. From 1990 to 1994, Mr. McMurray was the
manager of the Port of Lewiston, a municipal corporation. Prior to that time,
Mr. McMurray was the owner and operator of Fairley's Flowers, a flower and gift
store.
W. Dean Jurgens is the President and part owner of Jurgens & Co., P.A.,
certified public accountants.
Clyde E. Conklin, who joined the Bank in 1987, has served as the Chief
Executive Officer of the Bank since February 1996. From September 1994 to
February 1996, Mr. Conklin served as Senior Vice President - Lending. In 1993,
Mr. Conklin became Vice President - Lending. Prior to that time, Mr. Conklin
served as Agricultural Lending Manager.
Larry K. Moxley, who joined the Bank in 1973, currently serves as Chief
Financial Officer of the Bank, which position he has held since February 1996.
Mr. Moxley served as Senior Vice President - Finance from 1993 to February 1996
and as Vice President - Finance from 1984 to 1993.
60
<PAGE>
Terence A. Otte joined the Bank in June 1989 as an Agricultural Loan
Officer. From 1991 to 1994, he served as manager of the Bank's Moscow, Idaho
branch. In 1994 he became Vice President-Lending and Agricultural Lending
Manager and in 1996 became Vice President, Agricultural and Consumer Lending and
Compliance Officer.
Donn L. Durgan, who joined the Bank in February 1996, currently serves as
Vice President, Residential Lending. Prior to that time, Mr. Durgan was
employed by First Security Bank for 11 years in various positions in commercial
and residential real estate lending.
Douglas R. Ax, who joined the Bank in January 1997, currently serves as
Vice President, Commercial Lending. Prior to that time, Mr. Ax was employed by,
West One Bank (which became U.S. Bank) for over nine years in various positions
in commercial lending, most recently as a Vice President and Commercial Loan
Officer.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Bank is conducted through meetings and activities of
the Board of Directors and its committees. During the fiscal year ended March
31, 1996, the Board of Directors held 20 meetings. No director attended fewer
than 75% of the total meetings of the Board of Directors and of committees on
which such director served.
The Audit Committee, consisting of the entire Board of Directors, meets
with the Bank's outside auditor to discuss the results of the annual audit. The
Audit Committee met one time during the fiscal year ended March 31, 1996.
The Personnel Committee, consisting of Directors Larson and Marker and
Messrs. Conklin and Moxley, is responsible for determining compensation for all
employees. The Compensation Committee met one time during the fiscal year ended
March 31, 1996.
DIRECTORS' COMPENSATION
Directors currently receive an annual retainer of $10,600. The Chairman of
the Board receives an additional $6,000 annually. In December 1996, when the
current compensation for directors was established, the Board determined to pay
Mr. Larson and Mr. Jurgens, who each previously served as Chairman of the Board,
$15,000 and $50,000, respectively. These amounts represent the difference
between the $6,000 annual fee currently paid to the Chairman and the $1,000
annual fee previously paid, multiplied by the number of years each person served
as Chairman of the Board. In addition, Mr. Cox was awarded an additional
$10,000 in recognition of the additional time devoted and responsibility assumed
during 1996. It is currently anticipated that, after completion of the
Conversion, directors' fees will continue to be paid by the Bank and no separate
fees will be paid for service on the Board of Directors of the Holding Company.
Employee directors of the Bank will receive an annual retainer of $8,480.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following information is furnished for the
Chief Executive Officer of the Bank for the year ended March 31, 1997. No other
executive officers of the Bank received salary and bonus in excess of $100,000
during the year ended March 31, 1997.
61
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation(1)
-----------------------------------------------------------------
Name and Other Annual All Other
Position Year Salary($) Bonus($) Compensation($)(2) Compensation($)(3)
- -------- ---- --------- -------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Clyde E. Conklin 1997 $75,500 $24,842 -- 3,011
of Executive
Officer
</TABLE>
- ---------------------------------------
(1) Compensation information for fiscal years ended March 31, 1996 and 1995 has
been omitted as the Bank was not a public company nor a subsidiary thereof
at such time.
(2) The aggregate amount of perquisites and other personal benefits was less
than 10% of the total annual salary and bonus reported.
(3) Includes employer contribution to 401(k) plan.
EMPLOYMENT AGREEMENTS. In connection with the Conversion, the Holding
Company and the Bank (collectively, the "Employers") will enter into three-year
employment agreements with Mr. Conklin and Mr. Moxley. Under the agreements the
initial salary level for Mr. Conklin will be $88,000 and for Mr. Moxley will be
$85,000, which amounts will be paid by the Bank and may be increased at the
discretion of the Board of Directors or an authorized committee of the Board.
On each anniversary of the commencement date of the agreements, the term of the
agreements may be extended for an additional year. The agreements are
terminable by the Employers at any time, or by Mr. Conklin or Mr. Moxley if
either executive is assigned duties inconsistent with his initial position,
duties, responsibilities and status, or upon the occurrence of certain events
specified by federal regulations. In the event that an executive's employment
is terminated without cause or upon the executive's voluntary termination
following the occurrence of an event described in the preceding sentence, the
Bank would be required to honor the terms of the agreement through the
expiration of the current term, including payment of current cash compensation
and continuation of employee benefits for a period of six months.
The employment agreements provide for severance payments and other benefits
in the event of involuntary termination of employment in connection with any
change in control of the Employers. Severance payments also will be provided on
a similar basis in connection with a voluntary termination of employment where,
subsequent to a change in control, the executive is assigned duties inconsistent
with his position, duties, responsibilities and status immediately prior to such
change in control. The term "change in control" is defined in the agreement as
having occurred when, among other things, (a) a person other than the Holding
Company purchases shares of Common Stock pursuant to a tender or exchange offer
for such shares, (b) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended ("Exchange Act")) is
or becomes the beneficial owner, directly or indirectly, of securities of the
Holding Company representing 25% or more of the combined voting power of the
Holding Company's then outstanding securities, (c) the membership of the Board
of Directors changes as the result of a contested election, or (d) shareholders
of the Holding Company approve a merger, consolidation, sale or disposition of
all or substantially all of the Holding Company's assets, or a plan of partial
or complete liquidation.
The severance payment from the Employers will equal three times the
executive's average annual compensation during the five-year period preceding
the change in control. Such amount will be paid in a lump sum within ten
business days following the termination of employment. Assuming that a change
in control had occurred at December 31, 1996, Mr. Conklin and Mr. Moxley would
be entitled to severance payments of approximately $216,000 and $234,000,
respectively. Section 280G of the Internal Revenue Code of 1986, as amended
("Code"), states that severance payments which equal or exceed three times the
base compensation of the individual for the most recently completed five taxable
years are deemed to be "excess parachute payments" if they are contingent upon a
change in control. Individuals receiving excess parachute payments are subject
to a 20% excise tax on the amount of such excess payments, and the Employers
would not be entitled to deduct the amount of such excess payments.
62
<PAGE>
The agreement restricts the executive's right to compete against the
Employers for a period of one year from the date of termination of the agreement
if he voluntarily terminates employment, except in the event of a change in
control.
The Board of Directors of the Holding Company or the Bank may, from time to
time, also enter into employment or severance agreements with other senior
executive officers.
SALARY CONTINUATION AGREEMENTS. The Bank has entered into salary
continuation agreements with Messrs. Conklin and Moxley as an incentive to
ensure their continued employment with the Bank and to provide an additional
source of retirement income. Under the agreements, Messrs. Conklin and Moxley
would each receive lifetime benefits of $4,583 per month upon retirement at or
after attaining age 60. The monthly benefit would be reduced proportionately in
accordance with a specified vesting schedule in the event of the executive's
termination of employment prior to age 60. The agreements also provide for
payment of a reduced benefit in the event of an executive's disability and a
lump sum death benefit in the event of the executive's death while employed by
the Bank. In the event of a change in control of the Bank, the agreements
provide that the executive would be entitled to a lump sum payment based on the
executive's vested benefit when the change in control occurred. The Bank has
purchased life insurance on Messrs. Conklin and Moxley to informally fund the
Bank's obligations under the salary continuation agreements funded by a single
premium annuity in 1995. The vesting of the benefits under the salary
continuation agreements will be accelerated upon a change in control of the
Bank.
BENEFITS
GENERAL. The Bank currently pays the premiums for medical, dental, life and
disability insurance benefits for full-time employees, subject to certain
deductibles.
401(K) PLAN. The Bank maintains a 401(k) Plan (the "401(k) Plan") for the
benefit of eligible employees of the Bank. The 401(k) Plan is intended to be a
tax-qualified plan under Sections 401(a) and 401(k) of the Code. Employees of
the Bank who have completed 1,000 hours of service during 12 consecutive months
and who have attained age 21 are eligible to participate in the 401(k) Plan.
Participants may contribute a portion of their annual compensation to the 401(k)
Plan through a salary reduction election in an amount not in excess of
applicable Code limits. The limit for 1997 is $9,500. The Bank matches 50% of
participant contributions up to a maximum of 6% of a participant's salary. In
addition to employer matching contributions, the Bank may contribute a
discretionary amount to the 401(k) Plan in any plan year which is allocated to
individual participants in the proportion that their annual compensation bears
to the total compensation of all participants during the plan year. To be
eligible to receive a discretionary employer contribution, the participant must
complete 1,000 hours of service during the plan year and remain employed by the
Bank on the last day of the plan year. Participants are at all times 100%
vested in salary reduction contributions. With respect to employer matching and
discretionary employer contributions, participants are 40% vested in such
contributions at the completion of their fourth year of service with full
vesting occurring after five years of service. For the fiscal year ended March
31, 1996, the Bank incurred total contribution-related expenses of $103,000 in
connection with the 401(k) Plan.
In general, the investment of 401(k) Plan assets is directed by plan
participants. In connection with the Conversion, participants will have the
opportunity to direct the investment of up to 100% of their vested account
balance to purchase shares of the Common Stock. A participant in the 401(k)
Plan who elects to purchase Common Stock in the Conversion through the 401(k)
Plan will receive the same subscription priority and be subject to the same
individual purchase limitations as if the participant had elected to make such
purchase using other funds. See "THE CONVERSION -- Limitations on Purchases of
Shares."
EMPLOYEE STOCK OWNERSHIP PLAN. The Board of Directors has authorized the
adoption by the Bank of an ESOP for employees of the Bank to become effective
upon the completion of the Conversion. The ESOP is intended to satisfy the
requirements for an employee stock ownership plan under the Code and the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Full-
time employees of the Holding Company and the Bank
63
<PAGE>
who have been credited with at least 1,000 hours of service during a 12-month
period and who have attained age 19 will be eligible to participate in the ESOP.
In order to fund the purchase of up to 8% of the Common Stock to be issued
in the Conversion, it is anticipated that the ESOP will borrow funds from the
Holding Company. Such loan will equal 100% of the aggregate purchase price of
the Common Stock. If, for any reason, the ESOP is unable to acquire 8% of the
Common Stock issued in the Conversion, it is anticipated that the ESOP will
acquire shares not obtained through the Offering in open market purchases. The
loan to the ESOP will be repaid principally from the Bank's contributions to the
ESOP and dividends payable on Common Stock held by the ESOP over the anticipated
seven-year term of the loan. The interest rate for the ESOP loan is expected to
be the prime rate as published in The Wall Street Journal on the closing date of
the Conversion. See "PRO FORMA DATA." In any plan year, the Bank may make
additional discretionary contributions to the ESOP for the benefit of plan
participants in either cash or shares of Common Stock, which may be acquired
through the purchase of outstanding shares in the market or from individual
stockholders or which constitute authorized but unissued shares or shares held
in treasury by the Holding Company. The timing, amount, and manner of such
discretionary contributions will be affected by several factors, including
applicable regulatory policies, the requirements of applicable laws and
regulations, and market conditions.
Shares purchased by the ESOP with the proceeds of the loan will be held in a
suspense account and released on a pro rata basis as the loan is repaid.
Discretionary contributions to the ESOP and shares released from the suspense
account will be allocated among participants on the basis of each participant's
proportional share of total compensation. Forfeitures will be reallocated among
the remaining plan participants.
Participants will vest in their accrued benefits under the ESOP upon the
completion of five years of service. Benefits may be payable upon a
participant's retirement, early retirement, death, disability, or termination of
employment. The Bank's contributions to the ESOP are not fixed, so benefits
payable under the ESOP cannot be estimated.
It is anticipated that officers and/or directors of the Bank will be
appointed by the Board of Directors of the Bank to serve as trustees of the
ESOP. Under the ESOP, the trustees must vote all allocated shares held in the
ESOP in accordance with the instructions of plan participants and allocated
shares for which no instructions are received must be voted in the same ratio on
any matter as those shares for which instructions are given.
Pursuant to SOP 93-6, the Bank will record compensation expense in an amount
equal to the fair value of shares committed to be released to employees from the
ESOP and will exclude unallocated shares from earnings per share computations.
The effect of SOP 93-6 on net income and earnings per share in future periods
cannot be predicted due to the uncertainty of the fair value of the shares at
the time they will be committed to be released.
If the ESOP purchases newly issued shares from the Holding Company, total
stockholders' equity would neither increase nor decrease. However, on a per
share basis, stockholders' equity and per share net earnings would decrease
because of the increase in the number of outstanding shares.
The ESOP will be subject to the requirements of ERISA and the regulations of
the IRS and the Department of Labor issued thereunder. The Bank intends to
request a determination letter from the IRS regarding the tax-qualified status
of the ESOP. Although no assurance can be given that a favorable determination
letter will be issued, the Bank expects that a favorable determination letter
will be received by the ESOP.
STOCK OPTION PLAN. The Board of Directors of the Holding Company intends to
adopt the Stock Option Plan and to submit the Stock Option Plan to the
stockholders for approval at a meeting held no earlier than six months following
consummation of the Stock Conversion. Under current OTS regulations, the
approval of a majority vote of the Holding Company's outstanding shares is
required prior to the implementation of the Stock Option Plan
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within one year of the consummation of the Stock Conversion. The Stock Option
Plan will comply with all applicable regulatory requirements. However, the
Stock Option Plan will not be approved or endorsed by the OTS.
The Stock Option Plan will be designed to attract and retain qualified
management personnel and nonemployee directors, to provide such officers, key
employees and nonemployee directors with a proprietary interest in the Holding
Company as a incentive to contribute to the success of the Holding Company and
the Bank, and to reward officers and key employees for outstanding performance.
The Stock Option Plan will provide for the grant of incentive stock options
("ISOs") intended to comply with the requirements of Section 422 of the Code and
for nonqualified stock options ("NQOs"). Upon receipt of stockholder approval
of the Stock Option Plan, stock options may be granted to key employees of the
Holding Company and its subsidiaries, including the Bank. Unless sooner
terminated, the Stock Option Plan will continue in effect for a period of ten
years from the date the Stock Option Plan is approved by stockholders.
A number of authorized shares of Common Stock equal to 10% of the number of
shares of Common Stock issued in connection with the Stock Conversion will be
reserved for future issuance under the Stock Option Plan (172,500 shares based
on the issuance of 1,725,000 shares at the maximum of the Estimated Valuation
Range). Shares acquired upon exercise of options will be authorized but
unissued shares or treasury shares. In the event of a stock split, reverse
stock split, stock dividend, or similar event, 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 may be adjusted by the
Committee to reflect the increase or decrease in the total number of shares of
Common Stock outstanding.
The Stock Option Plan will be administered and interpreted by a committee of
the Board of Directors ("Committee"). Subject to applicable OTS regulations,
the Committee will determine which nonemployee directors, officers and key
employees will be granted options, whether, in the case of officers and
employees, such options will be ISOs or NQOs, the number of shares subject to
each option, and the exercisability of such options. All options granted to
nonemployee directors will be NQOs. The per share exercise price of all options
will equal at least 100% of the fair market value of a share of Common Stock on
the date the option is granted.
Under current OTS regulations, if the Stock Option Plan is implemented
within one year of the consummation of the Stock Conversion, (i) no officer or
employee could receive an award of options covering in excess of 25%, (ii) no
nonemployee director could receive in excess of 5% and (iii) nonemployee
directors, as a group, could not receive in excess of 30%, of the number of
shares reserved for issuance under the Stock Option Plan.
It is anticipated that all options granted under the Stock Option Plan will
be granted subject to a vesting schedule whereby the options become exercisable
over a specified period following the date of grant. Under OTS regulations, if
the Stock Option Plan is implemented within the first year following
consummation of the Stock Conversion, the minimum vesting period will be five
years. All unvested options will be immediately exercisable in the event of the
recipient's death or disability. Unvested options will also be exercisable
following a change in control (as defined in the Stock Option Plan) of the
Holding Company or the Bank to the extent authorized or not prohibited by
applicable law or regulations. OTS regulations currently provide that, if the
Stock Option Plan is implemented prior to the first anniversary of the Stock
Conversion, vesting may not be accelerated upon a change in control of the
Holding Company or the Bank.
Each stock option that is awarded to an officer or key employee will remain
exercisable at any time on or after the date it vests through the earlier to
occur of the tenth anniversary of the date of grant or three months after the
date on which the optionee terminates employment (one year in the event of the
optionee's termination by reason of death or disability), unless such period is
extended by the Committee. Each stock option that is awarded to a nonemployee
director will remain exercisable through the earlier to occur of the tenth
anniversary of the date of grant or one year (two years in the event of a
nonemployee director's death or disability) following the termination of a
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nonemployee director's service on the Board. All stock options are
nontransferable except by will or the laws of descent or distribution.
Under current provisions of the Code, the federal tax treatment of ISOs and
NQOs is different. With respect to ISOs, an optionee who satisfies certain
holding period requirements will not recognize income at the time the option is
granted or at the time the option is exercised. If the holding period
requirements are satisfied, the optionee will generally recognize capital gain
or loss upon a subsequent disposition of the shares of Common Stock received
upon the exercise of a stock option. If the holding period requirements are not
satisfied, the difference between the fair market value of the Common Stock on
the date of grant and the option exercise price, if any, will be taxable to the
optionee at ordinary income tax rates. A federal income tax deduction generally
will not be available to the Holding Company as a result of the grant or
exercise of an ISO, unless the optionee fails to satisfy the holding period
requirements. With respect to NQOs, the grant of an NQO generally is not a
taxable event for the optionee and no tax deduction will be available to the
Holding Company. However, upon the exercise of an NQO, the difference between
the fair market value of the Common Stock on the date of exercise and the option
exercise price generally will be treated as compensation to the optionee upon
exercise, and the Holding Company will be entitled to a compensation expense
deduction in the amount of income realized by the optionee.
Although no specific award determinations have been made at this time, the
Holding Company and the Bank anticipate that if stockholder approval is obtained
it would provide awards to its directors, officers and employees to the extent
permitted by applicable regulations. The size of individual awards will be
determined prior to submitting the Stock Option Plan for stockholder approval,
and disclosure of anticipated awards will be included in the proxy materials for
such meeting.
MANAGEMENT RECOGNITION PLAN. Following the Stock Conversion, the Board of
Directors of the Holding Company intends to adopt an MRP for officers,
employees, and nonemployee directors of the Holding Company and the Bank,
subject to shareholder approval. The MRP will enable the Holding Company and
the Bank to provide participants with a proprietary interest in the Holding
Company as an incentive to contribute to the success of the Holding Company and
the Bank. The MRP will comply with all applicable regulatory requirements.
However, the MRP will not be approved or endorsed by the OTS.
Under current OTS regulations, the approval of a majority vote of the
Holding Company's outstanding shares is required prior to the implementation of
the MRP within one year of the consummation of the Stock Conversion.
The MRP expects to acquire a number of shares of Common Stock equal to 4% of
the Common Stock issued in connection with the Stock Conversion (69,000 shares
based on the issuance of 1,725,000 shares in the Stock Conversion at the maximum
of the Estimated Valuation Range). Such shares will be acquired on the open
market, if available, with funds contributed by the Holding Company or the Bank
to a trust which the Holding Company may establish in conjunction with the MRP
("MRP Trust") or from authorized but unissued shares or treasury shares of the
Holding Company.
A committee of the Board of Directors of the Holding Company will administer
the MRP, the members of which will also serve as trustees of the MRP Trust, if
formed. The trustees will be responsible for the investment of all funds
contributed by the Holding Company or the Bank to the MRP Trust. The Board of
Directors of the Holding Company may terminate the MRP at any time and, upon
termination, all unallocated shares of Common Stock will revert to the Holding
Company.
Shares of Common Stock granted pursuant to the MRP will be in the form of
restricted stock payable ratably over a specified vesting period following the
date of grant. During the period of restriction, all shares will be held in
escrow by the Holding Company or by the MRP Trust. Under OTS regulations, if
the Stock Option plan is implemented within the first year following
consummation of the Stock Conversion, the minimum vesting period will be five
years. All unvested MRP awards will vest in the event of the recipient's death
or disability. Unvested MRP awards will also vest following a change in control
(as defined in the MRP) of the Holding Company or the
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Bank to the extent authorized or not prohibited by applicable law or
regulations. OTS regulations currently provide that, if the MRP is implemented
prior to the first anniversary of the Stock Conversion, vesting may not be
accelerated upon a change in control of the Holding Company or the Bank.
A recipient of an MRP award in the form of restricted stock generally will
not recognize income upon an award of shares of Common Stock, and the Holding
Company will not be entitled to a federal income tax deduction, until the
termination of the restrictions. Upon such termination, the recipient will
recognize ordinary income in an amount equal to the fair market value of the
Common Stock at the time and the Holding Company will be entitled to a deduction
in the same amount after satisfying federal income tax withholding requirements.
However, the recipient may elect to recognize ordinary income in the year the
restricted stock is granted in an amount equal to the fair market value of the
shares at that time, determined without regard to the restrictions. In that
event, the Holding Company will be entitled to a deduction in such year and in
the same amount. Any gain or loss recognized by the recipient upon subsequent
disposition of the stock will be either a capital gain or capital loss.
Although no specific award determinations have been made at this time, the
Holding Company and the Bank anticipate that if stockholder approval is obtained
it would provide awards to its directors, officers and employees to the extent
permitted by applicable regulations. Under current OTS regulations, if the MRP
is implemented within one year of the consummation of the Stock Conversion, (i)
no officer or employee could receive an award of options covering in excess of
25%, (ii) no nonemployee director could receive in excess of 5% and (iii)
nonemployee directors, as a group, could not receive in excess of 30%, of the
number of shares reserved for issuance under the MRP. The size of individual
awards will be determined prior to submitting the MRP for stockholder approval,
and disclosure of anticipated awards will be included in the proxy materials for
such meeting.
TRANSACTIONS WITH THE BANK
Federal regulations require that all loans or extensions of credit to
executive officers and directors must be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and must not involve more than the
normal risk of repayment or present other unfavorable features. The Bank is
therefore prohibited from making any new loans or extensions of credit to the
Bank's executive officers and directors at different rates or terms than those
offered to the general public and has adopted a policy to this effect. In
addition, loans made to a director or executive officer in an amount that, when
aggregated with the amount of all other loans to such person and his or her
related interests, are in excess of the greater of $25,000, or 5% of the Bank's
capital and surplus (up to a maximum of $500,000) must be approved in advance by
a majority of the disinterested members of the Board of Directors. See
"REGULATION -- Federal Regulation of Savings Associations -- Transactions with
Affiliates." The aggregate amount of loans by the Bank to its executive
officers and directors was $436,000 at December 31, 1996, or approximately 1.7%
of pro forma stockholders' equity (based on the issuance of the maximum of the
Estimated Valuation Range).
REGULATION
GENERAL
The Bank is subject to extensive regulation, examination and supervision by
the OTS as its chartering agency, and the FDIC, as the insurer of its deposits.
The activities of federal savings institutions are governed by the Home Owners'
Loan Act, as amended (the "HOLA") and, in certain respects, the Federal Deposit
Insurance Act ("FDIA") and the regulations issued by the OTS and the FDIC to
implement these statutes. These laws and regulations delineate the nature and
extent of the activities in which federal savings associations may engage.
Lending activities and other investments must comply with various statutory and
regulatory capital requirements. In addition, the Bank's relationship with its
depositors and borrowers is also regulated to a great extent, especially in such
matters as the ownership of deposit accounts and the form and content of the
Bank's mortgage documents. The Bank must file reports with the OTS and the FDIC
concerning its activities and financial condition in addition
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to obtaining regulatory approvals prior to entering into certain transactions
such as mergers with, or acquisitions of, other financial institutions. There
are periodic examinations by the OTS and the FDIC to review the Bank's
compliance with various regulatory requirements. The regulatory structure also
gives the regulatory authorities extensive discretion in connection with their
supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes. Any change in such
policies, whether by the OTS, the FDIC or Congress, could have a material
adverse impact on the Bank and its operations.
FEDERAL REGULATION OF SAVINGS ASSOCIATIONS
OFFICE OF THRIFT SUPERVISION. The OTS is an office in the Department of the
Treasury subject to the general oversight of the Secretary of the Treasury. The
OTS generally possesses the supervisory and regulatory duties and
responsibilities formerly vested in the Federal Home Loan Bank Board. Among
other functions, the OTS issues and enforces regulations affecting federally
insured savings associations and regularly examines these institutions.
FEDERAL HOME LOAN BANK SYSTEM. The FHLB System, consisting of 12 FHLBs, is
under the jurisdiction of the Federal Housing Finance Board ("FHFB"). The
designated duties of the FHFB are to supervise the FHLBs, to ensure that the
FHLBs carry out their housing finance mission, to ensure that the FHLBs remain
adequately capitalized and able to raise funds in the capital markets, and to
ensure that the FHLBs operate in a safe and sound manner. The Bank, as a member
of the FHLB-Seattle, is required to acquire and hold shares of capital stock in
the FHLB-Seattle in an amount equal to the greater of (i) 1.0% of the aggregate
outstanding principal amount of residential mortgage loans, home purchase
contracts and similar obligations at the beginning of each year, or (ii) 1/20 of
its advances (i.e., borrowings) from the FHLB-Seattle. The Bank is in
compliance with this requirement with an investment in FHLB-Seattle stock of
$929,000 at December 31, 1996. Among other benefits, the FHLB-Seattle provides
a central credit facility primarily for member institutions. It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB System. It makes advances to members in accordance with policies and
procedures established by the FHFB and the Board of Directors of the FHLB-
Seattle.
FEDERAL DEPOSIT INSURANCE CORPORATION. The FDIC is an independent federal
agency that insures the deposits, up to prescribed statutory limits, of
depository institutions. The FDIC currently maintains two separate insurance
funds: the BIF and the SAIF. As insurer of the Bank's deposits, the FDIC has
examination, supervisory and enforcement authority over the Bank.
The Bank's accounts are insured by the SAIF to the maximum extent permitted
by law. The Bank pays deposit insurance premiums based on a risk-based
assessment system established by the FDIC. Under applicable regulations,
institutions are assigned to one of three capital groups that are based solely
on the level of an institution's capital -- "well capitalized," "adequately
capitalized," and "undercapitalized" -- which are defined in the same manner as
the regulations establishing the prompt corrective action system, as discussed
below. These three groups are then divided into three subgroups which reflect
varying levels of supervisory concern, from those which are considered to be
healthy to those which are considered to be of substantial supervisory concern.
The matrix so created results in nine assessment risk classifications, with
rates that until September 30, 1996 ranged from 0.23% for well capitalized,
financially sound institutions with only a few minor weaknesses to 0.31% for
undercapitalized institutions that pose a substantial risk of loss to the SAIF
unless effective corrective action is taken.
Pursuant to the DIF Act, which was enacted on September 30, 1996, the FDIC
imposed a special assessment on each depository institution with SAIF-assessable
deposits which resulted in the SAIF achieving its designated reserve ratio. In
connection therewith, the FDIC reduced the assessment schedule for SAIF members,
effective January 1, 1997, to a range of 0% to 0.27%, with most institutions,
including the Bank, paying 0%. This assessment schedule is the same as that for
the BIF, which reached its designated reserve ratio in 1995. In addition, since
January 1, 1997, SAIF members are charged an assessment of .065% of SAIF-
assessable deposits for the purpose of paying interest on the obligations issued
by the Financing Corporation ("FICO") in the 1980s to help fund the
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thrift industry cleanup. BIF-assessable deposits will be charged an assessment
to help pay interest on the FICO bonds at a rate of approximately .013% until
the earlier of December 31, 1999 or the date upon which the last savings
association ceases to exist, after which time the assessment will be the same
for all insured deposits.
The DIF Act provides for the merger of the BIF and the SAIF into the Deposit
Insurance Fund on January 1, 1999, but only if no insured depository institution
is a savings association on that date. The DIF Act contemplates the development
of a common charter for all federally chartered depository institutions and the
abolition of separate charters for national banks and federal savings
associations. It is not known what form the common charter may take and what
effect, if any, the adoption of a new charter would have on the operation of the
Bank.
The FDIC may terminate the deposit insurance of any insured depository
institution if it determines after a hearing that the institution has engaged or
is engaging in unsafe or unsound practices, is in an unsafe or unsound condition
to continue operations, or has violated any applicable law, regulation, order or
any condition imposed by an agreement with the FDIC. It also may suspend
deposit insurance temporarily during the hearing process for the permanent
termination of insurance, if the institution has no tangible capital. If
insurance of accounts is terminated, the accounts at the institution at the time
of termination, less subsequent withdrawals, shall continue to be insured for a
period of six months to two years, as determined by the FDIC. Management is
aware of no existing circumstances that could result in termination of the
deposit insurance of the Bank.
LIQUIDITY REQUIREMENTS. Under OTS regulations, each savings institution is
required to maintain an average daily balance of liquid assets (cash, certain
time deposits and savings accounts, bankers' acceptances, and specified U.S.
Government, state or federal agency obligations and certain other investments)
equal to a monthly average of not less than a specified percentage (currently
5.0%) of its net withdrawable accounts plus short-term borrowings. OTS
regulations also require each savings institution to maintain an average daily
balance of short-term liquid assets at a specified percentage (currently 1.0%)
of the total of its net withdrawable accounts plus short-term borrowings.
Monetary penalties may be imposed for failure to meet liquidity requirements.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Liquidity and Capital Resources."
PROMPT CORRECTIVE ACTION. Under the FDIA, each federal banking agency is
required to implement a system of prompt corrective action for institutions that
it regulates. The federal banking agencies have promulgated substantially
similar regulations to implement this system of prompt corrective action. Under
the regulations, an institution shall be deemed to be (i) "well capitalized" if
it has a total risk-based capital ratio of 10.0% or more, has a Tier I risk-
based capital ratio of 6.0% or more, has a leverage ratio of 5.0% or more and is
not subject to specified requirements to meet and maintain a specific capital
level for any capital measure; (ii) "adequately capitalized" if it has a total
risk-based capital ratio of 8.0% or more, has a Tier I risk-based capital ratio
of 4.0% or more, has a leverage ratio of 4.0% or more (3.0% under certain
circumstances) and does not meet the definition of "well capitalized;" (iii)
"undercapitalized" if it has a total risk-based capital ratio that is less than
8.0%, has a Tier I risk-based capital ratio that is less than 4.0% or has a
leverage ratio that is less than 4.0% (3.0% under certain circumstances); (iv)
"significantly undercapitalized" if it has a total risk-based capital ratio that
is less than 6.0%, has a Tier I risk-based capital ratio that is less than 3.0%
or has a leverage ratio that is less than 3.0%; and (v) "critically
undercapitalized" if it has a ratio of tangible equity to total assets that is
equal to or less than 2.0%.
A federal banking agency may, after notice and an opportunity for a hearing,
reclassify a well capitalized institution as adequately capitalized and may
require an adequately capitalized institution or an undercapitalized institution
to comply with supervisory actions as if it were in the next lower category if
the institution is in an unsafe or unsound condition or has received in its most
recent examination, and has not corrected, a less than satisfactory rating for
asset quality, management, earnings or liquidity. (The OTS may not, however,
reclassify a significantly undercapitalized institution as critically
undercapitalized.)
An institution generally must file a written capital restoration plan that
meets specified requirements, as well as a performance guaranty by each company
that controls the institution, with the appropriate federal banking agency
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within 45 days of the date that the institution receives notice or is deemed to
have notice that it is undercapitalized, significantly undercapitalized or
critically undercapitalized. Immediately upon becoming undercapitalized, an
institution shall become subject to various mandatory and discretionary
restrictions on its operations.
At December 31, 1996, the Bank was categorized as "well capitalized" under
the prompt corrective action regulations of the OTS.
STANDARDS FOR SAFETY AND SOUNDNESS. The federal banking regulatory agencies
have prescribed, by regulation, standards for all insured depository
institutions relating to: (i) internal controls, information systems and
internal audit systems; (ii) loan documentation; (iii) credit underwriting; (iv)
interest rate risk exposure; (v) asset growth; (vi) asset quality; (vii)
earnings and (viii) compensation, fees and benefits ("Guidelines"). The
Guidelines set forth the safety and soundness standards that the federal banking
agencies use to identify and address problems at insured depository institutions
before capital becomes impaired. If the OTS determines that the Bank fails to
meet any standard prescribed by the Guidelines, the agency may require the Bank
to submit to the agency an acceptable plan to achieve compliance with the
standard. OTS regulations establish deadlines for the submission and review of
such safety and soundness compliance plans.
QUALIFIED THRIFT LENDER TEST. All savings associations are required to meet
a qualified thrift lender ("QTL") test to avoid certain restrictions on their
operations. A savings institution that fails to become or remain a QTL shall
either convert to a national bank charter or be subject to the following
restrictions on its operations: (i) the association may not make any new
investment or engage in activities that would not be permissible for national
banks; (ii) the association may not establish any new branch office where a
national bank located in the savings institution's home state would not be able
to establish a branch office; (iii) the association shall be ineligible to
obtain new advances from any FHLB; and (iv) the payment of dividends by the
association shall be subject to the rules regarding the statutory and regulatory
dividend restrictions applicable to national banks. Also, beginning three years
after the date on which the savings institution ceases to be a QTL, the savings
institution would be prohibited from retaining any investment or engaging in any
activity not permissible for a national bank and would be required to repay any
outstanding advances to any FHLB. In addition, within one year of the date on
which a savings association controlled by a company ceases to be a QTL, the
company must register as a bank holding company and become subject to the rules
applicable to such companies. A savings institution may requalify as a QTL if
it thereafter complies with the QTL test.
Currently, the QTL test requires that either an institution qualify as a
domestic building and loan association under the Internal Revenue Code or that
65% of an institution's "portfolio assets" (as defined) consist of certain
housing and consumer-related assets on a monthly average basis in nine out of
every 12 months. Assets that qualify without limit for inclusion as part of the
65% requirement are loans made to purchase, refinance, construct, improve or
repair domestic residential housing and manufactured housing; home equity loans;
mortgage-backed securities (where the mortgages are secured by domestic
residential housing or manufactured housing); FHLB stock; direct or indirect
obligations of the FDIC; and loans for educational purposes, loans to small
businesses and loans made through credit cards. In addition, the following
assets, among others, may be included in meeting the test subject to an overall
limit of 20% of the savings institution's portfolio assets: 50% of residential
mortgage loans originated and sold within 90 days of origination; 100% of
consumer loans; and stock issued by Freddie Mac or Fannie Mae. Portfolio assets
consist of total assets minus the sum of (i) goodwill and other intangible
assets, (ii) property used by the savings institution to conduct its business,
and (iii) liquid assets up to 20% of the institution's total assets. At
December 31, 1996, the qualified thrift investments of the Bank were
approximately 82.3% of its portfolio assets.
CAPITAL REQUIREMENTS. Under OTS regulations a savings association must
satisfy three minimum capital requirements: core capital, tangible capital and
risk-based capital. Savings associations must meet all of the standards in
order to comply with the capital requirements.
OTS capital regulations establish a 3% core capital or leverage ratio
(defined as the ratio of core capital to adjusted total assets). Core capital
is defined to include common stockholders' equity, noncumulative perpetual
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preferred stock and any related surplus, and minority interests in equity
accounts of consolidated subsidiaries, less (i) any intangible assets, except
for certain qualifying intangible assets; (ii) certain mortgage servicing
rights; and (iii) equity and debt investments in subsidiaries that are not
"includable subsidiaries," which is defined as subsidiaries engaged solely in
activities not impermissible for a national bank, engaged in activities
impermissible for a national bank but only as an agent for its customers, or
engaged solely in mortgage-banking activities. In calculating adjusted total
assets, adjustments are made to total assets to give effect to the exclusion of
certain assets from capital and to account appropriately for the investments in
and assets of both includable and nonincludable subsidiaries. Institutions that
fail to meet the core capital requirement would be required to file with the OTS
a capital plan that details the steps they will take to reach compliance. In
addition, the OTS's prompt corrective action regulation provides that a savings
institution that has a leverage ratio of less than 4% (3% for institutions
receiving the highest CAMEL examination rating) will be deemed to be
"undercapitalized" and may be subject to certain restrictions. See "--Federal
Regulation of Savings Associations -- Prompt Corrective Action."
Savings associations also must maintain "tangible capital" not less than
1.5% of the Bank's adjusted total assets. "Tangible capital" is defined,
generally, as core capital minus any "intangible assets" other than purchased
mortgage servicing rights.
Each savings institution must maintain total risk-based capital equal to at
least 8% of risk-weighted assets. Total risk-based capital consists of the sum
of core and supplementary capital, provided that supplementary capital cannot
exceed core capital, as previously defined. Supplementary capital includes (i)
permanent capital instruments such as cumulative perpetual preferred stock,
perpetual subordinated debt and mandatory convertible subordinated debt, (ii)
maturing capital instruments such as subordinated debt, intermediate-term
preferred stock and mandatory convertible subordinated debt, subject to an
amortization schedule, and (iii) general valuation loan and lease loss
allowances up to 1.25% of risk-weighted assets.
The risk-based capital regulation assigns each balance sheet asset held by
a savings institution to one of four risk categories based on the amount of
credit risk associated with that particular class of assets. Assets not included
for purposes of calculating capital are not included in calculating risk-
weighted assets. The categories range from 0% for cash and securities that are
backed by the full faith and credit of the U.S. Government to 100% for
repossessed assets or assets more than 90 days past due. Qualifying residential
mortgage loans (including multi-family mortgage loans) are assigned a 50% risk
weight. Consumer, commercial, home equity and residential construction loans are
assigned a 100% risk weight, as are nonqualifying residential mortgage loans and
that portion of land loans and nonresidential construction loans that do not
exceed an 80% loan-to-value ratio. The book value of assets in each category is
multiplied by the weighing factor (from 0% to 100%) assigned to that category.
These products are then totalled to arrive at total risk-weighted assets. Off-
balance sheet items are included in risk-weighted assets by converting them to
an approximate balance sheet "credit equivalent amount" based on a conversion
schedule. These credit equivalent amounts are then assigned to risk categories
in the same manner as balance sheet assets and included risk-weighted assets.
The OTS has incorporated an interest rate risk component into its
regulatory capital rule. Under the rule, savings associations with "above
normal" interest rate risk exposure would be subject to a deduction from total
capital for purposes of calculating their risk-based capital requirements. A
savings association's interest rate risk is measured by the decline in the net
portfolio value of its assets (i.e., the difference between incoming and
-----
outgoing discounted cash flows from assets, liabilities and off-balance sheet
contracts) that would result from a hypothetical 200 basis point increase or
decrease in market interest rates divided by the estimated economic value of the
association's assets, as calculated in accordance with guidelines set forth by
the OTS. A savings association whose measured interest rate risk exposure
exceeds 2% must deduct an interest rate risk component in calculating its total
capital under the risk-based capital rule. The interest rate risk component is
an amount equal to one-half of the difference between the institution's measured
interest rate risk and 2%, multiplied by the estimated economic value of the
association's assets. That dollar amount is deducted from an association's total
capital in calculating compliance with its risk-based capital requirement. Under
the rule, there is a two quarter lag between the reporting date of an
institution's financial data and the effective date for the new capital
requirement based on that data. A
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savings association with assets of less than $300 million and risk-based capital
ratios in excess of 12% is not subject to the interest rate risk component,
unless the OTS determines otherwise. The rule also provides that the Director
of the OTS may waive or defer an association's interest rate risk component on a
case-by-case basis. Under certain circumstances, a savings association may
request an adjustment to its interest rate risk component if it believes that
the OTS-calculated interest rate risk component overstates its interest rate
risk exposure. In addition, certain "well-capitalized" institutions may obtain
authorization to use their own interest rate risk model to calculate their
interest rate risk component in lieu of the OTS-calculated amount. The OTS has
postponed the date that the component will first be deducted from an
institution's total capital.
See "HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE" for a table that sets
forth in terms of dollars and percentages the OTS tangible, core and risk-based
capital requirements, the Bank's historical amounts and percentages at December
31, 1996 and pro forma amounts and percentages based upon the assumptions stated
therein.
LIMITATIONS ON CAPITAL DISTRIBUTIONS. OTS regulations impose uniform
limitations on the ability of all savings associations to engage in various
distributions of capital such as dividends, stock repurchases and cash-out
mergers. In addition, OTS regulations require the Bank to give the OTS 30 days'
advance notice of any proposed declaration of dividends, and the OTS has the
authority under its supervisory powers to prohibit the payment of dividends.
The regulation utilizes a three-tiered approach which permits various levels of
distributions based primarily upon a savings association's capital level.
A Tier 1 savings association has capital in excess of its fully phased-in
capital requirement (both before and after the proposed capital distribution).
Tier 1 savings association may make (without application but upon prior notice
to, and no objection made by, the OTS) capital distributions during a calendar
year up to 100% of its net income to date during the calendar year plus one-half
its surplus capital ratio (i.e., the amount of capital in excess of its fully
----
phased-in requirement) at the beginning of the calendar year or the amount
authorized for a Tier 2 association. Capital distributions in excess of such
amount require advance notice to the OTS. A Tier 2 savings association has
capital equal to or in excess of its minimum capital requirement but below its
fully phased-in capital requirement (both before and after the proposed capital
distribution). Such an association may make (without application) capital
distributions up to an amount equal to 75% of its net income during the previous
four quarters depending on how close the association is to meeting its fully
phased-in capital requirement. Capital distributions exceeding this amount
require prior OTS approval. Tier 3 associations are savings associations with
capital below the minimum capital requirement (either before or after the
proposed capital distribution). Tier 3 associations may not make any capital
distributions without prior approval from the OTS.
The Bank currently meets the criteria to be designated a Tier 1 association
and, consequently, could at its option (after prior notice to, and no objection
made by, the OTS) distribute up to 100% of its net income during the calendar
year plus 50% of its surplus capital ratio at the beginning of the calendar year
less any distributions previously paid during the year.
LOANS TO ONE BORROWER. Under the HOLA, savings institutions are generally
subject to the national bank limit on loans to one borrower. Generally, this
limit is 15% of the Bank's unimpaired capital and surplus, plus an additional
10% of unimpaired capital and surplus, if such loan is secured by readily-
marketable collateral, which is defined to include certain financial instruments
and bullion. The OTS by regulation has amended the loans to one borrower rule
to permit savings associations meeting certain requirements, including capital
requirements, to extend loans to one borrower in additional amounts under
circumstances limited essentially to loans to develop or complete residential
housing units. At December 31, 1996, the Bank's limit on loans to one borrower
was $1,609,000. At December 31, 1996, the Bank's largest aggregate amount of
loans to one borrower was $1.8 million. See "BUSINESS OF THE BANK -- Lending
Activities -- Commercial Real Estate Lending."
ACTIVITIES OF ASSOCIATIONS AND THEIR SUBSIDIARIES. A savings association
may establish operating subsidiaries to engage in any activity that the savings
association may conduct directly and service corporation
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subsidiaries to engage in certain preapproved activities or, with approval of
the OTS, other activities reasonably related to the activities of financial
institutions. When a savings association establishes or acquires a subsidiary
or elects to conduct any new activity through a subsidiary that the association
controls, the savings association must notify the FDIC and the OTS 30 days in
advance and provide the information each agency may, by regulation, require.
Savings associations also must conduct the activities of subsidiaries in
accordance with existing regulations and orders.
The OTS may determine that the continuation by a savings association of its
ownership control of, or its relationship to, the subsidiary constitutes a
serious risk to the safety, soundness or stability of the association or is
inconsistent with sound banking practices or with the purposes of the FDIA.
Based upon that determination, the FDIC or the OTS has the authority to order
the savings association to divest itself of control of the subsidiary. The FDIC
also may determine by regulation or order that any specific activity poses a
serious threat to the SAIF. If so, it may require that no SAIF member engage in
that activity directly.
TRANSACTIONS WITH AFFILIATES. Savings associations must comply with
Sections 23A and 23B of the Federal Reserve Act ("Sections 23A and 23B")
relative to transactions with affiliates in the same manner and to the same
extent as if the savings association were a Federal Reserve member bank. A
savings and loan holding company, its subsidiaries and any other company under
common control are considered affiliates of the subsidiary savings association
under the HOLA. Generally, Sections 23A and 23B: (i) limit the extent to which
the insured association or its subsidiaries may engage in certain covered
transactions with an affiliate to an amount equal to 10% of such institution's
capital and surplus and place an aggregate limit on all such transactions with
affiliates to an amount equal to 20% of such capital and surplus, and (ii)
require that all such transactions be on terms substantially the same, or at
least as favorable to the institution or subsidiary, as those provided to a non-
affiliate. The term "covered transaction" includes the making of loans, the
purchase of assets, the issuance of a guarantee and similar types of
transactions. Any loan or extension of credit by the Bank to an affiliate must
be secured by collateral in accordance with Section 23A.
Three additional rules apply to savings associations: (i) a savings
association may not make any loan or other extension of credit to an affiliate
unless that affiliate is engaged only in activities permissible for bank holding
companies; (ii) a savings association may not purchase or invest in securities
issued by an affiliate (other than securities of a subsidiary); and (iii) the
OTS may, for reasons of safety and soundness, impose more stringent restrictions
on savings associations but may not exempt transactions from or otherwise
abridge Section 23A or 23B. Exemptions from Section 23A or 23B may be granted
only by the Federal Reserve, as is currently the case with respect to all FDIC-
insured banks.
The Bank's authority to extend credit to executive officers, directors and
10% shareholders, as well as entities controlled by such persons, is currently
governed by Sections 22(g) and 22(h) of the Federal Reserve Act, and Regulation
O thereunder. Among other things, these regulations require that such loans be
made on terms and conditions substantially the same as those offered to
unaffiliated individuals and not involve more than the normal risk of repayment.
Regulation O also places individual and aggregate limits on the amount of loans
the Bank may make to such persons based, in part, on the Bank's capital
position, and requires certain board approval procedures to be followed. The
OTS regulations, with certain minor variances, apply Regulation O to savings
institutions.
COMMUNITY REINVESTMENT ACT. Banks are also subject to the provisions of the
Community Reinvestment Act of 1977, which requires the appropriate federal bank
regulatory agency, in connection with its regular examination of a bank, to
assess the bank's record in meeting the credit needs of the community serviced
by the bank, including low and moderate income neighborhoods. The regulatory
agency's assessment of the bank's record is made available to the public.
Further, such assessment is required of any bank which has applied, among other
things, to establish a new branch office that will accept deposits, relocate an
existing office or merge or consolidate with, or acquire the assets or assume
the liabilities of, a federally regulated financial institution.
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REGULATION OF WASHINGTON SAVINGS BANKS
GENERAL. As a Washington-chartered, federally insured savings bank, the
Bank will be subject to extensive regulation. Lending activities and other
investments must comply with various statutory and regulatory requirements,
including prescribed minimum capital standards. The Bank will be regularly
examined by the FDIC and the Department.
STATE REGULATION AND SUPERVISION. As a Washington-chartered savings bank,
the Bank will be subject to applicable provisions of Washington law and the
regulations of the Department adopted thereunder. Washington law and
regulations govern the ability to take deposits and pay interest thereon, to
make loans on or invest in residential and other real estate, to make consumer
loans, to invest in securities, to offer various banking services to its
customers, and to establish branch offices. Under state law, savings banks in
Washington also generally have all of the powers that federal mutual savings
banks have under federal laws and regulations. The Bank will be subject to
periodic examination and reporting requirements by and of the Department.
DEPOSIT INSURANCE. The deposits of the Bank will continue to be insured up
to applicable limits by the SAIF. See "-- Federal Regulation of Savings
Associations -- Deposit Insurance."
PROMPT CORRECTIVE ACTION. The Bank will be subject the prompt corrective
action regulations of the FDIC, which are substantially similar to those of the
OTS. See "-- Federal Regulation of Savings Associations -- Prompt Corrective
Action."
STANDARDS FOR SAFETY AND SOUNDNESS. The Bank will be subject to the FDIC's
standards for safety and soundness, which are substantially similar to those of
the OTS. See "-- Federal Regulations of Savings Associations -- Standards for
Safety and Soundness."
CAPITAL REQUIREMENTS. The FDIC's minimum capital standards applicable to
FDIC-regulated depository institutions require the most highly-rated
institutions to meet a "Tier 1" leverage capital ratio of at least 3% of total
assets. Tier 1 (or "core capital") consists of common stockholders' equity,
noncumulative perpetual preferred stock and minority interests in consolidated
subsidiaries minus all intangible assets other than limited amounts of purchased
mortgage servicing rights and certain other accounting adjustments. All other
banks must have a Tier 1 leverage ratio of at least 100-200 basis points above
the 3% minimum. The FDIC capital regulations establish a minimum leverage ratio
of not less than 4% for banks that are not highly rated or are anticipating or
experiencing significant growth.
Any insured bank with a Tier 1 capital to total assets ratio of less than
2% is deemed to be operating in an unsafe and unsound condition unless the
insured bank enters into a written agreement, to which the FDIC is a party, to
correct its capital deficiency. Insured banks operating with Tier 1 capital
levels below 2% (and which have not entered into a written agreement) are
subject to an insurance removal action and to the appointment of a receiver.
Insured banks operating with lower than the prescribed minimum capital levels,
generally will not receive approval of applications submitted to the FDIC. Also,
inadequately capitalized state nonmember banks will be subject to such
administrative action as the FDIC deems necessary.
FDIC regulations also require that banks meet a risk-based capital
standard. The risk-based capital standard requires the maintenance of total
capital (which is defined as Tier 1 capital and Tier 2 or supplementary capital)
to risk-weighted assets of 8% and Tier 1 capital to risk-weighted assets of 4%.
In determining the amount of risk-weighted assets, all assets, plus certain off
balance sheet items, are multiplied by a risk-weight of 0% to 100%, based on the
risks the FDIC believes are inherent in the type of asset or item. The
components of Tier 1 capital are equivalent to those discussed above under the
3% leverage requirement. The components of supplementary capital currently
include cumulative perpetual preferred stock, adjustable-rate perpetual
preferred stock, mandatory convertible securities, term subordinated debt,
intermediate-term preferred stock and allowance for loan and lease losses.
Allowance for loan and lease losses includable in supplementary capital is
limited to a maximum of 1.25%
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of risk-weighted assets. Overall, the amount of capital counted toward
supplementary capital cannot exceed 100% of Tier 1 capital.
Net unrealized holding gains or losses on available for sale debt and
equity securities are not included when calculating core and risk-based capital
ratios.
FDIC capital requirements are designated as the minimum acceptable
standards for banks whose overall financial condition is fundamentally sound,
which are well-managed and have no material or significant financial weaknesses.
The FDIC capital regulations state that, where the FDIC determines that the
financial history or condition, including off-balance sheet risk, managerial
resources and/or the future earnings prospects of a bank are not adequate and/or
a bank has a significant volume of assets classified substandard, doubtful or
loss or otherwise criticized, the FDIC may determine that the minimum adequate
amount of capital for that bank is greater than the minimum standards
established in the regulation.
ACTIVITIES AND INVESTMENTS OF INSURED STATE-CHARTERED BANKS. Federal law
generally limits the activities and equity investments of FDIC-insured, state-
chartered banks to those that are permissible for national banks. Under
regulations dealing with equity investments, an insured state bank generally may
not directly or indirectly acquire or retain any equity investment of a type, or
in an amount, that is not permissible for a national bank. An insured state
bank is not prohibited from, among other things, (i) acquiring or retaining a
majority interest in a subsidiary, the activities of which are limited to those
permissible to a subsidiary of a national bank, (ii) investing as a limited
partner in a partnership the sole purpose of which is direct or indirect
investment in the acquisition, rehabilitation or new construction of a qualified
housing project, provided that such limited partnership investments may not
exceed 2% of the bank's total assets, (iii) acquiring up to 10% of the voting
stock of a company that solely provides or reinsures directors', trustees' and
officers' liability insurance coverage or bankers' blanket bond group insurance
coverage for insured depository institutions, and (iv) acquiring or retaining
the voting shares of a depository institution if certain requirements are met.
Federal law provides that an insured state-chartered bank may not,
directly, or indirectly through a subsidiary, engage as "principal" in any
activity that is not permissible for a national bank unless the FDIC has
determined that such activities would pose no risk to the insurance fund of
which it is a member and the bank is in compliance with applicable regulatory
capital requirements. Any insured state-chartered bank directly or indirectly
engaged in any activity that is not permitted for a national bank must cease the
impermissible activity.
DIVIDENDS. The amount of dividends payable by the Bank to the Holding
Company depend upon the Bank's earnings and capital position, and is limited by
federal and state laws, regulations and policies. According to Washington law,
the Bank may not declare or pay a cash dividend on its capital stock if it would
cause its net worth to be reduced below (i) the amount required for liquidation
accounts or (ii) the net worth requirements, if any, imposed by the Department.
Dividends on the Bank's capital stock may not be paid in an aggregate amount
greater than the aggregate retained earnings of the Bank, without the approval
of the Department. Federal law further provides that no insured depository
institution may make any capital distribution (which would include a cash
dividend) if, after making the distribution, the institution would be
"undercapitalized," as defined in the prompt corrective action regulations.
Moreover, the federal bank regulatory agencies also have the general authority
to limit the dividends paid by insured banks if such payments should be deemed
to constitute an unsafe and unsound practice.
SAVINGS AND LOAN HOLDING COMPANY REGULATION
HOLDING COMPANY ACQUISITIONS. The HOLA and OTS regulations issued
thereunder generally prohibit a savings and loan holding company, without prior
OTS approval, from acquiring more than 5% of the voting stock of any other
savings association or savings and loan holding company or controlling the
assets thereof. They also prohibit, among other things, any director or officer
of a savings and loan holding company, or any individual who owns or controls
more than 25% of the voting shares of such holding company, from acquiring
control of any
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savings association not a subsidiary of such savings and loan holding company,
unless the acquisition is approved by the OTS.
HOLDING COMPANY ACTIVITIES. As a unitary savings and loan holding company,
the Holding Company generally is not subject to activity restrictions under the
HOLA. If the Holding Company acquires control of another savings association as
a separate subsidiary other than in a supervisory acquisition, it would become a
multiple savings and loan holding company. The HOLA provides that, among other
things, no multiple savings and loan holding company or subsidiary thereof which
is not an insured association shall commence or continue for more than two years
after becoming a multiple savings and loan association holding company or
subsidiary thereof, any business activity other than: (i) furnishing or
performing management services for a subsidiary insured institution, (ii)
conducting an insurance agency or escrow business, (iii) holding, managing, or
liquidating assets owned by or acquired from a subsidiary insured institution,
(iv) holding or managing properties used or occupied by a subsidiary insured
institution, (v) acting as trustee under deeds of trust, (vi) those activities
previously directly authorized by regulation as of March 5, 1987 to be engaged
in by multiple holding companies or (vii) those activities authorized by the
Federal Reserve Board as permissible for bank holding companies, unless the OTS
by regulation, prohibits or limits such activities for savings and loan holding
companies. Those activities described in (vii) above also must be approved by
the OTS prior to being engaged in by a multiple savings and loan holding
company.
QUALIFIED THRIFT LENDER TEST. The HOLA requires any savings and loan
holding company that controls a savings association that fails the QTL test, as
explained under "-- Federal Regulation of Savings Associations --Qualified
Thrift Lender Test," must, within one year after the date on which the
association ceases to be a QTL, register as and be deemed a bank holding company
subject to all applicable laws and regulations.
BANK HOLDING COMPANY REGULATION
GENERAL. Upon consummation of the Charter Conversion, the Holding Company,
as the sole shareholder of the Bank, will become a bank holding company and will
register as such with the Federal Reserve. Bank holding companies are subject
to comprehensive regulation by the Federal Reserve under the BHCA and the
regulations of the Federal Reserve. As a bank holding company, the Holding
Company will be required to file with the Federal Reserve annual reports and
such additional information as the Federal Reserve may require and will be
subject to regular examinations by the Federal Reserve. The Federal Reserve
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 the BHCA, a bank holding company must obtain Federal Reserve approval
before: (1) 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); (2) acquiring all or
substantially all of the assets of another bank or bank holding company; or (3)
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 Federal Reserve 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 Federal Reserve
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
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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 "Riegle-Neal Act") was enacted
to ease restrictions on interstate banking. The Riegle-Neal Act allows the
Federal Reserve to approve an application of an adequately capitalized and
adequately managed bank holding company to acquire 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 Federal Reserve may not approve the
acquisition of a 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 Riegle-Neal Act also prohibits the Federal Reserve 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 Riegle-Neal 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 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 Riegle-Neal 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 Riegle-Neal Act by adopting a law
after the date of enactment of the Riegle-Neal 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 Riegle-Neal Act authorizes the applicable federal banking agency to
approve interstate branching de novo by national and state banks, but only in
states which specifically allow for such branching. The Riegle-Neal 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 Federal Reserve has issued a policy statement on the payment
of cash dividends by bank holding companies, which expresses the Federal
Reserve's view that a bank holding company should pay cash dividends only to the
extent that the company's net income for the past year is sufficient to cover
both the cash dividends and a rate of earnings retention that is consistent with
the company's capital needs, asset quality and overall financial condition. The
Federal Reserve also indicated that it would be inappropriate for a company
experiencing serious financial problems to borrow funds to pay dividends.
Bank holding companies are required to give the Federal Reserve 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 Federal Reserve may disapprove such a purchase or redemption of
it determines that the proposal would constitute an unsafe or unsound practice
or would violate any law, regulation, Federal Reserve order, or any condition
imposed by, or written agreement with, the Federal Reserve. 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.
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CAPITAL REQUIREMENTS. The Federal Reserve has established capital
requirements for bank holding companies that generally parallel the capital
requirements for national banks. The Federal Reserve regulations provide that
capital standards will generally be applied on a bank only (rather than a
consolidated) basis on the case of a bank holding company with less than $150
million in total consolidated assets. Assuming sales of Common Stock at the
minimum of the Estimated Valuation Range, the Holding Company's total
consolidated assets will not exceed $150 million. See "HISTORICAL AND PRO FORMA
CAPITAL COMPLIANCE" for a numerical presentation of the Holding Company's pro
forma capital based on the assumptions stated therein.
TAXATION
FEDERAL TAXATION
GENERAL. The Holding Company and the Bank will report their income on a
calendar year basis using the accrual method of accounting and will be subject
to federal income taxation in the same manner as other corporations with some
exceptions. The following discussion of tax matters is intended only as a
summary and does not purport to be a comprehensive description of the tax rules
applicable to the Bank or the Holding Company.
BAD DEBT RESERVE. Historically, savings institutions such as the Bank which
met certain definitional tests primarily related to their assets and the nature
of their business ("qualifying thrift") were permitted to establish a reserve
for bad debts and to make annual additions thereto, which may have been deducted
in arriving at their taxable income. The Bank's deductions with respect to
"qualifying real property loans," which are generally loans secured by certain
interest in real property, were computed using an amount based on the Bank's
actual loss experience, or a percentage equal to 8% of the Bank's taxable
income, computed with certain modifications and reduced by the amount of any
permitted additions to the non-qualifying reserve. Due to the Bank's loss
experience, the Bank generally recognized a bad debt deduction equal to 8% of
taxable income.
In August 1996, provisions repealing the current thrift bad debt rules were
enacted by Congress as part of "The Small Business Job Protection Act of 1996."
The new rules eliminate the 8% of taxable income method for deducting additions
to the tax bad debt reserves for all thrifts for tax years beginning after
December 31, 1995. These rules also require that all institutions recapture all
or a portion of their bad debt reserves added since the base year (last taxable
year beginning before January 1, 1988). The Bank has previously recorded a
deferred tax liability equal to the bad debt recapture and as such, the new
rules will have no effect on the net income or federal income tax expense. For
taxable years beginning after December 31, 1995, the Bank's bad debt deduction
will be determined under the experience method using a formula based on actual
bad debt experience over a period of years or, if the Bank is a "large" bank
(i.e., assets in excess of $500 million) on the basis of net charge-offs during
the taxable year. The new rules allow an institution to suspend bad debt
reserve recapture for the 1996 and 1997 tax years if the institution's lending
activity for those years is equal to or greater than the institution's average
residential lending activity for the six taxable years preceding 1996. For this
purpose, only home purchase or home improvement loans are included and the
institution can elect to have the tax years with the highest and lowest lending
activity removed from the average calculation. If an institution is permitted
to postpone the reserve recapture, it must begin its six year recapture no later
than the 1998 tax year. The unrecaptured base year reserves will not be subject
to recapture as long as the institution qualifies as a bank as defined by the
statue. In addition, the balance of the pre-1988 bad debt reserves continue to
be subject to provision of present law referred to below that require recapture
in the case of certain excess distributions to shareholders.
DISTRIBUTIONS. To the extent that the Bank makes "nondividend
distributions" to shareholders, such distributions will be considered to result
in distributions from the balance of its bad debt reserve as of December 31,
1987 (or a lesser amount if the Bank's loan portfolio decreased since December
31, 1987) and then from the supplemental reserve for losses on loans ("Excess
Distributions"), and an amount based on the Excess Distributions will be
included in the Bank's taxable income. Nondividend distributions include
distributions in excess of the Bank's current and accumulated earnings and
profits, distributions in redemption of stock and distributions in partial
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or complete liquidation. However, dividends paid out of the Bank's current or
accumulated earnings and profits, as calculated for federal income tax purposes,
will not be considered to result in a distribution from the Bank's bad debt
reserves.
The amount of additional taxable income created from and Excess
Distribution is an amount that, when reduced by the tax attributable to the
income, is equal to the amount of the distribution. Thus, approximately one and
one-half times the Excess Distribution would be includable in gross income for
federal income tax purposes, assuming a 34% federal corporate income tax rate.
See "REGULATION" and "DIVIDEND POLICY" for limits on the payment of dividends by
the Bank. The Bank does not intend to pay dividends that would result in a
recapture of any portion of its tax bad debt reserve.
CORPORATE ALTERNATIVE MINIMUM TAX. The Code imposes a tax on alternative
minimum taxable income ("AMTI") at a rate of 20%. AMTI is increased by an
amount equal to 75% of the amount by which the Bank's adjusted current earnings
exceeds its AMTI (determined without regard to this preference and prior to
reduction for net operating losses). For taxable years beginning after December
31, 1986, and before January 1, 1996, an environmental tax of .12% of the excess
of AMTI (with certain modification) over $2.0 million is imposed on
corporations, including the Bank, whether or not an Alternative Minimum Tax
("AMT") is paid. Under President Clinton's 1998 budget proposal, the corporate
environmental income tax would be reinstated for taxable years beginning after
December 31, 1996 and before January 1, 2008.
DIVIDENDS-RECEIVED DEDUCTION AND OTHER MATTERS. The Holding Company may
exclude from its income 100% of dividends received from the Bank as a member of
the same affiliated group of corporations. The corporate dividends-received
deduction is generally 70% in the case of dividends received from unaffiliated
corporations with which the Holding Company and the Bank will not file a
consolidated tax return, except that if the Holding Company or the Bank owns
more than 20% of the stock of a corporation distributing a dividend, then 80% of
any dividends received may be deducted.
There have not been any IRS audits of the Bank's federal income tax returns
during the past five years.
STATE TAXATION
IDAHO. The Holding Company and the Bank are subject to the general
corporate tax provisions of the State of Idaho. Idaho's state corporate income
taxes are generally determined under federal tax law with some modifications.
Idaho taxable income is taxed at a rate of 8%. These taxes are reduced by
certain credits, primarily the Idaho investment tax credit in the case of the
Bank.
WASHINGTON. To the extent that the Holding Company and the Bank conducts
business in the State of Washington, any related gross income is generally
subject to a business and occupation tax (gross receipts tax). Washington
allows a deduction from gross income for interest received on certain loans
secured by first trust deeds. The business and occupation tax rate for
financial business is 1.6%.
DELAWARE. As a Delaware holding company not earning income in Delaware, the
Holding Company is exempted from Delaware corporate income tax, but is required
to file an annual report with and pay an annual franchise tax to the State of
Delaware.
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THE CONVERSION
THE OTS HAS GIVEN APPROVAL TO THE PLAN SUBJECT TO THE PLAN'S APPROVAL BY
THE MEMBERS OF THE BANK ENTITLED TO VOTE ON THE MATTER AND SUBJECT TO THE
SATISFACTION OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS IN ITS APPROVAL.
OTS APPROVAL, HOWEVER, DOES NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF
THE PLAN.
GENERAL
On January 8, 1997, the Board of Directors of the Bank unanimously adopted
the Plan of Conversion, which was amended on March 12, 1997, pursuant to which
the Bank will convert from a federally chartered mutual savings bank to a
federally chartered stock savings bank and subsequently relocate its main office
to Clarkston, Washington and convert to a Washington-chartered savings bank.
All of the capital stock of the Bank will be held by the Holding Company, a
newly formed Delaware corporation. THE FOLLOWING DISCUSSION OF THE PLAN OF
CONVERSION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PLAN OF CONVERSION,
WHICH AND IS AVAILABLE FROM THE BANK UPON REQUEST. The OTS has approved the
Plan of Conversion subject to the Plan's approval by the members of the Bank
entitled to vote on the matter at a Special Meeting called for that purpose to
be held on ___________, 1997, and subject to the satisfaction of certain other
conditions imposed by the OTS in its approval.
The Stock Conversion will be accomplished through adoption of a Federal
Stock Charter and Bylaws to authorize the issuance of capital stock by the Bank.
As part of the Stock Conversion, the Bank will transfer all of its newly issued
common stock (1,000 shares) to the Holding Company in exchange for 50% of the
net proceeds from the sale of Common Stock by the Holding Company. As soon as
practicable following the Stock Conversion, the Bank will relocate its main
office to Clarkston, Washington and consummate the Charter Conversion whereby it
will convert to a Washington-chartered savings bank. The main office relocation
will be accomplished by opening a full-service office in Clarkston, Washington
and designating that office as the Bank's main office. The Bank's
administrative offices will remain in their present location. In connection
with the Charter Conversion, the Holding Company anticipates becoming a bank
holding company under the BHCA.
The Plan of Conversion provides generally that: (i) the Bank will convert
from a federally chartered mutual savings bank to a federally chartered stock
savings bank; (ii) the Common Stock will be offered by the Holding Company in
the Subscription Offering to persons having Subscription Rights and in the
Direct Community Offering to certain members of the general public, with
preference given to natural persons and trusts of natural persons residing in
the Local Community; (iii) if necessary, shares of Common Stock not subscribed
for in the Subscription and Direct Community Offering will be offered to certain
members of the general public in a Syndicated Community Offering through a
syndicate of registered broker-dealers pursuant to selected dealers agreements;
(iv) the Holding Company will purchase all of the capital stock of the Bank to
be issued in connection with the Stock Conversion; and (v) the Bank will
relocate its main office to Clarkston, Washington and convert to a Washington-
chartered savings bank and the Holding Company will become a bank holding
company. The Stock Conversion will be effected only upon completion of the sale
of at least $12,750,000 of Common Stock to be issued pursuant to the Plan of
Conversion.
Consummation of the Stock Conversion is subject to the approval of the Plan
of Conversion by the Bank's members and the approval by the OTS of the Plan of
Conversion and the Holding Company's acquisition of the Bank. Consummation of
the Charter Conversion is subject to the approval by the OTS and the Department
of the Charter Conversion and approval by the Federal Reserve of the Holding
Company's continued ownership of the Bank. The Holding Company has received
approval from the OTS to become the holding company of the Bank, subject to the
satisfaction of certain conditions, and to acquire all of the common stock of
the Bank to be issued in the Stock Conversion in exchange for at least 50% of
the net proceeds from the sale of Common Stock in the Offerings. 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 intends to apply to the OTS and the Department for approval
of the conversion of the Bank to a Washington-chartered savings bank , after it
selects a location for its Clarkston, Washington office. The Bank is in the
process of evaluating
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locations for its Clarkston office and expects that the Charter Conversion will
not be completed until several months after the consummation of the Stock
Conversion, or longer in the event the Bank has difficulty locating suitable
office space in Clarkston. The Holding Company has intends to apply to the
Federal Reserve to become a bank holding company and for approval of the Holding
Company's continued ownership of 100% of the Bank following the Charter
Conversion concurrently with the Bank's application for the Charter Conversion.
While the Holding Company and the Bank expect receipt of all such approvals in a
timely manner, delays in receiving any such approvals may result in a delay in
the consummation of the Charter Conversion. If there is a significant delay in
obtaining the approval of the Federal Reserve for the Holding Company to become
a bank holding company or if the Federal Reserve seeks to impose conditions on
its approval that the Holding Company and the Bank believe would adversely
affect the Holding Company and the Bank, the Holding Company may elect to be
regulated by the OTS as a savings and loan holding company following the
completion of the Charter Conversion.
As part of the Conversion, the Holding Company is making a Subscription
Offering of its Common Stock to holders of Subscription Rights in the following
order of priority: (i) Eligible Account Holders (depositors with $50.00 or more
on deposit as of December 31, 1995); (ii) the Bank's ESOP; (iii) Supplemental
Eligible Account Holders (depositors with $50.00 or more on deposit as of March
31, 1997); and (iv) Other Members (depositors of the Bank as of April 30, 1997
and borrowers of the Bank with loans outstanding as of April 25, 1990 which
continue to be outstanding as of April 30, 1997).
Shares of Common Stock not sold in the Subscription and Direct Community
Offering may be offered in the Syndicated Community Offering. Regulations
require that the Direct Community and Syndicated Community Offerings be
completed within 45 days after completion of the Subscription Offering unless
extended by the Bank or the Holding Company with the approval of the regulatory
authorities. If the Syndicated Community Offering is determined not to be
feasible, the Board of Directors of the Bank will consult with the regulatory
authorities to determine an appropriate alternative method for selling the
unsubscribed shares of Common Stock. The Plan of Conversion provides that the
Conversion must be completed within 24 months after the date of the approval of
the Plan of Conversion by the members of the Bank.
No sales of Common Stock may be completed, either in the Subscription,
Direct Community or Syndicated Community Offerings, unless the Plan of
Conversion is approved by the members of the Bank.
The completion of the Offerings, however, is subject to market conditions
and other factors beyond the Bank's control. No assurance can be given as to
the length of time after approval of the Plan of Conversion at the Special
Meeting that will be required to complete the Offerings or other sale of the
Common Stock. If delays are experienced, significant changes may occur in the
estimated pro forma market value of the Holding Company and the Bank as
converted, together with corresponding changes in the net proceeds realized by
the Holding Company from the sale of the Common Stock. In the event the
Conversion is terminated, the Bank would be required to charge all Conversion
expenses against current income.
Orders for shares of Common Stock will not be filled until at least
1,275,000 shares of Common Stock have been subscribed for or sold and the OTS
approves the final valuation and the Conversion closes. If the Stock Conversion
is not completed within 45 days after the last day of the fully extended
Subscription Offering and the OTS consents to an extension of time to complete
the Stock Conversion, subscribers will be given the right to increase, decrease
or rescind their subscriptions. Unless an affirmative indication is received
from subscribers that they wish to continue to subscribe for shares, the funds
will be returned promptly, together with accrued interest at the Bank's passbook
rate from the date payment is received until the funds are returned to the
subscriber. If such period is not extended, or, in any event, if the Stock
Conversion is not completed, all withdrawal authorizations will be terminated
and all funds held will be promptly returned together with accrued interest at
the Bank's passbook rate from the date payment is received until the Conversion
is terminated.
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PURPOSES OF CONVERSION
Management of the Bank believes that the Stock Conversion offers a number
of advantages which will be important to the future growth and performance of
the Bank in that it is intended: (i) to improve the overall competitive position
of the Bank in its market area and to support possible future expansion and
diversification of operations (currently there are no specific plans,
arrangements or understandings, written or oral, regarding any such activities
other than the establishment of a Clarkston, Washington office); (ii) to afford
members of the Bank and others the opportunity to become stockholders of the
Holding Company and thereby participate more directly in, and contribute to, any
future growth of the Holding Company and the Bank; and (iii) to provide future
access to capital markets.
The Bank's Board of Directors has formed the Holding Company to serve upon
consummation of the Conversion as a holding company with the Bank as its
subsidiary. The Bank, as a federal mutual savings bank, does not have
stockholders and has no authority to issue capital stock. By converting to the
stock form of organization, the Holding Company and the Bank will be structured
in the form used by holding companies of commercial banks and by a large number
of savings institutions.
Management believes that conversion to a Washington-chartered savings bank
is in the best interests of the Bank, its members and the communities it serves.
As a result of recent legislation that provides that the SAIF will be merged
with the BIF on January 1, 1999, but only if there are no thrift institutions in
existence, the U.S. Congress is expected to consider further legislation that
may eliminate the thrift industry as a separate industry. The Treasury
Department is studying the development of a common charter for banks and thrifts
and is expected to submit a report of its findings to Congress in the near
future. The Bank cannot predict what the attributes of such common charter would
be or whether any legislation will result from this study. If developed, the
common charter may not offer all the advantages that a federal savings
association now enjoys (e.g., unrestricted nationwide branching). As a
----
Washington-chartered savings bank with offices in Washington and Idaho, the Bank
will have the flexibility to expand in Washington and Idaho, should it decide to
do so, through branch acquisitions, opening new branches, or by acquiring other
institutions. Furthermore, the Washington savings bank charter will provide the
Bank with the authority to pursue its community banking strategy. Because of the
uncertainties with regard to the future of the thrift industry, the Bank has
determined to undertake the Charter Conversion as soon as possible following the
Stock Conversion.
EFFECTS OF CONVERSION TO STOCK FORM ON DEPOSITORS AND BORROWERS OF THE BANK
VOTING RIGHTS. Savings members and borrowers will have no voting rights in
the Bank or the Holding Company and therefore will not be able to elect
directors of the Bank or the Holding Company or to control their affairs.
Currently, these rights are accorded to savings members of the Bank. Subsequent
to the Stock Conversion, voting rights will be vested exclusively in the Holding
Company with respect to the Bank and the holders of the Common Stock as to
matters pertaining to the Holding Company. Each holder of Common Stock shall be
entitled to vote on any matter to be considered by the stockholders of the
Holding Company. A stockholder will be entitled to one vote for each share of
Common Stock owned.
SAVINGS ACCOUNTS AND LOANS. The Bank's savings accounts, account balances
and existing FDIC insurance coverage of savings accounts will not be affected by
the Conversion. Furthermore, the Conversion will not affect the loan accounts,
loan balances or obligations of borrowers under their individual contractual
arrangements with the Bank.
TAX EFFECTS. The Bank has received an opinion from Breyer & Aguggia,
Washington, D.C., that the Conversion will constitute a nontaxable
reorganization under Section 368(a)(1)(F) of the Code. Among other things, the
opinion states that: (i) no gain or loss will be recognized to the Bank in its
mutual or stock form by reason of its Conversion; (ii) no gain or loss will be
recognized to its account holders upon the issuance to them of accounts in the
Bank immediately after the Conversion, in the same dollar amounts and on the
same terms and conditions as
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their accounts at the Bank in its mutual form plus interest in the liquidation
account; (iii) the tax basis of account holders' accounts in the Bank
immediately after the Conversion will be the same as the tax basis of their
accounts immediately prior to Conversion; (iv) the tax basis of each account
holder's interest in the liquidation account will be zero; (v) the tax basis of
the Common Stock purchased in the Conversion will be the amount paid and the
holding period for such stock will commence at the date of purchase; and (vi) no
gain or loss will be recognized to account holders upon the receipt or exercise
of Subscription Rights in the Conversion, except to the extent Subscription
Rights are deemed to have value as discussed below. Unlike a private letter
ruling issued by the IRS, an opinion of counsel is not binding on the IRS and
the IRS could disagree with the conclusions reached therein. In the event of
such disagreement, no assurance can be given that the conclusions reached in an
opinion of counsel would be sustained by a court if contested by the IRS.
Based upon past rulings issued by the IRS, the opinion provides that the
receipt of Subscription Rights by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members under the Plan will be taxable to the
extent, if any, that the Subscription Rights are deemed to have a fair market
value. RP Financial, a financial consulting firm retained by the Bank, whose
findings are not binding on the IRS, has indicated that the Subscription Rights
do not have any value, based on the fact that such rights are acquired by the
recipients without cost, are nontransferable and of short duration and afford
the recipients the right only to purchase shares of the Common Stock at a price
equal to its estimated fair market value, which will be the same price paid by
purchasers in the Direct Community Offering for unsubscribed shares of Common
Stock. If the Subscription Rights are deemed to have a fair market value, the
receipt of such rights may only be taxable to those Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members who exercise their
Subscription Rights. The Bank could also recognize a gain on the distribution
of such Subscription Rights. Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are encouraged to consult with their own tax
advisors as to the tax consequences in the event the Subscription Rights are
deemed to have a fair market value.
The Bank has also received an opinion from BDO Seidman, LLP, Spokane,
Washington, that, assuming the Conversion does not result in any federal income
tax liability to the Bank, its account holders, or the Holding Company,
implementation of the Plan of Conversion will not result in any Idaho income tax
liability to such entities or persons.
The opinions of Breyer & Aguggia and BDO Seidman, LLP and the letter from
RP Financial are filed as exhibits to the Registration Statement. See
"ADDITIONAL INFORMATION."
PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE CONVERSION PARTICULAR TO THEM.
LIQUIDATION ACCOUNT. In the unlikely event of a complete liquidation of
the Bank in its present mutual form, each depositor in the Bank would receive a
pro rata share of any assets of the Bank remaining after payment of claims of
all creditors (including the claims of all depositors up to the withdrawal value
of their accounts). Each depositor's pro rata share of such remaining assets
would be in the same proportion as the value of his or her deposit account to
the total value of all deposit accounts in the Bank at the time of liquidation.
After the Conversion, holders of withdrawable deposit(s) in the Bank,
including certificates of deposit ("Savings Account(s)"), shall not be entitled
to share in any residual assets in the event of liquidation of the Bank.
However, pursuant to OTS regulations, the Bank shall, at the time of the
Conversion, establish a liquidation account in an amount equal to its total
equity as of the date of the latest statement of financial condition contained
herein.
The liquidation account shall be maintained by the Bank subsequent to the
Conversion for the benefit of Eligible Account Holders and Supplemental Eligible
Account Holders who retain their Savings Accounts in the Bank. Each Eligible
Account Holder and Supplemental Eligible Account Holder shall, with respect to
each Savings Account held, have a related inchoate interest in a portion of the
liquidation account balance ("subaccount").
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The initial subaccount balance for a Savings Account held by an Eligible
Account Holder or a Supplemental Eligible Account Holder shall be determined by
multiplying the opening balance in the liquidation account by a fraction of
which the numerator is the amount of such holder's "qualifying deposit" in the
Savings Account and the denominator is the total amount of the "qualifying
deposits" of all such holders. Such initial subaccount balance shall not be
increased, and it shall be subject to downward adjustment as provided below.
If the deposit balance in any Savings Account of an Eligible Account Holder
or Supplemental Eligible Account Holder at the close of business on any annual
closing day of the Bank subsequent to December 31, 1995 is less than the lesser
of (i) the deposit balance in such Savings Account at the close of business on
any other annual closing date subsequent to December 31, 1995 or March 31, 1997
or (ii) the amount of the "qualifying deposit" in such Savings Account on
December 31, 1995 or March 31, 1997, then the subaccount balance for such
Savings Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit balance. In the event of
a downward adjustment, such subaccount balance shall not be subsequently
increased, notwithstanding any increase in the deposit balance of the related
Savings Account. If any such Savings Account is closed, the related subaccount
balance shall be reduced to zero.
In the event of a complete liquidation of the Bank (and only in such event)
each Eligible Account Holder and Supplemental Eligible Account Holder shall be
entitled to receive a liquidation distribution from the liquidation account in
the amount of the then current adjusted subaccount balance(s) for Savings
Account(s) then held by such holder before any liquidation distribution may be
made to stockholders. No merger, consolidation, bulk purchase of assets with
assumptions of Savings Accounts and other liabilities or similar transactions
with another federally insured institution in which the Bank is not the
surviving institution shall be considered to be a complete liquidation. In any
such transaction the liquidation account shall be assumed by the surviving
institution.
THE SUBSCRIPTION, DIRECT COMMUNITY AND SYNDICATED COMMUNITY OFFERINGS
THE SUBSCRIPTION AND DIRECT COMMUNITY OFFERING WILL EXPIRE AT 12:00 NOON,
PACIFIC TIME, ON THE EXPIRATION DATE, UNLESS EXTENDED OR CONTINUED BY THE
HOLDING COMPANY AND THE BANK, WITH THE APPROVAL OF THE OTS, IF NECESSARY.
SUBSCRIPTION OFFERING. In accordance with the Plan, nontransferable
Subscription Rights to purchase the Common Stock have been issued to all persons
and entities entitled to purchase the Common Stock in the Subscription Offering.
The amount of the Common Stock which these parties may purchase will be subject
to the availability of the Common Stock for purchase under the categories set
forth in the Plan. Subscription priorities have been established for the
allocation of stock to the extent that the Common Stock is available. These
priorities are as follows:
Category 1: ELIGIBLE ACCOUNT HOLDERS. Each depositor with $50.00 or more
on deposit at the Bank as of December 31, 1995 will receive nontransferable
Subscription Rights to subscribe for up to the greater of $125,000 of Common
Stock, one-tenth of one percent of the total offering of Common Stock 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 qualifying deposit of the
Eligible Account Holder and the denominator is the total amount of qualifying
deposits of all Eligible Account Holders. If the exercise of Subscription
Rights in this category results in an oversubscription, shares of Common Stock
will be allocated among subscribing Eligible Account Holders so as to permit
each Eligible Account Holder, to the extent possible, to purchase a number of
shares sufficient to make such person's total allocation equal to 100 shares or
the number of shares actually subscribed for, whichever is less. Any shares
remaining after that allocation will be allocated among the subscribing Eligible
Account Holders whose subscriptions remain unsatisfied in the proportion that
the amount of the qualifying deposit of each Eligible Account Holder whose
subscription remains unsatisfied bears to the total amount of the qualifying
deposits of all Eligible Account Holders whose subscriptions remain unsatisfied.
Subscription Rights received by officers and directors in this category based on
their increased deposits in the Bank
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in the one year period preceding December 31, 1995 are subordinated to the
Subscription Rights of other Eligible Account Holders.
Category 2: ESOP. The Plan of Conversion provides that the ESOP shall
receive nontransferable Subscription Rights to purchase up to 8% of the shares
of Common Stock issued in the Conversion. The ESOP intends to purchase 8% of
the shares of Common Stock issued in the Conversion. In the event the number of
shares offered in the Conversion is increased above the maximum of the Estimated
Valuation Range, the ESOP shall have a priority right to purchase any such
shares exceeding the maximum of the Estimated Valuation Range up to an aggregate
of 8% of the Common Stock.
Category 3: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. Each depositor with
$50.00 or more on deposit as of March 31, 1997 will receive nontransferable
Subscription Rights to subscribe for up to the greater of $125, 000 of Common
Stock, one-tenth of one percent of the total offering of Common Stock 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 qualifying deposits of the
Supplemental Eligible Account Holder and the denominator is the total amount of
qualifying deposits of all Supplemental Eligible Account Holders. If the
exercise of Subscription Rights in this category results in an oversubscription,
shares of Common Stock will be allocated among subscribing Supplemental Eligible
Account Holders so as to permit each Supplemental Eligible Account Holder, to
the extent possible, to purchase a number of shares sufficient to make such
person's total allocation equal to 100 shares or the number of shares actually
subscribed for, whichever is less. Any shares remaining after that allocation
will be allocated among the subscribing Supplemental Eligible Account Holders
whose subscriptions remain unsatisfied in the proportion that the amount of the
qualifying deposit of each Supplemental Eligible Account Holder whose
subscription remains unsatisfied bears to the total amount of the qualifying
deposits of all Supplemental Eligible Account Holders whose subscriptions remain
unsatisfied.
Category 4: OTHER MEMBERS. Each depositor of the Bank as of the Voting
Record Date and each borrower with a loan outstanding on April 25, 1990 which
continues to be outstanding as of the Voting Record Date will receive
nontransferable Subscription Rights to purchase up to $125,000 of Common Stock
to the extent shares are available following subscriptions by Eligible Account
Holders, the Bank's ESOP and Supplemental Eligible Account Holders. In the
event of an oversubscription in this category, the available shares will be
allocated among subscribing Other Members so as to permit each Other Member, to
the extent possible, to purchase a number of shares sufficient to make such
person's total allocation equal to 100 shares or the number of shares actually
subscribed for, whichever is less. Thereafter, unallocated shares will be
allocated among subscribing Other Members proportionately, based on the number
of votes on the Voting Record Date of a subscribing Other Member as compared to
the total votes on the Voting Record Date of all subscribing Other Members whose
subscriptions remain unsatisfied.
SUBSCRIPTION RIGHTS ARE NONTRANSFERABLE. PERSONS SELLING OR OTHERWISE
TRANSFERRING THEIR RIGHTS TO SUBSCRIBE FOR COMMON STOCK IN THE SUBSCRIPTION
OFFERING OR SUBSCRIBING FOR 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 OR ANOTHER AGENCY OF THE U.S. GOVERNMENT. Each
person exercising Subscription Rights will be required to certify that he or she
is purchasing such shares solely for his or her own account and that he or she
has no agreement or understanding with any other person for the sale or transfer
of such shares. ONCE TENDERED, SUBSCRIPTION ORDERS CANNOT BE REVOKED OR
MODIFIED WITHOUT THE CONSENT OF THE BANK AND THE HOLDING COMPANY.
The Subscription Offering and all Subscription Rights under the Plan will
expire at 12:00 noon, Pacific Time, on the Expiration Date, whether or not the
Bank has been able to locate each person entitled to such Subscription Rights.
The Subscription Offering may be extended by the Holding Company and the Bank up
to ______ __, 1997 without the OTS's approval. OTS regulations require that the
Holding Company complete the sale of Common Stock within 45 days after the close
of the Subscription Offering. If the sale of Common Stock is not completed
within such period, all funds received will be promptly returned with interest
at the Bank's passbook rate
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and all withdrawal authorizations will be canceled. If regulatory approval of
an extension of the time period has been granted, all subscribers will be
notified of such extension and of the duration of any extension that has been
granted, and will be given the right to increase, decrease or rescind their
orders. If an affirmative response to any resolicitation is not received by the
Holding Company from a subscriber, the subscriber's order will be rescinded and
all funds received will be promptly returned with interest (or withdrawal
authorizations will be canceled). No single extension can exceed 90 days.
DIRECT COMMUNITY OFFERING. Concurrently with the Subscription Offering,
the Holding Company is offering shares of Common Stock to certain members of the
general public in a Direct Community Offering, with preference given to natural
persons ("Preferred Subscribers") and trusts of natural persons residing in the
Local Community. Purchasers in the Direct Community Offering are eligible to
purchase up to $125,000 of Common Stock. In the event an insufficient number of
shares are available to fill orders in the Direct Community Offering, the
available shares will be allocated first to each Preferred Subscriber whose
order is accepted by the Bank, in an amount equal to the lesser of 100 shares or
the number of shares subscribed for by each such Preferred Subscriber, if
possible. Thereafter, unallocated shares will be allocated among the Preferred
Subscribers whose orders remains unsatisfied on a 100 shares per order basis
until all such orders have been filled or the remaining shares have been
allocated. If there are any shares remaining, shares will be allocated to other
persons of the general public who purchase in the Direct Community Offering
applying the same allocation described above for Preferred Subscribers. The
Direct Community Offering will terminate at 12:00 noon, Pacific Time, on the
Expiration Date unless extended by the Holding Company and the Bank, with
approval of the OTS, if necessary. Any extensions beyond 45 days after the close
of the Subscription Offering would require a resolicitation of orders, wherein
subscribers would be given the opportunity to continue their orders, in which
case they will need to affirmatively reconfirm their subscriptions prior to the
expiration of the resolicitation offering or their subscription funds will be
promptly refunded with interest at the Bank's passbook rate, or be permitted to
modify or cancel their orders. THE RIGHT OF ANY PERSON TO PURCHASE SHARES IN THE
DIRECT COMMUNITY OFFERING IS SUBJECT TO THE ABSOLUTE RIGHT OF THE HOLDING
COMPANY AND THE BANK TO ACCEPT OR REJECT SUCH PURCHASES IN WHOLE OR IN PART. IF
AN ORDER IS REJECTED IN PART, THE PURCHASER DOES NOT HAVE THE RIGHT TO CANCEL
THE REMAINDER OF THE ORDER. THE HOLDING COMPANY PRESENTLY INTENDS TO TERMINATE
THE DIRECT COMMUNITY OFFERING AS SOON AS IT HAS RECEIVED ORDERS FOR ALL SHARES
AVAILABLE FOR PURCHASE IN THE CONVERSION.
If all of the Common Stock offered in the Subscription Offering is
subscribed for, no Common Stock will be available for purchase in the Direct
Community Offering.
SYNDICATED COMMUNITY OFFERING. The Plan provides that, if necessary, all
shares of Common Stock not purchased in the Subscription and Direct Community
Offering, if any, may be offered for sale to certain members of the general
public in a Syndicated Community Offering through a syndicate of registered
broker-dealers to be formed and managed by Sandler O'Neill acting as agent of
the Holding Company. 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 Sandler O'Neill nor any registered broker-dealer shall have
any obligation to take or purchase any shares of the Common Stock in the
Syndicated Community Offering; however, Sandler O'Neill has agreed to use its
best efforts in the sale of shares in the Syndicated Community Offering.
Stock sold in the Syndicated Community Offering will be sold at the $10.00
Purchase Price, the same price as all other shares in the Offering. See "--
Stock Pricing and Number of Shares to be Issued." No person will be permitted
to subscribe in the Syndicated Community Offering for more than $125,000 of
Common Stock. See "--Marketing and Underwriting Arrangements" for a description
of the commission to be paid to the selected dealers and to Sandler O'Neill.
Sandler O'Neill may enter into agreements with selected dealers to assist
in the sale of shares in the Syndicated Community Offering. During the
Syndicated Community Offering, selected dealers may only solicit
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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
Conversion Stock. When and if Sandler O'Neill and the Holding Company believe
that enough indications of interest and orders have been received in the
Subscription Offering, the Direct Community Offering and the Syndicated
Community Offering to consummate the Conversion, Sandler O'Neill will request,
as of the Order Date, selected dealers to submit orders to purchase shares for
which they have received indications of interest from their customers. Selected
dealers will send confirmations to such customers on the next business day after
the Order Date. Selected dealers may debit the accounts of their customers on a
date which will be three business days from the Order Date ("Settlement 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 that the Holding Company established for each selected dealer. Each
customer's funds so forwarded to the Holding Company, along with all other
accounts held in the same title, will be insured by the FDIC up to the
applicable $100,000 legal limit. After payment has been received by the Holding
Company from selected dealers, funds will earn interest at the Bank's passbook
rate until the completion of the Offerings. At the completion of the
Conversion, the funds received in the Offerings will be used to purchase the
shares of Common Stock ordered. The shares issued in the Conversion cannot and
will not be insured by the FDIC or any other government agency. In the event
the Conversion is not consummated as described above, funds with interest will
be returned promptly to the selected dealers, who, in turn, will promptly credit
their customers' brokerage accounts.
The Syndicated Community Offering may terminate no more than 45 days
following the expiration of the Subscription Offering, unless extended by the
Holding Company with the approval of the OTS.
In the event the Bank is unable to find purchasers from the general public
for all unsubscribed shares, other purchase arrangements will be made by the
Board of Directors of the Bank, if feasible. Such other arrangements will be
subject to the approval of the OTS. The OTS may grant one or more extensions of
the offering period, provided that (i) no single extension exceeds 90 days, (ii)
subscribers are given the right to increase, decrease or rescind their
subscriptions during the extension period, and (iii) the extensions do not go
more than two years beyond the date on which the members approved the Plan. If
the Conversion is not completed within 45 days after the close of the
Subscription Offering, either all funds received will be returned with interest
(and withdrawal authorizations canceled) or, if the OTS has granted an extension
of time, all subscribers will be given the right to increase, decrease or
rescind their subscriptions at any time prior to 20 days before the end of the
extension period. If an extension of time is obtained, all subscribers will be
notified of such extension and of their rights to modify their orders. If an
affirmative response to any resolicitation is not received by the Holding
Company from a subscriber, the subscriber's order will be rescinded and all
funds received will be promptly returned with interest (or withdrawal
authorizations will be canceled).
PERSONS IN NON-QUALIFIED STATES. The Holding Company and the Bank will
make reasonable efforts to comply with the securities laws of all states in the
United States in which persons entitled to subscribe for stock pursuant to the
Plan reside. However, the Holding Company and the Bank are not required to
offer stock in the Subscription Offering to any person who resides in a foreign
country or resides in a state of the United States with respect to which: (i) a
small number of persons otherwise eligible to subscribe for shares of Common
Stock reside in such state; (ii) the granting of Subscription Rights or offer or
sale of shares of Common Stock to such persons would require the Holding Company
to register, under the securities laws of such state, as a broker or dealer or
to register or otherwise qualify the Common Stock for sale in such state; or
(iii) such registration or qualification would be impractical for reasons of
cost or otherwise. Where the number of persons eligible to subscribe for shares
in one state is small, the Holding Company and the Bank will base their decision
as to whether or not to offer the Common stock in such state on a number of
factors, including the size of accounts held by account holders in the state and
the cost of registering or qualifying the shares.
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LIMITATIONS ON PURCHASES OF SHARES
The Plan of Conversion provides for certain limitations to be placed upon
the purchase of Common Stock by eligible subscribers and others in the
Conversion. Each subscriber must subscribe for a minimum of 25 shares. With
the exception of the ESOP, which is expected to purchase 8% of the shares of
Common Stock issued in the Conversion, no person or entity may purchase more
than $125,000 of Common Stock in the Conversion; and no person or entity,
together with associates of and persons acting in concert with such person or
entity, may purchase in the aggregate more than $250,000 of Common Stock in the
Conversion. Officers, directors and their associates may not purchase, in the
aggregate, more than 33% of the shares of Common Stock offered in the
Conversion. For purposes of the Plan, the directors are not deemed to be acting
in concert solely by reason of their Board membership. Pro rata reductions
within each Subscription Rights category will be made in allocating shares to
the extent that the maximum purchase limitations are exceeded.
The Bank's and the Holding Company's Boards of Directors may, in their sole
discretion, increase the maximum purchase limitation set forth above up to 9.99%
of the shares of Common Stock sold in the Conversion, provided that orders for
shares which exceed 5% of the shares of Common Stock sold in the Conversion may
not exceed, in the aggregate, 10% of the shares sold in the Conversion. The
Bank and the Holding Company do not intend to increase the maximum purchase
limitation unless market conditions are such that an increase in the maximum
purchase limitation is necessary to sell a number of shares in excess of the
minimum of the Estimated Valuation Range. If the Boards of Directors decide to
increase the purchase limitation, all persons who subscribed for the maximum
number of shares will be given the opportunity to increase their subscriptions
accordingly, subject to the rights and preferences of any person who has
priority Subscription Rights.
The term "acting in concert" is defined in the Plan to mean (i) knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not pursuant to an express agreement; or (ii) a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise. In
general, a person who acts in concert with another other party shall also be
deemed to be acting in concert with any person who is also acting in concert
with that other party. THE HOLDING COMPANY AND THE BANK MAY PRESUME THAT
CERTAIN PERSONS ARE ACTING IN CONCERT BASED UPON, AMONG OTHER THINGS, JOINT
ACCOUNT RELATIONSHIPS AND THE FACT THAT SUCH PERSONS HAVE FILED JOINT SCHEDULES
13D WITH THE SEC WITH RESPECT TO OTHER COMPANIES.
The term "associate" of a person is defined in the Plan to mean (i) any
corporation or organization (other than the Bank or a majority-owned subsidiary
of the Bank) of which such person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10% or more of any class of equity
securities; (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity (excluding tax-qualified employee plans); and
(iii) any relative or spouse of such person, or any relative of such spouse, who
either has the same home as such person or who is a director or officer of the
Bank or any of its parents or subsidiaries. For example, a corporation of which
a person serves as an officer would be an associate of such person, and,
therefore, all shares purchased by such corporation would be included with the
number of shares which such person could purchase individually under the above
limitations.
The term "officer" is defined in the Plan to mean an executive officer of
the Bank, including its Chairman of the Board, President, Executive Vice
Presidents, Senior Vice Presidents, Vice Presidents in charge of principal
business functions, Secretary and Treasurer.
Common Stock purchased pursuant to the Conversion will be freely
transferable, except for shares purchased by directors and officers of the Bank
and the Holding Company and by National Association of Securities Dealers, Inc.
("NASD") members. See "-- Restrictions on Transferability by Directors and
Officers and NASD Members."
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MARKETING AND UNDERWRITING ARRANGEMENTS
The Bank and the Holding Company have engaged Sandler O'Neill as a
consultant and financial advisor in connection with the offering of the Common
Stock, and Sandler O'Neill has agreed to use its best efforts to solicit
subscriptions and purchase orders for shares of Common Stock in the Offerings.
Sandler O'Neill is not obligated to take or purchase any shares of Common Stock
in the Offerings. Based upon negotiations between the Bank and the Holding
Company concerning fee structure, Sandler O'Neill will receive a fee equal to
1.5% of the aggregate Purchase Price of the shares sold in the Subscription and
Direct Community Offering, excluding shares purchased by directors, officers,
employees, and any immediate family member thereof, and any employee benefit
plan of the Holding Company or the Bank, including the ESOP, subject to a
maximum fee equal to 1.5% of the aggregate gross proceeds at the midpoint of the
Estimated Valuation Range. 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 negotiated at such time under such agreement) to such selected
dealers, any sponsoring dealers fees, and a management fee to Sandler O'Neill of
2.0% for shares sold by NASD member firms pursuant to a selected dealers
agreement; provided, however, that any fees payable to Sandler O'Neill for
Common Stock sold by them pursuant to such a selected dealers agreement shall
not exceed 2.0% of the Purchase Price and provided, further, however, that the
aggregate fees payable to Sandler O'Neill and the selected dealers will not
exceed 7.0% of the aggregate purchase price of the Common Stock sold by selected
dealers. Fees to Sandler O'Neill and to any other broker-dealer may be deemed
to be underwriting fees, and Sandler O'Neill and such broker-dealers may be
deemed to be underwriters. Sandler O'Neill will also be reimbursed for its
reasonable out-of-pocket expenses, including legal fees, in an amount not to
exceed $50,000. Notwithstanding the foregoing, in the event the Offerings are
not consummated or Sandler O'Neill ceases, under certain circumstances after the
subscription solicitation activities are commenced, to provide assistance to the
Holding Company, Sandler O'Neill will be entitled to a fee for its management
advisory services in an amount to be agreed upon by the Bank and Sandler
O'Neill, and based upon the amount of services performed by Sandler O'Neill and
will also be reimbursed for its reasonable out-of-pocket expenses as described
above. The Holding Company and the Bank have agreed to indemnify Sandler
O'Neill for reasonable costs and expenses in connection with certain claims or
liabilities, including certain liabilities under the Securities Act. Sandler
O'Neill has received advances towards its fees totalling $50,000. Total
marketing fees to Sandler O'Neill are expected to be approximately $153,000 and
$215,000 at the minimum and the maximum of the Estimated Valuation Range,
respectively. See "PRO FORMA DATA" for the assumptions used to arrive at these
estimates.
Sandler O'Neill will perform conversion and records management services for
the Bank in the Conversion and will receive a fee for these services of $10,000,
plus reimbursement of reasonable out-of-pocket expenses which shall not exceed
$5,000.
DESCRIPTION OF SALES ACTIVITIES
The Common Stock will be offered in the Subscription and Direct Community
Offering principally by the distribution of this Prospectus and through
activities conducted at the Bank's Conversion Center at its main office
facility. The Conversion Center is expected to operate during normal business
hours throughout the Subscription and Direct Community Offering. It is expected
that at any particular time, one or more Sandler O'Neill employees will be
working at the Conversion Center. Such employees of Sandler O'Neill will be
responsible for mailing materials relating to the Subscription and Direct
Community Offering, responding to questions regarding the Conversion and the
Subscription and Direct Community Offering and processing stock orders.
Sales of Common Stock will be made by registered representatives affiliated
with Sandler O'Neill or by the selected dealers managed by Sandler O'Neill. The
management and employees of the Bank may participate in the Offerings in
clerical capacities, providing administrative support in effecting sales
transactions or, when permitted by state securities laws, answering questions of
a mechanical nature relating to the proper execution of the Order Form.
Management of the Bank may answer questions regarding the business of the Bank
when permitted by state securities laws. Other questions of prospective
purchasers, including questions as to the advisability or nature of the
investment, will be directed to registered representatives. The management and
employees of the Holding Company
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and the Bank have been instructed not to solicit offers to purchase Common Stock
or provide advice regarding the purchase of Common Stock.
No officer, director or employee of the Bank or the Holding Company will be
compensated, directly or indirectly, for any activities in connection with the
offer or sale of securities issued in the Conversion.
None of the Bank's personnel participating in the Subscription and Direct
Community Offering is registered or licensed as a broker or dealer or an agent
of a broker or dealer. The Bank's personnel will assist in the above-described
sales activities pursuant to an exemption from registration as a broker or
dealer provided by Rule 3a4-1 ("Rule 3a4-1") promulgated under the Exchange Act.
Rule 3a4-1 generally provides that an "associated person of an issuer" of
securities shall not be deemed a broker solely by reason of participation in the
sale of securities of such issuer if the associated person meets certain
conditions. Such conditions include, but are not limited to, that the
associated person participating in the sale of an issuer's securities not be
compensated in connection therewith at the time of participation, that such
person not be associated with a broker or dealer and that such person observe
certain limitations on his or her participation in the sale of securities. For
purposes of this exemption, "associated person of an issuer" is defined to
include any person who is a director, officer or employee of the issuer or a
company that controls, is controlled by or is under common control with the
issuer.
PROCEDURE FOR PURCHASING SHARES IN THE SUBSCRIPTION AND DIRECT COMMUNITY
OFFERING
To ensure that each purchaser receives a Prospectus at least 48 hours prior
to the 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 Order Forms.
To purchase shares in the Subscription and Direct Community Offering, an
executed Order Form and certification form with the required full payment for
each share subscribed for, or with appropriate authorization for withdrawal of
full payment from the subscriber's deposit account with the Bank (which may be
given by completing the appropriate blanks in the Order Form), must be received
by the Bank by 12:00 noon, Pacific Time, on the Expiration Date. Order Forms
which are not received by such time or are executed defectively or are received
without full payment (or without appropriate withdrawal instructions) are not
required to be accepted. In addition, the Bank is not obligated to accept
orders submitted on photocopied or telecopied Order Forms. The Holding Company
and the Bank have the right to waive or permit the correction of incomplete or
improperly executed Order Forms, but do not represent that they will do so.
Pursuant to the Plan of Conversion, the interpretation by the Holding Company
and the Bank of the terms and conditions of the Plan of Conversion and of the
Order Form will be final. Once received, an executed Order Form may not be
modified, amended or rescinded without the consent of the Bank unless the
Conversion has not been completed within 45 days after the end of the
Subscription Offering, unless such period has been extended.
In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priorities, depositors as of the Eligibility Record Date (December 31,
1995) and/or the Supplemental Eligibility Record Date (March 31, 1997) and/or
the Voting Record Date (April 30, 1997) must list all accounts on the Order Form
giving all names in each account and the account number.
Full payment for subscriptions may be made (i) in cash if delivered in
person at the Bank, (ii) by check, bank draft, or money order, or (iii) by
authorization of withdrawal from deposit accounts maintained with the Bank.
Appropriate means by which such withdrawals may be authorized are provided on
the Order Form. No wire transfers will be accepted. Interest will be paid on
payments made by cash, check, bank draft or money order at the Bank's passbook
rate from the date payment is received until the completion or termination of
the Conversion. If payment is made by authorization of withdrawal from deposit
accounts, the funds authorized to be withdrawn from
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a deposit account will continue to accrue interest at the contractual rates
until completion or termination of the Conversion (unless the certificate
matures after the date of receipt of the Order Form but prior to closing, in
which case funds will earn interest at the passbook rate from the date of
maturity until consummation of the Conversion), but a hold will be placed on
such funds, thereby making them unavailable to the depositor until completion or
termination of the Conversion. At the completion of the Conversion, the funds
received in the Offerings will be used to purchase the shares of Common Stock
ordered. THE SHARES ISSUED IN THE CONVERSION CANNOT AND WILL NOT BE INSURED BY
THE FDIC OR ANY OTHER GOVERNMENT AGENCY. In the event that the Conversion is
not consummated for any reason, all funds submitted will be promptly refunded
with interest as described above. Any subscriber funds handled by NASD members
in the Subscription and Direct Community Offering will be handled in compliance
with Rule 15c2-4 under the Exchange Act.
If a subscriber authorizes the Bank to withdraw the amount of the aggregate
Purchase Price from his or her deposit account, the Bank will do so as of the
effective date of Conversion, though the account must contain the full amount
necessary for payment at the time the subscription order is received. The Bank
will waive any applicable penalties for early withdrawal from certificate
accounts. If the remaining balance in a certificate account is reduced below
the applicable minimum balance requirement at the time that the funds actually
are transferred under the authorization the certificate will be canceled at the
time of the withdrawal, without penalty, and the remaining balance will earn
interest at the Bank's passbook rate.
If the ESOP subscribes for shares during the Subscription Offering, the
ESOP will not be required to pay for the shares subscribed for at the time it
subscribes, but rather may pay for such shares of Common Stock subscribed for at
the Purchase Price upon consummation of the Conversion, provided that there is
in force from the time of its subscription until such time, a loan commitment
from an unrelated financial institution or the Holding Company to lend to the
ESOP, at such time, the aggregate Purchase Price of the shares for which it
subscribed.
Individual Retirement Accounts ("IRAs") maintained in the Bank do not
permit investment in the Common Stock. A depositor interested in using his or
her IRA funds to purchase Common Stock must do so through a self-directed IRA.
Since the Bank does not offer such accounts, it will allow such a depositor to
make a trustee-to-trustee transfer of the IRA funds to a trustee offering a
self-directed IRA program with the agreement that such funds will be used to
purchase the Holding Company's Common Stock in the Offerings. There will be no
early withdrawal or IRS interest 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 may be
payable to the new trustee. Depositors interested in using funds in a Bank IRA
to purchase Common Stock should contact the Conversion Center at the Bank so
that the necessary forms may be forwarded for execution and returned prior to
the Expiration Date. In addition, the provisions of ERISA and IRS regulations
require that officers, directors and 10% shareholders who use self-directed IRA
funds to purchase shares of Common Stock in the Subscription Offering make such
purchases for the exclusive benefit of IRAs.
Certificates representing shares of Common Stock purchased, and any refund
due, will be mailed to purchasers at such address as may be specified in
properly completed Order Forms or to the last address of such persons appearing
on the records of the Bank as soon as practicable following consummation of the
sale of all shares of Common Stock. Any certificates returned as undeliverable
will be disposed of in accordance with applicable law. Until certificates for
the Common Stock are available and delivered to purchasers, purchasers may not
be able to sell the shares of Common Stock which they purchased, even though
trading of the Common Stock may have commenced.
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED
Federal regulations require that the aggregate purchase price of the
securities sold in connection with the Conversion be based upon an estimated pro
forma value of the Holding Company and the Bank as converted (i.e., taking into
----
account the expected receipt of proceeds from the sale of securities in the
Conversion), as determined by an independent appraisal. The Bank and the
Holding Company have retained RP Financial to prepare an appraisal
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of the pro forma market value of the Holding Company and the Bank as converted,
as well as a business plan. RP Financial will receive a fee expected to total
approximately $25,000 for its appraisal services and preparation of a business
plan, plus reasonable out-of-pocket expenses incurred in connection with the
appraisal. The Bank has agreed to indemnify RP Financial under certain
circumstances against liabilities and expenses (including legal fees) arising
out of, related to, or based upon the Conversion.
RP Financial has prepared an appraisal of the estimated pro forma market
value of the Holding Company and the Bank as converted taking into account the
formation of the Holding Company as the holding company for the Bank. For its
analysis, RP Financial undertook substantial investigations to learn about the
Bank's business and operations. Management supplied financial information,
including annual financial statements, information on the composition of assets
and liabilities, and other financial schedules. In addition to this information,
RP Financial reviewed the Bank's Form AC Application for Approval of Conversion
and the Holding Company's Form SB-2 Registration Statement. Furthermore, RP
Financial visited the Bank's facilities and had discussions with the Bank's
management and its special conversion legal counsel, Breyer & Aguggia. No
detailed individual analysis of the separate components of the Holding Company's
or the Bank's assets and liabilities was performed in connection with the
evaluation.
In estimating the pro forma market value of the Holding Company and the
Bank as converted, as required by applicable regulatory guidelines, RP
Financial's analysis utilized three selected valuation procedures, the
Price/Book ("P/B") method, the Price/Earnings ("P/E") method, and Price/Assets
("P/A") method, all of which are described in its report. RP Financial placed
the greatest emphasis on the P/E and P/B methods in estimating pro forma market
value. In applying these procedures, RP Financial reviewed, among other factors,
the economic make-up of the Bank's primary market area, the Bank's financial
performance and condition in relation to publicly-traded institutions that RP
Financial deemed comparable to the Bank, the specific terms of the offering of
the Holding Company's Common Stock, the pro forma impact of the additional
capital raised in the Conversion, conditions of securities markets in general,
and the market for thrift institution common stock in particular. RP Financial's
analysis provides an approximation of the pro forma market value of the Holding
Company and the Bank as converted based on the valuation methods applied and the
assumptions outlined in its report. Included in its report were certain
assumptions as to the pro forma earnings of the Holding Company after the
Conversion that were utilized in determining the appraised value. These
assumptions included expenses as described under "PRO FORMA DATA," an assumed
after-tax rate of return on the net Conversion proceeds of 3.96%, purchases by
the ESOP of 8% of the stock sold in the Conversion and purchases in the open
market by the MRP of a number of shares equal to 4% of the stock sold in the
Conversion at the Purchase Price. See "PRO FORMA DATA" for additional
information concerning these assumptions. The use of different assumptions may
yield somewhat different results.
On the basis of the foregoing, RP Financial has advised the Holding Company
and the Bank that, in its opinion, as of February 28, 1997, the aggregate
estimated pro forma market value of the Holding Company and the Bank as
converted and, therefore, the Common Stock was within the valuation range of
$12,750,000 to $17,250,000 with a midpoint of $15,000,000. After reviewing the
methodology and the assumptions used by RP Financial in the preparation of the
appraisal, the Board of Directors established the Estimated Valuation Range,
which is equal to the valuation range of $12,750,000 to $17,250,000 with a
midpoint of $15,000,000. In determining the reasonableness and adequacy of the
appraisal, consistent with OTS regulations and policies, the Board of Directors
reviewed the methodology and reasonableness of the assumptions utilized by RP
Financial in the preparation of the appraisal. Assuming that the shares are sold
at $10.00 per share in the Conversion, the estimated number of shares would be
between 1,275,000 and 1,725,000 with a midpoint of 1,500,000. The Purchase Price
of $10.00 was determined by discussion among the Boards of Directors of the Bank
and the Holding Company and Sandler O'Neill, taking into account, among other
factors (i) the requirement under OTS regulations that the Common Stock be
offered in a manner that will achieve the widest distribution of the stock and
(ii) desired liquidity in the Common Stock subsequent to the Conversion. Since
the outcome of the Offerings relate in large measure to market conditions at the
time of sale, it is not possible to determine the exact number of shares that
will be issued by the Holding Company at this time. The Estimated Valuation
Range may be amended, with the approval of the OTS, if
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necessitated by developments following the date of such appraisal in, among
other things, market conditions, the financial condition or operating results of
the Bank, regulatory guidelines or national or local economic conditions.
RP Financial's appraisal report is filed as an exhibit to the Registration
Statement. See "ADDITIONAL INFORMATION."
If, upon completion of the Subscription Offering, at least the minimum
number of shares are subscribed for, RP Financial, after taking into account
factors similar to those involved in its prior appraisal, will determine its
estimate of the pro forma market value of the Holding Company and the Bank as
converted, as of the close of the Subscription Offering.
No sale of the shares will take place unless prior thereto RP Financial
confirms to the OTS that, to the best of RP Financial's knowledge and judgment,
nothing of a material nature has occurred that would cause it to conclude that
the actual total purchase price on an aggregate basis was incompatible with its
estimate of the total pro forma market value of the Holding Company and the Bank
as converted at the time of the sale. If, however, the facts do not justify such
a statement, the Offerings or other sale may be canceled, a new Estimated
Valuation Range and price per share set and new Subscription, Direct Community
and Syndicated Community Offerings held. Under such circumstances, 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.
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. In the event
the total amount of shares issued is less than 1,275,000 or more than 1,983,750
(15% above the maximum of the Estimated Valuation Range), for aggregate gross
proceeds of less than $12,750,000 or more than $19,837,500, subscription funds
will be returned promptly with interest to each subscriber unless he indicates
otherwise. In the event a new valuation range is established by RP Financial,
such new range will be subject to approval by the OTS.
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 for investment purposes by directors, officers, their associates
and other persons in excess of the limitations provided in the Plan of
Conversion and in excess of the proposed director purchases set forth herein,
although no such purchases are currently intended. If such other purchase
arrangements cannot be made, the Plan will terminate.
In formulating its appraisal, RP Financial relied upon the truthfulness,
accuracy and completeness of all documents the Bank furnished it. RP Financial
also considered financial and other information from regulatory agencies, other
financial institutions, and other public sources, as appropriate. While RP
Financial believes this information to be reliable, RP Financial does not
guarantee the accuracy or 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 Holding Company and the Bank. THE APPRAISAL BY RP FINANCIAL IS NOT INTENDED
TO BE, AND MUST NOT BE INTERPRETED AS, A RECOMMENDATION OF ANY KIND AS TO THE
ADVISABILITY OF VOTING TO APPROVE THE CONVERSION OR OF PURCHASING SHARES OF
COMMON STOCK. MOREOVER, BECAUSE THE APPRAISAL IS NECESSARILY BASED ON MANY
FACTORS WHICH CHANGE FROM TIME TO TIME, THERE IS NO ASSURANCE THAT PERSONS WHO
PURCHASE SUCH SHARES IN THE CONVERSION WILL LATER BE ABLE TO SELL SHARES
THEREAFTER AT PRICES AT OR ABOVE THE PURCHASE PRICE.
RESTRICTIONS ON REPURCHASE OF STOCK
Upon consummation of the Conversion, the Board of Directors of the Holding
Company will have the authority to adopt stock repurchase plans, subject to
statutory and regulatory requirements, including the OTS regulations applicable
for three years from the date of consummation of the Conversion. Pursuant to OTS
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regulations, OTS-regulated savings associations (and their holding companies)
may not for a period of three years from the date of an institution's mutual-to-
stock conversion repurchase any of its common stock from any person, except in
the event of: (i) an offer made to all of its stockholders to repurchase the
common stock on a pro rata basis, approved by the OTS; or (ii) the repurchase of
qualifying shares of a director; or (iii) a purchase in the open market by a
tax-qualified or non-tax-qualified employee stock benefit plan in an amount
reasonable and appropriate to fund the plan. Furthermore, repurchases are
prohibited if the effect thereof would cause the association's regulatory
capital to be reduced below (a) the amount required for the liquidation account
or (b) the regulatory capital requirements imposed by the OTS. Repurchases are
generally prohibited during the first year following conversion. However, recent
OTS policy has relaxed this restriction, particularly during the second six
months after conversion. While an applicant needs to demonstrate the existence
of "exceptional circumstances" during the first six months after conversion, the
OTS has indicated that it would analyze repurchases during months six through 12
after conversion on a case-by-case basis. Upon ten days' written notice to the
OTS, and if the OTS does not object, an institution may make open market
repurchases of its outstanding common stock during years two and three following
the conversion, provided that (x) no more than 5% of the outstanding common
stock is to be purchased during any 12-month period, (y) the repurchases do not
cause the association to become undercapitalized as defined under the OTS prompt
corrective action regulations and (z) the repurchase would not adversely affect
the financial condition of the association. No assurances, however, can be given
that the OTS will approve a repurchase program under current policy or that such
policy will not change or become more restrictive.
SHARES TO BE PURCHASED BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS
The following table sets forth certain information as to the approximate
purchases of Common Stock by each director and executive officer of the Bank,
including their associates, as defined by applicable regulations. No individual
has entered into a binding agreement with respect to such intended purchases.
Directors and officers of the Bank and their associates may not purchase in
excess of 33% of the shares sold in the Conversion and, therefore, actual
purchases could be more or less than indicated below. For purposes of the
following table, it has been assumed that sufficient shares will be available to
satisfy subscriptions in all categories. Directors, officers and employees will
pay the same price for the shares for which they subscribe as the price that
will be paid by all other subscribers.
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<TABLE>
<CAPTION>
Percent of Percent of
Shares at Shares at
Minimum of Maximum of
Name and Anticipated Number of Anticipated Dollar Estimated Estimated
Position Shares Purchased(1) Amount Purchased Valuation Range Valuation Range
-------- --------------------- ------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Steve R. Cox 10,000 $ 100,000 0.78 0.58
Chairman
James N. Marker 2,500 25,000 0.20 0.14
First Vice Chairman
Robert S. Coleman, Sr. 10,000 100,000 0.78 0.58
Second Vice Chairman
Dr. L. Glen Carlson 15,000 150,000 1.18 0.87
Director
William J. Larson 15,000 150,000 1.18% 0.87%
Director
F. Ron McMurray 2,500 25,000 0.20 0.14
Director
W. Dean Jurgens 12,000 120,000 0.94 0.70
Director
Clyde E. Conklin 25,000 250,000 1.96 1.45
Chief Executive Officer
Larry K. Moxley 25,000 250,000 1.96 1.45
Chief Financial Officer
Terence A. Otte 5,000 50,000 0.39 0.29
Vice President
Donn L. Durgan 8,000 80,000 0.63 0.46
Vice President
Douglas R. Ax 25,000 250,000 1.96 1.45
------- ---------- ----- ----
Vice President
Total 155,000 $1,550,000 12.16% 8.99%
======= ========== ===== ====
</TABLE>
__________
(1) Excludes any shares awarded pursuant to the ESOP and MRP and options to
acquire shares pursuant to the Stock Option Plan. For a description of the
number of shares to be purchased by the ESOP and issued or reserved under
the MRP and Stock Option Plan, see "MANAGEMENT OF THE BANK -- Benefits --
Employee Stock Ownership Plan," "-- Benefits -- Stock Option Plan" and "--
Benefits -- Management Recognition Plan."
RESTRICTIONS ON TRANSFERABILITY BY DIRECTORS AND OFFICERS AND NASD MEMBERS
Shares of Common Stock purchased in the Offerings by directors and officers
of the Holding Company may not be sold for a period of one year following
consummation of the Conversion, except in the event of the death of the
stockholder or in any exchange of the Common Stock in connection with a merger
or acquisition of the Holding Company. Shares of Common Stock received by
directors or officers through the ESOP or the MRP or upon exercise of options
issued pursuant to the Stock Option Plan or purchased subsequent to the
Conversion are not subject to this restriction. Accordingly, shares of Common
Stock issued by the Holding Company to directors and officers shall bear a
legend giving appropriate notice of the restriction, and, in addition, the
Holding Company will give appropriate instructions to the transfer agent for the
Holding Company's Common Stock with respect to the restriction on transfers. Any
shares issued to directors and officers as a stock dividend, stock split or
otherwise with respect to restricted Common Stock shall be subject to the same
restrictions.
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Purchases of outstanding shares of Common Stock of the Holding Company by
directors, executive officers (or any person who was an executive officer or
director of the Bank after adoption of the Plan of Conversion) and their
associates during the three-year period following Conversion may be made only
through a broker or dealer registered with the SEC, except with the prior
written approval of the OTS. This restriction does not apply, however, to
negotiated transactions involving more than 1% of the Holding Company's
outstanding Common Stock or to the purchase of stock pursuant to the Stock
Option Plan.
The Holding Company has filed with the SEC a registration statement under
the Securities Act for the registration of the Common Stock to be issued
pursuant to the Conversion. The registration under the Securities Act of shares
of the Common Stock to be issued in the Conversion does not cover the resale of
such shares. Shares of Common Stock purchased by persons who are not affiliates
of the Holding Company may be resold without registration. Shares purchased by
an affiliate of the Holding Company will be subject to the resale restrictions
of Rule 144 under the Securities Act. If the Holding Company meets the current
public information requirements of Rule 144 under the Securities Act, each
affiliate of the Holding Company who complies with the other conditions of Rule
144 (including those that require the affiliate's sale to be aggregated with
those of certain other persons) would be able to sell in the public market,
without registration, a number of shares not to exceed, in any three-month
period, the greater of (i) 1% of the outstanding shares of the Holding Company
or (ii) the average weekly volume of trading in such shares during the preceding
four calendar weeks. Provision may be made in the future by the Holding Company
to permit affiliates to have their shares registered for sale under the
Securities Act under certain circumstances.
In addition, under guidelines of the NASD, members of the NASD and their
associates are subject to certain restrictions on the transfer of securities
purchased in accordance with Subscription Rights and to certain reporting
requirements upon purchase of such securities.
RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY
The following discussion is a summary of certain provisions of federal law
and regulations and Delaware corporate law, as well as the Certificate of
Incorporation and Bylaws of the Holding Company, relating to stock ownership and
transfers, the Board of Directors and business combinations, all of which may be
deemed to have "anti-takeover" effects. The description of these provisions is
necessarily general and reference should be made to the actual law and
regulations and to the Certificate of Incorporation and Bylaws of the Holding
Company. See "ADDITIONAL INFORMATION" as to how to obtain a copy of these
documents.
CONVERSION REGULATIONS
OTS regulations prohibit any person from making an offer, announcing an
intent to make an offer or participating in any other arrangement to purchase
stock or acquiring stock or subscription rights in a converting institution (or
its holding company) from another person prior to completion of its conversion.
Further, without the prior written approval of the OTS, no person may make such
an offer or announcement of an offer to purchase shares or actually acquire
shares in the converting institution (or its holding company) for a period of
three years from the date of the completion of the conversion if, upon the
completion of such offer, announcement or acquisition, that person would become
the beneficial owner of more than 10% of the outstanding stock of the
institution (or its holding company). The OTS has defined "person" to include
any individual, group acting in concert, corporation, partnership, association,
joint stock company, trust, unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities of an insured institution. However, offers made
exclusively to an association (or its holding company) or an underwriter or
member of a selling group acting on the converting institution's (or its holding
company's) behalf for resale to the general public are excepted. The regulation
also provides civil penalties for willful violation or assistance in any such
violation of the regulation by any person connected with the management of the
converting institution (or its holding company)
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or who controls more than 10% of the outstanding shares or voting rights of a
converting or converted institution (or its holding company).
CHANGE OF CONTROL REGULATIONS
OTS REGULATIONS. Under the Change in Bank Control Act, no person may
acquire control of an insured federal savings association or its parent holding
company unless the OTS has been given 60 days' prior written notice and has not
issued a notice disapproving the proposed acquisition. In addition, OTS
regulations provide that no company may acquire control of a savings association
without the prior approval of the OTS. Any company that acquires such control
becomes a "savings and loan holding company" subject to registration,
examination and regulation by the OTS.
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 that acquire beneficial ownership
exceeding 10% or more of any class of a savings association's stock must file
with the OTS a certification form 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. There
are also rebuttable presumptions in the regulations concerning whether a group
"acting in concert" exists, including presumed action in concert among members
of an "immediate family."
The OTS may prohibit an acquisition of control if it finds, among other
things, that (i) the acquisition would result in a monopoly or substantially
lessen competition, (ii) the financial condition of the acquiring person might
jeopardize the financial stability of the institution, or (iii) the competence,
experience or integrity of the acquiring person indicates that it would not be
in the interest of the depositors or the public to permit the acquisition of
control by such person.
FEDERAL RESERVE REGULATIONS. The Change in Bank Control Act and the BHCA,
together with the Federal Reserve regulations under those acts, require that the
consent of the Federal Reserve 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 Federal
Reserve or obtain Federal Reserve 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 --Bank Holding Company Regulation."
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ANTI-TAKEOVER PROVISIONS IN THE HOLDING COMPANY'S CERTIFICATE OF INCORPORATION
AND BYLAWS AND DELAWARE LAW
A number of provisions of the Holding Company's Certificate of
Incorporation and Bylaws deal with matters of corporate governance and certain
rights of stockholders. The following discussion is a general summary of certain
provisions of the Holding Company's Certificate of Incorporation and Bylaws and
regulatory provisions relating to stock ownership and transfers, the Board of
Directors and business combinations, which might be deemed to have a potential
"anti-takeover" effect. These provisions may have the effect of discouraging a
future takeover attempt which is not approved by the Board of Directors but
which individual Holding Company stockholders may deem to be in their best
interests or in 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 an opportunity to do
so. Such provisions will also render the removal of the incumbent Board of
Directors or management of the Holding Company more difficult. The following
description of certain of the provisions of the Certificate of Incorporation and
Bylaws of the Holding Company is necessarily general and reference should be
made in each case to such Certificate of Incorporation and Bylaws, which are
incorporated herein by reference. See "ADDITIONAL INFORMATION" as to how to
obtain a copy of these documents.
LIMITATION ON VOTING RIGHTS. The Certificate of Incorporation of the
Holding Company provides that in no event shall any record owner of any
outstanding Common Stock which is beneficially owned, directly or indirectly, by
a person who beneficially owns in excess of 10% of the then outstanding shares
of common stock (the "Limit") be entitled or permitted to any vote in respect of
the shares held in excess of the Limit, unless permitted by a resolution adopted
by a majority of the board of directors. Beneficial ownership is determined
pursuant to Rule 13d-3 of the General Rules and Regulations of the Exchange Act
and includes shares beneficially owned by such person or any of such person's
affiliates (as defined in the Certificate of Incorporation), shares which such
person or such person's affiliates have the right to acquire upon the exercise
of conversion rights or options and shares as to which such person and such
person's affiliates have or share investment or voting power, but shall not
include shares beneficially owned by the ESOP or directors, officers and
employees of the Bank or Holding Company or shares that are subject to a
revocable proxy and that are not otherwise beneficially, or deemed by the
Holding Company to be beneficially, owned by such person and his or her
affiliates.
BOARD OF DIRECTORS. The Board of Directors of the Holding Company is
divided into three classes, each of which shall contain approximately one-third
of the whole number of the members of the Board. The members of each class
shall be elected for a term of three years, with the terms of office of all
members of one class expiring each year so that approximately one-third of the
total number of directors are elected each year. The Holding Company's
Certificate of Incorporation provides that the size of the Board shall be as set
forth in the Bylaws. The Bylaws currently set the number of directors at seven.
The Certificate of Incorporation provides that any vacancy occurring in the
Board, including a vacancy created by an increase in the number of directors,
shall be filled by a vote of two-thirds of the directors then in office and any
director so chosen shall hold office for a term expiring at the annual meeting
of stockholders at which the term of the class to which the director has been
chosen expires. The classified Board is intended to provide for continuity of
the Board of Directors and to make it more difficult and time consuming for a
stockholder group to fully use its voting power to gain control of the Board of
Directors without the consent of the incumbent Board of Directors of the Holding
Company. The Certificate of Incorporation of the Holding Company provides that
a director may be removed from the Board of Directors prior to the expiration of
his or her term only for cause and only upon the vote of 80% of the outstanding
shares of voting stock. In the absence of this provision, the vote of the
holders of a majority of the shares could remove the entire Board, but only with
cause, and replace it with persons of such holders' choice.
CUMULATIVE VOTING, SPECIAL MEETINGS AND ACTION BY WRITTEN CONSENT. The
Certificate of Incorporation does not provide for cumulative voting for any
purpose. Moreover, the Certificate of Incorporation provides that special
meetings of stockholders of the Holding Company may be called only by the Board
of Directors of the Holding Company and that stockholders may take action only
at a meeting and not by written consent.
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AUTHORIZED SHARES. The Certificate of Incorporation authorizes the
issuance of 5,000,000 shares of Common Stock and 500,000 shares of preferred
stock. The shares of Common Stock and preferred stock were authorized in an
amount greater than that to be issued in the Conversion to provide the Holding
Company's Board of Directors with as much flexibility as possible to effect,
among other transactions, financings, acquisitions, stock dividends, stock
splits, restricted stock grants and the exercise of stock options. However,
these additional authorized shares may also be used by the Board of Directors,
consistent with fiduciary duties, to deter future attempts to gain control of
the Holding Company. The Board of Directors also has sole authority to determine
the terms of any one or more series of preferred stock, including voting rights,
conversion rates, and liquidation preferences. As a result of the ability to fix
voting rights for a series of preferred stock, the Board has the power, to the
extent consistent with its fiduciary duty, to issue a series of preferred stock
to persons friendly to management in order to attempt to block a tender offer,
merger or other transaction by which a third party seeks control of the Holding
Company, and thereby assist members of management to retain their positions. The
Holding Company's Board currently has no plans for the issuance of additional
shares, other than the issuance of shares of Common Stock upon exercise of stock
options and in connection with the MRP.
STOCKHOLDER VOTE REQUIRED TO APPROVE BUSINESS COMBINATIONS WITH PRINCIPAL
STOCKHOLDERS. The Certificate of Incorporation requires the approval of the
holders of at least 80% of the Holding Company's outstanding shares of voting
stock to approve certain "Business Combinations" (as defined therein) involving
a "Related Person" (as defined therein) except in cases where the proposed
transaction has been approved in advance by a majority of those members of the
Holding Company's Board of Directors who are unaffiliated with the Related
Person and were directors prior to the time when the Related Person became a
Related Person. The term "Related Person" is defined to include any individual,
corporation, partnership or other entity (other than the Holding Company or its
subsidiary) which owns beneficially or controls, directly or indirectly, 10% or
more of the outstanding shares of voting stock of the Holding Company or an
affiliate of such person or entity. This provision of the Certificate of
Incorporation applies to any "Business Combination," which is defined to
include: (i) any merger or consolidation of the Holding Company with or into any
Related Person; (ii) any sale, lease, exchange, mortgage, transfer, or other
disposition of 25% or more of the assets of the Holding Company or combined
assets of the Holding Company and its subsidiaries to a Related Person; (iii)
any merger or consolidation of a Related Person with or into the Holding Company
or a subsidiary of the Holding Company; (iv) any sale, lease, exchange,
transfer, or other disposition of 25% or more of the assets of a Related Person
to the Holding Company or a subsidiary of the Holding Company; (v) the issuance
of any securities of the Holding Company or a subsidiary of the Holding Company
to a Related Person; (vi) the acquisition by the Holding Company or a subsidiary
of the Holding Company of any securities of a Related Person; (vii) any
reclassification of common stock of the Holding Company or any recapitalization
involving the common stock of the Holding Company; or (viii) any agreement or
other arrangement providing for any of the foregoing.
Under Delaware law, absent this provision, business combinations, including
mergers, consolidations and sales of substantially all of the assets of a
corporation must, subject to certain exceptions, be approved by the vote of the
holders of a majority of the outstanding shares of common stock of the Holding
Company and any other affected class of stock. One exception under Delaware law
to the majority approval requirement applies to stockholders owning 15% or more
of the common stock of a corporation for a period of less than three years. Such
15% stockholder, in order to obtain approval of a business combination, must
obtain the approval of two-thirds of the outstanding stock, excluding the stock
owned by such 15% stockholder, or satisfy other requirements under Delaware law
relating to board of director approval of his or her acquisition of the shares
of the Holding Company. The increased stockholder vote required to approve a
business combination may have the effect of foreclosing mergers and other
business combinations which a majority of stockholders deem desirable and place
the power to prevent such a merger or combination in the hands of a minority of
stockholders.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to the
Holding Company's Certificate of Incorporation must be approved by a majority
vote of its Board of Directors and also by a majority of the outstanding shares
of its voting stock, provided, however, that an affirmative vote of at least 80%
of the outstanding voting stock entitled to vote (after giving effect to the
provision limiting voting rights) is required to
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amend or repeal certain provisions of the Certificate of Incorporation,
including the provision limiting voting rights, the provisions relating to
approval of certain business combinations, calling special meetings, the number
and classification of directors, director and officer indemnification by the
Holding Company and amendment of the Holding Company's Bylaws and Certificate of
Incorporation. The Holding Company's Bylaws may be amended by its Board of
Directors, or by a vote of 80% of the total votes eligible to be voted at a duly
constituted meeting of stockholders.
STOCKHOLDER NOMINATIONS AND PROPOSALS. The Certificate of Incorporation of
the Holding Company requires a stockholder who intends to nominate a candidate
for election to the Board of Directors, or to raise new business at a
stockholder meeting to give not less than 30 nor more than 60 days' advance
notice to the Secretary of the Holding Company. The notice provision requires a
stockholder who desires to raise new business to provide certain information to
the Holding Company concerning the nature of the new business, the stockholder
and the stockholder's interest in the business matter. Similarly, a stockholder
wishing to nominate any person for election as a director must provide the
Holding Company with certain information concerning the nominee and the
proposing stockholder.
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 that 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 Conversion proceeds
into productive assets during the initial period after the Conversion. The Board
of Directors believes these provisions are in the best interest of the Bank and
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 interest 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 discourage
persons from proposing a merger or other transaction at a price reflective of
the true value of the Holding Company and that is in the best interest of all
stockholders.
Attempts to acquire control of financial institutions and their holding
companies have recently become increasingly common. Takeover attempts that have
not been negotiated with and approved by the Board of Directors present to
stockholders the risk of a takeover on terms that may be less favorable than
might otherwise be available. A transaction that 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 of the Holding
Company for 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 the 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
that 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 benefits of certain protective
provisions of the Exchange Act, if the number of beneficial owners became less
than 300, thereby allowing for Exchange Act deregistration.
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 that would not be approved by the Holding
Company's Board, but
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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 Board 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 Conversion, the Holding Company may adopt additional
charter provisions regarding the acquisition of its equity securities that would
be permitted for a Delaware business 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.
The cumulative effect of the restriction on acquisition of the Holding
Company contained in the Certificate of Incorporation and Bylaws of the Holding
Company and in Federal and Delaware law may be to discourage potential takeover
attempts and perpetuate incumbent management, even though certain stockholders
of the Holding Company may deem a potential acquisition to be in their best
interests, or deem existing management not to be acting in their best interests.
DESCRIPTION OF CAPITAL STOCK
OF THE HOLDING COMPANY
GENERAL
The Holding Company is authorized to issue 5,000,000 shares of Common Stock
having a par value of $.01 per share and 500,000 shares of preferred stock
having a par value of $.01 per share. The Holding Company currently expects to
issue up to 1,725,000 shares of Common Stock and no shares of preferred stock in
the Conversion. Each share of the Holding Company's Common Stock will have the
same relative rights as, and will be identical in all respects with, each other
share of Common Stock. Upon payment of the Purchase Price for the Common Stock,
in accordance with the Plan of Conversion, all such stock will be duly
authorized, fully paid and nonassessable.
THE COMMON STOCK OF THE HOLDING COMPANY WILL REPRESENT NONWITHDRAWABLE
CAPITAL, WILL NOT BE AN ACCOUNT OF ANY TYPE, AND WILL NOT BE INSURED BY THE FDIC
OR ANY OTHER GOVERNMENT AGENCY.
COMMON STOCK
DIVIDENDS. The Holding Company can pay dividends out of statutory surplus
or from certain net profits if, as and when declared by its Board of Directors.
The payment of dividends by the Holding Company is subject to limitations which
are imposed by law and applicable regulation. See "DIVIDEND POLICY" and
"REGULATION." The holders of Common Stock of the Holding Company will be
entitled to receive and share equally in such dividends as may be declared by
the Board of Directors of the Holding Company out of funds legally available
therefor. If the Holding Company issues preferred stock, the holders thereof
may have a priority over the holders of the Common Stock with respect to
dividends.
STOCK REPURCHASES. The Plan and OTS regulations place certain limitations
on the repurchase of the Holding Company's capital stock. See "THE CONVERSION -
- - Restrictions on Repurchase of Stock" and "USE OF PROCEEDS."
VOTING RIGHTS. Upon Conversion, the holders of Common Stock of the Holding
Company will possess exclusive voting rights in the Holding Company. They will
elect the Holding Company's Board of Directors and act on such other matters as
are required to be presented to them under Delaware law or as are otherwise
presented to them by the Board of Directors. Except as discussed in
"RESTRICTIONS ON ACQUISITION OF THE
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HOLDING COMPANY," each holder of Common Stock will be entitled to one vote per
share and will not have any right to cumulate votes in the election of
directors. If the Holding Company issues preferred stock, holders of the Holding
Company preferred stock may also possess voting rights. Certain matters require
a vote of 80% of the outstanding shares entitled to vote thereon. See
"RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY."
As a federal mutual savings bank, corporate powers and control of the Bank
are vested in its Board of Directors, who elect the officers of the Bank and who
fill any vacancies on the Board of Directors as it exists upon Conversion.
Subsequent to Conversion, voting rights will be vested exclusively in the owners
of the shares of capital stock of the Bank, all of which will be owned by the
Holding Company, and voted at the direction of the Holding Company's Board of
Directors. Consequently, the holders of the Common Stock will not have direct
control of the Bank.
LIQUIDATION. In the event of any liquidation, dissolution or winding up of
the Bank, the Holding Company, as holder of the Bank's capital stock would be
entitled to receive, after payment or provision for payment of all debts and
liabilities of the Bank (including all deposit accounts and accrued interest
thereon) and after distribution of the balance in the special liquidation
account to Eligible Account Holders and Supplemental Eligible Account Holders
(see "THE CONVERSION"), all assets of the Bank available for distribution. In
the event of liquidation, dissolution or winding up of the Holding Company, the
holders of its common stock would be entitled to receive, after payment or
provision for payment of all its debts and liabilities, all of the assets of the
Holding Company available for distribution. If Holding Company preferred stock
is issued, the holders thereof may have a priority over the holders of the
Common Stock in the event of liquidation or dissolution.
PREEMPTIVE RIGHTS. Holders of the Common Stock of the Holding Company will
not be entitled to preemptive rights with respect to any shares that may be
issued. The Common Stock is not subject to redemption.
PREFERRED STOCK
None of the shares of the authorized Holding Company preferred stock will
be issued in the Conversion and there are no plans to issue the preferred stock.
Such stock may be issued with such designations, powers, preferences and rights
as the Board of Directors may from time to time determine. The Board of
Directors can, without stockholder approval, issue preferred stock with voting,
dividend, liquidation and conversion rights that could dilute the voting
strength of the holders of the Common Stock and may assist management in
impeding an unfriendly takeover or attempted change in control.
RESTRICTIONS ON ACQUISITION
Acquisitions of the Holding Company are restricted by provisions in its
Certificate of Incorporation and Bylaws and by the rules and regulations of
various regulatory agencies. See "REGULATION" and "RESTRICTIONS ON ACQUISITION
OF THE HOLDING COMPANY."
REGISTRATION REQUIREMENTS
The Holding Company will register the Common Stock with the SEC pursuant to
Section 12(g) of the Exchange Act upon the completion of the Conversion and will
not deregister its Common Stock for a period of at least three years following
the completion of the Conversion. Upon such registration, the proxy and tender
offer rules, insider trading reporting and restrictions, annual and periodic
reporting and other requirements of the Exchange Act will be applicable.
102
<PAGE>
LEGAL AND TAX OPINIONS
The legality of the Common Stock has been passed upon for the Holding
Company by Breyer & Aguggia, Washington, D.C. The federal tax consequences of
the Offerings have been opined upon by Breyer & Aguggia and the Idaho tax
consequences of the Offerings have been opined upon by BDO Seidman, LLP,
Spokane, Washington. Breyer & Aguggia and BDO Seidman, LLP have consented to the
references herein to their opinions. Certain legal matters will be passed upon
for Sandler O'Neill by Thacher Proffitt & Wood, Washington, D.C.
EXPERTS
The consolidated financial statements of the Bank as of March 31, 1996 and
for each of the two years in the period ended March 31, 1996 included in this
Prospectus have been audited by BDO Seidman, LLP, independent auditors, as
stated in its report appearing herein, and have been so included in reliance
upon the report of such firm given upon its authority as experts in accounting
and auditing.
RP Financial has consented to the publication herein of the summary of its
report to the Bank setting forth its opinion as to the estimated pro forma
market value of the Holding Company and the Bank as converted and its letter
with respect to subscription rights and to the use of its name and statements
with respect to it appearing herein.
ADDITIONAL INFORMATION
The Holding Company has filed with the SEC a Registration Statement on Form
SB-2 (File No. 333-23395) under the Securities Act with respect to the Common
Stock offered in the Conversion. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. Such
information may be inspected at the public reference facilities maintained by
the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at its
regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies
may be obtained at prescribed rates from the Public Reference Section of the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the Registration
Statement is publicly available through the SEC's World Wide Web site on the
Internet (http://www.sec.gov).
The Bank has filed with the OTS an Application for Approval of Conversion,
which includes proxy materials for the Bank's Special Meeting and certain other
information. This Prospectus omits certain information contained in such
Application. The Application, including the proxy materials, exhibits and
certain other information that are a part thereof, may be inspected, without
charge, at the offices of the OTS, 1700 G Street, N.W., Washington, D.C. 20552
and at the office of the Regional Director of the OTS at the West Regional
Office of the OTS, 1 Montgomery Street, Suite 400, San Francisco, California
94104.
103
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FIRSTBANK NORTHWEST
<TABLE>
<CAPTION>
Pages
<S> <C>
Independent Auditors' Report................................ F-1
Consolidated Statements of Financial Condition as of
March 31, 1996 and December 31, 1996....................... F-2
Consolidated Statements of Income for the Years Ended
March 31, 1995 and 1996 and the Nine Months Ended
December 31, 1995 and 1996................................. 21
Consolidated Statements of Changes in Equity for the Years
Ended March 31, 1995 and 1996 and the Nine Months Ended
December 31, 1995 and 1996................................. F-6
Consolidated Statements of Cash Flows for the Years
Ended March 31, 1995 and 1996 and the Nine Months Ended
December 31, 1995 and 1996................................. F-7
Summary of Significant Accounting Policies.................. F-10
Notes to Consolidated Financial Statements.................. F-16
</TABLE>
* * *
All schedules are omitted as the required information either is not
applicable or is included in the Consolidated Financial Statements or related
Notes.
Separate financial statements on the Holding Company have not been included
since it will not engage in material transactions, if any, until after the
Conversion. The Holding Company, which has been inactive to date, has no
significant assets, liabilities, revenues, expenses or contingent liabilities.
104
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
First Federal Bank of Idaho, a Federal Savings Bank, and Subsidiary
We have audited the accompanying consolidated statements of financial condition
of First Federal Bank of Idaho, a Federal Savings Bank, and Subsidiary (the
Bank) as of March 31, 1995 and 1996, and the related consolidated statements of
income, changes in equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Bank's
management. Our responsibility is to express an opinion on these consolidated
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 audits 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 above present
fairly, in all material respects, the consolidated financial position of First
Federal Bank of Idaho, a Federal Savings Bank, and Subsidiary at March 31, 1995
and 1996 and the consolidated results of their operations and their cash flows
for the years then ended in conformity with generally accepted accounting
principles.
January 31, 1997, except for Note 15
which is as of March 12, 1997
F-1
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
================================================================================================
March 31, March 31, December 31,
1995 1996 1996
- ------------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS (Note 14):
Non-interest bearing cash deposits $ 3,283,998 $ 3,549,349 $ 4,948,433
Interest bearing deposits 364,720 9,366,053 249,979
Federal funds sold 523,387 665,463 566,203
- ------------------------------------------------------------------------------------------------
Total cash and cash equivalents 4,172,105 13,580,865 5,764,615
Investment securities: (Notes 1 and 14)
Held-to-maturity 6,732,171 10,544,953 5,189,358
Available-for-sale 1,289,097 1,328,295 -
Mortgage-backed securities held-to-maturity
(Notes 2 and 14) 2,840,282 2,487,998 2,342,753
Loans receivable, net (Notes 3, 8, 9, and 14) 82,777,468 93,817,254 111,085,210
Accrued interest receivable (Note 4) 951,862 1,075,384 1,185,885
Real estate owned - 76,163 195,792
Stock in FHLB, at cost (Notes 12 and 14) 817,800 875,600 928,975
Premises and equipment, net (Note 5) 3,060,906 4,679,644 4,772,423
Income taxes receivable (Note 7) 73,000 10,667 -
Cash surrender value of life insurance polices 1,240,670 1,283,628 1,333,905
Mortgage servicing assets 11,372 10,598 213,438
Other assets 153,879 61,242 181,734
- ------------------------------------------------------------------------------------------------
TOTAL ASSETS $104,120,612 $129,832,291 $133,194,088
================================================================================================
</TABLE>
F-2
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
============================================================================================================
March 31, March 31, December 31,
1995 1996 1996
- ------------------------------------------------------------------------------------------------------------
(Unaudited)
LIABILITIES AND EQUITY
<S> <C> <C> <C>
LIABILITIES:
Deposits (Notes 6, 13, and 14) $88,787,009 $115,324,069 $105,348,812
Accrued interest on deposits 18,911 31,386 6,629
Advances from borrowers for taxes and insurance 1,179,763 1,076,174 981,485
Income taxes payable (Note 7) - - 154,376
Advances from FHLB (Notes 12 and 14) 4,000,000 2,304,028 15,059,583
Deferred federal and state income taxes (Note 7) 221,000 70,000 144,726
Accrued expenses and other liabilities 409,707 670,429 680,661
- ------------------------------------------------------------------------------------------------------------
Total liabilities 94,616,390 119,476,086 122,376,272
- ------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTES 3, 10, 11, 13 AND 15)
EQUITY:
Retained earnings, substantially
restricted (Note 8) 9,807,321 10,395,106 10,817,816
Unrealized loss on investment securities
available-for-sale, net of tax (Note 1) (303,099) (38,901) -
- ------------------------------------------------------------------------------------------------------------
Total equity 9,504,222 10,356,205 10,817,816
- ------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY $104,120,612 $129,832,291 $133,194,088
============================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-3
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
<TABLE>
<CAPTION>
=============================================================================================================
Unrealized Loss
on Investment
Retained Securities
Earnings, Available-
Substantially for-Sale, Total
Restricted net of tax Equity
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, April 1, 1994 $ 9,054,158 $(257,579) $ 8,796,579
Net income 753,163 - 753,163
Change in unrealized loss on investment
securities available-for-sale, net of tax - (45,520) (45,520)
- -------------------------------------------------------------------------------------------------------------
BALANCE, March 31, 1995 9,807,321 (303,099) 9,504,222
Net income 587,785 - 587,785
Change in unrealized loss on investment
securities available-for-sale, net of tax - 64,198 64,198
Write-down of investment securities available-
for-sale due to permanent impairment - 200,000 200,000
- -------------------------------------------------------------------------------------------------------------
BALANCE, March 31, 1996 10,395,106 (38,901) 10,356,205
Net income (unaudited) 422,710 - 422,710
Loss on sale of investment securities
available-for-sale (unaudited) - 38,901 38,901
- -------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1996 (unaudited) $10,817,816 $ - $10,817,816
============================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-4
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
March 31, December 31,
------------------------------ ------------------------------
1995 1996 1995 1996
- ---------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Cash Flows from Operating
Activities:
Net income $ 753,163 $ 587,785 $ 799,330 $ 422,710
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 338,311 299,870 216,154 267,783
Provision for loan losses 27,453 150,000 78,312 193,619
Write-down on impaired
investment securities
available-for-sale - 200,000 - -
Loss on sale of investment
securities available-for-sale - - - 89,789
Loss on sale of real estate owned - - - 1,815
Provision for deferred income
taxes 39,000 (126,000) (11,422) 49,726
Changes in assets and liabilities:
Accrued interest receivable (235,412) (123,522) (300,573) (110,501)
Other assets (54,454) 93,411 83,880 (323,332)
Income taxes receivable (payable) (26,700) 62,333 15,396 165,043
Accrued expenses and other liabilities (22,769) 273,197 110,743 (14,525)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 818,592 1,417,074 991,820 742,127
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
F-5
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
March 31, December 31,
---------------------------------- ----------------------------------
1995 1996 1995 1996
- ---------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of mortgage-backed
securities held-to-maturity $ - $ - $ - $ (109,082)
Proceeds from maturities of
mortgage-backed securities
held-to-maturity 589,070 340,320 250,621 245,367
Purchases of investment securities
held-to-maturity (8,578,024) (8,387,090) (1,405,247) (8,349,154)
Proceeds from maturities of investment
securities held-to-maturity 5,934,539 4,586,825 3,666,190 13,700,736
Proceeds from sale of investment
securities available-for-sale - - - 1,302,406
Decrease in loans receivable from
loans sold 51,566,000 69,769,000 52,376,000 46,407,000
Other net change in loans receivable (58,154,263) (81,034,949) (63,369,015) (64,064,367)
FHLB stock dividends (48,500) (57,800) (41,900) (53,375)
Purchases of premises and equipment (668,435) (1,919,161) (1,883,380) (347,588)
Purchase of other invested assets (1,240,670) - - -
Net increase in cash surrender
value of life insurance policies - (42,958) (51,727) (50,277)
Proceeds from sale of real estate owned - - - 74,348
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (10,600,283) (16,745,813) (10,458,458) (11,243,986)
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (3,070,811) 26,537,060 30,455,892 (9,975,257)
Advances from borrowers for
taxes and insurance 270,935 (103,589) (386,164) (94,689)
Advances from FHLB 4,000,000 22,500,000 22,500,000 39,150,000
Payments on advances from FHLB - (24,195,972) (24,033,472) (26,394,445)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,200,124 24,737,499 28,536,256 2,685,609
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-6
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
March 31, December 31,
----------------------------- --------------------------
1995 1996 1995 1996
- -------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (8,581,567) 9,408,760 19,069,618 (7,816,250)
CASH AND CASH EQUIVALENTS,
beginning of period 12,753,672 4,172,105 4,172,105 13,580,865
- -------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
end of period $4,172,105 $13,580,865 $23,241,723 $5,764,615
=============================================================================================================
<CAPTION>
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Interest $3,601,416 $ 5,145,455 $ 3,681,008 $4,039,133
Income taxes 516,137 457,490 442,316 -
NONCASH INVESTING AND FINANCING
ACTIVITIES:
Unrealized gain (loss) on investment
securities available-for-sale, net of tax (45,520) 64,198 97,356 (36,669)
Loans receivable charged to the
allowance for loan losses 3,154 3,342 1,997 14,962
Transfer from loans converted to
real estate acquired through
foreclosure - 76,163 98,799 119,629
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-7
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
================================================================================
Nature of Business First Federal Bank of Idaho, a Federal Savings Bank,
and Concentration and Subsidiary's (collectively referred to as the
of Credit Risk "Bank") principal business consists of attracting
deposits from the general public through a variety of
deposit products and investing these, together with
funds from on-going operations, in the origination of
residential mortgage loans and, to a lesser extent,
construction, agricultural, commercial, consumer and
other loans. The Bank primarily grants residential
loans to customers in Central and North Idaho and
Southeast Washington.
Principles of The consolidated financial statements include the
Consolidation accounts of First Federal Bank of Idaho, a Federal
Savings Bank and its wholly-owned subsidiary, Tri-
Star Financial Corporation whose activities consist
primarily of selling life insurance and tax deferred
annuities. All significant intercompany transactions
and balances are eliminated in consolidation.
Interim Financial The consolidated financial statements at December 31,
Information 1996 and for the nine months ended December 31, 1996
and 1995 are unaudited, but include all adjustments
(consisting only of normal recurring adjustments)
which the Company considers necessary for a fair
presentation of the financial position at such dates
and the operating results and cash flows for those
periods. Results for interim periods are not
necessarily indicative of results to be expected for
the entire year.
Use of Estimates The preparation of financial statements in conformity
with generally accepted accounting principles
requires management to make estimates and assumptions
that affect the reported assets and liabilities and
disclosures on contingent assets and liabilities at
the date of the financial statements and the reported
amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Material estimates that are susceptible to
significant change in the near-term relate to the
determination of the allowance for loan losses.
Management believes that the allowance for loan
losses is adequate. While management uses current
information to recognize losses on loans, future
additions to the allowances may be necessary based on
changes in economic conditions. In addition, various
regulatory agencies, as an integral part of their
examination
F-8
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
===============================================================================
process, periodically review the Bank's allowances
for loan losses. Such agencies may require the Bank
to recognize additions to the allowance based on
their judgments about information available to them
at the time of the examination.
Statement of For purposes of the statement of cash flows, the Bank
Cash Flows considers all cash on hand and in banks, federal
funds sold and highly liquid marketable debt
instruments with original maturities when purchased
of three months or less to be cash and cash
equivalents.
Premises and Premises and equipment, which consist of buildings,
Equipment building improvements, furniture, fixtures and office
equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the
straight-line method over the estimated useful lives
of the assets. The estimated useful lives used to
compute depreciation range from thirty to forty years
for buildings, thirty years for building
improvements, and five to ten years for furniture,
fixtures and equipment.
Income Taxes The Bank accounts for income taxes according to the
provisions of Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income
Taxes," which requires the use of the liability
method of accounting for deferred income taxes. Under
SFAS No. 109, deferred income taxes are provided for
temporary differences between the financial reporting
and tax basis of assets and liabilities using the
enacted tax rate expected to apply to the taxable
income of the period in which the deferred tax
liability or asset is expected to be settled or
realized. Tax credits are accounted for as a
reduction of income taxes in the year in which the
credit originates.
Investment and In May 1993, the Financial Accounting Standards Board
Mortgage-Backed issued SFAS No. 115, "Accounting for Certain
Securities Investments in Debt and Equity Securities." The Bank
adopted the provisions of SFAS 115 during the year
ended March 31, 1995. There was no material impact on
either income or equity of the Bank from the adoption
of this standard. SFAS 115 addresses the accounting
and reporting for investments in equity securities
that have readily determinable fair values and for
all investments in debt securities. Investments in
securities are to be classified as either held-to-
maturity, available-for-sale or trading.
F-9
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
===============================================================================
Held-to-Maturity - Investments in debt securities
classified as held-to-maturity are stated at cost,
adjusted for amortization of premiums and accretion
of discounts using the effective interest method. The
Bank has the ability and the intention to hold
investment and mortgage backed securities to maturity
and, accordingly, they are not adjusted for temporary
declines in their market value.
Available-for-Sale - Investments in debt and equity
securities classified as available-for-sale are
carried at the lower of their cost or estimated
market value in the aggregate. Unrealized gains and
losses are recognized (net of tax effect) through a
valuation allowance that is shown as a reduction in
the carrying value of the related securities and as a
corresponding reduction of equity.
Trading - Investments in debt and equity securities
classified as trading are stated at their market
value. Unrealized holding gains and losses for
trading securities are included in the statement of
income.
Gains and losses on the sale of securities are
determined using the specific identification method.
Loans Receivable Loans receivable are stated at unpaid principal
balances, less the allowance for loan losses, and
less the net deferred loan origination fees and
discounts. Deferred loan origination fees and
discounts are amortized over the contractual life
using the level-yield method.
The allowance for loan losses is established based on
management's evaluation of probable losses in its
loan portfolio. An allowance for loss on specific
impaired loans for which collectibility may not be
reasonably assured is established based upon, among
other factors, the estimated fair market values of
the underlying collateral and estimated holding and
selling costs.
Effective April 1, 1995, the Bank 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. These
statements define the recognition
F-10
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVING BANK
AND SUBSIDIARY
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
================================================================================
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 Bank applies the recognition criteria of SFAS No. 114 to
impaired multi-family residential, commercial real estate,
agriculture and restructured 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 Bank 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 Bank's
policies regarding charge-offs or recoveries.
Interest accruals on loans which are more than ninety days
delinquent are suspended. Suspended interest ultimately
collected is credited to interest income in the period of
recovery. Uncollectible accrued interest is included in the
Bank's allowance for loan losses.
Any unamortized discounts, premiums or fees on loans repaid
or sold are recognized as income in the year of repayment or
sale.
F-11
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVING BANK
AND SUBSIDIARY
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
================================================================================
REAL ESTATE Real estate acquired in settlement of foreclosure or in-
OWNED substance foreclosure, is initially recorded at the lower of
fair value, less selling costs, or the balance of the loan
on the property at date of foreclosure. Costs relating to
development and improvement of property are capitalized to
the extent that carrying value does not exceed estimated
fair market value, less estimated cost to sell, whereas
those relating to holding the property are charged to
expense.
Valuations are periodically performed by the Bank, and
losses are recognized by a charge to income if the carrying
value of a property exceeds its estimated fair value.
STOCK IN FEDERAL Federal law requires a member institution of the Federal
HOME LOAN BANK Home Loan Bank (FHLB) System to hold common stock of its
district FHLB according to predetermined formulas. No ready
market exists for such stock and it has no quoted market
value.
RECLASSIFICATIONS Certain reclassifications of prior years information have
been made to conform to the current year presentation.
ACCOUNTING FOR In March 1995, the Financial the Impairment of Accounting
AND DISPOSAL OF Standards Board issued SFAS No. 121, "Accounting for the
LONG-LIVED ASSETS Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," which establishes new guidelines regarding
when impairment losses on long-lived assets, which include
premises and equipment, certain identifiable intangible
assets and goodwill, should be recognized and how impairment
losses should be measured. This statement became effective
for the Bank for the fiscal year beginning April 1, 1996.
The adoption of this statement did not have a material
effect on the Bank's December 31, 1996 unaudited financial
statements.
ACCOUNTING FOR Effective April 1, 1996, the Bank adopted the provisions of
MORTGAGE SERVICING SFAS No. 122 "Accounting for Mortgage Servicing Rights."
RIGHTS SFAS No. 122 amends SFAS No. 65, "Accounting for Certain
Mortgage Banking Activities." SFAS No. 122 requires a
mortgage banking enterprise to recognize as a separate
asset, the rights to service mortgage loans regardless of
whether the servicing rights are acquired through either
purchase or origination. Prior to SFAS No. 122,
F-12
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVING BANK
AND SUBSIDIARY
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
================================================================================
SFAS No. 65 prohibited the capitalization of mortgage
servicing rights except where the rights to service the
loans were acquired from another organization. Additionally,
the new standard requires impairment analysis of mortgage
servicing rights regardless of whether purchased or
originated.
The Bank's mortgage servicing rights represent the
unamortized cost of originated contractual rights to service
mortgages for others in exchange for a servicing fee.
Mortgage servicing rights are amortized over the period of
estimated net servicing income and are periodically adjusted
for actual and anticipated prepayments of the underlying
mortgage loans. The effect of adopting SFAS No. 122 was to
increase income before income taxes for the nine months
ended December 31, 1996, by approximately $204,000
(unaudited).
ACCOUNTING FOR In October 1995, the Financial Accounting Standards Board
STOCK-BASED issued SFAS No. 123, "Accounting for Stock-Based
COMPENSATION Compensation," which encourages companies to adopt a new
method of accounting to measure the compensation cost of
stock-based employee compensation plans based on the fair
value of the stock at the date it is granted. This statement
became effective for the Bank for the fiscal year beginning
April 1, 1996. Currently, the Bank does not have any stock-
based compensation plans. However, in the future, such plans
may be offered and the provisions of SFAS No. 123 would
apply.
ACCOUNTING FOR In June 1996, the Financial Accounting Standards Board
TRANSFERS AND issued SFAS No. 125, "Accounting for Transfer and Servicing
SERVICING OF of Financial Assets and Extinguishment of Liabilities,"
FINANCIAL ASSETS which supercedes SFAS No. 122 and establishes new standards
AND EXTINGUISHMENT that focus on control whereas, after a transfer of
OF LIABILITIES financial assets, an entity recognizes the financial
servicing assets it controls and the liabilities it has
incurred, derecognizes financial assets when control has
been surrendered, and derecognizes liabilities when
extinguished. This statement applies prospectively in
fiscal years beginning after December 31, 1996. The Bank
does not expect adoption to have a material effect on its
financial statements.
F-13
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVING BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. INVESTMENT Investment securities, net of unamortized premiums or
SECURITIES unaccreted discounts consist of the following held-to-
maturity and available-for-sale:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
HELD-TO-MATURITY
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
MARCH 31, 1995: COST GAINS LOSSES MARKET VALUE
======================================================================================
<S> <C> <C> <C> <C>
Farm Credit Bank,
FHLB and FHLMC bonds 4,236,883 - (14,460) 4,222,423
Student Loan
Marketing Association bill 700,000 2,903 - 702,903
FHLB and FNMA notes 1,795,288 - (35,525) 1,759,763
--------------------------------------------------------------------------------------
Total $ 6,732,171 $ 2,903 $ (49,985) $ 6,685,089
======================================================================================
---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
MARCH 31, 1996: COST GAINS LOSSES MARKET VALUE
======================================================================================
<S> <C> <C> <C> <C>
Farm Credit Bank
and FHLB bonds $ 8,297,090 $ - $ (46,245) $ 8,250,845
Student Loan Marketing
Association bill 700,000 - (235) 699,765
FHLB and FNMA notes 1,547,863 - (19,048) 1,528,815
--------------------------------------------------------------------------------------
Total $ 10,544,953 $ - $ (65,528) $ 10,479,425
======================================================================================
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
MARCH 31, 1996: COST GAINS LOSSES MARKET VALUE
(UNAUDITED)
======================================================================================
<S> <C> <C> <C> <C>
FHLB bonds $ 3,989,124 $ 16,476 $ (20,500) $ 3,985,100
Student Loan
Marketing Assoc. bill 950,234 1,900 (549) 951,585
FNMA notes 250,000 - (5,450) 244,550
--------------------------------------------------------------------------------------
Total $ 5,189,358 $ 18,376 $ (26,499) $ 5,181,235
======================================================================================
</TABLE>
F-14
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVING BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE
--------------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
MARCH 31, 1995: COST GAINS LOSSES MARKET VALUE
======================================================================================
<S> <C> <C> <C> <C>
Colonial Government
Investment Fund
(126,444 shares) $ 1,592,196 $ - $ (303,099) $ 1,289,097
--------------------------------------------------------------------------------------
Less unrealized depreciation
on marketable equity
securities (303,099) - 303,099 -
--------------------------------------------------------------------------------------
Total $ 1,289,097 $ - $ - $ 1,289,097
======================================================================================
--------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
MARCH 31, 1996: COST GAINS LOSSES MARKET VALUE
======================================================================================
<S> <C> <C> <C> <C>
Colonial Government
Investment Fund
(126,444 shares) $ 1,392,196 $ - $ (63,901) $ 1,328,295
--------------------------------------------------------------------------------------
Less unrealized loss on
investment securities
available-for-sale (63,901) - 63,901 -
--------------------------------------------------------------------------------------
$ 1,328,295 $ - $ - $ 1,328,295
======================================================================================
</TABLE>
The amortized cost and estimated market value of investment
securities at December 31, 1996, by contractual maturity,
are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right
to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
=======================================================================
(UNAUDITED)
<S> <C> <C>
Due in one year or less $ 500,234 $ 499,850
Due after one through five years 4,689,124 4,681,385
-----------------------------------------------------------------------
$ 5,189,358 $ 5,181,235
=======================================================================
</TABLE>
F-15
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVING BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
2. MORTGAGE The amortized cost and estimated market values of mortgage-
BACKED backed and related securities are summarized as follows:
SECURITIES
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
MARCH 31, 1995: COST GAINS LOSSES MARKET VALUE
======================================================================================
<S> <C> <C> <C> <C>
FNMA Certificates $ 1,668,579 $ - $ (17,459) $ 1,651,120
Collateralized Mortgage
Obligations 556,121 - (867) 555,254
SBA Certificates 61,641 - (5,249) 56,392
GNMA Certificates 43,102 253 - 43,355
FHLMC Certificates 510,839 - (1,650) 509,189
--------------------------------------------------------------------------------------
Total $ 2,840,282 $ 253 $ (25,225) $ 2,815,310
======================================================================================
----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
MARCH 31, 1996: COST GAINS LOSSES MARKET VALUE
======================================================================================
<S> <C> <C> <C> <C>
FNMA Certificates $ 1,472,887 $ 17,263 $ (72,190) $ 1,417,960
Collateralized Mortgage
Obligations 488,082 1,504 (1,112) 488,474
SBA Certificates 37,010 - (3,145) 33,865
GNMA Certificates 39,215 762 (907) 39,070
FHLMC Certificates 450,804 4,456 (12,596) 442,664
--------------------------------------------------------------------------------------
Total $ 2,487,998 $ 23,985 $ (89,950) $ 2,422,033
======================================================================================
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
DECEMBER 31, 1996: COST GAINS LOSSES MARKET VALUE
======================================================================================
<S> <C> <C> <C> <C>
FNMA Certificates $ 1,332,334 $ 15,066 $ (74,952) $ 1,272,448
Collateralized Mortgage
Obligations 442,246 298 (1,297) 441,247
SBA Certificates 21,551 60 (2,592) 19,019
GNMA Certificates 145,039 2,509 (1,363) 146,185
FHLMC Certificates 401,583 3,592 (13,213) 391,962
--------------------------------------------------------------------------------------
Total $ 2,342,753 $ 21,525 $ (93,417) $ 2,270,861
======================================================================================
</TABLE>
F-16
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVING BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
The amortized cost and estimated market value of mortgage
backed securities at December 31, 1996, by contractual
maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
=====================================================================================
(Unaudited)
<S> <C> <C>
Due in one year or less $ 7,266 $ 7,236
Due after one through five years 14,285 11,783
Due after five years through ten years - -
Due after ten years 2,321,202 2,251,842
-------------------------------------------------------------------------------------
$2,342,753 $2,270,861
=====================================================================================
</TABLE>
3. LOANS Loans receivable consist of the following:
RECEIVABLE
<TABLE>
<CAPTION>
March 31, March 31, December 31,
1995 1996 1996
(Unaudited)
-----------------------------------------------------------------------------
<S> <C> <C> <C>
REAL ESTATE LOANS:
Conventional mortgages:
Adjustable rate loans $ 35,025,310 $ 36,166,820 $ 41,761,360
Fixed rate loans 18,487,312 25,381,370 29,733,379
FHA and VA insured 1,853,670 1,270,317 1,161,821
Construction 12,258,500 13,831,983 14,944,762
Agricultural 11,887,070 11,945,067 11,875,609
Commercial 5,068,081 4,036,102 6,007,391
OTHER LOANS:
Agricultural operating 561,092 589,157 1,024,314
Loans to depositors, secured
by savings 502,657 411,750 310,482
Other consumer 3,166,713 7,022,726 11,777,686
-----------------------------------------------------------------------------
</TABLE>
F-17
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVING BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
March 31, March 31, December 31,
1995 1996 1996
(Unaudited)
=============================================================================
<S> <C> <C> <C>
TOTAL LOANS RECEIVABLE 88,810,405 100,655,292 118,596,804
LESS:
Loans in process 5,052,172 5,726,171 6,223,956
Unearned loan fees and discounts 426,080 410,524 407,638
Allowance for loan losses 554,685 701,343 880,000
-----------------------------------------------------------------------------
LOANS RECEIVABLE, NET $ 82,777,468 $93,817,254 $111,085,210
=============================================================================
</TABLE>
Total loans receivable consists of approximately
$64,732,000, $76,050,000 and $87,090,000 in one- to four-
family residential real estate loans at March 31, 1995,
March 31, 1996 and December 31, 1996, respectively.
The following summarizes the changes in the allowance for
loan losses:
<TABLE>
<CAPTION>
March 31, March 31, December 31,
1995 1996 1996
(Unaudited)
=============================================================================
<S> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES,
beginning of period $ 530,386 $ 554,685 $ 701,343
Provision for loan losses 27,453 150,000 193,619
Recoveries - - -
Charge-offs (3,154) (3,342) (14,962)
-----------------------------------------------------------------------------
ALLOWANCE FOR LOAN LOSSES,
end of period $ 554,685 $ 701,343 $ 880,000
=============================================================================
</TABLE>
F-18
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVING BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Outstanding commitments of the Bank to originate loans as of
December 31, 1996 were as follows:
<TABLE>
<CAPTION>
FIXED VARIABLE
RATE RATE TOTAL
==========================================================================
(Unaudited)
<S> <C> <C> <C>
First mortgage loans $ 14,065,713 $ 2,260,425 $ 16,326,138
Other loans 38,250 - 38,250
--------------------------------------------------------------------------
OUTSTANDING LOAN
COMMITMENTS $ 14,103,963 $ 2,260,425 $ 16,364,388
==========================================================================
</TABLE>
Interest rates on fixed rate loan commitments range from
6.47% to 8.50% and are committed through March 1997. Fees
received in connection with these outstanding loan
commitments are deferred and will be recognized in income
over the life of the related loan after funding of the
loan.
The Bank remains contingently liable for approximately
$1,811,000 (unaudited) of loans sold with recourse as of
December 31, 1996. Loans serviced for others (including
contract collections) are not included in the consolidated
statements of financial condition. The unpaid principal
balances of these loans are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
-------------------------- ---------------------------
1995 1996 1995 1996
(Unaudited)
=============================================================================================
<S> <C> <C> <C> <C>
Loan portfolios serviced for:
FNMA $ 80,886,855 $ 73,181,444 $ 75,917,627 $ 65,599,875
FHLMC 31,166,542 45,481,134 41,034,176 62,346,466
Others 3,843,719 3,590,255 3,808,317 3,511,976
---------------------------------------------------------------------------------------------
$ 115,897,116 $ 122,252,833 $120,760,120 $131,458,317
=============================================================================================
</TABLE>
F-19
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVING BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
The principal amount of loans subject to delinquent
principal or interest, defined as payment being in arrears
over three months, totalled approximately $578,303, $692,000
and $1,338,000 (unaudited) at March 31, 1995, March 31, 1996
and December 31, 1996, respectively.
4. ACCRUED Accrued interest receivable consists of the following:
INTEREST
RECEIVABLE
<TABLE>
<CAPTION>
March 31, March 31, December 31,
1995 1996 1996
(Unaudited)
=============================================================================
<S> <C> <C> <C>
Investment securities $ 103,647 $ 16,226 $ 13,645
Mortgage-backed securities 15,883 76,811 97,619
Interest bearing deposits - 21,250 -
Loans receivable 832,332 961,097 1,074,621
-----------------------------------------------------------------------------
ACCRUED INTEREST RECEIVABLE $ 951,862 $ 1,075,384 $ 1,185,885
=============================================================================
</TABLE>
5. PREMISES AND Premises and equipment consists of the following:
EQUIPMENT
<TABLE>
<CAPTION>
March 31, March 31, December 31,
1995 1996 1996
(Unaudited)
=============================================================================
<S> <C> <C> <C>
Land, buildings and building
improvements $ 2,960,881 $ 4,747,777 $ 4,752,283
Branch premises under development 109,850 - 248,271
Furniture, fixtures and equipment 1,730,428 1,972,543 2,067,354
-----------------------------------------------------------------------------
4,801,159 6,720,320 7,067,908
Accumulated depreciation (1,740,253) (2,040,676) (2,295,485)
-----------------------------------------------------------------------------
PREMISES AND EQUIPMENT, NET $ 3,060,906 $ 4,679,644 $ 4,772,423
=============================================================================
</TABLE>
F-20
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVING BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
6. DEPOSITS Deposits and the related weighted average interest rates
consist of the following:
<TABLE>
<CAPTION>
March 31, March 31, December 31,
1995 1996 1996
(Unaudited)
=============================================================================
<S> <C> <C> <C>
DEPOSIT ACCOUNTS:
NOW accounts (1.36%,
1.48% and 1.23%) $ 13,146,372 $ 14,616,706 $ 15,211,424
Passbook accounts (3.33%,
3.29% and 3.00%) 15,609,900 13,860,858 13,455,667
Money market accounts
(3.28%, 3.03% and 3.03%) 8,931,898 7,167,327 7,427,621
-----------------------------------------------------------------------------
37,688,170 35,644,891 36,094,712
-----------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT:
3.20% to 4.19% 5,797,420 1,786,227 1,078,532
4.20% to 5.19% 16,001,220 13,854,350 24,585,767
5.20% to 6.19% 18,688,995 50,331,588 32,929,053
6.20% to 7.19% 6,674,310 10,299,587 9,751,964
7.20% to 8.19% 3,348,552 2,814,237 453,574
8.20% to 11.19% 588,342 593,189 455,210
-----------------------------------------------------------------------------
51,098,839 79,679,178 69,254,100
-----------------------------------------------------------------------------
DEPOSITS $ 88,787,009 $ 115,324,069 $ 105,348,812
=============================================================================
</TABLE>
F-21
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
The scheduled maturities of certificates of deposit at
December 31, 1996, are as follows:
<TABLE>
<CAPTION>
Amount
-------------------------------------------------------------------------------
(Unaudited)
<S> <C>
1997 $49,235,000
1998 12,240,000
1999 5,459,000
2000 796,000
2001 1,305,000
Thereafter 219,100
-------------------------------------------------------------------------------
Total $69,254,100
===============================================================================
</TABLE>
Interest expense on deposits consists of:
<TABLE>
<CAPTION>
Year ended Nine months ended
March 31, December 31,
---------------------- ----------------------
1995 1996 1995 1996
(Unaudited)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NOW and money market $ 486,419 $ 422,008 $ 319,254 $ 303,924
Passbook savings 549,675 454,056 345,773 311,573
Certificates of deposit 2,458,169 3,916,773 2,684,731 3,083,496
-------------------------------------------------------------------------------
Interest Expense $3,494,263 $4,792,837 $3,349,758 $3,698,993
===============================================================================
</TABLE>
Certificates of deposit of $100,000 or more totalled
approximately $9,294,000, $12,987,000 and $9,386,000
(unaudited) at March 31, 1995, March 31, 1996 and December
31, 1996, respectively. Deposit balances in excess of
$100,000 are not insured by the Federal Deposit Insurance
Corporation (FDIC).
F-22
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
7. INCOME TAXES The components of income tax expense are summarized as
follows:
<TABLE>
<CAPTION>
Year ended Nine months ended
March 31, December 31,
------------------- ---------------------
1995 1996 1995 1996
(Unaudited)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current:
Federal $ 329,423 $ 402,000 $ 349,785 $ 98,378
State 83,803 99,000 89,463 2,571
-----------------------------------------------------------------------------------
413,226 501,000 439,248 100,949
-----------------------------------------------------------------------------------
Deferred:
Federal 35,000 (109,000) (9,907) 43,161
State 4,000 (17,000) (1,515) 6,565
-----------------------------------------------------------------------------------
39,000 (126,000) (11,422) 49,726
-----------------------------------------------------------------------------------
INCOME TAX EXPENSE $ 452,226 $ 375,000 $ 427,826 $ 150,675
===================================================================================
</TABLE>
Deferred tax liabilities and assets consist of the
following:
<TABLE>
<CAPTION>
March 31, March 31, December 31,
1995 1996 1996
(Unaudited)
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
DEFERRED TAX LIABILITIES:
Stock in FHLB $ (236,000) $ (259,000) $ (279,000)
Loan loss reserves - - (83,000)
Depreciation (90,000) (46,000) (75,000)
Other (62,000) (88,000) (2,726)
-----------------------------------------------------------------------------------
Total Deferred Tax Liabilities (388,000) (393,000) (439,726)
-----------------------------------------------------------------------------------
DEFERRED TAX ASSETS:
Unearned loan fees 167,000 161,000 160,000
Allowance for loan losses - 59,000 135,000
Unrealized loss on equity security - 103,000 -
-----------------------------------------------------------------------------------
</TABLE>
F-23
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
March 31, March 31, December 31,
1995 1996 1996
(Unaudited)
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Deferred Tax Assets 167,000 323,000 295,000
-----------------------------------------------------------------------------------
NET DEFERRED
INCOME TAX LIABILITY $ (221,000) $ (70,000) $ (144,726)
===================================================================================
</TABLE>
A reconciliation of the statutory federal income tax rate to
the effective income tax rate follows:
<TABLE>
<CAPTION>
Year ended Nine months ended
March 31, December 31,
----------------------------------------- ------------------------------------
1995 1996 1995 1996
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income tax expense
at statutory rates $409,832 34.0% $327,347 34.0% $417,233 34.0% $194,951 34.0%
Increase (decrease)
resulting from:
State income taxes,
net of federal benefit 55,310 4.6 65,340 6.8 59,046 4.8 1,697 0.3
Permanent and other differences (12,916) (1.1) (17,687) (1.9) (48,453) (3.9) (45,973) (8.0)
- ------------------------------------------------------------------------------------------------------------------------
$452,226 37.5% $375,000 38.9% $427,826 34.9% $150,675 26.3%
========================================================================================================================
</TABLE>
8. EQUITY The Bank is subject to various regulatory capital
requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate
certain mandatory and possibly additional discretionary
actions by regulators that, if undertaken, could have a
direct material effect on the Bank's financial statements.
Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities and certain off-
balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and
classifications are also subject to qualitative judgments by
the regulators about components, risk weightings and other
factors.
F-24
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Quantitative measures established by regulation to ensure
capital adequacy require the Bank to maintain minimum
amounts and ratios. Under regulations of the Office of
Thrift Supervision ("OTS"), the Bank must meet three
minimum-capital requirements: a tangible capital requirement
equal to not less than 1.5 percent of tangible assets, a
core capital requirement, comprised of tangible capital
adjusted for supervisory goodwill and other deferred factors
equal to not less than 3 percent of tangible assets; and a
risk-based capital requirement equal to at least 8 percent
of all risk-weighted assets.
At December 31, 1996, the Bank met the regulatory tangible
capital, core capital and risk-based capital requirements.
At December 31, 1996, the Bank's regulatory tangible capital
and core capital were both $10,818,000 or 8.1 percent of
tangible assets and risk-based capital was $11,698,000 or
13.3 percent of total risk-weighted assets.
The following is a reconciliation of equity as reported in
accordance with generally accepted accounting principles
(GAAP capital) to federal regulatory capital:
<TABLE>
<CAPTION>
March 31, 1995 March 31, 1996 December 31, 1996
--------------------------------- ------------------------------ -----------------------------------
(Unaudited)
Risk Risk Risk
Tangible Core Based Tangible Core Based Tangible Core Based
Capital Capital Capital Capital Capital Capital Capital Capital Capital
- ------------------------------------------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital $ 9,504 $ 9,504 $ 9,504 $ 10,356 $ 10,356 $ 10,356 $ 10,818 $ 10,818 $ 10,818
Additional capital
items:
Allowances for loan
and
lease losses - - 555 - - 701 - - 880
- ------------------------------------------------------------------------------------------------------------------------------------
Regulatory capital 9,504 9,504 10,059 10,356 10,356 11,057 10,818 10,818 11,698
Minimum capital
requirement 1,562 3,125 5,138 1,947 3,895 6,254 1,998 3,996 7,052
- ------------------------------------------------------------------------------------------------------------------------------------
Regulatory capital -
excess $ 7,942 $ 6,379 $ 4,921 $ 8,409 $ 6,461 $ 4,803 $ 8,820 $ 6,822 $ 4,646
====================================================================================================================================
</TABLE>
F-25
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
As of March 31, 1995, March 31, 1996 and December 31, 1996,
the most recent respective notifications from the OTS
categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. There are
no conditions or events since the most recent notification
that management believes have changed the Bank's category.
To be categorized as well capitalized, the Bank must
maintain minimum ratios of total capital to risk-based
assets, core capital to risk-based assets and core capital
to adjusted total assets. The Bank's actual and minimum
capital requirements (in thousands) to be well capitalized
under prompt corrective action provisions are as
follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Minimum
Actual Requirements
-------------------- ---------------------
Amount Ratio Amount Ratio
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MARCH 31, 1995
Tier 1 Capital (to adjusted total assets) $ 9,504 9.1% $ 5,207 5.0%
Tier 1 Capital (to risk-weighted assets) $ 9,504 14.8% $ 3,854 6.0%
Total Capital (to risk-weighted assets) $ 10,059 15.7% $ 6,423 10.0%
MARCH 31, 1996
Tier 1 Capital (to adjusted total assets) $ 10,356 8.0% $ 6,492 5.0%
Tier 1 Capital (to risk-weighted assets) $ 10,356 13.2% $ 4,691 6.0%
Total Capital (to risk-weighted assets) $ 11,057 14.1% $ 7,818 10.0%
DECEMBER 31, 1996
Tier 1 Capital (to adjusted total assets) $ 10,818 8.1% $ 6,660 5.0%
Tier 1 Capital (to risk-weighted assets) $ 10,818 12.3% $ 5,289 6.0%
Total Capital (to risk-weighted assets) $ 11,698 13.3% $ 8,815 10.0%
----------------------------------------------------------------------------------------------------------------
</TABLE>
9. RELATED PARTY Prior to the Financial Institutions Reform, Recovery and
TRANSACTIONS Enforcement Act of 1989 (FIRREA), the Bank's policy allowed
all full-time permanent employees with one complete year of
service, key officers and directors to receive a first
mortgage loan on their primary residence at rates which may
be below market. At such time that they cease to be employed
by the Bank and are not eligible for retirement (age 55 or
older), the loan terms will change to the market interest
rate on the date the loan closed.
F-26
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Subsequent to FIRREA, preferential terms on key officer and
director loans were discontinued. The following schedule
summarizes the activity in loans to directors, key officers
and employees:
<TABLE>
<CAPTION>
March 31, March 31, December 31,
1995 1996 1996
(Unaudited)
----------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of period $1,049,433 $1,464,192 $1,376,661
Additions 557,875 545,900 -
Repayments and sales proceeds (143,116) (633,431) (151,632)
----------------------------------------------------------------------------
Balance, end of period $1,464,192 $1,376,661 $1,225,029
============================================================================
</TABLE>
10. PROFIT SHARING The Bank established, during 1995, a profit sharing plan
PLAN pursuant to Section 401(k) of the Internal Revenue Code,
whereby participants may contribute a percentage of
compensation, but not in excess of the maximum allowed under
the Code. The plan provides for a matching contribution by
the Bank which amounted to $5,945 and $33,447 for the years
ended March 31, 1995 and 1996, and $22,593 (unaudited) and
$135,238 (unaudited) for the nine months ended December 31,
1995 and 1996. In addition, the Bank may make additional
contributions at the discretion of the Board of Directors.
These additional contributions amounted to $0 and $61,770
for the years ended March 31, 1995 and 1996, and $51,068
(unaudited) and $69,737 (unaudited) for the nine months
ended December 31, 1995 and 1996.
11. RETIREMENT PLAN The Bank had a noncontributory pension trust ("the Plan")
which was suspended effective January 1, 1995. As a result
of the Plan suspension, a net loss of $96,000, resulting
from the recognition of previously deferred gains and losses
for prior service, was recorded as pension expense for the
year ended March 31, 1995.
F-27
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
On March 31, 1996, the Bank terminated the Plan. The
termination of the Plan required an additional contribution
of approximately $130,000 (unaudited) to fund the necessary
lump sum distributions as specified in the Plan documents.
The Bank satisfied this obligation in September 1996.
12. ADVANCES Advances from FHLB had weighted average interest rates at
FROM FHLB March 31, 1995, March 31, 1996 and December 31, 1996 of
6.74%, 6.10% and 6.07% (unaudited), respectively. Maturity
dates of advances were as follows:
<TABLE>
<CAPTION>
March 31, March 31, December 31,
1995 1996 1996
(Unaudited)
---------------------------------------------------------------------------
<S> <C> <C> <C>
Advances from FHLB due:
Less than 1 year $ 4,000,000 $ 750,000 $ 10,740,972
1 to 2 years - 328,472 390,972
2 to 3 years - 578,472 1,000,000
3 to 4 years - - 534,583
4 to 5 years - 647,084 2,393,056
---------------------------------------------------------------------------
$ 4,000,000 $ 2,304,028 $ 15,059,583
===========================================================================
</TABLE>
Pursuant to collateral requirements of the FHLB, advances
are secured by stock in the FHLB and qualifying first
mortgage loans.
13. COMMITMENTS The deposits of the Bank are insured by the Savings
AND Association Insurance Fund (SAIF), one of two funds
CONTINGENCIES administered by the FDIC. The Bank previously paid annual
premiums of approximately $.23 per $100 of deposits. On
September 30, 1996, the Deposit Insurance Funds Act of 1996
was signed, which authorized the FDIC to impose a special
assessment on certain deposits held by thrift institutions.
This special assessment, which was based on $.657 per $100
of outstanding deposits at March 31, 1995, was intended to
recapitalize the SAIF. Accordingly, the Bank recorded a one
time pre-tax charge of approximately $584,000 (unaudited) at
September 30, 1996, which was paid prior to December 31,
1996. The Bank's annual SAIF premium rates were reduced to
$.0648 per $100 of deposits beginning January 1, 1997.
F-28
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
14. FAIR VALUES OF SFAS No. 107, "Disclosures about Fair Value of Financial
FINANCIAL Instruments," requires disclosure of fair value
INSTRUMENTS information about financial instruments, whether or not
recognized on the balance sheet, for which it is practicable
to estimate that value. SFAS No. 107 excludes certain
financial instruments and all nonfinancial instruments from
its disclosure requirements. Accordingly, the aggregate fair
value estimates presented do not reflect the underlying fair
value of the Company. Although management is not aware of
any factors that would materially affect the estimated fair
value amounts presented, such amounts have not been
comprehensively revalued for purposes of these financial
statements since that date and, therefore, estimates of fair
value subsequent to that date may differ significantly from
the amounts presented below.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
March 31, 1996
--------------------------------------
Carrying Estimated
Amount Fair Value
--------------------------------------------------------------------------------
<S> <C> <C>
Financial assets
Cash and cash equivalents $ 13,580,865 $ 13,580,865
Investment securities held-to-maturity 10,544,953 10,479,425
Investment securities available for sale 1,328,295 1,328,295
Mortgage-backed securities held-to-
maturity 2,487,998 2,422,033
Loans receivable 93,817,254 93,157,000
Stock in FHLB 875,600 875,600
Cash surrender value of life insurance
policies 1,283,628 1,283,628
Financial liabilities
Deposits 115,324,069 116,050,000
Advances from FHLB 2,304,028 2,201,000
---------------------------------------------------------------------------------------
</TABLE>
F-29
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
December 31, 1996
-----------------------------
Carrying Estimated
Amount Fair Value
(Unaudited)
-------------------------------------------------------------------------
<S> <C> <C>
Financial assets
Cash and cash equivalents $ 5,764,615 $ 5,764,615
Investment securities held-to-maturity 5,189,358 5,181,235
Mortgage-backed securities
held-to-maturity 2,342,753 2,270,861
Loans receivable 111,085,210 110,303,430
Stock in FHLB 928,975 928,975
Cash surrender value of
life insurance policies 1,333,905 1,333,905
Financial liabilities
Deposits 105,348,812 106,011,951
Advances from FHLB 15,059,583 15,059,583
</TABLE>
The following methods and assumptions were used to estimate
the fair value of financial instruments:
CASH AND CASH EQUIVALENTS - The carrying amount of these
items is a reasonable estimate of their fair value.
INVESTMENT SECURITIES AND MORTGAGE-BACKED SECURITIES - The
fair value of investment securities is based on quoted
market prices or dealer estimates. Estimated fair value for
mortgage-backed securities issued by quasi-governmental
agencies is based on quoted market prices. The fair value of
all other mortgage-backed securities is based on dealer
estimates.
LOANS RECEIVABLE - For certain homogeneous categories of
loans, such as fixed and variable residential mortgages,
fair value is estimated using quoted market prices for
securities backed by similar loans, adjusted for differences
F-30
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
in loan characteristics. The fair value of other loan types
is estimated by discounting the future cash flows and
estimated prepayments using the current rates at which
similar loans would be made to borrowers with similar credit
ratings and for the same remaining term. Some loan types
were valued at carrying value because of their floating rate
or expected maturity characteristics.
CASH SURRENDER VALUE OF LIFE INSURANCE POLICIES - The
carrying amount of these policies approximate their fair
value.
STOCK IN FHLB - The fair value is based upon the redemption
value of the stock which equates to its carrying value.
DEPOSITS - The fair value of demand deposits, savings
accounts, and money market accounts is the amount payable on
demand at the reporting date. The fair value of fixed-
maturity certificates of deposit is estimated by discounting
the estimated future cash flows using the rates currently
offered for deposits with similar remaining maturities.
ADVANCES FROM FHLB - The fair value of FHLB advances and
other borrowings is estimated by discounting the estimated
future cash flows using rates currently available to the
Bank for debt with similar remaining maturities.
15. SUBSEQUENT On January 8, 1997, the Board of Directors of the Bank
EVENT - adopted the Plan of Conversion (the Plan), which was
ADOPTION OF subsequently amended on March 12, 1997, pursuant to which
PLAN OF the Bank will convert from a federally chartered mutual
CONVERSION savings bank to a federally chartered stock savings bank,
all of the outstanding common stock of which will be
acquired by FirstBank Corp. (the Company), a holding company
formed expressly for such purpose, in exchange for a portion
of the net conversion proceeds (Conversion). All of the
common stock of the Company to be issued in the Conversion
is being offered initially to certain eligible account
holders, members and to the Bank's tax-qualified employee
benefit plans. Pursuant to the Plan, as soon as practicable
after the Conversion, the Bank will relocate its main office
to the state of Washington and convert to a Washington-
chartered savings bank.
F-31
<PAGE>
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
The Bank plans to establish an Employee Stock Ownership Plan
(ESOP) for the benefit of eligible employees, to become
effective upon consummation of the Conversion. The ESOP
intends to purchase up to 8% of the Company's common stock
issued in the Conversion utilizing the proceeds of a loan
from the Company. The loan will be repaid over a period of
10 years and the collateral for the loan will be the common
stock purchased by the ESOP.
At the time of the Conversion, the Bank will establish a
liquidation account in an amount equal to its equity as
reflected in the latest balance sheet used in the final
conversion prospectus. The liquidation account will be
maintained for the benefit of eligible account holders and
supplemental eligible account holders who continue to
maintain their accounts at the Bank after the Conversion.
The liquidation account will be reduced annually to the
extent that eligible account holders and supplemental
eligible account holders have reduced their qualifying
deposits as of each anniversary date. Subsequent increases
will not restore an eligible account holder's or
supplemental eligible account holder's interest in the
liquidation account. In the event of a complete liquidation
of the Bank, each eligible account holder will be entitled
to receive a distribution from the liquidation account in an
amount proportionate to the current adjusted qualifying
balances for accounts then held.
The costs associated with Conversion will be deferred and
will be deducted from the proceeds of the sale and issuance
of the Company's stock. In the event the Conversion is not
consummated, costs incurred will be charged to expenses. At
December 31, 1996, deferred Conversion costs were $12,425
(unaudited).
After the Conversion, the Bank may not declare or pay
dividends on its stock if such declaration and payment would
violate statutory or regulatory requirements.
F-32
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than as contained in this
Prospectus in connection with the offering made hereby, and, if given or made,
such other information or representation must not be relied upon as having been
authorized by FirstBank Corp. or FirstBank Northwest. 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 or 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 FirstBank
Corp. or FirstBank Northwest since any of the dates as of which information is
furnished herein or since the date hereof.
<TABLE>
<CAPTION>
Table of Contents Page
----------------- ----
<S> <C>
Prospectus Summary .........................................
Selected Consolidated Financial Information ................
Recent Developments. .......................................
Risk Factors ...............................................
FirstBank Corp. ............................................
FirstBank Northwest ........................................
Use of Proceeds ............................................
Dividend Policy ............................................
Market for Common Stock ....................................
Capitalization .............................................
Historical and Pro Forma Capital Compliance ................
Pro Forma Data .............................................
FirstBank Northwest and Subsidiary .........................
Consolidated Statements of Income ..........................
Management's Discussion and Analysis of Financial ..........
Condition and Results of Operations ........................
Business of the Holding Company ............................
Business of the Bank .......................................
Management of the Holding Company ..........................
Management of the Bank .....................................
Regulation .................................................
Taxation ...................................................
The Conversion .............................................
Restrictions on Acquisition of the Holding Company .........
Description of Capital Stock of the Holding Company ........
Registration Requirements ..................................
Legal and Tax Opinions .....................................
Experts ....................................................
Additional Information .....................................
Index to Consolidated Financial Statements .................
</TABLE>
UNTIL THE LATER OF ___________, 1997, OR 25 DAYS AFTER COMMENCEMENT OF THE
SYNDICATED COMMUNITY OFFERING OF COMMON STOCK, 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.
[Logo]
(Proposed Holding Company for FirstBank Northwest)
1,725,000 Shares of
Common Stock
________
PROSPECTUS
________
SANDLER O'NEILL & PARTNERS, L.P.
___________, 1997
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Officers and Directors
Article XVII of the Certificate of Incorporation of FirstBank Corp.
requires indemnification of directors, officers and employees to the
fullest extent permitted by Delaware law.
Section 145 of the Delaware General Corporation Law sets forth
circumstances under which directors, officers, employees and agents
may be insured or indemnified against liability which they may incur
in their capacities:
145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE.--(a) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
II-1
<PAGE>
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
incurred by him any such capacity, or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against such
liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agents, so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
II-2
<PAGE>
Item 25. Other Expenses of Issuance and Distribution(1)
<TABLE>
<S> <C>
Legal fees and expenses........................ $150,000
Securities marketing legal fees................ 50,000
EDGAR, copying, printing, postage and mailing.. 120,000
Appraisal and business plan preparation........ 25,000
Accounting fees................................ 60,000
Securities marketing fees and expenses (2)..... 184,000
Data processing fees and expenses............. 15,000
SEC registration fee........................... 6,000
Blue Sky filing fees and expenses.............. 7,500
OTS filing fees................................ 8,400
Other expenses................................. 30,000
--------
Total...................................... $655,000
========
</TABLE>
_________________
(1) Assumes all of the Common Stock will be sold in the Subscription and
Direct Community Offerings.
(2) Based on the sale of Common Stock at the midpoint of the Estimated
Valuation Range.
Item 26. Recent Sales of Unregistered Securities.
Not Applicable
Item 27. Exhibits.
The exhibits filed as part of this Registration Statement are as
follows: O'Neill & Partners, L.P. (a)
<TABLE>
<S> <C>
1.1 - Form of proposed Agency Agreement among FirstBank Corp., FirstBank
Northwest and Sandler O'Neill & Partners, L.P. ()
1.2 - Engagement Letter between First Federal Bank of Idaho, F.S.B. and
Sandler O'Neill & Partners, L.P. (a)
2 - Plan of Conversion of First Federal Bank of Idaho, F.S.B. (a)
3.1 - Certificate of Incorporation of FirstBank Corp. (a)
3.2 - Bylaws of FirstBank Corp. (a)
4 - Form of Certificate for Common Stock (a)
5 - Opinion of Breyer & Aguggia regarding legality of securities
registered (a)
8.1 - Federal Tax Opinion of Breyer & Aguggia
8.2 - State Tax Opinion of BDO Seidman, LLP ()
8.3 - Opinion of RP Financial, LC. as to the value of subscription
rights (a)
10.1 - Proposed Form of Employment Agreement with Certain Executive
Officers (a)
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
10.2 - Proposed Form of Employee Stock Ownership Plan (a)
10.3 - First Federal Bank of Idaho, F.S.B. 401(k) Plan ()
10.4 - Salary Continuation Agreement between First Federal Bank of Idaho
F.S.B. and Clyde E. Conklin (a)
10.5 - Salary Continuation Agreement between First Federal Bank of Idaho,
F.S.B. and Larry K. Moxley (a)
21 - Subsidiaries of FirstBank Corp. (a)
23.1 - Consent of BDO Seidman, LLP
23.2 - Consent of Breyer & Aguggia (contained in opinion included as
Exhibit 5) (a)
23.3 - Consent of Breyer & Aguggia as to its Federal Tax Opinion (a)
23.4 - Consent of RP Financial, LC. (a)
24 - Power of Attorney (contained in signature page) (a)
27 - Financial Data Schedule (a)
99.1 - Order Form (a)
99.2 - Solicitation and Marketing Materials (a)
99.3 - Appraisal Agreement with RP Financial, LC. (a)
99.4 - Appraisal Report of RP Financial, LC. ()
99.5 - Proxy Statement for Special Meeting of Members of FirstBank
Northwest (a)
</TABLE>
______________
(a) Previously filed.
Item 28. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended ("Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high 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
II-4
<PAGE>
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) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act") (and, where
applicable, each filing of any employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act, and is therefore, unenforceable. In the event that a claim for
indemnification against liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the questions whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amended Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in Lewiston, Idaho on
the 2nd day of May, 1997.
FirstBank Corp.
By: /s/ Clyde E. Conklin
--------------------------------------
Clyde E. Conklin
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amended Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Clyde E. Conklin Chief Executive Officer and Director May 2, 1997
- -------------------------------------
Clyde E. Conklin (Principal Executive Officer)
/s/ Larry K. Moxley Chief Financial Officer and Director May 2, 1997
- -------------------------------------
Larry K. Moxley (Principal Financial Officer)
/s/ Cynthia M. Moore Controller May 2, 1997
- -------------------------------------
Cynthia M. Moore (Principal Accounting Officer)
/s/ William J. Larson* Director May 2, 1997
- -------------------------------------
William J. Larson
/s/ Steve R. Cox* Director May 2, 1997
- -------------------------------------
Steve R. Cox
/s/ Robert S. Coleman, Sr.* Director May 2, 1997
- -------------------------------------
Robert S. Coleman, Sr.
/s/ James N. Marker* Director May 2, 1997
- -------------------------------------
James N. Marker
/s/ W. Dean Jurgens* Director May 2, 1997
- -------------------------------------
W. Dean Jurgens
</TABLE>
- -----------
* By power of attorney dated March 14, 1997.
<PAGE>
As filed with the Securities and Exchange Commission on May 2, 1997
Registration No. 333-23395
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FIRSTBANK CORP.
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(Exact name of registrant as specified in charter)
Delaware 6035 84-1389562
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(State or other jurisdiction of (Primary SICC No.) (I.R.S. Employer
incorporation or organization) Identification No.)
920 Main Street
Lewiston, Idaho 83501
(208) 746-9610
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(Address and telephone number of principal executive offices)
John F. Breyer, Jr., Esquire
Aaron M. Kaslow, Esquire
BREYER & AGUGGIA
Suite 470 East
1300 I Street, N.W.
Washington, D.C. 20005
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(Name and address of agent for service)
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INDEX TO EXHIBITS
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1.1 -- Form of proposed Agency Agreement among FirstBank Corp., FirstBank Northwest and Sandler
O'Neill & Partners, L.P.
1.2 -- Engagement Letter between First Federal Bank of Idaho, F.S.B. and Sandler O'Neill &
Partners, L.P. (a)
2 -- Plan of Conversion of First Federal Bank of Idaho, F.S.B. (a)
3.1 -- Certificate of Incorporation of FirstBank Corp. (a)
3.2 -- Bylaws of FirstBank Corp. (a)
4 -- Form of Certificate for Common Stock (a)
5 -- Opinion of Breyer & Aguggia regarding legality of securities registered (a)
8.1 -- Federal Tax Opinion of Breyer & Aguggia
8.2 -- State Tax Opinion of BDO Seidman, LLP
8.3 -- Opinion of RP Financial, LC. as to the value of subscription rights (a)
10.1 -- Proposed Form of Employment Agreement with Certain Executive Officers (a)
10.2 -- Proposed Form of Employee Stock Ownership Plan (a)
10.3 -- First Federal Bank of Idaho, F.S.B. 401(k) Plan
10.4 -- Salary Continuation Agreement between First Federal Bank of Idaho F.S.B. and Clyde E. Conklin (a)
10.5 -- Salary Continuation Agreement between First Federal Bank of Idaho, F.S.B. and Larry K. Moxley (a)
21 -- Subsidiaries of FirstBank Corp. (a)
23.1 -- Consent of BDO Seidman, LLP
23.2 -- Consent of Breyer & Aguggia (contained in opinion included as Exhibit 5) (a)
23.3 -- Consent of Breyer & Aguggia as to its Federal Tax Opinion (a)
23.4 -- Consent of RP Financial, LC. (a)
24 -- Power of Attorney (contained in signature page) (a)
27 -- Financial Data Schedule (a)
99.1 -- Order Form (a)
99.2 -- Solicitation and Marketing Materials (a)
99.3 -- Appraisal Agreement with RP Financial, LC. (a)
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99.4 -- Appraisal Report of RP Financial, LC.
99.5 -- Proxy Statement for Special Meeting of Members of FirstBank Northwest (a)
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_____________________
(a) Previously filed.
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EXHIBIT 1.1
FORM OF PROPOSED AGENCY AGREEMENT AMONG
FIRSTBANK CORP., FIRSTBANK NORTHWEST AND SANDLER O'NEILL & PARTNERS, L.P.
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1,725,000 Shares
(subject to increase up to 1,983,750 shares
in the event of an oversubscription)
FirstBank Corp.
(a Delaware corporation)
Common Stock
(par value $.01 per share)
AGENCY AGREEMENT
________________, 1997
Sandler O'Neill & Partners, L.P.
Two World Trade Center, 104th Floor
New York, New York 10048
Ladies and Gentlemen:
FirstBank Corp., a Delaware corporation (the "Company"), and
FirstBank Northwest (formerly known as First Federal Bank of Idaho, a federal
savings bank) (the "Bank"), hereby confirm their agreement with Sandler O'Neill
& Partners, L.P. ("Sandler O'Neill" or the "Agent") with respect to the offer
and sale by the Company of 1,725,000 shares (subject to increase up to 1,983,750
shares in the event of an oversubscription) of the Company's Common Stock, par
value $.01 per share (the "Common Stock"). The shares of Common Stock to be sold
by the Company are hereinafter called the "Securities."
The Securities are being offered in accordance with the plan of
conversion (the "Plan") adopted by the Board of Directors of the Bank pursuant
to which the Bank intends to convert from a federally chartered mutual savings
bank to a federally chartered stock savings bank and issue all of its stock to
the Company (the "Stock Conversion"). Following the consummation of the Stock
Conversion, the Bank intends to relocate its main office to Clarkston,
Washington and convert from a federally chartered stock savings bank to a
Washington-chartered savings bank (the "Charter Conversion"). Pursuant to the
Plan, the Company is offering to the Bank's tax qualified employee benefit plans
(the "Employee Plans") and to certain of the Bank's depositors and borrowers
rights to subscribe for the Securities in a subscription offering (the
"Subscription Offering"). To the extent Securities are not subscribed for in the
Subscription
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Offering, such Securities may be offered to certain members of the general
public, with preference given to certain natural persons and trusts of natural
persons who are permanent residents of NezPerce, Latah, Kootenai or Idaho
counties of Idaho, in a direct community offering (the "Direct Community
Offering" and together with the Subscription Offering, as each may be extended
or reopened from time to time, the "Subscription and Community Offering") to be
commenced concurrently with the Subscription Offering. It is currently
anticipated by the Bank and the Company that any Securities not subscribed for
in the Subscription and Community Offering will be offered, subject to Section 2
hereof, in a syndicated community offering (the "Syndicated Community
Offering"). The Subscription and Community Offering and the Syndicated
Community Offering are hereinafter referred to collectively as the "Offerings,"
and the conversion of the Bank from mutual to stock form, the conversion of the
Bank to a Washington-chartered institution, the acquisition of the capital stock
of the Bank by the Company and the Offerings are hereinafter referred to
collectively as the "Conversion." It is acknowledged that the number of
Securities to be sold in the Offerings may be increased or decreased as
described in the Prospectus (as hereinafter defined). If the number of
Securities is increased or decreased in accordance with the Plan, the term
"Securities" shall mean such greater or lesser number, where applicable.
The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form SB-2 (No. 333-23395),
including a related prospectus, for the registration of the Securities under the
Securities Act of 1933, as amended (the "Securities Act"), has filed such
amendments thereto, if any, and such amended prospectuses as may have been
required to the date hereof by the Commission in order to declare such
registration statement effective, and will file such additional amendments
thereto and such amended prospectuses and prospectus supplements as may
hereafter be required. Such registration statement (as amended to date, if
applicable, and as from time to time amended or supplemented hereafter) and the
prospectus constituting a part thereof (including in each case all documents
incorporated or deemed to be incorporated by reference therein and the
information, if any, deemed to be part thereof pursuant to the rules and
regulations of the Commission under the Securities Act, as from time to time
amended or supplemented pursuant to the Securities Act or otherwise (the
"Securities Act Regulations")), are hereinafter referred to as the "Registration
Statement" and the "Prospectus," respectively, except that if any revised
prospectus shall be used by the Company in connection with the Subscription and
Community Offering or the Syndicated Community Offering which differs from the
Prospectus on file at the Commission at the time the Registration Statement
becomes effective (whether or not such revised prospectus is required to be
filed by the Company pursuant to Rule 424(b) of the 1933 Act Regulations), the
term "Prospectus" shall refer to such revised prospectus from and after the time
it is first provided to the Agent for such use.
Concurrently with the execution of this Agreement, the Company is
delivering to the Agent copies of the Prospectus of the Company to be used in
the Subscription and Community Offering. Such prospectus contains information
with respect to the Bank, the Company and the Common Stock.
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SECTION 1. Representations and Warranties.
(a) The Company and the Bank jointly and severally represent and
warrant to the Agent as of the date hereof as follows:
(i) The Registration Statement has been declared effective by the
Commission, no stop order has been issued with respect thereto and no
proceedings therefor have been initiated or, to the knowledge of the
Company and the Bank, threatened by the Commission. At the time the
Registration Statement became effective and at the Closing Time referred to
in Section 2 hereof, the Registration Statement complied and will comply in
all material respects with the requirements of the Securities Act and the
Securities Act Regulations and did not and 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 not
misleading. The Prospectus, at the date hereof does not and at the Closing
Time referred to in Section 2 hereof will not, include an untrue statement
of a material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the representations
and warranties in this subsection shall not apply to statements in or
omissions from the Registration Statement or Prospectus made in reliance
upon and in conformity with information with respect to the Agent furnished
to the Company in writing by the Agent expressly for use in the
Registration Statement or Prospectus (the "Agent Information," which the
Company and the Bank acknowledge appears only in the sections captioned
"Market for Common Stock" and "The Conversion - Marketing and Underwriting
Arrangements" of the Prospectus).
(ii) The Company has filed with the Department of the Treasury,
Office of Thrift Supervision (the "OTS") the Company's application for
approval of its acquisition of the Bank (the "Holding Company Application")
on Form H-(e)1-S promulgated under the savings and loan holding company
provisions of the Home Owners' Loan Act, as amended ("HOLA") and the
regulations promulgated thereunder. The Company has received written notice
from the OTS of its approval of the acquisition of the Bank, such approval
remains in full force and effect and no order has been issued by the OTS
suspending or revoking such approval and no proceedings therefor have been
initiated or, to the knowledge of the Company or the Bank, threatened by
the OTS. At the date of such approval and at the Closing Time referred to
in Section 2, the Holding Company Application complied and will comply in
all material respects with the applicable provisions of HOLA and the
regulations promulgated thereunder.
(iii) Pursuant to the rules and regulations of the OTS governing
the conversion of federally chartered mutual savings banks to stock form
(the "Conversion Regulations"), the Bank has filed with the OTS an
application for conversion on Form AC, and has filed such amendments
thereto and supplementary materials as may have been required to the date
hereof (such application, as amended to date, if applicable, and as from
time to time amended or supplemented hereafter, is hereinafter referred to
as the "Conversion Application"), including copies of the Bank's Proxy
Statement, dated ______, 1997, relating to the Conversion (the "Proxy
Statement"), and the Prospectus .
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The OTS has, by letter dated __________, 1997, approved the Conversion
Application, such approval remains in full force and effect and no order
has been issued by the OTS suspending or revoking such approval and no
proceedings therefor have been initiated or, to the knowledge of the
Company or the Bank, threatened by the OTS. At the date of such approval
and at the Closing Time referred to in Section 2, the Conversion
Application complied and will comply in all material respects with the
applicable provisions of the Conversion Regulations.
(iv) At the time of their use, the Proxy Statement and any other
proxy solicitation materials will comply in all material respects with the
applicable provisions of the Conversion Regulations and will not contain an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Bank will
promptly file the Prospectus and any supplemental sales literature with the
OTS. The Prospectus and all supplemental sales literature, as of the date
the Registration Statement became effective and at the Closing Time
referred to in Section 2, complied and will comply in all material respects
with the applicable requirements of the Conversion Regulations and, at or
prior to the time of their first use, will have received all required
authorizations of the OTS for use in final form.
(v) The OTS has not, by order or otherwise, prevented or
suspended the use of the Prospectus or any supplemental sales literature
authorized by the Company or the Bank for use in connection with the
Offerings.
(vi) At the Closing Time referred to in Section 2, the Company and
the Bank will have completed the conditions precedent to the Conversion in
accordance with the Plan, the applicable Conversion Regulations and all
other applicable laws, regulations, decisions and orders, including all
material terms, conditions, requirements and provisions precedent to the
Conversion imposed upon the Company or the Bank by the OTS, the Federal
Deposit Insurance Corporation (the "FDIC"), or any other regulatory
authority, other than those which the regulatory authority permits to be
completed after the Conversion.
(vii) RP Financial, LC, which prepared the valuation of the Bank as
part of the Conversion, has advised the Company and the Bank that it
satisfies all requirements for an appraiser set forth in the Conversion
Regulations and any interpretations or guidelines issued by the OTS with
respect thereto.
(viii) BDO Seidman, LLP, the accountants who certified the financial
statements and supporting schedules of the Bank included in the
Registration Statement are independent public accountants within the
meaning of the Code of Ethics of the [Association of Independent Certified
Public Accountants] and such accountants are, with respect to the Company,
the Bank and each subsidiary of the Bank, independent certified public
accountants as required by the Securities Act and the Securities Act
Regulations.
(ix) The only subsidiary of the Bank is TriStar Financial
Corporation (the "Subsidiary").
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(x) The consolidated financial statements and the related notes
thereto included in the Registration Statement and the Prospectus present
fairly the consolidated financial position of the Company, the Bank and the
Subsidiary as at the dates indicated and the results of operations,
retained earnings and cash flows for the periods specified, and comply as
to form in all material respects with the applicable accounting
requirements of the Securities Act Regulations and the Conversion
Regulations; except as otherwise stated in the Registration Statement, said
financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis; and the
supporting schedules and tables included in the Registration Statement
present fairly the information required to be stated therein.
(xi) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as otherwise
stated therein (A) there has been no material adverse change in the
financial condition, results of operations or business of the Company, the
Bank and the Subsidiary considered as one enterprise, whether or not
arising in the ordinary course of business, and (B) except for transactions
specifically referred to or contemplated in the Prospectus, there have been
no transactions entered into by the Company, the Bank or the Subsidiary,
other than those in the ordinary course of business and consistent with
past practice, which are material with respect to the Company, the Bank and
the Subsidiary considered as one enterprise.
(xii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware with corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and
to enter into and perform its obligations under this Agreement; and the
Company is duly qualified as a foreign corporation to transact business and
is in good standing in the State of Idaho and in each jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure to
so qualify would not have a material adverse effect on the financial
condition, results of operations or business of the Company, the Bank and
the Subsidiary considered as one enterprise.
(xiii) Upon consummation of the Conversion, the authorized, issued
and outstanding capital stock of the Company will be within the range as
set forth in the Prospectus under "Capitalization" (except for subsequent
issuances, if any, pursuant to reservations, agreements or employee benefit
plans referred to in the Prospectus); no shares of Common Stock have been
or will be issued and outstanding prior to the Closing Time referred to in
Section 2; at the time of Conversion, the Securities will have been duly
authorized for issuance and, when issued and delivered by the Company
pursuant to the Plan against payment of the consideration calculated as set
forth in the Plan and stated on the cover page of the Prospectus, will be
duly and validly issued and fully paid and non-assessable; the terms and
provisions of the Common Stock and the capital stock of the Company conform
to all statements relating thereto contained in the Prospectus; the
certificates representing the shares of Common Stock conform to the
requirement of federal and Delaware law; and the issuance of the Securities
is not subject to preemptive or other similar rights.
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(xiv) The Bank, as of the date hereof, is a federally chartered
savings bank in mutual form and upon consummation of the Stock Conversion
will be a federally chartered savings bank in stock form, in both instances
with full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus; the
Company, the Bank and the Subsidiary have obtained all licenses, permits
and other governmental authorizations currently required for the conduct of
their respective businesses or required for the conduct of their respective
businesses as contemplated by the Holding Company Application and the
Conversion Application, except where the failure to obtain such licenses,
permits or other governmental authorizations would not have a material
adverse effect on the financial condition, results of operations or
business of the Company, the Bank and the Subsidiary considered as one
enterprise; all such licenses, permits and other governmental
authorizations are in full force and effect and the Company, the Bank and
the Subsidiary are in all material respects in compliance therewith;
neither the Company, the Bank nor the Subsidiary has received notice of any
proceeding or action relating to the revocation or modification of any such
license, permit or other governmental authorization which, individually or
in the aggregate, if the subject of an unfavorable decision, ruling or
finding, might have a material adverse effect on the financial condition,
results of operations or business of the Company, the Bank or the
Subsidiary, considered as one enterprise; and the Bank is in good standing
under the laws of the United States and is qualified as a foreign
corporation in any jurisdiction in which the failure to so qualify would
have a material adverse effect on the financial condition, results of
operations or business of the Company, the Bank and the Subsidiary
considered as one enterprise.
(xv) The deposit accounts of the Bank are insured by the FDIC up
to the applicable limits and, upon consummation of the Stock Conversion,
the liquidation account for the benefit of eligible account holders and
supplemental eligible account holders will be duly established in
accordance with the requirements of the Conversion Regulations.
(xvi) Upon consummation of the Stock Conversion, the authorized,
issued and outstanding capital stock of the Bank is 1,000 shares of common
stock, par value $1.00 per share (the "Bank Common Stock"); no shares of
Bank Common Stock have been or will be issued prior to the Closing Time
referred to in Section 2; and as of Closing Time referred to in Section 2,
all of the issued and outstanding capital stock of the Bank will be duly
authorized, validly issued and fully paid and non-assessable, and all such
capital stock will be owned beneficially and of record by the Company free
and clear of any mortgage, pledge, lien, encumbrance or claim in law or
equity.
(xvii) The Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has full corporate power and authority
to own, lease and operate its properties and to conduct its business as
described in the Registration Statement and Prospectus, and is duly
qualified to transact business and is in good standing in each jurisdiction
in which such qualification is required, whether by reason of the ownership
or leasing of property or the conduct of business, except where the failure
to so qualify would not have a material adverse effect on the financial
condition, results of operations or business of the
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Company, the Bank and the Subsidiary considered as one enterprise; the
activities of the Subsidiary are permitted to subsidiaries of a federally
chartered savings bank by the rules, regulations, resolutions and practices
of the OTS; all of the issued and outstanding capital stock of the
Subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable and is owned directly by the Bank, free and clear of any
security interest, mortgage, pledge, lien, encumbrance or claim in law or
equity.
(xviii) The Company and the Bank have taken all corporate action
necessary for them to execute, deliver and perform this Agreement, and this
Agreement has been duly executed and delivered by, and is the valid and
binding agreement of, the Company and the Bank, enforceable in accordance
with its terms, except as may be limited by bankruptcy, insolvency or other
laws affecting the enforceability of the rights of creditors generally and
judicial limitations on the right of specific performance and except as the
enforceability of indemnification and contribution provisions may be
limited by applicable securities laws.
(xix) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and prior to the
Closing Time, except as otherwise may be indicated or contemplated therein,
none of the Company, the Bank or the Subsidiary will have (A) issued any
securities or incurred any liability or obligation, direct or contingent,
or borrowed money, except borrowings in the ordinary course of business
from the same or similar sources and in similar amounts as indicated in the
Prospectus, or (B) entered into any transaction or series of transactions
which is material in light of the business of the Company, the Bank and the
Subsidiary, considered as one enterprise excluding the origination,
purchase and sale of loans or the purchase or sale of investment securities
or mortgaged-backed securities in the ordinary course of business or
otherwise as indicated in the Prospectus.
(xx) 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 Securities that has not been obtained and
a copy of which has been delivered to the Agent, except as may be required
under the securities laws of various jurisdictions.
(xxi) Neither the Company, the Bank nor the Subsidiary is in
violation of its certificate of incorporation, charter or bylaws (and the
Bank will not be in violation of its charter or bylaws in stock form upon
consummation of the Conversion); and neither the Company, the Bank nor the
Subsidiary is in default (nor has any event occurred which, with notice or
lapse of time or both, would constitute a default) in the performance or
observance of any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which the Company, the Bank or the Subsidiary is a party or
by which it or any of them may be bound, or to which any of the property or
assets of the Company, the Bank or the Subsidiary is subject, except for
such defaults that would not, individually or in the aggregate, have a
material adverse effect on the financial condition, results of operations
or business of the Company, the Bank and the Subsidiary considered as one
enterprise.
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(xxii) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated herein have been duly
authorized by all necessary corporate action and do not and will not
conflict with or constitute a breach of, or default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company, the Bank or the Subsidiary pursuant to, any
contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which the Company, the Bank or the Subsidiary is a party or
by which it or any of them may be bound, or to which any of the property or
assets of the Company, the Bank or the Subsidiary is subject, except for
such defaults that would not, individually or in the aggregate, have a
material adverse effect on the financial condition, results of operations
or business of the Company, the Bank and the Subsidiary considered as one
enterprise; nor will such action result in any violation of the provisions
of the certificate of incorporation, charter or bylaws of the Company, the
Bank or its Subsidiary, or any applicable law, regulation or administrative
or court decree.
(xxiii) No labor dispute with the employees of the Company, the Bank
or the Subsidiary exists or, to the knowledge of the Company or the Bank,
is imminent; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers or
contractors which might be expected to result in any material adverse
change in the financial condition, results of operations or business of the
Company, the Bank and the Subsidiary considered as one enterprise.
(xxiv) The Company, the Bank and the Subsidiary have good and
marketable title to all properties and assets for which ownership is
material to the business of the Company, the Bank or the Subsidiary and to
those properties and assets described in the Prospectus as owned by them,
free and clear of all liens, charges, encumbrances or restrictions, except
such as are described in the Prospectus or are not material in relation to
the business of the Company, the Bank and the Subsidiary considered as one
enterprise; and all of the leases and subleases material to the business of
the Company, the Bank or the Subsidiary under which the Company, the Bank
or the Subsidiary hold properties, including those described in the
Prospectus, are valid and binding agreements of the Company, the Bank and
the Subsidiary, enforceable in accordance with their terms.
(xxv) Neither the Company, the Bank nor the Subsidiary are in
violation of any directive from the OTS or the FDIC to make any material
change in the method of conducting their respective businesses; the Bank
and the Subsidiary have conducted and are conducting their business so as
to comply in all material respects with all applicable statutes,
regulations and administrative and court decrees (including, without
limitation, all regulations, decisions, directives and orders of the OTS or
the FDIC), except in such respects as would not have a material adverse
effect upon the Company, the Bank and the Subsidiary considered as one
enterprise.
(xxvi) There is no action, suit or proceeding before or by any court
or governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company or the Bank, threatened, against or affecting
the Company, the Bank or the Subsidiary which is required to be disclosed
in the Registration Statement (other than
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as disclosed therein), or which might result in any material adverse change
in the financial condition, results of operations or business of the
Company, the Bank and the Subsidiary considered as one enterprise, or which
might materially and adversely affect the properties or assets thereof or
which might materially and adversely affect the consummation of the
Conversion; all pending legal or governmental proceedings to which the
Company, the Bank or the Subsidiary is a party or of which any of their
respective property or assets is the subject which are not described in the
Registration Statement, including ordinary routine litigation incidental to
the business, are considered in the aggregate not material; and there are
no contracts or documents of the Company, the Bank or the Subsidiary which
are required to be filed as exhibits to the Registration Statement or the
Conversion Application which have not been so filed.
(xxvii) The Bank has obtained an opinion of its special counsel,
Breyer & Aguggia, with respect to the legality of the Securities to be
issued and the federal income tax consequences of the Conversion, copies of
which are filed as exhibits to the Registration Statement; the Bank has
obtained an opinion of BDO Seidman with respect to the Idaho income tax
consequences of the Conversion, copies of which are filed as exhibits to
the Registration Statement; all material aspects of the aforesaid opinions
are accurately summarized in the Prospectus; the facts and representations
upon which such opinions are based are truthful, accurate and complete in
all material respects; and neither the Bank nor the Company has taken or
will take any action inconsistent therewith.
(xxviii) The Company is not required to be registered under the
Investment Company Act of 1940, as amended.
(xxix) All of the loans represented as assets on the most recent
financial statements or selected financial information of the Bank 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 Regulations 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 result in a material adverse effect on the financial condition, results
of operations or business of the Company, the Bank and the Subsidiary
considered as one enterprise.
(xxx) To the knowledge of the Company and the Bank none of the
Company, the Bank or the Subsidiary or employees thereof has made any
payment of funds of the Company or the Bank as a loan for the purchase of
the Common Stock, except for the intended loan to the ESOP for the purchase
of approximately 8% of the Common Stock to be issued in the Conversion, or
made any other payment of funds prohibited by law, and no funds have been
set aside to be used for any payment prohibited by law.
(xxxi) The Company, the Bank and the Subsidiary are in compliance in
all material respects with the applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transaction Reporting
Act of 1970, as amended, and the rules and regulations thereunder.
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(xxxii) Neither the Company, the Bank nor the Subsidiary nor any
properties owned or operated by the Company, the Bank or the Subsidiary is
in violation of or liable under any Environmental Law (as defined below),
except for such violations or liabilities that, individually or in the
aggregate, would not have a material adverse effect on the financial
condition, results of operations or business of the Company, the Bank and
the Subsidiary considered as one enterprise. There are no actions, suits or
proceedings, or demands, claims, notices or investigations (including,
without limitation, notices, demand letters or requests for information
from any environmental agency) instituted or pending, or to the knowledge
of the Company or the Bank threatened, relating to the liability of any
property owned or operated by the Company, the Bank or the Subsidiary,
under any Environmental Law. For purposes of this subsection, the term
"Environmental Law" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with
any regulatory authority relating to (i) the protection, preservation or
restoration of the environment (including, without limitation, air, water,
vapor, surface water, groundwater, drinking water supply, surface soil,
subsurface soil, plant and animal life or any other natural resource),
and/or (ii) the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or
disposal of any substance presently listed, defined, designated or
classified as hazardous, toxic, radioactive or dangerous, or otherwise
regulated, whether by type or by quantity, including any material
containing any such substance as a component.
(xxxiii) The Company, the Bank and the Subsidiary have filed all
federal income and state and local franchise tax returns required to be
filed and have made timely payments of all taxes shown as due and payable
in respect of such returns, and no deficiency has been asserted with
respect thereto by any taxing authority.
(xxxiv) The Company has received approval, subject to regulatory
approval to consummate the Offerings and issuance, to have the Securities
quoted on the National Market of the National Association of Securities
Dealers' Automated Quotation System ("Nasdaq National Market") effective as
of the Closing Time referred to in Section 2 hereof.
(xxxv) The Company will file a registration statement for the
Common Stock under Section 12(g) of the Securities Exchange Act (the
"Registration Statement") prior to completion of the Offerings and will
request that such Registration Statement be effective upon completion of
the Conversion.
(b) Any certificate signed by any officer of the Company or the
Bank and delivered to either of the Agent or counsel for the Agent shall be
deemed a representation and warranty by the Company or the Bank to each Agent as
to the matters covered thereby.
<PAGE>
-11-
SECTION 2. Appointment of Sandler O'Neill; Sale and Delivery of the
Securities; Closing.
On the basis of the representations and warranties herein contained
and subject to the terms and conditions herein set forth, the Company hereby
appoints Sandler O'Neill as its Agent to consult with and advise the Company,
and to assist the Company with the solicitation of subscriptions and purchase
orders for Securities, in connection with the Company's sale of Common Stock in
the Subscription and Community Offering and in the Syndicated Community
Offering. On the basis of the representations and warranties herein contained,
and subject to the terms and conditions herein set forth, Sandler O'Neill
accepts such appointment and agrees to use its best efforts to assist the
Company with the solicitation of subscriptions and purchase orders for
Securities in accordance with this Agreement; provided, however, that the Agent
shall not be obligated to take any action which is inconsistent with any
applicable laws, regulations, decisions or orders. The services to be rendered
by Sandler O'Neill pursuant to this appointment include the following: (i)
consulting as to the securities marketing implications of any aspect of the Plan
of Stock Conversion or related corporate documents; (ii) reviewing with the
Board of Directors the independent appraiser's appraisal of the common stock;
(iii) reviewing all offering documents, including the Prospectus, stock order
form and related offering materials (it being understood that preparation and
filing of such documents is the sole responsibility of the Company and the Bank
and their counsel); (iv) assisting in the design and implementation of a
marketing strategy for the Offerings; (v) providing support to the Company and
the Bank in obtaining all requisite regulatory approvals; (vi) assisting Bank
management in preparing for meetings with potential investors and broker-
dealers; and (vii) providing such other general advice and assistance as may be
requested to promote the successful completion of the Offerings.
The appointment of the Agent hereunder shall terminate upon the
earliest to occur of (a) forty-five (45) days after the last day of the
Subscription and Community Offering, unless the Company and the Agent agree in
writing to extend such period and the OTS agrees to extend the period of time in
which the Shares may be sold, (b) the receipt and acceptance of subscriptions
and purchase orders for all of the Securities, or (c) the completion of the
Syndicated Community Offering.
If any of the Securities remain available after the expiration of the
Subscription and Community Offering, at the request of the Company and the Bank,
Sandler O'Neill will seek to form a syndicate of registered broker or dealers
("Selected Dealers") to assist in the solicitation of purchase orders of such
Securities on a best efforts basis, subject to the terms and conditions set
forth in a selected dealers' agreement (the "Selected Dealers' Agreement"),
substantially in the form set forth in Exhibit A to this Agreement. Sandler
O'Neill will endeavor to limit the aggregate fees to be paid by the Company and
the Bank under any such Selected Dealers' Agreement to an amount competitive
with gross underwriting discounts charged at such time for underwritings of
comparable amounts of stock sold at a comparable price per share in a similar
market environment; provided, however, that the aggregate fees payable to Sander
O'Neill and Selected Dealers shall not exceed 7% of the aggregate Purchase Price
of the Securities sold by such Selected Dealers. Sander O'Neill will endeavor
to distribute the Securities among the Selected Dealers in a fashion which best
meets the distribution objective of the Company and the requirements of the
Plan, which may result in limiting the allocation
<PAGE>
-12-
of stock to certain Selected Dealers. It is understood that in no event shall
Sandler O'Neill be obligated to act as a Selected Dealer or to take or purchase
any Securities.
In the event the Company is unable to sell at least the total minimum
of the Securities, as set forth on the cover page of the Prospectus, within the
period herein provided, this Agreement shall terminate and the Company shall
refund to any persons who have subscribed for any of the Securities the full
amount which it may have received from them, together with interest as provided
in the Prospectus, and no party to this Agreement shall have any obligation to
the others hereunder, except for the obligations of the Company and the Bank as
set forth in Sections 4, 6(a) and 7 hereof and the obligations of the Agent as
provided in Sections 6(b) and 7 hereof. Appropriate arrangements for placing
the funds received from subscriptions for Securities or other offers to purchase
Securities in special interest-bearing accounts with the Bank until all
Securities are sold and paid for were made prior to the commencement of the
Subscription Offering, with provision for refund to the purchasers as set forth
above, or for delivery to the Company if all Securities are sold.
If at least the total minimum of Securities, as set forth on the cover
page of the Prospectus, are sold, the Company agrees to issue or have issued the
Securities sold and to release for delivery certificates for such Securities at
the Closing Time against payment therefor by release of funds from the special
interest-bearing accounts referred to above. The closing shall be held at the
offices of Breyer & Aguggia, at 10:00 a.m., local time, or at such other place
and time as shall be agreed upon by the parties hereto, on a business day to be
agreed upon by the parties hereto. The Company shall notify the Agent by
telephone, confirmed in writing, when funds shall have been received for all the
Securities. Certificates for Securities shall be delivered directly to the
purchasers thereof in accordance with their directions. Notwithstanding the
foregoing, certificates for Securities purchased through Selected Dealers shall
be made available to the Agent for inspection at least 48 hours prior to the
Closing Time at such office as the Agent shall designate. The hour and date
upon which the Company shall release for delivery all of the Securities, in
accordance with the terms hereof, is herein called the "Closing Time."
The Company will pay any stock issue and transfer taxes which may be
payable with respect to the sale of the Securities.
In addition to reimbursement of the expenses specified in Section 4
hereof, the Agent will receive the following compensation for its services
hereunder:
(a) one and one-half percent (1.5%) of the aggregate Actual Purchase
Price (as defined in the Prospectus) of the Securities sold in the
Subscription and Community Offering, subject to a maximum fee equal to one
and one-half percent (1.5%) of the aggregate gross proceeds at the midpoint
of the estimated price range as set forth on the cover page of the
Prospectus; and
(b) with respect to any Securities sold by an NASD member firm (other
than Sandler O'Neill) under the Selected Dealers' Agreement in the
Syndicated Community Offering, (i) the compensation payable to Selected
Dealers under any Selected Dealers' Agreement, (ii) any sponsoring dealer's
fees; and (iii) a management fee to Sandler
<PAGE>
-13-
O'Neill of two percent (2.0%). Any fees payable to Sandler O'Neill for
Securities sold by Sandler O'Neill under any such agreement shall be
limited to an aggregate of two percent (2.0%) of the Actual Purchase Price
of such Securities.
Notwithstanding the foregoing, no fee shall be payable with respect to
any Securities sold in the Subscription and Community Offering to any employee,
officer, or director of the Bank or the Company, any member of such person's
immediate family (which term shall mean parents, spouse, siblings, children and
grandchildren), or any employee benefit plan of the Company or the Bank
established for the benefit of their respective directors, officers or
employees.
If this Agreement is terminated by the Agent in accordance with the
provisions of Section 9(a) hereof or the Conversion is terminated by the
Company, no fee shall be payable by the Company to Sandler O'Neill; however, the
Company shall reimburse the Agent for all of its reasonable out-of-pocket
expenses incurred prior to termination, including the reasonable fees and
disbursements of counsel for the Agent in accordance with the provisions of
Section 4 hereof.
All fees payable to the Agent hereunder shall be payable in
immediately available funds at Closing Time, or upon the termination of this
Agreement, as the case may be. In recognition of the long lead times involved
in the conversion process, the Bank agrees to make advance payments to the Agent
in the aggregate amount of $50,000, $25,000 of which has been previously paid
and the remaining $25,000 of which shall be payable upon execution hereof, which
shall be credited against any fees or reimbursement of expenses payable
hereunder.
SECTION 3. Covenants of the Company. The Company and the Bank
covenant with the Agent as follows:
(a) The Company and the Bank will prepare and file such amendments or
supplements to the Registration Statement, the Prospectus, the Conversion
Application and the Proxy Statement as may hereafter be required by the
Securities Act Regulations or the Conversion Regulations or as may
hereafter be requested by the Agent. Following completion of the
Subscription and Community Offering, in the event of a Syndicated Community
Offering, the Company and the Bank (i) will promptly prepare and file with
the Commission a post-effective amendment to the Registration Statement
relating to the results of the Subscription and Community Offering, any
additional information with respect to the proposed plan of distribution
and any revised pricing information or (ii) if no such post-effective
amendment is required, will file with, or mail for filing to, the
Commission a prospectus or prospectus supplement containing information
relating to the results of the Subscription and Community Offering and
pricing information pursuant to Rule 424(c) of the Securities Act
Regulations, in either case in a form acceptable to the Agent. The Company
and the Bank will notify the Agent immediately, and confirm the notice in
writing, (i) of the effectiveness of any post-effective amendment of the
Registration Statement, the filing of any supplement to the Prospectus and
the filing of any amendment to the Conversion Application, (ii) of the
receipt of any comments from the OTS or the Commission with respect to the
transactions contemplated by this Agreement or the Plan, (iii) of any
request by the Commission or the OTS for any
<PAGE>
-14-
amendment to the Registration Statement or the Conversion Application or
any amendment or supplement to the Prospectus or for additional
information, (iv) of the issuance by the OTS of any order suspending the
Offerings or the use of the Prospectus or the initiation of any proceedings
for that purpose, (v) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose, and (vi) of the receipt of
any notice with respect to the suspension of any qualification of the
Securities for offering or sale in any jurisdiction. The Company and the
Bank will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at
the earliest possible moment.
(b) The Company and the Bank will give the Agent notice of its
intention to file or prepare any amendment to the Conversion Application or
Registration Statement (including any post-effective amendment) or any
amendment or supplement to the Prospectus (including any revised prospectus
which the Company proposes for use in connection with the Syndicated
Community Offering of the Securities which differs from the prospectus on
file at the Commission at the time the Registration Statement becomes
effective, whether or not such revised prospectus is required to be filed
pursuant to Rule 424(b) of the Securities Act Regulations), will furnish
the Agent with copies of any such amendment or supplement a reasonable
amount of time prior to such proposed filing or use, as the case may be,
and will not file any such amendment or supplement or use any such
prospectus to which the Agent or counsel for the Agent may object.
(c) The Company and the Bank will deliver to the Agent as many signed
copies and as many conformed copies of the Conversion Application and the
Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein)
as the Agent may reasonably request, and from time to time such number of
copies of the Prospectus as the Agent may reasonably request.
(d) During the period when the Prospectus is required to be delivered,
the Company and the Bank will comply, at their own expense, with all
requirements imposed upon them by the OTS, by the applicable Conversion
Regulations, as from time to time in force, and by the Securities Act, the
Securities Act Regulations, the Securities Exchange Act of 1934, as amended
(the "Securities Exchange Act"), and the rules and regulations of the
Commission promulgated thereunder, including, without limitation,
Regulation M, so far as necessary to permit the continuance of sales or
dealing in shares of Common Stock during such period in accordance with the
provisions hereof and the Prospectus.
(e) If, at any time during the period when the Prospectus is required
to be delivered, any event or circumstance shall occur as a result of which
it is necessary, in the opinion of counsel for the Agent, to amend or
supplement the Prospectus in order to make the Prospectus not misleading in
light of the circumstances existing at the time it is delivered to a
purchaser, the Company and the Bank will forthwith amend or supplement the
Prospectus (in form and substance satisfactory to counsel for the Agent) so
that, as so amended or supplemented, the Prospectus will not include an
untrue
<PAGE>
-15-
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 it is delivered to a purchaser, not misleading, and
the Company and the Bank will furnish to the Agent a reasonable number of
copies of such amendment or supplement. For the purpose of this
subsection, the Company and the Bank will each furnish such information
with respect to itself as the Agent may from time to time reasonably
request.
(f) The Company and the Bank will take all necessary action, in
cooperation with the Agent, to qualify the Securities for offering and sale
under the applicable securities laws of such states of the United States
and other jurisdictions as the Conversion Regulations may require and as
the Agent and the Company have agreed; provided, however, that the Company
and the Bank shall not be obligated to file any general consent to service
of process or to qualify as a foreign corporation in any jurisdiction in
which it is not so qualified. In each jurisdiction in which the Securities
have been so qualified, the Company and the Bank will file such statements
and reports as may be required by the laws of such jurisdiction to continue
such qualification in effect for a period of not less than one year from
the effective date of the Registration Statement.
(g) The Company authorizes Sandler O'Neill and any Selected Dealers to
act as agent of the Company in distributing the Prospectus to persons
entitled to receive subscription rights and other persons to be offered
Securities having record addresses in the states or jurisdictions set forth
in a survey of the securities or "blue sky" laws of the various
jurisdictions in which the Offerings will be made (the "Blue Sky Survey").
(h) The Company will make generally available to its security holders
as soon as practicable, but not later than 60 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.
(i) During the period ending on the third anniversary of the
expiration of the fiscal year during which the closing of the transactions
contemplated hereby occurs, the Company will furnish to its stockholders as
soon as practicable after the end of each such fiscal year an annual report
(including consolidated statements of financial condition and consolidated
statements of income, stockholders' equity and cash flows, certified by
independent public accountants) and, as soon as practicable after the end
of each of the first three quarters of each fiscal year (beginning with the
fiscal quarter ending after the effective date of the Registration
Statement), the Company will make generally available to its stockholders
consolidated summary financial information of the Company for such quarter
in reasonable detail. In addition, such annual report and quarterly
consolidated summary financial information shall be made public through the
issuance of appropriate press releases at the same time or prior to the
time of the furnishing thereof to stockholders of the Company.
<PAGE>
-16-
(j) During the period ending on the third anniversary of the
expiration of the fiscal year during which the closing of the transactions
contemplated hereby occurs, the Company will furnish to the Agent (i) as
soon as available, a copy of each report or other document of the Company
furnished generally to stockholders of the Company or furnished to or filed
with the Commission under the Securities Exchange Act or any national
securities exchange or system on which any class of securities of the
Company is listed, and (ii) from time to time, such other information
concerning the Company as the Agent may reasonably request.
(k) The Company and the Bank will conduct the Conversion in all
material respects in accordance with the Plan, the Conversion Regulations
and all other applicable regulations, decisions and orders, including all
applicable terms, requirements and conditions precedent to the Conversion
imposed upon the Company or the Bank by the OTS.
(l) The Company and the Bank will file, and deliver to the Agent
notice of its intention to file, after the consummation of the Stock
Conversion all necessary applications with the Washington Department of
Financial Institutions, Division of Banks (the "Division") and the OTS for
the conversion of the Bank from a federally chartered stock savings bank to
a Washington-chartered savings bank, and will deliver to the Agent copies
of all approvals related thereto upon receipt.
(m) Each of the Company and the Bank will use the net proceeds
received by it from the sale of the Securities in the manner specified in
the Prospectus under "Use of Proceeds."
(n) The Company will file with the Commission such reports on Form SR
as may be required pursuant to Rule 463 of the 1933 Act Regulations.
(o) The Company will maintain the effectiveness of the Registration
Statement for not less than three years. The Company will file with the
Nasdaq Stock Market all documents and notices required by the Nasdaq Stock
Market of companies that have issued securities that are traded in the
over-the-counter market and quotations for which are reported by the Nasdaq
National Market.
(p) The Company and the Bank will take such actions and furnish such
information as are reasonably requested by the Agent in order for the Agent
to ensure compliance with the National Association of Securities Dealers,
Inc.'s "Interpretation Relating to Free-Riding and Withholding."
(q) Other than in connection with any employee benefit plan or
arrangement described in the Prospectus, the Company will not, without the
prior written consent of the Agent, sell or issue, contract to sell or
otherwise dispose of, any shares of Common Stock other than the Securities
for a period of 180 days following the Closing Time.
(r) During the period beginning on the date hereof and ending on the
later of the third anniversary of the Closing Time or the date on which the
Agent receives full
<PAGE>
-17-
payment in satisfaction of any claim for indemnification or contribution to
which it may be entitled pursuant to Sections 6 or 7, respectively, neither
the Company nor the Bank shall, without the prior written consent of the
Agent, which consent shall not be unreasonably withheld, take or permit to
be taken any action that could result in the Bank Common Stock becoming
subject to any security interest, mortgage, pledge, lien or encumbrance;
provided, however, that this covenant shall be null and void if the Board
of Governors of the Federal Reserve System, by regulation, policy statement
or interpretive release, or by written order or written advice addressed to
the Bank or the Agent specifically addressing the provisions of Section
6(a) hereof, permits indemnification of the Agent by the Bank as
contemplated by such provisions.
SECTION 4. PAYMENT OF EXPENSES. The Company and the Bank jointly and
severally agree to pay all expenses incident to the performance of their
obligations under this Agreement, including but not limited to (i) the cost of
obtaining all securities and bank regulatory approvals, (ii) the printing and
filing of the Registration Statement as originally filed and of each amendment
thereto, (iii) the preparation, issuance and delivery of the certificates for
the Securities to the purchasers in the Offerings, (iv) the fees and
disbursements of the Company's and the Bank's counsel, accountants, appraiser
and other advisors, (v) the qualification of the Securities under securities
laws in accordance with the provisions of Section 3(f) hereof, including filing
fees and the fees and disbursements of counsel in connection therewith and in
connection with the preparation of the Blue Sky Survey, (vi) the printing and
delivery to the Agent of copies of the Registration Statement as originally
filed and of each amendment thereto and the printing and delivery of the
Prospectus and any amendments or supplements thereto to the purchasers in the
Offerings and the Agent, (vii) the printing and delivery to the Agent of copies
of a Blue Sky Survey, and (viii) the fees and expenses incurred in connection
with the listing of the Securities on the Nasdaq National Market. In the event
the Agent incurs any such fees and expenses on behalf of the Bank or the
Company, the Bank will reimburse the Agent for such fees and expenses whether or
not the Conversion is consummated; provided, however, that the Agent shall not
incur any substantial expenses on behalf of the Bank or the Company pursuant to
this Section without the prior approval of the Bank.
The Company and the Bank jointly and severally agree to pay certain
expenses incident to the performance of the Agent's obligations under this
Agreement, including (i) the filing fees paid or incurred by the Agent in
connection with all filings with the National Association of Securities Dealers,
Inc., and (ii) all reasonable out of pocket expenses incurred by the Agent
relating to the Offerings, including, without limitation, advertising,
promotional, syndication and travel expenses and fees and expenses of the
Agent's counsel, up to an aggregate of $50,000; provided, however, that the
Agent shall document such expenses to the reasonable satisfaction of the Bank.
All fees and expenses to which the Agent is entitled to reimbursement under this
paragraph of this Section 4 shall be due and payable upon receipt by the Company
or the Bank of a written accounting therefor setting forth in reasonable detail
the expenses incurred by the Agent.
<PAGE>
-18-
SECTION 5. Conditions of Agent's Obligations. The Company, the Bank
and the Agent agree that the issuance and the sale of the Securities and all
obligations of the Agent hereunder are subject to the accuracy of the
representations and warranties of the Company and the Bank herein contained as
of the date hereof and the Closing Time, to the accuracy of the statements of
officers and directors of the Company and the Bank made pursuant to the
provisions hereof, to the performance by the Company and the Bank of their
obligations hereunder, and to the following further conditions:
(a) No stop order suspending the effectiveness of the Registration
Statement shall have been issued under the Securities Act or proceedings
therefor initiated or threatened by the Commission, no order suspending the
Offerings or authorization for final use of the Prospectus shall have been
issued or proceedings therefor initiated or threatened by the OTS and no
order suspending the sale of the Securities in any jurisdiction shall have
been issued.
(b) At Closing Time, the Agent shall have received:
(1) The favorable opinion, dated as of Closing Time, of Breyer &
Aguggia, special counsel for the Company and the Bank, in form and
substance satisfactory to counsel for the Agent, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware.
(ii) The Company has full corporate power and authority to
own, lease and operate its properties and to conduct its business
as described in the Registration Statement and Prospectus and to
enter into and perform its obligations under this Agreement.
(iii) The Company is duly qualified as a foreign corporation
to transact business and is in good standing in the State of
Idaho and in each other jurisdiction in which the failure to so
qualify would have a material adverse effect upon the financial
condition, results of operations or business of the Company, the
Bank and the Subsidiary, considered as one enterprise.
(iv) Upon consummation of the Conversion, the authorized,
issued and outstanding capital stock of the Company will be within
the range as set forth in the Prospectus under "Capitalization"
and, except for shares issued upon incorporation of the Company,
no shares of Common Stock have been issued and no shares of Common
Stock will be issued and outstanding, except in connection with
the Conversion, prior to the Closing Time.
(v) The Securities have been duly and validly authorized for
issuance and sale and, when issued and delivered by the Company
<PAGE>
-19-
pursuant to the Plan against payment of the consideration
calculated as set forth in the Plan and stated on the cover page
of the Prospectus, will be duly and validly issued and fully paid
and non-assessable.
(vi) The issuance of the Securities is not subject to
preemptive or other similar rights arising by operation of law
or, to the best of such counsel's knowledge, otherwise.
(vii) The Bank has been at all times since the date hereof
and prior to the Closing Time validly existing and in good
standing under the laws of the United States of America as a
federally chartered savings bank of mutual form, and, at Closing
Time, has become duly organized, validly existing and in good
standing under the laws of the United States of America as a
federally chartered savings bank of stock form, in both instances
with full corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the
Registration Statement and the Prospectus; and the Bank is duly
qualified as a foreign corporation in each jurisdiction in which
the failure to so qualify would have a material adverse effect
upon the financial condition, results of operations or business of
the Company, the Bank and the Subsidiary, considered as one
enterprise.
(viii) The Bank is a member of the Federal Home Loan Bank of
Seattle and the deposit accounts of the Bank are insured by the
FDIC up to the applicable limits.
(ix) The Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
state of Idaho, has full corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Registration Statement and is duly qualified as a
foreign corporation to transact business and is in good standing
in each jurisdiction in which the failure to so qualify would have
a material adverse effect upon the financial condition, results of
operations or business of the Bank and its subsidiaries, taken as
a whole; the activities of the Subsidiary are permitted to
subsidiaries of a savings association holding company and of a
federally chartered savings bank by the rules, regulations,
resolutions and practices of the OTS; all of the issued and
outstanding capital stock of the Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable
and is owned directly by the Bank free and clear of any security
interest, mortgage, pledge, lien, encumbrance or claim in law or
equity.
(x) Upon consummation of the Conversion, all of the issued
and outstanding capital stock of the Bank will be duly authorized
and validly issued and fully paid and non-assessable, and all such
capital stock will be owned beneficially and of record by the
Company free and clear
<PAGE>
-20-
of any security interest, mortgage, pledge, lien, encumbrance, or
legal or equitable claim.
(xi) The OTS has duly approved the Holding Company
Application and the Conversion Application, subject to the
satisfaction of the conditions set forth in such approvals, and no
action is pending, or to the best of such counsel's knowledge,
threatened respecting the Holding Company Application or the
Conversion Application or the acquisition by the Company of all of
the Bank's issued and outstanding capital stock; the Holding
Company Application and the Conversion Application comply as to
form in all material respects with the Conversion Regulations and
all other applicable requirements of the OTS, and, to the best of
such counsel's knowledge, include all documents required to be
filed as exhibits thereto; and the OTS has authorized the Company
to become a savings and loan holding company and to own all of the
issued and outstanding capital stock of the Bank to be issued
pursuant to the Plan.
(xii) The FRB has duly approved the BHC Application and, to
the best of such counsel's knowledge, no action is pending or
threatened respecting the BHC Application or the acquisition by
the Company of all of the Bank's issued and outstanding capital
stock; the BHC Application complies in all material respects with
the Bank Holding Company Act of 1956, as amended and all other
applicable requirements of the FRB, to the best of such counsel's
knowledge, includes all documents required to be filed as exhibits
thereto, and is complete in all material respects; the Company is
duly authorized to become a bank holding company and is duly
authorized to own all of the issued and outstanding capital stock
of the Bank pursuant to the Plan.
(xiii) 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
each of the Company and the Bank, and this Agreement constitutes
the legal, valid and binding agreement of each of the Company and
the Bank, enforceable in accordance with its terms, except as
rights to indemnity and contribution hereunder may be limited
under applicable law (it being understood that such counsel may
avail itself of customary exceptions concerning the effect of
bankruptcy, insolvency or similar laws and the availability of
equitable remedies); the execution and delivery of this Agreement,
the incurrence of the obligations herein set forth and the
consummation of the transactions contemplated herein will not
result in any violation of the provisions of the certificate of
incorporation, charter or bylaws of the Company or the Bank; and,
to the best of such counsel's knowledge, the execution and
delivery of this Agreement, the incurrence of the obligations
herein set forth and the consummation of the transactions
contemplated herein will not constitute a breach of, or default
(or an event which, with notice or lapse of time or both, would
constitute
<PAGE>
-21-
a default) under, or result in the creation or imposition of any
lien, charge or encumbrance, that, individually or in the
aggregate, would have a material adverse effect on the financial
condition, results of operations or business of the Company, the
Bank and the Subsidiary considered as one enterprise, upon any
property or assets of the Company, the Bank or the Subsidiary
pursuant to any material contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which the Company,
the Bank or the Subsidiary is a party or by which any of them may
be bound, or to which any of the property or assets of the
Company, the Bank or the Subsidiary is subject.
(xiv) The Prospectus has been duly authorized by the OTS for
final use pursuant to the Conversion Regulations and no action is
pending, or to the best of such counsel's knowledge, is
threatened, by the OTS to revoke such authorization.
(xv) The Registration Statement is effective under the
Securities Act and no stop order suspending the effectiveness of
the Registration Statement has been issued under the Securities
Act or, proceedings therefor initiated or, to the best of such
counsel's knowledge, threatened by the Commission.
(xvi) No further approval, authorization, consent or other
order of any public board or body is required in connection with
the execution and delivery of this Agreement, the issuance of the
Securities and the consummation of the Conversion, except as may
be required under the securities or Blue Sky laws of various
jurisdictions as to which no opinion need be rendered.
(xvii) At the time the Registration Statement became
effective, the Registration Statement (except for the appraisal,
financial statements and schedules and other financial and
statistical data included therein, as to which no opinion need be
rendered) complied as to form in all material respects with the
requirements of the Securities Act and the Securities Act
Regulations.
(xviii) At the time the Form AC and Application H-(e)1-S were
approved, the Form AC and Application H-(e)1-S (except for the
appraisal, financial statements and schedules and other financial
and statistical data included therein, as to which no opinion need
be rendered) complied as to form in all material respects with the
requirements of the Conversion Regulations.
(xix) The Common Stock conforms to the description thereof
contained in the Prospectus, and the form of certificate used to
evidence the Common Stock is in due and proper form and complies
with all applicable statutory requirements.
<PAGE>
-22-
(xx) To the best of such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against or affecting the Company,
the Bank or the Subsidiary which are required, individually or in the aggregate,
to be disclosed in the Registration Statement and Prospectus, other than those
disclosed therein, and all pending legal or governmental proceedings to which
the Company, the Bank or the Subsidiary is a party or to which any of their
property is subject which are not described in the Registration Statement,
including ordinary routine litigation incidental to the business, are,
considered in the aggregate, not material.
(xxi) The information in the Prospectus under "Risk Factors -
Antitakeover Effects of Governing Documents, Delaware and Federal Law, Control
by Insiders and Employment Agreements," " - Possible Adverse Income Tax
Consequences of the Distribution of Subscription Rights," " - Potential
Operational Restrictions Associated with Regulatory Oversight," "Dividend
Policy," "Regulation," "Taxation," "The Conversion," "Restrictions on
Acquisition of the Holding Company" and "Description of Capital Stock of Holding
Company," to the extent that it constitutes matters of law, summaries of legal
matters, documents or proceedings, or legal conclusions, has been reviewed by
them and is correct in all material respects.
(xxii) To the best of such counsel's knowledge, there are no contracts,
indentures, mortgages, loan agreements, notes, leases or other instruments
required to be described or referred to in the Registration Statement or to be
filed as exhibits thereto other than those described or referred to therein or
filed as exhibits thereto, the descriptions thereof or references thereto are
correct, and no default exists, and no event has occurred which, with notice or
lapse of time or both, would constitute a default, in the due performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease or
other instrument so described, referred to or filed.
(xxiii) The Plan has been duly authorized by the Board of Directors of the
Company and the Board of Directors of the Bank and the OTS's approval of the
Plan remains in full force and effect; the Bank's charter has been amended,
effective upon consummation of the Conversion and the filing of such amended
charter with the OTS, to authorize the issuance of permanent capital stock; to
the best of such counsel's knowledge, the Company and the Bank have conducted
the Conversion in all material respects in accordance with applicable
requirements of the Plan, the Conversion Regulations and all other applicable
regulations, decisions and orders thereunder, including all material applicable
terms, conditions, requirements and conditions precedent to the Conversion
imposed upon the Company or the Bank by
<PAGE>
-23-
the OTS and, to the best of such counsel's knowledge, no order
has been issued by the OTS to suspend the Offerings and no action
for such purpose has been instituted or threatened by the OTS;
and, to the best of such counsel's knowledge, no person has
sought to obtain review of the final action of the OTS in
approving the Plan.
(xxiv) To the best of such counsel's knowledge, the Company
and the Bank and the Subsidiary have obtained all licenses,
permits and other governmental approvals and authorizations
currently required for the conduct of their respective businesses
as described in the Registration Statement and Prospectus, except
for such licenses, permits, approvals or authorizations the
failure of which to have would not result in a material adverse
change in the financial condition, results of operations or the
business of the Company, the Bank and the Subsidiary, considered
as one enterprise, and all such licenses, permits and other
governmental authorizations are in full force and effect, and the
Company and the Bank and the Subsidiary are in all material
respects complying therewith.
(xxv) Neither the Company, the Bank nor the Subsidiary is in
violation of its charter (and the Bank will not be in violation
of its charter in stock form upon consummation of the Conversion)
nor, to the best of such counsel's knowledge, in default (nor has
any event occurred which, with notice or lapse of time or both,
would constitute a default) in the performance or observance of
any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or
other instrument to which the Company, the Bank or the Subsidiary
is a party or by which the Company, the Bank or the Subsidiary or
any of their respective property may be bound in any respect that
would have a material adverse effect upon the financial
condition, results of operations or business of the Company, the
Bank and the Subsidiary, considered as one enterprise.
(xxvi) The Company is not required to be registered as an
investment company under the Investment Company Act of 1940.
(2) The favorable opinion, dated as of Closing Time, of Thacher,
Proffitt & Wood, counsel for the Agent, with respect to the matters
set forth in Section 5(b)(1)(i), (iv), (v), (vi) (solely as to
preemptive rights arising by operation of law), (xiii), (xv) and
(xviii) and such other matters as the Agent may reasonably require.
(3) In giving their opinions required by subsections (b)(l)
and(b)(2), respectively, of this Section, Breyer & Aguggia and
Thacher, Proffitt & Wood shall each additionally state that nothing
has come to their attention that would lead them to believe that the
Registration Statement (except for the appraisal, financial statements
and schedules and other financial or statistical data included
therein, as to which counsel need make no statement), at the time it
became
<PAGE>
-24-
effective, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus
(except for the appraisal, financial statements and schedules and
other financial or statistical data included therein, as to which
counsel need make no statement), at the time the Registration
Statement became effective or at Closing Time, included an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. In giving their opinions, Breyer & Aguggia and Thacher
Proffitt & Wood may rely as to matters of fact on certificates of
officers and directors of the Company and the Bank and certificates of
public officials, and as to certain matters of Idaho law upon the
opinions of _______________, which opinions shall be in form and
substance satisfactory to the Agent, and Thacher Proffitt & Wood may
also rely on the opinion of Breyer & Aguggia.
(c) At the Closing Time referred to in Section 2, the Company and the
Bank will have completed in all material respects the conditions precedent
to the Conversion in accordance with the Plan, the applicable Conversion
Regulations and all other applicable laws, regulations, decisions and
orders, including all terms, conditions, requirements and provisions
precedent to the Conversion imposed upon the Company or the Bank by the OTS
or the FDIC or any other regulatory authority other than those that the OTS
or the FDIC permit to be completed after the Conversion.
(d) At the Closing Time, there shall not have been, since the date
hereof or since the respective dates as of which information is given in
the Registration Statement and the Prospectus, any material adverse change
in the financial condition, results of operations or business of the
Company, the Bank and the Subsidiary considered as one enterprise, whether
or not arising in the ordinary course of business, and the Agent shall have
received a certificate of the Chief Executive Officer of the Company and of
the Bank, and the chief financial or chief accounting officer of the
Company and of the Bank, dated as of Closing Time, to the effect that (i)
there has been no such material adverse change, (ii) there shall have been
no material transaction entered into by the Company or the Bank from the
latest date as of which the financial condition of the Company or the Bank
is set forth in the Registration Statement and the Prospectus other than
transactions referred to or contemplated therein and transactions in the
ordinary cause of business, (iii) neither the Company nor the Bank shall
have received from the OTS any direction (oral or written) to make any
material change in the method of conducting its business with which it has
not complied (which direction, if any, shall have been disclosed to the
Agent) or which materially and adversely would affect the business,
financial condition or results of operations of the Company and the Bank
considered as one enterprise, (iv) the representations and warranties in
Section 1 hereof are true and correct with the same force and effect as
though expressly made at and as of the Closing Time, (v) the Company and
the Bank have complied with all agreements and satisfied all conditions on
their part to be performed or satisfied at or prior to Closing Time, (vi)
no stop order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been initiated or
<PAGE>
-25-
threatened by the Commission and (vii) no order suspending the Offerings or
the authorization for final use of the Prospectus has been issued and no
proceedings for that purpose have been initiated or threatened by the OTS
or the FDIC and no person has sought to obtain regulatory or judicial
review of the action of the OTS in approving the Plan in accordance with
the Conversion Regulations.
(e) At the time of the execution of this Agreement, the Agent shall
have received from BDO Seidman, LLP a letter dated such date, in form and
substance satisfactory to the Agent, to the effect that (i) they are
independent certified public accountants with respect to the Company, the
Bank and the Subsidiary within the meaning of the Code of Ethics of the
American Institute of Certified Public Accountants, the Securities Act and
the Securities Act Regulations and the Conversion Regulations; (ii) it is
their opinion that the consolidated financial statements and supporting
schedules included in the Registration Statement and covered by their
opinions therein comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the Securities
Act Regulations and the OTS Regulations; (iii) based upon limited
procedures as agreed upon by the Agent and BDO Seidman, LLP set forth in
detail in such letter, nothing has come to their attention which causes
them to believe that (A) the unaudited financial statements and supporting
schedules of the Bank and the Subsidiary included in the Registration
Statement do not comply as to form in all material respects with the
applicable accounting requirements of the Securities Act, the Securities
Act Regulations and the OTS Regulations or are not presented in conformity
with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements
included in the Registration Statement and the Prospectus, (B) the
unaudited amounts included under the captions "Selected Financial
Information" and "Recent Developments" in the Registration Statement and
the Prospectus do not agree with the amounts set forth in the unaudited
consolidated financial statements as of and for the dates and periods
presented under such caption or such unaudited amounts were not determined
on a basis substantially consistent with that used in determining the
corresponding amounts in the audited financial statements included in the
Registration Statement and Prospectus, (C) at a specified date not more
than five (5) days prior to the date of this Agreement, there has been any
increase in the consolidated long term or short term debt of the Bank and
the Subsidiary or any decrease in consolidated total assets, the allowance
for loan losses, total deposits or equity of the Bank and the Subsidiary,
in each case as compared with the amounts shown in the March 31, 1996
balance sheet included in the Registration Statement or, (D) during the
period from March 31, 1996 to a specified date not more than five days
prior to the date of this Agreement, there were any decreases, as compared
with the corresponding period in the preceding year, in total interest
income, net interest income, net interest income after provision for loan
losses, income before income tax expense or net income of the Bank and the
Subsidiary, except in all instances for increases or decreases which the
Registration Statement and the Prospectus disclose have occurred or may
occur; and (iv) in addition to the examination referred to in their
opinions and the limited procedures referred to in clause (iii) above, they
have carried out certain specified procedures, not constituting an audit,
with respect to certain amounts, percentages and financial information
which are included in the Registration Statement and Prospectus and which
are specified by the Agent, and have found such amounts, percentages and
financial
<PAGE>
-26-
information to be in agreement with the relevant accounting, financial and
other records of the Company, the Bank and the Subsidiary identified in
such letter.
(f) At Closing Time, the Agent shall have received from BDO Seidman,
LLP a letter, dated as of Closing Time, to the effect that they reaffirm
the statements made in the letter furnished pursuant to subsection (e) of
this Section, except that the specified date referred to shall be a date
not more than five days prior to Closing Time.
(g) At Closing Time, the Securities shall have been approved for
listing on the Nasdaq National Market upon notice of issuance.
(h) At Closing Time, the Agent shall have received a letter from RP
Financial, LC, dated as of the Closing Time, confirming its appraisal.
(i) At Closing Time, counsel for the Agent shall have been furnished
with such documents and opinions as they may require for the purpose of
enabling them to pass upon the issuance and sale of the Securities as
herein contemplated and related proceedings, or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment of
any of the conditions, herein contained; and all proceedings taken by the
Company in connection with the issuance and sale of the Securities as
herein contemplated shall be satisfactory in form and substance to the
Agent and counsel for the Agent.
(j) At any time prior to Closing Time, (i) there shall not have
occurred any material adverse change in the financial markets in the United
States or elsewhere or any outbreak of hostilities or escalation thereof or
other calamity or crisis the effect of which, in the judgment of the Agent,
are so material and adverse as to make it impracticable to market the
Securities or to enforce contracts, including subscriptions or orders, for
the sale of the Securities, and (ii) trading generally on either the Nasdaq
Stock Market or the New York Stock Exchange shall not have been suspended,
and minimum or maximum prices for trading shall not have been fixed, or
maximum ranges for prices for securities shall not have been required, by
either of such Exchange or Market or by order of the Commission or any
other governmental authority, and a banking moratorium shall not have been
declared by either Federal, New York or Idaho authorities.
SECTION 6. IDEMNIFICATION.
(a) The Company and the Bank, jointly and severally, agree to
indemnify and hold harmless the Agent, each person, if any, who controls the
Agent, within the meaning of Section 15 of the Securities Act or Section 20 of
the Securities Exchange Act, and its respective partners, directors, officers,
employees and agents as follows:
(i) from and against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, related to or arising out of the
Conversion or any action taken by the Agent where acting as agent of the
Company or the Bank or otherwise as described in Section 2 hereof;
<PAGE>
-27-
(ii) from and against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, based upon or arising out of any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), or the omission or
alleged omission therefrom of a material fact required to be stated therein
or necessary to make the statements therein not misleading or arising out
of any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus (or any amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
iii) from and against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid
in settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever described in clauses (i) or (ii) above, if such settlement is
effected with the written consent of the Company or the Bank, which consent
shall not be unreasonably withheld; and
iv) from and against any and all expense whatsoever, as incurred
(including, subject to Section 6(c) hereof, the fees and disbursements of
counsel chosen by the Agent), reasonably incurred in investigating,
preparing for or defending against any litigation, or any investigation,
proceeding or inquiry by any governmental agency or body, commenced or
threatened, or any pending or threatened claim whatsoever described in
clauses (i) or (ii) above, to the extent that any such expense is not paid
under (i), (ii) or (iii) above;
provided, however, that the indemnification provided for in this paragraph (a)
shall not apply to any loss, liability, claim, damage or expense (i) to the
extent arising out of any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission of a material fact required to be
stated therein or necessary to make not misleading any statements contained in
the Registration Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto) made in reliance upon and in conformity with
the Agent Information or (ii) found in a final judgment by a court of competent
jurisdiction to have resulted primarily from the bad faith, willful misconduct
or gross negligence of the Agent. Notwithstanding the foregoing, the
indemnification provided for in this paragraph (a) shall not apply to the Bank
to the extent that such indemnification by the Bank would constitute a covered
transaction under Section 23A of the Federal Reserve Act.
(b) The Agent agrees to indemnify and hold harmless the Company,
the Bank, their directors and trustees, each of their officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, of a material fact made in the Registration
Statement (or any amendment thereto) or the Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with the Agent
Information.
<PAGE>
-28-
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of any such
action. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to no more than one local counsel
in each separate jurisdiction in which any action or proceeding is commenced)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances.
(d) The Company and the Bank also agree that the Agent shall not have
any liability (whether direct or indirect, in contract or tort or otherwise) to
the Bank, the Company, its security holders or the Bank's or the Company's
creditors relating to or arising out of the engagement of the Agent pursuant to,
or the performance by the Agent of the services contemplated by, this Agreement,
except to the extent that any loss, claim, damage or liability is found in a
final judgment by a court of competent jurisdiction to have resulted primarily
from the Agent's bad faith, willful misconduct or gross negligence.
(e) In addition to, and without limiting, the provisions of Section
(6)(a)(iv) hereof, in the event that any Agent, any person, if any, who controls
the Agent within the meaning of Section 15 of the Securities Act or Section 20
of the Securities Exchange Act or any of its partners, directors, officers,
employees or agents is requested or required to appear as a witness or otherwise
gives testimony in any action, proceeding, investigation or inquiry brought by
or on behalf of or against the Company or the Bank or any of its respective
affiliates or any participant in the transactions contemplated hereby in which
the Agent or such person or agent is not named as a defendant or subject to the
an investigation or inquiry, the Company and the Bank jointly and severally
agree to reimburse the Agent for all reasonable and necessary out-of-pocket
expenses incurred by it in connection with preparing or appearing as a witness
or otherwise giving testimony and to compensate the Agent in an amount to be
mutually agreed upon.
SECTION 7. Contribution. In order to provide for just and
equitable contribution in circumstances in which the indemnity agreement
provided for in Section 6 hereof is for any reason held to be unenforceable by
the indemnified parties although applicable in accordance with its terms, the
Company, the Bank and the Agent shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by said
indemnity agreement incurred by the Company or the Bank and the Agent, as
incurred, in such proportions (i) that the Agent is responsible for that portion
represented by the percentage that the maximum aggregate marketing fees
appearing on the cover page of the Prospectus bears to the maximum aggregate
gross proceeds appearing thereon and the Company and the Bank are jointly and
severally responsible for the balance or (ii) if, but only if, the allocation
provided for in clause (i) is for any reason held unenforceable, in such
proportion as is appropriate to reflect not only the relative benefits to the
Company and the Bank on the one hand and the Agent on the other, as reflected in
clause (i), but also the relative fault of the Company and the Bank on the one
hand and the Agent on the other (relevant fault shall be determined by reference
<PAGE>
-29-
to, among other things, whether the untrue statement of a material fact or
omission to state a material fact relates to information supplied by the Company
and Bank or the Agent and the parties relative intent, knowledge, and access to
information), as well as any other relevant equitable considerations; provided,
however, that 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 was not guilty of such fraudulent
misrepresentation. For purposes of this Section, each person, if any, who
controls the Agent within the meaning of Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act shall have the same rights to
contribution as the Agent, and each director of the Company, each director of
the Bank, each officer of the Company who signed the Registration Statement, and
each person, if any, who controls the Company or the Bank within the meaning of
Section 15 of the Securities Act or Section 20 of the Securities Exchange Act
shall have the same rights to contribution as the Company and the Bank.
Notwithstanding anything to the contrary set forth herein, to the extent
permitted by applicable law, in no event shall the Agent be required to
contribute an aggregate amount in excess of the aggregate marketing fees to
which the Agent is entitled and actually paid pursuant to this Agreement.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of the Company or the Bank
submitted pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any Agent or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Securities.
SECTION 9. Termination of Agreement.
(a) The Agent may terminate this Agreement, by notice to the Company,
at any time at or prior to Closing Time (i) if there has been, since the date of
this Agreement or since the respective dates as of which information is given in
the Registration Statement, any material adverse change in the condition,
financial or otherwise, or in the earnings, business or business Prospects of
the Company or the Bank, or the Company, the Bank and the Subsidiary considered
as one enterprise, whether or not arising in the ordinary course of business, or
(ii) if there has occurred any material adverse change in the financial markets
in the United States or elsewhere or any outbreak of hostilities or escalation
thereof or other calamity or crisis the effect of which, in the judgment of the
Agent, are so material and adverse as to make it impracticable to market the
Securities or to enforce contracts, including subscriptions or orders, for the
sale of the Securities, (iii) or if trading generally on either the Nasdaq Stock
Market or the New York Stock Exchange has been suspended, or minimum or maximum
prices for trading have been fixed, or maximum ranges for prices for securities
have been required, by either of such Exchange or Market or by order of the
Commission or any other governmental authority, or if a banking moratorium has
been declared by either Federal, New York or Idaho authorities, (iv) if any
condition specified in Section 5 shall not have been fulfilled when and as
required to be fulfilled; (v) if there shall have been such material adverse
change in the condition or prospects of the Company or the Bank or the
prospective market for the Company's securities as in the Agent's good faith
opinion would make it inadvisable to proceed with the offering, sale or delivery
of the Securities; (vi) if in the Agent's good faith opinion, the price for the
Securities
<PAGE>
-30-
established by RP Financial, LC is not reasonable or equitable under then
prevailing market conditions, or (vii) if the Conversion is not consummated on
or prior to ____________________.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except as
provided in Section 4 hereof relating to the reimbursement of expenses and
except that the provisions of Sections 6 and 7 hereof shall survive any
termination of this Agreement.
SECTION 10. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Agent
shall be directed to the Agent at Two World Trade Center, 104th Floor, New York,
New York 10048, attention of Catherine A. Lawton, Principal, with a copy to V.
Gerard Comizio, Esq.,Thacher Proffitt & Wood, 1500 K Street, N.W., Washington,
D.C. 20005; notices to the Company and the Bank shall be directed to either of
them at 920 Main Street, Lewiston, Idaho 83501, attention of Clyde E. Conklin,
President and Chief Executive Officer with a copy to John F. Breyer, Jr., Esq.,
Breyer & Aguggia, 1300 I Street, N.W., Suite 470 East, Washington, D.C. 20005.
SECTION 11. Parties. This Agreement shall inure to the benefit of and
be binding upon the Agent, the Company and the Bank and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Agent, the Company and the Bank and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein or
therein contained. This Agreement and all conditions and provisions hereof and
thereof are intended to be for the sole and exclusive benefit of the Agent, the
Company and the Bank and their respective successors, and said controlling
persons and officers and directors and their heirs and legal representatives,
and for the benefit of no other person, firm or corporation.
SECTION 12. Entire Agreement; Amendment. This Agreement represents
the entire understanding of the parties hereto with reference to the
transactions contemplated hereby and supersedes any and all other oral or
written agreements heretofore made. No waiver, amendment or other modification
of this Agreement shall be effective unless in writing and signed by the parties
hereto.
SECTION 13. Governing Law and Time. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York applicable
to agreements made and to be performed in said State without regard to the
conflicts of laws provisions thereof. Unless otherwise noted, specified times
of day refer to Eastern time.
SECTION 14. Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of
<PAGE>
-31-
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
SECTION 15. Headings. Sections headings are not to be considered part
of this Agreement, are for convenience and reference only, and are not to be
deemed to be full or accurate descriptions of the contents of any paragraph or
subparagraph.
<PAGE>
-32-
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Agent, the Company and the Bank in accordance with its terms.
Very truly yours,
FIRSTBANK CORP.
By:
---------------------------------------
Title:
FIRSTBANK NORTHWEST
By:
---------------------------------------
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
SANDLER O'NEILL & PARTNERS, L.P.
By: Sandler O'Neill & Partners Corp.,
the sole general partner
By:
-----------------------------------
Catherine A. Lawton
Vice President
<PAGE>
EXHIBIT 8.1
FEDERAL TAX OPINION OF BREYER & AGUGGIA
<PAGE>
1300 I Street, N.W.
Suite 470 East
Washington, D.C. 20005
Telephone (202) 737-7900
Breyer & Aguggia Facsimile (202) 737-7979
- --------------------------------------------------------------------------------
ATTORNEYS-AT-LAW
April 15, 1997
Boards of Directors
FirstBank Corp.
First Federal Bank of Idaho,
a Federal Savings Bank
920 Main Street
Lewiston, Idaho 83501
Re: Certain Federal Income Tax Consequences Relating to Proposed Holding
Company Conversion of FirstBank Northwest and Subsequent Conversion to
a Washington-chartered Savings Bank
----------------------------------------------------------------------
Gentlemen:
In accordance with your request, set forth herein is the opinion of this
firm relating to certain federal income tax consequences of (i) the proposed
conversion of FirstBank Northwest (the "Savings Bank") from a federally-
chartered mutual savings bank to a federally-chartered stock savings bank (the
"Converted Savings Bank") (the "Stock Conversion"); (ii) the concurrent
acquisition of 100% of the outstanding capital stock of the Converted Savings
Bank by a parent holding company formed at the direction of the Board of
Directors of the Savings Bank and to be known as FirstBank Corp. (the "Holding
Company"); and, thereafter, (iii) the conversion of the Converted Savings Bank
to a Washington-chartered savings bank to be known as FirstBank Northwest (the
"Converted Bank") (the "Bank Conversion"). The Stock Conversion and the Bank
Conversion are referred to herein collectively as the "Conversion."
For purposes of this opinion, we have examined such documents and questions
of law as we have considered necessary or appropriate, including but not limited
to the Plan of Conversion as adopted by the Savings Bank's Board of Directors as
adopted on January 8, 1997 and as amended on March 12, 1997 (the "Plan"); the
federal mutual charter and bylaws of the Savings Bank; the certificate of
incorporation and bylaws of the Holding Company; the Affidavit of
Representations dated April 3, 1997 provided to us by the Savings Bank (the
"Affidavit"), and the Prospectus (the "Prospectus") included in the Registration
Statement on Form SB-2 filed with the Securities and Exchange Commission ("SEC")
on March 14, 1997 (the "Registration
<PAGE>
Boards of Directors
April 15, 1997
Page 2
Statement"). In such examination, we have assumed, and have not independently
verified, the genuineness of all signatures on original documents where due
execution and delivery are requirements to the effectiveness thereof. Terms
used but not defined herein, whether capitalized or not, shall have the same
meaning as defined in the Plan.
BACKGROUND
----------
Based solely upon our review of such documents, and upon such information
as the Savings Bank has provided to us (which we have not attempted to verify in
any respect), and in reliance upon such documents and information, we set forth
herein a general summary of the relevant facts and proposed transactions,
qualified in its entirety by reference to the documents cited above.
The Savings Bank is a federally-chartered mutual savings bank which is in
the process of converting to a federally-chartered stock savings bank and,
thereafter, to a Washington-chartered savings bank. The Savings Bank was
initially organized in 1920. The Savings Bank is also a member of the Federal
Home Loan Bank System and its deposits are federally insured under the Savings
Association Insurance Fund ("SAIF") of the Federal Deposit Insurance
Corporation. The Savings Bank operates out of its administrative office in
Lewiston, Idaho, and five branch offices in Lewiston and neighboring
communities.
The Savings Bank is primarily engaged in the business of attracting
deposits from the general public and originating permanent loans secured by
first mortgages on one- to four-family residential properties and, to lesser
extent, construction loans, agricultural real estate loans, commercial real
estate loans and consumer and other loans. At December 31, 1996, the Savings
Bank had total assets of $133.2 million, deposits of $105.3 million, and total
equity of $10.8 million.
As a federally-chartered mutual savings bank, the Savings Bank has no
authorized capital stock. Instead, the Savings Bank, in mutual form, has a
unique equity structure. A savings depositor of the Savings Bank is entitled to
payment of interest on his account balance as declared and paid by the Savings
Bank, but has no right to a distribution of any earnings of the Savings Bank
except for interest paid on his deposit. Rather, such earnings become retained
earnings of the Savings Bank.
However, a savings depositor does have a right to share pro rata, with
--- ----
respect to the withdrawal value of his respective savings account, in any
liquidation proceeds distributed if the Savings Bank is ever liquidated.
Savings depositors and certain borrowers are members of the Savings Bank and
thereby have voting rights in the Savings Bank. Each savings depositor is
entitled to cast votes based on the balances of their withdrawable deposit
account of the Savings Bank, and each borrower member (hereinafter "borrower")
is entitled to one vote in addition to the votes (if any) to which such person
is entitled in such borrower's capacity as a savings
<PAGE>
Boards of Directors
April 15, 1997
Page 3
depositor of the Savings Bank. All of the interests held by a savings depositor
in the Savings Bank cease when such depositor closes his accounts with the
Savings Bank.
The Holding Company was incorporated in March 1997 under the laws of the
State of Delaware as a general business corporation in order to act as a savings
institution holding company and a bank holding company. The Holding Company has
an authorized capital structure of 5,000,000 shares of common stock and 500,000
shares of preferred stock.
PROPOSED TRANSACTION
--------------------
The Board of Directors of the Savings Bank has decided that in order to
increase the Savings Bank's net worth, support future growth, increase the
amount of funds available for lending and investment, provide greater resources
for the expansion of customer services, and facilitate future expansion through
a greater emphasis on agricultural and commercial real estate lending, it would
be advantageous for the Savings Bank to convert from a federally-chartered
mutual savings bank to a federally-chartered stock savings bank and, thereafter,
to convert to a Washington-chartered savings bank. Further, the Board of
Directors of the Savings Bank has determined that in order to expand the
financial services currently offered through the Savings Bank and enhance
flexibility of operations for diversification of business opportunities, it
would be advantageous to have the stock of the Converted Savings Bank (and,
after the Bank Conversion, the stock of the Converted Bank) held by a parent
holding company.
The Savings Bank presently intends to consummate the Bank Conversion upon
receipt of all necessary regulatory approvals. However, a period of time may
elapse between the consummation of the Stock Conversion and the consummation of
the Bank Conversion.
Accordingly, pursuant to the Plan, the Savings Bank will undergo the Stock
Conversion whereby it will be converted from a federally-chartered mutual
savings bank to a federally-chartered stock savings bank. As part of the Stock
Conversion, the Savings Bank will amend its existing mutual savings bank charter
and bylaws to read in the form of a Federal Stock Charter and Bylaws. The
Converted Savings Bank will then issue to the Holding Company shares of the
Converted Savings Bank's common stock, representing all of the shares of capital
stock to be issued by the Converted Savings Bank in the Conversion, in exchange
for payment by the Holding Company of 50% of the net proceeds realized by the
Holding Company from such sale of its Common Stock, less amounts necessary to
fund the Employee Stock Ownership Plan of the Savings Bank, or such other
percentage as the Office of Thrift Supervision ("OTS") may authorize or require.
Also pursuant to the Plan, the Holding Company will offer its shares of
Common Stock for sale in a Subscription Offering and Direct Community Offering.
The aggregate purchase price at which all shares of Common Stock will be offered
and sold pursuant to the Plan and the total number of shares of Common Stock to
be offered in the Conversion will be determined by
<PAGE>
Boards of Directors
April 15, 1997
Page 4
the Boards of Directors of the Savings Bank and the Holding Company on the basis
of the estimated pro forma market value of the Converted Bank as a subsidiary of
--- -----
the Holding Company. The estimated pro forma market value will be determined by
--- -----
an independent appraiser. Pursuant to the Plan, all such shares will be issued
and sold at a uniform price per share. The Stock Conversion, including the sale
of newly issued shares of the stock of the Converted Savings Bank to the Holding
Company, will be deemed effective concurrently with the closing of the sale of
the Common Stock. The Bank Conversion will be consummated immediately following
the consummation of the Stock Conversion.
Under the Plan and in accordance with regulations of the OTS, the shares of
Common Stock will first be offered through the Subscription Offering pursuant to
non-transferable subscription rights on the basis of preference categories in
the following order of priority:
(1) Eligible Account Holders;
(2) Tax-Qualified Employee Stock Benefit Plans of the Savings Bank;
(3) Supplemental Eligible Account Holders; and
(4) Other Members.
Any shares of Common Stock not subscribed for in the Subscription Offering
will be offered in the Direct Community Offering in the following order of
priority:
(a) Natural persons residing in each county in which the Savings Bank has
a home or branch office; and
(b) The general public.
Any shares of Common Stock not subscribed for in the Community Offering
will be offered to certain members of the general public on a best efforts basis
by a selling group of broker dealers in a Syndicated Community Offering.
The Plan also provides for the establishment of a Liquidation Account by
the Converted Savings Bank for the benefit of all Eligible Account Holders and
any Supplemental Eligible Account Holders in an amount equal to the net worth of
the Savings Bank as of the date of the latest statement of financial condition
contained in the final prospectus issued in connection with the Conversion. The
establishment of the Liquidation Account will not operate to restrict the use or
application of any of the net worth accounts of the Converted Savings Bank. The
account holders will have an inchoate interest in a proportionate amount of the
Liquidation Account with respect to each savings account held and will be paid
by the Converted Savings Bank in event of liquidation prior to any liquidation
distribution being made with respect to capital stock.
<PAGE>
Boards of Directors
April 15, 1997
Page 5
Under the Plan, the Bank Conversion shall not be deemed to be a liquidation of
the Converted Savings Bank for purposes of distribution of the Liquidation
Account. Upon consummation of the Bank Conversion, the Liquidation Account,
together with the related rights and obligations of the Converted Savings Bank,
shall be assumed by the Converted Bank.
Following the Stock Conversion, voting rights in the Converted Savings Bank
shall be vested in the sole holder of stock in the Converted Savings Bank, which
will be the Holding Company. Following the Bank Conversion, voting rights in
the Converted Bank will similarly be vested in the Holding Company. Voting
rights in the Holding Company, both after the Stock Conversion and after the
Bank Conversion, will be vested in the holders of the Common Stock.
The Stock Conversion will not interrupt the business of the Savings Bank.
The Converted Savings Bank will continue to engage in the same business as the
Savings Bank immediately prior to the Stock Conversion, and the Converted
Savings Bank will continue to have its savings accounts insured by the SAIF.
Each depositor will retain a withdrawable savings account or accounts equal in
dollar amount to, and on the same terms and conditions as, the withdrawable
account or accounts at the time of Stock Conversion except to the extent funds
on deposit are used to pay for Common Stock purchased in the Stock Conversion.
All loans of the Savings Bank will remain unchanged and retain their same
characteristics in the Converted Savings Bank.
Similarly, the Bank Conversion is not expected to interrupt the business of
the Converted Savings Bank. Management of the Savings Bank expects that, after
the Conversion, the Converted Bank will initially continue to conduct business
in substantially the same manner as the Savings Bank prior to the Conversion.
Over time, the Converted Bank will continue the Savings Bank's diversification
of its loan portfolio into commercial loans. Further, the Bank Conversion is
expected to allow the Savings Bank to enhance its ability to structure its
banking services to respond to prevailing market conditions. The Converted Bank
will also continue to have its savings accounts insured by the SAIF. Each
depositor will retain a withdrawable savings account or accounts equal in dollar
amount to, and on the same terms and conditions as, the withdrawable account or
accounts at the time of Bank Conversion. All loans of the Converted Savings
Bank will remain unchanged and retain their same characteristics in the
Converted Bank.
The Plan must be approved by the OTS and by an affirmative vote of at least
a majority of the total votes eligible to be cast at a meeting of the Savings
Bank's members called to vote on the Plan. The Bank Conversion is also subject
to approval of the OTS and the Washington Department of Financial Institutions,
Division of Banking.
Immediately prior to the Conversion, the Savings Bank will have a positive
net worth determined in accordance with generally accepted accounting
principles.
<PAGE>
Boards of Directors
April 15, 1997
Page 6
OPINION
-------
Based on the foregoing and in reliance thereon, and subject to the
conditions stated herein, it is our opinion that the following federal income
tax consequences will result from the proposed transaction.
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 Savings Bank or the Converted Savings Bank as a result of
the Stock Conversion (see Rev. Rul. 80-105, 1980-1 C.B. 78).
---
2. The assets of the Savings Bank will have the same basis in the hands
of the Converted Savings Bank as in the hands of the Savings Bank
immediately prior to the Stock Conversion (Section 362(b) of the
Code).
3. The holding period of the assets of the Savings Bank to be received by
the Converted Savings Bank will include the period during which the
assets were held by the Savings Bank prior to the Stock Conversion
(Section 1223(2) of the Code).
4. No gain or loss will be recognized by the Converted Savings Bank on
the receipt of money from the Holding Company in exchange for shares
of common stock of the Converted Savings Bank (Section 1032(a) of the
Code). The Holding Company will be transferring solely cash to the
Converted Savings Bank in exchange for all the outstanding capital
stock of the Converted Savings 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 Holding Company upon receipt
of money from stockholders in exchange for shares of Common Stock
(Section 1032(a) of the Code).
6. No gain or loss will be recognized by the Eligible Account Holders and
Supplemental Eligible Account Holders of the Savings Bank upon the
issuance of them of deposit accounts in the Converted Savings Bank in
the same dollar amount and on the same terms and conditions in
exchange for their deposit accounts in the Savings Bank held
immediately prior to the Stock Conversion (Section 1001(a) of the
Code; Treas. Reg. (S)1.1001-1(a)).
7. The tax basis of the Eligible Account Holders' and Supplemental
Eligible Account Holders' savings accounts in the Converted Savings
Bank received as part of the Stock Conversion will equal the tax basis
of such account holders' corresponding
<PAGE>
Boards of Directors
April 15, 1997
Page 7
deposit accounts in the Savings Bank surrendered in exchange therefor
(Section 1012 of the Code).
8. Gain or loss, if any, will be realized by the deposit account holders
of the Savings Bank upon the constructive receipt of their interest in
the liquidation account of the Converted Savings Bank and on the
nontransferable subscription rights to purchase stock of the Holding
Company in exchange for their proprietary rights in the Savings Bank.
Any such gain will be recognized by the Savings Bank deposit account
holders, but only in an amount non in excess of the fair market value
of the liquidation account and subscription rights received. (Section
1001 of the Code; Paulsen v. Commissioner, 469 U.S. 131 (1985); Rev.
-----------------------
Rul. 69-646, 1969-2 C.B. 54.)
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 Savings 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, 1956-2 C.B. 182).
11. The basis of the Common Stock acquired in the Stock Conversion will be
equal to the purchase price of such stock, increased, in the case of
such stock 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).
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,
---
1980-1 C.B. 78).
14. The assets of the Converted Savings Bank will have the same basis in
the hands of the Converted Bank as in the hands of the Converted
Savings Bank immediately prior to the Bank Conversion (Section 362(b)
of the Code).
15. The holding period of the assets of the Converted Savings Bank to be
received by the Converted Bank will include the period during which
the assets were held by
<PAGE>
Boards of Directors
April 15, 1997
Page 8
the Converted Savings Bank prior to the Bank Conversion (Section
1223(2) of the Code).
SCOPE OF OPINION
----------------
Our opinion is limited to the federal income tax matters described above
and does not address any other federal income tax considerations or any federal,
state, local, foreign or other tax considerations. If any of the information
upon which we have relied is incorrect, or if changes in the relevant facts
occur after the date hereof, our opinion could be affected thereby. Moreover,
our opinion is based on the case law, Code, Treasury Regulations thereunder and
Internal Revenue Service rulings as they now exist. These authorities are all
subject to change, and such change may be made with retroactive effect. We can
give no assurance that, after such change, our opinion would not be different.
We undertake no responsibility to update or supplement our opinion. This
opinion is not binding on the Internal Revenue Service and there can be no
assurance, and none is hereby given, that the Internal Revenue Service will not
take a position contrary to one or more of the positions reflected in the
foregoing opinion, or that our opinion will be upheld by the courts if
challenged by the Internal Revenue Service.
CONSENTS
--------
We hereby consent to the filing of this opinion with the OTS as an exhibit
to the Application H-(e)1-S filed by the Holding Company with the OTS in
connection with the Conversion and the reference to our firm in the Application
H-(e)1-S under Item 110.55 therein.
<PAGE>
Boards of Directors
April 15, 1997
Page 9
We also hereby consent to the filing of this opinion with the SEC and the
OTS as exhibits to the Registration Statement and the Bank's Application for
Conversion on Form AC ("Form AC"), respectively, and the reference on our firm
in the Prospectus, which is a part of both the Registration Statement and the
Form AC, under the headings "THE CONVERSION -- Effect of Conversion to Stock
Form on Depositors and Borrowers of the Bank -- Tax Effects" and "LEGAL AND TAX
OPINIONS."
Very truly yours,
/s/Breyer & Aguggia
BREYER & AGUGGIA
<PAGE>
EXHIBIT 8.2
FORM OF STATE TAX OPINION OF BDO SEIDMAN, LLP
<PAGE>
BDO BDO Seidman, LLP 900 Seafirst Financial Center
Accountants and Consultants 601 West Riverside Avenue
Spokane, Washington 99201-0611
Telephone: (509) 747-8095
Fax: (509) 747-0415
Board of Directors April 17, 1997
FirstBank Corp.
First Bank Northwest
920 Main Street
Lewiston, Idaho 83501
Re: Certain Idaho/Washington Consequences Relating to Proposed
Holding Company Conversion of FirstBank Northwest and
Subsequent Conversion to a Washington-chartered Savings
Bank
Gentlemen:
In accordance with your request, set forth herein, is the opinion of this firm
relating to certain Idaho and Washington income tax consequences of the proposed
conversion of FirstBank Northwest (the "Savings Bank") from a federally-
chartered mutual savings bank to a federally-chartered stock savings bank (the
"Converted Savings Bank") (the "Stock Conversion"); (ii) the concurrent
acquisition of 100% of the outstanding capital stock of the Converted Savings
Bank by a parent holding company formed at the direction of the Board of
Directors of the Savings Bank and to be known as FirstBank Corp. (the "Holding
Company"); and thereafter, (iii) the conversion of the Converted Savings Bank to
a Washington-chartered savings bank to be known as FirstBank Northwest (the
"Converted Bank") (the "Bank Conversion").
You have previously received the opinion of Breyer & Aguggia regarding the
federal income tax consequences of the Stock Conversion, the Holding Company
formation and the Bank Conversion to the Savings Bank, the Converted Savings
Bank, the Holding Company and the deposit account holders of the Savings Bank
under the Internal Revenue Code of 1986, as amended (the "Code"). The federal
opinion concludes, inter alia, that the
----------
<PAGE>
BDO
Board of Directors 2 April 17, 1997
proposed bank conversions qualify as a tax-free reorganization under Section
368(a)(1)(F) of the Code.
The State of Idaho will, for income tax purposes, treat the proposed
transactions in an identical manner as they are treated by the Internal Revenue
Service for federal income tax purposes. Based upon the facts and circumstances
attendant to the Stock Conversion, the Bank Conversion, the Holding Company
formation, and pursuant to applicable provisions of the Internal Revenue Code,
it is our opinion that, under the laws of the State of Idaho, no adverse Idaho
state income tax consequences will be incurred by the parties to the proposed
transactions, including deposit account holders, as a result of the Stock
Conversion, the Holding Company formation, and the Bank Conversion.
The State of Washington has no statutory provision for income taxes. Based upon
the facts and circumstances attendant to the Stock Conversion, the Bank
Conversion, the Holding Company formation and pursuant to applicable provisions
of the Internal Revenue Code, it is our opinion that, under the laws of the
State of Washington, no Washington state income tax consequences will be
incurred by the parties to the proposed transactions, including deposit account
holders, as a result of the Stock Conversion, the Holding Company formation and
the Bank Conversion.
No opinion is expressed on any matter other than income tax consequences
including, but not limited to, any franchise, capital stock or Washington
business and occupation taxes which might result from the implementation of the
proposed transactions.
We hereby consent to the filing of this opinion with the OTS as an exhibit to
the Application H-(e)1-S filed by the Holding Company with the OTS in connection
with the Conversion and the reference to our firm in the Application H-(e)1-S
under Item 110.55 therein.
<PAGE>
BDO
Board of Directors 3 April 17, 1997
We also hereby consent to the filing of this opinion with the SEC and the OTS as
exhibits to the Registration Statement and the Bank's Application for Conversion
on Form AC ("Form AC"), respectively, and the reference to our firm in the
Prospectus, which is part of both the Registration Statement and the Form AC,
under the headings "THE CONVERSION--Effect of Conversion to Stock Form on
Depositors and Borrowers of the Savings Bank-Tax Effects" and LEGAL AND TAX
OPINIONS".
Very truly yours,
/s/BDO Seidman, LLP
BDO Seidman, LLP
<PAGE>
EXHIBIT 10.3
FIRST FEDERAL BANK OF IDAHO, F.S.B. 401(K) PLAN
<PAGE>
DILLION, BOSCH & DAW. CHARTERED
DEFINED CONTRIBUTION PROTOTYPE PLAN AND TRUST AGREEMENT
BASIC PLAN DOCUMENT * 001
Dillion, Bosch & Daw. Chartered, in its capacity as Prototype Plan Sponsor,
establishes this Prototype Plan intended to conform to and qualify under (S)401
and (S)501 of the Internal Revenue Code of 1986, as amended. An Employer
establishes a Plan and Trust under this Prototype Plan by executing an Adoption
Agreement. If the Employer adopts this Plan as a restated Plan in substitution
for, and in amendment of, an existing plan, the provisions of this Plan, as a
restated Plan, apply solely to an Employee whose employment with the Employer
terminates on or after the restated Effective Date of the Employer's Plan. If an
Employee's employment with the Employer terminates prior to the restated
Effective Date, that Employee is entitled to benefits under the Plan as the Plan
existed on the date of the Employee's termination of employment.
ARTICLE I
DEFINITIONS
1.01 "Employer" means each employer who adopts this Plan by executing an
Adoption Agreement.
1.02 "Trustee" means the person or persons who as Trustee execute the
Employer's Adoption Agreement, or any successor in office who in writing accepts
the position of Trustee. The Employer must designate in its Adoption Agreement
whether the Trustee will administer the Trust as a discretionary Trustee or as a
nondiscretionary Trustee. If a person acts as a discretionary Trustee, the
Employer also may appoint a Custodian. See Article X.
1.03 "Plan" means the retirement plan established or continued by the
Employer in the form of this Agreement, including the Adoption Agreement under
which the Employer has elected to participate in this Prototype Plan. The
Employer must designate the name of the Plan in its Adoption Agreement. An
Employer may execute more than one Adoption Agreement offered under this
Prototype Plan, each of which will constitute a separate Plan and Trust
established or continued by that Employer. The Plan and the Trust created by
each adopting Employer is a separate Plan and a separate Trust, independent from
the plan and the trust of any other employer adopting this Prototype Plan. All
section references within the Plan are Plan section references unless the
context clearly indicates otherwise.
1.04 "Adoption Agreement" means the document executed by each Employer
adopting this Prototype Plan. The terms of this Prototype Plan as modified by
the terms of an adopting Employer's Adoption Agreement constitute a separate
Plan and Trust to be construed as a single Agreement. Each elective provision of
the Adoption Agreement corresponds by section reference to the section of the
Plan which grants the election. Each Adoption Agreement offered under this
Prototype Plan is either a Nonstandardized Plan or a Standardized Plan, as
identified in the preamble to that Adoption Agreement. The provisions of this
Prototype Plan apply equally to Nonstandardized Plans and to Standardized Plans
unless otherwise specified.
1.05 "Plan Administrator" is the Employer unless the Employer designates
another person to hold the position of Plan Administrator. In addition to his
other duties, the Plan Administrator has full responsibility for compliance with
the reporting and disclosure rules under ERISA as respects this Agreement
<PAGE>
1.06 "Advisory Committee" means the Employer's Advisory Committee as from
time to time constituted.
1.07 "Employee" means any employee (including a Self-Employed Individual)
of the Employer. The Employer must specify in its Adoption Agreement any
Employee, or class of Employees, not eligible to participate in the Plan. If
the Employer elects to exclude collective bargaining employees, the exclusion
applies to any employee of the Employer included in a unit of employees covered
by an agreement which the Secretary of Labor finds to be a collective bargaining
agreement between employee representatives and one or more employers unless the
collective bargaining agreement requires the employee to be included within the
Plan. The term "employee representatives" does not include any organization
more than half the members of which are owners, officers, or executives of the
Employer.
1.08 "Self-Employed Individual/Owner-Employee." "Self-Employed Individual"
means an individual who has Earned Income (or who would have had Earned Income
but for the fact that the trade or business did not have net earnings) for the
taxable year from the trade or business for which the Plan is established.
"Owner-Employee" means a Self-Employed Individual who is the sole proprietor in
the case of a sole proprietorship. If the Employer is a partnership, "Owner-
Employee" means a Self-Employed Individual who is a partner and owns more than
10% of either the capital or profits interest of the partnership.
1.09 "Highly Compensated Employee" means an Employee who, during the Plan
Year or during the preceding 12-month period:
(a) is a more than 5% owner of the Employer (applying the constructive
ownership rules of Code (S)318, and applying the principles of Code (S)318,
for an unincorporated entity);
(b) has Compensation in excess of $75,000 (as adjusted by the Commissioner
of Internal Revenue for the relevant year);
(c) has Compensation in excess of $50,000 (as adjusted by the Commissioner
of Internal Revenue for the relevant year) and is part of the top-paid 20%
group of employees (based on Compensation for the relevant year); or
(d) has Compensation in excess of 50% of the dollar amount prescribed in
Code (S)415(b)(1)(A) (relating to defined benefit plans) and is an officers
of the Employer.
If the Employee satisfies the definition in clause (b), (c) or (d) in the
Plan Year but does not satisfy clause (b), (c) or (d) during the preceding 12-
month period and does not satisfy clause (a) in either period, the Employee is a
Highly Compensated Employee only if he is one of the 100 most highly compensated
Employees for the Plan Year. The number of officers taken into account under
clause (d) will not exceed the greater of 3 or 10% of the total number (after
application of the Code (S)414(q) exclusions) of Employees, but no more than 50
officers. If no Employee satisfies the Compensation requirement in clause (d)
for the relevant year, the Advisory Committee will treat the highest paid
officer as satisfying clause (d) for that year.
For purposes of this Section 1.09, "Compensation" means Compensation as
defined in Section 1.12, except any exclusions from Compensation elected in the
Employer's Adoption Agreement Section 1.12 do not apply, and Compensation must
include "elective contributions" (as defined in Section 1.12). The Advisory
Committee must make the determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of the top paid 20%
group, the top 100 paid
<PAGE>
Employees, the number of officers includible in clause (d) and the relevant
Compensation, consistent with Code (S)414(q) and regulations issued under that
Code section. The Employer may make a calendar year election to determine the
Highly Compensated Employees for the Plan Year, as prescribed by Treasury
regulations. A calendar year election must apply to all plans and arrangements
of the Employer. For purposes of applying any nondiscrimination test required
under the Plan or under the Code, in a manner consistent with applicable
Treasury regulations, the Advisory Committee will treat a Highly Compensated
Employee and all family members (a spouse, a lineal ascendant or descendant, or
a spouse of a lineal ascendant or descendant) as a single Highly Compensated
Employee, but only if the Highly Compensated Employee is a more than 5% owner or
is one of the 10 Highly Compensated Employees with the greatest Compensation for
the Plan Year. This aggregation rule applies to a family member even if that
family member is a Highly Compensated Employee without family aggregation.
The term "Highly Compensated Employee" also includes any former Employee
who separated from Service (or has a deemed Separation from Service, as
determined under Treasury regulations) prior to the Plan Year, performs no
Service for the Employer during the Plan Year, and was a Highly Compensated
Employee either for the separation year or any Plan Year ending on or after his
55th birthday. If the former Employee's Separation from Service occurred prior
to January 1, 1987, he is a Highly Compensated Employee only if he satisfied
clause (a) of this Section 1.09 or received Compensation in excess of $50,000
during: (1) the year of his Separation from Service (or the prior year); or (2)
any year ending after his 54th birthday.
1.10 "Participant" is an Employee who is eligible to be and becomes a
Participant in accordance with the provisions of Section 2.01.
1.11 "Beneficiary" is a person designated by a Participant who is or may
become entitled to a benefit under the Plan. A Beneficiary who becomes entitled
to a benefit under the Plan remains a Beneficiary under the Plan until the
Trustee has fully distributed his benefit to him. A Beneficiary's right to (and
the Plan Administrator's, the Advisory Committee's or a Trustee's duty to
provide to the Beneficiary) information or data concerning the Plan does not
arise until he first becomes entitled to receive a benefit under the Plan.
1.12 "Compensation" means, except as provided in the Employer's Adoption
Agreement, the Participant's Earned Income, wages, salaries, fees for
professional service and other amounts received for personal services actually
rendered in the course of employment with the Employer maintaining the plan
(including, but not limited to, commissions paid salesmen, compensation for
services on the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses). The Employer must elect in its Adoption Agreement
whether to include elective contributions in the definition of Compensation.
"Elective contributions" are amounts excludible from the Employee's gross income
under Code (S)(S)125, 402(a)(8), 402(h) or 403(b), and contributed by the
Employer, at the Employee's election, to a Code (S)401(k) arrangement, a
Simplified Employee Pension, cafeteria plan or tax-sheltered annuity. The term
"Compensation" does not include:
(a) Employer contributions (other than "elective contributions," if
includible in the definition of Compensation under Section 1.12 of the
Employer's Adoption Agreement) to a plan of deferred compensation to the
extent the contributions are not included in the gross income of the
Employee for the taxable year in which contributed, on behalf of an
Employee to a Simplified Employee Pension Plan to the extent such
contributions are excludible from the Employee's gross income, and any
distributions from a plan of deferred compensation, regardless of whether
such amounts are includible in the gross income of the Employee when
distributed.
<PAGE>
(b) Amounts realized from the exercise of a non-qualified stock option, or
when restricted stock (or property) held by an Employee either becomes
freely transferable or is no longer subject to a substantial risk of
forfeiture.
(c) Amounts realized from the sale, exchange or other disposition of stock
acquired under a stock option described in Part II, Subchapter D, Chapter 1
of the Code.
(d) Other amounts which receive special tax benefits, such as premiums for
group term life insurance (but only to the extent that the premiums are not
includible in the gross income of the Employee), or contributions made by
an Employer (whether or not under a salary reduction agreement) towards the
purchase of an annuity contract described in Code (S)403(b) (whether or not
the contributions are excludible from the gross income of the Employee),
other than "elective contributions," if elected in the Employer's Adoption
Agreement.
Any reference in this Plan to Compensation is a reference to the definition
in this Section 1.12, unless the Plan reference specifies a modification to this
definition. The Advisory Committee will take into account only Compensation
actually paid for the relevant period. A Compensation payment includes
Compensation by the Employer through another person under the common paymaster
provisions in Code (S)(S)3121 and 3306.
(A) LIMITATIONS ON COMPENSATION.
(1) COMPENSATION DOLLAR LIMITATION. For any Plan Year beginning after
December 31, 1988, the Advisory Committee must take into account only the first
$200,000 (or beginning January 1, 1990, such larger amount as the Commissioner
of Internal Revenue may prescribe) of any Participant's Compensation. For any
Plan Year beginning prior to January 1, 1989, this $200,000 limitation (but not
the family aggregation requirement described in the next paragraph) applies only
if the Plan is top heavy for such Plan Year or operates as a deemed top heavy
plan for such Plan Year.
(2) APPLICATION OF COMPENSATION LIMITATION TO CERTAIN FAMILY MEMBERS. The
$200,000 Compensation limitation applies to the combined Compensation of the
Employee and of any family member aggregated with the Employee under Section
1.09 who is either (i) the Employee's spouse; or (ii) the Employee's lineal
descendant under the age of 19. If, for a Plan Year, the combined Compensation
of the Employee and such family members who are Participants entitled to an
allocation for that Plan Year exceeds the $200,000 (or adjusted) limitation,
"Compensation" for each such Participant, for purposes of the contribution and
allocation provisions of Article III, means his Adjusted Compensation. Adjusted
Compensation is the amount which bears the same ratio to the $200,000 (or
adjusted) limitation as the affected Participant's Compensation (without regard
to the $200,000 Compensation limitation) bears to the combined Compensation of
all the affected Participants in the family unit. If the Plan uses permitted
disparity, the Advisory Committee must determine the integration level of each
affected family member Participant prior to the proration of the $200,000
Compensation limitation, but the combined integration level of the affected
Participants may not exceed $200,000 (or the adjusted limitation). The combined
Excess Compensation of the affected Participants in the family unit may not
exceed $200,000 (or the adjusted limitation) minus the affected Participants'
combined integration level (as determined under the preceding sentence). If the
combined Excess Compensation exceeds this limitation, the Advisory Committee
will prorate the Excess Compensation limitation among the affected Participants
in the family unit in proportion to each such individual's Adjusted Compensation
minus his integration level. If the Employer's Plan is a Nonstandardized Plan,
the Employer may elect to use a different method in determining the Adjusted
Compensation of the affected Participants by specifying that method in an
addendum to the Adoption Agreement, numbered Section 1.12.
<PAGE>
(B) NONDISCRIMINATION. For purposes of determining whether the Plan
discriminates in favor of Highly Compensated Employees, Compensation means
Compensation as defined in this Section 1.12, except: (1) the Employer may elect
to include or to exclude elective contributions, irrespective of the Employer's
election in its Adoption Agreement regarding elective contributions; and (2) the
Employer will not give effect to any elections made in the "modifications to
Compensation definition" section of Adoption Agreement Section 1.12. The
Employer's election described in clause (1) must be consistent and uniform with
respect to all Employees and all plans of the Employer for any particular Plan
Year. If the Employer's Plan is a Nonstandardized Plan, the Employer,
irrespective of clause (2), may elect to exclude from this nondiscrimination
definition of Compensation any items of Compensation excludible under Code
(S)414(s) and the applicable Treasury regulations, provided such adjusted
definition conforms to the nondiscrimination requirements of those regulations.
1.13 "Earned Income" means net earnings from self-employment in the trade
or business with respect to which the Employer has established the Plan,
provided personal services of the individual are a material income producing
factor. The Advisory Committee will determine net earnings without regard to
items excluded from gross income and the deductions allocable to those items.
The Advisory Committee will determine net earnings after the deduction allowed
to the Self-Employed Individual for all contributions made by the Employer to a
qualified plan and, for Plan Years beginning after December 31, 1989, the
deduction allowed to the Self-Employed under Code (S)164(f) for self-employment
taxes.
1.14 "Account" means the separate account(s) which the Advisory Committee
or the Trustee maintains for a Participant under the Employer's Plan.
1.15 "Accrued Benefit" means the amount standing in a Participant's
Account(s) as of any date derived from both Employer contributions and Employee
contributions, if any.
1.16 "Nonforfeitable" means a Participant's or Beneficiary's unconditional
claim, legally enforceable against the Plan, to the Participant's Accrued
Benefit.
1.17 "Plan Year" means the fiscal year of the Plan, the consecutive month
period specified in the Employer's Adoption Agreement. The Employer's Adoption
Agreement also must specify the "Limitation Year" applicable to the limitations
on allocations described in Article III. If the Employer maintains Paired
Plans, each Plan must have the same Plan Year.
1.18 "Effective Date" of this Plan is the date specified in the Employer's
Adoption Agreement.
1.19 "Plan Entry Date" means the date(s) specified in Section 2.01 of the
Employer's Adoption Agreement.
1.20 "Accounting Date" is the last day of an Employer's Plan Year. Unless
otherwise specified in the Plan, the Advisory Committee will make all Plan
allocations for a particular Plan Year as of the Accounting Date of that Plan
Year.
1.21 "Trust" means the separate Trust created under the Employer's Plan.
1.22 "Trust Fund" means all property of every kind held or acquired by the
Employer's Plan, other than incidental benefit insurance contracts.
1.23 "Nontransferable Annuity" means an annuity which by its terms provides
that it may not
<PAGE>
be sold, assigned, discounted, pledged as collateral for a loan or security for
the performance of an obligation or for any purpose to any person other than the
insurance company. If the Plan distributes an annuity contract, the contract
must be a Nontransferable Annuity.
1.24 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.25 "Code" means the Internal Revenue Code of 1986, as amended.
1.26 "Service" means any period of time the Employee is in the employ of
the Employer, including any period the Employee is on an unpaid leave of absence
authorized by the Employer under a uniform, nondiscriminatory policy applicable
to all Employees. "Separation from Service" means the Employee no longer has an
employment relationship with the Employer maintaining this Plan.
1.27 "Hour of Service" means:
(a) Each Hour of Service for which the Employer, either directly or
indirectly, pays an Employee, or for which the Employee is entitled to
payment, for the performance of duties. The Advisory Committee credits
Hours of Service under this paragraph (a) to the Employee for the
computation period in which the Employee performs the duties, irrespective
of when paid;
(b) Each Hour of Service for back pay, irrespective of mitigation of
damages, to which the Employer has agreed or for which the Employee has
received an award. The Advisory Committee credits Hours of Service under
this paragraph (b) to the Employee for the computation period(s) to which
the award or the agreement pertains rather than for the computation period
in which the award, agreement or payment is made; and
(c) Each Hour of Service for which the Employer, either directly or
indirectly, pays an Employee, or for which the Employee is entitled to
payment (irrespective of whether the employment relationship is
terminated), for reasons other than for the performance of duties during a
computation period, such as leave of absence, vacation, holiday, sick
leave, illness, incapacity (including disability), layoff, jury duty or
military duty. The Advisory Committee will credit no more than 501 Hours
of Service under this paragraph (c) to an Employee on account of any single
continuous period during which the Employee does not perform any duties
(whether or not such period occurs during a single computation period).
The Advisory Committee credits Hours of Service under this paragraph (c) in
accordance with the rules of paragraphs (b) and (c) of Labor Reg.
(S)2530.200b-2, which the Plan, by this reference, specifically
incorporates in full within this paragraph (c).
The Advisory Committee will not credit an Hour of Service under more than
one of the above paragraphs. A computation period for purposes of this Section
1.27 is the Plan Year, Year of Service period, Break in Service period or other
period, as determined under the Plan provision for which the Advisory Committee
is measuring an Employee's Hours of Service. The Advisory Committee will
resolve any ambiguity with respect to the crediting of an Hour of Service in
favor of the Employee.
(A) METHOD OF CREDITING HOURS OF SERVICE. The Employer must elect in its
Adoption Agreement the method the Advisory Committee will use in crediting an
Employee with Hours of Service. For purposes of the Plan, "actual" method means
the determination of Hours of Service from records of hours worked and hours for
which the Employer makes payment or for which payment is due from the Employer.
If the Employer elects to apply an "equivalency" method, for each equivalency
period for which the Advisory Committee would credit the Employee with at least
one Hour of Service, the Advisory
<PAGE>
Committee will credit the Employee with: (i) 10 Hours of Service for a daily
equivalency; (ii) 45 Hours of Service for a weekly equivalency; (iii) 95 Hours
of Service for a semimonthly payroll period equivalency; and (iv) 190 Hours of
Service for a monthly equivalency.
(B) MATERNITY/PATERNITY LEAVE. Solely for purposes of determining whether the
Employee incurs a Break in Service under any provision of this Plan, the
Advisory Committee must credit Hours of Service during an Employee's unpaid
absence period due to maternity or paternity leave. The Advisory Committee
considers an Employee on maternity or paternity leave if the Employee's absence
is due to the Employee's pregnancy, the birth of the Employee's child, the
placement with the Employee of an adopted child, or the care of the Employee's
child immediately following the child's birth or placement. The Advisory
Committee credits Hours of Service under this paragraph on the basis of the
number of Hours of Service the Employee would receive if he were paid during the
absence period or, if the Advisory Committee cannot determine the number of
Hours of Service the Employee would receive, on the basis of 8 hours per day
during the absence period. The Advisory Committee will credit only the number
(not exceeding 501) of Hours of Service necessary to prevent an Employee's Break
in Service. The Advisory Committee credits all Hours of Service described in
this paragraph to the computation period in which the absence period begins or,
if the Employee does not need these Hours of Service to prevent a Break in
Service in the computation period in which his absence period begins, the
Advisory Committee credits these Hours of Service to the immediately following
computation period.
1.28 "Disability" means the Participant, because of a physical or mental
disability, will be unable to perform the duties of his customary position of
employment (or is unable to engage in any substantial gainful activity) for an
indefinite period which the Advisory Committee considers will be of long
continued duration. A Participant also is disabled if he incurs the permanent
loss or loss of use of a member or function of the body, or is permanently
disfigured, and incurs a Separation from Service. The Plan considers a
Participant disabled on the date the Advisory Committee determines the
Participant satisfies the definition of disability. The Advisory Committee may
require a Participant to submit to a physical examination in order to confirm
disability. The Advisory Committee will apply the provisions of this Section
1.28 in a nondiscriminatory, consistent and uniform manner. If the Employer's
Plan is a Nonstandardized Plan, the Employer may provide an alternate definition
of disability in an addendum to its Adoption Agreement, numbered Section 1.28.
1.29 SERVICE FOR PREDECESSOR EMPLOYER. If the Employer maintains the plan
--------------------------------
of a predecessor employer, the Plan treats service of the Employee with the
predecessor employer as service with the Employer. If the Employer does not
maintain the plan of a predecessor employer, the Plan does not credit service
with the predecessor employer, unless the Employer identifies the predecessor in
its Adoption Agreement and specifies the purposes for which the Plan will credit
service with that predecessor employer.
1.30 RELATED EMPLOYERS. A related group is a controlled group of
-----------------
corporations (as defined in Code (S)414(b)), trades or businesses (whether or
not incorporated) which are under common control (as defined in Code (S)414(c))
or an affiliated service group (as defined in Code (S)414(m) or in Code
(S)414(o)). If the Employer is a member of a related group, the term "Employer"
includes the related group members for purposes of crediting Hours of Service,
determining Years of Service and Breaks in Service under Articles II and V,
applying the Participation Test and the Coverage Test under Section 3.06(E),
applying the limitations on allocations in Part 2 of Article III, applying the
top heavy rules and the minimum allocation requirements of Article III, the
definitions of Employee, Highly Compensated Employee, Compensation and Leased
Employee, and for any other purpose required by the applicable Code section or
by a Plan provision. However, an Employer may contribute to the Plan only by
being a signatory to the Execution Page of the Adoption Agreement or to a
Participation Agreement to the
<PAGE>
Employer's Adoption Agreement. If one or more of the Employer's related group
members become Participating Employers by executing a Participation Agreement to
the Employer's Adoption Agreement, the term "Employer" includes the
participating related group members for all purposes of the Plan, and "Plan
Administrator" means the Employer that is the signatory to the Execution Page of
the Adoption Agreement.
If the Employer's Plan is a Standardized Plan, all Employees of the
Employer or of any member of the Employer's related group, are eligible to
participate in the Plan, irrespective of whether the related group member
directly employing the Employee is a Participating Employer. If the Employer's
Plan is a Nonstandardized Plan, the Employer must specify in Section 1.07 of its
Adoption Agreement, whether the Employees of related group members that are not
Participating Employers are eligible to participate in the Plan. Under a
Nonstandardized Plan, the Employer may elect to exclude from the definition of
"Compensation" for allocation purposes any Compensation received from a related
employer that has not executed a Participation Agreement and whose Employees are
not eligible to participate in the Plan.
1.31 LEASED EMPLOYEES. The Plan treats a Leased Employee as an Employee of
----------------
the Employer. A Leased Employee is an individual (who otherwise is not an
Employee of the Employer) who, pursuant to a leasing agreement between the
Employer and any other person, has performed services for the Employer (or for
the Employer and any persons related to the Employer within the meaning of Code
(S)144(a)(3)) on a substantially full time basis for at least one year and who
performs services historically performed by employees in the Employer's business
field. If a Leased Employee is treated as an Employee by reason of this Section
1.31 of the Plan, "Compensation" includes Compensation from the leasing
organization which is attributable to services performed for the Employer.
(A) SAFE HARBOR PLAN EXCEPTION. The Plan does not treat a Leased Employee as
an Employee if the leasing organization covers the employee in a safe harbor
plan and, prior to application of this safe harbor plan exception, 20% or less
of the Employer's Employees (other than Highly Compensated Employees) are Leased
Employees. A safe harbor plan is a money purchase pension plan providing
immediate participation, full and immediate vesting, and a nonintegrated
contribution formula equal to at least 10% of the employee's compensation
without regard to employment by the leasing organization on a specified date.
The safe harbor plan must determine the 10% contribution on the basis of
compensation as defined in Code (S)415(c)(3) plus elective contributions (as
defined in Section 1.12).
(B) OTHER REQUIREMENTS. The Advisory Committee must apply this Section 1.31 in
a manner consistent with Code (S)(S)414(n) and 414(o) and the regulations issued
under those Code sections. The Employer must specify in the Adoption Agreement
the manner in which the Plan will determine the allocation of Employer
contributions and Participant forfeitures on behalf of a Participant if the
Participant is a Leased Employee covered by a plan maintained by the leasing
organization.
1.32 SPECIAL RULES FOR OWNER-EMPLOYEES. The following special provisions
---------------------------------
and restrictions apply to Owner-Employees:
(a) If the Plan provides contributions or benefits for an Owner-Employee or
for a group of Owner-Employees who controls the trade or business with
respect to which this Plan is established and the Owner-Employee or Owner-
Employees also control as Owner-Employees one or more other trades or
businesses, plans must exist or be established with respect to all the
controlled trades or businesses so that when the plans are combined they
form a single plan which satisfies the requirements of Code (S)401(a) and
Code (S)401(d) with respect to the employees of the controlled trades or
businesses.
<PAGE>
(b) The Plan excludes an Owner-Employee or group of Owner-Employees if the
Owner-Employee or group of Owner-Employees controls any other trade or
business, unless the employees of the other controlled trade or business
participate in a plan which satisfies the requirements of Code (S)401(a)
and Code (S)401(d). The other qualified plan must provide contributions
and benefits which are not less favorable than the contributions and
benefits provided for the Owner-Employee or group of Owner-Employees under
this Plan, or if an Owner-Employee is covered under another qualified plan
as an Owner-Employee, then the plan established with respect to the trade
or business he does control must provide contributions or benefits as
favorable as those provided under the most favorable plan of the trade or
business he does not control. If the exclusion of this paragraph (b)
applies and the Employer's Plan is a Standardized Plan, the Employer may
not participate or continue to participate in this Prototype Plan and the
Employer's Plan becomes an individually-designed plan for purposes of
qualification reliance.
(c) For purposes of paragraphs (a) and (b) of this Section 1.32, an Owner-
Employee or group of Owner-Employees controls a trade or business if the
Owner-Employee or Owner-Employees together (1) own the entire interest in
an unincorporated trade or business, or (2) in the case of a partnership,
own more than 50% of either the capital interest or the profits interest in
the partnership.
1.33 DETERMINATION OF TOP HEAVY STATUS. If this Plan is the only qualified
---------------------------------
plan maintained by the Employer, the Plan is top heavy for a Plan Year if the
top heavy ratio as of the Determination Date exceeds 60%. The top heavy ratio
is a fraction, the numerator of which is the sum of the present value of Accrued
Benefits of all Key Employees as of the Determination Date and the denominator
of which is a similar sum determined for all Employees. The Advisory Committee
must include in the top heavy ratio, as part of the present value of Accrued
Benefits, any contribution not made as of the Determination Date but includible
under Code (S)416 and the applicable Treasury regulations, and distributions
made within the Determination Period. The Advisory Committee must calculate the
top heavy ratio by disregarding the Accrued Benefit (and distributions, if any,
of the Accrued Benefit) of any Non-Key Employee who was formerly a Key Employee,
and by disregarding the Accrued Benefit (including distributions, if any, of the
Accrued Benefit) of an individual who has not received credit for at least one
Hour of Service with the Employer during the Determination Period. The Advisory
Committee must calculate the top heavy ratio, including the extent to which it
must take into account distributions, rollovers and transfers, in accordance
with Code (S)416 and the regulations under that Code section.
If the Employer maintains other qualified plans (including a simplified
employee pension plan), or maintained another such plan which now is terminated,
this Plan is top heavy only if it is part of the Required Aggregation Group, and
the top heavy ratio for the Required Aggregation Group and for the Permissive
Aggregation Group, if any, each exceeds 60%. The Advisory Committee will
calculate the top heavy ratio in the same manner as required by the first
paragraph of this Section 1.33, taking into account all plans within the
Aggregation Group. To the extent the Advisory Committee must take into account
distributions to a Participant, the Advisory Committee must include
distributions from a terminated plan which would have been part of the Required
Aggregation Group if it were in existence on the Determination Date. The
Advisory Committee will calculate the present value of accrued benefits under
defined benefit plans or simplified employee pension plans included within the
group in accordance with the terms of those plans, Code (S)416 and the
regulations under that Code section. If a Participant in a defined benefit plan
is a Non-Key Employee, the Advisory Committee will determine his accrued benefit
under the accrual method, if any, which is applicable uniformly to all defined
benefit plans maintained by the Employer or, if there is no uniform method, in
accordance with the slowest accrual rate permitted under the fractional rule
accrual method described in Code (S)411(b)(1)(C). If the Employer maintains a
<PAGE>
defined benefit plan, the Employer must specify in Adoption Agreement Section
3.18 the actuarial assumptions (interest and mortality only) the Advisory
Committee will use to calculate the present value of benefits from a defined
benefit plan. If an aggregated plan does not have a valuation date coinciding
with the Determination Date, the Advisory Committee must value the Accrued
Benefits in the aggregated plan as of the most recent valuation date falling
within the twelve-month period ending on the Determination Date, except as Code
(S)416 and applicable Treasury regulations require for the first and second plan
year of a defined benefit plan. The Advisory Committee will calculate the top
heavy ratio with reference to the Determination Dates that fall within the same
calendar year.
(A) STANDARDIZED PLAN. If the Employer's Plan is a Standardized Plan, the Plan
operates as a deemed top heavy plan in all Plan Years, except, if the
Standardized Plan includes a Code (S)401(k) arrangement, the Employer may elect
to apply the top heavy requirements only in Plan Years for which the Plan
actually is top heavy. Under a deemed top heavy plan, the Advisory Committee
need not determine whether the Plan actually is top heavy. However, if the
Employer, in Adoption Agreement Section 3.18, elects to override the 100%
limitation, the Advisory Committee will need to determine whether a deemed top
heavy Plan's top heavy ratio for a Plan Year exceeds 90%.
(B) DEFINITIONS. For purposes of applying the provisions of this Section 1.33:
(1) "Key Employee" means, as of any Determination Date, any Employee or
former Employee (or Beneficiary of such Employee) who, for any Plan Year in
the Determination Period: (i) has Compensation in excess of 50% of the
dollar amount prescribed in Code (S)415(b)(1)(A) (relating to defined
benefit plans) and is an officer of the Employer; (ii) has Compensation in
excess of the dollar amount prescribed in Code (S)415(c)(1)(A) (relating to
defined contribution plans) and is one of the Employees owning the ten
largest interests in the Employer; (iii) is a more than 5% owner of the
Employer; or (iv) is a more than 1% owner of the Employer and has
Compensation of more than $150,000. The constructive ownership rules of
Code (S)318 (or the principles of that section, in the case of an
unincorporated Employer,) will apply to determine ownership in the
Employer. The number of officers taken into account under clause (i) will
not exceed the greater of 3 or 10% of the total number (after application
of the Code (S)414(q) exclusions) of Employees, but no more than 50
officers. The Advisory Committee will make the determination of who is a
Key Employee in accordance with Code (S)416(i)(1) and the regulations under
that Code section.
(2) "Non-Key Employee" is an employee who does not meet the definition of
Key Employee.
(3) "Compensation" means Compensation as determined under Section 1.09 for
purposes of identifying Highly Compensated Employees.
(4) "Required Aggregation Group" means: (i) each qualified plan of the
Employer in which at least one Key Employee participates at any time during
the Determination Period; and (ii) any other qualified plan of the Employer
which enables a plan described in clause (i) to meet the requirements of
Code (S)401(a)(4) or of Code (S)410.
(5) "Permissive Aggregation Group" is the Required Aggregation Group plus
any other qualified plans maintained by the Employer, but only if such
group would satisfy in the aggregate the requirements of Code (S)401(a)(4)
and of Code (S)410. The Advisory Committee will determine the Permissive
Aggregation Group.
(6) "Employer" means the Employer that adopts this Plan and any related
employers described in Section 1.30.
<PAGE>
(7) "Determination Date" for any Plan Year is the Accounting Date of the
preceding Plan Year or, in the case of the first Plan Year of the Plan, the
Accounting Date of that Plan Year. The "Determination Period" is the 5
year period ending on the Determination Date.
1.34 "Paired Plans" means the Employer has adopted two Standardized Plan
Adoption Agreements offered with this Prototype Plan, one Adoption Agreement
being a Paired Profit Sharing Plan and one Adoption Agreement being a Paired
Pension Plan. A Paired Profit Sharing Plan may include a Code (S)401(k)
arrangement. A Paired Pension Plan must be a money purchase pension plan or a
target benefit pension plan. Paired Plans must be the subject of a favorable
opinion letter issued by the National Office of the Internal Revenue Service.
This Prototype Plan does not pair any of its Standardized Plan Adoption
Agreements with Standardized Plan Adoption Agreements under a defined benefit
prototype plan.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY. Each Employee becomes a Participant in the Plan in
-----------
accordance with the participation option selected by the Employer in its
Adoption Agreement. If this Plan is a restated Plan, each Employee who was a
Participant in the Plan on the day before the Effective Date continues as a
Participant in the Plan, irrespective of whether he satisfies the participation
conditions in the restated Plan, unless otherwise provided in the Employer's
Adoption Agreement.
2.02 YEAR OF SERVICE - PARTICIPATION. For purposes of an Employee's
-------------------------------
participation in the Plan under Adoption Agreement Section 2.01, the Plan takes
into account all of his Years of Service with the Employer, except as provided
in Section 2.03. "Year of Service" means an eligibility computation period
during which the Employee completes not less than the number of Hours of Service
specified in the Employer's Adoption Agreement. The initial eligibility
computation period is the first 12 consecutive month period measured from the
Employment Commencement Date. The Plan measures succeeding eligibility
computation periods in accordance with the option selected by the Employer in
its Adoption Agreement. If the Employer elects to measure subsequent periods on
a Plan Year basis, an Employee who receives credit for the required number of
Hours of Service during the initial eligibility computation period and during
the first applicable Plan Year will receive credit for two Years of Service
under Article II. "Employment Commencement Date" means the date on which the
Employee first performs an Hour of Service for the Employer. If the Employer
elects a service condition under Adoption Agreement Section 2.01 based on
months, the Plan does not apply any Hour of Service requirement after the
completion of the first Hour of Service.
2.03 BREAK IN SERVICE - PARTICIPATION. An Employee incurs a "Break in
--------------------------------
Service" if during any 12 consecutive month period he does not complete more
than 500 Hours of Service with the Employer. The "12 consecutive month period"
under this Section 2.03 is the same 12 consecutive month period for which the
Plan measures "Years of Service" under Section 2.02.
(A) 2-YEAR ELIGIBILITY. If the Employer elects a 2 years of service condition
for eligibility purposes under Adoption Agreement Section 2.01, the Plan treats
an Employee who incurs a one year Break in Service and who has never become a
Participant as a new Employee on the date he first performs an Hour of Service
for the Employer after the Break in Service.
(B) SUSPENSION OF YEARS OF SERVICE. The Employer must elect in its Adoption
Agreement whether a Participant will incur a suspension of Years of Service
after incurring a one year Break in Service. If this rule applies under the
Employer's Plan, the Plan disregards a Participant's Years of Service (as
defined in Section 2.02) earned prior to a Break in Service until the
Participant completes another Year of Service and the Plan suspends the
Participant's participation in the Plan. If the Participant completes a Year of
Service following his Break in Service, the Plan restores that Participant's
pre-Break Years of Service (and the Participant resumes active participation in
the Plan) retroactively to the first day of the computation period in which the
Participant earns the first post-Break Year of Service. The initial computation
period under this Section 2.03(B) is the 12 consecutive month period measured
from the date the Participant first receives credit for an Hour of Service
following the one year Break in Service period. The Plan measures any subsequent
periods, if necessary, in a manner consistent with the computation period
selection in Adoption Agreement Section 2.02. This Section 2.03(B) does not
affect a Participant's vesting credit under Article V and, during a suspension
period, the Participant's Account continues to share fully in Trust Fund
allocations under Section 9.11. Furthermore, this Section 2.03(B) will not
result in the restoration of any Year of Service disregarded under the Break in
Service rule of Section 2.03(A).
<PAGE>
2.04 PARTICIPATION UPON RE-EMPLOYMENT. A Participant whose employment with
--------------------------------
the Employer terminates will re-enter the Plan as a Participant on the date of
his re-employment, subject to the Break in Service rule, if applicable, under
Section 2.03(B). An Employee who satisfies the Plan's eligibility conditions
but who terminates employment with the Employer prior to becoming a Participant
will become a Participant on the later of the Plan Entry Date on which he would
have entered the Plan had he not terminated employment or the date of his re-
employment, subject to the Break in Service rule, if applicable, under Section
2.03(B). Any Employee who terminates employment prior to satisfying the Plan's
eligibility conditions becomes a Participant in accordance with Adoption
Agreement Section 2.01.
2.05 CHANGE IN EMPLOYEE STATUS. If a Participant has not incurred a
-------------------------
Separation from Service but ceases to be eligible to participate in the Plan, by
reason of employment within an employment classification excluded by the
Employer under Adoption Agreement Section 1.07, the Advisory Committee must
treat the Participant as an Excluded Employee during the period such a
Participant is subject to the Adoption Agreement exclusion. The Advisory
Committee determines a Participant's sharing in the allocation of Employer
contributions and Participant forfeitures, if applicable, by disregarding his
Compensation paid by the Employer for services rendered in his capacity as an
Excluded Employee. However, during such period of exclusion, the Participant,
without regard to employment classification, continues to receive credit for
vesting under Article V for each included Year of Service and the Participant's
Account continues to share fully in Trust Fund allocations under Section 9.11.
If an Excluded Employee who is not a Participant becomes eligible to
participate in the Plan by reason of a change in employment classification, he
will participate in the Plan immediately if he has satisfied the eligibility
conditions of Section 2.01 and would have been a Participant had he not been an
Excluded Employee during his period of Service. Furthermore, the Plan takes
into account all of the Participant's included Years of Service with the
Employer as an Excluded Employee for purposes of vesting credit under Article V.
2.06 ELECTION NOT TO PARTICIPATE. If the Employer's Plan is a Standardized
---------------------------
Plan, the Plan does not permit an otherwise eligible Employee nor any
Participant to elect not to participate in the Plan. If the Employer's Plan is
a Nonstandardized Plan, the Employer must specify in its Adoption Agreement
whether an Employee eligible to participate, or any present Participant, may
elect not to participate in the Plan. For an election to be effective for a
particular Plan Year, the Employee or Participant must file the election in
writing with the Plan Administrator not later than the time specified in the
Employer's Adoption Agreement. The Employer may not make a contribution under
the Plan for the Employee or for the Participant for the Plan Year for which the
election is effective, nor for any succeeding Plan Year, unless the Employee or
Participant re-elects to participate in the Plan. After an Employee's or
Participant's election not to participate has been effective for at least the
minimum period prescribed by the Employer's Adoption Agreement, the Employee or
Participant may re-elect to participate in the Plan for any Plan Year and
subsequent Plan Years. An Employee or Participant may re-elect to participate
in the Plan by filing his election in writing with the Plan Administrator not
later than the time specified in the Employer's Adoption Agreement. An Employee
or Participant who re-elects to participate may again elect not to participate
only as permitted in the Employer's Adoption Agreement. If an Employee is a
Self-Employed Individual, the Employee's election (except as permitted by
Treasury regulations without creating a Code (S)401(k) arrangement with respect
to that Self-Employed Individual) must be effective no later than the date the
Employee first would become a Participant in the Plan and the election is
irrevocable. The Plan Administrator must furnish an Employee or a Participant
any form required for purposes of an election under this Section 2.06. An
election timely filed is effective for the entire Plan Year.
<PAGE>
A Participant who elects not to participate may not receive a distribution
of his Accrued Benefit attributable either to Employer or to Participant
contributions except as provided under Article IV or under Article VI. However,
for each Plan Year for which a Participant's election not to participate is
effective, the Participant's Account, if any, continues to share in Trust Fund
allocations under Article IX. Furthermore, the Employee or the Participant
receives vesting credit under Article V for each included Year of Service during
the period the election not to participate is effective.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
PART 1. AMOUNT OF EMPLOYER CONTRIBUTIONS AND PLAN ALLOCATIONS: SECTIONS 3.01
- -----------------------------------------------------------------------------
THROUGH 3.06
- ------------
3.01 AMOUNT. For each Plan Year, the Employer contributes to the Trust the
------
amount determined by application of the contribution option selected by the
Employer in its Adoption Agreement. The Employer may not make a contribution to
the Trust for any Plan Year to the extent the contribution would exceed the
Participants' Maximum Permissible Amounts.
The Employer contributes to this Plan on the condition its contribution is
not due to a mistake of fact and the Revenue Service will not disallow the
deduction for its contribution. The Trustee, upon written request from the
Employer, must return to the Employer the amount of the Employer's contribution
made by the Employer by mistake of fact or the amount of the Employer's
contribution disallowed as a deduction under Code (S)404. The Trustee will not
return any portion of the Employer's contribution under the provisions of this
paragraph more than one year after:
(a) The Employer made the contribution by mistake of fact; or
(b) The disallowance of the contribution as a deduction, and then, only to
the extent of the disallowance.
The Trustee will not increase the amount of the Employer contribution
returnable under this Section 3.01 for any earnings attributable to the
contribution, but the Trustee will decrease the Employer contribution returnable
for any losses attributable to it. The Trustee may require the Employer to
furnish it whatever evidence the Trustee deems necessary to enable the Trustee
to confirm the amount the Employer has requested be returned is properly
returnable under ERISA.
3.02 DETERMINATION OF CONTRIBUTION. The Employer, from its records,
-----------------------------
determines the amount of any contributions to be made by it to the Trust under
the terms of the Plan.
3.03 TIME OF PAYMENT OF CONTRIBUTION. The Employer may pay its
-------------------------------
contribution for each Plan Year in one or more installments without interest.
The Employer must make its contribution to the Plan within the time prescribed
by the Code or applicable Treasury regulations. Subject to the consent of the
Trustee, the Employer may make its contribution in property rather than in cash,
provided the contribution of property is not a prohibited transaction under the
Code or under ERISA.
3.04 CONTRIBUTION ALLOCATION.
-----------------------
(A) METHOD OF ALLOCATION. The Employer must specify in its Adoption Agreement
the manner of allocating each annual Employer contribution to this Trust.
(B) TOP HEAVY MINIMUM ALLOCATION. The Plan must comply with the provisions of
this Section 3.04(B), subject to the elections in the Employer's Adoption
Agreement.
(1) TOP HEAVY MINIMUM ALLOCATION UNDER STANDARDIZED PLAN. Subject to the
Employer's election under Section 3.04(B)(3), the top heavy minimum allocation
requirement applies to a Standardized Plan for each Plan Year, irrespective of
whether the Plan is top heavy.
(a) Each Participant employed by the Employer on the last day of the
Plan Year will
<PAGE>
receive a top heavy minimum allocation for that Plan Year. The
Employer may elect in Section 3.04 of its Adoption Agreement to apply this
paragraph (a) only to a Participant who is a Non-Key Employee.
(b) Subject to any overriding elections in Section 3.18 of the Employer's
Adoption Agreement, the top heavy minimum allocation is the lesser of 3% of
the Participant's Compensation for the Plan Year or the highest
contribution rate for the Plan Year made on behalf of any Participant for
the Plan Year. However, if the Employee participates in Paired Plans, the
top heavy minimum allocation is 3% of his Compensation. If, under Adoption
Agreement Section 3.04, the Employer elects to apply paragraph (a) only to
a Participant who is a Non-Key Employee, the Advisory Committee will
determine the "highest contribution rate" described in the first sentence
of this paragraph (b) by reference only to the contribution rates of
Participants who are Key Employees for the Plan Year.
(2) TOP HEAVY MINIMUM ALLOCATION UNDER NONSTANDARDIZED PLAN. The top heavy
minimum allocation requirement applies to a Nonstandardized Plan only in Plan
Years for which the Plan is top heavy. Except as provided in the Employer's
Adoption Agreement, if the Plan is top heavy in any Plan Year:
(a) Each Non-Key Employee who is a Participant and is employed by the
Employer on the last day of the Plan Year will receive a top heavy
minimum allocation for that Plan Year, irrespective of whether he
satisfies the Hours of Service condition under Section 3.06 of the
Employer's Adoption Agreement; and
(b) The top heavy minimum allocation is the lesser of 3% of the Non-
Key Employee's Compensation for the Plan Year or the highest
contribution rate for the Plan Year made on behalf of any Key
Employee. However, if a defined benefit plan maintained by the
Employer which benefits a Key Employee depends on this Plan to satisfy
the antidiscrimination rules of Code (S)401 (a)(4) or the coverage
rules of Code (S)410 (or another plan benefiting the Key Employee so
depends on such defined benefit plan), the top heavy minimum
allocation is 3% of the Non-Key Employee's Compensation regardless of
the contribution rate for the Key Employees.
(3) SPECIAL ELECTION FOR STANDARDIZED CODE (S)401(K) PLAN. If the
Employer's Plan is a Standardized Code (S)401(k) Plan, the Employer may elect in
Adoption Agreement Section 3.04 to apply the top heavy minimum allocation
requirements of Section 3.04(B)(1) only for Plan Years in which the Plan
actually is a top heavy plan.
(4) SPECIAL DEFINITIONS. For purposes of this Section 3.04(B), the term
"Participant" includes any Employee otherwise eligible to participate in the
Plan but who is not a Participant because of his Compensation level or because
of his failure to make elective deferrals under a Code (S)401(k) arrangement or
because of his failure to make mandatory contributions. For purposes of
subparagraph (1)(b) or (2)(b), "Compensation" means Compensation as defined in
Section 1.12, except Compensation does not include elective contributions,
irrespective of whether the Employer has elected to include these amounts in
Section 1.12 of its Adoption Agreement, any exclusion selected in Section 1.12
of the Adoption Agreement (other than the exclusion of elective contributions)
does not apply, and any modification to the definition of Compensation in
Section 3.06 does not apply.
(5) DETERMINING CONTRIBUTION RATES. For purposes of this Section 3.04(B),
a Participant's
<PAGE>
contribution rate is the sum of all Employer contributions (not including
Employer contributions to Social Security) and forfeitures allocated to the
Participant's Account for the Plan Year divided by his Compensation for the
entire Plan Year. However, for purposes of satisfying a Participant's top heavy
minimum allocation in Plan Years beginning after December 31, 1988, the
Participant's contribution rate does not include any elective contributions
under a Code (S)401(k) arrangement nor any Employer matching contributions
allocated on the basis of those elective contributions or on the basis of
employee contributions, except a Nonstandardized Plan may include in the
contribution rate any matching contributions not necessary to satisfy the
nondiscrimination requirements of Code (S)401(k) or of Code (S)401(m).
If the Employee is a Participant in Paired Plans, the Advisory Committee
will consider the Paired Plans as a single Plan to determine a Participant's
contribution rate and to determine whether the Plans satisfy this top heavy
minimum allocation requirement. To determine a Participant's contribution rate
under a Nonstandardized Plan, the Advisory Committee must treat all qualified
top heavy defined contribution plans maintained by the Employer (or by any
related Employers described in Section 1.30) as a single plan.
(6) NO ALLOCATIONS. If, for a Plan Year, there are no allocations of
Employer contributions or forfeitures for any Participant (for purposes of
Section 3.04 (B)(l)(b)) or for any Key Employee (for purposes of Section
3.04(B)(2)(b)), the Plan does not require any top heavy minimum allocation for
the Plan Year, unless a top heavy minimum allocation applies because of the
maintenance by the Employer of more than one plan.
(7) ELECTION OF METHOD. The Employer must specify in its Adoption
Agreement the manner in which the Plan will satisfy the top heavy minimum
allocation requirement.
(a) If the Employer elects to make any necessary additional contribution
to this Plan, the Advisory Committee first will allocate the Employer
contributions (and Participant forfeitures, if any) for the Plan Year in
accordance with the provisions of Adoption Agreement Section 3.04. The
Employer then will contribute an additional amount for the Account of any
Participant entitled under this Section 3.04(B) to a top heavy minimum
allocation and whose contribution rate for the Plan Year, under this Plan
and any other plan aggregated under paragraph (5), is less than the top
heavy minimum allocation. The additional amount is the amount necessary to
increase the Participant's contribution rate to the top heavy minimum
allocation. The Advisory Committee will allocate the additional
contribution to the Account of the Participant on whose behalf the Employer
makes the contribution.
(b) If the Employer elects to guarantee the top heavy minimum allocation
under another plan, this Plan does not provide the top heavy minimum
allocation and the Advisory Committee will allocate the annual Employer
contributions (and Participant forfeitures) under the Plan solely in
accordance with the allocation method selected under Adoption Agreement
Section 3.04.
3.05 FORFEITURE ALLOCATION. The amount of a Participant's Accrued Benefit
---------------------
forfeited under the Plan is a Participant forfeiture. The Advisory Committee
will allocate Participant forfeitures in the manner specified by the Employer in
its Adoption Agreement. The Advisory Committee will continue to hold the
undistributed, non-vested portion of a terminated Participant's Accrued Benefit
in his Account solely for his benefit until a forfeiture occurs at the time
specified in Section 5.09 or if applicable, until the time specified in Section
9.14. Except as provided under Section 5.04, a Participant will not share in the
allocation of a forfeiture of any portion of his Accrued Benefit.
<PAGE>
3.06 ACCRUAL OF BENEFIT. The Advisory Committee will determine the accrual
------------------
of benefit (Employer contributions and Participant forfeitures) on the basis of
the Plan Year in accordance with the Employer's elections in its Adoption
Agreement.
(A) COMPENSATION TAKEN INTO ACCOUNT. The Employer must specify in its Adoption
Agreement the Compensation the Advisory Committee is to take into account in
allocating an Employer contribution to a Participant's Account for the Plan Year
in which the Employee first becomes a Participant. For all other Plan Years, the
Advisory Committee will take into account only the Compensation determined for
the portion of the Plan Year in which the Employee actually is a Participant.
The Advisory Committee must take into account the Employee's entire Compensation
for the Plan Year to determine whether the Plan satisfies the top heavy minimum
allocation requirement of Section 3.04(B). The Employer, in an addendum to its
Adoption Agreement numbered 3.06(A), may elect to measure Compensation for the
Plan Year for allocation purposes on the basis of a specified period other than
the Plan Year.
(B) HOURS OF SERVICE REQUIREMENT. Subject to the applicable minimum allocation
requirement of Section 3.04, the Advisory Committee will not allocate any
portion of an Employer contribution for a Plan Year to any Participant's Account
if the Participant does not complete the applicable minimum Hours of Service
requirement specified in the Employer's Adoption Agreement.
(C) EMPLOYMENT REQUIREMENT. If the Employer's Plan is a Standardized Plan, a
Participant who, during a particular Plan Year, completes the accrual
requirements of Adoption Agreement Section 3.06 will share in the allocation of
Employer contributions for that Plan Year without regard to whether he is
employed by the Employer on the Accounting Date of that Plan Year. If the
Employer's Plan is a Nonstandardized Plan, the Employer must specify in its
Adoption Agreement whether the Participant will accrue a benefit if he is not
employed by the Employer on the Accounting Date of the Plan Year. If the
Employer's Plan is a money purchase plan or a target benefit plan, whether
Nonstandardized or Standardized, the Plan conditions benefit accrual on
employment with the Employer on the last day of the Plan Year for the Plan Year
in which the Employer terminates the Plan.
(D) OTHER REQUIREMENTS. If the Employer's Adoption Agreement includes options
for other requirements affecting the Participant's accrual of benefits under the
Plan, the Advisory Committee will apply this Section 3.06 in accordance with the
Employer's Adoption Agreement selections.
(E) SUSPENSION OF ACCRUAL REQUIREMENTS UNDER NONSTANDARDIZED PLAN. If the
Employer's Plan is a Nonstandardized Plan, the Employer may elect in its
Adoption Agreement to suspend the accrual requirements elected under Adoption
Agreement Section 3.06 if, for any Plan Year beginning after December 31, 1989,
the Plan fails to satisfy the Participation Test or the Coverage Test. A Plan
satisfies the Participation Test if, on each day of the Plan Year, the number of
Employees who benefit under the Plan is at least equal to the lesser of 50 or
40% of the total number of Includible Employees as of such day. A Plan satisfies
the Coverage Test if, on the last day of each quarter of the Plan Year, the
number of Nonhighly Compensated Employees who benefit under the Plan is at least
equal to 70% of the total number of Includible Nonhighly Compensated Employees
as of such day. "Includible" Employees are all Employees other than: (1) those
Employees excluded from participating in the Plan for the entire Plan Year by
reason of the collective bargaining unit exclusion or the nonresident alien
exclusion under Adoption Agreement Section 1.07 or by reason of the
participation requirements of Sections 2.01 and 2.03; and (2) any Employee who
incurs a Separation from Service during the Plan Year and fails to complete at
least 501 Hours of Service for the Plan Year. A "Nonhighly Compensated Employee"
is an Employee who is not a Highly Compensated Employee and who is not a family
member aggregated with a Highly Compensated Employee pursuant to Section 1.09 of
the Plan.
<PAGE>
For purposes of the Participation Test and the Coverage Test, an Employee
is benefiting under the Plan on a particular date if, under Adoption Agreement
Section 3.04, he is entitled to an allocation for the Plan Year. Under the
Participation Test, when determining whether an Employee is entitled to an
allocation under Adoption Agreement Section 3.04, the Advisory Committee will
disregard any allocation required solely by reason of the top heavy minimum
allocation, unless the top heavy minimum allocation is the only allocation made
under the Plan for the Plan Year.
If this Section 3.06(E) applies for a Plan Year, the Advisory Committee
will suspend the accrual requirements for the Includible Employees who are
Participants, beginning first with the Includible Employee(s) employed with the
Employer on the last day of the Plan Year, then the Includible Employee(s) who
have the latest Separation from Service during the Plan Year, and continuing to
suspend in descending order the accrual requirements for each Includible
Employee who incurred an earlier Separation from Service, from the latest to the
earliest Separation from Service date, until the Plan satisfies both the
Participation Test and the Coverage Test for the Plan Year. If two or more
Includible Employees have a Separation from Service on the same day, the
Advisory Committee will suspend the accrual requirements for all such Includible
Employees, irrespective of whether the Plan can satisfy the Participation Test
and the Coverage Test by accruing benefits for fewer than all such Includible
Employees. If the Plan suspends the accrual requirements for an Includible
Employee, that Employee will share in the allocation of Employer contributions
and Participant forfeitures, if any, without regard to the number of Hours of
Service he has earned for the Plan Year and without regard to whether he is
employed by the Employer on the last day of the Plan Year. If the Employer's
Plan includes Employer matching contributions subject to Code (S)401(m), this
suspension of accrual requirements applies separately to the Code (S)401(m)
portion of the Plan, and the Advisory Committee will treat an Employee as
benefiting under that portion of the Plan if he is an Eligible Employee for
purposes of the Code (S)401(m) nondiscrimination test. The Employer may modify
the operation of this Section 3.06(E) by electing appropriate modifications in
Section 3.06 of its Adoption Agreement.
PART 2. LIMITATIONS ON ALLOCATIONS: SECTIONS 3.07 THROUGH 3.19
- --------------------------------------------------------------
[Note: Sections 3.07 through 3.10 apply only to Participants in this Plan
who do not participate, and who have never participated, in another qualified
plan or in a welfare benefit fund (as defined in Code (S)419(e)) maintained by
the Employer.]
3.07 The amount of Annual Additions which the Advisory Committee may
allocate under this Plan on a Participant's behalf for a Limitation Year may not
exceed the Maximum Permissible Amount. If the amount the Employer otherwise
would contribute to the Participant's Account would cause the Annual Additions
for the Limitation Year to exceed the Maximum Permissible Amount, the Employer
will reduce the amount of its contribution so the Annual Additions for the
Limitation Year will equal the Maximum Permissible Amount. If an allocation of
Employer contributions, pursuant to Section 3.04, would result in an Excess
Amount (other than an Excess Amount resulting from the circumstances described
in Section 3.10) to the Participant's Account, the Advisory Committee will
reallocate the Excess Amount to the remaining Participants who are eligible for
an allocation of Employer contributions for the Plan Year in which the
Limitation Year ends. The Advisory Committee will make this reallocation on the
basis of the allocation method under the Plan as if the Participant whose
Account otherwise would receive the Excess Amount is not eligible for an
allocation of Employer contributions.
3.08 Prior to the determination of the Participant's actual Compensation
for a Limitation Year, the Advisory Committee may determine the Maximum
Permissible Amount on the basis of the Participant's estimated annual
Compensation for such Limitation Year. The Advisory Committee must
<PAGE>
make this determination on a reasonable and uniform basis for all Participants
similarly situated. The Advisory Committee must reduce any Employer
contributions (including any allocation of forfeitures) based on estimated
annual Compensation by any Excess Amounts carried over from prior years.
3.09 As soon as is administratively feasible after the end of the
Limitation Year, the Advisory Committee will determine the Maximum Permissible
Amount for such Limitation Year on the basis of the Participant's actual
Compensation for such Limitation Year.
3.10 If, pursuant to Section 3.09, or because of the allocation of
forfeitures, there is an Excess Amount with respect to a Participant for a
Limitation Year, the Advisory Committee will dispose of such Excess Amount as
follows:
(a) The Advisory Committee will return any nondeductible voluntary
Employee contributions to the Participant to the extent the return would
reduce the Excess Amount.
(b) If, after the application of paragraph (a), an Excess Amount still
exists, and the Plan covers the Participant at the end of the Limitation
Year, then the Advisory Committee will use the Excess Amount(s) to reduce
future Employer contributions (including any allocation of forfeitures)
under the Plan for the next Limitation Year and for each succeeding
Limitation Year, as is necessary, for the Participant. If the Employer's
Plan is a profit sharing plan, the Participant may elect to limit his
Compensation for allocation purposes to the extent necessary to reduce his
allocation for the Limitation Year to the Maximum Permissible Amount and
eliminate the Excess Amount.
(c) If, after the application of paragraph (a), an Excess Amount still
exists, and the Plan does not cover the Participant at the end of the
Limitation Year, then the Advisory Committee will hold the Excess Amount
unallocated in a suspense account. The Advisory Committee will apply the
suspense account to reduce Employer Contributions (including allocation of
forfeitures) for all remaining Participants in the next Limitation Year,
and in each succeeding Limitation Year if necessary. Neither the Employer
nor any Employee may contribute to the Plan for any Limitation Year in
which the Plan is unable to allocate fully a suspense account maintained
pursuant to this paragraph (c).
(d) The Advisory Committee will not distribute any Excess Amount(s) to
Participants or to former Participants.
[Note: Sections 3.11 through 3.16 apply only to Participants who, in
addition to this Plan, participate in one or more plans (including Paired
Plans), all of which are qualified Master or Prototype defined contribution
plans or welfare benefit funds (as defined in Code (S)419(e)) maintained by the
Employer during the Limitation Year.]
3.11 The amount of Annual Additions which the Advisory Committee may
allocate under this Plan on a Participant's behalf for a Limitation Year may not
exceed the Maximum Permissible Amount, reduced by the sum of any Annual
Additions allocated to the Participant's Accounts for the same Limitation Year
under this Plan and such other defined contribution plan. If the amount the
Employer otherwise would contribute to the Participant's Account under this Plan
would cause the Annual Additions for the Limitation Year to exceed this
limitation, the Employer will reduce the amount of its contribution so the
Annual Additions under all such plans for the Limitation Year will equal the
Maximum Permissible Amount. If an allocation of Employer contributions, pursuant
to Section 3.04, would result in an Excess
<PAGE>
Amount (other than an Excess Amount resulting from the circumstances described
in Section 3.10) to the Participant's Account, the Advisory Committee will
reallocate the Excess Amount to the remaining Participants who are eligible for
an allocation of Employer contributions for the Plan Year in which the
Limitation Year ends. The Advisory Committee will make this reallocation on the
basis of the allocation method under the Plan as if the Participant whose
Account otherwise would receive the Excess Amount is not eligible for an
allocation of Employer contributions.
3.12 Prior to the determination of the Participant's actual Compensation
for the Limitation Year, the Advisory Committee may determine the amounts
referred to in 3.11 above on the basis of the Participant's estimated annual
Compensation for such Limitation Year. The Advisory Committee will make this
determination on a reasonable and uniform basis for all Participants similarly
situated. The Advisory Committee must reduce any Employer contribution
(including allocation of forfeitures) based on estimated annual Compensation by
any Excess Amounts carried over from prior years.
3.13 As soon as is administratively feasible after the end of the
Limitation Year, the Advisory Committee will determine the amounts referred to
in 3.11 on the basis of the Participant's actual Compensation for such
Limitation Year.
3.14 If pursuant to Section 3.13, or because of the allocation of
forfeitures, a Participant's Annual Additions under this Plan and all such other
plans result in an Excess Amount, such Excess Amount will consist of the Amounts
last allocated. The Advisory Committee will determine the Amounts last
allocated by treating the Annual Additions attributable to a welfare benefit
fund as allocated first, irrespective of the actual allocation date under the
welfare benefit fund.
3.15 The Employer must specify in its Adoption Agreement the Excess Amount
attributed to this Plan, if the Advisory Committee allocates an Excess Amount to
a Participant on an allocation date of this Plan which coincides with an
allocation date of another plan.
3.16 The Advisory Committee will dispose of any Excess Amounts attributed
to this Plan as provided in Section 3.10.
[Note: Section 3.17 applies only to Participants who, in addition to this
Plan, participate in one or more qualified plans which are qualified defined
contribution plans other than a Master or Prototype plan maintained by the
Employer during the Limitation Year.]
3.17 SPECIAL ALLOCATION LIMITATION. The amount of Annual Additions which
-----------------------------
the Advisory Committee may allocate under this Plan on behalf of any Participant
are limited in accordance with the provisions of Section 3.11 through 3.16, as
though the other plan were a Master or Prototype plan, unless the Employer
provides other limitations in an addendum to the Adoption Agreement, numbered
Section 3.17.
3.18 DEFINED BENEFIT PLAN LIMITATION. If the Employer maintains a defined
-------------------------------
benefit plan, or has ever maintained a defined benefit plan which the Employer
has terminated, then the sum of the defined benefit plan fraction and the
defined contribution plan fraction for any Participant for any Limitation Year
must not exceed 1.0. The Employer must provide in Adoption Agreement Section
3.18 the manner in which the Plan will satisfy this limitation. The Employer
also must provide in its Adoption Agreement Section 3.18 the manner in which the
Plan will satisfy the top heavy requirements of Code (S)416 after taking into
account the existence (or prior maintenance) of the defined benefit plan.
<PAGE>
3.19 DEFINITIONS - ARTICLE III. For purposes of Article III, the following
-------------------------
terms mean:
(a) "Annual Addition" - The sum of the following amounts allocated on
behalf of a Participant for a Limitation Year, of (i) all Employer
contributions; (ii) all forfeitures; and (iii) all Employee contributions.
Except to the extent provided in Treasury regulations, Annual Additions
include excess contributions described in Code (S)401(k), excess aggregate
contributions described in Code (S)401(m) and excess deferrals described in
Code (S)402(g), irrespective of whether the plan distributes or forfeits
such excess amounts. Annual Additions also include Excess Amounts reapplied
to reduce Employer contributions under Section 3.10. Amounts allocated
after March 31, 1984, to an individual medical account (as defined in Code
(S)415(1)(2)) included as part of a defined benefit plan maintained by the
Employer are Annual Additions. Furthermore, Annual Additions include
contributions paid or accrued after December 31, 1985, for taxable years
ending after December 31, 1985, attributable to post-retirement medical
benefits allocated to the separate account of a key employee (as defined in
Code (S)419A(d)(3)) under a welfare benefit fund (as defined in Code
(S)419(e)) maintained by the Employer.
(b) "Compensation" - For purposes of applying the limitations of Part 2 of
this Article III, "Compensation" means Compensation as defined in Section
1.12, except Compensation does not include elective contributions,
irrespective of whether the Employer has elected to include these amounts
as Compensation under Section 1.12 of its Adoption Agreement, and any
exclusion selected in Section 1.12 of the Adoption Agreement (other than
the exclusion of elective contributions) does not apply.
(c) "Employer" - The Employer that adopts this Plan and any related
employers described in Section 1.30. Solely for purposes of applying the
limitations of Part 2 of this Article III, the Advisory Committee will
determine related employers described in Section 1.30 by modifying Code
(S)(S)414(b) and (c) in accordance with Code (S)415(h).
(d) "Excess Amount" - The excess of the Participant's Annual Additions for
the Limitation Year over the Maximum Permissible Amount.
(e) "Limitation Year" - The period selected by the Employer under Adoption
Agreement Section 1.17. All qualified plans of the Employer must use the
same Limitation Year. If the Employer amends the Limitation Year to a
different 12 consecutive month period, the new Limitation Year must begin
on a date within the Limitation Year for which the Employer makes the
amendment, creating a short Limitation Year.
(f) "Master or Prototype Plan" - A plan the form of which is the subject
of a favorable notification letter or a favorable opinion letter from the
Internal Revenue Service.
(g) "Maximum Permissible Amount" - The lesser of (i) $30,000 (or, if
greater, one-fourth of the defined benefit dollar limitation under Code
(S)415(b)(1)(A)), or (ii) 25% of the Participant's Compensation for the
Limitation Year. If there is a short Limitation Year because of a change
in Limitation Year, the Advisory Committee will multiply the $30,000 (or
adjusted) limitation by the following fraction:
Number of months in the short Limitation Year
---------------------------------------------
12
(h) "Defined contribution plan" - A retirement plan which provides for an
individual account
<PAGE>
for each participant and for benefits based solely on the amount
contributed to the participant's account, and any income, expenses, gains
and losses, and any forfeitures of accounts of other participants which the
plan may allocate to such participant's account. The Advisory Committee
must treat all defined contribution plans (whether or not terminated)
maintained by the Employer as a single plan. Solely for purposes of the
limitations of Part 2 of this Article III, the Advisory Committee will
treat employee contributions made to a defined benefit plan maintained by
the Employer as a separate defined contribution plan. The Advisory
Committee also will treat as a defined contribution plan an individual
medical account (as defined in Code (S)415(1)(2)) included as part of a
defined benefit plan maintained by the Employer and, for taxable years
ending after December 31, 1985, a welfare benefit fund under Code (S)419(e)
maintained by the Employer to the extent there are post-retirement medical
benefits allocated to the separate account of a key employee (as defined in
Code (S)419A(d)(3)).
(i) "Defined benefit plan" - A retirement plan which does not provide for
individual accounts for Employer contributions. The Advisory Committee
must treat all defined benefit plans (whether or not terminated) maintained
by the Employer as a single plan.
[Note. The definitions in paragraphs (j), (k) and (1) apply only if the
limitation described in Section 3.18 applies to the Employer's Plan.]
(j) "Defined benefit plan fraction" -
Projected annual benefit of the Participant under the defined benefit plan(s)
-----------------------------------------------------------------------------
The lesser of (i) 125% (subject to the "100% limitation" in paragraph (1)) of
the
dollar limitation in effect under Code (S) 415(b)(1)(A) for the Limitation Year,
or (ii) 140% of the Participant's average Compensation for his
high three (3) consecutive Years of Service
To determine the denominator of this fraction, the Advisory Committee
will make any adjustment required under Code (S)415(b) and will determine a
Year of Service, unless otherwise provided in an addendum to Adoption
Agreement Section 3.18, as a Plan Year in which the Employee completed at
least 1,000 Hours of Service. The "projected annual benefit" is the annual
retirement benefit (adjusted to an actuarially equivalent straight life
annuity if the plan expresses such benefit in a form other than a straight
life annuity or qualified joint and survivor annuity) of the Participant
under the terms of the defined benefit plan on the assumptions he continues
employment until his normal retirement age (or current age, if later) as
stated in the defined benefit plan, his compensation continues at the same
rate as in effect in the Limitation Year under consideration until the date
of his normal retirement age and all other relevant factors used to
determine benefits under the defined benefit plan remain constant as of the
current Limitation Year for all future Limitation Years.
CURRENT ACCRUED BENEFIT. If the Participant accrued benefits in one
or more defined benefit plans maintained by the Employer which were in
existence on May 6, 1986, the dollar limitation used in the denominator of
this fraction will not be less than the Participant's Current Accrued
Benefit. A Participant's Current Accrued Benefit is the sum of the annual
benefits under such defined benefit plans which the Participant had accrued
as of the end of the 1986 Limitation Year (the last Limitation Year
beginning before January 1, 1987), determined without regard to any change
in the terms or conditions of the Plan made after May 5, 1986, and without
regard to any cost of living adjustment occurring after May 5, 1986. This
Current Accrued Benefit rule
<PAGE>
applies only if the defined benefit plans individually and in the aggregate
satisfied the requirements of Code (S)415 as in effect at the end of the
1986 Limitation Year.
(k) "Defined contribution plan fraction" -
The sum, as of the close of the Limitation Year, of the Annual
Additions to the Participant's Account under the defined
contribution plan(s)
---------------------------------------------------------------------
The sum of the lesser of the following amounts determined
for the Limitation Year and for each prior Year of Service with the Employer:
(i) 125%
(subject to the "100% limitation" in paragraph (1)) of the dollar limitation in
effect under Code
(S)415(c)(1)(A) for the Limitation Year (determined without regard to
the special dollar limitations for employee stock ownership plans), or
(ii) 35% of the Participant's Compensation for the Limitation Year
For purposes of determining the defined contribution plan fraction,
the Advisory Committee will not recompute Annual Additions in Limitation
Years beginning prior to January 1, 1987, to treat all Employee
contributions as Annual Additions. If the Plan satisfied Code (S)415 for
Limitation Years beginning prior to January 1, 1987, the Advisory Committee
will redetermine the defined contribution plan fraction and the defined
benefit plan fraction as of the end of the 1986 Limitation Year, in
accordance with this Section 3.19. If the sum of the redetermined
fractions exceeds 1.0, the Advisory Committee will subtract permanently
from the numerator of the defined contribution plan fraction an amount
equal to the product of (1) the excess of the sum of the fractions over
1.0, times (2) the denominator of the defined contribution plan fraction.
In making the adjustment, the Advisory Committee must disregard any accrued
benefit under the defined benefit plan which is in excess of the Current
Accrued Benefit. This Plan continues any transitional rules applicable to
the determination of the defined contribution plan fraction under the
Employer's Plan as of the end of the 1986 Limitation Year.
(l) "100% limitation." If the 100% limitation applies, the Advisory
Committee must determine the denominator of the defined benefit plan
fraction and the denominator of the defined contribution plan fraction by
substituting 100% for 125%. If the Employer's Plan is a Standardized Plan,
the 100% limitation applies in all Limitation Years, subject to any
override provisions under Section 3.18 of the Employer's Adoption
Agreement. If the Employer overrides the 100% limitation under a
Standardized Plan, the Employer must specify in its Adoption Agreement the
manner in which the Plan satisfies the extra minimum benefit requirement of
Code (S)416(h) and the 100% limitation must continue to apply if the Plan's
top heavy ratio exceeds 90%. If the Employer's Plan is a Nonstandardized
Plan, the 100% limitation applies only if: (i) the Plan's top heavy ratio
exceeds 90%; or (ii) the Plan's top heavy ratio is greater than 60%, and
the Employer does not elect in its Adoption Agreement Section 3.18 to
provide extra minimum benefits which satisfy Code (S)416(h)(2).
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. This Plan does not permit
---------------------------------------
Participant nondeductible contributions unless the Employer maintains its Plan
under a Code (S)401(k) Adoption Agreement. If the Employer does not maintain
its Plan under a Code (S)401(k) Adoption Agreement and, prior to the adoption of
this Prototype Plan, the Plan accepted Participant nondeductible contributions
for a Plan Year beginning after December 31, 1986, those contributions must
satisfy the requirements of Code (S)401(m). This Section 4.01 does not prohibit
the Plan's acceptance of Participant nondeductible contributions prior to the
first Plan Year commencing after the Plan Year in which the Employer adopts this
Prototype Plan.
4.02 PARTICIPANT DEDUCTIBLE CONTRIBUTIONS. A qualified Plan may not accept
------------------------------------
Participant deductible contributions after April 15, 1987. If the Employer's
Plan includes Participant deductible contributions ("DECs") made prior to April
16, 1987, the Advisory Committee must maintain a separate accounting for the
Participant's Accrued Benefit attributable to DECs, including DECs which are
part of a rollover contribution described in Section 4.03. The Advisory
Committee will treat the accumulated DECs as part of the Participant's Accrued
Benefit for all purposes of the Plan, except for purposes of determining the top
heavy ratio under Section 1.33. The Advisory Committee may not use DECs to
purchase life insurance on the Participant's behalf.
4.03 PARTICIPANT ROLLOVER CONTRIBUTIONS. Any Participant, with the
----------------------------------
Employer's written consent and after filing with the Trustee the form prescribed
by the Advisory Committee, may contribute cash or other property to the Trust
other than as a voluntary contribution if the contribution is a "rollover
contribution" which the Code permits an employee to transfer either directly or
indirectly from one qualified plan to another qualified plan. Before accepting
a rollover contribution, the Trustee may require an Employee to furnish
satisfactory evidence that the proposed transfer is in fact a "rollover
contribution" which the Code permits an employee to make to a qualified plan. A
rollover contribution is not an Annual Addition under Part 2 of Article III.
The Trustee will invest the rollover contribution in a segregated
investment Account for the Participant's sole benefit unless the Trustee (or the
Named Fiduciary, in the case of a nondiscretionary Trustee designation), in its
sole discretion, agrees to invest the rollover contribution as part of the Trust
Fund. The Trustee will not have any investment responsibility with respect to a
Participant's segregated rollover Account. The Participant, however, from time
to time, may direct the Trustee in writing as to the investment of his
segregated rollover Account in property, or property interests, of any kind,
real, personal or mixed; provided however, the Participant may not direct the
Trustee to make loans to his Employer. A Participant's segregated rollover
Account alone will bear any extraordinary expenses resulting from investments
made at the direction of the Participant. As of the Accounting Date (or other
valuation date) for each Plan Year, the Advisory Committee will allocate and
credit the net income (or net loss) from a Participant's segregated rollover
Account and the increase or decrease in the fair market value of the assets of a
segregated rollover Account solely to that Account. The Trustee is not liable
nor responsible for any loss resulting to any Beneficiary, nor to any
Participant, by reason of any sale or investment made or other action taken
pursuant to and in accordance with the direction of the Participant. In all
other respects, the Trustee will hold, administer and distribute a rollover
contribution in the same manner as any Employer contribution made to the Trust.
An eligible Employee, prior to satisfying the Plan's eligibility
conditions, may make a rollover contribution to the Trust to the same extent and
in the same manner as a Participant. If an Employee
<PAGE>
makes a rollover contribution to the Trust prior to satisfying the Plan's
eligibility conditions, the Advisory Committee and Trustee must treat the
Employee as a Participant for all purposes of the Plan except the Employee is
not a Participant for purposes of sharing in Employer contributions or
Participant forfeitures under the Plan until he actually becomes a Participant
in the Plan. If the Employee has a Separation from Service prior to becoming a
Participant, the Trustee will distribute his rollover contribution Account to
him as if it were an Employer contribution Account.
4.04 PARTICIPANT CONTRIBUTION - FORFEITABILITY. A Participant's Accrued
-----------------------------------------
Benefit is, at all times, 100% Nonforfeitable to the extent the value of his
Accrued Benefit is derived from his Participant contributions described in this
Article IV.
4.05 PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION. A Participant, by
--------------------------------------------------
giving prior written notice to the Trustee, may withdraw all or any part of the
value of his Accrued Benefit derived from his Participant contributions
described in this Article IV. A distribution of Participant contributions must
comply with the joint and survivor requirements described in Article VI, if
those requirements apply to the Participant. A Participant may not exercise his
right to withdraw the value of his Accrued Benefit derived from his Participant
contributions more than once during any Plan Year. The Trustee, in accordance
with the direction of the Advisory Committee, will distribute a Participant's
unwithdrawn Accrued Benefit attributable to his Participant contributions in
accordance with the provisions of Article VI applicable to the distribution of
the Participant's Nonforfeitable Accrued Benefit.
4.06 PARTICIPANT CONTRIBUTION - ACCRUED BENEFIT. The Advisory Committee
------------------------------------------
must maintain a separate Account(s) in the name of each Participant to reflect
the Participant's Accrued Benefit under the Plan derived from his Participant
contributions. A Participant's Accrued Benefit derived from his Participant
contributions as of any applicable date is the balance of his separate
Participant contribution Account(s).
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT AGE. The Employer must define Normal Retirement Age
---------------------
in its Adoption Agreement. A Participant's Accrued Benefit derived from
Employer contributions is 100% Nonforfeitable upon and after his attaining
Normal Retirement Age (if employed by the Employer on or after that date).
5.02 PARTICIPANT DISABILITY OR DEATH. The Employer may elect in its
-------------------------------
Adoption Agreement to provide a Participant's Accrued Benefit derived from
Employer contributions will be 100% Nonforfeitable if the Participant's
Separation from Service is a result of his death or his disability.
5.03 VESTING SCHEDULE. Except as provided in Sections 5.01 and 5.02, for
----------------
each Year of Service, a Participant's Nonforfeitable percentage of his Accrued
Benefit derived from Employer contributions equals the percentage in the vesting
schedule completed by the Employer in its Adoption Agreement.
(A) ELECTION OF SPECIAL VESTING FORMULA. If the Trustee makes a distribution
(other than a cash-out distribution described in Section 5.04) to a partially-
vested Participant, and the Participant has not incurred a Forfeiture Break in
Service at the relevant time, the Advisory Committee will establish a separate
Account for the Participant's Accrued Benefit. At any relevant time following
the distribution, the Advisory Committee will determine the Participant's
Nonforfeitable Accrued Benefit derived from Employer contributions in accordance
with the following formula: P(AB + (R x D)) - (R x D).
To apply this formula, "P" is the Participant's current vesting percentage
at the relevant time, "AB" is the Participant's Employer-derived Accrued Benefit
at the relevant time, "R" is the ratio of "AB" to the Participant's Employer-
derived Accrued Benefit immediately following the earlier distribution and "D"
is the amount of the earlier distribution. If, under a restated Plan, the Plan
has made distribution to a partially-vested Participant prior to its restated
Effective Date and is unable to apply the cash-out provisions of Section 5.04 to
that prior distribution, this special vesting formula also applies to that
Participant's remaining Account. The Employer, in an addendum to its Adoption
Agreement, numbered Section 5.03, may elect to modify this formula to read as
follows: P(AB + D) - D.
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/RESTORATION OF
----------------------------------------------------------------------
FORFEITED ACCRUED BENEFIT. If, pursuant to Article VI, a partially vested
- -------------------------
Participant receives a cash-out distribution before he incurs a Forfeiture Break
in Service (as defined in Section 5.08), the cash-out distribution will result
in an immediate forfeiture of the nonvested portion of the Participant's Accrued
Benefit derived from Employer contributions. See Section 5.09. A partially-
vested Participant is a Participant whose Nonforfeitable Percentage determined
under Section 5.03 is less than 100%. A cash-out distribution is a distribution
of the entire present value of the Participant's Nonforfeitable Accrued Benefit.
(A) RESTORATION AND CONDITIONS UPON RESTORATION. A partially-vested Participant
who is re-employed by the Employer after receiving a cash-out distribution of
the Nonforfeitable percentage of his Accrued Benefit may repay the Trustee the
amount of the cash-out distribution attributable to Employer contributions,
unless the Participant no longer has a right to restoration by reason of the
conditions of this Section 5.04(A). If a partially-vested Participant makes the
cash-out distribution repayment, the Advisory Committee, subject to the
conditions of this Section 5.04(A), must restore his Accrued Benefit
attributable to Employer contributions to the same dollar amount as the dollar
amount of his Accrued Benefit on the Accounting Date, or other valuation date,
immediately preceding the date of the cash-out distribution,
<PAGE>
unadjusted for any gains or losses occurring subsequent to that Accounting Date,
or other valuation date. Restoration of the Participant's Accrued Benefit
includes restoration of all Code (S)41 l(d)(6) protected benefits with respect
to that restored Accrued Benefit, in accordance with applicable Treasury
regulations. The Advisory Committee will not restore a re-employed Participant's
Accrued Benefit under this paragraph if:
(1) 5 years have elapsed since the Participant's first re-employment date
with the Employer following the cash-out distribution; or
(2) The Participant incurred a Forfeiture Break in Service (as defined in
Section 5.08). This condition also applies if the Participant makes
repayment within the Plan Year in which he incurs the Forfeiture Break in
Service and that Forfeiture Break in Service would result in a complete
forfeiture of the amount the Advisory Committee otherwise would restore.
(B) TIME AND METHOD OF RESTORATION. If neither of the two conditions
preventing restoration of the Participant's Accrued Benefit applies, the
Advisory Committee will restore the Participant's Accrued Benefit as of the Plan
Year Accounting Date coincident with or immediately following the repayment. To
restore the Participant's Accrued Benefit, the Advisory Committee, to the extent
necessary, will allocate to the Participant's Account:
(1) First, the amount, if any, of Participant forfeitures the Advisory
Committee would otherwise allocate under Section 3.05;
(2) Second, the amount, if any, of the Trust Fund net income or gain for
the Plan Year; and
(3) Third, the Employer contribution for the Plan Year to the extent made
under a discretionary formula.
In an addendum to its Adoption Agreement numbered 5.04(B), the Employer may
eliminate as a means of restoration any of the amounts described in clauses (1),
(2) and (3) or may change the order of priority of these amounts. To the extent
the amounts described in clauses (1), (2) and (3) are insufficient to enable the
Advisory Committee to make the required restoration, the Employer must
contribute, without regard to any requirement or condition of Section 3.01, the
additional amount necessary to enable the Advisory Committee to make the
required restoration. If, for a particular Plan Year, the Advisory Committee
must restore the Accrued Benefit of more than one re-employed Participant, then
the Advisory Committee will make the restoration allocations to each such
Participant's Account in the same proportion that a Participant's restored
amount for the Plan Year bears to the restored amount for the Plan Year of all
re-employed Participants. The Advisory Committee will not take into account any
allocation under this Section 5.04 in applying the limitation on allocations
under Part 2 of Article III.
(C) 0% VESTED PARTICIPANT. The Employer must specify in its Adoption Agreement
whether the deemed cash-out rule applies to a 0% vested Participant. A 0%
vested Participant is a Participant whose Accrued Benefit derived from Employer
contributions is entirely forfeitable at the time of his Separation from
Service. If the Participant's Account is not entitled to an allocation of
Employer contributions for the Plan Year in which he has a Separation from
Service, the Advisory Committee will apply the deemed cash-out rule as if the 0%
vested Participant received a cash-out distribution on the date of the
Participant's Separation from Service. If the Participant's Account is entitled
to an allocation of Employer contributions or Participant forfeitures for the
Plan Year in which he has a Separation from Service, the Advisory Committee will
apply the deemed cash-out rule as if the 0% vested Participant received a cash-
out distribution on the first day of the first Plan Year beginning after his
Separation from Service. For
<PAGE>
purposes of applying the restoration provisions of this Section 5.04, the
Advisory Committee will treat the 0% vested Participant as repaying his cash-out
"distribution" on the first date of his re-employment with the Employer. If the
deemed cash-out rule does not apply to the Employer's Plan, a 0% vested
Participant will not incur a forfeiture until he incurs a Forfeiture Break in
Service.
5.05 SEGREGATED ACCOUNT FOR REPAID AMOUNT. Until the Advisory Committee
------------------------------------
restores the Participant's Accrued Benefit, as described in Section 5.04, the
Trustee will invest the cash-out amount the Participant has repaid in a
segregated Account maintained solely for that Participant. The Trustee must
invest the amount in the Participant's segregated Account in Federally insured
interest bearing savings account(s) or time deposit(s) (or a combination of
both), or in other fixed income investments. Until commingled with the balance
of the Trust Fund on the date the Advisory Committee restores the Participant's
Accrued Benefit, the Participant's segregated Account remains a part of the
Trust, but it alone shares in any income it earns and it alone bears any expense
or loss it incurs. Unless the repayment qualifies as a rollover contribution,
the Advisory Committee will direct the Trustee to repay to the Participant as
soon as is administratively practicable the full amount of the Participant's
segregated Account if the Advisory Committee determines either of the conditions
of Section 5.04(A) prevents restoration as of the applicable Accounting Date,
notwithstanding the Participant's repayment.
5.06 YEAR OF SERVICE - VESTING. For purposes of vesting under Section
-------------------------
5.03, Year of Service means any 12-consecutive month period designated in the
Employer's Adoption Agreement during which an Employee completes not less than
the number of Hours of Service (not exceeding 1,000) specified in the Employer's
Adoption Agreement. A Year of Service includes any Year of Service earned prior
to the Effective Date of the Plan, except as provided in Section 5.08.
5.07 BREAK IN SERVICE - VESTING. For purposes of this Article V, a
--------------------------
Participant incurs a "Break in Service" if during any vesting computation period
he does not complete more than 500 Hours of Service. If, pursuant to Section
5.06, the Plan does not require more than 500 Hours of Service to receive credit
for a Year of Service, a Participant incurs a Break in Service in a vesting
computation period in which he fails to complete a Year of Service.
5.08 INCLUDED YEARS OF SERVICE - VESTING. For purposes of determining
-----------------------------------
"Years of Service" under Section 5.06, the Plan takes into account all Years of
Service an Employee completes with the Employer except:
(a) For the sole purpose of determining a Participant's Nonforfeitable
percentage of his Accrued Benefit derived from Employer contributions which
accrued for his benefit prior to a Forfeiture Break in Service, the Plan
disregards any Year of Service after the Participant first incurs a
Forfeiture Break in Service. The Participant incurs a Forfeiture Break in
Service when he incurs 5 consecutive Breaks in Service.
(b) The Plan disregards any Year of Service excluded under the Employer's
Adoption Agreement.
The Plan does not apply the Break in Service rule under Code
(S)411(a)(6)(B). Therefore, an Employee need not complete a Year of Service
after a Break in Service before the Plan takes into account the Employee's
otherwise includible Years of Service under this Article V.
5.09 FORFEITURE OCCURS. A Participant's forfeiture, if any, of his Accrued
-----------------
Benefit derived from Employer contributions occurs under the Plan on the earlier
of:
<PAGE>
(a) The last day of the vesting computation period in which the
Participant first incurs a Forfeiture Break in Service; or
(b) The date the Participant receives a cash-out distribution.
The Advisory Committee determines the percentage of a Participant's Accrued
Benefit forfeiture, if any, under this Section 5.09 solely by reference to the
vesting schedule of Section 5.03. A Participant does not forfeit any portion of
his Accrued Benefit for any other reason or cause except as expressly provided
by this Section 5.09 or as provided under Section 9.14.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE VI
TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT. Unless, pursuant to Section 6.03,
----------------------------------
the Participant or the Beneficiary elects in writing to a different time or
method of payment, the Advisory Committee will direct the Trustee to commence
distribution of a Participant's Nonforfeitable Accrued Benefit in accordance
with this Section 6.01. A Participant must consent, in writing, to any
distribution required under this Section 6.01 if the present value of the
Participant's Nonforfeitable Accrued Benefit, at the time of the distribution to
the Participant, exceeds $3,500 and the Participant has not attained the later
of Normal Retirement Age or age 62. Furthermore, the Participant's spouse also
must consent, in writing, to any distribution, for which Section 6.04 requires
the spouse's consent. For all purposes of this Article VI, the term "annuity
starting date" means the first day of the first period for which the Plan pays
an amount as an annuity or in any other form. A distribution date under this
Article VI, unless otherwise specified within the Plan, is the date or dates the
Employer specifies in the Adoption Agreement, or as soon as administratively
practicable following that distribution date. For purposes of the consent
requirements under this Article VI, if the present value of the Participant's
Nonforfeitable Accrued Benefit, at the time of any distribution, exceeds $3,500,
the Advisory Committee must treat that present value as exceeding $3,500 for
purposes of all subsequent Plan distributions to the Participant.
(A) SEPARATION FROM SERVICE FOR A REASON OTHER THAN DEATH.
(1) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT NOT EXCEEDING $3,500. If
the Participant's Separation from Service is for any reason other than death,
the Advisory Committee will direct the Trustee to distribute the Participant's
Nonforfeitable Accrued Benefit in a lump sum, on the distribution date the
Employer specifies in the Adoption Agreement, but in no event later than the
60th day following the close of the Plan Year in which the Participant attains
Normal Retirement Age. If the Participant has attained Normal Retirement Age at
the time of his Separation from Service, the distribution under this paragraph
will occur no later than the 60th day following the close of the Plan Year in
which the Participant's Separation from Service occurs.
(2) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEEDS $3,500. If the
Participant's Separation from Service is for any reason other than death, the
Advisory Committee will direct the Trustee to commence distribution of the
Participant's Nonforfeitable Accrued Benefit in a form and at the time elected
by the Participant, pursuant to Section 6.03. In the absence of an election by
the Participant, the Advisory Committee will direct the Trustee to distribute
the Participant's Nonforfeitable Accrued Benefit in a lump sum (or, if
applicable, the normal annuity form of distribution required under Section
6.04), on the 60th day following the close of the Plan Year in which the latest
of the following events occurs: (a) the Participant attains Normal Retirement
Age; (b) the Participant attains age 62; or (c) the Participant's Separation
from Service.
(3) DISABILITY. If the Participant's Separation from Service is because
of his disability, the Advisory Committee will direct the Trustee to pay the
Participant's Nonforfeitable Accrued Benefit in lump sum, on the distribution
date the Employer specifies in the Adoption Agreement, subject to the notice and
consent requirements of this Article VI and subject to the applicable mandatory
commencement dates described in Paragraphs (1) and (2).
(4) HARDSHIP. Prior to the time at which the Participant may receive
distribution under Paragraphs (1), (2) or (3), the Participant may request a
distribution from his Nonforfeitable Accrued Benefit in an amount necessary to
satisfy a hardship, if the Employer elects in the Adoption Agreement to permit
hardship distributions. Unless the Employer elects otherwise in the Adoption
Agreement, a
<PAGE>
hardship distribution must be on account of any of the following: (a) medical
expenses; (b) the purchase (excluding mortgage payments) of the Participant's
principal residence; (c) post-secondary education tuition, for the next semester
or quarter, for the Participant or for the Participant's spouse, children or
dependents; (d) to prevent the eviction of the Participant from his principal
residence or the foreclosure on the mortgage of the Participant's principal
residence; (e) funeral expenses of the Participant's family member; or (f) the
Participant's disability. A partially-vested Participant may not receive a
hardship distribution described in this Paragraph (A)(4) prior to incurring a
Forfeiture Break in Service, unless the hardship distribution is a cash-out
distribution (as defined in Article V). The Advisory Committee will direct the
Trustee to make the hardship distribution as soon as administratively
practicable after the Participant makes a valid request for the hardship
distribution.
(B) REQUIRED BEGINNING DATE. If any distribution commencement date described
under Paragraph (A) of this Section 6.01, either by Plan provision or by
Participant election (or nonelection), is later than the Participant's Required
Beginning Date, the Advisory Committee instead must direct the Trustee to make
distribution on the Participant's Required Beginning Date, subject to the
transitional election, if applicable, under Section 6.03(D). A Participant's
Required Beginning Date is the April 1 following the close of the calendar year
in which the Participant attains age 70 1/2. However, if the Participant, prior
to incurring a Separation from Service, attained age 70 1/2 by January 1, 1988,
and, for the five Plan Year period ending in the calendar year in which he
attained age 70 1/2 and for all subsequent years, the Participant was not a more
than 5% owner, the Required Beginning Date is the April 1 following the close of
the calendar year in which the Participant separates from Service or, if
earlier, the April 1 following the close of the calendar year in which the
Participant becomes a more than 5% owner. Furthermore, if a Participant who was
not a more than 5% owner attained age 70 1/2 during 1988 and did not incur a
Separation from Service prior to January 1, 1989, his Required Beginning Date is
April 1, 1990. A mandatory distribution at the Participant's Required Beginning
Date will be in lump sum (or, if applicable, the normal annuity form of
distribution required under Section 6.04) unless the Participant, pursuant to
the provisions of this Article VI, makes a valid election to receive an
alternative form of payment.
(C) DEATH OF THE PARTICIPANT. The Advisory Committee will direct the Trustee,
in accordance with this Section 6.01(C), to distribute to the Participant's
Beneficiary the Participant's Nonforfeitable Accrued Benefit remaining in the
Trust at the time of the Participant's death. Subject to the requirements of
Section 6.04, the Advisory Committee will determine the death benefit by
reducing the Participant's Nonforfeitable Accrued Benefit by any security
interest the Plan has against that Nonforfeitable Accrued Benefit by reason of
an outstanding Participant loan.
(1) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT DOES NOT
EXCEED $3,500. The Advisory Committee, subject to the requirements of Section
6.04, must direct the Trustee to distribute the deceased Participant's
Nonforfeitable Accrued Benefit in a single sum, as soon as administratively
practicable following the Participant's death or, if later, the date on which
the Advisory Committee receives notification of or otherwise confirms the
Participant's death.
(2) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEEDS
$3,500. The Advisory Committee will direct the Trustee to distribute the
deceased Participant's Nonforfeitable Accrued Benefit at the time and in the
form elected by the Participant or, if applicable by the Beneficiary, as
permitted under this Article VI. In the absence of an election, subject to the
requirements of Section 6.04, the Advisory Committee will direct the Trustee to
distribute the Participant's undistributed Nonforfeitable Accrued Benefit in a
lump sum on the first distribution date following the close of the Plan Year in
which the Participant's death occurs or, if later, the first distribution date
following the date the Advisory Committee receives notification of or otherwise
confirms the Participant's death.
<PAGE>
If the death benefit is payable in full to the Participant's surviving
spouse, the surviving spouse, in addition to the distribution options provided
in this Section 6.01(C), may elect distribution at any time or in any form
(other than a joint and survivor annuity) this Article VI would permit for a
Participant.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. Subject to the annuity
------------------------------------
distribution requirements, if any, prescribed by Section 6.04, and any
restrictions prescribed by Section 6.03, a Participant or Beneficiary may elect
distribution under one, or any combination, of the following methods: (a) by
payment in a lump sum; or (b) by payment in monthly, quarterly or annual
installments over a fixed reasonable period of time, not exceeding the life
expectancy of the Participant, or the joint life and last survivor expectancy of
the Participant and his Beneficiary. The Employer may elect in its Adoption
Agreement to modify the methods of payment available under this Section 6.02.
The distribution options permitted under this Section 6.02 are available
only if the present value of the Participant Nonforfeitable Accrued Benefit, at
the time of the distribution to the Participant, exceeds $3,500. To facilitate
installment payments under this Article VI, the Advisory Committee may direct
the Trustee to segregate all or any part of the Participant's Accrued Benefit in
a separate Account. The Trustee will invest the Participant's segregated
Account in Federally insured interest bearing savings account(s) or time
deposit(s) (or a combination of both), or in other fixed income investments. A
segregated Account remains a part of the Trust, but it alone shares in any
income it earns, and it alone bears any expense or loss it incurs. A
Participant or Beneficiary may elect to receive an installment distribution in
the form of a Nontransferable Annuity Contract. Under an installment
distribution, the Participant or Beneficiary, at any time, may elect to
accelerate the payment of all, or any portion, of the Participant's unpaid
Nonforfeitable Accrued Benefit, subject to the requirements of Section 6.04.
(A) MINIMUM DISTRIBUTION REQUIREMENTS FOR PARTICIPANTS. The Advisory Committee
may not direct the Trustee to distribute the Participant's Nonforfeitable
Accrued Benefit, nor may the Participant elect to have the Trustee distribute
his Nonforfeitable Accrued Benefit, under a method of payment which, as of the
Required Beginning Date, does not satisfy the minimum distribution requirements
under Code (S)401(a)(9) and the applicable Treasury regulations. The minimum
distribution for a calendar year equals the Participant's Nonforfeitable Accrued
Benefit as of the latest valuation date preceding the beginning of the calendar
year divided by the Participant's life expectancy or, if applicable, the joint
and last survivor expectancy of the Participant and his designated Beneficiary
(as determined under Article VIII, subject to the requirements of the Code
(S)401(a)(9) regulations). The Advisory Committee will increase the
Participant's Nonforfeitable Accrued Benefit, as determined on the relevant
valuation date, for contributions or forfeitures allocated after the valuation
date and by December 31 of the valuation calendar year, and will decrease the
valuation by distributions made after the valuation date and by December 31 of
the valuation calendar year. For purposes of this valuation, the Advisory
Committee will treat any portion of the minimum distribution for the first
distribution calendar year made after the close of that year as a distribution
occurring in that first distribution calendar year. In computing a minimum
distribution, the Advisory Committee must use the unisex life expectancy
multiples under Treas. Reg. (S)1.72-9. The Advisory Committee, only upon the
Participant's written request, will compute the minimum distribution for a
calendar year subsequent to the first calendar year for which the Plan requires
a minimum distribution by redetermining the applicable life expectancy. However,
the Advisory Committee may not redetermine the joint life and last survivor
expectancy of the Participant and a nonspouse designated Beneficiary in a manner
which takes into account any adjustment to a life expectancy other than the
Participant's life expectancy.
If the Participant's spouse is not his designated Beneficiary, a method of
payment to the Participant (whether by Participant election or by Advisory
Committee direction) may not provide more than incidental benefits to the
Beneficiary. For Plan Years beginning after December 31, 1988, the Plan
<PAGE>
must satisfy the minimum distribution incidental benefit ("MDIB") requirement in
the Treasury regulations issued under Code (S)401(a)(9) for distributions made
on or after the Participant's Required Beginning Date and before the
Participant's death. To satisfy the MDIB requirement, the Advisory Committee
will compute the minimum distribution required by this Section 6.02(A) by
substituting the applicable MDIB divisor for the applicable life expectancy
factor, if the MDIB divisor is a lesser number. Following the Participant's
death, the Advisory Committee will compute the minimum distribution required by
this Section 6.02(A) solely on the basis of the applicable life expectancy
factor and will disregard the MDIB factor. For Plan Years beginning prior to
January 1, 1989, the Plan satisfies the incidental benefits requirement if the
distributions to the Participant satisfied the MDIB requirement or if the
present value of the retirement benefits payable solely to the Participant is
greater than 50% of the present value of the total benefits payable to the
Participant and his Beneficiaries. The Advisory Committee must determine whether
benefits to the Beneficiary are incidental as of the date the Trustee is to
commence payment of the retirement benefits to the Participant, or as of any
date the Trustee redetermines the payment period to the Participant.
The minimum distribution for the first distribution calendar year is due by
the Participant's Required Beginning Date. The minimum distribution for each
subsequent distribution calendar year, including the calendar year in which the
Participant's Required Beginning Date occurs, is due by December 31 of that
year. If the Participant receives distribution in the form of a Nontransferable
Annuity Contract, the distribution satisfies this Section 6.02(A) if the
contract complies with the requirements of Code (S)401(a)(9) and the applicable
Treasury regulations.
(B) MINIMUM DISTRIBUTION REQUIREMENTS FOR BENEFICIARIES. The method of
distribution to the Participant's Beneficiary must satisfy Code (S)401(a)(9) and
the applicable Treasury regulations. If the Participant's death occurs after
his Required Beginning Date or, if earlier, the date the Participant commences
an irrevocable annuity pursuant to Section 6.04, the method of payment to the
Beneficiary must provide for completion of payment over a period which does not
exceed the payment period which had commenced for the Participant. If the
Participant's death occurs prior to his Required Beginning Date, and the
Participant had not commenced an irrevocable annuity pursuant to Section 6.04,
the method of payment to the Beneficiary, subject to Section 6.04, must provide
for completion of payment to the Beneficiary over a period not exceeding: (i) 5
years after the date of the Participant's death; or (ii) if the Beneficiary is a
designated Beneficiary, the designated Beneficiary's life expectancy. The
Advisory Committee may not direct payment of the Participant's Nonforfeitable
Accrued Benefit over a period described in clause (ii) unless the Trustee will
commence payment to the designated Beneficiary no later than the December 31
following the close of the calendar year in which the Participant's death
occurred or, if later, and the designated Beneficiary is the Participant's
surviving spouse, December 31 of the calendar year in which the Participant
would have attained age 70 1/2. If the Trustee will make distribution in
accordance with clause (ii), the minimum distribution for a calendar year equals
the Participant's Nonforfeitable Accrued Benefit as of the latest valuation date
preceding the beginning of the calendar year divided by the designated
Beneficiary's life expectancy. The Advisory Committee must use the unisex life
expectancy multiples under Treas. Reg. (S)1.72-9 for purposes of applying this
paragraph. The Advisory Committee, only upon the written request of the
Participant or of the Participant's surviving spouse, will recalculate the life
expectancy of the Participant's surviving spouse not more frequently than
annually, but may not recalculate the life expectancy of a nonspouse designated
Beneficiary after the Trustee commences payment to the designated Beneficiary.
The Advisory Committee will apply this paragraph by treating any amount paid to
the Participant's child, which becomes payable to the Participant's surviving
spouse upon the child's attaining the age of majority, as paid to the
Participant's surviving spouse. Upon the Beneficiary's written request, the
Advisory Committee must direct the Trustee to accelerate payment of all, or any
portion, of the Participant's unpaid Accrued Benefit, as soon as
administratively practicable following the effective date of that request.
<PAGE>
6.03 BENEFIT PAYMENT ELECTIONS. Not earlier than 90 days, but not later
-------------------------
than 30 days, before the Participant's annuity starting date, the Advisory
Committee must provide a benefit notice to a Participant who is eligible to make
an election under this Section 6.03. The benefit notice must explain the
optional forms of benefit in the Plan, including the material features and
relative values of those options, and the Participant's right to defer
distribution until he attains the later of Normal Retirement Age or age 62.
If a Participant or Beneficiary makes an election prescribed by this
Section 6.03, the Advisory Committee will direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit in accordance with that election.
Any election under this Section 6.03 is subject to the requirements of Section
6.02 and of Section 6.04. The Participant or Beneficiary must make an election
under this Section 6.03 by filing his election with the Advisory Committee at
any time before the Trustee otherwise would commence to pay a Participant's
Accrued Benefit in accordance with the requirements of Article VI.
(A) PARTICIPANT ELECTIONS AFTER SEPARATION FROM SERVICE. If the present value
of a Participant's Nonforfeitable Accrued Benefit exceeds $3,500, he may elect
to have the Trustee commence distribution as of any distribution date permitted
under the Employer's Adoption Agreement Section 6.03. The Participant may
reconsider an election at any time prior to the annuity starting date and elect
to commence distribution as of any other distribution date permitted under the
Employer's Adoption Agreement Section 6.03. If the Participant is partially-
vested in his Accrued Benefit, an election under this Paragraph (A) to
distribute prior to the Participant's incurring a Forfeiture Break in Service
(as defined in Section 5.08), must be in the form of a cash-out distribution (as
defined in Article V). A Participant may not receive a cash-out distribution
if, prior to the time the Trustee actually makes the cash-out distribution, the
Participant returns to employment with the Employer. Following his attainment
of Normal Retirement Age, a Participant who has separated from Service may elect
distribution as of any distribution date, irrespective of the elections under
Adoption Agreement Section 6.03.
(B) PARTICIPANT ELECTIONS PRIOR TO SEPARATION FROM SERVICE. The Employer must
specify in its Adoption Agreement the distribution election rights, if any, a
Participant has prior to his Separation from Service. A Participant must make
an election under this Section 6.03(B) on a form prescribed by the Advisory
Committee at any time during the Plan Year for which his election is to be
effective. In his written election, the Participant must specify the percentage
or dollar amount he wishes the Trustee to distribute to him. The Participant's
election relates solely to the percentage or dollar amount specified in his
election form and his right to elect to receive an amount, if any, for a
particular Plan Year greater than the dollar amount or percentage specified in
his election form terminates on the Accounting Date. The Trustee must make a
distribution to a Participant in accordance with his election under this Section
6.03(B) within the 90 day period (or as soon as administratively practicable)
after the Participant files his written election with the Trustee. The Trustee
will distribute the balance of the Participant's Accrued Benefit not distributed
pursuant to his election(s) in accordance with the other distribution provisions
of this Plan.
(C) DEATH BENEFIT ELECTIONS. If the present value of the deceased
Participant's Nonforfeitable Accrued Benefit exceeds $3,500, the Participant's
Beneficiary may elect to have the Trustee distribute the Participant's
Nonforfeitable Accrued Benefit in a form and within a period permitted under
Section 6.02. The Beneficiary's election is subject to any restrictions
designated in writing by the Participant and not revoked as of his date of
death.
(D) TRANSITIONAL ELECTIONS. Notwithstanding the provisions of Sections 6.01
and 6.02, if the Participant (or Beneficiary) signed a written distribution
designation prior to January 1, 1984, the Advisory Committee must distribute the
Participant's Nonforfeitable Accrued Benefit in accordance with that
designation, subject however, to the survivor requirements, if applicable, of
Sections 6.04, 6.05 and 6.06.
<PAGE>
This Section 6.03(D) does not apply to a pre-1984 distribution designation, and
the Advisory Committee will not comply with that designation, if any of the
following applies: (1) the method of distribution would have disqualified the
Plan under Code (S)401(a)(9) as in effect on December 31, 1983; (2) the
Participant did not have an Accrued Benefit as of December 31, 1983; (3) the
distribution designation does not specify the timing and form of the
distribution and the death Beneficiaries (in order of priority); (4) the
substitution of a Beneficiary modifies the payment period of the distribution;
or, (5) the Participant (or Beneficiary) modifies or revokes the distribution
designation. In the event of a revocation, the Plan must distribute, no later
than December 31 of the calendar year following the year of revocation, the
amount which the Participant would have received under Section 6.02(A) if the
distribution designation had not been in effect or, if the Beneficiary revokes
the distribution designation, the amount which the Beneficiary would have
received under Section 6.02(B) if the distribution designation had not been in
effect. The Advisory Committee will apply this Section 6.03(D) to rollovers and
transfers in accordance with Part J of the Code (S)401(a)(9) Treasury
regulations.
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES.
-----------------------------------------------------------
(A) JOINT AND SURVIVOR ANNUITY. The Advisory Committee must direct the Trustee
to distribute a married or unmarried Participant's Nonforfeitable Accrued
Benefit in the form of a qualified joint and survivor annuity, unless the
Participant makes a valid waiver election (described in Section 6.05) within the
90 day period ending on the annuity starting date. If, as of the annuity
starting date, the Participant is married, a qualified joint and survivor
annuity is an immediate annuity which is purchasable with the Participant's
Nonforfeitable Accrued Benefit and which provides a life annuity for the
Participant and a survivor annuity payable for the remaining life of the
Participant's surviving spouse equal to 50% of the amount of the annuity payable
during the life of the Participant. If, as of the annuity starting date, the
Participant is not married, a qualified joint and survivor annuity is an
immediate life annuity for the Participant which is purchasable with the
Participant's Nonforfeitable Accrued Benefit. On or before the annuity starting
date, the Advisory Committee, without Participant or spousal consent, must
direct the Trustee to pay the Participant's Nonforfeitable Accrued Benefit in a
lump sum, in lieu of a qualified joint and survivor annuity, in accordance with
Section 6.01, if the Participant's Nonforfeitable Accrued Benefit is not greater
than $3,500. This Section 6.04(A) applies only to a Participant who has
completed at least one Hour of Service with the Employer after August 22, 1984.
(B) PRERETIREMENT SURVIVOR ANNUITY. If a married Participant dies prior to his
annuity starting date, the Advisory Committee will direct the Trustee to
distribute a portion of the Participant's Nonforfeitable Accrued Benefit to the
Participant's surviving spouse in the form of a preretirement survivor annuity,
unless the Participant has a valid waiver election (as described in Section
6.06) in effect, or unless the Participant and his spouse were not married
throughout the one year period ending on the date of his death. A preretirement
survivor annuity is an annuity which is purchasable with 50% of the
Participant's Nonforfeitable Accrued Benefit (determined as of the date of the
Participant's death) and which is payable for the life of the Participant's
surviving spouse. The value of the preretirement survivor annuity is
attributable to Employer contributions and to Employee contributions in the same
proportion as the Participant's Nonforfeitable Accrued Benefit is attributable
to those contributions. The portion of the Participant's Nonforfeitable Accrued
Benefit not payable under this paragraph is payable to the Participant's
Beneficiary, in accordance with the other provisions of this Article VI. If the
present value of the preretirement survivor annuity does not exceed $3,500, the
Advisory Committee, on or before the annuity starting date, must direct the
Trustee to make a lump sum distribution to the Participant's surviving spouse,
in lieu of a preretirement survivor annuity. This Section 6.04(B) applies only
to a Participant who dies after August 22, 1984, and either (i) completes at
least one Hour of Service with the Employer after August 22, 1984, or (ii)
separated from Service with at least 10 Years of Service (as defined in Section
5.06) and completed at least one Hour of Service with the Employer in a Plan
Year
<PAGE>
beginning after December 31, 1975.
(C) SURVIVING SPOUSE ELECTIONS. If the present value of the preretirement
survivor annuity exceeds $3,500, the Participant's surviving spouse may elect to
have the Trustee commence payment of the preretirement survivor annuity at any
time following the date of the Participant's death, but not later than the
mandatory distribution periods described in Section 6.02, and may elect any of
the forms of payment described in Section 6.02, in lieu of the preretirement
survivor annuity. In the absence of an election by the surviving spouse, the
Advisory Committee must direct the Trustee to distribute the preretirement
survivor annuity on the first distribution date following the close of the Plan
Year in which the latest of the following events occurs: (i) the Participant's
death; (ii) the date the Advisory Committee receives notification of or
otherwise confirms the Participant's death; (iii) the date the Participant would
have attained Normal Retirement Age; or (iv) the date the Participant would have
attained age 62.
(D) SPECIAL RULES. If the Participant has in effect a valid waiver election
regarding the qualified joint and survivor annuity or the preretirement survivor
annuity, the Advisory Committee must direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit in accordance with Sections 6.01,
6.02 and 6.03. The Advisory Committee will reduce the Participant's
Nonforfeitable Accrued Benefit by any security interest (pursuant to any offset
rights authorized by Section 10.03[E]) held by the Plan by reason of a
Participant loan to determine the value of the Participant's Nonforfeitable
Accrued Benefit distributable in the form of a qualified joint and survivor
annuity or preretirement survivor annuity, provided any post-August 18, 1985,
loan satisfied the spousal consent requirement described in Section 10.03[E] of
the Plan. For purposes of applying this Article VI, the Advisory Committee
treats a former spouse as the Participant's spouse or surviving spouse to the
extent provided under a qualified domestic relations order described in Section
6.07. The provisions of this Section 6.04, and of Sections 6.05 and 6.06, apply
separately to the portion of the Participant's Nonforfeitable Accrued Benefit
subject to the qualified domestic relations order and to the portion of the
Participant's Nonforfeitable Accrued Benefit not subject to that order.
(E) PROFIT SHARING PLAN ELECTION. If this Plan is a profit sharing plan, the
Employer must elect the extent to which the preceding provisions of Section 6.04
apply. If the Employer elects to apply this Section 6.04 only to a Participant
described in this Section 6.04(E), the preceding provisions of this Section 6.04
apply only to the following Participants: (1) a Participant as respects whom
the Plan is a direct or indirect transferee from a plan subject to the Code
(S)417 requirements and the Plan received the transfer after December 31, 1984,
unless the transfer is an elective transfer described in Section 13.06; (2) a
Participant who elects a life annuity distribution (if Section 6.02 or Section
13.02 of the Plan requires the Plan to provide a life annuity distribution
option); and (3) a Participant whose benefits under a defined benefit plan
maintained by the Employer are offset by benefits provided under this Plan. If
the Employer elects to apply this Section 6.04 to all Participants, the
preceding provisions of this Section 6.04 apply to all Participants described in
the first two paragraphs of this Section 6.04, without regard to the limitations
of this Section 6.04(E). Sections 6.05 and 6.06 only apply to Participants to
whom the preceding provisions of this Section 6.04 apply.
6.05 WAIVER ELECTION - QUALIFIED JOINT AND SURVIVOR ANNUITY. Not earlier
------------------------------------------------------
than 90 days, but not later than 30 days, before the Participant's annuity
starting date, the Advisory Committee must provide the Participant a written
explanation of the terms and conditions of the qualified joint and survivor
annuity, the Participant's right to make, and the effect of, an election to
waive the joint and survivor form of benefit, the rights of the Participant's
spouse regarding the waiver election and the Participant's right to make, and
the effect of, a revocation of a waiver election. The Plan does not limit the
number of times the Participant may revoke a waiver of the qualified joint and
survivor annuity or make a new waiver during the election period.
<PAGE>
A married Participant's waiver election is not valid unless (a) the
Participant's spouse (to whom the survivor annuity is payable under the
qualified joint and survivor annuity), after the Participant has received the
written explanation described in this Section 6.05, has consented in writing to
the waiver election, the spouse's consent acknowledges the effect of the
election, and a notary public or the Plan Administrator (or his representative)
witnesses the spouse's consent, (b) the spouse consents to the alternate form of
payment designated by the Participant or to any change in that designated form
of payment, and (c) unless the spouse is the Participant's sole primary
Beneficiary, the spouse consents to the Participant's Beneficiary designation or
to any change in the Participant's Beneficiary designation. The spouse's
consent to a waiver of the qualified joint and survivor annuity is irrevocable,
unless the Participant revokes the waiver election. The spouse may execute a
blanket consent to any form of payment designation or to any Beneficiary
designation made by the Participant, if the spouse acknowledges the right to
limit that consent to a specific designation but, in writing, waives that right.
The consent requirements of this Section 6.05 apply to a former spouse of the
Participant, to the extent required under a qualified domestic relations order
described in Section 6.07.
The Advisory Committee will accept as valid a waiver election which does
not satisfy the spousal consent requirements if the Advisory Committee
establishes the Participant does not have a spouse, the Advisory Committee is
not able to locate the Participant's spouse, the Participant is legally
separated or has been abandoned (within the meaning of State law) and the
Participant has a court order to that effect, or other circumstances exist under
which the Secretary of the Treasury will excuse the consent requirement. If the
Participant's spouse is legally incompetent to give consent, the spouse's legal
guardian (even if the guardian is the Participant) may give consent.
6.06 WAIVER ELECTION - PRERETIREMENT SURVIVOR ANNUITY. The Advisory
------------------------------------------------
Committee must provide a written explanation of the preretirement survivor
annuity to each married Participant, within the following period which ends
last: (1) the period beginning on the first day of the Plan Year in which the
Participant attains age 32 and ending on the last day of the Plan Year in which
the Participant attains age 34; (2) a reasonable period after an Employee
becomes a Participant; (3) a reasonable period after the joint and survivor
rules become applicable to the Participant; or (4) a reasonable period after a
fully subsidized preretirement survivor annuity no longer satisfies the
requirements for a fully subsidized benefit. A reasonable period described in
clauses (2), (3) and (4) is the period beginning one year before and ending one
year after the applicable event. If the Participant separates from Service
before attaining age 35, clauses (1), (2), (3) and (4) do not apply and the
Advisory Committee must provide the written explanation within the period
beginning one year before and ending one year after the Separation from Service.
The written explanation must describe, in a manner consistent with Treasury
regulations, the terms and conditions of the preretirement survivor annuity
comparable to the explanation of the qualified joint and survivor annuity
required under Section 6.05. The Plan does not limit the number of times the
Participant may revoke a waiver of the preretirement survivor annuity or make a
new waiver during the election period.
A Participant's waiver election of the preretirement survivor annuity is
not valid unless (a) the Participant makes the waiver election no earlier than
the first day of the Plan Year in which he attains age 35 and (b) the
Participant's spouse (to whom the preretirement survivor annuity is payable)
satisfies the consent requirements described in Section 6.05, except the spouse
need not consent to the form of benefit payable to the designated Beneficiary.
The spouse's consent to the waiver of the preretirement survivor annuity is
irrevocable, unless the Participant revokes the waiver election. Irrespective
of the time of election requirement described in clause (a), if the Participant
separates from Service prior to the first day of the Plan Year in which he
attains age 35, the Advisory Committee will accept a waiver election as respects
the Participant's Accrued Benefit attributable to his Service prior to his
Separation from Service. Furthermore, if a Participant who has not separated
from Service makes a valid waiver election, except
<PAGE>
for the timing requirement of clause (a), the Advisory Committee will accept
that election as valid, but only until the first day of the Plan Year in which
the Participant attains age 35. A waiver election described in this paragraph is
not valid unless made after the Participant has received the written explanation
described in this Section 6.06.
6.07 DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS. Nothing contained in
---------------------------------------------
this Plan prevents the Trustee, in accordance with the direction of the Advisory
Committee, from complying with the provisions of a qualified domestic relations
order (as defined in Code (S)414(p)). This Plan specifically permits
distribution to an alternate payee under a qualified domestic relations order at
any time, irrespective of whether the Participant has attained his earliest
retirement age (as defined under Code (S)414(p)) under the Plan. A distribution
to an alternate payee prior to the Participant's attainment of earliest
retirement age is available only if: (1) the order specifies distribution at
that time or permits an agreement between the Plan and the alternate payee to
authorize an earlier distribution; and (2) if the present value of the alternate
payee's benefits under the Plan exceeds $3,500, and the order requires, the
alternate payee consents to any distribution occurring prior to the
Participant's attainment of earliest retirement age. The Employer, in an
addendum to its Adoption Agreement numbered 6.07, may elect to limit
distribution to an alternate payee only when the Participant has attained his
earliest retirement age under the Plan. Nothing in this Section 6.07 gives a
Participant a right to receive distribution at a time otherwise not permitted
under the Plan nor does it permit the alternate payee to receive a form of
payment not otherwise permitted under the Plan.
The Advisory Committee must establish reasonable procedures to determine
the qualified status of a domestic relations order. Upon receiving a domestic
relations order, the Advisory Committee promptly will notify the Participant and
any alternate payee named in the order, in writing, of the receipt of the order
and the Plan's procedures for determining the qualified status of the order.
Within a reasonable period of time after receiving the domestic relations order,
the Advisory Committee must determine the qualified status of the order and must
notify the Participant and each alternate payee, in writing, of its
determination. The Advisory Committee must provide notice under this paragraph
by mailing to the individual's address specified in the domestic relations
order, or in a manner consistent with Department of Labor regulations.
If any portion of the Participant's Nonforfeitable Accrued Benefit is
payable during the period the Advisory Committee is making its determination of
the qualified status of the domestic relations order, the Advisory Committee
must make a separate accounting of the amounts payable. If the Advisory
Committee determines the order is a qualified domestic relations order within 18
months of the date amounts first are payable following receipt of the order, the
Advisory Committee will direct the Trustee to distribute the payable amounts in
accordance with the order. If the Advisory Committee does not make its
determination of the qualified status of the order within the 18-month
determination period, the Advisory Committee will direct the Trustee to
distribute the payable amounts in the manner the Plan would distribute if the
order did not exist and will apply the order prospectively if the Advisory
Committee later determines the order is a qualified domestic relations order.
To the extent it is not inconsistent with the provisions of the qualified
domestic relations order, the Advisory Committee may direct the Trustee to
invest any partitioned amount in a segregated subaccount or separate account and
to invest the account in Federally insured, interest-bearing savings account(s)
or time deposit(s) (or a combination of both), or in other fixed income
investments. A segregated subaccount remains a part of the Trust, but it alone
shares in any income it earns, and it alone bears any expense or loss it incurs.
The Trustee will make any payments or distributions required under this Section
6.07 by separate benefit checks or other separate distribution to the alternate
payee(s).
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE VII
EMPLOYER ADMINISTRATIVE PROVISIONS
7.01 INFORMATION TO COMMITTEE. The Employer must supply current
------------------------
information to the Advisory Committee as to the name, date of birth, date of
employment, annual compensation, leaves of absence, Years of Service and date of
termination of employment of each Employee who is, or who will be eligible to
become, Participant under the Plan, together with any other information which
the Advisory Committee considers necessary. The Employer's records as to the
current information the Employer furnishes to the Advisory Committee are
conclusive as to all persons.
7.02 NO LIABILITY. The Employer assumes no obligation or responsibility to
------------
any of its Employees, Participants or Beneficiaries for any act of, or failure
to act, on the part of its Advisory Committee (unless the Employer is the
Advisory Committee), the Trustee, the Custodian, if any, or the Plan
Administrator (unless the Employer is the Plan Administrator).
7.03 INDEMNITY OF CERTAIN FIDUCIARIES. The Employer indemnifies and saves
--------------------------------
harmless the Plan Administrator and the members of the Advisory Committee, and
each of them, from and against any and all loss resulting from liability to
which the Plan Administrator and the Advisory Committee, or the members of the
Advisory Committee, may be subjected by reason of any act or conduct (except
willful misconduct or gross negligence) in their official capacities in the
administration of this Trust or Plan or both, including all expenses reasonably
incurred in their defense, in case the Employer fails to provide such defense.
The indemnification provisions of this Section 7.03 do not relieve the Plan
Administrator or any Advisory Committee member from any liability he may have
under ERISA for breach of a fiduciary duty. Furthermore, the Plan Administrator
and the Advisory Committee members and the Employer may execute a letter
agreement further delineating the indemnification agreement of this Section
7.03, provided the letter agreement must be consistent with and does not violate
ERISA. The indemnification provisions of this Section 7.03 extend to the
Trustee (or to a Custodian, if any) solely to the extent provided by a letter
agreement executed by the Trustee (or Custodian) and the Employer.
7.04 EMPLOYER DIRECTION OF INVESTMENT. The Employer has the right to
--------------------------------
direct the Trustee with respect to the investment and re-investment of assets
comprising the Trust Fund only if the Trustee consents in writing to permit such
direction. If the Trustee consents to Employer direction of investment, the
Trustee and the Employer must execute a letter agreement as a part of this Plan
containing such conditions, limitations and other provisions they deem
appropriate before the Trustee will follow any Employer direction as respects
the investment or re-investment of any part of the Trust Fund.
7.05 AMENDMENT TO VESTING SCHEDULE. Though the Employer reserves the right
-----------------------------
to amend the vesting schedule at any time, the Advisory Committee will not apply
the amended vesting schedule to reduce the Nonforfeitable percentage of any
Participant's Accrued Benefit derived from Employer contributions (determined as
of the later of the date the Employer adopts the amendment, or the date the
amendment becomes effective) to a percentage less than the Nonforfeitable
percentage computed under the Plan without regard to the amendment. An amended
vesting schedule will apply to a Participant only if the Participant receives
credit for at least one Hour of Service after the new schedule becomes
effective.
If the Employer makes a permissible amendment to the vesting schedule, each
Participant having at least 3 Years of Service with the Employer may elect to
have the percentage of his Nonforfeitable Accrued Benefit computed under the
Plan without regard to the amendment. For Plan Years beginning
<PAGE>
prior to January 1, 1989, the election described in the preceding sentence
applies only to Participants having at least 5 Years of Service with the
Employer. The Participant must file his election with the Advisory Committee
within 60 days of the latest of (a) the Employer's adoption of the amendment;
(b) the effective date of the amendment; or (c) his receipt of a copy of the
amendment. The Advisory Committee, as soon as practicable, must forward a true
copy of any amendment to the vesting schedule to each affected Participant,
together with an explanation of the effect of the amendment, the appropriate
form upon which the Participant may make an election to remain under the vesting
schedule provided under the Plan prior to the amendment and notice of the time
within which the Participant must make an election to remain under the prior
vesting schedule. The election described in this Section 7.05 does not apply to
a Participant if the amended vesting schedule provides for vesting at least as
rapid at all times as the vesting schedule in effect prior to the amendment. For
purposes of this Section 7.05, an amendment to the vesting schedule includes any
Plan amendment which directly or indirectly affects the computation of the
Nonforfeitable percentage of an Employee's rights to his Employer derived
Accrued Benefit. Furthermore, the Advisory Committee must treat any shift in the
vesting schedule, due to a change in the Plan's top heavy status, as an
amendment to the vesting schedule for purposes of this Section 7.05.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE VIII
PARTICIPANT ADMINISTRATIVE PROVISIONS
8.01 BENEFICIARY DESIGNATION. Any Participant may from time to time
-----------------------
designate, in writing, any person or persons, contingently or successively, to
whom the Trustee will pay his Nonforfeitable Accrued Benefit (including any life
insurance proceeds payable to the Participant's Account) in the event of his
death and the Participant may designate the form and method of payment. The
Advisory Committee will prescribe the form for the written designation of
Beneficiary and, upon the Participant's filing the form with the Advisory
Committee, the form effectively revokes all designations filed prior to that
date by the same Participant.
(A) COORDINATION WITH SURVIVOR REQUIREMENTS. If the joint and survivor
requirements of Article VI apply to the Participant, this Section 8.01 does not
impose any special spousal consent requirements on the Participant's Beneficiary
designation. However, in the absence of spousal consent (as required by Article
VI) to the Participant's Beneficiary designation: (1) any waiver of the joint
and survivor annuity or of the preretirement survivor annuity is not valid; and
(2) if the Participant dies prior to his annuity starting date, the
Participant's Beneficiary designation will apply only to the portion of the
death benefit which is not payable as a preretirement survivor annuity.
Regarding clause (2), if the Participant's surviving spouse is a primary
Beneficiary under the Participant's Beneficiary designation, the Trustee will
satisfy the spouse's interest in the Participant's death benefit first from the
portion which is payable as a preretirement survivor annuity.
(B) PROFIT SHARING PLAN EXCEPTION. If the Plan is a profit sharing plan, the
Beneficiary designation of a married Exempt Participant is not valid unless the
Participant's spouse consents (in a manner described in Section 6.05) to the
Beneficiary designation. An "Exempt Participant" is a Participant who is not
subject to the joint and survivor requirements of Article VI. The spousal
consent requirement in this paragraph does not apply if the Exempt Participant
and his spouse are not married throughout the one year period ending on the date
of the Participant's death, or if the Participant's spouse is the Participant's
sole primary Beneficiary.
8.02 NO BENEFICIARY DESIGNATION/DEATH OF BENEFICIARY. If a Participant
-----------------------------------------------
fails to name a Beneficiary in accordance with Section 8.01, or if the
Beneficiary named by a Participant predeceases him, then the Trustee will pay
the Participant's Nonforfeitable Accrued Benefit in accordance with Section 6.02
in the following order of priority, unless the Employer specifies a different
order of priority in an addendum to its Adoption Agreement, to:
(a) The Participant's surviving spouse;
(b) The Participant's surviving children, including adopted children, in
equal shares;
(c) The Participant's surviving parents, in equal shares; or
(d) The Participant's estate.
If the Beneficiary does not predecease the Participant, but dies prior to
distribution of the Participant's entire Nonforfeitable Accrued Benefit, the
Trustee will pay the remaining Nonforfeitable Accrued Benefit to the
Beneficiary's estate unless the Participant's Beneficiary designation provides
otherwise or unless the Employer provides otherwise in its Adoption Agreement.
If the Plan is a profit sharing plan, and the Plan includes Exempt Participants,
the Employer may not specify a different order of priority in the Adoption
Agreement unless the Participant's surviving spouse will be first in the
<PAGE>
(a) The specific reason for the denial;
(b) Specific references to pertinent Plan provisions on which the Advisory
Committee based its denial;
(c) A description of any additional material and information needed for
the Claimant to perfect his claim and an explanation of why the material or
information is needed; and
(d) That any appeal the Claimant wishes to make of the adverse
determination must be in writing to the Advisory Committee within 75 days
after receipt of the Plan Administrator's notice of denial of benefits. The
Plan Administrator's notice must further advise the Claimant that his
failure to appeal the action to the Advisory Committee in writing within
the 75-day period will render the Advisory Committee's determination final,
binding and conclusive.
If the Claimant should appeal to the Advisory Committee, he, or his duly
authorized representative, may submit, in writing, whatever issues and comments
he, or his duly authorized representative, feels are pertinent. The Claimant, or
his duly authorized representative, may review pertinent Plan documents. The
Advisory Committee will re-examine all facts related to the appeal and make a
final determination as to whether the denial of benefits is justified under the
circumstances. The Advisory Committee must advise the Claimant of its decision
within 60 days of the Claimant's written request for review, unless special
circumstances (such as a hearing) would make the rendering of a decision within
the 60-day limit unfeasible, but in no event may the Advisory Committee render a
decision respecting a denial for a claim for benefits later than 120 days after
its receipt of a request for review.
The Plan Administrator's notice of denial of benefits must identify the
name of each member of the Advisory Committee and the name and address of the
Advisory Committee member to whom the Claimant may forward his appeal.
8.10 PARTICIPANT DIRECTION OF INVESTMENT. A Participant has the right to
-----------------------------------
direct the Trustee with respect to the investment or re-investment of the assets
comprising the Participant's individual Account only if the Trustee consents in
writing to permit such direction. If the Trustee consents to Participant
direction of investment, the Trustee will accept direction from each Participant
on a written election form (or other written agreement), as a part of this Plan,
containing such conditions, limitations and other provisions the parties deem
appropriate. The Trustee or, with the Trustee's consent, the Advisory
Committee, may establish written procedures, incorporated specifically as part
of this Plan, relating to Participant direction of investment under this Section
8.10. The Trustee will maintain a segregated investment Account to the extent a
Participant's Account is subject to Participant self-direction. The Trustee is
not liable for any loss, nor is the Trustee liable for any breach, resulting
from a Participant's direction of the investment of any part of his directed
Account.
The Advisory Committee, to the extent provided in a written loan policy
adopted under Section 9.04, will treat a loan made to a Participant as a
Participant direction of investment under this Section 8.10. To the extent of
the loan outstanding at any time, the borrowing Participant's Account alone
shares in any interest paid on the loan, and it alone bears any expense or loss
it incurs in connection with the loan. The Trustee may retain any principal or
interest paid on the borrowing Participant's loan in an interest bearing
segregated Account on behalf of the borrowing Participant until the Trustee (or
the Named Fiduciary, in the case of a nondiscretionary Trustee) deems it
appropriate to add the amount paid to the Participant's separate Account under
the Plan.
If the Trustee consents to Participant direction of investment of his
Account, the Plan treats any
<PAGE>
post-December 31, 1981, investment by a Participant's directed Account in
collectibles (as defined by Code (S)408(m)) as a deemed distribution to the
Participant for Federal income tax purposes.
* * * * * * * * * * * * * * *
<PAGE>
the Trustee must observe in making loans, if any, to Participants and
Beneficiaries; and
(k) To establish and maintain a funding standard account and to make
credits and charges to the account to the extent required by and in
accordance with the provisions of the Code.
The Advisory Committee must exercise all of its powers, duties and
discretion under the Plan in a uniform and nondiscriminatory manner.
(A) LOAN POLICY. If the Advisory Committee adopts a loan policy, pursuant to
paragraph (j), the loan policy must be a written document and must include: (1)
the identity of the person or positions authorized to administer the participant
loan program; (2) a procedure for applying for the loan; (3) the criteria for
approving or denying a loan; (4) the limitations, if any, on the types and
amounts of loans available; (5) the procedure for determining a reasonable rate
of interest; (6) the types of collateral which may secure the loan; and (7) the
events constituting default and the steps the Plan will take to preserve plan
assets in the event of default. This Section 9.04 specifically incorporates a
written loan policy as part of the Employer's Plan.
9.05 FUNDING POLICY. The Advisory Committee will review, not less often
--------------
than annually, all pertinent Employee information and Plan data in order to
establish the funding policy of the Plan and to determine the appropriate
methods of carrying out the Plan's objectives. The Advisory Committee must
communicate periodically, as it deems appropriate, to the Trustee and to any
Plan Investment Manager the Plan's short-term and long-term financial needs so
investment policy can be coordinated with Plan financial requirements.
9.06 MANNER OF ACTION. The decision of a majority of the members appointed
----------------
and qualified controls.
9.07 AUTHORIZED REPRESENTATIVE. The Advisory Committee may authorize any
-------------------------
one of its members, or its Secretary, to sign on its behalf any notices,
directions, applications, certificates, consents, approvals, waivers, letters or
other documents. The Advisory Committee must evidence this authority by an
instrument signed by all members and filed with the Trustee.
9.08 INTERESTED MEMBER. No member of the Advisory Committee may decide or
-----------------
determine any matter concerning the distribution, nature or method of settlement
of his own benefits under the Plan, except in exercising an election available
to that member in his capacity as a Participant, unless the Plan Administrator
is acting alone in the capacity of the Advisory Committee.
9.09 INDIVIDUAL ACCOUNTS. The Advisory Committee will maintain, or direct
-------------------
the Trustee to maintain, a separate Account, or multiple Accounts, in the name
of each Participant to reflect the Participant's Accrued Benefit under the Plan.
If a Participant re-enters the Plan subsequent to his having a Forfeiture Break
in Service, the Advisory Committee, or the Trustee, must maintain a separate
Account for the Participant's pre-Forfeiture Break in Service Accrued Benefit
and a separate Account for his post-Forfeiture Break in Service Accrued Benefit,
unless the Participant's entire Accrued Benefit under the Plan is 100%
Nonforfeitable.
The Advisory Committee will make its allocations, or request the Trustee to
make its allocations, to the Accounts of the Participants in accordance with the
provisions of Section 9.11. The Advisory Committee may direct the Trustee to
maintain a temporary segregated investment Account in the name of a Participant
to prevent a distortion of income, gain or loss allocations under Section 9.11.
The Advisory Committee must maintain records of its activities.
<PAGE>
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. The value of each
--------------------------------------
Participant's Accrued Benefit consists of that proportion of the net worth (at
fair market value) of the Employer's Trust Fund which the net credit balance in
his Account (exclusive of the cash value of incidental benefit insurance
contracts) bears to the total net credit balance in the Accounts (exclusive of
the cash value of the incidental benefit insurance contracts) of all
Participants plus the cash surrender value of any incidental benefit insurance
contracts held by the Trustee on the Participant's life.
For purposes of a distribution under the Plan, the value of a Participant's
Accrued Benefit is its value as of the valuation date immediately preceding the
date of the distribution. Any distribution (other than a distribution from a
segregated Account) made to a Participant (or to his Beneficiary) more than 90
days after the most recent valuation date may include interest on the amount of
the distribution as an expense of the Trust Fund. The interest, if any, accrues
from such valuation date to the date of the distribution at the rate established
in the Employer's Adoption Agreement.
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS. A "valuation
------------------------------------------------------
date" under this Plan is each Accounting Date and each interim valuation date
determined under Section 10.14. As of each valuation date the Advisory
Committee must adjust Accounts to reflect net income, gain or loss since the
last valuation date. The valuation period is the period beginning the day after
the last valuation date and ending on the current valuation date.
(A) TRUST FUND ACCOUNTS. The allocation provisions of this paragraph apply to
all Participant Accounts other than segregated investment Accounts. The
Advisory Committee first will adjust the Participant Accounts, as those Accounts
stood at the beginning of the current valuation period, by reducing the Accounts
for any forfeitures arising under Section 5.09 or under Section 9.14, for
amounts charged during the valuation period to the Accounts in accordance with
Section 9.13 (relating to distributions) and Section 11.01 (relating to
insurance premiums), and for the cash value of incidental benefit insurance
contracts. The Advisory Committee then, subject to the restoration allocation
requirements of Section 5.04 or of Section 9.14, will allocate the net income,
gain or loss pro rata to the adjusted Participant Accounts. The allocable net
income, gain or loss is the net income (or net loss), including the increase or
decrease in the fair market value of assets, since the last valuation date.
(B) SEGREGATED INVESTMENT ACCOUNTS. A segregated investment Account receives
all income it earns and bears all expense or loss it incurs. The Advisory
Committee will adopt uniform and nondiscriminatory procedures for determining
income or loss of a segregated investment Account in a manner which reasonably
reflects investment directions relating to pooled investments and investment
directions occurring during a valuation period. As of the valuation date, the
Advisory Committee must reduce a segregated Account for any forfeiture arising
under Section 5.09 after the Advisory Committee has made all other allocations,
changes or adjustments to the Account for the Plan Year.
(C) ADDITIONAL RULES. An Excess Amount or suspense account described in Part 2
of Article III does not share in the allocation of net income, gain or loss
described in this Section 9.11. If the Employer maintains its Plan under a Code
(S)401(k) Adoption Agreement, the Employer may specify in its Adoption Agreement
alternate valuation provisions authorized by that Adoption Agreement. This
Section 9.11 applies solely to the allocation of net income, gain or loss of the
Trust. The Advisory Committee will allocate the Employer contributions and
Participant forfeitures, if any, in accordance with Article III.
9.12 INDIVIDUAL STATEMENT. As soon as practicable after the Accounting
--------------------
Date of each Plan Year, but within the time prescribed by ERISA and the
regulations under ERISA, the Plan Administrator will deliver to each Participant
(and to each Beneficiary) a statement reflecting the condition of his Accrued
Benefit in the Trust as of that date and such other information ERISA requires
be furnished
<PAGE>
the Participant or Beneficiary. No Participant, except a member of
the Advisory Committee, has the right to inspect the records reflecting the
Account of any other Participant.
9.13 ACCOUNT CHARGED. The Advisory Committee will charge a Participant's
---------------
Account for all distributions made from that Account to the Participant, to his
Beneficiary or to an alternate payee. The Advisory Committee also will charge a
Participant's Account for any administrative expenses incurred by the Plan
directly related to that Account.
9.14 UNCLAIMED ACCOUNT PROCEDURE. The Plan does not require either the
---------------------------
Trustee or the Advisory Committee to search for, or to ascertain the whereabouts
of, any Participant or Beneficiary. At the time the Participant's or
Beneficiary's benefit becomes distributable under Article VI, the Advisory
Committee, by certified or registered mail addressed to his last known address
of record with the Advisory Committee or the Employer, must notify any
Participant, or Beneficiary, that he is entitled to a distribution under this
Plan. The notice must quote the provisions of this Section 9.14 and otherwise
must comply with the notice requirements of Article VI. If the Participant, or
Beneficiary, fails to claim his distributive share or make his whereabouts known
in writing to the Advisory Committee within 6 months from the date of mailing of
the notice, the Advisory Committee will treat the Participant's or Beneficiary's
unclaimed payable Accrued Benefit as forfeited and will reallocate the unclaimed
payable Accrued Benefit in accordance with Section 3.05. A forfeiture under
this paragraph will occur at the end of the notice period or, if later, the
earliest date applicable Treasury regulations would permit the forfeiture.
Pending forfeiture, the Advisory Committee, following the expiration of the
notice period, may direct the Trustee to segregate the Nonforfeitable Accrued
Benefit in a segregated Account and to invest that segregated Account in
Federally insured interest bearing savings accounts or time deposits (or in a
combination of both), or in other fixed income investments.
If a Participant or Beneficiary who has incurred a forfeiture of his
Accrued Benefit under the provisions of the first paragraph of this Section 9.14
makes a claim, at any time, for his forfeited Accrued Benefit, the Advisory
Committee must restore the Participant's or Beneficiary's forfeited Accrued
Benefit to the same dollar amount as the dollar amount of the Accrued Benefit
forfeited, unadjusted for any gains or losses occurring subsequent to the date
of the forfeiture. The Advisory Committee will make the restoration during the
Plan Year in which the Participant or Beneficiary makes the claim, first from
the amount, if any, of Participant forfeitures the Advisory Committee otherwise
would allocate for the Plan Year, then from the amount, if any, of the Trust
Fund net income or gain for the Plan Year and then from the amount, or
additional amount, the Employer contributes to enable the Advisory Committee to
make the required restoration. The Advisory Committee must direct the Trustee to
distribute the Participant's or Beneficiary's restored Accrued Benefit to him
not later than 60 days after the close of the Plan Year in which the Advisory
Committee restores the forfeited Accrued Benefit. The forfeiture provisions of
this Section 9.14 apply solely to the Participant's or to the Beneficiary's
Accrued Benefit derived from Employer contributions.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE X
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES
10.01 ACCEPTANCE. The Trustee accepts the Trust created under the Plan
----------
and agrees to perform the obligations imposed. The Trustee must provide bond
for the faithful performance of its duties under the Trust to the extent
required by ERISA.
10.02 RECEIPT OF CONTRIBUTIONS. The Trustee is accountable to the
------------------------
Employer for the funds contributed to it by the Employer, but does not have any
duty to see that the contributions received comply with the provisions of the
Plan. The Trustee is not obliged to collect any contributions from the
Employer, nor is obliged to see that funds deposited with it are deposited
according to the provisions of the Plan.
10.03 INVESTMENT POWERS.
-----------------
[A] DISCRETIONARY TRUSTEE DESIGNATION. If the Employer, in Adoption Agreement
Section 1.02, designates the Trustee to administer the Trust as a discretionary
Trustee, then the Trustee has full discretion and authority with regard to the
investment of the Trust Fund, except with respect to a Plan asset under the
control or direction of a properly appointed Investment Manager or with respect
to a Plan asset properly subject to Employer, Participant or Advisory Committee
direction of investment. The Trustee must coordinate its investment policy with
Plan financial needs as communicated to it by the Advisory Committee. The
Trustee is authorized and empowered, but not by way of limitation, with the
following powers, rights and duties:
(a) To invest any part or all of the Trust Fund in any common or
preferred stocks, open-end or closed-end mutual funds, put and call options
traded on a national exchange, United States retirement plan bonds,
corporate bonds, debentures, convertible debentures, commercial paper, U.S.
Treasury bills, U.S. Treasury notes and other direct or indirect
obligations of the United States Government or its agencies, improved or
unimproved real estate situated in the United States, limited partnerships,
insurance contracts of any type, mortgages, notes or other property of any
kind, real or personal, to buy or sell options on common stock on a
nationally recognized exchange with or without holding the underlying
common stock, to buy and sell commodities, commodity options and contracts
for the future delivery of commodities, and to make any other investments
the Trustee deems appropriate, as a prudent man would do under like
circumstances with due regard for the purposes of this Plan. Any investment
made or retained by the Trustee in good faith is proper but must be of a
kind constituting a diversification considered by law suitable for trust
investments.
(b) To retain in cash so much of the Trust Fund as it may deem advisable
to satisfy liquidity needs of the Plan and to deposit any cash held in the
Trust Fund in a bank account at reasonable interest.
(c) To invest, if the Trustee is a bank or similar financial institution
supervised by the United States or by a State, in any type of deposit of
the Trustee (or of a bank related to the Trustee within the meaning of Code
(S)414(b)) at a reasonable rate of interest or in a common trust fund, as
described in Code (S)584, or in a collective investment fund, the
provisions of which govern the investment of such assets and which the Plan
incorporates by this reference, which the Trustee (or its affiliate, as
defined in Code (S)1504) maintains exclusively for the collective
investment of money contributed by the bank (or the affiliate) in its
capacity as trustee and which conforms to
<PAGE>
the rules of the Comptroller of the Currency.
(d) To manage, sell, contract to sell, grant options to purchase,
convey, exchange, transfer, abandon, improve, repair, insure, lease for any
term even though commencing in the future or extending beyond the term of
the Trust, and otherwise deal with all property, real or personal, in such
manner, for such considerations and on such terms and conditions as the
Trustee decides.
(e) To credit and distribute the Trust as directed by the Advisory
Committee. The Trustee is not obliged to inquire as to whether any payee or
distributee is entitled to any payment or whether the distribution is
proper or within the terms of the Plan, or as to the manner of making any
payment or distribution. The Trustee is accountable only to the Advisory
Committee for any payment or distribution made by it in good faith on the
order or direction of the Advisory Committee.
(f) To borrow money, to assume indebtedness, extend mortgages and
encumber by mortgage or pledge.
(g) To compromise, contest, arbitrate or abandon claims and demands, in
its discretion.
(h) To have with respect to the Trust all of the rights of an individual
owner, including the power to give proxies, to participate in any voting
trusts, mergers, consolidations or liquidations, and to exercise or sell
stock subscriptions or conversion rights.
(i) To lease for oil, gas and other mineral purposes and to create
mineral severances by grant or reservation; to pool or unitize interests in
oil, gas and other minerals and to enter into operating agreements and to
execute division and transfer orders.
(j) To hold any securities or other property in the name of the Trustee
or its nominee, with depositories or agent depositories or in another form
as it may deem best, with or without disclosing the trust relationship.
(k) To perform any and all other acts in its judgment necessary or
appropriate for the proper and advantageous management, investment and
distribution of the Trust.
(l) To retain any funds or property subject to any dispute without
liability for the payment of interest, and to decline to make payment or
delivery of the funds or property until final adjudication is made by a
court of competent jurisdiction.
(m) To file all tax returns required of the Trustee.
(n) To furnish to the Employer, the Plan Administrator and the Advisory
Committee an annual statement of account showing the condition of the Trust
Fund and all investments, receipts, disbursements and other transactions
effected by the Trustee during the Plan Year covered by the statement and
also stating the assets of the Trust held at the end of the Plan Year,
which accounts are conclusive on all persons, including the Employer, the
Plan Administrator and the Advisory Committee, except as to any act or
transaction concerning which the Employer, the Plan Administrator or the
Advisory Committee files with the Trustee written exceptions or objections
within 90 days after the receipt of the accounts or for which ERISA
authorizes a longer period within which to object.
<PAGE>
(o) To begin, maintain or defend any litigation necessary in connection
with the administration of the Plan, except that the Trustee is not obliged
or required to do so unless indemnified to its satisfaction.
[B] NONDISCRETIONARY TRUSTEE DESIGNATION/APPOINTMENT OF CUSTODIAN. If the
Employer, in its Adoption Agreement Section 1.02, designates the Trustee to
administer the Trust as a nondiscretionary Trustee, then the Trustee will not
have any discretion or authority with regard to the investment of the Trust
Fund, but must act solely as a directed trustee of the funds contributed to it.
A nondiscretionary Trustee, as directed trustee of the funds held by it under
the Employer's Plan, is authorized and empowered, by way of limitation, with the
following powers, rights and duties, each of which the nondiscretionary Trustee
exercises solely as directed trustee in accordance with the written direction of
the Named Fiduciary (except to the extent a Plan asset is subject to the control
and management of a properly appointed Investment Manager or subject to Advisory
Committee or Participant direction of investment):
(a) To invest any part or all of the Trust Fund in any common or
preferred stocks, open-end or closed-end mutual funds, put and call options
traded on a national exchange, United States retirement plan bonds,
corporate bonds, debentures, convertible debentures, commercial paper, U.S.
Treasury bills, U.S. Treasury notes and other direct or indirect
obligations of the United States Government or its agencies, improved or
unimproved real estate situated in the United States, limited partnerships,
insurance contracts of any type, mortgages, notes or other property of any
kind, real or personal, to buy or sell options on common stock on a
nationally recognized options exchange with or without holding the
underlying common stock, to buy and sell commodities, commodity options and
contracts for the future delivery of commodities, and to make any other
investments the Named Fiduciary deems appropriate.
(b) To retain in cash so much of the Trust Fund as the Named Fiduciary
may direct in writing to satisfy liquidity needs of the Plan and to deposit
any cash held in the Trust Fund in a bank account at reasonable interest,
including, specific authority to invest in any type of deposit of the
Trustee (or of a bank related to the Trustee within the meaning of Code
(S)414(b)) at a reasonable rate of interest.
(c) To sell, contract to sell, grant options to purchase, convey,
exchange, transfer, abandon, improve, repair, insure, lease for any term
even though commencing in the future or extending beyond the term of the
Trust, and otherwise deal with all property, real or personal, in such
manner, for such considerations and on such terms and conditions as the
Named Fiduciary directs in writing.
(d) To credit and distribute the Trust as directed by the Advisory
Committee. The Trustee is not obliged to inquire as to whether any payee
or distributee is entitled to any payment or whether the distribution is
proper or within the terms of the Plan, or as to the manner of making any
payment or distribution. The Trustee is accountable only to the Advisory
Committee for any payment or distribution made by it in good faith on the
order or direction of the Advisory Committee.
(e) To borrow money, to assume indebtedness, extend mortgages and
encumber by mortgage or pledge.
(f) To have with respect to the Trust all of the rights of an individual
owner, including the power to give proxies, to participate in any voting
trusts, mergers, consolidations or liquidations,
<PAGE>
and to exercise or sell stock subscriptions or conversion rights, provided
the exercise of any such powers is in accordance with and at the written
direction of the Named Fiduciary.
(g) To lease for oil, gas and other mineral purposes and to create
mineral severances by grant or reservation; to pool or unitize interests in
oil, gas and other minerals; and to enter into operating agreements and to
execute division and transfer orders, provided the exercise of any such
powers is in accordance with and at the written direction of the Named
Fiduciary.
(h) To hold any securities or other property in the name of the
nondiscretionary Trustee or its nominee, with depositories or agent
depositories or in another form as the Named Fiduciary may deem best, with
or without disclosing the custodial relationship.
(i) To retain any funds or property subject to any dispute without
liability for the payment of interest, and to decline to make payment or
delivery of the funds or property until a court of competent jurisdiction
makes final adjudication.
(j) To file all tax returns required of the Trustee.
(k) To furnish to the Named Fiduciary, the Employer, the Plan
Administrator and the Advisory Committee an annual statement of account
showing the condition of the Trust Fund and all investments, receipts,
disbursements and other transactions effected by the nondiscretionary
Trustee during the Plan Year covered by the statement and also stating the
assets of the Trust held at the end of the Plan Year, which accounts are
conclusive on all persons, including the Named Fiduciary, the Employer, the
Plan Administrator and the Advisory Committee, except as to any act or
transaction concerning which the Named Fiduciary, the Employer, the Plan
Administrator or the Advisory Committee files with the nondiscretionary
Trustee written exceptions or objections within 90 days after the receipt
of the accounts or for which ERISA authorizes a longer period within which
to object.
(l) To begin, maintain or defend any litigation necessary in connection
with the administration of the Plan, except that the Trustee is not obliged
or required to do so unless indemnified to its satisfaction.
APPOINTMENT OF CUSTODIAN. The Employer may appoint a Custodian under the
Plan, the acceptance by the Custodian indicated on the execution page of the
Employer's Adoption Agreement. If the Employer appoints a Custodian, the
Employer's Plan must have a discretionary Trustee, as described in Section
10.03[A]. A Custodian has the same powers, rights and duties as a
nondiscretionary Trustee, as described in this Section 10.03[B]. The Custodian
accepts the terms of the Plan and Trust by executing the Employer's Adoption
Agreement. Any reference in the Plan to a Trustee also is a reference to a
Custodian where the context of the Plan dictates. A limitation of the Trustee's
liability by Plan provision also acts as a limitation of the Custodian's
liability. Any action taken by the Custodian at the discretionary Trustee's
direction satisfies any provision in the Plan referring to the Trustee's taking
that action.
MODIFICATION OF POWERS/LIMITED RESPONSIBILITY. The Employer and the
Custodian or nondiscretionary Trustee, by letter agreement, may limit the powers
of the Custodian or nondiscretionary Trustee to any combination of powers listed
within this Section 10.03[B]. If there is a Custodian or a nondiscretionary
Trustee under the Employer's Plan, then the Employer, in adopting this Plan
acknowledges the Custodian or nondiscretionary Trustee has no discretion with
respect to the investment or re-investment of the Trust Fund and that the
Custodian or nondiscretionary Trustee is acting solely as custodian or as
directed trustee with respect to the assets comprising the Trust Fund.
<PAGE>
[C] LIMITATION OF POWERS OF CERTAIN CUSTODIANS. If a Custodian is a bank
which, under its governing state law, does not possess trust powers, then
paragraphs (a), (c), (e), (f), (g) of Section 10.03[B], Section 10.16 and
Article XI do not apply to that bank and that bank only has the power and
authority to exercise the remaining powers, rights and duties under Section
10.03[B].
[D] NAMED FIDUCIARY/LIMITATION OF LIABILITY OF NONDISCRETIONARY TRUSTEE OR
CUSTODIAN. Under a nondiscretionary Trustee designation, the Named Fiduciary
under the Employer's Plan has the sole responsibility for the management and
control of the Employer's Trust Fund, except with respect to a Plan asset under
the control or direction of a properly appointed Investment Manager or with
respect to a Plan asset properly subject to Participant or Advisory Committee
direction of investment. If the Employer appoints a Custodian, the Named
Fiduciary is the discretionary Trustee. Under a nondiscretionary Trustee
designation, unless the Employer designates in writing another person or persons
to serve as Named Fiduciary, the Named Fiduciary under the Plan is the president
of a corporate Employer, the managing partner of a partnership Employer or the
sole proprietor, as appropriate. The Named Fiduciary will exercise its
management and control of the Trust Fund through its written direction to the
nondiscretionary Trustee or to the Custodian, whichever applies to the
Employer's Plan.
The nondiscretionary Trustee or Custodian has no duty to review or to make
recommendations regarding investments made at the written direction of the Named
Fiduciary. The nondiscretionary Trustee or Custodian must retain any investment
obtained at the written direction of the Named Fiduciary until further directed
in writing by the Named Fiduciary to dispose of such investment. The
nondiscretionary Trustee or Custodian is not liable in any manner or for any
reason for making, retaining or disposing of any investment pursuant to any
written direction described in this paragraph. Furthermore, the Employer agrees
to indemnify and to hold the nondiscretionary Trustee or Custodian harmless from
any damages, costs or expenses, including reasonable counsel fees, which the
nondiscretionary Trustee or Custodian may incur as a result of any claim
asserted against the nondiscretionary Trustee, the Custodian or the Trust
arising out of the nondiscretionary Trustee's or Custodian's compliance with any
written direction described in this paragraph.
[E] PARTICIPANT LOANS. This Section 10.03[E] specifically authorizes the
Trustee to make loans on a nondiscriminatory basis to a Participant or to a
Beneficiary in accordance with the loan policy established by the Advisory
Committee, provided: (1) the loan policy satisfies the requirements of Section
9.04; (2) loans are available to all Participants and Beneficiaries on a
reasonably equivalent basis and are not available in a greater amount for Highly
Compensated Employees than for other Employees; (3) any loan is adequately
secured and bears a reasonable rate of interest; (4) the loan provides for
repayment within a specified time; (5) the default provisions of the note
prohibit offset of the Participant's Nonforfeitable Accrued Benefit prior to the
time the Trustee otherwise would distribute the Participant's Nonforfeitable
Accrued Benefit; (6) the amount of the loan does not exceed (at the time the
Plan extends the loan) the present value of the Participant's Nonforfeitable
Accrued Benefit; and (7) the loan otherwise conforms to the exemption provided
by Code (S)4975(d)(1). If the joint and survivor requirements of Article VI
apply to the Participant, the Participant may not pledge any portion of his
Accrued Benefit as security for a loan made after August 18, 1985, unless,
within the 90 day period ending on the date the pledge becomes effective, the
Participant's spouse, if any, consents (in a manner described in Section 6.05
other than the requirement relating to the consent of a subsequent spouse) to
the security or, by separate consent, to an increase in the amount of security.
If the Employer is an unincorporated trade or business, a Participant who is an
Owner-Employee may not receive a loan from the Plan, unless he has obtained a
prohibited transaction exemption from the Department of Labor. If the Employer
is an "S Corporation," a Participant who is a shareholder-employee (an employee
or an officer) who, at any time during the Employer's taxable year, owns more
than 5%, either directly or by attribution under Code (S)318(a)(1), of the
<PAGE>
Employer's outstanding stock may not receive a loan from the Plan, unless he has
obtained a prohibited transaction exemption from the Department of Labor. If
the Employer is not an unincorporated trade or business nor an "S Corporation,"
this Section 10.03[E] does not impose any restrictions on the class of
Participants eligible for a loan from the Plan.
[F] INVESTMENT IN QUALIFYING EMPLOYER SECURITIES AND QUALIFYING EMPLOYER REAL
PROPERTY. The investment options in this Section 10.03[F] include the ability
to invest in qualifying Employer securities or qualifying Employer real
property, as defined in and as limited by ERISA. If the Employer's Plan is a
Nonstandardized profit sharing plan, it may elect in its Adoption Agreement to
permit the aggregate investments in qualifying Employer securities and in
qualifying Employer real property to exceed 10% of the value of Plan assets.
10.04 RECORDS AND STATEMENTS. The records of the Trustee pertaining to
----------------------
the Plan must be open to the inspection of the Plan Administrator, the Advisory
Committee and the Employer at all reasonable times and may be audited from time
to time by any person or persons as the Employer, Plan Administrator or Advisory
Committee may specify in writing. The Trustee must furnish the Plan
Administrator or Advisory Committee with whatever information relating to the
Trust Fund the Plan Administrator or Advisory Committee considers necessary.
10.05 FEES AND EXPENSES FROM FUND. A Trustee or Custodian will receive
---------------------------
reasonable annual compensation as may be agreed upon from time to time between
the Employer and the Trustee or Custodian. No person who is receiving full pay
from the Employer may receive compensation for services as Trustee or as
Custodian. The Trustee will pay from the Trust Fund all fees and expenses
reasonably incurred by the Plan, to the extent such fees and expenses are for
the ordinary and necessary administration and operation of the Plan, unless the
Employer pays such fees and expenses. Any fee or expense paid, directly or
indirectly, by the Employer is not an Employer contribution to the Plan,
provided the fee or expense relates to the ordinary and necessary administration
of the Fund.
10.06 PARTIES TO LITIGATION. Except as otherwise provided by ERISA, no
---------------------
Participant or beneficiary is a necessary party or is required to receive notice
of process in any court proceeding involving the Plan, the Trust Fund or any
fiduciary of the Plan. Any final judgment entered in any proceeding will be
conclusive upon the Employer, the Plan Administrator, the Advisory Committee,
the Trustee, Custodian, Participants and Beneficiaries.
10.07 PROFESSIONAL AGENTS. The Trustee may employ and pay from the Trust
-------------------
Fund reasonable compensation to agents, attorneys, accountants and other persons
to advise the Trustee as in its opinion may be necessary. The Trustee may
delegate to any agent, attorney, accountant or other person selected by it any
non-Trustee power or duty vested in it by the Plan, and the Trustee may act or
refrain from acting on the advice or opinion of any agent, attorney, accountant
or other person so selected.
10.08 DISTRIBUTION OF CASH OR PROPERTY. The Trustee may make distribution
--------------------------------
under the Plan in cash or property, or partly in each, at its fair market value
as determined by the Trustee. For purposes of a distribution to a Participant
or to a Participant's designated Beneficiary or surviving spouse, "property"
includes a Nontransferable Annuity Contract, provided the contract satisfies the
requirements of this Plan.
10.09 DISTRIBUTION DIRECTIONS. If no one claims a payment or distribution
-----------------------
made from the Trust, the Trustee must promptly notify the Advisory Committee and
then dispose of the payment in accordance with the subsequent direction of the
Advisory Committee.
<PAGE>
10.10 THIRD PARTY/MULTIPLE TRUSTEES. No person dealing with the Trustee
-----------------------------
is obligated to see to the proper application of any money paid or property
delivered to the Trustee, or to inquire whether the Trustee has acted pursuant
to any of the terms of the Plan. Each person dealing with the Trustee may act
upon any notice, request or representation in writing by the Trustee, or by the
Trustee's duly authorized agent, and is not liable to any person in so acting.
The certificate of the Trustee that it is acting in accordance with the Plan
will be conclusive in favor of any person relying on the certificate. If more
than two persons act as Trustee, a decision of the majority of such persons
controls with respect to any decision regarding the administration or investment
of the Trust Fund or of any portion of the Trust Fund with respect to which such
persons act as Trustee. However, the signature of only one Trustee is necessary
to effect any transaction on behalf of the Trust.
10.11 RESIGNATION. The Trustee or Custodian may resign its position at
-----------
any time by giving 30 days' written notice in advance to the Employer and to the
Advisory Committee. If the Employer fails to appoint a successor Trustee within
60 days of its receipt of the Trustee's written notice of resignation, the
Trustee will treat the Employer as having appointed itself as Trustee and as
having filed its acceptance of appointment with the former Trustee. The
Employer, in its sole discretion, may replace a Custodian. If the Employer does
not replace a Custodian, the discretionary Trustee will assume possession of
Plan assets held by the former Custodian.
10.12 REMOVAL. The Employer, by giving 30 days' written notice in advance
-------
to the Trustee, may remove any Trustee or Custodian. In the event of the
resignation or removal of a Trustee, the Employer must appoint a successor
Trustee if it intends to continue the Plan. If two or more persons hold the
position of Trustee, in the event of the removal of one such person, during any
period the selection of a replacement is pending, or during any period such
person is unable to serve for any reason, the remaining person or persons will
act as the Trustee.
10.13 INTERIM DUTIES AND SUCCESSOR TRUSTEE. Each successor Trustee
------------------------------------
succeeds to the title to the Trust vested in his predecessor by accepting in
writing his appointment as successor Trustee and by filing the acceptance with
the former Trustee and the Advisory Committee without the signing or filing of
any further statement. The resigning or removed Trustee, upon receipt of
acceptance in writing of the Trust by the successor Trustee, must execute all
documents and do all acts necessary to vest the title of record in any successor
Trustee. Each successor Trustee has and enjoys all of the powers, both
discretionary and ministerial, conferred under this Agreement upon his
predecessor. A successor Trustee is not personally liable for any act or
failure to act of any predecessor Trustee, except as required under ERISA. With
the approval of the Employer and the Advisory Committee, a successor Trustee,
with respect to the Plan, may accept the account rendered and the property
delivered to it by a predecessor Trustee without incurring any liability or
responsibility for so doing.
10.14 VALUATION OF TRUST. The Trustee must value the Trust Fund as of
------------------
each Accounting Date to determine the fair market value of each Participant's
Accrued Benefit in the Trust. The Trustee also must value the Trust Fund on
such other valuation dates as directed in writing by the Advisory Committee or
as required by the Employer's Adoption Agreement.
10.15 LIMITATION ON LIABILITY - IF INVESTMENT MANAGER. ANCILLARY TRUSTEE
------------------------------------------------------------------
OR INDEPENDENT FIDUCIARY APPOINTED. The Trustee is not liable for the acts or
- ----------------------------------
omissions of any Investment Manager the Advisory Committee may appoint, nor is
the Trustee under any obligation to invest or otherwise manage any asset of the
Plan which is subject to the management of a properly appointed Investment
Manager. The Advisory Committee, the Trustee and any properly appointed
Investment Manager may execute a letter agreement as a part of this Plan
delineating the duties, responsibilities and liabilities of the Investment
Manager with respect to any part of the Trust
<PAGE>
Fund under the control of the Investment Manager.
The limitation on liability described in this Section 10.15 also applies to
the acts or omissions of any ancillary trustee or independent fiduciary properly
appointed under Section 10.17 of the Plan. However, if a discretionary Trustee,
pursuant to the delegation described in Section 10.17 of the Plan, appoints an
ancillary trustee, the discretionary Trustee is responsible for the periodic
review of the ancillary trustee's actions and must exercise its delegated
authority in accordance with the terms of the Plan and in a manner consistent
with ERISA. The Employer, the discretionary Trustee and an ancillary trustee may
execute a letter agreement as a part of this Plan delineating any
indemnification agreement between the parties.
10.16 INVESTMENT IN GROUP TRUST FUND. The Employer, by adopting this
------------------------------
Plan, specifically authorizes the Trustee to invest all or any portion of the
assets comprising the Trust Fund in any group trust fund which at the time of
the investment provides for the pooling of the assets of plans qualified under
Code (S)401(a). This authorization applies solely to a group trust fund exempt
from taxation under Code (S)501(a) and the trust agreement of which satisfies
the requirements of Revenue Ruling 81-100. The provisions of the group trust
fund agreement, as amended from time to time, are by this reference incorporated
within this Plan and Trust. The provisions of the group trust fund will govern
any investment of Plan assets in that fund. The Employer must specify in an
attachment to its adoption agreement the group trust fund(s) to which this
authorization applies. If the Trustee is acting as a nondiscretionary Trustee,
the investment in the group trust fund is available only in accordance with a
proper direction, by the Named Fiduciary, in accordance with Section 10.03[B].
Pursuant to paragraph (c) of Section 10.03[A] of the Plan, a Trustee has the
authority to invest in certain common trust funds and collective investment
funds without the need for the authorizing addendum described in this Section
10.16.
Furthermore, at the Employer's direction, the Trustee, for collective
investment purposes, may combine into one trust fund the Trust created under
this Plan with the Trust created under any other qualified retirement plan the
Employer maintains. However, the Trustee must maintain separate records of
account for the assets of each Trust in order to reflect properly each
Participant's Accrued Benefit under the plan(s) in which he is a Participant.
10.17 APPOINTMENT OF ANCILLARY TRUSTEE OR INDEPENDENT FIDUCIARY. The
---------------------------------------------------------
Employer, in writing, may appoint any person in any State to act as ancillary
trustee with respect to a designated portion of the Trust Fund. An ancillary
trustee must acknowledge in writing its acceptance of the terms and conditions
of its appointment as ancillary trustee and its fiduciary status under ERISA.
The ancillary trustee has the rights, powers, duties and discretion as the
Employer may delegate, subject to any limitations or directions specified in the
instrument evidencing appointment of the ancillary trustee and to the terms of
the Plan or of ERISA. The investment powers delegated to the ancillary trustee
may include any investment powers available under Section 10.03 of the Plan
including the right to invest any portion of the assets of the Trust Fund in a
common trust fund, as described in Code (S)584, or in any collective investment
fund, the provisions of which govern the investment of such assets and which the
Plan incorporates by this reference, but only if the ancillary trustee is a bank
or similar financial institution supervised by the United States or by a State
and the ancillary trustee (or its affiliate, as defined in Code (S)1504)
maintains the common trust fund or collective investment fund exclusively for
the collective investment of money contributed by the ancillary trustee (or its
affiliate) in a trustee capacity and which conforms to the rules of the
Comptroller of the Currency. The Employer also may appoint as an ancillary
trustee, the trustee of any group trust fund designated for investment pursuant
to the provisions of Section 10.16 of the Plan.
The ancillary trustee may resign its position at any time by providing at
least 30 days' advance
<PAGE>
written notice to the Employer, unless the Employer waives this notice
requirement. The Employer, in writing, may remove an ancillary trustee at any
time. In the event of resignation or removal, the Employer may appoint another
ancillary trustee, return the assets to the control and management of the
Trustee or receive such assets in the capacity of ancillary trustee. The
Employer may delegate its responsibilities under this Section 10.17 to a
discretionary Trustee under the Plan, but not to a nondiscretionary Trustee or
to a Custodian, subject to the acceptance by the discretionary Trustee of that
delegation.
If the U.S. Department of Labor ("the Department") requires engagement of
an independent fiduciary to have control or management of all or a portion of
the Trust Fund, the Employer will appoint such independent fiduciary, as
directed by the Department. The independent fiduciary will have the duties,
responsibilities and powers prescribed by the Department and will exercise those
duties, responsibilities and powers in accordance with the terms, restrictions
and conditions established by the Department and, to the extent not inconsistent
with ERISA, the terms of the Plan. The independent fiduciary must accept its
appointment in writing and must acknowledge its status as a fiduciary of the
Plan.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE XI
PROVISIONS RELATING TO INSURANCE AND INSURANCE COMPANY
11.01 INSURANCE BENEFIT. The Employer may elect to provide incidental
-----------------
life insurance benefits for insurable Participants who consent to life insurance
benefits by signing the appropriate insurance company application form. The
Trustee will not purchase any incidental life insurance benefit for any
Participant prior to an allocation to the Participant's Account. At an insured
Participant's written direction, the Trustee will use all or any portion of the
Participant's nondeductible voluntary contributions, if any, to pay insurance
premiums covering the Participant's life. This Section 11.01 also authorizes
the purchase of life insurance, for the benefit of the Participant, on the life
of a family member of the Participant or on any person in whom the Participant
has an insurable interest. However, if the policy is on the joint lives of the
Participant and another person, the Trustee may not maintain that policy if that
other person predeceases the Participant.
The Employer will direct the Trustee as to the insurance company and
insurance agent through which the Trustee is to purchase the insurance
contracts, the amount of the coverage and the applicable dividend plan. Each
application for a policy, and the policies themselves, must designate the
Trustee as sole owner, with the right reserved to the Trustee to exercise any
right or option contained in the policies, subject to the terms and provisions
of this Agreement. The Trustee must be the named Beneficiary for the Account of
the insured Participant. Proceeds of insurance contracts paid to the
Participant's Account under this Article XI are subject to the distribution
requirements of Article V and of Article VI. The Trustee will not retain any
such proceeds for the benefit of the Trust.
The Trustee will charge the premiums on any incidental benefit insurance
contract covering the life of a Participant against the Account of that
Participant. The Trustee will hold all incidental benefit insurance contracts
issued under the Plan as assets of the Trust created under the Plan.
(A) INCIDENTAL INSURANCE BENEFITS. The aggregate of life insurance premiums
paid for the benefit of a Participant, at all times, may not exceed the
following percentages of the aggregate of the Employer's contributions allocated
to any Participant's Account: (i) 49% in the case of the purchase of ordinary
life insurance contracts; or (ii) 25% in the case of the purchase of term life
insurance or universal life insurance contracts. If the Trustee purchases a
combination of ordinary life insurance contract(s) and term life insurance or
universal life insurance contract(s), then the sum of one-half of the premiums
paid for the ordinary life insurance contract(s) and the premiums paid for the
term life insurance or universal life insurance contract(s) may not exceed 25%
of the Employer contributions allocated to any Participant's Account.
(B) EXCEPTION FOR CERTAIN PROFIT SHARING PLANS. If the Employer's Plan is a
profit sharing plan, the incidental insurance benefits requirement does not
apply to the Plan if the Plan purchases life insurance benefits only from
Employer contributions accumulated in the Participant's Account for at least two
years (measured from the allocation date).
11.02 LIMITATION ON LIFE INSURANCE PROTECTION. The Trustee will not
---------------------------------------
continue any life insurance protection for any Participant beyond his annuity
starting date (as defined in Article VI). If the Trustee holds any incidental
benefit insurance contract(s) for the benefit of a Participant when he
terminates his employment (other than by reason of death), the Trustee must
proceed as follows:
(a) If the entire cash value of the contract(s) is vested in the
terminating Participant, or if the contract(s) will have no cash value at
the end of the policy year in which termination of
<PAGE>
employment occurs, the Trustee will transfer the contract(s) to the
Participant endorsed so as to vest in the transferee all right, title and
interest to the contract(s), free and clear of the Trust; subject however,
to restrictions as to surrender or payment of benefits as the issuing
insurance company may permit and as the Advisory Committee directs;
(b) If only part of the cash value of the contract(s) is vested in the
terminating Participant, the Trustee, to the extent the Participant's
interest in the cash value of the contract(s) is not vested, may adjust the
Participant's interest in the value of his Account attributable to Trust
assets other than incidental benefit insurance contracts and proceed as in
(a), or the Trustee must effect a loan from the issuing insurance company
on the sole security of the contract(s) for an amount equal to the
difference between the cash value of the contract(s) at the end of the
policy year in which termination of employment occurs and the amount of the
cash value that is vested in the terminating Participant, and the Trustee
must transfer the contract(s) endorsed so as to vest in the transferee all
right, title and interest to the contract(s), free and clear of the Trust;
subject however, to the restrictions as to surrender or payment of benefits
as the issuing insurance company may permit and the Advisory Committee
directs;
(c) If no part of the cash value of the contract(s) is vested in the
terminating Participant, the Trustee must surrender the contract(s) for
cash proceeds as may be available.
In accordance with the written direction of the Advisory Committee, the
Trustee will make any transfer of contract(s) under this Section 11.02 on the
Participant's annuity starting date (or as soon as administratively practicable
after that date). The Trustee may not transfer any contract under this Section
11.02 which contains a method of payment not specifically authorized by Article
VI or which fails to comply with the joint and survivor annuity requirements, if
applicable, of Article VI. In this regard, the Trustee either must convert such
a contract to cash and distribute the cash instead of the contract, or before
making the transfer, require the issuing company to delete the unauthorized
method of payment option from the contract.
11.03 DEFINITIONS. For purposes of this Article XI:
-----------
(a) "Policy" means an ordinary life insurance contract or a term life
insurance contract issued by an insurer on the life of a Participant.
(b) "Issuing insurance company" is any life insurance company which has
issued a policy upon application by the Trustee under the terms of this
Agreement.
(c) "Contract" or "Contracts" means a policy of insurance. In the event
of any conflict between the provisions of this Plan and the terms of any
contract or policy of insurance issued in accordance with this Article XI,
the provisions of the Plan control.
(d) "Insurable Participant" means a Participant to whom an insurance
company, upon an application being submitted in accordance with the Plan,
will issue insurance coverage, either as a standard risk or as a risk in an
extra mortality classification.
11.04 DIVIDEND PLAN. The dividend plan is premium reduction unless the
-------------
Advisory Committee directs the Trustee to the contrary. The Trustee must use
all dividends for a contract to purchase insurance benefits or additional
insurance benefits for the Participant on whose life the insurance company has
issued the contract. Furthermore, the Trustee must arrange, where possible, for
all policies issued on the lives of Participants under the Plan to have the same
premium due date and all ordinary life
<PAGE>
insurance contracts to contain guaranteed cash values with as uniform basic
options as are possible to obtain. The term "dividends" includes policy
dividends, refunds of premiums and other credits.
11.05 INSURANCE COMPANY NOT A PARTY TO AGREEMENT. No insurance company,
------------------------------------------
solely in its capacity as an issuing insurance company, is a party to this
Agreement nor is the company responsible for its validity.
11.06 INSURANCE COMPANY NOT RESPONSIBLE FOR TRUSTEE'S ACTIONS. No
-------------------------------------------------------
insurance company, solely in its capacity as an issuing insurance company, need
examine the terms of this Agreement nor is responsible for any action taken by
the Trustee.
11.07 INSURANCE COMPANY RELIANCE ON TRUSTEE'S SIGNATURE. For the purpose
-------------------------------------------------
of making application to an insurance company and in the exercise of any right
or option contained in any policy, the insurance company may rely upon the
signature of the Trustee and is saved harmless and completely discharged in
acting at the direction and authorization of the Trustee.
11.08 ACQUITTANCE. An insurance company is discharged from all liability
-----------
for any amount paid to the Trustee or paid in accordance with the direction of
the Trustee, and is not obliged to see to the distribution or further
application of any moneys it so pays.
11.09 DUTIES OF INSURANCE COMPANY. Each insurance company must keep such
---------------------------
records, make such identification of contracts, funds and accounts within funds,
and supply such information as may be necessary for the proper administration of
the Plan under which it is carrying insurance benefits.
Note: The provisions of this Article XI are not applicable, and the Plan
may not invest in insurance contracts, if a Custodian signatory to the Adoption
Agreement is a bank which has not acquired trust powers from its governing state
banking authority.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE XII
MISCELLANEOUS
12.01 EVIDENCE. Anyone required to give evidence under the terms of the
--------
Plan may do so by certificate, affidavit, document or other information which
the person to act in reliance may consider pertinent, reliable and genuine, and
to have been signed, made or presented by the proper party or parties. The
Advisory Committee and the Trustee are fully protected in acting and relying
upon any evidence described under the immediately preceding sentence.
12.02 NO RESPONSIBILITY FOR EMPLOYER ACTION. Neither the Trustee nor the
-------------------------------------
Advisory Committee has any obligation or responsibility with respect to any
action required by the Plan to be taken by the Employer, any Participant or
eligible Employee, or for the failure of any of the above persons to act or make
any payment or contribution, or to otherwise provide any benefit contemplated
under this Plan. Furthermore, the Plan does not require the Trustee or the
Advisory Committee to collect any contribution required under the Plan, or to
determine the correctness of the amount of any Employer contribution. Neither
the Trustee nor the Advisory Committee need inquire into or be responsible for
any action or failure to act on the part of the others, or on the part of any
other person who has any responsibility regarding the management, administration
or operation of the Plan, whether by the express terms of the Plan or by a
separate agreement authorized by the Plan or by the applicable provisions of
ERISA. Any action required of a corporate Employer must be by its Board of
Directors or its designate.
12.03 FIDUCIARIES NOT INSURERS. The Trustee, the Advisory Committee, the
------------------------
Plan Administrator and the Employer in no way guarantee the Trust Fund from loss
or depreciation. The Employer does not guarantee the payment of any money which
may be or becomes due to any person from the Trust Fund. The liability of the
Advisory Committee and the Trustee to make any payment from the Trust Fund at
any time and all times is limited to the then available assets of the Trust.
12.04 WAIVER OF NOTICE. Any person entitled to notice under the Plan may
----------------
waive the notice, unless the Code or Treasury regulations prescribe the notice
or ERISA specifically or impliedly prohibits such a waiver.
12.05 SUCCESSORS. The Plan is binding upon all persons entitled to
----------
benefits under the Plan, their respective heirs and legal representatives, upon
the Employer, its successors and assigns, and upon the Trustee, the Advisory
Committee, the Plan Administrator and their successors.
12.06 WORD USAGE. Words used in the masculine also apply to the feminine
----------
where applicable, and wherever the context of the Employer's Plan dictates, the
plural includes the singular and the singular includes the plural.
12.07 STATE LAW. The law of the state of the Employer's principal place
---------
of business (unless otherwise designated in an addendum to the Employer's
Adoption Agreement) will determine all questions arising with respect to the
provisions of this Agreement except to the extent superseded by Federal law.
12.08 EMPLOYER'S RIGHT TO PARTICIPATE. If the Employer's Plan fails to
-------------------------------
qualify or to maintain qualification or if the Employer makes any amendment or
modification to a provision of this Plan (other than a proper completion of an
elective provision under the Adoption Agreement or the attachment of an addendum
authorized by the Plan or by the Adoption Agreement), the Employer may no longer
participate under this Prototype Plan. Furthermore, if the Employer no longer
is a client of the
<PAGE>
Regional Prototype Sponsor, pursuant to Section 13.03 of the Plan, will result
in the discontinuance of the Employer's participation in this Prototype Plan
unless it resumes its client relationship with the Regional Prototype Sponsor.
If the Employer is not entitled to participate under this Prototype Plan, the
Employer's Plan is an individually-designed plan and the reliance procedures
specified in the applicable Adoption Agreement no longer will apply.
12.09 EMPLOYMENT NOT GUARANTEED. Nothing contained in this Plan, or with
-------------------------
respect to the establishment of the Trust, or any modification or amendment to
the Plan or Trust, or in the creation of any Account, or the payment of any
benefit, gives any Employee, Employee-Participant or any Beneficiary any right
to continue employment, any legal or equitable right against the Employer, or
Employee of the Employer, or against the Trustee, or its agents or employees, or
against the Plan Administrator, except as expressly provided by the Plan, the
Trust, ERISA or by a separate agreement.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE XIII
EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
13.01 EXCLUSIVE BENEFIT. Except as provided under Article III, the
-----------------
Employer has no beneficial interest in any asset of the Trust and no part of any
asset in the Trust may ever revert to or be repaid to an Employer, either
directly or indirectly; nor, prior to the satisfaction of all liabilities with
respect to the Participants and their Beneficiaries under the Plan, may any part
of the corpus or income of the Trust Fund, or any asset of the Trust, be (at any
time) used for, or diverted to, purposes other than the exclusive benefit of the
Participants or their Beneficiaries. However, if the Commissioner of Internal
Revenue, upon the Employer's request for initial approval of this Plan,
determines the Trust created under the Plan is not a qualified trust exempt from
Federal income tax, then (and only then) the Trustee, upon written notice from
the Employer, will return the Employer's contributions (and increment
attributable to the contributions) to the Employer. The Trustee must make the
return of the Employer contribution under this Section 13.01 within one year of
a final disposition of the Employer's request for initial approval of the Plan.
The Employer's Plan and Trust will terminate upon the Trustee's return of the
Employer's contributions.
13.02 AMENDMENT BY EMPLOYER. The Employer has the right at any time and
---------------------
from time to time:
(a) To amend the elective provisions of the Adoption Agreement in any
manner it deems necessary or advisable in order to qualify (or maintain
qualification of) this Plan and the Trust created under it under the
provisions of Code (S)401(a);
(b) To amend the Plan to allow the Plan to operate under a waiver of the
minimum funding requirement; and
(c) To amend this Agreement in any other manner.
No amendment may authorize or permit any of the Trust Fund (other than the
part which is required to pay taxes and administration expenses) to be used for
or diverted to purposes other than for the exclusive benefit of the Participants
or their Beneficiaries or estates. No amendment may cause or permit any portion
of the Trust Fund to revert to or become a property of the Employer. The
Employer also may not make any amendment which affects the rights, duties or
responsibilities of the Trustee, the Plan Administrator or the Advisory
Committee without the written consent of the affected Trustee, the Plan
Administrator or the affected member of the Advisory Committee. The Employer
must make all amendments in writing. Each amendment must state the date to
which it is either retroactively or prospectively effective. See Section 12.08
for the effect of certain amendments adopted by the Employer.
(A) CODE (S)411(D)(6) PROTECTED BENEFITS. An amendment (including the adoption
of this Plan as a restatement of an existing plan) may not decrease a
Participant's Accrued Benefit, except to the extent permitted under Code
(S)412(c)(8), and may not reduce or eliminate Code (S)411(d)(6) protected
benefits determined immediately prior to the adoption date (or, if later, the
effective date) of the amendment. An amendment reduces or eliminates Code
(S)411(d)(6) protected benefits if the amendment has the effect of either (1)
eliminating or reducing an early retirement benefit or a retirement-type subsidy
(as defined in Treasury regulations), or (2) except as provided by Treasury
regulations, eliminating an optional form of benefit. The Advisory Committee
must disregard an amendment to the extent application of the amendment would
fail to satisfy this paragraph. If the Advisory Committee must disregard an
amendment because the amendment would violate clause (1) or clause (2), the
Advisory Committee must maintain a
<PAGE>
schedule of the early retirement option or other optional forms of benefit the
Plan must continue for the affected Participants.
13.03 AMENDMENT BY REGIONAL PROTOTYPE PLAN SPONSOR. The Regional
--------------------------------------------
Prototype Plan Sponsor, without the Employer's consent, may amend the Plan and
Trust, from time to time, in order to conform the Plan and Trust to any
requirement for qualification of the Plan and Trust under the Internal Revenue
Code. The Regional Prototype Plan Sponsor may not amend the Plan in any manner
which would modify any election made by the Employer under the Plan without the
Employer's written consent. Furthermore, the Regional Prototype Plan Sponsor
may not amend the Plan in any manner which would violate the proscription of
Section 13.02. A Trustee does not have the power to amend the Plan or Trust.
13.04 DISCONTINUANCE. The Employer has the right, at any time, to suspend
--------------
or discontinue its contributions under the Plan, and to terminate, at any time,
this Plan and the Trust created under this Agreement. The Plan will terminate
upon the first to occur of the following:
(a) The date terminated by action of the Employer;
(b) The dissolution or merger of the Employer, unless the successor
makes provision to continue the Plan, in which event the successor must
substitute itself as the Employer under this Plan. Any termination of the
Plan resulting from this paragraph (b) is not effective until compliance
with any applicable notice requirements under ERISA.
13.05 FULL VESTING ON TERMINATION. Upon either full or partial
---------------------------
termination of the Plan, or, if applicable, upon complete discontinuance of
profit sharing plan contributions to the Plan, an affected Participant's right
to his Accrued Benefit is 100% Nonforfeitable, irrespective of the
Nonforfeitable percentage which otherwise would apply under Article V.
13.06 MERGER/DIRECT TRANSFER. The Trustee may not consent to, or be. a
----------------------
party to, any merger or consolidation with another plan, or to a transfer of
assets or liabilities to another plan, unless immediately after the merger,
consolidation or transfer, the surviving Plan provides each Participant a
benefit equal to or greater than the benefit each Participant would have
received had the Plan terminated immediately before the merger or consolidation
or transfer. The Trustee possesses the specific authority to enter into merger
agreements or direct transfer of assets agreements with the trustees of other
retirement plans described in Code (S)401 (a), including an elective transfer,
and to accept the direct transfer of plan assets, or to transfer plan assets, as
a party to any such agreement.
The Trustee may accept a direct transfer of plan assets on behalf of an
Employee prior to the date the Employee satisfies the Plan's eligibility
conditions. If the Trustee accepts such a direct transfer of plan assets, the
Advisory Committee and Trustee must treat the Employee as a Participant for all
purposes of the Plan except the Employee is not a Participant for purposes of
sharing in Employer contributions or Participant forfeitures under the Plan
until he actually becomes a Participant in the Plan.
(A) ELECTIVE TRANSFERS. The Trustee, after August 9, 1988, may not consent to,
or be a party to a merger, consolidation or transfer of assets with a defined
benefit plan, except with respect to an elective transfer, or unless the
transferred benefits are in the form of paid-up individual annuity contracts
guaranteeing the payment of the transferred benefits in accordance with the
terms of the transferor plan and in a manner consistent with the Code and with
ERISA. The Trustee will hold, administer and distribute the transferred assets
as a part of the Trust Fund and the Trustee must maintain a separate Employer
contribution Account for the benefit of the Employee on whose behalf the Trustee
accepted the
<PAGE>
transfer in order to reflect the value of the transferred assets. Unless a
transfer of assets to this Plan is an elective transfer, the Plan will preserve
all Code (S)411(d)(6) protected benefits with respect to those transferred
assets, in the manner described in Section 13.02. A transfer is an elective
transfer if: (1) the transfer satisfies the first paragraph of this Section
13.06; (2) the transfer is voluntary, under a fully informed election by the
Participant; (3) the Participant has an alternative that retains his Code
(S)411(d)(6) protected benefits (including an option to leave his benefit in the
transferor plan, if that plan is not terminating); (4) the transfer satisfies
the applicable spousal consent requirements of the Code; (5) the transferor plan
satisfies the joint and survivor notice requirements of the Code, if the
Participant's transferred benefit is subject to those requirements; (6) the
Participant has a right to immediate distribution from the transferor plan, in
lieu of the elective transfer; (7) the transferred benefit is at least the
greater of the single sum distribution provided by the transferor plan for which
the Participant is eligible or the present value of the Participant's accrued
benefit under the transferor plan payable at that plan's normal retirement age;
(8) the Participant has a 100% Nonforfeitable interest in the transferred
benefit; and (9) the transfer otherwise satisfies applicable Treasury
regulations. An elective transfer may occur between qualified plans of any type.
Any direct transfer of assets from a defined benefit plan after August 9, 1988,
which does not satisfy the requirements of this paragraph will render the
Employer's Plan individually designed. See Section 12.08.
(B) DISTRIBUTION RESTRICTIONS UNDER CODE (S)401(K). If the Plan receives a
direct transfer (by merger or otherwise) of elective contributions (or amounts
treated as elective contributions) under a Plan with a Code (S)401(k)
arrangement, the distribution restrictions of Code (S)(S)401(k)(2) and (10)
continue to apply to those transferred elective contributions.
13.07 TERMINATION.
-----------
(A) PROCEDURE. Upon termination of the Plan, the distribution provisions of
Article VI remain operative, with the following exceptions:
(1) if the present value of the Participant's Nonforfeitable Accrued
Benefit does not exceed $3,500, the Advisory Committee will direct the
Trustee to distribute the Participant's Nonforfeitable Accrued Benefit to
him in lump sum as soon as administratively practicable after the Plan
terminates; and
(2) if the present value of the Participant's Nonforfeitable Accrued
Benefit exceeds $3,500, the Participant or the Beneficiary, in addition to
the distribution events permitted under Article VI, may elect to have the
Trustee commence distribution of his Nonforfeitable Accrued Benefit as soon
as administratively practicable after the Plan terminates.
To liquidate the Trust, the Advisory Committee will purchase a deferred
annuity contract for each Participant which protects the Participant's
distribution rights under the Plan, if the Participant's Nonforfeitable Accrued
Benefit exceeds $3,500 and the Participant does not elect an immediate
distribution pursuant to Paragraph (2).
If the Employer's Plan is a profit sharing plan, in lieu of the preceding
provisions of this Section 13.07 and the distribution provisions of Article VI,
the Advisory Committee will direct the Trustee to distribute each Participant's
Nonforfeitable Accrued Benefit, in lump sum, as soon as administratively
practicable after the termination of the Plan, irrespective of the present value
of the Participant's Nonforfeitable Accrued Benefit and whether the Participant
consents to that distribution. This paragraph does not apply if: (1) the Plan
provides an annuity option; or (2) as of the period between the Plan termination
date and the final distribution of assets, the Employer maintains any other
defined contribution
<PAGE>
plan (other than an ESOP). The Employer, in an addendum to its Adoption
Agreement numbered 13.07, may elect not to have this paragraph apply.
The Trust will continue until the Trustee in accordance with the direction
of the Advisory Committee has distributed all of the benefits under the Plan.
On each valuation date, the Advisory Committee will credit any part of a
Participant's Accrued Benefit retained in the Trust with its proportionate share
of the Trust's income, expenses, gains and losses, both realized and unrealized.
Upon termination of the Plan, the amount, if any, in a suspense account under
Article III will revert to the Employer, subject to the conditions of the
Treasury regulations permitting such a reversion. A resolution or amendment to
freeze all future benefit accrual but otherwise to continue maintenance of this
Plan, is not a termination for purposes of this Section 13.07.
(B) DISTRIBUTION RESTRICTIONS UNDER CODE (S)401(K). If the Employer's Plan
includes a Code (S)401(k) arrangement or if transferred assets described in
Section 13.06 are subject to the distribution restrictions of Code
(S)(S)401(k)(2) and (10), the special distribution provisions of this Section
13.07 are subject to the restrictions of this paragraph. The portion of the
Participant's Nonforfeitable Accrued Benefit attributable to elective
contributions (or to amounts treated under the Code (S)401(k) arrangement as
elective contributions) is not distributable on account of Plan termination, as
described in this Section 13.07, unless: (a) the Participant otherwise is
entitled under the Plan to a distribution of that portion of his Nonforfeitable
Accrued Benefit; or (b) the Plan termination occurs without the establishment of
a successor plan. A successor plan under clause (b) is a defined contribution
plan (other than an ESOP) maintained by the Employer (or by a related employer)
at the time of the termination of the Plan or within the period ending twelve
months after the final distribution of assets. A distribution made after March
31, 1988, pursuant to clause (b), must be part of a lump sum distribution to the
Participant of his Nonforfeitable Accrued Benefit.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE XIV
CODE (S)401(K) AND CODE (S)401(M) ARRANGEMENTS
14.01 APPLICATION. This Article XIV applies to an Employer's Plan only if
-----------
the Employer is maintaining its Plan under a Code (S)401(k) Adoption Agreement.
14.02 CODE (S)401(k) ARRANGEMENT. The Employer will elect in Section 3.01
--------------------------
of its Adoption Agreement the terms of the Code (S)401(k) arrangement, if any,
under the Plan. If the Employer's Plan is a Standardized Plan, the Code
(S)401(k) arrangement must be a salary reduction arrangement. If the Employer's
Plan is a Nonstandardized Plan, the Code (S)401(k) arrangement may be a salary
reduction arrangement or a cash or deferred arrangement.
(A) SALARY REDUCTION ARRANGEMENT. If the Employer elects a salary reduction
arrangement, any Employee eligible to participate in the Plan may file a salary
reduction agreement with the Advisory Committee. The salary reduction agreement
may not be effective earlier than the following date which occurs last: (i) the
Employee's Plan Entry Date (or, in the case of a reemployed Employee, his
reparticipation date under Article II); (ii) the execution date of the
Employee's salary reduction agreement; (iii) the date the Employer adopts the
Code (S)401(k) arrangement by executing the Adoption Agreement; or (iv) the
effective date of the Code (S)401(k) arrangement, as specified in the Employer's
Adoption Agreement. Regarding clause (i), an Employee subject to the Break in
Service rule of Section 2.03(B) of the Plan may not enter into a salary
reduction agreement until the Employee has completed a sufficient number of
Hours of Service to receive credit for a Year of Service (as defined in Section
2.02) following his reemployment commencement date. A salary reduction
agreement must specify the amount of Compensation (as defined in Section 1.12)
or percentage of Compensation the Employee wishes to defer. The salary
reduction agreement will apply only to Compensation which becomes currently
available to the Employee after the effective date of the salary reduction
agreement. The Employer will apply a reduction election to all Compensation
(and to increases in such Compensation) unless the Employee specifies in his
salary reduction agreement to limit the election to certain Compensation. The
Employer will specify in Adoption Agreement Section 3.01 the rules and
restrictions applicable to the Employees salary reduction agreements.
(B) CASH OR DEFERRED ARRANGEMENT. If the Employer elects a cash or deferred
arrangement, a Participant may elect to make a cash election against his
proportionate share of the Employer's Cash or Deferred Contribution, in
accordance with the Employer's elections in Adoption Agreement Section 3.01. A
Participant's proportionate share of the Employer's Cash or Deferred
Contribution is the percentage of the total Cash or Deferred Contribution which
bears the same ratio that the Participant's Compensation for the Plan Year bears
to the total Compensation of all Participants for the Plan Year. For purposes
of determining each Participant's proportionate share of the Cash or Deferred
Contribution, a Participant's Compensation is his Compensation as determined
under Section 1.12 of the Plan (as modified by Section 3.06 for allocation
purposes), excluding any effect the proportionate share may have on the
Participant's Compensation for the Plan Year. The Advisory Committee will
determine the proportionate share prior to the Employer's actual contribution to
the Trust, to provide the Participants the opportunity to file cash elections.
The Employer will pay directly to the Participant the portion of his
proportionate share the Participant has elected to receive in cash.
(C) ELECTION NOT TO PARTICIPATE. A Participant's or Employee's election not to
participate, pursuant to Section 2.06, includes his right to enter into a salary
reduction agreement or to share in the allocation of a Cash or Deferred
Contribution, unless the Participant or Employee limits the effect of the
election to the non-401(k) portions of the Plan.
<PAGE>
14.03 DEFINITIONS. For purposes of this Article XIV:
-----------
(a) "Highly Compensated Employee" means an Eligible Employee who
satisfies the definition in Section 1.09 of the Plan. Family members
aggregated as a single Employee under Section 1.09 constitute a single
Highly Compensated Employee, whether a particular family member is a Highly
Compensated Employee or a Nonhighly Compensated Employee without the
application of family aggregation.
(b) "Nonhighly Compensated Employee" means an Eligible Employee who is
not a Highly Compensated Employee and who is not a family member treated as
a Highly Compensated Employee.
(c) "Eligible Employee" means, for purposes of the ADP test described in
Section 14.08, an Employee who is eligible to enter into a salary reduction
agreement for the Plan Year, irrespective of whether he actually enters
into such an agreement, and a Participant who is eligible for an allocation
of the Employer's Cash or Deferred Contribution for the Plan Year. For
purposes of the ACP test described in Section 14.09, an "Eligible Employee"
means a Participant who is eligible to receive an allocation of matching
contributions (or would be eligible if he made the type of contributions
necessary to receive an allocation of matching contributions) and a
Participant who is eligible to make nondeductible contributions,
irrespective of whether he actually makes nondeductible contributions. An
Employee continues to be an Eligible Employee during a period the Plan
suspends the Employee's right to make elective deferrals or nondeductible
contributions following a hardship distribution.
(d) "Highly Compensated Group" means the group of Eligible Employees who
are Highly Compensated Employees for the Plan Year.
(e) "Nonhighly Compensated Group" means the group of Eligible Employees
who are Nonhighly Compensated Employees for the Plan Year.
(f) "Compensation" means, except as specifically provided in this
Article XIV, Compensation as defined for nondiscrimination purposes in
Section 1.12(B) of the Plan. To compute an Employee's ADP or ACP, the
Advisory Committee may limit Compensation taken into account to
Compensation received only for the portion of the Plan Year in which the
Employee was an Eligible Employee and only for the portion of the Plan Year
in which the Plan or the Code (S)401(k) arrangement was in effect.
(g) "Deferral contributions" are Salary Reduction Contributions and Cash
or Deferred Contributions the Employer contributes to the Trust on behalf
of an Eligible Employee, irrespective of whether, in the case of Cash or
Deferred Contributions, the contribution is at the election of the
Employee. For Salary Reduction Contributions, the terms "deferral
contributions" and "elective deferrals" have the same meaning.
(h) "Elective deferrals" are all Salary Reduction Contributions and that
portion of any Cash or Deferred Contribution which the Employer contributes
to the Trust at the election of an Eligible Employee. Any portion of a
Cash or Deferred Contribution contributed to the Trust because of the
Employee's failure to make a cash election is an elective deferral.
However, any portion of a Cash or Deferred Contribution over which the
Employee does not have a cash election is not an elective deferral.
Elective deferrals do not include amounts which have become currently
available to the Employee prior to the election nor amounts designated as
nondeductible
<PAGE>
contributions at the time of deferral or contribution.
(i) "Matching contributions" are contributions made by the Employer on
account of elective deferrals under a Code (S)401(k) arrangement or on
account of employee contributions. Matching contributions also include
Participant forfeitures allocated on account of such elective deferrals or
employee contributions.
(j) "Nonelective contributions" are contributions made by the Employer
which are not subject to a deferral election by an Employee and which are
not matching contributions.
(k) "Qualified matching contributions" are matching contributions which
are 100% Nonforfeitable at all times and which are subject to the
distribution restrictions described in paragraph (m). Matching
contributions are not 100% Nonforfeitable at all times if the Employee has
a 100% Nonforfeitable interest because of his Years of Service taken into
account under a vesting schedule. Any matching contributions allocated to a
Participant's Qualified Matching Contributions Account under the Plan
automatically satisfy the definition of qualified matching contributions.
(l) "Qualified nonelective contributions" are nonelective contributions
which are 100% Nonforfeitable at all times and which are subject to the
distribution restrictions described in paragraph (m). Nonelective
contributions are not 100% Nonforfeitable at all times if the Employee has
a 100% Nonforfeitable interest because of his Years of Service taken into
account under a vesting schedule. Any nonelective contributions allocated
to a Participant's Qualified Nonelective Contributions Account under the
Plan automatically satisfy the definition of qualified nonelective
contributions.
(m) "Distribution restrictions" means the Employee may not receive a
distribution of the specified contributions (nor earnings on those
contributions) except in the event of (1) the Participant's death,
disability, termination of employment or attainment of age 59 1/2, (2)
financial hardship satisfying the requirements of Code (S)401(k) and the
applicable Treasury regulations, (3) a plan termination, without
establishment of a successor defined contribution plan (other than an
ESOP), (4) a sale of substantially all of the assets (within the meaning of
Code (S)409(d)(2)) used in a trade or business, but only to an employee who
continues employment with the corporation acquiring those assets, or (5) a
sale by a corporation of its interest in a subsidiary (within the meaning
of Code (S)409(d)(3)), but only to an employee who continues employment
with the subsidiary. For Plan Years beginning after December 31, 1988, a
distribution on account of financial hardship, as described in clause (2),
may not include earnings on elective deferrals credited as of a date later
than December 31, 1988, and may not include qualified matching
contributions and qualified nonelective contributions, nor any earnings on
such contributions, credited after December 31, 1988. A plan does not
violate the distribution restrictions if, instead of the December 31, 1988,
date in the preceding sentence the plan specifies a date not later than the
end of the last Plan Year ending before July 1, 1989. A distribution
described in clauses (3), (4) or (5), if made after March 31, 1988, must be
a lump sum distribution, as required under Code (S)401(k)(10).
(n) "Employee contributions" are contributions made by a Participant on
an after-tax basis, whether voluntary or mandatory, and designated, at the
time of contribution, as an employee (or nondeductible) contribution.
Elective deferrals and deferral contributions are not employee
contributions. Participant nondeductible contributions, made pursuant to
Section 4.01 of the Plan, are employee contributions.
<PAGE>
14.04 MATCHING CONTRIBUTIONS/EMPLOYEE CONTRIBUTIONS. The Employer may
---------------------------------------------
elect in Adoption Agreement Section 3.01 to provide matching contributions. The
Employer also may elect in Adoption Agreement Section 4.01 to permit or to
require a Participant to make nondeductible contributions.
(A) MANDATORY CONTRIBUTIONS. Any Participant nondeductible contributions
eligible for matching contributions are mandatory contributions. The Advisory
Committee will maintain a separate accounting, pursuant to Section 4.06 of the
Plan, to reflect the Participant's Accrued Benefit derived from his mandatory
contributions. The Employer, under Adoption Agreement Section 4.05, may
prescribe special distribution restrictions which will apply to the Mandatory
Contributions Account prior to the Participant's Separation from Service.
Following his Separation from Service, the general distribution provisions of
Article VI apply to the distribution of the Participant's Mandatory
Contributions Account.
14.05 TIME OF PAYMENT OF CONTRIBUTIONS. The Employer must make Salary
--------------------------------
Reduction Contributions to the Trust within an administratively reasonable
period of time after withholding the corresponding Compensation from the
Participant. Furthermore, the Employer must make Salary Reduction
Contributions, Cash or Deferred Contributions, Employer matching contributions
(including qualified Employer matching contributions) and qualified Employer
nonelective contributions no later than the time prescribed by the Code or by
applicable Treasury regulations. Salary Reduction Contributions and Cash or
Deferred Contributions are Employer contributions for all purposes under this
Plan, except to the extent the Code or Treasury regulations prohibit the use of
these contributions to satisfy the qualification requirements of the Code.
14.06 SPECIAL ALLOCATION PROVISIONS - DEFERRAL CONTRIBUTIONS MATCHING
---------------------------------------------------------------
CONTRIBUTIONS AND QUALIFIED NONELECTIVE CONTRIBUTIONS. To make allocations
- -----------------------------------------------------
under the Plan, the Advisory Committee must establish a Deferral Contributions
Account, a Qualified Matching Contributions Account, a Regular Matching
Contributions Account, a Qualified Nonelective Contributions Account and an
Employer Contributions Account for each Participant.
(A) DEFERRAL CONTRIBUTIONS. The Advisory Committee will allocate to each
Participant's Deferral Contributions Account the amount of Deferral
Contributions the Employer makes to the Trust on behalf of the Participant. The
Advisory Committee will make this allocation as of the last day of each Plan
Year unless, in Adoption Agreement Section 3.04, the Employer elects more
frequent allocation dates for salary reduction contributions.
(B) MATCHING CONTRIBUTIONS. The Employer must specify in its Adoption
Agreement whether the Advisory Committee will allocate matching contributions to
the Qualified Matching Contributions Account or to the Regular Matching
Contributions Account of each Participant. The Advisory Committee will make this
allocation as of the last day of each Plan Year unless, in Adoption Agreement
Section 3.04, the Employer elects more frequent allocation dates for matching
contributions.
(1) To the extent the Employer makes matching contributions under a
fixed matching contribution formula, the Advisory Committee will allocate
the matching contribution to the Account of the Participant on whose behalf
the Employer makes that contribution. A fixed matching contribution formula
is a formula under which the Employer contributes a certain percentage or
dollar amount on behalf of a Participant based on that Participant's
deferral contributions or nondeductible contributions eligible for a match,
as specified in Section 3.01 of the Employer's Adoption Agreement. The
Employer may contribute on a Participant's behalf under a specific matching
contribution formula only if the Participant satisfies the accrual
requirements for matching contributions specified in Section 3.06 of the
Employer's Adoption
<PAGE>
Agreement and only to the extent the matching contribution does not exceed
the Participant's annual additions limitation in Part 2 of Article III.
(2) To the extent the Employer makes matching contributions under a
discretionary formula, the Advisory Committee will allocate the
discretionary matching contributions to the Account of each Participant who
satisfies the accrual requirements for matching contributions specified in
Section 3.06 of the Employer's Adoption Agreement. The allocation of
discretionary matching contributions to a Participant's Account is in the
same proportion that each Participant's eligible contributions bear to the
total eligible contributions of all Participants. If the discretionary
formula is a tiered formula, the Advisory Committee will make this
allocation separately with respect to each tier of eligible contributions,
allocating in such manner the amount of the matching contributions made
with respect to that tier. "Eligible contributions" are the Participant's
deferral contributions or nondeductible contributions eligible for an
allocation of matching contributions, as specified in Section 3.01 of the
Employer's Adoption Agreement.
If the matching contribution formula applies both to deferral contributions
and to Participant nondeductible contributions, the matching contributions apply
first to deferral contributions. Furthermore, the matching contribution formula
does not apply to deferral contributions that are excess deferrals under Section
14.07. For this purpose: (a) excess deferrals relate first to deferral
contributions for the Plan Year not otherwise eligible for a matching
contribution; and (2) if the Plan Year is not a calendar year, the excess
deferrals for a Plan Year are the last elective deferrals made for a calendar
year. Under a Standardized Plan, an Employee forfeits any matching contribution
attributable to an excess contribution or to an excess aggregate contribution,
unless distributed pursuant to Sections 14.08 or 14.09. Under a Nonstandardized
Plan, this forfeiture rule applies only if specified in Adoption Agreement
Section 3.06. The provisions of Section 3.05 govern the treatment of any
forfeiture described in this paragraph, and the Advisory Committee will compute
a Participant's ACP under 14.09 by disregarding the forfeiture.
(C) QUALIFIED NONELECTIVE CONTRIBUTIONS. If the Employer, at the time of
contribution, designates a contribution to be a qualified nonelective
contribution for the Plan Year, the Advisory Committee will allocate that
qualified nonelective contribution to the Qualified Nonelective Contributions
Account of each Participant eligible for an allocation of that designated
contribution, as specified in Section 3.04 of the Employer's Adoption Agreement.
The Advisory Committee will make the allocation to each eligible Participant's
Account in the same ratio that the Participant's Compensation for the Plan Year
bears to the total Compensation of all eligible Participants for the Plan Year.
The Advisory Committee will determine a Participant's Compensation in accordance
with the general definition of Compensation under Section 1.12 of the Plan, as
modified by the Employer in Sections 1.12 and 3.06 of its Adoption Agreement.
(D) NONELECTIVE CONTRIBUTIONS. To the extent the Employer makes nonelective
contributions for the Plan Year which, at the time of contribution, it does not
designate as qualified nonelective contributions, the Advisory Committee will
allocate those contributions in accordance with the elections under Section 3.04
of the Employer's Adoption Agreement. For purposes of the special
nondiscrimination tests described in Sections 14.08 and 14.09, the Advisory
Committee may treat nonelective contributions allocated under this paragraph as
qualified nonelective contributions, if the contributions otherwise satisfy the
definition of qualified nonelective contributions.
14.07 ANNUAL ELECTIVE DEFERRAL LIMITATION.
-----------------------------------
(A) ANNUAL ELECTIVE DEFERRAL LIMITATION. An Employee's elective deferrals for
a calendar year beginning after December 31, 1986, may not exceed the 402(g)
limitation. The 402(g) limitation is the greater of $7,000 or the adjusted
amount determined by the Secretary of the Treasury. If, pursuant to a
<PAGE>
salary reduction agreement or pursuant to a cash or deferral election, the
Employer determines the Employee's elective deferrals to the Plan for a calendar
year would exceed the 402(g) limitation, the Employer will suspend the
Employee's salary reduction agreement, if any, until the following January 1 and
pay in cash the portion of a cash or deferral election which would result in the
Employee's elective deferrals for the calendar year exceeding the 402(g)
limitation. If the Advisory Committee determines an Employee's elective
deferrals already contributed to the Plan for a calendar year exceed the 402(g)
limitation, the Advisory Committee will distribute the amount in excess of the
402(g) limitation (the "excess deferral"), as adjusted for allocable income, no
later than April 15 of the following calendar year. If the Advisory Committee
distributes the excess deferral by the appropriate April 15, it may make the
distribution irrespective of any other provision under this Plan or under the
Code. The Advisory Committee will reduce the amount of excess deferrals for a
calendar year distributable to the Employee by the amount of excess
contributions (as determined in Section 14.08), if any, previously distributed
to the Employee for the Plan Year beginning in that calendar year.
If an Employee participates in another plan under which he makes elective
deferrals pursuant to a Code (S)401(k) arrangement, elective deferrals under a
Simplified Employee Pension, or salary reduction contributions to a tax-
sheltered annuity, irrespective of whether the Employer maintains the other
plan, he may provide the Advisory Committee a written claim for excess deferrals
made for a calendar year. The Employee must submit the claim no later than the
March 1 following the close of the particular calendar year and the claim must
specify the amount of the Employee's elective deferrals under this Plan which
are excess deferrals. If the Advisory Committee receives a timely claim, it
will distribute the excess deferral (as adjusted for allocable income) the
Employee has assigned to this Plan, in accordance with the distribution
procedure described in the immediately preceding paragraph.
(B) ALLOCABLE INCOME. For purposes of making a distribution of excess
deferrals pursuant to this Section 14.07, allocable income means net income or
net loss allocable to the excess deferrals for the calendar year in which the
Employee made the excess deferral, determined in a manner which is uniform,
nondiscriminatory and reasonably reflective of the manner used by the Plan to
allocate income to Participants' Accounts.
14.08 ACTUAL DEFERRAL PERCENTAGE ("ADP") TEST. For each Plan Year, the
---------------------------------------
Advisory Committee must determine whether the Plan's Code (S)401(k) arrangement
satisfies either of the following ADP tests:
(i) The average ADP for the Highly Compensated Group does not exceed 1.25
times the average ADP of the Nonhighly Compensated Group; or
(ii) The average ADP for the Highly Compensated Group does not exceed the
average ADP for the Nonhighly Compensated Group by more than two percentage
points (or the lesser percentage permitted by the multiple use limitation
in Section 14.10) and the average ADP for the Highly Compensated Group is
not more than twice the average ADP for the Nonhighly Compensated Group.
(A) CALCULATION OF ADP. The average ADP for a group is the average of the
separate ADPs calculated for each Eligible Employee who is a member of that
group. An Eligible Employee's ADP for a Plan Year is the ratio of the Eligible
Employee's deferral contributions for the Plan Year to the Employee's
Compensation for the Plan Year. For aggregated family members treated as a
single Highly Compensated Employee, the ADP of the family unit is the ADP
determined by combining the deferral contributions and Compensation of all
aggregated family members. A Nonhighly Compensated Employee's ADP does not
include elective deferrals made to this Plan or to any other Plan maintained by
the Employer, to the extent such elective deferrals exceed the 402(g) limitation
described in Section 14.07(A).
<PAGE>
The Advisory Committee, in a manner consistent with Treasury regulations,
may determine the ADPs of the Eligible Employees by taking into account
qualified nonelective contributions or qualified matching contributions, or
both, made to this Plan or to any other qualified Plan maintained by the
Employer. The Advisory Committee may not include qualified nonelective
contributions in the ADP test unless the allocation of nonelective contributions
is nondiscriminatory when the Advisory Committee takes into account all
nonelective contributions (including the qualified nonelective contributions)
and also when the Advisory Committee takes into account only the nonelective
contributions not used in either the ADP test described in this Section 14.08 or
the ACP test described in Section 14.09. For Plan Years beginning after
December 31, 1989, the Advisory Committee may not include in the ADP test any
qualified nonelective contributions or qualified matching contributions under
another qualified plan unless that plan has the same plan year as this Plan. The
Advisory Committee must maintain records to demonstrate compliance with the ADP
test, including the extent to which the Plan used qualified nonelective
contributions or qualified matching contributions to satisfy the test.
For Plan Years beginning prior to January 1, 1992, the Advisory Committee
may elect to apply a separate ADP test to each component group under the Plan.
Each component group separately must satisfy the commonality requirement of the
Code (S)401(k) regulations and the minimum coverage requirements of Code
(S)410(b). A component group consists of all the allocations and other
benefits, rights and features provided that group of Employees. An Employee may
not be part of more than one component group. The correction rules described in
this Section 14.08 apply separately to each component group.
(B) SPECIAL AGGREGATION RULE FOR HIGHLY COMPENSATED EMPLOYEES. To determine
the ADP of any Highly Compensated Employee, the deferral contributions taken
into account must include any elective deferrals made by the Highly Compensated
Employee under any other Code (S)401(k) arrangement maintained by the Employer,
unless the elective deferrals are to an ESOP. If the plans containing the Code
(S)401(k) arrangements have different plan years, the Advisory Committee will
determine the combined deferral contributions on the basis of the plan years
ending in the same calendar year.
(C) AGGREGATION OF CERTAIN CODE (S)401(K) ARRANGEMENTS. If the Employer treats
two plans as a unit for coverage or nondiscrimination purposes, the Employer
must combine the Code (S)401(k) arrangements under such plans to determine
whether either plan satisfies the ADP test. This aggregation rule applies to
the ADP determination for all Eligible Employees, irrespective of whether an
Eligible Employee is a Highly Compensated Employee or a Nonhighly Compensated
Employee. For Plan Years beginning after December 31, 1989, an aggregation of
Code (S)401(k) arrangements under this paragraph does not apply to plans which
have different plan years and, for Plan Years beginning after December 31, 1988,
the Advisory Committee may not aggregate an ESOP (or the ESOP portion of a plan)
with a non-ESOP plan (or non-ESOP portion of a plan).
(D) CHARACTERIZATION OF EXCESS CONTRIBUTIONS. If, pursuant to this Section
14.08, the Advisory Committee has elected to include qualified matching
contributions in the average ADP, the Advisory Committee will treat excess
contributions as attributable proportionately to deferral contributions and to
qualified matching contributions allocated on the basis of those deferral
contributions. If the total amount of a Highly Compensated Employee's excess
contributions for the Plan Year exceeds his deferral contributions or qualified
matching contributions for the Plan Year, the Advisory Committee will treat the
remaining portion of his excess contributions as attributable to qualified
nonelective contributions. The Advisory Committee will reduce the amount of
excess contributions for a Plan Year distributable to a Highly Compensated
Employee by the amount of excess deferrals (as determined in Section 14.07), if
any, previously distributed to that Employee for the Employee's taxable year
ending in that Plan Year.
<PAGE>
(E) DISTRIBUTION OF EXCESS CONTRIBUTIONS. If the Advisory Committee determines
the Plan fails to satisfy the ADP test for a Plan Year, it must distribute the
excess contributions, as adjusted for allocable income, during the next Plan
Year. However, the Employer will incur an excise tax equal to 10% of the amount
of excess contributions for a Plan Year not distributed to the appropriate
Highly Compensated Employees during the first 2 1/2 months of that next Plan
Year. The excess contributions are the amount of deferral contributions made by
the Highly Compensated Employees which causes the Plan to fail to satisfy the
ADP test. The Advisory Committee will distribute to each Highly Compensated
Employee his respective share of the excess contributions. The Advisory
Committee will determine the respective shares of excess contributions by
starting with the Highly Compensated Employee(s) who has the greatest ADP,
reducing his ADP (but not below the next highest ADP), then, if necessary,
reducing the ADP of the Highly Compensated Employee(s) at the next highest ADP
level (including the ADP of the Highly Compensated Employee(s) whose ADP the
Advisory Committee already has reduced), and continuing in this manner until the
average ADP for the Highly Compensated Group satisfies the ADP test. If the
Highly Compensated Employee is part of an aggregated family group, the Advisory
Committee, in accordance with the applicable Treasury regulations, will
determine each aggregated family member's allocable share of the excess
contributions assigned to the family unit.
(F) ALLOCABLE INCOME. To determine the amount of the corrective distribution
required under this Section 14.08, the Advisory Committee must calculate the
allocable income for the Plan Year in which the excess contributions arose.
"Allocable income" means net income or net loss. To calculate allocable income
for the Plan Year, the Advisory Committee will use a uniform and
nondiscriminatory method which reasonably reflects the manner used by the Plan
to allocate income to Participants' Accounts.
14.09 NONDISCRIMINATION RULES FOR EMPLOYER MATCHING
---------------------------------------------
CONTRIBUTIONS/PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. For Plan Years beginning
- -----------------------------------------------------
after December 31, 1986, the Advisory Committee must determine whether the
annual Employer matching contributions (other than qualified matching
contributions used in the ADP under Section 14.08), if any, and the Employee
contributions, if any, satisfy either of the following average contribution
percentage ("ACP") tests:
(i) The ACP for the Highly Compensated Group does not exceed 1.25 times
the ACP of the Nonhighly Compensated Group; or
(ii) The ACP for the Highly Compensated Group does not exceed the ACP for
the Nonhighly Compensated Group by more than two percentage points (or the
lesser percentage permitted by the multiple use limitation in Section
14.10) and the ACP for the Highly Compensated Group is not more than twice
the ACP for the Nonhighly Compensated Group.
(A) CALCULATION OF ACP. The average contribution percentage for a group is the
average of the separate contribution percentages calculated for each Eligible
Employee who is a member of that group. An Eligible Employee's contribution
percentage for a Plan Year is the ratio of the Eligible Employee's aggregate
contributions for the Plan Year to the Employee's Compensation for the Plan
Year. "Aggregate contributions" are Employer matching contributions (other than
qualified matching contributions used in the ADP test under Section 14.08) and
employee contributions (as defined in Section 14.03). For aggregated family
members treated as a single Highly Compensated Employee, the contribution
percentage of the family unit is the contribution percentage determined by
combining the aggregate contributions and Compensation of all aggregated family
members.
The Advisory Committee, in a manner consistent with Treasury regulations,
may determine the contribution percentages of the Eligible Employees by taking
into account qualified nonelective
<PAGE>
contributions (other than qualified nonelective contributions used in the ADP
test under Section 14.08) or elective deferrals, or both, made to this Plan or
to any other qualified Plan maintained by the Employer. The Advisory Committee
may not include qualified nonelective contributions in the ACP test unless the
allocation of nonelective contributions is nondiscriminatory when the Advisory
Committee takes into account all nonelective contributions (including the
qualified nonelective contributions) and also when the Advisory Committee takes
into account only the nonelective contributions not used in either the ADP test
described in Section 14.08 or the ACP test described in this Section 14.09. The
Advisory Committee may not include elective deferrals in the ACP test, unless
the Plan which includes the elective deferrals satisfies the ADP test both with
and without the elective deferrals included in this ACP test. For Plan Years
beginning after December 31, 1989, the Advisory Committee may not include in the
ACP test any qualified nonelective contributions or elective deferrals under
another qualified plan unless that plan has the same plan year as this Plan. The
Advisory Committee must maintain records to demonstrate compliance with the ACP
test, including the extent to which the Plan used qualified nonelective
contributions or elective deferrals to satisfy the test. For Plan Years
beginning prior to January 1, 1992, the component group testing rule permitted
under Section 14.08(A) also applies to the ACP test under this Section 14.09.
(B) SPECIAL AGGREGATION RULE FOR HIGHLY COMPENSATED EMPLOYEES. To determine
the contribution percentage of any Highly Compensated Employee, the aggregate
contributions taken into account must include any matching contributions (other
than qualified matching contributions used in the ADP test) and any Employee
contributions made on his behalf to any other plan maintained by the Employer,
unless the other plan is an ESOP. If the plans have different plan years, the
Advisory Committee will determine the combined aggregate contributions on the
basis of the plan years ending in the same calendar year.
(C) AGGREGATION OF CERTAIN PLANS. If the Employer treats two plans as a unit
for coverage or nondiscrimination purposes, the Employer must combine the plans
to determine whether either plan satisfies the ACP test. This aggregation rule
applies to the contribution percentage determination for all Eligible Employees,
irrespective of whether an Eligible Employee is a Highly Compensated Employee or
a Nonhighly Compensated Employee. For Plan Years beginning after December 31,
1982, an aggregation of plans under this paragraph does not apply to plans which
have different plan years and, for Plan Years beginning after December 31, 1988,
the Advisory Committee may not aggregate an ESOP (or the ESOP portion of a plan)
with a non-ESOP plan (or non-ESOP portion of a plan).
(D) DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS. The Advisory Committee
will determine excess aggregate contributions after determining excess deferrals
under Section 14.07 and excess contributions under Section 14.08. If the
Advisory Committee determines the Plan fails to satisfy the ACP test for a Plan
Year, it must distribute the excess aggregate contributions, as adjusted for
allocable income, during the next Plan Year. However, the Employer will incur an
excise tax equal to 10% of the amount of excess aggregate contributions for a
Plan Year not distributed to the appropriate Highly Compensated Employees during
the first 2 1/2 months of that next Plan Year. The excess aggregate
contributions are the amount of aggregate contributions allocated on behalf of
the Highly Compensated Employees which causes the Plan to fail to satisfy the
ACP test. The Advisory Committee will distribute to each Highly Compensated
Employee his respective share of the excess aggregate contributions. The
Advisory Committee will determine the respective shares of excess aggregate
contributions by starting with the Highly Compensated Employee(s) who has the
greatest contribution percentage, reducing his contribution percentage (but not
below the next highest contribution percentage), then, if necessary, reducing
the contribution percentage of the Highly Compensated Employee(s) at the next
highest contribution percentage level (including the contribution percentage of
the Highly Compensated Employee(s) whose contribution percentage the Advisory
Committee already has reduced), and continuing in this manner until the ACP for
the Highly Compensated Group satisfies the ACP test. If the Highly Compensated
Employee is part of an aggregated
<PAGE>
family group, the Advisory Committee, in accordance with the applicable Treasury
regulations, will determine each aggregated family member's allocable share of
the excess aggregate contributions assigned to the family unit.
(E) ALLOCABLE INCOME. To determine the amount of the corrective distribution
required under this Section 14.09, the Advisory Committee must calculate the
allocable income for the Plan Year in which the excess aggregate contributions
arose. "Allocable income" means net income or net loss. The Advisory Committee
will determine allocable income in the same manner as described in Section
14.08(F) for excess contributions.
(F) CHARACTERIZATION OF EXCESS AGGREGATE CONTRIBUTIONS. The Advisory Committee
will treat a Highly Compensated Employee's allocable share of excess aggregate
contributions in the following priority: (1) first as attributable to his
Employee contributions which are voluntary contributions, if any; (2) then as
matching contributions allocable with respect to excess contributions determined
under the ADP test described in Section 14.08; (3) then on a pro rata basis to
matching contributions and to the deferral contributions relating to those
matching contributions which the Advisory Committee has included in the ACP
test; (4) then on a pro rata basis to Employee contributions which are mandatory
contributions, if any, and to the matching contributions allocated on the basis
of those mandatory contributions; and (5) last to qualified nonelective
contributions used in the ACP test. To the extent the Highly Compensated
Employee's excess aggregate contributions are attributable to matching
contributions, and he is not 100% vested in his Accrued Benefit attributable to
matching contributions, the Advisory Committee will distribute only the vested
portion and forfeit the nonvested portion. The vested portion of the Highly
Compensated Employee's excess aggregate contributions attributable to Employer
matching contributions is the total amount of such excess aggregate
contributions (as adjusted for allocable income) multiplied by his vested
percentage (determined as of the last day of the Plan Year for which the
Employer made the matching contribution). The Employer will specify in Adoption
Agreement Section 3.05 the manner in which the Plan will allocate forfeited
excess aggregate contributions.
14.10 MULTIPLE USE LIMITATION. For Plan Years beginning after December
-----------------------
31, 1988, if at least one Highly Compensated Employee is includible in the ADP
test under Section 14.08 and in the ACP test under Section 14.09, the sum of the
Highly Compensated Group's ADP and ACP may not exceed the multiple use
limitation.
The multiple use limitation is the sum of (i) and (ii):
(i) 125% of the greater of: (a) the ADP of the Nonhighly Compensated
Group under the Code (S)401(k) arrangement; or (b) the ACP of the Nonhighly
Compensated Group for the Plan Year beginning with or within the Plan Year
of the Code (S)401(k) arrangement.
(ii) 2% plus the lesser of (i)(a) or (i)(b), but no more than twice the
lesser of (i)(a) or (i)(b).
The Advisory Committee, in lieu of determining the multiple use limitation
as the sum of (i) and (ii), may elect to determine the multiple use limitation
as the sum of (iii) and (iv):
(iii) 125% of the lesser of: (a) the ADP of the Nonhighly Compensated
Group under the Code (S)401(k) arrangement; or (b) the ACP of the Nonhighly
Compensated Group for the Plan Year beginning with or within the Plan Year
of the Code (S)401(k) arrangement.
(iv) 2% plus the greater of (iii)(a) or (iii)(b), but no more than twice
the greater of (iii)(a) or (iii)(b).
<PAGE>
The Advisory Committee will determine whether the Plan satisfies the
multiple use limitation after applying the ADP test under Section 14.08 and the
ACP test under Section 14.09 and after making any corrective distributions
required by those Sections. If, after applying this Section 14.10, the Advisory
Committee determines the Plan has failed to satisfy the multiple use limitation,
the Advisory Committee will correct the failure by treating the excess amount as
excess contributions under Section 14.08 or as excess aggregate contributions
under Section 14.09, as it determines in its sole discretion. This Section
14.10 does not apply unless, prior to application of the multiple use
limitation, the ADP and the ACP of the Highly Compensated Group each exceeds
125% of the respective percentages for the Nonhighly Compensated Group.
14.11 DISTRIBUTION RESTRICTIONS. The Employer must elect in Section 6.03
-------------------------
the Adoption Agreement the distribution events permitted under the Plan. The
distribution events applicable to the Participant's Deferral Contributions
Account, Qualified Nonelective Contributions Account and Qualified Matching
Contributions Account must satisfy the distribution restrictions described in
paragraph (m) of Section 14.03.
(A) HARDSHIP DISTRIBUTIONS FROM DEFERRAL CONTRIBUTIONS ACCOUNT. The Employer
must elect in Adoption Agreement Section 6.03 whether a Participant may receive
hardship distributions from his Deferral Contributions Account prior to the
Participant's Separation from Service. Hardship distributions from the Deferral
Contributions Account must satisfy the requirements of this Section 14.11. A
hardship distribution option may not apply to the Participant's Qualified
Nonelective Contributions Account or Qualified Matching Contributions Account,
except as provided in paragraph (3).
(1) DEFINITION OF HARDSHIP. A hardship distribution under this Section
14.11 must be on account of one or more of the following immediate and heavy
financial needs: (1) medical care described in Code (S)213(d) incurred by the
Participant, by the Participant's spouse, or by any of the Participant's
dependents, or necessary to obtain such medical care; (2) the purchase
(excluding mortgage payments) of a principal residence for the Participant; (3)
the payment of post-secondary education tuition and related educational fees,
for the next 12-month period, for the Participant, for the Participant's spouse,
or for any of the Participant's dependents (as defined in Code (S)152); (4) to
prevent the eviction of the Participant from his principal residence or the
foreclosure on the mortgage of the Participant's principal residence; or (5) any
need prescribed by the Revenue Service in a revenue ruling, notice or other
document of general applicability which satisfies the safe harbor definition of
hardship.
(2) RESTRICTIONS. The following restrictions apply to a Participant who
receives a hardship distribution: (a) the Participant may not make elective
deferrals or employee contributions to the Plan for the 12-month period
following the date of his hardship distribution; (b) the distribution is not in
excess of the amount of the immediate and heavy financial need (including any
amounts necessary to pay any federal, state or local income taxes or penalties
reasonably anticipated to result from the distribution); (c) the Participant
must have obtained all distributions, other than hardship distributions, and all
nontaxable loans (determined at the time of the loan) currently available under
this Plan and all other qualified plans maintained by the Employer; and (d) the
Participant agrees to limit elective deferrals under this Plan and under any
other qualified Plan maintained by the Employer, for the Participant's taxable
year immediately following the taxable year of the hardship distribution, to the
402(g) limitation (as described in Section 14.07), reduced by the amount of the
Participant's elective deferrals made in the taxable year of the hardship
distribution. The suspension of elective deferrals and employee contributions
described in clause (a) also must apply to all other qualified plans and to all
nonqualified plans of deferred compensation maintained by the Employer, other
than any mandatory employee contribution portion of a defined benefit plan,
including stock option, stock purchase and other similar plans, but not
including health or welfare benefit plans (other than the cash or deferred
arrangement portion of a cafeteria plan).
<PAGE>
(3) EARNINGS. For Plan Years beginning after December 31, 1988, a
hardship distribution under this Section 14.11 may not include earnings on an
Employee's elective deferrals credited after December 31, 1988. Qualified
matching contributions and qualified nonelective contributions, and any earnings
on such contributions, credited as of December 31, 1988, are subject to the
hardship withdrawal only if the Employer specifies in an addendum to this
Section 14.11. The addendum may modify the December 31, 1988, date for purposes
of determining credited amounts provided the date is not later than the end of
the last Plan Year ending before July 1, 1989.
(B) DISTRIBUTIONS AFTER SEPARATION FROM SERVICE. Following the Participant's
Separation from Service, the distribution events applicable to the Participant
apply equally to all of the Participant's Accounts, except as elected in Section
6.03 of the Employer's Adoption Agreement.
(C) CORRECTION OF ANNUAL ADDITIONS LIMITATION. If, as a result of a reasonable
error in determining the amount of elective deferrals an Employee may make
without violating the limitations of Part 2 of Article III, an Excess Amount
results, the Advisory Committee will return the Excess Amount (as adjusted for
allocable income) attributable to the elective deferrals. The Advisory
Committee will make this distribution before taking any corrective steps
pursuant to Section 3.10 or to Section 3.16. The Advisory Committee will
disregard any elective deferrals returned under this Section 14.11(C) for
purposes of Sections 14.07, 14.08 and 14.09.
14.12 SPECIAL ALLOCATION RULES. If the Code (S)401(k) arrangement
------------------------
provides for salary reduction contributions, if the Plan accepts Employee
contributions, pursuant to Adoption Agreement Section 4.01, or if the Plan
allocates matching contributions as of any date other than the last day of the
Plan Year, the Employer must elect in Adoption Agreement 9.11 whether any
special allocation provisions will apply under Section 9.11 of the Plan. For
purposes of the elections:
(a) A "segregated Account" direction means the Advisory Committee will
establish a segregated Account for the applicable contributions made on the
Participant's behalf during the Plan Year. The Trustee must invest the
segregated Account in Federally insured interest bearing savings account(s)
or time deposits, or a combination of both, or in any other fixed income
investments, unless otherwise specified in the Employer's Adoption
Agreement. As of the last day of each Plan Year (or, if earlier, an
allocation date coinciding with a valuation date described in Section
9.11), the Advisory Committee will reallocate the segregated Account to the
Participant's appropriate Account, in accordance with Section 3.04 or
Section 4.06, whichever applies to the contributions.
(b) A "weighted average allocation" method will treat a weighted portion
of the applicable contributions as if includible in the Participant's
Account as of the beginning of the valuation period. The weighted portion
is a fraction, the numerator of which is the number of months in the
valuation period, excluding each month in the valuation period which begins
prior to the contribution date of the applicable contributions, and the
denominator of which is the number of months in the valuation period. The
Employer may elect in its Adoption Agreement to substitute a weighting
period other than months for purposes of this weighted average allocation.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE A
APPENDIX TO BASIC PLAN DOCUMENT
This Article is necessary to comply with the Unemployment Compensation
Amendments Act of 1992 and is an integral part of the basic plan document.
Section 18.08 applies to any modification or amendment of this Article.
A-l. APPLICATIONS. This Article applies to distributions made on or
------------
after January 1, 1993. Notwithstanding any provision of the Plan to contrary
that would otherwise limit a distributee's election under this Article, a
distributee may elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in a direct
rollover.
A-2. DEFINITIONS.
-----------
(a) "Eligible rollover distribution." An Eligible rollover
distribution is any distribution of all or any portion of the
balance to the credit of the distributee, except that an eligible
rollover distribution does not include any distribution that is one
of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of
the distributee and the distributee's designated beneficiary, or for
a specified period of ten years or more; any distribution to the
extent such distribution is required under Code (S)401(a)(9); and
the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion of net unrealized
appreciation with respect to employer securities).
(b) "Eligible retirement plan." An eligible retirement plan is an
individual retirement account described in Code (S)408(a), and individual
retirement annuity described in Code (S)408(b), an annuity plan described
in Code (S)403(a), or a qualified trust described in Code (S)401(a), that
accepts the distributee's eligible rollover distribution. However, in the
case of an eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account or individual
retirement annuity.
(c) "Distributee." A distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's surviving spouse
and the employee's or former Employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in
Code (S)414(p), are distributees with regard to the interest of the spouse
or former spouse.
(d) "Direct rollover." A direct rollover is a payment by the
Plan to the eligible retirement plan specified by the distributee.
<PAGE>
ARTICLE B
APPENDIX TO BASIC PLAN DOCUMENT
This Article is necessary to comply with the Omnibus Budget Reconciliation
Act of 1993 (OBRA '93) and is an integral part of the basic plan document.
Section 12.08 applies to any modification or amendment of this Article.
In addition to other applicable limitations set forth in the plan, and
notwithstanding any other provision of the plan to the contrary, for plan years
beginning on or after January 1, 1994, the annual compensation of each employee
taken into account under the plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000 as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination period, and
the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference in this
plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into account in
determining an employee's benefits accruing in the current plan year, the
compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first plan year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
<PAGE>
ALPHABETICAL LISTING OF DEFINITIONS
<TABLE>
<CAPTION>
Section Reference
Plan Definition (Page Number)
<S> <C>
100% Limitation 3.19(1)(10)
Account 1.14 (5)
Accounting Date 1.20 (5)
Accrued Benefit 1.15 (5)
Actual Deferral Percentage ("ADP") Test 14.08 (6)
Adoption Agreement 1.04 (1)
Advisory Committee 1.06 (2)
Annual Addition 3.19(a) (7)
Average Contribution Percentage Test 14.09 (8)
Beneficiary 1.11 (3)
Break in Service for Eligibility Purposes 2.03 (1)
Break in Service for Vesting Purposes 5.07 (3)
Cash-out Distribution 5.04 (1)
Code 1.25 (6)
Code (S)411(d)(6) Protected Benefits 13.02 (1)
Compensation 1.12 (3)
Compensation for Code (S)401(k) Purpose 14.03(f) (2)
Compensation for Code (S)415 Purposes 3.19(b) (8)
Compensation for Top Heavy Purposes 1.33(B)(3) (9)
Contract(s) 11.03(c) (2)
Custodian Designation 10.03[B] (3)
Deemed Cash-out Rule 5.04(C) (2)
Deferral Contributions 14.03(g) (2)
Deferral Contributions Account 14.06(A) (4)
Defined Benefit Plan 3.19(i) (9)
Defined Benefit Plan Fraction 3.19(j) (9)
Defined Contribution Plan 3.19(h) (8)
Defined Contribution Plan Fraction 3.19(k) (9)
Determination Date 1.33(B)(7)(10)
Disability 1.28 (7)
Distribution Date 6.01 (1)
Distribution Restrictions 14.03(m) (3)
Earned Income 1.13 (5)
Effective Date 1.18 (5)
Elective Deferrals 14.03(h) (2)
Elective Transfer 13.06(A) (3)
Eligible Employee 14.03(c) (2)
Employee 1.07 (2)
Employee Contributions 14.03(n) (3)
Employer 1.01 (1)
Employer Contribution Account 14.06 (4)
Employer for Code (S)415 Purposed 31.9(c) (8)
Employer for Top Heavy Purposes 1.33(B)(6)(10)
Employment Commencement Date 2.02 (1)
ERISA 1.24 (6)
Excess Aggregate Contributions 14.09(D) (9)
Excess Amount 3.19(d) (8)
Excess Contributions 14.08 (7)
Exempt Participant 8.01 (1)
Forfeiture Break in Service 5.08 (3)
Group Trust Fund 10.16 (7)
Hardship 6.01(A)(4) (1)
Hardship for Code (S)401(k) Purposes 14.11(A)(11)
Highly Compensated Employee 1 .09 (2)
Highly Compensated Group 14.03(d) (2)
Hour of Service 1.27 (6)
Incidental Insurance Benefits 11.01 (A) (1)
Insurable Participant 11.03(d) (2)
Investment Manager 9.04(i) (1)
Issuing Insurance Company 11.03(b) (2)
Joint and Survivor Annuity 6.04(A) (6)
Key Employee 1.33(B)(1) (9)
Leased Employees 1.31 (8)
Limitation Year 1.17 and 3.19(e) (5 and 8)
Loan Policy 9.04(A) (2)
Mandatory Contributions 14.04(A) (3)
Mandatory Contributions Account 14.04(A) (3)
Master or Prototype Plan 3.19(f) (8)
Matching Contributions 14.03(i) (2)
Maximum Permissible Amount 3.19(g) (8)
Minimum Distribution Incidental Benefit 6.02(A) (3)
Multiple Use Limitation 14.10 (10)
Named Fiduciary 10.03[D] (5)
Nonelective Contributions 14.03(j) (2)
Nonforfeitable 1.16 (5)
Nonhighly Compensated Employee 14.03(b) (2)
Nonhighly Compensated Group 14.03(e) (2)
Non-Key Employee 1.33(B)(2) (9)
Nontransferable Annuity 1.23 (5)
Normal Retirement Age 5.01 (1)
Owner-Employee 1.08 (2)
Paired Plans 1.34(10)
Participant 1.10 (3)
Participant Deductible Contributions 4.02 (1)
Participant Forfeiture 3.05 (3)
Participant Loans 10.03[E] (4)
Participant Nondeductible Contributions 4.01 (1)
Permissive Aggregation Group 1.33(B)(5)(10)
Plan 1.03 (1)
Plan Administrator 1.05 (1)
Plan Entry Date 1.19 (5)
Plan Year 1.17 (5)
Policy 11.03(a) (2)
Predecessor Employer 1.29 (7)
Preretirement Survivor Annuity 6.04(B) (6)
Qualified Domestic Relations Order 6.07 (8)
Qualified Matching Contributions 14.03(k) (2)
Qualified Nonelective Contributions 14.03(l) (3)
Qualifying Employer Real Property 10.03[F] (5)
Qualifying Employer Securities 10.03[F] (5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Section Reference
Plan Definition (Page Number)
<S> <C>
Related Employers 1.30 (7)
Required Aggregation Group 1.33(B)(4) (9)
Required Beginning Date 6.01(B) (2)
Rollover Contributions 4.03 (1)
Self-Employed Individual 1.08 (2)
Service 1.26 (6)
Term Life Insurance Contract 11.03 (2)
Top Heavy Minimum Allocation 3.04(B) (1)
Top Heavy Ratio 1.33 (9)
Trust 1.21 (5)
Trustee 1.02 (1)
Trustee Designation 10.03[A] (1)
Trust Fund 1.22 (5)
Weighted Average Allocation Method 14.12 (11)
Year of Service for Eligibility Purposes 2.02 (1)
Year of Service for Vesting Purposes 5.06 (3)
</TABLE>
<PAGE>
ADOPTION AGREEMENT #003
STANDARDIZED CODE (S)401(K) PLAN
(PAIRED PROFIT SHARING PLAN)
The undersigned, FIRST FEDERAL BANK OF IDAHO, FSB ("Employer"), by
executing this Adoption Agreement, elects to become a participating Employer in
Dillon, Bosch & Daw, Chartered Defined Contribution Prototype Plan (basic plan
document #01) by adopting the accompanying Plan and Trust in full as if the
Employer were a Signatory to that Agreement. The Employer makes the following
elections granted under the provisions of the Prototype Plan.
ARTICLE I
DEFINITIONS
1.02 TRUSTEE. The Trustee executing this Adoption Agreement is: (Choose
-------
(a) or (b))
[X] (a) A discretionary Trustee. See Section 10.03[A] of the Plan.
[_] (b) A nondiscretionary Trustee. See Section 10.02[B] of the Plan.
[Note: The Employer may not elect Option (b) if a Custodian executed the
Adoption Agreement.]
1.03 PLAN. The name of the Plan as adopted by the Employer is FIRST
----
FEDERAL BANK OF IDAHO 401(K) PLAN.
1.07 EMPLOYEE. The following Employees are not eligible to participate
--------
in the Plan: (Choose (a) or least one of (b) or (c).
[_] (a) No exclusions.
[X] (b) Collective bargaining employees (as defined in Section 1.07 of the
Plan). [Note: If the Employer excludes union employees from the
Plan, the Employer must be able to provide evidence that retirement
benefits were the subject of good faith bargaining.]
[X] (c) Nonresident aliens who do not receive any earned income (as defined
in Code (S)911(d)(2) from the Employer which constitutes United
States source income (as defined in Code (S)861(a)(3)).
RELATED EMPLOYERS/LEASED EMPLOYEES. An Employee of any member of the Employer's
related group (as defined in Section 1.30 of the Plan), and any Leased Employee
treated as an Employee under Section 1.31 of the Plan is eligible to participate
in the Plan, unless excluded by reason of Options (b) or (c). [Note: A related
group members may not contribute to this Plan unless it executed a Participant
Agreement, even if its Employees are Participants in the Plan.]
1.12 COMPENSATION.
-------------
TREATMENT OF ELECTIVE CONTRIBUTIONS. (Choose (a) or (b))
[X] (a) "Compensation" includes elective contributions made by the Employer
on the Employee's behalf.
[_] (b) "Compensation" does not include elective contributions.
MODIFICATIONS TO COMPENSATION DEFINITION. (Choose (c) or al least on of (d)
and (e))
[_] (c) No modifications other than as elected under Options (a) or (b).
[_] (d) The Plan excludes Compensation in excess of $_______________.
[X] (e) In lieu of the definition in Section 1.12 of the Plan, Compensation
means any earnings reportable as W-2 wages for Federal income tax
withholding purposes, subject to any other election under this
Adoption Agreement Section 1.12.
1
<PAGE>
SPECIAL DEFINITION FOR SALARY REDUCTION CONTRIBUTIONS. An Employee's salary
reduction agreement applies to his Compensation determined prior to the
reduction authorized by that salary reduction agreement, with the following
exceptions: (Choose (f) or any combination of (g) and (h), if applicable)
[X] (f) No exceptions.
[_] (g) The dollar limitation described in Option (d) does not apply.
[_] (h) If the Employee makes elective contributions to another plan
maintained by the Employer, the Advisory Committee will determine the
amount of the Employee's salary reduction contribution for the
withholding period: (Choose (1) or (2))
[_] (1) After the reduction for such period of elective contributions to
the other plan(s).
[_] (2) Prior to the reduction for such period of elective
contributions to the plan(s).
1.17 PLAN YEAR/LIMITATION YEAR.
-------------------------
PLAN YEAR. Plan Year means: (Choose (a) or (b))
[X] (a) The 12 consecutive month period ending every December 31.
[_] (b) (Specify)____________________________________________________________
________________________________________________________________.
LIMITATION YEAR. The Limitation Year is: (Choose (c) or (d))
[X] (c) The Plan Year.
[_] (d) The 12 consecutive month period ending every ___________________.
1.18 EFFECTIVE DATE.
--------------
NEW PLAN. The "Effective Date" of the Plan is January 1, 1994.
RESTATED PLAN. The restated Effective Date is _____________________.
This Plan is a substitution and amendment of an existing retirement plan(s)
originally established _________________________________________________________
______________________________________[Note: See the Effective Date Addendum.]
1.27 HOUR OF SERVICE. The crediting method for Hours of Service is:
---------------
(Choose (a) or (b))
[X] (a) The actual method.
[_] (b) The ________________________ equivalency method, except:
[_] (1) No exceptions.
[_] (2) The actual method applies for purposes of: (Choose at least
one)
[_] (i) Participation under Article II.
[_] (ii) Vesting under Article V.
[_] (iii) Accrual of benefits under Section 3.06.
[Note: On the blank line, insert "daily," "weekly," "semi-monthly payroll
periods" or "monthly."]
1.29 SERVICE FOR PREDECESSOR EMPLOYER. In addition to the predecessor
--------------------------------
service the Plan must credit by reason of Section 1.29 of the Plan, the Plan
credits Service with the following predecessor employer(s): N/A. Service with
the designated predecessor employer(s) applies: (Choose at least one of (a) or
(b))
2
<PAGE>
[_] (a) For purposes of participation under Article II.
[_] (b) For purposes of vesting under Article V.
[Note: If the Plan does not credit any predecessor service under this provision,
insert "N/A" in the first blank line. The Employer may attach a schedule to this
Adoption Agreement, in the same format as this Section 1.29, designating
additional predecessor employers and the applicable service crediting
elections.]
1.31 LEASED EMPLOYEES. If a Leased Employee participates in a safe harbor
----------------
purchase plan (as described in Section 1.31) maintained by the leasing
organization, but the Employer is not eligible for the safe harbor plan
exception: (Choose (a) or (b))
[_] (a) The Advisory Committee will determine the Leased Employee's allocation
of Employer contributions under Article III without taking into
account the Leased Employee's allocation under the safe harbor plan.
[X] (b) The Advisory Committee will reduce the Leased Employee's allocation of
Employer nonelective contributions (other than designated qualified
nonelective contributions) under this Plan by the Leased Employee's
allocation under the safe harbor plan, but only to the extent that
allocation is attributable to the Leased Employee's service provided
to the Employer. [Note: The Employer may not elect Option (b) if a
Paired Plan or any other plan of the Employer makes a similar
reduction for the same plan of the leasing organization.]
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY.
-----------
ELIGIBILITY CONDITIONS. To become a Participant in the Plan, an Employee must
satisfy the following eligibility conditions: (Choose (a) or (b) or both)
[X] (a) Attainment of age 21. (specify age, not exceeding 21).
[X] (b) Service requirement. (Choose (1), (2) or (3))
[X] (1) One Year of Service.
[_] (2) _______months (not exceeding 12) following the Employee's
Employment Commencement Date.
[_] (3) One Hour of Service.
PLAN ENTRY DATE. "Plan Entry Date" means the Effective Date and: (Choose (c),
(d) or (e))
[_] (c) Semi-annual Entry Dates. The first day of the Plan Year and the first
day of the seventh month of the Plan Year.
[_] (d) The first day of the Plan Year.
[X] (e) (Specify entry dates) January 1, April 1, July 1, October 1
TIME OF PARTICIPATION. An Employee will become a Participant, unless excluded
under Adoption Agreement Section 1.07, on the Plan Entry Date (if employed on
the date): (Choose (f), (g) or (h))
[X] (f) immediately following
[_] (g) immediately preceding
[_] (h) nearest
the date the Employee completes the eligibility conditions described in Options
(a) and (b) of this Adoption Agreement Section 2.01. [Note: The Employer must
coordinate the selection of (f), (g) or (h) with the "Plan Entry Date" selection
in (c), (d) or (e). Unless otherwise excluded under Section 1.07, the Employee
must become a Participant by the earlier of : (1) the first day of the Plan year
beginning after the date the Employee completes
3
<PAGE>
the age and service requirements of Code (S)410(a); or (2) 6 months after the
date the Employee completes those requirements.]
DUAL ELIGIBILITY. The eligibility conditions of this Section 2.01 apply to:
(Choose (i) or (j))
[X] (i) All Employees of the Employer, except (Choose (1) or (2))
[_] (1) No exceptions.
[X] (2) Employees who are Participants in the Plan as of the
Effective Date.
[_] (j) Solely to an Employee employed by the Employer after _______. If the
Employee was employed by the Employer on or before the specified date,
the Employee will become a Participant: (Choose (1) or (2))
[_] (1) On the latest of the Effective Date, his Employment
Commencement Date or the date he attains age _____ (not to
exceed 21).
[_] (2) Under the eligibility conditions in effect under the Plan
prior to the restated Effective Date. If the restated Plan
required more than one Year of Service to participate, the
eligibility condition under this Option (2) for participation
in the Code (S)401(k) arrangement under this Plan is one Year
of Service for Plan Years beginning after December 31, 1988.
[For restated plans only.]
2.02 YEAR OF SERVICE - PARTICIPATION.
-------------------------------
HOURS OF SERVICE. An Employee must complete: (Choose (a) or (b))
[X] (a) 1,000 Hours of Service
[_] (b) _____ Hours of Service
during an eligibility computation period to receive a credit for a Year of
Service. [Note: The Hours of Service requirement may not exceed 1,000.]
ELIGIBILITY COMPUTATION PERIOD. After the initial eligibility computation
period described in Section 2.02 of the Plan, the Plan measures the eligibility
computation period as: (Choose (c) or (d))
[_] (c) The 12 consecutive month period beginning with each anniversary of an
Employee's Employment Commencement Date.
[X] (d) The Plan Year, beginning with the Plan Year which includes the first
anniversary of the Employee's Employment Commencement Date.
2.03 BREAK IN SERVICE - PARTICIPATION. The Break in Service rule described
--------------------------------
in Section 2.03(B) of the Plan: (Choose (a) or (b))
[_] (a) Does not apply to the Employer's Plan.
[X] (b) Applies to the Employer's Plan.
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT.
------
PART 1. [OPTIONS (A) THROUGH (G)] AMOUNT OF EMPLOYER'S CONTRIBUTION. The
Employer's annual contribution to the Trust will equal the total amount of
deferral contributions, matching contributions, qualified nonelective
contributions and nonelective contributions, as determined under this Section
3.01. (Choose any combination of (a), (b), (c) and (d), or choose (e))
[X] (a) DEFERRAL CONTRIBUTIONS (CODE (S)401(K) ARRANGEMENT). The Employer must
contribute the amount by which the Participants have reduced their
Compensation for the Plan Year, pursuant to their salary reduction
agreements on file with the Advisory Committee. A reference in the
Plan to salary reduction contributions is a reference to these
amounts.
4
<PAGE>
[X] (b) MATCHING CONTRIBUTIONS. The Employer will make matching contributions
in accordance with the formula(s) elected in Part II of this Adoption
Agreement Section 3.01.
[X] (c) DESIGNATED QUALIFIED NONELECTIVE CONTRIBUTIONS. The Employer, in its
sole discretion, may contribute an amount which it designates as a
qualified nonelective contribution.
[X] (d) NONELECTIVE CONTRIBUTIONS.
[X] (1) Discretionary contribution. The amount (or additional amount)
the Employer may from time to time deem advisable.
[_] (2) ___________% of the Compensation of all Participants under
the Plan, determined for the Employer's taxable year for
which it makes the contribution. [Note: The percentage
selected may not exceed 15%.]
[_] (3) ___________% of Net Profits but not more than $___________.
[_] (e) FROZEN PLAN. This Plan is a frozen Plan effective __________________
_______________________. The Employer will not contribute to the Plan
with respect to any period following the stated date.
NET PROFITS. The Employer: (Choose (f) or (g))
[X] (f) Need not have Net Profits to make its annual contribution under this
Plan.
[_] (g) Must have current or accumulated Net Profits exceeding $_________ to
make the following contribution: (Choose at least one of (1), (2) and
(3))
[_] (1) Matching contributions described in Option (b), except ______
____________________________________________________.
[_] (2) Qualified nonelective contributions described in Option (c).
[_] (3) Nonelective contributions described in Option _____________.
The term "Net Profits" means the Employer's net income or profits for any
taxable year determined by the Employer upon the basis of its books of account
in accordance with generally accepted accounting practices consistently applied
without any deductions for Federal and state taxes upon income or for
contributions made by the Employer under this Plan or under any other employee
benefit plan the Employer maintains. The term "Net Profits" specifically
excludes N/A. [Note: Enter "N/A" if no exclusions apply.]
If the Employer requires Net Profits for matching contributions and the Employer
does not have sufficient Net Profits under Option (g), it will reduce the
matching contribution under a fixed formula on a pro rata basis for all
Participants. A Participant's share of the reduced contribution will bear the
same ratio as the matching contribution the Participant would have received if
Net Profits were sufficient bears to the total matching contribution all
Participants would have received if Net Profits were sufficient. If more than
one member of a related group (as defined in Section 1.30) execute this Adoption
Agreement, each participating member will determine Net Profits separately but
will not apply this reduction unless, after combining the separately determined
Net Profits, the aggregate Net Profits are insufficient to satisfy the matching
contribution liability. "Net Profits" includes both current and accumulated Net
Profits.
PART II. [OPTIONS (H) AND (I)] MATCHING CONTRIBUTION FORMULA. [Note: If the
Employer elected Option (b), complete Options (h) and (i).]
[X] (h) AMOUNT OF MATCHING CONTRIBUTIONS. Subject to Option (i), for each Plan
Year, the Employer's matching contribution is: (Choose any combination
of (1), (2), (3) and (4))
[_] (1) An amount equal to _______% of each Participant's salary
reduction contributions for the Plan Year.
[_] (2) An amount equal to _______% of each Participant's first tier
of salary reduction contributions for the Plan Year, plus the
following matching percentage(s) for the following subsequent
tiers of salary reduction contributions for the Plan Year ___
____________________________________________________________
___________________________________________________.
5
<PAGE>
[X] (3) Discretionary formula.
[X] (i) An amount (or additional amount) equal to a matching
percentage the Employer from time to time may deem
advisable of the Participant's salary reduction
contributions for the Plan Year.
[_] (ii) An amount (or additional amount) equal to a matching
percentage the Employer from time to time may deem
advisable of each tier of the Participant's salary
reduction contributions for the Plan Year.
[Note: Under Options (2) or (3)(ii), the matching percentage for any
subsequent tier of salary reduction contributions may not exceed the
matching percentage for any prior tier.]
[_] (4) A Participant's matching contributions may not:
[_] (i) Exceed______________________________________________________
_________________________________________________________________
____________________________________________.
[_] (ii) Be less than________________________________________________
_________________________________________________________________
____________________________________________.
[X] (i) AMOUNT OF SALARY REDUCTION CONTRIBUTIONS TAKEN INTO ACCOUNT. When
determining a Participant's salary reduction contributions taken into
account under the matching contributions formula(s), the following
rules apply: (Choose any combination of (1) through (3))
[X] (1) The Advisory Committee will take into account all salary
reduction contributions credited for the Plan Year.
[_] (2) The Advisory Committee will disregard salary reduction
contributions exceeding _________________________________________
_________________________________________________________________
[_] (3) The Advisory Committee will treat as the first tier of salary
reduction contributions, an amount not exceeding: _______________
_____________________________________________________________.
The subsequent tiers of salary reduction contributions are:______
_________________________________________________________________
_________________________________________________________________
________.
PART III. [OPTION (I).]. SPECIAL RULES FOR CODE (S)401(K) ARRANGEMENT. (Choose
(i), if applicable)
[X] (i) SALARY REDUCTION AGREEMENTS. The following rules and restrictions
apply to an Employee's salary reduction agreement: (Make a selection
under (1), (2), (3) and (4))
(1) Limitation on amount. The Employee's salary reduction contributions:
(Choose (i) or at least one of (ii) or (iii)
[X] (i) No maximum limitation other than as provided in the
Plan.
[_] (ii) May not exceed ____________% of Compensation for the
Plan Year, subject to the annual additions limitation
described in Part 2 of Article III and the 402(g)
limitation described in Section 14.07 of the Plan.
[_] (iii) Based on percentages of Compensation must equal at least
________________________________________________________
_______________________,
(2) An Employee may revoke, on a prospective basis, a salary reduction
agreement: (Choose (i), (ii), (iii) or (iv))
[_] (i) Once during any Plan Year but not later than ___________
of the Plan Year.
6
<PAGE>
[_] (ii) As of any Plan Entry Date.
[X] (iii) As of the first day of any month.
[_] (iv) (Specify, but must be at least once per Plan Year ____
_____________________________________.
(3) An Employee who revokes his salary reduction agreement may file a new
salary reduction agreement with an effective date: (Choose (i), (ii),
(iii) or (iv))
[_] (i) No earlier than the first day of the next Plan Year.
[X] (ii) As of any subsequent Plan Entry Date.
[_] (iii) As of the first day of any month subsequent to the
month in which he revoked an Agreement.
[_] (iv) (Specify, but must be at least once per Plan Year
following the Plan Year of revocation)________________
___________________________________________________.
(4) A Participant may increase or may decrease, on a prospective basis,
his salary reduction percentage or dollar amount: (Choose (i), (ii),
(iii) or (iv))
[_] (i) As of the beginning of each payroll period.
[_] (ii) As of the first day of each month.
[X] (iii) As of any Plan Entry Date.
[_] (iv) (Specify, but must permit an increase or a decrease at
least once per Plan Year of revocation)_______________
___________________________________________________.
3.04 CONTRIBUTION ALLOCATION. The Advisory Committee will allocate
-----------------------
deferral contributions, matching contributions, qualified nonelective
contributions and nonelective contributions in accordance with Section 14.06 of
the Plan and the elections under this Adoption Agreement Section 3.04.
PART I. [OPTIONS (A) THROUGH (D)]. SPECIAL ACCOUNTING ELECTIONS, (Choose
whichever elections are applicable to the Employer's Plan)
[X] (a) MATCHING CONTRIBUTIONS ACCOUNT. The Advisory Committee will allocate
matching contributions to a Participant's: (Choose (1) or (2); (3) is
available only in addition to (1))
[X] (1) Regular Matching Contributions Account.
[_] (2) Qualified Matching Contributions Account.
[_] (3) Except, matching contributions under Option(s)
____________________ of Adoption Agreement Section 3.01 are allocable to
the Qualified Matching Contributions Account.
[X] (b) SPECIAL ALLOCATION DATES FOR SALARY REDUCTION CONTRIBUTIONS. The
Advisory Committee will allocate salary reduction contributions as of
the Accounting Date and as of the following additional allocation
dates: as contributions are deposited by the fifth day of each month.
[_] (c) SPECIAL ALLOCATION DATES FOR MATCHING CONTRIBUTIONS. The Advisory
Committee will allocate matching contributions as of the Accounting
Date and as of the following additional allocation dates:
______________________________________________________________.
[X] (d) DESIGNATED QUALIFIED NONELECTIVE CONTRIBUTIONS - DEFINITION OF
PARTICIPANT. For purposes of allocating the designated qualified
nonelective contribution, "Participant" means: (Choose (1) or (2))
[_] (1) All Participants.
[X] (2) Participants who are Nonhighly Compensated Employees.
PART II. METHOD OF ALLOCATION - NONELECTIVE CONTRIBUTION. Subject to any
restoration allocation required under Section 5.04, the Advisory Committee will
allocate and credit the annual nonelective contributions (and Participant
forfeitures treated as nonelective contributions) to the Employer Contributions
Account of each Participant who
7
<PAGE>
satisfies the conditions of Section 3.06, in accordance with the method selected
under this Part II. (Choose an allocation method under (e), (f), (g) or (h); (i)
is mandatory if the Employer elects (f), (g) or (h))
[X] (e) NON-INTEGRATED ALLOCATION FORMULA. The Advisory Committee will
allocate the annual nonelective contributions in the same ratio that
each Participant's Compensation for the Plan Year bears to the total
Compensation of all Participants for the Plan Year.
[_] (f) TWO-TIERED INTEGRATED ALLOCATION FORMULA - MAXIMUM DISPARITY. First,
the Advisory Committee will allocate the annual nonelective
contributions in the same ratio that each Participant's Compensation
plus Excess Compensation for the Plan Year bears to the total
Compensation plus Excess Compensation of all Participants for the Plan
Year. The allocation under this paragraph, as a percentage of each
Participant's Compensation plus Excess Compensation, must not exceed
the applicable percentage (5.7%, 5.4% or 4.3%) listed under the
Maximum Disparity Table following Option (k).
The Advisory Committee then will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all Participants for the Plan Year.
[_] (g) THREE-TIERED INTEGRATED ALLOCATION FORMULA. First, the Advisory
Committee will allocate the annual nonelective contributions in the
same ratio that each Participant's Compensation for the Plan Year
bears to the total Compensation of all Participants for the Plan Year.
The allocation under this paragraph, as a percentage of each
Participant's Compensation may not exceed the applicable percentage
(5.7%, 5.4% or 4.3%) listed under the Maximum Disparity Table
following Option (i).
As a second tier allocation, the Advisory Committee will allocate the
nonelective contributions in the same ratio that each Participant's Excess
Compensation for the Plan Year bears to the total Excess Compensation of all
Participants for the Plan Year. The allocation under this paragraph, as a
percentage of each Participant's Excess Compensation, may not exceed the
allocation percentage in the first paragraph.
Finally, the Advisory Committee will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all Participants for the Plan Year.
[_] (h) FOUR-TIERED INTEGRATED ALLOCATION FORMULA. First, the Advisory
Committee will allocate the annual nonelective contributions in the
same ratio that each Participant's Compensation for the Plan Year
bears to the total Compensation of all Participants for the Plan Year,
but not exceeding 3% of each Participant's Compensation.
As a second tier allocation, the Advisory Committee will allocate the
nonelective contributions in the same ratio that each Participant's Excess
Compensation for the Plan Year bears to the total Excess Compensation of all
Participants for the Plan Year, but not exceeding 3% of each Participant's
Excess Compensation.
As a third tier allocation, the Advisory Committee will allocate the annual
contributions in the same ratio that each Participant's Compensation plus Excess
Compensation for the Plan Year bears to the total Compensation plus Excess
Compensation of all Participants for the Plan Year. The allocation under this
paragraph, as a percentage of each Participant's Compensation plus Excess
Compensation, must not exceed the applicable percentage (2.7%, 2.4% or 1.3%)
listed under the Maximum Disparity Table following Option (i).
The Advisory Committee then will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all Participants for the Plan Year.
[_] (i) EXCESS COMPENSATION. For purposes of Option (f), (g) or (h), "Excess
Compensation" means Compensation in excess of the following
integration Level: (Choose (1) or (2))
[_] (1) _________% (not exceeding 100%) of the taxable wage base, as
determined under Section 230 of the Social Security Act, in
effect on the first day of the Plan Year: (Choose any combination
of (i) and (ii) or choose (iii)
[_] (i) Rounded to ________________________________________________ (but
not exceeding the taxable wage base).
[_] (ii) But not greater than $____________________.
[_] (iii) Without any further adjustment or limitation.
8
<PAGE>
[_] (2) $________________________ [Note: Not exceeding the taxable wage
base for the Plan Year in which this Adoption Agreement first is
effective.]
MAXIMUM DISPARITY TABLE. For purposes of Options (f), (g) and (h), the
applicable percentage is:
<TABLE>
<CAPTION>
Integration Level (as
percentage of taxable Applicable Percentages for Applicable Percentages
wage base) Option (f) or Option (g) for Option (h)
- --------------------- -------------------------- ----------------------
<S> <C> <C>
100% 5.7% 2.7%
More than 80% but less
than 100% 5.4% 2.4%
More than 20% (but not
less than $10,001)
and not more than 80% 4.3% 1.3%
20% (or $10,000, if
greater) or less 5.7% 2.7%
</TABLE>
TOP HEAVY MINIMUM ALLOCATION - APPLICATION OF REQUIREMENT. The Plan applies the
top heavy minimum allocation requirements of Section 3.04(B)(1): (Choose (j) or
(k))
[_] (j) In all Plan Years. A Participant is entitled to the top heavy minimum
allocation if he is employed by the Employer on the last day of the
Plan Year, unless: (Choose (1) or (2))
[_] (1) No exceptions.
[_] (2) The Participant is a Key Employee for the Plan Year. [Note: If
the Employer selects this Option (2), it will have to determine for
each Plan Year who are the Key Employees under the Plan.]
[X] (k) Only in Plan Years for which the Plan is top heavy. A Participant is
entitled to the top heavy minimum allocation if he is employed by the
Employer on the last day of the Plan Year, unless he is a Key
Employee. [Note Option (k) will require the Advisory Committee to
determine whether the Plan is top heavy for a Plan Year.]
TOP HEAVY MINIMUM ALLOCATION - METHOD OF COMPLIANCE. If a Participant's
allocation under this Section 3.04 is less than the top heavy minimum allocation
to which he is entitled under Section 3.04(B): (Choose (l) or (m))
[X] (l) The Employer will make any necessary additional contribution to the
Participant's Account, as described in Section 3.04(B)(7)(a) of the
Plan.
[_] (m) The Employer will satisfy the top heavy minimum allocation under the
Paired Pension Plan the Employer also maintains under this Prototype
Plan. However, the Employer will make any necessary additional
contribution to satisfy the top heavy minimum allocation for an
Employee covered only under this Plan and not under the Paired Pension
Plan. See Section 3.04(B)(7)(b) of the Plan.
If the Employer maintains another plan which is not a Paired Pension Plan
offered under this Prototype Plan, the Employer may provide in an addendum to
this Adoption Agreement, numbered Section 3.04, any modifications to the Plan
necessary to satisfy the top heavy requirements under Code (S)416.
RELATED EMPLOYERS. If two or more related employers (as defined in Section
1.30) contribute to this Plan, the Advisory Committee must allocate all Employer
contributions and forfeitures to each Participant in the Plan, in accordance
with the elections in this Adoption Agreement Section 3.04, without regard to
which contributing related group member employs the Participant. A
Participant's Compensation includes Compensation from all related employers,
irrespective of which related employers are contributing to the Plan. The
signatory Employer and any Participating Employer(s) will satisfy any fixed
matching contribution formula under Adoption Agreement Section 3.01 as agreed
upon by those Employers.
3.05 FORFEITURE ALLOCATION. Subject to any restoration allocation required
---------------------
under Sections 5.04 or 9.14, the Advisory Committee will allocate a Participant
forfeiture in accordance with Section 3.04: (Choose (a) or (b); (c) and (d) are
optional in addition to (a) or (b)).
9
<PAGE>
[_] (a) As an Employer nonelective contribution for the Plan Year in which the
forfeiture occurs, as if the Participant forfeiture were an additional
nonelective contribution for that Plan Year.
[X] (b) To reduce the Employer matching contributions and nonelective
contributions for the Plan Year. (Choose (1) or (2))
[_] (1) in which the forfeiture occurs.
[_] (2) immediately following the Plan Year in which the forfeiture
occurs.
[X] (c) To the extent attributable to matching contributions: (Choose (1), (2)
or (3))
[X] (1) In the manner elected under Options (a) or (b).
[_] (2) First to reduce Employer matching contributions for the Plan
Year: (Choose (i) or (ii)
[_] (i) in which the forfeiture occurs,
[_] (ii) immediately following the Plan Year in which the forfeiture
occurs, then as elected in Options (a) or (b).
[_] (3) As a discretionary matching contribution for the Plan Year
in which the forfeiture occurs, in lieu of the manner
elected under Options (a) or (b).
[_] (d) First to reduce the Plan's ordinary and necessary administrative
expenses for the Plan Year, and then will allocate any remaining
forfeitures in the manner described in Options (a), (b) or (c),
whichever applies. If the Employer elects Option (c), the forfeitures
used to reduce Plan expenses: (Choose (1) or (2)).
[_] (1) relate proportionately to forfeitures described in Option
(c) and to forfeitures described in Options (a) or (b).
[_] (2) relate first to forfeitures described in Option _______.
ALLOCATION OF FORFEITED EXCESS AGGREGATE CONTRIBUTIONS. The Advisory Committee
will allocate any forfeited excess aggregate contributions (as described in
Section 14.09): (Choose (e), (f) or (g)).
[X] (e) To reduce Employer matching contributions for the Plan Year: (Choose
(1) or (2)).
[X] (1) in which the forfeiture occurs.
[_] (2) immediately following the Plan Year in which the forfeiture
occurs.
[_] (f) As Employer discretionary matching contributions for the Plan Year in
which forfeited, except the Advisory Committee will not allocate
these forfeitures to the Highly Compensated Employees who incurred
the forfeitures.
[_] (g) In accordance with Options (a) through (d), whichever applies, except
the Advisory Committee will not allocate these forfeitures under
Option (a) or under Option (c)(3) to the Highly Compensated Employees
who incurred the forfeitures.
3.06 ACCRUAL OF BENEFIT.
------------------
COMPENSATION TAKEN INTO ACCOUNT. For the Plan Year in which the Employee first
becomes a Participant, the Advisory Committee will determine the allocation of
any designated qualified nonelective contribution or nonelective contribution by
taking into account: (Choose (a) or (b)).
[_] (a) The Employee's Compensation for the entire Plan Year.
[X] (b) The Employee's Compensation for the portion of the Plan Year in which
the Employee actually is a Participant in the Plan, except: (Choose
(1) or (2)).
[X] (1) No exceptions.
[_] (2) For purposes of the first 3% of Compensation allocated under
Option (e), (g) or (h) of Adoption Agreement Section 3.04,
whichever applies, the Advisory Committee will take into account
the Employee's Compensation for the entire Plan Year.
10
<PAGE>
ACCRUAL REQUIREMENTS. To receive an allocation of designated qualified
nonelective contributions, nonelective contributions and Participant forfeitures
treated as nonelective contributions for the Plan Year, a Participant must
satisfy the accrual requirements of this paragraph. If the Participant is
employed by the Employer on the last day of the Plan Year, the Participant must
complete at least one Hour of Service for that Plan Year. If the Participant
terminates employment with the Employer during the Plan Year, the Participant
must complete at least 500 Hours of Serviced (not exceeding 501) during the Plan
Year, except (Choose (c) or (d)).
[_] (c) No exceptions.
[X] (d) No Hour of Service requirement if the Participant terminates
employment during the Plan Year on account of: (Choose at least one of
(1), (2) and (3))
[X] (1) Death.
[X] (2) Disability.
[X] (3) Attainment of Normal Retirement Age in the current Plan Year or
in a prior Plan Year.
SPECIAL ACCRUAL REQUIREMENTS FOR MATCHING CONTRIBUTIONS. To receive an
allocation of matching contributions (and forfeitures applied to reduce matching
contributions) a Participant must satisfy the following condition(s): (Choose
(e) or any combination of (f), (g) and (h)
[X] (e) No conditions other than making salary reduction contributions.
[_] (f) The accrual requirements prescribed for an allocation of nonelective
contributions.
[_] (g) The Participant does not revoke his salary reduction agreement
effective during the Plan Year.
[_] (h) The Participant is not a Highly Compensated Employee for the Plan
Year. This Option (h) applies to: (Choose (1) or (2)).
[_] (1) All matching contributions.
[_] (2) Matching contributions described in Option(s) ____ of Adoption
Agreement Section 3.01.
3.15 MORE THAN ONE PLAN LIMITATION. If the provisions of Section 3.15 apply,
-----------------------------
the Excess Amount attributed to this Plan equals: (Choose (a), (b) or (c)).
[_] (a) The product of
(i) the total Excess Amount allocated as of such date (including any
amount which the Advisory Committee would have allocated but for
the limitations of Code (S)415), times
(ii) the ratio of (1) the amount allocated to the Participant as of
such date under this Plan divided by (2) the total amount
allocated as of such date under all qualified defined
contribution plans (determined without regard to the limitations
of Code (S)415).
[X] (b) The total Excess Amount.
[_] (c) None of the Excess Amount.
[Note: If the Employer adopts Paired Plans available under this Prototype Plan,
the Employer must coordinate its elections under Section 3.15 of each Adoption
Agreement].
3.18 DEFINED BENEFIT PLAN LIMITATION.
-------------------------------
APPLICATION OF LIMITATION. The limitation under Section 3.16 of the Plan.
(Choose (a) or (b)):
[_] (a) Does not apply to the Employer's Plan because the Employer does not
maintain an never has maintained a defined benefit plan covering any
Participant in this Plan.
[X] (b) Applies to the Employer's Plan. To the extent necessary to satisfy the
limitation under Section 3.18, the Employer will reduce: (Choose (1)
or (2))
[_] (1) The Participant's projected annual benefit under the defined
benefit plan under which the Participant participates.
11
<PAGE>
[X] (2) Its contribution or allocation on behalf of the Participant to
the defined contribution plan under which the Participant
participates and then, if necessary, the Participant's projected
annual benefit under the defined benefit plan under which the
Participant participates.
[Note: if the Employer selects (a), the remaining options in this Section 3.18
do not apply to the Employer's Plan.]
OVERRIDE OF 100% LIMITATION. The Employer elects: (Choose (c) or (d))
[X] (c) To apply the 100% limitation described in Section 3.19(l) of the Plan
in all Limitation Years. [Note: This election will avoid having to
calculate the Plan's top heavy ratio for any year, unless the Employer
has elected Adoption Agreement Section 3.04(k).]
[_] (d) Not to apply the 100% limitation for Limitation Years in which the
Plan's top heavy ratio (as determined under Section 1.33 of the Plan)
does not exceed 90%, but only if the defined benefit plan satisfies
the extra minimum benefit requirements of Code (S)416(h)(2) (and the
applicable Treasury regulations) after taking into account the
Employer's election under Options (e), (f), (g) or (h) of this Section
3.18. To determine the top heavy ratio, the Advisory Committee will
use the following interest rate and mortality assumptions to value
accrued benefits under a defined benefit plan: _______________________
____________________________. [Note: This election will require the
Advisory Committee to calculate the Plan's top heavy ratio.]
COORDINATION WITH TOP HEAVY MINIMUM ALLOCATION. The Advisory Committee will
apply the top heavy minimum allocation provisions of Section 3.04(B) of the Plan
with the following modifications: (Choose (e), (f), (g) or (h))
[X] (e) No modifications.
[_] (f) By substituting 4% for 3% in Paragraph (b) of Section 3.04(B)(1) or of
Section 3.04(B)(2) of the Plan, whichever applies, but only for any
Plan Year in which Option (d) applies to override the 100% limitation.
[_] (g) By increasing the top heavy minimum allocation to 5% for any Plan Year
in which the 100% limitation applies, and to 7 1/2% for any Plan Year
in which Option (d) applies to override the 100% limitation. The
increased percentage under this Option (g) applies irrespective of
whether the highest contribution rate for the Plan Year is less than
the increased percentage.
[_] (h) By eliminating the top heavy minimum allocation. [Note: The Employer
may not select this Option (h) if the defined benefit plan does not
guarantee the top heavy minimum benefit under Code (S)416 for every
Participant in this Plan who is a Non-Key Employee.]
If the elections under this Section 3.18 are not appropriate to satisfy the
limitations of Section 3.18, or the top heavy requirements under Code (S)416,
the Employer must provide the appropriate provisions in an addendum to this
Adoption Agreement.
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. The Plan: (Choose (a) or
---------------------------------------
(b))
[X] (a) Does not permit Participant nondeductible contributions.
[_] (b) Permits Participant nondeductible contributions, pursuant to Section
14.04 of the Plan.
ALLOCATION DATES. The Advisory Committee will allocate nondeductible
contributions for each Plan Year as of the Accounting Date and the following
additional allocation dates: (Choose (c) or (d))
[_] (c) No other allocation dates.
[_] (d) (Specify) ___________.
As of an allocation date, the Advisory Committee will credit all nondeductible
contributions made for the relevant allocation period. Unless otherwise
specified in (d), a nondeductible contribution relates to an allocation period
only if actually made to the Trust no later than 30 days after that allocation
period ends.
12
<PAGE>
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT. Normal Retirement Age under the Plan is: (Choose
-----------------
(a) or (b))
[X] (a) Age 65 [State age, but may not exceed 65].
[_] (b) The later of the date the Participant attains ______________ (_______)
years of age or the____________ (________) commenced participant in
the Plan. [The age selected may not exceed age 65 and the anniversary
selectee may not exceed the 5th].
5.02 PARTICIPANT DEATH OR DISABILITY. The 100% vesting rule under Section
-------------------------------
5.02 of the Plan: (Choose (a) or choose one or both of (b) and (c))
[_] (a) Does not apply.
[X] (b) Applies to death.
[X] (c) Applies to disability.
5.03 VESTING SCHEDULE.
----------------
DEFERRAL CONTRIBUTIONS ACCOUNT/QUALIFIED MATCHING CONTRIBUTIONS
ACCOUNT/QUALIFIED NONELECTIVE CONTRIBUTIONS ACCOUNT. A Participant has a 100%
Nonforfeitable interest at all times in his Deferral Contribution Account, his
Qualified Matching Contributions Account and in his Qualified Nonelective
Contributions Account.
REGULAR MATCHING CONTRIBUTIONS ACCOUNT/EMPLOYER CONTRIBUTIONS ACCOUNT. With
respect to a Participant's Regular Matching Contributions Account and Employer
Contributions Account, the Employer elects the following vesting schedule:
(Choose (a) or (b); (c) and (d) are available only as additional options)
[_] (a) Immediate vesting. 100% Nonforfeitable at all times.
[X] (b) Graduated Vesting Schedules:
<TABLE>
<CAPTION>
TOP HEAVY SCHEDULE NON TOP HEAVY SCHEDULE
(MANDATORY) (OPTIONAL)
Years of Nonforfeitable Years of Nonforfeitable
Service Percentage Service Percentage
-------- -------------- -------- --------------
<S> <C> <C> <C>
Less than 1 0 Less than 1 0
1 0 1 0
2 20 2 0
3 40 3 0
4 60 4 40
5 100 5 100
6 or more 100% 6 100
7 or more 100%
</TABLE>
[_] (c) Special vesting election for Regular Contributions Account. In lieu of
the election under Options (a) or (b), the Employer elects the
following vesting schedule for a Participant's Regular Matching
Contributions Account: (Choose (1) or (2))
[_] (1) 100% Nonforfeitable at all times.
[_] (2) In accordance with the vesting schedule described in the addendum
to this Adoption Agreement, numbered 5.03(c). [Note: if the
Employer elects this Option (c)(2), the addendum must designate
the applicable vesting schedule(s) using the same format as used
in Option (b).]
13
<PAGE>
[Note: Under Options (b) and (c)(2), the Employer must complete a Top Heavy
Schedule which satisfies Code (S)416. The Employer, at its option, may complete
a Non Top Heavy Schedule only if the Employer elected Adoption Agreement Section
3.04(k). The Non Top Heavy Schedule must satisfy Code (S)411(a)(2). Also see
Section 7.05 of the Plan.]
[X] (d) The Top Heavy Schedule under Option (b) (and, if applicable, under
Option (c)(2) applies: (Choose (1) or (2))
[X] (1) Only in a Plan Year for which the Plan is top heavy.
[_] (2) In the Plan Year for which the Plan first is top heavy and then
in all subsequent Plan Years. [Note: The Employer may not elect Option (d)
unless it has completed a Non Top Heavy Schedule.]
MINIMUM VESTING. (Choose (e) or (f))
[X] (e) The Plan does not apply a minimum vesting rule.
[ ] (f) A Participant's Nonrefundable Accrued Benefit will never be less than
the lesser of $________ or his entire Accrued Benefit, even if the
application of a graduated vesting schedule under Options (b) or (c)
would result in a smaller Nonforfeitable Accrued Benefit.
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/ RESTORATION
--------------------------------------------------------------------
OF FORFEITED ACCRUED BENEFIT. The deemed cash-out rule described in Section
- ----------------------------
5.04(C) of the Plan: (Choose (a) or (b))
[_] (a) Does not apply.
[X] (b) Will apply to determine the timing of forfeitures for 0% vested
Participants. A Participant is not a 0% vested Participant if he had a
Deferral Contributions Account.
5.06 YEAR OF SERVICE - VESTING
-------------------------
VESTING COMPUTATION PERIOD. The Plan measures a Year of Service on the basis of
the following 12 consecutive month periods: (Choose (a) or (b))
[X] (a) Plan Years.
(b) Employment Years. An Employment Year is the 12 consecutive month
period measured from the Employee's Employment Commencement Date and
each successive 12 consecutive month period measured from each
anniversary of that Employment Commencement Date.
HOURS OF SERVICE. The minimum number of Hours of Service an Employee must
complete during a vesting computation period to receive credit for a Year of
Service is: (Choose (c) or (d)).
[X] (c) 1,000 Hours of Service.
[_] (d) ______ Hours of Service. [Note: The Hours of Service requirement may
not exceed 1,000.]
5.08 INCLUDED YEARS OF SERVICE - VESTING. The Employer specifically
-----------------------------------
excludes the following Years of Service: (Choose (a) or at least one of (b), (c)
and (d)).
[X] (a) None other than as specified in Section 5.08(a) of
the Plan.
[_] (b) Any Year of Service before the Participant attained the age of _______
(____). [Note: The age selected may not exceed age 18.]
[_] (c) Any Year of Service during the period the Employer did not maintain
this Plan or a predecessor plan.
[_] (d) Any Year of Service before a Break in Service if the number of
consecutive Breaks in Service equals or exceeds the greater of 5 or
the aggregate number of the Years of Service prior to the Break. This
exception applies only if the Participant is 0% vested in his Accrued
Benefit derived from Employer contributions at the time he has a Break
in Service. Furthermore, the aggregate
14
<PAGE>
number of Years of Service before a Break in Service do not include
any Years of Service not required to be taken into account under this
exception by reason of any prior Break in Service.
ARTICLE VI
----------
TIME AND METHOD OF PAYMENTS OF BENEFITS
---------------------------------------
CODE Section 411(D)(6) PROTECTED BENEFITS. The elections under this Article VI
may not eliminate Code Section 411(d)(6) protected benefits. To the extent the
elections would eliminate a Code Section 411(d)(6) protected benefit, See
Section 13.02 of the Plan. Furthermore, if the elections liberalize the optional
forms of benefit under the Plan, the more liberal options apply on the later of
the adoption date or the effective date of this Adoption Agreement.
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT.
----------------------------------
DISTRIBUTION DATE. A distribution date under the Plan means the valuation date
immediately following a distribution event. [Note: The Employer must specify
the appropriate date(s). The specified distribution dates primarily establish
annuity stating dates and the notice and consent periods prescribed by the Plan.
The Plan allows the Trustee an administratively practicable period of time to
make the actual distribution relating to a particular distribution date.]
NONFORFEITABLE ACCRUED BENEFIT NOT EXCEEDING $3,500. Subject to the limitations
of Section 6.01(a)(1), the distribution date for distribution of a
Nonforfeitable Accrued Benefit not exceeding $3,500 is: (Choose (a), (b), (c)
or (d)).
[_] (a) ______________________________ of the ______________________ Plan Year
beginning after the Participant's Separation from Service.
[X] (b) the valuation date immediately following the Participant's Separation
from Service.
[_] (c) _____________________ of the Plan Year after the Participant incurs
______ _____________________ Break(s) in Service (as defined in
Article V).
[_] (d) _____________________ following the Participant's attainment of Normal
Retirement Age, but not earlier than ________________________ days
following his Separation from Service.
NONFORFEITABLE ACCRUED BENEFIT EXCEEDS $3,500. See the elections under Section
6.03.
DISABILITY. The distribution date, subject to the limitations of Section
6.01(a)(3), is: (Choose (e) or (f)).
[X] (e) The next valuation date following after the Participant terminates
employment because of disability.
[_] (f) The same as if the Participant had terminated employment without
disability.
HARDSHIP. Choose (g) or (h)).
[_] (g) The Plan does not permit a hardship distribution to a Participant who
has separated from Service.
[X] (h) The Plan permits a hardship distribution to a Participant who has
separated from Service in accordance with the hardship distribution
policy stated in: (Choose (1) or (2)).
[_] (1) Section 6.01(A)(4) of the Plan.
[X] (2) Section 14.11 of the Plan.
DEFAULT ON A LOAN. If a Participant or Beneficiary defaults on a loan made
pursuant to a loan policy adopted by the Advisory Committee pursuant to Section
9.04, the Plan: (Choose (i) or (ii)).
[X] (i) Treats the default as a distributable event. The Trustee, at the time
of the default, will reduce the Participant's Nonforfeitable Accrued
Benefit by the lesser of the amount in default (plus accrued interest)
or the Plan's security interest in that Nonforfeitable Accrued
Benefit. To the extent the loan is attributable to the Participant's
Deferral Contributions Account, Qualified Matching Contributions
15
<PAGE>
Account or Qualified Nonelective Contributions Account, the Trustee
will not reduce the Participant's Nonforfeitable Accrued Benefit
unless the Participant has separated from Service or unless the
Participant has attained age 59- 1/2.
[_] (j) Does not treat the default as a distributable event. When an otherwise
distributable event first occurs pursuant to Section 6.01 or Section
6.03 of the Plan, the Trustee will reduce the Participant's
Nonforfeitable Accrued Benefit by the lesser of the amount in default
(plus accrued interest) or the Plan's security interest in that
Nonforfeitable Accrued Benefit.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. The Advisory Committee will
------------------------------------
apply Section 6.02 of the Plan with the following modifications: (Choose (a) or
(b)).
[X] (a) No modifications.
[_] (b) The Plan permits the following annuity options:_______________________
______________________________________________________________________
_____________________________________________________________________.
Any Participant who elects a life annuity option is subject to the
requirements of Sections 6.04(A), (B), (C) and (D) of the Plan. See Section
6.04(E). [Note: The Employer may specify additional annuity options in an
addendum to this Adoption Agreement, numbered 6.02(b).
6.03 BENEFIT PAYMENT ELECTIONS.
-------------------------
PARTICIPANT ELECTIONS AFTER SEPARATION FROM SERVICE. A Participant who is
eligible to make distribution elections under Section 6.03 of the Plan may elect
to commence distribution of his Nonforfeitable Accrued Benefit. (Choose (a) or
(b)).
[_] (a) As of any distribution date, but not earlier than ____________________
______________________________________________ of the _____________________
___________________________________ Plan Year beginning after the
Participant's Separation from Service.
[X] (b) As of the following date(s): (Choose at least one of Options (1)
through (5))
[_] (1) As of any distribution date after the close of the Plan Year in
which the Participant attains Normal Retirement Age.
[X] (2) Any distribution date following his Separation from Service.
[_] (3) Any distribution date in the __________________________ Plan
Year(s) beginning after his Separation from Service.
[_] (4) Any distribution date in the Plan Year after the Participant
incurs _______ Break(s) in Service (as defined in Article V).
[_] (5) Any distribution date following attainment of age ___ and
completion of at least ____ Years of Service (as defined in
Article V).
The distribution events described in the election(s) made under Option (a)
or (b) apply equally to all Accounts maintained for the Participant.
PARTICIPANT ELECTIONS PRIOR TO SEPARATION FROM SERVICE - REGULAR MATCHING
CONTRIBUTIONS ACCOUNT AND EMPLOYER CONTRIBUTIONS ACCOUNT. Subject to the
restrictions of Article VI, the following distribution options apply to a
Participant's Regular Matching Contributions Account and Employer Contributions
Account prior to his Separation from Service: (Choose (c) or at least one of (d)
through (f)).
[_] (c) No distribution options prior to Separation from Service.
[X] (d) Attainment of Specified Age. Until he retires, the Participant has a
continuing election to receive all or any portion of his
Nonforfeitable interest in these Accounts after he attains: (Choose
(1) or (2)).
16
<PAGE>
[_] (1) Normal Retirement Age.
[X] (2) 59 1/2 years of age and is at least 100% vested in these
Accounts. [Note: if the percentage is less than 100%, see the
special vesting formula in Section 5.03.]
[_] (e) After a Participant has participated in the Plan for a period of not
less than ___ years and he is 100% vested in these Accounts, until he
retires, the Participant has a continuing election to receive all or
any portion of the Accounts. [Note: The number in the blank space may
not be less than 5.]
[_] (f) Hardship. A Participant may elect a hardship distribution prior to
his Separation from Service in accordance with the hardship
distribution policy: (Choose (1) or (2); (3) is available only in
addition to (1) or (2)).
[_] (1) Under Section 6.01(A)(4) of the Plan.
[_] (2) Under Section 14.11 of the Plan.
[_] (3) In no event may a Participant receive a hardship distribution
before he is at least _____% vested in these Accounts. [Note: if
the percentage in the blank is less than 100%, see the special
vesting formula in Section 5.03].
PARTICIPANT ELECTIONS PRIOR TO SEPARATION FROM SERVICE - DEFERRAL CONTRIBUTIONS
ACCOUNT, QUALIFIED MATCHING CONTRIBUTIONS ACCOUNT AND QUALIFIED NONELECTIVE
CONTRIBUTIONS ACCOUNT. Subject to the restrictions of Article VI, the following
distribution options apply to a Participant's Deferral Contributions Account,
Qualified Matching Contributions Account and Qualified Nonelective Contributions
Accounts prior to his Separation from Service: (Choose (g) or at least one of
(h) or (i)).
[_] (g) No distribution options prior to Separation from Service.
[X] (h) Until he retires, the Participant has a continuing election to receive
all or any portion of these Accounts after he attains: (Choose (1) or
(2)).
[_] (1) The later of Normal Retirement Age or 59 1/2.
[X] (2) Age 59 1/2 (at least 59 1/2).
[X] (i) Hardship. A Participant, prior to this Separation from Service, may
elect a hardship distribution in accordance with the hardship distribution
policy under Section 14.11 of the Plan.
SALE OF TRADE OR BUSINESS/SUBSIDIARY. If the Employer sells substantially all
of the assets (within the meaning of Code (S)409(d)(2)) used in a trade or
business or sells a subsidiary (within the meaning of Code (S)409(d)(3)), a
Participant who continues employment with the acquiring corporation is eligible
for distribution from his Deferral Contributions Account, Qualified Matching
Contributions Account and Qualified Nonelective Contributions Account. (Choose
(j) or (k)).
[X] (j) Only as described in this Adoption Agreement Section 6.03 for
distributions prior to Separation from Service.
[_] (k) As if he has a Separation from Service. After March 31, 1988, a
distribution authorized solely by reason of this Option (k) must
constitute a lump sum distribution, determined in a manner consistent
with Code (S)401(k)(10) and the applicable Treasury regulations.
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES. The
-----------------------------------------------------------
annuity distribution requirements of Section 6.04: (Choose (a) or (b)).
[X] (a) Apply only to a Participant described in Section 6.04(E) of the Plan
(relating to the profit sharing exception to the joint and survivor
requirements).
[_] (b) Apply to all Participants.
17
<PAGE>
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. If a distribution (other than
---------------------------------------
a distribution from a segregated Account and other then a corrective
distribution described in Sections 14.07, 14.08, 14.09 or 14.10 of the Plan)
occurs more than 90 days after the most recent valuation date, the distribution
will include interest at: (Choose (a) or (b))
[X] (a) 0% per annum [Note: The percentage may equal 0%.]
[_] (b) The 90 day Treasury bill rate in effect at the beginning of the
current valuation period.
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS. Pursuant to
------------------------------------------------------
Section 14.12, to determine the allocation of net income, gain or loss: (Choose
only those items, if any, which are applicable to the Employer's Plan)
[X] (a) For salary reduction contributions, the Advisory Committee will:
(Choose (1), (2), (3) or (4))
[X] (1) Apply Section 9.11 without modification.
[_] (2) Use the segregated account approach described in Section 14.12.
[_] (3) Use the weighted average method described in Section 14.12, based
on a __________ weighting period.
[_] (4) Treat as part of the relevant Account at the beginning of the
valuation period _____% of the salary reduction contributions:
(Choose (i) or (ii))
[_] (i) made during that valuation period
[_] (ii) made by the following specified time: ____________________.
[X] (b) For matching contributions, the Advisory Committee will: (Choose (1),
(2) or (3))
[X] (1) Apply Section 9.11 without modification.
[_] (2) Use the weighted average method described in Section 14.12, based
on a __________ weighting period.
[_] (3) Treat as part of the relevant Account at the beginning of the
valuation period _______% of the marching contributions allocated
during the valuation period.
[_] (c) For Participant nondeductible contributions, the Advisory Committee
will: (Choose (1), (2), or (3) (4))
[_] (1) Apply Section 9.11 without modification.
[_] (2) Use the segregated account approach described in Section 14.12.
[_] (3) Use the weighted average method described in Section 14.12, based on a
________ eighting period.
[_] (4) Treat as part of the relevant Account at the beginning of the
valuation period _______% of the Participant nondeductible
contributions: (Choose (i) or (ii))
[ ] (i) made during the valuation period.
18
<PAGE>
[_] (ii) made by the following specified time: ___________________________
___________________________________________________________.
ARTICLE X
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES
10.14 VALUATION OF TRUST. In addition to each Accounting Date, the
------------------
Trustee must value the Trust Fund on the following valuation date(s): (Choose
(a) or (b))
[X] (a) No other mandatory valuation dates.
[_] (b) (Specify) ____________________________________________________________
____________________________________________________________________.
EFFECTIVE DATE ADDENDUM
(RESTATED PLANS ONLY)
The Employer must complete this addendum only if the restated Effective
Date specified in Adoption Agreement Section 1.18 is different than the restated
effective date for at least one of the provisions listed in this addendum. In
lieu of the restated Effective Date in Adoption Agreement Section 1.18, the
following special effective dates apply: (Choose whichever elections apply)
[_] (a) COMPENSATION DEFINITION. The Compensation definition of Section 1.12
(other than the $200,000 limitation) is effective for Plan Years
beginning after ____________________________. [Note: May not be
effective later than the first day of the first Plan Year beginning
after the Employer executes this Adoption Agreement to restate the
Plan for the Tax Reform Act of 1986, if applicable.]
[_] (b) ELIGIBILITY CONDITIONS. The eligibility conditions specified in
Adoption Agreement Section 2.01 are effective for Plan Years beginning
after ___________________________________________.
[_] (c) SUSPENSION OF YEARS OF SERVICE. The suspension of Years of Service
rule elected under Adoption Agreement Section 2.03 is effective for
Plan Years beginning after _____________________.
[_] (d) CONTRIBUTION/ALLOCATION FORMULA. The contribution formula elected
under Adoption Agreement Section 3.01 and the method of allocation
elected under Adoption Agreement Section 3.04 is effective for Plan
Years beginning after _______________________________________________.
[_] (e) ACCRUAL REQUIREMENTS. The accrual requirements of Section 3.06 are
effective for Plan Years beginning after ____________________________.
[Note: If the effective date is later than Plan Years beginning after
December 31, 1989, the accrual requirements in the Plan prior to its restatement
may not be more restrictive for post-1989 Plan Years than the requirements
permitted under Adoption Agreement Section 3.06.]
[_] (f) ELIMINATION OF NET PROFITS. The requirement for the Employer not to
have net profits contribute to this Plan is effective for Plan Years
beginning after _________________________. [Note: The date specified
may not be earlier than December 31, 1985.]
[_] (g) VESTING SCHEDULE. The vesting schedule elected under Adoption
Agreement Section 5.03 ineffective for Plan Years beginning after
_________________________________________.
[_] (h) ALLOCATION OF EARNINGS. The special allocation provision elected
under Adoption Agreement Section 9.11 are effective for Plan Years
beginning after _________________________________.
19
<PAGE>
For Plan Years prior to the special Effective Date, the terms of the Plan
prior to its restatement under this Adoption Agreement will control for purposes
of the designated provisions. A special Effective Date may not result in the
delay of a Plan provision beyond the permissible Effective Date under any
applicable law requirements.
EXECUTION PAGE
The Trustee (and Custodian, if applicable), by executing this Adoption
Agreement, accepts its position and agrees to all of the obligations,
responsibilities and duties imposed upon the Trustee (or Custodian) under the
Prototype Plan and Trust. The Employer hereby agrees to the provisions of this
Plan and Trust, and in witness of its agreement, the Employer by its duly
authorized officers, has executed this Adoption Agreement, and the Trustee (and
Custodian, if applicable) signified its acceptance, on this 17th day of
February, 1994.
Name and EIN of Employer, FIRST FEDERAL BANK OF IDAHO, FSB, EIN No. 82-0138812.
Signed: /s/ Larry K. Moxley
--------------------------------------------------------------------
Larry K. Moxley
Name(s) of Trustee: FIRST FEDERAL BANK OF IDAHO, FSB
Signed: /s/ Larry K. Moxley /s/ G.J. Cole /s/ Mary K. Barker
--------------------------------------------------------------------
Larry K. Moxley G.J. Cole Mary K. Barker
/s/ Rocky Dover /s/ Donna M. Miller
--------------------------------------------------------------------
Rocky Dover Donna M. Miller
Name of Custodian: FIRST FEDERAL BANK OF IDAHO, FSB
Signed: /s/ Larry K. Moxley
-----------------------------------------------------------------
Larry K. Moxley
[Note: A Trustee is mandatory, but a Custodian is optional. See Section 10.03
of the Plan.]
PLAN NUMBER. The 3-digit plan number the Employer assigns to this Plan for
ERISA reporting purposes (Form 5500 Series) is: 002.
USE OF ADOPTION AGREEMENT. Failure to complete properly the elections in this
Adoption Agreement may result in disqualification of the Employer's Plan. The
3-digit number assigned to this Adoption Agreement (see page 1) is solely for
the Regional Prototype Plan Sponsor's recordkeeping purposes and does not
necessarily correspond to the plan number the Employer designated in the prior
paragraph. The Regional Prototype Plan Sponsor offers the following Paired
Pension Plan(s) with this Paired Profit Sharing Plan, identified by 3-digit
adoption agreement number: _______________________.
RELIANCE ON NOTIFICATION LETTER. If the Employer does not maintain (and has
never maintained) any other plan other than this Plan and a Paired Pension Plan,
it may rely on the Regional Prototype Plan Sponsor's notification letter
covering this Plan for purposes of plan qualification. For this purpose, the
Employer has not maintained another plan if this Plan, or the Paired Pension
Plan, amended and restated that prior plan and the prior plan was the same type
of plan as the restated plan. If the Employer maintains or has maintained
another plan other than a Paired Pension Plan, including a welfare benefit fund,
as defined in Code Section 419(e), which provides post-retirement medical
benefits for key employees (as defined in Code Section 419A(d)(3)), or an
individual medical account (as defined in Code Section 415(l)(2)), the Employer
may not rely on this Plan's qualified status unless it obtains a determination
letter from the applicable IRS Key District office.
20
<PAGE>
PARTICIPATION AGREEMENT
FOR PARTICIPATION BY RELATED GROUP MEMBERS (PLAN SECTION 1.30)
The undersigned Employer, by executing this Participation Agreement, elects
to become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Prototype
Plan as made by ______________________________, the Signatory Employer to the
Execution Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: __________________________________________.
2. The undersigned Employer's adoption of this Plan constitutes:
[_] (a) The adoption of a new plan by the Participating Employer.
[_] (b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as __________________________
_________________________________________, and having an original
effective date of ___________________________________.
Dated this _____ day of _______________, 199__.
Name of the Participating Employer:________________
___________________________________________________
Signed:____________________________________________
___________________________________________________
Participating Employer's EIN:______________________
ACCEPTANCE BY THE SIGNATORY EMPLOYER TO THE EXECUTIVE PAGE OF THE ADOPTION
AGREEMENT AND BY THE TRUSTEE.
Name of the Signatory Employer:____________________
___________________________________________________
Accepted:______________________
[Date] Signed:_____________________________________
Name(s) of Trustee:________________________________
___________________________________________________
Accepted:______________________
[Date] Signed:_____________________________________
Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important
Prototype Plan information.]
21
<PAGE>
EXHIBIT 23.1
CONSENT OF BDO SEIDMAN, LLP
<PAGE>
[BDO SEIDMAN LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 of our report dated January 31, 1997,
relating to the financial statements of First Federal Bank of Idaho, a Federal
Savings Bank, and Subsidiary, which appears in such Prospectus. We also consent
to the reference to us under the headings "Experts," "Legal and Tax Opinions"
and "Tax Effects" in such Prospectus.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
Spokane, Washington
May 2, 1997
<PAGE>
EXHIBIT 99.4
APPRAISAL REPORT OF RP FINANCIAL, LC.
<PAGE>
---------------------------------------------
CONVERSION APPRAISAL REPORT
FIRSTBANK CORP.
PROPOSED HOLDING COMPANY FOR
FIRST FEDERAL BANK OF IDAHO,
A FEDERAL SAVINGS BANK
Lewiston, Idaho
Dated As Of:
February 28, 1997
---------------------------------------------
Prepared By:
RP Financial, LC.
1700 North Moore Street
Suite 2210
Arlington, Virginia 22209
<PAGE>
February 28, 1997
Board of Directors
First Federal Bank of Idaho, a federal savings bank
920 Main Street
Lewiston, Idaho 83501
Gentlemen:
At your request, we have completed and hereby provide an independent
appraisal ("Appraisal") of the estimated pro forma market value of the common
stock which is to be issued in connection with the mutual-to-stock conversion of
First Federal Bank of Idaho, a federal savings bank, Lewiston, Idaho ("First
Federal" or the "Bank"). The common stock issued in connection with the Bank's
conversion will simultaneously be acquired by a holding company, FirstBank Corp.
("FirstBank" or the "Holding Company"). The conversion involves the issuance of
shares of common stock to depositors, tax-qualified employee plans of First
Federal and the Holding Company, including FirstBank's newly-formed employee
stock ownership plan ("ESOP"), borrowers, members of the local community and the
public at large.
This Appraisal is furnished pursuant to the conversion regulations
promulgated by the Office of Thrift Supervision ("OTS"). This Appraisal has been
prepared in accordance with the written valuation guidelines promulgated by the
OTS, most recently updated as of October 21, 1994. Specifically, this Appraisal
has been prepared in accordance with the "Guidelines for Appraisal Reports for
the Valuation of Savings and Loan Associations Converting from Mutual to Stock
Form of Organization" of the OTS, as successor to the Federal Home Loan Bank
Board ("FHLBB"), dated as of October 21, 1994; and applicable regulatory
interpretations thereof.
Description of Reorganization
- -----------------------------
The Board of Directors of the Bank has adopted a Plan of Conversion
pursuant to which the Bank will convert from a federally chartered mutual
savings bank to a federally chartered capital stock savings bank and issue all
of its outstanding shares to the Holding Company. The Holding Company will sell
in a Subscription Offering and a concurrent Community Offering, Holding Company
stock in the amount equal to the appraised value of the Bank. Immediately
following the conversion, the primary assets of the Holding Company will be the
capital stock of the Bank and the net conversion proceeds remaining after
purchase of the Bank's common stock by the Holding Company. The Holding Company
will use up to 50 percent of the net conversion proceeds to purchase the Bank's
common stock. The remaining net conversion proceeds, retained at the Holding
Company, will be used to fund a loan to the ESOP with the remainder to be used
as general working capital.
RP Financial, LC.
- -----------------
RP Financial, LC. ("RP Financial") is a financial consulting firm
serving the financial services industry nationwide that, among other things,
specializes in financial valuations and analyses of business enterprises and
securities, including the pro forma valuation for savings institutions
converting from mutual-to-stock form. The
- --------------------------------------------------------------------------------
Washington Headquarters
Rosslyn Center
1700 North Moore Street, Suite 2210 Telephone: (703) 528-1700
Arlington, VA 22209 Fax No: (703) 528-1788
<PAGE>
RP Financial, L.C.
Board of Directors
February 28, 1997
Page 2
background and experience of RP Financial is detailed in Exhibit V-1. We
believe that, except for the fee we will receive for our appraisal and assisting
the Bank in the preparation of its business plan, we are independent of the Bank
and the other parties engaged by the Bank to assist in the stock conversion
process.
Valuation Methodology
- ---------------------
In preparing our appraisal, we have reviewed First Federal's
application for Approval of Conversion, including the Proxy Statement, as filed
with the OTS, and the Holding Company's Form S-1 registration statement as filed
with the Securities Exchange Commission ("SEC"). We have conducted a financial
analysis of the Bank that has included due diligence related discussions with
the Bank's management; BDO Seidman, LLP, the Bank's independent auditor; Breyer
& Aguggia, the Bank's conversion counsel; and Sandler O'Neill & Partners, L.P.,
which has been retained by the Bank as financial and marketing advisor in
connection with the Holding Company's stock offering. All conclusions set forth
in the appraisal were reached independently from such discussions. In addition,
where appropriate, we have considered information based on other available
published sources that we believe are reliable. While we believe the information
and data gathered from all these sources are reliable, we cannot guarantee the
accuracy and completeness of such information.
We have investigated the competitive environment within which the Bank
operates and have assessed the Bank's relative strengths and weaknesses. We have
kept abreast of the changing regulatory and legislative environment and analyzed
the potential impact on the Bank and the industry as a whole. We have analyzed
the potential effects of conversion on the Bank's operating characteristics and
financial performance as they relate to the pro forma market value of First
Federal. We have reviewed the economy in the Bank's primary market area and have
compared the Bank's financial performance and condition with selected publicly-
traded thrift institutions with similar characteristics as the Bank's, as well
as all publicly-traded thrifts. We have reviewed conditions in the securities
markets in general and in the market for thrift stocks in particular, including
the market for existing thrift issues and the market for initial public
offerings by thrifts.
Our appraisal is based on the Bank's representation that the information
contained in the regulatory applications and additional information 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 the Bank and its independent auditors, nor did we independently
value the assets or liabilities of the Bank. The valuation considers the Bank
only as a going concern and should not be considered as an indication of the
liquidation value of First Federal.
Our appraised value is predicated on a continuation of the current
operating environment for the Bank and for all thrifts. Changes in the local and
national economy, the legislative and regulatory environment, the stock market,
interest rates, and other external forces (such as natural disasters or
significant world events) may occur from time to time, often with great
unpredictability, and may materially impact the value of thrift stocks as a
whole or the Bank's value alone. It is our understanding First Federal intends
to remain an independent institution and there are no current plans for selling
control of the Bank as a converted institution. To the extent that such factors
can be foreseen, they have been factored into our analysis.
Pro forma market value is defined as the price at which First Federal's
stock, immediately upon completion of the conversion offering, would change
hands between a willing buyer and a willing seller, neither being under any
compulsion to buy or sell and both having reasonable knowledge of relevant
facts.
<PAGE>
Valuation Conclusion
- --------------------
It is our opinion that, as of February 28, 1997, the aggregate pro forma
market value of the shares to be issued was $15,000,000 at the midpoint, equal
to 1,500,000 shares offered at a per share value of $10.00. Pursuant to OTS
conversion guidelines, the 15 percent offering range indicates a minimum value
of $12,750,000 and a maximum value of $17,250,000. Based on the $10.00 per share
offering price, this valuation range equates to an offering of 1,275,000 shares
at the minimum to 1,725,000 shares at the maximum. In the event that the Bank's
appraised value is subject to an increase, up to 1,983,750 shares may be sold at
an issue price of $10.00 per share, for an aggregate market value of
$19,837,500, without a resolicitation.
Limiting Factors and Considerations
- -----------------------------------
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of the
common stock. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject to
change from time to time, no assurance can be given that persons who purchase
shares of common stock in the conversion will thereafter be able to buy or sell
such shares at prices related to the foregoing valuation of the pro forma market
value thereof.
RP Financial's valuation was determined based on the financial condition
and operations of the Bank as of December 31, 1996, the date of the financial
data included in the Holding Company's prospectus.
RP Financial is not a seller of securities within the meaning of any
federal and state securities laws and any report prepared by RP Financial shall
not be used as an offer or solicitation with respect to the purchase or sale of
any securities. RP Financial maintains a policy which prohibits the company, its
principals or employees from purchasing stock of its client institutions.
The valuation will be updated as provided for in the conversion regulations
and guidelines. These updates will consider, among other things, any
developments or changes in the Bank's financial performance and condition,
management policies, and current conditions in the equity markets for thrift
shares. These updates may also consider changes in other external factors which
impact value including, but not limited to: various changes in the legislative
and regulatory environment, the stock market and the market for thrift stocks,
and interest rates. Should any such new developments or changes be material, in
our opinion, to the valuation of the shares, appropriate adjustments to the
estimated pro forma market value will be made. The reasons for any such
adjustments will be explained in the update at the date of the release of the
update.
Respectfully submitted,
RP FINANCIAL, LC.
/s/ Ronald S. Riggins
----------------------
Ronald S. Riggins
President
/s/ Gregory E. Dunn
----------------------
Gregory E. Dunn
Senior Vice President
<PAGE>
TABLE OF CONTENTS
FIRST FEDERAL BANK OF IDAHO
Lewiston, Idaho
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
----------- ------
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
- -----------
<S> <C>
Introduction 1.1
Strategic Overview 1.2
Balance Sheet Trends 1.5
Income and Expense Trends 1.8
Interest Rate Risk Management 1.12
Lending Activities and Strategy 1.13
Asset Quality 1.16
Funding Composition and Strategy 1.17
Subsidiary 1.18
Legal Proceedings 1.18
CHAPTER TWO MARKET AREA
- -----------
Introduction 2.1
Market Area Demographics 2.1
National Economic Factors 2.3
Local Economy 2.6
Competition 2.7
CHAPTER THREE PEER GROUP ANALYSIS
- -------------
Selection of Peer Group 3.1
Financial Condition 3.5
Income and Expense Components 3.8
Loan Composition 3.11
Interest Rate Risk 3.13
Credit Risk 3.15
Summary 3.15
</TABLE>
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
FIRST FEDERAL BANK OF IDAHO
Lewiston, Idaho
(continued)
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
----------- ------
<S> <C>
CHAPTER FOUR VALUATION ANALYSIS
- ------------
Introduction 4.1
Appraisal Guidelines 4.1
RP Financial Approach to the Valuation 4.1
Valuation Analysis 4.2
1. Financial Condition 4.2
2. Profitability, Growth and Viability of Earnings 4.4
3. Asset Growth 4.6
4. Primary Market Area 4.6
5. Dividends 4.7
6. Liquidity of the Shares 4.8
7. Marketing of the Issue 4.9
A. The Public Market 4.9
B. The New Issue Market 4.13
C. The Acquisition Market 4.13
8. Management 4.16
9. Effect of Government Regulation and Regulatory Reform 4.16
Summary of Adjustments 4.17
Valuation Approaches 4.17
1. Price-to-Book ("P/B") 4.18
2. Price-to-Earnings ("P/E") 4.19
3. Price-to-Assets ("P/A") 4.20
Valuation Conclusion 4.20
</TABLE>
<PAGE>
LIST OF TABLES
FIRST FEDERAL BANK OF IDAHO
Lewiston, Idaho
<TABLE>
<CAPTION>
TABLE
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<C> <S> <C>
1.1 Historical Balance Sheets 1.6
1.2 Historical Income Statements 1.9
2.1 Summary Demographic Data 2.2
2.2 Market Area Unemployment Trends 2.7
2.3 Deposit Summary 2.9
3.1 Peer Group of Publicly-Traded Thrifts 3.3
3.2 Balance Sheet Composition and Growth Rates 3.6
3.3 Income as a Percent of Average Assets and Yields, Costs, Spreads 3.9
3.4 Loan Portfolio Composition Comparative Analysis 3.12
3.5 Interest Rate Risk Comparative Analysis 3.14
3.6 Credit Risk Measures and Related Information 3.16
4.1 Market Area Unemployment Rates 4.7
4.2 Conversion Pricing Characteristics 4.14
4.3 Market Pricing Comparatives 4.15
4.4 Public Market Pricing 4.22
</TABLE>
<PAGE>
RP Financial, LC.
Page 1.1
I. OVERVIEW AND FINANCIAL ANALYSIS
Introduction
- ------------
First Federal Bank of Idaho, a federal savings bank ("First Federal" or the
"Bank") is a federally chartered mutual savings bank headquartered in Lewiston,
Idaho. In addition to its main office facility, First Federal conducts banking
operations out of 5 full service branch offices located in the Idaho cities of
Lewiston (2 offices), Moscow, Grangeville and Coeur d'Alene and two loan
production offices ("LPOs") in Lewiston and Coeur d'Alene. All of the Bank's
offices are located in northwestern Idaho. First Federal was organized in 1920
and has operated as a federally insured institution since 1933. First Federal
is a member of the Federal Home Loan Bank ("FHLB") system, with its deposits
insured up to the regulatory maximums by the Savings Association Insurance Fund
("SAIF") of the Federal Deposit Insurance Corporation ("FDIC"). At December 31,
1996, First Federal had $133.2 million in assets, $105.3 million in deposits and
net worth of $10.8 million or 8.1 percent of total assets.
In the near term, following the completion of the mutual-to-stock
conversion, the Bank will relocate its main office to Clarkston, Washington and
convert to a Washington-chartered savings bank. Clarkston, Washington is
adjacent to Lewiston, Idaho, across the Snake River. In anticipation of the
charter conversion, the Bank is changing its name to FirstBank Northwest. The
name change is expected to occur in April 1997, prior to the Bank's mutual-to-
stock conversion.
FirstBank Corp. ("FirstBank" or the "Holding Company"), a Delaware
corporation, was recently organized to facilitate the conversion of First
Federal. In the course of the conversion, the Holding Company will acquire all
of the capital stock that the Bank will issue upon its conversion from the
mutual-to-stock form of ownership. Going forward, FirstBank will own 100 percent
of the Bank's stock, and the Bank will be FirstBank's sole subsidiary. Up to 50
percent of the net proceeds received from the sale of common stock will be used
to purchase all of the then to be issued and outstanding capital stock of the
Bank, with the balance of the proceeds being retained by the Holding Company. At
this time, no other activities are contemplated for FirstBank other than the
ownership of the Bank, a loan to the newly-formed employee stock ownership plan
("ESOP") and investment of Holding Company cash in investment securities. In the
future, FirstBank may acquire or organize other operating subsidiaries, although
there are no specific plans at present.
<PAGE>
RP Financial, LC.
Page 1.2
Strategic Overview
- ------------------
Throughout most of its history, First Federal has maintained a strategic
focus of operating as a traditional thrift, placing an emphasis on 1-4 family
permanent mortgage lending funded by retail deposits. However, since the mid-
1980s, the Bank has pursued a more diversified lending strategy and since 1992
First Federal has maintained a mortgage banking emphasis. Agricultural real
estate lending was the initial focus of the Bank's lending diversification,
which was pursued in connection with the hiring of lending officers experienced
in agricultural real estate lending. The Bank became active in commercial real
estate loan participations in the late-1980s due to limited local lending
opportunities; however, as the result of credit quality deterioration
experienced in the loan participations, First Federal exited the commercial real
estate loan participation market in the early-1990s.
Over the past several years, the Bank has maintained a mortgage banking
emphasis, which has been supported by strong 1-4 family loan demand in the Coeur
d'Alene market. In conjunction with the implementation of a mortgage banking
strategy, First Federal opened an LPO in Coeur d'Alene in 1992. Loan demand in
Coeur d'Alene has been facilitated by the rapid growth that has occurred in that
market over the past ten years, which has been largely attributable to an
expanding tourism industry and migration from more populous regional markets,
particularly nearby Spokane, Washington. Most of the Bank's recent construction
lending activities have been supported by new housing demand in the Coeur
d'Alene market as well, where First Federal has focused on originating
construction loans to finance the construction of affordable housing for first
time home buyers. Accordingly, a slow down in the Coeur d'Alene market would
have a notable negative impact on the Bank's current lending activities. Part
of the Bank's strategy going forward will be to reduce its dependence on the 1-4
family loan market in Coeur d'Alene, including construction lending, through
pursuing greater lending diversification and, in particular focusing on growth
in commercial real estate, commercial business and consumer lending. The Bank's
community banking strategy may require considerable time and expense to fully
implement successfully, and there is no assurance such objectives will be
realized.
To supplement its lending activities, First Federal pursues a relatively
conservative investment strategy. First Federal's investment portfolio is
largely comprised of U.S. Government and Federal agency obligations, which
mature in less than five years. The Bank also maintains a portfolio of
mortgage-backed securities ("MBS"), which serve as a supplement to the Bank's
portfolio of 1-4 family permanent mortgage loans. The Bank's mortgage-backed
securities portfolio consists of traditional pass through securities, as well as
collateralized mortgage obligations ("CMOs). Mortgage-backed securities held by
First Federal consist substantially of adjustable rate securities and are
generally purchased as a means to deploy excess liquidity at more favorable
yields than other investment alternatives. In recent years, the Bank has not
purchased mortgage-backed securities, as loan demand has adequately absorbed
excess liquidity.
<PAGE>
RP Financial, LC.
Page 1.3
The Bank's earnings composition is reflective of its mortgage banking
emphasis, with a substantial proportion of First Federal's pre-tax earnings
being derived from loan sale gains. Loan sale gains for the Bank are generated
from the sale of FHA and VA loan originations on a servicing released basis. FHA
and VA loan originations have been sustained by the Coeur d'Alene market,
similar to the Bank's other 1-4 family lending activities. High operating
expenses are also representative of First Federal's mortgage banking emphasis,
with mortgage banking operating expenses being largely associated with off-
balance sheet activities (i.e., the origination and sale of loans and loans
serviced for others). However, beyond First Federal's mortgage banking emphasis,
the Bank's other operating strategies have contributed to a high level of
operating expenses, such as diversification into lending areas that are
personnel intensive, particularly agricultural and construction lending, and
maintenance of a relatively high number of branches for its asset size. The
rural characteristics of the Bank's market area and distance from urban
population centers limit opportunities for growth. First Federal will be adding
another branch in Clarkston, Washington, in connection with its charter
conversion, which will place further upward pressure on an already high
operating expense ratio.
Historically, the Bank's operating strategy and generally slow deposit
growth markets have resulted in moderate asset growth, an increasing capital
position and mixed earnings. As described herein, the Bank experienced rapid
growth in late 1995 in conjunction with a special CD promotion, but deposits
have since declined as a high proportion of the promotional CDs attracted have
been withdrawn. The Bank expects future deposit growth to be rather limited in
the market presently served. Earnings have been largely supported by gains
realized from the sale of loans, as the result of a favorable interest rate
environment and strong 1-4 family loan demand in the Coeur d'Alene market. While
the Bank's earnings are viewed as being subject to a fair amount of volatility,
due to the mortgage banking emphasis and dependence on loan sale gains to
sustain earnings, the interest rate risk and credit risk associated with First
Federal's net interest margin appears to have been effectively controlled in
recent years (although the interest rate environment has generally been
favorable). Interest rate risk has been controlled through selling long term
fixed rate loans in the secondary market, diversifying into interest-sensitive
types of lending, and investing in short- and intermediate-term instruments.
First Federal has sought to limit the credit risk associated with higher risk
types of loans, through restricting lending to familiar market areas and
strictly adhering to established underwriting guidelines.
In February 1996, a new Chief Executive Officer was appointed by the Bank,
who previously served as First Federal's Senior Vice President of Lending. Under
the direction of the new Chief Executive Officer, First Federal is pursuing a
strategy designed to gradually change the interest-earning asset mix of the Bank
to increase the concentration of commercial business, commercial real estate and
consumer loans and reduce the concentration of 1-4 family permanent mortgage
loans. To support the transformation of the loan portfolio, the Bank recently
hired a senior commercial lending officer. Through pursuing a more diversified
lending strategy,
<PAGE>
RP Financial, LC.
Page 1.4
the Bank anticipates increasing the overall yield of interest-earning assets and
enhancing its competitive position as a full service community-oriented
financial institution. However, notwithstanding the planned lending
diversification, it is contemplated that the origination of 1-4 family permanent
mortgage loans will remain the primary lending activity of the Bank.
To support the implementation of the Bank's new strategic direction and to
improve the Bank's competitive position, First Federal's Board of Directors has
elected to convert to the stock form of ownership. The additional capital
realized from conversion proceeds will increase liquidity to support funding of
future loan growth and other interest-earning assets, reduce the impact of
credit risk on capital by strengthening the Bank's equity position, and enhance
net interest income by increasing First Federal's interest-earning
assets/interest-bearing liabilities ("IEA/IBL") ratio. The additional funds
realized from the stock offering will also serve as an alternative funding
source to deposits in meeting the Bank's future funding needs, which will in
turn allow for more competitive pricing in the Bank's deposit rates.
Additionally, First Federal's higher equity-to-assets ratio will also better
position the Bank to take advantage of expansion opportunities as they arise.
Such expansion would most likely occur through acquiring branches, loan
production offices, or other financial institutions, in areas that would provide
for further penetration in the markets currently served by the Bank or nearby
surrounding markets. At this time, the Bank has no other specific plans for
expansion other than growth through existing branches, the addition of the
Clarkston, Washington branch and the lending diversification. The projected
internal use of conversion proceeds are highlighted below.
o Holding Company. Up to 50 percent of the net conversion proceeds will
---------------
be retained by FirstBank, initially be used to provide a loan to the
Bank's ESOP trust, and the balance will be invested into short- and
intermediate-term investments. Over time, the Holding Company funds
may be utilized for various corporate purposes, including funding
potential acquisitions, payment of dividends and possible repurchases
of common stock.
o First Federal. The net proceeds infused into the Bank in exchange for
-------------
all of the Bank's newly issued stock will initially be invested into
short-term investments. Over time, the proceeds are expected to be
substantially redeployed into the Bank's loan growth and normal
investment activities. In conjunction with the conversion, the Bank
plans to retain $5 million 30 year fixed rate mortgages in portfolio
and purchase $5 million of short-term mortgage-backed securities,
which will be funded with short-term FHLB advances to be repaid with
the conversion proceeds.
Overall, it is the Bank's objective to pursue growth that will serve to
increase returns while not significantly changing the risk profile without
previously establishing appropriate policies, procedures and systems. The Bank
has acknowledged that it intends to operate with excess capital in the near
term, operating with a below market return on equity, until such time as the new
capital can be leveraged in a safe and sound manner over an extended period of
time.
<PAGE>
RP Financial, LC.
Page 1.5
Balance Sheet Trends
- --------------------
From March 31, 1992 through December 31, 1996, First Federal exhibited
annual asset growth of more than 7 percent (see Table 1.1), although nearly
four-fifths of such growth occurred since March 31, 1995. The Bank's unusual
recent growth is primarily attributable to an enthusiastic customer response
to a short-term promotion of a special, premium-priced certificate of deposit
("CD") celebrating the Bank's 75th anniversary in 1995, coordinated with the
grand opening of the Bank's large Coeur d'Alene office. The 10 day promotion of
the 7.5 percent, 75 day CD during the fourth calendar quarter of 1995 attracted
over $20 million in new deposits and caused an internal shift of funds of
approximately $4 million to the Anniversary CD. As the premium rate Anniversary
CDs matured, the Bank sought to retain a portion of the funds in other deposit
programs, including renewing CDs at a premium over new offering rates. A portion
of these deposits have since been withdrawn and replaced with FHLB advances.
During the last several years, the Bank's interest-earning asset composition has
shifted towards a greater concentration of loans and higher risk weight loans,
thereby enhancing asset yields while increasing the Bank's credit risk profile.
A summary of First Federal's key operating ratios for the past five and three-
quarter fiscal years are presented in Exhibit I-3.
While First Federal's loan portfolio shows an annual increase of 13.6
percent since fiscal year end 1992, most of the growth in the loan portfolio has
occurred since fiscal year end 1995, largely through growth in adjustable rate
and 15 year fixed rate 1-4 family permanent mortgage loans. The Bank sells most
30-year fixed rate originations given its mortgage banking posture. Residential
permanent mortgage loans comprised 61.3 percent of gross loans outstanding at
December 31, 1996, versus a comparative ratio of 60.0 percent at fiscal year end
1995. First Federal's servicing portfolio of $131.5 million at December 31,
1996, reflecting net growth of $117 million since fiscal year end 1992, with the
majority of such growth taking place in fiscal 1994 during the refinance boom.
First Federal's other loan components have grown as well, given the
diversification emphasis, as shown below. Construction loans represent the most
notable area of lending diversification for the Bank ($14.9 million, or 12.6
percent of gross loans receivable at December 31, 1996), followed by consumer
loans ($12.1 million, or 10.2 percent) and agricultural real estate loans ($11.9
million, or 10.0 percent). The Bank's plan is to continue to emphasize growth in
commercial real estate, consumer and commercial business loans, while
construction and agricultural real estate loan growth is expected to be fairly
limited.
First Federal's cash and investments balance has fluctuated during the past
five and three-quarter fiscal years, ranging from a high of $25.5 million, or
19.6 percent of assets, at fiscal year end 1996, to a low of $11.0 million, or
8.2 percent of assets at December 31, 1996. Given the short-term maturity of the
75th Anniversary CD, the Bank reinvested such funds in short-term investments
(principally CDs at the FHLB), causing the balance of cash and investments to
swell to their peak fiscal year level in 1996. Since fiscal year end 1996, the
cash and investments balance has declined sharply, as liquidity has been
redeployed into loan growth
<PAGE>
Table 1.1
First Federal Bank of Idaho
Historical Balance Sheets
(Amount and Percent of Assets)
<TABLE>
<CAPTION>
At Fiscal Year End March 31,
-----------------------------------------------------------------------------------
1992 1993 1994 1995
------------------ ------------------ ------------------- -------------------
Amount Pct Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Amount of:
Assets $95,951 100.0% $96,816 100.0% $102,223 100.0% $104,121 100.0%
Cash and cash equivalents 9,042 9.4% 3,988 4.1% 12,754 12.5% 4,172 4.0%
Investment securities 4,589 4.8% 4,106 4.2% 5,445 5.3% 8,021 7.7%
Mortgage-backed securities 6,776 7.1% 5,013 5.2% 3,446 3.4% 2,840 2.7%
Loans receivable, net 60,711 63.3% 77,574 80.1% 76,217 74.6% 82,777 79.5%
Deposits 86,941 90.6% 83,182 85.9% 91,858 89.9% 88,787 85.3%
Borrowings 544 0.6% 4,044 4.2% --- 0.0% 4,000 3.8%
Total equity 6,634 6.9% 7,807 8.1% 8,797 8.6% 9,504 9.1%
Loans Serviced for Others $14,398 $35,415 $94,072 $115,897
Full service branches 4 4 4 5
Loan production offices 1 2 2 2
<CAPTION>
Annual
---------------------- At Growth
1996 Dec. 31, 1996 Rate
---------------------- --------------------- ----
Amount Pct Amount Pct Pct
------ --- ------ --- ---
($000) (%) ($000) (%) (%)
<S> <C> <C> <C> <C> <C>
Total Amount of:
Assets $129,832 100.0% $133,194 100.0% 7.15%
Cash and cash equivalents 13,581 10.5% 5,765 4.3% -9.04%
Investment securities 11,873 9.1% 5,189 3.9% 2.62%
Mortgage-backed securities 2,488 1.9% 2,343 1.8% -20.03%
Loans receivable, net 93,817 72.3% 111,085 83.4% 13.56%
Deposits 115,324 88.8% 105,349 79.1% 4.13%
Borrowings 2,304 1.8% 15,060 11.3% 101.20%
Total equity 10,356 8.0% 10,818 8.1% 10.84%
Loans Serviced for Others $122,253 $131,458
Full service branches 5 5
Loan production offices 2 2
</TABLE>
- ----------------------------
(1) Ratios are as a percent of ending assets.
Source: First Federal's prospectus.
<PAGE>
and utilized to fund expected deposit run-off by depositors attracted to the
Bank solely by the promotional CD interest rate. Additionally, the Bank sold
its $1.3 million mutual fund investment during the nine months ended December
31, 1996. Exhibit I-4 provides historical detail of the Bank's investment
portfolio. The investment portfolio, which totaled $4.0 million at December 31,
1996, is comprised of U.S. Government and federal agency securities with
maturities of less than five years. The U.S Government and federal agency
obligations are classified as held to maturity. Not included in the investment
balance is a single premium life insurance annuity, which equaled $1.3 million
at December 31, 1996 and provided a yield of 6.0 percent. The annuity was
purchased to informally fund the Bank's obligations under salary continuation
agreements as incentives for the Bank's Chief Executive Officer and Chief
Financial Officer. In addition to investment securities, the Bank held cash and
cash equivalents and FHLB stock, which amounted to $5.8 million and $0.9 million
(not reflected in Table 1.1), respectively, at December 31, 1996. First
Federal's cash and investments balance at December 31, 1996 was consistent with
targeted levels.
Historically, the Bank purchased MBS, primarily adjustable rate securities
to absorb excess liquidity and obtain higher yields. Over the last several
years, however, the mortgage-backed securities balance has trended lower, as the
Bank has been inactive in purchasing mortgage-backed securities due to adequate
loan demand to absorb excess liquidity. As of December 31, 1996, the Bank's
mortgage-backed securities balance equaled $2.3 million, or 1.8 percent of
assets, versus comparative measures of $6.8 million, or 7.1 percent of assets,
at fiscal year end 1992. The mortgage-backed securities portfolio is classified
as held to maturity. To the extent loan demand continues to adequately absorb
excess liquidity, purchases of mortgage-backed securities are expected to remain
a limited activity for First Federal. However, the Bank has entered into a
commitment to purchase $1.6 million of a CMO to be issued and guaranteed by the
Idaho Housing Authority. The purchase is expected to occur in June 1997 and will
be funded by an advance from the FHLB of Seattle.
Over the past five and three-quarter fiscal years, First Federal's funding
needs have been substantially met through retail deposits, internal cash flows
and retained earnings. The Bank's balance of deposits exhibited little change
from fiscal year end 1992 through fiscal year end 1995 and then increased
sharply during fiscal 1996. The sharp increase in deposits reflects the impact
of the previously discussed premium CD program offered during the fourth
calendar quarter of 1995, which resulted in a significant inflow of funds. First
Federal's balance of CDs increased from $51.1 million at fiscal year end 1995 to
$79.7 million at fiscal year end 1996. The deposit balance declined to $105.3
million at December 31, 1996, which was largely attributable to run-off of the
premium rate Anniversary CDs. Deposits held by the Bank have generally been
concentrated in CDs and, as of December 31, 1996, CDs comprised 65.7 percent of
the Bank's total deposits. Transaction and savings accounts comprise the balance
of the Bank's deposits, totaling $36.1 million, or 34.3 percent of total
deposits, at December 31, 1996. Borrowings typically have been utilized to a
limited degree by the Bank,
<PAGE>
although during the most recent nine month period First Federal increased its
use of borrowings, to fund loan growth and the run-off of premium rate
Anniversary CDs. First Federal held $15.1 million of borrowings at December 31,
1996, versus a comparative balance of $2.3 million at fiscal year end 1996.
Borrowings held by the Bank consist of FHLB advances, with short- and
intermediate-term maturities.
While positive earnings since March 31, 1992 translates into an annual
capital growth rate to date of 10.8 percent for the Bank, the capital growth has
significantly slowed from the peak growth of nearly 18 percent in fiscal 1993.
Capital growth outpaced the Bank's asset growth in fiscal years 1993, 1994 and
1995, which served to increase First Federal's equity-to-assets ratio from 6.9
percent at the end of fiscal 1992 to 9.1 percent at fiscal year end 1995. The
rapid growth since, primarily attributable to the 75th Anniversary promotion,
has caused the equity ratio to drop to the range of 8 percent of assets since
fiscal year end 1995. All of the Bank's capital is tangible capital, and the
Bank maintained capital surpluses relative to all of its regulatory capital
requirements at December 31, 1996. The addition of conversion proceeds will
serve to further strengthen First Federal's capital position and support future
growth.
Income and Expense Trends
- -------------------------
The Bank has reported positive earnings over the last five and three-
quarter fiscal years (see Table 1.2), ranging from a low of 0.16 percent of
average assets for the twelve months ended December 31, 1996 to a high of 1.15
percent of average assets in fiscal 1993. Earnings during the most recent 12
month period were depressed by non-recurring items, most notably with respect to
the one time special assessment to recapitalize the SAIF. Higher than normal
loan loss provisions, losses on the write-down and sale of a mutual fund and a
one time expense resulting from the termination of a pension plan further
contributed to the drop-off in the Bank's recent earnings. Net interest income
and operating expenses represent the major components of First Federal's core
earnings, although profitability is highly contingent upon gains realized from
the sale of loans. Non-interest operating income has been an important
contributor to the Bank's earnings as well, with such income derived
substantially from First Federal's mortgage banking and servicing activities.
First Federal's level of net interest income before provisions for loan
losses peaked at 3.99 percent of average assets in fiscal 1995 and has since
trended lower. The peak net interest income to average assets ratio posted in
fiscal 1995 was largely attributable to a reduction in the Bank's funding costs,
as First Federal's interest expense to average assets ratio declined from 5.60
percent in fiscal 1992 to 3.53 percent in fiscal 1995, largely reflecting an
improving capital position and resultant lower level of interest-bearing
liabilities. In the following periods, First Federal's net interest income ratio
declined, as the interest expense ratio increased from 3.53 percent during
fiscal 1995 to 4.39 percent during fiscal 1996, with the increase being largely
<PAGE>
<TABLE>
<CAPTION>
Table 1.2
First Federal Bank of Idaho
Historical Income Statements
(Amount and Percent of Avg. Assets)(1)
For the Fiscal Year Ended March 31,
----------------------------------------------------------------------------------
1992 1993 1994
------------------------ ------------------------- --------------------------
Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C>
Interest Income $7,726 8.48% $7,335 7.72% $7,418 7.31%
Interest Expense (5,104) -5.60% (3,928) -4.14% (3,625) -3.57%
------- ------ ------- ------ ------- ------
Net Interest Income $2,622 2.88% $3,407 3.59% $3,793 3.74%
Provision for Loan Losses (82) -0.09% (267) -0.28% (79) -0.08%
---- ------ ----- ------ ---- ------
Net Interest Income after Provisions $2,540 2.79% $3,140 3.31% $3,714 3.66%
Other Income 1,037 1.14% 493 0.52% 689 0.68%
Operating Expense (2,672) -2.93% (3,535) -3.72% (4,624) -4.56%
------- ------ ------- ------ ------- ------
Net Operating Income $905 0.99% $98 0.10% ($221) -0.22%
Non-Operating Income
- --------------------
Net gain(loss) on sales of securities $1 0.00% $0 0.00% $0 0.00%
Net gain(loss) on loan sales 0 0.00% 1,599 1.68% 2,321 2.29%
Net gain(loss) on REO 48 0.05% 192 0.20% 45 0.04%
Other non-operating income(loss) 0 0.00% 0 0.00% 0 0.00%
- ----- - ----- - -----
Net Non-Operating Income 49 0.05% 1,791 1.89% 2,366 2.33%
Net Income Before Tax $954 1.05% $1,889 1.99% $2,145 2.11%
Income Taxes (361) -0.40% (797) -0.84% (963) -0.95%
Change in Acctg. Principle -- -- -- --- (116) -0.11%
-- -- -- --- ----- ------
Net Income (Loss) $593 0.65% $1,092 1.15% $1,066 1.05%
Core Earnings
- -------------
Net Income Before Ext. Items $593 0.65% $1,092 1.15% $1,182 1.17%
Addback: Non-Operating Losses 0 0.00% 0 0.00% 0 0.00%
Deduct: Non-Operating Gains (49) -0.05% (1,791) -1.89% (2,366) -2.33%
Tax Effect Non-Op. Items(2) 19 0.02% 681 0.72% 899 0.89%
-- ----- --- ----- --- -----
Core Net Income $563 0.62% ($18) -0.02% ($285) -0.28%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------- For the 12 Months
1995 1996 Ended 12/31/96
------------------------- --------------------------- ---------------------------
Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C>
Interest Income $7,658 7.53% $9,552 8.12% $10,168 7.61%
Interest Expense (3,596) -3.53% (5,158) -4.39% (5,501) -4.12%
------- ------ ------- ------ ------- ------
Net Interest Income $4,062 3.99% $4,394 3.74% $ 4,667 3.49%
Provision for Loan Losses (27) -0.03% (150) -0.13% (266) -0.20%
---- ------ ----- ------ ----- ------
Net Interest Income after Provisions $4,035 3.97% $4,244 3.61% $4,401 3.30%
Other Income 846 0.83% 842 0.72% 938 0.70%
Operating Expense (4,721) -4.64% (5,293) -4.50% (5,585) -4.18%
------- ------ ------- ------ ------- ------
Net Operating Income $160 0.16% ($207) -0.18% ($246) -0.18%
Non-Operating Income
Net gain(loss) on sales of securities $0 0.00% ($200) -0.17% ($290) -0.22%
Net gain(loss) on loan sales 1,045 1.03% 1,370 1.16% 1,428 1.07%
Net gain(loss) on REO 0 0.00% 0 0.00% 0 0.00%
Other non-operating income(loss) 0 0.00% 0 0.00% (584) -0.44%
- ----- - ----- ----- ------
Net Non-Operating Income 1,045 1.03% 1,170 0.99% 554 0.41%
Net Income Before Tax $1,205 1.18% $963 0.82% $308 0.23%
Income Taxes (452) -0.44% (375) -0.32% (97) -0.07%
Change in Acctg. Principle 0 0.00% -- --- -- ---
- ----- -- --- -- ---
Net Income (Loss) $753 0.74% $588 0.50% $211 0.16%
Core Earnings
- -------------
Net Income Before Ext. Items $753 0.74% $588 0.50% $211 0.16%
Addback: Non-Operating Losses 0 0.00% 200 0.17% 874 0.65%
Deduct: Non-Operating Gains (1,045) -1.03% (1,370) -1.16% (1,428) -1.07%
Tax Effect Non-Op. Items(2) 397 0.39% 445 0.38% 211 0.16%
--- ----- --- ----- --- -----
Core Net Income $105 0.10% ($137) -0.12% ($131) -0.10%
</TABLE>
- ----------------------------
(1) Ratios are as a percent of average assets.
(2) Assumes tax rate of 38.0 percent.
Sources: First Federal's prospectus and audited financial statements.
<PAGE>
RP Financial, L.C.
Page 1.10
attributable to the premium rate Anniversary CDs added during fiscal 1996,
despite the higher interest income ratio due to growth in the proportion of
loans. For the most recent twelve month period, a more significant decline in
the interest income ratio compared to the interest expense ratio reduced the
Bank's net interest income ratio to 3.49 percent, versus a comparative ratio of
3.74 percent for fiscal 1996. The steeper reduction in the interest income
ratio can in part be attributable to the relatively high concentration of
interest-sensitive assets maintained by the Bank.
The impact of interest rates on First Federal's net interest margin is
further revealed through examination of the Bank's historical net interest rate
spreads and yields and costs set forth in Exhibits I-3 and I-5. Trends in the
Bank's net interest margin generally paralleled the widening and narrowing of
the yield-cost spread. As highlighted in Exhibit I-5, the premium CD program
offered in the third quarter of fiscal 1996 had a notable impact on the Bank's
interest-bearing funding costs, with the weighted average cost of the Bank's CDs
increasing from 4.88 percent in fiscal 1995 to 5.93 percent in fiscal 1996. As
the result of the high funding costs, the Bank's net interest rate spread
narrowed from 3.88 percent during fiscal 1995 to 3.61 percent during fiscal
1996. For the nine months ended December 31, 1996, a reduction in the Bank's
funding costs provided for a slight increase in the Bank's interest rate spread
to 3.68 percent. Overall, the Bank has maintained a favorable interest rate
spread in recent years, which has been supported by increasing the concentration
of interest-earning assets maintained in loans and diversification into higher
yielding types of lending.
Non-interest operating income has been a key contributor to First
Federal's earnings in recent years, with such income consisting substantially of
service fees and charges. Commission income realized from the Bank's subsidiary
activities accounts for the balance of the Bank's non-interest operating income.
Fee income is primarily generated from the Bank's portfolio of loans serviced
for others, which totaled $131.5 million at December 31, 1996. For the twelve
months ended December 31, 1996, non-interest operating income equaled 0.70
percent of average assets, which was consistent with levels recorded by the Bank
in recent years.
First Federal's operating expenses as a percent of average assets have
been maintained at a high level throughout the period shown in Table 1.2,
approximating or exceeding 4.50 percent during the past three fiscal years and
equaling 4.18 percent for the twelve months ended December 31, 1996. The rapid
increase in the operating expense ratio during fiscal 1992-94 was attributable
to opening the Coeur d'Alene office, slow growth, and expanded mortgage banking
and servicing activities. First Federal's mortgage banking activities materially
impact operating expenses, but have a minimal effect on the Bank's asset size.
Other factors contributing to the high operating expense ratio include the: (1)
maintenance of a relatively high number of branches for the Bank's asset size;
and (2) degree of diversification into personnel sensitive lending for a
relatively small institution. For the most recent twelve month period, higher
operating expenses were also incurred from the termination of the Bank's pension
plan, which resulted in an additional one time funding
<PAGE>
RP Financial, L.C.
Page 1.11
expense of $130,000. Overall, the staffing needs of the Bank's
operations are very high for an institution with $133 million in assets. As of
December 31, 1996, the Bank maintained 80 full time equivalent employees, or
assets per employee of $1.665 million. Comparatively, assets per employee
maintained by all publicly-traded SAIF-insured thrifts averaged $4.124 million,
or 2.5 times above the Bank's measure. Further upward pressure will be placed on
the Bank's operating expense ratio in the forthcoming year, due to the
additional expense resulting from opening and staffing the Clarkston branch and
increase costs associated with operating as a publicly-traded company, including
expenses related to the stock benefit plans.
One factor contributing to the Bank's high operating expenses is the
commission paid to the in-house loan origination officers, the level of which
corresponds with the level of originations. During fiscal years 1995 and 1996
and the most recent twelve months, commissions paid to originators approximated
$0.251, $0.360 and $0.440 million, or 5.3, 6.8 and 7.9 percent of operating
expenses, respectively.
As the result of the Bank's high operating expense ratio, First Federal
maintains a low expense coverage ratio (net interest income divided by operating
expenses). First Federal's expense coverage ratio equaled 0.83 times for the
twelve months ended December 31, 1996, indicating that the Bank's profitability
is dependent upon sources of non-interest operating income. Given the Bank's
mortgage banking emphasis and the resulting importance of non-interest operating
income on earnings, First Federal's efficiency ratio (operating expenses as a
percent of net interest income and non-interest operating income) is viewed as a
key measure of the Bank's core earnings strength. For the twelve months ended
December 31, 1996, the Bank's efficiency ratio equaled 96.1 percent, which is
considered high and indicates only marginal profitability. When factoring in
loan sale gains, First Federal's efficiency ratio improved to 79.3 percent,
which is still considered to be relatively high and, therefore, indicates
relatively low core profitability.
Mortgage banking loan sale gains have been a significant factor in First
Federal's earnings. The Bank's loan sale gains are derived from (1) the
origination and sale of FHA/VA loans, sold on a servicing released basis, and
(2) beginning in mid-1996, capitalized mortgage servicing rights. In recent
years, loan sale gains have approximated or exceeded the Bank's pre-tax
earnings, indicating that profitability is highly dependent upon the gains. For
the twelve months ended December 31, 1996, the Bank recorded loan sale gains or
$1.4 million, or 1.07 percent of average assets, which was consistent with the
level of loan sale gains recorded during fiscal years 1995 and 1996 and below
the fiscal 1994 gains of $2.3 million, or 2.29 percent of average assets. First
Federal's FHA and VA lending have been sustained by the strong housing demand in
the Coeur d'Alene market and, thus, is vulnerable to a slow down in that market.
Gains and losses resulting from the sale of investments typically have not been
a material factor in the Bank's earnings, reflecting First Federal's general
philosophy of holding investments to maturity. The $200,000
<PAGE>
RP Financial, L.C.
Page 1.12
loss posted in fiscal 1996 reflects the write-down of a mutual fund, while the
$290,000 loss for the twelve months ended December 31, 1996 reflects the
$200,000 write-down and the $90,000 loss recorded on the sale of the mutual
fund. Real estate gains and loss posted by First Federal have been largely
attributable to the maintenance and disposition of real estate owned, with the
overall impact being minimal on the Bank's recent earnings. The special
assessment to recapitalize the SAIF is shown as a non-operating loss during the
twelve months ended December 31, 1996, amounting to $584,000, or 0.44 percent of
average assets.
Loan loss provisions have impacted the Bank's earnings to various
degrees over the past five and three-quarter fiscal years, ranging from a low of
0.03 percent of average assets during fiscal 1995 to a high of 0.28 percent of
average assets during fiscal 1993. After dropping to a low in fiscal 1995, the
Bank has established higher loss provisions during the past one and three-
quarter fiscal years. For the twelve months ended December 31, 1996, loss
provisions established by the Bank amounted to $266,000, or 0.20 percent of
average assets. The recent increase in loss provisions was warranted by the
Bank's loan growth, as well as planned loan growth into higher risk types of
lending and an increase in the non-performing loan balance. As of December 31,
1996, the Bank maintained valuation allowances of $880,000, equal to 0.79
percent of net loans receivable and 73.2 percent of non-performing assets.
Exhibit I-6 sets forth the Bank's loan loss allowance activity during the past
two and three-quarter fiscal years.
The Bank's effective tax rate has typically ranged from 38 to 45 percent
in recent years. For the most recent nine months, however, given the recognition
of a tax refund, the Bank's effective tax rate dropped to approximately 26
percent. The Bank fully expects the normal effective tax rate in the future to
approximate the historical levels.
Interest Rate Risk Management
- -----------------------------
The interest rate risk associated with the Bank's balance sheet is
viewed as being relatively limited, in light of the high concentration of
interest-sensitive assets maintained by the Bank. As measured internally, the
Bank's one year cumulative gap ratio was slightly positive as of December 31,
1996. The Net Portfolio Value ("NPV") analysis provided by the OTS indicated
that a 2.0 percent instantaneous and sustained rise in interest rates would
result in an 11 percent decline in the Bank's NPV, based on the Bank's balance
sheet data as of December 31, 1996 (see Exhibit I-7). The Bank primarily manages
interest rate risk from the asset side of the balance sheet, through such
strategies as investing in short- and intermediate-term securities, selling 30-
year fixed rate loan originations in the secondary market, emphasizing the
origination of adjustable rate 1-4 family loans, and diversifying into interest-
sensitive types of lending. The Bank's planned growth in commercial and consumer
lending should serve to further increase the interest sensitivity of the loan
portfolio. As of December
<PAGE>
RP Financial, L.C.
Page 1.13
31, 1996, of the total loans due after December 31, 1997, ARM loans comprised
59.9 percent of those loans (see Exhibit I-8). The Bank's off-balance sheet
portfolio of loans serviced for others is also viewed as limiting the Bank's
interest rate risk exposure, given the general stability of loan servicing
income.
First Federal's interest rate risk measures indicate that net interest
income should not exhibit a great deal of volatility in various interest rate
environments. The infusion of stock proceeds will serve to further limit Bank's
interest rate risk exposure, as most of the net proceeds will be redeployed into
interest-earning assets and the increase in capital realized from the proceeds
will lessen the proportion of interest-sensitive liabilities meeting the Bank's
funding needs.
Lending Activities and Strategy
- -------------------------------
The Bank's lending activities have emphasized the origination of 1-4
family permanent mortgage loans (see Exhibits I-9 and I-10, which reflect loan
composition and lending activity, respectively). As of December 31, 1996,
residential permanent mortgage loans accounted for $72.7 million, or 61.3
percent of First Federal's total loan portfolio. Included in the residential
loan balance was a loan secured by a multi-family property, with an outstanding
balance of $512,000 at December 31, 1996. The Bank's second and third largest
category of loans were construction and consumer loans, which totaled $14.9
million, or 12.6 percent, and $12.1 million, or 10.2 percent, of gross loans
outstanding at December 31, 1996, respectively. The balance of the loan
portfolio was comprised of commercial real estate, agricultural real estate and
commercial business loans. Exhibit I-11 provides the contractual maturity of the
Bank's loan portfolio, by loan type, as of December 31, 1996.
First Federal originates both fixed rate and adjustable rate 1-4 family
loans. Currently, the Bank retains for portfolio all adjustable rate loans and
fixed rate loans with terms of 15 years or less. Conventional fixed rate loans
with 30-year terms are typically sold to FHLMC on a servicing retained basis,
although from time-to-time the Bank retains a limited number of the longer term
fixed rate loans for portfolio. First Federal also sells all FHA and VA loans on
a servicing released basis. Most of the Bank's fixed rate 1-4 family loan
originations are underwritten to conform to FHLMC requirements, while a notable
portion of the Bank's ARM loan originations are non-conforming loans. Non-
conforming loans generally bear a higher rate of interest than similar
conforming loans. At December 31, 1996, the Bank's residential loan portfolio
included $24.0 million of non-conforming loans.
In the current interest rate environment, 15- and 30-year fixed rate
loans have accounted for most of the Bank's 1-4 family loan volume. To enhance
the attractiveness of ARM loans, the Bank offers a variety of ARM loan products.
In addition to the standard one year ARM loan, First Federal offers convertible
loans
<PAGE>
RP Financial, L.C.
Page 1.14
which convert to one year ARMs after a fixed rate period of interest of 3 or 5
years. ARM loans are indexed to the U.S. Treasury Note Rate Constant Maturity
Rate, with the initial rate of interest being dependent upon the length of the
initial fixed rate term before repricing (i.e., a higher rate is charged for
loans with a longer initial fixed rate term). Most 1-4 family loans are
originated with loan-to-value ("LTV") ratios of 80.0 percent or less, while
loans with LTV ratios above 80.0 percent generally require private mortgage
insurance ("PMI"). ARM loans are subject to an annual repricing cap of 2.0
percent and a life time repricing cap of 6.0 percent. ARM loans are typically
offered at a discounted initial rate; however, ARM loan borrowers are qualified
at the higher of the fully indexed rate or 200 basis points above the initial
rate.
Construction loans originated by the Bank consist substantially of loans
to finance the construction of 1-4 family residences. Loans to finance entry
level homes in the Coeur d'Alene market currently account for the bulk of First
Federal's construction lending activities. Most of the Bank's construction
lending activities are for the construction of pre-sold homes, which convert to
permanent loans upon completion of the construction. To a lesser extent, First
Federal originates speculative construction loans. To control the risk
associated with speculative construction lending, the Bank limits the borrower
to a maximum loan amount ($500,000 to $1.3 million depending upon the borrower).
Construction loans require payment of interest only during the construction
period, which is typically 12 months. For construction loans, the Bank will lend
up to a maximum LTV ratio of 75.0 percent. The Bank's construction lending
activities will remain somewhat tied to the strength of the Coeur d'Alene market
for the intermediate term and, thus, to the extent there is slow down in that
market, First Federal's construction lending will be curtailed. As discussed in
greater detail in Chapter II, the construction market in Idaho, and particularly
Couer d'Alene, softened in 1996 and projections point towards further softening
in 1997.
First Federal has been active in agricultural real estate lending since
the mid-1980s, following the hiring of the Bank's current Chief Executive
Officer who has significant experience in agricultural lending. Agricultural
real estate loans totaled $11.9 million, or 10.0 percent of total loans
outstanding, at December 31, 1996. Farming in the Bank's market area is
generally dry-land farming, with wheat being the primary crop. Accordingly,
adverse circumstances affecting the area's wheat crop could have an adverse
effect on the Bank's agricultural loan portfolio. Agricultural real estate loans
are limited to a maximum LTV ratio of 75.0 percent and are generally
underwritten to Farmer Mac standards. In addition to the LTV ratio, other
factors considered by the Bank in extending agricultural loans include the
borrower's cash flow, the amount of working capital available to the borrower,
and the financial history of the borrower. Agricultural real estate loans are
extended as one year ARM loans, with initial fixed terms of one, three or five
years, or ten year fixed rate loans. ARM loans are amortized for terms of up to
25 years, while the fixed rate loans are amortized over ten years. Agricultural
real estate loans held by the Bank have an average balance of approximately
$100,000.
<PAGE>
RP Financial, L.C.
Page 1.15
Agricultural real estate lending involves a greater degree of risk than
residential real estate loans as such loans are dependent on: (1) the successful
operation of the farm property; (2) various external factors such as weather,
market prices and impact of government regulations; and (3) a limited number of
key individuals whose health may significantly affect farm operations.
Agricultural operating loans are dependent on the farm operations but also may
be unsecured or secured by depreciating assets such as farm equipment.
The commercial real estate loan portfolio constituted $6.0 million, or
5.1 percent of total loans outstanding, at December 31, 1996. Commercial real
estate loans held by the Bank include loans secured by a storage facility, a
manufactured home park, small office buildings, retail shops, land and other
small commercial properties. Land loans represent the largest component of the
commercial real estate loan portfolio, totaling $3.2 million at December 31,
1996. Land loans serve as a complement to the Bank's construction lending
activities, as they generally are extended for the development of 1-4 family
lots. Terms of land loans offered by the Bank generally require an LTV ratio of
75.0 percent or less and are fixed rate loans priced at a premium to the Bank's
1-4 family loan rates. Land loans are amortizing loans and typically have terms
of 5 years. Other commercial real estate lending conducted by the Bank consist
substantially of ARM loans with 15 year amortization terms. Consistent with the
higher credit risk associated with commercial real estate lending, loan rates
offered on those loans are at a premium to the Bank's 1-4 family loan rates. At
December 31, 1996, the Bank's largest outstanding loan was a $1.8 million
commercial real estate loan secured by a storage facility near Seattle,
Washington. As of December 31, 1996, the loan was performing in accordance with
its terms. Most of the Bank's commercial real estate loans are for much lower
balances, as the average loan balance of the Bank's outstanding commercial real
loans equaled $122,000 at December 31, 1996. Commercial real estate lending is
viewed as a growth area for the Bank, in which First Federal will emphasize the
origination of loans with balances of up to $1.0 million secured by local
properties.
Other loans held by the Bank consist primarily of consumer loans, with
home equity loans accounting for the largest segment of First Federal's consumer
loan portfolio. First Federal offers both home equity lines of credit and
amortizing home equity loans. Home equity lines of credit, which totaled $4.7
million at December 31, 1996, are floating rate loans tied to the prime rate and
are payable in 10 years. Amortizing home equity loans, which totaled $5.0
million at December 31, 1996, are offered as either 1-year adjustable rate loans
or fixed rate loans with terms of up to 10 years. Home equity loans are extended
up to an LTV ratio of 80.0 percent of the combined balance of the home equity
loan and the first lien. Direct automobile loans ($1.6 million at December 31,
1996) represent the next largest component of the consumer loan portfolio, with
the balance of the consumer loan portfolio consisting of miscellaneous loans
such as boat loans, recreation vehicle loans and loans secured by deposits.
Consumer lending is also a desired growth area for the Bank, with such
<PAGE>
RP Financial, L.C.
Page 1.16
growth expected to consist primarily of home equity loans. First Federal plans
to implement a credit card program within the next few months, which will
initially be offered only to existing customers.
To date, commercial business lending has been a relatively minor area of
lending diversification for the Bank, consisting primarily of agricultural
operating loans or lines of credit. Agricultural operating loans and lines of
credit are primarily secured loans, which are generally secured by crops,
government payments and equipment. Commercial business loans offered by the Bank
are generally extended as floating rate loans or short-term fixed rate loans.
Growth in local commercial business lending, as well as commercial real estate
lending, will be pursued in conjunction with the Bank's recent hiring of a
commercial lending officer.
Exhibit I-10, which shows the Bank's loan originations over the past two
and three-quarter years, indicates that residential and construction lending
have been the major lending activities of First Federal during recent years.
Residential and construction loan originations increased from fiscal 1995 to
fiscal 1996, as well as for the nine months ended December 31, 1996, versus the
comparative year ago period. The growth in residential and construction loan
originations was supported by strong loan demand in the Coeur d'Alene market.
Beyond residential and construction lending, consumer lending has been the most
active area lending for the Bank, with originations of consumer loans also
increasing over the past one and three-quarter fiscal years. The Bank was an
active seller of loans during the past two and three-quarter fiscal years,
reflecting the sale of residential loan originations to the secondary market. A
notable portion of the loans have been sold on a servicing released basis, with
such loans generally consisting of FHA and VA loans originated in the Coeur
d'Alene market. Loans sold on a servicing released basis accounted for 47.6
percent, 69.6 percent and 56.1 percent of loans sold during fiscal years 1995,
1996 and the nine months ended December 31, 1996, respectively. Loans sold on a
servicing released basis account for the Bank's loan sale gains, which has
supported First Federal's profitability in recent years. Going forward, the
Bank's lending strategy is to place a greater emphasis on the origination of
commercial real estate, commercial business and consumer loans, although the
origination of 1-4 family permanent mortgage loans is expected to remain as the
Bank's most prominent lending activity.
Asset Quality
- -------------
First Federal experienced credit quality deterioration in the early-
1990s, as evidenced by a non-performing assets-to-assets ratio of 4.41 percent
at fiscal year end 1992. The high level of non-performing assets held by the
Bank was largely attributable to non-performing loan participations, which
resulted in First Federal exiting the loan participation market. Subsequent to
fiscal 1992, the Bank's credit quality measures improved dramatically, with the
non-performing assets ratio declining to 0.95 percent of assets at fiscal year
end
<PAGE>
RP Financial, L.C.
Page 1.17
1993. After dropping to low of 0.21 percent at fiscal year end 1994, the Bank's
non-performing assets-to-assets ratio has trended higher over the past two and
three-quarter fiscal years, most notably during the nine months ended December
31, 1996. As of December 31, 1996, the Bank's non-performing assets totaled $1.2
million or 0.90 percent of assets. Comparatively, at fiscal year end 1996, non-
performing assets held by First Federal totaled $768,000, or 0.59 percent of
assets. The recent increase in the non-performing assets balance has been
largely attributable to an increase in non-performing construction loans secured
by properties in Coeur d'Alene market. As shown in Exhibit I-12, the Bank's non-
performing assets at December 31, 1995 consisted of $1.0 million of non-accruing
loans and $196,000 of real estate owned. Construction loans accounted for
$789,000 of the Bank's non-accruing loans at December 31, 1996.
The Bank reviews and classifies assets quarterly. At December 31, 1996,
the Bank had $1.7 million of assets classified as substandard, $753,000 of
assets classified as special mention and $16,000 of assets classified as loss.
Loss provisions established by the Bank are based on the credit quality of the
loan portfolio, the size and composition of the loan portfolio and trends in the
local economy. As of December 31, 1996, First Federal maintained $880,000 of
valuation allowances, equal to 0.79 percent of net loans receivable and 73.2
percent of non-performing assets.
Funding Composition and Strategy
- --------------------------------
Deposits have consistently been the Bank's primary source of funds and
at December 31, 1996 deposits accounted for 87.5 percent of First Federal's
interest-bearing liabilities. Exhibit I-13 sets forth the Bank's deposit
composition and Exhibit I-14 provides the interest rate and maturity composition
of the CD portfolio at December 31, 1996. The Bank's deposit composition has
consistently been concentrated in CDs, with First Federal's current CD
composition reflecting a higher concentration of short-term CDs (maturities of
less than one year). As of December 31, 1996, the CD portfolio totaled $69.3
million, or 65.7 percent of total deposits, with 71.1 percent of those CDs
having maturities of less than one year. Jumbo CDs (CD accounts with balances of
$100,000 or more) amounted to $9.4 million, or 13.6 percent of total CDs. First
Federal typically does not pay a premium rate for higher balance CDs. Deposit
rates offered by the Bank are generally in the middle to upper end of the range
of rates offered by local competitors.
Lower costing savings and transaction accounts comprise the remainder of
First Federal's deposits, amounting to $36.1 million or 34.3 percent of total
deposits at December 31, 1996. From fiscal year end 1996 to December 31, 1996,
the Bank's concentration of transaction and savings accounts increased from 30.9
percent to 34.3 percent, primarily as the result of a decline in the CD balance,
as opposed to growth in realized those accounts. Comparatively, the Bank's
concentration of transaction and savings accounts decreased from 42.5
<PAGE>
RP Financial, L.C.
Page 1.18
percent at fiscal year end 1995 to 30.9 percent at fiscal year end 1996,
primarily as the result of significant growth in the CD balance. The volatility
exhibited in the CD balance since fiscal year end 1995 has been largely due to
the premium CD rate offered by the Bank during a 10-day period during fiscal
1996, which resulted in a significant inflow of funds, and the subsequent
decline in the CD balance has been primarily run-off of the maturing premium
CDs. The Bank anticipates that a portion of the Anniversary CDs rolled over at
maturity will be subject to further withdrawals.
Borrowings typically have not been a prominent funding source for the
Bank, although borrowings were utilized to a greater degree during the nine
months ended December 31, 1996. First Federal's balance of borrowings increased
from $2.3 million at fiscal year end 1996 to $15.1 million at December 31, 1996.
Borrowings were added to fund deposit run-off and loan growth. Exhibit I-15
shows the Bank's use of borrowed funds during the past two and three-quarter
fiscal years. Borrowings held by the Bank consist entirely of FHLB advances,
which have short- and intermediate-term maturities. The Bank intends to further
increase its use of borrowings going forward, as a means to fund desired loan
growth. It is contemplated that borrowings added by the Bank will consist
substantially of short-term FHLB advances.
Subsidiary
- ----------
The Bank has one subsidiary, Tri-Star Financial Corporation, which was
created in 1985 and whose activities consist primarily of selling life insurance
and tax deferred annuities on an agency basis. At December 31, 1996, the Bank's
equity investment in its subsidiary was $20,000.
Legal Proceedings
- -----------------
The Bank is involved in routine legal proceedings occurring in the
ordinary course of business which, in the aggregate, are believed by management
to be immaterial to the financial condition of the Bank.
<PAGE>
II. MARKET AREA
Introduction
- ------------
First Federal's market area of northwestern Idaho and eastern Washington
are currently served through five full service retail branches in Lewiston (2
branches), Moscow, Grangeville, and Coeur d'Alene, Idaho and two loan production
offices ("LPOs") located in Lewiston and Coeur d'Alene, Idaho. The Coeur d'Alene
LPO is located in the same facility as the full service office. First Federal
plans to relocate its headquarters following the stock conversion and
reorganization, from Lewiston, Idaho to a de novo location in Clarkston,
Washington. While serving primarily Idaho historically, given the proximity of
the Idaho/Washington State border to the Bank's branches, the Bank also has
depositors and borrowers who are residents of Washington. Exhibit II-1 provides
information on the Bank's office facilities.
The historically slow growing Idaho economy has been dominated by
agriculture, tourism and lumber/wood products, industries whose health
significantly impacts the local economics. More recently, Idaho has experienced
above average growth due to (1) the expansion of the high-technology businesses
in the Boise area (southeast Idaho), and (2) in Coeur d'Alene (northwestern
Idaho) due to increased tourism and bedroom community growth relative to nearby
Spokane, Washington. While the Bank has benefited from growth in Coeur d'Alene,
the distant Boise market has little impact on the Bank's northwestern Idaho
market. Within the markets served by the Bank's offices, except for Coeur
d'Alene, the economies can continue to be characterized as slower growth areas.
It is important to point out that Idaho is a thinly populated state, and only
one county has a population over 100,000. Lewiston once served as the temporary
capital of Idaho, but the state government was moved to Boise in 1865.
Future business and growth opportunities will be partially influenced by
economic and demographic characteristics of the market served, particularly the
future growth and stability of the regional economy, demographic growth trends,
and the nature and intensity of the competitive environment for financial
institutions. These factors have been examined to help determine the growth
potential that exists for the Bank and the relative economic health of the
Bank's market area.
Market Area Demographics
- ------------------------
Demographic growth in the counties where the Bank currently maintains
branches has been measured by changes in population, number of households and
median household income, with trends in those areas summarized by the data
presented in Table 2.1 on the following page. The Bank's market area exhibited
<PAGE>
RP Financial, LC.
Page 2.2
Table 2.1
First Federal Bank of Idaho
Summary Demographic Data
<TABLE>
<CAPTION>
Year
--------------------------------------------- Growth Rate Growth Rate
Population (000) 1990 1996 2001 1990-96 1996-2001
---------------- ---- ---- ---- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES 248,710 265,295 278,802 1.1% 1.0%
IDAHO 1,007 1,194 1,345 2.9% 2.4%
IDAHO COUNTY 14 15 16 1.4% 1.3%
KOOTENAI COUNTY 70 96 118 5.5% 4.1%
LATAH COUNTY 31 33 35 1.4% 1.3%
NEZ PERCE COUNTY 34 37 40 1.5% 1.4%
Households (000)
UNITED STATES 91,947 98,239 103,293 1.1% 1.0%
IDAHO 361 428 482 2.9% 2.4%
IDAHO COUNTY 5 6 6 1.4% 1.3%
KOOTENAI COUNTY 27 37 45 5.4% 4.0%
LATAH COUNTY 11 13 13 1.9% 1.3%
NEZ PERCE COUNTY 14 15 16 1.4% 1.3%
Median Household Income ($)
UNITED STATES $29,199 $34,530 $33,189 2.8% -0.8%
IDAHO 26,411 31,595 33,109 3.0% 0.9%
IDAHO COUNTY 24,771 26,168 26,680 0.9% 0.4%
KOOTENAI COUNTY 27,161 31,870 33,581 2.7% 1.1%
LATAH COUNTY 23,806 30,052 31,991 4.0% 1.3%
NEZ PERCE COUNTY 27,015 31,050 31,740 2.3% 0.4%
Per Capita Income - ($)
UNITED STATES $13,179 $16,405 ---- 4.5% N/A
IDAHO 11,213 14,592 ---- 5.4% N/A
IDAHO COUNTY 10,982 12,445 ---- 2.5% N/A
KOOTENAI COUNTY 12,697 15,457 ---- 4.0% N/A
LATAH COUNTY 10,637 14,741 ---- 6.7% N/A
NEZ PERCE COUNTY 12,718 14,779 ---- 3.0% N/A
1996 Age Distribution(%) 0-14 Years 15-24 Years 25-44 Years 45-64 Years 65+ Year Median Age
------------------------ ---------- ----------- ----------- ----------- -------- ----------
UNITED STATES 22.0 13.7 31.6 19.9 12.8 34.3
IDAHO 24.6 16.1 28.1 19.2 12.0 32.5
IDAHO COUNTY 21.7 13.6 25.6 22.9 16.1 38.1
KOOTENAI COUNTY 22.3 13.5 28.6 22.0 13.3 36.0
LATAH COUNTY 19.3 25.8 30.1 15.5 9.2 28.1
NEZ PERCE COUNTY 20.4 13.7 28.5 21.2 16.2 36.8
Less Than $15,000 to $25,000 to $50,000 to $100,000 to
1996 HH Income Dist.(%) $15,000 25,000 $50,000 $100,000 $150,000 $150,000+
----------------------- ------- ------ ------- -------- -------- ---------
UNITED STATES 19.7 15.6 34.0 24.4 4.3 2.1
IDAHO 18.7 18.4 37.2 21.3 3.2 1.2
IDAHO COUNTY 24.4 22.6 36.6 14.2 1.5 0.7
KOOTENAI COUNTY 18.2 17.9 38.4 21.3 3.1 1.0
LATAH COUNTY 23.6 17.4 33.0 21.8 3.2 1.0
NEZ PERCE COUNTY 21.7 16.4 37.3 20.0 3.3 1.2
Source: CACI.
</TABLE>
<PAGE>
generally favorable growth characteristics, as measured by population and
household growth, although only Kootenai County recorded stronger growth than
exhibited by the state. Kootenai County's growth reflects the rapid growth
occurring in Coeur d'Alene, which has been supported by the tourism industry and
migration from the State of Washington. While population and household growth
in the primary market area counties, as well as Idaho, are generally projected
to slow modestly during the next five years, the comparative growth rates for
the four market area counties and Idaho are projected to remain above the
comparative U.S. growth rates. However, the favorable growth rates need to be
viewed in the context of the relatively small population bases constituting each
county, in which only a slight increase in population translates into a
relatively high growth rate. For example, the 1.4 percent annual population
growth rate posted for Latah County from 1990 to 1996 was the result of an
increase of population totaling 2,000 over the six year period.
With the exception of Idaho County, the primary market area counties
exhibited median household income and per capita income measures that were
comparable to the Idaho measures and lower than the U.S. measures. Median
household and per capita income were lower in Idaho County, reflecting the more
rural characteristics of that market. Consistent with the population and
household growth measures, Kootenai County exhibited strong growth rates in
household income and per capita income from 1990 to 1996, although Latah County
posted the strongest growth rates in household income and per capita income
during that period. Similar to the U.S., growth in household income is projected
to be less for the balance of the decade for the primary market area counties
and Idaho. However, in contrast to the projected decline in median household
income for the U.S., median household income for Idaho and the primary market
area counties is projected to increase over the next five years. The general
reduction in median household income growth reflects that most of the job growth
has been occurring in relatively low paying service jobs.
The age and household income distributions for the primary market area
counties were not materially different from the Idaho and U.S. comparative
measures. The relatively low median age exhibited by Latah County (28.1 years)
was likely attributable to the student population attending the University of
Idaho, which is based in Latah County.
National Economic Factors
- -------------------------
Over the past year, national economic growth has been mixed. Economic data
released in January 1996 indicated a generally sluggish economy, as highlighted
by the Federal Reserve's mid-January "Beige Book" report which reflected slowing
economic growth in its nationwide survey of economic conditions. Record-
breaking winter weather conditions further slowed the economy in January of
1996. While unemployment declined sharply in February, the decline was due in
part to the January figures which were skewed by the
<PAGE>
weather and by striking GM workers. A stronger than expected March 1996
employment report served to rekindle inflation fears, although other economic
indicators suggested that the pace of economic growth was moderate and inflation
was under control. Inflation concerns were further heightened in late-April, as
the result of higher oil and commodity prices; although, wages, which account
for most of the inflation measures, did not signal that inflation was heating
up. Unemployment data for both May and June suggested a strong pace of economic
growth, with the stronger than expected job growth pushing interest rates
higher. However, other economic measures, such as consumer and producer prices,
reflected a more modest pace of economic growth.
The third quarter of 1996 started with a continuation of second quarter
trends, although mid-July Congressional testimony by the Federal Reserve
Chairman hinted of expectations that the economy would taper off slightly in the
second half of 1996. However, much of the economic data released during July and
August continued to indicate a fairly robust pace of economic growth. Such
economic data included a stronger than expected increase in July durable goods
orders, the consumer confidence index hitting a six year high and a decline in
the August unemployment rate. Comparatively, for the balance of the third
quarter, economic data, such as a decline in August durable goods orders and
smaller than expected increases in August retail sales and consumer prices,
suggested that the economy was cooling off. A slight increase in the September
unemployment rate further signaled a slowing economy.
Economic data released at the beginning of the fourth quarter generally
confirmed that the national economy was slowing. October unemployment remained
at 5.2 percent, although the number of new jobs being added to the economy was
lower compared to job growth recorded during the late-spring and the summer.
Third quarter GDP growth fell to a 2.2 percent annual rate, versus a comparative
4.7 percent rate in the second quarter. Wage data also indicated that inflation
was under control, as wages remained flat for production and nonsupervisory
workers in October, despite a $0.50 increase in the minimum wage becoming
effective on October 1, 1996. While the November unemployment rate climbed to
5.4 percent from 5.2 percent in October, inflation concerns were heightened
somewhat by an unexpectedly sharp $0.09 jump in average hourly earnings.
However, most of the economic data released at the close of 1996, which included
jobless claims rising to a five month high in November and a decline in November
durable goods orders, suggested that the economy was sluggish and non-
inflationary.
While fourth quarter GDP growth came in at a stronger than expected 4.7
percent annual growth rate (subsequently revised to 3.9 percent), most of the
economic data released during the first quarter of 1997 has indicated a
continuation of moderate economic growth. Such measures as a 1.9 percent decline
in December durable goods orders and a modest uptick in the January 1997
unemployment rate to 5.4 percent, versus 5.3 percent in December 1996, eased
concerns that the economy was overheating. However, the increase in the
<PAGE>
unemployment rate was attributable to more people entering the job force, as
some markets began to experience labor shortages. In congressional testimony at
the end of February 1997, the Federal Reserve Chairman indicated that he
anticipated recent signs of lower job insecurity among workers would lead to
upward pressure in wages, which could possibly trigger the Federal Reserve to
boost interest rates.
Consistent with the mixed economic activity, interest rate trends have been
varied as well over the past year. Following a 0.25 percent rate cut by the
Federal Reserve in January 1996, interest rates moved higher during the balance
of the first quarter of 1996. The upward trend in interest rates reflected
generally improving economic conditions and indications that the Fed would not
cut interest rates further due to mixed inflation signals.
Interest rates continued to edge higher during the second quarter of 1996,
as the 30-year U.S. Government bond yield climbed above 7.0 percent following
the stronger than expected May job growth reported in early-June. In early-July,
the release of a strong June employment report had a more severe effect on bond
prices, as the large drop in unemployment provided for one of the largest one
day declines in bond prices with the yield on the 30-year benchmark bond
increasing from 6.93 percent to 7.18 percent. After trending lower for a brief
period during early- and mid-August, interest rates moved higher in late-August
and early-September as inflation concerns were raised by the stronger than
expected economic growth.
The Federal Reserve's decision not to raise interest rates at its September
and October 1996 meetings, along with economic data providing indications of a
cooling economy, translated into a declining interest rate environment during
late-September and through most of October. Interest rates continued to edge
lower through November, as the October economic data suggested that inflationary
pressures were non-threatening. Bond prices declined slightly in early-December,
as investors focused on weakness in the dollar and rising oil prices. Concern
over Japanese investors slowing their buying of U.S. Treasury notes caused bond
prices to slide in mid-December, despite economic data which continued to
indicate mild inflation. Interest rates were somewhat trendless at the close of
1996, as the Federal Reserve elected not to change interest rates at its
December meeting.
With few inflationary signs, interest rates held steady at the beginning of
1997, followed by an easing in early- and mid-February. Indications of slowing
economic growth and the Federal Reserve's decision to leave rates unchanged at
its early-February meeting spurred the mild downward trend in interest rates.
However, interest rates edged higher in late-February, following renewed
concerns by the Federal Reserve Chairman over the sharp rise in the stock market
during the past two years. As of February 28, 1997, one- and thirty-year U.S.
Government bonds were yielding 5.67 percent and 6.80 percent, respectively.
Exhibit II-2 provides historical interest rate trends from 1991 through February
28, 1997.
<PAGE>
Local Economy
- -------------
Idaho's economy is shaped by its geography, as (1) most of the state lies
in the rugged highlands of the Rocky Mountains, (2) the state is heavily
forested, (3) the valleys are conducive to agriculture and graze lands, and (4)
the land is rich in minerals for mining. Agriculture in the Bank's market area
is dry land farming, with major crops consisting of wheat, barley, peas,
lentils, beans and grass seed. Livestock is also raised in the Bank's market
area.
Lewiston, the largest city in northern Idaho, located in Lewis-Clark
valley, serves as the regional center for the state government. Lewiston borders
the state line and is located directly across the Snake River from Clarkston,
Washington, the site of the Bank's new headquarters. The Clarkston economy is
very much part of First Federal's market.
Forest products and agriculture serve as the cornerstone of the Lewiston
economy. Additionally, the Lewiston-Clarkston area is the most inland seaport in
the northwest and, thus, ocean going barges transport grain, lumber and wood
products from the Snake River port facilities to the Pacific Coast. The
viability of the ports and the shipping are currently being threatened by state
and federal environmental legislation to make the Snake River a free flowing
river, which would result in the elimination of barge traffic. In recent years,
medical services, light manufacturing and tourism have become more prominent in
the Lewiston-Clarkston economy.
<TABLE>
<CAPTION>
Among the major employers locally are:
Company Emp # Business Description
------- ----- --------------------
<S> <C> <C>
Potlatch Corporation 2,400 Forest Products
St. Joseph Regional Medical 900 Health Care Facility
Blount, Inc. 650 Arms Manufacturer
</TABLE>
Latah County, where the Moscow branch is located, is heavily influenced by
the University of Idaho, the largest single employer, with 2,400 employees and
11,500 students. Approximately 8 miles to the west of Moscow is Pullman,
Washington, where the University of Washington is located. Agriculture (peas and
lentils) and lumber/wood products also represent major industries for Moscow,
which is located in the "Palouse" region north of Lewiston. Idaho County, which
includes the Grangeville branch, is largely dependent upon the agriculture and
forest products industries, while tourism has been a growth industry for the
Grangeville economy in recent years.
<PAGE>
Economic activity for Kootenai County is centered around Coeur d'Alene,
which has experienced significant growth over the past ten years. Tourism,
forest products, mining and agriculture are the major industries of the local
economy, while the rapid growth has also provided for a large amount of new home
construction and increased demand for service related industries. The Coeur
d'Alene market has accounted for a major portion of the Bank's construction and
1-4 family loan originations in recent years; thus, a slow down in the Coeur
d'Alene economy would have a notable impact on those lending activities.
After eight years of growth in construction activity in Idaho, the 1996
activity slipped by approximately 3 percent and a 5 percent decline has been
projected for 1997 by a prominent local economist. Within Coeur d'Alene, total
construction declined by nearly 9 percent in 1996 from the previous year's
level, while Kootenai County declined by nearly 5 percent.
Table 2.2 displays unemployment data in the local market area as of
December 1996 and December 1995. Unemployment rates for the primary market area
counties were mixed, with Latah and Nez Perce Counties exhibiting relatively low
levels of unemployment. Comparatively, unemployment rates in Idaho and Latah
Counties were high, which can in part be attributable to the cyclical and
seasonal nature of the primary industries in those counties. Trends in
unemployment were mixed as well, with unemployment increasing in Idaho and
Kootenai Counties, while Nez Perce recorded a decline in unemployment compared
to a year ago. There was little change in Latah County's unemployment rate
between December 1995 and December 1996.
Table 2.2
Market Area Unemployment Trends
<TABLE>
<CAPTION>
Region December 1995 December 1996
------ -------------- --------------
<S> <C> <C>
United States 5.6% 5.3%
Idaho 5.6 5.7
Idaho County 12.0 12.4
Kootenai County 8.5 10.2
Latah County 3.1 3.2
Nez Perce 4.3 3.8
</TABLE>
Source: U.S. Bureau of Labor Statistics.
Competition
- -----------
Competition from other financial institutions operating in the Bank's
market area is intense, particularly from large superregional banks and
community-based institutions operating in both states, as well as several
aggressive credit unions. Smaller institutions such as First Federal will be
forced to either compete
<PAGE>
with larger institutions on pricing, or to identify and operate in a "niche"
that will allow for operating margins to be maintained at profitable levels.
Currently, First Federal is the largest institution headquartered in Lewiston.
Table 2.3 displays deposit market trends for Idaho and the market area
counties where the Bank maintained branches from June 30, 1994 through June 30,
1996. The data indicates that annual deposit growth in the Bank's primary market
area ranged from a low of 2.0 percent in Idaho County to a high of 6.8 percent
in Latah County. Deposit growth was strong in Kootenai County as well, and
accounted for the highest balance of deposits among the four market area
counties.
Deposit growth for the Bank was positive during the period covered in Table
2.3, as First Federal's market share of deposits increased modestly in all four
of the primary market area counties. First Federal's largest market share of
deposits is in Nez Perce County, where the Bank is headquartered and maintains
two full serve branch offices. As of June 30, 1996, the Bank's market share of
Nez Perce deposits equaled 16.4 percent, versus a comparative measure of 15.0
percent at June 30, 1994. The deposit growth was largely supported by the
premium CD program offered by the Bank in the fourth calendar quarter of 1995.
The premium CD program was done in connection with promoting the Bank's 75th
anniversary, in which a 75-day CD was offered at a 7.5 percent rate. The premium
rate was offered for only two weeks, but resulted in considerable funds being
taken in. Most recently, the Bank's deposits have declined during the nine
months ended December 31, 1996, reflecting deposit run-off of the premium CDs.
The conversion proceeds will enhance the Bank's competitiveness by providing
increased operating flexibility. The Bank should also continue to benefit from
its favorable image as a locally-owned and community-oriented institution, as
the trend of consolidation among financial institutions is expected to continue
to provide First Federal with additional opportunities to gain customers that
become dissatisfied with their banking relationship as the result of an
acquisition. The Bank's prospects for deposit growth will be mitigated by the
highly competitive market environment for deposits in the markets served by the
Bank. To augment the growth that is possible internally, First Federal may seek
opportunities to expand the Bank's growth potential through acquiring branches
or another financial institution in its primary market area.
<PAGE>
RP Financial, LC.
Page 2.9
---------------------------------
Table 2.3
First Federal Bank of Idaho
Deposit Summary
---------------------------------
<TABLE>
<CAPTION>
As of June 30,
---------------------------------------------------------------------------
1994 1996
----------------------------------- ----------------------------------- Deposit
Market Number of Market No. of Growth Rate
Deposits Share Branches Deposits Share Branches 1994-1996
-------- ----- -------- -------- ----- -------- ---------
(Dollars In Thousands) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
A. Deposit Summary
- ------------------
State of Idaho $9,284,641 100.0% 355 $10,023,976 100.0% 382 3.9%
Commercial Banks 8,423,993 90.7% 313 9,125,149 91.0% 334 4.1%
Savings and Loans 860,648 9.3% 42 898,827 9.0% 48 2.2%
Idaho County $131,703 100.0% 8 $137,073 100.0% 8 2.0%
Commercial Banks 122,020 92.6% 7 125,508 91.6% 7 1.4%
Savings and Loans 9,683 7.4% 1 11,565 8.4% 1 9.3%
First Federal Bank (1) 9,683 100.0% 1 11,565 100.0% 1 9.3%
First Federal Bank (2) 7.4% 8.4%
Kootenai County $711,818 100.0% 29 $779,139 100.0% 30 4.6%
Commercial Banks 696,223 97.8% 26 738,334 94.8% 27 3.0%
Savings and Loans 15,595 2.2% 2 40,805 5.2% 3 61.8%
First Federal Bank (1) 3,440 0.0% 1 11,401 27.9% 1 82.1%
First Federal Bank (2) 0.5% 1.5%
Latah County $256,448 100.0% 11 $292,314 100.0% 13 6.8%
Commercial Banks 232,695 90.7% 10 259,369 88.7% 11 5.6%
Savings and Loans 23,753 9.3% 1 32,945 11.3% 2 17.8%
First Federal Bank (1) 23,753 100.0% 1 30,119 91.4% 1 12.6%
First Federal Bank (2) 9.3% 10.3%
Nez Perce County $345,294 100.0% 14 $362,059 100.0% 15 2.4%
Commercial Banks 293,556 85.0% 12 302,838 83.6% 13 1.6%
Savings and Loans 51,738 15.0% 2 59,221 16.4% 2 7.0%
First Federal Bank (1) 51,738 100.0% 2 59,221 100.0% 2 7.0%
First Federal Bank (2) 15.0% 16.4%
</TABLE>
(1) Percent of S&L deposits.
(2) Percent of total deposits.
Source: FDIC; OTS.
<PAGE>
III. PEER GROUP ANALYSIS
This chapter presents an analysis of First Federal's operations versus a
group of comparable savings institutions (the "Peer Group") selected from the
universe of all publicly-traded savings institutions. The basis of the pro forma
market valuation of First Federal is provided by these institutions. Factors
affecting the Bank's pro forma value such as financial condition, credit risk,
interest rate risk, loan composition and recent operating results can be readily
assessed in relation to the Peer Group. Current market pricing of the Peer
Group, subject to appropriate adjustments to account for differences between
First Federal and the Peer Group, will then be used as a basis for the pro forma
valuation of First Federal's to-be-issued common stock.
Selection of Peer Group
- -----------------------
We consider the appropriate Peer Group to be comprised of only those
publicly-traded savings institutions whose common stock is either listed on a
national exchange or is NASDAQ listed, since the market for companies trading in
this fashion is regular and reported. We believe non-listed institutions are
inappropriate since the trading activity for thinly-traded stocks is typically
highly irregular in terms of frequency and price and may not be a reliable
indicator of market value. We have also excluded from the Peer Group those
companies under acquisition, mutual holding companies and recent conversions,
since their pricing ratios are subject to distortion and/or do not have a
seasoned trading history.
From the universe of publicly-traded thrifts, we selected ten institutions
with characteristics similar to those of First Federal. In the selection
process, we applied two primary "screens" to the universe of all public
companies:
. Screen #1. Northwestern and Western institutions, excluding
California institutions, with assets of $75 to $750 million, equity-
to-assets ratios between 10.0 percent and 25.0 percent, and positive
core earnings. Five companies met the criteria for Screen #1 and four
were included for the Peer Group: Horizon Financial Corp. of
Washington, Klamath First Bancorp of Oregon, Tri-County Bancorp of
Wyoming and United Financial Corporation of Montana. The fifth
company, WesterFed Financial Corporation of Montana, was excluded as
the result of its recently completed acquisition of Security Bancorp
of Montana, which is currently not reflected in WesterFed's pricing
multiples due to the recency of the acquisition. Exhibit III-2 details
the financial characteristics of all publicly-traded Northwestern and
Western institutions.
. Screen #2. Mid-West institutions with assets of $75 to $500 million,
equity-to-assets ratios of 10.0 percent to 20.0 percent, positive core
return on average assets ratios of less than 1.00, and an operating
expense to average assets ratio of greater than 2.50 percent. Twelve
institutions met the selection criteria for Screen #2 (see Exhibit
III-3), and six were included as part of First Federal's Peer Group:
AMB Financial Corp. of Indiana, Citizens First Financial Corp. of
<PAGE>
Illinois, First Mutual Bancorp of Illinois, Horizon Financial Services
of Iowa, Northwest Equity Corp. of Wisconsin, and Three Rivers
Financial Corp. of Michigan.
Of the six institutions excluded, two were excluded as the result of
recently paying significant special dividends, which caused their
pricing to be somewhat distorted on a price-to-book basis. Fort
Thomas Financial Corporation of Kentucky paid a $4.00 per share
special dividend in August 1996 and Indiana Community Bank, SB of
Indiana paid a $3.00 per share special dividend in August 1996. The
remaining four companies were excluded on the basis of maintaining
asset compositions that were considered to be less comparable to First
Federal's asset composition, relative to the asset compositions of the
other Peer Group candidates. In particular, three of the companies
were eliminated due to maintaining loan and MBS portfolio compositions
that were highly concentrated in 1-4 family permanent mortgage loans
and mortgage-backed securities: Bank West Financial Corp. of Michigan
(91.0 percent concentration), North Bancshares of Chicago Illinois
(93.5 percent concentration), and Sobieski Bancorp of Indiana (93.2
percent concentration). First Federal Bancorporation of Minnesota was
the other Peer Group candidate not selected, as the result of
maintaining an asset composition with a much higher concentration of
cash and investments and a much lower concentration of loans, as
compared to the Bank's relative measures. Cash and investment and
loans comprised 39.8 percent and 47.3 percent of First Federal
Bancorporation's assets, respectively, versus comparative measures of
9.9 percent and 83.4 percent for the Bank.
Table 3.1 on the following page shows the general characteristics of each
of the Peer Group companies and Exhibit III-4 provides summary demographic data
for the primary market areas served by each of the Peer Group companies. While
there are some differences between the Peer Group companies and First Federal,
we believe that the Peer Group provides a good representation of publicly-traded
thrifts with operations comparable to those of the Bank and, thus, will provide
a good basis for valuation. The following sections present a comparison of First
Federal's financial condition, income and expense trends, loan composition,
interest rate risk and credit risk versus the Peer Group. The conclusions drawn
from the comparative analysis are then factored into the valuation analysis
discussed in the final chapter.
A summary description of the key characteristics of each of the Peer Group
companies, which we determined warranted their inclusion as a comparable
institution to First Federal, is detailed below.
. AMB Financial Corp. of IN. Selected due to comparable size of branch
network, strong capital position, healthy net interest margin, similar
earnings contribution from sources of non-interest operating income,
relatively high operating expenses, and above average diversification into
higher risk types of lending.
. Citizens First Fin. Corp. of IL. Selected due to comparable size of branch
network, strong capital position, similar interest-earning asset
composition, comparable funding composition, similar earnings contribution
from sources of non-interest operating income, relatively high level of
operating expenses, and notable balance of loans serviced for others.
<PAGE>
<TABLE>
<CAPTION>
Table 3.1
Peer Group of Publicly-Traded Thrifts
March 10, 1997(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
($) ($Mil)
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 673 7 09-30 10/95 15.50 155
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 500 S 12 03-31 08/86 15.00 96
FMBD First Mutual Bancorp of IL OTC Central IL Thrift 316 S 7 12-31 07/95 16.00 60
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 266 S 6 12-31 05/96 15.50 44
UBMT United Fin. Corp. of MT OTC Central MT Thrift 108 S 4 12-31 09/86 19.75 24
NWEQ Northwest Equity Corp. of WI OTC Northwest WI Thrift 96 S 3 03-31 10/94 13.50 13
THR Three Rivers Fin. Corp. of MI AMEX Southwest MI Thrift 87 S 4 06-30 08/95 14.50 12
TRIC Tri-County Bancorp of WY OTC Southeastern WY Thrift 86 2 12-31 09/93 18.50 11
AMFC AMB Financial Corp. of IN OTC Northwest IN Thrift 84 S 4 12-31 04/96 13.75 15
HZFS Horizon Fin'l. Services of IA OTC Central IA Thrift 77 S 3 06-30 06/94 17.00 7
</TABLE>
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift,
M.B.=Mortgage Banker, R.E.=Real Estate Developer,
Div.=Diversified, and Ret.=Retail Banking.
(3) FDIC savings bank institution.
Source: Corporate offering circulars, data derived from information
published in SNL Securities Quarterly Thrift Report, and financial
reports of publicly-traded thrifts.
Date of Last Update: 03/10/97
<PAGE>
. First Mutual Bancorp of IL. Similar size of branch network, strong capital
position, similar interest-earning asset composition, comparable net
interest margin, relatively high level of operating expenses, and notable
balance of loans serviced for others.
. Horizon Fin'l. Services of IA. Selected due to comparable funding
composition, relatively high level of operating expenses, above average
diversification into higher risk types of lending, and similar credit
quality measures.
. Horizon Financial Corp. of WA. Selected due to Northwest market area,
strong capital position, similar interest-earning asset composition,
comparable net interest margin and a notable balance of loans serviced for
others.
. Klamath First Bancorp of OR. Selected due to Northwest market area,
comparable size of branch network, strong capital position, similar
interest-earning asset composition, and comparable net interest margin.
. Northwest Equity Corp. of WI. Selected due similar interest-earning asset
composition, strong net interest margin, relatively high level of operating
expenses, above average diversification into higher risk types of lending,
and similar credit quality.
. Three Rivers Fin. Corp. of MI. Selected due to similar size of branch
network, strong capital position, comparable funding composition, strong
net interest margin, similar earnings contribution from sources of non-
interest operating income, relatively high level of operating expenses,
above average diversification into high risk types of lending, and similar
credit quality.
. Tri-County Bancorp of WY. Selected due to Western market area and strong
capital position.
. United Financial Corp. of MT. Selected due to Western market area, similar
asset size, similar size of branch network, strong capital position,
comparable net interest margin, and similar credit quality.
In aggregate, the Peer Group companies are more highly capitalized than the
industry average (16.82 percent of assets versus 12.90 percent for the all SAIF
average), generate higher earnings as a percent of average assets (0.93 percent
core ROAA versus 0.83 percent for the all SAIF average), and generate a lower
ROE (5.39 percent core ROE versus 7.33 percent for the all SAIF average).
Overall, the Peer Group's average P/B ratio and core P/E multiple were below and
above the respective comparable SAIF averages (see next page).
Ideally, the Peer Group companies would be comparable to First Federal in
terms of all of the selection criteria, but the universe of publicly-traded
thrifts does not provide for an appropriate number of such companies. However,
in general, the companies selected for the Peer Group were fairly comparable to
First Federal, as will be highlighted in the following comparative analysis.
<PAGE>
<TABLE>
<CAPTION>
As of February 28, 1997
-----------------------
Peer All SAIF
Group Insured
----- -------
<S> <C> <C>
Equity-to-Assets 16.82% 12.90%
Core Return on Assets ("ROA") 0.93 0.83
Core Return on Equity ("ROE") 5.39 7.33
Price-to-Book ratio ("P/B") 100.03% 127.41%
Core Price-to-Earnings multiple ("P/E") 20.23x 17.52x
Price-to-Assets ratio ("P/A") 16.84% 15.51%
</TABLE>
Source: Table 4.4 - Chapter IV Valuation Analysis.
Financial Condition
- -------------------
Table 3.2 shows comparative balance sheet measures for First Federal and
the Peer Group, reflecting the expected similarities and some differences given
the selection procedures outlined above. The Bank's ratios reflect balances as
of December 31, 1996, while the Peer Group's ratios reflect balances as of
September 30, 1996 or December 31, 1996. First Federal's net worth base of 8.1
percent was below the Peer Group's average net worth ratio of 16.8 percent;
however, with the addition of stock proceeds, the Bank's pro forma capital
position (consolidated with the holding company) can be expected to be
comparable to the Peer Group's ratio. Intangible capital was not a factor in
either the Bank's or the Peer Group's capital ratios. Both the Bank's and the
Peer Group's capital ratios reflected capital surpluses with respect to the
regulatory capital requirements, with the Peer Group's ratios currently
indicating slightly greater capital surpluses. Again, on a pro forma basis, the
Bank's capital surpluses will be more comparable to the Peer Group's ratios.
The interest-earning asset compositions for the Bank and the Peer Group
were somewhat similar, with loans and mortgage-backed securities constituting
the bulk of interest-earning assets for First Federal and the Peer Group. First
Federal's combined level of loans and mortgage-backed securities was higher than
the Peer Group's ratio (85.2 percent versus 77.7 percent for the Peer Group),
with the Bank maintaining a higher concentration of loans and a lower
concentration of mortgage-backed securities relative to the comparative Peer
Group ratios. Comparatively, the Peer Group's cash and investments to assets
ratio was higher than the comparable ratio for First Federal (19.1 percent
versus 9.9 percent for the Bank). Overall, First Federal's interest-earning
assets amounted to 95.1 percent of assets, which was below the comparable Peer
Group ratio of 96.8 percent. The Bank's lower ratio resulted from maintaining a
relatively high level of fixed assets, which can be attributable to First
Federal's maintenance of a relative large branch network for its asset size.
Assets
<PAGE>
Table 3.2
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of December 31, 1996
<TABLE>
<CAPTION>
Balance Sheet as a Percent of Assets
----------------------------------------------------------------------------------------
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Investments Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
----------- ------ ------ -------- -------- ------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Federal Bank of Idaho
---------------------------
December 31, 1996 9.9 83.4 1.8 79.1 11.3 0.0 8.1 0.0 8.1 0.0
SAIF-Insured Thrifts 17.9 65.8 12.1 71.2 14.3 0.1 12.5 0.2 12.3 0.0
Comparable Group Average 19.1 67.6 10.1 69.9 11.8 0.0 16.8 0.0 16.8 0.0
Mid-West Companies 15.9 75.0 5.4 71.4 11.9 0.0 15.3 0.0 15.3 0.0
North-West Companies 12.5 77.1 8.4 71.0 8.1 0.0 19.3 0.0 19.3 0.0
Western Companies (Excl CA) 35.2 36.1 25.7 64.5 15.3 0.0 18.9 0.0 18.9 0.0
Comparable Group
----------------
Mid-West Companies
------------------
AMFC AMB Financial Corp. of IN(1) 17.4 74.9 4.9 77.1 1.2 0.0 19.4 0.0 19.4 0.0
CBK Citizens First Fin.Corp. of IL(1) 7.1 78.9 9.0 77.0 6.6 0.0 15.1 0.0 15.1 0.0
FMBD First Mutual Bancorp of IL(1) 12.2 84.5 0.0 64.5 14.1 0.0 19.9 0.0 19.9 0.0
HZFS Horizon Fin'l. Services of IA(1) 30.9 66.0 0.0 72.0 16.5 0.0 10.7 0.0 10.7 0.0
NWEQ Northwest Equity Corp. of WI(1) 7.5 80.2 8.1 65.4 21.6 0.0 12.1 0.0 12.1 0.0
THR Three Rivers Fin. Corp. of MI(1) 20.3 65.3 10.2 72.1 11.3 0.0 14.5 0.1 14.4 0.0
North-West Companies
--------------------
HRZB Horizon Financial Corp. of WA(1) 10.7 81.6 5.3 82.3 0.0 0.0 15.9 0.0 15.9 0.0
KFBI Klamath First Bancorp of OR 14.3 72.6 11.5 59.7 16.2 0.0 22.7 0.0 22.7 0.0
Western Companies (Excl CA)
---------------------------
TRIC Tri-County Bancorp of WY 27.7 41.1 29.4 56.5 27.3 0.0 15.3 0.0 15.3 0.0
UBMT United Fin. Corp. of MT(1) 42.7 31.1 22.1 72.5 3.4 0.0 22.5 0.0 22.5 0.0
<CAPTION>
Balance Sheet Annual Growth Rates
------------------------------------------------------------
Cash and Loans Borrows. Net Tng Net
Assets Investments & MBS Deposits &Subdebt Worth Worth
------ ----------- ----- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
First Federal Bank of Idaho
---------------------------
December 31, 1996 3.45 -69.51 23.71 -11.53 NM 5.95 5.95
SAIF-Insured Thrifts 11.09 5.51 12.42 5.73 18.36 -1.61 -1.79
Comparable Group Average 14.54 -5.47 19.84 5.29 35.08 -3.69 -3.67
Mid-West Companies 15.39 3.48 13.75 5.54 35.08 -5.97 -5.92
North-West Companies 9.45 -21.23 17.88 5.31 NM -1.75 -1.75
Western Companies (Excl CA) 17.09 -7.61 40.08 4.52 NM -1.07 -1.07
Comparable Group
----------------
Mid-West Companies
------------------
AMFC AMB Financial Corp. of IN(1) 21.34 NM 19.02 9.63 -66.67 NM NM
CBK Citizens First Fin.Corp. of IL(1) 16.78 24.96 14.13 -1.48 NM NM NM
FMBD First Mutual Bancorp of IL(1) 18.39 -23.43 27.97 5.58 NM -11.23 -11.23
HZFS Horizon Fin'l. Services of IA(1) 9.36 NM -10.47 5.75 45.30 -4.40 -4.40
NWEQ Northwest Equity Corp. of WI(1) 19.18 28.59 17.52 12.86 72.78 -6.94 -6.94
THR Three Rivers Fin. Corp. of MI(1) 7.29 -16.20 14.32 0.90 88.91 -1.30 -1.11
North-West Companies
--------------------
HRZB Horizon Financial Corp. of WA(1) 5.63 -11.72 8.77 5.46 NM 5.07 5.07
KFBI Klamath First Bancorp of OR 13.26 -30.73 26.99 5.15 NM -8.57 -8.57
Western Companies (Excl CA)
---------------------------
TRIC Tri-County Bancorp of WY 30.60 -5.89 62.66 8.86 NM -2.59 -2.59
UBMT United Fin. Corp. of MT(1) 3.58 -9.33 17.50 0.18 NM 0.45 0.45
<CAPTION>
Regulatory Capital
--------------------------
Tangible Core Reg.Cap.
-------- -------- --------
<S> <C> <C> <C>
First Federal Bank of Idaho
---------------------------
December 31, 1996 8.12 8.12 13.27
SAIF-Insured Thrifts 10.54 10.61 22.44
Comparable Group Average 13.00 13.46 28.48
Mid-West Companies 10.81 11.82 22.32
North-West Companies 19.22 17.58 36.01
Western Companies (Excl CA) 14.28 14.28 39.43
Comparable Group
----------------
Mid-West Companies
------------------
AMFC AMB Financial Corp. of IN(1) 13.40 13.40 26.60
CBK Citizens First Fin.Corp. of IL(1) 10.19 10.19 19.00
FMBD First Mutual Bancorp of IL(1) NM 19.94 36.77
HZFS Horizon Fin'l. Services of IA(1) 7.80 7.80 14.70
NWEQ Northwest Equity Corp. of WI(1) NM 7.78 12.66
THR Three Rivers Fin. Corp. of MI(1) 11.83 11.83 24.16
North-West Companies
--------------------
HRZB Horizon Financial Corp. of WA(1) NM 15.93 29.61
KFBI Klamath First Bancorp of OR 19.22 19.22 42.41
Western Companies (Excl CA)
---------------------------
TRIC Tri-County Bancorp of WY 13.35 13.35 33.16
UBMT United Fin. Corp. of MT(1) 15.20 15.20 45.70
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The
information provided in this table has been obtained from sources
we believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
per full service branch equaled $26.6 million for First Federal, versus a
comparative figure of $44.1 million for the Peer Group.
First Federal's funding liabilities reflect a funding strategy similar to
that of the Peer Group's funding composition, with retail deposits constituting
the major source of interest-bearing funds utilized by the Bank and the Peer
Group. The Bank's deposits equaled 79.1 percent of assets, which was higher than
the Peer Group average of 69.9 percent. Partially offsetting First Federal's
higher ratio of deposits was its slightly lower level of borrowings, as
indicated by borrowings-to-assets ratios of 11.3 percent and 11.8 percent for
the Bank and the Peer Group, respectively. Total interest-bearing liabilities
maintained by the Bank and the Peer Group, as a percent of assets, equaled 90.4
percent and 81.7 percent, respectively, with the Peer Group's lower ratio being
supported by maintenance of a higher capital position.
A key measure of balance sheet strength for a thrift institution is its
IEA/IBL ratio. Presently, the Bank's IEA/IBL ratio is lower than the Peer
Group's ratio, based on respective ratios of 105.2 percent and 118.5 percent.
The additional capital realized from stock proceeds should serve to partially
address the lower IEA/IBL ratio currently maintained by the Bank, as the
interest free capital realized in First Federal's stock offering will be
deployed into interest-earning assets. However, in light of the higher level of
non-interest earning assets held by First Federal, the Peer Group's IEA/IBL
ratio can be expected to remain stronger than the Bank's following the Bank's
conversion, thus First Federal's earnings power is diminished.
The growth rate section of Table 3.2 shows annual growth rates for key
balance sheet items. First Federal's growth rates are based on annualized growth
for the nine months ended December 31, 1996, while the Peer Group's growth rates
are based on annual growth for the twelve months ended September 30, 1996 or
December 31, 1996. Asset growth rates of positive 3.5 percent and 14.5 percent
were posted by the Bank and the Peer Group, respectively. First Federal's asset
growth measures reflect that strong loan growth was recorded during the period
(positive growth rate of 23.7 percent), with funding for the loan portfolio
being largely provided by the cash and investments portfolio (negative growth
rate of 69.5 percent). The Peer Group's stronger asset growth was realized
through a comparatively lower growth rate in loans and MBS (positive growth rate
of 19.8 percent) and a comparatively lower decline in cash and investments
(negative growth rate of 5.5 percent).
Retained earnings and borrowings funded the Bank's asset growth, as well as
deposit run-off of 11.5 percent. Deposit run-off associated with the premium CD
rate program offered at the end of calendar 1995 was largely responsible for the
notable deposit shrinkage recorded by the Bank. First Federal's borrowings
growth rate indicated as not meaningful "NM" resulted from a borrowings growth
rate well in excess of 100 percent, as First Federal's balance of borrowings
increased from $2.3 million to $15.0 million during the nine
<PAGE>
month period analyzed. Comparatively, the Peer Group's asset growth was funded
by deposits and borrowings, with the Peer Group's lower balance of borrowings
exhibiting a higher growth rate than deposits. In fact, the Peer Group's
borrowings growth rate shown in Table 3.2 was somewhat understated, as the "NM"
borrowings growth rate shown for six of the Peer Group companies included
companies with borrowings growth rates in excess of 100 percent. For the period
shown in Table 3.2, five of the Peer Group companies showing "NM" growth rates
posted borrowing growth rates in excess of 100 percent, and one Peer Group
company recorded no change in its balance of borrowings. Despite recording a
lower return on average assets ratio, First Federal posted a stronger capital
growth rate than the Peer Group (positive 6.0 percent versus negative 3.7
percent for the Peer Group). Dividend payments and stock repurchases, as well as
possible negative SFAS 115 adjustments, were likely factors that accounted for
the Peer Group's slightly negative capital growth rate. Following the increase
in capital realized from conversion proceeds, the Bank's capital growth rate
will be depressed by its higher pro forma capital position, as well as possible
dividend payments and stock repurchases.
Income and Expense Components
- -----------------------------
First Federal and the Peer Group reported net income to average assets
ratios of 0.16 percent and 0.69 percent, respectively, based on earnings for the
twelve months ended December 31, 1996 or for the twelve months ended September
30, 1996 for some of the Peer Group companies (see Table 3.3). Both the Bank's
and the Peer Group's earnings were depressed by the one time assessment to
recapitalize the SAIF, which is shown as a non-operating item under net gains in
Table 3.3. The Bank's lower profitability was attributable to its higher
operating expenses and loan loss provisions, despite the comparable net interest
margin, higher non-interest income and positive net non-operating income (the
Bank's gains on sale offset the impact of the special SAIF assessment).
The similar comparative net interest income ratios resulted from the Bank's
higher interest income ratio being more than offset by the Peer Group's lower
interest expense ratio. First Federal's higher interest income ratio was
supported by a higher yield earned on interest-earning assets (8.09 percent
versus 7.77 percent for the Peer Group), coupled with a higher concentration of
loans to assets (83.4 percent versus 67.6 percent for the Peer Group) and a
greater concentration of higher risk weight loans, despite the comparatively
lower level of interest-earning assets to assets ratio (95.1 percent versus 96.8
percent for the Peer Group). Comparatively, the Peer Group's lower interest
expense ratio was realized through maintaining a lower level of interest-bearing
liabilities (81.7 percent of assets versus 90.4 percent for the Bank), despite
First Federal's lower cost of funds (4.62 percent versus 4.89 percent for the
Peer Group). Following the infusion of conversion proceeds, the level of
interest-bearing liabilities maintained by the Bank should be similar to the
Peer Group's
<PAGE>
Table 3.3
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended December 31, 1996
<TABLE>
<CAPTION>
Net Interest Income Other Income
____________________________ ___________________
Loss NII
Net Provis. After Loan R.E. Other
Income Income Expense NII on IEA Provis. Fees Oper. Income
______ ______ _______ ______ _______ _______ ____ _____ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Federal Bank of Idaho
___________________________
December 31, 1996 0.16 7.61 4.12 3.49 0.20 3.30 0.00 0.00 0.70
SAIF-Insured Thrifts 0.56 7.36 4.13 3.23 0.14 3.10 0.12 -0.01 0.31
Comparable Group Average 0.69 7.50 3.99 3.51 0.08 3.42 0.11 0.00 0.26
Mid-West Companies 0.43 7.64 4.08 3.56 0.13 3.42 0.09 -0.01 0.35
North-West Companies 1.21 7.62 4.08 3.54 0.02 3.52 0.10 0.00 0.06
Western Companies (Excl CA) 0.96 6.97 3.64 3.33 0.00 3.33 0.20 0.00 0.20
Comparable Group
________________
Mid-West Companies
__________________
AMFC AMB Financial Corp. of IN(1) 0.49 7.50 3.79 3.71 0.00 3.71 0.09 0.00 0.41
CBK Citizens First Fin.Corp. of IL(1) 0.25 7.87 4.64 3.23 0.07 3.17 0.34 0.00 0.17
FMBD First Mutual Bancorp of IL(1) 0.46 7.15 3.61 3.54 0.03 3.51 0.04 0.00 0.25
HZFS Horizon Fin'l. Services of IA(1) 0.13 7.61 4.34 3.27 0.57 2.70 0.00 -0.09 0.45
NWEQ Northwest Equity Corp. of WI(1) 0.70 8.10 4.32 3.79 0.05 3.74 0.09 0.02 0.38
THR Three Rivers Fin. Corp. of MI(1) 0.52 7.61 3.81 3.80 0.08 3.72 0.00 0.02 0.47
North-West Companies
____________________
HRZB Horizon Financial Corp. of WA(1) 1.52 7.79 4.28 3.51 0.03 3.48 0.19 0.00 0.05
KFBI Klamath First Bancorp of OR 0.91 7.46 3.88 3.58 0.02 3.56 0.00 0.01 0.06
Western Companies (Excl CA)
___________________________
TRIC Tri-County Bancorp of WY 0.71 7.20 3.97 3.24 0.00 3.24 0.01 0.00 0.17
UBMT United Fin. Corp. of MT(1) 1.20 6.74 3.31 3.43 0.00 3.43 0.39 0.00 0.23
<CAPTION>
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
________________ ______________ _________________________
Total
Other G&A Goodwill Net Extrao. Yield Cost Yld-Cost
Income Expense Amort. Gains Items On Assets Of Funds Spread
______ _______ _______ _______ _______ _________ ________ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Federal Bank of Idaho
___________________________
December 31, 1996 0.70 4.18 0.00 0.41 0.00 8.09 4.62 3.47
SAIF-Insured Thrifts 0.42 2.24 0.02 -0.39 0.00 7.52 4.74 2.78
Comparable Group Average 0.37 2.38 0.00 -0.36 0.00 7.77 4.89 2.87
Mid-West Companies 0.44 2.81 0.00 -0.37 0.00 7.95 4.88 3.07
North-West Companies 0.16 1.45 0.00 -0.30 0.00 7.78 5.24 2.54
Western Companies (Excl CA) 0.39 2.00 0.00 -0.38 0.00 7.21 4.60 2.61
Comparable Group
________________
Mid-West Companies
__________________
AMFC AMB Financial Corp. of IN(1) 0.51 3.07 0.00 -0.42 0.00 7.91 4.59 3.31
CBK Citizens First Fin.Corp. of IL(1) 0.51 2.87 0.00 -0.41 0.00 8.23 5.26 2.97
FMBD First Mutual Bancorp of IL(1) 0.29 2.67 0.00 -0.39 0.00 7.39 4.86 2.53
HZFS Horizon Fin'l. Services of IA(1) 0.36 2.57 0.00 -0.30 0.00 7.85 4.96 2.90
NWEQ Northwest Equity Corp. of WI(1) 0.49 2.70 0.00 -0.32 0.00 8.41 5.02 3.39
THR Three Rivers Fin. Corp. of MI(1) 0.49 3.00 0.03 -0.40 0.00 7.89 4.57 3.33
North-West Companies
____________________
HRZB Horizon Financial Corp. of WA(1) 0.25 1.51 0.00 0.06 0.00 7.99 5.20 2.79
KFBI Klamath First Bancorp of OR 0.07 1.40 0.00 -0.67 0.00 7.58 5.29 2.29
Western Companies (Excl CA)
___________________________
TRIC Tri-County Bancorp of WY 0.17 1.97 0.00 -0.36 0.00 7.40 4.84 2.57
UBMT United Fin. Corp. of MT(1) 0.61 2.04 0.00 -0.39 0.00 7.02 4.36 2.66
<CAPTION>
MEMO: MEMO:
Assets/ Effective
FTE Emp. Tax Rate
__________ ________
<S> <C> <C>
First Federal Bank of Idaho
___________________________
December 31, 1996 1,663 31.39
SAIF-Insured Thrifts 4,124 35.01
Comparable Group Average 3,722 34.80
Mid-West Companies 2,791 35.13
North-West Companies 5,527 38.87
Western Companies (Excl CA) 4,772 29.76
Comparable Group
________________
Mid-West Companies
__________________
AMFC AMB Financial Corp. of IN(1) 3,094 33.09
CBK Citizens First Fin.Corp. of IL(1) 2,960 39.16
FMBD First Mutual Bancorp of IL(1) 2,593 37.15
HZFS Horizon Fin'l. Services of IA(1) NM 26.15
NWEQ Northwest Equity Corp. of WI(1) 2,809 41.63
THR Three Rivers Fin. Corp. of MI(1) 2,496 33.58
North-West Companies
____________________
HRZB Horizon Financial Corp. of WA(1) 4,389 33.76
KFBI Klamath First Bancorp of OR 6,664 43.98
Western Companies (Excl CA)
___________________________
TRIC Tri-County Bancorp of WY 4,772 33.70
UBMT United Fin. Corp. of MT(1) NM 25.82
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The
information provided in this table has been obtained from sources
we believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
ratio. Overall, First Federal and the Peer Group reported net interest income
to average assets ratios of 3.49 percent and 3.51 percent, respectively.
In another key area of core earnings strength, the Bank maintained a
considerably higher level of operating expenses than the Peer Group. For the
period covered in Table 3.3, the Bank and the Peer Group recorded operating
expense to average assets ratios of 4.18 percent and 2.38 percent, respectively.
First Federal's higher operating expense ratio can in part be explained by its
mortgage banking operations, which are personnel intensive but have a limited
impact on the Bank's asset size. Most notably, the Bank's off-balance sheet
portfolio of loans serviced for others equaled $131.5 million, or 98.7 percent
of assets, while comparatively the Peer Group's loans serviced for others
portfolio averaged $22.2 million, or 9.7 percent of assets. Other factors
contributing to the Bank's high level of operating expenses include maintaining
a relatively large number of branches for its asset size and its diversification
into personnel intensive types of lending such as construction and agricultural
lending. Overall, the relatively high level of personnel maintained by the Bank
is indicated by an assets per full time equivalent employee measure of $1.7
million, which was well below the Peer Group average of $3.7 million.
Accordingly, in assessing First Federal's core earnings strength relative to the
Peer Group's, the Bank's expense coverage ratio provides a less meaningful
indication of core earnings strength compared to the expense coverage ratios of
the Peer Group companies, which in general maintain less significant off-balance
sheet operations than First Federal. The Peer Group and the Bank reported
expense coverage ratios of 0.83x and 1.47x, respectively. First Federal's
expense coverage ratio of less than 1.0x indicates that profitability is
contingent upon non-interest sources of income, which are largely derived from
the Bank's mortgage banking activities and, thus, can be somewhat volatile in
nature. Taking non-interest income into account (but not gains on sale), the
Bank's efficiency ratio of 99.8 percent compares very unfavorably to the Peer
Group's average efficiency ratio of 61.3 percent. On a post-conversion basis,
the Bank's operating expenses can be expected to increase with the addition of
public company reporting expenses and stock benefit plans, with such expenses
already impacting the Peer Group's operating expenses. However, at the same
time, First Federal's higher pro forma capital position will better position the
Bank to leverage operating expenses through increased asset growth.
Sources of non-interest operating income, which does not include gains
realized from First Federal's mortgage banking operations, made a higher
contribution to the Bank's earnings than the Peer Group's, based on comparative
non-interest operating income to average assets ratios of 0.70 percent and 0.37
percent, respectively. When factoring in loan sale gains, the Bank's level of
non-interest income was considerably higher than the Peer Group's. Other than
the negative earnings impact of the special SAIF assessment, gains were not a
material factor in the Peer Group's earnings. Comparatively, gains were a net
positive contributor to the Bank's earnings, with gains realized from the sale
of loans amounting to 1.07 percent of First Federal's average
<PAGE>
assets. After factoring in the SAIF assessment and the write-down and loss
recorded on a mutual fund that was sold by the Bank, net gains recorded by First
Federal equaled positive 0.41 percent of average assets, versus a comparative
ratio of negative 0.36 percent for the Peer Group. Given that the gains on
mortgage loan sales were realized from First Federal's mortgage banking
activities, such gains warrant consideration in evaluating the Bank's core
earnings strength. However, at the same time, the gains are viewed as a less
stable source of income than the traditional sources of income that comprise a
thrift's recurring earnings and, thus, will be discounted somewhat in assessing
the relative strengths and weaknesses of First Federal's and the Peer Group's
core earnings measures. Real estate operations were not a material factor in
either the Bank's or the Peer Group's earnings.
Loss provisions had a larger impact on the Bank's earnings than the Peer
Group's, amounting to 0.20 percent and 0.08 percent of First Federal's and the
Peer Group's average assets, respectively. An increase in non-performing assets
warranted the higher loss reserves established by the Bank, as well as First
Federal's planned growth into higher risk types of lending. Going forward the
Bank's management has indicated that lower loss provisions will be established,
assuming there is no further deterioration experienced in First Federal's credit
quality.
The Peer Group's earnings advantage was narrowed as the result of paying a
slightly higher effective tax rate, with First Federal and the Peer Group
recording effective tax rates of 31.39 percent and 34.85 percent, respectively.
The Bank's lower tax rate was attributable to a refund of state taxes and, thus,
typically, First Federal's effective tax rate is slightly higher than the
effective tax rate exhibited by the Peer Group.
Loan Composition
- ----------------
Table 3.4 presents data related to the loan composition of First Federal
and the Peer Group. First Federal's loan portfolio composition reflected greater
diversification into higher risk types of lending, with low risk 1-4 family
permanent mortgage loans and mortgage-backed securities accounting for 61.6
percent and 79.0 percent of First Federal's and the Peer Group's loan and MBS
portfolios, respectively. The Peer Group's higher ratio was primarily
attributable to its higher concentration of mortgage-backed securities, while
the Peer Group's ratio of 1-4 family permanent mortgage loans was also above the
Bank's ratio. Highlighting the Bank's mortgage banking emphasis, First Federal
maintained a much higher balance of loans serviced for others than the Peer
Group ($131.5 million versus $22.2 million for the Peer Group). However, both
First Federal's and the Peer Group's balances of loan servicing intangibles were
minimal, equaling $66,000 and $25,000 for the Bank and the Peer Group,
respectively.
<PAGE>
<TABLE>
<CAPTION>
Table 3.4
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of December 31, 1996
Portfolio Composition as a Percent of MBS and Loans
---------------------------------------------------------
1-4 Constr. 5+Unit Commerc. RWA/ Serviced
Institution MBS Family & Land Comm RE Business Consumer Assets For Others
----------- ------ ------ ------ ------ -------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(%) (%) (%) (%) (%) (%) (%) ($000)
First Federal Bank of Idaho 2.05 59.58 14.97 12.57 0.85 9.98 66.18 131,458
SAIF-Insured Thrifts 15.27 61.53 5.47 11.66 6.45 1.74 51.00 370,862
Comparable Group Average 13.59 65.44 4.18 9.62 6.36 2.47 49.40 22,217
Comparable Group
----------------
AMFC AMB Financial Corp. of IN(1) 6.18 68.50 4.92 16.48 3.01 2.66 50.51 0
CBK Citizens First Fin.Corp. of IL(1) 10.12 69.00 5.76 9.10 4.77 3.05 54.05 77,817
FMBD First Mutual Bancorp of IL(1) 0.01 75.59 1.52 11.09 9.77 1.99 55.29 47,875
HZFS Horizon Fin'l. Services of IA(1) 11.52 57.80 2.79 7.41 13.23 8.26 54.14 0
HRZB Horizon Financial Corp. of WA(1) 5.59 82.29 2.45 11.11 0.08 0.00 54.77 56,921
KFBI Klamath First Bancorp of OR 11.33 83.53 2.88 4.15 0.73 0.01 42.40 1,259
NWEQ Northwest Equity Corp. of WI(1) 9.12 64.00 3.26 9.45 8.93 4.88 63.31 24,318
THR Three Rivers Fin. Corp. of MI(1) 13.49 59.47 7.95 7.43 12.96 2.17 50.90 13,814
TRIC Tri-County Bancorp of WY 27.58 58.15 0.74 8.28 5.24 0.50 38.15 164
UBMT United Fin. Corp. of MT(1) 40.95 36.06 9.53 11.65 4.84 1.18 30.50 0
<CAPTION>
Servicing
Institution Assets
----------- ---------
<S> <C>
($000)
First Federal Bank of Idaho 214
SAIF-Insured Thrifts 2,615
Comparable Group Average 25
Comparable Group
----------------
AMFC AMB Financial Corp. of IN(1) 0
CBK Citizens First Fin.Corp. of IL(1) 165
FMBD First Mutual Bancorp of IL(1) 85
HZFS Horizon Fin'l. Services of IA(1) 0
HRZB Horizon Financial Corp. of WA(1) 0
KFBI Klamath First Bancorp of OR 0
NWEQ Northwest Equity Corp. of WI(1) 0
THR Three Rivers Fin. Corp. of MI(1) 0
TRIC Tri-County Bancorp of WY 0
UBMT United Fin. Corp. of MT(1) 0
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
As indicated by the higher percentage of 1-4 family loans and mortgage-
backed securities maintained by the Peer Group, lending diversification was more
extensive for the Bank. Construction and land loans accounted for the Bank's
primary area of lending diversification, comprising 15.0 percent of loans and
MBS, versus a comparative ratio of 4.2 percent for the Peer Group. Multi-
family/commercial real estate loans accounted for the Peer Group's primary area
of lending diversification, amounting to 9.6 percent of loans and MBS, versus a
comparative ratio of 12.6 percent for the Bank. Other lending diversification
for the Bank consisted mostly of consumer loans, comprising 10.0 percent of the
Bank's loan and MBS portfolio and exceeding the Peer Group's comparative measure
of 2.5 percent. However, commercial business lending represented a greater area
of lending diversification for the Peer Group, with such loans amounting to 6.4
percent and 0.9 percent of the Peer Group's and the Bank's loan and MBS
portfolio compositions, respectively.
Consistent with the Bank's greater diversification into higher risk types
of lending, First Federal maintained a higher risk weighted assets-to-assets
ratio than the Peer Group (66.2 percent versus 49.4 percent for the Peer Group).
Overall, there is higher credit risk and higher yield potential associated with
the Bank's loan portfolio composition.
Interest Rate Risk
- ------------------
Table 3.5 reflects various key ratios highlighting the relative interest
rate risk exposure of the Bank versus the Peer Group companies. In terms of
balance sheet composition, First Federal's interest rate risk characteristics
were considered to be less favorable than the Peer Group's. In particular, First
Federal's lower capital position and lower IEA/IBL ratio indicate a greater
dependence on the yield-cost spread to sustain the net interest margin.
Likewise, First Federal's higher level of non-interest earning assets results in
a lower capacity to generate interest income in comparison to the Peer Group.
However, on a pro forma basis, the infusion of stock proceeds should serve to
address the Bank's lower equity-to-assets ratio, while First Federal's IEA/IBL
ratio and level of non-interest earning assets will likely remain less favorable
than the Peer Group's ratios.
To analyze interest rate risk associated with the net interest margin, we
reviewed quarterly changes in net interest income as a percent of average assets
for First Federal and the Peer Group. Based on the greater fluctuation exhibited
in the Bank's net interest margin during the five quarters ended December 31,
1996, the data indicates that there is greater interest rate risk associated
with the Bank's net interest margin compared to the net margins of the Peer
Group companies on average. However, the relative fluctuations in both the
Bank's and the Peer Group's net interest income to average assets ratios were
considered to be fairly limited and, thus, neither First Federal or the Peer
Group were viewed as having significant interest rate risk exposure in their
<PAGE>
Table 3.5
First Federal Bank of Idaho and the Peer Group
Interest Rate Risk Comparative Analysis
<TABLE>
<CAPTION>
Interest-Earning Non Interest-
Assets/ Earning
Equity/ Interest-Bearing Assets(2)/
Assets Liabilities(1) Assets
------------ -------------- ---------
(%) (%) (%)
<S> <C> <C> <C>
First Federal Bank of Idaho(3) 8.1% 105.2% 5.6%
Peer Group Average 16.8% 118.7% 3.4%
Peer Group(4)
- -------------
AMB Financial Corp. of IN 19.4% 124.1% 3.2%
Citizens First Fin. Corp. of IL 15.1% 113.6% 3.7%
First Mutual Bancorp of IL 19.9% 123.0% 3.3%
Horizon Fin'l Services of IA 10.7% 109.5% 3.8%
Horizon Financial Corp. of WA 15.9% 118.6% 2.3%
Klamath First Bancorp of OR 22.7% 129.6% 1.6%
Northwest Equity Corp. of WI 12.1% 110.1% 4.7%
Three Rivers Fin. Corp. of MI 14.5% 114.9% 4.7%
Tri-County Bancorp of WY 15.3% 117.2% 2.1%
United Fin. Corp. of MT 22.5% 126.4% 4.1%
</TABLE>
Net Interest Income Analysis
----------------------------
<TABLE>
<CAPTION>
Change Change Change Change
During in Bank's in Peer Group's in 1 Year in 30 Year
Quarter Ended Net Int. Inc.(5) Net Int. Inc.(5) T-Bill T-Bond
------------- ---------------- ---------------- ------ ------
(Basis Points)
<S> <C> <C> <C> <C>
12/31/95 -86 9 -54 -55
3/31/96 0 -15 24 71
6/30/96 48 14 30 20
9/30/96 5 -3 1 5
12/31/96 23 N.A. -20 -28
</TABLE>
(1) Interest-earning assets includes cash; interest-bearing liabilities
includes non-interest bearing deposits but excludes escrows.
(2) Comprised of REO, non-accruing loans, and other non interest-earning
assets.
(3) First Federal's data is as of December 31, 1996.
(4) Peer Group data is as of September 30, 1996 or most recent date available.
(5) Calculated as quarterly change in net interest income as a percent of
average assets, annualized.
Source: SNL Securities.
<PAGE>
respective net interest margins. The relatively steep decline posted in the
Bank's net interest margin during the quarter end December 31, 1995, amounting
to 86 basis points, reflects the impact of the premium CD program offered by the
Bank during that quarter, the funds of which were invested principally in
similar term CDs at the FHLB (at a negative spread). It is expected that the
infusion of stock proceeds will serve to enhance the stability of the Bank's net
interest margin, as interest-sensitive liabilities will be funding a lower
proportion of First Federal's assets.
Credit Risk
- -----------
Overall, First Federal's credit risk exposure appears to be somewhat
greater than the Peer Group's, as indicated by the Bank's greater
diversification into higher risk types of lending and maintenance of a higher
level of non-performing assets. As shown in Table 3.6, First Federal's ratio of
non-performing assets and accruing loans that are more than 90 days past due
equaled 0.90 percent of assets, versus a comparative ratio of 0.55 percent for
the Peer Group. Similarly, First Federal's non-performing loans to loans ratio
was higher than the Peer Group's ratio (0.91 percent versus 0.58 percent for the
Peer Group). Loss reserve ratios as a percent of problem assets also indicated a
potentially higher degree of credit risk exposure for the Bank, with the Bank
and the Peer Group maintaining loss reserves as a percent of non-performing
assets and accruing loans that are more than 90 days past due of 73.2 percent
and 189.6 percent, respectively. Net loan charge-offs were not a material factor
for either the Bank or the Peer Group during the period covered in Table 3.6.
Summary
- -------
Based on the above analysis and the criteria employed by RP Financial in
the selection of the companies for the Peer Group, RP Financial concluded that
the Peer Group forms a reasonable basis for determining the pro forma market
value of First Federal. Such general characteristics as asset size, capital
position, interest-earning asset composition, funding composition, core earnings
measures and loan composition all tend to support the reasonability of the Peer
Group from a financial standpoint.
<PAGE>
Table 3.6
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of December 31, 1996 or Most Recent Date Available
<TABLE>
<CAPTION>
NPAs & Rsrves/
REO/ 90+Del/ NPLs/ Rsrves/ Rsrves/ NPAs & Net Loan NLCs/
Institution Assets Assets Loans Loans NPLs 90+Del Chargoffs Loans
----------- ------ ------ ------ ------ ------ ------- --------- ----------
(%) (%) (%) (%) (%) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Federal Bank of Idaho 0.15 0.90 0.91 0.79 87.48 73.21 17 0.02
SAIF-Insured Thrifts 0.27 0.87 0.95 0.85 182.35 126.89 256 0.10
Comparable Group Average 0.27 0.55 0.58 0.58 232.60 189.59 10 0.04
Comparable Group
----------------
AMFC AMB Financial Corp. of IN(1) 0.00 0.43 0.57 0.56 98.60 98.60 7 0.05
CBK Citizens First Fin. Corp. of IL(1) 0.04 0.53 0.49 0.24 48.24 35.95 24 0.05
FMBD First Mutual Bancorp of IL(1) 0.02 0.14 0.02 0.46 NA 275.66 34 0.05
HZFS Horizon Fin'l. Services of IA(1) 0.81 1.12 1.01 0.76 75.00 45.26 26 0.21
HRZB Horizon Financial Corp. of WA(1) 0.00 0.01 NA 0.81 NA NA 0 0.00
KFBI Klamath First Bancorp of OR 0.01 0.04 0.04 0.20 485.86 356.92 0 0.00
NWEQ Northwest Equity Corp. of WI(1) 0.19 1.19 1.25 0.58 45.99 39.21 13 0.07
THR Three Rivers Fin. Corp. of MI(1) 1.06 1.22 1.09 0.79 72.61 42.90 0 0.00
TRIC Tri-County Bancorp of WY 0.00 0.07 0.15 1.19 801.92 801.92 0 0.00
UBMT United Fin. Corp. of MT(1) 0.62 0.70 NA 0.22 NA 9.92 0 0.00
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The
information provided in this table has been obtained from sources
we believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
IV. VALUATION ANALYSIS
Introduction
- ------------
This chapter presents the valuation analysis, prepared pursuant to the
approved valuation methodology promulgated by the OTS, and valuation factors
used to determine the estimated pro forma market value of the common stock of
the Holding Company. The common stock will be issued in conjunction with the
conversion of First Federal from the mutual-to-stock form of ownership. The
valuation has been prepared utilizing the pro forma valuation methodology
promulgated by the OTS, most recently set forth in their 1994 valuation
guidelines.
Appraisal Guidelines
- --------------------
The OTS appraisal guidelines, originally released in October 1983 and
amended October 1994, specify the methodology for estimating the pro forma
market value of an institution. The methodology provides for: (1) selection of a
peer group of comparable publicly-traded institutions, subsequent guidance from
the OTS limited eligibility to only seasoned public companies in the peer group;
(2) a financial and operational comparison of the subject company to the peer
group; and (3) a valuation analysis in which the pro forma market value of the
subject company is determined based on the market pricing of the peer group as
of the date of valuation. The current valuation guidelines limit the amount of a
new issue discount which may be incorporated into the valuation, thereby
curtailing the potential price appreciation in the after-market.
RP Financial Approach to the Valuation
- --------------------------------------
RP Financial's valuation analysis complies with the appraisal guidelines as
revised and issued as of October 21, 1994. Accordingly, the valuation
incorporates a detailed analysis based on the Peer Group discussed in Chapter
III, incorporating "fundamental analysis" techniques. Additionally, the
valuation incorporates a "technical analysis" of recently completed stock
conversions, given the significant weight in the valuation process of limiting
the new issue discount. The pricing characteristics of recent conversions serve
as the best proxy for near-term aftermarket trading activity in newly issued
thrift shares, and the pricing characteristics of such recent conversions have
been applied to First Federal's valuation in order to evaluate the Bank's
potential aftermarket trading characteristics. It should be noted that such
analysis cannot possibly fully account for all the market forces which impact
trading activity and pricing characteristics of a stock on a given day.
<PAGE>
The pro forma market value determined herein is a preliminary value for
the Holding Company's to-be-issued stock. Throughout the conversion process, RP
Financial will: (1) review changes in the Bank's operations and financial
condition; (2) monitor the Bank's operations and financial condition relative to
the Peer Group to identify any fundamental changes; (3) monitor the external
factors affecting value including, but not limited to, local and national
economic conditions, interest rates, and the stock market environment, including
the market for thrift stocks; and (4) monitor pending conversion offerings
(including those in the offering phase) both regionally and nationally. If
material changes should occur during the conversion process, RP Financial will
prepare updated valuation reports reflecting such changes and their related
impact on value, if any, over the course of the conversion process. RP Financial
will also prepare a final valuation update at the closing of the conversion
offering to determine if the preliminary range of value continues to be
appropriate.
The appraised value determined herein is based on the current market and
operating environment for the Bank and for all thrifts. Subsequent changes in
the local and national economy, the legislative and regulatory environment, the
stock market, interest rates, and other external forces (such as natural
disasters or major world events), which may occur from time to time (often with
great unpredictability) may materially impact the market value of all thrift
stocks, including First Federal, or First Federal's value alone. To the extent
a change in factors impacting the Bank's value can be reasonably anticipated
and/or quantified, RP Financial has incorporated the estimated impact into the
valuation analysis.
Valuation Analysis
- ------------------
A fundamental analysis discussing similarities and differences relative to
the Peer Group was presented in Chapter III. The following sections focus on
differences between the Bank and the Peer Group and how those differences affect
our pro forma valuation. Emphasis is placed on the specific strengths and
weaknesses of the Bank relative to the Peer Group in such key areas as financial
condition, profitability, growth and viability of earnings, asset growth,
primary market area, dividends, liquidity of the issue, marketing of the issue,
management, and the effect of government regulations and/or regulatory reform.
We have also considered the market for thrift stocks, and in particular new
issues, to assess the impact on value of First Federal coming to market at this
time.
1. Financial Condition
-------------------
The financial condition of an institution is an important determinant in
pro forma market value, because investors typically look to such factors as
liquidity, capital, asset composition and quality, and funding
<PAGE>
sources in assessing investment attractiveness. The similarities and differences
in the Bank's and the Peer Group's financial strengths are noted as follows:
. Overall A/L Composition. Residential assets, including 1-4 family
-----------------------
permanent mortgage loans and MBS, funded by retail deposits were the
primary components of both First Federal's and the Peer Group's
balance sheets. The Bank's interest-earning asset composition
exhibited a higher concentration of loans and a greater degree of
diversification into higher risk types of loans. At the same time,
the Bank had a high level of assets in non-earning form (reflecting
the relatively large number of office facilities and small average
deposit balance per office). The higher credit risk associated with
the Bank's more prominent lending diversification was indicated by a
higher risk weighted assets-to assets ratio and a higher level of non-
performing assets. First Federal's interest-earning asset composition
also translated into a higher yield earned on interest-earning assets,
which was substantially offset by the lower level of non-interest
earning assets held by the Peer Group. While First Federal's and the
Peer Group's funding compositions reflected similar concentrations of
deposits and borrowings, the Bank's deposits appear to be less stable
relative to the Peer Group given the level of withdrawals to date of
deposits attracted to the Anniversary CD and the level of such
deposits remaining today.
. Credit Quality. In general, the Peer Group recorded more favorable
--------------
credit quality measures than the Bank, based on the Peer Group's lower
level of non-performing assets and higher level of reserves as a
percent of non-performing assets. First Federal's higher risk
weighted assets-to-assets ratio further indicated potentially higher
credit risk exposure for the Bank, particularly in view of the limited
seasoning of a large portion of the portfolio.
. Balance Sheet Liquidity. The Peer Group operated with a higher
-----------------------
balance of cash and investment securities than the Bank (19.1 percent
of assets versus 9.9 percent for First Federal). First Federal and the
Peer Group were considered to have similar borrowing capacities, with
borrowings amounting to 11.3 percent and 11.8 percent of the Bank's
and the Peer Group's assets, respectively. The conversion proceeds
received by the Bank and the Holding Company should serve to
substantially address the lower level of cash and investments
currently maintained by First Federal, particularly given the
prospects of continued withdrawals of the deposits attracted through
the 75th Anniversary promotion.
. Funding Liabilities. Retail deposits served as the primary interest-
-------------------
bearing source of funds for the Bank and the Peer Group, with
borrowings being utilized to a comparable degree by the Bank and the
Peer Group. Currently, the Bank maintains a higher level of interest-
bearing liabilities than the Peer Group (90.4 percent of assets versus
81.7 percent for the Peer Group), which was attributable to First
Federal's lower capital position. Following the conversion, the
increase in First Federal's capital position will provide for a
comparable level of interest-bearing liabilities as maintained by the
Peer Group. At the same time, the potential for further reduction in
the deposit balances appears to place greater emphasis on the Bank's
borrowing capacity.
. Capital. The Bank operates with a lower pre-conversion capital ratio
-------
than the Peer Group, 8.1 percent and 16.8 percent of assets,
respectively. This disadvantage will be addressed as a result of the
stock offering, as the Bank's and the Holding Company's consolidated
pro forma capital position should approximate the Peer Group's equity-
to-assets ratio. Accordingly, RP Financial concluded that no
valuation adjustment was warranted for the Bank's capital position.
<PAGE>
Overall, we concluded that a moderate downward valuation adjustment was
warranted for the Bank's financial strength.
2. Profitability, Growth and Viability of Earnings
-----------------------------------------------
Earnings are an important factor in determining pro forma market value, as
the level and risk characteristics of an institution's earnings stream and the
prospects and ability to generate future earnings are typically heavily factored
into an investment decision. The Peer Group's earnings were generally reflective
of traditional thrift operating strategies, with net interest income and
operating expenses being the major determinants of their respective earnings,
while the Bank's earnings were more dependent upon sources of non-interest
income, particularly non-operating income. The specific factors considered in
the valuation include:
. Reported Earnings. The Bank recorded lower earnings on a ROAA basis
-----------------
(0.16 percent of average assets versus 0.69 percent for the Peer
Group). With the exception of one Peer Group company that is BIF-
insured (Horizon Financial of Washington), both the Bank's and the
Peer Group's reported earnings were depressed by the one time
assessment to recapitalize the SAIF. Absent the SAIF assessment
expense, First Federal's reported earnings were lower than the Peer
Group's. The Peer Group's more favorable reported earnings resulted
primarily from maintenance of a lower level of operating expenses,
which was partially negated by the gains and higher level of non-
interest operating income recorded by the Bank. Higher loss
provisions were also a factor in the lower earnings posted by the
Bank, while net interest income made comparable contributions to First
Federal's and the Peer Group's earnings. Reinvestment of conversion
proceeds into interest-earning assets will serve to increase the
Bank's earnings, with the benefit of reinvesting proceeds expected to
be somewhat offset by higher operating expenses associated with
operating as a publicly-traded company and the implementation of the
stock benefit plans. Overall, the difference between the Bank's and
the Peer Group's reported earnings was considered to be representative
of the Peer Group's superior earnings strength.
. Core Earnings. A comparable net interest margin and a significantly
-------------
lower level of operating expenses provided the Peer Group with a
significantly more favorable expense coverage ratio than maintained by
the Bank (1.47x versus 0.83x for the Bank). First Federal's
significantly higher level of operating expenses was in part
attributable to its off-balance sheet mortgage banking operations,
which provides the Bank with non-interest operating income and gains
realized from the sale of FHA and VA loans on a servicing released
basis. Non-interest operating income was at a higher level for the
Bank compared to the Peer Group average, while gains were a much more
significant contributor the Bank's earnings. Typically, gains
generated from the sale of loans and investments are viewed as
earnings with a relatively high degree of volatility, and, thus, are
substantially discounted in the evaluation of an institution's core
earnings. In the case of First Federal, the gains provided by its
mortgage banking operations warrant some consideration as a core
earnings factor, since such gains have been a prominent part of the
Bank's earnings in recent years and have been somewhat recurring in
nature. Nonetheless, the Bank's mortgage loan sale gains remain
subject to market conditions remaining conducive for the generation of
1-4 family loan originations; therefore, such gains are viewed as
being less sustainable than income generated through the net interest
margin
<PAGE>
and non-interest operating income. Even when giving credit to the
gains realized from mortgage loan sales, First Federal's core earnings
were lower than the Peer Group's. Overall, these measures, as well as
the expected earnings benefits the Bank should realize from the
redeployment of conversion proceeds into interest-earning assets,
which will be partially offset by expenses associated with the stock
benefit plans and operating as a publicly-traded company, indicate
that the Bank's core earnings are not as strong as the Peer Group's.
. Interest Rate Risk. Quarterly changes in the Bank's and the Peer
------------------
Group's net interest income to average assets ratios indicated a
greater degree of interest rate risk exposure in the Bank's net
interest margin, in light of the greater stability exhibited in the
Peer Group's net interest margin during various interest rate
environments. Other measures of interest rate risk, such as capital
ratios, IEA/IBL ratios, and the level of non-interest earning assets
to total assets were more favorable for the Peer Group. On a pro
forma basis, the infusion of stock proceeds will serve to address the
Bank's lower capital position; however, as the result of First
Federal's higher level of non-interest earning assets, the Peer Group
will continue to maintain a more favorable IEA/IBL ratio. Likewise,
the Bank's less stable net interest margin should be moderated by the
reinvestment of stock proceeds into interest-earning assets, some of
which will be short-term investments. Overall, the interest rate risk
associated with the Bank's earnings appears to be greater than the
Peer Group's.
. Credit Risk. Loan loss provisions had a greater impact on First
-----------
Federal's earnings, while losses on real estate operations were not a
significant factor in either the Bank's or the Peer Group's earnings.
In terms of future exposure to credit quality related losses, the Bank
maintained a higher level of non-performing assets and lower loss
reserves as percent of non-performing assets. First Federal's greater
earnings exposure to credit risk was also indicated by its greater
lending diversification into higher risk loan types and resulting
higher risk weighted assets-to-assets ratio. For these reasons, the
credit risk exposure associated with the Bank's earnings appears to be
greater than the Peer Group's.
. Earnings Growth Potential. Several factors were considered in
-------------------------
assessing earnings growth potential. First, after factoring in the
infusion of stock proceeds, the Bank will maintain comparability
liquidity as the Peer Group to fund loan growth. Second, both the Bank
and the Peer Group companies, on average, operate in markets that are
experiencing population growth, which would tend to support
opportunities for lending and deposit growth. While the population
growth rate in the Bank's primary market area is projected to remain
stronger than the primary markets served by the Peer Group companies,
the growth rate for the Bank's market area is somewhat inflated by the
relatively small size of its population base and, thus, only a modest
increase in population results in a fairly substantive growth rate
(see Exhibit III-4). Lastly, the Bank will have a similar capacity to
leverage as the Peer Group, based on a pro forma capital position that
will be comparable to the Peer Group's equity-to-assets ratio. On
balance, the Bank's earnings growth potential was considered to be
similar to the Peer Group's and no adjustment was warranted for
valuation purposes.
Overall, in comparison to the Bank's earnings characteristics, the Peer
Group exhibited superior earnings strength. Therefore, RP Financial concluded
that a moderate downward valuation adjustment was warranted for profitability,
growth and viability of the Bank's earnings relative to the Peer Group's.
<PAGE>
3. Asset Growth
------------
First Federal's asset growth was lower than the Peer Group's, during the
period covered in our comparative analysis (positive 3.5 percent versus positive
14.5 percent for the Peer Group). The potential for further deposit withdrawals
at the Bank may impair the Bank's deposit growth potential. On a pro forma
basis, the Bank's equity-to-assets ratio will be comparable to the Peer Group's
ratio, with both First Federal and the Peer Group with similar capital capacity
to leverage. Given that the Peer Group's deposits are growing more quickly, in
order for the Bank to maintain the same asset growth rate it will have to
utilize more borrowed funds. On balance, we believe a slight downward valuation
adjustment is appropriate.
4. Primary Market Area
-------------------
The general condition of a financial institution's market area has an
impact on value, as future success is in part dependent upon opportunities for
profitable activities in the local market area. While generally exhibiting
strong population growth rates, First Federal serves somewhat of a limited
population base in light of the rural characteristics of the market area. A
notable portion of the Bank's lending activities are dependent upon the fast
growing Couer D'Alene market area, thus a downturn in that market area would
likely result in a material decline in loan originations and increase the credit
risk associated with First Federal's loan portfolio. Unemployment in the Bank's
primary market area was mixed, with two of the counties posting extremely high
unemployment rates (Idaho and Kootenai Counties) and two of the counties posting
relatively low unemployment rates (Latah and Nez Perce Counties). Competition
faced by the Bank is significant, including competition from a number of
financial institutions which are significantly larger than the Bank.
In general, many of the Peer Group companies also operate in fairly rural
markets, although, on average, the Peer Group companies operated in more
populous markets than served by the Bank. Population growth in the markets
served by the Peer Group companies was not quite as strong as exhibited by Nez
Perce County, where the Bank is headquartered, and average per capita income in
the primary market areas served by the Peer Group companies was slightly lower
than Nez Perce County's per capita income. On average, the Peer Group companies
maintained a similar deposit market share as the Bank, indicating comparability
of their competitive positions in their respective market areas. Summary
demographic and deposit market share data for the Bank and the Peer Group
companies is provided in Exhibit III-4. As shown in Table 4.1, December 1996
unemployment rates in the markets served by the Peer Group companies were
generally not dramatically different than Nez Perce County's December 1996
unemployment rate, and were considered to be indicative of relatively stable
economic environments. Overall, the primary market areas served by the Peer
Group companies did not appear to represent a material advantage or disadvantage
relative to the primary market
<PAGE>
area served by First Federal. Therefore, we concluded no adjustment was
appropriate for the Bank's market area.
Table 4.1
Market Area Unemployment Rates
First Federal and the Peer Group Companies (1)
<TABLE>
<CAPTION>
December 1996
County Unemployment
------ -------------
<S> <C> <C>
First Federal - ID Nez Perce 3.8%
The Peer Group
--------------
AMB Financial Corp. - IN Lake 4.3%
Citizens First Fin. Corp. - IL McLean 2.5
First Mutual Bancorp - IL Macon 7.8
Horizon Fin'l Services - IA Mahaska 3.0
Horizon Financial Corp. - WA Whatcom 7.4
Klamath First Bancorp - OR Klamath 8.8
Northwest Equity Corp. - WI Polk 4.7
Three Rivers Fin. Corp. - MI St. Joseph 3.8
Tri-County Bancorp - WY Goshen 3.9
United Financial Corp. - MT Cascade 4.8
</TABLE>
(1) Unemployment rates are not seasonally adjusted.
Source: U.S. Bureau of Labor Statistics.
5. Dividends
---------
The Holding Company presently has not established a dividend policy, but
will consider instituting a cash dividend policy at some point in the future,
based on numerous factors including growth objectives, financial condition, the
amount of net proceeds retained by the Holding Company in the conversion,
investment opportunities available to the Holding Company and the Bank,
profitability, tax considerations, minimum capital requirements, regulatory
limitations, stock market characteristics and general economic conditions.
Historically, thrifts typically have not established dividend policies at
the time of their conversion to stock ownership. Newly converted institutions,
in general, have preferred to gain market seasoning, establish an earnings track
record and fully invest the conversion proceeds before establishing a dividend
policy. However, during the late-1980s and early-1990s, with negative publicity
surrounding the thrift industry, there was a tendency for more thrifts to
initiate moderate dividend policies concurrent with their conversion as a means
of increasing the attractiveness of the stock offering. Today, fewer
institutions are compelled to initially
<PAGE>
establish dividend policies at the time of their conversion offering to increase
the attractiveness of the stock issue as (1) industry profitability has
improved, (2) the number of problem thrift institutions has declined, and (3)
the stock market cycle for thrift stocks is generally more favorable than in the
early-1990s. At the same time, with ROE ratios under pressure, due to high
equity levels, well-capitalized institutions are subject to increased
competitive pressures to offer dividends.
As publicly-traded thrifts' capital levels and profitability have improved
and as weakened institutions have been resolved, the proportion of institutions
with cash dividend policies has increased. Nine out of the ten institutions in
the Peer Group presently pay regular cash dividends, with implied dividend
yields ranging from 1.75 percent to 4.76 percent. The average dividend yield on
the stocks of the Peer Group institutions was 2.38 percent as of February 28,
1997, representing an average earnings payout ratio of 44.99 percent. As of
February 28, 1997, approximately 80 percent of all publicly-traded SAIF-insured
thrifts had adopted cash dividend policies (see Exhibit IV-1), exhibiting an
average yield of 2.16 percent and an average payout ratio of 42.77 percent. The
dividend paying thrifts generally maintain higher than average profitability
ratios, facilitating their ability to pay cash dividends, which supports a
market pricing premium on average relative to non-dividend paying thrifts. It
should be noted that the payout ratios for both the Peer Group and SAIF-insured
averages were skewed upward by the negative earnings impact resulting from the
special SAIF assessment.
On a pro forma basis, the Holding Company will have the capital capacity to
pay a dividend that is comparable to the Peer Group's average dividend yield,
but the earnings capacity to pay a comparable dividend is lower. The Holding
Company's decision to forego establishing a dividend policy at the time of
conversion is not believed to represent a material impact on the attractiveness
of its stock, relative to the stocks of the Peer Group companies on average.
Therefore, a slight downward adjustment has been applied for this factor.
6. Liquidity of the Shares
-----------------------
The Peer Group is by definition composed of companies that are traded in
the public markets, eight of which trade on the NASDAQ system and two of which
trade on the AMEX. Typically, the number of shares outstanding and market
capitalization provides an indication of how much liquidity there will be in a
particular stock. The market capitalization of the Peer Group companies ranged
from $7.2 million to $155.0 million as of February 28, 1997, with an average
market value of $43.8 million. The shares outstanding of the Peer Group members
ranged from 426,000 to 10.0 million, with average shares outstanding of
approximately 2.8 million. The Bank's conversion offering will result in a
market value and shares outstanding that are less than the comparative Peer
Group averages, which is primarily attributable to the high market value and
shares
<PAGE>
outstanding figures maintained by two of the Peer Group companies (Klamath
Financial of Oregon and Horizon Financial of Washington). However, in comparison
to the majority of the Peer Group companies, the Bank's offering will result in
comparable liquidity characteristics for its stock. The Holding Company's stock
will be listed on the NASDAQ National Market. Accordingly, similar to the Peer
Group companies, we anticipate that there will be a liquid and efficient trading
market for the Bank's stock and, thus, no adjustment was required for this
factor.
7. Marketing of the Issue
----------------------
We believe that three separate markets exists for thrift stocks coming to
market such as First Federal: (1) the after-market for public companies, in
which trading activity is regular and investment decisions are made based upon
financial condition, earnings, capital, ROE and dividends; (2) the new issue
market in which converting thrifts are evaluated on a pro forma basis without
the benefit of prior operations as a publicly-held company and stock trading
history; and (3) the acquisition market for thrift franchises in Idaho. All
three of these markets were considered in the valuation of the Bank's to-be-
issued stock.
A. The Public Market
-----------------
The value of publicly-traded thrift stocks is easily measurable, and
is tracked by most investment houses and related organizations. In general,
thrift stock values react to market stimuli such as interest rates, inflation,
perceived industry health, projected rates of economic growth, regulatory issues
and stock market conditions in general. Exhibit IV-2 displays historical stock
market trends for various indices and includes historical stock price index
values for thrifts and commercial banks. Exhibit IV-3 displays historical stock
price indices for thrifts only.
In terms of assessing general stock market conditions, the stock
market has generally trended higher over the past year. The stock market began
1996 on a down note, reflecting concern over the budget stalemate in Washington.
Congressional testimony by the Federal Reserve Chairman provided for significant
swings in the stock market in mid-February 1996, reflecting changing investor
sentiment regarding the possibility of future rate cuts. The volatility
continued through the end of February, reflecting turbulence in the bond market
and general uncertainty over future interest rate trends. An unexpectedly large
drop in the February unemployment rate provided for a sharp one day sell-off in
the stock market on March 8, as bond prices plunged on news of the strong job
growth and the possibility that an accelerating economy may lead to higher
inflation. However, the stock market recovered the following week, as inflation
fears were somewhat alleviated by additional economic data which indicated a
more modest pace of economic growth than suggested by the unemployment data,
including a 0.2 percent drop in February wholesale prices. After trading in a
<PAGE>
narrow range through the end of March, merger activity and a jump in IBM's stock
price propelled the DJIA to a new record in early-April. The upturn was brief,
as bond and stock prices slumped following the stronger than expected March
employment report which served to rekindle inflation fears.
Earnings reports dominated the stock market in mid-April 1996, with
day-to-day fluctuations in the market reflecting changing investor sentiment
regarding the strength of first quarter earnings and future earnings
expectations. Favorable fourth quarter earnings among technology issues pushed
the NASDAQ Composite Index to new highs in late-April and early-May, while blue
chip stocks lagged the overall market. Stronger than expected first quarter GDP
growth reported in early-May stirred major sell-offs in stocks and bonds,
resulting in the 30-year bond edging above 7.0 percent and a one day drop in the
DJIA of almost 77 points. Inflation concerns receded somewhat following a mid-
May report by the Federal Reserve, which indicated that inflation remained in
check and near term rate increases were not likely. The positive reading on
inflation by the Federal Reserve, along with the Federal Reserve's decision to
leave interest rates unchanged at its late-May meeting, served to strengthen
bond and stock prices, with the DJIA posting new highs in late-May and the 30-
year bond dropping below 7.0 percent. However, signs of an accelerating economy
and revised upward estimates of second quarter GDP growth provided for a
pullback in the stock market at the end of May. Stronger than expected job
growth in May further depressed bond prices in early-June, which served to stall
the stock market as well.
Expectations that the Federal Reserve would not tighten interest rates
at its July 1996 meeting provided for a rally in the bond market in late-June,
as the 30-year bond yield dropped below 7.0 percent. The positive interest rate
outlook also served to boost the stock market in early-July, but the rally was
cut short by a larger than expected drop in June unemployment. Bond and stock
prices tumbled following the June unemployment report, as highlighted by a 115
point decline in the DJIA and an increase in the 30-year bond yield to 7.18
percent. The release of second quarter earnings reports provided for a volatile
stock market in mid-July, especially among the technology stocks. Overall, the
stock market declined due to earnings disappointments, with a more severe
decline occurring in the technology driven NASDAQ Composite Index. At the same
time bond prices recovered, as the 30-year bond yield dropped below 7.0 percent
following statements by the Federal Reserve Chairman which indicated he expected
the economy to slow down in the second half of 1996. Stocks and bonds rallied
in late-July and early-August, as economic data indicated a healthy but
moderating economy. However, higher interest rates pushed stocks lower in late-
August, reflecting increasing expectations that the Federal Reserve would
tighten interest rates in September. The decline in the stock market was
reversed in early-September, as investors reacted positively to the inflation
data contained in the August employment report. Oil stocks sustained the upward
trend in the stock market in early-September, as renewed tension between the
U.S. and Iraq pushed crude oil prices to their highest level in five years.
Both
<PAGE>
bond and stock prices surged higher in mid-September, as most of the economic
data for August indicated that economy was moderating and investors became more
optimistic that the Federal Reserve would not raise interest rates in September.
The Federal Reserve's decision not to raise interest rates at its
September 1996 meeting, and generally healthy third quarter earnings results
sustained the upward momentum in the stock market during the beginning of the
fourth quarter. Favorable inflation data and lower interest rates further
spurred the upward trend in the stock market prior to the election. Investors
were cheered by the "status quo" election results, as stocks rallied strongly
immediately following the election with the DJIA posting ten consecutive
advances through mid-November. Economic stability and a rising bond market
sustained the stock market rally through the end of November. For the entire
month of November, the DJIA increased 492.3 points, or 8.2 percent. Following
the rapid rise in the stock market during November, stocks retreated during the
first half of December. Profit taking, concern about speculative excesses in
the stock market and higher interest rates all contributed to the decline in the
stock market.
The stock market resumed an upward trend during the end of 1996 and
the first three weeks of 1997, with the DJIA establishing several new highs in
the process. Factors contributing to the rally in the stock market included the
Federal Reserve's decision to leave rates unchanged at its December meeting,
economic data which reflected moderate growth and low inflation, and favorable
fourth quarter earnings particularly in the technology sector. However, a
disappointing fourth quarter earnings report by IBM ignited a sell-off in the
stock market in late-January. Higher interest rates extended the downturn, as
the 30-year bond approached 7.0 percent at the end of January. A high degree of
market volatility was evident throughout most of February 1997, reflecting
concern over speculative excess in the stock market; particularly, as the DJIA
closed above the 7000 market in mid-February. Profit taking, growing
expectations of a correction and comments by the Federal Reserve Chairman pulled
the market lower in late-February. On February 28, 1997, the DJIA closed at
6877.74, translating into an increase of 24.2 percent from a year ago.
Similar to the overall stock market, the market for thrift stocks has
generally been favorable during the past twelve months. After trading in a
fairly narrow trading range during February 1996, thrift issues declined sharply
in early-March. The decline in thrift stocks, as well as interest-sensitive
issues in general, was precipitated by the decline in the February 1996
unemployment rate, as prospects for further near-term rate cuts by the Federal
Reserve were substantially eliminated by the explosive job growth. However,
thrift prices rebounded in late-March and early-April as interest rates
stabilized. A bullish outlook on the financial institution sector in general
served to further bolster prices in early-April, as a number of analysts
forecasted healthy first quarter earnings for thrift and bank stocks and that
the financial institution sector would outperform the market in general during
the balance of 1996.
<PAGE>
Thrift stocks traded lower at the beginning of the second quarter,
with the downturn again being attributable to inflation concerns resulting from
the March 1996 employment data. The downturn was abbreviated by the generally
strong first quarter earnings posted by bank and thrift issues, which provided
for a mild upward trend in thrift stocks in mid-April. Paralleling the stock
market in general, thrift prices dropped sharply in early-May following the rise
in interest rates caused by the strong first quarter GDP growth. Thrift prices
rebounded in mid-May, as interest rates declined slightly on the strength of
tame inflation news. At the end of May and through mid-June, uncertainty over
future interest rate trends provided for a flat thrift stock market.
The Supreme Court's ruling in favor of thrifts seeking damages for
goodwill served to boost thrift prices in the beginning of July, but the upturn
was abbreviated by a sharp increase in interest rates in early-July. The sharp
rise in interest rates, which was prompted by the stronger than expected June
unemployment report, pushed interest-sensitive issues in general lower.
Generally favorable second quarter earnings and lower interest rates supported a
modest recovery in thrift prices in mid-July, although concerns about future
interest rate trends moderated the impact of the healthy second quarter
earnings. Lower interest rates and the announced acquisitions of two large
California thrifts, American Savings with $20 billion in assets and CalFed
Bancorp with $14 billion in assets, pushed the SNL Index higher in late-July and
through mid-August. Thrift stocks settled into a narrow trading range in late-
August and early-September, as higher interest rates dampened interest in the
thrift sector. For the balance of September, trading activity in thrift stocks
was somewhat mixed. Higher thrift prices were recorded in mid-September, as the
yield on the 30-year U.S. Treasury bond briefly dropped below 7.0 percent.
However, the rally in financial services stocks faltered in late-September,
reflecting renewed fears about higher interest rates and rising bad debt on
credit cards.
Thrift prices generally moved higher during October and November
1996. The upward trend in thrift prices was supported by lower interest rates,
with the slow down in economic growth pushing the 30-year U.S. bond rate below
6.5 percent during the second half of November. Investors also reacted
positively to the SAIF rescue legislation, in light of the reduction in deposit
insurance premiums to be paid by SAIF-insured thrifts following the one time
special assessment. Higher interest rates and profit taking translated into a
declining market for thrift stocks during the first half of December, which was
followed by a mild upward trend in thrift issues at year end 1996.
Bullish sentiment for thrift stocks heightened at the beginning of
1997, as investors reacted positively to the favorable inflation data and
generally strong fourth quarter earnings. The rally in thrift issues was driven
by the large California institutions, reflecting expectations that there would
be further consolidation among the large California thrifts. The acquisition
speculation for the large California thrifts became a reality in mid-February,
as H.F. Ahamanson's unsolicited offer to acquire Great Western Financial sent
the SNL
<PAGE>
Index soaring in mid-February. The SNL Index for all publicly-traded thrifts
closed at 563.1 on February 28, 1997, an increase of 50.0 percent from one year
ago.
B. The New Issue Market
--------------------
In addition to thrift stock market conditions in general, the new
issue market for converting thrifts is also an important consideration in
determining the Bank's pro forma market value. Demand for converting issues was
strong in the first quarter of 1996, with most offerings being oversubscribed
and posting healthy increases in near term aftermarket trading. Comparatively,
offerings completed in the second quarter reflected a cooling interest in thrift
IPOs, as indicated by fewer oversubscriptions and generally weak aftermarket
trading performance. Interest returned to converting issues during the second
half of 1996, as most offerings experienced healthy oversubscriptions. Fewer
offerings, more attractive pricing, lower interest rates, and the general
positive trend in thrift prices were among the most prominent factors
contributing to the renewed investor interest shown for converting thrift
issues. As shown in Table 4.2, the median one week change in price for
offerings completed during the latest three months equaled positive 32.9
percent.
In examining the current pricing characteristics of institutions
completing their conversions during the last three months (see Table 4.3), we
note there exists a considerable difference in pricing ratios compared to the
universe of all publicly-traded thrifts. Specifically, the current average P/B
ratio of the conversions completed in the most recent three month period of
102.07 percent reflects a discount of 19.9 percent from the average P/B ratio of
all publicly-traded SAIF-insured thrifts (equal to 127.41 percent), and the
average core P/E ratio of 21.54 times reflects a premium of 22.9 percent from
the all SAIF-insured public average core P/E ratio of 17.52 times. The pricing
ratios of the better capitalized but lower earning recently converted thrifts
suggest that the investment community has determined to discount their stocks on
a book basis until the earnings improve through redeployment and leveraging of
the proceeds over the longer term.
In determining our valuation adjustment for marketing of the issue, we
considered trends in both the overall thrift market and the new issue market.
The overall market for thrift stocks is considered to be healthy, as thrift
stocks are currently exhibiting pricing ratios that are approaching historically
high levels. Investor interest in the new issue market has been favorable, as
most of the recently completed offerings have been oversubscribed and have
recorded healthy price increases in initial post-conversion trading activity.
C. The Acquisition Market
----------------------
Also considered in the valuation was the potential impact on First
Federal's stock price of recently completed and pending acquisitions of other
thrifts operating in First Federal's market area. As shown in Exhibit IV-4,
there has been limited acquisition activity of Idaho thrifts and banks over the
past few
<PAGE>
RP Financial, LC.
- --------------------------------------------------------------------------------
Table 4.2
Recent Conversions (Last Three Months)
Conversion Pricing Characteristics: Sorted Chronologically
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Information Pre-Conversion Data Offering
---------------------------------
Financial Info. Asset Quality Information
- ------------------------------------------------------------------------------------------------------------------------------------
Conversion Equity/ NPAs/ Res. Gross % of Exp./
Institution State Date Ticker Assets Assets Assets Cov. Proc. Mid. Proc.
- ----------- ----- ---- ------ ------ ------ ------ ---- ----- ---- -----
($Mil) (%) (%)(2) (%) ($Mil) (%) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Empire Federal Bancorp MT 01/27/97 EFBC $87 18.36% 0.00% NA $25.9 132% 2.4%
FirstFed America Bancorp MA 01/15/97 FAB $874 5.37% 0.42% 199% $87.1 132% 2.6%
Roslyn Bancorp(1) NY 01/13/97 RSLN 1,973 11.55% 0.82% 137% 436.4 132% 2.1%
Advance Fin. Bancorp WV 01/02/97 AFBC 93 6.49% 0.41% 86% 10.8 132% 4.5%
Home City Fin. Corp. OH 12/31/96 HCFC 58 9.01% 0.43% 146% 9.5 132% 4.2%
IFB Holdings MO 12/30/96 P. Sheet 54 5.91% 0.19% 277% 5.9 132% 6.4%
Century Bancorp(1) NC 12/23/96 CENB 82 13.75% 0.60% 109% 20.4 132% 4.5%
Southern Comm. Bancshares AL 12/23/96 SCBS 63 8.97% 0.24% 227% 11.4 132% 5.0%
Big Foot Fin. Corp. IL 12/20/96 BFFC 195 6.98% 0.06% 254% 25.1 132% 4.4%
River Valley Bancorp IN 12/20/96 RIVR 84 7.74% 0.27% 187% 11.9 132% 6.2%
Averages: $356 9.41% 0.34% 180% $64.5 132% 4.2%
Medians: 86 8.36% 0.34% 187% 16.1 132% 4.5%
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Insider Purchases Pro Forma Data
-----------------------------------------------------
Pricing Ratios(4) Fin. Characteristics
-----------------------------------------------------------------------------
Benefit Plans
--------------
Conversion Recog. Mgmt.
Institution State Date Ticker ESOP Plans & Dirs. P/TB P/E P/A ROA TE/A ROE
- ----------- ----- ---- ------ ---- ----- ------- ---- --- --- --- ---- ---
(%) (%) (%)(3) (%) (x) (%) (%) (%) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Empire Federal Bancorp MT 01/27/97 EFBC 8.0% 4.0% 2.7% 67.8% 28.8 23.6% 0.8% 34.9% 2.4%
FirstFed America Bancorp MA 01/15/97 FAB 8.0% 4.0% 1.8% 74.4% 20.1 9.2% 0.5% 12.4% 3.7%
Roslyn Bancorp(1) NY 01/13/97 RSLN 8.0% 4.0% 1.3% 73.8% 13.9 18.6% 1.3% 25.2% 5.3%
Advance Fin. Bancorp WV 01/02/97 AFBC 8.0% 8.0% 7.1% 71.8% 31.1 10.6% 0.3% 14.8% 2.3%
Home City Fin. Corp. OH 12/31/96 HCFC 8.0% 4.0% 7.9% 71.9% 16.9 14.4% 0.8% 19.9% 4.2%
IFB Holdings MO 12/30/96 P. Sheet 8.0% 4.0% 11.8% 73.6% 22.0 10.0% 0.5% 13.6% 3.3%
Century Bancorp(1) NC 12/23/96 CENB 8.0% 4.0% 6.0% 72.0% 22.2 20.5% 0.9% 28.5% 3.2%
Southern Comm. Bancshares AL 12/23/96 SCBS 8.0% 4.0% 25.7% 75.2% 25.2 15.6% 0.6% 20.8% 3.0%
Big Foot Fin. Corp. IL 12/20/96 BFFC 8.0% 4.0% 5.9% 72.7% 32.9 11.7% 0.4% 16.0% 2.2%
River Valley Bancorp IN 12/20/96 RIVR 8.0% 4.0% 3.5% 73.3% 15.2 12.7% 0.8% 17.3% 4.8%
Averages: 8.0% 4.4% 7.4% 72.6% 22.8 14.7% 0.7% 20.3% 3.5%
Medians: 8.0% 4.0% 5.9% 73.0% 22.1 13.5% 0.7% 18.6% 3.3%
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Post-IPO Pricing Trends
-------------------------------------------------------
Closing Price:
-------------------------------------------------------
First After After
Conversion IPO Trading % First % First %
Institution State Date Ticker Price Day Chg. Week(5) Chg. Month(6) Chg.
- ----------- ----- ---- ------ ----- --- ---- ------- ---- -------- ----
($) ($) (%) ($) (%) ($) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Empire Federal Bancorp MT 01/27/97 EFBC $10.00 $13.25 32.5% $13.38 33.8% $13.75 37.5%
FirstFed America Bancorp MA 01/15/97 FAB 10.00 13.63 36.2% 14.13 41.3% 14.88 48.7%
Roslyn Bancorp(1) NY 01/13/97 RSLN 10.00 15.00 50.0% 15.88 58.8% 16.00 60.0%
Advance Fin. Bancorp WV 01/02/97 AFBC 10.00 12.88 28.8% 12.88 28.8% 14.13 41.3%
Home City Fin. Corp. OH 12/31/96 HCFC 10.00 11.88 18.8% 12.25 22.5% 13.50 35.0%
IFB Holdings MO 12/30/96 P. Sheet 10.00 12.25 22.5% 12.50 25.0% 12.56 25.6%
Century Bancorp(1) NC 12/23/96 CENB 50.00 62.63 25.3% 66.00 32.0% 64.00 28.0%
Southern Comm. Bancshares AL 12/23/96 SCBS 10.00 13.00 30.0% 13.75 37.5% 13.50 35.0%
Big Foot Fin. Corp. IL 12/20/96 BFFC 10.00 12.31 23.1% 12.50 25.0% 14.00 40.0%
River Valley Bancorp IN 12/20/96 RIVR 10.00 13.69 36.9% 13.88 38.8% 15.25 52.5%
Averages: $14.00 $18.05 30.4% $18.71 34.3% $19.16 40.4%
Medians: 10.00 13.13 29.4% 13.56 32.9% 14.06 38.8%
</TABLE>
Note: * - Appraisal performed by RP Financial; "NT" - Not Traded;
"NA" - Not Applicable, Not Available.
(1) Non-OTS regulated thrifts. February 28, 1997
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Latest price if offering less than one week old.
(6) Latest price if offering more than one week but less than one month old.
(7) Second-step conversions.
<PAGE>
Table 4.3
Market Pricing Comparatives
Prices As of February 28, 1997
<TABLE>
<CAPTION>
Per Share Data
Market ---------------
Capitalization Core Book Pricing Ratios(3)
--------------- ---------------------------------------
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
SAIF-Insured Thrifts 20.30 140.42 1.16 15.91 19.92 127.41 15.51 129.55 17.52
Converted Last 3 Mths (no MHC) 19.94 107.39 0.90 19.98 25.07 102.07 21.32 102.07 21.54
Comparable Group
- ----------------
Converted Last 3 Mths (no MHC)
- ------------------------------
AFBC Advance Fin. Bancorp of WV 14.00 15.18 0.64 13.93 NM 100.50 14.85 100.50 21.88
BFFC Big Foot Fin. Corp. of IL 13.87 34.86 0.35 13.76 NM 100.80 16.16 100.80 NM
CENB Century Bancshares of NC 66.00 26.86 2.87 69.47 29.20 95.01 27.11 95.01 23.00
EFBC Empire Federal Bancorp of MT 13.62 35.30 0.46 14.76 NM 92.28 32.20 92.28 29.61
FAB FirstFed America Bancorp of MA 14.62 127.38 0.96 13.45 29.24 108.70 13.43 108.70 15.23
HCFC Home City Fin. Corp. of OH 13.25 11.61 0.77 13.90 22.46 95.32 19.01 95.32 17.21
RIVR River Valley Bancorp of IN 15.00 17.85 0.66 13.65 22.73 109.89 19.03 109.89 22.73
RSLN Roslyn Bancorp of NY 15.63 682.12 0.66 13.63 21.71 114.67 29.05 114.67 23.68
SCBS Southern Commun. Bncshrs of AL 13.50 15.35 0.71 13.30 NM 101.50 21.08 101.50 19.01
Table 4.3
Market Pricing Comparatives
Prices As of February 28, 1997
<CAPTION>
Dividends(4) Financial Characteristics(6)
-------------------------- -------------------------------------------------------
Amount/ Payout Total Equity/ NPAs/ Reported Core
---------------- ---------------
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- --------------------- ------- ------- ------- ------- ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
SAIF-Insured Thrifts 0.36 1.80 29.05 1,153 12.90 0.87 0.60 5.21 0.83 7.33
Converted Last 3 Mths (no MHC) 0.00 0.00 0.00 450 21.11 0.54 0.73 3.47 0.95 4.68
Comparable Group
- ----------------
Converted Last 3 Mths (no MHC)
- ------------------------------
AFBC Advance Fin. Bancorp of WV 0.00 0.00 0.00 102 14.78 0.41 0.34 2.30 0.68 4.59
BFFC Big Foot Fin. Corp. of IL 0.00 0.00 0.00 216 16.04 NA 0.35 2.18 0.41 2.54
CENB Century Bancshares of NC 0.00 0.00 0.00 99 28.53 0.77 0.93 3.25 1.18 4.13
EFBC Empire Federal Bancorp of MT 0.00 0.00 0.00 110 34.89 NA 0.83 2.37 1.09 3.12
FAB FirstFed America Bancorp of MA 0.00 0.00 0.00 949 12.35 NA 0.46 3.72 0.88 7.14
HCFC Home City Fin. Corp. of OH 0.00 0.00 0.00 61 19.95 0.43 0.85 4.24 1.10 5.54
RIVR River Valley Bancorp of IN 0.00 0.00 0.00 94 17.31 NA 0.84 4.84 0.84 4.84
RSLN Roslyn Bancorp of NY 0.00 0.00 0.00 2,348 25.33 NA 1.34 5.28 1.23 4.84
SCBS Southern Commun. Bncshrs of AL 0.00 0.00 0.00 73 20.77 NA 0.62 3.01 1.11 5.34
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB
= Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been
obtained from sources we believe are reliable, but we cannot guarantee
the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial LC.
Page 4.16
years. The absence of an active acquisition market for Idaho thrifts and banks
is due in part to the sparse number of thrifts and banks based in Idaho. In
light of the Bank's strong pro forma capital position, which would tend to make
First Federal a less attractive acquisition candidate, acquisition speculation
is not expected to have a material influence on the Bank's initial trading
price. To the extent that acquisition speculation may impact the Bank's
offering, we have largely taken this into account in selecting Northwest,
Western and Mid-West based companies, which operate in markets that have
experienced a comparable or a greater degree of acquisition activity as the
Bank's market area and, thus, are subject to the same type of acquisition
speculation that may influence First Federal's trading price.
Taking these factors and trends into account, primarily recent trends
in the new issue market, market conditions overall, and recent trends in the
acquisition market, RP Financial concluded that no adjustment was appropriate in
the valuation analysis for purposes of marketing of the issue.
8. Management
----------
First Federal's management team has experience and expertise in all of the
key areas of the Bank's operations. Exhibit IV-5 provides summary resumes of
First Federal's Board of Directors and executive management. While the Bank does
not have the resources to develop a great deal of management depth, given its
asset size and the impact it would have on operating expenses, management and
the Board have been effective in implementing an operating strategy that can be
well managed by the Bank's present management structure.
Similarly, the returns, capital positions, and other operating measures of
the Peer Group companies are indicative of well-managed financial institutions,
which have Boards and management teams that have been effective in implementing
competitive operating strategies. Therefore, on balance, we concluded no
valuation adjustment relative to the Peer Group was appropriate for this factor.
9. Effect of Government Regulation and Regulatory Reform
-----------------------------------------------------
The Bank and the Peer Group companies were similarly impacted by the
recently enacted SAIF rescue legislation, as First Federal and nine out of the
ten Peer Group companies are SAIF-insured institutions and, thus, were subject
to the same one time assessment. Likewise, the Bank's and all but one of the
Peer Group companies' deposits will be assessed at the same rate going forward.
In summary, as a fully-converted SAIF-insured savings bank, Guaranty Savings
will operate in substantially the same regulatory environment as the Peer Group
members -- all of whom are adequately capitalized institutions and are operating
with no apparent
<PAGE>
RP Financial LC.
Page 4.17
restrictions. Exhibit IV-6 reflects the Bank's pro forma regulatory capital
ratios. On balance, RP Financial concluded that no adjustment to the Bank's
value was warranted for this factor.
Summary of Adjustments
- ----------------------
Overall, we believe the Bank's pro forma market value should be discounted
relative to the Peer Group as follows:
<TABLE>
<CAPTION>
Key Valuation Parameters: Valuation Adjustment
------------------------ --------------------
<S> <C>
Financial Condition Moderate Downward
Profitability, Growth and Viability of Earnings Moderate Downward
Asset Growth Slight Downward
Primary Market Area No Adjustment
Dividends Slight Downward
Liquidity of the Shares No Adjustment
Marketing of the Issue No Adjustment
Management No Adjustment
Effect of Government Regulations and Regulatory Reform No Adjustment
</TABLE>
Valuation Approaches
- --------------------
In applying the accepted valuation methodology promulgated by the OTS and
adopted by the FDIC, i.e., the pro forma market value approach, we considered
the three key pricing ratios in valuing First Federal's to-be-issued stock --
price/earnings ("P/E"), price/book ("P/B"), and price/assets ("P/A") approaches
- -- all performed on a pro forma basis including the effects of the conversion
proceeds. In computing the pro forma impact of the conversion and the related
pricing ratios, we have incorporated the valuation parameters disclosed in First
Federal's prospectus for offering expenses, the effective tax rate and stock
benefit plan assumptions (summarized in Exhibits IV-7 and IV-8). A reinvestment
rate of 6.38 percent was utilized, equal to the arithmetic average of the Bank's
average yield on interest-earnings assets and cost of deposits for the nine
months ended December 31, 1996 (the reinvestment rate calculation specified by
OTS conversion guidelines). The 6.38 percent reinvestment rate is believed to
be representative of the blended rate reflecting the Bank's business plan as
converted and incorporating the impact of deposit withdrawals to fund a portion
of the stock issued in conversion. In our estimate of value, we assessed the
relationship of the pro forma pricing ratios relative to the Peer Group and the
recent conversions.
<PAGE>
RP Financial LC.
Page 4.18
RP Financial's valuation placed emphasis on the following:
. P/E Approach. The P/E approach is generally the best indicator of
------------
long-term value for a stock and, thus, was carefully considered in
this valuation. However, given the potential volatility associated
with the Bank's earnings, due to the significant impact of gains
derived from mortgage banking activities, a lesser than normal
emphasis was placed on the P/E approach and a relatively greater
emphasis was placed on the P/B approach.
. P/B Approach. P/B ratios have generally served as a useful benchmark
------------
in the valuation of thrift stocks, with the greater determinant of
long term value being earnings. RP Financial considered the P/B
approach to be a reliable indicator of value given current market
conditions, particularly the market for new conversions which often
exhibit P/E multiples that are well above industry averages and, thus,
are viewed as a less meaningful indicator of value.
. P/A Approach. P/A ratios are generally a less reliable indicator of
------------
market value, as investors do not place significant weight on total
assets as a determinant of market value. Investors place
significantly greater weight on book value and earnings -- which have
received greater weight in our valuation analysis.
The Bank has adopted Statement of Position ("SOP") 93-6, which will cause
earnings per share computations to be based on shares issued and outstanding
excluding unreleased ESOP shares. For purposes of preparing the pro forma
pricing analyses, we have reflected all shares issued in the offering, including
all ESOP shares, to capture the full dilutive impact, particularly since the
ESOP shares are economically dilutive, receive dividends and can be voted.
However, we did consider the impact of the adoption of SOP 93-6 in the
valuation.
Based on the application of the three valuation approaches, taking into
consideration the valuation adjustments discussed above, and placing the
greatest weight on the P/E and P/B approaches, RP Financial concluded that the
pro forma market value of the Bank's conversion stock is $15,000,000 at the
midpoint at this time.
1. Price-to-Book ("P/B"). The application of the P/B valuation method
---------------------
requires calculating the Bank's pro forma market value by applying a valuation
P/B ratio to First Federal's pro forma book value. Based on the $15.0 million
midpoint valuation, First Federal's pro forma P/B ratio was 64.21 percent. In
comparison to the average P/B ratio for the Peer Group of 100.03 percent, First
Federal's valuation reflected a 35.8 percent discount relative to the Peer
Group. RP Financial considered the discount under the P/B approach to be
reasonable, in light of the downward adjustments applied to the Bank's value for
financial condition and earnings. Additionally, the discounted P/B ratio is
also warranted by the Bank's lower pro forma ROE and resulting pro forma P/E
multiple.
<PAGE>
RP Financial LC.
Page 4.19
Given the emphasis in the revised appraisal guidelines on limiting near
term aftermarket price increases in the stocks of converting institutions, RP
Financial also considered the pro forma P/B ratios of recent conversions in its
valuation analysis. It is these companies that provide the best proxy for
aftermarket trading for a new issue such as First Federal's conversion stock (as
newly converted thrifts represent an "alternative investment" to purchasing
conversion stock), and it is the pro forma P/B ratio that investors have
recently tended to emphasize in evaluating the trading of new issues. At the
midpoint value of $15,000,000, First Federal's forma P/B ratio of 64.21 percent
was discounted by approximately 11.6 percent and 37.1 percent from the average
of the recently completed stock conversions of 72.6 percent at closing (see
Table 4.2) and 102.1 percent in the after market (see Table 4.3). The pricing in
the upper portion of the range approximates the average closing ratios for the
recent conversions (see Table 4.2). As indicated at the beginning of this
chapter, RP Financial's analysis of recent conversion pricing characteristics
has been limited to a technical analysis and, thus, the pricing characteristics
of recent conversions is not the primary determinate of valuation.
2. Price-to-Earnings ("P/E"). The application of the P/E valuation
method requires calculating the Bank's pro forma market value by applying a
valuation P/E multiple times the pro forma earnings base. Ideally, the pro forma
earnings base is composed principally of the Bank's recurring earnings base,
that is, earnings adjusted to exclude any one-time non-operating items, plus the
estimated after-tax earnings benefit of the reinvestment of net conversion
proceeds. First Federal's reported earnings equaled $211,000 for the twelve
months ended December 31, 1996. In deriving the Bank's core earnings, a number
of adjustments were made to reported earnings which tends to reduce the
reliability of the core earnings estimate. Adjustments made to the Bank's core
earnings included elimination of the one time special SAIF assessment
($584,000), accounting for the one time expense of terminating the Bank's
pension plan ($130,000), eliminating a non-recurring loss on the write-down and
sale of a mutual fund ($290,000), assuming normalized loss provisions of
$108,000 versus reported loss provisions of $266,000, and normalizing the Bank's
effective tax rate at 38.0 percent versus the abnormally low rate of 31.4
percent reflected in the Bank's reported earnings. In a comparative analysis of
the Bank's and the Peer Group's core earnings, gains realized from the sale of
investments and loans have also been excluded in deriving core earnings. Such
gains were a significantly larger factor in the Bank's earnings, as the result
of mortgage banking gains realized from the sale of FHA and VA loan originations
on a servicing released basis. While such gains have been a major part of First
Federal's reported earnings in recent years, they are not viewed as being highly
predictable or recurring in nature. The high degree of volatility associated
with First Federal's mortgage banking gains stems from the cyclical nature of
mortgage banking in general, due to the dependence of lending volumes on
interest rate movements, and the fact that First Federal's mortgage banking
gains have been substantially generated from a fast growing segment of its
market area that is not likely to be sustainable over an extended period of
time. As shown below, after factoring in the adjustments, First Federal's core
earnings were determined to equal $27,000 for the twelve months ended
December 31, 1996.
<PAGE>
(Note: see Exhibit IV-9 for the adjustments applied to the Peer Group's earnings
in the calculation of core earnings.)
<TABLE>
Amount
------
($000)
<S> <C>
Pre-tax reported earnings $309
Adjustment for SAIF assessment 584
Adjustment for termination of pension plan 130
Adjustment for loss and write-down of mutual fund 290
Adjustment for loan loss provisions 158
Adjustment for loan sale gains (1,428)
-----
Pre-tax core earnings 43
Income tax expense(1) (16)
---
Core earnings estimate $27
</TABLE>
(1) Tax effected at 38.0 percent.
Based on First Federal's trailing twelve month earnings, and incorporating
the impact of the pro forma assumptions discussed previously, the Bank's pro
forma P/E multiple at the $15,000,000 midpoint value was 43.80 times, resulting
in a premium of 116.5 percent from the Peer Group average of 20.23 times core
earnings. The premium exhibited in the Bank's core P/E multiple was accounted
for in the discount reflected in its pro forma P/B ratio.
3. Price-to-Assets ("P/A"). The P/A valuation methodology determines
-----------------------
market value by applying a valuation P/A ratio to the Bank's pro forma asset
base, conservatively assuming no deposit withdrawals are made to fund stock
purchases. In all likelihood there will be deposit withdrawals, which results
in understating the pro forma P/A ratio which is computed herein. At the
midpoint of the valuation range, First Federal's value equaled 10.29 percent of
pro forma assets. Comparatively, the Peer Group companies exhibited an average
P/A ratio of 16.84 percent, which implies a 38.9 percent discount being applied
to the Bank's pro forma P/A ratio.
Valuation Conclusion
- --------------------
Based on the foregoing, is our opinion that, as of February 28, 1997, the
aggregate pro forma market value of the Bank was $15,000,000 at the midpoint,
equal to 1,500,000 shares offered at $10.00 per share. Pursuant to the
conversion guidelines, the 15 percent offering range includes a minimum of
$12,750,000 and a maximum of $17,250,000. Based on the $10.00 per share
offering price, this valuation range equates to an
<PAGE>
RP Financial LC.
Page 4.21
offering of 1,275,000 shares at the minimum to 1,725,000 shares at the maximum.
The Holding Company's offering also includes a provision for a super maximum,
which if exercised, would result in an offering size of $19,837,500, equal to
1,983,750 shares at the $10.00 per share offering price. The comparative pro
forma valuation ratios relative to the Peer Group are shown in Table 4.4, and
the key valuation assumptions are detailed in Exhibit IV-7. The pro forma
calculations for the range are detailed in Exhibit IV-8.
<PAGE>
Table 4.4
Public Market Pricing
First Federal Bank of Idaho and the Comparables
As of February 28, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization --------------- Pricing Ratios(3)
--------------- Core Book ---------------------------------------
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
-------- ------- ------- ------- ------- ------- ------- ------- ------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Federal Bank of Idaho
- ---------------------------
Superrange 10.00 19.84 0.23 13.90 31.24 71.93 13.23 71.93 43.99
Range Maximum 10.00 17.25 0.23 14.67 29.92 68.15 11.68 68.15 43.95
Range Midpoint 10.00 15.00 0.23 15.57 28.49 64.21 10.29 64.21 43.80
Range Minimum 10.00 12.75 0.23 16.79 26.76 59.54 8.87 59.54 43.59
SAIF-Insured Thrifts(7)
- -----------------------
Averages 20.30 140.42 1.16 15.91 19.92 127.41 15.51 129.55 17.52
Medians --- --- --- --- 19.79 120.04 14.07 121.21 16.67
Comparable Group Averages
- -------------------------
Averages 15.90 43.82 0.82 16.13 21.28 100.03 16.84 100.07 20.23
Medians --- --- --- --- 20.62 98.40 17.44 98.63 18.02
Comparable Group
- ----------------
AMFC AMB Financial Corp. of IN 13.75 15.46 0.52 14.40 NM 95.49 18.50 95.49 26.44
CBK Citizens First Fin.Corp. of IL 15.50 43.66 0.44 14.32 NM 108.24 16.39 108.24 NM
FMBD First Mutual Bancorp of IL 16.00 60.30 0.55 16.73 NM 95.64 19.06 95.64 29.09
HZFS Horizon Fin'l. Services of IA 17.00 7.24 0.57 19.31 NM 88.04 9.45 88.04 29.82
HRZB Horizon Financial Corp. of WA 15.00 96.18 1.12 12.44 13.04 120.58 19.22 120.58 13.39
KFBI Klamath First Bancorp of OR 15.50 155.03 0.86 15.25 26.72 101.64 23.03 101.64 18.02
NWEQ Northwest Equity Corp. of WI 13.50 12.54 0.86 12.48 20.45 108.17 13.13 108.17 15.70
THR Three Rivers Fin. Corp. of MI 14.50 12.34 0.78 14.87 27.88 97.51 14.12 97.97 18.59
TRIC Tri-County Bancorp of WY 18.50 11.27 1.19 21.59 20.79 85.69 13.12 85.69 15.55
UBMT United Fin. Corp. of MT 19.75 24.15 1.28 19.89 18.81 99.30 22.38 99.30 15.43
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ --------------- ---------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Federal Bank of Idaho
- ---------------------------
Superrange 0.00 0.00 0.00 150 18.39 0.80 0.42 2.30 0.30 1.64
Range Maximum 0.00 0.00 0.00 148 17.14 0.81 0.39 2.28 0.27 1.55
Range Midpoint 0.00 0.00 0.00 146 16.03 0.82 0.36 2.25 0.24 1.47
Range Minimum 0.00 0.00 0.00 144 14.89 0.84 0.33 2.23 0.20 1.37
SAIF-Insured Thrifts(7)
- -----------------------
Averages 0.36 1.80 29.05 1,153 12.90 0.87 0.60 5.21 0.83 7.33
Medians --- --- --- --- --- --- --- --- --- ---
Comparable Group Averages
- -------------------------
Averages 0.39 2.38 44.99 229 16.82 0.55 0.69 3.95 0.93 5.39
Medians --- --- --- --- --- --- --- --- --- ---
Comparable Group
- ----------------
AMFC AMB Financial Corp. of IN 0.24 1.75 46.15 84 19.37 0.43 0.49 3.04 0.76 4.79
CBK Citizens First Fin.Corp. of IL 0.00 0.00 0.00 266 15.14 0.53 0.25 2.32 0.52 4.87
FMBD First Mutual Bancorp of IL 0.32 2.00 58.18 316 19.93 0.14 0.46 1.90 0.72 2.99
HZFS Horizon Fin'l. Services of IA 0.32 1.88 56.14 77 10.73 1.12 0.13 1.15 0.33 2.86
HRZB Horizon Financial Corp. of WA 0.40 2.67 35.71 500 15.94 0.01 1.51 9.40 1.47 9.15
KFBI Klamath First Bancorp of OR 0.28 1.81 32.56 673 22.66 0.04 0.91 3.62 1.35 5.36
NWEQ Northwest Equity Corp. of WI 0.44 3.26 51.16 96 12.14 1.19 0.70 5.17 0.91 6.73
THR Three Rivers Fin. Corp. of MI 0.36 2.48 46.15 87 14.48 1.22 0.52 3.44 0.78 5.17
TRIC Tri-County Bancorp of WY 0.60 3.24 50.42 86 15.31 0.07 0.71 4.18 0.95 5.59
UBMT United Fin. Corp. of MT 0.94 4.76 73.44 108 22.54 0.70 1.20 5.25 1.46 6.40
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) EPS (core basis) is based on actual trailing twelve month data, adjusted to
omit the impact of non-operating items (including the SAIF assessment) on a
tax effected basis, and is shown on a pro forma basis where appropriate.
(3) P/E = Price to Earnings; P/B = Price to Book; P/A = Price to Assets; P/TB =
Price to Tangible Book; and P/CORE = Price to Core Earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated twelve month dividend as a percent of trailing twelve month
estimated core earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and total
assets balances.
(7) Excludes from averages and medians those companies the subject of actual or
rumored acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBITS
<PAGE>
LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
I-1 Map of Office Locations
I-2 Audited Financial Statements
I-3 Key Operating Ratios
I-4 Investment Portfolio Composition
I-5 Yields and Costs
I-6 Loan Loss Allowance Activity
I-7 NPV Analysis
I-8 Fixed Rate and Adjustable Rate Loans
I-9 Loan Portfolio Composition
I-10 Loan Originations, Purchases and Sales
I-11 Contractual Maturity By Loan Type
I-12 Non-Performing Assets
I-13 Deposit Composition
I-14 Time Deposit Rate/Maturity
I-15 Borrowings
II-1 List of Branch Offices
II-2 Historical Interest Rates
III-1 General Characteristics of Publicly-Traded
Institutions
III-2 Financial Analysis of Northwestern and Western Institutions
</TABLE>
<PAGE>
LIST OF EXHIBITS(continued)
<TABLE>
<S> <C>
III-3 Financial Analysis of Midwest Peer Group Candidates
III-4 Peer Group Market Area Comparative Analysis
IV-1 Stock Prices: As of February 28, 1997
IV-2 Historical Stock Price Indices
IV-3 Historical Thrift Stock Indices
IV-4 Market Area Acquisition Activity
IV-5 Director and Senior Management Summary Resumes
IV-6 Pro Forma Regulatory Capital Ratios
IV-7 Pro Forma Analysis Sheet
IV-8 Pro Forma Effect of Conversion Proceeds
IV-9 Peer Group Core Earnings Analysis
V-1 Firm Qualifications Statement
</TABLE>
<PAGE>
EXHIBIT I-1
First Federal Bank of Idaho
Map of Office Locations
<PAGE>
First Federal Bank of ID, FSB
Branch Locations
[MAP APPEARS HERE]
<PAGE>
EXHIBIT I-2
First Federal Bank of Idaho
Audited Financial Statements
[Incorporated by Reference]
<PAGE>
EXHIBIT I-3
First Federal Bank of Idaho
Key Operating Ratios
<TABLE>
<CAPTION>
At or for
At or For the the Nine Months
Year Ended March 31, Ended December 31,
------------------------------------------------------ ------------------
1992 1993 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
KEY FINANCIAL RATIOS:
Performance Ratios (1):
Return on average assets (2)................... 0.64% 1.15% 1.05% 0.74% 0.50% 0.71% 0.33%
Return on average equity (3)................... 9.40 15.28 12.48 8.19 5.81 8.03 3.94
Average total equity to average assets (4)..... 6.85 7.51 8.43 9.03 8.55 8.85 8.32
Total equity to total assets at end of period.. 6.91 8.06 8.61 9.13 7.98 7.78 8.12
Interest rate spread (5)....................... 2.72 3.64 3.61 3.87 3.61 3.88 3.68
Net interest margin (6)........................ 2.97 3.80 3.88 4.15 3.89 4.17 3.93
Average interest-earning assets to average
interest-bearing liabilities................ 104.30 103.54 107.27 107.44 106.09 106.46 105.67
Non-interest expense as a percent of average
total assets................................ 2.91 3.74 4.57 4.64 4.64 4.40 4.82
Efficiency ratio (7)........................... 72.08 62.27 67.53 79.30 83.15 73.97 85.90
Equity Ratios:
Core capital................................... 6.91 8.06 8.61 9.13 7.98 7.78 8.12
Tangible capital............................... 6.91 8.06 8.61 9.13 7.98 7.78 8.12
Risk-based capital............................. 11.64 14.02 15.42 15.66 14.14 14.04 13.27
Asset Quality Ratios:
Nonaccrual and 90 days or more past due
loans as a percent of loans receivable, net.. 3.02 0.99 0.28 0.64 0.74 0.68 0.91
Nonperforming assets as a percent of
total assets................................. 4.41 0.95 0.21 0.51 0.59 0.55 0.90
Allowance for loan losses as a percent of
total loans receivable....................... 0.48 0.56 0.66 0.62 0.70 0.63 0.74
Allowance for loan losses as a percent of
nonperforming loans......................... 7.08 49.84 252.38 104.32 91.28 85.62 73.21
Net charge-offs to average outstanding loans... 0.02 0.15 0.01 0.00 0.00 0.00 0.01
</TABLE>
- ------------------
(1) Ratios for the nine-month periods are annualized.
(2) Net earnings divided by average total assets.
(3) Net earnings divided by average equity.
(4) Average total equity divided by average total assets.
(5) Difference between weighted average yield on interest-earning assets and
weighted average rate on interest-bearing liabilities.
(6) Net interest income as a percentage of average interest-earning assets.
(7) Represents the ratio of non-interest expenses divided by the sum of net
interest income and non-interest income.
Source: First Federal's prospectus.
<PAGE>
EXHIBIT I-4
First Federal Bank of Idaho
Investment Portfolio Composition
<TABLE>
<CAPTION>
At March 31,
--------------------------------------------- At December 31,
1995 1996 1996
--------------------- --------------------- --------------------
Carrying Percent of Carrying Percent of Carrying Percent of
Value Portfolio Value Portfolio Value Portfolio
----- --------- ----- --------- ----- ---------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Available for sale:
Mutual funds................. $ 1,289 11.87% $ 1,328 9.25% $ -- --%
Held to maturity:
U.S. Government and federal
agency obligations......... 6,732 61.98 10,545 73.43 5,189 68.89
Mortgage-backed securities... 2,840 26.15 2,488 17.32 2,343 31.11
------- ------ ------- ------ ------ ------
Total held to maturity.. 9,572 88.13 13,033 90.75 7,532 100.00
Total.................... $10,861 100.00% $14,361 100.00% $7,532 100.00%
======= ====== ======= ====== ====== ======
</TABLE>
The table below sets forth certain information regarding the carrying value,
weighted average yields and maturities of the Bank's investment and mortgage-
backed securities at December 31, 1996.
<TABLE>
<CAPTION>
Over Over
Less Than One to Five to Over Ten
One Year Five Years Ten Years Years
--------------------- ----------------- --------------- ---------------
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and federal
agency obligations......... $500 5.64% $4,689 6.21% --$ --% $ -- --%
Mortgage-backed securities... 7 7.12 14 7.06 -- -- 2,322 6.02
---- ------ ------
Total.................... $507 5.66 $4,703 6.21 -- -- $2,322 6.02
==== ====== ======
</TABLE>
Source: First Federal's prospectus.
<PAGE>
EXHIBIT I-5
First Federal Bank of Idaho
Yields and Costs
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------------------------
1995 1996
------------------------------- ---------------------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
------- --------- ---- ------- --------- ----
<S> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Interest-earning assets(1):
Loans receivable.......... $ 79,912 $6,826 8.54% $ 91,849 $8,408 9.15%
Mortgage-backed securities 2,981 136 4.56 2,622 157 5.99
Investment securities..... 8,075 501 6.20 6,553 457 6.97
Other earning assets...... 6,986 195 2.79 12,026 530 4.41
-------- ------ -------- ------
Total interest-earning
assets................. 97,954 7,658 7.82 113,050 9,552 8.45
------ ------
Non-interest-earning assets 3,873 5,460
-------- --------
Total assets............ $101,827 $118,510
======== ========
Interest-earning
liabilities:
Passbook, NOW and money
market accounts......... $ 39,546 1,036 2.62 $ 35,072 876 2.50
Certificates of deposit... 50,319 2,458 4.88 66,066 3,917 5.93
-------- ------ -------- ------
Total deposits.......... 89,865 3,494 3.89 101,138 4,793 4.74
Advances from FHLB........ 1,305 102 7.82 5,419 365 6.74
-------- ------ -------- ------
Total interest-bearing
liabilities............ 91,170 3,596 3.95 106,557 5,158 4.84
------ ------
Non-interest-bearing
liabilities............... 1,458 1,826
-------- --------
Total liabilities....... 92,628 108,383
-------- --------
Total equity............... 9,199 10,127
-------- --------
Total liabilities and
total equity........... $101,827 $118,510
======== ========
Net interest income........ $4,062 $4,394
====== ======
Interest rate spread....... 3.87% 3.61%
==== ====
Net interest margin........ 4.15% 3.89%
====== ======
Ratio of average
interest-earning
assets to average
interest-
bearing liabilities....... 107.44% 106.09%
======== ========
<CAPTION>
Nine Months Ended December 31,
-----------------------------------------------------------
1995(2) 1996(2)
-------------------------- ---------------------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
------- --------- ---- ------- --------- ----
<S> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Interest-earning assets(1):
Loans receivable.......... $ 90,916 $6,325 9.28% $103,407 $6,878 8.87%
Mortgage-backed securities 2,658 117 5.87 2,381 101 5.66
Investment securities..... 6,450 341 7.05 10,466 506 6.45
Other earning assets...... 7,168 242 4.50 6,783 155 3.05
-------- ------ -------- ------
Total interest-earning
assets................. 107,192 7,025 8.74 123,037 7,640 8.28
------ ------
Non-interest-earning assets 5,247 6,173
-------- --------
Total assets............ $112,439 $129,210
======== ========
Interest-earning
liabilities:
Passbook, NOW and money
market accounts......... $ 35,551 665 2.49 $ 36,110 615 2.27
Certificates of deposit... 58,538 2,685 6.12 74,074 3,084 5.55
-------- ------ -------- ------
Total deposits.......... 94,089 3,350 4.75 110,184 3,699 4.48
Advances from FHLB........ 6,599 322 6.51 6,250 315 6.72
-------- ------ -------- ------
Total interest-bearing
liabilities............ 100,688 3,672 4.86 116,434 4,014 4.60
------ ------
Non-interest-bearing
liabilities............... 1,796 2,027
-------- --------
Total liabilities....... 102,484 118,461
-------- --------
Total equity............... 9,955 10,749
-------- --------
Total liabilities and
total equity........... $112,439 $129,210
======== ========
Net interest income........ $3,353 $3,626
====== ======
Interest rate spread....... 3.88% 3.68%
==== ====
Net interest margin........ 4.17% 3.93%
====== ======
Ratio of average
interest-earning
assets to average
interest-
bearing liabilities....... 106.46% 105.67%
======== ========
- --------------------
</TABLE>
(1) Does not include interest on loans 90 days or more past due.
(2) Yields and ratios for the nine-month periods are annualized.
Source: First Federal's prospectus.
<PAGE>
EXHIBIT I-6
First Federal Bank of Idaho
Loan Loss Allowance Activity
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended March 31, December 31,
-------------------- -----------------
1995 1996 1995 1996
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Allowance at beginning of period.. $530 $555 $555 $701
Provision for loan losses(1)...... 28 150 78 194
Recoveries........................ -- -- -- --
Charge-offs:
Real estate loans:
Residential..................... -- -- -- 14
Construction.................... -- -- -- --
Agricultural.................... -- -- -- --
Commercial...................... -- -- -- --
Consumer and other loans......... 3 4 2 1
---- ---- ---- ----
Total charge-offs.............. 3 4 2 15
---- ---- ---- ----
Net charge-offs................ 3 4 2 15
---- ---- ---- ----
Balance at end of period....... $555 $701 $631 $880
==== ==== ==== ====
Ratio of allowance to total
loans outstanding
at the end of the period......... 0.62% 0.70% 0.63% 0.74%
Ratio of net charge-offs to
average loans outstanding
during the period................ -- -- -- 0.01%
- -----------
</TABLE>
(1) See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- Comparison of Operating Results for the Nine Months Ended
December 31, 1995 and 1996 -- Provisions for Loan Losses" and "-- Comparison
of Operating Results for the Years Ended March 31, 1995 and 1996 --
Provisions for Loan Losses" for a discussion of the factors responsible for
changes in the Bank's provision for loan losses between the periods.
Source: First Federal's prospectus.
<PAGE>
EXHIBIT I-7
First Federal Bank of Idaho
NPV Analysis
<TABLE>
<CAPTION>
Net Portfolio as % of
Net Portfolio Value Portfolio Value of Assets
-------------------------- -----------------------------
Basis Point ("bp")
Change in Rates $ Amount $ Change(1) % Change NPV Ratio(2) Change(bp)(3)
------------------- -------- ----------- --------- ------------ -------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
400 11,802 (4,815) (29) 8.99 (298)
300 13,362 (3,254) (20) 10.01 (196)
200 14,769 (1,847) (11) 10.90 (107)
100 15,903 (714) (4) 11.58 (39)
0 16,617 -- -- 11.97 --
(100) 16,784 168 1 12.01 4
(200) 16,440 (177) (1) 11.73 (24)
(300) 16,222 (395) (2) 11.52 (45)
(400) 16,485 (132) (1) 11.62 (35)
</TABLE>
- --------------------
(1) Represents the increase (decrease) of the estimated NPV at the indicated
change in interest rates compared to the NPV assuming no change in interest
rates.
(2) Calculated as the estimated NPV divided by the portfolio value of total
assets ("PV").
(3) Calculated as the increase (decrease) of the NPV ratio assuming the
indicated change in interest rates over the estimated NPV ratio assuming no
change in interest rates.
Source: First Federal's prospectus.
<PAGE>
EXHIBIT I-8
First Federal Bank of Idaho
Fixed Rate and Adjustable Rate Loans
<TABLE>
<CAPTION>
Fixed Floating or
Rates Adjustable Rates
----- ----------------
(In Thousands)
<S> <C> <C>
Real estate loans:
Residential.............. $33,712 $42,664
Construction............. -- --
Commercial............... 2,575 1,776
Agricultural............. 699 11,373
Consumer and other loans.. 3,151 4,165
------- -------
Total gross loans...... $40,137 $59,978
======= =======
</TABLE>
Source: First Federal's prospectus.
<PAGE>
EXHIBIT I-9
First Federal Bank of Idaho
Loan Portfolio Composition
<TABLE>
<CAPTION>
At March 31,
------------------------------------- At December 31,
1995 1996 1996
----------------- ------------------ ------------------
Amount Percent Amount Percent Amount Percent
------- -------- -------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
Residential................ $53,307 60.02% $ 62,818 62.41% $ 72,656 61.26%
Construction............... 12,259 13.80 13,832 13.74 14,945 12.60
Agricultural............... 11,887 13.39 11,945 11.87 11,876 10.01
Commercial................. 5,068 5.71 4,036 4.01 6,007 5.07
------- ------ -------- ------ -------- ------
Total real estate loans.. 82,521 92.92 92,631 92.03 105,184 88.94
Consumer and other loans:
Home equity................ 3,826 4.31 5,229 5.20 9,721 8.20
Agricultural operating..... 561 0.63 589 0.58 1,024 0.86
Other consumer............. 1,902 2.14 2,206 2.19 2,368 2.00
------- ------ -------- ------ -------- ------
Total consumer and
other loans............. 6,289 7.08 8,024 7.98 13,113 11.06
------- ------ -------- ------ -------- ------
Total loans receivable... 88,810 100.00% 100,655 100.00% 118,597 100.00%
------- ====== -------- ====== -------- ======
Less:
Loans in process........... 5,052 5,726 6,224
Unearned loan fees and
discounts................ 426 411 408
Allowance for loan losses.. 555 701 880
------- -------- --------
Loans receivable, net.... $82,777 $ 93,817 $111,085
======= ======== ========
</TABLE>
Source: First Federal's prospectus.
<PAGE>
EXHIBIT I-10
First Federal Bank of Idaho
Loan Originations, Purchases, and Sales
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended March 31, December 31,
-------------------- -----------------
1995 1996 1995 1996
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Total loans receivable at
beginning of period.............. $ 80,780 $ 88,810 $ 88,810 $100,655
-------- -------- -------- --------
Loans originated:
Real estate loans:
Residential..................... 61,030 83,551 63,030 64,912
Construction.................... 22,385 29,569 23,341 23,153
Agricultural.................... 2,402 1,023 692 798
Commercial...................... -- 1,481 1,202 3,419
Consumer and other loans......... 3,957 5,270 4,366 5,147
-------- -------- -------- --------
Total loans originated........ 89,774 120,894 92,631 97,429
-------- -------- -------- --------
Loans purchased:
Real estate loans:
Residential..................... 88 25 25 43
Construction.................... -- -- -- --
Agricultural.................... -- -- -- --
Commercial...................... -- -- -- --
Consumer and other loans......... -- -- -- --
-------- -------- -------- --------
Total loans purchased......... 88 25 25 43
-------- -------- -------- --------
Loans sold:
Servicing retained............... (26,996) (21,219) (14,339) (20,377)
Servicing released............... (24,570) (48,550) (38,037) (26,030)
-------- -------- -------- --------
Total loans sold.............. (51,566) (69,769) (52,376) (46,407)
Loan principal repayments......... (26,199) (32,112) (25,138) (25,818)
Other(1).......................... (4,067) (7,193) (3,973) (7,305)
-------- -------- -------- --------
Change in total loans receivable.. 8,030 11,845 11,169 17,942
-------- -------- -------- --------
Total receivable loans
at end of period................. $ 88,810 $100,655 $ 99,979 $118,597
======== ======== ======== ========
</TABLE>
- -----------
(1) Consists of refinanced loans.
Source: First Federal's prospectus.
<PAGE>
EXHIBIT I-11
First Federal Bank of Idaho
Contractual Maturity By Loan Type
<TABLE>
<CAPTION>
After After After After 10
One Year 3 Years 5 Years Years
Within Through Through Through Through Beyond
One Year 3 Years 5 Years 10 Years 15 Years 15 Years Total
-------- ------- ------- -------- -------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
Residential............. $ 276 $1,506 $3,897 $ 3,573 $12,059 $51,345 $ 72,656
Construction............ 14,945 -- -- -- -- -- 14,945
Commercial.............. 412 394 2,005 529 519 2,148 6,007
Agricultural............ -- 110 102 1,078 2,618 7,968 11,876
Consumer and other loans.. 2,849 1,295 1,883 6,628 239 219 13,113
------- ------ ------ ------- ------- ------- --------
Total gross loans..... $18,482 $3,305 $7,887 $11,808 $15,435 $61,680 $118,597
======= ====== ====== ======= ======= ======= ========
</TABLE>
Source: First Federal's prospectus.
<PAGE>
EXHIBIT I-12
First Federal Bank of Idaho
Non-Performing Assets
<TABLE>
<CAPTION>
At March 31,
--------------------- At December 31,
1995 1996 1996
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Loans accounted for on a
nonaccrual basis:
Real estate loans:
Residential....................... $ 407 $ 399 $ 189
Construction...................... -- 194 789
Agricultural...................... -- -- --
Commercial........................ -- -- --
Consumer and other loans........... -- -- 28
------ ------ ------
Total........................... 407 593 1,006
------ ------ ------
Accruing loans which are
contractually past due 90 days or more:
Real estate loans:
Residential....................... 4 97 --
Construction...................... 119 -- --
Agricultural...................... -- -- --
Commercial........................ -- -- --
Consumer and other loans........... 2 2 --
------ ------ ------
Total........................... 125 99 --
------ ------ ------
Total of nonaccrual and 90 days past
due loans.......................... 532 692 1,006
Real estate owned.................... -- 76 196
------ ------ ------
Total nonperforming assets........ $ 532 $ 768 $1,202
====== ====== ======
Restructured loans................... $3,333 $1,760 $1,746
Nonaccrual and 90 days or more past
due loans as a percentage of net
loans.............................. 0.64% 0.74% 0.91%
Nonaccrual and 90 days or more past
due loans as a percentage of total
assets............................ 0.51 0.53 0.76
Total nonperforming assets to
total assets....................... 0.51 0.59 0.90
</TABLE>
Source: First Federal's prospectus.
<PAGE>
EXHIBIT I-13
First Federal Bank of Idaho
Deposit Composition
<TABLE>
<CAPTION>
At March 31, At December 31,
------------------------------------------------- ------------------------------
1995 1996 1996
----------------- ------------------------------ ------------------------------
Percent Percent Percent
of of Increase of Increase
Amount Total Amount Total (Decrease) Amount Total (Decrease)
------- -------- -------- -------- ---------- -------- -------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NOW accounts......................... $13,146 14.81% $ 14,617 12.67% $ 1,471 $ 15,211 14.44% 594
Passbook accounts.................... 15,610 17.58 13,861 12.02 (1,749) 13,456 12.77 (405)
Money market deposit accounts........ 8,932 10.06 7,167 6.21 (1,765) 7,428 7.05 261
Fixed-rate certificates which
mature:
Within 1 year...................... 13,506 15.21 52,692 45.69 39,186 49,235 46.74 (3,457)
After 1 year, but within 2 years... 16,621 18.72 16,329 14.16 (292) 12,240 11.62 (4,089)
After 2 years, but within 5 years.. 18,834 21.21 10,639 9.23 (8,195) 7,779 7.38 (2,860)
Certificates maturing thereafter... 2,138 2.41 19 .02 (2,119) -- -- (19)
------- ------ -------- ------ ------- -------- ------ -------
Total........................... $88,787 100.00% $115,324 100.00% $26,537 $105,349 100.00% $(9,975)
======= ====== ======== ====== ======= ======== ====== =======
</TABLE>
Source: First Federal's prospectus.
<PAGE>
EXHIBIT I-14
First Federal Bank of Idaho
Deposit Composition
<TABLE>
<CAPTION>
Amount Due
-------------------------------------------
Percent
After After After of Total
Less Than 1 to 2 2 to 3 3 to 4 After Certificate
One Year Years Years Years 4 Years Total Accounts
--------- ------- ------ ------ ------- ------- ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
3.20 - 4.19%... $ 1,079 $ -- $ -- $ -- $ -- $ 1,079 1.55%
4.20 - 5.19%... 24,176 409 1 -- -- 24,586 35.50
5.20 - 6.19%... 14,897 11,029 4,796 793 1,414 32,929 47.55
6.20 - 7.19%... 9,075 677 -- -- -- 9,752 14.08
7.20 - 8.19%... -- 110 230 3 110 453 0.66
8.20 - 11.19%.. 8 15 432 -- -- 455 0.66
------- ------- ------ ------ ------- ------- ------
Total.......... $49,235 $12,240 $5,459 $796 $1,524 $69,254 100.00%
======= ======= ====== ====== ======= ======= ======
</TABLE>
Source: First Federal's prospectus.
<PAGE>
EXHIBIT I-15
First Federal Bank of Idaho
Borrowings
<TABLE>
<CAPTION>
At or For the At or For the Nine
Year Ended Months Ended
March 31, December 31,
------------------ ----------------------
1995 1996 1995 1996
---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Maximum amount of FHLB
advances outstanding at any
month end during the period..... $4,900 $9,688 9,688 $15,060
Approximate average FHLB
advances outstanding during the
period........................ 1,150 4,862 5,696 8,272
Balance of FHLB advances
outstanding at end of period.... 4,000 2,304 2,467 15,060
Weighted average rate paid on FHLB
advances at end of period........ 6.74% 6.03% 6.04% 6.06%
Approximate weighted average rate
paid on FHLB advances during the
period........................... 6.68% 6.19% 6.25% 5.94%
</TABLE>
Source: First Federal's prospectus.
<PAGE>
EXHIBIT II-1
First Federal Bank of Idaho
Borrowings
<TABLE>
<CAPTION>
Net Book Value Deposits
at December 31, at December 31,
Location Year Acquired 1996 1996
- -------- ------------- --------------- ---------------
(in thousands)
<S> <C> <C> <C>
Administrative Office
- ---------------------------
920 Main Street 1978 $ 213,000 N/A
Lewiston, Idaho 83501
Full-Service Office
- ---------------------------
921 F Street 1960 123,000 $40,119
Lewiston, Idaho 83501
444 Thain Road 1974 63,000 16,161
Lewiston, Idaho 83501
201 S. Jackson Street 1989 437,000 28,329
Moscow, Idaho 83843
108 S. Mill Street 1977 47,000 10,607
Grangeville, Idaho 83530
1233 Northwood Center Court 1995 1,738,000 10,132
Coeur d'Alene, Idaho 83814
Residential Loan Centers
- ---------------------------
1233 Northwood Center Court 1995 -- N/A
Coeur d' Alene, Idaho 83814
108 10th Street 1978 -- N/A
Lewiston, Idaho
</TABLE>
Source: First Federal's prospectus.
<PAGE>
EXHIBIT II-2
Historical Interest Rates
<PAGE>
Historical Interest Rates(1)
<TABLE>
<CAPTION>
Prime 90 Day One Year 30 Year
Year/Qtr. Ended Rate T-Bill T-Bill T-Bond
- --------------- ---- ------ ------ ------
<S> <C> <C> <C> <C> <C>
1991: Quarter 1 8.75% 5.92% 6.24% 8.26%
Quarter 2 8.50% 5.72% 6.35% 8.43%
Quarter 3 8.00% 5.22% 5.38% 7.80%
Quarter 4 6.50% 3.95% 4.10% 7.47%
1992: Quarter 1 6.50% 4.15% 4.53% 7.97%
Quarter 2 6.50% 3.65% 4.06% 7.79%
Quarter 3 6.00% 2.75% 3.06% 7.38%
Quarter 4 6.00% 3.15% 3.59% 7.40%
1993: Quarter 1 6.00% 2.95% 3.18% 6.93%
Quarter 2 6.00% 3.09% 3.45% 6.67%
Quarter 3 6.00% 2.97% 3.36% 6.03%
Quarter 4 6.00% 3.06% 3.59% 6.34%
1994: Quarter 1 6.25% 3.56% 4.44% 7.09%
Quarter 2 7.25% 4.22% 5.49% 7.61%
Quarter 3 7.75% 4.79% 5.94% 7.82%
Quarter 4 8.50% 5.71% 7.21% 7.88%
1995: Quarter 1 9.00% 5.86% 6.47% 7.43%
Quarter 2 9.00% 5.57% 5.63% 6.63%
Quarter 3 8.75% 5.42% 5.68% 6.51%
Quarter 4 8.50% 5.09% 5.14% 5.96%
1996: Quarter 1 8.25% 5.14% 5.38% 6.67%
Quarter 2 8.25% 5.16% 5.68% 6.87%
Quarter 3 8.25% 5.03% 5.69% 6.92%
Quarter 4 8.25% 5.18% 5.49% 6.64%
February 28, 1997 8.25% 5.22% 5.67% 6.80%
</TABLE>
(1) End of period data.
Source: SNL Securities.
<PAGE>
EXHIBIT III-1
General Characteristics of Publicly-Traded Institutions
<PAGE>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 10, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
California Companies
- --------------------
AHM Ahmanson and Co. H.F. of CA NYSE Nationwide M.B. 49,902 345 12-31 10/72 41.12 4,201
GWF Great Western Fin. Corp. of CA NYSE CA,FL Div. 43,548 S 416 12-31 / 44.00 6,067
GDW Golden West Fin. Corp. of CA NYSE Nationwide M.B. 37,730 232 12-31 05/59 67.75 3,885
GLN Glendale Fed. Bk, FSB of CA NYSE CA Div. 15,128 150 06-30 10/83 26.75 1,332
CSA Coast Savings Financial of CA NYSE California R.E. 8,549 S 89 12-31 12/85 46.75 869
DSL Downey Financial Corp. of CA NYSE Southern CA Thrift 4,954 S 52 12-31 01/71 23.62 601
FED FirstFed Fin. Corp. of CA NYSE Los Angeles CA R.E. 4,144 25 12-31 12/83 26.00 274
BPLS Bank Plus Corp. of CA OTC Los Angeles CA R.E. 3,323 S 33 12-31 / 13.50 246
BVFS Bay View Capital Corp. of CA OTC San Francisco CA M.B. 3,300 27 12-31 05/86 56.25 375
WES Westcorp Inc. of Orange CA NYSE California Div. 3,181 S 25 12-31 05/86 18.50 481
PFFB PFF Bancorp of Pomona CA OTC Southern CA Thrift 2,525 22 03-31 03/96 16.25 322
AFFFZ America First Fin. Fund of CA OTC San Francisco CA Div. 2,209 36 12-31 / 33.62 202
CENF CENFED Financial Corp. of CA OTC Los Angeles CA Thrift 2,185 18 12-31 10/91 34.00 175
FRC First Republic Bancorp of CA (3) NYSE CA,NV M.B. 2,157 11 12-31 / 23.25 178
CFHC California Fin. Hld. Co. of CA OTC Central CA Thrift 1,337 22 12-31 04/83 28.87 137
REDF RedFed Bancorp of Redlands CA OTC Southern CA Thrift 866 S 14 12-31 04/94 14.25 101
HTHR Hawthorne Fin. Corp. of CA OTC Southern CA Thrift 828 S 9 12-31 / 11.00 29
HEMT HF Bancorp of Hemet CA OTC Southern CA Thrift 827 J 12 06-30 06/95 13.37 84
QCBC Quaker City Bancorp of CA OTC Los Angeles CA R.E. 764 8 06-30 12/93 19.50 74
ITLA Imperial Thrift & Loan of CA (3) OTC Los Angeles CA R.E. 736 S 11 12-31 / 16.37 128
PROV Provident Fin. Holdings of CA OTC M.B. 580 S 0 06-30 06/96 16.00 82
HBNK Highland Federal Bank of CA OTC Los Angeles CA R.E. 490 11 12-31 / 24.00 55
SGVB SGV Bancorp of W. Covina CA OTC Los Angeles CA Thrift 370 6 06-30 06/95 13.62 34
MBBC Monterey Bay Bancorp of CA OTC West Central CA Thrift 327 S 6 12-31 02/95 17.50 57
PCCI Pacific Crest Capital of CA (3) OTC Southern CA R.E. 265 S 4 12-31 / 13.00 38
BYFC Broadway Fin. Corp. of CA OTC Los Angeles CA Thrift 117 S 3 12-31 01/96 10.37 9
FSSB First FS&LA of San Bern. CA OTC San Bernard. CA Thrift 100 S 4 06-30 12/92 9.50 3
Florida Companies
- -----------------
</TABLE>
96
<PAGE>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 10, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Florida Companies (continued)
- -----------------------------
BANC BankAtlantic Bancorp of FL OTC Southeastern FL M.B. 2,170 S 43 12-31 11/83 16.37 241
FFPB First Palm Beach Bancorp of FL OTC Southeast FL Thrift 1,490 S 31 09-30 09/93 29.50 149
HARB Harbor FSB, MHC of FL (46.0) OTC Eastern FL Thrift 1,060 22 09-30 01/94 37.50 185
FFFL Fidelity FSB, MHC of FL (47.4) OTC Southeast FL Thrift 876 20 12-31 01/94 18.75 126
BKUNA BankUnited SA of FL OTC Miami FL Thrift 824 S 7 09-30 12/85 9.62 76
CMSV Commty. Svgs, MHC of FL (48.5) OTC Southeast FL Thrift 655 17 09-30 10/94 19.50 96
FFLC FFLC Bancorp of Leesburg FL OTC Central FL Thrift 346 8 12-31 01/94 27.50 67
FFFG F.F.O. Financial Group of FL OTC Central FL R.E. 311 S 11 12-31 10/88 4.00 34
Mid-Atlantic Companies
- ----------------------
DME Dime Savings Bank, FSB of NY (3) NYSE NY,NJ,FL M.B. 18,870 87 12-31 08/86 17.50 1,833
GPT GreenPoint Fin. Corp. of NY (3) NYSE New York City NY Thrift 13,326 82 06-30 01/94 60.00 2,849
SVRN Sovereign Bancorp of PA OTC PA,NJ,DE M.B. 9,433 120 12-31 08/86 12.62 753
ASFC Astoria Financial Corp. of NY OTC New York City NY Thrift 7,273 46 12-31 11/93 43.00 923
LISB Long Island Bancorp of NY OTC Long Island NY M.B. 5,364 S 36 09-30 04/94 36.62 896
COFD Collective Bancorp Inc. of NJ OTC Southern NJ Thrift 5,253 S 79 06-30 02/84 41.12 838
RCSB RCSB Financial, Inc. of NY (3) OTC NY M.B. 4,049 J 34 11-30 04/86 33.62 515
ALBK ALBANK Fin. Corp. of Albany NY OTC NY,MA Thrift 3,506 63 06-30 04/92 35.12 453
ROSE TR Financial Corp. of NY OTC New York, NY Thrift 3,140 S 15 12-31 06/93 35.31 310
NYB New York Bancorp, Inc. of NY AMEX Southeastern NY Thrift 3,122 29 09-30 01/88 32.25 534
GRTR Greater New York SB of NY (3) OTC New York NY Div. 2,567 S 14 12-31 06/87 15.75 213
BKCO Bankers Corp. of NJ (3) OTC Central NJ Thrift 2,460 15 12-31 03/90 24.62 305
RSLN Roslyn Bancorp of NY (3) OTC Long Island NY M.B. 2,348 P 6 12-31 01/97 15.63 682
CMSB Cmnwealth Bancorp of PA OTC Philadelphia PA M.B. 2,085 S 39 06-30 06/96 15.87 285
NWSB Northwest SB, MHC of PA (29.9) OTC Pennsylvania Thrift 1,912 53 06-30 11/94 15.37 359
RELY Reliance Bancorp of NY OTC NYC NY Thrift 1,878 28 06-30 03/94 22.25 196
MLBC ML Bancorp of Villanova PA OTC Philadelphia PA M.B. 1,875 18 03-31 08/94 17.00 198
HARS Harris SB, MHC of PA (24.2) OTC Southeast PA Thrift 1,724 S 31 12-31 01/94 21.62 242
HAVN Haven Bancorp of Woodhaven NY OTC New York City NY Thrift 1,565 S 9 12-31 09/93 33.25 144
JSBF JSB Financial, Inc. of NY OTC New York City R.E. 1,519 S 13 12-31 06/90 39.81 389
QCSB Queens County SB of NY (3) OTC New York City NY R.E. 1,359 9 12-31 11/93 56.75 433
</TABLE>
97
<PAGE>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 10, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WSFS WSFS Financial Corp. of DE (3) OTC DE Div. 1,307 S 14 12-31 11/86 12.00 155
DIME Dime Community Bancorp of NY OTC Thrift 1,232 0 06-30 06/96 18.50 269
PFSB PennFed Fin. Services of NJ OTC Northern NJ Thrift 1,214 17 06-30 07/94 24.87 120
OCFC Ocean Fin. Corp. of NJ OTC Thrift 1,190 S 0 12-31 07/96 30.37 275
YFED York Financial Corp. of PA OTC PA,MD Thrift 1,160 22 06-30 02/84 18.12 123
MFSL Maryland Fed. Bancorp of MD OTC MD Thrift 1,128 J 25 02-28 06/87 37.25 117
FSLA First SB SLA MHC of NJ (47.5) OTC Eastern NJ Thrift 975 S 17 12-31 06/92 21.75 156
PVSA Parkvale Financial Corp of PA OTC Southwestern PA Thrift 945 28 06-30 07/87 25.50 103
PSBK Progressive Bank, Inc. of NY (3) OTC Eastern NY Thrift 886 S 17 12-31 08/84 23.62 90
PKPS Poughkeepsie SB of NY OTC Poughkeepsie NY R.E. 861 S 9 12-31 11/85 5.87 74
MBB MSB Bancorp of Middletown NY (3) OTC Southeastern NY Thrift 848 S 17 09-30 08/92 19.00 54
FFIC Flushing Fin. Corp. of NY (3) OTC New York, NY Thrift 775 7 12-31 11/95 19.12 158
IBSF IBS Financial Corp. of NJ OTC Southwest NJ Thrift 742 S 8 09-30 10/94 17.50 174
PWBC PennFirst Bancorp of PA OTC Western PA Thrift 701 S 9 12-31 06/90 13.50 53
PSAB Prime Bancorp, Inc. of PA OTC Southeastern PA Thrift 677 S 18 12-31 11/88 20.00 106
FCIT First Cit. Fin. Corp of MD OTC DC Metro Area Thrift 668 S 14 12-31 12/86 22.75 67
SFIN Statewide Fin. Corp. of NJ OTC Northern NJ Thrift 662 S 16 03-31 10/95 17.50 87
FSNJ First SB of NJ, MHC (45.9) OTC Northern NJ Thrift 651 J 4 05-31 01/95 23.50 72
BFSI BFS Bankorp, Inc. of NY OTC New York NY R.E. 651 5 09-30 05/88 50.87 84
THRD TF Financial Corp. of PA OTC Philadelphia PA Thrift 648 11 06-30 07/94 18.75 80
GAF GA Financial Corp. of PA AMEX Pittsburgh PA Thrift 634 10 12-31 03/96 16.12 136
FBBC First Bell Bancorp of PA OTC Pittsburgh PA Thrift 577 S 7 12-31 06/95 16.12 125
FMCO FMS Financial Corp. of NJ OTC Southern NJ Thrift 542 16 12-31 12/88 19.75 47
TSBS Trenton SB, FSB MHC of NJ(35.0 OTC Central NJ Thrift 524 S 10 12-31 08/95 16.00 145
PULS Pulse Bancorp of S. River NJ OTC Central NJ Thrift 510 4 09-30 09/86 18.75 57
AHCI Ambanc Holding Co. of NY (3) OTC East-Central NY Thrift 496 S 9 12-31 12/95 13.25 65
PBIX Patriot Bank Corp. of PA OTC Southeast PA Thrift 490 S 7 12-31 12/95 15.63 70
FSPG First Home Bancorp of NJ OTC NJ,DE Thrift 487 S 10 12-31 04/87 18.87 51
ANBK American Nat'l Bancorp of MD OTC Baltimore MD R.E. 487 S 9 07-31 11/95 13.12 47
LVSB Lakeview SB of Paterson NJ OTC Northern NJ Thrift 473 S 8 07-31 12/93 31.00 77
CNSK Covenant Bank for Svgs. of NJ (3) OTC Southern NJ Thrift 387 S 12 12-31 / 14.50 40
SHEN First Shenango Bancorp of PA OTC Western PA Thrift 384 S 4 12-31 04/93 25.25 52
PFNC Progress Financial Corp. of PA OTC Southeastern PA M.B. 384 9 12-31 07/83 8.37 31
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 10, 1997(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------- ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ----- ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CARV Carver FSB of New York, NY OTC New York, NY Thrift 365 S 8 03-31 10/94 9.87 23
PBCI Pamrapo Bancorp, Inc. of NJ OTC Northern NJ Thrift 363 8 12-31 10/89 19.87 63
FFWM First Fin. Corp of Western MD OTC Western MD Thrift 361 9 06-30 01/92 32.25 70
RARB Raritan Bancorp. of Raritan NJ (3) OTC Central NJ Thrift 354 S 5 12-31 03/87 24.25 37
FOBC Fed One Bancorp of Wheeling WV OTC Northern WV,OH Thrift 342 9 12-31 01/95 18.50 45
HARL Harleysville SA of PA OTC Southeastern PA Thrift 324 4 09-30 08/87 21.50 35
FSBI Fidelity Bancorp, Inc. of PA OTC Southwestern PA Thrift 318 S 8 09-30 06/88 23.25 32
FKFS First Keystone Fin. Corp of PA OTC Philadelphia PA Thrift 311 5 09-30 01/95 21.50 28
CVAL Chester Valley Bancorp of PA OTC Southeastern PA Thrift 290 6 06-30 03/87 20.00 33
EQSB Equitable FSB of Wheaton MD OTC Central MD Thrift 287 4 09-30 09/93 32.12 19
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 284 S 3 09-30 04/96 15.87 82
LFBI Little Falls Bancorp of NJ OTC New Jersey Thrift 281 S 7 12-31 01/96 13.25 38
WVFC WVS Financial Corp. of PA (3) OTC Pittsburgh PA Thrift 276 5 06-30 11/93 26.25 46
LFED Leeds FSB, MHC of MD (36.2) OTC Baltimore MD Thrift 275 S 1 06-30 03/94 18.25 63
YFCB Yonkers Fin. Corp. of NY OTC Yonkers NY Thrift 262 4 09-30 04/96 13.50 43
FIBC Financial Bancorp of NY OTC New York, NY Thrift 259 5 09-30 08/94 17.87 31
WSB Washington SB, FSB of MD AMEX Southeastern MD Thrift 255 S 3 07-31 / 5.12 22
FBER First Bergen Bancorp of NJ OTC Northern NJ Thrift 250 S 2 09-30 04/96 14.62 44
IFSB Independence FSB of DC OTC Washington DC Ret. 248 S 2 12-31 06/85 8.75 11
CTBK Center Banks, Inc. of NY (3) OTC Central NY Thrift 242 7 12-31 05/86 19.50 18
WYNE Wayne Bancorp of NJ OTC Thrift 240 S 0 12-31 06/96 16.75 37
GDVS Greater DV SB,MHC of PA (19.9) (3) OTC Southeast PA Thrift 236 7 12-31 03/95 11.00 36
ESBK Elmira SB of Elmira NY (3) OTC NY,PA Ret. 221 S 6 12-31 03/85 19.00 13
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 219 6 03-31 08/94 17.12 30
LARL Laurel Capital Group of PA OTC Southwestern PA Thrift 202 6 06-30 02/87 21.75 33
SBFL SB Fngr Lakes MHC of NY (33.1) OTC Western NY Thrift 197 S 4 04-30 11/94 15.50 28
PHFC Pittsburgh Home Fin. of PA OTC Pittsburgh PA Thrift 195 S 6 09-30 04/96 14.50 30
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 186 S 3 06-30 12/95 15.25 52
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 166 S 3 12-31 06/95 17.37 22
TPNZ Tappan Zee Fin. Corp. of NY OTC Southeast NY Thrift 120 S 1 03-31 10/95 14.87 23
PRBC Prestige Bancorp of PA OTC Thrift 115 0 12-31 06/96 15.00 14
AFBC Advance Fin. Bancorp of WV OTC Northern Neck WV Thrift 102 P 2 06-30 01/97 14.00 15
THBC Troy Hill Bancorp of PA OTC Pittsburgh PA Thrift 99 S 2 06-30 06/94 20.25 22
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 10, 1997(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 98 J 5 09-30 04/96 14.00 23
WWFC Westwood Fin. Corp. of NJ OTC Northern NJ Thrift 94 S 2 03-31 06/96 19.50 13
ALBC Albion Banc Corp. of Albion NY OTC Western NY Thrift 60 S 2 09-30 07/93 17.12 4
PWBK Pennwood SB of PA (3) OTC Pittsburgh PA Thrift 46 S 3 12-31 07/96 14.37 9
Mid-West Companies
------------------
SFB Standard Fed. Bancorp of MI NYSE MI,IN,OH M.B. 15,651 166 12-31 01/87 57.62 1,843
COFI Charter One Financial of OH OTC OH,MI Div. 13,905 155 12-31 01/88 47.62 2,212
RFED Roosevelt Fin. Grp. Inc. of MO OTC MO,IL,KS Div. 7,797 79 12-31 01/87 23.00 1,016
TCB TCF Financial Corp. of MN NYSE MN,IL,MI,WI,OH Div. 7,091 184 12-31 06/86 45.37 1,577
CFB Commercial Federal Corp. of NE NYSE NE,CO,KS,OK M.B. 6,868 98 06-30 12/84 35.87 771
FFHC First Financial Corp. of WI OTC WI,IL Div. 5,700 129 12-31 12/80 26.75 984
SPBC St. Paul Bancorp, Inc. of IL OTC Chicago IL Div. 4,357 52 12-31 05/87 26.50 604
SECP Security Capital Corp. of WI OTC Wisconsin Div. 3,658 42 06-30 01/94 86.75 798
MAFB MAF Bancorp of IL OTC Chicago IL Thrift 3,230 13 06-30 01/90 40.63 426
CTZN CitFed Bancorp of Dayton OH OTC Dayton OH M.B. 2,918 33 03-31 01/92 34.38 295
GTFN Great Financial Corp. of KY OTC Kentucky M.B. 2,897 41 12-31 03/94 32.62 460
STND Standard Fin. of Chicago IL OTC Chicago IL Thrift 2,340 S 13 12-31 08/94 20.50 332
ABCW Anchor Bancorp Wisconsin of WI OTC Wisconsin M.B. 1,869 33 03-31 07/92 45.00 208
FISB First Indiana Corp. of IN OTC Central IN M.B. 1,496 28 12-31 08/83 28.25 235
DNFC D&N Financial Corp. of MI OTC MI,WI Ret. 1,473 35 12-31 02/85 17.87 149
FTFC First Fed. Capital Corp. of WI OTC Southern WI M.B. 1,469 S 44 12-31 11/89 28.37 175
STFR St. Francis Cap. Corp. of WI OTC Milwaukee WI Thrift 1,409 13 09-30 06/93 29.00 155
JSBA Jefferson Svgs Bancorp of MO OTC St. Louis MO,TX Thrift 1,128 S 21 12-31 04/93 28.50 119
FFSW First Fed Fin. Serv. of OH OTC Northeastern OH Thrift 1,111 S 18 12-31 04/87 37.50 135
AADV Advantage Bancorp of WI OTC WI,IL Thrift 1,032 15 09-30 03/92 35.50 116
CFSB CFSB Bancorp of Lansing MI OTC Central MI Thrift 830 18 12-31 06/90 20.12 95
OFCP Ottawa Financial Corp. of MI OTC Western MI Thrift 827 S 26 12-31 08/94 19.25 100
IFSL Indiana Federal Corp. of IN OTC Northwestern IN Thrift 809 S 15 12-31 02/87 26.25 124
FFEC First Fed. Bancshares of WI OTC Northwest WI Thrift 729 S 20 12-31 10/94 18.62 128
NASB North American SB of MO OTC KS,MO M.B. 711 S 8 09-30 09/85 36.75 83
</TABLE>
<PAGE>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 10, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
Mid-West Companies (continued)
______________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ABCL Allied Bancorp of IL OTC Chicago IL M.B. 668 10 09-30 07/92 30.97 83
MSBK Mutual SB, FSB of Bay City MI OTC Michigan M.B. 665 22 12-31 07/92 6.75 29
GSBC Great Southern Bancorp of MO OTC Southwest MO Div. 658 S 25 06-30 12/89 17.12 140
HOMF Home Fed Bancorp of Seymour IN OTC Southern IN Thrift 633 S 15 06-30 01/88 27.25 91
SFSL Security First Corp. of OH OTC Northeastern OH R.E. 624 13 03-31 01/88 17.75 88
FNGB First Northern Cap. Corp of WI OTC Northeast WI Thrift 615 20 12-31 12/83 18.62 82
AVND Avondale Fin. Corp. of IL OTC Chicago IL Ret. 613 S 6 03-31 04/95 18.50 65
FFYF FFY Financial Corp. of OH OTC Youngstown OH Thrift 582 10 06-30 06/93 25.12 108
SSBK Strongsville SB of OH OTC Cleveland OH Thrift 568 13 12-31 / 23.75 60
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 555 7 12-31 06/94 23.12 103
HFFC HF Financial Corp. of SD OTC South Dakota Thrift 553 19 06-30 04/92 19.50 58
FFDP First Fed Bancshares of IL OTC Chicago IL Thrift 541 3 12-31 07/92 17.50 54
FDEF First Defiance Fin. Corp. of OH OTC Northwest OH Thrift 524 S 9 06-30 10/95 13.06 124
CBCI Calumet Bancorp of Chicago IL OTC Chicago IL Thrift 510 5 06-30 02/92 35.50 84
FFBH First Fed. Bancshares of AR OTC Northern AR Thrift 510 S 8 12-31 05/96 18.87 97
FBCI Fidelity Bancorp of Chicago IL OTC Chicago IL Thrift 476 S 5 09-30 12/93 19.75 55
FFSX First FS&LA. MHC of IA (46.0) OTC Western IA Thrift 457 12 06-30 06/92 30.25 57
PERM Permanent Bancorp of IN OTC Southwest IN Thrift 413 11 03-31 04/94 22.50 47
SFSB SuburbFed Fin. Corp. of IL OTC IL,IN Thrift 404 12 12-31 02/92 22.50 28
ASBI Ameriana Bancorp of IN OTC Eastern IN,OH Thrift 400 S 8 12-31 02/87 15.87 52
HALL Hallmark Capital Corp. of WI OTC Milwaukee WI Thrift 397 3 06-30 01/94 18.75 27
PMFI Perpetual Midwest Fin. of IA OTC EastCentral IA Thrift 389 4 12-31 03/94 19.94 38
CBSB Charter Financial Inc. of IL OTC Southern IL Thrift 388 S 6 09-30 12/95 15.75 67
CASH First Midwest Fin. Corp. of IA OTC IA,SD R.E. 388 S 9 09-30 09/93 16.75 49
SWBI Southwest Bancshares of IL OTC Chicago IL Thrift 382 5 12-31 06/92 19.87 52
CAFI Camco Fin. Corp. of OH OTC Eastern OH M.B. 378 S 7 12-31 / 15.75 48
PFSL Pocahnts Fed, MHC of AR (46.4) OTC Northeast AR Thrift 373 5 09-30 04/94 19.06 31
HBEI Home Bancorp of Elgin IL OTC Northern IL Thrift 371 S 5 12-31 09/96 15.12 106
FFKY First Fed. Fin. Corp. of KY OTC Central KY Thrift 367 7 06-30 07/87 21.00 88
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift 362 11 09-30 10/94 17.00 55
MCBS Mid Continent Bancshares of KS OTC Central KS M.B. 356 7 09-30 06/94 25.25 51
KNK Kankakee Bancorp of IL AMEX Illinois Thrift 351 10 03-31 12/92 27.37 39
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 348 S 6 12-31 07/94 21.50 47
</TABLE>
<PAGE>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 10, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PVFC PVF Capital Corp. of OH OTC Cleveland OH R.E. 348 9 06-30 12/92 16.50 38
HVFD Haverfield Corp. of OH OTC Cleveland OH Thrift 347 10 12-31 03/85 20.50 39
HMCI Homecorp, Inc. of Rockford IL OTC Northern IL Thrift 340 S 9 12-31 06/90 20.50 23
INBI Industrial Bancorp of OH OTC Northern OH Thrift 327 10 12-31 08/95 12.62 69
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 323 S 8 09-30 03/95 19.25 51
FMBD First Mutual Bancorp of IL OTC Central IL Thrift 316 S 7 12-31 07/95 16.00 60
WCBI WestCo Bancorp of IL OTC Chicago IL Thrift 308 S 1 12-31 06/92 21.25 55
SMFC Sho-Me Fin. Corp. of MO OTC Southwest MO Thrift 298 7 12-31 06/94 29.00 42
WFCO Winton Financial Corp. of OH OTC Cincinnati OH R.E. 292 S 4 09-30 08/88 13.00 26
GFCO Glenway Financial Corp. of OH OTC Cincinnati OH Thrift 284 S 6 06-30 11/90 20.75 25
PFDC Peoples Bancorp of Auburn IN OTC Northeastern IN Thrift 280 6 09-30 07/87 20.75 48
FCBF FCB Fin. Corp. of Neenah WI OTC Eastern WI Thrift 269 S 6 03-31 09/93 22.25 55
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 266 S 6 12-31 05/96 15.50 44
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 260 1 06-30 04/87 29.00 20
FFED Fidelity Fed. Bancorp of IN OTC Southwestern IN Thrift 260 4 06-30 08/87 9.00 22
FFOH Fidelity Financial of OH OTC Cincinnati OH Thrift 256 S 4 12-31 03/96 12.37 69
WAYN Wayne S&L Co. MHC of OH (47.8) OTC Central OH Thrift 251 S 6 03-31 06/93 26.00 39
OSBF OSB Fin. Corp. of Oshkosh WI OTC Eastern WI Thrift 250 S 7 12-31 06/92 32.00 37
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 236 7 06-30 12/93 14.00 26
DFIN Damen Fin. Corp. of Chicago IL OTC Chicago IL Thrift 235 3 11-30 10/95 14.50 55
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 235 S 5 09-30 10/94 14.75 30
CBIN Community Bank Shares of IN OTC Southeast IN Thrift 235 S 7 12-31 04/95 13.75 27
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 224 4 09-30 03/94 19.25 34
LARK Landmark Bancshares of KS OTC Central KS Thrift 222 5 09-30 03/94 18.87 35
SBCN Suburban Bancorp. of OH OTC Cincinnati OH Thrift 219 8 06-30 09/93 16.50 24
FFHS First Franklin Corp. of OH OTC Cincinnati OH Thrift 218 S 7 12-31 01/88 16.75 19
OHSL OHSL Financial Corp. of OH OTC Cincinnati, OH Thrift 218 S 4 12-31 02/93 22.12 27
BFFC Big Foot Fin. Corp. of IL OTC Chicago IL Thrift 216 P 3 07-31 12/96 13.87 35
MBLF MBLA Financial Corp. of MO OTC Northeast MO Thrift 209 2 06-30 06/93 20.12 27
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 201 S 7 12-31 04/95 15.00 31
CBCO CB Bancorp of Michigan City IN OTC Northwest IN Thrift 200 S 3 03-31 12/92 28.62 33
FFFD North Central Bancshares of IA OTC Central IA Thrift 198 S 4 12-31 03/96 15.25 52
MWFD Midwest Fed. Fin. Corp of WI OTC Central WI Thrift 195 S 9 12-31 07/92 18.00 29
</TABLE>
<PAGE>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 10, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
GFED Guarnty FS&LA,MHC of MO (31.0) OTC Southwest MO Thrift 191 4 06-30 04/95 11.75 37
FFBZ First Federal Bancorp of OH OTC Eastern OH Thrift 189 6 09-30 06/92 17.50 28
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift 186 S 3 09-30 04/95 16.62 47
PULB Pulaski SB, MHC of MO (29.0) OTC St. Louis MO Thrift 179 S 5 09-30 05/94 16.75 35
LSBI LSB Fin. Corp. of Lafayette IN OTC Central IN Thrift 178 S 3 12-31 02/95 19.50 18
PFED Park Bancorp of Chicago IL OTC Chicago IL Thrift 177 S 3 12-31 08/96 15.37 42
MARN Marion Capital Holdings of IN OTC Central IN Thrift 176 2 06-30 03/93 21.25 39
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 176 2 09-30 10/94 13.75 30
EGLB Eagle BancGroup of IL OTC Central IL Thrift 173 1 12-31 07/96 16.00 21
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 160 S 3 12-31 06/95 14.25 28
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 160 J 8 06-30 04/94 16.25 27
FFWD Wood Bancorp of OH OTC Northern OH Thrift 160 6 06-30 08/93 15.75 24
FFWC FFW Corporation of Wabash IN OTC Central IN Thrift 158 3 06-30 03/93 25.25 18
FBSI First Bancshares of MO OTC Southcentral MO Thrift 157 5 06-30 12/93 19.25 23
SJSB SJS Bancorp of St. Joseph MI OTC Southwest MI Thrift 152 S 4 06-30 02/95 25.50 23
QCFB QCF Bancorp of Virginia MN OTC Northeast MN Thrift 148 S 2 06-30 04/95 18.75 27
JXSB Jcksnville SB,MHC of IL (44.6) OTC Central IL Thrift 144 S 4 12-31 04/95 16.50 21
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 140 S 2 06-30 03/95 11.62 21
MWBI Midwest Bancshares, Inc. of IA OTC Southeast IA Thrift 136 4 12-31 11/92 28.50 10
CLAS Classic Bancshares of KY OTC Eastern KY Thrift 136 S 1 03-31 12/95 13.75 18
FKKY Frankfort First Bancorp of KY OTC Frankfort KY Thrift 129 S 3 06-30 07/95 9.75 34
PTRS The Potters S&L Co. of OH OTC Northeast OH Thrift 125 S 4 12-31 12/93 19.62 10
MFCX Marshalltown Fin. Corp. of IA OTC Central IA Thrift 124 S 3 09-30 03/94 14.62 21
WEHO Westwood Hmstd Fin Corp of OH OTC Cincinnati OH Thrift 120 2 12-31 09/96 14.50 41
GTPS Great American Bancorp of IL OTC East Central IL Thrift 120 J 3 09-30 06/95 15.87 31
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 117 2 06-30 12/93 18.00 19
MIFC Mid Iowa Financial Corp. of IA OTC Central IA Thrift 116 S 6 09-30 10/92 8.50 14
ASBP ASB Financial Corp. of OH OTC Southern OH Thrift 112 1 06-30 04/95 11.75 20
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 110 5 09-30 04/95 18.50 13
DCBI Delphos Citizens Bancorp of OH OTC Northwest OH Thrift 110 P 1 09-30 11/96 14.25 29
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 109 S 2 09-30 10/95 16.00 32
FFSL First Independence Corp. of KS OTC Southeast KS Thrift 109 1 09-30 10/93 11.87 13
FTNB Fulton Bancorp of MO OTC Central MO Thrift 100 S 2 04-30 10/96 18.50 32
</TABLE>
<PAGE>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 10, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CNSB CNS Bancorp of MO OTC Central MO Thrift 99 S 5 12-31 06/96 17.00 28
FFBI First Financial Bancorp of IL OTC Northern IL M.B. 97 S 2 12-31 10/93 16.50 7
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 97 3 03-31 09/95 14.25 14
NWEQ Northwest Equity Corp. of WI OTC Northwest WI Thrift 96 S 3 03-31 10/94 13.50 13
CIBI Community Inv. Bancorp of OH OTC NorthCentral OH Thrift 95 S 3 06-30 02/95 17.25 11
WCFB Wbstr Cty FSB MHC of IA (45.2) OTC Central IA Thrift 95 S 1 12-31 08/94 13.75 29
RIVR River Valley Bancorp of IN OTC Southeast IN Thrift 94 P 7 12-31 12/96 15.00 18
CBES CBES Bancorp of MO OTC Western MO Thrift 92 2 06-30 09/96 17.25 18
FTSB Fort Thomas Fin. Corp. of KY OTC Northern KY Thrift 91 2 09-30 06/95 12.00 19
INCB Indiana Comm. Bank, SB of IN OTC Central IN Ret. 91 S 3 06-30 12/94 16.75 15
PFFC Peoples Fin. Corp. of OH OTC Northeast OH Thrift 89 S 2 09-30 09/96 14.75 22
KYF Kentucky First Bancorp of KY AMEX Central KY Thrift 88 2 06-30 08/95 11.75 16
GFSB GFS Bancorp of Grinnell IA OTC Central IA Thrift 88 1 06-30 01/94 22.25 11
THR Three Rivers Fin. Corp. of MI AMEX Southwest MI Thrift 87 S 4 06-30 08/95 14.50 12
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 85 S 1 06-30 04/96 14.00 20
AMFC AMB Financial Corp. of IN OTC Northwest IN Thrift 84 S 4 12-31 04/96 13.75 15
PCBC Perry Co. Fin. Corp. of MO OTC EastCentral MO Thrift 81 S 1 09-30 02/95 17.25 14
SFFC StateFed Financial Corp. of IA OTC Des Moines IA Thrift 81 S 2 06-30 01/94 18.37 14
SOBI Sobieski Bancorp of S. Bend IN OTC Northern IN Thrift 79 3 06-30 03/95 14.00 12
HHFC Harvest Home Fin. Corp. of OH OTC Southwest OH Thrift 79 S 3 09-30 10/94 10.50 10
LOGN Logansport Fin. Corp. of IN OTC Northern IN Thrift 78 1 12-31 06/95 13.00 16
HZFS Horizon Fin'l. Services of IA OTC Central IA Thrift 77 S 3 06-30 06/94 17.00 7
PSFI PS Financial of Chicago IL OTC Chicago IL Thrift 73 P 1 12-31 11/96 13.75 30
ATSB AmTrust Capital Corp. of IN OTC Northcentral IN Thrift 72 S 3 06-30 03/95 11.87 6
MIVI Miss. View Hold. Co. of MN OTC Central MN Thrift 71 S 1 09-30 03/95 14.87 13
GWBC Gateway Bancorp of KY OTC Eastern KY Thrift 69 S 2 06-30 01/95 14.25 15
MSBF MSB Financial Corp. of MI OTC Southcentral MI Thrift 67 2 06-30 02/95 21.75 14
NSLB NS&L Bancorp of Neosho MO OTC Southwest MO Thrift 62 S 2 09-30 06/95 16.25 12
LXMO Lexington B&L Fin. Corp. of MO OTC West Central MO Thrift 62 S 1 09-30 06/96 14.62 18
HCFC Home City Fin. Corp. of OH OTC Southwest OH Thrift 61 P 1 06-30 12/96 13.25 12
CKFB CKF Bancorp of Danville KY OTC Central KY Thrift 60 1 12-31 01/95 17.75 16
CSBF CSB Financial Group Inc of IL (3) OTC Centralia IL Thrift 50 S 1 09-30 10/95 10.62 10
RELI Reliance Bancshares Inc of WI (3) OTC Milwaukee WI Thrift 48 S 1 June 04/96 7.12 18
</TABLE>
<PAGE>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 10, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HBBI Home Building Bancorp of IN OTC Southwest IN Thrift 45 2 09-30 02/95 21.00 7
HWEN Home Financial Bancorp of IN OTC Central IN Thrift 39 S 0 06-30 07/96 14.00 7
LONF London Financial Corp. of OH OTC Central OH Thrift 37 1 09-30 04/96 14.62 8
FLKY First Lancaster Bncshrs of KY OTC Thrift 37 0 06-30 07/96 16.00 15
JOAC Joachim Bancorp of MO OTC Eastern MO Thrift 36 S 1 03-31 12/95 14.50 11
New England Companies
---------------------
PBCT Peoples Bank, MHC of CT (37.4) (3) OTC Southwestern CT Div. 7,645 84 12-31 07/88 34.50 1,399
PHBK Peoples Heritage Fin Grp of ME (3) OTC ME,NH Div. 4,456 S 82 12-31 12/86 31.37 885
WBST Webster Financial Corp. of CT OTC Central CT Thrift 3,918 64 12-31 12/86 39.25 311
CFX Cheshire Fin. Corp. of NH (3) AMEX S.W. NH,MA M.B. 1,521 S 23 12-31 02/87 16.62 216
EGFC Eagle Financial Corp. of CT OTC Western CT Thrift 1,403 S 19 09-30 02/87 29.50 134
SISB SIS Bank of Springfield MA (3) OTC Central MA Div. 1,349 21 12-31 02/95 26.50 152
ANDB Andover Bancorp, Inc. of MA (3) OTC Northeastern MA M.B. 1,205 11 12-31 05/86 28.13 144
FESX First Essex Bancorp of MA (3) OTC MA,NH Div. 1,067 10 12-31 08/87 15.94 118
MDBK Medford Savings Bank of MA (3) OTC Eastern MA Thrift 1,039 16 12-31 03/86 28.75 130
AFCB Affiliated Comm BC, Inc of MA OTC MA Thrift 1,005 S 10 12-31 / 24.62 127
FAB FirstFed America Bancorp of MA AMEX Southeast MA M.B. 949 P 14 12-31 01/97 14.62 127
FFES First FS&LA of E. Hartford CT OTC Central CT Thrift 943 S 12 12-31 06/87 25.50 67
MASB MassBank Corp. of Reading MA (3) OTC Eastern MA Thrift 888 14 12-31 05/86 40.00 107
EBCP Eastern Bancorp of NH OTC VT, NH M.B. 866 25 09-30 11/83 25.62 94
BFD BostonFed Bancorp of MA AMEX Boston MA M.B. 797 S 8 12-31 10/95 16.25 102
MECH Mechanics SB of Hartford CT (3) OTC Hartford CT Thrift 710 S 0 12-31 06/96 17.00 90
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 692 S 10 12-31 07/86 20.62 106
NSSB Norwich Financial Corp. of CT (3) OTC Southeastern CT Thrift 683 18 12-31 11/86 22.62 122
NSSY Norwalk Savings Society of CT (3) OTC Southwest CT Thrift 637 S 8 12-31 06/94 25.25 60
GROV GroveBank for Savings of MA (3) OTC Eastern MA Thrift 599 S 7 12-31 08/86 50.62 78
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 558 15 12-31 12/81 29.75 68
CBNH Community Bankshares Inc of NH (3) OTC Southcentral NH M.B. 549 S 9 06-30 05/86 23.62 58
MWBX Metro West of MA (3) OTC Eastern MA Thrift 523 9 12-31 10/86 5.22 73
PBKB People's SB of Brockton MA (3) OTC Southeastern MA Thrift 513 S 14 12-31 10/86 12.81 46
</TABLE>
<PAGE>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 10, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
New England Companies (continued)
---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SOSA Somerset Savings Bank of MA (3) OTC Eastern MA R.E. 511 S 5 12-31 07/86 2.81 47
ABBK Abington Savings Bank of MA (3) OTC Southeastern MA M.B. 487 7 12-31 06/86 22.00 42
PBNB Peoples Sav. Fin. Corp. of CT (3) OTC Central CT Thrift 482 8 12-31 08/86 30.87 59
SWCB Sandwich Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 465 11 04-30 07/86 32.00 61
PETE Primary Bank of NH (3) OTC Southern NH Ret. 427 8 12-31 10/93 17.50 37
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 419 3 12-31 07/86 22.50 58
EIRE Emerald Island Bancorp, MA (3) OTC Eastern MA R.E. 410 7 12-31 09/86 19.50 43
WRNB Warren Bancorp of Peabody MA (3) OTC Eastern MA R.E. 359 6 12-31 07/86 15.87 58
MIDC Midconn Bank of Kensington CT (3) OTC Central CT Thrift 358 S 10 09-30 09/86 24.12 47
LSBX Lawrence Savings Bank of MA (3) OTC Northeastern MA Thrift 338 6 12-31 05/86 9.62 41
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 326 S 11 04-30 10/86 18.50 36
NMSB Newmil Bancorp. of CT (3) OTC Eastern CT Thrift 312 12 06-30 02/86 9.25 37
POBS Portsmouth Bank Shrs Inc of NH (3) OTC Southeastern NH Thrift 269 S 3 12-31 02/88 15.37 90
NHTB NH Thrift Bancshares of NH OTC Central NH Thrift 264 S 10 12-31 05/86 11.75 20
NEBC Northeast Bancorp of ME (3) OTC Eastern ME Thrift 230 S 8 06-30 08/87 13.75 17
TBK Tolland Bank of CT (3) AMEX Northern CT Thrift 228 S 7 12-31 12/86 15.50 18
HIFS Hingham Inst. for Sav. of MA (3) OTC Eastern MA Thrift 202 4 12-31 12/88 18.62 24
HPBC Home Port Bancorp, Inc. of MA (3) OTC Southeastern MA Thrift 189 S 2 12-31 08/88 19.00 35
BSBC Branford SB of CT (3) OTC New Haven CT R.E. 184 5 12-31 11/86 4.25 28
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 159 4 12-31 05/93 15.75 19
AFED AFSALA Bancorp of NY OTC Central NY Thrift 149 P 4 09-30 10/96 13.50 20
KSBK KSB Bancorp of Kingfield ME (3) OTC Western ME M.B. 133 J 8 12-31 06/93 34.00 14
MFLR Mayflower Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 116 S 4 04-30 12/87 17.50 16
NTMG Nutmeg FS&LA of CT OTC CT M.B. 94 S 3 12-31 / 7.37 5
FCB Falmouth Co-Op Bank of MA (3) AMEX Southeast MA Thrift 89 1 09-30 03/96 15.63 23
MCBN Mid-Coast Bancorp of ME OTC Eastern ME Thrift 56 S 2 03-31 11/89 19.00 4
GLBK Glendale Co-op. Bank of MA (3) OTC Boston MA Thrift 37 J 1 04-30 01/94 26.75 7
North-West Companies
--------------------
WAMU Washington Mutual Inc. of WA (3) OTC WA,OR,ID,UT,MT Div. 22,414 S 290 12-31 03/83 52.87 6,669
WFSL Washington FS&LA of Seattle WA OTC Western US Thrift 5,869 89 09-30 11/82 25.50 1,210
</TABLE>
<PAGE>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 10, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
North-West Companies (continued)
--------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IWBK Interwest SB of Oak Harbor WA OTC Western WA Div. 1,703 31 12-31 / 35.00 280
STSA Sterling Financial Corp. of WA OTC WA,OR M.B. 1,531 S 41 06-30 / 17.12 95
FWWB First Savings Bancorp of WA (3) OTC Central WA Thrift 947 S 16 03-31 11/95 19.75 209
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 673 7 09-30 10/95 15.50 155
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 500 S 12 03-31 08/86 15.00 96
FMSB First Mutual SB of Bellevue WA (3) OTC Western WA M.B. 401 S 6 12-31 12/85 19.50 48
CASB Cascade SB of Everett WA OTC Seattle WA Thrift 348 6 06-30 08/92 16.37 34
RVSB Rvrview SB,FSB MHC of WA(41.7) OTC Southwest WA M.B. 224 9 03-31 10/93 18.25 40
EFBC Empire Federal Bancorp of MT OTC Southern MT Thrift 110 P 3 06-30 01/97 13.62 35
<CAPTION>
South-East Companies
--------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFCH First Fin. Holdings Inc. of SC OTC CHARLESTON SC Div. 1,582 32 09-30 11/83 28.00 176
LIFB Life Bancorp of Norfolk VA OTC Southeast VA Thrift 1,420 20 12-31 10/94 19.75 194
AMFB American Federal Bank of SC OTC Northwest SC Thrift 1,395 S 41 12/31 01/89 28.87 316
MGNL Magna Bancorp of MS OTC MS,AL M.B. 1,342 62 06-30 03/91 18.75 258
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 991 J 29 9-30 12/83 22.00 157
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 902 8 06-30 12/95 21.25 365
VFFC Virginia First Savings of VA OTC Petersburg VA M.B. 781 S 23 06-30 01/78 16.25 94
ISBF ISB Financial Corp. of LA OTC SouthCentral LA Thrift 686 S 16 12-31 04/95 25.12 177
PALM Palfed, Inc. of Aiken SC OTC Southwest SC Thrift 660 S 19 12-31 12/85 14.75 77
CNIT Cenit Bancorp of Norfolk VA OTC Southeastern VA Thrift 656 J 15 12-31 08/92 45.00 73
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 642 S 10 03-31 04/86 16.62 76
VABF Va. Beach Fed. Fin. Corp of VA OTC Southeast VA M.B. 604 S 12 12-31 11/80 11.12 55
FFFC FFVA Financial Corp. of VA OTC Southern VA Thrift 534 11 12-31 10/94 24.75 116
CFCP Coastal Fin. Corp. of SC OTC SC Thrift 460 S 9 09-30 09/90 24.00 83
TSH Teche Holding Company of LA AMEX Southern LA Thrift 380 S 8 09-30 04/95 15.00 52
COOP Cooperative Bk.for Svgs. of NC OTC Eastern NC Thrift 341 17 03-31 08/91 20.50 31
FFRV Fid. Fin. Bkshrs. Corp. of VA OTC Southern VA Thrift 329 S 7 12-31 05/86 28.00 64
FSFC First So.east Fin. Corp. of SC OTC Northwest SC Thrift 326 11 06-30 10/93 10.75 47
SOPN First SB, SSB, Moore Co. of NC OTC Central NC Thrift 266 5 06-30 01/94 19.50 72
ANA Acadiana Bancshares of LA (3) AMEX Southern LA Thrift 265 S 4 12-31 07/96 17.37 47
</TABLE>
<PAGE>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 10, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- --------- ------ ------- ----- ----- ------ -------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
South-East Companies (continued)
- --------------------------------
UFRM United FS&LA of Rocky Mount NC OTC Eastern NC M.B. 264 S 9 12-31 07/80 8.25 25
MERI Meritrust FSB of Thibodaux LA OTC Southeast LA Thrift 231 S 8 12-31 / 35.50 27
FLAG Flag Financial Corp of GA OTC Western GA M.B. 229 S 4 12-31 12/86 12.75 26
PERT Perpetual of SC, MHC (46.8) OTC Northwest SC Thrift 210 S 5 09-30 10/96 26.00 39
SSFC South Street Fin. Corp. of NC (3) OTC South Central NC Thrift 208 P 2 09-30 10/96 16.75 75
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 206 1 09-30 03/96 19.87 85
PLE Pinnacle Bank of AL AMEX Central AL Thrift 192 S 5 06-30 12/86 22.37 20
GSFC Green Street Fin. Corp. of NC OTC Southern NC Thrift 176 S 3 09-30 04/96 18.25 78
ESX Essex Bancorp of VA AMEX VA,NC M.B. 172 S 12 12-31 / 1.62 2
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 166 S 5 09-30 07/95 16.87 31
FSTC First Citizens Corp of GA OTC Western GA M.B. 162 J 8 03-31 03/86 22.00 35
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 161 S 3 03-31 03/88 22.00 28
FGHC First Georgia Hold. Corp of GA OTC Southeastern GA Thrift 144 J 7 09-30 02/87 10.12 21
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 127 S 3 09-30 08/94 19.25 22
FFBS FFBS Bancorp of Columbus MS OTC Columbus MS Thrift 126 S 3 06-30 06/93 22.00 34
PDB Piedmont Bancorp of NC AMEX Central NC Thrift 125 2 06-30 12/95 10.62 29
GSLC Guaranty Svgs & Loan FA of VA OTC Charltsvl VA M.B. 115 S 3 06-30 / 9.50 9
CFNC Carolina Fincorp of NC (3) OTC Southcentral NC Thrift 109 P 4 06-30 11/96 15.00 28
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 108 S 4 06-30 10/95 14.25 18
TWIN Twin City Bancorp of TN OTC Northeast TN Thrift 107 S 3 12-31 01/95 18.50 16
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 106 S 2 12-31 04/96 27.25 50
KSAV KS Bancorp of Kenly NC OTC Central NC Thrift 101 3 12-31 12/93 19.75 13
CENB Century Bancshares of NC (3) OTC Charlotte NC Thrift 99 P 1 06-30 12/96 66.00 27
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 90 S 2 09-30 02/95 13.75 11
CCFH CCF Holding Company of GA OTC Atlanta GA Thrift 80 S 3 09-30 07/95 16.25 15
CZF Citisave Fin. Corp. of LA AMEX Baton Rouge LA Thrift 76 S 5 12-31 07/95 13.87 13
SCBS Southern Commun. Bncshrs of AL OTC NorthCentral AL Thrift 73 P 3 09-30 12/96 13.50 15
SSB Scotland Bancorp of NC AMEX S. Central NC Thrift 69 S 2 09-30 04/96 15.75 29
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 43 S 1 06-30 07/94 19.25 14
MBSP Mitchell Bancorp of NC (3) OTC Western NC Thrift 35 S 1 12-31 07/96 15.37 15
South-West Companies
- --------------------
</TABLE>
<PAGE>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 10, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
($Mil) ($) ($Mil)
South-West Companies (continued)
--------------------------------
CBSA Coastal Bancorp of Houston TX OTC Houston TX M.B. 2,859 S 40 12-31 / 27.12 135
FBHC Fort Bend Holding Corp. of TX OTC Eastcentral TX M.B. 279 5 03-31 06/93 24.25 20
JXVL Jacksonville Bancorp of TX OTC East Central TX Thrift 218 S 6 09-30 04/96 15.25 40
LOAN Horizon Bancorp, Inc of TX (3) OTC Austin TX R.E. 149 S 8 04-30 / 24.00 33
LBFI L&B Financial of S. Springs TX OTC Northeast TX Thrift 142 6 06-30 09/94 18.00 29
ETFS East Texas Fin. Serv. of TX OTC Northeast TX Thrift 114 S 2 09-30 01/95 18.25 20
AABC Access Anytime Bancorp of NM OTC Eastern NM Thrift 109 S 3 12-31 08/86 5.25 4
GUPB GFSB Bancorp of Gallup NM OTC Northwest NM Thrift 80 S 1 06-30 06/95 16.25 15
Western Companies (Excl CA)
---------------------------
FFBA First Colorado Bancorp of Co OTC Denver CO Thrift 1,501 J 26 12-31 01/96 17.12 311
WSTR WesterFed Fin. Corp. of MT OTC MT Thrift 564 20 06-30 01/94 21.50 95
GBCI Glacier Bancorp of MT OTC Western MT Div. 412 S 13 06-30 03/84 24.75 84
SFBM Security Bancorp of MT OTC Southcentral MT Thrift 382 S 16 06-30 11/86 30.25 46
UBMT United Fin. Corp. of MT OTC Central MT Thrift 108 S 4 12-31 09/86 19.75 24
TRIC Tri-County Bancorp of WY OTC Southeastern WY Thrift 86 2 12-31 09/93 18.50 11
CRZY Crazy Woman Creek Bncorp of WY OTC Northeast WY Thrift 53 1 09-30 03/96 13.62 14
Other Areas
-----------
</TABLE>
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage
Banker, R.E.=Real Estate Developer, Div.=Diversified, and
Ret.=Retail Banking.
(3) FDIC savings bank.
Source: Corporate offering circulars, SNL Securities Quarterly Thrift Report,
and financial reports of publicly Traded Thrifts.
Date of Last Update: 03/10/97
<PAGE>
EXHIBIT III-2
Financial Analysis of Northwestern and Western Institutions
<PAGE>
Exhibit III-2A
Market Pricing Comparatives
Prices As of February 28, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization --------------
--------------- Core Book Pricing Ratios(3)
Price/ Market 12-Mth Value/ ----------------------------------------
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
SAIF-Insured Thrifts 20.30 140.42 1.16 15.91 19.92 127.41 15.51 129.55 17.52
Special Selection Grouping(8) 22.59 804.31 1.20 12.67 19.70 153.99 19.00 163.25 19.22
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
CASB Cascade SB of Everett WA 16.37 33.61 0.86 10.34 19.96 158.32 9.66 158.32 19.03
EFBC Empire Federal Bancorp of MT 13.62 35.30 0.46 14.76 NM 92.28 32.20 92.28 29.61
FMSB First Mutual SB of Bellevue WA 19.50 47.83 1.49 10.79 12.58 180.72 11.94 180.72 13.09
FWWB First Savings Bancorp of WA 19.75 208.74 0.68 14.13 29.04 139.77 22.04 152.27 29.04
HRZB Horizon Financial Corp. of WA 15.00 96.18 1.12 12.44 13.04 120.58 19.22 120.58 13.39
IWBK Interwest SB of Oak Harbor WA 35.00 280.04 2.18 14.51 22.58 241.21 16.44 247.18 16.06
KFBI Klamath First Bancorp of OR 15.50 155.03 0.86 15.25 26.72 101.64 23.03 101.64 18.02
RVSB Rvrview SB,FSB MHC of WA(41.7) 18.25 16.72 1.13 11.11 19.21 164.27 17.85 182.32 16.15
STSA Sterling Financial Corp. of WA 17.12 94.83 0.69 10.78 NM 158.81 6.19 193.88 24.81
WFSL Washington FS&LA of Seattle WA 25.50 1209.98 1.96 13.99 14.49 182.27 20.62 203.35 13.01
WAMU Washington Mutual Inc. of WA 52.87 6669.13 1.72 11.23 NM NM 29.75 NM NM
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ---------------- --------------
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- --------------------- ------- ------ ------- ------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
SAIF-Insured Thrifts 0.36 1.80 29.05 1,153 12.90 0.87 0.60 5.21 0.83 7.33
Special Selection Grouping(8) 0.34 1.33 22.49 3,156 12.84 0.39 0.94 8.95 1.07 10.14
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
CASB Cascade SB of Everett WA 0.00 0.00 0.00 348 6.10 0.51 0.51 8.18 0.53 8.57
EFBC Empire Federal Bancorp of MT 0.00 0.00 0.00 110 34.89 NA 0.83 2.37 1.09 3.12
FMSB First Mutual SB of Bellevue WA 0.20 1.03 13.42 401 6.61 0.12 1.02 15.36 0.98 14.77
FWWB First Savings Bancorp of WA 0.20 1.01 29.41 947 15.77 0.21 1.01 5.46 1.01 5.46
HRZB Horizon Financial Corp. of WA 0.40 2.67 35.71 500 15.94 0.01 1.51 9.40 1.47 9.15
IWBK Interwest SB of Oak Harbor WA 0.56 1.60 25.69 1,703 6.82 0.54 0.83 12.18 1.17 17.12
KFBI Klamath First Bancorp of OR 0.28 1.81 32.56 673 22.66 0.04 0.91 3.62 1.35 5.36
RVSB Rvrview SB,FSB MHC of WA(41.7) 0.22 1.21 8.12 224 10.87 0.20 0.97 8.90 1.16 10.59
STSA Sterling Financial Corp. of WA 0.00 0.00 0.00 1,531 3.90 0.58 0.14 3.41 0.25 6.03
WFSL Washington FS&LA of Seattle WA 0.87 3.41 44.39 5,869 11.31 1.15 1.62 13.75 1.80 15.31
WAMU Washington Mutual Inc. of WA 1.00 1.89 58.14 22,414 6.32 0.56 0.98 15.83 0.99 16.01
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment)
on a tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets;
P/TB = Price to tangible book value; and P/CORE = Price to estimated
core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
(8) Includes North-West Companies;
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
<TABLE>
<CAPTION>
Exhibit III-28
Market Pricing Comparatives
Prices As of February 28, 1997
Market Per Share Data
Capitalization -------------- Pricing Ratios(3)
--------------- Core Book ----------------------------------------
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- -------- ------ ------ ------ -------- ------- ------- ------ --------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 20.30 140.42 1.16 15.91 19.92 127.41 15.51 129.55 17.52
Special Selection Grouping(8) 19.21 89.86 1.13 16.56 20.30 122.91 20.11 123.20 18.37
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
CRZY Crazy Woman Creek Bncorp of WY 13.62 14.41 0.51 14.79 NM 92.09 27.40 92.09 26.71
FFBA First Colorado Bancorp of Co 17.12 311.31 0.87 13.48 19.68 127.00 20.74 128.53 19.68
GBCI Glacier Bancorp of MT 24.75 83.51 1.81 11.54 15.37 214.47 20.27 214.66 13.67
SFBM Security Bancorp of MT(7) 30.25 45.62 1.55 20.51 23.27 147.49 11.93 171.29 19.52
TRIC Tri-County Bancorp of WY 18.50 11.27 1.19 21.59 20.79 85.69 13.12 85.69 15.55
UBMT United Fin. Corp. of MT 19.75 24.15 1.28 19.89 18.81 99.30 22.38 99.30 15.43
WSTR WesterFed Fin. Corp. of MT 21.50 94.54 1.12 18.08 26.88 118.92 16.77 118.92 19.20
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ---------------- --------------
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- --------------------- ------- ----- -------- ------ ------ ------ ------- ------- ------- ------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.36 1.80 29.05 1,153 12.90 0.87 0.60 5.21 0.83 7.33
Special Selection Grouping(8) 0.56 2.91 47.26 454 17.91 0.27 0.97 6.59 1.17 7.77
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
CRZY Crazy Woman Creek Bncorp of WY 0.40 2.94 NM 53 29.75 0.12 0.86 3.03 1.13 3.96
FFBA First Colorado Bancorp of Co 0.36 2.10 41.38 1,501 16.33 0.22 1.09 8.26 1.09 8.26
GBCI Glacier Bancorp of MT 0.64 2.59 35.36 412 9.45 0.29 1.37 14.32 1.54 16.10
SFBM Security Bancorp of MT(7) 0.46 1.52 29.68 382 8.09 0.39 0.53 6.24 0.63 7.44
TRIC Tri-County Bancorp of WY 0.60 3.24 50.42 86 15.31 0.07 0.71 4.18 0.95 5.59
UBMT United Fin. Corp. of MT 0.94 4.76 73.44 108 22.54 0.70 1.20 5.25 1.46 6.40
WSTR WesterFed Fin. Corp. of MT 0.40 1.86 35.71 564 14.11 0.23 0.61 4.49 0.86 6.29
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month earnings and average equity and assets balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
(8) Includes Western Companies (Excl CA);
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT III-3
Financial Analysis of Midwest Peer Group Candidates
<PAGE>
Exhibit III
Market Pricing Comparatives
Prices As of February 28, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization ---------------- Pricing Ratios(3)
--------------- Core Book ---------------------------------------
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
-------- ------- ------- ------- ------- ------- ------- ------- ---------
Financial Institution ($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 20.30 140.42 1.16 15.91 19.92 127.41 15.51 129.55 17.52
Comparable Group Average 15.09 20.95 0.59 14.82 23.86 103.25 15.60 103.29 23.82
Mid-West Companies 15.09 20.95 0.59 14.82 23.86 103.25 15.60 103.29 23.82
Comparable Group
----------------
Mid-West Companies
------------------
AMFC AMB Financial Corp. of IN 13.75 15.46 0.52 14.40 NM 95.49 18.50 95.49 26.44
BWFC Bank West Fin. Corp. of MI 11.62 21.14 0.32 13.30 23.24 87.37 15.15 87.37 NM
CBK Citizens First Fin.Corp. of IL 15.50 43.66 0.44 14.32 NM 108.24 16.39 108.24 NM
BDJI First Fed. Bancorp. of MN 18.50 12.97 1.01 17.78 NM 104.05 11.82 104.05 18.32
FMBD First Mutual Bancorp of IL 16.00 60.30 0.55 16.73 NM 95.64 19.06 95.64 29.09
FTSB Fort Thomas Fin. Corp. of KY 12.00 18.89 0.44 9.97 NM 120.36 20.73 120.36 27.27
HZFS Horizon Fin'l. Services of IA 17.00 7.24 0.57 19.31 NM 88.04 9.45 88.04 29.82
INCB Indiana Comm. Bank, SB of IN 16.75 15.44 0.48 12.10 NM 138.43 17.03 138.43 NM
NBSI North Bancshares of Chicago IL 18.00 19.04 0.71 16.80 NM 107.14 16.21 107.14 25.35
NWEQ Northwest Equity Corp. of WI 13.50 12.54 0.86 12.48 20.45 108.17 13.13 108.17 15.70
SOBI Sobieski Bancorp of S. Bend IN 14.00 12.35 0.45 15.81 NM 88.55 15.64 88.55 NM
THR Three Rivers Fin. Corp. of MI 14.50 12.34 0.78 14.87 27.88 97.51 14.12 97.97 18.59
Dividends(4) Financial Characteristics(6)
----------------------- ------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ---------------- -------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
-------- ----- -------- ------ ------- ------- ------- ------- ------- ------
Financial Institution ($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.36 1.80 29.05 1,153 12.90 0.87 0.60 5.21 0.83 7.33
Comparable Group Average 0.28 1.89 44.44 129 15.23 0.66 0.40 2.51 0.63 4.04
Mid-West Companies 0.28 1.89 44.44 129 15.23 0.66 0.40 2.51 0.63 4.04
Comparable Group
----------------
Mid-West Companies
------------------
AMFC AMB Financial Corp. of 0.24 1.75 46.15 84 19.37 0.43 0.49 3.04 0.76 4.79
BWFC Bank West Fin. Corp. of 0.28 2.41 NM 140 17.34 0.10 0.66 3.39 0.42 2.17
CBK Citizens First Fin.Corp 0.00 0.00 0.00 266 15.14 0.53 0.25 2.32 0.52 4.87
BDJI First Fed. Bancorp. of 0.00 0.00 0.00 110 11.36 0.38 0.32 2.46 0.68 5.18
FMBD First Mutual Bancorp of 0.32 2.00 58.18 316 19.93 0.14 0.46 1.90 0.72 2.99
FTSB Fort Thomas Fin. Corp. 0.25 2.08 56.82 91 17.23 1.34 0.51 2.36 0.78 3.58
HZFS Horizon Fin'l. Services 0.32 1.88 56.14 77 10.73 1.12 0.13 1.15 0.33 2.86
INCB Indiana Comm. Bank, SB 0.36 2.15 NM 91 12.30 NA 0.15 1.06 0.48 3.41
NBSI North Bancshares of Chi 0.48 2.67 67.61 117 15.13 NA 0.43 2.62 0.65 3.96
NWEQ Northwest Equity Corp. 0.44 3.26 51.16 96 12.14 1.19 0.70 5.17 0.91 6.73
SOBI Sobieski Bancorp of S. 0.28 2.00 62.22 79 17.66 0.11 0.21 1.19 0.51 2.83
THR Three Rivers Fin. Corp. 0.36 2.48 46.15 87 14.48 1.22 0.52 3.44 0.78 5.17
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month
data, adjusted to omit non-operating items (including the SAIF
assessment) on a tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets;
P/TB = Price to tangible book value; and P/CORE = Price to estimated
core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend
declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been
obtained from sources we believe are reliable, but we cannot
guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT III-4
Peer Group Market Area Comparative Analysis
<PAGE>
Exhibit III-4
Peer Group Primary Market Area Demographic/Competition Trends
<TABLE>
<CAPTION>
Per Capita Income
Population Proj. ----------------- Deposit
--------------- Pop. 1990-96 1996-2001 % State Market
Institution County 1990 1996 2001 % Change % Change Median Age Amount Average Share(1)
- ----------- ------ ---- ---- ---- -------- -------- ---------- ------ ------- --------
(000) (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMB Financial Corp. of IN Lake 476 483 490 1.7% 1.3% 34.6 13,931 91.2% 1.0%
Citizens First Fin. Corp. of IL McLean 129 141 151 9.5% 6.9% 30.0 16,685 96.2% 5.8%
First Mutual Bancorp of IL Macon 117 116 115 -1.0% -0.7% 33.4 14,849 85.6% 8.4%
Horizon Fin'l Services of IA Mahaska 22 22 23 2.6% 2.0% 35.9 14,489 92.9% 13.9%
Horizon Financial Corp. of WA Whatcom 128 152 172 19.3% 12.9% 33.8 15,720 93.6% 16.1%
Klamath First Bancorp of OR Klamath 58 62 65 7.0% 5.2% 36.1 14,058 84.1% 35.5%
Northwest Equity Corp. of WI Polk 35 38 40 8.9% 6.5% 36.2 14,233 85.2% 9.9%
Three Rivers Fin. Corp. of MI St. Joseph 59 61 63 3.8% 2.9% 34.2 15,650 89.0% 8.1%
Tri-County Bancorp of WY Goshen 12 13 13 2.4% 1.9% 36.1 11,300 83.8% 16.8%
United Financial Corp. of MT Cascade 78 82 85 5.0% 3.8% 34.0 13,930 103.3% 7.0%
-- -- -- ---- ---- ---- ------ ------ ----
Averages: 111 117 122 5.9% 4.3% 34.4 14,485 90.5% 12.2%
Medians: 59 62 65 3.8% 2.9% 34.2 14,233 89.0% 8.4%
First Federal Bank of Idaho Nez Perce 34 37 40 9.5% 7.0% 36.8 15,779 108.1% 12.6%
</TABLE>
(1) Total institution deposits in headquarters county as percent of total county
deposits.
Sources: CACI, Inc; FDIC; OTS.
<PAGE>
EXHIBIT IV-1
Stock Prices:
As of February 28, 1997
<PAGE>
<TABLE>
<CAPTION>
Exhibit IV-1
Weekly Thrift Market Line - Part One
Prices As Of February 28, 1997
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHC)
---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(320) 20.29 5,543 146.4 21.23 14.69 20.22 0.46 172.45 10.15
NYSE Traded Companies(11) 36.86 38,458 1,554.5 39.41 24.03 37.86 -2.35 269.27 12.90
AMEX Traded Companies(18) 16.84 3,791 73.8 18.03 12.11 16.65 0.44 267.39 10.45
NASDAQ Listed OTC Companies(291) 19.97 4,574 104.8 20.83 14.55 19.86 0.55 160.53 10.04
California Companies(24) 25.15 17,271 613.3 26.53 16.02 25.64 -1.73 111.00 16.50
Florida Companies(5) 17.40 7,707 113.3 17.65 11.40 15.97 6.72 80.04 18.03
Mid-Atlantic Companies(64) 20.73 6,134 135.6 21.36 14.49 20.47 1.03 149.46 12.99
Mid-West Companies(153) 20.00 3,991 106.8 20.99 14.95 19.95 0.35 183.00 8.15
New England Companies(11) 20.14 3,931 91.7 21.10 15.19 20.25 0.00 246.46 4.85
North-West Companies(6) 20.52 12,606 301.5 21.55 14.77 21.06 -2.15 110.25 7.12
South-East Companies(43) 18.94 3,554 68.4 20.10 13.91 18.84 0.58 226.95 11.65
South-West Companies(7) 17.73 1,856 38.8 18.44 12.58 17.32 1.83 -22.22 4.55
Western Companies (Excl CA)(7) 19.21 4,808 89.9 19.52 14.75 18.96 1.17 306.44 6.40
Thrift Strategy(248) 18.94 3,437 72.9 19.80 13.97 18.77 0.73 132.72 9.91
Mortgage Banker Strategy(40) 23.80 12,121 393.4 25.20 16.66 24.15 -0.85 264.88 11.77
Real Estate Strategy(14) 22.65 7,668 178.5 23.52 15.46 22.60 1.19 160.51 12.76
Diversified Strategy(14) 33.83 23,218 760.5 35.02 22.43 34.10 -1.06 245.56 8.28
Retail Banking Strategy(4) 15.47 3,519 60.3 15.88 10.94 15.50 -0.53 220.86 6.80
Companies Issuing Dividends(257) 20.83 5,748 158.7 21.84 15.15 20.72 0.65 187.62 9.59
Companies Without Dividends(63) 18.20 4,736 97.7 18.83 12.89 18.25 -0.28 106.23 12.45
Equity/Assets less than 6%(28) 22.14 15,418 434.0 23.25 14.22 22.27 -1.01 164.50 11.92
Equity/Assets 6-12%(153) 22.46 6,196 176.8 23.42 16.02 22.36 0.80 180.39 11.04
Equity/Assets greater than 12%(139) 17.62 2,915 57.6 18.50 13.37 17.53 0.38 133.96 8.83
Converted Last 3 Mths (no MHC)(7) 13.98 2,586 36.8 14.51 12.85 14.29 -2.21 0.00 4.42
Actively Traded Companies(49) 28.52 15,772 533.2 29.70 19.57 28.89 -1.24 196.88 11.97
Market Value Below $20 Million(70) 15.87 877 13.3 16.62 12.66 15.75 0.58 124.31 7.40
Holding Company Structure(281) 20.64 5,439 149.0 21.57 14.99 20.54 0.54 159.68 10.10
Assets Over $1 Billion(65) 30.90 17,347 555.7 32.13 20.47 31.01 -0.22 208.16 12.87
Assets $500 Million-$1 Billion(54) 20.13 5,337 96.5 20.80 14.36 20.12 0.10 215.95 11.76
Assets $250-$500 Million(69) 18.60 2,757 46.3 19.57 13.74 18.37 1.06 123.04 10.02
Assets less than $250 Million(132) 16.17 1,420 22.5 17.06 12.56 16.06 0.62 110.81 8.26
Goodwill Companies(130) 23.49 9,168 250.8 24.50 16.18 23.46 0.31 207.79 11.33
Non-Goodwill Companies(190) 18.23 3,206 79.0 19.12 13.74 18.13 0.55 110.81 9.38
Acquirors of FSLIC Cases(13) 30.52 34,866 1,299.9 32.20 20.31 31.19 -1.34 263.31 12.43
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
--------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
Market Averages. SAIF-Insured Thrifts(no MHC)
---------------------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(320) 0.85 1.17 16.06 15.63 158.60
NYSE Traded Companies(11) 1.75 2.54 19.90 19.03 349.37
AMEX Traded Companies(18) 0.59 0.86 14.10 13.95 106.53
NASDAQ Listed OTC Companies(291) 0.83 1.14 16.06 15.62 155.57
California Companies(24) 0.72 1.11 17.68 16.72 272.78
Florida Companies(5) 0.49 0.62 12.06 11.75 145.27
Mid-Atlantic Companies(64) 0.99 1.35 16.21 15.54 169.78
Mid-West Companies(153) 0.84 1.15 16.49 16.21 143.57
New England Companies(11) 1.21 1.39 16.95 15.78 222.69
North-West Companies(6) 0.91 1.17 13.27 12.65 148.69
South-East Companies(43) 0.72 1.03 14.03 13.87 119.11
South-West Companies(7) 0.46 1.00 16.02 15.21 223.53
Western Companies (Excl CA)(7) 0.93 1.13 16.56 16.53 101.98
Thrift Strategy(248) 0.74 1.04 16.05 15.66 141.60
Mortgage Banker Strategy(40) 1.19 1.51 15.63 14.86 227.84
Real Estate Strategy(14) 0.85 1.43 15.73 15.52 203.68
Diversified Strategy(14) 1.86 2.46 18.74 18.35 221.82
Retail Banking Strategy(4) 0.54 0.74 13.03 12.56 160.59
Companies Issuing Dividends(257) 0.95 1.27 16.24 15.79 157.12
Companies Without Dividends(63) 0.46 0.77 15.35 15.00 164.43
Equity/Assets less than 6%(28) 0.70 1.15 13.51 12.54 279.72
Equity/Assets 6-12%(153) 1.08 1.47 16.43 15.76 198.96
Equity/Assets greater than 12%(139) 0.63 0.86 16.17 16.09 91.83
Converted Last 3 Mths (no MHC)(7) 0.45 0.65 13.82 13.82 77.69
Actively Traded Companies(49) 1.70 2.17 17.99 17.32 243.77
Market Value Below $20 Million(70) 0.48 0.79 15.69 15.56 131.34
Holding Company Structure(281) 0.85 1.18 16.45 16.01 156.57
Assets Over $1 Billion(65) 1.50 1.99 19.37 18.10 264.28
Assets $500 Million-$1 Billion(54) 1.01 1.26 15.22 14.67 161.14
Assets $250-$500 Million(69) 0.70 1.08 15.23 14.96 157.69
Assets less than $250 Million(132) 0.54 0.79 15.25 15.18 107.70
Goodwill Companies(130) 1.08 1.46 16.41 15.41 206.52
Non-Goodwill Companies(190) 0.70 0.98 15.84 15.77 127.69
Acquirors of FSLIC Cases(13) 1.46 2.27 17.01 16.07 276.00
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data
and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common
equity and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities
or unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of
institutions included in the respective averages. All figures have been
adjusted for stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded
companies, and RP Financial, Inc. calculations. The information
provided in this report has been obtained from sources we believe
are reliable, but we cannot guarantee the accuracy or completeness
of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 28, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHC)
--------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(73) 21.68 9,399 279.0 22.43 14.63 21.64 0.58 159.01 12.08
NYSE Traded Companies(3) 33.58 53,300 1,620.1 35.29 16.58 34.54 -1.63 245.31 27.92
AMEX Traded Companies(5) 18.97 4,126 74.5 19.55 13.49 18.60 1.73 70.71 15.72
NASDAQ Listed OTC Companies(65) 21.28 7,518 225.4 22.00 14.63 21.22 0.60 161.72 10.88
California Companies(3) 17.54 6,143 114.9 18.20 10.79 17.46 0.60 416.67 20.33
Mid-Atlantic Companies(19) 23.33 15,473 405.1 23.96 15.35 23.16 1.03 89.63 11.34
Mid-West Companies(2) 10.62 942 10.0 10.62 8.87 10.12 4.94 0.00 4.94
New England Companies(39) 20.20 4,472 90.6 20.89 13.55 20.12 0.56 178.07 11.88
North-West Companies(4) 26.78 36,394 1,755.5 29.56 15.66 28.44 -5.22 116.05 13.03
South-East Companies(5) 26.10 2,093 38.5 26.25 21.80 25.55 2.88 0.00 11.61
Thrift Strategy(47) 21.26 4,275 124.0 21.86 14.91 21.06 1.25 148.05 10.49
Mortgage Banker Strategy(10) 22.23 24,301 459.4 23.53 14.98 23.03 -3.40 220.94 16.72
Real Estate Strategy(8) 20.96 5,136 121.4 21.29 12.56 20.42 1.80 209.10 13.25
Diversified Strategy(6) 25.74 32,326 1,365.4 27.10 14.81 26.33 -0.39 118.02 17.48
Retail Banking Strategy(2) 18.25 1,397 25.0 19.25 12.97 17.94 1.73 32.22 9.47
Companies Issuing Dividends(56) 22.44 8,145 295.8 23.32 14.76 22.50 0.23 156.16 11.23
Companies Without Dividends(17) 19.20 13,495 223.8 19.52 14.20 18.83 1.74 183.95 15.03
Equity/Assets (LESS THAN) 6%(6) 16.76 26,452 462.0 17.15 10.60 16.65 0.79 168.86 19.09
Equity/Assets 6-12%(48) 22.00 8,744 322.2 22.93 14.44 22.17 -0.07 162.18 11.03
Equity/Assets (GREATER THAN) 12%(19) 22.32 6,001 118.3 22.73 16.29 21.81 2.15 11.69 12.63
Converted Last 3 Mths (no MHC)(2) 40.82 22,025 354.5 41.13 38.50 40.56 -0.18 0.00 1.54
Actively Traded Companies(26) 23.43 15,268 496.8 24.52 15.22 23.75 -0.67 201.84 13.86
Market Value Below $20 Million(12) 16.81 892 14.2 17.21 11.32 16.19 3.31 98.06 13.67
Holding Company Structure(46) 22.42 9,347 298.7 23.24 15.52 22.47 0.03 166.22 11.48
Assets Over $1 Billion(16) 28.98 29,541 1,011.6 30.26 17.10 29.41 -0.94 160.54 18.07
Assets $500 Million-$1 Billion(17) 20.65 5,520 97.7 21.57 14.97 20.78 -0.25 145.32 8.60
Assets $250-$500 Million(20) 18.80 2,870 49.0 19.37 12.69 18.75 0.00 194.55 9.72
Assets less than $250 Million(20) 19.02 1,578 22.4 19.32 14.08 18.44 3.25 129.58 12.56
Goodwill Companies(36) 23.60 14,039 489.5 24.70 15.31 23.73 0.22 164.03 12.94
Non-Goodwill Companies(37) 19.98 5,304 93.2 20.42 14.03 19.80 0.90 150.03 11.30
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
--------------------- ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
Market Averages. BIF-Insured Thrifts(no MHC)
--------------------------------------------
<S> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(73) 1.32 1.31 15.62 14.85 157.59
NYSE Traded Companies(3) 1.81 1.82 18.99 14.58 247.25
AMEX Traded Companies(5) 0.94 0.87 15.01 14.58 142.64
NASDAQ Listed OTC Companies(65) 1.33 1.32 15.49 14.89 154.13
California Companies(3) 1.30 1.20 11.90 11.90 155.15
Mid-Atlantic Companies(19) 1.29 1.32 16.71 15.05 177.99
Mid-West Companies(2) 0.25 0.38 13.57 12.80 53.10
New England Companies(39) 1.48 1.41 14.34 13.85 162.83
North-West Companies(4) 1.27 1.25 12.15 11.58 127.16
South-East Companies(5) 0.63 0.84 25.53 25.53 96.32
Thrift Strategy(47) 1.23 1.24 16.90 15.89 151.69
Mortgage Banker Strategy(10) 1.49 1.48 14.18 14.00 189.77
Real Estate Strategy(8) 1.36 1.33 11.92 11.92 112.31
Diversified Strategy(6) 1.74 1.61 11.86 11.18 167.64
Retail Banking Strategy(2) 1.11 1.09 16.70 16.25 258.53
Companies Issuing Dividends(56) 1.43 1.40 15.48 14.50 165.68
Companies Without Dividends(17) 0.96 1.00 16.06 15.99 131.16
Equity/Assets (LESS THAN) 6%(6) 1.08 0.95 10.64 10.53 187.21
Equity/Assets 6-12%(48) 1.56 1.51 14.67 13.57 179.05
Equity/Assets (GREATER THAN) 12%(19) 0.81 0.91 19.41 19.29 95.86
Converted Last 3 Mths (no MHC)(2) 1.49 1.77 41.55 41.55 148.63
Actively Traded Companies(26) 1.69 1.66 15.06 14.39 183.38
Market Value Below $20 Million(12) 0.86 0.87 15.11 14.63 152.75
Holding Company Structure(46) 1.34 1.36 16.28 15.56 149.06
Assets Over $1 Billion(16) 1.79 1.75 15.78 14.43 188.30
Assets $500 Million-$1 Billion(17) 1.41 1.31 15.51 14.25 168.57
Assets $250-$500 Million(20) 1.21 1.23 14.13 13.83 147.64
Assets less than $250 Million(20) 0.94 0.98 17.05 16.77 130.77
Goodwill Companies(36) 1.51 1.47 15.71 14.08 197.50
Non-Goodwill Companies(37) 1.16 1.16 15.53 15.53 122.38
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data
and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common
equity and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities
or unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of
institutions included in the respective averages. All figures have been
adjusted for stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded
companies, and RP Financial, Inc. calculations. The information
provided in this report has been obtained from sources we believe
are reliable, but we cannot guarantee the accuracy or completeness
of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 28, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. MHC Institutions
---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(19) 20.39 4,760 35.4 21.18 14.67 20.18 1.00 160.00 8.87
BIF-Insured Thrifts(2) 22.75 21,913 265.0 24.00 14.47 23.41 -1.83 338.37 12.79
NASDAQ Listed OTC Companies(21) 20.63 6,565 59.5 21.48 14.65 20.52 0.70 219.46 9.29
Florida Companies(3) 25.25 5,531 63.7 25.92 16.67 24.25 3.67 0.00 1.88
Mid-Atlantic Companies(8) 17.25 8,382 46.5 18.23 12.28 17.13 1.04 117.50 13.98
Mid-West Companies(7) 19.15 1,943 14.7 19.96 14.34 19.18 -0.05 202.50 7.99
New England Companies(1) 34.50 40,553 522.8 36.50 19.69 35.81 -3.66 338.37 19.50
North-West Companies(1) 18.25 2,196 16.7 18.75 14.37 18.25 0.00 0.00 4.29
South-East Companies(1) 26.00 1,505 18.3 26.00 20.25 26.00 0.00 0.00 7.22
Thrift Strategy(19) 19.96 4,823 34.8 20.76 14.37 19.75 1.00 160.00 8.98
Mortgage Banker Strategy(1) 18.25 2,196 16.7 18.75 14.37 18.25 0.00 0.00 4.29
Diversified Strategy(1) 34.50 40,553 522.8 36.50 19.69 35.81 -3.66 338.37 19.50
Companies Issuing Dividends(20) 20.34 6,846 61.8 21.23 14.34 20.21 0.74 219.46 9.40
Companies Without Dividends(1) 26.00 1,505 18.3 26.00 20.25 26.00 0.00 0.00 7.22
Equity/Assets 6-12%(15) 21.83 8,033 75.4 22.81 15.06 21.59 1.38 219.46 10.16
Equity/Assets more than 12%(6) 17.30 2,456 15.1 17.75 13.50 17.50 -1.21 0.00 6.85
Actively Traded Companies(1) 21.75 7,185 74.0 23.50 13.18 21.25 2.35 117.50 17.57
Holding Company Structure(1) 21.75 7,185 74.0 23.50 13.18 21.25 2.35 117.50 17.57
Assets Over $1 Billion(4) 27.25 20,021 193.5 28.09 17.24 27.21 -0.22 338.37 14.46
Assets $500 Million-$1 Billion(5) 20.00 6,280 60.0 21.25 13.14 19.50 2.57 117.50 6.11
Assets $250-$500 Million(4) 23.39 2,116 20.5 24.44 16.90 23.63 -0.93 202.50 8.13
Assets less than $250 Million(8) 16.19 2,169 11.9 16.78 12.80 16.00 1.27 0.00 8.47
Goodwill Companies(10) 23.83 11,041 106.7 24.79 15.71 23.67 0.64 219.46 12.58
Non-Goodwill Companies(11) 17.76 2,537 17.1 18.50 13.70 17.68 0.75 0.00 6.32
MHC Institutions(21) 20.63 6,565 59.5 21.48 14.65 20.52 0.70 219.46 9.29
<CAPTION>
Current Per Share Financials
-----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
--------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
Market Averages. MHC Institutions
---------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(19) 0.61 1.00 13.27 12.90 130.87
BIF-Insured Thrifts(2) 0.95 0.85 11.87 11.86 130.37
NASDAQ Listed OTC Companies(21) 0.65 0.98 13.12 12.79 130.81
Florida Companies(3) 1.06 1.48 15.12 14.85 159.33
Mid-Atlantic Companies(8) 0.20 0.61 11.07 10.40 105.58
Mid-West Companies(7) 0.59 0.94 13.11 13.08 134.83
New England Companies(1) 1.96 1.53 15.24 15.22 188.52
North-West Companies(1) 0.95 1.13 11.11 10.01 102.22
South-East Companies(1) 0.95 1.35 19.33 19.33 139.42
Thrift Strategy(19) 0.55 0.94 13.11 12.81 129.10
Mortgage Banker Strategy(1) 0.95 1.13 11.11 10.01 102.22
Diversified Strategy(1) 1.96 1.53 15.24 15.22 188.52
Companies Issuing Dividends(20) 0.63 0.96 12.77 12.43 130.34
Companies Without Dividends(1) 0.95 1.35 19.33 19.33 139.42
Equity/Assets 6-12%(15) 0.68 1.07 13.40 12.96 148.22
Equity/Assets more than 12%(6) 0.56 0.76 12.34 12.34 82.08
Actively Traded Companies(1) 0.63 1.13 12.56 11.00 135.67
Holding Company Structure(1) 0.63 1.13 12.56 11.00 135.67
Assets Over $1 Billion(4) 1.10 1.35 13.58 12.79 159.67
Assets $500 Million-$1 Billion(5) 0.66 1.04 13.39 12.83 132.99
Assets $250-$500 Million(4) 0.80 1.34 15.50 15.46 179.72
Assets less than $250 Million(8) 0.34 0.61 11.59 11.45 91.11
Goodwill Companies(10) 0.85 1.18 13.66 12.98 151.36
Non-Goodwill Companies(11) 0.47 0.81 12.63 12.63 112.32
MHC Institutions(21) 0.65 0.98 13.12 12.79 130.81
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and
assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by public
(non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for stock
splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
<TABLE>
<CAPTION>
Exhibit IV-1
Weekly Thrift Market Line - Part One
Prices As Of February 28, 1997
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NYSE Traded Companies
---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA 41.12 102,153 4,200.5 44.87 22.62 41.12 0.00 119.31 26.52
CSA Coast Savings Financial of CA 46.75 18,585 868.8 47.87 28.50 47.62 -1.83 304.41 27.66
CFB Commercial Federal Corp. of NE 35.87 21,490 770.8 37.75 24.00 36.75 -2.39 872.09 12.09
DME Dime Savings Bank, FSB of NY* 17.50 104,744 1,833.0 17.87 11.00 17.50 0.00 73.96 18.64
DSL Downey Financial Corp. of CA 23.62 25,459 601.3 23.62 13.50 22.75 3.82 106.65 20.39
FRC First Republic Bancorp of CA* 23.25 7,676 178.5 24.62 12.25 23.37 -0.51 416.67 38.81
FED FirstFed Fin. Corp. of CA 26.00 10,530 273.8 27.37 14.25 27.00 -3.70 60.99 18.18
GLN Glendale Fed. Bk, FSB of CA 26.75 49,809 1,332.4 28.00 15.63 27.75 -3.60 64.62 15.05
GDW Golden West Fin. Corp. of CA 67.75 57,342 3,884.9 74.25 49.50 71.75 -5.57 158.69 7.34
GWF Great Western Fin. Corp. of CA(8) 44.00 137,876 6,066.5 46.88 21.12 46.37 -5.11 153.31 51.72
GPT GreenPoint Fin. Corp. of NY* 60.00 47,481 2,848.9 63.37 26.50 62.75 -4.38 N.A. 26.32
SFB Standard Fed. Bancorp of MI(8) 57.62 31,990 1,843.3 58.00 37.75 57.50 0.21 518.90 1.32
TCB TCF Financial Corp. of MN 45.37 34,757 1,576.9 47.12 32.12 46.37 -2.16 584.31 4.30
WES Westcorp Inc. of Orange CA 18.50 25,997 480.9 23.87 16.19 19.62 -5.71 152.39 -15.45
AMEX Traded Companies
---------------------
ANA Acadiana Bancshares of LA* 17.37 2,731 47.4 17.62 11.69 17.50 -0.74 N.A. 16.81
BKC American Bank of Waterbury CT* 29.75 2,293 68.2 29.87 24.12 28.13 5.76 58.67 6.25
BFD BostonFed Bancorp of MA 16.25 6,260 101.7 16.37 11.62 15.87 2.39 N.A. 10.17
CFX Cheshire Fin. Corp. of NH* 16.62 12,981 215.7 18.50 11.90 17.62 -5.68 39.66 7.23
CZF Citisave Fin. Corp. of LA 13.87 962 13.3 16.50 13.00 13.87 0.00 N.A. -0.93
CBK Citizens First Fin. Corp. of IL 15.50 2,817 43.7 15.50 9.50 15.37 0.85 N.A. 7.86
ESX Essex Bancorp of VA(8) 1.62 1,053 1.7 3.56 1.00 1.50 8.00 -90.33 -26.03
FCB Falmouth Co-Op Bank of MA* 15.63 1,455 22.7 15.63 10.25 15.00 4.20 N.A. 19.13
FAB FirstFed America Bancorp of MA 14.62 8,713 127.4 15.12 13.62 14.87 -1.68 N.A. N.A.
GAF GA Financial Corp. of PA 16.12 8,455 136.3 17.25 10.25 16.37 -1.53 N.A. 6.61
KNK Kankakee Bancorp of IL 27.37 1,415 38.7 27.87 18.50 27.00 1.37 173.70 10.59
KYF Kentucky First Bancorp of KY 11.75 1,389 16.3 15.25 10.75 11.87 -1.01 N.A. 8.10
NYB New York Bancorp, Inc. of NY 32.25 16,570 534.4 33.50 14.50 30.00 7.50 354.87 24.85
PDB Piedmont Bancorp of NC 10.62 2,751 29.2 19.12 9.25 10.50 1.14 N.A. 1.14
PLE Pinnacle Bank of AL 22.37 890 19.9 22.62 15.50 22.50 -0.58 231.41 28.79
SSB Scotland Bancorp of NC 15.75 1,840 29.0 15.75 11.62 15.37 2.47 N.A. 11.54
SZB SouthFirst Bancshares of AL 13.75 824 11.3 13.75 11.37 13.75 0.00 N.A. 3.77
SRN Southern Banc Company of AL 14.25 1,230 17.5 14.25 11.37 13.62 4.63 N.A. 8.61
SSM Stone Street Bancorp of NC 27.25 1,825 49.7 27.25 16.25 26.37 3.34 N.A. 32.93
TSH Teche Holding Company of LA 15.00 3,437 51.6 16.12 12.00 15.87 -5.48 N.A. 4.38
FTF Texarkana Fst. Fin. Corp of AR 16.87 1,835 31.0 17.00 13.62 17.00 -0.76 N.A. 7.93
THR Three Rivers Fin. Corp. of MI 14.50 851 12.3 14.62 12.37 14.37 0.90 N.A. 3.57
TBK Tolland Bank of CT* 15.50 1,172 18.2 16.12 9.50 14.75 5.08 113.79 29.17
WSB Washington SB, FSB of MD 5.12 4,220 21.6 5.69 4.38 5.50 -6.91 309.60 5.13
NASDAQ Listed OTC Companies
---------------------------
FBCV 1st Bancorp of Vincennes IN 29.00 697 20.2 30.50 24.76 28.75 0.87 N.A. 1.75
AFED AFSALA Bancorp of NY 13.50 1,455 19.6 13.50 11.31 13.50 0.00 N.A. 12.50
ALBK ALBANK Fin. Corp. of Albany NY 35.12 12,911 453.4 37.00 22.92 35.75 -1.76 51.05 11.95
AMFC AMB Financial Corp. of IN 13.75 1,124 15.5 13.75 9.75 13.75 0.00 N.A. 3.77
ASBP ASB Financial Corp. of OH 11.75 1,721 20.2 18.25 11.75 12.00 -2.08 N.A. -9.62
ABBK Abington Savings Bank of MA(8)* 22.00 1,893 41.6 22.75 14.50 22.50 -2.22 232.33 12.82
AABC Access Anytime Bancorp of NM 5.25 732 3.8 7.00 5.25 5.25 0.00 -22.22 -4.55
AFBC Advance Fin. Bancorp of WV 14.00 1,084 15.2 14.50 12.75 14.00 0.00 N.A. N.A.
AADV Advantage Bancorp of WI 35.50 3,275 116.3 36.00 30.75 35.75 -0.70 285.87 10.08
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
--------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NYSE Traded Companies
---------------------
<S> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA 0.97 2.40 19.09 16.08 488.50
CSA Coast Savings Financial of CA 0.54 2.12 22.24 21.89 460.00
CFB Commercial Federal Corp. of NE 2.00 2.85 18.37 16.15 319.60
DME Dime Savings Bank, FSB of NY* 1.00 1.30 9.76 9.67 180.15
DSL Downey Financial Corp. of CA 0.80 1.28 15.07 14.82 194.60
FRC First Republic Bancorp of CA* 1.63 1.51 16.47 16.45 280.95
FED FirstFed Fin. Corp. of CA 0.78 1.71 18.48 18.22 393.53
GLN Glendale Fed. Bk, FSB of CA 0.58 1.34 16.98 15.84 303.72
GDW Golden West Fin. Corp. of CA 6.34 7.76 40.99 40.99 657.99
GWF Great Western Fin. Corp. of CA(8) 1.52 2.18 17.78 15.64 315.85
GPT GreenPoint Fin. Corp. of NY* 2.79 2.64 30.74 17.61 280.65
SFB Standard Fed. Bancorp of MI(8) 2.98 3.94 29.91 24.84 489.24
TCB TCF Financial Corp. of MN 2.46 2.87 15.81 15.21 204.01
WES Westcorp Inc. of Orange CA 1.30 0.52 12.09 12.05 122.37
AMEX Traded Companies
---------------------
ANA Acadiana Bancshares of LA* -0.43 -0.40 17.03 17.03 97.06
BKC American Bank of Waterbury CT* 2.89 2.34 20.57 19.65 243.54
BFD BostonFed Bancorp of MA 0.36 0.58 14.19 14.19 127.30
CFX Cheshire Fin. Corp. of NH* 0.58 0.77 9.96 9.24 117.15
CZF Citisave Fin. Corp. of LA 0.63 0.84 12.58 12.57 78.62
CBK Citizens First Fin. Corp. of IL 0.21 0.44 14.32 14.32 94.57
ESX Essex Bancorp of VA(8) -7.61 -4.57 0.54 -0.23 162.87
FCB Falmouth Co-Op Bank of MA* 0.46 0.45 15.20 15.20 60.84
FAB FirstFed America Bancorp of MA 0.50 0.96 13.45 13.45 108.87
GAF GA Financial Corp. of PA 0.66 0.86 14.48 14.48 74.99
KNK Kankakee Bancorp of IL 1.26 1.69 25.79 24.10 247.80
KYF Kentucky First Bancorp of KY 0.53 0.69 10.85 10.85 63.26
NYB New York Bancorp, Inc. of NY 2.08 2.28 9.60 9.60 188.41
PDB Piedmont Bancorp of NC -0.10 0.06 7.14 7.14 45.47
PLE Pinnacle Bank of AL 1.08 1.70 16.65 16.07 215.35
SSB Scotland Bancorp of NC 0.41 0.53 13.47 13.47 37.29
SZB SouthFirst Bancshares of AL -0.02 0.54 15.64 15.64 109.57
SRN Southern Banc Company of AL 0.20 0.51 15.98 15.81 87.70
SSM Stone Street Bancorp of NC 0.67 0.83 20.48 20.48 58.29
TSH Teche Holding Company of LA 0.73 1.07 15.21 15.21 110.44
FTF Texarkana Fst. Fin. Corp of AR 1.31 1.61 14.40 14.40 90.33
THR Three Rivers Fin. Corp. of MI 0.52 0.78 14.87 14.80 102.67
TBK Tolland Bank of CT* 1.18 1.17 12.27 11.79 194.59
WSB Washington SB, FSB of MD 0.29 0.25 4.98 4.98 60.44
NASDAQ Listed OTC Companies
---------------------------
FBCV 1st Bancorp of Vincennes IN 0.63 -0.09 30.67 30.67 373.33
AFED AFSALA Bancorp of NY 0.61 0.61 14.05 14.05 102.70
ALBK ALBANK Fin. Corp. of Albany NY 2.03 2.56 24.72 21.35 271.56
AMFC AMB Financial Corp. of IN 0.33 0.52 14.40 14.40 74.33
ASBP ASB Financial Corp. of OH 0.39 0.56 10.21 10.21 64.98
ABBK Abington Savings Bank of MA(8)* 1.87 1.58 17.72 15.83 257.24
AABC Access Anytime Bancorp of NM -0.90 -0.34 6.82 6.82 148.79
AFBC Advance Fin. Bancorp of WV 0.32 0.64 13.93 13.93 94.27
AADV Advantage Bancorp of WI 0.98 2.54 27.53 25.50 314.98
</TABLE>
<PAGE>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 28, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------ ------- ------- ------- ------- ------- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
AFCB Affiliated Comm BC, Inc of MA 24.62 5,149 126.8 26.37 16.37 25.87 -4.83 N.A. 15.21
ALBC Albion Banc Corp. of Albion NY 17.12 250 4.3 17.75 16.50 16.56 3.38 31.69 2.21
ABCL Allied Bancorp of IL 30.97 2,695 83.5 31.25 21.00 30.50 1.54 209.70 23.88
ATSB AmTrust Capital Corp. of IN 11.87 531 6.3 11.87 8.50 11.87 0.00 N.A. 18.70
AHCI Ambanc Holding Co. of NY* 13.25 4,880 64.7 13.50 9.38 13.19 0.45 N.A. 17.78
ASBI Ameriana Bancorp of IN 15.87 3,291 52.2 16.37 12.87 16.00 -0.81 71.94 -0.81
AFFFZ America First Fin. Fund of CA 33.62 6,011 202.1 34.50 25.87 34.50 -2.55 79.31 11.14
AMFB American Federal Bank of SC(8) 28.87 10,955 316.3 29.25 14.75 28.75 0.42 507.79 52.99
ANBK American Nat'l Bancorp of MD 13.12 3,604 47.3 13.25 9.50 12.75 2.90 N.A. 8.25
ABCW Anchor Bancorp Wisconsin of WI 45.00 4,621 207.9 46.25 30.25 43.25 4.05 53.22 25.87
ANDB Andover Bancorp, Inc. of MA* 28.13 5,134 144.4 29.50 17.81 29.25 -3.83 161.67 9.80
ASFC Astoria Financial Corp. of NY 43.00 21,473 923.3 43.12 23.31 40.50 6.17 63.81 16.63
AVND Avondale Fin. Corp. of IL 18.50 3,525 65.2 18.50 12.50 18.25 1.37 N.A. 8.06
BFSI BFS Bankorp, Inc. of NY 50.87 1,658 84.3 55.00 36.00 50.75 0.24 461.48 3.29
BKCT Bancorp Connecticut of CT* 22.50 2,571 57.8 23.75 16.46 22.75 -1.10 157.14 0.00
BPLS Bank Plus Corp. of CA 13.50 18,245 246.3 13.75 8.62 13.25 1.89 N.A. 17.39
BWFC Bank West Fin. Corp. of MI 11.62 1,819 21.1 12.25 8.94 11.37 2.20 N.A. 9.42
BANC BankAtlantic Bancorp of FL 16.37 14,720 241.0 17.12 10.20 15.50 5.61 214.81 22.44
BKUNA BankUnited SA of FL 9.62 7,908 76.1 10.12 7.12 10.12 -4.94 77.16 -3.80
BKCO Bankers Corp. of NJ(8)* 24.62 12,378 304.7 25.00 16.87 24.62 0.00 293.92 22.37
BVFS Bay View Capital Corp. of CA 56.25 6,675 375.5 57.25 30.50 56.75 -0.88 184.81 32.76
BFSB Bedford Bancshares of VA 19.25 1,144 22.0 19.37 16.00 19.00 1.32 83.33 9.25
BFFC Big Foot Fin. Corp. of IL 13.87 2,513 34.9 14.25 12.31 14.00 -0.93 N.A. 6.69
BSBC Branford SB of CT* 4.25 6,559 27.9 4.25 2.87 4.12 3.16 100.47 9.82
BYFC Broadway Fin. Corp. of CA 10.37 893 9.3 11.00 9.00 10.25 1.17 N.A. 12.11
CBCO CB Bancorp of Michigan City IN 28.62 1,162 33.3 29.37 16.25 28.62 0.00 160.18 20.51
CBES CBES Bancorp of MO 17.25 1,025 17.7 17.31 12.62 17.00 1.47 N.A. 21.05
CCFH CCF Holding Company of GA 16.25 916 14.9 16.25 11.31 16.25 0.00 N.A. 10.17
CENF CENFED Financial Corp. of CA 34.00 5,155 175.3 34.50 20.75 34.38 -1.11 116.84 16.24
CFSB CFSB Bancorp of Lansing MI 20.12 4,706 94.7 21.14 17.73 20.50 -1.85 123.56 3.18
CKFB CKF Bancorp of Danville KY 17.75 927 16.5 20.75 17.50 18.00 -1.39 N.A. -12.35
CNSB CNS Bancorp of MO 17.00 1,653 28.1 17.00 11.00 15.50 9.68 N.A. 12.43
CSBF CSB Financial Group Inc of IL* 10.62 942 10.0 10.62 8.87 10.12 4.94 N.A. 4.94
CFHC California Fin. Hld. Co. of CA(8) 28.87 4,741 136.9 29.06 20.00 28.81 0.21 174.95 0.00
CBCI Calumet Bancorp of Chicago IL 35.50 2,377 84.4 36.50 27.50 35.25 0.71 75.31 6.77
CAFI Camco Fin. Corp. of OH 15.75 3,063 48.2 19.29 14.75 15.87 -0.76 N.A. -0.76
CMRN Cameron Fin. Corp. of MO 16.62 2,849 47.4 16.62 13.50 16.37 1.53 N.A. 3.88
CAPS Capital Savings Bancorp of MO 14.00 1,892 26.5 14.75 8.87 14.50 -3.45 5.66 7.69
CFNC Carolina Fincorp of NC* 15.00 1,851 27.8 15.25 13.00 14.37 4.38 N.A. 12.19
CARV Carver FSB of New York, NY 9.87 2,314 22.8 10.37 7.37 9.87 0.00 57.92 19.64
CASB Cascade SB of Everett WA 16.37 2,053 33.6 17.50 12.40 17.00 -3.71 27.89 1.55
CATB Catskill Fin. Corp. of NY* 15.87 5,183 82.3 15.87 9.87 15.37 3.25 N.A. 13.36
CNIT Cenit Bancorp of Norfolk VA 45.00 1,633 73.5 46.00 31.75 45.00 0.00 183.38 8.43
CTBK Center Banks, Inc. of NY* 19.50 948 18.5 19.50 13.12 19.12 1.99 77.27 20.00
CEBK Central Co-Op. Bank of MA* 18.50 1,965 36.4 18.50 14.75 18.00 2.78 252.38 5.71
CENB Century Bancshares of NC* 66.00 407 26.9 66.00 62.00 65.25 1.15 N.A. 1.54
CBSB Charter Financial Inc. of IL 15.75 4,253 67.0 16.25 10.87 15.87 -0.76 N.A. 26.00
COFI Charter One Financial of OH 47.62 46,443 2,211.6 49.50 29.34 48.25 -1.31 172.11 13.38
CVAL Chester Valley Bancorp of PA 20.00 1,634 32.7 20.75 17.26 20.75 -3.61 76.52 8.11
CTZN CitFed Bancorp of Dayton OH 34.38 8,584 295.1 37.25 22.50 36.12 -4.82 282.00 4.18
CLAS Classic Bancshares of KY 13.75 1,322 18.2 13.87 10.37 13.62 0.95 N.A. 18.33
CMSB Cmnwealth Bancorp of PA 15.87 17,954 284.9 15.87 9.75 15.37 3.25 N.A. 5.80
CBSA Coastal Bancorp of Houston TX 27.12 4,967 134.7 27.12 16.50 25.87 4.83 N.A. 18.58
CFCP Coastal Fin. Corp. of SC 24.00 3,452 82.8 25.00 15.20 24.12 -0.50 140.00 14.29
COFD Collective Bancorp Inc. of NJ(8) 41.12 20,391 838.5 42.00 23.00 37.00 11.14 439.63 17.08
<CAPTION>
Current Per Share Financials
-----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
--------------------- -------- ------- ------- ------- --------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
AFCB Affiliated Comm BC, Inc of MA 1.16 1.67 19.04 18.91 195.26
ALBC Albion Banc Corp. of Albion NY -0.24 0.47 23.07 23.07 239.44
ABCL Allied Bancorp of IL 1.16 1.74 21.01 20.43 247.85
ATSB AmTrust Capital Corp. of IN 0.34 0.15 13.46 13.31 135.80
AHCI Ambanc Holding Co. of NY* 0.23 0.22 14.42 14.42 101.74
ASBI Ameriana Bancorp of IN 0.70 1.06 13.22 13.20 121.46
AFFFZ America First Fin. Fund of CA 5.23 6.41 29.52 29.05 367.50
AMFB American Federal Bank of SC(8) 1.29 1.61 9.88 9.13 127.33
ANBK American Nat'l Bancorp of MD 0.19 0.68 12.36 12.36 135.03
ABCW Anchor Bancorp Wisconsin of WI 2.82 3.75 24.94 24.33 404.50
ANDB Andover Bancorp, Inc. of MA* 2.43 2.50 18.67 18.67 234.67
ASFC Astoria Financial Corp. of NY 1.72 2.54 27.42 22.75 338.69
AVND Avondale Fin. Corp. of IL 0.65 0.68 16.67 16.67 173.86
BFSI BFS Bankorp, Inc. of NY 5.37 6.35 31.49 31.49 392.35
BKCT Bancorp Connecticut of CT* 1.95 1.86 16.62 16.62 163.13
BPLS Bank Plus Corp. of CA -3.63 -3.08 8.66 8.64 182.14
BWFC Bank West Fin. Corp. of MI 0.50 0.32 13.30 13.30 76.70
BANC BankAtlantic Bancorp of FL 1.05 0.96 9.49 8.82 147.45
BKUNA BankUnited SA of FL 0.33 0.27 5.67 5.36 104.24
BKCO Bankers Corp. of NJ(8)* 1.97 2.12 15.58 15.31 198.72
BVFS Bay View Capital Corp. of CA 1.64 3.03 29.97 28.44 494.42
BFSB Bedford Bancshares of VA 1.14 1.46 15.93 15.93 111.33
BFFC Big Foot Fin. Corp. of IL 0.30 0.35 13.76 13.76 85.81
BSBC Branford SB of CT* 0.28 0.28 2.51 2.51 27.98
BYFC Broadway Fin. Corp. of CA -0.21 0.27 14.11 14.11 131.30
CBCO CB Bancorp of Michigan City IN 1.88 2.22 16.68 16.68 172.12
CBES CBES Bancorp of MO 0.81 1.09 16.89 16.89 89.44
CCFH CCF Holding Company of GA 0.52 0.77 15.76 15.76 87.65
CENF CENFED Financial Corp. of CA 2.20 2.71 22.12 22.08 423.83
CFSB CFSB Bancorp of Lansing MI 1.16 1.60 13.27 13.27 176.33
CKFB CKF Bancorp of Danville KY 0.82 0.81 16.29 16.29 64.77
CNSB CNS Bancorp of MO 0.20 0.35 14.60 14.60 59.83
CSBF CSB Financial Group Inc of IL* 0.25 0.38 13.57 12.80 53.10
CFHC California Fin. Hld. Co. of CA(8) 1.46 2.11 18.96 18.87 282.09
CBCI Calumet Bancorp of Chicago IL 2.27 2.96 34.40 34.40 214.65
CAFI Camco Fin. Corp. of OH 0.89 1.02 9.36 9.36 123.43
CMRN Cameron Fin. Corp. of MO 0.74 0.91 16.43 16.43 65.41
CAPS Capital Savings Bancorp of MO 0.72 1.05 10.54 10.54 124.57
CFNC Carolina Fincorp of NC* 0.52 0.52 12.99 12.99 59.15
CARV Carver FSB of New York, NY -0.05 0.38 14.96 14.28 157.76
CASB Cascade SB of Everett WA 0.82 0.86 10.34 10.34 169.53
CATB Catskill Fin. Corp. of NY* 0.64 0.64 15.89 15.89 54.75
CNIT Cenit Bancorp of Norfolk VA 1.91 2.13 29.22 28.18 401.57
CTBK Center Banks, Inc. of NY* 1.58 1.50 17.12 16.74 255.47
CEBK Central Co-Op. Bank of MA* 0.85 0.92 16.30 14.36 165.86
CENB Century Bancshares of NC* 2.26 2.87 69.47 69.47 243.46
CBSB Charter Financial Inc. of IL 0.72 0.95 13.26 12.24 91.33
COFI Charter One Financial of OH 2.75 3.52 20.00 18.54 299.39
CVAL Chester Valley Bancorp of PA 1.04 1.54 15.72 15.72 177.58
CTZN CitFed Bancorp of Dayton OH 1.58 2.32 21.55 19.09 339.95
CLAS Classic Bancshares of KY 0.23 0.39 14.22 11.89 103.04
CMSB Cmnwealth Bancorp of PA 0.43 0.62 12.67 9.72 116.13
CBSA Coastal Bancorp of Houston TX 1.32 2.23 18.25 15.03 575.69
CFCP Coastal Fin. Corp. of SC 1.08 1.16 8.02 8.02 133.17
COFD Collective Bancorp Inc. of NJ(8) 2.24 2.76 17.85 16.71 257.59
</TABLE>
<PAGE>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 28, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- -------- ------ ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 19.50 4,910 46.1 20.50 14.25 19.00 2.63 N.A. -4.88
CBIN Community Bank Shares of IN 13.75 1,984 27.3 14.75 12.00 14.00 -1.79 N.A. 5.77
CBNH Community Bankshares Inc of NH* 23.62 2,449 57.8 26.25 17.12 26.25 -10.02 529.87 15.22
CFTP Community Fed. Bancorp of MS 19.87 4,282 85.1 20.00 12.25 19.87 0.00 N.A. 16.88
CFFC Community Fin. Corp. of VA 22.00 1,272 28.0 22.50 18.00 22.00 0.00 214.29 6.02
CIBI Community Inv. Bancorp of OH 17.25 633 10.9 18.25 14.50 17.37 -0.69 N.A. 1.47
COOP Cooperative Bk.for Svgs. of NC 20.50 1,492 30.6 21.50 16.50 20.75 -1.20 105.00 1.23
CNSK Covenant Bank for Svgs. of NJ* 14.50 2,742 39.8 14.50 10.88 14.50 0.00 N.A. 1.75
CRZY Crazy Woman Creek Bncorp of WY 13.62 1,058 14.4 13.62 10.00 13.50 0.89 N.A. 13.50
DNFC D&N Financial Corp. of MI 17.87 8,348 149.2 18.25 12.00 18.00 -0.72 104.23 6.69
DFIN Damen Fin. Corp. of Chicago IL 14.50 3,771 54.7 14.75 11.00 14.37 0.90 N.A. 12.67
DCBI Delphos Citizens Bancorp of OH 14.25 2,039 29.1 14.25 11.75 14.12 0.92 N.A. 18.75
DIME Dime Community Bancorp of NY 18.50 14,547 269.1 18.50 11.69 18.25 1.37 N.A. 25.42
DIBK Dime Financial Corp. of CT* 20.62 5,129 105.8 21.25 12.75 20.75 -0.63 96.38 19.54
EGLB Eagle BancGroup of IL 16.00 1,303 20.8 16.25 10.50 15.87 0.82 N.A. 7.60
EBSI Eagle Bancshares of Tucker GA 16.62 4,552 75.7 17.00 13.62 16.75 -0.78 129.24 7.23
EGFC Eagle Financial Corp. of CT 29.50 4,543 134.0 30.75 22.25 29.25 0.85 237.14 -3.28
ETFS East Texas Fin. Serv. of TX 18.25 1,079 19.7 18.75 14.25 18.25 0.00 N.A. 11.48
EBCP Eastern Bancorp of NH(8) 25.62 3,671 94.1 26.00 15.17 25.50 0.47 104.14 9.02
ESBK Elmira SB of Elmira NY* 19.00 707 13.4 20.75 14.75 18.50 2.70 32.22 4.11
EIRE Emerald Island Bancorp, MA* 19.50 2,211 43.1 20.37 11.20 19.25 1.30 155.91 21.88
EFBC Empire Federal Bancorp of MT 13.62 2,592 35.3 14.44 13.00 14.19 -4.02 N.A. N.A.
EFBI Enterprise Fed. Bancorp of OH 14.75 2,026 29.9 16.00 12.75 15.25 -3.28 N.A. 1.72
EQSB Equitable FSB of Wheaton MD 32.12 600 19.3 33.00 21.00 31.50 1.97 N.A. 13.70
FFFG F.F.O. Financial Group of FL 4.00 8,430 33.7 4.00 2.50 3.75 6.67 -51.87 18.69
FCBF FCB Fin. Corp. of Neenah WI 22.25 2,460 54.7 23.50 17.00 22.25 0.00 N.A. 20.27
FFBS FFBS Bancorp of Columbus MS 22.00 1,566 34.5 24.25 17.00 22.00 0.00 N.A. -4.35
FFDF FFD Financial Corp. of OH 14.00 1,455 20.4 14.00 10.00 13.87 0.94 N.A. 5.66
FFLC FFLC Bancorp of Leesburg FL 27.50 2,438 67.0 27.50 17.25 23.50 17.02 N.A. 27.91
FFFC FFVA Financial Corp. of VA 24.75 4,693 116.2 25.00 14.62 24.75 0.00 N.A. 20.73
FFWC FFW Corporation of Wabash IN 25.25 702 17.7 25.25 16.50 25.00 1.00 N.A. 15.40
FFYF FFY Financial Corp. of OH 25.12 4,319 108.5 25.87 22.00 25.12 0.00 N.A. -0.75
FMCO FMS Financial Corp. of NJ 19.75 2,393 47.3 20.50 14.75 20.50 -3.66 119.44 8.22
FFHH FSF Financial Corp. of MN 17.00 3,230 54.9 17.12 11.37 16.50 3.03 N.A. 12.43
FOBC Fed One Bancorp of Wheeling WV 18.50 2,459 45.5 18.50 13.25 17.75 4.23 85.00 17.46
FFRV Fid. Fin. Bkshrs. Corp. of VA(8) 28.00 2,299 64.4 28.75 12.00 27.87 0.47 220.00 12.59
FBCI Fidelity Bancorp of Chicago IL 19.75 2,787 55.0 20.87 15.00 19.00 3.95 N.A. 16.18
FSBI Fidelity Bancorp, Inc. of PA 23.25 1,381 32.1 23.37 15.46 22.75 2.20 200.78 16.25
FFFL Fidelity FSB, MHC of FL (47.4) 18.75 6,745 59.8 19.75 12.00 18.25 2.74 N.A. 5.63
FFED Fidelity Fed. Bancorp of IN 9.00 2,489 22.4 13.25 8.75 8.75 2.86 27.66 -7.69
FFOH Fidelity Financial of OH 12.37 5,594 69.2 13.00 9.62 12.75 -2.98 N.A. 7.57
FIBC Financial Bancorp of NY 17.87 1,748 31.2 18.50 12.37 18.12 -1.38 N.A. 19.13
FBSI First Bancshares of MO 19.25 1,195 23.0 20.75 15.00 20.50 -6.10 50.98 15.82
FBBC First Bell Bancorp of PA 16.12 7,758 125.1 17.37 13.12 15.63 3.13 N.A. 21.66
FBER First Bergen Bancorp of NJ 14.62 3,015 44.1 14.62 9.00 14.62 0.00 N.A. 27.13
FCIT First Cit. Fin. Corp of MD 22.75 2,938 66.8 22.75 16.00 21.75 4.60 161.80 24.66
FSTC First Citizens Corp of GA 22.00 1,588 34.9 26.75 16.25 21.25 3.53 76.00 -12.87
FFBA First Colorado Bancorp of Co 17.12 18,184 311.3 17.75 11.50 17.00 0.71 418.79 0.71
FDEF First Defiance Fin.Corp. of OH 13.06 9,471 123.7 13.06 9.87 13.00 0.46 N.A. 5.58
FESX First Essex Bancorp of MA* 15.94 7,421 118.3 16.75 10.00 16.00 -0.38 165.67 21.49
FFES First FS&LA of E. Hartford CT 25.50 2,626 67.0 26.25 16.50 25.87 -1.43 292.31 10.87
FSSB First FS&LA of San Bern. CA 9.50 328 3.1 11.50 9.00 10.50 -9.52 -5.00 5.56
FFSX First FS&LA. MHC of IA (46.0) 30.25 1,883 26.2 31.50 21.36 30.25 0.00 202.50 3.42
FFSW First Fed Fin. Serv. of OH 37.50 3,612 135.5 39.75 21.82 37.50 0.00 120.59 -3.52
BDJI First Fed. Bancorp. of MN 18.50 701 13.0 19.25 12.25 18.50 0.00 N.A. 0.00
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
--------------------- -------- ------- ------- -------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 0.82 1.23 15.50 15.50 133.44
CBIN Community Bank Shares of IN 0.66 1.01 12.83 12.81 118.25
CBNH Community Bankshares Inc of NH* 1.71 1.39 16.05 16.05 224.06
CFTP Community Fed. Bancorp of MS 0.60 0.73 16.09 16.09 48.11
CFFC Community Fin. Corp. of VA 1.28 1.62 17.59 17.59 126.41
CIBI Community Inv. Bancorp of OH 0.95 1.37 17.88 17.88 149.76
COOP Cooperative Bk.for Svgs. of NC -2.18 0.07 17.07 17.07 228.75
CNSK Covenant Bank for Svgs. of NJ* 0.52 0.64 7.55 7.55 141.20
CRZY Crazy Woman Creek Bncorp of WY 0.39 0.51 14.79 14.79 49.71
DNFC D&N Financial Corp. of MI 1.08 1.41 10.32 10.20 176.46
DFIN Damen Fin. Corp. of Chicago IL 0.45 0.59 14.27 14.27 62.39
DCBI Delphos Citizens Bancorp of OH 0.73 0.73 14.26 14.26 53.80
DIME Dime Community Bancorp of NY 0.68 0.78 15.23 13.33 84.69
DIBK Dime Financial Corp. of CT* 2.29 2.47 11.58 11.10 134.89
EGLB Eagle BancGroup of IL -0.38 0.03 16.99 16.99 132.51
EBSI Eagle Bancshares of Tucker GA 0.85 1.13 12.62 12.62 141.07
EGFC Eagle Financial Corp. of CT 3.05 1.88 22.26 16.32 308.78
ETFS East Texas Fin. Serv. of TX 0.42 0.75 19.40 19.40 106.00
EBCP Eastern Bancorp of NH(8) 0.88 1.24 17.65 16.71 235.91
ESBK Elmira SB of Elmira NY* 0.58 0.54 19.91 19.04 312.17
EIRE Emerald Island Bancorp, MA* 1.08 1.09 12.64 12.64 185.27
EFBC Empire Federal Bancorp of MT 0.35 0.46 14.76 14.76 42.30
EFBI Enterprise Fed. Bancorp of OH 0.71 0.67 16.32 16.29 116.09
EQSB Equitable FSB of Wheaton MD 1.87 3.19 23.88 23.88 477.73
FFFG F.F.O. Financial Group of FL 0.07 0.22 2.23 2.23 36.90
FCBF FCB Fin. Corp. of Neenah WI 0.95 1.17 18.92 18.92 109.47
FFBS FFBS Bancorp of Columbus MS 0.85 1.11 15.73 15.73 80.29
FFDF FFD Financial Corp. of OH 0.34 0.47 14.72 14.72 58.72
FFLC FFLC Bancorp of Leesburg FL 0.90 1.34 22.00 22.00 142.10
FFFC FFVA Financial Corp. of VA 1.16 1.44 15.87 15.53 113.75
FFWC FFW Corporation of Wabash IN 1.89 2.35 22.96 22.96 225.36
FFYF FFY Financial Corp. of OH 1.13 1.71 19.30 19.30 134.83
FMCO FMS Financial Corp. of NJ 1.26 2.00 14.14 13.80 226.37
FFHH FSF Financial Corp. of MN 0.61 0.81 13.91 13.91 112.19
FOBC Fed One Bancorp of Wheeling WV 0.95 1.35 16.26 15.45 139.04
FFRV Fid. Fin. Bkshrs. Corp. of VA(8) 0.92 1.34 12.07 12.06 143.21
FBCI Fidelity Bancorp of Chicago IL 0.77 1.15 17.52 17.46 170.74
FSBI Fidelity Bancorp, Inc. of PA 0.95 1.67 15.77 15.74 230.18
FFFL Fidelity FSB, MHC of FL (47.4) 0.53 0.77 12.12 12.00 129.87
FFED Fidelity Fed. Bancorp of IN 0.18 0.33 5.06 5.06 104.53
FFOH Fidelity Financial of OH 0.26 0.39 9.08 9.08 45.74
FIBC Financial Bancorp of NY 0.72 1.27 14.74 14.66 148.23
FBSI First Bancshares of MO 1.01 1.26 19.38 19.35 131.39
FBBC First Bell Bancorp of PA 0.99 1.14 13.71 13.71 74.37
FBER First Bergen Bancorp of NJ 0.09 0.47 14.12 14.12 82.91
FCIT First Cit. Fin. Corp of MD 0.98 1.41 13.46 13.46 227.52
FSTC First Citizens Corp of GA 2.35 2.05 13.07 13.00 102.14
FFBA First Colorado Bancorp of Co 0.87 0.87 13.48 13.32 82.56
FDEF First Defiance Fin.Corp. of OH 0.51 0.67 12.73 12.73 55.35
FESX First Essex Bancorp of MA* 1.23 1.06 11.20 9.61 143.80
FFES First FS&LA of E. Hartford CT 1.53 2.31 21.96 21.91 358.97
FSSB First FS&LA of San Bern. CA -3.34 -3.89 14.36 13.71 305.90
FFSX First FS&LA. MHC of IA (46.0) 0.96 1.69 19.86 19.68 242.86
FFSW First Fed Fin. Serv. of OH 2.52 2.27 16.50 13.48 307.51
BDJI First Fed. Bancorp. of MN 0.48 1.01 17.78 17.78 156.53
</TABLE>
<PAGE>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 28, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------ ------- ------- ------- ------- ------- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFBH First Fed. Bancshares of AR 18.87 5,154 97.3 20.37 10.00 19.50 -3.23 N.A. 18.90
FFEC First Fed. Bancshares of WI(8) 18.62 6,855 127.6 18.66 13.75 18.50 0.65 N.A. 2.03
FTFC First Fed. Capital Corp. of WI 28.37 6,169 175.0 29.50 19.50 28.75 -1.32 152.18 20.72
FFKY First Fed. Fin. Corp. of KY 21.00 4,182 87.8 22.00 16.12 21.00 0.00 33.33 3.70
FFBZ First Federal Bancorp of OH 17.50 1,572 27.5 17.50 11.06 17.00 2.94 75.00 9.38
FFWM First Fin. Corp of Western MD(8) 32.25 2,168 69.9 33.25 17.75 33.00 -2.27 222.50 0.78
FFCH First Fin. Holdings Inc. of SC 28.00 6,301 176.4 28.00 17.50 28.00 0.00 128.57 24.44
FFBI First Financial Bancorp of IL 16.50 452 7.5 16.50 15.50 16.50 0.00 N.A. 3.97
FFHC First Financial Corp. of WI 26.75 36,802 984.5 28.25 16.00 28.13 -4.91 69.84 9.18
FFHS First Franklin Corp. of OH 16.75 1,156 19.4 17.25 13.50 16.00 4.69 27.67 1.52
FGHC First Georgia Hold. Corp of GA 10.12 2,035 20.6 10.50 6.00 9.75 3.79 164.23 19.06
FSPG First Home Bancorp of NJ 18.87 2,708 51.1 18.87 13.31 17.00 11.00 214.50 36.05
FFSL First Independence Corp. of KS 11.87 1,058 12.6 11.87 8.81 11.25 5.51 N.A. 14.46
FISB First Indiana Corp. of IN 28.25 8,303 234.6 30.37 21.00 30.00 -5.83 109.26 5.61
FKFS First Keystone Fin. Corp of PA 21.50 1,292 27.8 21.62 16.75 21.62 -0.56 N.A. 11.69
FLKY First Lancaster Bncshrs of KY 16.00 959 15.3 16.25 13.12 15.50 3.23 N.A. 9.44
FLFC First Liberty Fin. Corp. of GA 22.00 7,130 156.9 22.00 13.50 22.00 0.00 333.07 19.76
CASH First Midwest Fin. Corp. of IA 16.75 2,897 48.5 17.50 14.50 16.62 0.78 N.A. 9.26
FMBD First Mutual Bancorp of IL 16.00 3,769 60.3 16.00 11.62 15.50 3.23 N.A. 6.67
FMSB First Mutual SB of Bellevue WA* 19.50 2,453 47.8 20.50 12.25 20.50 -4.88 151.61 11.43
FNGB First Northern Cap. Corp of WI 18.62 4,387 81.7 18.62 15.25 17.50 6.40 27.88 14.58
FFPB First Palm Beach Bancorp of FL 29.50 5,040 148.7 29.50 19.94 27.00 9.26 N.A. 24.89
FSLA First SB SLA MHC of NJ (47.5) 21.75 7,185 74.0 23.50 13.18 21.25 2.35 117.50 17.57
FSNJ First SB of NJ, MHC (45.9)(8) 23.50 3,064 33.0 24.00 13.75 23.75 -1.05 N.A. 2.17
SOPN First SB, SSB, Moore Co. of NC 19.50 3,689 71.9 20.25 16.75 19.25 1.30 N.A. 4.00
FWWB First Savings Bancorp of WA* 19.75 10,569 208.7 22.12 12.37 21.00 -5.95 N.A. 7.51
SHEN First Shenango Bancorp of PA 25.25 2,060 52.0 25.75 20.00 25.00 1.00 N.A. 12.22
FSFC First So.east Fin. Corp. of SC 10.75 4,388 47.2 20.12 9.12 11.00 -2.27 N.A. 14.61
FFDP FirstFed Bancshares of IL 17.50 3,063 53.6 18.25 14.08 17.50 0.00 162.76 1.45
FLAG Flag Financial Corp of GA 12.75 2,037 26.0 13.50 9.75 12.37 3.07 30.10 18.60
FFIC Flushing Fin. Corp. of NY* 19.12 8,250 157.7 19.94 14.50 19.75 -3.19 N.A. 5.52
FBHC Fort Bend Holding Corp. of TX 24.25 820 19.9 25.75 16.87 23.56 2.93 N.A. -4.90
FTSB Fort Thomas Fin. Corp. of KY 12.00 1,574 18.9 17.75 11.75 13.00 -7.69 N.A. -17.92
FKKY Frankfort First Bancorp of KY 9.75 3,440 33.5 15.87 9.75 10.25 -4.88 N.A. -14.25
FTNB Fulton Bancorp of MO 18.50 1,719 31.8 18.50 12.50 16.37 13.01 N.A. 20.36
GFSB GFS Bancorp of Grinnell IA 22.25 500 11.1 22.25 20.00 21.50 3.49 N.A. 4.71
GUPB GFSB Bancorp of Gallup NM 16.25 901 14.6 16.25 13.25 16.00 1.56 N.A. 2.39
GWBC Gateway Bancorp of KY 14.25 1,076 15.3 15.25 13.00 14.75 -3.39 N.A. 0.00
GBCI Glacier Bancorp of MT 24.75 3,374 83.5 25.25 18.64 24.00 3.13 412.42 1.02
GLBK Glendale Co-op. Bank of MA* 26.75 247 6.6 26.75 16.50 23.00 16.30 N.A. 33.75
GFCO Glenway Financial Corp. of OH 20.75 1,187 24.6 22.75 18.09 20.00 3.75 N.A. 1.22
GTPS Great American Bancorp of IL 15.87 1,950 30.9 16.12 13.19 15.94 -0.44 N.A. 7.16
GTFN Great Financial Corp. of KY 32.62 14,117 460.5 34.75 24.00 34.25 -4.76 N.A. 12.02
GSBC Great Southern Bancorp of MO 17.12 8,177 140.0 18.00 12.12 17.00 0.71 486.30 -3.87
GDVS Greater DV SB,MHC of PA (19.9)* 11.00 3,272 7.2 11.50 9.25 11.00 0.00 N.A. 6.08
GRTR Greater New York SB of NY* 15.75 13,534 213.2 15.75 10.12 14.87 5.92 69.17 15.64
GSFC Green Street Fin. Corp. of NC 18.25 4,298 78.4 18.87 12.12 17.50 4.29 N.A. 17.74
GROV GroveBank for Savings of MA(8)* 50.62 1,542 78.1 50.69 24.50 50.50 0.24 470.69 1.75
GSLC Guaranty Svgs & Loan FA of VA 9.50 924 8.8 9.87 7.25 9.62 -1.25 N.A. 8.57
GFED Guarnty FS&LA,MHC of MO (31.0) 11.75 3,125 11.4 12.50 9.75 12.00 -2.08 N.A. -2.57
HEMT HF Bancorp of Hemet CA 13.37 6,282 84.0 14.00 9.25 13.87 -3.60 N.A. 20.23
HFFC HF Financial Corp. of SD 19.50 2,992 58.3 20.25 13.44 18.00 8.33 290.00 12.65
HFNC HFNC Financial Corp. of NC 21.25 17,192 365.3 21.75 13.12 21.75 -2.30 N.A. 18.91
HMNF HMN Financial, Inc. of MN 23.12 4,434 102.5 23.75 14.50 23.50 -1.62 N.A. 27.59
HALL Hallmark Capital Corp. of WI 18.75 1,443 27.1 18.75 14.50 18.12 3.48 N.A. 5.63
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
--------------------- -------- ------- ------- -------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C>
FFBH First Fed. Bancshares of AR 0.58 0.88 16.17 16.17 98.88
FFEC First Fed. Bancshares of WI(8) 0.67 0.88 14.27 13.73 106.32
FTFC First Fed. Capital Corp. of WI 1.56 1.72 15.10 14.24 238.19
FFKY First Fed. Fin. Corp. of KY 1.04 1.22 11.95 11.20 87.77
FFBZ First Federal Bancorp of OH 0.89 1.20 9.12 9.11 120.27
FFWM First Fin. Corp of Western MD(8) 1.48 1.99 19.44 19.44 166.44
FFCH First Fin. Holdings Inc. of SC 1.25 1.96 15.28 15.28 251.11
FFBI First Financial Bancorp of IL 0.22 0.70 16.62 16.62 214.92
FFHC First Financial Corp. of WI 1.35 1.90 11.15 10.81 154.89
FFHS First Franklin Corp. of OH 0.52 1.14 17.10 16.95 188.87
FGHC First Georgia Hold. Corp of GA 0.60 0.60 5.87 5.23 70.77
FSPG First Home Bancorp of NJ 1.57 2.08 11.62 11.36 179.91
FFSL First Independence Corp. of KS 0.58 0.85 11.32 11.32 102.94
FISB First Indiana Corp. of IN 1.65 1.83 16.70 16.48 180.23
FKFS First Keystone Fin. Corp of PA 1.05 1.65 18.03 18.03 240.48
FLKY First Lancaster Bncshrs of KY 0.38 0.49 14.27 14.27 38.43
FLFC First Liberty Fin. Corp. of GA 1.29 1.08 9.59 8.12 139.02
CASH First Midwest Fin. Corp. of IA 0.83 1.10 14.92 13.16 133.93
FMBD First Mutual Bancorp of IL 0.35 0.55 16.73 16.73 83.94
FMSB First Mutual SB of Bellevue WA* 1.55 1.49 10.79 10.79 163.31
FNGB First Northern Cap. Corp of WI 0.75 1.14 16.01 16.01 140.30
FFPB First Palm Beach Bancorp of FL 0.11 0.33 20.92 20.36 295.64
FSLA First SB SLA MHC of NJ (47.5) 0.63 1.13 12.56 11.00 135.67
FSNJ First SB of NJ, MHC (45.9)(8) 0.38 0.85 16.00 16.00 212.35
SOPN First SB, SSB, Moore Co. of NC 0.94 1.15 18.03 18.03 72.08
FWWB First Savings Bancorp of WA* 0.68 0.68 14.13 12.97 89.60
SHEN First Shenango Bancorp of PA 1.29 1.75 22.39 22.39 186.45
FSFC First So.east Fin. Corp. of SC -0.01 0.68 7.69 7.69 74.30
FFDP FirstFed Bancshares of IL 0.52 0.63 16.31 15.53 176.68
FLAG Flag Financial Corp of GA -0.08 0.12 9.89 9.89 112.38
FFIC Flushing Fin. Corp. of NY* 0.81 0.82 16.16 16.16 93.98
FBHC Fort Bend Holding Corp. of TX 0.75 1.75 21.84 20.20 339.67
FTSB Fort Thomas Fin. Corp. of KY 0.29 0.44 9.97 9.97 57.88
FKKY Frankfort First Bancorp of KY 0.32 0.43 9.84 9.84 37.42
FTNB Fulton Bancorp of MO 0.30 0.47 14.24 14.24 58.38
GFSB GFS Bancorp of Grinnell IA 1.60 2.06 20.10 20.10 175.25
GUPB GFSB Bancorp of Gallup NM 0.62 0.79 16.37 16.37 88.47
GWBC Gateway Bancorp of KY 0.56 0.77 16.19 16.19 64.59
GBCI Glacier Bancorp of MT 1.61 1.81 11.54 11.53 122.12
GLBK Glendale Co-op. Bank of MA* 1.16 0.97 23.71 23.71 149.55
GFCO Glenway Financial Corp. of OH 0.59 1.40 22.19 21.75 239.03
GTPS Great American Bancorp of IL 0.42 0.41 17.09 17.09 61.37
GTFN Great Financial Corp. of KY 1.38 1.35 19.87 19.07 205.23
GSBC Great Southern Bancorp of MO 1.09 1.24 8.14 8.14 80.43
GDVS Greater DV SB,MHC of PA (19.9)* -0.06 0.16 8.49 8.49 72.21
GRTR Greater New York SB of NY* 1.34 0.70 11.32 11.32 189.64
GSFC Green Street Fin. Corp. of NC 0.48 0.60 14.47 14.47 41.00
GROV GroveBank for Savings of MA(8)* 3.37 3.16 25.21 25.20 388.14
GSLC Guaranty Svgs & Loan FA of VA 0.49 0.58 6.86 6.86 124.71
GFED Guarnty FS&LA,MHC of MO (31.0) 0.45 0.38 8.53 8.53 61.09
HEMT HF Bancorp of Hemet CA -0.36 -2.62 12.91 0.00 131.63
HFFC HF Financial Corp. of SD 1.14 1.47 17.11 17.06 184.74
HFNC HFNC Financial Corp. of NC 0.55 0.67 14.62 14.62 52.44
HMNF HMN Financial, Inc. of MN 0.96 1.15 18.52 18.52 125.11
HALL Hallmark Capital Corp. of WI 1.09 1.46 19.46 19.46 274.99
</TABLE>
<PAGE>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 28, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- -------- ------ ------- ------- ------- ------- ------- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
HARB Harbor FSB, MHC of FL (46.0) 37.50 4,939 85.1 37.50 23.75 35.50 5.63 N.A. 4.90
HRBF Harbor Federal Bancorp of MD 17.12 1,754 30.0 18.25 12.37 17.37 -1.44 71.20 8.70
HFSA Hardin Bancorp of Hardin MO 14.25 955 13.6 14.25 11.00 13.75 3.64 N.A. 14.00
HARL Harleysville SA of PA 21.50 1,629 35.0 21.60 13.60 20.00 7.50 21.13 36.08
HARS Harris SB, MHC of PA (24.2) 21.62 11,216 58.7 22.62 14.75 21.88 -1.19 N.A. 18.47
HFFB Harrodsburg 1st Fin Bcrp of KY 16.00 2,030 32.5 19.00 13.25 17.25 -7.25 N.A. -15.21
HHFC Harvest Home Fin. Corp. of OH 10.50 935 9.8 13.75 9.25 10.12 3.75 N.A. 7.69
HAVN Haven Bancorp of Woodhaven NY 33.25 4,325 143.8 34.25 22.50 30.62 8.59 N.A. 16.18
HVFD Haverfield Corp. of OH 20.50 1,906 39.1 20.50 13.75 18.75 9.33 32.26 7.22
HTHR Hawthorne Fin. Corp. of CA 11.00 2,599 28.6 11.75 4.38 11.75 -6.38 -60.00 35.30
HBNK Highland Federal Bank of CA 24.00 2,296 55.1 24.00 14.25 23.50 2.13 N.A. 41.18
HIFS Hingham Inst. for Sav. of MA* 18.62 1,297 24.2 19.25 13.75 19.00 -2.00 308.33 -0.69
HBEI Home Bancorp of Elgin IL 15.12 7,009 106.0 15.25 11.81 15.00 0.80 N.A. 12.00
HBFW Home Bancorp of Fort Wayne IN 19.25 2,653 51.1 19.75 13.75 19.62 -1.89 N.A. 1.32
HBBI Home Building Bancorp of IN 21.00 312 6.6 21.25 16.25 21.00 0.00 N.A. 6.33
HCFC Home City Fin. Corp. of OH 13.25 876 11.6 14.00 12.00 14.00 -5.36 N.A. 0.00
HOMF Home Fed Bancorp of Seymour IN 27.25 3,352 91.3 27.75 16.33 27.50 -0.91 171.14 5.83
HWEN Home Financial Bancorp of IN 14.00 506 7.1 14.87 9.87 14.00 0.00 N.A. 9.80
HPBC Home Port Bancorp, Inc. of MA* 19.00 1,842 35.0 19.00 12.25 18.25 4.11 137.50 15.15
HMCI Homecorp, Inc. of Rockford IL 20.50 1,129 23.1 21.25 17.00 21.25 -3.53 105.00 7.22
LOAN Horizon Bancorp, Inc of TX(8)* 24.00 1,387 33.3 25.50 8.25 24.00 0.00 N.A. 11.63
HZFS Horizon Fin'l. Services of IA 17.00 426 7.2 17.75 14.00 17.75 -4.23 N.A. 12.43
HRZB Horizon Financial Corp. of WA* 15.00 6,412 96.2 16.75 11.75 15.50 -3.23 11.69 11.11
IBSF IBS Financial Corp. of NJ 17.50 9,936 173.9 17.87 12.50 17.87 -2.07 N.A. 11.96
ISBF ISB Financial Corp. of LA 25.12 7,051 177.1 25.25 13.62 23.87 5.24 N.A. 39.56
ITLA Imperial Thrift & Loan of CA* 16.37 7,824 128.1 16.62 12.62 16.00 2.31 N.A. 9.13
IFSB Independence FSB of DC 8.75 1,280 11.2 9.75 6.75 9.00 -2.78 337.50 9.38
INCB Indiana Comm. Bank, SB of IN 16.75 922 15.4 17.00 12.50 16.75 0.00 N.A. 3.08
IFSL Indiana Federal Corp. of IN(8) 26.25 4,737 124.3 27.25 16.25 26.25 0.00 248.14 17.34
INBI Industrial Bancorp of OH 12.62 5,504 69.5 16.00 9.87 12.75 -1.02 N.A. -1.02
IWBK Interwest SB of Oak Harbor WA 35.00 8,001 280.0 36.25 20.00 36.25 -3.45 250.00 8.53
IPSW Ipswich SB of Ipswich MA* 15.75 1,188 18.7 16.00 7.75 16.00 -1.56 N.A. 31.25
JSBF JSB Financial, Inc. of NY 39.81 9,764 388.7 40.00 31.87 40.00 -0.47 246.17 4.76
JXVL Jacksonville Bancorp of TX 15.25 2,638 40.2 15.75 9.38 15.00 1.67 N.A. 4.31
JXSB Jcksnville SB,MHC of IL (44.6) 16.50 1,272 9.4 17.25 11.50 16.25 1.54 N.A. 24.53
JSBA Jefferson Svgs Bancorp of MO 28.50 4,182 119.2 30.75 22.25 30.00 -5.00 N.A. 9.62
JOAC Joachim Bancorp of MO 14.50 760 11.0 15.25 11.50 14.00 3.57 N.A. 0.00
KSAV KS Bancorp of Kenly NC 19.75 663 13.1 21.00 17.12 19.75 0.00 N.A. -0.60
KSBK KSB Bancorp of Kingfield ME(8)* 34.00 411 14.0 34.00 17.27 34.00 0.00 N.A. 47.83
KFBI Klamath First Bancorp of OR 15.50 10,002 155.0 16.25 12.56 15.56 -0.39 N.A. -1.59
LBFI L&B Financial of S. Springs TX(8) 18.00 1,584 28.5 18.00 13.87 17.00 5.88 N.A. 5.88
LSBI LSB Fin. Corp. of Lafayette IN 19.50 918 17.9 20.00 14.50 20.00 -2.50 N.A. 0.00
LVSB Lakeview SB of Paterson NJ 31.00 2,487 77.1 32.50 16.14 30.25 2.48 N.A. 24.65
LARK Landmark Bancshares of KS 18.87 1,836 34.6 19.00 14.50 18.75 0.64 N.A. 4.83
LARL Laurel Capital Group of PA 21.75 1,515 33.0 21.75 14.50 19.50 11.54 69.92 31.82
LSBX Lawrence Savings Bank of MA* 9.62 4,250 40.9 10.25 5.12 9.87 -2.53 179.65 18.33
LFED Leeds FSB, MHC of MD (36.2) 18.25 3,455 22.8 19.00 13.00 19.00 -3.95 N.A. 14.06
LXMO Lexington B&L Fin. Corp. of MO 14.62 1,265 18.5 14.75 9.50 14.25 2.60 N.A. 8.30
LIFB Life Bancorp of Norfolk VA 19.75 9,847 194.5 21.00 14.00 19.75 0.00 N.A. 9.72
LFBI Little Falls Bancorp of NJ 13.25 2,890 38.3 14.00 9.50 14.00 -5.36 N.A. 3.92
LOGN Logansport Fin. Corp. of IN 13.00 1,256 16.3 14.75 11.12 13.00 0.00 N.A. 15.56
LONF London Financial Corp. of OH 14.62 529 7.7 15.25 9.75 15.25 -4.13 N.A. 3.54
LISB Long Island Bancorp of NY 36.62 24,458 895.7 39.25 26.94 38.37 -4.56 N.A. 4.63
MAFB MAF Bancorp of IL 40.63 10,490 426.2 40.63 22.25 39.75 2.21 378.00 16.92
MBLF MBLA Financial Corp. of MO(8) 20.12 1,339 26.9 26.00 19.00 20.25 -0.64 N.A. 5.89
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
--------------------- -------- ------- ------ -------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
HARB Harbor FSB, MHC of FL (46.0) 1.83 2.43 17.75 17.04 214.69
HRBF Harbor Federal Bancorp of MD 0.38 0.68 16.08 16.08 124.73
HFSA Hardin Bancorp of Hardin MO 0.45 0.75 14.99 14.99 101.59
HARL Harleysville SA of PA 1.12 1.71 12.52 12.52 199.04
HARS Harris SB, MHC of PA (24.2) 0.03 0.61 13.15 11.09 153.68
HFFB Harrodsburg 1st Fin Bcrp of KY 0.54 0.71 14.89 14.89 53.67
HHFC Harvest Home Fin. Corp. of OH 0.14 0.41 10.40 10.40 84.19
HAVN Haven Bancorp of Woodhaven NY 1.99 3.01 21.72 21.59 361.78
HVFD Haverfield Corp. of OH 0.79 1.77 14.88 14.86 181.98
HTHR Hawthorne Fin. Corp. of CA 2.66 1.67 12.25 12.25 318.50
HBNK Highland Federal Bank of CA 0.29 1.04 15.18 15.18 213.28
HIFS Hingham Inst. for Sav. of MA* 1.58 1.58 14.81 14.81 155.42
HBEI Home Bancorp of Elgin IL 0.06 0.31 14.12 14.12 52.87
HBFW Home Bancorp of Fort Wayne IN 0.62 1.03 17.61 17.61 121.64
HBBI Home Building Bancorp of IN -0.49 -0.02 17.84 17.84 142.83
HCFC Home City Fin. Corp. of OH 0.59 0.77 13.90 13.90 69.69
HOMF Home Fed Bancorp of Seymour IN 1.79 2.12 15.41 14.85 188.96
HWEN Home Financial Bancorp of IN 0.36 0.52 15.31 15.31 76.45
HPBC Home Port Bancorp, Inc. of MA* 1.64 1.65 10.66 10.66 102.41
HMCI Homecorp, Inc. of Rockford IL 0.29 0.99 18.09 18.09 301.55
LOAN Horizon Bancorp, Inc of TX(8)* 1.02 0.94 8.52 8.27 107.35
HZFS Horizon Fin'l. Services of IA 0.23 0.57 19.31 19.31 179.93
HRZB Horizon Financial Corp. of WA* 1.15 1.12 12.44 12.44 78.03
IBSF IBS Financial Corp. of NJ 0.46 0.74 14.52 14.52 74.68
ISBF ISB Financial Corp. of LA 0.73 0.99 15.93 15.45 97.27
ITLA Imperial Thrift & Loan of CA* 1.17 1.17 11.06 11.06 94.01
IFSB Independence FSB of DC 0.26 0.39 13.03 11.28 193.66
INCB Indiana Comm. Bank, SB of IN 0.15 0.48 12.10 12.10 98.37
IFSL Indiana Federal Corp. of IN(8) 1.07 1.50 14.77 13.78 170.81
INBI Industrial Bancorp of OH 0.44 0.85 11.28 11.28 59.34
IWBK Interwest SB of Oak Harbor WA 1.55 2.18 14.51 14.16 212.88
IPSW Ipswich SB of Ipswich MA* 1.51 1.22 8.29 8.29 133.79
JSBF JSB Financial, Inc. of NY 2.60 2.60 33.60 33.60 155.55
JXVL Jacksonville Bancorp of TX 0.54 0.81 13.43 13.43 82.58
JXSB Jcksnville SB,MHC of IL (44.6) 0.21 0.52 13.01 12.98 112.98
JSBA Jefferson Svgs Bancorp of MO 0.62 1.65 19.53 16.10 269.81
JOAC Joachim Bancorp of MO 0.19 0.33 14.05 14.05 47.54
KSAV KS Bancorp of Kenly NC 1.25 1.66 20.70 20.68 152.10
KSBK KSB Bancorp of Kingfield ME(8)* 2.76 2.76 22.00 20.37 322.46
KFBI Klamath First Bancorp of OR 0.58 0.86 15.25 15.25 67.30
LBFI L&B Financial of S. Springs TX(8) 0.51 0.69 15.66 15.66 89.90
LSBI LSB Fin. Corp. of Lafayette IN 0.90 0.82 18.21 18.21 193.73
LVSB Lakeview SB of Paterson NJ 2.25 0.95 19.47 15.51 190.07
LARK Landmark Bancshares of KS 0.89 1.09 17.82 17.82 120.90
LARL Laurel Capital Group of PA 1.45 1.86 14.31 14.31 133.65
LSBX Lawrence Savings Bank of MA* 1.23 1.23 6.83 6.83 79.50
LFED Leeds FSB, MHC of MD (36.2) 0.59 0.85 12.80 12.80 79.51
LXMO Lexington B&L Fin. Corp. of MO 0.36 0.50 14.83 14.83 48.75
LIFB Life Bancorp of Norfolk VA 0.87 1.16 15.33 14.84 144.18
LFBI Little Falls Bancorp of NJ 0.16 0.43 14.45 13.31 97.09
LOGN Logansport Fin. Corp. of IN 0.73 0.83 12.28 12.28 61.84
LONF London Financial Corp. of OH 0.52 0.76 15.11 15.11 70.53
LISB Long Island Bancorp of NY 1.32 1.60 21.22 21.22 219.31
MAFB MAF Bancorp of IL 1.73 2.61 23.89 20.62 307.94
MBLF MBLA Financial Corp. of MO(8) 1.02 1.29 21.23 21.23 156.01
</TABLE>
<PAGE>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 28, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MFBC MFB Corp. of Mishawaka IN 19.25 1,774 34.1 19.25 13.75 18.75 2.67 N.A. 15.82
MLBC ML Bancorp of Villanova PA 17.00 11,664 198.3 17.50 11.06 17.37 -2.13 N.A. 20.40
MBB MSB Bancorp of Middletown NY* 19.00 2,834 53.8 20.50 15.00 18.75 1.33 90.00 -3.16
MSBF MSB Financial Corp. of MI 21.75 648 14.1 21.75 15.75 20.75 4.82 N.A. 14.47
MGNL Magna Bancorp of MS 18.75 13,741 257.6 22.50 14.37 19.75 -5.06 275.00 7.14
MARN Marion Capital Holdings of IN 21.25 1,844 39.2 22.00 19.25 21.00 1.19 N.A. 10.39
MFCX Marshalltown Fin. Corp. of IA(8) 14.62 1,411 20.6 16.50 14.25 14.87 -1.68 N.A. -1.68
MFSL Maryland Fed. Bancorp of MD 37.25 3,131 116.6 38.25 26.91 38.25 -2.61 254.76 7.19
MASB MassBank Corp. of Reading MA* 40.00 2,687 107.5 41.37 32.50 41.37 -3.31 224.41 4.93
MFLR Mayflower Co-Op. Bank of MA* 17.50 889 15.6 18.50 11.50 17.00 2.94 250.00 2.94
MECH Mechanics SB of Hartford CT* 17.00 5,290 89.9 17.37 11.00 17.12 -0.70 N.A. 7.94
MDBK Medford Savings Bank of MA* 28.75 4,535 130.4 29.75 19.75 28.75 0.00 310.71 11.65
MERI Meritrust FSB of Thibodaux LA 35.50 774 27.5 35.50 29.25 35.50 0.00 N.A. 12.27
MWBX Metro West of MA* 5.22 13,889 72.5 5.37 3.50 5.06 3.16 26.70 -2.79
MCBS Mid Continent Bancshares of KS 25.25 2,017 50.9 27.00 17.37 26.56 -4.93 N.A. 8.04
MIFC Mid Iowa Financial Corp. of IA 8.50 1,656 14.1 8.50 6.00 8.50 0.00 70.00 33.44
MCBN Mid-Coast Bancorp of ME 19.00 230 4.4 20.25 18.00 19.00 0.00 232.75 0.00
MIDC Midconn Bank of Kensington CT(8)* 24.12 1,953 47.1 24.37 14.25 24.00 0.50 129.71 22.13
MWBI Midwest Bancshares, Inc. of IA 28.50 349 9.9 28.50 24.50 26.75 6.54 185.00 7.55
MWFD Midwest Fed. Fin. Corp of WI 18.00 1,604 28.9 24.50 9.87 18.00 0.00 260.00 -2.70
MFFC Milton Fed. Fin. Corp. of OH 13.75 2,205 30.3 16.00 11.50 14.37 -4.31 N.A. -5.17
MIVI Miss. View Hold. Co. of MN 14.87 855 12.7 14.87 10.75 14.62 1.71 N.A. 23.92
MBSP Mitchell Bancorp of NC* 15.37 980 15.1 15.37 10.19 15.00 2.47 N.A. 7.85
MBBC Monterey Bay Bancorp of CA 17.50 3,243 56.8 18.25 11.37 18.00 -2.78 N.A. 18.64
MSBK Mutual SB, FSB of Bay City MI 6.75 4,274 28.8 7.12 5.12 6.75 0.00 -22.86 22.73
NHTB NH Thrift Bancshares of NH 11.75 1,698 20.0 13.37 9.25 11.75 0.00 154.33 -6.89
NSLB NS&L Bancorp of Neosho MO 16.25 759 12.3 16.50 12.00 16.00 1.56 N.A. 19.31
NMSB Newmil Bancorp. of CT* 9.25 4,042 37.4 9.75 6.62 9.75 -5.13 45.21 -5.13
NASB North American SB of MO 36.75 2,264 83.2 39.50 29.25 39.25 -6.37 764.71 7.30
NBSI North Bancshares of Chicago IL 18.00 1,058 19.0 18.50 14.25 17.50 2.86 N.A. 9.09
FFFD North Central Bancshares of IA 15.25 3,429 52.3 15.63 10.12 15.63 -2.43 N.A. 12.46
NEBC Northeast Bancorp of ME* 13.75 1,232 16.9 14.00 12.00 14.00 -1.79 17.02 -1.79
NEIB Northeast Indiana Bncrp of IN 14.25 1,954 27.8 15.25 11.50 14.25 0.00 N.A. 4.63
NWEQ Northwest Equity Corp. of WI 13.50 929 12.5 14.19 9.87 13.62 -0.88 N.A. 11.39
NWSB Northwest SB, MHC of PA (29.9) 15.37 23,376 107.4 15.75 10.75 15.63 -1.66 N.A. 14.96
NSSY Norwalk Savings Society of CT* 25.25 2,392 60.4 26.00 18.75 25.37 -0.47 N.A. 8.04
NSSB Norwich Financial Corp. of CT* 22.62 5,400 122.1 22.62 12.62 20.37 11.05 223.14 15.29
NTMG Nutmeg FS&LA of CT 7.37 712 5.2 8.00 6.25 7.00 5.29 N.A. -1.73
OHSL OHSL Financial Corp. of OH 22.12 1,223 27.1 22.50 19.25 21.75 1.70 N.A. 3.51
OSBF OSB Fin. Corp. of Oshkosh WI(8) 32.00 1,160 37.1 33.25 22.75 32.00 0.00 178.25 17.43
OCFC Ocean Fin. Corp. of NJ 30.37 9,059 275.1 30.87 19.62 29.87 1.67 N.A. 19.10
OFCP Ottawa Financial Corp. of MI 19.25 5,179 99.7 19.25 16.00 18.87 2.01 N.A. 14.52
PFFB PFF Bancorp of Pomona CA 16.25 19,837 322.4 16.25 10.37 15.63 3.97 N.A. 9.28
PSFI PS Financial of Chicago IL 13.75 2,182 30.0 14.00 11.62 13.69 0.44 N.A. 17.02
PVFC PVF Capital Corp. of OH 16.50 2,323 38.3 17.25 12.00 16.37 0.79 275.00 4.76
PCCI Pacific Crest Capital of CA* 13.00 2,930 38.1 13.37 7.50 13.00 0.00 N.A. 13.04
PALM Palfed, Inc. of Aiken SC 14.75 5,228 77.1 15.25 11.62 14.81 -0.41 -4.03 5.36
PBCI Pamrapo Bancorp, Inc. of NJ 19.87 3,156 62.7 22.25 18.25 20.00 -0.65 252.93 -0.65
PFED Park Bancorp of Chicago IL 15.37 2,701 41.5 16.00 10.19 15.31 0.39 N.A. 18.23
PVSA Parkvale Financial Corp of PA 25.50 4,046 103.2 26.50 19.60 25.75 -0.97 207.97 -1.92
PBIX Patriot Bank Corp. of PA 15.63 4,457 69.7 16.25 10.42 15.25 2.49 N.A. 15.78
PEEK Peekskill Fin. Corp. of NY 15.25 3,378 51.5 15.25 11.12 15.00 1.67 N.A. 7.02
PFSB PennFed Fin. Services of NJ 24.87 4,821 119.9 25.25 14.62 23.12 7.57 N.A. 22.81
PWBC PennFirst Bancorp of PA 13.50 3,902 52.7 14.75 11.87 13.50 0.00 69.17 -0.88
PWBK Pennwood SB of PA* 14.37 610 8.8 14.50 9.00 14.37 0.00 N.A. 4.51
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
--------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C>
MFBC MFB Corp. of Mishawaka IN 0.62 0.97 19.43 19.43 126.24
MLBC ML Bancorp of Villanova PA 1.13 1.02 12.10 11.80 160.76
MBB MSB Bancorp of Middletown NY* 0.44 0.49 19.59 7.70 299.31
MSBF MSB Financial Corp. of MI 1.19 1.47 19.60 19.60 102.69
MGNL Magna Bancorp of MS 1.28 1.57 9.48 9.10 97.66
MARN Marion Capital Holdings of IN 1.10 1.36 21.68 21.68 95.34
MFCX Marshalltown Fin. Corp. of IA(8) 0.05 0.36 13.71 13.71 88.01
MFSL Maryland Fed. Bancorp of MD 2.81 1.97 30.23 29.75 360.41
MASB MassBank Corp. of Reading MA* 3.51 3.30 34.33 34.33 330.57
MFLR Mayflower Co-Op. Bank of MA* 1.15 1.10 12.90 12.65 130.78
MECH Mechanics SB of Hartford CT* -0.44 -0.42 13.48 13.48 134.22
MDBK Medford Savings Bank of MA* 2.30 2.25 20.40 18.82 229.13
MERI Meritrust FSB of Thibodaux LA 1.59 2.70 21.67 21.67 298.52
MWBX Metro West of MA* 0.47 0.48 2.82 2.82 37.62
MCBS Mid Continent Bancshares of KS 1.62 1.97 18.76 18.76 176.26
MIFC Mid Iowa Financial Corp. of IA 0.50 0.71 6.40 6.39 69.93
MCBN Mid-Coast Bancorp of ME 0.82 1.39 21.37 21.37 243.29
MIDC Midconn Bank of Kensington CT(8)* 0.95 1.19 17.84 15.03 183.53
MWBI Midwest Bancshares, Inc. of IA 1.81 3.00 27.51 27.51 390.90
MWFD Midwest Fed. Fin. Corp of WI 1.17 1.14 10.19 9.74 121.39
MFFC Milton Fed. Fin. Corp. of OH 0.49 0.62 12.29 12.29 79.69
MIVI Miss. View Hold. Co. of MN 0.65 0.88 15.16 15.16 82.71
MBSP Mitchell Bancorp of NC* 0.18 0.55 15.02 15.02 35.69
MBBC Monterey Bay Bancorp of CA 0.13 0.39 14.11 13.98 100.87
MSBK Mutual SB, FSB of Bay City MI -0.03 -0.04 9.47 9.47 155.52
NHTB NH Thrift Bancshares of NH 0.60 0.90 11.31 11.31 155.49
NSLB NS&L Bancorp of Neosho MO 0.43 0.61 16.05 16.05 81.43
NMSB Newmil Bancorp. of CT* 0.61 0.59 8.10 8.10 77.16
NASB North American SB of MO 3.41 3.54 22.59 21.77 314.08
NBSI North Bancshares of Chicago IL 0.47 0.71 16.80 16.80 111.03
FFFD North Central Bancshares of IA 0.83 0.98 16.35 16.35 57.72
NEBC Northeast Bancorp of ME* 0.78 0.63 13.15 11.13 186.61
NEIB Northeast Indiana Bncrp of IN 0.75 0.90 14.29 14.29 81.90
NWEQ Northwest Equity Corp. of WI 0.66 0.86 12.48 12.48 102.80
NWSB Northwest SB, MHC of PA (29.9) 0.56 0.81 8.17 7.79 81.79
NSSY Norwalk Savings Society of CT* 1.90 1.56 19.21 18.43 266.37
NSSB Norwich Financial Corp. of CT* 1.23 1.16 14.17 13.25 126.54
NTMG Nutmeg FS&LA of CT 0.40 0.41 7.08 7.08 131.92
OHSL OHSL Financial Corp. of OH 0.96 1.44 20.58 20.58 177.95
OSBF OSB Fin. Corp. of Oshkosh WI(8) 0.08 1.01 26.76 26.76 215.92
OCFC Ocean Fin. Corp. of NJ -0.36 1.08 27.23 27.23 131.37
OFCP Ottawa Financial Corp. of MI 0.48 0.98 14.55 11.50 159.74
PFFB PFF Bancorp of Pomona CA 0.06 0.44 14.15 13.99 127.27
PSFI PS Financial of Chicago IL 0.71 0.71 14.18 14.18 33.67
PVFC PVF Capital Corp. of OH 1.41 1.87 10.24 10.24 149.62
PCCI Pacific Crest Capital of CA* 1.09 0.93 8.18 8.18 90.49
PALM Palfed, Inc. of Aiken SC 0.45 0.73 10.10 9.63 126.22
PBCI Pamrapo Bancorp, Inc. of NJ 0.94 1.36 16.95 16.82 114.99
PFED Park Bancorp of Chicago IL 0.29 0.47 15.38 15.38 65.43
PVSA Parkvale Financial Corp of PA 1.76 2.42 17.56 17.40 233.64
PBIX Patriot Bank Corp. of PA 0.31 0.52 11.53 11.53 109.84
PEEK Peekskill Fin. Corp. of NY 0.58 0.76 16.27 16.27 55.21
PFSB PennFed Fin. Services of NJ 1.23 1.87 19.03 15.47 251.75
PWBC PennFirst Bancorp of PA 0.73 1.11 12.54 11.37 179.60
PWBK Pennwood SB of PA* 0.24 0.60 15.17 15.17 75.78
</TABLE>
<PAGE>
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209 Exhibit IV-1 (continued)
(703) 528-1700 Weekly Thrift Market Line - Part One
Prices As Of February 28, 1997
<TABLE>
<CAPTION>
Market Capitalization
---------------------------------
Shares Market
Price/ Outst- Capital-
Financial Institution Share(1) anding ization(9)
- --------------------- -------- ------- ----------
($) (000) ($Mil)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C>
PBKB People's SB of Brockton MA* 12.81 3,563 45.6
PFDC Peoples Bancorp of Auburn IN 20.75 2,308 47.9
PBCT Peoples Bank, NHC of CT (37.4)* 34.50 40,553 522.8
PFFC Peoples Fin. Corp. of OH 16.75 1,491 22.0
PHBK Peoples Heritage Fin Grp of ME* 31.37 28,221 885.3
PBNB Peoples Sav. Fin. Corp. of CT* 30.87 1,906 58.8
PERN Permanent Bancorp of IN 22.50 2,083 46.9
PHFI Perpetual Midwest Fin. of IA 19.94 1,907 38.0
PERT Perpetual of SC, MHC (46.8) 26.00 1,505 18.3
PCBC Perry Co. Fin. Corp. of ND 17.25 827 14.3
PHFC Pittsburgh Home Fin. of PA 14.50 2,073 30.1
PFSL Pocahnts Fed. HHC of AR (46.4) 19.06 1,628 14.4
POBS Portsmouth Bank Shrs Inc of NH(8)* 15.37 5,826 89.5
PKPS Poughkeepsie SB of NY 5.87 12,592 73.9
PRBC Prestige Bancorp of PA 15.00 963 14.4
PETE Primary Bank of NH* 17.50 2,086 36.5
PSAB Prime Bancorp, Inc. of PA 20.00 5,291 105.8
PFNC Progress Financial Corp. of PA 8.37 3,744 31.3
PSBK Progressive Bank, Inc. of NY* 23.62 3,825 90.3
PROV Provident Fin. Holdings of CA 16.00 5,125 82.0
PULB Pulaski SB, NHC of MO (29.0) 16.75 2,094 10.1
PULS Pulse Bancorp of S. River NJ 18.75 3,050 57.2
QCFB QCF Bancorp of Virginia MN 18.75 1,426 26.7
QCBC Quaker City Bancorp of CA 19.50 3,792 73.9
QCSB Queens County SB of NY* 56.75 7,630 433.0
RCSB RCSB Financial, Inc. of NY* 33.62 15,331 515.4
RARB Raritan Bancorp. of Raritan NJ* 24.25 1,531 37.1
REDF RedFed Bancorp of Redlands CA 14.26 7,083 100.9
RELY Reliance Bancorp of NY 22.25 8,825 196.4
RELI Reliance Bancshares Inc. of WI (8)* 7.12 2,528 18.0
RIVR River Valley Bancorp of IN 16.00 1,190 17.9
RFED Roosevelt Fin. Grp. Inc. of MO 23.00 44,183 1,016.2
RSLN Roslyn Bancorp of KY* 15.63 43,642 682.1
RVSB Rvrview SB, FSB NHC of WA (41.7) 18.25 2,196 15.7
SCCB S. Carolina Com. Bnshrs of SC 19.25 705 13.6
SBFL SB Fngr Lakes MHC of NY (33.1) 15.50 1,785 9.1
SFED SFS Bancorp of Schenectady NY 17.37 1,278 22.2
SGVB SEV Bancorp of W. Covina CA 13.62 2,522 34.3
SISB SIS Bank of Springfield MA* 26.50 5,724 151.7
SJSB SJS Bancorp of St. Joseph WI (8) 25.50 918 23.4
SKCG Sandwich Co-Op. Bank of MA* 32.00 1,902 60.9
SFBN Security Bancorp of MT (8) 30.25 1,508 45.6
SECP Security Capital Corp. of WI 86.75 9,203 798.4
SHSL Security First Corp. of OH 17.75 4,974 88.3
SMFC Sho-Me Fin. Corp. of MO 29.00 1,454 42.2
SOBI Sobieski Bancorp of S. Bend IN 14.00 882 12.3
SOSA Somerset Savings Bank of MA (8)* 2.81 16,652 46.8
SSFC South Street Fin. Corp. of NC* 16.75 4,496 75.3
SCBS Southern Commun. Bncshrs of AL 13.50 1,137 15.3
SMBC Southern Missouri Bncrp of MO 16.25 1,638 26.6
SWSI Southwest Bancshares of IL 19.87 2,637 52.4
SYRN Sovereign Bancorp of PA 12.62 59,641 752.7
STFR St. Francis Cap. Corp. of WI 29.00 5,365 155.3
SPBC St. Paul Bancorp, Inc. of IL 26.50 22,776 603.6
STND Standard Fin. of Chicago IL 20.50 16,173 331.5
</TABLE>
<TABLE>
<CAPTION>
Price Change Data
------------------------------------------------
52 Week (1) % Change From
--------------- ------------------------
Last Last Dec 31, Dec 31,
Financial Institution High Low Week Week 1994(2) 1995(2)
- ---------------------- ------- ------- ------- ------- ------- --------
($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PBKB People's SB of Brockton MA* 13.00 8.75 13.00 -1.46 115.66 20.62
PFDC Peoples Bancorp of Auburn IN 21.00 18.75 20.00 3.75 18.57 2.47
PBCT Peoples Bank, NHC of CT (37.4)* 36.00 19.69 35.81 -3.66 338.37 19.50
PFFC Peoples Fin. Corp. of OH 15.50 10.87 14.87 -0.81 N.A. 9.26
PHBK Peoples Heritage Fin Grp of ME* 31.81 19.00 31.75 -1.20 104.90 12.04
PBNB Peoples Sav. Fin. Corp. of CT* 32.25 20.00 30.19 2.25 212.77 11.24
PERN Permanent Bancorp of IN 22.50 14.00 22.00 2.27 N.A. 11.11
PHFI Perpetual Midwest Fin. of IA 22.00 16.75 19.25 3.58 N.A. 3.58
PERT Perpetual of SC, MHC (46.8) 26.00 20.25 26.00 0.00 N.A. 7.22
PCBC Perry Co. Fin. Corp. of ND 19.00 15.50 17.25 0.00 N.A. 1.47
PHFC Pittsburgh Home Fin. of PA 14.75 9.50 14.62 -0.82 N.A. 8.45
PFSL Pocahnts Fed. HHC of AR (46.4) 20.00 14.25 18.50 3.03 N.A. 8.91
POBS Portsmouth Bank Shrs Inc of NH(8)* 15.81 12.38 15.73 -2.29 47.65 12.03
PKPS Poughkeepsie SB of NY 6.00 4.75 5.75 2.09 -24.26 11.81
PRBC Prestige Bancorp of PA 15.00 9.75 14.62 2.60 N.A. 11.11
PETE Primary Bank of NH* 17.75 11.19 17.37 0.75 N.A. 14.83
PSAB Prime Bancorp, Inc. of PA 20.62 17.50 20.25 -1.23 188.18 -2.44
PFNC Progress Financial Corp. of PA 5.87 5.50 8.87 -5.64 -23.98 0.00
PSBK Progressive Bank, Inc. of NY* 24.50 17.17 23.25 1.59 76.66 3.82
PROV Provident Fin. Holdings of CA 17.19 10.12 17.00 -5.88 N.A. 14.29
PULB Pulaski SB, NHC of MO (29.0) 16.75 12.25 16.75 0.00 N.A. 15.52
PULS Pulse Bancorp of S. River NJ 18.75 14.50 18.50 1.35 51.53 19.05
QCFB QCF Bancorp of Virginia MN 19.50 13.87 18.50 1.35 N.A. 2.74
QCBC Quaker City Bancorp of CA 20.50 12.75 18.75 4.00 160.00 2.63
QCSB Queens County SB of NY* 56.75 30.94 54.12 4.86 N.A. 19.80
RCSB RCSB Financial, Inc. of NY* 34.75 22.50 33.87 -0.74 173.11 15.93
RARB Raritan Bancorp. of Raritan NJ* 24.50 20.25 23.50 3.19 148.72 4.30
REDF RedFed Bancorp of Redlands CA 15.44 8.37 15.44 -7.71 N.A. 5.56
RELY Reliance Bancorp of NY 22.37 14.44 21.37 4.12 N.A. 14.10
RELI Reliance Bancshares Inc. of WI (8)* 10.12 6.50 7.12 0.00 N.A. 5.48
RIVR River Valley Bancorp of IN 15.50 13.25 15.25 -1.64 N.A. 9.09
RFED Roosevelt Fin. Grp. Inc. of MO 23.25 15.63 22.50 2.22 489.74 9.52
RSLN Roslyn Bancorp of KY* 16.25 15.00 15.87 -1.51 N.A. N.A.
RVSB Rvrview SB, FSB NHC of WA (41.7) 18.75 14.37 18.25 0.00 N.A. 4.29
SCCB S. Carolina Com. Bnshrs of SC 20.50 15.00 19.00 1.32 N.A. 28.33
SBFL SB Fngr Lakes MHC of NY (33.1) 17.00 12.75 14.00 10.71 N.A. 12.73
SFED SFS Bancorp of Schenectady NY 17.37 11.75 16.50 5.27 N.A. 17.76
SGVB SEV Bancorp of W. Covina CA 13.97 7.75 12.87 5.83 N.A. 21.07
SISB SIS Bank of Springfield MA* 27.37 16.75 26.75 -0.93 N.A. 15.87
SJSB SJS Bancorp of St. Joseph WI (8) 25.87 18.50 24.87 2.53 N.A. 0.99
SKCG Sandwich Co-Op. Bank of MA* 34.00 18.87 32.25 -0.78 271.23 7.56
SFBN Security Bancorp of MT (8) 31.25 20.00 31.00 -2.42 290.32 2.54
SEC? Security Capital Corp. of WI 86.75 54.75 84.75 2.36 N.A. 17.63
SFSL Security First Corp. of OH 19.25 11.50 17.75 0.00 12.70 -2.04
SMFC Sho-Me Fin. Corp. of MO 29.50 14.50 28.25 2.65 N.A. 33.33
SOBI Sobieski Bancorp of S. Bend IN 16.00 11.75 14.00 0.00 N.A. -3.45
SOSA Somerset Savings Bank of MA (8)* 2.81 1.12 2.53 11.07 -45.12 42.64
SSFC South Street Fin. Corp. of NC* 17.00 12.12 15.63 7.17 N.A. 19.64
SCBS Southern Commun. Bncshrs of AL 13.75 13.00 13.75 -1.82 N.A. 1.89
SMBC Southern Missouri Bncrp of MO 17.25 13.50 16.25 0.00 N.A. 8.33
SWSI Southwest Bancshares of IL 20.50 17.67 19.75 0.61 98.70 8.88
SYRN Sovereign Bancorp of PA 12.71 8.02 15.00 -15.87 182.33 15.36
STFR St. Francis Cap. Corp. of WI 31.50 24.00 27.25 6.42 N.A. 11.54
SPBC St. Paul Bancorp, Inc. of IL 26.50 17.80 26.12 1.45 57.08 12.77
STND Standard Fin. of Chicago IL 21.25 14.50 20.50 0.00 N.A. 4.49
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
-------------------------------------------------------
Tangible
Financial Institution Trailing 12 Mo. Book Book
- ---------------------- 12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS (3) Share Share(4) Share
NASDAQ Listed OTC Companies (continued) ------- -------- ------ ------ ----------
- --------------------------------------- ($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
PBKB People's SB of Brockton MA* 0.92 0.58 8.09 7.68 144.10
PFDC Peoples Bancorp of Auburn IN 1.35 1.78 18.63 18.63 121.46
PBCT Peoples Bank, NHC of CT (37.4)* 1.96 1.53 15.24 15.22 188.52
PFFC Peoples Fin. Corp. of OH 0.05 0.24 15.90 15.90 59.86
PHBK Peoples Heritage Fin Grp of ME* 1.54 1.66 13.36 12.02 157.91
PBNB Peoples Sav. Fin. Corp. of CT* 2.11 2.13 24.24 22.66 253.09
PERN Permanent Bancorp of IN 0.46 1.01 19.23 19.04 198.26
PHFI Perpetual Midwest Fin. of IA 0.17 0.55 17.61 17.61 203.74
PERT Perpetual of SC, MHC (46.8) 0.95 1.35 19.33 19.33 139.42
PCBC Perry Co. Fin. Corp. of ND 0.55 0.90 18.22 18.22 98.12
PHFC Pittsburgh Home Fin. of PA 0.37 0.61 14.65 14.65 94.23
PFSL Pocahnts Fed. HHC of AR (46.4) 1.26 1.80 14.32 14.32 229.17
POBS Portsmouth Bank Shrs Inc of NH(8)* 1.05 0.85 11.49 11.49 46.11
PKPS Poughkeepsie SB of NY 0.98 1.55 5.57 5.57 68.37
PRBC Prestige Bancorp of PA 0.15 0.50 16.02 16.02 119.04
PETE Primary Bank of NH* 1.64 1.63 13.49 13.46 204.89
PSAB Prime Bancorp, Inc. of PA 0.86 1.12 10.87 10.20 128.01
PFNC Progress Financial Corp. of PA 0.33 0.43 5.33 4.62 102.56
PSBK Progressive Bank, Inc. of NY* 2.41 2.48 19.01 16.64 231.65
PROV Provident Fin. Holdings of CA 0.23 -0.01 16.57 16.57 113.20
PULB Pulaski SB, NHC of MO (29.0) 0.42 0.67 10.75 10.75 85.39
PULS Pulse Bancorp of S. River NJ 1.15 1.73 12.99 12.99 167.11
QCFB QCF Bancorp of Virginia MN 1.32 1.32 18.35 18.35 104.01
QCBC Quaker City Bancorp of CA 0.52 1.02 17.88 17.84 201.60
QCSB Queens County SB of NY* 2.74 2.78 27.71 27.71 178.07
RCSB RCSB Financial, Inc. of NY* 2.31 2.25 18.14 17.53 264.08
RARB Raritan Bancorp. of Raritan NJ* 1.89 2.09 18.13 17.76 231.34
REDF RedFed Bancorp of Redlands CA 0.94 -0.57 9.86 9.86 122.30
RELY Reliance Bancorp of NY 1.04 1.60 17.62 12.27 212.83
RELI Reliance Bancshares Inc. of WI (8)* 0.25 0.25 11.59 11.59 18.98
RIVR River Valley Bancorp of IN 0.66 0.66 13.65 13.65 78.84
RFED Roosevelt Fin. Grp. Inc. of MO 0.12 1.71 9.80 9.21 176.46
RSLN Roslyn Bancorp of KY* 0.72 0.66 13.63 13.63 53.80
RVSB Rvrview SB, FSB NHC of WA (41.7) 0.95 1.13 11.11 10.01 102.22
SCCB S. Carolina Com. Bnshrs of SC 0.53 0.71 17.57 17.57 61.32
SBFL SB Fngr Lakes MHC of NY (33.1) 0.58 0.10 11.22 11.22 110.51
SFED SFS Bancorp of Schenectady NY 0.68 1.05 16.57 16.57 129.91
SGVB SEV Bancorp of W. Covina CA 0.10 0.41 12.34 12.34 146.64
SISB SIS Bank of Springfield MA* 3.17 3.07 17.81 17.81 235.61
SJSB SJS Bancorp of St. Joseph WI (8) 0.28 0.79 17.23 17.23 165.46
SKCG Sandwich Co-Op. Bank of MA* 2.18 2.19 20.31 19.28 244.25
SFBN Security Bancorp of MT (8) 1.30 1.55 20.51 17.66 253.52
SEC? Security Capital Corp. of WI 3.69 4.77 61.74 61.74 397.47
SFSL Security First Corp. of OH 1.05 1.44 11.59 11.38 125.51
SWFC Sho-Me Fin. Corp. of MO 1.51 1.86 20.65 20.65 204.98
SOBI Sobieski Bancorp of S. Bend IN 0.19 0.45 15.81 15.81 89.54
SOSA Somerset Savings Bank of MA (8)* 0.14 0.14 1.74 1.74 30.67
SSFC South Street Fin. Corp. of NC* 0.62 0.66 13.15 13.15 46.25
SCBS Southernb Commun. Bncshrs of AL 0.40 0.71 13.30 13.30 64.05
SMBC Southern Missouri Bncrp of MO 0.90 0.84 16.01 16.01 97.59
SWSI Southwest Bancshares of IL 1.00 1.42 15.12 15.12 145.00
SYRN Sovereign Bancorp of PA 0.76 1.00 6.36 4.49 158.17
STFR St. Francis Cap. Corp. of WI 1.78 1.85 23.51 22.33 263.13
SPBC St. Paul Bancorp, Inc. of IL 1.15 1.71 17.04 16.99 191.31
STND Standard Fin. of Chicago IL 0.74 1.01 16.28 16.25 144.67
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 28, 1997
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
SFFC StateFed Financial Corp. of IA 18.37 783 14.4 18.37 15.00 18.00 2.06 N.A. 11.33
SFIN Statewide Fin. Corp. of NJ 17.50 4,995 87.4 17.50 11.25 15.87 10.27 N.A. 21.78
STSA Sterling Financial Corp. of WA 17.12 5,539 94.8 17.37 12.75 16.50 3.76 88.34 21.25
SSBK Strongsville SB of OH 23.75 2,531 60.1 24.00 18.50 24.00 -1.04 N.A. 5.56
SFSB SuburbFed Fin. Corp. of IL 22.50 1,255 28.2 22.75 16.00 22.25 1.12 237.33 18.42
SBCN Suburban Bancorp. of OH 16.50 1,475 24.3 17.75 14.25 16.25 1.54 N.A. 8.20
THRD TF Financial Corp. of PA 18.75 4,281 80.3 19.00 13.75 18.62 0.70 N.A. 15.38
ROSE TR Financial Corp. of NY 35.31 8,787 310.3 35.87 24.81 35.12 0.54 N.A. -0.54
TPNZ Tappan Zee Fin. Corp. of NY 14.87 1,539 22.9 15.12 11.37 15.00 -0.87 N.A. 9.18
PTRS The Potters S&L Co. of OH 19.62 506 9.9 20.12 15.50 19.62 0.00 N.A. -1.90
TSBS Trenton SB, FSB MHC of NJ(35.0(8) 16.00 9,037 49.9 16.25 12.37 16.25 -1.54 N.A. 0.00
TRIC Tri-County Bancorp of WY 18.50 609 11.3 19.00 17.00 18.75 -1.33 N.A. 2.78
THBC Troy Hill Bancorp of PA(8) 20.25 1,068 21.6 21.00 12.75 20.00 1.25 N.A. 1.25
TWIN Twin City Bancorp of TN 18.50 853 15.8 19.00 16.00 18.12 2.10 N.A. 7.25
UFRM United FS&LA of Rocky Mount NC 8.25 3,065 25.3 8.75 7.00 8.13 1.48 153.85 -2.94
UBMT United Fin. Corp. of MT 19.75 1,223 24.2 19.75 17.50 19.75 0.00 88.10 2.60
VABF Va. Beach Fed. Fin. Corp of VA 11.12 4,970 55.3 11.31 6.88 11.12 0.00 137.10 17.80
VFFC Virginia First Savings of VA 16.25 5,775 93.8 16.25 10.75 15.37 5.73 ***.** 27.45
WHGB WHG Bancshares of MD 14.00 1,620 22.7 14.25 10.87 13.87 0.94 N.A. 6.71
WSFS WSFS Financial Corp. of DE* 12.00 12,912 154.9 12.06 6.75 11.87 1.10 65.52 17.76
WVFC WVS Financial Corp. of PA* 26.25 1,737 45.6 26.50 19.50 25.75 1.94 N.A. 6.62
WRNB Warren Bancorp of Peabody MA* 15.87 3,662 58.1 16.37 10.25 16.00 -0.81 370.92 5.80
WFSL Washington FS&LA of Seattle WA 25.50 47,450 1,210.0 27.50 17.90 26.87 -5.10 74.78 5.85
WAMU Washington Mutual Inc. of WA* 52.87 126,142 6,669.1 58.87 26.25 56.75 -6.84 184.86 22.07
WYNE Wayne Bancorp of NJ 16.75 2,231 37.4 18.00 10.75 16.87 -0.71 N.A. 9.84
WAYN Wayne S&L Co. MHC of OH (47.8) 26.00 1,499 18.6 27.25 19.00 26.75 -2.80 N.A. 6.12
WCFB Wbstr Cty FSB MHC of IA (45.2) 13.75 2,100 13.1 14.50 12.25 13.75 0.00 N.A. 0.00
WBST Webster Financial Corp. of CT 39.25 7,926 311.1 41.00 26.75 39.50 -0.63 315.78 6.80
WEFC Wells Fin. Corp. of Wells MN 15.00 2,078 31.2 16.00 10.00 15.63 -4.03 N.A. 14.33
WCBI WestCo Bancorp of IL 21.25 2,567 54.5 22.25 18.33 21.37 -0.56 112.50 -1.16
WSTR WesterFed Fin. Corp. of MT 21.50 4,397 94.5 21.75 13.87 20.75 3.61 N.A. 17.81
WOFC Western Ohio Fin. Corp. of OH 21.50 2,187 47.0 23.75 19.50 21.50 0.00 N.A. -1.15
WWFC Westwood Fin. Corp. of NJ 19.50 647 12.6 19.50 10.25 18.00 8.33 N.A. 18.18
WEHO Westwood Hmstd Fin Corp of OH 14.50 2,843 41.2 14.50 10.37 13.75 5.45 N.A. 19.64
WFCO Winton Financial Corp. of OH(8) 13.00 1,986 25.8 15.00 11.25 12.30 5.69 N.A. 13.04
FFWD Wood Bancorp of OH 15.75 1,493 23.5 17.25 12.17 15.75 0.00 N.A. -7.35
YFCB Yonkers Fin. Corp. of NY 13.50 3,172 42.8 14.12 9.31 13.50 0.00 N.A. 4.90
YFED York Financial Corp. of PA 18.12 6,792 123.1 19.75 14.54 18.50 -2.05 91.75 11.51
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
SFFC StateFed Financial Corp. of IA 0.94 1.18 18.62 18.62 103.52
SFIN Statewide Fin. Corp. of NJ 0.47 1.09 13.08 13.05 132.55
STSA Sterling Financial Corp. of WA 0.39 0.69 10.78 8.83 276.46
SSBK Strongsville SB of OH 1.40 1.76 17.05 16.74 224.22
SFSB SuburbFed Fin. Corp. of IL 0.84 1.51 20.92 20.82 321.99
SBCN Suburban Bancorp. of OH 0.26 0.87 17.51 17.51 148.29
THRD TF Financial Corp. of PA 0.81 1.09 16.95 14.80 151.33
ROSE TR Financial Corp. of NY 3.31 2.65 22.69 22.69 357.40
TPNZ Tappan Zee Fin. Corp. of NY 0.52 0.48 13.96 13.96 77.88
PTRS The Potters S&L Co. of OH 0.06 0.89 20.36 20.36 248.02
TSBS Trenton SB, FSB MHC of NJ(35.0(8) 0.95 0.74 11.24 11.00 57.99
TRIC Tri-County Bancorp of WY 0.89 1.19 21.59 21.59 141.03
THBC Troy Hill Bancorp of PA(8) 0.82 0.96 16.87 16.87 93.14
TWIN Twin City Bancorp of TN 0.94 1.20 15.72 15.72 125.52
UFRM United FS&LA of Rocky Mount NC 0.23 0.41 6.44 6.44 86.00
UBMT United Fin. Corp. of MT 1.05 1.28 19.89 19.89 88.26
VABF Va. Beach Fed. Fin. Corp of VA 0.04 0.27 8.02 8.02 121.54
VFFC Virginia First Savings of VA 1.77 1.77 10.58 10.26 135.30
WHGB WHG Bancshares of MD 0.43 0.43 14.36 14.36 60.23
WSFS WSFS Financial Corp. of DE* 1.43 1.45 6.25 6.19 101.20
WVFC WVS Financial Corp. of PA* 1.57 1.98 20.21 20.21 158.85
WRNB Warren Bancorp of Peabody MA* 1.80 1.70 9.41 9.41 98.02
WFSL Washington FS&LA of Seattle WA 1.76 1.96 13.99 12.54 123.69
WAMU Washington Mutual Inc. of WA* 1.70 1.72 11.23 10.12 177.69
WYNE Wayne Bancorp of NJ 0.02 0.13 16.10 16.10 107.40
WAYN Wayne S&L Co. MHC of OH (47.8) 0.41 1.00 15.03 15.03 167.35
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.40 0.55 10.30 10.30 45.00
WBST Webster Financial Corp. of CT 3.09 3.20 24.79 19.20 494.27
WEFC Wells Fin. Corp. of Wells MN 0.52 0.88 13.36 13.36 96.88
WCBI WestCo Bancorp of IL 1.18 1.61 18.58 18.58 119.90
WSTR WesterFed Fin. Corp. of MT 0.80 1.12 18.08 18.08 128.18
WOFC Western Ohio Fin. Corp. of OH 0.69 0.86 24.34 22.86 158.99
WWFC Westwood Fin. Corp. of NJ 0.06 1.02 14.75 12.93 144.74
WEHO Westwood Hmstd Fin Corp of OH 0.13 0.25 14.06 14.06 42.19
WFCO Winton Financial Corp. of OH(8) 0.84 1.07 10.49 10.23 147.15
FFWD Wood Bancorp of OH 0.90 1.15 13.67 13.67 106.96
YFCB Yonkers Fin. Corp. of NY 0.57 0.81 13.74 13.74 82.63
YFED York Financial Corp. of PA 0.89 1.21 13.92 13.92 170.79
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit IV-1
Weekly Thrift Market Line - Part Two
Prices As Of February 28, 1997
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- ------------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------ -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
SAIF-Insured Thrifts(320) 12.99 12.77 0.61 5.24 3.84 0.83 7.31 0.89 123.67 0.85
NYSE Traded Companies(11) 6.26 6.01 0.57 8.25 4.38 0.73 11.71 1.48 69.91 1.38
AMEX Traded Companies(18) 15.90 15.83 0.58 4.60 3.27 0.86 6.43 0.61 139.52 0.65
NASDAQ Listed OTC Companies(291) 13.03 12.80 0.61 5.19 3.86 0.84 7.22 0.89 124.70 0.85
California Companies(24) 7.65 7.10 0.13 1.82 2.22 0.20 3.38 2.21 57.07 1.34
Florida Companies(5) 8.10 7.91 0.42 5.36 3.05 0.56 6.84 1.19 81.80 1.17
Mid-Atlantic Companies(64) 11.15 10.77 0.60 6.31 4.44 0.85 8.84 1.06 88.71 0.99
Mid-West Companies(153) 14.33 14.19 0.65 5.15 3.92 0.89 7.16 0.60 149.32 0.70
New England Companies(11) 8.67 8.36 0.52 6.52 5.39 0.64 7.71 0.91 77.92 0.97
North-West Companies(6) 14.28 13.94 0.81 7.25 4.15 1.03 9.25 0.56 146.37 0.70
South-East Companies(43) 14.91 14.78 0.71 5.56 3.59 0.98 7.61 0.99 126.50 0.90
South-West Companies(7) 11.21 11.03 0.30 1.49 0.08 0.58 5.16 0.86 63.15 0.81
Western Companies (Excl CA)(7) 17.91 17.88 0.97 6.59 4.72 1.17 7.77 0.27 282.65 0.67
Thrift Strategy(248) 14.43 14.21 0.61 4.64 3.70 0.85 6.52 0.78 133.03 0.77
Mortgage Banker Strategy(40) 7.62 7.29 0.58 7.57 4.56 0.70 9.36 1.21 89.44 1.01
Real Estate Strategy(14) 8.50 8.37 0.49 4.15 2.89 0.83 8.82 1.92 86.61 1.43
Diversified Strategy(14) 8.28 8.12 0.88 10.70 5.53 1.12 14.44 0.80 104.98 1.20
Retail Banking Strategy(4) 8.62 8.37 0.34 4.66 3.36 0.49 6.45 1.26 75.46 0.93
Companies Issuing Dividends(257) 13.06 12.84 0.67 5.91 4.24 0.90 7.99 0.77 126.12 0.82
Companies Without Dividends(63) 12.70 12.46 0.37 2.62 2.27 0.56 4.66 1.43 112.77 1.02
Equity/Assets greater than 6%(28) 4.97 4.66 0.24 4.79 2.93 0.40 7.93 1.83 68.00 1.05
Equity/Assets 6-12%(153) 8.60 8.25 0.56 6.59 4.41 0.77 8.98 0.97 122.56 0.99
Equity/Assets less than 12%(139) 19.25 19.17 0.73 3.90 3.41 0.99 5.41 0.58 137.83 0.65
Converted Last 3 Mths (no MHC)(7) 19.44 19.44 0.61 3.24 3.18 0.87 4.73 0.42 115.42 1.05
Actively Traded Companies(49) 8.58 8.33 0.79 9.73 6.06 1.01 12.44 1.34 91.44 0.97
Market Value Below $20 Million(70) 14.83 14.74 0.49 2.93 3.01 0.75 4.89 0.84 101.01 0.71
Holding Company Structure(281) 13.55 13.33 0.61 5.08 3.76 0.84 7.16 0.85 125.17 0.82
Assets Over $1 Billion(65) 8.19 7.68 0.62 7.76 4.44 0.81 10.50 1.05 86.47 1.03
Assets $500 Million-$1 Billion(54) 10.89 10.52 0.66 6.59 4.82 0.84 8.21 1.16 127.80 0.98
Assets $250-$500 Million(69) 10.94 10.76 0.52 4.90 3.60 0.79 7.53 0.81 161.80 0.80
Assets less than $250 Million(132) 17.17 17.11 0.63 3.68 3.28 0.87 5.32 0.74 118.86 0.74
Goodwill Companies(130) 8.99 8.51 0.60 6.70 4.45 0.79 9.02 0.97 96.19 0.95
Non-Goodwill Companies(190) 15.57 15.51 0.61 4.31 3.46 0.86 6.21 0.84 142.60 0.79
Acquirors of FSLIC Cases(13) 7.04 6.65 0.64 8.24 5.08 0.98 13.60 1.61 48.23 0.88
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
____________________________________________
SAIF-Insured Thrifts(320) 19.81 125.92 15.43 127.83 17.41 0.35 1.72 33.12
NYSE Traded Companies(11) 18.16 174.27 11.67 175.06 16.24 0.34 0.97 15.27
AMEX Traded Companies(18) 22.19 111.04 18.60 111.90 19.66 0.37 2.28 47.66
NASDAQ Listed OTC Companies(291) 19.72 125.38 15.35 127.55 17.31 0.34 1.72 32.90
California Companies(24) 13.41 136.39 9.92 135.99 15.56 0.22 0.72 10.91
Florida Companies(5) 22.37 157.51 12.10 162.87 18.59 0.25 0.94 16.90
Mid-Atlantic Companies(64) 19.32 125.61 13.48 130.51 16.51 0.34 1.68 34.99
Mid-West Companies(153) 20.40 121.25 16.33 121.93 17.64 0.34 1.77 32.32
New England Companies(11) 19.20 115.25 9.75 124.80 16.38 0.41 1.80 29.26
North-West Companies(6) 20.94 155.76 18.02 166.11 20.09 0.29 1.14 22.31
South-East Companies(43) 19.09 135.18 19.45 134.45 18.10 0.42 2.20 46.16
South-West Companies(7) 25.00 107.25 11.57 114.06 17.95 0.30 1.58 44.94
Western Companies (Excl CA)(7) 20.30 122.91 20.11 123.20 18.37 0.56 2.91 49.64
Thrift Strategy(248) 20.48 117.61 16.36 120.12 17.80 0.34 1.83 36.03
Mortgage Banker Strategy(40) 18.09 151.21 11.23 153.32 16.72 0.31 1.30 25.17
Real Estate Strategy(14) 13.26 143.96 11.58 145.79 15.03 0.19 0.83 17.71
Diversified Strategy(14) 18.08 190.20 15.87 189.75 14.46 0.69 2.15 34.52
Retail Banking Strategy(4) 22.50 122.43 10.58 125.54 20.77 0.15 1.17 0.00
Companies Issuing Dividends(257) 19.74 127.76 15.76 129.70 17.11 0.43 2.16 42.77
Companies Without Dividends(63) 20.20 118.79 14.11 120.60 18.82 0.00 0.00 0.00
Equity/Assets greater than 6%(28) 17.80 157.00 8.18 158.87 16.03 0.19 0.79 9.35
Equity/Assets 6-12%(153) 18.62 136.60 11.70 140.65 15.68 0.39 1.75 33.24
Equity/Assets less than 12%(139) 21.95 108.84 20.82 109.48 19.77 0.33 1.88 38.09
Converted Last 3 Mths (no MHC)(7) 24.81 101.28 19.39 101.28 20.94 0.00 0.00 0.00
Actively Traded Companies(49) 16.91 155.76 13.12 157.20 14.23 0.50 1.88 26.07
Market Value Below $20 Million(70) 20.50 101.61 15.03 102.61 19.32 0.29 1.84 35.34
Holding Company Structure(281) 20.18 124.97 15.96 126.52 17.62 0.36 1.78 34.23
Assets Over $1 Billion(65) 18.49 160.21 12.82 167.43 16.07 0.49 1.61 30.56
Assets $500 Million-$1 Billion(54) 19.22 133.47 14.16 135.06 16.13 0.30 1.50 30.38
Assets $250-$500 Million(69) 20.41 125.06 13.40 127.47 16.61 0.33 1.80 33.49
Assets less than $250 Million(132) 20.73 107.51 18.21 108.23 19.18 0.30 1.83 35.97
Goodwill Companies(130) 19.04 144.40 12.55 150.00 16.08 0.40 1.72 32.72
Non-Goodwill Companies(190) 20.47 113.98 17.28 114.03 18.39 0.31 1.73 33.43
Acquirors of FSLIC Cases(13) 17.11 164.54 11.93 168.55 15.20 0.43 1.75 18.88
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and
assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 28, 1997
Key Financial Ratios
----------------------------------------------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- ---------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
--------------------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(73) 11.72 11.36 0.92 9.92 6.21 0.94 9.78
NYSE Traded Companies(3) 7.41 5.83 0.70 10.07 5.79 0.72 10.69
AMEX Traded Companies(5) 13.16 12.91 0.58 6.02 4.26 0.58 6.01
NASDAQ Listed OTC Companies(65) 11.83 11.52 0.97 10.27 6.41 0.98 10.07
California Companies(3) 8.89 8.89 1.08 13.60 7.51 1.00 12.56
Mid-Atlantic Companies(19) 11.69 11.10 0.82 8.57 5.54 0.85 8.94
Mid-West Companies(2) 25.56 24.11 0.54 2.08 2.35 0.82 3.16
New England Companies(39) 9.23 8.95 1.00 11.66 7.31 0.96 11.14
North-West Companies(4) 11.16 10.68 1.13 11.51 5.57 1.11 11.35
South-East Companies(5) 27.71 27.71 0.64 1.46 1.86 0.92 2.27
Thrift Strategy(47) 13.32 12.87 0.87 8.34 5.75 0.90 8.33
Mortgage Banker Strategy(10) 9.21 9.10 0.88 10.81 6.44 0.89 11.02
Real Estate Strategy(8) 10.29 10.29 1.29 13.58 7.30 1.25 13.04
Diversified Strategy(6) 7.05 6.61 1.15 16.83 8.04 1.08 15.70
Retail Banking Strategy(2) 6.48 6.33 0.51 8.05 6.21 0.51 7.91
Companies Issuing Dividends(56) 11.23 10.79 0.95 10.25 6.41 0.96 10.01
Companies Without Dividends(17) 13.35 13.24 0.83 8.85 5.55 0.86 9.05
Equity/Assets less than 6%(6) 5.64 5.57 0.60 11.01 6.40 0.52 9.68
Equity/Assets 6-12%(48) 8.37 7.89 0.99 12.09 7.34 0.97 11.78
Equity/Assets greater than 12%(19) 21.81 21.64 0.85 4.24 3.36 0.98 4.88
Converted Last 3 Mths (no MHC)(2) 26.93 26.93 1.13 4.27 4.02 1.20 4.49
Actively Traded Companies(26) 8.51 8.15 1.05 12.57 7.62 1.03 12.31
Market Value Below $20 Million(12) 14.60 14.26 0.62 6.98 5.01 0.75 7.14
Holding Company Structure(46) 13.18 12.80 1.00 9.78 6.16 1.04 9.84
Assets Over $1 Billion(16) 9.18 8.58 1.04 12.71 6.80 1.03 12.51
Assets $500 Million-$1 Billion(17) 10.10 9.55 0.97 10.15 6.56 0.93 9.47
Assets $250-$500 Million(20) 10.72 10.58 0.88 9.91 6.44 0.88 9.97
Assets less than $250 Million(20) 16.40 16.20 0.82 7.29 5.14 0.92 7.46
Goodwill Companies(36) 8.60 7.83 0.85 10.69 6.55 0.85 10.49
Non-Goodwill Companies(37) 14.48 14.48 0.99 9.25 5.91 1.02 9.16
<CAPTION>
Asset Quality Ratios Pricing Ratios
----------------------- -----------------------------------------
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Financial Institution Assets NPAs Loans Earning Book Assets Book Earnings
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (X) (%) (%) (%) (x)
Market Averages. BIF-Insured Thrifts(no MHCs)
---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(73) 1.32 114.30 1.43 15.94 140.15 15.62 143.47 16.84
NYSE Traded Companies(3) 2.53 29.95 1.19 17.76 171.88 13.12 161.15 17.20
AMEX Traded Companies(5) 1.37 94.13 1.46 17.36 128.53 15.59 133.51 15.85
NASDAQ Listed OTC Companies(65) 1.25 120.48 1.44 15.74 139.48 15.76 143.74 16.88
California Companies(3) 2.23 50.98 1.43 13.39 149.37 13.35 149.42 14.46
Mid-Atlantic Companies(19) 1.81 75.54 1.40 17.44 138.97 15.21 146.68 17.87
Mid-West Companies(2) 0.50 46.43 0.43 0.00 78.26 20.00 82.97 27.95
New England Companies(39) 1.21 107.93 1.63 14.09 146.01 13.13 147.85 14.83
North-West Companies(4) 0.23 383.36 0.99 18.22 147.03 20.74 151.19 18.51
South-East Companies(5) 0.86 176.91 0.76 28.36 108.44 29.93 108.44 26.29
Thrift Strategy(47) 1.18 106.41 1.38 16.62 130.41 16.16 136.17 17.69
Mortgage Banker Strategy(10) 1.14 182.35 1.20 16.83 158.24 13.55 160.90 16.30
Real Estate Strategy(8) 1.56 110.68 1.70 14.78 167.33 17.59 167.33 15.13
Diversified Strategy(6) 2.27 109.49 1.92 12.37 171.41 15.35 161.91 14.67
Retail Banking Strategy(2) 1.17 59.03 1.03 10.67 112.58 7.31 114.90 10.74
Companies Issuing Dividends(56) 1.22 119.71 1.45 15.37 141.94 15.55 146.23 16.42
Companies Without Dividends(17) 1.66 96.12 1.38 17.94 134.42 15.84 135.00 18.26
Equity/Assets less than 6%(6) 3.04 42.42 1.43 17.07 162.00 9.09 164.06 19.22
Equity/Assets 6-12%(48) 1.31 115.22 1.59 13.62 148.02 12.88 152.91 13.98
Equity/Assets greater than 12%(19) 0.80 137.20 1.02 23.43 114.74 24.31 115.75 23.75
Converted Last 3 Mths (no MHC)(2) 0.77 84.54 0.94 25.46 104.84 28.08 104.84 23.34
Actively Traded Companies(26) 1.09 100.09 1.53 13.64 149.82 13.46 151.66 14.09
Market Value Below $20 Million(12) 1.48 58.72 1.12 15.30 115.40 15.41 119.25 20.48
Holding Company Structure(46) 1.07 122.20 1.46 16.47 137.49 17.38 142.65 17.01
Assets Over $1 Billion(16) 1.80 92.58 1.53 16.06 166.86 16.26 163.71 16.40
Assets $500 Million-$1 Billion(17) 1.21 105.07 1.54 14.67 139.66 13.90 154.30 16.01
Assets $250-$500 Million(20) 1.19 142.28 1.52 15.33 137.09 13.71 139.19 14.81
Assets less than $250 Million(20) 1.14 111.64 1.16 17.95 121.65 18.48 123.91 20.00
Goodwill Companies(36) 1.30 94.41 1.41 15.43 143.94 12.74 151.72 16.33
Non-Goodwill Companies(37) 1.33 133.54 1.44 16.42 136.92 18.16 136.92 17.30
<CAPTION>
Dividend Data(6)
-----------------------
Ind. Divi-
Div./ dend Payout
Financial Institution Share Yield Ratio(7)
--------------------- ------- ------- -------
($) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
---------------------------------------------
<S> <C> <C> <C>
BIF-Insured Thrifts(73) 0.41 1.83 25.18
NYSE Traded Companies(3) 0.33 0.56 11.95
AMEX Traded Companies(5) 0.62 2.96 36.75
NASDAQ Listed OTC Companies(65) 0.39 1.80 25.28
California Companies(3) 0.00 0.00 0.00
Mid-Atlantic Companies(19) 0.41 1.58 21.22
Mid-West Companies(2) 0.00 0.00 0.00
New England Companies(39) 0.47 2.21 29.98
North-West Companies(4) 0.45 1.65 33.98
South-East Companies(5) 0.30 1.84 17.20
Thrift Strategy(47) 0.42 1.97 28.22
Mortgage Banker Strategy(10) 0.37 1.62 14.43
Real Estate Strategy(8) 0.30 1.31 19.24
Diversified Strategy(6) 0.48 1.71 29.11
Retail Banking Strategy(2) 0.32 1.68 0.00
Companies Issuing Dividends(56) 0.53 2.39 33.38
Companies Without Dividends(17) 0.00 0.00 0.00
Equity/Assets less than 6%(6) 0.11 0.82 10.81
Equity/Assets 6-12%(48) 0.49 2.13 28.18
Equity/Assets greater than 12%(19) 0.28 1.38 22.16
Converted Last 3 Mths (no MHC)(2) 0.00 0.00 0.00
Actively Traded Companies(26) 0.51 2.10 29.96
Market Value Below $20 Million(12) 0.33 2.02 19.75
Holding Company Structure(46) 0.45 2.00 27.07
Assets Over $1 Billion(16) 0.51 1.69 23.50
Assets $500 Million-$1 Billion(17) 0.45 2.04 27.70
Assets $250-$500 Million(20) 0.39 1.75 25.79
Assets less than $250 Million(20) 0.30 1.85 23.82
Goodwill Companies(36) 0.52 2.12 29.09
Non-Goodwill Companies(37) 0.31 1.57 21.66
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data
and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common
equity and assets balances; ROI (return on investment) is current EPS
divided by current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities
or unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of
institutions included in the respective averages. All figures have been
adjusted for stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded
companies, and RP Financial, Inc. calculations. The information
provided in this report has been obtained from sources we believe
are reliable, but we cannot guarantee the accuracy or completeness
of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 28, 1997
<TABLE>
<CAPTION>
Key Financial Ratios
----------------------------------------------------------
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- ---------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
--------------------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%)
Market Averages. MHC Institutions
---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(19) 11.32 11.05 0.51 4.68 2.87 0.81 7.57
BIF-Insured Thrifts(2) 9.92 9.92 0.51 6.56 2.57 0.54 6.32
NASDAQ Listed OTC Companies(21) 11.17 10.93 0.51 4.88 2.84 0.78 7.44
Florida Companies(3) 9.74 9.60 0.66 6.84 3.97 0.93 9.58
Mid-Atlantic Companies(8) 10.97 10.47 0.22 1.86 0.94 0.63 5.52
Mid-West Companies(7) 12.05 12.04 0.50 4.50 3.13 0.74 6.91
New England Companies(1) 8.08 8.07 1.10 13.81 5.68 0.86 10.78
North-West Companies(1) 10.87 9.79 0.97 8.90 5.21 1.16 10.59
South-East Companies(1) 13.86 13.86 0.75 6.82 3.65 1.06 9.69
Thrift Strategy(19) 11.37 11.16 0.45 4.12 2.53 0.76 7.05
Mortgage Banker Strategy(1) 10.87 9.79 0.97 8.90 5.21 1.16 10.59
Diversified Strategy(1) 9.08 8.07 1.10 13.81 5.68 0.86 10.78
Companies Issuing Dividends(20) 11.02 10.77 0.49 4.77 2.79 0.77 7.31
Companies Without Dividends(1) 13.86 13.86 0.75 6.82 3.65 1.06 9.69
Equity/Assets 6-12%(15) 9.49 9.16 0.43 4.86 2.70 0.72 7.77
Equity/Assets >12%(6) 15.88 15.88 0.73 4.92 3.23 0.96 6.50
Actively Traded Companies(1) 9.26 8.11 0.47 5.03 2.90 0.85 9.02
Holding Company Structure(1) 9.26 8.11 0.47 5.03 2.90 0.85 9.02
Assets Over $1 Billion(4) 8.72 8.19 0.69 7.93 3.59 0.90 9.92
Assets $500 Million-$1 Billion(5) 10.07 9.65 0.52 4.93 3.31 0.81 7.82
Assets $250-$500 Million(4) 9.88 9.86 0.49 5.38 3.65 0.80 8.79
Assets less than $250 Million(8) 13.45 13.31 0.42 3.08 1.89 0.70 5.38
Goodwill Companies(10) 9.34 8.83 0.58 6.29 3.30 0.82 8.70
Non-Goodwill Companies(11) 12.82 12.82 0.44 3.61 2.42 0.75 6.30
MHC Institutions(21) 11.17 10.93 0.51 4.88 2.84 0.78 7.44
<CAPTION>
Asset Quality Ratios Pricing Ratios
----------------------- -----------------------------------------
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Financial Institution Assets NPAs Loans Earning Book Assets Book Earnings
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (X) (%) (%) (%) (x)
Market Averages. MHC Institutions
---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(19) 0.55 182.73 0.80 22.79 153.49 17.01 159.04 19.63
BIF-Insured Thrifts(2) 2.17 63.77 1.94 17.60 177.97 16.77 178.12 22.55
NASDAQ Listed OTC Companies(21) 0.73 169.51 0.92 22.14 156.06 16.99 161.05 19.84
Florida Companies(3) 0.49 111.99 0.79 22.14 163.93 15.51 167.38 18.55
Mid-Atlantic Companies(8) 1.07 208.24 1.06 27.45 156.00 16.85 166.71 19.90
Mid-West Companies(7) 0.58 130.94 0.76 20.62 144.61 17.19 144.85 20.90
New England Companies(1) 1.42 85.13 1.82 17.60 226.38 18.30 226.68 22.55
North-West Companies(1) 0.20 166.22 0.52 19.21 164.27 17.85 182.32 16.15
South-East Companies(1) 0.17 428.77 1.08 27.37 134.51 18.65 134.51 19.26
Thrift Strategy(19) 0.72 174.99 0.89 23.39 151.45 16.86 155.93 19.92
Mortgage Banker Strategy(1) 0.20 166.22 0.52 19.21 164.27 17.85 182.32 16.15
Diversified Strategy(1) 1.42 85.13 1.82 17.60 226.38 18.30 226.68 22.55
Companies Issuing Dividends(20) 0.76 154.26 0.91 21.40 157.26 16.89 162.52 19.89
Companies Without Dividends(1) 0.17 428.77 1.08 27.37 134.51 18.65 134.51 19.26
Equity/Assets 6-12%(15) 0.78 108.10 0.97 20.61 161.50 15.12 168.27 18.70
Equity/Assets >12%(6) 0.55 384.44 0.77 26.74 140.83 22.20 140.83 22.68
Actively Traded Companies(1) 0.75 70.10 1.01 0.00 173.17 16.03 197.73 19.25
Holding Company Structure(1) 0.75 70.10 1.01 0.00 173.17 16.03 197.73 19.25
Assets Over $1 Billion(4) 0.88 109.44 1.25 21.85 197.55 17.16 209.75 18.99
Assets $500 Million-$1 Billion(5) 0.57 65.95 0.66 23.78 151.23 15.03 159.93 19.82
Assets $250-$500 Million(4) 0.27 357.67 0.62 15.13 150.25 14.82 150.59 18.99
Assets less than $250 Million(8) 0.97 140.70 1.01 24.23 140.05 18.72 142.34 21.35
Goodwill Companies(10) 0.60 128.80 0.89 21.19 173.50 16.00 184.01 19.23
Non-Goodwill Companies(11) 0.86 210.22 0.95 23.10 140.37 17.87 140.37 20.45
MHC Institutions(21) 0.73 169.51 0.92 22.14 156.06 16.99 161.05 19.84
<CAPTION>
Dividend Data(6)
-----------------------
Ind. Divi-
Div./ dend Payout
Financial Institution Share Yield Ratio(7)
--------------------- ------- ------- -------
($) (%) (%)
Market Averages. MHC Institutions
---------------------------------
<S> <C> <C> <C>
SAIF-Insured Thrifts(19) 0.63 3.18 43.04
BIF-Insured Thrifts(2) 0.62 2.91 44.90
NASDAQ Listed OTC Companies(21) 0.63 3.16 43.35
Florida Companies(3) 1.00 4.03 0.00
Mid-Atlantic Companies(8) 0.46 2.70 60.32
Mid-West Companies(7) 0.73 3.99 71.43
New England Companies(1) 0.88 2.55 44.90
North-West Companies(1) 0.22 1.21 23.16
South-East Companies(1) 0.00 0.00 0.00
Thrift Strategy(19) 0.64 3.31 48.02
Mortgage Banker Strategy(1) 0.22 1.21 23.16
Diversified Strategy(1) 0.88 2.55 44.90
Companies Issuing Dividends(20) 0.66 3.33 52.02
Companies Without Dividends(1) 0.00 0.00 0.00
Equity/Assets 6-12%(15) 0.65 2.96 52.02
Equity/Assets >12%(6) 0.57 3.72 0.00
Actively Traded Companies(1) 0.40 1.84 63.49
Holding Company Structure(1) 0.40 1.84 63.49
Assets Over $1 Billion(4) 0.79 2.76 51.02
Assets $500 Million-$1 Billion(5) 0.67 3.40 63.49
Assets $250-$500 Million(4) 0.81 3.59 71.43
Assets less than $250 Million(8) 0.44 3.04 11.58
Goodwill Companies(10) 0.64 2.57 47.17
Non-Goodwill Companies(11) 0.62 3.68 35.71
MHC Institutions(21) 0.63 3.16 43.35
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data
and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common
equity and assets balances; ROI (return on investment) is current EPS
divided by current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities
or unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded
companies, and RP Financial, Inc. calculations. The information
provided in this report has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of
such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 28, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 3.91 3.29 0.20 4.61 2.36 0.49 11.40 2.14 36.71 1.23
CSA Coast Savings Financial of CA 4.83 4.76 0.12 2.40 1.16 0.47 9.42 1.53 48.84 1.08
CFB Commercial Federal Corp. of NE 5.75 5.05 0.64 11.13 5.58 0.92 15.86 1.07 69.60 1.01
DME Dime Savings Bank, FSB of NY* 5.42 5.37 0.54 10.47 5.71 0.70 13.61 2.45 24.13 1.09
DSL Downey Financial Corp. of CA 7.74 7.62 0.43 5.30 3.39 0.69 8.48 1.36 44.87 0.68
FRC First Republic Bancorp of CA* 5.86 5.86 0.61 10.81 7.01 0.57 10.01 2.22 38.80 0.97
FED FirstFed Fin. Corp. of CA 4.70 4.63 0.20 4.28 3.00 0.43 9.39 2.15 83.45 2.42
GLN Glendale Fed. Bk, FSB of CA 5.59 5.22 0.20 3.66 2.17 0.45 8.45 3.76 66.28 1.56
GDW Golden West Fin. Corp. of CA 6.23 6.23 1.01 15.68 9.36 1.23 19.19 1.37 35.24 0.59
GWF Great Western Fin. Corp. of CA(8) 5.63 4.95 0.48 8.44 3.45 0.68 12.11 1.79 41.34 1.03
GPT GreenPoint Fin. Corp. of NY* 10.95 6.27 0.95 8.92 4.65 0.90 8.44 2.91 26.91 1.52
SFB Standard Fed. Bancorp of MI(8) 6.11 5.08 0.65 10.21 5.17 0.86 13.49 0.59 53.01 0.43
TCB TCF Financial Corp. of MN 7.75 7.46 1.20 16.05 5.42 1.41 18.72 0.76 132.47 1.36
WES Westcorp Inc. of Orange CA 9.88 9.85 1.09 11.14 7.03 0.44 4.46 1.16 111.77 2.49
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 17.56 17.55 -0.47 -5.89 -2.48 -0.44 -5.48 0.56 159.79 1.32
BKC American Bank of Waterbury CT* 8.46 8.07 1.26 14.61 9.71 1.02 11.83 2.39 38.52 1.42
BFD BostonFed Bancorp of MA 11.15 11.15 0.32 2.88 2.22 0.52 4.65 0.54 97.04 0.63
CFX Cheshire Fin. Corp. of NH* 8.50 7.89 0.71 7.64 3.49 0.95 10.14 0.74 140.06 1.47
CZF Citisave Fin. Corp. of LA 16.00 15.99 0.78 4.47 4.54 1.04 5.97 0.22 40.85 0.15
CBK Citizens First Fin.Corp. of IL 15.14 15.14 0.25 2.32 1.35 0.52 4.87 0.53 35.95 0.24
ESX Essex Bancorp of VA(8) 0.33 -0.14 -2.71 NM NM -1.63 -40.51 3.44 51.87 2.16
FCB Falmouth Co-Op Bank of MA* 24.98 24.98 0.78 3.48 2.94 0.76 3.41 0.02 NA 1.22
FAB FirstFed America Bancorp of MA 12.35 12.35 0.46 3.72 3.42 0.88 7.14 NA NA NA
GAF GA Financial Corp. of PA 19.31 19.31 0.97 5.04 4.09 1.26 6.56 0.19 85.78 0.42
KNK Kankakee Bancorp of IL 10.41 9.73 0.50 4.97 4.60 0.67 6.67 0.90 74.47 0.99
KYF Kentucky First Bancorp of KY 17.15 17.15 0.88 3.96 4.51 1.14 5.15 0.09 486.84 0.81
NYB New York Bancorp, Inc. of NY 5.10 5.10 1.19 21.94 6.45 1.31 24.05 1.32 49.76 1.04
PDB Piedmont Bancorp of NC 15.70 15.70 -0.22 -0.82 -0.94 0.13 0.49 0.76 62.96 0.66
PLE Pinnacle Bank of AL 7.73 7.46 0.50 6.42 4.83 0.79 10.11 0.83 82.73 1.02
SSB Scotland Bancorp of NC 36.12 36.12 1.16 4.04 2.60 1.50 5.22 NA NA 0.50
SZB SouthFirst Bancshares of AL 14.27 14.27 -0.02 -0.12 -0.15 0.50 3.22 0.60 45.97 0.40
SRN Southern Banc Company of AL 18.22 18.03 0.23 1.30 1.40 0.58 3.32 NA NA 0.24
SSM Stone Street Bancorp of NC 35.13 35.13 1.22 4.38 2.46 1.51 5.42 0.17 272.78 0.61
TSH Teche Holding Company of LA 13.77 13.77 0.72 4.29 4.87 1.05 6.29 0.16 525.95 1.00
FTF Texarkana Fst. Fin. Corp of AR 15.94 15.94 1.47 7.54 7.77 1.81 9.27 0.17 403.17 0.84
THR Three Rivers Fin. Corp. of MI 14.48 14.42 0.52 3.44 3.59 0.78 5.17 1.22 42.90 0.79
TBK Tolland Bank of CT* 6.31 6.06 0.63 10.24 7.61 0.62 10.16 3.16 38.16 1.87
WSB Washington SB, FSB of MD 8.24 8.24 0.48 5.88 5.66 0.41 5.07 0.95 49.34 0.96
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 8.22 8.22 0.17 2.05 2.17 -0.02 -0.29 0.44 79.07 0.51
AFED AFSALA Bancorp of NY 13.68 13.68 0.59 4.34 4.52 0.59 4.34 NA NA NA
ALBK ALBANK Fin. Corp. of Albany NY 9.10 7.86 0.79 8.22 5.78 0.99 10.37 1.15 69.91 1.12
AMFC AMB Financial Corp. of IN 19.37 19.37 0.49 3.04 2.40 0.76 4.79 0.43 98.60 0.56
ASBP ASB Financial Corp. of OH 15.71 15.71 0.60 2.77 3.32 0.86 3.98 1.89 40.89 1.25
ABBK Abington Savings Bank of MA(8)* 6.89 6.15 0.74 11.12 8.50 0.62 9.40 0.27 135.80 0.59
AABC Access Anytime Bancorp of NM 4.58 4.58 -0.57 -12.10 -17.14 -0.22 -4.57 1.58 24.19 0.97
AFBC Advance Fin. Bancorp of WV 14.78 14.78 0.34 2.30 2.29 0.68 4.59 0.41 85.64 0.40
AADV Advantage Bancorp of WI 8.74 8.10 0.32 3.45 2.76 0.83 8.93 0.48 119.23 1.02
AFCB Affiliated Comm BC, Inc of MA 9.75 9.68 0.64 6.11 4.71 0.93 8.79 0.62 119.38 1.19
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- -------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA NM 215.40 8.42 NM 17.13 0.88 2.14 NM
CSA Coast Savings Financial of CA NM 210.21 10.16 213.57 22.05 0.00 0.00 0.00
CFB Commercial Federal Corp. of NE 17.94 195.26 11.22 222.11 12.59 0.28 0.78 34.00
DME Dime Savings Bank, FSB of NY* 17.50 179.30 9.71 180.97 13.46 0.00 0.00 0.00
DSL Downey Financial Corp. of CA 29.53 156.74 12.14 159.38 18.45 0.32 1.35 40.00
FRC First Republic Bancorp of CA* 14.26 141.17 8.28 141.34 15.40 0.00 0.00 0.00
FED FirstFed Fin. Corp. of CA NM 140.69 6.61 142.70 15.20 0.00 0.00 0.00
GLN Glendale Fed. Bk, FSB of CA NM 157.54 8.81 168.88 19.96 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 10.69 165.28 10.30 165.28 8.73 0.44 0.65 6.94
GWF Great Western Fin. Corp. of CA(8) 28.95 247.47 13.93 NM 20.18 1.00 2.27 65.79
GPT GreenPoint Fin. Corp. of NY* 21.51 195.19 21.38 NM 22.73 1.00 1.67 35.84
SFB Standard Fed. Bancorp of MI(8) 19.34 192.64 11.78 231.96 14.62 0.80 1.39 26.85
TCB TCF Financial Corp. of MN 18.44 NM 22.24 NM 15.81 0.75 1.65 30.49
WES Westcorp Inc. of Orange CA 14.23 153.02 15.12 153.53 NM 0.40 2.16 30.77
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* NM 102.00 17.90 102.00 NM 0.36 2.07 NM
BKC American Bank of Waterbury CT* 10.29 144.63 12.22 151.40 12.71 1.44 4.84 49.83
BFD BostonFed Bancorp of MA NM 114.52 12.77 114.52 28.02 0.20 1.23 55.56
CFX Cheshire Fin. Corp. of NH* 28.66 166.87 14.19 179.87 21.58 0.88 5.29 NM
CZF Citisave Fin. Corp. of LA 22.02 110.25 17.64 110.34 16.51 0.40 2.88 63.49
CBK Citizens First Fin.Corp. of IL NM 108.24 16.39 108.24 NM 0.00 0.00 0.00
ESX Essex Bancorp of VA(8) NM NM 0.99 NM NM 0.00 0.00 NM
FCB Falmouth Co-Op Bank of MA* NM 102.83 25.69 102.83 NM 0.20 1.28 43.48
FAB FirstFed America Bancorp of MA 29.24 108.70 13.43 108.70 15.23 0.00 0.00 0.00
GAF GA Financial Corp. of PA 24.42 111.33 21.50 111.33 18.74 0.32 1.99 48.48
KNK Kankakee Bancorp of IL 21.72 106.13 11.05 113.57 16.20 0.48 1.75 38.10
KYF Kentucky First Bancorp of KY 22.17 108.29 18.57 108.29 17.03 0.50 4.26 NM
NYB New York Bancorp, Inc. of NY 15.50 NM 17.12 NM 14.14 0.60 1.86 28.85
PDB Piedmont Bancorp of NC NM 148.74 23.36 148.74 NM 0.40 3.77 NM
PLE Pinnacle Bank of AL 20.71 134.35 10.39 139.20 13.16 0.80 3.58 74.07
SSB Scotland Bancorp of NC NM 116.93 42.24 116.93 29.72 0.30 1.90 73.17
SZB SouthFirst Bancshares of AL NM 87.92 12.55 87.92 25.46 0.50 3.64 NM
SRN Southern Banc Company of AL NM 89.17 16.25 90.13 27.94 0.35 2.46 NM
SSM Stone Street Bancorp of NC NM 133.06 46.75 133.06 NM 0.44 1.61 65.67
TSH Teche Holding Company of LA 20.55 98.62 13.58 98.62 14.02 0.50 3.33 68.49
FTF Texarkana Fst. Fin. Corp of AR 12.88 117.16 18.68 117.15 10.48 0.45 2.67 34.35
THR Three Rivers Fin. Corp. of MI 27.88 97.51 14.12 97.97 18.59 0.36 2.48 69.23
TBK Tolland Bank of CT* 13.14 126.32 7.97 131.47 13.25 0.20 1.29 16.95
WSB Washington SB, FSB of MD 17.66 102.81 8.47 102.81 20.48 0.10 1.95 34.48
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN NM 94.55 7.77 94.55 NM 0.40 1.38 63.49
AFED AFSALA Bancorp of NY 22.13 96.09 13.15 96.09 22.13 0.00 0.00 0.00
ALBK ALBANK Fin. Corp. of Albany NY 17.30 142.07 12.93 164.50 13.72 0.60 1.71 29.56
AMFC AMB Financial Corp. of IN NM 95.49 18.50 95.49 26.44 0.24 1.75 72.73
ASBP ASB Financial Corp. of OH NM 115.08 18.08 115.08 20.98 0.40 3.40 NM
ABBK Abington Savings Bank of MA(8)* 11.76 124.15 8.55 138.98 13.92 0.40 1.82 21.39
AABC Access Anytime Bancorp of NM NM 76.98 3.53 76.98 NM 0.00 0.00 NM
AFBC Advance Fin. Bancorp of WV NM 100.50 14.85 100.50 21.88 0.00 0.00 0.00
AADV Advantage Bancorp of WI NM 128.95 11.27 139.22 13.98 0.40 1.13 40.82
AFCB Affiliated Comm BC, Inc of MA 21.22 129.31 12.61 130.20 14.74 0.60 2.44 51.72
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 28, 1997
Key Financial Ratios
--------------------------------------------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- ---------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
--------------------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC Albion Banc Corp. of Albion NY 9.63 9.63 -0.10 -1.00 -1.40 0.20 1.96
ABCL Allied Bancorp of IL 8.48 8.24 0.47 5.68 3.75 0.70 8.53
ATSB AmTrust Capital Corp. of IN 9.91 9.80 0.25 2.42 2.86 0.11 1.07
AHCI Ambanc Holding Co. of NY* 14.17 14.17 0.26 1.73 1.74 0.25 1.66
ASBI Ameriana Bancorp of IN 10.88 10.87 0.61 5.09 4.41 0.92 7.70
AFFFZ America First Fin. Fund of CA 8.03 7.90 1.37 19.48 15.56 1.68 23.87
AMFB American Federal Bank of SC(8) 7.76 7.17 1.04 13.07 4.47 1.30 16.31
ANBK American Nat'l Bancorp of MD 9.15 9.15 0.15 1.44 1.45 0.54 5.14
ABCW Anchor Bancorp Wisconsin of WI 6.17 6.01 0.72 11.15 6.27 0.96 14.83
ANDB Andover Bancorp, Inc. of MA* 7.96 7.96 1.07 13.89 8.64 1.10 14.29
ASFC Astoria Financial Corp. of NY 8.10 6.72 0.53 6.41 4.00 0.78 9.47
AVND Avondale Fin. Corp. of IL 9.59 9.59 0.39 3.69 3.51 0.40 3.86
BFSI BFS Bankorp, Inc. of NY 8.03 8.03 1.46 18.53 10.56 1.73 21.91
BKCT Bancorp Connecticut of CT* 10.19 10.19 1.24 11.61 8.67 1.19 11.07
BPLS Bank Plus Corp. of CA 4.75 4.74 -2.00 -37.58 -26.89 -1.69 -31.88
BWFC Bank West Fin. Corp. of MI 17.34 17.34 0.66 3.39 4.30 0.42 2.17
BANC BankAtlantic Bancorp of FL 6.44 5.98 0.83 11.86 6.41 0.76 10.85
BKUNA BankUnited SA of FL 5.44 5.14 0.36 7.30 3.43 0.30 5.97
BKCO Bankers Corp. of NJ(8)* 7.84 7.70 1.13 12.97 8.00 1.21 13.96
BVFS Bay View Capital Corp. of CA 6.06 5.75 0.34 5.41 2.92 0.63 10.00
BFSB Bedford Bancshares of VA 14.31 14.31 1.09 7.00 5.92 1.40 8.97
BFFC Big Foot Fin. Corp. of IL 16.04 16.04 0.35 2.18 2.16 0.41 2.54
BSBC Branford SB of CT* 8.97 8.97 1.04 11.76 6.59 1.04 11.76
BYFC Broadway Fin. Corp. of CA 10.75 10.75 -0.17 -1.88 -2.03 0.21 2.42
CBCO CB Bancorp of Michigan City IN 9.69 9.69 1.11 11.72 6.57 1.31 13.84
CBES CBES Bancorp of MO 18.88 18.88 0.92 7.15 4.70 1.24 9.62
CCFH CCF Holding Company of GA 17.98 17.98 0.60 2.89 3.20 0.89 4.28
CENF CENFED Financial Corp. of CA 5.22 5.21 0.53 10.49 6.47 0.65 12.92
CFSB CFSB Bancorp of Lansing MI 7.53 7.53 0.69 8.61 5.77 0.95 11.87
CKFB CKF Bancorp of Danville KY 25.15 25.15 1.29 4.87 4.62 1.28 4.81
CNSB CNS Bancorp of MO 24.40 24.40 0.36 2.18 1.18 0.63 3.82
CSBF CSB Financial Group Inc of IL* 25.56 24.11 0.54 2.08 2.35 0.82 3.16
CFHC California Fin. Hld. Co. of CA(8) 6.72 6.69 0.53 7.95 5.06 0.76 11.49
CBCI Calumet Bancorp of Chicago IL 16.03 16.03 1.07 6.56 6.39 1.40 8.55
CAFI Camco Fin. Corp. of OH 7.58 7.58 0.77 9.64 5.65 0.88 11.05
CMRN Cameron Fin. Corp. of MO 25.12 25.12 1.20 4.45 4.45 1.47 5.47
CAPS Capital Savings Bancorp of MO 8.46 8.46 0.63 6.69 5.14 0.92 9.75
CFNC Carolina Fincorp of NC* 21.96 21.96 0.88 4.00 3.47 0.88 4.00
CARV Carver FSB of New York, NY 9.48 9.05 -0.03 -0.33 -0.51 0.24 2.52
CASB Cascade SB of Everett WA 6.10 6.10 0.51 8.18 5.01 0.53 8.57
CATB Catskill Fin. Corp. of NY* 29.02 29.02 1.19 6.60 4.03 1.19 6.60
CNIT Cenit Bancorp of Norfolk VA 7.28 7.02 0.50 6.96 4.24 0.55 7.76
CTBK Center Banks, Inc. of NY* 6.70 6.55 0.66 9.63 8.10 0.63 9.15
CEBK Central Co-Op. Bank of MA* 9.83 8.66 0.52 5.32 4.59 0.56 5.76
CENB Century Bancshares of NC* 28.53 28.53 0.93 3.25 3.42 1.18 4.13
CBSB Charter Financial Inc. of IL 14.52 13.40 0.93 5.39 4.57 1.23 7.11
COFI Charter One Financial of OH 6.68 6.19 0.93 14.10 5.77 1.19 18.05
CVAL Chester Valley Bancorp of PA 8.85 8.85 0.61 6.72 5.20 0.90 9.95
CTZN CitFed Bancorp of Dayton OH 6.34 5.62 0.51 7.68 4.60 0.74 11.27
CLAS Classic Bancshares of KY 13.80 11.54 0.38 1.79 1.67 0.64 3.04
CMSB Cmnwealth Bancorp of PA 10.91 8.37 0.44 4.47 2.71 0.64 6.45
CBSA Coastal Bancorp of Houston TX 3.17 2.61 0.24 7.12 4.87 0.40 12.02
CFCP Coastal Fin. Corp. of SC 6.02 6.02 0.85 14.01 4.50 0.92 15.05
COFD Collective Bancorp Inc. of NJ(8) 6.93 6.49 0.90 12.90 5.45 1.10 15.90
CMSV Commty. Svgs, MHC of FL (48.5) 11.62 11.62 0.64 5.36 4.21 0.96 8.04
CBIN Community Bank Shares of IN 10.85 10.83 0.59 5.15 4.80 0.90 7.88
</TABLE>
<TABLE>
<CAPTION>
Asset Quality Ratios Pricing Ratios
----------------------- -----------------------------------------
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Financial Institution Assets NPAs Loans Earning Book Assets Book Earnings
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (X) (%) (%) (%) (x)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC Albion Banc Corp. of Albion NY 0.37 139.82 0.65 NM 74.21 7.15 74.21 NM
ABCL Allied Bancorp of IL 0.17 211.76 0.41 26.70 147.41 12.50 151.59 17.80
ATSB AmTrust Capital Corp. of IN 2.62 26.14 0.95 NM 88.19 8.74 89.18 NM
AHCI Ambanc Holding Co. of NY* 3.63 26.16 1.70 NM 91.89 13.02 91.89 NM
ASBI Ameriana Bancorp of IN 0.48 58.85 0.39 22.67 120.05 13.07 120.23 14.97
AFFFZ America First Fin. Fund of CA 0.58 54.76 0.50 6.43 113.89 9.15 115.73 5.24
AMFB American Federal Bank of SC(8) 0.51 150.52 1.25 22.38 NM 22.67 NM 17.93
ANBK American Nat'l Bancorp of MD 1.37 69.91 1.56 NM 106.15 9.72 106.15 19.29
ABCW Anchor Bancorp Wisconsin of WI 0.75 157.67 1.54 15.96 180.43 11.12 184.96 12.00
ANDB Andover Bancorp, Inc. of MA* 1.30 77.05 1.40 11.58 150.67 11.99 150.67 11.25
ASFC Astoria Financial Corp. of NY 0.66 29.17 0.55 25.00 156.82 12.70 189.01 16.93
AVND Avondale Fin. Corp. of IL 0.71 104.44 1.46 28.46 110.98 10.64 110.98 27.21
BFSI BFS Bankorp, Inc. of NY 1.04 90.39 1.03 9.47 161.54 12.97 161.54 8.01
BKCT Bancorp Connecticut of CT* 1.45 84.76 1.98 11.54 135.38 13.79 135.38 12.10
BPLS Bank Plus Corp. of CA 3.35 56.47 2.24 NM 155.89 7.41 156.25 NM
BWFC Bank West Fin. Corp. of MI 0.10 126.57 0.18 23.24 87.37 15.15 87.37 NM
BANC BankAtlantic Bancorp of FL 0.76 118.19 1.52 15.59 172.50 11.10 185.60 17.05
BKUNA BankUnited SA of FL 0.95 27.57 0.33 29.15 169.66 9.23 179.48 NM
BKCO Bankers Corp. of NJ(8)* 1.20 25.55 0.43 12.50 158.02 12.39 160.81 11.61
BVFS Bay View Capital Corp. of CA 0.73 156.53 1.49 NM 187.69 11.38 197.78 18.56
BFSB Bedford Bancshares of VA 0.54 95.03 0.59 16.89 120.84 17.29 120.84 13.18
BFFC Big Foot Fin. Corp. of IL NA NA NA NM 100.80 16.16 100.80 NM
BSBC Branford SB of CT* 2.19 96.45 2.95 15.18 169.32 15.19 169.32 15.18
BYFC Broadway Fin. Corp. of CA 2.24 43.23 1.17 NM 73.49 7.90 73.49 NM
CBCO CB Bancorp of Michigan City IN 1.70 54.83 2.02 15.22 171.58 16.63 171.58 12.89
CBES CBES Bancorp of MO NA NA 0.49 21.30 102.13 19.29 102.13 15.83
CCFH CCF Holding Company of GA 0.75 89.85 1.04 NM 103.11 18.54 103.11 21.10
CENF CENFED Financial Corp. of CA 1.34 49.80 0.94 15.45 153.71 8.02 153.99 12.55
CFSB CFSB Bancorp of Lansing MI 0.20 271.42 0.64 17.34 151.62 11.41 151.62 12.58
CKFB CKF Bancorp of Danville KY 1.47 13.42 0.22 21.65 108.96 27.40 108.96 21.91
CNSB CNS Bancorp of MO 0.33 111.42 0.62 NM 116.44 28.41 116.44 NM
CSBF CSB Financial Group Inc of IL* 0.50 46.43 0.43 NM 78.26 20.00 82.97 27.95
CFHC California Fin. Hld. Co. of CA(8) 1.21 45.60 0.76 19.77 152.27 10.23 152.99 13.68
CBCI Calumet Bancorp of Chicago IL 1.29 86.03 1.45 15.64 103.20 16.54 103.20 11.99
CAFI Camco Fin. Corp. of OH 0.57 50.44 0.34 17.70 168.27 12.76 168.27 15.44
CMRN Cameron Fin. Corp. of MO 0.83 87.40 0.87 22.46 101.16 25.41 101.16 18.26
CAPS Capital Savings Bancorp of MO 0.20 141.28 0.38 19.44 132.83 11.24 132.83 13.33
CFNC Carolina Fincorp of NC* 0.07 568.18 0.53 28.85 115.47 25.36 115.47 28.85
CARV Carver FSB of New York, NY 1.26 20.65 1.03 NM 65.98 6.26 69.12 25.97
CASB Cascade SB of Everett WA 0.51 168.34 1.19 19.96 158.32 9.66 158.32 19.03
CATB Catskill Fin. Corp. of NY* 0.61 106.20 1.47 24.80 99.87 28.99 99.87 24.80
CNIT Cenit Bancorp of Norfolk VA 0.82 71.39 1.03 23.56 154.00 11.21 159.69 21.13
CTBK Center Banks, Inc. of NY* 1.59 54.86 1.03 12.34 113.90 7.63 116.49 13.00
CEBK Central Co-Op. Bank of MA* 1.69 53.35 1.25 21.76 113.50 11.15 128.83 20.11
CENB Century Bancshares of NC* 0.77 84.54 0.94 29.20 95.01 27.11 95.01 23.00
CBSB Charter Financial Inc. of IL 0.67 93.40 0.87 21.88 118.78 17.25 128.68 16.58
COFI Charter One Financial of OH 0.37 129.94 0.84 17.32 238.10 15.91 NM 13.53
CVAL Chester Valley Bancorp of PA 0.76 127.23 1.14 19.23 127.23 11.26 127.23 12.99
CTZN CitFed Bancorp of Dayton OH 0.91 71.24 1.12 21.76 159.54 10.11 180.09 14.82
CLAS Classic Bancshares of KY 0.86 71.29 1.06 NM 96.69 13.34 115.64 NM
CMSB Cmnwealth Bancorp of PA 0.41 116.96 0.94 NM 125.26 13.67 163.27 25.60
CBSA Coastal Bancorp of Houston TX 0.59 39.07 0.54 20.55 148.60 4.71 180.44 12.16
CFCP Coastal Fin. Corp. of SC 0.17 543.23 1.09 22.22 NM 18.02 NM 20.69
COFD Collective Bancorp Inc. of NJ(8) 0.43 55.96 0.47 18.36 230.36 15.96 246.08 14.90
CMSV Commty. Svgs, MHC of FL (48.5) 0.57 62.39 0.61 23.78 125.81 14.61 125.81 15.85
CBIN Community Bank Shares of IN 0.22 117.84 0.46 20.83 107.17 11.63 107.34 13.61
</TABLE>
<TABLE>
<CAPTION>
Dividend Data(6)
---------------------
Ind. Divi-
Div./ dend Payout
Financial Institution Share Yield Ratio(7)
--------------------- ------- ------- -------
($) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C>
ALBC Albion Banc Corp. of Albion NY 0.31 1.81 NM
ABCL Allied Bancorp of IL 0.00 0.00 0.00
ATSB AmTrust Capital Corp. of IN 0.20 1.68 58.82
AHCI Ambanc Holding Co. of NY* 0.00 0.00 0.00
ASBI Ameriana Bancorp of IN 0.60 3.78 NM
AFFFZ America First Fin. Fund of CA 1.60 4.76 30.59
AMFB American Federal Bank of SC(8) 0.48 1.66 37.21
ANBK American Nat'l Bancorp of MD 0.12 0.91 63.16
ABCW Anchor Bancorp Wisconsin of WI 0.50 1.11 17.73
ANDB Andover Bancorp, Inc. of MA* 0.60 2.13 24.69
ASFC Astoria Financial Corp. of NY 0.44 1.02 25.58
AVND Avondale Fin. Corp. of IL 0.00 0.00 0.00
BFSI BFS Bankorp, Inc. of NY 0.00 0.00 0.00
BKCT Bancorp Connecticut of CT* 0.82 3.64 42.05
BPLS Bank Plus Corp. of CA 0.00 0.00 NM
BWFC Bank West Fin. Corp. of MI 0.28 2.41 56.00
BANC BankAtlantic Bancorp of FL 0.15 0.92 14.29
BKUNA BankUnited SA of FL 0.00 0.00 0.00
BKCO Bankers Corp. of NJ(8)* 0.64 2.60 32.49
BVFS Bay View Capital Corp. of CA 0.64 1.14 39.02
BFSB Bedford Bancshares of VA 0.48 2.49 42.11
BFFC Big Foot Fin. Corp. of IL 0.00 0.00 0.00
BSBC Branford SB of CT* 0.08 1.88 28.57
BYFC Broadway Fin. Corp. of CA 0.20 1.93 NM
CBCO CB Bancorp of Michigan City IN 0.00 0.00 0.00
CBES CBES Bancorp of MO 0.00 0.00 0.00
CCFH CCF Holding Company of GA 0.50 3.08 NM
CENF CENFED Financial Corp. of CA 0.36 1.06 16.36
CFSB CFSB Bancorp of Lansing MI 0.48 2.39 41.38
CKFB CKF Bancorp of Danville KY 0.44 2.48 53.66
CNSB CNS Bancorp of MO 0.20 1.18 NM
CSBF CSB Financial Group Inc of IL* 0.00 0.00 0.00
CFHC California Fin. Hld. Co. of CA(8) 0.44 1.52 30.14
CBCI Calumet Bancorp of Chicago IL 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 0.48 3.05 53.93
CMRN Cameron Fin. Corp. of MO 0.28 1.68 37.84
CAPS Capital Savings Bancorp of MO 0.24 1.71 33.33
CFNC Carolina Fincorp of NC* 0.00 0.00 0.00
CARV Carver FSB of New York, NY 0.00 0.00 NM
CASB Cascade SB of Everett WA 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 0.28 1.76 43.75
CNIT Cenit Bancorp of Norfolk VA 1.00 2.22 52.36
CTBK Center Banks, Inc. of NY* 0.40 2.05 25.32
CEBK Central Co-Op. Bank of MA* 0.32 1.73 37.65
CENB Century Bancshares of NC* 0.00 0.00 0.00
CBSB Charter Financial Inc. of IL 0.24 1.52 33.33
COFI Charter One Financial of OH 0.92 1.93 33.45
CVAL Chester Valley Bancorp of PA 0.44 2.20 42.31
CTZN CitFed Bancorp of Dayton OH 0.32 0.93 20.25
CLAS Classic Bancshares of KY 0.28 2.04 NM
CMSB Cmnwealth Bancorp of PA 0.24 1.51 55.81
CBSA Coastal Bancorp of Houston TX 0.40 1.47 30.30
CFCP Coastal Fin. Corp. of SC 0.44 1.83 40.74
COFD Collective Bancorp Inc. of NJ(8) 1.00 2.43 44.64
CMSV Commty. Svgs, MHC of FL (48.5) 0.80 4.10 NM
CBIN Community Bank Shares of IN 0.34 2.47 51.52
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 28, 1997
Key Financial Ratios
----------------------------------------------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- ---------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
--------------------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CBNH Community Bankshares Inc of NH* 7.16 7.16 0.86 11.93 7.24 0.70 9.70
CFTP Community Fed. Bancorp of MS 33.44 33.44 1.31 4.38 3.02 1.59 5.32
CFFC Community Fin. Corp. of VA 13.92 13.92 1.03 7.49 5.82 1.30 9.48
CIBI Community Inv. Bancorp of OH 11.94 11.94 0.68 5.06 5.51 0.98 7.30
COOP Cooperative Bk. for Svgs. of NC 7.46 7.46 -1.01 -11.74 -10.63 0.03 0.38
CNSK Covenant Bank for Svgs. of NJ* 5.35 5.35 0.43 8.00 3.59 0.52 9.85
CRZY Crazy Woman Creek Bncorp of WY 29.75 29.75 0.86 3.03 2.86 1.13 3.96
DNFC D&N Financial Corp. of MI 5.85 5.78 0.68 11.92 6.04 0.88 15.56
DFIN Damen Fin. Corp. of Chicago IL 22.87 22.87 0.72 3.08 3.10 0.94 4.04
DCBI Delphos Citizens Bancorp of OH 26.51 26.51 1.36 5.12 5.12 1.36 5.12
DIME Dime Community Bancorp of NY 17.98 15.74 0.80 5.41 3.68 0.92 6.21
DIBK Dime Financial Corp. of CT* 8.58 8.23 1.76 21.77 11.11 1.89 23.48
EGLB Eagle BancGroup of IL 12.82 12.82 -0.31 -3.17 -2.38 0.02 0.25
EBSI Eagle Bancshares of Tucker GA 8.95 8.95 0.65 7.91 5.11 0.87 10.51
EGFC Eagle Financial Corp. of CT 7.21 5.29 1.02 14.04 10.34 0.63 8.65
ETFS East Texas Fin. Serv. of TX 18.30 18.30 0.39 2.04 2.30 0.70 3.65
EBCP Eastern Bancorp of NH(8) 7.48 7.08 0.38 5.06 3.43 0.54 7.13
ESBK Elmira SB of Elmira NY* 6.38 6.10 0.18 2.91 3.05 0.17 2.71
EIRE Emerald Island Bancorp, MA* 6.82 6.82 0.64 9.52 5.54 0.64 9.60
EFBC Empire Federal Bancorp of MT 34.89 34.89 0.83 2.37 2.57 1.09 3.12
EFBI Enterprise Fed. Bancorp of OH 14.06 14.03 0.68 4.31 4.81 0.64 4.07
EQSB Equitable FSB of Wheaton MD 5.00 5.00 0.42 8.11 5.82 0.71 13.84
FFFG F.F.O. Financial Group of FL 6.04 6.04 0.20 3.17 1.75 0.62 9.95
FCBF FCB Fin. Corp. of Neenah WI 17.28 17.28 0.91 4.91 4.27 1.11 6.04
FFBS FFBS Bancorp of Columbus MS 19.59 19.59 1.08 5.49 3.86 1.41 7.18
FFDF FFD Financial Corp. of OH 25.07 25.07 0.68 3.69 2.43 0.95 5.10
FFLC FFLC Bancorp of Leesburg FL 15.48 15.48 0.66 3.98 3.27 0.98 5.92
FFFC FFVA Financial Corp. of VA 13.95 13.65 1.05 6.69 4.69 1.30 8.30
FFWC FFW Corporation of Wabash IN 10.19 10.19 0.88 8.33 7.49 1.09 10.36
FFYF FFY Financial Corp. of OH 14.31 14.31 0.84 4.91 4.50 1.27 7.43
FMCO FMS Financial Corp. of NJ 6.25 6.10 0.58 8.96 6.38 0.93 14.21
FFHH FSF Financial Corp. of MN 12.40 12.40 0.58 4.03 3.59 0.77 5.35
FOBC Fed One Bancorp of Wheeling WV 11.69 11.11 0.69 5.72 5.14 0.98 8.13
FFRV Fid. Fin. Bkshrs. Corp. of VA(8) 8.43 8.42 0.66 7.78 3.29 0.96 11.33
FBCI Fidelity Bancorp of Chicago IL 10.26 10.23 0.50 4.17 3.90 0.74 6.23
FSBI Fidelity Bancorp, Inc. of PA 6.85 6.84 0.44 5.96 4.09 0.77 10.47
FFFL Fidelity FSB, MHC of FL (47.4) 9.33 9.24 0.43 4.41 2.83 0.63 6.41
FFED Fidelity Fed. Bancorp of IN 4.84 4.84 0.17 3.30 2.00 0.31 6.04
FFOH Fidelity Financial of OH 19.85 19.85 0.60 3.42 2.10 0.90 5.13
FIBC Financial Bancorp of NY 9.94 9.89 0.49 4.76 4.03 0.86 8.40
FBSI First Bancshares of MO 14.75 14.73 0.82 5.13 5.25 1.02 6.41
FBBC First Bell Bancorp of PA 18.43 18.43 1.41 6.72 6.14 1.63 7.74
FBER First Bergen Bancorp of NJ 17.03 17.03 0.11 0.86 0.62 0.59 4.51
FCIT First Cit. Fin. Corp of MD 5.92 5.92 0.46 7.41 4.31 0.66 10.66
FSTC First Citizens Corp of GA 12.80 12.73 2.23 19.62 10.68 1.95 17.11
FFBA First Colorado Bancorp of Co 16.33 16.13 1.09 8.26 5.08 1.09 8.26
FDEF First Defiance Fin. Corp. of OH 23.00 23.00 0.92 3.74 3.91 1.21 4.91
FESX First Essex Bancorp of MA* 7.79 6.68 1.04 13.76 7.72 0.90 11.86
FFES First FS&LA of E. Hartford CT 6.12 6.10 0.44 6.90 6.00 0.66 10.41
FSSB First FS&LA of San Bern. CA 4.69 4.48 -1.07 -20.30 NM -1.24 -23.65
FFSX First FS&LA. MHC of IA (46.0) 8.18 8.10 0.40 4.92 3.17 0.71 8.66
FFSW First Fed Fin. Serv. of OH 5.37 4.38 0.91 16.56 6.72 0.82 14.91
BDJI First Fed. Bancorp. of MN 11.36 11.36 0.32 2.46 2.59 0.68 5.18
FFBH First Fed. Bancshares of AR 16.35 16.35 0.63 5.48 3.07 0.95 8.32
FFEC First Fed. Bancshares of WI(8) 13.42 12.91 0.69 4.76 3.60 0.91 6.25
FTFC First Fed. Capital Corp. of WI 6.34 5.98 0.70 10.32 5.50 0.77 11.38
<CAPTION>
Asset Quality Ratios Pricing Ratios
----------------------- -----------------------------------------
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Financial Institution Assets NPAs Loans Earning Book Assets Book Earnings
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (X) (%) (%) (%) (x)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CBNH Community Bankshares Inc of NH* 0.38 178.91 1.02 13.81 147.17 10.54 147.17 16.99
CFTP Community Fed. Bancorp of MS 0.35 79.78 0.48 NM 123.49 41.30 123.49 27.22
CFFC Community Fin. Corp. of VA 0.20 317.33 0.72 17.19 125.07 17.40 125.07 13.58
CIBI Community Inv. Bancorp of OH 0.88 53.98 0.64 18.16 96.48 11.52 96.48 12.59
COOP Cooperative Bk. for Svgs. of NC 0.42 56.37 0.31 NM 120.09 8.96 120.09 NM
CNSK Covenant Bank for Svgs. of NJ* 1.62 48.97 1.35 27.88 192.05 10.27 192.05 22.66
CRZY Crazy Woman Creek Bncorp of WY 0.12 452.46 1.06 NM 92.09 27.40 92.09 26.71
DNFC D&N Financial Corp. of MI 0.66 112.57 0.94 16.55 173.16 10.13 175.20 12.67
DFIN Damen Fin. Corp. of Chicago IL 0.15 98.29 0.38 NM 101.61 23.24 101.61 24.58
DCBI Delphos Citizens Bancorp of OH NA NA NA 19.52 99.93 26.49 99.93 19.52
DIME Dime Community Bancorp of NY 1.03 68.42 1.41 27.21 121.47 21.84 138.78 23.72
DIBK Dime Financial Corp. of CT* 1.01 197.32 3.33 9.00 178.07 15.29 185.77 8.35
EGLB Eagle BancGroup of IL 1.76 31.80 0.87 NM 94.17 12.07 94.17 NM
EBSI Eagle Bancshares of Tucker GA 1.06 53.91 0.84 19.55 131.70 11.78 131.70 14.71
EGFC Eagle Financial Corp. of CT 1.22 50.16 1.04 9.67 132.52 9.55 180.76 15.69
ETFS East Texas Fin. Serv. of TX 0.39 64.22 0.60 NM 94.07 17.22 94.07 24.33
EBCP Eastern Bancorp of NH(8) 1.49 22.06 0.58 29.11 145.16 10.86 153.32 20.66
ESBK Elmira SB of Elmira NY* 0.93 72.34 0.89 NM 95.43 6.09 99.79 NM
EIRE Emerald Island Bancorp, MA* 0.23 281.89 1.04 18.06 154.27 10.53 154.27 17.89
EFBC Empire Federal Bancorp of MT NA NA NA NM 92.28 32.20 92.28 29.61
EFBI Enterprise Fed. Bancorp of OH 0.09 201.97 0.27 20.77 90.38 12.71 90.55 22.01
EQSB Equitable FSB of Wheaton MD 1.19 19.13 0.32 17.18 134.51 6.72 134.51 10.07
FFFG F.F.O. Financial Group of FL 2.94 55.67 2.35 NM 179.37 10.84 179.37 18.18
FCBF FCB Fin. Corp. of Neenah WI 0.11 408.42 0.52 23.42 117.60 20.33 117.60 19.02
FFBS FFBS Bancorp of Columbus MS 0.63 83.16 0.77 25.88 139.86 27.40 139.86 19.82
FFDF FFD Financial Corp. of OH 0.15 116.80 0.29 NM 95.11 23.84 95.11 29.79
FFLC FFLC Bancorp of Leesburg FL 0.23 133.73 0.48 NM 125.00 19.35 125.00 20.52
FFFC FFVA Financial Corp. of VA 0.44 143.89 1.04 21.34 155.95 21.76 159.37 17.19
FFWC FFW Corporation of Wabash IN 0.16 205.83 0.48 13.36 109.97 11.20 109.97 10.74
FFYF FFY Financial Corp. of OH 0.84 69.96 0.78 22.23 130.16 18.63 130.16 14.69
FMCO FMS Financial Corp. of NJ 1.18 45.42 0.91 15.67 139.67 8.72 143.12 9.88
FFHH FSF Financial Corp. of MN 0.06 354.34 0.36 27.87 122.21 15.15 122.21 20.99
FOBC Fed One Bancorp of Wheeling WV 0.27 151.30 1.07 19.47 113.78 13.31 119.74 13.70
FFRV Fid. Fin. Bkshrs. Corp. of VA(8) 1.14 84.83 1.16 NM 231.98 19.55 232.17 20.90
FBCI Fidelity Bancorp of Chicago IL 0.67 25.45 0.23 25.65 112.73 11.57 113.12 17.17
FSBI Fidelity Bancorp, Inc. of PA 0.48 100.13 1.00 24.47 147.43 10.10 147.71 13.92
FFFL Fidelity FSB, MHC of FL (47.4) 0.40 65.35 0.35 NM 154.70 14.44 156.25 24.35
FFED Fidelity Fed. Bancorp of IN 0.17 415.56 0.83 NM 177.87 8.61 177.87 27.27
FFOH Fidelity Financial of OH 0.42 77.55 0.43 NM 136.23 27.04 136.23 NM
FIBC Financial Bancorp of NY 3.44 17.16 1.11 24.82 121.23 12.06 121.90 14.07
FBSI First Bancshares of MO 0.65 52.74 0.43 19.06 99.33 14.65 99.48 15.28
FBBC First Bell Bancorp of PA 0.10 114.26 0.13 16.28 117.58 21.68 117.58 14.14
FBER First Bergen Bancorp of NJ 1.22 120.06 3.00 NM 103.54 17.63 103.54 NM
FCIT First Cit. Fin. Corp of MD 2.58 41.67 1.50 23.21 169.02 10.00 169.02 16.13
FSTC First Citizens Corp of GA NA NA 1.41 9.36 168.32 21.54 169.23 10.73
FFBA First Colorado Bancorp of Co 0.22 102.47 0.32 19.68 127.00 20.74 128.53 19.68
FDEF First Defiance Fin. Corp. of OH 0.23 168.53 0.49 25.61 102.59 23.60 102.59 19.49
FESX First Essex Bancorp of MA* 0.55 140.92 1.18 12.96 142.32 11.08 165.87 15.04
FFES First FS&LA of E. Hartford CT 0.65 42.47 1.53 16.67 116.12 7.10 116.39 11.04
FSSB First FS&LA of San Bern. CA 3.02 35.25 1.49 NM 66.16 3.11 69.29 NM
FFSX First FS&LA. MHC of IA (46.0) 0.13 288.03 0.54 NM 152.32 12.46 153.71 17.90
FFSW First Fed Fin. Serv. of OH 0.16 155.53 0.35 14.88 227.27 12.19 NM 16.52
BDJI First Fed. Bancorp. of MN 0.38 112.10 0.88 NM 104.05 11.82 104.05 18.32
FFBH First Fed. Bancshares of AR 0.15 159.31 0.31 NM 116.70 19.08 116.70 21.44
FFEC First Fed. Bancshares of WI(8) 0.03 398.60 0.16 27.79 130.48 17.51 135.62 21.16
FTFC First Fed. Capital Corp. of WI 0.12 457.67 0.74 18.19 187.88 11.91 199.23 16.49
<CAPTION>
Dividend Data(6)
-----------------------
Ind. Divi-
Div./ dend Payout
Financial Institution Share Yield Ratio(7)
--------------------- ------- ------- -------
($) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C>
CBNH Community Bankshares Inc of NH* 0.64 2.71 37.43
CFTP Community Fed. Bancorp of MS 0.30 1.51 50.00
CFFC Community Fin. Corp. of VA 0.56 2.55 43.75
CIBI Community Inv. Bancorp of OH 0.40 2.32 42.11
COOP Cooperative Bk. for Svgs. of NC 0.00 0.00 NM
CNSK Covenant Bank for Svgs. of NJ* 0.00 0.00 0.00
CRZY Crazy Woman Creek Bncorp of WY 0.40 2.94 NM
DNFC D&N Financial Corp. of MI 0.00 0.00 0.00
DFIN Damen Fin. Corp. of Chicago IL 0.24 1.66 53.33
DCBI Delphos Citizens Bancorp of OH 0.00 0.00 0.00
DIME Dime Community Bancorp of NY 0.00 0.00 0.00
DIBK Dime Financial Corp. of CT* 0.36 1.75 15.72
EGLB Eagle BancGroup of IL 0.00 0.00 NM
EBSI Eagle Bancshares of Tucker GA 0.60 3.61 70.59
EGFC Eagle Financial Corp. of CT 0.92 3.12 30.16
ETFS East Texas Fin. Serv. of TX 0.20 1.10 47.62
EBCP Eastern Bancorp of NH(8) 0.64 2.50 72.73
ESBK Elmira SB of Elmira NY* 0.64 3.37 NM
EIRE Emerald Island Bancorp, MA* 0.28 1.44 25.93
EFBC Empire Federal Bancorp of MT 0.00 0.00 0.00
EFBI Enterprise Fed. Bancorp of OH 0.00 0.00 0.00
EQSB Equitable FSB of Wheaton MD 0.00 0.00 0.00
FFFG F.F.O. Financial Group of FL 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI 0.72 3.24 NM
FFBS FFBS Bancorp of Columbus MS 0.50 2.27 58.82
FFDF FFD Financial Corp. of OH 0.20 1.43 58.82
FFLC FFLC Bancorp of Leesburg FL 0.48 1.75 53.33
FFFC FFVA Financial Corp. of VA 0.40 1.62 34.48
FFWC FFW Corporation of Wabash IN 0.60 2.38 31.75
FFYF FFY Financial Corp. of OH 0.70 2.79 61.95
FMCO FMS Financial Corp. of NJ 0.20 1.01 15.87
FFHH FSF Financial Corp. of MN 0.50 2.94 NM
FOBC Fed One Bancorp of Wheeling WV 0.58 3.14 61.05
FFRV Fid. Fin. Bkshrs. Corp. of VA(8) 0.20 0.71 21.74
FBCI Fidelity Bancorp of Chicago IL 0.32 1.62 41.56
FSBI Fidelity Bancorp, Inc. of PA 0.36 1.55 37.89
FFFL Fidelity FSB, MHC of FL (47.4) 0.80 4.27 NM
FFED Fidelity Fed. Bancorp of IN 0.40 4.44 NM
FFOH Fidelity Financial of OH 0.20 1.62 NM
FIBC Financial Bancorp of NY 0.40 2.24 55.56
FBSI First Bancshares of MO 0.20 1.04 19.80
FBBC First Bell Bancorp of PA 0.40 2.48 40.40
FBER First Bergen Bancorp of NJ 0.12 0.82 NM
FCIT First Cit. Fin. Corp of MD 0.00 0.00 0.00
FSTC First Citizens Corp of GA 0.44 2.00 18.72
FFBA First Colorado Bancorp of Co 0.36 2.10 41.38
FDEF First Defiance Fin. Corp. of OH 0.32 2.45 62.75
FESX First Essex Bancorp of MA* 0.48 3.01 39.02
FFES First FS&LA of E. Hartford CT 0.60 2.35 39.22
FSSB First FS&LA of San Bern. CA 0.00 0.00 NM
FFSX First FS&LA. MHC of IA (46.0) 0.72 2.38 NM
FFSW First Fed Fin. Serv. of OH 0.48 1.28 19.05
BDJI First Fed. Bancorp. of MN 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 0.20 1.06 34.48
FFEC First Fed. Bancshares of WI(8) 0.28 1.50 41.79
FTFC First Fed. Capital Corp. of WI 0.64 2.26 41.03
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 28, 1997
Key Financial Ratios
----------------------------------------------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- ---------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
--------------------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FFKY First Fed. Fin. Corp. of KY 13.62 12.76 1.23 8.80 4.95 1.44 10.32
FFBZ First Federal Bancorp of OH 7.58 7.57 0.78 10.14 5.09 1.05 13.67
FFWM First Fin. Corp of Western MD(8) 11.68 11.68 0.95 7.82 4.59 1.27 10.52
FFCH First Fin. Holdings Inc. of SC 6.08 6.08 0.52 8.22 4.46 0.82 12.89
FFBI First Financial Bancorp of IL 7.73 7.73 0.12 1.27 1.33 0.37 4.03
FFHC First Financial Corp. of WI 7.20 6.98 0.89 12.41 5.05 1.26 17.46
FFHS First Franklin Corp. of OH 9.05 8.97 0.28 2.99 3.10 0.61 6.54
FGHC First Georgia Hold. Corp of GA 8.29 7.39 0.87 10.77 5.93 0.87 10.77
FSPG First Home Bancorp of NJ 6.46 6.31 0.91 14.08 8.32 1.21 18.65
FFSL First Independence Corp. of KS 11.00 11.00 0.58 4.79 4.89 0.85 7.01
FISB First Indiana Corp. of IN 9.27 9.14 0.92 10.20 5.84 1.02 11.32
FKFS First Keystone Fin. Corp of PA 7.50 7.50 0.47 5.84 4.88 0.74 9.17
FLKY First Lancaster Bncshrs of KY 37.13 37.13 0.98 1.94 2.38 1.26 2.50
FLFC First Liberty Fin. Corp. of GA 6.90 5.84 0.84 12.45 5.86 0.70 10.42
CASH First Midwest Fin. Corp. of IA 11.14 9.83 0.74 6.08 4.96 0.98 8.05
FMBD First Mutual Bancorp of IL 19.93 19.93 0.46 1.90 2.19 0.72 2.99
FMSB First Mutual SB of Bellevue WA* 6.61 6.61 1.02 15.36 7.95 0.98 14.77
FNGB First Northern Cap. Corp of WI 11.41 11.41 0.56 4.62 4.03 0.85 7.03
FFPB First Palm Beach Bancorp of FL 7.08 6.89 0.04 0.50 0.37 0.12 1.51
FSLA First SB SLA MHC of NJ (47.5) 9.26 8.11 0.47 5.03 2.90 0.85 9.02
FSNJ First SB of NJ, MHC (45.9)(8) 7.53 7.53 0.19 2.28 1.62 0.43 5.10
SOPN First SB, SSB, Moore Co. of NC 25.01 25.01 1.33 5.18 4.82 1.63 6.34
FWWB First Savings Bancorp of WA* 15.77 14.48 1.01 5.46 3.44 1.01 5.46
SHEN First Shenango Bancorp of PA 12.01 12.01 0.75 5.68 5.11 1.02 7.71
FSFC First So.east Fin. Corp. of SC 10.35 10.35 -0.01 -0.09 -0.09 0.88 6.18
FFDP FirstFed Bancshares of IL 9.23 8.79 0.26 2.95 2.97 0.32 3.57
FLAG Flag Financial Corp of GA 8.80 8.80 -0.07 -0.77 -0.63 0.11 1.15
FFIC Flushing Fin. Corp. of NY* 17.20 17.20 0.89 4.87 4.24 0.90 4.93
FBHC Fort Bend Holding Corp. of TX 6.43 5.95 0.24 3.48 3.09 0.55 8.11
FTSB Fort Thomas Fin. Corp. of KY 17.23 17.23 0.51 2.36 2.42 0.78 3.58
FKKY Frankfort First Bancorp of KY 26.30 26.30 0.81 2.52 3.28 1.09 3.39
FTNB Fulton Bancorp of MO 24.39 24.39 0.58 4.24 1.62 0.91 6.65
GFSB GFS Bancorp of Grinnell IA 11.47 11.47 0.96 8.11 7.19 1.23 10.45
GUPB GFSB Bancorp of Gallup NM 18.50 18.50 0.81 3.56 3.82 1.03 4.53
GWBC Gateway Bancorp of KY 25.07 25.07 0.83 3.27 3.93 1.15 4.49
GBCI Glacier Bancorp of MT 9.45 9.44 1.37 14.32 6.51 1.54 16.10
GLBK Glendale Co-op. Bank of MA* 15.85 15.85 0.79 4.97 4.34 0.66 4.16
GFCO Glenway Financial Corp. of OH 9.28 9.10 0.25 2.66 2.84 0.60 6.31
GTPS Great American Bancorp of IL 27.85 27.85 0.69 2.42 2.65 0.68 2.36
GTFN Great Financial Corp. of KY 9.68 9.29 0.72 6.97 4.23 0.71 6.82
GSBC Great Southern Bancorp of MO 10.12 10.12 1.36 13.46 6.37 1.54 15.31
GDVS Greater DV SB,MHC of PA (19.9)* 11.76 11.76 -0.08 -0.70 -0.55 0.22 1.85
GRTR Greater New York SB of NY* 5.97 5.97 0.71 12.35 8.51 0.37 6.45
GSFC Green Street Fin. Corp. of NC 35.29 35.29 1.18 5.35 2.63 1.48 6.68
GROV GroveBank for Savings of MA(8)* 6.50 6.49 0.90 14.23 6.66 0.84 13.34
GSLC Guaranty Svgs & Loan FA of VA 5.50 5.50 0.44 7.17 5.16 0.52 8.49
GFED Guarnty FS&LA,MHC of MO (31.0) 13.96 13.96 0.76 5.28 3.83 0.64 4.45
HEMT HF Bancorp of Hemet CA 9.81 0.00 -0.31 -2.63 -2.69 -2.27 -19.11
HFFC HF Financial Corp. of SD 9.26 9.23 0.61 6.69 5.85 0.79 8.63
HFNC HFNC Financial Corp. of NC 27.88 27.88 1.13 3.83 2.59 1.38 4.67
HMNF HMN Financial, Inc. of MN 14.80 14.80 0.77 4.89 4.15 0.93 5.85
HALL Hallmark Capital Corp. of WI 7.08 7.08 0.43 5.82 5.81 0.58 7.79
HARB Harbor FSB, MHC of FL (46.0) 8.27 7.94 0.91 10.75 4.88 1.21 14.28
HRBF Harbor Federal Bancorp of MD 12.89 12.89 0.34 2.37 2.22 0.61 4.24
HFSA Hardin Bancorp of Hardin MO 14.76 14.76 0.49 2.83 3.16 0.82 4.72
HARL Harleysville SA of PA 6.29 6.29 0.61 9.29 5.21 0.94 14.19
<CAPTION>
Asset Quality Ratios Pricing Ratios
----------------------- ----------------------------------------
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Financial Institution Assets NPAs Loans Earning Book Assets Book Earnings
--------------------- ------- ------- ------- ------- ------- ------- ------- --------
(%) (%) (%) (X) (%) (%) (%) (x)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FFKY First Fed. Fin. Corp. of KY 0.55 90.93 0.57 20.19 175.73 23.93 187.50 17.21
FFBZ First Federal Bancorp of OH 0.56 156.26 1.00 19.66 191.89 14.55 192.10 14.58
FFWM First Fin. Corp of Western MD(8) 1.75 129.77 2.82 21.79 165.90 19.38 165.90 16.21
FFCH First Fin. Holdings Inc. of SC 1.28 56.63 0.87 22.40 183.25 11.15 183.25 14.29
FFBI First Financial Bancorp of IL 0.43 106.97 0.61 NM 99.28 7.68 99.28 23.57
FFHC First Financial Corp. of WI 0.29 147.30 0.67 19.81 239.91 17.27 247.46 14.08
FFHS First Franklin Corp. of OH 0.52 81.80 0.62 NM 97.95 8.87 98.82 14.69
FGHC First Georgia Hold. Corp of GA 1.39 46.70 0.77 16.87 172.40 14.30 193.50 16.87
FSPG First Home Bancorp of NJ 0.78 98.58 1.42 12.02 162.39 10.49 166.11 9.07
FFSL First Independence Corp. of KS 0.57 112.38 1.01 20.47 104.86 11.53 104.86 13.96
FISB First Indiana Corp. of IN 1.76 63.33 1.34 17.12 169.16 15.67 171.42 15.44
FKFS First Keystone Fin. Corp of PA 2.35 37.98 1.52 20.48 119.25 8.94 119.25 13.03
FLKY First Lancaster Bncshrs of KY 0.83 31.75 0.31 NM 112.12 41.63 112.12 NM
FLFC First Liberty Fin. Corp. of GA 1.11 72.71 1.14 17.05 229.41 15.83 NM 20.37
CASH First Midwest Fin. Corp. of IA 0.75 80.99 0.96 20.18 112.27 12.51 127.28 15.23
FMBD First Mutual Bancorp of IL 0.14 275.66 0.46 NM 95.64 19.06 95.64 29.09
FMSB First Mutual SB of Bellevue WA* 0.12 723.09 1.07 12.58 180.72 11.94 180.72 13.09
FNGB First Northern Cap. Corp of WI 0.12 377.58 0.51 24.83 116.30 13.27 116.30 16.33
FFPB First Palm Beach Bancorp of FL 1.08 73.82 1.16 NM 141.01 9.98 144.89 NM
FSLA First SB SLA MHC of NJ (47.5) 0.75 70.10 1.01 NM 173.17 16.03 197.73 19.25
FSNJ First SB of NJ, MHC (45.9)(8) 0.91 51.83 1.27 NM 146.88 11.07 146.88 27.65
SOPN First SB, SSB, Moore Co. of NC 0.10 224.72 0.33 20.74 108.15 27.05 108.15 16.96
FWWB First Savings Bancorp of WA* 0.21 311.17 1.08 29.04 139.77 22.04 152.27 29.04
SHEN First Shenango Bancorp of PA 0.50 140.23 1.04 19.57 112.77 13.54 112.77 14.43
FSFC First So.east Fin. Corp. of SC 0.07 577.21 0.50 NM 139.79 14.47 139.79 15.81
FFDP FirstFed Bancshares of IL 0.14 167.24 0.37 NM 107.30 9.90 112.69 27.78
FLAG Flag Financial Corp of GA 3.67 52.67 2.77 NM 128.92 11.35 128.92 NM
FFIC Flushing Fin. Corp. of NY* 0.71 95.82 1.46 23.60 118.32 20.34 118.32 23.32
FBHC Fort Bend Holding Corp. of TX 1.31 43.41 1.29 NM 111.03 7.14 120.05 13.86
FTSB Fort Thomas Fin. Corp. of KY 1.34 31.02 0.47 NM 120.36 20.73 120.36 27.27
FKKY Frankfort First Bancorp of KY 0.16 48.04 0.09 NM 99.09 26.06 99.09 22.67
FTNB Fulton Bancorp of MO NA NA NA NM 129.92 31.69 129.92 NM
GFSB GFS Bancorp of Grinnell IA 1.63 49.75 0.92 13.91 110.70 12.70 110.70 10.80
GUPB GFSB Bancorp of Gallup NM 0.25 159.18 0.75 26.21 99.27 18.37 99.27 20.57
GWBC Gateway Bancorp of KY 0.45 25.80 0.44 25.45 88.02 22.06 88.02 18.51
GBCI Glacier Bancorp of MT 0.29 173.40 0.70 15.37 214.47 20.27 214.66 13.67
GLBK Glendale Co-op. Bank of MA* 0.30 96.33 0.70 23.06 112.82 17.89 112.82 27.58
GFCO Glenway Financial Corp. of OH 0.41 52.07 0.27 NM 93.51 8.68 95.40 14.82
GTPS Great American Bancorp of IL 0.13 192.81 0.35 NM 92.86 25.86 92.86 NM
GTFN Great Financial Corp. of KY 3.23 14.46 0.65 23.64 164.17 15.89 171.05 24.16
GSBC Great Southern Bancorp of MO 1.83 121.83 2.59 15.71 210.32 21.29 210.32 13.81
GDVS Greater DV SB,MHC of PA (19.9)* 2.91 42.41 2.06 NM 129.56 15.23 129.56 NM
GRTR Greater New York SB of NY* 7.90 9.80 1.94 11.75 139.13 8.31 139.13 22.50
GSFC Green Street Fin. Corp. of NC 0.20 68.31 0.19 NM 126.12 44.51 126.12 NM
GROV GroveBank for Savings of MA(8)* 0.58 100.03 0.77 15.02 200.79 13.04 200.87 16.02
GSLC Guaranty Svgs & Loan FA of VA 2.06 35.12 0.96 19.39 138.48 7.62 138.48 16.38
GFED Guarnty FS&LA,MHC of MO (31.0) 1.57 73.15 1.47 26.11 137.75 19.23 137.75 NM
HEMT HF Bancorp of Hemet CA 0.98 62.27 1.37 NM 103.56 10.16 NM NM
HFFC HF Financial Corp. of SD 0.59 127.45 0.96 17.11 113.97 10.56 114.30 13.27
HFNC HFNC Financial Corp. of NC 1.15 80.19 1.39 NM 145.35 40.52 145.35 NM
HMNF HMN Financial, Inc. of MN 0.08 531.92 0.65 24.08 124.84 18.48 124.84 20.10
HALL Hallmark Capital Corp. of WI 0.05 715.63 0.56 17.20 96.35 6.82 96.35 12.84
HARB Harbor FSB, MHC of FL (46.0) 0.50 208.24 1.41 20.49 211.27 17.47 220.07 15.43
HRBF Harbor Federal Bancorp of MD 0.43 41.21 0.28 NM 106.47 13.73 106.47 25.18
HFSA Hardin Bancorp of Hardin MO 0.19 90.18 0.29 NM 95.06 14.03 95.06 19.00
HARL Harleysville SA of PA 0.09 602.74 0.75 19.20 171.73 10.80 171.73 12.57
<CAPTION>
Dividend Data(6)
-----------------------
Ind. Divi-
Div./ dend Payout
Financial Institution Share Yield Ratio(7)
--------------------- ------- ------- -------
($) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C>
FFKY First Fed. Fin. Corp. of KY 0.52 2.48 50.00
FFBZ First Federal Bancorp of OH 0.24 1.37 26.97
FFWM First Fin. Corp of Western MD(8) 0.48 1.49 32.43
FFCH First Fin. Holdings Inc. of SC 0.72 2.57 57.60
FFBI First Financial Bancorp of IL 0.00 0.00 0.00
FFHC First Financial Corp. of WI 0.60 2.24 44.44
FFHS First Franklin Corp. of OH 0.32 1.91 61.54
FGHC First Georgia Hold. Corp of GA 0.08 0.79 13.33
FSPG First Home Bancorp of NJ 0.40 2.12 25.48
FFSL First Independence Corp. of KS 0.25 2.11 43.10
FISB First Indiana Corp. of IN 0.60 2.12 36.36
FKFS First Keystone Fin. Corp of PA 0.20 0.93 19.05
FLKY First Lancaster Bncshrs of KY 0.00 0.00 0.00
FLFC First Liberty Fin. Corp. of GA 0.40 1.82 31.01
CASH First Midwest Fin. Corp. of IA 0.36 2.15 43.37
FMBD First Mutual Bancorp of IL 0.32 2.00 NM
FMSB First Mutual SB of Bellevue WA* 0.20 1.03 12.90
FNGB First Northern Cap. Corp of WI 0.64 3.44 NM
FFPB First Palm Beach Bancorp of FL 0.60 2.03 NM
FSLA First SB SLA MHC of NJ (47.5) 0.40 1.84 63.49
FSNJ First SB of NJ, MHC (45.9)(8) 0.50 2.13 NM
SOPN First SB, SSB, Moore Co. of NC 0.68 3.49 72.34
FWWB First Savings Bancorp of WA* 0.20 1.01 29.41
SHEN First Shenango Bancorp of PA 0.48 1.90 37.21
FSFC First So.east Fin. Corp. of SC 0.20 1.86 NM
FFDP FirstFed Bancshares of IL 0.40 2.29 NM
FLAG Flag Financial Corp of GA 0.34 2.67 NM
FFIC Flushing Fin. Corp. of NY* 0.16 0.84 19.75
FBHC Fort Bend Holding Corp. of TX 0.28 1.15 37.33
FTSB Fort Thomas Fin. Corp. of KY 0.25 2.08 NM
FKKY Frankfort First Bancorp of KY 0.36 3.69 NM
FTNB Fulton Bancorp of MO 0.20 1.08 66.67
GFSB GFS Bancorp of Grinnell IA 0.40 1.80 25.00
GUPB GFSB Bancorp of Gallup NM 0.40 2.46 64.52
GWBC Gateway Bancorp of KY 0.40 2.81 71.43
GBCI Glacier Bancorp of MT 0.64 2.59 39.75
GLBK Glendale Co-op. Bank of MA* 0.00 0.00 0.00
GFCO Glenway Financial Corp. of OH 0.68 3.28 NM
GTPS Great American Bancorp of IL 0.40 2.52 NM
GTFN Great Financial Corp. of KY 0.48 1.47 34.78
GSBC Great Southern Bancorp of MO 0.40 2.34 36.70
GDVS Greater DV SB,MHC of PA (19.9)* 0.36 3.27 NM
GRTR Greater New York SB of NY* 0.20 1.27 14.93
GSFC Green Street Fin. Corp. of NC 0.40 2.19 NM
GROV GroveBank for Savings of MA(8)* 0.72 1.42 21.36
GSLC Guaranty Svgs & Loan FA of VA 0.10 1.05 20.41
GFED Guarnty FS&LA,MHC of MO (31.0) 0.36 3.06 NM
HEMT HF Bancorp of Hemet CA 0.00 0.00 NM
HFFC HF Financial Corp. of SD 0.36 1.85 31.58
HFNC HFNC Financial Corp. of NC 0.28 1.32 50.91
HMNF HMN Financial, Inc. of MN 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 0.00 0.00 0.00
HARB Harbor FSB, MHC of FL (46.0) 1.40 3.73 NM
HRBF Harbor Federal Bancorp of MD 0.40 2.34 NM
HFSA Hardin Bancorp of Hardin MO 0.40 2.81 NM
HARL Harleysville SA of PA 0.40 1.86 35.71
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 28, 1997
Key Financial Ratios
----------------------------------------------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- ---------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
--------------------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
HARS Harris SB, MHC of PA (24.2) 8.56 7.22 0.02 0.23 0.14 0.49 4.58
HFFB Harrodsburg 1st Fin Bcrp of KY 27.74 27.74 1.01 3.58 3.38 1.33 4.71
HHFC Harvest Home Fin. Corp. of OH 12.35 12.35 0.18 1.07 1.33 0.52 3.13
HAVN Haven Bancorp of Woodhaven NY 6.00 5.97 0.57 9.09 5.98 0.86 13.75
HVFD Haverfield Corp. of OH 8.18 8.17 0.44 5.36 3.85 0.98 12.00
HTHR Hawthorne Fin. Corp. of CA 3.85 3.85 0.90 23.39 24.18 0.57 14.69
HBNK Highland Federal Bank of CA 7.12 7.12 0.14 1.94 1.21 0.52 6.94
HIFS Hingham Inst. for Sav. of MA* 9.53 9.53 1.09 11.13 8.49 1.09 11.13
HBEI Home Bancorp of Elgin IL 26.71 26.71 0.13 1.00 0.40 0.68 5.18
HBFW Home Bancorp of Fort Wayne IN 14.48 14.48 0.52 3.21 3.22 0.87 5.34
HBBI Home Building Bancorp of IN 12.49 12.49 -0.35 -2.61 -2.33 -0.01 -0.11
HCFC Home City Fin. Corp. of OH 19.95 19.95 0.85 4.24 4.45 1.10 5.54
HOMF Home Fed Bancorp of Seymour IN 8.16 7.85 0.98 12.05 6.57 1.16 14.27
HWEN Home Financial Bancorp of IN 20.03 20.03 0.50 5.11 2.57 0.72 7.39
HPBC Home Port Bancorp, Inc. of MA* 10.41 10.41 1.73 15.77 8.63 1.74 15.87
HMCI Homecorp, Inc. of Rockford IL 6.00 6.00 0.10 1.59 1.41 0.33 5.44
LOAN Horizon Bancorp, Inc of TX(8)* 7.94 7.70 1.06 12.58 4.25 0.98 11.59
HZFS Horizon Fin'l. Services of IA 10.73 10.73 0.13 1.15 1.35 0.33 2.86
HRZB Horizon Financial Corp. of WA* 15.94 15.94 1.51 9.40 7.67 1.47 9.15
IBSF IBS Financial Corp. of NJ 19.44 19.44 0.62 3.00 2.63 0.99 4.83
ISBF ISB Financial Corp. of LA 16.38 15.88 0.81 4.38 2.91 1.09 5.94
ITLA Imperial Thrift & Loan of CA* 11.76 11.76 1.43 14.06 7.15 1.43 14.06
IFSB Independence FSB of DC 6.73 5.82 0.13 1.97 2.97 0.20 2.96
INCB Indiana Comm. Bank, SB of IN 12.30 12.30 0.15 1.06 0.90 0.48 3.41
IFSL Indiana Federal Corp. of IN(8) 8.65 8.07 0.68 7.23 4.08 0.96 10.14
INBI Industrial Bancorp of OH 19.01 19.01 0.75 3.70 3.49 1.45 7.15
IWBK Interwest SB of Oak Harbor WA 6.82 6.65 0.83 12.18 4.43 1.17 17.12
IPSW Ipswich SB of Ipswich MA* 6.20 6.20 1.22 20.19 9.59 0.99 16.31
JSBF JSB Financial, Inc. of NY 21.60 21.60 1.66 7.56 6.53 1.66 7.56
JXVL Jacksonville Bancorp of TX 16.25 16.25 0.68 4.82 3.54 1.02 7.23
JXSB Jcksnville SB,MHC of IL (44.6) 11.52 11.49 0.19 1.60 1.27 0.47 3.96
JSBA Jefferson Svgs Bancorp of MO 7.24 5.97 0.23 3.21 2.18 0.61 8.55
JOAC Joachim Bancorp of MO 29.55 29.55 0.41 1.53 1.31 0.71 2.66
KSAV KS Bancorp of Kenly NC 13.61 13.60 0.88 6.02 6.33 1.17 7.99
KSBK KSB Bancorp of Kingfield ME(8)* 6.82 6.32 0.89 13.40 8.12 0.89 13.40
KFBI Klamath First Bancorp of OR 22.66 22.66 0.91 3.62 3.74 1.35 5.36
LBFI L&B Financial of S. Springs TX(8) 17.42 17.42 0.56 3.25 2.83 0.76 4.39
LSBI LSB Fin. Corp. of Lafayette IN 9.40 9.40 0.50 4.76 4.62 0.46 4.33
LVSB Lakeview SB of Paterson NJ 10.24 8.16 1.24 11.79 7.26 0.52 4.98
LARK Landmark Bancshares of KS 14.74 14.74 0.79 4.92 4.72 0.97 6.03
LARL Laurel Capital Group of PA 10.71 10.71 1.11 10.51 6.67 1.43 13.48
LSBX Lawrence Savings Bank of MA* 8.59 8.59 1.60 20.13 12.79 1.60 20.13
LFED Leeds FSB, MHC of MD (36.2) 16.10 16.10 0.76 4.69 3.23 1.10 6.76
LXMO Lexington B&L Fin. Corp. of MO 30.42 30.42 0.83 3.84 2.46 1.15 5.33
LIFB Life Bancorp of Norfolk VA 10.63 10.29 0.67 5.64 4.41 0.90 7.52
LFBI Little Falls Bancorp of NJ 14.88 13.71 0.17 1.44 1.21 0.45 3.86
LOGN Logansport Fin. Corp. of IN 19.86 19.86 1.19 4.98 5.62 1.51 6.34
LONF London Financial Corp. of OH 21.42 21.42 0.75 3.94 3.56 1.10 5.75
LISB Long Island Bancorp of NY 9.68 9.68 0.64 6.17 3.60 0.77 7.48
MAFB MAF Bancorp of IL 7.76 6.70 0.68 9.51 4.26 1.02 14.34
MBLF MBLA Financial Corp. of MO(8) 13.61 13.61 0.66 4.84 5.07 0.84 6.12
MFBC MFB Corp. of Mishawaka IN 15.39 15.39 0.52 2.94 3.22 0.82 4.59
MLBC ML Bancorp of Villanova PA 7.53 7.34 0.72 9.34 6.65 0.65 8.43
MBB MSB Bancorp of Middletown NY* 6.55 2.57 0.18 2.32 2.32 0.20 2.58
MSBF MSB Financial Corp. of MI 19.09 19.09 1.29 6.04 5.47 1.59 7.46
MGNL Magna Bancorp of MS 9.71 9.32 1.36 13.93 6.83 1.67 17.08
<CAPTION>
Asset Quality Ratios Pricing Ratios
----------------------- -----------------------------------------
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Financial Institution Assets NPAs Loans Earning Book Assets Book Earnings
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (X) (%) (%) (%) (x)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HARS Harris SB, MHC of PA (24.2) 0.75 63.17 0.84 NM 164.41 14.07 194.95 NM
HFFB Harrodsburg 1st Fin Bcrp of KY 0.79 34.30 0.38 29.63 107.45 29.81 107.45 22.54
HHFC Harvest Home Fin. Corp. of OH 0.21 67.68 0.26 NM 100.96 12.47 100.96 25.61
HAVN Haven Bancorp of Woodhaven NY 1.01 64.99 1.38 16.71 153.08 9.19 154.01 11.05
HVFD Haverfield Corp. of OH 0.28 276.81 0.94 25.95 137.77 11.26 137.95 11.58
HTHR Hawthorne Fin. Corp. of CA 10.58 17.32 2.16 4.14 89.80 3.45 89.80 6.59
HBNK Highland Federal Bank of CA 3.30 46.96 2.00 NM 158.10 11.25 158.10 23.08
HIFS Hingham Inst. for Sav. of MA* 0.78 88.21 0.90 11.78 125.73 11.98 125.73 11.78
HBEI Home Bancorp of Elgin IL 0.49 50.03 0.35 NM 107.08 28.60 107.08 NM
HBFW Home Bancorp of Fort Wayne IN 0.07 600.00 0.55 NM 109.31 15.83 109.31 18.69
HBBI Home Building Bancorp of IN 0.35 51.68 0.27 NM 117.71 14.70 117.71 NM
HCFC Home City Fin. Corp. of OH 0.43 145.20 0.75 22.46 95.32 19.01 95.32 17.21
HOMF Home Fed Bancorp of Seymour IN 0.46 108.25 0.58 15.22 176.83 14.42 183.50 12.85
HWEN Home Financial Bancorp of IN 0.96 44.47 0.58 NM 91.44 18.31 91.44 26.92
HPBC Home Port Bancorp, Inc. of MA* 0.40 307.31 1.54 11.59 178.24 18.55 178.24 11.52
HMCI Homecorp, Inc. of Rockford IL 3.64 11.70 0.53 NM 113.32 6.80 113.32 20.71
LOAN Horizon Bancorp, Inc of TX(8)* 0.38 135.94 0.72 23.53 NM 22.36 NM 25.53
HZFS Horizon Fin'l. Services of IA 1.12 45.26 0.76 NM 88.04 9.45 88.04 29.82
HRZB Horizon Financial Corp. of WA* 0.01 NA 0.81 13.04 120.58 19.22 120.58 13.39
IBSF IBS Financial Corp. of NJ 0.11 123.82 0.55 NM 120.52 23.43 120.52 23.65
ISBF ISB Financial Corp. of LA NA NA 1.03 NM 157.69 25.83 162.59 25.37
ITLA Imperial Thrift & Loan of CA* 2.24 61.01 1.64 13.99 148.01 17.41 148.01 13.99
IFSB Independence FSB of DC 2.40 9.37 0.38 NM 67.15 4.52 77.57 22.44
INCB Indiana Comm. Bank, SB of IN NA NA NA NM 138.43 17.03 138.43 NM
IFSL Indiana Federal Corp. of IN(8) 1.32 64.27 1.12 24.53 177.73 15.37 190.49 17.50
INBI Industrial Bancorp of OH 0.46 101.75 0.54 28.68 111.88 21.27 111.88 14.85
IWBK Interwest SB of Oak Harbor WA 0.54 87.60 0.82 22.58 241.21 16.44 247.18 16.06
IPSW Ipswich SB of Ipswich MA* 1.81 47.96 1.19 10.43 189.99 11.77 189.99 12.91
JSBF JSB Financial, Inc. of NY 1.37 24.80 0.61 15.31 118.48 25.59 118.48 15.31
JXVL Jacksonville Bancorp of TX 1.03 48.82 0.69 28.24 113.55 18.47 113.55 18.83
JXSB Jcksnville SB,MHC of IL (44.6) 0.37 131.69 0.59 NM 126.83 14.60 127.12 NM
JSBA Jefferson Svgs Bancorp of MO 1.02 48.29 0.67 NM 145.93 10.56 177.02 17.27
JOAC Joachim Bancorp of MO 0.33 63.87 0.32 NM 103.20 30.50 103.20 NM
KSAV KS Bancorp of Kenly NC 0.55 55.35 0.37 15.80 95.41 12.98 95.50 11.90
KSBK KSB Bancorp of Kingfield ME(8)* 1.38 47.56 0.90 12.32 154.55 10.54 166.91 12.32
KFBI Klamath First Bancorp of OR 0.04 356.92 0.20 26.72 101.64 23.03 101.64 18.02
LBFI L&B Financial of S. Springs TX(8) 0.51 103.00 1.08 NM 114.94 20.02 114.94 26.09
LSBI LSB Fin. Corp. of Lafayette IN 1.37 70.21 1.09 21.67 107.08 10.07 107.08 23.78
LVSB Lakeview SB of Paterson NJ 1.00 67.13 1.85 13.78 159.22 16.31 199.87 NM
LARK Landmark Bancshares of KS 0.15 233.44 0.57 21.20 105.89 15.61 105.89 17.31
LARL Laurel Capital Group of PA 0.64 148.64 1.27 15.00 151.99 16.27 151.99 11.69
LSBX Lawrence Savings Bank of MA* 0.85 129.65 2.42 7.82 140.85 12.10 140.85 7.82
LFED Leeds FSB, MHC of MD (36.2) 0.02 942.85 0.25 NM 142.58 22.95 142.58 21.47
LXMO Lexington B&L Fin. Corp. of MO 1.26 25.84 0.44 NM 98.58 29.99 98.58 29.24
LIFB Life Bancorp of Norfolk VA 0.38 197.80 1.76 22.70 128.83 13.70 133.09 17.03
LFBI Little Falls Bancorp of NJ 1.18 28.24 0.84 NM 91.70 13.65 99.55 NM
LOGN Logansport Fin. Corp. of IN 0.36 81.47 0.42 17.81 105.86 21.02 105.86 13.98
LONF London Financial Corp. of OH 0.71 71.65 0.69 28.12 96.76 20.73 96.76 19.24
LISB Long Island Bancorp of NY 1.36 46.38 1.08 27.74 172.57 16.70 172.57 22.89
MAFB MAF Bancorp of IL 0.47 119.22 0.74 23.49 170.07 13.19 197.04 15.57
MBLF MBLA Financial Corp. of MO(8) 0.19 127.59 0.50 19.73 94.77 12.90 94.77 15.60
MFBC MFB Corp. of Mishawaka IN 0.09 171.72 0.22 NM 99.07 15.25 99.07 19.85
MLBC ML Bancorp of Villanova PA 0.61 129.89 1.81 15.04 140.50 10.57 144.07 16.67
MBB MSB Bancorp of Middletown NY* 0.78 26.77 0.54 NM 96.99 6.35 246.75 NM
MSBF MSB Financial Corp. of MI 0.78 72.91 0.61 18.28 110.97 21.18 110.97 14.80
MGNL Magna Bancorp of MS 3.81 19.52 1.09 14.65 197.78 19.20 206.04 11.94
<CAPTION>
Dividend Data(6)
-----------------------
Ind. Divi-
Div./ dend Payout
Financial Institution Share Yield Ratio(7)
--------------------- ------- ------- -------
($) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C>
HARS Harris SB, MHC of PA (24.2) 0.58 2.68 NM
HFFB Harrodsburg 1st Fin Bcrp of KY 0.40 2.50 74.07
HHFC Harvest Home Fin. Corp. of OH 0.40 3.81 NM
HAVN Haven Bancorp of Woodhaven NY 0.60 1.80 30.15
HVFD Haverfield Corp. of OH 0.56 2.73 70.89
HTHR Hawthorne Fin. Corp. of CA 0.00 0.00 0.00
HBNK Highland Federal Bank of CA 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA* 0.36 1.93 22.78
HBEI Home Bancorp of Elgin IL 0.00 0.00 0.00
HBFW Home Bancorp of Fort Wayne IN 0.20 1.04 32.26
HBBI Home Building Bancorp of IN 0.30 1.43 NM
HCFC Home City Fin. Corp. of OH 0.00 0.00 0.00
HOMF Home Fed Bancorp of Seymour IN 0.40 1.47 22.35
HWEN Home Financial Bancorp of IN 0.20 1.43 55.56
HPBC Home Port Bancorp, Inc. of MA* 0.80 4.21 48.78
HMCI Homecorp, Inc. of Rockford IL 0.00 0.00 0.00
LOAN Horizon Bancorp, Inc of TX(8)* 0.16 0.67 15.69
HZFS Horizon Fin'l. Services of IA 0.32 1.88 NM
HRZB Horizon Financial Corp. of WA* 0.40 2.67 34.78
IBSF IBS Financial Corp. of NJ 0.32 1.83 69.57
ISBF ISB Financial Corp. of LA 0.34 1.35 46.58
ITLA Imperial Thrift & Loan of CA* 0.00 0.00 0.00
IFSB Independence FSB of DC 0.22 2.51 NM
INCB Indiana Comm. Bank, SB of IN 0.36 2.15 NM
IFSL Indiana Federal Corp. of IN(8) 0.72 2.74 67.29
INBI Industrial Bancorp of OH 0.40 3.17 NM
IWBK Interwest SB of Oak Harbor WA 0.56 1.60 36.13
IPSW Ipswich SB of Ipswich MA* 0.20 1.27 13.25
JSBF JSB Financial, Inc. of NY 1.40 3.52 53.85
JXVL Jacksonville Bancorp of TX 0.50 3.28 NM
JXSB Jcksnville SB,MHC of IL (44.6) 0.40 2.42 NM
JSBA Jefferson Svgs Bancorp of MO 0.40 1.40 64.52
JOAC Joachim Bancorp of MO 0.50 3.45 NM
KSAV KS Bancorp of Kenly NC 0.60 3.04 48.00
KSBK KSB Bancorp of Kingfield ME(8)* 0.20 0.59 7.25
KFBI Klamath First Bancorp of OR 0.28 1.81 48.28
LBFI L&B Financial of S. Springs TX(8) 0.40 2.22 NM
LSBI LSB Fin. Corp. of Lafayette IN 0.00 0.00 0.00
LVSB Lakeview SB of Paterson NJ 0.25 0.81 11.11
LARK Landmark Bancshares of KS 0.40 2.12 44.94
LARL Laurel Capital Group of PA 0.44 2.02 30.34
LSBX Lawrence Savings Bank of MA* 0.00 0.00 0.00
LFED Leeds FSB, MHC of MD (36.2) 0.68 3.73 NM
LXMO Lexington B&L Fin. Corp. of MO 0.00 0.00 0.00
LIFB Life Bancorp of Norfolk VA 0.44 2.23 50.57
LFBI Little Falls Bancorp of NJ 0.10 0.75 62.50
LOGN Logansport Fin. Corp. of IN 0.40 3.08 54.79
LONF London Financial Corp. of OH 0.24 1.64 46.15
LISB Long Island Bancorp of NY 0.60 1.64 45.45
MAFB MAF Bancorp of IL 0.36 0.89 20.81
MBLF MBLA Financial Corp. of MO(8) 0.40 1.99 39.22
MFBC MFB Corp. of Mishawaka IN 0.32 1.66 51.61
MLBC ML Bancorp of Villanova PA 0.38 2.24 33.63
MBB MSB Bancorp of Middletown NY* 0.60 3.16 NM
MSBF MSB Financial Corp. of MI 0.50 2.30 42.02
MGNL Magna Bancorp of MS 0.60 3.20 46.88
</TABLE>
<PAGE>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 28, 1997
<TABLE>
<CAPTION>
Key Financial Ratios
----------------------------------------------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- ---------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
--------------------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
MARN Marion Capital Holdings of IN 22.74 22.74 1.15 4.90 5.18 1.42 6.06
MFCX Marshalltown Fin. Corp. of IA(8) 15.58 15.58 0.06 0.36 0.34 0.41 2.63
MFSL Maryland Fed. Bancorp of MD 8.39 8.25 0.79 9.61 7.54 0.55 6.74
MASB MassBank Corp. of Reading MA* 10.39 10.39 1.08 10.62 8.78 1.02 9.98
MFLR Mayflower Co-Op. Bank of MA* 9.86 9.67 0.92 9.28 6.57 0.88 8.88
MECH Mechanics SB of Hartford CT* 10.04 10.04 -0.34 -6.20 -2.59 -0.32 -5.92
MDBK Medford Savings Bank of MA* 8.90 8.21 1.05 11.73 8.00 1.02 11.47
MERI Meritrust FSB of Thibodaux LA 7.26 7.26 0.55 7.37 4.48 0.93 12.52
MWBX Metro West of MA* 7.50 7.50 1.33 17.67 9.00 1.36 18.05
MCBS Mid Continent Bancshares of KS 10.64 10.64 1.04 8.88 6.42 1.26 10.79
MIFC Mid Iowa Financial Corp. of IA 9.15 9.14 0.73 7.82 5.88 1.03 11.11
MCBN Mid-Coast Bancorp of ME 8.78 8.78 0.34 3.85 4.32 0.58 6.53
MIDC Midconn Bank of Kensington CT(8)* 9.72 8.19 0.51 5.39 3.94 0.64 6.75
MWBI Midwest Bancshares, Inc. of IA 7.04 7.04 0.46 6.68 6.35 0.77 11.07
MWFD Midwest Fed. Fin. Corp of WI 8.39 8.02 1.04 11.36 6.50 1.01 11.07
MFFC Milton Fed. Fin. Corp. of OH 15.42 15.42 0.62 3.29 3.56 0.78 4.16
MIVI Miss. View Hold. Co. of MN 18.33 18.33 0.80 4.19 4.37 1.08 5.67
MBSP Mitchell Bancorp of NC* 42.08 42.08 0.50 1.20 1.17 1.54 3.66
MBBC Monterey Bay Bancorp of CA 13.99 13.86 0.13 0.89 0.74 0.39 2.66
MSBK Mutual SB, FSB of Bay City MI 6.09 6.09 -0.02 -0.32 -0.44 -0.02 -0.43
NHTB NH Thrift Bancshares of NH 7.27 7.27 0.40 5.27 5.11 0.60 7.90
NSLB NS&L Bancorp of Neosho MO 19.71 19.71 0.56 2.44 2.65 0.79 3.46
NMSB Newmil Bancorp. of CT* 10.50 10.50 0.81 7.53 6.59 0.78 7.28
NASB North American SB of MO 7.19 6.93 1.13 15.81 9.28 1.17 16.41
NBSI North Bancshares of Chicago IL 15.13 15.13 0.43 2.62 2.61 0.65 3.96
FFFD North Central Bancshares of IA 28.33 28.33 1.52 6.32 5.44 1.79 7.46
NEBC Northeast Bancorp of ME* 7.05 5.96 0.44 5.86 5.67 0.35 4.74
NEIB Northeast Indiana Bncrp of IN 17.45 17.45 1.01 4.97 5.26 1.22 5.96
NWEQ Northwest Equity Corp. of WI 12.14 12.14 0.70 5.17 4.89 0.91 6.73
NWSB Northwest SB, MHC of PA (29.9) 9.99 9.52 0.72 6.94 3.64 1.04 10.04
NSSY Norwalk Savings Society of CT* 7.21 6.92 0.81 10.33 7.52 0.67 8.48
NSSB Norwich Financial Corp. of CT* 11.20 10.47 0.95 8.84 5.44 0.90 8.33
NTMG Nutmeg FS&LA of CT 5.37 5.37 0.32 5.67 5.43 0.33 5.81
OHSL OHSL Financial Corp. of OH 11.57 11.57 0.57 4.63 4.34 0.85 6.95
OSBF OSB Fin. Corp. of Oshkosh WI(8) 12.39 12.39 0.04 0.29 0.25 0.46 3.66
OCFC Ocean Fin. Corp. of NJ 20.73 20.73 -0.29 -2.66 -1.19 0.88 7.99
OFCP Ottawa Financial Corp. of MI 9.11 7.20 0.40 3.14 2.49 0.83 6.42
PFFB PFF Bancorp of Pomona CA 11.12 10.99 0.05 0.47 0.37 0.39 3.47
PSFI PS Financial of Chicago IL 42.11 42.11 2.11 5.01 5.16 2.11 5.01
PVFC PVF Capital Corp. of OH 6.84 6.84 0.99 14.81 8.55 1.31 19.64
PCCI Pacific Crest Capital of CA* 9.04 9.04 1.19 15.94 8.38 1.02 13.60
PALM Palfed, Inc. of Aiken SC 8.00 7.63 0.37 4.51 3.05 0.59 7.31
PBCI Pamrapo Bancorp, Inc. of NJ 14.74 14.63 0.81 5.27 4.73 1.17 7.63
PFED Park Bancorp of Chicago IL 23.51 23.51 0.50 3.51 1.89 0.81 5.69
PVSA Parkvale Financial Corp of PA 7.52 7.45 0.77 10.40 6.90 1.06 14.30
PBIX Patriot Bank Corp. of PA 10.50 10.50 0.40 2.96 1.98 0.67 4.97
PEEK Peekskill Fin. Corp. of NY 29.47 29.47 1.07 3.85 3.80 1.40 5.05
PFSB PennFed Fin. Services of NJ 7.56 6.14 0.55 6.47 4.95 0.83 9.84
PWBC PennFirst Bancorp of PA 6.98 6.33 0.42 5.50 5.41 0.64 8.36
PWBK Pennwood SB of PA* 20.02 20.02 0.33 3.41 1.67 0.83 8.52
PBKB People's SB of Brockton MA* 5.61 5.33 0.74 13.43 7.18 0.47 8.47
PFDC Peoples Bancorp of Auburn IN 15.34 15.34 1.11 7.27 6.51 1.47 9.59
PBCT Peoples Bank, MHC of CT (37.4)* 8.08 8.07 1.10 13.81 5.68 0.86 10.78
PFFC Peoples Fin. Corp. of OH 26.56 26.56 0.09 0.58 0.34 0.45 2.77
PHBK Peoples Heritage Fin Grp of ME* 8.46 7.61 1.19 14.00 4.91 1.28 15.09
PBNB Peoples Sav. Fin. Corp. of CT* 9.58 8.95 0.92 8.97 6.84 0.92 9.06
<CAPTION>
Asset Quality Ratios Pricing Ratios
----------------------- -----------------------------------------
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Financial Institution Assets NPAs Loans Earning Book Assets Book Earnings
--------------------- ------- ------- ------- ------- ------- ------- ------- --------
(%) (%) (%) (X) (%) (%) (%) (x)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
MARN Marion Capital Holdings of IN 0.95 121.70 1.37 19.32 98.02 22.29 98.02 15.63
MFCX Marshalltown Fin. Corp. of IA(8) NA NA 0.19 NM 106.64 16.61 106.64 NM
MFSL Maryland Fed. Bancorp of MD 0.48 84.24 0.46 13.26 123.22 10.34 125.21 18.91
MASB MassBank Corp. of Reading MA* 0.27 100.30 0.94 11.40 116.52 12.10 116.52 12.12
MFLR Mayflower Co-Op. Bank of MA* 1.13 82.25 1.44 15.22 135.66 13.38 138.34 15.91
MECH Mechanics SB of Hartford CT* 2.06 56.89 1.71 NM 126.11 12.67 126.11 NM
MDBK Medford Savings Bank of MA* 0.53 139.29 1.34 12.50 140.93 12.55 152.76 12.78
MERI Meritrust FSB of Thibodaux LA 0.48 62.95 0.61 22.33 163.82 11.89 163.82 13.15
MWBX Metro West of MA* 2.21 46.46 1.39 11.11 185.11 13.88 185.11 10.88
MCBS Mid Continent Bancshares of KS 0.15 82.23 0.23 15.59 134.59 14.33 134.59 12.82
MIFC Mid Iowa Financial Corp. of IA 0.13 181.46 0.44 17.00 132.81 12.16 133.02 11.97
MCBN Mid-Coast Bancorp of ME 0.41 120.43 0.60 23.17 88.91 7.81 88.91 13.67
MIDC Midconn Bank of Kensington CT(8)* 1.97 27.19 0.68 25.39 135.20 13.14 160.48 20.27
MWBI Midwest Bancshares, Inc. of IA 0.47 103.85 0.82 15.75 103.60 7.29 103.60 9.50
MWFD Midwest Fed. Fin. Corp of WI 0.24 322.17 1.04 15.38 176.64 14.83 184.80 15.79
MFFC Milton Fed. Fin. Corp. of OH 0.35 77.30 0.42 28.06 111.88 17.25 111.88 22.18
MIVI Miss. View Hold. Co. of MN 0.07 NA 1.99 22.88 98.09 17.98 98.09 16.90
MBSP Mitchell Bancorp of NC* 2.56 17.67 0.60 NM 102.33 43.07 102.33 27.95
MBBC Monterey Bay Bancorp of CA 0.48 83.49 0.56 NM 124.03 17.35 125.18 NM
MSBK Mutual SB, FSB of Bay City MI 0.13 208.44 0.73 NM 71.28 4.34 71.28 NM
NHTB NH Thrift Bancshares of NH 1.10 58.61 0.79 19.58 103.89 7.56 103.89 13.06
NSLB NS&L Bancorp of Neosho MO 0.04 186.36 0.13 NM 101.25 19.96 101.25 26.64
NMSB Newmil Bancorp. of CT* 1.86 86.77 3.07 15.16 114.20 11.99 114.20 15.68
NASB North American SB of MO NA NA 0.93 10.78 162.68 11.70 168.81 10.38
NBSI North Bancshares of Chicago IL NA NA 0.30 NM 107.14 16.21 107.14 25.35
FFFD North Central Bancshares of IA 0.21 474.69 1.19 18.37 93.27 26.42 93.27 15.56
NEBC Northeast Bancorp of ME* 1.36 79.76 1.43 17.63 104.56 7.37 123.54 21.83
NEIB Northeast Indiana Bncrp of IN 0.20 320.13 0.73 19.00 99.72 17.40 99.72 15.83
NWEQ Northwest Equity Corp. of WI 1.19 39.21 0.58 20.45 108.17 13.13 108.17 15.70
NWSB Northwest SB, MHC of PA (29.9) 0.86 81.23 0.93 27.45 188.13 18.79 197.30 18.98
NSSY Norwalk Savings Society of CT* 2.21 38.08 1.18 13.29 131.44 9.48 137.00 16.19
NSSB Norwich Financial Corp. of CT* 1.66 134.62 3.29 18.39 159.63 17.88 170.72 19.50
NTMG Nutmeg FS&LA of CT 1.90 24.50 0.51 18.43 104.10 5.59 104.10 17.98
OHSL OHSL Financial Corp. of OH 0.22 107.97 0.33 23.04 107.48 12.43 107.48 15.36
OSBF OSB Fin. Corp. of Oshkosh WI(8) 0.17 247.22 0.62 NM 119.58 14.82 119.58 NM
OCFC Ocean Fin. Corp. of NJ 0.80 62.07 0.91 NM 111.53 23.12 111.53 28.12
OFCP Ottawa Financial Corp. of MI 0.32 113.73 0.44 NM 132.30 12.05 167.39 19.64
PFFB PFF Bancorp of Pomona CA 1.93 53.40 1.42 NM 114.84 12.77 116.15 NM
PSFI PS Financial of Chicago IL NA NA NA 19.37 96.97 40.84 96.97 19.37
PVFC PVF Capital Corp. of OH 0.68 107.66 0.82 11.70 161.13 11.03 161.13 8.82
PCCI Pacific Crest Capital of CA* 2.24 53.13 1.69 11.93 158.92 14.37 158.92 13.98
PALM Palfed, Inc. of Aiken SC 3.44 34.31 1.51 NM 146.04 11.69 153.17 20.21
PBCI Pamrapo Bancorp, Inc. of NJ 3.45 23.22 1.35 21.14 117.23 17.28 118.13 14.61
PFED Park Bancorp of Chicago IL 0.15 188.68 0.76 NM 99.93 23.49 99.93 NM
PVSA Parkvale Financial Corp of PA 0.26 596.13 2.23 14.49 145.22 10.91 146.55 10.54
PBIX Patriot Bank Corp. of PA 0.15 247.00 0.70 NM 135.56 14.23 135.56 NM
PEEK Peekskill Fin. Corp. of NY 1.31 25.21 1.42 26.29 93.73 27.62 93.73 20.07
PFSB PennFed Fin. Services of NJ 0.86 28.23 0.38 20.22 130.69 9.88 160.76 13.30
PWBC PennFirst Bancorp of PA 0.59 75.76 1.46 18.49 107.66 7.52 118.73 12.16
PWBK Pennwood SB of PA* 1.46 51.48 1.60 NM 94.73 18.96 94.73 23.95
PBKB People's SB of Brockton MA* 1.02 90.38 1.79 13.92 158.34 8.89 166.80 22.09
PFDC Peoples Bancorp of Auburn IN 0.40 79.14 0.40 15.37 111.38 17.08 111.38 11.66
PBCT Peoples Bank, MHC of CT (37.4)* 1.42 85.13 1.82 17.60 226.38 18.30 226.68 22.55
PFFC Peoples Fin. Corp. of OH 0.03 772.00 0.43 NM 92.77 24.64 92.77 NM
PHBK Peoples Heritage Fin Grp of ME* 1.14 120.91 1.89 20.37 234.81 19.87 NM 18.90
PBNB Peoples Sav. Fin. Corp. of CT* 0.61 55.81 0.61 14.63 127.35 12.20 136.23 14.49
<CAPTION>
Dividend Data(6)
----------------------
Ind. Divi-
Div./ dend Payout
Financial Institution Share Yield Ratio(7)
--------------------- ------- ------- ------
($) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C>
MARN Marion Capital Holdings of IN 0.80 3.76 72.73
MFCX Marshalltown Fin. Corp. of IA(8) 0.00 0.00 0.00
MFSL Maryland Fed. Bancorp of MD 0.80 2.15 28.47
MASB MassBank Corp. of Reading MA* 1.08 2.70 30.77
MFLR Mayflower Co-Op. Bank of MA* 0.48 2.74 41.74
MECH Mechanics SB of Hartford CT* 0.00 0.00 NM
MDBK Medford Savings Bank of MA* 0.72 2.50 31.30
MERI Meritrust FSB of Thibodaux LA 0.70 1.97 44.03
MWBX Metro West of MA* 0.12 2.30 25.53
MCBS Mid Continent Bancshares of KS 0.40 1.58 24.69
MIFC Mid Iowa Financial Corp. of IA 0.08 0.94 16.00
MCBN Mid-Coast Bancorp of ME 0.52 2.74 63.41
MIDC Midconn Bank of Kensington CT(8)* 0.78 3.23 NM
MWBI Midwest Bancshares, Inc. of IA 0.60 2.11 33.15
MWFD Midwest Fed. Fin. Corp of WI 0.30 1.67 25.64
MFFC Milton Fed. Fin. Corp. of OH 0.60 4.36 NM
MIVI Miss. View Hold. Co. of MN 0.16 1.08 24.62
MBSP Mitchell Bancorp of NC* 0.80 5.20 NM
MBBC Monterey Bay Bancorp of CA 0.10 0.57 NM
MSBK Mutual SB, FSB of Bay City MI 0.00 0.00 NM
NHTB NH Thrift Bancshares of NH 0.50 4.26 NM
NSLB NS&L Bancorp of Neosho MO 0.50 3.08 NM
NMSB Newmil Bancorp. of CT* 0.24 2.59 39.34
NASB North American SB of MO 0.80 2.18 23.46
NBSI North Bancshares of Chicago IL 0.48 2.67 NM
FFFD North Central Bancshares of IA 0.25 1.64 30.12
NEBC Northeast Bancorp of ME* 0.32 2.33 41.03
NEIB Northeast Indiana Bncrp of IN 0.32 2.25 42.67
NWEQ Northwest Equity Corp. of WI 0.44 3.26 66.67
NWSB Northwest SB, MHC of PA (29.9) 0.32 2.08 57.14
NSSY Norwalk Savings Society of CT* 0.20 0.79 10.53
NSSB Norwich Financial Corp. of CT* 0.48 2.12 39.02
NTMG Nutmeg FS&LA of CT 0.00 0.00 0.00
OHSL OHSL Financial Corp. of OH 0.76 3.44 NM
OSBF OSB Fin. Corp. of Oshkosh WI(8) 0.64 2.00 NM
OCFC Ocean Fin. Corp. of NJ 0.00 0.00 NM
OFCP Ottawa Financial Corp. of MI 0.36 1.87 NM
PFFB PFF Bancorp of Pomona CA 0.00 0.00 0.00
PSFI PS Financial of Chicago IL 0.00 0.00 0.00
PVFC PVF Capital Corp. of OH 0.00 0.00 0.00
PCCI Pacific Crest Capital of CA* 0.00 0.00 0.00
PALM Palfed, Inc. of Aiken SC 0.12 0.81 26.67
PBCI Pamrapo Bancorp, Inc. of NJ 1.00 5.03 NM
PFED Park Bancorp of Chicago IL 0.00 0.00 0.00
PVSA Parkvale Financial Corp of PA 0.52 2.04 29.55
PBIX Patriot Bank Corp. of PA 0.33 2.11 NM
PEEK Peekskill Fin. Corp. of NY 0.36 2.36 62.07
PFSB PennFed Fin. Services of NJ 0.28 1.13 22.76
PWBC PennFirst Bancorp of PA 0.36 2.67 49.32
PWBK Pennwood SB of PA* 0.28 1.95 NM
PBKB People's SB of Brockton MA* 0.36 2.81 39.13
PFDC Peoples Bancorp of Auburn IN 0.60 2.89 44.44
PBCT Peoples Bank, MHC of CT (37.4)* 0.88 2.55 44.90
PFFC Peoples Fin. Corp. of OH 0.30 2.03 NM
PHBK Peoples Heritage Fin Grp of ME* 0.72 2.30 46.75
PBNB Peoples Sav. Fin. Corp. of CT* 0.92 2.98 43.60
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 28, 1997
Key Financial Ratios
----------------------------------------------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- ---------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
--------------------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PERM Permanent Bancorp of IN 9.70 9.60 0.24 2.35 2.04 0.52 5.16
PMFI Perpetual Midwest Fin. of IA 8.64 8.64 0.08 0.93 0.85 0.27 3.00
PERT Perpetual of SC, MHC (46.8) 13.86 13.86 0.75 6.82 3.65 1.06 9.69
PCBC Perry Co. Fin. Corp. of MO 18.57 18.57 0.58 2.93 3.19 0.95 4.79
PHFC Pittsburgh Home Fin. of PA 15.55 15.55 0.43 4.09 2.55 0.71 6.74
PFSL Pocahnts Fed, MHC of AR (46.4) 6.25 6.25 0.55 9.19 6.61 0.79 13.13
POBS Portsmouth Bank Shrs Inc of NH(8)* 24.92 24.92 2.29 9.07 6.83 1.85 7.34
PKPS Poughkeepsie SB of NY 8.15 8.15 1.48 18.05 16.70 2.35 28.55
PRBC Prestige Bancorp of PA 13.46 13.46 0.14 1.20 1.00 0.47 4.00
PETE Primary Bank of NH* 6.58 6.57 0.84 13.19 9.37 0.84 13.11
PSAB Prime Bancorp, Inc. of PA 8.49 7.97 0.73 7.99 4.30 0.95 10.41
PFNC Progress Financial Corp. of PA 5.20 4.50 0.34 6.59 3.94 0.45 8.58
PSBK Progressive Bank, Inc. of NY* 8.21 7.18 1.14 13.13 10.20 1.17 13.51
PROV Provident Fin. Holdings of CA 14.64 14.64 0.21 2.06 1.44 -0.01 -0.09
PULB Pulaski SB, MHC of MO (29.0) 12.59 12.59 0.49 3.91 2.51 0.78 6.24
PULS Pulse Bancorp of S. River NJ 7.77 7.77 0.72 7.81 6.13 1.09 11.75
QCFB QCF Bancorp of Virginia MN 17.64 17.64 1.24 6.25 7.04 1.24 6.25
QCBC Quaker City Bancorp of CA 8.87 8.85 0.27 2.91 2.67 0.54 5.70
QCSB Queens County SB of NY* 15.56 15.56 1.61 9.81 4.83 1.63 9.95
RCSB RCSB Financial, Inc. of NY* 6.87 6.64 0.91 11.05 6.87 0.88 10.76
RARB Raritan Bancorp. of Raritan NJ* 7.84 7.68 0.83 11.06 7.79 0.92 12.23
REDF RedFed Bancorp of Redlands CA 8.06 8.06 -0.77 -12.38 -6.60 -0.46 -7.51
RELY Reliance Bancorp of NY 8.28 5.77 0.54 5.96 4.67 0.84 9.16
RELI Reliance Bancshares Inc of WI(8)* 61.06 61.06 1.32 2.16 3.51 1.32 2.16
RIVR River Valley Bancorp of IN 17.31 17.31 0.84 4.84 4.40 0.84 4.84
RFED Roosevelt Fin. Grp. Inc. of MO 5.55 5.22 0.06 1.20 0.52 0.85 17.17
RSLN Roslyn Bancorp of NY* 25.33 25.33 1.34 5.28 4.61 1.23 4.84
RVSB Rvrview SB,FSB MHC of WA(41.7) 10.87 9.79 0.97 8.90 5.21 1.16 10.59
SCCB S. Carolina Comm. Bnshrs of SC 28.65 28.65 0.85 2.93 2.75 1.14 3.92
SBFL SB Fngr Lakes MHC of NY (33.1) 10.14 10.14 -0.57 -5.05 -3.74 0.10 0.87
SFED SFS Bancorp of Schenectady NY 12.75 12.75 0.45 3.23 3.34 0.81 5.85
SGVB SGV Bancorp of W. Covina CA 8.42 8.42 0.08 0.79 0.73 0.31 3.23
SISB SIS Bank of Springfield MA* 7.56 7.56 1.50 20.09 11.96 1.45 19.46
SJSB SJS Bancorp of St. Joseph MI(8) 10.41 10.41 0.17 1.51 1.10 0.49 4.26
SWCB Sandwich Co-Op. Bank of MA* 8.32 7.89 0.93 11.17 6.81 0.94 11.23
SFBM Security Bancorp of MT(8) 8.09 6.97 0.53 6.24 4.30 0.63 7.44
SECP Security Capital Corp. of WI 15.53 15.53 0.99 6.03 4.25 1.27 7.80
SFSL Security First Corp. of OH 9.23 9.07 0.95 10.43 5.92 1.31 14.30
SMFC Sho-Me Fin. Corp. of MO 10.07 10.07 0.79 7.17 5.21 0.98 8.83
SOBI Sobieski Bancorp of S. Bend IN 17.66 17.66 0.21 1.19 1.36 0.51 2.83
SOSA Somerset Savings Bank of MA(8)* 5.67 5.67 0.46 8.38 4.98 0.46 8.38
SSFC South Street Fin. Corp. of NC* 28.43 28.43 1.34 4.71 3.70 1.43 5.02
SCBS Southern Commun. Bncshrs of AL 20.77 20.77 0.62 3.01 2.96 1.11 5.34
SMBC Southern Missouri Bncrp of MO 16.41 16.41 0.94 5.51 5.54 0.88 5.15
SWBI Southwest Bancshares of IL 10.43 10.43 0.72 6.38 5.03 1.03 9.06
SVRN Sovereign Bancorp of PA 4.02 2.84 0.51 12.73 6.02 0.67 16.75
STFR St. Francis Cap. Corp. of WI 8.93 8.49 0.72 7.28 6.14 0.75 7.56
SPBC St. Paul Bancorp, Inc. of IL 8.91 8.88 0.62 6.89 4.34 0.92 10.24
STND Standard Fin. of Chicago IL 11.25 11.23 0.55 4.40 3.61 0.75 6.01
SFFC StateFed Financial Corp. of IA 17.99 17.99 0.98 5.00 5.12 1.23 6.27
SFIN Statewide Fin. Corp. of NJ 9.87 9.85 0.38 3.40 2.69 0.89 7.89
STSA Sterling Financial Corp. of WA 3.90 3.19 0.14 3.41 2.28 0.25 6.03
SSBK Strongsville SB of OH 7.60 7.47 0.67 8.42 5.89 0.85 10.58
SFSB SuburbFed Fin. Corp. of IL 6.50 6.47 0.28 4.06 3.73 0.50 7.29
SBCN Suburban Bancorp. of OH 11.81 11.81 0.19 1.48 1.58 0.62 4.95
THRD TF Financial Corp. of PA 11.20 9.78 0.61 4.72 4.32 0.82 6.36
<CAPTION>
Asset Quality Ratios Pricing Ratios
----------------------- -----------------------------------------
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Financial Institution Assets NPAs Loans Earning Book Assets Book Earnings
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (X) (%) (%) (%) (x)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PERM Permanent Bancorp of IN 1.71 31.61 1.07 NM 117.00 11.35 118.17 22.28
PMFI Perpetual Midwest Fin. of IA 0.45 151.55 0.88 NM 113.23 9.79 113.23 NM
PERT Perpetual of SC, MHC (46.8) 0.17 428.77 1.08 27.37 134.51 18.65 134.51 19.26
PCBC Perry Co. Fin. Corp. of MO NA NA 0.21 NM 94.68 17.58 94.68 19.17
PHFC Pittsburgh Home Fin. of PA 1.22 47.45 0.83 NM 98.98 15.39 98.98 23.77
PFSL Pocahnts Fed, MHC of AR (46.4) 0.32 141.55 1.25 15.13 133.10 8.32 133.10 10.59
POBS Portsmouth Bank Shrs Inc of NH(8)* 0.29 89.58 0.76 14.64 133.77 33.33 133.77 18.08
PKPS Poughkeepsie SB of NY 4.49 21.98 1.33 5.99 105.39 8.59 105.39 3.79
PRBC Prestige Bancorp of PA 0.18 170.81 0.43 NM 93.63 12.60 93.63 30.00
PETE Primary Bank of NH* 1.40 45.71 1.16 10.67 129.73 8.54 130.01 10.74
PSAB Prime Bancorp, Inc. of PA 1.34 45.65 1.00 23.26 183.99 15.62 196.08 17.86
PFNC Progress Financial Corp. of PA 0.98 61.67 0.96 25.36 157.04 8.16 181.17 19.47
PSBK Progressive Bank, Inc. of NY* 1.05 94.69 1.53 9.80 124.25 10.20 141.95 9.52
PROV Provident Fin. Holdings of CA 1.95 46.19 1.08 NM 96.56 14.13 96.56 NM
PULB Pulaski SB, MHC of MO (29.0) NA NA 0.34 NM 155.81 19.62 155.81 25.00
PULS Pulse Bancorp of S. River NJ 1.23 39.65 1.79 16.30 144.34 11.22 144.34 10.84
QCFB QCF Bancorp of Virginia MN NA NA NA 14.20 102.18 18.03 102.18 14.20
QCBC Quaker City Bancorp of CA 1.81 61.38 1.30 NM 109.06 9.67 109.30 19.12
QCSB Queens County SB of NY* 0.72 98.47 0.83 20.71 204.80 31.87 204.80 20.41
RCSB RCSB Financial, Inc. of NY* 0.74 94.44 1.37 14.55 185.34 12.73 191.79 14.94
RARB Raritan Bancorp. of Raritan NJ* 0.44 183.19 1.26 12.83 133.76 10.48 136.54 11.60
REDF RedFed Bancorp of Redlands CA 3.94 29.77 1.40 NM 144.52 11.65 144.52 NM
RELY Reliance Bancorp of NY 0.97 25.31 0.54 21.39 126.28 10.45 181.34 13.91
RELI Reliance Bancshares Inc of WI(8)* NA NA 0.56 28.48 61.43 37.51 61.43 28.48
RIVR River Valley Bancorp of IN NA NA NA 22.73 109.89 19.03 109.89 22.73
RFED Roosevelt Fin. Grp. Inc. of MO 0.83 28.67 0.51 NM 234.69 13.03 249.73 13.45
RSLN Roslyn Bancorp of NY* NA NA NA 21.71 114.67 29.05 114.67 23.68
RVSB Rvrview SB,FSB MHC of WA(41.7) 0.20 166.22 0.52 19.21 164.27 17.85 182.32 16.15
SCCB S. Carolina Comm. Bnshrs of SC 1.33 50.96 0.87 NM 109.56 31.39 109.56 27.11
SBFL SB Fngr Lakes MHC of NY (33.1) 1.15 49.69 1.27 NM 138.15 14.01 138.15 NM
SFED SFS Bancorp of Schenectady NY 0.66 59.05 0.55 29.95 104.83 13.37 104.83 16.54
SGVB SGV Bancorp of W. Covina CA 0.92 31.65 0.39 NM 110.37 9.29 110.37 NM
SISB SIS Bank of Springfield MA* 0.59 203.71 2.55 8.36 148.79 11.25 148.79 8.63
SJSB SJS Bancorp of St. Joseph MI(8) 0.35 129.05 0.66 NM 148.00 15.41 148.00 NM
SWCB Sandwich Co-Op. Bank of MA* 0.75 102.83 1.13 14.68 157.56 13.10 165.98 14.61
SFBM Security Bancorp of MT(8) 0.39 86.91 0.61 23.27 147.49 11.93 171.29 19.52
SECP Security Capital Corp. of WI 0.10 NA 1.51 23.51 140.51 21.83 140.51 18.19
SFSL Security First Corp. of OH 0.21 377.44 0.89 16.90 153.15 14.14 155.98 12.33
SMFC Sho-Me Fin. Corp. of MO 0.06 980.22 0.70 19.21 140.44 14.15 140.44 15.59
SOBI Sobieski Bancorp of S. Bend IN 0.11 222.22 0.37 NM 88.55 15.64 88.55 NM
SOSA Somerset Savings Bank of MA(8)* 8.41 14.61 1.58 20.07 161.49 9.16 161.49 20.07
SSFC South Street Fin. Corp. of NC* 0.36 54.38 0.39 27.02 127.38 36.22 127.38 25.38
SCBS Southern Commun. Bncshrs of AL NA NA 1.99 NM 101.50 21.08 101.50 19.01
SMBC Southern Missouri Bncrp of MO 0.71 56.68 0.64 18.06 101.50 16.65 101.50 19.35
SWBI Southwest Bancshares of IL 0.22 93.24 0.30 19.87 131.42 13.70 131.42 13.99
SVRN Sovereign Bancorp of PA 0.68 53.74 0.57 16.61 198.43 7.98 NM 12.62
STFR St. Francis Cap. Corp. of WI NA NA 0.82 16.29 123.35 11.02 129.87 15.68
SPBC St. Paul Bancorp, Inc. of IL 0.57 149.12 1.19 23.04 155.52 13.85 155.97 15.50
STND Standard Fin. of Chicago IL 0.16 176.36 0.47 27.70 125.92 14.17 126.15 20.30
SFFC StateFed Financial Corp. of IA 1.27 23.88 0.37 19.54 98.66 17.75 98.66 15.57
SFIN Statewide Fin. Corp. of NJ 0.92 57.17 1.09 NM 133.79 13.20 134.10 16.06
STSA Sterling Financial Corp. of WA 0.58 93.09 0.88 NM 158.81 6.19 193.88 24.81
SSBK Strongsville SB of OH 0.42 62.45 0.34 16.96 139.30 10.59 141.88 13.49
SFSB SuburbFed Fin. Corp. of IL 0.28 84.20 0.42 26.79 107.55 6.99 108.07 14.90
SBCN Suburban Bancorp. of OH 0.13 NA 1.84 NM 94.23 11.13 94.23 18.97
THRD TF Financial Corp. of PA 0.32 79.91 0.57 23.15 110.62 12.39 126.69 17.20
<CAPTION>
Dividend Data(6)
-----------------------
Ind. Divi-
Div./ dend Payout
Financial Institution Share Yield Ratio(7)
--------------------- ------- ------- -------
($) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C>
PERM Permanent Bancorp of IN 0.30 1.33 65.22
PMFI Perpetual Midwest Fin. of IA 0.30 1.50 NM
PERT Perpetual of SC, MHC (46.8) 0.00 0.00 0.00
PCBC Perry Co. Fin. Corp. of MO 0.30 1.74 54.55
PHFC Pittsburgh Home Fin. of PA 0.24 1.66 64.86
PFSL Pocahnts Fed, MHC of AR (46.4) 0.90 4.72 71.43
POBS Portsmouth Bank Shrs Inc of NH(8)* 0.59 3.84 56.19
PKPS Poughkeepsie SB of NY 0.10 1.70 10.20
PRBC Prestige Bancorp of PA 0.12 0.80 NM
PETE Primary Bank of NH* 0.00 0.00 0.00
PSAB Prime Bancorp, Inc. of PA 0.68 3.40 NM
PFNC Progress Financial Corp. of PA 0.08 0.96 24.24
PSBK Progressive Bank, Inc. of NY* 0.68 2.88 28.22
PROV Provident Fin. Holdings of CA 0.00 0.00 0.00
PULB Pulaski SB, MHC of MO (29.0) 1.00 5.97 NM
PULS Pulse Bancorp of S. River NJ 0.70 3.73 60.87
QCFB QCF Bancorp of Virginia MN 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA 0.00 0.00 0.00
QCSB Queens County SB of NY* 1.00 1.76 36.50
RCSB RCSB Financial, Inc. of NY* 0.60 1.78 25.97
RARB Raritan Bancorp. of Raritan NJ* 0.70 2.89 37.04
REDF RedFed Bancorp of Redlands CA 0.00 0.00 NM
RELY Reliance Bancorp of NY 0.56 2.52 53.85
RELI Reliance Bancshares Inc of WI(8)* 0.00 0.00 0.00
RIVR River Valley Bancorp of IN 0.00 0.00 0.00
RFED Roosevelt Fin. Grp. Inc. of MO 0.68 2.96 NM
RSLN Roslyn Bancorp of NY* 0.00 0.00 0.00
RVSB Rvrview SB,FSB MHC of WA(41.7) 0.22 1.21 23.16
SCCB S. Carolina Comm. Bnshrs of SC 0.60 3.12 NM
SBFL SB Fngr Lakes MHC of NY (33.1) 0.40 2.58 NM
SFED SFS Bancorp of Schenectady NY 0.24 1.38 41.38
SGVB SGV Bancorp of W. Covina CA 0.00 0.00 0.00
SISB SIS Bank of Springfield MA* 0.48 1.81 15.14
SJSB SJS Bancorp of St. Joseph MI(8) 0.44 1.73 NM
SWCB Sandwich Co-Op. Bank of MA* 1.20 3.75 55.05
SFBM Security Bancorp of MT(8) 0.46 1.52 35.38
SECP Security Capital Corp. of WI 1.20 1.38 32.52
SFSL Security First Corp. of OH 0.44 2.48 41.90
SMFC Sho-Me Fin. Corp. of MO 0.00 0.00 0.00
SOBI Sobieski Bancorp of S. Bend IN 0.28 2.00 NM
SOSA Somerset Savings Bank of MA(8)* 0.00 0.00 0.00
SSFC South Street Fin. Corp. of NC* 0.32 1.91 51.61
SCBS Southern Commun. Bncshrs of AL 0.00 0.00 0.00
SMBC Southern Missouri Bncrp of MO 0.50 3.08 55.56
SWBI Southwest Bancshares of IL 0.76 3.82 NM
SVRN Sovereign Bancorp of PA 0.08 0.63 10.53
STFR St. Francis Cap. Corp. of WI 0.48 1.66 26.97
SPBC St. Paul Bancorp, Inc. of IL 0.48 1.81 41.74
STND Standard Fin. of Chicago IL 0.40 1.95 54.05
SFFC StateFed Financial Corp. of IA 0.40 2.18 42.55
SFIN Statewide Fin. Corp. of NJ 0.40 2.29 NM
STSA Sterling Financial Corp. of WA 0.00 0.00 0.00
SSBK Strongsville SB of OH 0.48 2.02 34.29
SFSB SuburbFed Fin. Corp. of IL 0.32 1.42 38.10
SBCN Suburban Bancorp. of OH 0.60 3.64 NM
THRD TF Financial Corp. of PA 0.40 2.13 49.38
</TABLE>
<PAGE>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 28, 1997
<TABLE>
<CAPTION>
Key Financial Ratios
----------------------------------------------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ----------------------- ---------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
- --------------------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
ROSE TR Financial Corp. of NY 6.35 6.35 0.97 15.00 9.37 0.78 12.01
TPNZ Tappan Zee Fin. Corp. of NY 17.93 17.93 0.69 4.16 3.50 0.64 3.84
PTRS The Potters S&L Co. of OH 8.21 8.21 0.03 0.28 0.31 0.39 4.17
TSBS Trenton SB, FSB MHC of NJ(35.0(8) 19.38 18.97 1.66 8.70 5.94 1.29 6.78
TRIC Tri-County Bancorp of WY 15.31 15.31 0.71 4.18 4.81 0.95 5.59
THBC Troy Hill Bancorp of PA(8) 18.11 18.11 1.01 4.92 4.05 1.18 5.76
TWIN Twin City Bancorp of TN 12.52 12.52 0.78 5.74 5.08 0.99 7.33
UFRM United FS&LA of Rocky Mount NC 7.49 7.49 0.28 3.47 2.79 0.49 6.19
UBMT United Fin. Corp. of MT 22.54 22.54 1.20 5.25 5.32 1.46 6.40
VABF Va. Beach Fed. Fin. Corp of VA 6.60 6.60 0.03 0.49 0.36 0.21 3.29
VFFC Virginia First Savings of VA 7.82 7.58 1.40 18.17 10.89 1.40 18.17
WHGB WHG Bancshares of MD 23.84 23.84 0.75 4.87 3.07 0.75 4.87
WSFS WSFS Financial Corp. of DE* 6.18 6.12 1.46 24.96 11.92 1.48 25.31
WVFC WVS Financial Corp. of PA* 12.72 12.72 1.07 7.76 5.98 1.35 9.79
WRNB Warren Bancorp of Peabody MA* 9.60 9.60 1.86 20.41 11.34 1.76 19.27
WFSL Washington FS&LA of Seattle WA 11.31 10.14 1.62 13.75 6.90 1.80 15.31
WAMU Washington Mutual Inc. of WA* 6.32 5.70 0.98 15.83 3.22 0.99 16.01
WYNE Wayne Bancorp of NJ 14.99 14.99 0.02 0.18 0.12 0.14 1.16
WAYN Wayne S&L Co. MHC of OH (47.8) 8.98 8.98 0.25 2.71 1.58 0.60 6.61
WCFB Wbstr Cty FSB MHC of IA (45.2) 22.89 22.89 0.87 3.89 2.91 1.20 5.35
WBST Webster Financial Corp. of CT 5.02 3.88 0.65 12.43 7.87 0.68 12.87
WEFC Wells Fin. Corp. of Wells MN 13.79 13.79 0.55 3.80 3.47 0.93 6.44
WCBI WestCo Bancorp of IL 15.50 15.50 0.98 6.33 5.55 1.34 8.63
WSTR WesterFed Fin. Corp. of MT 14.11 14.11 0.61 4.49 3.72 0.86 6.29
WOFC Western Ohio Fin. Corp. of OH 15.31 14.38 0.52 2.63 3.21 0.65 3.27
WWFC Westwood Fin. Corp. of NJ 10.19 8.93 0.04 0.40 0.31 0.71 6.86
WEHO Westwood Hmstd Fin Corp of OH 33.33 33.33 0.35 1.51 0.90 0.67 2.90
WFCO Winton Financial Corp. of OH(8) 7.13 6.95 0.66 8.78 6.46 0.84 11.18
FFWD Wood Bancorp of OH 12.78 12.78 0.91 6.64 5.71 1.16 8.49
YFCB Yonkers Fin. Corp. of NY 16.63 16.63 0.76 5.18 4.22 1.08 7.36
YFED York Financial Corp. of PA 8.15 8.15 0.55 6.54 4.91 0.74 8.89
<CAPTION>
Asset Quality Ratios Pricing Ratios
----------------------- ----------------------------------------
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Financial Institution Assets NPAs Loans Earning Book Assets Book Earnings
--------------------- ------- ------- ------- ------- ------- ------- ------- --------
(%) (%) (%) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
ROSE TR Financial Corp. of NY NA NA 0.86 10.67 155.62 9.88 155.62 13.32
TPNZ Tappan Zee Fin. Corp. of NY 2.12 26.73 1.22 28.60 106.52 19.09 106.52 NM
PTRS The Potters S&L Co. of OH 2.20 76.26 3.61 NM 96.37 7.91 96.37 22.04
TSBS Trenton SB, FSB MHC of NJ(35.0(8) 0.36 91.15 0.52 16.84 142.35 27.59 145.45 21.62
TRIC Tri-County Bancorp of WY 0.07 801.92 1.19 20.79 85.69 13.12 85.69 15.55
THBC Troy Hill Bancorp of PA(8) 1.39 49.75 0.81 24.70 120.04 21.74 120.04 21.09
TWIN Twin City Bancorp of TN 0.53 37.63 0.27 19.68 117.68 14.74 117.68 15.42
UFRM United FS&LA of Rocky Mount NC 1.20 93.51 1.62 NM 128.11 9.59 128.11 20.12
UBMT United Fin. Corp. of MT 0.70 9.92 0.22 18.81 99.30 22.38 99.30 15.43
VABF Va. Beach Fed. Fin. Corp of VA 1.42 51.34 1.00 NM 138.65 9.15 138.65 NM
VFFC Virginia First Savings of VA 2.32 44.65 1.17 9.18 153.59 12.01 158.38 9.18
WHGB WHG Bancshares of MD 0.50 40.63 0.26 NM 97.49 23.24 97.49 NM
WSFS WSFS Financial Corp. of DE* 2.86 65.77 2.95 8.39 192.00 11.86 193.86 8.28
WVFC WVS Financial Corp. of PA* 0.36 204.24 1.31 16.72 129.89 16.53 129.89 13.26
WRNB Warren Bancorp of Peabody MA* 1.75 73.15 2.03 8.82 168.65 16.19 168.65 9.34
WFSL Washington FS&LA of Seattle WA 1.15 25.89 0.41 14.49 182.27 20.62 203.35 13.01
WAMU Washington Mutual Inc. of WA* 0.56 115.82 0.98 NM NM 29.75 NM NM
WYNE Wayne Bancorp of NJ 1.17 61.42 1.26 NM 104.04 15.60 104.04 NM
WAYN Wayne S&L Co. MHC of OH (47.8) 0.61 58.24 0.42 NM 172.99 15.54 172.99 26.00
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.45 92.96 0.73 NM 133.50 30.56 133.50 25.00
WBST Webster Financial Corp. of CT 0.85 110.74 1.45 12.70 158.33 7.94 204.43 12.27
WEFC Wells Fin. Corp. of Wells MN 0.34 87.34 0.33 28.85 112.28 15.48 112.28 17.05
WCBI WestCo Bancorp of IL 0.53 54.54 0.40 18.01 114.37 17.72 114.37 13.20
WSTR WesterFed Fin. Corp. of MT 0.23 155.72 0.54 26.88 118.92 16.77 118.92 19.20
WOFC Western Ohio Fin. Corp. of OH 0.73 56.20 0.55 NM 88.33 13.52 94.05 25.00
WWFC Westwood Fin. Corp. of NJ 0.14 155.97 0.54 NM 132.20 13.47 150.81 19.12
WEHO Westwood Hmstd Fin Corp of OH 0.03 459.38 0.18 NM 103.13 34.37 103.13 NM
WFCO Winton Financial Corp. of OH(8) 0.51 57.75 0.34 15.48 123.93 8.83 127.08 12.15
FFWD Wood Bancorp of OH 0.29 120.40 0.45 17.50 115.22 14.73 115.22 13.70
YFCB Yonkers Fin. Corp. of NY 1.30 27.74 1.07 23.68 98.25 16.34 98.25 16.67
YFED York Financial Corp. of PA 2.14 29.56 0.73 20.36 130.17 10.61 130.17 14.98
<CAPTION>
Dividend Data(6)
-----------------------
Ind. Divi-
Div./ dend Payout
Financial Institution Share Yield Ratio(7)
--------------------- ------- ------- -------
($) (%) (%)
<S> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
ROSE TR Financial Corp. of NY 0.88 2.49 26.59
TPNZ Tappan Zee Fin. Corp. of NY 0.20 1.34 38.46
PTRS The Potters S&L Co. of OH 0.28 1.43 NM
TSBS Trenton SB, FSB MHC of NJ(35.0(8) 0.35 2.19 36.84
TRIC Tri-County Bancorp of WY 0.60 3.24 67.42
THBC Troy Hill Bancorp of PA(8) 0.40 1.98 48.78
TWIN Twin City Bancorp of TN 0.64 3.46 68.09
UFRM United FS&LA of Rocky Mount NC 0.20 2.42 NM
UBMT United Fin. Corp. of MT 0.94 4.76 NM
VABF Va. Beach Fed. Fin. Corp of VA 0.20 1.80 NM
VFFC Virginia First Savings of VA 0.10 0.62 5.65
WHGB WHG Bancshares of MD 0.20 1.43 46.51
WSFS WSFS Financial Corp. of DE* 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA* 0.80 3.05 50.96
WRNB Warren Bancorp of Peabody MA* 0.44 2.77 24.44
WFSL Washington FS&LA of Seattle WA 0.87 3.41 49.43
WAMU Washington Mutual Inc. of WA* 1.00 1.89 58.82
WYNE Wayne Bancorp of NJ 0.00 0.00 0.00
WAYN Wayne S&L Co. MHC of OH (47.8) 0.92 3.54 NM
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.80 5.82 NM
WBST Webster Financial Corp. of CT 0.72 1.83 23.30
WEFC Wells Fin. Corp. of Wells MN 0.00 0.00 0.00
WCBI WestCo Bancorp of IL 0.60 2.82 50.85
WSTR WesterFed Fin. Corp. of MT 0.40 1.86 50.00
WOFC Western Ohio Fin. Corp. of OH 1.00 4.65 NM
WWFC Westwood Fin. Corp. of NJ 0.20 1.03 NM
WEHO Westwood Hmstd Fin Corp of OH 0.28 1.93 NM
WFCO Winton Financial Corp. of OH(8) 0.42 3.23 50.00
FFWD Wood Bancorp of OH 0.40 2.54 44.44
YFCB Yonkers Fin. Corp. of NY 0.20 1.48 35.09
YFED York Financial Corp. of PA 0.60 3.31 67.42
</TABLE>
<PAGE>
EXHIBIT IV-2
Historical Stock Price Indices
<PAGE>
Historical Stock Price Indices(1)
<TABLE>
<CAPTION>
SNL SNL
NASDAQ Thrift Bank
Year/Qtr. Ended DJIA S&P 500 Composite Index Index
- --------------- ---- ------- --------- ----- -----
<S> <C> <C> <C> <C> <C>
1991: Quarter 1 2881.1 375.2 482.3 125.5 66.0
Quarter 2 2957.7 371.2 475.9 130.5 82.0
Quarter 3 3018.2 387.9 526.9 141.8 90.7
Quarter 4 3168.0 417.1 586.3 144.7 103.1
1992: Quarter 1 3235.5 403.7 603.8 157.0 113.3
Quarter 2 3318.5 408.1 563.6 173.3 119.7
Quarter 3 3271.7 417.8 583.3 167.0 117.1
Quarter 4 3301.1 435.7 677.0 201.1 136.7
1993: Quarter 1 3435.1 451.7 690.1 228.2 151.4
Quarter 2 3516.1 450.5 704.0 219.8 147.0
Quarter 3 3555.1 458.9 762.8 258.4 154.3
Quarter 4 3754.1 466.5 776.8 252.5 146.2
1994: Quarter 1 3625.1 445.8 743.5 241.6 143.1
Quarter 2 3625.0 444.3 706.0 269.6 152.6
Quarter 3 3843.2 462.6 764.3 279.7 149.2
Quarter 4 3834.4 459.3 752.0 244.7 137.6
1995: Quarter 1 4157.7 500.7 817.2 278.4 152.1
Quarter 2 4556.1 544.8 933.5 313.5 171.7
Quarter 3 4789.1 584.4 1,043.5 362.3 195.3
Quarter 4 5117.1 615.9 1,052.1 376.5 207.6
1996: Quarter 1 5587.1 645.5 1,101.4 382.1 225.1
Quarter 2 5654.6 670.6 1,185.0 387.2 224.7
Quarter 3 5882.2 687.3 1,226.9 429.3 249.2
Quarter 4 6442.5 737.0 1,280.7 483.6 280.1
February 28, 1997 6877.7 790.8 1,309.0 563.1 314.0
</TABLE>
(1) End of period data.
Sources: SNL Securities; Wall Street Journal.
<PAGE>
EXHIBIT IV-3
Historical Thrift Stock Indices
<PAGE>
MONTHLY MARKET REPORT
INDEX VALUES
<TABLE>
<CAPTION>
Index Values Percent Change Since
----------------------------------------- --------------------------
02/28/97 01/31/97 12/31/96 02/28/96 1 Month YTD LTM
-------- -------- -------- -------- ------- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
All Pub. Traded Thrifts 563.1 520.1 483.6 374.3 8.28 16.44 50.44
MHC Index 609.6 585.7 538.0 471.5 4.08 13.30 29.29
Insurance Indices
- ---------------------------------------------------------------------------------------------------
SAIF Thrifts 506.8 460.1 439.2 350.7 10.14 15.37 44.52
BIF Thrifts 726.3 700.0 616.8 445.2 3.77 17.75 63.16
Stock Exchange Indices
- ---------------------------------------------------------------------------------------------------
AMEX Thrifts 169.1 165.2 156.2 135.7 2.39 8.28 24.61
NYSE Thrifts 336.9 296.7 277.3 242.4 13.53 21.50 38.98
OTS Thrifts 645.4 609.5 569.7 456.4 5.88 13.28 41.40
Geographical Indices
- ---------------------------------------------------------------------------------------------------
Mid-Atlantic Thrifts 1,118.2 1,029.5 970.7 725.2 8.62 15.20 54.19
Midwestern Thrifts 1,258.0 1,192.9 1,159.3 970.7 5.46 8.51 29.60
New England Thrifts 482.1 463.8 428.9 331.7 3.94 12.40 45.34
Southeastern Thrifts 523.5 462.5 447.2 370.2 13.19 17.06 41.39
Southwestern Thrifts 369.2 325.9 315.9 253.1 13.30 16.89 45.88
Western Thrifts 579.8 527.6 474.7 356.4 9.88 22.13 62.69
Asset Size Indices
- ---------------------------------------------------------------------------------------------------
Less than $250M 635.9 607.3 586.6 539.4 4.71 8.40 17.89
$250M to $500M 862.9 832.2 789.8 683.5 3.69 9.26 26.25
$500M to $1B 574.0 540.4 521.8 433.1 6.23 10.02 32.54
$1B to $5B 618.8 565.7 546.0 423.1 9.37 13.32 46.24
Over $5B 366.2 335.5 305.8 227.2 9.17 19.76 61.20
Comparative Indices
- ---------------------------------------------------------------------------------------------------
Dow Jones Industrials 6,877.7 6,813.1 6,448.3 5,506.2 0.95 6.66 24.91
S&P 500 790.8 786.2 740.7 644.75 0.59 6.76 22.66
</TABLE>
All SNL indices are market-value weighted, i.e., an institution's effect on
an index is proportionate to that institution's market capitalization. All
SNL thrift indices, except for the SNL MHC Index, began at 100 on March 30,
1984. The SNL MHC Index began at 201.082 on Dec. 31, 1992, the level of
the SNL Thrift Index on that date. On March 30, 1984, the S&P 500 closed at
159.2 and the Dow Jones Industrials stood at 1164.9.
Mid-Atlantic: DE, DC, PA, MD, NJ, NY, PR; Midwestern: IA, IL, IN, KS, KY,
MI, MN, MO, ND, NE, OH, SD, WI; New England: CT, ME, MA, NH, RI, VT;
Southwestern: AL, AR, FL, GA, MS, NC, SC, TN, VA, WV; Southwestern: CO,
LA, NM, OK, TX, UT; Western: AZ, AK, CA, HI, ID, MT, NV, OR, WA, WY
Source: SNL Securities
<PAGE>
EXHIBIT IV-4
Market Area Acquisition Activity
<PAGE>
Idaho Bank and Thrift Acquisitions
1994-Present
<TABLE>
<CAPTION>
Target Company's Financial Data
At Completion Date
-------------------------------
Date Ann'd/ Target/State Pooling/ Equity/ NPAs/(1) Reserves/
Completed Acquiror/State Purchase Assets Assets ROAA ROAE Assets NPAs
- -------------------------------------------------------------------------------------------------------------------------
($000) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
05/08/95 West One Bancorp ID Purchase 9,244,503 8.61 1.32 15.41 0.31 377.96
12/27/95 US Bancorp OR
12/13/93 American Ban Corp ID Purchase 66,991 10.38 1.69 16.34 0.84 NA
07/15/94 First Security Corp UT
04/19/93 Idaho State Bank ID Purchase 46,288 6.01 0.10 1.57 4.76 NA
01/24/94 West One Bancorp ID
Average: 3,119,261 8.33 1.04 11.11 1.97 377.96
Median: 66,991 8.61 1.32 15.41 0.84 377.96
<CAPTION>
Acquisition Terms Acquisition Price At Completion Date
---------------------- ------------------------------------
Total Offer Cash
Date Ann'd/ Target/State Pooling/ Deal Price/ Debt
Completed Acquiror/State Purchase Value Share Stock P/B P/TB P/A P/E
- ------------------------------------------------------------------------------------------------------------------------------
($Mil) ($) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
05/08/95 West One Bancorp ID Purchase 1994.0 52.920 Stock 257.52 273.35 21.57 17.29
12/27/95 US Bancorp OR
12/13/93 American Ban Corp ID Purchase 20.3 65.453 Cash 250.99 250.99 30.30 14.87
07/15/94 First Security Corp UT
04/19/93 Idaho State Bank ID Purchase 3.4 NA Stock 94.03 94.03 7.35 5.34
01/24/94 West One Bancorp ID
Average: 672.6 59.187 200.85 206.12 19.74 12.50
Median: 20.3 59.187 250.99 250.99 21.57 14.87
</TABLE>
(1) NPAs consist of REO, non-accruing loans, and loans 90+ days delinquent.
<PAGE>
EXHIBIT IV-5
Director and Senior Management Summary Resumes
<PAGE>
First Federal Bank of Idaho
Director and Senior Management Summary Resumes
William J. Larson is a partner in the Quality Inn and Convention Center in
Clarkston, Washington and other various real estate development projects. Prior
to 1993, he was a partner in Houser & Son, Inc., a livestock and farming
operation.
James N. Marker is general manager and part owner of Idaho Truck Sales Co.,
Inc., a heavy duty truck dealership.
Steve R. Cox is the president and shareholder of Randall, Blake & Cox,
P.A., a law firm in Lewiston, Idaho, and is a non-practicing certified public
accountant.
Robert S. Coleman, Sr., a retired businessman, is the former President and
co-owner of Coleman Oil, Co., a petroleum distributor.
Dr. L. Glen Carlson, a native of the area, is a retired dentist. He
developed the Bryden Canyon Center, a complex of medical and dental offices.
Dr. Carlson is trustee of family owned farmland at Nez Perce, Idaho.
F. Ron McMurray has been the manager of Inland 465, a warehouse
distribution center, since 1994. From 1990 to 1994, Mr. McMurray was the
manager of the Port of Lewiston, a municipal corporation. Prior to that time,
Mr. McMurray was the owner and operator of Fairley's Flowers, a flower and gift
store.
W. Dean Jurgens is the President and part owner of Jurgens & Co., P.A.,
certified public accountants.
Clyde E. Conklin, who joined the Bank in 1987, has served as the Chief
Executive Officer of the Bank since February 1996. From September 1994 to
February 1996, Mr. Conklin served as Senior Vice President - Lending. In 1993,
Mr. Conklin became Vice President - Lending. Prior to that time, Mr. Conklin
served as Agricultural Lending Manager.
Larry K. Moxley, who joined the Bank in 1973, currently serves as Chief
Financial Officer of the Bank, which position he has held since February 1996.
Mr. Moxley served as Senior Vice President - Finance from 1993 to February 1996
and as Vice President - Finance from 1984 to 1993.
Terence A. Otte joined the Bank in June 1989 as an Agricultural Loan
Officer. From 1991 to 1994, he served as manager of the Bank's Moscow, Idaho
branch. In 1994 he became Vice President-Lending and Agricultural Lending
Manager and in 1996 became Vice President, Agricultural and Consumer Lending and
Compliance Officer.
Donn L. Durgan, who joined the Bank in February 1996, currently serves as
Vice President, Residential Lending. Prior to that time, Mr. Durgan was
employed by First Security Bank for 11 years in various positions in commercial
and residential real estate lending.
Douglas R. Ax, who joined the Bank in January 1997, currently serves as
Vice President, Commercial Lending. Prior to that time, Mr. Ax was employed by,
West One Bank (which became U.S. Bank) for over nine years in various positions
in commercial lending, most recently as a Vice President and Commercial Loan
Officer.
Source: First Federal's prospectus.
<PAGE>
EXHIBIT IV-6
First Federal Bank of Idaho
Pro Forma Regulatory Capital Ratios
<PAGE>
EXHIBIT IV-6
First Federal Bank of Idaho
Pro Forma Regulatory Capital Ratios
<TABLE>
<CAPTION>
PRO FORMA AT DECEMBER 31, 1996
---------------------------------------------------------------------------------
15% above
Midpoint of Maximum of Maximum of
Minimum of Estimated Estimated Estimated Estimated
Valuation Range Valuation Range Valuation Range Valuation Range
-------------------- ------------------- ------------------- -----------------
1,275,000 Shares 1,500,000 Shares 1,725,000 Shares 1,983,750 Shares
December 31, 1996 at $10.00 Per Share at $10.00 Per Share at $10.00 Per Share at $10.00 Per Share
------------------- -------------------- ------------------- ------------------- -----------------
Percent Percent
of of Percent
Percent of Percent of Total Total of
Total Total Assets Assets Total Assets
Amount Assets (1) Amount Assets (1) Amount (1) Amount (1) Amount (1)
------- ---------- -------- ---------- -------- --------- -------- --------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital............. $10,818 8.12% $15,351 11.06% $16,190 11.58% $17,030 12.10% $18,008 12.68%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Tangible capital......... $10,818 8.12% $15,351 11.06% $16,190 11.58% $17,030 12.10% $18,008 12.68%
Tangible capital
requirement............. 1,998 1.50 2,081 1.50 2,096 1.50 2,112 1.50 2,130 1.50
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess................... $ 8,820 6.62% $13,270 9.56% $14,094 10.08% $14,918 10.60% $15,878 11.18%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Core capital............. $10,818 8.12% $15,351 11.06% $16,190 11.58% $17,030 12.10% $18,008 12.68%
Core capital
requirement(2).......... 3,996 3.00 4,162 3.00 4,193 3.00 4,224 3.00 4,259 3.00
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess................... $ 6,822 5.12% $11,189 8.06% $11,997 8.58% $12,806 9.10% $13,749 9.68%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Risk-based capital(3).... $11,698 13.27% $16,231 17.85% $17,070 18.67% $17,910 19.48% $18,888 20.41%
Risk-based
capital requirement..... 7,052 8.00 7,274 8.00 7,315 8.00 7,356 8.00 7,403 8.00
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess................... $ 4,646 5.27% $ 8,957 9.85% $ 9,755 10.67% $10,554 11.48% $11,485 12.41%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
___________________
(1) Tangible capital levels are shown as a percentage of tangible assets. Core
capital levels are shown as percentage of total adjusted assets. Risk based
capital levels are shown as a percentage of risk-weighted assets.
(2) The current OTS core capital requirement for savings associations is 3% of
total adjusted assets. The OTS has proposed core capital requirements which
would require a core capital ratio of 3% of total adjusted assets for
thrifts that receive the highest supervisory rating for safety and soundness
and a core capital ratio of 4% to 5% for all other thrifts.
(3) Assumes net proceeds are invested in assets that carry a 50% risk-weighting.
Source: First Federal's prospectus.
<PAGE>
EXHIBIT IV-7
Pro Forma Analysis Sheet
<PAGE>
Exhibit IV-7
PRO FORMA ANALYSIS SHEET -- PAGE 1
First Federal Bank of Idaho
Prices as of February 28, 1997
<TABLE>
<CAPTION>
Comparable All ID All SAIF
Companies Companies Companies
------------- ------------- -------------
Price Multiple: Symbol Subject(1) Mean Median Mean Median Mean Median
-------------- ------ ---------- ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price-earnings ratio = P/E 28.49x 21.28x 20.62x 0.00x 0.00x 19.92x 19.79x
Price-core earnings = P/CORE 43.80x 20.23x 18.02x 0.00x 0.00x 17.52x 16.67x
Price-book ratio = P/B 64.21% 100.03% 98.40% 0.00% 0.00% 127.41% 120.04%
Price-tng book ratio = P/TB 64.21% 100.07% 98.63% 0.00% 0.00% 129.55% 121.21%
Price-assets ratio = P/A 10.29% 16.84% 17.44% 0.00% 0.00% 15.51% 14.07%
<CAPTION>
Valuation Parameters
--------------------
<S> <C> <C> <C>
Pre-Conv Earnings (Y) $ 211,000 Est ESOP Borrowings (E) $1,200,000
Pre-Conv Book Value (B) $ 10,818,000 Cost of ESOP Borrowings (S) 0.00% (4)
Pre-Conv Assets (A) $ 133,194,000 Amort of ESOP Borrowings (T) 7 Years
Reinvestment Rate(2) (R) 3.96% Recognition Plans Amount (M) $ 600,000
Est Conversion Exp(3) (X) 656,000 Recognition Plans Expense (N)$ 120,000
Proceeds Not Reinvested (Z) $ 1,800,000
</TABLE>
<TABLE>
<S> <C>
Calculation of Pro Forma Value After Conversion
-----------------------------------------------
1. V = P/E (Y-R(X+Z)-ES-(1-TAX)E/T-(1-TAX)N)) V = $ 14,999,052
-------------------------------------------------
1-(P/E)R
2. V = P/B (B-X-E-M) V = $ 15,002,068
-----------------------
1-P/B
3. V = P/A (A-X-M-E) V = $ 14,996,032
----------------------
1-P/A
</TABLE>
<TABLE>
<CAPTION>
Total Price Total
Conclusion Shares Per Share Value
---------- -------- --------- --------
<S> <C> <C> <C>
Appraised Value 1,500,000 $10.00 $ 15,000,000
<CAPTION>
RANGE:
------
<S> <C> <C> <C>
- Minimum 1,275,000 $10.00 $ 12,750,000
- Maximum 1,725,000 $10.00 $ 17,250,000
- Superrange 1,983,750 $10.00 $ 19,837,500
</TABLE>
(1) Pricing ratios shown reflect the midpoint appraised value.
(2) Net return assumes a reinvestment rate of 6.38 percent, and a tax
rate of 38.00 percent.
(3) Conversion expenses reflect estimated expenses as presented in
offering document.
(4) Assumes a borrowings cost of 0.00 percent and a tax rate of 38.00
percent.
<PAGE>
Exhibit IV-7
PRO FORMA ANALYSIS SHEET -- PAGE 2
First Federal Bank of Idaho
Prices as of February 28, 1997
<TABLE>
<CAPTION>
Mean Pricing Median Pricing
--------------- --------------------
Valuation Approach Subject Peers (Disc) Peers (Disc)
------------------ ------- ----- ------ ----- ------
<S> <C> <C> <C> <C> <C>
P/E Price-earnings 28.49x 21.28x 33.86% 20.62x 38.16%
P/CORE Price-core earnings 43.80x 20.23x NM % 18.02x NM %
P/B Price-book 64.21% 100.03% -35.81% 98.40% -34.75%
P/TB Price-tang. book 64.21% 100.07% -35.84% 98.63% -34.90%
P/A Price-assets 10.29% 16.84% -38.88% 17.44% -41.00%
Average Premium (Discount) -19.17% -18.12%
</TABLE>
<PAGE>
EXHIBIT IV-8
Pro Forma Effect of Conversion Proceeds
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
First Federal Bank of Idaho
At the Minimum of the Range
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 12,750,000
Less: Estimated offering expenses --------------- 625,000
-----------
Net Conversion Proceeds ----------------------------- $ 12,125,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 12,125,000
Less: Held in Non-Earning Assets(5)(1) ---------- 1,530,000
-----------
Net Proceeds Reinvested ----------------------------- $ 10,595,000
Estimated net incremental rate of return ------------ 3.96 %
-----------
Earnings Increase ----------------------------------- $ 419,096
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 90,343
Less: Recognition Plans Expense(4)--------------- 63,240
-----------
Net Earnings Increase ------------------------------- $ 265,513
3. Pro-Forma Earnings (rounded)
Period Before Conversion After Conversion
------ ----------------- ----------------
12 Months ended December 31, 1996 $ 211,000 $ 476,513
12 Months ended December 31, 1996 (Core)$ 27,000 $ 292,513
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
December 31, 1996 $ 10,818,000 $ 10,595,000 (3)(4) $ 21,413,000
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
December 31, 1996 $ 133,194,000 $ 10,595,000 $ 143,789,000
NOTE: Shares for calculating per share amounts: 1,275,000
(1) Estimated ESOP borrowings of $ 1,020,000 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of
38.00 percent.
ESOP financed by holding company - excluded from reinvestment and total
assets.
(2) ESOP borrowings are amortized over 7 years, amortization is tax-effected.
(3) ESOP borrowings of $ 1,020,000 are omitted from net worth.
(4) $ 510,000 purchased by the Recognition Plans with an estimated pre-tax
expense of $ 102,000 and a tax rate of 38.00 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment income.
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
First Federal Bank of Idaho
At the Midpoint of the Range
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 15,000,000
Less: Estimated offering expenses --------------- 656,000
-----------
Net Conversion Proceeds ----------------------------- $ 14,344,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 14,344,000
Less: Held in Non-Earning Assets(5)(1) ---------- 1,800,000
-----------
Net Proceeds Reinvested ----------------------------- $ 12,544,000
Estimated net incremental rate of return ------------ 3.96 %
-----------
Earnings Increase ----------------------------------- $ 496,190
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 106,286
Less: Recognition Plans Expense(4)--------------- 74,400
-----------
Net Earnings Increase ------------------------------- $ 315,505
3. Pro-Forma Earnings (rounded)
Period Before Conversion After Conversion
------ ----------------- ----------------
12 Months ended December 31, 1996 $ 211,000 $ 526,505
12 Months ended December 31, 1996 (Core)$ 27,000 $ 342,505
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
December 31, 1996 $ 10,818,000 $ 12,544,000 (3)(4) $ 23,362,000
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
December 31, 1996 $ 133,194,000 $ 12,544,000 $ 145,738,000
NOTE: Shares for calculating per share amounts: 1,500,000
(1) Estimated ESOP borrowings of $ 1,200,000 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of 38.00
percent. ESOP financed by holding company - excluded from reinvestment and
total assets.
(2) ESOP borrowings are amortized over 7 years, amortization is tax-effected.
(3) ESOP borrowings of $ 1,200,000 are omitted from net worth.
(4) $ 600,000 purchased by the Recognition Plans with an estimated pre-tax
expense of $ 120,000 and a tax rate of 38.00 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment income.
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
First Federal Bank of Idaho
At the Maximum of the Range
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 17,250,000
Less: Estimated offering expenses --------------- 687,000
-----------
Net Conversion Proceeds ----------------------------- $ 16,563,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 16,563,000
Less: Held in Non-Earning Assets(5)(1) ---------- 2,070,000
-----------
Net Proceeds Reinvested ----------------------------- $ 14,493,000
Estimated net incremental rate of return ------------ 3.96 %
-----------
Earnings Increase ----------------------------------- $ 573,285
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 122,229
Less: Recognition Plans Expense(4)--------------- 85,560
-----------
Net Earnings Increase ------------------------------- $ 365,497
3. Pro-Forma Earnings (rounded)
Period Before Conversion After Conversion
------ ----------------- ----------------
12 Months ended December 31, 1996 $ 211,000 $ 576,497
12 Months ended December 31, 1996 (Core)$ 27,000 $ 392,497
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
December 31, 1996 $ 10,818,000 $ 14,493,000 (3)(4) $ 25,311,000
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
December 31, 1996 $ 133,194,000 $ 14,493,000 $ 147,687,000
NOTE: Shares for calculating per share amounts: 1,725,000
(1) Estimated ESOP borrowings of $ 1,380,000 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of
38.00 percent. ESOP financed by holding company - excluded from reinvestment
and total assets.
(2) ESOP borrowings are amortized over 7 years, amortization is tax-effected.
(3) ESOP borrowings of $ 1,380,000 are omitted from net worth.
(4) $ 690,000 purchased by the Recognition Plans with an estimated pre-tax
expense of $ 138,000 and a tax rate of 38.00 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment income.
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
First Federal Bank of Idaho
At the Superrange Maximum
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 19,837,500
Less: Estimated offering expenses --------------- 697,000
-----------
Net Conversion Proceeds ----------------------------- $ 19,140,500
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 19,140,500
Less: Held in Non-Earning Assets(5)(1) ---------- 2,380,500
-----------
Net Proceeds Reinvested ----------------------------- $ 16,760,000
Estimated net incremental rate of return ------------ 3.96 %
-----------
Earnings Increase ----------------------------------- $ 662,959
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 140,563
Less: Recognition Plans Expense(4)--------------- 98,394
-----------
Net Earnings Increase ------------------------------- $ 424,002
3. Pro-Forma Earnings (rounded)
Period Before Conversion After Conversion
------ ----------------- ----------------
12 Months ended December 31, 1996 $ 211,000 $ 635,002
12 Months ended December 31, 1996 (Core)$ 27,000 $ 451,002
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
December 31, 1996 $10,818,000 $ 16,760,000 (3)(4) $ 27,578,000
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
December 31, 1996 $ 133,194,000 $ 16,760,000 $ 149,954,000
NOTE: Shares for calculating per share amounts: 1,983,750
(1) Estimated ESOP borrowings of $ 1,587,000 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of 38.00
percent. ESOP financed by holding company - excluded from reinvestment and
total assets.
(2) ESOP borrowings are amortized over 7 years, amortization is tax-effected.
(3) ESOP borrowings of $ 1,587,000 are omitted from net worth.
(4) $ 793,500 purchased by the Recognition Plans with an estimated pre-tax
expense of $ 158,700 and a tax rate of 38.00 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment income.
<PAGE>
EXHIBIT IV-9
Peer Group Core Earnings Analysis
<PAGE>
Core Earnings Analysis
Comparable Institution Analysis
For the Twelve Months Ended December 31, 1996
<TABLE>
<CAPTION>
Estimated
Net Income Less: Net Tax Effect Less: Extd Core Income
to Common Gains(Loss) @ 34% Items to Common Shares
---------- ----------- ---------- ---------- ---------- ----------
($000) ($000) ($000) ($000) ($000) ($000)
<S> <C> <C> <C> <C> <C> <C>
Comparable Group
----------------
AMFC AMB Financial Corp. of IN(1) 374 318 -108 0 584 1,124
CBK Citizens First Fin.Corp. of IL(1) 592 983 -334 0 1,241 2,817
FMBD First Mutual Bancorp of IL(1) 1,335 1,137 -387 0 2,085 3,769
HZFS Horizon Fin'l. Services of IA(1) 96 222 -75 0 243 426
HRZB Horizon Financial Corp. of WA(1) 7,396 -304 103 0 7,195 6,412
KFBI Klamath First Bancorp of OR 5,782 4,252 -1,446 0 8,588 10,002
NWEQ Northwest Equity Corp. of WI(1) 614 277 -94 0 797 929
THR Three Rivers Fin. Corp. of MI(1) 442 340 -116 0 666 851
TRIC Tri-County Bancorp of WY 541 277 -94 0 724 609
UBMT United Fin. Corp. of MT(1) 1,287 415 -141 0 1,561 1,223
<CAPTION>
Estimated
Core EPS
-------
($)
<S> <C>
Comparable Group
----------------
AMFC AMB Financial Corp. of IN(1) 0.52
CBK Citizens First Fin.Corp. of IL(1) 0.44
FMBD First Mutual Bancorp of IL(1) 0.55
HZFS Horizon Fin'l. Services of IA(1) 0.57
HRZB Horizon Financial Corp. of WA(1) 1.12
KFBI Klamath First Bancorp of OR 0.86
NWEQ Northwest Equity Corp. of WI(1) 0.86
THR Three Rivers Fin. Corp. of MI(1) 0.78
TRIC Tri-County Bancorp of WY 1.19
UBMT United Fin. Corp. of MT(1) 1.28
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The
information provided in this table has been obtained from sources
we believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT V-1
RP Financial, LC.
Firm Qualifications Statement
<PAGE>
FIRM QUALIFICATION STATEMENT
RP Financial provides financial and management consulting and valuation services
to the financial services industry nationwide, particularly federally-insured
financial institutions. RP Financial establishes long-term client relationships
through its wide array of services, emphasis on quality and timeliness, hands-on
involvement by our principals and senior consulting staff, and careful
structuring of strategic plans and transactions. RP Financial's staff draws from
backgrounds in consulting, regulatory agencies and investment banking, thereby
providing our clients with considerable resources.
STRATEGIC AND CAPITAL PLANNING
RP Financial's strategic and capital planning services are designed to provide
effective workable plans with quantifiable results. Through a program known as
SAFE (Strategic Alternatives Financial Evaluations), RP Financial analyzes
strategic options to enhance shareholder value or other established objectives.
Our planning services involve conducting situation analyses; establishing
mission statements, strategic goals and objectives; and identifying strategies
for enhancement of franchise value, capital management and planning, earnings
improvement and operational issues. Strategy development typically includes the
following areas: capital formation and management, asset/liability targets,
profitability, return on equity and market value of stock. Our proprietary
financial simulation model provides the basis for evaluating the financial
impact of alternative strategies and assessing the feasibility/compatibility of
such strategies with regulations and/or other guidelines.
MERGER AND ACQUISITION SERVICES
RP Financial's merger and acquisition (M&A) services include targeting
candidates and potential acquirors, assessing acquisition merit, conducting
detailed due diligence, negotiating and structuring transactions, preparing
merger business plans and financial simulations, rendering fairness opinions and
assisting in implementing post-acquisition strategies. Through our financial
simulations, comprehensive in-house data bases, valuation expertise and
regulatory knowledge, RP Financial's M&A consulting focuses on structuring
transactions to enhance shareholder returns.
VALUATION SERVICES
RP Financial's extensive valuation practice includes valuations for a variety of
purposes including mergers and acquisitions, mutual-to-stock conversions, ESOPs,
subsidiary companies, mark-to-market transactions, loan and servicing
portfolios, non-traded securities, core deposits, FAS 107 (fair market value
disclosure), FAS 122 (loan servicing rights) and FAS 123 (stock options). Our
principals and staff are highly experienced in performing valuation appraisals
which conform with regulatory guidelines and appraisal industry standards. RP
Financial is the nation's leading valuation firm for mutual-to-stock conversions
of thrift institutions.
OTHER CONSULTING SERVICES AND DATA BASES
RP Financial offers a variety of other services including branching strategies,
feasibility studies and special research studies, which are complemented by our
quantitative and computer skills. RP Financial'sconsulting services are aided by
its in-house data base resources for commercial banks and savings institutions
and proprietary valuation and financial simulation models.
YEAR 2000 SERVICES
RP Financial, through a relationship with a computer research and development
company with a proprietary methodology, offers Year 2000 advisory and conversion
services to financial institutions which are more cost effective and less
disruptive than most other providers of such service.
RP Financial's Key Personnel (Years of Relevant Experience)
Ronald S. Riggins, Managing Director (17)
William E. Pommerening, Managing Director (11)
Gregory E. Dunn, Senior Vice President (15)
James P. Hennessey, Senior Vice President (10)
James J. Oren, Vice President (10)
Timothy M. Biddle, Vice President (7)
Alan P. Carruthers, Director-Community Banking (15)
